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Tag Archives: Industrial Organization

Industrial Policy: Shouldn’t we actively encourage X, rather than just passively allow Y?

This post will combine two of my interests: 1. Framing effects2. General equilibrium and the fallacy of composition Although most Econlog readers can see past framing effects, they have a powerful effect on the general population. My claim is that most people would answer yes to the question in the title of this post. And I also claim they’d continue to answer yes if you reversed X and Y. It simply sounds good. Do I have any evidence for this claim? Sam Bowman...

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Why the Prices Are So Damn High: Reply to Alex

Alex has already posted a reply to my critique of Why Are the Prices So Damn High?   Here’s my point-by-point reply, with Alex in blockquotes. In contrast, my friend Bryan Caplan is not happy. Bryan’s basic point is to argue, ‘look around at all the stupid ways in which the government prevents health care and education prices from falling. Of course, government is the explanation for higher prices.’ In point of fact, I agree with many of Bryan’s points. Bryan says,...

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In Sync: How Business Responds to Gratis Government

Whenever people criticize government provision of a product, clever analysts often demur that private suppliers who compete with government have exactly the same problems.  Part of Helland and Tabarrok‘s case for the Baumol effect in education, for example, is that prices have risen at the same rate in both the public and private sectors: Prices are much lower at public than at private institutions. The vertical scale is a ratio scale, so equal slopes mean equal rates...

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Why the Prices Are So Damn High: A Deeper Look

Out of my colleagues in Carow Hall, I’ve learned the most from Tyler Cowen, and I reason the most like Robin Hanson.  But I agree the most with Alex Tabarrok.  I was surprised, then, to find so much to disagree with in Alex’s new monograph (co-authored with Eric Helland), entitled Why Are the Prices So Damn High?  Helland and Tabarrok try to explain why prices in labor-intensive industries – most notably education and health care – have increased so much more rapidly...

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Are economics textbooks too expensive?

Greg Mankiw has an interesting article that discusses the teaching of basic economics. This caught my eye: A common argument used to explain the high price of textbooks involves the principal agent problem between student and instructor. The instructor chooses the book, often oblivious to its price. The student has little choice but to buy the book. As a result, the publisher has substantial market power and sets the price much above cost, resulting in exorbitant...

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Demsetz on Game Theory

Those who know the late Harold Demsetz’s important role in my life might be surprised that I haven’t posted on him since he died on January 4. The reason is simple: I spent my time on him writing a piece for the Wall Street Journal. It will appear on Monday. I had limited space for the piece and so there was so much I wanted to say but didn’t have space to say. Here’s a good quote from his autobiographical essay in his 1988 book, Ownership, Control, and the Firm:...

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No Economic Reason to Fear China

An article in The Economist (“The Lives of the Parties,” December 15, 2018) reminds us why China is not to be feared. If the domination of Chinese society by the state persists or grows, the country will crash as the Soviet Union did, and for basically the same reasons. Like the Soviet Union, China grew rapidly for a while, helped by its mimicking of Western ways in technology and management and by the displacement of poor workers from agriculture to manufacturing....

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Infrastructure ‘Stimulus’ – Chinese Ghost Cities & The Big Money Drain

As President Trump's "Infrastructure Week" comes to an ignominious end, NIRP Umbrella's Alex Deluce reminds us that spending money on bridges to nowhere and cities of the future is anything but the stimulating panacea it is talked up to be... Is a Chinese credit bubble in the cards? Well, it will be interesting to see if China’s authorities can get through the unwind of US $3 trillion worth of excess credit and the distressed debt on banks’ balance sheets. From 2009 to...

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Who will save China’s rust belt?

Now that Trump has decided to save America's rust belt, I thought it would be interesting to look at the issues facing China's rust belt. Here is the Financial Times: North-eastern China is facing a demographic crisis as educated millennials abandon the industrial heartland, the country's worst-performing region. Planning officials revealed this month that the economy of Liaoning, one of the three northeastern provinces, had shrunk 2.2 per cent in the first nine months of the year --...

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The Monopoly Motive

Today's the first day of GMU's fall semester, and for some reason I'm thinking about a class I haven't taught in years: Industrial Organization.  I wrote the notes when I was much younger and more enamored of theory.  Much of the class was a critique of the Structure-Conduct-Performance model so prevalent at Berkeley and Princeton.  Slogan version of the model, to paraphrase Orwell: "Many firms good, few firms bad."While I hate to claim vindication by vaguely-defined events, the last two...

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