EconLog Archive
Behavioral Economics
Cochrane’s Political Economy
From his rebuttal to Krugman: Krugman is trying to say that a cabal of obvious crackpots bedazzled all of macroeconomics with the beauty of their mathematics, to the point of inducing policy paralysis. Alas, that won’t stick. The sad fact is that few in Washington pay the slightest attention to modern macroeconomic research, in particular .. MORE
Economic Methods
“All Theories Are False”
I can’t tell you how many times natural and social scientists have solemnly told me, “All theories are false.” Their “proof” usually amounts to the solitary example of Newtonian physics, proven false by Einsteinian physics. But if you’re patient, they eventually just say, “Look, no theory perfectly fits the facts. That makes them all false.” .. MORE
Finance: stocks, options, etc.
What if Lehman had been Bailed Out?
Joe Nocera speculates, In truth, a Merrill or A.I.G. default would have created something akin to a financial nuclear bomb — much worse than Lehman’s filing for bankruptcy. Merrill was a much bigger firm, with deep roots on Main Street thanks to its “thundering herd.” A.I.G. was the world’s largest insurance company, whose credit-default swaps .. MORE
Economic Methods
Some Pushback to Krugman
From John Cochrane and from Daniel Klein. Cochrane writes, Most of the article is just a calumnious personal attack on an ever-growing enemies list, which now includes “new Keyenesians” such as Olivier Blanchard and Greg Mankiw. Rather than source professional writing, he plays gotcha with out-of-context second-hand quotes from media interviews. He makes stuff up, .. MORE
Finance: stocks, options, etc.
Moral Hazard and Capital Structure
Russ Roberts is working on a paper suggesting that the fragility of our financial system could be the result of past bailouts, in which unsecured creditors and counterparties of financial institutions were always made whole. In some sense, the fact that the Fed fears contagion makes them turn such liabilities into ex post nearly riskless .. MORE
Family Economics
The Real Problem With Monogamy: Asymmetric Information
Some people sincerely like monogamy; other people sincerely don’t. Under the circumstances, it seems wise for everyone to just reveal their proclivities and pair up with people who share their expectations. Unfortunately, I don’t see this happening. There is a fundamental flaw with monogamy, but it’s not human nature. It’s asymmetric information. My key assumption: .. MORE
Economics of Health Care
Friday Afternoon Miscellany
Keith Hennessey has an interesting question. What thought leader most clearly and effectively presents points of view with which you frequently strongly disagree? He proposes that awards be given. Would Tyrone be considered eligible? Presumably, my nominees have to be progressives. My left-of-center blog reading list includes Mark Thoma, Menzie Chinn, and James Kwak, whose .. MORE
Finance: stocks, options, etc.
9-15 anniversary event
I will be speaking at an event on Capitol Hill on Tuesday, September 15. This is an anniversary of sorts for the financial crisis, and that is the topic for the event. I am planning a really hard-hitting talk. I am looking forward also to a talk by Russ Roberts. I hope that reporters attend, .. MORE
Political Economy
Experts and Government
An essay in the The Australian touches on issues that I often write about on this blog. The tendency to regard public opinion as the prisoner of irrationality informed the attitude of the elite towards the public display of emotion throughout most of the 20th century. Officials and opinion makers were particularly worried about the .. MORE
Monetary Policy
The Fed’s Hold on Economists
And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. “I’ve been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him,” Krugman said of Greenspan in a 2007 interview with Pacifica Radio’s Democracy Now! “Nobody really .. MORE
Economics of Health Care
Shocking Views on Health Policy
They come from Richard A. Cooper, a physician (not to be confused with Richard Cooper, the specialist in international economics). Orszag has argued that if Medicare spending could be as low in Newark as it is at Mayo, the nation could save billions. But this theory doesn’t hold up in practice. Consider: One-fourth of the .. MORE
Economic History
Was Hoover’s No-Wage-Cuts Pledge a Banana Subsidy?
Like almost everyone else, libertarians typically argue that Herbert Hoover’s policies exacerbated the Great Depression. But there’s a key difference: Normal people blame Hoover’s commitment to laissez-faire, but libertarians blame Hoover’s proto-New Deal policies. Libertarian economists are particularly likely to highlight Hoover’s fervent effort to maintain nominal wages in the face of sharp deflation. See .. MORE
Energy, Environment, Resources
Trip to Yosemite
I’m heading for Yosemite later this afternoon. My goal: get to the top of Half Dome. I made it almost the whole way last year. If I get to the cables (in this picture from the web–that’s not me; that’s someone else) and then chicken out, I’ll still be happy.
Economics of Health Care
Obama’s Contradiction on Health Care: II
Three commenters on my post last night (ed, mark, and Karl Smith) pointed out, correctly, it turns out, that I missed Obama’s point. I accused him of contradicting himself by claiming that he wouldn’t put any government funds into the “public option” and then saying, just three paragraphs later, that he needed to address how .. MORE
Finance: stocks, options, etc.
When a Fund Bet on a Bailout
Bloomberg reports, From July 2007 to July 2008, the commercial-paper portion of Reserve Primary’s holdings jumped to almost 60 percent from 1 percent, according to the trade association. The fund’s yield rose to 0.4 percentage point above the average among its peers in 2008 from slightly below average, a substantial increase by money market standards .. MORE
Family Economics
Monogamy and Heterogeneity
One thing I’ve learned from seminars: Preferences are almost unimaginably heterogeneous. During a presentation, I’ll be thinking, “No one will like this paper.” Then lo and behold, this paper has three ardent defenders. And this is the harmonious, genteel GMU econ department. Imagine the preference heterogeneity of the world as a whole! A striking non-academic .. MORE
Economics of Health Care
Obama’s Contradiction on Health Care
Here are two segments of Obama’s speech this evening. They were within two paragraphs of each other: Despite all this, the insurance companies and their allies don’t like this idea. They argue that these private companies can’t fairly compete with the government. And they’d be right if taxpayers were subsidizing this public insurance option. But .. MORE
Politics and Economics
Obama Speaks
[Update: My reactions to the President’s health care speech are here.] The folks at Cato think that President Obama’s speech to school kids was creepy. I agree. You know what it reminds me of? In 7th or 8th grade, during the Vietnam War, my junior high school brought in the “Up With People” singers. They .. MORE
Cost-benefit Analysis
Jet Lag, Night Feedings, and Fixed Costs
Economists usually emphasize marginal analysis. Should a firm make one more pound of steel? Should a shopper spend one more minute looking for a lower price? But economics has just as much to say about all-or-nothing decisions. If a firm has to pay a fixed cost to stay in business, it shouldn’t just weigh the .. MORE
Monetary Policy
Friedman vs. Bernanke, II
As noted in my previous post on this, Tyler Cowen and I have converged: we agree that Bernanke’s and Friedman’s views on the causes of the Great Depression differed and that, although there is some ambiguity, there is no clear evidence that Friedman would have favored the Paulson-Bernanke bailouts. I’d like to advance the discussion .. MORE
Economic Growth
A Contestable Market
Free to Choose Media asks, What institutions can enable the world’s poor to realize their power and achieve prosperity? The best blog answer can win $250. The forthcoming book, From Poverty to Prosperity, by yours truly and Nick Schulz, would say that the answers are probably local rather than global. That is, the institutions that .. MORE