Bryan Caplan and David Henderson

August 2005

A Monthly Archive (56 entries)

Economic Impact of the Hurricane

Energy, Environment, Resources
Arnold Kling
The first place I went for an economic assessment of the impact of Hurricane Katrina was James Hamilton's www.econbrowser.com, because of his expertise in energy. I was not disappointed. For example, he wrote, One of the questions I am almost... MORE

Grey-area Medicine and Non-monetary Costs

Economics of Health Care
Arnold Kling
Another installment in my continuing attempt to fight Gladwellian nonsense and to defend the use of economics in health care policy: Most people do not like to go to the doctor, undergo medical procedures, or stay in the hospital. Medical... MORE

Backwards Induction in Oldboy

Game Theory
Bryan Caplan
The latest great fictional depiction of backwards induction is the Korean thriller Oldboy. Not for the faint of heart, but when the villain says (roughly) "You shouldn't have been wondering why I locked you up. You should have been wondering... MORE

The Price of Cold Turkey

Microeconomics
Bryan Caplan
What does a psychiatrist call it when you pay people to stop consuming alcohol and/or drugs, and run frequent tests to make sure they are holding up their end of the deal? Contingency management. According to "Contingency Management: Incentives for... MORE

Most Influential Economist?

Economic Education
Arnold Kling
For a classroom exercise, my daughter just asked me to define influence and to name the most influential person in world history. My definition of influence was, "the ability to change people's minds," and I chose John Locke, although I... MORE

Technological Independence

Growth: Causal Factors
Arnold Kling
Gizmag writes, The aptly-named LifeStraw is an invention that could become one of the greatest life-savers in history. It is a 25 cm long, 29 mm diameter, plastic pipe filter and purchased singly, costs around US2.00 ...LifeStraw is a personal,... MORE

Son of Simon

Energy, Environment, Resources
Bryan Caplan
In the spirit of the original Simon-Ehrlich bet, people who disagree about the long-run price of oil are putting their money where their mouth is. According to the Laissez-Faire Books blog, energy expert Matthew Simmons has bet NYT columnist John... MORE

Jackson Hole Macro

Macroeconomics
Arnold Kling
At Jackson Hole, Alan Greenspan said, The rising prices of stocks, bonds and, more recently, of homes, have engendered a large increase in the market value of claims which, when converted to cash, are a source of purchasing power. Financial... MORE

Kotlikoff Anecdote

Social Security
Bryan Caplan
Arnold's post on Kotlikoff and Ferguson's proposals for Social Security and health care reform reminds me of a short exchange I had with Kotlikoff in grad school. (I was a Ph.D. student at Princeton, and he was our guest speaker).... MORE

Who Wrote It?

Economics and Culture
Bryan Caplan
Here's a great quote from one of my two favorite novels: The thought that soothed Rostopchin was not a new one. Since the world began and men have killed one another, no one has committed such an idea without consoling... MORE

Hard Heads, Soft Hearts

Social Security
Arnold Kling
Niall Ferguson and Laurence J. Kotlikoff, writing in The New Republic (subscription required), propose to tackle the fiscal mess three ways. First, they suggest replacing existing Federal taxes (personal income, corporate income, payroll, and estate) with a consumption tax that... MORE

Did Gladwell Libel Economists?

Economics of Health Care
Arnold Kling
I think so. Gladwell tries to simultaneously argue two points, which are mutually contradictory. 1) People have to obtain health care, so that raising the cost to them will not reduce their demand. Therefore, insulating them from the cost of... MORE

Gas Prices, Fuel Efficiency, etc.

Energy, Environment, Resources
Arnold Kling
Lots of blather going around the blogosphere about gas prices and fuel efficiency. Most of it violates Oil Econ 101. Perhaps the most reasonable blog take is by Andrew Samwick. The aspect of SUVs that does annoy me is that... MORE

Affordable Welfare State

Growth: Consequences
Arnold Kling
Tyler Cowen writes, Imagine that nanotechnology, or some other version of The Next Big Thing, came to pass. The bounty of nature would be replaced by the bounty of science. Might our economy look a bit more like the welfare... MORE

Housing Rents and Bubbles

Finance: stocks, options, etc.
Arnold Kling
David Leonhardt of the New York Times writes, Rents are rising again across the country, squeezing tenants who are already coping with high gasoline prices and improving returns to landlords after a deep five-year slump. The turnaround appears to be... MORE

Libertarian Basics

Economic Philosophy
Arnold Kling
is the title of my latest essay. Consider the following classification system for government regulations and programs. (a) interventions that work so much better than private alternatives that we feel grateful for them (b) interventions that are better than private... MORE

Pleased as Punch

Behavioral Economics and Rationality
Bryan Caplan
I must gleefully report that I am one of the winners of the 2005 Thomas S. Szasz Award for Outstanding Contributions to the Cause of Civil Liberties, largely for my article "The Economics of Szasz: Preferences, Constraints, and Mental Illness."... MORE

Grades Are So Money

Human Capital: Returns to entrepreneurs, skills, etc.
Bryan Caplan
A Typical Blog rejects my equation of grades and money in my post on pity grading. His main objections, and my replies: 1) 'Merit-based' grades seem to be a lot more merit-based than 'merit-based' wealth. All the students these professors... MORE

A Kingdom for a Frame

Microeconomics
Bryan Caplan
In response to my framing puzzle post, Tyler Cowen asks: My puzzle is different: why is framing so expensive? The frames are just finished wood, which you could import or buy cheap at a lumber yard. The framing labor is... MORE

Health Policy Prescriptions

Economics of Health Care
Arnold Kling
Malcolm Gladwell writes, People without health insurance have bad teeth because, if you’re paying for everything out of your own pocket, going to the dentist for a checkup seems like a luxury. It isn’t, of course. He argues that because... MORE

Economist's Apprentice, Master Humorist

Economics and Culture
Bryan Caplan
Emily Anne, the Economist's Apprentice, has three laugh-out-loud funny posts on housing bubbles, poverty, and subsidized information. No joke!... MORE

General Equilibrium: The Reality Series

Economics and Culture
Bryan Caplan
There is some fascinating economics in the latest issue of Entertainment Weekly (sorry, not online yet). The article "No Funny Business" explains that the rise of reality tv five years or so ago is just now starting to exert a... MORE

Academic Merit vs. Economic Merit

Economics of Education
Arnold Kling
In response to Bryan's post on the role of "pity grades" in undermining academic meritocracy, Jane Galt writes, I find it odd, too, that so many academics profess to be egalitarians, yet academia as a whole has produced one of... MORE

A Framing Puzzle

Microeconomics
Bryan Caplan
Here's a puzzle I'd like to resolve before I teach Industrial Organization again: Why are there so many framing stores? It seems like there is a place that puts your artwork into frames on practically every street corner. According to... MORE

Anti Anti-dumping

International Trade
Arnold Kling
Greg Mankiw and Phillip L. Swagel write, In February, seven of nine newly elected senators publicly endorsed the Byrd Amendment, a provision that encourages American companies to file antidumping lawsuits by awarding the revenues collected from the resulting tariffs to... MORE

Holding Pen Update

Economics of Education
Arnold Kling
The Christian Science Monitor reports, It seems the popularity of makeover shows on television, such as "Queer Eye for the Straight Guy" and "Design on a Dime," has fueled a decorating craze on college campuses... Spending on dorm and apartment... MORE

James Miller's Challenge Bet

Growth: Consequences
Arnold Kling
In my latest essay, I wrote, In my opinion, James Miller is making a bad bet. If you want to bet against Ray Kurzweil, you should look for patterns of prediction errors. As this essay will show, Kurzweil has been... MORE

The Economics and Philosophy of Pity Grades

Economic Philosophy
Bryan Caplan
More students than I care to remember have argued with me about their grades. But there is one argument that I always dismiss out of hand: "You should raise my grade because I NEED a higher grade!" I don't do... MORE

Private Provision of Public Goods

Public Goods
Arnold Kling
Subir Gokarn observes, I've often been asked for my opinion on what the country's sunrise sectors are. My response, at first tongue-in-cheek, but becoming more and more serious over the years, is that anybody who decides to compete against the... MORE

Profit, Office Politics, and Creativity

Economics and Culture
Bryan Caplan
The 1990's cult tv classic Profit just came out on DVD, and everyone who likes economics and has a strong stomach ought to see it. The show could hardly be called pro-market, but the main reason is that it focuses... MORE

Real Electoral Reform

Public Choice Theory
Arnold Kling
In this essay, I argue that mass democracy reduces the quality of government. In 1790, the largest state in the union, Virginia, had a population of under 700,000. Today, Montgomery County has a population of over 900,000. Our nine-member County... MORE

Social Security Opt-out?

Social Security
Arnold Kling
Kyle Markley writes, Social Security should be a voluntary program. Every individual should have the right to opt out, without any restrictions on eligibility and without any requirement to justify their decision. ...Would individuals who opt out be reimbursed for... MORE

Economics and Autism

Economic Methods
Arnold Kling
Simon Baron-Cohen said, A systemizer is somebody whose style of thinking is predominantly in terms of understanding things according to rules or laws. You can think of lots of different kinds of systems: mathematical systems (algebra, computer programs), or mechanical... MORE

Productivity Trend

Growth: Consequences
Arnold Kling
James Hamilton writes, Between 1995 and 2004, U.S. output per worker grew at a 2.9% annual rate, even faster than the impressive pre-1973 pace. It's hard to attribute this to a change in any of those factors thought to have... MORE

Financial Innovation and Regulation

Finance: stocks, options, etc.
Arnold Kling
While I was at the beach, the last two essays in my series on finance came out. The first one discussed financial innovation. (note: URL corrected 8-14) The previous essay described how the Capital Asset Pricing Model (CAPM) says that... MORE

Tolstoy and the Great Man Theory

Game Theory
Bryan Caplan
Most historians tell stories in which the decisions of a few Great Men drastically change the fates of millions. Prinzip started World War I by assassinating Archduke Franz Ferdinand, Stalin collectivized agriculture, and Hitler ordered the Holocaust. Tolstoy wrote his... MORE

Punk Rock Star Finishes His Thesis - And It's Good, Too!

Behavioral Economics and Rationality
Bryan Caplan
My musical discovery of the last two years is the punk rock band Bad Religion. Thirteen CDs, all full of great songs - try Supersonic, Suffer, and the music videos for Los Angeles is Burning and Atomic Garden. More amazing... MORE

Health Care in California: Sick from Economic Illiteracy

Economics of Health Care
Bryan Caplan
The symptoms: Rapidly rising medical costs and lots of wasteful treatment. The treatment: Crack down health savings accounts! That's the quality of reasoning you get from California's Insurance Commissioner Garamendi. This critique from Richard Ralston of Americans for Free Choice... MORE

Money and Happiness: Double-Check With the GSS

Behavioral Economics and Rationality
Bryan Caplan
Arnold and I have a running debate on the connection between material wealth and happiness. He's skeptical of the whole subject; I'm not. He thinks that people's behavior shows that money brings happiness; I've claimed that the standard conclusion that... MORE

Contrarian Like a Conformist

Information Goods, Intellectual Property
Bryan Caplan
Robin Hanson is guest blogging this week at Marginal Revolution. In his first post, he explains how he chose his big post-tenure research project: He took the unconventional step of asking other people what they thought, and averaging their responses:... MORE

Economic Illiterates of the Great Depression

Economic History
Bryan Caplan
According to my paper on the idea trap, economic downturns reduce economic literacy. Just when people need their economic common sense the most, they open their hearts to the crackpots. Perhaps the best example is the Great Depression, when every... MORE

Is Homo Economicus A Sociopath?

Microeconomics
Bryan Caplan
The other day I was reading Martha Stout's The Sociopath Next Door. Although it's engaging, it didn't tell me anything I didn't already know. But it did remind me of a question I've wondered about before: Is homo economicus a... MORE

Jobs are not a scarce resource

Growth: Consequences
Arnold Kling
Jeremy Rifkin says, [An economist] would say we are going to create new types of jobs: analysts, consultants, programmers, engineers, educators and technicians, right? That was Robert Reich's idea when he was secretary of labor under Bill Clinton. The problem... MORE

How Constitutions Might Matter

Politics and Economics
Bryan Caplan
Many economists hold the view that constitutions don't affect policy. The argument goes roughly like this: "If most people want to do X, no sentence on a musty piece of parchment is going to stop them." Even if this argument... MORE

A Metric for Growth Speeds

Growth: Consequences
Arnold Kling
Mahalanobis quotes Peter C.B. Phillips and Donggyu Sul, the fastest learning countries are China, India and the East Asian group. Remarkably, China has experienced over four centuries of base trajectory OECD growth in the last 52 years taking it to... MORE

Debate With Wittman Continues

Politics and Economics
Bryan Caplan
The latest issue of Econ Journal Watch features the second round of my debate with Donald Wittman. Here's me; here's Wittman.... MORE

CAPM

Finance: stocks, options, etc.
Arnold Kling
Can the Capital Asset Pricing Model be explained without using math? I don't really think so, but I try in this essay. Now, suppose another recipe-development project opportunity comes along. By shifting a portion of your portfolio into this new... MORE

Correction to Modigliani-Miller essay

Finance: stocks, options, etc.
Arnold Kling
Thanks to commenter Daniel Davies, I have changed an incorrect word in my Modigliani-Miller essay. It now reads Before MM, the conventional wisdom was that highly-levered firms (firms that issue a lot of debt relative to equity) offered their investors... MORE

Oil Econ 102

Energy, Environment, Resources
Arnold Kling
Terrific econoblog featuring James econbrowser Hamilton and Robert (what, no blog?) Kaufmann on long-term oil supply and policy issues. Hamilton writes, If you ask people today to make huge sacrifices that later turn out to be unnecessary or to be... MORE

Building a Better Llama

Cross-country Comparisons
Bryan Caplan
Alex Tabarrok's llama statue reminds me of an argument by Jared Diamond that no longer convinces me. In Guns, Germs, and Steel, Diamond forcefully argues that an important reason Eurasia was more economically successful than the rest of the world... MORE

Sweatshop Wages

International Trade
Arnold Kling
are better than average wages, according to Benjamin Powell and David Skarbek. Their longer paper is here. It says, The apparel industry has been widely criticized for "exploiting" Third World workers in sweatshops, but the data show that these workers... MORE

Exit and Voice

Politics and Economics
Arnold Kling
Michael Munger points out how a competitive marketplace gives greedy, impersonal merchants an incentive to behave as if they love him. Of course, I would prefer the "Everyone loves Mikey!" explanation. If I am treated well, it should be because... MORE

Anti-antitrust

Regulation and Subsidies
Arnold Kling
David R. Henderson writes, The best statement of the philosophical case against antitrust is in philosopher Harry Binswanger's essay, "Antitrust: 'Free Competition' at Gunpoint." Binswanger draws a fundamental distinction between economic power and political power. Economic power, he notes, is... MORE

Unequal Security Screening Waits

Behavioral Economics and Rationality
Arnold Kling
The Washington Post reports that some airlines, which do not control airport screening but do control the lines that you wait in, are giving first-class passengers shorter waits. Across the country, "elite" lines are making a comeback at U.S. airports.... MORE

Another Take on What's Wrong With Economics

Economic Methods
Bryan Caplan
Not only do I disagree with Arnold's views on the self-interest and rationality assumptions; it also looks like Arnold disagrees with Arnold! In the past, Arnold has expressed a lot of sympathy for my view that systematically mistaken economic beliefs... MORE

Modigliani-Miller

Finance: stocks, options, etc.
Arnold Kling
I describe the famous theorem here. Before MM, the conventional wisdom was that highly-levered firms (firms that issue a lot of debt relative to equity) offered their investors higher risks and higher expected returns than less-levered firms. MM said that... MORE

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