Bryan Caplan and David Henderson

June 2010

A Monthly Archive (131 entries)

Recommended Books

Books: Reviews and Suggested Readings
Arnold Kling
Diane Coyle offers her recommendations. Pointer from Tyler Cowen. The comments are mine. 1. Paul Seabright, The Company of Strangers. I strongly recommend this one. Note that there is a revised edition out, or due out soon. 2. David Landes,... MORE

Sowell's "Intellectuals and Society"

Books: Reviews and Suggested Readings
David Henderson
My review of Thomas Sowell's latest book, Intellectuals and Society, was published in the latest Regulation. I had previous blogged about it on this site. One benefit of blogging: several commenters found one of Sowell's paragraphs that I quoted plodding... MORE

The Fiscal Singularity is Near

Fiscal Policy
Arnold Kling
The Congressional Budget Office just released its latest so-called Long Term Budget Outlook. From the summary: this report focuses largely on the next 25 years. However, because considerable interest exists in the longer-term outlook, figures showing projections through 2080 and... MORE

Don't Ask, Don't Tell

Economic Philosophy
David Henderson
"Worker Bee" Stings the Blogosphere The title I've chosen for this post could have been the title of a short recent piece by self-described "worker bee" economist Kartik Athreya. (The article, titled "Economics is Hard. Don't Let Bloggers Tell You... MORE

Over at Cato Unbound, my old friend Sheldon Richman denies that restrictive covenants are kosher in libertarian terms:[I]n a fully free society restrictive covenants in deeds would be unenforceable because they are feudal in nature and thus violate fundamental libertarian... MORE

Robin Hanson and Curt Flood

Behavioral Economics and Rationality
Arnold Kling
He writes, It sees to me that while people do vary in conformity, this variation is less in how much folks care about others' evaluations, and more about which others they care about. "Conformists" tend to care about a common... MORE

Unbundling Government

Political Economy
Arnold Kling
This week is Secession Week at Let a Thousand Nations Bloom. I have no problems with the S word, but I also use the economic expression "unbundling." For example, Ed Glaeser writes, In a sense, the gulf between the political... MORE

The Counterintuitive Explained

Economic Education
Bryan Caplan
Although I've argued that basic economics is intuitive, I recommend this short Wikipedia article on the counterintuitive.  Its best example:[A] policy of catching large fish and throwing back small ones may be counter-productive. In response to that policy, evolutionary pressure... MORE

The Strange Political Economy of Kidnapping

Economics of Crime
Bryan Caplan
In the United States, stereotypical kidnappings are almost non-existent.  But in some Third World countries - especially Latin America - the problem's quite serious.  Mexico's up to 8000 reported kidnappings per year, and experts plausibly claim that over 90% of... MORE

The Macro Doubtbook, Installment 2

Macroeconomics
Arnold Kling
The first installment was The Northwest Passage. An excerpt from the second installment, called General Equilibrium Theory: suppose that unemployment did not exist, but that instead there was a very low-value job (say, dishwashing) that is always available, at whatever... MORE

Are Soccer Fans Socialist?

sports economics
Arnold Kling
My complaint about soccer rules creating too much room for luck drew many comments. People can argue that I am a philistine who does not appreciate the beauty of the sport, and that is fine. The only sport I claim... MORE

The Euro and Armageddon

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Michael Pettis writes, In my opinion the current set of crises, beginning with the sub-prime crisis in the US and spreading throughout the world, is not a short-term liquidity crisis like LTCM, the Asian Crisis, or the Mexican crisis of... MORE

If I Could Write the Lede

Public Choice Theory
Arnold Kling
President Obama's economic coordinator Lawrence Summers today announced the President's intention to gradually reallocate radio spectrum. The long-outmoded command-and-control system will be updated over the next decade, using a new set of rules and auctions. An overflow audience consisting mostly... MORE

My Question for Larry Summers

Regulation and Subsidies
Arnold Kling
I doubt that I will get to ask it. He is announcing that over the next ten years, the government is going to make more spectrum available for broadband. My question is: isn't this just a partial solution to a... MORE

Russ Roberts on Hayek

Monetary Policy
David Henderson
Russ Roberts has a nice op/ed on Hayek's main ideas in today's Wall Street Journal. He highlights four contributions of Hayek. I agree with all four, but he gave a poor example for one of them. The four are: 1.... MORE

Caplan on Hayek, Richter, and Socialism

Political Economy
Arnold Kling
Russ Roberts interviews Bryan Caplan. The overall theme is the arguments about socialism. For example, why has socialism produced evil leaders? Is it power that corrupts? Is it that the contest for power selects ruthless individuals? Or is it that... MORE

Soccer and the Law of Large Numbers

Economic Methods
Arnold Kling
I am not a soccer fan. In my amateur opinion, the rules ought to be changed to foster more scoring. This is not because I want to see more scoring. But having more scoring would reduce the luck factor. It... MORE

The Everyday Wonder of Markets

Business Economics
David Henderson
On Friday afternoon, I drove from Monterey to a hotel near the San Francisco airport to give a talk the next morning at an event held by the Free to Choose Network. The event was the Winning Ideas Weekend and... MORE

Association, Exclusion, Liberty, and the Status Quo

Economic Philosophy
Bryan Caplan
One of my conservative friends keeps telling me that, "The right to associate is the right to exclude."  As a libertarian, I agree.  But the subtext of his slogan is that libertarians focus far too much on government regulations that... MORE

The Dodd-Frank Bill

Finance: stocks, options, etc.
Arnold Kling
If you don't have anything nice to say, then keep quiet. That's why I have not been commenting on the Dodd-Frank bill. I like what Tyler Cowen wrote, particularly his sentence about the credit rating agencies. THE BEST EQUILIBRIUM IS... MORE

Signal and Noise in Economics Writing

Economic Methods
Arnold Kling
Kartik Athreya writes, Why should anyone accept uncritically that Economics, or any field of human endeavor, for that matter, should be easy to process and contribute to? Pointer from Greg Mankiw. Read the whole thing. He is suggesting that bloggers... MORE

Is the Beast Starved?

Fiscal Policy
Arnold Kling
Tyler Cowen writes, In many respects, the expansionary phase of big government is coming to an end, and quickly. ...It is not that fiscal conservatives have won a grand battle of ideas, but rather that governments realize that the bills... MORE

Tyler on Wage Stickiness: A Quick Note

Labor Market
Bryan Caplan
While I was away in Atlanta, Tyler asked, "How sticky are wages today?"  His doubts:Keep in mind that unemployment rates today are disproportionately concentrated in low-income and low-education workers.  Haven't we been told, for years, that these same individuals are... MORE

The Northwest Passage

Macroeconomics
Arnold Kling
Below are two pages of the hypothetical book on macro. Once (If?) I get to the main part of the book, I will need good sources for analysis of pre-1920's macroeconomic events and for postwar events in other countries.... MORE

JEP on line

Arnold Kling
Timothy Taylor told me that the Journal of Economic Perspectives is now available to anyone on line, for free, going back to 1999. This is my favorite economics journal, because the articles are accessible to nonspecialists and focus on important... MORE

Budget Hawk, Stimulus Dove

Fiscal Policy
Arnold Kling
It's not my position. But I would think someone would articulate it. It sounds like what Mark Thoma would advocate, for example. That is, someone could advocate: 1 A larger deficit in the short term. 2. Specific, clear measures to... MORE

Toward a Book on Macroeconomics

Macroeconomics
Arnold Kling
Suppose I were to write a book on macroeconomics. How should it be structured? My goals would be: 1. Explain why controversies in macroeconomics are so difficult to resolve. Explain why it is a mistake to be supremely confident in... MORE

Group Solidarity and Survival

Behavioral Economics and Rationality
Arnold Kling
Bruce Charlton writes, Libertarians are intrinsically and on principle cowardly and hedonistic loners who will not suffer privation, take risks or undergo personal suffering either for the good of the group or for transcendental goals (unless they subjectively, arbitrarily happen... MORE

What Do Mortgage Lenders Want?

Finance: stocks, options, etc.
Arnold Kling
Mike Konczal writes, I think further deregulation would see something similar to what we see in the credit card market, where everyone's mortgage looks like whatever the laws of North Dakota say, and that the poorest homeowners (or "inept", if... MORE

Bartlett's Final Chapter

Fiscal Policy
David Henderson
My last post on Bruce Bartlett's The New American Economy led, understandably, to a lot of discussion of supply-side economics. I'll deal with that more in future post(s) but meanwhile I'm keeping my promise to post about his last chapter.... MORE

Paul Seabright, GYOB

Macroeconomics
Arnold Kling
Internally at Econlog, GYOB means "get your own blog." It is a term of disparagement used to describe commenters who frequently post comments that are longer than the original post. In the case of Paul Seabright, I am thinking that... MORE

Visualize Growth

Growth: Consequences
David Henderson
You know the bumper sticker I see a lot of in California? It says "Visualize World Peace." A takeoff is "Visualize Whirled Peas." Well, this one helps you visualize the growth of per capita income and of life expectancy. HT... MORE

Social Science in the Trenches

Politics and Economics
Bryan Caplan
I have to think that this passage from All Quiet on the Western Front exaggerates the intellectuality of the average soldier, but it's such a great read that I'm going to break my personal rule against blockquoting:"But what I would... MORE

The Voegeli and Samples Show

Upcoming Events
Arnold Kling
If you are in DC tomorrow morning, I recommend going to hear the authors of two new books. William Voegeli is the author of Never Enough: America's Limitless Welfare State, and John Samples is the author of The Struggle to... MORE

Glaeser on Mokyr

Books: Reviews and Suggested Readings
Arnold Kling
Reviewing Joel Mokyr's The Enlightened Economy, Ed Glaeser writes, It is easy to envision the massive mills of Manchester and think that the Industrial Revolution was all about scale and machines. But there was more. At its core, this economic... MORE

The Lower Right Quadrant

Institutional Economics
Arnold Kling
In a comment on my eariler post, Paul Seabright writes, Unlike Arnold I'm very interested in the bottom right quadrant, inter alia because historically the boundaries between government and criminal groups have often been very fuzzy. He is referring to... MORE

A Theory of Economic Recovery

Macroeconomics
Arnold Kling
Reading Paul Seabright has made me want to once again dismiss the theory of aggregate demand and instead push Recalculation. There are two patterns that must emerge in a complex modern economy. One is a pattern of labor specialization. People... MORE

Charlton Controversy, Continued

Central Planning vs. Local Knowledge
Arnold Kling
Niklas Blanchard adds interesting comments. Charlton follows up:, The joke of the Texas Sharpshooter is that he fires his gun many times into a barn door, then draws a target over the bullet holes, with the bulls-eye over the closest... MORE

The Glories of Competition

Business Economics
David Henderson
From today's Wall Street Journal, a front-page article by Geoffrey A. Fowler titled, "Price Cuts Electrify E-Reader Market": Two of the leading makers of electronic-book readers, threatened by the success of Apple Inc.'s iPad, slashed prices Monday in a move... MORE

Rule of Law, 1, Obama 0

Regulation
David Henderson
I've read a lot of judges' decisions, but I've rarely read any that are so blunt as the one issued by Martin Feldman today, a decision that overturns the Obama administration's moratorium on offshore oil drilling. Some excerpts: Much to... MORE

More on Supply-Side Economics

Supply-side Economics
David Henderson
On yesterday's post, Bob Murphy asks: David, what exactly do you mean by saying tax rate cuts didn't increase revenues? Tax revenues did in fact go up (eventually), right? So I assume you mean they didn't go up more than... MORE

Idiocracy

Business Economics
Arnold Kling
Without mentioning the movie, Bruce Charlton thinks we are living it. So we should be honest about the fact that human do not anymore fly to the moon because humans cannot anymore fly to the moon. Humans have failed to... MORE

30-Year Fixed-Rate Mortgage Debate

Finance: stocks, options, etc.
Arnold Kling
Richard Green likes them. Nick Rowe does not. I can understand Green's antipathy toward the most common forms of adjustable-rate mortgages in the United States. However, I think that a mortgage that amortizes over 30 years, with an interest-rate adjustment... MORE

The Company of Strangers

Books: Reviews and Suggested Readings
Arnold Kling
Notwithstanding my disagreements with Paul Seabright on political economy, the revised edition of The Company of Strangersis one of the best economics books to come out so far this year. I strongly recommend it, particularly if you did not read... MORE

Health Pricing Transparency in Imperial Germany

Economics of Health Care
Bryan Caplan
Last November, Tyler Cowen enumerated fourteen things to do instead of Obamacare.  Number six:Make an all-out attempt, comparable to the moon landing effort if need be, to introduce price transparency for medical services.  This can be done.This Singaporean recommendation stuck... MORE

When to Rely on Coercion

Political Economy
Arnold Kling
In the revised edition of The Company of Strangers, Paul Seabright writes (p. 26), One of the great intellectual achievements of modern economics has been to work out very precisely the circumstances under which decentralized systems of market exchange can... MORE

Fiscal Inflation

Fiscal Policy
Arnold Kling
I noticed John Cochrane's paper on fiscal inflation, but I did not have anything pithy to say about it. But a reader emailed and asked me to comment. The shorter version ends on this note: If [high inflation] comes, we... MORE

Bruce Bartlett on "Starving the Beast"

Taxation
David Henderson
I've posted twice now (here and here) about sections of Bruce Bartlett's book, The New American Economy. I found Chapter 6, titled, "Starving the Beast Didn't Work," quite persuasive. First, Chapter 6. Bartlett deals with the idea, popular with many... MORE

From the AER

Economic History
Arnold Kling
The regular issues of the American Economic Review rarely interest me, but the papers and proceedings issue is often better. This year, covering the meetings held in January and arranged by Robert Hall, is particularly good. It seems as though... MORE

The Seen, the Unseen, War, and Peace

Cost-benefit Analysis
Bryan Caplan
Economists and libertarians often argue that foolish policies prevail because the benefits of government action are more visible than the costs.  To bolster their point, many reference Bastiat's classic essay, "What Is Seen and What is Not Seen."  Here's how... MORE

First They Separated the Twins...

Family Economics
Bryan Caplan
I staunchly oppose putting twins in separate classrooms when they prefer to be together.  As I explained before:Sure, if you separate twins, they'll make more friends.  But that hardly means you're doing them a favor.  The reason why twins put... MORE

Markets For Everything: North Korean Edition

International Trade
David Henderson
It turns out that the people in red who were cheering for North Korea in their soccer game against Brazil weren't North Koreans at all, but Chinese actors. According to Hunter Stuart in the Huffington Post, the North Korean government... MORE

One-Sentence Macro Policy

Monetary Policy
Arnold Kling
Tyler Cowen writes, I believe the "zero bound" is perhaps the single largest "red herring" in the economics profession today. If you understand that sentence, you know everything you need to know about Tyler's case against fiscal stimulus. In case... MORE

The Baumol Puzzle

Information Goods, Intellectual Property
Arnold Kling
When you buy a car, should the price include a licensing fee to the ancestor who invented the wheel? That question is implicit in William Baumol's new book. I think that the answer is obviously "no," but it is less... MORE

Baiting Bryan

Family Economics
Arnold Kling
Two from the Washington Post. 1. Kathleen Parker writes, By large percentages, the sperm-donor children suffered more depression, delinquency and substance abuse than children who were adopted or raised in a home with their two natural parents. See also Bruce... MORE

I recently read a paper by Loyola prof (and GMU Ph.D.) Dan D'Amico.  The first part of the paper explained that among crime researchers, there is a strong consensus that the U.S. government is too punitive - even though the... MORE

My Father's Day Essay for the WSJ

Family Economics
Bryan Caplan
My Father's Day essay for the Wall St. Journal is now up, and I've got EconLog readers to thank.  You've been a great sounding board for all the main arguments about family economics I've been stockpiling over the last five... MORE

Focusing on Entrepreneurs

Books: Reviews and Suggested Readings
Arnold Kling
William Baumol's latest book is The Microtheory of Innovative Entrepreneurship. It is hard to think of an economist as important as Baumol who does not have a Nobel Prize. He is old enough to put himself out to pasture, but... MORE

Joe Barton is Wrong

Politics and Economics
David Henderson
Yesterday, Republican leaders John Boehner, Eric Cantor and Mike Pence issued a statement castigating their fellow Republican Congressman Joe Barton. Barton had apologized to BP's CEO, Tony Hayward, for the shoddy treatment he received from Congressmen of both parties. He... MORE

Mortgage Lending and Discrimination

Finance: stocks, options, etc.
Arnold Kling
Felix Salmon writes If you're a high-income Latino with a mortgage, you're almost twice as likely to be facing foreclosure than a high-income non-Hispanic white person. And in general, the foreclosure crisis is hitting blacks and Latinos much harder than... MORE

Hypothetical Agendas

Politics and Economics
Arnold Kling
Following up on Hypothetical Bargains (read that one first), let me offer some hypothetical agendas for a tea-party influenced Republican Party, as a way of explaining the relationship between the soil and the weeds. Think of the four agendas as... MORE

John Taylor's Counter-narrative

Finance: stocks, options, etc.
Arnold Kling
He writes, You may not have heard much about the Great Deviation. I define it as the recent period during which macroeconomic policy became more interventionist, less rules-based, and less predictable. It is a period during which policy deviated from... MORE

Zingales Joins the Swamp

Finance: stocks, options, etc.
Arnold Kling
Yesterday, in Squam Lake or Swamp, I noted that four economists on the faculty at the University of Chicago signed on to a report on financial reform that treats this as a Keynesian moment and ignores Hayekian issues. Today, thanks... MORE

In econ grad school, you learn a dozen good ideas and a hundred seemingly irrelevant ones.  Most of those hundred ideas deservedly languish in obscurity; no one uses them to explain the real world, even in conversation.  But once in... MORE

Bruce Bartlett on Debt Default

Fiscal Policy
David Henderson
On the prospect of U.S. government default on its debt, Bruce Bartlett writes, after mentioning John Tamny: Tamny is not an isolated crackpot; reputable conservative economists have been writing sympathetically about the idea of default for decades. These include Nobel... MORE

Hypothetical Bargains

Books: Reviews and Suggested Readings
Arnold Kling
Below the fold is an essay that is partly a reaction to reading parts of William Voegeli's new book, Never Enough, which ruminates on liberalism, conservatism, and the welfare state.... MORE

The State of the European Crisis

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Richard Baldwin and Daniel Gros introduce a set of essays on the crisis in the eurozone. The authors unanimously believe that the crisis is not over, and that the Eurozone rescue is not finished. More needs to be done. I... MORE

Squam Lake or Swamp?

Books: Reviews and Suggested Readings
Arnold Kling
What happens when you bring leading academic experts in economics and finance together to come up with ideas to prevent future financial crises? You get The Squam Lake report, enthusiastically greeted by Ben Bernanke. I am not impressed. The report... MORE

What is Massive Financial Fraud?

Finance: stocks, options, etc.
Arnold Kling
This story says that the government has decided to prosecute one Lee Bentley Farkas for financial fraud. As a non-lawyer, and seeing only the description in this and related stories, it is very difficult for me to discern the difference... MORE

Tea Time

Politics and Economics
Arnold Kling
That was the name of this symposium, which I attended. In general, the conservative establishment seems to have discovered the Tea Party movement, and so in addition to the symposium I want to talk about other attempts by elite conservatives... MORE

Rajan and Reinhart

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Raghu Rajan spoke at Cato about his new book, Fault Lines. One of the discussants was Carmen Reinhart, of Reinhart and Rogoff fame. I found it interesting, and it might be worth checking out when Cato puts up a recording,... MORE

Holding Universities Accountable

Economics of Education
Arnold Kling
Glenn Reynolds writes, Make institutions of higher education partially liable when students are unable to pay student loans. A really strict system would make the school a co-signer, but making it even 5 or 10% liable for missed payments would... MORE

It's Official: You Won't be Able to Keep Your Health Insurance

Economics of Health Care
David Henderson
On John Goodman's Health Policy Blog this morning, he cites the federal government's estimate of the percent of employers whose health insurance policies for their employees will not be grandfathered in under the new regulations. His table is quite striking.... MORE

Charter Cities vs. Anti-Foreign Bias

Behavioral Economics and Rationality
Bryan Caplan
The Atlantic's got an incredible profile of Paul Romer.  The highlight is yet another example of how anti-foreign bias blocks paths to progress.  Romer seemed close to getting two charter cities in Madagascar, then things went pear-shaped:Barely a year after... MORE

Why the European Bailouts?

Optimum Currency Areas
Arnold Kling
The Daily Mail reports, Democracy could 'collapse' in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned. That is actually a better story than the more common... MORE

Morning Recommendations

Growth: Causal Factors
Arnold Kling
1. A well-written review of From Poverty to Prosperity. I admit I was surprised when I got to the end of the post. 2. A new metaphor for the economy, from Don Boudreaux. He compares it to a gigantic jigsaw... MORE

Inflation, Socialism, and Moral Indifference

Economic Philosophy
Bryan Caplan
Back in 2008, I told my lunch buddies that the bailouts were worse than four years of 10% inflation.  Now I think that's an understatement.  Crazy new policy initiatives will probably end after the next election, but the idea trap's... MORE

Adolescence Without a Curfew

Economics of Education
Arnold Kling
Michael Barone writes, [A recent ballyhooed study of the phenomenon of extended adolescence] got me thinking about the much ballyhooed provision of the Obamacare bill that allows parents to include "children" up to age 26 in their family health insurance... MORE

Economics, Libertarianism, and the BP Spill

Energy, Environment, Resources
Arnold Kling
Ed Glaeser writes, Consider the purely hypothetical case of a massive oil spill in the Gulf of Mexico. The traditional libertarian would argue that regulation is unnecessary because the tort system will hold the driller liable for any damage. But... MORE

A Beautiful Video

Economics of Health Care
David Henderson
Watch this short video of an 8-month-old baby who is suddenly able to hear. It's heart-warming. This doesn't quite compare, but it reminds me of my father's reaction when, in his mid-50s, he had surgery on his ear. He had... MORE

Values are Subjective

Economic Education
David Henderson
The first day of every econ class I teach, I start with my "Ten Pillars of Economics." Pillar #7 is, "The value of a good or service is subjective." Last night, I went to dinner with two of my star... MORE

Cut Their Pay

Fiscal Policy
Arnold Kling
President Obama writes, Already this year, we have lost 84,000 jobs in state and local governments...if additional action is not taken, hundreds of thousands of additional jobs will be lost. Therefore, we need to cut pay for state and local... MORE

Catching Up

Books: Reviews and Suggested Readings
Arnold Kling
Various things that came up while I was traveling are discussed below.... MORE

How Lucky Was I?

Economics of Education
Bryan Caplan
When I talk to economists who earned their econ Ph.D. in the 70s and 80s, they paint a grim picture: 70 hour workweeks, followed by truly comprehensive exams where everything's fair game and lots of students fail.When I talk to... MORE

Returned From Europe

Political Economy
Arnold Kling
I just returned from Europe, where I participated in two conferences sponsored by market-oriented think tanks. Some impressions below. (Note: Tyler Cowen has some interesting things to say, blogging from Germany--Tyler and I failed to meet in Berlin, primarily because... MORE

Ego & Hubris

Books: Reviews and Suggested Readings
Bryan Caplan
I don't know what's more amazing:1. That there's an autobiographical graphic novel, Ego & Hubris, about former Cato intern Michael Malice.2. That self-described "strident leftist" Harvey Pekar collaborated with Malice on the project.  (Malice wrote most of the script, Pekar... MORE

Getting Rich by Solving Problems

Human Capital: Returns to entrepreneurs, skills, etc.
David Henderson
One of my favorite parts of Bryan Caplan's book, The Myth of the Rational Voter, is where he talks about the importance of being able to get rich by solving problems. I remembered his statement only approximately but over the... MORE

Education and Anti-Market Bias: The Illusion of Perversity

Behavioral Economics and Rationality
Bryan Caplan
Most libertarians and free-market economists are surprised when I tell them that more educated people are more libertarian and more pro-market than the general population.  I think they're in the grip of two illusions:1. Sampling bias.  Well-educated leftists cling to... MORE

Economic Enlightenment and Education: Reply to Arnold

Behavioral Economics and Rationality
Bryan Caplan
Arnold approvingly cites the new Buturovich-Klein study finding that people who went to college know less about economics than those who didn't.  But if you read the original piece, the authors graciously distance themselves from this very conclusion!In commenting on... MORE

Kid Takes on Ben Barber

Labor Market
David Henderson
On John Stossel's show last week, a young girl put political scientist Ben Barber on the spot after he had advocated a minimum wage law. It starts at the 37 second point. Notice how clear she is in posing the... MORE

What the Klein Study Proves

Political Economy
Arnold Kling
[update: Daniel Klein emails me to credit Zeljka Buturovic for the study.] Dave Leigh writes, People who frequently shop at Wal-Mart scored much better than those who never do (2.24 to 4.24 questions wrong, respectively). This isn't much of a... MORE

The Cognitive Capture Dilemma

Political Economy
Arnold Kling
Steven M. Davidoff writes, What makes these issues so intractable is that you want regulators to interact with the people they regulate. In addition, regulators from industry sometimes best understand the industry they regulate. He correctly points out that the... MORE

Our Standard of Living

Growth: Consequences
David Henderson
Radio Shack has put its catalogs for 1939 to 2005 on line. They're worth a gander. Choose any date earlier than 10 years ago and you get a feel for just how much our standard of living has increased. The... MORE

Peltzman on the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Last night, I heard Sam Peltzman talk on the financial crisis. He is known for the Peltzman effect, in which safety regulations (in cars for example) induce offsetting behaviors that increase risk. He described the history of financial regulation in... MORE

Good Sentences

Economics of Education
Arnold Kling
from John Goodman. In general, a bureaucratic system is one in which normal market forces have been systematically suppressed. In such an environment, there tends to be a sea of (relative) mediocrity, sometimes punctuated by little islands of excellence. Further,... MORE

Good News from David Friedman

Books: Reviews and Suggested Readings
David Henderson
Earlier this week, David Friedman announced that he is considering a third edition of one of my favorite books ever: The Machinery of Freedom. I'm not a big fan of the title but I love the contents. One of my... MORE

Matching Narrative to Policy

Finance: stocks, options, etc.
Arnold Kling
Mark Thoma writes, Regulators certainly made mistakes, and there is plenty of room for improvement, but does that mean we should abandon attempts to regulate? Of course not. It is hard to argue against the proposition that better regulation would... MORE

Why Are Interest Rates Low?

Monetary Policy
Arnold Kling
Raghu Rajan writes, My sense is that we do not know enough about the effect of ultra-low interest rates to state categorically that they are an unmitigated good for reviving the economy. But perhaps the most important cost of low... MORE

The First Amendment and the Principles of Public Opinion

Politics and Economics
Bryan Caplan
Three principles of public opinion I've pushed over the years:1. The status quo is popular.  Well-worded questions usually show that the median person favors the status quo, exactly as the Median Voter Model predicts.2. Liberty is more popular at an... MORE

Just a Reminder

Fiscal Policy
Arnold Kling
That we do not need one penny of fiscal stimulus to save state and local government jobs. Just cut pay and keep the workers with the same budget. Everyone to my left seems to keep forgetting that option.... MORE

Underwriting Errors Outlawed

Finance: stocks, options, etc.
Arnold Kling
The WSJ reports The thrust of the mortgage section would require lenders to make sure that borrowers can repay any home loans they are sold. It puts limits on the ability of lenders to offer loans without documentation from borrowers,... MORE

A Tax Increase I Can Support

Tax Reform
Arnold Kling
Getting rid of the mortgage interest deduction. Subsidizing mortgage indebtedness is not a good thing. I am not buying any "starve the beast" arguments. My personal starve-the-beast approach is to donate a lot of my income to charity. But the... MORE

The Triumph of Harold, Kumar, and Liberty

Politics and Economics
Bryan Caplan
In two weeks, I'm giving a FEE lecture on "Public Opinion for Libertarians."  I'll probably start by asking for a show of hands: "Who wants the depressing version of today's lecture?  Okay, who wants the really depressing version?"  The sad... MORE

If I Had More Time

Finance: stocks, options, etc.
Arnold Kling
I would comment more on these: 1. Charles Goodhart writes, Let me start by recalling that this is the third version of a quasi-automatic market mechanism for limiting bank losses and facilitating bank resolution that has been proposed in the... MORE

Reynolds: No Evidence for Double Dip Recession

Labor Market
David Henderson
After talking to me about those figures, CNNMoney reporter Tami Luhby wrote, "Though Labor Department statistics say there are 5.5 job seekers for every opening, Reynolds said there is work available if people are willing to relocate or take jobs... MORE

Free Richter

Economic History
Bryan Caplan
The Richter reissue is also available as a free pdf.  From my intro: From the outset, many questioned the practicality of the socialists' solution. After you equalize incomes, who will take out the garbage? Yet almost no one questioned the... MORE

Hanson's Brief History of Warfare

Economic History
Bryan Caplan
The latest from Robin Hanson's odyssey through anthropology:Most confusion comes from seeking a one-way trend, as in "is there more or less war than in ancient times?" Problem is: overall, warfare increased, then decreased. [...] Yes, most of the "tribal"... MORE

Roberts and Kling on the Crisis

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts is summarized in the NYT Dealbook. My paper in the Harvard Journal of Law and Public Policy is now available. Other papers on the financial crisis are here. For now, since I am mostly on vacation, they are... MORE

Lidtke's The Outlawed Party

Books: Reviews and Suggested Readings
Bryan Caplan
After learning the basics of Bismarck's Anti-Socialist Laws, I turned to Vernon Lidtke's The Outlawed Party: Social Democracy in Germany, 1878-1890, published in 1966.  Despite Lidtke's obvious sympathy for this proto-totalitarian movement, I really enjoyed it.  I take inordinate pleasure... MORE

Rajan Joins the Blogosphere

Finance: stocks, options, etc.
Arnold Kling
He writes, Paul [Krugman] is, of course, a great theoretical Nobel-prize-winning economist, so his attacks must be taken seriously (and I did take his trade theory classes at MIT, in the interest of full disclosure). Unfortunately, much of the "Fannie... MORE

Is the Ruling Class an Elite?

Politics and Economics
Arnold Kling
Daniel Klein writes, According to a Zogby International survey that I write about in the May issue of Econ Journal Watch, the answer is unequivocal: The left flunks Econ 101. Liberals are confident that they are smarter and better educated... MORE

Chickens for Peace

Game Theory
Bryan Caplan
David Friedman's dinnertime conversations with his son Bill inspired the following hypothetical:Imagine that someone in our future is equipped with a device capable of delivering packages to the past. He makes a list of thirty or forty of the most... MORE

Richter Back in Print

Books: Reviews and Suggested Readings
Bryan Caplan
A handsome new edition of Eugen Richter's dystopian novel Pictures of the Socialistic Future, featuring a new introduction on the "born bad" thesis by yours truly, is now available from the Mises Institute for just $12.  When I read political... MORE

Case for Immigration

Labor Mobility, Immigration, Outsourcing
David Henderson
In this month's Feature Article, Suffolk University economist Ben Powell makes an economic case for immigration. He takes on the following myths: (1) that immigrants are a drag on the economy, (2) that immigrants "take our jobs," and (3) that... MORE

Libertarian Nurture? The Case of the Paul Family

Family Economics
Bryan Caplan
The NYT has a fun story on how Ron Paul raised Rand Paul:In keeping with their position as the First Family of Libertarianism, the Pauls of Lake Jackson, Tex., did not have many rules around their home. "Behave yourself and... MORE

Traditional Third World Elites: A Qualified Defense

Cross-country Comparisons
Bryan Caplan
My parents and teachers raised me to despise traditional Third World elites - not kleptocrats like Mobutu or Marcos, who were barely on their radar, but anyone who lived well in the midst of poverty.  "The extremes of wealth and... MORE

In "Cato Memories," I recalled the joy of cleaning the archives:In a footnote in Why Americans Hate Politics, E.J. Dionne wrote: "My thanks to Ed Crane and David Boaz of the Cato Institute for letting me read through their excellent... MORE

Ludwig von Mises on the Drug War

Regulation
David Henderson
I'm at a weekend conference at which we're discussing various works by economists and philosophers. One of the readings is "The Foundations of Liberal Policy," a chapter in Ludwig von Mises's book, Liberalism: The Classical Tradition, published in 1927. Of... MORE

The Coase Theorem and Endowment Effects

Property Rights
Arnold Kling
There is a problem with the assignment of property rights on Karl Marx Street. The street is in Griebnetzsee, a suburb of Berlin, and it sits on a hill overlooking a beautiful lake. It is very chic, with fancy villas.... MORE

The evidence on nature, nurture, and sexual orientation just got a lot better.  (For earlier discussion, see here, here, and here).  Gene Expression summarizes the latest evidence:Three recent twin studies have largely overcome previous methodological issues, demonstrate clear genetic influences... MORE

To put it baldly, since capitalism undermined aristocracy, it was a good thing from an intellectual's point of view. That is from Alan S. Kahan, Mind vs. Money: The War between Intellectuals and Capitalism. quoted in a review by... MORE

What is a NINJA loan?

Finance: stocks, options, etc.
Arnold Kling
The acronym NINJA stands for no income, no job, and no assets. Often, I hear this described as lenders willing to make mortgage loans to borrowers with no income, no jobs, or no assets. Technically, this is not correct. NINJA... MORE

Who Wants to Move to Minnesota?

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
In the comments, Steve Sailer cites:Moynihan's Law of Proximity to the Canadian Border: on just about any socially positive measure, there is a positive correlation between a state's ranking and it's distance from the Canadian border: e.g., Minnesota is usually... MORE

Free Trade for Gaza

International Trade
David Henderson
Tom Palmer has an excellent post on why it's important to let people in Gaza engage in free trade. Currently, the Israeli and Egyptian governments have extreme restrictions on trade, something I posted on recently. Palmer writes: The trade embargo... MORE

Social Security and Kids

Social Security
David Henderson
In the comments on my post on retirement last week, Chris Koresko asks a good question, writing: Would it make sense to link the size of a retiree's Social Security payment to the number of kids he has in the... MORE

Markets: Rich/Nice vs. Poor/Mean

Microeconomics
Bryan Caplan
Consider a model where workers are either rich or poor, and employers are either nice or mean.  Rich workers might be more conscientious than poor workers, or simply less tempted to steal from their boss.  Nice employers trust their workers... MORE

If Capitalists Ran the Schools

Economics of Education
Bryan Caplan
Robin's been warming up to Bowles and Gintis' classic Schooling in Capitalist America.  The usual summary of B&G is that our educational system is basically a factory that makes good cogs for the capitalists' social machine.  As a product of... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Bryan Caplan
1. Cheaper By the Dozen.  The true story of a turn-of-the-century efficiency expert who combines his two passions - time and motion studies and his twelve kids.  Recommended by Joshua Gan.2. La Perdida. Graphic novel about a (half)-Mexican American leftist... MORE

M3 Plummeting

Monetary Policy
David Henderson
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. This is from Ambrose Evans-Pritchard in the Telegraph, a British publication. It goes on:... MORE

Hayek on Social Justice

Central Planning vs. Local Knowledge
David Henderson
Yesterday I was reading excerpts from Hayek's Law, Legislation, and Liberty to prepare for a conference this coming weekend in Seattle. Here are some choice excerpts from Hayek's discussion of "social justice." For the same reason that the prices which... MORE

Magna Carta Club, Part 2

Book Club
Bryan Caplan
Due to limited demand, I'm going to finish up the Magna Carta Club with one last post on Clauses 11-63.  Highlights:Clause 11.  Further demagogic limits on Jewish money-lenders' rights to collect on debts.Clause 12. Limits the tax known as "scutage";... MORE

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