Bryan Caplan and David Henderson

March 2011

A Monthly Archive (115 entries)

Tune In

Upcoming Events
Arnold Kling
Bryan and I will be among the speakers. But others should be at least as interesting. On Friday, April 1, the Kauffman Foundation will host the third annual Economics Bloggers Forum. The Forum brings together select economics, finance, and technology... MORE

An Urgent Defense of Optimism

Behavioral Economics and Rationality
Bryan Caplan
At the most general level, Tyler's recent posts on what he calls the "Fallacy of Mood Affiliation" are excellent.  Except... I know from lunch that he sees me as a great example of the Fallacy.  When he speaks of...People who... MORE

Progressive Nudges for Household Savings

Behavioral Economics and Rationality
Arnold Kling
If I were a card-carrying progressive, I would not stoop to being a lapdog for Wall Street and the real estate industry, playing the violin for "affordable housing" and low-down-payment mortgages. True, if somebody buys a house with little money... MORE

Heritabilities Are Meaningful and Important

Family Economics
Bryan Caplan
The punchline of most twin and adoption studies is an estimate of 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 New Roman";} a trait's "heritability." ... MORE

The New Leisure

Labor Market
Arnold Kling
According to Gallup, American workers who are emotionally disconnected from their work and workplace -- known as "actively disengaged" workers -- rate their lives more poorly than do those who are unemployed. Forty-two percent of actively disengaged workers are thriving... MORE

What I'm Reading

Books: Reviews and Suggested Readings
Arnold Kling
I've only started The Blind Spot, by William Byers. It is a book on science in our culture. From the preface, p. ix: I emphasize that I am not condemning science and technology as a whole, nor am I ignorant... MORE

Michael Mandel Strikes Again

Macroeconomics
Arnold Kling
Is he now this country's most important macroeconomist? Here, he writes, in many of these industries, we actually have physical measures- tons of steel, barrels of oil, bushels of corn-that gives us a check on the BEA numbers (The one... MORE

It's Gambling, and it's Wrong

Finance: stocks, options, etc.
Arnold Kling
With those words, I believe I shifted the debate at yesterday's hearing. I was referring to buying a home with a low down payment. The example I used was a $200,000 home with $5000 down. I received a lot of... MORE

The Value of Sports

Economics and Culture
David Henderson
Commenting on my post on sports, my friend John Goodman said that he was surprised that I am so into sports. People who knew me before I was about 32 are surprised too, one of the main ones being my... MORE

Are High Food Prices Due to the Fed?

Monetary Policy
David Henderson
On Judge Napolitano's "Freedom Watch" on March 25, Austrian economist Bob Murphy claimed that the unrest in the Middle East was due to rising food prices which in turn are due to the Fed printing money. I'm not sure about... MORE

Moral Risk-Aversion and the Deserving Poor

Economic Philosophy
Bryan Caplan
Another passage by Matt Zwolinski on poverty and desert that keeps coming back to me:[A]ny measures we take to diminish the likelihood of false positives - people getting welfare who don't deserve it - will probably increase the likelihood of... MORE

I Thought I was Being Civil

Finance: stocks, options, etc.
Arnold Kling
Strongly worded, perhaps, but civil. You can decide. I find that the video takes a long time to load. My prepared remarks begin around 25 minutes in. Right after I finish, the Committee Chairman mentions this blog. The Q&A starts... MORE

Rojas on Selfish Reasons to Have More Kids

Books: Reviews and Suggested Readings
Bryan Caplan
Fabio Rojas, sociology professor at Indiana University and my best friend from UC Berkeley, reviews my new book at Orgtheory.  His more than fair intro:Though this book is written by an economist, it's not another cute-o-nomics pop text. It's a... MORE

NCAA Outcomes: Margins and Randomness

Statistical theory and methods
David Henderson
The outcomes so far in the NCAA men's basketball games have surprised most people. The biggest surprise is Virginia Commonwealth University (VCU) beating the mighty Kansas, President Obama's choice to win the whole thing. VCU's wins are surprising. But it,... MORE

King Khan

Economics of Education
David Henderson
I second Arnold's recommendation of the Khan video. Some highlights: 4:47: These videos help even an autistic kid. Wow! 5:10: "Here I was, an analyst at a hedge fund; it was very strange for me to do something of social... MORE

Video of the Day

Economics of Education
Arnold Kling
Khan of the Khan Academy. If Tyler Cowen still believes in stagnation after watching this video, then he has no soul.... MORE

The Economy in Transition

Growth: Consequences
Arnold Kling
Michael Spence and Sandile Hlatshwayo write, For the tradable sector as a whole, value added per job rose substantially, an increase of 44 percent from 1990 to 2008, far above the increase of 21 percent in the economy as a... MORE

Cowen on Moral Intuitionism

Economic Philosophy
Bryan Caplan
Tyler Cowen writes:I am a moral realist and intuitionist, as is Bryan, but my view on applications is very different.[...]...Bryan wants to "coin" a large number of (non-trivial) moral truths this way, such as his claim that taxation is morally... MORE

Hanson's Pragmatic Pacifism

Cost-benefit Analysis
Bryan Caplan
I just discovered that I could conceivably co-author Pragmatic Pacifism with Robin Hanson.  Robin:War is bad. Defending against war, that can be justified. But starting a war, well that is presumably very bad. Not that starting a war could never... MORE

The Greatest American Hero

Books: Reviews and Suggested Readings
David Henderson
I wrote this one evening in the fall of 1981 after watching an episode of "The Greatest American Hero" in which the key character interacts with the Lone Ranger. I had known nothing ab0ut the show but I was suddenly... MORE

My Schedule

Upcoming Events
Arnold Kling
I have to put together two presentations in a hurry. One is for this Senate Banking Committee hearing on proposals for housing finance. Actually, I probably will just speak extemporaneously to attack the other witnesses' proposals, and just hope that... MORE

In Search of the Deserving Poor

Economic Philosophy
Bryan Caplan
While vacationing in Italy, I kept thinking about philosopher Matt Zwolinski's thoughts on the deserving and undeserving poor:[T]he mere fact that there is a valid moral distinction to be made does not entail that we want our public policies to... MORE

Key Data for 2009

Macroeconomics
Arnold Kling
First, we learned that business start-ups declined sharply. Now, we learn that job creation was sluggish. I would recommend trying to understand why these phenomena occurred, rather than relying on preconceptions. I think that there is some real work to... MORE

The Cost of War

Upcoming Events
David Henderson
Tomorrow, Friday, March 25, I'll be giving at a talk at California State University, Monterey Bay, titled "The Cost of War." It goes from 10:00 to noon and is open to the public. Here's the announcement and here are the... MORE

Absurdist Passages of the Year

Behavioral Economics and Rationality
Bryan Caplan
How many of you don't find the following passage from the NYT utterly bizarre?Admiral Hueber also said that the coalition was communicating with rebel forces. But later, when he was pressed on whether the United States was telling rebels not... MORE

Economic Advice

Fiscal Policy
Arnold Kling
An open letter signed by Martin N. Baily Martin S. Feldstein R. Glenn Hubbard Edward P. Lazear N. Gregory Mankiw Christina D. Romer Harvey S. Rosen Charles L. Schultze Laura D. Tyson Murray L. Weidenbaum All ten are former chairs... MORE

Quiggin's Zombie

Books: Reviews and Suggested Readings
David Henderson
It is disappointing that there is one zombie idea that Quiggin does not bury and still buys into: the idea that a government with a lot of coercive power over people's lives can be trusted to use that power for... MORE

My AEA Speech for Ed Clark, 1980

Political Economy
David Henderson
Here is the speech I referred to in my previous post. I would like to thank Leonard Silk for his fundamental decency and sense of fair play in letting me appear here today. I come before you to speak on... MORE

Will I Lose My TARP Bet?

Economic Methods
Bryan Caplan
Back in 2008, I made the following bet:If the Director of the OMB's 2013 report says that a shortfall exists, I win.  Otherwise, I lose.  The stakes: I will make up to five $100 bets at even odds.Now it seems... MORE

My AEA Speech on the Presidential Panel, 1980

Political Economy
David Henderson
In 1980, the American Economics Association had its annual meeting in Denver in early September. When I arrived and paid my dues, I noticed that the program had a session planned for the first day titled, "Presidential Candidates' Economic and... MORE

The Love Potion of Socialized Medicine

Economics of Health Care
Bryan Caplan
During my flight to Italy, I read Barbara Demick's outstanding Nothing to Envy: Ordinary Lives in North Korea cover to cover.  Even if you've studied Communism for decades, you'll be appalled: In the 90s, North Korea basically moved from total... MORE

BPEA on line

Books: Reviews and Suggested Readings
Arnold Kling
You can now access the current issue and complete archive of Brookings Papers on Economic Activity. Many classic papers in applied macro are hence made available. Thanks to Ted Gayer for an email pointer, and thanks to Brookings for undertaking... MORE

A Quick Case for Charter Cities: Memo to the Gates Foundation

Cross-country Comparisons
Bryan Caplan
The Bill and Melinda Gates Foundation has an interesting accountability mechanism.  After they make a major funding decision, they solicit pro and con memos on "roads not taken" - other ways they could have spent their money.  Since the Gates... MORE

The Recalculation Story, Brad DeLong Version

Macroeconomics
Arnold Kling
He writes, After the most recent downturn, however--and to a lesser extent after its two predecessors--things have been different. The downturn was not caused by a liquidity squeeze. The Federal Reserve cannot wave is wand and return asset prices to... MORE

The Best Charities

Income Distribution
David Henderson
I received the following from a regular reader of this blog, an economics professor who was one of my best teachers when I studied economics for a year at the University of Western Ontario: Hi David, I have enjoyed your... MORE

Three Thoughts on Italy

Cross-country Comparisons
Bryan Caplan
1. After ten more days of observation, I've grown a lot more optimistic about Italian living standards.  Now I'd say that GDP per capita is overstated by 25% rather than 100%.  If I'm right about this, Italy is a powerful... MORE

John Goodman on Inequality and Lotteries

Income Distribution
David Henderson
I can't think of anything in the private sector that even begins to compare to this reverse Robin Hood redistribution from the poor to the rich and the nouveau riche. And remember, in order to pull it off, government first... MORE

Some History of Deposit Insurance

Finance: stocks, options, etc.
Arnold Kling
Arpit Gupta writes, federal insurance had the benefit of further entrenching the power of small banks, which would otherwise be a competitive disadvantage relative to their larger banking peers. We adopted the FDIC not as a part of a well-thought... MORE

How to Help Poor People in Poor Countries, Part 2

Income Distribution
David Henderson
I was gratified by the response--in quantity and quality--to my post yesterday, "How to Help Poor People in Poor Countries, Part 2." I promised to say what my colleagues wrote in response to my question. Before doing so, I'll point... MORE

How to Help Poor People in Poor Countries, Part 1

Income Distribution
David Henderson
About 40 to 60 percent of the economists around my campus--the Naval Postgraduate School--get together for a brown-bag lunch around a table once a month and just talk about whatever is on our minds. We're an eclectic bunch. There are... MORE

Kling wrote, the textbook definition of a liquidity trap is an infinite elasticity of the demand for money. The central bank can expand the money supply to an unlimited degree, without affecting interest rates, output, or prices. Paul Krugman #1... MORE

Asymmetric Loss Functions

Cost-benefit Analysis
David Henderson
One of the most important things I learned from my Economics professors at UCLA was at a cocktail party at the late Sherwin Rosen's place in Rochester, New York. Labor economist Finis Welch was visiting from UCLA and I had... MORE

Some Data to Ponder

Growth: Consequences
Arnold Kling
Michael Mandel writes, We can see that public/quasi-public employment rose steadily over the past ten years, and is now up 16%. By comparison, the rest of the private sector is down 8% in jobs over the past 10 years. He... MORE

Discussions of government spending are carried on as if there's a clearcut difference between "discretionary spending" on the one hand and "mandatory" or "entitlement" spending on the other. What do the words mean? Discretionary spending is spending that politicians have... MORE

Crowding Out: A New Subject

Macroeconomics
Arnold Kling
Menzie Chinn writes, It appears to me that real interest rates were undeniably higher during the Reagan administration than during, say, the past four quarters of the Obama administration I see that we have managed to change the topic from... MORE

A Review of the Widely Unread

Books: Reviews and Suggested Readings
Arnold Kling
In the latest issue of The Independent Review, Stan Leibowitz reviews Unchecked and Unbalanced. I suppose that the right response from me should be "Thank you for taking the time and trouble to review my book" rather than quibble with... MORE

Liquidity Traps and Unicorns

Macroeconomics
Arnold Kling
The difference being that you might one day see a unicorn. A liquidity trap requires 1. Low nominal interest rates. (The nominal interest rate is the interest rate as stated.) 2. High real interest rates, due to low or negative... MORE

Kinsley on Budget Cutting

Fiscal Policy
David Henderson
Zinni's article [on why it's absolutely necessary to keep government funding of the U.S. Institute of Peace] is a good example of a genre of literature we'll be seeing a lot of as the president and Congress grapple with the... MORE

Critical Thinking on the Holocaust

Economic Philosophy
David Henderson
Since students actually know so little, I must explain the differences between Holocaust deniers, Holocaust minimizers, and Hitler rehabilitationists. I must explain propaganda and euphemism and anti-Zionism. I must acquaint them with fascism, eugenics, Romantic struggle and surrender, Einsatzgruppen and... MORE

Morning Crankiness, Nobel Laureates Edition

Macroeconomics
Arnold Kling
I am a bit "off" this morning. Ordinarily, my philosophy is "catch them doing something right." If you try to correct people when they do something wrong, they just take offense, and you accomplish nothing. But, nonetheless: Nobel Laureate Paul... MORE

Matt Holzmann writes, Silicon foundries and specialty materials factories were destroyed or damaged with no real chance yet to determine the extent of that damage. But it is certain there will be severe shortages of a number of critical materials.... MORE

The Political Economy of Spending Caps

Economics of Health Care
Arnold Kling
John Goodman writes, On paper, ObamaCare cut Medicare's unfunded liability in half the minute Barack Obama signed the health reform bill. (A reduction of more than $53 trillion -- looking indefinitely into the future!) Going forward, Medicare will grow no... MORE

Asset Price Swings, Revisited

Finance: stocks, options, etc.
Arnold Kling
Since writing on Frydman and Goldberg, I have had some email correspondence with one of the authors. I think I should do more to say where I agree with the authors. 1. I think that the rational expectations hypothesis in... MORE

A Whiff of Liberaltarianism from the Left

Politics and Economics
Arnold Kling
Elaine Kamarck writes, in the spirit of a new progressive incrementalism, here are three battles that progressives should fight in the next Congress to put our fiscal and economic house in order: create jobs by cutting the payroll tax and... MORE

Your Taxes at Work

Taxation
David Henderson
From Third Way comes this clever exercise in numeracy: seeing how important various parts of the federal budget are by translating it into what you pay in taxes for each part. So you plug in all the taxes you pay,... MORE

Regional Disasters: AS/AD vs. PSST

Macroeconomics
Arnold Kling
Suppose that a natural disaster occurs in one region. How does this affect the rest of the world? In the aggregate supply and demand paradigm, it would seem that the rest of the world benefits from stronger net exports. In... MORE

In a comment on my post, Minimum Wage: The Missing Explanation, Tom West writes: I'm not certain it's necessarily a net loss for the USA to have actually had labor laws and unionization that led to a middle class large... MORE

Health Care Prior to Stagnation

Economics of Health Care
Arnold Kling
An article by D. Eric Schansberg on the topic of "Envisioning a Free Market in Health Care" has an interesting table showing for various time periods the rate of "excess cost growth" in health care, meaning the differential between the... MORE

Should Caesar Have Been Killed?

Public Choice Theory
David Henderson
Is this a day to celebrate or to mourn the death of Julius Caesar? That's the question for the Ides of March. Here's what Wikipedia says about his policies: When the triumph was over, Caesar set forth to passing an... MORE

Exit, Voice, and Borders

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Nicolas Maloberti writes, since they relax the constraints faced by governments, immigration barriers should be seen as a major contributor in creating the conditions for the perpetuation of the sort of political arrangements that classical liberals resist. If individual sovereignty... MORE

The Problem with (Some) Experimental Economics

Behavioral Economics and Rationality
David Henderson
On Facebook today, a friend posed the following question that he had heard in a sermon: Would you rather have $100K for your own use OR $1M to be given away (anonymously to a good cause with whom you have... MORE

Summarizing an IMF conference, Olivier Blanchard lists nine points. I will make extended comments below the fold. Here is a crucial sentence: Monetary policy has to go beyond inflation stability, adding output and financial stability to the list of targets,... MORE

Central Planning in Health Care

Central Planning vs. Local Knowledge
David Henderson
President Obama has repeatedly given us his vision of how to lower the cost of health care and raise its quality: Find out what works; then get everyone else to copy it. Toward that end, the administration is making millions... MORE

Gene Smiley on the Great Depression

Macroeconomics
David Henderson
One of the commenters, mark, on Arnold's post today on the Great Depression noted that Gene Smiley has a book out on it. The book is excellent. I asked Gene to put in a few thousand words the highlights of... MORE

Deposit Insurance Revisionism

Finance: stocks, options, etc.
Arnold Kling
This post is based on discussions with George Selgin and correspondence with William Melick. Melick sent a copy of a paper he wrote with Randall Kroszner, called "Lessons from the U.S. Experience with Deposit Insurance," in which they write, the... MORE

History and the Great Depression

Economic History
Arnold Kling
Over the weekend, I was at a seminar that I organized on the historical narrative of the Great Depression. Below the fold, I will summarize some things that came out of it. For me, the most interesting insights concern how... MORE

Minimum Wage: The Missing Explanation

Labor Market
David Henderson
LET THEM WORK In essence, we have seen the rise of a large class of "zero marginal product workers," to coin a term. Their productivity may not be literally zero, but it is lower than the cost of training, employing,... MORE

Power Corrupts

Public Choice Theory
David Henderson
"Power tends to corrupt: absolute power corrupts absolutely." This quote is, of course, from Lord Acton. Today, Megan McArdle has laid out beautifully how it corrupts. This is my favorite McArdle post in a long time. She starts with a... MORE

The purpose of this exercise is to test my understanding of Sumner's view of monetary theory and policy. I will do this by putting words in the mouths of Sumner and Taylor. It will be a long post, so it... MORE

Card and Krueger on Minimum Wage

Labor Market
David Henderson
'How,' ask Card and Krueger early in the book, 'can the general public, most governments, and many other social scientists disagree with the negative view of the minimum wage that is so widely held by economists?' (p. 7). The reader... MORE

Hummel on Fed Accounting

Monetary Policy
David Henderson
Jeff Hummel has posted a careful analysis of the Federal Reserve's recent change in accounting rules. His bottom line is that basically the change is no big deal. Although Jeff makes the case very carefully, as is his wont, it... MORE

Tyler Cowen Explains the "Flash Crash"

Behavioral Economics and Rationality
Arnold Kling
He writes, computers still are not meta-rational. They do not understand what they do not understand very well But could one argue that Watson is Meta-rational, in that it assigns a probability to having the correct answer? Perhaps this feature... MORE

Disaster and Recovery

Property Rights
David Henderson
As a specific instance, the fire-bomb raids on Hamburg in July and August 1943 were highly intense community-wide disasters. As normally occurs in such situations, people proved tougher than structures. The raids destroyed about 50 percent of the buildings in... MORE

Nominate a Book

Books: Reviews and Suggested Readings
Arnold Kling
for the Hayek Prize for a book written in the past two years. Hint: From Poverty to Prosperity is eligible. So is The Rational Optimist. I was going to nominateThe Price of Everything, but it seems to have a 2008... MORE

Callous Reflections

Economic Philosophy
Bryan Caplan
Like Jason Brennan, I think that truly "callous" libertarians are few and far between.  But I keep thinking about reasons for the misperception.  I already mentioned two.  Libertarians are relatively unafraid to...1. Make a distinction between the deserving and the... MORE

The Sarajevo of the Cato Institute?

Economic Philosophy
David Henderson
David Gordon makes a category error. The other factor was more fundamental; we have discussed it already but now Rothbard elaborated on it in more detail. Crane and Koch, in a quest for political power, wished to compromise with libertarian... MORE

Deposit Insurance

Finance: stocks, options, etc.
Arnold Kling
What is the state of the art in understanding deposit insurance? I am interested in survey articles that cover thinking in the last twenty years or so. Suppose we start with a distinction between a solvency problem and a liquidity... MORE

Failings of Left-Wing and Market-Oriented Economists

Economic Philosophy
David Henderson
Tyler Cowen (here and here) and co-blogger Arnold Kling have commented on what they see as the main failings of left-wing and market-oriented economists. I agree with much of what Arnold said and some of what Tyler said: my disagreements... MORE

No Prayer, Sorry

Public Choice Theory
Arnold Kling
Bryan Caplan says that maybe liberals and libertarians can agree that farm subsidies are bad. However, I am not impressed by this. Liberals have no problem reducing government support for groups they dislike, such as "corporate farmers." But they still... MORE

Economists' Ideological Blind Spots

Economic Methods
Arnold Kling
Tyler Cowen makes up long lists of the blind spots of left-leaning economists and right-leaning economists. If I were asked this question, I would boil my answers down to one suggestion for each. What I think left-leaning economists should do... MORE

Roman Frydman and Michael D. Goldberg

Books: Reviews and Suggested Readings
Arnold Kling
The book is Beyond Mechanical Markets: Asset Price Swings, Risk, and the Role of the State, and I have written an essay about it. Frydman and Goldberg say that the existence of asset price swings contradicts previous theories of financial... MORE

Maybe Liberaltarianism Has a Prayer After All

Economic Philosophy
Bryan Caplan
Ezra Klein sounds like my clone when arguing with the Secretary of Agriculture.  Highlight:EK: You keep saying that rural Americans are good and decent people, that they work hard and participate in their communities. But no one is questioning that.... MORE

Jason Brennan, my favorite philosopher of democracy, ponders the "case of the missing callous libertarians" at Bleeding Heart Libertarians: If you only read academic philosophy discussing orthodox right libertarianism, you might expect that libertarians are callous and indifferent to poverty...If... MORE

Vincent Reinhart on Bear Stearns

Finance: stocks, options, etc.
Arnold Kling
He writes, the form of the Bear Stearns resolution actually invited another form of speculative attack. The official playbook appeared to protect creditors fully and to wipe out shareholders. This expectation made it profitable to identify the next financial firm... MORE

Tort Reform, Grassroots Style

Regulation
David Henderson
Citing America's Declaration of Independence and the Maine Constitution, the ordinance proposed that "Sedgwick citizens possess the right to produce, process, sell, purchase, and consume local foods of their choosing." These would include raw milk and other dairy products and... MORE

Hope Vs. Experience

Finance: stocks, options, etc.
Arnold Kling
I think that is what is on display at the Room for Debate discussion of housing finance reform. The hopers say that we need a housing policy, ignoring the experience. I say otherwise. Concerning Freddie Mac and Fannie Mae, I... MORE

The Evolution of the Horse Face

Microeconomics
Bryan Caplan
From Melvin Konner's The Evolution of Childhood:In horse evolution, the face lengthened faster than the body size increased because face length is determined by the area of tooth surface needed for chewing, which, since it tracks the amount eaten, depends... MORE

Undercover Boss: A Post-Mortem

Labor Market
David Henderson
Now that I've seen the Undercover Boss episode about the Cincinnati mayor, it's time to analyze. See here for my predictions. The bottom line is that I was on to something. Alex Tabarrok, in a comment on my previous post,... MORE

Finally, An Intellectually Serious Case Against Immigration

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
In langur troops, a core of related females and their offspring associate for up to a few years with unrelated immigrant males.  If the newcomers win, they drive the other males away and systematically kill infants less than six months... MORE

Maymin on Financial Regulation

Regulation
David Henderson
One might think that the ideal regulations would be those that find the right numbers for these portfolios, not too small and not too large--the Goldilocks of risk. Surprisingly enough, it is not possible. It turns out that no algorithm... MORE

Energy Subsidies

Energy, Environment, Resources
Arnold Kling
Tim Carney writes, Environmental policy is not driven by tree-hugging activists, earnest liberal bloggers, or ecologically minded citizens. Instead, it flows from the lobbyists and executives of well-connected multinational corporations and built-for-subsidy startups that see profit in the loan guarantees,... MORE

James Heckman on the Great Stagnation

Income Distribution
Arnold Kling
He writes, Currently, over 40% of all American children are born out of wedlock and more than 12% of all children live in families where the mother has never married. Such families provide fewer financial and parenting resources for child... MORE

Kids and Happiness: The Sweet and Sour Spot

Economic Philosophy
Bryan Caplan
I've heard a wide variety of objections to my forthcoming book on kids.  But the thinkers I most respect usually argue that the empirical happiness research is my Achilles heel.  After all, they point out, the negative effect of kids... MORE

Undercover Boss: Government vs. Private

Labor Market
David Henderson
In which the author makes some predictions. My wife and I have watched about the last 4 episodes of "Undercover Boss" on CBS and are now hooked. All 4 have been private-sector for-profit companies and here's what I've noticed: 1.... MORE

Do Labor Unions Promote the Middle Class?

Labor Market
David Henderson
In today's WaPost, political scientists Jacob S. Hacker and Paul Pierson argue that not only are unions good for their members but also that unions promote a strong middle class. Their main argument is that unions are a strong political... MORE

The Macro Implications of Monetized Debt

Macroeconomics
Arnold Kling
PIMCO's Bill Gross writes, most of the publically issued $9 trillion of Treasury notes and bonds are now in the hands of foreign sovereigns and the Fed (60%) while private market investors such as bond funds, insurance companies and banks... MORE

The Depths of FDR's Anti-Semitism

Economic History
Bryan Caplan
A forthright admission from Andre Schiffrin's pro-Roosevelt Dr. Seuss & Co. Go To War:...Roosevelt took it upon himself to negotiate privately with the Vichy governor of Morocco, Auguste Nogues, and then with General Giraud.  FDR, who spoke fluent French, suggested... MORE

Greenspan on the Economy

Macroeconomics
David Henderson
Yesterday, CNBC's Squawkbox had Alan Greenspan on for an extensive interview. The difference between the communication skills of Alan Greenspan as economic commentator and the communication skills of Alan Greenspan as Fed Chairman is like the difference between day and... MORE

The Case Against News

Behavioral Economics and Rationality
Bryan Caplan
By and large, I think news is a waste of time.  If I want to increase my factual knowledge, I read history - or Wikipedia.  News, I like to say, is the lie that something important happens every day.  Most... MORE

How Overvalued is Italy?

Cross-country Comparisons
Bryan Caplan
Whenever economists ask, "Where is the gap between official per capita GDP and actual living standards the greatest?," I don't pause.  My instant answer is always: Italy.  Official stats put its GDP per capita around $30,000.  But virtually every part... MORE

The Great Substitution

Growth: Consequences
Arnold Kling
Naturally, Tyler Cowen recommends David Leonhardt's post, which in turn highlights Michael Greenstone and Adam Loney on the dismal trends in median male earnings. I think that broad aggregates of wages and productivity may not be the most informative way... MORE

The Decline of Economic Theory

Economic Methods
Bryan Caplan
When I started my Ph.D. in Princeton, pure economic theory was king.  Economists with stellar math skills were high in status and high in demand, even if their knowledge of the real world was... slight.  In the following eighteen years,... MORE

Two Basic Macro Questions

Macroeconomics
Arnold Kling
1. Does the Fed matter? Vincent and Carmen Reinhart write, First, spending and pricing decisions are assumed to be based on long-term assessments of real income and real rates of return. Second, changes in monetary policy can only change real... MORE

The Biggest Idea in Development that No One Really Tried

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
Yesterday the noble Michael Clemens spoke at GMU about his impending JEP piece on migration.  To get a feel for what you missed, check out his Youtube tour de force, "The Biggest Idea in Development that No One Really Tried."... MORE

Maladaptation to Higher Productivity

Labor Market
Arnold Kling
Dani Rodrik writes, In economies that don't exhibit large inter-sectoral productivity gaps or high and persistent unemployment, labor displacement would not have important implications for economy-wide productivity. In developing economies, on the other hand, the prospect that the displaced workers... MORE

The Future of Egypt: Time to Go On the Record

Cross-country Comparisons
Bryan Caplan
One good way to guard against hidesight bias is to publicly state your odds in advance.  The Iranian Revolution, for example, spurred a wave of cock-eyed optimism around the world.  But before long, theocracy and bloody warfare left Iran in... MORE

Keynesian Politics and the Minimum Wage

Macroeconomics
David Henderson
Last month, Alex Tabarrok posted an interesting piece on the failure of Keynesian politics. Let's posit arguendo, he said, that Keynesian economics is correct: during a recession, if the government increases aggregate demand using tax cuts or government spending increases,... MORE

Ken Rogoff and Others

Finance: stocks, options, etc.
Arnold Kling
As usual, Mark Thoma has interesting links for today. 1. Ken Rogoff writes, Many countries' tax systems hugely favor debt over equity. The housing boom in the United States might never have reached the proportions that it did if homeowners... MORE

My Paper on Housing Finance Reform

Finance: stocks, options, etc.
Arnold Kling
I write, Any attempt to reengineer a housing-finance system with a new set of government-guaranteed entities would entail all of the risks of restoring the existing GSEs, plus more. The taxpayers would be exposed to similar potential hazards, but with... MORE

From Caplan-Crampton-Grove-Somin's new working paper:Earlier researchers have already identified some systematic biases that undermine retrospective voting.  Voters myopically reward and punish politicians for recent economic performance.  (Bartels 2010; Achen and Bartels 2008, 2004a)  Partisanship heavily distorts voters' attributional judgments. (Marsh... MORE

Systematically Biased Beliefs About Political Influence: The Working Paper

Behavioral Economics and Rationality
Bryan Caplan
My co-authors and I finally have a working paper based on our 2008 survey of the general public and political scientists.  Many thanks to all the EconLog readers who helped along the way.  Here's the basic idea from the intro. ... MORE

Jack Calfee, RIP

Regulation
David Henderson
I hadn't known until reading Arnold's post this morning and then the Wall Street Journal article that he referenced that Jack Calfee, a health economist at AEI, had died. I didn't know Jack well--we talked on the phone only about... MORE

Some Health Care Tidbits

Economics of Health Care
Arnold Kling
1. The late John Calfee has an op-ed in today's WSJ that emphasizes the way that the Massachusetts health care reform raised costs. Meanwhile, economists John Cogan, Glenn Hubbard and Daniel Kessler reported in the Forum for Health Economics &... MORE

Education vs. Money Management

Economic Methods
Arnold Kling
Consider the following two propositions, one in education (E) and one in finance (F). (E) One way to improve education would be to get rid of the bottom 10 percent of teachers and to try to replicate more widely the... MORE

What I'm Reading

Economics and Culture
Arnold Kling
Life, the autobiography of Keith Richards of the Rolling Stones. On p. 338: Mick would come and visit me occasionally in Switzerland and talk about "economic restructuring." We're sitting around half the time talking about tax lawyers! The intricacies of... MORE

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