Clifford F. Thies

Decriminalization of marijuana and the demand for alcohol, marijuana and cocaine

Abstract This study examines whether the decriminalization of marijuana in eleven states has affected self-reported usage of drugs. Generally, decriminalization is not found to significantly impact drug use. An implication is that the demand for drugs is highly inelastic with respect to incremental changes in the legal sanctions for possession of small amounts of marijuana.

What Did Inflation Accounting Tell Us

Financial statements for the period 1977–1983 are reconstructed for a sample of 50 large manufacturing firms using replacement cost (or current cost) data provided by ASR 190 and FASB 33, and market (or fair) values of long-term debt and preferred stock. As expected, these data confirm that historical cost accounting overstates profitability during a period of rising prices. These data also indicate that historical cost–based financial ratios often grossly misrepresent the relative financial strengths of firms. Financial analysis conducted on the assumption that the biases induced by historical cost accounting are similar across firms is likely to lead to false conclusions regarding financial strengths and weaknesses.

Q, Cash Flow and Investment: An Econometric Critique

The effects of measurement and specification error on estimates of the Q and cash flow model of investment are investigated. Two sources of error are considered: expensing of RcD expenditures and failing to identify that component of cash flow which relaxes financing constraints. We apply random-effects and instrumental variables estimators to a model that addresses these sources of error. We find that: (1) the capitalization of R& D strengthens the explanatory power of the model; (2) expected and unexpected components of cash flow have different effects; and (3) the effects of Q are much more evident in firms facing low costs of external finance.

The Success of American Communes

This study analyzes the effect of the structure of communes on their success, using the data of 281 communes started in America from 1683 to 1937. Factors increasing the likelihood of success include (i) being a pietist religious sect, (ii) inducing commitment as measured by an index of several underlying variables, (iii) allowing some private property, and (iv) with some qualification, having anarchic governance. These results support the prevailing commitment hypothesis. They additionally indicate that communes can increase their likelihood of success by making some concessions to egoistic concerns.

Rent Control with Rationing by Search Costs: A Note

This note derives the long-run implications of rent controls when rent-controlled apartments are implicitly rationed to tenants who are more efficient in searching for apartments in the controlled sector. Rent controls are shown to involve transfers that essentially are from some to other tenants, as well as dead-weight losses due to higher search costs that are borne by tenants. Key to this analysis is the condition that, at the margin, rent plus the higher cost of search for a rent-controlled apartment must equal rent in the noncontrolled sector.

Estimating the effects of casinos and of lotteries on bankruptcy: a panel data set approach.

Using newly-constructed estimates of state revenue or its equivalent from casino-type and lottery gambling and panel data set regression techniques, a small but statistically significant bankruptcy effect is found. Assuming a linear relationship between gambling and the rate of personal bankruptcies, casino-type gambling increases bankruptcies by about 2%. Lottery gambling, while less potent per dollar of revenue generated, has about the same total effect.

Small Firm Mutual Funds: Additional Evidence on the Small Firm Effect.

Returns generated with small firm mutual fund data are used to examine the extent to which identification of a “small firm effect” is due to the difficulty in measuring the direct and indirect transaction costs involved in investing in the common shares of small capitalization stocks. Little if any evidence of the excess risk-adjusted returns is obtained for either of the period 1978–1983, when the small firm effect was observed, or the period 1984–1989, when it was not. The “small firm effect” may therefore be attributed to (1) higher direct transaction costs including bid-ask spread and broker fees and (2) higher indirect transaction costs including portfolio management expenses and market impact costs.

Business cycles and black holes

Real business cycle theory, as exemplified by Fischer Blacks Business Cycles and Equilibrium, posits that business cycles are due to random “technology shocks,” and not to monetary, fiscal or other government policies. Rational expectations and complete markets are supposed to enable decision makers to avoid the costly mistakes that would otherwise result from policies that distort incentives to borrow and invest. This paper questions the assumptions of rational expectations and complete markets from an Austrian‐school perspective. It argues that decision makers economize on information costs by basing their plans at least in part on the actual prices observed in the course of doing business, and that government regulations have impinged on the evolution of markets, leaving them far from complete.

Reexamining the Term Structure of Interest Rates and the Interwar Demand for Money

This paper reexamines whether the term structure of interest rates, rather than merely a single interest rate, should be included in the demand for money of the interwar era. In contrast to earlier work, we use cointegration techniques to model the equilibrium/error correction process, and find that a sufficiently rich dynamic model using a single interest rate has considerable explanatory power. Nevertheless, we conclude that the inclusion of the term structure may help to explain the turbulent monetary dynamics of the Depression era.

Fisher equations inverted and not

Regressions of the realized real after-tax interest rate on theex post rate of inflation are shown to be incapable of discriminating between the competing hypotheses that the real after-tax interest rate is not effected by expected inflation due to the substitutability between debt and equity (the Fisher hypothesis); and, that the nominal after-tax interest rate is not effected by expected inflation due to the substitutability between money and debt (the inverted Fisher hypothesis). An alternative regression which is so capable, is shown to reject the inverted and support the original Fisher hypothesis.