Bryan Caplan and David Henderson

January 2010

A Monthly Archive (144 entries)

Name that Blip Redux

Politics and Economics
Bryan Caplan
Tom Ault makes an interesting point in the comments:I'd just like to point out that some commenters are looking at a graph of total government spending (the sum of federal, state and local spending) and drawing correlations based on which... MORE

Two New Books

Books: Reviews and Suggested Readings
Arnold Kling
Policy and Economic Performance in Divided Korea during the Cold War Era: 1945-91 by Nicholas Eberstadt. And The Invention of Enterprise, edited by David S. Landes, Joel Mokyr, and William J. Baumol. I have only skimmed them so far. If... MORE

Name that Blip

Politics and Economics
Bryan Caplan
Arnold's last post inspired me to double-check the long-term trend of government spending relative to GDP.  Here's a nice graph courtesy of www.usgovernmentspending.com:Aside from the two World Wars, the growth was almost linear until the early Reagan years.  Then it... MORE

One-Party State Watch

Political Economy
Arnold Kling
Steven Greenhut writes, The United States had 2.3 state and local government employees per 100 citizens in 1946 and has 6.5 state and local government employees per 100 citizens now. In 1947, Hodges writes, 78 percent of the national income... MORE

Rand vs. Evolutionary Psychology: Part 2

Economic Philosophy
Bryan Caplan
"I want you to observe, that those who cry the loudest about their disillusionment, about the failure of virtue, the futility of reason, the impotence of logic - are those who have achieved the full, exact, logical result of... MORE

Bhagwati vs. Blinder

International Trade
David Henderson
My review of Jagdish Bhagwati and Alan S. Blinder, Offshoring of American Jobs, appears in the latest issue of Regulation. I show that although Bhagwati had accused Alan Blinder of dropping his belief in free trade, the accusation was unfounded.... MORE

Barney Frank's Surprising Answer

Finance: stocks, options, etc.
Arnold Kling
I submitted a question to his interview with Bigthink. The relevant segment is here, a bit more than 18 minutes in. I asked about equating affordable housing with mortgage subsidies. He said he never did that. For him, affordable housing... MORE

Huemer Flourishes

Economic Philosophy
Bryan Caplan
Mike Huemer is excellent as usual at the Cato Unbound Rand symposium.  Here's his take on the Objectivists' "survival vs. flourishing debate":The important question, however, is not which view is Rand's, but which view is more likely true. On this,... MORE

The Ivory Tower: Do Non-Leftists Want In?

Economics of Education
Bryan Caplan
Gross and Fosse have a supply-driven theory of leftist domination of higher education:A pair of sociologists think they may have an answer: typecasting. Conjure up the classic image of a humanities or social sciences professor, the fields where the imbalance... MORE

Art Carden on SOTU

Labor Market
David Henderson
Over at the "Division of Labor" blog, Art Carden has a great post on President Obama's State of the Union address. (Unfortunately, clicking on the link takes you to the site but not necessarily to the specific post.) Rather than... MORE

Implausible Wimps: A Reply to Hara Marano

Family Economics
Bryan Caplan
I'm not a big fan of Hara Marano's A Nation of Wimps.  While I agree that overparenting is silly, I recently complained that she "implausibly claim[s] that overparenting does long-term harm to children by infantilizing them."  Marano kindly responds in... MORE

Proposal for a Moral Budget

Fiscal Policy
Arnold Kling
I claim that it is immoral for government to make promises that it does not expect to keep. Today, on the CBO Director's blog, there is in analysis of a proposal that would satisfy my criteria for morality. The Roadmap,... MORE

Clemens on Haiti

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
Here at GMU Econ, Michael Clemens is "the one that got away."  We tried to hire him a couple years ago, but couldn't get him to yes.  His latest piece in the Washington Post is yet another reason to wish... MORE

The "Zero-Probability Fallacy" Fallacy

Behavioral Economics and Rationality
Bryan Caplan
Lenore Skenazy's Free-Range Kids has 58 5-star reviews on Amazon - and only one 1-star review.  But Olga, the book's lone detractor, makes a striking argument: The real innumerates are not paranoid parents, but people like me and Skenazy who... MORE

Why the U.S. is Ungovernable

Political Economy
Arnold Kling
It's the latest meme. The U.S. is ungovernable, because of a) Senate procedures b) Republican obstructionism c) polarization d) special interests etc. I've seen it from Marc Ambinder, Steven Pearlstein, and others. I'm too lazy to copy links, but my... MORE

Take it as given that U.S. fiscal policy is unsustainable. It was unsustainable before Obama became President, and one can argue that he has made it worse. It was unsustainable before Bush became President, and one can argue that he... MORE

The Genius of Libertarianism

Politics and Economics
Arnold Kling
The Washington Post reports, "You know the way to boost your poll numbers is not do anything," Obama said at a town hall gathering in Ohio last week. "That's how you do it. You don't offend anybody. I'd have real... MORE

Earmarks and Total Spending

Public Choice Theory
Arnold Kling
Tyler Cowen quotes Garett Jones: The key to controlling spending is permitting more earmarks (sic). Tyler asks us to guess Garett's model. One model would be this: 1. Each Congressperson wants to use government spending to buy enough votes to... MORE

Getting Along in Business

Behavioral Economics and Rationality
Arnold Kling
A reader emails: I am low on agreeableness with people at my place of work...I am interested in knowing what you have learned about how to get along with co-workers and overcome low Agreeableness. I think that people who are... MORE

Gender Imbalances and Growth Reconsidered

Family Economics
Bryan Caplan
Most people oppose polygamy out of intolerance, but many social scientists offer a deeper objection: Polygamy simulates the allegedly awful social effects of high male/female ratios.  Arnold's particularly worried:If it were not for monogamy, the competition among males for females... MORE

Gunnar Myrdal on Minimum Wages

Labor Market
David Henderson
Yesterday, Chris Koresko, one of the commenters on my post on how the minimum wage had helped destroy the tuna canning industry in Samoa, stated: Please correct me if I'm wrong, but my vague memory is that the first minimum... MORE

Recommended

Business Economics
Arnold Kling
Ben Casnocha dug up a James Fallows piece from 1985 on entrepreneurialism vs. credentialism. Fallows writes, Nowhere is the tension between the two cultures, the entrepreneurial and the professional, more evident at the moment than in American business. At just... MORE

Caplan Influences Schumer and Hatch?

Macroeconomics
Arnold Kling
Senators Charles E. Schumer and Orrin G. Hatch write, Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2 percent Social Security payroll... MORE

Insuring Kenyan Cattle

Information Goods, Intellectual Property
David Henderson
A new insurance scheme has been launched in northern Kenya which offers herdsmen a chance to protect their livestock against drought. The initiative uses satellite technology to check the pasture available for the herders. This is from "Satellite Images Help... MORE

The Rap on Economics

Economic Education
Arnold Kling
Keynes vs. Hayek, a rap video developed by John Papola and Russ Roberts. It might be a great discussion starter for an economics class.... MORE

O'Grady on Haiti

Politics and Economics
David Henderson
You can't make this stuff up. Apparently-serious people are suggesting that Bill Clinton be made the aid czar. Mary O'Grady of the Wall Street Journal says why this is a bad idea. An excerpt from her piece: According to sources... MORE

The Henderson Let Em In Club

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Bill Easterly is a member. 82 Percent of Haitians above this poverty line [$10 per day] are here in the United States. (I calculate this with Lant Pritchett here, ungated version here.) Only the top 1.4 percent of people in... MORE

Obamacare Passes By 6/30/10: Should I Bet Against It?

Politics and Economics
Bryan Caplan
The Intrade price of Obamacare passing by June 30, 2010 is 36.0.  I'm sorely tempted to bet against it's passage, even after reading the fine print:This contract will settle (expire) at 100 ($10.00) if a healthcare reform bill is passed into... MORE

"Big Corporations Almost Never Lose Money"

Microeconomics
Bryan Caplan
That's an actual quote from Galbraith's New Industrial State.  And somehow the last two years are supposed to show that Friedman was out of touch with reality?  I'm speechless, but fortunately Amar Bhide gives me a rhetorical bail-out in F2P2:Arnold... MORE

60 Minutes "Gets" Minimum Wage, Kind Of

Labor Market
David Henderson
The island [Samoa] may lose its tuna industry. One cannery, Chicken of the Sea, has left. And because the U.S. Congress wanted to help Samoa by imposing American minimum wage, Governor Tulafono is worried that the last cannery, Starkist, could... MORE

I Loved Free-Range Kids

Books: Reviews and Suggested Readings
Bryan Caplan
While writing Selfish Reasons to Have More Kids, I've been reading a lot of popular parenting books.  I'm pleased to report that I finally found one that I love: Lenore Skenazy's Free-Range Kids.  Most of the competition tries to be... MORE

Progressive Corporatism Explained

Political Economy
Arnold Kling
Timothy P. Carney never uses that exact term, but he explains it well in an interview with Nick Gillespie. Well worth a viewing. Near the end, the question comes up about whether "libertarian populism" is an antidote. I think that... MORE

Increasing Liability of Bank Executives

Finance: stocks, options, etc.
Arnold Kling
Axel Leijonhuvfud writes, In the early days of fractional reserve banking, bank owners were subject to unlimited liability. In the US, double liability for bank shareholders was common up to the Great Depression. All American investment banks were partnerships into... MORE

Too Small to Succeed?

Finance
David Henderson
Indeed, one of the major contributors to bank failures during the Great Depression was the National Banking Act of 1864. That law, according to monetary historian Jeff Hummel, an economist at San Jose State University, banned any branching (interstate or... MORE

How I Would Have Sold Obamacare

Politics and Economics
Bryan Caplan
Russ Roberts and Will Wilkinson are baffled by Krugman's understanding of how the U.S. government works.  I think Krugman might actually be right.  Yes, there is division of powers.  But leadership, rhetoric, agenda setting, and commitment all work to some... MORE

Ayn Rand's Niche

Economic Philosophy
Arnold Kling
Michael Huemer writes, What accounts for the continuing and increasing interest in the work of Ayn Rand? Clearly, the attraction of her ideas has much to do with it. This is true despite the fact that most people, even in... MORE

Krugman is Good Again

Economics of Health Care
Bryan Caplan
Krugman's latest op-ed brings back fond memories of the thinker he used to be.  As David Henderson points out, Krugman plainly admits that insurance regulation makes the adverse selection problem worse: Suppose, for example, that Congress took the advice of... MORE

Huemer on Rand at Cato

Economic Philosophy
Bryan Caplan
Mike Huemer, my favorite philosopher in the world, is true to form in the Rand symposium at Cato Unbound.  Highlights:Rand is the most popular libertarian thinker because of her great novels, not her comprehensive philosophical system:Rand, I believe, is the... MORE

Mandel on FP2P

Books: Reviews and Suggested Readings
Arnold Kling
Michael Mandel writes, It's good to see a book which focuses on this topic, whether the authors call it innovation economics or Economics 2.0 or something else. We need more of this kind of thinking. My guess is that Michael... MORE

The Henderson Club

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Or we could call it the Let Them In club. Elliott Abrams is a member. Mark Krikorian is not. Krikorian is one of the people who makes it difficult for a libertarian like me to feel comfortable with the conservative... MORE

The Quants

Books: Reviews and Suggested Readings
Arnold Kling
The Quants, by Scott Patterson, is the latest indulgence in my taste for financial crisis porn. It reminds me a lot of Roger Lowenstein's When Genius Failed. Lowenstein's book, which narrates the rise and fall of the infamous hedge fund... MORE

Adverse Selection by Law

Economics of Health Care
David Henderson
Finally, Krugman admits the problem with a ban on pre-existing conditions clauses in health insurance. From Paul Krugman's column today: Suppose, for example, that Congress took the advice of those who want to ban insurance discrimination on the basis of... MORE

In his latest TV ad for subsidies for wind-generated power, T. Boone Pickens states words to the effect: Much of our oil is imported from countries that hate us. Pickens uses this to argue that the U.S. government should subsidize... MORE

Pyramid Power

Labor Market
Bryan Caplan
In the latest Cato Unbound, Rod Long attacks Ayn Rand's view that actually-existing capitalism is highly meritocratic:Rand describes a "pyramid of ability" operating within capitalism, wherein the dull masses are carried along by the intelligent and enterprising few. "The man... MORE

Big Banks

Political Economy
Arnold Kling
Tyler Cowen writes, Obama proposes a new banking plan and everyone is commenting for instance here is Simon Johnson. The plan seems to involve limits on bank size and limits on proprietary trading. In principle, I am against attempts by... MORE

Here's what Megan McArdle advocated today: eliminate the tax-deductibiity of health insurance benefits for people making more than $150K a year in household income, $100K for singles. So now imagine that you're a married person with a family and you're... MORE

A Sentence to Ponder

Business Economics
Arnold Kling
from Felix Salmon: I see [Tyler] Cowen as being a kind of anti-Larry Summers in the internal government debate about what to do about Haiti. Rather than being the person who throws cold water on promising ideas, he's the person... MORE

The Case for Competitive Government

Political Economy
Arnold Kling
Scott Sumner writes, The recent election of Scott Brown is just one more opportunity to ruminate over the excessive size of the US government. In earlier posts I have argued that there are big diseconomies of scale in governance. Small... MORE

Let Them In

Labor Mobility, Immigration, Outsourcing
David Henderson
Jacob Hornberger has an interesting post today comparing Obama and FDR. FDR prevented Jews from immigrating from Europe in the late 1930s. Had he let them in, he would have saved lives. Obama's military is broadcasting to Haitians not to... MORE

Various

Cross-country Comparisons
Arnold Kling
John Taylor is interviewed. I recommend clicking on "interview transcript," since it is faster to skim and read than to watch an interview. At one point, the interviewer poses a question from Scott Sumner on whether the Fed was too... MORE

Huge News Story I Missed in December

Politics and Economics
David Henderson
MItch McConnell Enabled Obamacare Just before Christmas, I read somewhere that Mitch McConnell, the minority leader in the U.S. Senate, had made it easier for Harry Reid to pass the ugly Senate health care bill. I hadn't understood it at... MORE

Simon vs. Ehrlich at a Funeral

Economic Philosophy
Bryan Caplan
I recently attended my first funeral.  Even though I never met the deceased, I cried.  The only good thing to say about death is that it beats severe, chronic pain.  I didn't need a lot of details about her life... MORE

Jonah Goldberg on Haiti

Growth: Causal Factors
Arnold Kling
He offers a diagnosis based on FP2P. It's true that Haiti has few natural resources, but neither do Japan or Switzerland. What those countries do have are what Kling and Schulz call valuable "intangible assets" -- the skills, rules, laws,... MORE

Kling and Schulz on Airline Security

Terrorism
Arnold Kling
We write, The security process needs several things it is lacking. It needs continuous adaptation, with a strong focus on satisfying customers and improving results. It needs to find new and better methods of meeting the demands of customers who... MORE

How to Give to Haiti?

Income Distribution
David Henderson
I'm convinced that I want to give money to help people in Haiti. I haven't done so yet because I haven't found the right charity. Tyler Cowen has suggested two but I was underwhelmed by his suggestions. Some have said... MORE

Wage Freeze for Government Workers

Macroeconomics
Arnold Kling
If Josh Barro had not written this: As states and localities continue to fight budget crises, they have an opportunity to close gaps by freezing employee wages. Because public employee compensation rose too fast over the last three years, they... MORE

George Akerlof and Rachel Kranton

Books: Reviews and Suggested Readings
Arnold Kling
Their new book is called Identity Economics, and they think it's a pretty big deal.On p. 114: we can explain a large number of phenomena, including the nature of African-American poverty, the reasons why students drop out of school, the... MORE

Murphy's Catch-Up Contradiction

Growth: Causal Factors
Bryan Caplan
Bob Murphy thinks that my recent posts on Soviet and European growth "seem contradictory": Now I'm not saying Caplan was wrong about the Soviet Union, and I'm not saying this new guy is wrong about Europe. What I am saying... MORE

Gifts in Kind vs. Gifts in Money

Revealed Preference
David Henderson
A standard thing we teach our students is that it's more efficient to give money to people than to give stuff. Here's a beautiful statement of the point by Alanna Shaikh, a global health professional. An excerpt: Donating stuff instead... MORE

Kling vs. Sumner, Continued

Macroeconomics
Arnold Kling
Scott Sumner writes, If NGDP falls 8% below trend, then nominal wages must also fall 8% below trend to maintain full employment, regardless of what is happening to real wages. So I think his story of the past year really... MORE

Price Discrimination Explains Everything

Information Goods, Intellectual Property
Arnold Kling
Trying to explain cable TV bundling, James Surowiecki writes (his name makes me dyslexic), The appeal of bundling is partly that it reduces transaction costs: instead of having to figure out how much each part of a package is worth... MORE

Paul Romer on Haiti

Cross-country Comparisons
Arnold Kling
He writes, There is a natural complementary approach that is a much better bet than giving colonialism another chance--letting Haitians migrate somewhere with better governance and rules. This is the surest answer to the question posed in the beginning. It... MORE

Sumner and Tobin

Macroeconomics
Arnold Kling
Scott Sumner cites James Tobin on the virtues of the Fed targeting nominal GDP. I wish Tobin had lived long enough to have something to say about the role of money in the current financial crisis. As you know I... MORE

Why the Fed is Buying Mortgage Securities

Finance: stocks, options, etc.
Arnold Kling
According to James Hamilton, the difference between what the Fed has been doing in 2009 and true quantitative easing is that under the latter strategy, the Fed would be funding the MBS purchases with zero-interest money, with the intent of... MORE

Morning Commentary

Macroeconomics
Arnold Kling
Daniel Little discusses Seeing Like a State, which is something of a cult classic among some Masonomists. Thanks to Mark Thoma for the pointer. Well worth a read. Bill Woolsey says that it is obvious why we had a such... MORE

David Henderson vs. Mark Weisbrot on January 17

Upcoming Events
David Henderson
On Sunday, January 17 (tomorrow), I'll be debating Mark Weisbrot on the big issues: capitalism vs. socialism. You can listen to it live here at 11:00 a.m. PST (2:00 p.m. EST). I was supposed to debate Harold Meyerson, who writes... MORE

Pregnancy Substitutes and Economic Growth

Growth: Consequences
Bryan Caplan
In the U.S., the all-inclusive cost of a surrogate pregnancy (including the surrogate's fee, in vitro costs, medical expenses, brokers' fees, etc.) is $75,000+.  But you can save a bundle by going to India, the growing world capital of fertility... MORE

George H. Nash writes, Traditionally, American conservatives have been Eurocentric in their political and cultural discourse, but how can conservatives convincingly articulate this perspective to non-European immigrants and to millions of superficially educated young Americans, and at a time when... MORE

The Credit Crunch Story

Finance: stocks, options, etc.
Arnold Kling
John Cochrane tells it, and he says, Now that the short-termcredit crunch is over, the recession seems likely to be followed by a quick recovery, at least if the government does not get in the way with too many counterproductive... MORE

David Brooks on Haiti

Growth: Causal Factors
Arnold Kling
Read the whole thing. An excerpt: Why is Haiti so poor? Well, it has a history of oppression, slavery and colonialism. But so does Barbados, and Barbados is doing pretty well. Haiti has endured ruthless dictators, corruption and foreign invasions.... MORE

Why Such a Deep Recession?

Macroeconomics
Arnold Kling
Several economists, not just Scott Sumner, have argued that the recession is too deep and too broad to be explained by the Recalculation Story. I think that there are many weaknesses in the Recalculation Story. It is far from a... MORE

Ignorance, Incentives, and Meaning

Information Goods, Intellectual Property
Bryan Caplan
In "Making Babies - the New Biology and the 'Old' Morality," Leon Kass writes:[T]he cloned individual's belief in the openness of his own future may be undermined, and with it, his freedom to be himself. Ignorance of what lies ahead... MORE

Two Follow-Ups

Political Economy
Arnold Kling
I want to respond to two comments on previous blog posts. On the issue that I call "market failure," meaning the ability of incumbents to block trial-and-error innovation, I mentioned education. It turns out that Michael Strong has a nice... MORE

Hayek and Central Planning

Central Planning vs. Local Knowledge
David Henderson
As I've posted about earlier, to understand why socialism must fail, you need to understand Hayek's argument (which he drew from Ludwig von Mises and elaborated on) that the information that's most valuable is information held in the hands of... MORE

Alabama vs. the E.U.

Cross-country Comparisons
Bryan Caplan
Super-Economy serves Krugman some fine economic ridicule:Alabama has the same per capita income and slightly faster growth rate as the Social Democratic EU.15, which Krugman wants us to believe is a "Dynamic" region that the US should "learn from". Has... MORE

Evil Shortage: Why the Evil Empire Fell

Economic History
Bryan Caplan
Arnold says that the Soviet Union fell due to the "moral rot" of corruption.  As long as we define "corruption" broadly, as Arnold seems to do, I think he's dead wrong.  Soviet moral rot was worst in the Thirties, when... MORE

Market Failure

Political Economy
Arnold Kling
I want to propose a new definition of market failure. For me, market failure exists to the extent that innovation is blocked by incumbents. If innovators can succeed by out-competing incumbents, then the market is working. If incumbents have a... MORE

See Us in Concert

Upcoming Events
Arnold Kling
On February 4th, Nick Schulz and I will speak at Cato. Details here. One idea I've toyed with is what I call a "house concert." Just as some musicians give concerts in people's houses, I was wondering if there are... MORE

EMH and Bubbles

Finance: stocks, options, etc.
Arnold Kling
John Cassidy interviews John Cochrane. Cochrane says, I think most people mean by a "bubble" just, "Prices were high and I wish I sold yesterday." The efficient markets (hypothesis) never told you that wasn't going to happen. What efficient markets... MORE

Yuval Levin on Capitalism

Politics and Economics
Arnold Kling
Now that it is on the web, I listened to Yuval Levin's lecture . Basically, Levin does not think that capitalism has any enemies. However, he thinks that it has many misguided and/or unreliable friends. 1. Liberals are misguided/unreliable because... MORE

Go Quietly, Old People

Economics of Health Care
David Henderson
My review of bio-ethicist Daniel Callahan's new book, Taming the Beloved Beast: How Medical Technology Costs Are Destroying Our Health Care System, was posted on-line yesterday. In it, Callahan advocates rationing health care to the elderly, not allowing them to... MORE

The Solow Model and Soviet Growth Optimism

Cross-country Comparisons
Bryan Caplan
Brad DeLong makes a determined effort to explain why Samuelson and his fellow textbook writers' optimism about Soviet growth was a reasonable extension of the Solow model.  My point-by-point critique:Economists who used PPP and production functions to predict that the... MORE

The Moral Rot Factor

Political Economy
Arnold Kling
Bryan has brought up the issue of economics textbooks that over-rated the Soviet Union's economic prospects. For some reason, Brad DeLong feels obliged to go after Bryan about this. My view on the Soviet Union is that it collapsed because... MORE

Two Scott Sumner Posts

Macroeconomics
Arnold Kling
First I am so used to NGDP targeting be attacked from the right that I forget that it has no supporters on the left. Recall that conservatives usually support inflation or price level targeting, and think that NGDP targeting is... MORE

Pro-Soviet Neocons?

Cross-country Comparisons
Bryan Caplan
Matt Yglesias has an interesting reaction to my post on pro-Soviet economists:If you look at the issue through an international relations lens, or through a focus on US domestic politics, you'll get a different picture. The main political tendency inclined... MORE

Remarks on Safe Assets

Arnold Kling
The issue of "safe assets" is important and complex. I have a lot of thoughts on the topic, but they do not yet cohere into a whole.... MORE

Some Health Care Reform Discussion

Economics of Health Care
Arnold Kling
Cato's Michael Cannon warns, Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill... MORE

Yoram Bauman has responded to my review of his Cartoon Introduction to Economics in detail.  One of my main complaints:Klein and Bauman shouldn't have run away from self-interest in chapter 1.  Yes, I know that textbooks love to claim that... MORE

In Praise of Facebook

Central Planning vs. Local Knowledge
David Henderson
Over the Christmas holiday, I was talking to a young man I know who works for Facebook. He said that he ultimately wanted to go to graduate school so that he could be of service to people. I told him... MORE

FP2P Watch

Cross-country Comparisons
Arnold Kling
Robert Fogel writes, In many ways, China is the most capitalist country in the world right now. In the big Chinese cities, living standards and per capita income are at the level of countries the World Bank would deem "high... MORE

Belongia and Roberts on the Fed

Monetary Policy
Arnold Kling
Scott Sumner calls it a "must listen." What I like is the part near the end, where Roberts tries to argue that reform of the Fed is unlikely. Our political system demands a "maestro," someone that everyone can look to... MORE

Rand vs. Evolutionary Psychology: Part 1

Books: Reviews and Suggested Readings
Bryan Caplan
"I want you to observe, that those who cry the loudest about their disillusionment, about the failure of virtue, the futility of reason, the impotence of logic - are those who have achieved the full, exact, logical result of the... MORE

Jonathan Gruber and Me

Economics of Health Care
David Henderson
Jonathan Gruber has gotten some negative press for not revealing that he received substantial payments from the Obama Administration while also writing a Washington Post article favoring Obama's proposed government interventions in medical care. The main thing I would add... MORE

Questions about Jonathan Gruber

Economics of Health Care
Arnold Kling
Jonathan Gruber is under fire for failing to disclose to reporters the funds he received from the government to investigagte health care reform. This story reports, That puts the total federal money Gruber received in the last two years at... MORE

Crisis Commentary

Finance: stocks, options, etc.
Arnold Kling
Ricardo Caballero writes, By 2001, as the demand for safe assets began to rise above what the U.S. corporate world and safe mortgage‐borrowers naturally could provide, financial institutions began to search for mechanisms to generate triple-A assets from previously untapped... MORE

Avatar as a Defense of Property Rights

Property Rights
David Henderson
In fact, Avatar is a powerful antiwar movie - and a defense of property rights. For that reason, I found it easy to identify with those whose way of life was being destroyed by military might. This is from my... MORE

Moral Knowledge: A Question of Timing

Economic Philosophy
Bryan Caplan
In The Virtue of Selfishness, Ayn Rand writes:No philosopher has given a rational, objectively demonstrable, scientific answer to the question of why man needs a code of values.  So long as that question remained unanswered, no rational, scientific, objective code... MORE

Friedman and Schwartz Speak Truth about Power

Monetary Policy
David Henderson
One of my favorite parts of Milton Friedman's and Anna J. Schwartz's modern classic, A Monetary History of the United States, 1867-1960, is a lengthy footnote on pp. 463-64. It's their explanation of why they think the reported amount of... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Arnold Kling
Yet another book on World War I. David Fromkin's Europe's Last Summer. His thesis is that the assassination of Archduke Ferdinand was a pretext for two wars that had been previously planned. One was an Austrian war against Serbia, and... MORE

I doubt that Arnold's Recalculation story is more than a smidge of the current world recession.  But I can certainly imagine shocks where he'd be dead on - and there are few shocks I enjoy imagining more than the triumph... MORE

Hook-onomics

Books: Reviews and Suggested Readings
David Henderson
My review of Pete Leeson's book, The Invisible Hook, is on the web at Regulation magazine. Highlights: Despite the book's title, a takeoff on Adam Smith's "invisible hand," Leeson does not claim that pirates were led by their self-interest, as... MORE

The Origin of the Word "Relationship"

Economics and Culture
Bryan Caplan
To my ears, the word "relationship" has long sounded like psycho-babble invented circa 1950.  It's hard to imagine anyone in the 19th-century discussing their "relationships."  Tonight I decided to finally investigate my hypothesis.  I was almost dead on: According to... MORE

Rubin on Palin

Politics and Economics
David Henderson
I'm glad Arnold called our attention to this piece on Palin by Jennifer Rubin. I thought Rubin nicely explained the visceral reaction many Jews, including one woman I'm very close to, have to Palin. I'm not a Palin fan and... MORE

Two Follow-ups

Macroeconomics
Arnold Kling
1. On the current state of the economy, Mark Thoma highlights the employment-to-population ratio. Here is his chart: I think he is right to push this, because I find it a more reliable indicator than the unemployment rate. The graph... MORE

Commercial Real Estate Prices: What Inference to Draw?

Finance: stocks, options, etc.
Arnold Kling
Megan McArdle writes, My latest column for the Atlantic looks at the commercial real estate crash and comes to the conclusion that it effectively undermines the major narratives that many people have adopted to explain the residential bubble. Though the... MORE

Rules and Culture

Growth: Causal Factors
Arnold Kling
Tim Kane listens to a talk by Paul Romer, and muses, Romer forces us to accept that rules are very difficult to change. Nations in particular, even when its leaders recognize the need for rules to change, have difficulty making... MORE

False hope is not a free lunch.  I've said it before:I suspect that students with who believe in malleable intelligence are more likely to go to graduate school despite low test scores. They'll probably get better grades because of their... MORE

From the Vault: My 2006 Piece on Bernanke

Monetary Policy
David Henderson
Every once in a while, someone asks an easy question. Scott Sumner asked one: Are academics allowed to present someone else's paper in a seminar (if we correctly identify the author?) The answer is unequivocally YES. Here's one of my... MORE

Dan's Great Question about Bernanke

Monetary Policy
Bryan Caplan
Dan asks a great question in the comments:Does anyone know if Bernanke has given a defense of his change in perspective? Has anyone even challenged him on the apparent contradiction between his actions as Fed chairman and his academic work?Anyone?... MORE

TeaPartarians?

Political Economy
Arnold Kling
The Bush Administration, particularly in its final year, discredited the Republican Party as a proponent of free markets. What should come next? One idea, promoted at Cato by Brink Lindsey and Will Wilkinson, is liberaltarianism. The idea is to approach... MORE

Interview with Raghuram Rajan

Finance: stocks, options, etc.
Arnold Kling
Interesting throughout. Thanks to Mark Thoma for the pointer. I agree with much of Rajan says, so I want to highlight the sentence with which I agree the least. On the role of government in the housing market, he says... MORE

Scott Sumner asks:If there are any GMU professors reading this, I have a question.  Are academics allowed to present someone else's paper in a seminar (if we correctly identify the author?)I was inclined to say no, but Scott's post on an... MORE

The Cartoon Introduction to Economics: Nice, but Short on Ridicule

Books: Reviews and Suggested Readings
Bryan Caplan
There's a lot to like in Klein and Bauman's The Cartoon Introduction to Economics.  It's fun, it's funny, and it teaches a lot of economics.  But although I'm a huge fan of economics, comedy, and graphic novels, I can only... MORE

FP2P Podcast

Arnold Kling
I did two radio interviews today. One was on Unchecked and Unbalanced with Charlie Brennan on KMOX, a segment of about 15 minutes that felt like it was 2/3 commercials. The other was on FP2P for blogtalkradio, with D. R.... MORE

What If

Finance: stocks, options, etc.
Arnold Kling
A reader asks, With regard to the recent financial crisis and current economic recession - if you were given the power to go back in time and change only one thing in an effort to prevent the crisis and recession,... MORE

Human Sex Ratio Doesn't Run in Families

Family Economics
Bryan Caplan
I have three children, all sons.  On a gut level, I feel like there's a systematic factor at work.  It must be my overpowering machismo, right?  But it looks like my gut is dead wrong.  At least in the NLSY,... MORE

Balance of Payments

International Trade
David Henderson
The latest Freeman just came on-line and carries my piece on the Balance of Payments. It's basic economics that many people who read this blog already know but also many probably don't. Some highlights: Quick. What's the trade deficit between... MORE

A Really Obvious Way to Bend the Curve

Economics of Health Care
Bryan Caplan
In the U.S., the all-inclusive cost of a surrogate pregnancy usually exceeds $75,000.  Since insurance won't cover much if any of these expenses, most people who hire an American surrogate are fairly well-off.  Fortunately, there's a much cheaper option: Do... MORE

The Economics of the Microsoft Case

Regulation
David Henderson
I don't know when it happened, but my review of Page's and Lopatka's excellent book on the Microsoft antitrust case is on-line. It appeared in the Fall issue of Regulation. It's both here and here. My two favorite paragraphs from... MORE

The Economics of Illegal Drugs

Taxation
David Henderson
WSJ article gets a lot right and a little wrong. A recent article by David Luhnow in the Wall Street Journal, "Saving Mexico," contains a lot of good economic analysis of the market for illegal drugs, as well as a... MORE

Intellectuals and Society

Books: Reviews and Suggested Readings
Arnold Kling
It seems to be the theme du jour. The interview with Thomas Sowell continues. At one point, Sowell notes that we cannot blame Larry Summers for policies, because politicians are selecting the policies. I think that Bryan Caplan would say... MORE

Thinking Outside the House

Finance: stocks, options, etc.
Arnold Kling
Free Exchange agrees with Ben Bernanke (and me that stopping the housing bubble was more of regulatory issue than a monetary policy issue. the Fed didn't act because there is something institutionally the matter with it, which prevented effective regulatory... MORE

FP2P Watch

Books: Reviews and Suggested Readings
Arnold Kling
Listen to this Interview with Nick Schulz. I'd say that this is the best short interview on the book to date, but I found myself frustrated that there wasn't more. But even my one-hour podcast with Russ Roberts leaves a... MORE

The Books I Wish My Colleagues Would Write

Books: Reviews and Suggested Readings
Bryan Caplan
My New Year's resolution for Robin Hanson got me thinking about the book projects I wish my other colleagues would pursue.  Digest version:1. Tyler Cowen should write that I call a "book of answers" with the working title Social Intelligence:... MORE

Predictably Irrational or Predictably Rational?

Behavioral Economics and Rationality
David Henderson
This is not to say that people are "perfectly rational." "Perfect rationality" as a statement of human nature, as distinguished from a theoretical device, makes for evolutionary nonsense. Had hominids sought to achieve perfect rationality in their decisions, they would... MORE

My Sowell-mate on the Knowledge-Power Discrepancy

Books: Reviews and Suggested Readings
Arnold Kling
Unchecked and Unbalanced is about the discrepancy between knowledge and power. Thomas Sowell's latest book, Intellectuals and Society, is about the same phenomenon. (Guess which one is selling better on Amazon.) If my many blog posts on the problem of... MORE

FP2P Watch

Books: Reviews and Suggested Readings
Arnold Kling
We get a nice review.... MORE

Real Recovery

Growth: Causal Factors
Arnold Kling
Robert Samuelson writes, What scars will the Great Recession leave? We are already seeing some. Americans are moving less than at any time since World War II, reports demographer William Frey of the Brookings Institution. People are tied to existing... MORE

My New Year's Resolution for Robin Hanson

Books: Reviews and Suggested Readings
Bryan Caplan
I don't make New Year's resolutions.  If I think I ought to change my behavior, I do so without delay.  Fortunately, that doesn't stop me from making resolutions for other people.  Here's a resolution I just proposed for Robin Hanson:In... MORE

Bernanke's Speech to the AEA

Finance: stocks, options, etc.
Arnold Kling
He says, Slide 4 shows that the version of the Taylor rule based on forecast inflation (in green dots) explains both the course of monetary policy earlier in the past decade as well as the decision not to respond aggressively... MORE

Krugman on the State of the Economy

Macroeconomics
Arnold Kling
From his Nobel AEA meeting lecture. It should have been easy to put the evidence of a mammoth housing bubble together with the concepts of third-generation crisis theory to see how a nasty deleveraging cycle could occur without the "original... MORE

FP2P Watch

Growth: Causal Factors
Arnold Kling
Daron Acemoglu writes, On one side of the border fence, in Santa Cruz County, Arizona, the median household income is $30,000. A few feet away, it's $10,000. On one side, most of the teenagers are in public high school, and... MORE

Consumer Surplus from Cancer Drugs

Economics of Health Care
David Henderson
Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years, and the average willingness-to-pay for these survival gains was roughly $322,000. Improvements in cancer survival during this period created 23 million additional life-years and roughly $1.9... MORE

Another Masonomist Likes the Naughts

Growth: Consequences
Arnold Kling
Tyler Cowen writes Putting aside the United States, which ranks third, the four most populous countries are China, India, Indonesia and Brazil, accounting for more than 40 percent of the world's people. And all four have made great strides. Indonesia... MORE

Soft Rule-Utilitarianism

Institutional Economics
Arnold Kling
In my follow-up to James Manzi's manifesto, I brought up a notion that I call soft rule-utilitarianism. In the comments, Manzi interpreted this as being close to what I would call hard rule-utilitarianism.... MORE

Psychological Effects of Status Rank Changes

Behavioral Economics and Rationality
Arnold Kling
Anthony Stevens and John Price wrote depression is an adaptive response to losing rank and conceiving of oneself as a loser. The adaptive function of the depression, according to rank theory, is to facilitate losing and to promote accommodation to... MORE

When I praised the growing division of maternal labor, the supposed reductio ad absurdum of baby selling came up.  My reply:I see nothing wrong with selling your baby - born or unborn - to loving parents.Until recently, though, I didn't... MORE

Are Economists Cheap? Or Just Rational?

Cost-benefit Analysis
David Henderson
Today's weekend Wall Street Journal carries a hilarious story about how cheap some economists are. Three stories from the piece and then my thoughts. Highlights: Children of economists recall how tightfisted their parents were. Lauren Weber, author of a recent... MORE

Courts Fail. Use Regulators

Regulation and Subsidies
Arnold Kling
Andrei Shleifer examines why regulation might emerge. The Pigouvian theory is undermined because market failures or information asymmetries do not seem to be necessary for regulation, yet those are seen by the theory as the prerequisites for government intervention. The... MORE

When Experts Fail

Central Planning vs. Local Knowledge
Arnold Kling
David Brooks writes, For better or worse, over the past 50 years we have concentrated authority in centralized agencies and reduced the role of decentralized citizen action. We've done this in many spheres of life. Maybe that's wise, maybe it's... MORE

New Year's Blogging Resolutions

Econlog Administrative Issues
Arnold Kling
Pete Boettke writes, we are convinced that Mises and Hayek identified in the 1930s through the 1950s the central elements of sound economic and social analysis: the problem of economic calculation and the division of knowledge; the cultural and institutional... MORE

The Economics of Cities

Economics and Culture
Arnold Kling
Edward L. Glaeser and Joshua D. Gottlieb survey the fundamental economics questions about cities, including why they exist. Cities are ultimately nothing more than proximity, so the returns to urban concentration can be seen as reductions in transport costs. ...a... MORE

Sumner, the Stock Market, and Price Controls

Finance: stocks, options, etc.
Bryan Caplan
Sumner replies at length to my question, "Why did financial markets like Nixon's price controls so much?"  His easiest answer is that Nixon's infamous August 15 speech did a lot more than impose price controls.  It also devalued gold by... MORE

When Michael Barone inventoried the top scares of the decade, I kept thinking, "Is that all you've got?"  I'll grant that the Naughts were scarier than the Nineties; the 1991 collapse of the USSR was like waking up from a... MORE

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