Bryan Caplan and David Henderson

Arnold Kling: September 2011

An Author Archive by Month (48 entries)

Venture Capital and Loan Guarantees

Business Economics
Arnold Kling
It is important to understand the difference. Megan McArdle writes, A lot of Solyndra's defenders have been arguing that if the government is going to play venture capitalist, this is simply what's going to happen: venture capitalists accept that a... MORE

As the World Ages

Growth: Consequences
Arnold Kling
Phillip Longman writes, Because of the phenomenon of hyper-aging in the developing world, another great variable is already changing as well: migration. In Mexico, for example, the population of children age 4 and under was 434,000 less in 2010 than... MORE

Quotable

Labor Market
Arnold Kling
From the WSJ blog: Since the recession ended, businesses had increased their real spending on equipment and software by a strong 26%, while they have added almost nothing to their payrolls. The post's title also is eloquent.... MORE

More on the Myth of the Macroeconomy

Macroeconomics
Arnold Kling
From a speech by Electronic Arts CEO John Riccitiello, reported by Andy Katkin. I see an unfortunate gap between the economic performance of key parts of the tech sector, and the rest of our economy. I see two economies on... MORE

Pay for Performance

Behavioral Economics and Rationality
Arnold Kling
Bruno S. Frey and Margit Osterloh give a number of reasons to question the effectiveness of performance-based compensation systems. One of the reasons should be familiar to readers of this blog. It would be naïve to assume that the persons... MORE

The Myth of the Macroeconomy

Macroeconomics
Arnold Kling
Does that sound like a good book title? The theme would be that treating the economy as if it were a single individual that sometimes spends less and works less is a simplification that does more harm than good. This... MORE

The Best and the Brightest

Political Economy
Arnold Kling
Megan McArdle writes, The administration was supposed to have the economic dream team. Couldn't they have spared a moment to sit down with the folks at DOE and explain the concept of sunk costs? This is why everyone has to... MORE

From National Affairs

Monetary Policy
Arnold Kling
The current issue (fall 2011) looks quite interesting. Some of the pieces you can now access on line: 1. On means testing for entitlements, Andrew Biggs writes, There is an alternative approach -- one that achieves many of the ends... MORE

I Don't Get This

Economics of Education
Arnold Kling
Nancy Folbre writes, Indeed, research by the economists Eric Hanushek and Steven Rifkin -- both advocates of school reform -- indicates that neither teachers' own test scores when they were students nor their educational credentials explain much of the variation... MORE

Russ Roberts vs. the Great Whatever

Income Distribution
Arnold Kling
He writes. So my challenge to Tyler is to tell me what he thinks the stagnation in median income signifies. Has there been a change in the returns to education or creativity? Or is it mostly a statistical artifact? Whichever... MORE

The Great Factor-Price Equalization, Two Views

Cross-country Comparisons
Arnold Kling
Timothy Taylor writes, The African Development Bank reports: "Recent estimates put the size of the middle class in the region in the neighborhood of 300 to 500 million people, representing the population that is between Africa's vast poor and the... MORE

Larry Summers on the European Situation

Optimum Currency Areas
Arnold Kling
He writes, At every stage of this process, from the first signs of trouble in Greece, to the spread of problems to Portugal and Ireland, to the recognition of Greece's inability to pay its debts in full, to the rise... MORE

Monetary Contraction Update

Monetary Policy
Arnold Kling
The WSJ blog writes, Since the start of September, the greenback is up 19% against the Brazilian real, 18% against the South African rand and nearly 9% against the Korean won. It's up more than 7.5% against the Indian rupee.... MORE

My Thoughts on Monetary Policy

Monetary Policy
Arnold Kling
1. If you believe that aggregate demand matters, then monetary policy is too tight. 2. We won't know whether or not to believe that aggregate demand matters until we see higher inflation. If we see 3 percent inflation or more... MORE

What is Fiscal Profligacy?

Fiscal Policy
Arnold Kling
Tyler Cowen writes, In bad times, and when accounting gimmicks are rampant, a government's fiscal policy is best understood as a portfolio of options positions, not in terms of a static balance sheet. Read the whole post. There is much,... MORE

Political Cynicism

Politics and Economics
Arnold Kling
From Russ Roberts. And the next president, Republican or Democrat, will spend less than we've been spending. But not a lot less. So those Tea Partiers are in for disappointment. Oh, we might go back to the level of government... MORE

More on the Economic Freedom Indexes

Cross-country Comparisons
Arnold Kling
David has posted on this already. But I want to quote from the Executive Summary. Hong Kong retains the highest rating for economic freedom, 9.01 out of 10. The other nations among the top 10 are: Singapore (8.68); New Zealand... MORE

Cynical about Confidence

Behavioral Economics and Rationality
Arnold Kling
1. Mike Munger. The problem is that our last two Presidents, first GWB and now BHO, are freakishly overconfident even by the standards of human males. Neither is capable of imagining that anyone actually disagrees with them, unless the disagreer... MORE

On Macroeconometric Models

Economic Methods
Arnold Kling
My latest essay. the Congressional Budget Office can reasonably estimate the effect of economic and policy scenarios on components of the government's budget, including taxes and spending. However, it cannot reasonably estimate the effect of tax and spending changes on... MORE

School Reform Successes

Economics of Education
Arnold Kling
The Economist touts some. four important themes emerge: decentralisation (handing power back to schools); a focus on underachieving pupils; a choice of different sorts of schools; and high standards for teachers. Pointer from Tyler Cowen. I am skeptical. I think... MORE

This Should Not be News

Business Economics
Arnold Kling
Tyler Cowen quotes from a paper by Erik Hurst and Benjamin Wild Pugsley: most small businesses have little desire to grow big or to innovate in any observable way. We show that such behavior is consistent with the industry characteristics... MORE

Robin Hanson on Libertarian Basics

Political Economy
Arnold Kling
He writes, So everyone agrees that we heroically help some, and leave others to die. We only disagree on who falls into which category. What most non-libertarians favor is some form of collectivist policy at a national level. National socialism,... MORE

David Autor on the Job Market(s)

Labor Market
Arnold Kling
I felt a little guilty about my Job-seeker's Paradox post, knowing that I was channeling David Autor. So let me relieve my conscience by quoting at length from a paper that Autor wrote in April of 2010. Routine tasks as... MORE

Toward a World Central Bank?

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
A Committee of economists proposes, the creation of an International Monetary Policy Committee composed of representatives of major central banks that will report regularly to world leaders on the aggregate consequences of individual central bank policies. In other words, more... MORE

The Best Thing I've Read Recently

Political Economy
Arnold Kling
It's the essay "Capitalism and the Jewish Intellectuals," by Jeffrey and Shterna Friedman. It's in the same issue of Critical Review as my essay "Macroeconometrics: The Science of Hubris." I recommend subscribing to Critical Review, even though the publisher maintains... MORE

Willpower

Books: Reviews and Suggested Readings
Arnold Kling
That is the title of a new would-be hit pop-sci book by Roy F. Baumeister and John Tierney. I liked it better than Freakonomics, which is faint praise. It probably deserves more praise than that. Definitely worth reading, but then... MORE

Jim Follain on Macro

Macroeconomics
Arnold Kling
He writes, First, let's do more research to help reduce the uncertainty regarding the fiscal situation we face and the new, modern and more complex economy in which we live. This step will involve de-emphasizing a number of metrics underlying... MORE

The Job-Seeker's Paradox

Labor Market
Arnold Kling
Phil Bowermaster writes, Increasingly, perhaps, a job is something that we each have to create. We can't count on someone else to create one for us. That model is disappearing. We have to carve something out for ourselves, something that... MORE

A Lesson in Mainstream Macro

Macroeconomics
Arnold Kling
From Narayana Kocherlakota, The impact of any macroeconomic shock can be divided into two components. One component is the effect of the natural demand and supply adjustments that would occur if prices and their expectations were to adjust continuously. Monetary... MORE

Onward towards Snow Crash

Institutional Economics
Arnold Kling
Alex Tabarrok reports, Private cities are happening now for a reason. Africa, India, and China are urbanizing more rapidly than has ever occurred in human history. In Africa, the number of urban dwellers is projected to increase by nearly 400... MORE

Some Macro to read and to think about

Economic History
Arnold Kling
1. Doug Irwin offers a monetarist explanation of the 1937 recession, based on gold sterilization. Scott Sumner is no doubt pumping his fist in the air. 2. Daniel Little on the Great Factor-Price Equalization. 3. Here is a thought I... MORE

Making Astrology Look Respectable

Economic Methods
Arnold Kling
On the Internet, it is easy to find the John Kenneth Galbraith quip, "The only function of economic forecasting is to make astrology look respectable." Does anyone have a genuine citation for it? A page number somewhere? Anyway, they're back... MORE

Credentials and Teacher Quality

Economics of Education
Arnold Kling
According to Marcus Winter, they are not highly correlated.... MORE

Is Media Bias a Market Failure?

Behavioral Economics and Rationality
Arnold Kling
A couple of readers have raised this issue. If news media are so biased, why does the market not correct this? My first thought is that there probably is no market for unbiased media. There is definitely a market for... MORE

Indicators of the New Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
1. Risk spreads are elevated again. 2. Correlations are elevated again. Pointer from Tyler Cowen. In the end, I think this will have a bigger effect than any stimulus package.... MORE

An Education Gap?

Labor Market
Arnold Kling
Jonathan Rothwell and Alan Berube write, At the height of the recession in 2009, the average U.S. job required 13.54 years of education, up from 13.37 in 2005. The increase reflected layoffs in less-education intensive industries such as construction and... MORE

The Stupidest Most Annoying Argument for Stimulus

Economics of Education
Arnold Kling
Mark Thoma recycles a chart from the Center for Budget and Policy Priorities showing cuts in employment in education. Ergo, we need to send stimulus money to state and local governments. I don't mean to single out Mark. Every Democrat... MORE

My NPR Non-Appearance

Politics and Economics
Arnold Kling
Earlier today, I got an email from someone at NPR asking if I was available to comment on the President's speech afterward. I replied with my phone number, and the woman called me (not an on-air personality. I will withhold... MORE

Old-time Religion?

Macroeconomics
Arnold Kling
Paul Krugman writes, You often hear people saying that the crisis has revealed the need for new economic thinking, for new ideas about macroeconomics. Yet the first priority seems to be to resuscitate old ideas. Brad DeLong describes an interview... MORE

My Jobs Speech

Labor Market
Arnold Kling
I figured I would talk before the President does. Here goes. Let me know what you think.... MORE

Gold and Treasuries

Finance: stocks, options, etc.
Arnold Kling
Paul Krugman writes, What effect should a lower real interest rate have on the Hotelling path? The answer is that it should get flatter: investors need less price appreciation to have an incentive to hold gold. Yesterday, in my high... MORE

The Great AI Shift?

Growth: Consequences
Arnold Kling
Jaron Lanier says, If you had talked to anyone involved in it twenty years ago, everyone would have said that the ability for people to inexpensively have access to a tremendous global computation and networking facility ought to create wealth.... MORE

Adaptation

Business Economics
Arnold Kling
This official Google blog post says, Over the next few months we'll be shutting down a number of products and merging others into existing products as features. The list is below. This will make things much simpler for our users,... MORE

Capital Mis-Regulation

Finance: stocks, options, etc.
Arnold Kling
Kevin Dowd and others have written a lengthy, important paper on the flaws in the Basel capital regulations. They write, The Basel system provides a textbook example of the dangers of regulatory empire building and regulatory capture, and the underlying... MORE

The Outlook for Social Security

Social Security
Arnold Kling
Charles Blahous writes, population aging will remain a bigger financial challenge even than health cost inflation for decades to come. The vast majority of long-term cost growth in Social Security and Medicare, for example, is projected to take place by... MORE

Political Freedom and Economic Freedom

Political Economy
Arnold Kling
I have seen some discussion of the issue of the extent to which libertarians would trade off political freedom for economic freedom. I think some of the pieces were written by trolls, so I will not reward them with links.... MORE

Further Adventures with Econ Videos

Economic Education
Arnold Kling
I posted four new videos on the topic of outsourcing. They are numbers 9-12 in my AP Economics lecture series. Feedback on any of them would be appreciated. With number 12, I sort of dance around the idea of PSST.... MORE

The Rabbit Hole of Behavioral Economics

Behavioral Economics and Rationality
Arnold Kling
Frances Woolley writes, Once you fall down the rabbit hole, you just have to keep on going. If people's choices are not a reliable guide to their well-being, you have to turn to something else. Ask people how happy they... MORE

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