Economic and business historian Robert Hessen died on Monday, April 15 at age 87. I wrote some reminiscences of him on my Substack site, “I Blog to Differ.” Here I want to link to his 2 contributions to my Concise Encyclopedia of Economics. One is his article “Corporations.” Here are two key paragraphs. Here’s a key paragraph: To differentiate it from a partnership, a corporation should be defined as a legal and contractual mechanism for creating and operating a business for profit, using capital from investors that will be managed on their behalf by directors and officers. To lawyers, howev ..read more

The YouTube algorithm is a mysterious thing. It’s supposed to recommend videos you might like, based on videos you’ve watched and rated before, but as far as I can tell the recommendations are generated randomly by a half-asleep chimpanzee. Still, just as broken clocks are still right twice a day, random suggestions can manage to highlight things worth checking out. A while back, the YouTube algorithm put, of all things, a clip from Sesame Street in my recommended videos. This episode featured a guest appearance by Brett Goldstein, best known for his role in Ted Lasso as the hot-tempered and e ..read more

Economic models of cooperation and conflict are often based on the Prisoner’s Dilemma (PD) of game theory. As simple as this model is, it helps us understand whether or not a war will be fought, where “fought” includes escalation steps through retaliation—the current situation between the government of Israël and the government of Iran. Assume two countries each governed by its respective ruler, S and R. (In the simplest model, it may not matter who the ruler is and whether it is an individual or a group.) Each ruler faces the alternative of fighting with the other or not. By definition of a P ..read more

In an earlier post, I listed some questions for interventionists to consider before advocating their interventions.  This is part of my ongoing crusade to get interventionists to think about things as they actually are as opposed to a blank slate.  These two modes of thinking I call “status quo reasoning” (seeing the world as it is) versus “state of nature reasoning” (seeing the world as a blank slate). Some recent research demonstrates the importance of status quo reasoning.  In a new working paper at the National Bureau of Economic Research entitled “The Market and Climate Imp ..read more

Do you recall that student back in middle school, frantically waving his hand trying to get the teacher to call on him? That’s how I feel when I read the following sort of news story: As the US economy hums along month after month, minting hundreds of thousands of new jobs and confounding experts who had warned of an imminent downturn, some on Wall Street are starting to entertain a fringe economic theory. What if, they ask, all those interest-rate hikes the past two years are actually boosting the economy? In other words, maybe the economy isn’t booming despite higher rates but rat ..read more

Years ago, I read Banker to the Poor: Micro-Lending and the Battle Against World Poverty by Muhammad Yunus. In the book, Yunus describes the origins and purpose of the Grameen Bank. This bank specializes in offering small loans to people in poverty to help them begin to attain self-sufficiency. This isn’t a charitable organization – it’s a for-profit bank, and Yunus stresses in the book that the need to be profitable is part of what makes Grameen effective at achieving its goal of lifting people out of poverty and freeing them from a cycle of dependency. Curiously, he found that his very succe ..read more

Lately I’ve been watching Fox News Channel more than usual. I’ve noticed Jesse Waters (who replaced Tucker Carlson, who replaced Bill O’Reilly) using a phrase a lot: military-age males. He invariably uses it to refer to immigrants, typically illegal immigrants. Glenn Reynolds at Instapundit also did it recently. When you observe the males they’re talking about, you know just as much about these males as Waters, Reynolds, et al do; in other words, not much. They could just as easily go to UC Berkeley, wander around the campus, and notice that 90% or more of the males there are “military-age ma ..read more

Here are five observations about recent trends in monetary policy: 1.  The Fed would really like to avoid any further increase in interest rates. This psychological aversion to interest rate increases in not rational, and it actually makes it more likely that the Fed will find it necessary to raise interest rates even further.  That’s because this sort of “reversal aversion” is itself a form of forward guidance, which makes monetary policy more clumsy.  It increases the risk that disinflation will reverse course, requiring further rate increases. 2.  I’ve seen claims that ..read more

If the Wright Brothers could have used AI to guide their decision making, it’s almost certain they would never have gotten off the ground. That’s because, points out Teppo Felin of Utah State University and Oxford, all the evidence said human flight was impossible. So how and why did the Wrights persevere? Felin explains that the human ability to ignore existing data and evidence is not only our Achilles heel, but also one of our superpowers. Topics include the problems inherent in modeling our brains after computers, and the value of not only data-driven prediction, but a ..read more

Inheritances can be controversial because some people inherit enormous wealth while others inherit nothing or even debts. Due to this apparent inequity, even the archconservative economist James Buchanan supported massive inheritance taxes. By contrast, another free-market economist, Milton Friedman, argued such taxes are inefficient because they encourage people to consume during their lifetimes rather than save, which is better for economic growth. The monetary inheritances we receive, if any, from our parents are only a fraction of what we inherit in total. Over time, technology and knowled ..read more