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May 2017

A Monthly Archive (60 entries)

U.S. Immigration Has Had a Large Positive Long-Run Impact

Labor Mobility, Immigration, Outsourcing
David Henderson
Our findings provide evidence that helps us better understand the impacts of immigration in United States history. The first is that, in the long-run immigration has had extremely large economic benefits. The second is that there is no evidence that... MORE

Reasoning from a price change caused the Great Depression

History of Economic Thought
Scott Sumner
The Great Depression had two primary causes: an excessively tight monetary policy caused NGDP to drop in half between 1929 and early 1933, and then a set of New Deal policies such as the National Industrial Recovery Act (NIRA) slowed... MORE

AARP on Drug Prices

Economics of Health Care
David Henderson
A few years ago I finally succumbed and became a member of the AARP. My reason is that it gave me a substantial discount on my eye glasses, a discount that more than paid for the annual fee. As a... MORE

More Ginis please

Income Distribution
Scott Sumner
The Gini coefficient is a popular tool used by economists to measure economic inequality. Unfortunately, economists tend to rely on income data, which is not a very good measure of economic well being. Conceptually we'd like to use consumption data,... MORE

Cruise Ships and Private Plots

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
I'm now cruising to Bermuda.  Which has me thinking: In an open borders world, cruising would probably drastically decline.  Why?  Because cruise ships show the logic of open borders in stunted form.  Think about it: On a cruise ship, people... MORE

Saving, cost control, and infrastructure

Cross-country Comparisons
Scott Sumner
There's been a lot of recent talk about increasing federal spending on infrastructure. In my view this misses the point. There are two effective ways to get more infrastructure; cost control and increased saving. Here's Matt Yglesias: Mass transit construction... MORE

Tabarrok on the Great Depression

Macroeconomics
David Henderson
Alex Tabarrok narrates a very good video on the Great Depression. It's called "Understanding the Great Depression." In it, he applies an aggregate demand/aggregate supply framework and puts most of what happened in that framework. I have two criticisms, but... MORE

In the comment section of a recent post, Thomas Hutcheson and I discussed what would happen if there were a financial crisis without tight money (defined as sharply falling NGDP growth.) It's not easy to find examples, because financial crises... MORE

Nationalism Is Not News

Behavioral Economics and Rationality
Bryan Caplan
In the last two years, there's been an avalanche of news on the "rise of nationalism."  I find this narrative deeply aggravating.  My critics - even a colleague or two - say it's because I'm in denial over the painful... MORE

Does John Cochrane get Italy wrong?

Eurozone crisis
Alberto Mingardi
John Cochrane took part in a debate on Italy and the euro, hosted by Il Sole 24 Ore, Italy's premier financial daily. The debate was promoted by Luigi Zingales. Most of my friends thought it was not a great idea,... MORE

Larry Summers Trumps Trump

International Trade
David Henderson
On agriculture, China reiterated a promise that it has broken in the past to let in more beef. Previously, we, as reciprocity, had been withholding publication of a permissive rule on Chinese poultry, but we have now relented. Advantage... MORE

Trust Assimilation in the United States

Economics and Culture
Bryan Caplan
I recently spent a month reading through the vast empirical literature on trust.  A simple survey question - usually along the lines of "Can most people be trusted?" - seems to predict many good social outcomes.  What most interests me,... MORE

"Public opinion" is not what you think

Economics of Health Care
Scott Sumner
Many people anthropomorphize the public, and talk about "the public" having an opinion, just as you or I might have an opinion. I view this as a big mistake. Elsewhere I have argued that polls on policy questions are very... MORE

The Behavioral Econ of Paperwork

Behavioral Economics and Rationality
Bryan Caplan
Next month, I'll collect my final payment from my Dependent Care Flexible Spending Account - and I couldn't be happier.  I hate filling out paperwork.  Though it only takes a couple hours to save thousands of dollars, I resent the... MORE

Bob Murphy left a comment after my MoneyIllusion post on the NGDP prediction market (and David Henderson had a similar question): In a traditional financial market, people have skin in the game and that helps to yield the "wisdom of... MORE

I am pleased to announce that a new Hypermind NGDP market is up and running. Back in 2015, we ran an annual NGDP prediction market and 4 quarterly markets. Because only the annual forecast has much macroeconomic significance, this time... MORE

Solar Power: Lots of Jobs per KWH is Bad, not Good

Energy, Environment, Resources
David Henderson
Creating jobs is not the same as creating wealth. When I start a class in economics, I start with the Ten Pillars of Economic Wisdom. The pillar above about jobs and wealth is #8. When I teach it, I... MORE

Wages are the key to the business cycle

Labor Market
Scott Sumner
Back in the 1980s and 1990s, I did some research with Steve Silver on sticky wages and the business cycle. Using postwar data, it's very difficult to draw any conclusion, as the economy was hit by both supply and demand... MORE

Statutory Rape and Availability Bias in Virginia

Behavioral Economics and Rationality
Bryan Caplan
My home state of Virginia does not have a Romeo and Juliet Law.  If an 18-year-old and a 17-year-old have consensual sex, the 18-year old is guilty of statutory rape.  As a result, I can easily see parents of teenage... MORE

I often debate the question of whether severe slumps are caused by financial crisis or tight money. In my view it's usually tight money, with financial stress being a symptom of falling NGDP. So how would we test my hypothesis?... MORE

Nowrasteh on E-Verify

Labor Market
David Henderson
I asked Alex Nowrasteh for his input on the E-Verify issue that I posted about yesterday. Here's what he wrote: E-Verify won't work because employers ignore it in states where it is required with virtually zero legal consequences (see blog... MORE

Me on Anarcho-Capitalism on the Rubin Report

Economic Philosophy
Bryan Caplan
Whatever you think about anarcho-capitalism, the production values of my Rubin Report interview on the subject are top notch!  Enjoy.In other news, Mike Huemer and I have a fan from the NFL (and GW Law).... MORE

by Nicolás Maloberti When it comes to information, we have growing powers to filter out what we don't like. Suppliers have also growing powers to cater to our demand without us having to make any conscious choices. This is worrisome... MORE

E-Verify: Let's Make Us More Like Europe

Labor Market
David Henderson
One of the main things the United States has going for it is its relatively fluid labor market, relative, at least, to labor markets in much of Europe. I wrote over 20 years ago about the Europeanization of the U.S.... MORE

The "Real X" Defense

Economic Philosophy
Bryan Caplan
Consider these two couplets:Couplet #1: "Socialism has failed."  "No, real socialism has never existed."Couplet #2: "Libertarianism has failed." "No, real libertarianism has never existed."In both cases, the point of the first clause is to discredit an economic system.  In both... MORE

Do robots reduce employment?

International Trade
Scott Sumner
A new NBER paper by Daron Acemoglu and Pascual Restrepo finds that "deployment of robots reduces employment and wages, but they caution that it is difficult to measure net labor market effects." Here is a graph that summarizes their results:... MORE

What can we expect from Macron?

Eurozone crisis
Alberto Mingardi
As you know, Emmanuel Macron is the new President of the French Republic. Macron has beaten Marine Le Pen with a substantial majority: 66% of the votes. Most commentators- at least, most of European commentators, were so relieved by Le... MORE

Is Mankiw's $2.10 Optimal Gas Tax Correct?

Energy, Environment, Resources
David Henderson
In Sunday's post, I noted an important deficiency in Greg Mankiw's treatment of negative externalities and stated that this matters for his treatment of gasoline taxes. Here's why. Greg lists 3 negative externalities associated with gasoline, and says that the... MORE

I am going to criticize a recent Tyler Cowen post on Greece. But before doing so, let me explain where I think we agree. 1. Fiscal policy doesn't explain very much of the business cycle. 2. Greece's problems go far... MORE

Geography Is Policy

Cost-benefit Analysis
Bryan Caplan
For the last twenty years or so, Jeffrey Sachs and co-authors have been arguing that institutions and policy matter less than most economists think.  The harsh reality is that geography has a huge effect on countries' economic success.  From what... MORE

Greg Mankiw's Deficient Treatment of Negative Externalities

Energy, Environment, Resources
David Henderson
I was teaching my class Friday on the economics of externalities. I'm using the 5th edition of Greg Mankiw's Principles of Economics. Why the 5th edition? To save my students over $100 a pop. Textbooks rarely get much better after... MORE

Good news on trade?

International Trade
Scott Sumner
This FT article sounds like bad news, but in my view it's just the opposite: A deal announced on Friday by officials in Beijing and Washington was billed as "gigantic" and "Herculean" by his administration in its efforts to reset... MORE

Why Do College Admissions Offices Value Volunteer Work?

Economics of Education
David Henderson
Mark Barbieri, a regular reader of this blog, asked the following question and gave me permission to use his name. He wrote: Dr. Henderson, My oldest son is a junior in high school and is getting serious about the college... MORE

What Is Emotional Truth?

Economic Philosophy
Bryan Caplan
As a rule, I don't care for "hard sci-fi."  In fact, artistically speaking, I normally dislike true stories of any kind.  And I barely care about continuity errors.  When I read novels or watch movies, I crave what I call... MORE

Avik Roy on GOP health care reform.

Economics of Health Care
Scott Sumner
Avik Roy has a highly informative article in Forbes, discussing the pros and cons of the recent House health care bill (which is now before the Senate). He suggests that the proposal offers a number of improvements over the current... MORE

Government Spending in Canada

Fiscal Policy
David Henderson
The Fraser Institute in Vancouver, Canada has published a short but illuminating study of federal government spending for the last 150 years. (Disclosure: I am a senior fellow with the Fraser Institute.) The study is titled "Prime Ministers and Government... MORE

When it comes to public debt and deficits, I sometimes feel like people go to one extreme or the other. Japan has a public debt equal to about 250% of GDP, but many people wave it away as a minor... MORE

Supply-Side Medical Reforms

Economics of Health Care
David Henderson
Whatever one thinks of the recent health care bill passed by the House of Representatives, one of my biggest disappointments is the lack of discussion of supply-side initiatives among even health economists who know many of the facts. One refreshing... MORE

What's Wrong With the Macro AP

Economic Education
Bryan Caplan
Today my 8th-grade homeschoolers take the Advanced Placement test in Macroeconomics.  Back in 1989, when I took this exam, it covered little more than 1960s Keynesianism.  The current test is marginally better.  Now we've got long-run Aggregate Supply curves and... MORE

Allan H. Meltzer, RIP

Obituaries
David Henderson
My Hoover colleague and long-time monetarist economist Allan Meltzer died yesterday. He was 89. Here is the announcement from Tom Gilligan, director of the Hoover Institution: STANFORD, CA: "It is with sadness that I share the loss of Allan Meltzer,... MORE

Thoma on the Financial Choice Act

Regulation
David Henderson
Though it mostly went unnoticed, the House Financial Services Committee voted in favor of the Financial Choice Act. This legislation would substantially weaken the Dodd-Frank financial reforms. So writes Mark Thoma in "Killing Banking Rules Will Invite a Whopper of... MORE

Is history cyclical?

Economic History
Scott Sumner
I just finished reading Tyler Cowen's new book, "The Complacent Class." Tyler is really good at bringing together lots of seemingly disparate trends and finding a common underlying theme. Many (but not all) of the anecdotes in the book will... MORE

Warren Bet

Economic Methods
Bryan Caplan
My long-time friend Ben Haller posted this prediction on Facebook:Elizabeth Warren on Bill Maher - man, she is really good. I hereby predict that she will be President in 2020... That's assuming she runs - but I think she will.I... MORE

Update on FIRE

Liberty
David Henderson
Last week, I defended the Foundation for Individual Rights in Education (FIRE) from Scott Alexander's charge that it is "all about the right seeking greater fairness in mainstream institutions." I wrote: Actually the Foundation for Individual Rights in Education is... MORE

Policy needs to be symmetrical

Monetary Policy
Scott Sumner
Thomas Hutcheson left an interesting comment after my previous post: There is an alternative: use unemployment (some vector or indicators not just U3) to target the "unemployment" portion of the Fed's mandate and the Price level to target the "price... MORE

It's here and aired on May 3. My segment starts at 17:40. The topics covered in order are corporate tax cuts, deregulation, and immigration. The interviewer is Lindsay France.... MORE

Don't target unemployment

Labor Market
Scott Sumner
The government reported today that the unemployment rate has fallen to 4.4%. To give you an idea of how low that is, consider that since 1971 the only period of lower unemployment was the tech boom of the late 1990s:... MORE

Incentives Work in the NBA Too

Incentives
David Henderson
Chicago Bulls coach Fred Hoiberg objected to how Isaiah Thomas of the Boston Celtics regularly carries the ball and gets away with it. Check out from about 2:40 on in this video. I hadn't realized how extreme it was until... MORE

William J. Baumol, RIP

Obituaries
David Henderson
Bill Baumol, one of the stars of the economics profession, died today at age 95. I think it's a travesty that the Nobel committee never got its act together enough to give him the Nobel prize in economics. Bill... MORE

Pollitt on Putnam

Economics and Culture
Bryan Caplan
Lately, I've been intently reading the social science of trust.  Katha Pollitt's critique of Robert Putnam's Bowling Alone may not be the most insightful, but it's definitely the most entertaining:Putnam argues that declining membership in such venerable civic institutions as... MORE

Carl F. Christ, RIP

Obituaries
David Henderson
On April 21, economist and econometrician Carl F. Christ died at age 93. He had a good run. Here's a quote that Conversable Economist Timothy Taylor reproduced this morning. I think it's beautiful: I used to believe that it... MORE

Russ Roberts's Wonderful Loaf

Economic Education
David Henderson
The farmer who grows the wheat, the miller that grinds the flour The baker and all the others who work hour after hour They're all on their own, each one making independent decisions But somehow their plans fit together with... MORE

America: A dromedary, not a Bactrian camel

Income Distribution
Scott Sumner
It's now becoming fashionable to describe America in binary terms, such as red and blue, coastal and middle, affluent and struggling. In my view these generalizations are often misleading. Let's take the case of income distribution. If you listened to... MORE

The Widerquist-Caplan UBI Debate

Cost-benefit Analysis
Bryan Caplan
I recently did another debate on the Universal Basic Income, this time on Public Square with Georgetown philosopher - and founder of the journal Basic Income Studies - Karl Widerquist.To be honest, I was surprised by the path the... MORE

Who stands in the way of populists? The French case.

Eurozone crisis
Alberto Mingardi
On Sunday, the French will have to choose their new President from between Emmanuel Macron and Marine Le Pen. In the first round, they received 24% and 21.3% of the vote, respectively. It was a crowded field, and two... MORE

In Defense of FIRE

Liberty
David Henderson
Scott Alexander writes: This is a bizarre claim, given the existence of groups like Accuracy In Media, Media Research Center, Newsbusters, Foundation For Individual Rights In Education, Heterodox Academy, et cetera which are all about the right seeking greater fairness... MORE

Remember Marxism?

Economic Philosophy
Bryan Caplan
Lately I've been hearing abundant apocalyptic rhetoric about the collapse of traditional Western norms of critical thinking, free inquiry, and tolerance.  The story, roughly, is that after a century of unprecedented intellectual freedom, a new generation of barbarians - mostly... MORE

Antiestablishmentarianism

Labor Market
Scott Sumner
Donald Trump once said. "I know words, I have the best words". Interestingly, all of those words are one syllable. But I happen to know an eleven-syllable word, which is defined by Wikipedia: Antiestablishmentarianism (or anti-establishmentarianism) is a political philosophy... MORE

The Consumer Gratitude Heuristic

Behavioral Economics and Rationality
Bryan Caplan
In the real world, prices often seem far above marginal cost.  Yesterday, for example, I bought a pair of tweezers for $14.99.  But it's hard to see how the marginal cost - metal, electricity, transportation, miscellaneous - could even reach... MORE

Why Predatory Pricing is Highly Unlikely

Business Economics
David Henderson
A widely held belief is that large firms with some market power can use their profits generated in particular markets to cut prices below costs in another market and drive out their competitors. Then, according to this belief, once... MORE

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