Topic: Cato Publications

Monetary and Fiscal Policy at Cato Unbound

This month we’re talking macroeconomics at Cato Unbound. Tim Congdon kicks things off with an essay about the confused legacy of John Maynard Keynes. We have been told, again and again, that the United States is in a liquidity trap – because the federal funds rate can’t go below zero.

There are several problems with this often-repeated claim. First, even at a federal funds rate of zero, other instruments of monetary policy remain effective. Second, a central bank lending rate of zero is not at all what Keynes himself meant when he used the term “liquidity trap.” Third, what Keynes did mean is a source of considerable ambiguity, as necessitated by the simplified model he presented in his General Theory of Employment, Interest, and Money. And finally, a liquidity trap that conforms to his model may never actually occur, at least not in the strict sense.

Advancing these claims is Tim Congdon, the United Kingdom’s leading monetarist and author of the recent book Money in a Free Society. He is joined by three other prominent economists, each with a slightly different view of the issue. They are Dean Baker, co-director of the Center for Economic and Policy Research; Don Boudreaux of George Mason University; and Robert Hetzel, an economist with the Federal Reserve Bank of Richmond.

As always, Cato Unbound readers are encouraged to take up our themes and enter into the conversation on their own websites and blogs, or at other venues. Trackbacks are enabled. We also welcome your letters and may publish them at our option. Send them to jkuznicki at

This Week in Government Failure

Over at Downsizing the Federal Government, we focused on the following issues this past week:

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Information Regulation that Hasn’t Worked

When Senator William Proxmire (D-WI) proposed and passed the Fair Credit Reporting Act forty years ago, he almost certainly believed that the law would fix the problems he cited in introducing it. It hasn’t. The bulk of the difficulties he saw in credit reporting still exist today, at least to hear consumer advocates tell it.

Advocates of sweeping privacy legislation and other regulation of the information economy would do well to heed the lessons offered by the FCRA. Top-down federal regulation isn’t up to the task of designing the information society. That’s the upshot of my new Policy Analysis, “Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.” In it, I compare Senator Proxmire’s goals for the credit reporting industry when he introduced the FCRA in 1969 against the results of the law today. Most of the problems that existed then persist today. Some problems with credit reporting have abated and some new problems have emerged.

Credit reporting is a complicated information business. Challenges come from identity issues, judgments about biography, and the many nuances of fairness. But credit reporting is simple compared to today’s expanding and shifting information environment.

“Experience with the Fair Credit Reporting Act counsels caution with respect to regulating information businesses,” I write in the paper. “The federal legislators, regulators, and consumer advocates who echo Senator Proxmire’s earnest desire to help do not necessarily know how to solve these problems any better than he did.”

Management of the information economy should be left to the people who are together building it and using it, not to government authorities. This is not because information collection, processing, and use are free of problems, but because regulation is ill-equipped to solve them.

This Week at

The day after Thanksgiving didn’t see one of these updates, so we’ve got two weeks of new content at to cover.

George H. Smith continued his Excursions series with the first two parts in an extended look at the Declaration of Independence. In part 1, Smith discussed the intellectual history behind the document’s famous reference to “unalienable” rights. In part 2, he turned to two instances of curious wording: the use of “self-evident” and the lack of “property” in Jefferson’s list of inalienable rights.

We had a few new videos, too. In an addition to our “Libertarian View” series, Penn Jillette—magician and H. L. Menken research fellow at the Cato Institute—talks about what he sees as the important distinction between trying to convince someone that what you believe is true and just stating sincerely what you believe.

On November 29, we posted our first talk from Thomas Szasz. Speaking in 1994, the famous psychiatry skeptic addressed the problem of socialism in health care—an issue very much with us today.

And just today, we added a talk by Roger Garrison on monetary policy and central banking.

Finally, we had an extended—and ongoingdebate in the Free Thoughts blog between Julian Sanchez and Miles Pope on conceptions of morality in Jan Narveson’s The Libertarian Idea.

As always, there’s much more at Keep up to date with everything new on the site by following us on Twitter, Facebook, and Google+.

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Demos vs. Cato: Say No to Bailouts

Over at PolicyMic, Cato scholar Daniel J. Mitchell debates Demos co-founder David Callahan on whether massive government bailouts saved us from a second Great Depression, or plunged the economy into a prolonged recession that hurt taxpayers and undermined the self-corrective mechanisms of the market. Mitchell argues:

The Bush-Obama policies of bailouts and regulation have been bad for taxpayers, but they’ve also been bad for the economy.

A vibrant and dynamic economy requires the possibility of big profits, but also the discipline of failure. Indeed, capitalism without bankruptcy is like religion without hell.

Yet that’s what politicians from both parties have created. Profits are private and losses are socialized, so is anyone surprised that Wall Street responds to these incentives with imprudent risk?

Read Mitchell’s post here, and the other side here.

David Friedman at Cato

David Friedman, the author of  Hidden OrderLaw’s Order, and Future Imperfect, will speak at the Cato Institute on Tuesday, November 29, at noon. His topic will be “The Market for Law.”

Is there a market for good law? Without the state providing law, could it be offered by multiple, private, and competing agencies? David Friedman, professor of law at Santa Clara University, explored this idea in his classic 1973 book, The Machinery of Freedom: Guide to a Radical Capitalism. But in the years since, he’s revised and strengthened some of his theories. In this talk, he will offer these new ideas from the last 30 years of thinking about the market for law.

David Friedman is always interesting and provocative. Register now! And note: because of our ongoing expansion project, this event will be held one block east of Cato at the Undercroft Auditorium, 900 Massachusetts Ave. NW.

Read more about David Friedman at