Bryan Caplan and David Henderson

November 2008

A Monthly Archive (118 entries)

Should We Penalize Liquidity Preference?

Finance: stocks, options, etc.
Arnold Kling
Greg Mankiw says that it is time to re-read Keynes, and Tyler Cowen is ready to take him up on it. One important Keynesian idea is liquidity preference. In textbooks, an increase in liquidity preference means that people want to... MORE

Why I Was Wrong

Finance: stocks, options, etc.
Arnold Kling
Did I fail to foresee the financial crisis? Absolutely. Brad DeLong gives some reasons that also go for me. I was "expecting," in the sense of anticipating that it was they were both likely enough and serious enough that public... MORE

Becker Embraces Unhappiness Research

Behavioral Economics and Rationality
Bryan Caplan
I don't know Gary Becker's stand on happiness research, but he clearly thinks that his fellow economists overlook the importance of unhappiness:Economists have underplayed the cost to individuals of mild to severe recessions in part because they have neglected the... MORE

An Ode to Speakers Corner (mocking the regulation of their public speakers' forum), Ode to Romancing Singapore (mocking the government's natalist campaign), and this cartoon mocking the government's use of security cameras:I've seen lots of political satire on professors' doors... MORE

Democracy in Singapore: How Is One-Party Rule Possible?

Cross-country Comparisons
Bryan Caplan
Americans often describe Singapore as a "dictatorship."  I've occasionally done so myself.  After further study, though, I've concluded that this view is simply wrong.  Singapore is a democracy in practice as well as theory.  Yes, the ruling People's Action Party... MORE

Singapore Gives Thanks

Cross-country Comparisons
Bryan Caplan
Here's my favorite plaque in all of Singapore, displayed on the Dalhousie Obelisk:Which reminds me: If you're sharing today's meal with a protectionist, remember that the best side dish for a turkey dinner is an oversized helping of economic education. ... MORE

Thanksgiving Thoughts

Growth: Consequences
David Henderson
I have two main thoughts to share this day. The first is personal. I have so much to be thankful for. When I think about growing up on the cold prairies in Canada and going to our neighbors' house to... MORE

Emperor, Clothes, etc.

Finance: stocks, options, etc.
Arnold Kling
Richard Dale writes, thousands of finance research papers are published each year, and yet there have been few if any warnings from the academic community of the incendiary potential of global financial markets. Is it too harsh to conclude that... MORE

Letter of Law, Spirit of Law

Finance: stocks, options, etc.
Arnold Kling
George Packer writes, The moral code of these Wall Street executives corresponds to stage one of Lawrence Kohlberg's famous stages of morality: "The concern is with what authorities permit and punish." Morally, they are very young children. The Swiss bankers... MORE

Different Forms of Government

Political Economy
Arnold Kling
Responding to Bryan, Will Wilkinson writes, bureaucrats in a technocracy will be motivated to explore ideas, while bureaucrats in a democracy will be motivated to signal and recruit fidelity to the coalition's pre-assigned ideas. The point is that a country... MORE

Roderick Long and the Tiny Gnomes from Neptune

Political Economy
Bryan Caplan
When I was flying to Singapore I kept thinking about Roderick Long's Cato Unbound piece on "Corporations versus the Market."  Now that I've returned, I see there's been a ridiculously lively followup discussion.  I'm sorry to have missed it, but... MORE

When You're in a Hole, Keep Digging

Fiscal Policy
Arnold Kling
Mike Shedlock writes, New Jersey is $60 billion in the hole on pension funding and the Governor is planning on skipping payments in a "pension payment holiday" until 2012 so as to not increase property taxes. Considering that the pension... MORE

Here's a question that got a big laugh around a Singaporean lunch table: "So, do most people here support Electronic Road Pricing?"  Not on your life!  If you want to see how S'poreans really feel about ERP, check out this... MORE

Notes on McArdle's Law

Finance: stocks, options, etc.
Arnold Kling
The theory that in a financial panic people demand too much risk protection is one possible explanation of what I like to call McArdle's Law, namely "Money is weird. Finance is weird." In contrast, I quoted Hall and Woodward to... MORE

Singapore: Where Do I Start?

Cross-country Comparisons
Bryan Caplan
If you'll forgive the allusion, I tempted to open with "I've seen the future, and it works!"  But the quote is apt: If Asia stays on course for the next three decades, China will be a massive version of Singapore... MORE

A Theory of Financial Panic

Finance: stocks, options, etc.
Arnold Kling
Ricardo Caballero and Arvind Krishnamurthy write, Knightian uncertainty generates a sort of double- (or more) counting problem, where scarce capital is wasted insuring against impossible events. Read the whole thing. Of course, Mark Thoma found it. The article provides a... MORE

Book Forum

Upcoming Events
Arnold Kling
Russ Roberts will talk about The Price of Everything at a Cato book forum next Monday at noon. It's an economics novel, and I think it is terrific. I don't know how he will handle the book forum (presumably, he... MORE

Do I Get a Prize?

Finance: stocks, options, etc.
Arnold Kling
Yesterday, I wrote, The [government] should also buy debt from Freddie Mac and Fannie Mae, because that debt still trades at a risk premium relative to Treasuries, even though taxpayers are already on the hook for it. Today, the Federal... MORE

Talking Points on the Obama Economic Team

Finance: stocks, options, etc.
Arnold Kling
For a possible appearance on a Richmond radio program this morning. --best academic credentials of any economic team in history. Focused on economic growth, not redistribution, suggesting that Obama shares that focus and takes economic policy very seriously --Larry Summers... MORE

Recommended Reading on the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Just for fun, Felix Salmon's take on Citicorp management. I would make a similar criticism of the Freddie Mac CEO during the 2003-2008 period. But from the larger systemic perspective, is bad management really an exogenous variable? Or is it... MORE

Summers on Unemployment Benefits

Labor Market
David Henderson
On today's Forbes.com, I have a piece titled, "Has Bush Heard of Bastiat?" Forbes chose the title, but I think it's a good one. And I'm willing to bet dollars to doughnuts that Bush hasn't heard of Bastiat. I wouldn't... MORE

Heretical Thoughts

Finance: stocks, options, etc.
Arnold Kling
James Hamilton writes The Fed has been trying to sop up the illiquid assets that nobody else wants. But I think what the Fed should be doing is instead acquiring assets of a type that would allow it to quickly... MORE

My Understanding of TIPS

Finance: stocks, options, etc.
Arnold Kling
There has been a lot of commentary concerning Treasury Inflation-Protected Securities. One alleged anomaly is that the 10-year bond that expires on January 15 is reported to have a double-digit yield. How can that happen? The overall return on a... MORE

Depression Mania

Finance: stocks, options, etc.
Arnold Kling
Mark Thoma has a roundup of commentary on the Citigroup bailout. I'll add a few thoughts. 1. For all of the Depression Mania, there is a lot of the U.S. economy that does not have to shrink. Manufacturing is pretty... MORE

This lecture looks at private monetary instruments and their relationship to government monetary instruments.... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
A lot of these pointers come from Mark Thoma. Problems in the UK, Uncertainty caused by regulators, another breathless WaPo expose of deregulation.... MORE

Cowen on Great Depression

Economic History
David Henderson
I work as little as possible on my birthday (November 21), which is why I didn't post yesterday. Tyler Cowen's column in yesterday's New York Times is excellent and I want to note some highlights, with my additional thoughts, and... MORE

The Origins of Money

Economic History
Arnold Kling
In contrast to my militaristic account, we have Nick Szabo: Local but extremely valuable trade was, this essay argues, made possible among many cultures by the advent of collectibles, by the time of the Upper Paleolithic. Collectibles substituted for otherwise... MORE

Fight!

Finance: stocks, options, etc.
Arnold Kling
Richard Green writes, depositories are not capable of holding long-term fixed-rate mortgages, because it subjects them to too much duration risk: mortgages are assets with long duration (i.e., have values that are sensitive to changes in interest rates), while deposits... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
negative interest rates; FDIC thoughts on the housing bubble in 2004; Cecilia Rouse over Austan Goolsbee?; Greg Mankiw's Macro Quiz... MORE

Is Zero a Lower Bound for Interest Rates?

Monetary Policy
Arnold Kling
Suppose that the Federal Funds rate falls to zero. Does that mean that we are in the infamous liquidity trap, in which the Fed is powerless to use open market operations to affect the economy? I think not, and I'm... MORE

Incentive Ceiling

Price Controls
David Henderson
As someone who has taught economics for 28 of the last 33 years, I thought I had pretty much seen everything a student could come up with in an introductory course in which the issue was rent control. What I'm... MORE

Lectures on Macroeconomics, No. 7

Macroeconomics
Arnold Kling
With this lecture, I start to look at the second great puzzle of macroeconomics. How does the financial sector affect the real economy? Before one can answer that question one needs to examine the fundamental role of money and credit.... MORE

Do Financial CEO's Have Enough Down Side?

Finance: stocks, options, etc.
Arnold Kling
Megan McArdle says yes. If all people cared about was avoiding the possibility of outright starvation, then Sweden would be a country of wild risk-takers and epic slackers. And indeed, on the margin, there are people who don't bother to... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Start with Markus K. Brunnermeier. While the overall mortgage losses are large on an absolute scale, they are still relatively modest compared to the destruction of about $8 trillion in stock market wealth that occurred in the period from October... MORE

Off the Record

Finance: stocks, options, etc.
Arnold Kling
Yesterday evening, I attended a panel discussion on the financial crisis. The ground rules were that the discussion was off the record, which I will interpret as allowing me to comment on the content of the discussion, without disclosing who... MORE

Insider Trading

Finance
David Henderson
The news that the feds are charging Mark Cuban with "insider trading" raises an interesting issue: what's wrong with insider trading? You might think it's obvious. If so, read the articles on insider trading in the 1st and 2nd editions... MORE

Housing Bubble: Who Knew?

Finance: stocks, options, etc.
Arnold Kling
According to the Wall Street Journal real-time economics blog, A Factiva search of the top 50 newspapers in the U.S. returns 268 stories referring to a housing or real-estate bubble in 2003. In 2004 that number increases to 369 and... MORE

Thoughts on Financial Regulation

Finance: stocks, options, etc.
Arnold Kling
from Andrew Lo. The functional approach to studying financial institutions and regulation begins with the observation that there are six functions of the financial system--a payments system, a pooling mechanism for undertaking large-scale investments, resource transfer across time and space,... MORE

Nozick--An Appreciation

Economic Philosophy
David Henderson
Over on "The Austrian Economists," Peter Boettke writes an appreciation of the late Robert Nozick, who would have turned 70 on November 16. The title Pete gave it has caused most commenters to focus on Nozick's smarts, but Pete's appreciation... MORE

George Selgin on Free Banking

Finance: stocks, options, etc.
Arnold Kling
He talks with Russ Roberts, who asks skeptical questions. Selgin thinks that one can have sound unregulated, uninsured banking without reserve requirements of 100 percent. He thinks that bank owners need to have significant capital at risk. Once upon a... MORE

The New Football Czar

Regulation
David Henderson
On CBS's "60 Minutes" this evening, almost the whole time was devoted to an interview with Barack and Michelle Obama. They are an incredibly charming couple and it's hard not to like them, especially him. But at the end, interviewer... MORE

Metaphors for Financial Reform

Finance: stocks, options, etc.
Arnold Kling
It occurs to me that one way to think of people's views on financial regulatory reform is to treat people as using one or more of the following three metaphors: 1. Machismo Those who are driven by this metaphor think... MORE

Department of Financial Security

Finance: stocks, options, etc.
Arnold Kling
The Washington Post gives a generous portion of its Sunday editorial section to Eliot Spitzer. Today's balkanized regulatory framework for financial services no longer matches in any way the needs of a fully integrated global financial system. The divisions of... MORE

Easterly on Collier and Correlation

Growth: Causal Factors
Arnold Kling
Reviewing Paul Collier's The Bottom Billion, William Easterly writes, Collier comes perilously close to another statistical fallacy known as selection bias. He chose the countries that belong to his Bottom Billion on the basis of their poverty today, and then... MORE

Seminar in Portland

Trade Barriers
David Henderson
Next Saturday, November 22, I will be giving two talks at the 18th Annual Freedom Seminar in Portland, Oregon. My two talks are titled, "The Case for Free Trade and Against Barrierism" and "The Paulson Bailout: Bush's Road to Serfdom."... MORE

Why Credit Default Swaps?

Finance: stocks, options, etc.
Arnold Kling
I have argued that credit default swaps are fatally flawed because there is no natural seller. One commenter on this post asked, then, Has Arnold gone into detail on why CDSs exist? I understand his point that they have no... MORE

Devil Says "Sin Less"

Regulation
David Henderson
That should have been the headline on George W. Bush's op/ed in today's Wall Street Journal. The title the Journal gave it is "The Surest Path Back to Prosperity." And the decline (that's the line underneath the title that sums... MORE

From the Cutting Room Floor: The Rationality of Donors

Behavioral Economics and Rationality
Bryan Caplan
And here's a scene about the rationality of charitable donors, inspired in part by Landsburg's "giving your all" theorem: d.  Charitable GivingBennett and DiLorenzo (1994) argue that due to donors' rational ignorance, the market for charitable giving works poorly.  But... MORE

From the Cutting Room Floor: The Rationality of Juries

Behavioral Economics and Rationality
Bryan Caplan
The earliest draft of "Rational Ignorance vs. Rational Irrationality," (2001. Kyklos 54, pp. 3-26) was unpublishably long.  Here's one of my favorite "deleted scenes": e.  JuriesAnglo-American rules of evidence [almost] explicitly assume that jurors are not rational.  Judges weigh information's... MORE

What Would Robin Hanson Say?

Economics of Health Care
Arnold Kling
Sally Satel writes, About one in two American doctors say they prescribe placebos to their patients, and more than two-thirds believe it permissible to do so, according to a new study from the National Institutes of Health. Nortin Hadler believes... MORE

Ten Minutes, Eleven Questions

Finance: stocks, options, etc.
Arnold Kling
I have been invited to speak for ten minutes on the financial crisis. As you will see below, I do not agree so much with President Bush (via Mankiw). Unlike the President, I see no benefit in putting credit default... MORE

Quoting Will

Political Economy
Arnold Kling
Wilkinson, that is: We're going to get lectured a lot-probably by many of the same twenty-five year olds who have invested heavily in home decor featuring presidential power porn-on how the failure of this or that is due to a... MORE

Finance is Weird

Finance: stocks, options, etc.
Arnold Kling
James Kwak of Baseline Scenario wrote, The problems in the U.S. housing market were not themselves big enough to generate the current financial crisis... without any fundamental changes, the markets decided that AIG might be at risk, and the fear... MORE

The Lorelai Paradox

Family Economics
Bryan Caplan
Last night my wife and I finished the final episode of the final season of Gilmore Girls.  If you haven't heard of it, it's a dramedy about a free-spirited single mom, Lorelai, and her studious daughter, Rory.  Since they're only... MORE

Here's James Hamilton at his most dismissive:Some of my colleagues still talk of the possibility of a liquidity trap, in which the central bank supposedly has no power even to cause inflation. Their theory is that interest rates fall so... MORE

How Are Stocks Like Bonds?

Finance: stocks, options, etc.
Bryan Caplan
From John Cochrane:The standard portfolio rule says that your stock percentage should rise with the expected return (stocks and bonds) divided by squared return volatility. So, if you were happy with a 50/50 portfolio with an expected return of 7%... MORE

Size of School Districts

Economics of Education
Arnold Kling
Joshua Bordoff, Jason Bendor, andn Jason Furman wrote, Smaller school districts may also be more efficient (Barrow and Rouse 2002, p. 29, Fowler and Walbert 1991). This may result from the difficulties in dealing with a large organization that may... MORE

Truth and Narrative

Finance: stocks, options, etc.
Arnold Kling
Consider two propositions: 1. Market failure is inevitable. 2. Government failure is inevitable. In talking about the financial crisis, I believe that to speak the truth one has to accept both propositions. Most people prefer narrative, which either explicitly or... MORE

When Do You Disbelieve a "Change of Heart"?

Behavioral Economics and Rationality
Bryan Caplan
When a Nazi announces that he's had a change of heart, I just don't believe him.  Take the infamous David Duke.  In his youth, he wore a swastika.  Now he has a book that's subtitled a "path to racial understanding." ... MORE

Lectures on Macroeconomics, No. 6

Labor Market
Arnold Kling
The main theme of this lecture is economic policy and labor market adjustment. My conjecture is that in our post-industrial economy, conventional Keynesian policies do not operate as they do in an industrial economy. Another issue is that the natural... MORE

Central Planning in World War II

Central Planning vs. Local Knowledge
David Henderson
In my Veteans Day tribute to economist Richard Timberlake yesterday, I highlighted his experiences in World War II as a pilot of a B-17 bomber. I didn't mention his economic insights in his book, They Never Saw Me Then, because... MORE

Hoover Blasts His Opponents

Economic History
Bryan Caplan
You've heard what Hoover said in his own defense on November 5, 1932.  What did he say about his opponents?  His lead-in:I would again call your attention to the fact that with the Democratic victory in congressional elections of 1930,... MORE

"The American Disease": View from 1989

Cross-country Comparisons
Bryan Caplan
Here's a striking paragraph from 1989:It was in Singapore that I first heard of the "American Disease," a primary symptom of which is living beyond one's means. A significant dimension of this pathology often is a slowing of productivity gains.... MORE

Your Defined Benefits = My Obligations?

Finance: stocks, options, etc.
Arnold Kling
The Associated Press reports, Under the law, companies facing shortfalls must bring their plans up to full funding over the next seven years. Those that fall short will be forced to take steps such as freezing the accrual of new... MORE

Bootleggers, Baptists, and Minorities

Political Economy
Arnold Kling
The new issue of Cato Unbound promises to be interesting. It starts with an essay by Roderick Long. because corporate power and the free market are actually antithetical; genuine competition is big business's worst nightmare. But also, in all too... MORE

Must-Read from Michael Lewis

Finance: stocks, options, etc.
Arnold Kling
Self-recommending, as Tyler would say. Lewis profiles someone who bet against subprime loans. Although you really must drop everything to go read the whole thing, here is one tidbit: Next, the baby nurse he'd hired back in 1997 to take... MORE

For Future Reference

Finance: stocks, options, etc.
Arnold Kling
Megan McArdle writes Money is weird. Finance is weird. There is no other industry that is, first, so tightly coupled, and second, severely affects every other industry in the country. She Is trying to ward off cognitive dissonance over the... MORE

Lectures on Macroeconomics, No. 5

Macroeconomics
Arnold Kling
So far, I have focused on unemployment as a problem of adjustment. In this essay, I review the history of the Dotcom recession, and I focus on the index of aggregate hours worked as an indicator of macroeconomic performance. According... MORE

Hoover Sings His Own Praises

Economic History
Bryan Caplan
Murray Rothbard opened my eyes to the real story about Herbert Hoover, but his quotation splicing makes me wince.  In my next two posts, I'm going to dissect one of Hoover's last major speeches before the 1932 election - his... MORE

Mr. Caplan Goes to Singapore

Upcoming Events
Bryan Caplan
I leave for Singapore on Saturday.  I will be giving two public lectures there on Tuesday, 11/18:A seminar on The Myth of the Rational Voter at the Civil Service College from 9:30 to 11:30 AM.A lecture on Selfish Reasons to... MORE

Lectures on Macroeconomics, No. 4

Labor Market
Arnold Kling
This lecture covers an important issue: why do firms adjust by cutting workers rather than by cutting wages?... MORE

Notes From the Bailout

Finance: stocks, options, etc.
Arnold Kling
Below are various links, including some that pertain to AIG. The government is eventually planning to sell the normal insurance lines of AIG. The proceeds from those sales then can be used to fund losses on the credit default swaps... MORE

What If I Were Dr. Doom?

Finance: stocks, options, etc.
Bryan Caplan
Nouriel Roubini says the market will fall another 20-25%, and advocates a bailout for U.S. automakers.  In fact, while he recognizes a line-drawing problem, he seems to favor a bailout for any firm that involves "systemic" risk.I wonder: If I... MORE

A Mortgage Fact Pack

Finance: stocks, options, etc.
Arnold Kling
From Freddie Mac. Lots of interesting stuff there, including a breakdown that says that over 15 percent of some of their riskiest loans are non-owner-occupied. See pl. 30. However, it is not clear that they have all of the risk... MORE

Twilight of the Twilight of the Gods

Economics and Culture
Bryan Caplan
I've been an opera fan for two decades, and I've never heard of macroeconomic events affecting the world of opera - until now.  The DC Opera is cancelling (or at least delaying) the American Ring:"Seven years ago, Washington National Opera... MORE

Dean Baker

Public Choice Theory
David Henderson
One of the more interesting economist bloggers on the left side of the spectrum is Dean Baker. He had an interesting post the other day. (Hat tip to Sheldon Richman.) Baker wrote: The [Washington] Post tells us how the people... MORE

The State of Conservatism

Political Economy
Arnold Kling
P. J. O.Rourke writes, The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate... MORE

Kling on Financial Markets

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts and I talk. We start with credit default swaps, and that may be a bit hard to follow. Then we get into broader issues of what I call the housing industrial policy and the purpose of the various... MORE

Lectures on Macroeconomics, No. 3

Labor Market
Arnold Kling
In this lecture, I get to the punch line and offer my explanation of unemployment. Markets are constantly in adjustment, with the number of people in different occupations changing. Usually, the task of adjustment and adaptation goes remarkably smoothly. Occasionally,... MORE

Lectures in Macro, No. 2

Macroeconomics
Arnold Kling
I continue to focus on the issue of unemployment. In this lecture, I want to emphasize two things. One is the problems with popular intuition that jobs are scarce. The other is the wide variety of jobs, and hence labor... MORE

Unpresidential Remarks

Fiscal Policy
Arnold Kling
Tyler Cowen writes, If our next president seems flip or overconfident, observers will be skeptical above all else. Tyler mostly talks about idea traps, a notion that I think of as Bryan's. Let me make some remarks that are sufficiently... MORE

Lectures in Macroeconomics, No. 1

Macroeconomics
Arnold Kling
These lectures will cover macroeconomics as I think it should be taught, not the way it is normally taught. The focus is not on model-building. The focus is on the two most troubling questions in macro. 1.How is it that... MORE

More on Autos

International Trade
David Henderson
My co-blogger Arnold has an excellent blog on the auto industry. There's more to say, though. Notice his first quote from Obama: The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce... MORE

The Economics of the Auto Industry

Fiscal Policy
Arnold Kling
President-elect Obama held a press conference yesterday. He said, in part, The auto industry is the backbone of American manufacturing and a critical part of our attempt to reduce our dependence on foreign oil. I would like to see the... MORE

Why the Left Should Not Forgive the American Voter

Behavioral Economics and Rationality
Bryan Caplan
Paul Krugman says that the American people just ended 14 years of monster rule.  If he's right, though, what does that say about the rationality of the American people?  I don't see how those who agree with Krugman could draw... MORE

A Plea for Facts

Finance: stocks, options, etc.
Arnold Kling
One of the reasons that I am worried about the economy is that I am seeing such a high ratio of sweeping proposals to hard facts. [UPDATE: At this discussion of the role of the Community Reinvestment Act in the... MORE

In Defense of Rationalist Clubs

Behavioral Economics and Rationality
Bryan Caplan
Inspired by Pascal Boyer's latest piece in Nature, Robin Hanson reminds us that he's a preacher's son:We feel a deep pleasure from realizing that we believe something in common with our friends, and different from most people.  We feel an... MORE

Tweak Cafe and Save Detroit

Regulation
David Henderson
My favorite writer/thinker at the Wall Street Journal, Holman Jenkins, had a marvelous article yesterday on how to save Detroit. His solution is to tweak CAFE standards. CAFE, you might recall, stands for Corporate Average Fuel Economy. Imposed by President... MORE

After the Election

Politics and Economics
Arnold Kling
Paul Krugman writes, for the past 14 years America's political life has been largely dominated by, well, monsters. ...Monsters like Dick Cheney, who saw 9/11 as an opportunity to start torturing people. You can see how mellow Krugman has become... MORE

Reminder--lunch with me on Monday

Upcoming Events
Arnold Kling
1 PM at the Lebanese Taverna in Silver Spring, Monday, November 10. It looks like we're getting a good response. If you haven't already, let me know in the comments if you are coming.... MORE

Peer Review as a Reputation System

Economic Methods
Arnold Kling
Many people reacted to my take-down of peer review, and at least one commenter asked, "Can you come up with something better?" Easily. The generic problem is something called "reputation systems."... MORE

Reword This Question

Behavioral Economics and Rationality
Bryan Caplan
A few weeks ago, Larry Bartels presented a new paper here arguing that governments around the world spend less than their citizens want.  Most of his evidence comes from the international ISSP survey, which asks:Listed below are various areas of... MORE

Compensation for Immigration

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
I've previously argued that if you're worried about the effect of immigration on the wages of low-skilled Americans, reducing immigration is overkill.  It is more efficient and humane to simply impose a surtax on immigrants, and use the revenue to... MORE

Trusting Scholarship

Economic Methods
Arnold Kling
Felix Salmon writes, one of the problems with such research is the way that it's presented to the public, through newspaper and magazine articles, or TED lectures, or the online dissemination of pre-pubication versions of papers. The stuff which gets... MORE

Probably even smarter - only physics, math, and c.s. have higher average GRE scores.  We even beat electrical engineers.  Sorry, dad, but facts are facts. :-)Nevertheless, the fact that economists are smart is much less important that the fact that... MORE

Hoover: The Myth of Free Trade

Economic History
Bryan Caplan
These days a lot of economists blame the Smoot-Hawley Tariff Act for worsening the Great Depression.  Herbert Hoover considered this hypothesis back in 1932 - and angrily rejected it.Note: When Hoover says "our opponents set up the Hawley-Smoot tariff bill,"... MORE

Why I am Paranoid

Fiscal Policy
Arnold Kling
Sovereign debt crises happen suddenly. One day, a country is paying normal interest rates and has full control over its fiscal and monetary policy. Then, investors lose confidence. Within days, the country has collapsed, and within weeks the savings of... MORE

Epicurus and Elections

Economic Philosophy
Bryan Caplan
If I let electoral results upset me, I would be miserable all the time.  No matter who wins, I lose, because I am light-years away from the views of virtually all electable politicians.Fortunately, I long ago achieved philosophical detachment.  I... MORE

The Pump, the Pension, and the Pain

Behavioral Economics and Rationality
Bryan Caplan
The financial crisis was a huge hit for practically everyone.  Even if you owned no stock - directly or indirectly - you're still on the hook for the bailout.  When the price of gas spiked, in contrast, the typical American... MORE

Life in a Banana Republic

Finance: stocks, options, etc.
Arnold Kling
A banana republic is a country where government obligations swamp total wealth. In a typical banana republic, wealthy individuals race to move their savings overseas to safe havens. Those who fail to do so will suffer from taxation, inflation, and... MORE

The Employee Suppression of Choice Act

Labor Market
David Henderson
Under current law, workers, to be represented, must vote in a secret ballot. The EFCA would give unions another way to monopolize a workplace: get a majority of workers to sign a card authorizing a union to represent them. This... MORE

Will Networks Blow It Again?

Politics and Economics
David Henderson
In the presidential election of 2000, all of the major networks but Fox News Channel blew it. Not by declaring Gore the winner too early or, later in the evening, Bush the winner too early. Those are predictions and you... MORE

Those Wild and Crazy Markets

Finance: stocks, options, etc.
Arnold Kling
Uwe Reinhardt writes, Iceland's problem, like that of the rest of the world, is rooted in the unquestioned belief in the free market doctrine that swept the world during the past two decades...Iceland's liberal government thought it was safe to... MORE

Voting

Behavioral Economics and Rationality
Arnold Kling
Will Wilkinson writes, I'm not voting today, but that's simply because I didn't change my registration when I moved. That's no excuse! Right in front of me in line was a man who was illiterate, spoke no English, and was... MORE

How McCain Could Have Won

Politics and Economics
Bryan Caplan
Yesterday my RA, Brian Blase, made the smartest point about political strategy that I've heard all year.  In fact, if Blase were McCain's right-hand man instead of mine, the Republican candidate's probability of victory would be about 40% instead of... MORE

Insurance or Mass Delusion?

Social Security
Arnold Kling
Robert Solow writes, It is plausible that a state-run universal social insurance system would be better able than a private company to detect and prevent exploitation of the system by malingerers. Maybe success would depend on the creation of a... MORE

Anti-Democratic Thought for the Day

Political Economy
Arnold Kling
From Patri Friedman. Only without political freedom can economic freedom thrive (see Hong Kong, Singapore). With political freedom (democracy) comes a welfare state and loss of economic freedom.... MORE

Walter Block, arguing against Bryan, says that fractional reserve banking is fraudulent. There is some chance that when you make your deposit you will not get your money back, and instead someone else will have taken title to it. Therefore,... MORE

Watch Walter Block Defend Common Sense, Part 2

Cross-country Comparisons
Bryan Caplan
This is truly insightful:[I]t has long been my experience that whenever any person reasonably but not fully sophisticated in economics sees the findings of these studies [of economic freedom], he invariably objects on the ground that his own country is... MORE

Watch Walter Block Defend Common Sense

Austrian Economics
Bryan Caplan
Seriously.  He shines in this response to Paul Craig Roberts on economic freedom indices.  Highlight:Then there is this entirely inept, misleading, and even insulting equation of the "American taxpayer's situation today with that a 19th century American slave."  Did you... MORE

Block and Me on FRB

Austrian Economics
Bryan Caplan
A little while back I had another email exchange with the tireless Walter Block.  The subject: The moral legitimacy of fractional reserve banking.  With my permission, Block has posted an edited version of our entire dialogue.  The highlight: Block asks... MORE

I recently relayed one of Murray Rothbard's great Herbert Hoover quotes.  When I was tracking the quote down, though, I noticed something weird in Rothbard's work.  The online 5th edition of Rothbard's America's Great Depression (p.187) states: "To portray the... MORE

Another Academic Panel on the Crisis

Finance: stocks, options, etc.
Arnold Kling
So many teach-ins. The one at Yale School of Management builds up to an interesting argument in the last half hour over mark-to-market accounting. In all of the teach-ins I've seen, this one generates the most actual debate. The link... MORE

Was Greenspan's Monetary Policy Too Loose?

Monetary Policy
David Henderson
We are not arguing that Greenspan's policies were perfect. Nor should anything that follows be construed as a defense of central banking or of the Federal Reserve. Particularly alarming is the way the lender-of-last-resort function has been expanding the moral-hazard... MORE

Future Scenarios for Economics

Economic Education
Arnold Kling
Tyler Cowen writes, The consulting incomes of finance economists will fall and fewer talented people will go into finance. Speaking fees will fall since fewer economists will give talks at hedge funds. The relative status of macroeconomists will rise and... MORE

Mortgage Securities and Porn Videos

Finance: stocks, options, etc.
Arnold Kling
Robert Shiller complains about groupthink among policymakers. He means that they didn't heed his warnings of a housing bubble. My complaint is about the groupthink that says we really, really must revive the mortgage securities industry. Instead, I suggest thinking... MORE

Numeracy Watch

Fiscal Policy
David Henderson
One factor in the poor reporting of economics is the innumeracy of many reporters. Most people have trouble getting big numbers straight--distinguishing millions from billions, for example. Unfortunately, so do many reporters, even those who report economic news. Today's New... MORE

Return to top