The Regulation of Private Money*

Financial crises are bank runs. At root, the problem is short-term debt (private money), which while an essential feature of market economies, is inherently vulnerable to runs in all its forms (not just demand deposits). Bank regulation aims at preventing bank runs. History shows two approaches to bank regulation: the use of high-quality collateral to back banks’ short-term debt and government insurance for the short-term debt. Also, explicit or implicit limitations on entry into banking can create charter value (an intangible asset) that is lost if the bank fails. This can create an incentive for the bank to abide by the regulations and not take too much risk.     

Stock Market Efficiency and Economic Efficiency: Is There a Connection?

In a capitalist economy, prices serve to equilibrate supply and demand for goods and services, continually changing to reallocate resources to their most efficient uses. However, secondary stock market prices, often viewed as the most “informationally efficient” prices in the economy, have no direct role in the allocation of equity capital since managers have discretion in determining the level of investment. What is the link between stock price informational efficiency and economic efficiency? We present a model of the stock market in which: (i) managers have discretion in making investments and must be given the right incentives; and (ii) stock market traders may have important information that managers do not have about the value of prospective investment opportunities. In equilibrium, information in stock prices will guide investment decisions because managers will be compensated based on informative stock prices in the future. The stock market indirectly guides investment by transferring two kinds of information: information about investment opportunities and information about managers' past decisions. However, because this role is only indirect, the link between price efficiency and economic efficiency is tenuous. We show that stock price efficiency is not sufficient for economic efficiency by showing that the model may have another equilibrium in which prices are strong-form efficient, but investment decisions are suboptimal. We also suggest that stock market efficiency is not necessary for investment efficiency by considering a banking system that can serve as an alternative institution for the efficient allocation of investment resources.     

Effects of Organizational Learning and Information-Processing Behaviors on New Product Success

Individual learning constructs were formulated in an organizational learning context and empirically tested for relationships with new product success. Two constructs, information recording-retrieving and information reviewing, were found to be positively related to new product success. The relevance of these constructs to organizational learning theory are discussed, along with the implication that managers should carefully record and review past information to improve future new product success rates.     

HOW JAPAN FIRST BEGAN TO EXPORT MACHINE‐MADE MANUFACTURES TO EAST ASIA*

Drawing on late Meiji period data, the efforts of Japan's cotton spinning mills to overcome overseas competition and establish themselves in the Chinese, Korean and Hong Kong markets are examined. Estimating a probit model of the decision to export, it is found that despite readily available export finance and commercial networks that should have greatly lowered the costs of participating in East Asian markets, sunk entry costs still appear to have been quite large. Many otherwise capable mills apparently saw little prospect of entering tariff‐less East Asian markets, notwithstanding the possibility of generous subsidies and trade association devised predatory strategies.     

‘Lines of credit,debts of obligation’: migrant remittances to Britain,c.1875–19131

Britain of the nineteenth century was a net recipient of migrant remittances. Surprisingly little, however, is known about the flow of such funds to the UK. This article addresses this hiatus in several ways. First, it provides an account of the main mechanisms by which remittances were transferred in this period. Second, it presents new estimates of the volume of remittances flowing to Britain between 1875 and 1913, and, in doing so, offers a comparison of remittance patterns between different Anglophone societies. Third, it assesses the significance of remittances for their recipients in the UK. The article ends by considering the implications of all of the above for the way in which historians are currently trying to formulate the concept of a ‘British world’.     

DOES INDIAN CASINO GAMBLING REDUCE STATE REVENUES? EVIDENCE FROM ARIZONA

Critics of Indian gaming contend that reservation casinos have a negative impact on state economies. This paper tests the hypothesis that the introduction of Indian casinos caused a structural change in the formation of Arizona state revenues. Data are from Maricopa County, the largest county in Arizona. Findings suggest that Indian casinos may divert funds from taxable to non-taxable sectors. The growth in tax revenue from non-gaming sectors of the economy has masked these displacement effects. However, given the trend toward increasing the proportion of state funds from sales taxes, a diminution in the rate of economic growth could have serious implications for future state budgets.