Bryan Caplan and David Henderson

Arnold Kling: January 2011

An Author Archive by Month (66 entries)

New from the NBER

Behavioral Economics and Rationality
Arnold Kling
1. (no ungated version found) Kevin S. Milligan and David A. Wise on factors affecting labor force participation of the elderly, an important issue relative to Social Security. 2. Justine Hastings and Olivia S. Mitchell on how savings behavior and... MORE

Correcting James Kwak

Finance: stocks, options, etc.
Arnold Kling
This post about Freddie Mac and Fannie Mae does not reach a fundamentally unsound conclusion. However, along the way, I think he gets a number of things wrong. First, a minor correction. He writes, Although they had been private, profit-seeking... MORE

What I'm Reading

Books: Reviews and Suggested Readings
Arnold Kling
Back on the Road to Serfdom, a collection of essays edited by Thomas E. Woods, Jr. The authors are mostly people you have not heard of, and the topics are varied. Per Bylund writes (p. 52), the Swedish model is... MORE

Nick Rowe vs. Scott Sumner

Macroeconomics
Arnold Kling
Nick Rowe writes, Monetary disequilibrium theorists will disagree with those Keynesians. We add monetary exchange to the mix. We don't buy and sell output for labour. We don't buy and sell output for bonds. We buy and sell output for... MORE

The Rest of The Great Stagnation

Books: Reviews and Suggested Readings
Arnold Kling
I was planning to review Tyler Cowen's e-book while I read it, but then we lost power, and my Kindle was working while my Internet connection was not, so my comments on the entire rest of the book are below... MORE

Financial Crisis Inquiry Commission

Finance: stocks, options, etc.
Arnold Kling
Does anyone care about the report of the Financial Crisis Inquiry Commission? Keith Hennessey, Bill Thomas, and Douglas Holtz-Eakin write, Brookings Institution economists Martin Baily and Douglas Elliott describe the three common narratives about the financial crisis. The first argues... MORE

Roosevelt and the Puritans

Economic History
Arnold Kling
Razib Khan writes, Walter Russell Mead has a fascinating blog post up, The Birth of the Blues. In it, he traces the roots of modern American "Blue-state" liberalism back to the Puritans, the Yankees of New England. This is a... MORE

I am constantly amazed by bloggers and commenters who sneer that I do not understand macroeconomics in general or aggregate demand in particular. Often, the most sneering comments come from people who have no clue about the way economists use... MORE

Fighting With Numbers

Arnold Kling
Tyler Cowen writes, Here is coverage from Arnold Kling, though I think he (like some MR commentators) is spending too much time on impressions and not considering (at all) the numbers presented in chapter one. The numbers do not tell... MORE

The Great Stagnation, Chapter One

Books: Reviews and Suggested Readings
Arnold Kling
I will review Tyler Cowen's new Kindle single one chapter at a time. My father always said that the first iron law of social science is, "Sometimes it's this way, and sometimes it's that way." In other words, beware of... MORE

Light Blogging

Political Economy
Arnold Kling
I have very little time for blogging this week. Here are some things that would interest me if it were a normal week: 1. Ronald Bailey on various studies of how libertarians differ from others in terms of moral outlook.... MORE

The Problem with Schools

Economics and Culture
Arnold Kling
Bryan is not the first one to worry about schools. In 1962, John Holland Snow accused the educational establishment of subversion. I believe that an educational movement or philosophy which minimizes or denies the possibility of our people and institutions... MORE

Corporations

Institutional Economics
Arnold Kling
I would like to try to answer the question that I ducked at the Disputation on Friday evening. That question was whether corporations should have the same rights as people. One panelist, Lisa Graves, answered "no" emphatically (to loud applause,... MORE

The Disputation

Political Economy
Arnold Kling
You can watch here. Move the slider to around 35 to 40 minutes in. I call it a disputation because, given the differences in religious beliefs, Tim and I were not really going to change any minds.... MORE

House Price Behavior

Books: Reviews and Suggested Readings
Arnold Kling
I am going to react to three things: Nick Rowe talks about the fact that housing transaction volume is higher when prices are rising; Scott Sumner's latest attempted swindle; and the paper by Steven Gjerstad and Vernon L. Smith in... MORE

More Notes for a Debate

Upcoming Events
Arnold Kling
What have I gotten myself into?. You can watch tonight (Friday, January 21st) on C-span. I have never been booed before, but that seems likely. Tim Carney and I will play the role of Christians in this Roman lion theater,... MORE

The Great Reconfiguration, Again

Growth: Causal Factors
Arnold Kling
Jim Tankersley writes, The Great Recession wiped out what amounts to every U.S. job created in the 21st century. But even if the recession had never happened, if the economy had simply treaded water, the United States would have entered... MORE

Peter Thiel, Cowenian

Growth: Causal Factors
Arnold Kling
In an interview, Thiel says, the problem was that everybody had tremendous expectations that the country was going to be a much wealthier place in 2010 than it was in 1995, and in fact there's been a lot less progress.... MORE

The Great Reconfiguration

Labor Market
Arnold Kling
Michael Mandel writes, This first chart shows the change in wage and salary payments by major industry from 2000-2009, adjusted for inflation, using BEA data. We see that healthcare and social assistance generated $210 billion in real wage gains from... MORE

Housing Finance Reform

Finance: stocks, options, etc.
Arnold Kling
Peter J. Wallison, Alex J. Pollock, and Edward J. Pinto write, Our alternative approach is to ensure that only prime quality mortgages, which comprise the vast majority of US mortgages, are allowed into the securitization system. The very low delinquency... MORE

Notes for a Debate

Political Economy
Arnold Kling
On the topic of corporate power. Open to the public. This Friday evening, January 21st. 7:30 PM. Washington Plaza Hotel, 10 Thomas Circle, in NW Washington DC. Frederick Hall. My notes follow:... MORE

Fixing Montgomery County Education

Economics of Education
Arnold Kling
A commenter asked what I would do differently. Here goes: 1. Make sure that when teachers move into administrative jobs (other than principal), they take a huge pay cut. I do not mind paying a classroom teacher a big salary.... MORE

Poorer than we thought?

Growth: Consequences
Arnold Kling
Evidently Tyler Cowen will offer that message in an "e-book single." From the description: In a figurative sense, the American economy has enjoyed lots of low-hanging fruit since at least the seventeenth century: free land; immigrant labor; and powerful new... MORE

Robert Murphy Thinks I Fell for a Swindle

Austrian Economics
Arnold Kling
He writes, Contrary to Sumner, there is no huge reallocation of construction workers (from January 2006 to April 2008) that Kling or the Austrians must explain. Scott Sumner used housing starts to suggest that most of the decline in housing... MORE

The Enchantment of the Democratic Process

Political Economy
Arnold Kling
Mark Thoma writes, the real question is why so many people have stopped believing that the state has the authority to be the arbiter of last resort in a pluralistic society. Read the whole thing, which starts out as an... MORE

Worth Reading

Austrian Economics
Arnold Kling
William Easterly on Hayekian order. Impossible to excerpt.... MORE

The Looting of a County

Political Economy
Arnold Kling
Montgomery County, Maryland, where I live, is one of the nation's richest counties, thanks to its proximity to the capital of the empire. A local newspaper reports, The core belief for Prouty and members of the MCEA is that the... MORE

If They Had Asked Me

Labor Market
Arnold Kling
The New York Times asks various folks for their view of why jobs have not come back during this recovery. I recommend taking a longer view of the process. I think that a major reconfiguration of the U.S. economy has... MORE

Paul Seabright on Free-Market Ideology

Finance: stocks, options, etc.
Arnold Kling
He writes, The reason why it was so easy to sell securities rated triple-A -- like the higher tranches of the now notorious collateralized debt obligations -- was not that every potential buyer was a true believer in the theory... MORE

Reconfigurations

Growth: Consequences
Arnold Kling
Consider the following hypotheses. 1. The Great Depression and World War II ended the last vestiges of the Jeffersonian agricultural economy in America. The yeoman farmer disappears. 2. The current recession is accelerating a transition away from the industrial era... MORE

Nick Rowe notes that Spain and Ireland also have seen unusually high productivity, and hence high unemployment, relative to output during this recession. Here's my guess. It's because all three countries had a big fall in construction. But what's so... MORE

For Discussion

Politics and Economics
Arnold Kling
From Mario Rizzo: The unreasonableness, or so it seems, of our political culture is, to a large extent, a product of the kind of special interest redistributionist society we have built. Read the whole thing. My thoughts: 1. I have... MORE

AS vs. PSST, again

Labor Market
Arnold Kling
The debate is hotting up, as our friends across the pond would say. Some random comments. 1. The Washington Post reports that some on the left want to see older workers encouraged to retire, to make room for young workers.... MORE

Denmark

Institutional Economics
Arnold Kling
Scott Sumner writes, Denmark is much more decentralized. The same sort of policies adopted in Denmark would work less well in the US, because we are much more centralized, and hence far less democratic (if you define democracy properly, where... MORE

For Economics Teachers

Growth: Causal Factors
Arnold Kling
We call this the I, Toaster video. It would be a great discussion starter for an economics class, just because it does not intend to teach an economics lesson. Thanks to Don Boudreaux for the pointer.... MORE

Scott Sumner Fights Dirty

Macroeconomics
Arnold Kling
He looks at data. Housing starts peaked in January 2006, and then fell steadily for years: January 2006 -- housing starts = 2.303 million, unemployment = 4.7% --April 2008 -- housing starts = 1.008 million, unemployment = 4.9% --October 2009... MORE

Two Notes on PSST

Macroeconomics
Arnold Kling
1. Some folks on the right are bothered by the term "sustainable" in patterns of sustainable specialization and trade. They seem to be afraid that I am some sort of tree-hugging wuss. Or that I think patterns of trade need... MORE

What Type of Unemployment?

Macroeconomics
Arnold Kling
Brad DeLong writes, It seems fairly clear to me that calling this "structural change" is somewhat of a misnomer. Structural change is when workers find jobs in expanding industries. That happens overwhelmingly during booms. For workers to lose jobs in... MORE

The Euro

Optimum Currency Areas
Arnold Kling
Paul Krugman writes a pre-mortem. You still hear people talking about the global economic crisis of 2008 as if it were something made in America. But Europe deserves equal billing. This was, if you like, a North Atlantic crisis, with... MORE

PSST vs. the Aggregate Production Function

Macroeconomics
Arnold Kling
Regular readers know that I am trying to nudge them toward a different paradigm in macroeconomics. I want to get away from thinking of economic activity as spending, and instead move toward thinking of it as patterns of sustainable specialization... MORE

The Plight of the Marginal College Grad

Economics of Education
Arnold Kling
Richard Vedder and co-authors analyze the numbers. More than one-third of current working graduates are in jobs that do not require a degree, and the proportion appears to be rising rapidly...60 percent of the increased college graduate population between 1992... MORE

Foreclosure Mess

Institutional Economics
Arnold Kling
Megan McArdle asks, why aren't libertarians proposing solutions for the foreclosure crisis? Actually, I have written, 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... MORE

FP2P Kindle Price Cut

Books: Reviews and Suggested Readings
Arnold Kling
For those of you who have been holding out on obtaining the Kindle edition of From Poverty to Prosperity because of the exorbitant cost, you are in luck. Amazon finally cut the price below $10.... MORE

One story of the 1930's, which I discussed recently, is that agricultural workers were displaced by tractors and other forms of mechanization. I find this an interesting story, and I went on to I post Who Will Write This Paper?... MORE

Colander on Complexity

Economic Methods
Arnold Kling
Since I brought up the topic, a commenter pointed me to the Wikipedia article on complexity in economics, and that in turn referred to David Colander. [complexity theory] is highly mathematical, and, as I stated above, accepts the need for... MORE

Who Will Write This Paper, No. 2?

Labor Market
Arnold Kling
Title: Fixed Worker Costs and the Distribution of Leisure Abstract: In an earlier paper, we showed that a change in technology can lead to an increase in leisure. In this paper, we explain how an increase in leisure can be... MORE

Forecasting for a Swing

Economic Methods
Arnold Kling
Joe Keohane writes about Nouriel Roubini, For a prophet, he's wrong an awful lot of the time. In October 2008, he predicted that hundreds of hedge funds were on the verge of failure and that the government would have to... MORE

Complication vs. Complexity

Macroeconomics
Arnold Kling
In an interview, Ben Ramalin says, We treat complex things as if they were merely complicated... distinguished between complicated systems, which can be modeled mathematically, and complex systems, for which there is no mathematical model which can say, if X... MORE

The Attitude

Politics and Economics
Arnold Kling
David Cole writes, We, the Real Americans, in order to form a more God-Fearing Union, establish Justice as we see it, Defeat Health-Care Reform, and Preserve and Protect our Property, our Guns and our Right Not to Pay Taxes, do... MORE

Let the Debate Begin

Political Economy
Arnold Kling
So says Uwe E. Reinhardt. Even the word private in "private charitable giving" is not completely accurate. A more accurate term would be "private donations coupled with involuntary, tax-financed public subsidies." If progressives want to attack private charity because they... MORE

Who Will Write This Paper?

Labor Market
Arnold Kling
Perhaps Cowen and Lemke. Here is my sketch: Title: Technology Shifts and Unemployment Abstract: We present a model in which shifts in technology cause unemployment. There are two types of workers, which we call Type C and Type S. A... MORE

Cowen and Lemke on Unemployment

Labor Market
Arnold Kling
They write, The fact that the United States has pre-crisis levels of output with fewer workers raises doubts as to whether those additional workers were producing very much in the first place. If a business owner fires 10 people and... MORE

Unemployment: Why Don't Employers Fish More?

Macroeconomics
Arnold Kling
I am trying to sort out my thinking on unemployment in the Recalculation Story. I think that a basic question is this: when workers lose jobs because a sector needs to shrink, this creates a pool of unemployed workers. Why... MORE

Second Thoughts on Economics

Economic Education
Arnold Kling
Just in time for the annual meetings of the American Economic Association, Russ Roberts writes, modeling economic behavior using the tools of the physical sciences in hopes of attaining the holy grail of a full-blown, accurate, model that can track... MORE

Falkenstein vs. Sumner

Finance: stocks, options, etc.
Arnold Kling
Scott Sumner writes, I define "finance" as the business of allocating capital, which is a bit different from how it shows up in the national accounts. For instance, I believe the CEOs of major non-financial companies are being paid (in... MORE

I am sorry, but I do not believe it is relevant to ask how educated they are. Using sanitation workers as an example, I would put it this way. If you do not have enough sanitation workers because you cannot... MORE

Speaking of Science Funding

Business Economics
Arnold Kling
I attended a set of two panels this morning at the American Association for the Advancement of Science, touting "convergence," meaning joint work involving engineering and the biological sciences (with other disciplines as well). The scientists were talking their book,... MORE

Labor Market Commentary

Labor Market
Arnold Kling
Two pointers from the indispensable Mark Thoma. 1. Catherine Rampell writes, A large fraction of displaced workers who have found new jobs have had to switch careers, and most of those career-changers have downgraded to a lower-paying job, according to... MORE

My Proposal for a Code of Ethics for Economists

Economic Methods
Arnold Kling
There has been much discussion of late of a code of ethics for economists, with a focus on disclosing personal interests. I would go in a different direction. My code of ethics would consist of one line: Take into account... MORE

Robin Hanson on the Singularity

Growth: Consequences
Arnold Kling
Self-recommending, until I get the 90 minutes to listen. I have heard Robin talk on this subject, and he is fascinating.... MORE

An Assignment for Progressives

Finance: stocks, options, etc.
Arnold Kling
First, read Peter Wallison's op-ed. Congress should assure that housing does not again make itself a ward of the government. Then, write an essay that consists of something other than ad hominem attacks on Wallison. Instead, write an essay that... MORE

Paragraphs to Ponder

Economics of Health Care
Arnold Kling
From the New York Times: Because payroll taxes and firing costs are still so high, businesses across Southern Europe are loath to hire new workers on a full-time basis, so young people increasingly are offered unpaid or low-paying internships, traineeships... MORE

Michael Barone on Thomas Bruscino

Books: Reviews and Suggested Readings
Arnold Kling
Again from the Claremont Review of Books, again gated. One enormous divide--far wider than it is today--was between North and South. Between 1865 and 1940, when more than 30 million foreign immigrants moved to the North, only about one million... MORE

Harvey Mansfield on Kenneth Minogue

Books: Reviews and Suggested Readings
Arnold Kling
From the Claremont Review of Books, but gated. Thus the fundamental problem in western democracy now, as Minogue sees it, arises from inequality not in wealth but in wisdom or competence...The intellectual elite behind the politico-moral project that he opposes... MORE

The Perils of Amateur Epidemiology

Economic Methods
Arnold Kling
Robin Hanson cites one paper that says that higher unemployment reduces mortality, perhaps because of healthier eating, while another paper says that higher unemployment reduces the consumption of fruits and vegetables. He writes, Either we can cross "eat healthier" off... MORE

Arnold Kling with a Minus Sign

Political Economy
Arnold Kling
I don't know any other way to describe Peter Wilby. Unfortunately, private charity doesn't always have the same priorities as public policy. In the UK, the most popular causes are children, animals, cancer and lifeboats. Overseas causes, for relief of... MORE

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