Interesting blog bits

1. The IEA blog covers a new IEA publication on Balancing the economy: The hand of government or the invisible hand?
   

   Despite its considerable strengths, the UK economy is seen as having a number of problems, in particular productivity which lags behind some competitors, low levels of investment and persistent regional disparities. Following the referendum decision to leave the EU, there is wide interest in developing a new industrial strategy. The UK government's proposals are unlikely to help the situation.

2. Jenesa Jeram suggests This Christmas, reject sugar taxes and embrace the joy of food

   We don't need a sugar tax to protect us from Christmas excesses.

3. Andrew Bernard, J. Bradford Jensen, Stephen Redding, Peter Schott on Global firms: Insights for trade and trade policy
   

   Events of the last year have raised questions about the future growth of international trade. This column examines the role played by ‘global firms’ that both import and export, and are likely to be part of multinationals, in the international economy. In a world of interdependent firm decisions, small reductions in tariffs or trade costs can have magnified effects on trade flows, as they induce firms to serve more markets with more products at greater volumes, and also to source greater volumes of intermediate inputs from more countries. At the same time, policies to restrict imports can end up hurting producers for whom both importing and exporting are a central pillar of their overall business strategy.

4. Scott Sumner asks Did monetary offset cause the Great Recession?

   In the past, it has been argued by Summer that tight money caused the Great Recession. But what caused the tight money?

5. Ed Dolan asks What Is the Nairu and Why Does it Matter?

   What happens in terms of US monetary policy will depend, in large part, on what may be the wonkiest number in all of economics—the Nairu. Nairu stands for Non-Accelerating Inflation Rate of Unemployment—such a mouthful that no one ever says it out loud. The basic idea behind the Nairu is simple. It is widely accepted that as the economy moves through the business cycle from recession to expansion to boom, shortages develop in labor and product markets that put upward pressure on prices and wages. The Nairu is supposed to capture the sweet spot—the lowest level to which the unemployment rate can safely fall before inflation starts to accelerate.

6. Scott Burns on Cashing Out of Poverty

   Financial innovations like mobile money have gained fame for transforming commerce in the developing world. But they’re also helping the poor escape poverty.

7. Timothy Taylor offers An Appetizer Buffet of Economic Research Highlights

   The sort of readers who find Taylor's blog interesting might also want to check out the "Research Highlights" blog being run by Tim Hyde for the American Economic Association. Once or twice each week, the blog features a paper chosen from this set of seven journals and offers up a short, readable, nontechnical overview. Here are some examples from the last few weeks.

Interesting blog bits

1. Matt Ridley asks Why is the left reviving apartheid?
   

   Identity politics is taking us backwards to division and prejudice.

2. Tom G. Palmer on A New, Old Challenge: Global Anti-Libertarianism

   A spectre is haunting the world: the spectre of radical anti-libertarian movements, each grappling with the others like scorpions in a bottle and all competing to see which can dismantle the institutions of liberty the fastest. Some are ensconced in the universities and other elite centers, and some draw their strength from populist anger. The leftist and the rightist versions of the common anti-libertarian cause are, moreover, interconnected, with each fueling the other. All explicitly reject individual liberty, the rule of law, limited government, and freedom of exchange, and they promote instead radical, albeit aggressively opposed, forms of identity politics and authoritarianism. They are dangerous and should not be underestimated.

3. Russ Roberts on The Human Side of Trade

   Free trade is on the run. The president-elect of the United States calls the free market the “dumb market.” He wants to renegotiate past trade deals. The death spiral of manufacturing jobs makes people wonder if trade with China was really such a good idea. Some economists claim to have found evidence that increased trade with China causes an increase in suicide. It is tempting to argue then, that free trade, while good for the economy, is not so good for human beings.

4. Timothy Taylor on the Economics of Gentrification

   "Gentrification" arises when a neighborhood in a city that has in the past offered relatively low-cost housing to relatively low-income people experiences the entry of a wave of higher-income buyers. The new entrants often buy the older housing stock and rebuild or refurbish it, pushing up housing prices in the rest of the neighborhood. On one side, this process offers lower-income people who own their homes a chance for a financial windfall, and can also offer benefits to the neighborhood like improved local job opportunities, shopping options, and public safety. On the other side, gentrification also disrupts existing neighborhoods and can displace low-income residents, some of whom may have been living in the neighborhood for a long time.

5. Michael Reddell on Brexit, Trump and all that

   Last week, The Treasury hosted a guest lecture featuring two visiting academics under the heading Brexit, Trump & Economics: Where did we go wrong. When the invitation went out, I was rather puzzled by the title? Who was this “we” that apparently “got things wrong”?

6. Tyler Cowen on Prizes are flourishing.

   Stumped for solutions to hundreds of industrial and technical problems, businesses and governments alike are turning the search for innovative ideas into prize-worthy puzzles that capitalize on the ingenuity of the crowd.

Interesting blog bits

1. Lynne Kiesling on Pharmaceuticals and multi-layered government-granted monopoly
   

   Kiesling looks at Mylan’s price increase of the EpiPen in late August that has caused consternation and a lot of debate about the reasons why Mylan has been able to increase the EpiPen price so dramatically above its production cost.

2. Timothy Taylor on China's Insufficient Investment in Education

   Can China maintain its rapid pace of economic growth in the decades ahead? The argument discussed here suggests that one substantial hindrance may be China's education system is not keeping up.

3. Tim Worstall on How to make public policy these days

   Ride hobby horse, spout piffle, invent targets then shout loudly. Sounds about right.

4. Susannah Kahtan on Re-dressing old wounds: The unintended consequences of NHS prescription regulations
   

   The current system for exempting certain patients from paying for their NHS prescriptions is discriminatory, unjust and unfit for purpose. The high cost of prescription medication deters many patients from engaging consistently with treatment, increasing their risk of adverse outcomes such as strokes and heart attacks.

5. Bryan Caplan explans Why I Don't Vote: The Honest Truth

   My honest answer begins with extreme disgust. When I look at voters, I see human beings at their hysterical, innumerate worst. When I look at politicians, I see mendacious, callous bullies. Yes, some hysterical, innumerate people are more hysterical and innumerate than others. Yes, some mendacious, callous bullies are more mendacious, callous, and bully-like than others. But even a bare hint of any of these traits appalls me. When someone gloats, "Politifact says Trump is pants-on-fire lying 18% of the time, versus just 2% for Hillary," I don't want to cheer Hillary. I want to retreat into my Bubble, where people dutifully speak the truth or stay silent.

6. Tyler Cowen tells us Facts about Jane Jacobs

   Just 8, but I'm going to guess you don't know any of them

7. Matt Ridley on Invasion of the alien species

   In July, the New Zealand government announced its intention to eradicate all rats, stoats and possums from the entire country by 2050 to save native birds such as the kiwi. It’s an ambitious plan, perhaps impossible to pull off with the methods available today, but it’s a stark reminder that invasive alien species today constitute perhaps the greatest extinction threat to animal populations world-wide.

8. Steven Kaplan on (God Knows) Wall Street Isn’t Perfect, But It Has Helped Make the World A Lot Better Off

   There is a large academic literature on the effect of financial markets. A great deal of that research finds that countries with thriving financial sectors experience greater growth in GDP. Countries that restrict their financial sectors grow less.

Interesting blog bits

1. Tom Clougherty on Cato Journal: Revisiting Three Intellectual Pillars of Monetary Wisdom.

   It is argued that conventional thinking on monetary policy rests on three faulty assumptions.

2. Timothy Taylor on the Allocation of Scarce Elevators

   One of the great economic problems of out times!

3. Robert Grundke and Christoph Moser on Evidence of hidden protectionism in the US in the Great Recession

   When the Great Recession hit the world economy, fears of protectionism led to close monitoring of non-tariff barriers to trade. The increase in US import protection appeared rather modest for all those trade policy measures that do not need to be notified to the WTO. However, stricter enforcement of given product standards does not require any notification. This column argues that the US has increasingly relied on this less transparent and trade-reducing policy instrument during the recent economic crisis.

4. Ed Dolan asks What Does the Unemployment Rate Measure? Labor Market Slack or the Social Stress of Joblessness? Why Does it Matter?
   

   Written in a US context but the issues raised apply to other countries as well.

5. Eric Crampton on Tobacco excise: running the numbers
   

   He looks at the likely effects of the tobacco tax hikes.

6. Branko Milanovic on Why “Make America Denmark Again” will not happen
   

   Milanovic looks at the seemly counter-intuitive idea that the rise of US inequality coincides with the decline of large companies that used to employ hundreds of thousands or even millions of workers and by their substitution by much smaller companies.

7. Chad P. Bown and Meredith Crowley on Today’s trade policy and trade research
   

   Free trade is under fire in nations across the world. This column surveys evidence on the importance of trade barriers. There is substantial variation in applied trade policy across countries, industries, and their trading partners, both cross-sectionally and over time. The variation found in these newly available and increasingly detailed databases offer researchers the opportunity to analyse and better understand firm-level trade, aggregate trade, and the shock to the world economy precipitated by China’s phenomenal export growth.

8. John Taylor on Rules Are Green and Discretion Is Red in the Monetary Game

   Taylor discusses a call for reform of the international monetary system.

9. Tim Worstall on Organic food is worse for the environment

   Organic food is not better than other produce in Britain because food standards are already so high.

10. Winton Bates asks What is the "bourgeois deal" and why should you care?

    The basic idea being that it is ethical and rhetorical change that has enabled most humans today to be much better off than their forebears. The bourgeois deal refers to societal acceptance of innovations that compete with and displace old ways of doing things in exchange for widespread improvements in living standards.

Interesting blog bits

Some weekend reading:

1. Chris Dillow on Bonuses and productivity
   

   Big bonuses for bosses can have adverse effects upon productivity

2. Jérémie Cohen-Setton comments on The critique of modern macro
   

   Do modern macroeconomic tools developed in the stable macroeconomic environment still make sense?

3. Tim Worstall comments that Greek Debt Deal Looks Further Away Than Ever
   

   Various European finance ministers and the like are meeting in Riga today. And the Greek financial markets are up a bit on hopes that everyone will get closer to an agreement on how to deal with the Greek debt crisis. No one actually expects a deal to get done today but the hopes are that some baby steps toward one might be made.

4. Eric Crampton notes that All your health is belong to us
   

   If the one paying the piper calls the tune, be careful who you let pay for dinner. Britain's NHS is considering rationing healthcare by a measure of deservingness

5. Timothy Taylor on Americans, Led by Democrats, Get Friendlier With Free Trade
   

   A working hypothesis would be that countries with lower incomes and/or more exposure to foreign trade are more likely to see it in overall positive terms.

6. Tim Harford on Paying to Get Inside the Restaurant: Is it worth it to fork over cash for a table?
   

   The next time you’re fortunate enough to have dinner at a high-end restaurant, take a moment to enjoy not only the food and wine, but the frisson of a really good puzzle: Why do restaurants price things the way they do?

7. John Taylor on A Monetary Policy for the Future

   Should forward guidance be part of a monetary policy for the future? My answer is yes, but only if it is consistent with the rules-based strategy of the central bank, and then it is simply a way to be transparent. If forward guidance is used to make promises for the future that will not be appropriate in the future, then it is time-inconsistent and should not be part of monetary policy. For all these reasons monetary policy in the future should be centered on a rule or strategy for the policy instruments designed to achieve stated goals with consistent forward guidance but without cyclical macroprudential actions or quantitative easing.

8. Joshua Gans on The last two digits of a price can signal your desperation to sell
   

   Competitive options for buyers and sellers can define a limit beyond which they will not go, but there is still a range of prices that fall within those limits. Within that range, clearly sellers would like a higher price, while buyers would like a lower one, so each has an incentive to signal to the other their willingness to be a tough negotiator. Sometimes, however, you might want to send a signal that you might be willing to be less tough. Why?

9. Chris Dillow on The Knowledge Problem

   Was Hayek merely a Cold Warrior who is irrelevant today, or does he still have something to teach us? I ask because of two things that have happened to me this morning.

10. Jason Brennan on Philosophy Departments, Cost-Benefit Analysis, and the Seen and Unseen

    In the past few days, philosophy bloggers have been writing with concern about how more philosophy departments around the country are closing

Interesting blog bits

A few interesting blog bits to start the year with.

1. Chris Dillow writes in Praise of Complexity Economics

   One feature of complexity economics is that recessions can be caused not merely by shocks but rather by interactions between companies. Tens of thousands of firms fail every year. Mostly, these failures don't have macroeconomic significance. But sometimes - as with the Fukushima nuclear power plant or Lehman Brothers - they do. Why the difference? A big part of the answer lies in networks. If a firm is a hub in a tight network, its collapse will cause a fall in output elsewhere. If, however, the network is loose, this will not happen; the loss of the firm is not so critical.

2. Tim Worstall asks Isn’t the Venezuelan economy doing well?

   As we’ve mentioned around here before there’s nothing wrong at all with the idea that you’d like to change an uneven income distribution. It may or may not be desirable, may or may not be practicable, but the basic desire for a little less extremity in the gap between rich and poor is not a dishonourable goal. It’s just that there are sensible and non-sensible ways of going about this.

3. Clive Cook writes about The Year of Piketty

   Above all, admirers and critics alike pay tribute to "Capital" for drawing attention to inequality. I hadn't noticed that it was lacking attention to begin with. The American left pays attention to little else. It was really the reverse: The obsession with inequality demanded, so to speak, an academic testament, and that's what "Capital" provided. Piketty's economics leaves a lot to be desired, but his timing was fantastic.

4. Scott Sumner on The French experiment: Laffer >>>>>>> Piketty

   What an unmitigated disaster for Pikettynomics! The French "super-tax" on the rich raised less than one one-hundredth of one percent of GDP in tax revenue.

5. Stephen Moore on The Laffer Curve turns 40: the legacy of a controversial idea

   When Reagan left the White House in 1989, the highest tax rate had been slashed from 70 percent in 1981 to 28 percent. (Even liberal senators such as Ted Kennedy and Howard Metzenbaum voted for those low rates.) And contrary to the claims of voodoo, the government’s budget numbers show that tax receipts expanded from $517 billion in 1980 to $909 billion in 1988 — close to a 75 percent change (25 percent after inflation).

6. Emma Griffin on Sex and the Industrial Revolution

   Before the mid-18th century poverty had controlled young people’s sexual behaviour and steered them away from sexual intercourse until they were ready in the eyes of their neighbours to marry, set up house and raise a family. The young men and women of the factory districts did not show this kind of deference to social norms. They made decisions about when to start a family that tied in with their own wishes, rather than obeying what their community dictated. Seen in this light it becomes possible to understand the true complexity and significance of the Industrial Revolution. As well as ushering in new working patterns, industrialisation raised the incomes of the poor just enough to permit them to make meaningful decisions about their own life. As such, it was a vital step towards the sexual revolution of more recent times.

7. John Cochrane asks Cancel currency?

   Ken Rogoff has an interesting NBER Working paper "Costs and Benefits to Phasing Out Paper Currency." Ken would like to get rid of paper currency in favor of all electronic transactions. I'm a big fan of low-cost electronic transactions using interest-paying electronic money. But I'm not ready to give up cash. Ken has two basic points: The zero bound, and tax evasion / illegal economy.

Interesting blog bits

A bit of interesting weekend reading:

1. Steven G. Medema on Neither Misunderstood Nor Ignored: The Early Reception of Coase's Wider Challenge to the Analysis of Externalities

   The ‘Coase theorem’ has long been the idea most commonly associated with Ronald Coase’s analysis in The Problem of Social Cost. Yet, Coase frequently argued late in his career that he has been misunderstood, and that the central message(s) of the article lay elsewhere. Though virtually all of the discussion in decades following the publication of The Problem of Social Cost focused on Coase’s negotiation result, the fact is that Coase’s message was not, at the start, misunderstood. This paper takes up a number of the treatments of The Problem of Social Cost in the years immediately following its publication to demonstrate that Coase’s emphasis on the reciprocal nature of externalities, the importance of transaction costs, the possibility of merger solutions, the costs associated with state action, and the need for a comparative institutional approach were anything but lost on these early commentators. It was only later that the negotiation result became the major fixation of interpreters of Coase’s work.

2. Timothy Taylor on The Secular Stagnation Controversy

   For economists, the word "secular" isn't about a lack of religious belief. Instead, it's refers to whether a condition is expected to last for a long and indefinite period--and in particular, a period not related to whether the economy is entering or exiting a recession. Thus, the concept of "secular stagnation" is the idea that the U.S. economy is not just suffering through the aftereffects of the Great Recession, but is for some reason entering a longer-term period of stagnant growth.

3. Tim Worstall on Why Uber might be making a mistake in paying by the hour

   There’s a little technical detail about incentives that suggests that Uber might be making a mistake in their policy of paying minicab drivers by the hour. That mistake being not quite getting the difference between the income effect and the substitution effect as it affects pieceworkers (those two effects together being what gives us the Laffer Curve of course).

4. Masayuki Morikawa asks Are large headquarters unproductive?

   Headquarters play important strategic roles in modern companies, but downsizing of headquarters is often advocated as a cost-cutting measure. This column presents evidence from Japanese firm-level data that headquarters size is positively associated with firms’ overall productivity. Moreover, the benefits of ICT are greater for companies with relatively large headquarters. Downsizing headquarters to cut costs may thus be harmful for long-term company performance.

5. Marco Annunziata on African growth looking forward

   Africa has generated a lot of enthusiasm lately. The cynical view of the continent as a hopeless basket case has been replaced by the lofty narrative of Africa Rising. This column argues that Africa’s progress is impressive, and there is more to the story than a commodity boom. But Africa is at a crossroads. The opportunities are huge, but the road ahead is long, and will require persistent and patient effort from policymakers as well as business.

6. Margaret McMillan asks What is driving the ‘African growth miracle’?

   Some argue that growth across Africa is fundamentally a result of rising commodity prices and that if these prices were to collapse, so too would Africa’s growth rates. This column documents substantial shifts in the occupational structure of most African economies between 2000 and 2010 and thus provides a good reason for cautious optimism about the continent’s economic progress.

7. John Cochrane on Lazear on Labor

   Modern labor economists see employment and unemployment as a search and matching process with a lot of churn. The popular impression, echoed in most media discussion, is that there is a fixed number of jobs, and people just wait around for more jobs to be "created." That's what it may feel like to an individual, but that's not how the economy works. Lazear's column puts in one very short space some of the better ways to think about unemployment.

8. Keith Boyfield on Privateers and the sinister threat posed by ‘patent trolls’

   Many in Britain may not be familiar with the term ‘patent privateering’ – but that may all be about to change. British courts are apparently being targeted in a forum-shopping exercise by global monopolists, who are using this technique to reduce competition and innovation in the hi-tech sector.

   Earlier in the week I discussed patent trolls here.
   

Interesting blog bits

1. Carlos Vargas-Silva asks Are Migrants Good for the Economy?

   Two studies about the impact of migration on the UK economy have been published which – if media reports are to believed – appear to contradict one another. A closer reading of these reports, however, shows that in fact they come to very similar economic conclusions.

2. Chris Dillow on Optimum Deaths

   What is the optimum number of migrant deaths? The answer is not zero.

3. Tim Worstall points out What glories this capitalist free market thing hath wrought

   There’s nothing worse than being exploited by some running lackey pig dog of a capitalist, as Deirdre McCloskey reminds us.

4. Joel Waldfogel on Piracy Undermining Content Creation: Loch Ness Monster or Black Swan?

   Theory and common sense dictate that piracy should threaten new product creation. If it costs money to bring new works to market, then a reduction in revenue – all else constant – should render some projects uneconomic. So compelling is this theory that the content industries share it with lawmakers at every opportunity. Robert Solow once quipped, “You see the computer age everywhere but in the productivity statistics.” So it has been with piracy and content creation: one can see a negative impact of piracy everywhere except in the evidence about content creation. Maybe until now.

5. Ed Dolan on Universal Basic Income and Work Incentives: What Can Economic Theory Tell Us?

   Everywhere you look, it seems, people are talking about a Universal Basic Income (UBI)—a monthly cash benefit paid to every citizen that would replace the existing means-tested welfare system.

6. Tim Harford on Monopoly is a bureaucrat’s friend but a democrat’s foe

   “It takes a heap of Harberger triangles to fill an Okun gap,” wrote James Tobin in 1977, four years before winning the Nobel Prize in economics. He meant that the big issue in economics was not battling against monopolists but preventing recessions and promoting recovery.

7. Andrea Prat asks How can we measure media power?

   The potential for political influence is what most people think of when they talk about the power of the media. A new media power index, proposed in this column, aggregates power across all platforms and focuses not on markets but on voters. It measures not actual media influence but rather its potential. Using the index, the author finds that the four most powerful media companies in the US are television-based and the absolute value of the index is high. This indicates that most American voters receive their news from a small number of news sources, which creates the potential for large political influence.

8. Gabriel M. Ahlfeldt, Stephen Redding, Daniel M. Sturm and Nikolaus Wolf on The economics of density: Evidence from the Berlin Wall

   Economic activity is highly unevenly distributed across space. Understanding what drives the agglomeration and dispersion is important for many economic and policy questions. This column describes a theoretical model of internal city structure incorporating agglomeration and dispersion and heterogeneity in local fundamentals. The authors use the division and reunification of Berlin as a natural experiment. Their findings show that both heterogeneity in locational fundamentals and agglomeration forces are important in shaping a city’s internal structure.

9. Tim Worstall on Companies are the cells of the economy

   It’s often pointed out that companies are little sections of a command economy and thus, some leap to say, obviously it’s possible to have a command economy because we actually do.

Interesting blog bits

1. Timothy Taylor on Characteristics of U.S. Minimum Wage Workers
   

   Set aside for a few heartbeats the vexed question of just how a minimum wage would affect employment, and focus on a more basic set of facts: What are some characteristics of U.S. workers who receive the minimum wage? The statistics here are from a short March 2014 report from the U.S. Bureau of Labor Statistics, "Characteristics of Minimum Wage Workers, 2013." Of course, the facts about who is receiving the minimum wage also reveal who will be most directly affected by any changes.

2. Chris Dillow on Economists and the Public
   

   In a comment here, I propose the creation of a new job, or jobs - professors for the public understanding of economics, analogous to the professorships at Bristol and Oxford which do the same for science.

3. Ben Jones asks Should Philosophers Avoid Politics?
   

   In a recent blog post and article, Bas van der Vossen makes a straightforward argument for why political philosophers should stay out of politics: (1) professionals have a prima facie moral duty to make a reasonable effort to avoid activities that predictably make them worse at their tasks (the principle of “responsible professionalism” or RP), (2) the task of political philosophers is to seek the truth about politics, (3) engaging in politics predictably makes us worse at seeking the truth about politics, and (4) therefore political philosophers have a prima facie moral duty to avoid engaging in politics.

4. Kristian Niemietz argues that Brick shortages come and go. Planning restrictions are the real obstacle to house building
   

   An unexpected increase in construction (from an extremely low base) has left building materials, especially bricks, in short supply, leading to a sudden surge in prices. Anti-development activists are having a field day, because this turn of events has provided them with a convenient excuse to explain away the negative effects of their obstructionism. A shortage of bricks, not Nimbyism, is causing the housing crisis, or so we are told.

5. Peter Klein on Making Money from Behavioral Social Science?
   

   Longtime readers of this blog expect skepticism about behavioral social science. One of my issues is the assumed, but unexplored, assumption that private actors and market institutions cannot deal with behavioral anomalies, and therefore government intervention is necessary to make people act “rationally.”

6. Tim Worstall argues The NY Times Is Wrong; There Is No Case For High-Speed Rail
   

   I always find it slightly odd that left liberals are so in love with a 19th century technology such as the railroads. They’re most certainly not in favour of 19th century science nor moral attitudes so what is it about rail that so excites them? But other than that mystification they’ve missed a very important point. There simply is no case for high-speed rail in the US.

7. Kaoru Hosono and Daisuke Miyakawa on Natural disasters, firm activity, and damage to banks

   Natural disasters affect firm activities both directly and indirectly. One prominent indirect effect is on firms’ transaction partners, in particular – their banks. This column shows how damage to banks affects firm activities, such as capital investment and exports, using as a natural experiment Japan’s 1995 Kobe earthquake. Bank damage has a significant and negative impact on both firm investment and on exports but this effect does not last very long.

8. Joseph E. Aldy and Seamus J. Smyth on Heterogeneity in the value of life

   Increasing longevity yields large economic benefits. However, public policies do not take into account the heterogeneity in these benefits across the population. This column presents simulated experimental findings about the heterogeneity in the value of statistical life. There is heterogeneity over the life-cycle, as well as prominent ‘black-white’ and ‘female-male’ gaps in the value of life, driven by differences in the labour income across these groups. The findings suggest that one-size-fits-all policies would not correctly reflect the individual willingness to pay to reduce mortality risk.

Interesting blog bits

1. Andrew Cohen on Libertarianism and Parental Licensing
   

   Back in December of 2011, I posted “Licensing Parents,” defending a view Hugh LaFollette had introduced into philosophical literature in 1980: that the state should license parents (LaFollette further defended this stance in 2010; see Note 1). LaFollette is not a libertarian and as I indicated then, I disagree with him about a lot–including the need to license medical doctors and lawyers. I nonetheless think he is right that we ought to license parents. In this post, I explain why libertarians—or at least minarchist BH-libertarians—ought to endorse parental licensing.

2. Bryan Caplan on The Economist on Overparenting
   

   Though I'm no fan of The Economist's editorials, their science coverage remains outstanding. Check out their latest piece on overparenting.

3. Ryan Bourne on ‘Does good broadcasting require compulsion?’ The question the BBC won’t address
   

   I got to thinking about how helpful this interview style would be when I read the BBC’s own Director of Policy James Heath’s response to my response to his original blog post on why the licence fee is the right method of funding for the BBC. Rather than focusing on the arguments that I had made as to why a licence fee – a compulsory charge applied to everyone who wants to watch any live television – was indefensible and unnecessary, Heath instead used his article to outline why the BBC itself was of value to us.

4. Thorsten Beck, Hans Degryse, Ralph De Haas and Neeltje van Horen on When arm’s length is too far

   The small and medium-size enterprises (SMEs) were among the most severely affected in the Global Crisis. This column discusses new evidence on how different lending techniques affect lending in bad and good times. Data from 21 countries in central and eastern Europe show that ‘relationship lending’ alleviates credit constraints during a cyclical downturn but not during a boom period. The positive impact of relationship lending in an economic downturn is strongest for smaller and more opaque firms and in regions where the downturn is more severe.

5. Linda Goldberg, Signe Krogstrup, John Lipsky and Hélène Rey ask Why is financial stability essential for key currencies in the international monetary system?

   The dollar’s dominant role in international trade and finance has proved remarkably resilient. This column argues that financial stability – and the policy and institutional frameworks that underpin it – are important new determinants of currencies’ international roles. While old drivers still matter, progress achieved on financial-stability reforms in major currency areas will greatly influence the future roles of their currencies.

6. David Saha on The Transatlantic Trade and Investment Partnership: Review of the debate on economic blogs

   An early draft of the Transatlantic Trade and Investment Partnership (TTIP) sparked an intensive public debate over possible advantages and disadvantages. This column reviews some arguments in favour of the Partnership and against it. While there is some debate over how large the economic benefit could be in the face of already relatively low trade barriers, critics claim that the deal will lower standards of consumer protection, provision of public services, and environmental protection in the EU.

7. Tim Woratall on Don't Believe What You Read; Google Doesn't Avoid Tax

   It’s the results reporting season over in my native UK again and once again, as regular as the seasons themselves roll around, we’ve spluttering pieces in the press about how Google avoids all of this tax that it should justly and righteously pay. Which means it must be the time of year for me to point out that Google doesn’t in fact avoid paying UK corporation tax, whatever you might be being told in the newspapers.

8. John Cochrane on Lucas and Sargent Revisited

   The economics blogosphere has a big discussion going on over Bob Lucas and Tom Sargent's classic "After Keynesian Macroeconomics."

Interesting blog bits

1. Konstantins Benkovskis and Julia Woerz, on Lower import prices = 100% welfare gains? Not necessarily: don′t forget the impact of consumer taste and product quality

   Import price statistics may not be a reliable indicator of welfare gains. They must adequately reflect the fact that consumers value variety, and that consumer tastes and product quality change over time. This column evaluates existing findings, and introduces new results for the four largest EU economies – including evidence of higher consumer welfare gains than suggested by official import prices for the period from 1995 to 2012.

2. Susan Ariel Aaronson on Why the US and EU are failing to set information free

   The internet promotes educational, technological, and scientific progress, but governments sometimes choose to control the flow of information for national security reasons, or to protect privacy or intellectual property. This column highlights the use of trade rules to regulate the flow of information, and describes how the EU, the US, and their negotiating partners have been unable to find common ground on these issues. Trade agreements have yet to set information free, and may in fact be making it less free.

3. Nico Voigtländer and Mara Squicciarini on Knowledge elites, enlightenment, and industrialisation

   Although studies of contemporary economies find robust associations between human capital and growth, past research has found no link between worker skills and the onset of industrialisation. This column resolves the puzzle by focusing on the upper tail of the skill distribution, which is strongly associated with industrial development in 18th-century France.

4. Don Boudreaux on Cool!

   2014 is the centenary of an unusually large number of regrettable events. But some good things also happened that year – for example, 1914 saw the first installation in a private residence of air-conditioning.

5. Art Carden on Should Your City Run More Buses or Build Light Rail? Cato's O'Toole Says More Buses

   If your city doesn’t have a light rail system, someone in town probably wants to build one. If your city already has a light rail system, someone in town probably wants to expand it. According to a June 3 Policy Analysis by the Cato Institute’s Randal O’Toole, this would be an expensive mistake.

6. Peter Boettke on The Good, the Bad, and the Ugly ... of crony capitalism?!

   Paul Rubin is an economic thinker I respect tremendously, but I am not sure I agree with him here. I do agree with live in the 2nd best (at best) world and thus it is a mistake to use 1st best theoretical ideas to guide practical affairs of public policy. I prefer instead to think of institutional robustness, rather than ideal welfare economics.

7. John Taylor on New Legislation Requires Fed to Adopt Policy Rule

   A lot of research and experience shows that more predictable rules-based monetary policy leads to better economic performance—both in terms of price stability and steadier-stronger employment and output growth. But in practice there have been big swings in Fed policy between rules and discretion, with damaging results as in the 1970s and the past decade of a financial crisis, great recession and slow recovery. This experience—especially the swing from rules to discretion in the past decade—demonstrates the need for legislation requiring the Fed to adopt rules for setting its policy instruments.

8. Bryan Caplan on Ownership for Cartoonishly Nice People

   The noble and prolific Jason Brennan has just released Why Not Capitalism?, a short book replying to Gerald Cohen's Why Not Socialism? Outstanding work, as usual. For me, the highlight is Brennan's explanation for why even cartoonishly nice people would want to own private property. It's easy to see why cartoonishly nice people - classic Disney characters like Mickey and Minnie Mouse - would want other people to own private property. But why would the nicest people imaginable want to claim ownership on their own behalf?

9. Art Carden on Intolerant Socialism

   As Jason Brennan writes, capitalism is preferable to socialism because voluntary socialist experiments like utopian communes and socialist camping trips are possible in a world with private ownership of the means of production. Capitalism tolerates socialism. Socialism does not tolerate capitalism.

Interesting blog bits

1. Matt Ridley asks Do people mind more about inequality than poverty?

   Few people know that global inequality is falling and so is poverty.

2. Kevin Vallier on Reasonable Libertarian Worries about Nudging
   

   This is part of a series of replies to “Human Freedom and the Art of Nudging,” written by Charles Mathewes and Christina McRorie, religious studies professors at the University of Virginia. I think their piece is, quite honestly, bad. It attacks libertarian criticisms of nudging based on a host of straw men.

3. Peter Boettke on Science/Scholarship and Academics

   Joe Salerno publically called me out to explain my position on how a scientific/scholarly discipline advances and the role that private funding plays. He also asks me to contemplate a counter-factual of my own career if there was no private funding available.

4. Donal Curtin shouts Wrong, wrong, wrong, wrong, wrong

   I do want to comment, though, on the substance of some potential telco policy ideas that were apparently leaked from Clare Curran's office. And yes, you get it, he thinks the policy is wrong.

5. Tim Worstall explains A most wonderful example of cause and effect

   A number of studies have been done over the years trying to work out whether people are insider trading given the specialist knowledge that they have. For example, one such showed that Senators were getting a 12% annual return on their stock portfolios. The conclusion was that yes, they were indeed using their inside information about what laws were likely to be written and how. No prosecutions of course because this wasn't actually illegal but it was pretty clear that the activity was going on. Using very much the same techniques researchers have had a look at the stock investments of the policemen of that world, the folks at the SEC.

6. Tim Worstall says Those 'Communists' At The IMF Do Indeed Say That Redistribution Harms Growth

   There’s been a recent paper issued by economists at the IMF looking at whether and how redistribution harms economic growth. There’s been a number of gleeful headlines insisting that what they’ve actually said is that redistribution does not harm economic growth at all, all of us right wing neoliberal free market types are just wrong. Sadly, this isn’t actually what the paper says.

7. Angus Deaton and Arthur Stone ask What good are children?

   Study after study has shown that those who live with children are less satisfied with their lives than those who do not. Is there something wrong with these empirical analyses? Or is it that happiness measures are unreliable? This column argues that the results are correct but that comparisons of the wellbeing of parents and non-parents are of no help at all for people trying to decide whether to have children.

8. Stefano DellaVigna, John List, Ulrike Malmendier and Gautam Rao on Voting to tell others

   The question of why people vote has intrigued social scientists for decades. This column discusses a model of voting due to social image motivations and presents empirical tests based on it. In this model, an individual would be motivated to vote because of an anticipation of being asked after the election. The results of a conducted field experiment suggest that the anticipation of being asked provides a large motivation to vote. In fact, the motivation is as large as being paid $5-15 to vote. Applying this methodology to other elections would provide more rigorous evidence about the validity of the proposed model.

Interesting blog bits

1. Jeremy Greenwood, Nezih Guner, Georgi Kocharkov and Cezar Santos on US inequality due to assortative marriages.
   

   How Americans form and dissolve families has changed dramatically since 1950. One of these changes has been an increase in assortative mating, i.e. how likely a person is to marry someone of similar educational background. This column argues that since education is an important determinant of income, these patterns of matching have had an important impact on the economy's distribution of income.

2. John Taylor on Next Time Remember the Lessons from Stimulus Packages
   

   It’s the five-year anniversary of the 2009 stimulus package. I’ve done a slew of empirical research on the stimulus in those years from predicting in advance that its impact would be small to estimating afterwards that its impact was small.

3. John Taylor asks Should Policymakers or Macro Models Be Taken to the Woodshed?
   

   There’s a good debate going on about the usefulness of macro models, and in particular whether the so-called New Keynesian models let us down or even helped bring on the financial crisis and the Great Recession.

4. Alexander Czombera on Zimbabwean Currencies: Condoms, Sweets and Paper Money
   

   If there is one single law in economics then it is that markets tend to equilibrium. Or, to align this with Grove’s law (“Technology will always win. You can delay technology by legal interference, but technology will flow around legal barriers”), the free market will find its ways, whether in white, grey or black market.

5. David Henderson on CBO's Minimum Wage Study: Dealing with Publication Bias

   I've finally got around to reading more details about the Congressional Budget Office's report on the number of jobs lost from raising the minimum wage.

6. Don Boudreaux on The CBO On Minimum-Wage Studies.

   If I understand correctly what’s going on here, it’s not obvious to me that publication bias for minimum-wage studies runs the way the CBO assumes.

7. Robert P. Murphy on Economists Debate the Minimum Wage

   Economists famously argue about everything. Even so, it used to be that economists across the board—whether left, right, or center—generally agreed that the minimum wage was ill-suited to help the poor.

8. Henrik Braconier and Mauro Pisu on Roads to deeper European integration
   

   Despite substantial integration, national borders still provide a large obstacle to trade in Europe. This column shows that much of these ‘iceberg costs’ can be attributed to underdeveloped infrastructure, namely roads. Improving international roadways to the level of national ones could substantially raise gains to trade.

9. Chris Dillow on The "Middle Class", & Marxism

   Is Marx more relevant than ever before? This is the question posed by talk of the falling middle class and poorly-paid self-employed.

10. Chris Dillow on the Bonnie Tyler syndrome

    Trouble in Venezuela has led to some rightists sneering at Owen Jones for supporting the socialist government. Such partisan point-scoring, however, hides an interesting question: what is the origin of Owen's mistake, assuming it to have been one?

Interesting blog bits

Storms, tea cups

• Free banking
  1. George Selgin writes on Economic Schools of Thought
  2. Bob Murphy gets upset with Selgin, here and here
  3. Joe Salerno also gets upset with Selgin
  4. Gene Callahan seems happier with Selgin. See also the comments to that posting.
  5. Selgin replies to Salerno and Murphy here
  6. Salerno responds here
• Al Roth asks Is blogging repugnant?

Interesting blog bits

A little midweek relaxing local reading:

1. Bill Kaye-Blake on Summary theories of the firm
   

   I can't recommend this posting too highly ...!!!!

2. Eric Crampton on Lockean Parking
   

   In the Lockean framework, private property can be appropriated from the commons through the mixing of labour. If you mix your labour with the untilled soil, leaving as much and as good yet for others to till, then that tilled soil is yours. You have homesteaded it.

3. Matt Nolan on ICT, factor shares, employment, and inequality
   

   Matt is am going to take you on a journey of a series of fortunate events, and at the end hopefully he has a point!

4. Donal Curtin asks Why are we where we are on this league table?
   

   League tables are always fascinating, and I came across a rather suggestive one in the January 11 issue of the Economist, in an article, 'Setting out the store', which was making the case for governments to sell off more of their assets.

5. Not PC on "Trickle Down"
   

   "Trickle down" does exist. It emanates from government.

6. Brennan McDonald on University As Consumption Good
   

   The literature generally looks at university as an investment. You incur costs – foregone wages, tuition, lower income etc. for a few years in the hope of earning a higher labour market income after graduation but it's hard to classify university as an investment if almost everyone is treating it like a consumption good.

Interesting blog bits

1. Lynne Kiesling on Interpreting Google's purchase of Nest

   Were you surprised to hear of Google’s acquisition of Nest? Probably not; nor was I. Google has long been interested in energy monitoring technologies and the effect that access to energy information can have on individual consumption decisions.

2. Joshua Gans asks How will Google adjust Nest?

   The rationale for the acquisition of Nest seems to be similar to YouTube. Google will provide capabilities and investments that will allow Nest to scale.

3. Jason Sorens with More on Rodrik & Globalization
   

   The LSE’s EUROPP blog has published my critique of Dani Rodrik’s The Globalization Paradox.

4. John List and Omar Al-Ubaydli on The generalisability of experimental results in economics
   

   Lab and field experiments help us understand human behaviour as they increase our confidence in causal effects in regard to different economic problems. This column highlights the relevance of experimental data and discusses the value of lab in comparison to field experiments. While lab experiments are the only applicable way-to-go in a number of situations, they tend to inflate scrutiny. This could artificially modify behaviour, and would potentially threaten the causal interpretation of the estimates. The debate about lab versus field experiments is far from settled. However, what economists do agree about is that to obtain convincing causal effects relating to human behaviour, a joint consideration of a number of methods would be superior to using any single one in isolation.

5. Richard Posner on Bureaucracy and Efficiency

   The term “bureaucracy” refers to administration by a multi-tiered hierarchy of trained, nonpolitical professionals guided by written rules (thus minimizing discretion). Historically it referred to governmental administration, but nowadays the term is applied to the administration, in the characteristic bureaucratic form, of any institution.

6. Gary Becker on Competition and the Efficiency of Bureaucracies

   Whether an organization is “efficient” cannot be defined in any absolute sense, but only relative to feasible alternatives. Therefore, it is reasonable to conclude that a large bureaucratic organization is efficient if it manages to thrive in a competitive sector; that is, a sector with easy entry of organizations with different decision-making structures. For if potential entrants were more efficient than the bureaucratic organizations, they would enter the sector and out-compete the bureaucracies.

7. Tomohiko Inui, Ryoji Matsuoka and Makiko Nakamuro ask More time spent on television and video games, less time spent on studying?
   

   Parents worry that their children waste too many hours playing video games or watching TV that would be better spent studying. Whereas past research has focused on teenagers, this column presents evidence on the causal effects of study and leisure hours for children of elementary school age, when key lifetime habits are being developed. Video entertainment is found to be a less significant determinant of time spent studying than parental involvement (such as supervision).

8. Daron Acemoglu and James Robinson on Democracy's pains
   

   Disillusionment with political leaders is spreading across the globe. In the United States, the approval ratings of the President and the Congress are at all-time lows, and probably for good reason. There is general dissatisfaction with the ruling class across much of Europe, particularly in the South. But this is much broader than a Western world phenomenon.

9. Joakim Ruist on The fiscal consequences of unrestricted immigration from Romania and Bulgaria
   

   The lifting of transitional access restrictions for Romanian and Bulgarian workers is a hotly debated topic in the EU with big implications for public finances in destination countries. This column presents analysis of immigrants in Sweden, which never imposed access restrictions when these two countries joined the EU. Romanian and Bulgarian migrants to Sweden under this unrestricted regime make a sizeable positive contribution to Swedish public finances. Contributions can be expected to be even larger in the UK and Ireland.

10. Jennifer L. Castle and David F. Hendry on The real wage–productivity nexus
    

    During the Great Recession, UK real wages have fallen rather than the usual unemployment reaction. Nevertheless, this column argues that a structural break in the wage inflation/unemployment trade-off has not occurred. There has been a constant relationship between real wages and productivity since 1860. The key to the constancy is to the joint modelling of dynamics, location shifts, relevant variables and non-linearities.

Interesting blog bits

1. Gary Becker on Capitalism’s Return from the Financial Crisis
   

   Karl Marx saw every major depression in the nineteenth century as the final crisis of capitalism, due to its “ internal contradictions”, that would usher in the era of socialism and communism. Alas for Marx, each time he was proved wrong because the end of these depressions was often followed by an even stronger capitalist surge.

2. Richard Posner asks Has Capitalism Revived/Survived?

   The recent (actually current, though diminishing) depression kicked off by the worldwide financial crisis of September 2008 has not created any new communist or socialist countries. What it has done is give rise in almost all countries to a demand for more stringent regulation of banks and other financial institutions, and of some of their financial instruments, and to large public deficits; but neither of these developments is a harbinger of socialism. It’s no longer even clear what “socialism” means, or who has a coherent program of socialist administration of a modern economy.

3. Donal Curtin on How governments rort their own countries' airline passengers
   

   A while ago I had a go at the protectionist stupidity of typical bilateral inter-government airline agreements, as instanced on this occasion by Cathay Pacific having to get the Australian government's permission to increase the number of flights it would like to make between Hong Kong and Australia.
   More recently I've come across some research documenting just how much of a dead hand these agreements tend to be, and how much more airline traffic would be enabled by having more liberal arrangements.

4. William Easterly asks Are the Aid Donors Un-Developing Ethiopia?

   The World Bank, the US Agency for International Development (USAID), and the UK’s Department for International Development (DFID) have consistently failed to act on allegations of human rights abuses in Ethiopia, including ones that are tied to their aid programmes, according to new reports.

5. Peter Klein on NBER Papers of Interest

   Klein points us to 3 new NBER papers on compensation, performance, and productivity.

6. Eric Crampton on Of Free Riders and Forced Riders: America's Cup edition
   

   But there's a necessary complement to free-rider problems. If we do make payment mandatory through taxes, we'll get a forced rider problem: lots of people who get epsilon, zero, or negative utility from the yacht race are forced to pay for it through their taxes.

7. Daron Acemoglu and James Robinson ask Why Hasn’t Botswana Diversified out of Diamonds?

   Yet despite this and the fact that diamonds are running it out, Botswana has struggled to diversify out of diamonds, and it also has very high levels of inequality. There has not been a resource curse in terms of economic growth, but the economy has not diversified out of diamonds and into more modern sectors either.

8. Matt Nolan says That’s it, I’m done: RBNZ takes the path of discretion

   This seems to be saying that simply ensuring the resilience of the financial system is not enough, the central bank should be trying to exert direct, and discretionary, control over what financial markets do and where investment heads. Fine tuning at its finest. It does appear that policymakers here have been strongly influenced by Borio.

9. John Cochrane on McDonalds and the minimum wage

   Recently, on a long car trip returning from a glider contest, I did something unusual among our liberal elite: I actually went to a McDonalds and ate there.

10. Michael W Klein and Jay C. Shambaugh ask Is there a dilemma with the Trilemma

    The ‘financial trilemma’ – that open capital markets and pegged exchange rates mean a loss of monetary autonomy – has recently been challenged. Some argue that even flexible exchange rates cannot assure monetary autonomy without capital controls, while others argue even countries with fixed exchange rates can gain autonomy through temporary capital controls. This column argues that free floating exchange rates do in fact allow autonomy, and partially floating ones allow partial autonomy. For countries with fixed exchange rates, capital controls provide monetary autonomy when they are widely applied and longstanding, but not when they are temporary and narrowly targeted.

Interesting blog bits - Coase update 2

The list of obituaries of and tributes to Ronald Coase has now reached more than 60 links including some dealing with the story that Coase was forced out of the University of Virginia in 1964.

Interesting blog bits - Coase update

The list of obituaries of and tributes to Ronald Coase has now reached 50 links. And there are a number of other links that I haven't bothered to include since they didn't seem to add much. I hate to think just what the actual number of comments about Coase's passing is.

Interesting blog bits (updated lots of times)

A few of the many obituaries of and tributes to Ronald Coase:

1. David Henderson
2. Richard Epstein
3. Richard Epstein
4. Peter Boettke
5. Peter Klein
6. Donald J. Boudreaux
7. David Gordon
8. Robert Higgs
9. Daniel Kuehn
10. Vuk Vukovic
11. Kevin Bryan. A version is also available at VoxEU.org.
12. Victor W. Hwang
13. Joshua Gans
14. Edward Lopez
15. Sarah Galer and Jeremy Manier
16. Caleb Garling and Benny Evangelista
17. Brendan Greeley
18. Todd Zywicki
19. Jonathan Turley
20. Matthew Yglesias
21. Stephanie Flanders
22. John Kay
23. Diane Coyle
24. Nick Gillespie
25. Dylan Matthews
26. Mark Littlewood
27. Timothy B. Lee
28. Rupert Darwall
29. Marc Sidwell
30. Cass R. Sunstein
31. John Naughton
32. Edward Lotterman
33. Phil Rosenthal
34. John Cassidy
35. Richard A. Epstein Epstein is a reply to Cassidy
36. Phil Miller
37. David P Goldman
38. Martin Hutchinson
39. Larry Downes
40. Walter Olson
41. Severin Borenstein
42. Casey B. Mulligan
43. Kenny Tan
44. Ray Perryman
45. Prashanth Perumal
46. Robert Stavins
47. Mike Rappaport
48. J. Gordon Hylton
49. Steven Medema
50. Steven Medema
51. Kevin Rafferty
52. Andrew Sheng and Xiao Geng
53. Walter Block
54. Donald J. Boudreaux
55. Jonathan Z. Zhou
56. Paul Greenberg
57. Anna Demchenko
58. Matt Nolan
59. Peter Cresswell
60. Oliver Hartwich
61. The New York Times
62. The Washington Post
63. The Ronald Coase Institute
64. The Wall Street Journal
65. The New Zealand Herald
66. The Economist
67. The Economist
68. The Sydney Morning Herald
69. University of London
70. Links to do with Coase being forced out of the University of Virginia
1. Hawes Spence
2. Nick Gillespie
3. David Friedman
4. George Leef