Bryan Caplan and David Henderson

Arnold Kling: July 2012

An Author Archive by Month (44 entries)

Politics Channels Hatred

Political Economy
Arnold Kling
In Capitalism and Freedom, Milton Friedman wrote, What the market does is to reduce greatly the range of issues that must be decided through political means Thanks to Don Boudreaux for the pointer. Those who prefer government to markets will... MORE

John Taylor vs. Ryan Avent

Monetary Policy
Arnold Kling
Taylor writes, The Fed has effectively replaced large segments of the market with itself--it bought 77% of new federal debt in 2011. By doing so, it creates great uncertainty about the impact of its actions on inflation, the dollar and... MORE

Evan Soltas on the Great Factor-Price Equalization

International Trade
Arnold Kling
He writes, The basic idea here is that the maintenance of Bretton Woods' fixed exchange rates required a system of financial controls which so severely limited capital flows, global investment and trade that economies were effectively closed. When Bretton Woods... MORE

Reforming Government as an Institution

Institutional Economics
Arnold Kling
William Galston discusses institutional reforms to make government work more effectively. the time is ripe to push for new fiscal institutions to engage in a long-overdue rethinking of the rules shaping fiscal decisionmaking, to consolidate certain related government functions within... MORE

Enrico Moretti on Mobility

Growth: Causal Factors
Arnold Kling
Interviewed by Nick Schulz, he says, In total, almost half of college graduates move out of their birth states by age 30. Only 27 percent of high school graduates and 17 percent of high school dropouts do so. It is... MORE

Gary Gorton's forthcoming book

Finance: stocks, options, etc.
Arnold Kling
It is called Misunderstanding Financial Crises, a title that may be unintentionally ironic. As you probably know, Gorton is famous for treating the crisis as a "run on the shadow banking system" that had very little real basis. The deterioration... MORE

Brink Lindsey's New eBook

Books: Reviews and Suggested Readings
Arnold Kling
It is called Human Capitalism. It might be called The Age of Abundance* (*for some people). Brink is trying to thread the needle between those who view the poor as victims and those who apparently don't. (Bryan read an earlier... MORE

The Magic Solution of Devaluation

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Scott Sumner writes, If the Spanish and Greek governments shrank enough to balance their budgets, they'd still have 24% unemployment, if not more. Their economies are hopelessly uncompetitive at the current exchange rate. And if those countries had a huge... MORE

Capital One's Actuals

Behavioral Economics and Rationality
Arnold Kling
Bryan writes, Was Capital One's sales pitch fraudulent in this sense? No; at minimum, they're missing element #3 (falsity). As commenter Thomas DeMeo pointed out, the actual allegation may differ from Bryan's hypothetical. consumers were: Misled about the benefits of... MORE

Avent and Yglesias Reinforced

Income Distribution
Arnold Kling
By Peter Ganong and Daniel Shoag. They write, population is no longer flowing to richer states...in recent years (1) the real returns to migration to productive places have fallen dramatically for low-skilled workers but have remained high for high-skilled workers,... MORE

Defining Voluntary Exchange

Economic Philosophy
Arnold Kling
Bryan writes, Couldn't you just as easily say that consumers benefit from the peace of mind of Capital One's payment protection products, even though the products make little financial sense? Now it's my turn to raise some hypotheticals. (a) If... MORE

Bike Rental vs. Car Rental

Microeconomics
Arnold Kling
Russ Roberts poses the question. Why is that you can rent a car for less than $20 a day, but renting a bike costs $10 an hour? I don't think it's the case that the bicycle rental business is spectacularly... MORE

Religion and Consumer Protection

Behavioral Economics and Rationality
Arnold Kling
I view Bryan's criticism as somewhat rhetorical. I am getting a lot of similar comments. It is as if I were to praise the Internet and someone were to ask me about Josef Mengele and say: See what happens if... MORE

Behavioral Politics

Political Economy
Arnold Kling
NPR lists policies that economists agree are good ideas but which are political non-starters. Basically, they want to replace the corporate income tax and the payroll tax with a consumption tax and a carbon tax. Let's stipulate that they are... MORE

What Could Go Wrong?

Finance: stocks, options, etc.
Arnold Kling
From Bloomberg News. The Federal Reserve Bank of New York said money-market fund investors should be prohibited from withdrawing all their assets at once as a way to make the $2.5 trillion industry "safer and more fair." I do not... MORE

The latest survey of the IGM panel of economists poses this: Long run fiscal sustainability in the U.S. will require cuts in currently promised Medicare and Medicaid benefits and/or tax increases that include higher taxes on households with incomes below... MORE

Education and Disruption

Economics of Education
Arnold Kling
Benjamin Lima writes, With MOOCs, now anyone in the world with an internet connection can download and watch lectures from eminent experts at top universities, for free, and hundreds of thousands have done so. This is indeed a huge leap... MORE

Peter Thiel's Question

Growth: Causal Factors
Arnold Kling
Bryan has one angle. I have another. In this video, Thiel confronts Google CEO Eric Schmidt over the issue of Google's cash hoard. If you have $50 billion in low-yielding investments, are you not more of a bank than a... MORE

Capital One vs. CFPB, again

Political Economy
Arnold Kling
For background, I recommend Fast Company's article from 1999, which lauds Capital One's creative use of the customer service process for up-selling. Those of you who are curious about the details of what is going on should find this helpful.... MORE

Ray Fisman on Structural Unemployment

Labor Mobility, Immigration, Outsourcing
Arnold Kling
He writes, Hurst notes that fewer and fewer Americans with a high school education or less are finding employment in manufacturing. This is a trend that accelerated in the late 1990s. Some of those lost jobs resulted in twentysomethings exiting... MORE

Fraud, Preferences, and Paternalism

Political Economy
Arnold Kling
Don Boudreaux disagrees with my pro-CFPB post. He writes, Because the transactions in question are voluntary and among adults, it isn't anyone else's business what transpires between A and C. Would Arnold applaud a DHS ban on the sale of... MORE

Good for the consumer financial protection board

Finance: stocks, options, etc.
Arnold Kling
CNN money reports, Cardholders who enrolled in a payment protection or credit monitoring product -- or who tried to cancel one of these products but were persuaded by a call center representative to keep it -- on or after August... MORE

Olivia Fox Cabane on Charisma

Books: Reviews and Suggested Readings
Arnold Kling
She is the author of The Charisma Myth, a self-help book that I am in the middle of reading. Before you buy it (and before you comment on this post), I recommend watching this video, evidently from a talk given... MORE

The Centrists Attempt to Regroup

Politics and Economics
Arnold Kling
I got an email the other day tipping me off to today's launch of the Fix the Debt campaign, a bipartisan effort. These folks are the shattered remains of what used to be the center in American politics. I don't... MORE

David Brooks Repeats Himself

Behavioral Economics and Rationality
Arnold Kling
I thought that Why Our Elites Stink (I suspect Brooks winces at the headline the editors supplied) these people are brats; they have no sense that they are guardians for an institution the world depends on; they have no consciousness... MORE

If I Were on the Left

Political Economy
Arnold Kling
I do not think that I would find Arthur Brooks persuasive. He writes, Free markets and entrepreneurship are driven not by greed but by earned success. He gives examples. I would give counter-examples. I would say that regulation is needed... MORE

Computers, Education, and Comparative Advantage

Economics of Education
Arnold Kling
Bryan writes, At risk of sounding extremely narcissistic, the key question for Tyler and me is whether online education is going to put the two of us out of a job. Our definitional conflict notwithstanding, the two of us both... MORE

Moral Authority, Continued

Public Choice Theory
Arnold Kling
Note Chris Dillow's cynical take: Crony capitalism, then, is the only feasible form of capitalism. Matt Mitchell writes, My colleague Adam Thierer has assembled an interesting compendium of expert opinions on regulatory capture. The quotes show experts interested in grappling... MORE

Flat-of-the-curve in Education?

Economics of Education
Arnold Kling
Michael Graham writes, Education reform activist Bill Costello points out that our annual "per-pupil spending in 2006 was 41 percent higher than the OECD average of $7,283, and yet American students still placed in the bottom quarter in math and... MORE

A Thought to Ponder

Behavioral Economics and Rationality
Arnold Kling
from Timothy Taylor. Behind Hornbeck's estimates seems to me a deeper pattern of human behavior. When confronted with difficulties, leaving to try somewhere else is hard, but do-able. Staying and continuing with the same behavior is unpleasant, but do-able. But... MORE

Prompted by Tyler's reminiscences We entered MIT in 1976, which means we hit the job market during a recession (1980). For that reason, and others, we were underachievers by MIT standards. (Just preceding us were Krugman, Bernanke, and Rogoff, and... MORE

Local Knowledge and Mortgage Lending

Finance: stocks, options, etc.
Arnold Kling
Kristle Romero Cortes writes (abstract) This paper shows that mortgage lenders with a physical branch near the property being financed have better information about home-price fundamentals than non-local lenders. During the real estate run-up from 2002-06, home price growth negatively... MORE

The Moral Authority Test

Public Choice Theory
Arnold Kling
Tim Carney reports on the latest project from the Mercatus Center. George Mason University's Mercatus Center this week is kicking off a series of papers on cronyism and business-government collusion. (Seemingly-related Video from LearnLiberty) You can think of the project... MORE

The Selgin-Sumner-Tobin Model vs. PSST

Macroeconomics
Arnold Kling
George Selgin writes, U.S. NGDP was restored to its pre-crisis level over two years ago. Since then both its actual and its forecast growth rate have been hovering relatively steadily around 5 percent, or about two percentage points below the... MORE

Jobless Science Ph.D's

Labor Market
Arnold Kling
The Washington Post has the story, but buries the lede. The pharmaceutical industry once was a haven for biologists and chemists who did not go into academia. Well-paying, stable research jobs were plentiful in the Northeast, the San Francisco Bay... MORE

The Status-Good Model of College

Economics of Education
Arnold Kling
Bryan correctly characterized my views. However, to me they imply a tipping equilibrium. Something that is a status good in one era can be the opposite in another. Think of smoking, for example. At some point, there may emerge a... MORE

Pepconomics

Microeconomics
Arnold Kling
My latest essay is on the economics of Pepco, the apparently under-performing electric utility. I am concerned by two factors that insulate Pepco from facing market discipline concerning reliability. The first is that Pepco is a regulated monopoly. The second... MORE

Employer Tyranny vs. Guaranteed Freedom

Political Economy
Arnold Kling
John Holbo writes, Libertarians can, of course, just come out and say that they prefer contract rights to guarantees of freedom. No one is paying any attention to me in this debate, But I wrote, Just be careful about assuming... MORE

The Debt-Fueled Binge Story, Keynes, and PSST

Macroeconomics
Arnold Kling
Mark Thoma gives us Tim Duy: What was more important in holding the economy close to potential output, residential construction itself, or the housing price bubble? I tend to believe the price-driven balance sheet effects were driving dynamics over this... MORE

A Paragraph to Ponder

Economic Methods
Arnold Kling
From Robert Roberts Knowledge comes into us through a variety of channels that can be blocked by our concern for status, and the successful knowledge-seeker will be one who keeps those channels open. The process requires that we be able... MORE

Tone vs. Substance

Books: Reviews and Suggested Readings
Arnold Kling
In a comment on the Don Boudreaux book, Jason Collins writes, As most of Boudreaux's posts are in what you define as category (c), the book is not going to change the mind of your liberal friend. Contrast the comments... MORE

Employer Tyranny

Labor Market
Arnold Kling
Chris Bertram, Corey Robin, and Alex Gourevitch write, These are just some of the considerations that lie at the heart of any defense of unions, regulation of contract and the workplace, and workplace democracy. Whether we call that defense egalitarian... MORE

The Perfect Gift

Books: Reviews and Suggested Readings
Arnold Kling
[limited blogging, due to power outage and crowded Starbucks] It strikes me that Don Boudreaux' book Hypocrites and Half-Wits, would make the perfect gift to surreptitiously leave in a liberal friend's bathroom. His mini-rant/lessons are best read three or four... MORE

Eurozone: Markets Applaud Latest Can-Kicking

Eurozone crisis
Arnold Kling
Sony Kapoor writes, Setting up an agency that is capable of resolving (shutting down, selling or recapitalizing) banks is perhaps the most urgent part of such a banking union and can be done independently from pooled deposit insurance or common... MORE

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