Bryan Caplan and David Henderson

February 2013

A Monthly Archive (69 entries)

Hummel on Fed's Billion-Dollar Losses

Monetary Policy
David Henderson
The last temptation is the greatest treason: To do the right deed for the wrong reason. --T.S. Eliot, "Murder in the Cathedral" I was reminded of this quote when reading an e-mail Jeff Hummel sent to a few of his... MORE

Henderson on John Stossel Show

Fiscal Policy
David Henderson
John Stossel's show tonight on the Fox Business Channel (9:00 p.m. EST and 6:00 p.m. PST) is about the sequester, budget cuts, crazy government programs, etc. I sat in the green room and watched almost all of it and it's... MORE

Is Self-Assertion a Free Lunch?

Behavioral Economics and Rationality
Bryan Caplan
Steve Sailer has an interesting reaction to yesterday's post on Asians' Democratic leanings: Bryan has the psychological dynamics 180 degrees backwards. The Republicans problem with Asian and Latin voters is not that Republicans don't respect the newcomers enough, it's that... MORE

Citing an OECD study, Yglesias notes:...America has the highest-paid general practitioners in the world. Why is this?  Presumably American MDs are great at using credentialism to restrict the supply of labor, but there's another possible reason that deserves your attention. Really, a... MORE

Why Are Asians So Democratic? The Respect Motive in Action

Behavioral Economics and Rationality
Bryan Caplan
Republican critics of immigration often decry Hispanics' lop-sided identification with the Democratic Party.  Due to their low income, the story goes, Hispanics naturally prefer the party of Big Government.  Since Hispanics will never vote Republican, Republicans' only prudent response is... MORE

Respect for Authority: The Case of Canada

Cross-country Comparisons
David Henderson
Last September, my friend Stephen Cox wrote an excellent obituary of another friend of mine, Ronald Hamowy. Here's one paragraph that got me thinking: Ronald was a professor in the Department of History at the University of Alberta from 1969... MORE

Measurement Error and the Education Premium

Cost-benefit Analysis
Bryan Caplan
If you take a look at the Census, education appears to be extremely lucrative.  Back in 1975, drop-outs earned about 20% less than high school grads, college grads earned over 50% more than high school grads, and holders of advanced... MORE

Should Cost/Benefit Analysis Consider Only Benefits?

Cost-benefit Analysis
David Henderson
There's no such thing as a free lunch. Don't worry. I'm not going to produce a new insight that cost/benefit analysis should consider only benefits. But the reason for the title of this post is that a logical conclusion to... MORE

Economics and Fallibility

Behavioral Economics and Rationality
Bryan Caplan
When students first hear about the famous Akerlof's "lemons model," they almost invariably misinterpret it.  "Aha," they think, "this is why used car dealers get rich ripping off unsuspecting customers."  The true point, of course, is that asymmetric information makes... MORE

Armen Alchian: Teacher

Economic Education
David Henderson
I've written between 45 and 50 op/eds in the Wall Street Journal but never before have I had the intense response--all positive, by the way--that I've had to my Wednesday piece on the late Armen Alchian. I heard from Alchian's... MORE

Sequester: This is Supposed to be Scary?

Fiscal Policy
David Henderson
My local newspaper linked to a badly written story about the sequester. The author is Ryan Teague Beckwith of Digital First Media and the piece is titled "Sequester: Seven Specific Cuts the Government is Considering." My comments follow on each.... MORE

"Locally Blonde"

Central Planning vs. Local Knowledge
David Henderson
A few minutes ago, I went to drop off my shirt and pants and pick up my dry cleaning. I gave Jennifer the slip for my pick-up items. It's pink and they've been using pink slips for some time. Then... MORE

The Washington Post reports that if the sequester happens...About 800,000 Defense Department civilians could face 22 unpaid leave days, spread out over as many weeks, amounting to a 20 percent pay cut over that period.Because work requirements will not fall,... MORE

"Low-Immigration, Pro-Immigrant."  So reads the masthead of the Center for Immigration Studies.  I'm still trying to make sense of it.  If someone announced a "low-in-law visits, pro-in-law stance," we'd laugh.  If you like your in-laws, you'll welcome frequent visits.  If... MORE

Henderson on Responsibility for Sequestration

Fiscal Policy
David Henderson
Sam Brock of the NBC affiliate in San Jose came down to Monterey on Wednesday to interview me about the coming sequester of government spending. I didn't realize to what extent the interview would be about "who is to blame."... MORE

The Minimum Wage and Monopsony

Labor Market
David Henderson
There's been a fair amount of discussion on the web lately (here and here, for instance) about the minimum wage and monopsony. As is well known in economics, a skillfully set minimum wage, in the presence of monopsony in the... MORE

Bowles-Simpson: Don't Fight the Focal Point

Fiscal Policy
Garett Jones
In today's US News Debate Club, I offer my views on the latest deficit reduction outline offered by Clinton Administration official Erskine Bowles and former GOP Senator and current curmudgeon Alan Simpson.  My closing sentence: We could do worse than the latest... MORE

Alchian Didn't Do a Lot of Work?

Economic Education
David Henderson
In my Wall Street Journal piece, I quoted Friedrich Hayek saying to me, in 1975: There are two economists who deserve the Nobel prize because their work is important but won't get it because they didn't do a lot of... MORE

Sheepskin Effects in the General Social Survey

Economics of Education
Bryan Caplan
A sizable literature on the education premium finds solid evidence of a "sheepskin effect": diploma years pay noticeably more than other years.  When I noticed that the General Social Survey has a DEGREE variable, I saw a golden opportunity to... MORE

Part of the reason money growth predicts real economic growth is because banks are in the business of being ahead of the curve: They lend money when they think a boom is likely in the near future, and they cut... MORE

Henderson on Alchian

Economic Education
David Henderson
The Wall Street Journal published my piece this morning on the late Armen Alchian and some of his important contributions to economics. Some excerpts follow. The intro: In 1975, I attended a week-long conference in Connecticut at which the star... MORE

Some Evolutionary Food for Thought

Behavioral Economics and Rationality
Bryan Caplan
Further evidence that social scientists underestimate the power of evolution, courtesy of Marlene Zuk:[A] new field called experimental evolution is showing us that sometimes evolution occurs before our eyes, with rapid adaptations happening in 100, 50, or even a dozen... MORE

Barkley Rosser on Armen Alchian

Economic History
David Henderson
Barkley Rosser has given me permission to reprint his story about Armen Alchian that he told on Marginal Revolution this morning. Here goes: There is a curious story about Alchian from his work at RAND and from just after his... MORE

Armen Alchian, RIP

Property Rights
David Henderson
Armen Alchian died this morning at age 98. He taught me microeconomics my first quarter at UCLA, in the fall of 1972. At the time, he was 58 and in his prime. That was the most demanding economics course I... MORE

Town Without Traffic Lights II

Regulation
Garett Jones
In 2010, Alex wrote:Here's a video of a small town in Britain that turned its traffic lights off.  Order ensued.It's 2013.  Here's a video of another small town in Britain, Poynton, that turned its traffic lights off in the heart... MORE

Fiduciary Excuses

Economic Philosophy
Bryan Caplan
"I was just following orders."  "I was only doing my job."  "I had a legal obligation to act."  The most self-righteous criminals often invoke fiduciary obligations to explain why their actions were morally required rather than morally forbidden.Mike Huemer, guest... MORE

Lord Acton on "Power Corrupts"

Public Choice Theory
David Henderson
I'm sure that most of you know the famous saying, "Power tends to corrupt, and absolute power corrupts absolutely." I'm also pretty sure that a large percent of you who know the saying also know that it was the famous... MORE

The first rule of empirical social science is that correlation isn't causation: Purchases of baby strollers predict childbirth but few of us believe baby strollers cause childbirth. We're all trained in the post hoc fallacy, we're often looking for solutions... MORE

Winship's Numerate Insight on Growth

Growth: Consequences
David Henderson
Brookings Institution economist Scott Winship makes a simple arithmetic point that is a powerful economic one: a lower growth rate starting from a high level can give us higher absolute growth than a higher growth rate starting from a low... MORE

Does Conflict Immigrate?

Economics and Culture
Bryan Caplan
During today's debate #2, I circled back to debate #1: If you really want to help the world's victims of oppression and intolerance, open borders is a cheap, humane alternative to military intervention.  How many Rwandan lives would have been... MORE

Pacifism in 4 Easy Steps

Economic Philosophy
Bryan Caplan
Normal 0 false false false MicrosoftInternetExplorer4 As I said, this morning's Students for Liberty debate was a double-header.  Here's my two minute opening statement for Topic #2: War.Pacifism in 4 Steps  1.      In the modern world, there are no... MORE

Open Borders in 4 Easy Steps

Economic Philosophy
Bryan Caplan
Today at Students for Liberty 2013 I did a double-header debate against the Center for Immigration Studies' Jan Ting.  The format gave each of us a two minute (!) opening statement for each topic.   Here's my opening statement for Topic... MORE

Krugman and a Critic on the Minimum Wage

Labor Market
David Henderson
President Obama has proposed an increase in the minimum wage from its current level of $7.25 an hour to $9.00 an hour. This is after the George W. Bush increase, between 2007 and 2009, from $5.15 an hour to $7.25... MORE

Me at Students for Liberty 2013

Economic Education
Bryan Caplan
I'm speaking at Students for Liberty's 2013 conference tomorrow and Sunday.  My topics: public choice, voter irrationality, and The Case Against Education.  I'll also be debating the Center for Immigration Studies' Jan Ting on (a) immigration, and (b) military intervention. ... MORE

The Wall Street Journal's Mary Kissel tweets: Blocking Hagel sets a bad precedent & lets Obama label the GOP obstructionist. And what happens when the Rs take back the White House?[More on the Hagel non-filibuster here]Do precedents matter? Does my behavior... MORE

IGM on High-Skilled Immigration

Economic Methods
Bryan Caplan
The IGM Forum reacts to:The average US citizen would be better off if a larger number of highly educated foreign workers were legally allowed to immigrate to the US each year.The result is very lop-sided agreement:The award for the strangest... MORE

David's latest reply on illegal immigration is excellent, and I freely concede his two main points as I understand them.  Namely:1. A narrow segment of illegal workers would lose in the short-run from legalization:I had in mind a specific group... MORE

Employers and Immigrants: Response to Bryan Caplan

Labor Mobility, Immigration, Outsourcing
David Henderson
In responding to my criticism of his post, Bryan quoted two sentences but left out the sentences that followed in the same paragraph. That omission matters. Bryan also subtly changed the subject. First, the omission. Bryan writes: David is right... MORE

The Perks of Being Illegal

Labor Market
Bryan Caplan
David makes a very strong case for the strange-to-me view that employers actually prefer illegal workers.  He's especially compelling when he notes:[I]f you're an illegal worker earning less than the minimum, then when you become legal, your ability to credibly... MORE

Illegality, Minimum Wages, and Credible Commitment

Labor Mobility, Immigration, Outsourcing
David Henderson
Co-blogger Bryan Caplan finds "strange" the claim that "employers prefer to hire illegal immigrants because they don't have to pay them minimum wage or follow other labor market regulations." I don't find it strange at all. First, although I know... MORE

Assorted Tweets

Monetary Policy
Garett Jones
1.  "OK, who thinks sequestration would cause the Fed to boost QE?"If you're raising your hand, then you think the zero nominal bound on interest rates isn't a zero nominal bound on looser monetary policy.  And you think that the... MORE

Is Illegality A Benefit?

Labor Market
Bryan Caplan
One of the strangest claims I've heard is that employers prefer to hire illegal immigrants because they don't have to pay them minimum wage or follow other labor market regulations.  I can imagine this happening under special circumstances (e.g. everyone... MORE

Must Default Be Avoided at All Costs?

Fiscal Policy
David Henderson
Default must be avoided at all costs and should not be an option on the table. This is from Jason J. Fichtner and Veronique de Rugy, "The Debt Ceiling: Assets Available to Prevent Default," January 25, 2013. What's their reasoning?... MORE

Collective Guilt: A Socratic Dialogue

Economic Philosophy
Bryan Caplan
Pericles: Have you seen the latest outrage our enemies have committed against us?  We have to strike back.Socrates: Strike back against whom? Pericles: Our enemies, as I said. Socrates: Right.  But how will we pinpoint the enemies who perpetrated this... MORE

My Selfish Reasons to Have More Kids tries to persuade people to increase their fertility.  Jonathan Last's What To Expect When No One's Expecting explicitly disavows this aim: Finally, this book is not an attempt to convince you to have... MORE

The new Econ Journal Watch piece by David Cushman checks this claim that Krugman made in March 2009:...it is right to expect high growth in future if the economy is depressed now. I'm not writing about that quote, since Cushman and... MORE

Open Borders and Personality Bleg

Behavioral Economics and Rationality
Bryan Caplan
What personality types are most likely to support open borders?  Since almost no one in the First World favors open borders, we shouldn't expect to find common personalities that typically support open borders.  It's conceivable, though, that rare personalities typically... MORE

Jonathan Last's new What To Expect When No One's Expecting is the best-written, most engaging, and funniest book on the social cost of low birth rates and population decline.  While he focuses on fertility, he breaks with typical conservatives by... MORE

A proposal by the Prince George's County Board of Education to copyright work created by staff and students for school could mean that a picture drawn by a first-grader, a lesson plan developed by a teacher or an app created... MORE

Some Wisdom of Don Corleone

Behavioral Economics and Rationality
Bryan Caplan
I just finished re-reading The Godfather.  It's full of grist for the social science mill.  My personal favorite:"There are men in this world," he said, "who go about demanding to be killed.  You must have noticed them.  They quarrel in... MORE

Taken together, the results imply that anti-opium efforts substantially increased the opiate-industry resources flowing to the Taliban. For each kilogram of opium removed from the market, the estimates imply that only one-sixth of a kilogram would have come from Taliban-heavy... MORE

Amazing Dan Klein

Behavioral Economics and Rationality
Bryan Caplan
I'm puzzled by Dan Klein's recent guest post.  I trust his empirics.  Indeed, I prize them.  But what do they show?  As far as I can tell, Dan's empirics show that a sizable minority of economists are small-l libertarians, but... MORE

Benefits Bleg

Labor Market
Bryan Caplan
I'm looking around for U.S. data on employment benefits as a function of education (or, failing that, income).  Data on health insurance as a function of education would be almost as good.  The ideal table would look something like:Education Level... MORE

You've heard the expression "retire in place": You stop putting in a real effort at work because your employer never fires anyone. The web is full of anecdotes about cushy jobs where you can retire in place and spend your... MORE

The Feds' Suit of S&P

Finance: stocks, options, etc.
David Henderson
I found two pieces on the federal government's suit of S&P particularly interesting because both make important points I hadn't thought of. First, the Wall Street Journal's editorial page take, which is titled "Payback for a Downgrade?" It's dec line... MORE

An Amazing Consensus among Economists: Not

Economic Methods
Bryan Caplan
My friend and colleague Dan Klein has written a guest reply to my recent post on economists' consensus.  Here's Dan: v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} I was surprised to read Bryan's words: "Compared to non-economists, economists enjoy... MORE

Krugman on Gains from Trade

International Trade
David Henderson
Paul Krugman has posted his slides for a lecture on gains from trade. They're excellent. One fun highlight on the last slide is a quote from my fellow Canuck, the late Harry Johnson: Second-best policies are usually recommended by third-best... MORE

Your Big Break, If Any

Labor Market
Bryan Caplan
I got my big break in the summer of 1993 when I met Tyler Cowen.  I was a summer fellow at the Institute for Humane Studies, and he was our weekly speaker.  We had time to chat afterwards, and I... MORE

Nowrasteh on Guest Workers

Labor Mobility, Immigration, Outsourcing
David Henderson
That is why a robust guest-worker program is needed: to accommodate future flows of migrants. After decades of unauthorized immigration motivated by economic gain, it is fantasy to expect it to stop after legalizing those unauthorized immigrants already here. Let... MORE

Government Hiring: An Axiomatic Stabilizer

Fiscal Policy
Garett Jones
Last week I said: It would be great to measure how much reported GDP volatility would fall if we calculated the whole thing the same way we calculate the government part of GDP. Since the government doesn't report profits, and since... MORE

Dwight Lee on Socially Responsible Corporations

Public Choice Theory
David Henderson
I Can See Subsidies and Import Restrictions If a corporation generously gives to charity, is it socially responsible? Most people would say yes. But economist Dwight Lee, in "Socially Responsible Corporations: The Seen and the Unseen," Econlib's Featured Article for... MORE

Instead of writing a guest post, Mike Huemer ended up just replying to your questions in the comments.  His main reply is here, but don't miss the back-and-forth.... MORE

Big Break Theory

Labor Market
Bryan Caplan
People often hope for a "big break" - a large, durable improvement in their situation.  An unknown actor landing a major role in a big-budget film is the classic example.  But big breaks seem to be everywhere: getting your first... MORE

College Athletes: Go on Strike!

Labor Market
David Henderson
The latest John Stossel show on Fox Business Network is another home run. In it, he deals with the economics of sports: ticket "scalping," the NCAA's enforcing a monopsony on the labor of student athletes, laws against gambling on sports,... MORE

Me on Economists' Ideological Divide

Economic Methods
Bryan Caplan
My "What Makes People Think Like Economists?" (Journal of Law and Economics 2001) also analyzes why economists disagree with each other.  Key results (footnotes omitted):Overall, the SAEE evidence suggests that disagreements among economists are surprisingly random. There are 10 questions... MORE

ObamaCare: Two Ominous Signs

Economics of Health Care
David Henderson
In the last few days, there have been two ominous signs about our future under ObamaCare. Both suggest the term "ObamaCare" is more accurate than the more-often used term "Affordable Care Act," because both suggest that the term "affordable" is... MORE

Kling v. Huemer

Books: Reviews and Suggested Readings
Bryan Caplan
In case you missed it: 1. Arnold Kling critiques Michael Huemer's new book.  2. Huemer responds, with a few extra lines from me, and Kling offers his rejoinder.... MORE

Marshmallow Bleg

Behavioral Economics and Rationality
Bryan Caplan
Have results from the Stanford Marshmallow Experiment ever been used to predict adult income?  Or even better, adult income controlling for education and IQ?Any relevant citations are much-appreciated.... MORE

Wolfers on Economists' Ideological Divide

Economic Methods
Bryan Caplan
Justin Wolfers has skeptical comments on Gordon and Dahl's new paper on economists' ideology, featuring this cool graph:Since I remained a little unclear about the origin of the graph, I emailed Wolfers.  He graciously responded, and gave me permission to... MORE

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