Bryan Caplan and David Henderson

April 2014

A Monthly Archive (76 entries)

Where Does All the Booze Go?

Behavioral Economics and Rationality
James Schneider
In a recent post, Bryan wrote about how people do not accurately report how much tobacco they purchase. If they did, then the survey data would be consistent with tobacco sales. However, surveys report less than half of the actual... MORE

Feminizing Famine

Energy, Environment, Resources
James Schneider
Recently, I've been rereading parts of Cormac Ó Gráda's Famine: A Short History. The book juxtaposes an interesting pair of facts. The first fact describes how famine is marketed (for lack of a better word): The sense that the horrors... MORE

What I find interesting about the case of Los Angeles Clippers owner Donald Sterling is how well it illustrates Gary Becker's insights on the economics of discrimination. Becker pointed out that the market makes people "pay" for discriminating on racial... MORE

Even before Mark Carney took over as Governor of the Bank of England, he showed signs of independent thinking. Most famously, he came close to endorsing NGDP targeting at a speech in Toronto during early 2013. More recently, he hinted... MORE

Farewell, James Schneider

Behavioral Economics and Rationality
David Henderson
Our guest blogger James Schneider will post his last entry tomorrow. Because his friend Bryan Caplan posted the welcome, I have asked for--and have been granted--the honor of writing his farewell. I met James at a Liberty Fund seminar on... MORE

Ayn Rand in the Happy Lab

Behavioral Economics and Rationality
Bryan Caplan
Ayn Rand made many uncharitable claims about her philosophical opponents, but this passage from Galt's Speech in Atlas Shrugged takes the cake:They do not want to own your fortune, they want you to lose it; they do not want to... MORE

Applying Hayek's "Local Knowledge" Insight to Foreign Policy

Central Planning vs. Local Knowledge
David Henderson
Now, there's nothing in Hayek's arguments to suggest that it applies only to central planning of a domestic economy. A government that wishes to intervene in another country's affairs faces the same problem, possibly even magnified by the fact that... MORE

The resurrection of the automatic watch

Entrepreneurialism
Alberto Mingardi
David Landes' brilliant book, Revolution in Time: Clocks and the Making of the Modern World, ends with a chapter that reads like an obituary of sorts to Swiss watchmaking. The book was published in 1983, and Landes maintained that the... MORE

Cowen and Crisis Reconsidered

Behavioral Economics and Rationality
Bryan Caplan
Robert Higgs famously blames the growth of government on crises - especially wars and depressions.  I firmly believed in this story for over a decade until I read Tyler Cowen's critique:The ratchet effect becomes much stronger in the twentieth century... MORE

A pragmatic view of causation

Monetary Policy
Scott Sumner
I'm not trained in philosophy, but I do regard myself as a philosophical pragmatist. So when I grapple with issues of causality I try to imagine which definition of 'causation' is the most useful. Consider two possible causes of WWII:... MORE

Acemoglu and Robinson on Mobutu

Growth: Causal Factors
David Henderson
I'm at a conference in San Diego in which the participants are discussing various articles and book chapters on the causes of economic growth. A number of chapters are from Daren Acemoglu and James A. Robinson, Why Nations Fail, which... MORE

George R.R. Martin's Pacifist Tendencies

Books: Reviews and Suggested Readings
Bryan Caplan
I've argued that George R.R. Martin's novels vividly illustrate my case for pacifism.  Now G.R.R.M. tells us directly:You're a congenial man, yet these books are incredibly violent. Does that ever feel at odds with these views about power and war?... MORE

Great line from Lars Christensen.  Read the underlying facts.... MORE

Schumpeter, intellectuals and capitalism

Books: Reviews and Suggested Readings
Alberto Mingardi
Kevin Hassett recently debated Thomas Piketty on his book, "Capital in the 21st Century". After presenting some interesting points on Piketty's work, Hassett reminds his audience, somehow ironically, that not just Marx, but also Joseph Schumpeter thought that capitalism was... MORE

Too Many

Behavioral Economics and Rationality
Bryan Caplan
"There are too many X" is usually a socially acceptable complaint.  With one key exception: If the X's are people.  Declaring, "There are too many blacks" makes you a racist.  Announcing, "There are too many Jews" makes you an anti-Semite. ... MORE

Econlib in Classes

Economic Education
David Henderson
When I was at the Association for Private Enterprise Education (APEE) annual meetings in Las Vegas last week, two professors came up to me and, unsolicited, sang high praises of Liberty Fund's Library of Economics and Liberty web site. Both... MORE

Consumption is the bedrock upon which essentially all of economics is built. We assume that all economic activity is aimed at creating consumption (defined broadly to include the value of leisure time, and non-market factors such as clean air.) Of... MORE

Talking to Mark Krikorian

Economic Philosophy
Bryan Caplan
At last night's debate, I finally got to talk to the Center for Immigration Studies' Mark Krikorian.  Some thoughts:1. Mark has good manners and radiates little anger.  Immigration opponents would be more influential if they emulated him.  2. Fortunately, such... MORE

Cuba's Wage Policy: Modified Nazi

Labor Market
David Henderson
The writer of Schindler's List would understand. The Economist writes: But on March 29th Cuba's parliament approved a new foreign-investment law that for the first time allows Cubans living abroad to invest in some enterprises (provided, according to Rodrigo Malmierca,... MORE

Robert Solow on Piketty

Books: Reviews and Suggested Readings
David Henderson
According to Solow, if Piketty gets his way, real wages will stagnate. My copy of Thomas Piketty's Capital in the Twenty-First Century finally arrived and now I face a tradeoff between reading it and reading many reviews of it. I'm... MORE

Normal 0 MicrosoftInternetExplorer4 Last night's immigration debate with Mark Krikorian and Alex Nowrasteh was... interesting.  Reflections forthcoming.  For now, here's my opening statement. Normal 0 MicrosoftInternetExplorer4 America Should Open its Borders Under current U.S. law, it is illegal for... MORE

We aren't very Victorian, are we?

Book Club
Alberto Mingardi
I was reading recently John Vincent's "The Formation of the British Liberal Party 1857-68", a classic on the subject and a most interesting book. I was struck by the following passage: Very striking rewards, then, did not act at all... MORE

Crazy Immigration

Economic Philosophy
Bryan Caplan
Under open borders, over six billion people would be free to move to the United States.  The population could increase by more than a factor of twenty.  And under real open borders, there's no mandatory waiting period.  If everyone wants... MORE

German success is surprisingly recent

Labor Market
Scott Sumner
Many people assume that Germany has long been an economic success story. It was certainly successful back in the 1950s and 1960s. But as recently as 2004 it was widely viewed as the "sick man of Europe" despite all those... MORE

Krugman's Strange Post on Solar Power

Energy, Environment, Resources
David Henderson
Paul Krugman has a strange post on solar power that contradicts basic microeconomics. He writes: Like just about everyone who has looked at the numbers on renewable energy, solar power in particular, I was wowed by the progress. Something really... MORE

Why the EMH is truer than supply and demand

Finance: stocks, options, etc.
Scott Sumner
My previous post discussed the strangeness of the efficient markets hypothesis. Here I'll defend its utility. In the field of economics, all models represent simplifications of reality. Thus when we consider whether the EMH is true, it makes no sense... MORE

Gary Johnson's Bold Attack on Freedom of Association

Economic Philosophy
David Henderson
The Our America initiative, which is headed up by 2012 Libertarian presidential candidate and former two-term New Mexico Gov. Gary Johnson, has produced a sharp commercial asking for donations to fund a legal challenge to presidential debates. The basic argument?... MORE

Social Desirability Bias: How Psych Can Salvage Econo-Cynicism

Behavioral Economics and Rationality
Bryan Caplan
The strongest evidence against the economic way of thinking is the way that people describe their own behavior.  People rarely announce, "I'm looking out for number one."  Businesses rarely advertise, "Our own profit is our top priority."  Students rarely declare,... MORE

Old Home Week

Economic Education
David Henderson
Three of my former students were in town last week and I had lunch with each of them. Meeting with them and hearing what they had learned in my class was very gratifying. On Wednesday, I had lunch with one... MORE

Facts

Economic Methods
David Henderson
One of my pet peeves is people latching on to alleged facts and then running with them even when there is doubt about whether they are true. These "facts" then get repeated so often that many people form an emotional... MORE

Quantum finance

Finance
Scott Sumner
The New York Review of Books has a very interesting interview of George Soros. At one point he is asked about the recent revolution in the Ukraine. Here is part of his response, and then a follow-up question: [Soros] Contrary... MORE

I'm a Liberal

Economic History
David Henderson
When I figured out my basic political beliefs at ages 17 and 18, I didn't know the term for them. Katherine George, a left-wing sociology professor at the University of Winnipeg with whom I was arguing, called me a libertarian.... MORE

Tuesday Immigration Debate

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
This Tuesday, Reason is hosting a DC debate on "Should America Open Its Borders?"  Cato's Alex Nowrasteh and I say yes; the Center for Immigration Studies' Mark Krikorian says no.The Center for Immigration Studies' masthead reads, "Low-Immigration, Pro-Immigrant."  I've dissected... MORE

Europe vs Uber

Eurozone crisis
Alberto Mingardi
Uber is having a hard time in Europe. The San Francisco company has started its operations in quite a few cities now. This fact has raised protest by taxi-drivers (as any other human being, they do not like new competitors).... MORE

Rudebusch on "Housing Demand"

Macroeconomics
David Henderson
This is another installment in my posts on my visit to the San Francisco Fed on April 9. My talk was in the afternoon, but I always like to see the talks that precede mine so that I can get... MORE

Tourists Welcome

Cost-benefit Analysis
Bryan Caplan
Almost everyone wants to heavily restrict immigration.  Foreigners will take our jobs, go on welfare, poison our culture, and vote for socialism.  But there's one kind of foreigner almost every country welcomes: tourists.  Sure, locals gripe about their cluelessness and... MORE

Can a Positive Number Fall by over 100 Percent and Still be Positive?

Statistical theory and methods
David Henderson
Answer: No. But it has become increasingly common for people, even otherwise numerate analysts, to write as if it can. Consider a recent instance. In the Spring 2014 issue of Regulation, Sam Batkins and Mitch Boynton discuss a case in... MORE

Bad news; industrial production is soaring

Macroeconomics
Scott Sumner
TravisV sent me to the following graph of industrial production: That looks like good news. To see why it is bad news, we need to take a brief digression. The recent recession has been rather unusual. RGDP fell sharply between... MORE

I've Won My TARP Bet

Economic Methods
Bryan Caplan
Back in 2008, I noted an obscure TARP provision: SEC. 134. RECOUPMENT.Upon the expiration of the 5-year period beginning upon the date of the enactment of this Act, the Director of the Office of Management and Budget, in consultation with... MORE

I Agree with Barbara Ehrenreich

Income Distribution
David Henderson
On a flight home from Las Vegas last night, I found the April 14 issue of Time magazine. I hadn't read it in years. On the last page was a feature called "10 Questions." They were 10 questions to "activist,... MORE

Larry Summers is persuasive

Economic Philosophy
Scott Sumner
Tyler Cowen directed me to a long interview of Larry Summers. I have two general impressions after listening to the interview: 1. Larry Summers seems brilliant. 2. I disagree with him on just about everything. That got me wondering why... MORE

Try Harder or Do Something Easier?

Behavioral Economics and Rationality
Bryan Caplan
A friend tells you, "I'm thinking of starting a restaurant.  Advise me."  You know that about 60% of new restaurants fail in their first three years - and have no reason to think that your friend would be anything other... MORE

Smoking, Social Desirability Bias, and Dark Matter

Behavioral Economics and Rationality
Bryan Caplan
At the IEA blog, Kristian Niemietz points out that expenditure surveys fail to detect most of the tobacco sales visible in national product accounts.  For most goods, the two show broadly the same pattern: with small errors, what people profess... MORE

Civil Disobedience: King versus Huemer

Cost-benefit Analysis
Bryan Caplan
Martin Luther King's "Letter from a Birmingham Jail" defends an odd position: You may morally break an unjust law IF you make no effort to evade the legal punishment for the unjust law you break.In no sense do I advocate... MORE

Germany's mysterious recovery

Labor Market
Scott Sumner
In the past 10 years Germany as gone from being the "sick man of Europe" to the star of the eurozone. This partly reflects the strong job creation that preceded the recession, perhaps due to the labor market reforms of... MORE

Ramblings on Piketty

Book Club
Alberto Mingardi
I've finally received my copy of Capital in the Twenty-First Century, Thomas Piketty's magnum opus that has already risen to the status of a cult book for the political left. It is a good rule never to comment on a... MORE

My San Francisco Fed Talk

Monetary Policy
David Henderson
Last Wednesday I gave a talk at the San Francisco Federal Reserve Bank. The event was the "2014 Conference of Twelfth District Directors." I was one of three presenters. See here for the other two. The session was on "Bubbles"... MORE

Divorce and Motivated Reasoning in the WaPo

Behavioral Economics and Rationality
Bryan Caplan
In The Economic Naturalist, Robert Frank remarks: Normal 0 false false false MicrosoftInternetExplorer4 Psychologist Tom Gilovich has suggested that someone who wants to accept a hypothesis tends to ask, "Can I believe it?"  In contrast, someone who wants to reject... MORE

In recent history, the UK has liberalized its rules concerning the hours that pubs can operate. For example, the Licensing Act of 1988 expanded Sunday hours and no longer required pubs to close for two and a half hours in... MORE

Donald Boudreaux takes on one of Robert Reich's recent arguments for the minimum wage. Reich writes: A $15/hour minimum is unlikely to result in higher prices because most businesses directly affected by it are in intense competition for consumers, and... MORE

Kids and Happiness: The State of the Art

Behavioral Economics and Rationality
Bryan Caplan
Nelson, Kushlev, and Lyubomirsky's "The Pains and Pleasures of Parenting: When, Why, and How Is Parenthood Associated With More or Less Well-Being?" (forthcoming in the Psychological Bulletin) is a great survey of research on parenthood and happiness.  Quick version: Contrary... MORE

Maximizing Short-Run Profits

Business Economics
David Henderson
I was one of three speakers on a panel at the San Francisco Federal Reserve Bank on Wednesday. The other two speakers were Kevin Lansing of the SF Fed and Atif Mian of Princeton University. The event went well and... MORE

Inequality among doctors

Income Distribution
Scott Sumner
The following graph perked my interest: I notice that the inequality of Medicare payments mirrors the overall income inequality in American society. (Which is ironic as Medicare is a socialist program beloved by pundits like Paul Krugman.) I don't know... MORE

The Moral Vision of a Blind Economist

Obituaries
David Henderson
That's the title that Regulation gave my piece on Walter Oi. [I had given it the title "An Economist of Character Who Was a Real Character.] It appears in the Spring 2014 issue of Regulation. I had already written a... MORE

Crude Self-Interest: Why Kids Go to College

Behavioral Economics and Rationality
Bryan Caplan
Economists tend to dogmatically reduce human behavior to crude self-interest.  They're often deeply wrong.  Sometimes, though, the shoe fits.  UCLA's Higher Education Research Institute has been asking kids why they're going to college for a long time.  In recent decades,... MORE

Simon Kuznets: An Appreciation

Macroeconomics
David Henderson
I second co-blogger Bryan Caplan's appreciation of the late Simon Kuznets. One of my pleasures in writing the many bios of famous economists for The Concise Encyclopedia of Economics was researching and writing his bio. Some excerpts from the Encyclopedia... MORE

The Impolitic Wisdom of Simon Kuznets

Cost-benefit Analysis
Bryan Caplan
Highlight from Diane Coyle's GDP: A Brief but Affectionate History:Kuznets, however, saw specifically his task as working out how to measure national economic welfare rather than just output.  He wrote:It would be of great value to have national income estimates... MORE

Reason's Home Run on Immigration

Labor Mobility, Immigration, Outsourcing
David Henderson
When I dug into [Reason e-book] Humane and Pro-Growth, I realized that I had fallen behind in the immigration debate. Sure, I had read all of my [Econlog] co-blogger Bryan Caplan's excellent posts on immigration. And I've become quite familiar... MORE

The Righteous Scofflaw

Cost-benefit Analysis
Bryan Caplan
The most popular argument against illegal immigration is probably that breaking the law is wrong.  At least since the Nazis, though, virtually no one believes that breaking the law is always wrong.  Instead, we all recognize circumstances under which being... MORE

Is Venice going to secede?

Eurozone crisis
Alberto Mingardi
Two weeks ago, an online referendum on the independence of Veneto has gained the attention of the international media. This is not surprising: Venice is one the marvels of the world, and people rightly care for its future. The referendum's... MORE

Robert Bradley on Enron

Business Economics
David Henderson
My previous Econlib article, "Enron: The Perils of Interventionism," described how capitalism's most trenchant critics turned the rise and fall of this once iconic corporation into "Exhibit A" against laissez-faire. Other critics, though, understanding that America's regulated economy leaves no... MORE

UPDATE BELOW: Anyway, there were a few houses I worked on where we got J-grade lumber, which is lumber that is destined for Japan. It is a grade above A-grade that you can't even buy at a lumber yard. You... MORE

Never reason from an inflation rate change

Macroeconomics
Scott Sumner
In a new post, Tyler Cowen is skeptical of Paul Krugman's claim that higher inflation hurts the rich. Brad DeLong also expresses some skepticism. I agree with Cowen and DeLong, but would like to quibble with this comment in... MORE

The Ghetto of Talent

Economic History
Bryan Caplan
Charles Murray has recently come under attack for the position he staked out in Human Accomplishment on gender and achievement.  He's ably defended himself by pointing out what he actually wrote.  In the process, though, I remembered my favorite part... MORE

Not Just Horsepower but Power without Horses

Economic History
James Schneider
For awhile, I've been vaguely aware of Norman Borlaug's importance without knowing very much about him. Recently, I've read a Borlaug biography called Our Daily Bread by Noel Vietmeyer. At this point in my life, I don't have the time... MORE

Like many libertarians, I find the bet between Paul Ehrlich and Julian Simon to be a fascinating episode in intellectual history. However, I've always been even more interested in Ehrlich's descriptions of imminent mass starvation from The Population Bomb. By... MORE

What we are up against

Regulation
Scott Sumner
The Great Recession led to a lot of "if only" comments. If only we could charge a negative interest rate on reserves, to discourage banks from hoarding excess reserves. If only we had had more regulation back during the housing... MORE

I've Changed My Mind, Part 2

Economic Philosophy
David Henderson
UPDATE BELOW In a comment on my April Fool's Post, "I've Changed My Mind," NZ wrote: You make a joke out of changing your mind, which seems to imply that you don't actually plan to change your mind because you're... MORE

Water Runs Downhill, and School Is Boring

Behavioral Economics and Rationality
Bryan Caplan
Lately I've been reading everything I can on how people feel when they're in school.  The evidence is thin, but confirms the obvious: Most people find school super-boring.  The High School Survey of Student Engagement is probably the single best... MORE

What's a Doctor to Do?

Economics of Health Care
David Henderson
Over at Marginal Revolution, Tyler Cowen posted a question asked by a 3rd-year medical student who's a regular reader of MR. Here's the question: I am a 3rd year medical student, and for the purposes of this question, let's assume... MORE

Is Welfare a Band-Aid for Nominal Wage Rigidity?

Cost-benefit Analysis
Bryan Caplan
The minimum wage and welfare (broadly defined to include unemployment benefits and such) curiously interact.  As I've previously explained:The minimum wage deprives the unfortunate workers shown in red of their ability to support themselves.  Given this involuntary unemployment, the case... MORE

I don't generally get into debates over monetary "disequilibrium," as I don't find the concept to be particularly useful. It's too vague. But against my better judgment I'm going to take a stab at the debate between David Glasner and... MORE

Nudging consumers and regulators

Behavioral Economics and Rationality
Alberto Mingardi
About one year ago, the British Financial Conduct Authority (FCA) -- which also regulates consumer credit -- published an Occasional Paper aimed at explaining how it is going to take advantage of the insights of behavioral economics. For one thing,... MORE

I've Changed My Mind

Economic Philosophy
David Henderson
I woke up this morning with an epiphany. In my political views, I've been on the wrong track for a long time. Specifically: 1. I think Obamacare is great. So what if it's causing young people to subsidize the elderly?... MORE

Answering Arnold's Challenge

Growth: Consequences
Bryan Caplan
Tyler publicizes a challenge from founding EconLog blogger Arnold Kling:I still want to see an economist reconcile a belief in secular stagnation with a belief in Piketty's claim that the return on capital is going to exceed the growth rate... MORE

You Don't Know the Best Way to Deal with Russia

Cost-benefit Analysis
Bryan Caplan
Foreign policy experts love making bold predictions.  The clearer their conclusions, the wiser they sound.  Unfortunately, as Philip Tetlock documents, their predictions about controversial topics are scarcely better than chance.  They're all style, no substance.  The Economist's recent editorial on... MORE

Return to top