Plain Sense Economics

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article in The New York Times, by theoretical physicist Mark Buchanan, complains that economists rely too heavily on outdated views of how markets work.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 [...]

A “devoted reader” (nepotism alert here – he’s my son…) asked for a plain sense review of the gas tax holiday supported by Senators Clinton and McCain.
First, let’s get a couple of quotes:
As reported in The New York Times:

Mrs. Clinton said at a rally on Monday morning in Graham, N.C., that she would introduce legislation [...]

Prediction markets represent a fascinating development on the Internet. They’re a live, real-world example of the power of markets. True confession…I understand the basics of these markets, but there is much more for me to learn about them. Still I thought it important to introduce them here. Plus – there are some particularly relevant predictions [...]

In both my principles of micro course and my freshman seminar we have been discussing the appropriate role of government in our economy. Stephen Dubner and Steven Levitt of Freakonomics fame, contributed an article in the New York Times Sunday Magazine today – on unintended consequences.
When the Federal government imposes a luxury tax, intended to [...]

I generally grate my teeth when I bother to read the editorial columns in the Wall Street Journal. Today, one of them had a dose of plain sense. When speaking of the current congestion at major airport hubs, the writer suggested

Meantime, economics offers a better way to manage scarcity: Use prices to ration capacity at [...]