Bryan Caplan and David Henderson

Arnold Kling: December 2009

An Author Archive by Month (90 entries)

Comes the Revolution...

Political Economy
Arnold Kling
Glenn Reynolds discusses using charitable donations to fund the now-killed D.C. school voucher program. In Unchecked and Unbalanced, one of the reforms I propose is to allow citizens rather than Congress to allocate some of their tax dollars to their... MORE

Manzi's Manifesto, continued

Political Economy
Arnold Kling
Responding to my question about the meaning of the term "social cohesion," he writes, the widespread and irrational willingness and propensity to sometimes and to some extent sacrifice narrowly-defined rational self-interest to the needs of a greater collective, and the... MORE

The Perpetual Foreclosure Crisis, Continued

Finance: stocks, options, etc.
Arnold Kling
Peter J. Wallison writes, On Christmas Eve, when most Americans' minds were on other things, the Treasury Department announced that it was removing the $400 billion cap from what the administration believes will be necessary to keep Fannie Mae and... MORE

Tyler Cowen writes, We're also seeing job losses in virtually every sector. It's not for instance a "sectoral shift away from services and into matchstick production and tungsten." It's a shift out of jobs which are revealed as unprofitable and... MORE

MRV watch

Books: Reviews and Suggested Readings
Arnold Kling
Bryan's Myth of the Rational Voter was #3 on a list of the top ten pro-liberty books of the decade, as selected by a panel of 22 advocates of classical liberalism. Two of Bill Easterly's books made the list. Pointer... MORE

You Should Read FP2P

Books: Reviews and Suggested Readings
Arnold Kling
Or so says Yuval Levin. I just can't recommend it enough. It's a deeply insightful look at where economics is going and why that should matter to us. We also get a plug from economics instructor Brooks Wilson.... MORE

Various Follow-ups

Growth: Causal Factors
Arnold Kling
These relate to recent discussions on this blog. 1. Clifford Winston and Robert Crandall on market failure and government failure, from Forbes last October. 2. A review of an optimistic book by Gregg Easterbrook. Mark Perry ties this back to... MORE

Market Failure and Government Failure, Again

Political Economy
Arnold Kling
In the Christian Science Monitor, Nick Schulz and I write, When innovation-driven excesses and imbalances are recognized in the marketplace, the system can correct itself quickly. This is less the case when government policy failure occurs. The theme is that... MORE

Stimulus Without Multipliers

Fiscal Policy
Arnold Kling
Paul Krugman provides an analysis showing arithmetically that the fiscal stimulus will have a declining contribution to GDP growth, even as stimulus spending increases. What is interesting to me about this analysis is that the concept of a multiplier has... MORE

Market Failure and Government Failure

Regulation and Subsidies
Arnold Kling
That is the topic of a self-recommending podcast in which Russ Roberts interviews Clifford Winston. Actually, although I have not had time to listen (I am on travel), reading over the notes on the podcast highlights this looks like one... MORE

Hmmm

Behavioral Economics and Rationality
Arnold Kling
In Rand's study...There were more than two hundred grocer's cartons, each divided into sections and filled to the brim with colored stones Rand had collected and sorted. This is from Anne C. Heller's biography of Ayn Rand. Based on... MORE

Measured Productivity and Actual Productivity

Growth: Consequences
Arnold Kling
Is measured aggregate productivity accurate? Probably not, but I can think of important reasons that it would be understated as well as overstated. 1. For goods where there is a long history of measurement, productivity growth tends to be higher... MORE

Suits vs. Geeks

Business Economics
Arnold Kling
Tyler Cowen asks why pay differentials in software development do not reflect the large differences in productivity across developers. James Kwak gives what would have been my answer. the way salaries are set at companies. At a high level, they... MORE

Another Recalculation Theorist

Macroeconomics
Arnold Kling
Joseph Lawler writes, The beauty of the structural change theory of jobless recoveries is that it is testable. If hiring is determined by shifts in what the economy produces, then the data will show that permanent layoffs outnumber temporary layoffs... MORE

A Sentence to Ponder

Behavioral Economics and Rationality
Arnold Kling
from Razib: More often when you strip away adherence to theology you do not get atheism, you get animism. Ponder his whole post.... MORE

Selective Memory

Behavioral Economics and Rationality
Arnold Kling
The New Republic has a list of successful progressive reforms that conservatives opposed. It focuses on quotes from conservatives that today look bad. My guess is that one could comb through the back issues of their magazine and find quotes... MORE

A Dedicated User of the Harvard-Goldman Filter

Finance: stocks, options, etc.
Arnold Kling
The latest edition of What Went Wrong is up. This is a series of video Q&A's with various experts on the financial crisis. So far, I have been generally disappointed. In the recent episodes, Glenn Hubbard says nothing shocking. Bill... MORE

Time Consistency

Behavioral Economics and Rationality
Arnold Kling
Time consistency is one of those terms that economists throw around, and it has come up several times recently on this blog. It might be worth defining/explaining. The situation arises when someone makes a commitment to take an action in... MORE

Three Links from Mark Thoma

Finance: stocks, options, etc.
Arnold Kling
Chosen from among those here. 1. Gretchen Morgenson and Louise Story write, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then... MORE

The Power of Productivity

Growth: Causal Factors
Arnold Kling
Mark Perry writes, manufacturing employment in the United States fell below 12 million this year for the first time since 1946, and is now at the lowest level (11,648,000 manufacturing jobs in November) since March of 1941 According to the... MORE

Brad DeLong's Dangerous Modeling

Macroeconomics
Arnold Kling
From a short paper he calls Picking up Nickels: The more speculators ex ante expect bailouts and the more speculators are impressed with their own cleverness, the more hesitant should the central bank be about providing monetary accommodation. The paper... MORE

Super-FP2P

Information Goods, Intellectual Property
Arnold Kling
If Nick and I ever do a sequel to From Poverty to Prosperity, we should interview Hal Varian. Watch this talk, which has several interesting observations, particularly about how businesses are restructuring on the basis of new communication technology and... MORE

Kling-Schulz on Intellectual Property

Information Goods, Intellectual Property
Arnold Kling
In From Poverty to Prosperity, we write, One broad alternative to restrictive patents and copyrights would be for a patronage model to support the development of new recipes...People with friends or family members afflicted with a particular ailment could form... MORE

Creative Destruction

Business Economics
Arnold Kling
William Easterly writes, The Wall Street Journal featured this awesome chart yesterday. Only 8 of top global 25 companies in 1999 are still in top 25 in 2009, and some of them have shed a lot of market cap. One... MORE

David Brooks on Book 1

Books: Reviews and Suggested Readings
Arnold Kling
From Poverty to Prosperity gets a nice review from David Brooks. He writes, "From Poverty to Prosperity" includes interviews with major economists, and it is striking how they are moving away from mathematical modeling and toward fields like sociology and... MORE

Menzie Chinn's Course on the Crisis

Finance: stocks, options, etc.
Arnold Kling
The syllabus looks interesting, but I think there are two topics that I would emphasize more if I were teaching it. 1. How did we get here? Most people seem to start their history of the crisis in about 2007... MORE

Banana Republic Watch

Finance: stocks, options, etc.
Arnold Kling
A commenter points to an essay by Rob Arnott. The lion's share of the debt reduction may well be accomplished through reflation. We can eliminate half of our debt in 15 years if our inflation runs 5% higher than our... MORE

Unchecked and Unbalanced Podcast

Books: Reviews and Suggested Readings
Arnold Kling
Tom Keene interviews me. He likes the fact that Unchecked and Unbalanced is short--only 116 pages.... MORE

The Regulators' Cognitive Failure

Finance: stocks, options, etc.
Arnold Kling
The Washington Post reports, The Fed's failure to foresee the crisis or to require adequate safeguards happened in part because it did not understand the risks that banks were taking, according to documents and interviews with more than three dozen... MORE

Cyclical Monetary Theory

Macroeconomics
Arnold Kling
Read Scott Sumner's post. I would distill it as arguing that macroeconomics and monetary theory follow a cyclical pattern. 1. During good times, such as the Great Moderation, a view develops that the monetary authority can stabilize the economy by... MORE

Joshua Aizenman and Nancy Marion write, The estimated impact of inflation on today's debt/GDP ratio is larger than in the mid-1970s but not as large as in the mid-1940s. If inflation were 5% higher, the debt/GDP ratio would be about... MORE

Sumner on Allison

Finance: stocks, options, etc.
Arnold Kling
I should have outsourced my comments on John Allison's interview to Scott Sumner.... MORE

Original or Distilled?

Economics of Education
Arnold Kling
The Boston Globe reports on a site that posts students' notes on faculty lectures. Several professors, including the English professor and writer Louis Menand and the economist Greg Mankiw, have refused. Mankiw says he didn't want to make it easier... MORE

College and Value

Economics of Education
Arnold Kling
Kevin Carey writes, The average graduation rate at four-year colleges in the bottom half of the Barron's taxonomy of admissions selectivity is only 45 percent. And that's just the average-at scores of colleges, graduation rates are below 30 percent, and... MORE

The Harvard-Goldman Filter

Finance: stocks, options, etc.
Arnold Kling
My position on breaking up banks generates questions from two groups. Libertarians ask, how can I justify breaking up private sector institutions? Naive liberals ask, why is this policy not embraced by our political leaders? My answer to both relates... MORE

This video is self-recommending. It defies further commentary.... MORE

Phelps on the Future of Capitalism

Austrian Economics
Arnold Kling
Nobel Laureate Edmund Phelps writes a long interesting article. Excerpts and my comments below the fold.... MORE

The Job Assignment Problem

Macroeconomics
Arnold Kling
Alan S. Blinder writes, The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate. There are two possible explanations. One: The last two quarters were among the most technologically... MORE

John Allison, a former bank CEO and hard-core libertarian, suggests requiring Federally-insured banks to have 20 percent equity capital. That is in the last part of a 10-part interview, during part of which he questions the need for Federal insurance... MORE

Carnival of Catastrophe

Fiscal Policy
Arnold Kling
What do you do about an unsustainable path for the government Budget? Hold a Carnival. A blog carnival, that is, or a collection of posts. I submitted one of my classics to the carnival. One of the more interesting takes,... MORE

Win APEE's Money

Economic Education
Arnold Kling
The Association of Private Enterprise Education writes, The 2010 Policy Communicators Contest invites college professors and graduate students from all disciplines to submit essays on the relationship between public policy and economic growth. It is of particular interest to compare... MORE

Manzi's Manifesto

Growth: Consequences
Arnold Kling
James Manzi writes, The level of family disruption in America is enormous compared to almost every other country in the developed world. Of course, out-of-wedlock births are as common in many European countries as they are in the United States.... MORE

Book 1 on Reason TV

Books: Reviews and Suggested Readings
Arnold Kling
Ten minutes, with Nick Gillespie interviewing me and my co-author Nick Schulz. Too bad they didn't film some of the discussions we had before and after we recorded the show. But this will give you a small taste of From... MORE

Bank Regulation is a Political Economy Problem

Finance: stocks, options, etc.
Arnold Kling
Paul Volcker says financial innovation has not been a good thing. Now, I have no doubts that it moves around the rents in the financial system, but not only this, as it seems to have vastly increased them. You cannot... MORE

More on the Late Paul Samuelson

Economic Methods
Arnold Kling
A lot of the feeling about him is correlated with how one feels about math. Those feelings range from Robert Lucas (quoted by Tyler Cowen and elsewhere): I internalized its view that if I couldn't formulate a problem in economic... MORE

The Next Bubble?

Energy, Environment, Resources
Arnold Kling
Nick Schulz and I write, If Congress and the president want to push the country in a greener direction, there are easier -- and safer -- ways of doing it. Put a price, in the form of a tax, on... MORE

David Cutler on Health Care Policy

Economics of Health Care
Arnold Kling
Steven Landsburg writes, My gut instincts point me in a different direction that Professor Cutler's do, but I think we agree on what the big problems are and on what would count as solutions. I think almost all economists would... MORE

Life Extension and the Budget

Fiscal Policy
Arnold Kling
The Chicago Sun Times reports, Life expectancy for Americans by 2050 will surpass government projections by as much as eight additional years for women and five for men, This is good news. The trend is not just for death to... MORE

Distilling Famous Thinkers

Economic Philosophy
Arnold Kling
Dan Klein has thoughts on studying the great minds of the past. This bears on the issue of whether or not one can or should distill Hayek (or any other famous thinker) to five blog posts, as Bryan blithely suggested.... MORE

The Source of my Anti-Monetarism

Macroeconomics
Arnold Kling
Alex Tabarrok forwards Paul Krugman's citations of the late Paul Samuelson on the ineffectiveness of monetary policy, due to high substitutability between Federal reserve liabilities and other assets. Alex says that Samuelson sounds like me. Clearly, the causality runs from... MORE

Book 1 Podcast

Books: Reviews and Suggested Readings
Arnold Kling
Russ Roberts and I talk about From Poverty to Prosperity. One interesting issue is why the economic ideas in the book are so little discussed in the mainstream media or in the standard economics curriculum. Part of the reason may... MORE

Thoughts on Spontaneous Order

Business Economics
Arnold Kling
In a comment from a troll Bryan Caplan entry, I find, I've long since lost all patience with Hayek. His original, true ideas could have been five good blog posts Personally, I think that the concept of spontaneous order takes... MORE

Recommended Reading on Health Care

Economics of Health Care
Arnold Kling
Tyler Cowen recommends an article that interviews health information technology CEO Jonathan Bush. I concur in the recommendation. Read the whole thing.... MORE

Thoughts on the Late Paul Samuelson

Economic Education
Arnold Kling
1. He was influential. He influenced students through his textbook, and he influenced the entire economics profession through his dissertation, published as "Foundations of Economic Analysis." Readers of this blog will tend to disapprove of his influence, in that it... MORE

Links of Interest

Arnold Kling
1. Peter Gordon praises Book 1. Tim Harford reports on Partha Dasgupta's lecture on the gap between the income of developed and underdeveloped countries, which is one of the main topics in Book 1. 2. Goldman Sachs and AIG. 3.... MORE

Recession? What Recession?

Fiscal Policy
Arnold Kling
The USA Today story on the increases in highly-paid Federal workers has been making the rounds. This quote in the story is inevitable: Jessica Klement, government affairs director for the Federal Managers Association, says the federal workforce is highly paid... MORE

Anti-Masonomics

Political Economy
Arnold Kling
Don Boudreaux writes, I'd like to ask Prof. Krugman why he's so keen to entrust vastly more resources and power to an agency that, even when controlled by the political party that shares his values and worldview, is "extremely dysfunctional."... MORE

Against Intellectual Property

Information Goods, Intellectual Property
Arnold Kling
David K. Levine and Michele Boldrin write, Is intellectual property needed as a shield for the weak against the strong? Those of us who have yet to make our name in the media markets should fear obscurity rather than piracy.... MORE

The Case for Health Care Reform

Economics of Health Care
Arnold Kling
Matt Welch writes, In France, by contrast, you walk to the corner pharmacist, get either a prescription or over-the-counter medication right away, shell out a dozen or so euros, and you're done. If you need a doctor, it's not hard... MORE

Two Reviews

Books: Reviews and Suggested Readings
Arnold Kling
About Book 1, I recommend Mike Gibson's review. An excerpt: It's a wonderfully concise introduction to development, economic history, the roots of progress, wealth-creation, entrepreneurialism, and innovation-all this and more. ...Kling and Schulz do not really broach the subject, but... MORE

Canadian Recalculation?

Macroeconomics
Arnold Kling
Mike Moffatt wants to know if I see Stephen Gordon's analysis as supporting the Recalculation Story for Canada. Gordon writes, the manufacturing sector is where most of the damage occurred. Even though it employed fewer than one worker in eight... MORE

Monetary Thought Experiments

Macroeconomics
Arnold Kling
Scott Sumner writes, Why would doubling the supply of currency cause people to hold twice as much currency in real terms? Here is my thought experiment. Suppose that the government retired lots of $10 bills, giving $5 bills in exchange,... MORE

Book 1 Reviewed

Books: Reviews and Suggested Readings
Arnold Kling
Ira Stoll writes, One of the virtues, or drawbacks, of having a book composed of a bunch of interviews is that the interviewees don't always agree with each other, or with the authors. Professor Fogel, for example, remarks that if... MORE

Educational Disintermediation

Economics of Education
Arnold Kling
Alex Tabarrok writes, I have argued that universities will move to a superstar market for teachers in which the very best teachers use on-line instruction and TAs to teach thousands of students at many different universities. What he is suggesting... MORE

Corrigan's Contradiction

Finance: stocks, options, etc.
Arnold Kling
Simon Johnson writes, E. Gerald Corrigan in his Dolan Lecture at Fairfield University. Corrigan, former President of the New York Fed and a senior executive at Goldman Sachs for more than a decade, makes three main points. 1. "Large Integrated... MORE

Do You Like Science Fiction?

Books: Reviews and Suggested Readings
Arnold Kling
Reihan Salam thinks that Book 2 falls in that general category. In Unchecked and Unbalanced, Arnold Kling offers a trenchant libertarian critique of the policies that led to the financial crisis. His basic take is that as our society has... MORE

Trial and Error

Economics of Health Care
Arnold Kling
Atul Gawande says something I believe to be true and something I believe to be false. What I believe to be true: To figure out how to transform medical communities, with all their diversity and complexity, is going to involve... MORE

Book 1 and Book 2 Watch

Institutional Economics
Arnold Kling
Paul Gregory writes, China and russia in the 1980s offer a unique case study in why some reforms work and others do not. The contrast refutes the notion that a strong, perhaps totalitarian state, is required for successful reform. In... MORE

Debt Rollover and Inflation

Fiscal Policy
Arnold Kling
Megan McArdle and Russ Roberts discuss the issue in the last quarter of their podcast. If you prefer an academic paper, read Joshua Aizenman and Nancy Marion. They write, in part today's temptation to inflate away some of the debt... MORE

Jeffrey Friedman on Competition vs. Planning

Institutional Economics
Arnold Kling
Self-recommending, but here is an excerpt: In a complex world where nobody really knows what will succeed until it is tried, competition that pits people's ideas against each other is the only way to test these ideas. Competition among capitalists... MORE

Karl Smith looks at gross job flows and ask whether they support or refute the Recalculation Story. We can think of three reasons for people to lose jobs. First, normal churn, in which people shift out of declining firms and... MORE

Some Thoughts on Monetarism

Monetary Policy
Arnold Kling
This post is going to be another macroeconomics lecture. I am going to make some technical arguments about money, expectations and spending. But first, a word about policy. There is absolutely no reason that I can come up with not... MORE

Emotional Politics

Politics and Economics
Arnold Kling
Will Wilkinson and Jonah Goldberg (among others) are debating whether a little bit of nationalism is a good thing. For example, Wilkinson writes, Liberty is best loved when it is loved because it is good -- because it makes possible... MORE

My Two Ideas on Jobs

Labor Market
Arnold Kling
1. Cut pay for state, local, and Federal workers. Many people worry about governments having to cut back on employment. They see this as an argument for higher government spending. However, it is actually a much stronger argument for cutting... MORE

Wesley Mouch Watch

Political Economy
Arnold Kling
Finreg 21 reports, Regulators will be bringing pressure on banks to make greater efforts to serve poorer communities after an FDIC survey showed that more than a quarter of U.S. households have little or no financial activity through banks. So,... MORE

I mention Scott Sumner a lot on this blog. Why? Because I see him as sticking up for mainstream macroeconomics. I myself have been pushing a non-mainstream idea, sort of a muddle between Leijonhufvud and Hayek that I call the... MORE

Hansonian Foreign Aid

Behavioral Economics and Rationality
Arnold Kling
Bill Easterly and Laura Freschi point to a study showing that foreign aid increases happiness--for the donor countries. For the recipients, not so much. I have not read the study, but I doubt that I would find the research methods... MORE

I Hate This Story

Energy, Environment, Resources
Arnold Kling
I've written about it before, but Wired reminds me, Startup companies that enjoy DOE support, most notably Tesla Motors and Fisker Automotive, have an extraordinary advantage over potential competitors since they have secured access to capital on very cheap terms.... MORE

The Future will not be Civil

Behavioral Economics and Rationality
Arnold Kling
the new genetics will reveal much less than hoped about how to cure disease, and much more than feared about human evolution and inequality, including genetic differences between classes, ethnicities and races. That is Geoffrey Miller, who you may... MORE

Morning Commentary, Hubris Edition

Political Economy
Arnold Kling
1. Robert Kagan writes The foreign policy establishment and intellectual world are much the same. They fully supported intervention in Vietnam, mostly supported intervention in Iraq and fully supported the war in Afghanistan -- until the wars got hard, or... MORE

Some Reviews of Book 1

Books: Reviews and Suggested Readings
Arnold Kling
Curt Gardner writes, The development question is not merely a matter of distributing recipes and watching prosperity develop. Recipes often come with buried cultural assumptions that we take for granted, because they are so ingrained for us. These things could... MORE

A reader writes, If the price-insensitive people are at home avoiding the crowds then it would seem the online stores would be getting shopped by a higher than average percentage of price-insensitive people. It appears to me the 'price discrimination'... MORE

Comment on Tyrone's Latest Post

Economic Methods
Arnold Kling
I got a server error when I tried to leave a comment on Tyler Cowen's blog. Here is the comment: Suppose that the credibility of a scientist is a function of two variables: (1) the evidence he offers; and (2)... MORE

Scott Sumner Back to Normal

Macroeconomics
Arnold Kling
That is, he is saying things I disagree with. 1. Between July and November 2008 the Fed adopted an ultra-tight monetary policy. 2. Real interest rates on indexed 5 year T-bonds rose from 0.5% to 4.2% 3. The tight money... MORE

Douglass North on Afghanistan

Political Economy
Arnold Kling
Nobel Laureate Douglass North is not a blogger or an op-ed columnist. But I can guess at his reaction to President Obama's speech last night. The President said, We'll support Afghan ministries, governors, and local leaders that combat corruption and... MORE

David Wessel on the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Here, he answers some questions posed by bloggers, including a couple from me. The organizers solicited the questions by email, and they asked us to promote the videos on our blogs. I am not getting paid, and right now I... MORE

The CBO Has Not Changed Macro Models!

Macroeconomics
Arnold Kling
This is not big news, but Derek Thompson writes as if it is. The CBO came out today with a new report on the effect of the stimulus, or the American Recovery and Reinvestment Act (ARRA). The conclusion is that... MORE

I Agree with Scott Sumner

Macroeconomics
Arnold Kling
On most monetary issues, I don't. But I like this post, where he comes out four square in favor of using the monetary base as his measure of the money supply. So when people start asking me about the banking... MORE

Preview of Book 2

Books: Reviews and Suggested Readings
Arnold Kling
Policy Review publishes a preview of Book 2. Executives had too much confidence in their risk management strategies. Regulators, too, had excessive confidence in the measures that they had in place to ensure safety and soundness of banks and other... MORE

Morning Commentary

Finance: stocks, options, etc.
Arnold Kling
Bill Easterly is not of fan of military nation-building in Afghanistan. He writes, critics of top-down state plans for economic development are also not fans of top-down state plans for military development. If the Left likes the first, and the... MORE

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