EconLog Archive
Business Economics
Sam Peltzman on Industrial Deconcentration
I’m going through old copies of the Journal of Law and Economics, the first journal to which I subscribed, before sending them off to a young woman who is majoring in economics and thinking about going into a graduate program. I came across an article by my UCLA industrial organization professor, Sam Peltzman. I took .. MORE
Microeconomics
Constraints Must Constrain: Becker and Backwards Induction
The most powerful weapon in an economist’s arsenal is the law of demand. When the price (or opportunity cost) of something increases, people will purchase, consume, or choose it less often. The law of demand is a common backbone for many arguments. If the spine breaks the body falls. Naturally, those who want to undermine .. MORE
Competition
James Mackintosh’s Misunderstanding of Markets
Pierre Lemieux pointed out a crucial way in which Wall Street Journal reporter James Mackintosh biased the result with this statement: “Sure, it is true that free markets are the best way to run an economy that is fully competitive, has no unpriced side effects, or ‘externalities,’ such as carbon emissions, and where contracts cover .. MORE
Growth: Consequences
A Rising Tide Lifts Yachts and Rowboats
The Financial Times recently interviewed Daron Acemoglu: The research shows that major technological disruption — such as the Industrial Revolution — can flatten wages for an entire class of working people. It also points to the distributional conflict and power dynamics inherent in it. “Yes, you got progress,” Acemoglu says, “but you also had costs .. MORE
Economic and Political Philosophy
How to “Run the Economy” is a Loaded Question
I will let my readers separate the grain from the chaff—and there is both—in the piece of a Wall Street Journal columnist who spent a few months as a journalist in residence at the University of Chicago’s business school (James Mackintosh, “What I Learned About ‘Woke’ Capital and Milton Friedman at the University of Chicago,” .. MORE
Central Planning
I Disagree with Bob Poole on Zoning
Show me the contract. In effect, postwar single-family zoning represented an agreement under which homebuyers accepted restrictions on other types of uses in their neighborhood in order to be protected from negative externalities that neighbors might create, without the protection of the covenant provided by single-family zoning. To abolish single-family zoning is a violation of .. MORE
Regulation and Subsidies
A Stunning Subsidy Graph
This week, the civil grand jury for Monterey County issued its report on the Monterey-Salinas Transit. It was tasked with answering a specific question. Go here if you want to read more about the question and the grand jury’s answer. But here is what I found striking: fares account for only 5 percent of the .. MORE
Fiscal Policy
The Wolf is Getting Closer
Over the past 90 years, the public has frequently been warned that the US budget deficit would lead to an economic crisis. As in the famous story about the boy who cried wolf, they eventually began to tune out those warnings. And it does no good to cite specific data about the budget deficit rising .. MORE
Energy, Environment, Resources
Environmental Religion
For years, libertarians and conservatives have charged that much of what passes for environmentalism in the West is little more than faith-based religion. Paul Greenberg and Carl Safina, both environmentalists and university professors, want to make it official. In their Time magazine article, The Case for Making Earth Day a Religious Holiday, they take full .. MORE
Economic and Political Philosophy
Freedom and the Limits of Intellectuals
Edmund Burke once said, “It is the nature of all greatness not to be exact.” There is a certain kind of conversation I often have that brings this point to mind. I often argue that we underestimate the degree to which bottom-up, evolved orders can solve the kinds of public goods or externality problems that .. MORE
Economic and Political Philosophy
Governments Don’t Like (Poorer) Crime Victims
There are ideal governments that some ideologues think will be born if they only dream about them hard enough; and there are actual governments, where politicians and bureaucrats respond to their ordinary incentives. Not every consumer wants to buy a luxury car at the cost of foregoing more of other things. We should also expect .. MORE
Uncategorized
Destructive Energy Policies in the United States and California
Consider, for example, one potential effect of global warming: rising ocean levels. For the past three decades, writes physicist and former Caltech provost Steven E. Koonin in his 2021 book, Unsettled, sea levels have risen by 0.12 inches per year. If sea levels continued to rise at that rate, then, by the year 2100, .. MORE
Macroeconomics
A Target Band for Inflation?
David Beckworth directed me to this tweet: If the Fed had a single mandate to target inflation, then there would be an argument for switching from a point target like 2% to a band such as 1.5% to 2.5%. But the Fed has a dual mandate, under which an inflation band would be completely pointless. .. MORE
Regulation
Buy Your New Dishwasher Now
A few years ago, when Obama was president, I read that new federal dishwasher standards were coming. So even though we didn’t really need a new dishwasher, ours was fairly old and so I bought a new one before the new standards would be implemented. My reason? The standards required future dishwashers to use less .. MORE
Adam Smith
A Tribute to Adam Smith
The great Adam Smith was born sometime in early June 1723. I’m not going to spend time figuring out which day because it doesn’t really matter. To commemorate Smith’s birthday, Reason magazine asked various people to give their favorite quotes from Smith and comment on them. I like a lot of the choices. Among my .. MORE
Books: Reviews and Suggested Readings
Robert Hetzel’s History of the Fed
Robert Hetzel has written an outstanding new book entitled The Federal Reserve: A New History. I reviewed the book for Central Banking. Here’s an excerpt: During 2008, the Fed overreacted to (transitory) rising energy prices, and policy became too contractionary during the early stages of the Great Recession. Just as during the Great Depression of .. MORE
Media Watch
Elon Musk, Edward Luce, and Libertarianism
Hyperbole has its rhetorical or pedagogical advantages, but it must not overcome reality. I am not casting the first stone at Financial Times columnist Edward Luce, but I do want to criticize a recent column of his (“Beware Elon Musk’s Warped Libertarianism,” May 24, 2023). On what basis does Mr. Luce claim that Elon Musk .. MORE
Economic Education
Econ 101 Lessons from Highway 61 Revisited
A year ago, I wrote about twin examples offered by one of Minnesota’s Twin Cities, St. Paul, of the principles of Econ 101 in action. The Saint Paul City Council passed a minimum wage ordinance in 2018 that, from January 2020, would raise the city’s minimum wage by stages to $15 an hour for all firms .. MORE
Finance
Beware of Foolproof Recession Indicators
Beware of “foolproof” recession indicators. For years, people have been telling me that an inversion of the 2-year and 10-year yield spread on Treasury securities indicates that a recession will occur within 12 months. I’ve warned them that while the indicator has a good track record, it’s far from perfect. This yield spread inverted on .. MORE
Competition
The Tragedy of the Republican Presidential Commons
Who asked Nikki Haley to run for president? Can somebody introduce us to the gentlepersons who convinced Tim Scott to enter the contest? Is anybody outside of his family and his congregation urging Mike Pence to join the Republican field? The same applies to the other long shots — Vivek Ramaswamy, Doug Burgum, Chris Sununu .. MORE
Free Markets
Are Republicans Discovering the Limits of Markets?
A recent oped in the Financial Times bears a strange title: “On America’s Ramshackle Railroads, Republicans Concede the Limits of the Market.” Although this sentence does not appear in the piece itself, it does reflect its author’s opinion. Oren Cass, president of American Compass and a proponent of industrial policy and protectionism, argues that the .. MORE