EconLog small logo

September 2014

A Monthly Archive (91 entries)

Flying blind

Monetary Policy
Scott Sumner
There is a sort of zero sum aspect to exchange rates. Any change in exchange rates means one currency is weaker and one is stronger, relative to the other. But exchange rates tell us nothing about whether currencies are weaker... MORE

Saturday Morning Breakfast Cereal has joined The Oatmeal, XKCD, and Botched Spot as one of my favorite comics. This particular installment was especially brilliant. It proposes a browser plug-in that makes the opportunity cost of military hardware explicit. The night... MORE

This discussion is related to the time inconsistency of optimal policy, which occurs when the government cannot implement an optimal tax policy because the stated policy is inconsistent with the government's incentives over time. Consider a proposal made by the... MORE

Pious Thinking

Behavioral Economics and Rationality
Bryan Caplan
I often argue that popular ideas are deeply mistaken.  I attacked everything from nationalism and militarism to Tiger Parenting and labor market regulation.  There's one utterly corrupt outlook, though, that I almost never bother to criticize.  As soon as I... MORE

The Austrian Tradition on Mises' Birthday

Austrian Economics
Art Carden
Pete Boettke has a great post on the intellectual legacy of Ludwig von Mises at Coordination Problem (HT: Pete Boettke via Twitter). With speculation about the possibility of a shared Baumol-Kirzner Nobel Prize, this is an interesting time to be... MORE

This is an edited version of my comment on this Reddit thread. OP had offered this quote from his microeconomics professor: "Government is the only institution which is allowed to hold a gun to your head and force you to... MORE

Why is the Right Soft on Education?

Economic Philosophy
Bryan Caplan
When the American left complains about domestic poverty, you might think the American right's standard response would be either:1. "What poverty?  By any sensible standard, the 'American poor' are rich."2. "America doesn't have a poverty problem; it's the American poor... MORE

Don't jump to conclusions (markets are smarter than you or I)

Central Planning vs. Local Knowledge
Scott Sumner
Many pundits, especially highly intelligent liberal pundits, often fall into the trap (fatal conceit?) of assuming that because they can't explain why the market would do something, the market must be wrong. But markets are almost infinitely subtle. A commenter... MORE

Recarving Rushmore: With Warren G. Harding

Economic History
David Henderson
My wife and I took a break from work yesterday to channel surf. We found Alfred Hitchcock's classic North by Northwest and we were hooked, staying with it to the end. At the end, there is an exciting chase at... MORE

What kind of Great Stagnation?

Macroeconomics
Scott Sumner
Paul Krugman likes to mock extremely talented conservative economists every time they make a statement that seems inconsistent with the textbook AS/AD model of demand shock-created recessions. And yet as far as I can tell, the views of people like... MORE

Social Security: The Inside Story

Social Security
Bryan Caplan
The Social Security Administration's latest "Actuarial Note" is as fascinating as actuarial notes get.  Its main lessons:1. Social Security used to be a great deal.  The poorest one-earner couples born in 1920 got a real return of 9.18%; the richest... MORE

While prepping for yesterday's Principles of Macroeconomics discussion of GDP, I listened again to Diane Coyle's EconTalk episode in which she and Russ Roberts discussed the history and development of GDP. Toward the end, they discuss a philosophical question: is... MORE

Commenter Fed up directed me to an article at Yahoo discussing the squeeze on the middle class: A survey by Pew this year found that 57 percent of Americans felt their income was trailing the cost of living -- the... MORE

Social TV: Social Media Creates More Weak Ties

Information Goods, Intellectual Property
Art Carden
Earlier today, I heard a bit on the radio that was of the standard "screen time is destroying kids' minds and making them less social and..." form. Online social norms are still evolving, but I really doubt screens are making... MORE

Spot the Problem

Behavioral Economics and Rationality
David Henderson
In a July post, Matt Bruenig estimates that in the absence of government programs to alleviate poverty, the percent of Americans who would be officially classified as poor would be a whopping 23.8% versus what it actually is: 15%. Go... MORE

The Welfare State as Extended Warranty

Cost-benefit Analysis
Bryan Caplan
"Extended warranty?  How can I lose?"             -- Homer SimpsonValue is subjective, and taste for risk varies widely.  But every economist I've asked - and virtually every savvy consumer - concludes that extended warranties are a lousy deal.  The short... MORE

Piketty, Piketty, Piketty, Piketty

EconTalk
Russ Roberts
Check out the EconTalk interview, the followup discussion questions, my thoughts on the conversation, and my discussion with Tyler Cowen, Brad DeLong, and Robert Solow (last link).... MORE

Richard McKenzie on Foreign Export Subsidies

International Trade
David Henderson
The subsidization of foreign exports enables Americans to tap into the income bases of foreign countries and impose a tax on foreigners every time a subsidized product is imported into this country. Communist China, for example, would never consider allowing... MORE

Social Desirability Bias and Abortion

Behavioral Economics and Rationality
Bryan Caplan
Economists have long argued that we should pay a lot more attention to what people do and a lot less attention to what people say.  But they make little effort to justify their pro-action/anti-talk position.  The strongest support for economists'... MORE

Canadian success

Cross-country Comparisons
Scott Sumner
David Henderson has a very good post on the Canadian economy.  David argues that austerity can be expansionary, and points to the example of Canada in the 1990s. Josh Barro counters that Canada was aided by an expansionary monetary policy:... MORE

Zeke Emmanuel on Optimal Life Expectancy

Economics of Health Care
David Henderson
Private Policy Like Arnold Kling, I found some of the information in Ezekiel Emanuel's article on aging troubling. But also, like health policy analyst Greg Scandlen, I found Ezekiel Emanuel troubling. I first saw reference to his article in a... MORE

The Puzzling Ubiquity of Disability

Economics of Education
Bryan Caplan
In 1976, 8.3% of students in U.S. public schools were officially disabled.  By 2010, the disabled share was up to 13%.  What on earth happened?  This piece by Jay Greene and Greg Forster considers and critiques three main stories.  Prepare... MORE

The Key to victory: Run against Piketty-nomics

Politics and Economics
Scott Sumner
This is good news: New Zealand's NZX 50 Index increased 1.1 percent, driven higher by power-company stocks, after John Key won a third term as prime minister. Key, a former head of foreign exchange at Merrill Lynch & Co., led... MORE

Unintended Consequences of De-Insuring Insurance

Economics of Health Care
David Henderson
Kevin Drum alerts us to some unintended consequences of a law that he advocates. Over at Mother Jones, Kevin Drum has noticed that some health insurers are charging a huge co-insurance rate for HIV drugs. He writes: If all your... MORE

Uber Wars Update

Eurozone crisis
Alberto Mingardi
The district court of Frankfurt lifted the nationwide ban on UberPOP in Germany. UberPOP is the most controversial and most promising service Uber offers: it doesn't just connect professional drivers of black cars (as Uber indeed does) in a bigger... MORE

Response to Krugman on My Canada Study

Fiscal Policy
David Henderson
UPDATE BELOW I think this qualifies as a cockroach idea (zombies just keep shambling along, whereas sometimes you think you've gotten rid of cockroaches, but they keep coming back.) I thought we had disposed of all this four years ago.... MORE

Bill Woolsey directed me to a post by Kevin Grier (commenting on Lars Christensen): OK, so the first graph is the path of Nominal income (PY) relative to trend. The second is the path of real income (Y) and the... MORE

Saving Money with One Income

Family Economics
Art Carden
There's a very interesting discussion on the Libertarian Homeschooler Facebook page about living on one income. My contribution, reproduced verbatim: 1. Recognize that your time is *very* valuable. It might actually be better to pick up a few dollars freelancing... MORE

You often read very thoughtful progressives explain why the government sector in the US is too small. You'd think 40% of GDP would be enough, but they insist we have "unmet needs" for a single-payer health care system (18% of... MORE

Richard Epstein's Faulty Case for Intervention

Central Planning vs. Local Knowledge
David Henderson
My Hoover colleague Richard Epstein has recently been arguing for the U.S. government to make war in the Middle East and has singled out libertarians for particular criticism. In a relatively fact-free piece, Richard argued that libertarians are "clueless on... MORE

Scotland and the irrational media

Eurozone crisis
Alberto Mingardi
Scotland won't secede: 54% voted for 'no', 46% voted 'yes'. The composure with which the losers conceded tells you something about this referendum. The secessionists had remarkably little complaint with the state of the Union. They did not push for... MORE

Inequality in education

Economics of Education
Scott Sumner
Because I'm a resident of Newton, Massachusetts, I couldn't help noticing that it was recently named the Best Suburb in America for education. And it's easy to see why: That's largely because this wealthy Boston suburb has the money to... MORE

Anarchy in the UK? Not so much. Scottish voters have decided to stay in the UK, and Justin Wolfers calls this "a loss for pollsters and a win for betting markets." I agree: betting markets produce a much higher signal-to-noise... MORE

I've done a lot of interviews on education at EconTalk and there's always more to learn. There were two moments that really stuck with me from this conversation with Elizabeth Green about her book, Building a Better Teacher. One is... MORE

How High Is Schools' Implicit Land Rent?

Economics of Education
Bryan Caplan
If a business rents land, any accountant will count the rent as a cost of doing business.  If a business borrows to buy land, any accountant will count the interest payments as a cost of doing business.  What happens, though,... MORE

Start!

Behavioral Economics and Rationality
David Henderson
Over at marginalrevolution.com, Tyler Cowen has posted some excellent rules for managing your time. I won't repeat them here--they're short enough--but I want to add an important one, comment on a few, and add a final one. Here's the one... MORE

Scotland, Quebec, and Tupy

Cross-country Comparisons
David Henderson
Scotland's greater statism and, ironically for the birth place of Adam Smith, suspicion of capitalism, is a potent obstacle to reform in England and Wales. It is also a serious danger to economic prosperity north of the border. Sooner or... MORE

Clive Crook on Scotland

Eurozone crisis
Alberto Mingardi
Clive Crook has a taste for contrarian views that makes him well worth reading. He wrote two articles on Scottish independence. Here he emphasizes the reasons why Scotland shouldn't go for secession, though he points out also the dishonesty on... MORE

Tribal Desire

Behavioral Economics and Rationality
Bryan Caplan
On Twitter, Mark Krikorian opined that, "Desire for membership in a tribe is as inherent to the human personality as some form of body covering."  He's not exactly wrong, but omits three essential caveats.1. Desire for tribal membership varies widely. ... MORE

In early 2013, I had the privilege of speaking at a student conference in Brazil. While I was making my travel arrangements, I asked my Facebook network whether I should pay the extra $100 for Economy Comfort on the international... MORE

How Can Small Kids Earn a Few Dollars?

Family Economics
Art Carden
This morning, our six-year-old earned fifty cents. That fifty cents topped of the money he has been earning recently and gave him enough to buy a $17 toy he wants. I couldn't be prouder: when he wants something, he finds... MORE

My 1984 CEA Memo on Alaskan Oil Exports

International Trade
David Henderson
Earlier this week, I posted a 1983 memo that I wrote to my boss at the Council of Economic Advisers, Martin Feldstein, about a meeting to discuss relaxing the limits on exports of Alaskan oil. Below is a follow-up memo... MORE

The Universal Citizenist

Economic Philosophy
Bryan Caplan
In the past, I've argued that Steve Sailer's citizenism is a moral travesty.  Advancing the interests of your in-group should always play second fiddle to respecting the rights of out-groups.  But recently, he presented what sounds like a universal argument... MORE

Recent Reading: Onward, Christian Soldiers Edition

Books: Reviews and Suggested Readings
Art Carden
Stanley Hauerwas, War and the American Difference: Theological Reflections on Violence and National Identity. This wasn't really "recent" as it was several months ago, but Hauerwas spoke at Samford last semester. Hauerwas discusses war--a key sacrament of civic religion--from a... MORE

Implicit Rent and the True Cost of Education Bleg

Cost-benefit Analysis
Bryan Caplan
As far as I can tell, spending statistics for education do not count implicit land rent as part of the cost of education.  The Digest of Education Statistics' Table 213 for example, states that:Current expenditures include instruction, support services, food... MORE

This is beginning to sound like a broken record. A reformist right-wing government does lots of good things, trimming the size of the public sector. It promises monetary stability but delivers instability---a contractionary monetary shock. This time it was in... MORE

Vanguard's Strange Assumption

Finance
David Henderson
I'm a big fan of Vanguard. All of my IRA-type assets are in Vanguard funds. And when I mistakenly claimed in a Wall Street Journal that John (Jack) Bogle, who started Vanguard, had learned from work by Eugene Fama, Bogle... MORE

My 1983 CEA Memo on the Ban on Alaskan Oil Exports

International Trade
David Henderson
Last week, I posted here and here about Larry Summers's excellent talk in which he advocated removing the ban on U.S. oil exports. I then remembered that when I was the Senior Economist for Energy Policy with President Reagan's Council... MORE

Will "Minecraft Coaching" be a 21st Century Job?

Economics of Education
Art Carden
It's happened. A few weeks ago I finally bought Minecraft for the kids (the Pocket Edition for mobile devices is only about $7). We're still learning the ins and outs of the game, and early going has meant periodic frustration... MORE

The Logic of Gilensian Activism

Behavioral Economics and Rationality
Bryan Caplan
Martin Gilens' Affluence and Influence argues that when America's rich disagree with their fellow citizens, American democracy heeds the rich.  His evidence is hardly airtight, but by the standards of social science, it's fairly compelling.  To me, he provides an... MORE

Will Scottish secession be a disaster?

Eurozone crisis
Alberto Mingardi
Is secession a recipe for disaster? There seems to be an emerging consensus on the point, at least in the case of Scotland. I shall confess I am biased in the opposite direction. I read this piece by Murray Rothbard... MORE

Ending slavery made America richer

Growth: Causal Factors
Scott Sumner
Matt Yglesias has a good post that goes right at the "smiley-face" view of early US history--that we were a great country save for the regrettable aberration of slavery. He doesn't pull any punches: Specifically, white Americans conquered a vast... MORE

Open Borders: My Vox Interview

Cost-benefit Analysis
Bryan Caplan
The noble Dylan Matthews interviewed me on open borders for Vox.  Here's his write-up.  Here's the full interview.  We shall overcome.... MORE

Larry Summers on Oil Exports, Part II

Energy, Environment, Resources
David Henderson
Yesterday, I posted about Larry Summers's excellent speech making the case against government restrictions on exports of oil and natural gas. It was getting overly long and so this is Part II. I'll start by highlighting, and responding to, the... MORE

What's worse than a sloppy government bureaucracy?

Property Rights
Alberto Mingardi
A sloppy government bureaucracy isn't a very admirable thing. But it may look better, if you compare it with an efficient government bureaucracy. Have a look to this post by Michael S. Greve, who blogs on an incident involving him... MORE

The Closing of the Liberal Mind (pt. 2)

Labor Market
Scott Sumner
A few weeks ago I did a post pointing out that pundits on both the left and the right have moved further to the extremes, and away from sensible policy views. I just noticed another example today, an article... MORE

Larry Summers on Oil Exports, Part I

Energy, Environment, Resources
David Henderson
I believe that the question of whether the United States should have a substantially more permissive policy with respect to the export of crude oil and with respect to the export of natural gas is easy. The answer is affirmative.... MORE

A Szaszian Take on Conformity Signaling

Behavioral Economics and Rationality
Bryan Caplan
From The Sheepskin Psychosis by John Keats:By what standards do the college psychiatrists judge [would-be drop-outs] to be immature?  A psychiatrist is prone to measure maturity by the degree to which an individual adapts or adjusts to, or accepts or... MORE

Our Regulated Society

Regulation
David Henderson
Last night, after a productive meeting in Indianapolis, I flew home to Monterey. Well, not quite to Monterey. That was the plan. But the plan didn't work out. And the reason it didn't work out is a tale of regulation.... MORE

The Summer of Sharing

EconTalk
Russ Roberts
(I'm Russ Roberts, the host of EconTalk, a sister site of EconLog here at the Library of Economics and Liberty. I'm going to blog here from time to time about what's going on at EconTalk.) It has been the summer... MORE

That terrible people do terrible things does not mean that good people can stop them without ultimately making matters worse. I think Bryan's "Common-Sense Case for Pacifism" is relevant to the President's claim that we will "degrade and ultimately destroy"... MORE

Silent Citizenism

Behavioral Economics and Rationality
Bryan Caplan
Topher Hallquist effectively preaches cosmopolitanism to the Effective Altruism community:Can you imagine a politician advocating free trade on the grounds that, while it might hurt the politician's own country a little, it would have enormous benefits for people living in... MORE

First Cut

Cost-benefit Analysis
Bryan Caplan
When I try to convince my ideological opponents that a government program is a waste of money, I often succeed.  More than a few liberals have responded to my case against education by shrugging, "You're totally right - what a... MORE

Lorenzo on the opponents of neoliberalism

Political Economy
Scott Sumner
Over at TheMoneyIllusion I occasionally recommend that people look at the the excellent posts done by Lorenzo. His essays tend to be relatively long, but well worth reading in full. His newest post exposes the ignorance and ideological bias that... MORE

Why Should You Major in Economics?

Economics of Education
Art Carden
Fall semester has started, and I hope you're settled in. If you're a college freshman or sophomore, you might be trying to choose a major. If you're a high school junior or senior, you might be thinking about what you... MORE

Left wing parents and right wing dystopias

Book Club
Alberto Mingardi
You can't make this stuff up. Author and screenwriter Ewan Morrisson writes in the Guardian that If you see yourself as a left-leaning progressive parent, you might want to exercise some of that oppressive parental control and limit your kids... MORE

Dear Catherine,I was very pleased to read your "The College Degree Has Become the New High School Degree."  I'm currently writing a book defending the signaling model of education.  You're clearly taking my favorite story seriously:Note, though, that the skills... MORE

This has to be one of the most amusing things I've read all year: The problem comes from believing that QE is some magic growth elixir. The world's Keynesians have convinced themselves that the U.S. is now growing faster than... MORE

Prize Bleg

Information Goods, Intellectual Property
David Henderson
Cafe Hayek blogger Don Boudreaux has reminded me about the 2014 Coolidge Prize for Journalism competition. So, like him, I am asking you a favor. Please suggest, in the comments, your favorite blog posts or other articles (or both) of... MORE

Where I Dissent from Nathan Smith

Behavioral Economics and Rationality
Bryan Caplan
My former student Nathan Smith has published a gracious critique of yours truly.  Since he begins his critique with generous praise, let me do the same: Nathan Smith is probably the most brilliant Ph.D. student I've ever had the pleasure... MORE

Is deflation bad?

Macroeconomics
Scott Sumner
Here's David Andolfatto: Everyone knows that deflation is bad. Bad, bad, bad. Why is it bad? Well, we learned it in school. We learned it from the pundits on the news. The Great Depression. Japan. What, are you crazy? It's... MORE

Reply to Scott Sumner on Global Warming

Economic Methods
David Henderson
Scott Sumner writes: I recall that when liberals favored lots of "command and control" regulation to address global warming, and conservatives favored a carbon tax. That was the "market solution" comparable to the market-based approach to reducing sulfur emissions from... MORE

Never reason from a wage change

Macroeconomics
Scott Sumner
Bryan Caplan has a post showing that Janet Yellen is one of the sensible Keynesians, who understands the problems caused by sticky wages. Here's the Washington Post discussing Yellen's views: The stagnation in wages despite a pickup in hiring over... MORE

The Nixon Pardon: Incentives Matter in Politics Too

Public Choice Theory
David Henderson
In this weekend's Wall Street Journal, Ken Gormley and David Shribman celebrate the 40th anniversary of President Ford's pardon of Nixon. The piece is titled "The Nixon Pardon at 40: Ford Looks Better Than Ever." They give basically three arguments:... MORE

Laniakea for the Laniakeans!

Labor Mobility, Immigration, Outsourcing
Art Carden
Via The Skeptical Libertarian, I just watched the video below about "Laniakea: Our home supercluster." As I pointed out in a comment on the TSL Facebook page, what's really important here is that we now know where to build the... MORE

Four things I believe

Monetary Policy
Scott Sumner
Here are four things I strongly believe to be true: 1. The Great Recession was caused by tight money at the Fed, and other major central banks. Period. End of Story. 2. Fed policy almost never strays far from the... MORE

Joan Rivers: More than a Comedian

Obituaries
David Henderson
Like many people, I mourn the loss of Joan Rivers. In the last year or so, my wife and I have gotten into watching Fashion Police and enjoying, except for her over-the-top comments, many of Joan's great, obviously prepared, catty... MORE

The Upshot at the New York Times introduces us to the NYT 4th Down Bot, which will tell us in real time whether a team should or shouldn't go for it on 4th down. There's a fairly well-known argument that... MORE

EconLog reader Meretta Marks sent me the following request:Would you consider the following topic for your EconLog blog: "What every high school junior should know before thinking of going to college" Suppose.....it's the beginning of the school year in high... MORE

Yellen is a Good Keynesian

Behavioral Economics and Rationality
Bryan Caplan
From: My Department of Credit Where Credit Is DueI've previously insisted that when there's high unemployment, all good Keynesians should say "Wages must fall!"  I'm delighted to learn, then, that Janet Yellen is one of the good Keynesians.The stagnation in... MORE

Arrow: Why Shouldn't I Go to the Highest Bidder?

Economic Philosophy
David Henderson
Harold Hotelling, an economist, taught some of the statistics courses and "gave a course in mathematical economics" that Arrow said he took "out of curiosity." But because it began to hook him on economics, when his cash ran down Arrow... MORE

Kling on Bush and Baker on Health Care

Economics of Health Care
David Henderson
Like many entrepreneurs, Bush began by trying to solve one problem and ended up having to solve another. The problem that he and his partner tried to solve was reducing the cost of childbirth, in part by making more effective... MORE

How to Teach the Income and Substitution Effects

Economic Education
Bryan Caplan
The shape of the demand curve depends on two forces: the substitution effect and the income effect.  A typical treatment:When the price of q1, p1, changes there are two effects on the consumer. First, the price of q1 relative to... MORE

Are Your Clicks More Powerful Than Your Votes?

Politics and Economics
Art Carden
At the beginning of the year, I tweeted The Clickbait Pledge: The Clickbait Pledge: I will click on nothing "shocking," that will "blow [my] mind," or relating to celebrity antics.— Art Carden (@artcarden) January 30, 2014 I therefore found the... MORE

(Taxi) Deutschland Über Uber

Regulation
David Henderson
I couldn't resist. Guest blogger Alberto Mingardi's excellent update on Uber's legal status in Germany made me think of this title. Taxi Deutschland successfully sued to prevent ride-share operator Uber from operating throughout Germany. The German government, thus, triumphed over... MORE

California Drought: A Pricing Problem

Energy, Environment, Resources
David Henderson
A simple economic truth is that water-price hikes can get the job done without the expense--and the inefficiency--of conservation ads and water police--as well as the discord that can arise when neighbors snitch on and shame each other. Also, people... MORE

I got off the parking lots roads leading to Samford at around 7:55 after leaving my house three miles away 20 minutes earlier. My time stuck in traffic gave me ample opportunity to think about what my beloved dismal science... MORE

Uber Wars. The Ban Menace

Regulation
Alberto Mingardi
The BBC reports that Uber has been banned in Germany by a Frankfurt court: A court in Frankfurt ruled that the firm lacked the necessary legal permits to operate under German law. It has emerged that the firm was told... MORE

Against Winning

Cost-benefit Analysis
Bryan Caplan
When I was a child, adults taught us to look down on bad winners.  The maxim: "It's not whether you win or lose; it's how you play the game."  The implicit model was something like: Yes, winning is better than... MORE

Predicting bubbles

Finance
Scott Sumner
MaynardGKeynes recently left this comment: Simple fact is that Shiller correctly predicted 3 of the last 3 bubbles (2000, housing, 2007). That's a widely held view, but is it correct? This is from Eugene Fama's Nobel Prize lecture (in the... MORE

The Role of Unions

Labor Market
David Henderson
Every Labor Day in the last few years, we hear about the decline of unions and how that has been a bad thing. What I find striking is how economically uninformed most of this commentary is. Start with the fact... MORE

Return to top