Bryan Caplan and David Henderson

May 2003

A Monthly Archive (33 entries)

California Energy Crisis Redux?

Energy, Environment, Resources
Arnold Kling
Could California suffer another "energy crisis?" Lynne Kiesling writes, California has a lower construction rate for proposed generation projects than other states that have implemented electricity restructuring...even in states that started with higher capacity relative to demand, such as Texas... MORE

Liquidity Trap, II

Monetary Policy
Arnold Kling
The comments on the Liquidity Trap or Statism Trap thread have been interesting. I want to respond to a couple of issues that were raised. First, D-squared pointed out that Krugman has written about the liquidity trap in Brookings Papers,... MORE

China, India and Deflation

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Prashant Kothari forwarded an email from one of his readers that said, I think global deflation is [in] the cards as long as we have free trade in goods and services. China is rapidly becoming a sophisticated manufacturer and there... MORE

History of Option Pricing

Finance: stocks, options, etc.
Arnold Kling
The development of the Black-Scholes option pricing formula is a fascinating story. It is well told in this article by sociologist Donald MacKenzie. The Black-Scholes-Merton analysis provided a range of intellectual resources for those tackling problems of pricing derivatives of... MORE

Liquidity Trap or Statism Trap?

Supply-side Economics
Arnold Kling
In this essay, I take issue with Paul Krugman's claim that the liquidity trap is relevant to Japan and the United States. Krugman has learned the wrong lessons. He thinks that the bank bailouts are a good thing, that Japan's... MORE

Comment of the Week, 2003-05-28

Economics of Education
Arnold Kling
On the topic of the academic job market, Damien Smith writes, Could the trouble in the humanities PhD market not be an insider-outsider problem, where the "insiders" (in this case, tenured faculty) exercise a form of market power over the... MORE

Anti-Consumer Regulation

Regulation and Subsidies
Arnold Kling
Two recent columns concerning the regulation of Internet commerce show how regulation sometimes restricts competition at the expense of the consumer. The Wall Street Journal argues that state regulations prevent consumers from obtaining health insurance that otherwise would be available... MORE

Paris in the Springtime

Social Security
Arnold Kling
Two recent opinion pieces discuss the French ritual of strikes in May. The Wall Street Journal writes, Four workers financed each pensioner in 1960 and two in 2000. By 2020 the ratio will be one-to-one. Mr. Raffarin has told the... MORE

"Concentrated Poverty" Declines

Growth: Consequences
Arnold Kling
Paul A. Jargowsky found that "concentrated poverty" (people living in high-poverty neighborhoods) declined by 24 percent in the United States in 1990's. In contrast, he says that from 1970 to 1990 poverty became more concentrated spatially. Based on the trend... MORE

The Academic Job Market

Economics of Education
Arnold Kling
Two recent essays discuss the academic job market. Laura Vanderkam argues that students with good academic skills over-estimate their chances of landing a good job with a Ph.D. Like actors, however, humanities graduate students have to realize that — except... MORE

Three P's of Growth

Growth: Causal Factors
Arnold Kling
Steven Kirchner points to a speech by Australian Secretary to the Treasury Ken Henry on the topic of the determinants of growth. Henry decomposes output per capita into output per hour worked times hours worked per working-age person times the... MORE

Government Performance Effectiveness

Cost-benefit Analysis
Arnold Kling
Ted Balaker links to this analysis by the Office of Management and Budget of the effectiveness of government programs. Demanding that programs prove results in order to earn financial support, however obvious and sensible, marks a dramatic departure from past... MORE

Institutional Survival

Institutional Economics
Arnold Kling
Henry Farrell argues against the view that institutions must reduce transactions costs in order to survive. there are an awful lot of institutional arrangements out there that demonstrably have very little to do with efficiency or transaction cost reduction, and... MORE

Regulatory Tariffs Vs. Quotas

Regulation and Subsidies
Arnold Kling
Reason Foundation's Ted Balaker sees a libertarian silver lining in the cloud of state government budget deficits. After all, some states are now eyeing legalized gambling as a new cash cow. Maybe the next step will be to legalize –... MORE

Government Overgrowth, II

Supply-side Economics
Arnold Kling
Was the stock market boom good for New York? Not according to Megan McArdle, otherwise known as 'Jane Galt'. in an era of prosperity, city spending grew an astonishing $5.6 billion, or 25% - right up to the capacity of... MORE

Economic Policy Diversity

Regulation and Subsidies
Arnold Kling
In an essay on diversity in economic policy, I propose dividing the United States. By splitting into the virtual regions of Miltonia and Hillaria, we could run a "natural experiment" to see how things work. Perhaps after ten or twenty... MORE

Growth and Demographics

Social Security
Arnold Kling
Steven Nyce and Syl Schieber analyze the likelihood that the size of the labor force will start to decline in many developed countries. It now appears that many of the developed economies will experience periods in which the numbers of... MORE

Temporary Dividend Tax Cut?

Fiscal Policy
Arnold Kling
Jacob Levy criticizes the Senate's proposed temporary tax cut on dividends. The arguments in favor of repealing the dividend tax have to do with removing distortions from the capital markets and from the incentives faced by corporations, and with improving... MORE

Comment of the Week, 2003-05-16

Revealed Preference
Arnold Kling
On the topic of revealed preference, David Thomson writes, Human beings are neither existentially [n]or psychologically able to endure lives of everyday indolence and unrelenting pleasure seeking. That sounds like the introductory sentence for a thesis in behavioral economics. For... MORE

Economics of Obesity

Economics of Health Care
Arnold Kling
Obesity is getting increased attention from health policy experts and economists. Roger Bate writes, My analysis is preliminary and in any case proves nothing, but it is indicative that fast food has little to do with overall obesity rates. If... MORE

Surveys Vs. Revealed Preference, III

Revealed Preference
Arnold Kling
I take a skeptical view of surveys in this essay. From the standpoint of revealed preference, the [survey evidence] that income over $20,000 does not raise happiness simply falls apart. Observing the fact that even people with very high incomes... MORE

Should Britain Join the Euro?

Optimum Currency Areas
Arnold Kling
This is a fierce debate. The partisans in favor write, By removing the barriers of separate currencies, the creation of the euro has led to a rapid increase in cross-border trade in the euro-zone. Germany's trade with the EU has... MORE

21st Century Trade Barriers

Trade Barriers
Arnold Kling
Two stories that have been discussed recently about new variations of protectionism. One concerns the European Union's ban on genetically modified food. This issue will be taken to the World Trade Organization by the U.S., along with other countries, including... MORE

Government Overgrowth

Supply-side Economics
Arnold Kling
One fascinating phenomenon is that when government grows so large and its interest groups so powerful, it threatens to crowd out the private sector. This is a concern in Israel, where a new economic plan that tries to limit government... MORE

Sowell on Health Care

Economics of Health Care
Arnold Kling
Thomas Sowell has an essay in three parts on the issue of universal health care coverage. In part one, he challenges politicians who continue to treat profits as evil, in spite of the superior performance of capitalism relative to socialism... MORE

Deflation-fighting and Depreciation

Macroeconomics
Arnold Kling
Continuing the discussion that began with the thread Liquidity Trapped?, we can add opinions from Richard Berner of Morgan Stanley and Victor Canto of the Cato Institute. Canto writes, The data make a compelling case that we are on the... MORE

California Energy Regulation

Energy, Environment, Resources
Arnold Kling
Lynne Kiesling bemoans electricity regulation policy in California. [The original deregulation effort] was much more about freeing up restrictions on trade in wholesale electricity markets, although it did a pathetic job of that, requiring buyers and sellers to use the... MORE

Liquidity Trapped?

Macroeconomics
Arnold Kling
The threat of deflation and/or a liquidity trap has been discussed in a number of places recently. Columnist Robert J. Samuelson writes, Global demand remains weak; surplus capacity discourages new investment; gluts depress prices. Deflation could be dangerous: Lower prices... MORE

Comment of the Week, 2003-05-07

Energy, Environment, Resources
Arnold Kling
In the thread about capitalism as a benevolent system, Ward mused, Maybe there should be a school of Austrian Environmentalism that studies innovative ways to clean up or maintain the environment. To which Lynn Kiesling replied, one organization that does... MORE

Nanotech Research Funding

Regulation and Subsidies
Arnold Kling
Is Federal funding for research in nanotechnology justified? Declan McCullagh raises some doubts. First, private sources will pay for basic research. It may not be at the level that all researchers would prefer, but if it can lead to applied... MORE

Rethinking Keynes

Macroeconomics
Arnold Kling
In Would Keynes Change His Mind?, I suggest that some key elasticities in the economy have changed since Keynes wrote. Today, the economy is more elastic than it was in the 1930's. Today's recession is a far cry from the... MORE

Social Security Tax Cut?

Fiscal Policy
Arnold Kling
A proposal from former Labor Secretary Robert Reich: The best and the fastest way to get more money into the pockets of people who are likely to spend it quickly is to cut the taxes of average working people. Most... MORE

Capitalism as a Benevolent System

Austrian Economics
Arnold Kling
Critics of capitalism see it as a cruel system that fosters injustice and exploitation. An alternative view is offered by many economists, particularly those of the Austrian School. George Reisman, for example, speaks of what he calls twelve insights into... MORE

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