Why Austrian socialism?

Socialist objectives can be achieved in a market context with the rule of law if market socialism were to take the form of competitive worker-owned and self-managed enterprises, supplemented by universally available welfare redistributions, which could include a basic income, universal capital grants, or education and health insurance vouchers.      

Why multilevel selection matters

In spite of its checkered intellectual history, and in spite of the myriad proposals of alternative models that claim both to account for the range of human behavior and to dispense with the need for selection above the organism level, a multilevel selection framework allowing for biological as well as cultural group selection remains the only coherent means of accounting for the persistence and spread of behavioral inclinations which, at least upon first appearance at low frequency, would have been biologically altruistic. This argument is advanced on three tracks: through a review of experimental and observational evidence inconsistent with a narrow version of rational choice theory, through a critique of models or explanations purporting to account for prosocial behavior through other means, and via elaboration of the mechanisms, plausibility, and intellectual history of biological group selection.      

Why Financial Deregulation?

Over the past six years, financial markets in Australia have been deregulated almost completely. This article attempts to explain why Australia's financial markets have been deregulated and why financial deregulation has occurred so quickly. It suggests the answers lie in changed perceptions of the usefulness of regulation as a means to specific ends. Exogenous developments in the financial environment altered the impact of regulations on financial institutions. The result was a weakening in the competitive position of regulated financial institutions relative to unregulated financial institutions and direct financiers. This led simultaneously to a reduction in the ability of the monetary authorities to control the growth of total financing and a growing perception amongst regulated institutions that the costs of regulated status outweighed the benefits. The rapid demise of the regulations can be traced to the joint realisation by the monetary authorities and the regulated institutions that the regulations no longer served their respective ends. This conjunction of 'public interest' and 'private interest' in financial deregulation can in turn be traced to the unique ability of financial markets to generate close substitutes for existing financial products at low cost.     

Why Environmentalists Resist Trade Liberalization

We build a two-country differential game model of polluting oligopoly to consider the effects of trade liberalization. As in static models, the opening of trade promotes competition but expands global pollution. Characterizing open-loop and feedback strategies, we derive a sufficient condition for losses from trade. This losses-from-trade proposition could provide a rationale for persistent resistance to globalization by environmentalists.     

Why do Banks Fail?

Banks advance loans in the absence of precise knowledge in relation to the outcome of borrowers' projects. Consequently, uncertainty in relation to loan repayment emerges. Thus, banks introduce the 'credit standard' as insurance against loans, so that should borrowers' projects fail, borrowers have an alternative means of honouring their debt obligations. It is argued in this paper that in the competitive atmosphere under which this sector operates, it is not possible to secure the entire loan portfolio by introducing the credit standard, and in recent years this difficulty has been further exacerbated by financial liberalisation, which may have caused bank failures.     

Why Credit Rating Agencies Exist

Although credit rating agencies exist and are important to the capital markets, there remains a question of why they should exist. Two standard theories are that rating agencies correct a problem of information asymmetry and that they de facto regulate investments. These theories do not fully answer the question. This paper suggests an alternative explanation. While rating agencies produce little new information, they sort information available in the credit market. This sorting function is needed due to the large volume of information in the credit market. Sorting facilitates better credit analysis and investment selection, but bond investors or a cooperative of them cannot easily replicate this function. Outside of their information intermediary and regulatory roles, rating agencies serve a useful market purpose even if credit ratings inherently provide little new information. This alternative explanation has policy implications for the regulation of the industry.     

Why is Corruption Tolerated?

It is maintained that a closer analysis of the features of the underlying contract reveals that under many circumstances corruption is in fact a rational and understandable reaction to institutional failures, which are often far from accidental. Sometimes it can even be considered legitimate, when instrumental in achieving goals shared by the vast majority of the electorate.To this purpose, three different stylized institutional frameworks are analyzed: developed, totalitarian and transition countries. The origin, scope and consequences of corruption vary significantly across the different frameworks. The normative conclusions should therefore be adjusted accordingly.     

Why banks should keep secrets

Summary. We show that it is sometimes efficient for a bank to commit to a policy that keeps information about its risky assets private. Our model, based upon Diamond-Dybvig (1983), has the feature that banks acquire information about their risky assets before depositors acquire it. A bank has the option of using contracts where the middle-period return on deposits is contingent on this information, but by doing so it must also reveal the information. We derive the conditions on depositors preferences and banking technology for which a bank would prefer to keep information secret even though it must then use a non-contingent deposit contract.Received: 5 November 2002, Revised: 19 December 2004, JEL Classification Numbers: D8, G21, G28.I would like to thank an anonymous referee, Sudipto Bhattacharya, Ed Green, Chandra Kanodia, Andy McLennan, Arijit Mukherji, Bradley Ruffle, Neil Wallace, Warren Weber, and especially Nobu Kiyotaki for useful comments and suggestions.