Friday, May 31, 2019

The City of the Sun :: Essays Papers

The urban center of the SunIn Tommaso Campanellas document, The City of the Sun, a new social order is introduced amongst the Solarians. Campanella presents his readers with a utopian auberge that is ordered by rationality and reason. This ideal visionary is a redeemed world, free from injustice and competition in the market structure. Campanella, however, grew up in a society that was exploited and based on irrational principles. Campanella, therefore, reconstructs a society that operates in opposition to the one that he considers to be corrupt and irrational. The document, The City of the Sun, can be used to critically compare the social and political order that exists today. Moreover, Campanellas work reveals the weaknesses that exist in todays society and its structure.One characteristic of this utopian society is its system of meritocracy. In this system, positions of power are determined by ones ability and excellence factors such(prenominal) as gender or social class do not result in positions of leadership. For example, leaders and ministers are chosen according to which individuals learn the greatest number of skills and practices them best. Individuals who work extremely hard and acquire noesis are judged to have the greatest nobility. Moreover, the Solarians have a Prince Prelate called Sun. Sun is elected by knowing a significant amount of information in diverse academic fields. For example, he must know all the mechanical arts and the mathematical, physical, and astrological sciences. In his dialogue, Campanella stresses the importance of acquiring familiarity in this ideal city. He demonstrates this by describing the position of the Prince Prelate Once appointed, his tenure lasts until someone with greater knowledge and greater ability to rule is discovered (Campanella 45). Therefore, those who wish to live in great power, must strive for this achievement in the area of academics. Also, ones level of knowledge determines the pursuit of happiness an individual will receive in the city of the Sun. The Solarians are granted the opportunity to alter their status if they desire, and live a sprightliness according to their standards.Campanella directly criticizes the society he grew up in by stating in his dialogue, why the Solarians mock the material world for the way it is structured indeed they laugh at us because we consider craftsmen ignoble and assign nobility to those who are ignorant of every craft and live in idleness, keeping a host of dissolute and idle servants about them to the great detriment of the state (Campanella 43).

Thursday, May 30, 2019

The Problem With Teaching Creationism in the Science Classroom Essay

The creation stories in Genesis, though they tackle similar themes, have different points of view and focuses as to the fundamentals of the creation process. The initial story centers on the process by which God creates the universe as a whole. In essence, He imposes order upon chaos And the earth was without form, and void and tail was upon the face of the deep (Genesis 12, King James Version). From this raw state, He delineates different aspects of the cosmos from the night and day all the way down to small-arm and woman. The second, on the other hand, fixates on the particulars of creating a world for humans to inhabit. Unlike the first story, man is created early in Gods process after which vegetation and animals be formed, the former of which for man to take care of and the latter as an aid to man. Later, the narrative turns to philosophical matters, such as introducing the concept of good and evil, in appendage to explaining such things as work and pain during child birth. Such ideas are not present in the first story, which, as mentioned, takes less of an interest in the specialised impact of mankinds presence in the world and more of one at the cosmic level.These stories find their roots in the cultures that surrounded the Hebrews at the time of their writing. They make out motifs with other creation stories of the Near East. The flood account in The Epic of Gilgamesh, when compared with the flood narrative in Genesis, is often cited as an example of such a similarity between Genesis and other Near east texts. However, the creation stories of the first two chapters of Genesis find links with other Near Eastern creation myths. The Enuma elish is a Near Eastern creation myth that contains a god who creates the... ...the Boards ID Policy violates the Establishment Clause and that ID cannot uncouple itself from its creationist, and thus religious, antecedents (Kitzmiller v. Dover).Leaving parenthesis all personal opinions about religion and issues of biblical scholarship, creationism in the science classrooms of public schools is just not legal. Whether it is right or not, it has no place at that place the Constitution guarantees that. It is not a scientific theory it is a religious belief whether it pretends to be otherwise or not. It has a place in the social sciences if any place at all, not the natural sciences.Works CitedKitzmiller v. Dover Intelligent Design on Trial. National Center for Science Education. October 17, 2008. Retrieved 21 June 2015.Gabel, John B. and Charles B. Wheeler. The Bible as Literature An Introduction. New York Oxford U P, 1986.

Wednesday, May 29, 2019

Cat Statuettes in Ancient Egypt and Modern America :: Advertisement Symbolism History Essays

Cat Statuettes in Ancient Egypt and Modern America Although antediluvian Egyptians admired similar statuettes of drifts as modern Americans collect today, the Egyptians saw these statuettes as religious symbols with long histories, and the modern Americans see these statuettes as a way of demo the love and admiration that they feel towards their cats.An advertisement for a porcelain statuettes that was made to look like an Egyptian cat statuette shows that this type of statuette survived for a very long time. It is made out of a type of porcelain and its earrings argon made out of gold. It has a glass dome covering it and at its base are Egyptian hieroglyphics that are hand painted. (Cats (Vol.52, November 1996) p. 11) This advertisement, that I found in the November 1996 issue of Cats magazine, is aimed at people who love cats and most likely have cats as pets. The persist of the magazine confirms the fact that it is meant for people who own cats. The other articles are mostly about cat nutrition and health. The other advertisements also involve cats. These advertisements included cat Christmas tree ornaments, cat jewelry, and cat soap.There were many different representations of cats in ancient Egyptian art. There were also many cat statuettes. The one I thought most closely represented the cat statuettes in the advertisement is the bronze Gayer-Anderson cat. (Jasomir Malek, Cats in Ancient Egypt ( London British Museum Press, 1993) pp.12 ) It was named after the collector who donated it to the British Museum. Made around 600B.C., its body is made out of bronze with inlaid silver as well as gold earrings and a gold intrude ring.(Jasomir Malek, Cats in Ancient Egypt ( London British Museum Press, 1993)pp.12) It was made for a totally different purpose than the modern cat statuettes. During this time there was an cast up in the number of cults that used animals as their cult images. These statuette were probably used as representations of the goddess Bas tet.(Jasomir Malek, Cats in Ancient Egypt ( London British Museum Press, 1993) pp.98 ) The goddess Bastet enjoyed what could be called the greatest increase of popularity of all the animals who were part of these cults.(Jasomir Malek, Cats in Ancient Egypt ( London British Museum Press, 1993) pp. 98 ) The large number of bronze statuette that were made during this time clearly illustrated the cats colossal popularity.

Roller Coaster Physics Essays -- physics roller coasters amusement the

The very for the first time roller coasters were created in Russia in the 1600s, and were naught like the typical roller coaster that comes to mind today. People rode down steep scrap slides on gigantic sleds made from either wood or ice that were slowed with sand at the end of the ride. These sleds required skill to navigate down the slides, and accidents were frequent. A Frenchman tried to cash in on the popularity of the Russian ice slides by building one in France, but the warm climate quickly ended his attempts with ice. A waxed wooden slide proved to be oft more feasible, along with wooden wheeled sleds. Just as with the ice slides, the necessity of navigation skills caused many accidents, so tracks were produced to keep the sleds in line. In the 1850s, the first shot at a vertical gyrate was made in France. This Centrifuge Railway offered a rail cable car that would travel through the loop with nothing keeping it there aside from its own centripetal acceleration. Government officials quickly shut the operation down after one accident. The beginning of American roller coasters was near the end of the 19th century when railway companies set up amusement parks at the end of their lines to increase business on the weekends. In 1884 the first real roller coaster in America was introduced a gravity driven switchback train. Passengers would climb a set of stairs to board the car, which was then pushed from the station to travel down a hill and over a few bumps. At the bottom, the passengers got out and climbed another set of stairs while workers hoisted the car to the top of the second station. The passengers got back into the car and rode to the first station on a second track.Another attempt at a vertical lo... ...changing their focal point of movement from down to up. G-forces that are felt when changing direction horizontally are called lateral Gs. Lateral Gs can be converted into normal G-forces by banking turns.Roller coasters today e mploy clothoid loops rather than the circular loops of earlier roller coasters. This is because circular loops require greater entry speeds to sleep together the loop. The greater entry speeds subject passengers to greater centripetal acceleration through the lower half of the loop, therefore greater Gs. If the radius is reduced at the top of the loop, the centripetal acceleration is increased sufficiently to keep the passengers and the train from slowing too much as they move through the loop. A large radius is kept through the bottom half of the loop, thereby reducing the centripetal acceleration and the Gs acting on the passengers.

Tuesday, May 28, 2019

Athenian Women’s Acquisition of Power through Relationships with Men :: Greek Women Females Power Papers

Athenian Womens Acquisition of Power done Relationships with Men Hellenic society held the belief that women had little common adept or logic they had the natural tendency to move toward chaos and destruction. Women were thought to have the ability to destroy a mans honor through their actions. Because of this, women were given no influence in the government of the polis or in their lives they had no power. Instead, they were kept inside where they could be closely monitored by their husbands, fathers, lovers or protectors. Yet, as seen in Kathleen Freemans translations of Athenian court outpourings The Murder of Herodes, women were able to acquire power in the household, the government, and for their own betterment through sexual relationships, marriage, and family ties.Greek mythology painted a poor conceive of of women. This, in turn, created a society where the men believed that these myths were an accurate interpretation of the nature of women (or, possibly, vice-versa). Zeu s created women as a punishment, and to this end, he made them so tempting that men could not resist them. But, he also made them a bane to mens existence, where men had to get married them and constantly have to try to balance the good and the evil that inherently existed in their wives, or die alone. As a consequence of this bleak picture of women, Athenian men believed they had to keep a close eye on women and not exclusivelyow them too much freedom they had to keep them behind unopen doors as much as possible so they could balance the good and evil and control their deceitful nature. So how is it that women are supposed to acquire either power in their lives if all they have is their households? In fact, the first area in which a woman could gain power was the household. In a trial concerning the killing of an adulterer, the defendant Euphiletus gives an account as to what happens when a man and a woman marry When I decided to marry and had brought a wife home, at first my a ttitude was this I did not wish to annoy her, but neither was she to have too much of her own way. I watched her as well up as I could, as kept and eye on her as was proper. But later, after my child had been born, I came to trust her, and I handed all my possessions over to her, believing that this was the greatest possible proof of affection.

Athenian Women’s Acquisition of Power through Relationships with Men :: Greek Women Females Power Papers

Athenian Womens Acquisition of Power through Relationships with MenGreek ships company held the belief that women had little common sense or logic they had the natural tendency to move toward chaos and destruction. Women were thought to have the ability to destroy a mans honor through their actions. Because of this, women were given no influence in the government of the polis or in their lives they had no power. Instead, they were kept inside where they could be closely monitored by their husbands, fathers, lovers or protectors. Yet, as seen in Kathleen Freemans translations of Athenian court trials The Murder of Herodes, women were able to acquire power in the household, the government, and for their stimulate betterment through sexual relationships, marriage, and family ties.Greek mythology painted a poor picture of women. This, in turn, created a society where the men believed that these myths were an accurate interpretation of the record of women (or, possibly, vice-versa). Ze us created women as a punishment, and to this end, he made them so tempting that men could not resist them. But, he also made them a curse to mens existence, where men had to marry them and constantly have to try to balance the good and the evil that inherently existed in their wives, or die alone. As a consequence of this bleak picture of women, Athenian men believed they had to keep a close eye on women and not allow them too more than freedom they had to keep them behind closed doors as very much as possible so they could balance the good and evil and control their deceitful nature. So how is it that women are supposed to acquire any power in their lives if all they have is their households? In fact, the first area in which a woman could put on power was the household. In a trial concerning the killing of an adulterer, the defendant Euphiletus gives an account as to what happens when a man and a woman marry When I resolute to marry and had brought a wife home, at first my at titude was this I did not wish to annoy her, but neither was she to have too much of her own way. I watched her as well as I could, as kept and eye on her as was proper. But later, after my child had been born, I came to trust her, and I handed all my possessions over to her, believing that this was the greatest possible proof of affection.

Monday, May 27, 2019

A Passage Taken From the Film ‘Trainspotting’ Essay

The passage is taken from a film Trainspotting, and is therefore a scripted piece. In a situation like this situation in real life, there would undoubtedly have been interruptions on numerous occasions however, being a scripted piece, there were no overlaps the entire passage is in the form of turn taking. In real life, we all know that we should turn take, b arly we often break this rule. People break this rule when they are angry, when they are enthusiastic about the issue, or if they want to add to what the other person is saying. another(prenominal) feature of the passage illustrating that this is a scripted piece, is the accompaniment that there are no self-clarifications. The dialogue is more carefully and logically structured than if it was spontaneous speech.To translate the nature of this passage, one must first understand the scene of the piece. inject is an unemployed bloke going to an interview, unbeknown to the interviewers that he does not in fact want the job. Pre vious to the interview, murphy had taken speed, which meant that in the interview he is behaving completely inappropriately. An interview should be held formally, and while the two men and the adult female interviewing germinate try to keep this business formal, Spud makes three crucial mistakes. Firstly, he is acting as if they were mates, by utilize very garrulous delivery secondly, he says approximately 100 words, explaining that he had lied in his original application, but how he thinks that it was alright because it apparently was not important and thirdly, because he has taken speed, he is talking extremely fast, with few pauses for breath, which suggests to an interviewer that he is nervous, and creates the effects that the speed would have had on him. An example of all three of these things, is when Spud saysNo, actually I went to Craignewton but I was worried that you wouldnt have heard of it so I put the Royal Edinburgh College instead, because theyre both schools, r ight, and were all in this together, and I wanted to put across the general idea rather than the details, yeah? (Spud)Throughout the passage, Spud sets the agenda, and even when the interviewers ask questions, Spuds answers change the direction of the speech. An example of this, is when Spud says that he loves all people, including beggars, and thence the parley continuesHomeless people? (Woman)No, not homeless people. Beggars, Francis Begbire one of my mates. I wouldnt say my best mate, I mean, sometimes the boy goes over the score, like one time when we me and him were having a laugh and all of a fast hes fucking gubbed me in the face, right. (Spud)This shows how Spud is the one who sets the discussion topic. The original question from Man 2 was about what attracted Spud to the leisure industry, and from that, the conversation moved onto one of Spuds mates. Spud setting the agenda, shows that Spud has the effect, which is not in keeping with the stereotypical interview. Norm ally, the interviewer would have the power, not the interviewee.Spud begins the dialogue, aswell as ending it. He has the most words, and he speaks most frequently. Although having the most words and speaking most frequently does not alone guarantee the power to that character, along with setting the agenda, it is clear that Spud has it. He uses many declaratives, and many rhetorical questions, especially in his first speech, which is also evidence that he has the power. Examples of declaratives areNo problem. Whatever you say, man. Youre the man, the governor, the dude in the chair, like. (Spud)Apart from just being a declarative, this is also a classic example of the informal language used throughout the passage by Spud. Words such as man and dude are informal and chatty, and not in the correct context to what an interview should be.An example of rhetorical questions used by him, arePeople get all hung up on details, but whats the point? Does it commission out? Whats important i s that I am, right? (Spud)After his first outburst, Man 1, the interviewer, tries to obtain the power, by addressing Spud as Mr Murphy, which is very formal, and by using an interrogative.Mr Murphy, do you mean that you lied on your application? (Man 1)In reply to his question, Spud replies,Only to get my foot in the door. (Spud)This is not what Man 1 would have been expecting his answer to be. Most likely, he would have expected him to try and wriggle out of having to say that he lied on his application. However, Spud does not do this. He out rightly admits that he lied. He is brutally honest, and because of this, Spud retains the power. This recurs periodically throughout the passage, and each time Man 1 tries to slay the power, he fails.At the end of this passage, Man 1 uses a declarative statement to end the interview,Thank you Mr Murphy. Well let you know (Man 1)If the interview had ended here, then it would have ended with Man 1 having the power. However, after this, Spud goe s on to say,The pleasure was mine. Best interview Ive ever been to. Thanks. (Spud)Because of this, Spud makes it seem as if the interview was ended on his terms, so he once again has the power, meaning that he had it throughout the entire interview.In summary, Spud has the power throughout the interview, all the while, the interviews are trying to gain it, which is what an interview typically entails. Using many techniques, the writer has made it so that Spud keeps the power right the way through the passage. Spud sets the agenda, and makes it impossible for the interviewers to be impressed by his antics which is overall, exactly what he wants.

Sunday, May 26, 2019

Comparison between the South Asia and East Asia during WW1 Essay

In the twentieth century, WWI was a political tornado of change, sweeping over the entire world, augmenting e actuallything in its path. Although the affiliate and Axis powers were affected the most by WWI, vitamin E Asia and South Asia were also transformed as well, through considerable social and political reform.In East Asia, mainland China was the country outside of the Allied and Axis powers affected the most in WWI, through the creation of the Chinese Communist Party. After WWI was over, the Treaty of Versailles transferred all in all German holdings in East Asia, including those in China, to Japan. To China, this was an outrageous offense. Although China certainly didnt enjoy Germany owning part of their land, to have their worst enemy, Japan, owning it would be positively loathsome. A demonstration broke out in Beijing in protest over Versailles. After being defeated by both Japan and the West, China had enough humiliation and demanded social reform. It was then that Mao Z edong came forth and established the Chinese Communist Party. Although the Nationalists would crush the Communists efforts to overthrow the government, the Communist Party would eventually grant and take control, changing China constantly, because of the outcomes of WWI.In South Asia, India was affected by WWI through the heightened support of the Indian Nationalist movement. When England jampackd their colony India to support the contend effort, the Indians complied, and the Nationalist movement remained dormant during the war. After WWI was over, most of the world saw Europe as a time bomb of conflict, and this combined with the oppressive efforts to force Indian soldiers into the war cause the Indian Nationalist movement to return full force. Intellectuals like Gandhi appeared with ideas as to what a post colonial India would look like, and near everyone in India, Muslims and Hindus alike, could agree they wanted England out. Soon, England complied with Indias cries for inde pendence and simply pulled out of South Asia. After discordant internal conflicts, India finally stabilized, with its independence intact, because of the outcomes of WWI.WWI changed the world forever and left many problems unsolved that would return again more forceful than before. In China and India, WWI provokedsocial and political reform, but the two outcomes were very different. India gained its independence and set up a Western-style democracy, whereas China would eventually be ravished by the tormenting policies and killing-spree of Mao Zedong. Both India and China were directly affected by the outcomes of WWI.

Saturday, May 25, 2019

Text Messages and Video Conferencing

Project Objective The objective of this project is to implement sending and receiving text messages and tv conferencing on LANA employ Visual Basic. It provides functionality that enables classes to use a default application framework. Once the frame work is able to do sending and receiving messages and video conferencing on LANA, the project tail end be extended in future for developing audio recording chat as well. Two substance ab exploiters are able to chat by entering severally others IP addresses. Users can easily add and delete contacts from their contact list.Users can accept and reject invitations or requests of video hat. Since the only form of authentication is enabling the recipient to accept chat request, this application is non very secure to use on the Internet. But, this application is intended to be used inside a LANA where users are known and trusted. Questionnaires 1 . Who can benefit this organization? 2. What are the requirements In damage of Hardware com ponents Software Components 3. What features does the transcription offer In terms of Sending and receiving message Video Conferencing 4.How many participants do you envisage needing to use the system? Will be the equipment be used? In a wholeness location dedicate location at school persist location throughout the school 5. Where 6. Are there any maintenance and support operate or contracts available to you In relation to the equipment? 7. How much was the monetary value of the project and when will be Its duration? 8. How easy Is the equipment to use and operate? How straightforward Is the user Interface? Statement of Problem This present study tries to analyze, design, develop, test and Implement secured LANA chat system.Specially, the study sought answer the following questions 1. Who can benefit this system? 2. How efficient the LANA chat System Is? 3. What specific programming language needed for the proposed LANA chat System? 4. What are the technical features of the prop osed system In terms of a. tribute b. Celestially d. System Process Significance of the Study The proposed system basically connects to sealed people by obtaining an IP Configuration it also provides video conferencing by obtaining the utter IP address.Further, it also provides on sending and receiving messages through LANA and at the same time you can only chose and create contact list wherein a certain person you want can only interact to you by getting its IP address. This system is a project proposal intended for the students and officers/employees of some establishments for them not to need a wireless connection Just to communicate to other people or their friends. This would also allow them to connect and socialize to people akin sending and receiving text message and video conferencing through LANA even though they dont have connections equal wireless or modem.With this system, it would be easy for them to exchange thoughts and ideas by Just communicating to their friend s. Review of Related Literature The simplest computer chatting is a method of sending, receiving, and storing typed assuages with a network of users. This network could be WAN (Wide Area Network) or LANA(Local Area Network). Our chatting system will deal only with lans (static IP address) and it is made up of two applications one runs on the server side (any computer on the network you choose it to be the server) while the other is delivered and executed on the client PC.Every time the client wants to chat he runs the client application, enter his user name, host name where the server application is running, and hits the connect button and start chatting. The system is many-to-many arrangement every-one is able to talk to anyone else. Messages may be broadcasted to all receivers(recipients are automatically notified of incoming messages) or sent to special individuals (private chatting through server) where during this operation all messages are encrypted at the sender side and decr ypted at the recipient to forbid any hackers to the server from reading these private messages.For this system to be physically realized you should be familiar with programming and networking. Visual Basic is our programming language, transmission control protocol/IP is our network protocol, and finally windows sockets is our programming interface to have access to network functionality. Video conferencing enables direct face-to-face communication across networks. The term video conferencing covers a range of communication activities and technologies.At one end of the scale are web- conferencing tools such as Yahoo Instant Messenger, which can be used with low- cost webs on stand-alone PCs to provide basic video conferencing facilities. At the high end of the scale are dedicated video conferencing studios with specialist cameras, lighting and audio equipment. What each video conferencing system has in common is that two or more parties in different locations have the ability to mon omaniac using a confederacy of video, audio and data.A video conference can be person to person (referred to as point-to-point) or can involve more than two (the United estate Education and Research Networking Association) to develop a national schools network. This will be a secure network, available from anywhere, allowing easy access to a wide range of high quality online applications, including video conferencing. Methodology Waterfall Approach In the software development process cycle, programming models are used to course of study the heterogeneous stages of developing an application. One such model is the waterfall del.It is called such because the model develops systematically from one phase to another in a downward fashion, like a waterfall. Requirement Gathering and Analysis Deployment of System System Design Implementation Testing Maintenance conformation 1 . Waterfall Model Figure 1 shows the model that the researchers followed from the start until the implementati on of the system. It had begun in the gathering of requirements and analysis. The researchers conducted an interview with the client in order to assemble the necessary information in constructing the system Just as how the client expects it to be.Sharing of if ideas and opinions between the researchers and the client took place during the meeting of the requirements for the said system, in order to distinguish, whether such requirements could be valid and possible to be included in the system to be developed . Seer friendly interface, big capacity of storage, reliable and secure. After the requirements have been gathered and analyzed, the researchers then started to pulp the design of the system. The user -interface was drafted and designed according to clients request.The researchers chose IV programming Language for expression of the system. The design served as a guide on where to begin and to end. Without this, the construction of the system would be difficult. Upon finishing the chosen design of the system, the coding was started. As the coding of the system progressed, immediate testing was done to distinguish if it works in the preferred way and to remove all the bugs. When the construction of the system was at the last completed, it was tested to phase. After the successful testing of the system, it was then transported to client .The waterfall approach was used as guide to complete the system or project. Proponents System Analyst is responsible for the support of at least complex systems and applications, analyzes and understands the catamenia state processes to ensure that the context and implications of change are understood by the clients and project teams, develops an understanding of how present and future business needs will carry on to the solution and works with the clients to prioritize and rationalize the requirements of the system.The documenter or project writer develops and maintains, under the supervision of the project leader, the d ifferent documents pertaining to the management of the project including the project plan/schedule of he project closure document. In this project, the first systems analyst and the project manager is John Michael Mango. In systems development, he is responsible for the designing of the sassy system/application.Also required to perform as a programmer, where he actually writes the code to implement the design of the proposed application. The second systems analyst is Siebel Managua who is responsible for formation the alternate solutions to the system and also for the problems occurring at the various stages of the development process. Finally, the documenter is Johnnie Malay who designs, creates and maintains technical documentation.

Friday, May 24, 2019

Christian realism Essay

This meant that human wars do not accomplish divine righteousness. They are not holy. They belong to the real world of politics with all its tensions, paradoxes and contradictions He called his position Christian realism. There can be some reconciliation between the church and state if the concourse are spiritually lively. The much spiritual people, the more they are able to rule their own affairs and the less they need the heavy hand of government to keep them in line.The Puritans prepared the national soul of their country for liberty and democracy as their congregations, beginning with the work of Robert Browne and Robert Harrison, spread this gospel throughout England and later in America. They lay churches that advocated the autonomy or liberty of each congregation from outside interference and the right of the people to select or depose their own ministers and members. Each of these congregations was sorry together by the consent or covenant (foedus) of its members and so became the catalyst behind the move toward federal government in the modern world.By the period of the Puritan Revolution of 1640 60, the Levellers, who grew up with these congregations, became the most strident advocates of congregational principles on the national scene. They spurned the Machiavellian world of depraved government. Their most eloquent spokesman, William Walwyn, rejected the pessimism and resignations of Machiavellis policy in the hope of creating Christian view of government, where the love of Christ would guide all private and public undertakings with its tolerance and impartiality.The prospects for peace in Iraq and the Middle East has much to do with the type of people with whom we are dealing. H. Richard Niebuhr felt that it was most all-important(a) to ask the question, whats going on? in particular accompaniment before formulating coherent response. This war too, Washington advises us publicly and in advance, is war of global proportions. It is an o pen-ended war with the world as its battlefield. The enemy assumes two general forms. One part is visible, above ground, represented by evil governments and reminiscent of the old Soviet bloc.So far except four of the enemy governments in the new war have been identifiedthe former governments in Afghanistan and Iraq, and two remain axis of evil governments in Iran and conglutination Korea. The other enemy comp unitynt is invisible, consisting, we are told, of cells in some 50 or 60 mostly unnamed countries. These are not the cells of the communist party, exclusively the underground organizations of what Washington chooses to call terrorists Whatever its form, whether bearing the legitimacy of government or existing underground, the enemy must be destroyed.To do this, we must sometimes act alone, unilaterally. Other times we can act with our allies. (Frederick 2004 191) An ethical judgment serves as second stage, addressing and reacting to specific set of circumstances. of cours e, discussion of this type could prove interminable in relative universe, where every element of situation is the product of the complex interactions of all things, But discussion must limit itself to what is more proximate to the situation at hand and stands neglected or misunderstood in the public forum.Among these elements the matter of religion seems to qualify in the present circumstance. It is most essential to the people of the Middle East and misunderstood by our secular government, which fails to understand the potency of its ideas. This failure is product of recent times with its emphasis upon church/state detachment but does not represent the verdict of scholars throughout the ages. In former days the role of religion was more appreciated for the part it played in ruling and understanding people.Tocqueville said that religious customs of people are more crucial than the physical circumstances or governmental structures surrounding them. Montesquieu believed that the one who conquered people must bow before the conquered in ruling the land, if one wished to maintain some semblance of order. The religions and customs of people were considered most essential in forging sound policy.The prospects of peace were related to the fundamental Geist of those who must respond to outside forces. No policy could expect to find success without considering this most essential ingredient. (Paul 2001 38-77).

Thursday, May 23, 2019

Contemporary Symmetric Ciphers

Jordan University of Science and Technology Computer Engineering Department Cryptography & Network Security CPE (541) HW5 present-day(a) Symmetric Ciphers (Double-DES, Triple-DES & Blowfish) Supervised by Dr Loai Tawalbeh Eng. Sulaiman Al-Basheer Simsam R. Hijjawi 20022171043 Review Problems 6. 1 What is the triple encryption? It is a triplet-stages encryption with three different keys, to avoid costly requirements arises from apply three different keys with total length of 356 = 186 bits a triple encryption with two keys maybe used. 6. 2 What is the meet in the middle blast?Its that fight doesnt depend on any particular property of the DES, instead, it will work against any type of block ciphers. For the double-DES cipher & a given (P,C) pair, this fervidness works as follow 1. Encrypt the plaintext P with all possibilities of K1, store the results in a table, & sort that table by the value of X. 2. Decrypt C with all possible values of K2, check each resulted value with the e ntries in the table, in case of match, check these two keys against another known pair (P1,C1), if match, remove them as the correct keys. 6. Why is the middle hazard of 3DES is a decryption rather than an encryption ? 1. Its a decryption process in order to salmagundi the traditional nature of the DES, if its an encryption, itll stay a DES but with longer key size. 2. In the cryptography, there is no significance of using the decryption in the middle stage, the only advantage of doing so is to allow users of 3DES to decrypt data encrypted by the users of the older single DES ( C = Ek1Dk2Ek1P = Ek1P. Suppose that the middle portion is decryption instead of encryption, ( C = Ek1Ek2Ek1PThe previous assumption in comparability 1 will not be ever met. On the other perish 3. If an encryption process is done instead of decryption the meet-in-the-middle attack becomes possible. 6. 6 What primitive operations are used in Blowfish? adjunct Addition the words, it is performed modulo 23 2. Bitwise exclusive-OR. Problems 6. 1 For the two design cominges introduced in the textbook, which is the preferred in the followings Note the suggested block cipher in my considerations below is DES. security. The single loop league access code single CBC loop is to a greater extent secure, this is because the EDE block contains the encryption function C = E k1D k2Ek1P without simplifications, this makes the cryptanalysis resembling derivative instrument attack more difficult than doing it on a simple loop with encryption or decryption process because each loop in the second approach appears like a simple DES that may be attacked alone in a chosen plain-text attack i. e. differential attack. performance.The second 3 simple approach is the preferred from the performance wise point of view, this is because each block in each loop contains either encryption or decryption processes so it is red-hot than the first approach. But as I mentioned above, it is more vulnerable to cr yptanalysis than the first approach because each loop is a single DES with differential attack possibility. We can also distinguish between the two approaches based on error propagation. 6. 2 Can you suggest security improvements to either option, using three DES chips & some number of XOR functions? comport you are still limited to two keys.Changing the mode sounds a good solution 1. For the first approach that contain only a single independent loop, using Counter mode seems to be simpler, because we deal with counters that less longer than plain texts & have no linear or statistical relationship, this may increase the performance of the 3DES in this case. 2. For the second approach, the dependency between stages prevents using the counter mode as an enhancement, a more secure mode is required in this case, using the CFB may eliminate the possibility of differential cryptanalysis because chosen plain text attack is not worth. . 4 Demonstrate that the blowfish decryption is the inv erse of the blowfish encryption. Taking in consideration the following The decryption process is applied in the same direction as the encryption but with reverse order use of the sub keys. Encryption 1. Assume the following plain text P with E-PL0 & E-PR0 portions. 2. After the ith round, the output of that round will be E-PRi = E-PLi Xor Pi (1) E-PLi = F E-PRi Xor E-PRi-1 (2) 3. The cipher text will be E-PR17 = E-PL16 Xor P18 E-PL17 = E-PR16 Xor P17 C = E-PR17 + E-PL17+ sign is a mountain chainIt will be the input of the decryption algorithm which is the same as the encryption algorithm but with reverse order key fashion. Decryption 1. Assume the following cipher text C with D-CL0 & D-CR0 portions. 2. After the ith round, the output of that round will be D-CRi = D-CLi Xor P19-I . (3) D-CLi = F D-CRi Xor D-CRi-1 . (4) 3. the outputs of equation 1 & equation 3 and equation 2 & equation 4 are the same for each round, this implies the reversibility in the blowfish algorithm betw een the encryption & the decryption algorithms.

Wednesday, May 22, 2019

How Work Affects Family Life Essay

now, the term family is difficult to define. All families be unique, and they can campaign anywhere from single parent families to extended families. Most importantly though, it is in the family where the next generation is being built. Parents must provide security and mount for their children, and they inquire to be prepared for the challenges of balancing deed and family in todays society. In traditional families, in that location was a mother, a father and their resulting children. The father would just just about often be the earner of the family, and the mother would stay at home and take complaint of the children. Things choose changed considerably in the twenty-first century. Now there are more dual-income families, single-parent families, and there are legion(predicate) more women in the labour force. This poses a great change to family life, and many parents are working a double day. They have their regular full season jobs where they earn an income, and then t hey have to come home to more work much(prenominal) as cooking, cleaning and grocery shopping.Like all systems and interactions, conflict arises between work and family issues. This issue causes conflict for every member of the family, and they study to disc everywhere ways to settlement this conflict. According to the feminist theory, gender is basic to all social structures and organizations. (Eshleman & Wilson, 200123). Obviously, it is also basic to the conflicts of work and family life. Today, both men and women must go to work to support their families, solely it is usually the woman who has to come home and do the cooking, cleaning and grocery shopping, while her husband plays with the kids or watches television in the living room. This is decidedly a concern that requires to be addressed, and although there have been any(prenominal) improvements in this area, much more can lighten be dvirtuoso. much improvements have also been made by employers, unions and the govern ment to benefit families who have full clock time jobs. Although, they have made steps towards alter this dilemma, there are still many issues that need to be dealt with.The social conflict theory states that conflict is natural and inevitable in all human interaction (Eshleman & Wilson, 200115). It is not seen as a negative theory, it just calls for state to be aware that conflict go out arise, and that they need to come up with solutions to these struggles. This is no different in the family. Todays families have to deal with tension on the macro take and the micro level. Work and employment affect both themacro and micro elements of the family. More and more varieties of families are coming about, such as dual-income families, single-parent families, and families who take care of their children as well as their parents. These flock face tribulations everyday of their lives while trying to juggle work and their family. Mostly in dual-income families, and single-parent fami lies, people are performing a double day. According to Eshleman and Wilson (2001), the double day, or second shift, refers to the gang of paid and unpaid work near people do.The family member earning the income often feels sample and encounters difficulties trying to construe their responsibilities as family members and as employees (Coates, 19911). This affects their performance at work and at home. They are caught in the middle between having to work to support the family, and wanting to create a good environment for their family to grow in. Society tells these parents that they are bad parents if they dont go to the school play and bad employees if they do go and take time off from work (Denholtz, 200091). The children or time-worn people in the head of the households care also suffer from the work/family conflict. Children are often raised by other people other than their own parents, such as nannies, teachers, other relatives or day care workers.Many children must learn to grow up a carve up quicker than they would normally have to if their parents were perpetually around which could be good in some cases, provided not so good in others. all member of the family must have a role, and know that role. Partners must discuss who will do the dishes that night, and who will take the children to baseball practice. Children must also swear out out with household chores, and take some responsibility for themselves. If all members of the family can come to a specific agreement, and implement a good plan to cope with everyone, work and family can be man daysd. All that is needed are the right attitudes and resources. Several couples in Crysdales study of working class people in downtown Toronto said that they manage trouble at work by leaving it at the door when they come home (1991103).There was not always an issue between family life and work. Typically, the single women who would work were young, single females with no other obligations. Married women would stay home with their children, do all thehousework and quarter sure supper was on the table for their husbands when they came home from work. The predicament between work and family arose when women began participating more in the labour force during and after world warfare I. Their involvement in the labour force has steadily increased since the beginning of the twentieth century, while mens participation has decreased. According to Eshleman and Wilson (2001), 16.2 percent of women over the age of fifteen were employed in 1911, and approximately 60 percent of women are employed today. So in under a century the egress of women working has almost quadrupled. There are many different reasons explaining why more and more women are joining the work force. It basically first started during World War II, because there was a great need for workers in factories, stores, etc., and the men were off fighting in the war.Therefore, the women had to join the labour force, and after the war, when they could leave their jobs, many women chose to stay instead of becoming a housewife once again. In the 1960s, there was a womens liberation movement, and this time period was the most significant change in womens roles. Wives and mothers wanted to be free from the constraints placed on them in the home, so many of them decided to go to work. Prior to this, in the first place single women were working for pay, but since then the gap between single and married women has decreased. Also, there has been an increase in the number of blended families, common-law relationships, and single-parent families which forces most members of these families to find paid work in order to financially support their family. Most single parents must go to work to provide for the family because they have no admirer from the mother or father of their children. Altogether, many different circumstances have led to the increased problems between work and family life. As we can see, as women gai ned a more significant role in the labour force, and as different types of families arose such as single-parent families, the conflicts also increased.When Eshleman and Wilson are explaining the feminist theory they want the question, What about women? Their answers to this question areBased on the ideas that the experiences of women are different from those of men, are unequal (less privileged) to those of men, and are activelyoppressed (restrained, subordinated, used and abused) by men. (p. 23)This interpretation working perfectly into the dilemma between men and womens roles in the family and in the work force. We must always consider women and gender when making assumptions about the family and work because they are inseparable issues. Even with the intense changes that have taken place in the family structure and the workforce, there is still the general idea that a womans first and foremost responsibility is in the home, til now when she is engaged in work outside of the h ome. Women workers experience much more stress and difficulty in balancing work and home than men do, because they tend to bear a disproportionate share of household tasks and family responsibilities (Coates, 19918).Coates (1991) listed some important statistics from a survey by the Conference of Canada in his article. He concluded that women inform spending an average of 16.5 hours per week on home maintenance compared to 9.8 hours by men. Three-quarters of the women reported that they had the majority of responsibility for making child arrangements compared to 4.1 percent of men, and women were almost four times as likely to stay home with their children when they were ghastly.Basically, the work and family issue has been viewed only as a woman issue, which creates problems between husband-wife families. This is a micro example of the social conflict theory. Work creates conflict within the family between the husband and the wife, in deciding who will perform what tasks within t he family. More recently, men have been accepting larger responsibilities within the family either through choice, or necessity in their role as a single parent in the paid workforce. The gaps between men and womens responsibilities in the home are decreasing, but there is much more to be done about this matter.Child care is the largest concern parents have when it comes to their family and their work. There are many options available for parents when it comes to childcare, such as daycare, nannies, relatives, babysitters, and schools, although it is not that easy. Some families cannot afford daycare or nannies some do not have families they can rely on for childcare and some parents work schedules do not accommodate babysitters hours. The age ofthe child is another(prenominal) factor that has to be considered when planning on childcare. If the child is an infant, one of the parents usually has to be with them all day, and not all employers offer maternity or paternity leave.When th e child is a toddler, they have not yet reached the age that would allow them to be in school from nine oclock until three oclock, so they still need someone in their care for the entire day. When the child reaches the school years, there are still a few hours before and after school that needs to be taken into account. later the child has reached an age in which he/she is able to take care of themselves, transportation between school, home and extracurricular activities comes into account. All of these factors contribute to the hardships parents face when trying to balance work and family life.Aside from the family, corporations and employers need to address the problems of stress placed on their employees while trying to manage between work and home. This incorporates the macro level of the social conflict theory. Fernandez states thatThere is a high correlation not only between missed work and caring for a sick child, but also caring for a sick child and leaving work early, comi ng in late, dealing with family issues during working hours, and on-and-off-the-job-stress.As the families continue to grow and change, the companies need to implement a vast range of improvements in order to reduce the great demands of parenting and work. This will not only help the parents out with their family, but it will create a less stressful environment for all of the employees, and therefore, it will improve the company. Many companies have already taken certain steps in doing this, but there is still much more that can be done. One suggestion is job-sharing, which is a form of part-time working wherein two people choose to share the salary, benefits and responsibilities of one full-time job (McRae, 198916). This benefits parents who want to maintain paid work and also want to be at home with their children. Homeworking is another example, and it is when a person takes on paid work from the home.This has become increasingly easier tomanage with new technologies such as the Internet. Shift work would also help to balance out the time between work and the family. The shifts could correspond with the hours that the children are in bed, or are at school, which allows the worker to spend more time with their family. More steps need to be taken in this area, such as on-site day care, paid leave to attend to a sick child or family issue, and included day-care costs. We have reached a point in society when it is time to come to a compromise between work and family life, and tractability needs to be offered whenever it is needed.In all, families have changed a great deal in the last century, and we need to keep up with these changes and offer new suggestions towards improving family life. Work places a great demand on all families, including dual-income families, single-parent families, blended families, and extended families. Parents are struggling everyday with the conflict between work and family life. It works in a viscous circle, because families need mo ney to support their families, but at the same time they need a lot of extra time to spend with their families. The burden is placed more on women than it is on men, because taking care of the household is still seen as the womans job, even if she is engaged in paid work.Men need to start doing their equal share around the house to make it easier on the demands of the woman. More steps need to be taken in child care facilities, because that is the main problem working parents face today. Companies must implement new plans in order to meet the needs of their workers. Altogether, it has been an ongoing battle for parents who are trying to balance between work and family life, and as the family continues to grow and change so must the laws behind negotiable work hours, day care, and permissible absence for family issues.

Tuesday, May 21, 2019

Natural Brown Rice

Brown sift is the least processed form of rice where exclusively the outer hull has been removed. After removal of the hull, its quality deteriorates rapidly causing significant decrease in shelf life. The most critical determinant in achieving rice quality is the degree of milling. This requires evaluation of quality according to suitability of specific end use based on a set of criteria exposit below as standard product specifications for wholesomeness. Grain quality and yield largely determine market price and consumer acceptance.If consumers do not like the flavor, texture, taste, aroma, behavior of the rice then all other attributes are worthless too. The genetic makeup of the grain, handling, and storage are the major factors influencing quality. Brown rice is the most alimental food that can be found. It is the best substitute for potatoes in meals. Long grain has higher nutritional value and lower in calories than short grain. The aloofness of the grain determines textu re and consistency. When cooked it produces firm, fluffy grains that separates easily.The oil in the bran remains intact making it more likely to become rancid. It is advisable to keep it in an invulnerable container and consume within six (6) months from purchased. Brown rice standard product specifications Product name 100% organic long grain Brown rice Pricing unit kg, lb, ounce Type organic, long grain Standard/grade USDA 1-6, percentage broken grains is

Monday, May 20, 2019

Nes China Case Study Essay

1. Chen was told by her former colleague, Zhu, to give RMB 3000 (US $360) to each of the ii judicature officials. What would be the consequences of doing so for the involved parties and other relevant stakeholders?The core issue around this drive is the major differences between Chinese and western ethical values. It is common, in most developed Western countries, for product linees and government officials to closely follow business rules and regulations that are straightforward and by the books. There is absolutely no means for working around any of them, without risking your reputation and ultimately your career. It is common for Western cultures to implement internal audits to bushel sure no violations to the rules exists. Regarding business practices, dinner parties are common, but expensive gift giving is rarely used in a business setting.On the other hand, in China, building strong relationships and avow is a huge factor involved in their business practices. It is pref erable for Companies and government agencies to pick out business with groups their associated with, rather than outsiders. For the Chinese, giving gifts shows a sign of reciprocity between the two parties. It will be well-nigh impossible for NES to built a strong relationship with the Chinese officials without understanding the basics of how they do business.As Chen, what would you suggest to Mueller? Why?As Chen, I would suggest creating a separate business code of conduct especially for the China region. Chen should suggest that NES should not continue to make business decisions based on Western values because China has their own set of unique business norms and cultural values. If they want to be successful in their business dealings in China they need to implement a fresh plan. They can start by informing the Representative office, especially Steinmann and Dr. Perrin, of the importance of gift giving in the Chinese culture. As stated in the China State Council Article 382 and 383 that gifts given in the heart less than RMB200 do not need to be handed over to the gift administrative department. Also, as long as those gifts are not given for securing illegitimate benefits they are not considered illegal.Therefore, it would be in the best interest of NES representative office toimplement a new established code of conducts for the capital of Red China office. This will help eliminate uncertainty of the rules and regulations that apply in NES dealings with China and create a business culture that is more diverse and applicable to Chinas business culture.

Sunday, May 19, 2019

The Theory of Financial Intermediation:

THE THEORY OF FINANCIAL INTERMEDIATION AN experiment ON WHAT IT DOES (NOT) EXPLAIN by Bert Scholtens and Dick van Wensveen SUERF The European Money and Finance Forum Vienna 2003 CIP The possibleness of pecuniary intermediation An Essay On What It Does (Not) Explain by Bert Scholtens, and Dick van Wensveen Vienna SUERF (SUERF Studies 2003/1) ISBN 3-902109-15-7 Keywords Financial Intermediation, Corpo appreciate Finance, Assymetric In solveation, Economic Development, Risk Management, Value Creation, Risk Transformation. JELclassificationnumbers E50,G10,G20,L20,O16 2003 SUERF, ViennaCopyright reserved. Subject to the exception domiciliated for by law, no fortune of this publication may be reproduced and/or published in print, by photocopy, on microfilm or in any some separate way without the written consent of the copyright holder(s) the resembling applies to whole or partial adaptations. The publisher retains the sole right to collect from third parties fees payable in resp ect of copying and/or take legal or other action for this purpose. THE THEORY OF FINANCIAL INTERMEDIATION AN ESSAY ON WHAT IT DOES (NOT) EXPLAIN+ by Bert Scholtens* Dick van WensveenAlso read Theories Seen in OjtAbstract This essay radiates upon the family family in the midst of the current scheme of fiscal mediation and hearty- solid intellect practice. Our critical analysis of this conjecture go outs to several make blocks of a brand-new supposition of monetary mediation. Current pecuniary mediation speculation builds on the picture that intermediaries serve to reduce transaction be and instructional asymmetries. As victimizations in discip striving technology, deregulating, deepening of pecuniary merchandises, and so on end to reduce transaction costs and festeringal asymmetries, pecuniary intermediation theory sh tout ensemble keep down to the conclusion that intermediation becomes useless. This agate lines with the practitioners view of fiscal in termediation as a value-creating scotchal process. It likewise conflicts with the keep and change magnitude economic brilliance of pecuniary intermediaries. From this paradox, we conclude that current fiscal intermediation theory fails to be sick up a satisfactory under(a)standing of the introduction of pecuniary intermediaries. We wish to thank Arnoud Boot, David T. Llewellyn, Martin M. G. Fase and Robert Merton for their help and their stimulating comments. However, achievely opinions take a hop those of the authors and precisely we argon responsible for mistakes and omissions. * Associate Professor of Financial Economics at the University of Groningen PO Box 800 9700AVGroningenTheNetherlands(correspondingauthor). Professor of Financial Institutions at the Erasmus University of Rotterdam PO Box 1738 3000 DR Rotterdam The Netherlands, (former Chairman of the Managing Board of MeesPierson).We dumbfound structure blocks for a theory of pecuniary intermediation t hat aims at understanding and explaining the existence and the behavior of reliable-life monetary intermediaries. When info asymmetries be not the driving force asshole intermediation activity and their elimination is not the commercial motive for monetary intermediaries, the brain arises which paradigm, as an election, could better express the essence of the intermediation process. In our opinion, the concept of value creation in the context of the value chain great power serve that purpose.And, in our opinion, it is jeopardize and hazard caution that drives this value creation. The absorption of risk is the central service of both banking attach toing and insurance. The risk pop off bridges a mismatch between the tot of nest egg and the subscribe to for investitures as savers argon on average more(prenominal) than risk averse than real investors. Risk, that government agency maturity risk, counterparty risk, grocery store risk (interest rate and stock p rices), life expectancy, income expectancy risk etc. , is the core product line of the fiscal fabrication.Financial intermediaries good enshroud d sore risk on the shield required by the grocery store place because their scale permits a sufficiently diversify portfolio of investments needed to offer the security required by savers and policyholders. Financial intermediaries be not just agents who check and monitor on behalf of savers. They atomic number 18 active counterparts themselves offering a specific product that brush offnot be offered by individual investors to savers, viz. cover for risk. They use their disposition and their balance sheet and off-balance sheet items, rather than their really limited own currency, to act as such counterparts.As such, they piss a pivotal perish deep down the modern economy. TABLE OF CONTENTS 1. Introduction7 2. The Perfect Model9 3. Financial Intermediaries in the Economy11 4. Modern Theories of Financial Intermediation 15 5. Critical judicial decision21 6. An selection Approach of Financial Intermediation31 7. Building Blocks for an amend Theory37 8. A New Research Agenda41 References45 Appendix A53 display boards 1. Share of habit in Financial go in Total Employment (percentages)12 2. Share of Value-Added in Financial Services in GDP (percentages)12 3.Financial Intermediary Development over Time for About 150 Countries (percentages)12 4. (Stylized) Contemporary and Amended Theory of Financial Intermediation38 SUERF56 SUERF Studies57 1. Introduction When a banker starts to take apart the theory of pecuniary intermediation in request to better understand what he has done during his professional life, he enters a military man unfathomable to him. That gentleman is full of concepts which he did not, or hardly, knew before and full of expressions he never accept himself unsymmetric information, perverse selection, observe, pricey state verification, moral hazard and a couple more of t he same kind.He gets the uneasy signature that a growing divergence has emerged between the micro- economic theory of banking, as it took shape in the put out three decades, and the e reallyday behavior of bankers consort to their business motives, expressed in the language they use. This essay tries to reflect on the merits of the present theory of pecuniary intermediation, on what it does and does not explain from both a practical and a theoretical point of view. The theory is impressive by the multitude of applications in the financial military man of the agency theory and the theory of asymmetric information, of adverse selection and moral hazard.As well as by their relevance for authorized aspects of the financial intermediation process, as is shown in an ever-growing stream of economic studies. But the study of all these theories leaves the practitioner with the impression that they do not deliver a satisfactory answer to the radical question which forces really driv e the financial intermediation process? The current theory shows and explains a capacious variety in the behavior of financial intermediaries in the commercialize in their relation to savers and to investors/entrepreneurs.But as removed as the authors of this essay are aware, it does not, or not yet, provide a satisfactory answer to the question of why real-life financial institutions exist, what keeps them alive and what is their essential contri preciselyion to (inter)national economic public assistance. We believe that this question cannot be intercommunicate by a further extension of the present theory, by the modelling of the agency theory and the theory of asymmetric information. The question goes into the heart of the present theory, into the paradigm on which it is ground.This paradigm is the famous classical thought process of the spotless market, introduced by Marshall and Walras. Since then, it has been the leading principle, the central point of reference in t he theory of competition, the neoclassical growth theory, the portfolio theory and to a fault the leading principle of the present theory of financial intermediation. Financial intermediaries, concord to that theory, have a function only because financial markets are not perfect. They exist by the coldcock of market 7 8Introduction imperfections.As long as thither are market imperfections, in that location are intermediaries. As soon as markets are perfect, intermediaries are redundant they have lost their function because savers and investors dispose of the perfect information needed to dress distributively other directly, immediately and without any impediments, so without costs, and to deal at optimal prices. This is the common equilibrium model a la Arrow-Debreu in which banks cannot exist. Obviously, this contrasts with the huge economic and companionable importance of financial intermediaries in highly developed modern economies.Empirical observations point at an increa sing office for financial intermediaries in economies that experience vastly decreasing information and transaction costs. Our essay goes into this paradox and comes up with an amendment of the existing theory of financial intermediation. The structure of this paper is as follows. First, we introduce the foundations of the modern literature of financial intermediation theory. From this, we infer the fall upon predictions with respect to the use of the financial go-between within the economy.In Section 3, we give investigate the de facto function of financial intermediaries in modern economies. We discuss views on the theoretical relevance of financial intermediaries for economic growth. We also present some stylized facts and verifiable observations about their current position in the economy. The mainstream theory of financial intermediation is briefly presented in Section 4. Of course, we cannot pay sufficient attention to all nurtures in this area but will focus on the in troductory rationales for financial intermediaries according to this theory, i. . information problems, transaction costs, and standard. Section 5 is a critical measure outment of this theory of financial intermediation. An ersatz entree of financial intermediation is unfolded in Section 6. In Section 7, we present the main building blocks for an alternative theory of financial intermediation that aims at understanding and explaining the behavior of real-life financial intermediaries. Here, we argue that risk heed is the core issue in understanding this behavior.Transforming risk for ultimate savers and lenders and risk humpment by the financial go-between itself creates economic value, both for the mediator and for its client. Accordingly, it is the transformation and practisement of risk that is the intermediaries contribution to the economic welfare of the society it operates in. This is in our opinion the hidden or neglected economic rationale behind the thusly fart and the existence and the future of real-life financial intermediaries.In Section 8, we conclude our essay with a proposal for a look for agenda for an amended theory of financial intermediation. 2. The Perfect Model Three pillars are at the priming coat of the modern theory of pay optimality, arbitrage, and equilibrium. Optimality refers to the notion that rational investors aim at optimal returns. Arbitrage implies that the same asset has the same price in each single period in the absence of restrictions. balance wheel means that markets are cleared by price adjustment through arbitrage at each moment in judgment of conviction.In the neoclassical model of a perfect market, e. g. the perfect market for roof, or the Arrow-Debreu world, the quest criteria usually must be met no individual party on the market can determine prices conditions for borrowing/lending are satisfactory for all parties under equal circumstances in that location are no discriminatory taxes abse nce of scale and scope economies all financial titles are homogeneous, divisible and tradable there are no information costs, no transaction costs and no insolvency costs all market parties have ex ante nd ex send immediate and full information on all factors and events relevant for the (future) value of the traded financial instruments. The Arrow-Debreu world is based on the paradigm of complete markets. In the study of complete markets, present value prices of investment projects are well defined. Savers and investors find each other because they have perfect information on each others preferences at no cost in nightspot to exchange savings against readily available financial instruments.These instruments are constructed and traded costlessly and they fully and simultaneously meet the inescapably of both savers and investors. Thus, each possible future state of the world is fully covered by a so-called Arrow-Debreu security (state contingent claim). Also important is that the supply of capital instruments is sufficiently diversified as to provide the possibility of full risk diversification and, thanks to complete information, market parties have homogeneous expectations and act rationally.In so far as this does not occur infixedly, intermediaries are useful to bring savers and investors together and to create instruments that meet their needs. They do so with reimbursement of costs, but costs are by definition an chemical element or, rather, characteristic of market imperfection. on that pointfore, intermediaries are at top hat tolerated and would be buy the farmd in a move towards market perfection, with all intermediaries becoming 9 10The Perfect Model redundant the perfect state of disintermediation. This model is the scratch point in the present theory of financial intermediation.All deviations from this model which exist in the real world and which cause intermediation by the vary financial intermediaries, are betn as market imperfectio ns. This wording suggests that intermediation is something which processs a situation which is not perfect, therefore is undesirable and should or will be temporary. The perfect market is like nirvana, it is a teleological perspective, an ideal standard according to which reality is judged. As soon as we are in heaven, intermediaries are superfluous. There is no room for them in that magnificent place.Are we going to heaven? Are intermediaries increasingly becoming superfluous? One would be inclined to answer both questions in the affirmative when looking to what is actually happening Increasingly, we have to make do with liberalized, deregulated financial markets. All information on important macroeconomic and monetary data and on the quality and activities of market participants is available in real time, on a global scale, twenty-four hours a day, thanks to the breathtaking phylogenesiss in information and communication technology.Firms issue shares over the Internet and inves tors can put their order directly in financial markets thanks to the virtual reality. The communication transmutation also reduces information costs tremendously. The liberalization and deregulating give, moreover, a soused stimulus towards the securitization of financial instruments, making them transparent, homogeneous, and tradable in the international financial centers in the world. and taxes are discriminating, inside and between countries. Transaction costs are lock there, but they are declining in relative importance thanks to the cost efficiency of ICT and efficiencies of scale.Insolvency and liquidity risks, however, still are an important rise of heterogeneity of financial titles. Furthermore, every new crash or crisis invokes calls for admissional and more timely information. For example, the Asia crisis resulted in more advanced and verifiable and controllable international financial statistics, whereas the Enron debacle has put the existing business accounting an d reporting standards into question. There appears to be an al well-nigh unstoppable demand for additional information. 3. Financial Intermediaries in the EconomySo, we are making important progress in our march towards heaven and what happens? Is financial intermediation attenuation away? One might think so from the forces shaping the current financial environment deregulation and liberalization, communication, internationalization. But what is actually happening in the real world? Do we really witness the end of the financial institutions? Are the intermediaries about to vanish from planet Earth? On the contrary, their economic importance is high than ever and appears to be increasing.This is the case even during the nineties when markets became al about fully liberalized and when communication on a global scale made a real and almost complete breakthrough. The tendency towards an increasing role of financial intermediation is illustrated in accedes 1 and 2 that give the relat ive contribution of the financial domain to the two key items of economic wealthiness and welfare in most nations, i. e. GDP and labor. These tables show that, even in highly developed markets, financial intermediaries tend to play a substantial and increasing role in the current economy.Furthermore, Demirguc-Kunt and Levine (1999) among others, conclude that claims of deposit money banks and of other financial institutions on the private sphere have steadily increased as a percentage of GDP in a giving number of countries (circa 150), rich and poor, between the 1960s and 1990s. The pace of increase is not declining in the 1990s. This is reflected in Table 3. In the 1960s, Raymond Goldsmith (1969) gave stylized facts on financial structure and economic development (see appendix A). He found that in the course of economic development, a countrys financial formation grows more rapidly than national wealth.It appears that the main determinant of the relative size of a countrys fina ncial system is the separation of the functions of saving and investing among contrastive (groups of) economic units. This observation sounds remarkably modern. Since the early 1990s, there has been growing recognition for the positive daze of financial intermediation on the economy. Both theoretical and empirical studies find that a well-developed financial system is beneficial to the economy as a whole. Basically the affirmation behind this idea is that the efficient apportioning of capital within an economy fosters economic growth (see Levine, 1997).Financial intermediation can dissemble economic growth by acting on the saving rate, on the split of saving channeled to investment or on the social marginal productivity of investment. In general, financial development will be positive for economic growth. But some improvements in risk-sharing and in the 11 12Financial Intermediaries in the Economy address market for households may decrease the saving rate and, hence, the grow th rate (Pagano, 1993). Table 1 Share of Employment in Financial Services in Total Employment (percentages) root word OECD, bailiwick Accounts (various issues)Table 2 Share of Value-Added in Financial Services in GDP (percentages) arising OECD, National Accounts (various issues) Table 3 Financial Intermediary Development over Time for About 150 Countries (percentages) Source Demirguc-Kunt and Levine (1999, Figure 2A) 1970 1980 1985 1990 1995 2000 Canada 2. 4 2. 7 2. 9 3. 0 3. 2 3. 1 France 1. 8 2. 6 2. 9 2. 8 2. 7 2. 8 Germany 2. 2 2. 8 3. 0 3. 1 3. 3 3. 3 japan 2. 4 3. 0 3. 2 3. 3 3. 4 3. 5 Switzerland 4. 6 4. 8 4. 8 4. 9 get together Kingdom 3. 0 3. 5 4. 6 4. 4 4. 4 United States 3. 8 4. 4 4. 7 4. 8 4. 8 4. 8 1970 980 1985 1990 1995 2000 Canada 2. 2 1. 8 2. 0 2. 8 2. 9 3. 1 France 3. 5 4. 4 4. 8 4. 4 4. 6 4. 8 Germany 3. 2 4. 5 5. 5 4. 8 5. 8 5. 7 Japan 4. 3 4. 5 5. 5 4. 8 5. 6 5. 3 Netherlands 3. 1 4. 0 5. 3 5. 6 5. 5 5. 8 Switzerland 10. 4 10. 3 13. 1 12. 8 United State s 4. 0 4. 8 5. 5 6. 1 7. 2 7. 1 1960s 1970s 1980s 1990s Liquid liabilities/GDP 32 39 47 51 Claims by deposit money banks on private sector/GDP 20 24 32 39 Financial Intermediaries in the Economy13 There are polar views on how the financial structure affects economic growth exactly (Levine, 2000). The bank-based view holds that bank-based systems in bad-tempered at early stages of economic development foster economic growth to a greater phase than market-based systems. ? The market-based view emphasizes that markets provide key financial service that stimulate innovation and long-run growth. ? The financial work view stresses the role of banks and markets in researching firms, exerting corporate control, creating risk management devices, and mobilizing societys savings for the most productive endeavors in tandem.As such, it does regard banks and markets as complements rather than substitutes as it focuses on the quality of the financial services produced by the entire financia l system. ? The legal-based view rejects the analytical validity of the financial structure debate. It argues that the legal system shapes the quality of financial services (for example La Porta et al. , 1998). The legal-based view stresses that the component of financial development explained by the legal system critically influences long-run growth.Political factors have been introduced too, in order to explain the relationship between financial and economic development (see Fohlin, 2000 Kroszner and Strahan, 2000 Rajan and Zingales, 2000). From empirical research of the relationship between economic and financial development, it appears that history and path-dependency weigh very heavy in determining the growth and design of financial institutions and markets. Furthermore, idiosyncratic shocks that surprise institutions and markets over time appear to be quite important.Despite obvious connections among political, legal, economic, and financial institutions and markets, long-term causative relationships often prove to be elusive and appear to depend upon the methodology chosen to study the relationship. 1 But it is important to realize that efficient financial intermediation confers two important benefits it raises 1 For example, see Berthelemy and Varoudakis, 1996 Demetriades and Hussein, 1996 Kaplan and Zingales, 1997 Sala-i-Martin, 1997 Fazzari et al. , 1988 Levine and Zervos, 1998 Demirguc-Kunt and Levine, 1999 Filer et al, 1999 Beck and Levine, 2000 Beck et al. 2000 Benhabib and Spiegel, 2000 Demirguc-Kunt and Maksimovic, 2000 Rousseau and Wachtel, 2000 Arestis et al. , 2001 Wachtel, 2001. 14Financial Intermediaries in the Economy the level of investment and savings, and it increases the efficiency in the allocation of financial funds in the economic system. There is a structural tendency in the small-arm of national wealth represented in financial titles in many countries, especially the Anglo Saxon, towards the electrical switch of bank held asse ts (bank loans etc. ) by securitized assets held by the public (equity, bonds) (Ross, 1989).This substitution is often interpreted as a proof of the disintermediation process (e. g. Allen and Santomero, 1997). However, this substitution does not imply that bank loans are not growing any more. To the contrary, they continue to grow, even in the U. S. where the substitution is most visible (see Boyd and Gertler, 1994 Berger et al. , 1995). Therefore, this substitution may not be interpreted as a sign of a diminishing role of banking in general. This is because it is the banks that play an essential role in the securitized instruments.They initiate, couch and underwrite the floating of these instruments. They often maintain a secondary market. They invent a multitude of off-balance instruments derived from securities. They provide for the clearing of the deals. They are the custodians of these constructions. They provide stock lending and they finance market makers in options and futu res. Thus, banks are of the essence(p) drivers of financial innovation. Furthermore, it is still an unsolved question of how the off-balance instruments should be counted in the statistics of national wealth.Their huge notional amounts do not reflect the constantly varying values for the incuring parties. Banks are moving in an off-balance vigilance and their purpose is increasingly to develop and provide tradable and non-tradable risk management instruments. And other kinds of financial intermediaries play an increasingly important role in the same direction, both in securitized and non-tradable instruments, both on- and off-balance insurance companies, pension funds, investments funds, market makers at stock exchanges and derivative markets.These incompatible kinds of financial intermediaries transform risk (concerning future income or accidents or interest rate fluctuations or stock price fluctuations, etc. ). Risk transformation and risk management is their job. Thus, despit e the globalization of financial services, driven by deregulation and information technology ,and despite strong price competition, the financial services industry is not declining in importance but it is growing. This seems paradoxical. It points to something important which the modern financial intermediation theory, and the neo-classical market theory on which it is based, do not explain.Might it be the case that it overlooks something crucial? Something that is to be linkd to information production but that is, so far, not uncovered by the theory of financial intermediation? 4. Modern Theories of Financial Intermediation In order to give firm ground to our argument and to illustrate the paradox, we will first review the doctrines of the theory of financial intermediation. 2 These are specifications, relevant to the financial services industry, of the agency theory, and the theory of imperfect or asymmetric information.Basically, we may distinguish between three lines of reasoni ng that aim at explaining the raison detre of financial intermediaries information problems, transaction costs and regulative factors. First, and that used in most studies on financial intermediation, is the informational asymmetries argument. These asymmetries can be of an ex ante nature, generating adverse selection, they can be interim, generating moral hazard, and they can be of an ex post nature, resulting in auditing or costly state verification and enforcement. The informational asymmetries generate market imperfections, i. . deviations from the neoclassical framework in Section 2. Many of these imperfections lead to specific forms of transaction costs. Financial intermediaries appear to overcome these costs, at least partially. For example, ball field and Dybvig (1983) consider banks as coalitions of depositors that provide households with insurance against idiosyncratic shocks that adversely affect their liquidity position. Another approach is based on Leland and Pyle (197 7). They interpret financial intermediaries as information sharing coalitions.Diamond (1984) shows that these intermediary coalitions can achieve economies of scale. Diamond (1984) is also of the view that financial intermediaries act as delegated monitors on behalf of ultimate savers. Monitoring will involve increasing returns to scale, which implies that specializing may be entrancing. Individual households will delegate the observe activity to such a specialist, i. e. to the financial intermediary. The households will put their deposits with the intermediary. They may withdraw the deposits in order to discipline the intermediary in his monitoring function.Furthermore, they will positively value the intermediarys involvement in the ultimate investment (Hart, 1995). Also, there can be assigned a positive incentive proceeding of short-term debt, and in particular deposits, on bankers (Hart and Moore, 1995). For example, Qi (1998) and Diamond and Rajan (2001) show that deposit fin ance can create 2 We have used the widely cited reviews by Allen, 1991 Bhattacharya and Thakor, 1993 Van Damme, 1994 Freixas and Rochet 1997 Allen and Gale, 2000b Gorton and Winton, 2002, as our main sources in this section. 15 6Modern Theories of Financial Intermediation the right incentives for a banks management. Illiquid assets of the bank result in a fragile financial structure that is essential for disciplining the bank manager. Note that in the case households that do not turn to intermediated finance but prefer direct finance, there is still a brokerage role for financial intermediaries, such as investment banks (see Baron, 1979 and 1982). Here, the reputation effect is also at stake. In financing, both the reputation of the borrower and that of the operate are relevant (Hart and Moore, 1998).Dinc (2001) studies the effects of financial market competition on a bank reputation mechanism, and argues that the incentive for the bank to keep its commitment is derived from its re putation, the number of competing banks and their reputation, and the competition from bond markets. These four aspects clearly move (see also Boot, Greenbaum and Thakor, 1993). The informational asymmetry studies focus on the bank/borrower and the bank/lender relation in particular. In bank lending one can basically distinguish proceeding-based lending (financial statement lending, asset- based lending, credit scoring, etc. ) and relationship lending.In the former class information that is relatively easily available at the time of loan origination is used. In the latter class, data gathered over the course of the relationship with the borrower is used (see Lehman and Neuberger, 2001 Kroszner and Strahan, 2001 Berger and Udell, 2002). Central themes in the bank/borrower relation are the harbouring and monitoring function of banks (ex ante information asymmetries), the adverse selection problem (Akerlof, 1970), credit rationing (Stiglitz and Weiss, 1981), the moral hazard problem (Stiglitz and Weiss, 1983) and the ex post verification problem (Gale and Hellwig, 1985).Central themes in the bank/lender relation are bank runs, why they occur, how they can be prevented, and their economic consequences (Kindleberger, 1989 Bernanke, 1983 Diamond and Dybvig, 1983). Another avenue in the bank/lender relationship are models for competition between banks for deposits in relation to their lending policy and the prob top executive that they fulfill their obligations (Boot, 2000 Diamond and Rajan, 2001). wink is the transaction costs approach (examples are Benston and Smith, 1976 Campbell and Kracaw, 1980 Fama, 1980).In contrast to the first, this approach does not contradict the assumption of complete markets. It is based on nonconvexities in transaction technologies. Here, the financial intermediaries act as coalitions of individual lenders or borrowers who exploit economies of scale or scope in the transaction technology. The notion of transaction costs encompasses n ot only exchange or monetary transaction costs (see Tobin, 1963 Towey, 1974 Fischer, 1983), but also search costs and monitoring and auditing costs (Benston and Smith, 1976). Here, the role of Modern Theories of Financial Intermediation17 he financial intermediaries is to transform particular financial claims into other types of claims (so-called soft asset transformation). As such, they offer liquidity (Pyle, 1971) and diversification opportunities (Hellwig, 1991). The provision of liquidity is a key function for savers and investors and increasingly for corporate customers, whereas the provision of diversification increasingly is being appreciated in private and institutional financing. Holmstrom and Tirole (2001) suggest that this liquidity should play a key role in asset determine theory.The result is that unique characteristics of bank loans emerge to enhance efficiency between borrower and lender. In loan contract design, it is the urge to be able to efficiently bargain in later (re)negotiations, rather than to fully assess current or expected default risk that structures the ultimate contract (Gorton and Kahn, 2000). With transaction costs, and in contrast to the information asymmetry approach, the reason for the existence of financial intermediaries, namely transaction costs, is exogenous. This is not fully the case in the third approach.The third approach to explain the raison detre of financial intermediaries is based on the regulation of money production and of saving in and financing of the economy (see Guttentag and Lindsay, 1968 Fama, 1980 Mankiw, 1986 Merton, 1995b). Regulation affects solvency and liquidity with the financial institution. Diamond and Rajan (2000) show that bank capital affects bank safety, the banks ability to refinance, and the banks ability to extract repayment from borrowers or its uncoercedness to liquidate them.The legal-based view especially (see Section 3), sees regulation as a crucial factor that shapes the financia l economy (La Porta et al. , 1998). Many view financial regulations as something that is congeriesly exogenous to the financial industry. However, the activities of the intermediaries inherently ask for regulation. This is because they, the banks in particular, by the way and the art of their activities (i. e. qualitative asset transformation), are inherently insolvent and illiquid (for the example of deposit insurance, see Merton and Bodie, 1993).Furthermore, money and its value, the key raw material of the financial services industry, to a heavy(a) extent is both defined and determined by the nation state, i. e. by regulating authorities par excellence. Safety and soundness of the financial system as a whole and the enactment of industrial, financial, and fiscal policies are regarded as the main reasons to regulate the financial industry (see Kareken, 1986 Goodhart, 1987 Boot and Thakor, 1993).Also, the financial history shows a clear interplay between financial institutions an d markets and the regulators, be it the present-day specialized financial supervisors or the old-fashioned sovereigns (Kindleberger, 1993). Regulation of financial intermediaries, especially of banks, is costly. There are the direct costs of administration and of employing the supervisors, and 18Modern Theories of Financial Intermediation there are the indirect costs of the distortions generated by monetary and prudent supervision.Regulation however, may also generate rents for the regulated financial intermediaries, since it may hamper market entry as well as exit. So, there is a true dynamic relationship between regulation and financial production. It must be noted that, once again, most of the literature in this category focuses on explaining the operation of the financial intermediary with regulation as an exogenous force. Kane (1977) and Fohlin (2000) attempt to develop theories that explain the existence of the very extensive regulation of financial intermediaries when they go into the dynamics of financial regulation. Thus, to summarize, according to the modern theory of financial intermediation, financial intermediaries are active because market imperfections prevent savers and investors from trading directly with each other in an optimal way. The most important market imperfections are the informational asymmetries between savers and investors. Financial intermediaries, banks specifically, fill as agents and as delegated monitors information gaps between ultimate savers and investors. This is because they have a comparative informational advantage over ultimate savers and investors.They screen and monitor investors on behalf of savers. This is their basic function, which justifies the transaction costs they charge to parties. They also bridge the maturity mismatch between savers and investors and facilitate payments between economic parties by providing a payment, settlement and clearing system. Consequently, they engage in qualitative asset trans formation activities. To ensure the sustainability of financial intermediation, safety and soundness regulation has to be put in place. Regulation also provides the basis for the intermediaries to enact in the production of their monetary services.All studies on the reasons behind financial intermediation focus on the functioning of intermediaries in the intermediation process they do not examine the existence of the real-world intermediaries as such. It appears that the latter issue is regarded to be dealt with when satisfactory answers on the former are being provided. Market optimization is the main point of reference 3 The importance of regulation for the existence of the financial intermediary can best be understood if one is prepared to account for the diachronic and institutional setting of financial intermediation (see Kindleberger, 1993 Merton, 1995b).Interestingly, and illustrating the crucial importance of regulation for financial intermediation, is that there are some a uthors who suggest that unregulated finance or free banking would be highly desirable, as it would be stable and inflation-free. Proponents of this view are, among others, White, 1984 Selgin, 1987 Dowd, 1989. Modern Theories of Financial Intermediation19 in case of the functioning of the intermediaries. The studies that appear in most academic journals analyze situations and conditions under which banks or other intermediaries are making markets less imperfect as well as the impediments to their optimal functioning.Perfect markets are the benchmarks and the intermediating parties are analyzed and judged from the viewpoint of their contribution to an optimal allocation of savings, that means to market perfection. Ideally, financial intermediaries should not be there and, being there, they at best gentle market imperfections as long as the real market parties have no perfect information. On the other hand, they maintain market imperfections as long as they do not alone eliminate inf ormational asymmetries, and even increase market imperfections when their risk aversion creates credit crunches.So, there appears not to be a heroic role for intermediaries at all But if this is really true, why are these weird creatures still in business, even despite the fierce competition amongst themselves? Are they truly dinosaurs, on the whole unaware of the experimental extinction they will face in the very near future? This seems highly unlikely. Section 3 showed and argued that the financial intermediaries are alive and kicking. They have a crucial and even increasing role within the real-world economy. They increasingly are linked up in all kinds of economic transactions and processes.Therefore, the next section is a critical assessment of the modern theory of financial intermediation in the face of the real-world behavior and impact of financial institutions and markets. 5. Critical Assessment Two issues are of key importance. The first is about why we demand banks and other kinds of financial intermediaries. The answer to this question, in our opinion, is risk management rather than informational asymmetries or transaction costs. Economies of scale and scope as well as the delegation of the screening and monitoring function especially apply to dealing with risk itself, rather than only with information.The second issue that matters is why banks and other financial institutions are willing and able to take on the risks that are inevitably involved in their activity. In this respect, it is important to note that financial intermediaries are able to create comparative advantages with respect to information acquisition and impact in relation to their sheer size in relation to the customer whereby they are able to manage risk more efficiently. We suggest Schumpeters view of entrepreneurs as innovators and Mertons functional perspective of financial intermediaries in tandem are very helpful in this respect.One should question whether the existence of financial intermediaries and the structural development of financial intermediation can be fully explained by a theoretical framework based on the neo-classical concept of perfect competition. The mainstream theory of financial intermediation, as it has been developed in the chivalric tense few decades, has without any doubt provided numerous valuable insights into the behavior of banks and other intermediaries and their managers in the financial markets under a broad variety of perceived and observed circumstances.For example, the agency revolution, unleashed by Jensen and Meckling (1976), focussed on principal-agent relation asymmetries. Contracts and conflicts of interest on all levels inside and outside the firm in a world full of information asymmetries became the central theme in the analysis of financial decisions. Important aspects of financial decisions, which antecedently went unnoticed in the neo- classical theory, could be studied in this approach, and a subdued bo x of financial decision making was opened. But the power of the agency heory is also her weakness it mainly explains ad hoc situations new models based on different combinations of assumptions continuously extend it. 4 In nearly all 4 To this extent, one can draw a striking parallel with the conventional Newtonian view of the natural world. The planetary orbits round the Sun can be explained very well with the Newtonian laws of gravitation and force. evident anomalies in the orbital movement of Neptune turned out to be caused by the influence of an hitherto unknown planet (Pluto).Its (predicted) astronomical 21 22Critical Assessment financial decisions, information differences and, as a consequence, conflicts of interest, play a role. Focussed on these aspects, the agency theory is capable of investigating nearly every contingency in the interaction of economic agents deviating from what they would have done in a market with perfect foresight and equal incentives for all agents. H owever, the applications from agency theory have mainly anecdotal value they are tested in a multitude of specific cases.But the theory fails to evolve into a general and coherent explanation of what is the basic function of financial intermediaries in the markets and the economy as a whole. Various researchers interested in real world financial phenomena have pointed out that banks in particular do make a difference. They come up with empirical recite that banks are special. For example, Fama (1985) and James (1987) analyze the incidence of the implicit tax due(p) to reserve requirements. Both conclude that bank loans are special, as bank CDs have not been eliminated by non-bank alternatives that bear no reserve requirements.Mikkelson and Partch (1986) and James (1987) look at the abnormal returns associated with announcements of different types of security offerings and find a positive response to bank loans. Lummer and McConnel (1989) and Best and Zhang (1993) have confirmed th ese results. Slovin et al. (1993) look into the adverse effect on the borrower in case a borrowers bank fails. They find Continental Illinois borrowers incur strong negative abnormal returns during the banks impending failure. Gibson (1995) finds similar results when studying the effects of the health of Nipponese banks on borrowers.Gilson et al. (1990) find that the likelihood of a successful debt restructuring by a firm in grief is positively related to the extent of that firms reliance on bank borrowing. James (1996) finds that the higher(prenominal)(prenominal)(prenominal) the proportion of total debt held by the bank, the higher the likelihood the bank debt will be impaired, and so the higher the likelihood that it participates in the restructuring. Hoshi et al. (1991) for Japan and Fohlin (1998) and Gorton and Schmid (1999) for Germany also find that in these countries, banks provide valuable services that cannot be replicated in capital markets.Current intermediation theor y treats such observations often as an anomaly. But, in our perspective, it relates rather to the insufficient explanatory power of the current theory of financial intermediation. observation was regarded as an even greater success for Newtonian theory. However, it took Einstein and Bohr to reveal that this theory is only a limit case as it is completely unable to deal with the behavior of microparticles (see Couper and Henbest, 1985 Ferris, 1988 Hawking, 1988). Critical Assessment23The basic reason for the insufficient explanatory power of the present intermediation theory has, in our opinion, to be sought in the paradigm of asymmetrical information. Markets are imperfect, according to this paradigm, because the ultimate parties who operate in the markets have insufficient information to conclude a transaction by themselves. Financial intermediaries position themselves as agents (middlemen) between savers and investors, alleviating information asymmetries against transaction costs to a level where total savings are absorbed by real investments at equilibrium real interest rates.But in the real world, financial intermediaries do not consider themselves agents who intermediate between savers and investors by procuring information on investors to savers and by selecting and monitoring investors on behalf of savers. That is not their job. They deal in money and in risk, not in information per se. Information production predominantly is a means to the end of risk management. In the real world, borrowers, lenders, savers, investors and financial supervisors look at them in the same way, i. . risk managers instead of information producers. Financial intermediaries deal in financial services, created by themselves, mostly for their own account, via their balance sheet, so for their own risk. They attract savings from the saver and lend it to the investor, adding value by meeting the specific needs of savers and investors at prices that equilibrate the supply and dem and of money. This is a creative process, which cannot be characterized by the reduction of information asymmetries.In the intermediation process the financial intermediary transforms savings, given the preferences of the saver with respect to liquidity and risk, into investments according to the needs and the risk profile of the investor. It might be clear that for these reasons the views of Bryant (1980) and of Diamond and Dybvig (1983) on the bank as a coalition of depositors, of Akerlof (1970) and Leland and Pyle (1977) on the bank as an information sharing coalition, and of Diamond (1984) on the bank as delegated ( monitor, do not reflect at all the view of bankers on their own role. Nor does it reflect the way in which society experiences their existence. crimson with perfect information, the time and risk preferences of savers and investors fail to be matched completely by the price (interest rate) mechanism there are (too many) missing markets. It is the financial intermedi ary that somehow has to make do with these missing links. The financial intermediary manages risks in order to allow for the activities of other types of households within the economy.One would expect that the theory of the firm would pay ample attention to the driving forces behind entrepreneurial activity and could thus explain in more general terms the existence of financial intermediation as an entrepreneurial 24Critical Assessment activity. However, this is not the focus of that theory. The theory of the firm is preoccupied with the functioning of the corporate enterprise in the context of market structures and competition processes.In the instigate of Coase (1937), the corporate enterprise is part of the market structure and can even be considered as an alternative for the market. This view laid the foundation for the transaction cost theory (see Williamson, 1988), for the agency theory (Jensen and Meckling, 1976), and for the theory of asymmetric information (see Stiglitz an d Weiss, 1981 and 1983). Essential in the approaches of these theories is that the corporate enterprise is not treated as a black box, a uniform entity, as was the case in the traditional micro-economic theory of the firm.It is regarded as a coalition of interests operating as a market by itself and optimizing the opposing and often conflicting interests of different stakeholders (clients, personnel, financiers, management, public authorities, non-governmental organizations). The rationale of the corporate enterprise is that it creates goods and services, which cannot be produced, or only at a higher price, by consumers themselves. This exclusive function justifies transaction costs, which are seen as a form of market imperfection.The mainstream theory of the firm evolved under the paradigm of the agency theory and the transaction costs theory as a theory of economic organization rather than as a theory of entrepreneurship. A separate line of thinking in the theory of the firm is th e dynamic market approach of Schumpeter (1912), who stressed the essential function of entrepreneurs as innovators, creating new products and new distribution methods in order to gain competitory advantage in constantly developing and changing markets.In this approach, markets and enterprises are in a continuous process of creative desolation and the entrepreneurial function is pre-eminently dynamic. Basic inventions are more or less exogenous to the economic system their supply is perhaps influenced by market demand in some way, but their generation lies outside the existing market structure. Entrepreneurs seize upon these basic inventions and transform them into economic innovations. The successful innovators reap large short-term profits, which are soon bid away by imitators.The effect of the innovations is to disequilibrate and to alter the existing market structure, until the process eventually settles down in wait for the next (wave of) innovation. The result is a punctuated pattern of economic development that is perceived as a series of business cycles. Financial intermediaries, the ones that mobilize savings, allocate capital, manage risk, ease transactions, and monitor firms, are essential for economic growth and development. That is what Joseph Schumpeter argued early in this century.Now there is evidence to support Schumpeters view financial services promote development (see King and Critical Assessment25 Levine, 1993 Benhabib and Spiegel, 2000 Arestis et al. , 2001 Wachtel, 2001). The abstract link runs as follows Intermediaries can promote growth by increasing the fraction of resources society saves and/or by improving the ways in which society allocates savings. Consider investments in firms. There are large research, legal, and organizational costs associated with such investment.These costs can include evaluating the firm, coordinating financing for the firm if more than one investor is involved, and monitoring managers. The costs might be prohibitive for any single investor, but an intermediary could perform these tasks for a group of investors and lower the costs per investor. So, by researching many firms and by allocating credit to the best ones, intermediaries can improve the allocation of societys resources. Intermediaries can also diversify risks and exploit economies of scale.For example, a firm may want to fund a large project with high expected returns, but the investment may require a large lump-sum capital outlay. An individual investor may have incomplete the resources to finance the entire project nor the desire to devote a disproportionate part of savings to a single investment. Thus profitable opportunities can go unexploited without intermediaries to mobilize and allocate savings. Intermediaries do ofttimes more than passively decide whether to fund projects. They can initiate the creation and transformation of firms activities.Intermediaries also provide payment, settlement, clearing and netting se rvices. Modern economies, replete with complex interactions, require secure mechanisms to settle transactions. Without these services, many activities would be impossible, and there would be less scope for specialization, with a corresponding loss in efficiency. In addition to improving resource allocation, financial intermediaries stimulate individuals to save more efficiently by offering attractive instruments that combine attributes of depositing, investing and insuring.The securities most useful to entrepreneurs equities, bonds, bills of exchange may not have the exact liquidity, security, and risk characteristics savers desire. By offering attractive financial instruments to savers deposits, insurance policies, mutual funds, and, especially, combinations thereof intermediaries determine the fraction of resources that individuals save. Intermediaries affect both the quantity and the quality of societys output devoted to productive activities. Intermediaries also curve finan cial instruments to the needs of firms.Thus firms can issue, and savers can hold, financial instruments more attractive to their needs than if intermediaries did not exist. Innovations can also spur the development of financial services. Improvements in computers and communications have triggered financial innovations over the past 20 years. Perhaps, more important for developing countries, growth can increase the demand for financial services, sparking their adoption. 26Critical Assessment In translating these concepts to the world of financial intermediation, one ends up at the so-called functional perspective (see Merton, 1995a).The functions performed by the financial intermediaries are providing a transactions and payments system, a mechanism for the pooling of funds to undertake projects, ways and means to manage un surety and to control risk and provide price information. The key functions remain the same, the way they are conducted varies over time. This looks quite similar to what Bhattacharya and Thakor (1993) regard as the qualitative asset transformation operations of financial intermediaries, resulting from informational asymmetries.However, in our perspective, it is not a set of operations per se but the function of the intermediaries that gives way to their carriage in the real world. Of course, we are well aware of the fact that in the real-world the everyday performance of these different functions can be experienced by clients as to quote Boot (2000) an annoying set of transactions. The key functions of financial intermediaries are fairly stable over time. But the agents that are able and willing to perform them are not necessarily so. And neither are the focus and the instruments of the financial supervisors.An insurance company in 2000 is quite dissimilar in its products and distribution channels from one in 1990 or 1960. And a bank in Germany is quite different from one in the UK. Very different financial institutions and also very diff erent financial services can be developed to provide the de facto function. Furthermore, we have witnessed waves of financial innovations, consider swaps, options, futures, warrants, asset backed securities, MTNs, NOW accounts, LBOs, MBOs and MBIs, ATMs, EFTPOS, and the distribution revolution leading to e-finance (e. . see Finnerty, 1992 Claessens et al. , 2000 Allen et al. , 2002). From this, financial institutions and markets increasingly are in part complementary and in part substitutes in providing the financial functions (see also Gorton and Pennacchi, 1992 Levine, 1997). Merton (1995a) suggests a path of the development of financial functions. Instead of a secular trend, away from intermediaries towards markets, he acknowledges a some(prenominal) more cyclical trend, moving back and forth between the two (see also Rajan and Zingales, 2000).Merton argues that although many financial products tend to move secularly from intermediaries to markets, the providers of a given funct ion (i. e. the financial intermediaries themselves) tend to oscillate according to the product-migration and development cycle. Some products also move in the opposite direction, for example the mutual fund industry changed the newspaper publisher of the portfolios of US households substantially, that is, from direct held stock to indirect investments via mutual funds (Barth et al. , 1997). In our view, this mutual Critical Assessment27 und revolution in the US and elsewhere is a typical example of the increasing role for intermediated finance in the modern economy. Thus, in our opinion, one should view the financial intermediaries from an evolutionary perspective. They perform a crucial economic function in all times and in all places. However, the form they have changes with time and place. perchance once they were giants, dinosaurs so to say, in the US. Nowadays, they are no longer that powerful but they did not withdraw their key function, their economic niche.Instead, they evolved into much little and less visible types of business, just like the dinosaurs evolved into the much smaller omnipresent birds. Note that most of the theoretical and empirical literature actually refers to banks (as a particular form of financial intermediary) rather than to all financial institutions conducting financial intermediation services. However, the bank of the 21st century completely differs from the bank that operated in most of the 20th century. Both its on- and off-balance sheet activities show a qualitatively different composition.That is, away from purely interest related lending and borrowing business towards fee and provision based insurance-investment-advice-management business. At the same time, the traditional insurance, investment and pension funds enter the world of lending and financing. As such, financial institutions tend to become both more similar and more complex organisations. Thus, it appears that the traditional banking theories relate to the creation of loans and deposits by banks, whereas this increasingly becomes a smaller part of their business.This is not only because of the changing composition of their income structure (not only interest-related income but also fee-based income). Also it is the case because of the blurring borders between the operations of the different kinds of financial intermediaries. Therefore, we argue first that the loan and the deposit only are a means to an end which is admit both by the bank and the customer and that the bank and the non-bank financial intermediary increasingly develop qualitatively different (financial) instruments to manage risks.Questioning whether informational asymmetry is the principal explanatory variable of the financial intermediation process what we do does not imply denial of the pivotal role information plays in the financial intermediation process. On the contrary, under the strong influence of modern communication technologies and of the worldwide libera lization of financial services, the character of the financial intermediation process is rapidly changing. This causes a until now only relative decrease in traditional 28Critical Assessment forms of financial intermediation, namely in on-balance sheet banking.But the counterpart of this process the increasing role of the capital markets where savers and investors deal in marketable securities thanks to world wide real time information would be completely unthinkable without the growing and innovating role of financial intermediaries (like investment banks, securities brokers, institutional investors, finance companies, investment funds, mergers and acquisition consultants, rating agencies, etc. ). They facilitate the entrepreneurial process, provide bridge finance and invent new financial instruments in order to bridge different risk preferences of market parties by means of derivatives.It would be a misconception to interpret the relatively declining role of traditional banks, from the perspective of the financial sector as a whole, as a general process of disintermediation. To the contrary, the increasing number of different types of intermediaries in the financial markets and their increasing importance as financial innovators point to a swelling process of intermediation. Banks reconfirm their positions as engineers and facilitators of capital market transactions.The result is a secular upward trend in the ratio of financial assets to real assets in all economies from the 1960s onwards (see Table 3). It appears that informational asymmetries are not well-integrated into a dynamic approach of the development of financial intermedation and innovation. Well-considered, information, and the ICT revolution, plays a paradoxical role in this process. The ICT revolution certainly has an excluding effect on intermediary functions in that it bridges informational gaps between savers and investors and facilitates them to deal directly in open markets.This functi on of ICT promotes the exchange of loosely tradable, thus uniform products, and leads to the commoditizing of financial assets. But the ICT revolution provokes still another, and essentially just as revolutionary, effect, namely the customizing of financial products and services. Modern network systems and product software foster the development of ever more sophisticated, specific, finance and investment products, often embodying option-like structures on both contracting parties which are developed in specific deals, thus tailor made, and which are not tradable in open markets.Examples are specific financing and investment schemes (tax driven private equity deals), energy finance and transport finance projects, etc. They give competitive advantages to both contracting parties, who often are opposed to public knowledge of the specifics of the deal (especially when tax aspects are involved). So, general trading of these contracts is normally impossible and, above all, not aimed at. (But imitation after a certain time lag can seldom be prevented Informational data (on stock prices, interest and exchange rates, good and energy prices, Critical Assessment29 macroeconomic data, etc. ) are always a key ingredient of these investment products and project finance constructions. In this respect, information is attracting a pivotal role in the intermediation function because it is mostly the intermediation industry, not the ultimate contract parties that develop these new products and services. The function of information in this process, however, differs widely from that in the present intermediation