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Economic Education

Bella and Brutto are Different: A Lesson in Comparative Advantage

By Giorgio Castiglia | Oct 5, 2024

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

By Pierre Lemieux | Oct 5, 2024

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

By Scott Sumner | Oct 4, 2024

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

By David Henderson | Oct 4, 2024

  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

By Ryan Young | Oct 4, 2024

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?

By Scott Sumner | Oct 3, 2024

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

By Jon Murphy | Oct 3, 2024

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

By David Henderson | Oct 2, 2024

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

By Kevin Corcoran | Oct 2, 2024

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

By Scott Sumner | Oct 1, 2024

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

By Pierre Lemieux | Oct 1, 2024

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

By Scott Sumner | Sep 29, 2024

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

By David Henderson | Sep 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

By Scott Sumner | Sep 27, 2024

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?

By David Henderson | Sep 27, 2024

  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

By Pierre Lemieux | Sep 27, 2024

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”

By David Henderson | Sep 26, 2024

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

By Scott Sumner | Sep 26, 2024

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

By Pierre Lemieux | Sep 26, 2024

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

By Kevin Corcoran | Sep 26, 2024

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?

By Scott Sumner | Sep 24, 2024

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

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