Bryan Caplan and David Henderson

Arnold Kling: March 2011

An Author Archive by Month (51 entries)

Tune In

Upcoming Events
Arnold Kling
Bryan and I will be among the speakers. But others should be at least as interesting. On Friday, April 1, the Kauffman Foundation will host the third annual Economics Bloggers Forum. The Forum brings together select economics, finance, and technology... MORE

Progressive Nudges for Household Savings

Behavioral Economics and Rationality
Arnold Kling
If I were a card-carrying progressive, I would not stoop to being a lapdog for Wall Street and the real estate industry, playing the violin for "affordable housing" and low-down-payment mortgages. True, if somebody buys a house with little money... MORE

The New Leisure

Labor Market
Arnold Kling
According to Gallup, American workers who are emotionally disconnected from their work and workplace -- known as "actively disengaged" workers -- rate their lives more poorly than do those who are unemployed. Forty-two percent of actively disengaged workers are thriving... MORE

What I'm Reading

Books: Reviews and Suggested Readings
Arnold Kling
I've only started The Blind Spot, by William Byers. It is a book on science in our culture. From the preface, p. ix: I emphasize that I am not condemning science and technology as a whole, nor am I ignorant... MORE

Michael Mandel Strikes Again

Macroeconomics
Arnold Kling
Is he now this country's most important macroeconomist? Here, he writes, in many of these industries, we actually have physical measures- tons of steel, barrels of oil, bushels of corn-that gives us a check on the BEA numbers (The one... MORE

It's Gambling, and it's Wrong

Finance: stocks, options, etc.
Arnold Kling
With those words, I believe I shifted the debate at yesterday's hearing. I was referring to buying a home with a low down payment. The example I used was a $200,000 home with $5000 down. I received a lot of... MORE

I Thought I was Being Civil

Finance: stocks, options, etc.
Arnold Kling
Strongly worded, perhaps, but civil. You can decide. I find that the video takes a long time to load. My prepared remarks begin around 25 minutes in. Right after I finish, the Committee Chairman mentions this blog. The Q&A starts... MORE

Video of the Day

Economics of Education
Arnold Kling
Khan of the Khan Academy. If Tyler Cowen still believes in stagnation after watching this video, then he has no soul.... MORE

The Economy in Transition

Growth: Consequences
Arnold Kling
Michael Spence and Sandile Hlatshwayo write, For the tradable sector as a whole, value added per job rose substantially, an increase of 44 percent from 1990 to 2008, far above the increase of 21 percent in the economy as a... MORE

My Schedule

Upcoming Events
Arnold Kling
I have to put together two presentations in a hurry. One is for this Senate Banking Committee hearing on proposals for housing finance. Actually, I probably will just speak extemporaneously to attack the other witnesses' proposals, and just hope that... MORE

Key Data for 2009

Macroeconomics
Arnold Kling
First, we learned that business start-ups declined sharply. Now, we learn that job creation was sluggish. I would recommend trying to understand why these phenomena occurred, rather than relying on preconceptions. I think that there is some real work to... MORE

Economic Advice

Fiscal Policy
Arnold Kling
An open letter signed by Martin N. Baily Martin S. Feldstein R. Glenn Hubbard Edward P. Lazear N. Gregory Mankiw Christina D. Romer Harvey S. Rosen Charles L. Schultze Laura D. Tyson Murray L. Weidenbaum All ten are former chairs... MORE

BPEA on line

Books: Reviews and Suggested Readings
Arnold Kling
You can now access the current issue and complete archive of Brookings Papers on Economic Activity. Many classic papers in applied macro are hence made available. Thanks to Ted Gayer for an email pointer, and thanks to Brookings for undertaking... MORE

The Recalculation Story, Brad DeLong Version

Macroeconomics
Arnold Kling
He writes, After the most recent downturn, however--and to a lesser extent after its two predecessors--things have been different. The downturn was not caused by a liquidity squeeze. The Federal Reserve cannot wave is wand and return asset prices to... MORE

Some History of Deposit Insurance

Finance: stocks, options, etc.
Arnold Kling
Arpit Gupta writes, federal insurance had the benefit of further entrenching the power of small banks, which would otherwise be a competitive disadvantage relative to their larger banking peers. We adopted the FDIC not as a part of a well-thought... MORE

Kling wrote, the textbook definition of a liquidity trap is an infinite elasticity of the demand for money. The central bank can expand the money supply to an unlimited degree, without affecting interest rates, output, or prices. Paul Krugman #1... MORE

Some Data to Ponder

Growth: Consequences
Arnold Kling
Michael Mandel writes, We can see that public/quasi-public employment rose steadily over the past ten years, and is now up 16%. By comparison, the rest of the private sector is down 8% in jobs over the past 10 years. He... MORE

Crowding Out: A New Subject

Macroeconomics
Arnold Kling
Menzie Chinn writes, It appears to me that real interest rates were undeniably higher during the Reagan administration than during, say, the past four quarters of the Obama administration I see that we have managed to change the topic from... MORE

A Review of the Widely Unread

Books: Reviews and Suggested Readings
Arnold Kling
In the latest issue of The Independent Review, Stan Leibowitz reviews Unchecked and Unbalanced. I suppose that the right response from me should be "Thank you for taking the time and trouble to review my book" rather than quibble with... MORE

Liquidity Traps and Unicorns

Macroeconomics
Arnold Kling
The difference being that you might one day see a unicorn. A liquidity trap requires 1. Low nominal interest rates. (The nominal interest rate is the interest rate as stated.) 2. High real interest rates, due to low or negative... MORE

Morning Crankiness, Nobel Laureates Edition

Macroeconomics
Arnold Kling
I am a bit "off" this morning. Ordinarily, my philosophy is "catch them doing something right." If you try to correct people when they do something wrong, they just take offense, and you accomplish nothing. But, nonetheless: Nobel Laureate Paul... MORE

Matt Holzmann writes, Silicon foundries and specialty materials factories were destroyed or damaged with no real chance yet to determine the extent of that damage. But it is certain there will be severe shortages of a number of critical materials.... MORE

The Political Economy of Spending Caps

Economics of Health Care
Arnold Kling
John Goodman writes, On paper, ObamaCare cut Medicare's unfunded liability in half the minute Barack Obama signed the health reform bill. (A reduction of more than $53 trillion -- looking indefinitely into the future!) Going forward, Medicare will grow no... MORE

Asset Price Swings, Revisited

Finance: stocks, options, etc.
Arnold Kling
Since writing on Frydman and Goldberg, I have had some email correspondence with one of the authors. I think I should do more to say where I agree with the authors. 1. I think that the rational expectations hypothesis in... MORE

A Whiff of Liberaltarianism from the Left

Politics and Economics
Arnold Kling
Elaine Kamarck writes, in the spirit of a new progressive incrementalism, here are three battles that progressives should fight in the next Congress to put our fiscal and economic house in order: create jobs by cutting the payroll tax and... MORE

Regional Disasters: AS/AD vs. PSST

Macroeconomics
Arnold Kling
Suppose that a natural disaster occurs in one region. How does this affect the rest of the world? In the aggregate supply and demand paradigm, it would seem that the rest of the world benefits from stronger net exports. In... MORE

Health Care Prior to Stagnation

Economics of Health Care
Arnold Kling
An article by D. Eric Schansberg on the topic of "Envisioning a Free Market in Health Care" has an interesting table showing for various time periods the rate of "excess cost growth" in health care, meaning the differential between the... MORE

Exit, Voice, and Borders

Labor Mobility, Immigration, Outsourcing
Arnold Kling
Nicolas Maloberti writes, since they relax the constraints faced by governments, immigration barriers should be seen as a major contributor in creating the conditions for the perpetuation of the sort of political arrangements that classical liberals resist. If individual sovereignty... MORE

Summarizing an IMF conference, Olivier Blanchard lists nine points. I will make extended comments below the fold. Here is a crucial sentence: Monetary policy has to go beyond inflation stability, adding output and financial stability to the list of targets,... MORE

Deposit Insurance Revisionism

Finance: stocks, options, etc.
Arnold Kling
This post is based on discussions with George Selgin and correspondence with William Melick. Melick sent a copy of a paper he wrote with Randall Kroszner, called "Lessons from the U.S. Experience with Deposit Insurance," in which they write, the... MORE

History and the Great Depression

Economic History
Arnold Kling
Over the weekend, I was at a seminar that I organized on the historical narrative of the Great Depression. Below the fold, I will summarize some things that came out of it. For me, the most interesting insights concern how... MORE

The purpose of this exercise is to test my understanding of Sumner's view of monetary theory and policy. I will do this by putting words in the mouths of Sumner and Taylor. It will be a long post, so it... MORE

Tyler Cowen Explains the "Flash Crash"

Behavioral Economics and Rationality
Arnold Kling
He writes, computers still are not meta-rational. They do not understand what they do not understand very well But could one argue that Watson is Meta-rational, in that it assigns a probability to having the correct answer? Perhaps this feature... MORE

Nominate a Book

Books: Reviews and Suggested Readings
Arnold Kling
for the Hayek Prize for a book written in the past two years. Hint: From Poverty to Prosperity is eligible. So is The Rational Optimist. I was going to nominateThe Price of Everything, but it seems to have a 2008... MORE

Deposit Insurance

Finance: stocks, options, etc.
Arnold Kling
What is the state of the art in understanding deposit insurance? I am interested in survey articles that cover thinking in the last twenty years or so. Suppose we start with a distinction between a solvency problem and a liquidity... MORE

No Prayer, Sorry

Public Choice Theory
Arnold Kling
Bryan Caplan says that maybe liberals and libertarians can agree that farm subsidies are bad. However, I am not impressed by this. Liberals have no problem reducing government support for groups they dislike, such as "corporate farmers." But they still... MORE

Economists' Ideological Blind Spots

Economic Methods
Arnold Kling
Tyler Cowen makes up long lists of the blind spots of left-leaning economists and right-leaning economists. If I were asked this question, I would boil my answers down to one suggestion for each. What I think left-leaning economists should do... MORE

Roman Frydman and Michael D. Goldberg

Books: Reviews and Suggested Readings
Arnold Kling
The book is Beyond Mechanical Markets: Asset Price Swings, Risk, and the Role of the State, and I have written an essay about it. Frydman and Goldberg say that the existence of asset price swings contradicts previous theories of financial... MORE

Vincent Reinhart on Bear Stearns

Finance: stocks, options, etc.
Arnold Kling
He writes, the form of the Bear Stearns resolution actually invited another form of speculative attack. The official playbook appeared to protect creditors fully and to wipe out shareholders. This expectation made it profitable to identify the next financial firm... MORE

Hope Vs. Experience

Finance: stocks, options, etc.
Arnold Kling
I think that is what is on display at the Room for Debate discussion of housing finance reform. The hopers say that we need a housing policy, ignoring the experience. I say otherwise. Concerning Freddie Mac and Fannie Mae, I... MORE

Energy Subsidies

Energy, Environment, Resources
Arnold Kling
Tim Carney writes, Environmental policy is not driven by tree-hugging activists, earnest liberal bloggers, or ecologically minded citizens. Instead, it flows from the lobbyists and executives of well-connected multinational corporations and built-for-subsidy startups that see profit in the loan guarantees,... MORE

James Heckman on the Great Stagnation

Income Distribution
Arnold Kling
He writes, Currently, over 40% of all American children are born out of wedlock and more than 12% of all children live in families where the mother has never married. Such families provide fewer financial and parenting resources for child... MORE

The Macro Implications of Monetized Debt

Macroeconomics
Arnold Kling
PIMCO's Bill Gross writes, most of the publically issued $9 trillion of Treasury notes and bonds are now in the hands of foreign sovereigns and the Fed (60%) while private market investors such as bond funds, insurance companies and banks... MORE

The Great Substitution

Growth: Consequences
Arnold Kling
Naturally, Tyler Cowen recommends David Leonhardt's post, which in turn highlights Michael Greenstone and Adam Loney on the dismal trends in median male earnings. I think that broad aggregates of wages and productivity may not be the most informative way... MORE

Two Basic Macro Questions

Macroeconomics
Arnold Kling
1. Does the Fed matter? Vincent and Carmen Reinhart write, First, spending and pricing decisions are assumed to be based on long-term assessments of real income and real rates of return. Second, changes in monetary policy can only change real... MORE

Maladaptation to Higher Productivity

Labor Market
Arnold Kling
Dani Rodrik writes, In economies that don't exhibit large inter-sectoral productivity gaps or high and persistent unemployment, labor displacement would not have important implications for economy-wide productivity. In developing economies, on the other hand, the prospect that the displaced workers... MORE

Ken Rogoff and Others

Finance: stocks, options, etc.
Arnold Kling
As usual, Mark Thoma has interesting links for today. 1. Ken Rogoff writes, Many countries' tax systems hugely favor debt over equity. The housing boom in the United States might never have reached the proportions that it did if homeowners... MORE

My Paper on Housing Finance Reform

Finance: stocks, options, etc.
Arnold Kling
I write, Any attempt to reengineer a housing-finance system with a new set of government-guaranteed entities would entail all of the risks of restoring the existing GSEs, plus more. The taxpayers would be exposed to similar potential hazards, but with... MORE

Some Health Care Tidbits

Economics of Health Care
Arnold Kling
1. The late John Calfee has an op-ed in today's WSJ that emphasizes the way that the Massachusetts health care reform raised costs. Meanwhile, economists John Cogan, Glenn Hubbard and Daniel Kessler reported in the Forum for Health Economics &... MORE

Education vs. Money Management

Economic Methods
Arnold Kling
Consider the following two propositions, one in education (E) and one in finance (F). (E) One way to improve education would be to get rid of the bottom 10 percent of teachers and to try to replicate more widely the... MORE

What I'm Reading

Economics and Culture
Arnold Kling
Life, the autobiography of Keith Richards of the Rolling Stones. On p. 338: Mick would come and visit me occasionally in Switzerland and talk about "economic restructuring." We're sitting around half the time talking about tax lawyers! The intricacies of... MORE

Return to top