Bryan Caplan and David Henderson

Arnold Kling: March 2009

An Author Archive by Month (65 entries)

Libertarians and Jonah Goldberg

Books: Reviews and Suggested Readings
Arnold Kling
Jonah argues that we have become belated converts to the Liberal Fascism thesis. And Arnold Kling who said my book was in fact written by three people -- "Goldberg the revisionist historian, Goldberg the outraged conservative child, and Goldberg the... MORE

Tyler Cowen Explains Systemic Risk

Finance: stocks, options, etc.
Arnold Kling
in one sentence. If your banks are less risky, often something else is more risky, and vice versa.... MORE

Health Care Expert

Economics of Health Care
Arnold Kling
Guess who? proposals in his book, including a plan to scrap Medicare, Medicaid and employer-based health insurance in favor of vouchers that people could use to purchase coverage. It was not me, although I would be quite happy with those... MORE

A Useful Narrative of the Crisis

Finance: stocks, options, etc.
Arnold Kling
Matt Taibbi writes, What had brought us to the brink of collapse in the first place was this relentless instinct for building ever-larger megacompanies, passing deregulatory measures to gradually feed all the little fish in the sea to an ever-shrinking... MORE

Weekend Commentary

Finance: stocks, options, etc.
Arnold Kling
John Reed stresses the same issue that I do on the financial crisis: capital requirements, and their perverse encouragement of banks to hold securities instead of the underlying mortgages. One point that he makes that is new to me is... MORE

Criminal Law in Theory and in Practice

Economics of Crime
Arnold Kling
Cato sent me a copy of In the Name of Justice, edited by Timothy Lynch. It's not my field, so I just read Lynch's introduction. He describes a litany of ways in which our criminal justice system takes away Constitutional... MORE

Should Banks be kept Small?

Finance: stocks, options, etc.
Arnold Kling
Tyler Cowen does not see much help in keeping banks small. I agree with Simon Johnson, who thinks that big banks are too powerful politically. I think that the issue does pretty much boil down to political economy. Big banks... MORE

A Letter to the Washington Post

Finance: stocks, options, etc.
Arnold Kling
They printed it (to read my letter, scroll down after you follow the link). Their front-page story on Geithner's regulatory proposal made me lose my Cheerios when I read it. What they printed is a mild effort to correct their... MORE

Health Care Policy Swindle

Economics of Health Care
Arnold Kling
Keith Hennessey writes, You cannot spend $634 B on health IT, preventive care, and outcome measurement. You'll run out of things on which to spend it. Actually, you can spend that much--the recipients of the money will see to that.... MORE

Progressive Corporatism and the Resistance

Political Economy
Arnold Kling
Glenn Reynolds comments on the plight of Freddie Mac as reported in today's Washington Post. [The Post reports] When Freddie Mac's executives concluded a few weeks ago that they had to disclose that the government's management of the McLean company... MORE

Simon Johnson on Money and Power

Finance: stocks, options, etc.
Arnold Kling
He writes Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people. But there's a deeper and more... MORE

Paging Felix Salmon

Finance: stocks, options, etc.
Arnold Kling
Or someone else who is equally on top of the bond market. [UPDATE: an anonymous commenter quickly backed some market values out of the swaptions market. Bravo! I've added the commenter's calculations to the table below, which only had the... MORE

Ideas for teaching economics

Economic Education
Arnold Kling
Kelly Markson writes, In several principles-of-economics textbooks, the first chapter is devoted to the basic elements of economics such as scarcity, tradeoffs, opportunity costs, incentives, marginal thinking, etc. Most instructors spend very little time with this chapter. I spend weeks... MORE

Chapters for a book on Masonomics

Austrian Economics
Arnold Kling
Should I write it? I do have other projects, but Tyler believes in multitasking. Possible chapters (not necessarily in this order): 1. The love-hate relationship with Austrian economics. Pete Boettke (note that he has co-bloggers) is relatively gung-ho Austrian, but... MORE

Paragraphs to Ponder

Economic Methods
Arnold Kling
From John Mackey, the CEO of Whole Foods, in an essay in Be the Solution, p. 79: the classical economists became enchanted with the efficiency and the productivity of the industrial enterprises that they studied. Industrial and machine metaphors became... MORE

Meeting on Financial Regulation

Economic Methods
Arnold Kling
Last night I gave my talk at a meeting on financial regulation. The meeting was organized by David Evans. I gather that his goal is to put together a group of practitioners in the field of finance and regulation to... MORE

CDS Paper

Finance: stocks, options, etc.
Arnold Kling
Houman Shadab's working paper on credit default swaps is now available. In a previous blog post, I quoted from a draft version. I haven't yet read this latest version, but my guess is that it is even better.... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
All pointers courtesy of the indispensable Mark Thoma. First, Hernando de Soto writes, These derivatives are the root of the credit crunch. Why? Unlike all other property paper, derivatives are not required by law to be recorded, continually tracked and... MORE

My Talk on Financial Regulation

Finance: stocks, options, etc.
Arnold Kling
It's tonight, to a private audience. I only have ten minutes, which is good, because many of the guests are more knowledgeable and distinguished than I am. What I plan to say: 1. If you look at the sequence of... MORE

The Toxic NCAA Bracket

Finance: stocks, options, etc.
Arnold Kling
Suppose that a week ago I had entered a March Madness pool, paid $10, and filled out a bracket. Suppose that right now my bracket is looking weak, with only about half the teams I picked to make the sweet... MORE

Upcoming Appearances

Upcoming Events
Arnold Kling
April 7: Seasteading. Patri Friedman speaking, Doug Bandow and me commenting. At Cato in Washington, DC at noon. April 23: Health Care debate. Robert Kuttner vs. me. I believe it will be 4 PM at the Dudley Davis Center at... MORE

Edward Leamer on Housing and Macro

Macroeconomics
Arnold Kling
He has a new book, which sounds very interesting (but expensive). I've been re-reading his 2007 paper. My comments follow.... MORE

Taleb and Empiricism

Economic Methods
Arnold Kling
Russ Roberts talks with Nassim Taleb. I was most interested in the latter third of the conversation, where Taleb talks about his radical empiricism. For example, he argues that medicine makes more progress with trial-and-error than with knowledge of biological... MORE

These Sound Interesting

Labor Market
Arnold Kling
Abraham, et al on the differences between the household survey and the establishment survey of employment. And Glaeser and Gottlieb on the aggolomeration economies of cities. I have not found free online versions of either paper, though.... MORE

Deception and Signaling

Behavioral Economics and Rationality
Arnold Kling
In Be the Solution, Michael Strong writes (p. 66-69), Are altruists occupationally prone to anger? Well,, it turns out that they are, in fact, biologically inclined to be angry and punitive toward those who they perceive to be not being... MORE

Contest: What to Measure?

Books: Reviews and Suggested Readings
Arnold Kling
Win the Fraser Institute's Money. They want you to enter a contest about what to measure in order to improve public policy. In Be The Solution, Michael Strong cites the Fraser Institute's measures of economic freedom and how well they... MORE

Regulatory Arbitrage, AIG Edition

Finance: stocks, options, etc.
Arnold Kling
In an email, Houman Shadab writes, AIGFP was treated as a bank for its counterparties' risk-weighting purposes, but AIGFP was not regulated as a bank (or an insurance company) for its own CDS credit exposures (had it been, it would've... MORE

The Financial Regulation Problem

Finance: stocks, options, etc.
Arnold Kling
The beloved Henry Paulson writes, In March 2008, after conducting a year-long process of study, I put forward a series of comprehensive recommendations to modernise our regulatory architecture in the Treasury's Blueprint for a Modern Financial Regulatory Framework. The blueprint... MORE

Some Morning Links

Finance: stocks, options, etc.
Arnold Kling
On AIG, you might wish to read James Kwak. You should definitely read James Hamilton. But more shocking yet, at least if we measure these things in dollars and cents, is the amount of taxpayer funds that have gone to... MORE

Lessons from Mancur Olson

Growth: Causal Factors
Arnold Kling
Philip Greenspun writes, The logical conclusion from reading this book is to prefer a new state to an old state, a newly stable state to a long-stable state, and a new industry to an old one. Read the whole thing,... MORE

Tyler Cowen and Robin Hanson

Economic Methods
Arnold Kling
A bloggingheads dialog. I think it really heats up starting about 30 minutes in. If you want to know what it's like to argue with Tyler or Robin, watching this will show you.... MORE

Waldman on Financial Intermediation

Finance: stocks, options, etc.
Arnold Kling
Read the whole thing. I am proud that he claims to have been inspired by my Future of Macroeconomics post, but he obviously has been thinking about this stuff for quite some time.... MORE

Thinking Outside the Beltway

Books: Reviews and Suggested Readings
Arnold Kling
I'm reading Be the Solution, by Michael Strong. I'm about 50 pages into it. The book combines a passion for capitalism, a passion for solving social problems, and some New Age spirituality. Think Ayn Rand meets Stephen Covey. I see... MORE

The Future of Macroeconomics

Macroeconomics
Arnold Kling
Three predictions: 1. There will be much less emphasis on monetary policy, and much more emphasis on financial institutions and financial regulatory policy. 2. There will be much less emphasis on fiscal policy, and much more emphasis on sectoral reallocation... MORE

William Isaac is Wrong on Market Value Accounting

Finance: stocks, options, etc.
Arnold Kling
David Henderson quotes Isaac to the effect that we would have had thousands of bank failures under market value accounting in the 1980's. That is wrong. If market value accounting had been in place in the 1970's, we would not... MORE

What Amity Shlaes Got Right

Economic History
Arnold Kling
Matt Yglesias joins the attack squad on Amity Shlaes, author of The Forgotten Man, a history of the Great Depression and the New Deal. For me, the main take-aways from the book are: 1. Franklin Roosevelt had no coherent economic... MORE

Keynes, Probability, and Economics

Economic Methods
Arnold Kling
How one thinks about probability affects how one thinks about economics. Consider the use of the word "probability" in each of the following sentences:... MORE

James Hamilton on AIG

Finance: stocks, options, etc.
Arnold Kling
He doesn't like the distribution of pain. I accept the argument that a complete failure of AIG would have unacceptable consequences. The relevant question then is, what combination of parties is going to absorb the loss? The concern I wish... MORE

A Textbook Perspective on Current Events

Macroeconomics
Arnold Kling
James Kwak points to an online chapter by Charles Jones. Like a decadent buffet at an expensive hotel, securitization involves lumping together large numbers of individual financial instruments such as mortgages and then slicing and dicing them into different pieces... MORE

She writes, though the current recession is unquestionably severe, it pales in comparison with what our parents and grandparents experienced in the 1930s. Last Friday's employment report showed that unemployment in the United States has reached 8.1%--a terrible number that... MORE

Recommended Reading

Finance: stocks, options, etc.
Arnold Kling
Ben Bernanke on the future of bank regulation. there is some evidence that capital standards, accounting rules, and other regulations have made the financial sector excessively procyclical--that is, they lead financial institutions to ease credit in booms and tighten credit... MORE

bloggingheads

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts and I discuss current events. I felt awkward, and so I didn't feel particularly good about it afterward. The bloggingheads folks think that the best clip is here. Constructive suggestions welcome.... MORE

Eeyore's Economic Outlook

Fiscal Policy
Arnold Kling
Ken Rogoff writes, As debt mounts and the recession lingers, we are surely going to see a number of governments trying to lighten their load through financial repression, higher inflation, partial default, or a combination of all three. Read the... MORE

Systemic Risk, Seen and Unseen

Finance: stocks, options, etc.
Arnold Kling
James Kwak writes, Once investors figure out that bank debt is not safe, they will refuse to lend to any banks, and we are back in September all over again. Nonetheless, I think that zombie banks are create more unseen... MORE

Sociology on One Foot

Economic Methods
Arnold Kling
Tyler Cowen points to Fabio Rojas, who tries to reduce sociology to four issues. Rachel Kling once offered an even quicker summary of every sociological course: "There's poverty and America sucks."... MORE

DeLong vs. Boldrin

Fiscal Policy
Arnold Kling
Gregory Clark moderates. There is almost no enlightenment, but plenty of rhetorical metaphors. For example, about 38 minutes in, Boldrin says, "If the guy has a broken nose, you don't put a band-aid on his butt." I stopped listening shortly... MORE

College and Inequality

Economics of Education
Arnold Kling
Theda Skocpol and Suzanne Mettler write (free but awkward registration required), in 1970, 6.2 percent of the U.S. population in the bottom income quartile had completed a baccalaureate degree by age 24-and that percentage actually declined slightly, to 6 percent,... MORE

Bob Shiller's Finance Course

Finance: stocks, options, etc.
Arnold Kling
is on line. My inclination would be to read the transcripts, but if you prefer you may either listen or watch.... MORE

Banana Republic Economics, Again

Finance: stocks, options, etc.
Arnold Kling
Read the latest from Simon Johnson. Read it now.... MORE

Productivity Measured in Goods

Growth: Consequences
Arnold Kling
Mark Perry crunches some numbers. In 1950, it would have taken almost 8 months of full-time work at the average manufacturing wage to earn the $1,650 needed to purchase the 16 items above at the retail prices in 1950 (or... MORE

Individualism, Institutions, and Growth

Growth: Causal Factors
Arnold Kling
William Easterly writes, values across different cultures lie along a spectrum between two separate poles: (1) valuing individual autonomy, believing in equal treatment of individuals, reliance on formal law, the same moral standards apply to all, enforcement of morality is... MORE

Signs of Deflation

Macroeconomics
Arnold Kling
That is how I read Michael Bryan and Brent Meyer. the sharp drop in the flexible component of the core CPI is another clear indication of the strong disinflationary pressure on retail prices in recent months. Over the past four... MORE

More on Mandel, Austrianism, and Keynesianism

Austrian Economics
Arnold Kling
My take is this: there was some productivity growth but much of it fell outside of the usual cash and revenue-generating nexus. Maybe you will live until 83 rather than 81.5 and your pain reliever will work better. In... MORE

Two Perspectives on Deficits and Debt

Fiscal Policy
Arnold Kling
First, from columnist Steven Pearlstein Two trillion dollars sounds like a lot of money, but in a pinch we could pay it all back in just one year if we were willing to reduce household and government spending by about... MORE

Can you say "rent-seeking?"

Public Choice Theory
Arnold Kling
Ed Kane writes, TARP recipients paid out $76.7 million on lobbying and $37 million on federal campaign contributions in 2008 and (through Feb 2, 2009) received access to $295.2 billion in TARP funds. The ratio of lobbying expense to TARP... MORE

On Monetarism

Macroeconomics
Arnold Kling
In a comment on this post, Scott Sumner writes, If the Fed doubled the money supply would you suddenly change your preferences and want to hold twice as much cash in your wallet? To which I retort: if you suddenly... MORE

Greg Mankiw Gets Technical

Economic Methods
Arnold Kling
He writes, The purpose of this picture is to show that deeper-than-average recessions are followed by faster-than-average recoveries. (Similar evidence was compiled in the 2005 Economic Report of the President, Chapter 2.) This evidence might be taken as evidence in... MORE

New Commanding Heights

Growth: Consequences
Arnold Kling
Michael Mandel breaks down the change in consumer spending over the past year. While other categories declined, spending on education, health care, and recreation increased. Nick Schulz (who pointed this out to me) and I call these areas "the new... MORE

Back to Basics

Macroeconomics
Arnold Kling
Robert P. Murphy and Bryan seem to me to be confusing things.... MORE

Taking Krugman's Side

Monetary Policy
Arnold Kling
Goodness knows, I don't want to. I still think he owes me a correction--and in fact an apology--in his column for putting in quotation marks an inaccurate, misleading, and distorted version of something I said. But here is Tyler Cowen... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Tim Duy: For Bernanke and Geithner, there are no bad assets. Only misunderstood assets. Read the whole thing, and follow the link to Yves Smith. Thanks to Mark Thoma for the pointer. Tyler Cowen: No one wants to say it,... MORE

Scott Sumner Cries Out

Macroeconomics
Arnold Kling
He wants the Fed to do whatever it can to try to get prices headed up rather than down. His best argument: What do we have to lose?: We can get rid of interest on bank reserves (and consider a... MORE

Jim Hamilton Says He's Happy Owning Stocks

Finance: stocks, options, etc.
Arnold Kling
The argument is here. I don't think that the future is going to resemble the past. That doesn't mean I'm out of stocks, but I'm not going to buy an index fund the way I used to. I think a... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Two links from the indispensable Mark Thoma. First, Tyler Cowen writes, A newbank rescue plan may be more crucial right now than the fiscal stimulus package enacted last month. Yet we don't seem capable of finding a clear path toward... MORE

Shlaes and Mandel

Macroeconomics
Arnold Kling
At the Kauffman forum that I attended in Kansas City the other day, I thought that the most interesting comments, neither of which I agreed with, were offered by Amity Shlaes and Michael Mandel, who blog here and here, respectively.... MORE

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