EconLog Archive
Economic Education
Why Liberalism
When I first started teaching, David Henderson gave me some advice: to be open about who I am regarding my economic philosophy. At the beginning of class (and several other times throughout), I mention that I am a classical liberal—a free-market economist who argues that individuals rather than governments are best suited to deal with .. MORE
Economic Theory
Trust Government Statistics, Not Government
“Expert failure” is clearly having a moment. Pollsters, Wall Street analysts, tech futurists… all are facing demands to reckon with getting it wrong. Economics, though, seems to be getting special attention. Lately, this has metastasized into Orweillian skepticism of government data itself. It’s one thing to argue that economists have misread numbers. It’s quite another .. MORE
Incentives
It Should Pay to be Super
I’ve had a difficult time watching superhero movies the past few years. Not because they lack quality (though perhaps true), but because they rely on bad economics. To justify this claim, I propose to answer the question: why wouldn’t there be superheroes? The Gotham Problem Imagine you live in Gotham City, where there is rampant .. MORE
Tariffs
Adam Smith Would Not Approve: The Evidence
Shortly after the “Liberation Day” tariffs were announced back in April, Janet Bufton wrote an excellent post about whether or not Adam Smith would approve of those so-called “reciprocal” tariffs. I also riffed off her post here. In both cases, we argued these tariffs were not compliant with Smith’s argument and thus he would not .. MORE
Economic Education
EconLog Price Theory: Pricing Plumbing
This is the latest in our series of posts in our series on price theory problems with Professor Bryan Cutsinger. You can see all of Cutsinger’s problems and solutions by subscribing to his EconLog RSS feed. Share your proposed solutions in the comments. Professor Cutsinger will be present in the comments for the next couple of .. MORE
Economic Institutions
Don’t Mistake a Miracle for Its Cause
In times of crisis, we consider what can be done to return to a path of prosperity and wealth. However, there is a tendency to mistake the previous manifestations of economic success—the sectors and products that an economy has, in the past, successfully produced—for the more fundamental source of success. When, in 1947, Ludwig Erhard .. MORE
Economic Theory
Profits are Social Authentication
In his 1980 book, Knowledge and Decisions, Thomas Sowell highlights the importance of social authentication and verification processes. Does this work? Is that a good idea? If it works, it survives. If not, it doesn’t. Over time, we accumulate rules, norms, and practices that make it easier for us to get things done. Some of .. MORE
Price Controls
On Fair Prices
Discussions on what constitutes a “fair” (or just) price are quite old. Classical market liberals will typically classify a fair price as any price that is voluntarily agreed upon by the parties in an exchange. That’s all well and good, but I wonder how useful the concept of “fair price” is. First, a bit of .. MORE
Economic History
Straight Whiskey and Dirty Politics
In the early 20th century, America was buzzing with Progressive Era reforms aimed at taming the excesses of industrialization. One landmark was the Pure Food and Drugs Act of 1906, hailed as a victory for consumer safety. It banned poisonous ingredients in food and drink, required accurate labeling, and cracked down on imitations. But when .. MORE
Economic Education
Let Them Eat Steak: Cutsinger’s Solution
Question: Russ buys 5 sirloins per week. True or false: If the price of sirloin rises by $5 apiece, and if Russ’ preferences and income remain constant, he will have $25 a week less to spend on other things. Solution: One of the first things I emphasize in my micro principles course is that the .. MORE
Economic Growth
Free Trade and Dynamic Efficiency
…for the economy to function well, you don’t just need good property rights, you also need what we could call, somewhat vaguely, “economic freedoms.” You need labor mobility; you need to get rid of guilds; you need to get rid of monopolies, both local and global; you need to get rid of all kinds of .. MORE
Economic and Political Philosophy
An Intuition Test
The conclusions we reach about the world are, to a large extent, influenced by our underlying intuitions. Various writers have discussed how our immediate sense of how the world works has a huge influence on how our worldviews develop. Thomas Sowell’s A Conflict of Visions posits that there are fundamentally different “visions” about the world .. MORE
Economic Growth
2025 Nobel: Growth Through Technology and Culture
Today, the Nobel Prize in Economics was awarded to Joel Mokyr (Northwestern University), Philippe Aghion (London School of Economics), and Peter Howitt (Brown University) “for having explained innovation-driven economic growth.”1 This follows a recent trend for the Committee to award to economics focused on economic growth, following Acemoglou, Johnson, and Robinson in 2024 and Kremer, .. MORE
Economic Theory
When Godzilla Breaks Windows
It’s morning in Tokyo. You’re sitting on your balcony with a cup of coffee or tea, enjoying the rising sun over the bay. Birds chirp. All is peaceful—until that peace is shattered by a giant radioactive kaiju named Godzilla. You watch in horror as the massive, irradiated monster makes landfall and begins his rampage through .. MORE
Regulation
Is The Housing Affordability Crisis an Illusion?
Average home prices remain very close to the all-time highs reached at the beginning of the year. Accordingly, public opinion surveys show rising concern about the issue of housing affordability, and politicians are taking notice. The Trump administration has waded in with a potentially forthcoming national housing emergency declaration so the President can do… something. We .. MORE
Labor Market
Understanding Theory: Labor Market Edition
Recently, the Trump Administration announced that H-1B applications would face a new $100,000 fee (in addition to the already existing fees, not to mention legal fees). The H-1B visa allows firms to hire foreign individuals with a college degree for their positions. Firms enter a lottery, and if they win the lottery, they can hire .. MORE
Liberty
Digital ID in the Cradle of Liberty (My Last EconLog Post)
On September 26, the British prime minister’s office announced that “A new digital ID scheme will help combat illegal working while making it easier for the vast majority of people to use vital government services. Digital ID will be mandatory for Right to Work checks.” I was getting ready to offer an argument against government .. MORE
Liberty
The Missing Rules
On my (endlessly expanding) “to-read” list is Nicholas Wade’s book The Origin of Politics: How Evolution and Ideology Shape the Fate of Nations. The book seems like it can offer insight into a question I’ve been curious about for a while: What separates rules or systems that run “against human nature” in a way that is .. MORE
Political Economy
Letting Markets Work: Urban Planning
For some reason, urban planning has become a hot topic on social media. Even more strangely, it has become ideologized. In the name of the community, left-wingers are generally for state-run public transportation and government housing. In the name of families or individuals, many right-wingers want more suburbs and, particularly, taxpayer-funded highways to accommodate cars. .. MORE
Economic Growth
Good News on Income
The Bureau of Labor Statistics released updated figures on household and individual income. The news is quite positive: Real median household income in 2024 was a record $83,730, reversing a downward trend that began in 2020 with the pandemic. Real median individual income also reached a new high at $45,140 in 2024.[1] Both of these .. MORE
Taxation
What Is A Value Added Tax?
At least once on this blog, I promised my readers that I would explain what a value added tax is and why it is not a trade barrier. However, I realized that it is not obvious how to explain all that in a blog post, and I decided to do an article for Regulation instead. .. MORE