Bryan Caplan and David Henderson

May 2013

A Monthly Archive (71 entries)

Superfreakonomics on Geo-Engineering

Energy, Environment, Resources
David Henderson
Back in 2009, I posted three pieces on Steven D. Levitt and Stephen J. Dubner's book Superfreakonomics. As with their first book, there were strengths and weaknesses. I highlighted them here, here, and here. I never posted, though, on their... MORE

Introducing Alberto Mingardi

Econlog Administrative Issues
Amy Willis
All of us at EconLog are delighted to welcome Alberto Mingardi as our newest guest blogger. Mingardi, one of the rising stars of European libertarianism, is the founder and Director General of the Italian free-market think tank, Istituto Bruno Leoni. His latest book, "L'intelligenza del... MORE

Reynolds on Krugman and DeLong

Income Distribution
David Henderson
Alan Reynolds has posted two excellent responses to criticisms of him by Paul Krugman and Brad DeLong. They are "Imaginary Squabbles Part 3: Krugman and DeLong's Changing Theories and Missing Facts" and "Imaginary Squabbles Part 4: Krugman and DeLong on... MORE

An economist who has published in the American Economic Review has written a paper that s/he thinks is his/her best work--estimating a probability of 1/3 that it lands in the AER. The anonymous author is offering to sell the paper... MORE

The Subprime Crisis: Why Asymmetric Information Didn't Save Us

Behavioral Economics and Rationality
Bryan Caplan
Foote, Gerardi, and Willen's subprime manifesto is theoretically enlightening as well as empirically edifying.  Unlike many economists, they understand asymmetric information on an unusually deep level.  Standard adverse selection models suggest that the market for iffy mortgage-backed securities would never... MORE

If I Had a Billion Dollars: My Answer to Bryan's Question

Central Planning vs. Local Knowledge
Art Carden
Bryan asked his PhD students how the government should spend $1 billion most efficiently (in the Kaldor-Hicks sense). He posted the best answers here. I agree generally that subsidizing decisions to have kids would be a good use of the... MORE

Solow on Friedman

Fiscal Policy
David Henderson
I promised recently that I would post on Robert Solow's views on Friedman once I had got over the shock. I am now over the shock. Because Solow's piece is quite brief, I won't try to summarize it here. Instead,... MORE

Monetizing Job Security

Cost-benefit Analysis
Bryan Caplan
Federal workers' total compensation far exceeds that of private sector workers.  The CBO says so, and so does a large academic literature.  One glaring omission, though, is federal job security.  High job security is nice to have during normal times,... MORE

Jason Furman at CEA

Business Economics
David Henderson
There's a rumor, presumably well-founded, that Jason Furman will become the next Chairman of the Council of Economic Advisers. Given the universe of people from whom President Obama probably chose, I think it's probably a good choice. Four years ago,... MORE

Feedback Loops in Government

Public Choice Theory
David Henderson
Public Choice in a Nutshell Government officials are happy making and executing plans that affect the lives of millions, but when things go wrong, well ... they're willing to accept the responsibility, but they're not willing to take the blame.... MORE

Here are highlights from the UEFA Champions League match between Bayern Munich and Borussia Dortmund from a few days ago. There is no Great Stagnation.... MORE

Like most people, Tyler Cowen thinks that rising high school graduation rates are good news:The nation's high school graduation rate has risen -- to 78 percent in 2010, the Education Department says in its most recent estimate. That's obviously still... MORE

Henderson on Milton Friedman

Economic Philosophy
David Henderson
What were Friedman's other characteristics that mattered? I'll explain by telling my own tale of discovering Milton Friedman. In the summer of 1968, when I was 17 and had just finished reading almost all of Ayn Rand's works, fiction and... MORE

Intelligence, Common Sense, and Subprime

Behavioral Economics and Rationality
Bryan Caplan
Conjecture: Financial experts' strange combination of astute calculation and elementary error on subprime lending is one of history's most important examples of the contrast between intelligence and common sense.Discuss.... MORE

John Allison's Nice Summary

Public Choice Theory
David Henderson
As a financial contributor to the Cato Institute, I get a bimonthly memorandum from the president and CEO of Cato, John A. Allison. In the latest one, he leads off with two paragraphs that sum up, beautifully succinctly, so much... MORE

There were, once again, some truly excellent comments on my last post, in which I offered my answers to the questions blockquoted below. Furthermore, Jeanne Hoffman at Heels First Travel--a lawyer by training and a member of the IHS staff--also... MORE

Shorting Housing

Behavioral Economics and Rationality
David Henderson
Thanks to Bryan Caplan for his excellent post this morning. In the Comments section, people discussed the difficulty of shorting housing even if you thought it was overpriced. I'll tell two stories of two friends who saw what was happening.... MORE

Conditional Insight, Unconditional Disaster

Behavioral Economics and Rationality
Bryan Caplan
I just read Foote, Gerardi, and Willen's subprime facts manifesto.  Twice.  In the process, I learned more about the subprime crisis than I learned in the last five years put together.  If you're going to read one piece on this... MORE

Coase on a Plane: My Answer

Cost-benefit Analysis
Art Carden
Thanks to everyone who offered excellent comments on my last post. Most people were thinking about it the way I do. To recap, here were the questions I someday want to ask on an exam or in a job interview:... MORE

Consumer Surplus: An Application of the Concept

Cost-benefit Analysis
David Henderson
I've written on consumer surplus a number of times on this blog. See here. David Boaz recently posted on a 1979 talk by Nathaniel Branden to which I was the introducer. In my intro to Nathan, I applied the concept... MORE

Coase on a Plane, or, an Idea, Recycled

Microeconomics
Art Carden
I agree with co-blogger Bryan that most voters are rationally irrational. My sense is that there are also a lot of voters and people in positions of influence who know just enough economics to be dangerous. As Steve Horwitz and... MORE

The Flaw in Heyne, Boettke, and Prychitko

Economics of Health Care
David Henderson
In a post on Tuesday, "Find the Flaw," I asked readers to find and evaluate the implicit assumption in the following passage from an economics textbook: When physicians must be licensed and new drugs approved by the Food and Drug... MORE

Commuting, Chronic Stress, and Costs That Are Harder to See

Behavioral Economics and Rationality
Art Carden
This morning, I tweeted the following: Spend extra $ to cut your commute. I read (in @rdobelli's book?) that we underestimate commuting costs.— Art Carden (@artcarden) May 22, 2013 We've tried to model it. When we lived in Memphis, we... MORE

Tocqueville's Tweeters

Central Planning vs. Local Knowledge
David Henderson
Private Sector, 1: FEMA, 0 Social media is [sic] often recognized narrowly as a way to connect with friends, or to share and read the news. Yesterday it was demonstrated that social media can serve as a medium of mobilization... MORE

Vipul Naik drew my attention to Brian's comment on my last immigration post:If you are a good libertarian, you will care only about your own freedom and well being. The freedom of others is only of concern to the extent... MORE

The Dirty Laundry of Instrumental Variables

Economic Methods
Bryan Caplan
Are instrumental variables (IV) estimates really superior to ordinary least squares (OLS)?  Most high-status empirical economists seem to think so.  Meta-analyses often treat IV as presumptively superior to OLS.  Yet when you ponder IV output, it's often simply bizarre.Rose and... MORE

Find the Flaw

Economics of Health Care
David Henderson
Here is a passage from one of my favorite economics textbooks: When physicians must be licensed and new drugs approved by the Food and Drug Administration (FDA) before they can be marketed, buyers are spared the cost of evaluating goods... MORE

Updating My RSS Feeds: What Am I Missing?

Cost-benefit Analysis
Art Carden
With the end of the semester and the coming demise of Google Reader, I'm going to take an inventory of my already-thin list of RSS feeds and add and subtract as I deem necessary. Since crowdsourcing is the hip, "in"... MORE

"Craziness" and Immigration Policy: A Dialog with Brad Trun

Behavioral Economics and Rationality
Bryan Caplan
A while back on Twitter, I asked:Question for people who think my views on immigration are "crazy": Would the same views remain "crazy" if I were Haitian?Brad Trun, blogger at Libertarian Realist, wrote a direct and forthright reply.  Some will... MORE

How to Spend a Billion Dollars: Best Answers

Cost-benefit Analysis
Bryan Caplan
Thanks for all 115 answers to my "how to spend a billion dollars" challenge.  Two general observations:1. When you claim that X is most efficient way for the federal government to spend an extra billion dollars, you should point to... MORE

Population Externality Bleg

Cost-benefit Analysis
Bryan Caplan
Suppose a city's population exogenously rises.  You might think that price theory clearly implies that demand for real estate will rise.  But that's not so.  In theory, higher population could generate a congestion externality so awful that demand for real... MORE

Values Every Scholar Should Adopt

moral reasoning
Art Carden
Jacob Levy directs readers to the Mission Statement of the Freedom Center at the University of Arizona. I agree that these are values to be emulated. While I sometimes allow the perfect to become the enemy of the good, I... MORE

Congestion Externality Bleg

Cost-benefit Analysis
David Henderson
In the cost/benefit analysis course i teach, one of the actual cost/benefit analyses we work our way through--and one that I present as a reasonably good CBA--is a study done by two St. Louis Federal Reserve economists on adding another... MORE

Age and Common Sense

IQ in Economics
Bryan Caplan
Jim Flynn's latest book has fascinating info on age and intelligence.  But Sternberg, Wagner, Williams, and Horvath, "Testing Common Sense" (American Psychologist, 1995) suggest that Flynn misses an important part of the story.  There's a widespread perception that "common sense"... MORE

Look Out the Window, or, Stop and Smell the Bacon

Energy, Environment, Resources
Art Carden
Ronald Coase famously advised economists to "look out the window" every so often. It's advice I (try to) take to heart. Here's an example. On Monday afternoon, I was standing behind our building waiting for a few people and "enjoying"... MORE

Another Inflation Bet

Economic Methods
Bryan Caplan
Arthur Breitman and I have hammered out the following inflation bet: If the 12 month change of the CPI-U as reported by the BLS is greater than 5% for any sliding window between today and December 2015 in monthly increments,... MORE

Linda Gorman on How ObamaCare Treats Middle Class

Economics of Health Care
David Henderson
Linda Gorman, my former Naval Postgraduate School colleague and author of three excellent articles in The Concise Encyclopedia of Economics (here, here, and here), has written a post laying out some weird consequences of the ObamaCare law. I would be... MORE

Recent Reading and Coming Attractions: Stats, Stats, and More Stats!

Books: Reviews and Suggested Readings
Art Carden
Here's a quick update to yesterday's post on what I've been reading lately. I had to give to exams this morning, so that gave me plenty of time to read. If you're looking for something to take to the beach... MORE

How to Spend A Billion Dollars

Cost-benefit Analysis
Bryan Caplan
My Ph.D. students' responses to the following question on their final exam disappointed me:In the modern U.S., what is the most efficient way for the federal government to spend an extra billion dollars?  What is the maximally utilitarian way for... MORE

Contrarian Virtue

Economic Philosophy
Bryan Caplan
In case it's unclear, nothing in my analysis of conformity and virtue implies that I personally am especially virtuous.  The fact that I hold many unpopular views does however mean that my virtue is unusually easy to assess.  If you... MORE

Kenneth Elzinga on Teaching Economics

Economic Education
David Henderson
The best talk I attended at the annual meetings of the Association for Private Enterprise Education (APEE) was a luncheon speech given by Kenneth Elzinga of the University of Virginia. I have known Ken since the early 2000s when we... MORE

"Social Welfare Groups" Defined in the Process of Their Emergence

Central Planning vs. Local Knowledge
Art Carden
One of my favorite essays in the social sciences is James Buchanan's very short "Order Defined in the Process of its Emergence." It probably has the highest ratio of insight-to-text of any article I've ever read, and I come back... MORE

You Will Know Them By Their Unpopular Views

Behavioral Economics and Rationality
Bryan Caplan
Consider a world where 80% of people are Conformists, 10% of people are Righteous, and 10% are Reprobates.  The Conformists are epistemically and morally neutral, so they believe and support whatever is popular.   The Righteous are epistemically and morally... MORE

Recent Reading

Books: Reviews and Suggested Readings
Art Carden
I tell people I have the best job in the world: I get paid to read, write, think, and talk about things I find absolutely fascinating. Here are a few things I've read recently (or that I'm reading currently): 1.... MORE

Kling on Clans, North on States

Economic History
Art Carden
I just read Arnold Kling's Featured Article on Mark S. Weiner's The Rule of the Clan. On the strength of the review I bought the book. Here's Kling's summary of Weiner: 1. A decentralized order is possible. Indeed, it is... MORE

"Most Economists?" Really?

Business Economics
David Henderson
Sari, Ed. My friend Edward Lopez, who blogs here, linked on Facebook to a great story from the New York Times about an entrepreneur's solution to the challenge of dry-cleaning saris. It's neat and the piece is short. Then Ed... MORE

I was pleased to see my old friend Ben Haller challenging me in the comments on my global warming econometrics bleg.  He's in blockquotes, I'm not:The more crap you throw into the regression, the more it will be overfit and... MORE

Global Warming Econometrics Bleg

Energy, Environment, Resources
Bryan Caplan
What happens if you regress annual global temperature 1880-2011 on CO2, linear trend, and other stuff trending positively or negative over this era?  The list of regressors should ideally include not just other climatological variables, but placebo variables like church... MORE

Gray Lady Down: Justin Gillis's Misleading News Story

Energy, Environment, Resources
David Henderson
How to Mislead and Undercut While Appearing to be Writing a News Story A friend who is an avid reader of the New York Times sent me a link last night to a piece by New York Times reporter, and... MORE

Marty Nemko: Don't Go to College

Economics of Education
David Henderson
The Daily Show had a nice segment this week on the case for not going to college. The whole thing is quite good. Check out what the guy at the 2:40 point learned. The late Ayn Rand's term for his... MORE

In a Just World...

Economics and Culture
Bryan Caplan
In a just world, no researcher would be fired for truthfully stating that some kinds of immigrants have low IQs.In a just world, however, researchers would be fired for arguing that people with below-average IQs should be denied their basic... MORE

Sanctions and Boycotts in an Interconnected World

International Trade
David Henderson
Hawking's decision to join the boycott of Israel is quite hypocritical for an individual who prides himself on his own intellectual accomplishment. His whole computer-based communication system runs on a chip designed by Israel's Intel team. I suggest that if... MORE

Facebook: So Long. Sort of.

Behavioral Economics and Rationality
Art Carden
In response to precipitous increases in the opportunity cost of my time and my wish to Avoid News, I've scaled back my presence on social media. I still maintain Economics in One Meme and a still-nascent "professional" Facebook page, where... MORE

Rector, Poverty, and Immigration

Cost-benefit Analysis
Bryan Caplan
Robert Rector and Jason Richwine's new Heritage report on the fiscal effects of immigration has been widely criticized (see here, here, and here for starters).  I'm honestly surprised that the report is not worse.  Rector and Richwine may get a... MORE

Hayek on Medical Marijuana

Central Planning vs. Local Knowledge
David Henderson
Yesterday, as co-blogger Art Carden noted, was the late Friedrich Hayek's birthday. I want to honor him by pointing out his insight about medical marijuana. Really? Medical marijuana? But, you're probably saying, Hayek never discussed marijuana, medical or otherwise. That's... MORE

F.A. Hayek would have been 114 years old today. To celebrate, here's a set of videos in which Hayek is interviewed by, among others, Axel Leijonhufvud (!), Armen Alchian (!!), and James Buchanan (!!!). Or, if you prefer the written... MORE

Owen, Sawhill, and "the" Return to Education

Cost-benefit Analysis
Bryan Caplan
Yesterday I attended a roundtable discussion on the new Brookings brief, "Should Everyone Go to College?"  The authors, Stephanie Owen and Isabel Sawhill, succinctly document a point that labor economists routinely neglect: there ain't no such thing as "the" return... MORE

Dwight Lee on Ebenezer Scrooge's Morality

Economic Philosophy
David Henderson
The first Scrooge [before the visit of the three ghosts] satisfied only the requirements of the first morality, which I call mundane morality, while the second Scrooge [after the ghosts' visits] enthusiastically embraced the second morality, which I call magnanimous... MORE

Keynesian Bets: What's Out There

Behavioral Economics and Rationality
Bryan Caplan
As far as I can tell, none of the comments on my Keynesian bet bleg point out or propose a Keynesian bet.  On Twitter, however, Noah Smith alerted me to the existence of the following Smith-DeLong bet:If, at any time... MORE

Adam Smith on the Public Choice of Foreign Intervention

Cost-benefit Analysis
David Henderson
Why the 13 colonies are a net loser for Great Britain: A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different... MORE

Keynesian Bets Bleg

Economic Methods
Bryan Caplan
The strongest evidence for Keynesianism, in my view, is introspection.  During the last five years, however, I've often heard Keynesians claim that their views have been vindicated by events.  To which I'm sorely tempted to respond:It's easy to claim "vindication... MORE

The Pyramid of Macroeconomic Insight and Virtue

Economic Methods
Bryan Caplan
Many of my friends laughed at Paul Krugman when he wrote: Maybe I actually am right, and maybe the other side actually does contain a remarkable number of knaves and fools.Krugman continued:The key to understanding this is that the anti-Keynesian... MORE

John Thacker on Vaccinations and the Sequester

Fiscal Policy
David Henderson
John Thacker, a frequent commenter on this blog, also frequently comments on Scott Sumner's blog. It's safe to say that I have learned something from virtually every comment he has written. On Scott Sumner's blog yesterday, Thacker points out some... MORE

This is a teaser for a forthcoming post. The scene: Chuck E. Cheese's in Vestavia Hills, Alabama, where my two-year-old and my four-year-old are nibbling like birds on slices of the large pepperoni pizza we ordered. This was not what... MORE

Chef Rudy's Virtues Project

Economics and Culture
David Henderson
When I was 16, I had a job at the Minaki Lodge in Minaki, Ontario from which I was fired. (Why was I fired? That's a whole other story. It had nothing to do with my work ethic.) After I... MORE

My take on Reinhart and Rogoff

Growth: Causal Factors
David Henderson
UPDATE BELOW Betsey Stevenson and Justin Wolfers write: In the end, all the corrections advocated by the critics shift the average GDP growth for very-high-debt nations to 2.2 percent, from a negative 0.1 percent in Reinhart and Rogoff's original work.... MORE

A Natalist Provision

Family Economics
Bryan Caplan
In Selfish Reasons to Have More Kids, I advise people to "privatize natalism."You don't have to be Bill Gates to strategically design wills, trusts, and one-shot gifts. A middle-class income is more than enough. Compared to the out-of-pocket cost of... MORE

Medicare Kills a Program

Economics of Health Care
David Henderson
What do you do when you find a program that actually works, that is, saves the government money and improves health outcomes? If you're the people who run Medicare, the socialized health insurance program for the elderly, you kill it.... MORE

Today is May Day. Never Forget. Never Again. On Saturday, I spent the day in a seminar room with a group of students from Samford and Birmingham-Southern College (plus Paul Cleveland, an economist from Birmingham-Southern and author of Unmasking the... MORE

I Was a Teenage Misanthrope

Economic Philosophy
Bryan Caplan
When I was a teenager, I viewed all of the following with antipathy: students not in honors classes, heavy metal fans, people who disliked classical music, stoners, athletes, cheerleaders, all but two of my teachers, car collectors, sports fans, smokers,... MORE

Smuggling in Values

Economics of Health Care
David Henderson
Co-blogger Bryan Caplan made a good point yesterday about the alleged efficiency/equity tradeoff. He's right to emphasize it. Many economists smuggle in their "equality" value by equivocating between equity as equality and equity as some other value. I pointed this... MORE

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