Bryan Caplan and David Henderson

August 2010

A Monthly Archive (136 entries)

Exchanging Nickels for Dimes?

Finance: stocks, options, etc.
Arnold Kling
James Hamilton writes, Suppose that the Federal Reserve were to sell off all its Treasury securities of less than one-year maturity, and use the proceeds to buy up all the longer term Treasury debt it could. For example, in December... MORE

Education and Signaling: Bill Dickens Replies

Economics of Education
Bryan Caplan
Last week, Bill Dickens critiqued the signaling model of education, and I replied.  Here's Bill's rejoinder:Bryan has said a lot nice things about me in this space. Let me take this opportunity to return the favor. There are many different... MORE

The Desire to See Others Suffer

Behavioral Economics and Rationality
Arnold Kling
James Lewis argues that fascism involves the political use of sadism to recruit millions of followers in a campaign of pleasurable punishment against a scapegoated person or group. I found the essay provocative, which is a term I apply when... MORE

Inflation Regimes: the 5.5 percent barrier

Macroeconomics
Arnold Kling
As Bryan offers data for study, let me suggest that in the United States the regime changes somewhere between 5.0 and 6.0 percent for the annualized "core" inflation rate (the CPI excluding food and energy). 1. Take the moving six-month... MORE

Inflation Regimes Data

Monetary Policy
Bryan Caplan
Want to play with the inflation data to see if some variant of Arnold's inflation regimes theory holds water?  My new RA Zac Gochenour has posted the data right here.  Enjoy, and please share if you discover anything interesting either... MORE

The Unemployment Problem

Labor Market
Arnold Kling
Megan McArdle writes, How much unemployment reduction you get for a given amount of stimulus spending is, obviously, at best an imperfect estimation. But let's take the CBO's estimates as representing a rough consensus of those who favor stimulus: for... MORE

Thank You IVF, Friedman Family Edition

Family Economics
Bryan Caplan
Several friends have advised me to tone down my book's trenchant defense of assisted reproductive technology.  Patri Friedman's just given me another reason to stand my ground: We are delighted to announce the birth of Iselle Rose Friedman early this... MORE

Dodd-Frank-Enron

Finance: stocks, options, etc.
Arnold Kling
Peter Wallison writes, The dominant theme of the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act is fear of instability and change...Where [non-bank] financial firms once focused on beating their competitors, they will now focus on currying favor with... MORE

Adam Smith on Ford's $5 a Day

Labor Market
David Henderson
Don Boudreaux has an excellent post taking on the myth that one reason Henry Ford paid the huge (at the time) daily wage of $5 was that he wanted workers to have more money to buy his cars. Don gives... MORE

Russ Roberts and Dan Pink

Business Economics
Arnold Kling
They discuss motivation and incentives. Very enjoyable conversation. If anything, it is a little too fast-paced. One point is that people seek autonomy, mastery, and purpose. I think that is very true in people's avocations, or hobbies. I think, though,... MORE

Bond Bubble Watch

Fiscal Policy
Arnold Kling
Nobel Laureate Gary Becker comments on the possibility of a debt crisis. Morgan Stanley's report argues debt/GDP is not a good measure of default risk, and suggests instead the ratio of debt to government revenues. On this measure, the US... MORE

Ozimek's Reductios

Economic Philosophy
Bryan Caplan
Adam Ozimek offers two reductios against my claim that it's almost always good to create life.  Reductio #1:[I]f you take seriously the notion that the utility of not being born is less than the utility of being born, it seems... MORE

Pre-Order Selfish Reasons to Have More Kids

Books: Reviews and Suggested Readings
Bryan Caplan
I won't submit my final manuscript for another week or two, but you can already pre-order Selfish Reasons to Have More Kids from Amazon.  Neat.HT: Adam Ozimek... MORE

Inflation Regimes? Where?

Monetary Policy
Bryan Caplan
My former student Eli Dourado has ably performed the legwork on my first-cut test of Arnold's inflation regimes theory.  Pay special attention to the last graph, limited to countries with mean inflation below 10%.  There isn't the slightest sign of... MORE

My Syllabus of Errors

Economic Philosophy
Bryan Caplan
If Brad DeLong himself has a few mistakes to confess, imagine how many I've made!  I discuss quite a few in my intellectual autobiography, but here are my highlights (lowpoints?), in rough chronological order:1. I used to think Catholicism was... MORE

How Toggling Works (I Think)

Macroeconomics
Arnold Kling
Bryan asks how I think that the Fed can make big changes in inflation regime but not make small changes within a regime. Again, my thinking is based almost entirely on my reading of postwar U.S. monetary history, which went... MORE

Two Tyler Retweets

Finance: stocks, options, etc.
Arnold Kling
The sole purpose of this post is to retweet two of Tyler Cowen's assorted links. 1. How to tell when a CEO is lying. I was expecting to click through and read, "His lips are moving," but in fact it... MORE

Toggling Without a Switch

Monetary Policy
Bryan Caplan
While I think there's little evidence in favor of Arnold's inflation regimes hypothesis, it strikes me as vastly more likely than Arnold's skepticism about the very ability of central banks to change nominal variables.  Question for Arnold: If you really... MORE

The Upcoming November Election

Politics and Economics
Arnold Kling
Larry Sabato writes, the main cause of Democratic distress isn't promoting liberal legislation but simply being in charge when bad things are happening to the nation's economy. So, we have high unemployment, and the party in power is being blamed.... MORE

Three Inflation Regimes

Monetary Policy
Arnold Kling
Bryan's question on testing for inflation regimes drew interesting comments. Some notes: 1. The idea that the rate of inflation and its variability are correlated is not original with me. I know the observation was made earlier in the literature,... MORE

The Economics of the Gift of Life

Economic Philosophy
Bryan Caplan
If someone gives another person $100, almost all economists agree that the recipient is better off.  Hard-line neoclassical economists will say it's true by definition; the rest won't be so emphatic, but they'll confidently agree.  Even happiness researchers will probably... MORE

Austrian Resurgence

Austrian Economics
Arnold Kling
The Wall Street Journal profiles GMU's Pete Boettke. The resurgence of Austrian economics does have its hazards, Mr. Boettke says. The antigovernment fervor on cable-television shows and the Internet may have popularized its theories, but it also "reinforces the idea... MORE

Arnold has a novel theory of dual inflation regimes:I don't think that the Fed can fine tune the economy. I think that, at most, it can toggle between two regimes: a regime where inflation is high and variable; and a... MORE

Bond Bubble Watch

Fiscal Policy
Arnold Kling
Brian Riedl of Heritage gives us the good cheer on the Budget. Over the past 50 years, Washington has collected 18 percent of GDP while spending 20.3 percent of GDP. Annual figures have not deviated much from these averages. Even... MORE

Where I Believe that I was Most Wrong

Finance: stocks, options, etc.
Arnold Kling
Brad DeLong started this one, and Tyler Cowen picked up on it. Megan McArdle has the longest list (which by no means implies that she was the most often wrong.) 1. My way of thinking about the price/rent ratio for... MORE

The Decline in Civil Liberties

Regulation
David Henderson
On a flight from Chicago to Washington, D.C., in 1981, I sat beside a U.S. foreign service officer who had just finished a stint in Moscow. He told me that although he had enjoyed the job, he needed to get... MORE

She writes, There is no such thing as a perfect Fed; it's always going to err on one side or another. You said you wanted a Fed that didn't err on the loose side; now you have it. This is... MORE

Balan's Test

Economics of Education
Bryan Caplan
My debate partner David Balan poses a fascinating test of the signaling model in the comments: Here's a possible test. Among Israeli Jews there is a substantial religious minority known as "Ultra-Orthodox" or "Haredi" Jews. In this group a large... MORE

Bond Bubble Watch

Fiscal Policy
Arnold Kling
Morgan Stanley's Arnaud Mares writes, The sovereign debt crisis is not European: it is global. And it is not over. Pointer from WSJ Real Time Economics. Mares points out that the current debt/GDP ratios are not the problem. It is... MORE

A Nice Sentence

Monetary Policy
Arnold Kling
from Mark Thoma. To me, some of the beliefs held by the other side are astoundingly unbelievable, but they would, of course, say the same thing about me. He then links to a piece by the evil twin of Andy... MORE

Monetary Theory Question

Money
Arnold Kling
There has been a lot of drama among monetary theorists in the blogosphere, and I have been waiting for Scott Sumner to join the fray. He writes, Thus the question is never whether low rates unfairly subsidize borrowers, or whether... MORE

Education and Signaling: Reply to Bill Dickens

Economics of Education
Bryan Caplan
As you'd expect, Bill's case against the signaling model doesn't convince me.  Here are my thoughts, point-by-point:I take it that you think that nearly all of the value of schooling is signaling?My best guess is that 80% of the private... MORE

GDP and Well-Being

Microeconomics
David Henderson
If you, like me, liked Arnold's post today on the pitfalls of GDP, take a look at my piece titled "GDP Fetishism." I explicitly address, among other things, the huge problem with valuing the G (government spending on goods and... MORE

Spending vs. PSST

Macroeconomics
Arnold Kling
Mark Thoma articulates the conventional view. It's useful to break down the economy into four major sectors -- households, businesses, government, and the foreign sector...lower consumption growth will be a substantial drag on the economy...looking to housing to lead the... MORE

More Predatory Education

Economics of Education
Arnold Kling
The Washington Monthly has the scoop: The Washington Monthly and Education Sector, an independent think tank, looked at the 15 percent of colleges and universities with the worst graduation records--about 200 schools in all--and found that the graduation rate at... MORE

Bill Dickens versus the Signaling Model of Education

Economics of Education
Bryan Caplan
Bill Dickens was my Econ 1 teacher.  He's also long been one of the intellectual consciences on my shoulder - an imagined reader whose standards I strive to meet.  He recently emailed me a critique of a thesis for which... MORE

Brink Lindsey, Will Wilkinson

Business Economics
Arnold Kling
They are leaving Cato, and bloggers are gossiping. Here is my $.02: 1. I get paid by the piece writing for Cato occasionally, and they give me the title "adjunct scholar." But I have no office or salary there. I... MORE

Sovereign Debt Wonkery

Fiscal Policy
Arnold Kling
I wrote Guessing the Trigger Point for a U.S. Debt Crisis for Mercatus. Don't assume that you understand it the first time you read it. This is a really difficult, subtle issue. Think of the following as an analogy. A... MORE

The Housing-Oil Analogy

Regulation and Subsidies
Bryan Caplan
Arnold's latest post is spot-on.  I can't resist turning it into an SAT analogy... Housing: Oil :: Today: the SeventiesIn both cases, the public flipped out over the market outcome, government rushed to "do something," and ended up creating a... MORE

A Consensus to Question

Finance: stocks, options, etc.
Arnold Kling
Felix Salmon writes, the main message from the big conference on Fannie and Freddie is that there's a broad-based consensus, Rick Santelli rants notwithstanding, that large-scale government participation in the housing market is necessary to prevent further house-price declines. Old... MORE

Markets for Everything, Minaki Edition

Business Economics
David Henderson
$5 for 4 eggs On Monday, August 2, I was at my cottage and wanted to make a special breakfast for my cousin and his wife that morning and the next morning. I needed an additional 4 eggs. The problem:... MORE

American Health Care Policy Issues

Economics of Health Care
Arnold Kling
That is the title of this paper, in which I trace the history, politics, and economics of our health care system The bottom line: The health care reforms that were debated in 2009 and 2010 did not address the fundamental... MORE

Becker versus the Comics Code

Labor Market
Bryan Caplan
In the early 1950s, American comics were edgy.  Newsstands carried the usual kid stuff, but they also featured genres like graphic horror, true crime, and noir.  Then came a fear-mongering psychiatrist, a Congressional inquiry, and threats of censorship.  The industry... MORE

More Bond Bubble Talk

Finance: stocks, options, etc.
Arnold Kling
At The Economist, pointer from Tyler Cowen. Laurence Kotlikoff writes, current bondholders will get hurt in two ways. The prices of their bonds will fall due to concern about future money creation and the current price level will jump due... MORE

Evolution, Economics, and Education

Alternative Economics
Arnold Kling
Mike Gibson points to a sequence of posts by D.S. Wilson. They start here (with some broken links in the first paragaph--I needed to use Google to follow up on one of them), and proceeds rather slowly for my taste.... MORE

Gender and the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Anthropologist Lionel Tiger says, in general I think it's the case that females don't go for that kind of money because they don't want to. I have said on a number of occasions that if someone put me in charge... MORE

Locavores vs. Basic Economics

Central Planning vs. Local Knowledge
Arnold Kling
Steven Landsburg writes, How many grapes were sacrificed by growing that California tomato in a place where there might have been a vineyard? How many morning commutes are increased, and by how much, because that New York greenhouse displaces a... MORE

Bob Murphy's Question

Cost-benefit Analysis
Bryan Caplan
In the comments, Bob Murphy writes:When Bryan says the first-best solution is to tax education, is he just making a point that there are negative externalities? In other words, does Bryan also think a government tax on pollution is the... MORE

Macroeconomic Puzzles

Finance: stocks, options, etc.
Arnold Kling
Paul Krugman writes, Right now, the Mankiw indicator is -8.5 -- core inflation at about 1, unemployment at 9.5. As you can see, that implies a majorly negative interest rate; what we actually get is zero. He suggests that the... MORE

Media Bias and Warren Olney

Politics and Economics
David Henderson
Last week I posted on a case of media bias and a case of media bullying. Here's another true story about media bias, this time involving Warren Olney, a well-known name in the Los Angeles radio market. In the early... MORE

Inconvenient Positions

Economic Methods
Bryan Caplan
My book on democracy, my almost-complete book on kids, and my future book on education all take inconvenient positions.  Meaning: In each case, there's an ideologically cleaner and more crowd-pleasing rationale for what I think people ought to do.Case 1:... MORE

AD or AS?

Labor Market
Arnold Kling
Minneapolis FRB President Narayana Kocherlakota says, I mentioned that the relationship between unemployment and job openings was stable from December 2000 through June 2008. Were that stable relationship still in place today, and given the current job opening rate of... MORE

Twenty-Somethings

Income Distribution
Arnold Kling
From a long piece in the New York Times Magazine: How about expanding programs like City Year, in which 17- to 24-year-olds from diverse backgrounds spend a year mentoring inner-city children in exchange for a stipend, health insurance, child care,... MORE

Do Mark Shields and Michael Gerson Understand Principles?

Economic Philosophy
David Henderson
No. Well, I think we saw some of that in the mosque controversy, where the president first set out a very clear and ringing principle, and then retreated from it significantly. Saturday, when he qualified his unqualified endorsement of Friday... MORE

In the Name of "Affordable Housing"

Public Choice Theory
Arnold Kling
Greg Mankiw prints some notes from Philip Swagel from last week's conference on the future of housing finance. Conference participants from industries involved with the financing and construction of homes assert that no American will ever buy a home again... MORE

Parking, Once Again

Regulation and Subsidies
Arnold Kling
Tyler Cowen offers a number of links. I clicked on this op-ed, by Donald Shoup. To prevent shortages, some cities have begun to adjust their meter rates (using trial and error) to produce about an 85 percent occupancy rate for... MORE

My Reason Interview

Revealed Preference
David Henderson
Peter Suderman of Reason interviewed me last week in connection with a short article I did on how Canadian politicians Jean Chretien and Paul Martin turned around the federal budget from persistent deficits to persistent surpluses (until the latest recession.)... MORE

Discipline: Advice and Evidence

Family Economics
Bryan Caplan
Here's an excerpt on discipline (plus academic references) from Selfish Reasons to Have More Kids.  If parents want a happier life, they need to rethink the justification for discipline. The welfare of the child is one legitimate goal.  If your... MORE

Escheat: It's Not You, It's Me

Property Rights
David Henderson
That's close to what I said to the E*Trade guy when I called up this morning to close my account. See my previous post, "You're Not a Frequent Trader? We'll Take Your Stuff," for why I wanted to close the... MORE

Questions Worth Answering

Politics and Economics
Bryan Caplan
You're unlikely to see more thought-provoking questions than the set in Robin's latest:Some classic great divides: tyrants vs. freedom-lovers, rich vs. poor, faithful vs. heathen, urbanites vs. townies, men vs. women, intellectuals vs. ignoramuses, artists vs. the undiscerning, greens vs.... MORE

Geraldo Rivera as Coase

Property Rights
David Henderson
Just watching the O'Reilly Factor a few minutes ago, I saw Geraldo Rivera make an interesting proposal about the controversial mosque/athletic facility/culinary school/art studio near ground zero in Manhattan. He started by stating out that the current owner of the... MORE

On National Education Policy

Economics of Education
Arnold Kling
George Leef writes, The first point to observe is that "our" college graduation rate is just a statistical artifact, like "our" home ownership rate and "our" voting rate. To people imbued with a central planning mindset, such statistics betoken national... MORE

Ed Pinto on Mortgages

Finance: stocks, options, etc.
Arnold Kling
The short version, in the Wall Street Journal (subscriber-only). The long version, which is the definitive work on how housing policy affected mortgage lending. Pinto has access to good data. He has the institutional knowledge. He doesn't have an address... MORE

My Run-in With the Washington Post

Politics and Economics
David Henderson
I didn't put "media bias" in the title because this isn't exactly a case of media bias: it's more a case of media bullying. I was the health economist with Martin Feldstein's Council of Economic Advisers from September 1982 to... MORE

You're not a Frequent Trader? We'll Take Your Stuff

Property Rights
David Henderson
When I got home from work Tuesday evening, there was a message on my answering machine from E*Trade. I have an account with E*Trade that I've used to buy stocks. I'm not an active trader. I tend to buy and... MORE

The Horwitz Challenge

Economic Philosophy
Bryan Caplan
On Facebook, Steve Horwitz writes:The next time you're engaged in a political discussion with someone who has very strong views different from your own, ask them if they can name two famous thinkers or politicians whose politics are opposed to... MORE

Media Bias and the L.A. Times

Politics and Economics
David Henderson
Bryan Caplan's and David Boaz's comments on media bias remind me of an incident that happened almost two years ago. Ralph Vartabedian called me to get my take on the members of President-elect Obama's economic team, particularly Christina Romer and... MORE

I Lived to See the Future

Growth: Consequences
Bryan Caplan
In 1982, TSR released a science-fiction role-playing game called Star Frontiers.  The rules weren't great, but I loved the campaign world - so much that I recently started running a new game for my kids using the Star Frontiers universe... MORE

Boaz on Media Bias

Politics and Economics
Bryan Caplan
You don't have to convince me that liberal media bias is real and large.  But Cato's David Boaz points out another amusing example: [M]ainstream (liberal) media regularly put an ideological label on conservative and libertarian organizations and interviewees, but not... MORE

The Government Mortgage Subsidy

Finance: stocks, options, etc.
Arnold Kling
ABC News quotes PIMCO's Bill Gross. "Without government guarantees, mortgage rates would be hundreds -- hundreds of basis points higher, resulting in a moribund housing market for years." Is he just talking his book, or is he serious? The standard... MORE

David Kennedy talks to Russ Roberts

Economic History
Arnold Kling
In this podcast, where the topic is the history of the Depression. Kennedy's book, Freedom From Fear, is one that I read recently and enjoyed. I find it quite interesting that the standard narrative is that Hoover was non-interventionist and... MORE

Bill and Robin's Not So Excellent Hypothesis

Family Economics
Bryan Caplan
Robin explains a new theory of falling fertility that he cooked up with Bill Dickens on the road back from GenCon:The key idea: farming pressures strengthened a fem forager tendency to, when personally richer, invest more energy in pursuing status,... MORE

Computer Models as Autocrats

Finance: stocks, options, etc.
Arnold Kling
Amar Bhide writes, In recent times, though, a new form of centralized control has taken root--one that is the work not of old-fashioned autocrats, committees, or rule books but of statistical models and algorithms. These mechanistic decision-making technologies have value... MORE

Overpaid Federal Employees Redux

Labor Market
Bryan Caplan
In March, USA Today reported that federal employees were heavily overpaid, Peter Orszag countered with some apples-to-apples econometrics, and I objected that Orszag (a) seemed to ignore exceptionally generous federal benefits, and that (b) official benefit statistics fail to count... MORE

Most Monolithic

Economic History
Bryan Caplan
Murray Rothbard - as well as many of the New Left Cold War revisionists who inspired him - heavily ridiculed the view that the Communist movement was "monolithic."  Like other movements, they point out, Communists quarelled, formed factions, ignore chains... MORE

Predatory Educating

Economics of Education
Arnold Kling
Steve Eisman says, There are two kinds of accreditation -- national and regional. Accreditation bodies are non-governmental, non-profit peer-reviewing groups. Schools must earn and maintain proper accreditation to remain eligible for Title IV programs. In many instances, the for-profit institutions... MORE

Left, Right, and Wrong

Politics and Economics
Arnold Kling
Brink Lindsey is interviewed by Jonathan Rauch for the "five books" series. Lindsey's book choices are not as interesting as his comments on the role of the progressive left and the traditionalist-conservative right. At any given time truth is partly... MORE

Parking: What is the Relevant Margin?

Regulation and Subsidies
Arnold Kling
In a comment, Robin Hanson asks (or re-asks) why parking should be free, when there are thousands of other goods with low marginal cost that are not free. My basic answer is that there are thousands of other goods with... MORE

Smart Phones and Restaurants

Growth: Consequences
Bryan Caplan
One thing I haven't seen smart phones do yet: Figure out that you're in a restaurant, then let you order your meal straight from your phone without talking to a server.  To cut transactions costs further, your phone would tell... MORE

The Leamer Indicators

Macroeconomics
Arnold Kling
Now, I am getting to the part of Macroeconomic Patterns and Stories where Leamer gets very conventional. Economic activity equals spending, monetary policy equals the Fed Funds rate, and all the fiscal and monetary dials work as they do in... MORE

Harry & Teddy and High Inflation

Monetary Policy
David Henderson
A little economics goes a long way This is from Thomas Griffith, Harry and Teddy, a book about the relationship between Henry R. Luce and Theodore H. White, much of which revolved around their passion and thoughts about China under... MORE

Price Discrimination Explains...Macro?

Macroeconomics
Arnold Kling
In chapter 10 of Macroeconomic Patterns and Stories, Ed Leamer writes, in recessions, the most price sensitive customers drop by the wayside, and what remains are the wealthy who don't care much about price. Facing this kind of customer base,... MORE

My First Look at Strictly Confidential

Books: Reviews and Suggested Readings
Bryan Caplan
As soon as I saw that the Mises Institute had published Strictly Confidential: The Private Volker Fund Memos of Murray N. Rothbard, I took out my credit card.  Rothbard's at the top of my list of thinkers who proverbially, "may... MORE

Leamer on the Current Recession

Macroeconomics
Arnold Kling
Obviously, I am going through Macroeconomic Patterns and Stories chapter by chapter. It is really too bad that he positioned it as a textbook, because I think that the rest of the profession needs to read it. Anyway, he signed... MORE

Parking Spaces: What is the Free-Market Equilibrium?

Regulation and Subsidies
Arnold Kling
Robin Hanson writes, I didn't see Tyler favoring forcing prices above marginal cost, just opposing laws requiring excess supply. So, there are two issues. a. How much land should be devoted to parking spaces? b. Given the answer to (a),... MORE

Extraterritoriality

Political Economy
Arnold Kling
That is the title of a work from 1925 by Shih Shun Liu. Richard Johnsson has placed it on line. Some quotes. In the earlier stages of human development, race or nationality rather than territory formed the basis of a... MORE

Idle Chatter from Ed Leamer

Macroeconomics
Arnold Kling
Continuing my relatively unplanned commentary on Macroeconomic Patterns and Stories, chapters 7 and 10 are on idleness. One can think of a recession as resources being idle, and then we wonder why they are idle when they could be productive.... MORE

Why is there Free Parking?

Regulation and Subsidies
Arnold Kling
Tyler Cowen's latest column is on the anomaly of free parking. If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation... MORE

Momentum in Employment: Why it Matters

Labor Market
Arnold Kling
The other day, I verified Ed Leamer's finding that there is momentum in payroll employment. This is an extremely important finding, as I will explain below. Just as a teaser, I think it strongly supports Tyler Cowen's ZMP story, but... MORE

Taking Dean Baker Seriously

Books: Reviews and Suggested Readings
David Henderson
My book review of Dean Baker's short book, Taking Economics Seriously, is just out in Policy Review. Although I liked a fair amount of the book--see my review--Dean restricted himself with his implication that unless a large number of people... MORE

Which Jobs to Save?

Labor Market
Arnold Kling
Tyler Cowen writes, In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again, at least assuming those are "good" jobs in the first place. (Yes, people thought they knew... MORE

Momentum in Employment

Labor Market
Arnold Kling
According to Ed Leamer's Macroeconomic Patterns and Stories, chapter 4, payroll employment is not a random walk. The change in payroll employment in August will be highly correlated with the average change from May through July. This was 26,667, according... MORE

Two Provocative Quotes on Education

Economics of Education
Arnold Kling
Both in Forbes blogs. Rich Karlgaard: Self-learning rules. We are at the beginning of the Death of Credentials. The ROI for 95% of college educations will be negative. Bill Gates: If I told you that the best math teacher was... MORE

Nobody Invited Me

Finance: stocks, options, etc.
Arnold Kling
To the Administration's Panel on Housing Policy. Off hand, here is what I would say. 1. Government support of secondary mortgage markets is the worst form of trickle-down economic policy. Many very wealthy people profit from it, and the benefits... MORE

Tyler Cowen on the Paul Ryan Plan

Economics of Health Care
Arnold Kling
He writes, We all know that health care spending has to be restrained in some manner. There are (at least) two approaches: 1. Have the federal government take a more active role in shutting down or limiting some reimbursements, based... MORE

Macro Doubtbook, Installment 11

Macroeconomics
Arnold Kling
The previous installment was here. The installment below discusses macroeconometrics. It is very brief, because I think that the issue is better discussed in the context of the historical perspective that I envision providing in the main part of the... MORE

Seasonal Employment (Not Wonkish)

Macroeconomics
Arnold Kling
Bryan weighs in on an issue of seasonal employment. This issue has produced much controversy among a few wonks. See the post by Mark Thoma. Almost 40 years ago, I was a seasonal teenage worker, in a factory in South... MORE

Casey Mulligan makes a thought-provoking point about summer employment:[N]ational employment was two million to three million higher in July than it was six months before (employment estimates vary somewhat between the business surveys and the household survey). [...] But it's... MORE

Trend vs. Random Walk

Macroeconomics
Arnold Kling
I am starting to re-read Ed Leamer's textbook, Macroeconomic Patterns and Stories. Very early, he presents a graph of real GDP from 1955 to 2005 on a log scale, showing that it grows at a trend rate of 3 percent,... MORE

Sunburn, TARP, and the Activist's Fallacy

Behavioral Economics and Rationality
Bryan Caplan
Like Conan O'Brien, I don't tan in the sun; I burst into flames.  The most painful moments in my life have been due to sunburn.  I was burned so bad in 1981 that I didn't get another until 1994 -... MORE

Retirement Risk

Social Security
Arnold Kling
Megan McArdle quotes Jonathan Cohn: To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too... MORE

Unfair Measure of the Laffer Curve

Supply-side Economics
Arnold Kling
Nick Schulz links to a post by Tino that makes the point that in spite of much lower tax rates, the U.S. government collects more tax revenue per capita than do European governments. If all else were equal, this would... MORE

More on Cowen on Nominal Rigidities

Labor Market
Bryan Caplan
In case you didn't notice, the reason why I outsourced my advice for the unemployed is that Tyler preceded it with, "Yet I have seen not one such post to the unemployed," and followed it with, "If such posts would... MORE

Strange Question from Ed Glaeser

Finance: stocks, options, etc.
Arnold Kling
He writes, In the case of the housing boom, we can't even answer the basic question of how much approval rates or loan-to-value ratios changed over time for a person with fixed characteristics. The loan approval rate that Glaeser discusses... MORE

The Health Insurance Hurdle

Labor Market
Arnold Kling
Tyler Cowen asks what is wrong with the labor market. He points to David Leonhardt, who writes, the downturn has still exacted a much harsher toll on the less educated. The unemployment rate for college graduates is still just 4.5... MORE

My Advice for the Unemployed

Labor Market
Bryan Caplan
Non-ironically outsourced to Tyler Cowen:Hey guys, lower your wage demands!  It's good for you!  You'll get a job and avoid the soul-sucking ravages of idleness.  It's good for the country!  It's good for Bernanke, you'll get those regional Fed presidents... MORE

Babcock-Marks and Signaling

Economics of Education
Bryan Caplan
After summarizing the Babcock-Marks' evidence on declining study time, I pointed out that the return to education rose heavily during the same period, then remarked:Babcock and Marks could reply, of course, that the return to college would have been even... MORE

Mark Kleiman on Responsibility

Economics of Crime
David Henderson
In the video on this page, economist Mark Kleiman, whose expertise is on the drug war, tells of an interesting approach taken by a Hawaiian judge to make people keep their promises not to use illegal drugs. If I were... MORE

College: Easy Money

Economics of Education
Bryan Caplan
According to Philip Babcock and Mindy Marks, college students' weekly study time fell by 40% between 1961 and 2003.  The research is forthcoming in the Review of Economics and Statistics, but here's a very readable popularization.  Their basic findings:In 1961,... MORE

Various Links

Finance: stocks, options, etc.
Arnold Kling
Kevin Villani enters the dispute over what caused the financial crisis on the side of those of us who see misguided policy as a major factor. Philip Greenspun worries about what happens when the marginal product of a worker falls... MORE

The Origin of Origin Laws

Labor Market
David Henderson
Bryan Caplan asks the normative question, "Is anyone willing to often even a semi-plausible economic argument in defense of mandatory national origin labels?" I'm not. But I do have an answer to this positive question: what is the origin of... MORE

Growth Clusters

Growth: Causal Factors
Arnold Kling
From David Halberstam's The Fifties, p. 174: Everyone in this country, he thought, had a car and a family, and sooner or later everyone had to go somewhere. Dorothy Wilson listened to him with growing trepidation--when Kemmons Wilson said he... MORE

The Pelican Brief and the People's Romance

Political Economy
David Henderson
A large percent of my vacation reading this last week has been novels, rather than than non-fiction. But even in those, I see things to blog about. One novel I just finished is John Grisham's The Pelican Brief. I won't... MORE

You've probably noticed that imports are labeled by national origin.  This is usually required.  The most obvious effect of such regulation is to slightly disadvantage foreign producers by raising their cost of production.  But the only slightly less obvious effect... MORE

Political Mood Cycles

Behavioral Economics and Rationality
Bryan Caplan
My casual observation of American politics suggests that national political mood follows a four-year cycle that syncs with the presidential electoral cycle.  Here's how I see the cycle running:Election Year: StridentInauguration Year: HopefulSecond Year: DisappointedThird Year: Boredand then back to...Election... MORE

Phelps on Short-Sightedness

Business Economics
David Henderson
I'm less impressed with Phelps's piece than Arnold is, to put it mildly. Take the following line from Phelps: Executives avoid farsighted projects, no matter how promising, out of a concern that lower short-term profits will cause share prices to... MORE

Three Dispositions of (Modern) Liberals

Books: Reviews and Suggested Readings
Arnold Kling
When libertarians read Alan Brinkley's The End of Reform, they will frequently nod with approval when Brinkley refers to some faction within the Roosevelt Administration as "statists." Just bear in mind that for Brinkley, that term is not derogatory. After... MORE

Two from the New York Times

Macroeconomics
Arnold Kling
1. Nobel Laureate Edmund Phelps writes, One reform would be to create a First National Bank of Innovation -- a state-sponsored network of merchant banks that invest in and lend to innovative projects. Another would be to improve corporate governance... MORE

Jerry Jordan on Regime Uncertainty

Fiscal Policy
David Henderson
In this five-minute interview with Karen Gibbs, Jerry Jordan lays out nicely the "regime uncertainty" (Bob Higgs's term) that we face. That is, business people, and the rest of us, for that matter, don't know what future tax rates or... MORE

Did Health Care Reform Cure Medicare?

Economics of Health Care
Arnold Kling
The Medicare Trustees issued a report that shows a much lower path for Medicare spending. Mark Thoma has links to two people, including Paul Krugman, who triumphantly say that this shows that health care reform has solved the long-term problems... MORE

How FDA Regulation Stifles Drug Development

Regulation
David Henderson
In the current issue of Regulation magazine, I have a review of two books, Overdose, by Richard Epstein, and Leviathan's Drug Problem, by John R. Graham. Both are excellent. Although Epstein's book came out in 2006, it didn't make much... MORE

Keynes vs. Bohm-Bawerk

Macroeconomics
Arnold Kling
This morning, we will find out whether the recovery remains jobless. Meanwhile, I have an essay, Labor is Capital, that offers an explanation for jobless recoveries. Much of today's American workforce is engaged in roundabout production, which Böhm-Bawerk equated with... MORE

Recalculation Story Watch

Labor Market
Arnold Kling
Joseph Y. Calhoun III points out the Recalculationist implications of Mark Perry's post showing that job openings are increasing much faster than employment. Read for yourself.... MORE

Market-Failure Theory vs. Soviet Theory

Books: Reviews and Suggested Readings
Arnold Kling
I have just started reading Alan Brinkley's The End of Reform, about the evolution of liberalism during the New Deal. Very strongly recommended. It does what Jonah Goldberg claims that the Left refuses to do, which is make a serious... MORE

The Soviet Experiment, Continued

Central Planning vs. Local Knowledge
Arnold Kling
I found the discussion in the comments on my earlier post interesting. I have a lot of follow-up, so I will put this below the fold.... MORE

More on the Austerity of 1945-1947

Economic History
Arnold Kling
I dug up two interesting articles. In case I am more interested in this than you are, I will put this post below the fold.... MORE

The Soviet Experiment

Books: Reviews and Suggested Readings
Arnold Kling
Rediscovering Fire, by Guinivere Liberty Nell, has a basic premise: The Soviet Union was a genuine experiment in trying to fix market failures, and we might want to learn from it. On p. 30, The Bolshevik theory was that the... MORE

How Don Boudreaux Got Hooked on Economics

Economic Education
David Henderson
In a previous post, I praised Don Boudreaux of Cafe Hayek for spreading economic wisdom to people in letters to the editor. This is the story Don told me about how he got hooked on economics. I tell this story... MORE

How Far Does the Five-Organ Hypothetical Get Us?

Economic Philosophy
Bryan Caplan
Simple moral theories are almost always easy to refute with simple hypotheticals.  Yet in the real world, right and wrong rarely seem ambiguous to me.  The reason isn't that I think that consequences don't count.  I take consequences seriously.  My... MORE

Paul Johnson's Peroration

Books: Reviews and Suggested Readings
Arnold Kling
Since we have been discussing his Modern Times, I thought I would excerpt his conclusion, below.... MORE

James Manzi on Experimental Social Science

Economic Methods
Arnold Kling
Strongly recommended. A sample: within this universe of programs that are far more likely to fail than succeed, programs that try to change people are even more likely to fail than those that try to change incentives. A litany of... MORE

Murphy on Discrimination

Labor Market
David Henderson
This month's Feature Article on Econlib, by economist Robert Murphy, is the nicest succinct article I've seen on how free markets make people pay a price for the kind of discrimination that most people abhor. He points out also that... MORE

Not Robin Hanson or Tyler Cowen

Behavioral Economics and Rationality
Arnold Kling
But Jonathan Haidt sounds like them. The answer, according to Mercier and Sperber, is that reasoning was not designed to pursue the truth. Reasoning was designed by evolution to help us win arguments. That's why they call it The Argumentative... MORE

The Macro Doubtbook, Installment 10

Macroeconomics
Arnold Kling
The previous installment was here. The installment below covers behavioral economics. Recall that the ultimate approach in the Doubtbook will be to stitch together the history of macroeconomic thought with the history of macroeconomic episodes. The opening chapter looks at... MORE

Moral Relativism and Modern Times

Books: Reviews and Suggested Readings
Arnold Kling
Seeing Bryan's previous recommendations, I am reading Paul Johnson's Modern Times for the first time. It is a bracing book, filled with opinions that differ from those of Progressive historians. On a number of minor points, I find Johnson less... MORE

In Praise of Don Boudreaux

Economic Education
David Henderson
Economics in One Letter Almost every morning when I wake up, one thing I can count on in my e-mail inbox is a letter written by Don Boudreaux earlier that morning in which he takes on this or that economic... MORE

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