More from these Authors

• Book | 2012

  The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy

  Thomas K. McCraw

  In 1776 the United States government started out on a shoestring and quickly went bankrupt fighting its War of Independence against Britain. At the war's end, the national government owed tremendous sums to foreign creditors and its own citizens. But lacking the power to tax, it had no means to repay them. 'The Founders and Finance' is the first book to tell the story of how foreign-born financial specialists—immigrants—solved the fiscal crisis and set the United States on a path to long-term economic success. Pulitzer Prize–winning author Thomas K. McCraw analyzes the skills and worldliness of Alexander Hamilton (from the Danish Virgin Islands), Albert Gallatin (from the Republic of Geneva), and other immigrant founders who guided the nation to prosperity. Their expertise with liquid capital far exceeded that of native-born plantation owners Washington, Jefferson, and Madison, who well understood the management of land and slaves but had only a vague knowledge of financial instruments—currencies, stocks, and bonds. The very rootlessness of America's immigrant leaders gave them a better understanding of money, credit, and banks and the way each could be made to serve the public good. The remarkable financial innovations designed by Hamilton, Gallatin, and other immigrants enabled the United States to control its debts, to pay for the Louisiana Purchase of 1803, and—barely—to fight the War of 1812, which preserved the nation's hard-won independence from Britain.

  Citation:

  McCraw, Thomas K. The Founders and Finance: How Hamilton, Gallatin, and Other Immigrants Forged a New Economy. Harvard University Press, 2012.

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• Working Paper | HBS Working Paper Series | 2012

  Technology Choice and Capacity Portfolios Under Emissions Regulation

  David Drake, Paul R. Kleindorfer and Luk N. Van Wassenhove

  We study the impact of emissions tax and emissions cap-and-trade regulation on a firm's long-run technology choice and capacity decisions. We study the problem through a two-stage, stochastic model where the firm chooses capacities in two technologies in stage one, demand uncertainty resolves between stages (as does emissions price uncertainty under cap-and-trade), and then the firm chooses production quantities. As such, we bridge the discrete choice capacity literature in Operations Management (OM) with the emissions-related sustainability literature in OM and Economics. Among our results, we show that a firm's expected profits are greater under cap-and-trade than under an emissions tax due to the option value embedded in the firm's production decision, which contradicts popular arguments that the greater uncertainty under cap-and-trade will erode value. We also show that improvements to the emissions intensity of the "dirty" type can increase the emissions intensity of the firm's optimal capacity portfolio. Through a numerical experiment grounded in the cement industry, we find emissions to be less under cap-and-trade, with technology choice driving the vast majority of the difference.

  Keywords: Pollution and Pollutants; Governing Rules, Regulations, and Reforms; Technology; Production; Performance Capacity; Mathematical Methods;

  Citation:

  Drake, David, Paul R. Kleindorfer, and Luk N. Van Wassenhove. "Technology Choice and Capacity Portfolios Under Emissions Regulation." Harvard Business School Working Paper, No. 12–079, March 2012.

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• Article | Montréal Review | August 2011

  The Current Crisis and the Essence of Capitalism

  Thomas K. McCraw

  Keywords: Economic Systems;

  Citation:

  McCraw, Thomas K. "The Current Crisis and the Essence of Capitalism." Montréal Review (August 2011).

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