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The Greedy Hand in a Velvet Glove

by Amity Shlaesvia Hoover Digest
Friday, July 30, 1999

How a little-known man in the front office of Macy’s invented tax withholding and gave rise to the modern welfare state. By Hoover media fellow Amity Shlaes.

Getting Business Off the Dole

by Stephen Moorevia Hoover Digest
Friday, July 30, 1999

Who are America’s costliest welfare recipients? Not unemployed men or single mothers, but the companies of the Fortune 500. Hoover visiting fellow Stephen Moore analyzes an outrage.

Itemize This

by Peter Brimelowvia Hoover Digest
Friday, July 30, 1999

Hoover media fellow Peter Brimelow explores the high price of America’s onerous tax code.

Can America Keep Its Lead?

via Hoover Digest
Friday, July 30, 1999

The information revolution might as well be stamped “made in America,” but there are signs that Taiwan, South Korea, and other nations are moving up on us fast. Hoover fellow Nicholas Imparato on what the United States must do to maintain its edge.

Hong Kong: Less Free to Choose

by Edward Neilanvia Hoover Digest
Friday, July 30, 1999

Hoover media fellow Edward Neilan discusses the sorry state of Hong Kong today. “To see how the free market really works,” Milton Friedman used to say, “Hong Kong is the place to go.” Would that it were still true.

Why the Republican Congress Hasn’t Cut Your Taxes

by Tom Bethellvia Hoover Digest
Friday, July 30, 1999

Republicans control both houses of Congress—yet taxes as a percentage of GDP remain at an all-time high. How can this be? Hoover media fellow Tom Bethell explains.

Judicial Corruption in Developing Countries: Its Causes and Economic Consequences

by Edgardo Buscagliavia Analysis
Thursday, July 1, 1999

Many scholars have provided path-breaking contributions to the institutional analysis of systemic and systematic corruption. Descriptive studies focusing on corrupt practices and on the impact of corruption on economic development are abundant. Yet the literature has not yet isolated the main legal, organizational, and market-related causes of systemic corruption within the public sector in general and within the judiciary in particular.

This essay proposes a framework within which the institutional analysis of corrupt activities within the judiciary can be further understood in developing countries. First, an approach to the study of public sector corruption based on science, not on guesswork or intuition, must be verifiable if we are to develop reliable anticorruption policy prescriptions. Therefore, legal, economic, and organizational factors are proposed here to explain corruption within the judicial sectors of developing countries. Second, the economic theory of corruption should recognize that official corruption is a significant source of institutional inertia in public sector reforms. An account of the private costs and benefits of judicial reforms as perceived by public officials is also considered in this study.

Capitalism and its Discontents: The Adam Smith Address

by Michael J. Boskinvia Analysis
Thursday, July 1, 1999

A review of episodes in economic and intellectual history indicates the superiority of a limited government market economy over the alternative models of economic organization. The siren calls of pundits, politicians, and even some economists in favor of communist central planning during the Great Depression; market socialism after World War II; and, more recently, massive welfare states and/or extensive government micromanagement of markets each ran afoul of their own problems and comparisons to the limited government (based on sound criteria) capitalist model. The limited government capitalist model, once again under attack from those who would greatly expand the role of government, needs its defenders, as the alternative models have proven historically, intellectually, and practically bankrupt.

Reforming Hazardous Waste Policy

via Analysis
Tuesday, June 1, 1999

Hazardous waste regulation in the United States under the Resource Conservation and Recovery Act has several significant problems. The regulations prioritize risks poorly, failing to set tougher standards for more-hazardous wastes. They have forced firms to spend billions of dollars on diverting waste from disposal on land, without convincing evidence of high health and environmental benefits. Finally, because the regulations raise the cost of legally managing wastes, they may encourage illegal dumping of wastes and thus actually hurt the environment more than they help it.

The program needs fundamental reform. Such reforms would relax the regulations and rely more on economic incentives. Setting up these incentives, however, requires some thought. Hazardous waste policy addresses a wide variety of substances, and its environmental effects depend on how facilities manage their wastes. Thus, traditional incentive policies, such as "green" taxes, must be tailored for this purpose. Taxes should be levied not on the wastes themselves but on the environmental releases from waste management facilities. These taxes would decentralize decisions and, perhaps more important, more clearly link the policy to its environmental goals. A modified deposit/refund (similar to bottle bills) could have similar benefits and would eliminate the policy's incentives for illegal disposal.

The Economic Effects of the Liability System

by Daniel P. Kesslervia Analysis
Tuesday, June 1, 1999

Liability law has two principal objectives: compensation of parties injured in accidents and deterrence of negligent behavior of potential injurers. Considerable evidence, however, suggests that the current liability system in the United States achieves neither. The system has high transaction costs and fails to compensate injured parties appropriately. There is evidence that liability pressure has distorted firms' incentives for innovation. In the health care sector, liability pressure has led to defensive medicine--precautionary treatments with minimal medical benefit administered out of fear of legal liability.

This essay summarizes recent empirical research on the economic effects of liability-reducing reforms to tort law. The strategy of this research is to compare time trends in economic outcomes from states that adopted law reforms with trends in outcomes from states that did not, controlling for other determinants of the outcomes in question. Differences in trends between the two types of states provide an estimate of the effect of the reforms.

In general, this research suggests that reductions in the level of liability improve productive efficiency. But even if these studied reforms improve efficiency, they may not improve the performance of the system in terms of the compensation goal. The essay concludes with a discussion of the potential effects of a wide range of largely untried reforms to the liability system, some advocating radical changes to the allocation of responsibility for accidental injuries, that seek to address both compensation and deterrence goals.


Economic Policy Working Group

The Working Group on Economic Policy brings together experts on economic and financial policy to study key developments in the U.S. and global economies, examine their interactions, and develop specific policy proposals.

Milton and Rose Friedman: An Uncommon Couple