Bryan Caplan and David Henderson

March 2014

A Monthly Archive (84 entries)
A forthcoming AER paper examines whether professionals in the mortgage securitization industry foresaw the housing crash. If these professionals knew that they were buying and selling toxic assets, they would betray this knowledge by their personal housing decisions. For... MORE

In response to something I wrote in January, I received a letter last week, postmarked January 30. Well played, U.S. Postal Service. It's like many I've received over the years when the writer doesn't like an article or blog post... MORE

There's a vigorous debate about the money multiplier taking place in the blogosphere. On one side is everyone from MMTers, to new monetarists, to market monetarists. On the other is Nick Rowe. And I'm sort of in the middle, but... MORE

The "war on tobacco" has long been one of the priorities of governments' healthcare policies all over the world. Libertarians tend to be skeptical of the very idea. If we deem the individual to be the legitimate owner of her... MORE

The Market for Less

Behavioral Economics and Rationality
Bryan Caplan
Guest blogger James Schneider makes a thought-provoking point about the market for self-control:The market is often better at abetting good habits than it is at discouraging bad habits. Imagine an alternate world in which a lot of people aspired to... MORE

Lessons from "The Lives of Others"

Regulation
David Henderson
Our economic lives. A local libertarian group showed the movie, "The Lives of Others," at the Marina Public Library last night. The group invited me to give a few remarks after the showing. What motivated them to show the movie... MORE

A Few Dangers of Heroin Prohibition

Economics of Crime
James Schneider
In a recent post, David Henderson commented on how people view the horrors of drugs: But what so few people seem to understand is that virtually all their horror stories about drugs occurred during a time when drugs were illegal....But... MORE

The Wall Street Journal has an article entitled; "Gas Boom Rejuvenates Manufacturing." There certainly are some manufacturing sectors that will be helped by the energy boom. However people shouldn't expect too much from this development. In a recent post I... MORE

A British Perspective on American Signaling

Economics of Education
Bryan Caplan
Fun footnote from Gregory Clark's new The Son Also Rises: Normal 0 MicrosoftInternetExplorer4 In my second year as an assistant professor at Stanford University, I was assigned the task of mentoring six freshmen.  Each appeared on paper to have an... MORE

From the Vault: Reply to the Village Voice

Regulation
David Henderson
In writing a tribute to the late Murray Weidenbaum last weekend, I came across a piece I wrote in 1979, a piece that had caused me to get in touch with Murray. I titled it "Reply to the Voice." It... MORE

Central banks do not deserve our respect

Monetary Policy
Scott Sumner
Nor (in my view) do they deserve our contempt. They should be viewed skeptically. They are trying to do a good job, but often fall well short. One such occasion occurred in 2011 when the ECB tightened monetary policy. Prior... MORE

The best part of Collier's Exodus is his analysis of "diaspora dynamics."  In plain English, Irish like to immigrate to countries that already have a lot of Irish, Jews like to immigrate to countries that already have a lot of... MORE

Pillars of Economic Wisdom in Action

Economic Education
David Henderson
I wrote earlier about a special readings course I put together for people who had done well in my Cost/Benefit course but wanted more economics than they get in our MBA curriculum. As a kind of celebration, a number of... MORE

Jeremy Stein gave a speech that advocated adding financial risk to the Fed's traditional dual mandate. Or at least targeting risk in the hope that it makes it easier to fulfill its traditional mandate. I see lots of potential problems,... MORE

How Diabolical is Unz's Proposal?

Economic Philosophy
Bryan Caplan
Ron Unz wants to raise the minimum wage to discourage illegal immigration.  The mechanism: The minimum wage raises unemployment for low-skilled workers, and illegal immigrants are very low-skilled.  His words:In effect, a much higher minimum wage serves to remove the... MORE

Michael Cannon's Cannon

Economics of Health Care
David Henderson
Cato Institute's health economist Michael Cannon is the lead economist in a legal case that takes on the IRS. The Affordable Care Act (ACA), aka Obamacare, grants tax credits to low-income people who buy health insurance in state-run exchanges. There... MORE

Socialism Was Born Bad: The Case of Oskar Lange

Economic Philosophy
Bryan Caplan
Oskar Lange is arguably the most famous of the market socialists.  His fans often see him as a great spokesman for "socialism with a human face."  In the early 1990s, I attended a talk where Ken Arrow lauded Lange as... MORE

Endless bubbles?

Finance: stocks, options, etc.
Scott Sumner
I distinctly recall that Robert Shiller did not recommend that people buy stocks in 2009. That made me wonder when Robert Shiller did say it was a good time to buy stocks. Stephen Kirchner pointed me to an Alan Reynolds... MORE

The Worst They Can Do

Behavioral Economics and Rationality
Bryan Caplan
All modern governments do terrible things during wartime.  Most deliberately murder innocents; the rest at least recklessly endanger innocents.  Morally speaking, all sides in any serious military conflict are led by war criminals.Unfortunately, however, these genuine insights often lead my... MORE

Paris Flirts With Banning Cars Based on License-Plate Number

Energy, Environment, Resources
James Schneider
Recently, a lack of wind and rain has inflicted unusually high smog levels on Paris. On Monday, March 17, Paris combatted the dangerously high levels of pollution by barring cars with even-numbered license plates from the roads. The intent was... MORE

Endogeneity and the Drug War

Economics of Crime
David Henderson
Why the things that happened during the drug war are not a good argument FOR the drug war. And the things that happened BECAUSE of the drug war are a fortiori not an argument for the drug war. Last fall,... MORE

Question for Scott

Economic Methods
Bryan Caplan
Scott writes:Would you feel comfortable telling an accident victim in a wheelchair that "his type of person" is disproportionately composed of drunks? If not, be careful in making generalizations about the unemployed.My question for Scott: Would you feel comfortable telling... MORE

Murray Weidenbaum, RIP

Obituaries
David Henderson
Murray Weidenbaum, Ronald Reagan's first chairman of the President's Council of Economic Advisers, died on Thursday. The New York Times obit on him is excellent, uncovering some nuggets about him that I hadn't known. Check out the picture in the... MORE

Are ZMP workers uneducated or unmotivated?

Labor Market
Scott Sumner
This is a touchy subject, so let's begin with an analogy to clarify things. Years ago I read that drunk drivers were involved in 1/2 of all traffic fatalities. I'd guess the ratio was also high for accidents that put... MORE

A survey on communist symbols

Economic History
Alberto Mingardi
The CRCE is a long standing think tank that worked on the subject of communism and, later, on transitions from communism. They recently published a survey on communist symbols in former socialist countries. By communist symbols, they mean those pieces... MORE

Victory at Oberlin

Economics of Health Care
David Henderson
After my debate on Obamacare at Oberlin College on Wednesday, dozens of cheering students came running to the stage, lifted me up and carried me away because of my total victory over my opponent, Ted Marmor. OK, well that's not... MORE

Open Borders Day Roundup

Economic Philosophy
Bryan Caplan
Many good things about open borders for Open Borders Day via Open Borders.  Imbibe.... MORE

Should your neighbor make healthier choices at restaurants? Market signals are one source of information. Left to their own devices, restaurants rarely provide calorie information at the point of order. Evidently, people do not want to be reminded about the... MORE

Why we debate the unimportant issues

Regulation and Subsidies
Scott Sumner
Alex Tabarrok has a post discussing the laws protecting auto dealers from competition. One thing I notice is that when I discuss this sort of crazy law in the faculty dining room, many non-economists will tell me that they have... MORE

My debate opponent Ron Unz says he's abandoning his California minimum wage initiative for lack of funds.  The Nation's Sasha Abramsky responds with a soft-hitting interview.  The low point:You just mentioned undocumented migrants in the context of your minimum wage... MORE

David Friedman on Bill Nordhaus; Timothy Taylor on Bad Academic Writing

Energy, Environment, Resources
David Henderson
David Friedman has lately been picking apart a piece written by Yale University's Bill Nordhaus in the New York Review of Books two years ago. I did so in my class on Energy Economics two years ago, drawing on this... MORE

The Free Exchange Economist blog recently published a nice celebration of Hayek's "The Road to Serfdom", that was published some 70 years ago. It might not be Hayek's best book, but it is still the most popular one. It enjoyed... MORE

Would (Our) Open Borders Lead to (Their) Closed Borders?

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
My Facebook friend Anna Krupitsky asks a great question:Let's imagine: if United Stated today opened its borders, how many countries and how soon would close theirs for people leaving?There's ample evidence that ending emigration restrictions leads to more immigration restrictions. ... MORE

The Legacy of Milton Friedman

Monetary Policy
Scott Sumner
Last month I attended a conference on Milton Friedman, in Austin, Texas. The final session discussed his legacy, and I thought I'd share a few of my remarks. I argued that Friedman and Schwartz's Monetary History of the United States... MORE

Reminder: My Debate at Oberlin

Upcoming Events
David Henderson
The debate is with Ted Marmor of Yale University. Topic: Affordable Health Care: A Debate: A discussion of the Affordable Care Act and alternatives with David Henderson and Ted Marmor Time: Wednesday, March 19 at 7:30pm to 8:30pm Place: Nancy... MORE

The Marital Return to Education: An Epiphany

Family Economics
Bryan Caplan
Suppose college graduates out-earn high school grads by $30,000 a year.  Naive analysts will tell you, "Finish college and you'll get a $30,000 raise."  The clever, however, will warn you about ability bias.  The kind of people who become college... MORE

Pikkety and Inequality: My Reply to Commenters

Income Distribution
David Henderson
In response to my recent post on the New York Times interview with Thomas Piketty, a number of people commented relatively late in the game. For that reason, few regular readers will likely see their comments and so I'm choosing... MORE

The Popularity of Silly Methods

Economic Methods
James Schneider
In Bryan's blog post Predicting the Popularity of Obvious Methods, he suggests that social scientists are more likely to pursue non-obvious methods when the obvious methods don't provide the answer that they like. In the spirit of his post, the... MORE

Milton and Rose Friedman on Inequality

Income Distribution
David Henderson
Last week my group of students who work their way through readings had our last formal meeting. Good news: they decided over drinks afterwards that they want to continue the meetings informally next quarter and one of them suggested calling... MORE

An excellent book review

Book Club
Alberto Mingardi
Writing a good book review is not an easy job. I've been writing book reviews regularly, for some years now. I am also a big consumer of book reviews. I suspect it is so because I am very grateful to... MORE

For-profit schools have a bad reputation. The bad apples spend a bundle on recruiting marginal students and then leave them with crushing debt and poor job prospects. Many for-profit schools generate the majority of their revenue from Title IV... MORE

Immigration: My Eyes Work Fine

Behavioral Economics and Rationality
Bryan Caplan
Critics of my open borders advocacy often accuse me of intellectual blindness, of living in a fantasy world of my own creation.  So rather than rehash any of my arguments or review the academic evidence yet again, I'm going to... MORE

Open Borders Day is Starting

Economic Philosophy
Bryan Caplan
March 16 is Open Borders Day, an international holiday to raise awareness of the single most important policy issue of the modern world.  Open Borders Day is a time to reflect on the many immigrants - legal and illegal -... MORE

George Soros, speculator and proud

Book Club
Alberto Mingardi
George Soros has a new book, "The Tragedy of the European Union. Disintegration or Revival?" that consists of a series of interviews with Gregor Peter Schmitz, Europe Correspondent for the German magazine Der Spiegel. The book is sometimes very interesting... MORE

Proposed Questions for Oberlin Debate

Economics of Health Care
David Henderson
I announced back in February that I will be debating Yale University's Ted Marmor on health care, with emphasis on the Affordable Care Act, aka Obamacare. I asked you for proposed questions because the debate isn't structured as a traditional... MORE

Francis A. Walker

Labor Market
David Henderson
In his excellent post on Francis Walker's 1896 piece attacking open borders, Bryan didn't mention just who Francis Walker was. I'm sure Bryan knows, but it might help other readers to know. Walker was not just some nativist rube or... MORE

1896: Immigration and The Atlantic

Economic History
Bryan Caplan
In 2013, The Atlantic sympathetically profiled the open borders movement.  Quite a change from this piece the magazine ran in 1896, when nearly open borders still prevailed.  The author, Francis Walker, begins with admirable clarity:When we speak of the restriction... MORE

Piketty's Dodge on Inequality

Income Distribution
David Henderson
New York Times economics columnist Eduardo Porter recently interviewed economist Thomas Piketty on his work on income and wealth inequality. Piketty, in case you haven't followed, has been documenting the increase in income and wealth inequality in the richer countries,... MORE

Evan Soltas has an excellent new post explaining why the Fed is likely to raise interest rates in late 2015. He thinks this policy is appropriate, but I'd like to focus on a different issue---whether this rate increase caused the... MORE

Being Sendhil Mullainathan

Economic Philosophy
Bryan Caplan
Harvard's Sendhil Mullainathan has a remarkable life story.  From a profile in Forbes:Born in a small farming village in India, Mullainathan lived there for seven years while his father moved to the U.S. to go to graduate school. On his... MORE

Adam Smith Bio Corrected

International Trade
David Henderson
It is a mistake to say that Adam Smith unambiguously favored retaliatory tariffs. Russ Roberts called my attention to a mistake in my bio of Adam Smith in The Concise Encyclopedia of Economics. I had bought the conventional wisdom on... MORE

Optometry Challenge

Economics of Health Care
Bryan Caplan
Give me one good reason why basic eye exams can't already be done by a robot. Written while waiting for a human with an M.D. to repeatedly ask me "Better like this... or like that?"... MORE

Value of Self-Rated Health Bleg

Economics of Health Care
Bryan Caplan
Social scientists and medical researchers often ask people to rate their own health.  The General Social Survey, for example, asks respondents to place themselves on a four-step scale:Would you say your own health, in general, is excellent, good, fair, or... MORE

Economics must be harder than it looks

Economic Philosophy
Scott Sumner
Mark Sadowski sent me this paper from Paul Davidson, which he thought was hilarious: There are two different major economic theories that attempt to explain the operation of the money using, entrepreneurial economy that we call capitalism and its financial... MORE

Public schools provide education free of charge.  The result, unsurprisingly, is overwhelming market dominance.  Almost 90% of school-age kids attend public school.  Most people think this is a great thing.  Maybe they're right, maybe they're wrong.  Either way, though, public... MORE

Even When More Isn't Merrier, It Can Still Be Better

Energy, Environment, Resources
James Schneider
In 1966, Paul Ehrlich visited India to study butterflies. This trip provided a perfect rhetorical device to help his readers imagine the dangers of overpopulation. He was able to describe his firsthand reaction to Delhi: As we crawled through the... MORE

I have a special course I'm leading this quarter for students who did well in a previous course on Cost/Benefit Analysis. We work our way through articles--sometimes technical articles from economics journals and more often articles by economists in the... MORE

During the days of William Jennings Bryan it was pretty well understood that deflationary monetary policies helped bondholders and inflationary monetary policies helped debtors. That's why the rich favored the gold standard and lots of indebted farmers and small merchants... MORE

Blame the Republicans

Behavioral Economics and Rationality
Bryan Caplan
When I blame people for their problems, Democrats and liberals are prone to object at a fundamental level.  One fundamental objection rests on determinism: Since everyone is determined to act precisely as he does, it is always false to say,... MORE

Is Outrage at the Top 1% Distracting Us?

Income Distribution
David Henderson
I worry about growing income inequality. But I worry even more that the discussion is too narrowly focused. I worry that our outrage at the top 1 percent is distracting us from the problem that we should really care about:... MORE

The Modest Problem of Children Having Children

Family Economics
James Schneider
Most people take it for granted that teen pregnancy causes poor outcomes. However, how do you untangle whether teen pregnancy causes bad economic outcomes or is merely a leading indicator? Arline T. Geronimus and Sanders Korenman approached the issue... MORE

Schuck on Why Government Fails So Often

Books: Reviews and Suggested Readings
David Henderson
I'm working my way through Peter H. Schuck, Why Government Fails So Often. It's due out next month from Princeton University Press and I'm writing a review of it. I'm over halfway through and I'm loving it. Schuck does a... MORE

The European Union versus the e-cig

Economics of Health Care
Alberto Mingardi
In December last year we discussed the new European directive on tobacco products. It has been approved, and includes, as Andy Coghlan reports on the New Scientist, "strict conditions on how e-cigarettes can be formulated, advertised and sold". Now, if... MORE

40 Years on the Status Treadmill

Economic History
Bryan Caplan
The General Social Survey has spent four decades asking Americans about their self-perceived status:If you were asked to use one of four names for your social class, which would you say you belong in: the lower class (=1), the working... MORE

Krugman slides deeper into old Keynesianism

Monetary Policy
Scott Sumner
Those of us who liked the 1990s vintage Paul Krugman have been able to hold on to a few stands of hope. At least he still supports free trade. At least he only applies the old Keynesian model to the... MORE

Was Bork Right About Mergers?

Business Economics
David Henderson
In a just-published NBER study, "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Paper 19939, economists Orley C. Ashenfelter of Princeton, Daniel Hosken of the Federal Trade Commission, and Matthew C. Weinberg of... MORE

There's a lot of discussion about the natural rate of unemployment. Some think we are already close to the natural rate. Others think the labor market is much weaker than the official 6.6% figure would suggest. Evan Soltas has what... MORE

Poverty: The Stages of Blame Applied

Economic Philosophy
Bryan Caplan
What do my stages of blame imply about real-world poverty policy?1. As I've argued in detail here, poor healthy adults in the First World are largely undeserving.  Indeed, few are even objectively poor; just look at the many luxuries the... MORE

Caldwell on Hayek's "Consistent" Stories

Austrian Economics
David Henderson
In a fascinating article on why Friedrich Hayek did not write a review of John Maynard Keynes's The General Theory of Employment, Interest, and Money, Hayek expert Bruce Caldwell writes: Perhaps most damning is the tendency of Hayek's stories to... MORE

How Will Legalizing Marijuana Impact Hard Drug Use?

Economics of Crime
James Schneider
Recently Megan McArdle discussed whether legalizing pot would reduce hard drug use. Under marijuana prohibition, the buyer must enter an illegal drug market. The seller is likely to offer harder drugs for sale. By legalizing marijuana but keeping hard drugs... MORE

NGDP targeting is not a "fragile" policy

Monetary Policy
Scott Sumner
This post tries to tie together some diverse observations about the sticky wage/NGDP shock model. The motivation for this (unfortunately long) post was the observation that many non-economists seem to find the sticky wage/NGDP shock model to be appealing. I... MORE

An update on Mr. Renzi

Eurozone crisis
Alberto Mingardi
In a comment to my blog post on Mr Renzi, the new Italian prime minister, Shane L has posed a very interesting question: I wonder if, in the same sense that only Nixon could go to China, only a respected... MORE

Poverty: The Stages of Blame

Economic Philosophy
Bryan Caplan
I've repeatedly argued that there's a connection between (a) how deserving the poor are, and (b) how the poor ought to be treated.  Unfortunately, as soon as I make this deliberately vague claim, many readers rush to ascribe specific, silly... MORE

Media Bias: RT May Have Less Than I Thought

Cross-country Comparisons
David Henderson
Like many Americans, I have been skeptical about RT, the TV network, previously called "Russia Today," that is funded by the Russian government. That didn't stop me from going on the network because I don't have a policy of going... MORE

The Principal Doctrines of Epicurus is a 3rd-century outline of Epicurean philosophy.  This bullet point is so consistent with my posts on friendliness, social intelligence, and the Bubble that I feel compelled share it.He who desires to live in tranquility... MORE

The Happiness of the Richest

Behavioral Economics and Rationality
Bryan Caplan
Over lunch, Justin Wolfers mentioned a hard-to-believe fact: In a data set with an unusually high maximum income category, 100% of the richest people were "very happy."  I decided to track down the data.  Despite my incredulity, Justin's description was... MORE

Henderson on TANSTAAFL

Economic Education
David Henderson
At the start of every class I teach, I give my students what I call "The Ten Pillars of Economic Wisdom." These pillars, I tell them, are the basis for a huge percent of economic analysis and if they master... MORE

Is Abenomics working?

Macroeconomics
Scott Sumner
Tyler Cowen recently linked to an interesting post by Edward Hugh. Hugh argues that much of the recent uptick in Japanese inflation is due to the recent depreciation of the yen. That may be true in an accounting sense, but... MORE

Prior to 2001, I supported a much smaller government, but I wasn't particularly obsessed about government debt per se. I didn't think that government borrowing was stealing from future generations (the technology for stealing from future generations more or less... MORE

Reminiscences of Rogge

Business Economics
David Henderson
UPDATE BELOW: Earlier today over at Cafe Hayek, Don Boudreaux highlighted a quote from the late Benjamin A. Rogge. That brought back warm memories for me. Rogge, who lived from 1920 to 1980, was a libertarian economics professor at Wabash... MORE

Ukrainian Prediction Challenge

Economic Philosophy
Bryan Caplan
To repeat myself:The long-run benefits of war are highly uncertain.  Some wars - most obviously the Napoleonic Wars and World War II - at least arguably deserve credit for decades of subsequent peace.  But many other wars - like the... MORE

What Say You? The Intuitive Case Against the Minimum Wage

Behavioral Economics and Rationality
Bryan Caplan
Don Boudreaux asks minimum wage supporters to answer two questions they should have asked themselves long ago.Question #1:Name some other goods or services for which a government-mandated price hike of 25 percent will not cause fewer units of those goods and services... MORE

The mysterious rise in youth unemployment

Labor Market
Scott Sumner
There's a new piece in The Economist discussing the disturbing rise of youth unemployment all over the world. Oddly there is no mention of minimum wage laws. When supply doesn't equal demand, shouldn't artificial price floors be the first place... MORE

1.6%, Not 97%, Agree that Humans are the Main Cause of Global Warming

Energy, Environment, Resources
David Henderson
UPDATE BELOW Mark Bahner, a commenter on my previous post on global warming and on David Friedman's post, has sifted through the data behind John Cook's statement that 97% of climate scientists who stated a position believe that humans are... MORE

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