Bryan Caplan and David Henderson

Arnold Kling: January 2010

An Author Archive by Month (74 entries)

Two New Books

Books: Reviews and Suggested Readings
Arnold Kling
Policy and Economic Performance in Divided Korea during the Cold War Era: 1945-91 by Nicholas Eberstadt. And The Invention of Enterprise, edited by David S. Landes, Joel Mokyr, and William J. Baumol. I have only skimmed them so far. If... MORE

One-Party State Watch

Political Economy
Arnold Kling
Steven Greenhut writes, The United States had 2.3 state and local government employees per 100 citizens in 1946 and has 6.5 state and local government employees per 100 citizens now. In 1947, Hodges writes, 78 percent of the national income... MORE

Barney Frank's Surprising Answer

Finance: stocks, options, etc.
Arnold Kling
I submitted a question to his interview with Bigthink. The relevant segment is here, a bit more than 18 minutes in. I asked about equating affordable housing with mortgage subsidies. He said he never did that. For him, affordable housing... MORE

Proposal for a Moral Budget

Fiscal Policy
Arnold Kling
I claim that it is immoral for government to make promises that it does not expect to keep. Today, on the CBO Director's blog, there is in analysis of a proposal that would satisfy my criteria for morality. The Roadmap,... MORE

Why the U.S. is Ungovernable

Political Economy
Arnold Kling
It's the latest meme. The U.S. is ungovernable, because of a) Senate procedures b) Republican obstructionism c) polarization d) special interests etc. I've seen it from Marc Ambinder, Steven Pearlstein, and others. I'm too lazy to copy links, but my... MORE

Take it as given that U.S. fiscal policy is unsustainable. It was unsustainable before Obama became President, and one can argue that he has made it worse. It was unsustainable before Bush became President, and one can argue that he... MORE

The Genius of Libertarianism

Politics and Economics
Arnold Kling
The Washington Post reports, "You know the way to boost your poll numbers is not do anything," Obama said at a town hall gathering in Ohio last week. "That's how you do it. You don't offend anybody. I'd have real... MORE

Earmarks and Total Spending

Public Choice Theory
Arnold Kling
Tyler Cowen quotes Garett Jones: The key to controlling spending is permitting more earmarks (sic). Tyler asks us to guess Garett's model. One model would be this: 1. Each Congressperson wants to use government spending to buy enough votes to... MORE

Getting Along in Business

Behavioral Economics and Rationality
Arnold Kling
A reader emails: I am low on agreeableness with people at my place of work...I am interested in knowing what you have learned about how to get along with co-workers and overcome low Agreeableness. I think that people who are... MORE

Recommended

Business Economics
Arnold Kling
Ben Casnocha dug up a James Fallows piece from 1985 on entrepreneurialism vs. credentialism. Fallows writes, Nowhere is the tension between the two cultures, the entrepreneurial and the professional, more evident at the moment than in American business. At just... MORE

Caplan Influences Schumer and Hatch?

Macroeconomics
Arnold Kling
Senators Charles E. Schumer and Orrin G. Hatch write, Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2 percent Social Security payroll... MORE

The Rap on Economics

Economic Education
Arnold Kling
Keynes vs. Hayek, a rap video developed by John Papola and Russ Roberts. It might be a great discussion starter for an economics class.... MORE

The Henderson Let Em In Club

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Bill Easterly is a member. 82 Percent of Haitians above this poverty line [$10 per day] are here in the United States. (I calculate this with Lant Pritchett here, ungated version here.) Only the top 1.4 percent of people in... MORE

Progressive Corporatism Explained

Political Economy
Arnold Kling
Timothy P. Carney never uses that exact term, but he explains it well in an interview with Nick Gillespie. Well worth a viewing. Near the end, the question comes up about whether "libertarian populism" is an antidote. I think that... MORE

Increasing Liability of Bank Executives

Finance: stocks, options, etc.
Arnold Kling
Axel Leijonhuvfud writes, In the early days of fractional reserve banking, bank owners were subject to unlimited liability. In the US, double liability for bank shareholders was common up to the Great Depression. All American investment banks were partnerships into... MORE

Ayn Rand's Niche

Economic Philosophy
Arnold Kling
Michael Huemer writes, What accounts for the continuing and increasing interest in the work of Ayn Rand? Clearly, the attraction of her ideas has much to do with it. This is true despite the fact that most people, even in... MORE

Mandel on FP2P

Books: Reviews and Suggested Readings
Arnold Kling
Michael Mandel writes, It's good to see a book which focuses on this topic, whether the authors call it innovation economics or Economics 2.0 or something else. We need more of this kind of thinking. My guess is that Michael... MORE

The Henderson Club

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Or we could call it the Let Them In club. Elliott Abrams is a member. Mark Krikorian is not. Krikorian is one of the people who makes it difficult for a libertarian like me to feel comfortable with the conservative... MORE

The Quants

Books: Reviews and Suggested Readings
Arnold Kling
The Quants, by Scott Patterson, is the latest indulgence in my taste for financial crisis porn. It reminds me a lot of Roger Lowenstein's When Genius Failed. Lowenstein's book, which narrates the rise and fall of the infamous hedge fund... MORE

Big Banks

Political Economy
Arnold Kling
Tyler Cowen writes, Obama proposes a new banking plan and everyone is commenting for instance here is Simon Johnson. The plan seems to involve limits on bank size and limits on proprietary trading. In principle, I am against attempts by... MORE

A Sentence to Ponder

Business Economics
Arnold Kling
from Felix Salmon: I see [Tyler] Cowen as being a kind of anti-Larry Summers in the internal government debate about what to do about Haiti. Rather than being the person who throws cold water on promising ideas, he's the person... MORE

The Case for Competitive Government

Political Economy
Arnold Kling
Scott Sumner writes, The recent election of Scott Brown is just one more opportunity to ruminate over the excessive size of the US government. In earlier posts I have argued that there are big diseconomies of scale in governance. Small... MORE

Various

Cross-country Comparisons
Arnold Kling
John Taylor is interviewed. I recommend clicking on "interview transcript," since it is faster to skim and read than to watch an interview. At one point, the interviewer poses a question from Scott Sumner on whether the Fed was too... MORE

Jonah Goldberg on Haiti

Growth: Causal Factors
Arnold Kling
He offers a diagnosis based on FP2P. It's true that Haiti has few natural resources, but neither do Japan or Switzerland. What those countries do have are what Kling and Schulz call valuable "intangible assets" -- the skills, rules, laws,... MORE

Kling and Schulz on Airline Security

Terrorism
Arnold Kling
We write, The security process needs several things it is lacking. It needs continuous adaptation, with a strong focus on satisfying customers and improving results. It needs to find new and better methods of meeting the demands of customers who... MORE

Wage Freeze for Government Workers

Macroeconomics
Arnold Kling
If Josh Barro had not written this: As states and localities continue to fight budget crises, they have an opportunity to close gaps by freezing employee wages. Because public employee compensation rose too fast over the last three years, they... MORE

George Akerlof and Rachel Kranton

Books: Reviews and Suggested Readings
Arnold Kling
Their new book is called Identity Economics, and they think it's a pretty big deal.On p. 114: we can explain a large number of phenomena, including the nature of African-American poverty, the reasons why students drop out of school, the... MORE

Kling vs. Sumner, Continued

Macroeconomics
Arnold Kling
Scott Sumner writes, If NGDP falls 8% below trend, then nominal wages must also fall 8% below trend to maintain full employment, regardless of what is happening to real wages. So I think his story of the past year really... MORE

Price Discrimination Explains Everything

Information Goods, Intellectual Property
Arnold Kling
Trying to explain cable TV bundling, James Surowiecki writes (his name makes me dyslexic), The appeal of bundling is partly that it reduces transaction costs: instead of having to figure out how much each part of a package is worth... MORE

Paul Romer on Haiti

Cross-country Comparisons
Arnold Kling
He writes, There is a natural complementary approach that is a much better bet than giving colonialism another chance--letting Haitians migrate somewhere with better governance and rules. This is the surest answer to the question posed in the beginning. It... MORE

Sumner and Tobin

Macroeconomics
Arnold Kling
Scott Sumner cites James Tobin on the virtues of the Fed targeting nominal GDP. I wish Tobin had lived long enough to have something to say about the role of money in the current financial crisis. As you know I... MORE

Why the Fed is Buying Mortgage Securities

Finance: stocks, options, etc.
Arnold Kling
According to James Hamilton, the difference between what the Fed has been doing in 2009 and true quantitative easing is that under the latter strategy, the Fed would be funding the MBS purchases with zero-interest money, with the intent of... MORE

Morning Commentary

Macroeconomics
Arnold Kling
Daniel Little discusses Seeing Like a State, which is something of a cult classic among some Masonomists. Thanks to Mark Thoma for the pointer. Well worth a read. Bill Woolsey says that it is obvious why we had a such... MORE

George H. Nash writes, Traditionally, American conservatives have been Eurocentric in their political and cultural discourse, but how can conservatives convincingly articulate this perspective to non-European immigrants and to millions of superficially educated young Americans, and at a time when... MORE

The Credit Crunch Story

Finance: stocks, options, etc.
Arnold Kling
John Cochrane tells it, and he says, Now that the short-termcredit crunch is over, the recession seems likely to be followed by a quick recovery, at least if the government does not get in the way with too many counterproductive... MORE

David Brooks on Haiti

Growth: Causal Factors
Arnold Kling
Read the whole thing. An excerpt: Why is Haiti so poor? Well, it has a history of oppression, slavery and colonialism. But so does Barbados, and Barbados is doing pretty well. Haiti has endured ruthless dictators, corruption and foreign invasions.... MORE

Why Such a Deep Recession?

Macroeconomics
Arnold Kling
Several economists, not just Scott Sumner, have argued that the recession is too deep and too broad to be explained by the Recalculation Story. I think that there are many weaknesses in the Recalculation Story. It is far from a... MORE

Two Follow-Ups

Political Economy
Arnold Kling
I want to respond to two comments on previous blog posts. On the issue that I call "market failure," meaning the ability of incumbents to block trial-and-error innovation, I mentioned education. It turns out that Michael Strong has a nice... MORE

Market Failure

Political Economy
Arnold Kling
I want to propose a new definition of market failure. For me, market failure exists to the extent that innovation is blocked by incumbents. If innovators can succeed by out-competing incumbents, then the market is working. If incumbents have a... MORE

See Us in Concert

Upcoming Events
Arnold Kling
On February 4th, Nick Schulz and I will speak at Cato. Details here. One idea I've toyed with is what I call a "house concert." Just as some musicians give concerts in people's houses, I was wondering if there are... MORE

EMH and Bubbles

Finance: stocks, options, etc.
Arnold Kling
John Cassidy interviews John Cochrane. Cochrane says, I think most people mean by a "bubble" just, "Prices were high and I wish I sold yesterday." The efficient markets (hypothesis) never told you that wasn't going to happen. What efficient markets... MORE

Yuval Levin on Capitalism

Politics and Economics
Arnold Kling
Now that it is on the web, I listened to Yuval Levin's lecture . Basically, Levin does not think that capitalism has any enemies. However, he thinks that it has many misguided and/or unreliable friends. 1. Liberals are misguided/unreliable because... MORE

The Moral Rot Factor

Political Economy
Arnold Kling
Bryan has brought up the issue of economics textbooks that over-rated the Soviet Union's economic prospects. For some reason, Brad DeLong feels obliged to go after Bryan about this. My view on the Soviet Union is that it collapsed because... MORE

Two Scott Sumner Posts

Macroeconomics
Arnold Kling
First I am so used to NGDP targeting be attacked from the right that I forget that it has no supporters on the left. Recall that conservatives usually support inflation or price level targeting, and think that NGDP targeting is... MORE

Remarks on Safe Assets

Arnold Kling
The issue of "safe assets" is important and complex. I have a lot of thoughts on the topic, but they do not yet cohere into a whole.... MORE

Some Health Care Reform Discussion

Economics of Health Care
Arnold Kling
Cato's Michael Cannon warns, Over smaller ranges of earned income, the legislation would impose effective marginal tax rates that exceed 100 percent. Families of four would see effective marginal tax rates as high as 174 percent under the Senate bill... MORE

FP2P Watch

Cross-country Comparisons
Arnold Kling
Robert Fogel writes, In many ways, China is the most capitalist country in the world right now. In the big Chinese cities, living standards and per capita income are at the level of countries the World Bank would deem "high... MORE

Belongia and Roberts on the Fed

Monetary Policy
Arnold Kling
Scott Sumner calls it a "must listen." What I like is the part near the end, where Roberts tries to argue that reform of the Fed is unlikely. Our political system demands a "maestro," someone that everyone can look to... MORE

Questions about Jonathan Gruber

Economics of Health Care
Arnold Kling
Jonathan Gruber is under fire for failing to disclose to reporters the funds he received from the government to investigagte health care reform. This story reports, That puts the total federal money Gruber received in the last two years at... MORE

Crisis Commentary

Finance: stocks, options, etc.
Arnold Kling
Ricardo Caballero writes, By 2001, as the demand for safe assets began to rise above what the U.S. corporate world and safe mortgage‐borrowers naturally could provide, financial institutions began to search for mechanisms to generate triple-A assets from previously untapped... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Arnold Kling
Yet another book on World War I. David Fromkin's Europe's Last Summer. His thesis is that the assassination of Archduke Ferdinand was a pretext for two wars that had been previously planned. One was an Austrian war against Serbia, and... MORE

Two Follow-ups

Macroeconomics
Arnold Kling
1. On the current state of the economy, Mark Thoma highlights the employment-to-population ratio. Here is his chart: I think he is right to push this, because I find it a more reliable indicator than the unemployment rate. The graph... MORE

Commercial Real Estate Prices: What Inference to Draw?

Finance: stocks, options, etc.
Arnold Kling
Megan McArdle writes, My latest column for the Atlantic looks at the commercial real estate crash and comes to the conclusion that it effectively undermines the major narratives that many people have adopted to explain the residential bubble. Though the... MORE

Rules and Culture

Growth: Causal Factors
Arnold Kling
Tim Kane listens to a talk by Paul Romer, and muses, Romer forces us to accept that rules are very difficult to change. Nations in particular, even when its leaders recognize the need for rules to change, have difficulty making... MORE

TeaPartarians?

Political Economy
Arnold Kling
The Bush Administration, particularly in its final year, discredited the Republican Party as a proponent of free markets. What should come next? One idea, promoted at Cato by Brink Lindsey and Will Wilkinson, is liberaltarianism. The idea is to approach... MORE

Interview with Raghuram Rajan

Finance: stocks, options, etc.
Arnold Kling
Interesting throughout. Thanks to Mark Thoma for the pointer. I agree with much of Rajan says, so I want to highlight the sentence with which I agree the least. On the role of government in the housing market, he says... MORE

FP2P Podcast

Arnold Kling
I did two radio interviews today. One was on Unchecked and Unbalanced with Charlie Brennan on KMOX, a segment of about 15 minutes that felt like it was 2/3 commercials. The other was on FP2P for blogtalkradio, with D. R.... MORE

What If

Finance: stocks, options, etc.
Arnold Kling
A reader asks, With regard to the recent financial crisis and current economic recession - if you were given the power to go back in time and change only one thing in an effort to prevent the crisis and recession,... MORE

Intellectuals and Society

Books: Reviews and Suggested Readings
Arnold Kling
It seems to be the theme du jour. The interview with Thomas Sowell continues. At one point, Sowell notes that we cannot blame Larry Summers for policies, because politicians are selecting the policies. I think that Bryan Caplan would say... MORE

Thinking Outside the House

Finance: stocks, options, etc.
Arnold Kling
Free Exchange agrees with Ben Bernanke (and me that stopping the housing bubble was more of regulatory issue than a monetary policy issue. the Fed didn't act because there is something institutionally the matter with it, which prevented effective regulatory... MORE

FP2P Watch

Books: Reviews and Suggested Readings
Arnold Kling
Listen to this Interview with Nick Schulz. I'd say that this is the best short interview on the book to date, but I found myself frustrated that there wasn't more. But even my one-hour podcast with Russ Roberts leaves a... MORE

My Sowell-mate on the Knowledge-Power Discrepancy

Books: Reviews and Suggested Readings
Arnold Kling
Unchecked and Unbalanced is about the discrepancy between knowledge and power. Thomas Sowell's latest book, Intellectuals and Society, is about the same phenomenon. (Guess which one is selling better on Amazon.) If my many blog posts on the problem of... MORE

FP2P Watch

Books: Reviews and Suggested Readings
Arnold Kling
We get a nice review.... MORE

Real Recovery

Growth: Causal Factors
Arnold Kling
Robert Samuelson writes, What scars will the Great Recession leave? We are already seeing some. Americans are moving less than at any time since World War II, reports demographer William Frey of the Brookings Institution. People are tied to existing... MORE

Bernanke's Speech to the AEA

Finance: stocks, options, etc.
Arnold Kling
He says, Slide 4 shows that the version of the Taylor rule based on forecast inflation (in green dots) explains both the course of monetary policy earlier in the past decade as well as the decision not to respond aggressively... MORE

Krugman on the State of the Economy

Macroeconomics
Arnold Kling
From his Nobel AEA meeting lecture. It should have been easy to put the evidence of a mammoth housing bubble together with the concepts of third-generation crisis theory to see how a nasty deleveraging cycle could occur without the "original... MORE

FP2P Watch

Growth: Causal Factors
Arnold Kling
Daron Acemoglu writes, On one side of the border fence, in Santa Cruz County, Arizona, the median household income is $30,000. A few feet away, it's $10,000. On one side, most of the teenagers are in public high school, and... MORE

Another Masonomist Likes the Naughts

Growth: Consequences
Arnold Kling
Tyler Cowen writes Putting aside the United States, which ranks third, the four most populous countries are China, India, Indonesia and Brazil, accounting for more than 40 percent of the world's people. And all four have made great strides. Indonesia... MORE

Soft Rule-Utilitarianism

Institutional Economics
Arnold Kling
In my follow-up to James Manzi's manifesto, I brought up a notion that I call soft rule-utilitarianism. In the comments, Manzi interpreted this as being close to what I would call hard rule-utilitarianism.... MORE

Psychological Effects of Status Rank Changes

Behavioral Economics and Rationality
Arnold Kling
Anthony Stevens and John Price wrote depression is an adaptive response to losing rank and conceiving of oneself as a loser. The adaptive function of the depression, according to rank theory, is to facilitate losing and to promote accommodation to... MORE

Courts Fail. Use Regulators

Regulation and Subsidies
Arnold Kling
Andrei Shleifer examines why regulation might emerge. The Pigouvian theory is undermined because market failures or information asymmetries do not seem to be necessary for regulation, yet those are seen by the theory as the prerequisites for government intervention. The... MORE

When Experts Fail

Central Planning vs. Local Knowledge
Arnold Kling
David Brooks writes, For better or worse, over the past 50 years we have concentrated authority in centralized agencies and reduced the role of decentralized citizen action. We've done this in many spheres of life. Maybe that's wise, maybe it's... MORE

New Year's Blogging Resolutions

Econlog Administrative Issues
Arnold Kling
Pete Boettke writes, we are convinced that Mises and Hayek identified in the 1930s through the 1950s the central elements of sound economic and social analysis: the problem of economic calculation and the division of knowledge; the cultural and institutional... MORE

The Economics of Cities

Economics and Culture
Arnold Kling
Edward L. Glaeser and Joshua D. Gottlieb survey the fundamental economics questions about cities, including why they exist. Cities are ultimately nothing more than proximity, so the returns to urban concentration can be seen as reductions in transport costs. ...a... MORE

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