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Arnold Kling: January 2009

An Author Archive by Month (61 entries)

Masonomists in the Media

Fiscal Policy
Arnold Kling
Ever wondered what Russ Roberts would do as President? He writes, I am recommending the elimination of the payroll tax... --Eliminating all corporate welfare. Corporate welfare rewards those corporations that excel at lobbying rather than serving their customers. Eliminating it... MORE

Reply to Robert Waldmann

Macroeconomics
Arnold Kling
He writes a long post that agrees with some of what I write and disagrees with some of my views.... MORE

An Anti-Stimulus Conference

Upcoming Events
Arnold Kling
See the invitation below. My theme will be "what certified macroeconomists think about the stimulus bill."... MORE

Good Luck, Jeremy Stein

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal blog (Justin Lahart) reports, He advocated aggressive government audits of banks, aimed at separating solvent ones from insolvent ones. Once that was done, insolvent banks would be forced into closure or sale while solvent ones would... MORE

Recommended Reading

Fiscal Policy
Arnold Kling
Justin Wolfers writes, there are about three papers written on monetary policy for each paper mentioning fiscal policy. And there are only a few dozen papers written on the multiplier each year. He has more data. Jerry Muller writes, a... MORE

The Case for Profits

Fiscal Policy
Arnold Kling
I make the case at Forbes online. I first found out about it when Cato posted a copy of the essay on their web site. I wonder how many people actually will click on the "opinions" section of Forbes on... MORE

Podcasts

Fiscal Policy
Arnold Kling
Cato's Caleb Brown recently recorded me in two podcasts. My thoughts on multipliers and stimulus are here (this link may be more reliable). You will also find a link to my recent podcast on co-ordinated health care (I linked to... MORE

Minskynomics

Macroeconomics
Arnold Kling
as explained by yours truly.... MORE

Partisan, Pandering, Permanent

Fiscal Policy
Arnold Kling
From The New York Times: The economic stimulus plan that Congress has scheduled for a vote on Wednesday would shower the nation's school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year... MORE

Should Freddie and Fannie Come Back?

Finance: stocks, options, etc.
Arnold Kling
Susan Woodward and Robert Hall say "yes." Their history of the mortgage market is correct. Their analysis of the nature of the competition between banks, thrifts, and the GSE's (what some of us call the "duelling guarantee" model) is correct.... MORE

From Dark Age to Renaissance

Macroeconomics
Arnold Kling
I'm feeling somewhat lonely these days. My understanding of macroeconomics is closer to that of Paul Krugman, Mark Thoma, and Brad DeLong than it is to that of Robert Barro, John Cochrane, or Eugene Fama. And yet I am a... MORE

Timely? Temporary?

Fiscal Policy
Arnold Kling
Douglas Elmendorf, the head of the Congressional Budget Office, writes, CBO estimates that enacting the bill would increase federal budget deficits by $169 billion over the remaining months of fiscal year 2009, by $356 billion in 2010, by $174 billion... MORE

Brad DeLong and Kevin Murphy, in English

Fiscal Policy
Arnold Kling
$100 of Government SpendingMurphy's EstimatesDeLong's EstimatesKeynes Effect$50$150Housework Effect-$25-$30Galbraith Effect-$25$0Feldstein Effect-$80-$33The Bottom Line-$80$87 I explain here. [UPDATE: I made two errors in the initial numbers. I believe it is correct as of Jan. 27, 1:40 PM EST]... MORE

John Cochrane Muses on Monetary Theory

Macroeconomics
Arnold Kling
John Cochrane has posted an essay on his take on the economy, stimulus, and so on. I think he gets muddled in several places.... MORE

William Easterly

Fiscal Policy
Arnold Kling
has a new blog. From his first post: If you are not accountable for promises, if you try to do everything and focus on nothing, and if you obsess about aid money raised rather than results achieved, haven't you already... MORE

Two Podcasts

Economic Methods
Arnold Kling
Yours truly on why the doctor needs a boss. It's about ten minutes. I start out by describing an experience I had with reincarnation. Russ Roberts and Robin Hanson discuss the search for meaning and truth. It is clear that... MORE

A Great Sentence

Finance: stocks, options, etc.
Arnold Kling
From James Hamilton if everybody and their grandmother is lining up for a bailout, and pulling political strings ([1], [2]) to make sure they get it, I read that as prima facie evidence that the taxpayers' interests are not being... MORE

What's with the Economics Profession?

Fiscal Policy
Arnold Kling
Will Wilkinson writes When I see Delong more or less indiscriminately trashing everyone at Chicago, or Krugman trashing Barro, etc., what doesn't arise in my mind is a sense that some of these guys really know what they're talking about... MORE

Is Europe Insolvent?

Cross-country Comparisons
Arnold Kling
Jagadeesh Gokhale writes, By 2020, the average EU country will need to raise the tax rate to 55 percent of national income to pay promised benefits. In other words, their Social Security systems are in worse shape than ours.... MORE

Who Knows Macro?

Fiscal Policy
Arnold Kling
Tyler Cowen does not like the tone of the stimulus debate. A highly respected anti-stimulus economist puts up some anti-stimulus evidence in a highly imperfect test (in Barro's defense, he did cover more than just WWII). The anti-stimulus economist is... MORE

Urban Death Traps

Economic History
Arnold Kling
Razib Khan writes, up until the year 1900 the world's cities were massive genetic blackholes. Cities only kept their population up through migration, which explains how Rome shrunk to 30,000 inhabitants by the 7th century. Today,. we think of cities... MORE

Two Good Links from Megan

Fiscal Policy
Arnold Kling
1. A panel at The University of Chicago, featuring John Huizinga (my former classmate at MIT), Kevin Murphy, and Robert Lucas. Huizinga makes three points. First, we are hearing a lot of Keynesian macro being tossed around now, and it's... MORE

Morning Reading

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal reports on how TARP funds went to politically-connected banks. Barney Frank does a cameo. Andy Harless might agree with what I wrote here (but he might not). Pointer from Mark Thoma. Robert Barro draws an apt... MORE

Is Obama a type P?

Business Economics
Arnold Kling
President Obama comes across to me as the Master of the Mixed Signal. It seems unclear how he will set priorities or where he stands on several key issues. I think this goes beyond a calculated effort to try to... MORE

Talking Points on Stimulus

Fiscal Policy
Arnold Kling
For Seattle public radio, 10:20 AM Pacific Time today. I will add a link to a recording, probably within the next 24 hours. My main theme is that we should have a small, temporary stimulus, not a permanent shift of... MORE

The Case for Stimulating Profits

Fiscal Policy
Arnold Kling
I am going to endorse the idea that Bryan Caplan called smart stimulus. if you cut employers' share of the payroll tax, this puts money in employers' hands, not workers'. But the indirect effect is to reduce the labor surplus;... MORE

The Oil Cycle

Energy, Environment, Resources
Arnold Kling
In Catherine Rampell's list of sectors that had the greatest sales growth last year, I was struck by how many of them are energy-related. Assuming that farming was driven by ethanol, the top four sectors were essentially oil plays. Oil... MORE

The Best Policy Regarding Banks

Finance: stocks, options, etc.
Arnold Kling
John M. Berry writes, At some point, politicians are going to have to stop pandering to their constituents and show leadership by explaining why the economy can't survive without a banking system. Hear we go again. We hear a rising... MORE

Education and Technology

Economics of Education
Arnold Kling
John Merrifield and I write, We criticize the way that Goldin and Katz talk about "years of schooling" as a continuous variable, when the underlying phenomenon is that the combination of high school graduation rates and college attendance rates increased... MORE

Douglas Rushkoff on the Inauguration Event

Political Economy
Arnold Kling
Some excerpts from his 1999 book, Coercion: Why We Listen to What "They" say. Chapter three is called "Spectacle."... MORE

Make it a Crime

Finance: stocks, options, etc.
Arnold Kling
James Hamilton writes, I believe there was an unfortunate interaction between financial innovations and lack of regulatory oversight, which allowed the construction of new financial instruments with essentially any risk-reward profile desired and the ability to leverage one's way into... MORE

Some Random Books

Books: Reviews and Suggested Readings
Arnold Kling
Two books arrived in the mail while I was away. I was at a Liberty Fund seminar. During a conversation at dinner, someone introduced me to some concepts due to Michael Oakeshott. Gene Callahan explains it, Central to Oakeshott's last... MORE

Healthy Banks or Healthy Markets?

Finance: stocks, options, etc.
Arnold Kling
John Hempton writes, If the bank runs for three years it will again be solvent. If it runs for less than six years it will be fully and adequately capitalised. This is in fact how the Japanese mega-banks recapitalised. I... MORE

The Empire Reaps Tribute

Political Economy
Arnold Kling
Radley Balko writes, After the 2000 Census, the richest county in America was Douglas County, Colorado. By 2007, Douglas County had fallen to sixth. The new top three are now Loudon County, Virginia; Fairfax County, Virginia; and Howard County, Maryland.... MORE

Boo, Eugene Fama

Macroeconomics
Arnold Kling
Readers of this blog know that I am against the Paulson/TARP bailout thingy and against a big stimulus. Some of you may also have read that distinguished (some would say Nobel caliber) financial economist Eugene Fama has a new blog,... MORE

The Pattern

Finance: stocks, options, etc.
Arnold Kling
ActorThe PromiseThe Reality Financial ExecutivesBrilliant Risk ManagementCatastrophic Losses Eliot SpitzerMr. Clean, Financial ReformerCelebrity Prosecutions, Real Abuses Untouched, and Not So Clean Sarbanes-OxleyFinancial ResponsibilityLarge Costs, No Apparent Benefits Basel Capital StandardsInternational Coordination, Sound BanksWorldwide Banking Collapse Fannie, FreddieStable Mortgage CreditFed the... MORE

The Case for McMedicine

Economics of Health Care
Arnold Kling
Michael Cannon and I make it. Patients with multiple diagnoses require someone who can organize the efforts of multiple medical professionals. It is not unreasonable to imagine that delivering health care effectively, particularly for complex patients, could require a corporate... MORE

Deficits ad Absurdum

Fiscal Policy
Arnold Kling
Brad Setser writes, Facts are facts. The US has already proved it can raise over $1.5 trillion in a single year [in Treasury borrowing] That is a the sort of statement that could come back and haunt someone. It is... MORE

The Best of Times, the Worst of Times

Fiscal Policy
Arnold Kling
The Washington Post reports The number of jobs in the nation increased by about 2 percent during Bush's tenure, the most tepid growth over any eight-year span since data collection began seven decades ago. Gross domestic product, a broad measure... MORE

Collected Macro Lectures

Macroeconomics
Arnold Kling
I have collected my series of fourteen macro lectures, previously delivered as blogs posts, in one place, called Lectures on Macroeconomics. Also, you can listen to Steve Fazzari and Russ Roberts explain Keynesian economics.... MORE

Lectures on Macroeconomics, No. 14

Macroeconomics
Arnold Kling
This lecture looks at a recession as an information problem. It is a synthesis of a number of the ideas mentioned in previous lectures.... MORE

Why is the Economy Doing Poorly?

Fiscal Policy
Arnold Kling
Tyler Cowen gives eight reasons, and then concludes First, a large fiscal stimulus addresses factor #8 but fares poorly in alleviating the other problems. Of course it may give a band-aid for #5 or #6 and you can tell other... MORE

James Surowiecki Makes Libertarianism Impossible

Finance: stocks, options, etc.
Arnold Kling
He writes, among the biggest supporters of both [the bailout and the stimulus] have been the world's investors, at least insofar as their collective judgment is reflected in market prices. As I showed yesterday, investors overwhelmingly supported the Paulson plan:... MORE

Be Careful What You Wish For

Fiscal Policy
Arnold Kling
Nick Schulz emailed me this paragraph from the Bureau of Labor Statistics: Eleven of the most populous metropolitan areas are composed of 34 metropolitan divisions, which are essentially separately identifiable employment centers. In November, Detroit-Livonia-Dearborn, Mich., again registered the highest... MORE

Acemoglu on the Economy and Economics

Finance: stocks, options, etc.
Arnold Kling
Daron Acemoglu has written an essay on what the financial crisis means for economics. Highly recommended. I will excerpt and comment extensively. Thanks to Acemoglu's frequent collaborator Simon Johnson for the pointer, which I picked up from Mark Thoma. In... MORE

How You Think in a Crisis

Behavioral Economics and Rationality
Arnold Kling
Not very well, according to Tyler Cowen. The more we feel out of control, the more our brains imagine patterns that don't really exist. ...Studies show that if people contemplate and reaffirm their most important values, such as honesty and... MORE

Managing Retirement Accounts

Finance: stocks, options, etc.
Arnold Kling
The Wall Street Journal reports that recent events have raised doubts about the ability of people to manage their own retirement accounts. The most obvious pitfall is that 401(k) plans shift all retirement-planning risks -- not saving enough, making poor... MORE

The Stimulus and the Somme

Fiscal Policy
Arnold Kling
Mark Thoma gives us Joseph Stiglitz and Martin Feldstein being interviewed by Charlie Rose. I listened to it last night, and I found it so chilling that it adversely affected my sleep. Two issues stand out. 1. Both of them... MORE

morning commentary

Macroeconomics
Arnold Kling
Paul Krugman says that we need a big fiscal stimulus. He writes, Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we're looking at an... MORE

Lectures on Macroeconomics, No. 13

Fiscal Policy
Arnold Kling
Having reached the unlucky number of 13, it is fitting to talk about multipliers and model estimates.... MORE

We All Wanna Change the World

Political Economy
Arnold Kling
Bryan discusses policy libertarianism and structural libertarianism. If they were 60's leftists, the policy libertarians would be willing to work within the system and the structural libertarians would want to change the system. In this case, I feel ambivalence, of... MORE

Short-term Success, Long-term Fizzle

Economic Methods
Arnold Kling
Gordon Dahl and Lance Lochner write (I can't find an ungated 2008 version of the paper, and the 2005 version seems to differ), Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test... MORE

Ken Rogoff Interview

Finance: stocks, options, etc.
Arnold Kling
Doug Clement interviews Ken Rogoff. Rogoff says, I've taught for years in my class that many types of money funds and asset classes outside the traditional regulatory system are subject to the same kind of runs as the conventional banking... MORE

Against the Big Stimulus

Fiscal Policy
Arnold Kling
After reading Willem Buiter's long piece (pointer from Mark Thoma), I decided that it is time to come out firmly against a large fiscal stimulus. Instead, I would prefer a small stimulus. The case for a large stimulus appears to... MORE

Jon Danielsson writes, Risk-sensitive capital can be dangerous because it gives a false sense of security. In the same way it is so hard to measure risk, it is also easy to manipulate risk measurements. It is a straightforward exercise... MORE

Today's Reading List

Finance: stocks, options, etc.
Arnold Kling
All from Mark Thoma. The shortest read is from Robert Waldmann. A sudden decline in the liquidity of assets can create problems as firms can't unwind leveraged positions without extreme market disruption. If the assets had always been illiquid, those... MORE

Capital Requirements and Bond Ratings

Finance: stocks, options, etc.
Arnold Kling
Robert Rosenkranz writes, in effect, the regulatory reliance on ratings makes the rating agencies the de facto allocators of capital in our system. And every actor in the financial system has every incentive to group and slice assets in ways... MORE

Bubble Seers

Finance: stocks, options, etc.
Arnold Kling
Two stories look at early warnings of the housing bubble. Bruce Bartlett points to A Forbes piece from September 2001--way too early, in my opinion. Prices in most markets at that time were too low, not too high. He points... MORE

Techno-escapism

Growth: Causal Factors
Arnold Kling
When the real world gets you down, it's always nice to read about technology and the future. So I recommend the latest world question center from John Brockman, et al. His question for this year is, "What will change everything?"... MORE

Lectures on Macroeconomics, No. 12

Macroeconomics
Arnold Kling
This lecture speculates on some possible behavioral economics of booms and recessions. The idea is that herd behavior (buying at the top, selling at the bottom) is a form of procrastination.... MORE

Another Perspective on LTCM

Finance: stocks, options, etc.
Arnold Kling
Concerning the 1998 resolution of troubled hedge fund Long Term Capital Management, Brad Setser writes, The big banks called to the New York Fed were the creditors of LTCM and they were in some sense "bailed-in." To avoid taking losses... MORE

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