Bryan Caplan and David Henderson

December 2009

A Monthly Archive (173 entries)

Comes the Revolution...

Political Economy
Arnold Kling
Glenn Reynolds discusses using charitable donations to fund the now-killed D.C. school voucher program. In Unchecked and Unbalanced, one of the reforms I propose is to allow citizens rather than Congress to allocate some of their tax dollars to their... MORE

Manzi's Manifesto, continued

Political Economy
Arnold Kling
Responding to my question about the meaning of the term "social cohesion," he writes, the widespread and irrational willingness and propensity to sometimes and to some extent sacrifice narrowly-defined rational self-interest to the needs of a greater collective, and the... MORE

The Perpetual Foreclosure Crisis, Continued

Finance: stocks, options, etc.
Arnold Kling
Peter J. Wallison writes, On Christmas Eve, when most Americans' minds were on other things, the Treasury Department announced that it was removing the $400 billion cap from what the administration believes will be necessary to keep Fannie Mae and... MORE

Question for Sumner

Finance: stocks, options, etc.
Bryan Caplan
Forbes provokes Sumner to don the robes of hanging judge for the hypocritical right:If Forbes is right, and the markets are made up by a bunch of fools, then why not go with socialism?Here's what I think is really going... MORE

Tyler Cowen writes, We're also seeing job losses in virtually every sector. It's not for instance a "sectoral shift away from services and into matchstick production and tungsten." It's a shift out of jobs which are revealed as unprofitable and... MORE

Easterly Contra Galbraith

Central Planning vs. Local Knowledge
Bryan Caplan
Back in the sixties, Galbraith famously argued that East and West were converging.  The East had government central planning.  The West had corporate central planning.  Same difference, right?  In his interview with Arnold and Nick, Bill Easterly begs to differ:[T]he... MORE

MRV watch

Books: Reviews and Suggested Readings
Arnold Kling
Bryan's Myth of the Rational Voter was #3 on a list of the top ten pro-liberty books of the decade, as selected by a panel of 22 advocates of classical liberalism. Two of Bill Easterly's books made the list. Pointer... MORE

The Gist of Julian Simon

Energy, Environment, Resources
David Henderson
In a comment on Bryan Caplan's post today, Steve asks: Could someone please provide a distillation of Simon's work? The link is to his website, where all I can find is a list of published papers. I gave such a... MORE

You Should Read FP2P

Books: Reviews and Suggested Readings
Arnold Kling
Or so says Yuval Levin. I just can't recommend it enough. It's a deeply insightful look at where economics is going and why that should matter to us. We also get a plug from economics instructor Brooks Wilson.... MORE

Various Follow-ups

Growth: Causal Factors
Arnold Kling
These relate to recent discussions on this blog. 1. Clifford Winston and Robert Crandall on market failure and government failure, from Forbes last October. 2. A review of an optimistic book by Gregg Easterbrook. Mark Perry ties this back to... MORE

An Alibertarian Case for Reproductive Laissez-Faire

Economic Philosophy
Bryan Caplan
Libertarians often highlight "the right to do wrong."  We are often morally obliged to tolerate the wicked and foolish behavior of others.  A quote wrongly attributed to Voltaire beautifully captures the intuition: "I disapprove of what you say, but I... MORE

How Free Markets Make Bad Behavior Costly

Economics and Culture
David Henderson
Although she [Ayn Rand] was normally generous in her responses to general audiences, NBI [Nathaniel Branden Institute] students were held to higher standards. Rand was likely to denounce anyone who asked inappropriate or challenging questions "as a person of low... MORE

Another Reason to Get an Econ Ph.D.

Economics of Education
Bryan Caplan
Bruce Charlton says that the hard sciences just aren't fun anymore.  The system now rewards workaholism and subservience a lot more than creativity:Modern science is just too dull an activity to attract, retain or promote many of the most intelligent... MORE

Why Were American Econ Textbooks So Pro-Soviet?

Cross-country Comparisons
Bryan Caplan
When I was in Econ 1, we actually used the infamous 1989 Samuelson text - the one that said, "the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and... MORE

Market Failure and Government Failure, Again

Political Economy
Arnold Kling
In the Christian Science Monitor, Nick Schulz and I write, When innovation-driven excesses and imbalances are recognized in the marketplace, the system can correct itself quickly. This is less the case when government policy failure occurs. The theme is that... MORE

How Big a Spender Was Bush II?

Fiscal Policy
Bryan Caplan
Compared to all presidents, 1952-2008, here's Bush II's record:Measure #1: Annual Change in Total Real Spending: 4.9% - second only to LBJMeasure #2: Annual Change in Total Real Spending, not counting interest on the federal debt: 4.6% - second only... MORE

Stimulus Without Multipliers

Fiscal Policy
Arnold Kling
Paul Krugman provides an analysis showing arithmetically that the fiscal stimulus will have a declining contribution to GDP growth, even as stimulus spending increases. What is interesting to me about this analysis is that the concept of a multiplier has... MORE

Market Failure and Government Failure

Regulation and Subsidies
Arnold Kling
That is the topic of a self-recommending podcast in which Russ Roberts interviews Clifford Winston. Actually, although I have not had time to listen (I am on travel), reading over the notes on the podcast highlights this looks like one... MORE

Deborah Spar's The Baby Business is, by far, the best overview of the cutting-edge technology and sociology of having babies.  If you want to learn about in vitro fertilization, surrogacy, cloning, and international adoption, Spar's book is a one-stop shop. ... MORE

Northian Pessimism in FP2P

Growth: Causal Factors
Bryan Caplan
Doug North has never sounded wiser or clearer than he does in his interview with Arnold and Nick.  North's concluding statement is the highlight for me:I'm moderately pessimistic about the future of the world...What particularly bothers me is that the... MORE

Failure to "Get" Hayek

Central Planning vs. Local Knowledge
David Henderson
When I teach my Ten Pillars of Economic Wisdom, I tell a story to illustrate part of Pillar Five, "Information is valuable and costly, and is inherently decentralized." The part this illustrates is the "inherently decentralized" part, which I owe... MORE

Stephen Kinsella offers an analogy to offend two disjoint movements in one swoop:I would love to see libertarian IP advocates have to live in a world that truly implemented their IP views fully, consistently--it would be like a communist USSR... MORE

FP2P Quip of the Day

Regulation
Bryan Caplan
From Arnold and Nick: "In many poorly governed countries, ordinary businesses are as tenuous as drug-dealing in the United States."... MORE

Hmmm

Behavioral Economics and Rationality
Arnold Kling
In Rand's study...There were more than two hundred grocer's cartons, each divided into sections and filled to the brim with colored stones Rand had collected and sorted. This is from Anne C. Heller's biography of Ayn Rand. Based on... MORE

Measured Productivity and Actual Productivity

Growth: Consequences
Arnold Kling
Is measured aggregate productivity accurate? Probably not, but I can think of important reasons that it would be understated as well as overstated. 1. For goods where there is a long history of measurement, productivity growth tends to be higher... MORE

What Just Happened?

Economics of Health Care
Bryan Caplan
Can someone help me make heads or tails out of this piece on the Senate bill?  Key claims to reconcile:1. Demand for health insurance is going way up:Health insurers get some big presents in the Senate's health overhaul bill --... MORE

Suits vs. Geeks

Business Economics
Arnold Kling
Tyler Cowen asks why pay differentials in software development do not reflect the large differences in productivity across developers. James Kwak gives what would have been my answer. the way salaries are set at companies. At a high level, they... MORE

Another Recalculation Theorist

Macroeconomics
Arnold Kling
Joseph Lawler writes, The beauty of the structural change theory of jobless recoveries is that it is testable. If hiring is determined by shifts in what the economy produces, then the data will show that permanent layoffs outnumber temporary layoffs... MORE

Bob Murphy on Krugman

International Trade
David Henderson
Krugman Confuses an Accounting Identity With Causation In a post titled, "Things Free Trade Doesn't Do," Krugman wrote: There are a lot of good things you can say about international trade. But it does not, repeat not, do anything to... MORE

A Sentence to Ponder

Behavioral Economics and Rationality
Arnold Kling
from Razib: More often when you strip away adherence to theology you do not get atheism, you get animism. Ponder his whole post.... MORE

Memory Boost

Economics of Health Care
Bryan Caplan
Arnold writes:I know I had another argument with Bryan this year where I had to concede to him, but right now I cannot remember the topic. Selective memory strikes again.I'm happy to help out.  The history of the dispute:1. Arnold... MORE

Selective Memory

Behavioral Economics and Rationality
Arnold Kling
The New Republic has a list of successful progressive reforms that conservatives opposed. It focuses on quotes from conservatives that today look bad. My guess is that one could comb through the back issues of their magazine and find quotes... MORE

The Lesson of Ebenezer Scrooge

Taxation
David Henderson
When Scrooge wakes up, he realizes that indeed he can change. In my favorite scene in the movie, Scrooge dances around in his nightshirt like a kid in a candy store, celebrating his power to change. And what is the... MORE

Respect Me

Family Economics
Bryan Caplan
The official theory of the holidays is that they're a time for families to have a good time together.  Unfortunately, the practice falls far short of the theory.  Many people dread the holidays, because they feel obliged to spend a... MORE

A Dedicated User of the Harvard-Goldman Filter

Finance: stocks, options, etc.
Arnold Kling
The latest edition of What Went Wrong is up. This is a series of video Q&A's with various experts on the financial crisis. So far, I have been generally disappointed. In the recent episodes, Glenn Hubbard says nothing shocking. Bill... MORE

Time Consistency

Behavioral Economics and Rationality
Arnold Kling
Time consistency is one of those terms that economists throw around, and it has come up several times recently on this blog. It might be worth defining/explaining. The situation arises when someone makes a commitment to take an action in... MORE

Three Links from Mark Thoma

Finance: stocks, options, etc.
Arnold Kling
Chosen from among those here. 1. Gretchen Morgenson and Louise Story write, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then... MORE

Some Preliminary Political Economy of the Senate Bill

Economics of Health Care
Bryan Caplan
My favorite passage from Ezra Klein's pro-Senate bill blogging:Someone who puts off purchasing coverage and then tries to buy Aetna's plan the first time they collapse unexpectedly will not be sold a plan...Under reform, these people get the chance to... MORE

Exegesis, Public Choice, and the Senate Health Care Bill

Economics of Health Care
Bryan Caplan
When I explain the antitrust laws to my Industrial Organization students, I begin with the Fable of the Martian.  Suppose you're driving 66 miles per hour in a 55 mph zone with a fresh-off-the-spaceship Martian passenger.  No one in sight... MORE

The Power of Productivity

Growth: Causal Factors
Arnold Kling
Mark Perry writes, manufacturing employment in the United States fell below 12 million this year for the first time since 1946, and is now at the lowest level (11,648,000 manufacturing jobs in November) since March of 1941 According to the... MORE

Brad DeLong's Dangerous Modeling

Macroeconomics
Arnold Kling
From a short paper he calls Picking up Nickels: The more speculators ex ante expect bailouts and the more speculators are impressed with their own cleverness, the more hesitant should the central bank be about providing monetary accommodation. The paper... MORE

The Ahistoricity of the SIVH

Behavioral Economics and Rationality
Bryan Caplan
The Self-Interested Voter Hypothesis (SIVH) is a poor predictor of political views in the modern U.S.  In his interview in FP2P, Joel Mokyr claims that the SIVH has been a flop for centuries: My forthcoming book is called The Enlightened... MORE

Super-FP2P

Information Goods, Intellectual Property
Arnold Kling
If Nick and I ever do a sequel to From Poverty to Prosperity, we should interview Hal Varian. Watch this talk, which has several interesting observations, particularly about how businesses are restructuring on the basis of new communication technology and... MORE

Joe Salerno on Central Bankers

Monetary Policy
David Henderson
Central bankers are politicians with tenure. This was economist Joe Salerno's response to Stuart Varney's claim that giving Congress more control over the Federal Reserve would put politicians in charge of monetary policy. (It's at about the 4:09 point.) I've... MORE

More on Economic Sanctions

International Trade
David Henderson
Because discussion after about 12 hours on a given post tends to be ignored, I'm using this post to respond to some of the comments on my previous post. Commenter Mike Rulle argues: It is incorrect to say that people... MORE

Kling-Schulz on Intellectual Property

Information Goods, Intellectual Property
Arnold Kling
In From Poverty to Prosperity, we write, One broad alternative to restrictive patents and copyrights would be for a patronage model to support the development of new recipes...People with friends or family members afflicted with a particular ailment could form... MORE

Creative Destruction

Business Economics
Arnold Kling
William Easterly writes, The Wall Street Journal featured this awesome chart yesterday. Only 8 of top global 25 companies in 1999 are still in top 25 in 2009, and some of them have shed a lot of market cap. One... MORE

David Brooks on Book 1

Books: Reviews and Suggested Readings
Arnold Kling
From Poverty to Prosperity gets a nice review from David Brooks. He writes, "From Poverty to Prosperity" includes interviews with major economists, and it is striking how they are moving away from mathematical modeling and toward fields like sociology and... MORE

The Myth of Shock Therapy

Cross-country Comparisons
Bryan Caplan
If Russia really had "shock therapy" in the early nineties, how come it didn't move out of the bottom decile of the Economic Freedom of the World index until 2002?  Is moving from the bottom decile to the next-to-bottom decile... MORE

Menzie Chinn's Course on the Crisis

Finance: stocks, options, etc.
Arnold Kling
The syllabus looks interesting, but I think there are two topics that I would emphasize more if I were teaching it. 1. How did we get here? Most people seem to start their history of the crisis in about 2007... MORE

Banana Republic Watch

Finance: stocks, options, etc.
Arnold Kling
A commenter points to an essay by Rob Arnott. The lion's share of the debt reduction may well be accomplished through reflation. We can eliminate half of our debt in 15 years if our inflation runs 5% higher than our... MORE

The Problem With Economic Sanctions

International Trade
David Henderson
When governments impose sanctions on people in another country, the main goal of the officials who favor the policy is to harm the person or people in charge of that country's government so that they will change their policies. That's... MORE

Unchecked and Unbalanced Podcast

Books: Reviews and Suggested Readings
Arnold Kling
Tom Keene interviews me. He likes the fact that Unchecked and Unbalanced is short--only 116 pages.... MORE

The Regulators' Cognitive Failure

Finance: stocks, options, etc.
Arnold Kling
The Washington Post reports, The Fed's failure to foresee the crisis or to require adequate safeguards happened in part because it did not understand the risks that banks were taking, according to documents and interviews with more than three dozen... MORE

Repugnantly Corrupt Bargains

Economic Philosophy
Bryan Caplan
Even if I favored Obama's move towards socialized medicine, I'd still be repulsed by the bribes and opportunism of the legislation designed to take us there.  I can see the appeal of coercing for a pure cause.  I can't see... MORE

FP2P: Paul Romer Interview Highlights

Books: Reviews and Suggested Readings
Bryan Caplan
Kling and Schulz's interview with Paul Romer sharply raises my already favorable opinion of him.  Highlights (italicized titles mine):No, This Isn't NanotechI'll claim that there's a recipe out there that you could use to just assemble carbon, oxygen, and hydrogen... MORE

Double-Digit Inflation Bet with Bob Murphy

Monetary Policy
David Henderson
Like co-blogger Bryan, I am much less pessimistic about inflation than Bob Murphy is. I think inflation will rise, but there's a lot of room between its current level and 10%. Also, I'm less optimistic about inflation long-term than Bryan... MORE

Dude, Who Will Shovel My Snow?

Labor Market
Bryan Caplan
In my neighborhood, many households would pay unskilled workers $30/hour or more to shovel snow.  I would, that's for sure.  But no one comes door-to-door offering these services.  The obvious explanation is that (a) teens are the only unskilled workers... MORE

FP2P: The Book Hayek Should Have Written

Books: Reviews and Suggested Readings
Bryan Caplan
I zoomed through Kling-Schulz's From Poverty to Prosperity.  The honest truth: It is the best book I've read all year, and the best book of interviews with economists ever written.  If you're tempted to discount my recommendation because Arnold's my... MORE

Brad Said It

Economic Education
Bryan Caplan
The quote was from DeLong's rave review of The Accidental Theorist.  The next sentence reads:But all these are outweighed by one fact: he is almost always--not always, but almost always--right.Even in 1999, that was a stretch.  By 2009, what non-Democratic... MORE

Cyclical Monetary Theory

Macroeconomics
Arnold Kling
Read Scott Sumner's post. I would distill it as arguing that macroeconomics and monetary theory follow a cyclical pattern. 1. During good times, such as the Great Moderation, a view develops that the monetary authority can stabilize the economy by... MORE

Who Said It?

Economic Education
Bryan Caplan
"Critics of Paul Krugman call him acerbic and boastful, unfair on the attack and unwilling to make concessions on the defense, certain that he is correct, and always sure that those who disagree are mendacious or foolish (or both). And... MORE

Correcting a Favorite Textbook Author

Macroeconomics
Bryan Caplan
Maybe I'm just misinterpreting this passage, but I feel the need to correct one of my favorite textbook authors.  Alex Tabarrok writes:A fall in wages increases the incentive to hire (call this the substitution effect) but it decreases the income... MORE

The Dining Room Table Responds

Macroeconomics
Bryan Caplan
Penny: He's a really good-looking guy, and I thought he was kind of cheesy at first... Billy: [quietly] Trust your instincts. Penny: But, he turned out to be totally sweet. Sometimes people are layered like that. There's something totally different... MORE

Hayek on Knowledge

Central Planning vs. Local Knowledge
David Henderson
I don't want to weigh in comprehensively on co-blogger Bryan's claims about Hayek. What I will say is that it's important to distinguish between three claims: (1) the claim that many modern libertarians and economists overrate Hayek (a claim with... MORE

Rejoinder on Hayek

Economic Methods
Bryan Caplan
Many people I know objected to my last post on Hayek.  Arnold jokingly called me a troll.  My colleague Russ Roberts urged me to learn greater patience:Five blog posts, huh? I guess that's something like saying Coase only wrote a... MORE

Inspiration from Ayn Rand

Books: Reviews and Suggested Readings
David Henderson
Some of the commenters on my post on Ayn Rand didn't like the fact that the book I discussed revealed some of the pretty-negative parts of Ayn Rand's character. One commenter, Brianna, wrote: What matters in the end are her... MORE

Signaling and Jury Duty

Economics of Crime
David Henderson
A junior colleague of mine, Noah Myung, who holds a Ph.D. in economics from Cal Tech, told me the following hilarious story. He was a math/econ major at UCLA and had just completed a course on game theory, taught by... MORE

Joshua Aizenman and Nancy Marion write, The estimated impact of inflation on today's debt/GDP ratio is larger than in the mid-1970s but not as large as in the mid-1940s. If inflation were 5% higher, the debt/GDP ratio would be about... MORE

Sumner on Allison

Finance: stocks, options, etc.
Arnold Kling
I should have outsourced my comments on John Allison's interview to Scott Sumner.... MORE

"No Frills" IVF in Africa

Family Economics
Bryan Caplan
Greg Clark's not gonna like this:Poor and war-torn, Sudan might be the last place you would expect to find an experiment in cutting-edge fertility treatments. But by the end of October, a clinic at the University of Khartoum plans to... MORE

Original or Distilled?

Economics of Education
Arnold Kling
The Boston Globe reports on a site that posts students' notes on faculty lectures. Several professors, including the English professor and writer Louis Menand and the economist Greg Mankiw, have refused. Mankiw says he didn't want to make it easier... MORE

College and Value

Economics of Education
Arnold Kling
Kevin Carey writes, The average graduation rate at four-year colleges in the bottom half of the Barron's taxonomy of admissions selectivity is only 45 percent. And that's just the average-at scores of colleges, graduation rates are below 30 percent, and... MORE

The Harvard-Goldman Filter

Finance: stocks, options, etc.
Arnold Kling
My position on breaking up banks generates questions from two groups. Libertarians ask, how can I justify breaking up private sector institutions? Naive liberals ask, why is this policy not embraced by our political leaders? My answer to both relates... MORE

This video is self-recommending. It defies further commentary.... MORE

The first surrogate mother contracts outraged the public.  Now, almost no one cares - except the satisfied parties to these mutually advantageous arrangements.  What happened?  Elizabeth Scott of Columbia Law School has a thought-provoking story to tell, with a strong,... MORE

Kling-Schulz: An Immediate Delight

Books: Reviews and Suggested Readings
Bryan Caplan
Arnold and Nick's From Poverty to Prosperity is an immediate delight.  I'm only on page 4, and I'm already cracking up.  Here is economic wit:Sixty years ago, a social studies teacher looking for a movie that would motivate students to... MORE

A Manager's Perspective on Health Insurance

Economics of Health Care
Bryan Caplan
A while back, I wrote:Yes, health insurance is bundled with jobs.  But markets bundle lots of products, and I see no evidence that this bundling undermines reputational incentives in the least.  Think about a typical restaurant.  It bundles many kinds... MORE

Phelps on the Future of Capitalism

Austrian Economics
Arnold Kling
Nobel Laureate Edmund Phelps writes a long interesting article. Excerpts and my comments below the fold.... MORE

Paul Krugman repeats his argument that wage cuts are an individually rational but socially destructive way to reduce unemployment.  His motive: To quash a politically impossible effort to cut the minimum wage.  Paul does address the real balance effect, but... MORE

Is Blinder Going Off the Reservation?

Fiscal Policy
David Henderson
Co-blogger Arnold focused earlier this morning on part of Alan Blinder's Wall Street Journal article, "The Case for Optimism on the Economy." Arnold focuses on what he calls "the job assignment problem." Arnold sees the problem as one of people... MORE

The Job Assignment Problem

Macroeconomics
Arnold Kling
Alan S. Blinder writes, The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate. There are two possible explanations. One: The last two quarters were among the most technologically... MORE

John Allison, a former bank CEO and hard-core libertarian, suggests requiring Federally-insured banks to have 20 percent equity capital. That is in the last part of a 10-part interview, during part of which he questions the need for Federal insurance... MORE

Carnival of Catastrophe

Fiscal Policy
Arnold Kling
What do you do about an unsustainable path for the government Budget? Hold a Carnival. A blog carnival, that is, or a collection of posts. I submitted one of my classics to the carnival. One of the more interesting takes,... MORE

Win APEE's Money

Economic Education
Arnold Kling
The Association of Private Enterprise Education writes, The 2010 Policy Communicators Contest invites college professors and graduate students from all disciplines to submit essays on the relationship between public policy and economic growth. It is of particular interest to compare... MORE

Manzi's Manifesto

Growth: Consequences
Arnold Kling
James Manzi writes, The level of family disruption in America is enormous compared to almost every other country in the developed world. Of course, out-of-wedlock births are as common in many European countries as they are in the United States.... MORE

Life Extension and the Economy

Labor Market
Bryan Caplan
One of Robin's most brilliant posts concludes:The standard views of techies about what techs will be feasible might be wrong, and the standard views of economists of how to forecast tech consequences might be wrong.  And it is fine for... MORE

Book 1 on Reason TV

Books: Reviews and Suggested Readings
Arnold Kling
Ten minutes, with Nick Gillespie interviewing me and my co-author Nick Schulz. Too bad they didn't film some of the discussions we had before and after we recorded the show. But this will give you a small taste of From... MORE

Bank Regulation is a Political Economy Problem

Finance: stocks, options, etc.
Arnold Kling
Paul Volcker says financial innovation has not been a good thing. Now, I have no doubts that it moves around the rents in the financial system, but not only this, as it seems to have vastly increased them. You cannot... MORE

More on the Late Paul Samuelson

Economic Methods
Arnold Kling
A lot of the feeling about him is correlated with how one feels about math. Those feelings range from Robert Lucas (quoted by Tyler Cowen and elsewhere): I internalized its view that if I couldn't formulate a problem in economic... MORE

The Next Bubble?

Energy, Environment, Resources
Arnold Kling
Nick Schulz and I write, If Congress and the president want to push the country in a greener direction, there are easier -- and safer -- ways of doing it. Put a price, in the form of a tax, on... MORE

David Cutler on Health Care Policy

Economics of Health Care
Arnold Kling
Steven Landsburg writes, My gut instincts point me in a different direction that Professor Cutler's do, but I think we agree on what the big problems are and on what would count as solutions. I think almost all economists would... MORE

Does the Public Get This Right?

Economics of Health Care
Bryan Caplan
There is one question in the Roper-AP survey where I wonder if the American public is more perceptive than pro-Obama economists.  The question: "If the government makes these changes to health insurance [i.e., extending coverage], would that probably cause you... MORE

My WSJ Article on Samuelson

Economic Methods
David Henderson
My article on Paul Samuelson's work is in today's (Tuesday's) Wall Street Journal. They cut it by about 600 words to fit the space. My favorite paragraph that appeared is this one: "Let those who will write the nation's laws... MORE

Hail Victor Fuchs

Economics of Health Care
Bryan Caplan
One of my favorite passages in The Myth of the Rational Voter argues that economists should often support markets even when they aren't working very well.  Why?  Because in the real world, government habitually make genuine market failures worse in... MORE

Wall Street Journal on Health Care

Economics of Health Care
David Henderson
Today's lead unsigned editorial on health care in the Wall Street Journal is one of the best they have run. One good paragraph: They might have piped up earlier: What they're finally admitting is that all the grandiose talk about... MORE

Life Extension and the Budget

Fiscal Policy
Arnold Kling
The Chicago Sun Times reports, Life expectancy for Americans by 2050 will surpass government projections by as much as eight additional years for women and five for men, This is good news. The trend is not just for death to... MORE

Double-Digit Inflation Bet With Bob Murphy

Macroeconomics
Bryan Caplan
I'm a sucker for a good Simpsons reference.  Here's a great one from Bob Murphy:It may smack of paranoid conspiracy theories to some readers, but as the principal in the Simpsons said when the students overheard him predicting that they... MORE

Distilling Famous Thinkers

Economic Philosophy
Arnold Kling
Dan Klein has thoughts on studying the great minds of the past. This bears on the issue of whether or not one can or should distill Hayek (or any other famous thinker) to five blog posts, as Bryan blithely suggested.... MORE

The Source of my Anti-Monetarism

Macroeconomics
Arnold Kling
Alex Tabarrok forwards Paul Krugman's citations of the late Paul Samuelson on the ineffectiveness of monetary policy, due to high substitutability between Federal reserve liabilities and other assets. Alex says that Samuelson sounds like me. Clearly, the causality runs from... MORE

Philosophy and Rational Irrationality

Behavioral Economics and Rationality
Bryan Caplan
Now that Robin knows what philosophers think, he likes them more.  I recently received a thoughtful email from Ph.D. philosophy student Matthew Skene that makes the opposite case.  Here's the full message, reprinted with permission. My name is Matt Skene,... MORE

Book 1 Podcast

Books: Reviews and Suggested Readings
Arnold Kling
Russ Roberts and I talk about From Poverty to Prosperity. One interesting issue is why the economic ideas in the book are so little discussed in the mainstream media or in the standard economics curriculum. Part of the reason may... MORE

Thoughts on Spontaneous Order

Business Economics
Arnold Kling
In a comment from a troll Bryan Caplan entry, I find, I've long since lost all patience with Hayek. His original, true ideas could have been five good blog posts Personally, I think that the concept of spontaneous order takes... MORE

One Take on Strauss's Craziness

Economic Philosophy
Bryan Caplan
If you think Rothbard was harsh on Hayek in Rothbard vs. the Philosophers, here's what he has to say about Leo Strauss's Thoughts on Machiavelli:First, something should be said about the manner, the texture, the methodology of this book, which... MORE

Recommended Reading on Health Care

Economics of Health Care
Arnold Kling
Tyler Cowen recommends an article that interviews health information technology CEO Jonathan Bush. I concur in the recommendation. Read the whole thing.... MORE

Thoughts on the Late Paul Samuelson

Economic Education
Arnold Kling
1. He was influential. He influenced students through his textbook, and he influenced the entire economics profession through his dissertation, published as "Foundations of Economic Analysis." Readers of this blog will tend to disapprove of his influence, in that it... MORE

Borenstein's Biased Reporting

Energy, Environment, Resources
David Henderson
I posted last week on Andrew C. Revkin's and John M. Broder's New York Times news story, to show how clever journalists can bias the reader at every turn. In today's local Monterey County Herald appears an Associated Press news... MORE

Two Takes on Hayek's Flabbiness

Austrian Economics
Bryan Caplan
I've long since lost all patience with Hayek.  His original, true ideas could have been five good blog posts, his errors and bizarre obsessions are numerous, and his writing style insults every person who ever tried to write a decent... MORE

Links of Interest

Arnold Kling
1. Peter Gordon praises Book 1. Tim Harford reports on Partha Dasgupta's lecture on the gap between the income of developed and underdeveloped countries, which is one of the main topics in Book 1. 2. Goldman Sachs and AIG. 3.... MORE

Ayn Rand and the World She Made

Books: Reviews and Suggested Readings
David Henderson
I posted briefly on Anne C. Heller's book, Ayn Rand and the World She Made, and have now finished it. It was good from cover to cover. When I finished the last page Sunday night, I turned to my wife... MORE

Billion Dollar Bribe

Politics and Economics
Bryan Caplan
Suppose you had a billion dollars to spend in Washington to advance liberty.  What's the biggest libertarian policy reform your billion could buy?  How precisely should you spread your money around?Remember: Many obvious strategies would lead to bad publicity and... MORE

The Best Sentence of the Week

Economics of Crime
David Henderson
Some students and I, in a special readings class, were working our way through some chapters of David Friedman's law and economics book, Law's Order. In an interesting section where he makes a persuasive case for allowing a market in... MORE

Recession? What Recession?

Fiscal Policy
Arnold Kling
The USA Today story on the increases in highly-paid Federal workers has been making the rounds. This quote in the story is inevitable: Jessica Klement, government affairs director for the Federal Managers Association, says the federal workforce is highly paid... MORE

How Wise Is Repugnance?

Economic Philosophy
Bryan Caplan
I finally read that instant classic of bioethics, Leon Kass' "The Wisdom of Repugnance."  While its proximate goal is to urge a ban on human cloning, Kass advances a much more general ethical position:[R]epugnance is the emotional expression of deep... MORE

Anti-Masonomics

Political Economy
Arnold Kling
Don Boudreaux writes, I'd like to ask Prof. Krugman why he's so keen to entrust vastly more resources and power to an agency that, even when controlled by the political party that shares his values and worldview, is "extremely dysfunctional."... MORE

Today Tyler pointed me to the PhilPapers Surveys, the most fascinating opinion poll I've seen in years.  Not only does it survey philosophers' views on thirty classic and modern controversies; it meta-surveys philosophers' views on philosophers' typical views! The PhilPapers... MORE

Murphy on Geo-Engineering

Energy, Environment, Resources
David Henderson
The option of geo-engineering makes it much safer to continue using fossil fuels and thereby pass on extra trillions of dollars of wealth to the next generation at possibly little or even no cost. So writes Robert Murphy in the... MORE

Against Intellectual Property

Information Goods, Intellectual Property
Arnold Kling
David K. Levine and Michele Boldrin write, Is intellectual property needed as a shield for the weak against the strong? Those of us who have yet to make our name in the media markets should fear obscurity rather than piracy.... MORE

If I'd known about this section on "The Delusion of Overrating the Happiness of Our Ancestors" in Thomas Macaulay's History of England (1848), it definitely would have made it into The Myth of the Rational Voter:[I]n spite of evidence, many... MORE

The Case for Health Care Reform

Economics of Health Care
Arnold Kling
Matt Welch writes, In France, by contrast, you walk to the corner pharmacist, get either a prescription or over-the-counter medication right away, shell out a dozen or so euros, and you're done. If you need a doctor, it's not hard... MORE

Two Reviews

Books: Reviews and Suggested Readings
Arnold Kling
About Book 1, I recommend Mike Gibson's review. An excerpt: It's a wonderfully concise introduction to development, economic history, the roots of progress, wealth-creation, entrepreneurialism, and innovation-all this and more. ...Kling and Schulz do not really broach the subject, but... MORE

What is Maturity - and Who's Got It?

Economics and Culture
Bryan Caplan
Like most interesting words, "maturity" is hard to define.  The most literal definition is just "how much you act like an adult."  But since adult behavior varies widely, and we often call some adults "immature," that's not very helpful.  As... MORE

Canadian Recalculation?

Macroeconomics
Arnold Kling
Mike Moffatt wants to know if I see Stephen Gordon's analysis as supporting the Recalculation Story for Canada. Gordon writes, the manufacturing sector is where most of the damage occurred. Even though it employed fewer than one worker in eight... MORE

Monetary Thought Experiments

Macroeconomics
Arnold Kling
Scott Sumner writes, Why would doubling the supply of currency cause people to hold twice as much currency in real terms? Here is my thought experiment. Suppose that the government retired lots of $10 bills, giving $5 bills in exchange,... MORE

Last week, I blasted CBS's show 60 Minutes. This week I've come to praise it. 60 Minutes's long segment was with referee Tim Donaghy. I thought it would be a standard story about a guy betting on one side and... MORE

Higher Education: The End Is Not Nigh

Economics of Education
Bryan Caplan
Five years ago, I laughed at Alex Tabarrok for worrying that online instruction would put traditional colleges - and traditional professors like us - out of business.  He's still worried:[U]niversities will move to a superstar market for teachers in which... MORE

Book 1 Reviewed

Books: Reviews and Suggested Readings
Arnold Kling
Ira Stoll writes, One of the virtues, or drawbacks, of having a book composed of a bunch of interviews is that the interviewees don't always agree with each other, or with the authors. Professor Fogel, for example, remarks that if... MORE

Educational Disintermediation

Economics of Education
Arnold Kling
Alex Tabarrok writes, I have argued that universities will move to a superstar market for teachers in which the very best teachers use on-line instruction and TAs to teach thousands of students at many different universities. What he is suggesting... MORE

Corrigan's Contradiction

Finance: stocks, options, etc.
Arnold Kling
Simon Johnson writes, E. Gerald Corrigan in his Dolan Lecture at Fairfield University. Corrigan, former President of the New York Fed and a senior executive at Goldman Sachs for more than a decade, makes three main points. 1. "Large Integrated... MORE

Questions for a Dissertation Defense

Economics of Health Care
Bryan Caplan
Tomorrow morning, Robin Hanson is chairing a very interesting dissertation defense:One part finds that US firms that self-insure, thereby avoiding many health insurance regulations, spend 18-25% more per employee on medicine...The take-away:For those who think med is great, this seems... MORE

Question for Recalculationists, Round 3

Macroeconomics
Bryan Caplan
Unless I've unfairly overlooked someone, it looks like no recalculationist answered my original question - namely, "By what percentage do real GDP and employment fall if nominal GDP unexpectedly declines by 5%?"  Arnold comes the closest.In this example, I would... MORE

Do You Like Science Fiction?

Books: Reviews and Suggested Readings
Arnold Kling
Reihan Salam thinks that Book 2 falls in that general category. In Unchecked and Unbalanced, Arnold Kling offers a trenchant libertarian critique of the policies that led to the financial crisis. His basic take is that as our society has... MORE

Trial and Error

Economics of Health Care
Arnold Kling
Atul Gawande says something I believe to be true and something I believe to be false. What I believe to be true: To figure out how to transform medical communities, with all their diversity and complexity, is going to involve... MORE

Calomiris on the Financial Crisis

Finance
David Henderson
I posted last month on one part of Russ Roberts' interview with Charles Calomiris. Some of the commenters highly recommended the whole podcast and I agree. I've listened to it twice all the way through and taken notes. Calomiris often... MORE

Question for Recalculationists, Round 2

Macroeconomics
Bryan Caplan
Arnold answers my question with another question:[W]hy does nominal GDP suddenly fall by 5 percent?Let's keep it simple: The public freaks out for no good reason and responds by trying to increase cash balances, and the Fed doesn't accomodate.... MORE

Book 1 and Book 2 Watch

Institutional Economics
Arnold Kling
Paul Gregory writes, China and russia in the 1980s offer a unique case study in why some reforms work and others do not. The contrast refutes the notion that a strong, perhaps totalitarian state, is required for successful reform. In... MORE

Debt Rollover and Inflation

Fiscal Policy
Arnold Kling
Megan McArdle and Russ Roberts discuss the issue in the last quarter of their podcast. If you prefer an academic paper, read Joshua Aizenman and Nancy Marion. They write, in part today's temptation to inflate away some of the debt... MORE

NY Times' Non-Reporting Reporting

Energy, Environment, Resources
David Henderson
If you want to see a great example of a purported news story in which the reporters try to bias the story one way, check out today's New York Times story on Climategate. I preface this by saying that I... MORE

Question for Recalculationists

Macroeconomics
Bryan Caplan
Suppose that the modern U.S. economy faced no out-of-the-ordinary recalculation problems.   By what percentage do real GDP and employment fall if nominal GDP unexpectedly declines by 5%?P.S. If you're wondering why I'm asking...... MORE

Jeffrey Friedman on Competition vs. Planning

Institutional Economics
Arnold Kling
Self-recommending, but here is an excerpt: In a complex world where nobody really knows what will succeed until it is tried, competition that pits people's ideas against each other is the only way to test these ideas. Competition among capitalists... MORE

A Glimmer of Hope on Freedom

Regulation
David Henderson
In some ways, Canada has much less freedom of speech than we have in the United States. Specifically, someone can be fined, told to apologize, and prohibited from speaking on the subject again if he engages in certain kinds of... MORE

Karl Smith looks at gross job flows and ask whether they support or refute the Recalculation Story. We can think of three reasons for people to lose jobs. First, normal churn, in which people shift out of declining firms and... MORE

Some Thoughts on Monetarism

Monetary Policy
Arnold Kling
This post is going to be another macroeconomics lecture. I am going to make some technical arguments about money, expectations and spending. But first, a word about policy. There is absolutely no reason that I can come up with not... MORE

The Point of Stitches

Books: Reviews and Suggested Readings
Bryan Caplan
Tyler says that David Small's graphic novel Stitches is "professionally done but pointless."  I say it's an eloquent illustration of one of the most important exceptions to the behavioral genetic conclusion that parents have little long-run effect on their kids. ... MORE

Dean Baker Nails It on Immigration

Labor Mobility, Immigration, Outsourcing
David Henderson
In a Washington Post story today, reporter Philip Rucker bemoans the fact that the expansion of demand for medical care that would follow from the passage of Congress's health care bill would butt up against a restricted supply of doctors.... MORE

Ridiculous Sentence on Economic Policy

Economic History
David Henderson
Co-blogger Bryan asked for candidates for ridiculous sentences on economic policy. I have one candidate and another possible. The first is the old socialist saw: Production for use and not for profit. The second, which I can't find quickly, is... MORE

So Bad It's Good

Economic History
Bryan Caplan
A single sentence in the Durants' The Age of Napoleon makes me wonder whether I can trust a word they write on economic policy:In the laissez-faire economy, producers, distributors, and consumers labored to mulct one another, or to evade the... MORE

Emotional Politics

Politics and Economics
Arnold Kling
Will Wilkinson and Jonah Goldberg (among others) are debating whether a little bit of nationalism is a good thing. For example, Wilkinson writes, Liberty is best loved when it is loved because it is good -- because it makes possible... MORE

The Ethics of Giving Machiavellian Advice

Economic Philosophy
Bryan Caplan
A British reporter just gave me the following hypothetical: Suppose a politician wanted to cynically take advantage of voter irrationality to gain their support for costly measures to fight global warming.  What would his most effective strategies be?One of my... MORE

My Two Ideas on Jobs

Labor Market
Arnold Kling
1. Cut pay for state, local, and Federal workers. Many people worry about governments having to cut back on employment. They see this as an argument for higher government spending. However, it is actually a much stronger argument for cutting... MORE

Wesley Mouch Watch

Political Economy
Arnold Kling
Finreg 21 reports, Regulators will be bringing pressure on banks to make greater efforts to serve poorer communities after an FDIC survey showed that more than a quarter of U.S. households have little or no financial activity through banks. So,... MORE

I mention Scott Sumner a lot on this blog. Why? Because I see him as sticking up for mainstream macroeconomics. I myself have been pushing a non-mainstream idea, sort of a muddle between Leijonhufvud and Hayek that I call the... MORE

Hansonian Foreign Aid

Behavioral Economics and Rationality
Arnold Kling
Bill Easterly and Laura Freschi point to a study showing that foreign aid increases happiness--for the donor countries. For the recipients, not so much. I have not read the study, but I doubt that I would find the research methods... MORE

The Public Choice of the Ancient Hebrews

Politics and Economics
Bryan Caplan
I just finished Richard Friedman's Who Wrote the Bible?  It's a classic popularization of the Documentary Hypothesis, which claims that the Pentateuch (the first five books of the Bible) is actually a medley of four earlier sources called J (the... MORE

I Hate This Story

Energy, Environment, Resources
Arnold Kling
I've written about it before, but Wired reminds me, Startup companies that enjoy DOE support, most notably Tesla Motors and Fisker Automotive, have an extraordinary advantage over potential competitors since they have secured access to capital on very cheap terms.... MORE

The Future will not be Civil

Behavioral Economics and Rationality
Arnold Kling
the new genetics will reveal much less than hoped about how to cure disease, and much more than feared about human evolution and inequality, including genetic differences between classes, ethnicities and races. That is Geoffrey Miller, who you may... MORE

Morning Commentary, Hubris Edition

Political Economy
Arnold Kling
1. Robert Kagan writes The foreign policy establishment and intellectual world are much the same. They fully supported intervention in Vietnam, mostly supported intervention in Iraq and fully supported the war in Afghanistan -- until the wars got hard, or... MORE

Some Reviews of Book 1

Books: Reviews and Suggested Readings
Arnold Kling
Curt Gardner writes, The development question is not merely a matter of distributing recipes and watching prosperity develop. Recipes often come with buried cultural assumptions that we take for granted, because they are so ingrained for us. These things could... MORE

How Arthur Lupia Changed My Mind

Behavioral Economics and Rationality
Bryan Caplan
Today the renowned political scientist Arthur Lupia visited GMU.  His mission: Attack the quality of academic research on voter competence.  His arguments changed my mind, but in the opposite of the intended direction.  Given Lupia's intelligence, expertise, and effort, his... MORE

A reader writes, If the price-insensitive people are at home avoiding the crowds then it would seem the online stores would be getting shopped by a higher than average percentage of price-insensitive people. It appears to me the 'price discrimination'... MORE

Comment on Tyrone's Latest Post

Economic Methods
Arnold Kling
I got a server error when I tried to leave a comment on Tyler Cowen's blog. Here is the comment: Suppose that the credibility of a scientist is a function of two variables: (1) the evidence he offers; and (2)... MORE

Scott Sumner Back to Normal

Macroeconomics
Arnold Kling
That is, he is saying things I disagree with. 1. Between July and November 2008 the Fed adopted an ultra-tight monetary policy. 2. Real interest rates on indexed 5 year T-bonds rose from 0.5% to 4.2% 3. The tight money... MORE

Douglass North on Afghanistan

Political Economy
Arnold Kling
Nobel Laureate Douglass North is not a blogger or an op-ed columnist. But I can guess at his reaction to President Obama's speech last night. The President said, We'll support Afghan ministries, governors, and local leaders that combat corruption and... MORE

David Wessel on the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Here, he answers some questions posed by bloggers, including a couple from me. The organizers solicited the questions by email, and they asked us to promote the videos on our blogs. I am not getting paid, and right now I... MORE

Fortune Encyclopedia of Economics in Alexandria

Political Economy
David Henderson
The predecessor to The Concise Encyclopedia of Economics was The Fortune Encyclopedia of Economics. I received the following e-mail from Mark Skousen, just back from a trip to Greece, Turkey, Israel, Egypt, and Italy (edited for space): I lasted visited... MORE

What Does Selfishness Require of Us?

Economic Philosophy
Bryan Caplan
I often wish the people around me were more selfish - or at least better at being selfish.  I know how to deal with rational, self-interested actors.  They're really quite charming.  If I want them to change their behavior, I... MORE

The CBO Has Not Changed Macro Models!

Macroeconomics
Arnold Kling
This is not big news, but Derek Thompson writes as if it is. The CBO came out today with a new report on the effect of the stimulus, or the American Recovery and Reinvestment Act (ARRA). The conclusion is that... MORE

I Agree with Scott Sumner

Macroeconomics
Arnold Kling
On most monetary issues, I don't. But I like this post, where he comes out four square in favor of using the monetary base as his measure of the money supply. So when people start asking me about the banking... MORE

Obvious Stuff I Agree With

Economic Philosophy
Bryan Caplan
1. Nationalism is evil:One big problem with nationalism is that it is a leading cause of mass murder. Fascism and Nazism were, of course, extreme forms of nationalism and the mass murders Nazi and fascist regimes committed were justified on... MORE

Preview of Book 2

Books: Reviews and Suggested Readings
Arnold Kling
Policy Review publishes a preview of Book 2. Executives had too much confidence in their risk management strategies. Regulators, too, had excessive confidence in the measures that they had in place to ensure safety and soundness of banks and other... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Bill Easterly is not of fan of military nation-building in Afghanistan. He writes, critics of top-down state plans for economic development are also not fans of top-down state plans for military development. If the Left likes the first, and the... MORE

Ayn Rand Discovers Public Choice

Books: Reviews and Suggested Readings
David Henderson
He [Parnell Thomas, chairman of the House Un-American Activities Committee] tried to placate her [Ayn Rand] with promises of a "whole [new] special hearing devoted to nothing but ideology," where she could bring out "all the facts." She told him... MORE

Questions I'm Going to Ask John Nye

Economic History
Bryan Caplan
My colleague John Nye specializes in French economic history.  Other than his job market talk, though, I can't say that he's done much to bring me up to speed in this field.  Since I have much to learn, I'm taking... MORE

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