Quotes of the day

The EMH was a kind of jiu-jitsu response on the part of economists to turn weakness into strength. "I can't figure out how things work, so I'll make that a principle."--Emanuel Derman

See? Economists are scientists, after all. That which they can’t explain, they turn into an axiom.--Felix Salmon

It's remarkable that in the current debate over how to control health care costs so little attention is being given to the important results of our 10-year experiment with consumer driven health plans.--Alex Tabarrok

Political risk is like the worst kind of tax. It stifles valuable economic activity without raising any revenue for the government.--Paul Romer

I think most of the people demanding that I discuss nothing but current [healthcare] legislation understand this very well. That's because they feel exactly the same way about pro-lifers advocating for bans on partial-birth abortion, various sorts of counseling, waiting periods, and parental consent.--Megan McArdle

The [Bank of America] deal [for Merrill Lynch] was not altogether voluntary; as details have slowly emerged, the coercive role of the Fed and Treasury has loomed larger. What exactly happened in the weeks leading up to the merger? Did the deal save us all from economic apocalypse? And what does the government’s unprecedented role in it portend for the future of our economy?--William Cohan

Because earnings are taxed via income and payroll taxes, people have too little incentive to work and consume. In addition, because there is a negative externality associated with carbon, people have too little incentive to move their consumption basket toward less carbon-intensive products. In other words, the relative price of consumption compared to leisure is too high, and the relative price of carbon consumption compared to non-carbon consumption is too low. The trick is how to fix the second distortion [of consuming more expensive but less carbon-intensive goods] without making the first one [the disincentive of taxes to work and spend] worse. A tax on carbon with the revenues used to cut income taxes does that. Everyone who thinks there are negative carbon externalities should agree that is the efficient policy. A tax on carbon with the revenue squandered via lump-sum handouts to powerful special interests, however, fixes the second distortion but makes the first one worse. ... But there is a consensus, more or less, that we could fix one margin of adjustment without distorting the other margin more. That requires a cut in income or payroll taxes to be a key part of the environmental policy.--Greg Mankiw

The real question on the table is: Do we want to empower our government to punish bad behavior that was perfectly legal when it occurred? If you answer one way, you'll favor compensation for slaveholders, retraining programs for displaced workers and free (or at least inexpensive) cap-and-trade permits for polluting firms. If you answer the other way, you'll reverse those judgments.--Steve Landsburg