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Arnold Kling: December 2011

An Author Archive by Month (67 entries)

Reihan Salam on Financial Regulation

Finance: stocks, options, etc.
Arnold Kling
He writes, it is not just craven financial elites that clamor for stabilization policies that invariably benefit craven financial elites: it is virtually everyone in the crisis-plagued societies, as financialization gives everyone a stake, direct or indirect, in the fate... MORE

Mining for PSST

Macroeconomics
Arnold Kling
James Hamilton writes, My suggestion is that America should try to return to what some scholars maintain was the original source of America's success, which came from using North America's abundant natural resources as a basis for a competitive advantage... MORE

Trends to Watch, Updated

Growth: Causal Factors
Arnold Kling
Following up on last year's post on long-term trends (which in turn followed up on a post from 2005: 1. Productivity growth has tailed off in recent quarters. It varies so much on a year-to-year basis that it takes quite... MORE

Modern Common-Pool Resources

Information Goods, Intellectual Property
Arnold Kling
Timothy Taylor writes, The Milgrom, Levin, and Eilat argument is also intriguing because it points out an inherent conflict between property rights and innovation. For example, those who invent something today and seek out a patent must often be concerned... MORE

Why No Cheap Textbooks?

Economics of Education
Arnold Kling
Timothy Taylor writes, When it comes to textbooks, all choices are equally "free" to the actual decision-maker, who in this case is the professor rather than the student. If students at the college bookstore could choose among equivalent books by... MORE

Today on the Eurozone Crisis

Finance: stocks, options, etc.
Arnold Kling
Johnn Cochrane makes the case that bank regulators are not up to the job. The last generation of smart MBAs got around capital requirements by pooling risky assets into "AAA" securities that had lower risk weights, and then putting those... MORE

Megan McArdle is a Vicky

Income Distribution
Arnold Kling
She writes, If you're like, well, almost everybody, you're not saving enough. 15% of each paycheck into the 401(k) is the bare minimum you can get away with If I were to channel my inner David Graeber, I would say... MORE

We're All Heterodox Now

Macroeconomics
Arnold Kling
The Economist writes, They have thrived on the back of massive disillusion with mainstream economics, which held that the economy would grow steadily if central banks kept inflation low and stable, and that there were no great gains in the... MORE

Bricks, Mortar, and Education

Economics of Education
Arnold Kling
Stephen Gordon writes, Eventually you could have local campuses becoming places where MITx students seek tutoring, network, and socialize - reclaiming some of the college experience they'd otherwise have lost. Phil thought this sounded like college as a giant coffee... MORE

Tabarrok on Innovation

Growth: Causal Factors
Arnold Kling
Russ Roberts and Alex Tabarrok converse for an hour. Recommended. It brings out/reinforces points from Alex's ebook.... MORE

Book Recommendations

Books: Reviews and Suggested Readings
Arnold Kling
From Jason Collins. An interesting list.... MORE

Self-Recommending Books, Not Yet Available

Books: Reviews and Suggested Readings
Arnold Kling
The Craft of Economics, by Ed Leamer. Seems to be expected January 6. Coming Apart: The State of White America, 1960-2010, by Charles Murray. Expected January 31. I mentioned the Murray book during the "virtual meetup" that I held on... MORE

Various Sentences to Ponder

Growth: Causal Factors
Arnold Kling
From Jason Collins: There are some massive externalities to the behaviour of other people. Chrystia Freeland, quoting a Taiwanese-born American executive on the effect of globalization on American workers: "So if you're going to demand 10 times the paycheck, you... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
Tyler Cowen writes, Dodd-Frank left questions of capital and leverage largely to the Basel III international banking agreements, the second piece of the new financial regulatory architecture. Basel III, like its predecessors Basel I and Basel II, encourages banks to... MORE

Patent Trolls

Information Goods, Intellectual Property
Arnold Kling
James Bessen, Jennifer Ford, and Michael J. Meurer have the ugly data. We find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010. During the last four years, the lost... MORE

Francis Fukuyama Wants a New Ideology

Political Economy
Arnold Kling
He writes, Politically, the new ideology would need to reassert the supremacy of democratic politics over economics and legitimate anew government as an expression of the public interest. But the agenda it put forward to protect middle-class life could not... MORE

Why No Mini-Recessions?

Macroeconomics
Arnold Kling
Scott Sumner writes, Now here's one of the most striking facts about US business cycles. When the unemployment rate does rise by more than 0.6%, it keeps going up and up and up. With the exception of the 1959 steel... MORE

Libertarian Ideas for the Mainstream

Politics and Economics
Arnold Kling
James Pethokoukis gets snarky about Obamanomics and then offers constructive suggestions, based largely on two e-books, Race Against the Machine and Launching the Innovation Renaissance. 9. Create a patent system with the length of legal protection depending on the cost... MORE

You can try this URL: https://talkgadget.google.com/hangouts/extras/talk.google.com/kling Or go to Google+, try to start a hangout, then select "hangouts with extras" and try to join the hangout Kling. This will start officially at 11 AM eastern time, today (about one hour... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
1. James Hamilton reviews the emergency lending of the Fed from 2008-2011. Phase 4, then, could turn out to be a return to emergency lending as the Fed tries to contain collateral damage from the unfolding European drama. 2. Olivier... MORE

Instructions for Virtual Meetup

Upcoming Events
Arnold Kling
A reminder that I will attempt this on Thursday, Dec. 22, at 11 AM Eastern time, with a topic of "the future of education." I will be using the Google+ hangout feature. That means that you have to be on... MORE

Eurobanking

Finance: stocks, options, etc.
Arnold Kling
Hyun Song Shin writes, My recent research suggests that the 'global banking glut' may have been more culpable for the crisis than the 'global savings glut' I reported on his paper when I first read it (I believe Tyler Cowen... MORE

Robert Hetzel on the Liquidity Trap

Macroeconomics
Arnold Kling
He speaks for me when he writes, The institutional fact that makes a liquidity trap an irrelevant academic construct is the unlimited ability of the central bank to create money. One can make this point in an irrefutable manner by... MORE

Manski and Caplan

Family Economics
Arnold Kling
I just got around to reading Charles Manski on "Genes, Eyeglasses, and Social Policy." Manski is dismissive of heritability studies, and I am curious how Bryan would react, given the importance he places on heritability studies for his argument that... MORE

Virtual Meetup

Upcoming Events
Arnold Kling
I am trying to organize a virtual meetup using a Google "hangout." The time will be this Thursday at 11 AM. OH--Eastern time zone (U.S.) I think you have to be on Google+ to participate. The topic will be the... MORE

An Extended Take on Ignorance

Political Economy
Arnold Kling
from Xerographica. Note the many links, including one to A Jeffrey Friedman paper.... MORE

An Institutional Check on Financial Regulators?

Finance: stocks, options, etc.
Arnold Kling
Ross Levine writes, [We] propose a new institution, which I label the "Sentinel," to act as the public's sentry over financial policies and to help compel financial regulators to act in the public interest, regardless of their private interests. The... MORE

Economists and Influence

Politics and Economics
Arnold Kling
Richard Green asks why economists do not have more influence at the White House. His answer: economists have poor social skills I do not think that is the issue at all. There is diversity among economists, and there are plenty... MORE

Bryan Caplan Crosses Nick Rowe

Labor Market
Arnold Kling
Bryan writes, Unemployment is just a labor surplus; since wages are the price of labor, the fundamental cause of unemployment has to be excessive wages. Nick Rowe writes, The only way to increase output in a demand-constrained economy is to... MORE

Income Distribution Policy

Income Distribution
Arnold Kling
Timothy Taylor has a must-read post. (I could say that almost every day, but today I am going to provide additional commentary.) It's long, but here is a brief excerpt. On the tax side, the U.S. tax code is already... MORE

The Chess Game of Health Care Regulation

Economics of Health Care
Arnold Kling
Daeho Kim writes, To identify the impact of PPS on cardiac procedures, I exploit the discontinuity in Medicare eligibility at the age of 65. Utilizing data from before-and-after the PPS [prospective payment system] reform, I find a discontinuous change in... MORE

Laboratories of Socialism

Political Economy
Arnold Kling
Gar Alperovitz writes, Local and state governments are likewise changing the nature of American capitalism. Almost half the states manage venture capital efforts, taking partial ownership in new businesses. Calpers, California's public pension authority, helps finance local development projects; in... MORE

Technology and Higher Education Reform

Economics of Education
Arnold Kling
I attended a dinner discussion on this topic the other night. Matt Yglesias raised two skeptical questions. 1. Since the invention of the printing press, distance learning has been feasible. At the margin, what does the Internet make possible? On... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
1. Richard Milne in the Financial Times. the biggest worry is that European leaders appear to be repeating one of the original sins that led to the eurozone crisis in the first place: forcing banks and insurers to load up... MORE

Joseph Stiglitz Crosses Nick Rowe

Macroeconomics
Arnold Kling
Stiglitz writes, At the beginning of the Depression, more than a fifth of all Americans worked on farms. Between 1929 and 1932, these people saw their incomes cut by somewhere between one-third and two-thirds, compounding problems that farmers had faced... MORE

Does This Work?

Political Economy
Arnold Kling
Here is a video on Crony Capitalism. It offers a number of libertarian talking points on the issue. I agree with many of the individual points, but they are made rather quickly. The argument that regulation was intensified, not cut... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
Tim Worstall writes, We're going to be gearing the eurozone banking system up on sovereign debt. Which means that if anyone does in fact default then the eurozone banking system really will go bust, crash and burn in a great... MORE

SarbOx and MF Global

Business Economics
Arnold Kling
There has been a lot of mention of Sarbanes-Oxley in the context of the failure of MF Global. This might be a good test of whether SarbOx is worth anything. 1. How much of MF Global's behavior was criminal pre-SarbOx?... MORE

An Annoying Law

Public Choice Theory
Arnold Kling
In New York: This month, thousands of New Yorkers will hand over their apartment keys to strangers, making a few extra bucks by renting out their homes when they head out of town. But they might not know they're actually... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
An entire article on the two-drunks problem. The European Banking Authority ordered the region's banks on Dec. 8 to raise 115 billion euros ($154 billion) by June. Faced with dwindling profits and unable to tap capital markets to sell new... MORE

Two Papers on PSST

Macroeconomics
Arnold Kling
In the latest issue of Capitalism and Society. I wrote one of the papers, and then Peter Howitt wrote a comment. I recommend both of them, although personally I find Howitt's paper more interesting, because I already knew what I... MORE

Inside the New Poverty Measure

Income Distribution
Arnold Kling
Robert Lerman looks at how the sausage got made. the SPM threshold is a relative concept. It equals what a family with two children at the 33rd percentile of spending devote to food, clothing, housing, and utilities plus another 20%... MORE

Cheeseburgers Require PSST

Austrian Economics
Arnold Kling
Waldo Jaquith reflects that it's quite impractical--nearly impossible--to make a cheeseburger from scratch. Tomatoes are in season in the late summer. Lettuce is in season in spring and fall. Large mammals are slaughtered in early winter. The process of making... MORE

More on the Anti-Commons

Property Rights
Arnold Kling
From Eli Dourado. If we could be certain that eminent domain would only used when it was efficiency-enhancing, and that adequate compensation would be made to the expropriated, I would have no problem with it. I would regard it as... MORE

Khan!

Economics of Education
Arnold Kling
Salman Khan has interesting thoughts on education. One root of the problem is the fact that the college degree is issued by the same institution that is in charge of setting, and enforcing, the standards of that credential, says Khan,... MORE

Shorter Dierdre McCloskey

Austrian Economics
Arnold Kling
She writes, What works? Creativity. Innovation. Discovery. The Austrian core. And where did discovery come from? It came from the releasing of the West from ancient constraints on the dignity and liberty of the bourgeoisie, producing an intellectual and engineering... MORE

Valuing Financial Services

Finance: stocks, options, etc.
Arnold Kling
Christina Wang writes, Making conservative assumptions, we show that the current official method overestimates the service output of the commercial banking industry by at least 21% (amounting to $116.8 billion in 2007:Q4 for example) and GDP by 0.3% ($52.9 billion... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
One report on the latest accord: According to a statement issued after the meeting broke up, governments participating in the agreement will need to have balanced budgets -- which is counted as a structural deficit no greater than 0.5 percent... MORE

Of Models and PSST

Economic Methods
Arnold Kling
Some comments on an earlier post raised a number of issues. 1. Shouldn't the economy just have stayed on its production possibility curve in 1929, rather than go through the Depression? Well, the problem is if it stays on the... MORE

Random Family and Inequality

Income Distribution
Arnold Kling
Greg Mankiw posts a video of Harvard colleagues discussing the issue of inequality. It's very long, so I did not watch all of it, but I skipped around. The one person on the panel who was new to me was... MORE

Cognitive Hubris

Central Planning vs. Local Knowledge
Arnold Kling
My latest essay weaves together Daniel Kahneman and Jeffrey Friedman. Suppose you were to ask yourself how well you understand the world around you. How accurate is your map of reality? If you interrogate System Two, it might reply, "There... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
Perry Mehrling writes, Now comes the latest deal over eurozone fiscal rules, presumably the deal that ECB President Draghi asked for last week. It is a deal about sovereign budget discipline. But if I read Draghi's speech right, we should... MORE

Alex Tabarrok Talks His Book

Books: Reviews and Suggested Readings
Arnold Kling
Interviewed by Nick Schulz. there is plenty of risk in sending a kid to college! Forty percent of students don't graduate within six years (and probably never will), many more graduate with degrees that won't help them much in the... MORE

Health Care Dilemmas

Economics of Health Care
Arnold Kling
How Doctors Die, an essay by Ken Murray, has been making the rounds. Almost all medical professionals have seen what we call "futile care" being performed on people. That's when doctors bring the cutting edge of technology to bear on... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
Felix Salmon writes, The best case scenario is that those countries bite the bullet and restructure their debt now, since to delay is to make any restructuring much more painful and expensive than it needs to be. Pointer from Mark... MORE

The Intellectual Property Mess

Information Goods, Intellectual Property
Arnold Kling
Warren Toomey writes, Although AT&T quickly settled its legal disputes with Berkeley Software Design and the University of California, legal wrangling over intellectual property claims to various parts of Unix and Linux have continued over the years, often involving byzantine... MORE

Boettke on the Lamp Post Problem

Economic Methods
Arnold Kling
I recently came across Where Did Economics Go Wrong? Modern Economics as a Flight From Reality, published by Pete Boettke in Critical Review. Looking at its themes, you can see issues that I have dwelt on considerably on this blog.... MORE

Shock Me, Shock Me

Finance: stocks, options, etc.
Arnold Kling
From a new study by Andrew Haughwout and others, At the peak of the boom in 2006, over a third of all U.S. home purchase lending was made to people who already owned at least one house. In the four... MORE

Today on the Eurozone Crisis

Eurozone crisis
Arnold Kling
First, two pointers from Mark Thoma. Jeff Frankel calls this the hour of the technocrat. Obvious disadvantages of some technocrats include lack of managerial experience, lack of perceived legitimacy, and lack of a domestic political powerbase. Monti and Papademos both... MORE

What I've Been Reading

Books: Reviews and Suggested Readings
Arnold Kling
Moonwalking with Einstein by Joshua Foer. It is about a year that he spent honing his memory sufficiently to win the U.S. memory championships. Most of the book is about memory and its relationship, if any, to intelligence. He never... MORE

David Friedman on Consensual Government

Political Economy
Arnold Kling
Speaking at the Cato Institute, David Friedman breezed through a number of deep issues concerning the nature of government. The talk itself is only 30 minutes, but you might have to listen multiple times. I was planning to attend, but... MORE

The PSST Just-So Story

Arnold Kling
I will put this below the fold. It is from an essay that I am drafting.... MORE

Comments on Eurozone Solutions

International Macroeconomics: Exchange Rates, International Debt, etc.
Arnold Kling
Tyler Cowen writes, When it comes to debt, the periphery countries simply don't want to pay up. Their national wealth is many times their gdp and thus much much greater than their debts, even for Greece. It's amazing how many... MORE

Mankiw: We Need Fiscal Hawks, Monetary Doves

Macroeconomics
Arnold Kling
He writes, If I understand the news coming out of Europe correctly, the new head of the European Central Bank is offering a simple deal: If fiscal policy becomes hawkish, monetary policy will be dovish. In other words, as government... MORE

Are These Recessions All the Same?

Labor Market
Arnold Kling
Here are some data on job losses in each recession since 1970 (I grouped together the two recessions in 1980-1982). I look at total losses in nonfarm payroll employment and losses in employment in the durable goods sector. The figures... MORE

Thinking About CEO Pay

Business Economics
Arnold Kling
Tyler Cowen writes, Keep in mind that we are already juggling a few margins here, including "getting this CEO to work harder or better" and "this CEO vs. another." Read the whole thing, as well as his previous post. Some... MORE

John Goodman on the Health Care Olympics

Economics of Health Care
Arnold Kling
I refer to the attempt to measure national health care efficiency by comparing outcomes to expenditures as the international health care Olympics. The conventional wisdom is that the U.S. does poorly. John Goodman disagrees. On spending, he writes, the U.S.... MORE

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