Bryan Caplan and David Henderson

Arnold Kling: July 2008

An Author Archive by Month (85 entries)

Two Ideas from Brad Templeton

Political Economy
Arnold Kling
1. A Ship of Nomads. My goal is to build a large ship and put around 100 decent sized condominiums on it for co-owners. The ship would have a few megabits of satellite connectivity for internet and telephone, plus equipment... MORE

Geography and Economic Destiny

Growth: Causal Factors
Arnold Kling
Megan McArdle writes, Ten thousand years or so after the first humans built sailing ships for trade, the coast still matters immensely. In fact, there are only two prosperous landlocked countries of any size: Austria and Switzerland. Read the whole... MORE

Fuzzy Math

Economics of Education
Arnold Kling
The Washington Post reports, Upon the debut of the Maryland School Assessments in 2003, Montgomery County ranked second in the state in math, with 67 percent of students passing tests in elementary and middle school. This year, the county ranks... MORE

Today's Tylerisms

Economics of Health Care
Arnold Kling
He quotes a comment from David R. Henderson. I'm reluctantly coming to the conclusion, after having read his site almost daily for over a year, that Tyler is not a free-market crusader. Henderson is referring to the Freddie-Fannie bailout, which... MORE

Ruining my Day

Regulation and Subsidies
Arnold Kling
John Tierney writes, it is the duty of the press to scour the known universe looking for ways to ruin your day. Indeed. David Broder writes, Each year, as the money comes in, the trust fund will distribute it to... MORE

Replying to Thoma on Health Care

Economics of Health Care
Arnold Kling
Mark Thoma writes, when I think about moving P to G, I also think about moving the revenue stream with it (e.g. individuals would pay monthly premiums in taxes rather than to the insurance company). Thus, if we move all... MORE

What Every Worker Believes

Business Economics
Arnold Kling
1. I should have more autonomy. 2. I should be rewarded more for my own ideas that work. 3. I should be penalized less for my own ideas that fail. 4. Competition that is innovative or inexpensive is unfair. That... MORE

A Depression-Era Solution on Housing

Regulation and Subsidies
Arnold Kling
Holman Jenkins writes, So far, Washington has put its political capital into trying to refinance salvageable homes for unsalvageable homeowners, when a relevant policy would consist of judiciously buying unsalvageable houses and demolishing them. Fannie and Freddie's strength is housing... MORE

I Don't Understand Mark Thoma

Economics of Health Care
Arnold Kling
He writes, But focusing on the immediate problems brought about by tax cuts and military spending should not divert us from the more formidable problem of solving the escalating health cost problem. If Obama wins and tries to institute some... MORE

Communications Media and Institutions

Political Economy
Arnold Kling
Marc Pesce delivers a few facts and a lot of breathless prose. Somewhere in the last few months, half the population of the planet became mobile telephone subscribers. In a decade's time we've gone from half the world having never... MORE

The End of the World

Finance: stocks, options, etc.
Arnold Kling
Tyler Cowen writes, When it comes to the mortgage agencies, there is no real choice but to bail out the debt holders. The alternative is a run on the dollar and collapse of faith in U.S. government securities and the... MORE

An Anarcho-Capitalist Tranzy?

Political Economy
Arnold Kling
John Stewart writes, Global governance is essential if nations are to cooperate to overcome the deficiencies of global markets...It can ensure that nations capture the benefits of their contribution to global social, economic and environmental projects that have collective benefits... MORE

An Inconvenient Question

Political Economy
Arnold Kling
Glenn Reynolds asks, If somebody offered us our current income tax system for the first time, would we buy it? On another topic, but effectively asking the same question, Washington Post editorializes, the policies and institutions that worked in the... MORE

The Income Heritability Puzzle

Income Distribution
Arnold Kling
At GNXP, Herrick writes let's just go all the way to perfect heritability of IQ and perfect assortive mating on IQ. In other words, let's see if "IQ clones" will be have enough similarity in wages to match the 0.4... MORE

My latest essay: Financial markets will always be subject to miscalculations and mistakes. However, the more we ask politicians to provide perfect insulation from financial risk, the more fragile the system will become. That is the real lesson we should... MORE

Low Collective Benefits

Politics and Economics
Arnold Kling
Sudhir Venkatesh writes Introduced with much fanfare in 1993, HOPE helped municipal governments demolish dilapidated public housing projects and revitalize their inner cities. To receive program money, mayors agreed to move families from the projects to low-poverty neighborhoods and build... MORE

Boys, Girls, and Math

Economics of Education
Arnold Kling
A study by Janet Hyde, Sara Lindberg, Amy Ellis and Carolyn Williams is getting a lot of publicity (two non-academic friends brought it up in conversation lastnight). They find that boys and girls do not differ in their performance on... MORE

The McCain-Stiglitz Axis

Regulation and Subsidies
Arnold Kling
Regarding the Freddie-Fannie bailout, the Republican Presidential nominee writes, if a dime of taxpayer money ends up being directly invested, the management and the board should immediately be replaced, multimillion dollar salaries should be cut, and bonuses and other compensation... MORE

The Lesson of the Housing Bill

Political Economy
Arnold Kling
Think of the following as a diagram: High Collective BenefitsLow Collective BenefitsMostly Market MechanismsMostly Government Mechanisms Along the horizontal axis, as you move to the right, resources are allocated by government mechanisms more than by market mechanisms. Along the vertical... MORE

Switzerland

Cross-country Comparisons
Arnold Kling
I am trying to learn more about the political system of Switzerland. The country has 23 cantons, each with its own parliament! I can find the population of each canton and the number of members in each parliament. I am... MORE

Imagine a Referendum on the Housing Bill

Public Choice Theory
Arnold Kling
Megan McArdle writes, Instead of moving to put FM/FM into a more easily understood model--either nationalizing them, or privatising--they're making the GSEs even weirder, and of course, piling on more debt...keeping pet companies on a leash so that you can... MORE

Imagining Alternative Futures

Growth: Consequences
Arnold Kling
Tyler Cowen offers six, not mutually exclusive. For example, 4. Energy becomes very cheap, destruction is easy, deterrence is difficult, power decentralizes, and we retreat to medieval-style fortresses. In my view, the two most interesting variables in forecasting the future... MORE

Education: Is There a Massive Market Failure?

Economics of Education
Arnold Kling
Goldin and Katz get more press. "There has been much more growth of inequality among college graduates than among noncollege workers," Katz says. Only some people, he says, are coming out of college with the high-level abstract-reasoning skills that fully... MORE

Business Books

Books: Reviews and Suggested Readings
Arnold Kling
Joe Nocera picks the best business narratives. I assume this means a book that describes an individual, a company, an event, or an era. I agree with him that Barbarians at the Gate (about the RJR-Nabisco takeover) and Liar's Poker... MORE

The Nanny State

Regulation and Subsidies
Arnold Kling
Marc Fisher writes, Montgomery County, the government that brought you bans on trans fats, smoking and any sales of liquor except by the county's own stores, last week added a new kind of regulation, becoming probably the first place in... MORE

Morning Reading on Political Economy

Political Economy
Arnold Kling
First, Jesse Larner on Hayek. So to Hayek, the common law is a spontaneous phenomenon, without obvious human direction. In a sense law is related to custom in this manner, but there is no guarantee that honoring this concept of... MORE

Too Virtual to be True

Business Economics
Arnold Kling
Glenn Reynolds pointed to this blog post, which says that an inflatable electric car could be only $2500 in price and available starting in 2010-2011. The link takes you to a site for something called XP Vehicles. It lists no... MORE

Inconvenient Arithmetic and Engineering

Energy, Environment, Resources
Arnold Kling
Kevin Bullis writes, Over the past couple of weeks, T. Boone Pickens, an oil tycoon, has been using some of his billions to run television ads supporting...what seems to be the biggest wind farm in the country. It would nearly... MORE

More on U.S. Education

Human Capital: Returns to entrepreneurs, skills, etc.
Arnold Kling
Two links from Mark Thoma. First, Clive Crook. For decades the educational quality of the US labour force surged. In 1940, less than 5 per cent of the population aged 25-64 had at least a four-year college education. By 2000,... MORE

Goldin-Katz Filters into the Mainstream

Economics of Education
Arnold Kling
David Brooks writes, During the 20th century, Americans were better educated than the citizens of any other power. Since 1970, that lead has been forfeited, producing inequality and wage stagnation. To compete, the U.S. will require a series of human... MORE

Real Health Care Reform

Economics of Health Care
Arnold Kling
Two relatively new books that I have not read. One is by Roger Feldman. Should Medicare pay for patient expenses the way automobile insurers pay for car-repair bills? ...Medicare would pay each patient a fixed amount of money, reserving larger... MORE

Regulation We Don't Need

Regulation and Subsidies
Arnold Kling
Vince Reinhart writes, The problem with securitization is that it dilutes individual responsibility. The mortgage broker can easily become disconnected from the outcome of the initial lending decision. Federal regulation is needed to ensure that mortgage originators perform the appropriate... MORE

Jeff Frankel on the Faith Trap

Political Economy
Arnold Kling
He writes, Someone this week asked me what I thought of policy-makers who ex ante profess a free-market ideology and acute sensitivity to the dangers of moral hazard from financial bailouts, but who toss that ideology overboard when faced with... MORE

Some Denialist Arguments

Energy, Environment, Resources
Arnold Kling
From David Evans. The signature of an increased greenhouse effect is a hot spot about 10km up in the atmosphere over the tropics. We have been measuring the atmosphere for decades using radiosondes: weather balloons with thermometers that radio back... MORE

Emergency Housing Pork

Regulation and Subsidies
Arnold Kling
The Washington Post editorializes, Earlier this year, as clouds were already gathering over the GSEs, Congress raised the limit -- to almost $730,000 in certain high-cost areas -- on the theory that Fannie and Freddie could help unfreeze the housing... MORE

Expectations and Oil

Energy, Environment, Resources
Arnold Kling
Tyler Cowen asks, Over the two previous days oil fell $10.50 a barrel. By definition this is driven by news about supply and demand but has so much news come out so quickly? Maybe the news is that the political... MORE

The Must-Read Economics Book of 2008

Books: Reviews and Suggested Readings
Arnold Kling
Bruno Frey writes, procedural utility has also been found to play a role in consumers' decisions. The first evidence of this was presented by Kahneman, et al., who investigated customers' reactions to a situation where the price of a good... MORE

The Faith Trap

Political Economy
Arnold Kling
Robin Hanson writes, It seems we hope a stronger and more benevolent God or State will protect us when feel less able to protect ourselves. He is reporting on a paper in a psychology journal by Aaron C. Kay with... MORE

I Wish Larry Summers Had a Blog

Finance: stocks, options, etc.
Arnold Kling
Over at the Creative Capitalism site, Larry gets to the nub of the Freddie-Fannie issue. What went wrong? The illusion that the companies were doing virtuous work made it impossible to build a political case for serious regulation. When there... MORE

Happiness, I Still Can't Get No

Behavioral Economics and Rationality
Arnold Kling
In Happiness: A Revolution in Economics, Bruno S. Frey writes (p. 30) Human beings are unable and unwilling to make absolute judgments. Rather, they constantly draw comparisons from their environment, from the past, or from their expectations of the future.... MORE

Hanushek on Education

Economics of Education
Arnold Kling
In the latest podcast, Russ Roberts interviews Eric Hanushek. Hanushek describes some natural experiments in education with statistical properties that I can actually understand. In a number of cases judges interpreted state constitutions as requiring states to increase funding for... MORE

The Risk Disclosure Problem, Revisited

Finance: stocks, options, etc.
Arnold Kling
Ricardo Caballero writes no institution is immune to panics, as long as it is providing its socially useful liquidity transformation and intermediation role. Thanks to Tyler Cowen for the pointer. This is very consistent with the view I put forth... MORE

Reverse Ability Bias

Economics of Education
Arnold Kling
David Card writes, estimates based on supply-side innovations tend to recover returns to education for a subset of individuals with relatively high returns to education. Let me try to put that into English. The conventional wisdom is that when somebody... MORE

Perspective on Freddie and Fannie

Finance: stocks, options, etc.
Arnold Kling
The other essay I have out today offers background on Fannie Mae and Freddie Mac. As of the late 1970s, most of the mortgage credit in the United States was supplied by savings and loan associations (S&Ls), which are very... MORE

Macro Without Aggregate Demand

Macroeconomics
Arnold Kling
I have two essays out today. The first one is called The Depressive Realism Economy. It now appears that we were living in a dream world a few years ago, with oil prices unsustainably low and house price inflation unsustainably... MORE

Jagdish Bhagwati on Creative Capitalism

Income Distribution
Arnold Kling
The professor who taught my international trade course back in graduate school writes, what CSR (corporate social responsibility) does is to extend the traditional practice of the Burghers-Jains-Calvinists -- where families that made the moneys spent them directly on social... MORE

Good Post on Fannie, Freddie

Finance: stocks, options, etc.
Arnold Kling
From Tanta at Calculated Risk. Read the whole thing. I'll comment on some excerpts. One of the issues that's being bandied about is whether Freddie and Fannie can/should be allowed to fail. I think it's a moot point. I think... MORE

I Need Talking Points on Fannie, Freddie

Finance: stocks, options, etc.
Arnold Kling
The Washington Post writes, As the housing market boomed in recent years, Fannie and Freddie, like many lenders, took riskier loans. Freddie Mac executives have said they loosened lending standards to avoid losing market share. This supports my version of... MORE

Bailed it Shall Be

Finance: stocks, options, etc.
Arnold Kling
The New York Times reports it. Officials said that after talking to senior lawmakers through the weekend, they expected that Congress would attach the proposals to a housing bill that could be completed and sent to the White House for... MORE

The Consensus Economic Platform?

Political Economy
Arnold Kling
Greg Mankiw runs on support for free trade, opposition to farm subsidies, an energy tax, raising the retirement age, and other proposals. I think he is correct that this platform would win a lot of votes with Ph.D economists. It... MORE

Too Big to Bail?

Finance: stocks, options, etc.
Arnold Kling
James Hamilton writes, The overriding concern in dealing with the current mess is that the process of rapid and radical deleveraging would so impede the flow of new credit that the housing price declines, foreclosures, and bankruptcies significantly overshoot the... MORE

Fannie, Freddie, and Doomsday

Finance: stocks, options, etc.
Arnold Kling
In this morning's news, Shares of Fannie Mae and Freddie Mac tumbled again Thursday on a report that government officials have begun planning for a possible collapse of the mortgage finance giants. As an investor, could you make a profit... MORE

What's Bad for General Motors...

Social Security
Arnold Kling
Roger Lowenstein writes, But none of G.M.’s management miscues was so damaging to its long-term fate as the rich pensions and health care that robbed General Motors of its financial flexibility and, ultimately, of its cash. Whether General Motors was... MORE

Quarterback, Shepherd, Project Manager

Economics of Health Care
Arnold Kling
Jane Gross writes, Looking back on the last few years of my mother’s life, ...my single biggest mistake was not finding a doctor with expertise in geriatrics to quarterback her care and attend to the quality of her life, not... MORE

The Goldin-Katz Swindle

Economics of Education
Arnold Kling
On p. 96 of their new book, Claudia Goldin and Lawrence F. Katz provide a table on the composition of the U.S. labor force in terms of educational background, based on historical census data. The percentage of high school graduates... MORE

Libertarian Misanthropes

Game Theory
Arnold Kling
First, there's South Bend Seven. I'm still waiting for the plan that requires volunteering* from able bodied retirees as a condition of receiving their social security checks, or requires a few hours a week of service from anyone getting unemployment... MORE

Participatory Dictatorship

Political Economy
Arnold Kling
Stephen R. Shalom has a proposal to re-scale government institutions. I propose that legislative functions be carried out by a system of nested councils. Here is one way that such a system might function. There would be primary-level councils that... MORE

More Rebooting America Quotes

Political Economy
Arnold Kling
In general, the writers are better at diagnosis than prescription.... MORE

Rebooting America

Books: Reviews and Suggested Readings
Arnold Kling
Clay Shirky writes, If I had to pick one method of rebooting civic life, it would be by finding new ways to grant groups the legitimacy essential to pursuing long-term and constructive goals on their own. This is in the... MORE

The Center-Wonk Vote

Books: Reviews and Suggested Readings
Arnold Kling
I went to this event, featuring Reihan Salam and Ross Douthat, authors of Grand New Party. Some observations:... MORE

David Friedman on the Myth of the Rational Voter

Books: Reviews and Suggested Readings
Arnold Kling
In The Machinery of Freedom, p. 132, Friedman writes, Imagine buying cars the way we buy governments. Ten thousand people would get together and agree to vote, each for the car he preferred. Whichever car won, each of the ten... MORE

David Friedman's Machinery of Freedom

Books: Reviews and Suggested Readings
Arnold Kling
The book was first published in 1973, with a revised edition in 1989. I just got around to reading it. Some excerpts and my commentary follow.... MORE

David Friedman on Property Rights

Books: Reviews and Suggested Readings
Arnold Kling
He wrote, The right to decide whether or not I turn on the lights in my house is worth more to me than to my neighbors, so in principle I should be able to buy their permission. The problem is... MORE

Marriage and Caste Watch

Human Capital: Returns to entrepreneurs, skills, etc.
Arnold Kling
Clive Crook writes, Younger cohorts are no better educated than these soon-to-retire boomers. Broadly speaking, educational quality has topped out - and on at least one measure, it is actually deteriorating. In 2006, Americans aged 55-59 collectively possessed more masters... MORE

Solar Energy Update

Energy, Environment, Resources
Arnold Kling
McKinsey folks write, During the next three to seven years, solar energy’s unsubsidized cost to end customers should equal the cost of conventional electricity in parts of the United States (California and the Southwest) and in Italy, Japan, and Spain.... MORE

Hansonism

Behavioral Economics and Rationality
Arnold Kling
Will Wilkinson and Robin Hanson have at it. When Tyler Cowen says "self-recommending," does that mean he recommends it without watching it? Anyway, a few issues. 1. Hanson says that people have a propensity to disagree, just to be contrary.... MORE

J. Carter Wood writes, presumably Kling would have to argue that the same now-and-then relationship would also apply when exchanging babies born in Stockholm in 1600 and 1740? Remember, there appears to have been at least a 10-fold decline in... MORE

Behavioral Politics

Political Economy
Arnold Kling
Mike Munger and Russ Roberts deliver one of the best podcasts ever. Munger describes the way in which moving from a private bus system to a public system in Santiago Chile made essentially everyone in the city worse off. The... MORE

Ken Rogoff Calls for a Slow-Down

Macroeconomics
Arnold Kling
He writes, governments are clawing to stretch out unsustainable booms, further pushing up commodity prices, and raising the risk of a once-in-a-lifetime economic and financial mess. All this need not end horribly, but policy makers in most regions have to... MORE

What About Pets?

Family Economics
Arnold Kling
Jonathan Guryan, Erik Hurst, and Melissa S. Kearney find that time spent taking care of children is positively correlated with education. They write, We offer four possible explanations for why child care patterns by education differ from the leisure and... MORE

What Went Wrong?

Political Economy
Arnold Kling
In a somewhat melancholy 4th of July essay, Canadian libertarian Pierre Lemieux writes, How could a country founded on the ideal of individual liberty, with a state devoted to the mission of protecting it, slide down the road to tyranny... MORE

Scary Housing Data

Finance: stocks, options, etc.
Arnold Kling
A few weeks ago, Lawrence B. Lindsey wrote, There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it... MORE

The Long-Term Budget Outlook

Fiscal Policy
Arnold Kling
From the Congressional Budget Office: How would the economy be affected if the projected rise in primary spending under CBO’s alternative fiscal scenario (from about 18 percent of GDP in 2007 to about 35 percent in 2082) was financed entirely... MORE

Mencius Moldbug proposes a thought experiment. Imagine that there had been no scientific or technical progress at all during the 20th century. That the government of 2008 had to function with the technical base of 1908... [Conversely, imagine] what would... MORE

Dorothea Dix

Political Economy
Arnold Kling
The more I read (or Kindle) Daniel Walker Howe's What Hath God Wrought, the more antecedents I see to modern liberal reformers. For example, he describes Dorothea Dix, who is summed up well in her Wikipedia entry. Dorothea Lynde Dix... MORE

Tyranny Without Law Enforcement?

Political Economy
Arnold Kling
Bradford Plumer writes, Finamore points out, for instance, that if China enforced all the building codes it has on the books, it could cut its energy use dramatically. NRDC is training Chinese building inspectors, who often don't understand the codes,... MORE

Bryan Caplan Joins the Pigou Club

Economics of Education
Arnold Kling
He writes, Question: If signaling has negative externalities, could government action make matters more efficient? Answer: Yes - government could tax education. Then everyone could get half as much education and still get the same job offers. No, this is... MORE

The Reform Mindset

Behavioral Economics and Rationality
Arnold Kling
Peter Orszag recommends a talk by David Brooks at the Aspen Ideas Festival. The web site for the conference says that full video will be available, but for now there are only short clips. Go here and look for the... MORE

New NBER working papers

Business Economics
Arnold Kling
Mihir A. Desai, Dhammika Dharmapala, and Monica Singhal write, The Low Income Housing Tax Credit (LIHTC) program provides for the majority of new affordable housing units built in the U.S. and has resulted in the production of 1.5 million low-income... MORE

Producer and Consumer Cities

Growth: Causal Factors
Arnold Kling
Maarten Bosker, Eltjo Buringh, and Jan Luiten van Zanden write, The sociologist Max Weber introduced a distinction between ‘consumer cities’ and ‘producer cities’... The classical consumer city is a centre of government and military protection or occupation, which supplies services... MORE

Goldin and Katz

Human Capital: Returns to entrepreneurs, skills, etc.
Arnold Kling
I have ordered their new book, after seeing it mentioned in David Leonhardt's column in the New York Times. An excerpt from the book is here. For cohorts born from the 1870s to about 1950, every decade was accompanied by... MORE

IMF to Investigate the U.S. Financial System?

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
A reader forwarded me this story. Officials with the International Monetary Fund (IMF) have informed Bernanke about a plan that would have been unheard-of in the past: a general examination of the US financial system. The IMF's board of directors... MORE

Robert Fogel on Health Care

Economics of Health Care
Arnold Kling
He says, Don’t be afraid of it; it’s actually the leading industry. The demands of healthcare are going to pull all other industries forward...I say if this were a privatized system, we would all say “gee it’s wonderful. All these... MORE

Reformers vs. Limited Government

Political Economy
Arnold Kling
I am not repeating the famous sentence of the Massachusetts Bill of Rights, "to the end that this may be a government of laws and not of men." There never was such a government. Constitute them how you will,... MORE

The Last Quarter Century

Income Distribution
Arnold Kling
Brad DeLong writes, The true history of the U.S. since 1980, IMHO at least, is not Sean Wilentz's "Age of Reagan" but is instead composed of a half dozen or so deeper and broader tides, like: 1. The end of... MORE

Return to top