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August 2015

A Monthly Archive (81 entries)

Tight money leads to lower interest rates

Monetary Policy
Scott Sumner
Tyler Cowen has a new blog post that has 13 observations on the Fed's upcoming policy decisions. Most are reasonable, especially the first comment. But I strongly disagree with point 6: 6. Now the risks look fairly symmetric. The first... MORE

WSJ Highlights

Business Economics
David Henderson
I spent part of Sunday catching up on Wall Street Journals that had piled up when I was at my cottage in Canada. Some highlights, in chronological order. 1. "ObamaCare Undercover," August 1-2, 2015 (July 31 on-line). Highlight: Last year... MORE

The Monopoly Motive

Industrial Organization
Bryan Caplan
Today's the first day of GMU's fall semester, and for some reason I'm thinking about a class I haven't taught in years: Industrial Organization.  I wrote the notes when I was much younger and more enamored of theory.  Much of... MORE

Asian immigration will make America more unequal, and that's a good thing

Labor Mobility, Immigration, Outsourcing
Scott Sumner
It seems that Asia has overtaken Latin America as the largest source of immigration to the US. Here's a recent example of that trend: Mexicans still dominate the overall composition of immigrants in the U.S., accounting for more than a... MORE

Buying Puts for Years?

Finance: stocks, options, etc.
David Henderson
In a response to, I think, me, although he doesn't make it clear whether he's responding to me, Robert P. Murphy writes: I realized from Levi's comment that people are genuinely misunderstanding what I was trying to say in that... MORE

A nice summary on secession

Politics and Economics
Alberto Mingardi
Tim Sablik has an interesting literature review on secession on the Richmond Fed's "EconFocus." Sablik presents research relevant to the issue, including Alesina and Spolaore and Buchanan and Faith. He also deals with contemporary secessionist communities - like Catalonia and... MORE

I hope the title of this post has caught your attention---if not please reread it. In the previous few recessions, the consensus of economists did not even forecast a recession until it was already underway. That is, not only can... MORE

Bio of Eugene Fama

Finance: stocks, options, etc.
David Henderson
His major early contribution was to show that stock markets are efficient (See efficient capital markets). The term "efficient" here does not mean what it normally means in economics--namely, that benefits minus costs are maximized. Instead, it means that prices... MORE

Scott on Victimology

Economic Philosophy
Bryan Caplan
Scott against me on victimhood:Or let's take another case; you decide to violate the law by jaywalking, crossing the street in the middle of the block. You are struck and killed by a car. (This happened to a Bentley student... MORE

Beyond victims and villains

moral reasoning
Scott Sumner
I've always had a visceral distaste for dividing people up into victims and villains. Thus I wasn't happy to see this analogy by Bryan Caplan (when talking about the Ashley Madison affair.) Constructing hypotheticals with blameworthy pseudo-victims is easy enough.... MORE

Question-Begging and Victim-Blaming

Behavioral Economics and Rationality
Bryan Caplan
Jonathan Ichikawa joins Jason Brennan in the philosophical symposium on the Ashley Madison hack.  He begins innocuously:Here is a sadly familiar story: a teenage girl sneaks out of her parents' house, goes to a party, and gets drunk. A man... MORE

Confirmation bias?

Finance: stocks, options, etc.
Scott Sumner
I agree with David Henderson's new post, which starts off with this Bob Murphy quote on the recent stock market decline: As shocking as these developments [drops in stock prices and increased volatility] may be to some analysts, those versed... MORE

Does a measly quarter point matter?

Macroeconomics
Scott Sumner
Paul Krugman and Larry Summers have recently argued that the Fed should not raise rates later this year. I agree, mostly because I believe it will prevent them from hitting their announced inflation target, but also because it slightly increases... MORE

Robert P. Murphy: We've "Been Warning for Years"

Austrian Economics
David Henderson
Austrian economist Robert P. Murphy writes: As shocking as these developments [drops in stock prices and increased volatility] may be to some analysts, those versed in the writings of economist Ludwig von Mises have been warning for years that the... MORE

Bio of Oliver Williamson

Business Economics
David Henderson
The turning point in Williamson's thinking about markets and firms happened when he was an economist in 1966-67 with the Antitrust Division of the U.S. Department of Justice. In his biography at the Nobel site, Williamson writes: Although the leadership... MORE

Good News That Should Have Been Kept Secret

Economic Philosophy
Bryan Caplan
I've long scorned mainstream media for their relentless, misleading negativity.  Now the NYT publishes a gloriously positive story - and I wish it hadn't.  This is Huemerian civil disobedience in action:The tens of thousands of migrants who have flooded into... MORE

Markets Without Limits and Ashley Madison

Economic Philosophy
Bryan Caplan
As a rule, news is a distraction from worthy intellectual pursuits.  But Jason Brennan manages to thoughtfully filter the Ashley Madison hack through the lens of his new Markets without Limits (co-authored with Peter Jaworski):Most people believe what Ashley Madison... MORE

Why bubbles are so hard to spot

Finance: stocks, options, etc.
Scott Sumner
There's been a lot of discussion about the recent Chinese stock market crash. Most observers view the events through the lens of the "bubble" model of financial markets. This view claims that there are sharp price run-ups caused by irrational... MORE

Ask What Changed

Finance: stocks, options, etc.
David Henderson
Many people are trotting out their pet theories for why the stock market has crashed in the last week. Some of them may even be right. But there's one question we should ask of all of them: What changed? Here's... MORE

RIP Nathan Rosenberg

Obituaries
Alberto Mingardi
Nathan Rosenberg died on August 24th. Read the obituaries by Joshua Gans on Digitopoly and by Richard Langlois on Organizations and Markets. Together with lawyer L.E. Birdzell, Rosenberg wrote a book that is a true must read: How the West... MORE

How bad government policies make us meaner

Price Controls
Scott Sumner
In a recent post I argued that government monopolies often offered worse service to customers than competitive private firms. In this post (which will have something to offend both progressives and conservatives), I'll look at a different, but related problem.... MORE

Man, Economy, and Science

Alberto Mingardi
The Mises Institute just published in book form a 1959 monograph by Murray Rothbard, "Science, Technology and Government." The manuscript was discovered among the Rothbard papers and first published on Mises.org in 2004. Alas, I didn't read it back then... MORE

The Denunciation Deficit

Behavioral Economics and Rationality
Bryan Caplan
Some intriguing Psychology & Economics of the media from post-libertarian Joshua Hedland:"If Muslims are peaceful, why don't they condemn terrorism?" This is a common question in some philosophical corners in response to headlines about attacks by radical Islamists.After providing a... MORE

One of the most gratifying things about blogging is seeing the quality of press reporting going up over time. One sees more and more news reports that seem to have been influenced by the debate in the blogosphere. A great... MORE

Chinese Entrepreneurs in Egypt

Business Economics
David Henderson
Nobody in the family seems intimidated by life in Asyut, and they don't consider themselves successful; Chen and Lin often say that their factory is just a low-level industry. But, whenever I visit, I can't help thinking: Here in Egypt,... MORE

A few days ago, I posted about a problem with government provision of information and government's mandates that private firms provide information. The problem: there's no guarantee and, moreover, no reason to think, that the government will provide or mandate... MORE

It's worse than it looks

Macroeconomics
Scott Sumner
By "it" I mean the current stance of policy. To see why, we need to review the circularity problem. Asset markets look at the Fed, and the Fed looks at asset markets. When there is enough blood on the floor,... MORE

The Happy Hypocrisy of Unpaid Internships

Behavioral Economics and Rationality
Bryan Caplan
Let me begin, like virtually every writer on unpaid internships, by blockquoting the Department of Labor's rules about such positions' permissibility.  Unpaid internships in the for-profit sector are allowed as long as all of the following are true:1. The internship,... MORE

Our Rights versus Government "Rights"

Behavioral Economics and Rationality
David Henderson
In a post earlier this morning, in which I responded to Kurt Schlichter, I quoted the following from Schlichter: Number One: We Americans have an absolute right to decide who does and doesn't come into our country and the conditions... MORE

Will and O'Sullivan on Conquest

Book Club
Alberto Mingardi
National Review has published two outstanding articles on Robert Conquest. George Will writes that if books can change history, Conquest's certainly did. Will quotes one flabbergasting passage from "The Great Terror." The context is the preparation for the great purge... MORE

Reply to Kurt Schlichter

Labor Mobility, Immigration, Outsourcing
David Henderson
Pundit and trial lawyer Kurt Schlichter has written a strongly worded article telling Republican candidates for President how they should think about immigration. The tone suggests that he's not very open to changing his mind. Nevertheless, the points he makes... MORE

Coming soon. Another Greek election

Eurozone crisis
Alberto Mingardi
Greek Prime Minister Mr Tsipras has resigned, and so Greece is heading off to elections in September. As The Wall Street Journal reports, Elections offer Mr. Tsipras the chance to expel the rebels from Syriza and return to office as... MORE

A Problem with Information Mandates

Information Goods, Intellectual Property
David Henderson
Even many very pro-free-market economists, noting that there is imperfect information in the marketplace, advocate that government provide information or require private firms to provide information. Even they often tend to regard government as an entity that will somehow provide... MORE

Krugman's Strange Conclusion

Macroeconomics
David Henderson
UPDATE: I was wrong. Alex Tabarrok has provided the data from FRED. I should have done so. Median family income was $56,447 in 1984, down slightly from $56,585 in 1980. Given how wrong I was, I would rather not have... MORE

I try to reread 3 books ever 10 years or so: To Kill a Mockingbird, Lucky Jim, and The Adventures of Huckleberry Finn. This summer, the second book I read (I've posted about the first one here, here, and here)... MORE

More on levels vs. growth rates

Cross-country Comparisons
Scott Sumner
I seem to be one of the few people that are neither a China bull nor a China bear. On one side I'm constantly annoyed by China boosters who claim their rapid growth rate is proof of the superiority of... MORE

I scorn political correctness in all its forms - and its most widespread and successful form is patriotism.  Think about it: Schools take millions of kids, then endlessly tell them they all belong to the same glorious blameless imaginary community. ... MORE

Policies that Affect Growth Rates: Question for Scott

Growth: Causal Factors
Bryan Caplan
Question for Scott: Suppose a government executed anyone who created or publicized any new idea.  Wouldn't that affect output growth - and not just output level?... MORE

Paul Krugman has a post that contrasts the economic performance of Japan, the US and France: What's striking here is how similar the three look. Japan lagged in the late 1990s and early 2000s, but recovered. France has lagged since... MORE

I'm now reading the 3rd edition of David Friedman's Machinery of Freedom.  From the new material:The argument against immigration takes the level of redistribution as given and points out its effect on who migrates where and why. One should also... MORE

Bryson on Eugenics

Behavioral Economics and Rationality
David Henderson
In his book One Summer, about America in 1927, Bill Bryson writes: Remarkably, the Ku Klux Klan was not the most dangerous outpost of bigotry in America in the period. That distinction belonged, extraordinary though it is to state, to... MORE

Let's Bet on the West

Behavioral Economics and Rationality
Bryan Caplan
I say Western civilization is a hardy weed.  Contrary to most of its avowed friends, Western civilization keeps gaining market share - grotesque atavisms notwithstanding.The truth is that Western civilization is taking over the globe.  In virtually any fair fight,... MORE

The Grisly Public Choice Behind the End of Prohibition

Public Choice Theory
David Henderson
Writing about Prohibition in his One Summer (about the United States in 1927), Bill Bryson tells a story about a tragic incident that may well have helped lead to the end of Prohibition. Earlier in the book, Bryson had told... MORE

Separation and Dr. Pangloss

Behavioral Economics and Rationality
Bryan Caplan
A widely-quoted bit from Louie CK:Divorce is always good news. I know that sounds weird, but it's true because no good marriage has ever ended in divorce ... That would be sad. If two people were married and they... just... MORE

Is Europe becoming more like the US?

Cross-country Comparisons
Scott Sumner
A new article in the Financial Times got me thinking about the US and Europe: Portugal is the EU country hit hardest by a Europe-wide demographic problem as falling fertility rates and ageing populations threaten economic growth and the provision... MORE

America Takes Over the World--Peacefully

International Trade
David Henderson
I had promised to post more about the first book I read on my vacation. But in the tradeoff between swimming and posting, I leaned strongly to the former. Now I'm catching up. In One Summer, Bill Bryson, discussing the... MORE

Glaucon: Can you believe all these rich jerks who refuse to help the poor?Socrates: I'm puzzled, Glaucon.  You're rich, but I've never seen you help the poor.Glaucon: I gave five gold pieces this year.  But I'm not talking about charity,... MORE

Scott Alexander on Malcolm Muggeridge

Books: Reviews and Suggested Readings
David Henderson
Many people whom I respect have highly recommended the blog slatestarcodex by "Scott Alexander." The quotation marks are there because the name is a pseudonym. I have taken longer to warm up to him. But he had me at Malcolm... MORE

John Gray on Hayek

Austrian Economics
Alberto Mingardi
John Gray is well known for being an ideological wanderer. Though a classical liberal in the late 70s and in the 80s, when he used to co-operate with a number of classical liberal organizations, he subsequently became a vocal critic... MORE

Kevin Williamson on Social Security

Social Security
David Henderson
Note: I returned late Thursday from my 2.5-week vacation at my cottage in Canada. Thus the relative sparseness of my posts and especially of my answers to commenters. In an otherwise excellent post, which I highly recommend, Kevin D. Williamson... MORE

Divine coincidence?

Labor Market
Scott Sumner
Some of my progressive friends argue that markets are not efficient because information is a public good. Thus research in equity values will be under-provided. Others argue the financial sector is inefficient because greedy Wall Street types convince the gullible... MORE

Michael Darda on Alan Blinder

Monetary Policy
Scott Sumner
Alan Blinder once served as Vice Chairman of the Federal Reserve Board, and now has a new piece in the Wall Street Journal. Michael Darda sent me the following email in response: Alan Blinder in today's WSJ, arguing, as some... MORE

How shall we define 'liberal'?

Economic History
Scott Sumner
Daniel Klein has a very interesting piece in the Intercollegiate Review on the changing meaning of the term 'liberal'. It begins as follows: Here I make a plea, addressed to conservatives and libertarians, regarding the word liberal: please do not... MORE

Hatchuel on the new waves of statism

Eurozone crisis
Alberto Mingardi
Romain Hatchuel, who is "managing partner of Square Advisors LLC, a New York-based asset-management firm", had a very good op-ed in the Wall Street Journal, "The World-Wide Undermining of Free Markets". Mr Hatchuel's points will not sound new to EconLog's... MORE

Treatment: A Little Cost-Benefit Analysis is a Dangerous Thing

Behavioral Economics and Rationality
Bryan Caplan
Suppose you discover that a medical procedure genuinely reduces your risk of dying this year.  When you look further, however, you learn that your risk of dying only falls from 10-in-1000 to 9-in-1000.  Here are three reactions in order of... MORE

Why are so many currencies suddenly appreciating all over the world?

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Many readers might be confused by the title of this post. Haven't we been reading about a currency war? Aren't competitive devaluations occurring one after another, all over the world? The answer is no, for a very simple reason---it's impossible.... MORE

Is Breast Cancer Screening Worthless? The Fact Box Speaks

Behavioral Economics and Rationality
Bryan Caplan
Gigerenzer's Risk Savvy also presents transparent statistical evidence against routine mammograms.  The presentation slightly changes, relying on a "fact box" rather than an icon box.  But the idea remains the same: Clearly summarize outcome frequencies from women randomly assigned to... MORE

Was China's devaluation a beggar-thy-neighbor policy?

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
I've argued that devaluations are not beggar-thy-neighbor policies. More specifically, the Chinese need to devalue their currency to boost NGDP (and RGDP) growth, and that this would also help the world economy, as a more prosperous China would import more... MORE

Is Prostate Screening Worthless? The Icon Box Speaks

Economics of Health Care
Bryan Caplan
Gerd Gigerenzer's Risk Savvy is strikingly consistent with Hansonian medical skepticism.  One striking example: his cost-benefit analysis of prostate screening.  His key analytical tool is the icon box.An icon box brings transparency into health care.  It can be used to... MORE

Free the yuan

Monetary Policy
Scott Sumner
A few days ago I did a post suggesting that the Chinese government needed to devalue the yuan. Today (or last night) the Chinese government took a modest step in that direction: China said it will let the market play... MORE

A Waste of Paper?

Books: Reviews and Suggested Readings
Bryan Caplan
Last week I walked the stacks of GMU's Fenwick Library with my elder sons.  Their presence was clarifying.  As we three perused the books, my main emotion was embarrassment.  I'm an academic.  A university library is supposed to be a... MORE

In the 1990s there was (or seemed to be) a consensus that you do not want to apply aggregate demand arguments to questions of long run growth and income distribution. Demand shocks have no long run real effects. In simple... MORE

Bio of Elinor Ostrom

Energy, Environment, Resources
David Henderson
Most economists are familiar with the late Garrett Hardin's classic article, "The Tragedy of the Commons" (see Tragedy of the Commons). Hardin's idea was that when no one owns a resource, it is overused because no one can control its... MORE

Shun the paper, not the person

Economic Methods
Scott Sumner
Paul Romer has recently been posting on the subject of intellectual honesty in economic research. I'm supportive of his argument that economists should behave like honest scientists, rather than lawyers who withhold information that is detrimental to their argument. I'm... MORE

Bryson on U.S. Standard of Living in 1927

Growth: Consequences
David Henderson
The first book I read on my current vacation at my cottage is Bill Bryson's One Summer, subtitled America, 1927. It's his story about various events in the United States in 1927. I've been a fan of his travel writing;... MORE

Optimal Worker Safety One More Time

Labor Market
David Henderson
MikeDC, the person for whom I wrote my original post, writes: Daniel Kuehn and Hazel Meade pretty straightforwardly state my objection. I think I'd just reiterate that the problem comes when the equilibrium wage is sufficiently low that the optimal... MORE

The Rule of Law in the Regulatory State

Regulation
David Henderson
What banker dares to speak out against the Fed, or trader against the SEC? What hospital or health insurer dares to speak out against HHS or Obamacare? What business needing environmental approval for a project dares to speak out against... MORE

The Unfair Labor Training Act

Behavioral Economics and Rationality
Bryan Caplan
John Bishop's "What We Know About Employer-Provided Training" alerted me to the existence of some obscure but plausibly very harmful labor regulations.  Suppose your employer provides free job training every Saturday.  Compared to regular schooling, this is a great deal. ... MORE

Does Market Power Affect Optimal Worker Safety?

Central Planning vs. Local Knowledge
David Henderson
The possibly surprising answer is "No." In an earlier post, I showed that in a free market and under certain assumptions, even workers who are poor will get what is, from their viewpoint, the optimal amount of safety. One commenter... MORE

There are many arguments for rules over discretion. Here's one that I haven't seen before. Policymakers are only human, and don't like to admit to making mistakes. Especially when those mistakes might have harmed millions of people. In contrast, markets... MORE

Ghost World and Zombieland

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
I'm embarrassed to admit that I only recently got around to reading Lant Pritchett's Let Their People Come: Breaking the Gridlock on Global Labor Mobility.  The full text is free and packed with goodness, but I learned the most from... MORE

Dennis Hastert and Colorado pot dealers

Economics of Crime
Scott Sumner
It was always understood that some people might have a legitimate need to withdraw large amounts of cash from banks, perhaps if they ran businesses that had to make a lot of cash transactions. The law against structured withdrawals of... MORE

Student Loans and Bankruptcy

Behavioral Economics and Rationality
Bryan Caplan
One of the main things I learned while writing The Case Against Education: Contrary to almost everyone, student loans are virtually the least objectionable government subsidy for college.  Why?  As you know, I firmly subscribe to the view that -... MORE

Robert Conquest RIP

Book Club
Alberto Mingardi
The Daily Telegraph reports that Robert Conquest has died at age 98. He was one of the great historians of our time and we all owe him much, for he was a key person in explaining what Soviet communism really... MORE

Is the rise of utilitarianism unstoppable?

Labor Mobility, Immigration, Outsourcing
Scott Sumner
If I might be allowed a bit of armchair philosophical speculation, it seems to me that the advance of technology and utilitarianism are two of the most relentless trends in world history. The growing importance of technology is easy to... MORE

Yanis Varoufakis as a media star

Eurozone crisis
Alberto Mingardi
I suspect that one of the most enduring legacies of the Greek crisis may be the making of Yanis Varoufakis into a global opinion leader. It is a curious phenomenon. Varoufakis was the leading Greek negotiator in a round of... MORE

In a comment on a recent post of mine on worker safety, in which I highlighted the "Job Safety" entry by W. Kip Viscusi in The Concise Encyclopedia of Economics, MikeDC wrote: If you've got an impoverished and hungry subsistence... MORE

The Ethics of Terminus

Economic Philosophy
Bryan Caplan
[Warning: Season 4-5 Walking Dead spoilers]In zombie survival sensation The Walking Dead, the protagonists are captured by a community of hipster cannibals.  The community is called Terminus; its members, Terminants.  Their business model:1. Lure human survivors to their compound with... MORE

The Huge Benefits of the Sharing Economy

Free Markets
David Henderson
There has been a lot of excitement recently over what many people call the "sharing economy," in which new firms such as Uber, Lyft, Airbnb and other website businesses are increasing the value of capital assets. Uber and Lyft allow... MORE

Interesting email from Todd Proebsting, reprinted with his permission. Dear Prof. Caplan, Your recent attempt at a wager on Iran's nuclear progress, and the subsequent exchange with the author about why you wanted 10:1 odds reminded me that the CIA... MORE

China: The real problem is nominal

Macroeconomics
Scott Sumner
Here's a report on China in the Financial Times: Before the release of Wednesday's second-quarter gross domestic product estimate, China's nominal GDP growth rate had plummeted from almost 20 per cent to 5.8 per cent since 2011, a much sharper... MORE

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