EconLog Archive
Economic Education
Bella and Brutto are Different: A Lesson in Comparative Advantage
As we dig into the Fall semester, thousands of students will begin their first economics course and be exposed to the world of economic thinking. I used to be a drumming instructor with a music lessons company. One thing I enjoyed doing as a teacher was leaving the student with the capability of performing and .. MORE
Incentives
The Dictator’s Incentives and Trade-Offs
A story in the Wall Street Journal illustrates some of the dictator’s incentives and trade-offs. It shows that it is not easy to be a dictator, how his country cannot be innovative and rich, and how it is not fun to live there even for somebody happy to serve the regime (Ann M. Simmons, “Spy .. MORE
Macroeconomics
Goolsbee vs. Summers
Bloomberg has a couple of articles today where prominent economists respond to today’s strong jobs report. Here is Chicago Fed president Austin Goolsbee: Federal Reserve Bank of Chicago President Austan Goolsbee lauded the strong September jobs report but warned of putting too much stock in one month’s data, adding that there are risks that inflation .. MORE
Competition
How to Help Consumers
The good news is that economics gives us some tried and true ways of making consumers better off. They mainly have to do with allowing competition and allowing increased supplies. Trump did some of that while president. Harris as vice president showed no signs of moves in that direction. Yet many of the policies .. MORE
Austrian Economics
Tolstoy, Kirzner, and Happiness as a Process
A recent Liberty Fund Virtual Reading Group explored the theme of joy in Leo Tolstoy’s novel Anna Karenina. For Tolstoy, happiness is not an end state that a person can reach. It is an ongoing discovery process filled with trial and error. This is similar to the way many economists view markets. One of F.A. .. MORE
Cross-country Comparisons
What ails the Anglosphere?
I recently encountered a couple excellent articles discussing productivity problems in English-speaking countries. A paper by Ben Southwood, Samuel Hughes and Sam Bowman begins by showing how the UK lags far behind France in building things like housing, expressways, subways, high speed rail lines, nuclear power plants, and other forms of infrastructure. France and Britain .. MORE
Free Markets
Trade and Wages
In a recent essay at American Compass, Michael Lind attempts to refute certain aspects of economists’ case for free trade. Others have addressed the numerous empirical, factual, and theoretical issues with his essay. I will focus on just one particular claim. Lind writes: The attack on tariffs as regressive taxes unites two of the themes .. MORE
Fiscal Policy
My October 1 Talk at OLLI
A surprisingly receptive audience reaction to Social Security reform. Yesterday I gave a talk to the Osher Lifelong Learning Institute (OLLI) at California State University, Monterey Bay (CSUMB). I typically give 2 such talks in the spring and 2 in the fall. This year is no exception. One of the people involved with OLLI suggested .. MORE
Free Markets
Price Stickiness, Policy Stickiness
Perfect markets make a nice fairy tale, but they don’t match reality. And few strawmen have been as repeatedly slain as the idea that the case for markets depends on market perfection, and thus the inevitable failure of real-world markets to match this textbook abstraction undercuts the argument for using markets. Some of the strongest .. MORE
International Trade
Why Sanctions Often Fail to Work
Back in early 2022, there was a great deal of optimism that sanctions against Russia would cripple its economy. Those predictions have not come true. A recent article in The Economist shows why: Prior to 2022, Kazakhstan sold relatively little electrical machinery to Russia. After the Ukraine invasion, Kazakh exports soared more than 7-fold. How .. MORE
Free Markets
“Here, We Sell Local”: Collectivist or Tribal Protectionism
That nationalism is a kind of collectivism or modern-tribalism is illustrated by a current phenomenon: foreigners seem so disliked that, in some people’s views, “we” should neither import from, nor export to, “them.” On the import side, foreigners—foreign producers or their governments or the latter’s taxpayers—are disliked because they produce goods at such a low .. MORE
International Macroeconomics
John Cochrane on Interest Rates and Exchange Rates
In my recent book entitled Alternative Approaches to Monetary Policy, I described two different low interest rate monetary policies, one expansionary and contractionary: Because of the interest parity condition, we know that these are both low interest rate policies. International investors will accept a lower interest rates in safe assets located in countries where the .. MORE
Central Planning
My Weekly Reading for September 29, 2024
Deregulation Can Fix the Housing Crunch by J.D. Tuccille, Reason, September 23, 2024. Excerpt: Building regulations reflect a wide range of government interventions, including zoning restrictions, land use regulations, energy efficiency codes, safety codes, and more. The intent behind such rules often started with public health, then expanded to encompass energy efficiency, home values, and even .. MORE
Economic Methods
When Mockery Boomerangs
Over at National Review, Jim Geraghty has a series of articles suggesting that the Covid virus escaped from a research lab in Wuhan, China. Today, he has a story with the following headline: Guess Where the Possibly Nuclear-Fuel-Leaking Sunken Chinese Submarine Is? I didn’t have much trouble guessing—it was Wuhan. What did surprise me is .. MORE
Energy, Environment, Resources
Is There a Good Case for Requiring Gasoline Sellers to Carry Minimum Reserves?
I don’t think so. Governor Newsom has called a special session of the legislature to consider his plan centered around a minimum inventory requirement on gasoline sellers. The idea is that when a spike occurs in California due to low supply, some state official or organization would allow – or require – release of .. MORE
Free Markets
D’Argenson’s Injunction to the State, Deep or Shallow
A minor figure of the 18th century can teach a lesson to today’s rulers of the deep or shallow state of virtually all countries. René-Louis de Voyer, Marquis d’Argenson (1694-1757) was an early Enlightenment figure, friend of Voltaire, and, for a short time, minister of Louis XV. In his memoirs, he wrote (Vol. 5, p. .. MORE
History of Economic Thought
A Possible Correction on Milton Friedman’s “Isolation”
In a September 4 post titled “The Isolated Milton Friedman,” I quoted two paragraphs from Michael Hirsh, Capital Offense: How America’s Wise Men Turned America’s Future Over to Wall Street. I won’t quote the whole passage again. Here’s a passage that struck me as strange, given what a warm and welcoming person Milton was: For .. MORE
Macroeconomics
Monetary Policy Was Even Worse than We Thought
In a recent post, I made the following claim: So why wasn’t the overall inflation rate transitory, as many had predicted? The answer is simple. All of the cumulative inflation since 2019 is demand side, and demand side inflation is permanent. PCE inflation over the past 5 years has exceeded the Fed’s 2% target by .. MORE
Income and Wealth distribution
Taking Sides Between Potential and Current Homeowners
The increase in the relative price of housing (relative to the prices of other goods and services) is the consequence of supply increasing less than demand. Many economic factors are at play, such as a growing population, land prices, and construction costs. Many political mandates and prohibitions play a role in limiting the supply of .. MORE
Labor Market
Minimum Wages and the Substitution Effect
The substitution effect is an idea in economics that can understood pretty intuitively. When the price of some good rises relative to some alternative, people will tend to buy more of the alternative and less of the now more expensive good. If apples and oranges used to be the same price, but apples get more .. MORE
Fiscal Policy
What monetary stimulus?
Today’s Bloomberg reports that China instituted a new program of monetary stimulus: China’s central bank unveiled a broad package of monetary stimulus measures to revive the world’s second-largest economy, underscoring mounting alarm within Xi Jinping’s government over slowing growth and depressed investor confidence. But is this what actually happened? Here’s how the exchange rate for .. MORE