Bryan Caplan and David Henderson

February 2009

A Monthly Archive (118 entries)

The Future

Growth: Causal Factors
Arnold Kling
Jeff Cornwall summarizes the panel on the outlook for the economy and entrepreneurs at the Kauffman Foundation forum this past weekend in Kansas City. In a later post, I will discuss the interesting ideas that were brought up at that... MORE

Links Without Comment (almost)

Behavioral Economics and Rationality
Arnold Kling
Only because I am too busy. Grant McCracken on whether restrained consumer spending will be temporary or permanent. Virginia Postrel on the same topic, based on discussions at the Kauffman Foundation Forum. It was great to see her looking so... MORE

Two Observations on Milk

Economics and Culture
Bryan Caplan
I normally dislike movies based on true stories, but Milk is genuinely good.  Two observations and a question:Observation 1.  I was disappointed that the infamous "Twinkie defense" and the Szaszian critique thereof got virtually no attention in the movie.  What... MORE

Me on the Economics of Imperialism

Behavioral Economics and Rationality
David Henderson
In this radio interview, Scott Horton interviews me about various current economic issues including: the Obama budget, the Bush-Paulson-Bernanke bailout, why most of the Republicans in Congress have zero credibility in pushing for small government, the economics of imperialism, Adam... MORE

Adolf Hitler's Economics

Central Planning vs. Local Knowledge
David Henderson
Lew Rockwell has an interesting article today on Adolf Hitler's economic policies. His bottom line: Adolf Hitler was a Keynesian. Two highlights: What were those economic policies? He suspended the gold standard, embarked on huge public works programs like Autobahns,... MORE

Intended or Unintended?

Behavioral Economics and Rationality
Arnold Kling
An article in Prospect: A company chairman is told a new project will increase profits but harm the environment. He says, "I don't care about harming the environment. Let's start the new project. I just want to make as much... MORE

Macroeconomic Identity Politics

Macroeconomics
Bryan Caplan
I've already faulted Fama for misuse of the macroeconomic identity GDP=C+I+G+NX.  Now TheMoneyIllusion takes the War On Misleading Tautology to a new level:When I discuss the effect of monetary stimulus on aggregate demand with other economists, I notice that they... MORE

Kansas City BBQ and Blogfest

Books: Reviews and Suggested Readings
Arnold Kling
Tyler Cowen reports on the barbecue competition. He and I, along with a Princeton University Press person, Seth Ditchick (sp?) arrived in time to go to lunch at Oklahoma Joe's. It was the best BBQ I can remember ever having.... MORE

Obama's Gall

Fiscal Policy
David Henderson
Consider the chronology. . In January 2009, the Congressional Budget Office projects that the fiscal year 2009 budget deficit will be over one trillion dollars, or, specifically, $1,186 billion. It also predicts a deficit in FY2013 of $257 billion. .... MORE

Parents habitually try to influence what their kids eat.  "Eat up."  "Clean your plate."  "No dessert until you finish your vegetables."  "Soda?  No, you get milk."  At least in the modern U.S., parents' main goals seem to be to (a)... MORE

Great Lines from Bob Lucas

Macroeconomics
David Henderson
The first book review I did for Fortune, in 1984, was of Arjo Klamer's Conversations with Economists. In future posts, I'll quote some of my favorite quotes from Bob Solow and from others. Here's my favorite passage from the interview... MORE

Caplan-Hanson Debate: Now Taking Requests

Economic Education
Bryan Caplan
Robin Hanson and I have agreed to debate each other before the GMU Econ Society after spring break.  But we can't decide what to debate about.  Robin accordingly suggested that we ask our blog readers for requests.  It needs to... MORE

Save the Economy or Save the Banks?

Monetary Policy
Arnold Kling
Scott Sumner writes, Many economists simply assume that the current contraction has been caused by the financial crisis. After all, isn't that obvious? Actually, no. For nearly a year after the onset of the financial crisis nominal GDP continued growing... MORE

For a New Liberty on iTunes

Book Club
Bryan Caplan
FYI: If you're having trouble keeping up with the For a New Liberty book club, the whole audio book seems to be available for free on iTunes.  Personally, though, I can't bear to hear anyone say Rothbard's words but the... MORE

Evening Commentary

Fiscal Policy
Arnold Kling
From Brad DeLong, Michele Boldrin, Clive Crook, and David Brooks. Thanks to Greg Mankiw for the first two pointers. Comments below.... MORE

Summers' Warning?

Fiscal Policy
David Henderson
In a recent NBER working paper, "How Globalization Affects Tax Design," (WP # 14664), James R. Hines, Jr. and Lawrence H. Summers point out that the increasing mobility of capital makes economic activity more sensitive to tax rates, thus increasing... MORE

A Few Links

Finance: stocks, options, etc.
Arnold Kling
Bill Gross writes, The U.S. and global financial systems require credit creation and foreclosure prevention, not bank nationalization as currently contemplated by some. As you know, I differ. I want foreclosures and bank shutdowns. Nick Schulz points me to Chistopher... MORE

SummaryIn this chapter on "Personal Liberty," Rothbard puts run-of-the-mill "civil libertarians" to shame.  He's more radical than most of the left on traditional civil liberties like freedom of speech, drugs, and wiretapping.  He stands up for the rights to libel... MORE

Ya Gotta Believe

Behavioral Economics and Rationality
Arnold Kling
Michael Brooks, writing in The New Scientist, says, Bering considers a belief in some form of life apart from that experienced in the body to be the default setting of the human brain. Education and experience teach us to override... MORE

Another Tale of Suits and Geeks

Finance: stocks, options, etc.
Arnold Kling
Felix Salmon writes, because the copula function used CDS prices to calculate correlation, it was forced to confine itself to looking at the period of time when those credit default swaps had been in existence: less than a decade, a... MORE

Yeah, right . . . The Time Inconsistency Problem

Public Choice Theory
David Henderson
Yesterday, Shaun Donovan, the secretary of the Department of Housing and Urban Development, was on Face the Nation to defend President Obama's bailout program for mortgage holders. The questioner, CBS's Bob Schieffer, asked some good questions. One of his best... MORE

In 1975, Ann Landers famously reported that 70% of parents had buyer's remorse: If they had their lives to live over against, they wouldn't have kids.  Landers' study subsequently made it into some statistics lectures as an illustration of the... MORE

What Would Keynes Do?

Fiscal Policy
Arnold Kling
I write, If you follow the news media, you may think that the economics profession is divided into two camps: the majority, who favor the stimulus bill; and a minority, who are against any stimulus. In fact, there are many... MORE

Bank Strategy: Nothing New?

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal quotes a joint statement by U.S. bank regulators. The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing... MORE

Up in the Valley

Information Goods, Intellectual Property
Arnold Kling
Marc Andreessen is the least depressing person I've heard in a long time. Listen to the whole thing. He is ready to throw the whole legacy banking system under the bus, and instead go full speed with online banking. I'm... MORE

The Wonder of Economic Freedom

Political Economy
David Henderson
Yesterday my wife and I got on the road early to go to San Jose (we live 75 miles south in Pacific Grove) to help our daughter move her stuff from a storage locker to a shared apartment in San... MORE

Failing Banks

Finance: stocks, options, etc.
Arnold Kling
[update: see Woodward and Hall for an idea for handling Citicorp. I assume they mean to deal with the parent company, Citigroup.] See Simon Johnson and Tyler Cowen. Tyler argues that shutting down failing banks could be really ugly, because... MORE

Krugman's Collectivism

Economic Philosophy
David Henderson
When someone accuses someone else of stupidity and the someone who does the accusing is generally pretty smart, I expect that the accusation, even if nasty, will at least hit the target. Not so Paul Krugman's attack on Ohio Republican... MORE

Having More Kids: Don't Ask, Do Tell

Family Economics
Bryan Caplan
When I explain that I'm writing a book called Selfish Reasons to Have More Kids, people often ask me, "Well, why aren't you having any more?"  It's a fair question, but one that one should always hesitate to ask -... MORE

Universal Human Nature

Economic History
Arnold Kling
Christopher I. Beckwith writes, Viewed from the perspective of Eurasian history over the last four millennia, there does not seem to me to be any significant difference between the default underlying human socio-political structure during this time period--that is, down... MORE

"I Don't Care"

Political Economy
David Henderson
That's the message President Obama is sending to those who have saved their money and waited on the sidelines to buy a house. One intended effect of his mortgage bailout plan is to support housing prices and the unintended effect... MORE

Lie to Me

Revealed Preference
David Henderson
Like my fellow blogger Bryan, I take particular pleasure in seeing people "tell it like it is." For that reason, I particularly like the new TV show, "Lie to Me." In it, some federal government employees (you can't have everything)... MORE

The Principal of Convenience

Economic Philosophy
Bryan Caplan
Eliezer beautifully articulates the moral outrage I felt from the age of 3 to 18:Another example would be the principal who, faced with two children who were caught fighting on the playground, sternly says:  "It doesn't matter who started the... MORE

Official Takes Stand Against Auto Bailout

Political Economy
Arnold Kling
A heroic public servant speaks. "Voters picked me because they wanted nursery schools, police and nurses, and not to buy loss-making car factories," From that bastion of heartless, free-market ideology, Sweden. Thanks to Richard Florida for the pointer.... MORE

Give Back My Wallet

Fiscal Policy
Arnold Kling
Rasmussen reports, Forty-five percent (45%) of Americans oppose the federal government subsidizing mortgage payments for financially troubled homeowners, according to a new Rasmussen Reports national telephone survey. Thirty-eight percent (38%) think government subsidies are a good idea, and 18% are... MORE

Buying Inefficiency: Federal $ and State Medicaid Spending

Economics of Health Care
Bryan Caplan
Brian Blase, my former RA, presents some edifying facts about Medicaid at National Review Online.The nearly $1 trillion stimulus bill making its way through Congress includes a little bit of everything, but if the bill passes as is, a large... MORE

Rick Santelli: My New Hero

Economic Philosophy
David Henderson
In response to Bryan Caplan's post this morning about Hank Rearden and Atlas Shrugged, one of the commenters, Bob Murphy, made an insightful comment and another commenter, megapolisomancy, recommended the following youtube video of CNBC's Rick Santelli. This is fresh... MORE

Massachusetts Health Care Reform

Economics of Health Care
Arnold Kling
These critics sound like me. Massachusetts members of the Physicians for a National Health Program released a report today faulting the state's experiment with health reform for failing to achieve universal coverage, being too expensive and draining funds away from... MORE

How a Rational Politician Treats Irrational Voters

Behavioral Economics and Rationality
Bryan Caplan
I officially nominate Greg Mankiw for an Emperor Has No Clothes Award.  The Award (it's real!) normally goes to critics of religion.  But politics is the premiere religion of the modern world - and where else can you find impious... MORE

The Resonance of Libertarian Oratory

Behavioral Economics and Rationality
Bryan Caplan
My co-author Scott Beaulier's now blogging and teaching a course about Atlas Shrugged.  He always was lucky... except for that time that he accidentally decapitated himself during his first session of Dungeons and Dragons, but that's another story.Anyway, Scott's class... MORE

Lunch with John Nash

Game Theory
David Henderson
Nobel prize winner John Nash is visiting my school, the Naval Postgraduate School, this week and is giving a speech tomorrow to the student body. Some of my economist colleagues and I had lunch with him today. He seems to... MORE

Folsom on New Deal

Economic History
David Henderson
I saw a masterful performance yesterday at San Jose State University: a talk by historian Burton Folsom on his new book, New Deal, Raw Deal. Folsom has a lot of energy and humor. The way he told the story of... MORE

The Housing Bailout as a Public Good

Political Economy
Arnold Kling
Why do we have a housing bailout that spends $75 billion, plus $200 billion in "support" for Freddie Mac and Fannie Mae? By what test is this a public good? My test is this: would an overwhelming majority of Americans... MORE

Two Paradoxes of Singaporean Political Economy

Cross-country Comparisons
Bryan Caplan
I've finished my paper for Ethos, the journal of Singapore's Civil Service College.  From the intro (footnotes omitted):Officially, Singapore is a democracy.  When you compare it to almost any other democratic country, though, Singapore has two deeply puzzling features.  Puzzle... MORE

Determining Bank Solvency

Finance: stocks, options, etc.
Arnold Kling
John Hempton has a must-read post in which he says that determining bank solvency is difficult. I think he understates the difficulty, because he does not get into the issue of valuing short put options that once were way out... MORE

Clive Crook reviews Animal Spirits, by Akerlof and Shiller. Likening the role of government to a parent's duty to create a happy home, the authors write: "The proper role of the parent is to set the limits so that the... MORE

Misplaced Priorities

Finance: stocks, options, etc.
Arnold Kling
Consider the following list of candidates for government assistance, via financial bailout or stimulus: a) banks and other financial institutions b) the nonfinancial business sector c) underwater homebuyers d) other consumers e) state and local governments In my view, (b)... MORE

One-Two Punch on Mark-to-Market

Regulation
David Henderson
Today, the Wall Street Journal published two excellent letters on the mark-to-market regs that banks are under. IMO, too little has been written about this by economists. The second letter tells a horror story; the first makes a constructive suggestion... MORE

Marginal Tax Rates Will Rise

Supply-side Economics
David Henderson
As I have been saying for the last month or so, when I saw the details of the tax rebate (and I'm sure other marginalists have been saying so too), under the "stimulus" bill that President Obama will sign today,... MORE

SummaryThis chapter begins with a premise shared by almost everyone - that "involuntary servitude" is impermissible:The libertarian, therefore, is totally opposed to slavery.  An academic question nowadays, one might object?  But is it really? For what is slavery but (a)... MORE

Amar Bhide Monday

Growth: Causal Factors
Arnold Kling
In the Wall Street Journal, he writes, The depressions and panics of the 19th century ended without any fiscal stimulus to speak of, as did the gloom that followed the stock-market crash of 1987. Countercyclical fiscal policy may or may... MORE

Who is Jan Helfeld?

Politics and Economics
David Henderson
In a comment on one of my recent posts, commenter Patrick Sullivan referenced an interview with Harry Reid in which the interviewer tried to get Senator Reid to admit that taxes are involuntary. Reid simply wouldn't. I found the style... MORE

Will's Challenge

Political Economy
Bryan Caplan
I'd like to think that I'm the but-for cause of this paragraph, but either way, the world should listen:[I]t is a mistake to assume that equality of democratic voice improves the prospects of the poor and working classes unless the... MORE

We Coulda Had a Payroll Tax Holiday

Macroeconomics
Bryan Caplan
Tim Kane wisely notes that we could have had a one-year payroll tax holiday for the cost of Obama's fiscal stimulus program:What's amazing is that much of the rest of the bill's stimulus does not actually enter the economy until... MORE

Arnold mentions that:The Washington Post reviews The Lords of Finance, focusing on the role of the gold standard as a policy blunder contributing to the Great Depression. As I've said, a great swath of economists (starting with Milton Friedman and... MORE

Ross Douthat on Liberaltarianism

Political Economy
Arnold Kling
He writes, ...a bigger-tent liberalism - somewhat chastened, perhaps, by some big-government failures in the Obama era - that makes libertarian intellectuals feel welcome, engages them in conversations about smarter regulations and more efficient tax policy, and generally woos them... MORE

I Challenge Richard Florida

Growth: Causal Factors
Arnold Kling
to a bet on the future of New York City. In a must-read article in the latest issue of The Atlantic, Florida says that New York will come out of the recession in good shape. I propose a $50 wager... MORE

Evening Commentary

Fiscal Policy
Arnold Kling
Tyler Cowen writes, In my opinion the sophisticated Keynesian view is still that the stimulus won't work. Great, great sentence. Has Jeff Frankel joined the ranks of the deranged? What he writes strikes me as not terribly different from what... MORE

Another Speaking Opportunity

Upcoming Events
Arnold Kling
on markets and health care. I know the topic sounds boring these days, but it really is somewhat important as a public policy issue. If you work on or near Capitol Hill, feel free to drop by. Friday, February 20th,... MORE

Favorite "Liberal" Economist

Economic Philosophy
David Henderson
In the 1990s, before Paul Krugman became a regular columnist for the New York Times, my friend Alan Reynolds referred to Krugman as "my favorite Keynesian economist." What he had in mind, I think, was Krugman's great popular articles on... MORE

Anti-Economist Bias Yes, Conservative Bias No

Macroeconomics
Bryan Caplan
Media Matters reports that almost none of the economic "experts" pontificating on Obama's economic plan are actually economists:Media Matters purposefully used a broad definition of "economist" to be inclusive, coding as an economist any guest who has a master's degree... MORE

Canada's Central Bank

Economic History
David Henderson
Yesterday, blogger Megan McArdle had an interesting post on Canada. She wrote: Canada is now being held up as a regulatory example to us, but Canada has always been an odd duck--it was also the only major economy in the... MORE

Sentences of the Day

Politics and Economics
David Henderson
In response to Tyler Cowen's statement that Arnold Kling "wasn't guilty of anything in the first place, except perhaps having exaggerated the coercive nature of taxation," commenter Laserlight asks: Are you suggesting that taxation is not coercive? If I just... MORE

Kling vs. NY Times

Econlog Administrative Issues
Arnold Kling
1. In journalism, there is a term known as fact-checking. 2. When a columnist puts a person's words in quotes, that represents a fact, which ought to be checked. 3. The quote attributed to me in Paul Krugman's column was... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Amar Bhide writes, Regulators apparently succumbed to the idea, peddled by financiers and modern theorists, that if a little financial innovation was good, a lot must be great--even if it was far outside their capacity to monitor. Thanks to Reihan... MORE

Quoted Out of Context Again

Fiscal Policy
Arnold Kling
[UPDATE Feb. 13 2:40 PM eastern time: Andrew Sullivan of The Atlantic has done the gentlemanly thing and withdrawn the racism charge. Adam Serwer of The American Prospect has apologized for not taking into account the full context. ] I... MORE

Land of Lincoln

Economic History
David Henderson
My occasional co-author, Jeff Hummel, has scored a real coup: getting a balanced assessment of Abraham Lincoln published in Illinois. And not just in Illinois but also in the most important Illinois newsaper, the Chicago Tribune. And not just in... MORE

Markets in Everything

Economics of Crime
David Henderson
Two judges in Pennsylvania are alleged to have taken bribes in return for sentencing teenagers to jail. One case was that of Ms. Hillary Transue: Hillary Transue did not have an attorney, nor was she told of her right to... MORE

Obama's New Deal, Part 3

Labor Market
David Henderson
In a recent post, I said that whatever other mistakes Obama was making, at least he was repeating only 1 of 4 mistakes that Hoover/FDR (I think I'll start calling them Herbert Delano Roosevelt) made. Commenters pointed out correctly that... MORE

What Happened to American Unions?

Labor Market
Bryan Caplan
My favorite subplot in Brink Lindsey's "Nostalgianomics" is his tale of the decline of American unionization rates.  He begins by ridiculing people who blame the change on virtually non-existent policy changes:Scrounging about for a policy explanation for declining unionization, Levy... MORE

Nostalgianomics, A Cato Gem

Economic History
Bryan Caplan
I enthusiastically recommend Brink Lindsey's "Nostalgianomics."  It's just plain interesting, well-written, and edifying.  In a just world, it would have appeared in The New Yorker.  The springboard of the piece is Krugman's recent love letters to the 1950s.  Brink grants... MORE

My Analysis Is...

Macroeconomics
Bryan Caplan
Arnold wants me to explain why "two-thirds of the American people think they could do a better job on the economy than Congress."  My take is that a lot of Americans want an even more populist approach to the crisis. ... MORE

The 1930's and Today

Economic History
Arnold Kling
The Washington Post reports on how economists are still debating the 1930's. We are, but I bet I could get a pretty broad swath of economists, left and right, to agree to the following: 1. The steps that Roosevelt took... MORE

Drug War Success

Regulation
David Henderson
The best sentence of the day: "If the drug effort were failing there would be no violence," a senior U.S. official said Wednesday. In other words, the fact that there is violence in Latin America means the drug war is... MORE

James Wolcott and Stereotypes

Revealed Preference
David Henderson
My co-blogger, Arnold Kling, posted today about a blogger named James Wolcott. Mr. Wolcott appears to be someone who is deeply troubled by those who would use stereotypes to make their case. But because I didn't know who Mr. Wolcott... MORE

What is Bryan's Analysis?

Economic Education
Arnold Kling
A poll says that two-thirds of the American people think they could do a better job on the economy than Congress. Forty-four percent (44%) voters also think a group of people selected at random from the phone book would do... MORE

What I Really Said at Heritage

Econlog Administrative Issues
Arnold Kling
Andrew Sullivan passes along an accusation from somebody named James Wolcott that I made a racist reference to President Obama at an event co-sponsored by the Heritage foundation. The event was taped, and I hope that Heritage will post the... MORE

Causes of the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Mark Jickling of the Congressional Research Service produced a handy chart of causal factors for the financial crisis. I think there are at least twenty, and I personally would probably endorse at least two-thirds of them as playing some role.... MORE

British Flynn Effect Reverses

IQ in Economics
Bryan Caplan
People in advanced countries have been getting smarter for decades; that's the Flynn effect.  Researchers have been arguing for quite a while about when the Flynn effect is going to level off.  Now Flynn says that in Great Brain, his... MORE

Are We Getting to Him?

Fiscal Policy
David Henderson
During President Obama's press conference on Monday, the first question was: Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have... MORE

Geithner Lays an Egg

Central Planning vs. Local Knowledge
Arnold Kling
I outsource my comments to Tyler Cowen.... MORE

Brink Lindsey Baits Paul Krugman

Income Distribution
Arnold Kling
Brink Lindsey has written a paper criticizing Paul Krugman's view that the period from 1950-1970 was a sort of golden era for economic policy, because it involved high economic growth with relatively little inequality. Lindsey instead sees the immediate postwar... MORE

Economics does not equal Macroeconomics

Macroeconomics
Arnold Kling
Clive Crook writes, Mr Krugman gives liberals the economics they want. Mr Barro gives conservatives the same service. They narrow or deny the common ground. Why does this matter? Because the views of readers inclined to one side or the... MORE

SummaryThis is the shortest chapter of the book, just six pages long.  Rothbard makes a laundry list of what he calls "the major problem areas of our society" and argues that government is central to every one of them.  The... MORE

Confidence and the Wrong Map

Finance: stocks, options, etc.
Arnold Kling
Over at econtalk, Russ Roberts interviews Daron Acemoglu. Self-recommending, as Tyler would say. Also, here is a video featuring Daniel Kahneman and Nassim Taleb. Taleb, like me, wants to get rid of risk-taking by banks, and leave non-insured institutions free... MORE

Does Gravity Kill?

Economic Methods
Bryan Caplan
A while back, I favorably quoted this line from Larry White: "One can't explain an unusual cluster of errors by citing greed, which is always around, just as one can't explain a cluster of airplane crashes by citing gravity."  Soon... MORE

"The President Believes"

Fiscal Policy
David Henderson
In a recent post I wrote about Larry Summers: I doubt that he likes the awful [stimulus] bill, but what I'm pretty sure of is that he likes being on the inside. One commenter, Charlie, wrote: it's amazing how both... MORE

Macroeconometrics: The Lost History

Economic Methods
Arnold Kling
A first version is here. I was thinking of submitting something like this to the AEA's new Journal Macroeconomics. Suggestions for improvement are welcome.... MORE

The Stimulus and Black Swans

Fiscal Policy
Arnold Kling
I wrote this for Cato. The present scenario analysis highlights two black swans. The first one is Depression Averted, under which a stimulus keeps the economy from falling in a downward spiral of layoffs and shutdowns. The other black swan... MORE

Getting to Recovery

Finance: stocks, options, etc.
Arnold Kling
James Hamilton writes, I have in my research instead stressed technological frictions. For example, when spending on cars abruptly falls, there is a physical, technological challenge with getting the specialized labor and capital formerly employed in manufacturing cars into some... MORE

Sense from Frank Rich

Economic History
David Henderson
Yes, you read that correctly. Frank Rich, the partisan New York Times columnist, has a good column today. In it, he delves into what he calls "[T]he tsunami of populist rage coursing through America." Here's one of the best sections:... MORE

Stimulus Bill or Reparations Bill?

Fiscal Policy
Arnold Kling
I think that President Obama set the bar ridiculously low when he said that 75 percent of the stimulus should kick in within by the end of 2010, but the House bill did not even get over that bar. Why... MORE

Regulatory Arbitrage

Finance: stocks, options, etc.
Arnold Kling
Viral Acharya and Matthew Richardson write, for years, regulation - capital requirement in particular - has targeted individual bank risk, when the justification for its existence resides primarily in managing systemic risk. It is to be expected that financial institutions... MORE

When Russ Roberts rewrites some typically hysterical economic reporting, it's a thing of beauty.  But I still prefer his regular blogging. :-)... MORE

The Remote Control Puzzle

Microeconomics
Bryan Caplan
How many remote controls do you own?  I probably have at least thirty remotes somewhere inside my house.  The reason, of course, is that virtually every electronic device comes with its own customized remote control.  Some of these remotes try... MORE

Jones on CNN Money

Macroeconomics
Bryan Caplan
My wise colleague Garett Jones has the office next to mine, so I can question him just by shouting.  (We've got thin walls in Carow Hall).  But now that Garett's writing for CNN Money, it's getting much easier for people... MORE

John Maynard Keynes writes, So far as employees are concerned, reductions in contributions are more likely to lead to increased expenditure as compared with saving than a reduction in income tax would, and are free from the objection to a... MORE

Morning Reading

Fiscal Policy
Arnold Kling
Greg Mankiw writes I would institute an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax. I think if you put leading economists into a room to negotiate on... MORE

Barro Interview

Fiscal Policy
David Henderson
Check out the interview with Harvard economist Robert Barro. He makes some excellent points, one of the main ones being the important difference between a tax rebate and a cut in tax rates. I made this point in my Forbes.com... MORE

More Appreciation of Hazlitt

Books: Reviews and Suggested Readings
David Henderson
In his excellent post this morning on Henry Hazlitt's Economics in One Lesson, Bryan Caplan, in my opinion, slightly understated the case for Hazlitt. I agree with everything Bryan said, but he gives the impression that Hazlitt's treatment is simplistic.... MORE

Block, Hazlitt, DeLong, Me, and the Noble Lie

Books: Reviews and Suggested Readings
Bryan Caplan
Walter Block has written a new intro to Henry Hazlitt's Economics in One Lesson:Writing this introduction is a labor of love for me. You know how women sometimes say to each other "This dress is you!"? Well, this book is... MORE

Who is Advising these Guys?

Finance: stocks, options, etc.
Arnold Kling
Ed Glaeser does not like the Republican mortgage plan any more than I do. I am not sure that plan is still alive. It may have been superceded by another ill-conceived idea, a tax break for home buyers. See Tyler... MORE

Two Critiques of Macroeconometrics

Economic Methods
Arnold Kling
Menzie Chinn writes, A key reason for the academic disenchantment with these types of models included the view that the identification schemes used were untenable (e.g., why is income in the consumption function but not in the investment?). Another source... MORE

Me on KQED-FM

International Trade
David Henderson
On Thursday, February 5 at 9:00 a.m. PST, I'll be on KQED-FM in San Francisco until 10:00 a.m. The show is called Forum. The topic: the "Buy American" provisions in the "stimulus" bill. The other person being interviewed is Harley... MORE

CBO Stimulus Estimates

Fiscal Policy
Arnold Kling
Doug Elmendorf writes CBO estimates that the Senate legislation would raise output by between 1.4 percent and 4.1 percent by the fourth quarter of 2009; by between 1.2 percent and 3.6 percent by the fourth quarter of 2010; and by... MORE

Akerlof and Shiller Heart Higgs?

Behavioral Economics and Rationality
Arnold Kling
George A. Akerlof and Robert J. Shiller do not come to praise mainstream macroeconomics. Keynes' followers rooted out almost all of the animal spirits...that lay at the heart of his explanation for the Great Depression...They...minimized the intellectual distance between The... MORE

Morning Commentary (Feeling Angry)

Finance: stocks, options, etc.
Arnold Kling
Three things to be angry about this morning. 1. The Obama Administration's plans to save banks. I outsource my comments to Yves Smith. Thanks to Mark Thoma for the pointer. 2. Alan Blinder and David Leonhardt confusing stimulus with class... MORE

SummaryRothbard now applies the normative standards developed in chapter 2 to explain what libertarians have against government (or as Rothbard, inspired by Germanic capitalization, calls it, "the State").  The argument is simple: If a private individual did what governments do,... MORE

Russ Roberts on "Stimulus"

Fiscal Policy
David Henderson
In yesterday's Boston Globe, GMU economist Russ Roberts has an excellent piece on the proposed "stimulus" package. The article is directed against the huge spending and tax rebate bill working its way through Congress. Roberts recognizes upfront that even Nobel... MORE

Organ Selling in Singapore: The Sad Real Story

Economics of Health Care
Bryan Caplan
My sources in Singapore inform me that a real free market in human organ donations isn't in the cards - and never was.  An econ prof at a Singapore college explains:My colleagues at the ministry of health tell me that... MORE

Morning Reading (Somewhat Depressing)

Finance: stocks, options, etc.
Arnold Kling
Compare this: Officials said the GOP was coalescing behind a proposal designed to give banks an incentive to make loans at rates currently estimated at 4 percent to 4.5 percent. Fannie Mae and Freddie Mac, which were seized by the... MORE

Violent Agreement

Finance: stocks, options, etc.
Arnold Kling
I guess I was supposed to debate Simon Johnson in this NPR web chat. Simon blogs at Baseline Scenario and is a major star in the economics profession. I don't feel particularly good about the chat. 1. The format seemed... MORE

Middlemen by Munger

Economic Education
David Henderson
The feature article on Econlib this month is by economically literate political scientist Michael Munger. In it, he defends the role of the middleman, drawing on two classic articles, one by Bastiat and one by R.A. Radford. My favorite paragraph:... MORE

Temporary vs. Permanent

Fiscal Policy
Arnold Kling
Tyler Cowen weighs in on an issue that has been bouncing around the blogosphere. Overall the Keynesian effects can mean either the permanent or the temporary spending boost has a bigger effect and there are also a number of ways... MORE

Glaeser on Housing Policy

Finance: stocks, options, etc.
Arnold Kling
Ed Glaeser writes, Ellickson's analysis suggests that this is just about the worst of all possible policy responses. By drawing out the foreclosure process, these moratoria increase the time during which homes are no-man's-land. During such periods, homes and neighborhoods... MORE

Fraud and Punishment

Economic Philosophy
Bryan Caplan
While I'm not a libertarian absolutist, there are plenty of criticisms of strict libertarian doctrine that don't hold water.  Two that have been on my mind lately:1. Will Wilkinson doesn't see why libertarianism prohibits fraud:Even when I was a believer... MORE

My Current Outline

Fiscal Policy
Arnold Kling
For my talk at the anti-stimulus conference. Still a work in progress.... MORE

Consumers or Businesses?

Fiscal Policy
Arnold Kling
Hall and Woodward write, One problem with the employment stimulus is that the funds go in the first instance to the owners of businesses and not to consumers generally. This criticism applies to my preferred stimulus, which is to take... MORE

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