Bryan Caplan  

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Caplan's Talk in Sweden... Why I am Not a Republican, Con...
My colleagues Tyler Cowen and Alex Tabarrok have published a new economics principles textbook.  It's amazing, then, that Alex is still giving away fantastic economic education for free.  Check out his latest post, and get edified:
Imagine that a single employer was able to buy for his employees equal quality health insurance at a lower price. Would wages at that firm rise?  No, an employer only has to pay workers what they could earn in another job.  If other firms aren't paying more then this firm need not raise wages even though its costs have fallen.  Thus an employer that reduced health insurance costs while keeping real compensation the same could pocket the savings as profit.  It's only when other firms follow suit--also in an attempt to cut costs and earn excess profits--that wages at all firms rise, eliminating the excess profit everywhere.

The process produces the equilibrium
.  You can't have one without the other.
Alex's pedagogy is so good that I only have one thing to add: His point applies equally well to almost any bundled decision - for example, an econ textbook that bundles micro and macro...
 

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COMMENTS (2 to date)
Brandon Robison writes:

Very cool. But am I the only person who finds non-mute-able music on websites annoying?

Paul McLellan writes:

It's a pity that Alex and Tyler's book is priced in the strange world of textbooks whereby a $30 is suddenly over $100. It's the same problem as we have in the current medical debate, the decision maker and the person paying are different people: the real customer for the textbook is the instructor, but it is paid for by the students so there is no pressure to keep the price down.

It is interesting that in Britain, at least back when I was a student, no course I ever did had a textbook you "had" to purchase. The lectures and course notes on their own were the textbook. Additional textbooks were useful and recommended but not essential. As a result, textbooks in the UK were about 1/4 the price of the same book in the US and often available in paperback.

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