EconLog Archive
Fiscal Policy
Spend Less on Education?
Sometimes, an economist argues against conventional wisdom, as in this essay, where I question the view that the government needs to increase its spending on education. If we combine the limited extent to which education is a public good with the factors that make government the highest-cost producer, it becomes almost certain that the cost-benefit .. MORE
Fiscal Policy
Job-Creation Arithmetic, II
On his web site, Paul Krugman has posted the textbook macroeconomics of fiscal policy for stimulating employment. In a related post, Krugman explains how this basic macroeconomic model explains what some people (like me, for instance) found puzzling about a recent column in the New York Times. No, I didn’t forget to divide by 10…no .. MORE
Economic Growth
Savings, Capital Deployment, and Growth
I was taught in graduate school that economic growth has two main drivers: the savings rate, which determined the steady-state capital-labor ratio; and the efficiency of labor, which increases over time due to technological change and better human capital. Yesterday at a seminar, I heard IMF chief economist Ken Rogoff mention another parameter: the efficiency .. MORE
Trade Barriers
Trading with Weasels
In this essay, I argue against excluding France, Germany, and Russia from trading with Iraq. Private-sector companies from France, Germany, and Russia should be allowed to compete for Iraq’s business, along with other private-sector companies. Even if we have a quarrel with the governments of the Weasels, it is not productive to take revenge on .. MORE
Microeconomics
Basic Supply and Demand
Reading this story about unemployment among computer programmers left me feeling amused and vindicated. “This is the worst I’ve seen,” said … an out-of-work systems integration analyst, who has been involved in the tech industry since 1974. “I’m running into people who have been out of work a year or a year and a half. .. MORE
Economics of Education
Comment of the Week, 2003-04-23
On the subject of productivity in the government sector Scott (no last name included) wrote, …All of the educational proposals currently in vogue specifically involve reducing productivity. They keep looking for smaller class sizes and higher teacher pay with the promise of better educational achievement for the students. But no one is promising as large .. MORE
International Macroeconomics
Optimum Currency Areas
Martin Feldstein explains why Europe is not an optimum currency area, even though the United States is one. First, American employees move within the country when demand is relatively weak in a particular region, facilitated by a common language and a culture that regards moving across the country as perfectly normal. Germans are not leaving .. MORE
Fiscal Policy
Job-Creation Arithmetic
Paul Krugman writes, The average American worker earns only about $40,000 per year; why does the administration, even on its own estimates, need to offer $500,000 in tax cuts for each job created? Krugman’s arithmetic is to take the ten-year revenue loss from the tax cut, divide that by the number of jobs that supposedly .. MORE
Productivity
Cost Disease
If the government is taking more in taxes than it did forty years ago, then why does the typical citizen not feel that he or she is getting more in services? Kevin Drum proposes an answer. In fact, most of the per capita increase in government expenditure over the past 40 years has come from .. MORE
Austrian Economics
Leftist Austrian Economics
I don’t know how else to describe this article by Richard Florida (recommended with reservations by Stephen Karlson). In the later 20th century, the pace of creativity quickened while the profit from routinized production plummeted. A new version of capitalism began evolving in which creativity was not just perennial but constant, in which rapid-fire innovation .. MORE
Energy, Environment, Resources
Fishy Economics
How can we deal with the problem that unrestricted access to fish leads to over-fishing? This is almost a textbook exercise in Coase economics. One solution is fish farming, in which a business owns the fish that it breeds in a particular area. In The Skeptical Environmentalist, Bjorn Lomborg argues that fish farming is increasing .. MORE
Growth: Consequences
Elastic Economy
In this essay, I suggest that the economy has grown more diverse over the past fifty years, making it more elastic. One way to describe the elastic economy is that it has become more complex. Human wants continue to be relatively simple and basic. The fundamental resources, such as land and labor, are the same. .. MORE
Tax Reform
More Tax Day Thoughts
Virginia Postrel writes, most Americans want the tax system to do three things: to be progressive, to treat households with the same incomes equally, and to treat all individuals with the same incomes equally, whether or not they’re married. The problem is, we can have any two of those things at the same time, but .. MORE
Tax Reform
Tax Day Thoughts
April 15th is an appropriate day to consider the complexity of the tax code. Here is a piece by Chris Edwards written in October of 2001 on the case for a consumption-based tax. The key factor that causes rising income tax complexity is that the tax base is inherently difficult to measure. The Haig-Simons measure .. MORE
Energy, Environment, Resources
Economics of Hydrogen, II
Lynne Kiesling quotes an engineering analysis of hydrogen as a fuel source for automobiles. I can assure you that there is no way that spending heat energy to make hydrogen to be burned to make heat energy can be anything but a losing proposition… thermodynamically, and hence – with certainty – economically, this is a .. MORE
Cost-benefit Analysis
Sports Stadiums
The Atlantic Monthly points to this survey of the economic impact of pro sports stadiums. The verdict from many economic studies is that the marginal contribution of a sports team to a local economy is small, and perhaps negative. When a stadium is financed with public money, the benefits do not accrue to the public. .. MORE
Income Distribution
Measuring Tax Progressivity
The May issue of The Atlantic Monthly pointed to this study of tax progressivity at the state level. The authors write, Our primary finding is that most state and local tax systems take a much greater share of income from middle- and low-income families than from the wealthy. That is, most state tax systems are .. MORE
Trade Barriers
Agricultural Trade Barriers
Paul J. Gessig makes the case for dismantling U.S. agricultural subsidies. According to Organization for Economic Coordination and Development (OECD) data and calculations from Dan Griswold of the Cato Institute, completely eliminating the current web of subsidies and tariffs would provide the economic equivalent of an immediate $18 billion per-year tax cut for American consumers. .. MORE
Macroeconomics
Reconstructing Iraq
The future of Iraq’s economy is suddenly a topical issue. I wrote, The new government in Iraq should encourage the growth of a private sector, by keeping taxes and regulation on businesses to a minimum. However, for the next several years, the government itself may have to be a large part of the economy. It .. MORE
Information Goods, Intellectual Property
Comment of the Week, 04-09-03
The signal-to-noise ratio in our comments continues to be very high. See the Economics of Hydrogen thread and the imperfect markets thread, for example. But I give the comment of the week award this week to Robert Musil. A brief excerpt: Disney’s continuing “creation” of Mickey Mouse would likely end if Mickey image became common .. MORE
Information Goods, Intellectual Property
Lessig on Copyright
In 1998, Congress extended copyright terms on both new and existing works. Lawrence Lessig tried unsuccessfully to have this extension overturned by the Supreme Court. In this interview, Lessig explains the weakness of the economic argument for the copyright extension. First, even for new works, a longer copyright term confers very little incentive at the .. MORE