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March 2016

A Monthly Archive (63 entries)
In yesterday's Washington Post, Charles Lane reports on the move, that's almost a done deal, to raise California's minimum wage in stages to a whopping $15 an hour by 2022. Lane, or his editors, wisely titled the article, "The risks... MORE

Lake Wobegon Keynesians

Fiscal Policy
Scott Sumner
The Keynesian view of fiscal policy is an ever-changing theory. In the 1960s, it was believed that fiscal stimulus was needed during recessions. In the 1990s, Keynesians argued that fiscal policy was not an appropriate stabilization tool, rather monetary policy... MORE

The Case Against Education: Forthcoming from Princeton University Press

Books: Reviews and Suggested Readings
Bryan Caplan
I am delighted to report that Princeton University Press will be publishing The Case Against Education in 2017.  PUP was an excellent partner for The Myth of the Rational Voter, and I'm looking forward to doing business together again.  And... MORE

So Far: My Response on Unfriendly AI

Behavioral Economics and Rationality
Bryan Caplan
Eliezer Yudkowsky asks: "Well, in the case of Unfriendly AI, I'd ask which of the following statements Bryan Caplan denies."  My point-by-point reply:1. Orthogonality thesis - intelligence can be directed toward any compact goal; consequentialist means-end reasoning can be deployed... MORE

Obamacare Spent A Lot to Get More Coverage

Economics of Health Care
David Henderson
And it could have been a lot less intrusive. There's never been any secret that if the US [government] was willing to spend an extra $100 billion or more, it could subsidize health insurance for a lot more people. This... MORE

A little bit pregnant

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Paul Krugman has a new post of mercantilism: Neil Irwin has a good think piece on Trumpism and the trade deficit; but as Dean Baker rightly suggests, it arguably suffers a bit from being a discussion of the effects of... MORE

Booth on the ethics of economic preaching

Economic Education
Alberto Mingardi
I've already pointed out that I think free-marketers are underestimating the impact of Mariana Mazzucato's work. Her book "The Entrepreneurial State" has made her a public persona; she is an effective speaker, and I fear in the next few years... MORE

So Far: Unfriendly AI Edition

Economic Methods
Bryan Caplan
Eliezer Yudkowsky responds to my "selective pessimism" challenge with another challenge.  Here he is, reprinted with his permission. Bryan Caplan issued the following challenge, naming Unfriendly AI as one among several disaster scenarios he thinks is unlikely: "If you're selectively... MORE

Unintended, but Predictable, Consequence #262

Unintended Consequences
David Henderson
Significantly, when the last American troops left Iraq, in December 2011, isis did not follow them home. "In its various incarnations," notes Daniel Byman, a counterterrorism expert who is a professor at Georgetown, the Islamic State "focused first and foremost... MORE

Bernanke on monetary policy options

Monetary Policy
Scott Sumner
Rajat directed me to a series of posts by Ben Bernanke, discussing monetary policy options if the US once again hits the zero rate bound. Bernanke thinks this problem is likely to occur in the next recession, and I agree.... MORE

For lawyers, doctors, and dentists-- three of the most over-represented occupations in the top 1 percent--state-level lobbying from professional associations has blocked efforts to expand the supply of qualified workers who could do many of the "professional" job tasks for... MORE

Saturday Afternoon Video

Economics and Culture
David Henderson
The death of Tibor Machan, whom I wrote about briefly here, caused me to watch a 48-minute panel discussion by current and former editors of Reason on the 45-year anniversary of Reason. I'm using this video with permission of Reason.... MORE

Tibor Machan RIP

Obituaries
David Henderson
Yesterday on Facebook I learned that libertarian philosopher Tibor Machan died. That caused me to watch two videos: (1) an interview on William F. Buckley Jr.'s show "Firing Line" in which he was questioned by Buckley and Ernest Van Den... MORE

Don't try to normalize interest rates

Monetary Policy
Scott Sumner
Marcus Nunes has a new post that discusses a recent Wall Street Journal article. Here's the WSJ: The Fed needs to keep raising short-term interest rates to diminish risks to the economy and markets of "excessive accommodation," Mr. Kaplan told... MORE

So Far

Cost-benefit Analysis
Bryan Caplan
This world contains mighty social forces that have worked wonders within the observed range.  Top cases:1. Industrialization.  So far, industrialization has launched mankind from the ubiquitous poverty of the farmer age to the amazing plenty of the modern age.2. Population... MORE

Does anything matter? (And what would Pascal do?)

Growth: Consequences
Scott Sumner
This will be a highly speculative post, which is aimed at getting you thinking "outside the box", not answering any questions. Scott Alexander has a very nice post pointing out that surveys indicate no increase in Chinese happiness since 1999,... MORE

Live Below Your Means

Behavioral Economics and Rationality
David Henderson
The secret to getting rich is as powerful as it is unexciting: live below your means. That's it. The bigger the difference between what you earn and what you spend, the sooner you'll find yourself with enough money to do... MORE

Kudos to Obama

Cross-country Comparisons
David Henderson
Holy Cow! Somehow I got myself so buried in end-of-quarter projects that I didn't bother to read President Obama's speech, televised live on Cuban TV. I now have. He knocked it out of the park. Various people have been saying... MORE

Liberty Mutual: Pay More Now Instead of Later

Business Economics
David Henderson
For the last few months, at least, my wife and I have been annoyed by the silliness of Liberty Mutual's ads for auto insurance. Thank goodness for the mute button, or, if we're watching something we have DVRed, the fast... MORE

Get a Compound

Behavioral Economics and Rationality
Bryan Caplan
Critics of libertarianism frequently fault us for ignoring the value of community.  Libertarians may be perfectly happy living in a society bound together by nothing stronger than "I'll leave you alone, you leave me alone."  But psychologically normal humans crave... MORE

Henry Ford versus Henry Royce

Business Economics
David Henderson
Last weekend, I was at a conference in Ogden, Utah co-sponsored by Liberty Fund and the Charles Koch Foundation. One of my favorite readings for the conference is the Introduction to the book How the West Grew Rich by Nathan... MORE

The world is a very complicated place, and people who look at things from just one dimension end up missing much that is important. For instance, in this post Bob Murphy talks about how Ireland has done well in recent... MORE

Piketty on Top Marginal Tax Rates

Taxation
David Henderson
Co-blogger Scott Sumner got into a discussion about Thomas Piketty's views about what the top marginal tax rate on income in France should be. I've read his book Capital in the Twenty-First Century thoroughly and reviewed it at length. I... MORE

Borjas Concludes that Male Illegal Aliens Come Here to Work

Labor Mobility, Immigration, Outsourcing
David Henderson
Borjas reports the good news on illegal aliens. Harvard economist George Borjas, who is fairly critical of immigration, wrote yesterday that he has concluded that most male illegal aliens come to the United States to work. He reports on the... MORE

My Simplistic Theory of Left and Right, 2016 Edition

Behavioral Economics and Rationality
Bryan Caplan
Last fall, I proposed my "simplistic theory of left and right":1. Leftists are anti-market.  On an emotional level, they're critical of market outcomes.  No matter how good market outcomes are, they can't bear to say, "Markets have done a great... MORE

Is economics more "scientific" than science?

Economic Methods
Scott Sumner
Here's The Economist: In recent years medicine, psychology and genetics have all been put under the microscope and found wanting. One analysis of 100 psychology papers, published last year, for instance, was able to replicate only 36% of their findings.... MORE

GDP Deflator vs. Consumer Price Index

Macroeconomics
David Henderson
While reviewing Robert Gordon's book The Rise and Fall of American Growth for Regulation, I found it relevant to dig into the GDP deflator and the Consumer Price Index. The reasons why would take me too far afield. I knew... MORE

Suppose you wanted to switch to socialism---what would be the ideal place to do so? You'd want a country with extremely high quality civil servants. That would be France. You'd want a country where socialism is not a dirty word,... MORE

The Freedom-Loving Case for Open Borders

Economic Philosophy
Bryan Caplan
Here's my opening statement from Wednesday's Open Borders Debate with Mark Krikorian, sponsored by America's Future Foundation.Robert Nozick famously criticized government for forbidding "capitalist acts between consenting adults."  If an employer wants to hire you and you want to... MORE

Celebrating Immigration

Economic History
Emily Skarbek
St. Patrick's Day in the United States is a celebration of immigrants. Immigrants who wouldn't pass the Krikorian Criteria. It is not a state-recognized, legal holiday in most places. Instead it is an outgrowth of American civil society. The first... MORE

Kocherlakota on the inflation outlook

Monetary Policy
Scott Sumner
Matthew Boesler has a very nice piece in Bloomberg discussing the market reaction to several recent pieces of news. You should read the whole article (it's short) because it's hard to excerpt. The most interesting takeaway is that the market's... MORE

Retroactive Krikorianism

Economic History
Bryan Caplan
The last time I faced off with Mark Krikorian of the Center for Immigration Studies, he sketched his ideal immigration policy.  (start at 15:10) Who should get in?  Three types of people:1. Spouses and minor children of U.S. citizens.2. "Einsteins." ... MORE

The Economist reports on a new initiative in Switzerland: Campaigners in many rich countries want to strip private banks of the power to create money. In Switzerland members of the "Vollgeld Initiative" presented the government with enough signatures in December... MORE

The Glorious Lasting Accidental Liberalization

Behavioral Economics and Rationality
Bryan Caplan
In honor of Open Borders Day, let's talk about the last major U.S. immigration liberalization, the Immigration and Nationality Act of 1965.  Critics of immigration blame it for bringing America's foreign-born share back near its historic peak.  They're right on... MORE

Where Did the $110 Billion Go?

Economics of Crime
David Henderson
In our sister blog four days ago, George Mason University law professor Michael S. Greve does a huge service in a few words. He highlights the fact that the feds have taken $110 billion--that's right: billion with a "b"--in fines... MORE

How Open Borders Will Win, If It Wins

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
Harvard's spring break was last week, so its students celebrated Open Borders Day one week early.  Here are the slides for the talk I presented there.  Full video coming soon.P.S. In honor of regularly-scheduled Open Borders Day, I'm debating the... MORE

The media's blind spot: Negative IOR

Finance: stocks, options, etc.
Scott Sumner
The media has an agenda, which covers its reporting of negative interest on reserves (IOR). Let's review the evidence: In late January, the Bank of Japan cuts interest rates into negative territory and does a bit more QE. The yen... MORE

Herbert H Posen and Franklin D Blanchard

Macroeconomics
David Henderson
Co-blogger Scott Sumner quoted correctly from an article in The Economist: In places stuck in deflationary quicksand it may be necessary to be more radical still. Olivier Blanchard and Adam Posen of the Peterson Institute for International Economics have argued... MORE

Two dubious ideas

Price Controls
Scott Sumner
Here's The Economist: In places stuck in deflationary quicksand it may be necessary to be more radical still. Olivier Blanchard and Adam Posen of the Peterson Institute for International Economics have argued that Japan would benefit from an incomes policy.... MORE

The Microaggressions of Immigration

Behavioral Economics and Rationality
Bryan Caplan
I have zero sympathy for the fashionable crusade against "microaggressions."  When backed by government funding and lawsuits, the concept is a thinly-veiled attack on freedom of speech.  But even without government backing, "microaggression" is an attack on common decency.  Taking... MORE

Kudos to Brad DeLong

International Trade
David Henderson
Paul Krugman has recently written some incredibly critical things about free trade. Co-blogger Scott Sumner has responded admirably. Now Brad DeLong weighs in also. Here is part of his excerpt of Krugman's case (you can find the whole Krugman piece... MORE

Why don't we see big NGDP crashes any longer?

Monetary Policy
Scott Sumner
Before WWII, the government did not measure nominal GDP. But economists Robert Gordon and Nathan Balke put together estimates of nominal GNP, for the period after 1875. (For the US, changes in NGDP and NGNP are highly correlated.) We used... MORE

Obama Pulls a Cheney

Public Choice Theory
David Henderson
You may recall that I passed this law called the Affordable Care Act to sign people up for health care. This is from a transcript of President Obama's remarks on Friday to the SXSW (South by Southwest) conference in Austin,... MORE

Innovative bureaucracies?

Entrepreneurialism
Alberto Mingardi
I am afraid people on the free-market side have generally underestimated the impact of Marianna Mazzucato's book, The Entrepreneurial State. Mazzucato's work has been reviewed glowingly by Martin Wolf and embraced by many of the left as exposing an untold... MORE

Academic Conservatives and Survivor Bias

Economics and Culture
David Henderson
Someone on Facebook this morning linked to an interesting, but misleading titled, op/ed on conservatives in academia. The op/ed, by Jon A. Shields and Joshua M. Dunn, Sr., is titled "Forget what the right says: Academia isn't so bad for... MORE

Jerry Taylor's Sleight of Hand on Freedom of Association

Behavioral Economics and Rationality
David Henderson
Jerry Taylor of the Niskanen Center and John Stossel of Fox Business Network have been arguing about, among other things, freedom of association. Taylor is against it; Stossel is for it. Specifically, Jerry Taylor wants a law that makes... MORE

The year of thinking dangerously

International Trade
Scott Sumner
Donald Trump seems to have the ability to get otherwise sensible people to adopt some of the most bizarre positions imaginable. Here's Jonah Goldberg, describing two recent victims of Trumpism: Consider Larry Kudlow and Stephen Moore. In August, the two... MORE

During the 1980s and 1990s, there was a growing consensus that: 1. The minimum wage was not a particularly effective anti-poverty program, as it raised unemployment. Even the New York Times editorialized in favor of abolition of the minimum wage,... MORE

Last week we received the sad news that economist Sergio Ricossa died at age 88, after a long illness. Ricossa was the doyen of Italy's libertarians. A couple of decades ago he was better known in international circle, as he... MORE

From the Archives: Knight on Robbins (1934)

Austrian Economics
Emily Skarbek
In spending time in the LSE archives recently, I came across a letter Frank Knight sent to Lionel Robbins on February 17, 1934. In the letter, Knight wishes to amend his review of Robbins's "Essay on the Nature and Significance... MORE

Trade with China Reduced Domestic Inequality

International Trade
David Henderson
In a recent post, I challenged Mark Kleiman's view that low-income people do not benefit at all from international trade. He wrote: But the bottom line is that all of the gains, not merely from trade but from economic growth,... MORE

How Reforms Have Made Donald Trump Possible

Public Choice Theory
David Henderson
But just because voters are ideologically mixed does not mean they are centrists at heart. Many voters support a mix of extreme liberal policies (like taxing the rich at 90 percent) and extreme conservative policies (like deporting all undocumented immigrants).... MORE

The Emperor repeatedly forgets his clothes

Monetary Policy
Scott Sumner
Today I'm going to criticize economists for not knowing what they mean by the term 'inflation'. But before doing so, I'd like to point to an analogy; economists have no idea what the terms 'easy money' and 'tight money' mean,... MORE

Hammock on the Chicken Tax and Other Tariffs

International Trade
David Henderson
The most ridiculous result of the Chicken Tax is surely the Ford Transit Connect, which is produced in Turkey and Spain. All Transit Connects are imported with rear windows and rear seats with seat belts, making them passenger vehicles. Once... MORE

I'm a hard-core libertarian who defines libertarianism broadly.  If you think voluntarism is seriously underrated and government is seriously overrated, you're a libertarian in my book.  I also strive to treat others with common decency regardless of their political views. ... MORE

Paul Krugman says that there are three reasons to support more infrastructure spending. But he actually only provides two. The problematic reason is: The second case is a bit, but only a bit, harder: we are still in or near... MORE

Kleiman on Trade and Taxes

International Trade
David Henderson
So when the modern Republican Party (R.I.P), in the name of "small government" and opposition to "class warfare," set its face against policies to redistribute the gains from economic growth, it destroyed the theoretical basis for thinking that a rising... MORE

Is China trade inflationary?

International Trade
Scott Sumner
I like contrarian arguments, but the hypothesis in the title is a bit too much for even me to accept. Instead I'll argue that the fans of the recent paper by Autor, Dorn and Hanson (ADH) are implicitly making this... MORE

Larry Summers is a bootlegger and a Baptist. In a comment on my post on Larry Summer's critique of Donald Trump in a vacuum, ff asked: What did you think of Larry Summers recent column in the WP advocating the... MORE

Larry Summers's Anti-Trump Case In a Vacuum

Behavioral Economics and Rationality
David Henderson
Recently, economist Larry Summers made his case against Donald Trump. It has one main problem. Although Larry makes, in some ways, a powerful case, he makes it in a vacuum. The question is not whether Donald Trump should be president... MORE

Warren Buffett, out of sample

Finance: stocks, options, etc.
Scott Sumner
In a recent post I discussed a couple of arguments against the Efficient Market Hypothesis, which I used to hear a lot when I first started blogging in early 2009. One had to do with the outperformance of hedge funds,... MORE

Wishful Thinking and Unintended Consequences

Unintended Consequences
David Henderson
Mrs. Clinton was won over. Opposition leaders "said all the right things about supporting democracy and inclusivity and building Libyan institutions, providing some hope that we might be able to pull this off," said Philip H. Gordon, one of her... MORE

Myth of the Rational Voter 2016

Behavioral Economics and Rationality
Bryan Caplan
In 2007, I published The Myth of the Rational Voter: Why Democracies Choose Bad Policies.  Every presidential election year, people ask for an update, and I normally say, "Nothing's changed."  But 2016 really does look like an outlier.  My thoughts:1.... MORE

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