Bryan Caplan and David Henderson

January 2007

A Monthly Archive (85 entries)

Planes, Trains, and Automobiles

Cost-benefit Analysis
Bryan Caplan
Here are three surprising transportation factoids from Clifford Winston's Government Failure vs. Market Failure. Winston on planes: Airport expenses are covered by passenger facility charges and landing fees, which are set by local airport authorities based on an aircraft's weight...... MORE

Promising Abstract, Disappointing Paper

Social Security
Arnold Kling
Elizabeth M. Caucutt, Thomas F. Cooley, and Nezih Guner write During the period from 1880 to 1940 pay-as-you-go social security systems emerged in most advanced economies. In this paper we describe a model economy in which demographics, technology, and social... MORE

Climate Prediction Markets

Energy, Environment, Resources
Arnold Kling
Mark Bahner writes, The U.S. government should set up a prize fund totaling $400 million, payable in 2031. The prize fund would be open to any U.S. university with accredited science or engineering programs. The fund would be awarded as... MORE

The Reality of Massachusetts Health Care

Economics of Health Care
Arnold Kling
The Boston Globe reports, More than 200,000 people with health insurance would have to buy additional coverage to meet proposed minimum standards under the state's new health insurance law, according to a count completed by insurers yesterday. Most of the... MORE

The Pig Club

Energy, Environment, Resources
Arnold Kling
Also in the Milken Institute Review, Jerry Taylor and Peter Van Doren write, A comprehensive study recently published by the nonpartisan International Institute for Sustainable Development estimates that federal and state subsidies for ethanol in 2006 were somewhere between $5.1... MORE

China and India

Cross-country Comparisons
Arnold Kling
In the February 12 issue of National Review, not yet available on line, John O'Sullivan writes, Several estimates suggest that China, India, and the U.S. will between them account--and roughly account equally--for three-quarters of world GDP by mid-century...The same estimates...show... MORE

Sounds Right to Me

Tax Reform
Arnold Kling
Ramesh Ponnuru writes, What they're saying is that, yes, expensive health plans would be taxed more [under the recent Bush health proposal]. But people would respond to the new policy by scaling back their health plans. Thus they’d avoid the... MORE

Dysculturation?

Growth: Causal Factors
Bryan Caplan
Claims about dysgenics usually quickly degenerate into a big debate about nature vs. nurture. Steve Sailer interestingly argues that both sides are missing the deeper point: It's important to realize that for evaluating the likelihood of Idiocracy or Freakonomics, it... MORE

Milton Friedman Day

Political Economy
Arnold Kling
Today is Milton Friedman day. More information is here My little contribution is this essay. I call this the Fundamental Problem of Political Economy. How do we limit the power that idiots have over us? One solution, that might be... MORE

Building a Better Idiot

Economics and Culture
Bryan Caplan
Let me join Tyler and Steve Sailer in recommending the very funny Idiocracy. If you're interested in intelligence research and/or behavioral genetics and have a sense of humor, you'll have a big smile on your face. I know I did.... MORE

Soon after the first Iraq torture scandal, I remember a pompous politician declaring (more or less) that "The reason why we don't torture prisoners is so American soldiers don't get tortured." Whatever you think about torture, this argument seems underwhelming.... MORE

Hanson's Mistake: Facts, Values, and Experts

Behavioral Economics and Rationality
Bryan Caplan
Robin Hanson begins his health econ class with a heavy dose of disillusion: I teach Health Economics starting today, and every year I start with data assuring students that learning data will not change their health policy opinions. He cites... MORE

Brad DeLong on Health Care

Economics of Health Care
Arnold Kling
He writes, Our irresistible force is our belief that health care should not be rationed by price. Our immovable object is the unwillingness of American taxpayers to be turned into an IV drip bag for the health sector that the... MORE

The Internet, Punditry, and Scholarship

Information Goods, Intellectual Property
Arnold Kling
My latest essay includes an analysis of the comparative advantage that I have using the Internet. The Net boosts my salience the most. In an environment where what counts is reaction time, I do well. Hal Varian does the "worst"... MORE

Health Care Conversation Winds Down

Economics of Health Care
Arnold Kling
The Cato Unbound discussion of health insurance in which I participated has wound down. Here is a snippet from Jonathan Cohn's last post. Programs exclusively for poor people tend to be poor (because they lack powerful political constituencies)... Now, conservatives... MORE

Economists who support the minimum wage realize that it is - at best - a small transfer. Why do they keep focusing on it? A common answer: The minimum wage has symbolic value. Here are two of Klein's respondents: A... MORE

An Economist or a Public Intellectual?

Economic Methods
Arnold Kling
Now that we know that an economist is someone who is honest and a public intellectual is someone who is not, suppose we were to read the following. We have data on the real income—that is, income adjusted for inflation—of... MORE

Multiple Choice

Political Economy
Arnold Kling
[2] once wrote, While [1]'s theoretical work is universally admired by professional economists, there's much more ambivalence about his policy pronouncements and especially his popularizing. And it must be said that there were some serious questions about his intellectual honesty... MORE

Speaking of Rising Inequality

Income Distribution
Arnold Kling
Tyler Cowen's NYT column today is a must read. In general, there is more income inequality among older populations than among younger populations, if only because older people have had more time to experience rising or falling fortunes. Furthermore, more-educated... MORE

CEO Pay and Market Signals

Income Distribution
Arnold Kling
Bruce Bartlett writes (from behind the NYTimeSelect firewall, unfortunately), [Alan] Reynolds has been criticized for making too much of inherent limitations in the data that have been known for many years and for ignoring evidence that conflicts with his thesis.... MORE

Energy Diversification

Energy, Environment, Resources
Arnold Kling
I thought that the most disagreeable part of the Bush State of the Union Address was on energy. If you want to reduce gasoline consumption by 20 percent, then join the Pigou club and tax gasoline. If you assume that... MORE

I second Arnold's recommendation of the Klein-Dompe piece. Dan Klein is probably the greatest intellectual entrepreneur I know. Who else would see a petition to raise the minimum wage and think "Wow, what an opportunity to write a fascinating article"?... MORE

Economists for a Higher Minimum Wage

Labor Market
Arnold Kling
Daniel B. Klein and Stewart Dompe want to know why some economists favor raising the minimum wage. Here is one example: Arindrajit Dube: Increased income (and reduced inequality) has broad effects throughout society and polity; this includes (but is not... MORE

Print More Euros

Optimum Currency Areas
Arnold Kling
Bryan's Euro Bet gets discussed in the Economist blog. There are real issues with the euro; its member states are far from an optimal currency zone, and the problem will only get worse as more members are added (if they... MORE

The Bush Health Plan

Economics of Health Care
Arnold Kling
I write, Consider the status quo. An economist on the faculty at Princeton who receives generous health benefits from the University is able to enjoy them tax-free. So can the professor's secretary. But, as with all tax breaks, there is... MORE

Beating the Odds: Why Do People Insist on Even Bets?

Behavioral Economics and Rationality
Bryan Caplan
"I'm sure that a Democrat will win in 2008." "Sure? OK, let's bet at 100:1." "Umm, no thanks. But I'll do it for even odds." I've had a bunch of conversations like this. Someone proclaims to know the future with... MORE

Tyrone Posts on Health Care

Economics of Health Care
Arnold Kling
Jonathan Zasloff writes Bush plans to pay for [his proposed health insurance deduction] not by efficiencies, but rather by restricting the benefit packages of the already insured, through the deductibility cap. Paying for something with efficiencies is nothing but a... MORE

Euro Bet

Macroeconomics
Bryan Caplan
I made a wager this weekend while I was at a Liberty Fund conference in Chicago. Fellow participant Jeremy Rabkin of Cornell made quite a few predictions about the non-future of the EU that struck me as overconfident. When he... MORE

Reality-Based Retirement Club

Social Security
Arnold Kling
In an audio file, Russ Roberts interviews Greg Mankiw. Toward the end, Mankiw endorses raising the retirement age for entitlements--what I call the age of government dependency. Welcome to the yet un-named club! (not that Mankiw's membership is new). My... MORE

Thoughts on Education

Economics of Education
Arnold Kling
In this essay, I pull together thoughts on education, based on my reaction to Charles Murray's recent op-eds. He tends to treat IQ as if it were a measure of one's capacity to hold knowledge, like the volume of a... MORE

Milton Friedman, Hated Conservative

Cross-country Comparisons
Arnold Kling
Shortly before he died, Milton Friedman gave the Wall Street Journal an email interview. China has maintained political and human collectivism while gradually freeing the economic market. This has so far been very successful but is heading for a clash,... MORE

Measuring Corruption

Growth: Causal Factors
Arnold Kling
Ben Muse has a useful post that links to several measures of corruption. For example, according to Transparency International, the best scoring countries are Finland, Iceland, and New Zealand. The worst are Iraq, Myanmar, and Haiti. The U.S. is 20th.... MORE

Colombia's Natural State?

Institutional Economics
Arnold Kling
The New York Times reports on Colombia, The government of President Álvaro Uribe, the largest recipient of American aid outside the Middle East, has found itself ensnared in a widening scandal as revelations surface of a secret alliance between some... MORE

Capping a Bad Tax Break

Economics of Health Care
Arnold Kling
Greg Mankiw points to a story about a health policy proposal under consideration by President Bush. Bush's health-care proposal would use tax breaks to make it easier for people who do not have employer-provided health insurance to buy coverage on... MORE

The Case Against Tax Breaks

Tax Reform
Arnold Kling
Maya MacGuineas writes, Most tax expenditures are really spending programs designed to look like tax cuts. Picture them as vouchers for healthcare, mortgage payments, daycare, transportation -- name the tax break. Dressing these programs up as tax cuts makes them... MORE

While I was considering an offer to teach intermediate macro, I thought about how I would do it. I would teach it in history-of-thought terms, showing how ideas grew out of the context of their times. 1. 1920's Hyperinflations--the first... MORE

Kevin Drum's Turkish Bazaar

Economics of Health Care
Arnold Kling
He accuses Arnold Kling, who thinks the healthcare biz need less insurance and more free market capitalism in order to drive down costs and force people to buy only the care they need. I doubt it. More likely it would... MORE

Public School Choice

Economics of Education
Arnold Kling
Reihan Salam writes, To understand why Mike Bloomberg's latest round of proposed school reforms is so bloody brilliant, read Lisa Snell on the weighted student formula. The New York Sun points out that WSF bears a faint resemblance to a... MORE

The Free-Market Agenda

Politics and Economics
Arnold Kling
In this essay, I say that it should be 1. Increase the proportion of children who are schooled outside of the public school system. 2. Increase the proportion of health care spending that is paid for directly by consumers. 3.... MORE

Calhoun's Defense of Poland's Unanimity Rule

Economic History
Bryan Caplan
Historians have a standard story about the partition of Poland in the 18th century: Poland was unable to defend itself effectively because it had a crazy unanimity rule that gave every nobleman a veto over everything. Seems plausible. But yesterday... MORE

Is Economics All About Scarcity?

Economic Education
Arnold Kling
Michael Mandel says no. Proposed definition: Economics is the study of the functioning--and malfunctioning--of the economy, with the aim of improving living standards My justification for a different definition is that there are big chunks of the economy where scarcity... MORE

Global Warming Heretics

Energy, Environment, Resources
Arnold Kling
Robert M. Carter, et al write, peer review is both too inbred and insufficiently thorough to serve any audit purpose, which we believe is now essential for science studies that are to be used to drive trillion-dollar policies. The authors... MORE

Health Care Celebrity Death Match

Economics of Health Care
Arnold Kling
The Cato Unbound issue on health care has reached the rebuttal stage. I write, ...So I agree with Holt's diagnosis, that health care providers have too much political power. But his prescription–to put more of the health care system under... MORE

Name This Club

Social Security
Arnold Kling
Greg Mankiw crows that Robert Samuelson has joined the Pigou Club, calling for an energy tax. I would crow because Samuelson writes, Raise the eligibility ages for Social Security and Medicare gradually to 70 by 2029. At 65, people would... MORE

Tightwadism

Behavioral Economics and Rationality
Arnold Kling
Referred by John Tierney (yet another new blog!), I took the survey put up by George Loewenstein and others on whether you are a tightwad or a spendthrift. People who think of themselves as either tightwads or spendthrifts supposedly are... MORE

Charles Murray on Education

Economics of Education
Arnold Kling
He writes, it makes sense for only about 15% of the population, 25% if one stretches it, to get a college education. And yet more than 45% of recent high school graduates enroll in four-year colleges... No data that I... MORE

The Philosophy of Introspection

Economic Philosophy
Bryan Caplan
I've long claimed that economists undervalue introspection. Now Tyler is giving opponents of introspection some new excuses for ignoring it, and ends with: Will Bryan Caplan take the bait and present his argument that such studies are a priori false... MORE

Two Blogs on Business Economics

Business Economics
Arnold Kling
Organizations and Markets looks interesting, although the most stimulating posts are coming from a guest blogger, Steven Postrel. For example, It turns out that the main reason why upstream specialist A needs to know something about downstream specialty B is... MORE

Guaranteed Health Care

Economics of Health Care
Arnold Kling
Jacob S. Hacker writes, If one word captures the essence of Health Care for America, it is "guaranteed." Health Care for America would guarantee coverage; it would guarantee a generous package of benefits; it would guarantee greater choice; and it... MORE

Why Company Health Clinics?

Economics of Health Care
Arnold Kling
James Miller notes a New York Times story on corporations setting up in-house health clinics. Miller comments, Much of economic growth comes from specializing. Whatever is requiring firms such as Pepsi to "unspecialize" by providing health care is greatly harming... MORE

Modern Institutions and Civil Society

Institutional Economics
Arnold Kling
Following some recent essays of mine, readers Michael Lotus and James Bennett recommend this chapter by Alan MacFarlane. Human life can for convenience be divided into four major spheres, the pursuit of power (politics), the pursuit of wealth (economics), the... MORE

A Gem for the World's Econo-Cartophiles

Growth: Causal Factors
Bryan Caplan
I've loved maps since I was a small child, but I've never seen one like this before. Neat.... MORE

The Incomparable Hanson

Economic Philosophy
Bryan Caplan
Here is one of the most original philosophical examples I've read in years. It starts: Imagine you are walking in the wild and come across what looks like a big rock painted with the following words: I may look like... MORE

Consensus on Roosevelt Fast Approaching

Economic History
Bryan Caplan
Daniel Gross says Roosevelt was better than Hitler, Stalin, and Mussolini. I agree. This does raise the interesting point that given world conditions for investors, the U.S. should have been able to do really well without really trying. Instead it... MORE

Premium Medicine, Illustrated

Economics of Health Care
Arnold Kling
The Wall Street Journal reports, As doctors studied the course of treatment of dozens of patients at Virginia Mason's spine clinic, it was clear no standard procedures were being followed. Though Virginia Mason physicians are salaried and have no direct... MORE

Suppose most economists believe that "Libertarian economists can't do math," and that, on average, they are correct. How does this affect libertarian economists' incentive to learn math? You could say that this stereotype will be self-fulfilling. If everyone assumes that... MORE

Moral and Mental Development

Growth: Causal Factors
Arnold Kling
From my latest essay: As we get wealthier, we also become enhanced physically, cognitively, and morally, leading to a virtuous cycle of improvements to the standard of living. As the economy improves, human cognitive ability and moral reasoning improves, which... MORE

American Mugabe?

Economic History
Bryan Caplan
Brad thinks it's a little crazy for me to compare Roosevelt to Mugabe: To get to somebody willing to argue that the entire New Deal taken as a whole made things worse, you have to go to somebody like Arnold's... MORE

Normal Criticism of the New Deal

Economic History
Bryan Caplan
Brad DeLong's of course right that I'm not normal. At the same time, he's backed off enough that I wonder if he'd put himself in the same boat as two normal guys with negative things to say about the New... MORE

The Immigration Indicator

Cross-country Comparisons
Arnold Kling
Henrik Rasmussen writes, estimates of Danes living in London vary between 35,000 and 70,000, which is roughly 1% of the total Danish population of 5.4 million. According to the leading Copenhagen business daily Børsen, the average income of these Danish... MORE

Negotiating Drug Prices

Economics of Health Care
Arnold Kling
A CBO report says, A chain pharmacy usually dispenses prescriptions as written by the physician for brand-name drugs under patent protection; so even though a chain pharmacy may buy a large volume of brand-name drugs under patent protection, it generally... MORE

What Was the New Deal?

Economic History
Arnold Kling
Reading Brad DeLong's latest word on the subject, I find that we seem to agree on the economics, but perhaps not on the history. We both like Roosevelt's policies of going off the gold standard and providing deposit insurance. Where... MORE

Roosevelt's Law of Tooth and Claw

Economic History
Bryan Caplan
Hamilton and Arnold are making a lot of sense. On the negatives of the New Deal, though, it's also worth pointing out how scary Roosevelt's policies and populist rhetoric were to business. If I were a potential investor in 1933,... MORE

The New Deal and the Great Depression

Economic History
Arnold Kling
James Hamilton writes, The notion that if we can just create more monopoly power for every single sector of the economy, encouraging every sector to produce less so they can raise their wages and prices, that we will then somehow... MORE

What Kind of Global Warming Skeptic?

Energy, Environment, Resources
Arnold Kling
'Jane Galt' writes, As I read it, the Stern Report basically assumes that there are low diminishing returns to income (it sets the elasticity of marginal utility of consumption, or η, to 1). It strikes me as odd to see... MORE

And a Child Shall Lead Them

Economics and Culture
Bryan Caplan
Over vacation, we stayed with my brother's family at his cabin in Lake Arrowhead. In this slightly cramped space, my brother and I kept trying to watch the extended cut of Gladiator. Unfortunately, my four-year-old sons kept trying to watch... MORE

The China Example

Institutional Economics
Arnold Kling
Will Hutton writes, My hypothesis when I began was that China was so different that it could carry on adapting its model, living without democracy or European enlightenment values. I have changed my mind and now see more clearly than... MORE

WIN and the PBC

Macroeconomics
Bryan Caplan
I'm too young to remember, but my memory still instantly links Ford with his risible "Whip Inflation Now" (WIN) buttons. The same memory inspires James Hamilton to write an inspired account of the famed Burns-Nixon Political Business Cycle (PBC). I... MORE

Bastiat Lives At Cafe Hayek

Regulation and Subsidies
Bryan Caplan
Don and Russ continue their Herculean effort to make economics too clear not to understand. The latest gems: Don on protectionist anecdotes: But I wonder how many of these people would accept the following line of argument: Researcher Jones, like... MORE

Why Does Homelessness Persist in Rich Liberal Cities?

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
During my stay in SoCal, a surprising thought kept returning to me: Why hasn't government solved the problem of homelessness? I know this question seems out of character. But I not saying that government should solve the problem of homelessness;... MORE

90 Percent Lack Health Insurance

Economics of Health Care
Arnold Kling
In this essay, I start by suggesting that hardly anyone has health insurance. The health coverage most Americans have is what I call “insulation,” not insurance. Rather than insuring them against risk, most families’ health plans insulate them from paying... MORE

Applying Douglass North, et al to Iraq and China

Institutional Economics
Arnold Kling
In this essay, I elaborate on the new paper by North, Wallis, and Weingast that I first posted on last week. In the essay, I write, I would say that there is no chance that the United States will succeed... MORE

If this doesn't make you laugh out loud, what will?... MORE

Million Dollar Babies: Economic Fact versus Popular Fancy in L.A.

Behavioral Economics and Rationality
Bryan Caplan
I just got back from another vacation in Los Angeles. As they say, it's a "city of contrasts," but the most interesting contrast is rarely mentioned. On the one hand, even pretty ordinary Angelenos - especially the elderly - reside... MORE

Me in the Economist

Behavioral Economics and Rationality
Bryan Caplan
I was surprised to learn that the Economist thought this little post deserved a broader audience: But as with any argument involving economists, there is more than one side to it. For one thing, many experiences demand a substantial outlay... MORE

AEA Meeting Papers

Macroeconomics
Arnold Kling
Here is the complete list. The ever-creative Nobel Laureate George Akerlof writes, —a realistic norm regarding consumption behavior will make consumption directly dependent on current income, in violation of the neutrality of consumption given wealth; —a realistic norm will make... MORE

Telling Bias Stories

Political Economy
Arnold Kling
Robin Hanson writes, Each side in a controversy feels a need to offer bias theories to explain why the other side disagrees. Without such bias theories, observers will wonder why they should side with one side against the other, if... MORE

The Pigou Club's Powerful Members

Energy, Environment, Resources
Arnold Kling
Ron Bailey writes, 77 percent of the world’s known oil reserves are in the hands of state-owned oil companies. Such “companies” do not respond with alacrity to market signals and so are under-investing in new production technologies and even in... MORE

Avoiding Truth

Political Economy
Arnold Kling
My latest essay says, The great mass of people form their political beliefs with little regard for facts or logic. However, the elites also have a strategy for avoiding truth. Elites form their political beliefs dogmatically, using their cleverness to... MORE

Schooling and Health

Economics of Health Care
Arnold Kling
Gina Kolata of the New York Times discusses research showing that staying in school longer tends to extend life. A key paper is by Adriana Lleras-Muney. Her approach to sorting out causality and confounding effects: between 1915 and 1939, at... MORE

Juntas vs. Open Societies

Institutional Economics
Arnold Kling
Douglass C. North, John Joseph Wallis, and Barry R. Weingast have a new paper, immodestly titled, "A Conceptual Framework for Interpreting Recorded Human History." I will excerpt from it in the extended entry. An earlier paper (from 2005) may be... MORE

An Idea only an Economist Could Love

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Dwight Lee writes, The suggested policy is straightforward. Simply give Americans the right to sell their citizenships to non-Americans, with the sellers having to leave the country and the buyers allowed to move in with all the rights and opportunities... MORE

Malcolm Gladwell on Enron

Business Economics
Arnold Kling
This story rings true with me. “There have been scandals in corporate history where people are really making stuff up, but this wasn’t a criminal enterprise of that kind,” [Yale law professor Jonathan] Macey says. “Enron was vanishingly close, in... MORE

A Faustian Bargain: Romania and Bulgaria Join the EU

International Trade
Bryan Caplan
One day I expect my sons to give me a grand tour of Romania. Thanks to their mom, grandparents, and company, my sons' Romanian is at least as good as their English. So I've got more than just an academic... MORE

Optimistic Prognoses

Growth: Consequences
Arnold Kling
Edge has a whole bunch of them. Jonathan Haidt says, The Baby Boomers Will Soon Retire I am optimistic about the future of social science research because the influence of the baby boom generation on the culture and agenda of... MORE

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