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October 2017

A Monthly Archive (68 entries)

Inflation is Even More Inflated Than We Thought

Growth: Causal Factors
David Henderson
In his entry, "Consumer Price Indexes," in The Concise Encyclopedia of Economics, Michael Boskin concludes that the CPI overstates inflation by 0.8 to 0.9 percentage points annually. That doesn't add up over the years; it compounds up. Here's a key... MORE

Hard Questions About the Protestant Reformation

Cost-benefit Analysis
Bryan Caplan
Today is the 500th anniversary of the birth of the Protestant Reformation.  Martin Luther published his 95 Theses precisely half a millennium ago.  It's tempting for libertarians to celebrate this day as a great victory for freedom of speech and... MORE

Bad policies lead to bad theory

Monetary Policy
Scott Sumner
In the past, I've argued that bad economic policies led to the development of Keynesian economics. The two major culprits were tight money during 1929-32 and the NIRA (which both dramatically raised real wages.) If Irving Fisher's "compensated dollar plan"... MORE

This October 16 EconTalk episode with Bloomberg writer Megan McArdle is excellent on both sides. Some highlights, along with my comments, follow. McArdle: I'm down on hatred in general. I don't think I hate anyone that I've ever known. And,... MORE

Misleading Bureaucratese

Economic Education
Contributing Guest
by Pierre Lemieux ...the BEA's casuistry is confusing if not misleading for the typical journalist, not to speak of the typical citizen. In a press release of October 5, the Organisation for Economic Co-operation and Development (OECD) presented its estimates... MORE

Another Fed mistake from 2008

Monetary Policy
Scott Sumner
George Selgin sent me a 2000 JMCB paper by David Reifschneider and John C. Williams, who were both at the Fed: To reduce the effects of this phenomenon, in our simulations we incorporate a notional upward adjustment to the inflation... MORE

Saturday Morning Video: Economic Inequality

Income Distribution
David Henderson
This is a very high-quality (audio-video wise--you judge the content) of my recent talk at Baylor University on economic inequality. Thanks to Peter Klein for inviting me.... MORE

401k plans do not "subsidize saving"

Taxation
Scott Sumner
USA Today reports: Most workers who have access to 401(k) plans will be able to invest up to $18,500 next year, plus an additional $6,000 in catch-up contributions if they are 50 and over. But lawmakers in Washington have been... MORE

An Unfair Tax on Unlucky Young Men

Taxation
David Henderson
"The draft was an unfair tax on unlucky young men," Henderson said. "Economists of the 1960s saw that clearly, and about two dozen of them worked hard to end it." This is from Payton Robb, "Henderson speaks about economists' role... MORE

ICE's Flawed Cost-Benefit Analysis

Cost-benefit Analysis
David Henderson
As a general rule, if total liabilities and costs incurred in seizing a real property or business exceed the value of the property, the property should not be seized. This is from Ryan Devereaux and Spencer Woodman, "Leaked ICE Guide... MORE

Do low taxes explain inequality?

Taxation
Scott Sumner
Matt Yglesias suggests that the answer is yes: Three or four decades later, scholars are able to look at the fruits of those policies and draw some conclusions. The same main technologies that exist in the United States and United... MORE

Soonish Success!

Books: Reviews and Suggested Readings
Bryan Caplan
I'm delighted to report that my co-author - Zach Weinersmith - and his co-author - Kelly Weinersmith - have hit the New York Times Bestseller list with their Soonish: Ten Emerging Technologies That'll Improve and/or Ruin Everything.  It's a fascinating... MORE

Can YouTube Censor?

moral reasoning
David Henderson
No, it can't. On Monday, the conservative educational nonprofit Prager University filed a lawsuit against YouTube and its parent company, Google, for "intentional" censorship of conservative speakers. YouTube made more than fifteen percent of the organization's videos impossible to access... MORE

What can school choice accomplish?

Central Planning vs. Local Knowledge
Scott Sumner
I've always been a big fan of school choice, indeed I'd like to entirely abolish the public school system and move to 100% private education. Having public schools makes no more sense than having a public church. At the same... MORE

In praise of investor activism

Finance
Alberto Mingardi
Paul Singer, founder and co-CEO of Elliott Management Corp, has published an interesting article in praise of shareholder activism on The Wall Street Journal. Singer maintains that the debate on "the appropriate balance of power between public corporations and... MORE

North on the October Revolution

Central Planning vs. Local Knowledge
David Henderson
On October 25, 1917, the October revolution, in which the Bolsheviks overthrew Kerensky's government, occurred. Gary North gives a nice encapsulation of the history and effects of Communism. Introduction On October 25, 1917, the precursor to the Communist Party in... MORE

Highlights of George W. Bush Speech

International Trade
David Henderson
Note: In my haste to post, I forgot to note that it wasn't a speech. It was a Q&A, with Condi Rice asking questions. I've just returned from the Hoover Institution retreat that started Sunday night and went to noon... MORE

Econ as Anatomy

Economic Methods
Bryan Caplan
Biology teachers often start their courses by reviewing the scientific method.  Stripped down to essentials, this means:1. Formulate a hypothesis.2. Run an experiment to test the hypothesis.3. Tentatively accept your hypothesis if the experiment works; otherwise, go back to Step... MORE

Price cap for electricity in the UK?

Energy, Environment, Resources
Alberto Mingardi
A paper by Rupert Darwall for British think tank Reform a few years ago boldly argued that "Energy policy represents the biggest expansion of state power since the nationalisations of the 1940s and 1950s and is on course to becoming... MORE

Students for Liberty Open Borders Debate: My Opening Statement

Labor Mobility, Immigration, Outsourcing
Bryan Caplan
Saturday I once again debated the Center for Immigration Studies' Mark Krikorian on open borders, this time for the Students for Liberty regional conference at the University of Maryland.  Here's my opening statement. Normal 0 false false false MicrosoftInternetExplorer4 RESOLVED:... MORE

The 1987 stock market crash

Finance: stocks, options, etc.
Scott Sumner
I have a new piece at The Hill discussing the 1987 stock market crash, as well as its implications for today's economy: The real lesson of 1987 is that all lessons are provisional, subject to revision as more time goes... MORE

Henderson at Texas Tech in Lubbock

Upcoming Events
David Henderson
This coming Thursday, October 26, I will be speaking at the Free Market Institute at Texas Tech University. Topic: How Economists Helped End the Military Draft Date: October 26 Time: 5:30 to 6:30 p.m. Place: Grand Auditorium (CR 105) Jerry... MORE

Sunday Morning Audio: The German Economic Miracle

Growth: Causal Factors
David Henderson
Garrett M. Petersen, aka the "Economics Detective," interviewed me a few weeks ago about the post-World War II German economic miracle. I had written about it in "German Economic Miracle" in The Concise Encyclopedia of Economics. Garrett, a Ph.D. student... MORE

A breath of fresh air from John Cochrane

Monetary Policy
Scott Sumner
Over at TheMoneyIllusion I've been running a series of posts that are critical of popular views of inflation. I claim inflation is determined by shifts in the supply and demand for money, and that factors like the Phillips curve and... MORE

The News and Me

Media Watch
David Henderson
I've been traveling for 7 of the last 9 days and, as a result, haven't kept up with the news as much as normally. And doing so has made me realize how little I miss it. There's a lot... MORE

Voters don't hate inflation

Monetary Policy
Scott Sumner
Here's Tyler Cowen: Many monetary rules call for higher rates of price inflation if the economy starts to enter a downturn. That's often the right economic prescription, but voters hate high inflation. Tyler is engaged in "reasoning from a price... MORE

Attacking Civilians in War

moral reasoning
Contributing Guest
by Pierre Lemieux The more democratic the state is, the smaller the difference between its rulers, combatants, and civilians, and the more justifiable should be a deliberate attack on the latter, ceteris paribus. A recent article by Scott D. Sagan... MORE

Resentment Not Hate

Behavioral Economics and Rationality
Bryan Caplan
People often claim that their political opponents are motivated by sheer hatred.  Thus, we have "hate-mongers," "hate speech," "hate groups," and even "hate maps."  But almost no one openly claims "hate" as their political motive.  When accused of hatred, the... MORE

Over at TheMoneyIllusion I have a new post that (among other things) discusses this claim: Blanchard was prompted to recite his faith in the power of the Phillips Curve by former Fed governor Jeremy Stein, who wondered how central banks... MORE

Economic Possibilities for our Spacetraveling Grandchildren

Books: Reviews and Suggested Readings
Alberto Mingardi
I've been watching on Netflix a new Star Trek series, Discovery, which is sort of a prequel to the classic Kirk & Spock series. I've found the series engaging and extremely well crafted - but, just after a few episodes,... MORE

Hassett's Numbers are Plausible

Taxation
David Henderson
In the long run, all of the factor owners' loss from a capital income tax is a loss to labor (the area below the horizontal dashed line is negligible; see A below). Therefore, in the long run, capital-income tax revenue... MORE

Anti-Market Bias in One Sentence

Behavioral Economics and Rationality
Bryan Caplan
A telling quote from this NYT piece on NAFTA:The potential demise of the trade deal prompted supportive messages from labor unions, including the A.F.L.-C.I.O. and the United Steelworkers, as well as some Democrats."Any trade proposal that makes multinational corporations nervous... MORE

I posted a few days ago on Kevin Hassett's case for the Trump tax cuts, pointing out the huge positive effect on the real wages that he claims they would have. One commenter, JFA, asked the relevant question: The question... MORE

Don't assume that irrationality is hard-wired into humans

Behavioral Economics and Rationality
Scott Sumner
I don't doubt that there are some types of human behavior that are both hard-wired and irrational. But it's very dangerous to simply assume that any form of irrationality that you encounter is innate (i.e. genetic). Here's the NYT: "A... MORE

Thoughts on the UMich Immigration Debate

Economic Methods
Bryan Caplan
Thoughts on my latest debate:1. Hans von Spakovsky was the most lawyerly opponent I've ever debated.  His first (and second) approach to almost any issue was simply to describe the law.  In most cases, he didn't even defend its wisdom... MORE

Again on the Catalonian secession and the EU

Eurozone crisis
Alberto Mingardi
Many people have pointed out that the Catalonian secession can trigger an economic shock. The Catalonians say they want to stay in the European Union and keep the euro, but they can't do so. If they secede, they'll need to... MORE

Two Texas Talks

Upcoming Events
David Henderson
I'll be giving in two talks in Texas this week. Southern Methodist University, Dallas Sponsor: O'Neil Center for Global Markets & Freedom Topic: How Economists Helped End the Draft Time: Wednesday, 6:00 to 7:00 p.m. (Reception to follow) Place: Ernst... MORE

Rethinking Macroeconomics

Macroeconomics
Scott Sumner
I recently attended a conference at the Peterson Institute on "Rethinking Macroeconomics", which mostly meant returning macro to its Keynesian roots. Readers may know that I have a contrarian take on the crisis---I believe it occurred because macroeconomists did not... MORE

Does Trump's Immigration Agenda Harm Democracy? My Opening Statement

Behavioral Economics and Rationality
Bryan Caplan
800x600 Last Friday, I debated Heritage's Hans von Spakovsky on "Does Trump's Immigration Agenda Harm Democracy?"  The resolution was unusual for me in three ways:1. I usually try to stick to timeless issues.  For this debate, I had to... MORE

Fred McChesney RIP

Obituaries
David Henderson
Law and economics scholar Fred McChesney died last Thursday at age 68. He was a first-rate scholar, a wonderful friend, and an engaging conversationalist. I'm so glad that he called me up when he was in Monterey a couple... MORE

Mises was a neocon, and other oddities

Economic Philosophy
Alberto Mingardi
It is of great comfort to us who share an antiquarian passion for the history of political thought that fundamental questions such as, "What is the state?" invariably come to the surface. But sometimes you get the impression that new... MORE

Hassett on Tax Cuts and Growth

Taxation
David Henderson
On October 5, Kevin Hassett, the new chairman of President Trump's Council of Economic Advisers, gave an excellent talk at the Tax Policy Center. The topic was taxes and economic growth. The transcript of the talk is here. The video... MORE

1967 and 2008: Two botched policies

Macroeconomics
Scott Sumner
I've occasionally done blog posts explaining how it's possible to prevent recessions from occurring, even after they have begun. That's because a recession is dated from the point where output starts falling, but it's not considered a recession unless the... MORE

I am currently in DC attending a star-studded macroeconomic policy conference at the Peterson Institute. Today's participants included Bernanke, Summers, Blanchard, Draghi, Fischer, and many other eminent economists. Bernanke's paper was by far the most interesting, especially his proposal for... MORE

A Protectionist Utopia?

International Trade
Contributing Guest
by Pierre Lemieux If everybody were protected as a producer, nobody would be "protected" as a consumer. My previous post argued against the "populist argument" claiming that free trade destroys jobs and thus cannot be beneficial to consumers who have... MORE

Evidence for money non-neutrality

Macroeconomics
Scott Sumner
Tyler Cowen recently linked to an interesting paper by Emi Nakamura and Jon Steinsson, which discusses the problem of identification in macroeconomics. One section looks at what we know about the monetary policy transmission mechanism: What is the most convincing... MORE

We're Number 11, We're Number 11! Eh?

Books: Reviews and Suggested Readings
David Henderson
The Cato Institute, the Fraser Institute, and more than 70 think tanks around the world have published the latest edition of Economic Freedom of the World. It's by James Gwartney, Robert Lawson, and Joshua Hall, with the assistance of... MORE

Me in Michigan

Economic Education
Bryan Caplan
I'm speaking twice on immigration in Michigan this week.1. I'm lecturing on "Trillion-Dollar Bills on the Sidewalk" at Michigan State on Thursday, October 12, at 7 PM.2. I'm debating Hans von Spakovsky of the Heritage Foundation on "America First: Does... MORE

Henderson on Thaler's Nobel

Behavioral Economics and Rationality
David Henderson
UPDATE BELOW My piece on Richard Thaler appeared in the Wall Street Journal, electronic edition Monday evening and print edition on Tuesday. The Journal titled it "This Year's Nobel Economist Makes Sense of Irrationality." This one took way less time... MORE

Congratulations to Richard Thaler

Behavioral Economics and Rationality
Scott Sumner
As a University of Chicago alum, it's always nice to see the UC pick up another Nobel Prize in economics. Economists are often accused of engaging in empty theorizing, but Thaler has developed useful ideas, such as methods by which... MORE

Hume on Pessimistic Bias

Behavioral Economics and Rationality
Bryan Caplan
A nice quote on pessimistic bias during the reign of King James I from Hume's History of England:Every session of parliament, during this reign, we meet with grievous lamentations concerning the decay of trade and the growth of popery: Such... MORE

A very bad book

Books: Reviews and Suggested Readings
Alberto Mingardi
On our sister website, the Online Library of Law and Liberty, I've reviewed a very bad book, "Re-thinking Capitalism" edited by Michael Jacobs and Mariana Mazzucato. Here's the key-bit: Rethinking Capitalism is but the latest example of a notable... MORE

Richard Thaler Wins Nobel Prize

Economic Philosophy
David Henderson
My former colleague, Richard Thaler, at the University of Rochester has won the Nobel Prize in Economics this morning. I'll be writing my regular bio for The Wall Street Journal today, which we'll post here when complete.... MORE

In a speech delivered before the Yale Socialist Club a decade after his return to New Haven, [Irving Fisher] related this minor incident of his stay in Santa Barbara: Discovering that the man who came to massage him was a... MORE

Balance of trade data is not what you think

International Trade
Scott Sumner
Tyler Cowen directed me to a post by Brad Setser, with this very interesting observation: I feel I am at risk of becoming a bit shrill on the topic of tax and trade, but it is very hard--in my view--to... MORE

Define "efficient"

Taxation
Scott Sumner
Tyler Cowen directed me to an article on government efficiency in The Atlantic. The author tried to push back against the claim that state and local governments were more efficient than the Federal government: Similarly, the Internal Revenue Service is... MORE

Ricardo Hausmann on the Venezuelan Tragedy

Growth: Causal Factors
David Henderson
The Financial Times has an excellent interview with economist Ricardo Hausmann on the Chavez and Maduro-created tragedy that is Venezuela. HT2 Timothy Taylor, aka, the Conversable Economist. The whole thing is worth reading. With help from a good interviewer, Cardiff... MORE

First as tragedy, then as farce

Alternative Economics
Scott Sumner
Countries such as China and Russia are reluctant to come to terms with their history. Many of their residents are unaware of the horrors perpetrated by Mao and Stalin. I suppose that's no big surprise; people prefer to see their... MORE

by Pierre Lemieux If jobs were the cause of prosperity, banning agricultural technology would generate much prosperity by dramatically increasing employment in that sector. The economic argument for free international trade is basically that people produce in order to consume,... MORE

What's Killing Us? A Huemer Guest Post

Behavioral Economics and Rationality
Bryan Caplan
Great short piece by Michael Huemer, my favorite philosopher.  Reprinted with his permission.What's killing us? I made the following graph. I include the top ten causes of death in the U.S., plus homicide and illegal drug overdoses, because the latter... MORE

Roger Farmer on NGDP futures targeting

Monetary Policy
Scott Sumner
I had the good fortune of meeting Roger Farmer last year, when he was still teaching at UCLA. We had a great discussion of Keynes's ideas. (I seem to recall we both thought he was misunderstood, and that the General... MORE

The Pathos of Doing the Best I Can

Behavioral Economics and Rationality
Bryan Caplan
Edin and Nelson's Doing the Best I Can is packed with poignant stories, but here's the one that almost made me cry....Ritchie Weber knows what it is like to hit rock bottom.  Just two years ago he was spending nights... MORE

The Power of the Median Voter Theorem

Public Choice Theory
David Henderson
Political commentator Michael Barone writes: So despite California Democrats' hopes that an early presidential primary date will give the state greater influence in selecting a Democratic nominee, past history suggests that that's not likely -- and that there's a risk... MORE

Doing the Best I Can: Social Science at Its Best

Behavioral Economics and Rationality
Bryan Caplan
I'm a long-time fan of Kathryn Edin and Maria Kefalas' Promises I Can Keep: Why Poor Women Put Motherhood Before Marriage (University of California Press, 2005).  Only recently, however, did I discover that Edin had partnered with Timothy Nelson to... MORE

The Catalonian Mess

Eurozone crisis
Alberto Mingardi
Last Sunday, the Catalonians organised a referendum to secede from Spain, which was illegal under the Spanish Constitution and thus opposed by the Spanish government. Such an opposition was not merely a statement of principles, and the police's interventions in... MORE

What a Wonderful World!

Books: Reviews and Suggested Readings
David Henderson
Around the world, nutrition is rising and hunger is falling. Norberg quotes an estimate from the United Nations' Food and Agricultural Organization that in the last 25 years, about 2 billion people have been freed from hunger. And the... MORE

Milton Friedman wouldn't have been confused

Monetary Policy
Scott Sumner
Stephen Kirchner pointed me to a very infuriating Financial Times article on inflation. Here is the title: Nobody seems to know why there's no US inflation Nobody? Seriously? How about market monetarists who point to the very slow growth of... MORE

Adam Camac and Daniel Laguros, based in Houston, interviewed me last week about the economics of price gouging. The show notes are here. As their "About" button shows, they cover a lot of issues, including one I hadn't known about:... MORE

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