EconLog Archive
Income Distribution
The Poor Get Richer
Daniel Drezner assembles several items that refute the conventional wisdom that in the United States the poor get poorer as the rich get richer. If you care only about income, the poorest percentage of the population made great strides during the late nineties, completely erasing any losses from the previous twenty years. In my view, .. MORE
Supply-side Economics
Wesbury on Tax Cuts
Brian Wesbury makes a supply-side case for tax cuts. One point he makes that I agree with is that when we think of the government “crowding out” the private sector, we should focus on spending rather than taxes: Spending must be financed by either borrowing or taxation. In other words, we can pay for government .. MORE
Fiscal Policy
Economic Attribution Error
In this essay, I argue that the importance attached to the President or the Fed Chairman in determining economic outcomes may be an instance of what psychologists call the fundamental attribution error. During the Clinton administration, the projected Budget surplus improved by over one trillion dollars. However, most of this change came as a surprise .. MORE
Energy, Environment, Resources
California Energy Crisis Redux?
Could California suffer another “energy crisis?” Lynne Kiesling writes, California has a lower construction rate for proposed generation projects than other states that have implemented electricity restructuring…even in states that started with higher capacity relative to demand, such as Texas and New York, generation construction success rates are higher than California’s. Regulatory uncertainty in California .. MORE
Monetary Policy
Liquidity Trap, II
The comments on the Liquidity Trap or Statism Trap thread have been interesting. I want to respond to a couple of issues that were raised. First, D-squared pointed out that Krugman has written about the liquidity trap in Brookings Papers, and I wanted to link to the article. It is a long, interesting piece, and .. MORE
Cross-country Comparisons
China, India and Deflation
Prashant Kothari forwarded an email from one of his readers that said, I think global deflation is [in] the cards as long as we have free trade in goods and services. China is rapidly becoming a sophisticated manufacturer and there soon will be no reason not to outsource tradeables from China. As long as the .. MORE
Finance: stocks, options, etc.
History of Option Pricing
The development of the Black-Scholes option pricing formula is a fascinating story. It is well told in this article by sociologist Donald MacKenzie. The Black-Scholes-Merton analysis provided a range of intellectual resources for those tackling problems of pricing derivatives of all kinds. Amongst those resources were the idea of perfect hedging (or of a ‘replicating .. MORE
Cross-country Comparisons
Liquidity Trap or Statism Trap?
In this essay, I take issue with Paul Krugman’s claim that the liquidity trap is relevant to Japan and the United States. Krugman has learned the wrong lessons. He thinks that the bank bailouts are a good thing, that Japan’s problem is a “liquidity trap,” and that the U.S. also could fall into a liquidity .. MORE
Economics of Education
Comment of the Week, 2003-05-28
On the topic of the academic job market, Damien Smith writes, Could the trouble in the humanities PhD market not be an insider-outsider problem, where the “insiders” (in this case, tenured faculty) exercise a form of market power over the wage? To continue the discussion, return to the original thread.
Public Choice Theory
Anti-Consumer Regulation
Two recent columns concerning the regulation of Internet commerce show how regulation sometimes restricts competition at the expense of the consumer. The Wall Street Journal argues that state regulations prevent consumers from obtaining health insurance that otherwise would be available via the Internet. New Jersey’s regulators, for example, have the power to tell insurers what .. MORE
Social Security
Paris in the Springtime
Two recent opinion pieces discuss the French ritual of strikes in May. The Wall Street Journal writes, Four workers financed each pensioner in 1960 and two in 2000. By 2020 the ratio will be one-to-one. Mr. Raffarin has told the French that “If we do nothing today, in less than 20 years our pensions will .. MORE
Growth: Consequences
“Concentrated Poverty” Declines
Paul A. Jargowsky found that “concentrated poverty” (people living in high-poverty neighborhoods) declined by 24 percent in the United States in 1990’s. In contrast, he says that from 1970 to 1990 poverty became more concentrated spatially. Based on the trend of prior decades, one might have reasonably assumed that high-poverty neighborhoods were an unavoidable aspect .. MORE
Economics of Education
The Academic Job Market
Two recent essays discuss the academic job market. Laura Vanderkam argues that students with good academic skills over-estimate their chances of landing a good job with a Ph.D. Like actors, however, humanities graduate students have to realize that — except for a few jackpot cases — there is no market for their product. When you .. MORE
Economic Growth
Three P’s of Growth
Steven Kirchner points to a speech by Australian Secretary to the Treasury Ken Henry on the topic of the determinants of growth. Henry decomposes output per capita into output per hour worked times hours worked per working-age person times the proportion of working-aged people in the population. He calls these factors the three P’s: productivity, .. MORE
Cost-benefit Analysis
Government Performance Effectiveness
Ted Balaker links to this analysis by the Office of Management and Budget of the effectiveness of government programs. Demanding that programs prove results in order to earn financial support, however obvious and sensible, marks a dramatic departure from past practice. No one has asked about the extent to which Elderly Housing Grants help the .. MORE
Institutional Economics
Institutional Survival
Henry Farrell argues against the view that institutions must reduce transactions costs in order to survive. there are an awful lot of institutional arrangements out there that demonstrably have very little to do with efficiency or transaction cost reduction, and an awful lot to do with furthering the interests of social elites. Just look at .. MORE
Regulation and Subsidies
Regulatory Tariffs Vs. Quotas
Reason Foundation’s Ted Balaker sees a libertarian silver lining in the cloud of state government budget deficits. After all, some states are now eyeing legalized gambling as a new cash cow. Maybe the next step will be to legalize – and tax – marijuana. It is a well-known proposition in international trade that trade quotas .. MORE
Public Choice Theory
Government Overgrowth, II
Was the stock market boom good for New York? Not according to Megan McArdle, otherwise known as ‘Jane Galt’. in an era of prosperity, city spending grew an astonishing $5.6 billion, or 25% – right up to the capacity of record capital gains income and Wall Street bonuses to sustain it. Now that the money .. MORE
Optimum Currency Areas
Economic Policy Diversity
In an essay on diversity in economic policy, I propose dividing the United States. By splitting into the virtual regions of Miltonia and Hillaria, we could run a “natural experiment” to see how things work. Perhaps after ten or twenty years, we Miltonians will come around to the point of view that “It takes a .. MORE
Economic Growth
Growth and Demographics
Steven Nyce and Syl Schieber analyze the likelihood that the size of the labor force will start to decline in many developed countries. It now appears that many of the developed economies will experience periods in which the numbers of non-elderly will decline. Moreover, in some cases, these declines will exceed the rates of labor .. MORE
Fiscal Policy
Temporary Dividend Tax Cut?
Jacob Levy criticizes the Senate’s proposed temporary tax cut on dividends. The arguments in favor of repealing the dividend tax have to do with removing distortions from the capital markets and from the incentives faced by corporations, and with improving tranparency in corporate accounting. Removing distortions from the capital markets is a good thing for .. MORE