EconLog small logo

January 2016

A Monthly Archive (76 entries)

Don't Make Canadians Poorer

Regulation and Subsidies
David Henderson
In short, because the price of oil has fallen, Canadians as a whole are somewhat poorer than if the price had not fallen. What should government do about this? Not make them poorer. Wasteful government spending is bad enough when... MORE

Huffington Post's Stunning Ignorance of Immigration Law

Labor Mobility, Immigration, Outsourcing
David Henderson
"Yes, we're planning to add this note to all future stories about Trump," the [Huffington Post] spokesperson said. "No other candidate has called for banning 1.6 billion people from the country! If any other candidate makes such a proposal, we'll... MORE

Influence, target, control

Monetary Policy
Scott Sumner
I often get commenters complaining that the Fed should not be controlling interest rates. They think the market should set rates. In one sense I agree, but in another sense I wonder if the commenters are confused. I wonder if... MORE

Gordon on Growth: Rates versus Levels

Growth: Causal Factors
David Henderson
I'm looking forward to reading Robert Gordon's new book, The Rise and Fall of American Growth. PBS recently did an 8-minute segment on it that lays out his argument nicely. HT2 John Cochrane and Greg Mankiw. I won't try to... MORE

An Ivy League Admissions Officer Speaks

Economics of Education
Bryan Caplan
My post on elite high schools and college admission led an Ivy League admissions officer to email me.  Here's what he wrote, with his kind permission.  Name and school redacted.Bryan, Your post on TJ caught my eye, as last... MORE

In Like Flint and Out Like My Cousin Vinny

Regulation
David Henderson
David A. Graham argues that firms that make charitable contributions create long-term problems. For those who haven't been paying attention to the news lately, the government of Flint, Michigan totally messed up, selling lead-laced water to Flint residents for 16... MORE

J.S. Mill and Extreme Pornography

Economic History
Emily Skarbek
Tyler Cowen's post on Marginal Revolution today gives an interesting take on the effects of jettisoning Millian liberalism from the left / Progressive ideology. Not only would eugenicist ideas have never gained any traction historically, he argues, but the lack... MORE

Tyler Cowen has an excellent post on progressivism and individual rights. At one point he discusses the views of Kevin Drum: Kevin Drum had an interesting point in response (and do read his full post, there is more to it... MORE

My Future of Freedom Foundation Interview

Cost-benefit Analysis
Bryan Caplan
The Future of Freedom Foundation's Jacob Hornberger and Richard Ebeling interviewed me for their Youtube show.  Enjoy.... MORE

Bet on Terrorist Incident

Economics of Crime
David Henderson
On Monday, I attended an excellent event at the Hoover Institution on the work and influence of the late Robert Conquest. Recall that he was the person who, with his 1968 book, The Great Terror, "outed" Joseph Stalin as a... MORE

Welcome to the first installment of the EconLog Reading Club on Ancestry and Long-Run Growth. This week's paper: Putterman, Louis, and David Weil. 2010. "Post-1500 Population Flows and the Long-Run Determinants of Economic Growth and Inequality." Quarterly Journal of Economics... MORE

Paul Krugman on French economic policies

Macroeconomics
Scott Sumner
A finance student from Coventry sent me Paul Krugman post from 1997, which has some interesting things to say about today. Fifteen years ago, just after Fran├žois Mitterrand became president of France, I attended my first conference in Paris. .... MORE

An Educational Challenge

Economic Methods
Bryan Caplan
In Mastering 'Metrics, Angrist and Pischke write: [S]ome people cut their schooling short so as to pursue more immediately lucrative activities.  Sir Mick Jagger abandoned his pursuit of a degree at the London School of Economics in 1963 to play... MORE

Ponnuru's Corollary to Hanlon's Razor

Behavioral Economics and Rationality
Bryan Caplan
"Never attribute to malice that which can be adequately explained by stupidity" is technically known as Hanlon's Razor.  Ramesh Ponnuru's proposes a novel corollary:Never attribute to malice that which can be adequately explained by stupidity. This sound aphorism may have... MORE

Means-Testing Social Security: The Cohen-Friedman Debate, I

Behavioral Economics and Rationality
Bryan Caplan
Did you know that in 1972, Milton Friedman debated former HEW Secretary Wilbur Cohen on means-testing Social Security?  Until two weeks ago, I sure didn't.  To be honest, neither debater is at the top of his game.  Cohen makes a... MORE

Joan Baez Sr.: A Reminiscence

International Trade
David Henderson
Here's a true story that illustrates two things I love in political discussions, two things that are all too rare. In April 1980, while the Mariel boatlift was beginning, the fact that some, and possibly many, of the Cubans coming... MORE

The Ambitious Case Against T.J.

Behavioral Economics and Rationality
Bryan Caplan
In northern Virginia, parents yearn to "get their kids into T.J." - the Thomas Jefferson High School for Science and Technology.  It's our answer to New York's Bronx Science and Stuyvesant - publicly-funded high schools for the best and brightest. ... MORE

Keynesian economics and cognitive illusions

Monetary Policy
Scott Sumner
Consider the following two paradoxes: 1. Falling wages are associated with falling RGDP. Falling wages cause higher RGDP. 2. Falling interest rates are associated with falling NGDP growth. Falling interest rates cause higher NGDP growth. You often hear people say... MORE

Progress on Health Care

Economics of Health Care
David Henderson
Progress on health care? Really? While Obama is President? The Obama who said you can keep your doctor and your insurance and oh, by the way, your insurance will cost less? That Obama? Yes, really. But it has little or... MORE

My recent book on the Great Depression is not easy to review. The arguments are complex, and not always easy to follow. I did my best, but it's a very complicated story. Given my low expectations, I was pleasantly surprised... MORE

Larry Summers and asset prices

Finance
Scott Sumner
I frequently argue that anti-EMH theories are not useful. That is, theories of irrational market behavior, such as "bubbles", are simply not useful to policymakers, academics and ordinary investors. If they are useful to anyone (it's hard to know either... MORE

Hire Locally

International Trade
David Henderson
I have an idea and I wonder what various commenters think about it. I was looking on line for a small town in Washington state and found out that one of its most famous citizens is a professional baseball player.... MORE

Forgetting How to Drive in the Snow

Behavioral Economics and Rationality
Bryan Caplan
Last night, less than one inch of snow caused massive traffic jams in DC.  Hypothesis, inspired by today's post on forgetting: Holding snowfall constant, the traffic jams will be most severe at the start of every snow season, then decline. ... MORE

Forgetting: The Basic Facts

Behavioral Economics and Rationality
Bryan Caplan
You don't know most of what you've learned.  Why not?  Because human beings forget.  How and why do they forget?  The main story is that people forget what they don't use.  A bit of googling turned up a nice meta-analysis,... MORE

The Economics of the Cadillac Health Care Tax, Part II

Economics of Health Care
David Henderson
A little analysis goes a long way. Yesterday, I wrote: I'm sympathetic to what it's [the Cadillac tax is] trying to achieve, but I'm against it. Moreover, I'm against it for the same reason that I'm sympathetic to what it's... MORE

Hey Fed, stop hanging around the Combat Zone

Monetary Policy
Scott Sumner
The Combat Zone was the name for Boston's red light district, when I first moved here in 1982. I believe it's now gentrified, much like Times Square in NYC. But I'd like to see if we can work this into... MORE

Jane Mayer's Problem

Books: Reviews and Suggested Readings
David Henderson
George Melloan, a retired editor of the Wall Street Journal, had a review in a recent issue of the Journal of Jane Mayer's new book, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right.... MORE

SOAS Policy Forum on Sweatshops

Labor Market
Emily Skarbek
On Monday I gave a talk at SOAS University London for a group of students titled "Can Sweatshops Help the World's Poorest?" The gist of the talk was to present basic economic reasoning on wage determination and wage composition, and... MORE

The Missing Moods

Behavioral Economics and Rationality
Bryan Caplan
Last month, I argued that people's moods provide information about their reliability:Yes, the desire to feel any specific mood can lead people into error.  At the same time, however, some moods are symptoms of error, and others are symptoms of... MORE

The Economics of the Cadillac Health Care Tax, Part I

Economics of Health Care
David Henderson
A libertarian friend who sells health insurance asked me the following by email: What are your views on the healthcare "Cadillac" tax? I started to answer him by email but then realized that my response is probably of more general... MORE

In last year's Caplan-Jones immigration debate, Garett heavily appealed to research on ancestry and growth.  The gist:Countries now inhabited by the descendants of historically advanced civilizations do much better than countries now inhabited by descendants of historically backwards civilizations.  How... MORE

High Profits as an Incentive to Bear High R&D Costs

Business Economics
David Henderson
Sunk Costs Now Were Not Always Sunk Here's a question I asked my students in the final exam last quarter: When the drug company Burroughs-Wellcome brought out the first major anti-AIDS drug, AZT, in the late 1980s, the company priced... MORE

Behavioral economists aren't as smart as they think

Behavioral Economics and Rationality
Scott Sumner
I recently did a post criticizing economists who second guess the behavior of others. This new post gives me another opportunity: Thaler asserts that good economics needs good psychology, instead of its tradition of inventing bad psychology. He makes short... MORE

China is rapidly shifting to a service economy

Growth: Consequences
Scott Sumner
The Financial Times has a new piece on the Chinese economy, which contains a graph showing the striking shift toward a service economy: However Gavyn Davies suggests that this graph is misleading, and also provides a graph showing the shares... MORE

I Changed My Mind About Betting

Behavioral Economics and Rationality
Bryan Caplan
The most profound way I changed my mind:When I was a child, I thought betting was like playing with matches.  Only fools did either.  The habit stuck through my twenties until I met Robin Hanson.  Hanging out with Robin didn't... MORE

Am I an ideologue?

Economic Methods
Scott Sumner
Adam Ozimek has a good post showing that economists are not ideologues, and that they change their mind when new information comes in. So I tried to think of some examples that would apply to me. I'll start with early... MORE

Will Paul Krugman Say He's Sorry?

Monetary Policy
David Henderson
Being Paul Krugman means never having to say you're sorry. Paul Krugman writes: But being a conservative means never having to say you're sorry for predicting inflation. He's talking about Art Laffer's prediction in 2009 that inflation due to the... MORE

Climate Economists Base Their Alarm on Their Own Ethical Judgments

Energy, Environment, Resources
David Henderson
Update below The title above doesn't quite tell the story. It's hard to tell in just a title. That's why you need to read this post. Unless you've been living in a cave, you probably know that when economists say... MORE

We never seem to learn

Monetary Policy
Scott Sumner
At the beginning of 2015, we were told that growth would pick up, because plunging oil prices were "like a tax cut." Well, they are like a tax cut, but of course demand-side tax cuts also fail to boost growth,... MORE

"Poor Programs" Bleg

Political Economy
Bryan Caplan
"Poverty programs will always be poor programs."  I've heard this thought many times, but the original source seems to be former HEW Secretary Wilbur Cohen.  His exact words: "A program that deals only with the poor will end up being... MORE

The European right and the GOP

Politics and Economics
Scott Sumner
Politics is a moving target. Political parties are continually evolving over time, and over decades the changes can be quite stark. Many "blue states" used to be red when I was young, and vice versa. In the South this partly... MORE

The Great Pacification, U.S. Edition

Economic History
Bryan Caplan
Recent horrors notwithstanding, there is a strong long-run global trend toward fewer war deaths.  A new paper by Tim Kane somewhat surprisingly shows that there is also a strong long-run trend toward lower U.S. troop deployments.  Basic graph:  US troops... MORE

Smith's Defense of Western Civilization

Economic Philosophy
David Henderson
I'm glad that co-author Bryan Caplan called attention to the excellent essay by Nathan Smith. Otherwise I might not have known about it. Bryan highlighted some great sections. I want to highlight one other section. It's about the nicest modern... MORE

Terrorism and Innumeracy

Behavioral Economics and Rationality
Bryan Caplan
Maverick Philosopher Bill Vallicella responds to my praise of Nathan Smith on terrorism:The Caplan/Smith argument is that because the number of auto-related deaths is much greater than terror-related deaths so far, a high level  of concern about terrorism is not... MORE

Antitrust vs. "Cannibal Capitalism"

Business Economics
Alberto Mingardi
A new complaint against McDonald's has been brought to the European Commission. Interestingly enough, this is the result of a sort of "globalisation of trade-unionism": a coalition of Italian consumer organizations and European and U.S. trade unions accuses the restaurant... MORE

Western Civilization is a Hardy Weed: The Case of Islam

Economics and Culture
Bryan Caplan
The brilliant Nathan Smith has a brilliant new essay, "The Islamophobic Case for Open Borders."  Here are choice selections.A familiar truism well-expressed: If we're still driving cars despite thousands of automobile accident deaths per year, we don't really set the... MORE

China's always been poorly governed

Macroeconomics
Scott Sumner
I often get annoyed reading articles claiming that China has an economic model that others should emulate. China is a poor country, not just compared to the US, but even compared to Mexico. Even if you believe poverty reflects factors... MORE

Does Contract Enforcement Require Government as a Backstop?

Books: Reviews and Suggested Readings
David Henderson
Recently, Arnold Kling has been arguing that even when contract enforcement is totally private, it requires government as a backstop. He wrote: Taking existing institutions as an existence proof for the feasibility of an-cap is not a valid argument. The... MORE

Friedman and Reynolds on Saez and Zucman

Statistical theory and methods
David Henderson
This paper combines income tax returns with macroeconomic household balance sheets to estimate the distribution of wealth in the United States since 1913. We estimate wealth by capitalizing the incomes reported by individual taxpayers, accounting for assets that do not... MORE

The Institutions of Forensic Science

Economics of Crime
Emily Skarbek
Without posting any spoilers, it's fair to say that the new Netflix sensation, Making a Murderer, has sparked a significant discussion on the effectiveness of the US criminal justice system. Bravo. A much more critical attitude towards US incarceration practices... MORE

Sympathy for the devil?

Regulation
Scott Sumner
In my view, rent seeking is the great evil of the modern world, largely explaining the poverty of countries like Iraq and India. The main problem in the world today is people who put the self-interest of their narrow special... MORE

Last week I highlighted a comment by Econlog reader Jim Glass. Since then, I've looked closely at the study he cited. The study is titled "Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials." It's published in the... MORE

The Economist Who Didn't Bark

Economics and Culture
David Henderson
Actually, economists plural. One of my favorite Sherlock Holmes stories is "Silver Blaze" because Holmes used as evidence the fact that a dog didn't bark. In line with my relentless "glass half full" way of looking at the world, I... MORE

What would an IS shock look like?

Monetary Policy
Scott Sumner
One thing that makes it hard to discuss macroeconomics with people is the widely held assumption that changes in interest rates reflect changes in monetary policy. That misconception comes from the fact that people misinterpret the implications of two true... MORE

Ridley, liberty, optimism and pessimism

Books: Reviews and Suggested Readings
Alberto Mingardi
On our sister website, the Library of Law and Liberty, I have a review of Matt Ridley's new book, "The Evolution of Everything". Check out the comments, too. The discussion over what should or shouldn't count as "political progress" is... MORE

Uberize the Economy

Regulation
David Henderson
Kay is the editor of The Walrus and has been writing about Uber, usually positively. But here, he argues that it's unfair for competition from Uber to undercut the taxicab monopoly. He could have gone two ways: (1) advocate banning... MORE

Passing the buck

Monetary Policy
Scott Sumner
The Fed has a legal mandate for price stability and high employment. Their mandate does not instruct them to stop trying if things get a bit difficult. It does not instruct them to pass the job on to the fiscal... MORE

Hiring Without Signals

Labor Market
David Henderson
Readers of Econlog who read co-blogger Bryan Caplan's posts know that Bryan has posted a lot on a college degree as an expensive signal to potential employers. Here are 88 posts Bryan has written on signaling. I find Bryan's argument... MORE

For the second time in six months, the world's equity markets have been roiled by a tiny downward move in the Chinese currency. It seems unlikely that this is mere coincidence. And yet I've yet to see a convincing explanation... MORE

Henderson Vote Counts

Public Choice Theory
David Henderson
Jen Henderson, that is. Back in August, the blogosphere was popping with stories about a cynical group of businesses in Missouri that persuaded the city council to create a special Community Improvement District. Here's part of the news story at... MORE

Thinking on the Margin

Behavioral Economics and Rationality
David Henderson
The two Feature Articles for January are out this week and the first one is by me. The title is "Think on the Margin." An excerpt on buying beer: A few years ago, I went to the supermarket to buy... MORE

Who's afraid of level targeting?

Monetary Policy
Scott Sumner
Ken Duda directed me to a speech by Stanley Fischer, which lays out four options for the next time rates hit zero: 1. Negative interest on reserves 2. A higher inflation target 3. Fiscal stimulus 4. Abolition of currency It's... MORE

Spooner the Constitutionalist

Books: Reviews and Suggested Readings
Alberto Mingardi
I think the "Liberty Matters" discussions, provided by our sister-website the Online Library of Liberty, cannot be praised highly enough. If the Internet and the blogosphere don't have a shortage of libertarian themes and of many genuinely interesting and original... MORE

Brian Doherty on Guns, Crime, and Gun Laws

Cost-benefit Analysis
David Henderson
This morning when I was reading the blogs, the title of Brian Doherty's article caught my eye: "You Know Less Than You Think About Guns." Really? Well, it turns out that, if he was addressing me, he was right. His... MORE

Henderson on the Lars Larson Show

Finance: stocks, options, etc.
David Henderson
Talking about the 1.5% drop in the S&P 500, trade with China, and the problem with retaliatory tariffs. It's here. And my segment goes from about 85:10 to about 94:20.... MORE

Three Great Comments on My FDA Post

Regulation
David Henderson
Three people, Jim Glass, Dan Klein, and db, made important comments on my FDA post yesterday. First, Jim Glass: How the patent system and the FDA discourage study of cancer prevention (quoting...) "R & D on cancer prevention and treatment... MORE

Trump and/or Berlusconi

Alberto Mingardi
Many have compared Donald Trump to Silvio Berlusconi. See Rula Jebreal, Frank Bruni, Beppe Severgnini, Christian Koppff, Beatrice Faleri. Before becoming a pundit in the US, Jebreal used to be a rather softspoken and thoughtful Italian anchorwoman. Severgnini is a... MORE

The Problem with FDA Restrictions on Drugs

Regulation
David Henderson
Or, actually, one of many problems. When asked specifically how his wife's illness had changed his work at the F.D.A., Dr. Pazdur said he was intent on making decisions more quickly. "I have a much greater sense of urgency these... MORE

How We Count Counts: Diane Coyle on The Rise and Fall of American Growth

Books: Reviews and Suggested Readings
Emily Skarbek
Diane Coyle has reviewed Robert Gordon's new book (out late January), The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Gordon's central argument will be familiar to readers of his work. In his... MORE

Tyler Cowen has a good post on the catastrophic collapse of the Brazilian economy: And how is Brazilian output doing you may wonder?: By the end of 2016 Brazil's economy may be 8% smaller than it was in the first... MORE

A Teen Tries the Ideological Turing Test

Behavioral Economics and Rationality
Bryan Caplan
A practice test essay question from Cracking the A.P. U.S. History Exam:Evaluate the extent to which farmers and factory workers did not easily adapt to changes stemming from industrialization in the years 1865-1900.Standard textbooks lament the plights of farmers and... MORE

Introducing Emily Skarbek

Econlog Administrative Issues
David Henderson
Starting tomorrow, January 4, Econlog will have a new guest blogger. It is my pleasure to introduce Emily Skarbek. Emily is a Lecturer in Political Economy at King's College London. She earned her Ph.D. in economics from George Mason University... MORE

Jeffrey Sachs's Sleight of Hand

Energy, Environment, Resources
David Henderson
The wars over climate science aren't really about whether humanity is dangerously changing the climate. It is. So begins a short piece in today's (Saturday/Sunday) Wall Street Journal titled "A Grand Bargain on Energy." The rest of the piece is... MORE

NGDP or NGO?

Monetary Policy
Scott Sumner
Vincent Geloso has a new post, where he suggests using nominal gross output (NGO) as an alternative to NGDP targeting: The intuition behind NGDP target is that monetary policy should be aimed at reacting to changes in demand for money.... MORE

After I began blogging in early 2009, I started giving talks entitled "The Real Problem Was Nominal." I argued that tight money, not financial distress, was the cause of the Great Recession. As far as I know, Robert Hetzel was... MORE

I Win My Inflation Bet with Robert Murphy

Economic Methods
Bryan Caplan
Six years ago, Robert Murphy and I made the following bet:At any point between now and January 2016, if there is a year/year increase in seasonally adjusted CPI that is at least 10%, then you pay me at that time... MORE

Return to top