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June 2015

A Monthly Archive (73 entries)

The euro and the Greek blackmail

Eurozone crisis
Alberto Mingardi
We're showered with information and comments on the Greek crisis, and rightly so. The Greek Prime minister Alexis Tsipras has called for a referendum on the terms offered by creditors to Greece. Then night talks between Mr Juncker and Mr... MORE

Question for Jeff Zients on Ex-Im

International Trade
David Henderson
While surfing the web this morning, I came across a mention, by Cato Institute economist Dan Ikenson, of a White House conference call on the Export-Import Bank. I thought, what the heck, the call is during my lunch break; I'll... MORE

Macroeconomics in small economies

Fiscal Policy
Scott Sumner
Like many American economists, I've learned macroeconomics from an American perspective. But America is a very unusual country. For instance, US RGDP growth has averaged about 3% for the past 120 years, if not more. Most business cycles are fairly... MORE

Wolfgang Kasper on the Euro

International Macroeconomics: Exchange Rates, International Debt, etc.
David Henderson
In following the Greek economic crisis, I have very little to add that has not been said. But one economist who said it well three and a half years ago is Australian economist and German native Wolfgang Kasper. His Econlib... MORE

When Americans think about inequality, it is often linked to ethnic differences. Sometimes that's also true in Europe (as with the Roma), but more often the inequality is regional. Perhaps the starkest example lies in Italy, where even in 2007... MORE

Numeracy Watch: 5 is Less than 10

Behavioral Economics and Rationality
David Henderson
Andrew Oxlade writes: He [Ian Spreadbury] declined to predict the exact trigger but said it was more likely to happen in the next five years rather than 10. There's some pretty serious innumeracy going on here. I'm not sure if... MORE

Why can't we have nice things?

Labor Mobility, Immigration, Outsourcing
Scott Sumner
If you travel to other countries you might occasionally notice something that you wish the US had. The one I notice most often is good subways. This article caught my eye: Stan Paul, who begins his morning ride to UCLA... MORE

Henderson on Epstein on Fossil Fuels

Energy, Environment, Resources
David Henderson
How can a practical case also be a moral case? Simple: if one's standard of value is human life, as Epstein says his is, then whatever enhances human life is moral. There are some problems around the edges of his... MORE

The Importance of Numeracy

Political Economy
David Henderson
When I was the senior economist for health policy under Martin Feldstein, chairman of President Reagan's Council of Economic Advisers, one of his biggest criticisms of politicians was their innumeracy. I agree that that matters a lot, and it's not... MORE

1937 and 2013

Scott Sumner
Bob Murphy has a new post discussing the similarities between the fiscal policy of 2013 (often called 'austerity') and the fiscal policy of 1937, which some Keynesians believe helped cause the 1937-38 depression (which was relatively deep). In fact, there... MORE

More here. Unfortunately, the outcome that I thought likely has happened. Here's the ruling.... MORE

A quick note on Luigi Einaudi

Economic History
Alberto Mingardi
I was recently in Portugal for the "Estoril Political Forum", masterly organised by Joao Carlos Espada. This was an uplifting event: we listened to many interesting speeches, in a room packed with hundreds of Portuguese students in the social sciences.... MORE

Jose Romeu Robazzi recently left the following comment: "IMHO the disagreement between keynesians and monetarists remain the same: both schools identify AD shortfall as a problem, and both schools recommend some sort of intervention (e.g. wealth transfers to sustain AD):... MORE

Krugman's Clever Misdirection on King versus Burwell

Economics of Health Care
David Henderson
Paul Krugman is clever. In a post, "Most of the Way with Obamacare," about the effects of Obamacare on the number of people with health insurance, he sneaks in two claims as if they are obvious and noncontroversial. The first... MORE

Suderman on Republicans on Health Care

Economics of Health Care
David Henderson
Peter Suderman of Reason magazine has an excellent article in Politico on just how bad the Congressional Republicans have been at coming up with an alternative to ObamaCare. I won't recite all of his points because that would amount to... MORE

The "other things"

Fiscal Policy
Scott Sumner
Russ Roberts did a recent post complaining about the way Paul Krugman uses data to support his arguments. Roberts pointed out that when things turn out as he expected, Krugman cites the events as proof of his (Keynesian) worldview. When... MORE

Why do we write too much?

Books: Reviews and Suggested Readings
Alberto Mingardi
I have a longish review of Andro Linklater's "Owning the Earth" at the Library of Law and Liberty. Linklater's project was to offer a story of the development of land ownership in Western societies. Not the smallest of endeavours in... MORE

Henderson on Finkelstein

Economics of Health Care
David Henderson
Another interesting aspect of Arrow's article is his view of the economics of information. He writes, "The value of information is frequently not known in any meaningful sense to the buyer; if, indeed, he knew enough to measure the value... MORE

A bit freer today than yesterday

Property Rights
Scott Sumner
This caught my eye: The Supreme Court ruled Monday that a 66-year-old program that lets the government take raisins away from farmers to help reduce supply and boost market prices is unconstitutional. In an 8-1 ruling, the justices said forcing... MORE

The title of this post might seem a bit strange, for several reasons: 1. The tax cut was widely blamed for causing a recession 2. I'm a libertarian that favors low taxes In a first-best world I'd like to see... MORE

Does Foreign Intervention Cause Blowback

Politics and Economics
David Henderson
In a blog post today, Arnold Kling cites Robert Nozick's term "normative sociology." The idea is that many people point to what they want the causes of something to be rather than trying their best to find what the causes... MORE

Could a well designed euro have worked?

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
As the Greek crisis approaches some sort of resolution, it's worth asking whether the euro ever had a chance of working. While we may never know the answer to this question, we do know that a well-designed euro would have... MORE

Happy birthday, IEA!

Liberty
Alberto Mingardi
On Thursday, the London-based Institute of Economic Affairs organized a gala dinner to celebrate its 60th anniversary. The same day Steve Davies, who is education director at the Institute of Economic Affairs, had a nice article summarizing the Institute's achievements.... MORE

The Democrats move left

Tax Reform
Scott Sumner
In recent decades, the Republican Party has moved to the right on some issues, notably immigration. More recently, the Democrats have moved left on issues like trade, fiscal stimulus and the minimum wage. And taxes, as the following story illustrates:... MORE

Russ Roberts vs. Simon Wren-Lewis

Monetary Policy
Scott Sumner
I have repeatedly pointed out that the US government did a massive amount of austerity in 2013, and yet GDP growth was higher than during 2012. One would think that Keynesians would have a response to my claim, a response... MORE

As promised, I'm reporting here on how I drew out Milton Friedman's views on conscription during World War II. If you look at the quote from his 1966 piece on conscription, you can easily conclude that he favored conscription during... MORE

Over at Cafe Hayek, Don Boudreaux has written a passionate statement against the draft: "My Son Will Never Be a Conscript." I love the last paragraph: Fortunately, what is perhaps Milton Friedman's greatest legacy remains in place: actual conscription does... MORE

The Incredible Vanishing Minarchist

Economic Philosophy
Bryan Caplan
In the 70s and 80s, a great intellectual battle waged between two libertarian factions: minarchists and anarcho-capitalists.  In 1974, the Libertarian Party papered-over the dispute with one of the oddest compromises in political history: the Dallas Accord. Under its terms,... MORE

Kevin Drum's Third Law is wrong

Macroeconomics
Scott Sumner
Tyler Cowen recently listed three laws, and Kevin Drum responded with variations on Tyler's Laws. Here was Tyler's third law: 3. Cowen's Third Law: All propositions about real interest rates are wrong. And Kevin's version: 3. Drum's Third Law: Really?... MORE

John Thacker on Democrats Subsidizing Rural Areas

Public Choice Theory
David Henderson
Sometimes comments on various blogs are so good that they deserve to be highlighted. John Thacker, who occasionally comments on this blog, has such a comment at co-blogger Scott Sumner's other blog, The Money Illusion. In a comment on Scott's... MORE

Larry Summers on TPP

International Trade
David Henderson
Tyler Cowen writes: Larry Summers on TPP makes perfect sense. I haven't seen anything on the anti- side coming close to this level of analysis, and in a short column at that. So I went to read Summers's "perfectly sensible"... MORE

Not So Hard to Argue

Economic Philosophy
Bryan Caplan
Scott Sumner:Unlike many on the left, I don't envy the rich. I'm really happy that Larry is really happy. If Larry was even a bit happier, and if that boosted total global happiness, that would be fine with me. But... MORE

Matt Yglesias on environmental impact regulations

Energy, Environment, Resources
Scott Sumner
Why was the proposed wind farm not built off the coast of Cape Cod? It was stopped by "environmentalists". Why don't we have high speed rail up and down the northeast corridor? "Environmentalists" won't allow it. Of course the real... MORE

Down With Public Goods

Economic Education
Bryan Caplan
Every economic educator should immediately read Frances Woolley's working paper, "Why Public Goods are a Pedagogical Bad."  The conflict between the official definition of "public goods" and the actual use of the phrase has long troubled me.  But Woolley explains... MORE

Or at least that's the inference I draw from an email sent to me by Zurich resident Marco Salvi: Dear Professor Sumner I would like to bring to your attention that the Swiss voters have rejected today the introduction of... MORE

Hooves and Priors

Economics of Health Care
David Henderson
In "Yes Indeed: I Have My Priors About the Minimum Wage," Don Boudreaux at Cafe Hayek writes: So an economist whose priors tell him or her that raising the hourly cost of employing low-skilled labor will cause employers to choose... MORE

Interpersonal utility comparisons are unavoidable

Wealth distribution
Scott Sumner
When I advocate policies aimed at redistribution on utilitarian grounds, some commenters object that interpersonal utility comparisons are impossible. Actually they are unavoidable. Consider a policy that almost all well-informed people would support; ending sugar subsidies. Ending sugar subsidies would... MORE

Government Works Badly

Central Planning vs. Local Knowledge
David Henderson
Two huge recent scandals, both of which involve the federal government, strongly support the case that the government should not be given more power and, in fact, should have much of its power stripped away. The two scandals are the... MORE

Some progressives complain that American CEOs are overpaid. They point to the fact that the spread between the highest and lowest employee in a Japanese corporation is far lower than in the US. The implication is that if only the... MORE

How electorates react to defaults

Eurozone crisis
Alberto Mingardi
There are basically three reasons European leaders are still desperately trying to avoid Grexit. First, the fact that a nation leaving the currency union is perceived as a leap into the dark. Many consider probable that higher volatility and insecurity... MORE

The Sachs-Warner Conditions

Cross-country Comparisons
Bryan Caplan
I've long been a fan of Sachs and Warner's 1995 "Economic Convergence and Economic Polices."  Key result: Non-idiotic economic policies are a sufficient condition for economic convergence.  They operationalize idiotic policies as follows:We then establish two basic subsets of "appropriate"... MORE

Reddit: Lenny Bruce Would Understand

Competition
David Henderson
Capitalism is the best. It's free enterprise. Barter. Gimbels, if I get really rank with the clerk, "Well I don't like this", how I can resolve it? If it really gets ridiculous, I go, "Frig it, man, I walk." What... MORE

NATO Bet

Behavioral Economics and Rationality
Bryan Caplan
Tyler heavily insinuates that Russia will invade a NATO member in the foreseeable future:"At least half of Germans, French and Italians say their country should not use military force to defend a NATO ally if attacked by Russia," the Pew... MORE

The Role of Luck in Income Distribution

Income Distribution
David Henderson
I'm in Zurich today to give a talk on economic inequality. While preparing my talk, I came across an article by Branko Milanovic in the Review of Economics and Statistics. It's titled "Global Inequality of Opportunity: How Much of our... MORE

Market monetarism in Iceland?

Monetary Policy
Scott Sumner
Matt Yglesias has a good post discussing how Iceland defied the conventional wisdom and still did better than countries like Ireland (which is arguably the country that had the most similar economic crisis.) Matt says Iceland did 4 things: 1.... MORE

Identificationists Beware

Economic Methods
Bryan Caplan
$15 minimum wages methodologically excite Noah Smith:Sometimes people ask me where I stand on economic policy. Am I a free-marketer or an interventionist? I tell them that I'm an identificationist.  In statistics, "identification" just means separating two groups in order... MORE

Economists use the term "second best policy" for a public policy that may not be optimal, but nonetheless might improve things if public policy is off target in other respects. Thus if we don't have a tax on pollution emitted... MORE

A Question for Krugman

Fiscal Policy
David Henderson
Paul Krugman has a post today about how badly some Republican governors have been doing with their budget policies. His basic criticism is that they have cut taxes. But he also has, at various times recently, complained about austerity. What,... MORE

Two Types of Fear

Behavioral Economics and Rationality
Bryan Caplan
After reading Ehrlich's confession, I realized that there are two very different kinds of socio-political fear-mongering.Type 1: Saying that a disaster will happen under certain conditions.  Example: "If population continues to grow, hundreds of millions will starve by the year... MORE

Peter Pan in Japan

Monetary Policy
Scott Sumner
Ever since 2009, I've been using the Peter Pan analogy for the expectations channel of monetary stimulus: If I think I can fly, then I can fly. Now the Japanese are adopting this approach: Though lower oil prices have stalled... MORE

Nick Hanauer on Noah Smith

Labor Market
David Henderson
A billionaire named Nick Hanauer has weighed in on the minimum wage debate. Am I trying to bias you against him by mentioning his net worth? Not really. Instead, I'm following the lead of PBS, which published his piece. In... MORE

The Sum of All Fears

Behavioral Economics and Rationality
Bryan Caplan
I didn't think there was anything more to say about infamous doomsayer Paul Ehrlich.  Until he decided to justify his career to the New York Times.  Background:No one was more influential -- or more terrifying, some would say -- than... MORE

The world's three smallest macro models

Macroeconomics
Scott Sumner
In a comment over at TheMoneyIllusion, Britonomist pleaded for a transmission mechanism: I'm sympathetic to market-monetarists, I'd love to be able to believe that problems like low aggregate demand can easily be solved using monetary policy alone even at the... MORE

The Long and the Short Runs

Labor Market
David Henderson
After noting how high payroll tax rates are in Europe, Arnold Kling comments: I had not realized that these tax rates are so high. I find it hard to reconcile Germany's relatively low unemployment rate with this high payroll tax... MORE

The (white) kids are alright

Income Distribution
Scott Sumner
This post is about Charles Murray's book entitled Coming Apart, which I have not read. It's a bit presumptuous for me to comment on a book merely based on book reviews. So consider this an initial inquiry, I'm looking to... MORE

Great Moments in Economic History

Taxation
David Henderson
I'm working on a talk on economic inequality that I'm giving in Zurich next week and so I've been paying particular attention to what Thomas Piketty has written since his book came out. In the latest New York Review of... MORE

Thaler Rediscovers Hayek?

Behavioral Economics and Rationality
David Henderson
As often happens when I read or hear something new, my impressions a day or more later, once I've pondered more, are different from my first impressions. There's another thing about Thaler's view of standard neoclassical economics that bothers me.... MORE

Grexit, Brexit and the uncertain future of the EU

Eurozone crisis
Alberto Mingardi
Grexit or Brexit, which is worse for the European Union? Joschka Fisher, one of the leaders of the environmentalist movement in Europe and formerly the German Foreign Minister under Gerhard Schroeder, has an interesting piece on "Project Syndicate". Fisher is... MORE

Thaler and Caplan on Homo Economicus

Behavioral Economics and Rationality
David Henderson
I have in my pile Richard Thaler's latest book, Misbehaving: The Making of Behavioral Economics. I'm reviewing it later this month for a quarterly publication. But this morning I had time, while doing other things, to listen to a delightful... MORE

Why Is Illegal Immigration So Low?

Behavioral Economics and Rationality
Bryan Caplan
Contrary to popular opinion, U.S. immigration enforcement is draconian.  The proof is in the prices illegal immigrants pay to human smugglers.  Even Mexicans, our closest Third World neighbors, pay 2-3 years' worth of wages to illegally cross the border.  Every... MORE

Tim Smeeding on Inequality

Income Distribution
David Henderson
Lane Kenworthy writes: Tim Smeeding knows more than virtually anyone about inequality and poverty in the United States and other rich nations. I asked him what he recommends to reduce income inequality. His response: 1. Tax appreciated assets when inherited... MORE

Reply to Austan Goolsbee

Monetary Policy
Scott Sumner
In a tweet, former Obama economic advisor Austan Goolsbee asked: q for NGDP target fans: if fed target=5% when actual=0, implicitly means target 5% infl for 1 yr. Wouldn't mkt doubt 5% infl just temporary? The answer (from a fellow... MORE

3 Answers from Alex Nowrasteh

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
Alex responds to the questions I asked him yesterday.  Read the whole thing, but here are my original three questions, with summaries of his answers in blockquotes:1. How much higher would cumulative Mexican immigration since 1986 have been if the... MORE

Over at TheMoneyIllusion a commenter named Julius Probst told me that he asked Larry Summers about NGDP targeting, and Summers seemed supportive. After I mentioned this in my blog, Politico decided to ask him directly. Here's what they found: Did... MORE

Can Inequality Misperceptions Save Selfish Voting?

Behavioral Economics and Rationality
Bryan Caplan
Objective self-interest has very little effect on people's political views.  The obvious explanation is that people vote for ideals, not objective interests.  But Gimpelson and Treisman's evidence on systematically biased beliefs about inequality suggests another explanation: Voting is selfish but... MORE

David Rose on Obamacare Strategy

Economics of Health Care
David Henderson
The Wall Street Journal editors had an interesting unsigned editorial ("In Search of an Obamacare Breakout," May 22) recently (they call such editorials "Review and Outlook") on what Republicans in Congress should do if the Supreme Court finds, later this... MORE

The Fed is not doing its job

Monetary Policy
Scott Sumner
Here's a recent WSJ report on the economy: Many Federal Reserve officials entered 2015 thinking they likely would start raising short-term interest rates by midyear. That idea got put on ice after a winter economic slowdown, partly attributed to the... MORE

3 Questions for Alex Nowrasteh

Cost-benefit Analysis
Bryan Caplan
Alex Nowrasteh's interesting comments leave me with three questions.1. How much higher would cumulative Mexican immigration since 1986 have been if the IRCA's employer sanctions hadn't been imposed?2. How much higher would cumulative Mexican immigration since 1986 have been if... MORE

Nowrasteh on the 1986 Immigration Act

Cost-benefit Analysis
Bryan Caplan
Cato's Alex Nowrasteh emailed me an interesting reaction to my post on Reagan's 1986 immigration law.  Reprinted with this permission: Bryan, I enjoyed your blog post.  A few thoughts: The bigger cost of IRCA was its boost of border security,... MORE

The Psychology of Trolling

Behavioral Economics and Rationality
Bryan Caplan
Last week on Facebook, I asked: "Trolls: bored or malevolent?"  Today I discovered some relevant research.  According to Buckels, Trapnell, and Paulhus, "Trolls Just Want to Have Fun" (Personality and Individual Differences, 2014) "malevolent" is the main answer.  Indeed, it's... MORE

It's pretty clear to me why mortgage interest is tax deductible--homeowners (and builders, realtors, bankers, etc.) are a very powerful special interest group. This post asks a different question. Why is business interest deductible against taxes on business earnings? Perhaps... MORE

Do We Just Owe it to Ourselves?

Fiscal Policy
David Henderson
Update below: Ask the proverbial "man on the street" whether current government debt imposes a burden on future generations, and he will likely answer "yes." But ask the same question of sophisticated economists, especially Keynesian ones, and they will likely... MORE

Was the Reagan Amnesty Bad for Immigrants?

Cost-benefit Analysis
Bryan Caplan
I struggled to locate the 1984 open borders editorial that won Mathieu Giroux his bet with his uncle, but he kindly helped me out.  Here is Robert Bartley's legendary Wall Street Journal column is in all its individualist glory.  Philosophically,... MORE

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