EconLog Archive
Cost-benefit Analysis
Immigration Charity Bleg
Suppose you wanted to spend your charitable dollars to increase the total number of people who migrate from the Third World to the First World. What approach would give you the biggest bang for your buck? Are any specific countries, organizations, or loopholes especially promising? Unconventional answers are welcome as long as they’re genuinely effective. .. MORE
Public Choice Theory
My Election Outcomes: An Update
The day after November’s election, I posted on my bets and on the results on a local tax increase referendum. Here’s what I wrote on the local tax increase: A friend and retired lawyer, Carl Mounteer, and I wrote the ballot argument against a property tax increase in Pacific Grove. The measure, Measure A, needed .. MORE
Finance
TARP: A Gift for the Bondholders
When the federal government bought shares in the biggest banks, who benefited most: Shareholders or bondholders? According to co-blogger Luigi Zingales and U Chicago professor Pietro Veronesi, the answer is clear: bondholders. They estimate the total benefit to banks at $131 billion, and the total increase in debt value due to the plan at $119bn. .. MORE
Behavioral Economics
When to Trust Your Superiors
A while back, James Donald left a somewhat strident comment on EconLog. The key passage: When the superior rule the inferior, it is not only better for the superior, it is also better for the inferior. Many readers will reject Donald’s claim out of hand for its tone or undertones. Yet there are definitely conditions .. MORE
Economic and Political Philosophy
Krugman on Scientific Method
Some of Paul Krugman’s best posts are on scientific method, specifically, how do you judge a theory. One of his posts today is beautiful, or, more correctly, would have been beautiful had he dropped the last line. In that line, he attacks people who disagree with him politically. I’ll quote, though, from the good part: .. MORE
Regulation
Prosecutorial Persecution
Broadcom co-founder Henry Samueli, a Silicon Valley legend, refused to testify for the prosecution and had strong evidence that he could offer Ruehle. But he, too, had been bludgeoned into pleading guilty to a minor felony and so refused to testify for the defense. It seems that, in testimony before the SEC, Samueli had been .. MORE
Behavioral Economics
Free Market Airport Security
I think Garett’s basically wrong about airport security on the free market. Yes, both markets and politics respond to risk misperceptions. But the political response is much more likely to ignore cost and convenience, to impose whatever sounds good. The market response will still pander to misperceptions, but it will weigh these misperceptions against cost .. MORE
Behavioral Economics
Would the Private Sector Make You Remove Your Shoes Before Boarding?
Alex and some of the internet are noting that airline security might cost lives and does cost liberty. Yglesias asks one counterfactual: How many airplanes would be “blown up by terrorists” if there were no airline security? I might have asked instead how many airplanes would be flown into skyscrapers and nuclear power plants .. MORE
Finance
Shadow Banking: Probably Bigger than you Thought
Bloomberg’s Moshinsky and Brunsden report: The shadow banking industry has grown to about $67 trillion, $6 trillion bigger than previously thought…The [Financial Stability Board, FSB], a global financial policy group comprised of regulators and central bankers, found that shadow banking grew by $41 trillion between 2002 and 2011. Full report (PDF) here. For comparison, U.S. .. MORE
Business Economics
Business Accountability: Good and In-Between
I’ve had two experiences in the last few weeks in which one business was incredibly accountable and one business was reasonably accountable although its employee was so-so. The good story first. I was traveling home from Miami to Monterey on November 4 and the first leg of the trip, on American Airlines, was from Miami .. MORE
Public Choice Theory
The Mouse’s Power: Popularity or Cash?
Alex notes that once again, the Mouse appears to have won a copyright battle (he won a big one back in 1998). So, is this evidence that most political outcomes are driven by cash? Is this evidence that, contrary to my claims, money drives most of U.S. politics? Hardly. Disney is one of .. MORE
Economic and Political Philosophy
Some Unpleasant Immigration Arithmetic
Let C=total number of immigrants – legal and illegal – who annually enter the U.S. under existing laws. Let F=the total number of immigrants who would annually enter the U.S. under open borders. Under perfectly open borders, C=F. Under perfectly closed borders, C=0. Where does the status quo fall on this continuum? The obvious metric: .. MORE
Cost-benefit Analysis
How Deep to Cut: A First-Pass Answer to Pearlstein’s Challenge
Towards the end of my debate with Steve Pearlstein, he posed an intriguing question. My paraphrase: Suppose half of higher education really is pure waste. What’s the efficient government response? Should government should cut its subsidy by 50%? Or what? Steve’s asking a complex question, so let’s start with a simple case: perfectly elastic (i.e. .. MORE
Finance
Altering the Federal Debt Structure: Go Long
One advantage the United States has that Canada didn’t is low interest rates. Interest rates today are much lower than when the Canadian government altered course. The yield on the ten-year Treasury bond in late June 2010, for example, was only about three percent. So, one thing the U.S. government could do quickly is to .. MORE
Taxation
California’s Laffer Curve: Playing with Fire
It’s not Go Galt: It’s Go to Texas. As I have noted before, the Laffer Curve–the curve that relates tax revenues to tax rates–must be correct. The relevant question is where we are on the Laffer Curve. Are we on the part of the curve–the “prohibitive region”–where an increase in marginal tax rates will reduce .. MORE
Behavioral Economics
Would the Private Sector Make You Wear an Airplane Seatbelt?
This week I tweeted: What argument do defenders of government-mandated airline seatbelt paternalism use? It can’t be that plane crashes aren’t salient to buyers. Note that I’m asking why the government has to mandate seatbelt usage. Since people overestimate the chance of dying in a plane crash, I suspect that in the absence of government .. MORE
Behavioral Economics
What Makes People Think Like Economists About Inflation?
Tyler blogs this 2001 Bryan and Venkatu piece on systematically biased beliefs about inflation: In the roughly 20,000 responses we have received from our telephone survey since August 1998, the average rate at which respondents thought prices had risen over the previous 12 months was about 6.0 percent. This “perception” of inflation is more than .. MORE
Human Capital
John Kay on Manufacturing Fetish
UPDATE BELOW The rear cover of the iPhone tells you it is designed in California and assembled in China. The phone sells, in the absence of carrier subsidy, for about $700. Purchased components – clever pieces of design such as the tiny flash drive and the small but high-performing camera – may account for as .. MORE
Economics of Education
Correction: Total Government Spending on Higher Education
Last night I realized that I repeatedly used an incorrect figure for government higher education spending in my debate with Steve Pearlstein. I said “Taxpayers heavily subsidize higher education – about $500 billion dollars per year.” But ~$500B is in fact the figure for total higher education spending. The true figures for higher education spending .. MORE
Labor Mobility, Immigration, Outsourcing
Friedman on Immigration History
Correction below. Did the United States begin in 1875? A little checking turned up the following information: 1. Ellis Island was only established as a federal immigration point–the first such–in 1890. 2. The first federal restrictions on immigration were passed in 1875; they excluded criminals, prostitutes, and Chinese contract laborers. Congress passed the first general .. MORE
Fiscal Policy
The Coming Tax Increases
Remember when critics of the Romney tax plan claimed that under his plan, the middle class would face tax increases of about 2,000 per family? [Here’s just one of many examples.] Well, unless state and local government plans for their employees’ pensions are reined in, households will face state and local tax increases of almost .. MORE