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My Weekly Reading for December 22, 2024 - Econlib
Learning Fiscal Discipline: Colorado’s Success, Shortcomings, and Regulatory Ruse Excerpt: At its core, TABOR codifies limits on both taxation and spending. It has been so successful that, for the fourth straight year, the State of Colorado announced that they would be refunding taxpayers, this time to the tune of $1.7 billion. TABOR is not, […]
Printing Money for Reparations: A Dangerous Path for Colombia - Econlib
The recent proposal by Colombian President Gustavo Petro to print money to finance reparations for the victims of the armed conflict has raised significant concerns. Amid the populist rhetoric of the president, who emphasizes settling a “deep social and historical debt,” this approach is leading Colombia down a dangerous economic path. One only needs to […]
Confusing Wealth and Consumption - Econlib
Drive into the Whole Foods parking lot, and you’ll see the latest BMWs, Mercedes, Audis, Porsches and Volvos. More relevant than what the 1% are paying is the widening gap between the 1% and the rest of their countrymen who are struggling to pay the food bills at Walmart. So writes Elliot Schiff of […]
Why Does Santa Claus Exist? - Econlib
Every year, millions of parents propagate the myth of “Santa Claus”: an omniscient, magical man bringing near-infinite toys to children across the globe. Santa Claus employs elves and flying reindeer, lives in an inhospitable environment, and necessarily travels 0.5% the speed of light. Despite the obvious dubiousness of these claims, parents invest in the story […]
Is inflation meaningful? Is it useful? - Econlib
In several recent posts, Tyler Cowen has stressed the need for better models of inflation. In one case, he expressed exasperation at my claim that (price) inflation is an almost meaningless concept: 4b. More seriously, Scott seems to dismiss the price level concept altogether. For instance he once wrote: “In the past, I’ve frequently argued […]
Tariffs Hurt Canadians and Americans - Econlib
Am I subsidizing Safeway? Why would I ask? Here’s why. My wife and I spend at least $400 a month at Safeway. Safeway doesn’t buy anything from us. So, our monthly trade deficit with Safeway is at least $400. And, in Trump’s view of the world, a trade deficit equals a subsidy. By Trump’s […]
Donating on the Margins - Econlib
Many years ago, shortly after joining the Marines, I signed up for a bone marrow donor registry. I largely forgot having done so as the years passed until one day in June 2020, when I got a call from my father. He had gotten a call from the registry. (When I had first registered, I […]
Whose prices rise with tariffs? - Econlib
Economic theory predicts that, except in certain edge cases, tariffs will raise the domestic price of imported goods and services in a country. The way economists present the effects of tariffs to students is generally through a simple supply and demand model (for example, see this discussion of tariffs that is fairly representative of the […]
Activism, Production, and Consumption - A Case Study from Flint - Econlib
Some years ago, a crisis emerged in Flint, Michigan. The public water supply was found to have dangerously high levels of lead and this was having a significant negative public health impact. Among the first to raise the alarm was a professor at Virginia Tech named Marc Edwards. He brought a great deal of attention […]
What went wrong in 2021? - Econlib
During the period from 2021 to 2023, inflation was far higher than the Federal Reserve would have wished, and also far higher than forecast by the markets. Does that mean we can excuse the Fed for allowing inflation to overshoot its target by a large amount? The answer is no. I’ll try to explain why […]
Did Taylor Swift "Juice the Economy"? - Econlib
It may seem obvious that Taylor Swift “juiced the economy” during her two-year Eras world tour (Hannah Miao, “Billions in Cocktails and Friendship Bracelets: How Taylor Swift Juiced the Economy,” Wall Street Journal, December 8, 2024). But it is not. For example, the claim cannot be evaluated by simply counting how much money her fans […]
Is This War With Lebanon Different? (with Matti Friedman) - Econlib
Is Israel’s war with Lebanon going to end differently from past attempts to secure Israel’s northern border? Journalist Matti Friedman, who recounted his experience as a soldier in Lebanon in his book Pumpkinflowers, reflects on that experience in light of current events and looks to the future in this conversation with EconTalk’s Russ Roberts.
Working for Change in Democratic Politics - Econlib
Brother, can you paradigm, or spare a signature? In a recent post, blogger Janet Bufton writes: The second way toward lasting change is to do the persuasive work that would have brought them [the changes] about—or the best approximation that the people can bear—through democratic politics. This method does not save anyone from the problems […]
My Weekly Reading for December 15, 2024 - Econlib
Friday Feature: SEA Homeschoolers by Colleen Hroncich, Cato at Liberty, December 6, 2024. Excerpt: Conservative Christians probably aren’t generally seen as trailblazers, but they were at the forefront of homeschooling in the 1960s and 1970s. So it’s not surprising that curricula and resources for homeschoolers are often Christian in nature. When Blair Lee, a college […]
NGDP guardrails: Do the right thing - Econlib
Tyler Cowen recent asked o1 Pro this question: What is the biggest problem with the idea of the Fed subsidizing an NGDP futures market, as economist Scott Sumner has proposed? Feel free to give an answer relying on theoretical macroeconomics, agency problems, finance theory, and the like. Here’s part of the response: One of the […]
What Stray Cats Taught Me About Spontaneous Order - Econlib
My wife and I recently returned from our first trip to Greece. Between a busy schedule of espresso, sailing, hiking, pilgrimages to historical sights, and just generally eating our way across the Hellenistic Empire, I noticed one thing in particular: cats. Cats everywhere. In the street, on our feet, in the bar, on the car. […]
Subsidies and waste - Econlib
It is possible to spend $100,000 on a luxury car. Most people don’t do so, and not just because they cannot “afford” one. Even among Americans with over $100,000 in wealth, only a tiny fraction would choose to spend $100,000 on a luxury car. You can also spend $35,000 on a luxury car, something like […]
Searching for Truth in a Social Media World - Econlib
We’ve heard a lot about misinformation in the news of late…but how do we know when we encounter it? What’s the difference between misinformation and disinformation, and is there any space for truth anymore? If too many people believe things that aren’t true, shouldn’t we try to fix that??? Not necessarily, says this episode’s guest Arnold Kling. Kling […]
The Fed’s Financial Chicanery: No End to the Money Printing - Econlib
Here’s a multiple-choice question I’ll be placing on an upcoming quiz in my monetary economics class: The Federal Reserve is like which of the following: A failed 1980s Savings & Loan 2023 failure Silicon Valley Bank 2001 mega bankruptcy Enron All of the above Answer: All of the above. The Fed compares to S&Ls because […]
What Is Kakistocracy? - Econlib
Every year in December, The Economist finds a “word of the year” that summarizes a major event or trend and has gained popularity in its wake. It is useful to know that the magazine has been opposed to populism as it rose in the United States and elsewhere in the world but, I would say, […]
The Other Kind of Romance in Politics - Econlib
Public choice is often called by the shorthand “politics without romance.” In the Concise Encyclopedia of Economics entry, we summarize this romance to overcome as, The wishful thinking…that participants in the political sphere aspire to promote the common good. In the conventional “public interest” view, public officials are portrayed as benevolent “public servants” who faithfully […]
Paul Krugman retires from the NYT - Econlib
Over the years, I’ve done a number of posts reacting to Paul Krugman’s columns and blog posts. Now that Krugman is retiring from his NYT column (but not from academia), I thought I’d share a few observations about his career as a pundit. What made Krugman such an influential economic pundit, perhaps the most influential? […]
Crypto, Investment, and Intrinsic Value - Econlib
Crypto doesn’t have intrinsic value; neither does paper money and neither does gold. A friend who regularly reads both the Financial Times and my posts on EconLog and on my Substack sent me the following email: I was talking with a friend who is a wealth manager at JP Morgan, and he is advising some […]
Consumer Purchasing Price Theory: Cutsinger's Solution - Econlib
[Editor’s note: We’re bringing back price theory with our series on Price Theory problems with Professor Bryan Cutsinger. You can view the previous problem and Cutsinger’s solution here and here. Share your proposed solutions in the Comments. Professor Cutsinger will be present in the comments for the next two weeks, and we’ll again post his proposed solution shortly thereafter. […]
How valuable is just asking people? - Econlib
A story in three acts, dear reader, that you may have seen in various forms before: Act one: An activist or TV talking head declares that the economy is failing, particular for those who are struggling most, and economic conditions are terrible. Act two: An economist interjects that actually, the economy is doing quite well, […]
How to Get Rich Slowly - Econlib
To get rich slowly, hang on to that beat-up old sedan. In an EconLog post on December 7, Giorgio Castiglia surprised me with the following story: At a 10-year high-school reunion, a middle school math teacher arrives in a beat-up old sedan and an old buddy of his pulls up in a shiny new convertible […]
Synecdoche, Bullets, and Politics - Econlib
The following is not the most important aspect of the tragic murder of Brian Thompson, the CEO of UnitedHealthcare. But it does illustrate how using the correct words and being conscious of figures of speech help avoid confusion. Technically, a firearm cartridge is made of (1) a casing, which holds gunpowder and a primer to […]
One Year of Milei: Stabilization, A Balanced Budget and Deregulation in Argentina - Econlib
Today marks exactly one year since Javier Milei rose to the presidency in Argentina. Expectations were high among libertarians, as this was the first time a self-described ‘anarcho-capitalist’ was elected to the highest office anywhere in the world. During his first year, Argentina has certainly experienced change. The country is no anarcho-capitalist paradise, but is […]
Gell-Mann Amnesia and AI - Econlib
Tyler Cowen recently challenged us to try to stump an AI named “o1”: 1. o1 is a very good economist. Try to stump it if you can. I could not find o1, so I used ChatGPT 4o mini. I hope someone will try the following question with an o1 and report the results in the […]
Why Industrial Policy Is (Almost) Always a Bad Idea (with Scott Sumner) - Econlib
Tariffs are in the air. Will they help or hurt Americans? Listen as economist Scott Sumner makes the case against tariffs and various other forms of government intervention that go by the name of industrial policy. Along the way he looks at some of the history of worrying about the economic and military dangers posed […]
The Monkey's Paw and interest rates - Econlib
A recent article in The Economist discussed what they assume is the president-elect’s view of interest rates: A more hawkish Fed may, in turn, invite the wrath of Mr Trump, who has insisted that, as president, he should have a say over interest rates. He will surely want to see steeper rate cuts now that […]
My Weekly Reading and Viewing for December 8, 2024 - Econlib
Indiana Cops Seized Their Cash From a FedEx Hub. Prosecutors Just Agreed To Return It. by C.J. Ciaramella, Reason, December 3, 2024. Excerpts: Indiana prosecutors will return $42,000 in cash they seized from a California small business, several months after the owners filed a class action lawsuit alleging that law enforcement is exploiting a major FedEx […]
Economics In Personal Decision Making - Econlib
Two main reasons for studying economics are often given in textbooks and classes. First, it helps us understand the social world we live in and, secondly, it informs better public policy decisions. An example comes from Adam Smith in The Wealth of Nations. By understanding what makes a nation wealthy compared to others, we might […]
Thinking About Imports and Exports - Econlib
A thought experiment, dear reader, on how to think about international trade and its impact on the wealth of a nation. Suppose one day, every country in the world suddenly said, in unison, “Hey America! We’ve decided we think you’re just the best and to show how much we love you, we’ve decided that from now […]
Does National Security Justify Trade Restrictions? - Econlib
In a recent Defining Ideas article, “Why Trade Should Be Free,” I made the case for free trade. Although my way of stating it is slightly original, the case for free trade is one that many economists, including Adam Smith, have made. Free trade causes people in the free trade country to produce the goods […]
The Self-Government of the People - Econlib
Explaining his nomination of Russell Vought for the position of director of the Office of Management and Budget, President-elect Donald Trump wrote (“Donald Trump Picks Scott Bessent as Treasury Secretary,” Financial Times, November 23, 2024): Russ knows exactly how to dismantle the Deep State and end Weaponized Government, and he will help us return Self […]
What Deindustrialization? - Econlib
Many critics of free trade argue that globalization has led to the US becoming deindustrialized; That is, trade is eroding our manufacturing base. Economists refute this claim by pointing to the fact that US industrial production is near the record highs set in 2018 or that the manufacturing component, while off the highs set in […]
Jeff Hummel on Tether - Econlib
My friend and monetary theory teacher (of me) Jeff Hummel writes beautiful responses to various friends who comment on monetary issues. In a discussion of Tether, one of his friends quoted a source saying, “Tether is the third largest buyer of three-month US Treasuries and is projected to be the first next year. Tether now […]
Wanna bet? - Econlib
Some bloggers take bets on the ideas they express in their writing. A few have been quite successful. I have chosen not to do so (thus far.) In some cases, those who refrain from betting are criticized for not having the courage of their convictions. I don’t believe that criticism is reasonable, and I’ll explain […]
Letting the Rich Subsidize the Poor - Econlib
In a recent post, I imagined a hypothetical situation where cranberries turned out to be a surefire way to prevent cancer. I described how this would create a huge shift in demand, leading to an increase in prices, which in turn would lead to an increase in supply: Suppose tomorrow, scientists announce that eating 100 […]