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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

Open the Schools and the Playgrounds

14 hours ago

A group of researchers, spearheaded by Brown University Professor Emily Oster, have created and made available the most comprehensive databaseon schools and Covid case rates for students and staff since the pandemic started. Her data—covering almost 200,000 kids across 47 states from the last two weeks of September—showed a Covid-19 case rate of 0.13% among students and 0.24% among staff. That’s a shockingly and wonderfully low number. By comparison, the current overall U.S. case rate is 2.6%, an order of magnitude higher.
Other research has shown that hospitalization and fatality rates for school-age children are also extremely low. People 19 and younger account for only 1.2% of Covid-19 hospitalizations in the U.S. during the peak of the pandemic. The Centers

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Private Firms Cannot Censor

1 day ago

It has been commonplace lately to complain about censorship conducted by Twitter, Facebook, and YouTube.
Here’s the problem: they can’t censor. What they can do, and do do, is prevent users from posting things.
Do they have an agenda? Sure they do. And it often stinks.
But that doesn’t mean that what they’re doing is censorship.
George Washington University law professor Jonathan Turley, whom I respect a lot, writes:
Xi’s coughs came to mind as Twitter and Facebook prevented Americans from being able to read the New York Post’s explosive allegations of influence-peddling by Hunter Biden through their sites.
Notice how Turley misstates the issue to make his point. Twitter and Facebook did not prevent Americans from being able to read the New York Post. The New York

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Hirshleifer on Regression to Savagery

3 days ago

In researching my latest Defining Ideas article due tomorrow, I came across this paragraph from UCLA economics professor Jack Hirshleifer. One thing to know about Jack was how incredibly careful a scholar he was.
Substantively, the historical review here suggests an extraordinary resiliency of human populations and social structures. It is of course impossible to prove that social breakdown will never occur in the aftermath of disaster, especially when we contemplate the unprecedented catastrophe of nuclear war. But the lurid picture of post-disaster regression to savagery, that staple of fiction and of popular thought, can draw no support from the historical record.
This is from Jack Hirshleifer, Economic Behavior in Adversity, University of Chicago Press,

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Reply to Paul Romer

7 days ago

Economist Paul Romer tweeted today:
Doesn’t sound like China is going to sign up for the “Great Barrington” plan for surrendering to the virus. Wouldn’t it be refreshing to live in a country where everybody understands that it is the government’s job to do whatever it takes to protect public health?
He was referencing the following Associated Press item:
ASIA TODAY: Chinese health authorities will test all 9 million people in the eastern city of Qingdao for the coronavirus this week after nine cases linked to a hospital were found, the government announces.
I think Paul is correct to say that an authoritarian government such as China’s is unlikely to show as much tolerance for people’s freedom as the authors of the Great Barrington Declaration advocate.
It is

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How Does Big Tech Cheat and Steal?

7 days ago

Last night on his show on Fox News Channel, host Tucker Carlson interviewed Colorado Congressman Ken Buck. Buck was critical of high-tech companies, as is Carlson, and was pushing for new antitrust legislation.
But that’s not what this post is about. Twice in a 3.5 minute interview, Buck claimed that high-tech companies cheat and steal. (At the 1:00 point and again at the 2:28 point.) Buck didn’t specify how. A journalist worth his salt would have asked how. But Tucker didn’t.
Here’s my question to commenters. Do any of you know how big tech cheats and steals? Please give details.

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Sir Samuel Brittan RIP

8 days ago

Tyler Cowen, over at Marginal Revolution, quite rightly laments the death of British economic journalist, the aptly named Samuel Brittan.
Like Tyler, I first heard of Brittan’s Capitalism and the Permissive Society from the late Roy A. Childs, Jr. You might think that “Permissive” in the title is used negatively. No. One of the things Brittan liked about capitalism was that it is permissive. I’m going from memory here; my copy was destroyed in my 2007 office fire.
It was either in that book or in something else that Roy Childs told me from another Samuel Brittan writing that Brittan told the story about how Milton Friedman, with one view on one issue, got him respecting free market views more: it was that Friedman was such an outspoken advocate of a free market

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Henderson on Nobel Winners in Wall Street Journal

9 days ago

In its technical paper justifying the awards, the Nobel Committee points out a major problem with using taxes to fund government programs: taxation distorts. The term economists use is “deadweight loss,” a loss that is not offset by a gain to anyone. Economists have estimated that raising $1 in taxes doesn’t cost society only $1; it costs somewhere between $1.17 and $1.56. The extra 17 to 56 cents is deadweight loss. The committee notes that by auctioning off major electromagnetic assets, the federal government avoided having to tax as much.
This isn’t to say that the ideal auction is one that maximizes government revenue. One way to maximize auction revenue is for the FCC to act like a monopolist and hold spectrum off the market. But what matters most is that

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Casey Mulligan’s Excellent Adventure

13 days ago

A sharply dressed bearded man stood up near the door of the White House meeting room and bellowed, “HHS, you need to hear the OMB loud and clear: your AKS RIA is DOA!” and exited the meeting. As several others filed out of the room behind him, I leaned toward CEA’s General Counsel Joel Zinberg and whispered, “That must be a world record for number of acronyms in one sentence. What the hell does it mean?” Joel chuckled and said, “I have no idea, except that we’re going to enjoy working with that guy.”
“That guy” was Joel Grogan, a high-level Trump appointee in the Office of Management and Budget (OMB). The quote is from You’re Hired: Untold Successes and Failures of a Populist President, by University of Chicago economist Casey B. Mulligan. It’s about his time as

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Three Economists Walk Into a Discussion, Part 2

14 days ago

Last week I posted Part 1 of my observations on the discussion between Kevin Hassett and Austan Goolsbee. This is Part 2.
I left with the issue of the federal deficit and debt.
35:30: Goolsbee doesn’t think we’ll be Greece. We have low income tax rates, no VAT, and better demographics.
He argues that tax rates on grandkids will need to he higher. He thinks we need immigration to offset the aging of the population.
DRH comment: I’m disappointed that neither Hassett nor Goolsbee discussed refinancing the debt to 10 to 30-year bonds, thus saving on a potential time bomb if interest rates rise by even 2 percentage points.
38:00: Goda says that the chance of kids today outearning their parents in the long run is less than for my generation outearning our parents.

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On the Shortness of Time

15 days ago

Last month, in a post on an EconTalk with Bob Chitester, I seconded Bob’s view of the importance of poetry.
One of my favorites, which I never see anyone else quote, is one I learned in high school. My high school English teacher, believe it or not, was Miss English.
It’s titled “On the Shortness of Time” and is by Wilfrid Scawen Blunt. My favorite lines are the last two. Here it is:
If I could live without the thought of death,Forgetful of time’s waste, the soul’s decay,I would not ask for other joy than breath,With light and sound of birds and the sun’s ray.I could sit on untroubled day by dayWatching the grass grow, and the wild flowers rangeFrom blue to yellow and from red to greyIn natural sequence as the seasons change.I could afford to wait, but for the

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More Capital Per Worker Makes Workers More Productive

17 days ago

In a recent blog post, I wrote:
Aside for non-economists: Why would reductions in income tax rates on corporations and on high-income individuals even be expected, at a theoretical level, to increase real wages? By increasing the incentive to invest in capital. The greater the capital to labor ratio, the higher are real wages.
Commenter Robert asked:
Could someone expand on this a bit for me? Does investing in capital, mean investing in capital goods (i.e., land, machinery, tools, etc)? I don’t understand why that would necessarily lead to higher real wages.
Commenter Laron gave a nice succinct answer:
The capital goods like machinery increase labor’s productivity, which increases wages. Others can chime in with more detail or to correct me tho.
Here’s what the

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Somewhat Good News on Unemployment and Employment

19 days ago

The Bureau of Labor Statistics data on employment and unemployment in September were released this morning. It’s not nearly as good news as in the last few months, of course, something you would expect as we get closer to full employment. But it’s good news nevertheless.
The overall unemployment rate fell yet again, this time from 8.4 to 7.9 percent. That reflects two facts. The first one, which is good, is that employment increased by 275,000 between August and September. The second fact, which is bad, is that 695,000 people left the labor force. So the main driver of the lower unemployment rate was people leaving the labor force rather than people getting jobs.
Beneath those aggregate data are two pieces of good sectoral news: sectors that were hit hardest

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Three Economists Walk Into a Discussion, Part 1

22 days ago

On September 15, the Stanford Institute for Economic Policy had a virtual discussion about both Covid-19 and the views of the two major presidential candidates. The moderator was Gopi Shah Goda, deputy director of, and senior fellow at, SIEPR and the two interviewees were Kevin Hassett, who had been chairman of the Council of Economic Advisers under President Trump and Austan Goolsbee, who had had the same job under President Obama.
I watched it live.
I’ll hit some highlights and make some comments. This is Part 1.
At 4;24, Goda asks: “What are the right economic policies to provide relief to those whose livelihoods have been adversely affected by the pandemic and stimulate the economy? How much spending should we do in the short run on Covid relief issues like

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A Key Characteristic of a Banana Republic

24 days ago

Over at The Money Illusion, fellow EconLog blogger Scott Sumner lays out 21 characteristics of a banana republic. He points out that it’s not a complete list. I agree.
In particular, there’s one characteristic missing, a characteristic that has been quite relevant in the United States and in major parts of the world since early April.
It is this:
Does the government prevent people from practicing their occupation and shut down huge parts of the economy based on the idea, not that people are sick and might spread their sickness to others, but that people might be sick, even though most of them aren’t, and might spread their sickness to others? And relatedly, does it threaten people who could easily prove themselves not to be sick with fines and/or jail sentences

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Competition in Indiana Politics Leads to Reduced Regulation

26 days ago

Me: I want to go to there.

INDIANAPOLIS (AP) — Most of Indiana’s coronavirus restrictions on businesses and crowd sizes will be lifted this weekend, but people will still be required to wear masks in public for another three weeks, Gov. Eric Holcomb said Wednesday.
Holcomb, a Republican running for reelection, has faced discontent from some conservatives over coronavirus restrictions. He said he would lift statewide capacity limits for restaurants and bars and crowd limits for social events beginning Saturday because he says the state has made progress in recent weeks in slowing the spread of COVID-19. The mask requirement will be extended until Oct. 17.

This is from Tom Davies, “Indiana governor keeps mask order, drops other virus limits,” Associated Press,

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A Partial Defense of Milton Friedman’s 1970 NYT Essay

27 days ago

To understand my story, you first need to understand Friedman’s basic point. Here it is in a nutshell: Managers are employees of corporations. In the decisions they make with corporate resources, they should be responsible to the corporation. That means being responsible to the stockholders, who, after all, are the corporation’s owners. The vast majority of stockholders want the corporation to, in Friedman’s words, “make as much money as possible.” Thus Friedman’s claim that the social responsibility of a corporation is to make money. Friedman was clear that he wasn’t advocating breaking the rules. He stated that the managers should conform “to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”
I learned Friedman’s

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Evidence that We’re Better Off Than in the 1960s, #2976

28 days ago

Those of you who read Don Boudreaux over at CafeHayek know that he often gives evidence that the average American is way better off than his/her counterpart in the 1960s, 1970s, and 1980s.
This is my story comparing now to the 1960s.
I was talking to a California friend recently and we were both belly-aching about state and local governments’ assaults on Californians’ freedom. The biggest ones right now are the lockdowns. (Parenthetical note: Governor Newsom’s new purple standard is absurd. It treats the whole of a county the same even though there’s incredible heterogeneity within a county. Monterey County’s average number of cases over the last 7 days is 15.6 per 100,000 residents, putting us in the purple zone. But Monterey Peninsula’s 7-day average is 3.6,

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A Hole in the Market

29 days ago

“When markets fail, use markets.”
The above is a quote from Arnold Kling, the person who started this blog. I thought of that when reading Sally Satel, “Rethink Crisis Response,” Reason, October 2020. The whole October issue, by the way, is focused on fixing the police, and it’s excellent.
Here are the first 3 paragraphs from Satel’s article.
“Please just send one police car, please don’t have your weapons drawn, please take him to the hospital.” These are the words that many families with a mentally ill loved one have learned to say when crisis strikes. Sabah Muhammad and her siblings have spoken them several times since 2007, the year her brother was diagnosed with paranoid schizophrenia. He had been a standout student and star running back at his high school

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State Government Stymies Bars’ Attempts to Satisfy Customers #37614

September 21, 2020

Don’t let us catch you eating what we don’t think is a meal.
Bar owners have had a particularly tough go of it during the pandemic, with the governor completely shutting them down following a brief reopening early this summer, but they are getting creative as the lockdown continues. According to the state board of alcoholic beverage control, bars can open if — and only if — they offer “bona fide meals” in conjunction with their wine, beer and cocktails.
If they do, they essentially function as restaurants and must follow the rules imposed on dining establishments, and as long as Monterey County remains in the most restrictive shutdown category, that means take-out and outdoor dining only.
The ABC’s standards for what constitutes bona fide meals are fairly strict.

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Raghuran Rajan’s The Third Pillar

September 18, 2020

In his latest book, Raghuram Rajan, a chaired professor of finance at the University of Chicago’s Booth School of Business and former governor of the Reserve Bank of India, advocates what he calls “inclusive localism.” His basic idea is that there are three pillars of a good and productive society: the market, the state, and the community. He argues that the community, which is the third pillar, nicely balances the excesses of both the free market and the state.
Although there is a strong case to be made for the importance of the community, Rajan does not make it nearly as well as he could have. The Third Pillar contains many insights and important facts, but his argument for inclusive localism is half-hearted. He concedes far too much to the current large state

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NASA Is Paying for Moon Rocks

September 17, 2020

NASA is creating financial incentives for private companies to market lunar resources. This could be a first step to developing lunar mining capabilities. The biggest benefit of the program, though, is precedent. It puts the U.S. government’s imprimatur on space commerce. Given the ambiguities in public international space law, this precedent has the potential to steer space policy and commerce in a pro-market direction.
This is a key paragraph in Alexander William Salter and David R. Henderson, “NASA is Paying for Moon Rocks. The Implications for Space Commerce are Huge,” AIER, September 16, 2020.
Read the whole thing. It’s short.

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Case and Deaton on Deaths of Despair and the Future of Capitalism

September 16, 2020

In their recent book Deaths of Despair and the Future of Capitalism, Anne Case and Nobel economics prizewinner Angus Deaton, both emeritus economists at Princeton University, show that the death rate for middle-age whites without a college degree bottomed out in 1999 and has risen since. They attribute the increase to drugs, alcohol, and suicide. Their data on deaths are impeccable. They are careful not to attribute the deaths to some of the standard but problematic reasons people might think of, such as increasing inequality, poverty, or a lousy health care system. At the same time, they claim that capitalism, pharmaceutical companies, and expensive health insurance are major contributors to this despair.
The dust jacket of their book states, “Capitalism, which

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Branko Milanovic on Holiday Inn

September 15, 2020

Don Boudreaux, over at CafeHayek, has been posting about his debate with Branko Milanovic over whether middle class stagnation is a myth. I have some thoughts to add to that debate. I’ll do so at the end. But reading Milanovic’s comments reminded me of something he wrote in 1996 that I challenged in an article co-authored with my then colleague Robert McNab and my former student from Hungary Tamas Rozsas. The article is “The Hidden Inequality in Socialism,” The Independent Review, Winter 2005.
Here’s that segment of the article:
Referring to the effect of subsidies on essential items and to the quality of vacation homes for the top party brass, Milanovic argues that these privileges would not have altered measured income inequality to a great extent. He claims

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EconTalk with Bob Chitester

September 14, 2020

The latest EconTalk interview is with one of my favorite people, Bob Chitester. It’s well worth listening to, especially his story about how he, a manager of a small-city PBS station, decided to make the series that made him famous and made Milton Friedman even more famous than he was: Free to Choose.
He talks briefly, by the way, about the students who spend a week at Capitaf at Vermont working through Milton’s Capitalism and Freedom. I was the discussion leader the first time they did this, and afterwards I recommended that the next time, we drop a few chapters of Capitalism and Freedom and add a few chapters of Milton and Rose Friedman’s Free to Choose. We did that the next summer. Each book is special in its own way, something that Russ Roberts and Bob agree

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O’Rourke on the Millennials and Socialism

September 13, 2020

As soon as children discover that the world isn’t nice, they want to make it nicer. And wouldn’t a world where everybody shares everything be nice? Aw … kids are so tender-hearted.
But kids are broke — so they want to make the world nicer with your money. And kids don’t have much control over things — so they want to make the world nicer through your effort. And kids are very busy being young — so it’s your time that has to be spent making the world nicer.
This is from P.J. O’Rourke, “This is why millennials adore socialism,” New York Post, September 12, 2020.
Lots of good stuff here. I do want to address one error, an error that P.J. seems to agree with “progressives” about. He writes:
That would have been in the 19th century — during America’s first “Progressive

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Beware the Duck!

September 12, 2020

There’s one more problem with solar power: peak electricity use in California occurs in the late afternoon and early evening, when solar power is small or zero.
When I taught an energy economics course at the Naval Postgraduate School in 2015, I made that point. One student responded, “Ah, yes, the duck curve.” In response to my quizzical look, he pointed the rest of the class and me to an image like this one. The line showing the supply of electrical power from “dispatchable sources,” which, as a rough approximation, means fossil fuels, traces what looks like the tail, back, neck, and head of a duck viewed from the side. In the early morning, there’s not much power from solar so electricity production from fossil fuels is high: that’s the tail of the duck. During

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Intro to My September 12, 2011 Speech at Western Kentucky University

September 11, 2020

On the (almost) 10-year anniversary of 9/11, I gave a speech at Western Kentucky University. The speech was titled “Lessons Not Learned from 9/11: An Economic, Numerate, and Constitutional Perspective.”
Here are the opening lines:
It’s altogether fitting and proper that we should take time to remember the innocent people whose lives were lost on September 11. Fortunately, I didn’t lose anyone on that horrible day. But some friends of mine did lose people they knew and cared for; one friend lost two of his friends: one in the airplane that flew into the Pentagon and one in the World Trade Center in New York. And anyone in this audience who has ever watched a rerun of Cheers or Frasier has some connection to someone murdered on 9/11: TV producer David Angell, who,

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Ivor Cummins on the Coronavirus

September 10, 2020

I found this video by Ivor Cummins quite informative. Of course, I’m open to being told why he might be, or even is, wrong.
The data on Sweden and “dry tinder” are particularly interesting. Economists Dan Klein, Joakim Book, and Christian Bjornskov have written about this and he quotes it.
One thing I think Cummins brushed by unconvincingly is the difference between the USA Midwest and the USA Northeast, at about the 23:40 point. He says the shape is similar. He and I have a different view of the word “similar.”
One of the most upsetting parts is about how the lockdowns during the summer lengthened the time to herd immunity and therefore might themselves create an increase in the deaths in the fall and winter.

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Henderson and Horton on Whether China is an Economic Threat

September 8, 2020

Scott Horton is a well-informed foreign policy analyst who interviews people mainly about foreign policy. Because of the potential foreign-policy implications of my recent Defining Ideas article on China, Scott interviewed me last week. His interview is titled, “David Henderson on the Supposed Economic Threat from China.” It goes about 42 minutes.
There are two things I like consistently about being interviewed by Scott: (1) his energy and (2) the fact that I always learn something from him.
Here are the highlights with approximate times:
2:47: Gains from trade don’t stop at the border.
4:00: The asymmetry in the gains and losses from trade and what that means for the discussion on economic policy.
9:45: Tariffs fell gradually after the war.
10:15: The Box bought

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The Right to Labor

September 7, 2020

Honor laborers by letting them work
On this Labor Day, it’s fitting to appreciate and defend people’s right to engage in labor. That right has been under attack since March as state and local governments have threatened force to stop waiters and waitresses, bartenders, hairdressers, manicurists, gym trainers, and Pilates instructors, to name a few, from practicing their trade.
And it’s not as if the politicians defending those rules think that they themselves should be subject to them. Nancy Pelosi’s only apology for breaking a rule in San Francisco by getting her hair done was for being set up (i.e., caught on camera), not for breaking the rule. Chicago major Lori Lightfoot thought that she should be able to her hair done even though the commoners are not.  The

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