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David Henderson

David Henderson

David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

Articles by David Henderson

Are the Tax Cuts and Increased Wages and Bonuses Connected?

1 day ago

They might be.

Veronique de Rugy of the Mercatus Center has an excellent piece at Reason on the connection, if any, between the recent cut in the corporate income tax rates and the spate of bonuses, pay increases, and increases in employer contributions to employee 401(k)s. Her article is titled "Is Tax Reform Already Working?"

First, she lays out some basic facts:The legislation, which permanently slashed corporate tax rates from 35 percent down to 21 percent, was only signed into law last month. But more than 100 companies have already indicated that they will make big moves to benefit workers and the economy–including raising wages, handing out bonuses, granting 401(k) increases, and committing to

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The Big Victims of Drug Prohibition

2 days ago

Never forget consumer surplus.

Steven Landsburg is critical of co-blogger Scott Sumner’s proposal to give preference in licensing legal marijuana sellers to those who were previously convicted of marijuana offenses. Scott calls this "affirmative action for drug pushers." Actually, though, his quote about the policy he favors does not mention drug dealers. (The word "pushers" is a misnomer; almost no one who sells drugs "pushes" them.)

Here’s the relevant passage that Scott quoted:In Los Angeles, residents with past marijuana convictions will not only be allowed to buy licences to sell the drug, but will be given priority. Under the city’s "social-equity programme", low-income Angelenos who have previous

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For a Free Market in Plasma

4 days ago

Ottawa, Ontario and Washington, D.C. – A group of professional ethicists and economists published an open letter urging provincial governments to reconsider proposals to ban compensation for blood plasma donations. The letter is signed by 26 ethicists and economists, including two Nobel Prize winners (Alvin Roth and Vernon Smith), a recipient of the Order of Canada (Jan Narveson), amongst others.
This is the opening paragraph of today’s press release advocating legalizing a market for blood plasma. Georgetown University’s Peter Jaworski, one of the signers, asked me to sign because I am both an economist and a Canadian. I did. The actual statement is very well argued.

Some excerpts from the

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Hillary Clinton Was Wrong

5 days ago

Maerker: In Mexico, there are those who propose not keeping going with this battle and legalize drug trafficking and consumption. What is your opinion?

Clinton: I don’t think that will work. I mean, I hear the same debate. I hear it in my country. It is not likely to work. There is just too much money in it, and I don’t think that–you can legalize small amounts for possession, but those who are making so much money selling, they have to be stopped.This is from an interview of then Secretary of State Hillary Clinton in early 2011. It’s quoted by Jacob Sullum of Reason. Denise Maerker of Televisa had asked Clinton’s opinion of proposals to reduce black-market violence by repealing drug prohibition.


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Welcoming Prejudice

6 days ago

I don’t believe in intellectual cooties.Reason: This year there has been a lot of discussion about whether there’s a pipeline between libertarians and the alt-right.

Sharpe: Yup.

Libertarian Party Chair Nicholas Sarwark has been drawing some bright lines.

It’s a really bad idea. It’s a really bad idea. Why would I tell anyone to leave my party? How can I turn you if I can’t talk to you? Come, even white nationalists, come. If I can turn you, I’ll turn you. My hero is that guy Daryl Davis. You know that guy? He’s one of my brothers who was out there trying to get KKK members to turn. And he keeps their hoods as a trophy. He’s turned like 44 of them in 30 years. That’s my hero.

The vast majority of those

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Has President Trump Been Very Consequential?

8 days ago

Over at his other blog, TheMoneyIllusion, fellow EconLog blogger Scott Sumner writes:I’ve often suggested that Presidents have far less power than people assume, and that events tend to follow the "zeitgeist", or the prevailing mood in the country. That’s why Obamacare was not repealed, and it explains why Trump has not been very consequential, despite his obvious personal flaws. I agree with Scott that Presidents have far less power than people assume.I don’t agree, though, that he "has not been very consequential." The way to tell is to do one’s best to imagine what a President Hillary Clinton would have done.

There are a number of areas in which we have seen and, I think, will see, a big difference

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But or Therefore?

9 days ago

"Marin County has long resisted growth in the name of environmentalism. But high housing costs and segregation persist."

So reads the title of a news story by Liam Dillon in the Los Angeles Times. The reporting is excellent. I hope Mr. Dillon didn’t choose the title.

Here are four key paragraphs:Marin residents often win fights to keep the county’s landscape unspoiled by large, new construction. The county, which sits across the Golden Gate Bridge from San Francisco, is home to Point Reyes National Seashore and many other natural splendors.

But residents’ long-standing distaste for development hasn’t led just to the preservation of open spaces. In this affluent enclave of high real estate and rental

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Both Sides–BDS and Israel’s Government–are Wrong on BDS

9 days ago

And an appeal to basic principles of freedom explains why.In his novel 1984, George Orwell gave us the memorable term "thoughtcrime" to describe thoughts which the state punishes to protect itself from criticism. The Strategic Affairs Ministry’s recent decision to bar the members of numerous BDS (Boycott, Divestment and Sanctions) groups from traveling to Israel is punishing them for the "thoughtcrime" of trying to voluntarily persuade people to boycott Israeli goods. BDS members taking this position are violating no one’s rights, but the Israeli travel bans, by contrast, do violate people’s rights, ironically making the Israeli government guilty of the very illiberality that the BDS movement has long

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Economic Freedom via Freedom of Speech

11 days ago

To paraphrase the Eleventh Circuit, imposing a surcharge rather than offering a discount is no more misleading than calling the weather warmer in New Orleans rather than colder in San Francisco.

This is from the United States Court of Appeals for the Ninth Circuit decision allowing retailers to state they are charging a surcharge for use of credit cards rather than giving a discount for the use of cash.

Here’s another excerpt from their decision:Applying intermediate scrutiny, the panel held that the activity to which plaintiffs’ desired speech was directed – charging credit card users more than cash users – was not unlawful or misleading. The panel held that enforcing section 1748.1 against plaintiffs

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Henderson on Trump

11 days ago

Richard Reinsch, the editor of our sister Liberty Fund blog, "Law and Liberty," asked me to write a response essay to this essay on Donald Trump by Greg Weiner. When I accepted, I didn’t know Professor Weiner’s views well and I assumed that because Law and Liberty tends to be conservative, his essay would be mainly positive towards Donald Trump.

I was wrong. Greg actually was quite critical of Donald Trump and it was mainly on Burkean conservative grounds.

So what I wrote was a balanced assessment of Trump in which I tried to put some of the conservative objections to Donald Trump’s style in perspective. The title of my piece, which was changed at the last minute to more accurately reflect the content,

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Henderson on The New Tax Law

12 days ago

I’ll be speaking to the Monterey Peninsula Republican Women this Thursday.

Topic: An Economist Analyzes the New Tax LawDate: Thurs, Jan. 11thTime: 11:30AM – 1:30PMLocation:Rancho Canada Gold Course, 4860 Carmel Valley Rd., Carmel Valley.

It’s a luncheon with a fee but I’m told that you can show up and just see the talk. But to make sure call:Sylvia at 831-484-1104.

The main speaker is Brad Dacus of the Pacific Justice Institute and his topic is "Freedom of Religion."

I don’t know which order the talks are in. Mine is limited to 15 minutes.

Comments and Sharing

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Henderson and Williams on Free to Exchange

12 days ago

My long-time friend Ben Powell, a professor of economics at Texas Tech University and the director of the Free Market Institute there, is quite a good interviewer: asking good questions and coming up with good lines apparently on the fly.

Here’s a link to a recently aired "Free to Exchange" episode. The first 13 minutes are with Walter Williams and the last 11 minutes are with me.

Times below are approximate. I’ve highlighted only the parts from the interview with me, although I highly recommend watching the interview with Walter too.

13:00: Brief history of draft.14:00: Why draft doesn’t lower cost of having a military.15:00: Great question in optimal tax theory.16:00: Elvis Presley.16:40: Bill

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Jonathan Weisman’s Bias

13 days ago

Jonathan Weisman is a New York Times reporter on economic policy. Back in 1999, he reported on economics for the Baltimore Sun.

The web is great. On my computer that burned in my fire in 2007, I had both the news report he did in which he quoted me and my published letter to the Baltimore Sun correcting his error and calling him out for his bias. I thought it was lost. But no fear: the web is here.

This weekend I found both his original news story and my letter.

His story is titled "President’s economic legacy debated," and is dated March 17, 1999. The line directly underneath is "Clinton claims credit, but experts disagree."

Here is the the part where he refers to me. (He refers to me later too but

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Craigslist Reduced Female Homicide Rate by Over One Sixth

15 days ago

Female prostitution is both illegal in most American cities and extremely dangerous, as prostitutes face risks of violence from the environment and clients. Previous studies suggest that prostitution has the highest homicide rate of any female intensive occupation in the United States by several orders of magnitude. Policies that can efficiently minimize these hazards are therefore of prima facie importance. Between 2002 and 2010, Craigslist provided an "erotic services" section on its front page which was used almost exclusively by prostitutes to advertise illegal sex services. The company opened this service in different cities at different points in time. We use a differences-in-differences strategy to

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Kathleen Wynne is Wrong

16 days ago

What do economists predict employers of low-wage workers will do when a government raises the minimum wage by a large amount, say, $2.40 an hour?

An increase in the minimum wage doesn’t magically make low-wage workers more productive. So we predict that employers will reduce other components of the compensation package: reduce paid breaks, reduce their contribution for benefits such as health and dental insurance, and reduce other components of the pay package.

That is exactly what two owners of Tim Hortons coffee shops in Cobourg, Ontario are doing in response to the $2.40 per hour increase in the minimum wage that became law in Ontario on January 1. This is from a Canadian Press news story published

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Play the Hand You’re Dealt

17 days ago

In response to co-blogger Bryan Caplan’s post about being on the Fox News Channel (FNC), one commenter wrote:The Fox News Network, and Carlson in particular, are basically running propaganda operations for the Trump administration. While regular readers understand that you have many disagreements with Fox show hosts, nonetheless, your interview was used to further their nihilistic propaganda goals.

I wish everyone would boycott Fox, but if they allow you to make your case against immigration restrictions, for example, it would be worth appearing since you’re no easy foil.Note his implicit assumption that every FNC viewer already agrees with Bryan that all subsidies to higher education should be ended. I

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The Unintended Consequences of Drug Reimportation

17 days ago

Allowing U.S. consumers to engage in parallel trade would require pharmaceutical companies to lower prices here, negotiate price increases with other OECD governments, contracturally prohibit buyers from re-selling, or reduce drug sales to low-price countries so that they have no surplus to export. None of those options are as easy as lobbying the U.S. government to prevent parallel trade and preserve America’s status as a lone cash cow in a world of price controls.
This is from Mike Riggs, "Are Canadian Pharmacies the Solution to America’s High Prescription Drug Prices?", Reason, January 3, 2018.

Riggs cites testimony by Cato Institute legal scholar (and my friend) Roger Pilon in which Pilon links to an

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Mea Culpa on Fourth Amendment Showdown

18 days ago

On November 29, I argued that the legal authorities should have gotten a warrant if they wanted to access the information on where Timothy Carpenter made calls from. The basis for my argument was that getting the information without Carpenter’s consent violated his Fourth Amendment rights.

I think I was wrong.

In the comments, Phil wrote:But the records the police obtained where not Carpenter’s records; they were the phone company’s records. The law is well established (Smith v. Maryland) that when you share your information with a third party — like a bank when you write a check, or the phone company when you dial a phone — you can no longer say it is your private information. Exceptions, of course,

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Robert Murphy Helps Resolve an Economic Paradox

19 days ago

If it’s true that a worker gets paid an amount just equal to what he or she adds to total economic output, then how can there be any surplus left over to benefit the masses? In particular, suppose that an incredibly productive person decides to drop out of the workforce altogether. Should the rest of society even care, or is it all a wash?

It turns out that there’s no contradiction between these principles: Even though a worker is paid the value of his or her marginal product, it is still true that the rest of society benefits from the worker’s contribution to the economy. And look at it another way: If highly productive workers were suddenly to become monks, the rest of us would be materially poorer,

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Money as Coined Liberty

21 days ago

Here is another installment of the questions I asked as discussion leader of a colloquium on Ken Rogoff’s and others’ proposals to abolish $100, $50, and possibly $20 bills. I’ve previously posted here, here, and here.

(1) On page 64, Rogoff, in discussing German opposition to a proposal to cap cash payments at 5,000 euros, writes:"Curiously, the opposition’s rallying cry seems to be ‘Money is coined liberty’ from Dostoyevsky’s The House of the Dead."In explaining why he thinks this is curious, Rogoff writes:"To draw an analogy between life in a Tsarist prison and life in the modern liberal state as a defense of large-denomination notes borders on the absurd."This leads to two questions:(i) When one

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Tales of Chicago Workshops

22 days ago

A number of economists are posting on Facebook this morning about the article on Princeton economist Anne Case’s view on why so few women go into economics. The piece is short and I have nothing to add to it, other than that I think she is probably right.

What I do want to add is about University of Chicago economics workshops. (When I presented there in 1977, it was called a "workshop." They still call them that. I presented my recently completed Ph.D. dissertation in the famous industrial organization workshop. By the way, I still am proud of the way I handled criticisms from one of the toughest critics, Lester Telser.) Those workshops have come up in some of the Facebook comments.

What follows is

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Bombing Makes People Mad

24 days ago

This study uses discontinuities in U.S. strategies employed during the Vietnam War to estimate their causal impacts. It identifies the effects of bombing by exploiting rounding thresholds in an algorithm used to target air strikes. Bombing increased the military and political activities of the communist insurgency, weakened local governance, and reduced noncommunist civic engagement. The study also exploits a spatial discontinuity across neighboring military regions that pursued different counterinsurgency strategies. A strategy emphasizing overwhelming firepower plausibly increased insurgent attacks and worsened attitudes toward the U.S. and South Vietnamese government, relative to a more

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Mark Steyn Agrees with Bryan Caplan on Immigration

24 days ago

About one important factual claim, not about the best policies.

My fellow Canadian Mark Steyn wrote recently about what he sees as some of the harmful effects of Muslim immigration into Europe. I hasten to say that I don’t disagree with everything he says. Check this interview he does about the Muslim population in Malmo, Sweden and see if you don’t feel at least a little concerned about the "Aim and shoot at the Jews" line (at about the 3:07 point) chanted by a number of Muslim activists in Sweden.

That’s the bad news.

Here’s the good news. Steyn writes:As I said to Tucker Carlson the other night, the demographic transformation of the western world is "the biggest story of our time", and it will indeed

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Market Failure or Market Success?

25 days ago

Rising incomes also have contributed to our expanding waistlines. U.S. GDP per capita and calorie intake have risen virtually in tandem since 1970. At the same time, the growth of the service sector and the use of workplace technology have made our working lives more sedentary, so we burn fewer calories.

The net effect of these changes has been a classic case of market failure: Unbounded demand has met almost unlimited supply, and the resulting over-consumption has greatly harmed our society’s health. Contrary to conventional wisdom, we don’t believe that the remedy is necessarily better education about nutrition: Everyone reading this probably knows, for instance, that salad is a healthier option than

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Would Rogoff’s Preferred Policy Reduce Liberty and Privacy?

27 days ago

I’ve posted a few times (here and here) on Kenneth Rogoff’s proposals to get rid of the $100, $50, and possibly $20 bill. Here are a few more questions I asked about his writing at the colloquium:On page 93, second paragraph, Rogoff distinguishes between "protection from government snooping and protection from relatives, friends, employers, or other private entities." He would like less protection from government snooping than from relatives snooping.

Question: Does he have his priorities right? If we must choose, which would you prefer: more protection from government snooping than from relatives or less protection from government than from relatives? And why would you choose the way you would?

On page

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My Shortrun Tax Strategy

29 days ago

I promised yesterday to say more about the short-run implications of the tax bill for me. I’m not giving advice but some of you might find this helpful.

The first major point is that the increase in the standard deduction to $24,000 changes things a lot for my wife and me. We have been itemizers ever since buying a house in 1986. But our mortgage interest is now down to about $3,000 a year, we give somewhere between $2,000 and $2,500 to charities annually, our property taxes are about $4,000 a year, and our state income taxes (we live in high-tax California) are about $10,000 a year. That totals about $19,000. With the limit on deductibility of state and local taxes (SALT) of $10,000 a year, we would have

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Five Thoughts About the Tax Bill

December 21, 2017

Here are five thoughts about the tax bill: they are from big-picture economic analysis. Later today or tomorrow, I’ll post on how I plan to adjust my behavior before December 31, 2017 in response to the tax bill.

1. How economists judge tax cuts.Economists across the political spectrum, to their credit, do not view the tax bill the way almost everyone else does. Most people look at how much more or less they will pay in taxes. Economists tend to look at the overall effects. I think, by the way, that this speaks well of economists. Whatever you think of Paul Krugman, for example, notice that he never talked about the effect of the tax bill on himself. Without knowing a lot of details about his income and

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Krugman Talks Sense on Trade and Immigration

December 20, 2017

On December 15, the Business Insider posted an excellent interview by Josh Barro of Paul Krugman. It’s excellent in the sense that Josh kept the conversation going quickly, as did Paul, so that they managed to cover a lot of issues.

They started, of course, with the tax cut, and I don’t know enough–and I think no one knows enough–to evaluate Krugman’s claims about its effects. He, not surprisingly, minimizes the effect on growth and on real wages; I’m more optimistic, but we’ll see.

There is one part, about why the economy is doing so well, where I disagree with Paul. He states:The economy’s pretty good. In fact, it looks like we’re close to full employment, although we don’t know why wages aren’t

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Dianne Feinstein’s Misunderstanding of the Mortgage Deduction

December 19, 2017

Many tweeters have been making fun of the following Dianne Feinstein tweet:The Republican tax bill caps the mortgage interest deduction at $750,000 for new mortgages. In California, seven counties have average home prices that are more than $750,000: Alameda, Marin, Orange, San Francisco, San Mateo, Santa Clara and Santa Cruz counties. #GOPTaxScamThey point out, probably correctly, that this is not the usual messaging that the Democratic Party uses. I’ll let you read some of the comments.

But my criticism is more on the straight economics, not the politics.

Feinstein’s point pretty clearly, or else she wouldn’t have hash tagged #GOPTaxScam, is that this tax bill is really bad for people whose houses

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Peace at a 49ers Game

December 18, 2017

Yesterday I attended only my second NFL game. What a game to choose, with the home team winning in the last 3 seconds with a come-from-behind field goal. Field goal kicker Robbie Gould made 6 field goals on 6 attempts. Field Gould, anyone?

Now to the economic point, which my friend, co-author, and fellow attendee Charley Hooper pointed out: This was a stadium in which there were at least 50,000 people and it was, as far as we could tell, completely peaceful. Many of you probably think: what’s the big deal? Of course it was peaceful.

But that’s the point. Of course it was peaceful. Fights are the unusual even at a Raiders game. And it’s the "of course" that’s so striking. Charley quoted Matt Ridley’s

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