Bryan Caplan and David Henderson

July 2012

A Monthly Archive (110 entries)

Nominal Rigidity of What?

Behavioral Economics and Rationality
Bryan Caplan
During recessions, hourly pay for realtors and salesmen falls rapidly.  Even if they're largely paid on commission, their unemployment still spikes.  Doesn't this show that blaming unemployment on nominal wage rigidity is misguided?I think not.  Labor markets for realtors and... MORE

Politics Channels Hatred

Political Economy
Arnold Kling
In Capitalism and Freedom, Milton Friedman wrote, What the market does is to reduce greatly the range of issues that must be decided through political means Thanks to Don Boudreaux for the pointer. Those who prefer government to markets will... MORE

Memories of Milton

Economic Education
David Henderson
As co-blogger Bryan and many others have noted, today would have been Milton Friedman's 100th birthday. Over the years, I have posted appreciations of him and so I don't want to redo it. Instead, I'll link to a few and... MORE

An Ode to Milton Friedman

Economic Education
Bryan Caplan
Today would have been Milton Friedman's 100th birthday.  I only met the man long enough for him to sign my copy of Capitalism and Freedom, but he's been a tremendous influence on me.  All of my other adolescent intellectual heroes... MORE

John Taylor vs. Ryan Avent

Monetary Policy
Arnold Kling
Taylor writes, The Fed has effectively replaced large segments of the market with itself--it bought 77% of new federal debt in 2011. By doing so, it creates great uncertainty about the impact of its actions on inflation, the dollar and... MORE

Landsburg on Median Income

Income Distribution
David Henderson
Steve Landsburg has an excellent post today showing that to know what has happened to incomes of various groups, you have to look behind the median. Of course, anyone who has used statistics carefully knows this, but it's amazing how... MORE

Evan Soltas on the Great Factor-Price Equalization

International Trade
Arnold Kling
He writes, The basic idea here is that the maintenance of Bretton Woods' fixed exchange rates required a system of financial controls which so severely limited capital flows, global investment and trade that economies were effectively closed. When Bretton Woods... MORE

Bill Dickens on Me on Poverty: A Rejoinder

Behavioral Economics and Rationality
Bryan Caplan
One of my great privileges is to have a mentor and critic as good as Bill Dickens.  And truth be told, the best criticism of a project is early criticism.  Here's my reaction to his initial critique of Poverty: Who... MORE

Reforming Government as an Institution

Institutional Economics
Arnold Kling
William Galston discusses institutional reforms to make government work more effectively. the time is ripe to push for new fiscal institutions to engage in a long-overdue rethinking of the rules shaping fiscal decisionmaking, to consolidate certain related government functions within... MORE

Enrico Moretti on Mobility

Growth: Causal Factors
Arnold Kling
Interviewed by Nick Schulz, he says, In total, almost half of college graduates move out of their birth states by age 30. Only 27 percent of high school graduates and 17 percent of high school dropouts do so. It is... MORE

Bill Dickens on Me on Poverty

Behavioral Economics and Rationality
Bryan Caplan
The noble Bill Dickens responded on Facebook to my recent posts on poverty.  Reprinted with his permission.  My rejoinder is coming shortly.@Bryan Before you get too heavily into this new book, what happens in countries with more generous social welfare... MORE

Henderson on Cronyism

Regulation and Subsidies
David Henderson
So, why does cronyism occur? In my paper, entitled The Economics and History of Cronyism, released today by the Mercatus Center, I cite two factors: government power over the economy and the discretionary power available to particular government officials. If... MORE

Gary Gorton's forthcoming book

Finance: stocks, options, etc.
Arnold Kling
It is called Misunderstanding Financial Crises, a title that may be unintentionally ironic. As you probably know, Gorton is famous for treating the crisis as a "run on the shadow banking system" that had very little real basis. The deterioration... MORE

IGM, Economic Consensus, and Partisan Bias

Behavioral Economics and Rationality
Bryan Caplan
Justin Wolfers staunchly defends a view I've long been pushing: economists agree to a shocking extent.  If you follow the economic policy debate in the popular press, you would be excused for missing one of our best-kept secrets: There's remarkable... MORE

Brink Lindsey's New eBook

Books: Reviews and Suggested Readings
Arnold Kling
It is called Human Capitalism. It might be called The Age of Abundance* (*for some people). Brink is trying to thread the needle between those who view the poor as victims and those who apparently don't. (Bryan read an earlier... MORE

Does Import Dependence Make Us More Vulnerable?

International Trade
David Henderson
An increasing reliance on imports, combined with the fraying of the nation's power grid, highways and rail lines, leaves the United States more vulnerable to the damage of natural disasters and terrorist attacks, according to a report to be released... MORE

The Fallacy of Dulling the Pain of Poverty

Behavioral Economics and Rationality
Bryan Caplan
Why are the poor more likely to abuse drugs and alcohol?  As a matter of dollars and cents, substance abuse should rise, not fall, with income.  These habits are expensive, both directly and indirectly.  Directly: Drugs and alcohol cost money. ... MORE

What Did You Learn in Business School?

Economics of Education
Bryan Caplan
Question for readers with business degrees (A.A., B.A., M.B.A.): How much of what you learned in your business coursework do you actually apply in your business career?  Please give details.... MORE

Alan Blinder: Banks Don't Pay Taxes

Taxation
David Henderson
Oh, and, by the way, the federal government is a taxpayer. In an op/ed in Monday's Wall Street Journal, "How Bernanke Can Get Banks Lending Again," Princeton University economist Alan Blinder writes: But suppose it doesn't work. Suppose the Fed... MORE

The Magic Solution of Devaluation

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Scott Sumner writes, If the Spanish and Greek governments shrank enough to balance their budgets, they'd still have 24% unemployment, if not more. Their economies are hopelessly uncompetitive at the current exchange rate. And if those countries had a huge... MORE

Poverty and Behavior: Generalizing Yglesias

Behavioral Economics and Rationality
Bryan Caplan
Last week, Matt Yglesias had an extremely insightful critique of the view that unemployment remains high because "we are not as wealthy as we thought we were": It is both true that we are not as wealthy as we... MORE

Capital One's Actuals

Behavioral Economics and Rationality
Arnold Kling
Bryan writes, Was Capital One's sales pitch fraudulent in this sense? No; at minimum, they're missing element #3 (falsity). As commenter Thomas DeMeo pointed out, the actual allegation may differ from Bryan's hypothetical. consumers were: Misled about the benefits of... MORE

Avent and Yglesias Reinforced

Income Distribution
Arnold Kling
By Peter Ganong and Daniel Shoag. They write, population is no longer flowing to richer states...in recent years (1) the real returns to migration to productive places have fallen dramatically for low-skilled workers but have remained high for high-skilled workers,... MORE

Arnold's Hypotheticals

Behavioral Economics and Rationality
Bryan Caplan
I agree with Arnold's analysis of all three of his hypotheticals.  But I doubt Capital One's sales pitch was analogous to:I tell you that a tree is about to fall on you, but if you give me all the money... MORE

Defining Voluntary Exchange

Economic Philosophy
Arnold Kling
Bryan writes, Couldn't you just as easily say that consumers benefit from the peace of mind of Capital One's payment protection products, even though the products make little financial sense? Now it's my turn to raise some hypotheticals. (a) If... MORE

Some Economics of Sanctions on Iran

International Trade
David Henderson
The experience with sanctions on Iran suggests some of the difficulties. In that case, the internal group likely to benefit most from sanctions is the Pasdaran, or Revolutionary Guards, which, coincidentally, may also prove to be the group most in... MORE

Popular Resistance to Cost-Effectiveness Research: Two Stories and a Challenge

Behavioral Economics and Rationality
Bryan Caplan
Measuring the cost-effectiveness of medical treatment seems unpopular - especially among conservatives.  Why would this be?  I have two stories - one fairly charitable, the other not so charitable.The charitable story.  Many people - even people who strongly favor heavy... MORE

Bike Rental vs. Car Rental

Microeconomics
Arnold Kling
Russ Roberts poses the question. Why is that you can rent a car for less than $20 a day, but renting a bike costs $10 an hour? I don't think it's the case that the bicycle rental business is spectacularly... MORE

The Relevance of the Religious Hypothetical

Behavioral Economics and Rationality
Bryan Caplan
Consider two contrasting arguments against a policy rationale:1. Your rationale could conceivably be abused for bad ends.2. Your rationale supports many policies you yourself oppose.Arnold seems to think that my religious objection to his consumer protection views (here, here, and... MORE

Religion and Consumer Protection

Behavioral Economics and Rationality
Arnold Kling
I view Bryan's criticism as somewhat rhetorical. I am getting a lot of similar comments. It is as if I were to praise the Internet and someone were to ask me about Josef Mengele and say: See what happens if... MORE

Behavioral Politics

Political Economy
Arnold Kling
NPR lists policies that economists agree are good ideas but which are political non-starters. Basically, they want to replace the corporate income tax and the payroll tax with a consumption tax and a carbon tax. Let's stipulate that they are... MORE

The Economics of the Olympics

Economic History
David Henderson
There's a widespread view that holding the Olympics must be a money-losing proposition. One of our frequent commenters, Tom West, expressed that view recently. That view is understandable because losing money has been the norm. When the Olympics were held... MORE

The Upper Hand Heuristic

Cross-country Comparisons
Bryan Caplan
As Adam Smith explains, treating other people well is often in our narrow self-interest: It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own... MORE

What Could Go Wrong?

Finance: stocks, options, etc.
Arnold Kling
From Bloomberg News. The Federal Reserve Bank of New York said money-market fund investors should be prohibited from withdrawing all their assets at once as a way to make the $2.5 trillion industry "safer and more fair." I do not... MORE

The latest survey of the IGM panel of economists poses this: Long run fiscal sustainability in the U.S. will require cuts in currently promised Medicare and Medicaid benefits and/or tax increases that include higher taxes on households with incomes below... MORE

Does Peggy Noonan Understand Comparative Advantage?

International Trade
David Henderson
In the controversy surrounding the uniforms of the 2012 U.S. Olympic team, the problem isn't China. That the uniforms were made there is merely a deep embarrassment and a missed opportunity. Our textile and manufacturing companies deserved that work. You... MORE

California: Land of the Free

Regulation
David Henderson
I went on line a few days ago to order some vitamins. One of the items I ordered was Green Tea Complex. When I tried to place the order, I got a message in red saying that I couldn't order... MORE

Would Arnold Support an RFPB?

Behavioral Economics and Rationality
Bryan Caplan
The world's competing faiths subscribe to mutually incompatible doctrines - including doctrines about how to avoid eternal suffering in the afterlife.  One of these faiths could conceivably be true.  But no more than one.  If there are X incompatible views,... MORE

Education and Disruption

Economics of Education
Arnold Kling
Benjamin Lima writes, With MOOCs, now anyone in the world with an internet connection can download and watch lectures from eminent experts at top universities, for free, and hundreds of thousands have done so. This is indeed a huge leap... MORE

August 1: Freedom for Western Canadian Wheat Farmers

International Trade
David Henderson
On August 1 this year, the Canadian government's monopsony over western Canadian wheat will end. For 68 years, farmers in western Canada have been able to sell their wheat legally only to one entity: the Canadian Wheat Board. But starting... MORE

Peter Thiel's Question

Growth: Causal Factors
Arnold Kling
Bryan has one angle. I have another. In this video, Thiel confronts Google CEO Eric Schmidt over the issue of Google's cash hoard. If you have $50 billion in low-yielding investments, are you not more of a bank than a... MORE

In a fascinating debate, Peter Thiel challenges Google's Eric Schmidt:Google is a great company.  It has 30,000 people, or 20,000, whatever the number is.  They have pretty safe jobs.  On the other hand, Google also has 30, 40, 50 billion... MORE

Hummel on Graeber

Money
David Henderson
Jeff Hummel sent me a critique of David Graeber's book, Debt: The First 5000 Years. Jeff has given me permission to run an edited version. Here it is: I have read David Graeber's Debt: The First 5000 Years thoroughly and... MORE

Capital One vs. CFPB, again

Political Economy
Arnold Kling
For background, I recommend Fast Company's article from 1999, which lauds Capital One's creative use of the customer service process for up-selling. Those of you who are curious about the details of what is going on should find this helpful.... MORE

Ray Fisman on Structural Unemployment

Labor Mobility, Immigration, Outsourcing
Arnold Kling
He writes, Hurst notes that fewer and fewer Americans with a high school education or less are finding employment in manufacturing. This is a trend that accelerated in the late 1990s. Some of those lost jobs resulted in twentysomethings exiting... MORE

Fraud, Preferences, and Paternalism

Political Economy
Arnold Kling
Don Boudreaux disagrees with my pro-CFPB post. He writes, Because the transactions in question are voluntary and among adults, it isn't anyone else's business what transpires between A and C. Would Arnold applaud a DHS ban on the sale of... MORE

Social Darwinism vs. the Economic Way of Thinking

Cost-benefit Analysis
Bryan Caplan
David Gordon has a fascinating piece on Social Darwinist defenses of capitalism:[I]t is difficult to find writers who called themselves "social Darwinists." But some of Obama's critics have gone too far. Jonah Goldberg, e.g., treats social Darwinism as largely a... MORE

Good for the consumer financial protection board

Finance: stocks, options, etc.
Arnold Kling
CNN money reports, Cardholders who enrolled in a payment protection or credit monitoring product -- or who tried to cancel one of these products but were persuaded by a call center representative to keep it -- on or after August... MORE

Unintended Consequences of Intervention

Political Economy
David Henderson
Many libertarian and conservative economists I know are good at pointing out the unintended, and usually negative, consequences of domestic government policy. But a smaller subset of these people seem willing to look at foreign policy with the same skeptical... MORE

Olivia Fox Cabane on Charisma

Books: Reviews and Suggested Readings
Arnold Kling
She is the author of The Charisma Myth, a self-help book that I am in the middle of reading. Before you buy it (and before you comment on this post), I recommend watching this video, evidently from a talk given... MORE

How I Love Education

Economic Philosophy
Bryan Caplan
When I write about education, I suspect I come off as a philistine.  You might even boil my position down to: "Students are bored, and aren't acquiring job skills, so their education is a waste of time and money."  But... MORE

Mitt Romney's Passion

Business Economics
David Henderson
I don't think of Mitt Romney as a passionate man. But there is one area in which I think he shows some passion: defending businesses and corporations from hostile attacks. I saw this when he argued that "corporations are people."... MORE

The Centrists Attempt to Regroup

Politics and Economics
Arnold Kling
I got an email the other day tipping me off to today's launch of the Fix the Debt campaign, a bipartisan effort. These folks are the shattered remains of what used to be the center in American politics. I don't... MORE

Markets Don't Ration

Central Planning vs. Local Knowledge
David Henderson
For example, Uwe Reinhardt, an economics professor and advocate of government-controlled medicine, writes, "In short, free markets are not an alternative to rationing. They are just one particular form of rationing. Ever since the Fall from Grace, human beings have... MORE

The Contributions of William T. Dickens

Behavioral Economics and Rationality
Bryan Caplan
Tyler and Arnold have written engaging retrospectives on their Ph.D. cohorts at Harvard and MIT.  But I'd rather discuss the contributions of Arnold's classmate - and my undergraduate Econ 1 professor - William T. Dickens.  Arnold's right to say:Bill Dickens... MORE

Ezra Klein: Pass Laws, Be Productive

Revealed Preference
David Henderson
Ezra Klein claims that the current Congress is "one of the very worst congresses we have ever had" and then claims to "prove it." He gives 14 reasons. Reason #1 is "They're not passing laws." What's his implicit assumption? That... MORE

David Brooks Repeats Himself

Behavioral Economics and Rationality
Arnold Kling
I thought that Why Our Elites Stink (I suspect Brooks winces at the headline the editors supplied) these people are brats; they have no sense that they are guardians for an institution the world depends on; they have no consciousness... MORE

Sumner's Common Sense

Behavioral Economics and Rationality
Bryan Caplan
In a post that officially attacks "common sense," Scott Sumner shows that he possesses a great deal of it.  Don't believe that nominal wage rigidity can explain continuing high unemployment?[W]age stickiness is a much bigger problem when inflation is low,... MORE

Arnold on the Current State of Computers in Education

Economics of Education
Bryan Caplan
Arnold writes:Here is how I size up the current state of computers in education: My reactions, point by point:1. Note that in the music industry, the Internet has put record stores out of business. It has not put composers and... MORE

In January 1997, Red Herring magazine, now defunct, published a debate between Paul Krugman and me. It was titled "Does Technology Create Jobs?" Here's one of his key paragraphs: It's also true that higher profits generated by the new technology... MORE

I'm Telling

Labor Market
Bryan Caplan
Alex Tabarrok suggests that sexual harassment is analogous to employee theft.  If this were so, however, victims of harassment would have an ridiculously easy remedy for their woes: Tell the boss.  When an employee tattles on a co-worker for stealing,... MORE

If I Were on the Left

Political Economy
Arnold Kling
I do not think that I would find Arthur Brooks persuasive. He writes, Free markets and entrepreneurship are driven not by greed but by earned success. He gives examples. I would give counter-examples. I would say that regulation is needed... MORE

Computers, Education, and Comparative Advantage

Economics of Education
Arnold Kling
Bryan writes, At risk of sounding extremely narcissistic, the key question for Tyler and me is whether online education is going to put the two of us out of a job. Our definitional conflict notwithstanding, the two of us both... MORE

What Would Efficient Sexual Harassment Law Look Like?

Economics and Culture
Bryan Caplan
In a post I otherwise applaud, Alex Tabarrok presents an efficiency defense of sexual harassment law: What the theory and the empirical results are saying is that people exposed to a higher risk of sexual harassment are paid more, just as people... MORE

A Short History of Gasoline Price Controls

Economic History
David Henderson
In the Weekend Interview in today's Wall Street Journal (WSJ editor Rob Pollock interviews George Shultz), Shultz says the following: And one thing you know from experience is when you control the price of something, you end up getting less... MORE

Moral Authority, Continued

Public Choice Theory
Arnold Kling
Note Chris Dillow's cynical take: Crony capitalism, then, is the only feasible form of capitalism. Matt Mitchell writes, My colleague Adam Thierer has assembled an interesting compendium of expert opinions on regulatory capture. The quotes show experts interested in grappling... MORE

My recent post on online education specifies:When I talk about "online education," I don't just mean students at existing brick-and-mortar colleges taking some classes from their dorm rooms.  I mean students enrolling in virtual colleges instead of physical colleges.Tyler objects:I... MORE

Stossel on Jobs

Labor Market
David Henderson
While watching the last 15 minutes or so of the latest Stossel program on Fox Business last night, I became aware that I had a smile on my face and was feeling positive and optimistic. Why? Because during those minutes,... MORE

Flat-of-the-curve in Education?

Economics of Education
Arnold Kling
Michael Graham writes, Education reform activist Bill Costello points out that our annual "per-pupil spending in 2006 was 41 percent higher than the OECD average of $7,283, and yet American students still placed in the bottom quarter in math and... MORE

A Thought to Ponder

Behavioral Economics and Rationality
Arnold Kling
from Timothy Taylor. Behind Hornbeck's estimates seems to me a deeper pattern of human behavior. When confronted with difficulties, leaving to try somewhere else is hard, but do-able. Staying and continuing with the same behavior is unpleasant, but do-able. But... MORE

Robert Murphy on Global Warming

Energy, Environment, Resources
David Henderson
Robert Murphy has a first-rate piece on global warming in which he covers some important new ground. First, here's ground he and I (in a post on his earlier article) have already covered but he says it particularly well: Yet... MORE

Prompted by Tyler's reminiscences We entered MIT in 1976, which means we hit the job market during a recession (1980). For that reason, and others, we were underachievers by MIT standards. (Just preceding us were Krugman, Bernanke, and Rogoff, and... MORE

Local Knowledge and Mortgage Lending

Finance: stocks, options, etc.
Arnold Kling
Kristle Romero Cortes writes (abstract) This paper shows that mortgage lenders with a physical branch near the property being financed have better information about home-price fundamentals than non-local lenders. During the real estate run-up from 2002-06, home price growth negatively... MORE

A Controversial Issue Resolved With Econometrics

Economic Methods
Bryan Caplan
In answer to David's challenge to name "one controversial issue that had been resolved with econometrics," I nominate the self-interested voter hypothesis - the idea that voters maximize their narrow self-interest.  While many people - scholars included - take this... MORE

Does Econometrics Resolve Issues?

Economic Methods
David Henderson
Bryan Caplan's statement, "In social science, the best arguments prove more than the best studies," reminds me of a conversation I was in earlier this week. Economist Jeff Hummel said he couldn't think of even one controversial issue that had... MORE

Part-Time Jobs and Climbing Trees

Human Capital: Returns to entrepreneurs, skills, etc.
David Henderson
In a comment on my post on Walter Williams's book, "liberty" writes: It seems to me that sometimes when free market individualists swoon over the benefits of gaining a work ethic, including having many jobs when young and learning from... MORE

The Moral Authority Test

Public Choice Theory
Arnold Kling
Tim Carney reports on the latest project from the Mercatus Center. George Mason University's Mercatus Center this week is kicking off a series of papers on cronyism and business-government collusion. (Seemingly-related Video from LearnLiberty) You can think of the project... MORE

A One-Penny Proof

Microeconomics
Bryan Caplan
I recently tweeted:In social science, the best arguments prove more than the best studies. Hands down.Here's one homely example of what I have in mind.When economists explain marginalism, students often object, "But surely no one ever changes his behavior over... MORE

Thomas Ricks's Fiasco

Labor Market
David Henderson
In late June, Gen. Stanley A. McChrystal, the former commander of international forces in Afghanistan, called for reinstating the draft. "I think if a nation goes to war, every town, every city needs to be at risk," he said at... MORE

The Selgin-Sumner-Tobin Model vs. PSST

Macroeconomics
Arnold Kling
George Selgin writes, U.S. NGDP was restored to its pre-crisis level over two years ago. Since then both its actual and its forecast growth rate have been hovering relatively steadily around 5 percent, or about two percentage points below the... MORE

From the latest draft of The Case Against Education:The permanent residents of the Ivory Tower often congratulate themselves for broadening students' horizons.  For the most part, however, "broaden" means "expose students to yet another subject they'll never use in real... MORE

Henderson on Robert Guest

International Trade
David Henderson
His basic argument is that migration of people across borders creates, in the United States particularly, not so much a melting pot as a "rich stew." (This is not a quote from the book; it's actually from Cato Institute senior... MORE

Jobless Science Ph.D's

Labor Market
Arnold Kling
The Washington Post has the story, but buries the lede. The pharmaceutical industry once was a haven for biologists and chemists who did not go into academia. Well-paying, stable research jobs were plentiful in the Northeast, the San Francisco Bay... MORE

Tipping, Status, and Signaling

Microeconomics
Bryan Caplan
Everything Arnold says about status goods and tipping points holds for signaling as well.  It's theoretically possible for bizarre new equilibria to emerge:Something that is a status good in one era can be the opposite in another. Think of smoking,... MORE

Kahneman on the Crash

Behavioral Economics and Rationality
Bryan Caplan
Daniel Kahneman's view of the 2008 crash is eerily similar to my own:Many people now say they knew a financial crisis was coming, but they didn't really. After a crisis we tell ourselves we understand why it happened and maintain... MORE

The Status-Good Model of College

Economics of Education
Arnold Kling
Bryan correctly characterized my views. However, to me they imply a tipping equilibrium. Something that is a status good in one era can be the opposite in another. Think of smoking, for example. At some point, there may emerge a... MORE

Amazon put Borders out of business.  Is online education going to do to the same to brick-and-mortar colleges?*  Reflecting on earlier conversations with Arnold, I've realized that there are three competing perspectives with three competing predictions.Perspective #1: Human capital model. ... MORE

Up From Poverty

Labor Market
David Henderson
"Up From Poverty" is the title of my review [scroll down to page 12] of Walter Williams's book, Up From the Projects: an Autobiography. Why do I review an autobiography in a publication titled Regulation? Here's why: When economists want... MORE

Barro on Marginal Utility and Wealth Transfers

Economic Education
David Henderson
In an otherwise good article defending Tyler Cowen, Josh Barro states the following: There is declining marginal utility of money: A person who makes $10,000 gets more value out of an extra dollar than a person who makes $100,000 does.... MORE

Pepconomics

Microeconomics
Arnold Kling
My latest essay is on the economics of Pepco, the apparently under-performing electric utility. I am concerned by two factors that insulate Pepco from facing market discipline concerning reliability. The first is that Pepco is a regulated monopoly. The second... MORE

Employer Tyranny vs. Guaranteed Freedom

Political Economy
Arnold Kling
John Holbo writes, Libertarians can, of course, just come out and say that they prefer contract rights to guarantees of freedom. No one is paying any attention to me in this debate, But I wrote, Just be careful about assuming... MORE

The Debt-Fueled Binge Story, Keynes, and PSST

Macroeconomics
Arnold Kling
Mark Thoma gives us Tim Duy: What was more important in holding the economy close to potential output, residential construction itself, or the housing price bubble? I tend to believe the price-driven balance sheet effects were driving dynamics over this... MORE

A People's History of American Empire mentions that former South Vietnamese prime minister Nguyen Cao Ky was an open admirer of Hitler.  Intrigued, I decided to investigate.  The charge checks out.  Exact quote:"People ask me who my heroes are. I... MORE

A Paragraph to Ponder

Economic Methods
Arnold Kling
From Robert Roberts Knowledge comes into us through a variety of channels that can be blocked by our concern for status, and the successful knowledge-seeker will be one who keeps those channels open. The process requires that we be able... MORE

Savings, Genes, and Fade-Out

Family Economics
Bryan Caplan
Parenting often has large effects on the young.  Parents do stuff, their kids respond, and observers conclude that parenting is very important.  You need twin and adoption methods to uncover the crucial caveat: these parenting effects usually fade-out.  Kids aren't... MORE

Joffe on LIBOR

Finance
David Henderson
As many readers probably know, there has been a huge scandal recently about the setting of the London InterBank Offer Rate (LIBOR). This is the rate used around the world on literally trillions of dollars in loans, including many mortgages.... MORE

Tone vs. Substance

Books: Reviews and Suggested Readings
Arnold Kling
In a comment on the Don Boudreaux book, Jason Collins writes, As most of Boudreaux's posts are in what you define as category (c), the book is not going to change the mind of your liberal friend. Contrast the comments... MORE

Adam Smith on U.S. Independence

International Trade
David Henderson
Here is what Adam Smith wrote in 1776 (in The Wealth of Nations) about the odds that the British government would voluntarily give up control over the 13 colonies. Notice his clear distinction between what he thought the British government... MORE

Jersey Shore, Emily Whitehurst, and Merit

Economics and Culture
Bryan Caplan
I've repeatedly argued that economic success and merit are moderately positively correlated.  In plain English: Talented people who work hard usually enjoy considerably higher income and status.  I hasten to add that in a free market, this correlation would be... MORE

Employer Tyranny

Labor Market
Arnold Kling
Chris Bertram, Corey Robin, and Alex Gourevitch write, These are just some of the considerations that lie at the heart of any defense of unions, regulation of contract and the workplace, and workplace democracy. Whether we call that defense egalitarian... MORE

Yesterday I stumbled across a obscure experiment in open borders.  Under the 1954 Geneva Accords, the Vietnamese were explicitly given 300 days to freely migrate between the Communist north and the non-Communist south.  As Wikipedia explains:The agreements allowed a 300-day... MORE

McKenzie's Defense of Apple

Business Economics
David Henderson
Interestingly, since 2010, when Apple and the publishers were supposedly conspiring against consumers, e-book sales have escalated by several hundred percent and as a percentage of all book sales, perhaps, in part, because of the so-called "anticompetitive conspiracy." That fact... MORE

The Perfect Gift

Books: Reviews and Suggested Readings
Arnold Kling
[limited blogging, due to power outage and crowded Starbucks] It strikes me that Don Boudreaux' book Hypocrites and Half-Wits, would make the perfect gift to surreptitiously leave in a liberal friend's bathroom. His mini-rant/lessons are best read three or four... MORE

Optimal Openness

Economic Methods
Bryan Caplan
There's something very appealing about Arnold's praise of thinkers who try to open readers' minds instead of closing them:Suppose we look at writing on issues where people tend to hold strong opinions that fit with their ideology. Such writing can... MORE

It Lost 244% of Its Value? Impossible

Statistical theory and methods
David Henderson
In an otherwise good article in today's Wall Street Journal, "Just Say Nein to Eurobonds," Matthew Will writes: From 1980 to the launch of the euro in January 1999, the Italian lira and Portuguese escudo lost 108% and 244% of... MORE

Basic Research Does Not Equal Technology

Business Economics
David Henderson
One of the best articles by the late William A. Niskanen, which I used to great effect in my recent "Energy Economics" course, is his take-apart of "Bacon's Chain." The article is titled "R&D and Economic Growth: Some Cautionary Tales,"... MORE

Tyler writes:Their "simps" think they should have done better.  In their own, unconstrained models of the world, they each wish they could be doing better.  They each have refused to "do better" out of an understanding of limited institutional and... MORE

Henderson on Shiller

Finance
David Henderson
My review [scroll down] of Robert Shiller's Finance and the Good Society is out in the latest issue of Regulation. A highlight about the finance portion: On the issue of crises, the main financial crisis in our future is likely... MORE

The Party Line Continuum

Economic Methods
Bryan Caplan
Two veterans of the Council of Economic Advisors object to my claim that political appointees have to toe a party line.Jeff Frankel:Bryan, When I was a Member of President Clinton's Council of Economic Advisers, I never said anything I didn't... MORE

Eurozone: Markets Applaud Latest Can-Kicking

Eurozone crisis
Arnold Kling
Sony Kapoor writes, Setting up an agency that is capable of resolving (shutting down, selling or recapitalizing) banks is perhaps the most urgent part of such a banking union and can be done independently from pooled deposit insurance or common... MORE

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