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10 Dec 09
The Benefits of Procrastination: The Economics of Geo-engineering
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Many critics of geo-engineering overlook an important fact: there is a gain from procrastination. In some of their expositions, they argue, implicitly and sometimes explicitly, that because humans will eventually have to reduce greenhouse-gas emissions anyway, we might as well do the adult thing and start the painful adjustment today.5 But this ignores the principle that a "quick fix" can allow the deferment of solving a particular problem, lowering the total cost of the long-run solution.
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Back-of-the-envelope calculations suggest that this strategy could leave our descendants many trillions of dollars richer than the alternative of implementing immediate and large cuts in emissions.
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25 Nov 09
These Boots Are Made for Talking: The fuzzy math and goofy logic of government-goosed employment
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But the most fundamental flaw in the president’s stimulus hype is
the notion that more jobs are always better (which also underlies
his claim
that global warming will be a boon to the economy as long as we
spend lots of money to mitigate it). According to this standard,
if the government really did find a supplier who spends 520
man-hours to deliver one pair of work boots, it should buy as
many as possible.
24 Nov 09
How Little We Know
Russell Roberts argues against giving more power to regulators for the purpose of reforming capitalism. Regulators were part of the problem, and there is no reason to believe they will be wiser in the future.
18 Nov 09
Where’s That Inflation? The monetary base has ballooned, yet inflation remains far off. Or does it?
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So while the standard CPI shows deflation over the past year,
that stems from a few anomalous sectors, such as energy, where
prices have dipped significantly since 2008. The median CPI, on
the other hand, shows an inflation rate that does not look very
unusual. -
Besides placing undue faith in the Fed’s ability to time
perfectly any necessary anti-inflationary measures, the consensus
suggests that the nation’s central bank now has the heretofore
undiscovered ability to increase the money supply without
creating inflation. If true, this would be an important new
development, since inflation has long been rightly vilified for
destroying entrepreneurship and long-term economic growth. But if
false, this conceit could prove dangerous indeed. And it’s
probably false. - 3 more annotations...
17 Nov 09
Bernanke’s Philosopher: The Fed chairman is portrayed as a follower of John Maynard Keynes, but his real inspiration is Milton Friedman.
It should be noted that Ben Bernanke has gone beyond monetarism (and, I'm pretty sure, Keynes) in endorsing bailouts.
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While it’s true that the Obama ad-ministration is
pursuing Keynesian fiscal stimulus, the Federal Reserve under
Bernanke has consciously acted on the Friedman/Schwartz insight
that loosening central bank credit is a fundamental tool in
forestalling deflation and depression. Understanding that
monetarism can mean both the management of low inflation in good
times, and the creation of inflation in bad times, has proven too
difficult for most of the media. -
For her part, Schwartz is critical of Bernanke’s application of
her and Friedman’s theories. “You don’t have to lower the
interest rates to the extent that he has in order to increase the
money supply,” she says. “The essential action should be
increasing the money supply. That’s the lesson of the Great
Depression.” - 2 more annotations...
14 Nov 09
Economics in One Lesson
Henry Hazlitt's classic book on secondary effects ("what is not seen"). This edition was published in 1952.
The Use of Knowledge in Society
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The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.
Underappreciated Coase and Alchian
Donald Boudreaux summarizes two essays: Ronald Coase's "The Marginal Cost Controversy" and Armen Alchain's "Cost and Output."
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When the bridge is not congested, the marginal cost of allowing each driver access to the bridge is zero. Is the optimal toll zero? According to textbook theory: yes. According to the much-wiser Coase: no. If Jones were forced, by whatever means, to charge a price equal to his marginal cost of zero, clearly he would not recover his cost of building the bridge. Equally importantly, other investors would have no way of knowing if, and how much, additional investment is appropriate in building bridges to span the Mississippi.
09 Nov 09
Not Your Grandfather's (or Keynes’s) Economy
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From the 1950s through the 1970s, unemployment during recessions was typified by manufacturing production workers with no more than a high school education on temporary layoff. That is no longer the case.
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Statistics on the educational composition of the labor force tell us that the textbook notion of homogeneous unskilled “labor” does not describe today's workers.
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