Bryan Caplan and David Henderson

October 2012

A Monthly Archive (85 entries)

Hayek and Hurricanes

Central Planning vs. Local Knowledge
David Henderson
In a natural disaster like Hurricane Sandy, the only thing people should fear more than the storm is the government's response. Let us count the ways. Mandatory evacuations presume that politicians know the risks better than property owners themselves. That... MORE

Why Is the National Return to Education So Low?

Cross-country Comparisons
Bryan Caplan
Like Garett, I'm a huge admirer of Lant Pritchett's "Where Has All the Education Gone?" (World Bank Economic Review, 2001).  My favorite part of the paper is when Pritchett presents three stories that might explain his results:I discuss three possibilities... MORE

Jeff Ely on Price Controls During Disasters

Price Controls
David Henderson
I had thought that pretty much all economists agreed that price controls during disasters are a bad idea. But Northwestern University economist Jeff Ely has a different take. He writes the following: But in fact it is quite typical for... MORE

The Outlook for New York

Supply-side Economics
Arnold Kling
If there are no objections, I am going to interrupt my non-blogging to offer a downbeat economic prognosis for New York City in the wake of the storm. I can imagine that the disruption to patterns of sustainable specialization and... MORE

Cuba to Open Its Border (Outwards)

Cross-country Comparisons
Bryan Caplan
Starting in January, Cubans will no longer need exit visas to leave their workers' paradise.  Just one problem: Are there any First World countries that will let them come?For that matter, what's the best Third World country that will let... MORE

Economic arguments about education often conflate human capital, ability bias, and signaling.  Since I am a big fan of Roderick Long's exhortation to "Whip conflation now!," I decided to do something to squelch this conflation.  Namely: Produce a clarifying table.The... MORE

On Speculation: BEST LETTER EVER

Finance: stocks, options, etc.
David Henderson
This is from a letter that Don Boudreaux wrote to the Washington Post: Have you noticed the enormous increase in greedy speculation in the northeast over the past two days? It's quite something! In advance of hurricane Sandy, consumers are... MORE

Socialized Medicine Can Kill

Economics of Health Care
David Henderson
A 29-year-old woman will die without a new drug that the NHS is refusing to provide despite the manufacturer offering it to her for free, it emerged today. Caroline Cassin, 29, who suffers from Cystic Fibrosis (CF) has been offered... MORE

Why We Won't Eliminate the Electoral College

Public Choice Theory
David Henderson
Co-blogger Garett Jones has an interesting post making his case for the electoral college. I don't have a strong view either way, but I can tell you why it's extremely unlikely that the electoral college will ever be eliminated. The... MORE

Did Nations that Boosted Education Grow Faster?

Economics of Education
Garett Jones
No. Each dot in the graph below represents a nation: Change in education on the x-axis and change in per capita GDP growth on the y-axis.  Between the 60's and the 90's every country in this sample boosted its average... MORE

Housing Bubble and Fraud

Behavioral Economics and Rationality
Luigi Zingales
Preet Bharara, Manhattan's U.S. attorney, is a man on a mission. Not satisfied with the historical conviction of former McKinsey managing director Raja Gupta for insider trading, he quickly moved to investigate mortgage fraud. Earlier this month he sued Wells... MORE

Escaping Poverty: Your Friendly Advice

Behavioral Economics and Rationality
Bryan Caplan
Suppose a 15-year-old from a poor family in the First World asked you an earnest question: "What can I do to escape poverty?"  How would you answer?Responses from progressives, liberals, moderates, and left-libertarians are especially welcome.... MORE

A Bunch of Arguments in Favor of Regressive Tuition

Economics of Education
Bryan Caplan
Florida may start varying tuition by major:Tuition would be lower for students pursuing degrees most needed for Florida's job market, including ones in science, technology, engineering and math, collectively known as the STEM fields.The committee is recommending no tuition increases... MORE

Bain Capital and the Decline of Galbraithianism

Economic History
Garett Jones
Today most serious economic observers take it for granted that creative destruction is the norm.  The rise of internet firms, the overnight demise of Enron and Arthur Andersen a decade ago, and especially the rapid turnover of the Fortune 500... MORE

My Visit to NASA

Business Economics
David Henderson
Every fall quarter I teach an economics class to Executive MBA students by distance learning. For the first time, we have civilians in the program--in this case 5 students from NASA's Johnson Space Center in Houston. When I teach 5... MORE

Tribute to an Audience

Business Economics
David Henderson
UPDATE below. One of the lessons I tell my friends who want tips on speaking is one that, in the intensity of the moment, I often forget to do myself. Last Tuesday, I remembered. It is to lead with a... MORE

Firing Aversion: A Human Resources Perspective

Behavioral Economics and Rationality
Bryan Caplan
Yesterday I presented my case against education to GMU's Osher Lifetime Learning Institute.  As usual, the experience was a true merit good: picture a packed room of retirees full of enthusiasm and curiosity for the life of the mind.  The... MORE

In Praise of Calibration

Macroeconomics
Garett Jones
Nobelist Thomas Sargent said this, about early tests of rational expectations macro models back in the 70's: I recall [future Nobelists] Bob Lucas and Ed Prescott both telling me that those tests were rejecting too many good models. That phrase, "[T]hose tests were... MORE

Evil and Support for the Welfare State

Economic Philosophy
Bryan Caplan
I've been reflecting on Garett's post on human evil and the welfare state ever since he wrote it.  The most striking passage:Bryan notes that by some moral standards, we don't owe much to strangers in general; if that's right, how... MORE

Is Fiat Money a Bubble?

Money
Garett Jones
I thought the mainstream view was that fiat money was--in most mainstream theories and possibly in practice--a bubble.Jean Tirole (Econometrica, 1985) defines a bubble (it's a conventional definition among economists), and notes that Samuelson's excellent model of money fits that... MORE

The death penalty has fallen into disfavor in recent years.  But what's the long-run trend?  I've intermittently wondered about this for over a decade.  Last night, I finally decided to check.I found a time series of total U.S. executions from... MORE

Earlier this month, Vipul Naik asked me to ask you about the persuasiveness of my case for open borders.  Today Vipul posted an extended analysis of your responses.  Very thoughtful, very careful, very fair.  Read the whole thing.... MORE

How Would a Georgist Single Tax Work in Monopoly?

Economic Education
Bryan Caplan
Another fascinating aside from Larry White's The Clash of Economic Ideas (Kindle price just $23.40):Georgist theory was even the inspiration for the board game Monopoly.  The game's original creator called it "The Landlord Game" and intended it to illustrate the... MORE

Mish Bet Update

Economic Methods
Bryan Caplan
I'm pleased to report that the noble Mike Shedlock has paid up on our unemployment bet.  You might think this goes without saying, but I'm afraid to say that lesser men have failed to promptly pay up in the past. ... MORE

The pattern of individual, decentralized human evil I've discussed in recent posts is an underappreciated argument against the welfare state.  If a substantial fraction of the people around us are money-burners and perverse punishers, how much sympathy will voters have... MORE

Why Not a Free Market in Educational Loans?

Cost-benefit Analysis
Bryan Caplan
Suppose investments in education are every bit as fantastic as we're supposed to believe: Ability bias and signaling are myths, so the entire observed education premium is causal and socially valuable.  Even so, it's hard to see why government should... MORE

Bruce Bartlett's Mistake

Taxation
David Henderson
I wrote on Friday: Bruce's bottom line may be right, but there's something fishy about these numbers. Start with the fact that the median income for the whole country is at or around the bottom end of this bracket. That... MORE

Why I Love the Electoral College

Public Choice Theory
Garett Jones
There's some evidence that democracy itself makes people happier, but largely I see democracy as a means to an end.  One among those ends is "reducing social conflict."  The electoral college, set forth in the U.S. Constitution, is a great... MORE

Two Verdicts on Two Replies to Two Replies

Behavioral Economics and Rationality
Bryan Caplan
1. Garett and Me on EvilMy reply to Garett:I'd be much more impressed by an experiment showing that subjects spontaneously try to hurt others.  Suppose you tell them they can pay some money in order to change others' endowments.  Start... MORE

Friday Night Video: Life Without Capitalism

Growth: Causal Factors
David Henderson
The Fund for American Studies put out this excellent 6-minute video. Posted with permission.... MORE

Bartlett on Romney's Tax Plan

Taxation
David Henderson
In response, Romney put forward a new tax plan in recent days suggesting that he might not raise taxes by eliminating specific deductions that are too popular to touch, but rather by capping all of a taxpayer's deductions by some... MORE

CPI Bias and Experiment Bias

Growth: Consequences
David Henderson
As Bryan admits, his experiment to figure out whether the economy is stagnating suffered from a small-sample problem. Various commenters when Bryan first asked for volunteers pointed out that there was huge selection bias. The people who are even aware... MORE

On Human Evil (Economic Experiment Edition)

Behavioral Economics and Rationality
Garett Jones
Bryan says: I'd be much more impressed by an experiment showing that subjects spontaneously try to hurt others.Actually, there are plenty of those in the experimental public goods literature.  The questions raised by these public goods experiments might be what started... MORE

As Goes Janesville

Business Economics
Luigi Zingales
Saturday I had the chance to see a screening of the much awaited documentary film As Goes Janesville (http://371productions.com/what-we-make/documentaries/as-goes-janesville/ ) by Brad Lichtenstein. The documentary follows the life of a small town (Janesville, Wisconsin, 63,479 inhabitants) as a GM plant,... MORE

Rigor, Math, and Numbers

Economic Methods
David Henderson
Quickly researching the work of the two Nobel Prize winners Monday morning has given me more than the usual amount of thinking to blog on. I came across an interesting thought in the classic 1962 Gale/Shapley article that, as you'll... MORE

Does High School Algebra Pass a Cost-Benefit Test?

Cost-benefit Analysis
Bryan Caplan
"How much do students learn in school?"  The question is harder than it seems.  You get one answer if you measure their knowledge at the end of the school year or right before graduation.  You'll probably get a very different... MORE

UPDATE BELOW: When I have approximately 4 hours to research and write a Wall Street Journal article each year on the Nobel prize winners in economics, by necessity, I have to pick and choose what to emphasize. Another constraint is... MORE

Some Men Just Want to Please the Experimenter

Behavioral Economics and Rationality
Bryan Caplan
Garett's post on the prevalence of sheer malevolence is fascinating, but I'm not convinced.  A key fact about experiments is that many participants just want to please the experimenter.  Once they sit down in the lab, they start asking, "What... MORE

You work in the market economy to buy stuff in the market economy, either now or later.  So if sales taxes are permanently high that weakens your desire to work in the market economy.  That means leisure--which government is still... MORE

Designing Men

Regulation
David Henderson
That's the title I gave my piece in today's Wall Street Journal on the Nobel prize winners in economics. But, consistent with my experience as author of over 200 op/eds, the editors didn't use my title. The title they used... MORE

The Best Kinds of Free Education

Economics of Education
Bryan Caplan
EconLog reader Alan Shields sent me some interesting comments on my observation that the best education in the world is already free.  Reprinted with Alan's permission:I've been thinking about your thought experiment of "who would choose to take a course... MORE

"Some Men Just Want to Watch the World Burn"

Behavioral Economics and Rationality
Garett Jones
A claim confirmed repeatedly in experiments:In the destructor game, players are randomly paired and assigned the roles of destructor versus passive player. The destructor player chooses to destroy or not to destroy a share of his passive partner's earnings....15% of... MORE

True by Definition: Redistribution and Economic Freedom

Cross-country Comparisons
Bryan Caplan
My main complaint about Scott Sumner is that he still hasn't joined the faculty of George Mason's Economics Department.  But I'm also unhappy about the distinction he frequently makes between "size of government" (or "redistribution") and "market freedom."  The latest... MORE

Obama's War on Coal?

Energy, Environment, Resources
David Henderson
I was working Sunday on a talk I'm giving on October 23 in Dallas on Obama's economic policies. One thing I had taken as given, having talked to a few people who I thought had followed the issue closely, is... MORE

"Why do Americans work so much more than Europeans?" That's the title of one of Nobelist Ed Prescott's papers.  His story has something to do with high taxes causing low employment, so you might be tempted to begin your yawning... MORE

By keeping average taxes the same, while reducing marginal tax rates, it is possible to encourage people to earn and report more income. This is from Alan Reynolds, "Marginal Tax Rates," in the first edition of The Concise Encyclopedia of... MORE

Utopian Experimental Socialism

Alternative Economics
Bryan Caplan
Larry White's The Clash of Economic Ideas pointed me to a wonderful short essay by Joshua Muravchik.  In it, Muravchik makes the most original observation about socialism I've encountered in years: He ["Utopian socialist" Robert Owen] was no obscure crank.... MORE

Friedman on Chicago vs. Columbia

Books: Reviews and Suggested Readings
David Henderson
I just received my review copy of Lanny Ebenstein's The Indispensable Milton Friedman. It's a compilation of less-well-known, but, nevertheless, often very interesting, essays by Friedman. Yesterday morning, I did a "drop-in interviewer" spot on a local libertarian/conservative talk show... MORE

Malcolm and the Nation of Islam (Chapters 11-15)SummaryAt the urging of his siblings, imprisoned Malcolm writes a letter to Elijah Muhammad, leader of the Nation of Islam.  Elijah Muhammad responds, and before long Malcolm is not just a true believer,... MORE

Romney's Tax Cut

Taxation
David Henderson
There is a lot of controversy about Mitt Romney's proposal for cutting tax rates and broadening the tax base by limiting deductions and exemptions. I've discussed this here and here and Garett Jones highlighted Josh Barro's piece on it yesterday.... MORE

Imagine you live in a democracy surrounded by a hostile majority.  The median voter wants to deprive you of the rights to (a) accept a job offer from a willing employer, or (b) rent an apartment from a willing landlord. ... MORE

As always, I enjoyed the hour.  Hope you do as well.I suspect it was this post that led to the invitation.  I really do believe Fisher's 1933 Econometrica article offers a more complete model of the entire business cycle process... MORE

How Stagnant Are We? The Results

Growth: Consequences
Bryan Caplan
Remember my Time Diary Self-Experiment?  Only 41 people responded, so I take the feedback with a grain of salt.  Still, both of my predictions were correct.  To refresh your memory, I asked respondents to repeatedly ask themselves:1. Was my experience... MORE

Josh Barro, Progressive Taxation, and Public Choice

Public Choice Theory
Garett Jones
Josh Barro today claimed that the Romney tax plan can't work. The Romney plan is simple to summarize: Cut income tax rates across the board, then end enough deductions and exclusions (informally, "loopholes") to make it revenue neutral.  Plus, the Romney... MORE

At least at some Red Lobsters:The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.Mickey Kaus's Monday prediction becomes Tuesday's news.  No surprise here,... MORE

Hanson on "Bankrupt California," Part Two

Energy, Environment, Resources
David Henderson
I promised in yesterday's post to cover the parts of Victor Davis Hanson's article that dealt with other aspects of California. Immigration aside, I found myself agreeing with a number of them and wanting to extend some. 1. Gas prices.... MORE

My WSJ Review of Flynn's Are We Getting Smarter?

Books: Reviews and Suggested Readings
Bryan Caplan
My review of James Flynn's Are We Getting Smarter? is in today's Wall Street Journal.  Highlights:When most people hear about the Flynn effect, they conclude that we really are getting smarter. Mr. Flynn is more cautious. He opens the book... MORE

Open Borders Persuasion Bleg

Economic Philosophy
Bryan Caplan
Immigration restrictions probably have bigger effects on the world's economy than all other regulations combined.  As far as I can tell, virtually every moral theory - utilitarian, libertarian, egalitarian, Rawlsian, Kantian, Christian, and Marxist for starters -  implies that these... MORE

Victor Davis Hanson on "Bankrupt California"

Economics of Crime
David Henderson
"Bostonian," one of the commenters on my previous post on immigration quoted from an article by my Hoover colleague, Victor Davis Hanson. So I read the whole thing. There's a lot of meaty content, good and weak, in his article,... MORE

National Egoism and Vronsky Syndrome

Economic Philosophy
Bryan Caplan
I was just at a conference where several eminent economists embraced the following principle:The United States should adopt whatever policies maximize the per-capita GDP of the existing population of the United States, and their descendents.It was frustrating to listen.  On... MORE

Henderson vs. Woodruff on Immigration

Labor Mobility, Immigration, Outsourcing
David Henderson
In response to my Freeman article, "Tear Down These Walls," Henry Woodruff wrote [permission granted from The Freeman to reprint his letter and my response]: I very much enjoyed reading David Henderson's article, "Tear Down These Walls," in the June... MORE

Bailouts are for Bondholders

Public Choice Theory
Garett Jones
During the worst days of 2008, something strange happened.  During the Eight Days of Terror, the S&P 500 fell by 23% but there were no loud calls for the government to guarantee the value of stocks (Aside: TARP was signed... MORE

Overdetermination vs. Randomness

Statistical theory and methods
David Henderson
Here are the opening sentences from an article by San Jose Mercury News sports reporter Tim Kawakami: All the melodramatic twists, tweaks and breaks should've made the Giants virtually unbeatable on Saturday. They had their ace, Matt Cain, on the... MORE

Henderson on Landsburg's "Armchair Economist"

Books: Reviews and Suggested Readings
David Henderson
Steven Landsburg's The Armchair Economist is one of the best economics books ever written. It is insightful, disarmingly simple and yet sophisticated and, at the same time, provocative, passionate, and witty. Were I to detail the many things I like... MORE

How to Pronounce Tiebout and More

Public Choice Theory
Garett Jones
From William Fischel's brief biography of the Connecticut-born economist. Fischel spoke with Charles Tiebout's family and friends, so this statement deserves weight: If I could offer but one contribution to his memory, let it be to induce economists to pronounce his... MORE

Can I Sit In?

Economics of Education
Bryan Caplan
Yesterday morning I found myself in a shuttle with two of the world's most eminent labor economists.  So I presented one of my favorite puzzles for human capital extremists: Why is the best education in the world already free?  Colleges... MORE

The Latest Unemployment Figures

Labor Market
David Henderson
Our new co-blogger, Luigi Zingales, in his first post, has done an excellent job of dispelling the conspiracy theory that political operatives in the Obama administration "got to" the professionals in the Bureau of Labor Statistics who gather and report... MORE

I Win My Unemployment Bet With Mike Shedlock

Economic Methods
Bryan Caplan
Back in 2010, Mike Shedlock ("Mish") and I agreed to the following bet:If the official initially reported U.S. monthly unemployment rate falls below 8.0% for any month between now and June, 2015, I win $100.  Otherwise, Mish wins $100. Since,... MORE

BLS Data

Political Economy
Luigi Zingales
The Bureau of Labor Statistics had not finished releasing the surprisingly good September data that a number of commentators started raising doubts about the truthfulness of the data. There is no doubt that the data were a boost to President... MORE

Bloomberg: Prime Minister Antonis Samaras compared Greeks' struggle with economic hardship and political turmoil with the conditions that led to the collapse of the Weimar Republic in post-World War I Germany and ushered in the Nazi era.Remember what Keynes thought about... MORE

Henderson on John Goodman's Priceless

Books: Reviews and Suggested Readings
David Henderson
My review of health economist John Goodman's book, Priceless, is now out. I'm generally positive about the book, but I do have some major criticisms. Some positive excerpts: A dominant theme in health care reform is what Goodman calls "the... MORE

From the FT: France's Socialist government has been forced into retreat by an online revolt by entrepreneurs and investors against its plans to raise capital gains taxes.It said it would review the details of its budget proposal to bring taxes on... MORE

Supermajority Rule: Buchanan, Tullock, Bernanke

Public Choice Theory
Garett Jones
Most supporters of democracy embrace the ideal of majority rule.  The great Swedish economist Knut Wicksell started from a different ideal: Unanimity.  If your idea is so great, shouldn't we all agree to it? And even if it's only a... MORE

Last Night's Debate on Health Care

Economics of Health Care
David Henderson
I'm so glad that I don't need to use quotation marks around the word "debate" in the title above. For the days leading up to it, every time I've mentioned it, I've used quotation marks because the typical format is... MORE

Why the GOP is the Bigger Default Risk

Public Choice Theory
Garett Jones
Because Democrats really, really believe in death panels.  Steve Rattner, a former Obama Administration official, used the term (presumably as a form of gallows humor) in the Times a few weeks ago.  Rattner's piece hits some of the same themes... MORE

Freakonomics on Shale Gas

Energy, Environment, Resources
David Henderson
Steve Sexton over at Freakonomics has an excellent piece on shale gas. It lays out some basic economics beautifully. Before I continue, a disclosure: I have invested in a fracking operation in Colorado. I wish I hadn't, but that's another... MORE

Welcome to Luigi Zingales

Econlog Administrative Issues
Garett Jones
I remember the first time I saw Luigi Zingales speak.  It was early 2009, at what Arnold called an "Anti-Stimulus Conference."  Arnold himself gave an excellent talk, my colleague Don Boudreaux did as well. Time exceptionally well spent.  But the... MORE

Autobiography of Malcolm X Book Club Update

Books: Reviews and Suggested Readings
Bryan Caplan
I'll post on part 3 (chapters 11-15) on October 12.... MORE

My post on "Tough Luck" sparked a Facebook conversation with the great Bill Dickens.  Reprinted with his permission:Bill: You've got to be kidding me. The problem with most of your examples is simple. While Libertarians have to say tough luck!... MORE

Treasury Bondholders: Winning in the Senate?

Public Choice Theory
Garett Jones
Many are convinced that the U.S. government will likely either default or hyperinflate its way out of debt.  I disagree: I think Treasury bondholders will win. As I wrote in Econ Journal Watch:A U.S. default is unlikely: As a demographically... MORE

Tough Luck

Economic Philosophy
Bryan Caplan
"What if a poor person gets sick, doesn't have insurance, and can't get friends, family, or charity to pay for treatment?""What if an elderly person gets defrauded out of his entire retirement and the perpetrator vanishes into thin air?""What if... MORE

Welcome, Luigi Zingales

Economic Philosophy
David Henderson
Starting this week and for the next few months, Econlog will have a guest blogger, Luigi Zingales. Professor Zingales is the Robert C. McCormack Professor of Entrepreneurship and Finance and the David G. Booth Faculty Fellow. We have not met... MORE

Robert Murphy: A New Result on Carbon Taxes

Energy, Environment, Resources
David Henderson
Just about every public discussion of carbon tax swaps implicitly assumes that the distortions emanating from the tax code must decrease if the government begins taxing a negative externality (carbon emissions) and uses the revenue to reduce tax rates on... MORE

Group IQ: One Source of Trustworthiness

IQ in Economics
Garett Jones
In Arnold's new essay entitled "Libertarians and Group Norms," he writes:[W]e live in a world that demands enormous levels of trust among strangers...I doubt that anyone fully comprehends what holds this fabric of trust together. I agree.  But we're building comprehension,... MORE

How Stagnant Are We? A Time Diary Self-Experiment

Growth: Consequences
Bryan Caplan
An argument I've repeatedly had with Tyler Cowen:Tyler: We're stagnating!Bryan: No we're not.  You're ignoring massive CPI bias.  We live in an age of consumption-biased technological change.  Official numbers don't adequately adjust for quality improvements, and utterly ignore the mountains... MORE

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