Bryan Caplan and David Henderson

October 2003

A Monthly Archive (29 entries)

Consumption Tax?

Tax Reform
Arnold Kling
Pejman Yousefzadeh makes the case for a consumption tax. A consumption tax such as the one contemplated by H.R. 25 and S. 1493 will reduce transaction costs to a minimum, eliminate the need for concerns about loopholes and exemptions, and... MORE

Credit Bush for Recovery?

Macroeconomics
Arnold Kling
Is a real economic recovery underway? If so, do President Bush's tax cuts deserve credit? These questions have been raised by Paul Krugman and others. When I was a young economist working in the forecasting section of the Federal Reserve... MORE

Comments on Science and Social Security

Social Security
Arnold Kling
Many interesting comments on my suggestion that science could bail out social security. First, Andrew writes, Social Security pays retirees a benefit based on their pre-retirement wages, targeting a 'replacement rate' rather than a real benefit level. If GDP grows... MORE

Science vs. Social Security

Growth: Consequences
Arnold Kling
In an essay called Will Science Save Social Security?, I write, Overall, if events play out over the next quarter century as the technology optimists predict, then GDP will be so astronomical that the costs of Social Security and Medicare... MORE

Wal-Mart controversy

Regulation and Subsidies
Arnold Kling
Wal-Mart is controversial. On the issue of labor costs, Steve Pearlstein writes, I'm talking about a minimum wage that would put a family with two full-time workers above the poverty line in high-cost metropolitan areas -- and no doubt put... MORE

Aging Europe

Social Security
Arnold Kling
The aging of Europe is not a problem, according to Dominic Standish. On present trends of rising productivity, employing the same number of people in 2040 as now would produce over double the amount of wealth we currently have to... MORE

Hayekians vs. Stiglitzians

Information Goods, Intellectual Property
Arnold Kling
I contrast Hayek and Stiglitz on the importance of imperfect information. Hayek would have the government tolerate messy competition. His point is that with the optimal outcome unknown, government resolution of issues shuts off the learning process that market competition... MORE

Electric Liberation

Growth: Consequences
Arnold Kling
A paper by Jeremy Greenwood, Ananth Seshadri, and Mehmet Yorukoglu examines the role of modern appliances in liberating women from housework. To understand the impact of the household revolution, try to imagine the tyranny of household chores at the turn... MORE

Over-worked or Over-taxed?

Supply-side Economics
Arnold Kling
Americans work more than Europeans. Do we work too much, or does Europe tax work too much? Edward Prescott argues the latter. Americans on a per person aged 15-64 basis work in the market sector 50 percent more than do... MORE

Health Care Spending, Continued

Economics of Health Care
Arnold Kling
Alex Tabarrok finds evidence that supports more spending on health care. It has been estimated, for example, that increases in life expectancy from reductions in mortality due to cardiovascular disease over 1970-1990 has been worth over $30 trillion dollars -... MORE

Economists Too Linear?

Growth: Causal Factors
Arnold Kling
In an essay on nonlinear thinking, I wonder if economists spend too much time studying calculus. economists know that many of the processes that are important in our field, such as compound interest and economic growth, are nonlinear. But the... MORE

Japanese Banks

Regulation and Subsidies
Arnold Kling
Joe Peek and Eric S. Rosengren explain how regulatory incentives contribute to the persistent mis-allocation of capital by Japanese banks. Bank regulation and supervision policies in Japan provide banks that have significant nonperforming loans and impaired capital little incentive to... MORE

Health Care Spending

Economics of Health Care
Arnold Kling
Business Week's Howard Gleckman successfully distinguishes between health care cost and health care spending. Medical technology is no different than consumer electronics. When DVD players cost $500, few people bought them, so total spending on the devices was insignificant. Now... MORE

Our Loss, China's Non-gain

International Trade
Arnold Kling
Joseph Carson of Alliance Capital Management decided to investigate how many manufacturing jobs China has gained at the expense of other countries. The result was somewhat surprising. According to our analysis, between 1995 and 2002 roughly 22 million jobs were... MORE

Online Trade Barriers

Regulation and Subsidies
Arnold Kling
Michael Cox writes about trade barriers that affect Internet commerce. Georgia requires buyers to purchase contact lenses in person, ostensibly to protect their health but in effect as a boost to in-state eyewear retailers. Oklahoma won't allow its citizens to... MORE

Stock Options as Tax Deferral

Human Capital: Returns to entrepreneurs, skills, etc.
Arnold Kling
Kevin Hassett thinks that stock options are used because they are a form of tax-deferred compensation. It is sensible that the tax code encourages equity compensation. Shareholders benefit when management has a significant stake in the appreciation of a firm's... MORE

U.S. as Debtor

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Ken Rogoff, former chief economist of the International Monetary Fund, finds it odd that the United States is a borrower rather than a lender in international capital markets. Isn't it even stranger that this borrowing includes sizable chunks from countries... MORE

Economics vs. Populism

International Trade
Arnold Kling
In this essay, I argue that economists face an uphill battle in dealing with populist beliefs about international trade, entitlements, and consumption versus saving. In my view, international trade is only one aspect of the overall phenomenon of Progress and... MORE

Comment of the Week, 10-15-03

Economics of Education
Arnold Kling
A lot of interesting comments on school vouchers. For example, Peter Gallagher writes, What beneficiaries want may NOT be a better education: and even if they do, they may not be very discriminating in deciding what 'better' looks like when... MORE

Lessons of the Great Depression

Macroeconomics
Arnold Kling
In this essay, I summarize what I have been reading about the Great Depression and its implications for today. The Depression certainly was an era of displacement. In fact I have borrowed the very term "displacement" from the late economic... MORE

Kotlikoff on Social Security

Social Security
Arnold Kling
Steve Verdon points to a speech by Laurence Kotlikoff with a plan for saving Social Security and Medicare. The Personal Security System 1. The accrual of additional Social Security retirement (OAI) benefits is eliminated. 2. Current retirees and current workers... MORE

Adverse Results for School Vouchers

Economics of Education
Arnold Kling
Chang-Tai Hsieh and Miguel Urguiola find evidence that in Chile school vouchers caused schools to compete for the best students rather than compete to deliver better education. Although statistically insignificant, the point estimates suggest that, if anything, test scores experienced... MORE

Doubts about Planning

Growth: Causal Factors
Arnold Kling
Jonathan Rauch argues that the absence of a plan for post-war Iraq is a feature, not a bug. In truth, the planning mind-set is exactly wrong for Iraq. Anything might have happened after the war: a flood of refugees, a... MORE

Basic Oil Economics

Energy, Environment, Resources
Arnold Kling
Holman Jenkins makes some useful points. nowadays U.S. consumption of Persian Gulf oil totals about $18 billion a year, less than we spend on computer parts from Asia. The price mechanism works: Oil would flow in greater volume from higher-cost... MORE

The Great Depression

Macroeconomics
Arnold Kling
The Great Depression continues to be a fascinating period to study. As Thomas Sowell points out, the myth is well entrenched that the New Deal pulled the economy out of the Depression. Only now has a book been written in... MORE

Training Economic Man

Behavioral Economics and Rationality
Arnold Kling
Kevin McCabe says that experimental economics offers three implications for policymakers trying to foster economic growth through the adoption of markets. First, safeguards must be put into place to protect impersonal exchange from our innate desire for personal exchange. Second,... MORE

Economic Arguments

Regulation and Subsidies
Arnold Kling
A few days ago, controversial radio personality Rush Limbaugh created a controversy. As a commentator on a football pre-game show, he said (1) The Philadelphia Eagles' quarterback was overrated by others in the media. (2) The reason that the quarterback... MORE

Health Insurance Reform

Economics of Health Care
Arnold Kling
Recent stories on an increase in the number of Americans without health insurance prompted a couple of essays on health insurance reform. Ronald Bailey writes, One way to increase the number of insured Americans is to break the link between... MORE

Various Articles

Regulation and Subsidies
Arnold Kling
Posting here will be infrequent until later in October. Meanwhile, here are some links that may be of interest. Is the insecurity of Microsoft software an externality that should be regulated or taxed? An example of professional licensing as rent-seeking... MORE

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