Ageism Employment Discrimination

Ageism Employment Discrimination AGEISM AND EMPLOYMENT Social and economic controversies surrounding age discrimination by employers in the workplace is becoming a major social problem. For baby boomers reaching age 55 and over, research implies significant generational issues in terms of attitudes of the employer and society in general (Palamore, Branch, Harris, 2005). Previous studies demonstrate that age discrimination is stereotypical among hiring managers in the workplace and is a leading social problem for the aging population (Gringart, Helmes, Speelman, 2005). According to (Marshall, 2007) ageism in the workplace relates to the employer’s impression and evaluation of capabilities. Judgmental attitudes based upon a person’s aging appearance, as opposed to their potential, is covert discrimination. Waller (2006) presents an interesting perspective of inequity and ageism the harassment by employers to persons over 55. Waller implies that employers face the same liabilities and legal consequences as that of discrimina tion by â€Å"race, sex, disability, sexual orientation, religion, or beliefs† (Waller, 2006 p. 33). Ageism as a psychosocial problem is detrimental to the emotional and mental well being of the persons experiencing discrimination in the workplace (Marshall, 2007). The population over the age of 50 faces significant vulnerability in the workplace where skilled workers are at a greater risk of termination than the unskilled younger worker (Roscigno et al., 2007). Ageism affects those approaching retirement age, persons 50 and over, who are not physically or mentally prepared for retirement. This premature event is demoralizing to persons who spent a lifetime committed to their no-longer-needed professional experience. It appears that policy makers lack consideration for the over 50-population and allow loopholes for the employers by unclear discrimination laws and regulations. MacGregor (2006) summarizes another factor of ageism in the workplace, the initiation, and enforcement of early retirement by offering incentives. If initiatives do not elicit early retirement, demoted status frequently leaves the persons with no alternative other than forced early retirement. Economic, social, financial, and stereotypical attitudes toward the aging workforce needs reevaluation by corporate America as the labor force of the aging population will soon exceed the younger labor force (Goldberg, 2000). The hypothesis of this study describes the profound affects of discrimination and displacement of person over 55 years of age in the workplace. Evidence finds that attitudes of ageism are a widespread dilemma, which is increasing the vulnerability of future generations in the workplace environment (Goldberg, 2000). The number of baby boomers reaching retirement age in the near future may change the attitudes about the graying workforce from a social and economic perspective (Wan, Sengupta, Velkoff, DeBArros, 2005). This study addresses unemployment and ageism issues of baby boomers in the state of New Hampshire, which compromises 30 percent of its population (Angiropolis, 2008). Hypotheses Review of current and past research provides empirical evidence, in conjunction with statistical trends presented by the New Hampshire Employment Security and Department of Labor (Angiropolis, 2008). This experimental study hopes to validate the presence of age discrimination, eliminating gender characteristics and hiring inequity, in New Hampshire. According to previous studies, age definitely played a role in hiring determination. Globalization of age discrimination affects society from a generational and economic viewpoint. Since the dilemma of increasing aging baby boomers area, a major economic portion of the workforce appears through previous literature as an ongoing social problem. Literature is a vital feature of this research study for the validation and emphasis of ageism as a growing social problem in the workplace. Therefore, a research survey identifying and validating the seriousness of ageism in the workplace, including New Hampshire is the hypotheses of this study. Review of Literature and Theories Rix, (2005) reports that â€Å"nearly 1.7 million workers aged 55 and older were displaced from their jobs between January 2001 and December 2003† (p. 4). Re-employment for many exceeds a period of 4-5 months. For example, the Employment Security Commission in Manchester, New Hampshire confirms the average unemployment compensation is between 20-26 weeks and unemployment benefits do not exceed a 26-week period (Asselin, A., personal communication, January 16, 2008). Ageism, reorganization, and lay-offs all displace employees. Often persons are over qualified, yet ageism appears to discourage hiring managers, although employers carefully avoid the topic of age due to discrimination laws and fears of lawsuits. Experienced workers in New Hampshire, include persons with academic degrees, years of vocational training, and life skills (Asselin, A., personal communication, January 16, 2008). In the past few years, statistics show an increase for persons over age 55 receiving unemploy ment in New Hampshire (Angiropolis, 2008). Ageism in the workplace is a global problem—one that exists in countries and states other than New Hampshire. Mandatory retirement, abolished in the United States in 1996 as part of the Age Discrimination in Employment Act (ADEA, 1996), is not part of employment policy for Canadians. They still struggle with legislation to end age discrimination of persons from age 60-65. MacGregor (2005/2006) reports mandatory retirement is an ongoing political and social problem for the aging Canadian population. Additional empirical studies of the Australian aging population suggest inequity and stereotypical attitudes of hiring older adults (MacGregor 2005/2006). From a global perspective, this does not appear to be a consideration for hiring managers—ageism seems to take precedence over knowledge in the hiring decision. Gringart et al. (2005, as cited by Bittman, Flick, Rice, 2001) refer to a study that sampled â€Å"1007 hiring decision- makers† (Gringart et al., p. 88) and found most hiring managers preferred younger employees. Managers preferred training younger employees as opposed to older employees since stereotypically younger persons are purportedly more capable of learning. A similar study conducted in the United States indicated similar results of stereotypical attitudes towards ageism by hiring managers (Bendick, Jackson, Wall, 1999, as cited by Gringart et al., 2005). Recent research focuses on interaction, stereotypical aspects, and corporate expenditures influencing age discrimination in the workplace (Rosecigno, Mong, Byron, Tester, 2007). Considering previous research findings the existence of ageism and discrimination, is it plausible that societal views about aging are generational in nature, and in turn, influence attitudes of employers? Are the growing cultural differences likely to affect future generations if attitudes do not change? Vincent (2005) summarizes generational society as being a culture that is no longer specific to the younger generations; it includes persons transitioning from work to retirement. Where the over-55 population is forced into early retirement by employers, it appears from a social, political, and legal viewpoint to validate and reinforce stereotypical attitudes about this population. These behaviors present a growing problem and require reevaluation if indeed this is an increasing social problem.   For pers ons aged 55 and older forced into early retirement, discouragement and emotional issues generally escalate healthcare costs due to lack of income potential and isolation from mainstream society. In addition, Gringart et al. (2005) suggests early or forced retirement is a significant loss to the younger generation since the older, more experienced, and knowledgeable employee is no longer present to share the wisdom of experience and influence. What example is society teaching the younger generation about biases prejudices of the older population, and their future in the workplace? The astronomical numbers of over 55 workers forced to retire in 1999, â€Å"5.4 million† (Palamore et al., 2005, p. 82), indicates ageism is a growing issue in our society. Such loss of resources affects the economy and society in general and presents a negative view of aging. Every citizen needs to be concerned on the topic of ageism and discrimination in the workplace since future predictions imply the number of baby boomers reaching full retirement age will double within the next decade (Nelson 2005). The population will shift to a â€Å"Graying America† (Nelson, 2005, p. 218). Undo ubtedly, this shift will dramatically influence all aspects of society, including the aging population in New Hampshire. The New Hampshire Employment Security and Department of Labor reports the aging population of unemployed workers is continually increasing (Angiropolis, 2008). In 2004, the Department of Labor in New Hampshire reported a total of 6,901 displaced workers 3,450 males, and 2,641 females. Totaling 18 percent unemployed between the ages of 45-54 and 14 percent between the ages of 55-64 total claims for both groups totaled 4,426 unemployed persons that filed claims, the total for that year 28,000 claims. Current data of unemployment claims indicate a continuum of increase in 2006 reported claims of 6,592, in 2007, 7,536 claims reported. In addition, to the overall increase from 27,612 in 2006 to 35,609 in 2007 an increase of 7,609 between 2004 and 2007 (Angiropolis, 2008). Data of age groups for 2007, yet published, the significance of percentages of unemployed between ages 45-64 in past years indicates 32% of citizens in New Hampshire (Angiropolis, 2008). Previous data-reflecting ageism i n of displaced workers in New Hampshire requires further research in order to determine if there is a relationship between qualities and characteristics of hiring managers to either eliminate or reinforce ageism discrimination. Methods Participants A research study is questionnaires in the form of a survey of 400 random businesses in New Hampshire area to measure the characteristics and capabilities of potential employees. The qualifying participants must be owners, and or hiring managers. Materials and Procedure The research experiment is a self-designed survey to be conducted by telephone to participants. Utilizing the method of a Likert scale the survey seeks to ask hiring manager to list the most significant qualities when deciding to hire persons in their organization or company. This survey asks the participants to rank in order of their comfort level in job applicant capacity; the survey hopes to indicate stereotypical preferences of hiring employees by decision-makers (see Appendix 1). Participating hiring managers will be told the survey is voluntary in nature. If they chose to respond to this study of various decision-making attributes of hiring personal. Participants will also be told of the purpose of this survey instrument (a) educating future generations on how to prepare for employment, (b) the significant qualities, and characteristics that hiring managers are seeking. In addition, this instrument serves and an educational process of teaching the younger generation how to prepare for retirement at an early age. Since ageism appears to be a global issue with emphasis influencing stereotypical attitudes and assumptions of the aging workforce. Future projections of ageism as a deterrent when persons reaching over age 55 become unemployed and are unable to re-enter the workforce. Implications Limitations of the survey are primarily time constraints for this research study. In addition, sample size of respondents may not provided the results this experiment hopes to conclude in terms of stereotypical characteristics of decision-making by hiring managers. Moreover, some of the questions regarding age and gender may not be accurately disclosed by responding participants. Validity of this research is dependent upon honest factual responses by hiring-managers and the designer of the survey. The possibility that the responses are questioned since the validity of responses relies solely on the designer applies to the ethical principles of this researcher and study. A further limitation of this experiment requires permission from the ethics committee of the State Board of Psychologist in New Hampshire prior to the survey’s completion. Discussion Past research implies the validity of discrimination for persons over age 55, including premature termination and difficulty with re-employment. Research exemplifies the existence of negative ageism, yet little research questions the opinions of over 50 persons experiencing the dilemma of forced retirement and the rejection associated with developmental milestones of aging. As a diverse society where prejudices and biases exist from a cultural viewpoint, ageism ranks as a minority group. Perhaps further research addressing methods of creating societal change regarding cultural biases and prejudices can influence negativity around aging and employment. Several articles from peer-review journals provide significant empirical evidence of stereotypical negativity from employers in the workforce. In addition, a conversation with an employee from Employment Security Commission in Manchester, New Hampshire, regarding displaced persons aged 50 and over. Ms. Asselin provided written consent to use specific portions of this conversation for the use of this study. Ms. Asselin, reported, â€Å"I see older client’s everyday, which are more than qualified for positions, and are not employed by the hiring managers.† Most report they are over qualified; several persons are 50 and over. When directly asked the question of age discrimination, she states, â€Å"Definitely, we see this all the time, even though the employers do not mention age† (Asselin, A., personal communication, January 16, 2008). The null hypothesis (Ho) of business owners in New Hampshire is dependent upon the results of the survey data. In terms of validating if ageism characteristics plays a significant role in employer decision-making during the interview process. Thus, validating previous research that ageism is a global social problem. The argument that New Hampshire’s unemployed persons between the ages of 45-60 having difficulties re-entering the workforce is the premises of this research. In addition, if the survey concludes hiring managers display covert discrimination then further research of all New Hampshire business managers may indicate change is needed regarding attitudes towards ageism in the workplace. New Hampshire’s workforce is a fraction of the problem considering past research of age discrimination, research provides data that ageism is a global problem, that will likely increase in the next decade if attitudes do not change (Nelson, 2005). The reality and beliefs of this society indicates the capacity of older workers over age 55 lacks the ability of adequately training capacity. Performance decreases, or often miss work because of illness categorizes a culture of persons (Goldberg, 2000). This assumption and attitude stereotypically tries to diminish a population of persons by stigmatizing ageism. Does this mean that after age 55 and over, the quality of life, experience that this generation of persons provided for many years forced into early retirement and becomes no longer useful to society? Considering the baby boomer population will be the majority of the workforce within the next decade what affect will this impose on society if diminished from the workforce? Directions for the future Although discrimination is illegal, further research of attitudes of hiring managers can predict the affects age discrimination on future generations, the economy, and the healthcare system in New Hampshire. Differentiating whether ageism and discrimination are stereotypical in New Hampshire, is dependent upon the results of the survey. Since this experiment includes a sample of 400 of the potentially 100 plus hiring managers in New Hampshire. Future studies of all business owners, and or hiring managers may provide data that are more significant. More importantly is examining the assumptions that persons over age 55 are incapable of adequate productivity by hiring managers; otherwise, future generations will face the same deterrent attitude if change does not occur. Ultimately, everyone ages, changes in employment policies, decreasing age discrimination, for future generations is imperative. Since research supports ageism in the workforce appears to be a neglected social problem requiring further research of a marginalized population. Appendix 1 Survey Questionnaire Participant’s response indicated by circling one of the selections below, by the designer of the survey. 1. Education level: (a) High school diploma, (b) Some college (c) College graduates (d) Education level does not matter 2. Experience: (a) 1-5 years (b) 6-10 years (c) 11-20 years (d) prefer to conduct your own training. 3. Gender: Males (a) age 21-30 (b) age 31-40 (c) age 41-51 (d) age 51-60 (e) over 60 (f)no preferences Gender: Females (a) age 21-30 (b) age 31-40 (c) age 41-51 (d) age 51-60 (e) over 60 (f)no preferences 4. Appearance: (a) significant (b) somewhat significant (c) little significances (d) no significance 5. Technical ability: (a) significant (b) somewhat significant (c) little significances (d) no significance 6. Assimilation into the team: (a) significant (b) somewhat significant (c) little significances (d) no significance 7. Ability to work independently: (a) significant (b) somewhat significant (c) little significances (d) no significance 8. Professional standards: (a) significant (b) somewhat significant (c) little significances (d) no significance 9. Energy levels: (a) significant (b) somewhat significant (c) little significances (d) no significance 10. Productive peer relationships: (a) significant (b) somewhat significant (c) little significances (d) no significance References Angiropolis, M. (2008). New Hampshire Employment Securitys Economic and Labor Market Information Bureau. New Hampshire Economic Conditions, 108 (1) Retrieved January 16, 2008, from http://64.233.169.104/search?q=cache:T7mkj4veHl0J:www.nh.gov/nhes/elmi/pdfzip/econanalys/Look_forward/looking%2520forward_measuringunemp.pdf+age+of+unemployed+in+NHhl=enct=clnkcd=1gl=us Bittman, M., Flick, M., Rice, J. (2001). A survey of employers in a high growth industry. Social Policy Research Center: the Recruitment of Older Austrailian Workers. Gringhart, F., Helmes, E., Speelman, C. P. (2005). [Exploring attitudes toward older workers among Austrailain employers. Journal of Aging and Social Policy, 17(3), 85-103. Goldberg, B. (2000). Age Works What Corporate America Must Do to Survive the Graying of the Workforce. New York: The Free Press. MacGregor, D. (2005/​2006). Yes, right to work is fundamental, even for people over 65. Monitor: Economic, Social, and Environmental Perspectives, 12(7), 1-24. Marshall, V. W. (2007). Advancing the sociology of ageism. Social Forces, 86(1), 257-264. Nelson, T. D. (2005). Ageism: Prejudice against our feared future self. Journal of Social Issues, 61(2), 207-221. Palamore, E. B., Branch, L., Harris, Diana. (2005). Cost of ageism. Encyclopedia of Ageism, 80-83. Reio, , Jr. T. G., Sanders-Reio, J. (1999). Combating workplace ageism. Adult Learning, 11(1), 10. References Rix, S. E. (2005). Update on the older worker: 2004 (Public Policy Institute, pp. 1-4). Washington, DC: U.S. Bureau of Labor Statistics Roscigno, V. J., Mong, S., Byron, R., Tester, G. (2007). Age discrimination, social closure, and employment. Social Forces, 86(1), 332-334. The U.S. Equal Employment Opportunitiy Commission. (1997). The Age Discrimination In Employment Act of 1967 (ADEA). In Title VII of The Civil Rights Act of 1967 (Section 621, pp. Pub.-L 101-433). Washington, DC: Department of Labor and the Department of Justice, U.S. Vincent, J. A. (2005). Understanding generations: Political economy and culture in an ageing society. The British Journal of Social Psychology, 50(4), 579-599 Waller, C. (2006). Outlawing age discrimination: 2006. Engineering Management, 16(4), 32-33. Wan, H., Sengupta, M., Velkoff, V. A., DeBArros, K. A. (2005). U.S. Census Bureau. In Current Population Report (65+ In the United States, pp. 23-209). Washington, DC: U.S. Government Printing Office.

Cause Effect Essay - The Causes of Teen Suicide :: Expository Cause Effect Essays Teenager

The purpose of this paper is to explain the causes of teen suicide. This paper will include statistics and some background information on suicide survivors. Also this report will discuss some warning signs of teen suicide. It is important to take the subject of suicide seriously. It doesn't seem right that a teenager, who has lived for such a short time, would choose to die, but those who can't get over their depression sometimes do. Teen suicide is the third leading cause of death for young people aged 15 to 24 and the fourth leading cause of death for persons between the ages of 10 and 14 and it seems to be on the rise. Only accidental deaths and homicide follow it. Some experts believe that many "accidental" deaths are actually suicides. According to a 1991 Center for Disease Control and Prevention study, 27% of high school students thought about suicide, 16% had a plan and 8% made an attempt. Suicide affects teens of all races and social standing. Boys commit suicide more often than girls do. It could be because it's easier to get the tools for suicide, boys usually use firearms and girls often use pills so since the gun is more deadly, boys complete suicide. Over the past 15 years, the rate among girls has scarcely changed, but the rate among boys has tripled. Also, the rate among non-white males, even though it's still lower than the white male rate, has been rising most quickly of all. Suicide remains the second leading cause of death among whites after accidents and the third among blacks after homicides and accidents. Teen suicide is now considered a national mental health problem. The main two causes for teen suicide is the mental disease of depression and family problems. 90% of teen suicide victims have at least one diagnosable, active psychiatric illness at the time of death, which is most often depression, substance abuse, or behavior disorders. Only 33-50% of victims was known by their doctors as having a mental illness at the time of their death, and only 15% were in treatment at the time of death. The pressures of modern life are greater these days and competition for good grades and college admission is difficult which are extra stresses on already unsure teens. Some even think it's because there is more violence in the media. Lack of parental interest may make them feel alone and anonymous.

America And Ethnicity Of The Races Essay

Racial discrimination and social inequality is a worldwide social illness. This especially happens in highly developed countries that have capabilities of granting the needs of numerous immigrants from other countries. However, the provision of being highly developed is also a way by which countries become highly diverse in population and culture. Mainly, this is also the reason why there exists too much discrimination in the said type of societies. In this regard, the American society is among the focus of the discussion of such issues. To be able to understand the impact of the said issue towards the society, two major public policies shall be examined in support of the said issue. The policies to be tackled in this paper would be pertaining to the Criminal Justice Policy and Immigration Naturalization Policy. Using the events that govern the said policies, this paper shall introduce the issues that govern the race and ethnicity issues of the American government and politics. Leon E. Wynter’s â€Å"Transracial America Sells† shows how the black-Americans already lead the entertainment industry. As he usually talks about the â€Å"browning of mainstream commercial culture† in most of his compositions, Wynter points out how the radical shift in the place of race and ethnicity in American commercial culture since the late 1970’s really affects the preferences of people in the marketplace. He also adds on his essay how nonwhite Americans are giving so much profit to the entertainment industry. He says â€Å"color has been weaving through music, sports, television, news media and literature in a bold band that had never been seen before†. True, even the different expressions such as â€Å"Wassup† which came from the black-American culture is already widely accepted. Meanwhile, Langston Hughes’ â€Å"Let America be America again† talks about the long-lost dream of the American race. A unified country giving everyone a chance to live in a rather easy life through laboring everyone especially those who are in dire need of employment. In his poem, he points out how much the land of America really belongs to those who plow it such as the farmers, to those who cultivates its culture and resources, to those who really serve their country to the hardest yet best way they could. Contrary to Wynter’s composition, Hughes sees the marketplace to be a place of greed widely using people for its own profit and gains. To Hughes, this kind of false equality is rather a hindrance to the true essence of the American dream. As obviously seen, both of the writers likes to show how possible it really is to attain the American aim of being unified as one country. One believes in what is obviously seen in the society specially on the marketplace where both white and nonwhite Americans gain the fame and thus influence the greater crowd of a mixed culture and depict a unified America, while the other strongly suggests on putting the lesser fortunate into employment and letting them gain from what they have earned since the land belongs to them. Consequently, Wynter’s vision of the dream of equality is far more obvious than that of Hughes’. Wynter’s idea is more practical and thus more appealing to almost everyone in the entire globe. Even other countries actually see the reality of what Wynter says â€Å"transracial sells†. Surely, many will agree that the mixed culture of the white and non-white Americans is widely spreading in the whole world through media and entertainment. Since technology has already evolved so much, the unification of different races is easier attained through the use of the entertainment industry and commerce. As a fact, a bigger percentage of the world population is highly influenced with what they see on TV or n the Internet which commerce usually uses as a medium of selling it’s products. Hughes’ poem on the other hand is also acceptable although it’s a bit of the less truth that is actually happening right now. We are actually leaving in a world where oppression is really rampant and the fact that it happens to those who are less fortunate, his vision of the American dream is somewhat hard to fulfill. Sad but true, we are actually living in a society where the fittest in the group survives. It is also convincing when Hughes pointed out how greed affects the marketplace so much, that sometimes the equality that the entertainment industry shows is rather false since its only driven by profit-oriented goals of commerce and yet it doesn’t care so much on the needs and interests of the greater number of the lower members of its community who give it the chance of existing. After all, there would be no such kind of commercial success without the existence of those who patronage its product, the people who have lesser opportunity in the marketplace. But even though he had such a good view on how the American dream could be fulfilled, he still lacked the practical way on looking on what has already been done to meet that certain American goal. As clearly mentioned in the evidences above, at some point, racism and ethnic discrimination may still be a main problem that the American Government should face. However, with the policies created by the political parties of the country especially regarding the immigration and criminal justice systems of the country, it could be seen how the community has been faring on the said issue so far. As mentioned by Patterson in â€Å"The Ordeal of Integration†, â€Å"the large and continuous growing number of ethnic groups having a middle class life in America proves that the social policies of the country concerning ethnic groups are applied strongly and are re3ceiving fine results†. Hence, the statement, which was made by Higham earlier, has been proven true and shown as a resolvable matter in the American society. Yes, the political balance of the country towards its views of the social minorities would continuously be improved and regulated.

The Worlds Leading Economic Theorists Finance Essay - Free Essay Example

Sample details Pages: 12 Words: 3464 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? While the book is arguably aimed more at an academic audience, the material is clearly accessible to policymakers and regulators. Just this past month, in recognition of the one-year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the NYU Stern School and the Pew Charitable Trusts put on a conference in Washington, D.C. During the entire day of proceedings, sitting toward the back was a senior staffer of the House Committee on Financial Services reading Balancing the Banks. When I asked him what he thought of the book, he commented on how insightful it was and that the book had given him pause to thought. The four chapters are organized as follows. In a brief chapter 1, the authors lay out their case for regulation of the banking sector and how things had gone wrong leading into this crisis. An important argument made by the authors is an extension of Dewatripont and Tiroles (1984) representation hypothesis to the case of all finan cial institutions, in particular, the shadow banking system. The theory basically argues that prudential regulation should replicate the corporate governance at nonfinancial firms in terms of mimicking the market discipline imposed by debtholders. Because of the government safety net and the implicit government guarantees, this discipline is eroded in the financial sector. Chapter 2, and by far the longest essay, is written by Tirole, and focuses both on what he considers to be the major causes of the crisis and, given these causes, how the financial system should be reformed. The chapter describes a whos who of possible suspects for what caused the financial crisis. The most interesting part of this discussion is less Tiroles naming of these suspects and, instead, Tiroles take on why they are suspects. For the reader interested in the global financial architecture, the chapter provides a unique look into the mind of one of the worlds leading thinkers in this area. Tiroles follow -on long list of reforms and motivation for these reforms allows one to compare Tiroles view of financial regulation to that of other academics, such as NYU Sterns work (Viral V. Acharya and Matthew Richardson 2009), Markus Brunnermeier et al. (2009), and the Squam Lake Group (2010) among others, and the actual enacted legislation both in the United States and abroad. The third chapter by Rochet takes a more targeted look at prudential bank regulation with a particular emphasis on the Basel Accords. This is a must read for anyone interested in the Basel accords and why these accords were inadequate for our financial system. In fact, I view this chapter somewhat as an indictment of the entire Basel approach to prudential bank regulation. While Rochet does not go as far as to argue for scrapping them, his suggested reforms are consistent with a complete overhaul of the system currently in place. As described below, he would most likely not be supportive of Basel III. The final c hapter by both Dewatripont and Rochet follows on from the criticisms provided in the prior chapter on the Basel Accords. In particular, the chapter takes a banking crisis as given and then discusses how distressed banks should be treated in this crisis. The authors discuss a special bankruptcy regime for financial institutions and some of the challenges that arise within an international setting. As discussed below, a key theme of this chapter is a more systemwide approach to measuring and managing risks of financial institutions. My review will cover three areas. First, I will try and put into perspective the major conclusions of the authors on financial sector regulation. Second, I will provide a few critical remarks on the chapters. Third, and perhaps equally important, it should be noted that the authors wrote these essays prior to the enactment of major financial regulation such as the Dodd-Frank Act and the new Basel III accords. It seems worthwhile therefore to see whether some of the authors ideas ended up being part of these historic legislations. Financial Sector Regulation A consistent theme throughout the three main essays is that the purpose of prudential regulation is twofold: (1) protect depositors, holders of insurance policies, or investors in pension or similar funds from default, and, in the case of bailouts, taxpayers [micro-prudential regulation], and (2) contain and manage systemic risk [macro-prudential regulation]. All of the chapters argue that macro-prudential regulation was lacking in the current architecture of global finance. In other words, the financial system, through the procyclical nature of both its accounting and capital requirements, and the regulatory apparatus of the Basel Accords, was focused too much on individual institution risk and not systemwide risk. In other words, regulators need to focus not just on the own losses of a financial institution, but also on the cost that their failure would impose on the sy stem. It is hard to argue with this point. On page 116, chapter 4 best lays out the viewpoint of the authors: as the recent crisis has shown, indicators for future distress cannot be condensed into one single summary capital ratio, even if it very complex. Instead, we believe that regulatory intervention should be triggered by a number of relatively simple (and publicly verifiable) indicators, including measures of liquidity risk, exposures to macroeconomic shocks, and bilateral exposure to other banks or financial institutions. Following this point, all the authors in their respective essays extoll the benefits of a solvency regime for dealing with banks. This regime needs to have certain properties. First, the regulator must be powerful enough to be able to take prompt corrective action, in other words, to deal with troubled institutions prior to default.Chapter 4 in particular discusses the ability of the FDIC to take such action in dealing with its banks and argues that th is is a good model. Second, the regulator must have legal power to not only act in the case of a failure of any financial institution, but a regime needs to be set up to deal specifically with banking crises, that is, multiple failures. Third, and arguably an intractable problem, all the respective essays note that there needs to be international coordination on bankruptcy when dealing with multinational financial institutions. Another common theme across the essays, especially those of chapters 2 and 3, is the question of how to deal with liquidity. As Tirole points out, prudential regulation of liquidity can be viewed in a very similar way to that of prudential regulation of capital, that is, micro-based by protecting taxpayers, and macro-based by managing systemic risk. The authors are not particularly specific on what they would like to see, other than support for government intervention via liquidity channels and the need to consider the liquidity positions of financial inst itutions. Given their support for well-articulated simple rules, one might surmise that the authors would view the Basel III liquidity requirements (which in theory will eventually kick in later this decade) as good first steps. Another consistent theme in some of the chapters is the principle underlying the authors representation hypothesis. The basic idea is that, in regulating financial firms, regulators should take on the normal corporate governance role that one would see creditors perform for nonfinancial firms. One of the main differences between financial and nonfinancial firms is the access to the government safety net. In theory, the regulation hypothesis would solve this problem. In chapter 1 of the book, the authors describe how this hypothesis could have been used to deal with firms that either rely on wholesale funding, or that are too interconnected or generally too-big-to-fail. I believe that one could more broadly describe the representation hypothesis as the authors approach to regulating the shadow banking sector. That said, it is surprising that the book provides little discussion of shadow banking, in particular, money market funds, repo financing, securities lending, or even investment banking.Somewhat similar to the regulation that has emerged, such as the Dodd-Frank Act and Basel III, the authors primary focus is on the banking sector. I think this is a missed opportunity. In the next section, I describe three other areas I wish the book had covered in more detail. Missed Opportunity No book on the financial crisis will please every reader. This book is no different, and I thought it might be worthwhile to mention three areas where, given the authors expertise in the field of banking, I believe they missed an opportunity to inform the reader. The first is with respect to Tiroles description of how and why the financial crisis occurred. While the chapter starts with a principles-based approach, at the end of day, the chapt er provides a litany of causes but does not really choose leading candidates. The reader could have benefitted from Tiroles knowledge on the subject.While it is clear that Tirole, and the other authors, are in the camp that poorly designed regulation and insufficient implementation of regulation is the primary cause, chapter 2 does not pinpoint the market failure. It seems a necessary requirement for designing an appropriate regulatory architecture is to focus on the market failure.Therefore, it may not be a surprise that chapter 2 lays out a whole series of reforms without creating an overlay of principles that future regulation should address. In particular, chapter 1 of the book provided a historical perspective that I think could have been quite informative on how to proceed with regulatory reform. The advantage of beginning with a more pinpoint analysis of the crisis is that, once you understand how markets have failed, the nature of the solution becomes a lot clearer. There fore, not unlike the Dodd-Frank Act itself, the solutions offered in chapter 2 are a bit more heavy handed scrutiny rather than a principled regulatory response. I should say that, in defense of the book itself, however, chapters 3 and 4 are more along these lines and the suggested reforms center around macro-prudential regulation and the management of systemic risk. Having been involved in such a process through the publication of the NYU Stern books on the financial crisis, Restoring Financial Stability: How to Repair a Failed System (Acharya and Richardson 2009) and Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Acharya et al. 2010), I do think the authors miss an opportunity here to make a statement on the financial crisis. It seemed clear to us that, while there were a lot of symptoms of ills in the financial markets and a lot of proximate causes of the sort described in chapter 2the housing bubble, the rise in subprime lending, compen sation incentives in financial firms, a huge expansion in securitization, a big expansion of creditwhat turned a collapsing housing bubble into a devastating crisis in the financial system was the huge concentration of systemic risktail riskin the banking and shadow banking system. The second missed opportunity is that the authors do not take a lead in discussing how capital and liquidity requirements should be set, other than that these requirements should be countercyclical. While the authors provide a good analysis of what was wrong with the current system, and that this system needs to expand beyond capital requirements, it must have been clear to the authors that any new financial architecture would argue for new capital and liquidity rules. The authors have been some of the leading economic researchers in this area. There is a raging debate about both the level of and the cross-sectional variation of capital requirements. For example, Douglas Gale (2010) argues that the cas e for higher capital levels is not so clear-cut (see also Skander Van dan Heuvel 2008). Given the authors earlier work, one would imagine that the authors have a different take on this subject. The book provided the authors a perfect opportunity to address this debate head-on. From a practical point of view, capital requirements are arguably one of the more important tools used by regulators and are at the heart of the Basel Accords and the international financial regulatory regime. Lastly, while the topic of mispriced government guarantees and moral hazard is discussed in the book, I found it surprising that the topic got so little coverage. There is little analysis of what it means for our ability to regulate the financial sector when many financial institutions can finance their activities at below-market rates, which we know can lead to excessive risk. These distortions occurred not only at banks with access to FDIC insurance, but also with respect to the government sponsored (and backed) enterprises Fannie Mae and Freddie Mac and the too-big-to-fail large, complex financial institutions. And it remains a big issue. To this point, there is a study done by the Federal Reserve Bank of Richmond that found about 45 percent of all financial liabilities in 1999 fell under the U.S. safety net. They did the study a decade later and it was close to 60 percent. (See Nadezhda Malysheva and John R. Walter 2010). I do not really know what the authors view is. Do the authors believe moral hazard was a secondary issue, or, like the Dodd-Frank Act, do they believe a special bankruptcy regime can take care of the problem? Again, given the authors work on this issue, especially on the pricing of deposit insurance and market incentives, it would have been nice to provide greater elocution on the government guarantee problem. Of course, these comments are less criticisms of the authors analysis and more a wish list on my part. One interesting feature of the authors work is that their book was written prior to the enactment of significant financial regulation. The book therefore provides a somewhat unique opportunity to compare what leading economists thought was the best regulation ex ante against the actual financial regulation that got implemented, specifically the rules written into the Dodd-Frank Act and Basel III. We turn to this comparison in the next section. The Dodd-Frank Act and Basel III At one level, at least one of the authors, Tirole, should be quite happy with Dodd-Frank. The creation of (1) a consumer finance protection agency, (2) greater transparency of exposures across the system and more standardization of financial products (especially in the derivatives area), (3) the possibility at least of countercyclical capital requirements, (4) recognition of the problem of liquidity and therefore potential future regulation of liquidity, (5) some oversight albeit limited on compensation, (6) regulation of credit rating agencies, a nd (7) skin in the game in securitization markets, cover major parts of Tiroles suggested financial reforms and all of these appear within the Dodd-Frank Act. Moreover, the Dodd-Frank Act clearly emphasizes macro-prudential regulation for the first time as an important component of the financial regulatory system. The Act creates a supporting research organization within Treasury, the Office of Financial Research, to measure and provide tools for measuring systemic risk. Using this data, The Dodd-Frank Act assigns new responsibilities to a new body, the Financial Stability Oversight Council (FSOC), to identify systemically important financial institutions (SIFIs). FSOC, along with the relevant agencies, are then given the power to provide enhanced regulation of these SIFIs, such as levels of capital and liquidity necessary to withstand major shocks to asset markets. In addition, the Act also gives authority for prompt corrective action of SIFIs through the orderly liquidation aut hority which is to be run and modeled by the FDIC. All three authors should be quite pleased with the new focus on macro-prudential regulation. As Tirole writes on page 62, we note that a banks failure does not have the same consequences during a period of crisis as it does during an otherwise calm period. . .such a failure has a greater chance of having a systemic impact if other banks are simultaneously affected by a macroeconomic shock and therefore may become undercapitalized . . . this all suggests that capital requirements should be higher the more the banks failure is likely to coincide with (or be driven by) macroeconomic shocks and other banks failure. At another level though, Tirole, Dewatripont, and Rochet might be less impressed with how the Dodd-Frank Act actually manages systemic risk. The devil is in the details, and there are plenty of things in the Dodd-Frank Act that would not coincide with the authors thinking on macro-prudential regulation. Rather than prov ide a long list of issues, I will mention just a few important ones: As much as the Act argues for macro-prudential regulation, the Act is focused on the orderly liquidation of an individual institution and not the system as a whole. As all three authors would argue, there is nothing unique per se about a bankruptcy procedure for a firm; what is special is its effect on the rest of the financial sector. All three authors stress the point that, in terms of managing systemic risk, bailouts are inevitable in a crisis. The architecture of the financial system should be built around this point. I therefore believe that the authors might actually argue that parts of Dodd-Frank have actually increased systemic risk. Specifically, the Act restricts the Feds ability to deal with nonbanks in terms of its lender of last resort capabilities unless a system-wide crisis has emerged. Therefore, when the financial system is weak, temporary liquidity problems at a particular firm could trigger a f ull-blown crisis. Not surprisingly, given their research, the authors are particularly aware of the role incentives play in financial markets. Thus, I believe the authors would conclude that the Act has incentives all wrong, and arguably increases both moral hazard and systemic risk in the financial system. According to Dodd-Frank, if the system fails, and money cannot be recovered from creditors, the surviving SIFIs must make up the difference ex post. In a crisis, the prudent firms pay for the sins of others. This creates a free rider problem, a race to the bottom and greater ex ante risk taking. Moreover, when surviving SIFIs are struggling to stay afloat, they must provide capital. This is clearly pro-cyclical, further igniting the crisis. With respect to Basel III, there are certainly important changes to Basel II that are consistent with the content of this book, most notably the addition of a liquidity requirement for financial firms, a simple leverage ratio as a suppleme ntary measure to risk-based capital, and higher capital requirements overall for SIFIs. That said, the authors most likely would take a dim view of Basel III. In particular, Basel III continues the risk-weights that are tied to credit ratings both within and across asset classes, as well as the internal ratings approach that Rochet forcefully argues against in chapter 3. Remarkably, the Basel approach is still focused on the risk of individual banks as opposed to systemwide risks. The authors view that what is needed is a battery of simple and easily calculated indicators, such as exposures of banks to various macroeconomic risks, has not held the day. Instead, Basel III continues the focus of the previous Basel accords on risk-weighted capital measures of individual firms as the main indicator. Finally, as mentioned above, one of the main principles underlying the authors approach to financial regulation is based on their concept of the representation hypothesis. In the absence of market discipline, the regulator should take on the corporate governance role of debtholders. A corollary to this hypothesis is that if two financial institutions, call them bank A and shadow bank B, perform similar functions, A and B should be regulated as such. While the Dodd-Frank Act does allow for some regulation of shadow banks (if they are SIFIs), generally speaking, both Basel III and Dodd-Frank fall into the familiar trap of regulating by form rather than function. And by solely addressing the failures of banking institutions, regulators are excluding the systemically important shadow banking system that serves similar functions, such as clearing houses and money market funds. Excluding these groups of institutions makes the system vulnerable, prohibits access to emergency funding, and creates an unlevel playing field. Current regulation therefore violates the principle of the representation hypothesis put forth by the authors. Acharya, Viral V., Thomas F. Cooley, Mat thew Richardson, and Ingo Walter, ed. 2010. Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance. Hoboken, N.J.: Wiley. Acharya, Viral V., and Matthew Richardson, ed. 2009. Restoring Financial Stability: How to Repair a Failed System. Hoboken, N.J.: Wiley. Brunnermeier, Markus, Andrew Crockett, Charles Goodhart, Martin Hellwig, Avinash D. Persaud, and Hyun Shin. 2009. The Fundamental Principles of Financial Regulation. Geneva: International Center for Monetary and Banking Studies; London: Centre for Economic Policy Research. Dewatripont, Mathias, and Jean Tirole. 1984. The Prudential Regulation of Banks. Cambridge, Mass. and London: MIT Press. Gale, Douglas. 2010. Capital Regulation and Risk Sharing. International Journal of Central Banking, 6(4): 187-204. Malysheva, Nadezhda, and John R. Walter. 2010. How Large Has the Federal Financial Safety Net Become? Economic Quarterly, 96(3): 273-90. Squam Lake Group. 2010. Squam Lake Report: Fixing the Financial System. Princeton and Oxford: Princeton University Press. Van den Heuvel, Skander. 2008. The Welfare Cost of Bank Capital Requirements. Journal of Monetary Economics, 55(2): 298-320. Don’t waste time! Our writers will create an original "The Worlds Leading Economic Theorists Finance Essay" essay for you Create order