Government In Economic Affairs Research Articles

Milton Friedman and the Road to Monetarism: A Review Essay

Milton Friedman and the Road to Monetarism: A Review Essay

The Emergence of Classical American Patent Law

One enduring historical debate concerns whether the American Constitution was intended to be -- referring to a theory of statecraft that maximizes the role of private markets and minimizes the role of government in economic affairs. The most central and powerful proposition of classical constitutionalism is that the government's role in economic development should be minimal. First, private rights in property and contract exist to any community needs for development. Second, if a particular project is worthwhile the market itself will make it occur. Third, when the government attempts to induce development politics inevitably distorts the decision making. The result is excessive state involvement, with benefits typically going to well placed interest groups.From the Colonial period until the mid-nineteenth century American legislatures and courts conceived of the patent as an active tool of economic growth. States in particular granted patents in anticipation that the grantee would actually develop some work of public improvement. This conception of the patent was distinctly pre-classical in the sense that it envisioned considerable state involvement in ensuring that granted patents were put to appropriate use. In addition, state issued patents, although not federal patents, were issued to promoters -- that is, to those who did not really claim to have invented anything new, but rather promised to develop technology or infrastructure in a new place.A few decades later a much more classical conception of the patent emerged, as a property right pure and simple. Questions about whether and how to employ a patent were lodged almost entirely with its owner, who at the high point of patent classicism even had the power to use patents to keep technology off the market -- precisely contrary to what the original framers of the provision had in mind.An essential part of this development was the rise of federal patent exclusivity -- a result that was not mandated by the text of the Constitution's IP Clause, particularly when read against the Tenth Amendment. The sources of increased hostility toward state issued patents were twofold. First was the view that state issued patents burdened interstate commerce. For example, the Supreme Court struck down the state-issued steamboat patent under the Commerce Clause, not under the Constitution's IP Clause. Second, however, only federal exclusivity could effectively limit the power of the states to grant unwarranted exclusive rights to favored grantees. The eventual result was a regime in which Congress acquired the exclusive power to award patents for inventions.Changes in United States patent law under the 1836 Patent Act and later were driven by classical beliefs that monopoly is bad and generally unnecessary for economic development, with invention as a narrow exception. This entailed, first, that the conditions for obtaining a patent be narrow, limited to actual inventions within the applicant's possession, and adequately disclosed. Second, patent issuance had to be made a nonpolitical, administrative action. The applicant was entitled to a patent if he could make specific showings concerning technology and use. The prior art queries that increasingly dominated patentability doctrine focused on what had been available in the past, rather than what economic development might require for the future. Finally, once a patent was issued the government very largely abandoned its interest. The patent entered commerce as personal property, creating individual rights but few social obligations. Together these requirements led both Congress and the courts away from relatively open ended policy concerns, and toward technical specification and boundary clarity. The result was a patent system increasingly detached from questions about economic development.

WILLIAM M. MCCLENAHAN, JR., and WILLIAM H. BECKER. Eisenhower and the Cold War Economy.

Dwight D. Eisenhower's economic policy during the Cold War is the focus of this informative and important study. Although the book does not break new ground, it reinvigorates an all-too-neglected aspect of Eisenhower studies: the president and former general's abiding concern for the domestic and international economic systems. The book makes the bold observation that Eisenhower's concern for these economies was, in fact, second only to the Cold War contest with the Soviet Union, and that “at times it is inaccurate to suggest that one was subordinate to the other” (p. ix). This is an important insight that sheds light not only on Eisenhower but on the nature of the Cold War more generally. William M. McClenahan, Jr., and William H. Becker have a clear goal in writing this book: they seek to resurrect Eisenhower's conservative principles as a potential guide for foreign policy today. Although readily acknowledging that circumstances at the beginning of the twenty-first century are vastly different than those in the 1950s, they nonetheless assert that there is much to learn from Eisenhower's approach to foreign relations, particularly with regard to economic policy. Like today, during Ike's two terms as president, the United States confronted major domestic and international economic challenges. Eisenhower approached these challenges, the authors contend, with a conservative outlook that “emphasized personal self-reliance and a limited role for government in economic affairs.” Yet, at the same time he was “pragmatic” about U.S. economic requirements and sought no “radical alterations” on issues such as Social Security or taxes. He was, the authors write, “flexible within the parameters of his conservatism.” Due to his long military career, Eisenhower also “understood the growth of bureaucracy” better than any of his predecessors, which helped him to navigate the unprecedented expansion of the federal government during his tenure (p. x). The authors analyze Eisenhower's economic policies at the macro and micro levels, the former concerned with broader trends in the economy such as inflation and overall government spending, the latter with the policies specifically related to agriculture, antitrust, and foreign economic affairs. These policies developed against the backdrop of the Cold War with the Soviet Union. The authors argue that Eisenhower was more successful in achieving his macro-economic goals than his micro-economic ones.

Functioning of market economy and rent-seeking: Why it is necessary to diminish the role of government in economic affairs?

At the beginning, the author points out that rent-seeking economy is a distinctive phenomenon for majority of the contemporary market economies. It is reflected in the aspirations of the well organised interest groups to capture public choice and politicians as a tool to gain non-market benefits for themselves, or to take activities to gain income by non-market redistributions instead to do it on the market. According to the author examples of rent-seeking economy are antitrust, arbitrary export-import restrictions, subsidies for various sectors of economy, unions' practices of closed shop or collective bargaining. The author notes that there are legitimate public goods and services (such as military and police services or infrastructure) and therefore legitimate taxing and spending for providing of such public necessities. In his opinion, however, rent-seeking economy results from the growing government intervention in economy based upon widening of its role and responsibility to handle a wide spectrum of illegitimate ??social?? issues, rather than rest upon better providing of classical government services. Rent-seeking economy is a result of abandoning the strict market economy with no or little income gained by the extra market redistribution. The social environment where it is permissible and desirable to remove as great as possible economic activities from the free, non-regulated markets to the public sector or to the sector of the highly regulated economy which is cartelised by coercion, leads entrepreneurs to change their orientation. They do not perceive the regular competition as the best way to make success, but by lobbying with the political bodies. The basic rule of rent-seeking is that when there is a chance to gain rent, there will be someone who will try to get it. Therefore, in the author's opinion the government and the public inclining towards state interventionism are the main to blame for the rise of rent-seeking. This is because they make chances to gain rents since the general social and political environment enables it, as well as because there is an insufficiency of detailed legislative and constitutional restrictions on the role of the government in economy. Therefore, the basic condition for elimination or at least reduction of the scope of rent-seeking economy, in the opinion of the author, is to drastically diminish the role of the government in economic affairs. In that way the economy would be strictly separated form the politics, and entrepreneurs would be sent a signal that the reallocation of resources from productive to lobbying activities for gaining privileges is not an appropriate way to gain income. Within this context, the author points to consideration of the achievements of the James Buchanan's public choice theory that deals with the defects of political decision-making. He also points to the fact that the essence of the liberal constitutional reform that could diminish the scope of rent-seeking could be best perceived in the words stated by Friedrich Hayek the Nobel prize winner, saying that the government should be prohibited to employ ??coercive discriminatory acts??. This means that the government should not employ its monopoly of physical force to award economic privileges to anyone, but it should adopt laws of general use to be applied to the unknown number of cases in the future, concludes the author.

Confidence in Hong Kong's Capitalist Society in the Aftermath of the Asian Financial Turmoil

The Asian financial turmoil that hit Hong Kong unexpectedly has produced the worst postwar economic crisis in this bastion of unfettered capitalism. It has exacerbated some worrisome trends that have plagued Hong Kong for more than a decade: diminishing international competitiveness of the economy; widening income inequality; greater involvement of the government in economic affairs; declining mobility opportunities; and an increasingly anxious middle class. Empirical findings however show that whilst Hongkongers' confidence in Hong Kong's capitalist society has been shaken a little, popular support for it has, on the whole, remained robust. Still, social discontent is on the rise, particularly among the middle-classes. Growing popular demand for governmental intervention and the proclivity of the post-1997 regime to exercise economic activism might, in the long run, threaten the viability of this last example of untrammeled capitalism.

Games Economists Play: A Survey of Non‐Computerized Classroom‐Games for College Economics

The bulk of this unusual paper consists of an extensive online annotated compilation of 113 non‐computerized classroom‐games, most of which can be played within one class period, to assist in the teaching of college‐level basic micro and macroeconomic concepts (see http://www.aug.edu/~sbajmb or http://www.marietta.edu/~delemeeg).The paper itself consists of three major sections. The first catalogues, summarizes, and provides sample annotations of the games we collected. Section two makes a number of observations about the games. For instance, we notice an imbalance between games for microeconomics (many) and games for macroeconomics (few). We also detail which standard introductory economics topics are covered well and which are not covered well or missing altogether. For example, we observe that few games exist to present the proper economic role of government in economic affairs. The third section surveys the available literature on the costs and benefits of playing games in the classroom. In particular, our survey reveals that existing studies consider costs and benefits to students and instructors only partially, and we lay out a matrix that should help in the design of improved studies on the efficacy of gaming in the classroom.

A new perspective on the role of the government in economic development

Provides a new perspective on the role of the government in economic affairs. Utilising recent advances in the evolutionary theories of the firm, the coordination function of the government is emphasised. This paper argues that the government possesses certain unique features that allow it to restrict competition, and provide stable and reliable conditions under which firms organise, compete, cooperate and exchange. The coordinating perspective is employed to re‐examine the arguments for industrial policies regarding private investment decisions, market competition, diffusion of technologies and tariff protection on infant industries. This paper concludes that dynamic private enterprises assisted by government coordination policies explains the rapid economic growths in post‐war Japan and the Asian newly industrialising economies.

The Rhetoric of Science and the Rhetoric of Revolt in the “Story” of Positive Accounting Theory

Examines Watts and Zimmerman′s Positive Accounting Theory as a literary narrative, as the “PAT story”, in an effort to explain its success in light of the fact that it falls well short of their professed methodological standards. Their use of the rhetoric of science is examined, with special attention to their projection of a “scientific persona”, their rhetorical construction of the legitimate” boundaries of accounting research, their use of metaphor and other literary devices, their rhetorical transport of “scientific authority” from other disciplines, and the circumstances that made their audience receptive to scientific rhetoric. Their use of conservative political rhetoric (the rhetoric of revolt against the interference of government in economic affairs) is also examined, with special attention given to the devices used to convey a normative message while maintaining a positive posture, and to the role of sociohistorical circumstances (the Reagan era) that encouraged their audience to overlook the story′s lack of scientific substance.

Bioeconomics and post Keynesian economics: a search for common ground

This paper is concerned with the links between two schools of economic thought which challenge the neoclassical synthesis. Bioeconomics refers to that school of economics stressing the fact that the human species is a part of the larger biosystem of the planet and ultimately subject to the same laws and limitations as other life forms. Post Keynesian economics is a specific school of macroeconomics stressing the fundamental ideas of Keynes, Marx, and Kalecki concerning uncertainty, the nature of production, and the role of government in economic affairs. Bioeconomics and post Keynesian economics have much in common in terms of their methodological framework, their emphasis on production rather than exchange, and their interpretation of the social rate of discount. A potential area of conflict between the two schools is their attitude toward economic growth. The areas of commonality between the two schools are discussed and a research and policy program which combines the insights of both approaches is suggested.

THE STOCK EXCHANGE: ITS ROLE AT VARIOUS STAGES OF CAPITALIST DEVELOPMENT*

THE PROCESS OF CAPITAL accumulation-the transformation of savings into real capital assets-is a crucial issue in any economic system. In a capitalistic economy the capital market and the stock exchange are the agencies which connect the savers in the society, the sources of funds, with the users of funds. This study examines the performance of the stock exchange and the capital market at various periods in English and American history. The principal conclusion is that the role of the stock market and the capital market in economic affairs has undergone great changes. The causes of the observed changes in the role of the markets are rooted in fundamental changes that have occurred in the underlying economic organization that the capital market and stock exchange are organized to serve. The shift from a commercial to an industrial economy, the particular problems involved in financing internal improvements and a national transportation system in the United States, and especially the shifting position of government in economic affairs have seriously affected the role of the stock exchange and the capital market. The first three chapters analyze the origins and early development of the stock exchange and the capital market in England and the United States. In both countries the initial impetus for the development of the market was the necessity of meeting the financial needs of the state. The construction of a national railroad system and the attendant problems of railroad finance became the basis for the American capital market and stock exchange and also helped give the markets their orientation toward speculation and purely private financial transactions. With the completion of the essential parts of the railroad network in the late 1880's, American finance capitalism shifted its attention to the opportunities for merger and combination in industrial units. While the orientation of the financial hierarchy shifted, the opera-