Bryan Caplan and David Henderson

February 2014

A Monthly Archive (73 entries)

Income, Wealth, Happiness, and Ideological Convenience

Cross-country Comparisons
David Henderson
I've had to think long and hard before writing this response to Bryan Caplan's post about income and happiness and Justin Wolfers's response. 1. I start by saying that I'm skeptical about how informative it is to ask people how... MORE

Wolfers Responds on Happiness

Behavioral Economics and Rationality
Bryan Caplan
Justin Wolfers kindly responded to my recent post.  His thoughts, reprinted with his permission. Interesting, fun, provocative, and well written.  Your math looks to be right to me. Some thoughts: 1. I'm not sure that controlling for confounds necessarily would... MORE

Does happiness cause income?

Cross-country Comparisons
Scott Sumner
Bryan Caplan has a post that discusses the research of Daniel Sacks, Betsey Stevenson, and Justin Wolfers, on the correlation between income and happiness. I'm no expert on this subject, but it seems to me that researchers seem to assume... MORE

David Friedman on the 97% Consensus on Global Warming

Energy, Environment, Resources
David Henderson
As David Friedman points out, it is hard for us who are not climate scientists to know what is true or false about global warming. But one thing we can sometimes do is check what various writers on climate science... MORE

Aid to bookstores?

Economics and Culture
Alberto Mingardi
Star novelist James Patterson is donating 1 million dollars in financial aid to independent bookstores. Patterson apparently maintains that "federal government's financial support of troubled industries like Wall Street and the automobile sector should extend to the bookstore business". This... MORE

Smoking Prevention: Nagging versus Taxing

Regulation
James Schneider
Often times, government policies are ostensibly about providing knowledge, when they are actually about nagging. Consider cigarette warning labels. They now take up more space on the packaging than they did in the past, but they still provide surprisingly little... MORE

Crude Materialism versus the Wolfers Equation

Behavioral Economics and Rationality
Bryan Caplan
Suppose you're a crude materialist who believes that money is the secret to happiness.  You're estimating an equation of the form: Happiness (in Standard Deviations) = a + b * ln(income) How big should you expect b to be?  Well,... MORE

Williamson pulls rank on Yglesias

Monetary Policy
Scott Sumner
I've often argued that the Fed made a mistake holding rates at 2% at their meeting of September 16, 2008 (right after Lehman failed.) Matt Yglesias has a new piece that is also critical of this decision, and Steve Williamson... MORE

The Singaporean Path to Cosmopolitanism

Economics and Culture
Bryan Caplan
Singapore has one of the most open immigration polices in the world.  But these policies do not currently enjoy popular support.  According to the World Values Survey, Singaporeans seem more anti-immigration than Americans:Only 4% of Singaporeans favour open borders, and... MORE

Australia's auto industry collapses as America's booms

Regulation and Subsidies
Scott Sumner
From the Economist: Toyota's announcement on February 10th that it would join Ford and Holden in pulling out of carmaking in Australia, closing its assembly line in 2017, was greeted with commensurate dismay. Yet beneath the obligatory political blame-mongering was... MORE

11-99 Foundation: Buying Protection

Economics of Crime
David Henderson
I live in California, where I often see license plate frames carrying the words, "Lifetime Member, 11-99 Foundation." The frames are usually on newer-model luxury cars. I finally got curious enough to look up what the 11-99 Foundation is. Here's... MORE

How Welfare Hurts Walmart

Microeconomics
Bryan Caplan
Walmart's critics often argue that food stamps, Medicaid, and other poverty programs subsidize its labor force.  Since government pays a big part of its workers' living expenses, Walmart doesn't have to.  Is this true?As long as non-workers remain eligible for... MORE

Bans Against Headscarves Can Backfire

Economics of Education
James Schneider
Modesty is usually imposed rather than prohibited. However, some countries place restrictions on the Islamic practice of wearing headscarves. Although the French restriction against religious symbols in public schools is not technically directed against Muslims in particular, many view it... MORE

Was Mishkin the Benjamin Strong of 2008?

Monetary Policy
Scott Sumner
Benjamin Strong headed the Fed during the Roaring 20s, and used countercyclical monetary policy to try to stabilize prices and output (which is roughly equivalent to NGDP targeting.) He died in 1928 and the new leaders of the Fed switched... MORE

The Minimum Wage vs. Welfare: Band-Aid or Salt?

Cost-benefit Analysis
Bryan Caplan
Peter Thiel entertains what economists would call a "second-best" argument in favor of raising the minimum wage:"In theory, I'm against it, because people should have the freedom to contract at whatever wage they'd like to have. But in practice, I... MORE

The Keynesian information bubble

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Paul Krugman likes to brag that he doesn't read conservative bloggers, as they have nothing useful to say. And certainly the world is full of conservatives making sloppy arguments. But the downside of that strategy is that when he makes... MORE

For Crying Out Loud, Dineen: Dealing with Long-Held Views that are Wrong

Behavioral Economics and Rationality
David Henderson
At first, you might think this post is just about hockey. But it's not. There's a moral to the story about how we can make the mistake of falling in love with our views simply because they have become part... MORE

Taxes are all around

Economics and Culture
Alberto Mingardi
The Lithuanian Free Market Institute has long been one of the most energetic think tanks in Europe. They are also one of the few free-market organizations, among the European ones, that have a thoroughly broad and diversified base. Lithuania is... MORE

Who Should We Revere?

Money
James Schneider
Sifting through the coins in your pocket, you will likely find many images of politicians. In some sense, this conveys the impression that government leaders are the most important figures in society. However, everyday currency can honor other contributors to... MORE

Media Bias Yet Again

moral reasoning
David Henderson
Instapundit blogger Glenn Reynolds called attention to a case of media bias. One of his readers noted that Politico reporter Elizabeth Titus, in a piece on how there seem to be no scandals in Republican governor Scott Walker's background, identified... MORE

The 2008 transcripts: The real issues

Monetary Policy
Scott Sumner
The Fed releases the detailed minutes of its meetings with a 5 year lag. Bloggers that follow monetary policy closely have been eagerly awaiting the 2008 minutes, expecting all sorts of revealing (and perhaps embarrassing) quotes. Although I haven't yet... MORE

I've finally got around to reading more details about the Congressional Budget Office's report on the number of jobs lost from raising the minimum wage. The CBO estimated a range of outcomes from raising the minimum wage from its current... MORE

Erik Prince on Collective Punishment

Behavioral Economics and Rationality
David Henderson
Co-blogger Bryan's post, "Desert versus Identity," has got me thinking. Bryan writes: War crimes are a stark example. Suppose a soldier from group X plainly murdered ten innocent civilians from group Y. What do the people of X say? "It... MORE

Ambition Revisited

Cost-benefit Analysis
Bryan Caplan
I just ran across some more striking evidence that ambition really matters.  James Rosenbaum's "College-For-All: Do Students Understand What College Demands?" (Social Psychology of Education, 1998) shows degree completion as a function of high school students' GPA and educational aspirations.Exhibit... MORE

Who is the Italian prime minister this week?

Eurozone crisis
Alberto Mingardi
Mark Calabria, the Director of Financial Regulation Studies at the Cato Institute, has tweeted "Who is the Italian prime minister this week? Does it matter?". As the family name may suggest, Mark has an Italian background - and I gather... MORE

Health Insurance as Collective Bargaining

Economics of Health Care
James Schneider
McKinsey has studied the hospital networks that are being used by plans on the new public health exchanges. They divide networks into three groups that they call broad, narrow, and ultra-narrow. Broad networks contain more than 70 percent of the... MORE

Desert versus Identity

Behavioral Economics and Rationality
Bryan Caplan
When moderns read the Old Testament, they're often horrified by the gruesome collective punishments.  Mankind falls into wickedness, so God sends a flood to drown every man, women, and child on earth?*  Before the book is over, though, the prophets... MORE

Recently, I "welcomed" Princeton economists Alan Blinder and Paul Krugman to the "supply-side." I had the idea that they had not admitted that high marginal tax rates reduce the incentive to work and invest. I was wrong. I don't have... MORE

All three factors can combine to make the value of the insurance policy well below its price. Let's say that the family values the insurance at $3,500. That family is worse off because it is paying $4,000 net of the... MORE

My Cato Address to Students for Liberty

Economic Philosophy
Bryan Caplan
On Friday, the Cato Institute hosted a reception for Students for Liberty - and gave me the honor of welcoming them.  Here's what I said.Welcome Students for Liberty!  I'm so happy to see all of you in the world's greatest... MORE

Bastiat just rolled over in his grave

Fiscal Policy
Scott Sumner
The Administration has released a report defending the ARRA program, and it's every bit as embarrassing as you might expect. Where to begin . . . 1. The report seems to ignore the fact that fiscal stimulus failed to produce... MORE

Ballparking the Marital Return to College

Cost-benefit Analysis
Bryan Caplan
When education correlates with a good outcome, labor economists are usually eager to publicize the fact.  There is, however, one glaring exception.  Labor economists rarely announce that the well-educated are more likely to marry a well-educated spouse - and capture... MORE

Jason Furman: Excellent or Sad

Business Economics
David Henderson
Tyler Cowen recently linked to an article in the Washington Post about "the excellent Jason Furman." And if you read the puff piece article, you would certainly think Furman is an excellent economist. The writer, Zachary A. Goldfarb, tells tale... MORE

But now we know the actual problem was tight money, which caused NGDP to fall in half. Here's Noah Smith: This seems to be the overwhelming consensus in academic macro these days. It seems obvious to most people that the... MORE

Rent Control Devalues the Whole Neighborhood

Price Controls
James Schneider
Rent control has numerous negative effects on the housing market. If a landlord is forced to charge below-market rent, it reduces the incentive to improve the property or even perform basic maintenance. Perhaps, even more importantly, it misallocates who lives... MORE

Questions that have no answer

Monetary Policy
Scott Sumner
There are some questions that have no answers. One example is the question: "Was monetary policy too expansionary during the housing boom?" The only sensible answer is "it depends." It's not clear what the Fed was trying to do during... MORE

Paul Krugman was upset over a recent column by Casey Mulligan. Here's Krugman: Jonathan Gruber is mad as hell, and he's not going to take it anymore. The eminent health care economist and health reform architect is annoyed at Casey... MORE

Lenin the Prohibitionist

Books: Reviews and Suggested Readings
Bryan Caplan
Mark Lawrence Schrad's new Vodka Politics: Alcohol, Autocracy, and the Secret History of the Russian State is more than good; it's novel.  Despite my long-term interest in Russian history, much of what Schrad had to say was genuinely new to... MORE

Never reason from a price change, example #305

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Over at TheMoneyIllusion I have a series of posts exposing the common fallacy of "reasoning from a price change." (Trademark) This occurs when people assume that consumers will buy less oil when the price is high, or there will be... MORE

Don't Nudge Me, Man! - Health Insurance Edition

Economics of Health Care
James Schneider
Nudge's chapter on Medicare Part D discussed the difficulties people had making optimal plan choices. The elderly often faced such a bewildering array of plans that it would have been almost impossible to minimize out-of-pocket expenses based on the specific... MORE

Open Letter to President Wildes re Professor Block

Economic Education
David Henderson
One of the ways I will occasionally depart from straight economics on this blog is to defend fellow academics from unfair attacks by bullies. When the president of your university attacks you unfairly and in public, he is being a... MORE

Like other legislation of that era, the Fed was a government intervention supported both by ideologically-motivated and well-meaning reformers and by the industry being regulated. Rather than being this as some sort of unique conspiracy to take control of the... MORE

Immaculate inflation and immaculate growth

Fiscal Policy
Scott Sumner
Here's Paul Krugman: Barry Ritholtz reminds us that we've just passed the third anniversary of the debasement-and-inflation letter -- the one in which a who's who of right-wing econopundits warned that quantitative easing would have dire consequences. As Ritholtz notes,... MORE

What consequences for the Swiss referendum?

Eurozone crisis
Alberto Mingardi
Bryan Caplan has a characteristically brilliant post on the Swiss referendum. He links a tweet by Paul Haydon that shows that the areas with more immigration have been less supportive of closing borders. One crucial point of the referendum is... MORE

What Bad Students Know that Good Economists Don't

Economics of Education
Bryan Caplan
The college premium skyrocketed over the last three decades.  B.A.s now out-earn high school grads by 70-80%.*  College graduation, in contrast, barely rose.  In econospeak, the supply of college graduates looks bizarrely price-inelastic.Over the last two months, I've read virtually... MORE

Everest and the Quest for Status

Books: Reviews and Suggested Readings
James Schneider
I'm currently polishing up my behavioral health economics book The Seven Deadly Sins. The first five chapters discuss the core health concerns of diet, exercise, drinking, smoking, and sex. The last two "sins" are using heroin and climbing Everest. I... MORE

Evolutionary Psychology on Crusonia

Behavioral Economics and Rationality
Bryan Caplan
Suppose two 20-year-olds wash up on a the desert island of Crusonia.  One is male, the other female.  They are both from the same country, but are otherwise randomly selected.  Both are convinced they have no hope of escaping the... MORE

Obamacare defenders and Princeton University economists Paul Krugman and Alan Blinder have granted that the Congressional Budget Office is making a reasonable claim in saying that by 2024, Obamacare, if not repealed or delayed, will reduce the number of hours... MORE

What Janet Yellen and Rick Santorum Have in Common

Economic Methods
James Schneider
Bryan has discussed the puzzling lack of social conservatives in economics. Economists use an agreed-upon framework that would seem to offer social conservatives a "safe harbor" to express their ideas, as long as they express them within the accepted framework.... MORE

The Futility of Quarreling When There Is No Surplus to Divide

Behavioral Economics and Rationality
Bryan Caplan
Imagine two people have the following relationship options:Option A: DateOption B: Be FriendsOption C: Stop Seeing Each OtherPerson #1's preference ordering is: {A, C, B}.  In English, #1 most prefers to date, and least prefers to just be friends.Person #2's... MORE

Why Income Mobility is Larger in the Middle

Income Distribution
David Henderson
Whenever we talk about income mobility, we should never forget that we're talking about mobility in each direction. One can move down the income scale as well as up. Indeed, if we measure income mobility of households by movement from... MORE

What the Swiss Vote Really Shows

Behavioral Economics and Rationality
Bryan Caplan
The Swiss just passed a referendum to restrict immigration from the EU.  Tyler thinks this shows that open borders is a hopeless cause.  When immigration gets too high, public opinion naturally turns against immigration. Normal 0 MicrosoftInternetExplorer4 In my view... MORE

Why do booms feel good?

Labor Market
Scott Sumner
The answer to this question might seem obvious, but it isn't. Yes, booms feature lots of jobs and income, but most standard macro models suggest that booms feature "excesses," with too much employment and perhaps over-investment too. In the... MORE

A Question of Organizational Literacy

Behavioral Economics and Rationality
Bryan Caplan
What fraction of Americans can correctly explain the difference between a business and a corporation?Please show your work.... MORE

American Hustle: Unreal and Real

Business Economics
David Henderson
WARNING: MULTIPLE SPOILERS AHEAD I saw the movie, American Hustle, on Friday night and liked it a lot. I liked the pace and I especially liked the integration with 1970s music, one of my favorite decades for pop music. I... MORE

Bias and Bigness Bleg

Political Economy
Bryan Caplan
Question for anyone who thinks that the existing regulation regime is well-designed to protect the interests of big business: Why do so many regulations exempt firms with small numbers of employees (typically 50 or less) - and so few regulations... MORE

How not to privatize

Eurozone crisis
Alberto Mingardi
The other day my colleague Massimiliano Trovato and I had an op-ed in The Wall Street Journal Europe, on the forthcoming "privatization" of Poste Italiane, the Italian postal service. I've always thought that the old Milton Friedman mantra on tax... MORE

Here's an imaginary dialogue: Student: So the central bank sets the level of interest rates, right? Professor: Not really. It would be more accurate to say that interest rates mostly reflect the condition of the economy. Higher inflation and/or higher... MORE

Some take it as a matter of faith that increasing taxes will dull people's desire to work. However, higher taxes can sometimes cause people to work more. When higher taxes reduce the after-tax wage, people are poorer for any given... MORE

How Rival Marriage Is

Family Economics
Bryan Caplan
Last month, I observed:If you share your home with a spouse, you don't have as much space for yourself as a solitary occupant of the same property.  But both of you probably enjoy the benefits of more than half a... MORE

Me at Webber Tonight

Upcoming Events
David Henderson
I'm sorry for not posting this earlier. I just learned that this is open to the public. I'm speaking at Webber International University in Babson Park, Florida tonight. 6:15 for food and drink. 7:00 for the talk. Here's the link.... MORE

Bleg on Health Care Questions

Economics of Health Care
David Henderson
On March 19, I will be speaking at Oberlin College in Ohio. It will be a debate with Ted Marmor of Yale University. Well, not quite a debate. The format is that the organizers, Professor Marmor, and I will agree... MORE

AMA Highlights

Economic Education
Bryan Caplan
Last night's Ask Me Anything was a treat.  Main surprise: I was expecting more weird and personal questions.  A few highlights:[-]eliaspowers Hi Bryan, There has been a lot of talk online recently on the merits of a Basic Income Guaranty or... MORE

Deception-Based Medicine

Economics of Health Care
James Schneider
Emily Oster stirred a lot of controversy when she suggested that pregnant women could enjoy a drink of alcohol if they so chose. Why did she arrive at a view that clashed with much of the American medical establishment? She... MORE

Two cheers for the tasteless

Economics and Culture
Alberto Mingardi
Does Tamara Ecclestone prompt "a rethink of capitalism"? So writes the Philosopher's Mail, a website that aims to "prove genuinely popular and populist news outlet which at the same time is alive to traditional philosophical virtues". Nowadays, rich people easily... MORE

Diasporas, Swamping, and Open Borders Abolitionism

Economic Philosophy
Bryan Caplan
Paul Collier's Exodus makes one great obvious-once-you-think-about-it point: diasporas matter.The third big thing we know [about immigration] is that the costs of migration are greatly eased by the presence in the host country of a diaspora from the country of... MORE

Here's Paul Krugman suggesting that the ECB has been in a liquidity trap for years: And yes, Europe is very much in a trap. Inflation is falling because the economy is weak, and the economy is being weakened in part... MORE

Ask Me Anything Tonight

Economic Education
Bryan Caplan
I'll be doing an Ask Me Anything tonight at 9 PM EST on reddit.  Here's the link.HT: Michael Tontchev for setting this up.P.S. Please post your questions on reddit, not the EconLog comments.... MORE

Obituary Hypothetical: What If Mengele Cured Cancer?

Economic Philosophy
Bryan Caplan
Josef Mengele is one of history's most infamous Nazi war criminals.  A doctor, he notoriously performed grotesque medical experiments on human beings without their consent.  If you're strong of stomach, here's a small sample of what Dr. Mengele did to... MORE

The Sucker Tax

Behavioral Economics and Rationality
James Schneider
When people refer to humans as "sheep," it frequently sets my neck hair on edge. Mostly because I'm a speciesist, but also because people lump together a wide variety of disparate behaviors to imply that people "mindlessly" follow social norms.... MORE

Robert Murphy on the Minimum Wage

Labor Market
David Henderson
In this article, I explain why, even if the revisionist empirical studies are accurate, it still does not follow that the proposed hike in the minimum wage will be a boon for low-skilled workers. I also argue that, because critics... MORE

Meet James Schneider

Econlog Administrative Issues
Bryan Caplan
Allow me to introduce EconLog's latest guest blogger, James Schneider.  James was my best friend at Princeton econ.  Way back in 1993, he heard a rumor I was Princeton's token libertarian.  As soon as he confirmed the rumor, we became... MORE

Where the Stress Falls

Monetary Policy
Scott Sumner
Marcus Nunes has a highly critical post contrasting Paul Krugman's views on Argentina in 2012 and today. I won't be quite as critical. As is often the case with Krugman it's almost impossible to figure out what he is "really... MORE

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