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Tag Archives: Industrial Organization

Manufacturing: An Example of Industrial Policy

Recent data and analysis show two interesting facts: (1) American manufacturing output has been falling for a year; (2) the Trump administration’s tariffs have reduced manufacturing employment. One chart and one new econometric study will help understand. As a bonus, we’ll also see that, as dangerous as a central bank is, an independent one has a major benefit that is too easily overlooked. Of course, there is nothing sacred in manufacturing. Whether what is produced...

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Is the “War on Tech” just around the corner?

The media says yes. I say no. Before explaining why, I’ll use a couple of analogies. In the 1980s, I recall reading that all the recent innovations in macro, especially “micro foundations”, would eventually lead to lots of Great New Models.  The great new models never arrived and macroeconomics circa 2019 is complete mess. A few years later, behavioral economics was the new fad.  Again we were told that these behavioral insights would revolutionize the field.  If you...

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Really Awful Wall Street Journal Headline

This is the headline on the print version of a Wall Street Journal news story in the November 12 edition. Fortunately, in the electronic version, it is now a more-accurate “Frackers Prepare to Pull Back, Exacerbating a Slowdown in U.S. Oil Growth.” Why the problem with the first headline? Because it says that frackers’ motivation in pumping less oil and gas is to push up prices. But for that to be their motivation, they would have to have a lot of market power as a...

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Putting the fun back into being a fungi

Economists often use models where firms are assumed to maximize profits. Non-economists sometimes criticize these models, arguing that their assumptions about human nature are too simple. This debate over the behavior of humans won’t be resolved anytime soon. Meanwhile, there is increasing evidence that fungi entrepreneurs respond rationally to incentives: A study just published in Current Biology by Toby Kiers of the Free University of Amsterdam suggests that, like...

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Regulation creates concentration

The Bay Area of California is ground zero of NIMBYism.  Daniel Herriges has a very good article on the issue: A few months ago, I wrote about San Bruno, California’s rejection of a 425-unit apartment complex, even after the developer jumped through an insane series of hoops. To get the project approved, Mike Ghielmetti’s Signature Development followed San Bruno’s own voter-approved downtown vision to the letter. The project was near mass transit. It would have had 64...

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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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