Bryan Caplan and David Henderson

February 2003

A Monthly Archive (30 entries)

Supply-side Dissatisfaction

Supply-side Economics
Arnold Kling
Some folks are reportedly bitter about the appointment of Greg Mankiw to succeed Glenn Hubbard as Chairman of the Council of Economic Advisers. N. Gregory Mankiw, whom Mr. Bush nominated on Wednesday to lead his Council of Economic Advisers, wrote... MORE

Comment of the Week 2003-02-27

Game Theory
Arnold Kling
This week, I give the award to this comment by Zimran. Talking about the issue of airline profitability, he writes in part the airline industry also has perennial over capacity. Companies may enter and exit the market, but the planes... MORE

Economics for Environmentalists

Energy, Environment, Resources
Arnold Kling
At the fascinating Longbets web site, Robert A. Freling of the Solar Electric Light Fund makes this bet: By the year 2020 solar electricity will be as cheap or cheaper than that produced by fossil fuels I wish that environmentalists... MORE

The Airline Union Game

Game Theory
Arnold Kling
'Jane Galt' gives an explanation for airline bankruptcies . In single-union negotiations, money left on the table now can be partially reclaimed by demanding higher wages in the next round of negotiations. Not so with multi-lateral arrangements. Any money left... MORE

Milton Friedman on Social Security

Social Security
Arnold Kling
My choice for last week's comment of the week generated a lot of comments! It refers to this article by Milton Friedman, who describes a conceptual scheme for transitioning out of Social Security. Based on the comments, I can tell... MORE

Moore's Law

Growth: Causal Factors
Arnold Kling
Economics teachers and students will want to read Jon "Hannibal" Stokes' article on Moore's Law, because 1. In my opinion, Moore's Law is the most important economic phenomenon of our time. See also William Nordhaus, The Progress of Computing, and... MORE

FCC Policy Issues

Regulation and Subsidies
Arnold Kling
In the age of the Internet, the FCC has become a pivotal regulatory body, as I pointed out in The Economics of the Wireless Last Mile. In a new essay, I argue that In the United States today, companies that... MORE

Is Copyright Necessary?

Information Goods, Intellectual Property
Arnold Kling
Douglas Clement does an outstanding job of providing background on the way that economists have dealt with the issue of copyright in the context of economic growth. (An earlier version of Clement's article first appeared here.) Clement's article revolves around... MORE

Economics of Hydrogen

Energy, Environment, Resources
Arnold Kling
Gregg Easterbrook lets a lot of the air out of the hydrogen balloon. Pure hydrogen is not an energy source, except to stars. As it will be used in cars or to power homes and offices, hydrogen--like a battery--is an... MORE

Stock Prices and Scandals

Finance: stocks, options, etc.
Arnold Kling
Jeff Madrick describes disparate economic views on whether stock prices should guide managers. The modern theory typically depends on the idealized efficient-markets theory, which asserts that at any given moment the stock price is not only the best measure we... MORE

Comment of the Week

Social Security
Arnold Kling
Because the comments that people are submitting here are unusually good, I think I'll feature at least one every week. This week's "comment of the week" is from Jim Glass on the Deficit Argument IV thread. He links to an... MORE

The Risk Premium

Finance: stocks, options, etc.
Arnold Kling
Surfing while snowbound, somehow I started with this post on Asymmetrical Information and wound up reading this article by Robert D. Arnott and Peter L. Bernstein on the equity risk premium. It is an exhaustive study that covers many fundamental... MORE

Consumption Taxation

Tax Reform
Arnold Kling
Writing in Slate, Tim Noah discusses consumption taxation, an idea for tax reform that goes back well over half a century. Lester Thurow, a liberal economist, made the case two decades ago for a consumption tax that would include a... MORE

Congestion Tax Works

Microeconomics
Arnold Kling
The first day of London's "congestion tax" began well, according to this report. There were complaints and small demonstrations around London, but traffic was lighter than normal and did not appear to back up around the edges of the restricted... MORE

Risk Spreads Widen

Finance: stocks, options, etc.
Arnold Kling
The Economic Report of the President notes that after September 11, all measures of risk spreads widened. the uniformity of stock market movements around the world suggests that a key driver of U.S. stock prices in 2002 was a worldwide... MORE

Romance or Signalling Game?

Game Theory
Arnold Kling
Economists sometimes seem to be incurable anti-romantics. Consider James Miller's treatment of Valentine's Day as a signalling game. Even a woman who hates flowers would be rational in getting mad at her boyfriend for not buying her flowers on Valentine's... MORE

The Deficit Argument, IV

Social Security
Arnold Kling
Hal Varian gives a clear account of the concern with long-term deficits. A recent study by the economists Alan J. Auerbach, William G. Gale, Peter R. Orszag and Samara R. Potter, "Budget Blues: The Fiscal Outlook and Options for Reform,"... MORE

Growth in Flour

Growth: Consequences
Arnold Kling
Back in December, Virginia Postrel marveled at being able to buy a 5-pound bag of flour for 69 cents. In response, Brad DeLong on his weblog calculated the cumulative gain in productivity over the last 500 years, using flour as... MORE

Future Technology

Growth: Causal Factors
Arnold Kling
In reading The Next Fifty Years, a collection of essays edited by John Brockman of Edge.org, I was struck by the following quote from Rodney Brooks, director of MIT's Artificial Intelligence laboratory. Our thirty-year goal is to have such exquisite... MORE

The Budget Debate

Macroeconomics
Arnold Kling
Columnist Robert J. Samuelson describes the Budget debate as each side trying to embarrass the other, without ever confronting the truly important budget issues What both sides are trying to avoid discussing, according to Samuelson, is the anomalous structure of... MORE

Migratory Lucky Duckies

Income Distribution
Arnold Kling
One of the weaknesses of using income variation in a single year as a measure of the distribution of income is that people change income brackets over time. In general, the trend for any given household is upward, as households... MORE

Bush Administration Embraces New Growth Theory

Growth: Causal Factors
Arnold Kling
In an article for the Concise Encyclopedia of Economics, Paul Romer explains the difference between old and new growth theory. A traditional explanation for the persistent poverty of many less developed countries is that they lack objects such as natural... MORE

The Language Barrier

Growth: Causal Factors
Arnold Kling
The Internet has created new opportunities for international trade in information services. In this essay, I argue that this is creating a trade barrier for non-English speakers. For now, the Internet revolution is boosting the economic prospects of the English... MORE

The Deficit Argument, III

Productivity, Baumol's cost disease
Arnold Kling
Responding to my previous post, Brad DeLong offers a theory of government spending that is certainly, well, different. one percent faster real GDP growth does not leave federal spending unchanged. A lot of government services require that bureaucrats be paid... MORE

The Deficit Argument, II

Social Security
Arnold Kling
Liberal and conservative economists are not as far apart on the issues of fiscal policy as it might first appear. Both sides share a concern that government growth could outstrip GDP growth. The position of liberal economists on the U.S.... MORE

The Deficit Argument

Macroeconomics
Arnold Kling
Kevin Hassett believes that the U.S. budget deficit is a matter more of politics than economics. On the issue of deficits and interest rates, he writes My own view is that there are many close substitutes for U.S. government bonds... MORE

Japan Needs Revolution?

Growth: Causal Factors
Arnold Kling
Technology analyst Joi Ito offers this diagnosis of Japan's long slump. Post-war Japan consolidated power in the ruling party. People were educated to be obedient. Harmony was maintained by co-opting or disabling people or organizations that could threaten the system.... MORE

Tax Reform Timidity

Public Choice Theory
Arnold Kling
The New York Times' Daniel Altman describes the state of the income tax code. Washington managed to hack through much of the underbrush of the tax code in an overhaul that President Ronald Reagan signed into law in 1986. But... MORE

Synthetic Fuels Program

Energy, Environment, Resources
Arnold Kling
About a year ago, Paul Romer pointed out that In the next century we’re going to be moving back and forth, experimenting with where to draw the line between institutions of science and institutions of the market. In this context,... MORE

Income Vs. Happiness

Revealed Preference
Arnold Kling
A short article by Don Peck and Ross Douthat in The Atlantic Monthly summarizes some research on the relationship between income and happiness by Dutch sociologist Ruut Veenhoven. Peck and Douthat interpret the results as suggesting that Above about $20,000... MORE

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