Bryan Caplan and David Henderson

January 2009

A Monthly Archive (138 entries)

Me on ABC-TV

Fiscal Policy
David Henderson
I was interviewed this afternoon by ABC-TV for Good Morning America. It will play tomorrow (Saturday) morning. Check your local listings. The issue was the "stimulus" package. I found the questions unusually good. We'll see what gets used.... MORE

Blame Others, Hurt Yourself

Behavioral Economics and Rationality
Bryan Caplan
I while back, I discussed some evidence that blaming people for your problems makes you feel worse about them:If and who you blame for bad events matters too. In one study, "[V]ictims of severe accidents who blamed themselves for the... MORE

What Does a Szaszian Therapist Do?

Behavioral Economics and Rationality
Bryan Caplan
I've occasionally said that if unicorns don't exist, we can't have a real argument about what unicorns are like.  But if that's right, how is Szaszian therapy possible?  How can you practice psychotherapy if you don't believe in the existence... MORE

The Power of Love

Economics and Culture
Bryan Caplan
[warning: spoiler] Big Love, HBOs transcendentally excellent polygamy drama, is back for its third season.  I've praised it often enough (here and here for starters), but the last show was too good not to blog.  In this episode, Don Embry,... MORE

Masonomists in the Media

Fiscal Policy
Arnold Kling
Ever wondered what Russ Roberts would do as President? He writes, I am recommending the elimination of the payroll tax... --Eliminating all corporate welfare. Corporate welfare rewards those corporations that excel at lobbying rather than serving their customers. Eliminating it... MORE

Reply to Robert Waldmann

Macroeconomics
Arnold Kling
He writes a long post that agrees with some of what I write and disagrees with some of my views.... MORE

Obama's New Deal

Regulation
David Henderson
On a recent talk show, I made the point that although Obama's fiscal "stimulus" is likely to destroy wealth, at least he is not making four major mistakes that Herbert Hoover and FDR made: (1) substantially raising tariffs (Hoover with... MORE

An Anti-Stimulus Conference

Upcoming Events
Arnold Kling
See the invitation below. My theme will be "what certified macroeconomists think about the stimulus bill."... MORE

Good Luck, Jeremy Stein

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal blog (Justin Lahart) reports, He advocated aggressive government audits of banks, aimed at separating solvent ones from insolvent ones. Once that was done, insolvent banks would be forced into closure or sale while solvent ones would... MORE

Recommended Reading

Fiscal Policy
Arnold Kling
Justin Wolfers writes, there are about three papers written on monetary policy for each paper mentioning fiscal policy. And there are only a few dozen papers written on the multiplier each year. He has more data. Jerry Muller writes, a... MORE

The Case for Profits

Fiscal Policy
Arnold Kling
I make the case at Forbes online. I first found out about it when Cato posted a copy of the essay on their web site. I wonder how many people actually will click on the "opinions" section of Forbes on... MORE

Harding's Stimulus Plan

Macroeconomics
David Henderson
Floccina writes: David Henderson, Arnold Kling & Bryan Caplan, I would love to read your take on Jim Powell's article about the 1920-1921 depression. Is Jim Powell showing huge bias? Can we learn anything that would be helpful in the... MORE

Throw Your Vote Away - Vote for a Second Party

Behavioral Economics and Rationality
Bryan Caplan
The standard argument against voting for third parties is that "You're throwing your vote away."  There's no point voting for someone who can't win.Now consider how this applies to Singapore, where even second parties have no real prospect of winning. ... MORE

Podcasts

Fiscal Policy
Arnold Kling
Cato's Caleb Brown recently recorded me in two podcasts. My thoughts on multipliers and stimulus are here (this link may be more reliable). You will also find a link to my recent podcast on co-ordinated health care (I linked to... MORE

Economists Against the "Stimulus"

Fiscal Policy
David Henderson
Posted from San Francisco airport while I'm en route to San Antonio. Today's New York Times carries a full page ad, paid for by the Cato Institute, with a strong statement against President Obama's stimulus package. It quotes his statement:... MORE

Minskynomics

Macroeconomics
Arnold Kling
as explained by yours truly.... MORE

Partisan, Pandering, Permanent

Fiscal Policy
Arnold Kling
From The New York Times: The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation's school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year... MORE

Should Freddie and Fannie Come Back?

Finance: stocks, options, etc.
Arnold Kling
Susan Woodward and Robert Hall say "yes." Their history of the mortgage market is correct. Their analysis of the nature of the competition between banks, thrifts, and the GSE's (what some of us call the "duelling guarantee" model) is correct.... MORE

From Dark Age to Renaissance

Macroeconomics
Arnold Kling
I'm feeling somewhat lonely these days. My understanding of macroeconomics is closer to that of Paul Krugman, Mark Thoma, and Brad DeLong than it is to that of Robert Barro, John Cochrane, or Eugene Fama. And yet I am a... MORE

Singapore Fact of the Day

Cross-country Comparisons
Bryan Caplan
The opposition parties which competed in the 1997 and 2001 general elections are all to the political "left" of the PAP [the ruling People's Action Party], while the PAP occupies the center-right.  There is no right-wing opposition. (Mauzy and Milne,... MORE

SummaryIn this chapter ("Property and Exchange"), Rothbard introduces the "non-aggression axiom," also often known as the "non-initiation of force axiom."  The intuition is simple enough: No one has the right to start using physical violence or the threat thereof against... MORE

Timely? Temporary?

Fiscal Policy
Arnold Kling
Douglas Elmendorf, the head of the Congressional Budget Office, writes, CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion... MORE

Brad DeLong and Kevin Murphy, in English

Fiscal Policy
Arnold Kling
$100 of Government SpendingMurphy's EstimatesDeLong's EstimatesKeynes Effect$50$150Housework Effect-$25-$30Galbraith Effect-$25$0Feldstein Effect-$80-$33The Bottom Line-$80$87 I explain here. [UPDATE: I made two errors in the initial numbers. I believe it is correct as of Jan. 27, 1:40 PM EST]... MORE

John Cochrane Muses on Monetary Theory

Macroeconomics
Arnold Kling
John Cochrane has posted an essay on his take on the economy, stimulus, and so on. I think he gets muddled in several places.... MORE

Forum Today on Financial Crisis

Upcoming Events
David Henderson
Here's an announcement from the Naval Postgraduate School, where I teach. Bottom line: it live streams this afternoon. The times are PDT. It will go in the order below; I will be last. Each of us will present for 15... MORE

The Charge of Creepiness

Family Economics
Bryan Caplan
CK, an EconLog reader, writes:I find your obsession with the topic of people's personal choices to be deeply creepy. Also, the fact that your starting point is that they are in error is a textbook example of bad logic, e.g.,... MORE

William Easterly

Fiscal Policy
Arnold Kling
has a new blog. From his first post: If you are not accountable for promises, if you try to do everything and focus on nothing, and if you obsess about aid money raised rather than results achieved, haven't you already... MORE

Hummel on Fed

Monetary Policy
David Henderson
Monetary economist Jeff Hummel has posted today a detailed exposition of recent Fed policy. The two most interesting things to me are: (1) The money supply is increasing. This fact undercuts one part of the "monetary policy is impotent" view... MORE

Two Podcasts

Economic Methods
Arnold Kling
Yours truly on why the doctor needs a boss. It's about ten minutes. I start out by describing an experience I had with reincarnation. Russ Roberts and Robin Hanson discuss the search for meaning and truth. It is clear that... MORE

Wolfe in Safety's Clothing

Politics and Economics
David Henderson
In my latest Forbes.com article (co-authored with my book co-author Charles Hooper), I (we) take on Naderite Sidney Wolfe's views on safe drugs and on conflicts of interest. We point out that despite Wolfe's view that consultants to drug companies... MORE

In my experience, virtually the only reason why people don't want more kids is that they don't feel like spending any more time on childcare.  The strictly financial cost of another child almost never comes up.  Granted, I greatly oversample... MORE

A Great Sentence

Finance: stocks, options, etc.
Arnold Kling
From James Hamilton if everybody and their grandmother is lining up for a bailout, and pulling political strings ([1], [2]) to make sure they get it, I read that as prima facie evidence that the taxpayers' interests are not being... MORE

What's with the Economics Profession?

Fiscal Policy
Arnold Kling
Will Wilkinson writes When I see Delong more or less indiscriminately trashing everyone at Chicago, or Krugman trashing Barro, etc., what doesn't arise in my mind is a sense that some of these guys really know what they're talking about... MORE

The For a New Liberty Book Club continues on Monday, when I'll post my thoughts on chapter 2.  I plan on doing a chapter every Monday until the book's done.  Anything less would be, as Rothbard loved to say, "Monstrous!"... MORE

Response to Shelby Steele

Economic Philosophy
David Henderson
I sent the following letter to the Wall Street Journal, but I'm guessing, given that they haven't published it yet, that they won't. So I am: I was shocked by two statements by my friend and Hoover colleague, Shelby Steele... MORE

Tyler Cowen Discovers Public Choice

Public Choice Theory
David Henderson
You might claim: "they didn't nationalize it the right way" and maybe they didn't. Still, once you proceed down the nationalization path, you have to live with the nationalizations you will get, not the nationalizations as a professor might recommend... MORE

Me in the Chronicle: Free Version

Family Economics
Bryan Caplan
If you had trouble reading my piece in The Chronicle of Higher Education, here's an ungated version.... MORE

Is Europe Insolvent?

Cross-country Comparisons
Arnold Kling
Jagadeesh Gokhale writes, By 2020, the average EU country will need to raise the tax rate to 55 percent of national income to pay promised benefits. In other words, their Social Security systems are in worse shape than ours.... MORE

Once kidney selling is legal in Singapore, will it enjoy a stampede of kidney-based tourism?  I say yes: Illegal Third World kidney transactions are scary to people from the First World.  So are legal kidney transactions in Iran.  Singapore will... MORE

Pinker's Genome

Economics of Health Care
Bryan Caplan
Steven Pinker answered the call to "know thyself" by having his genome sequenced.  Some results:The two biggest pieces of news I got about my disease risks were a 12.6 percent chance of getting prostate cancer before I turn 80 compared... MORE

The Dollar as Anchor

Monetary Policy
David Henderson
Lots of people lately have been talking about how lousy the dollar is as a store of value. I'll repeat the offer I made in a recent book review in Regulation, in response to an economist's claim that government had... MORE

Who Knows Macro?

Fiscal Policy
Arnold Kling
Tyler Cowen does not like the tone of the stimulus debate. A highly respected anti-stimulus economist puts up some anti-stimulus evidence in a highly imperfect test (in Barro's defense, he did cover more than just WWII). The anti-stimulus economist is... MORE

Urban Death Traps

Economic History
Arnold Kling
Razib Khan writes, up until the year 1900 the world's cities were massive genetic blackholes. Cities only kept their population up through migration, which explains how Rome shrunk to 30,000 inhabitants by the 7th century. Today,. we think of cities... MORE

The Most Important Macro Hour

Fiscal Policy
David Henderson
Ever since September, I've been wishing that Milton Friedman were still alive, not just because he was such a good, warm, friendly guy, but also because he would have brought a lot of clarity to the credit crisis, the bailout,... MORE

Two Good Links from Megan

Fiscal Policy
Arnold Kling
1. A panel at The University of Chicago, featuring John Huizinga (my former classmate at MIT), Kevin Murphy, and Robert Lucas. Huizinga makes three points. First, we are hearing a lot of Keynesian macro being tossed around now, and it's... MORE

Kidney Selling Coming Soon to Singapore!

Cross-country Comparisons
Bryan Caplan
The sweet voice of reason works swiftly in Singapore.  Less than six months after I blogged about its Health Minister's interest in legalizing kidney sales, it's "almost certain to pass into law after another reading in Singapore's government-dominated parliament."  The... MORE

More than one economist has told me that nominal wage rigidity is getting weaker during this recession.  Now some journalists are saying the same thing (HT: Jacob Oost):More squeezed employers, though, are seeking an alternative to layoffs. They're turning to... MORE

Morning Reading

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal reports on how TARP funds went to politically-connected banks. Barney Frank does a cameo. Andy Harless might agree with what I wrote here (but he might not). Pointer from Mark Thoma. Robert Barro draws an apt... MORE

The Price of Everything

Economic Education
David Henderson
My review of Russ Roberts' excellent economics novel, The Price of Everything is in the latest issue of Regulation. Roberts is definitely growing as a novelist. I like it better than The Invisible Heart, which I liked better than his... MORE

Is Obama a type P?

Business Economics
Arnold Kling
President Obama comes across to me as the Master of the Mixed Signal. It seems unclear how he will set priorities or where he stands on several key issues. I think this goes beyond a calculated effort to try to... MORE

Historical Body Counts

Cost-benefit Analysis
Bryan Caplan
In the process of replying to Jeff Hummel in the comments, I came across this useful summary of the death toll of the wars of the 18th century.  And there's a lot more where that came from.  Read them and... MORE

Talking Points on Stimulus

Fiscal Policy
Arnold Kling
For Seattle public radio, 10:20 AM Pacific Time today. I will add a link to a recording, probably within the next 24 hours. My main theme is that we should have a small, temporary stimulus, not a permanent shift of... MORE

The Case for Stimulating Profits

Fiscal Policy
Arnold Kling
I am going to endorse the idea that Bryan Caplan called smart stimulus. if you cut employers' share of the payroll tax, this puts money in employers' hands, not workers'. But the indirect effect is to reduce the labor surplus;... MORE

The Oil Cycle

Energy, Environment, Resources
Arnold Kling
In Catherine Rampell's list of sectors that had the greatest sales growth last year, I was struck by how many of them are energy-related. Assuming that farming was driven by ethanol, the top four sectors were essentially oil plays. Oil... MORE

Block Owes Me a Buck

Politics and Economics
Bryan Caplan
In July, 2007, I bet Walter Block at 200:1 odds that Ron Paul wouldn't be the next U.S. president.  I would rather have lost, Walter.  But alas, you owe me $1.... MORE

Here's my plan: I'll lead off each discussion of Murray Rothbard's For a New Liberty with (a) a brief summary of the chapter of the week, and (b) some critical comments.  But this is your book club, so in the... MORE

The Best Policy Regarding Banks

Finance: stocks, options, etc.
Arnold Kling
John M. Berry writes, At some point, politicians are going to have to stop pandering to their constituents and show leadership by explaining why the economy can't survive without a banking system. Hear we go again. We hear a rising... MORE

Education and Technology

Economics of Education
Arnold Kling
John Merrifield and I write, We criticize the way that Goldin and Katz talk about "years of schooling" as a continuous variable, when the underlying phenomenon is that the combination of high school graduation rates and college attendance rates increased... MORE

Robin's Dangerous Question

Economic Methods
Bryan Caplan
Robin celebrates Inauguration Day with an idealistic yet cynical challenge:[W]hat does Obama have to do for you to consider him a "good" president, or even better than Bush?  It is enough for you that he is (part) black and a... MORE

Me in the Chronicle of Higher Education

Family Economics
Bryan Caplan
My editorial on parenting has finally appeared in The Chronicle of Higher Education.  In it, I summarize some big results from time diary studies (Parental effort has risen sharply in the last few decades) and behavioral genetics (The long-run effect... MORE

Douglas Rushkoff on the Inauguration Event

Political Economy
Arnold Kling
Some excerpts from his 1999 book, Coercion: Why We Listen to What "They" say. Chapter three is called "Spectacle."... MORE

Make it a Crime

Finance: stocks, options, etc.
Arnold Kling
James Hamilton writes, I believe there was an unfortunate interaction between financial innovations and lack of regulatory oversight, which allowed the construction of new financial instruments with essentially any risk-reward profile desired and the ability to leverage one's way into... MORE

The Origin of Singaporean Crime Policy

Economics of Crime
Bryan Caplan
When I was filling out my customs form for Singapore, I was chilled to see the all-capital letters, "DEATH FOR DRUGS IN SINGAPORE."  Philosophically, I have nothing against the death penalty, but of course I have everything against drug prohibition.* ... MORE

Some Random Books

Books: Reviews and Suggested Readings
Arnold Kling
Two books arrived in the mail while I was away. I was at a Liberty Fund seminar. During a conversation at dinner, someone introduced me to some concepts due to Michael Oakeshott. Gene Callahan explains it, Central to Oakeshott's last... MORE

Healthy Banks or Healthy Markets?

Finance: stocks, options, etc.
Arnold Kling
John Hempton writes, If the bank runs for three years it will again be solvent. If it runs for less than six years it will be fully and adequately capitalised. This is in fact how the Japanese mega-banks recapitalised. I... MORE

Letter from Birmingham Jail

Regulation
David Henderson
With Martin Luther King day being celebrated tomorrow, it's appropriate to read or reread his "Letter from Birmingham Jail,'' written in April 1963. Some powerful passages are below. On why he went to Birmingham even though he wasn't from Birmingham... MORE

The Empire Reaps Tribute

Political Economy
Arnold Kling
Radley Balko writes, After the 2000 Census, the richest county in America was Douglas County, Colorado. By 2007, Douglas County had fallen to sixth. The new top three are now Loudon County, Virginia; Fairfax County, Virginia; and Howard County, Maryland.... MORE

Coasean Fortune Cookie of the Day

Economic Philosophy
Bryan Caplan
The Coase Theorem is a tautology, but as tautologies go, it's an inspiration.  Once upon a time, it inspired me to say, "Coasean reasoning only holds perfectly with zero transactions costs. But the Coasean insight that creative bargaining is a... MORE

Peggy's Praise of Power

Political Economy
David Henderson
One of the columns in the Wall Street Journal I read almost every week is Peggy Noonan's weekend column, "Declarations." A former speechwriter for Ronald Reagan, Ms. Noonan has a way with words. The content can range from the incredibly... MORE

Becker on Over-Hasty Conversion

Macroeconomics
Bryan Caplan
"When the facts change, I change my mind," say Keynes.  But how do you explain people who change their minds when faced by facts they should have known all along?  Gary Becker wants to know:As Posner and others have indicated,... MORE

Posner's Primer on Wage Rigidity

Labor Market
Bryan Caplan
Very well-put:Unfortunately, not all prices are flexible; wages especially are not. This is not primarily because of union or other employment contracts. Few private-sector employers in the United States are unionized and as a result few workers (other than federal... MORE

"30 Rock" Highlights

Economics of Health Care
David Henderson
Last night's "30 Rock" was a riot. Some of my favorite segments: Character played by Salma Hayek: I have another patient on my off days. He's a sweet old man with advanced dementia, totally disconnected from reality. Jack: That reminds... MORE

What If Fama Was a Protectionist?

International Trade
Bryan Caplan
Here's a Fama-flavored argument for protectionism.GDP = Consumption + Investment + Government Spending + Net ExportsNet Exports = Exports - ImportsThe larger Imports are, the smaller Net Exports are, and the smaller GDP gets.Therefore, Imports reduce GDP, and keeping out... MORE

Fama and Fiscal Policy

Fiscal Policy
Bryan Caplan
I disagree with both Fama and Arnold's critique of Fama.  Fama's strangely trying to use an accounting identity to make inferences about causation.  No can do.  But Arnold seems to say that fiscal policy matters as long as there are... MORE

Boo, Eugene Fama

Macroeconomics
Arnold Kling
Readers of this blog know that I am against the Paulson/TARP bailout thingy and against a big stimulus. Some of you may also have read that distinguished (some would say Nobel caliber) financial economist Eugene Fama has a new blog,... MORE

It seems obvious that the answer to the above question is "yes." But it wasn't obvious to a small businessman who bet hundreds of thousands of his own money and hundreds of thousands of other people's money on his answer.... MORE

Grist for Arnold's Mill

Behavioral Economics and Rationality
Bryan Caplan
From Kahneman et al's "Would You Be Happier If You Were Richer?":Strack and colleagues reported an experiment in which students were asked: (i) "How happy are you with your life in general?" and (ii) "How many dates did you have... MORE

What Counts as Evidence that the Bailout Worked?

Economic Methods
Bryan Caplan
Back in September, I asked, "How would we know if the bail-out worked?"  "Wait and see" doesn't cut it, because:If the bail-out happens, how will we know if it prevented disaster? If unemployment stays under 8%, proponents will say that... MORE

Priceless Macro, Part Two

Fiscal Policy
David Henderson
On Saturday, January 12, the Obama Presidency-Elect (I can't think of a less clunky term) sent out, "The Job Impact of the American Recovery and Reinvestment Plan," by Christina Romer and Jared Bernstein. It would qualify for Arnold Harberger's term... MORE

Tyler's been having fun with his MR Book Club on Keynes' General Theory:I will go through the book, chapter by chapter, with an eye toward a deeper understanding of what Keynes wrote and why it is, as Greg says, so... MORE

The Pattern

Finance: stocks, options, etc.
Arnold Kling
ActorThe PromiseThe Reality Financial ExecutivesBrilliant Risk ManagementCatastrophic Losses Eliot SpitzerMr. Clean, Financial ReformerCelebrity Prosecutions, Real Abuses Untouched, and Not So Clean Sarbanes-OxleyFinancial ResponsibilityLarge Costs, No Apparent Benefits Basel Capital StandardsInternational Coordination, Sound BanksWorldwide Banking Collapse Fannie, FreddieStable Mortgage CreditFed the... MORE

From Singapore Politics Under the People's Action Party:Lee Kuan Yew believes in eugenics.  Among others, he has been influenced by Professor H.J. Eysenck, an expert on measuring intelligence who visited Singapore in 1987.  Lee states that his views are a... MORE

The Psychology of Gran Torino

Economics and Culture
Bryan Caplan
Eastwood's Gran Torino is a love letter to what psychologist John Ray calls "the old-fashioned personality."  (Here's my quick intro to the paper).  Who else but Eastwood could so compellingly dramatize Ray's conclusion that "when pejorative assumptions are discarded, the... MORE

The Case for McMedicine

Economics of Health Care
Arnold Kling
Michael Cannon and I make it. Patients with multiple diagnoses require someone who can organize the efforts of multiple medical professionals. It is not unreasonable to imagine that delivering health care effectively, particularly for complex patients, could require a corporate... MORE

Priceless Macro, Part One

Macroeconomics
David Henderson
At a Carnegie-Rochester conference I attended over 30 years ago, when I was an assistant professor at the University of Rochester B-school, Arnold Harberger criticized a pile of economists' papers on Latin American development. One of his criticisms still stands... MORE

Deficits ad Absurdum

Fiscal Policy
Arnold Kling
Brad Setser writes, Facts are facts. The US has already proved it can raise over $1.5 trillion in a single year [in Treasury borrowing] That is a the sort of statement that could come back and haunt someone. It is... MORE

Peacenik Sound Byte of the Day

Fiscal Policy
Bryan Caplan
From War Resisters.com: U.S. military spending - Dept. of Defense plus nuclear weapons (in $billions) - is equal to the military spending of the next 15 countries combined... [O]f the top 15 countries shown, at least 12 are considered allies... MORE

The Best of Times, the Worst of Times

Fiscal Policy
Arnold Kling
The Washington Post reports The number of jobs in the nation increased by about 2 percent during Bush's tenure, the most tepid growth over any eight-year span since data collection began seven decades ago. Gross domestic product, a broad measure... MORE

Critical Review Symposium on My Book

Books: Reviews and Suggested Readings
Bryan Caplan
The latest Critical Review is a full-issue symposium on The Myth of the Rational Voter.  Stephen Bennett and CR editor Jeff Friedman lead off with a novella-length frontal assault on the book.  Then there's seven more critiques from David Colander,... MORE

If you go to an old-fashioned Keynesian macro text, it will explain that raising taxes and spending by equal amounts increases total spending.  How is this possible?  Well, if the Marginal Propensity to Consume=a, then the gross positive effect on... MORE

Collected Macro Lectures

Macroeconomics
Arnold Kling
I have collected my series of fourteen macro lectures, previously delivered as blogs posts, in one place, called Lectures on Macroeconomics. Also, you can listen to Steve Fazzari and Russ Roberts explain Keynesian economics.... MORE

The Smart Way to Do Nothing

Finance: stocks, options, etc.
Bryan Caplan
Here's a fair challenge from Surowiecki and The Economist's mystery blogger:And as The Economist's mystery blogger noted yesterday, anyone's who's paying attention to the stock market knows what would happen if Obama announced today that he was abandoning his plans... MORE

Two Quick Points on Kling v. Surowiecki

Finance: stocks, options, etc.
Bryan Caplan
1. Financial markets' support for the Paulson plan is hardly evidence that the plan was good for the overall economy.  After all, its essence was a massive transfer from taxpayers to financial markets.  This is just a bigger-scale version of... MORE

Lectures on Macroeconomics, No. 14

Macroeconomics
Arnold Kling
This lecture looks at a recession as an information problem. It is a synthesis of a number of the ideas mentioned in previous lectures.... MORE

Plastic Logic

Central Planning vs. Local Knowledge
David Henderson
In coastal California, where I live, various cities have weekly publications that are distributed at a zero price, have a cutting-edge, vaguely (sometimes explicitly) leftist slant, and almost always are uncritically "environmentalist." They rarely take on any policy that most... MORE

Why is the Economy Doing Poorly?

Fiscal Policy
Arnold Kling
Tyler Cowen gives eight reasons, and then concludes First, a large fiscal stimulus addresses factor #8 but fares poorly in alleviating the other problems. Of course it may give a band-aid for #5 or #6 and you can tell other... MORE

James Surowiecki Makes Libertarianism Impossible

Finance: stocks, options, etc.
Arnold Kling
He writes, among the biggest supporters of both [the bailout and the stimulus] have been the world's investors, at least insofar as their collective judgment is reflected in market prices. As I showed yesterday, investors overwhelmingly supported the Paulson plan:... MORE

Alex Tabarrok on Obama

Political Economy
David Henderson
Alex Tabarrok went to see President-elect Obama speak at George Mason University on Thursday and came away impressed. Why? Here are Alex's words: His [Obama's] goal is "not to create a slew of new government programs, but a foundation for... MORE

The Good News Will Cost You

Information Goods, Intellectual Property
Bryan Caplan
A standard rule of Internet content is that unless it's pornographic, you don't have to pay for it.  But I just stumbled on a weird counter-example.  If you want to read even the main stories on the Good News Network,... MORE

Lindbeck, Weibull, and God

Economics and Culture
Bryan Caplan
Modern American Catholics reject many Catholic teachings:According to a recent Gallup Poll, 78 percent of American Catholics support allowing Catholics to use birth control, 63 percent think priests should be able to marry, and 55 percent think women should be... MORE

I'm surprised to learn that a payroll tax cut actually has some political traction.  A few insiders are even highlighting its unique benefits:"Cutting the payroll tax is a great idea. It not only puts money back in people's pockets --... MORE

Contractor Cutoffs

Microeconomics
Bryan Caplan
Getting a contractor - plumber, painter, cable guy, whatever - to come to your house tends to be frustrating.  You wait around for hours, he finally shows up, and then... he don't do a very good job.  Or, he finally... MORE

Be Careful What You Wish For

Fiscal Policy
Arnold Kling
Nick Schulz emailed me this paragraph from the Bureau of Labor Statistics: Eleven of the most populous metropolitan areas are composed of 34 metropolitan divisions, which are essentially separately identifiable employment centers. In November, Detroit-Livonia-Dearborn, Mich., again registered the highest... MORE

Acemoglu on the Economy and Economics

Finance: stocks, options, etc.
Arnold Kling
Daron Acemoglu has written an essay on what the financial crisis means for economics. Highly recommended. I will excerpt and comment extensively. Thanks to Acemoglu's frequent collaborator Simon Johnson for the pointer, which I picked up from Mark Thoma. In... MORE

More Laughs in Economics

Economic Education
Bryan Caplan
Here's a long list of links on humorous econ pieces, including Leijonhufvud's classic "Life Among the Econ."P.S. Correction: I misremembered my conversation with my colleague John Nye.  "Japan's Phillips Curve Looks Like Japan" was the annual favorite of a panel... MORE

How Singapore Sells Co-Payment

Economic Education
Bryan Caplan
In Singapore, the government almost never hands out goodies free of charge.  There's almost always a co-payment, even for health care and education.  Western economists justify these charges as a partial remedy for "moral hazard."  But perhaps Singapore has been... MORE

Educational Obsession in Pop Culture

Economics of Education
Bryan Caplan
A former student emails me:I'm currently looking for any filmed clip of someone perpetuating the myth that college is a MUST for everyone.  I've found several Obama clips (surprise, surprise) but I'm looking for clips outside the political world; i.e.,... MORE

How You Think in a Crisis

Behavioral Economics and Rationality
Arnold Kling
Not very well, according to Tyler Cowen. The more we feel out of control, the more our brains imagine patterns that don't really exist. ...Studies show that if people contemplate and reaffirm their most important values, such as honesty and... MORE

Smart Stimulus, II: The Healy Grant

Macroeconomics
Bryan Caplan
Here's another clever stimulus idea.  The source is Andrew Healy, who explained it to me over pizza right the day before Christmas.  I'm not sure if he actually advocates it, but here it is:The federal government temporarily picks up the... MORE

Black Swans

Behavioral Economics and Rationality
David Henderson
Joe Nocera has a nice piece on risk management in last Sunday's New York Times magazine. A great line: "The old adage, 'garbage in, garbage out' certainly applies," Groz said. "When you realize that VaR is using tame historical data... MORE

Managing Retirement Accounts

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal reports that recent events have raised doubts about the ability of people to manage their own retirement accounts. The most obvious pitfall is that 401(k) plans shift all retirement-planning risks -- not saving enough, making poor... MORE

The Stimulus and the Somme

Fiscal Policy
Arnold Kling
Mark Thoma gives us Joseph Stiglitz and Martin Feldstein being interviewed by Charlie Rose. I listened to it last night, and I found it so chilling that it adversely affected my sleep. Two issues stand out. 1. Both of them... MORE

Forbes.com just published my article, "Will the Real Christina Romer Please Stand Up?" I'm not thrilled with the title because it seems to hint that Professor Romer has been hypocritical and, as far as I know, she hasn't been. But... MORE

It's Funny Because It's True

Macroeconomics
Bryan Caplan
My colleague John Nye says "Japan's Phillips Curve Looks Like Japan" is the funniest paper ever published in economics.  I think I prefer Alan Blinder's "The Economics of Brushing Teeth." But I'm enough of an egomaniac to present for your... MORE

Smart Stimulus

Macroeconomics
Bryan Caplan
With flexible prices, many tax cuts are equivalent to each other.  If wages instantly adjust, for example, it doesn't matter whether you cut the employers' share of the payroll tax, the employees' share, or the whole thing.  The recipient of... MORE

morning commentary

Macroeconomics
Arnold Kling
Paul Krugman says that we need a big fiscal stimulus. He writes, Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we're looking at an... MORE

Lectures on Macroeconomics, No. 13

Fiscal Policy
Arnold Kling
Having reached the unlucky number of 13, it is fitting to talk about multipliers and model estimates.... MORE

Female Protectionism Redux

Behavioral Economics and Rationality
Bryan Caplan
Here's the latest paper on the puzzle of female protectionism - "Why are Women More Protectionist than Men?" by Eugene Beaulieu and Michael Napier.  (For earlier work, see here and here).  And here's Beaulieu and Napier's extremely frustrating closing paragraph:Although... MORE

We All Wanna Change the World

Political Economy
Arnold Kling
Bryan discusses policy libertarianism and structural libertarianism. If they were 60's leftists, the policy libertarians would be willing to work within the system and the structural libertarians would want to change the system. In this case, I feel ambivalence, of... MORE

Short-term Success, Long-term Fizzle

Economic Methods
Arnold Kling
Gordon Dahl and Lance Lochner write (I can't find an ungated 2008 version of the paper, and the 2005 version seems to differ), Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test... MORE

Except Seasteading

Political Economy
Bryan Caplan
Out of all the Structural Libertarians named in my last post, there is one counter-example to my claim that "It's policy all the way down": Patri Friedman's "seasteading" proposal.  The whole point of seasteading is to get outside of existing... MORE

Policy All the Way Down

Political Economy
Bryan Caplan
Are policy reformers naive?  Both libertarians and public choice economists (and especially libertarian public choice economists) often say so:  "The policies we have are a rational response of political actors to the institutional incentives they face.  The only way to... MORE

Ken Rogoff Interview

Finance: stocks, options, etc.
Arnold Kling
Doug Clement interviews Ken Rogoff. Rogoff says, I've taught for years in my class that many types of money funds and asset classes outside the traditional regulatory system are subject to the same kind of runs as the conventional banking... MORE

Inequality in Life Spans

Economics of Health Care
David Henderson
Do you think the government should forcibly reduce income inequality using taxes and subsidies? If so, wouldn't it follow that the government should forcibly reduce inequality in life spans? No? Then, if you answered Yes to the first question, you... MORE

What's Wrong With the Cartoon Guide to American History

Books: Reviews and Suggested Readings
Bryan Caplan
Despite my admiration for Larry Gonick's Cartoon History of the Universe series (which includes his Cartoon History of the Modern World), I can't recommend his Cartoon Guide to American History.  It's good on the Indians and slavery, but the rest... MORE

Against the Big Stimulus

Fiscal Policy
Arnold Kling
After reading Willem Buiter's long piece (pointer from Mark Thoma), I decided that it is time to come out firmly against a large fiscal stimulus. Instead, I would prefer a small stimulus. The case for a large stimulus appears to... MORE

Jon Danielsson writes, Risk-sensitive capital can be dangerous because it gives a false sense of security. In the same way it is so hard to measure risk, it is also easy to manipulate risk measurements. It is a straightforward exercise... MORE

Selection Bias in Blogging

Economics of Health Care
David Henderson
Over at marginalrevolution.com, Tyler Cowen posted a particularly good entry on famous economists' famous errors. The average quality of comments on that site is usually higher than on most economics sites, due, in no small part to Tyler's and Alex's... MORE

Today's Reading List

Finance: stocks, options, etc.
Arnold Kling
All from Mark Thoma. The shortest read is from Robert Waldmann. A sudden decline in the liquidity of assets can create problems as firms can't unwind leveraged positions without extreme market disruption. If the assets had always been illiquid, those... MORE

Who Are These People?

Family Economics
Bryan Caplan
During this holiday season, you may have enjoyed reconnecting with your extended family.  But many people have a different reaction.  After yet another unpleasant holiday meal, they shake their heads, and silently ask themselves, "Who are these people?"  Where else... MORE

The Power of Friedman

Economic Philosophy
David Henderson
My main New Year's resolution, which I've kept for two days so far, is not to waste time channel surfing but, instead, to watch interesting DVDs. On New Year's Day, I watched the last half hour of the Keira Knightley... MORE

Capital Requirements and Bond Ratings

Finance: stocks, options, etc.
Arnold Kling
Robert Rosenkranz writes, in effect, the regulatory reliance on ratings makes the rating agencies the de facto allocators of capital in our system. And every actor in the financial system has every incentive to group and slice assets in ways... MORE

Bubble Seers

Finance: stocks, options, etc.
Arnold Kling
Two stories look at early warnings of the housing bubble. Bruce Bartlett points to A Forbes piece from September 2001--way too early, in my opinion. Prices in most markets at that time were too low, not too high. He points... MORE

Wages of the Dead

Labor Market
Bryan Caplan
Here's a typically inane FDR quote:No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.Taken literally, Roosevelt's norm is superfluous: If you don't pay your workers enough... MORE

The Crisis Prophet Speaks

Macroeconomics
Bryan Caplan
Robert Higgs, my favorite crisis prophet, has wisdom for the self-styled free-market economists who freaked out during the past few months:Back in my days as a professor, I always endeavored early in the course to teach my students the fundamental... MORE

Techno-escapism

Growth: Causal Factors
Arnold Kling
When the real world gets you down, it's always nice to read about technology and the future. So I recommend the latest world question center from John Brockman, et al. His question for this year is, "What will change everything?"... MORE

Lectures on Macroeconomics, No. 12

Macroeconomics
Arnold Kling
This lecture speculates on some possible behavioral economics of booms and recessions. The idea is that herd behavior (buying at the top, selling at the bottom) is a form of procrastination.... MORE

Another Perspective on LTCM

Finance: stocks, options, etc.
Arnold Kling
Concerning the 1998 resolution of troubled hedge fund Long Term Capital Management, Brad Setser writes, The big banks called to the New York Fed were the creditors of LTCM and they were in some sense "bailed-in." To avoid taking losses... MORE

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