Plain Sense Economics

The pharmaceutical giant, Pfizer, watched its main source of revenue and profits, Lipitor, lose its patent protection this week, and now faces competition from generic equivalents. In 2010 Lipitor was the second highest selling prescription drug with $5.2 billion in sales in the U.S. alone. (source: Drugs.com). Now, in the next year, prices of the [...]

Several years ago I wrote about prediction markets like Intrade.com. As the U.S. Presidential election cycle heats up I find I am drawn back to this special kind of bookmaking operation on the Internet. You can see a long list of Presidential election predictions on the Intrade site.
The phrase The Wisdom of Crowds is the [...]

This post will be useful in the fall, when I hold a Principles of Microeconomics class. In that class we take a look at the market for labor, including productivity. We know that if we add a production input, like labor, but hold other inputs (like capital equipment) steady, that marginal improvements to output will [...]

Congress has been deadlocked on the issue of restoring or changing the tax cuts passed in 2001 and 2003. Those original cuts had a sunset provision – the cuts end on December 31, 2010. If Congress does nothing, income tax rates, including capital gains and estate taxes, return to their 2000 levels.  Democrats want to [...]

I can’t believe that my local state representative, whom I’ve met several times and who came and talked with one of my University Seminar classes, will be introducing a rent control law for mobile home parks in the next state legislative session. Technically, the law requires justification of rent increases, instead of an absolute price [...]

In a couple of weeks I’ll be starting two sections of Principles of Microeconomics. Pretty early on we start engaging in the debate over the appropriate role of government in markets. The early discussions will focus on generally bad government intervention – like rent control. Later we’ll find areas where it makes sense for government [...]

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.

Visit msnbc.com for Breaking News, World News, and News about the Economy

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