Bryan Caplan and David Henderson

Arnold Kling: May 2009

An Author Archive by Month (52 entries)

Can Risk Buckets Work?

Finance: stocks, options, etc.
Arnold Kling
James Kwak writes, In short, we need a system for risk weighting that is harder to "game" than the current one - and a set of regulators who will enforce it. Given how long Basel II has been going on,... MORE

Speaking of Health Care Reform

Economics of Health Care
Arnold Kling
That's what I'll be doing on Capitol Hill on Tuesday, at noon, for Cato. I have nothing new to say. The facts haven't changed, so I haven't changed my mind since I wrote Crisis of Abundance.... MORE

Health Reform's Savings Myth

Economics of Health Care
Arnold Kling
That is the title of an op-ed piece by Maya MacGuineas that is on the Washington Post web site. I didn't see it in print, because I am still not used to the way they have mixed up the Sunday... MORE

Lectures on Macroeconomics, No. 15

Macroeconomics
Arnold Kling
This lecture is on the household's "make or buy" decision. The more we outsource production, the more economic activity there is. In a recession, we cut back on outsourcing.... MORE

Grasping the Nettle of Personality

Books: Reviews and Suggested Readings
Arnold Kling
A commenter recommended Daniel Nettle's book on Personality. It was a good recommendation. Various lines of evidence suggest that our interest in money--and the material goods it buys--is mainly as a marker of comparative social status. Some more notes and... MORE

Since When...

Books: Reviews and Suggested Readings
Arnold Kling
Did the NBER create an RSS feed for abstracts of new working papers? http://www.nber.org/rss/new.xml I didn't notice this feature at the nber site, but my Google reader suggested it to me.... MORE

Health Care Economics

Economics of Health Care
Arnold Kling
Atul Gawande writes, many physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the... MORE

The Anti-Stimulus

Fiscal Policy
Arnold Kling
Greg Mankiw reports that the yield curve is steep, meaning that long-term interest rates have risen. In my view, this is perfectly rational, and it shows that the short-run effect of the fiscal stimulus is negative, as Jeff Sachs predicted.... MORE

Afghanistan's Natural State

Political Economy
Arnold Kling
On William Easterly's blog, Laura Freschi writes, Efforts to curb corruption in Afghanistan are failing, says a new USAID report. Based on dozens of interviews and a comprehensive review of existing studies and polls, the report describes the sources of... MORE

How do Political Beliefs Change?

Political Economy
Arnold Kling
Robin Hanson writes, it looks bad to admit we do politics to selfishly show off, instead of to help society make better policy. So we are built to instead talk, and think, as if we do politics for its influence... MORE

Geoffrey Miller on Personality

Books: Reviews and Suggested Readings
Arnold Kling
He writes, many of the new-fangled types of intelligence that have become popular recently...boil down to general intelligence plus some combination of the Big Five personality traits. Social intelligence...seems rather well predicted by a combination of general intelligence and extraversion,... MORE

The Economics of "Going Green"

Energy, Environment, Resources
Arnold Kling
A reporter called me to give the "anti" side of the case for going "green." It's not hard. It is a matter of basic economics. 1. Suppose that a gallon of gas costs $2.50 and an hour of labor costs... MORE

High School: Don't Bother to Graduate [UPDATE--my error]

Labor Mobility, Immigration, Outsourcing
Arnold Kling
David Card writes, I show that evidence from cross-city comparisons is remarkably consistent with recent findings from aggregate time series data. Both designs provide support for three key conclusions: (1) workers with below high school education are perfect substitutes for... MORE

Public Financing of Political Campaigns

Political Economy
Arnold Kling
Jonathan Chait writes, Do Kling and Schulz think that interest groups can have that much influence over the outcomes of elections -- so much influence that the Democrats will have a near lock on power? If so, shouldn't they support... MORE

What is the GDP Gap?

Macroeconomics
Arnold Kling
Doug Elmendorf writes, the difference between the economy's actual and potential output will average 7 percent of GDP (which is equivalent to about a trillion dollars) this year and next, and that gap in output will not close until 2013.... MORE

Two Disagreeable Questions for Ben Bernanke

Finance: stocks, options, etc.
Arnold Kling
Because it was my daughter's law school graduation, I heard this speech. I am surprised that a couple of bloggers linked to it, since Bernanke gave a personal talk, not a financial one. There was a large news media presence.... MORE

Is There Hope for My Most Wrong Belief?

Economic History
Arnold Kling
David Frum writes, [Peter] Heather takes a less benign view of Rome. Here, he says, is a society of savage aggressiveness, that grew not through productivity improvement but by waging war on its neighbors to enslave their populations. Pointer from... MORE

Geoffrey Miller, Masonomist

Books: Reviews and Suggested Readings
Arnold Kling
Geoffrey Miller writes, Many products are signals first and material objects second. I am only a little way past the introduction to Spent. Tyler has already read it. So has Robin. So far, Miller hasn't told me anything that Robin... MORE

Stuck in the Natural State?

Growth: Causal Factors
Arnold Kling
Antonio Fatas and Ilian Mihov write, China has sustained high growth rates in recent years despite its poor institutions because institutional quality is relatively less important in developing economies. However, we find that as their incomes increase, such countries need... MORE

Health Care: Mandates or Vouchers

Economics of Health Care
Arnold Kling
Grace-Marie Turner and Joseph R. Antos write about a Republican health care proposal, The nexus of their plan is redirecting the $300 billion annual tax subsidy for employment-based health insurance to individuals in the form of refundable, advanceable tax credits.... MORE

Memo to Krugman and DeLong: Start a Little Differently

Finance: stocks, options, etc.
Arnold Kling
Paul Krugman writes, Brad DeLong offers a neat little model of speculative fluctuations in asset prices, based on the idea that investors gradually switch strategies based on what seems to work for other people: if people buying stocks seem to... MORE

Warren Buffett, Five

Books: Reviews and Suggested Readings
Arnold Kling
Michael Lewis cribs from Alice Schroeder's biography. He seems always to have been something of a physical and emotional coward. He is actually less wary in his financial life than he is outside of it. He avoids social conflict, unless... MORE

Bet Accepted

Politics and Economics
Arnold Kling
Bryan writes, I predict that Republicans will regain control of at least one branch of the federal government at some point between now and January 20, 2017 (two inaugurations from now). So Arnold, how about a $100 bet at even... MORE

Making Capital Disappear

Finance: stocks, options, etc.
Arnold Kling
Tyler Cowen points to a terse summary of an idea of Matt King. The only other reference to this idea that I can find is here. In the expansion of the credit bubble, U.S. banks strove to keep their tangible... MORE

Why I Fear a One-Party State

Political Economy
Arnold Kling
Bryan writes, it's not obvious that Republicans actually offer more free-market politics than Democrats do. Probably true, but beside the point. I am not upset with political trends because I want Republicans to win. I am upset because I foresee... MORE

Today's Financial Reading

Finance: stocks, options, etc.
Arnold Kling
Two suggestions from Mark Thoma. First, Anne Sibert writes, There is a substantial economics literature on the effect of gender on attitudes toward risk and most of it appears to support the idea that men are less risk averse than... MORE

North, Wallis, and Weingast

Political Economy
Arnold Kling
Indeed, Violence and Social Orders is an important book. My guess is that many reviewers will complain about the editing and organization. Many points are repeated ad nauseum. Some reasonably important points are tossed off more casually. I'll quote some... MORE

The Emerging Stagnant Majority

Labor Mobility, Immigration, Outsourcing
Arnold Kling
William Voegeli, in an article for the Claremont Review called "The Wilderness Years Begin," cites an article by Ronald Brownstein. Start by considering the electorate's six broadest demographic groups -- white voters with at least a four-year college degree; white... MORE

Thoughts on Comparative Effectiveness Research

Economics of Health Care
Arnold Kling
Tyler Cowen writes, This commission, if it sticks to its statistical mandate, will be able to recommend many more possible cuts than any vote-maximizing administration will be likely to make. Some other principle will be used to determine cuts. Many... MORE

Paging Simon Johnson and James Kwak

Finance: stocks, options, etc.
Arnold Kling
One of the themes of their baseline scenario blog is that banking regulators have been captured by large banks. In researching the history of capital regulation, I came across this paper by David Jones, of the Federal Reserve Board. It... MORE

The Washington Post vs. the Obama Administration

Politics and Economics
Arnold Kling
Opening today's Washington Post, there are three editorials. The lead editorial is on Obama's policies with respect to the automobile industry. the spectacle of creditors being stripped of their legal rights in favor of a labor union with which the... MORE

Pro-Autistic Economics

Books: Reviews and Suggested Readings
Arnold Kling
Rightly or wrongly, autistics are often seen as staking out their independence from the group and from group norms. They're seen as questioning the psychological power of the leaders and bullies and indicating that they do not, within their... MORE

Power over Pay

Political Economy
Arnold Kling
The Obama Administration wants it. Wall Street pay has long been a hot-button issue in Washington, but the public outrage over excessive compensation has erupted in recent weeks. I interpret the public outrage a bit differently. It seems to me... MORE

The Third Iron Law

Economic Methods
Arnold Kling
William Easterly takes on Paul Collier (and implicitly many other users of regression techniques). Oodles of regressions were run...Oodles of control variables were tried...Sample was sliced up to get results... Read the whole thing. My father used to say that... MORE

Keith Hennessey is Bitter

Economics of Health Care
Arnold Kling
He writes, The President is attempting to claim credit for [health care] savings that (a) do not yet exist, (b) are not backed up by any specific changes in industry practices or government policies, and (c) are related to him... MORE

The Entitlement Outlook

Economics of Health Care
Arnold Kling
Andrew Biggs writes, Over the next 30 years, population aging is our main entitlements problem and it makes sense to seek solutions that are based on the problem we have, not the problem we want to have. Beyond 30 years,... MORE

Costs and Benefits of Beliefs

Behavioral Economics and Rationality
Arnold Kling
Russell Hardin describes an economic theory of what people "know" (I keep wanting to substitute "believe" for "know"). we can explain bits of knowledge that a given person has as being substantially affected by the costs and benefits of obtaining... MORE

Woodward and Hall on Current Policy

Finance: stocks, options, etc.
Arnold Kling
Interesting throughout. They join the rest of what I call the peanut gallery (those of us, left and right, who cannot understand the bank bailouts). The effect of the government's current policy is to pay off all claimants on financial... MORE

Canadian Banks and their Regulators

Finance: stocks, options, etc.
Arnold Kling
Tara Perkins writes, OSFI [Canada's bank regulator] ranks Canadian financial institutions on a ladder according to its perception of how much trouble they might be. Those at the top--that list typically includes the Big Five banks--are the good kids who... MORE

Test-Marketing

Books: Reviews and Suggested Readings
Arnold Kling
I asked, "If we had a product that allowed us to put questions and answers on your Web site, and this product wouold make all the e-mails go away, would you buy it?" Now here's a good lesson in... MORE

Let 'em Fail

Finance: stocks, options, etc.
Arnold Kling
Peter Wallison writes, it is my view that only the failure of a large commercial bank can create a systemic breakdown, and that nonbank financial firms--even large ones--are no more likely than GM to have this effect. For that reason,... MORE

Regulatory Dilemmas

Finance: stocks, options, etc.
Arnold Kling
I wrote this for the Mercatus Center. The case for accentuating regulatory differences. We want to provide consumers with bank deposits that are insured. To protect taxpayers, we want to prevent insured banks from taking significant risks. Therefore, banks should... MORE

Revenue Sharing

Fiscal Policy
Arnold Kling
USA Today reports, In a historic first, Uncle Sam has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments. Thanks to Nick Schulz for the pointer. The gist of the story is... MORE

George Selgin on Free Banking

Money
Arnold Kling
He says in an interview, Free banks compete, as it were, on an even playing field in issuing paper IOUs, which are basically what banknotes are. They have to redeem those IOUs on a regular basis: The competition among different... MORE

The Problem with Democracy

Political Economy
Arnold Kling
Will Wilkinson writes, People who finally gained equal political rights through a long democratic struggle cannot have been unreasonable to see democratic politics as a morally and politically progressive force. Basically, what I read into this sentence is the notion... MORE

Scott Sumner's Parenthetical Remark

Political Economy
Arnold Kling
He writes, [BTW, Bill Gates essentially taxed middle class consumers all over the developed world, and is giving almost all of the money to the disadvantged in poor countries. That's something governments don't do, and yet for his "monopoly profits"... MORE

Ed Leamer

Macroeconomics
Arnold Kling
He is one of the most interesting economic thinkers out there, and Russ Roberts does a nice job interviewing him. The podcast covers the lack of knowledge that we have about macroeconomics, the fact that so many business cycles seem... MORE

More Thoughts on Masonomics

Macroeconomics
Arnold Kling
Tyler and Alex have new textbooks on micro and macro. Both begin with the same anecdote. In 1787, the British government had hired sea captains to ship convicted felons to Australia...On one voyage, more than a third of the males... MORE

Gillian Tett on the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
The talk is here. Near the end, in response to a question about the Lehman Brothers failure, she explains something that I did not really understand before. My working hypothesis has been that the faliure of securitization was no big... MORE

The Three S's of Finance

Finance: stocks, options, etc.
Arnold Kling
Think of financial intermediation as consisting of three S's: Spreading (that is, using diversification of risk) Selecting (that is, choosing the right risks to take) Signaling (that is, convincing people that the intermediary is sound) In my favorite example of... MORE

Finance as a Network

Finance: stocks, options, etc.
Arnold Kling
Andrew G. Haldane recommends using an ecology/network metaphor to understand the financial system. An external event strikes. Fear grips the system which, in consequence, seizes. The resulting collateral damage is wide and deep. Yet the triggering event is, with hindsight,... MORE

The Case for Libertarian Evangelism

Political Economy
Arnold Kling
Edward P. Stringham and Jeffrey Rogers Hummel write, According to the Mises-Bastiat view, governments are able to get away with as much as they do only because they have the support of enough people. Bad policies persist only because the... MORE

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