Bryan Caplan and David Henderson

Microeconomics

A Category Archive (252 entries)
Minecraft has spawned a lot of imitators. One is Survival Craft, which we heard about a few days ago and downloaded. Our oldest has been playing it virtually non-stop for a couple of days, and he prefers it to Minecraft... MORE

The world is a pretty complex and mesmerizing place, and people (and firms) do a lot of things that are, at first glance, hard to understand. Consider airlines. I've heard on numerous occasions complaints about how major carriers board their... MORE

This is an edited version of my comment on this Reddit thread. OP had offered this quote from his microeconomics professor: "Government is the only institution which is allowed to hold a gun to your head and force you to... MORE

The Upshot at the New York Times introduces us to the NYT 4th Down Bot, which will tell us in real time whether a team should or shouldn't go for it on 4th down. There's a fairly well-known argument that... MORE

How to Teach the Income and Substitution Effects

Economic Education
Bryan Caplan
The shape of the demand curve depends on two forces: the substitution effect and the income effect.  A typical treatment:When the price of q1, p1, changes there are two effects on the consumer. First, the price of q1 relative to... MORE

Robert Litan on Microeconomists' Contributions

Microeconomics
David Henderson
Robert Litan gives a nice 15-minute speech in which he highlights some of the main contributions that microeconomists have made that have generated, over 30+ years, hundreds of billions (and possibly trillions) of dollars in consumer and producer surplus. (These... MORE

Markets and Prices Allow Us To Use Knowledge We Don't Have

Central Planning vs. Local Knowledge
Art Carden
Another semester is upon us, and in my principles of macroeconomics class at Samford we spent the first week reading Frederic Bastiat's What is Seen and What is Not Seen and Leonard Read's I, Pencil. In class yesterday we considered... MORE

Why Do Government Enterprises Work So Well?

Microeconomics
Bryan Caplan
When I was in high school, Murray Rothbard's analysis of government ownership was a revelation.  Why was my high school a den of waste, incompetence, and stagnation?  Because it was a government enterprise!On the free market, in short, the consumer... MORE

I recall a story that scientists are often unable to explain the "tricks" performed by magicians. Scientists tend to be smart, but also rather linear thinkers. They are not used to their test tubes trying to deceive them. Something similar... MORE

Last month, I read Randal O'Toole's Cato Policy Analysis on rail versus buses in which he concluded that high-capacity buses are preferable to rail in part because they can share roads and highways with cars and trucks and don't require... MORE

Among the hats I'm wearing these days, I'm writing semi-monthly columns for a Birmingham-based website called DepositAccounts.com. Recent columns have considered population growth, inflation, and the origins of money. My archive is here. In addition, EconLog friend Sam Wilson and... MORE

In yesterday's Wall Street Journal, David Neumark argued that even though "modest increases" in the minimum wage won't have large disemployment effects, the minimum wage is a poorly-targeted anti-poverty measure: "Minimum wages are ineffective at helping poor families because such... MORE

I, Crayon

Growth: Causal Factors
Art Carden
Here's a Sesame Street classic. I remember this from when I was a kid; we watched it a few times with our kids Monday morning. The sheer amount of knowledge embodied in this whole process is mesmerizing. And of course,... MORE

You Nasty Creators of Consumer Surplus

Business Economics
David Henderson
Longtime partners Alaska Air Group Inc. and Delta Air Lines Inc. are slugging it out in a battle for Seattle that is turning into one of the U.S. airline industry's nastiest turf wars in years. So reads the opening paragraph... MORE

Why Does High-Pressure Salesmanship Work?

Behavioral Economics and Rationality
Bryan Caplan
[Warning: Minor spoilers].Just finished The Wolf of Wall St.   Though based on a true story, the ugly facts are usually easy to minimize: Most investment firms aren't run by stoned sociopaths, and most investment firms' customers make money.  But one... MORE

According to a report in the Tennessean by way of AL.com, "gains in whiskey sales are outpacing increases in production by 'at least' a 2-to-1 margin...The Jack Daniel distillery announced a $100 million expansion in distilling and warehouse space." Reports... MORE

Krugman Defends Price Theory

Microeconomics
David Henderson
One of my frustrations when reading Paul Krugman's blog is that I often get the feeling that I'm not reading a post by an economist. We economists tend to talk about relative prices, how prices motivate behavior (incentives), etc. Krugman... MORE

Reverse Mortgages in Organs

Price Controls
Art Carden
Bryan's post below inspired me to think about an idea Mike Hammock and I first talked about while we were colleagues at Rhodes College that, I think, carries Zac Gochenaur's* argument a bit further: reverse mortgages in organs (here's an... MORE

Economism and Immigration

Microeconomics
Bryan Caplan
In our immigration debate, Mark Krikorian heavily downplayed the relevance of economic arguments.  Instead of focusing on immigration's economic benefits, we should dwell on the damage immigration does to our national solidarity, culture, and politics.  His reply to my post-debate... MORE

Myth of the Rational Voter: The Animated Series, Part 3

Behavioral Economics and Rationality
Bryan Caplan
I'm back from vacation, and my Learn Liberty video on anti-market bias is up.  Enjoy.... MORE

Why the EMH is truer than supply and demand

Finance: stocks, options, etc.
Scott Sumner
My previous post discussed the strangeness of the efficient markets hypothesis. Here I'll defend its utility. In the field of economics, all models represent simplifications of reality. Thus when we consider whether the EMH is true, it makes no sense... MORE

UPDATE BELOW: Anyway, there were a few houses I worked on where we got J-grade lumber, which is lumber that is destined for Japan. It is a grade above A-grade that you can't even buy at a lumber yard. You... MORE

The Market for Less

Behavioral Economics and Rationality
Bryan Caplan
Guest blogger James Schneider makes a thought-provoking point about the market for self-control:The market is often better at abetting good habits than it is at discouraging bad habits. Imagine an alternate world in which a lot of people aspired to... MORE

The Wall Street Journal has an article entitled; "Gas Boom Rejuvenates Manufacturing." There certainly are some manufacturing sectors that will be helped by the energy boom. However people shouldn't expect too much from this development. In a recent post I... MORE

Public schools provide education free of charge.  The result, unsurprisingly, is overwhelming market dominance.  Almost 90% of school-age kids attend public school.  Most people think this is a great thing.  Maybe they're right, maybe they're wrong.  Either way, though, public... MORE

Henderson on TANSTAAFL

Economic Education
David Henderson
At the start of every class I teach, I give my students what I call "The Ten Pillars of Economic Wisdom." These pillars, I tell them, are the basis for a huge percent of economic analysis and if they master... MORE

How Welfare Hurts Walmart

Microeconomics
Bryan Caplan
Walmart's critics often argue that food stamps, Medicaid, and other poverty programs subsidize its labor force.  Since government pays a big part of its workers' living expenses, Walmart doesn't have to.  Is this true?As long as non-workers remain eligible for... MORE

Recently, there has been a brouhaha in the blogosphere over comments made by Paul Krugman and then responded to critically by Russ Roberts and Bob Murphy. Chris Dillow then defended Krugman. The issue--and everyone on both sides agrees that this... MORE

Brace Yourselves. The In-Laws are coming. With that in mind, here are a few things from my archive that you might wish to discuss in between bouts of Peace on Earth and Goodwill to Men this Christmas. 1. Christmas and... MORE

Interest is Special, Says Special Interest

Microeconomics
Art Carden
Regular readers of EconLog know that I, like Bryan Caplan, try to follow Rolf Dobelli's advice and Avoid News. Here's one reason why. Scan the headlines and look for claims about programs that are Obviously Good Ideas, according to Some... MORE

Econ as Incredulity

Economic Methods
Bryan Caplan
What is economic theory?  Is it a body of proven truths?  Or a set of hypotheses whose only merit is that they've so far been successfully tested against the facts?  Most economists openly embrace the latter position, but secretly believe... MORE

I want to maximize bang for my charitable bucks; good stewardship demands it (here's one way, for example). Should I, therefore, participate in Christmas toy drives or other holiday giving opportunities? Or should I instead spread my giving more evenly... MORE

This morning, I skimmed through a textbook on Alabama history that I picked up at Goodwill earlier this semester so I can bring myself up to speed on some of the major facts, themes, names, and dates in Alabama history... MORE

Why Buildings Aren't Taller

Political Economy
Bryan Caplan
Whenever Robin Hanson turns to urban economics, I expect to be edified.  A prime example:Urban economics studies the spatial distribution of activity. In most urban econ models, the reason that cities aren't taller is that, per square meter of useable... MORE

Means-Testing and Behavioral Econ

Behavioral Economics and Rationality
Bryan Caplan
I'm a big fan of means-testing (see here, here, and here for starters).  Analytically, though, stringent means-testing is indistinguishable from high marginal tax rates.  In both cases, the government takes away a big chunk of every dollar you earn.  Philosophers... MORE

Economics and The Rapture

Behavioral Economics and Rationality
Art Carden
Economists are fond of calling environmental doomsayers' bluffs by challenging them to invest in oil futures if they're really afraid we're going to run out of oil within the next few years. I've done this before (here, for example, is... MORE

Last week, David linked to a reprinted press release from Reuters titled "Business Owners Welcome White House Support for $10 Minimum Wage." Here are a few thoughts: 1. I think the headline is meant to create mental disequilibrium for the... MORE

I want to add a hearty "amen" to David's post on Michael Cohen's recent article on President Obama's truth-challenged claims about health care. My views on the economic literacy of the American electorate are Caplanian, but Cohen stakes out a... MORE

A lot of the radio stations and programs to which I listen in the car and in my office are "listener-supported," which means regular pledge drives and seemingly-endless appeals for money. I'd probably prefer that they simply monetize my ears... MORE

On Sweatshops: They're Better Than the Alternative

Labor Mobility, Immigration, Outsourcing
Art Carden
I just answered an email from some seventh-grade students who were asking about my Forbes.com article "Immigrants, Sweatshops, and Standards of Living." I suggested they look up Benjamin Powell's work, particularly this article on sweatshops that he wrote for the... MORE

"We are perishing for want of wonder, not for want of wonders."-G.K. Chesteron I'm sitting at a Starbucks in Houston, Texas, where we're visiting my sister, her husband, and my newborn niece. It's been a good trip, albeit with one... MORE

This morning, I'm speaking to one of Mike Munger's classes at Duke about Walmart and the importance of trade. Here are a few resources. 1. An ungated version of my paper "Retail Innovations in American Economic History," which appeared as... MORE

Fun Facts on Disability Insurance

Cost-benefit Analysis
Bryan Caplan
The new Cato Policy Analysis on Social Security Disability Insurance is full of fun facts. (footnotes omitted)The U.S. disability rate fell 25% between 1977 and 1987, then more than doubled.  The staunchest health care skeptics should be baffled.  Unless, of... MORE

I'm pretty risk-averse when it comes to travel, so I probably get to the airport earlier than I need to. That was the case this morning: I was booked on a 6:45 AM flight from Birmingham to Atlanta and arrived... MORE

Prices Sing

Economic Education
David Henderson
Daniel Reid, a Naval Postgraduate School student of mine from the Spring quarter who really grokked my class, wrote a poem titled "Prices Sing." Here it is, with his permission: Such sweetly multi-layered resonances compressively veil themselves within her uniquely... MORE

A few weeks ago The Atlantic ran a great story about "How the NFL Fleeces Taxpayers" (HT: Reddit). Stadium subsidies are a classic example of failure to appreciate "what it not seen." As Dennis Coates and Brad Humphreys point out... MORE

One of the most compelling characters in Adam Smith's work is the person he refers to as "the man of system." Here's Smith's oft-quoted passage from The Theory of Moral Sentiments: The man of system, on the contrary, is apt... MORE

Via Scott Shackford, at Reason, we learn of "The Scourge of Illegal, Underground Dinner Parties." In short, people are paying to attend dinner parties featuring fancy food. And such transactions are unregulated. Naturally, people are concerned. Presumably, some of those... MORE

This is an almost 2-hour video of a forum held at Butler University in April. The participants are Mike Munger, Robert Skideslky, Richard Epstein and moderator Russ Roberts. The transcript is here. Some highlights: 00:08:40: Mike Munger's "beauty contest... MORE

Economics offers a lot of cool and counterintuitive insights. One of the most fun, I think, is the independence of the legal incidence and the economic incidence of a tax. In other words, if demanders are not very responsive to... MORE

Stephanie Herman, a "homeschooling mom of two boys who has taught high school economics in a homeschool coop," was kind enough to send me a review copy of her book Cost Benefit Jr., which provides "an economics curriculum for young... MORE

I got a lot of great comments on last week's post about what would happen if tipping became the norm at McDonald's. See especially these comments by Eric Rall, Jeff (nice catch, but I'm using "McDonald's" as a stand-in for... MORE

Proposed hikes to minimum wages and improvements in working conditions are not free lunches, and at least part of the cost gets passed on to consumers in the form of higher prices. The reply from advocates of the higher minimum... MORE

Tuesday's article about McDonald's and minimum wages got a decent amount of attention and a lot of comments of varying quality. Before my article appeared, Forbes staff writer Clare O'Connor had published a piece borrowing estimates from the University of... MORE

I've read a few of the comments on my Forbes.com article about minimum wages, and there seems to be a lot of agreement that one of the real problems is that executives are overpaid. If that's true, then I have... MORE

New at Forbes: McDonald's and Minimum Wages

Central Planning vs. Local Knowledge
Art Carden
Here's my latest Forbes.com article, which is written in part in response to fellow Forbes.com contributor Laura Shin's question about whether the attention given to McDonald's wages will lead a higher minimum wage. I highlight what is, I think, one... MORE

But Did it Toast?

Austrian Economics
Art Carden
Yesterday, I offered a few thoughts on "I, Pencil" and related projects with a link to Thomas Thwaites' "Toaster Project" TED Talk. In evaluating students' essays on this, I was struck by how many people wrote that Thwaites "succeeded" in... MORE

I, Toaster: Revisited

Austrian Economics
Art Carden
One of my favorite TED Talks is Thomas Thwaites' explanation of how he tried to build a toaster from scratch. It's an excellent example of the lesson taught by Leonard E. Read in "I, Pencil." A couple of the organizations... MORE

In today's post on AL.com, Scott Beaulier of the Johnson Center at Troy University explains how the River Region Obesity Task Force is looking to measure students' BMIs. A few thoughts: 1. First they came for the beer, but I... MORE

Coase versus Pigou on Independence Day

Central Planning vs. Local Knowledge
Art Carden
As I write this on Wednesday night, I hear the sounds of fireworks going off in the distance. My first thought was "maybe distant fireworks were the 'orange stuff' my son saw that through his window that 'scared [him]' earlier... MORE

Market Distortions Are Lower Bounds

Behavioral Economics and Rationality
Art Carden
A few days ago, I blogged from the Mall of America and asked whether it is "the most bourgeois place on Earth." One commenter pointed out that it's subsidized and actually policed by the Bloomington PD. Neither really surprise me... MORE

Why Don't Dying Firms Raise Prices?

Cost-benefit Analysis
Bryan Caplan
"Demand is more elastic in the long-run than the short-run."  It's a textbook truism.  Implication: Raising prices is often a bad idea even if profits instantly rise.  In the long-run, demand will get more elastic, and the price-gouging firm will... MORE

The Present and the Future Both Need Bastiat

Growth: Causal Factors
Art Carden
I agree with Bryan: Frederic Bastiat's essay "What is Seen and What is Not Seen" is "the pinnacle of profundity." Indeed, on re-reading Bryan's post on Bastiat from last summer, I realized he wrote most of what I was planning... MORE

Parental Economics and Risk: A Couple of Reading Suggestions

Behavioral Economics and Rationality
Art Carden
Last week, I raised a few proverbial glasses to my wife and two of my kids. It's only proper that I continue with a few words on parenting. While I've basically given up Facebook (I'm still cleaning out my friends... MORE

Efficiency, Equity, and Ideology: What "Other Values" Matter?

Behavioral Economics and Rationality
Art Carden
Here's a puzzle I've noticed: criticize government intervention on efficiency grounds, and you will be quick to be told that there are "other values" (equity, for example) that a good society should consider in addition to efficiency. Perhaps you will... MORE

The June issue of Cato Unbound features a lead essay on recycling by Mike Munger and, so far, response essays from Edward Humes, Melissa Walsh Innes, and Steven Landsburg. As of right now, there are also "conversation" essays from Mike... MORE

My latest op-ed was published today by AL.com. In it, I evaluated claims by Senator Jeff Sessions and Rep. Mo Brooks that "we don't have that many jobs" (Sessions) and that "simple economics" says "You increase the supply of anything,... MORE

On May 29, I explained my answer to Bryan's question about using a billion dollars. I added a bonus question based on a conversation with Bryan: In the short run, Facebook will probably lead to an increase in the divorce... MORE

Semi-Rivalry and Fiscal Externalities

Microeconomics
Bryan Caplan
Suppose a country has a progressive tax system.  If everyone equally consumes government benefits, isn't everyone with below-median income automatically a net fiscal burden - i.e., a person who withdraws taxes more from the Treasury than he contributes?Naive analysts usually... MORE

Your Sort Is Prohibited: A Licensing Dialog

Behavioral Economics and Rationality
Bryan Caplan
When you shop online, vendors usually give you a bunch of different ways to sort your options.  Take Amazon:One popular sorting option - especially for customers with low income - is "Price: Low to High."  You've probably used it yourself... MORE

Five Points in Birmingham is a destination for an interesting combination of good food and crazy. There's a Chick-fil-A in Five Points, and I didn't realize until I read this article that said Chick-fil-A doesn't have a drive-thru. There was,... MORE

There were, once again, some truly excellent comments on my last post, in which I offered my answers to the questions blockquoted below. Furthermore, Jeanne Hoffman at Heels First Travel--a lawyer by training and a member of the IHS staff--also... MORE

Coase on a Plane: My Answer

Cost-benefit Analysis
Art Carden
Thanks to everyone who offered excellent comments on my last post. Most people were thinking about it the way I do. To recap, here were the questions I someday want to ask on an exam or in a job interview:... MORE

Coase on a Plane, or, an Idea, Recycled

Microeconomics
Art Carden
I agree with co-blogger Bryan that most voters are rationally irrational. My sense is that there are also a lot of voters and people in positions of influence who know just enough economics to be dangerous. As Steve Horwitz and... MORE

AI and GE

Growth: Consequences
Bryan Caplan
My favorite question from this year's Ph.D. Micro midterm:Suppose artificial intelligence researchers produce and patent a perfect substitute for human labor at zero MC.  Use general equilibrium theory to predict the overall economic effects on human welfare before AND after... MORE

Blood and Expectations: The Case of the American Liquor Industry

Behavioral Economics and Rationality
Bryan Caplan
Suppose you had a meeting with Al Capone in 1923.  He tells you, "The Irish are giving us trouble with their cut-rate beer, so we're gonna rub 'em out."  You'd probably feel a chill run down your spine.  You certainly... MORE

Carden and Horwitz on Market Failure

Public Choice Theory
David Henderson
Externalities, public goods, asymmetric information, and market power provide necessary--but insufficient--conditions for intervention to be justified. They certainly are not talismans that provide interventionists with carte blanche to tinker with the members of a society as if they were pieces... MORE

Adam Ozimek has an interesting objection to my claim (here and here) that empirical work on the disemployment effect of the minimum wage contradicts empirical work on the wage effect of low-skilled immigration:Bryan's immigration example is missing an important point.... MORE

Big Break Theory

Labor Market
Bryan Caplan
People often hope for a "big break" - a large, durable improvement in their situation.  An unknown actor landing a major role in a big-budget film is the classic example.  But big breaks seem to be everywhere: getting your first... MORE

Outsourcing My Critique of Left-Libertarianism

Economic Philosophy
Bryan Caplan
Despite many areas of agreement, I think that left-libertarianism is basically wrong.  One day I'll post an in-depth critique.  Until then, I'm outsourcing the job to Daniel Shapiro and Steve Horwitz.Shapiro highlights:Being one's own boss is quite a risky proposition,... MORE

Self-Correction in Markets and Politics

Behavioral Economics and Rationality
Bryan Caplan
We can't stop our minds from jumping to conclusions.  If we smell smoke, we jump to the conclusion, "Fire."  If metal glitters, we jump to the conclusion, "Gold."  If a person smiles at us, we jump to the conclusion, "Friend." ... MORE

Economic arguments about education often conflate human capital, ability bias, and signaling.  Since I am a big fan of Roderick Long's exhortation to "Whip conflation now!," I decided to do something to squelch this conflation.  Namely: Produce a clarifying table.The... MORE

You work in the market economy to buy stuff in the market economy, either now or later.  So if sales taxes are permanently high that weakens your desire to work in the market economy.  That means leisure--which government is still... MORE

At least at some Red Lobsters:The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.Mickey Kaus's Monday prediction becomes Tuesday's news.  No surprise here,... MORE

Of Monkeys and Micro

Behavioral Economics and Rationality
Bryan Caplan
Calorie restricted diets demonstrably increase the lifespans of yeast, fish, rodents, and dogs.  Will they work for humans?  For obvious reasons, controlled human experiments are problematic.  Researchers therefore turned to the next best thing: experiments on non-human primates - rhesus... MORE

Price Discrimination Explains Everything

Microeconomics
Arnold Kling
I've said this many times. I was reminded of it by this story from John Scalzi about tortillas priced higher when priced as "wraps," which Matt Yglesias suggests provides a means for price discrimination. In terms of efficient pricing, one... MORE

Bike Rental vs. Car Rental

Microeconomics
Arnold Kling
Russ Roberts poses the question. Why is that you can rent a car for less than $20 a day, but renting a bike costs $10 an hour? I don't think it's the case that the bicycle rental business is spectacularly... MORE

The Upper Hand Heuristic

Cross-country Comparisons
Bryan Caplan
As Adam Smith explains, treating other people well is often in our narrow self-interest: It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own... MORE

A One-Penny Proof

Microeconomics
Bryan Caplan
I recently tweeted:In social science, the best arguments prove more than the best studies. Hands down.Here's one homely example of what I have in mind.When economists explain marginalism, students often object, "But surely no one ever changes his behavior over... MORE

Tipping, Status, and Signaling

Microeconomics
Bryan Caplan
Everything Arnold says about status goods and tipping points holds for signaling as well.  It's theoretically possible for bizarre new equilibria to emerge:Something that is a status good in one era can be the opposite in another. Think of smoking,... MORE

Pepconomics

Microeconomics
Arnold Kling
My latest essay is on the economics of Pepco, the apparently under-performing electric utility. I am concerned by two factors that insulate Pepco from facing market discipline concerning reliability. The first is that Pepco is a regulated monopoly. The second... MORE

Savings, Genes, and Fade-Out

Family Economics
Bryan Caplan
Parenting often has large effects on the young.  Parents do stuff, their kids respond, and observers conclude that parenting is very important.  You need twin and adoption methods to uncover the crucial caveat: these parenting effects usually fade-out.  Kids aren't... MORE

Tyler writes:Their "simps" think they should have done better.  In their own, unconstrained models of the world, they each wish they could be doing better.  They each have refused to "do better" out of an understanding of limited institutional and... MORE

The Virtues of Price Discrimination

Microeconomics
Arnold Kling
Jeff Ely writes, the winners and losers from an auction system aren't who you think. Auctions don't favor the deep-pocketed compared to the small guys. Exactly the opposite. The marginal consumer is priced out of the market when a seller... MORE

Intellectual Ability and Educational Difficulty

Economics of Education
Bryan Caplan
Eli has a good comment on my signaling model with changing intellectual ability: The math seems right, but I don't understand why you would assume that K is constant. It should be an increasing function of A, no? My intuition... MORE

The Age of Contestability

Microeconomics
Bryan Caplan
When economists want to measure the competitiveness of an industry, they usually start by counting the number of competing firms.  If they see a lot of firms, they infer a lot of competition.  Few firms?  Little competition.  One firm?  No... MORE

Fund-Raising and the Independent Scholar

Behavioral Economics and Rationality
Bryan Caplan
Arnold writes:Think tanks, like universities, may be ripe for disintermediation. Although I think my writing for Cato helped my personal brand, I would rather be viewed as an independent scholar. I view scholars as personal brands, and I do not... MORE

When to Be Meek

Cost-benefit Analysis
Bryan Caplan
If you're not getting what you want out of life, people usually advise you to speak up and demand what's coming to you.  You'll never get anywhere just saying "please" and "thank you."  You've got to stand up and assert... MORE

Supply, Demand, and Outcomes

Politics and Economics
Arnold Kling
Reihan Salam has had a number of interesting posts recently. Here, he discusses Kevin Carey's analysis of how subsidies to college education ultimately benefit not the consumers but the suppliers. Suppose that you want people to have more high-quality education... MORE

Psychiatry's Disorders

Behavioral Economics and Rationality
Bryan Caplan
Wired has a nice piece on the psychiatric in-fighting behind the new Diagnostic and Statistical Manual of Mental Disorders.  Highlights:1. The arbitrariness of psychiatric diagnoses:The authority of any doctor depends on their ability to name a patient's suffering. For patients... MORE

How to Fix Group Projects

Microeconomics
Bryan Caplan
When I was a student, I always hated group projects.  As a professor, I never assign them.  The source of my antipathy: Group projects provide terrible incentives.  Since everyone gets the same grade, the lazy and incompetent free ride off... MORE

Hail IJ: Bone Marrow Sales Are Now Legal

Economics of Health Care
Bryan Caplan
Back in June Robert McNamara of the Institute for Justice told me about their battle to legalize bone marrow sales.  Just six months later, it looks like they've won.  Despite the text of NOTA (the National Organ Transplant Act), the... MORE

Kevin Drum vs. Priceless Economics

Labor Market
Arnold Kling
He writes, So here's the story. Union Pacific is offering $48,000 per year for skilled, highly specialized, journeyman work that's physically grueling and requires workers to be away from home about half of each month. The competition is offering 50%... MORE

Beautiful Discussion on the Web

Cost-benefit Analysis
David Henderson
Bryan Caplan has already blogged about the debate between Paul Krugman and Steve Landsburg. I have nothing to add to the substantive issue debated. But I do have four things to add: 1. Notice that Krugman, in a later post,... MORE

Krugman, Landsburg, Pangloss, and Fixed Costs

Behavioral Economics and Rationality
Bryan Caplan
Krugman:Think of the government budget as involving tradeoffs similar to those an individual household makes. On one side, there are all kinds of things the government could be doing, from dropping freedom bombs to providing children with dental care; think... MORE

Firms are usually picky about who they hire.  But when they spot potential customers, their standard slogan is "Come one, come all."  Sure, there are some exceptions.  A few restaurants still have dress codes, and some rental car companies won't... MORE

Carroll, Wilkinson, and Four Demand Curves

Family Economics
Bryan Caplan
WSJ.com now features my target essay on my parental odyssey, replies by Laura Carroll and Will Wilkinson, and my replies to their replies.  I successfully suppressed my urge to send a bunch of demand curves to the WSJ.  But I... MORE

The Evolution of the Horse Face

Microeconomics
Bryan Caplan
From Melvin Konner's The Evolution of Childhood:In horse evolution, the face lengthened faster than the body size increased because face length is determined by the area of tooth surface needed for chewing, which, since it tracks the amount eaten, depends... MORE

What I'm Watching

Microeconomics
Arnold Kling
This MIT symposium. In the first session, Jerry Hausman winds up talking about a paper he did on the demand for energy-efficient air conditioners. For what it's worth, I was the research assistant for that paper. He found that consumers... MORE

I am sorry, but I do not believe it is relevant to ask how educated they are. Using sanitation workers as an example, I would put it this way. If you do not have enough sanitation workers because you cannot... MORE

Price Discrimination Explains Everything

Microeconomics
Arnold Kling
The Washington Post reports, If you have ever had the annoying experience of buying a plane ticket through a portal such as Kayak, then seeing the final price jump $10 or $40 at check out, you have probably found yourself... MORE

Pop Answer

Microeconomics
Bryan Caplan
There's much disagreement in the comments, but I side firmly with everyone who said that the answer is indeterminate because the income and substitution effects work in opposite directions.  Your unexpectedly high grade is evidence that you earn more points... MORE

Pop Quiz

Microeconomics
Bryan Caplan
Suppose you get your midterm back, and discover that you've scored considerably higher than you expected.  According to basic micro, how will you adjust your study effort in response to this pleasant surprise?... MORE

History of Fire Protection

Microeconomics
Arnold Kling
William Polley recommended a paper by Annelise Graebner Anderson. Russ Roberts recommended an essay by Fred S. McChesney. The point is that fire-fighting began as a private function. Largely volunteer in the U.S. In London, fire brigades were hired by... MORE

The Economics of Fire Protection

Microeconomics
Arnold Kling
Surely, someone has done this? I assume that fire-fighting is an industry with declining average costs. Suppose that it takes $1 million in fixed costs per year to maintain the fire department (that includes normal profit, aka opportunity cost), the... MORE

Return to Solipsism

Microeconomics
Bryan Caplan
In my "Solipsist's Guide to Comparative Advantage," I showed how, for all practical purposes, trade actually raises worker productivity.  Notice, though, that my example shows the productivity effects of trade if you and I have different absolute advantages: you're a... MORE

A Solipsist's Guide to Comparative Advantage

Microeconomics
Bryan Caplan
According to extreme solipsism, you're the only person who really exists.  Suppose this strange position were true.  What would it imply for the Law of Comparative Advantage?Consider a standard textbook problem with two agents: you and me.  By hypothesis, I'm... MORE

Sole and Absolute Discretion

Microeconomics
Bryan Caplan
I've signed some bizarre contracts in my day.  When I bought my house, for example, the terms "sole and absolute discretion" frequently appeared in the builder's contract.  Taken literally, my contract basically said, "I give you a pile of money,... MORE

Why I Am Not a Left-Libertarian

Microeconomics
Bryan Caplan
As a radical libertarian, pacifist, champion of open borders, and mortal enemy of Columbus, I seem like an easy convert to left-libertarianism.  Proponents like Sheldon Richman and Rod Long are smart and earnest people.  Their motives are pure.  Still, their... MORE

GDP and Well-Being

Microeconomics
David Henderson
If you, like me, liked Arnold's post today on the pitfalls of GDP, take a look at my piece titled "GDP Fetishism." I explicitly address, among other things, the huge problem with valuing the G (government spending on goods and... MORE

Markets: Rich/Nice vs. Poor/Mean

Microeconomics
Bryan Caplan
Consider a model where workers are either rich or poor, and employers are either nice or mean.  Rich workers might be more conscientious than poor workers, or simply less tempted to steal from their boss.  Nice employers trust their workers... MORE

Mankiw's Clarity on Kidney Exchanges

Microeconomics
David Henderson
Mankiw hits a home run in a short space. In a blog post on Sunday, Greg Mankiw hit a home run in discussing the sale of kidneys. It's so well done, and so succinctly done, that there's no point in... MORE

Pricing in Economics Textbooks

Economic Methods
David Henderson
On a list serve that I receive, Warren Gibson, an economics instructor at San Jose State University, recently wrote: Rothbard's Man, Economy, and State discusses bargaining at length but I can't think of another text that does so. Rothbard starts... MORE

Max Borders on Subjective Value

Microeconomics
David Henderson
The May Econlib article went up yesterday. It's titled "The Relentless Subjectivity of Value" and is written by Max Borders. My favorite paragraph is on Nudge by Thaler and Sunstein. Borders writes: Furthermore, nudgers are usually establishing choice architectures for... MORE

Strange Moments in Marginalism

Microeconomics
Bryan Caplan
From September Dawn, a dramatization of the Mountain Meadows Massacre:Jonathan: Don't do it!  You'll be cursed!Micah: I'm already cursed!... MORE

When Doesn't the Law Matter?

Microeconomics
Bryan Caplan
It's clear that many existing laws have little or no effect on behavior.  An even larger class of laws have little or no effect on most people's behavior.  What are the main mechanisms of legal irrelevance?1. People know the law... MORE

Question for Left-Libertarians

Microeconomics
Bryan Caplan
Obamacare penalizes firms that don't provide health insurance.  If a firm has fewer than 50 employees, however, it's exempt:Requires employers with 50 or more employees who do not offer coverage to their employees to pay $2,000 annually for each full‐time... MORE

GDP Fetishism

Macroeconomics
David Henderson
Econlib's featured article this month is GDP Fetishism by me. Opening graf: When economics professors teach the basics of Gross Domestic Product (GDP), we usually caution our students that it is not a good measure of welfare. Unfortunately, many economists... MORE

Problems with Age-Testing

Microeconomics
Bryan Caplan
Let me clarify my question for David.  I support both means-testing and age-testing, but they're more similar than they seem.  It's true, of course, that you can change your means, but not your age.  But in both cases, there are... MORE

Question for David

Social Security
Bryan Caplan
Don't higher age cut-offs cause most or all of the problems associated with means-testing?  Why are you for the former, yet ambivalent on the latter?... MORE

Since there was a lot of interest in explaining supermarket shortages the night before the blizzard, I'm back for round 2.  Here goes:I'll probably go to the supermarket tomorrow.  What will the supermarket look like?a. Still stripped bare.  Due to... MORE

A Puzzle from the Blizzard

Microeconomics
Bryan Caplan
A blizzard is about to hit DC.  As reports of its magnitude spread yesterday, people unsurprisingly rushed to grocery stores to stock up.  Stores unsurprisingly failed to raise prices to cope with this sudden demand shock.  By the time I... MORE

"Big Corporations Almost Never Lose Money"

Microeconomics
Bryan Caplan
That's an actual quote from Galbraith's New Industrial State.  And somehow the last two years are supposed to show that Friedman was out of touch with reality?  I'm speechless, but fortunately Amar Bhide gives me a rhetorical bail-out in F2P2:Arnold... MORE

Yoram Bauman has responded to my review of his Cartoon Introduction to Economics in detail.  One of my main complaints:Klein and Bauman shouldn't have run away from self-interest in chapter 1.  Yes, I know that textbooks love to claim that... MORE

A reader writes, If the price-insensitive people are at home avoiding the crowds then it would seem the online stores would be getting shopped by a higher than average percentage of price-insensitive people. It appears to me the 'price discrimination'... MORE

Price Discrimination, Again

Business Economics
Arnold Kling
Some pushback from Karl SmithAdam Ozimek. Stores must sell their goods at a prices that cover the wholesale cost of the individual goods as well as the overhead costs of the store, like labor and the building lease. The amount... MORE

Bye Bye Borders?

Microeconomics
Bryan Caplan
When I read this Amazon review, I got a Christopher Walken-like premonition that Borders will soon die:The bright red cover caught my eye. The title made me smile ("how clever!") and the first sentence I read inside made me laugh... MORE

Why Aren't Government Employees Worse?

Microeconomics
Bryan Caplan
I first read Murray Rothbard when I was seventeen years old, and suddenly my whole high school made sense. Lazy teachers, guys with college degrees teaching gym, required drama classes, and lies, lies, lies everywhere.  Mr. Libertarian had a compelling... MORE

More on Monopoly

Microeconomics
David Henderson
My co-blogger, Bryan, posted an excellent piece on the origins of monopoly. I think it also led to one of the highest-quality set of comments I've seen on Econlog. Here's some additional backing for Bryan's points from some of my... MORE

Where Does Monopoly Power Come From?

Microeconomics
Bryan Caplan
Textbook accounts of monopoly usually take the existence of a monopoly for granted, then analyze its consequences.  When I was an undergraduate, this usually provoked me to argue with the textbook.  "Where did this 'monopoly power' come from?!" I'd ask. ... MORE

Me on KQED-FM

Macroeconomics
David Henderson
I'll be talking about the economy on KQED-FM, 88.5 in San Francisco at 9:05 a.m. You can listen live. Update: BTW, this is PDT. Goes to 10:00 a.m. PDT. Can call in at 866-733-6786.... MORE

Creative Destruction: What's Next?

Microeconomics
Bryan Caplan
Everywhere I look, firms are going out of business.  The recession is obviously the proximate cause.  On closer look, however, the recession is just stepping up the bankruptcy time table for firms that were already on their way out.  In... MORE

Mainstream Marketing vs. the Central Six

Microeconomics
Bryan Caplan
After faulting economists for ignoring marketing, Geoffrey Miller harshly attacks mainstream marketing for ignoring what he calls the "Central Six" - IQ plus the Big Five personality traits.  At first, you might think he's merely telling marketers, "Here's something useful... MORE

One of the best passages in Geoffrey Miller's Spent shows economists at our worst:My crisis point came at a 1999 conference that I organized in London on the origin of people's economic preferences.  We psychologists thought that economists would enjoy... MORE

Despite the lack of a consensus in the comments on the right answer to my micro midterm question, I maintain that there's just one right answer.  The key point - and the reason I emphasized the words virtually and before... MORE

Question from My Last Ph.D. Micro Midterm

Microeconomics
Bryan Caplan
Here's my favorite question from my 2009 Ph.D. Micro midterm: People occasionally argue that Western consumers are virtually "satiated" - before long, they will have everything they want.  Assume this claim is correct, and that labor productivity continues to improve. ... MORE

The Remote Control Puzzle

Microeconomics
Bryan Caplan
How many remote controls do you own?  I probably have at least thirty remotes somewhere inside my house.  The reason, of course, is that virtually every electronic device comes with its own customized remote control.  Some of these remotes try... MORE

Contractor Cutoffs

Microeconomics
Bryan Caplan
Getting a contractor - plumber, painter, cable guy, whatever - to come to your house tends to be frustrating.  You wait around for hours, he finally shows up, and then... he don't do a very good job.  Or, he finally... MORE

Kane's Pledge

Microeconomics
Bryan Caplan
After defending bankruptcy for the Big Three, Tim Kane pioneers a new way to put your money where your mouth is:  [T]t is not true that customers won't buy from a bankrupt company.  Happens all the time. So I have... MORE

Government Conspiracy to Silence Mankiw

Microeconomics
Bryan Caplan
Mankiw calculates that McCain's tax plan slashes his return to work by 83%.  Obama's plan slashes his return to work by 93%.  Doesn't anyone in politics want Greg to keep working?  The funny thing about his post is that it... MORE

Why Are Bartenders So Rude?

Microeconomics
Bryan Caplan
This past year I've often found myself in the company of avid barhoppers.  Since I don't drink, it's no surprise that I don't appreciate the experience.  But I'm surprised by how truly awful the experience is - why pay good... MORE

Do I Take Teasing Too Seriously?

Microeconomics
Bryan Caplan
When phone companies, ISPs, cable companies, and the like offer "teaser rates" ("$50 for the first three months"), I assume the worst. If their regular rate were good, they would tell me upfront. So if they won't tell me what... MORE

Amazing Elasticity

Microeconomics
Bryan Caplan
Here's another margin of gasoline price-elasticity to add to Greg Mankiw's list: Netflix now advertises "Save Gas. Let us deliver your movies." P.S. The fact that these margins are hard to foresee is another reason why we probably tend to... MORE

Unions and Productivity

Microeconomics
Arnold Kling
Ezra Klein writes, It's an article of faith for some on the right that unions wreck productivity. Not in the private sector. I would be surprised if you had lower productivity in unionized firms. You can't have both lower productivity... MORE

The Gasoline Market

Microeconomics
Arnold Kling
Megan McArdle likes to tell a story with charts. I like to tell it this way. There is a wholesale market for gasoline, and there is a retail market for gasoline. Gas stations buy in the wholesale market and sell... MORE

The $.30 Question

Microeconomics
Bryan Caplan
Amazon has been charging $19.77 for my book for almost a year. But very recently, they cut the price to $19.47. Why $.30? Why now? Ideas? P.S. If someone who actually works for Amazon knows the answer, won't you please... MORE

In The Logic of Life, Tim Harford tries to figure out why rents in New York and other trendy urban locations are so high. You might think that the rents are high because the wages are high. But adjusting for... MORE

Following up on my last question, what would it take to make you take a spammer seriously? Imagine that one email scam in 10,000 was genuine. How could a complete stranger from Micronesia convince you even to read his email,... MORE

I've previously argued that you usually need extensive educational credentials just to get an interview for anything more than a low-status job. It strikes me that there is a similar problem if you have a new product and want to... MORE

The Sub-Utopianism of the Market

Microeconomics
Bryan Caplan
Remember Joel Waldfogel's The Tyranny of the Market? Waldfogel's thesis, as he explains in Slate: "For small groups with preferences outside the norm, the market often fails to deliver." That sounds like bad news for me, because I'm a member... MORE

Coase in Detroit

Microeconomics
Bryan Caplan
Suppose you signed a contract to pay a worker $100k a year for life. Then a competitor shows up an offers to do the same job for $50k. You can't get out of the contract. What is the best way... MORE

Last week, Alex Tabarrok (who is co-authoring a principles textbook with Tyler Cowen) asked me for good examples of non-monetary incentives. Perhaps the best response is: "Do what I want, and I'll be your friend." Depending upon who makes the... MORE

Is Tax Evasion a Good Investment?

Microeconomics
Bryan Caplan
Gary Becker strongly suggests that it is:If taxpayers responded only to the expected cost of evading taxes, evasion would be far more widespread. The reason is that only about 7 percent of all tax returns are audited (over a 7... MORE

The Rojas Effect

Microeconomics
Bryan Caplan
For Halloween, here's the true, spooky story of how I met Fabio Rojas: In the Fall of 1989, young Rojas, a freshman at UC Berkeley, was assigned the roommate from hell. (No, not me!) The roommate was emotionally abusive and... MORE

Lecture on Mechanism Design

Microeconomics
Arnold Kling
He's not a Nobel Laureate, but Al Roth gave a recent lecture at Google on the topic. He talks about job matching and kidney sales as examples. Bonus question: can you name the economist who introduces Roth? Thanks to Greg... MORE

Talk About Perverse Incentives

Microeconomics
Bryan Caplan
I hope I'm misunderstanding Ed Glaeser, but I don't think I am:Since the rich should not be subsidized, the transfer payments should be means tested and limited to families earning less than $75,000 per year. There should also be income... MORE

How Much Cash Is In Your Wallet? Why?

Microeconomics
Bryan Caplan
At a recent GMU lunch, two economists sparred over the optimal quantity of cash to keep in one's wallet. Economist A holds very little cash, on the grounds that you can pay for virtually everything with credit cards. Economist B... MORE

Why Don't Hispanics Beg in America?

Microeconomics
Bryan Caplan
How often has an Hispanic asked you for spare change? I've lived around LA, San Francisco, NYC, and DC, all of which have lots of Hispanics and lots of beggars. But as far as I can remember, I've never encountered... MORE

Today Alex makes a point that I drill into my graduate students: The assumptions underlying the standard market efficiency theorems are sufficient conditions for market efficiency, not necessary ones. Dani Rodrik and the many econ textbooks that claim that market... MORE

There's No Such Thing as a Free Vegan Lunch

Microeconomics
Bryan Caplan
Who says there's no such thing as a free lunch? At least in downtown D.C., they're not hard to find. Just go to a reception at a think tank and chow down. But this is not without its hazards, as... MORE

Behavioral economists often emphasize nominal rigidities - such as the tendency of list prices to stay the same in the face of shifts in supply and demand. Neoclassical economists often emphasize the Law of One Price - the tendency of... MORE

Polygamy Meets Economy

Microeconomics
Bryan Caplan
Even if you think my earlier posts on HBO's Big Love were gratuitous, you can't deny the economic relevance of one of the latest story lines:Bill hears about a new investment opportunity. A slot machine manufacturer wants investors, and doesn't... MORE

The Wonder That Is Dog

Microeconomics
Bryan Caplan
Richard Dawkins and I have something else in common: We're amazed by dogs:If mutation, rather than selection, really limited evolutionary change, this should be true for artificial no less than natural selection. Domestic breeding relies upon exactly the same pool... MORE

Why Do Book-Sellers Discount Popular Books?

Microeconomics
Bryan Caplan
I've heard the question before, but this time, it's personal: Amazon just sharply slashed the price of my book to $19.77. The standard answer is that the (absolute value of) elasticity of demand is higher for more popular books. The... MORE

Bio-Economics in the Courtroom

Microeconomics
Bryan Caplan
True story: Twin brothers Raymon and Richard Miller are the father and uncle to a 3-year-old little girl. The problem is, they don't know which is which. Or who is who. The identical Missouri twins say they were unknowingly having... MORE

Princess Mahalanobis: Blog Baby

Microeconomics
Bryan Caplan
Believe it or not: This blog has given life to a baby girl! Michael Stastny, better known as Mahalanobis, has the story: My wife had a baby today, which implies with high probability that I had a baby today too.... MORE

Division of Labor in Graphic Novels

Microeconomics
Bryan Caplan
Bismark is often quoted as saying that "People who like sausages and legislation should never watch either being made." (The actual line isn't as catchy: "Laws are like sausages, it is better not to see them being made.") If your... MORE

Taking Out the Competition

Microeconomics
Bryan Caplan
Two resolutions of the take-out paradox that I'm not buying: 1. Fairness, best expressed by Nathan Smith: Maybe different prices for take-out and dine-in would be perceived as "unfair" by customers, and undermine business. Or maybe the restaurateurs themselves feel... MORE

My Take on Take-Out

Microeconomics
Bryan Caplan
Thanks for some excellent comments on the take-out paradox. On reflection, Arnold's beverage-centric explanation seems more important than the one Tyler and I agreed on over lunch. But you be the judge: Dine-in patrons provide an important advertising benefit for... MORE

My Guess on Take-Out

Microeconomics
Arnold Kling
Bryan asks why don't people open high-end restaurants without a dine-in option? As far as I can tell, such restaurants are virtually non-existent. I'll make my guess. In restaurants, the analogy with "follow the money" is "follow the beverages." For... MORE

The Missing Take-Out

Microeconomics
Bryan Caplan
Almost every restaurant does take-out these days. Funny thing is, they usually charge as much for take-out as they do for dine-in. How is that possible? Dine-in requires servers and a lot more real estate. Shouldn't it be cheaper? As... MORE

Scrooge and the Junker Fallacy

Microeconomics
Bryan Caplan
Another great section in Landsburg, from the chapter "What I Like About Scrooge": This is a law of arithmetic: if Scrooge eats less, there's more food for someone else. This is a law of economics: if nobody else wants that... MORE

Ice Cream Demand

Microeconomics
Bryan Caplan
It was 85 degrees in Fairfax last Monday. When I bought an ice cream cone at Ben and Jerry's, I asked the owner how much extra business he was doing that day compared to the typical day in January. What... MORE

The Presumption of Elasticity

Microeconomics
Bryan Caplan
Did tax cuts in the '80's spur Internet entrepreneurship twenty years later? I can't prove it. But it seems very plausible, and no one's proven otherwise. After all, when marginal tax rates are 70%, the dream of striking it rich... MORE

Economics in Candyland

Microeconomics
Bryan Caplan
True story: Last night, I was playing Candyland with my four-year-old sons. The green gingerbread man token is always in excess demand, so the house rule is that the boy who plays green goes second. (It's never too soon to... MORE

The Sociology of the V.R.W.C.

Microeconomics
Bryan Caplan
Sociologist Fabio Rojas just introduced GMU economists to diagrams of social networks. These diagrams provide a neat way to quickly show who knows who, who knows people who know people, and who knows everybody. Rojas presented new data on networks... MORE

My family subscribes to both XM and Sirius satellite radio. The reason is that XM has a deal with the manufacturer of my car, and Sirius has a deal with the manufacturer of my wife's car. When I heard of... MORE

Collusion in the Classroom

Microeconomics
Bryan Caplan
I grade on a curve. So if all of my students studied 50% less, they might learn less economics, but their grades would stay the same. The students keep studying because they are in a Prisoners' Dilemma - their lives... MORE

Another Puzzle from the Tower Bankruptcy Sale

Microeconomics
Bryan Caplan
I just made my life's final purchase from Tower Records. Perhaps it's insensitive to be pondering economic puzzles while my favorite store is on its deathbed, but I can't resist. Here goes: How come the prices for Rap/Hip-hop were slashed... MORE

Big finding as the Titanic goes down: The greater the demand for a CD at its regular price, the greater the elasticity of demand for that CD. When everything is 50% off, CDs that normally sell 1 per week may... MORE

Save Your Breath

Microeconomics
Bryan Caplan
Jane Galt raises a great question: [H]ow bad would something have to be before I would challenge it? I have, on occasion taken stands against bigotry that were potentially dangerous to myself--telling my project manager, for example, that his racist... MORE

I've been beating up on Analytical Egalitarianism quite a bit lately (see here, here, and here). Now Sandra Peart, a leading proponent of this view, has risen to the challenge. According to Peart, scholars should assume equal human abilities because... MORE

The Draft: Who Pays the Price?

Microeconomics
Bryan Caplan
Arnold writes: The draft is a cruel tax, but the volunteer army does create a disconnect between the people who are fighting and the people for whom they are fighting. What are the effects of this "disconnect" supposed to be?... MORE

Dochia On Analytical Egalitarianism

Microeconomics
Bryan Caplan
Econlog reader (and former Avian Flu blogger) Silviu Dochia writes: I'm with Scott Clark on this one. Levy’s point has nothing to do with nature vs. nurture. Then why the Smith and Mill quotations, which are specifically about nature vs.... MORE

Scott Clark, an Econlog reader, responds to my critique of analytical egalitarianism: The way I viewed analytical egalitarianism when i was in Levy's class was not that everyone is the same as everyone else. But when analyzing and making policy... MORE

Baffled by "Analytical Egalitarianism"

Microeconomics
Bryan Caplan
There's a peculiar doctrine coming out of George Mason in recent years. It's called "analytical egalitarianism," and has been energetically promoted by my brilliant colleague David Levy, his co-author Sandra Peart, and quite a few others. (See here and here... MORE

What Do You Want to Be Free to Choose?

Microeconomics
Bryan Caplan
Here's a question for libertarians (though of course others should feel free to answer): What currently illegal thing do you personally really want to be free to do? Set aside "not pay taxes"; that's too easy. For me, anyway, the... MORE

I'm not sure that I've ever been really sad to see a store go out of business. Until today, when I saw the signs up at Tower Records. What is there to do except listen to Morrissey (or maybe Götterdämmerung)?... MORE

Peak Load Pricing at the Movies

Microeconomics
Bryan Caplan
Whenever I'm stuck in a line, I grumble about the need for peak load pricing. Raise the price during popular times, cut the price during off-times, and watch the world's blood pressure fall. At the same time, however, I understand... MORE

Classic Catallarchy

Microeconomics
Bryan Caplan
In blogging as in most things, I prefer the timeless to the transient. I read history books, not newspapers. And if a blog entry won't be interesting in a month or a year, I'd rather not write it. In this... MORE

The Joy of the Switch

Microeconomics
Bryan Caplan
My website has had non-stop problems for the last month. Now, at last, it's fully operational. I've lamented my evil web hosting company - name withheld to protect the guilty - for years. I've often dreamed of taking my business... MORE

The Marginal Myth

Microeconomics
Bryan Caplan
One of economists' favorite things to say is: "Economics only makes predictions at the margin. We can't tell you how much people will buy, only that they'll buy less when the price goes up." Sometimes this is true. But there... MORE

Hair Length and the Demand for Haircuts, II

Microeconomics
Bryan Caplan
Several readers basically share my solution to the haircutting puzzle. Namely: Hair length per se is irrelevant to the demand for haircuts. What matters is the acceptable range of hair length - roughly speaking, the difference between the shortest acceptable... MORE

Hair Length and the Demand for Haircuts

Microeconomics
Bryan Caplan
Puzzle: When is demand for haircuts higher? When short hair is in fashion, or long hair? Or is the relationship more complex? I'll post my preferred answer tomorrow.... MORE

When Is Entry "Easy"?

Microeconomics
Bryan Caplan
Is it "easy" to enter the market for tomatoes? In a sense, yes: Just plant some tomato seeds, pick the ones that grow, and you're "in the market." But in another sense, no: You'd have to grow a lot of... MORE

Polygamy: Economics vs. History

Microeconomics
Bryan Caplan
Economic theory says that allowing polygamy makes life better for women. As Tim Harford explains: A lot of the knee-jerk reactions against polygyny are from people who can't add up. In a society with equal numbers of men and women,... MORE

Credible Incentives for Your Teenage Bum

Microeconomics
Bryan Caplan
This month on Econlib, Donald Cox has a great column on economics for parents: Ever since I started the mind-bending journey that is parenthood—my wife and I have a daughter in first grade and a son in preschool—my appreciation for... MORE

Obscure Demand Function Factoid

Microeconomics
Bryan Caplan
Why did so many comic books during the Silver Age features gorillas? (Didn't know that they did? Neither did I!) According to Wikipedia: There are several rumors surrounding the wide use of gorillas in comic books at the time: 1.... MORE

Eternal Temptation

Microeconomics
Bryan Caplan
I just found out that my Internet service provider sells its services on a lifetime basis. For a $300 lump-sum payment, I will never have to worry about quarterly service fees OR domain registration for my website again. Should I... MORE

Less Stumped

Microeconomics
Bryan Caplan
The high bidder called my wife this morning, suggesting that his price could come down. When he found out the price we paid, he asked a lot of questions, and exclaimed "You got a great deal!" So perhaps his strategy... MORE

Stumped

Microeconomics
Bryan Caplan
A dead 80-foot tree was leaning precariously toward our house, so my wife asked three tree-cutting firms to submit bids. The spread was absurdly wide: $1900, $875, and $3200 for the same job. How is this possible? The quality and... MORE

How to Get in the Financial Times

Microeconomics
Bryan Caplan
How economics is changing: A few years ago, the Financial Times discussed my article on systematically biased beliefs about economics. A few days ago, the Financial Times discussed my blog on the economics of dental hygiene.... MORE

Whenever I go out in public, I notice pairs of mothers and daughters. Once kids hit adolescence, you rarely see mothers and sons, fathers and sons, or fathers and daughters spending much time together. But mothers and daughters of all... MORE

A Failure of Introspection

Microeconomics
Bryan Caplan
I've learned a lot more about the economy from introspection than I have from statistics. If someone shows me statistical evidence that people buy more chocolate when its price goes up, my reaction will be "I've bought lots of chocolate,... MORE

A common objection to hereditarian theories of intelligence is that "Intelligence is SO important, evolution would have eliminated genetic variation." A simple fruit fly experiment (discussed in newscientist.com) shows how wrong this is: The team first bred a group of... MORE

The Marginal Tooth

Microeconomics
Bryan Caplan
Keynes famously wished that economists would one day become as useful as dentists. But every time I go to the dentist, it's clear that knowledge of economics would be useful to to dentists. The whole idea of cost-benefit analysis seems... MORE

Tom, Tyler, Bob, and Rob

Microeconomics
Bryan Caplan
While of course all of George Mason's Department of Economics was once again desperately rooting for Gordon Tullock to win the Nobel Prize, Thomas Schelling and Robert Aumann are welcome substitutes. They don't teach at GMU, of course, but our... MORE

Heroic Stature for Sale

Microeconomics
Bryan Caplan
Eureka! I've been wanting to blog on my renewed love of the Hero System role-playing game for a while, but only five minutes ago did I find a solid econ segue way. In the spirit of Tyler Cowen's "Markets in... MORE

Foresee the Empty Nest

Microeconomics
Bryan Caplan
I've been arguing for quite a while that most people - including us dads - would be selfishly better off if they had more kids. Parents focus too much on how exhausted they are now, and forget how lonely they're... MORE

Bush's Hate Speech

Microeconomics
Bryan Caplan
The gougers are the most beastly, the coarsest, the most savage exploiters... These bloodsuckers have waxed rich during the hurricane on the people's want, they have amassed thousands and hundreds of thousands... These spiders have grown fat at the expense... MORE

The Price of Cold Turkey

Microeconomics
Bryan Caplan
What does a psychiatrist call it when you pay people to stop consuming alcohol and/or drugs, and run frequent tests to make sure they are holding up their end of the deal? Contingency management. According to "Contingency Management: Incentives for... MORE

A Kingdom for a Frame

Microeconomics
Bryan Caplan
In response to my framing puzzle post, Tyler Cowen asks: My puzzle is different: why is framing so expensive? The frames are just finished wood, which you could import or buy cheap at a lumber yard. The framing labor is... MORE

A Framing Puzzle

Microeconomics
Bryan Caplan
Here's a puzzle I'd like to resolve before I teach Industrial Organization again: Why are there so many framing stores? It seems like there is a place that puts your artwork into frames on practically every street corner. According to... MORE

Is Homo Economicus A Sociopath?

Microeconomics
Bryan Caplan
The other day I was reading Martha Stout's The Sociopath Next Door. Although it's engaging, it didn't tell me anything I didn't already know. But it did remind me of a question I've wondered about before: Is homo economicus a... MORE

Resolving the Sibling Paradox

Microeconomics
Bryan Caplan
Intelligent critiques of evolutionary theory are extremely rare, but they do exist. Probably the best of the lot is philosopher David Stove. Stove has zero sympathy for religion; his complaint about evolutionary theory is that it makes false predictions. One... MORE

Big Brains and Free Samples

Microeconomics
Bryan Caplan
I was intrigued by Arthur Robson's explanation for why "intelligence and longevity were simultaneously exaggerated in humans." ("The Biological Basis of Economic Behavior" 2001. Journal of Economic Literature 39: 11-33): Not only has human brain size increased dramatically over the... MORE

Imperfect Information and the Generation Gap

Microeconomics
Bryan Caplan
I recently argued that economics could help evolutionary psychology explain why parents and their children disagree. If your actions have externalities for your siblings or other kin, the optimal choice for your parents' genes differs from the optimal choice for... MORE

Evolutionary Psych and the Generation Gap

Microeconomics
Bryan Caplan
Watching War of the Worlds reminded me of one of the big puzzles in evolutionary psychology: Why do parents and their children disagree? "I only want what's best for you" is every parent's slogan, and if Darwin is right, how... MORE

Tabarrok and Caplan at WSJ.com

Microeconomics
Bryan Caplan
Today I had a debate (well, more of an amiable public dialogue) with Alex Tabarrok at the Wall Street Journal's Econoblog. The topic: Non-Levitt freakonomics. Check it out here.... MORE

Motivating Sheep

Microeconomics
Bryan Caplan
Perhaps the greatest truth about human nature that you do not find in the typical economics textbook is that people are sheep. Most human beings don't like to be different from the others around them; they want to fit in... MORE

Aren't You Cold?

Microeconomics
Bryan Caplan
I wear shorts about 10 months per year, and I live near Washington DC. Judging from the number of funny looks I get, and the number of times perfect strangers stare at me and ask "Aren't you cold?," my behavior... MORE

Solve Tyler's Puzzle

Microeconomics
Bryan Caplan
Tyler Cowen has a number of hypotheses about why all movies cost the same price. As a frequent movie-goer, I'd like to know, but I don't find any of his answers too convincing. A lot of the problem gets solved... MORE

The Larry Summers controversy (see here and here) is probably going to make it even harder to do no-holds-barred research on the fascinating subject of gender identity. But fortunately, academia is probably still too competitive for obscurantism to triumph. Evolutionary... MORE

I finally saw The Aviator, and it's hard not to scream "Scorsese was robbed!" Larry White has already done a great job of analyzing the bread-and-butter economics of the story. What's fascinating to me, however, is the exploration of Hughes'... MORE

Economists have a favorite cynical explanation for the slow-growth movement: Property owners are trying to raise real estate prices by restricting supply. I'm no mind-reader, but I doubt that's the real motive of most opponents of further development. But in... MORE

Random Punishment

Microeconomics
Bryan Caplan
"People with kids care more about the future than people without kids." Who could take offense at this truism? "Gays are substantially less likely to have kids than straights." Angry yet? "Gays probably care less about the future than straights."... MORE

I was overjoyed last year as I anticipated the opening of the Cinema de Lux at Fairfax Corner. If you haven't been there, go - the theater is beautiful, the seats are extremely comfortable, and the screens are enormous. But... MORE

The Selfish Reason to Have More Kids

Microeconomics
Bryan Caplan
Steve Landsburg has some powerful moral arguments for having another kid. (See the chapter "People Wanted" in Fair Play). Contrary to organizations like Zero Population Growth, the externalities of another productive human being are positive, not negative. But like most... MORE

Asymmetric Price Adjustment

Microeconomics
Arnold Kling
Andrew Chamberlain points to a Ph.D thesis by Matt Lewis on search costs and asymmetric price adjustment. The idea is that firms face a kinked demand curve (more elastic for price increases than for price cuts), because consumers search when... MORE

Bundling II

Microeconomics
Arnold Kling
I extended my thoughts on bundling with this essay. What George Stigler showed is that ordinary intuition about bundling is wrong. Your intuition is that the reason that the seller engages in bundling is to force you to buy something... MORE

Coase and Dean

Microeconomics
Arnold Kling
Everett Ehrlich invokes Nobel Laureate Ronald Coase as Ehrlich interprets the success of Howard Dean in terms of reduced transactions costs in setting up a political organization. the Internet has changed all that in one crucial respect that wouldn't surprise... MORE

Price Discrimination and Profitability

Microeconomics
Arnold Kling
Alex Tabarrok asks, If we graphed use of price discrimination against profits would we find a positive slope across the economy as a whole? I doubt it, yet this is what the theory would seem to predict. Send me your... MORE

Economics of Water

Microeconomics
Arnold Kling
Water is generally viewed as a resource that requires centralized government management. However, Jacob Sullum shows that government does not necessarily allocate water rationally. Since cotton is a water-intensive crop, the middle of a desert seemed a strange place to... MORE

Minimum Wage and CEO Pay

Income Distribution
Arnold Kling
Marc Brazeau asks (see Steve Antler's site), Two common arguments against raising the minimum wage are possible inflationary effects and job loss. Why aren't these issues raised in relation to executive compensation? I think that the conventional wisdom is that... MORE

Demand Too Elastic?

Microeconomics
Arnold Kling
London's congestion charge, which seemed like such a good idea from an economic perspective, may have run afoul of elastic demand, according to an article by Iain Murray. economists...estimated that a reduction in traffic of 15 percent would require that... MORE

Labor Supply and Demand

Microeconomics
Arnold Kling
About a year ago, the big story in our local suburban newspaper was the adoption of a "living wage" bill in our county. This summer, the big story was the shortage of teenage jobs here. I was tempted to write... MORE

Steven Levitt

Microeconomics
Arnold Kling
The New York Times profiles Steven Levitt, the recent Clark Medal winner. Using data from more than 50,000 home sales in Cook County, Ill., he compared the figures for homes owned by real-estate agents with those for homes for which... MORE

Basic Supply and Demand

Microeconomics
Arnold Kling
Reading this story about unemployment among computer programmers left me feeling amused and vindicated. "This is the worst I've seen," said ... an out-of-work systems integration analyst, who has been involved in the tech industry since 1974. "I'm running into... MORE

Employees as Owners

Microeconomics
Arnold Kling
Charles Duhigg, a student at Harvard's Business School, reviews some disadvantages of employee stock ownership. A 2000 study by economists at the University of South Alabama found that when the amount of stock held in an ESOP increases, ''management will... MORE

Economic vs. Non-economic Savings Incentives

Microeconomics
Arnold Kling
Hal Varian compares the potency of two types of incentives to save. One incentive is a tax break for savings. The other is a non-economic incentive, in which it becomes easier for an employee to sign up (or harder not... MORE

Economics of Obesity

Microeconomics
Arnold Kling
Economists Shin-Yi Chou, Michael Grossman, and Henry Saffer attempt to weigh in on the issue of why obesity is spreading. These data show that more household time is going to market work. There is correspondingly less time and energy available... MORE

Congestion Tax Works

Microeconomics
Arnold Kling
The first day of London's "congestion tax" began well, according to this report. There were complaints and small demonstrations around London, but traffic was lighter than normal and did not appear to back up around the edges of the restricted... MORE

Return to top