Bryan Caplan and David Henderson

Arnold Kling: June 2009

An Author Archive by Month (51 entries)

Resources for Home-Schooled Economists

Economic Education
Arnold Kling
reviews of economic research. Pointer from David Warsh... MORE

The Forked Tongue Speaks

Economics of Health Care
Arnold Kling
There is a disconnect in the Obama administration's rhetoric on health care. On the one hand, the administration points out that our current health care financing system, particularly for government-funded programs, is unsustainable. This suggests an urgent need for... MORE

Nobody Tell Tyler Cowen

Behavioral Economics and Rationality
Arnold Kling
From Scientific American: One group that does not value perceived losses differently than gains are individuals with autism, a disorder characterized by problems with social interaction. When tested, autistics often demonstrate strict logic when balancing gains and losses, but this... MORE

Kevin Murphy Interviewed

Labor Market
Arnold Kling
Definitely worth reading, with a variety of topics covered. On one topic, he says It's difficult to look at, for example, the very low unemployment rates we saw in the early 2000s and say that represented an economy in which... MORE

A Regulatory History Lesson

Finance: stocks, options, etc.
Arnold Kling
The Obama Administration's 89-page report on financial regulatory reform says on page 3, Market discipline broke down as investors relied excessively on credit rating agencies. To me, attributing the use of credit rating agencies to a breakdown in market discipline... MORE

Buy Global

International Trade
Arnold Kling
Don Boudreaux always gets to the heart of these issues. Suppose, for example, that shirts can be made in one of two ways. The first is by hand. It costs a shirt maker using this method--regardless of how many shirts... MORE

Fixing the Health Care System

Economics of Health Care
Arnold Kling
Melinda Beeuwkes Buntin and David Cutler write, There are health care institutions that have spent large sums on health IT with zero or even negative returns; some health IT reforms made matters worse and had to be uninstalled. The reason... MORE

Posner and Kling on Financial Regulation

Finance: stocks, options, etc.
Arnold Kling
Concerning the Obama Administration's white paper, Richard Posner writes, The report is scathing about the financial incontinence of bankers and consumers but complacent about regulatory failures. UPDATE: As a commenter notes, my volume is very low relative to the moderator's.... MORE

Fool's Gold

Finance: stocks, options, etc.
Arnold Kling
Gillian Tett's book on the financial crisis is the one that I would recommend at this point. Some notes and excerpts below. This may reflect my biases, but what I took away from the book was the co-ordination between regulators... MORE

Regulation that Encouraged Herding

Finance: stocks, options, etc.
Arnold Kling
Avinash Persaud writes, During booms, asset prices rise and measured risks fall. Acting prudently, financial firms will feel it is safe to expand lending. All financial firms expanding together will lead to a scramble for assets that will lead to... MORE

Health Care Non-reform Watch

Economics of Health Care
Arnold Kling
I argue, The debate we should be having is over whether restraint in our use of medical services should be initiated by government officials or left to consumers. The Democrats want to avoid that debate. Instead, they make it sound... MORE

Matt Ridley vs. My Most Wrong Belief

Books: Reviews and Suggested Readings
Arnold Kling
I have temporary custody of a draft manuscript of a new book by Matt Ridley. The title of the book is tentative, but the subtitle is "Economic progress and the evolution of the future." Once the book comes out, it... MORE

Financial Reform, 2

Finance: stocks, options, etc.
Arnold Kling
This is the promised follow-up to Friday's post. These are further notes from the conference on financial regulatory reform.... MORE

Bad Bets or Co-ordination Failure?

Finance: stocks, options, etc.
Arnold Kling
James Kwak discusses an issue that has been dogging the analysis of the financial crisis since the beginning, and which has resurfaced now that people are looking at what steps to take to reform the financial system. I put the... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
Charles I. Jones and Paul M. Romer write, By something like 1300 A.D., China was the most technologically advanced country in the world, with a large integrated population. According to the Lee model, it should have persisted indefinitely as the... MORE

Financial Reform

Upcoming Events
Arnold Kling
I will be interviewed on June 25th at 2 PM eastern time in a "webinar," which means that if you participate live then you can ask questions. You can register here. I have attended a couple of these as a... MORE

Robin Hanson on the Signalling Process

Behavioral Economics and Rationality
Arnold Kling
He writes, a boss who has known you for years may not promote you unless you get a better degree, even if that teaches you nothing useful for your job. He might not hire you without that degree, even if... MORE

The Financial White Paper: A Fabulous Tale

Finance: stocks, options, etc.
Arnold Kling
Once upon a time, there was a summer camp. To entertain the kids, the counselors handed out matches1, lighter fluid2, and newspapers3. The camp burned down. Afterwards, a white paper was written, proposing more supervision by counselors. It called for... MORE

Defending what Paul Krugman Wrote

Macroeconomics
Arnold Kling
In 2002, he passed along a joke that the economy needed a housing bubble. Krugman is controversial, so the post generated comments on this blog and elsewhere, some of which are overly "gotcha" in character. Some points I would make:... MORE

What's Wrong with the Financial Regulation White Paper

Finance: stocks, options, etc.
Arnold Kling
I am reading this draft. Also of interest is this interview with President Obama.... MORE

Things I'm Glad I Never Said

Macroeconomics
Arnold Kling
Paul Krugman, writing in August of 2002: To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan... MORE

Help with the Spinach

Economics of Health Care
Arnold Kling
In health care reform, I have described cost controls as the spinach and expansion of coverage as the dessert. I continue to predict that the Democrats will first go for expansion of coverage in a way that alienates Republicans, and... MORE

Audience Questions, 2

Macroeconomics
Arnold Kling
Why is a FICA cut better than a federally-funded sales tax holiday? The latter: - affects everyone, not just workers - is progressive - encourages consumption without delaying deleveraging The big advantage of a sales tax holiday is that,... MORE

Simon Johnson on Geithner and Summers

Finance: stocks, options, etc.
Arnold Kling
He is not happy with the "foundation" for regulatory reform proposed by the current and former Treasury Secretaries. Their view: Regulation is overly focused on safety and soundness of individual banks. Reality: There was a complete failure of safety and... MORE

One-Party State Watch

Arnold Kling
You can watch what the demographers say here. Click on the video link.... MORE

Audience Questions

Macroeconomics
Arnold Kling
Feel free to put constructive questions in the comments. Here are two questions that I recently received, one on health care and one on Keynesian economics. On health care, actually two questions: You asked thequestion why is health care something... MORE

Financial Regulation in Hindsight

Finance: stocks, options, etc.
Arnold Kling
My views are here. I am also skeptical about the claim that we needed a "systemic risk regulator" to prevent the crisis. This would be true if most of the financial damage could not have been prevented by any individual... MORE

Employer-Provided Health Insurance

Economics of Health Care
Arnold Kling
I write, We should aim to phase out employer-provided health insurance. However, instead of trying to create a household insurance market that reconstitutes the unsustainable features of employer-provided health insurance, we need to allow for radical innovation in the very... MORE

Personality and Econometrics

Behavioral Economics and Rationality
Arnold Kling
Bryan recently put up two interesting posts, one on personality, the other on econometrics. On personality, he points to some analysis saying that the correlation is higher between certain personality traits and life outcomes than it is between socioeconomic status... MORE

One-Party State watch

Political Economy
Arnold Kling
Dan Balz summarizes the grim demographic statistics. He quotes Robert Lang of Virginia Tech. "There's just not enough rural folks and small-city people left in America." For Republicans, the most hopeful statistic is this: Democrats lost white college graduates by... MORE

Sociology and Masonomics

Economic Methods
Arnold Kling
Bryan writes, We still think about supply and demand, but we also think about policy, psychology, behavioral genetics, and much more. Some random comments: I wrote about Masonomics as thinking about incentives, signaling, institutions, and evolution. I have heard Nobel... MORE

From Poverty to Prosperity Watch

Growth: Causal Factors
Arnold Kling
Daron Acemoglu writes, [Prior to 1800,] growth was never based on continuous technological innovations; thus it never resembled the technology-based growth described in Chapters 13-15. Third, in most cases economic institutions that would be necessary to support sustained growth did... MORE

One-Party State Watch

Political Economy
Arnold Kling
Newt Gingrich connects some dots. In 2008 alone, the UAW gave $4,161,567 to the Democratic Party, including Barack Obama. In return, the UAW received 55 percent of Chrysler and 17.5 percent of GM, plus billions of dollars.... MORE

Inequality of Political Power

Political Economy
Arnold Kling
It's hard to decide what to excerpt from Will Wilkinson's article. A fresh-faced 31-year-old, Deese dropped out of Yale Law School last year to work for Hillary Clinton's presidential campaign. When Clinton sank, Deese skipped over to the winning ship,... MORE

One-Party State Watch

Politics and Economics
Arnold Kling
The Bradley Symposium transcript is now available. Mitch Daniels (p.13): You can be a silver-spoon, blue-blood, wind-surfing, coastal elitist, but if you wear the Democratic label you are presumed to be connected and empathetic and to understand the problems of... MORE

More on the Fischer Black Model

Finance: stocks, options, etc.
Arnold Kling
Some more thoughts on Fischer Black's model of business cycles, following up on my earlier post on Tyler Cowen's piece. 1. Black thinks of us as living in a CAPM world. There is no reward for idiosyncratic risk (risk that... MORE

The Purpose of the Public Health Insurance Plan

Economics of Health Care
Arnold Kling
Ezra Klein writes, The inclusion of a strong public insurance option has become, for most observers I know, the single most recognizable marker for victory. If the public plan exists, liberals have won. If it's eliminated, or neutered, then conservatives... MORE

Justin Fox, Fischer Black, Tyler Cowen

Finance: stocks, options, etc.
Arnold Kling
Fox, The Curious Capitalist, has a new book, called The Myth of the Rational Market. He spent a lot of time trying to piece together the history of the theory of efficient financial markets--random walks, capital asset pricing model, option... MORE

Forecasting

Macroeconomics
Arnold Kling
Tyler Cowen writes, "Dormant inflation" will spring to life, at some point quite rapidly, and the Fed will choose to tighten. Five to six percent inflation for a while would be OK but we will be faced with the prospect... MORE

On Being Certain

Books: Reviews and Suggested Readings
Arnold Kling
Robert Burton writes, The message at the heart of this book is that the feelings of knowing, correctness, conviction, and certainty aren't deliberate conclusions and conscious chohices. They are mental sensations that happen to us. That is from the conclusion... MORE

Does Cooperation Lead to Socialism?

Political Economy
Arnold Kling
Kevin Kelly says yes: Did we really believe we could collaboratively build and inhabit virtual worlds all day, every day, and not have it affect our perspective? The force of online socialism is growing. Its dynamic is spreading beyond electrons--perhaps... MORE

So Many Narratives

Books: Reviews and Suggested Readings
Arnold Kling
Eric Falkenstein summarizes many books on the financial crisis, concluding For me, the best explanation comes from two parts. Stan Liebowitz's account on how we slowly eroded mortgage standards with the best intentions, led by academia, regulators, legislators, and investment... MORE

Some Intellectual History for Matt Yglesias

Macroeconomics
Arnold Kling
He writes, the decision has been made to somewhat arbitrarily impose the view that macro models must be grounded in micro foundations. Readers of this blog know that I would be the last person to defend economic methods in macro... MORE

Lectures on Macroeconomics, No. 16

Macroeconomics
Arnold Kling
This lecture will describe inflation as a fiscal phenomenon. You have heard that inflation is, anywhere and everywhere, a monetary phenomenon. This lecture will take a more nuanced view. The conventional wisdom would say that we can run large deficits... MORE

Orszag and Hanson on McAllen's medical costs

Economics of Health Care
Arnold Kling
Peter Orzsag writes, McAllen's per capita expenditures grew to nearly twice the national average - driven primarily by local norms that tend towards heavier use of discretionary services - such as diagnostic testing and surgical versus less invasive interventions -... MORE

The Fiscal Policy Lag

Fiscal Policy
Arnold Kling
Keith Hennessey has another must-read post. I believe the Administration made an enormous mistake in its legislative implementation of the stimulus. As a result, the boost to GDP will come six to nine months later than it needed to (maybe... MORE

Health Care Policy

Economics of Health Care
Arnold Kling
You can listen to me, giving what felt at the time like a good talk. Also, I recommend Keith Hennessey You cannot magically slow health spending growth without proposing policy changes that affect incentives and behavior. If the President is... MORE

Marcus Welby Was Greedy, Too

Economics of Health Care
Arnold Kling
From my letter to the editor at the Washington Post: In 1960, 50 percent of personal health-care spending was paid for by patients out of pocket. Today, that figure is about 10 percent. We will never again see a patient-centered... MORE

One-Party State Watch

Political Economy
Arnold Kling
I went to an event on the future of conservatism, described here.... MORE

Free Lunch!

Economics of Health Care
Arnold Kling
The President's Council of Economic Advisers writes, We estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2 percent in... MORE

From the abstract of a recent NBER working paper: we solve the stochastic neoclassical growth model with recursive preferences using four different approaches: second- and third-order perturbation, Chebyshev polynomials, and value function iteration. These computations tell us how many angels... MORE

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