Abstracts of published papers by
Jac C. Heckelman

CATEGORIES

• voting rules
• institutional sclerosis
• economic and democratic freedoms
• Constitutional Convention of 1787
• political business cycles
• spatial models of senate elections
• direct democracy
• secret ballot elections
• convergence
• public finance
• surveys of public choice views
• banking system
• miscellaneous
• books

Banking System

• Political Selection of Federal Reserve Bank Cities

  (with John Wood)

  Public Choice and Economic History (Joshua Hall and Marcus Witcher (eds.)), Springer, 135-153, 2018

  Abstract. The Federal Reserve Act (1913) established the Reserve Board Organization Committee (RBOC) to determine the number and location of Federal Reserve districts and Reserve banks. Some scholars argue that the decisions were politically motivated but direct econometric evidence is lacking. A regression model utilizing solely political variables correctly predicts 11 of the 12 selected cities; the exception being Cleveland's selection over Cincinnati. Our results present direct evidence of the importance of political determinants for RBOC selection.

• A Social Choice Analysis of the Selection of Federal Reserve Bank Cities

  Open Journal of Economics and Finance 1: 30-36, 2017

  Abstract. The Federal Reserve Act (1913) established the Reserve Board Organization Committee (RBOC) to determine the number and location of Federal Reserve districts and Reserve banks. As part of their information gathering, the RBOC conducted two polls of national banks. One poll requested preferences on up to 12 cities, and the other requested a rank ordering of the top three. We analyze these votes and show that the selected cities are not wholly consistent with either poll. An aggregation based on simple plurality vote sorted by district correctly identifies 11 of the 12 selected cities; the exception being Cleveland's selection over Pittsburgh. Other aggregation methods analyzed here predict fewer of the selected cities, and we show that any other scoring rule would be inconsistent with at least one of the 12 selections.

• Joint Determination of Regulations by the Regulator and the Regulated: Commerical Bank Reserve Requirements, 1875-1979

  (with John Wood)

  Eastern Economic Journal 34: 158-171, 2008

  Abstract. We apply the theory of clubs to bank decisions on choosing membership in the national system and being subject to federal regulations, or remaining outside the system and opting instead for state regulation. Although costs to national membership are typically higher, member banks can use their influence to reduce these costs. This is expected to be more prominent for the larger banks, which retain greater influence on the regulators. Thus, the theory predicts membership depends on costs, which in turn depend on membership. We test these relationships in a system of simultaneous equations for the periods 1875-1913, 1914-1934, and 1935-1980. Our results are consistent with the notion of large bank memberships responding to changes in reserve ratios, and reserve ratios responding to membership rates for large banks. In addition, we find bank sensitivity to national reserve ratios to be lowest when the Fed was given additional discretion in setting reserve ratios post 1935, and federal regulator responsiveness to large bank membership was greatest during this time as well.

• Federal Reserve Membership and the Banking Act of 1935: An Application to the Theory of Clubs

  (with John Wood)

  Public Choice Interpretations of American Economic History (Jac C. Heckelman, John C. Moorhouse, and Robert Whaples, eds.), Kluwer Academic Press, pp.147-161, 1999

  Abstract. Between 1914 and 1980 state-chartered banks were free to accept or forgo the costs and benefits of Federal Reserve membership. Their decisions were sensitive to changes in the burden of the Fed's reserve requirements caused by fluctuations in interest rates. But large banks were less likely than small banks to change their membership status, especially after the Fed acquired discretion over its reserve requirements in 1935. These choices fall within the theory of clubs and illustrate rent seeking, voting with the feet, and the exploitation of the great by the small. We develop a model of the Fed's determination of the conditions of membership subject to expected bank responses and then formalize the membership decisions of profit-seeking banks taking account of their possible influences on the Fed. In essence, all banks are likely to vote with their feet depending on membership costs, but small banks may free ride on large bank lobbying of the Fed for reduced reserve ratios. This effect should be stronger after the New Deal enhancements of Fed discretionary powers.