The state—the machinery and power of the state—is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries. Regulation may be actively sought by an industry, or it may be thrust upon it. A central thesis of this paper is that, as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit. The state has one basic resource which in pure principle is not shared with even the mightiest of its citizens: the power to coerce. The state can seize money by the only method which is permitted by the laws of a civilized society, by taxation. The state can ordain the physical movements of resources and the economic decisions of households and firms without their consent.

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The Theory of Economic Regulation

This study tests whether firms that would benefit from import relief (eg, tariff increases and quota reductions) attempt to decrease earnings through earnings management during import relief investigations by the United States International Trade Commission (ITC) The import relief determination made by the ITC is based on several factors that are specified in the federal trade acts, including the profitability of the industry Explicit use of accounting numbers in import relief regulation provides incentives for managers to manage earnings in order to increase the likelihood of obtaining import relief and/or increase the amount of relief granted While studies of earnings management typically examine situations in which all contracting parties have incentives to "perfectly" monitor (adjust) accounting numbers for such manipulation, import relief investigations provide a specific motive for earnings management that is not

http://course.sdu.edu.cn/G2S/eWebEditor/uploadfile/20130217205533187.pdf

Earnings Management During Import Relief Investigations

The assumption that government bonds are perceived as net wealth by the private sector is crucial in demonstrating real effects of shifts in the stock of public debt. In particular, the standard effects of "expansionary" fiscal policy on aggregate demand hinge on this assumption. Government bonds will be perceived as net wealth only if their value exceeds the capitalized value of the implied stream of future tax liabilities. This paper considers the effects on bond values and tax capitalization of finite lives, imperfect private capital markets, a government monopoly in the production of bond "liquidity services," and uncertainty about future tax obligations. It is shown within the context of an overlapping-generations model that finite lives will not be relevant to the capitalization of future tax liabilities so long as current generations are connected to future generations by a chain of operative intergenerational transfers (either in the direction from old to young or in the direction from young to old). Applications of this result to social security and to other types of imposed intergenerational transfer schemes are also noted. In the presence of imperfect private capital markets, government debt issue will increase net wealth if the government is more efficient, at the margin, than the private market in carrying out the loan process. Similarly, if the government has monopoly power in the production of bond "liquidity services," then public debt issue will raise net wealth. Finally, the existence of uncertainty with respect to individual future tax liabilities implies that public debt issue may increase the overall risk contained in household balance sheets and thereby effectively reduce household wealth.(This abstract was borrowed from another version of this item.)

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Are Government Bonds Net Wealth

In a general equilibrium model of a labor economy, the size of government, measured by the share of income redistributed, is determined by majority rule. Voters rationally anticipate the disincentive effects of taxation on the labor-leisure choices of their fellow citizens and take the effect into account when voting. The share of earned income redistributed depends on the voting rule and on the distribution of productivity in the economy. Under majority rule, the equilibrium tax share balances the budget and pays for the voters' choices. The principal reasons for increased size of government implied by the model are extensions of the franchise that change the position of the decisive voter in the income distribution and changes in relative productivity. An increase in mean income relative to the income of the decisive voter increases the size of government.

A Rational Theory of the Size of Government

This paper presents a theory of competition among pressure groups for political influence. Political equilibrium depends on the efficiency of each group in producing pressure, the effect of additional pressure on their influence, the number of persons in different groups, and the deadweight cost of taxes and subsidies. An increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers. This analysis unifies the view that governments correct market failures with the view that they favor the politically powerful: both are produced by the competition for political favors.

A Theory of Competition Among Pressure Groups for Political Influence

The paper describes how ordinary citizens view economic regulation and summarizes answers to questions about regulation and regulators since the 1970s from the General Social Survey. The pattern is clear: ordinary citizens are skeptical and wary. They want less regulation and do not trust regulators to do what is right. The mistrust has become stronger over time. However, the public supports environmental and electricity rate regulation. These sentiments are shared across age, sex, race, education, and income groups and the left/right ideological spectrum. The public tends to oppose less traditional regulation, such as wage and price controls, government ownership of some industries, and regulation of steel prices. But there is less consensus across demographic groups: blacks, the less educated, and low-income groups are less hostile, or marginally friendly, to less conventional modes of regulation. The paper concludes by contrasting public opinion with the path of regulation since the 1970s.

Sam Peltzman

Papers

Public Opinion about Regulation