Bryan Caplan and David Henderson

June 2012

A Monthly Archive (85 entries)

The Drop in Home Equity

Macroeconomics
Arnold Kling
Timothy Taylor has written one of his bests posts. He writes, Through much of the 1990s, the ratio of owner's equity to GDP fell, but in the early 1990s, that was partly a result of depressed regional real estate markets... MORE

Opening Minds, Closing Minds

Politics and Economics
Arnold Kling
The following thought occurred to me recently. Suppose we look at writing on issues where people tend to hold strong opinions that fit with their ideology. Such writing can (a) attempt to open the minds of people on the opposite... MORE

The GSS and the Political Externalities of Immigration: A Guest Post by Sam Wilson

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
GMU Ph.D. student Sam Wilson recently mentioned on Facebook that he was using the General Social Survey to test for political externalities of immigration.  He posted a few crosstabs, but nothing more.  I immediately publicly offered him the chance to... MORE

The Curious Ethos of the Academic/Appointee

Economic Methods
Bryan Caplan
High-status academic economists often look down on economists who engage in blogging and punditry.  Their view: If you can't "definitively prove" your claims, you should remain silent.  At the same time, though, high-status academic economists often receive top political appointments. ... MORE

Would Conscription Reduce Support for War?

Public Choice Theory
David Henderson
A number of prominent people in recent years as well as many people I run into in academia have been arguing that one virtue of returning to conscription is that it would put the sons of wealthy and politically powerful... MORE

Jonathan Rauch is Uncharitable

Economics of Health Care
Arnold Kling
He writes, According to conservatives, the government should not make people buy insurance; it certainly should not provide coverage for them. That would seem to eliminate the two main ways to deal with free riders. One obvious possibility remains. If... MORE

On Monday, my colleague Virgil Storr heard my IHS lecture on "The Case Against Education," and sent me some interesting comments.  Here's full exchange, with Virgil's kind permission.  Quick question: Do we have good ways of figuring out who will... MORE

When I first read David's latest post, I mentally reversed the true results.  I thought that every expert on the panel agreed that:A cut in federal income tax rates in the US right now would raise taxable income enough so... MORE

Where Are We on the Laffer Curve?

Taxation
David Henderson
A cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut. This is one of the... MORE

PSST: Work-Sharing May Not Work

Macroeconomics
Arnold Kling
Don Peck writes, Today, American companies facing weak demand typically lay off workers, even though that decision can be costly down the road (rehiring and training are expensive). A work-sharing program would allow companies to instead make temporary, across-the-board reductions... MORE

Evil Exceptions

Economic Philosophy
Bryan Caplan
Philosophers spend a great deal of time crafting plausible exceptions to widely-accepted moral rules.  Sure, murder is wrong.  But what if you could murder a man on his death-bed to prevent a plane crash?  What if you could smother the... MORE

Changing World Trade Patterns

International Trade
Arnold Kling
From the latest issue of the Journal of Economic Perspectives, I recommend The Rise of Middle Kingdoms by Gordon H. Hanson. Whereas high-income economies accounted for four-fifths of global trade in 1985, they will account for less than half by... MORE

What Arrow Said About Education in 1973

Economics of Education
Bryan Caplan
In the early 90s, I saw Ken Arrow informally debate Murray Rothbard.  Arrow was not impressive; all he did was repeat tired textbook arguments about market failure.  My subsequent encounters with Arrow's thought were no better.  Early this year, however,... MORE

Mexico's Economic Growth

Growth: Causal Factors
David Henderson
In the United States, the image of Mexico is abysmal and largely wrong. The average American seems to believe that Mexico is a destitute, quasi-socialist nation with rampant drug violence that is sending waves of illegal immigrants to the United... MORE

I Flunk Horwitz's Doonesbury Contest

Economic Education
David Henderson
Attention undergraduates: Here is an opportunity for you to get published. Take a look at today's Doonesbury as it's chock full of bad economics. I would like to have a contest to see which undergraduate can produce the best response... MORE

Eurozone Crisis: what is the solution?

Eurozone crisis
Arnold Kling
Friends sometimes ask me this question. My answer is rather harsh. The problem is that some governments and some banks are insolvent. When a financial institution is insolvent, its liabilities must be taken over by a solvent institution. The solvent... MORE

Real Subjects Have No Arbiter

Economic Philosophy
Bryan Caplan
When you challenge the morality of the status quo, people usually leap to its defense.  After a few rounds of argument, though, defenders of the status quo often retreat to meta-ethics.  Maybe immigration restrictions do seem wrong.  But how are... MORE

Taking Lousy Government for Granted

Public Choice Theory
David Henderson
Their Supreme Gall There are two ways to take lousy government for granted: (1) to understand clearly how lousy, petty, vicious, self-serving, and narcissistic most government is, and (2) to understand implicitly how lousy, petty, vicious, self-serving, and narcissistic most... MORE

Priceless Economics

Labor Mobility, Immigration, Outsourcing
Arnold Kling
A McKinsey Report says, Based on current trends in population, education, and labor demand, the report projects that by 2020 the global economy could face the following hurdles: 38 million to 40 million fewer workers with tertiary education (college or... MORE

Marco Rubio: Trade Agreements Are About Producers

International Trade
David Henderson
One of the hardest ideas for non-economists to get is the idea that a government's unilateral elimination of trade barriers create a net benefit for the people in the country whose government makes the unilateral move. I pointed this out... MORE

The Case for a Strong Government Auditor

Business Economics
Arnold Kling
In an essay, I write, An independent auditor has some obvious potential problems. On the one hand, it could be ineffectual if it turns out to be weak relative to the independent agencies, or captured by them. On the other... MORE

Friday Night Video: Greed Is

Economic Philosophy
David Henderson
This is one of the best of Milton Friedman, all in 2.4 minutes. He's not saying greed is good. He's saying greed is. The big question is which institutions harness that greed for good outcomes.... MORE

Final Reply to Ridley

Cross-country Comparisons
Bryan Caplan
Matt Ridley once again graciously responds in the comments.  Our differences appear to have largely evaporated.  Ridley's in blockquotes, I'm not.But your challenge mistakes my argument. I have not argued that there is no positive correlation of innovation with population,... MORE

I Come Cheap

Books: Reviews and Suggested Readings
Arnold Kling
1. via 99-cent e-book: Not What They Had in Mind. I am still proud of this analysis of the financial crisis. Of course, if you want to get it even cheaper, you can download it from SSRN. 2. as part... MORE

Anna J. Schwartz, RIP

Money
David Henderson
Anna J. Schwartz, who co-authored A Monetary History of the United States, 1876-1960 with Milton Friedman, died today. She was 96. Their book was a tour de force. They spent years on it in the late 1950s and early 1960s.... MORE

Steve Chapman Publicizes My Bet

Monetary Policy
David Henderson
In his column in the Chicago Tribune today, Steve Chapman publicizes my inflation bet with Bob Murphy: Inflation hawks have been predicting a severe outbreak for years. But David Henderson, an economist at Stanford University's Hoover Institution and the Naval... MORE

Rejoinder to Ridley on Innovation and Population

Economic History
Bryan Caplan
Matt Ridley graciously replies to my critique of his Julian Simon Award Lecture in the comments.  Ridley's in blockquotes, I'm not:First, I know of a lot of people who are not conventionally clever but who contribute to innovation by making... MORE

A Fiscal History Lesson

Fiscal Policy
David Henderson
The Hoover Institution's on-line publication, Defining Ideas, has published my article, "A Fiscal History Lesson." In it, I retell the story that I told at longer length in my 2010 Mercatus study, "The U.S. Postwar Miracle." Two highlight paragraphs: In... MORE

James Manzi on Stargazing

Economic Methods
Arnold Kling
In a podcast with Russ Roberts, Manzi says, Is the number of stars in our galaxy odd or even? Well, there's a real answer to that question. If you have a bunch of people yelling odd and a bunch of... MORE

Ridley, Simon, Population, and Innovation

Cross-country Comparisons
Bryan Caplan
Matt Ridley ends his excellent Julian Simon Award Lecture with a criticism: Having paid homage to Julian Simon's ideas, let me end by disagreeing with him on one thing. At least I think I am disagreeing with him, but I may be... MORE

My WSJ Review of Born Together - Reared Apart

Books: Reviews and Suggested Readings
Bryan Caplan
My review of Nancy Segal's history of the Minnesota Study of Twins Reared Apart is in Thursday's Wall St. Journal.  Highlights:Nancy Segal's "Born Together--Reared Apart" is a thorough history of the project and of the 137 pairs of star-crossed twins... MORE

Rick Berman: Mercenary/Hero for Freedom

Public Choice Theory
David Henderson
"If this country is worth saving, it's worth saving at a profit." --H.L. Hunt This is a quote from one of the best books of the 1970s, The Machinery of Freedom, by David Friedman. It comes at the end of... MORE

Tyler Cowen's Column, Again

Politics and Economics
Arnold Kling
Cowen writes, Ezra responds to my column of Sunday with this post. He also can point to Catherine Rampell and Bryce Covert. In a comment on my post, Cowen wrote, I definitely agree we are spending and borrowing too much... MORE

When I was in sixth grade, a 1967 copy of The Pageant of World History by Gerald Leinwand came into my possession.  While I learned a great deal from it, the book contains shocking omissions.  Here's what Leinwand says about... MORE

Jose Antonio Vargas Is Sadly Ineligible for Semi-Amnesty

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
Jose Antonio Vargas, the Rosa Parks of U.S. immigration law, is one year over Obama's cut-off for semi-amnesty.  But Vargas is too noble not to celebrate:Obama's temporary order, however incremental and incomplete, is the most significant development in the fight... MORE

Deirdre McCloskey Throws Down the Gauntlet

Political Economy
Arnold Kling
She writes, The master narrative of High Liberalism is mistaken factually. Externalities do not imply that a government can do better. Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers. Efficiency is not... MORE

Of Honor Codes and Social Contracts

Economic Philosophy
Bryan Caplan
When I was at Princeton, every exam began with a strange ritual required by the Honor Code: Students had to sign a promise not to cheat.  The promise reads:I pledge my honor that I have not violated the honor code... MORE

Krugman on Inflation

Macroeconomics
David Henderson
Paul Krugman writes: I've been writing about how macroeconomic reality under Ronald Reagan didn't actually match the myth, and many people are inevitably upset. And one of the things they tend to bring up is the hoary old myth that... MORE

Sentence to Ponder

Business Economics
Arnold Kling
From Tyler Cowen: If your blogging or writing doesn't increase the degree of trust among people who do not agree with each other, probably you are lowering the chance for better policy, not increasing it, no matter what you perceive... MORE

Tyler Cowen writes for the NY Times

Politics and Economics
Arnold Kling
His latest column ends, The reason that we aren't getting more expansionary macro policy is fundamental: a lack of trust. It's not an easy problem to fix, but the place to start is by recognizing it. Two possibilities. 1. He... MORE

Perspective on the Eurozone Crisis

Eurozone crisis
Arnold Kling
John Cochrane writes, The euro was explicitly set up as a currency union without a fiscal union. (And it turned in to one without a bank regulatory union.) That can work, a fact which practically all commentators ignore. The central... MORE

Nullification or Nothing

Economic Philosophy
Bryan Caplan
Arnold doesn't share my conditional jubilation over Obama's semi-amnesty.  Arnold's in blockquotes, my replies follow.Even if you want open borders, I am not sure that this is how you want your goals accomplished. I see no other politically possible way... MORE

Here are six theses on extremely unjust laws that I dare you to dispute:1. Extremely unjust laws are conceivable.2. Extremely unjust laws exist.3. It is morally permissible to break an extremely unjust law.4. It is morally permissible to evade punishment... MORE

David Stockman's Time Horizon

Social Security
David Henderson
"I'm just not going to spend a lot of political capital solving some other guy's problem in 2010." --David Stockman, in William Greider, "The Education of David Stockman," Atlantic, December 1981. One of the biggest "inside politics" articles in 1981... MORE

The Sector with the Sticky-Wage Problem

Labor Market
Arnold Kling
As Josh Barro points out, it is the public sector. San Jose spends $142,000 per FTE on wages and benefits, up 85 percent from 10 years ago. As a result, the city shed 28 percent of its workforce over that... MORE

Executive Nullification

Politics and Economics
Arnold Kling
Bryan writes, Obama's semi-amnesty for hundreds of thousands of illegal immigrants sounds like the best U.S. political news of the 21st-century. I am less certain. Even if you want open borders, I am not sure that this is how you... MORE

Is Obama's Semi-Amnesty for Real?

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
I don't just think that immigration restrictions are bad policy; I think they're a grotesque crime against humanity - with all that implies.  Given this starting point, Obama's semi-amnesty for hundreds of thousands of illegal immigrants sounds like the best... MORE

This is from a talk I gave on my book, The Joy of Freedom: An Economist's Odyssey, less than 3 months after 9/11. HT to Jim Cardoza.... MORE

Merit, Ethics, and Reward

Business Economics
David Henderson
I've enjoyed the back and forth between co-blogger Bryan Caplan and Trevor Burrus. I'm starting to think that a good line for Vizzini to have used in "The Princess Bride," besides "Never get involved in a land war in Asia,"... MORE

Exit and Voice in the Workplace

Political Economy
Arnold Kling
Elizabeth Anderson writes, I'm arguing that the case for workplace democracy and other democratic constraints on employers is the same as the case for democracy anywhere: it's better for securing the freedom and personal independence of the governed than the... MORE

Burrus and Merit: Final Thoughts

Economic Philosophy
Bryan Caplan
Trevor Burrus continues our previous exchange on merit and liberty (see here, here, here, and here for previous installments).  Trevor misses one of my key points here:Bryan asks, if the question of merit is incidental to the case for free... MORE

Awaiting Comments from Scott Sumner

Monetary Policy
Arnold Kling
Two papers on Milton Friedman's monetarism (both in the same pdf), one from Jerry Jordan and one from Allan Meltzer. They come from a 2010 symposium sponsored by the LIberty Fund and the Pacific Research Institute, and they are reproduced... MORE

Tear Down These Walls

Labor Market
David Henderson
My article, "Tear Down These Walls," based on my blog post of the same name, is now out in The Freeman. One highlight: Immigration reform would dwarf any other measure economists have considered to help people in poor countries. Take... MORE

Does Portugal Show the Signaling Model Is Wrong?

Cross-country Comparisons
Bryan Caplan
Tyler mischievously taunts me on Twitter:Good thing the Portuguese saved all those resources which Sweden wasted on signaling.On MR he adds:In 2009, only 30 percent of Portuguese adults had completed high school or its equivalent, according to figures from the... MORE

Wal-Mart's Positive Effects

Business Economics
David Henderson
Devin G. Pope and Jaren C. Pope have recently had a Working Paper published by NBER. It's #18111 (May 2012) and it's cleverly titled, "When Walmart Comes to Town: Always Low Housing Prices? Always?" Here's an ungated version. In it,... MORE

The Big Gulp Ban

Politics and Economics
Arnold Kling
Will Wilkinson writes, I've often suspected that paternalists like Mr Noah generally cares more about sending "a powerful message of social disapproval" than about the actual effects of paternalistic policy on welfare. It's worth remembering that liberalism is, at its... MORE

Elinor Ostrom, RIP

Central Planning vs. Local Knowledge
David Henderson
As many bloggers have noted, Elinor Ostrom, who co-won the Nobel Prize in economics, died today of cancer. Here's the post I wrote after she won the prize, along with Oliver Williamson. And here are two paragraphs from my Wall... MORE

Trevor Burrus, I Want to Convert You to Meritocracy

Economic Philosophy
Bryan Caplan
The meritorious Trevor Burrus responds to my defense of merit against his critique.  Though he's not crying uncle, Trevor concedes a key point:Bryan argues that "the correlation between market success and merit is imperfect, [but] still fairly high." Great success... MORE

Toga! Toga!

Economics and Culture
Bryan Caplan
"Excellent."  That's what Tyler calls Noah Smith's effort to salvage the human capital model.  Noah's story: Students learn lots of useful job skills outside of class by socializing together.[U]seful skills, which you mostly learn on the job, are not the... MORE

Rejoicing Over Class Cutting

Economics of Education
David Henderson
Bryan Caplan poses again the puzzle about students, human capital, and signaling. I won't repeat it because he says it so well. One of his commenters, Cameron Mulder, has an interesting piece of evidence against the idea that students rejoice... MORE

College and Class Identity

Economics of Education
Arnold Kling
Noah Smith writes, College is an intense incubator where smart people meet other smart people. The large number of leisure activities and the close quarters in which people live facilitate the formation of friendships and romantic relationships, while the exclusiveness... MORE

A Puzzle for Human Capital Extremists Revisited

Economics of Education
Bryan Caplan
A while back I posed the following puzzle to those who dismiss the signaling model of education:Why do students rejoice whenever a teacher cancels class?From a human capital standpoint, students' attitude is baffling.  They've paid good money to acquire additional... MORE

Gerald Prante on Means-Testing

Behavioral Economics and Rationality
Bryan Caplan
Gerald Prante of the Tax Foundation, author of the best dissertation I ever chaired, emailed me some interesting comments on means-testing.  Reprinted with his permission:Saw your post with regards to means-testing Social Security and Medicare. Such a system would likely... MORE

The meritorious libertarian Trevor Burrus has unfortunately joined the ranks of libertarians against merit:Libertarians are often accused of advocating for a merit-based society. The free market, the argument goes, produces a distribution that more-or-less corresponds to how meritorious the people... MORE

Replies on Means-Testing

Economic Philosophy
Bryan Caplan
I'm happy to see all the feedback on my latest means-testing post, but I wish more readers engaged my original question.  After presenting one simple means-testing formula, I asked:In the new political equilibrium, how much do you predict the full... MORE

Matt Zwolinski on Sweatshops

Labor Market
David Henderson
Was Schindler Wrong? Philosophy professor Matt Zwolinski has an excellent video on sweatshops at LearnLiberty.org. LearnLiberty.org has given me permission to put it here. I basically like the video, although I have one question and one disagreement. My question is... MORE

Means Testing Isn't "Awesome"

Fiscal Policy
David Henderson
Over two years ago, Bryan Caplan posted on why means testing is "awesome". He didn't actually make that case, though. The case he actually made is that means testing is a good idea. "Awesome" is a step above "a good... MORE

Means-Testing and Political Economy

Behavioral Economics and Rationality
Bryan Caplan
Why not means-test Social Security and Medicare?  On the surface, this seems like a perfect liberaltarian reform.  Libertarians should favor drastic cuts in government spending, liberals should favor drastic cuts in government spending on the rich, and both should favor... MORE

Sheldon Richman, with whom I seem to agree well over 90 percent of the time, writes the following: Generations of government intervention have reduced workers' bargaining power in favor of employers. Any interference with the free market that suppresses competition... MORE

If You Don't Like It: Reply to Some Comments

Economic Philosophy
Bryan Caplan
Thanks for many thoughtful comments on "If You Don't Like It."  A few that particularly grabbed me:Tom P:I think we can give a friendlier interpretation to Roehling's terms. "Bargaining power": you spend many years working for a firm, developing human... MORE

You Come to Resemble Your Customers

Business Economics
Arnold Kling
Tyler Cowen quotes from a wide-ranging essay by David Graeber. The growth of administrative work [in universities] has directly resulted from introducing corporate management techniques. Invariably, these are justified as ways of increasing efficiency and introducing competition at every level.... MORE

If You Don't Like It

Economic Philosophy
Bryan Caplan
Suppose your boss screams all the time, has extremely bad breath, or requires all his employees to speak in a faux British accent.  Even today, the law usually offers you no recourse - except, of course, for "If you don't... MORE

Do Economists Study Money?

Money
David Henderson
Non-economists often think that "economists study money." The reality, though, is that most academic economists hardly think about money at all. Whether we're talking about tariffs, wages, Social Security taxes, or pollution, the analysis (though often couched in dollar terms... MORE

The Bankers' View

Eurozone crisis
Arnold Kling
Robert RubinRoger Altman writes, How can Europe pull back from this brink? It needs to immediately install a series of emergency financial tools to prevent an implosion; and put forward a detailed, public plan to achieve full integration within six... MORE

One of the best ways to get a raise from your current employer is to get a better offer from a competing employer.  You just tell your boss, "Match their offer or I walk."  The risk, of course, is that... MORE

From Cheating to Signaling

Economics of Education
Bryan Caplan
Alex Tabarrok cleverly notes that cheating on exams would be pointless if the human capital model were the whole truth:Cheating works best if the signaling model is true. If education were all about increasing productivity and if employers could measure... MORE

The Political is Personal

Politics and Economics
Arnold Kling
Dan Balz writes, a report issued Monday by the Pew Research Center paints a particularly stark portrait of a nation in which the most significant divisions are no longer based on race, class or sex but on political identity. Read... MORE

The Return to SAT Preparation Classes

Economics of Education
Bryan Caplan
SAT preparation classes don't work wonders, but they do work.  Herrnstein and Murray have a nice graph in The Bell Curve: A cynic might object that (a) you're only improving your SAT score, not your underlying cognitive ability, and (b)... MORE

Pooling Risks

Economics of Health Care
David Henderson
John Goodman posted yesterday on another post by law professor Jill Horwitz and economics professor Helen Levy. In their post, Professors Horwitz and Levy defend Obamacare from various criticisms. I won't bother repeating John Goodman's arguments. Rather, what I note... MORE

Firing Aversion: A Cross-Cultural Study

Behavioral Economics and Rationality
Bryan Caplan
Thanks to EconLog readers, I've finally located some real empirics on what I call "firing aversion" (see here, here, and here).  My favorite piece so far: "Cultural Influences on Employee Termination Decisions" (European Management Journal, 2001).  The authors analyze a... MORE

Vignettes from the Harold Demsetz Conference

Economic Philosophy
David Henderson
As a student of UCLA economist Harold Demsetz, I was invited to a conference in his honor. It occurred on Friday and Saturday. My travel and attendance there, plus my time spent on my Saturday lunch tribute to him, are... MORE

James W. Ceaser on the Constitution

Institutional Economics
Arnold Kling
He writes, Legalistic constitutionalism refers to formulas and rules. It makes one think immediately of lawyers and judges spinning elaborate constitutional doctrines and devising multi-pronged "tests." Like ancient Egyptian priests, these legal experts speak an occult jargon that few citizens... MORE

Tyler Momentarily Embraces Signaling

Economics of Education
Bryan Caplan
Loyal Marginal Revolution reader Nick_L asks Tyler:What's the most important economics question you ever asked?Tyler answers:"What is the required type font for submitting this dissertation?"I'm fond of saying that if I refused to study a foreign language in high school... MORE

Two Improper Concepts to Measure

Economic Methods
Arnold Kling
1. The value of household production. Timothy Taylor writes, Get an estimate of hours devoted to home production, and then multiply by the wage that would be paid to domestic labor. No! No, no, no! Suppose I build a deck... MORE

Vocational Education: Do Students Suffer in the Long-Run?

Economics of Education
Bryan Caplan
I've shown the following NBER abstract (from Hanushek, Woessmann, and Zhang) to several economists:Policy debates about the balance of vocational and general education programs focus on the school-to-work transition. But with rapid technological change, gains in youth employment from vocational... MORE

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