EconLog Archive
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
Trade Barriers
Comment of the Week, 2003-06-12
On the subject of globalization, ‘achilles’ writes There is a burgeoning movement that seeks to blame rising unemployment in the United States on the “export” of jobs to cheaper lands overseas. That is version 2.0 of the old mindset that led people to blame unemployment on the purchases of cheaper foreign goods by consumers. Imposing .. MORE
Finance: stocks, options, etc.
Social Security Privatization
Peter Ferrara claims that Social Security could be gradually privatized and the future deficit eliminated without reducing benefits. This is a free lunch of staggering dimensions. Among other things, it relies on the following assumption. The long-term real rate of return on corporate stocks is around 7.5 percent to 8.0 percent, and on corporate bonds .. MORE
International Macroeconomics
Germany
The German economy is in bad shape. Brad DeLong points to a paper by Adam S. Posen that assesses Germany’s potential to go into a long slump like Japan. For an advanced economy to perpetually stagnate, its political economy must have the four elements of Japan’s negative economic syndrome: · incomplete financial liberalization; · macroeconomic .. MORE
Trade Barriers
Protesting Globalization
Given her credentials as a conservative icon, Phyllis Schlafly is one of the stranger bedfellows of the anti-globo movement. Here is her protectionist proposal: Congress should reject all attempts to extend the current number of H-1B visas and allow the limit to revert to 65,000; require employers to show a good-faith effort to hire U.S. .. MORE
Energy, Environment, Resources
Oil Econ 101
I once wrote an essay called Oil Econ 101, in which I argued that while we can lower our consumption of oil, that would not reduce our dependence on Saudi oil. Ram of postpolitics.com suggested I might want to comment on this interview with Robert Baer, a former CIA analyst who is concerned about what .. MORE
Economics of Health Care
Health Care Madness
Why is health care regarded as something that the market cannot provide? In this essay, I argue that the problem is mental illness. Anyone who believes that we can afford collectively what we cannot afford individually is delusional… Suppose that a group of friends is getting ready to go out for dinner. At first, they .. MORE
Income Distribution
Comment of the Week, 2003-06-04
This week, there were a number of interesting comments on the topic of measuring income inequality and income mobility. In response to a question I raised about whether a measure of wealth should include expected future earnings, D-squared wrote, Absolutely not, for reasons set out by John Stuart Mill. Wealth is ownership of real and .. MORE
Fiscal Policy
The Challenge to Cut Spending
Recently, Kevin Drum issued this challenge to those who claim to prefer lower government spending. Let’s hear what you want to cut. And remember, for bonus points you have to include some programs that you yourself benefit from. I was reminded of this when I got an email about this press release. Senators Paul Sarbanes .. MORE
Economics of Education
Academic Salaries
Stephen Karlson points to this story about resentment among humanities faculty of higher salaries in professional schools. While many academics have accepted the inevitability of the differences, others believe that salaries in professional schools are out of control. Critics worry that not only money, but attention and a sense of importance, is being diverted from .. MORE
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