EconLog Archive
Economic Growth
Internet Bubble and Growth
Brad DeLong argues that the failure of many Internet-based enterprises does not imply a social loss. profits are not the same thing as social value…Profit is primarily a signal about the size of a set of enterprises: If too small, then customers are desperate for your products, prices are high, and profits abundant; if too .. MORE
Behavioral Economics
Surveys Vs. Revealed Preference, II
In a previous post, I mentioned Richard Layard’s critique of economics, based on survey research. Now, I have written an extended response to Layard. An excerpt: [Layard] is saying that you cannot trust people’s behavior as an indicator of their preferences, because their tastes may be socially constructed. However, if tastes are socially constructed, then .. MORE
Efficient Markets Hypothesis
Comment of the Week, 2003-04-02
On the issue of index investing, Yasser Mawji wrote Surely there’s a problem of aggregation that’s inherent to index fund investing. If most investors are blindly purchasing index funds without any regard for valuation, then those stocks which constitute the index will become overvalued. Back in 1999-2000, a stock would rocket 20% or more on .. MORE
Supply-side Economics
The Budget Debate, VIII
Be careful what you wish for. Some supply-siders have asked for “dynamic scoring” of tax cuts, to take into account supply-side effects. The Congressional Budget Office has done this analysis. CBO’s analysis suggests the proposals, on net, would probably increase labor supply but decrease investment and the stock of capital. Largely because of those two .. MORE
Energy, Environment, Resources
Economics of Hydrogen
Lynne Kiesling has written a five-part article on hydrogen fuel cells. She looks at technical issues as well as economic issues, and each part in the series offers insightful analysis. The last installment questions the wisdom of the Bush Administration’s proposed subsidy for hydrogen fuel development. She writes, Governments (and corporate bureaucracies, for that matter) .. MORE
Economic Education
Economics and its Enemies
William Coleman, author of Economics and its Enemies, gave a lecture on the history of anti-economics. He sees two main sources of hostility to economics. First, The paradoxical truth is that nothing is more unpopular than the pursuit of the public interest. For every member of the public is a vested interest who wants preference .. MORE
Efficient Markets Hypothesis
Can you Beat the Market?
Financial columnist James Glassman touts a study by Joshua D. Coval, David A. Hirshleifer, and Tyler G. Shumway that shows that some investors were able to beat the market consistently. This conflicts with the efficient markets hypothesis. The authors write, A rolling-forward strategy of going long firms purchased by previously successful investors and shorting firms .. MORE
Fiscal Policy
War Economics
We are starting to see articles on the economics of the Iraq war. Some are described in this article by Virginia Postrel and others are described in this post by ‘Jane Galt.‘ Postrel correctly points out that old-fashioned Keynesian theory would peg the national cost of the war as being less than the Budget impact .. MORE
Economics of Education
Comments of the Week, 2003-03-26
The teacher pay issue drew the most interesting comments. Someone who left only a first name wrote a voucher system would make the educationally well-off better off, would make the poorly-off worse off, would Balkanize society, and would create an educational under-class. To which Patrick Sullivan replied, All of the above problems exist in the .. MORE
Behavioral Economics
Organ Transplant Market?
Irwin M. Stelzer argues that the shortage of organ donors is due to price controls–in particular, the fact that organ donors do not get paid. if we can begin to think about this issue in a clear-headed way, we might consider the advantages of establishing a genuine, ongoing market in organs. If someone in need .. MORE
Economics of Education
Teacher Pay
Peter Temin argues that teacher pay is too low. He says that in the past, limitied opportunities for women meant that schools were supplied with a pool of high-quality teachers willing to work for low pay. Today, however, talented women have other opportunities that pay better than teaching. He concludes, The implication of this analysis .. MORE
Uncategorized
About EconLog / Econlib
EconLog, edited by Arnold Kling and Bryan Caplan, is an economics-oriented weblog or “blog” associated with the Library of Economics and Liberty (Econlib). EconLog provides up-to-date commentary and links on recent topical matters in economics, with new articles posted three to six times each week. Reader comments are welcomed. EconLog and Econlib provide helpful resources .. MORE
Social Security
The Budget Debate, VII
I want to follow up on the attempt by the Center for Budget and Policy Priorities to compare the future bulge in entitlement spending to the Bush tax cut–see this thread. The CBPP was able to shrink the gap between entitlement spending and tax revenues in the middle of the century from something in the .. MORE
Social Security
The Budget Debate, VI
[Update: Bernard Yomtov convinced me that the CBPP did not make the error I suggested below. Instead, the way that they accomplished the swindle is explained in this post.] As a share of GDP, increases in future Medicare and Social Security benefits are much larger than the tax cuts enacted by the Bush Administration. The .. MORE
Behavioral Economics
Peak Load Pricing and Mental Transaction Costs
Clay Shirky used (coined?) the term mental transaction costs to describe the problem with using micropayments (small payments to download articles or music). I believe that economists tend to over-rate the value of peak-load pricing systems, because they fail to take into account mental transactions costs. As Andrew Odlyzko has pointed out, consumers prefer flat-rate .. MORE
Public Choice Theory
Comments of the Week, 2003-03-19
There were several interesting comments under the thread of Public Transit and Public Choice. Bernard Yomtov wrote, Liberals do believe the market fails sometimes. This is hardly a radical position. It is almost universally accepted except among market-worshippers who seem unable to believe that anything that happens in unregulated markets could possibly be bad. So .. MORE
Behavioral Economics
Surveys Vs. Revealed Preference
Richard Layard uses survey research and some fancy philosophical footwork to argue against conventional wisdom in economics and in favor of a nanny state. Some quotes from the series of three lectures: People in the West have got no happier in the last 50 years. They have become much richer, they work much less, they .. MORE
Economic Education
Protesting Economic Education
In this essay, I cited Steven Pinker on the value of teaching economics, but I concluded with doubts as to whether “economic idiotarianism” could be eradicated entirely with education. Consider this story about the movement for alternative economics, including a student petition protesting Harvard’s classic “Ec 10” introductory course. The story also mentions a forthcoming .. MORE
Tax Reform
Impact of Dividend Tax Reform
The users of housing rehabilitation tax credits believe that the Bush Administration proposal to eliminate double taxation of dividends will hurt their industry. Richard Moe writes, By allowing shareholders to receive tax-free dividends only on corporate profits that are fully taxed, the Bush plan could force companies to make a choice: Take the tax credit, .. MORE
Finance: stocks, options, etc.
Employees as Owners
Charles Duhigg, a student at Harvard’s Business School, reviews some disadvantages of employee stock ownership. A 2000 study by economists at the University of South Alabama found that when the amount of stock held in an ESOP increases, ”management will likely behave in a risk-reducing manner and decrease its commitment to innovation.” More specifically, they’ll .. MORE
Social Security
The Deficit Argument, V
David Warsh gives one of the more sober overviews of the debate over tax cuts, the deficit, and Social Security. There are two basic issues in US tax policy — the question of the size of government and the health insurance/pension problem. …During the 1990s, the federal share of GDP climbed steadily from its thirty-year .. MORE