EconLog Archive
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
#ReadWithMe
Evaluating We Have Never Been Woke, Part 3: Economics
In his book We Have Never Been Woke, Musa al-Gharbi examines the worldview of symbolic capitalists in great detail. Much of what he describes looks very familiar to me (although the fact that I see the behavior al-Gharbi describes so regularly is itself something I consider as having very little weight as evidence — I’ll .. MORE
Economic Education
Ideas Have Consequences: Law & Economics Edition
A new paper by Elliot Ash (ETH Zurich), Daniel L Chen (Toulouse School of Economics), and Suresh Naidu (Columbia University) in the Quarterly Journal of Economics discusses the impact of the Manne Economics Institute for Federal Judges on judicial rulings (“Ideas Have Consequences: The Impact of Law and Economics on American Justice“). From their abstract: .. MORE
Economic Education
EconLog Price Theory: Let Them Eat Steak
We’re bringing back price theory with 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 weeks, and we’ll post his .. MORE
Taxation
In (Sort of) Defense of (Something Like) Property Taxes
A revolt is building across the United States against property taxes. From Florida to North Dakota, states have attempted or are attempting to abolish them. The anger driving this movement comes from two sources. One is the belief that you are being taxed for living in your house. “Is the property yours or are you .. MORE
Economic and Political Philosophy
The Liberal 19th Century
Many libertarians and classical liberals consider the 19th century in the West as the most liberal epoch in history. We can certainly see stains, notably slavery and later Jim Crow, as well as colonialism (think about the control of trade from the colonies, which Adam Smith criticized in his 1776 Wealth of Nations). In many .. MORE
Incentives
The Social Benefits of Iconoclasts
Years ago, my father offered me some advice. (Many such instances, but I have a specific case in mind.) When in class, he told me, never be afraid to raise your hand and ask questions or seek clarification on some point you don’t understand. People are often reluctant to do this, he said, because they’re .. MORE