Over at Learn Liberty, I take on the recent kerfuffle over intergenerational mobility. Some scholars and journalists are saying that the U.S. has a major "problem" with mobility because its "churn" numbers (the rate at which children of rich parents fall into lower income deciles and children of poor parents rise into higher ones) are … Continue reading Intergenerational Mobility Isn’t Always a Good Thing
My latest for Learn Liberty looks at proposals for starting an equalization program to redistribute from rich to poor states in the U.S. and finds them wanting. Due to the audience for that blog, I kept that post nontechnical and brief. I'll reproduce part of it here and then elaborate on some of the complexities … Continue reading Federalism Isn’t Unfair
"What if we can't make government smaller?" the Niskanen Center's Will Wilkinson asks. He says that the evidence, particularly Wagner's Law, shows that government spending is impervious to political assault, and libertarians should make their peace with big government. Instead, libertarians should focus on reforming regulations to foster competition and the market process. I have … Continue reading Can Government Spending Be Cut After All?
Are you an economics graduate student casting about for dissertation topics? I have a few ideas for you. As part of the rewriting of Freedom in the 50 States, I've been reviewing the economic literature on how various public policies affect consumer and producer surplus, deadweight loss, and so on. We use an estimate of … Continue reading Research Questions for Economics Graduate Students
On September 27, Catalonia, an "autonomous community" of Spain, votes in a regional election that will likely determine whether the region declares independence from Spain. The Economist and other global news outlets have generally not taken the movement very seriously, which is a grave mistake. According to a series of new polls, the independentists are … Continue reading Why Catalan Independence Might Be Good for the World
In the U.S., states have full authority over local government. Some states strictly centralize power and leave local government little to do. For instance, Hawaii has a single school district for the entire state, so that different localities cannot choose to spend different amounts on the government schools. Michigan effectively has a similar system, because … Continue reading How Decentralized Is Your State?
At e3ne.org, I have posted some reflections on my last discussion with the Ethics & Economics Challenge students, on the topic of private property rights. The work of Acemoglu, Johnson, and Robinson on how property rights support high levels of development plays a prominent role. Here's a scatter plot from their famous 2001 paper: Economies … Continue reading Property Rights: Necessary but Not Sufficient for Prosperity
This week's post at e3ne.org is about the miracle of the price system: Natural disasters harm people’s standard of living by destroying resources, but in a free marketplace, rising prices and profits in scarce goods give both buyers and sellers an incentive to heal the economic wound. Drawn by the possibility of making good profits … Continue reading The Miracle of the Price System
The theory of comparative advantage shows how voluntary exchange benefits both parties and encourages specialization. You don't need to possess an absolute advantage in any particular productive activity to enjoy a comparative advantage. Your comparative advantage is whatever you can do relatively cheaply compared to everything else and everyone else. For instance, Haiti still trades … Continue reading Do You Really Understand Comparative Advantage?
The economic thinking behind "buy local" campaigns is typically terrible. One such example is the claim that a dollar "circulates more" when you spend it locally. The rate of circulation of a dollar doesn't create any wealth. Try it out: circulate a dollar among a group of friends and feel your standard of living stay … Continue reading What “Buy Local” Campaigns Get Wrong
Critics of the President’s State of the Union address noted it did little to promote bipartisanship. Yet, it has already stimulated bipartisan agreement on one of the President’s education proposals. In the State of the Union, President Obama proposed free community college: “I am sending this Congress a bold new plan to lower the cost … Continue reading The SOTU and Bipartisanship
The Hagedorn, Manovskii, and Mitman working paper on the effect of unemployment insurance (UI) on employment has been getting a lot of press lately. In brief, they find that the end of the federal unemployment insurance extension accounts for about 1.8 million new jobs in 2014. Mike Konczal does a useful deep dive on the … Continue reading If Revisionist UI Models Are Wrong, So Are Revisionist Minimum Wage Models
Dragnet's Joe Friday may have never uttered those words, but he would be impressed nonetheless by the facts on crime. There was a fascinating piece by Erik Eckholm in yesterday’s New York Times on the dramatic reductions in crime over the past several decades. Overall, crime peaked in 1991 and has fallen steadily since then. … Continue reading Just the Facts Ma’am
At the meeting of the American Economic Association in Boston last weekend, there were protests organized by a group calling itself "Kick It Over," who, as the Washington Post styled it, were "battling for the soul of economics." Their protest included heckling and disruptions of the talks given by Gregory Mankiw, Larry Summers, and Carmen Reinhart. … Continue reading Of Plutocrats and Arguments
There is great buzz over today’s jobs report. The economy added 321,000 jobs in November. The New York Times: “After more than five years of elusive gains, ordinary Americans may finally be about to see the benefits of the recovery where it really counts: in their pocketbooks and wallets. … For the year as a … Continue reading Jobs, Jobs, Jobs
President Obama is preparing to issue an executive order on immigration—the executive action that has been promised for some time. As one might guess, the NYT editorial board is pleased. Some supporters of liberalized immigration (including a path to citizenship) are concerned over the damage that Obama’s actions will do to the rule of law. As … Continue reading Executive Action, Congressional Inaction
Unless the polls are systematically biased or there is a late-breaking surge in support for "Yes," the "No" campaign looks set to squeak by with a narrow victory in the Scottish independence referendum. On the betting markets, a "Yes" vote has plunged below an implied probability of 20%. What has this decline in the prospects … Continue reading On Eve of Scottish Vote, Another Look at Capital Markets
The Oxford Review of Economic Policy has a brand-new special issue on the economics of independence. The entire issue seems to be open-access right now, so check it out. (HT: Doug Irwin) In Scottish news, polls have turned a bit against independence, and betting markets now price a "Yes" at around 22-24%. I will take … Continue reading More on Economics of Secession
Michael Salla, Robert O’Harrow Jr, and Steven Rich (The Washington Post) have written an interesting series on asset forfeiture (see the teaser “Civil asset forfeitures more than double under Obama,” by Christopher Ingraham on Wonkblog). The basic presumption of asset forfeiture is simple: you are guilty until proven innocent. If you are the target of … Continue reading The Presumption of Guilt and the Glories of “Stop and Seize”
What can we learn from capital markets about the likely consequences of Scottish independence? A trio of recent polls has shown the "Yes" side to have pulled roughly even with "No." With momentum on their side, it's not unthinkable at all that "Yes" will pull it out, resulting in the first secession from a Western … Continue reading Scottish Independence and the Markets
Marc blogged the other day about the New York Times editorial board's endorsement of repealing federal marijuana prohibition, just months after having rejected that step. Now, this isn't quite the same as endorsing marijuana legalization - just returning it to the states - but it is a significant step nonetheless. Still, they are well behind … Continue reading Marijuana: The Political Class vs. Everybody Else
Governments behaving badly... We've all seen it. Get a bunch of libertarians from around the world together, and each seems to take perverse pride in proving that her own government is the worst of all. How can we quantify governments' badness? On the economic side, we might look to the Economic Freedom of the World … Continue reading A New Measure of Political Risk: The DOG Factor
Many people are concerned about income and wealth inequality. I am not concerned about economic inequality as such; I care about absolute poverty (how many people live in misery because of wretched physical conditions), and I care about a broad distribution of opportunity (everyone's having a "fair shot" at economic success), but I don't see … Continue reading Putting Economic Inequality in Perspective
The New York Times had a wonderful piece earlier this week on the disposal of war surplus to state and local law enforcement agencies under the Department of Defense Excess Property Program (1033 Program). Since 2006, the Department of Defense has sold or given away (at minimum): 432 MRAPs (mine-resistant ambush-protected vehicles) 435 other armored … Continue reading The Spoils of War [Surplus]
Early Friday morning, the House passed an important amendment to the appropriations bill for Commerce, Science, Justice and Related Agencies. As Billy House reports (National Journal): Using states' rights as a bipartisan rallying cry, the House voted 219 to 189 early Friday to prohibit the Justice Department from using federal funds to conduct raids or … Continue reading Finally! Some Bipartisan Support for the 10th Amendment
Graduation is upon us. Many of my students are graduating with higher student loan debt than they would have imagined and limited job prospects. A few weeks back when I discussed future plans with several graduating seniors, there was a sense of dismay and a sense that the odds were against them given the poor … Continue reading The Other 99 Percent
The London School of Economics has released a new report entitled Ending the Drug Wars and it is available here. The report is collection of papers that might be of some help for those hoping to think through the issues. The forward takes the form of a statement signed by a long list of notables … Continue reading The War on Drugs
"Why did the autonomous city-state die?" asks political-economic historian David Stasavage in a new American Political Science Review article. He finds that new autonomous city-states enjoyed higher population growth rates than nonautonomous city-states, up to 108 years. After that point, their population growth was lower than that of nonautonomous city-states. His argument is that the … Continue reading More Evidence on Law of Political Entropy
If you knew that a person believed that corporations primarily like to outsource production to poor countries to get lower labor costs, what would you predict about that person's view on whether the minimum wage has significant disemployment effects? Just from my observation of the world, I would predict that people believing that low labor … Continue reading A Fallacy of Mood Affiliation
Some of these developing countries are both huge and ethnically and regionally diverse, India and Indonesia most notably. One might think that these governments would have even more reason to decentralize than would the governments of comparatively homogeneous Western democracies. Therefore, the relative lack of decentralization in developing countries remains a puzzle.
Source: Barry Eichengreen, "The Origins and Nature of the Great Slump Revisited" So U.S. real wages rose more or less throughout the Great Depression. During the Hoover years, you can write this phenomenon off as sticky wages plus the Federal Reserve's disastrous policy of deflation, plus some of Hoover's jawboning of executives to get them … Continue reading This One Figure Shows How the New Deal Made the Great Depression Worse (updated)
This week the Congressional Budget Office released The Budget and Economic Outlook: 2014-2024. From the press coverage, one would have guessed the report was either entitled Obamacare: the Job Killer that is Almost as Bad as Benghazi or Obamacare: Ending the “Job Lock” and Opening the Door to Leisure. In reality, the impact of the … Continue reading Once Again, We Chase the Shiny Objects
In my last two posts, I showed that the U.S. has a large social welfare state by cross-national standards, maybe even the second-largest in the OECD. However, the U.S. welfare state is much less redistributive from rich to poor than most other welfare states. In this post, I tackle spending on infrastructure ("gross fixed capital … Continue reading U.S. Infrastructure and Subsidy Spending: Not What You Might Expect
In my last post, I said "total net social spending" included net public spending and mandatory private social spending. In fact, it includes voluntary private social expenditures as well. The U.S. has by far the highest voluntary social expenditures in the OECD, so if you subtract those out, the U.S. net public and mandatory private … Continue reading More on OECD Welfare States
The early figures on the Affordable Care Act are raising some concerns for those who believed that it would address the problem of the uninsured. Christopher Weaver and Anna Wilde Matthews (Wall Street Journal) report: Early signals suggest the majority of the 2.2 million people who sought to enroll in private insurance through new marketplaces … Continue reading Making Sense of the Numbers
The LSE's EUROPP blog has published my critique of Dani Rodrik's The Globalization Paradox. It's an expanded version of this blog post on Pileus from a few days ago.
Dani Rodrik, the political scientist's favorite economist, argues for a limit to globalization in his recent book Globalization's Paradox. The LSE EUROPP blog has a nice little summary of the book's argument: Markets require a wide range of non-market institutions (of regulation, stabilisation, and legitimation) in order to work well and remain socially sustainable. These … Continue reading Can Globalization Go Too Far?
Ezra Klein (Wonkblog) has a brief interview with Georgetown’s David Super on how poorly programs for the poor have functioned (and how good HealthCare.gov appears by comparison). The alternatives discussed include outsourcing to private contractors (bad) and implicitly providing more resources (good).One alternative that is not discussed: providing benefits through a fractional negative income tax … Continue reading Programs for the Poor are Poor Programs
As we all know, Colorado’s legalization of recreational marijuana went into effect the other day, and Washington will soon follow. I would spend some time discussing the merits of legalization, but I largely agree with Grover’s post on Green Wednesday. As one might expect, it didn’t take long for the op-eds to offer their opposition … Continue reading Legalization and the Issue of Substitution
It appears that President Obama’s address on inequality was the beginning of a larger move to the left and an embrace of economic populism. As Edward-Issac Dovere (Politico) explains: [Obama is] connecting to progressive populism with an aggressive, spending-oriented, activist government approach to the economy personified by Elizabeth Warren and Bill de Blasio. Obama’s already … Continue reading Left Turn (Reducing Inequality, continued)