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Tag Archives: price controls

The confusing terminology of monetary policy

As if monetary policy is not confusing enough, the terminology is also ambiguous, with terms used in inconsistent ways. For instance, is the Fed targeting interest rates, or are they targeting inflation?  Consider the following flow chart, showing two possible monetary policy targets.  At the bottom you have the actual tools that the central bank can use to influence policy.  In the middle you have flexible market prices that they may try to control, with the long run...

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Sanders and AOC’s Elitist Credit Card Caps

Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez have announced plans to introduce legislation that would limit the interest rate that credit card companies are allowed to charge customers. Although there is currently no federal limit, some state governments have limits. Sanders and Ocasio-Cortez propose capping the annual rate of interest on credit card debt at 15 percent. What could go wrong with this idea? Lots. Such limits, called usury laws,...

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Markets In Everything, San Francisco Toilet Edition

Last Saturday, I was up in San Francisco for an event and met my daughter for coffee first. After leaving her, I decided to walk along the ocean so that I would get my exercise and wouldn’t get to the event before it started. As I was walking, I thought it would be nice to find a bathroom, but I wasn’t thrilled about the typical options, particularly since I wanted to sit down, if you know what I mean. Then I saw it: Good2Go. It seemed too good to be true. I asked...

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The Fed’s Winners and Losers – Ultimately, We’re All Losers

When the Federal Reserve artificially manipulates interest rates, it’s messing with our minds by distorting important signals that prices provide in a free market. As investment guru Jim Grant put it in a recent article in , central bank interest rates are nothing but crude price controls.Like all price controls, the Fed’s interest rate mechanizations create some winners and some losers. But in the long run, the distortions caused by the central bank’s interventionist monetary policy makes...

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The Minimum Wage as a Perpetual Motion Machine

Perpetual motion machine, Perpetuum mobile, 3D illustration. 3D model is accurately made according to drawings of Leonardo da Vinci Jubal Harshaw at the blog GrokInFullness had an excellent post last month on the minimum wage that I had missed. (HT2 Jonathan Meer.) It’s titled “The Minimum Wage as a Perpetual Motion Machine.” Here are the second and third paragraphs: I worry that an elasticity of less than 1 can be abused by people who try to calculate the net...

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Hidden Costs of the Minimum Wage

Jonathan Meer, an economics professor and first-rate economic researcher at Texas A&M University, shared with me an op/ed on the minimum wage that he wrote recently. It was rejected by a few publications, although I think, as you’ll see, the rejection had nothing to do with the quality of the piece. So he and I have agreed that I’ll run it here as a guest blog post.(I posted about Jonathan’s excellent performance in a debate on the minimum wage with Jamie Galbraith here.)The Downsides of...

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The Federal Minimum Wage Increase Hurt Many Low-Skilled Workers

We find that increases in the minimum wage significantly reduced the employment of low-skilled workers. By the second year following the $7.25 minimum wage’s implementation, we estimate that targeted individuals’ employment rates had fallen by 6.6 percentage points (9%) more in bound states than in unbound states. The implied elasticity of our target group’s employment with respect to the minimum wage is −1, which is large within the context of the existing...

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Alan Krueger RIP

Shocking news today: Noted Princeton University economist Alan Krueger died this weekend. He was only 58 years old. Alan was the chairman of President Obama’s Council of Economic Advisers from 2011 to 2013. He was also co-author, with David Card, of the famous book that challenged the conventional wisdom on the effects of moderate increases in the minimum wage. Here’s an excerpt from my pretty critical review of their book. Note that he was no fan of the current...

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Alex Tabarrok on the kidney market

Bob Murphy has a new podcast interview with Alex Tabarrok. (As Tyler would say, self-recommending.) One of my favorite segments discussed the shortage of kidneys for transplant, a topic I blog on quite often. Alex pointed out that the kidney shortage could be eliminated if there were suitably strong incentives for people to donate kidneys. And since the US government already pays for kidney dialysis, which is more expensive than kidney transplant, this sort of program...

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Van Doren on Payday Loans

The Consumer Financial Protection Bureau (CFPB) recently proposed the elimination of new payday lending rules created under the Obama Administration and imposed in 2017. Payday lenders are frequently vilified—a recent New York Times editorial declared that the CFPB “betrayed financially vulnerable Americans last week by proposing to gut rules…that shield borrowers from predatory loans”—but recent evidence indicates that the predatory costs of payday loans may be...

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