Category: Economics

Krugman’s leeches analogy today spurs me to comment: If the police department in your town is doing a bad job and the crime rate is high, the obvious solution is to cut funding for the police department! Sounds a lot like bloodletting theory, dontcha think? We’ll just drain off the bad blood! It’s so simple and…

Two articles in The New York Times today got me thinking about the tragedy of the commons. This is not new thinking, but it’s not widespread enough, in my opinion. And, I hope this expresses it in a somewhat new way. One of the articles talks about the ongoing failure of pharmaceutical companies to develop…

Following up on my last post, I actually think that there are two possible explanations for the “Fed Credibility” argument’s wide deployment, both hinted at in Simon’s response to my comment: I think the credibility argument is really about the underlying motives of the policymakers, rather than their abilities. However I also think that argument…

For once a short post, inspired by Simon Wren’s suggestion that the Fed should allow (encourage) a temporary rise in wage inflation. (The merits of such a policy being obvious to many of us given the current virtues of some extra inflation, and past decades’ wage trends.) I’ve never understood the credibility danger of the Fed announcing…

Today’s New York Times article on rapid online repricing by holiday retailers depicts a retail world starting to approach the “flash-trading” status of financial markets: Amazon dropped its price on the game, Dance Central 3, to $24.99 on Thanksgiving Day, matching Best Buy’s “doorbuster” special, and went to $15 once Walmart stores offered the game…

This Galbraith article — pointing to Ron Unz’s ongoing good thinking on the topic, got me thinking: If employers are faced with higher wage rates, that gives them more incentive to invest in business capital that 1. makes workers more efficient and productive, and 2. reduces the number workers they need. Is this incentive effect figured…

I’ve pointed out before that in some areas (here, Medicare), government programs are hugely more efficient and well-run than their private counterparts. I don’t know if this qualifies as one of those, but it does make a very important point that I’ve also made before: Government is not the problem. Bad government is the problem.…

Update: More expansive discussion of this model with more graphics, here. Update 2: There is a revised and corrected version of the model and spreadsheet here, with discussion. It has long seemed to me that redistribution is, for some reason, necessary for the emergence, continuance, and growth of large, prosperous, modern, high-productivity monetary economies. No such economy has ever emerged absent…

I’ve been reading Steven Johnson’s The Ghost Map, about the London cholera epidemic of 1854, and one passage reminded me exactly of today’s economics discipline. The sense of similarity was heightened because I also (instigated by Nick Rowe) happened to be reading Mankiw’s micro textbook section on the rising marginal cost of production — a notion that…

With Republicans frantically clinging to discredited ideology and digging in their heels on raising top marginal tax rates, I thought it would be worth revisiting a post from a couple of years ago, showing some excellent long-term evidence that higher marginal tax rates are not associated with slower growth. Quite the contrary, in fact. Here you…

This item raised my eyebrows when I saw it. Joshua Tucker at The Monkey Cage points out that the Republicans are proposing we do exactly that. The idea (NYT, emphasis mine): …tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent…

I’ve often commented on how childish, really adolescent, the views of libertarians are. But it’s rare that I see such a stunning example. In a recent NYT “Room for Debate,” Russell Sobel of The Citadel gives us this: Fixing disaster relief is simple: greater use of decentralized markets, and focusing government on its proper role.…

While he (uncharacteristically) doesn’t explain or deploy it terribly well, Paul Krugman points to some very excellent research on the relationship between private debt levels and the depth and duration of (especially financial-crisis-driven) recessions. The Schularick/Taylor Vox EU article is here. The Jorda/Schularick/Taylor paper is here (PDF). I think the work is excellent in large part because JS&T…

As a many-times business owner, I noted a couple of years back that in the ecosystem of publicly traded companies, there is nobody who thinks, acts, has incentives like, or is really anything like a real business owner. I’m pleased to find that Adam Smith agrees with me (emphasis mine): The trade of a joint stock…