Bryan Caplan and David Henderson

September 2010

A Monthly Archive (145 entries)

Rational Optimist Review

Books: Reviews and Suggested Readings
David Henderson
This is how I end my review of Matt Ridley's The Rational Optimist. I defended it from some of the charges against it by William Easterly. And a book that "only" shows us how economic freedom makes most Americans and... MORE

Washington Ideas Forum

Economics of Education
Arnold Kling
You can watch the main event here, still going on this afternoon and tomorrow. I participated in a side show, not video streamed, about the future of the middle class. This was a large-group discussion, which was recorded, and at... MORE

Two Replies to Two Things

IQ in Economics
Bryan Caplan
In the comments, Two Things writes:1. If your book about poverty doesn't discuss IQ then it will be worthless, or nearly so. 2. If your book blames poverty in underdeveloped countries on the immigration policies of developed countries then it... MORE

Outlier Doubts

Political Economy
Arnold Kling
I think it is fair to say that my free-market views are more extreme than most. Non-economists do not appreciate how well markets work. Most other economists do not, in my opinion, appreciate how poorly government works. Naturally, I expend... MORE

Unchecked and Unbalanced Watch

Political Economy
Arnold Kling
Eric Falkenstein writes Back in the bubble, the one thing everyone (regulators, academics, politicians, journalists) thought banks were doing right, was mortgage lending. This conventional beltway wisdom now has more power. Read the whole post, which consists of a 2003... MORE

Rothbard on the Depression

Austrian Economics
Arnold Kling
I started to read it. Should I finish? Some excerpts and my comments. the timidity and confusion of Reagonomics make very clear what its choice will be: massive inflation of money and credit, and hence the resumption of double-digit and... MORE

My Plans

Books: Reviews and Suggested Readings
Bryan Caplan
Now that I've finished writing Selfish Reasons to Have More Kids, people keep asking me about my future research plans.  My first order of business is to finish up the political responsibility project I've been working on with Ilya Somin,... MORE

Tolerance Will Keep Rising: I'll Bet on It!

Economic Methods
Bryan Caplan
In a thoughtful and provocative post, Tyler tells us:Tolerance of gay individuals and alternative lifestyles is at a historic high.  I would not endorse a crude "regression toward the mean" hypothesis, but we should at least try it on for... MORE

On the Clock

Economics of Education
Bryan Caplan
The excellent Fabio Rojas offers bluntly excellent advice for grad students in the latest Inside Higher Ed.  He begins by distinguishing "short-clock" from "long-clock" disciplines:Some disciplines kick people out in four to six years. I call these "short clock." Engineering,... MORE

The Theory of Consent

Political Economy
Arnold Kling
Bart Hinkle poses an issue. Last week a Chesterfield circuit court ruled Romito has no obligation to pay dues to the homeowners' association in the tony Bexley neighborhood. Romito bought his property two decades ago, when membership in the association... MORE

Recalculation differs from textbook structural unemployment. In textbook structural unemployment, there are two GDP factories, one in the north and one in the south. There is a shortage of workers in the south, and there are too many workers in... MORE

Who Said It?

Macroeconomics
Bryan Caplan
Eventually, however, the war spread to the very issue of whether unemployment in recessions in involuntary...  Sweetwater economists began to respond to the natural gravitational pull of the assumptions of optimization and well-functioning markets, which tend to rule out the... MORE

Dorman on Minimum Wage

Labor Market
David Henderson
A few days ago I posted about economist Peter Dorman's views on the minimum wage and just noticed that a few days later he replied as a commenter. This is my reply to him. Professor Dorman writes: Mainstream empirical research... MORE

Why Don't U.S. Corporations Threaten to Exit?

Political Economy
Arnold Kling
A reader has the following question: corporations have the power to exit, by locating headquarters overseas, essentially trading its "US citizenship" for one of a number of more attractive locations. Though I admit, corporations can't do this costlessly. Why is... MORE

Rational Religious Ignorance?

Economics and Culture
Bryan Caplan
People aren't just rationally ignorant about politics and economics; they also seem to be rationally ignorant about religion.  The latest Pew Forum on Religion and Public Life poll weighed, measured, and found wanting the religious knowledge of over 3000 adult... MORE

Funding Dis-Education

Business Economics
Arnold Kling
Mike Gibson points me to this story. [Peter] Thiel is starting a new initiative that will offer grants of up to $100,000 for kids to drop out of school. His goal is to get college students to work in business... MORE

Signaling that I'm Not Signaling About Signaling

Economics of Education
Bryan Caplan
During our last few lunches, Robin has challenged me to clarify my position on educational signaling - and help my critics to do the same.  And more recently, he named "You have little interest in getting clear on what exactly... MORE

Rebranding Additive Shocks

Macroeconomics
Bryan Caplan
A year ago, I wrote a little-known post called "Additive Shocks."  A week ago, Sumner made my point with more panache:...I don't know about you, but I don't recall reading; "Severe AD shocks are really, really bad, except when the... MORE

EconZen

Information Goods, Intellectual Property
Bryan Caplan
If no one practiced statistical discrimination, no one would have any reason to engage in signaling.... MORE

When Are We the Bad Guys?

Economic Philosophy
Bryan Caplan
In response to "Terrible Turnaround," Scott Sumner writes:Suppose that in 1943 we knew for a fact that dropping a bomb on Germany and Japan, and killing 3,000 civilians, would have caused them to surrender.  Would the act have been morally... MORE

Ed Crane on David Brooks

Economic Philosophy
David Henderson
David Brooks wrote what I thought of as one of his strangest editorials last month and I didn't get around to commenting on it. Titled "A Case of Mental Courage," it led off with a gruesome story about a woman... MORE

A Libertarian One-Liner

Political Economy
Arnold Kling
from Kevin D. Williamson: If you're not willing to have somebody hauled off at gunpoint over the project, then it's probably not a legitimate concern of the state. Implicit in this point of view is the presumption that voluntary cooperation... MORE

Educational Signaling and Statistical Discrimination

Economics of Education
Bryan Caplan
The tacit assumption of signaling models of education is that employers engage in statistical discrimination.  Instead of looking into each applicant's soul and finding his true marginal productivity, employers rely heavily on more-or-less accurate stereotypes about "high school drop-outs," "English... MORE

Gridlock at the Worst Time

Politics and Economics
Arnold Kling
Tyler Cowen writes, More and more laws will be frozen in place. This already seems to be the case with immigration policy. More and more expenditures will be frozen into place. Politics will become more symbolic, and in some ways... MORE

The Bernanke View

Finance: stocks, options, etc.
Arnold Kling
Ben Bernanke says, The notion that financial assets can always be sold at prices close to their fundamental values is built into most economic analysis, and before the crisis, the liquidity of major markets was often taken for granted by... MORE

The view that the U.S. government actually increases income inequality used to be limited to (some) libertarians and socialists.  After the bailouts of 2008 and beyond, though, even moderates might start to wonder.  Where does the truth lie?  Please show... MORE

The Lost History of Volcker-era Monetary Policy

Economic History
Arnold Kling
Karl Smith writes, Its as close to a test of modern macro theory as we have. We thought if we shrank the growth rate of the money supply we would get a recession but we also lower the rate of... MORE

Hedengren et al and Dorman Advance the Ball

Labor Market
David Henderson
In an article in Econ Journal Watch, David Hedengren, Dan Klein, and Carrie Milton present data showing a sharp divide among economists who sign petitions on economic policy issues. They segment the petitions into liberty-reducing and liberty-augmenting. Economists who signed... MORE

Culture and Institutions

Books: Reviews and Suggested Readings
Arnold Kling
Fred Pryor has a new book, called Capitalism Reassessed, a title which does not really say what the book is about. He uses various qualitative data sources to classify OECD economies into subsets. Some excerpts from the book below the... MORE

The Attack on Civilization

Growth: Consequences
David Henderson
Somewhere along the way, during the last 50 years, the critique of capitalism changed from condemning its failure to spread the wealth to condemning the very opposite. Suddenly the great sin of capitalism was that it was producing too much,... MORE

Goodbye Mini-meds

Economics of Health Care
David Henderson
And so it begins. Today, one part of Obama's new health care law kicked in. It's a part that, if enforced literally, is likely to eliminate so-called "mini-med" insurance. As I wrote: But the reason the mini-meds are so affordable... MORE

Sole and Absolute Discretion

Microeconomics
Bryan Caplan
I've signed some bizarre contracts in my day.  When I bought my house, for example, the terms "sole and absolute discretion" frequently appeared in the builder's contract.  Taken literally, my contract basically said, "I give you a pile of money,... MORE

A Book I Wish Someone Else Had Written

Books: Reviews and Suggested Readings
Arnold Kling
The book is Intellectual Capital. Forty Years of the Nobel Prize in Economics, by Thomas Karier, and I was sent a review copy. It appears that the author culled through the economics Nobel web site to obtain material. There are... MORE

Alan Blinder Testifies

Macroeconomics
Arnold Kling
He says, the days of what I call the "Field of Dreams" strategy--build a bigger GDP, and the jobs will come--should be over. It's a sensible strategy in many contexts, but it has two serious drawbacks in the present situation.... MORE

I, Super-Senior CDO Tranche?

Finance: stocks, options, etc.
Arnold Kling
We know Leonard Read's famous "I, Pencil" essay, where he says that nobody knows how to make a pencil. Somehow, the market arranges it so that wood, graphite, dyes, cutting tools, and other inputs come together to make a pencil.... MORE

Rod Replies

Economic Philosophy
Bryan Caplan
Rod Long replies to my "Why I Am Not a Left-Libertarian":Bryan's response focuses on the ways in which free markets would solve the problems I point to if they were really problems. But the whole point of my position is... MORE

A NCPA study finds When adjusted using a more appropriate discount rate, however, states' unfunded obligations were 22 percent of U.S. GDP. All but 10 states and the District of Columbia have total adjusted unfunded liabilities above 15 percent of... MORE

David Friedman on Nuttiness

Economic Methods
David Henderson
David Friedman has an excellent post titled "What Should Count as Nutty?" It follows two of his earlier posts on Christine O'Donnell. A couple of excerpts: In trying to make sense of all this, I fall back on the observation... MORE

Daughter of Lucy

Macroeconomics
Arnold Kling
In August of 2003, I wrote about my preferred economic indicator, which I called a labor capacity utilization index, or LUCY. I want to update it. Back then, I used an index of aggregate hours worked, which I assume meant... MORE

Comments on Various Links

Politics and Economics
Arnold Kling
I think all of these come from Mark Thoma. 1. Robert Reich writes that fiscal and monetary policy will not get us out of the recession. So what's the answer? Reorganizing the economy to make sure the vast middle class... MORE

The College Fun Puzzle

Economics of Education
Bryan Caplan
Question: If college is so much more fun than getting a job, why are irresponsible, impulsive slackers less likely to start college and more likely to drop out?... MORE

When Did House Prices Get Out of Hand?

Finance: stocks, options, etc.
Arnold Kling
One of the talking points among those who deny that Freddie and Fannie played a large role in the housing bubble is that the agencies lost market share in 2003 and 2004, and that is when house prices took off.... MORE

Economists Signing Petitions

Energy, Environment, Resources
David Henderson
Dan Klein and David Hedengren have a piece at Cato on economists signing petitions. One of their basic findings is how little overlap there is between the group of economists who sign anti-freedom petitions and the group who sign pro-freedom... MORE

Opera and Education

Economics of Education
Bryan Caplan
When I argue that the social benefits of education are grossly overrated, one thought bothers me: Poorly-educated people bore me.  If education levels fell to efficient levels, the long-run effect would be a world with fewer people for me to... MORE

Same Topic, Same Week, Different Panelists

Upcoming Events
Arnold Kling
On Tuesday, September 28, the title of the conference is "The workforce of the future," the location is the Ronald Reagan Building, and the sponsor is the National Journal. The keynote speaker is supposed to be National Economic Council director... MORE

Education and Sibling Contrast

Economics of Education
Bryan Caplan
You probably know a family where some of the kids went to college and others didn't.  IQ aside, what are the crucial differences between the ones who went and the ones who didn't?... MORE

Two Links

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
1. File this story under "collapsing center watch." (Yesterday, I linked to my response to a NYT question about the state of the economy. In that response, I changed the subject in order to mention my view that the political... MORE

L-data and D-data

Macroeconomics
Arnold Kling
Nick Rowe writes, When we go into a recession, many things become easier to buy and harder to sell. And when we go into a boom, those same things become easier to sell and harder to buy. A recession has... MORE

Why I Am Not a Left-Libertarian

Microeconomics
Bryan Caplan
As a radical libertarian, pacifist, champion of open borders, and mortal enemy of Columbus, I seem like an easy convert to left-libertarianism.  Proponents like Sheldon Richman and Rod Long are smart and earnest people.  Their motives are pure.  Still, their... MORE

Did the Recession End 15 Months Ago?

Macroeconomics
Arnold Kling
The official committee of the National Bureau of Economic Research says, "Yes." The New York Times asked "Really?" Many bloggers answered "no." I was one of them. Employment declined by nearly one million workers in the four months after the... MORE

Not From the Onion

Taxation
David Henderson
UK Proposes All Paychecks Go to the State First Update at bottom. That's the headline on a CNBC story and these are the first two paragraphs: The UK's tax collection agency is putting forth a proposal that all employers send... MORE

Me on WGN, Chicago

Taxation
David Henderson
Last week, I was interviewed for 16 minutes by Mike McConnell on WGN, Chicago. He was a cut above in his understanding of the various economic issues. My test for whether it's working with the host is whether he invites... MORE

Boaz Teaches Virtue to Social Conservatives

Family Economics
Bryan Caplan
Cato's David Boaz tries to show social conservatives the path of virtue:Those are reasonable concerns, but they have little or no relationship to abortion or gay marriage. Abortion may be a moral crime, but it isn't the cause of high... MORE

Top Ten Economic Contractions?

Economic History
Arnold Kling
What are the ten most important episodes of economic contraction to study? Some obvious ones: 1. The Great Depression in the U.S. 2. The Great Depression in Europe 3. The Japanese slump of the 1990's and beyond 4. The oil... MORE

A Few Links

Labor Market
Arnold Kling
James Hamilton on the JOLTS data, which I have also been pushing. Caroline Baum on the Kling view of the job creation problem. Arthur Brooks on the Arthur Brooks controversy.... MORE

Terrible Turnaround

Economic Philosophy
Bryan Caplan
We often have ethical arguments about when it's morally permissible for us to do seemingly terrible things to them.  Examples:1. When is it morally permissible for us to deliberately drop a nuclear bomb on their civilians?2. When is it morally... MORE

Immigration and the Minimum Wage

Labor Market
Bryan Caplan
David Henderson's got two quibbles with my talk on immigration:First, [Bryan] says that if we didn't get rid of the minimum wage, legal immigrants would just get black-market jobs. That's true, but incomplete. Precisely because they would now be legal,... MORE

Markets for Everything, Including Bad Grammar

Economics and Culture
David Henderson
Gun Control is when you keep firearms plus guns away from people. Many people think that gun control is right because they think keeping people away from guns will reduce the amount of deaths each year. They also think that... MORE

Outline for a Talk

Politics and Economics
Arnold Kling
To be given next month, not open to the public, on the widely-unread Unchecked and Unbalanced. 1. We are in the midst of three crises--a financial crisis, a political crisis and a sovereign debt crisis. I will propose that they... MORE

Liberty and Me

Books: Reviews and Suggested Readings
Arnold Kling
Guinivere Liberty Nell and I discussed her book, Rediscovering Fire, at an event at Heritage last week. Here is the video. I start at about minute 26. Nell used a lot of cartoons in her talk, which may give the... MORE

Caplan On Immigration

Labor Mobility, Immigration, Outsourcing
David Henderson
I would say that Bryan Caplan hit a home run with his recent lecture on immigration, but that would be an understatement. Bryan was the Mr. October of economists. He laid out the arguments beautifully and in the right order,... MORE

Real Estate Time Bomb?

Property Rights
David Henderson
One more problem with securitization. This morning, Yves Smith over at Naked Capitalism has a sobering article about a not-very-well-known time bomb in real estate. Here's a relevant section: Given how many sales will be done out of REO, and... MORE

The Senile Walrasian

Economic Education
Bryan Caplan
When economists explain supply-and-demand, they often invoke the Walrasian auctioneer.  Imagine we all gather together at a massive auction house, with all eyes on the auctioneer in the front.  He calls out prices, and the attendees call out quantities.  When... MORE

Two Talks in St. Louis

Upcoming Events
David Henderson
On Thursday, September 23, I'll be giving two talks in St. Louis. The first is at the University of Missouri, St. Louis. It's in 411 Woods Hall and, including Q&A, goes from 2:00 p.m. to 3:30 p.m. Title: Seven Myths... MORE

My Hammer and Some Nails

Political Economy
Arnold Kling
My solution is competitive government. I do not think that wanting to live in Silver Spring Maryland should automatically subject me to the local school monopoly, the national pensions system monopoly, and so on. I would like to be able... MORE

Michael Mandel's Indicator, along a Margin

Economics of Education
Arnold Kling
Michael Mandel writes, college costs have kept rising, while the real earnings of young college grads have gone down since 2000. In particular, since the recession started in 2006, real tuitions and fees have skyrocketed, while real earnings have plummeted.... MORE

Immigration Restrictions: A Solution in Search of a Problem

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
The video and slides from this week's GMU Econ Society/FFF talk are up.  They're easier to follow if you watch them in tandem.P.S. FFF president Jacob Hornberger's review is enough to make me blush.... MORE

Gary Gorton's Latest

Finance: stocks, options, etc.
Arnold Kling
Gary B. Gorton and Andrew Metrick write, If the growth of shadow banking was facilitated by regulatory changes, then why not just reverse all these changes? Would such reversals bring us back to a safer system dominated by traditional banks?... MORE

In Pursuit of Empirical Macroeconomics

Macroeconomics
Arnold Kling
The following should not be construed as advice to graduate students. Let someone else try it first. 1. Forget the national income and product accounts. Pay no attention to the arbitrary classification of output as C,I,G, and NX. 2. Instead,... MORE

Colander on the Economics Profession

Economic Methods
Arnold Kling
A commenter points to a post from Pete Boettke a couple months ago, where he quotes testimony from David Colander. One would think that competition in ideas would lead to the stronger ideas winning out. Unfortunately, because the macroeconomy is... MORE

Since there's a lot of interest in my case against high-IQ misanthropy, here's a fuller discussion from Selfish Reasons to Have More Kids:You Don't Have to Raise the Average to Pull Your Weight        Eighty percent of success is showing... MORE

End the Penny

Money
David Henderson
Here's an entertaining criticism of the penny. In 2006, I supervised a thesis in which my student made the case for eliminating the penny. The author, Stephanie King, was at the time a Major in the U.S. Marine Corps. A... MORE

Free-Market Education Reform: Austerity vs. Choice

Economic Education
Bryan Caplan
In response to my defense of austerity over "constructive" free-market reforms, Adam Ozimek blogs:I find plausible his speculation that privatizing social security could lead to policies intended to prop up the stock market, like TARP x 100. However, I have... MORE

Phil Maymin on Glenn Beck

Politics and Economics
David Henderson
But Beck does not make a single case against immoral government behavior. In fact, he agrees with the principle. And this is the third, and biggest, problem that I have with him. He started and ended his show with the... MORE

We Don't Know

Business Economics
Arnold Kling
Russ Roberts discusses some survey data in which small businesses report that their biggest problem is lack of sales. Some economists have leaped on this as a decisive data point demonstrating that the problem in the economy is aggregate demand,... MORE

Tiananmen Square Hypothetical

Economic History
Bryan Caplan
Suppose the 1989 Tiananmen Square protests ended not in a bloodbath, but in the collapse of Chinese Communism and the establishment of multi-party democracy.  What would have happened to the Chinese economy between 1989 and today?  Would it have done... MORE

Data Bleg on Post-WWII Transition

Business Economics
David Henderson
I'm completing a study on how quickly the U.S. economy transitioned after WWII from a wartime economy with strong elements of central control to a relatively free-market economy. I've got all that. What I'm missing is stories such as, "The... MORE

A Rationally Optimistic Price?

Books: Reviews and Suggested Readings
Arnold Kling
A reader alerted me that the current Kindle-edition price of The Rational Optimist is zero. At that price, you simply must download it.... MORE

Self-Discrediting

Economic Methods
Arnold Kling
This study comes from the Economic Policy Institute. The study analyzes workers with similar human capital. It controls for education, experience, hours of work, organizational size, gender, race, ethnicity and disability and finds that, compared to workers in the private... MORE

We Need a Tea Party

Politics and Economics
Arnold Kling
Russ Roberts points to an interesting article on the decentralized organization of the tea party. I could not find much in Montgomery County, Maryland, where Russ and I live. Yesterday, I voted in our Democratic primary. I voted for any... MORE

Against High-IQ Misanthropy

Economic Philosophy
Bryan Caplan
Out of all the reactions I've heard to Selfish Reasons to Have More Kids, the most disturbing are all variations on "Except stupid people.  They shouldn't have kids."  I could snark, "You mean people like you?," but that would be... MORE

Northern Evangelicalism

Politics and Economics
Arnold Kling
The social fabric is fraying. Human capital is being squandered. Society is segmenting. The labor markets are ill. Wages are lagging. Inequality is increasing. The nation is overconsuming and underinnovating. China and India are surging. Not all of these... MORE

Highlights from The Rational Optimist

Growth: Consequences
Bryan Caplan
I finally got around to reading Matt Ridley's The Rational Optimist.  Highlights:1. Ehrlich's errors were worse than I realized:In March of that year India issued a postage stamp celebrating the wheat revolution.  That was the very same year the environmentalist... MORE

Klein, Laughter, and the Academy

Economics and Culture
Bryan Caplan
Dan Klein considers, then rejects, the analogy between male nurses and non-left professors:In their paper, Gross and Fosse are suggesting that men don't want to become nurses because people will giggle at that. Perhaps there is something to that. There... MORE

Are Social Security Commitments a Sunk Cost?

Social Security
David Henderson
In a word, No. In a comment on my post yesterday, Jim Glass writes: This $15 trillion transfer owed to pre-2010 participants is a sunk cost. He goes on to explain: Whether it was a good idea or bad one... MORE

David Warsh on Tyler Cowen

Economic Education
Arnold Kling
Warsh writes, Sometimes Cowen, 48, seems to have nothing but outside interests, as his readers know from Marginal Revolution Noting that Cowen directs the Mercatus Center, recently mentioned in the context of Jane Mayer's conspiratorial portrayal of the Koch brothers,... MORE

The Output Gap Story

Macroeconomics
Arnold Kling
Russ Roberts asks whether spending creates prosperity. has foreign aid spending created prosperity in those countries? Usually not. Or maybe never. The money gets spent and then it's over. The multiplier never materializes. And that's because these economies are broken.... MORE

The Dynamics of Creative Destruction

Macroeconomics
Arnold Kling
Dane Stangler and Paul Kedrosky write, When they come into existence, for example, startup firms create, on average, three millions jobs per year. Many of these jobs are lost and new ones are created, but employment at the moment of... MORE

The Cost of High Taxes

Fiscal Policy
Arnold Kling
Richard Rogerson writes, In 1960, hours of work were actually higher in Germany, France, and Belgium than they were in Canada, the United States, and Australia. That is, 50 years ago the relative work levels of these countries were reversed.... MORE

Social Security: The Privatization Shell Game

Fiscal Policy
David Henderson
Bryan posits a policy in 2005, had Bush succeeded beyond his wildest dreams, of privatizing Social Security. Bryan gives an argument against that. But there's a more basic argument that I made on a late 1990s talk show with Roger... MORE

Austerity for Liberty

Political Economy
Bryan Caplan
Suppose that in 2005, Bush managed to "privatize Social Security" to a politically astonishing degree.  Under the hypothetical legislation:1. Workers are free to divert 100% of their future payroll tax into private accounts.2. Workers are free to immediately ask for... MORE

Arthur Brooks of AEI

Politics and Economics
Arnold Kling
I went to a Cato annual picnic yesterday. Several of my Cato friends were not there. Brink Lindsey, obviously.* But there happened to be some no-shows among folks who I know that are still there. You know who you are... MORE

Amar Bhide (WSJ, subscription) makes a good case that it is just corporate welfare. Big companies with large R&D budgets, unsurprisingly, favor the proposal. But it's a bad idea. Tax credits for R&D don't encourage the broad-based innovation that is... MORE

The Era of Expert Failure

Central Planning vs. Local Knowledge
Arnold Kling
I also have a new essay for Cato. Ironically, whenever government experts fail, their instinctive reaction is to ask for more power and more resources. Instead, we need to step back and recognize that what we are seeing is not... MORE

Macroeconomic Costs of Credentialism

Macroeconomics
Arnold Kling
My latest essay: Entrepreneurs in healthcare and education face unusually strong barriers to entry. Both industries are credentials cartels. Licensing and accreditation are key requirements to compete in those fields, and incumbents are in control of the process. In addition,... MORE

Hummel on Government Military Pay Policy

Labor Market
David Henderson
Unlike in previous wars, Congress did not wait for World War II's termination to dispense generous social welfare to veterans. An American legion sponsored Serviceman's Readjustment Act, popularly known as the GI Bill of Rights, sailed through Congress in 1944,... MORE

My 2003 Bet

Politics and Economics
David Henderson
I mentioned on my post yesterday that I had made a bet in 2003 about an outcome in the MIddle East in 2008 and that I won my bet, although the other bettor didn't pay up. Interestingly, none of the... MORE

Unemployment Bet

Labor Market
David Henderson
Bryan is right to record bets. In 2003, at the Mont Pelerin Society meetings in Chattanooga, I made a bet about the Middle East for outcomes in 2008. I bet $1,000, her acknowledgement of it was in my computer in-box,... MORE

Pension Fact of the Day

Social Security
Bryan Caplan
I took three reads to get Robin's point, but it's profound:While the ratio of folks over 65 to younger adults (OADR) will almost double in 45 years, the ratio of disabled to healthy adults (ADDR) will hardly change at all.In other... MORE

Education: First Cut, Then Improve

Economics of Education
Bryan Caplan
Education can be improved; I don't deny it.  For example, I think vocationally-oriented German high school is clearly more efficient than the goofy American approach.  My first choice is a free market in education; but if government insists on subsidies,... MORE

Taking Up Bryan's Challenge

Economics of Education
David Henderson
I have never let my schooling interfere with my education. The above is a famous quote from Mark Twain and it relates to the challenge Bryan posed about whether there any countries in which there is too little education. I... MORE

My Complete Bet Inventory

Economic Methods
Bryan Caplan
University of Chicago student Brian McDonald has graciously inventoried all my outstanding bets, including a couple I'd forgotten about.  His complete list:Bryan Caplan's bets in order of closing date: 1. "I've bet my $200 to Walter's $1 that Ron Paul... MORE

The other day, Tyler Cowen challenged me to name any country that I consider under-educated.  None came to mind.  While there may be a country on earth where government doesn't on net subsidize education, I don't know of any.On the... MORE

Martin Wolf on Freedom of the Press

Regulation
David Henderson
[Libertarianism] is hopeless intellectually, because the values people hold are many and divergent and some of these values do not merely allow, but demand, government protection of weak, vulnerable or unfortunate people. Moreover, such values are not "wrong". The reality... MORE

I Can Only Sputter

Politics and Economics
Arnold Kling
WSJ Real Time Economics reports, Republicans have held up Mr. Diamond's confirmation because he is not an authority on monetary policy. Peter Diamond is well qualified to be a Fed Governor. In my opinion, those who oppose him need to... MORE

Money, Inflation and Debt

Fiscal Policy
Arnold Kling
An excellent podcast, featuring Jeffrey Rogers Hummel. He argues that there is not enough tax revenue available from seignorage for governments to inflate their way out of their debts. Because of financial innovation and money substitutes, it would take hyperinflation... MORE

The Future of Finance

Books: Reviews and Suggested Readings
Arnold Kling
That is the title of a new book that resulted from this symposium sponsored by the London School of Economics. Chapters can be downloaded individually here. They do not add up to a coherent whole, and some appeal to me... MORE

Morning Reading

Economic Education
Arnold Kling
Ed Pinto writes, Here's my proposal to bring Congress's penchant for imprudent lending to a quick end: All congressional pension assets should be invested in funds backed solely by the high- risk loans mandated by federal housing legislation. I have... MORE

Rothbard on Communism: Something Sensible

Economic History
Bryan Caplan
As a rule, I find Rothbard's take on the history of Marxism-Leninism to be misguided, if not absurd.  But these paragraphs from Rothbard's 102-page critique of a now-forgotten American history textbook are excellent:This is all he says of the nature... MORE

The Role of the State: Who Decides?

Political Economy
Arnold Kling
Martin Wolf writes, [Libertarianism] is hopeless intellectually, because the values people hold are many and divergent and some of these values do not merely allow, but demand, government protection of weak, vulnerable or unfortunate people. Moreover, such values are not... MORE

Germany's Economic "Miracle"

Growth: Causal Factors
David Henderson
Larry White has a good op/ed in tomorrow's Wall Street Journal on Germany's post-World-War-II economic miracle. He attributes this correctly to Ludwig Erhard's abolition of Hitler's price controls that the Allies had continued to enforce after the war ended. He... MORE

I just emailed the final version of Selfish Reasons to Have More Kids to Basic Books.  Without Normal 0 MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times... MORE

Unintended, but Totally Predictable, Consequences

Economics of Health Care
David Henderson
Even though this action was a totally predictable response to the incentives we set up, it's unwarranted and unnecessary. Last April, I posted on how the health care law passed by Congress would likely cause some insurance companies to drop... MORE

Buying a House With 20/20 Hindsight

Finance: stocks, options, etc.
Bryan Caplan
Knowing what you now know, suppose that you could pick one year between 1987 and 2010 to buy a house in the U.S.  The catch: It's a one-time deal, and you have to hold the house until 2010.  When you're... MORE

For Ye Have Signaling Always With You

Information Goods, Intellectual Property
Bryan Caplan
Many economists assume that market forces will somehow figure out a way to make signaling costs disappear.  But as far as I can tell, they never explain why signaling costs would be easier to eliminate than any other costs.  And... MORE

My Reply to Bill - Digest Version

Economics of Education
Bryan Caplan
While writing my final reply to Bill Dickens, I often wished I were writing six short posts instead of one long one.  My favorite could-have-been free-standing points (Bill's in quotes, I'm not):1. Policy implications.Further, you must believe that there is... MORE

Jay Heflin writes, An August report by the Kellogg Graduate School of Management at Northwestern University found government pension programs in as many as 31 states are headed for financial disaster by 2030 and that taxpayers will likely wind up... MORE

More Gangs, Less Crime

Public Goods
David Henderson
Our analysis suggests not that gangs cause violence, but that violence causes gangs. In other words, gangs form in response to government's failure to protect youths against violence. The surprising implication of our insight is that efforts to reduce gang... MORE

What I'm Reading: 2

Books: Reviews and Suggested Readings
Arnold Kling
Teach Like a Champion, by Doug Lemov. As a teacher, I find it helpful. However, with apologies to James C. Scott the book could have been entitled "Seeing like a teacher." An excerpt: the "plane" of your classroom is the... MORE

What I'm Reading: 1

Books: Reviews and Suggested Readings
Arnold Kling
Boomergeddon, by James A. Bacon. He sent me a copy after he saw my piece on guessing the trigger point for a sovereign debt crisis. Years ago, I read Boomernomics by William Sterling. That book also raised the issue of... MORE

Knowledge-Power Discrepancy

Central Planning vs. Local Knowledge
Arnold Kling
I discuss knowledge and power with Russ Roberts. The central theme of Unchecked and Unbalanced is that we live an a world with increasingly important dispersed knowledge and yet in a structural sense power is becoming more complicated. The result,... MORE

The Medicare Fraud in Our Future

Economics of Crime
David Henderson
In tonight's 60 Minutes episode, the lead item was on the huge amount of Medicare fraud that takes place. Scam artists get lists of patients, lists of expensive items they can bill to Medicare, and a bank account. Then they... MORE

Education and Signaling: Rejoinder to Bill Dickens

Economics of Education
Bryan Caplan
Today I'm celebrating Labor Day by continuing my exchange with Bill Dickens on the signaling model of education.  (Previous rounds here, here, and here).  What's the Labor Day connection?  Simple: If I'm right, we'd be collectively better off if we... MORE

Government in the Mortgage Business

Finance: stocks, options, etc.
Arnold Kling
The New York Times reports, "This is subprime lending done right," said John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for 600 community organizations, and a staunch critic of the lending industry. He is talking about... MORE

Stop Calling it the Retirement Age

Social Security
Arnold Kling
Ezra Klein writes, there is one thing that both parties increasingly seem to agree on: You should work longer. Klein's thinking is that people do not want to work longer, so raising the Social Security "retirement age" is a bad... MORE

Should I Take to Drink? The Latest Evidence

Economics of Health Care
Bryan Caplan
The last time I asked "Should I take to drink?," the best evidence seemed to say "Don't bother."  Now Hanson and Crampton say the totality of the evidence is indeed in favor of moderate drinking, confounds notwithstanding.  Hmm.... MORE

Tax Rates, 1990 to Now

Taxation
David Henderson
In a comment on my post, "From the Vault: My Review of Krugman," commenter David C writes: I'd like to point out that on taxes at least, Krugman's position hasn't changed from 1990. He still thinks the tax rates we... MORE

WSJ Survey Biases the Options

Taxation
David Henderson
Greg Mankiw posts about how some economists responded to a Wall Street Journal poll about whether the Bush tax cuts should be extended. According to Greg: 6 percent said no, all the tax cuts should be allowed to expire, 24... MORE

Mandatory Bad Customer Service

Economics of Health Care
Arnold Kling
Uwe E. Reinhart writes, The recently passed Affordable Care Act requires heath insurance issuers to use at least some minimum fraction of revenue from the premiums it receives on medical services. While the idea might sound straightforward, this fraction, known... MORE

Good News about the Oil Spill

Energy, Environment, Resources
David Henderson
Terry Hazen, a microbial ecologist at the Lawrence Berkeley National Laboratory who published a groundbreaking study of microbial activity Tuesday in the online research journal Science Express, has had a team of researchers out in the Gulf since May 25... MORE

Payroll Tax Holiday and the Trust Funds

Social Security
Arnold Kling
Megan McArdle writes, Politically, this has one major drawback: it's going to put huge holes in the Social Security and Medicare trust funds. Since I think those trust funds are meaningless accounting devices, I don't think this has any practical... MORE

Immigrants and American Culture

Economics and Culture
Bryan Caplan
While preparing for my upcoming talk on immigration, I decided to flesh out my claim that states with lots of immigrants are cultural beacons, and states with few immigrants are boring cultural wastelands.  It's even more true than I thought. ... MORE

Mortgage Credit and the Housing Bubble

Finance: stocks, options, etc.
Arnold Kling
Adam J. Levitin and Susan M. Wachter write, the bubble was a supply-side phenomenon, attributable to an excess of mispriced mortgage finance: mortgage finance spreads declined and volume increased, even as risk increased, a confluence attributable only to an oversupply... MORE

Technocratic Fundamentalism

Finance: stocks, options, etc.
Arnold Kling
Barry Eichengreen writes, Those root causes were an ideology of market fundamentalism and the policies flowing from it. The idea that markets get it right and governments only get in the way, what I refer to here as market fundamentalism,... MORE

Bond Bubble Watch

Cross-country Comparisons
Arnold Kling
Jonathan D. Ostry, Atish R. Ghosh, Jun I. Kim, and Mahvash S. Qureshi write, at 5 percent of GDP below the debt limit, the government should be able to borrow at the risk-free rate; but as debt rises by a... MORE

From the Vault: My Review of Krugman

Books: Reviews and Suggested Readings
David Henderson
I was web searching this morning in the Fortune archives--I wrote a lot of articles and books reviews for Fortune between 1983 and the late 1990s--and I came across my December 31, 1990 review of Paul Krugman's 1990 book, The... MORE

Selfish/Self-Interested

Economic Philosophy
Bryan Caplan
Agree or disagree: "Selfish" is to "self-interested" as "cheap" is to "thrifty."Please explain your answer.... MORE

If I Taught Greg Mankiw's Seminar

Books: Reviews and Suggested Readings
Arnold Kling
His list of books for a freshman seminar in economics includes a diverse selection, including Bryan's Myth of the Rational Voter, which is the only one that I would duplicate. Offhand, I would pick 1. Jerry Muller, The Mind and... MORE

Unchecked and Unbalanced Watch

Public Goods
Arnold Kling
Pete Peterson writes, the Los Angeles City Council is expected to overturn the 36-year-old policy of city-funded sidewalk repair, returning responsibility to property owners. The city is attempting to narrow a nearly half-billion-dollar budget gap. The sidewalk repair program costs... MORE

Is the Taylor Rule Really a Rule?

Monetary Policy
Arnold Kling
John Taylor writes, The Taylor rule says that the federal funds rate should equal 1.5 times the inflation rate plus .5 times the GDP gap plus 1. Currently the inflation rate is about 1.5 percent and the GDP gap is... MORE

Lawrence Lindsey Vs. Christy Romer

Macroeconomics
Arnold Kling
She says, by June, before the Recovery Act could have had much of an impact, it was 9½ percent. That is, our projection turned out to be wrong even before the Recovery Act had a chance to get off the... MORE

Oil Bubble Talk is Back

Energy, Environment, Resources
Arnold Kling
CNBC quotes Peter Beutel, I honestly think that if there were no investors using oil as an asset that the price of oil right now would be $10 or $15 or $18, but it wouldn't be anywhere near where it... MORE

Thomas Sargent, Master Macroeconomist

Economic Methods
Arnold Kling
In an interview, he says, the more dynamic, uncertain and ambiguous is the economic environment that you seek to model, the more you are going to have to roll up your sleeves, and learn and use some math. Pointer from... MORE

David Friedman on Eggs and Quality

Information Goods, Intellectual Property
David Henderson
I had missed David Friedman's post last week on eggs and quality. The whole thing is worth reading. He points out that even though the British government doesn't require vaccination of hens against salmonella, 90 percent of egg producers have... MORE

I've grown slightly anxious about my bet with John Quiggin on European unemployment.  But Sumner's a great therapist:An optimist like me would argue that we aren't about to copy the French statist model; dramatically higher minimum wages, generous UI benefits,... MORE

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