DOCSLIB.ORG

Bank Regulation and the Effectiveness of Open Market Operations

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Bank Regulation and the Effectiveness of Open Market Operations JOHN H. KAREKEN Universityof Minnesota Bank Regulation and the Effectiveness of Open Market Operations IN THIS PAPER I am occupied with whether recent changes in U.S. bank regulatorypolicy have made the Federal Reserve less effective as a centralbank than it was. In passing, I am also occupied with how U.S. regulatorypolicy may change over the years immediatelyahead and withwhether, depending on how the policy changes,the FederalReserve is going to end up less effective than it is at present. For me, effective has a very narrowmeaning: the FederalReserve is effective to the extent that, by means of (domestic) open market operations, it can in some appropriatesense control the nominalgross nationalproduct of the United States. Insteadof nominalGNP, I might, of course, have chosen realGNP as the FederalReserve's targetvariable or, alternatively,the averageof prices of all goods and services currently produced by resident companies. Most would agree, however, that nominalGNP responds, if perhapswith a lag, even to a fully anticipated change in the Federal Reserve's portfolio of Treasurysecurities or, in other words, to a fully anticipatedofficial open marketoperation. And by choosing nominalGNP, I avoid the questionof how its components, real GNP and the GNP deflator, respond to anticipatedand unantici- patedchanges in the FederalReserve's portfolioof Treasurysecurities. The Federal Reserve is not limited to engaging in open market operations.It can try to influence U.S. nominalGNP by, for example, I am obligedto membersof the BrookingsPanel for helpfulcomments and to so many othercolleagues, near and distant,that I cannotlist all of them. Severalmust, however, be singledout: CarterH. Golembe,Robert Litterman, and Neil Wallace. 405 406 Brookings Papers on Economic Activity, 2:1984 changing discount rates or the required reserves ratio. We can also imagineit engagingin "open mouth"operations or, as in 1966,attempting by threatto persuade banks to do this or that. It seems to me, though, thatmost FederalReserve officialsand knowledgeableoutsiders believe that nominal GNP should be controlledby official open marketopera- tions. That is why I define effective as I do. Thereis anotherdefinition to be highlighted.In partbecause regulatory policy has been changed, differences in classes of U.S. financialinter- mediariesare not nearly as pronouncedas they were. It is now at best extremely difficult to distinguish between the commercialbanks and savings and loan associations (S&Ls) doing business in the United States, except by appealto niceties of law thatas a practicalmatter mean precious little. I thus think of the U.S. bankingindustry as being made up of all of the federally and state-charteredS&Ls (and for what little they add, the savings banks) in the United States, federally and state- charteredU.S. commercialbanks, and U.S .-based commercialbanking subsidiariesof foreign bankingorganizations. Although on occasion it will be necessary to refer specificallyto commercialbanks or to S&Ls, I mean both when I use the word bankswithout qualification. In the section of the paper that follows immediately, I consider whether government regulationof banks is necessary for an effective centralbank. ThereafterI review relevantrecent changes in U.S. bank regulatory policy and go into whether those changes have made the FederalReserve any less effective than it was. To conclude, I speculate about U.S. regulatorypolicy of the years immediatelyahead and about whetherthe most likely changes in policy will makethe FederalReserve less effective than it is now. In the first section of the paperI arguethat there mustbe government regulationif the centralbank is to be effective, able, that is, by means of open marketoperations to influencenominal GNP, and that the type of government-imposedrestriction required depends on the payments technology being used.' That propositionis to be read as a warning,at 1. As maybe apparent,the phrase"by meansof openmarket operations" is important. Since other ways of influencingnominal GNP may exist, there is no implicationthat government-imposedrestrictions are in general necessary. Indeed, Hall has proposed paying interest on requiredreserves and using the rate paid to influencenominal GNP. See Robert E. Hall, "Optimal Fiduciary Monetary Systems," Journal of Monetary Economics, vol. 12 (July 1983),pp. 33-50. But it is no partof my purposeto decide how best to controlnominal GNP. John H. Kareken 407 least by those who are ideologicallydisposed toward laissez faire. Under the laissez faire bankingpolicy, nominalGNP is beyond the reach of the centralbank that is limited to engagingin open marketoperations. To put the point anotherway, underthe laissez fairepolicy any officialopen marketoperation is without effect. In the second section I review and appraiserecent relevantchange in U.S. bankregulatory policy. And relevant is to be stressedbecause most of the changes in that policy have no bearingon the effectiveness of the Federal Reserve. Geographicrestrictions come immediatelyto mind. They have been eased somewhat, but even if eliminatedthe Federal Reserve would not now be any more or less effective than it was. I therefore consider only those parts of policy governing bank interest payments to depositors and the activities in which banks (and bank holdingcompanies) may engage. Goingbeyond bank regulatorypolicy, I also appraise the much-publicizedemergence of the nonbankbanks or, to use a phrasethat anyone who still cares aboutour languageshould prefer,the loophole banks. I concludethat despite potentiallysignificant changes in policy and the emergence of loophole banks, the Federal Reserve is in at least one sense not appreciablyless effective thanit was. Thereis the possibility,though, of the FederalReserve being unwilling to control nominal GNP. What if it is confrontedby, for example, an incipient financialcrisis? I am far from sure that the Federal Reserve, althougha lender of last resort with responsibilityfor what happens to nominalGNP, can ever find itself torn. But if it can, then, as I argue in the last section of the paper, easing or eliminatinggovernment-imposed restrictionsmay makeit less effective. In that connection, the important question is what Congress and the regulatoryagencies do in the years aheadand, morespecifically, how they managethe potentialfor riskiness in banking. The Need for Government Regulation In this section I argue that governmentregulation is necessary if a centralbank is to be able to influencenominal GNP by exchangingbonds for currency or currency for bonds. (For now, that is what effective means:being able to influencenominal GNP.) I also arguethat the type of government-imposedrestriction required depends on the payments 408 BrookingsPapers on Economic Activity, 2:1984 technologybeing used. I do not reallyestablish either proposition, since all I do is considera few specificpayments technologies. I am, however, seeking only plausibility.Moreover, the assumedpayments technology of the first subsection would seem a good approximationof that being used currentlyin the United States. Its distinguishingcharacteristic is that, just as in the United States of the present, some purchases are made with currency. THE SUPPLY OF CURRENCY I find it convenient to define intermediationas makingsmall-denom- inationclaims out of large-denominationclaims or as substitutingsmall for large-denominationclaims. To illustrate,a private-sectorcompany buys a ninety-daybearer claim on the government,a claim with face or maturityvalue of $ 10,000,and then sells 10,000ninety-day bearer claims to the large-denominationgovernment claim, each with a face value of $1. Presently it will be necessary to go into what the buying and selling prices are. Here, though, it suffices to note that in doing what it was describedas doingthe private-sectorcompany is not only intermediating but also supplyinga tangiblemeans of paymentor currency,an alterna- tive to the government-issuedor officialcurrency. But if private-sector companies are free to intermediateor supply currency,then nothingof any consequencefollows froman officialopen marketoperation.2 The centralbank is ineffective. The precise meaning offree to intermediatemay be apparent:there is unimpeded(zero-cost) entry into and exit from the private-sectorintermediation industry. For a central bank to be ineffective, it must also be assumed, though, that intermediationis a constant average-cost activity.3 And, further, the government's cost of intermediatingmust be identical to the private sector's cost. But that last assumption seems innocuous; even when thereis greatincentive, keepinga technologysecret is nearto impossible. 2. I borrow from Neil Wallace, "A Legal RestrictionsTheory of the Demand for 'Money' and the Role of MonetaryPolicy," QuarterlyReview of the Federal Reserve Bankof Minneapolis,vol. 7 (Winter1983), pp. 1-7. 3. If x > y, then issuingx small-denominationclaims, each with face value z/x, where z is the face value of the large-denominationclaim, must cost more than issuingy small- denominationclaims, each with face value z/y. The constantaverage cost is, however,for the issue of a given numberof small-denominationclaims, say n. So the assumptionis that if issuingn claimsagainst a large-denominationclaim costs c dollars,then issuing 2n claims againsttwo large-denominationclaims costs 2c dollars. John H. Kareken 409 We can suppose that any private-sectorcompany engaged in inter- mediationsells its small-denominationclaims, those with face value
Load more

Recommended publications
  • Cash Management and Fiduciary Banking Services
    The Winterbotham Merchant Bank a division of The Winterbotham Trust Company Limited CASH MANAGEMENT AND FIDUCIARY BANKING SERVICES Table of Contents Winterbotham Group 4 Regulated Subsidiaries 5 Cash Management and Fiduciary Banking Services 6 Critical Advantages 7 What is Fiduciary Banking? 8 Additional Cash Management Services 9 The Winterbotham Merchant Bank 9 Winterbotham International Securities 10 WINTERBOTHAM GROUP Since our founding in 1990 The Winterbotham Group has focused on the provision of high quality financial services to a global clientele, utilizing the most modern technology, delivered personally. At Winterbotham we seek to add value and our suite of services and the location of their delivery has expanded as the needs of our clients have grown. Today Winterbotham operates in six international financial centers from which we offer services which are individually customized and delivered with an attention to detail now often lost as the transfer of service ‘online’ encourages financial decisions to be self-directed. During our almost three decades of growth Winterbotham’s ownership remains vested in the hands of its founder and his family and this continuity is mirrored in our vision which has not changed: YOUR OBJECTIVES = OUR OBJECTIVES ENABLING YOUR BUSINESS TO THRIVE The Winterbotham Trust Company Limited is a Bank and Trust Company, Broker/Dealer and Investment Fund Administrator, with Head Offices in Nassau, The Bahamas. Winterbotham operates a subsidiary Bank, WTC International Bank Corporation, in San Juan, Puerto Rico and non-banking regional offices/subsidiaries in the Cayman Islands, Chennai, Montevideo and Hong Kong. The group has developed a niche offering in the provision of back office, structuring, administration, corporate governance, IT and accounting services for entrepreneurs and their companies, wealthy individuals and families, their family offices, and for financial institutions.
    [Show full text]
  • Understanding Open Market Operations
    Foreword The Federal Reserve Bank of New York is responsible for Michael Akbar Akhtar, vice president of the day-to-day implementation of the nation’s monetary pol- Federal Reserve Bank of New York, leads the reader— icy. It is primarily through open market operations—pur- whether a student, market professional or an interested chases or sales of U.S. Government securities in the member of the public—through various facets of mone- open market in order to add or drain reserves from the tary policy decision-making, and offers a general per- banking system—that the Federal Reserve influences spective on the transmission of policy effects throughout money and financial market conditions that, in turn, the economy. affect output, jobs and prices. Understanding Open Market Operations pro- This edition of Understanding Open Market vides a nontechnical review of how monetary policy is Operations seeks to explain the challenges in formulat- formulated and executed. Ideally, it will stimulate read- ing and implementing U.S. monetary policy in today’s ers to learn more about the subject as well as enhance highly competitive financial environment. The book high- appreciation of the challenges and uncertainties con- lights the broad and complex set of considerations that fronting monetary policymakers. are involved in daily decisions for open market opera- William J. McDonough tions and details the steps taken to implement policy. President Understanding Open Market Operations / i Acknowledgment Much has changed in U.S. financial markets and institu- Partlan for extensive comments on drafts; and to all of tions since 1985, when the last edition of Open Market the Desk staff for graciously and patiently answering my Operations, written by Paul Meek, was published.
    [Show full text]
  • Payment System Disruptions and the Federal Reserve Followint
    Working Paper Series This paper can be downloaded without charge from: http://www.richmondfed.org/publications/ Payment System Disruptions and the Federal Reserve Following September 11, 2001† Jeffrey M. Lacker* Federal Reserve Bank of Richmond, Richmond, Virginia, 23219, USA December 23, 2003 Federal Reserve Bank of Richmond Working Paper 03-16 Abstract The monetary and payment system consequences of the September 11, 2001, terrorist attacks are reviewed and compared to selected U.S. banking crises. Interbank payment disruptions appear to be the central feature of all the crises reviewed. For some the initial trigger is a credit shock, while for others the initial shock is technological and operational, as in September 11, but for both types the payments system effects are similar. For various reasons, interbank payment disruptions appear likely to recur. Federal Reserve credit extension following September 11 succeeded in massively increasing the supply of banks’ balances to satisfy the disruption-induced increase in demand and thereby ameliorate the effects of the shock. Relatively benign banking conditions helped make Fed credit policy manageable. An interbank payment disruption that coincided with less favorable banking conditions could be more difficult to manage, given current daylight credit policies. Keywords: central bank, Federal Reserve, monetary policy, discount window, payment system, September 11, banking crises, daylight credit. † Prepared for the Carnegie-Rochester Conference on Public Policy, November 21-22, 2003. Exceptional research assistance was provided by Hoossam Malek, Christian Pascasio, and Jeff Kelley. I have benefited from helpful conversations with Marvin Goodfriend, who suggested this topic, David Duttenhofer, Spence Hilton, Sandy Krieger, Helen Mucciolo, John Partlan, Larry Sweet, and Jack Walton, and helpful comments from Stacy Coleman, Connie Horsley, and Brian Madigan.
    [Show full text]
  • Cash Or Credit?
    LESSON 15 Cash or Credit? LESSON DESCRIPTION • Compare the advantages and disadvantages AND BACKGROUND of using credit. Most students are aware of the variety of pay - • Explain how interest is calculated. ment options available to consumers. Cash, • Analyze the opportunity cost of using credit checks, debit cards, and credit cards are often and various forms of cash payments. used by their parents; however, the students • Evaluate the costs and benefits of various probably do not understand the implications of credit card agreements. each. This lesson examines the advantages and disadvantages of various payment methods and focuses especially on using credit. The students TIME REQUIRED are challenged to calculate the cost of credit, Two or three 45-minute class periods compare credit card agreements, and analyze case studies to determine whether credit is being used wisely. MATERIALS Lesson 15 is correlated with national standards • A transparency of Visual 15.1 , 15.2 , and 15.3 for mathematics and economics, and with per - • A copy for each student of Introduction to sonal finance guidelines, as shown in Tables 1-3 Theme 5 and Introduction and Vocabulary in the introductory section of this publication. sections of Lesson 15 from the Student Workbook ECONOMIC AND PERSONAL FINANCE • A copy for each student of Exercise 15.1 , CONCEPTS 15.2 , and 15.3 from the Student Workbook • Annual fee • APR • A copy for each student of Lesson 15 Assessment from the Student Workbook • Credit limit • Finance charge • Credit card application forms—one for each student. Collect these ahead of time, or have • Grace period students bring in those their parents receive.
    [Show full text]
  • Macroeconomics Course Outline and Syllabus
    City University of New York (CUNY) CUNY Academic Works Open Educational Resources New York City College of Technology 2018 Macroeconomics Course Outline and Syllabus Sean P. MacDonald CUNY New York City College of Technology How does access to this work benefit ou?y Let us know! More information about this work at: https://academicworks.cuny.edu/ny_oers/8 Discover additional works at: https://academicworks.cuny.edu This work is made publicly available by the City University of New York (CUNY). Contact: [email protected] COURSE OUTLINE FOR ECON 1101 – MACROECONOMICS New York City College of Technology Social Science Department COURSE CODE: 1101 TITLE: Macroeconomics Class Hours: 3, Credits: 3 COURSE DESCRIPTION: Fundamental economic ideas and the operation of the economy on a national scale. Production, distribution and consumption of goods and services, the exchange process, the role of government, the national income and its distribution, GDP, consumption function, savings function, investment spending, the multiplier principle and the influence of government spending on income and output. Analysis of monetary policy, including the banking system and the Federal Reserve System. COURSE PREREQUISITE: CUNY proficiency in reading and writing RECOMMENDED TEXTBOOK and MATERIALS* Krugman and Wells, Eds., Macroeconomics 3rd. ed, Worth Publishers, 2012 Leeds, Michael A., von Allmen, Peter and Schiming, Richard C., Macroeconomics, Pearson Education, Inc., 2006 Supplemental Reading (optional, but informative): Krugman, Paul, End This Depression
    [Show full text]
  • Open Mouth Operations: a Swiss Case Study Michael J
    Economic SYNOPSES short essays and reports on the economic issues of the day 2005 I Number 1 Open Mouth Operations: A Swiss Case Study Michael J. Dueker and Andreas Fischer early all central banks, other than those that peg Bank sought to implement the smallest initial rise in the an exchange rate, now explicitly communicate repo rate that would achieve their new target for the LIBOR. Npolicy changes through an announced target level The fact that the 3-month Swiss LIBOR rate immediately for a short-term interest rate. Notably, in 1999, the Swiss rose by the full 25 basis points, while the repo rate rose by National Bank replaced its monetary base target with an only about 15 basis points, suggests that the Swiss National operating target for the 3-month Swiss franc interbank Bank used open mouth operations to increase the rate lending (LIBOR) rate that the central bank adjusts as part spread above its usual level of 15 basis points. By the time of its strategy to maintain price stability. One question that of the second target change in September 2004, however, has arisen with interest rate targets is whether a central bank the Swiss National Bank did not achieve its objective of can cause the interest rate to move simply by expressing its raising the Swiss LIBOR rate by 25 basis points (to a level intention to establish a new target level—so-called open of 75 basis points) until it had raised the repo rate to a level mouth operations—or whether transactions of securities in of approximately 60 basis points—that is, not until the the central bank’s portfolio—open market operations—are typical rate spread of about 15 basis points was restored.
    [Show full text]
  • Money Supply ECON 40364: Monetary Theory & Policy
    Money Supply ECON 40364: Monetary Theory & Policy Eric Sims University of Notre Dame Fall 2017 1 / 59 Readings I Mishkin Ch. 3 I Mishkin Ch. 14 I Mishkin Ch. 15, pg. 341-348 2 / 59 Money I Money is defined as anything that is accepted as payments for goods or services or in the repayment of debts I Money serves three functions: 1. Medium of exchange 2. Unit of account 3. Store of value I Any asset can serve as a store of value (e.g. house, land, stocks, bonds), but most assets do not perform the first two roles of money I Money is a stock concept { how much money you have (in your wallet, in the bank) at a given point in time. Income is a flow concept 3 / 59 Roles of Money I Medium of exchange role is the most important role of money: I Eliminates need for barter, reduces transactions costs associated with exchange, and allows for greater specialization I Unit of account is important (particularly in a diverse economy), though anything could serve as a unit of account I As a store of value, money tends to be crummy relative to other assets like stocks and houses, which offer some expected return over time I An advantage money has as a store of value is its liquidity I Liquidity refers to ease with which an asset can be converted into a medium of exchange (i.e. money) I Money is the most liquid asset because it is the medium of exchange I If you held all your wealth in housing, and you wanted to buy a car, you would have to sell (liquidate) the house, which may not be easy to do, may take a while, and may involve selling at a discount if you must do it quickly 4 / 59 Evolution of Money and Payments I Commodity money: money made up of precious metals or other commodities I Difficult to carry around, potentially difficult to divide, price may fluctuate if precious metal or commodity has consumption value independent of medium of exchange role I Paper currency: pieces of paper that are accepted as medium of exchange.
    [Show full text]
  • Voluntary National Content Standards in Economics 2Nd Edition Voluntary National Content Standards in Economics
    Voluntary national ContEnt StandardS in EConomics 2nd Edition Voluntary national ContEnt StandardS in EConomics 2nd Edition WRITING COMMITTEE ACKNOWLEDGMENTS John Siegfried, Writing Committee Chair Many individuals reviewed the Voluntary National Vanderbilt University Content Standards in Economics, 2nd Edition. The individuals listed below provided special assistance Alan Krueger, Writing Committee Co-Chair in helping develop the content of the standards. Through February 2009 Princeton University Stephen Buckles Vanderbilt University Susan Collins University of Michigan Bonnie Meszaros University of Delaware Robert Frank Cornell University James O’Neill University of Delaware Richard MacDonald St. Cloud State University Robert Strom Ewing Marion Kauffman Foundation KimMarie McGoldrick University of Richmond John Taylor Stanford University George Vredeveld University of Cincinnati FUNDING The Council for Economic Education gratefully acknowledges the funding of this publication by the United States Department of Education, Office of Innovation and Improvement, Excellence in Economic Education: Advancing K-12 Economic & Financial Education Nationwide grant award U215B050005-08. Any opinions, findings, conclusions, or recommendations expressed in the publication are those of the authors and do not necessarily reflect the view of the U.S. Department of Education. Copyright © 2010, Council for Economic Education, 122 East 42 Street, Suite 2600, New York, NY 10168. All rights reserved. The Content Standards and Benchmarks in this document may be reproduced for non-commercial educational and research purposes. Notice of copyright must appear on all pages. Printed in the United States of America. ISBN 978-1-56183-733-5 5, 4, 3, 2, 1 ii Voluntary national Content StandardS IN eCONOMiCS Contents PREFACE . v FOREWORD TO THE FIRST EDITION .
    [Show full text]
  • An Assessment of Calgary As a Financial Centre
    An Assessment of Calgary as a Financial Centre June, 2017 Presented to: Calgary Economic Development Prepared by: The Conference Board of Canada Contents Executive Summary ....................................................................................................................................... 3 Introduction .................................................................................................................................................. 5 Calgary as a Global Financial Centre ............................................................................................................. 6 The Status of Financial Services in Calgary ............................................................................................... 6 Calgary’s Strengths .................................................................................................................................... 8 Investment Banking .............................................................................................................................. 9 Foreign Direct Investment .................................................................................................................. 12 Wealth Management and Private Equity ............................................................................................ 13 Corporate Banking and Professional Services .................................................................................... 15 Benchmarking the Attractiveness of Calgary as a Financial Centre ...........................................................
    [Show full text]
  • Green Trust Cash Loan Application
    Green Trust Cash Loan Application Coelomate Marco recognize conically and telepathically, she meditates her earing regrade thereabout. Unproper Lynn ceils, his suzerain let-out effaces longwise. Teutonic Derby upper-case: he oar his Romanies ghastly and somewhither. Minimum credit history: Three years. There are green. If you exit any accident, numbers stated on rig site may drink from actual numbers. Our site is green trust loans subject to borrowers like to bridge those with ease with easy application that you enter your credit history and. Their cash trust cash loans. Try and a cycle of greater the growth of various scientific backgrounds have trouble that backs up and trust loan could improve your customers. Card Sort, designed to be quick and simple. My truck tranny went quick as week as we got back seat after racking up all property debt. She has contributed to NPR, there on some apps that charge membership fees and allow myself to get a last advance is take as long as well want to flute the amount. Debt do consistently by this application. How much would you like you borrow? This was in my first step and In he past I cannot able to merit it crimson to bowl off sooner. Then the cash trust is much income, unfair or very misleading on if i borrowed. Green Gate Loan offer the right payday loans accurately for you. Your verifiable income must support your ability to repay your loan. Green trust cash green trust cash, so you needed. Make an application for fully guaranteed installment loans now.
    [Show full text]
  • Cash Advance Admin User Guide
    Concur Expense: Cash Advance Admin User Guide Last Revised: August 27 2021 Applies to these SAP Concur solutions: Expense Professional/Premium edition Standard edition Travel Professional/Premium edition Standard edition Invoice Professional/Premium edition Standard edition Request Professional/Premium edition Standard edition Table of Contents Section 1: Permissions ................................................................................................ 1 Section 2: Overview .................................................................................................... 1 Typical Cash Advance Process ...................................................................................... 1 Receiving Email Notifications of a Cash Advance Pending Issuance ................................... 2 Cash Advances Using a Company Card.......................................................................... 2 Imported Transactions of Type Cash Advance ........................................................... 3 Directly Issued and Auto-Issuance Cash Advances ......................................................... 3 Section 3: Cash Advance Admin Tool ........................................................................... 3 Section 4: Procedures ................................................................................................. 4 Accessing Cash Advance Admin.................................................................................... 4 Searching for Employees ............................................................................................
    [Show full text]
  • (Missing: How Lowering Land Prices Encourages Saving
    George’s Economics of Abundance: Replacing dismal choices with practical resolutions and synergies Mason Gaffney Introduction: Resolutions vs. trade-offs It is part of George’s genius that his proposals solve one problem by resolving it with another, turning two problems into one solution. It is something like tuning up the orchestra for a concert, turning dissonance into harmony, and keeping the beat together, turning cacaphony into rhythm. It is the mark of good solutions that they reconcile and resolve, rather than simply “trade-off.”1 That is what George means when he writes that “the laws of the universe are harmonious.” That is what Founding Fathers like Washington, Jefferson and Franklin meant by a “natural order.” Like them, George is a deist in spirit, a believer in the consistency of the universe. The concept that some things are more “natural” than others is not arbitrary. The clue that one has found the “natural” law is that it makes forces harmonize and team together instead of clashing, and neutralizing each other.2 The principle of constructive synthesis–a touch of Hegel–is another way of perceiving the value of turning cacaphony into harmony.3 Economists today offer us mainly “trade-offs” and hard choices. For every good thing we must give up another, so net gains are just marginal. That is the approved posture: it makes one seem hard-headed, worldly, and practical. Too much positive thinking sounds suspiciously optimistic, and invites rebellious cynical muttering that “there ain’t no free lunch.” It goes back at least to Malthus, who offered mankind the hard choice of food vs.
    [Show full text]