Here are 12 important articles to help you understand sound economics, ideally before you head off to grad school in economics.
Note: Coase, Hayek, McCloskey, Alchian, Buchanan, Friedman, Lucas
Early on, I saved a small bundle on hard copy subscriptions. Realizing that mainstream media was into ACDC was a bonus.
Of course, there remain honest folk in mainstream media. The trick is to know.
Someone smart said we need mainstream media to sort out the trash. True enough. Mainstream has to maintain at least the credibility and gravitas of a piece on its face. The troll and clickbait sites are uncovered soon enough, unless you’re too willing to be trolled.
So, what to do?
Find good friends and enemies. Find good people to follow.
What makes for “good?” It’s when they point you to something credible, or hint that something is unduly biased. Those with opposing views are best because you have to work against your own grain.
In the end, free expression is just a clause that works when people think.
Here’s a link to a discussion on statistics. If you did some thinking, many things you don’t see have a powerful story. Bastiat is famous for the cases of the unseen.
Hat tip to Don Boudreaux.
For readings, please refer to my lecture notes on macroeconomics, and to Mankiw’s chapter on the natural rate of unemployment. For extra-credit questions, you may have to do further research or readings.
Please answer the following questions, and submit your answers by email by March 2, 2016.
There is no need to submit your answers. We will discuss them in class.
_____ (a) law enforcement services
_____ (b) cell phone service
_____ (c) wives or husbands (aka the marriage market)
_____ (d) kangkong, tomatoes, onions
_____ (e) Nokia cell phones
_____ (f) security guard services
____ (a) There are many perfect competitors, while there are usually only a handful of monopolistic competitors.
____ (b) Product innovation is not important for perfect competitors, whereas monopolistic competition would not exist unless sellers can produce “branded” products by using or adapting new technology.
____ (c) In the long run, there is zero profit in perfect competition, while there is a small positive profit for monopolistic competitors.
|Price leadership, or a market dominated by a large firm||A. An agreement to collude, allocating market shares and setting prices.|
|Contestable market||B. Ease of entry or exit|
|One firm is the only seller||C. Small firms behave like perfect competitors because they cannot control the price.|
____ (a) Oligopolists set the price by conspiring with each other to form a cartel, whereas monopolistic competitors do not engage in overt conspiracy (i.e. they set the price by secret means).
____ (b) Oligopolists tend to engage in advertising to steal market share, whereas a monopolistic competitor does not bother to differentiate his product from that of his competitor.
____ (c) Oligopolists face a downward sloping demand curve, whereas monopolistic competitors face a slightly downward sloping demand curve. As a result, monopolistic competitors set price without worrying about the prices set by others, whereas oligopolists cannot set the price independently of each other.
______Where there are economies of scale (there is a natural monopoly), society is better off because production is at the lowest resource cost.
______Monopoly from patents given to investors encourage innovation that benefits mankind.
______Where there are few barriers to entry, and more-or-less constant-average-cost to produce the given product, the result is a contestable monopoly, and here, the monopolist sets prices as though it was producing in a perfectly competitive market in order not to lose his monopolist status.
______Where there is extreme income inequality, and a generally perceived need to provide low-cost access to the given product, a legislated monopoly through licenses (such as for lawyers, doctors, etc.), makes it possible to provide for mandated low prices for a target group of “needy” consumers.