Arnold Kling  

Various Articles

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Libertarian Redistribution... Health Insurance Reform...

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 (in more ways than one).

Robert Hall draws out the implications of extrapolating ever-increasing health care costs.

Edward ("real world economics") Lotterman looks at the dubious benefits of living wage regulation.

Brad DeLong cites Petra Moser's prize-winning work suggesting that patents do not necessarily foster innovation.

Cass R. Sunstein and Richard Thaler review Michael Lewis' Moneyball, which is about exploiting the inefficient market for baseball talent.

Here is a long interview with Allan Meltzer. I have been reading a lot about the Great Depression lately, but this is the first explanation I have seen of how the "real bills doctrine" kept the Fed from increasing the supply of reserves.



COMMENTS (4 to date)
Mcwop writes:

Taxing Microsoft software insecurity is a bad, if not silly idea. Software security extends far beyond MSFT, and software in general. There is a heavy human component involved. Want the most secure OS? Go look at OpenBSD, but good luck running Microsoft Office on it. Regardless, there are ample software options that are more secure, but nobody ever gets fired for buying Microsoft. Should we tax purchasers for not considering more secure options? Or tax companies that do not stay on top of security patches?

The living wage is another silly idea because it will distort the labor market in so many ways. One example is if the wage is set the same for all regions. Living wages differ by region, and any attempt to implement it must at least deal with this factor. Otherwise, people in NYC subject to the wage will use political muscle to pull the wage up taking all other regions with it. Two, assuming there is universal health, why continue at my job when I can get a living wage and “free” health care working as a ski lift attendant? Three, does a high school kid need a living wage. Might a living wage increase the dropout rate, causing incomes to decline on average, and deteriorate the educated workforce pool. Never mind, the already mentioned fact that business will automate away living wage jobs. After all, do you really need a lift attendant?

Patrick R. Sullivan writes:

" this is the first explanation I have seen of how the 'real bills doctrine' kept the Fed from increasing the supply of reserves."

Friedman and Schwarz wrote about its influence, in their, "A Monetary History..."

Lawrance George Lux writes:

Software insecurity is a business risk and cost, not something which can be regulated or taxed. The article on professional licensing highlights the horrors of hidden taxes, and the defeat of economic performance which is incurred. It expresses that Politicans destroy economic policy in their search for revenue.

The health care article expresses the idiocy of current American thought. Medicare proclaimed all Americans could get the finest of Health Care, no matter what the cost. Education is no better. We cannot afford to eat the Profits earned by the Healthy in maintaining the health of structurally Ill people. We cannot spend as much to educate a Blue-Collar laborer, as on a MBA.

Economists often ignore the flip-side of the 'Living-Wage' argument. Institution of Minimum Wage rates which are viable, lower the cost of Labor training, increase the use of 'Idiot-Safe' technology, lower the incidence of Industrial accident with it's cost, and does not affect any but the least-Productive labor elements--causing them to be transferred to more productive employment in the long-run. There is an argument to be made that 'Living-Wage' regulation actually reduces the long-range labor cost of Industry, if health and retirement benefits can be constrained.

Patents do induce innovation, if they actually promote a productive process. The award of Patents, though, should be altered. I have argued before in a publication that Patent authorities should assign Patent royalty rates with assignment of a Patent, this to eliminate economic monopoly of the productive process; and to place the Patent position is a proper economic prospective.

Allan Meltzer is an extremely intelligent man, but he places too great a reliance on Monetary theory. Maintenance of Consumer Demand is the primary element of economic performance, not specifically maintenance of the Money Supply. Everyone fears a Deflationary period of extended Period, while advantage could be gained; specifically a real-value increase in Wages.
lgl

Mike Sproul writes:

Meltzer's comments about how the real bills doctrine led to the great depression are unfortunately off the mark. I give an explanation in "Backed Money, Fiat Money, and the Real Bills Doctrine". The correct interpretation of the RBD is that the Fed can increase the money supply without causing inflation as long as it increases its assets (i.e., backing for the money) in step with the money. In practice, that means the Fed will do no harm as long as it always stands ready to pay $1 for a bond worth $1. What caused the depression was that the Fed was refusing to pay out dollars to people who had securities worth $1 to offer.

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