Bryan Caplan and David Henderson

Arnold Kling: November 2011

An Author Archive by Month (56 entries)

A Surprise OWSer

Monetary Policy
Arnold Kling
I write, Are the Fed's actions in the interest of the 99 percent of us who do not own many shares of European banks? Overall, my comments stressed style over substance. This was for the NYT Room for Debate feature.... MORE

Nick Rowe Asks About Debt Growth

Finance: stocks, options, etc.
Arnold Kling
He writes, I'm talking about the debt of households and firms. And I'm talking long run, not just the last few years. Over the last several decades, the ratio of debt to GDP has increased a lot. Not just in... MORE

Simon Johnson on Econtalk

Finance: stocks, options, etc.
Arnold Kling
Self-recommending, as Tyler would say. The lawyer-blogger at Capitalism without Failure comments, Prof. Johnson says he is a follower of George Stigler, who made the point that when you regulate industry, industry will attempt to capture the regulators. Bankers are... MORE

Usage-Based Pricing for Books

Information Goods, Intellectual Property
Arnold Kling
Joshua Gans suggests the model. How would this occur? I imagine that there is a vast exchange available -- maybe we could call it a library -- where all books ever written are available. Publishers nominate reading prices for their... MORE

Two Long Reads

Politics and Economics
Arnold Kling
1. Bloomberg discloses information it obtained on banks receiving loans from the Fed. The Bagehot adage is "lend freely, at a penalty rate." The Fed got the first part. 2. Lee Ohanian argues against the excesses of public sector unions.... MORE

Timothy Taylor writes, Veron emphasizes that it may be most useful to require those issuing securities, and asking to have them rated, "to disclose more standardized and audited information about their risk factors and financial exposures." This new regulatory rule... MORE

More Evidence for ZMP

Labor Market
Arnold Kling
I assume that David's title was partly tongue-in-cheek. Anyway, consider what Kay Hymowitz writes. Between 1950 and 1980, Brooklyn lost half a million residents. And the blue-collar decline continues in the new millennium, with the borough losing more than 9,000... MORE

Kevin Drum vs. Priceless Economics

Labor Market
Arnold Kling
He writes, So here's the story. Union Pacific is offering $48,000 per year for skilled, highly specialized, journeyman work that's physically grueling and requires workers to be away from home about half of each month. The competition is offering 50%... MORE

A Sentence that I Doubt

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
from Timothy Garton Ash: The passive consensus in favor of Europe is bigger than it appears in Great Britain. If I were to draw this as a cartoon, he would be the pet shop owner in the famous Monty Python... MORE

A Fable of Two Countries

Fiscal Policy
Arnold Kling
Once, there were two countries, I and U. Each had GDP of $100. Each had nominal GDP growth of 4 percent. Country I was a good country, with government debt of only $60, taxes of $20, and spending on everything... MORE

Italy's Black Friday Sale

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Selling bonds at a discount. "The pricing is awful," said Padhraic Garvey, rate strategist with Dutch bank ING in Amsterdam. "The object of the exercise this morning was to get the job done and they've done that, but that's about... MORE

Why is it Life Insurance?

Finance: stocks, options, etc.
Arnold Kling
I claimed that if an event is very likely to happen, then it is not insurable. Some commenters responded that we have life insurance, and yet everybody dies. The reason that we can have life insurance is that the timing... MORE

Outsourcing our Carbon Emissions

Energy, Environment, Resources
Arnold Kling
The blogger at The Oil Drum writes: We are dealing with a large number of countries with very different energy intensities. The big issue would seem to be outsourcing of heavy manufacturing. This makes the energy intensity of the country... MORE

What Happened to State and Local Governments?

Macroeconomics
Arnold Kling
Michael Mandel writes, real state and local government output, as measured by the BEA, has been effectively flat since 2001. To put it a different way, the stagnation at the state and local government level started way before the 2007... MORE

Me on Middle-Class Jobs

Labor Market
Arnold Kling
Interviewed by Phil Bowermaster here. I elaborate on my thesis that the Great Depression was a major transition and that we currently are undergoing another major transition.... MORE

Long-term Care Insurance

Economics of Health Care
Arnold Kling
Jeffrey R. Brown and Amy Finkelstein write, Between 35 and 50 percent of 65 year-olds will use a nursing home at some point in their remaining lives. Pointer from Timothy Taylor. My take on this is that when something has... MORE

More on ZMP

Labor Market
Arnold Kling
Tyler Cowen comments, drawing a response from Bryan. I just don't think that the fraction of the healthy adult population with ZMP has risen much since the last time unemployment was 5%. Here is where the term sustainable in patterns... MORE

A Pithy Sentence

Income Distribution
Arnold Kling
from Larry Summers. A general posture for government of standing up for capitalism rather than particular well-connected capitalists would also serve to mitigate inequality. Pointer from Mark Thoma.... MORE

European Banks

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Hyun Song Shin writes, The permissive bank risk management practices epitomized in the Basel II proposals were already widely practised within Europe as banks became more adept at circumventing the spirit of the initial 1988 Basel I Accord. Basel II... MORE

Dinner with Tim Congdon

Politics and Economics
Arnold Kling
The other night, RealClearPolitics hosted a dinner with Tim Congdon, the author of Money in a Free Society. Congdon is a British disciple of Milton Friedman. Scott Sumner knows who he is, but not vice-versa. Unlike Sumner, Congdon uses a... MORE

The Folly of Fools

Books: Reviews and Suggested Readings
Arnold Kling
That is the title of a new book by Robert Trivers. Tyler Cowen thought it was worthwhile. Not me. The book is supposed to be about deception and self-deception, but that seems to be an excuse for Trivers to opine... MORE

The Truck Driver Puzzle

Labor Market
Arnold Kling
An economist who attended a business conference told me that the trucking industry is doing well (probably a sign that the economy overall is improving). However, industry experts foresee a shortage of drivers next year. How is that? Some possibilities:... MORE

The Debt Story: AD or PSST?

Macroeconomics
Arnold Kling
Atif Mian and Amir Sufi write, If weak household balance sheets are responsible for a large share of job cuts, we expected losses in non-tradable industries to be much larger in U.S. counties with weak household balance sheets. That is... MORE

Best Economics Books of the Year

Books: Reviews and Suggested Readings
Arnold Kling
Tyler Cowen has a good list. He can be trusted to be unbiased on books written by authors with no GMU connection: Kahneman, Brynjolffson and McAfee, and Field. I would add Friedman and Kraus, Engineering the Financial Crisis, to the... MORE

Youth Unemployment, Continued

Labor Market
Arnold Kling
Federal Reserve economist Christopher L. Smith has a good paper on the topic. Since the start of the most recent recession, the employment‐population rate for high school‐age youth (16 and 17 year olds) has fallen from around 23 percent to... MORE

TGS and RATM

Economics of Education
Arnold Kling
That is, "The Great Stagnation" and "Race Against the Machine." Tyler Cowen writes, I understand how the TGS argument fits into the cyclical story of 2007-2011 (excess confidence and overextension, Minsky moment, AD contraction, AS problems slow down the recovery),... MORE

Response to Bryan on ZMP

Labor Market
Arnold Kling
His post is here. I would say that there is a decent probability that he is correct. However, below are some potential counter-arguments. I will also address Don Boudreaux. On the point that past forecasts of technological unemployment have been... MORE

Do AS and AD Intersect in a Recession?

Macroeconomics
Arnold Kling
As you may know, I have been recording chalk-talks for my high school economics class. I did macro first, and now I am working on micro (I am now quite a few lectures ahead of where we are currently in... MORE

Video of the Year

Growth: Consequences
Arnold Kling
In my opinion, it is this debate between Tyler Cowen and Erik Brynjolffson. The speakers, the moderator, and the audience questions were all top form. Remind me never to get into a live debate with Tyler. I thought he was... MORE

One Scenario for Sovereign Debt

Politics and Economics
Arnold Kling
Robert Samuelson writes, as economist Arvind Subramanian of the Peterson Institute makes clear in an open letter to IMF Managing Director Christine Lagarde. What the IMF should do is organize a huge rescue fund -- at least $1 trillion to... MORE

How Sticky Are Nominal Wages?

Labor Market
Arnold Kling
The broadest measure of employee compensation is called the employment cost index. It includes the cost of benefits, such as health insurance. It is available quarterly, starting in the first quarter of 2001. I used the private sector worker ECI.... MORE

Measurement Problems: House Price Inflation

Macroeconomics
Arnold Kling
A while back, Scott Sumner wrote, The BLS doesn't claim housing prices fell 7.7% since mid-2006, they claim they rose by 7.7%. Just a minor 39.3% discrepancy with C-S. BLS is the Bureau of Labor Statistics, the custodians of the... MORE

Youth Unemployment: A Puzzle for Any Story

Labor Market
Arnold Kling
Mike Konczal writes, Every age group has seen a substantial drop in the employment-population ratio during this Lesser Depression, but no other group I've seen comes close to this plummet. For the first time in half a century, a majority... MORE

Evidence for PSST: A Rejoinder

Labor Market
Arnold Kling
Bryan writes, What's the best available "Guide to Discontinuity/ZMP for Skeptics"? Non-economists have always been quick to believe stories about technological unemployment. Economists have been ridiculing this popular fear for centuries. What happened in the last three years that ought... MORE

One Cause of the STEM Shortfall

Economics of Education
Arnold Kling
According to Timothy Taylor, grade inflation in the humanities has been contributing to college students moving away from science, technology, engineering, and math fields, as well as economics, for the last half century. This comes at the end of an... MORE

Discontinuities

Labor Market
Arnold Kling
Bryan writes then when technological change occurs, we should observe Cut wages in existing industries drastically enough to keep firms afloat and workers fully employed. That is true for small changes. Mathematically, it assumes continuous functions. It may not be... MORE

Shorter Diamond Age

Income Distribution
Arnold Kling
That is how I would describe Tyler Cowen's latest column. higher income inequality will increase the appeal of traditional mores -- of discipline and hard work -- because they bolster one's chances of advancing economically Reading that, I could not... MORE

My First Austrian Moment?

Austrian Economics
Arnold Kling
In January of 2001, I wrote, You no longer need to plan and manage large capital expenditures, so you do not need a large bureaucracy. What I expect the Internet to generate is an increase in the number of small... MORE

The Great Books of Liberalism and Conservatism

Political Economy
Arnold Kling
Tyler Cowen finds the most interesting part of the analysis of Carl T. Bogus (whose name reminds me of the old commercial, "with a name like Smucker's, it has to be good"). Conservatives have big appetites for ideology; liberals don't.... MORE

Have a Nice Day, Mario Draghi

Politics and Economics
Arnold Kling
It turns out that the new head of the European Central Bank is another alumnus of the MIT economics department. However, since he got his Ph.D in 1976, he and I did not overlap. The friend who pointed this out... MORE

Have a Nice Day

Optimum Currency Areas
Arnold Kling
That is about all that is left to say about the European situation. Clive Crook writes, the only sane choice is to accept the logic of the currency union they created and the obligations that go with it. In the... MORE

Is the Government an Efficient Charity?

Income Distribution
Arnold Kling
Tyler Cowen agrees with me that the most interesting sentence in Shikha Dalmia's essay is in 1979, households in the bottom quintile received more than 50 percent of all transfer payments. In 2007, similar households received about 35 percent of... MORE

Choosing a College Major

Economics of Education
Arnold Kling
Fabio Rojas writes, using a yearly survey of freshmen, that college students are becoming more interested in making money. In 1971, about 50% went to college to make money. In the 1990s, it's about 70%. Similarly, modern college students are... MORE

Mobility and Marriage

Income Distribution
Arnold Kling
Bryan picked up on the fact that what we call intergenerational "economic mobility" (or lack thereof) is very much a cultural phenomenon. I would like to add that marriage patterns play a role, too. If economic classes become more endogamous... MORE

Solar Power

Energy, Environment, Resources
Arnold Kling
Joshua Gans writes, What interested me more was the growing evidence that solar energy might be subject to a Moore's Law rate of improvement. According to Ramez Naam in Scientific American, the cost of solar photovoltaic models has been falling... MORE

Nice Sentence

Macroeconomics
Arnold Kling
From Ed Glaeser. Unemployment represents a crisis of imagination, a failure to figure out how to make potential workers productive in the modern economy. That might be a one-sentence articulation of PSST. The challenge is to find the comparative advantage... MORE

Libertarianism...and its Discontents

Economic Philosophy
Arnold Kling
Three items crossed my computer screen recently: --the launch of Libertarianism.org by the folks at Cato. It looks like a nice web site, one that invites exploration. --Tyler Cowen's link to a piece by Will Wilkinson. --two older pieces by... MORE

Lifted from the Comments

Economics of Education
Arnold Kling
Foobarista writes on this post: There used to be an idea that degrees are either academic or professional. The rise of "studies" degrees (and stuff like them such as "sustainability") are what I'd call "aspirational". If there's an employment market... MORE

Alex Tabarrok Explains College Wage Stagnation

Economics of Education
Arnold Kling
He writes, Over the past 25 years the total number of students in college has increased by about 50 percent. But the number of students graduating with degrees in science, technology, engineering and math (the so-called STEM fields) has remained... MORE

A Quote I Will Use Often

Behavioral Economics and Rationality
Arnold Kling
Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance. That is from Daniel Kahneman, Thinking Fast and Slow, p. 201. The chapter is called "The illusion of... MORE

Euro-TARP

Politics and Economics
Arnold Kling
I am making the mistake of reacting to the latest twists in the saga of Greece and other European countries. I started by reading this: Britain is poised to provide billions of pounds for a new global economic rescue package,... MORE

Sentences I do not Understand

Growth: Causal Factors
Arnold Kling
From a McKinsey report, A detailed analysis of the French economy, for example, showed that while the Internet is reported to have destroyed 500,000 jobs over the past 15 years, it created 1.2 million new ones. From a PSST perspective,... MORE

My Version of Race Against the Machine

Growth: Consequences
Arnold Kling
I wrote mine first, but it came out today (and at the last minute I inserted a reference to the Brynjofsson-McAfee e-book). Anyway, I write, In a hyper-Schumpeterian economy, the main work consists of destroying someone else's job. Garett Jones... MORE

Politically Correct Employment

Income Distribution
Arnold Kling
Kenneth Anderson writes, Even more frightening is the young woman who graduated from UC Berkeley, wanting to work in "sustainable conservation." She is now raising chickens at home, dying wool and knitting knick-knacks to sell at craft fairs. Her husband... MORE

A High-Yielding Investment?

Finance: stocks, options, etc.
Arnold Kling
A real estate agent told a young couple that I know that their house could sell for about $100,000 in today's market, even though it could rent for about $1500 a month. That would make the annual rent equal to... MORE

A Conversation with Jeffrey Friedman

Political Economy
Arnold Kling
Although I missed his appearances at AEI and Cato (videos here and here, respectively), I talked with Jeffrey and his wife, Shterna, in a coffee shop. I did not take any notes. He was in town to talk about his... MORE

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