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October 2015

A Monthly Archive (76 entries)

A theory of house temperatures

Monetary Policy
Scott Sumner
Bob Murphy has occasionally complained that I contradict myself on interest rates. I frequently say: 1. Interest rates are a meaningless indicator of the current stance of monetary policy. 2. Raising interest rates makes monetary policy more contractionary, on the... MORE

George Selgin on Bernanke's Spinning

Politics and Economics
David Henderson
Moreover, thanks to Bloomberg's having forced the Fed to disclose the contents of all three Maiden Lane portfolios, we now know that, by April 3, 2008, when Bernanke made the same "investment grade" claim in testifying before the Senate Banking... MORE

China's demographic fatal conceit

Unintended Consequences
Alberto Mingardi
In his book The Great Escape, Nobel laureate Angus Deaton (see here David's excellent article) argues that The misdiagnosis of the population explosion by the vast majority of social scientists and policy makers, and the grave harm that the resultant... MORE

Heather MacDonald on the Drug War

Economics of Crime
David Henderson
Heather MacDonald, the Thomas W. Smith fellow at the Manhattan Institute for Policy Research, recently testified before the Senate Judiciary Committee. The second last sentence of her closing paragraph gives the gist of her message: In closing, let me say... MORE

Less Output or Cartel Output: That is the Issue

Cost-benefit Analysis
David Henderson
Or, at least, it's one of the most important issues. As soon as I arrived in the United States in September 1972, I started paying close attention to California politics. I was fascinated by the number of initiatives on the... MORE

Paul Krugman writes that Marco Rubio and other Republican candidates are proposing wildly unaffordable tax cuts whereas the two main Democratic candidates are not. And it is true that unless the Republican candidates get serious about substantially cutting the size... MORE

The Danger of Economics

Behavioral Economics and Rationality
Bryan Caplan
Timeless insight from Don Boudreaux:This thought is frequently thrown at me and other advocates of laissez-faire, such as when protectionists allege that our endorsement of unilateral free trade ignores "market imperfections" and other "complexities" that aren't discussed in econ-principles courses.... MORE

Rubio versus Harwood and Rubio versus Free Labor Markets

Labor Mobility, Immigration, Outsourcing
David Henderson
Last night's Republican debate was quite interesting. I can't do justice to all of it in one post, but here are two highlights that involve Marco Rubio. I said yesterday that leftist John Harwood was a strange pick to be... MORE

Prior to late 2008, I had gone 25 years without having a strong opinion on monetary policy. It seemed about right, even if on occasion I might have preferred something a bit easier or a bit tighter. Then it seemed... MORE

Bush-Trump Bet

Economic Methods
Bryan Caplan
Bet proposal from the great Tim Kane:@Noahpinion If. Nothing is certain. And I will wager that Trump drops out before Jeb. Any takers? @bryan_caplan @hooverwhalen-- Tim Kane (@TimmerKane) October 29, 2015 Tim and I are now on for $20.... MORE

Well-Said

Cross-country Comparisons
Bryan Caplan
Nicolas Kristof:I've defended Islam from critics like Bill Maher who, as I see it, demonize a diverse faith of 1.6 billion Muslims because a small percentage are violent extremists. But it's incumbent on those of us who object to this... MORE

The World Without Marx

Cost-benefit Analysis
Bryan Caplan
Suppose Karl Marx had never been born.  How would the modern world be different?  My best guess is highly optimistic.  Without Marx, there would have been no prominent intellectual promoter of violent revolution for socialist dictatorship.  There would still have... MORE

The Stupid Party

Politics and Economics
David Henderson
The old line among libertarians circa the late 1970s was that Democrats are the evil party and Republicans are the stupid party. I think both parties have covered both adjectives in recent years, what with wars, torture, drone killings based... MORE

Boudreaux on Economic Principles

Economic Education
David Henderson
Questioner: How's your wife? Henny Youngman: Compared to what? I thought of this old Henny Youngman joke while reading Don Boudreaux's excellent post this morning, "On the Principles of Economic Principles." Don is responding to a statement from blogger Ezra... MORE

Entrepreneurship and the Steve Jobs movie

Entrepreneurialism
Alberto Mingardi
I've watched the "Steve Jobs" movie (what a movie!) and I'd like to share a couple of thoughts. The movie is not a substitute for the monumental biography by Walter Isaacson (another book which has been on my bedside table... MORE

What I Didn't Get to Say to the Workshop Audience

Economic Philosophy
Bryan Caplan
Sunday's Writers Workshop left little time to question the panelists, but all of the questions asked were directed at me.  After my talk, discussion continued in the hall.  Top things left unsaid, or at least unheard by most of the... MORE

These two questions are much more similar that we tend to assume, despite the normative/positive distinction emphasized in EC101 textbooks. They are not identical questions in the short run---say the October or December Fed meetings---but over a long period of... MORE

What I Didn't Get to Say to Mike Gonzalez

Economics and Culture
Bryan Caplan
At the Social Contract Writers Workshop, Mike Gonzalez from the Heritage Foundation spoke on the value of immigrant assimilation and the evils of multiculturalism.  While I didn't strongly disagree with anything he said, I still have two unspoken thoughts to... MORE

Kevin Williamson on Human Progress

Growth: Causal Factors
David Henderson
I've got to admit it's getting better. Over at National Review, Kevin Williamson has an excellent article on human progress. Its title: "Take a Bow, Species." Were I to excerpt the really good parts, I would probably end up excerpting... MORE

What I Didn't Get to Say to Mark Krikorian

Behavioral Economics and Rationality
Bryan Caplan
If you haven't heard of John Tanton, you should: He's the intellectual entrepreneur behind most of America's major anti-immigration organizations.  This morning I spoke before one of Tanton's brain children, US Inc., for their annual Social Contract Writers Workshop.  As... MORE

Reagan Learned

moral reasoning
David Henderson
My favorite paragraph I've read all week (on the aftermath of the Abel Archer exercise) is from then President Ronald Reagan, writing in his diary at the time: He wrote in his diary on Nov. 18, 1983: "I feel the... MORE

Delaying the crash

Monetary Policy
Scott Sumner
I am gradually working my way through Bernanke's recent memoir, and so far I am greatly enjoying the book. It does an outstanding job of explaining how things looked from the inside, and is full of fascinating tidbits. For instance,... MORE

If you're not a libertarian (and maybe even if you are), Anthony de Jasay is possibly the greatest thinker you have never heard of. A reason for that might be that de Jasay (who just turned 90 on October 15)... MORE

Raj Chetty on Income Mobility

Income Distribution
David Henderson
Mr. Chetty and the economists he works with tackle problems that seem intractable, and offer hopeful prescriptions. Consider economic inequality--the income spread between rich, middle-class and poor. Mr. Chetty addresses the issue indirectly. He examines income mobility, which he defines... MORE

A right-turn for Switzerland?

Eurozone crisis
Alberto Mingardi
Some friends of mine are alarmed about the new course in Swiss politics. I tend to agree with Scott Sumner: Switzerland is my favourite political system. And I am not particularly alarmed by the latest elections, in which the Union... MORE

How I think

Economic History
Scott Sumner
Over at MoneyIllusion a commenter asked me the following question: What is your "take" (to borrow a sports term) on the role played by mass quantities of gold and silver pouring into Spain during the first centuries of that period?... MORE

The Epstein-Huemer Debate on Anarcho-Capitalism

Economic Philosophy
Bryan Caplan
Video of the Junto debate between Richard Epstein and Michael Huemer is now up.  The resolution: "A government that performs its fundamental functions is preferable to a system of anarcho-capitalism in which these functions are privatized."  Enjoy. Normal 0 false... MORE

Human Smuggling and Border Crossings by Gabriella Sanchez

Books: Reviews and Suggested Readings
Bryan Caplan
To write Human Smuggling and Border Crossings (Routledge 2015), Gabriella Sanchez interviewed a large sample of human smugglers in Arizona.  The result is a fascinating ethnography.  Smugglers often have a Huemerian - not Kingian - take on civil disobedience:When Zulema... MORE

Paul Krugman has a new post on Japan, which makes some good points. He considers the possibility that Japan will never escape the zero rate trap. I don't think that we have a good sense of what that scenario implies,... MORE

Canada's Election Outcome

Public Choice Theory
David Henderson
Co-blogger Scott Sumner writes: Yesterday's win for the Canadian Liberals was a huge win for libertarian policies in North America: If Scott had simply inserted the word "some" before "libertarian," I would agree with him. He has correctly identified the... MORE

Social Undesirability Bias

Behavioral Economics and Rationality
Bryan Caplan
When the truth sounds bad, people lie.  They lie to others.  They lie to themselves.  That's the essence of Social Desirability Bias, one of the most powerful forces in the social world.  Politics without Social Desirability Bias would be almost... MORE

The libertarian coast

Regulation
Scott Sumner
Yesterday's win for the Canadian Liberals was a huge win for libertarian policies in North America: One other industry may gain from the Liberal landslide. Canadian marijuana stocks including Canopy Growth Corp., Aphria Inc. and Mettrum Health Corp. may gain... MORE

What My "Case Against Education" Is Not

Cost-benefit Analysis
Bryan Caplan
Great parody of "Every NYT Higher-Ed Thinkpiece Ever Written":Higher Education is in a Crisis. A deep, dark, existential crisis which can only be blamed on its resistance to innovative disruption and its abandonment of cherished liberal arts principles. You might... MORE

Reply to Arnold Kling

Monetary Policy
Scott Sumner
Arnold Kling replied to me recent post discussing a 4% inflation target (a policy I oppose, by the way.) I strongly disagree with all 6 of his points. He is responding to this claim I made: The simplest solution is... MORE

First-Order Effects Are First

Behavioral Economics and Rationality
David Henderson
Co-blogger Bryan Caplan's excellent post on forecasting this morning reminds me of a similar point that co-author Charley Hooper (CLH) and I made in our book, Making Great Decisions in Business and Life. Here it is: First Find First-Order Effects... MORE

Where Superforecasters Start

Behavioral Economics and Rationality
Bryan Caplan
How can you improve your forecasting?  One of Superforecasting's most useful principles is "outside first."  Suppose you have a lot of details about the Renzetti family, and you're trying to guess whether it owns a pet.  It's tempting to dwell... MORE

Bernanke's memoir: First impressions

Monetary Policy
Scott Sumner
Seminars at the University of Chicago were pretty intense. I recall times when the speaker was barely one sentence into his presentation, and was already being challenged by pointed questions. I hate to be "that guy", but . . .... MORE

Meer vs. Galbraith on the $15 Minimum Wage

Labor Market
David Henderson
I finally got around to watching the debate about the minimum wage between Jonathan Meer and Jamie Galbraith. Meer is an economics professor at Texas A&M University and Galbraith is an economics professor in the Lyndon B. Johnson School at... MORE

Market monetarism is not (primarily) about NGDP targeting

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
I was very excited to read about a new San Francisco Fed study that supported one key tenet of market monetarism. A number of commenters seemed confused as to why it was a big deal. To see why, we need... MORE

Closed borders and the liberty of the rest of us

Labor Mobility, Immigration, Outsourcing
Alberto Mingardi
Open borders have been a matter of discussion within the libertarian movement for a few years. Bryan Caplan, on this same blog, has consistently advanced a very strong case for open borders. See, for example, his "Let Anyone Take a... MORE

Deaton on Medicare and Life Expectancy

Public Choice Theory
David Henderson
The recent Nobel Prize winner, Angus Deaton, in his book, The Great Escape, writes: The very wealthy have little need for state-provided education or health care; they have every reason to support cuts in Medicare and to fight any increases... MORE

Thanks Texas

Energy, Environment, Resources
Scott Sumner
I just spent some time in California, and noticed that there are a lot of really rich people out there. My hotel was in Santa Monica, a pleasant beach town where the average house costs $2.7 million. One property was... MORE

Superforecasting on Epistemic Bait and Switch

Books: Reviews and Suggested Readings
Bryan Caplan
A great discussion of the mistaken Iraq forecasts of the intelligence community (IC) from Superforecasting:[F]ew things are harder than mental time travel.  Even for historians, putting yourself in the position of someone at the time - and not being swayed... MORE

More really good news

Monetary Policy
Scott Sumner
I recently pointed out that Fed officials are becoming more receptive to the market monetarist proposal for negative interest on reserves. Today there is more progress, on an even more important front. First let me provide a bit of background... MORE

Reply to Kevin Drum

Scott Sumner
Kevin Drum has a post discussing whether the Fed could achieve a 4% inflation target. The post discusses some of Brad DeLong's idea, and then concludes as follows: So if I'm reading DeLong right, it's not clear that the Fed... MORE

Superforecasting: Supremely Awesome

Books: Reviews and Suggested Readings
Bryan Caplan
I'm already an unabashed Tetlock fanboy.  But his latest book, Superforecasting: The Art and Science of Prediction (co-authored with Dan Gardner but still written in the first person) takes my fandom to new levels.  Quick version: Philip Tetlock organized one... MORE

Henderson on Deaton

Labor Mobility, Immigration, Outsourcing
David Henderson
Hoover has published my longer piece on Nobel Prize winner Angus Deaton. It's titled "A Nobel for Humanity." It's not my title, but I like it better than the one I gave it, just as I liked the Wall Street... MORE

It's hard to teach a central bank new tricks

Monetary Policy
Scott Sumner
How did the Fed do during its first 100 years? For a deeper look at this question, you should read Selgin, Lastrapes and White. Here I'll take a very broad overview, and look at a few key themes. In my... MORE

They Scare Me

Behavioral Economics and Rationality
Bryan Caplan
In 3rd-grade, my best friend was Mormon.  As a result, I joined a Mormon cub scout troop.  Since then, I've often interacted with Mormons, and I though I've never become one, I have to say: They are the nicest bunch... MORE

The Deaton Paradox

Fiscal Policy
David Henderson
Yesterday I was busy writing the piece on Nobel Prize winner Angus Deaton for the Wall Street Journal. Here's the link, although realize that it's gated. The good news: Hoover asked me to do a longer piece, which will be... MORE

Missing Links

Behavioral Economics and Rationality
Bryan Caplan
Pieces I failed to link to while visiting the University of Illinois:1. Me on open borders in TIME.2. Alex Tabarrok on open borders in The Atlantic.3. Scott Alexander on me on mental illness.Oh, and I forgot:4. The Chronicle of Higher... MORE

Comparative Phooling

Books: Reviews and Suggested Readings
David Henderson
Bad government is itself a product of phishing and phoolishness, for "we are prone to vote for the person who makes us the most comfortable," even when that person's decisions are effectively bought by special interests. This is a quote... MORE

Market monetarism continues to make progress

Monetary Policy
Scott Sumner
One of the earliest ideas to come out of market monetarism was the proposal for negative interest rates on reserves (negative IOR). I mentioned this idea in a couple papers published in early 2009, and the New York Fed discussed... MORE

Arnold Kling recently responded to a point I made about the Fed not determining the path of interest rates: He wrote, Unfortunately, the Fed doesn't get to decide the path of interest rates. It looks like they do, but that's... MORE

Herbert Spencer, the misunderstood libertarian

Books: Reviews and Suggested Readings
Alberto Mingardi
On our sister website, the Library of Law and Liberty, I have a review of "Herbert Spencer. Legacies", a new collection of essays on Spencer. By the way, I'm most pleased with the title the editors used for the piece:... MORE

"The likelihood of Hitler being able to accomplish his goals would have been greatly diminished if the people had been armed," he told CNN on Thursday. This is from a BBC report titled "Ben Carson defends linking gun control to... MORE

Yes, a strong dollar matters; but why?

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Giles Wilkes directed me to an interesting Financial Times article on the strong dollar: In its April forecast for the global economy, IMF statistics suggested that global gross domestic product in nominal US dollar terms would hit $74.5tn this year,... MORE

Gross Evidence on Immigrant Voting

Public Choice Theory
David Henderson
One of the concerns I have had about substantially expanding immigration to the United States, Canada, and other countries is that a large number of immigrants, not understanding the important role of economic freedom in raising our standards of living,... MORE

Everything's endogenous

Money
Scott Sumner
Your debutante just knows what you need But I know what you want -- Bob Dylan Over at MoneyIllusion I did a post---partly tongue in cheek---pointing out that if Milton Friedman were alive today he might be forced to change... MORE

Open Borders Comes to Illinois

Economic Philosophy
Bryan Caplan
I'm speaking in Urbana, Illinois on open borders this Thursday.  Details here.... MORE

Portugal after the elections

Eurozone crisis
Alberto Mingardi
The Portuguese elections may result in a gridlocked government. The center-right coalition won - but did not secure a working majority. The incumbents gained 37% of the votes, the Socialists 32%. The Left bloc reached 10% and the Communists, who... MORE

Mark Thoma on NAFTA

International Trade
David Henderson
Yesterday, economist Mark Thoma wrote a piece on Donald Trump's claim that NAFTA was a disaster. It's titled "Is Donald Trump right to call NAFTA a 'disaster'?" I thought Thoma would say it wasn't a disaster because, however imperfect NAFTA... MORE

Home Schooling Questions: Economists vs. the Public

Economics of Education
Bryan Caplan
Questions non-economists ask when I tell them I'm homeschooling my sons:1. What makes you think you're qualified to teach them?2. Who are you to decide what your kids should study?3. What about socialization?4. How come you're not teaching [insert pet... MORE

Kling on Phishing for Phools

Books: Reviews and Suggested Readings
David Henderson
Phooey The other Feature Article on Econlib today is "Phools and Their Money," Arnold Kling's review of Phishing for Phools: The Economics of Manipulation & Deception by George A. Akerlof and Robert J. Shiller. A highlight, after Arnold gives their... MORE

I've made this point before, but it's worth repeating, given all the recent talk about the Fed relying on the Phillips Curve. The Phillips Curve model only works when the business cycle is driven by demand shocks. When we are... MORE

Robert Murphy on Minimum Wage Studies

Labor Market
David Henderson
Many economists who currently support large minimum wage hikes claim that the best research now shows that such an increase would not cause significant drops in employment. However, their conclusion relies on a dubious reading of the literature. Dozens of... MORE

What I Learned from Gordon Tullock

Economic Education
Bryan Caplan
The papers for the Tullock Memorial Conference are now up, including my presentation on "What I Learned from Gordon Tullock."  If I had more time, I would have spent it discussing Tullock's undersung analysis of dictatorship.... MORE

Henderson on Thaler's Misbehaving

Books: Reviews and Suggested Readings
David Henderson
University of Chicago economist Richard H. Thaler, probably the most important founder of "behavioral economics," is a fantastic storyteller. In his latest book, Misbehaving, he tells, roughly chronologically, of his initial doubts about the standard economist's "rational actor" model and... MORE

I recently argued that banks do not play an important role in monetary policy. Rather we need to focus on the supply and demand for base money, which is mostly determined by central bank policies. The blog Spontaneous Finance recently... MORE

When the Fed ignores the market

Monetary Policy
Scott Sumner
Market forecasts are often wrong. But they remain the least bad way we have of predicting the future. In the past, we've paid a heavy price when the Fed ignored market forecasts. In September 2008, the TIPS markets predicted very... MORE

Saturday Morning Video: Love Gov on Government Spying

Economics and Culture
David Henderson
This morning I watched the final short video in the 5-part Love Gov series. Now that I've seen them all, I would rank them, from top to bottom, 1, 2, 5, 3, 4. In this one, Alexis finally develops some... MORE

A snapshot of Portugal

Eurozone crisis
Alberto Mingardi
In the Wall Street Journal Joseph Sternberg has a thorough op-ed on Portugal, which is heading to a national election tomorrow. No party comparable to the Spanish "Podemos" or the Greek "Syriza" has emerged in Portugal that may have a... MORE

Missing the big picture

Monetary Policy
Scott Sumner
I've done scattered posts discussing the flaws in alternative approaches to monetary economics. Here I'd like to try to show some underlying themes in these critiques. I'll briefly discuss 4 common myths: 1. The trade view 2. The fiscal view... MORE

My Simplistic Theory of Left and Right

Behavioral Economics and Rationality
Bryan Caplan
A few weeks ago, Robin Hanson posed a lunchtime challenge: What is the difference between Left and Right?  The point of the question, of course, is not to explain how every self-styled leftist differs from every self-styled rightist.  The point... MORE

The Catalonian secession and the EU

Eurozone crisis
Alberto Mingardi
The Catalonian regional election was won by the separatist parties, which are now heading towards independence following their leader, Presidente Arturo Màs. This would create much trouble at the national level. The Partido Popular of Mr Rajoy perhaps hasn't reacted... MORE

Betting, Liberty, and the Status Quo

Behavioral Economics and Rationality
Bryan Caplan
I claim that betting stifles hyperbole, the fuel of Big Government.  In this sense, my Betting Norm has an underlying libertarian agenda.  One could object, however, that killing hyperbole is a double-edged sword.  Sure, it deprives statists of the chance... MORE

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