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December 2016

A Monthly Archive (71 entries)

Gary Cohn on the Chinese currency

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Tyler Cowen recently linked to an interview of Gary Cohn, who will be Trump's top economic advisor: The Chinese have taken multidecade views on what they're doing. They built up their surplus capital account over many, many years. It is... MORE

Covenants without the Sword?

Institutional Economics
Emily Skarbek
Can markets work without state regulation? The conventional wisdom suggests that this is not possible, but it turns out that trade often thrives outside of the state. There is a growing literature that demonstrates this. One of my favorite studies... MORE

Reading Bastiat's Economic Sophism

Books: Reviews and Suggested Readings
Alberto Mingardi
Christmas break is a wonderful season to catch up with some long-procrastinated reading. These days I'm reading Bastiat's Economic Sophisms eventually cover to cover. I'm quite ashamed I never did it before -- but, as it happens with classics,... MORE

Scott Alexander Calls Out the New York Times

Media Watch
David Henderson
Normally, Scott Alexander writes very long posts. This one is very short and well worth reading. His bottom line: The correct way to report on this graph is "About twice as many economists believe a voucher system would improve education... MORE

Growth, or jobs for Americans?

Growth: Causal Factors
Scott Sumner
The New York Times has a good article on the trade-off between growth and jobs (a theme I have repeatedly discussed): Donald J. Trump wants us to dream bigger about the economic future. We shouldn't be content with the roughly... MORE

Alan Blinder's Bad Article

Price Controls
David Henderson
Princeton economist Alan Blinder, who has often written very good work--I'm a fan, with qualifications, of his book Hard Heads, Soft Hearts and he has two excellent entries, here and here, in The Concise Encyclopedia of Economics--has written a bad... MORE

Who Wants to be an Entrepreneur?

EconTalk
Amy Willis
If you were a poor person in a poor country, would you choose to work in a sweatshop, or be your own boss, buying and selling in the local market? Which would you value more- security and stability, or... MORE

Chemo For Cats

Economics of Health Care
David Henderson
Earlier this month, we found out that our favorite cat, Joey, has small cell lymphoma. That's the bad news. The good news is that they now have chemotherapy for cats. We inject a pill 3 times a week. All... MORE

Never reason from an exchange rate change

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Suppose I had a crystal ball and saw one year into the future. At that time, the Japanese yen and the Brazilian real had both depreciated by 15% in the foreign exchange market. What would that tell me? At one... MORE

Is Tyler Cowen's Point Well Known?

Wages and Salaries
David Henderson
Towards the end of his latest Bloomberg column, Tyler Cowen writes: It's well known in economics that when prices and opportunities change, it is the elastic factors of production (those that can change their plans readily) that gain the most,... MORE

Farewell, Thomas Sowell

Growth: Consequences
David Henderson
At age 86, Tom Sowell has decided to retire as a regular columnist. This is his final column. A few items in it caught my attention. Here is one: During a stay in Yosemite National Park last May, taking photos... MORE

I Dream of Repentance

Behavioral Economics and Rationality
Bryan Caplan
Since the election, several people have privately asked me, "Well, whatever you think about Trump, don't you at least enjoy the attendant outrage of the left?  At least that must make you happy, right?"  In my misanthropic youth, the answer... MORE

Bruce Bueno de Mesquita on War and Presidential Success

Public Choice Theory
David Henderson
Over at EconTalk, Russ Roberts has an interesting interview with political scientist Bruce Bueno de Mesquita on the incentives that U.S. presidents have had to get their country into war. It tracks a lot of the same territory that Zachary... MORE

Charitable Arbitrage

Behavioral Economics and Rationality
David Henderson
First, Merry Christmas, Happy Hanukkah, and Happy Holidays to all. Now to my post. Robert Murphy recently stated that he carries Clif Bars with him so that when he sees someone begging for money, he has something nourishing to give... MORE

The Texas magnet

Energy, Environment, Resources
Scott Sumner
Two years ago, the New Orleans Pelicans NBA team seemed to have a bright future: The Pelicans, the team that had just hired Gentry as head coach, played the Warriors closer than their four-game, first-round sweep that season would suggest.... MORE

The Economics of Christmas Trees

Cost-benefit Analysis
David Henderson
Tim Taylor, the Conversable Economist, has an interesting post on Christmas trees, an update of one he ran a few years ago. He carefully analyzes the environmental effects of buying a new Christmas tree every year versus buying an... MORE

The Confusion about Inequality and Poverty

Growth: Causal Factors
David Henderson
In an article titled "Why People Vote Against Their Own Interests," Forbes, November 8, Bruce Lee, an Associate Professor of International Health at the Johns Hopkins Bloomberg School of Public Health, writes: Voting seems pretty straightforward, right? Choose what is... MORE

Finally Some Good News from Paul Krugman

Labor Market
David Henderson
Both his [Trump's] pick as budget director and his choice to head Health and Human Services want to dismantle the Affordable Care Act and privatize Medicare. His choice as labor secretary is a fast-food tycoon who has been a vociferous... MORE

Peter Robinson Interviews Kellyanne Conway

International Trade
David Henderson
One of my biggest surprises of the 2016 political season was the election of Donald Trump and, relatedly, his winning in Wisconsin, Michigan, and Pennsylvania. Now my Hoover colleague Peter Robinson, host of "Uncommon Knowledge," has interviewed one of the... MORE

Economics is held in low repute

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Matt Yglesias has an excellent post discussing the views of Peter Navarro, who was just named head of Trump's National Trade Council: "When net exports are negative," Ross and Navarro write, "that is, when a country runs a trade deficit... MORE

The Benefits of International Trade

International Trade
David Henderson
This morning I made blueberry pancakes, a special treat, using fresh blueberries. Fresh blueberries. In December. On the shortest, and one of the coldest, days of the year. How could that be? Here's how: They're from Peru. When I... MORE

Native American Economics

EconTalk
Amy Willis
When most people try to conjure an image of Indian reservations today, it tends to be a gloomy one. And while this isn't true of all reservations, it does remain true of many. On this week's EconTalk episode, host... MORE

Easy Answer All My Students Should Know

Economic Education
Bryan Caplan
Last week, I presented a question almost all my Public Choice students have trouble answering:Suppose voters were rational [in the Rational Expectations sense] and the SIVH [Self-Interested Voter Hypothesis] were true. T, F, and Explain: Democracies would spend a higher... MORE

Significant Links

Growth: Consequences
David Henderson
Here are three links to pieces I've read and learned from: 1. William Easterly on stereotypes. Excerpt: Three laws guide this bogus analysis of groups. First, define the group by the outcome you are trying to explain. Second, invoke a... MORE

Did monetary offset cause the Great Recession?

Monetary Policy
Scott Sumner
In the past, I've argued that tight money caused the Great Recession. But what caused the tight money? One answer is too much weight placed on inflation targeting, combined with a backward-looking approach to inflation. Consumer price inflation was quite... MORE

Nixon's Wage and Price Controls

Public Choice Theory
Emily Skarbek
A new paper in Public Choice shows that President Richard Nixon understood the costs of wage and price controls, but implemented them to secure his re-election in 1972. Here is the abstract: In late July, 1971, Nixon reiterated his... MORE

Orange Rocks and the Minimum Wage

Behavioral Economics and Rationality
Bryan Caplan
I've long been deeply suspicious of contrarian research that purports to show that the minimum wage doesn't decrease low-skilled employment.  But Don Boudreaux explains my suspicion far better than I could:Has any science ever devoted so much time, effort, and... MORE

Henderson on Oge's CAFE

Regulation
David Henderson
In the next few years, companies that sell cars and light trucks in the United States will have to comply with increasingly stringent federal regulations on fuel economy. The government's regulations call for a required average of 54.5 miles per... MORE

India's money shortage

Money
Scott Sumner
Both old monetarists and market monetarists like to describe recessions in terms of a "shortage of money", caused by either a drop in the money supply or an increase in money demand. In this view, the focus is on money... MORE

Henderson on Latest Love Canal Book

Books: Reviews and Suggested Readings
David Henderson
But the real story of Love Canal isn't the "corporate guys: bad; government guys and community activists: good" tale that many people believe. In its February 1981 issue, Reason magazine published an exhaustive, fact-filled, 13,000-word article on Love Canal written... MORE

What do markets tell us about US Presidents?

Efficient Markets Hypothesis
Scott Sumner
In my comment sections I see a lot of speculation about the rising stock market, and what it's telling us about the policies of the next administration. I'm on record as strongly favoring the use of market indicators to evaluate... MORE

I'm reading Sebastian Mallaby's biography of Alan Greenspan. I would have no hesitation in calling it a masterpiece. For research, detail, prose, the book compares with Charles Moore's monumental biography of Margaret Thatcher. Greenspan makes for an entertaining subject:... MORE

Hooper and Henderson on Patrick Frank

Energy, Environment, Resources
David Henderson
Patrick Frank is a scientist at the Stanford Synchrotron radiation Lightsource (SSRL), part of the SLAC (formerly Stanford Linear Accelerator Center) national Accelerator Laboratory at Stanford University. The SSLR produces extremely bright x-rays as a way for researchers to study... MORE

Many a Slip

Behavioral Economics and Rationality
Bryan Caplan
Another reason why I think I win my bets so consistently: I take seriously the old proverb, "There's many a slip 'twixt cup and lip."  When I bet that "X won't officially happen by date Y," I'm not merely thinking,... MORE

National Origin as Nurture Effect

Family Economics
Bryan Caplan
Abundant adoption and twin studies find minimal long-run nurture effects.  In plain language: The family that raises you has little effect on your adult outcomes.  A key caveat, though, is that almost all of these studies come from the First... MORE

Nick Rowe and I have fairly similar views on what's right and what's wrong with Neo-Fisherism. Recall that Neo-Fisherism is the view that shifting to a policy of higher nominal interest rates will lead to higher inflation, especially if the... MORE

The Spoils of War

EconTalk
Amy Willis
How would you rate an American President whose term was marked by an 8% annual growth in per capita income? Further, this President's administration recorded zero wartime casualties. Sound good? Turns out, the President in question was Warren Harding,... MORE

Easy Question Almost All My Public Choice Students Miss

Cost-benefit Analysis
Bryan Caplan
A recurring final exam question for my undergraduate Public Choice class:Suppose voters were rational [in the Rational Expectations sense] and the SIVH [Self-Interested Voter Hypothesis] were true. T, F, and Explain: Democracies would spend a higher share of their budgets... MORE

Free Trade for the Tillerson

International Trade
David Henderson
With apologies to Cat Stevens, aka Yusuf Islam. Rex Tillerson, the former Exxon CEO whom Donald Trump has picked for Secretary of State, has made a lot of comments and taken a lot of positions in favor of free trade.... MORE

Ralph Raico, RIP

Obituaries
Alberto Mingardi
Historian Ralph Raico passed away yesterday. David has already shared some memories, let me share mine too. I met Ralph first when I was 18. A sweet, grumpy man, he was a very serious scholar and a magnificent teacher. I... MORE

The Fed has a mandate to stabilize prices and provide for high employment. The Fed interprets that mandate as calling for 2% PCE inflation and an unemployment rate close to the natural rate. Tim Duy points out that the unemployment... MORE

Ralph Raico, RIP

Obituaries
David Henderson
David Gordon writes that Ralph Raico has died. Writes David: His intellectual brilliance was evident from an early age, and while still in high school, he attended Ludwig von Mises's seminar at New York University. There he met Murray Rothbard,... MORE

I've expressed a lot of frustration with the way that pundits have been ignoring monetary offset. Thus it's worth praising one who does not. Here's Matt Yglesias: Indeed, Fed officials are signaling clearly that more stimulus will mean more rate... MORE

Kahan and the Politically Motivated Reasoning Paradigm

Behavioral Economics and Rationality
Bryan Caplan
Gary Lucas, rising star of Behavioral Public Choice, turned me on to the work of psychologist Dan Kahan.  Highlights from Kahan's review article on the "Politically Motivated Reasoning Paradigm", or PMRP:Citizens divided over the relative weight of "liberty" and "equality"... MORE

Henderson on Scott Pruitt

Regulation
David Henderson
Yesterday, USA Today's editorial page called, in response to yesterday's post, to ask me to write an "opposing view" on Scott Pruitt. They gave me the tightest deadline I've ever faced: 2.75 hours to write a 340-word piece. The editor... MORE

Automation and trade

International Trade
Scott Sumner
I've been arguing that the problems often attributed to trade are more likely due to automation. Indeed in a sense both trends are two sides of the same coin --- creative destruction. It might help to make this point with... MORE

Trump's Picks versus Reagan's

Politics and Economics
David Henderson
As someone who has, to put it mildly, not been a fan of Donald Trump (see here and here, for example), I've been pleasantly surprised by many of his picks for cabinet positions. Looking at them, I conclude, at least... MORE

An open letter to America's CEOs

Cost-benefit Analysis
Scott Sumner
Dear CEOs, You may face a decision about whether to locate a new factory in America or Mexico. In the past, either location gave you an option of later moving production to the opposite country. It appears that option is... MORE

How to Get Lower Drug Prices

Economics of Health Care
David Henderson
Why are pharmaceutical prices so high while the prices of so many other items we buy are low and even falling? The difference is competition. Drug companies typically have a monopoly on the drugs they sell, and monopolists charge high... MORE

The Mercatus Center has a new colloquium on the current low interest rate environment, and the implications of higher rates in the future. My contribution discusses four possible ways that interest rates might rise: 1. Tighter money 2. Easier money... MORE

Conversion: The Quantity/Quality Trade-off

Behavioral Economics and Rationality
Bryan Caplan
Confession: Whenever I write, I'm looking for converts.  I don't just want to share some information.  I want to change how my readers think - and how they see themselves.When I read other proselytizing thinkers, however, I cringe.  I cringe... MORE

Noah Smith linked to the following recent paper in the AER, by Justin R Pierce and Peter K. Shott. : Abstract: This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy... MORE

Three Themes of the Niskanen Center

Behavioral Economics and Rationality
Bryan Caplan
The Niskanen Center has been an engine of idea creation since its foundation in 2014.  I know many of its scholars well.  But I'm still trying to figure out Niskanen's fundamental goal.  Perhaps I'm obtuse, but I detect three distinct... MORE

Automation destroyed 20 million manufacturing jobs

International Trade
Scott Sumner
I am becoming increasingly frustrated by all the articles I'm reading about how trade is supposedly decimating jobs in US manufacturing. I went to the FRED data set, and they have manufacturing output (real) going back to the first quarter... MORE

Teaching the Minimum Wage

Economic History
Emily Skarbek
When I teach the Principles of Economics, I often note the relationship between positive analysis and normative judgments. One of my favorite ways to teach this is when we cover the minimum wage. Using Thomas Leonard's article Eugenics and Economics... MORE

How I Got Culture

Economics and Culture
David Henderson
Sarah Skwire recently wrote an article, "The Awesome Social Value of the Chiquita Banana Song," in which she actually made the Chiquita banana song fascinating. An excerpt sums up why she writes about such things: I spend a lot of... MORE

What caused the 1974 recession?

Macroeconomics
Scott Sumner
A commenter named Captain Parker recently left this comment: Ok, so, inflation is a monetary phenomenon and Burns should take the blame. This I believe. Yay Milton Friedman. But if you look at '72 through '76 you would conclude Burns... MORE

This week's EconTalk may turn out to be one of our most widely listened-to episodes, and it's easy to see why. While deeply disturbing, it's nonetheless fascinating. Host Russ Roberts welcomes Princeton's Thomas Leonard to talk about his book, Illiberal... MORE

Should Arthur Burns be rehabilitated?

Monetary Policy
Scott Sumner
In the history of American central banking, Arthur Burns (1970-78) and G. William Miller (1978-79) are often viewed as villains, largely responsible for the Great Inflation. (Although Martin (1951-70) was the one who got the ball rolling.) A new paper... MORE

Henderson on Extending Hayek's Insight

Central Planning vs. Local Knowledge
David Henderson
Hayek's conclusion about the importance of local knowledge can be extended far beyond markets into many parts of our lives. In this essay, I summarize Hayek's argument and then apply it to some good things that happened on September 11,... MORE

The Dumbest Thing Batman Ever Said

Behavioral Economics and Rationality
Bryan Caplan
Batman v. Superman: The Dawn of Justice isn't a great movie, but it does have one great teaching moment.  Batman is trying to get his hands on some Kryptonite.  Faithful butler Alfred wants to know why.  Batman's rationale:Batman: He [Superman]... MORE

The Carrier scandal

Politics and Economics
Scott Sumner
Here's Larry Summers on the recent Carrier fiasco: Market economies can operate anywhere along a continuum between two poles. I have always thought of American capitalism as dominantly rule and law based. Courts enforce contracts and property rights in ways... MORE

On the Italian referendum

Eurozone crisis
Alberto Mingardi
Prime Minister Matteo Renzi announced his resignation after a major defeat. The constitutional referendum saw high participation (68.48% of Italians went to the ballot) and the "no" side achieved a clear victory, 59% versus 41% of the voters. Just four... MORE

Speech Tomorrow at San Jose State University

Upcoming Events
David Henderson
Tomorrow, Monday, I will be speaking at San Jose State University, as part of SJSU's David S. Saurman Provocative Lecture Series. Title of talk: Popular Misconceptions about Income Inequality Time: 5:15 p.m. Place: New Student Union Theater My talk will... MORE

Who will save China's rust belt?

Industrial Organization
Scott Sumner
Now that Trump has decided to save America's rust belt, I thought it would be interesting to look at the issues facing China's rust belt. Here is the Financial Times: North-eastern China is facing a demographic crisis as educated millennials... MORE

Reflections on my Latest RT Appearance

Media Watch
David Henderson
As I noted in yesterday's post, there's always an issue of the bias of the news network on which one appears, and one is right to be skeptical. The fact that RT is funded by the Russian government ought to... MORE

The Italian referendum

Eurozone crisis
Alberto Mingardi
Tomorrow, Italians will go to the ballot, for a referendum on a constitutional reform promoted by the government led by Mr Renzi. The referendum is widely supposed to be likely--were the anti-Renzi side to win--to trigger financial turbulence. A... MORE

I was on RT, the Russian-government-funded news network, earlier this week, talking about various issues. My segment begins around the 15:00 point and goes to about 22:30. Some friends have questioned the wisdom of going on a network funded... MORE

What kind of inflation hurts the public?

Monetary Policy
Scott Sumner
I recently participated on a panel in London, discussing options for monetary and fiscal policy. At one point I mentioned that if the Japanese didn't want such a large central bank balance sheet, then they ought to set a higher... MORE

Borjas, Ideology, and #ForeignLivesMatter

Cost-benefit Analysis
Bryan Caplan
Shikha Dalmia and George Borjas' immigration debate in Reason manages to be intriguing and aggravating at the same time.  For me, the highlights are when Borjas leaves technical economics and lays his ideological cards on the table.  Borjas is in... MORE

Good News on Repealing Obamacare: The Woodwork Effect

Economics of Health Care
David Henderson
Many people worry that if Obamacare were replaced in one fell swoop, almost all the people who enrolled in Medicaid due to the law would lose their health insurance. This worry is understandable. Nevertheless, it turns out to be unjustified.... MORE

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