EconLog Archive
Social Security
Comments on Science and Social Security
Many interesting comments on my suggestion that science could bail out social security. First, Andrew writes, Social Security pays retirees a benefit based on their pre-retirement wages, targeting a ‘replacement rate’ rather than a real benefit level. If GDP grows faster so do their wages, all other things equal. Higher wage growth raises payroll tax .. MORE
Growth: Consequences
Science vs. Social Security
In an essay called Will Science Save Social Security?, I write, Overall, if events play out over the next quarter century as the technology optimists predict, then GDP will be so astronomical that the costs of Social Security and Medicare will be dwarfed. In such a world we may face difficult philosophical issues, but maintaining .. MORE
Regulation and Subsidies
Wal-Mart controversy
Wal-Mart is controversial. On the issue of labor costs, Steve Pearlstein writes, I’m talking about a minimum wage that would put a family with two full-time workers above the poverty line in high-cost metropolitan areas — and no doubt put upward pressure on wages at places like Wal-Mart. Or how about requiring employers like Wal-Mart .. MORE
Social Security
Aging Europe
The aging of Europe is not a problem, according to Dominic Standish. On present trends of rising productivity, employing the same number of people in 2040 as now would produce over double the amount of wealth we currently have to provide for the pensions and care of the over 60s. However, others disagree. William G. .. MORE
Austrian Economics
Hayekians vs. Stiglitzians
I contrast Hayek and Stiglitz on the importance of imperfect information. Hayek would have the government tolerate messy competition. His point is that with the optimal outcome unknown, government resolution of issues shuts off the learning process that market competition provides. Stiglitz sees the messiness in real-world economies, and he claims to have the right .. MORE
Growth: Consequences
Electric Liberation
A paper by Jeremy Greenwood, Ananth Seshadri, and Mehmet Yorukoglu examines the role of modern appliances in liberating women from housework. To understand the impact of the household revolution, try to imagine the tyranny of household chores at the turn of the last century. In 1890 only 24 percent of houses had running water, none .. MORE
Supply-side Economics
Over-worked or Over-taxed?
Americans work more than Europeans. Do we work too much, or does Europe tax work too much? Edward Prescott argues the latter. Americans on a per person aged 15-64 basis work in the market sector 50 percent more than do the French. This was not always the case. In the early 1970s, Americans allocated less .. MORE
Economics of Health Care
Health Care Spending, Continued
Alex Tabarrok finds evidence that supports more spending on health care. It has been estimated, for example, that increases in life expectancy from reductions in mortality due to cardiovascular disease over 1970-1990 has been worth over $30 trillion dollars – yes, 30 trillion dollars (for this research see: book, papers, summary). A conservative estimate is .. MORE
Economic Growth
Economists Too Linear?
In an essay on nonlinear thinking, I wonder if economists spend too much time studying calculus. economists know that many of the processes that are important in our field, such as compound interest and economic growth, are nonlinear. But the economics curriculum in graduate school is focused on training students to make linear approximations. Studying .. MORE
Regulation and Subsidies
Japanese Banks
Joe Peek and Eric S. Rosengren explain how regulatory incentives contribute to the persistent mis-allocation of capital by Japanese banks. Bank regulation and supervision policies in Japan provide banks that have significant nonperforming loans and impaired capital little incentive to be strict with troubled borrowers. In fact, it is in the self-interest of banks to .. MORE
Economics of Health Care
Health Care Spending
Business Week’s Howard Gleckman successfully distinguishes between health care cost and health care spending. Medical technology is no different than consumer electronics. When DVD players cost $500, few people bought them, so total spending on the devices was insignificant. Now that they cost $50, everyone is buying. As unit costs fall, total spending rises. Same .. MORE
International Trade
Our Loss, China’s Non-gain
Joseph Carson of Alliance Capital Management decided to investigate how many manufacturing jobs China has gained at the expense of other countries. The result was somewhat surprising. According to our analysis, between 1995 and 2002 roughly 22 million jobs were lost globally, a decline of 11%. Yet over the same period, global industrial production jumped .. MORE
Public Choice Theory
Online Trade Barriers
Michael Cox writes about trade barriers that affect Internet commerce. Georgia requires buyers to purchase contact lenses in person, ostensibly to protect their health but in effect as a boost to in-state eyewear retailers. Oklahoma won’t allow its citizens to be buried in a casket bought out-of-state. South Carolina inhibits Internet mortgage brokers by requiring .. MORE
Finance: stocks, options, etc.
Stock Options as Tax Deferral
Kevin Hassett thinks that stock options are used because they are a form of tax-deferred compensation. It is sensible that the tax code encourages equity compensation. Shareholders benefit when management has a significant stake in the appreciation of a firm’s stock. But the tax code wrongly encourages reliance on options and only options. While options .. MORE
International Macroeconomics
U.S. as Debtor
Ken Rogoff, former chief economist of the International Monetary Fund, finds it odd that the United States is a borrower rather than a lender in international capital markets. Isn’t it even stranger that this borrowing includes sizable chunks from countries such as India and China, many of whose 2.3 billion people live on less than .. MORE
International Trade
Economics vs. Populism
In this essay, I argue that economists face an uphill battle in dealing with populist beliefs about international trade, entitlements, and consumption versus saving. In my view, international trade is only one aspect of the overall phenomenon of Progress and Displacement. Technological change is rapid and inevitable. It means that the employment base is constantly .. MORE
Economics of Education
Comment of the Week, 10-15-03
A lot of interesting comments on school vouchers. For example, Peter Gallagher writes, What beneficiaries want may NOT be a better education: and even if they do, they may not be very discriminating in deciding what ‘better’ looks like when it comes to education. I agree that families may make choices regarding education that are .. MORE
Macroeconomics
Lessons of the Great Depression
In this essay, I summarize what I have been reading about the Great Depression and its implications for today. The Depression certainly was an era of displacement. In fact I have borrowed the very term “displacement” from the late economic historian Charles Kindleberger, author of Manias, Panics, and Crashes and one of the eminent economists .. MORE
Economics of Health Care
Kotlikoff on Social Security
Steve Verdon points to a speech by Laurence Kotlikoff with a plan for saving Social Security and Medicare. The Personal Security System 1. The accrual of additional Social Security retirement (OAI) benefits is eliminated. 2. Current retirees and current workers receive their accrued Social Security retirement benefits. 3. The OAI payroll tax is eliminated and .. MORE
Economics of Education
Adverse Results for School Vouchers
Chang-Tai Hsieh and Miguel Urguiola find evidence that in Chile school vouchers caused schools to compete for the best students rather than compete to deliver better education. Although statistically insignificant, the point estimates suggest that, if anything, test scores experienced a relative decline in communities where the private sector made greater inroads. The results of .. MORE
Austrian Economics
Doubts about Planning
Jonathan Rauch argues that the absence of a plan for post-war Iraq is a feature, not a bug. In truth, the planning mind-set is exactly wrong for Iraq. Anything might have happened after the war: a flood of refugees, a cholera pandemic, a civil war—or, for that matter, the discovery of an advanced nuclear program. .. MORE