Bryan Caplan and David Henderson

November 2009

A Monthly Archive (139 entries)

The Party of No

Books: Reviews and Suggested Readings
Arnold Kling
The Washington Post reports, a new Washington Post poll also reveals deep dissatisfaction among GOP voters with the party's leadership as well as ideological and generational differences that may prove big obstacles to the party's plans for reclaiming power. The... MORE

CBS's Propaganda on Gold

Labor Market
David Henderson
In the lead segment of "60 Minutes" last night, CBS did the unusual: it presented an incoherent story. The topic was gold being mined in the Congo, many of the proceeds of which are used for war. That was how... MORE

China's Allocation of Capital

Growth: Causal Factors
Arnold Kling
Tyler Cowen thinks that China is making the wrong bet. Automobiles, steel, semiconductors, cement, aluminum and real estate all show signs of too much capacity. In Shanghai, the central business district appears to have high vacancy rates, yet building continues.... MORE

Falkenstein on Book 1

Books: Reviews and Suggested Readings
Arnold Kling
In Book 1, otherwise favorably, Eric Falkenstein writes, I found their general description of finance to have a misleading emphasis. There was an exposition where assets have risk characteristics that are obscured as they are passed up a food chain,... MORE

Nobel Conflict?

Economic Methods
Arnold Kling
Russ Roberts interviews Pete Boettke on Nobel Laureate Elinor Ostrom and the Bloomington School. As you listen, note near the end of a slight dig against the 2007 Nobel Prize topic of mechanism design. Ostrom's work would suggest that trial-and-error... MORE

Steve Horwitz and Mark Perry look at trends in household appliance prices and ownership. Perry writes, By almost every measure of appliance ownership, poor American households in 2005 had much better living conditions than the average American household in 1971... MORE

Bernanke Mea Culpa Redux

Monetary Policy
Bryan Caplan
Don Boudreaux's open letter to Ben Bernanke reminds me how badly I overestimated my former teacher's practical wisdom:Dear Mr Bernanke:I had to down an extra mug of coffee this morning to be certain that I read your op-ed in today's... MORE

The Perpetual Foreclosure Crisis

Finance: stocks, options, etc.
Arnold Kling
This story reports, The Obama administration, battling a foreclosure crisis that shows no signs of relenting, will step up pressure on mortgage companies to do more to help people remain in their homes, officials said Saturday. This story was predictable.... MORE

The Malevolent Invisible Hand

Energy, Environment, Resources
Bryan Caplan
Lately my colleague Dan Klein has presented new evidence that the "invisible hand" was more central to Adam Smith's thought that most scholars now believe.  Perhaps that's why this passage from Will and Ariel Durant jumped out at me.  It's... MORE

A Philosophical Bet

Economic Philosophy
Bryan Caplan
Robin responds to my cryonic doubts as I expected: By changing the subject to hard science, where I grant that his knowledge vastly exceeds my own.  Alas, as in past arguments, he doesn't answer my fundamental complaint: There's nothing in... MORE

What's Really Wrong With Cryonics

Growth: Consequences
Bryan Caplan
"I don't want to achieve immortality through my work. I want to achieve it through not dying."                                                          --Woody AllenOne of the most... MORE

Bob Murphy on EMH

Finance
David Henderson
Ever since I was an assistant professor at the University of Rochester's B-school (now called the Simon School) in the late 1970s, I have believed in the Efficient Markets Hypothesis. The basic idea is that market prices reflect all available... MORE

When Is Uncertainty an Argument for Inaction?

Cost-benefit Analysis
Bryan Caplan
From a naive point of view, uncertainty clearly tips the scales against costly action.  If you're only 50% sure that your transmission if broken, for example, you have less reason to replace it than if you are 100% sure that it's... MORE

How the Economy of Anarchist Spain Really Worked

Economic History
Bryan Caplan
Last week, I received a Polish translation of a long essay I wrote over a decade ago on Spanish anarchism.  During the Spanish Civil War (1936-9), an avowedly anarcho-socialist movement called the CNT won control over large parts of Spain. ... MORE

Snap Judgments vs. Apathy

Information Goods, Intellectual Property
Bryan Caplan
I say it's silly for parents to worry much about other parents' opinions of them.  They're probably too tired and distracted to pay any attention to you, anyway.  Robin demurs:Bryan presumes we care less about the judgments others make when... MORE

Accountability and the Web

Business Economics
David Henderson
Musician Dave Carroll recently posted a video on YouTube after United Airlines refused to take responsibility for one of its employees' having wrecked his Taylor guitar. In his last conversation with the United Airlines Customer Relations Manager, Carroll said he... MORE

Book 1, Book 2

Books: Reviews and Suggested Readings
Arnold Kling
Tyler Cowen recently said, if everyone read the book and was persuaded by it, would anything change for the better? An author should aim to write a book which matters. My latest book, Unchecked and Unbalanced is out. We might... MORE

The Great Depression as a Recalculation

Growth: Consequences
Arnold Kling
In an interview, Bruce Greenwald says, Basically, in the Depression a huge sector of the economy that everyone had always regarded as central, died. And it dies for an almost virtuous reason. That sector of course is agriculture. Because productivity... MORE

Price Discrimination: Illegal or Not?

Business Economics
David Henderson
In his excellent post on price discrimination and how pervasive it seems to be, Arnold states: The manufacturer would like to charge $400 to JS and $200 to BZ. However, to do so blatantly would be illegal. One commenter challenged... MORE

Reverse Stimulus

Growth: Causal Factors
Arnold Kling
Jerry O'Driscoll writes there is a name for this economic policy: corporatism. Big government favors selected big business and rewards big labor as a junior partner. It's not socialism, but the economic component of a fascist political program. Credit administered... MORE

Robin Gets Functionalist, As Predicted

Family Economics
Bryan Caplan
After asking, "Why do parents forget what it's like to be a kid?," I remarked:Many parents really do forget what's it's like to be a kid...I honestly don't know why.  I bet Robin Hanson would have a clever functionalist story. ... MORE

The Financial Crisis Narrative

Finance: stocks, options, etc.
Arnold Kling
Douglas J. Elliott and Martin Neil Baily write, Risk taking, after all, is part of a dynamic market economy and drives economic growth, so we discourage risk taking at our peril. Am I the only one who sees the irony... MORE

Climate Science and Macroeconomics

Economic Methods
Arnold Kling
Nick Rowe compares and contrasts climate science with macroeconomics. After listing some similarities, he turns to differences. D1. Macroeconomists are trying to explain people; climate scientists aren't. People are harder to explain. In particular, people's behaviour depends on what they... MORE

Price Discrimination, Again

Business Economics
Arnold Kling
Some pushback from Karl SmithAdam Ozimek. Stores must sell their goods at a prices that cover the wholesale cost of the individual goods as well as the overhead costs of the store, like labor and the building lease. The amount... MORE

Lately my twins and I have been enjoying the Diary of a Wimpy Kid series.  I don't think it's a spoiler to say that Mr and Mrs. Heffley, the mom and dad in these stories, seem totally clueless.  My kids... MORE

Ronald Brownstein writes To save costs, Democrats mostly want to change the incentives for providers. Republicans mostly want to change the incentives for patients by shifting toward a model where insurance covers only catastrophic expenses and people pay for more... MORE

SuperFreakonomics, III

Books: Reviews and Suggested Readings
David Henderson
This is my third post (see the first two here and here) on Levitt and Dubner's SuperFreakonomics. Chapter 3 is one of my favorite chapters in the book, for one main reason: the way it deals with the Kitty Genovese... MORE

Congressional Millionaires

Politics and Economics
Bryan Caplan
Factoids of the day: 1.  44% of Congressmen are millionaires.  2. Consistent with the "limousine liberals" stereotype, eight out of the ten richest are Democrats.I wonder how much of this can be explained by the vast overrepresentation of lawyers in... MORE

Be a Koch Fellow

Labor Market
Bryan Caplan
The Charles G. Koch Charitable Foundation is still taking applications for spring Internships in D.C.  The deadline: December 4th.  If you're a student who'd like to get paid to talk about the kinds of things you read on econ blogs,... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Arnold Kling
In order of satisfaction: 1. Empire of Liberty,by Gordon Wood 2. The Great Transformation, by Karl Polanyi 3. Masters and Commanders, by Andrew Roberts 4. Startup Nation, by Dan Senor and Saul Singer Wood is giving us the history of... MORE

Price Discrimination Explains Everything

Business Economics
Arnold Kling
In my high school economics class, my students asked me to explain why there are sales on "Black Friday." The class period was over, so I only had time to blurt out "price discrimination" without getting into an explanation of... MORE

Why Don't More Therapists Use Exposure Therapy?

Economics of Health Care
Bryan Caplan
At least according to the Handbook of Exposure Therapies, exposure is the most effective treatment for anxiety, OCD, post-traumatic stress, and similar problems.  But most therapists don't use it.  If you're a health economist, it's only natural to wonder why. ... MORE

Hummel Responds

Economic History
Bryan Caplan
Jeff Hummel sent me a gentlemanly response to my critique of his WWII revisionism lecture: While I usually appreciate attention, I wasn't expecting it in this case.  I posted those two talks on an obviously nascent webpage to make them available... MORE

Underestimating Climategate

Economic Methods
Bryan Caplan
Neither Tyler nor Robin think that Climategate tells us much about climate science.  Robin says that "it's news about academia, not climate":[T]this behavior has long been typical when academics form competing groups, whether the public hears about such groups or... MORE

UC Tuition: The Revolt of the Will-Haves

Economics of Education
David Henderson
Taxpayer funding of higher education is a forced transfer to the relatively wealthy Socialist author Robert Kuttner once called Proposition 13, California's 1978 property-tax-cut initiative, the revolt of the haves. The latest opposition by UC students to a 32% increase... MORE

By Popular Demand: a Kindle Edition

Books: Reviews and Suggested Readings
Arnold Kling
From Poverty to Prosperity is available on Amazon's Kindle. I appreciate the publisher's responsiveness on this. Publishers have tended to think of Kindle editions as like paperbacks--you don't come out with one right away in order to avoid cannibalizing hardback... MORE

Hummel's Three Laws and WWII Revisionism: Part 1

Economic History
Bryan Caplan
I recently listened to an old lecture (c.1979) that economist and historian Jeff Hummel put on his webpage.  It's a one-hour intro to World War II revisionism.  While I'm sympathetic to the conclusion that U.S. participation in WWII actually made... MORE

Macro and the Organizational Capital Model

Macroeconomics
Arnold Kling
Robert Shiller writes, Consider this possibility: after all these months, people start to think it's time for the recession to end. The very thought begins to renew confidence, and some people start spending again -- in turn, generating visible signs... MORE

The Right Minimum Wage Question

Labor Market
David Henderson
Like Bryan, I received the same request from the same friend: what question(s) would I want to put on a survey of economists. My response was that I would want the question on the minimum wage asked accurately instead of... MORE

Styles of Thought in Economics

Economic Methods
Arnold Kling
Seth Roberts interviews Tyler Cowen, who says, I am very interested in the topic of "styles of thought in economics." Robert Solow, my thesis adviser, was a big fan of starting with simple numerical examples. The point is that you... MORE

A Good Line

Labor Mobility, Immigration, Outsourcing
Arnold Kling
From Jeff Jacoby Those immigrants didn't come here in order to be lawbreakers; they broke a law in order to come here. If you had a store that was the only place people could go to buy bread, and people... MORE

From Intuitionism to Contrarianism: A Case Study

Economic Philosophy
Bryan Caplan
As an undergraduate, I spent hundreds of hours pondering the foundations of morality, also known as "meta-ethics."  In the end, the young Michael Huemer converted me to ethical intuitionism, a view I've held ever since.  (BTW, a decade or so... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
Ben Casnocha is the first to write a review. An excerpt: This is a book for people interested in economics first, entrepreneurship second, and globalization third. It's a book for people looking for contemporary insight on the ideas of people... MORE

Axel Leijonhufvud, Recalculation Theorist

Macroeconomics
Arnold Kling
What I call the Recalculation Story has many origins. One of them is Axel Leijonhufvud. He recently wrote, The economy is an adaptive dynamical system. It possesses the self-regulating, "equilibrating" properties that we usually refer to as "market mechanisms". But... MORE

A Turning Point?

Politics and Economics
Arnold Kling
Those of us who are opposed to the concentration of power in the hands of technocrats have had much to be depressed about over the past year. However, sometimes fortunes change. I wonder if this past week will come to... MORE

Are Markets Efficient? Krugman vs. Kling

Finance: stocks, options, etc.
Arnold Kling
He says they are: Now, you could and should be worried if this thing looked like a great bubble -- if long-term rates looked unreasonably low given the fundamentals. But do they? Long rates fluctuated between 4.5 and 5 percent... MORE

Me on Market Wrap

Upcoming Events
David Henderson
I just completed an interview with Moe Ansari of Market Wrap. We talked about the current recession, the health care bill, and various other things. If you want to listen (I think you'll hear an edited version but they might... MORE

From Poverty to Prosperity Watch

Growth: Causal Factors
Arnold Kling
Josh Lerner writes, Upon Singapore's independence in 1965--three years after Jamaica's own establishment as a nation--the two nations were about equal in wealth: the gross domestic product (in 2006 U.S. dollars) was $2,850 per person in Jamaica, slightly higher than... MORE

Dominating the Narrative

Economic History
Arnold Kling
Will Wilkinson writes, Ygesias says, "I believe that absent the [TARP] bailout, we'd be looking at even higher unemployment today." I think this is a plausible claim. But I don't know of a satisfactory way to evaluate it. It's plausible... MORE

Haunted By the Hitler Hypothetical

Economic Philosophy
Bryan Caplan
When you play with fire, you get burned.  And when you philosophize with hypotheticals involving Nazis, you get misrepresented.  In the Caplan-Hanson debate, I began:Let me begin with a disclaimer: Despite his moral views, Robin is an incredibly nice, decent... MORE

Are American Doctors Overpaid?

Economics of Health Care
Arnold Kling
Sherry Glied, Ashwin Prabhu, and Norman Edelman do not think so. The value of physicians' underlying human capital is estimated by forecasting an age-earnings profile for doctors based on the characteristics in youth of NLSY cohort participants who subsequently became... MORE

The Government/Slavery Analogy

Books: Reviews and Suggested Readings
Arnold Kling
Reacting to my recent post on the analogy Robert Higgs drew between libertarianism and abolitionism, a commenter wrote, Hans Hoppe, hardcore libertarian, once described what may be the crucial difference between a democratic state and slavery: the latter was private... MORE

Sumner Gives Away the Store

Economic Methods
Bryan Caplan
When a person with crummy but popular arguments says that "truth is relative," I understand their motives.  They're denying that anyone else's arguments are any better, and hoping that there's safety in numbers.  But when a person with clever but... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
The Kauffman Foundation conducted a survey of entrepreneurs. The findings can be inferred from the table of contents. Experience, Management, and Luck: The Keys to Success Professional Networks, Education, Funding, Personal Networks: Important Location, Investor Advice, Alumni Networks, and Regional... MORE

Was TARP Necessary?

Finance: stocks, options, etc.
Arnold Kling
Simon Johnson writes, There is no question that passing the TARP was the right thing to do. In some countries, the government has the authority to provide fiscal resources directly to the banking system on a huge scale, but in... MORE

My Responses to Readers Questions

Economic Education
Arnold Kling
In response to Bryan's post, readers posed some interesting questions to ask in a survey of members of the American Economic Association. Is there any reason besides a desire to learn, or to make entry into a Ph.D. programme easier... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Paul DeGrauwe writes, My contention is that the rational expectations models are the intellectual heirs of these central planning models. Not in the sense that individuals in these rational expectations models aim at planning the whole, but in the sense... MORE

Since You Asked, Scott

Labor Market
Bryan Caplan
How can any economist - even Krugman - advocate job subsidies and work sharing?  Krugman's answer is that it's a "third-best" solution.  His top three:1. Sumnerian monetary policy.  Seriously, but without the hat tip.2. More fiscal stimulus.3. Job subsidies and... MORE

Ask and You May Learn

Economic Methods
Bryan Caplan
An economist I know just emailed me:I anticipate participating in a survey project of a sample of AEA members. Such a survey is an opportunity for throwing in extraneous questions of interest. Can you think of question or two you... MORE

My New Public Choice Class

Public Choice Theory
Bryan Caplan
The webpage for my spring, 2010 Graduate Public Choice II course is now up, including the syllabus, complete lecture notes, and homeworks.  About half of the material is from my Graduate Public Finance I course; the rest is new.  Highlights... MORE

Unchecked and Unbalanced Watch

Books: Reviews and Suggested Readings
Arnold Kling
Robert Higgs writes, Slavery existed for thousands of years, in all sorts of societies and all parts of the world. To imagine human social life without it required an extraordinary effort. Yet, from time to time, eccentrics emerged to oppose... MORE

International Trade Economists are Bayesians

International Trade
David Henderson
In Bryan's excellent recent post on why most economists aren't Bayesians, he writes that the position of economic theorists is: If no one has proven that Comparative Advantage still holds with imperfect competition, transportation costs, and indivisibilities, only an ignoramus... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
Daron Acemoglu writes, People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions -- the... MORE

The Financial Regulatory Chess Game

Finance: stocks, options, etc.
Arnold Kling
Edward J. Kane writes, Regulation is best understood as a dynamic game of action and response, in which either regulators or regulatees may make a move at any time. In this game, regulatees tend to make more moves than regulators... MORE

Hasty readers of happiness research often conclude that kids are a disaster for happiness.  If you actually look at the size as well as the sign of standard estimates, however, the right conclusion is that kids ever-so-slightly reduce happiness.  I... MORE

Repealing the Laws of Supply and Demand

Economics of Health Care
Arnold Kling
Megan McArdle writes, When you increase the demand for something without increasing the supply, you either get price increases, or shortages. Neither is what the authors are promising for their bills. She is referring, of course, to health care legislation,... MORE

The Economics of Electric Cars

Energy, Environment, Resources
Arnold Kling
I have begun reading Startup Nation, a book about Israeli entrepreneurialism. Unfortunately, the first anecdote is about an attempt, requiring huge capital commitments and considerable government intervention, to create an infrastructure for electric cars. The idea is to build a... MORE

My Alternative Health Care Bill

Economics of Health Care
Arnold Kling
Tyler Cowen offers his, which strikes me as overly complicated. The bill I would propose would be one that encourages experimentation at the state level. Offer to support an experiment that allows an individual state to adopt single-payer, while allowing... MORE

What If India Had Been an Asian Tiger?

Growth: Consequences
Bryan Caplan
For decades after World War II, India was a Soviet-wannabe state.  While their ruling parties lacked the brutality to fully nationalize their economy, post-war India was an early version of "socialism with a human face."  Well, except for massive ethnic... MORE

No Bubbles Here. Move Along Now

Macroeconomics
Arnold Kling
WSJ Real Time Economics reports on a speech by the Fed's Don Kohn, Our abilities to discern the 'correct' values of assets is quite limited. At present, however, the prices of assets in U.S. financial markets do not appear to... MORE

A Minsky Recovery?

Labor Market
Arnold Kling
As always, there are conflicting views on the economic outlook. Daniel Gross is optimistic. In the third quarter, productivity--econospeak for companies doing more work with the same amount of labor--rose at a 9.5 percent annual rate... But just as hamsters... MORE

An Apology

Econlog Administrative Issues
David Henderson
In my post yesterday, which I wrote in haste--generally a bad idea--I called former President Bush "a joke." I was expressing my frustration at his willingness to talk a good game but not to play a good game. But we... MORE

Why Academic Economists Aren't Bayesians

Economic Methods
Bryan Caplan
I don't think I'll find a better answer than Robin's:[T]he main social function of academia is to let students, patrons, readers, etc. affiliate with credentialed-as-impressive minds.  If so, academic beliefs are secondary - the important thing is to clearly show... MORE

What Is Money Velocity?

Money
Bryan Caplan
A key feature of the financial crisis was a massive fall in the velocity of money.  But what exactly is "money velocity"?  By definition, V=PY/M.  In English: Velocity=Nominal Income divided by the Money Supply.  When asked for some intuition, economists... MORE

Bush Admits His Errors

Politics and Economics
David Henderson
In a speech last week, former President George W. Bush admitted that he had erred in imposing new layers of regulation on the U.S. economy. Here's the news story: Former President George W. Bush, outlining plans for a new public... MORE

So You Want to Do Good

Growth: Causal Factors
Arnold Kling
A question from a reader: I teach an introduction to ag econ class, and today a young student came to chat with me about economic development. She is sincerely and passionately interested in helping developing countries reach our prosperity. She... MORE

Why Aren't Academic Economists Bayesians?

Economic Methods
Bryan Caplan
Almost all economic models assume that human beings are Bayesians: They start with some prior beliefs about how the world works, and update those beliefs using Bayes' Theorem as new information arrives.  Behavioral economists often question whether people are in... MORE

An Insider and and Outsider

Finance: stocks, options, etc.
Arnold Kling
The alternate universes inhabited by insiders and outsiders are evident in two links from Mark Thoma. First, Bill Dudley gives us the insider view. Liquidity risk will never be eliminated, nor should it. The preferences of borrowers to borrow long... MORE

FDA May Decide to Raise Transactions Costs

Regulation
David Henderson
That's not the headline, of course. The headline in the New York Times is, "F.D.A. Says It May Ban Alcoholic Drinks With Caffeine." When I read it, I thought, "Oh, no. The FDA is about to ban rum and coke."... MORE

Mankiw's Text Hints at Yes, But The Answer is No One of the standard claims made about the 1970s is that a major contributor to inflation and low growth was OPEC. In his excellent textbook, Macroeconomics, 6th ed., for example,... MORE

Unchecked and Unbalanced Watch

Political Economy
Arnold Kling
Michael Strong talks about special economic zones as a way of creating competition in governance. The idea seems similar to Paul Romer's concept of charter cities. Strong is optimistic that the state will "wither away" (as Marx would put it)... MORE

Cap Creditors' Bailouts?

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts tucks an interesting suggestion into his diatribe against the arrogance of financial regulators. A ceiling of 50 cents on the dollar for creditors and lenders when the institutions they fund become insolvent is a natural place to start... MORE

Marginal Tax Rates, Again

Fiscal Policy
Arnold Kling
A reader recommends a paper by Laurence J. Kotlikoff and David Rapson. The reader views this paper as contradicting the article I linked to earlier. Kotlikoff and Rapson report marginal tax rates of closer to 40 percent than 100 percent... MORE

The Faces of Janus

Books: Reviews and Suggested Readings
Bryan Caplan
While preparing my promotion packet, I came across my old review of A. James Gregor's outstanding The Faces of Janus: Marxism and Fascism in the Twentieth Century.  Highlights: Gregor provides an elegant and thoughtful history of what one might uncharitably... MORE

Bequest Question

Family Economics
Bryan Caplan
According to "mistake" theories of inheritance, people leave bequests because they don't have enough information to spend all their assets before they die.Question: In a world with annuities and negative mortgages, how can anyone continue to believe this story?... MORE

The Signaling Model of Education Standing on One Foot

Economics of Education
Bryan Caplan
Look at what people learn in the classroom.  Look at what people do on the job.  How much of a connection do you see?... MORE

Health Care: Let the Games Begin

Economics of Health Care
Arnold Kling
Gene Steuerle writes, Here is the bottom line on how employers and employees together can maximize what they get from government. Many employers who don't provide insurance today will probably just choose to pay the tax ($400-per-employee under one scenario... MORE

Lessons from Banking History

Finance: stocks, options, etc.
Arnold Kling
Piergiorgio Alessandri and Andrew G. Haldane write, Historically, the link between the state and the banking system has been umbilical. Starting with the first Italian banking houses in the 13th century, banks were financiers of the sovereign. Sovereign need was... MORE

Book Update: Available for Order

Books: Reviews and Suggested Readings
Arnold Kling
Finally, From Poverty to Prosperity is available for order at Amazon. It will be in stock there in a few days. I should warn you that it is an intellectually heavy book. It is not the sort of thing that... MORE

A Proposal to Save Jobs

Fiscal Policy
Arnold Kling
A Wall Street Journal blog writes State and local governments in the U.S. may be forced to cut 900,000 jobs next year without additional help from the federal government, according to a report released by a prominent liberal think tank... MORE

The Great War

Economic History
Arnold Kling
John Quiggin writes, The names of Asquith, Bethmann-Hollweg, Berchtold and Poincare are barely remembered, yet on any reasonable accounting they belong among the great criminals of history. Not only did they create the conditions for war, and rush (eagerly in... MORE

Marginal Tax Rates

Income Distribution
Arnold Kling
Clifford F. Thies writes, When you take into account the loss of means-tested benefits (e.g., cash assistance, food stamps, housing subsidies, and health insurance), and the taxes that people pay on earned income, the return to working is essentially zero... MORE

Maine's Pelosi/Baucus Care

Economics of Health Care
David Henderson
An excellent news story in today's New York Times highlights the problems with government regulation of health insurance in Maine, problems that, the reporter notes, would likely occur if the U.S. Senate's and the U.S. House of Representatives' versions of... MORE

Explaining the Direction of Health Care Refrom

Economics of Health Care
Arnold Kling
The most important political fact affecting health care reform is the sizable Democratic majority. There are too many Democrats in the House and Senate for a bipartisan bill to make sense. Given that we are going to have a partisan... MORE

Unchecked and Unbalanced Watch

Political Economy
Arnold Kling
John Kay writes, Control of rent-seeking requires decentralisation of economic power. These policies involve limits on the economic role of the state; constraints on the concentration of economic power in large business; constant vigilance at the boundaries between government and... MORE

Status Competition

Political Economy
Arnold Kling
Gordon Wood, in Empire of Liberty, writes, After all, wealth, compared to birth, breeding, ethnicity, family heritage, gentility, even education, is the least humiliating means by which one person can claim superiority over another; and it is the one most... MORE

Exposure Therapy: When Probabilities Fail

Behavioral Economics and Rationality
Bryan Caplan
In chapter 4 of Selfish Reasons to Have More Kids, I show that - objectively speaking - kids today are safer than ever.  And I'm far from the first social scientist to point out the public's systematically biased beliefs about... MORE

Read it and Weep

Economics of Health Care
Arnold Kling
Various pundits offer suggestions for controlling health care costs, hosted by the New York Times. My proposal (health care vouchers) has zero chance of being enacted. You may not like it, anyway. The other pundits' proposals, even if they were... MORE

How Singapore's #1

Cross-country Comparisons
Bryan Caplan
A new international Gallup survey on migration preferences finds that the U.S. is the most popular dream destination.  Singapore, however, is #1 on the Potential Net Migration Index, which adjusts for population:The Potential Net Migration Index is the estimated number... MORE

Should College Attendance be Subsidized?

Economics of Education
Arnold Kling
Guess who said : Going to college is a lot like standing up at a concert to see better. Selfishly speaking, it works, but from a social point of view, we shouldn't encourage it. Answer here.... MORE

Israel's Nasty Minimum Wage

Labor Market
David Henderson
The government is considering establishing work camps in the south of the country, where illegal migrant workers will receive shelter, food and medical care, Army Radio reported Wednesday. In exchange, illegal migrants would perform manual labor outside the camps, but... MORE

The Writing on the Wall

Economic History
Bryan Caplan
I've been thinking all day about what to write for the 20th anniversary of the fall of the Berlin Wall.  Here goes.The conventional interpretation of the Wall: Socialism, a movement that began with wide-eyed idealism, was gradually corrupted.  The first... MORE

Innovation and entrepreneurship are amazingly good things...and predatory government and corruption are amazingly bad things. That is our new book (the one that Amazon doesn't want you to read) standing on one foot. From this podcast, where I am... MORE

Mises in the Wall Street Journal

Austrian Economics
David Henderson
Mark Spitznagel has a piece in the Wall Street Journal on Ludwig von Mises' classic book, The Theory of Money and Credit. It's good that Spitznagel is calling our attention to this classic, which is still worth reading. But he... MORE

More Scott Sumner

Macroeconomics
Arnold Kling
He writes, I think that one thing that separates me from other macroeconomists is that I see short run changes in NGDP as being powerfully impacted by changes in future expected NGDP. Thus if the expected level of NGDP one,... MORE

Getting Your Storks in a Row

Family Economics
Bryan Caplan
Last week I read all the major research on the response of fertility to economic incentives.  There are actually two distinct literatures.  The first focuses on the effect of intentional "birth subsidies" on child-bearing.  The second focuses on the unintentional... MORE

Stiglitz and Orszags on Fannie Mae

Finance
David Henderson
The paper concludes that the probability of default by the GSEs is extremely small. Given this, the expected monetary costs of exposure to GSE insolvency are relatively small -- even given very large levels of outstanding GSE debt and even... MORE

Paul Collier on Democracy

Political Economy
Arnold Kling
He writes, What incumbents fear most is not losing an election, but being overthrown by their own military. When the international community can protect a government from such a threat, it should do so, conditional upon the election being properly... MORE

Macroeconomic Disconnects

Macroeconomics
Arnold Kling
Scott Sumner brings up some difficulties for anyone who would argue that monetary policy is not a sufficient tool for fighting the recession. He is not arguing from his yet-to-be-articulated new paradigm. He is stating traditional macro.... MORE

Steinbrenner U.

Economics of Education
Arnold Kling
Inside Higher Ed reports, A small number of colleges have become much more competitive over recent decades, according to Caroline M. Hoxby, an economist at Stanford University. But her study -- published by the National Bureau of Economic Research --... MORE

A Child Understands the Fall of the Wall

Regulation
David Henderson
As Bryan has mentioned, Monday, November 9 will be the 20th anniversary of the fall of the Berlin Wall. In Chapter 3 of my book, The Joy of Freedom: An Economist's Odyssey, I tell that story and integrate it with... MORE

Charting Structural Economic Change

Labor Market
Arnold Kling
If all goes well this link will take you to an article (with cool charts!) where I make an empirical case for telling the Recalculation story rather than pretending that we have the same economy that existed in the 1930's... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
It looks like I will have two books come out in the same month. The first one will be out in two weeks, but you cannot pre-order it on Amazon. The second one will be out in three weeks, and... MORE

Hitting a Nerve in Singapore

Cross-country Comparisons
Bryan Caplan
After Singapore's Law Minister used my article in Ethos to rebut international criticism, Singapore's Online Citizen asked permission to run a longer version of "Two Paradoxes of Singaporean Political Economy."  Reactions were... mixed.  Several readers backed me up:I would say... MORE

Arnold Kling on Money

Money
David Henderson
In his post today on money, Arnold writes: However, as you know, I prefer to think of money as designed top down, to serve the needs of government. But shouldn't what you "prefer to think" count for literally zero? What... MORE

Money--Designed or Emergent?

Economic History
Arnold Kling
George Selgin writes, Economists generally take for granted, if only tacitly, a teleological view of money's historical development, according to which it first takes the "primitive" form of mundane commodities such as cowrie shells and cacao seeds, and then advances... MORE

Two Links

Behavioral Economics and Rationality
Arnold Kling
Both feature Tyler Cowen. Here (or perhaps you should start here), he talks about stories. It is classic Tyler, playing cat and mouse games with your head. Basically, he is saying that stories have an advantage in that they serve... MORE

Wisdom Worth Repeating

Macroeconomics
Arnold Kling
Tyler Cowen repeats a tweet, and I will too. It comes from Masonomist Garett Jones. Workers mostly build organizational capital, not final output. This explains high productivity per 'worker' during recessions. This is yet another difference between the labor force... MORE

The Broward Sherriff's Office is engaging in entrapment operations to catch unlicensed contractors. On this tape, at about the minus 1:45 point, Detective Daniel Belyeu explains that right now many people are desperate for work. His solution? Make them more... MORE

Law and Order's Economics

Economics of Health Care
David Henderson
My student, Mike Williams, sent me the following last night: I don't know if you watch Law and Order Special Victims Unit but they had a rather frustrating take on the pharmacutical companies tonight. In the episode one of their... MORE

Libertarians' Favorite Commie Quote

Economic Philosophy
Bryan Caplan
In The Road to Serfdom, Hayek quoted Trotsky thusly: "Where the sole employer is the State, opposition means deaths by slow starvation."  Libertarians have repeated this line ever since, often without realizing that the source is Trotsky, not Hayek.  It... MORE

Reducing Real Compensation

Labor Market
Arnold Kling
Alex Tabarrok highlights a post by David Beckworth on the sharp decline in nominal spending in 2008-2009. Alex writes, We could use some inflation to get back on track. Nominal wages are simply not flexible enough to get the job... MORE

Dear New Yorker: I Want My Catch Phrase Back

Behavioral Economics and Rationality
Bryan Caplan
I'm a firm believer that (a) all publicity is good publicity, (b) the more attention my memes get, the better - even if if I get no credit.  And in the past, The New Yorker has done me nothing but... MORE

Armen Alchian

Efficient Markets Hypothesis
David Henderson
In this month's Featured Article, Fred McChesney pays tribute to the work of Armen Alchian and makes the case that he deserves the Nobel prize in economics. I already knew most of what McChesney writes because, after all, I studied... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
The book that Amazon does not want you to read can now be ordered from Barnes and Noble. The cover image is incorrect. The book itself is something that Nick and I are very proud of.... MORE

I Optimized

Cost-benefit Analysis
David Henderson
One of the conclusions that emerges from "thinking on the margin," one of the Ten Pillars of Economic Wisdom that I teach my students, is that just as you shouldn't underinvest in something, so also you shouldn't overinvest. In fighting... MORE

Thoughts on the Macro Paradigm

Macroeconomics
Arnold Kling
Scott Sumner's latest deserves comment. Before I do that, however, I want to say that yesterday I was trying to teach the consequences of paying interest on reserves to my bright high school students. They got, correctly, that paying interest... MORE

R & R

Finance: stocks, options, etc.
Arnold Kling
Meaning Ken Rogoff and Carmen Reinhart, of course, both of whom appeared on the PBS New Hour November 2 (fast forward to about minute 27), talking about our financial crisis in the context of historical crises. Rogoff's first sentence is... MORE

Singapore is widely regarded as a dictatorship.  Even the contrarian Gordon Tullock joins in the chorus; in Autocracy, he remarks that, "The dominant form of autocracy has been the non-totalitarian type presented by Franco, Lee of Singapore, or Mobutu of... MORE

Economists Are Irrational; Is Anyone Else?

Economic Methods
Bryan Caplan
George Stigler is notorious for his dogmatic belief that any stable feature of the social world is efficient.  Since people are rational, they quickly spot and bargain around inefficiencies.  I was a little surprised, then, to read these words in... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
From someone who works at one of the companies involved in publishing our book: The issue with this book is that the record is locked. What this means is that either Encounter or the publisher has made a sticky change... MORE

When Government Gets Desperate

Fiscal Policy
Arnold Kling
Megan McArdle does not approve of California's revenue-raising tactic. No, the government didn't actually increase taxes; it just raised the withholding. They'll give any extra funds back to taxpayers in April, and presumably fewer people will have to write checks... MORE

It's the Prices, Stupid

Economics of Health Care
Arnold Kling
That was the title of a famous article claiming that U.S. Health care spending is high because provider charges are excessive. Now, Ezra Klein (pointer from Tyler Cowen) brandishes charts furnished by an insurance industry trade group that purport to... MORE

Tyler Without Tyler

Growth: Consequences
Arnold Kling
Edge devotes its latest symposium to how humans will process information in the current era. Tyler Cowen's latest book speaks to that issue, but he is nowhere to be found on the symposium. Still, I believe that Nick Bilton does... MORE

Financial Markets vs. Kling

Finance: stocks, options, etc.
Arnold Kling
Paul McCulley writes, a bull flattening bias of the Treasury curve, with longer-dated rates falling toward the near-zero Fed policy rate, can be viewed as a consensus view that the level of the output/unemployment gap plumbed during the recession is... MORE

Morning Links

Macroeconomics
Arnold Kling
1. David Warsh offers a suggestion for the most prestigious female economist. The answer is probably Carmen Reinhart, of the University of Maryland, when measured by citation counts, the yardstick commonly used to gauge professional fame. Reminder that you can... MORE

Studies Show

Economic Methods
Bryan Caplan
Warden: The part of the brain that remembers dance steps is also the anger center. So, juveniles who know how to fox trot are 10% less likely to commit a double homicide.Prisoner: Who conducted this study?Warden: The Institute of Shut... MORE

Outsiders

Books: Reviews and Suggested Readings
Arnold Kling
Am I too weak to resist financial crisis porn? The latest example of my shameful indulgence is The Greatest Trade Ever, by Gregory Zuckerman. As with Andrew Ross Sorkin's Too Big to Fail, I could not put it down. Even... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
Nick Schulz did some nosing around, and he thinks this might explain some of the peculiarities of the publication process with our book. Perseus Distribution, a member of The Perseus Books Group, and Encounter Books announced...that they have entered into... MORE

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