EconLog Archive
Behavioral Economics
A Bet I Forgot to Make
Just one election cycle ago, Tyler embraced a conclusion I found implausible on the basis of a model I found absurd: When it comes to marijuana legalization, I believe that the “anti-” forces will muster as many parental votes as they need to, to defeat it when they need to. The elasticity of supply is nearly .. MORE
Public Choice Theory
William of Orange, Political Import
In the corporate world, it’s common for top executives to be recruited from outside the firm, even outside the industry. But in American politics, convention and sometimes law require politicians to have longstanding ties to the geographic areas they ostensibly serve. That shrinks the market for politicians: If a governor has apparently done a .. MORE
Growth: Consequences
Open Borders and Global IQ Bleg
Another bleg from the tireless Vipul Naik of Open Borders. Vipul’s words: What impact would open borders have on global IQ within a generation or two? Even hardcore IQ hereditarians concede some sort of Flynn effect and the role of malnutrition in depressing African, and possibly Indian, IQ. Open borders would correct this, and raise .. MORE
Economics of Health Care
FDA Breaks Its Own Regulations
Most people believe that the FDA needs to ensure that the medicines we Americans consume have been proven to be safe and effective long before we ever get a chance to use them. Yet the Makena story gives us a peek into an area of medical practice where unproven “homebrew” drugs rule the market, where .. MORE
Regulation and Subsidies
Ohio and the Auto Bailout
The presidential election seems to come down to Ohio and the vote in Ohio is likely to come down to one issue : the auto bailout. With one out of eight workers employed in the auto industry, it is hardly surprising that this is the most important issue in Ohio. And this issue seems to .. MORE
Behavioral Economics
Self-Correction in Markets and Politics
We can’t stop our minds from jumping to conclusions. If we smell smoke, we jump to the conclusion, “Fire.” If metal glitters, we jump to the conclusion, “Gold.” If a person smiles at us, we jump to the conclusion, “Friend.” The main way humans attain accuracy isn’t by changing our impulsive cognitive natures, but by .. MORE
Labor Market
Tim Taylor on Minimum Wage Increase
Tim Taylor, aka, the Conversable Economist, has a good post on the minimum wage. He makes one crucial error, though. Quoting from his own book, he writes: Here’s an insight for opponents of a higher minimum wage to mull over: Let’s say a 20 percent rise in the minimum wage leads to 4 percent fewer .. MORE
Cost-benefit Analysis
The Present Value of Learning, Adjusted for Forgetting
Suppose learning marginal fact F increases your productivity by V. What is the present value of learning F? Economists will be tempted to mechanically apply the standard present value formula. Using discrete time to keep things simple: PDV(F)=V + V/(1+r) + V/(1+r)^2 + V/(1+r)^3 + … = V/r. If V=$100, and r=5%, the present value .. MORE
Behavioral Economics
Optimal Open-Mindedness
Lately a few people have accused me of being “closed-minded.” As they’d predict, I reject the accusation. I say my degree of openness is close to optimal. Consistent with Bayesian reasoning, I am as reluctant to claim vindication by events as I am to admit refutation by events. (If you disagree, I am always willing .. MORE
Public Choice Theory
Woodrow Wilson’s Public Choice
At a Liberty Fund conference I just finished up in Miami, in our book of readings was the following quote: The best rulers are always those to whom great power is interested . . . . It is, therefore, manifestly a radical defect in our federal system that it parcels out power and confuses responsibility .. MORE
Central Planning
Spontaneous Order in New York City
The traffic in the blackout areas of Manhattan is lawless in the most literal sense: the traffic lights aren’t working, so the law cannot be applied as usual. But “lawless” doesn’t seem to be a fitting description; the driving seems better-behaved than usual. We’re so used to seeing people act under a system of government .. MORE
Regulation
TSA: A Slight Glimmer of Hope
And please, don’t tell me in the comments how I’m making a big deal about this: I’m making a small deal. I report bad things; I also like to report good things, even slightly good things. I fly out of Monterey airport, a small airport, a lot and so I’ve gotten to know a number .. MORE
Supply-side Economics
The Outlook for New York, Continued
The New York Times reports, The storm damage had a synergy of its own. Efforts to pump floodwaters from subway and automobile tunnels were slowed by electrical shortages. Hastily arranged car pools became bogged down on highways and city streets clogged with other commuters. Many gas stations, without power to operate their pumps, could not .. MORE
Upcoming Events
Henderson on Stossel
I was supposed to go to New York earlier this week to tape a segment for John Stossel’s show on Fox Business Network. Obviously, that didn’t happen. So I did it from the Stanford studio on Wednesday. The other person I’m on with is Sallie James of the Cato Institute. They could see me but .. MORE
Economics of Health Care
You Should Repeatedly Read Cochrane’s “After the ACA”
Soon after I finished my Ph.D. at Princeton, I started going to academic conferences. When I met senior professors at these gathering, they were often surprised to discover my pedigree. Regardless of the subject at hand, I habitually revealed exactly what I thought. How could someone so unguarded get through Princeton econ? When I read .. MORE
Central Planning
Hayek and Hurricanes
In a natural disaster like Hurricane Sandy, the only thing people should fear more than the storm is the government’s response. Let us count the ways. Mandatory evacuations presume that politicians know the risks better than property owners themselves. That can’t possibly be true. In an information age, we all have access to the same .. MORE
Cross-country Comparisons
Why Is the National Return to Education So Low?
Like Garett, I’m a huge admirer of Lant Pritchett’s “Where Has All the Education Gone?” (World Bank Economic Review, 2001). My favorite part of the paper is when Pritchett presents three stories that might explain his results: I discuss three possibilities for reconciling the macro and micro evidence and explaining the differences across countries. The .. MORE
Price Controls
Jeff Ely on Price Controls During Disasters
I had thought that pretty much all economists agreed that price controls during disasters are a bad idea. But Northwestern University economist Jeff Ely has a different take. He writes the following: But in fact it is quite typical for the consumer surplus maximizing solution to be a rationing system with a price below market .. MORE
Supply-side Economics
The Outlook for New York
If there are no objections, I am going to interrupt my non-blogging to offer a downbeat economic prognosis for New York City in the wake of the storm. I can imagine that the disruption to patterns of sustainable specialization and trade could be significant and long-lasting. Even granting that this was a smaller flood than .. MORE
Cross-country Comparisons
Cuba to Open Its Border (Outwards)
Starting in January, Cubans will no longer need exit visas to leave their workers’ paradise. Just one problem: Are there any First World countries that will let them come? For that matter, what’s the best Third World country that will let them come? Update: Yes, I’m familiar with the U.S. “wet feet/dry feet” policy. But .. MORE
Economics of Education
Economic Models of Education: A Typology for Future Reference
Economic arguments about education often conflate human capital, ability bias, and signaling. Since I am a big fan of Roderick Long’s exhortation to “Whip conflation now!,” I decided to do something to squelch this conflation. Namely: Produce a clarifying table. The first three entries are polar cases. They’re worth discussing even if no one believes .. MORE