Think Economically


Maximum understanding, minimum average total cost.

Economist smacks down skeptics for misreading his research

A fantastic write-up of an even more fantastic reply to misinterpretation from William D. Nordhaus (

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Price controls in the market for gasoline. Could Gingrich push gas prices lower? Should we actively make gas more expensive?

Gingrich says gas should cost two dollars and fifty cents. When markets and politicians disagree, the market usually wins. Still, every time gas prices creep higher, there’s political hay in claiming you can fix it.

Thomas Friedman has a whole different idea on how to handle the price of gas: push it up and let it stay there. Ivan Eland calls it mercantilism.

Some crazy guy still thinks we should peg the dollar to gold. I say crazy because that’s crazy.

What would happen to the market for gas with price controls? Check the video:


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Stupid subsidies are stupid. Economists know this. Obama’s proposed manufacturing subsidy may be good politics but it’s bad policy..

Matt Yglesias is great here. Seriously? What possible argument can there be for manufacturing subsidies?

It’s not an infant industry. It’s not clear that we have huge returns to capital in manufacturing that are being ignored by the private markets. And if we do, lowering the corporate tax rate and broadening the base is the right solution–why would we favor manufacturing jobs over other jobs? It just means less jobs.


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Wikipedia article of the day: Durable goods; Durable goods orders slump by 4%

Not so hot news: Durable Goods Orders in U.S. Slump 4%, Most in Three Years

Maybe not too surprising, as there were tax reasons to shift orders into 2011, but still. Ouch.

The stories should probably just read “Boeing has bad month”, because that seems to be a lot of what’s going on.

What is a durable good? One that doesn’t wear out, like a car or plane or washing machine, as opposed to, say, a dog biscuit. Unrelated to the news, but interesting to read: in a market for durable goods, do monopolists have the upper hand or do consumers?

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Ezra Klein: Romneycare is working. The jury is still out on Obamacare, but the outlook is good.

Ezra Klein has an excellent summary of economists’ analyses of Obamacare and Romneycare. Healthcare coverage certainly seems like a natural monopoly, and it looks like costs are declining with increases in scale.

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Detroit auto makers are back. General Motors, Ford, Chrysler are all working to expand capacity, but demand is outpacing them.

Nothing quite like reading the news. The article here is from the AP and discusses at length the change in the market from dialing down production to rushing to get back to capacity. It’s such a dense article, and you can’t read it without thinking about the elasticity of supply…well, at least I can’t. What will happen to prices? Was the bailout a good thing? Like I have any idea. I give it a crack though. Part 2 is after the break. Enjoy!

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