Banking lessons from the past: The 1938 regulatory Agreement interpreted

We show that the interagency 1938 Uniform Agreement on Bank Supervisory Procedures set the precedent for dynamically varying supervisory standards to conform to national macroeconomic policies and political agendas. Our evidence indicates that the conferences leading to the Agreement were motivated and dominated by the Federal Reserve. Contrary to the goals of the other banking agencies, the Fed sought greater leniency in bank examination in order to stimulate bank credit creation. This precedent for softening examination standards was paralleled in 1991–1992 when the administration and regulatory agencies attempted to offset a proclaimed credit crunch by subordinating bank examinations to the perceived need for more bank credit. The implied risk of trading off bank safety for short-lived economic policies merits more open national debate.Our earlier work on this topic was partially supported by the National Center on Financial Studies, University of California, Berkeley.     

Fortress Bethesda

Critics within and outside the National Institutes of Health say that NIH's central administration is hostile and defensive and needs to be shaken up. They hope a new director will do just that.     

Economics as ethics: Bastiat's nineteenth century interpretation

Frederic Bastiat was an influential economic writer of the middle 1800s. In his work,Economic Sophisms (1848), Bastiat proposed a dual system of ethics, containing economic ethics and religious ethics.Bastiat first described the tendency of individuals toward plunder as a means of satisfying their economic needs. Men, he held, could work and produce what they needed by toil, but history had shown that men preferred to take what they could from others who had toiled. Bastiat identified two main types of plunder — force and fraud.Bastiat held that appeals made by philosophers over the centuries had done little to stop plunder. He believed that the best way to reduce physical and moral aggression was by educating individuals to the harmful effects caused by violent and fraudulent behavior.Thus, Bastiat proposed two systems of ethics — economic ethics and religious ethics. Under his system of economic ethics, Bastiat suggested that the recipients of maleficent actions could be stimulated to resist the actions when they were made aware of the true social costs caused by the oppressors. Under his system of religious ethics, Bastiat thought that the perpetrators of maleficent actions could be dissuaded from performing the actions by appealing to their sense of justice and morality.M. G. O'Donnell, Professor of Economics at the University of Southwestern Louisiana, is the author of various articles on early contributions to the discipline of economics, specifically on the writings of Harriet Martineau, Charlotte Perkins Gilman and Henry Sidgwick which have been published in theJournal of Economic Education, theSocial Science Quarterly and theHistory of Political Economy. She has written various articles on educational techniques which have been published in theJournal of Economic Education andSocial Studies, and is the author ofThe Educational Thought of the Classical Political Economists (1985).     

Public utility valuation and risk under incentive regulation

The objective of providing inducements for public utilities to seek to improve the efficiency of their operations has been a longstanding regulatory concern. Among the evolving strategies for furthering that objective is a shift toward what has come to be referred to as incentive regulation. We examine here how this departure from past regulatory practice will affect the market value and market risk of the utility firm, and the specific manner in which an incentive mechanism can be implemented in order to achieve a desired valuation outcome. A particular focus is the establishment of boundaries on allowed rates of return under incentive regulation which are consistent with that desired outcome. The likely impact on utility ratepayers is considered.     

Organizational climate factors and the evaluation of technical ideas

Based on data obtained from 359 idea evaluators, canonical correlation analysis was used to examine the relationship between several organizational factors and a set of criteria used in the evaluation of technical ideas. In contrast to other studies, it was found that organizational factors—assessed in terms of organizational climate—could be explained in terms of two dimensions: organizational clarity and risk. Technical evaluation criteria could be explained in terms of professional self-gratification and organizational responsibility. In light of the multivariate relationship among the two sets of factors, a number of organizational design implications are outlined.     

The effect of futures trading on price variability in the market for onions

Conclusion This paper is in part a study of the operation of futures markets. The empirical evidence presented suggests that futures markets do reduce price fluctuations of traded commodities. Despite these facts, Congress eliminated futures trading in onions at the request of onion growers and shippers. As is often the case with political actions, the losses from the law are spread over a large number of individuals who do not have the incentive to become informed or to lobby on the matter, while the gains accrue to a smaller group with sufficient interest to lobby. Thus, in addition to shedding some light on the operation of futures markets, this paper is also a new illustration of an old maxim in political economy. Over 200 years ago, Adam Smith [11, p. 128] noted, People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. With the government becoming a larger and larger influence on the economy, producers are finding it to be more in their interest to organize with the assistance of the legislature.