Bryan Caplan and David Henderson

Arnold Kling: May 2010

An Author Archive by Month (61 entries)

More on the 30-year Fixed Rate Mortgage

Finance: stocks, options, etc.
Arnold Kling
Mark Perry writes, It wouldn't take much of an increase in inflation and short-term interest rates before many banks/thrifts could see their interest margins squeezed, and short-term rates could conceivably even rise above 5% sometime in the next 30 years,... MORE

What the Battle is About

Political Economy
Arnold Kling
Scott Sumner continues the discussion of the merits of neoliberalism. Here are some remarks of mine. 1. This relates to what Arthur Brooks calls The Battle. I have not read Brooks' book, and my guess is that I will have... MORE

A Black-Cowen Model of the Recession

Macroeconomics
Arnold Kling
Fischer Black started from a model of efficient markets with diversified investors. However, there is nondiversifiable risk in the economy, there will be times when you get a bad draw. At those times, the value of physical and human capital... MORE

What Financial Re-Regulation?

Finance: stocks, options, etc.
Arnold Kling
In two weeks, I am supposed to speak on a panel entitled "Financial Re-regulation." My question is, what re-regulation? To me, re-regulation means you would reverse some step that you took toward deregulation. But the new financial reform bill does... MORE

Macro Models and Forecasts

Economic Methods
Arnold Kling
Nick Rowe writes, We can't forecast next year's Y unless Statistics Canada tells us next year's X, and they can't. His point is that some variables are outside of the model, and to make a forecast in real time you... MORE

The Wheels of Housing Regulation Grind On

Political Economy
Arnold Kling
A news report begins, The Federal Housing Finance Agency (FHFA) has sent to the Federal Register a proposed rule to establish a framework for affordable housing goals for the 12 Federal Home Loan Banks (Banks). The proposed rule implements provisions... MORE

Remarks on U.S. Mortgage Finance

Finance: stocks, options, etc.
Arnold Kling
At a conference yesterday on mortgage finance, I managed to turn a discussion of the future of securitization into a discussion of the 30-year fixed-rate mortgage. I think that the 30-year fixed-rate mortgage is an artifact of government intervention, and... MORE

Are Intellectuals Pessimistic?

Growth: Consequences
Arnold Kling
I'm asking Bryan. "Pessimistic bias" is one of the four biases he finds among people who are ignorant of economics. He also claims that educated people are generally better than the less-educated on economic issues. But in an interview with... MORE

Various

Politics and Economics
Arnold Kling
I think I got to these either from Mark Thoma or Yves Smith. 1. Wolfgang Munchau writes, I have heard credible reports suggesting that the underlying situation of the German Landesbanken is even worse than those estimates suggest. Last year,... MORE

Shorter Matt Ridley

Books: Reviews and Suggested Readings
Arnold Kling
The op-ed and the Cato event, the latter with Robin Hanson commenting.... MORE

Shorter Arthur Brooks

Books: Reviews and Suggested Readings
Arnold Kling
His book is not out yet. Meanwhile, you can listen to the talk. I like the analogy (due to his wife) between believing in free enterprise while distrusting business to believing in marriage while distrusting husbands. Or you can read... MORE

Not as Rich as We Think

Macroeconomics
Arnold Kling
Tyler Cowen writes, This is the era of the rude economic awakening, and Greece is simply an extreme manifestation. The new European bailout plan is a denial of this truth rather than recognition of the new reality that a lot... MORE

Kling Interviewed

Macroeconomics
Arnold Kling
by Rob McClendon. The two segments are each less than ten minutes. They cover a range of topics, from what Nick Schulz and I call Economics 2.0 to bank bailouts to the outlook for employment. Part one. Followed by Part... MORE

Jean Tirole and the Silent Revision

Macroeconomics
Arnold Kling
Jean Tirole writes, Economic theory stresses the necessity for the state to boost industrial and financial sectors during periods of liquidity shortage. [here a footnote reads, "This is an old theme, dating back at least to Keynes and Hicks. For... MORE

The Macroeconomic Reversal

Macroeconomics
Arnold Kling
Nick Rowe writes, Regulation and supervision can never eliminate financial instability. If your faith is contingent on being able to prevent financial crises, you have lost the faith. Read the whole thing. I too am struck by the rapid change... MORE

Better Regulation Fails To Strengthen Banks

Finance: stocks, options, etc.
Arnold Kling
That is the conclusion of Asli Demirgüç-Kunt and Enrica Detragiache, two economists with the International Monetary Fund. All in all, we do not find support for the hypothesis that better compliance with BCPs [Basel Core Principles] results in sounder banks... MORE

More Matt Ridley

Economic History
Arnold Kling
From The Rational Optimist, p. 182: Empires, indeed governments generally, tend to be good things at first and bad things the longer they last. First they improve society's ability to flourish by providing central services and removing impediments to trade... MORE

Good News

Public Choice Theory
Arnold Kling
From an email: Dear Grantseeker, One of the best kept secrets in Washington is that the new Health Reform Act is channeling millions of dollars in funding to other areas of vital interest to other nonprofits, tribes and local government!.... MORE

Impressions of Tea Partiers

Politics and Economics
Arnold Kling
I am missing Matt Ridley, Arthur Brooks, and Jeff Miron speak in DC this week because I am in Indiana. The first leg of my trip was to do a "house concert" for a group of about 35 people, many... MORE

The New Matt Ridley Book

Economic History
Arnold Kling
I picked up a copy at the airport yesterday, and I am about half-way through. It is called The Rational Optimist, and John Tierney has a brief summary. My guess is that a lot of people will want to talk... MORE

Virtual Federalism

Political Economy
Arnold Kling
Tyler Cowen quotes from an idea that would allow Israelis and Palestinians to live in overlapping neighborhoods, with choice of political allegiance. This is proposed as a way of solving the problem that there are no natural, mutually agreeable boundaries... MORE

Scott Sumner on the Great Depression

Macroeconomics
Arnold Kling
The talk is here. Very worthwhile. Near the end he makes the point that when there is a large collapse there is a tendency to blame it on huge imbalances prior to the crash. The "huge imbalances" view is what... MORE

Capturing the Dynamic

Politics and Economics
Arnold Kling
Ross Douthat writes, This is the perverse logic of meritocracy. Once a system grows sufficiently complex, it doesn't matter how badly our best and brightest foul things up. Every crisis increases their authority, because they seem to be the only... MORE

Sovereign Debt and Confidence

Fiscal Policy
Arnold Kling
Robert J. Samuelson writes, In a classroom, limiting government debt in relation to GDP can be defended. The idea is to reassure investors (a.k.a. "financial markets") that the debt burden isn't becoming heavier so they will continue lending at low... MORE

The Obvious Solution on Health Care

Economics of Health Care
Arnold Kling
Why didn't I think of this? Jim Yong Kim and James N. Weinstein write, What will lead to improvements is a multidisciplinary approach that brings the best minds to focus on the problem. Experts in management, systems thinking and engineering,... MORE

Self-Recommending this Week

Upcoming Events
Arnold Kling
Russ Roberts on the financial crisis. Arthur Brooks, speaking on his his new book, which seems to be available, although when I checked for it on Kindle the other day it said it had not yet been released. Jeff Miron... MORE

Macro: the View from Inside the Ivory Tower

Economic Methods
Arnold Kling
Narayana R. Kocherlakota, President of the Minneapolis Fed, writes, modern macro models are designed to be mathematical formalizations of the entire economy. This ambitious approach is frustrating for many outside the field. Many economists like verbal intuitions as a way... MORE

Give One Point to Scott Sumner

Macroeconomics
Arnold Kling
David Leonhardt looks at the behavior of real wages in the latest recession. A big reason wages have held up this time is inflation has been nearly absent. As some economic historians have pointed out to me, there is a... MORE

The Econometrics Controversy

Economic Methods
Arnold Kling
Joshua D. Angrist and Jörn-Steffen Pischke write, Empirical microeconomics has experienced a credibility revolution, with a consequent increase in policy relevance and scientific impact. The quote is from the paper, which is gated, and the link is to the abstract,... MORE

Piggy Banking and Unlimited Government Church

Political Economy
Arnold Kling
A reader asks what I mean by "piggy bank" in reference to a central bank. What I mean is that the central bank, instead of buying safe securities in order to expand the money supply, buys risky securities in order... MORE

Marriage and Inequality

Income Distribution
Arnold Kling
Richard Fry and D'Vera Cohn write, In 2007, median household incomes of three groups -- married men, married women and unmarried women -- were about 60% higher than those of their counterparts in 1970. But for a fourth group, unmarried... MORE

Some Bailout Commentary

Finance: stocks, options, etc.
Arnold Kling
James DeLong wonders what the business model is for Wall Street. Or, "We borrow from the government at low rates and lend back to the government at a premium, and for that we get paid a lot." (From the investment... MORE

An interview with Andreas Bergh. Just watch it.... MORE

Rodrik Update

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
In an email, Dani Rodrik writes to correct my misinterpretation. I don't think the world needs a strong government. I think the world needs to ease up on economic globalization, precisely because it cannot have (and should not have, for... MORE

The Deeper Meaning of the Greek Crisis

Political Economy
Arnold Kling
We are going to argue about this one. Dani Rodrik writes, The choice that the EU faces is the same in other parts of the world: either integrate politically, or ease up on economic unification. I read his essay as... MORE

Cognitive Failure or Moral Failure

Finance: stocks, options, etc.
Arnold Kling
Claire A. Hill writes, many brilliant and sophisticated market participants with considerable amounts of money at stake and considerable access to information about the securities and about markets generally made the same mistake the rating agencies did. These instruments were... MORE

Musings on Macro

Macroeconomics
Arnold Kling
Russ Roberts interviews Ed Leamer. If you are not already familiar with Leamer's views on econometrics, then you should listen. Leamer has a notion of macro that I think needs more elaboration. He says that in a normal economy, when... MORE

On Economic History

Economic History
Arnold Kling
Razib writes, I think it is critical to emphasize why ancient barbarian elites were so keen on conquering civilized states, and why there seems to have been less mass migration of the peasantry. In the modern world when we think... MORE

Mortgage Market Experts

Upcoming Events
Arnold Kling
will be at George Washington University on May 26. I will also be there, near the end of the day. I once worked with Bob Avery, Lawrence J. White (will he remember?), Ed Golding, and Bob Van Order. All of... MORE

Robin Hanson is Incurable

Economics of Health Care
Arnold Kling
From the Boston Globe. the simplest and least ethically hazardous way to capitalize on the placebo effect is to acknowledge that medicine isn't just a set of approved treatments--it's also a ritual, with symbolism and meaning that are key to... MORE

Go See Matt Ridley

Books: Reviews and Suggested Readings
Arnold Kling
He will speak at Cato and at Mercatus. I will be out of town, unfortunately, but I hope to be able to get hold of a copy of the book as soon as it comes out. It is likely to... MORE

Europe's TARP

Finance: stocks, options, etc.
Arnold Kling
Tyler Cowen writes, 6. Basically the ECB is monetizing bad government debt claims. His other 11 short points also are interesting. Peter Boone and Simon Johnson write, This is a whole new level of global moral hazard - the result... MORE

Odious Debt

Fiscal Policy
Arnold Kling
Barry Eichengreen writes, Only the delusional can believe that, when everyone else is taking swingeing cuts, Greece's creditors can continue receiving 100 cents on the euro. It beggars belief that Greek government debt can top out at 150% of GDP,... MORE

Outsider Academic Journals

Economic Methods
Arnold Kling
Bruce Charlton no longer edits one. While he was editor, he published Robin Hanson's classic article on what we now call Hansonian medicine. Daniel Klein still edits one, and the latest issue features an article challenging Bryan Caplan's view that... MORE

The Minsky-Jones Forecast Looks Good

Macroeconomics
Arnold Kling
Two months ago, I wrote, The standard forecast is, "employment has been less than what we expected, so let's assume it will continue to be less than expected." My forecast is that the recalculation is just getting started, and we... MORE

A Kauffman Foundation survey of a non-random sample. I think that the questions may tell you more than the answers: Tyler Cowen asks whether the Chinese economy will crack up in five years. Mark Thoma asks what will happen to... MORE

This afternoon, I'm scheduled to join a press call with Simon Johnson and two Senators discussing a proposed amendment to the financial reform bill. Simon and I have been in alignment since the day we "debated" the issue of nationalizing... MORE

Should the IMF Have Intervened Sooner in Greece?

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
I'll say right away that I don't know squat about the theory or the practice of the IMF. But the IMF seems to have the power to negotiate deals of the sort that say, "We'll lend you the money, but... MORE

Theory vs. History

Fiscal Policy
Arnold Kling
Nick Rowe writes, If it prints money and is not in a recession, or has inflation, then that is a problem. Printing money will make inflation worse, and that's a problem. But it's a negative feedback problem. The inflation will... MORE

Do You Belong to the Church?

Political Economy
Arnold Kling
Make a list of five to ten social issues that you feel are important. Next, make a list of five to ten social issues that you think government should stay out of. What is the intersection of those two sets?... MORE

A Note on Public Sector Pay

Fiscal Policy
Arnold Kling
Michael Mandel looks at the numbers. The chart shows that public and private sector pay rose in parallel from 2001 to 2004. Then the lines diverged. Since early 2005, public sector pay has risen by 5% in real terms. Meanwhile,... MORE

The New Sectarianism in America

Political Economy
Arnold Kling
Richard Cohen writes the very reason most Americans find secularism a strange and useless term is that this country has never had a state religion. I believe that America does have a state religion. I call it the religion of... MORE

Why U.S. Budget History is Not Encouraging

Fiscal Policy
Arnold Kling
My essay claims, there is no precedent for reducing the ratio of debt to GDP by simply growing our way out of it. My general worry is that the essay is incomprehensible to people who have never walked through the... MORE

The Singularity is Not so Near

Growth: Causal Factors
Arnold Kling
Via a Tyler Cowen tweet, Robert Fortner writes, The accuracy of computer speech recognition flat-lined in 2001, before reaching human levels. Raw computer power is not enough to solve complex problems. That is why predicting that we will have brain... MORE

The Voice of the Outsider

Behavioral Economics and Rationality
Arnold Kling
Russ Roberts interviews Nassim Taleb in a fast-paced discussion. They kick around a number of interesting ideas. One of them is that leverage is linked to overconfidence. When you believe you can predict the future, you borrow a lot. When... MORE

Slacker U

Economics of Education
Arnold Kling
Philip Babcock and Mindy Marks write, We find a 10 hour decline in the average weekly study time of full-time college students at four-year colleges in the United States, from about 24 hours per week in 1961 to about 14... MORE

Government Fraud

Fiscal Policy
Arnold Kling
Andrew G. Biggs writes, State pension funds are underfunded by over $3 trillion; this is more than six times the $438 billion in underfunding the plans themselves report. Pension shortfalls far exceed explicit state debts. Current state pension accounting practices... MORE

Four Principles of Human Action

Political Economy
Arnold Kling
I stretched to make them fit into a framework of A, B, C, and D. Think of this post as a follow-up to both the government menace post and the Ropke post. A stands for Altruism. B stands for Business.... MORE

The U.S. Welfare State

Income Distribution
Arnold Kling
I was invited to contribute to a British booklet called Small State, Big Society. Feeling contrarian, I refused to describe the U.S. as a small state. Instead, I wrote, The United States has a surprisingly large welfare state. The American... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Arnold Kling
1. Wilhelm Ropke's Political Economy, by Samuel Gregg. On p. 52, he describes three ways of allocating resources and assigns moral values to each method. The first moral position was described by Ropke as 'the ethically negative' method: that is,... MORE

Is Government a Menace?

Political Economy
Arnold Kling
Yesterday, President Obama said, When our government is spoken of as some menacing, threatening foreign entity, it ignores the fact that in our democracy, government is us. We, the people -- (applause.) We, the people, hold in our hands the... MORE

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