Bryan Caplan and David Henderson

Arnold Kling: August 2011

An Author Archive by Month (54 entries)

Media Bias and Asymmetric Insight

Behavioral Economics and Rationality
Arnold Kling
Megan McArdle writes, What bias does--in science, in media, in any situation where information is gathered--is affect what questions you ask. McArdle suggests that you tend to be skeptical of findings that go against your point of view, but you... MORE

The Knowledge-Power Discrepancy

Central Planning vs. Local Knowledge
Arnold Kling
Susan Hockfield writes, Rebuilding our manufacturing capacity requires the demolition of the idea that the United States can thrive on its service sector alone. We need to create at least 20 million jobs in the next decade to offset the... MORE

The Monetary Policy Debate

Monetary Policy
Arnold Kling
David Leonhardt is insightful. you would also find a sizable group of economists who thought the Fed could and should do far more than it was doing. This group, known as doves, tilts liberal, though it includes conservatives as well.... MORE

A Questionable Video

Economic Education
Arnold Kling
I took a break from the basic economic concepts to record this video. I am leaning against encouraging my students to watch it. Regular readers of this blog may enjoy it.... MORE

Kipper- Und Wipperzeit Update, August 28

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Nick Rowe writes, The Tea Party makes life difficult for the Lender of Last Resort, because the Tea Party wants some sort of guarantee it will get its money back. And that guarantee can never be made cast-iron. If it... MORE

Act Libertarianism and Rule Libertarianism

Books: Reviews and Suggested Readings
Arnold Kling
Robert Frank writes, Personal autonomy will always be compromised unless all problems stemming from activities that cause harm to others are resolved efficiently. That is from p.196 of his latest book, The Darwin Economy. So far, I have just read... MORE

What's the Big Story?

Growth: Causal Factors
Arnold Kling
Tyler Cowen writes, the Japanese economy was more dependent on productivity gains in the first place. As those gains start to slow down or dry up, it bites harder and more quickly. I want to talk about three big stories... MORE

But Why Would Greg Mankiw Adopt?

Economics of Education
Arnold Kling
Timothy Taylor writes, My solution is my own introductory textbook, "Principles of Economics." The second edition of this text is out this fall through Textbook Media, Inc. The pricing works this way: $17 for access to an online e-textbook which... MORE

Do We Need all this Expectations Hoodoo?

Macroeconomics
Arnold Kling
Michael Woodford writes, expectations can be shaped far more effectively by speaking directly about future policy, rather than leaving it to be inferred from actions that have no definite implications for the future. Words speak louder than actions? Woodford is... MORE

Experimenting with Teaching Videos

Economics of Education
Arnold Kling
These are for my high school classes, where I teach AP statistics and AP economics. I am trying to do my version of Khan Academy. My hope is that the students can watch these on their own, and then I... MORE

The Economy as Machine

Economic Methods
Arnold Kling
Paul Rosenberg writes, But when she turned to private discussions with 21 leading progressive economists, she was delighted to find a much more coherent use of one particular metaphor. The dominant metaphor in public discourse is a conservative one -... MORE

Politics and Tribalism

Behavioral Economics and Rationality
Arnold Kling
David McRaney writes one of the most insightful paragraphs I have ever read. In a political debate you feel like the other side just doesn't get your point of view, and if they could only see things with your clarity,... MORE

Housing Finance in Other Countries

Finance: stocks, options, etc.
Arnold Kling
In the Richmond Fed bulletin, Renee Haltom writes, The United States finds itself on the far end of the spectrum in many aspects of housing. At the funding level, the United States has the most government support of owner-occupied housing... MORE

Transforming Education and Health Care

Economics of Education
Arnold Kling
Marc Andreessen gives his view of the world. It includes, Health care and education, in my view, are next up for fundamental software-based transformation. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries.... MORE

The Fiscal Outlook for U.S. States

Fiscal Policy
Arnold Kling
Jeff Miron writes, The analysis here suggests that some of the recent debate about state fiscal situations has been misfocused. Attempts to reduce the power of government employee unions, or to reduce the generosity of pensions for state and local... MORE

Shaky Banks

Finance: stocks, options, etc.
Arnold Kling
Tyler Durden writes, if one were to be told that a bank has a Tangible Common Equity ratio of under 2%, the logical response would be that said bank is a goner. Yet both Credit Agricole and Deutsche Bank are... MORE

Roundabout Production

International Trade
Arnold Kling
Timothy Taylor writes, Here's a table combining several studies, showing a rise in foreign value-added in exports from 18% in 1970 to 24% in 1990, 27% in 1995, and 33% by 2005. This is a sign of longer global supply... MORE

Good News and Bad News on the Jobs Front

Politics and Economics
Arnold Kling
Investor's Business Daily reports that employment at Federal regulatory agencies increased 5 percent between March of 2010 and March of 2011.... MORE

Should We Forget the Production Function?

Macroeconomics
Arnold Kling
That is the question that occurred to me after reading Tyler Cowen. If the employers don't want you at the high wage, and don't want you at the low wage, what might your perceived MP be, temporarily or not? MP... MORE

The Feeling is Mutual

Political Economy
Arnold Kling
Brad DeLong writes, America's best hope for sane technocratic governance required the elimination of the Republican Party from our political system as rapidly as possible. DeLong's dream of technocratic governance is some people's nightmare. I think the solution is what... MORE

NCH Podcast

Growth: Consequences
Arnold Kling
Paul Howard and I discuss the New Commanding Heights. That is, education and health care are taking over a larger share of the economy, and this is an important phenomenon for political economy.... MORE

Thoughts on the New Commanding Heights

Economic Education
Arnold Kling
1. From Paul Howard. Government policy both encourages consumer spending in health and education and protects providers in those industries through licensing requirements that reduce competition from lower-cost or higher-quality providers (charter schools, retail clinics, etc.). 2. From John Goodman.... MORE

Stop Coddling Warren Buffett

Income Distribution
Arnold Kling
He writes, Last year my federal tax bill -- the income tax I paid, as well as payroll taxes paid by me and on my behalf -- was $6,938,744. That sounds like a lot of money. But what I paid... MORE

Sounds Like PSST

Macroeconomics
Arnold Kling
From the introduction to a new paper by Paul Beaudry and Franck Portier: Changes in measured macroeconomic activity are mainly driven by changes in the volume of trade between individuals. There are two types of causes to changes in volume... MORE

Clive Crook on Monetary Policy

Monetary Policy
Arnold Kling
He writes, The past few weeks have settled, to my satisfaction at least, a long-running debate on this very topic. Rather than targeting inflation, central banks should keep nominal incomes growing on a pre-announced path: say 5 per cent a... MORE

The Age of Government Dependency

Economics of Health Care
Arnold Kling
Timothy Taylor writes, moving back the retirement age could have a large effect in addressing the financial problems of Social Security, but would have a much smaller effect in helping Medicare. Read the whole thing. The reason that raising the... MORE

Microfoundations of Unemployment

Labor Market
Arnold Kling
Tyler Cowen writes, Why don't the unemployed lower their wages to find a job? The more tragic you think unemployment is, the greater the puzzle here, and yet the people who stress the tragedy are often least likely to admit... MORE

The Top Political Contributors

Political Economy
Arnold Kling
From Mark Perry. It's mostly labor unions.... MORE

Gender and the New Commanding Heights

Growth: Consequences
Arnold Kling
Don Peck writes, As recently as 2001, U.S. manufacturing still employed about as many people as did health and educational services combined (roughly 16 million). But since then, those latter, female-dominated sectors have added about 4 million jobs, while manufacturing... MORE

Jamie Galbraith Makes an Assumption

Fiscal Policy
Arnold Kling
He writes, But there isn't, in fact, a "long-term deficit problem." So long as interest rates stay below the growth rate, as they are, debt-to-GDP levels eventually stabilize and even decline. The notion that there is a big problem is... MORE

Macroeconometrics: The Science of Hubris

Economic Methods
Arnold Kling
That is my paper in Critical Review, which has a number of papers that I am eager to read. This is the paper where I tear apart the macroeconometric models used to estimate the effects of fiscal stimulus. This is... MORE

Real and Nominal Bond Yields

Monetary Policy
Arnold Kling
A reader emails, I think you'll be surprised when you pull up the 10yr real yield vs inflation expectations. Virtually the entire move in bond yields has come at the expense of the real yield component. 10yr real yield is... MORE

How Capital Regulation Creates Systemic Risk

Finance: stocks, options, etc.
Arnold Kling
Philip Maymin writes, any set of regulations that attempts to assign risk to all securities in the same way for all banks would necessarily create some regulatorily-favored group of securities because the objective algorithm assigned too low an amount of... MORE

Kipper- Und Wipperzeit Update, August 9

Finance: stocks, options, etc.
Arnold Kling
Livio Di Matteo writes In essence, resolving the crisis in confidence needs the current ad hoc approach to be replaced with the structure of a more formal mechanism that will generate the confidence in the world financial system needed to... MORE

Administrative Costs of Medicare

Economics of Health Care
Arnold Kling
John Goodman and Thomas Saving write, raw numbers show that, using Medicare's own accounting, its administrative expenses per enrollee are higher than private insurance. They are lower only when expressed as a percentage - but that may be because the... MORE

Ken Rogoff on the Current Situation

Finance: stocks, options, etc.
Arnold Kling
He writes, Too many decisions, for example the recent withdrawal of monetary stimulus by the European Central Bank and the US Federal Reserve have been predicated on overly rosy growth projections. Read the whole thing. Rogoff and co-author Carmen Reinhart... MORE

The Markets React, and so do I

Finance: stocks, options, etc.
Arnold Kling
In the New York Daily News. When it comes to estimating the probability of a default by the U.S. government, credit rating agencies have no special claim to expertise. The risk of sovereign debt cannot be determined through analysis of... MORE

Nomadism

Growth: Consequences
Arnold Kling
Venkat Rao writes Movement is not expensive if the environment is set up to support it. I am not an extremist or minimalist. I don't want to be living off a few packs on a bicycle for the rest of... MORE

A Means A in the Chronicle of Higher Education

Economics of Education
Arnold Kling
The Chronicle reports, The best way to eliminate grade inflation is to take professors out of the grading process: Replace them with professional evaluators who never meet the students, and who don't worry that students will punish harsh grades with... MORE

Daily Kipper- und Wipperzeit Update

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Tyler Cowen writes, Arguably it's now a question of who stares down whom. If you do not doubt German resolve, bet on the ECB and lend money to Italy fairly cheaply. If you fear that Italy suffers from its own... MORE

A Self-Help Book

Books: Reviews and Suggested Readings
Arnold Kling
I was sent a review copy of Innovation You, by Jeff DeGraff. A couple of excerpts: p. 181, Ask a family systems therapist what happens when a family member gathers the clan and says, "We have to be honest. Dad... MORE

Liberating the New Commanding Heights

Economics of Education
Arnold Kling
Inside Higher Ed reports, The bill, S. 1250, the Growing Excellent Achievement Training Academies for Teachers and Principals Act, introduced in June, would give grants to states to set up or authorize "academies" for training teachers and principals. The training... MORE

A Stanford Course Where A Means A

Economics of Education
Arnold Kling
Artificial Intelligence, to be taught in the fall by Sebastian Thrun and Peter Norvig. Although you will not get a Stanford certificate, the course promises a certificate that shows how you would have done on Stanford's grading curve. Thanks to... MORE

A Means A, a bit more fleshed out

Economics of Education
Arnold Kling
Pasted in below the fold. Comments welcome.... MORE

Manufacturing and Reality

Labor Market
Arnold Kling
Stephen J. Rose gets it right. The "problem" with manufacturing is mainly productivity growth that permits fewer workers to produce more goods. As workers are freed from having to produce common goods and services, total output expands greatly. For example,... MORE

Social Security Facts

Social Security
Arnold Kling
The Congressional Budget Office calls this an infographic. It answers a lot of frequently-asked questions about Social Security. One of the facts is that the number of workers per beneficiary has fallen from 4.9 in 1960 to 2.8 in 2010.... MORE

Boone and Johnson on the Eurozone Crisis

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Peter Boone and Simon Johnson have what written what I believe is the best analysis of the Eurozone crisis, which on this blog I refer to is as the Kipper- Und Wipperzeit. Thanks to Timothy Taylor for the pointer. I... MORE

A Means A

Economics of Education
Arnold Kling
A few months ago, Ben Casnocha wrote, Maybe 5-10% of high school high achievers should pursue higher education without attending a four year traditional college. This is the "Real Life University" option for entrepreneurial spirits. This is for folks who... MORE

Schools without Classrooms

Economics of Education
Arnold Kling
In the legacy education model, teachers combine coaching, feedback, and content delivery. By coaching I mean advice, guidance, and encouragement. Feedback includes formal grading as well as informal praise and criticism. Content delivery includes lectures and reading assignments. Perhaps the... MORE

Kipper- Und Wipperzeit Update

Finance: stocks, options, etc.
Arnold Kling
Apparently, the resolution of the debt ceiling restored the dollar's status as a safe haven in the eyes of the world's investors. That accelerated the flight from European sovereign debt and European banks. That in turn raised fears in financial... MORE

Paul Romer on Institutional Reform

Institutional Economics
Arnold Kling
The talk is here. He says things to offend many people, libertarians in particular. For example, he talks about problems that we would call public-choice issues, with for-profit education and health care. That is, he argues that when government is... MORE

GDP and Employment in the Current Cycle

Labor Market
Arnold Kling
The latest GDP revisions have tightened the relationship between employment and GDP in this cycle compared to the unrevised data. Some advocates of an AD-AS story are ready to say, "Nothing structural to see here. The aggregate production function is... MORE

More Thoughts on Metaphors

Political Economy
Arnold Kling
Let me "+1" David Henderson's recommendation of the article by Max Borders. Borders writes, We can no more fix an economy than we can fix a rainforest or a coral reef. I riffed on the metaphor of a rain forest... MORE

Compared to What?

Fiscal Policy
Arnold Kling
John Taylor writes, So it is clear that the budget has come a long way from the Administration's first spending proposal--about half way to the House proposal--and it was accomplished without any tax increases. Some are disappointed that Washington did... MORE

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