EconLog Archive
Macroeconomics
The economy should be “left alone to sort things out” during a recession
Broadly speaking, there are three approaches to stabilization policies and business cycles: 1. Stop the excesses: In this view, monetary policy is too expansionary at certain times. Some people worry about excessive real GDP growth. Others worry about asset prices bubbles and/or an orgy of lending. In this view, the excessive monetary stimulus leads to .. MORE
Economic Methods
My Moment with Gary Becker
From Selfish Reasons to Have More Kids: In 1992, Gary Becker won the Nobel prize in economics for one big idea: “Economics is everywhere.” He saw economics in discrimination; employers hire people they hate if the wage is right. He saw economics in crime; crooks rob banks because that’s where the money is. He saw .. MORE
Austrian Economics
Robert P. Murphy on Capital
However, the classical understanding of capital and its place in economic theory was muddled. Even though it was refined in light of the new marginal productivity theory of pricing, the increasing formalism of economics in the 20th century led many economists to lose the new insights. This article outlines these developments and explains why many .. MORE
Cost-benefit Analysis
Three Graphs About Trying and Failing
The true return to college heavily depends on the probability of successful completion. That probability in turn heavily depends on pre-college academic performance. How heavily? Check out these three graphs from Bound, Lovenheim, and Turner’s “Why Have College Completion Rates Declined?” (American Economic Journal 2010). BLT compare results for the NLS72 (high school graduation cohort .. MORE
Obituaries
Gary S. Becker, RIP
Becker’s unusually wide applications of economics started early. In 1955 he wrote his doctoral dissertation at the University of Chicago on the economics of discrimination. Among other things, Becker successfully challenged the Marxist view that discrimination helps the person who discriminates. Becker pointed out that if an employer refuses to hire a productive worker simply .. MORE
Behavioral Economics
Demagoguery Explained
In the dictionary, “demagogues” are bad by definition. In Merriam-Webster, a demagogue is “a political leader who tries to get support by making false claims and promises and using arguments based on emotion rather than reason.” In the Oxford Dictionary, he’s “a political leader who seeks support by appealing to popular desires and prejudices rather .. MORE
Economic and Political Philosophy
Friday Night Video: Daniel Hannan on Socialism
I didn’t have time to get permission to repost the Daniel Hannan video on Econlog, but you can go here to watch it. It’s very good. It’s about 13 minutes long. HT to Dan Klein.
Income Distribution
The correct reason to oppose high MTRs
In a recent post I suggested that relatively high marginal tax rates on consumption of the ultra-rich might be justified as part of a tax reform package that abolished the personal income tax, and also abolished the corporate income tax, and also abolished all inheritance taxes. I use utilitarian reasoning in all my tax posts, .. MORE
Taxation
Reply to Scott Sumner on 80% Marginal Tax Rates
On his other blog, The Money Illusion, my co-blogger Scott Sumner argues for an 80% marginal tax rate on consumption for high-consumption people. I admit my surprise at seeing Scott advocate that, which is why it has taken me a little while to process it. What is Scott’s argument? He writes: Some conservatives questioned my .. MORE
Regulation
What If Firms Could Opt Out of Sexual Harassment Law?
Suppose firms could publicly opt out of sexual harassment law. Would they choose to do so? The simplistic answer is, “Since sexual harassment laws were forced on firms, they’ll all opt out as soon as they get the chance.” But status quo bias is a powerful force – and even if it weren’t, social norms .. MORE
Behavioral Economics
Where Does All the Booze Go?
In a recent post, Bryan wrote about how people do not accurately report how much tobacco they purchase. If they did, then the survey data would be consistent with tobacco sales. However, surveys report less than half of the actual tobacco sales. People are reluctant to admit to socially frowned upon activities. This pattern of .. MORE
Energy, Environment, Resources
Feminizing Famine
Recently, I’ve been rereading parts of Cormac Ó Gráda’s Famine: A Short History. The book juxtaposes an interesting pair of facts. The first fact describes how famine is marketed (for lack of a better word): The sense that the horrors of famine fall disproportionately on women … is often reflected today in the publicity campaigns .. MORE
Labor Market
Donald Sterling and the Economics of Discrimination
What I find interesting about the case of Los Angeles Clippers owner Donald Sterling is how well it illustrates Gary Becker’s insights on the economics of discrimination. Becker pointed out that the market makes people “pay” for discriminating on racial grounds. The white person who refuses to hire a black person who is more productive .. MORE
Labor Market
Is it OK to reason from a (aggregate) wage change?
Even before Mark Carney took over as Governor of the Bank of England, he showed signs of independent thinking. Most famously, he came close to endorsing NGDP targeting at a speech in Toronto during early 2013. More recently, he hinted that aggregate nominal wages are a useful indicator (and target?) of monetary policy: Has Bank .. MORE
Behavioral Economics
Farewell, James Schneider
Our guest blogger James Schneider will post his last entry tomorrow. Because his friend Bryan Caplan posted the welcome, I have asked for–and have been granted–the honor of writing his farewell. I met James at a Liberty Fund seminar on health care in Indianapolis last May and appreciated his insightful comments at the seminar. For .. MORE
Behavioral Economics
Ayn Rand in the Happy Lab
Ayn Rand made many uncharitable claims about her philosophical opponents, but this passage from Galt’s Speech in Atlas Shrugged takes the cake: They do not want to own your fortune, they want you to lose it; they do not want to succeed, they want you to fail; they do not want to live, they want .. MORE
Central Planning
Applying Hayek’s “Local Knowledge” Insight to Foreign Policy
Now, there’s nothing in Hayek’s arguments to suggest that it applies only to central planning of a domestic economy. A government that wishes to intervene in another country’s affairs faces the same problem, possibly even magnified by the fact that the small number of government policymakers at the center have even less information about the .. MORE
Uncategorized
The resurrection of the automatic watch
David Landes’ brilliant book, Revolution in Time: Clocks and the Making of the Modern World, ends with a chapter that reads like an obituary of sorts to Swiss watchmaking. The book was published in 1983, and Landes maintained that the quartz revolution in time-keeping would make mechanical clocks and watches obsolete. He did not underestimate .. MORE
Behavioral Economics
Cowen and Crisis Reconsidered
Robert Higgs famously blames the growth of government on crises – especially wars and depressions. I firmly believed in this story for over a decade until I read Tyler Cowen’s critique: The ratchet effect becomes much stronger in the twentieth century than before. Furthermore most forms of governmental growth probably would have occurred in the .. MORE
Economic and Political Philosophy
A pragmatic view of causation
I’m not trained in philosophy, but I do regard myself as a philosophical pragmatist. So when I grapple with issues of causality I try to imagine which definition of ‘causation’ is the most useful. Consider two possible causes of WWII: a. Nationalism b. Mr. and Mrs. Hitler getting married and having a baby in 1889. .. MORE
Economic Growth
Acemoglu and Robinson on Mobutu
I’m at a conference in San Diego in which the participants are discussing various articles and book chapters on the causes of economic growth. A number of chapters are from Daren Acemoglu and James A. Robinson, Why Nations Fail, which I posted about here. There are a number of things about the book to criticize .. MORE