Bryan Caplan and David Henderson

December 2004

A Monthly Archive (39 entries)

Social Security and Indexing

Social Security
Arnold Kling
William Sterling writes, Price indexation should save the government trillions of dollars in the long run because of the magic of compound interest. Wage growth has historically outpaced consumer price inflation by about 1.1% per annum. That means that the... MORE

Nobel Laureate Edward Prescott thinks that we need mandatory saving to solve a time inconsistency problem. The reason we need to have mandatory retirement accounts is not because people are irrational, but precisely because they are perfectly rational -- they... MORE

Teacher, teach thyself economics

Economics of Education
Arnold Kling
Columbia University Teachers College Professor Amy Stuart Wells writes, policymakers should amend state laws to better support the high-achieving charter schools and close the rest. And I hope they will also remember the hard lesson learned from this reform: that... MORE

More on Medicaid

Economics of Health Care
Arnold Kling
Jeffrey R. Brown and Amy Finkelstein write, At $135 billion annually, long-term care expenditures represent over 8.5 percent of total health expenditures for all ages, or roughly 1.2 percent of GDP... Private insurance reimburses only 4 percent of long-term care... MORE

Phelps on the Dollar

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Edmund Phelps, who I once said might have won the Noble Prize had he been Scandinavian, ventures a perspective on the dollar and the trade deficit. This model revolves around the epochal event hanging over the present situation: the explosion... MORE

Carnival of the Capitalists

Economics of Health Care
Arnold Kling
On the blogroll to the left, you will find "Jay Solo: Carnival of the Capitalists," which is a collection of posts that comes out every Monday. This week's edition is unusually good. Don't miss it. One of the links I... MORE

Kinsley on Social Security

Social Security
Arnold Kling
Here is the crux of the issue in Kinsley's argument: if [privatization] contemplates reducing Social Security payments proportionally to the reduction in taxes -- and counting on people to make up the difference with their new investments -- people will... MORE

Or is it Medicaid?

Economics of Health Care
Arnold Kling
I was not aware of some of these statistics. Medicaid, the nation's largest health insurance program, is costing the states and the federal government more than $300 billion a year. The growth of the program, which covers the poor and... MORE

Textbook Omissions

Economic Education
Arnold Kling
After studying leading graduate economics textbooks in micro, macro, and industrial organization, Dan Johansson writes, Among the 19 books, only 2 references are made to entrepreneur, only 5 to institutions, only 8 to property rights, and not a single reference... MORE

No Entitlements Crisis?

Social Security
Arnold Kling
Now that President Bush is proposing to reform Social Security, opponents are arguing that there is no crisis. They might wish to read Laurence Kotlikoff. continuing to ignore the problem will simply let more generations, particularly older ones off the... MORE

Survey of Regulation

Regulation and Subsidies
Arnold Kling
Robert W. Crandall writes, the deregulatory movement has led to a modest amount of progress in reining in some of these programs in the United States. Unfortunately, much remains to be done in freeing water, spectrum, and land from inefficient... MORE

Information and Incentives

Economics of Health Care
Arnold Kling
Paul H. O'Neill writes Today, in many corners of even our most significant federal payment systems, we still pay clinicians and facilities for activity, not for the quality of the job they did for the patient. ...The federal government should... MORE

The Long Tail

Information Goods, Intellectual Property
Arnold Kling
Chris Anderson writes, What's really amazing about the Long Tail is the sheer size of it. Combine enough nonhits on the Long Tail and you've got a market bigger than the hits. Take books: The average Barnes & Noble carries... MORE

Taxes and Market Time

Tax Reform
Arnold Kling
Steven J. Davis and Magnus Henrekson write, Regressions on rich-country samples in the mid 1990s indicate that a unit standard deviation tax rate difference of 12.8 percentage points leads to 122 fewer market work hours per adult per year, a... MORE

I Heart Michael Powell

Economic Philosophy
Arnold Kling
Reason interviews the Chairman of the FCC, who says I’m a big believer in individual entrepreneurship and innovation. I think American capitalism is the finest economic system ever invented. It has crushed— not beaten, crushed—every alternative deployed in the history... MORE

Global Warming

Energy, Environment, Resources
Arnold Kling
Global warming is the topic this week discussed by Richard Posner and Gary Becker. Posner writes, [The Kyoto Protocol] is either too much or too little. It is too much if, as most scientists believe, global warming will continue to... MORE

Dollars and Deficits

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
About the falling dollar, I literally say "So what?" Taking as given government policy for spending, taxes, and money creation, there is nothing specific that political leaders can contribute to the operation of the foreign exchange markets...Our government has no... MORE

Adequacy of Personal Savings

Social Security
Arnold Kling
In a research paper, John Karl Scholz says that over 80 percent of households are saving at least as much as is optimal. However, much of their result is based on counting Social Security wealth in their analysis. Private net... MORE

Friedman on the Battle of Ideas

Politics and Economics
Arnold Kling
Nobel Laureate Milton Friedman writes, Hardly anyone today, from the far Left to the far Right, regards socialism in the traditional sense of government ownership and operation of the means of production as either feasible or desirable. Those who profess... MORE

More on Privatization

Social Security
Arnold Kling
Paul Krugman makes a generous concession to privatization supporters. For the record, I don't think giving financial corporations a huge windfall is the main motive for privatization; it's mostly an ideological thing. I don't recall MIT having a course in... MORE

Government Mergers

Institutional Economics
Arnold Kling
Peter Gordon writes, Just surfing the U.S. Statistical Abstracts, which are now available through www.census.gov for many years back, reveals the dimensions of the most auspicious government consolidation project in U.S. history: the consolidation of school districts. Sixty years ago,... MORE

What is selfishness?

Economic Philosophy
Arnold Kling
Don Boudreaux writes, when someone selfishly jogs to improve his or her health, we applaud. When that same someone selfishly seeks financial profit by offering goods or services for sale to consumers, many of us are wary. (And even most... MORE

Social Security Privatization

Social Security
Arnold Kling
In response to this post by Michael Kinsley, I wrote this. Michael Kinsley is correct to be skeptical that privatization will generate a bonus large enough to eliminate the gap between the promises made to future recipients and the likely... MORE

Discovery Procedure in Wireless Technology

Austrian Economics
Arnold Kling
John Yunker writes, While Japan and Korea will retain their lead for some time, the US is poised to surpass Europe in network speeds, bandwidth consumption and, more important, network variety... Remember when the US was criticized by Europe for... MORE

Becker-Posner on Drug Patents

Information Goods, Intellectual Property
Arnold Kling
A good intro to the economic issues surrounding pharmaceutical patents, from Richard Posner and Gary Becker. Posner writes, Invention is a cumulative process; a new invention is usually an incremental improvement on an existing one. So the more patents that... MORE

Analogy for Government

Public Goods
Arnold Kling
Chris Dillow writes, I’ve got an idea that would revolutionize the way we do our weekly shopping. Every few years, we all vote for our favourite supermarket company. The one that gets more votes across the country than any other... MORE

Politics and Academia

Politics and Economics
Arnold Kling
The issue of why academics lean left has received considerable notice. I am not sure of the answer, but one thing I do not buy is the notion that people become professors out of an unusually strong desire for public... MORE

Tax Breaks vs. Subsidies

Tax Reform
Arnold Kling
Edward Lotterman writes, When or why should government use direct payments versus tax breaks? The answers are more political than economic. One skeptic has argued, "Politicians and economists have a love-hate relationship with tax breaks. Politicians love them and economists... MORE

Housing Bubble?

Finance: stocks, options, etc.
Arnold Kling
Jonathan McCarthy and Richard W. Peach, two economists at the New York Fed, agree with me that there is no housing bubble. we see that the adjusted rent-to-price ratio is not at a level that suggests a home price bubble... MORE

In this essay, I wonder why the Left and the Right do not reverse their positions on Social Security privatization. However, there is one important difference between keeping Social Security as it is and switching to privatization. Under the current... MORE

Health Insurance Regulation

Economics of Health Care
Arnold Kling
Radley Balko and Michael Cannon propose changes in health insurance regulation. Currently, many states require health insurers to charge the same premiums for any member of a group health plan, regardless of risk. This means that the costs of the... MORE

Subsidize Health Care to Cut Costs?

Economics of Health Care
Arnold Kling
John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler argue that by broadening the health care tax subsidy to include personal spending (not just corporate spending), costs would go down. According to our calculations, based on research from the... MORE

Education Outcomes and Spending

Economics of Education
Arnold Kling
An OECD report on comparative performance of high school students in different countries is receiving a lot of attention. Overall, wealthier countries tend to do better in educational terms than poor nations, but there are exceptions: Korea's national income, for... MORE

History of Markets

Economic History
Arnold Kling
Brad DeLong posts the syllabus for his economic history course. Included is this paper by Peter Temin. He claims that in the Roman Empire, the prices represent extensive market exchanges typical of a market economy, not reciprocal exchanges typical of... MORE

Whose Debt is it, Anyway?

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Don Boudreaux is puzzled as to why I should care about my country's net savings position, as opposed to just my personal net savings position. Suppose that government starts collecting trade data on blonde-haired people. The government could then calculate... MORE

Social Security Transition Cost

Social Security
Arnold Kling
Responding to a comment on the previous post, I write, Suppose that your house has a very dilapidated roof. The next big winter storm is likely to cause huge damage unless it is repaired. So you borrow $20,000 and fix... MORE

Social Security Reform

Social Security
Arnold Kling
The New York Times has two relevant op-eds. John Kasich writes, benefits are growing faster than inflation. First-time Social Security benefits are now tied to wage growth, and wages are rising faster than prices. The result: over the next 75... MORE

Subsidies Raise Prices

Regulation and Subsidies
Arnold Kling
Steve Pearlstein uses his column to explain some freshman economics. What two things do a college education, health care and housing have in common? One is that the price of these things has been rising at least twice as fast... MORE

Remembering a Teacher

Economic Education
Arnold Kling
Bernard Saffran, known to many economists for his regular column in the Journal of Economic Perspectives, died suddenly of a heart attack on Monday. When I was an undergraduate, I took most of my economics courses from Bernie. I wrote... MORE

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