Bryan Caplan and David Henderson

Arnold Kling: June 2010

An Author Archive by Month (70 entries)

Recommended Books

Books: Reviews and Suggested Readings
Arnold Kling
Diane Coyle offers her recommendations. Pointer from Tyler Cowen. The comments are mine. 1. Paul Seabright, The Company of Strangers. I strongly recommend this one. Note that there is a revised edition out, or due out soon. 2. David Landes,... MORE

The Fiscal Singularity is Near

Fiscal Policy
Arnold Kling
The Congressional Budget Office just released its latest so-called Long Term Budget Outlook. From the summary: this report focuses largely on the next 25 years. However, because considerable interest exists in the longer-term outlook, figures showing projections through 2080 and... MORE

Robin Hanson and Curt Flood

Behavioral Economics and Rationality
Arnold Kling
He writes, It sees to me that while people do vary in conformity, this variation is less in how much folks care about others' evaluations, and more about which others they care about. "Conformists" tend to care about a common... MORE

Unbundling Government

Political Economy
Arnold Kling
This week is Secession Week at Let a Thousand Nations Bloom. I have no problems with the S word, but I also use the economic expression "unbundling." For example, Ed Glaeser writes, In a sense, the gulf between the political... MORE

The Macro Doubtbook, Installment 2

Macroeconomics
Arnold Kling
The first installment was The Northwest Passage. An excerpt from the second installment, called General Equilibrium Theory: suppose that unemployment did not exist, but that instead there was a very low-value job (say, dishwashing) that is always available, at whatever... MORE

Are Soccer Fans Socialist?

sports economics
Arnold Kling
My complaint about soccer rules creating too much room for luck drew many comments. People can argue that I am a philistine who does not appreciate the beauty of the sport, and that is fine. The only sport I claim... MORE

The Euro and Armageddon

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Michael Pettis writes, In my opinion the current set of crises, beginning with the sub-prime crisis in the US and spreading throughout the world, is not a short-term liquidity crisis like LTCM, the Asian Crisis, or the Mexican crisis of... MORE

If I Could Write the Lede

Public Choice Theory
Arnold Kling
President Obama's economic coordinator Lawrence Summers today announced the President's intention to gradually reallocate radio spectrum. The long-outmoded command-and-control system will be updated over the next decade, using a new set of rules and auctions. An overflow audience consisting mostly... MORE

My Question for Larry Summers

Regulation and Subsidies
Arnold Kling
I doubt that I will get to ask it. He is announcing that over the next ten years, the government is going to make more spectrum available for broadband. My question is: isn't this just a partial solution to a... MORE

Caplan on Hayek, Richter, and Socialism

Political Economy
Arnold Kling
Russ Roberts interviews Bryan Caplan. The overall theme is the arguments about socialism. For example, why has socialism produced evil leaders? Is it power that corrupts? Is it that the contest for power selects ruthless individuals? Or is it that... MORE

Soccer and the Law of Large Numbers

Economic Methods
Arnold Kling
I am not a soccer fan. In my amateur opinion, the rules ought to be changed to foster more scoring. This is not because I want to see more scoring. But having more scoring would reduce the luck factor. It... MORE

The Dodd-Frank Bill

Finance: stocks, options, etc.
Arnold Kling
If you don't have anything nice to say, then keep quiet. That's why I have not been commenting on the Dodd-Frank bill. I like what Tyler Cowen wrote, particularly his sentence about the credit rating agencies. THE BEST EQUILIBRIUM IS... MORE

Signal and Noise in Economics Writing

Economic Methods
Arnold Kling
Kartik Athreya writes, Why should anyone accept uncritically that Economics, or any field of human endeavor, for that matter, should be easy to process and contribute to? Pointer from Greg Mankiw. Read the whole thing. He is suggesting that bloggers... MORE

Is the Beast Starved?

Fiscal Policy
Arnold Kling
Tyler Cowen writes, In many respects, the expansionary phase of big government is coming to an end, and quickly. ...It is not that fiscal conservatives have won a grand battle of ideas, but rather that governments realize that the bills... MORE

The Northwest Passage

Macroeconomics
Arnold Kling
Below are two pages of the hypothetical book on macro. Once (If?) I get to the main part of the book, I will need good sources for analysis of pre-1920's macroeconomic events and for postwar events in other countries.... MORE

JEP on line

Arnold Kling
Timothy Taylor told me that the Journal of Economic Perspectives is now available to anyone on line, for free, going back to 1999. This is my favorite economics journal, because the articles are accessible to nonspecialists and focus on important... MORE

Budget Hawk, Stimulus Dove

Fiscal Policy
Arnold Kling
It's not my position. But I would think someone would articulate it. It sounds like what Mark Thoma would advocate, for example. That is, someone could advocate: 1 A larger deficit in the short term. 2. Specific, clear measures to... MORE

Toward a Book on Macroeconomics

Macroeconomics
Arnold Kling
Suppose I were to write a book on macroeconomics. How should it be structured? My goals would be: 1. Explain why controversies in macroeconomics are so difficult to resolve. Explain why it is a mistake to be supremely confident in... MORE

Group Solidarity and Survival

Behavioral Economics and Rationality
Arnold Kling
Bruce Charlton writes, Libertarians are intrinsically and on principle cowardly and hedonistic loners who will not suffer privation, take risks or undergo personal suffering either for the good of the group or for transcendental goals (unless they subjectively, arbitrarily happen... MORE

What Do Mortgage Lenders Want?

Finance: stocks, options, etc.
Arnold Kling
Mike Konczal writes, I think further deregulation would see something similar to what we see in the credit card market, where everyone's mortgage looks like whatever the laws of North Dakota say, and that the poorest homeowners (or "inept", if... MORE

Paul Seabright, GYOB

Macroeconomics
Arnold Kling
Internally at Econlog, GYOB means "get your own blog." It is a term of disparagement used to describe commenters who frequently post comments that are longer than the original post. In the case of Paul Seabright, I am thinking that... MORE

The Voegeli and Samples Show

Upcoming Events
Arnold Kling
If you are in DC tomorrow morning, I recommend going to hear the authors of two new books. William Voegeli is the author of Never Enough: America's Limitless Welfare State, and John Samples is the author of The Struggle to... MORE

Glaeser on Mokyr

Books: Reviews and Suggested Readings
Arnold Kling
Reviewing Joel Mokyr's The Enlightened Economy, Ed Glaeser writes, It is easy to envision the massive mills of Manchester and think that the Industrial Revolution was all about scale and machines. But there was more. At its core, this economic... MORE

The Lower Right Quadrant

Institutional Economics
Arnold Kling
In a comment on my eariler post, Paul Seabright writes, Unlike Arnold I'm very interested in the bottom right quadrant, inter alia because historically the boundaries between government and criminal groups have often been very fuzzy. He is referring to... MORE

A Theory of Economic Recovery

Macroeconomics
Arnold Kling
Reading Paul Seabright has made me want to once again dismiss the theory of aggregate demand and instead push Recalculation. There are two patterns that must emerge in a complex modern economy. One is a pattern of labor specialization. People... MORE

Charlton Controversy, Continued

Central Planning vs. Local Knowledge
Arnold Kling
Niklas Blanchard adds interesting comments. Charlton follows up:, The joke of the Texas Sharpshooter is that he fires his gun many times into a barn door, then draws a target over the bullet holes, with the bulls-eye over the closest... MORE

Idiocracy

Business Economics
Arnold Kling
Without mentioning the movie, Bruce Charlton thinks we are living it. So we should be honest about the fact that human do not anymore fly to the moon because humans cannot anymore fly to the moon. Humans have failed to... MORE

30-Year Fixed-Rate Mortgage Debate

Finance: stocks, options, etc.
Arnold Kling
Richard Green likes them. Nick Rowe does not. I can understand Green's antipathy toward the most common forms of adjustable-rate mortgages in the United States. However, I think that a mortgage that amortizes over 30 years, with an interest-rate adjustment... MORE

The Company of Strangers

Books: Reviews and Suggested Readings
Arnold Kling
Notwithstanding my disagreements with Paul Seabright on political economy, the revised edition of The Company of Strangersis one of the best economics books to come out so far this year. I strongly recommend it, particularly if you did not read... MORE

When to Rely on Coercion

Political Economy
Arnold Kling
In the revised edition of The Company of Strangers, Paul Seabright writes (p. 26), One of the great intellectual achievements of modern economics has been to work out very precisely the circumstances under which decentralized systems of market exchange can... MORE

Fiscal Inflation

Fiscal Policy
Arnold Kling
I noticed John Cochrane's paper on fiscal inflation, but I did not have anything pithy to say about it. But a reader emailed and asked me to comment. The shorter version ends on this note: If [high inflation] comes, we... MORE

From the AER

Economic History
Arnold Kling
The regular issues of the American Economic Review rarely interest me, but the papers and proceedings issue is often better. This year, covering the meetings held in January and arranged by Robert Hall, is particularly good. It seems as though... MORE

One-Sentence Macro Policy

Monetary Policy
Arnold Kling
Tyler Cowen writes, I believe the "zero bound" is perhaps the single largest "red herring" in the economics profession today. If you understand that sentence, you know everything you need to know about Tyler's case against fiscal stimulus. In case... MORE

The Baumol Puzzle

Information Goods, Intellectual Property
Arnold Kling
When you buy a car, should the price include a licensing fee to the ancestor who invented the wheel? That question is implicit in William Baumol's new book. I think that the answer is obviously "no," but it is less... MORE

Baiting Bryan

Family Economics
Arnold Kling
Two from the Washington Post. 1. Kathleen Parker writes, By large percentages, the sperm-donor children suffered more depression, delinquency and substance abuse than children who were adopted or raised in a home with their two natural parents. See also Bruce... MORE

Focusing on Entrepreneurs

Books: Reviews and Suggested Readings
Arnold Kling
William Baumol's latest book is The Microtheory of Innovative Entrepreneurship. It is hard to think of an economist as important as Baumol who does not have a Nobel Prize. He is old enough to put himself out to pasture, but... MORE

Mortgage Lending and Discrimination

Finance: stocks, options, etc.
Arnold Kling
Felix Salmon writes If you're a high-income Latino with a mortgage, you're almost twice as likely to be facing foreclosure than a high-income non-Hispanic white person. And in general, the foreclosure crisis is hitting blacks and Latinos much harder than... MORE

Hypothetical Agendas

Politics and Economics
Arnold Kling
Following up on Hypothetical Bargains (read that one first), let me offer some hypothetical agendas for a tea-party influenced Republican Party, as a way of explaining the relationship between the soil and the weeds. Think of the four agendas as... MORE

John Taylor's Counter-narrative

Finance: stocks, options, etc.
Arnold Kling
He writes, You may not have heard much about the Great Deviation. I define it as the recent period during which macroeconomic policy became more interventionist, less rules-based, and less predictable. It is a period during which policy deviated from... MORE

Zingales Joins the Swamp

Finance: stocks, options, etc.
Arnold Kling
Yesterday, in Squam Lake or Swamp, I noted that four economists on the faculty at the University of Chicago signed on to a report on financial reform that treats this as a Keynesian moment and ignores Hayekian issues. Today, thanks... MORE

Hypothetical Bargains

Books: Reviews and Suggested Readings
Arnold Kling
Below the fold is an essay that is partly a reaction to reading parts of William Voegeli's new book, Never Enough, which ruminates on liberalism, conservatism, and the welfare state.... MORE

The State of the European Crisis

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Richard Baldwin and Daniel Gros introduce a set of essays on the crisis in the eurozone. The authors unanimously believe that the crisis is not over, and that the Eurozone rescue is not finished. More needs to be done. I... MORE

Squam Lake or Swamp?

Books: Reviews and Suggested Readings
Arnold Kling
What happens when you bring leading academic experts in economics and finance together to come up with ideas to prevent future financial crises? You get The Squam Lake report, enthusiastically greeted by Ben Bernanke. I am not impressed. The report... MORE

What is Massive Financial Fraud?

Finance: stocks, options, etc.
Arnold Kling
This story says that the government has decided to prosecute one Lee Bentley Farkas for financial fraud. As a non-lawyer, and seeing only the description in this and related stories, it is very difficult for me to discern the difference... MORE

Tea Time

Politics and Economics
Arnold Kling
That was the name of this symposium, which I attended. In general, the conservative establishment seems to have discovered the Tea Party movement, and so in addition to the symposium I want to talk about other attempts by elite conservatives... MORE

Rajan and Reinhart

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Raghu Rajan spoke at Cato about his new book, Fault Lines. One of the discussants was Carmen Reinhart, of Reinhart and Rogoff fame. I found it interesting, and it might be worth checking out when Cato puts up a recording,... MORE

Holding Universities Accountable

Economics of Education
Arnold Kling
Glenn Reynolds writes, Make institutions of higher education partially liable when students are unable to pay student loans. A really strict system would make the school a co-signer, but making it even 5 or 10% liable for missed payments would... MORE

Why the European Bailouts?

Optimum Currency Areas
Arnold Kling
The Daily Mail reports, Democracy could 'collapse' in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned. That is actually a better story than the more common... MORE

Morning Recommendations

Growth: Causal Factors
Arnold Kling
1. A well-written review of From Poverty to Prosperity. I admit I was surprised when I got to the end of the post. 2. A new metaphor for the economy, from Don Boudreaux. He compares it to a gigantic jigsaw... MORE

Adolescence Without a Curfew

Economics of Education
Arnold Kling
Michael Barone writes, [A recent ballyhooed study of the phenomenon of extended adolescence] got me thinking about the much ballyhooed provision of the Obamacare bill that allows parents to include "children" up to age 26 in their family health insurance... MORE

Economics, Libertarianism, and the BP Spill

Energy, Environment, Resources
Arnold Kling
Ed Glaeser writes, Consider the purely hypothetical case of a massive oil spill in the Gulf of Mexico. The traditional libertarian would argue that regulation is unnecessary because the tort system will hold the driller liable for any damage. But... MORE

Cut Their Pay

Fiscal Policy
Arnold Kling
President Obama writes, Already this year, we have lost 84,000 jobs in state and local governments...if additional action is not taken, hundreds of thousands of additional jobs will be lost. Therefore, we need to cut pay for state and local... MORE

Catching Up

Books: Reviews and Suggested Readings
Arnold Kling
Various things that came up while I was traveling are discussed below.... MORE

Returned From Europe

Political Economy
Arnold Kling
I just returned from Europe, where I participated in two conferences sponsored by market-oriented think tanks. Some impressions below. (Note: Tyler Cowen has some interesting things to say, blogging from Germany--Tyler and I failed to meet in Berlin, primarily because... MORE

What the Klein Study Proves

Political Economy
Arnold Kling
[update: Daniel Klein emails me to credit Zeljka Buturovic for the study.] Dave Leigh writes, People who frequently shop at Wal-Mart scored much better than those who never do (2.24 to 4.24 questions wrong, respectively). This isn't much of a... MORE

The Cognitive Capture Dilemma

Political Economy
Arnold Kling
Steven M. Davidoff writes, What makes these issues so intractable is that you want regulators to interact with the people they regulate. In addition, regulators from industry sometimes best understand the industry they regulate. He correctly points out that the... MORE

Peltzman on the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
Last night, I heard Sam Peltzman talk on the financial crisis. He is known for the Peltzman effect, in which safety regulations (in cars for example) induce offsetting behaviors that increase risk. He described the history of financial regulation in... MORE

Good Sentences

Economics of Education
Arnold Kling
from John Goodman. In general, a bureaucratic system is one in which normal market forces have been systematically suppressed. In such an environment, there tends to be a sea of (relative) mediocrity, sometimes punctuated by little islands of excellence. Further,... MORE

Matching Narrative to Policy

Finance: stocks, options, etc.
Arnold Kling
Mark Thoma writes, Regulators certainly made mistakes, and there is plenty of room for improvement, but does that mean we should abandon attempts to regulate? Of course not. It is hard to argue against the proposition that better regulation would... MORE

Why Are Interest Rates Low?

Monetary Policy
Arnold Kling
Raghu Rajan writes, My sense is that we do not know enough about the effect of ultra-low interest rates to state categorically that they are an unmitigated good for reviving the economy. But perhaps the most important cost of low... MORE

Just a Reminder

Fiscal Policy
Arnold Kling
That we do not need one penny of fiscal stimulus to save state and local government jobs. Just cut pay and keep the workers with the same budget. Everyone to my left seems to keep forgetting that option.... MORE

Underwriting Errors Outlawed

Finance: stocks, options, etc.
Arnold Kling
The WSJ reports The thrust of the mortgage section would require lenders to make sure that borrowers can repay any home loans they are sold. It puts limits on the ability of lenders to offer loans without documentation from borrowers,... MORE

A Tax Increase I Can Support

Tax Reform
Arnold Kling
Getting rid of the mortgage interest deduction. Subsidizing mortgage indebtedness is not a good thing. I am not buying any "starve the beast" arguments. My personal starve-the-beast approach is to donate a lot of my income to charity. But the... MORE

If I Had More Time

Finance: stocks, options, etc.
Arnold Kling
I would comment more on these: 1. Charles Goodhart writes, Let me start by recalling that this is the third version of a quasi-automatic market mechanism for limiting bank losses and facilitating bank resolution that has been proposed in the... MORE

Roberts and Kling on the Crisis

Finance: stocks, options, etc.
Arnold Kling
Russ Roberts is summarized in the NYT Dealbook. My paper in the Harvard Journal of Law and Public Policy is now available. Other papers on the financial crisis are here. For now, since I am mostly on vacation, they are... MORE

Rajan Joins the Blogosphere

Finance: stocks, options, etc.
Arnold Kling
He writes, Paul [Krugman] is, of course, a great theoretical Nobel-prize-winning economist, so his attacks must be taken seriously (and I did take his trade theory classes at MIT, in the interest of full disclosure). Unfortunately, much of the "Fannie... MORE

Is the Ruling Class an Elite?

Politics and Economics
Arnold Kling
Daniel Klein writes, According to a Zogby International survey that I write about in the May issue of Econ Journal Watch, the answer is unequivocal: The left flunks Econ 101. Liberals are confident that they are smarter and better educated... MORE

The Coase Theorem and Endowment Effects

Property Rights
Arnold Kling
There is a problem with the assignment of property rights on Karl Marx Street. The street is in Griebnetzsee, a suburb of Berlin, and it sits on a hill overlooking a beautiful lake. It is very chic, with fancy villas.... MORE

To put it baldly, since capitalism undermined aristocracy, it was a good thing from an intellectual's point of view. That is from Alan S. Kahan, Mind vs. Money: The War between Intellectuals and Capitalism. quoted in a review by... MORE

What is a NINJA loan?

Finance: stocks, options, etc.
Arnold Kling
The acronym NINJA stands for no income, no job, and no assets. Often, I hear this described as lenders willing to make mortgage loans to borrowers with no income, no jobs, or no assets. Technically, this is not correct. NINJA... MORE

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