Diana Weinert Thomas

Corporate Lobbying, Political Connections, and the 2008 Troubled Asset Relief Program

Political involvement has long been shown to be a profitable investment for firms that seek favorable regulatory conditions or support in times of economic distress. But how important are different types of political involvement for the timing and magnitude of political support? To answer this question, we take a comprehensive look at the lobbying expenditures and political connections of banks that were recipients of government support under the 2008 Troubled Asset Relief Program (TARP). We find that firms that lobbied or had other types of political connections were not only more likely to receive TARP funds, they also received a greater amount of support earlier than firms that were not politically involved through lobbying or direct political connections. For every dollar spent on lobbying during the five years prior to the TARP bailout, firms received between

Rational Irrationality and the Political Process of Repeal: The Women's Organization for National Prohibition Reform and the 21st Amendment

485.77 and

The Brewer, the Baker, and the Monopoly Maker

585.65 in TARP support.

Regulation and the cost of childcare

The theory of rational irrationality suggests that voters are biased and do not face sufficient incentives to choose rationally; instead they vote for various private reasons. As a result, socially and economically destructive policies can receive widespread public support. Furthermore, because there is no private benefit of learning from experience, such policies can persist over time. We argue here that despite this otherwise dismal outlook on public policy, the theory of rational irrationality leaves two avenues for economically sensible reform: First, when the ex post costs of irrationality are higher than expected, rationally irrational voters will reduce their consumption of irrationality and demand more rational policies. Second, rationally irrational voters can be convinced to rationally update their policy preferences through the use of appealing rhetoric and persuasion by experts. We discuss these two avenues for reform using the example of the repeal of the 18th amendment, which, as we will show, relied on both updating as well as persuasive campaigning.

Intellectual Property Rights, Public Choice, Networks, and the New Age of Informal IP Regimes

Purpose – This paper seeks to examine how productive entrepreneurial activities, such as innovation, influence unproductive entrepreneurial activities, such as regulatory rent seeking.Design/methodology/approach – To investigate the argument the authors consider Bavarias brewing industry in the fourteenth through sixteenth centuries using an analytic narrative approach.Findings – The example of Bavarias brewing industry suggests that productive entrepreneurial activities may increase unproductive entrepreneurial activities. Confronted with a situation in which innovation erodes their monopoly returns, legally protected producers and policymakers reregulate industry to recapture lost rents. Regulation policy under such reregulation tends to be more encompassing, and thus produces more unproductive entrepreneurial activity, than pre‐innovation regulation policy. This reflects the greater number or variety of producers that new regulation policy must encompass for reregulation to recreate rents.Originality...

Economic Freedom and Financial Market Liquidity: Evidence from ADRs

ABSTRACT Female labour market choices depend on the availability, affordability and quality of childcare. In this article, we evaluate different regulatory measures and their effect on both the quality and the cost of childcare. First, we analyse data on regulations and costs to estimate the effect of regulatory measures on the cost of childcare. Next, we summarize the existing literature on the effect of regulation on childcare quality. We find that regulation intended to improve quality often focuses on easily observable measures of the care environment that do not necessarily affect the quality of care but that do increase the cost. Thus, we find that the regulatory environment could be improved by eliminating costly measures that do not affect quality of care.

Chapter 6 The Institutional Context of Epistemic Communities: Experts in P. T. Bauer's Work

In this Article, we review the literature on formal versus informal regimes for protecting intellectual property (IP) rights, the stated aims of which are to encourage investments in myriad creative activities that foster economic growth (through the discovery of new products and new production methods) or expand the aesthetic pleasures of human life (literary and artistic works). Public choice concerns about competition for—and capture of—the rents associated with patents and copyrights suggest that formal government enforcement of intellectual property rights is not the first-best option in some cases and is counterproductive in others. We then explore the effectiveness of alternative, informal means of protecting intellectual property rights, such as trade secrets, first-mover advantages and the “street-performer protocol,” in facilitating the appropriation of returns to the time, effort and money required to discover new knowledge and new ideas sufficient to make such investments worthwhile ex ante. Emphasizing that in practice innovators typically rely on combinations of formal and informal protections, we end by proposing some modest reforms to the current institutional framework.

Rational Irrationality and the Micro Foundations of Reform

This paper analyzes the effect of economic freedom on the liquidity of financial markets using a non-traditional approach. Using a sample of 393 American Depositary Receipts (ADRs), we examine the liquidity of these securities while conditioning on the level of economic freedom in the ADR home country. We find robust evidence that ADRs from countries with the most economic freedom have the most liquidity (i.e. the lowest bid-ask spreads and the least price impact). These findings are driven by certain characteristics of economic freedom, such as the lower levels of regulation, more free trade, stronger property-right protection, and sound money. In other tests, we examine liquidity surrounding the beginning of several broad-based regulatory changes in the Chinese financial system, which allowed for more open foreign investment and lending services. Using this (arguably) exogenous event as a natural experiment, we find meaningful improvements in the liquidity of Chinese ADRs vis-a-vis non-Chinese ADRs. These results suggest that causation flows from economic freedom to market liquidity instead of the other way around.

In and Out of the Commons: Extractive Public Entrepreneurship and the Aggie Blue Bikes Program

The growth of knowledge literature acknowledges the importance of the institutional context of science for the discovery of knowledge. This chapter argues that in addition to the institutions that connect experts, the institutional context that exists between experts and their subjects importantly influences the relevance of the knowledge that experts discover. When experts are removed from their subject and feedback mechanisms are weak, the type of knowledge discovered by networks of experts has little policy relevance. When experts operate in a network that is closely linked to their subjects, the type of knowledge they discover will have a greater degree of policy relevance. Evidence from P. T. Bauers work on different networks of experts in the developing world is used to illustrate this theory.

Corporate Lobbying, Political Connections, and the Bailout of Banks

Bryan Caplan’s book The Myth of the Rational Voter (2007) supports the idea that voters indulge in holding irrational beliefs about economic policy because the cost of doing so to the individual is negligible. As a consequences, socially and economically destructive policies receive widespread public support. Furthermore, because there is no private benefit of learning from experience, such policies can persist over time. Voters are biased and do not face sufficient incentives to choose rationally, instead they vote for various private reasons, which Caplan labels biases. We argue here that despite this otherwise dismal outlook on public policy, Caplans theory leaves two avenues for economically sensible reform: First, when the ex post costs of irrationality are higher than expected, rationally irrational voters will reduce their consumption of irrationality and demand more rational policies. Second, rationally irrational voters can be convinced to rationally update their policy preferences through the use of appealing rhetoric and persuasion by experts (Caplan 2010). We discuss these two avenues for reform using the example of the repeal of the 18th amendment, which as we will show relied on both updating as well as persuasive campaigning.