EconLog Archive
Uncategorized
Cost Disease and Class War
Steve (“econopundit“) Antler says that Baumol’s Cost Disease is the basis for a new form of class warfare, pitting service producers against goods producers. Much of what’s normally called “technical progress” is actually the “iron law” of service pricing in action. Postwar advances that replaced household servants with home appliances evidenced this law. We can .. MORE
International Trade
Trade Controversies
The New York Times has several recent articles on international trade. One piece discusses IBM’s evaluation of outsourcing. in recent weeks many politicians in Washington, including some in the Bush administration, have begun voicing concerns about the issue during a period when the economy is still weak and the information-technology, or I.T., sector remains mired .. MORE
Social Security
The $44 trillion shortfall
‘Jane Galt’ links to a paper that was notorious before it was released. Some news outlets reported that the measures of fiscal imbalance created by Jagadeesh Gokhale and Kent Smetters were suppressed by the Bush OMB department because they showed such a large present value shortfall: $44 trillion. Ironically, however, one of the main purposes .. MORE
Growth: Consequences
Income over Time
I share Brad DeLong’s fascination with anecdotes that illustrate historical comparisons of income. He posted one concerning the pay of a professor one hundred years ago. our professor sees himself as a reasonable and badly underpaid man. He is not asking for what he would see as the “large salar[y], commensurate with what equal ability .. MORE
Social Security
Boskin Scenario, Revisited
Will deferred taxes on IRA’s and similar savings plans save the Federal Budget, as a recent draft paper by Michael Boskin seemed to suggest? Not according to William G. Gale , Alan J. Auerbach , and Peter Orszag. Boskin’s projections of revenue from tax-deferred accounts have only a very modest effect on the long-term fiscal .. MORE
International Trade
Outsourcing
I try to make the classic case for free trade in an article about outsourcing to India. In fact, a good way to attain clarity in discussing the issue of outsourcing is to substitute the phrase “economic activity” for outsourcing: There sure has been an increase in economic activity with India lately. Aren’t you afraid .. MORE
Energy, Environment, Resources
Comment of the Week, 2003-07-18
I may have been on vacation for over a week, but the site was active with comments. On the limits-to-growth thread, Harold wrote, Less land is required for agriculture every year. Even less would be if so many governments would not pay their farmers to farm marginal land. This strikes me as an important point. .. MORE
International Trade
Come Back July 20
I will be on vacation until July 17, and I presume it will take me a few days to get back to blogging. Meanwhile, TechCentralStation has a couple of articles of mine that they may run while I am away. One concerns the issue of outsourcing to India as an example of free trade. The .. MORE
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