Bryan Caplan and David Henderson

September 2009

A Monthly Archive (135 entries)

Soviet Shoes

Central Planning vs. Local Knowledge
David Henderson
I mentioned in Tuesday's post that one of my favorite passages from Scott Shane's Dismantling Utopia is the passage about shoes. Commenter Bill asked me for the passage. Here it is: My informal survey suggested that some of the longest... MORE

Taking Bryan's Counterintuitive Claim Challenge

Economic Education
Arnold Kling
Recently, Bryan posed a challenge and a follow-up to state a basic economic claim that is difficult to explain simply and intuitively. Of all of Greg Mankiw's Ten Principles of Economics, the one that I think is hardest to explain... MORE

Unchecked and Unbalanced Teaser

Books: Reviews and Suggested Readings
Arnold Kling
Cato's Caleb Brown and I recorded a podcast about Unchecked and Unbalanced, which I gather will appear in late November. If you listen for the eight minutes or so, I think you will get a rough sense of the issues... MORE

Money as a Store of Value

Macroeconomics
Arnold Kling
A commenter asks how I reconcile my assertion that money is a store of vaue with my view that macroeconomics should not emphasize the role of money as a store of value. It is only the second view--that money is... MORE

From Poverty to Prosperity Watch

Growth: Causal Factors
Arnold Kling
Mark Kleiman writes, I'm worried about the tiny budget of the National Science Foundation and other basic-research enterprises, about an increasingly shoddy educational system, and about cooking the planet. The stock of capital plant and equipment, not so much. In... MORE

Intuitive Econ Challenge

Economic Education
Bryan Caplan
In a recent post, I posed a challenge:State any proposition in basic economics in the comments, and I'll make it intuitive in a follow-up post.Now I'm back to keep my promise.  Fortunately for me, many of the 55 comments don't... MORE

My First Day of Class

Economic Education
David Henderson
I started my Executive MBA economics class today that I teach in front of a camera to 3 remote locations: D.C., Norfolk, and Oceana. I've taught since 1975 with 4 years off to work at Cato or in the Reagan... MORE

Monetary Theory, Once Again

Macroeconomics
Arnold Kling
Josh Hendrickson and a reader raise interesting questions.... MORE

Unchecked and Unbalanced Watch

Behavioral Economics and Rationality
Arnold Kling
One of the themes in the second of my forthcoming books is that power is becoming concentrated while knowledge is becoming specialized. David Carr muses about how hard it is to know everything nowadays. In terms of what I call... MORE

Inner Economist Watch

Behavioral Economics and Rationality
Arnold Kling
FuturePundit on the finite supply of willpower.... MORE

Whose Macro is Bizarre?

Macroeconomics
Arnold Kling
Thanks to Mark Thoma for keeping the debate going. In a defense of what Paul Krugman would call Dark Age Macroeconomics, David Beckworth unleashes that most medieval of weapons, the dreaded Vector Autoregression. More on that below the fold. Also... MORE

Securitization and Credit Default Swaps

Finance: stocks, options, etc.
Arnold Kling
The latest issue of FinReg21 looks at them. First, Charles Davi makes a big deal out of the fact that credit default swaps are derivatives, which allow institutions that do not own securities to make side bets on the value... MORE

Utility Isn't Everything

Economic Philosophy
Bryan Caplan
Scott Sumner is one of the great monetary thinkers of our age.  But the news isn't all good - he's also a utilitarian.  I am frankly mystified by the enduring popularity of a moral theory subject to so many simple... MORE

Krugman on Federal Debt

Fiscal Policy
David Henderson
Read the following from Paul Krugman in 2003 when the irresponsible people increasing the federal debt (he and I agree here) were Bush and the Republican Congress. Two highlights: That may sound alarmist: right now the deficit, while huge in... MORE

Questions About Financial Crises

Finance: stocks, options, etc.
Arnold Kling
Neither a borrower nor a lender be. That's the way I feel after reading This Time is Different, by Carmen M. Reinhart and Kenneth S. Rogoff. This is certainly one of the must-read books of the year. Some thoughts after... MORE

Basic Economics Is Intuitive

Economic Education
Bryan Caplan
Economists often off-handedly remark that basic economics is "counterintuitive."  In one of the papers he presented at GMU, Scott Sumner has a whole appendix on "Why is economics so counterintuitive?"  Even my hands aren't clean here: In The Myth of... MORE

Responses to Two Critics

Macroeconomics
Arnold Kling
I have been making the following claims about macro.... MORE

Sumner on Why Friedman Was Too Klingian

Monetary Policy
Bryan Caplan
Milton Friedman famously argued that "money matters," but he had a caveat: Money matters with long and variable lags.  Over at Cato Unbound, Sumner suggests that even Friedman was far too Klingian:Most economists assume that interest rates or the money... MORE

Caught My Eye

Finance: stocks, options, etc.
Arnold Kling
Esther (genius grant) Duflo and Abhijit Banerjee are interviewed. They are known for doing experimental tests of anti-poverty tactics. In one project we gave away a kilo of lentils for each immunization given to a child, and it had a... MORE

Consumer Warning on Drugs

Regulation
David Henderson
An Indiana woman was recently charged with a crime for buying cold medicine. It's due to a bill signed by that great believer in freedom, George W. Bush, in 2006. Many state governments, including Indiana's, followed suit with their own... MORE

A Guess and a Test

Family Economics
Bryan Caplan
From Will Wilkinson, in a 100+ comment discussion at Overcoming Bias:I would guess that number of children is negatively correlated to number of sexual partners.According to the General Social Survey, Will's guess is... correct!  The correlation between number of children... MORE

How to Kill Entrepreneurship

Business Economics
Arnold Kling
Make it an exercise in obtaining government money. Fisker Automotive, a private company based in Irvine, Calif., has received a $529 million loan from a Department of Energy program designed to fund the development of alternative vehicles. This was announced... MORE

Weird Economics at G-20 Summit

International Trade
David Henderson
From the September 22 Wall Street Journal: Those countries running current account deficits, most notably the U.S., would have to define ways to boost savings. Nations running surpluses -- China, Germany and Japan, among others -- would detail how they... MORE

Why Not Restore Glass-Steagall?

Finance: stocks, options, etc.
Arnold Kling
David Moss writes, The fifty years of relative financial calm that followed the Glass-Steagall Act of 1933, the Securities Exchange Act of 1934, and the Banking Act of 1935 strongly suggest that sound public risk management can make a positive... MORE

Read the whole thing. He likes the Recalculation story, which he points out he articulated last December. But he doesn't really buy my bizarre monetary theory. He writes, "I see the Fed as controlling nominal gdp but not always real... MORE

Attention, Twits

Econlog Administrative Issues
Arnold Kling
Give your advice and help in the comments. I am now a twit. A newbie twit. I set up an account on twitter. David Henderson has one, too. What should we do with these? Should we have some "follow me... MORE

Government Spending on Health Care is Industrial Policy

Economics of Health Care
Bryan Caplan
Strange as it may seem, Scandinavia now has free-market admirers, most notably Will Wilkinson and especially Scott Sumner.  The heart of their case: If you ignore their welfare states, Denmark has one of the freest economies in the world, and... MORE

Bizarre Monetary Theory, Once Again

Macroeconomics
Arnold Kling
Bill Woolsey writes, it is not difficult to see that a large shift in the composition of demand would result in larger shifts in resource utilization, higher structural unemployment, and slower growth in the productive capacity of the economy. For... MORE

Felix Salmon vs. Olivier Blanchard

Finance: stocks, options, etc.
Arnold Kling
Salmon writes, At heart, it all comes down to information: loans are stronger and more desirable than bonds, because a bank intends to hold its loan to maturity and does a lot of underwriting, shoring it up with covenants. Bonds,... MORE

Data on Canadian Medical Care

Economics of Health Care
David Henderson
"The plural of anecdote is data." (attributed to George Stigler) My wife had breast cancer in 1986 and is an active consumer of information about breast cancer. A few days ago she gave me a link to a web site... MORE

Good News About Subsistence

Labor Market
Bryan Caplan
Robin's sounding strangely like a doom-sayer* lately:But as long as enough people are free to choose their fertility... then in the long run we should expect to see a substantial fraction of population with an heritable inclination to double their... MORE

As John Taylor points out, our debt situation today is much scarier than it was after World War II. When the war ended, we stopped accruing war debt. As GDP grew, the ratio of debt to GDP shrank. I would... MORE

Unintended Consequences of Regulation

Regulation
David Henderson
From yesterday's Wall Street Journal, two good old-style news stories on the consequences of regulation. To Outfox the Chicken Tax, Ford Strips Its Own Vans BALTIMORE -- Several times a month, Transit Connect vans from a Ford Motor Co. factory... MORE

Elves and Helicopters

Macroeconomics
Arnold Kling
Bryan asks, Could the central bank hit a 20,000% nominal growth target, plus or minus 1000%? No. Certainly not next quarter. Maybe it come close if it aimed for such a target in 2014. Consider two thought-experiments, one involving elves... MORE

10,005% Nominal GDP Growth

Monetary Policy
Bryan Caplan
In response to my criticism, Arnold writes:I do not think that central banks control nominal GDP any more tightly during a hyperinflation than at other times. That is, in normal times, if nominal GDP wants to grow at a 5... MORE

Stringham's A Winner... Again

Fiscal Policy
Bryan Caplan
Two years ago, my co-author Ed Stringham and I won a First Prize in the Templeton Enterprise awards, all thanks to Ed's initiative.  Now another lucky co-author has Stringham to thank for a big prize:Trinity College Associate Professor of American... MORE

My Bizarre Monetary Theory, Continued

Macroeconomics
Arnold Kling
Before I respond to Bryan's comments, let me first recommend the two Scott Sumner papers that he mentions. This paper develops a theory that cultural values drive economic policy, which in turn drives economic outcomes. It is an interesting complement... MORE

Robin's Atoms

Growth: Causal Factors
Bryan Caplan
I always defer to Robin's knowledge of the natural sciences.  So what am I do to when he replies thusly to my virtual reality post?There are roughly 1057 atoms in our solar system, and about 1070 atoms in our galaxy,... MORE

Arnold's Bizarre Monetary Econ

Macroeconomics
Bryan Caplan
I'd like to think that I'm misunderstanding Arnold's views on monetary econ.  But in his latest post, he states his position quite clearly.  He begins with the uncontroversial:The Federal Reserve can manipulate some market interest rates by printing money and... MORE

I Deny (the significance of) MV = PY

Macroeconomics
Arnold Kling
Jeffrey Rogers Hummel writes, Orthodox monetarists attributed such shocks to declines in the rate of monetary growth, whereas traditional Keynesians blamed declining autonomous expenditures. Both of these sources are captured in the well known equation of exchange: MV = Py,... MORE

Kling vs. the International Monetary Fund

Finance: stocks, options, etc.
Arnold Kling
They write, Current reservations about securitization do not invalidate its economic rationale, arguing instead for repairing the flaws exposed by the recent crisis. Securitization alleviates credit constraints and places asset exposures with entities that are more willing to accept and... MORE

Competition in Media Works

Taxation
David Henderson
When I read that President Obama would make the rounds of all the major network news shows except that of Fox News Channel, I was skeptical that any hard information would come out. But we did see the results of... MORE

The Feds' Attack on Freedom of Speech

Regulation
David Henderson
Not the Fed, as in Bernanke, but the Feds, as in the federal government. Here are excerpts from an AP news story that just came in: The government is investigating a major insurance company for allegedly trying to scare seniors... MORE

I'm glad that Tyler's criticizing faux-agnostic economists, but I'm enough of a spoilsport to point out that he previously advised his readers to closet their inner economists - at least to their families.... MORE

Virtual Cornucopia

Growth: Causal Factors
Bryan Caplan
In the past Robin has braved the derision of his colleagues by speculating that in the next few decades, (a) we might upload our brains and achieve immortality, and (b) the economy might start doubling in size every few days. ... MORE

Predictability of Crises

Macroeconomics
Arnold Kling
Gilles Saint-Paul writes, any macroeconomic theory that, in the midst of the housing bubble, would have predicted a financial crisis two years ahead with certainty would have triggered, by virtue of speculation, an immediate stock market crash and a spiral... MORE

Ezra Klein Won't Take My Medicine

Economics of Health Care
Arnold Kling
He seems to accept my diagnosis. The average health-care coverage for the average family now costs $13,375, according to Kaiser... About 160 million Americans receive health coverage through their employers. In general, the employer picks up 73 percent of the... MORE

Boettke on Masonomics

Austrian Economics
Arnold Kling
Pete Boettke pens An Open Letter to Tyler Cowen (and Arnold Kling). He has some nice things to say about Tyler.... MORE

Tyler's complex pluralistic take on local regulation perplexes Matt Yglesias:[W]hy on earth isn't the libertarian take on this that we should permit high density construction and let the market decide what happens? The answer to Matt's question is surprisingly simple. ... MORE

Should You Pay Off Your Mortgage?

Taxation
David Henderson
That's a question asked by Louis J. Prues and answered by the Wall Street Journal's Kelly Greene in the weekend Journal. Ms. Greene summarizes the findings of an analysis by Tony Webb, a research economist with the Boston Center for... MORE

Obama's Bait and Switch

Economics of Health Care
David Henderson
In the spring of this year, President Obama argued that one reason for health care reform was to get long-term spending on government health care under control. As he recognized and as every scholar and analyst who has studied future... MORE

Why Aren't Government Employees Worse?

Microeconomics
Bryan Caplan
I first read Murray Rothbard when I was seventeen years old, and suddenly my whole high school made sense. Lazy teachers, guys with college degrees teaching gym, required drama classes, and lies, lies, lies everywhere.  Mr. Libertarian had a compelling... MORE

Jimmy Carter's Ad Hominem

Economic Philosophy
David Henderson
Former President Carter Presents Us With a Teachable Moment One of the terms most misused in recent years is the charge of ad hominem. Once, when I testified before the Food and Drug Administration and quoted an FDA bureaucrat, Dr.... MORE

One More Step toward Fascism

Regulation
David Henderson
The Wall Street Journal reports the following today: Policies that set the pay for tens of thousands of bank employees nationwide would require approval from the Federal Reserve as part of a far-reaching proposal to rein in risk-taking at financial... MORE

Kling on the State of Macro

Macroeconomics
Arnold Kling
Let me tell my story using the following table, which shows the primary causes of economic fluctuations according to different economists.: Animal Spirits,Liquidity PreferenceMonetary ShocksProductivity ShocksRecalculationKeynes, Akerlof-Shiller, KrugmanLucas, Dornbusch, Fischer, BlanchardPrescottClower, Leijonhufvud, Hayek, Kling Macro practitioners (the people who report... MORE

Tyler Cowen on Masonomics

Economic Methods
Arnold Kling
He spoke at a lunch today. I didn't take notes, so I may have some things wrong.... MORE

Poster Child for U.S. Health Care

Economics of Health Care
Arnold Kling
A British reader forwarded this. Note that in order to get life-saving treatment, the boy apparently must go to the U.S. Overall, I am not a huge fan of our health care system, but one thing that I suspect that... MORE

The Biggest Lie on Health Reform

Economics of Health Care
Arnold Kling
Of the following statements made by President Obama in his speech on health reform last week, which is not true? Answer below the fold. a) "if you are among the hundreds of millions of Americans who already have health insurance... MORE

John Quiggin on Macro

Macroeconomics
Arnold Kling
He writes, The appealing idea that macroeconomics should develop naturally from standard microeconomic foundations must be recognised as a distraction. In its place, we must accept, in the language of systems theory that macroeconomic phenomena are emergent, arising from complex... MORE

The Expected Human

Labor Market
Bryan Caplan
The day my latest son was born, I quoted Julian Simon:One spring day about 1969 I visited the U.S. AID office on the outskirts of Washington, D.C., to discuss a project intended to lower fertility in less-developed countries. I arrived... MORE

Audio on the Crisis

Finance: stocks, options, etc.
Arnold Kling
It's here. I start about 7-1/2 minutes in, and Russ Roberts starts about 33 minutes in. Russ sounds great. Mine probably reads better than it sounds. You can read a decent approximation of what I said here. Then listen to... MORE

Posner on Personality

Behavioral Economics and Rationality
Bryan Caplan
It almost sounds like Posner's jumping on the personality-and-economics bandwagon:Optimism is also a personality trait, and, as it happens, one essential to human progress. As I have argued elsewhere with reference to our current economic situation, what Keynes called "animal... MORE

Economics of Mandated Health Insurance

Economics of Health Care
David Henderson
Today's Wall Street Journal contains an interesting front-page news story about mandated health insurance, focusing on the case of Massachusetts. When Mitt Romney was governor, he pushed through a mandate, with subsidies for low-income people to buy it and taxes... MORE

Private Death Panels

Economics of Health Care
Bryan Caplan
Suppose it were legally safe for a private insurer to offer death panels - presumably after talking to marketing to get a better name.  (By "legally safe" I mean not just the absence of contrary regulation, but a strong expectation... MORE

Suits, Geeks, and Lehman

Finance: stocks, options, etc.
Arnold Kling
From a New York Times story: He recalls vividly the days in early 2007 at Lehman when his financial models began to throw up more warnings showing delinquencies and defaults, and he remembers colleagues on his desk raising questions about... MORE

Gordon Reviews Create Your Own Economy

Books: Reviews and Suggested Readings
Bryan Caplan
David Gordon, possibly the world's greatest fact checker, reviews Tyler's new book here.... MORE

The Moral Hazard Story

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts told it with great passion today. I'm hoping an audio will be available tomorrow. But he should not feel lonely. Simon Johnson and James Kwak write, creditors had only limited incentives to watch over major banks. Ordinarily, creditors... MORE

Why Get Insurance?

Behavioral Economics and Rationality
Arnold Kling
My best guess is that most insurance is bought not to reduce risk but instead to signal prudence and caring. The first life insurance companies had a terrible time selling "bets on their death," and only succeded when they... MORE

What I'm Saying

Finance: stocks, options, etc.
Arnold Kling
If all goes according to schedule (unlikely), then about the time that this is posted, I should be in the middle of saying something along these lines:... MORE

The Historical Roots of the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
My paper has been released.... MORE

Ohanian and His Critics

Economic History
Bryan Caplan
Lee Ohanian's paper on "What - or Who - Started the Great Depression?" didn't get a lot of love in the comments.  I'm not going to reply to all the criticisms, but there are a few I'd like to... MORE

Me On KQED-FM

Upcoming Events
David Henderson
On Tuesday, September 15, at 9:00 a.m. PDT (noon, EDT), I'll be on KQED-FM (88.5) Forum out of San Francisco, talking about the first anniversary of the Lehman Brothers collapse. The other guests will be Joe Grundfest of Stanford Law... MORE

Laidler and Sumner on the State of Macro

Macroeconomics
Arnold Kling
Will WIlkinson notifies me of Scott Sumner's essay at Cato Unbound. Self-recommending, with interesting commentators lined up. On a related note, David Laidler writes, The point of [Keynes'] liquidity preference theory was that money, whose use as a means of... MORE

Tea and Empathy

Economics of Education
David Henderson
[BTW, I almost made it to the top of Half Dome. Last year, I was intimidated by the series of steep switchbacks just preceding the cables at the top. On Saturday, I got to the switchbacks, felt intimidated again, had... MORE

Reminder

Upcoming Events
Arnold Kling
The place to be Tuesday morning will be on Capitol Hill.... MORE

More Tea and Sympathy

Politics and Economics
Arnold Kling
Again, off mission so below the fold.... MORE

In previous years, I've taught graduate Public Finance I.  In designing the course, I treated "public finance" as a synonym for "public economics" or "economics of government."  So while I spent several weeks discussing bread-and-butter public finance topics like the... MORE

Blog on Causes of the Crisis

Macroeconomics
Arnold Kling
I am definitely going to be a subscriber to this new blog. Thanks to Will Wilkinson for the pointer. Several of the initial posts are pushback at Paul Krugman's piece on what economists got wrong. Nobel Laureate Vernon Smith chimes... MORE

Tea and Sympathy

Politics and Economics
Arnold Kling
A conservative photo-journalist refers to yesterday's rally in Washington as The Conservative Woodstock. I believe that this day could be referred to in the not too distant future as the day that changed America. This was the day the great... MORE

The View from Outside

Finance: stocks, options, etc.
Arnold Kling
Tyler Cowen lets loose with both barrels in today's New York Times. we're still at the point where the medical sector is enshrined as "too big to take a pay cut," which is not so far removed from the banking... MORE

Cochrane's Political Economy

Behavioral Economics and Rationality
Bryan Caplan
From his rebuttal to Krugman: Krugman is trying to say that a cabal of obvious crackpots bedazzled all of macroeconomics with the beauty of their mathematics, to the point of inducing policy paralysis.  Alas, that won't stick. The sad fact... MORE

"All Theories Are False"

Economic Methods
Bryan Caplan
I can't tell you how many times natural and social scientists have solemnly told me, "All theories are false."  Their "proof" usually amounts to the solitary example of Newtonian physics, proven false by Einsteinian physics.  But if you're patient, they... MORE

What if Lehman had been Bailed Out?

Finance: stocks, options, etc.
Arnold Kling
Joe Nocera speculates, In truth, a Merrill or A.I.G. default would have created something akin to a financial nuclear bomb -- much worse than Lehman's filing for bankruptcy. Merrill was a much bigger firm, with deep roots on Main Street... MORE

Some Pushback to Krugman

Economic Methods
Arnold Kling
From John Cochrane and from Daniel Klein. Cochrane writes, Most of the article is just a calumnious personal attack on an ever-growing enemies list, which now includes "new Keyenesians" such as Olivier Blanchard and Greg Mankiw. Rather than source professional... MORE

Moral Hazard and Capital Structure

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts is working on a paper suggesting that the fragility of our financial system could be the result of past bailouts, in which unsecured creditors and counterparties of financial institutions were always made whole. In some sense, the fact... MORE

Some people sincerely like monogamy; other people sincerely don't.  Under the circumstances, it seems wise for everyone to just reveal their proclivities and pair up with people who share their expectations.  Unfortunately, I don't see this happening.  There is a... MORE

Friday Afternoon Miscellany

Political Economy
Arnold Kling
Keith Hennessey has an interesting question. What thought leader most clearly and effectively presents points of view with which you frequently strongly disagree? He proposes that awards be given. Would Tyrone be considered eligible? Presumably, my nominees have to be... MORE

9-15 anniversary event

Upcoming Events
Arnold Kling
I will be speaking at an event on Capitol Hill on Tuesday, September 15. This is an anniversary of sorts for the financial crisis, and that is the topic for the event. I am planning a really hard-hitting talk. I... MORE

Experts and Government

Political Economy
Arnold Kling
An essay in the The Australian touches on issues that I often write about on this blog. The tendency to regard public opinion as the prisoner of irrationality informed the attitude of the elite towards the public display of emotion... MORE

The Fed's Hold on Economists

Monetary Policy
David Henderson
And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him,"... MORE

Shocking Views on Health Policy

Economics of Health Care
Arnold Kling
They come from Richard A. Cooper, a physician (not to be confused with Richard Cooper, the specialist in international economics). Orszag has argued that if Medicare spending could be as low in Newark as it is at Mayo, the nation... MORE

Like almost everyone else, libertarians typically argue that Herbert Hoover's policies exacerbated the Great Depression.  But there's a key difference: Normal people blame Hoover's commitment to laissez-faire, but libertarians blame Hoover's proto-New Deal policies.  Libertarian economists are particularly likely to... MORE

Trip to Yosemite

Energy, Environment, Resources
David Henderson
I'm heading for Yosemite later this afternoon. My goal: get to the top of Half Dome. I made it almost the whole way last year. If I get to the cables (in this picture from the web--that's not me; that's... MORE

Obama's Contradiction on Health Care: II

Economics of Health Care
David Henderson
Three commenters on my post last night (ed, mark, and Karl Smith) pointed out, correctly, it turns out, that I missed Obama's point. I accused him of contradicting himself by claiming that he wouldn't put any government funds into the... MORE

When a Fund Bet on a Bailout

Finance: stocks, options, etc.
Arnold Kling
Bloomberg reports, From July 2007 to July 2008, the commercial-paper portion of Reserve Primary's holdings jumped to almost 60 percent from 1 percent, according to the trade association. The fund's yield rose to 0.4 percentage point above the average among... MORE

Monogamy and Heterogeneity

Family Economics
Bryan Caplan
One thing I've learned from seminars: Preferences are almost unimaginably heterogeneous.  During a presentation, I'll be thinking, "No one will like this paper."  Then lo and behold, this paper has three ardent defenders.  And this is the harmonious, genteel GMU... MORE

Obama's Contradiction on Health Care

Economics of Health Care
David Henderson
Here are two segments of Obama's speech this evening. They were within two paragraphs of each other: Despite all this, the insurance companies and their allies don't like this idea. They argue that these private companies can't fairly compete with... MORE

Obama Speaks

Politics and Economics
Arnold Kling
[Update: My reactions to the President's health care speech are here.] The folks at Cato think that President Obama's speech to school kids was creepy. I agree. You know what it reminds me of? In 7th or 8th grade, during... MORE

Jet Lag, Night Feedings, and Fixed Costs

Cost-benefit Analysis
Bryan Caplan
Economists usually emphasize marginal analysis.  Should a firm make one more pound of steel?  Should a shopper spend one more minute looking for a lower price?  But economics has just as much to say about all-or-nothing decisions.  If a firm... MORE

Friedman vs. Bernanke, II

Monetary Policy
David Henderson
As noted in my previous post on this, Tyler Cowen and I have converged: we agree that Bernanke's and Friedman's views on the causes of the Great Depression differed and that, although there is some ambiguity, there is no clear... MORE

A Contestable Market

Growth: Causal Factors
Arnold Kling
Free to Choose Media asks, What institutions can enable the world's poor to realize their power and achieve prosperity? The best blog answer can win $250. The forthcoming book, From Poverty to Prosperity, by yours truly and Nick Schulz, would... MORE

The FDA's $2.3 Billion Attack on Free Speech

Economics of Health Care
David Henderson
Even Google didn't believe it. After Pfizer's $2.3 billion settlement with the Food and Drug Administration was announced, if you were to search for the words "Pfizer 2.3 billion legal settlement," Google responded with, "Did you mean: Pfizer 2.3 million... MORE

Obama's Baby Step on Free Trade

International Trade
David Henderson
Finally, I have something positive to say about Obama's economic policy. Last Thursday the U.S. government lifted a number of restrictions on trade with Cuba. The Treasury Department lifted most restrictions on family travel to Cuba and also lifted limits... MORE

The Narrative of the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
In this essay, I write, The dramatic structural changes that took place in the financial industry were not noticed by the general public, and received little coverage even in the financial press. However, it is a myth that financial regulators... MORE

I've Got a Little List

Politics and Economics
Bryan Caplan
Ryan Avent's not happy with my exploratory list of anti-suburban regulations:This is truly a remarkable list. One thing to note is that Caplan doesn't seem to grasp that criticisms of pro-suburban policies are largely about the forms that are encouraged... MORE

Henderson Speech at Hillsdale College

Upcoming Events
David Henderson
I'll be speaking at Hillsdale College in Hillsdale, Michigan on September 15. Topic: The Joy of Freedom: An Economist's Odyssey. Location: Lane 125. Time: 6:45 p.m. Sponsored by: Praxis, a political economy club on campus. Open to the public.... MORE

Banana Republic Watch

Political Economy
Arnold Kling
Who wrote this? Answer below the fold. The mystery author writes, The finance sector's increasing concentration and growing political muscle have undermined the traditional American understanding of the difference between free markets and big business. This means not only that... MORE

Cities, Suburbs, Country: Who's Subsidizing Whom?

Politics and Economics
Bryan Caplan
When I was pointing out some ways that government discourages suburbanization, I started wondering about budgetary cross-subsidies between cities, suburbs, and rural areas in the U.S.  Who's subsidizing whom?  Nothing decent googles for me - though I did come across... MORE

The Incredible Shrinking Private Sector?

Economics of Health Care
Arnold Kling
Michael Mandel writes, The employment report shows that private sector employment in August 2009 was lower than it was in August 1999 Of course, August of 1999 was near the peak of the dotcom boom, and August of 2009 is... MORE

Boo Alan Blinder

Political Economy
Arnold Kling
He writes, an audit of its monetary policies by the GAO -- which, remember, works for Congress -- could easily develop into something quite dangerous. Here is a not-so-unlikely hypothetical: sometime in 2010, the Fed, wanting to avoid inflation, will... MORE

Labor Day is Not Union Day

Labor Market
David Henderson
The present recession has increased private-sector unemployment to over ten percent, and feckless attempts by government to ameliorate the recession have greatly expanded government employment. I predict that BLS data for 2009 will show government unions crossing the 50 percent... MORE

Now that my baby situation is under control, I'm ready to respond to Matt Yglesias.  Last week, he wrote, "Bryan Caplan specifically cites America's large houses and ample parking spaces as the benefits of our free market approach when they... MORE

Book Watches

Books: Reviews and Suggested Readings
Arnold Kling
Both forthcoming books now have Amazon pages. Neither is published yet, but pre-orders would be appreciated. From Poverty to Prosperity. Unchecked and Unbalanced.... MORE

Spontaneous Order Denied

Economic History
Arnold Kling
Doug Rushkoff says that our capitalist society is neither spontaneous nor an order. He thinks it came about because of some decisions made by monarchs in the 13th century. The first innovation was to centralize currency. What better way for... MORE

Mortgage Markets: The Public Option

Finance: stocks, options, etc.
Arnold Kling
The Washington Post reports, Only one lender of consequence remains: the federal government...nearly 90 percent of all new home loans are funded or guaranteed by taxpayers...Government officials generally agree that it would be better for private lenders to resume their... MORE

What Do Conservatives Believe?

Political Economy
Arnold Kling
Tyler Cowen draws up a list. I liked his last point: Responsibility is a more important value than either liberty or equality. The other night, we had a dinner party where my wife and I were the only ones who... MORE

Casey Mulligan on Employment

Labor Market
David Henderson
Casey Mulligan's blog is a gold mine. My two highlights are his two latest blogs. First, he points out that, according to the household employment data, seasonally adjusted employment last month fell by about 400,000. He attributes some of this... MORE

Another Great Simon

Economic Education
Bryan Caplan
Today Tyler shares his erudition on another great Simon, Simon Newcomb.  I primarily know Newcomb from his 1893 piece in the QJE, "The Problem of Economic Education."  It's one of the great dissections of economic misconceptions.  If you've always wanted... MORE

The Recalculation Model, Simplified

Macroeconomics
Arnold Kling
First, I note that Paul Krugman is sounding Austrian. In a follow-up to his longer piece, he writes, the economy is a complex system of interacting individuals -- and these individuals themselves are complex systems. Neoclassical economics radically oversimplifies both... MORE

The G 20 Speaks

Finance: stocks, options, etc.
Arnold Kling
They say, Consistent and coordinated implementation of international standards, including Basel II, to prevent the emergence of new risks and regulatory arbitrage, particularly with regard to Central Counterparties for credit derivatives, oversight of credit ratings agencies and hedge funds, and... MORE

Windbags and Modernity

Family Economics
Bryan Caplan
During my many recent hours at the neonatal ward, I've finished Gary Becker's A Treatise on the Family.  The last chapter is the best, particularly his analysis of the decline of respect for the elderly:Older persons are held in esteem... MORE

Implicit Marginal Tax Rate Could be 131 Percent University of Chicago economist Casey Mulligan, in his latest NBER piece, finds greater than 100 percent marginal tax rates across a large swath of the U.S. population. How so? From his NBER... MORE

Friedman vs. Bernanke

Monetary Policy
David Henderson
In the back and forth between Tyler Cowen and me, with a lot of heavy hitters commenting, we have actually made progress. I posted the following on August 31: To put it another way, Friedman and Schwartz argued that the... MORE

Capitalism and the Jews

Economics and Culture
David Henderson
My co-blogger, Arnold Kling, posted yesterday on American Jews and politics. I found the articles interesting, but I wonder if any of the Commentary writers are aware of Milton Friedman's attempt to explain why Jews, who have done so well... MORE

Krugman vs. Blanchard on the State of Macro

Macroeconomics
Arnold Kling
Paul Krugman writes, contra Olivier Blanchard, that The state of macro, in short, is not good. I agree with his diagnosis. But his prescription, to return to some sort of old-time Keynesian religion, is too vague. It would be precise... MORE

The Median Economist Speaks on Health Care

Economics of Health Care
Arnold Kling
Jonathan Gruber writes, Liberals are right that fundamental cost control can only come from the supply side. Consumers are poor and ineffective shoppers in the medical arena. Ultimately, they will do what their doctors tell them to do. ...But here... MORE

Robert Fogel on Health Care Costs

Economics of Health Care
Arnold Kling
His article would be self-recommending, except that Tyler uses that expression to mean something that he has not yet read. I have read Fogel's piece. He writes about rising health care expenditures, The main factor is that the long-term income... MORE

Identity Politics and Phobias

Political Economy
Arnold Kling
In Commentary Magazine, David Wolpe writes, Podhoretz's book is meant to explain why Jews do not vote their self-interest. I would say it is because they vote their self-conception, which is a very different thing. Jews identify with those who... MORE

Ideas Have Consequences: SRHMK Edition

Family Economics
Bryan Caplan
Simon Nicolas Caplan, my third son, was born this morning.  Mother, baby, and father are all doing well.Besides the usual suspects, I'd like to thank the late great Julian Simon for putting me on my natalist path.  Almost as soon... MORE

More on Monopoly

Microeconomics
David Henderson
My co-blogger, Bryan, posted an excellent piece on the origins of monopoly. I think it also led to one of the highest-quality set of comments I've seen on Econlog. Here's some additional backing for Bryan's points from some of my... MORE

Tyler Cowen on Bank Bailouts (Again)

Finance: stocks, options, etc.
Arnold Kling
He writes, Two years ago, my view was this: if there is a banking crisis, the Fed should be loose with money and let the market sort out which banks deserve support and which do not. And stop there. When... MORE

Against Human Weakness

Economic Philosophy
Bryan Caplan
Whenever a politician is exposed as an adulterer, the same meme always resurfaces: "We're all human, we shouldn't have 'unrealistic' expectations, everyone has moments of weakness, so let's forgive and move on..."  Micha Gertner gives an eloquent version over at... MORE

Could Freddie Come Baaaack?

Finance: stocks, options, etc.
Arnold Kling
John Hempton writes, Pre-tax, pre-provision operating profits of Freddie Mac are running at over $15 billion. If the government were not demanding 10 percent on its preference shares the companies would be sufficiently well capitalised to repay their interest in... MORE

Paging Scott Sumner

Monetary Policy
Arnold Kling
He needs to clear up some confusion. I think that Penn Bullock, is quite confused about Milton Friedman, monetarism, and the current crisis. In fact, Bullock is so confused that I searched in vain for something to excerpt. On the... MORE

Where Does Monopoly Power Come From?

Microeconomics
Bryan Caplan
Textbook accounts of monopoly usually take the existence of a monopoly for granted, then analyze its consequences.  When I was an undergraduate, this usually provoked me to argue with the textbook.  "Where did this 'monopoly power' come from?!" I'd ask. ... MORE

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