EconLog Archive
Social Security
Social Security Privatization Debated
Here is Peter Ferrara’s comeback to me on Social Security privatization and stock market scenarios. The views advanced by Kling, however, are not peculiar to him. They reflect what personal account reformers are calling these days the “pain caucus” approach to Social Security reform. The pain caucus thinks that the Social Security reform debate is .. MORE
Economics of Health Care
Health Care Economics
Some recent articles on the economics of health care: Helen Levy and Thomas Deleire compare the expenditure patterns of people who have health insurance to those of people without health insurance. I think that this is a useful reminder that many people are uninsured by choice. We may believe that they ought to have health .. MORE
Energy, Environment, Resources
Limits to Growth?
Bjorn Lomborg and Olivier Rubin have an article that concisely challenges the thesis that environmental limits to growth are binding. [the limits-to-growth argument’s] real weakness is the underlying assumption that planet Earth has finite, essential resources (such as oil, water, and grain) for which there are no substitutes. Few resources have turned out to be .. MORE
Behavioral Economics
Are Small Investors Irrational?
Hal Varian’s column cites research on the irrationality of small investors during the dotcom bubble. First, there were significant differences of opinion about the value of Internet stocks, with retail investors tending to be much more optimistic than insiders or institutions. Second, there were significant restrictions on short-selling those stocks, a way of betting that .. MORE
Economic Growth
Comment of the Week, 2003-07-02
In the discussion of perspectives on Social Security, I suggested that wages tend to rise with productivity, so that indexing Social Security to wages leads to higher benefits than indexing it to prices. Eric Krieg asked, Arnold, why are wages and productivity neccessarily linked? Could international competition ensure that wages are static while productivity soars? .. MORE
Austrian Economics
Europe’s Constitution
Europe’s proposed constitution is receiving scant attention in mainstream media, but many Web sites that I visit have discussed it. Most of the reviews are mixed, but Marian L. Tupy’s opinion is unambiguous. They could have liberalized the rigid European labor market, eased the weight of a plethora of high taxes and reduced the 97,000 .. MORE
Institutional Economics
Many Interest Rates
Graham Turner claims to offer magical monetary manipulations. A year and a half after the Japanese government introduced its first fiscal stimulus, the yield curve (10-year Japanese government bond yields minus the discount rate) had steepened by nearly 2 percentage points. If the BoJ [Bank of Japan] had simultaneously initiated a policy of quantitative easing .. MORE
Social Security
Perspectives on Social Security
Last year, Stanley Fischer discussed Australia’s Social Security system. He found several aspects to be admirable. Australia has already undertaken the key pension system reforms that most of the rest of the industrialized world is now struggling with. The World Bank’s policy advice closely matches the current Australian system of pension provision, which combines the .. MORE
Income Distribution
Income Distribution Stories
This week, the topic of income distribution made news. Several news outlets highlighted a report from the IRS on the 400 highest-income taxpayers. annual samples of individual income tax returns for Tax Years 1992 through 2000 were sorted by AGI, and the 400 returns with the highest AGI in each year identified. Using 1990 dollars, .. MORE
Economics of Health Care
Comment of the Week, 2003-06-25
On my criticism of a physician’s proposal to cut prices for prescription drugs, Bruce Bartlett wrote, It would cut medical costs even more if we forced all doctors to work for the minimum wage. I used a similar analogy in my latest essay. If physician payments were reduced sharply, many doctors would exit the business. .. MORE
Finance: stocks, options, etc.
Housing’s P/E Ratio
Should you rent or buy your house? I’ve always answered this question using an arbitrage relationship that should obtain between a house’s rental rate and the real rate of interest. The rental rate is the ratio of the annual cost of renting a comparable house to the price of the house. profitability = rental rate .. MORE
Economics of Health Care
Quack Remedy
If I were to attempt to practice medicine without a license, I could be prosecuted. On the other hand, there is nothing stopping a doctor from pronouncing himself an economic expert and recommending price controls. In today’s Washington Post, physician Marc Siegel writes, Price controls, which the Bush administration opposes, would help the Medicare system .. MORE
Energy, Environment, Resources
Oil Import Tariff?
Charles Krauthammer’s premise, that reducing demand for oil will reduce terrorism, violates what I call Oil Econ 101. But he does offer the least costly way to achieve the goal. Slap, say, a $5 (or $10–the bazaar is open) tax on every imported barrel. And most important, keep the new price–let’s say $35–as a floor. .. MORE
Social Security
IRA’s to the Rescue?
Asymmetrical Information points to a paper by Michael Boskin. Roughly $400 billion a year is contributed to various tax-deferred saving vehicles, and the amount is likely to grow with nominal income growth and the increased limits on tax-deferred contributions recently passed into law. Immense additional future deferred taxes, larger than the long-run actuarial deficits in .. MORE
Macroeconomics
Bubbles and Macroeconomics
In this essay, I discuss two alleged bubbles and what they might imply for U.S. macroeconomics. Why do foreign investors invest so heavily in dollar-denominated assets and bear the risk of a decline in the dollar? Personally, I think it is because they are stupid. But that is not an appropriate answer for an economist .. MORE
Efficient Markets Hypothesis
Comment of the Week, 2003-06-18
On the topic of resisting efficient markets, ‘rvman’ wrote, Put all of your money in index funds. For five years, pick stocks and invest with monopoly money, matching your real original investment in your fake portfolio. If you can beat the market for those five years, and at least 4 of the 5 individual years, .. MORE
International Macroeconomics
Common Sense Macroeconomics
Robert Solow favors common sense over exotic theory. On the concerns about deflation in the U.S., he writes, If you look at the hundreds of prices that are tracked by the Bureau of Labour Statistics as elements of the consumer price index, you can list them in order, from fastest rising to steady to fastest .. MORE
Efficient Markets Hypothesis
Bond Market Bubble?
Followers of the market for U.S. government bonds have started tossing around the term “bond bubble” with increasing frequency. The concern is that interest rates on long-term Treasuries have gotten so low that investors face high risk (if interest rates rise, the value of securities will fall) at low return. My favorite academic bond analyst, .. MORE
Energy, Environment, Resources
Ethanol Mandate
Lynne Kiesling points to this article by Joel Schwartz on the ethanol mandate. what if our elected officials … forced you to pay $180 more each year for gasoline that contains an antiquated additive you don’t need, and that could actually worsen air quality? Schwartz argues that the focus on ethanol is driven by rent-seeking .. MORE
Economics of Health Care
Drug Price Discrimination?
Derek Lowe compares the fact that prescription drugs cost less outside the U.S. to the phenomenon of price discrimination by airlines. Most consumers [of pharmaceuticals] in the US don’t realize that they’re subsidizing the lower prices for everyone else, whereas I think most high-fare airline passengers have internalized it. They at least wouldn’t be as .. MORE
Behavioral Economics
Resisting Efficient Markets
Columnist James Glassman discusses the Efficient Markets Hypothesis with John Allen Paolos, author of A Mathematician Plays the Stock Market. If you believe in the EMH, you understand that highly successful stock selections are really just lucky guesses… But, to tell the truth, while I believe in the EMH intellectually, I have a hard time .. MORE