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Inflation began rising in 2021 due to pandemic-related supply chain disruptions and reopening dynamics. The Russia-Ukraine war that started in February 2022 intensified these pressures through a commodity super cycle (a broad and sustained surge in energy and raw material prices) that sent inflationary shockwaves to nearly all major economies, including the U.S., where CPI .. MORE
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Microeconomics
Economists like to draw triangles. In trade, you can’t have high tariffs, no retaliation, and unchanged prices. In monetary policy, you can’t fix interest rates, fix the money supply, and promise perfect stabilization. In hiring under unequal starting conditions, there is a similar triangle that most debates about fairness in hiring glide past. When firms .. MORE
Economic Methods
“There are two things you are better off not watching in the making: sausages and econometric estimates. This is a sad and decidedly unscientific state of affairs we find ourselves in. Hardly anyone takes data analyses seriously. Or perhaps more accurately, hardly anyone takes anyone else’s data analyses seriously.” That is the scathing critique that .. MORE
Incentives
Why do factory seals matter? If you look at trading cards on eBay, you’ll find that factory-sealed sets, packs, and boxes command a premium over anything opened. If you have listened to any episode of EconTalk featuring Michael Munger, you will know that “the answer is transaction costs.” You probably understand why: the factory seal .. MORE
Sam's Links
Sam Enright works on innovation policy at Progress Ireland, an independent policy think tank in Dublin, and runs a publication called The Fitzwilliam. Most relevant to us, on his personal blog, he writes a popular link roundup; what follows is an abridged version of his Links for February and Links for March. Blogs and short .. MORE
Money and Inflation
One of my brothers recently joked that he would love to meet the person who first pitched gift cards. Who ever thought that consumers would agree to make their money less useful? This is an important question for economists as well. Carl Menger’s famous book On the Origins of Money argues that money could have .. MORE
Regulation
Mancur Olson’s The Rise and Decline of Nations doesn’t provide a particularly optimistic picture: once your nation has been stable for a while, and may even have risen to wealth, it becomes more and more vulnerable to “institutional sclerosis.” This happens because small groups are better able to overcome free-riding, resulting in their ability to .. MORE
Monetary Policy
There are at least two meanings for “dominance” in relation to monetary and fiscal policy. The first one, proposed by Milton Friedman in 1968, is that when monetary policy and fiscal policy are in contradiction, that is, one is expansionary and the other contractionary, the effects of monetary policy tend to prevail. The other meaning, .. MORE
Adam Smith
This month marks the 250th anniversary of Adam Smith’s magnum opus, The Wealth of Nations. The Liberty Fund print edition is 950 pages (excluding material added by the editors) and just about every page is chock full of wisdom. While there are some flaws, we rightfully celebrate this book as the monumental leap forward to .. MORE
Adam Smith
Imagine that you spent 250 years being called the wrong name. That’s basically what’s happened to Adam Smith’s treatise. Everyone refers to it as “The Wealth of Nations,” and sure, that’s a reasonable shorthand for those in the know and those who are simply being expedient. But for politicians and pundits, it turns a rigorous .. MORE
“[W]hatever we may think of Smith and the Wealth of Nations they did become symbolic of the new discipline of economics through the centuries and it hardly befits us to question the judgments of past generations’s assessments of the value of a work they read for themselves for their own purposes. It is a matter .. MORE
Yet the argument of Book V of Wealth of Nations is something quite different. Over hundreds of pages, Smith patiently shows why both peace and a tolerable administration of justice are historically rare, and continually fragile. To the extent that some society or other happens to have them, it seems to be neither the natural .. MORE
For Smith, moral philosophy is the study of virtue and the faculty of mind that allows us to determine what is praise- or blameworthy conduct. When we understand the project of the moral sentiments, we can see that Smith adopts the same logic in his analysis of political economy. Political economy provides a lens through .. MORE
“Much of Book 3 is dedicated to a historical account of how and why the feudal order that prevailed throughout Europe for many centuries eventually gave way to a liberal, commercial order—that is, how a world dominated by hierarchy, dependence, and intrastate conflict was superseded by one in which the rule of law reigned and .. MORE
Hi Mr. Butt, "The contribution of tight labor markets to inflation was initially quite modest. But as product market shocks have faded, the tight labor market and the resulting persistence in nominal wage increases have..
saicharan, March 23