Bryan Caplan and David Henderson

October 2013

A Monthly Archive (76 entries)

Switching the printing press on

Monetary Policy
Alberto Mingardi
"Inflation is a disease, a dangerous disease for a society, it is sometimes a fatal disease for a society." This short video by Milton Friedman, dating back to the early 80s, is still well worth seeing. With his unsurpassed clarity,... MORE

Debate Results

Economic Methods
Bryan Caplan
The Intelligence Squared debate results are in. I performed near the peak of my ability, but my very best was not good enough for the live audience. Not by a long shot: Our side actually lost 4 percentage-points, and... MORE

Do We Work Too Much?

Behavioral Economics and Rationality
Art Carden
A student sent me a link to this article claiming that we would be better off with a thirty-hour as opposed to forty-hour workweek. I'm sympathetic to the argument: I think a lot of us are on the wrong side... MORE

See Me Today at Intelligence Squared

Economic Methods
Bryan Caplan
Tonight I'm debating for Intelligence Squared in New York City.  The resolution: "Let Anyone Take a Job Anywhere."  Vivek Wadhwa and I are arguing for the affirmative case; Ron Unz and Kathleen Newland are arguing the negative case.  The entire... MORE

Reclaiming Fairness: Competition Policy

Political Economy
Bart Wilson
To follow up on my attempt to reclaim fairness for commerce, let's consider what this means for competition policy. The 18th century meaning of unfair with its roots in commerce didn't completely disappear by the 20th century. In 1914 Congress... MORE

Even famous economists occasionally tell me that, "Firms have no incentive to train workers in general job skills."  The argument: Once firms teach workers general job skills, the newly-trained workers can immediately threaten to quit unless they get a raise. ... MORE

Did Obama Break His Promise?

Economics of Health Care
David Henderson
Jared Bernstein's Sense of Time On a number of occasions before ObamaCare passed in late March 2010, President Obama promised that if you like your current health insurance plan, you can keep it. Now Jared Bernstein, formerly Joe Biden's chief... MORE

Salim Furth: Two Kinds of Austerity

Fiscal Policy
David Henderson
In "Look Closer: Tax Increases, Not Spending Cuts, Are the Harmful Austerity," economist Salim Furth notes two kinds of fiscal austerity: tax increases and budget cuts. He finds that the negative short-run impact of tax increases on GDP is much... MORE

I Would Argue

Economic Methods
Bryan Caplan
After reading a draft of Selfish Reasons to Have More Kids, Tyler Cowen bemusedly told me, "You have more enthusiasm for your own arguments than you do for the children themselves."  A slight exaggeration, but I take it as a... MORE

You might be familiar with hand-wringing about how people are extending their adolescence into their twenties and not entering "adulthood" until later ("thirty is the new twenty" and all that). This concerns me a bit, too, but should it? It's... MORE

Trust, Diversity, Credit Cards, and E-Commerce

Behavioral Economics and Rationality
Bryan Caplan
Modern social scientists are in love with trust.  Economists, sociologists, and political scientists all eagerly explain that high-trust societies work, and low-trust societies don't.  Trust is so beloved that many leftist social scientists have started to sound like social conservatives. ... MORE

Eugene Fama, Extreme Libertarian?

Economic Philosophy
David Henderson
Well, I'm an extreme libertarian, but I realize we're in a democracy, and in a democracy people can have views of all stripes and there's no reason to argue about it. This is a quote from Eugene Fama, in an... MORE

Why Not Compulsory College?

Behavioral Economics and Rationality
Bryan Caplan
A few nay-saying libertarians and unschoolers aside, almost everyone favors compulsory K-12 education.  Yet virtually no one favors compulsory college.  It's quite a mystery.  If mandatory education is a great idea at the primary and secondary levels, why would it... MORE

Day dreaming for libraries

Entrepreneurialism
Alberto Mingardi
Neil Gaiman has written a formidable plea for public libraries. Here you can find the text of a lecture that he delivered in London on October 14, subsequently published on The Guardian. His arguments are instinctively appealing to all of... MORE

Friday Night Video: CBS Recognizes How ObamaCare Can Hurt

Economics of Health Care
David Henderson
Here. Notice the guy who says the young woman is paying more for a better product and more protection. Really? She pointed out that her deductible would rise from $1500 to $4000 and that after that, the insurance for only... MORE

Reply to Professor Erik Brynjolfsson

Economics of Health Care
David Henderson
In the comments section of my post yesterday on health insurance, "The Pre-Existing Elephant in the Room," Erik Brynjolfsson, the Schussel Family Professor at the MIT Sloan School of Management, Director of the MIT Center for Digital Business, Chair of... MORE

Without digging deeply into the conversation, my sense is that a lot of economists and public intellectuals saw the financial crisis and the slow recovery as a confirmation of a lot of things they already believed. For textbook Keynesians, it... MORE

The Pre-Existing Elephant in the Room

Economics of Health Care
David Henderson
When Republicans advocate, and have advocated, delaying or even ending the individual mandate to buy health insurance, I am, and have been, with them. I don't like the government initiating force against people. But no one should kid himself that... MORE

An "antifragile" financial system - but how?

Economic Philosophy
Alberto Mingardi
John Kay recently had a must-read piece Financial Times, now available ungated on his website. Kay makes an interesting point: the obsession with "too big to fail" financial institutions and "the lobbying power of incumbent companies" is leading the revamping... MORE

The Big Bag of Wealth

Alternative Economics
Bart Wilson
The second paper assignment in freshman Humanomics is to write a short story, a type of homage to Washington Irving's "The Devil and Tom Walker" but from the point of view of Matt Ridley's The Rational Optimist. The story below... MORE

Pick Your Poison

Cost-benefit Analysis
Bryan Caplan
Suppose you need a helper, but face two imperfect candidates:1. A smart person who only cares about himself.2. A stupid person who only cares about you.Under what conditions would you prefer #1?  Under what conditions would you prefer #2?  Why? ... MORE

Angela Merkel has won the German elections by a landslide, but as she did not reach an absolute majority, she is still struggling to form a government. It is a bit paradoxical, but Merkel's electoral triumph, which resulted also in... MORE

The Relative Unimportance of Seigniorage

International Trade
David Henderson
I start every 50-minute segment of my class with a 5-minute discussion in which the students can ask about or talk about anything as long as it is economics. I've been doing it since January 1993 and it has been... MORE

Lawrence Klein, RIP

Macroeconomics
David Henderson
Lawrence Klein, an economist who won the 1980 Nobel Prize in economics for his macro-models of the economy, died on Sunday. Because the bio of him in The Concise Encyclopedia of Economics is so short, I'm reprinting all of it... MORE

Why Do Firms Prefer More Able Workers?

Behavioral Economics and Rationality
Bryan Caplan
Academics habitually tax the public's patience with stupid questions.  It's easy to see why practical folk ignore us.  Every now and then, though, an academic asks a truly profound question that seems stupid on the surface.  Case in point: David... MORE

A lot of the radio stations and programs to which I listen in the car and in my office are "listener-supported," which means regular pledge drives and seemingly-endless appeals for money. I'd probably prefer that they simply monetize my ears... MORE

On Sweatshops: They're Better Than the Alternative

Labor Mobility, Immigration, Outsourcing
Art Carden
I just answered an email from some seventh-grade students who were asking about my Forbes.com article "Immigrants, Sweatshops, and Standards of Living." I suggested they look up Benjamin Powell's work, particularly this article on sweatshops that he wrote for the... MORE

Does College Pay Off for Cashiers? Yes & No

Economics of Education
Bryan Caplan
Two years ago, David Leonhardt argued that B.A.s pay, even for careers that don't require them.  The title: "Even for Cashiers, College Pays Off."  Is this true?I've spent the last two weeks tracking down the data.  Leonhardt relied on Anthony... MORE

Reply to James Pethokoukis--and a Challenge

Fiscal Policy
David Henderson
Last week, James Pethokoukis of the American Enterprise Institute, an Institute with which I was affiliated in the late 1990s and early 2000s, wrote a piece titled "The dodgy austerity economics of the tea party." Here's a key paragraph: Now... MORE

David Henderson's "A Nobel for the Random Walk of Stock Prices" (op-ed, Oct. 15) describes me as "one high-profile beneficiary of Mr. Fama's insight," allegedly inspiring my founding of the Vanguard 500 Index Fund in 1975. This is untrue. Perhaps... MORE

Friday Night Video: Mark Cuban, Humanitarian

Entrepreneurialism
David Henderson
This isn't the usual Friday night video. Rather, it's a mention of an ABC-TV show that my wife and I watch every Friday night. It's called "Shark Tank." I highly recommend it. It's the highlight of our Friday evening. Five... MORE

Krugman on Interest Rates

Monetary Policy
David Henderson
Paul Krugman once bragged--I can't find the link off-hand--that he doesn't read much of what libertarians and conservatives write on economics, but he really knows their views well anyway. I wonder. Earlier this month, Jeff Hummel wrote one of the... MORE

Henderson on the Three Nobels

Finance
David Henderson
"Today, Apple announced a bigger dividend than stock market analysts predicted. So I should buy Apple stock, right?" I sometimes get this kind of question from people who know I'm an economist. My answer: "No, you should have bought Apple... MORE

The Iron Laws of Pedagogy

Behavioral Economics and Rationality
Bryan Caplan
Everyone who's ever been a student can vouch for what I call the Iron Laws of Pedagogy:First Iron Law: Students learn only a small fraction of what they're taught.Second Iron Law: Students remember only a small fraction of what they... MORE

Reinhardt on Doctors' Monopoly

Economics of Health Care
David Henderson
Organized medicine invariably opposes wider scopes of practice and independent practice of nonphysician health professionals, ostensibly not to protect economic turf but to protect the quality of patient care. Curiously, one rarely finds those to be protected by this paternalism... MORE

My Two Modes

Cost-benefit Analysis
Bryan Caplan
Sometimes I wonder if I'm an extreme cynic or an extreme idealist.  The truth is that I'm both.  My mind works in two different modes.I enter my idealist mode whenever someone proposes a reform that could plausibly make the world... MORE

Here's a sad mistake I encounter all too often: people think economic growth and technological progress are substitutes for rather than inputs into enjoyment and appreciation of finer things like the arts or deeper things like the sacred. I offer... MORE

Against crony capitalism, Italian style

Eurozone crisis
Alberto Mingardi
The Italian Post service is joining the shareholders of Alitalia, the "national" air carrier. I've written on this odd move of the Italian government here. Today I co-signed an appeal to the Italian government, to resist this protectionist temptation. The... MORE

Giving Writers the Benefit of the Doubt

Behavioral Economics and Rationality
Art Carden
It's been said that libertarian philosophers love Murray Rothbard as an economist and historian, but not as a philosopher. Libertarian historians love Murray Rothbard as an economist and philosopher, but not as an historian. Libertarian economists love Murray Rothbard as... MORE

Henderson on Fama, Shiller, and Hansen

Finance
David Henderson
Sometimes the Nobel committee seems to make a partly political statement in choosing winners of the prize in economics. Not this year. On Monday, the Royal Swedish Academy of Sciences awarded the 2013 Nobel to three deserving American economists: Eugene... MORE

Reclaiming Fairness as a Precept of Commerce

Politics and Economics
Bart Wilson
Fairness isn't an end commonly associated with markets. If anything, our empathetic instincts often lead us to view the outcomes of competition in the marketplace as unfair. But fairness as it relates to markets wasn't always such a hazy concept.... MORE

Who Treats You Worse?

Economics and Culture
Bryan Caplan
My impression is that customers treat workers worse than bosses.  But perhaps I'm wrong.  Question for all people who interact with both customers and bosses: who treats you worse?Please show your work.... MORE

Why Not Protect Workers from Customers?

Behavioral Economics and Rationality
Bryan Caplan
Most countries have a long list of "worker protection" laws.  Laws protect workers against low pay, lack of benefits, discrimination, sexual harassment, overtime at normal pay, and much much more.  Basic labor economics teaches us to view these laws with... MORE

"We are perishing for want of wonder, not for want of wonders."-G.K. Chesteron I'm sitting at a Starbucks in Houston, Texas, where we're visiting my sister, her husband, and my newborn niece. It's been a good trip, albeit with one... MORE

60 Minutes Highlights

Economic Philosophy
David Henderson
UPDATE: Correction below Just before watching David Ortiz's grand-slam home run in the Detroit/Boston game this evening, I watched 60 Minutes bat 1.000. Two out of three segments were excellent, one was good, and all had explicit or implicit economic... MORE

The Economics of Receipts

Business Economics
David Henderson
Megan McArdle has an excellent short piece on why businesses provide receipts even when customers don't ask for them. She gives a brief interesting history of the introduction of cash registers also. Bottom line: the purpose of cash registers, with... MORE

Trade unions at the opera

Price Controls
Alberto Mingardi
Richard Epstein has a very interesting column on how "Unions Take High Culture Hostage". The whole thing is well worth reading. Epstein sets off from a recent concert at Carnegie Hall, that was called off because of a surprise strike.... MORE

Henderson on Sunstein

Books: Reviews and Suggested Readings
David Henderson
Fresh off a tour as head of President Obama's Office of Information and Regulatory Affairs, Cass Sunstein, now a professor at Harvard Law School, shares his enthusiasm for simpler regulation in this new book. It is appropriately titled Simpler. I... MORE

The flying postman

Politics and Economics
Alberto Mingardi
Officially, Italy has a no longer a "Ministero delle partecipazioni statali" ("Ministry of State Shareholdings") since its suppression by referendum in 1993. The Italian government has privatized much since--but politics do not understand privatization as relinquishing control on a particular... MORE

Time for a Third Party? Let's Bet

Politics and Economics
Art Carden
Via Students for Liberty on Facebook, I saw this Politico article reporting polling data showing "Record demand for third party." As one of the comments points out, it's the sort of thing that gets attention periodically but that never really... MORE

A Challenge for Anti-Keynesians

Behavioral Economics and Rationality
Bryan Caplan
Many of my favorite people are strident anti-Keynesians.  In their eyes, Keynesianism isn't just false; it's incoherent pseudo-science, a blight on our fair economics profession.  Those who think of Keynesianism as pseudo-science generally hold all Keynesians in one dim view. ... MORE

Krugman on Default

Economic Methods
David Henderson
One of the frustrating things about reading Paul Krugman's blog regularly, as I do, is that I so often have to cut through his nastiness to see if he's actually saying something important and, even better, true. Why do I... MORE

Economic Possibilities for Our Grandchildren*

Institutional Economics
Art Carden
Samford goes on Fall Break this weekend. In my principles of macro class, we just spent two weeks talking about the institutional causes of the wealth of nations as well as the Solow growth model. As you get ready for... MORE

Lilliputian Competition Authority

Book Club
Bart Wilson
This fall my student reading and dinner group is concurrently reading Personal Knowledge and Gulliver's Travels (beautifully annotated by Asimov). I have been fascinated with Gulliver's Travels since high school but it has been several years since I last read... MORE

There is no denying that central banks have some impact on interest rates, in both the short and the long run. But the complexity of and qualifications to that impact have been swept into a memory hole, submerging a host... MORE

A Cheap, Inoffensive Way to Make Democracy Work Better

Cost-benefit Analysis
Bryan Caplan
Experts agree: The typical voter knows next to nothing about politics, economics, or policy.  In a democracy, this has major negative externalities.  Existing civics education is supposed to deal with these externalities, but it's been an abject failure: Students learn... MORE

What I've Been Writing Lately

Books: Reviews and Suggested Readings
Art Carden
1. How to Win at the Airport, for Heels First. I'm spending a lot of time in airports this week and need to keep this advice in mind. 2. Does the Surveillance and Security State Make Us Safer?, for Forbes.com.... MORE

When Is Abolitionism Justified?

Economic Philosophy
Bryan Caplan
Tyler on open borders:In my view the open borders advocates are doing the pro-immigration cause a disservice.  The notion of fully open borders scares people, it should scare people, and it rubs against their risk-averse tendencies the wrong way.This raises... MORE

This morning, I'm speaking to one of Mike Munger's classes at Duke about Walmart and the importance of trade. Here are a few resources. 1. An ungated version of my paper "Retail Innovations in American Economic History," which appeared as... MORE

Fun Facts on Disability Insurance

Cost-benefit Analysis
Bryan Caplan
The new Cato Policy Analysis on Social Security Disability Insurance is full of fun facts. (footnotes omitted)The U.S. disability rate fell 25% between 1977 and 1987, then more than doubled.  The staunchest health care skeptics should be baffled.  Unless, of... MORE

Higher-Cost Health Insurance for Older California Resident

Economics of Health Care
David Henderson
One thing that pretty much everyone expected if he/she had paid attention during the ObamaCare debate is that the new law would impose a huge cost on young people. That seems to be happening. But what do we make of... MORE

I'm pretty risk-averse when it comes to travel, so I probably get to the airport earlier than I need to. That was the case this morning: I was booked on a 6:45 AM flight from Birmingham to Atlanta and arrived... MORE

A Micro-Mincer regression estimates personal income as a function of personal education and controls:ln Personal Income = a + b*Personal Years of Education + other stuffUnless b is very large, b approximately equals the individual education premium.  b=.09, for example,... MORE

Daniel Goleman's Attack

Economic Philosophy
David Henderson
In "Rich People Care Less," Daniel Goleman, the famous psychologist who writes about emotional intelligence, writes: In politics, readily dismissing inconvenient people can easily extend to dismissing inconvenient truths about them. The insistence by some House Republicans in Congress on... MORE

The ObamaCare-Induced Shift to Part-Time Work

Labor Market
David Henderson
UPDATE BELOW: The title of this post is the same as the title of a post I wrote in January 2013. Why do I use the same title? Because of this statement from Brad DeLong: I mean, some employers are... MORE

Keep Calm and Read Bastiat

Macroeconomics
Art Carden
This morning, a colleague and I are conducting a seminar on Frederic Bastiat for homeschooled students. We're discussing "What is Seen and What is Not Seen," "A Petition," "The State," and "The Law." In re-reading these essays, I'm struck yet... MORE

Washington Monument Strategy on Steroids

Public Choice Theory
David Henderson
A perennial case in point is the "Washington Monument strategy" of the National Park Service. At budget time, the service frequently threatens to curtail visiting hours at its most popular attractions, such as the Washington Monument, if its budget request... MORE

Morbid Thinking

Behavioral Economics and Rationality
Bryan Caplan
We often accuse each other of wishful thinking.  Only rarely, though, do we accuse each other of the opposite cognitive vice: morbid thinking.  The disparity could be purely linguistic, but it probably isn't.  We have tons of synonyms for "wishful... MORE

Prices Sing

Economic Education
David Henderson
Daniel Reid, a Naval Postgraduate School student of mine from the Spring quarter who really grokked my class, wrote a poem titled "Prices Sing." Here it is, with his permission: Such sweetly multi-layered resonances compressively veil themselves within her uniquely... MORE

We've often heard the complaint, "Isn't it awful that public safety workers such as firemen, whose work is so important to us, are paid so little while professional athletes are paid so much?' Before getting to some interesting answers to... MORE

A few weeks ago The Atlantic ran a great story about "How the NFL Fleeces Taxpayers" (HT: Reddit). Stadium subsidies are a classic example of failure to appreciate "what it not seen." As Dennis Coates and Brad Humphreys point out... MORE

The Error of Utilitarian Behavioral Economics

Behavioral Economics and Rationality
Bart Wilson
If you hang around economists long enough, you're bound to hear the word utility. They don't mean it in the original (at least 500 years old), usefulness sense of the word, as in the utility of electric power to wash... MORE

Capitalism and the filmmakers

Economic History
Alberto Mingardi
As F.A. Hayek wrote in his "History and Politics" (reprinted here), "there is scarcely a political ideal or concept which does not involve opinions about a whole series of past events, and there are few historical memories which do not... MORE

Would Obamacare Have Saved Walter White's Soul?

Behavioral Economics and Rationality
Bryan Caplan
[Warning: Non-Finale Breaking Bad Spoilers]The Daily Beast's Jamelle Bouie claims that Obamacare would have ruined the premise of Breaking Bad:Remember, the instigating action of the series is White's cancer diagnosis--in order to pay for his treatments and leave a nest... MORE

Ezra Klein's Claim about the Shutdown

Politics and Economics
David Henderson
This [the shutdown of well under half of the federal government] is all about stopping a law that increases taxes on rich people and reduces subsidies to private insurers in Medicare in order to help low-income Americans buy health insurance.... MORE

A Primer on Malemployment

Economics of Education
Bryan Caplan
Fogg and Harrington provide an excellent intro to the empirics of malemployment.  Highlights:Definitions:Mal-employment, a variant of underemployment, is based on the concept of over-education. It represents a mismatch between skill requirements of the job and the education of the worker:... MORE

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