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A Conditional Theory of Banking Enterprise

Published online by Cambridge University Press:  19 October 2009

Robert Haney Scott
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Extract

Applied economics consists of the application of the general principles of economics to a particular situation in order to provide an explanation of the behavior of economic agents in that situation. However, the degree of specificity of any explanation depends upon the particular uses to which the explanation is to be put. Thus, in applied economics one may wish to explain the behavior of the agents who operate a particular enterprise. Or, one may wish to provide a. broader frame of reference to explain the behavior of agents who operate a. type or class of enterprises. By utilizing the analysis of the general economic theory of the firm one may introduce the additional constraints under which, for example, a public utility operates, and thereby derive a. theory of public utilities. Or, in the same way, one may wish to construct a, theory of transport firms, or a theory of retail firms, or a theory of manufacturing firms.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 1 , Issue 2 , June 1966 , pp. 84 - 98
Copyright
Copyright © School of Business Administration, University of Washington 1966

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References

1 For descriptions of issues and bibliographic materials see the articles reprinted from the National Banking Service Review published in a. volume entitled, Studies in Competition and the Banking Structure, ed., senior staff of the Department of Banking and Economic Research, Office of the Comptroller of the Currency, U. S. Treasury, 1966.

2 Shull, Bernard applied multiple market analysis to the behavior of commercial banks in his paper, “Commercial Banks as Multiple-Product Price-Discriminating Firms,” Carson, Deane (Ed.), Banking and Monetary Studies (Homewood, Ill., 1963Google Scholar). Shull's model was later amended by Mumey, Glen A., “A Micro-economic Model to Explain Bank Behavior,” Business Review, Vol. XXIII, (Seattle, Wash.: University of Washington Press, April–June 1964), pp. 26–36.Google Scholar

3 Here again we abstract from the great variety that actually exists among banks in the handling of service charges in order to concentrate upon the more fundamental forces involved.

4 For further analysis along this line see the articles by Shull and Mumey referred to in Footnote 1.

5 of course, an average dollar size of check is assumed implicitly because of a desire to avoid viewing output as the number of checks cashed and instead relate it to the dollar volume of demand deposits. In the analysis of a. specific firm, a. further breakdown would be desirable.

6 Although, of course, they should be concerned about monetary policy from the broader point of view of its impact upon economic stability.

7 See the references cited in footnote 2.

8 Eli Shapiro has spoken to the general question of banking regulations. See his discussion of “Credit Controls and Financial Intermediaries,”Proceedings of the Conference on Savings and Residential Financing (u. S. Savings and Loan League, 1965), pp. 58–81Google Scholar and the panel discussion on the same subject that followed, pp. 82–101. The principal suggestion was that variable insurance premiums on deposits of varying risk could enable a relaxation of many existing controls. On this issue also see: Mayer, Thomas, “A Graduated Deposit Insurance Plan,” Review of Economics and Statistics, Vol. XLVII (February 1965), pp. 114–116Google Scholar; and comment by Eli Shapiro and William L. White, p. 116.