Plain Sense Economics

This is why economists sometimes have a bad reputation (in addition to forecasting 9 of the last 5 recessions…) This op-ed piece in the Boston Globe poses a question on whether sellers should raise prices in times of acute demand – i.e. price gouging. The straight up economic answer is that gouging should be allowed. [...]

Growing up in Michigan, we called that carbonated beverage pop.

Slate published this article, “Sweet Surrender: Taxing soda to make you stop drinking it.” This is another example of using an excise tax to change consumer behavior. If one believes that there are negative externalities to the consumption of sugar-laden, artificially-flavored, carbonated water, then these taxes [...]

Common goods are non-exclusive (it is hard to prevent anyone from consuming them – can’t sell tickets) and they are rival (consumption reduces their number). The economic parable, “The Tragedy of the Commons” highlights the policy problems with managing common goods.
From the April 9 edition of The New York Times, comes a report of a [...]

This report on NBC News tonight highlighted the impact of a recent increase in Federal taxes on cigarettes and chewing tobacco.

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The report mentions an estimate that a 10% rise in cigarette prices results in a 7% drop in smoking among youth and a 4% [...]

Robert Frank, Cornell economist and co-author of the principles textbook that we use in class, wrote in the New York Times this past Sunday:
The consensus is that short-run deficits help end recessions, and that whether long-run deficits matter depends entirely on how government spends the borrowed money. If failure to borrow meant forgoing productive investments, [...]

This article from The Economist describes a not-quite-a-market for agricultural water uses in California.
Farmers like Mr Errotabere have begun to use water more efficiently, dripping it through perforated hoses rather than flooding fields. There is a growing market in water trades between farmers. Most important, the state has set up a water bank. Farmers north [...]

Thanks to a tip from Greg Mankiw’s blog – we learn that Oregon was the first state to impose a tax on gasoline – back in 1919. This article in Wired describes the interest of the state to fund highway projects, including the Columbia River Highway up the Gorge. So, this isn’t really an [...]

In microeconomics we talk about oligopolies – where a few number of competitors control a market. As long as these competitors do not coordinate prices or market areas, or otherwise conspire to keep other competitors out, they may legally operate in the U.S. On the other hand if they do conspire – collude – they [...]

In Principles of Micro class last week we talked about how sellers will reduce production when market prices fall. Lower prices mean less opportunity for profits, and usually lead to lower output.
Here’s an article in today’s Wall Street Journal, that illustrates this point.Refiners Look to Reduce Production as Falling Gas Prices Cut Into Profits
Here’s the [...]

This article in The New York Times, by theoretical physicist Mark Buchanan, complains that economists rely too heavily on outdated views of how markets work. There’s lots to think about here, and perhaps argue with, but it is a very thoughtful piece worth a read.
a quick excerpt…
Well, part of the reason is that economists still [...]