Blockchain Papers

Anton Korinek

No abstract is available for this record.

Anthony G. Hopwood

No abstract is available for this record.

Jason A. Kirk

Abstract Jason A. Kirk is a lecturer in the International Relations Program at the University of Pennsylvania. Notes The author wishes to thank the following for their comments on earlier versions of this essay: Sunila Kale, Peter Kingstone, and four anonymous reviewers and the editorial staff at India Review. This essay draws upon research conducted for a dissertation on subnational World Bank lending and the federal politics of economic reform in India. The analysis has benefited greatly from feedback from a number of people on various aspects of the larger project, including Tom Callaghy, Rudy Sil, Rahul Mukherji, Francine Frankel, John Echeverri-Gent, Tulia Falleti, and Douglas Verney. Responsibility for any factual or analytical errors rests with the author. 1. Author's interview with Joëlle Chassard, World Bank country coordinator for India, July 17, 2002, Washington, DC. 2. In India, the Bank's state adjustment loans legally specify the Government of India as "borrower," with the relevant state as "beneficiary" to receive the rupee equivalent of the Bank's dollar-denominated loans. This is a country-specific arrangement reflecting the Indian central government's preference for control over foreign loans to states. In contrast, in Brazil, where state governments enjoy more liberal borrowing privileges, they can be the "borrower" on World Bank loans so long as the federal government provides a sovereign guarantee (required by the Bank's Articles of Agreement). Article 293, Clause Three of the Constitution of India asserts the center's control over states' international borrowing: "A State may not without the consent of the Government of India raise any loan if there is still outstanding any part of a loan which has been made to the State by the Government of India or its predecessor Government, or in respect of which a guarantee has been given by the Government of India or by its predecessor Government." Since all states have outstanding debt to the center, in practice this clause means they must seek its express permission to borrow from outside the territory of India. 3. Author's email correspondence with James Manor, Professor, Institute of Development Studies, Sussex, UK, September 16, 2002. 4. Author's interview with Joëlle Chassard. 5. Author's interview with Edwin Lim, World Bank country director for India (1996–2002), July 14, 2003, Osterville, Mass. 6. Caste politics in AP are complex and cannot be adequately addressed here. For detailed analyses, see Rama S. Melkote, "Andhra Pradesh: The Reform State and its Dilemmas," paper presented at a workshop on State Politics in India in the 1990s: Political Mobilization and Political Competition, organized by the Developing Countries Research Centre, University of Delhi, and London School of Economics, December 16–17, 2004, New Delhi; Atul Kohli, "The NTR Phenomenon in Andhra Pradesh: Political Change in a South Indian State," Asian Survey Vol. 28, No. 10 (October 1988), pp. 991–1017; and K. C. Suri, "Democratic Process and Electoral Politics in Andhra Pradesh," Overseas Development Institute Working Paper No. 180 (September 2002). 7. N. Chandrababu Naidu with Sevanti Ninan, PlainSpeaking (New Delhi: Viking/Penguin Books India, 2000), p. 17. 8. This poll has been cited in a number of sources, and referred to by Naidu himself in public speeches. See for example Lloyd I. Rudolph and Susanne Hoeber Rudolph, "Iconisation of Chandrababu: Sharing Sovereignty in India's Federal Market Economy," Economic and Political Weekly, May 5–11, 2001. 9. Karli Srinivasulu, "Regime Change and Shifting Social Bases: The Telugu Desam Party in the 12th General Election," in Ramashray Roy and Paul Wallace, eds., Indian Politics and the 1998 Election (Thousand Oaks, CA: Sage Publications, 1999), p. 210. 10. For a more detailed discussion of Naidu's conversion, see Sumantra Sen and Francine Frankel, eds., "Andhra Pradesh's Long March Towards 2020: Electoral Detours in a Developmentalist State," Doing Business in India: Political, Social and Cultural Overview (Philadelphia: Center for the Advanced Study of India, University of Pennsylvania, Spring 2005). The author provided research assistance and served as associate editor for this publication. 11. Author's interview with Duvurri Subbarao, finance secretary, Andhra Pradesh (1993–98), September 26, 2002, Washington, DC. 12. Sen and Frankel, eds., "Andhra Pradesh's Long March Towards 2020," p. 4. For a more detailed discussion of the Malaysian model, see Toby Huff, "Malaysia's Multimedia Super Corridor and its First Crisis of Confidence," Asian Journal of Social Science Vol. 30, No. 2 (June 2002), pp. 248–70. 13. The Vision 2020 document asserts that "knowledge-led growth" in fields such as IT services, biotech, and pharmaceuticals – along with other select "growth engine" sectors such as agro-industry, mining, and tourism – would by 2020 permit the state to achieve "a level of development that [would] provide its people tremendous opportunities to achieve prosperity and wellbeing and enjoy a high quality of life." See Government of Andhra Pradesh, Andhra Pradesh: Vision 2020 (Hyderabad: State Secretariat, January 1999). 14. Author's interview with Edwin Lim. 15. World Bank, India – Andhra Pradesh: Agenda for Economic Reforms, January 16, 1997. 16. Author's interview with Edwin Lim. 17. National Sample Survey data, cited in C. P. Chandrasekhar and Jayati Ghosh, "The Continuing Possibilities of Land Reform," http://www.macroscan.com/the/food/nov04/fod231104Land_Reform.htm. 18. K. Srinivas Reddy, "Extremist Resurgence," Frontline: India's National Magazine, October 11–24, 2003. The term Naxalite comes from the radical movement's origins in Naxalbari, West Bengal, in the late 1960s. 19. See for example, World Bank, "World Bank to Assist Human Development Needs in India's Lead Reforming State," News Release No. 98/1850/SAS, June 25, 1998. 20. "Booting Up in Andhra Pradesh: The State Election to Watch in India," The Economist, September 11, 1999; emphasis added. 21. Loraine Kennedy, "The Political Determinants of Reform Packaging: Contrasting Responses to Economic Liberalisation in Andhra Pradesh and Tamil Nadu," author's manuscript, p. 42. This paper was published as a chapter in Rob Jenkins, ed., Regional Reflections: Comparing Politics across India's States (New Delhi: Oxford University Press, 2004). The World Bank is only a minor actor in Kennedy's analysis of AP (and it did not have a focus state relationship with Tamil Nadu during the period she describes), but she suggests that its loans "have contributed to locking the state government into [its] pro-reform stance by creating constraints, in the form of conditionalities." In actual practice, the Bank was more lenient in its enforcement of conditionalities in AP than in Karnataka, as the analysis here shows. 22. "He Knows His Friends, Foes, and Priorities," The Economic Times of India, October 8, 1999. 23. This argument is also advanced in James Manor, "Explaining Political Trajectories in Andhra Pradesh and Karnataka," in Jenkins, ed., Regional Reflections: Comparing Politics across India's States. 24. Author's interview with Montek Singh Ahluwalia, Director, Independent Evaluations Office, International Monetary Fund, July 2002, Washington, D.C. 25. Celia W. Dugger, "Even the Poor Pay Heed to the Esoterica of India's Riches," The New York Times, September 10, 1999. 26. Though under "first-past-the-post" rules, the vote shares translated into 91 seats for Congress, 180 for the TDP, and 12 for the BJP (of the Assembly's 294 seats). 27. Manor, "Explaining Political Trajectories in Andhra Pradesh and Karnataka"; Suri, "Democratic Politics and Electoral Process in Andhra Pradesh." 28. This point is made in V. Sridhar, "The Neo-liberal Consensus," Frontline: India's NationalMagazine, April 23, 2004. 29. See for example Jos Mooij, "Smart Governance? Politics and the Policy Process in Andhra Pradesh, India," Overseas Development Institute Working Paper No. 228 (October 2003). 30. World Bank, "India: Power Sector Reform in Andhra Pradesh," Participation in Macroeconomic Policies: Case Studies, http://www.worldbank.org/participation/web/webfiles/indiapower.htm. 31. Rajen Harshe, "Stakeholder Participation in Andhra Pradesh Reform Process," draft report submitted to the World Bank as an internal document (2001); shared with the author by Rajen Harshe, August 2002. 32. World Bank, "India: Power Sector Reform in Andhra Pradesh." 33. R. J. Rajendra Prasad, "WB Chief's Remarks General: Gov't.," The Hindu, September 6, 2000, http://www.hinduonnet.com. 34. Syed Amin Jafri, "AP House Rocked by World Bank Official's Statement," Rediff.Com, September 5, 2000, http://www.rediff.com. 35. The power minister, K. Subbarayudu, did not score high marks for public relations when he retorted that copies of the documents were available on the Bank's website, since this defense only invited an opposition rejoinder about the government's technological elitism and lack of concern toward poor citizens. 36. Remarks by BJP floor leader Indrasena Reddy as reported in V. Sridhar, "Brutal Crackdown," Frontline: India's National Magazine, September 16–29, 2000. 37. "Riding Two Horses" (editorial), The Hindu, June 4, 2000. 38. Lionel Messias, "World Bank Praise for AP," Gulf News, November 10, 2000. 39. Even in 2000, before the drought, AP had accounted for 385 of 480 cases reported across India. Though analysts attribute these tragedies to multiple factors, state policies were substantially implicated in a recurring scenario: indigent and lacking access to formal credit, many of the victims had taken on large personal debts to local moneylenders in order to purchase fertilizer, pesticide, and other inputs – the prices of which, like power tariffs, increased as Naidu's government withdrew subsidies to meet its fiscal adjustment targets. 40. "Electricity Might Determine the Fate of TDP," Indo-Asian News Service, April 16, 2004. 41. Sen and Frankel, "Andhra Pradesh's Long March Towards 2020," p. 23. 42. As opposed to other factors, such as a delayed expression of public indignation at the communal violence in Gujarat in 2002, which took place on the party's watch. 43. World Bank, Unlocking Andhra Pradesh's Growth Potential: An Agenda to Achieve the Vision 2020 Growth Targets, August 2004. Accessible via http://www.worldbank.org. 44. Subhomoy Bhattacharjee, "World Bank May Cut Off State Loans," Rediff.com, August 9, 2004. 45. "Heels Over Head: YSR turn pro-World Bank," The Economic Times, May 18, 2005. 46. K. V. Kurmanath, "Pace of Reforms Has Slackened in Last One Year: World Bank," Business Line, May 4, 2005. 47. Author's interview with B. K. Bhattacharya, former Chief Secretary, Government of Karnataka, August 2002, Bangladore. 48. Parvathi Menon, "Loan as Lever," Frontline: India's National Magazine, November 19, 2004. 49. "A Blend of Reforms Needed," The Statesman, November 9, 2000; see also "India: State's 'Admirable' Plans Praised," The Hindu, November 10, 2000. 50. Parvathi Menon, "Karnataka's Agony," Frontline, August 18–31, 2001. 51. "India: Cabinet Decides against Power Tariff Hike," The Hindu, September 14, 2001. 52. "Karnataka: Subsidy Bill may Torpedo Fiscal Correction Plans," The Hindu Business Line, April 19, 2002. 53. S. L. Krishna, budget speech delivered to the State Assembly on March 21, 2002, http://www.kar.nic.in/finance/bud2002/part-a.htm. 54. Divya Sreedharan, "WB Loath to Release Funds for Reforms in Power Sector," The Hindu, May 5, 2003. Carter succeeded Edwin Lim after his retirement from the Bank in September 2002. 55. "VRS Scheme has had a Negative Impact – Study," The Hindu, December 26, 2003. 56. "Krishna May Become IT CEO Again," The Economic Times, May 17, 2004. 57. "Rs. 72.84 Cr Revenue Surplus Budget for Karnataka," The Financial Express, July 20, 2004. 58. "Control Fiscal Deficit to Ensure Rapid Progress," The Hindu, August 5, 2004. 59. Subir Roy, "'I Want to Show that Good Politics is also Good Economics'," Business Standard, August 11, 2004. 60. "World Bank Happy with Reforms Process," The Hindu, January 26, 2005. 61. Author's interview with Sumir Lal, World Bank external affairs officer, August 11, 2003, New Delhi. 62. "World Bank to Back Investment Lending in Tamil Nadu," The Hindu Business Line, May 19, 2005. 63. The basic guidelines state that states must fulfill four conditions: first, devise a medium-term fiscal framework to limit the fiscal deficit to less than 3% of GSDP and achieve a zero revenue deficit within 3–5 years; second, contain subsidies, especially in the power sector; third, raise user fees for services; and fourth, improve governance and reduce administrative costs. 64. World Bank, India: Country Assistance Strategy 2005–08 (Washington, DC: The World Bank, 2004). 65. World Bank, Assessing Aid: What Works, What Doesn't, and Why (Oxford: Oxford University Press for the World Bank, 1998). 66. On this, see for example Jonathan Rodden, "Federalism and Bailouts in Brazil," in Jonathan Rodden, Gunnar S. Eskeland, and Jennie Litvack, eds., Fiscal Decentralization and the Challenge of Hard Budget Constraints (Cambridge: The MIT Press, 2003), pp. 213–48. 67. For a review, see M. Govinda Rao, "Incentivizing Fiscal Transfers in the Indian Federation," Publius: The Journal of Federalism, Vol. 33, No. 4 (Fall 2003), pp. 43–62. 68. Lloyd I. Rudolph and Susanne Hoeber Rudolph, In Pursuit of Lakshmi: The Political Economy of the Indian State (Chicago: The University of Chicago Press, 1987), pp. 1, 13, 3.

Frederico G. Jayme, Marco Crocco

This paper aims at analyzing regional development in Brazil regarding its financial conditions. It departs from the features of the federalism and decentralization in Brazil, as well as the state and local expenditures. We intends to investigate the role of the federalism and decentralization after the recentralization of taxes and budget in Brazilian economy. Conclusions highlight the importance of financial sector as one of the influential aspects of regional imbalances in Brazil.

Roger Aliaga‐Díaz

Capital adequacy regulations specify a minimum capital-to-assets ratio for banks in the economy. The effects of these regulations on the level of economic activity have not been thoroughly studied by the banking regulation literature. Specifically, the fact that as proposed by the Basle Accords, a constant ratio tying bank lending to bank equity may reinforce macroeconomic fluctuations has been looked at by only a few existing theoretical papers. This paper proposes a stochastic dynamic general equilibrium model to study the interactions between the banking sector and the aggregate level of economic activity. Banks behavior is fully micro-founded. Banks financing decisions (equity versus deposits) are constrained not only by the regulation but also by a financial imperfection arising from the fact that during bad times banks find it difficult to recapitalize by raising equity. Thus, higher borrower bankruptcy rates during recessions imply that banks have to cut new loans until the ratio is restored to the required level. Since production firms can only imperfectly substitute bank lending with other forms of financing, a negative macroeconomic shock affects production and investment both directly and indirectly through the bank loan supply. This banking regulation and the financial imperfection imply two different constraints to the banks problem that bind only occasionally in the stochastic steady state. This prevents the use of standard linearization techniques to solve the model numerically. Alternatively, using some discretization of the state space methods such as Value Function Iteration is difficult because the model cannot be written in terms of a central planner problem. Following Fackler (2003) I solve the decentralized general equilibrium problem by using a very general Function Approximation technique that nests the Parameterized Expectation Approach as a particular case. The method allows to approximate numerically either the policy functions or the expectation functions. It is also flexible as regards the choice of approximating functions, including Chebyshev polynomials and piecewise polynomial splines. The technique relies on the Collocation Method to solve for the polynomial coefficients in combination with either generic root-finding algorithms or a fixed-point iteration scheme. Numerical results suggest that banks try to anticipate aggregate shocks by accumulating a buffer of capital over the regulatory minimum. Nevertheless, a series of bad shocks may be strong enough to eventually undermine these "reserves" and to make banks cut back on lending. This suggests the existence of a financial accelerator, since the supply of loans shrinks together with the demand during recessions. This mechanism has interesting policy implications and provides grounds for a procyclical value of the required capital-to-assets ratio

Előd Takáts

No abstract is available for this record.

Nizar Allouch, Monique Florenzano

No abstract is available for this record.

Wojciech Kopczuk, Joel Slemrod, Shlomo Yitzhaki

An optimal linear world income tax that maximizes a border-neutral social welfare function provides a drastic reduction in world consumption inequality, dropping the Gini coefficient from 0.69 to 0.25. In contrast, an optimal decentralized (i.e., within countries) redistribution has a miniscule effect on world income inequality. Thus, the traditional public finance concern about the excess burden of redistribution cannot explain why there is so little world redistribution.

John Bryant

No abstract is available for this record.

Russell W. Cooper, Hubert Kempf

This article studies the effects of political institutions on inflation. In our view, hyperinflation is the manifestation of a tragedy of commons in a divided society with a weak central monetary authority. Economies with fiat money are inherently inflation-prone: the collection of seigniorage through the inflation tax is less conspicuous than other taxes, and the printing of money is essentially costless. In many countries, the control of the money supply is de facto or de jure decentralized. Sets of agents (in various regions or interest groups) can effectively pressure the central government to finance their expenditures. As these interest groups pursue their self-interest, they neglect the welfare effects of the inflation tax on individuals in other groups. These elements combine to imply that countries which rely on the inflation tax to meet the resource demands of competing interest groups will typically experience inefficiently (due to negative spillovers) high inflation.

Biagio Bossone

No abstract is available for this record.

Rosario Manasan

This short note provides a framework for looking at public sector governance and productivity improvements. It argues that the role of government in enhancing productivity growth is two-fold. First, government should provide an environment that is conducive in improving total factor productivity in private sector production. Second, government should work to increase the productivity of the public sector itself. In terms of providing the appropriate economic setting that is favorable to private-sector-led development, government needs (1) to provide the macroeconomic and the microeconomic environment that will establish incentives for firms/individuals to act in accordance with the invisible hand had there been no market imperfection, (2) to provide the institutional infrastructure (i.e., property rights, law and order, rules and even application and enforcement of the same) that markets need to work efficiently; and (3) to ensure the financing/provision of adequate basic health care and education, and basic physical infrastructure (World Bank 1992). In particular, the instruments that government may use in this regard are include (1) direct government interventions in the product markets as defined by the regulatory structure in strategic sectors, and (2) economy-wide policies like financial liberalization, trade liberalization, and foreign investments liberalization. On the other hand, (1) budget reform (2) the installation of a system of performance measurement and incentive in the public sector, (3) the re-engineering of the bureaucracy, (4) the combating of corruption, and (5) decentralization are the key features of a program that will increase the productivity of government operations.

Yoshirō Miwa, J. Mark Ramseyer

Alexander Gerschenkron argued that banks facilitate growth in “backward” countries, and modern theorists sometimes similarly claim that banks can promote growth by reducing informational asymmetries and improving the allocation of funds. Japan has played a part in these debates. In early twentieth‐century Japan, firms relied heavily on bank debt, observers argue. Those firms with preferential access to debt outperformed the others, and those that were part of the zaibatsu corporate groups obtained that access through their affiliated banks. In fact, Japanese banks did not play the role attributed to them. Japan was not a bank‐centered economy; instead, firms relied on equity finance. It was not an economy where firms with access to banks outperformed their rivals; instead, such firms earned no advantage. And it was not a world in which the zaibatsu manipulated their banks to favor affiliated firms; instead, zaibatsu banks loaned affiliated firms little more than the deposits those firms had made with the banks. During the first half of the last century, Japanese firms obtained almost all their funds through decentralized, competitive capital markets.

Eduard Braun

The current economic problems in Southeast Asia can be attributed not to too much reliance on financial markets, but to too little . Like the U.S. economy a century ago, the emerging Asian economies do not have welldeveloped capital markets and so remain heavily dependent on their banking systems to finance growth. For all its benefits, banking is “not only basically 19th‐century technology, but disaster‐prone technology.” The extreme maturity (and, in some cases, currency) mismatch on banks' balance sheets plus the first‐come, first‐served nature of the deposit obligations mean that banks are inherently vulnerable to massive runs by depositors—and that their economies are subjected to periodic credit crunches. And, as the author says, “in the summer of 1997 a banking‐driven disaster struck in East Asia, just as it had struck so many times before in U.S. history.” In this century, In this century, the U.S. economy has steadily reduced its dependence on banks by developing “dispersed and decentralized” financial markets. In so doing, it has increased the efficiency of the U.S. capital allocation process and reduced its susceptibility to the credit crunches that have occurred throughout U.S. history. By contrast, Japan has not reduced its economy's dependence on banks, and its efforts to deal with its banking problems have served only to destabilize itself as well as its neighbors. Developing countries in Southeast Asia and elsewhere are urged not to follow the Japanese example, but to take measures aimed at developing financial markets and institutions that will either substitute for or complement bank products and services.

James M. Boughton

The World Economic Outlook (WEO) exercise at the IMF evolved during the 1980s, partly in response to demands by policymakers in national finance ministries for objective and internationally comparable projections and policy scenarios. The exercise had begun as a staff initiative, encouraged by the Managing Director (Johannes Witteveen). Gradually, the Executive Board, the Interim Committee, the Group of Seven, and others came to view the discussion of the WEO documents as an important element in their efforts to keep abreast of world economic developments and prospects. Direct and indirect feedback from those discussions informed the staff as to how the exercise should be improved. Driven by this policy relevance, the WEO evolved from a decentralized project that was only haphazardly model-based into a more rigorous and coordinated exercise.

Ron Martin, Richard Minns

MARTIN R. and MINNS R. (1995) Undermining the financial basis of regions: the spatial structure and implications of the UK pension fund system, Reg. Studies 29, 125–144. Regional growth theory and regional policy traditionally focus on the process of industrial development. Relatively little is known about the flows of money and financial capital that shape that development. This paper examines the spatial organization and implications of the UK pension fund system, one of the principal circuits of financial capital in the national economy. It is shown how the great bulk of pension fund contributions that originate right across the various regions of the UK are channelled into and controlled by financial institutions in the South East of the country. Moreover, those funds are then invested primarily back into companies and organizations located or headquartered in the South East. This spatially centralized system pursues liquidity rather than productive investment, and little of the money trickles down to the regions in the form of finance for capital investment or business expansion. The UK pension fund system thus undermines regions by extracting savings from all over the country and centralizing their management, administration and investment in one region. A key task for regional policy, therefore, should be to promote the decentralization of financial power and financial market structures to the regions so that a greater proportion of money funds remain in and benefit the areas where they originate. MARTIN R. et MINNS R. (1995) L'ébranlement de la base financière des régions: la structure gèographique et les retombées du système de fonds d'assurance-vieillesse du Royaume-Uni, Reg. Studies 29, 125–144. La théorie de croissance régionale et la politique d'aménagement du territoire portent sur le processus de développement industriel. Rares sont les preuves sur les flux d'argent et de capital qui influencent ce développement. Cet article cherche à examiner l'organisation géographique et les retombées du système de fonds d'assurance-vieillesse, l'un des principaux circuits de capital dans l'économie nationale. On démontre comment la masse des cotisations auprès des fonds d'assurance-vieillesse, qui proviennent de toutes les régions du Royaume-Uni, sont affectées aux organismes financiers qui sont situés dans le Sud-Est du pays et qui les gèrent. De surcroît, ces fonds-là sont réinvestis dans une large mesure dans des sociétés et des organismes dont les locaux ou les sièges se trouvent dans le Sud-Est. Ce système centralise du point de vue géographique, porte plutôt sur la liquidité que sur l'investissement productif, et peu d'argent s'infiltre alors dans les régions sous forme de finance désignée pour les dépenses d'investissement ou le développement des entreprises. De cette façon le système de fonds d'assurance-vieillesse du Royaume-Uni ébranle des régions en soutirant des économies dans tout le pays et en centralisant la gestion, l'administration et l'investissement dans une seule région. Par la suite, une tâche primordiale de la politique régionale devrait être alors la promotion de la décentralisation aux régions du pouvoir financier et des structures du des fonds en numeraire reste au sein et au profit des régions d'o[ugrave] ils proviennent. MARTIN R. und MINNS R. (1994) Die Untergrabung der finanziellen Basis der Regionen: die räumliche Struktur des und Implikationen für das britische Rentengeldersystem, Reg. Studies 29, 125–144. Regionalpolitik wie Theorie regionalen Wachstums haben sich immer schon auf den Prozeß industrieller Entwicklung konzentriert. Vergleichsweise wenig weiß man über die Finanzkapital- und Geld-ströme, die diese Entwicklung bestimmen. Der Aufsatz untersucht die räumliche Organisation und Implikationen des britischen Rentengeldersystems, eine der wichtigsten Runden des Finanzkapitals in der Wirtschaft des Landes. Es wird aufgezeigt, wie der Großteil der Rentengelder-beiträge, die aus verschiedenen Regionen des UK zusam-menkommen, Finanzinstituten im Südosten des Landes zugeführt und von ihnen kontrolliert werden. Diese Gelder werden überdies dann vorzugsweise wieder in Gesellschaften und Organisationen investiert, die ihren Standort oder Hauptgeschäftsstelle im Südosten haben. Dieses räumlich zentralisierte System verfolgt statt produktiver Investierung vorzugsweise Liquidität, und den Provinzen fließt nur wenig in Form von Finanzierung von Kapital-investierung oder Geschäftserweiterung zu. Das britische Rentengeldersystem untergräbt somit die Regionen, indem es aus dem ganzen Lande Esparnisse herausholt, und dann Management, Verwaltung und Investierung in einer Region zusammenfaßt. Es sollte deshalb eine Hauptaufgabe der Regionalpolitik sein, die Dezentralisation der Finanzmacht und der Finanzmarkstrukuren auf die Regionen zu betreiben, so daß ein gröberer Anteil der Gelder in den Herkunftsgebieten bleibt und ihnen nützt.

Alfred C. Holden

The case is strong for declaring an inadequacy of export finance for small business. In 1988–90, the documentation has expanded beyond that of academic research and claims by the Small Business Administration to Congressional testimony by exporters and bankers, surveys by trade associations of manufacturers and bankers, and investigations by the Government's export finance agency as well as our central bank. Nonetheless, small business is exhorted to look abroad in its marketing efforts and so to participate in reducing the U.S. trade deficit. As one means of alleviating this international marketing challenge, the Export‐Import Bank of the United States (Eximbank) has moved to convert a pilot program of 1988–89 into a fall‐fledged decentralized effort to deliver export finance to qualified small firms. The intention is that carefully trained administrators in selected states will be able to match qualified exporters with financial institutions and thereby assure that the small firms receive working capital in adequate quantity to meet terms and conditions of an export contract. While Eximbank's staff is poised to support the marketing and credit analysis work of the state/local administrators, this paper examines the need for a fully cooperative effort among four parties or groups in the face of a national retrenchment by many banks in the provision of export finance for small firms.

James Tybout

PLANNING AUTHORITIES in less developed countries (LDCs) often regard financial market intervention as an efficient way to induce gr()wth and structural change. Elaborate regimes of interest ceilings and subsidies have been used to promote industrialization, exporting, geographic decentralization, and other national priorities. Some of these programs have doubtless achieved their intended objectives. However, with inflation frequently exceeding controlled interest rates, they have also tended to generate an excess demand for loans. Legally prohibited from price discrimination, creditors have been obliged to allocate their portfolios according to various criteria, and loan applicants whom creditors find relatively unappealing have been forced to rely heavily on self-finance or the unregulated curb markets. McKinnon (1973) and Shaw (1973) have argued that such rationing regimes lead to serious factor misallocations, inappropriate technology choices, and unnecessarily low growth rates. In the past decade their perspective has been formalized with macro models of financially repressed economies, and numerous supportive empirical studies have been reported (Fry (1982) surveys the literature). Surprisingly, however, several fundamental micro issues have received little attention: what is the nature of the bias in credit allocation that nonprice rationing induces; and how does

Robert E. Lucas

No abstract is available for this record.

Robert M. Townsend

A recent development in economic science is the attempt to integrate monetary theory with the theory of general economic equilibrium. This work takes as its starting point the idea that money cannot have value in standard, general equilibrium models. In these, too much trade can be accomplished in centralized markets (see Robert Clower, 1969, 1971; Frank Hahn, 1973; or Neil Wallace, 1980). Thus, to decentralize or break up the structure, either exchange must be made costly or there must be restrictions on who can trade with whom, and thus such choicetheoretic models offer the intriguing possibility that real and monetary phenomena can be understood as intimately related. This paper continues in the relatively brief, choice-theoretic tradition, motivated by real and monetary phenomena associated economic development and growth: 1) To be noted first is Simon Kuznets' seminal work on national income (1971). In a cross-section study of fifty-seven countries in 1958, Kuznets shows that the share of the agricultural sector, including forestry, fishing, and hunting, in Gross Domestic Product is inversely correlated with Gross Domestic Product per capita. The share of the industrial sector, including transportation and communication, is closely and positively associated with per capita product. The share of the service sector tends to be positively but weakly associated with per capita product, but the share of banking, insurance, and real estate shows a striking rise as one shifts from lowto higher-income countries. Moreover, the evidence suggests that the ratio of industrial prices to agricultural prices is perhaps lower the higher is per capita income, though the evidence on relative prices for the service sector is inconsistent. Turning to long time-series for thirteen developed and four less developed countries, Kuznets finds dramatic evidence for a decline of the agricultural sector and a rise in the industrial sector with per capita income, at least in developed countries. Again, results for the service sector are mixed, but Canada, France, and the United States are positive exceptions. The share of a transport-communication subsector rises quite consistently. Turning next to shares of sectors in the labor force, Kuznets finds, both on a cross-sectional and secular basis, that all the above movements are at least mirrored and in many cases amplified. In particular, both components of the share of the service sector, services and commerce, rise substantially with Gross Domestic Product per capita. 2) To be noted second is the extensive work of Raymond Goldsmith on financial structure and financial intermediation. For the United States, Goldsmith (1958) finds that the activity of intermediaries, as measured by their share in national assets, in tangible assets, and in all claims, has shown a substantial rise from 1860 to 1952. Similarly, Goldsmith (1969) finds that the ratio of financial institutions' assets to Gross National Product rises substantially from 1860 to 1963 in both developed and less developed countries, including Switzerland, Great Britain, the United States, Japan, Argentina, and India. Related, the number of households with savings accounts, the number with life insurance policies, and the number with stock ownership expressed as percents of the population are all low for less developed countries relative to developed countries, and *Professor of Economics, Carnegie-Mellon University, Graduate School of Industrial Administration, Schenley Park, Pittsburgh, PA 15213. This paper was motivated by a conversation with Thomas Sargent and has been aided by helpful comments from Robert Barro, Robert E. Lucas, Jr., Dan Peled, Kenneth Singleton, and Neil Wallace. Financial support from the National Science Foundation, the Alfred P. Sloan Foundation, and the Peterkin Symposium on Foundations of Monetary Policy and Government Finance at Rice University, and research assistance from Pramerudee Townsend are all gratefully acknowledged. I alone assume full responsibility for any errors and for the views expressed here.

Anat Lerner

The formulation of the argument for distributional equality by William Breit and William Culbertson is an improvement on that of The Economics of Control and is more effective in class. Their generalization of the to the case of increasing marginal utility (of income) offset by a greater degree of diminishing marginal utility elsewhere, is also an improvement. Their point that Paul Samuelson did not escape the ''equal ignorance assumption is well taken. Ambiguity, being a case of lack of clarity is a charge that can never successfully be refuted. However, I would like to deny a switching of conclusions. Perhaps the ambiguity would have been avoided if I had added the following words in Roman type to the italicized sentence quoted: . . if it is desired to maximize the total satisfaction in a society, the rational procedure, in the absence of the knowledge that would enable us to equalize the marginal utilities, is to maximize the probable total satisfaction-i.e., to divide income on an equlitarian basis. The theorem on page 32 is not than the and mild one of page 29. It is the same proposition. The ingenous device of the 100 million coconut islands in one way does more than is claimed for it and in another way, does less. If it were possible to divide the total population into pairs which had the same utility functions, the equalization of income within each pair would never involve a wrong movement to be offset by a right oine. That is why there is certainty of improvement from equalization on every island. Furthermore, there would be an absolute maximization, with certainty, of the total satisfaction of the pair on each island from their joint income. On the other hand, the parable assumes that the combined incomes of the pairs have somehow already been equalized; that for every individual in the half of the total population with incomes less than the mean, his partner in the other half of the population (with an identical utility function) has an income greater than the mean by the exact amount that his is less than the mean. (This implies incidentally that no individual has an income as as twice the mean unless his partner has a zero income.) If this is not the case, some islands will be richer than others. We will then have to equalize the incomes of the islands before we could conduct Breit and Culbertson's experiment. The parable, therefore, while not necessary for the meek that income equalization maximizes the probable total satisfaction, is not sufficient for the bold proposition (to which I have never subscribed) that income equalization increases total satisfaction with absolute certainty. Breit and Culbertson's development of their parable reflects the same discomfort they have seen in others. The pair on the island are not satisfied with the proof that the equalization of the incomes has maximized their probable satisfaction. Sharing a widespread human craving for certainty, they want to be quite sure that they have at least increased their actual total satisfactions. This assurance is unfortunately not available as long as the utility functions are unknown. Breit and Culbertson also are seeking for a certainty of gain in a much bolder and more interesting regarding realized satisfactions instead of the maximization of a mere probability, and are accurately represented by the island pair they have invented. They have imagined a certainty of gain only by imagining the discovery of identicalutility twins. But the whole point of the * University of California, Berkeley.

Vasilis Kostakis, Chris Giotitsas

The still raging financial crisis of 2007–2008 has enabled the emergence of several alternative practices concerning the production, circulation, and use of money. This essay explores the political economy of the Bitcoin ecosystem. Specifically, we examine the context in which this digital currency is emerging as well as its nature, dynamics, advantages, and disadvantages. We conclude that Bitcoin, a truly interesting experiment, exemplifies “distributed capitalism” and should be mostly seen as a technological innovation. Rather than providing pragmatic answers and solutions to the current views on the financial crisis, Bitcoin provides some useful and timely questions about the principles and bases of the dominant political economy. A ECONOMIA POLÍTICA DO BITCOINResumoO aquecimento da crise financeira de 2007-2008 permitiu o surgimento de várias práticas alternativas em matéria de produção, circulação e uso do dinheiro. Este ensaio explora a economia política do ecossistema Bitcoin. Especificamente, vamos examinar o contexto em que essa moeda digital está emergindo, bem como a sua natureza, dinâmica, vantagens e desvantagens. Concluímos que Bitcoin, uma experiência verdadeiramente interessante, exemplifica "capitalismo distribuído" e deve ser visto principalmente como uma inovação tecnológica. Em vez de fornecer respostas e soluções pragmáticas para os pontos de vista atuais sobre a crise financeira, Bitcoin fornece algumas perguntas úteis e oportunas sobre os princípios e as bases da economia política dominante.