Bryan Caplan and David Henderson

April 2013

A Monthly Archive (63 entries)

The Hulk's Handshakes and Optimal Monetary Policy

Public Choice Theory
Garett Jones
The world's a complex place and we don't know a lot about how it works. To make matters worse, it's not just that we're ignorant about the world, we're ignorant about ourselves: We rarely know our own strength. Given our... MORE

A Charitable Parable

Economic Philosophy
Bryan Caplan
From Matt Zwolinski: Guy stuck on the side of the road. Car tire blown out. Waves down passing car. Libertarian/Marxist in the car: "Sorry, buddy. What we need is structural change. In a [Communist Utopia/Freed market], there would be far... MORE

The Evasion of Equity

Economic Philosophy
Bryan Caplan
Economics textbooks often speak of the "efficiency-equity trade-off."  The definition of efficiency is fairly clear.  But what exactly is "equity"?  When cornered, most economists say that equity is a synonym for "fairness" or "distributive justice."  In practice, however, most economists... MORE

A Supererogatory Provision

Economic Philosophy
Bryan Caplan
I incline to the view that giving charity to deserving strangers is morally good but not morally required.  To use philosophical jargon, I hold that charity is supererogatory.  However, the fact that I consider charity to be above and beyond... MORE

Budget Cuts Seem to Work

Fiscal Policy
David Henderson
Washington Post blogger Mike Konzcal writes that we now have a test of monetary vs. fiscal policy. According to him, fiscal policy won. That is, fiscal policy is more potent and monetary policy is impotent. In fact the very data... MORE

Why Trailers Instead of Manufactured Homes?

Regulation
David Henderson
It's the regulations. In a comment on my post, "Tocqueville's Trailers," MingoV writes: Small manufactured houses make more sense than mobile homes. Here's why: 1. Almost no owner moves a mobile home, so the costs of frame/chassis, axles, wheels, hitch,... MORE

Open Borders in The Atlantic

Economic Philosophy
Bryan Caplan
The Atlantic profiles Vipul Naik, Michael Clemens, Michael Huemer, and other champions of free migration.  Highlights:What if there was a program that would cost nothing, improve the lives of millions of people from poorer nations, and double world GDP? At... MORE

Tocqueville's Trailers

Behavioral Economics and Rationality
David Henderson
To move into Pismodise you must meet four conditions: Be 55 or older, keep your dog under 20 pounds, be present when guests stay at your home, and be comfortable with what most Americans consider a very small house. "If... MORE

Since 2008 U.S. banks have been able to earn interest on their reserves: This pins down a minimum interest rate that banks can earn: They never lend for less than that amount. For decades longer, U.S. banks have been able... MORE

Bewerunge and Rosen's working paper on public- versus private-sector compensation begins with a discussion of recent controversy:Putting the inflammatory rhetoric aside, much of the debate boils down to the question of whether public and private sector workers receive about the... MORE

Garett Jones argues that the growth rate of the money supply is a target--and targets are often hard to hit, while short-term interest rates are an instrument. He writes: This is known as the "instruments versus targets" distinction in macroeconomics,... MORE

Back in 2010, USA Today and other popular media loudly declared that federal employees were grossly overpaid.  Famed economist Peter Orszag swiftly denied this allegation on behalf of the Obama administration.  I found his response extremely suspicious, but was too... MORE

Want to know how to win a gold medal in Rio in 2016? Here's a guaranteed plan to reach the top spot on the podium: 1. Qualify for an Olympic event. 2. Do better than every other competitor. That's it!... MORE

Will ObamaCare Reduce the Number of Uninsured People?

Economics of Health Care
David Henderson
In two words, not necessarily. In four words: "We simply don't know." Greg Scandlen walks us through the reasoning here. The whole thing is worth reading. An excerpt: The Congressional Budget Office is more constrained, but even they have upped... MORE

Talk this Morning: "More Immigrants, Please"

Labor Mobility, Immigration, Outsourcing
Art Carden
I'm speaking this morning to the New Horizons Program at UAB--a lifelong education program for senior citizens--on immigration. My outline and bibliography are here. I'll discuss jobs, wages, culture, crime--and the eugenic origins of immigration restrictions. I'm also going to... MORE

The Grave Evil of Unemployment

Behavioral Economics and Rationality
Bryan Caplan
Free-market economists rarely declare, "We have to do X about unemployment."  Why not?  Free-market economists' standard reply is just, "We expect X to fail."  Their critics, however, have a less favorable explanation: Free-market economists oppose X because free-market economists are... MORE

Bet on Euro: I Won

International Macroeconomics: Exchange Rates, International Debt, etc.
David Henderson
Back in October 2011, I had a bet on the Euro with Iain Murray of the Competitive Enterprise Institute. To recall, he bet that by the end of March 2013, Spain, Italy, and Greece would have left the Euro. I... MORE

James Buchanan on Writing

Political Economy
David Henderson
An excerpt from my appreciation of Public Choice, Gordon Tullock, and James Buchanan: One other thing I've gotten from Buchanan--primarily by hearing it from his past students, and mainly from the most-published ones--is his famous line, "Don't get it right;... MORE

In fiction politicians can say what they really think of voters. Two examples: 1. The Onion reports Hillary Clinton's thoughts on whether she should run for President (questionable language): ...while I can't definitively say what my plans are one way... MORE

Can Expectations Save Communism?

Behavioral Economics and Rationality
Bryan Caplan
Every social system requires favorable expectations to survive.  Democracy can't survive unless people expect losing parties to voluntarily surrender power.  Anarcho-capitalism can't survive unless people expect private defense firms to peacefully resolve their disputes.  Once you take the power of... MORE

Bleg: Median Voter Theorem

Public Choice Theory
David Henderson
In my Cost/Benefit Analysis course, I teach one segment on Public Choice. One of the issues I get into is the median voter theorem. I point out that it applies more directly to direct democracy, i.e., voting on initiatives and... MORE

Boston: Centralization vs. Friedrich Hayek and Jane Jacobs

Central Planning vs. Local Knowledge
David Henderson
The Massachusetts' governor's response to one murderer being at large was to shut down an entire large city--de facto, martial law. Various commenters have said that he "asked" people to stay in their homes. That might be literally true. But... MORE

Sundry Observations on Statistical Discrimination and Terrorism

Behavioral Economics and Rationality
Art Carden
There are a lot of great comments on my last post, "Better Living Through Statistics: Muslim Terrorists Edition." A few observations: That Muslims are far more likely to be terrorists than others is barely relevant to our day-to-day lives given... MORE

Friday Night Video: Shikha Dalmia on Unskilled Immigrants

Labor Mobility, Immigration, Outsourcing
David Henderson
With permission from ReasonTV, this is Shikha Dalmia on five reasons that unskilled immigrants are good for America. If you go to this link, you can find a fairly faithful transcript.... MORE

Better Living Through Statistics: Muslim Terrorists Edition

Behavioral Economics and Rationality
Art Carden
As I've written before, I'm excited about Bryan's forthcoming The Case Against Education (ooh! Here's a FEE podcast version on YouTube!). Here's another piece of advice that continues the Bubble/Serenity conversation started by Bryan and David. At the margin, you... MORE

Speech: The Perverse Economics of Sanctions

Upcoming Events
David Henderson
Tonight I'll be speaking at the Monterey Institute of International Studies on the perverse economics of sanctions. The other speaker is Stephen Zunes. The overall event is on Iran. 7:30 PM at the Irvine Auditorium, Monterey Institute of International Studies... MORE

ZMP, Morale, and Statistical Discrimination

Cost-benefit Analysis
Bryan Caplan
Recent Twitter exchange between myself and Tyler:@tylercowen: [ZMP] is about morale effects in the workplace, not "finding something for them to do," the latter is trivially easy.@bryan_caplan: This reply deserves mischief-free elaboration.@tylercowen: Is there a difference?@bryan_caplan: Asking "Is there a... MORE

Why are apparently good workers unemployed for so long in recessions? One channel that Tyler has promoted is ZMP: Some workers are almost completely unproductive, so employers can them rather than have them eat up all the pizza on Pizza... MORE

I enjoyed David's post on Bryan's Bubble. I'm an avid consumer (and producer) of advice, and I read big chunks of Harry Browne's How I Found Freedom in an Unfree World after David recommended it. Browne makes the very important... MORE

What You Say When You Don't Call an Applicant

Behavioral Economics and Rationality
Bryan Caplan
"If your phone doesn't ring, it's me."  When a potential employers doesn't call about your application, they're telling you something about you - but they're also saying something about themselves.  My friend Perry Metzger explains:[Reprinted with Perry's permission.]BTW, one effect... MORE

What You Say When You Throw an Application Away

Cost-benefit Analysis
Bryan Caplan
Tyler has an odd interpretation of an interesting story.  The story:[R]esearchers sent out 4,800 fake résumés at random for 600 job openings. What they found is that employers would rather call back someone with no relevant experience who's only been out... MORE

Physics Applied to Economics

Economic Education
David Henderson
When I teach my Energy Economics course, in the first problem set, one of the problems is the following: Name an energy activity that the government is currently engaged in that you think should be eliminated and give your reasons... MORE

Two public choice theories of fiscal policy: Under Starve the Beast, the spenders tell the tax-cutters, "If you get what you want, that means I can't get what I want."  It's a story of limits to budgets, limits to borrowing, limits... MORE

Immigration and Bubbles

Behavioral Economics and Rationality
Bryan Caplan
Vipul Naik called my attention to an interesting comment on immigration and bubbles:Isn't the bubble idea in opposition to the unlimited immigration idea? Your bubble advice boils down to surrounding yourself as much as possible with like minded people. Immigration... MORE

Proposition 65: When Government Cries Wolf

Central Planning vs. Local Knowledge
David Henderson
There was some confusion a few days ago about whether certain kinds of licorice are legal in California. I had pointed out that an out-of-state firm was unwilling, because of Proposition 65, to ship its licorice to California. That does... MORE

Margaret Thatcher's Legacy

Taxation
David Henderson
I've held off commenting on Margaret Thatcher because I didn't know her legacy as well as many did. In 2011, Bruce Bartlett pointed out that she did not succeed in reducing government spending or government revenue as a percent... MORE

How I Found Well-Being in a Bubble World

Behavioral Economics and Rationality
David Henderson
That could be the title of co-blogger Bryan's latest post, as commenter Rochelle essentially pointed out. Even though I'm not with him on all the particulars, I am with most. Here was my earlier version. My main purpose with this... MORE

Make Your Own Bubble in 10 Easy Steps

Behavioral Economics and Rationality
Bryan Caplan
Someone on Twitter asked for advice on how to create a Beautiful Bubble.  Perhaps he was teasing me, but it's a good question.  Here's my 10 Step Program:1. Amicably divorce your society.  Don't get angry at the strangers who surround... MORE

Proposition 65 and the Red Licorice Police

Regulation
David Henderson
My wife is a big fan of red shoestring licorice. She tried to order some on-line from an out-of-state vendor. Here's the e-mail she got back: Please accept our sincerest apologies. Due to changes in the California Proposition 65 at... MORE

AI and GE: Answers

Cross-country Comparisons
Bryan Caplan
Last week I posed the following question from my Ph.D. Micro midterm: Normal 0 MicrosoftInternetExplorer4 Suppose artificial intelligence researchers produce and patent a perfect substitute for human labor at zero MC.  Use general equilibrium theory to predict the overall economic... MORE

On Homeschoolery: A Bet, Revised

Economics of Education
Art Carden
Thanks, everyone, for suggestions on my proposal below, and I'm especially honored that seasoned bettor Bryan offered a few suggestions (I also got a nice email with suggestions from EconLog friend Fabio Rojas, who noted that the selection biases in... MORE

The Effect of Intelligence on Job Performance is Intuitive

Behavioral Economics and Rationality
Bryan Caplan
From Schmidt and Hunter, "General Mental Ability in the World of World" (2004, Journal of Personality and Social Psychology):Why Is GMA [General Mental Ability] So Important for Job Performance?It can be difficult for people to accept facts and findings they... MORE

Art's Bet

Economic Methods
Bryan Caplan
First, let me join the rest of EconLog in welcoming guest blogger Art Carden.Second, I'm extremely pleased that Art quickly proposed a home school bet.  Betting is what separates us from the mass of men who live by loose and... MORE

Is Econ a Mickey Mouse Major?

Economics and Culture
Bryan Caplan
My intellectual conscience engages whenever I speak of "Mickey Mouse majors."  After all, many people see my own discipline - economics - as a prime example.  Are they wrong?It depends.  There are at least four different senses of the "Mickey... MORE

First things first: A hearty welcome to my new co-blogger Art Carden.To the task at hand: A while ago I wrote on how "Capital should be untaxed" should be the default view in economics: Zero capital taxation should be the... MORE

From the WSJ (h/t Tyler):The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts...One way to read this... MORE

Letters to Kim Jong-Un

Political Economy
Bryan Caplan
A thought-provoking request from the noble Vipul Naik, reprinted with his permission:If you were to write a letter to Kim Jong-Un with suggestions on how to improve living conditions in North Korea, what would you write in the letter? Assume... MORE

On The Effects of Homeschooling: A Bet

Alternative Economics
Art Carden
I can't wait for Bryan's The Case Against Education: every semester, my beliefs move in favor of the signaling model and against the human capital model of schooling. This isn't to say there aren't a lot of students who are... MORE

Jared Bernstein Gets Efficiency Wrong

Taxation
David Henderson
Jared Bernstein, formerly chief economist for Vice-President Joe Biden, argues for a measure that I agree with him on, but ends up arguing, on one criterion, against the measure. He doesn't know that this argument goes the other way, which... MORE

Krugman Gets Hoover Wrong

Economic History
David Henderson
No one whose opinion I respect doubts that Paul Krugman is very clever. Here's a recent example from his column in yesterday's New York Times, titled "The Urge to Purge": When the Great Depression struck, many influential people argued that... MORE

IQ and Hiring: Does the Law Matter?

IQ in Economics
Bryan Caplan
While investigating the legality of hiring based on educational credentials and IQ tests, I came across an interesting old post by Half Sigma.  Why credentialism is safe but IQ tests aren't:[I]t's OK to use college degrees as a hiring requirement...... MORE

Worstall on Cyprus and Russians

Cross-country Comparisons
David Henderson
In response to my post earlier today, Tim Worstall wrote me. He quoted this from my review: We have examples of highly extractive governments even in the modern world. One shocking one, to me at least, is the case of... MORE

Acemoglu and Robinson on the Wealth of Nations

Books: Reviews and Suggested Readings
David Henderson
Acemoglu and Robinson divide countries into two types: extractive and inclusive. In extractive countries, one group--usually a very small minority--uses coercive power to grab wealth from and, often literally, enslave a larger group. In inclusive countries, political power is widely... MORE

International IQ Testing Bleg

IQ in Economics
Bryan Caplan
A series of queries that's stumping most of my favorite IQ researchers:Are there any countries where IQ testing for hiring purposes is totally legal?  Largely legal? Do we have any idea if the education premium rose less in those countries... MORE

AI and GE

Growth: Consequences
Bryan Caplan
My favorite question from this year's Ph.D. Micro midterm:Suppose artificial intelligence researchers produce and patent a perfect substitute for human labor at zero MC.  Use general equilibrium theory to predict the overall economic effects on human welfare before AND after... MORE

Legality of Credentialism Bleg

Labor Market
Bryan Caplan
I'm looking for sources about the legality of hiring on the basis of educational credentials.  If you've got any pointers for me, please share them in the comments.P.S. Evidence on what firms can safely do in practice is much more... MORE

Blood and Expectations: The Case of the American Liquor Industry

Behavioral Economics and Rationality
Bryan Caplan
Suppose you had a meeting with Al Capone in 1923.  He tells you, "The Irish are giving us trouble with their cut-rate beer, so we're gonna rub 'em out."  You'd probably feel a chill run down your spine.  You certainly... MORE

Henderson on Mulligan's Redistribution Recession

Books: Reviews and Suggested Readings
David Henderson
Casey Mulligan's cleverly titled book, The Redistribution Recession, could have been one of the most important economics books in 2012. It makes the case that a major reason U.S. employment has been so low is that during the recent recession,... MORE

Crazy Equilibria: From Democracy to Anarcho-Capitalism

Behavioral Economics and Rationality
Bryan Caplan
Imagine advocating democracy a thousand years ago.  You sketch your basic idea: "Every few years we'll have a free election.  Anyone who wants power can run for office, every adult gets a vote, and whoever gets the most votes runs... MORE

Why Economics and Liberty?

Economic Methods
Art Carden
I'm honored to join the EconLog team as a guest blogger for the next few months. The original bloggers here--Bryan Caplan, David Henderson, and Arnold Kling--have played very important roles in my intellectual development. I've learned much from what they... MORE

Introducing Art Carden

Economic Education
David Henderson
I'm pleased to announce that EconLog has a new guest blogger. He is Art Carden. Art is an Assistant Professor of Economics at Samford University's Brock School of Business in Birmingham, Alabama, a Senior Research Fellow with the Institute for... MORE

Carden and Horwitz on Market Failure

Public Choice Theory
David Henderson
Externalities, public goods, asymmetric information, and market power provide necessary--but insufficient--conditions for intervention to be justified. They certainly are not talismans that provide interventionists with carte blanche to tinker with the members of a society as if they were pieces... MORE

Major Premium

Cost-benefit Analysis
Bryan Caplan
Economists usually talk about the college premium, but the college premium heavily depends on your major.  At the same time, though, stronger students typically choose harder - and more lucrative - majors.  Thus, the college premium is doubly infected by... MORE

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