Bryan Caplan and David Henderson

June 2009

A Monthly Archive (112 entries)
I've repeatedly encountered the following social conservative meme, most recently in an argument over the Mark Sanford affair:We've got to stop acting like hypocrites are the worst thing in the world.  At least hypocrites have moral standards; they're just not... MORE

Resources for Home-Schooled Economists

Economic Education
Arnold Kling
reviews of economic research. Pointer from David Warsh... MORE

Krugman Misstates Arrow

Economics of Health Care
David Henderson
My co-blogger Bryan Caplan comments today on Paul Krugman's blog post on Arrow's famous 1963 article on health insurance. There is more to be said. Krugman writes: Both George Will and Greg Mankiw basically argue that we don't need a... MORE

Genetics and the Future of Religion

Economics and Culture
Bryan Caplan
Religiosity is partly genetic, and the religious are out-breeding the secular.  It follows, then, that societies will get more religious over time.  But over at Gene Expression, Razib argues that while the premises are true, the conclusion is false.  He... MORE

Nobody Speaking

Economics of Health Care
Bryan Caplan
In a recent post on health care, Krugman writes:[E]conomists have known for 45 years -- ever since Kenneth Arrow's seminal paper -- that the standard competitive market model just doesn't work for health care: adverse selection and moral hazard are... MORE

What's Wrong With Realism? What's Right With It? Part 1

Behavioral Economics and Rationality
Bryan Caplan
A word to the wise: If you have a theory and want it to spread far and wide, call it "realism."  Who could be against realism?  Case in point: The so-called "realist" theory of international relations.  According to this view,... MORE

The Forked Tongue Speaks

Economics of Health Care
Arnold Kling
There is a disconnect in the Obama administration's rhetoric on health care. On the one hand, the administration points out that our current health care financing system, particularly for government-funded programs, is unsustainable. This suggests an urgent need for... MORE

Nobody Tell Tyler Cowen

Behavioral Economics and Rationality
Arnold Kling
From Scientific American: One group that does not value perceived losses differently than gains are individuals with autism, a disorder characterized by problems with social interaction. When tested, autistics often demonstrate strict logic when balancing gains and losses, but this... MORE

Central Planning of Cancer Research

Central Planning vs. Local Knowledge
David Henderson
New York Times Article Shows Pitfalls of Central Planning The weather in Grand Cayman is so-so, which is why I'm blogging today. "Grant System Leads Cancer Researchers to Play it Safe," reads the title of a news story in today's... MORE

The Political Economy of Geoengineering

Behavioral Economics and Rationality
Bryan Caplan
The complete videocast of the AEI mini-conference on geoengineering is now up, including Scott Barrett's target speech, Thomas Schelling's comments, and my comments.  Like Bart Simpson, I'm my own toughest critic, but I was pleased as punch with my extension... MORE

Kevin Murphy Interviewed

Labor Market
Arnold Kling
Definitely worth reading, with a variety of topics covered. On one topic, he says It's difficult to look at, for example, the very low unemployment rates we saw in the early 2000s and say that represented an economy in which... MORE

Why Bernanke Should Be Canned

Monetary Policy
Bryan Caplan
Contrary to my expectations, Bernanke's been a disaster.  At the same time, though, I can't honestly say that his successor will be any better.  Why then do I strongly favor firing my former teacher?  Accountability.  When someone fails as badly... MORE

A Regulatory History Lesson

Finance: stocks, options, etc.
Arnold Kling
The Obama Administration's 89-page report on financial regulatory reform says on page 3, Market discipline broke down as investors relied excessively on credit rating agencies. To me, attributing the use of credit rating agencies to a breakdown in market discipline... MORE

Against Growth Agnosticism

Growth: Causal Factors
Bryan Caplan
Tim Kane is as sickened by growth agnosticism as I am:So why is that so many popular discussion of growth emphasize how totally mysterious it is? William Easterly's book, "The Elusive Quest for Growth" is a case in point, but... MORE

Sumner, Wilson, Harding, Keynes

Economic History
Bryan Caplan
In his latest one-two punch, Scott Sumner...1. ...explains why Woodrow Wilson was the worst president in U.S. history:...Wilson's economic policies were perhaps the worst in American history.  He presided over the creation of the Fed and the income tax, which... MORE

Buy Global

International Trade
Arnold Kling
Don Boudreaux always gets to the heart of these issues. Suppose, for example, that shirts can be made in one of two ways. The first is by hand. It costs a shirt maker using this method--regardless of how many shirts... MORE

Fixing the Health Care System

Economics of Health Care
Arnold Kling
Melinda Beeuwkes Buntin and David Cutler write, There are health care institutions that have spent large sums on health IT with zero or even negative returns; some health IT reforms made matters worse and had to be uninstalled. The reason... MORE

Posner and Kling on Financial Regulation

Finance: stocks, options, etc.
Arnold Kling
Concerning the Obama Administration's white paper, Richard Posner writes, The report is scathing about the financial incontinence of bankers and consumers but complacent about regulatory failures. UPDATE: As a commenter notes, my volume is very low relative to the moderator's.... MORE

Not From the Onion

Regulation
David Henderson
FTC Takes First Step in Regulating Internet Alarming Development on Internet Catches Government's Attention What some fail to realize, though, is that such reviews can be tainted: Many bloggers have accepted perks such as free laptops, trips to Europe, $500... MORE

On health economics:Florence Rath died only eight days later, complaining not so much of a broken thigh and a fractured pelvis as of the refusal of the doctors to obey her."They know they can't cure me, so why don't they... MORE

Fool's Gold

Finance: stocks, options, etc.
Arnold Kling
Gillian Tett's book on the financial crisis is the one that I would recommend at this point. Some notes and excerpts below. This may reflect my biases, but what I took away from the book was the co-ordination between regulators... MORE

Regulation that Encouraged Herding

Finance: stocks, options, etc.
Arnold Kling
Avinash Persaud writes, During booms, asset prices rise and measured risks fall. Acting prudently, financial firms will feel it is safe to expand lending. All financial firms expanding together will lead to a scramble for assets that will lead to... MORE

Retrospective Voting: Worse Than Chance

Behavioral Economics and Rationality
Bryan Caplan
Voters literally know less than zero about economic policy - we would have better policies if they just voted randomly.  But people who believe in "retrospective voting models" often retort that voters' policy incompetence doesn't matter.  They don't have to... MORE

Health Care Non-reform Watch

Economics of Health Care
Arnold Kling
I argue, The debate we should be having is over whether restraint in our use of medical services should be initiated by government officials or left to consumers. The Democrats want to avoid that debate. Instead, they make it sound... MORE

The Bill Gates Mystery

Labor Market
Bryan Caplan
Not long after I started at GMU, Tyler approximately remarked that, "Bill Gates is just crazy - he works like a dog despite his billions."  I don't remember how I responded at the time.  But when I'm trying to understand... MORE

Matt Ridley vs. My Most Wrong Belief

Books: Reviews and Suggested Readings
Arnold Kling
I have temporary custody of a draft manuscript of a new book by Matt Ridley. The title of the book is tentative, but the subtitle is "Economic progress and the evolution of the future." Once the book comes out, it... MORE

What Would You do Without a Governor?

Central Planning vs. Local Knowledge
David Henderson
Bizarre Headline in Wall Street Journal "Governor's Trip Confuses South Carolina." So reads the headline of the on-line version of a news story in today's Wall Street Journal. The hard-copy version of the headline is even more dramatic: "State of... MORE

Ezra Klein's Non Sequitur on Health Care

Economics of Health Care
David Henderson
Ezra Klein writes: The [U.S. health care] system is currently biased toward the worst form of cost control: rationing by income. Every year, we contain costs by quietly letting 2 million or so more people fall into the ranks of... MORE

The Shield: Social Intelligence Gets Ugly

Economics and Culture
Bryan Caplan
I just finished the final episode of The Shield, FX's drama about a squad of corrupt LA cops.  I loved every episode.  At risk of alienating people who will share my evaluation, The Shield is like The Wire, except it's... MORE

Off on Vacation

International Trade
David Henderson
Dear Econlog Readers, My wife and I get up bright and early tomorrow morning to go to Grand Cayman for a week's vacation. For that reason, I won't be posting as much as usual. Best, David... MORE

I (More or Less) Agree With Krugman

Economics of Health Care
David Henderson
Paul Krugman had a blog post last week that I agree with most of. (Pardon the preposition at the end of the sentence.) He criticized a bill, the Preserving Access to Targeted, Individualized, and Effective New Treatments and Services (PATIENTS)... MORE

Insurance as a Prisoners' Dilemma

Economics of Health Care
Bryan Caplan
I've got a little toenail fungus.  Now that you're done cringing in disgust, let's get to the economics.  My HMO doesn't cover treatment, because the problem is "merely cosmetic."  Until recently, though, I didn't care, because they're weren't any good... MORE

Financial Reform, 2

Finance: stocks, options, etc.
Arnold Kling
This is the promised follow-up to Friday's post. These are further notes from the conference on financial regulatory reform.... MORE

Bad Bets or Co-ordination Failure?

Finance: stocks, options, etc.
Arnold Kling
James Kwak discusses an issue that has been dogging the analysis of the financial crisis since the beginning, and which has resurfaced now that people are looking at what steps to take to reform the financial system. I put the... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
Charles I. Jones and Paul M. Romer write, By something like 1300 A.D., China was the most technologically advanced country in the world, with a large integrated population. According to the Lee model, it should have persisted indefinitely as the... MORE

Financial Reform

Upcoming Events
Arnold Kling
I will be interviewed on June 25th at 2 PM eastern time in a "webinar," which means that if you participate live then you can ask questions. You can register here. I have attended a couple of these as a... MORE

Fox News Roundup

Economics of Health Care
David Henderson
My wife and I watch the Fox News Channel more than any other channel. It's not because we agree with everything, or even most of what, they say. My main reasons are twofold: (1) They bring up issues that the... MORE

The Not-So Fundamental Attribution Error

Behavioral Economics and Rationality
Bryan Caplan
Remember the so-called "fundamental attribution error"?  According to some psychologists and the economists who love them, we have a strong tendency to overestimate the importance of individual differences and underestimate  the importance of circumstances.  I've questioned its fundamentality and erroneousness... MORE

Samuelson vs. Friedman

Labor Market
David Henderson
Tyler Cowen quotes the following paragraph from an interview with Paul Samuelson: Milton Friedman. Friedman had a solid MV = PQ doctrine from which he deviated very little all his life. By the way, he's about as smart a guy... MORE

Robin Hanson on the Signalling Process

Behavioral Economics and Rationality
Arnold Kling
He writes, a boss who has known you for years may not promote you unless you get a better degree, even if that teaches you nothing useful for your job. He might not hire you without that degree, even if... MORE

My Favorite Convert

Behavioral Economics and Rationality
Bryan Caplan
When Robin Hanson arrived at GMU ten years ago, he was a hard-line rational choice political economist.  (See his job market paper).  For every political phenomenon, he insisted on "a story without fools."  Not anymore.  After a couple years of... MORE

The Financial White Paper: A Fabulous Tale

Finance: stocks, options, etc.
Arnold Kling
Once upon a time, there was a summer camp. To entertain the kids, the counselors handed out matches1, lighter fluid2, and newspapers3. The camp burned down. Afterwards, a white paper was written, proposing more supervision by counselors. It called for... MORE

Defending what Paul Krugman Wrote

Macroeconomics
Arnold Kling
In 2002, he passed along a joke that the economy needed a housing bubble. Krugman is controversial, so the post generated comments on this blog and elsewhere, some of which are overly "gotcha" in character. Some points I would make:... MORE

How I Raised My Social Intelligence

Behavioral Economics and Rationality
Bryan Caplan
My social intelligence is a lot higher than it used to be.  I still wouldn't say that I'm "good with people."  But in my youth, I was truly inept.  In junior high, I had one real friend, and many overt... MORE

What's Wrong with the Financial Regulation White Paper

Finance: stocks, options, etc.
Arnold Kling
I am reading this draft. Also of interest is this interview with President Obama.... MORE

Things I'm Glad I Never Said

Macroeconomics
Arnold Kling
Paul Krugman, writing in August of 2002: To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan... MORE

Dean Baker on the Uninsured

Economics of Health Care
David Henderson
Dean Baker correctly takes to task people who claim that the estimated average cost of covering the uninsured with Obama's proposal is a whopping $62,500. Here's his key paragraph: Republicans were quick to put the cost at $62,500 for each... MORE

Sumner: An Embarassment of Riches

Macroeconomics
Bryan Caplan
I could devote a dozen posts to Scott Sumner's latest essay-length entry.  But I'll limit myself to the highlights:Stop worrying about inflation....Laffer is too good an economist to say anything blatantly false, but the entire tone of his WSJ piece... MORE

Help with the Spinach

Economics of Health Care
Arnold Kling
In health care reform, I have described cost controls as the spinach and expansion of coverage as the dessert. I continue to predict that the Democrats will first go for expansion of coverage in a way that alienates Republicans, and... MORE

Audience Questions, 2

Macroeconomics
Arnold Kling
Why is a FICA cut better than a federally-funded sales tax holiday? The latter: - affects everyone, not just workers - is progressive - encourages consumption without delaying deleveraging The big advantage of a sales tax holiday is that,... MORE

Simon Johnson on Geithner and Summers

Finance: stocks, options, etc.
Arnold Kling
He is not happy with the "foundation" for regulatory reform proposed by the current and former Treasury Secretaries. Their view: Regulation is overly focused on safety and soundness of individual banks. Reality: There was a complete failure of safety and... MORE

One-Party State Watch

Arnold Kling
You can watch what the demographers say here. Click on the video link.... MORE

Audience Questions

Macroeconomics
Arnold Kling
Feel free to put constructive questions in the comments. Here are two questions that I recently received, one on health care and one on Keynesian economics. On health care, actually two questions: You asked thequestion why is health care something... MORE

Financial Regulation in Hindsight

Finance: stocks, options, etc.
Arnold Kling
My views are here. I am also skeptical about the claim that we needed a "systemic risk regulator" to prevent the crisis. This would be true if most of the financial damage could not have been prevented by any individual... MORE

In Defense of Low Correlations

Economic Methods
Bryan Caplan
An interesting side discussion from "The Power of Personality" defends the practical importance even small correlations:Walter Mischel (1968) argued that personality traits had limited utility in predicting behavior because their correlational upper limit appeared to be about .30. Subsequently, this... MORE

Employer-Provided Health Insurance

Economics of Health Care
Arnold Kling
I write, We should aim to phase out employer-provided health insurance. However, instead of trying to create a household insurance market that reconstitutes the unsustainable features of employer-provided health insurance, we need to allow for radical innovation in the very... MORE

Personality and Econometrics

Behavioral Economics and Rationality
Arnold Kling
Bryan recently put up two interesting posts, one on personality, the other on econometrics. On personality, he points to some analysis saying that the correlation is higher between certain personality traits and life outcomes than it is between socioeconomic status... MORE

Myth of the Rational Voter, California Initiative Edition

Behavioral Economics and Rationality
Bryan Caplan
From Time, of all places, comes this column by Joel Stein:It turns out that letting me vote on stuff is a bad idea, for much the same reason that giving me a credit card was a bad idea: I love... MORE

Guys in Suits

Central Planning vs. Local Knowledge
David Henderson
Bankruptcy Judge Actually Understands Law How did I miss this? Judge Robert Drain ordered Delphi to hold an auction and allow bids to challenge the government-brokered sale to Platinum Equity. "What's so special about Platinum?" asked Judge Drain. "They're just... MORE

Does Personality Matter? Compared to What?

Behavioral Economics and Rationality
Bryan Caplan
I finally found the time to read "The Power of Personality: The Comparative Validity of Personality Traits, Socioeconomic Status, and Cognitive Ability for Predicting Important Life Outcomes."  [new working link!] It's a meta-analysis, so you've really got to trust the... MORE

One-Party State watch

Political Economy
Arnold Kling
Dan Balz summarizes the grim demographic statistics. He quotes Robert Lang of Virginia Tech. "There's just not enough rural folks and small-city people left in America." For Republicans, the most hopeful statistic is this: Democrats lost white college graduates by... MORE

Tyler Should Bet Against Obama-Care

Economics of Health Care
Bryan Caplan
Robin's happy that "in the NYT, Tyler Cowen dares Obama to put up or shut up."  Tyler himself says:The most likely possibility is that the government will spend more on health care today, promise to realize savings tomorrow and never... MORE

The New York Times today carries a story about how the Federal Reserve Board is making decisions about who gets loans and who doesn't. The reporter, Edmund Andrews, writes: But the financial crisis has drastically changed the role of the... MORE

Summers vs. Goolsbee

Politics and Economics
David Henderson
President Obama was getting his daily economic briefing one recent morning when a fly distracted him. The president swatted and missed, just as the pest buzzed near the shoes of Lawrence H. Summers, the chief White House economic adviser. "Couldn't... MORE

Sociology and Masonomics

Economic Methods
Arnold Kling
Bryan writes, We still think about supply and demand, but we also think about policy, psychology, behavioral genetics, and much more. Some random comments: I wrote about Masonomics as thinking about incentives, signaling, institutions, and evolution. I have heard Nobel... MORE

The Myth of the Rational Voter, Minimum Wage Edition

Behavioral Economics and Rationality
Bryan Caplan
Quoth David Neumark:The accumulated evidence undermines the case for minimum wages even in the best of times. I recognize that there is continuing debate about some of the effects of minimum wages, and that strong public support for higher minimums... MORE

Russ's Challenge

Economic Methods
Bryan Caplan
From my colleague Russ Roberts:I continue to ask the question: name an empirical study that uses sophisticated statistical techniques that was so well done, it ended a controversy and created a consensus--a consensus where former opponents of one viewpoint had... MORE

The Coming Minimum Wage Increase

Labor Market
David Henderson
Early in the Great Depression, President Herbert Hoover made things worse by persuading big businessmen to keep wages high. At those high wages, employers wanted to employ fewer people than otherwise. We are about to suffer another small dose of... MORE

McCraw's Marginal Mistake

Business Economics
David Henderson
In his book, Prophet of Innovation: Joseph Schumpeter and Creative Destruction, business historian Thomas K. McCraw lays out a numerical example of economies of scale. Unfortunately, in doing so he confuses marginal and average cost. McCraw writes (pp. 52-53): Let... MORE

I've studied economics for over twenty years.  The more I think about it, though, the more I realize that I don't know what "economics" means anymore.  Textbooks may say that economics is about "incentives" or "trade-offs."  But you can publish... MORE

Motives and Outcomes

Politics and Economics
David Henderson
In a comment on my post yesterday, Will Wilkinson defended his parallel between Republicans and Democrats. I had granted him that there were parallels in their hypocrisy. But he went further, writing: I think some libertarians and conservatives are annoyed... MORE

From Poverty to Prosperity Watch

Growth: Causal Factors
Arnold Kling
Daron Acemoglu writes, [Prior to 1800,] growth was never based on continuous technological innovations; thus it never resembled the technology-based growth described in Chapters 13-15. Third, in most cases economic institutions that would be necessary to support sustained growth did... MORE

One-Party State Watch

Political Economy
Arnold Kling
Newt Gingrich connects some dots. In 2008 alone, the UAW gave $4,161,567 to the Democratic Party, including Barack Obama. In return, the UAW received 55 percent of Chrysler and 17.5 percent of GM, plus billions of dollars.... MORE

The Aristocracy of Pull, 2

Central Planning vs. Local Knowledge
David Henderson
In a December post, I wrote about the aristocracy of pull, that beautifully descriptive phrase that Ayn Rand used in her classic novel, Atlas Shrugged. It refers to the use of government power to allocate resources. Today, my fellow blogger... MORE

Inequality of Political Power

Political Economy
Arnold Kling
It's hard to decide what to excerpt from Will Wilkinson's article. A fresh-faced 31-year-old, Deese dropped out of Yale Law School last year to work for Hillary Clinton's presidential campaign. When Clinton sank, Deese skipped over to the winning ship,... MORE

HMOs Died Because They Worked

Economics of Health Care
Bryan Caplan
Robin's got a great graph on the HMO revolution.  HMOs held health care spending as a fraction of GDP constant during most of the 90s.  Nothing before or since has managed to do the same.  The graph makes me wonder... MORE

Sandra Scarr's "Why Child Care Has Little Impact on Children's Development" (Current Directions in Psychological Science, 1997) is an impressive literature survey.  Postcard version: Within a broad range of safe environments, quality variations in child care have only small and... MORE

One-Party State Watch

Politics and Economics
Arnold Kling
The Bradley Symposium transcript is now available. Mitch Daniels (p.13): You can be a silver-spoon, blue-blood, wind-surfing, coastal elitist, but if you wear the Democratic label you are presumed to be connected and empathetic and to understand the problems of... MORE

Friedman's Law

Cost-benefit Analysis
David Henderson
In his classic, The Machinery of Freedom (1973, 1989), David D. Friedman formulated Friedman's Law. The law states: It costs any government at least twice as much to do something as it costs anyone else. David Friedman is usually much... MORE

Reading Brad DeLong's "non-Socratic dialogue on social welfare functions" has inspired me to return to one of my favorite literacy forms.  In DeLong's original dialogue, Prof. Agathon helps Prof. Glaukon reach a shocking conclusion:Agathon: "That means that the market system,... MORE

More on the Fischer Black Model

Finance: stocks, options, etc.
Arnold Kling
Some more thoughts on Fischer Black's model of business cycles, following up on my earlier post on Tyler Cowen's piece. 1. Black thinks of us as living in a CAPM world. There is no reward for idiosyncratic risk (risk that... MORE

The Purpose of the Public Health Insurance Plan

Economics of Health Care
Arnold Kling
Ezra Klein writes, The inclusion of a strong public insurance option has become, for most observers I know, the single most recognizable marker for victory. If the public plan exists, liberals have won. If it's eliminated, or neutered, then conservatives... MORE

Justin Fox, Fischer Black, Tyler Cowen

Finance: stocks, options, etc.
Arnold Kling
Fox, The Curious Capitalist, has a new book, called The Myth of the Rational Market. He spent a lot of time trying to piece together the history of the theory of efficient financial markets--random walks, capital asset pricing model, option... MORE

Limits to Progress?

Growth: Consequences
David Henderson
Without the progress of the 20th century, Milton Berle said, we'd all be watching television by candlelight. (Of course, postal delivery might be roughly the same.) This is from Todd G. Buchholz's article on economic growth in last Friday's Wall... MORE

Behaviorial Geneticists versus Policy Implications

Cost-benefit Analysis
Bryan Caplan
In most disciplines, experts oversell their ability to give useful policy advice.  In behavioral genetics, however, experts strangely undersell their ability to give useful policy advice.  Here's a striking passage from Plomin, DeFries, McClearn, and McGuffin's leading behavioral genetics textbook:The... MORE

Isn't That Just an Asian Effect?

Cross-country Comparisons
Bryan Caplan
Over at Freakonomics, Justin Wolfers shares a graph showing how different nations are faring during this recession. His take: "the greater your involvement in producing high-value goods, the harder the fall."  My take on the same graph: Asian economies are... MORE

Forecasting

Macroeconomics
Arnold Kling
Tyler Cowen writes, "Dormant inflation" will spring to life, at some point quite rapidly, and the Fed will choose to tighten. Five to six percent inflation for a while would be OK but we will be faced with the prospect... MORE

On Being Certain

Books: Reviews and Suggested Readings
Arnold Kling
Robert Burton writes, The message at the heart of this book is that the feelings of knowing, correctness, conviction, and certainty aren't deliberate conclusions and conscious chohices. They are mental sensations that happen to us. That is from the conclusion... MORE

Obama on How Markets Reduce Racial Discrimination

Political Economy
David Henderson
University of Chicago economist Gary Becker, in his Ph.D. dissertation, later made into a book, The Economics of Discrimination, showed that free markets make racial discrimination costly. His basic argument is that discrimination is a self-imposed restriction on trade that... MORE

Pays Cuts: Are They For Real?

Labor Market
Bryan Caplan
Several economists I know say that labor markets have gotten more flexible in recent years.  But are nominal pay cuts really happening to any significant degree?  The only evidence that's come across my desk is from this piece, which claims... MORE

Does Cooperation Lead to Socialism?

Political Economy
Arnold Kling
Kevin Kelly says yes: Did we really believe we could collaboratively build and inhabit virtual worlds all day, every day, and not have it affect our perspective? The force of online socialism is growing. Its dynamic is spreading beyond electrons--perhaps... MORE

More on Matt Yglesias

Macroeconomics
David Henderson
Arnold has posted below on Matt Ygelesias's criticism of the view that macroeconomics requires a microeconomic foundation. There's more to say. First, check out comment #21 by one, Matt Rognlie, on Yglesias's site. It's quite good. I was surprised when... MORE

An Unanswered Question on the Economics of Suicide

Information Goods, Intellectual Property
Bryan Caplan
What don't more people with painful, terminal diseases commit suicide?  Religion dissuades some of them - that's the point of Hamlet's famous soliloquy.  But most people quickly ignore religious teachings when they seriously cramp their style.Some people might worry about... MORE

So Many Narratives

Books: Reviews and Suggested Readings
Arnold Kling
Eric Falkenstein summarizes many books on the financial crisis, concluding For me, the best explanation comes from two parts. Stan Liebowitz's account on how we slowly eroded mortgage standards with the best intentions, led by academia, regulators, legislators, and investment... MORE

Some Intellectual History for Matt Yglesias

Macroeconomics
Arnold Kling
He writes, the decision has been made to somewhat arbitrarily impose the view that macro models must be grounded in micro foundations. Readers of this blog know that I would be the last person to defend economic methods in macro... MORE

Lectures on Macroeconomics, No. 16

Macroeconomics
Arnold Kling
This lecture will describe inflation as a fiscal phenomenon. You have heard that inflation is, anywhere and everywhere, a monetary phenomenon. This lecture will take a more nuanced view. The conventional wisdom would say that we can run large deficits... MORE

Orszag and Hanson on McAllen's medical costs

Economics of Health Care
Arnold Kling
Peter Orzsag writes, McAllen's per capita expenditures grew to nearly twice the national average - driven primarily by local norms that tend towards heavier use of discretionary services - such as diagnostic testing and surgical versus less invasive interventions -... MORE

Did Obama Restore Confidence?

Macroeconomics
Bryan Caplan
One non-Obama-loving economist I know nevertheless gave him credit for "restoring confidence."  I agree that confidence is coming back.  But does Obama deserve the credit?  The obvious alternative is that panic, like grief, normally fades away a few months after... MORE

The Fiscal Policy Lag

Fiscal Policy
Arnold Kling
Keith Hennessey has another must-read post. I believe the Administration made an enormous mistake in its legislative implementation of the stimulus. As a result, the boost to GDP will come six to nine months later than it needed to (maybe... MORE

Health Care Policy

Economics of Health Care
Arnold Kling
You can listen to me, giving what felt at the time like a good talk. Also, I recommend Keith Hennessey You cannot magically slow health spending growth without proposing policy changes that affect incentives and behavior. If the President is... MORE

Marcus Welby Was Greedy, Too

Economics of Health Care
Arnold Kling
From my letter to the editor at the Washington Post: In 1960, 50 percent of personal health-care spending was paid for by patients out of pocket. Today, that figure is about 10 percent. We will never again see a patient-centered... MORE

Backwards Induction in The Lookout

Game Theory
Bryan Caplan
The Lookout is not just one of the best modern crime flicks you've never heard of.  It's also the most compelling dramatic depiction of backwards induction I can remember.  The lead character has trouble sequencing his actions (wake up, shower,... MORE

One-Party State Watch

Political Economy
Arnold Kling
I went to an event on the future of conservatism, described here.... MORE

Pessimistic Bias Strikes Again?

Behavioral Economics and Rationality
Bryan Caplan
I've been arguing for years that non-economists suffer from pessimistic bias.  They underestimate the recent past, present, and future performance of the economy.  A new piece in the Journal of Economic Psychology is consistent with my thesis: When you ask... MORE

The Parental Wish List: What's Missing?

Family Economics
Bryan Caplan
What is the point of raising kids?  On my view, the point is basically consumption.  Creating life and watching it grow is a fascinating and rewarding journey.  For many parents, though, the main point is actually investment: Taking little savages... MORE

The Bizarre World of Regulation

Regulation
David Henderson
Today's Wall Street Journal carries an article that highlights how strange regulation can be. Before reading, recall that one of the major alleged goals of regulation of cigarettes was to handle the problem of second-hand smoke. The idea was that... MORE

Free Lunch!

Economics of Health Care
Arnold Kling
The President's Council of Economic Advisers writes, We estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2 percent in... MORE

From the abstract of a recent NBER working paper: we solve the stochastic neoclassical growth model with recursive preferences using four different approaches: second- and third-order perturbation, Chebyshev polynomials, and value function iteration. These computations tell us how many angels... MORE

Good Question

Behavioral Economics and Rationality
Bryan Caplan
From my chairman, Don Boudreaux:This afternoon you interviewed a pundit who claims to be "inspired" by the way that Bill and Hillary Clinton, having been so critical of Barack Obama during the presidential primary campaign, now work so agreeably with... MORE

Portfolios of the Poor: Highlights

Books: Reviews and Suggested Readings
Bryan Caplan
How markets free individuals from degrading family ties.Approaching several people for loans before getting one is not merely an inconvenient outcome of the financial shallowness of the informal sector, but a source of stress and shame.For migrants who have left... MORE

Gorman on Health Reform

Economics of Health Care
David Henderson
This month's featured article on Econlib is by health economist Linda Gorman. Gorman points out that Blue Cross was given an important tax advantage over commercial insurers early in the game and that Medicare and Medicaid were modeled on Blue... MORE

Thumbs Up for Portfolios of the Poor

Books: Reviews and Suggested Readings
Bryan Caplan
I really liked Portfolios of the Poor: How the World's Poor Live on $2 A Day.  Westerners tend to think of the world's bottom billion as charity cases. The harsh and amazing reality, though, is that they largely stand on... MORE

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