EconLog Archive
Political Economy
The Moral Authority Test
Tim Carney reports on the latest project from the Mercatus Center. George Mason University’s Mercatus Center this week is kicking off a series of papers on cronyism and business-government collusion. (Seemingly-related Video from LearnLiberty) You can think of the project as having two goals. One goal would be to clarify for conservatives the distinction between .. MORE
Microeconomics
A One-Penny Proof
I recently tweeted: In social science, the best arguments prove more than the best studies. Hands down. Here’s one homely example of what I have in mind. When economists explain marginalism, students often object, “But surely no one ever changes his behavior over a single penny.” However, they’re provably wrong. If “no one ever changes .. MORE
Labor Market
Thomas Ricks’s Fiasco
In late June, Gen. Stanley A. McChrystal, the former commander of international forces in Afghanistan, called for reinstating the draft. “I think if a nation goes to war, every town, every city needs to be at risk,” he said at the Aspen Ideas Festival. “You make that decision and everybody has skin in the game.” .. MORE
Macroeconomics
The Selgin-Sumner-Tobin Model vs. PSST
George Selgin writes, U.S. NGDP was restored to its pre-crisis level over two years ago. Since then both its actual and its forecast growth rate have been hovering relatively steadily around 5 percent, or about two percentage points below the pre-crisis rate.The growth rate of U.S. average hourly (money) earnings has, on the other hand, .. MORE
Economics and Culture
Ask a Martian Sociologist: What Does American Education Say About the American Labor Market?
From the latest draft of The Case Against Education: The permanent residents of the Ivory Tower often congratulate themselves for broadening students’ horizons. For the most part, however, “broaden” means “expose students to yet another subject they’ll never use in real life.” Put yourself in the shoes of a Martian sociologist. Your mission: Given our .. MORE
Cost-benefit Analysis
Henderson on Robert Guest
His basic argument is that migration of people across borders creates, in the United States particularly, not so much a melting pot as a “rich stew.” (This is not a quote from the book; it’s actually from Cato Institute senior fellow Tom Palmer, but I think Guest would like it.) Immigrants to the United States .. MORE
Labor Market
Jobless Science Ph.D’s
The Washington Post has the story, but buries the lede. The pharmaceutical industry once was a haven for biologists and chemists who did not go into academia. Well-paying, stable research jobs were plentiful in the Northeast, the San Francisco Bay area and other hubs. But a decade of slash-and-burn mergers; stagnating profit; exporting of jobs .. MORE
Information Goods, Intellectual Property
Tipping, Status, and Signaling
Everything Arnold says about status goods and tipping points holds for signaling as well. It’s theoretically possible for bizarre new equilibria to emerge: Something that is a status good in one era can be the opposite in another. Think of smoking, for example. At some point, there may emerge a generation for whom having their .. MORE
Behavioral Economics
Kahneman on the Crash
Daniel Kahneman’s view of the 2008 crash is eerily similar to my own: Many people now say they knew a financial crisis was coming, but they didn’t really. After a crisis we tell ourselves we understand why it happened and maintain the illusion that the world is understandable. Also: Economists have a mystique among social .. MORE
Economics of Education
The Status-Good Model of College
Bryan correctly characterized my views. However, to me they imply a tipping equilibrium. Something that is a status good in one era can be the opposite in another. Think of smoking, for example. At some point, there may emerge a generation for whom having their children attend an elite college is not a status good. .. MORE
Economics and Culture
The Future of Online Education: Three Competing Perspectives
Amazon put Borders out of business. Is online education going to do to the same to brick-and-mortar colleges?* Reflecting on earlier conversations with Arnold, I’ve realized that there are three competing perspectives with three competing predictions. Perspective #1: Human capital model. Analysis: The point of college is to teach marketable skills. Online education will soon .. MORE
Labor Market
Up From Poverty
“Up From Poverty” is the title of my review [scroll down to page 12] of Walter Williams’s book, Up From the Projects: an Autobiography. Why do I review an autobiography in a publication titled Regulation? Here’s why: When economists want to discuss the damage done by the minimum wage, for example, we tend to cite .. MORE
Economic Education
Barro on Marginal Utility and Wealth Transfers
In an otherwise good article defending Tyler Cowen, Josh Barro states the following: There is declining marginal utility of money: A person who makes $10,000 gets more value out of an extra dollar than a person who makes $100,000 does. So, transferring wealth from rich people to poor people makes the public better off in .. MORE
Microeconomics
Pepconomics
My latest essay is on the economics of Pepco, the apparently under-performing electric utility. I am concerned by two factors that insulate Pepco from facing market discipline concerning reliability. The first is that Pepco is a regulated monopoly. The second is that there is no price indicating the benefits of reliability. Right now, the only .. MORE
Political Economy
Employer Tyranny vs. Guaranteed Freedom
John Holbo writes, Libertarians can, of course, just come out and say that they prefer contract rights to guarantees of freedom. No one is paying any attention to me in this debate, But I wrote, Just be careful about assuming that there must be a perfect option. Once you assume that there is something that .. MORE
Macroeconomics
The Debt-Fueled Binge Story, Keynes, and PSST
Mark Thoma gives us Tim Duy: What was more important in holding the economy close to potential output, residential construction itself, or the housing price bubble? I tend to believe the price-driven balance sheet effects were driving dynamics over this past business cycle. I still think that the best charts demonstrating this are Timothy Taylor’s. .. MORE
Economic History
Be Careful What You Wish For – You May Already Have It
A People’s History of American Empire mentions that former South Vietnamese prime minister Nguyen Cao Ky was an open admirer of Hitler. Intrigued, I decided to investigate. The charge checks out. Exact quote: “People ask me who my heroes are. I admire Hitler because he pulled his country together when it was in a terrible .. MORE
Economic Methods
A Paragraph to Ponder
From Robert Roberts Knowledge comes into us through a variety of channels that can be blocked by our concern for status, and the successful knowledge-seeker will be one who keeps those channels open. The process requires that we be able to “listen,” either literally or figuratively, to what others say. If what they say shows .. MORE
Family Economics
Savings, Genes, and Fade-Out
Parenting often has large effects on the young. Parents do stuff, their kids respond, and observers conclude that parenting is very important. You need twin and adoption methods to uncover the crucial caveat: these parenting effects usually fade-out. Kids aren’t like clay that parents mold for life; they’re like flexible plastic than responds to pressure .. MORE
Finance
Joffe on LIBOR
As many readers probably know, there has been a huge scandal recently about the setting of the London InterBank Offer Rate (LIBOR). This is the rate used around the world on literally trillions of dollars in loans, including many mortgages. Marc Joffe has a good blog post on the facts of the scandal. What is .. MORE
Books: Reviews and Suggested Readings
Tone vs. Substance
In a comment on the Don Boudreaux book, Jason Collins writes, As most of Boudreaux’s posts are in what you define as category (c), the book is not going to change the mind of your liberal friend. Contrast the comments at the bottom of a Cafe Hayek post with those in Marginal Revolution. Cafe Hayek’s .. MORE