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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

Cass Sunstein’s Critique of Samantha Power

22 hours ago

For those who don’t know, Harvard law professor Cass Sunstein, whose book Simpler I reviewed [scroll down about 80 percent] a few years ago and whose book The Cost-Benefit Revolution I reviewed [scroll down about halfway] earlier this year, is married to former U.S. Ambassador to the United Nations Samantha Power.
Power has recently published The Education of an Idealist, and I discussed her worldview briefly earlier this week.
In Simpler, Sunstein, drawing on psychologist Daniel Kahneman, lays out two cognitive systems. He writes:
System 1 is the automatic system, while System 2 is more deliberative and reflective. System 1 works fast. It is emotional and intuitive. When it hears a loud noise, it is inclined to run. When it is offended, it wants to hit back. Much

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The Balance Sheet of Supply Side Economics

4 days ago

The major pluses of their [the supply-siders’] approach have been three. First, they came up with a way to dramatize the fact that an x percent increase in tax rates–even if it leads to higher tax revenues–will cause less than, and possibly much less than, an x percent increase in tax revenues. This was best illustrated by Arthur Laffer, with his Laffer Curve.
Second, the supply-side economists’ focus on incentives made unprecedentedly prominent the harmful effects of high marginal tax rates. As a result, in the early to mid-1980s, the supply siders’ views caused a fair number of mainstream members of an elitist economics profession to examine the importance of high marginal tax rates. Third, supply siders had a substantial effect on thinking about taxation in the

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A Celebration of the U.S. Constitution

5 days ago

Below is an article reprinted from It is an edited version of a talk I gave about the U.S. Constitution on September 17, 2007. I’ve edited it slightly since it appeared in 2007. Specifically, I made a charge at the end against George W. Bush that turns out to be almost certainly unjustified and so I removed it.
Author’s note written in 2007: Sept. 17 was the 220th anniversary of the signing of the U.S. Constitution. To commemorate that day, California State University, Monterey Bay (CSUMB) held a public forum with a panel of four speakers: David Anderson, a history professor at CSUMB; Michelle Welsh, a lawyer and member of the ACLU; John Arquilla, a professor at the Naval Postgraduate School; and me. What follows is the talk I gave. Even though I criticized left/liberal icons

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Some Basic Arithmetic on Carbon Dioxide Emissions

5 days ago

A number of people in the United States argue for increasing the number of electric vehicles as a percent of the automobile stock.
Their argument is that in the United States, transportation contributes 29% of the total carbon dioxide emissions. (Everything that follows is 2017 data.) Industry contributes 22%, electricity contributes 28%, commercial and residential contribute 12%, and agriculture contributes 9%. A friend of a friend tells me that light-duty transportation vehicles account for 59% of that 29%, which is 17% of total CO2 emissions.
Imagine that replacing all light-duty transportation vehicles with EVs reduces their contribution by the full 17 percentage points. (Of course, it wouldn’t because the electricity for EVs must be generated, so the 17

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Samantha Power: The Woman of System

7 days ago

We need to restore a constituency and a faith that we can have a productive foreign policy, and I think that part of what that will entail is putting diplomacy and burden sharing at the front of our messaging and of our packaging and of our actions. Right now, humanitarian intervention, if it happens — and it’s happening in different places around the world — but is much more likely to be done by regional organizations like the African Union than it is to be orchestrated by great powers.
And given the lagging public opinion, until some successful actions are prosecuted — depending, again, on the circumstances — that may be a wise thing. But that doesn’t mean that the United States doesn’t have a role, for example, in training and equipping the troops that are

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Michael Grossberg on Libertarian Futurism and Pretty Much Everything

10 days ago

I’m not big on libertarian futurism or on science fiction. I’m not bragging. On the contrary, I think it’s due to my lack of imagination.
So when I recommend an interview on the Libertarian Futurist Society’s (LFS) Prometheus Blog, you can be fairly confident that it would interest not just libertarian futurists but also libertarians and maybe even an audience broader than that.
I highly recommend the blog’s interview with LFS founder Michael Grossberg. (I knew Michael briefly in the early to mid-1980s and we lost touch.) It covers lots of ground. Some highlights follow.
On current Democratic president candidate Marianne Williamson:
Yes, but back then Marianne was an aspiring actress, very talented and stylish, and a very smart student, in several of my advanced

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9/11, Six Years Later

11 days ago

George W. Bush has provided, and is providing, much of that pavement.As you know if you’ve been paying attention to the news, this is the 18th anniversary of the murders of almost 3,000 people in Washington, D.C., New York City, and Pennsylvania.I wrote a piece for 6 years after the event and, since I own the copyright, I’m reprinting it here:
It has been six years since the horrid attacks of Sept. 11, 2001. Throughout that time, George W. Bush has been president of the United States and, especially given the emphasis he has put on 9/11, it’s fair to judge him on how well he’s done on policies aimed at responding to 9/11. I will leave out, except tangentially, a judgment on his policies on civil liberties, not because I don’t have one, but because I want to focus

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Michael Trump or Donald Dukakis

12 days ago

In researching my article “Donald Trump Vs. Adam Smith,” I came across Michael Dukakis’s speech to Moog Automotive, an auto parts firm near St. Louis. What I found striking is the uncanny resemblance between Dukakis’s and Donald Trump’s views on foreign trade and even on making American great again. Thus the title of this post.
Here’s the segment on C-SPAN. Missouri Congressman Dick Gephardt warms them up with his economic nationalism and then Dukakis continues the message.
Some highlights:
8:20: Gephardt wants an aggressive trade policy.
12:10: Gephardt wants to “Make America #1 Again.”
13:30: Dukakis wants to “Make America #1 Again.”
19:00: Dukakis says the president is commander in chief of the battle for America’s future. (Lawyer Dukakis must have been dozing

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Me on Andrew Yang on PBS Website

13 days ago

Yang’s plan for a VAT “takes us right away to European levels of government spending,” David R. Henderson, an economics professor at the Naval Postgraduate School and a research fellow at the conservative Hoover Institution, told the NewsHour. “A VAT to fund UBI (universal basic income) then gets rid of our degrees of freedom to deal with the deficit.”
This is from Dan Cooney, “How would Andrew Yang give Americans $1,000 per month? With this tax,” PBS Newshour, September 9, 2019. I said a lot of things in my 15-minute phone interview that Dan could have used. But, and this is rare in my experience with media people, I think he used the most important thing I said. I would definitely talk to him again. Nice going, Dan.
One little correction: I’m an Emeritus

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Donald Trump versus Adam Smith

13 days ago

The three quotes above give two opposite views of a country’s trade deficit. According to the first two, by Donald Trump, the U.S. trade deficit is a major problem that must be fixed. According to the third quote, by 18th-century economist Adam Smith, the idea of a balance of trade is absurd. Who’s right? I won’t keep you in suspense. President Trump is wrong and Adam Smith is right. But what matters crucially is why Trump is wrong and Smith is right.
First, the U.S. merchandise trade deficit, which is what most people are referring to when they talk about the trade deficit, is somewhat offset by the positive balance on services and further offset by the difference between income received from abroad and paid abroad.
Second, even for those who worry about the

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Murphy on Henderson and Carbon Taxes

14 days ago

There are several problems here. First, even if we agreed that government (as opposed to private) payments for tree-planting made sense, it doesn’t at all follow that the revenue should come from a carbon tax. In general, raising a dollar of revenue from a tax on carbon content hurts the economy more than raising a dollar from taxing labor or consumption. (My article on the “tax interaction effect” gives the economic intuition behind this point.) So if the government needs to raise $x billion in order to pay people to plant enough trees to strike a blow against harmful climate change, then there’s no reason to raise that $x billion through a carbon tax. It would be less harmful to the economy to raise that revenue using taxes that fall on a broader base, so that

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Author on British Inheritance Misses Two Important Points

15 days ago

In a recent article titled “Is property inheritance widening the wealth gap?” author James Gordon points out that people in Britain who own houses will often leave them to their adult children and, thus, adult children of Brits with no houses will see a large gap between their wealth and those of their housing-endowed peers.
To his credit, Gordon provides balance by citing American economist and occasional EconLog blogger Steve Horwitz:
“I don’t see inheritance being the game-changer that everyone thinks it is,” he [Horwitz] says. “With baby boomers living much longer, even if their sons and daughters are set for a bumper sum of money, many won’t receive it until they are in their mid-60s and by then they will be financially secure and won’t necessarily need it.

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Paul Romer Likes Anarchy and Thinks It’s Government

16 days ago

Mr. Romer’s answer is to do with this moment what Burning Man does every summer: Stake out the street grid; separate public from private space; and leave room for what’s to come. Then let the free market take over. No market mechanism can ever create the road network that connects everyone. The government must do that first.

In all of this, Mr. Romer has been creeping further from the economists toward the urban planners. By the time he got to Burning Man in August, he was thinking of himself as a University of Chicago-trained economist, once indoctrinated in the almighty free market, now in open revolt against his roots.

They “invented a sense of superordinate civic order — so there would be rules, and structure, and streets, and orienting spaces, and

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Arnold Kling’s ex-Communist Mother’s Testimony

17 days ago

Arnold Kling, who previously was a mainstay of EconLog and now has his own blog, posted this morning with a link to his mother’s fascinating testimony before a St. Louis meeting of the famous House Unamerican Activities Committee. His mother, Anne Ruth Kling, nee Yasgur, had been a member of the Communist Party during and slightly after World War II. That in itself I find fascinating. My mother, who died in 1969 while I was forming my political views, told me that she sometimes voted for the New Democratic Party, which was (and is) the socialist-leaning party in Canada. There’s no comparison: my mother voting occasionally socialist and Arnold’s mother was a dedicated Communist. On the shock scale, Arnold’s mom wins big time.
I found several things fascinating

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You’re Not Using the Money for Anything

18 days ago

After watching scary British crime dramas, my wife and I often turn to a rerun of The Big Bang Theory for comic relief. I find myself laughing almost as hard the 10th time I see an episode as I did the first time.
Last night, though, one comment of Penny’s stood out and it bugs me every time I hear it. She learns that even though she is the high earner in her marriage, her husband Leonard has squirreled away over $6,000 in a secret bank account. She’s upset.
I get that she’s upset. Trust and openness in a marriage are important. But here’s what I don’t get, or, rather, I get and disapprove of. She castigates Leonard because he’s not using the money for anything.
There are two possible meanings of “not using the money for anything.” The charitable interpretation

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Extended Warranty Prices as a Market Measure of Quality

19 days ago

Yesterday, as I was writing my latest piece for the Hoover Institution’s on-line publication Defining Ideas, I was telling a friend that when my wife and I shop for cars, we pretty much shop for only cars made by Japanese companies. In our experience, and in the data we’ve looked at over the years in Consumer Reports and elsewhere, cars made by Japanese companies* are much more reliable than those made by U.S. companies.
One set of data I’ve looked at that confirms that is on resale prices. Japanese cars tend to maintain their value much better than American cars.
He told me some other data that also confirm this. Last year he shopped for a used car and wanted a reliable 2012 model. Because he wanted it to be reliable, he priced an extended warranty. For U.S.

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Labor Day Vignettes

20 days ago

I’ve spent from 7:30 this morning to 1:30 this afternoon working on my next article for the Hoover Institution’s on-line publication, Defining Ideas. I’m putting the labor back in Labor Day.
Before I go home, I want to highlight a few Labor Day thoughts.
From my article “Honor Laborers,” which appeared on September 5, 2016:
Most Americans think of Labor Day as part of a long weekend and the unofficial end of summer. It was originally meant, though, to recognize the contributions of labor unions. I recommend a third alternative: use Labor Day to honor laborers.
Read the whole thing.
From Timothy Taylor, “Taming the Demon of Work,” September 2, 2019:
When my wife was getting an MBA, it was common to hear advice about career choices along the lines of “find your

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Two Poems by David R. Henderson

24 days ago

I gave a talk last night to approximately 80 members of the local Lincoln Club, a group within the Republican Party of California. The topic was “President Trump’s Economic Policies: A Balanced Assessment.”
After giving some basic background about myself, I showed them a poem that summed up my talk. I’m hereby copyrighting it.
There was a president,
Who had an orange curl,
Right in the middle of his forehead.
When he was good
He was very good indeed,
But when he was bad he was horrid.
–David R. Henderson (with apologies to Henry Wadsworth Longfellow)
The very good indeed was the tax cut and deregulation and slowing of new regulation.
The horrid was international trade (tariffs), immigration, and government spending (the last with help from Democrats.)

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Update on Trees and Global Warming

25 days ago

Last week I wrote an article in which I suggested planting trees as potentially a much cheaper way to slow or even reverse global warming, cheaper, that is, than a carbon tax. I wrote:
The third low-cost way to rein in global warming is by planting trees. Trees absorb and store CO2 emissions. You could call the tree-planting strategy geo-engineering, but it would count as such in a very low-tech form. According to a July 4, 2019 article in The Guardian, planting one trillion trees would be much cheaper than a carbon tax and much more effective. At an estimated cost of 30 cents per additional tree, the overall cost would be $300 billion. That’s large, but it’s a one-time cost. Moreover, writes The Guardian’s environment editor Damian Carrington, such a

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Great Moments in the Labor Theory of Value

26 days ago

Mark Brady

Aug 27 2019 at 1:54pm

Whatever the shortcomings of Professor Asao Inoue’s approach, Jonathan Turley’s writing also falls short of clarity.
Turley writes, “Professor Asao Inoue believes that writing ability should not be assessed to achieve “antiracist” objectives.”
For a minute this threw me completely.  I suggest that what Turley means is “Professor Asao Inoue believes that “antiracist” objectives are better achieved by not grading writing ability.”  That said, I’m not persuaded that this is in fact what Inoue believes.
Turley also writes, “These students are not going to be evaluated in their careers by their “labor” or given tailored standards.

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An Ah Hah Moment While Shopping

28 days ago

I think I understand one side of Bernie Sanders.
I returned a few minutes ago from shopping at the Lucky Supermarket in Pacific Grove, California. On the shopping list was a particular kind of cheese my wife wanted: Sargento Sharp Cheddar in slices. I had to look at a long row of similarly packaged cheeses to find the right one. It got me to realize that whether I shop for cheese, toothpaste, tortillas, olive oil, or numerous other items, I usually have to look carefully to find just the right one my wife wants or I want.
This time a little voice in my head said, “Why can’t they have a narrower choice so it’s easier to find what I want?”
That was my inner Bernie Sanders voice. If you don’t know what I’m referring to, it’s a comment by Bernie Sanders in May 2015

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David Koch, RIP

August 23, 2019

David Koch, who died today at age 79, was a generous human being. His generosity ranged from contributions to libertarian projects relatively early in his life to contributions to art and medical research late in his life.
People who knew him better than I will, I’m sure, talk about many of his contributions. I want to talk about my first big awareness of him and about the event at which I took the picture above.
In May 1979, I ran for, and was voted in as, a delegate to the 1979 Libertarian Party convention in Los Angeles. At the time I was an assistant professor at the University of Rochester’s Graduate School of Management (now the Simon School) and was about to leave to become a senior policy analyst at the Cato Institute in San Francisco. Being a cautious

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A Carbon Tax Is Not a Slam Dunk

August 21, 2019

Advocates of a carbon tax argue, correctly, that a tax is a much better way to reduce carbon usage than any system of regulations could be. The reason is that every use of carbon that creates carbon dioxide imposes damage, and a carbon tax based on the amount of carbon dioxide created will cause everyone who creates carbon dioxide to, indirectly, take that damage into account. The carbon tax beautifully scales the payment to the damage: those who create more damage pay more in carbon taxes.
By contrast, a system of regulations or subsidies that favors one energy source over another, or one energy use over another, depends on central planners having information that they cannot possibly have. So, for example, if government planners require that a certain percentage

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Bernie Sanders Didn’t Say It

August 19, 2019

When I wrote a review of the excellent Socialism Sucks by Bob Lawson and Ben Powell, I quoted a passage from it that they attributed to Bernie Sanders. It did sound extreme, even for Bernie, and I should have checked.
Unfortunately, I didn’t. That’s a problem because Bernie didn’t say it.
Here’s the relevant passage in my review:
They [Lawson and Powell] quote Bernie Sanders’s 2011 comment that “the American dream was more apt to be realized” in Venezuela than in the United States.
In “The Falsity of the Sanders Venezuela Meme,” Ouillette, March 10, 2018, Jack Staples-Butler lays out some excellent detective work in which he explains where the quote came from.
Staples-Butler writes:
So did Sanders write it? This mystery was resolved with a single email to the

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Keynes’ Understated Criticism of FDR’s New Deal

August 18, 2019

One main component of Franklin Roosevelt’s New Deal was the National Industrial Recovery Act (NIRA), which cartelized hundreds of American industries. If FDR’s goal was, as the name of the act implies, to  help industries recovered from the depth of the what would later be known as the Great Depression, the NIRA never made sense. When you cartelize an industry, you cut output and raise prices. With output being so low, you make the situation worse, not better.
My EconLog co-blogger Scott Sumner posted yesterday about an interesting letter that John Maynard Keynes wrote to Franklin D. Roosevelt during FDR’s first year in office, 1933. Scott highlighted the parts of the letter that interested him, having to do mainly with monetary policy. Scott briefly mentions

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Great Moments in Price Discrimination

August 17, 2019

Below is a quote from a news item in the Washington Post by Casey Quackenbush, August 15, 2019. It’s titled “A Run on Gas Masks: Hong Kong protestors circumvent crackdown on protective gear” and is quoted in Liz Wolfe, “Hong Kong’s Market Is Providing Gas Masks and Protective Gear Despite Government Crackdown,”, August 16, 2019.
At big protests, [Lee] rents a stall nearby and sells packets containing an eye mask, respirator, gloves and helmet. The packet costs him about $64, but he sells on a pay-what-you-can basis. The student price is $1.27…At a recent protest, Lee said, about 20 police came to his stall looking for ‘laser pens or other dangerous goods.’
He packages his supplies in black plastic bags. That way, protesters won’t get stopped on the

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The New York Times Is Truly Messed Up

August 16, 2019

Although rightly rejected today, the Virginia-born Fitzhugh attained national prominence in the late antebellum period as one of the most widely read defenders of a slave-based economy. Charles Sumner called him a “leading writer among Slave-masters,” and his regular contributions to the pro-South magazine DeBow’s Review gained him a national readership in the 1850s.
In 1855 Fitzhugh embarked on a publicity tour of the Northeast, jousting with abolitionist Wendell Phillips in a series of back-to-back lectures on the slavery question. By 1861, he had added his voice to the cause of southern secessionism and began mapping out an elaborate slave-based industrialization policy for the Confederacy’s wartime economy.
Fitzhugh was also an avowed anti-capitalist.

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A Day That Should Live in Infamy

August 15, 2019

August 15, 2019 is the 48th anniversary of President Nixon’s announcement of a 90-day freeze on all wages and prices. What followed after 90 days were various phases that caused the controls to last into 1974. The worst effects of the price controls were in the oil and gasoline markets, where OPEC’s price increase in the fall of 1973, combined with binding price controls, led to shortages, lineups, rationing, occasional violence in lines, and, arguably, President Carter’s Rapid Deployment Force, which was later changed into U.S. Central Command (CENTCOM.) So August 15, 1971 is a day that should live in infamy.
I worked as an intern with Herb Stein’s Council of Economic Advisers in the summer of 1973. I lived with a bunch of other interns in a seedy house on East

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Soldiers as Price Takers

August 14, 2019

There didn’t seem to be much sense to getting killed. The war went on at its own slow, deliberate pace, and if he got himself killed it would make no difference one way or another to anyone but himself, and to his family, perhaps. Whether he was dead or not, at exactly the same moment of the twentieth century the armies would move, the machines in which the real fighting finally took place would destroy each other, the surrender would be signed . . . Survive, he remembered desperately from the lumber file, survive, survive . . .
This is from Irwin Shaw, The Young Lions, 1948.
A few months ago, I saw the movie version by the same name on TV and liked it a lot. I realized that I hadn’t seen it since it had first come out and I was eight years old. One thing our

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Reinhardt’s Misleading Data on Drug Price Differences

August 12, 2019

Timothy Taylor, the Conversable Economist, posted today on some highlights from the late Uwe Reinhardt’s last book, Priced Out: The Economic and Ethical Costs of American Health Care. He, following the lead of the Milken Institute Review in its excerpt of the book, shows charts comparing the cost of various health care goods and services in the United States to the cost in other countries. The bottom line, which will surprise no one who has followed the issue, is that the cost of pretty much everything is higher in the United States.
But also following the Milken Institute Review‘s lead, he shows charts on the price of some brand name prescription drugs, showing that they are way above the prices in other countries.
If you want to know the differences in prices of

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