Bryan Caplan and David Henderson

Arnold Kling: February 2010

An Author Archive by Month (66 entries)

Boo Jonathan Rauch

Fiscal Policy
Arnold Kling
I often like him, but not this column, in which he writes, Rep. Paul Ryan of Wisconsin, the ranking Republican on the House Budget Committee, who recently unveiled a new edition of what he calls a "Road Map for America's... MORE

Unchecked and Unbalanced Watch

Books: Reviews and Suggested Readings
Arnold Kling
Mark Calabria reviews the widely-unread Unchecked and Unbalanced. He makes it sound better than it really is.... MORE

The Case Against Inequality

Income Distribution
Arnold Kling
In an interview, Richard Wilkinson says I think people are extremely sensitive to status differentiation and to being looked down on, or disrespected, and those often seem to be the triggers to violence. We quote an American prison psychiatrist who... MORE

Demand Stimulus in a Jones-Minsky Economy

Macroeconomics
Arnold Kling
In a Garett Jones economy, a worker represents an investment. A firm can vary its production without adding or subtracting workers. At the margin, what workers do is provide additional capabilities, what Jones calls organizational capital. In a Hyman Minsky... MORE

Sentences to Ponder

Macroeconomics
Arnold Kling
Eric S. Raymond writes, We've spent the last seventy years increasing the hidden overhead and downside risks associated with hiring a worker -- which meant the minimum revenue-per-employee threshold below which hiring doesn't make sense has crept up and up... MORE

From Poverty to Prosperity Watch

Growth: Consequences
Arnold Kling
click here for an illustration. Ten years ago, when I had maybe twenty readers, I wrote a similar essay. My guess is that this blog post alone will generate 100 times the number of readers for that essay than the... MORE

Health Care Summit Post-Mortem

Politics and Economics
Arnold Kling
I thought that President Obama did well to convey a willingness to negotiate. If I were the Republicans, I would move off the "scrap the bill" talking point and instead go with something like this. We have some areas where... MORE

Grading the Health Care Summit

Economics of Health Care
Arnold Kling
I sat through the first 2-1/2 hours, and here are my grades. IssueDemocratsRepublicansCostsD+F+Insurance ReformFDDeficitF-F On costs, everyone came out four-square against waste, fraud, and abuse in Medicare. I don't give points for that. If they were serious, they could pass... MORE

Health Care Summit Pre-Mortem

Economics of Health Care
Arnold Kling
By the way, Cato will be having a live blog (link now fixed) of the health care summit, and I am invited to participate in the live blogging. My views on health care have not really changed since I wrote... MORE

A Non-State Within a State?

Political Economy
Arnold Kling
Adam Knott writes, Panarchist society could emerge and proliferate at the same time current society is in place. The community I referred to above would not directly change the coerced wage and trade agreement that we might be subjected to... MORE

The Right of Exit

Political Economy
Arnold Kling
Michael Gibson writes, Is a right of exit compatible with our obligations either to community or to a territorial system of governance? This is an excellent question, because it gets to the heart of whether competitive government is a practical... MORE

You will be shocked to learn that I am against it. I've already gotten a couple of emails about this piece, or otherwise I would not have seen it. I guess it's a good placement.... MORE

How I Think About Keynesian Economics

Macroeconomics
Arnold Kling
By the way, my panel appearance on jobs is now up on C-span (I start about 45 minutes in. Also, I saved some of my thoughts for the Q&A, which starts about 64 minutes in.) In this post, I want... MORE

With All Due Respect, 2

Finance: stocks, options, etc.
Arnold Kling
My views have been influenced by Gary Gorton, well before his latest paper, but I nonetheless disagree with him on important matters. I view the financial crisis as having four components: Bad Bets Excessive leverage Domino effects 21st-century bank runs... MORE

With All Due Respect

Finance: stocks, options, etc.
Arnold Kling
Tyler Cowen writes, You might wish to go back to "old banking" but according to Gorton that stopped being profitable during the 1980s. There's always an uninsured place to put your money, regulation can't stop that, and such money can... MORE

The Political Scene

Politics and Economics
Arnold Kling
1. I was on a panel at the American Action Network today. My talk got a lot of laughs. At some point, there may be C-span video, but they might not have covered the panels.* There were a number of... MORE

Theories of the Recession

Macroeconomics
Arnold Kling
Mark Gertler and Nobuhiro Kiyataki write, As balance sheets strengthen with improved economics conditions, the external …finance problem declines, which works to enhance borrower spending, thus enhancing the boom. Along the way, there is mutual feedback between the …financial and... MORE

Top-Down Health Care Reform

Economics of Health Care
Arnold Kling
From the White House. One key improvement, for example, is eliminating the Nebraska FMAP provision and providing significant additional Federal financing to all States for the expansion of Medicaid. For America's seniors, the proposal completely closes the Medicare prescription drug... MORE

What I'm Reading

Books: Reviews and Suggested Readings
Arnold Kling
The New Holy Wars, by Robert H. Nelson. He seeks to interpret various economic and environmental ideologies in religious terms. Some excerpts follow. [Update: fascinating stuff in the comments section. Let me highlight a couple of links: Peter Taylor and... MORE

Speaking on Job Creation

Upcoming Events
Arnold Kling
I will be talking here on Tuesday morning. Supposedly will be covered by CSPAN and other media. I think that most in the audience will be looking for concrete policy proposals to create jobs, as opposed to a message that... MORE

Bipartisanship or Irreconcilable Differences?

Politics and Economics
Arnold Kling
Pundits bemoan the absence of bipartisanship. Implicitly, they believe that bipartisanship is necessary and sufficient to solve public policy problems. Another possibility is that our politics today actually involves irreconcilable differences. One picture of American politics is that only about... MORE

Paranoia About Paranoia

Politics and Economics
Arnold Kling
Michael Gerson writes, But there are others, new to political engagement, who have found paranoia and anger intoxicating. They watch Glenn Beck rail against the omnipresent threat of Saul Alinsky, read Ayn Rand's elevation of egotism and contempt for the... MORE

Some Health Reform Ideas

Economics of Health Care
Arnold Kling
From Nick Schulz and me. Not sure why this showed up here. I thought we submitted it somewhere else. Anyway, we say that a better idea would be to move toward a health-care safety net. This should have two components:... MORE

Bailout Ahead

Fiscal Policy
Arnold Kling
The Pew Center reports, $1 trillion. That's the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees' retirement benefits and the $3.35 trillion price tag of those promises. ...To... MORE

A Strange Preference on Wage Subsidies

Politics and Economics
Arnold Kling
Mark Thoma says that he signed a petition, which reads in part, There are many ways to design an effective hiring tax credit, but in general the beneficial effects will be greater the stronger the hiring incentives and the lower... MORE

Macroeconometrics and Science

Economic Methods
Arnold Kling
Menzie Chinn writes, the forecasts are generated using old-fashioned models in the spirit of the neoclassical synthesis (demand determined in short run, supply determined in the long run) with (as I understand it) backwards looking expectations rather than model-consistent expectations.... MORE

Recommended

Behavioral Economics and Rationality
Arnold Kling
These are posts that I recommend, without providing excerpts. Robin Hanson offers an illustration of the theory that prestige-status is less threatening to people than dominance-status. So do people perceive the wealth of Bill Gates as conferring prestige-status (not so... MORE

The Commission, the Deficit, and the VAT

Fiscal Policy
Arnold Kling
Greg Mankiw writes, let's suppose that you are a conservative and you want the fiscal commission to succeed. You will have to agree to higher taxes as part of the bargain. But what should you aim to get in return?... MORE

The Health Cost Narrative is Incomplete

Economics of Health Care
Arnold Kling
Stare at the following table, which gives population projections for the elderly in the United States, in millions. Age Group20072020203065-7419.332.338.875 +18.622.533.3 Source: Census Bureau International Population Data Base. Over the next twenty years, we are going to double the number... MORE

The Case for Brain Drains

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Laura Freschi makes it, citing work by William Easterly and Yaw Nyarko. Even using official figures, which likely far undercount the value of remittances by excluding informal channels, remittances sent back by Africans abroad outweigh the cost of educating them... MORE

Martin Feldstein on the Greek Tragedy

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
He writes, The European economic and monetary union is doubly flawed. First, it forces diverse countries to live with a single interest rate and exchange rate that cannot be appropriate for all members. Second, combining a single currency with independent... MORE

Jeffrey Friedman on the Greek Tragedy

Finance: stocks, options, etc.
Arnold Kling
He writes, Today's FT brings the news that "European financial institutions have $235 billion worth of claims on Greek debt, most of which is thought to be in government bonds." Why do they hold so much Greek government debt? Because... MORE

Piggy Bank Watch

Monetary Policy
Arnold Kling
James Hamilton writes, Where did the Fed obtain the funds to make all these loans and later buy all this MBS? Mechanically, the Fed implements any of these operations simply by crediting new deposits to the account that the receiving... MORE

No Conspiracy

Monetary Policy
Arnold Kling
In response to David and Bryan, I do not think that Ben Bernanke and other Fed officials are sitting inside their offices plotting to ruin the economy while saving banks. They have convinced themselves (and most pundits) that saving the... MORE

Wish You Lived in Europe?

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Terrific NYU Symposium on the Greek tragedy. Paul Wachtel California is not Greece. I do not know what will happen if California defaults but I do remember what happened when NYC defaulted on its general obligation bonds in 1975 (I... MORE

Will Wilkinson and Brink Lindsey Get the Finger

Politics and Economics
Arnold Kling
from Ed Kilgore, of the Progressive Policy Institute. Certainly, few self-conscious libertarians have much tolerance for racism, but they are encouraging a point of view about "welfare" that has long been catnip to racists. And that's a problem for liberals.... MORE

Interpreting Fed Policy

Monetary Policy
Arnold Kling
1. Ricardo Reis writes, With regards to its interest-rate policy, the Federal Reserve has followed the advice from theory by committing to …deflation and to keep interest rates at zero for the foreseeable future. It has deviated from the theoretical... MORE

Michael Kinsley on Disagreement

Politics and Economics
Arnold Kling
He writes, Slate's Jacob Weisberg, wrote over the weekend that the "biggest culprit in our current predicament [is] the childishness, ignorance, and growing incoherence of the public at large." Defending Weisberg, Kinsley goes on to say, it is silly to... MORE

More Jeffrey Friedman

Finance: stocks, options, etc.
Arnold Kling
Here, he writes, Competition puts capitalists' different motives, like their different ideas, to the acid test of consumer satisfaction. This tends to give consumers what they want--or at least what they think they want--and it diversifies a capitalist society's investment... MORE

Anti-AARP?

Social Security
Arnold Kling
How snowed in are we? So snowed in that we had the television on when this Charlie Rose interview with David Brooks came on. It was quite good. I agreed with Brooks on many things, and even when I did... MORE

Gary Johnson and Jeff Miron

Politics and Economics
Arnold Kling
Like snow, they are all over the DC area this week, for example at a Reason event that I missed. Jeff Miron is, like me, a graduate of Swarthmore College in the 1970's, an economics Ph.D from MIT in the... MORE

The True Sources of Risk

Finance: stocks, options, etc.
Arnold Kling
Avinash Persaud writes, Credit risk is best hedged through diversification across uncorrelated credits. Liquidity risk is best hedged through diversification across time. Market risk is best hedged through a combination of diversification across assets and time (having time to decide... MORE

The PIIGS Crisis

Finance: stocks, options, etc.
Arnold Kling
Peter Boone, Simon Johnson,, and James Kwak discuss the current financial situation, focusing on the PIIGS crisis. Their bottom line translates into: have a nice day. The PIIGS crisis seems a bit like the subprime crisis. That is the PIIGS... MORE

Knowledge-Power Discrepancy

Finance: stocks, options, etc.
Arnold Kling
Jeffrey Friedman writes, What I am calling social democracy is, in its form, very different from socialism. Under social democracy, laws and regulations are issued piecemeal, as flexible responses to the side effects of progress -- social and economic problems... MORE

Bipartisan Health Care Reform: My Bottom Line

Economics of Health Care
Arnold Kling
If I were a Republican, I would use any health care summit to set the following conditions for agreeing to support a bipartisan health plan. 1. All Medicare savings must be used to shore up Medicare. None of those savings... MORE

Pricing the Apple iPad

Business Economics
Arnold Kling
Megan McArdle writes, One estimate is that the cheapest iPad costs $270 to manufacture. Throw in advertising, transportation, distribution, and so forth, and maybe they can cut the price $100 if they're willing to make a slim profit in order... MORE

Russ Roberts, Meet Paul Krugman

International Trade
Arnold Kling
This week's econtalk is a monologue by Russ Roberts on the topic of trade. My one quibble is that he brings up increasing returns as a source of specialization and trade without mentioning Paul Krugman's work on the topic. That... MORE

The Progressive Tantrum

Political Economy
Arnold Kling
James Surowiecki writes, People want the government to help provide jobs, but they also want it to cut the deficit. His point is that people are inconsistent, so the government just has to ignore them and run a deficit to... MORE

Fantasy Federalism

Political Economy
Arnold Kling
This is going to be a random daydream sort of post. It beats watching Super Bowl pregame or doing pointless snow-shoveling (you loaded 16 tons, what do you get? Another day older and deeper in debt). I want the U.S.... MORE

Morning Commentary

Political Economy
Arnold Kling
1. The New York Times editorializes, Here is an unpopular but undeniable fact of life: When private sector demand is weak, the federal government must serve as the spender of last resort. When the New York Times entitles an editorial... MORE

From Poverty to Prosperity Event

Books: Reviews and Suggested Readings
Arnold Kling
Yesterday, Nick and I spoke at Cato, with comments by Tim Kane and introductory remarks from Brink Lindsey. You can watch or listen to it by going to this page.My personal bit starts at minute 22, or shortly thereafter. Actually,... MORE

Financial Crisis, Phase Two

Finance: stocks, options, etc.
Arnold Kling
Carmen Reinhart talks to the WSJ. historically, following a wave of financial crises especially in financial centers, you get a wave of defaults. You go from financial crises to sovereign debt crises. I think we're in for a period where... MORE

Morning Disturbances

Political Economy
Arnold Kling
From the Washington Post 1. In Finance The Federal Reserve would consider reopening its program to support the mortgage market if interest rates spiked or the economy showed new weakness, Federal Reserve Bank of New York President William C. Dudley... MORE

The Inevitability of Medicare Vouchers

Economics of Health Care
Arnold Kling
Tyler Cowen ruminates over Medicare vouchers. He also links to ruminations by Ross Douthat. In my view, the question is not whether you like vouchers are not. Vouchers are inevitable, given the alternatives. Alternative 1 is to keep what we... MORE

Libertarian Schisms

Political Economy
Arnold Kling
I started with a post by Jim Manzi, worked back to Jonah Goldberg, and landed on an article by Brian Doherty, about some newly-released writings from Murray Rothbard. The uneasy relationship between Rothbard and Hayek is echoed to this day,... MORE

The Invention of Enterprise

Books: Reviews and Suggested Readings
Arnold Kling
I am still slogging through the new book edited by Landes, Mokyr, and Baumol. Again, self-recommending if From Poverty to Prosperity left you hungry for more in-depth reading. In chapter 1, Michael Hudson discusses my Most Wrong Belief, which is... MORE

Capitalism and the Jews

Books: Reviews and Suggested Readings
Arnold Kling
That is the title of Jerry Z. Muller's new book. Muller is an outstanding intellectual historian, whose earlier book The Mind and the Market is a classic. His latest book is much shorter, and I read it straight through. Some... MORE

Should Macroeconometric Models be Outlawed?

Economic Methods
Arnold Kling
Sometimes, people want something so badly that there is money to be made selling them a defective product. Werner Troesken's paper (full version here) on the history of quack medicines offers an example. No matter how many of these medicines... MORE

Russ Roberts is Wrong

Fiscal Policy
Arnold Kling
He writes, The U.S. government borrows money easily because we're the tallest pygmy. But if we keep spending money like a drunken sailor, we will get shorter and more responsible nations will soon tower over us. We are not the... MORE

Economics Bloggers Surveyed

Fiscal Policy
Arnold Kling
by the Kauffman Foundation. It's not a random sample, so the results are not terribly reliable. And even if you had a reliable of sample of economists' opinions, they might disagree on a lot of these issues. And even if... MORE

Obama's Budget Attacked

Fiscal Policy
Arnold Kling
A blogger writes, we will still face unsustainable medium- and long-term deficits. Let us explain this word "unsustainable." For me personally, an unsustainable budget would be if I promised to buy my kids mansions in Paris, Tokyo, and London. I... MORE

The Political Economy of TARP

Fiscal Policy
Arnold Kling
Among the many faults of TARP, the most enduring is probably the way it discredited the concept of fiscal discipline. Now, all restraints on deficit spending have been lifted. For documentation of the huge rise in spending and deficits relative... MORE

Models and Hunches

Economic Methods
Arnold Kling
I am possibly going to speak on a panel in a few weeks on the issue of U.S. unemployment. I am thinking of trying to convey two ideas (is that too many? I only have ten minutes). 1. Do not... MORE

Housing Policy: What Would Reagan Do?

Finance: stocks, options, etc.
Arnold Kling
Tracy Alloway finds a reportthat one of TARP's goals is propping up house prices I remember 1980, when holding down consumer energy prices was the main goal of energy policy. Then Ronald Reagan was elected President, and one of the... MORE

Two Interesting Health Care Papers

Economics of Health Care
Arnold Kling
1. Leemore Dafny, Katherine Ho and Mauricio Varela write, We estimate that employees would be willing to forego 10 to 40 percent or more of their employer subsidies for the right to apply those subsidies to the plan of their... MORE

Market Failure in Education

Upcoming Events
Arnold Kling
Bill Gates writes, So far technology has hardly changed formal education at all. But a lot of people, including me, think this is the next place where the Internet will surprise people in how it can improve things--especially in combination... MORE

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