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February 2016

A Monthly Archive (73 entries)

Henderson on the Case Against a VAT

Taxation
David Henderson
Take Europe, where the VAT is a major source of government revenue. When Belgium, France, Germany, Ireland, Italy and the Netherlands adopted a VAT--all between 1968 and 1971--their stated revenue goal was neutrality: Gains in revenue from the VAT were... MORE

As you may recall, Milton Friedman debated former HEW Secretary Wilbur Cohen on means-testing Social Security back in 1972.  Now let's check out the Friedman highlights.  The Great One begins with his characteristically brilliant contrarianism: Public opinion notwithstanding, Social Security,... MORE

Jonathan Meer and Jeremy West have found that increases in the minimum wage destroy jobs, not so much by destroying current jobs as by reducing the growth rate of new jobs. That makes sense if employers' investments in capital are... MORE

Autor, Dorn, and Hanson on the China Shock

International Trade
Scott Sumner
Noah Smith has an article in Bloomberg discussing a new paper by David Autor, David Dorn and Gordon Hanson (ADH): In his recent book "Economics Rules," Harvard economist Dani Rodrik laments how economists often portray a public consensus while disagreeing... MORE

Cash and freedom

Money
Alberto Mingardi
In 2014, John Cochrane authored this beautiful post in defence of cash. I'm never tired of pointing it to people's attention, as he makes so many important points. Olivia Townsend has an interesting piece on CapX, in which she comments... MORE

I'm not sure this will convince anyone, but I'll try anyway. As you may have gathered from my previous post, I don't believe in bubbles. In addition, I'm a libertarian. I see those two facts as being related. If asset... MORE

Is There Objective Truth?

Economic Methods
David Henderson
Short answer: Yes. Co-blogger Scott Sumner wrote yesterday: Richard Rorty once said something to the effect that if you claim X is actually true, despite most people believing it to be false, you are implicitly forecasting that most people will... MORE

Some Economics of Tipping and Take Away

Incentives
Emily Skarbek
Munger and Roberts have a great Econtalk where they briefly discuss restaurant pricing schemes and the puzzle of why it is not usually cheaper to have take-away (a.k.a. "to go") when clearly the cost of producing the good is cheaper... MORE

Upcoming Events

Economic Education
Bryan Caplan
My next few weeks are packed with speaking engagements - hopefully somewhere near you!  The schedule:1. Students for Liberty, Washington DC.  February 27, 9-10 AM.  "Immigration Restrictions: A Solution in Search of a Problem."2. Institute for Humane Studies, Yale University. ... MORE

Highlights from Nate Silver Interview

Economic Methods
David Henderson
Small sample sizes, global poverty, basketball and the Golden State Warriors, legalizing drugs, herd behavior in the media, and media as cheerleaders. Recently, Tyler Cowen interviewed Nate Silver of five thirtyeight.com in front on audience at the Mercatus Center. Here... MORE

EMH update

Finance: stocks, options, etc.
Scott Sumner
When I started blogging in February 2009, I immediately got into lots of arguments about the Efficient Markets Hypothesis, which I think is "true" in the sense of being a good social science theory, a useful approximation of reality. I... MORE

In case you missed any segment of the latest Reading Club, here's the full package:BackgroundLead-inPart #1: Putterman and WeilPutterman's Commentaries, with My RepliesPart #2: Comin, Easterly, and GongPart #3: Spolaore and WacziargTwo Fun Facts from Putterman-WeilPart #4: Chanda, Cook, and... MORE

Here are responses to the Reading Club AMA questions, point-by-point:December:What about the possibility that the distribution of traits may vary between populations due to genetic differences between populations? If it is those traits are driving long-run growth, and those traits... MORE

In the comments, Ask Me Anything about ancestry and long-run growth.  Tomorrow I'll do my best to answer every question.P.S. Feel free to repost comments from earlier Reading Club entries.... MORE

Brad DeLong's Distorted View of Wealth

Labor Market
David Henderson
He [Thomas Piketty] saw five striking facts: First, ownership of private wealth--with its power to command resources, dictate where and how people would work, and shape politics--was always highly concentrated. This is the second sentence of Brad DeLong's "The Melting... MORE

Last weekend I gave a talk up at the Liberty Forum in Manchester, New Hampshire. While there, I learned more about the Free State Movement, an idea about which I was only dimly aware. The following is from memory, so... MORE

Teaching to the Test Bleg

Economics of Education
Bryan Caplan
I'm looking for good empirical work measuring the prevalence and effects of "teaching to the test."  Nothing good pops up on Google Scholar.  Help!... MORE

I Win My Bush-Trump Bet with Tim Kane

Economic Methods
Bryan Caplan
Right before Halloween, I bet Tim Kane $20 at even odds that Bush would drop out of the election before Trump.  And so he has.  All praise to Tim for his continuing willingness to bet his beliefs!... MORE

Uber for welfare?

Political Economy
Alberto Mingardi
We should Uberize our safety net. This might appear to be a bold statement but it is actually rather commonsensical. Cesare Rhonda and Derek Khanna have put the idea forward in an interesting op-ed for Politico. The so-called sharing economy... MORE

Garett Jones inspired my intellectual journey through the literature on ancestry and long-run growth.  When we debated last semester, I initially expected him to base his case on the economic importance of average national IQ.  He alerted me upfront, however,... MORE

The Trump and Bush Phenomena

Public Choice Theory
David Henderson
As far back as July, I thought many people who agree with me politically (in case you don't read this blog much, I'm a libertarian, not a conservative) were not taking Donald Trump as seriously as they should. I'm not... MORE

Oil Prices are Complicated

Energy, Environment, Resources
David Henderson
Earlier this week I did a post on oil prices in which I failed to take account of futures markets. That's a no-no. I stated in a comment that I would likely do another post. This is it. When... MORE

Drug overdose deaths: It's not just economics

Economics of Crime
Scott Sumner
Let me start this highly unscientific post with a caveat, I think it's quote likely that economic distress plays some role in the recent rise in drug overdose deaths. Here I'll try to caution people that the role might be... MORE

Thus the inventor of a new machine or any other invention has the exclusive priviledge of making and vending that invention for the space of 14 years by the law of this country, as a reward for his ingenuity, and... MORE

Ancestry and Long-Run Growth Reading Club: Chanda Comments

Cross-country Comparisons
Bryan Caplan
Areedam Chanda kindly sent me the following comments on my post on Chanda, Cook, and Putterman. Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 Bryan Thanks for choosing to discuss our paper and for your positive reaction. A few... MORE

Prove-Me-Wrong Prizes

Behavioral Economics and Rationality
Bryan Caplan
Hard-line libertarians generally oppose libel and slander law: Free speech includes the freedom to speak damaging falsehoods - including damaging falsehoods about specific people.  Whether or not you agree, here's a magic bullet to privately defuse libel and slander: The... MORE

Real and monetary shocks, a numerical example

Monetary Policy
Scott Sumner
Here's Tyler Cowen: Closer to the central point I think is Scott's claim: "Any "real shock" that reduces NGDP expectations because the Fed responded passively is also a monetary shock." For me that is a real shock with insufficient monetary... MORE

The Question I Didn't Ask Nate Silver

Behavioral Economics and Rationality
Bryan Caplan
During the Q&A for Tyler's Conversation with Nate Silver, this question occurred to me too late to ask in person.  Here goes:In the show Orange Is the New Black, you're named as a living, breathing embodiment of human rationality. Are... MORE

Sheri Pym Favors Involuntary Servitude

Labor Market
David Henderson
Apple's reasonable technical assistance shall accomplish the following three important functions: (1) it will bypass or disable the auto-erase function whether or not it has been enabled; (2) it will enable the FBI to submit passcodes to the SUBJECT DEVICE... MORE

Welcome to the fourth and final installment of the EconLog Reading Club on Ancestry and Long-Run Growth. This week's paper: Chanda, Areendam, C. Cook, and Louis Putterman. "Persistence of Fortune: Accounting for Population Movements, There Was No Post-Columbian Reversal." American... MORE

Interest rate pessimism

Monetary Policy
Scott Sumner
Back in the 1970s, there was much pessimism about whether the Fed could get inflation under control by raising interest rates. Rates kept going higher and higher, and yet inflation also kept increasing. Markets did react to unexpected rate increases... MORE

Oil Economics

Energy, Environment, Resources
David Henderson
UPDATE: See baconbacon's comment below and my response. I may well have blown this big time. I had been meaning to write a post about oil prices and the economy. Now this article in the New Yorker by James Surowiecki... MORE

On Meddling

Books: Reviews and Suggested Readings
Alberto Mingardi
Thanks to a Facebook recommendation by Tom Palmer, I've got my hands on "Meddling. On the Virtue of Leaving Others Alone" by John Lachs. It's a splendid little book, philosophically dense but written in a way which makes it completely... MORE

Praise: Substitution versus Income Effects

Behavioral Economics and Rationality
Bryan Caplan
Touchy-feely parents shower praise on their kids.  "Great job!"  "You're super smart!"  "Wonderful."  Old-school parents do the opposite.  "You could have done better."  "A-?"  "That won't get you into Harvard."Why the chasm?  The real story, I suspect, is emotional rather... MORE

Hopeless Excuses

Behavioral Economics and Rationality
Bryan Caplan
Suppose I'm right about mental illness.  Telling people they're "sick" might still be a noble lie that makes them feel better.  But the reverse is also true: Even if I'm wrong, telling people they're "sick" might be harmful.  Perhaps the... MORE

Is David Brooks Right about Obama?

Economic Philosophy
David Henderson
UPDATE BELOW I tend not to read David Brooks's columns in the New York Times because they have never impressed me. So I wouldn't have bothered commenting on his recent column were it not for the fact that someone I... MORE

Trevor Burrus on Justice Scalia

Obituaries
Alberto Mingardi
Justice Scalia died on February 13th. For those who knew him, it's a shock. It sounds a bit weird, but I think that it was Bill Clinton who put it best, by saying that "he was so full of life... MORE

Milton Friedman on Trumbo

Economic Philosophy
David Henderson
On a flight from Newark to L.A. on Thursday, I saw the movie Trumbo. I liked it a lot. I know that they left out things that would have made Trumbo a much less sympathetic character. The only real discussion... MORE

Saturos directed me to a comment by Eliezer Yudkowsky: Just realized today that besides giving a real-world example of epistemic efficiency, markets also provide a real-world source of Newcomblike problems. Efficient markets can be so good at predicting you that... MORE

Tim Besley's inaugural lecture as the W. Arthur Lewis Professor of Development Economics at LSE can best be summed up as drawing attention to the rise and importance of political economy for understanding questions of economic development. A brief... MORE

Play the Hand You're Dealt

Economic Philosophy
David Henderson
I have a few mottos in life. The title of this post is one of them, and it has served me well. It sounds obvious. What other kind of hand could you play? None. But what you can do... MORE

Putterman-Weil Data

Economic Methods
Bryan Caplan
With the authors' kind permission, here is Putterman and Weil's data in Excel format.... MORE

Correlation and causation

Macroeconomics
Scott Sumner
On January 23rd, I made the following claims: 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... MORE

Two Fun Facts from Putterman-Weil

Book Club
Bryan Caplan
Putterman and Weil generously shared their whole data set with me - including a lot of info not available online.  I soon discovered two fun facts about ancestry-adjusted state and agricultural history.  Remember that state history is bounded from 0-1,... MORE

It takes a regime change

Monetary Policy
Scott Sumner
In the 1970s, the Fed kept tinkering with interest rates, not understanding that high rates don't mean tight money. Inflation and NGDP growth kept soaring higher and higher. Eventually economists came to believe that (old) Keynesian economics was bankrupt. A... MORE

End Draft Registration

Labor Market
David Henderson
Many women's rights advocates hail the Department's decision as a step toward equality. In light of the policy change, many have also called for ending the exclusion of women from the selective service. In 1981, the Supreme Court ruled that... MORE

Betting Rules

Behavioral Economics and Rationality
Bryan Caplan
Tyler on the meta-lesson of our unemployment bet: Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:8.0pt; mso-para-margin-left:0in; line-height:200%; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Arial",sans-serif;... MORE

In my previous post I criticized Paul Krugman's claim that monetary policy could not have been tightening significantly during the summer of 2008, as real bond yields remained low. In other words, Krugman claimed that low bond yields were telling... MORE

Beckworth and Ponnuru on 2008

Monetary Policy
Scott Sumner
David Beckworth and Ramesh Ponnuru have produced some excellent pieces on the mistakes made by the Fed in 2008. Here's an excerpt from their latest: Krugman thinks the behavior of long-term real interest rates contradicts our thesis. They rose in... MORE

Welcome to the third installment of the EconLog Reading Club on Ancestry and Long-Run Growth. This week's paper: Spolaore, Enrico, and Roman Wacziarg. "How Deep Are the Roots of Economic Development?" Journal of Economic Literature 51 (2): 325-369.  The authors'... MORE

Foglia on Piketty and inequalities

Property Rights
Alberto Mingardi
Thomas Piketty's "Capital in the 21st Century" has been widely debated. So, one wonders if there is anything new that could actually be added at this point. I found this article by Antonio Foglia quite intriguing. I shall disclose that... MORE

A Simple Proof Not All Markets Work Well

Behavioral Economics and Rationality
Bryan Caplan
Twenty five years ago, I interned at the Cato Institute and met Jerry Taylor.  Now he runs the Niskanen Center.  Here's what Jerry says about the movement we've both inhabited for decades:Libertarians love to preach the virtues of markets. Yet... MORE

Larry Summers's Perspective and Mine

Growth: Consequences
David Henderson
I'm presently working my way through, and enjoying, Robert J. Gordon's magnum opus, The Rise and Fall of American Growth. I'm reviewing it for Regulation and already, just 30 pages in, I'm seeing some problems. Arnold Kling highlighted a paragraph... MORE

My Talk at the University of Toronto

Upcoming Events
David Henderson
On Monday, February 8, I will be giving a talk at the University of Toronto. Topic: An Economist's Case for a Non-Interventionist Foreign Policy Time: 3:00 p.m. to 5:00 p.m. Location: Croft Chapter House The public is welcome, but you... MORE

I Win My Long-Term Unemployment Bet with Tyler

Behavioral Economics and Rationality
Bryan Caplan
Barely two years ago, Tyler Cowen and I agreed to the following bet:...U.S. unemployment will never fall below 5% during the next twenty years.  If the rate falls below 5% before September 1, 2033, he immediately owes me $10.  Otherwise,... MORE

Altruism, No Regard for Some Others, or Belief in the Tooth Fairy

Behavioral Economics and Rationality
David Henderson
I gave a talk yesterday at a Fraser Institute event in Toronto. The luncheon speaker, neuro-economist Paul Zak, did a great job talking about oxytocin and its role in our systems. He started out beautifully, contrasting Thomas Hobbes's view of... MORE

Storytelling

Monetary Policy
Scott Sumner
People like to think in terms of stories: It's a movie classic. The lovers are out for a walk when a villain dashes out of his house and starts fighting the man. The woman takes refuge in the house; having... MORE

Venezuela's Tiger

Monetary Policy
Emily Skarbek
Often economists want to isolate questions of public debt and analyse these issues as if public choice considerations weren't at play. Perhaps less studied are the ways in which debt practices can systematically exert pressure on formal political institutions. But... MORE

Making capitalism more attractive

Economic History
Alberto Mingardi
A well-known economic journalist, Hugo Dixon, published an op-ed in the New York Times on "How to make capitalism more appealing". I wholeheartedly agree with one of his points: "The classic left-wing response to the perceived unfairness of capitalism has... MORE

James Bullard on Neo-Fisherian economics

Monetary Policy
Scott Sumner
James Bullard has a Powerpoint presentation on NeoFisherian economics. It concludes with 8 bullet points; here is the first: Policymaker conventional wisdom and NK theory both suggest low nominal rates should cause inflation to rise. Is this actually what they... MORE

Here's the link. I will also be giving a talk at St. John's on Wednesday night but I don't have the link for that yet.... MORE

Via email, Easterly tells me that their "distance from the equator" variable is "the ratio of degrees of latitude to 90 degrees."  So what do their results imply about the net effect of immigration?  Let's return to their key table,... MORE

Comedian Tackles Immigration

Labor Mobility, Immigration, Outsourcing
David Henderson
Comedian Steve Gerben has a 30-minute comedy act on immigration. His idea is brilliant. I had never before thought of reaching people on that touchy subject with comedy, but he does an excellent job. I won't do my usual comprehensive... MORE

Thank God economists cannot predict recessions

Monetary Policy
Scott Sumner
Civil engineers are rarely able to predict the collapse of US highway bridges, at least to within a period of 12 months. How should we feel about that fact? Maybe I'm biased, as my grandfather was a highway engineer in... MORE

Welcome to the second installment of the EconLog Reading Club on Ancestry and Long-Run Growth. This week's paper: Comin, Diego, William Easterly, and Erick Gong. 2010. "Was the Wealth of Nations Determined in 1000 BC?" American Economic Journal: Macroeconomics 2... MORE

Studies of Public Goods

Public Goods
David Henderson
In a comment on a recent post of mine about government spending on infrastructure, Ben H. wrote: This seems to ignore the problem of public goods. It is, arguably, pretty easy to identify public goods for which spending $1 increases... MORE

Louis Putterman responds to my reading club post on Putterman-Weil.  Reprinted with his kind permission: I just wanted to offer one correction and one further quick comment.  You wrote: "How could one even begin to construct such a matrix?  Whenever... MORE

Two Election Bets

Economic Methods
Bryan Caplan
1. Steve Pearlstein bets $50 at even odds that Ted Cruz wins the Republican nomination.  I bet against.2. Nathaniel Bechhofer bets $40 at 2:1 that Hillary Clinton wins the 2016 presidential election.  I bet against.My reasoning, in both cases, is... MORE

Is the TPP Good or Bad on Net?

International Trade
David Henderson
If you read the latest Econlib Feature Article by Pierre Lemieux, "Free Trade and TPP," you won't have an answer to the title question of this post. So why I did I ask him to write it? Because I knew... MORE

ADHD Reconsidered

Economic Philosophy
Bryan Caplan
Several readers have taken issue with my use of the term "ADHD."  To be honest, I'm not comfortable with it either, but my reason is the opposite of my critics.  Like the late great Thomas Szasz, my objection is that... MORE

Of all the things that puzzle me about macroeconomics, the relationship between changes in monetary policy and changes in long-term interest rates is perhaps the most confusing. I get why monetary injections tends to reduce short-term rates----prices are sticky and... MORE

Janet, Janet: The Shrewd San Francisco Fed

Central Planning vs. Local Knowledge
David Henderson
This is my long overdue comment on what I observed at the meetings of the San Francisco Federal Reserve Bank in April 2014. I had previously given some highlights of my talk here and commented on Glenn Rudebusch's talk here.... MORE

ADHD Shall Save Us

Behavioral Economics and Rationality
Bryan Caplan
Back in 2012, I wrote:The median American is no Nazi, but he is a moderate national socialist - statist to the core on both economic and social policy.  Given public opinion, the policies of First World democracies are surprisingly libertarian.Since... MORE

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