EconLog Archive
Finance: stocks, options, etc.
The Market Reaction to the Election
A throwaway comment at the end of my previous post may have been misunderstood. So today I’ll provide a more complete interpretation of the market response to the recent election. There were a number of significant market responses to the election, including: 1. Significantly higher stock prices2. A stronger dollar3. Higher interest rates4. Higher inflation .. MORE
Books: Reviews and Suggested Readings
We at 100
The 20th century produced fictional dystopias besides real ones, yet the best known – like George Orwell’s Nineteen Eighty-Four – originated in liberal democracies. All, however, owe much to a novel from one from one of the real dystopias, We, by the Soviet Union’s Yevgeny Zamyatin. Born in 1887, Zamyatin became a Bolshevik while a .. MORE
Institutional Economics
Is the Rule of Law Sacred?
It is not because preserving the rule of law is a French problem that it has no relevance for the United States. Quite the contrary. The current minister of the Interior, the top cop in France, recently declared (see Nicolas Bastuk and Samuel Dufay, “L’État de droit est-il sacré?” or “Is the Rule of Law .. MORE
Economic Institutions
My Personal Prediction Machine
Alex Tabarrok has an excellent post at Marginal Revolution this morning explaining why he had and has confidence in prediction markets. It’s very hard to argue, while predicting, against people who are putting their own money on their own predictions. Like Alex, I tracked those markets closely, which is why I was telling friends that .. MORE
Central Planning
The Problem With Economic Planning
Economic planning, where the government uses policies such as taxation, subsidies, spending, or nationalization, in order to direct economic outcomes, is back in vogue. Its proponents often liken economic planning to planning done by individuals in the economy. The difference, they claim, is that national economic planning can help accomplish larger economic, national, or social .. MORE
Macroeconomics
Watch the Breakevens
Lars Svensson has argued that monetary policymakers should “target the forecast”, which means they should set their policy at a position expected to lead to on-target inflation. Early in 2024, a few high inflation readings led to concern that we might not be on track for a soft landing. Inflation eased later in the year, .. MORE
Books: Reviews and Suggested Readings
Players, Games, and Rules
Joe Nocera and Bethany McLean’s The Big Fail: What the Pandemic Revealed About Who America Protects and Who It Leaves Behind has a lot of criticisms of how medical institutions operated during the pandemic (and also generally). One occasionally hears that the United States shows why a free market in health care can’t work. (I confess, .. MORE
Free Markets
An Interesting Political Phenomenon
We observe a strange phenomenon that does not only affect America but currently looks especially virulent in this country. (Before the fall of the Soviet empire, it was more noticeable in Europe.) When an election is coming, each of the two main competing sides shouts that if the other 50% (plus 1% or whatever) wins, .. MORE
Cost-benefit Analysis
Externalities and Public Policy
External effects such as air pollution are often cited as an example of a problem that can be usefully addressed by public policy. In the real world, however, two factors cause externalities to be overemphasized as a justification for regulation: Transactions costs Motivated reasoning A recent article by Geoffrey Kabat in Reason magazine helps to .. MORE
Central Planning
Martin Anderson on Ronald Reagan’s Smarts
Yesterday, I posted over on my Substack on a long interview that my late Hoover Institution colleague Martin Anderson did about his time with Richard Nixon. In it he revealed how quickly Nixon came to Marty’s position against the military draft in 1967, relatively shortly after meeting Marty. There’s lots more that’s fascinating in that .. MORE
Adam Smith
The Linguistic Disadvantages of Liberalism
The words used in public discussions shape the outcome of debates. In political discourse, language plays a critical role in conveying ideas, shaping perceptions, and even determining public opinion. In the 21st century, despite the successes of liberalism in expanding freedom and reducing poverty, liberal ideas remain unpopular in many parts of the world. This .. MORE
Economic History
The “Opportunity” to Get Cancer
Art Carden has written a terrific article this morning on the huge economic progress we have made in the last 2 centuries. It’s “Conceived in Liberty or Conceived in Sin? Exploitation and Modern Prosperity,” Econlib, November 4, 2024. One excerpt: We are R.I.C.H.: Rich, Interconnected, Civilized, and Healthy. What does this mean? First, I’m referring .. MORE
Economic and Political Philosophy
When should we defer to others?
Based on the indicators that I look at, I’d expect PCE inflation to run well above 2% over the next 5 years. On the other hand, market indicators such as TIPS spreads point to roughly 2% expected inflation. Which view should I trust? I’d say both. If I put zero weight on my own (inside) .. MORE
Economic Growth
My Weekly Reading for November 3, 2024
Rather than post on anything directly connected to the election, I’ll post on things that will be with us no matter who wins. The Fourth Industrial Revolution and the Future of Work by Timothy Taylor, Conversable Economist, October 31, 2024. Excerpt: At least to me, it isn’t obvious that the 4th Industrial Revolution is different .. MORE
Economic History
A Few Things Lumber Tells Us About the World
What is economic history if not the chronicle of individuals trying to improve their respective conditions (maximize their utility, as economists say) by exchanging with their fellow humans and eventually developing extended commerce and markets? (See John Hicks, A Theory of Economic History.) Of course, economic history also reflects “the dark side of the force” .. MORE
Behavioral Economics
The Confidence-Man in the 21st Century
I recently read Herman Melville’s novel entitled The Confidence-Man. (At least I assumed it was a novel when I picked it up, although often it seemed more like a series of anecdotes. I need to reread it.) In the story, Melville portrays a series of con men (or is it just one?), pretending to be .. MORE
Price Controls
Nocera and McLean’s priceless PPE analysis
I suspect regular readers of this blog are familiar with what basic economics tells us we can expect to see as a result of price controls. Let’s say that for some good, there is a large positive demand shock or negative supply shock, or both. This shifts the demand curve to the right, or supply .. MORE
Economic Education
Electric Vehicles Price Theory Problem: Cutsinger’s Solution
[Editor’s note: Welcome to the second of our new series on Price Theory problems with Professor Bryan Cutsinger. We reprint this month’s question below; you can also view the original post from earlier this month here. You can also see the solution to last month’s problem here.] Question: According to the Energy Information Administration, crude .. MORE
Free Markets
Why Trade Should Be Free
In the section above, I stated that people often think that “there’s a special problem when we buy from people in other countries.” In a sense, that’s true. If you buy a low-end toaster, chances are that it’s made in China. Buying one from China means that you’re not buying one made anywhere else, .. MORE
Adam Smith
Henderson on Pandemic Planning
I recently started reading The Big Fail: What the Pandemic Revealed About Who American Protects and Who It Leaves Behind, by Joe Nocera and Bethany McLean. They had previously written the book All the Devils are Here: The Hidden History of the Financial Crisis, which I found to be one of the better books on the 2008 .. MORE
Cost-benefit Analysis
Should bad outcomes always be prevented?
Almost every single day, I seem to encounter at least one article that I find highly annoying. In many cases, it involves a bad government policy. And most of those bad policies are aimed at addressing very real problems, but the cost of the policy ends up exceeding the benefit. Consider the sport of snow .. MORE