Bryan Caplan and David Henderson

Arnold Kling: November 2009

An Author Archive by Month (77 entries)

The Party of No

Books: Reviews and Suggested Readings
Arnold Kling
The Washington Post reports, a new Washington Post poll also reveals deep dissatisfaction among GOP voters with the party's leadership as well as ideological and generational differences that may prove big obstacles to the party's plans for reclaiming power. The... MORE

China's Allocation of Capital

Growth: Causal Factors
Arnold Kling
Tyler Cowen thinks that China is making the wrong bet. Automobiles, steel, semiconductors, cement, aluminum and real estate all show signs of too much capacity. In Shanghai, the central business district appears to have high vacancy rates, yet building continues.... MORE

Falkenstein on Book 1

Books: Reviews and Suggested Readings
Arnold Kling
In Book 1, otherwise favorably, Eric Falkenstein writes, I found their general description of finance to have a misleading emphasis. There was an exposition where assets have risk characteristics that are obscured as they are passed up a food chain,... MORE

Nobel Conflict?

Economic Methods
Arnold Kling
Russ Roberts interviews Pete Boettke on Nobel Laureate Elinor Ostrom and the Bloomington School. As you listen, note near the end of a slight dig against the 2007 Nobel Prize topic of mechanism design. Ostrom's work would suggest that trial-and-error... MORE

Steve Horwitz and Mark Perry look at trends in household appliance prices and ownership. Perry writes, By almost every measure of appliance ownership, poor American households in 2005 had much better living conditions than the average American household in 1971... MORE

The Perpetual Foreclosure Crisis

Finance: stocks, options, etc.
Arnold Kling
This story reports, The Obama administration, battling a foreclosure crisis that shows no signs of relenting, will step up pressure on mortgage companies to do more to help people remain in their homes, officials said Saturday. This story was predictable.... MORE

Book 1, Book 2

Books: Reviews and Suggested Readings
Arnold Kling
Tyler Cowen recently said, if everyone read the book and was persuaded by it, would anything change for the better? An author should aim to write a book which matters. My latest book, Unchecked and Unbalanced is out. We might... MORE

The Great Depression as a Recalculation

Growth: Consequences
Arnold Kling
In an interview, Bruce Greenwald says, Basically, in the Depression a huge sector of the economy that everyone had always regarded as central, died. And it dies for an almost virtuous reason. That sector of course is agriculture. Because productivity... MORE

Reverse Stimulus

Growth: Causal Factors
Arnold Kling
Jerry O'Driscoll writes there is a name for this economic policy: corporatism. Big government favors selected big business and rewards big labor as a junior partner. It's not socialism, but the economic component of a fascist political program. Credit administered... MORE

The Financial Crisis Narrative

Finance: stocks, options, etc.
Arnold Kling
Douglas J. Elliott and Martin Neil Baily write, Risk taking, after all, is part of a dynamic market economy and drives economic growth, so we discourage risk taking at our peril. Am I the only one who sees the irony... MORE

Climate Science and Macroeconomics

Economic Methods
Arnold Kling
Nick Rowe compares and contrasts climate science with macroeconomics. After listing some similarities, he turns to differences. D1. Macroeconomists are trying to explain people; climate scientists aren't. People are harder to explain. In particular, people's behaviour depends on what they... MORE

Price Discrimination, Again

Business Economics
Arnold Kling
Some pushback from Karl SmithAdam Ozimek. Stores must sell their goods at a prices that cover the wholesale cost of the individual goods as well as the overhead costs of the store, like labor and the building lease. The amount... MORE

Ronald Brownstein writes To save costs, Democrats mostly want to change the incentives for providers. Republicans mostly want to change the incentives for patients by shifting toward a model where insurance covers only catastrophic expenses and people pay for more... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Arnold Kling
In order of satisfaction: 1. Empire of Liberty,by Gordon Wood 2. The Great Transformation, by Karl Polanyi 3. Masters and Commanders, by Andrew Roberts 4. Startup Nation, by Dan Senor and Saul Singer Wood is giving us the history of... MORE

Price Discrimination Explains Everything

Business Economics
Arnold Kling
In my high school economics class, my students asked me to explain why there are sales on "Black Friday." The class period was over, so I only had time to blurt out "price discrimination" without getting into an explanation of... MORE

By Popular Demand: a Kindle Edition

Books: Reviews and Suggested Readings
Arnold Kling
From Poverty to Prosperity is available on Amazon's Kindle. I appreciate the publisher's responsiveness on this. Publishers have tended to think of Kindle editions as like paperbacks--you don't come out with one right away in order to avoid cannibalizing hardback... MORE

Macro and the Organizational Capital Model

Macroeconomics
Arnold Kling
Robert Shiller writes, Consider this possibility: after all these months, people start to think it's time for the recession to end. The very thought begins to renew confidence, and some people start spending again -- in turn, generating visible signs... MORE

Styles of Thought in Economics

Economic Methods
Arnold Kling
Seth Roberts interviews Tyler Cowen, who says, I am very interested in the topic of "styles of thought in economics." Robert Solow, my thesis adviser, was a big fan of starting with simple numerical examples. The point is that you... MORE

A Good Line

Labor Mobility, Immigration, Outsourcing
Arnold Kling
From Jeff Jacoby Those immigrants didn't come here in order to be lawbreakers; they broke a law in order to come here. If you had a store that was the only place people could go to buy bread, and people... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
Ben Casnocha is the first to write a review. An excerpt: This is a book for people interested in economics first, entrepreneurship second, and globalization third. It's a book for people looking for contemporary insight on the ideas of people... MORE

Axel Leijonhufvud, Recalculation Theorist

Macroeconomics
Arnold Kling
What I call the Recalculation Story has many origins. One of them is Axel Leijonhufvud. He recently wrote, The economy is an adaptive dynamical system. It possesses the self-regulating, "equilibrating" properties that we usually refer to as "market mechanisms". But... MORE

A Turning Point?

Politics and Economics
Arnold Kling
Those of us who are opposed to the concentration of power in the hands of technocrats have had much to be depressed about over the past year. However, sometimes fortunes change. I wonder if this past week will come to... MORE

Are Markets Efficient? Krugman vs. Kling

Finance: stocks, options, etc.
Arnold Kling
He says they are: Now, you could and should be worried if this thing looked like a great bubble -- if long-term rates looked unreasonably low given the fundamentals. But do they? Long rates fluctuated between 4.5 and 5 percent... MORE

From Poverty to Prosperity Watch

Growth: Causal Factors
Arnold Kling
Josh Lerner writes, Upon Singapore's independence in 1965--three years after Jamaica's own establishment as a nation--the two nations were about equal in wealth: the gross domestic product (in 2006 U.S. dollars) was $2,850 per person in Jamaica, slightly higher than... MORE

Dominating the Narrative

Economic History
Arnold Kling
Will Wilkinson writes, Ygesias says, "I believe that absent the [TARP] bailout, we'd be looking at even higher unemployment today." I think this is a plausible claim. But I don't know of a satisfactory way to evaluate it. It's plausible... MORE

Are American Doctors Overpaid?

Economics of Health Care
Arnold Kling
Sherry Glied, Ashwin Prabhu, and Norman Edelman do not think so. The value of physicians' underlying human capital is estimated by forecasting an age-earnings profile for doctors based on the characteristics in youth of NLSY cohort participants who subsequently became... MORE

The Government/Slavery Analogy

Books: Reviews and Suggested Readings
Arnold Kling
Reacting to my recent post on the analogy Robert Higgs drew between libertarianism and abolitionism, a commenter wrote, Hans Hoppe, hardcore libertarian, once described what may be the crucial difference between a democratic state and slavery: the latter was private... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
The Kauffman Foundation conducted a survey of entrepreneurs. The findings can be inferred from the table of contents. Experience, Management, and Luck: The Keys to Success Professional Networks, Education, Funding, Personal Networks: Important Location, Investor Advice, Alumni Networks, and Regional... MORE

Was TARP Necessary?

Finance: stocks, options, etc.
Arnold Kling
Simon Johnson writes, There is no question that passing the TARP was the right thing to do. In some countries, the government has the authority to provide fiscal resources directly to the banking system on a huge scale, but in... MORE

My Responses to Readers Questions

Economic Education
Arnold Kling
In response to Bryan's post, readers posed some interesting questions to ask in a survey of members of the American Economic Association. Is there any reason besides a desire to learn, or to make entry into a Ph.D. programme easier... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Paul DeGrauwe writes, My contention is that the rational expectations models are the intellectual heirs of these central planning models. Not in the sense that individuals in these rational expectations models aim at planning the whole, but in the sense... MORE

Unchecked and Unbalanced Watch

Books: Reviews and Suggested Readings
Arnold Kling
Robert Higgs writes, Slavery existed for thousands of years, in all sorts of societies and all parts of the world. To imagine human social life without it required an extraordinary effort. Yet, from time to time, eccentrics emerged to oppose... MORE

From Poverty to Prosperity Watch

Books: Reviews and Suggested Readings
Arnold Kling
Daron Acemoglu writes, People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions -- the... MORE

The Financial Regulatory Chess Game

Finance: stocks, options, etc.
Arnold Kling
Edward J. Kane writes, Regulation is best understood as a dynamic game of action and response, in which either regulators or regulatees may make a move at any time. In this game, regulatees tend to make more moves than regulators... MORE

Repealing the Laws of Supply and Demand

Economics of Health Care
Arnold Kling
Megan McArdle writes, When you increase the demand for something without increasing the supply, you either get price increases, or shortages. Neither is what the authors are promising for their bills. She is referring, of course, to health care legislation,... MORE

The Economics of Electric Cars

Energy, Environment, Resources
Arnold Kling
I have begun reading Startup Nation, a book about Israeli entrepreneurialism. Unfortunately, the first anecdote is about an attempt, requiring huge capital commitments and considerable government intervention, to create an infrastructure for electric cars. The idea is to build a... MORE

My Alternative Health Care Bill

Economics of Health Care
Arnold Kling
Tyler Cowen offers his, which strikes me as overly complicated. The bill I would propose would be one that encourages experimentation at the state level. Offer to support an experiment that allows an individual state to adopt single-payer, while allowing... MORE

No Bubbles Here. Move Along Now

Macroeconomics
Arnold Kling
WSJ Real Time Economics reports on a speech by the Fed's Don Kohn, Our abilities to discern the 'correct' values of assets is quite limited. At present, however, the prices of assets in U.S. financial markets do not appear to... MORE

A Minsky Recovery?

Labor Market
Arnold Kling
As always, there are conflicting views on the economic outlook. Daniel Gross is optimistic. In the third quarter, productivity--econospeak for companies doing more work with the same amount of labor--rose at a 9.5 percent annual rate... But just as hamsters... MORE

So You Want to Do Good

Growth: Causal Factors
Arnold Kling
A question from a reader: I teach an introduction to ag econ class, and today a young student came to chat with me about economic development. She is sincerely and passionately interested in helping developing countries reach our prosperity. She... MORE

An Insider and and Outsider

Finance: stocks, options, etc.
Arnold Kling
The alternate universes inhabited by insiders and outsiders are evident in two links from Mark Thoma. First, Bill Dudley gives us the insider view. Liquidity risk will never be eliminated, nor should it. The preferences of borrowers to borrow long... MORE

Unchecked and Unbalanced Watch

Political Economy
Arnold Kling
Michael Strong talks about special economic zones as a way of creating competition in governance. The idea seems similar to Paul Romer's concept of charter cities. Strong is optimistic that the state will "wither away" (as Marx would put it)... MORE

Cap Creditors' Bailouts?

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts tucks an interesting suggestion into his diatribe against the arrogance of financial regulators. A ceiling of 50 cents on the dollar for creditors and lenders when the institutions they fund become insolvent is a natural place to start... MORE

Marginal Tax Rates, Again

Fiscal Policy
Arnold Kling
A reader recommends a paper by Laurence J. Kotlikoff and David Rapson. The reader views this paper as contradicting the article I linked to earlier. Kotlikoff and Rapson report marginal tax rates of closer to 40 percent than 100 percent... MORE

Health Care: Let the Games Begin

Economics of Health Care
Arnold Kling
Gene Steuerle writes, Here is the bottom line on how employers and employees together can maximize what they get from government. Many employers who don't provide insurance today will probably just choose to pay the tax ($400-per-employee under one scenario... MORE

Lessons from Banking History

Finance: stocks, options, etc.
Arnold Kling
Piergiorgio Alessandri and Andrew G. Haldane write, Historically, the link between the state and the banking system has been umbilical. Starting with the first Italian banking houses in the 13th century, banks were financiers of the sovereign. Sovereign need was... MORE

Book Update: Available for Order

Books: Reviews and Suggested Readings
Arnold Kling
Finally, From Poverty to Prosperity is available for order at Amazon. It will be in stock there in a few days. I should warn you that it is an intellectually heavy book. It is not the sort of thing that... MORE

A Proposal to Save Jobs

Fiscal Policy
Arnold Kling
A Wall Street Journal blog writes State and local governments in the U.S. may be forced to cut 900,000 jobs next year without additional help from the federal government, according to a report released by a prominent liberal think tank... MORE

The Great War

Economic History
Arnold Kling
John Quiggin writes, The names of Asquith, Bethmann-Hollweg, Berchtold and Poincare are barely remembered, yet on any reasonable accounting they belong among the great criminals of history. Not only did they create the conditions for war, and rush (eagerly in... MORE

Marginal Tax Rates

Income Distribution
Arnold Kling
Clifford F. Thies writes, When you take into account the loss of means-tested benefits (e.g., cash assistance, food stamps, housing subsidies, and health insurance), and the taxes that people pay on earned income, the return to working is essentially zero... MORE

Explaining the Direction of Health Care Refrom

Economics of Health Care
Arnold Kling
The most important political fact affecting health care reform is the sizable Democratic majority. There are too many Democrats in the House and Senate for a bipartisan bill to make sense. Given that we are going to have a partisan... MORE

Unchecked and Unbalanced Watch

Political Economy
Arnold Kling
John Kay writes, Control of rent-seeking requires decentralisation of economic power. These policies involve limits on the economic role of the state; constraints on the concentration of economic power in large business; constant vigilance at the boundaries between government and... MORE

Status Competition

Political Economy
Arnold Kling
Gordon Wood, in Empire of Liberty, writes, After all, wealth, compared to birth, breeding, ethnicity, family heritage, gentility, even education, is the least humiliating means by which one person can claim superiority over another; and it is the one most... MORE

Read it and Weep

Economics of Health Care
Arnold Kling
Various pundits offer suggestions for controlling health care costs, hosted by the New York Times. My proposal (health care vouchers) has zero chance of being enacted. You may not like it, anyway. The other pundits' proposals, even if they were... MORE

Should College Attendance be Subsidized?

Economics of Education
Arnold Kling
Guess who said : Going to college is a lot like standing up at a concert to see better. Selfishly speaking, it works, but from a social point of view, we shouldn't encourage it. Answer here.... MORE

Innovation and entrepreneurship are amazingly good things...and predatory government and corruption are amazingly bad things. That is our new book (the one that Amazon doesn't want you to read) standing on one foot. From this podcast, where I am... MORE

More Scott Sumner

Macroeconomics
Arnold Kling
He writes, I think that one thing that separates me from other macroeconomists is that I see short run changes in NGDP as being powerfully impacted by changes in future expected NGDP. Thus if the expected level of NGDP one,... MORE

Paul Collier on Democracy

Political Economy
Arnold Kling
He writes, What incumbents fear most is not losing an election, but being overthrown by their own military. When the international community can protect a government from such a threat, it should do so, conditional upon the election being properly... MORE

Macroeconomic Disconnects

Macroeconomics
Arnold Kling
Scott Sumner brings up some difficulties for anyone who would argue that monetary policy is not a sufficient tool for fighting the recession. He is not arguing from his yet-to-be-articulated new paradigm. He is stating traditional macro.... MORE

Steinbrenner U.

Economics of Education
Arnold Kling
Inside Higher Ed reports, A small number of colleges have become much more competitive over recent decades, according to Caroline M. Hoxby, an economist at Stanford University. But her study -- published by the National Bureau of Economic Research --... MORE

Charting Structural Economic Change

Labor Market
Arnold Kling
If all goes well this link will take you to an article (with cool charts!) where I make an empirical case for telling the Recalculation story rather than pretending that we have the same economy that existed in the 1930's... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
It looks like I will have two books come out in the same month. The first one will be out in two weeks, but you cannot pre-order it on Amazon. The second one will be out in three weeks, and... MORE

Money--Designed or Emergent?

Economic History
Arnold Kling
George Selgin writes, Economists generally take for granted, if only tacitly, a teleological view of money's historical development, according to which it first takes the "primitive" form of mundane commodities such as cowrie shells and cacao seeds, and then advances... MORE

Two Links

Behavioral Economics and Rationality
Arnold Kling
Both feature Tyler Cowen. Here (or perhaps you should start here), he talks about stories. It is classic Tyler, playing cat and mouse games with your head. Basically, he is saying that stories have an advantage in that they serve... MORE

Wisdom Worth Repeating

Macroeconomics
Arnold Kling
Tyler Cowen repeats a tweet, and I will too. It comes from Masonomist Garett Jones. Workers mostly build organizational capital, not final output. This explains high productivity per 'worker' during recessions. This is yet another difference between the labor force... MORE

Reducing Real Compensation

Labor Market
Arnold Kling
Alex Tabarrok highlights a post by David Beckworth on the sharp decline in nominal spending in 2008-2009. Alex writes, We could use some inflation to get back on track. Nominal wages are simply not flexible enough to get the job... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
The book that Amazon does not want you to read can now be ordered from Barnes and Noble. The cover image is incorrect. The book itself is something that Nick and I are very proud of.... MORE

Thoughts on the Macro Paradigm

Macroeconomics
Arnold Kling
Scott Sumner's latest deserves comment. Before I do that, however, I want to say that yesterday I was trying to teach the consequences of paying interest on reserves to my bright high school students. They got, correctly, that paying interest... MORE

R & R

Finance: stocks, options, etc.
Arnold Kling
Meaning Ken Rogoff and Carmen Reinhart, of course, both of whom appeared on the PBS New Hour November 2 (fast forward to about minute 27), talking about our financial crisis in the context of historical crises. Rogoff's first sentence is... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
From someone who works at one of the companies involved in publishing our book: The issue with this book is that the record is locked. What this means is that either Encounter or the publisher has made a sticky change... MORE

When Government Gets Desperate

Fiscal Policy
Arnold Kling
Megan McArdle does not approve of California's revenue-raising tactic. No, the government didn't actually increase taxes; it just raised the withholding. They'll give any extra funds back to taxpayers in April, and presumably fewer people will have to write checks... MORE

It's the Prices, Stupid

Economics of Health Care
Arnold Kling
That was the title of a famous article claiming that U.S. Health care spending is high because provider charges are excessive. Now, Ezra Klein (pointer from Tyler Cowen) brandishes charts furnished by an insurance industry trade group that purport to... MORE

Tyler Without Tyler

Growth: Consequences
Arnold Kling
Edge devotes its latest symposium to how humans will process information in the current era. Tyler Cowen's latest book speaks to that issue, but he is nowhere to be found on the symposium. Still, I believe that Nick Bilton does... MORE

Financial Markets vs. Kling

Finance: stocks, options, etc.
Arnold Kling
Paul McCulley writes, a bull flattening bias of the Treasury curve, with longer-dated rates falling toward the near-zero Fed policy rate, can be viewed as a consensus view that the level of the output/unemployment gap plumbed during the recession is... MORE

Morning Links

Macroeconomics
Arnold Kling
1. David Warsh offers a suggestion for the most prestigious female economist. The answer is probably Carmen Reinhart, of the University of Maryland, when measured by citation counts, the yardstick commonly used to gauge professional fame. Reminder that you can... MORE

Outsiders

Books: Reviews and Suggested Readings
Arnold Kling
Am I too weak to resist financial crisis porn? The latest example of my shameful indulgence is The Greatest Trade Ever, by Gregory Zuckerman. As with Andrew Ross Sorkin's Too Big to Fail, I could not put it down. Even... MORE

Book Update

Books: Reviews and Suggested Readings
Arnold Kling
Nick Schulz did some nosing around, and he thinks this might explain some of the peculiarities of the publication process with our book. Perseus Distribution, a member of The Perseus Books Group, and Encounter Books announced...that they have entered into... MORE

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