Not All Housing GSEs Are Alike: An Analysis of the Federal Home Loan Bank System and the Foreclosure Crisis

While the financial crisis of 2008 ultimately affected the range of U.S. financial institutions, it began with practices in home ownership finance. The Federal Home Loan Bank (FHLBank) System was the first instrumentality created by the U.S. government, in 1932, to sustain affordable home ownership finance. In this article, the authors ask what role, if any, the FHLBanks played in the subprime lending and securitization practices that precipitated the current crisis. The authors analyze publicly available FHLBank financial data in terms of a framework focused on the System's assets: advances; mortgage loans acquired from members; and investments, particularly in mortgage-backed-securities. They conclude that the FHLBanks did not contribute significantly to problematic practices. Nonetheless, they recommend consideration of three reforms to the FHLBanks to ensure a return to effective regulation and responsible, affordable home ownership finance.     

Does economic freedom cause prosperity? An IV approach

A positive, statistical and economic significant relation between growth, income level and the Economic Freedom of the World (EFW) index has been amply documented. Most analyses, however, use OLS methods which, in the presence of endogenous variables do not establish causality and produce biased and inconsistent estimates. This paper uncovers the exogenous component of EFW using IV methods and finds a robust channel from economic freedom to prosperity. The findings, including instrument validity tests, support the importance of policies and institutions for development and warrants policy advice aimed at increasing economic freedom to foster prosperity.     

Learning to Cooperate: Learning Networks and the Problem of Altruism

We explore how two populations learn to cooperate with each other in the absence of institutional support. Individuals play iterated prisoner's dilemmas with the other population, but learn about successful strategies from their own population. Our agent-based evolutionary models reconfirm that cooperation can emerge rapidly as long as payoffs provide a selective advantage for nice, retaliatory strategies like tit-for-tat, although attainable levels of cooperation are limited by the persistence of nonretaliatory altruists. Learning processes that adopt the current best response strategy do well only when initial conditions are very favorable to cooperation, while more adaptive learning processes can achieve high levels of cooperation under a wider range of initial conditions. When combined with adaptive learning, populations having larger, better connected learning relationships outperform populations with smaller, less connected ones. Clustered relationships can also enhance cooperation, particularly in these smaller, less connected populations.     

The Democratic Domino Theory: An Empirical Investigation

According to the democratic domino theory, increases or decreases in democracy in one country spread and "infect" neighboring countries, increasing or decreasing their democracy in turn. Using spatial econometrics and panel data that cover over 130 countries between 1850 and 2000, this article empirically investigates the democratic domino theory. We find that democratic dominoes do in fact fall as the theory contends. However, these dominoes fall significantly "lighter" than the importance of this model suggests. Countries "catch" only about 11% of the increases or decreases in their average geographic neighbors' increases or decreases in democracy. This finding has potentially important foreign policy implications. The "lightness" with which democratic dominoes fall suggests that even if foreign military intervention aimed at promoting democracy in undemocratic countries succeeds in democratizing these nations, intervention is likely to have only a small effect on democracy in their broader regions.     

The Dynamics of Political Attention: Public Opinion and the Queen's Speech in the United Kingdom

This article represents the effect of public opinion on government attention in the form of an error-correction model where public opinion and policymaking attention coexist in a long-run equilibrium state that is subject to short-run corrections. The coexistence of policy-opinion responsiveness and punctuations in political attention is attributed to differences in theoretical conceptions of negative and positive feedback, differences in the use of time series and distributional methods, and differences in empirical responsiveness of government to public attention relative to responsiveness to public preferences. This analysis considers time-series data for the United Kingdom over the period between 1960 and 2001 on the content of the executive and legislative agenda presented at the start of each parliamentary session in the Queen's Speech coded according to the policy content framework of the U.S. Policy Agendas Project and a reconstituted public opinion dataset on Gallup's "most important problem" question. The results show short-run responsiveness of government attention to public opinion for macroeconomics, health, and labor and employment topics and long-run responsiveness for macroeconomics, health, labor and employment, education, law and order, housing, and defense .     

Dynamic Representation(s): Federal Criminal Justice Policy and an Alternative Dimension of Public Mood

Does public policy respond to public opinion? Previous research suggests dynamic representation occurs in the aggregate. Yet, most of the evidence for policy response is limited to the policy intentions of elected officials on issues related to more or less government spending. We examine policy response to an alternative dimension of public mood, public preferences for more or less punitive criminal justice policies, using multiple indicators of policy from various stages of the policy-making process. Criminal justice policy should be responsive to public preferences given the public’s concern about crime and the negative social construction of criminals. Thus, there is an electoral incentive for public officials to respond to public preferences along this alternative dimension of public sentiment regarding criminal justice policy. We estimate a DYMIMIC model of federal criminal justice policy as a function of the multiple dimensions of public policy mood using Kalman filtering. The results indicate that criminal justice policy responds to the second, not the first, dimension of public mood. We find evidence that policy-makers at multiple stages of the policy process are able to differentiate among multiple signals from the public and respond appropriately. The results present a more sophisticated portrait of democratic responsiveness.     

Consociationalism and its critics: Evidence from the historic Northern Ireland Assembly election 2007

Critics of consociational power-sharing institutional arrangements in deeply divided societies argue that such arrangements solidify the underlying conflict cleavage and render it all-important for party competition and voter behaviour. I find evidence to the contrary in the case of voter behaviour at the historic 2007 Assembly election in Northern Ireland. At least in the unionist bloc, I find the effective disappearance of the ethno-national conflict cleavage as a determinant of voter choice. This suggests that consociational arrangements have led to both inclusion and moderation, rather than polarisation and ‘ethnic outbidding’.     

Social Science and the Public Interest

Social Science and the Public Interest

Social Science and the Public Interest November/December 2009     

David Riesman and <Emphasis Type="Italic">The Lonely Crowd</Emphasis>

The reception of David Riesman’s classic sociological work The Lonely Crowd exemplifies both the possibilities and perils of the work of public intellectuals. The book was almost universally misread as a paean to inner-direction, and a lament upon the decline of the independent American spirit. But it was something rather more different, and more complex, than either of these things.