REPAIRING THE CRACKS: THE SUPERVISORY ROLE OF THE BANK OF ENGLAND POST-NORTHERN ROCK

Last autumn's run on Northern Rock was arguably of more political than economic importance. However, it is significant that most of the deposits were lost from internet and postal accounts rather than withdrawn by the picturesque queues of small investors, which attracted so much media attention, making it possibly the first cyber run on a bank. More can be learnt from failures than successes, and it now seems appropriate to consider the longer-term implications of the Northern Rock affair for the supervisory responsibilities of the Bank of England.     

THE MEANING OF FAILED REPLICATIONS: A REVIEW AND PROPOSAL

The welcome rise of replication tests in economics has not been accompanied by a consensus standard for determining what constitutes a replication. A discrepant replication, in current usage of the term, can signal anything from an unremarkable disagreement over methods to scientific incompetence or misconduct. This paper proposes a standard for classifying one study as a replication of some other study. It is a standard that places the burden of proof on a study to demonstrate that it should have obtained identical results to the original, a conservative standard that is already used implicitly by many researchers. It contrasts this standard with decades of unsuccessful attempts to harmonize terminology, and argues that many prominent results described as replication tests should not be described as such. Adopting a conservative standard like this one can improve incentives for researchers, encouraging more and better replication tests.     

HOMO DEMOCRATICUS: OR WHY DEMOCRACY SHOULD NOT BE THE OBJECTIVE OF US FOREIGN POLICY

This article argues that government efforts to support democratisation in other countries are often counterproductive because they further strengthen government institutions over and above a responsible, active, citizenry and often target the wrong recipients because of government aversion to risk. Foreign assistance programmes would do better to support individual liberties rather than democracy.     

SHOULD WE WORRY ABOUT THE FAILURE OF THE HOTELLING RULE?

Abstract The continuing dependence of the global economy on fossil fuels is worrying because it imposes limits on growth due to the non‐renewable nature of these resources and also contributes to global climate change. Resource optimists believe that this is no reason to worry, because the economy will always find a way to overcome these constraints. Their arguments, however, require that resource prices reflect the scarcity of non‐renewable resources, which implies that they must obey the Hotelling rule. Empirical analyses, however, show that the Hotelling rule does not hold in reality, which raises the question: does the failure of the Hotelling rule imply that social optimality is not achieved? This paper argues that the answer depends on the reason for the failure. If extraction and exploration costs, or technological progress in these activities, are the reasons for the failure, a market failure is not implied, and optimality may still be achieved. But if the Hotelling rule fails due to uncertain property rights or strategic interaction, the market will surely fail to provide an optimal solution. A market failure is likely to speed up resource consumption compared to the social optimum.     

A STRATEGIC PERSPECTIVE OF BANK FINANCIAL CONGLOMERATES IN LONDON AFTER THE CRASH

The deregulation of financial markets has led to severe challenges for bank management and banking strategy. Investment banking is a sector that has experienced important and well-publicized changes. London's celebrated ‘Big Bang’ helped to stimulate new banking strategies that were characterized by the formation of so-called ‘bank financial conglomerates’. The October 1987 stock market crash, however, has precipitated strategic and organizational crises for many of these banks active in securities business and capital market products. This article re-examines investment banking strategies in London and some of the lessons associated with the crash experiences.     

EMPLOYEE PARTICIPATION IN OCCUPATIONAL HEALTH AND SAFETY: SHOULD UNION-APPOINTED OR ELECTED REPRESENTATIVES BE THE MODEL FOR THE UK?

Peter Kidger, Lecturer in Human Resource Management at the new Salford Management School, considers whether the offshore health and safety system, under which employees have the statutory right to elect safety representatives irrespective of union membership, could serve as a model for an elective system applicable in all workplaces. He reviews the conditions necessary for representation to be effective, the arguments for restricting representation to union appointments, and some of the criticisms of the 1977 SRSC Regulations. He concludes that there is a case for having safety representatives in all workplaces, but draws attention to enforcement and implementation problems which an elective system would face.     

WHY STUDENTS SHOULD PAY THE FULL COSTS OF THEIR EDUCATION

The community as a whole, including students, would be best served by a system under which those who benefit from higher education pay the full costs involved. An optimal student population would emerge (much lower than at present), the tax burden would be reduced and universities would become solvent and independent. Moreover, 'bizarre and outlandish' courses would dwindle.     

A SYSTEMS APPROACH TO BANK PRUDENTIAL MANAGEMENT AND SUPERVISION: THE UTILIZATION OF FEEDFORWARD CONTROL

This paper explores the operational characteristics of a new systems approach for monitoring the prudential strength, or safety, of modern commercial banks. It exploits the principle of feedforward control through the simulated contingency analysis of a bank's planned financial and associated management positions. This approach will be shown to have operational potential for both individual bank managements and the supervisory authorities who monitor the prudential soundness of all banks. Most of the research to date in this field has been concerned with assessing the adequacy of a bank's capital funds, its capital adequacy position. The primary function of bank capital is to act as a kind of internal insurance fund in order to protect a bank against uncertainties.     

THE PATIENT AS CONSUMER: THE ADVERTISING OF PHARMACEUTICALS DIRECTLY TO CONSUMERS SHOULD BE ALLOWED AND ENCOURAGED

The pharmaceutical industry, with few exceptions, is not permitted to advertise its products directly to consumers (DTCA). It is the author's opinion that DTCA should be allowed and encouraged and that it is only a matter of time before this happens. Support for this view comes from reviewing the substantial amount of research undertaken in this controversial area of health policy.     

THE ECONOMETRICS OF THE HOLY GRAIL — A REVIEW OF ECONOMETRICS: ALCHEMY OR SCIENCE? ESSAYS IN ECONOMETRIC METHODOLOGY

Books reviewed in this article: David F. Hendry (1993) Econometrics: Alchemy or Science? Essays in Econometric Methodology