Bryan Caplan and David Henderson

February 2004

A Monthly Archive (29 entries)

The Budget Outlook

Fiscal Policy
Arnold Kling
Niall Ferguson and Laurence Kotlikoff paint a dire picture of the fiscal outlook in the U.S. Much of the material is a recital of the prospects for Social Security and Medicare, with which readers of this blog are familiar. One... MORE

Academic Lock-in

Economic Education
Arnold Kling
In a polemic I wrote against academic tastes, I raise the question of why top universities remain successful. I suggest, The nation's top-tier colleges benefit from network and lock-in effects. No single Ivy League undergraduate has the incentive to attend... MORE

The European Outlook

Growth: Causal Factors
Arnold Kling
Olivier Blanchard sees hope. In the United States, over the period 1970 to 2000, GDP per hour increased by 38%. Hours per person also increased, by 26%, so GDP per person increased by 64%. In France, over the same period,... MORE

Greenspan's Concerns

Social Security
Arnold Kling
Federal Reserve Chairman Alan Greenspan tries taking on some sacred cows. In a logical assessment of the Social Security's future financial condition, he suggested ways to curtail the growth in future benefits. The response was predictable Sen. Arlen Specter, R-Pa.,... MORE

Extreme Free Trade

International Trade
Arnold Kling
What happens when you take free trade to extremes among states with uneven incomes? Virginia Postrel suggests looking at the fifty United States as an example. The United States is one giant free trade zone. Businesses can move their plants,... MORE

Block that Free Lunch

International Trade
Arnold Kling
Russell Roberts speculates on what might happen if Indian outsourcing really gets out of hand. suppose Indians decided to work for free and give away the software, the ultimate competitive threat. If outsourcing work to low-wage Indians is bad, surely... MORE

Benedict Arnold Legislators

International Trade
Arnold Kling
Walter Williams explains how sugar protectionism has caused candy manufacturing to be outsourced. the protectionist miracle that Congress has created for the sugar industry has cost anywhere from 7,500 to 10,000 jobs in sugar-using industries due to higher sugar costs.... MORE

Saving Jobs from Outsourcing

Labor Market
Arnold Kling
Stuart Anderson looks at the arithmetic of Indiana's effort to save jobs from outsourcing. Out of 65 contract employees, Tata would have employed a number of Hoosiers through an Indiana-based subcontractor, but would also have used Indians currently employed by... MORE

Where are the Jobs?

Labor Market
Arnold Kling
Virginia Postrel thinks that the Bureau of Labor Statistics may be under-estimating employment. the bureau has missed more than 300,000 manicurists. It puts the total at around 30,000, compared with the count of 372,000 -- up from 189,000 a decade... MORE

The High-Cost Producer

Economics of Health Care
Arnold Kling
Alex Tabarrok points out how government ends up paying too much for pharmaceuticals. in some areas, Medicaid accounts for a large fraction of the market...In this situation it makes sense for pharmaceutical companies to raise prices - they lose customers... MORE

Cost of Sarbanes-Oxley

Regulation and Subsidies
Arnold Kling
Stephen M. Bainbridge argues that the cost of regulations under the Sarbanes-Oxley law (SOX) enacted in the wake of the Enron scandal are too high. The SEC initially estimated ยง 404 compliance would require only 383 staff hours. According to... MORE

Social Security Reform

Social Security
Arnold Kling
Michael Tanner of the Cato Institute has a proposal for weaning young workers off of the Social Security system. workers who chose the individual account option would receive a bond in recognition of their past contributions to Social Security. That... MORE

Unstable Information Economy

Growth: Consequences
Arnold Kling
Eli Noam says that an economy where the key input is research will be unstable. In industries where up-front costs are high but production and distribution costs approach zero, the main strategy will be to consolidate and cartelise in order... MORE

Academic Self-Selection

Economics of Education
Arnold Kling
Why does the academy lean left in terms of politics? In this essay, I offer a hypothesis. In general, wherever creative individuals receive incomes without having to worry about the "business aspect" of their organizations, you have freedom without responsibility...... MORE

Finite Labor Supply in India

International Trade
Arnold Kling
Anti-outsourcing alarmists say that India has an "infinite supply of cheap labor." If that were true, then we would not be reading stories like this. According to a Nasscom Hewitt Total Rewards Survey 2003, the entry level salary (junior software... MORE

What Explains Inequality?

Income Distribution
Arnold Kling
Two new books give provocative answers. According to Houses Divided, reviewed here, Thomas M. Shapiro argues in this sober and authoritative book that we should look to disparities of wealth for the answer...Whites start out ahead because they inherit more... MORE

Debating Rubinomics

Fiscal Policy
Arnold Kling
Jeff Faux and Brad DeLong revisit fiscal history. In particular, they ask whether Democratic President Clinton sold his soul for deficit reduction. Faux writes, Hopes that the peace dividend from the end of the Cold War would finance major new... MORE

Service Sector Productivity

Productivity, Baumol's cost disease
Arnold Kling
Hal Varian's New York Times column today discusses the apparent rebound in service-sector productivity since around 1995. Before this rebound occurred, there was a fear that service sector productivity growth was inherently slow. Way back in 1967, the noted economist... MORE

Statistical Jargon

Economic Methods
Arnold Kling
I try to use the 2000 election in Florida and the question of Iraq's weapons of mass destruction to illustrate statistical concepts. In statistics, a parameter (not to be confused, as it is often is by laymen, with perimeter), is... MORE

Social SecurityAnalysis

Social Security
Arnold Kling
The 2004 Economic Report of the President also discusses Social Security. One issue is measuring the Social Security shortfall. Most economists reject the so-called "actuarial shortfall" as a measure. One alternative is the Gokhale-Smetters present value estimate. The 2004 Economic... MORE

Who Bears the Tax Burden?

Fiscal Policy
Arnold Kling
The 2004 Economic Report of the President contains a chapter on tax incidence. the person who is legally responsible for paying the tax may not be the one who actually bears the burden of the tax...the incidence of a tax... MORE

Immigrant Labor Market Issues

Labor Market
Arnold Kling
Caitlin Flanagan's cover story (as of this writing, not yet on line) for the March issue of The Atlantic Monthly is on the crucial role played by female immigrant workers in the "have-it-all" lifestyle of professional women with children. one... MORE

Income Redistribution Proposals

Income Distribution
Arnold Kling
The Chronicle of Higher Education discusses a number of income redistribution proposals. For example, Edmund Phelps has suggested a government wage subsidy for low-wage workers. Mr. Phelps argues that his plan -- which, in his view, should entirely replace the... MORE

Environmentalist Forecasting Model

Energy, Environment, Resources
Arnold Kling
My view of environmentalists is that they use the fixed-coefficients production function for long-term forecasting. Thus, they ignore substitution and technological change. Ronald Bailey reviews the many mistaken predictions based on this methodology. For example, For the first Earth Day... MORE

Collective vs. Individual Benefits

Social Security
Arnold Kling
I have a new essay that argues that we over-estimate the value of collective benefits. Contrary to my training as an economist, I believe that at least some of the preference that workers have for in-kind benefits reflects flat-out irrationality.... MORE

Cost-of-Living Arbitrage, II

International Trade
Arnold Kling
I received a lot of pushback on my earlier post. Comments and email have pointed out that (a) the cost of living really is five times lower in India and (b) Indian expatriates are indeed moving back home to take... MORE

Nanotechnology and the Great Race

Growth: Causal Factors
Arnold Kling
I once wrote an essay that I called The Great Race, in which I argued that two factors that affect the future are technological change in the private sector and the growth of entitlement spending. Many posts in this blog... MORE

Regulation and Industry Structure

Regulation and Subsidies
Arnold Kling
Milton Friedman argues that the drug-approval process is the problem. On the drug side, what seems to me to be the most serious situation is the extent to which the Food and Drug Administration makes it extremely expensive to produce... MORE

Cost-of-Living Arbitrage

International Trade
Arnold Kling
An engineer from India emails me, The purchasing power parity in India is 5 compared to USA - a 20000 $ programmer in India is actually making 100,000 $ in terms of his spending power. ...an average programmer in India... MORE

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