Enhanced Human Capital Stock and the Military Experience: A Modest Policy Proposal

George Washington\u27s sentiments on the obligations of citizens were clear. He regarded military service as the duty of every male citizen who enjoyed the privileges of democracy. He stressed that an army composed of citizen-soldiers was preferable, from a point of social cohesion and political stability, to one composed of professional soldiers - and cited the Swiss Army as the proper example (Graham, 1971). In spite of these perceived benefits, the United States has historically been of two minds with respect to providing for the national defense. That is, should the military be composed of professional soldiers, induced to enlist by opportunity cost differentials or a taste for military service? Or should the military consist in large part of citizen-soldiers responding to a national obligation - in much the same manner as citizens called for jury duty (Lacey, 1982)? The national response to security threats has reflected this dichotomy. From the Civil War to World War II, the government periodically relied on conscription to augment a small, professional army. In the aftermath of World war II, the draft apparatus was dismantled, only to be quickly reconstructed with the onset of the Cold War. For the next twenty-five years conscription (and draft-induced enlistments) provided a substantial portion of our armed forces; spreading the military experience over a large segment of the young, male population. Given the necessity for maintaining a large military presence over an protracted period, the draft came to be viewed as a reasonable demand of citizenship. It remained for an unpopular war and a unfairly selective draft to dim the values of a broader military experience

Comparative Efficiencies: National and Military Service

The National Service Act of 1993 is viewed as a means of inculcating a sense of personal and social responsibility in young adults. The present emphasis on fiscal responsibility and budget reduction implies that any new expenditure program be funded by either: (a) reductions in present programs; or, (b) new taxes. As new taxes are regarded as politically incorrect by legislators seeking to extend their tenure, program cuts become mandatory. It is proposed that military downsizing is one means of funding national service; and that the tradeoff is suboptimal. Downsizing adversely affects minorities and the least skilled - who benefit most from military training. A new military enlistment option is suggested as a means of improving access for the least advantaged to the social mainstream and increasing the generation of human capital. The new option would be funded by reducing the maximum number of national service participants by 50%

Random Walks, Lemmings, and Behaviorism; The Search for a Market Lodestar

Random Walk: Burton Malkiel defines a random walk as one in which future steps or directions cannot be predicted on the basis of past actions. Within the context of the stock market, a random walk for a stock\u27s price means that it is as likely to fall as to rise, regardless of previous price performance (Malkiel, 1996). To hold the random walk hypothesis as truth is to foresake all punditry regarding fundamental and technical analysis and to abandon long-standing shibboleths such as evolving industries and sectoral rotation. Essentially, random walk implied that winners could not consistently be picked. The Wall Street Journal lends credence to this hypothesis with its long-running contest of darts versus the experts, where stocks selected by darts tossed at the financial page are matched, performance-wise, with stocks selected by market experts. The random walk hypothesis is not particularly popular in the general financial community as it implies that financial management brings only a layer of cost - and the investor is better served by investing in a fund which closely represents the overall market. Random walk was derided as an academic contrivance by many in the financial sector. However, the hypothesis gained support as financial information flowed more freely and in greater volume over time, and market/industry/firm transactions became more transparent

Irrational Markets, Irrational Investors: the Foreign Card

The full arrival of the information age, transported through the medium of the internet, provides the individual investor with quicker access to more information than ever before. Economic theory tells us that greater transparency in investment decisions should make for more efficient financial markets; i.e. smaller deviations of security prices from their true or intrinsic values. However, recent evidence based in US stock market performance suggests that the vastly improved information flow may cause investors to act in a less rational manner, leading to greater market volatility and less efficient financial markets. The argument that information technology (IT) provides the average investor with greater transparency in decision-making is a compelling one. With greater transparency, more information will be more available to more investors, leading to improved price discovery among professional investors. In turn, non-professional investors will be able to obtain a better price (Pagano and Roell, 1996). In concert, the internet, personal computers, discount brokers, and tighter SEC regulations on equitable disclosure make securities markets more transparent. IT provides free access to all public information and offers investors a larger store of information than was historically provided via the print media. Pagano and Roell (1996) also propose that expected trading costs to investors decline as a market becomes more transparent, which further levels the playing field for non-professional traders. However, it is the nexus between more perfect information and investor psychology which may provide at least a partial explanation for recent heightened volatility in the US stock market (Evidence the reduction of the Nasdaq composite index from 5200 in March 2000 to 1300 in July 2002 and the deflation of the DJIA from 10,500 in February 2002 to nearly 7500 in July 2002). The paper will examine the links between more perfect information, investor psychology, and market volatility and, as a bromide, suggest that foreign investment comprise a part of one\u27s portfolio