Bryan Caplan and David Henderson

Arnold Kling: October 2011

An Author Archive by Month (60 entries)

The Great Debate

Political Economy
Arnold Kling
I've been working on lectures on microeconomics for my AP econ class. I am finished with macro (I hope), although at some point I will put together something on PSST. Anyway, I was cruising along with micro lectures, getting ready... MORE

Ed Yardeni's Proposal for the Housing Market

Finance: stocks, options, etc.
Arnold Kling
He writes, the Homestead Act that Carl Goldsmith and I proposed this past summer. It would provide a matching down payment subsidy of up to $20,000 for anyone purchasing a home as their principal residence for two million houses. It... MORE

Footnote of the Day

Books: Reviews and Suggested Readings
Arnold Kling
Is at the end of this paragraph, from Eric Brynjolfsson and Andrew McAfee (BM), Race Against the Machine: When SBTC [skill-biased technological change] increases the incomes of high-skill workers and decreases incomes and employment for low-skill workers, the net effect... MORE

Russ Roberts on Aggregate Demand

Macroeconomics
Arnold Kling
He writes, When an economy is not healthy, there is less exchange. There is less buying and selling of goods and services and labor. To describe that unhealthiness as less aggregate demand is just to put the problem into different... MORE

The Great Stagnation for College Graduates

Economics of Education
Arnold Kling
Michael Mandel presents an arresting chart on the decline in real earnings of young male college graduates over the last decade, and writes, no one has given me a good explanation yet of why young American college grads should have... MORE

Race Against the Machine Watch

Growth: Consequences
Arnold Kling
Robin Hanson says, We've seen many, many decades of steady progress in automation. We've seen what the rate looks like. We've seen that it's slow, methodical; it takes time to slowly chip away at the kinds of jobs humans do... MORE

Clarity on Clearing Houses

Finance: stocks, options, etc.
Arnold Kling
Mark Roe writes, as many trades move from the banks to the clearinghouse, the clearinghouse itself will become a systemically vital institution. It will be too big to fail. Thanks to Mark Thoma for the pointer. Often I do not... MORE

Is This the Cure or the Disease?

Finance: stocks, options, etc.
Arnold Kling
From an article on Ricardo Caballero. Because this "insatiable demand for safe debt instruments," as Caballero has called it, was not wholly absorbed by the traditional safe haven of U.S. Treasury notes, it helped spur the growth of the mortgage-backed... MORE

Freddie, Fannie, and Risky Mortgage Lending

Finance: stocks, options, etc.
Arnold Kling
Charles Calomiris uses internal emails to tell the story of what happened between 2004 and 2008. The turning point was the spring and summer of 2004. Fannie and Freddie had kept their exposures low to loans made with little or... MORE

Learning Economics

Growth: Causal Factors
Arnold Kling
That was the title of a self-published book of essays. The title has a double meaning. One meaning is that one can learn (some) economics from reading the book. The other is that an economy is a learning mechanism. Anyway,... MORE

Student Loans

Income Distribution
Arnold Kling
Mike Konczal writes, Because of legal choices we've made in how to set up this relationship, it stays forever, is virtually impossible to discharge under hardship, churns fees when it goes bad, and creditors can get to anything, including Social... MORE

If Timothy Taylor were Energy Secretary

Energy, Environment, Resources
Arnold Kling
He would champion the Drill-Baby Carbon Tax. On one side, there would be a national commitment to move ahead with all deliberate speed in developing the vast U.S. fossil fuel energy resources that are now technologically available. On the other... MORE

A View from Yale

Economics of Education
Arnold Kling
A reader points me to an article by a Yale student. The author is troubled when she hears that 25 percent of Yale graduates who have jobs are in consulting. But Annie and Jeff weren't the only two students I... MORE

Of Bunk and Economics

Books: Reviews and Suggested Readings
Arnold Kling
I was sent a review copy of Debunking Economics, by Australian economics professor Steven Keen. I agree with his view that heterodox economists have something to offer, particularly in the area of macroeconomics. His discussion of a debt bubble and... MORE

Confirmation for Baumeister's Gender Analysis?

Behavioral Economics and Rationality
Arnold Kling
From the Harvard Business Review blog: Men were more confident across all age groups, with 70% of males having high or very high levels of self-confidence, compared to 50% of the women surveyed. Half of women managers admitted to feelings... MORE

The Great Okun's Law Violation

Labor Market
Arnold Kling
Steve Lohr writes, During the last recession, the authors write, one in 12 people in sales lost their jobs, for example. And the downturn prompted many businesses to look harder at substituting technology for people, if possible. Since the end... MORE

Another Post on EFC

Books: Reviews and Suggested Readings
Arnold Kling
I finished reading Engineering the Financial Crisis fairly quickly. In part, it is because it is only 156 pages. In part, it is because I found the analysis so congenial. Actually, if you did not follow the issues closely back... MORE

Will Higher Education Tip?

Economics of Education
Arnold Kling
Mark Weedman writes, A school in this Google model derives its identity from its faculty and curriculum, or its "software" while de-emphasizing the importance of its infrastructure, such as its classroom, library and other campus facilities. In other words, it... MORE

Newspaper Macroeconomics

Macroeconomics
Arnold Kling
I am not a fan of textbook macroeconomics. But it is a marvel of logical consistency when compared with the macroeconomics that you get from journalists. From the perspective of a macroeconomic textbook, journalists write as if the aggregate supply... MORE

Bryan's Question and Stagnation

Growth: Causal Factors
Arnold Kling
Bryan asked, Suppose half of the sectors of the economy grow forever at 4%, while the rest completely stagnate. I'm strongly tempted to say that this economy's growth rate equals 2% forever. Anyone tempted to disagree? If so, why? He... MORE

Engineering the Financial Crisis

Finance: stocks, options, etc.
Arnold Kling
That is the title of the new book by Jeffrey Friedman and Wladimir Klaus. I have just started to read it. Their view is very close to mine in several ways. First, they emphasize the role of capital regulations in... MORE

He writes, There are no solid theoretical foundations for price level theory in a modern economy where hedonics is very important. It's not just that we're not good at measuring price changes for computers and consulting services; it's not even... MORE

True Monopoly or False Dichotomy?

Politics and Economics
Arnold Kling
Adam Schwiebert writes, citizens are told that the only choices they have are to either raise taxes or incur massive layoffs/program cuts. Absent from the False Duopoly is the third option: realign government compensation packages. I agree completely with the... MORE

The Construction Sector and the Economy

Macroeconomics
Arnold Kling
Citing work by his colleagues, David Andolfatto writes, the collapse of the construction sector accounts for 46.4% of the decline in U.S. GDP and 51.9% of the decline in total employment (roughly 3.4 million jobs). Pointer from Mark Thoma. There... MORE

Wesley Mouch Update

Politics and Economics
Arnold Kling
Andrew Fox writes, Those Occupy Wall Street-types in their tents at MacPherson Square? If they really, truly are bugged by corporate welfare, they need to schlep their signs and their chants and their anger over to the Mandarin Oriental Hotel.... MORE

Daniel Kahneman's Thinking

Books: Reviews and Suggested Readings
Arnold Kling
The book is called Thinking, Fast and Slow and for me it is one of the best five books of the year. No, he is not attempting to break new ground. It is more like a summing up of his... MORE

Internships vs. Apprenticeships

Economics of Education
Arnold Kling
Timothy Taylor writes, In America, many schools and parents and students will speak out strongly in favor of strong commitments to "community service" and volunteer projects and unpaid short-term internships. But many of these same people tend to recoil if... MORE

Democracy Without Government

Politics and Economics
Arnold Kling
From an article in the Chronicle of Higher Education. The process is what scholars of anarchism call "direct action." For example, instead of petitioning the government to build a well, members of a community might simply build it themselves. It... MORE

For the Myth of the Macroeconomy File

Growth: Consequences
Arnold Kling
1. I found an ungated version of the John Haltiwanger paper first spotted by Mark Thoma and then praised by Tyler Cowen. Some excerpts and my comments are below the fold. 2. Brian Arthur has a piece on the digital... MORE

Steven Jobs and Steven Chu

Political Economy
Arnold Kling
My latest essay. At this point, it seems likely that Jobs will be remembered as having contributed significantly to human progress. Chu's historical legacy is more problematic. Assuming that Chu's efforts at promoting solar power and electric automobiles are no... MORE

Lifted from the Comments

Income Distribution
Arnold Kling
John Nye writes on this post, precisely because the West is much richer, positional or status goods are consequently more important. The struggle over status goods can be masked when you have rapid growth and a lot of mobility. But... MORE

The Myth of the Median Worker

Macroeconomics
Arnold Kling
Russ Roberts continues to engage with Tyler Cowen on whether there has been stagnation. A lot of the argument is over what has happened to the median worker. But that may not be a useful construct. Let us continue to... MORE

Business Innovation in a Free State

Political Economy
Arnold Kling
Concerning a hypothetical start-up state, Patri Friedman asks, What key freedoms and protections would you create, and what immediate industries would they enable? What business would you start if you moved there? One approach is to think of something that... MORE

The Legacy of Sargent and Sims

Economic Methods
Arnold Kling
Some thoughts, beyond my reaction of "eh." 1. Since their work became widely circulated, one can argue plausibly that 99 percent of all macroeconomics papers published, dissertations completed, and tenure decisions awarded have been in the mold of Sargent, Sims,... MORE

Caught My Eye

Trade Barriers
Arnold Kling
Timothy Taylor writes, The single most costly trade barrier concerns rules against importing ethanol. The fact that such rules exist at all, of course, strongly suggests that the key issue in ethanol policy is not how much gasoline we can... MORE

David Leonhardt Signals a Bottom

Politics and Economics
Arnold Kling
He writes, The most worrisome aspect about our current slump is that it combines obvious short-term problems -- from the financial crisis -- with less obvious long-term problems. Those long-term problems include a decade-long slowdown in new-business formation, the stagnation... MORE

Comments on Servants

Labor Market
Arnold Kling
I liked the comment thread on this post. A few paragraphs from Michael E. Sullivan's comment: You can get a huge return by hiring a personal assistant if your time is very valuable, but in order to achieve this, your... MORE

David Wessel's Economic Questions

Politics and Economics
Arnold Kling
He wants to ask them to Republican candidates for President, not me. But my answers are in italics. All below the fold.... MORE

Scientific Stagnation?

Growth: Causal Factors
Arnold Kling
David Brooks summarizes some recent articles complaining about stagnation in scientific innovation. The time traveler would be vibrating with excitement. She'd want to know what other technological marvels had been invented in the past 41 years. She'd ask about space... MORE

Against Merit Pay for Teachers

Business Economics
Arnold Kling
That would be my position. A government-run system of teacher compensation, based on test scores, would in some ways be the worst of all worlds. It would create incentives for teachers to "game" the system. It would give too much... MORE

The Latest Nobel

Economic Methods
Arnold Kling
Tyler Cowen tells you about Sargent and Sims. My reaction is, "eh." Sort of like Bert Blyleven. Star players, but not historically important, unless you're from Minnesota.... MORE

David Graeber Interview

Economic History
Arnold Kling
Worth a listen. In fact, he almost endorses my most wrong view!! He says that currency and markets emerged from plunder. However, he does say that there were early trading nations that were not plundering empires. He also has provocative... MORE

The Crack Theory of Inflation

Monetary Policy
Arnold Kling
NPR lets John Taylor make the case against easier money and higher inflation. He says encouraging inflation is a slippery slope. A central bank may just want to raise inflation moderately, but he says, it inevitably gets translated into higher... MORE

He testifies, I have long thought that the Mortgage Interest Deduction is a residual of the 1913 tax code, accomplishes little that its supporters claim for it, pushes capital away from plant and equipment toward housing, and benefits high income... MORE

Two Interesting Questions

Political Economy
Arnold Kling
1. David Warsh writes about a project in which economists were asked to come up with a long-term research agenda in economics. It appears to me that the suggestions are heavily weighted toward technocratic thinking. If anyone had asked me,... MORE

Notes for the Credentialism File

Economics of Health Care
Arnold Kling
A New York Times Story: Doctorates are popping up all over the health professions, and the result is a quiet battle over not only the title "doctor," but also the money, power and prestige that often comes with it. ...For... MORE

Steven Jobs as a Baumeister Male Archetype

Behavioral Economics and Rationality
Arnold Kling
Robin Hanson writes, Now try to imagine a world where everyone actually tried to follow this advice. And notice that we have an awful lot of things that need doing which are unlikely to be anyone's dream job. So a... MORE

Who Are the Good Guys?

Political Economy
Arnold Kling
Eric Raymond writes, Community and collectivism are opposites. Community is valuable and powerful; it is individuals freely choosing to cooperate and identify with each other to achieve more than they can individually, as we do in the open-source community. Collectivism... MORE

An Economic Bill of Rights

Institutional Economics
Arnold Kling
What should be in it? I think of it as something less than an abstract principle ("everyone has the right to undertake any transaction that does not involve fraud") and something more than a policy proposal. My thinking is that... MORE

Bruce Meyer on Income Distribution

Income Distribution
Arnold Kling
Outstanding podcast with Russ Roberts. I did not expect to listen to much of it, but I wound up listening to all of it. Important tidbits include the fact that poor people tend to under-report income in surveys. This makes... MORE

Joseph Stiglitz on Recalculation

Macroeconomics
Arnold Kling
He writes, First, America and the world were victims of their own success. Rapid productivity increases in manufacturing had outpaced growth in demand, which meant that manufacturing employment decreased. Labor had to shift to services. The problem is analogous to... MORE

Where are the Servants?

Labor Market
Arnold Kling
In an economy where some folks are very rich and many folks are unemployed, why are there not more personal servants? Why don't Sergey Brin and Bill Gates have hundreds of people on personal retainer? I pose this question as... MORE

Business Reality vs. Wonk Theory

Business Economics
Arnold Kling
Felix Salmon writes, And while the state attorneys general -- at least in states like New York and California -- might have a more aggressive stance towards the big banks than Treasury does, the fact is that they, too, are... MORE

Miscellaneous

Political Economy
Arnold Kling
Russ Roberts writes, Who really writes the latest financial regulations, where the devil is in the details? Who has a bigger incentive to pay attention to their content -- financial insiders such as the executives of large financial institutions or... MORE

The IS-LM Model Attacked and Defended

Macroeconomics
Arnold Kling
Tyler Cowen writes, Every time you write down an IS-LM model you should hear a clock start ticking in your head. The longer the clock ticks, you more you need to worry about this problem because the more that a)... MORE

Personality, Gender, and Economics

Behavioral Economics and Rationality
Arnold Kling
I have been reading Is There Anything Good About Men? by Roy Baumeister (co-author of the newer book, Willpower.). A few remarks here, with more below the fold. 1. If you are a zero-tolerance reader ("I stopped reading on page... MORE

Tales from the Job Market

Labor Market
Arnold Kling
This WSJ Story (you may have to News-Google it) is mostly about workers with the wrong skills for the current market. But I note this: BestCare Home Health Agency, a Fresno, Calif., nonprofit that provides nursing and other in-home health... MORE

On the History of Money

Money
Arnold Kling
David Graeber writes, Anthropology is full of examples of societies without markets or money, but with elaborate systems of penalties for various forms of injuries or slights. And it is when someone has killed your brother, or severed your finger,... MORE

Nothing to the Rumor

Tax Reform
Arnold Kling
Herman Cain apparently has proposed a tax reform along lines I once suggested. I made the case from a public choice perspective that single-digit tax rates would reduce the incentive to lobby for tax breaks. Still, there is nothing to... MORE

Revisiting the 1930s

Economic History
Arnold Kling
1. Stephen Williamson gives a platform to Harold Cole and Lee Ohanian to defend a recent controversial op-ed. most of the increase in per-capita output that occurred after 1933 was due to higher productivity - not higher labor input. The... MORE

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