EconLog Archive
Social Security
Milton Friedman on Social Security
My choice for last week’s comment of the week generated a lot of comments! It refers to this article by Milton Friedman, who describes a conceptual scheme for transitioning out of Social Security. Based on the comments, I can tell that people are challenged by Friedman’s idea. Let me try to explain it. Suppose that .. MORE
Economic Growth
Moore’s Law
Economics teachers and students will want to read Jon “Hannibal” Stokes’ article on Moore’s Law, because 1. In my opinion, Moore’s Law is the most important economic phenomenon of our time. See also William Nordhaus, The Progress of Computing, and Brad DeLong’s commentary on my arithmetic. 2. Moore’s Law is packed with economic issues. For .. MORE
Regulation and Subsidies
FCC Policy Issues
In the age of the Internet, the FCC has become a pivotal regulatory body, as I pointed out in The Economics of the Wireless Last Mile. In a new essay, I argue that In the United States today, companies that license spectrum are like Third-World squatters. They do not have clear title to their spectrum, .. MORE
Information Goods, Intellectual Property
Is Copyright Necessary?
Douglas Clement does an outstanding job of providing background on the way that economists have dealt with the issue of copyright in the context of economic growth. (An earlier version of Clement’s article first appeared here.) Clement’s article revolves around a controversial proposition articulated by Michele Boldrin and David K. Levine. They argue that copyright .. MORE
Energy, Environment, Resources
Economics of Hydrogen
Gregg Easterbrook lets a lot of the air out of the hydrogen balloon. Pure hydrogen is not an energy source, except to stars. As it will be used in cars or to power homes and offices, hydrogen–like a battery–is an energy medium, a way to store power that has been obtained in some other way…hydrogen .. MORE
Efficient Markets Hypothesis
Stock Prices and Scandals
Jeff Madrick describes disparate economic views on whether stock prices should guide managers. The modern theory typically depends on the idealized efficient-markets theory, which asserts that at any given moment the stock price is not only the best measure we have of the future value of a company, but usually an accurate one. The stock .. MORE
Social Security
Comment of the Week
Because the comments that people are submitting here are unusually good, I think I’ll feature at least one every week. This week’s “comment of the week” is from Jim Glass on the Deficit Argument IV thread. He links to an interesting article by Milton Friedman suggesting a way to immediately transition from Social Security to .. MORE
Efficient Markets Hypothesis
The Risk Premium
Surfing while snowbound, somehow I started with this post on Asymmetrical Information and wound up reading this article by Robert D. Arnott and Peter L. Bernstein on the equity risk premium. It is an exhaustive study that covers many fundamental issues in finance, so it is not easily summarized here. Their main conclusion is that .. MORE
Tax Reform
Consumption Taxation
Writing in Slate, Tim Noah discusses consumption taxation, an idea for tax reform that goes back well over half a century. Lester Thurow, a liberal economist, made the case two decades ago for a consumption tax that would include a generous income-based refundable credit to help people at the lower end of the income scale. .. MORE
Microeconomics
Congestion Tax Works
The first day of London’s “congestion tax” began well, according to this report. There were complaints and small demonstrations around London, but traffic was lighter than normal and did not appear to back up around the edges of the restricted zone, as expected by opponents of Mayor Ken Livingstone’s charging plan. Video cameras enforce the .. MORE
Finance: stocks, options, etc.
Risk Spreads Widen
The Economic Report of the President notes that after September 11, all measures of risk spreads widened. the uniformity of stock market movements around the world suggests that a key driver of U.S. stock prices in 2002 was a worldwide decrease in tolerance for risky assets combined with lower projected earnings growth The report also .. MORE
Game Theory
Romance or Signalling Game?
Economists sometimes seem to be incurable anti-romantics. Consider James Miller’s treatment of Valentine’s Day as a signalling game. Even a woman who hates flowers would be rational in getting mad at her boyfriend for not buying her flowers on Valentine’s Day, because by not wasting resources on her the boyfriend has signaled his disinterest. For .. MORE
Social Security
The Deficit Argument, IV
Hal Varian gives a clear account of the concern with long-term deficits. A recent study by the economists Alan J. Auerbach, William G. Gale, Peter R. Orszag and Samara R. Potter, “Budget Blues: The Fiscal Outlook and Options for Reform,” lays out the facts… According to the economists’ projections, the spending on Social Security, Medicare .. MORE
Growth: Consequences
Growth in Flour
Back in December, Virginia Postrel marveled at being able to buy a 5-pound bag of flour for 69 cents. In response, Brad DeLong on his weblog calculated the cumulative gain in productivity over the last 500 years, using flour as the unit of measurement. I used this as an opening anecdote in a talk that .. MORE
Books: Reviews and Suggested Readings
Future Technology
In reading The Next Fifty Years, a collection of essays edited by John Brockman of Edge.org, I was struck by the following quote from Rodney Brooks, director of MIT’s Artificial Intelligence laboratory. Our thirty-year goal is to have such exquisite control over the genetics of living systems that instead of growing a tree, cutting it .. MORE
Macroeconomics
The Budget Debate
Columnist Robert J. Samuelson describes the Budget debate as each side trying to embarrass the other, without ever confronting the truly important budget issues What both sides are trying to avoid discussing, according to Samuelson, is the anomalous structure of entitlement spending. The Congressional Budget Office projects that from 2000 to 2030, the costs of .. MORE
Income Distribution
Migratory Lucky Duckies
One of the weaknesses of using income variation in a single year as a measure of the distribution of income is that people change income brackets over time. In general, the trend for any given household is upward, as households move up the ladder and their places on the lower rungs are taken by younger .. MORE
Economic Growth
Bush Administration Embraces New Growth Theory
In an article for the Concise Encyclopedia of Economics, Paul Romer explains the difference between old and new growth theory. A traditional explanation for the persistent poverty of many less developed countries is that they lack objects such as natural resources or capital goods. But Japan had little of either in 1950 and still has .. MORE
Economic Growth
The Language Barrier
The Internet has created new opportunities for international trade in information services. In this essay, I argue that this is creating a trade barrier for non-English speakers. For now, the Internet revolution is boosting the economic prospects of the English speakers of the world. This includes the countries where English is the native language, as .. MORE
Uncategorized
The Deficit Argument, III
Responding to my previous post, Brad DeLong offers a theory of government spending that is certainly, well, different. one percent faster real GDP growth does not leave federal spending unchanged. A lot of government services require that bureaucrats be paid salaries: their salaries rise as fast as GDP per worker rises. Still more government programs–Social .. MORE
Growth: Consequences
The Deficit Argument, II
Liberal and conservative economists are not as far apart on the issues of fiscal policy as it might first appear. Both sides share a concern that government growth could outstrip GDP growth. The position of liberal economists on the U.S. Budget deficit is that in order to keep government from growing too quickly relative to .. MORE