Bryan Caplan and David Henderson

Arnold Kling: October 2010

An Author Archive by Month (54 entries)

By Request: Monetarism and the Great Depression

Economic History
Arnold Kling
The request is for my reaction to the way that economies in the Great Depression seemed to do better after going off the gold standard. Does this provide evidence that monetary easing would help today? In general, macroeconomic data are... MORE

Numbers to Ponder

Macroeconomics
Arnold Kling
From the WSJ Real Time Economics blog, here and here. 1. Banks have an inventory of about 1 million foreclosed homes, plus another 5 million homes where the loans are badly nonperforming. Any way you look at it, that is... MORE

Taylor-Cogan vs....well, Everybody

Fiscal Policy
Arnold Kling
John F. Cogan and John B. Taylor write, Our main finding is that the increase in government purchases due to the ARRA has been remarkably small, especially when compared to the large size of the overall ARRA package. In fact,... MORE

Requests

Politics and Economics
Arnold Kling
A reader requests that I update the One-Party State Watch. This story about the success of Google's $1.8 million political fundraising dinner serves the purpose. Another reader asks me what my benchmarks would be for taking the Tea Party seriously.... MORE

Reading, Not Recommended

Books: Reviews and Suggested Readings
Arnold Kling
I received review copies of: 1. Economic Lives, a collection of previously published papers by economic sociologist Viviana A. Zelizer. It is so repetitive that one is tempted to give it less credit than it deserves. She talks about the... MORE

Recalculation Watch: Unemployed Law School Graduates

Economics of Education
Arnold Kling
Annie Lowrey reports, The job market for lawyers is terrible, full stop--and that hits young lawyers, without professional track records and in need of training, worst. Though the National Association for Law Placement, an industry nonprofit group, reports that employment... MORE

Primer on Austrian Economics

Austrian Economics
Arnold Kling
Eamonn Butler, who wrote the much under-appreciated Best Book on the Market, has a new project, a primer on Austrian ecoomics. Once again, I think he has done an outstanding job. In light of our discussion of Arrow, I note... MORE

Morning Commentary

Politics and Economics
Arnold Kling
First, on the political situation. This poll claims that Back in 1974 - shortly after Richard Nixon's resignation in the Watergate scandal - 55 percent of Americans were optimistic about "our system of government and how well it works." Today,... MORE

Technocratic Overconfidence

Behavioral Economics and Rationality
Arnold Kling
Matt Ridley discusses a paper that uses "behavioral economics" to assess regulators. The paper is by Slavisa Tasic, and I believe that it can be found here. Tasic writes, In the context of political economy, overconfidence takes the form of... MORE

What did Arrow Prove?

Economic Education
Arnold Kling
Among those trying to popularize the Arrow Impossibility Theorem are Steven Landsburg, Tyler Cowen, and Alex Tabarrok. Alex writes, More generally, what Arrow showed is that group choice (aggregation) is not like individual choice... Arrow showed that when a group... MORE

Election Pre-Mortem

Politics and Economics
Arnold Kling
I made a bet with Bryan that seems increasingly dubious. I took the view that the demographic trends favor Democrats. More of the population is non-white, born after 1980, and located in large metro areas. So, how are the Republicans... MORE

Economic Ideas Not Well Popularized

Economic Education
Arnold Kling
Tyler Cowen asks which economic ideas are most difficult to popularize. This could mean (a) that there is nowhere to go to read a definitive popular version or (b) that people can read a definitive popular treatment and yet walk... MORE

What is Wrong with the New Elite?

Political Economy
Arnold Kling
Charles Murray writes, Far from spending their college years in a meritocratic melting pot, the New Elite spend school with people who are mostly just like them -- which might not be so bad, except that so many of them... MORE

Predicting Success in Entrepreneurs

Business Economics
Arnold Kling
Via various people, Paul Graham identifies characteristics of successful business founders. First is "determination." I have a cousin who got into a business in which he had to make 150 cold calls a day, and if he was lucky he... MORE

Scary Paragraph

Finance: stocks, options, etc.
Arnold Kling
Business Week reports, Laurie Goodman, a mortgage analyst at Amherst Securities Group, said in an Oct. 1 report that if government doesn't step up its intervention, over 11 million borrowers are in danger of losing their homes. That's one in... MORE

A Snark on Health Care Cost Reduction

Economics of Health Care
Arnold Kling
David Leonhardt writes, The debate over the health law showed that there is deep political opposition to Medicare cuts -- even if such cuts are the single most important step toward bringing down the country's long-term deficit. In theory, many... MORE

Time to Re-think Securitization?

Finance: stocks, options, etc.
Arnold Kling
The New York Times reports, On Wall Street and in bank boardrooms, the question of whether investors can force banks to buy back, or "put-back," the bad mortgages to the banks that sold them is dominating the debate and worrying... MORE

Why is College Expensive?

Economics of Education
Arnold Kling
Robert B. Archibald and David H. Feldman write, First, higher education is a service industry. From 1947 to 2009 the average annual price increase for services was 4.0 percent, while for goods the average annual price increase was only 2.4... MORE

Bob Hall on Quantitative Easing

Monetary Policy
Arnold Kling
He was giving a talk on unemployment. Along the way, he said that with quantitative easing, the Fed borrows short and lends long. So the Treasury could do the same thing by issuing less long-term debt and more short-term debt.... MORE

Health Care Costs and Wages

Economics of Health Care
Arnold Kling
John Goodman writes, In four years' time, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year. (I think... MORE

Hummel vs. Bernanke

Monetary Policy
Arnold Kling
Jeffrey Rogers Hummel explains the Bernanke view of financial intermediation but raises a critical question about its policy implications. what distinguishes banks from other financial intermediaries is not merely that deposits are used as money but also that banks, in... MORE

MIT Economists in the New York Times

Economics of Health Care
Arnold Kling
1. Twenty years ago, Peter Diamond wrote, suppose individuals could be grouped independent of their health needs and work status. What if government simply assigned people to groups, ranging in size from 10,000 to 100,000, based solely on where they... MORE

Karma

Politics and Economics
Arnold Kling
Jonathan Haidt writes, For the tea partiers, federal activism has become a moral insult. They believe that, over time, the government has made a concerted effort to subvert the law of karma. Read the entire essay. My comments could go... MORE

The Scientific Process

Economic Methods
Arnold Kling
David Freedman in The Atlantic writes, We think of the scientific process as being objective, rigorous, and even ruthless in separating out what is true from what we merely wish to be true, but in fact it's easy to manipulate... MORE

Foreclosure "scandal" again

Finance: stocks, options, etc.
Arnold Kling
I am starting to get angry with some of the pundits. I probably should just chill for a few days. A few random points. 1. I opposed TARP from day one. I wanted to see the insolvent banks put into... MORE

Idea Rents

Information Goods, Intellectual Property
Arnold Kling
Tyler Cowen writes, What if ideas rather than land are the fixed factor? Wages and profits stagnate. Some "idea landlords" receive enormous pecuniary returns, while others do not. I think that the standard estimate is that innovators earn less than... MORE

Thoughts on Unemployment

Labor Market
Arnold Kling
Alex Tabarrok writes, The first puzzle about unemployment when thought about from within the search-matching framework is that unemployment rates are highest among the least skilled, i.e. among those worker/jobs with the easiest matches. It's hard to believe that it... MORE

More Praise for TARP

Politics and Economics
Arnold Kling
David Ignatius writes that the bailouts almost surely saved the country from another Great Depression. You might expect that the rest of the essay would explain why we should believe this. Instead, he goes on to ask, What accounts for... MORE

A Few More Thoughts on the Foreclosure Scandal

Finance: stocks, options, etc.
Arnold Kling
I am not a lawyer, so treat the following as an amateur's view. When you obtain a mortgage on a home, two documents get recorded. One is a mortgage, which as I understand it is just a piece of paper... MORE

Cato Unbound, Self-Recommending Edition

Growth: Causal Factors
Arnold Kling
Deirdre McCloskey, Gregory Clark, and Matt Ridley debate the cause(s) of the industrial revolution. McCloskey writes, contrary to the usual declarations of the economists since Adam Smith or Karl Marx, the Biggest Economic Story was not caused by trade or... MORE

Full Robin Hanson

Growth: Consequences
Arnold Kling
Maybe this isn't Robin Hanson's greatest hits, but it's a start. Listen when you have an hour and a half. I'll refund your money if you're not satisfied.... MORE

My Essay on the Foreclosure Scandal

Finance: stocks, options, etc.
Arnold Kling
In The Washington Times. What has emerged in recent weeks as "the foreclosure scandal" represents the collision of this 21st-century computerized, global financial system with an 18th-century legal process for obtaining ownership rights to buildings and land. Indeed, the United... MORE

How an Irrational Fad Became Entrenched

Economic Methods
Arnold Kling
Scott Sumner asks, How was it that just a few years later it was almost impossible to get anything published without assuming rational expectations, efficient markets, etc. Let me tell you. For a period of about 5 to 10 years,... MORE

Austerity Within Reason

Fiscal Policy
Arnold Kling
This month's issue of Reason has an article about fiscal tightening moves that did not cause macroeconomic disaster. I discuss the demobilization after World War II. Maurice McTigue discusses New Zealand 25 years ago. David Henderson talks about Canada 15... MORE

Work Choices, Money, and Status

Income Distribution
Arnold Kling
If Greg Mankiw did not know that his latest column on the incentive effects (on Greg) of higher marginal tax rats would be ill-received, then he is somewhere along the autism spectrum. Tyler Cowen tries to return the discussion to... MORE

The Latest Economics Nobel

Macroeconomics
Arnold Kling
As Tyler reports, it goes to Peter A. Diamond (unqualified to be a Fed governor, according to some self-styled experts), Date T. Mortensen, and Christopher A. Pissarides. A few comments. 1. This appears to be for theories of labor matching.... MORE

Why TARP was wrong

Finance: stocks, options, etc.
Arnold Kling
Timothy Geithner defends TARP. Financial crises matter not because they hurt banks and bankers. They matter because they kill jobs, businesses and the value of retirement savings. To protect Main Street from the damage caused by a financial crisis, you... MORE

Notes for a Talk

Political Economy
Arnold Kling
I am having trouble putting this together. It is supposed to be based on U and U, for an audience that I expect to lean neocon, and to go for about 20 minutes, followed by Q&A. I would rather provoke... MORE

Employment: A New Trough

Labor Market
Arnold Kling
The employment situation reported today showed a decline in nonfarm payroll employment. That means that my favorite indicator, labor capacity utilization, is at its lowest level since the recession began. The National Bureau of Economic Research, which uses spending as... MORE

The Real Foreclosure Scandal

Finance: stocks, options, etc.
Arnold Kling
The Washington Post is filled with the story again. Once again, they get it wrong, in my opinion. If mortgage servicers were foreclosing on the wrong borrowers, that would be a scandal. That would be if they send the foreclosure... MORE

History of Fire Protection

Microeconomics
Arnold Kling
William Polley recommended a paper by Annelise Graebner Anderson. Russ Roberts recommended an essay by Fred S. McChesney. The point is that fire-fighting began as a private function. Largely volunteer in the U.S. In London, fire brigades were hired by... MORE

The Economics of Fire Protection

Microeconomics
Arnold Kling
Surely, someone has done this? I assume that fire-fighting is an industry with declining average costs. Suppose that it takes $1 million in fixed costs per year to maintain the fire department (that includes normal profit, aka opportunity cost), the... MORE

Morning Links

Politics and Economics
Arnold Kling
E. J. Dionne hearts Rep. Tom Perriello. Perriello was one of the participants in the panel on the future of the middle class where I felt out of place. He was not the Congressman who threw down his pen. But... MORE

Workers Usurp the Means of Production

Economics of Education
Arnold Kling
The New York Times reports, Today, Mr. Lee and five other teachers -- all veterans of Teach for America, a corps of college graduates who undergo five weeks of training and make a two-year commitment to teaching -- are running... MORE

Fundamentalism

Political Economy
Arnold Kling
David complained about an article in which the author blamed libertarians for the refusal of a fire department to put out a fire because the homeowner had not paid for fire protection. David's point is that it was a government... MORE

Some Trends of Interest

Labor Market
Arnold Kling
1. Menzie Chinn offers charts that demonstrate that unemployment is highest in 2010 among those who had the lowest income in 2008. Does that mean that they have the stickiest wages? Just kidding. I think the one thing we could... MORE

I Wasn't Invited

Politics and Economics
Arnold Kling
Matt Welch writes, There you have it. The 47 smartest economists around the president of the United States agree that the best way to solve the "untenable fiscal situation" is to boost education spending, weatherize homes, throw more bad money... MORE

150 Years Ago

Books: Reviews and Suggested Readings
Arnold Kling
James M. McPherson writes, This pre-industrial world could not survive the transportation revolution, which made possible a division of labor and specialization of production for ever larger and more distant markets. The transportation revolution includes canals, steamboats, and railroads. It... MORE

Twenty-One Years Ago

Business Economics
Arnold Kling
Below is a random post.... MORE

Legally Recalculating

Macroeconomics
Arnold Kling
Larry Ribstein writes, I have been insisting for awhile now that the economy was only the trigger of permanent decline in the demand for Big Law's services. Indeed, the factors cited in the Hildebrandt analysis support this: outsourcing and other... MORE

ABC vs. Recalculation

Austrian Economics
Arnold Kling
A reader asks me to explain the difference. Answer below the fold.... MORE

Morning Recommendations

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Russ Roberts interviews Bryan Caplan on the case for open borders. The challenge with making that case is that anything other than xenophobia is counterintuitive. Thorfinn suggests that if the U.S. overspends on health care, it also overspends on education.... MORE

John Quiggin's new book

Books: Reviews and Suggested Readings
Arnold Kling
It is called Zombie Economics. It is a polemic against conservative and libertarian economics. I agree with some of it, which might be considered a rave review. But really, I am still waiting for a book that attacks us without... MORE

Finance, TARP, and the Great Recession

Finance: stocks, options, etc.
Arnold Kling
At the unpleasant session yesterday, I did learn something interesting from Doyne Farmer of the Santa Fe Institute, while he was ranting against the state of the art in macroeconomic models. He said that in 2006, the Fed simulated a... MORE

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