Online selling technology raises the specter of widespread dynamic pricing, or price discrimination (PD). Articulating a widely held view, Paul Krugman writes, "[D]ynamic pricing is undeniably unfair: some people pay more just because of who they are." Implicit in this view are two claims: (C1) PD is unfair because it violates the equal treatment norm; and (C2) equal treatment of buyers by sellers requires unitary pricingthe same price for one and all. These claims may be thought to underwrite a third: (C3) PD ought to be met with public policy initiatives deterring it. I argue that this view is mistaken: (1) On any reasonable concept of equal treatment, buyers are treated more equally under PD. (2) Although some public policy initiatives aim to deter PD; it is not because PD treats some buyers unfairly with respect to other buyers. (3) Despite emerging online selling technology, PD promises to be ephemeral.
Performing or receiving tattoos is forbidden in American prisons. What are the intentions behind this prohibition? Does the policy meet its intentions? Does it promote the broader ends of prison institutions: to protect justice, provide efficient correctional services, rehabilitate criminals, and deter crime? I argue that repealing the prohibition of inmate tattooing would achieve outcomes more in line with the intentions of prison management than does the current prohibition policy.
Many economists agree that markets work exceptionally well yet concede that this can only happen within the context of clearly defined property rights, which necessitates government action. This is false. Ice harvesters in 19th century Boston were able to create their own system of property rights that allowed each person around the pond to thicken ice as needed. In doing so, this paper contributes to a growing literature demonstrating that property rights can not only be provided privately, but that they serve the function of ideal state-provided property rights.
In the early stock market in London there were substantial risks of non-payment and fraud. (Mortimer, 1801) According to Hobbesian theory, we would expect stock markets to develop only after government has implemented rules and regulations to eliminate these problems. The historical account, however, provides evidence that solutions to these problems did not come from the state. This article outlines the emergence of the London Stock Exchange, which was created by eighteenth century brokers who transformed coffeehouses into private clubs that created and enforced rules. Rather than relying on public regulation to enforce contracts and reduce fraud, brokers consciously found a way to solve their dilemmas by forming a self-policing club.
From a neo-classical point of view, neither the market
structure nor the behavior point of view gives historical support to it.
The neo-Austrian point of view proved to be more fruitful. Though
it, too, minimizes the role of entrepreneurship among consumers, at
least in theory it has a role for it. In this paper that role was described
more clearly and historically illustrated. If markets do work, and we
have history to prove it, consurners behave entrepreneurially.
Market Monetarism, with its policy rule of NGDP targeting, has in common with free banking that both seek to avoid monetary disequilibrium. One might conclude that these are different approaches to achieving the same end. The purpose of this paper is to show that the proximate ends are in fact conceived differently: Stable NGDP as an object of choice by a central bank is different from NGDP as the emergent outcome of the market process. Furthermore, well-known insights on knowledge, the pricing process, and the institutional context of economic activity suggest that this difference has important implications.
The report argues that aid volatility is an important source of volatility for the poorest countries. Following a method already applied by the Agence Française de Développement, the report argues that loans to LICs should incorporate a floating grace period, which the country could draw upon when hit by a shock. The definition of a shock should include aid uncertainty, along with others such as commodity shocks and natural disasters. The idea is calibrated to a key IMF policy instrument towards Low-Income Countries, the Poverty-Reducing and Growth Facility (PRGF).
Le rapport montre que l’aide aux pays pauvres contribue à accroître la volatilité de ces pays. Suivant une méthode déjà élaborée par l’Agence Française de Développement, l’article propose d’accorder des crédits aux pays pauvres, qui incorporent un droit de grâce flexible, utilisable par le pays, lorsqu’il est confronté à un choc négatif, quelle qu’en soit la cause : choc d’aide, de prix des matières premières ou catastrophe naturelle. Il montre comment l’instrument utilisé par le FMI à destination des pays pauvres, le PRGF, pourrait être modifié pour ce faire.
The Economic Freedom Index of North America measures the impact of governmental institutions. The literature finds that economic freedom leads to higher incomes. Economic freedom is a geographically defined benefit, the value of which will be capitalized into real estate values. We hypothesize that more economic freedom should lead to higher home prices, ceteris paribus. Our findings support our hypothesis. Through a variety of direct and indirect effects, economic freedom influences the quality of life. States that are more economically free are more attractive places to live, and the benefits accruing to more economic freedom are capitalized into home prices.
While several cross-sectional studies (La Porta et. al. 2002, Norton 2002) examine institutional and cultural determinants of economic freedom, changes in economic freedom remain unexamined. I find changes in voter preferences for economic freedom to be a significant determinant of changes in economic freedom in a panel of 25 OECD countries. The voter preference measure is robust to several alternative specifications, including the addition of institutional variables.
Health insurance mandates require health insurers to provide coverage for particular health services or illnesses. This paper examines how various state health insurance mandates influence premiums and enrollment in health insurance plans. Contrary to previous studies that compare premiums across states, we examine premiums for the same plans in cities that lie on state borders. By holding both plan and population characteristics constant, we isolate the impact of state mandates on insurance premiums. We estimate that some mandates can increase premiums by up to 16 percent. These higher premiums not only affect enrollment in health plans, but also can affect the decisions of individuals to become self-employed or to change jobs.
From ratification of the Constitution until the U.S. Civil War, private enterprise radically improved the nation's transportation infrastructure, specifically through the incorporation and subsequent physical creation of toll bridges and roads, canals, railroads, and transportation companies. Private transportation investment exceeded that of the state and national governments combined, primarily because private ventures, especially for-profit, joint stock corporations, provided transportation goods more efficiently than early governments could. Although the antebellum transportation system was imperfect, it greatly reduced travel times and freight costs and thus helped to make commodity and financial markets more efficient and the nation more politically unified than it otherwise would have been.
This paper adds to the long debate over the capacity of unorganized employees to obtain and protect their interests by contracting in free labor markets. It does so by calculating perhaps the first estimate of the income elasticity of demand for leisure time, using data from the U.S. Census of Manufactures for manufacturing employees from 1890 to 1914, the classic period of alleged widespread labor exploitation. Recent data on the history of per capita real income growth is also reported along with other indicators of human well-being. Last, an estimate of the elasticity of labor supply in manufacturing during 1900-1914 is reported.
Several states have laws that prohibit large increases in prices on consumer goods, or “price gouging,” during emergency situations like pandemics. We investigate the impact of such laws on online consumer behavior using data from Google Shopping Trends during the onset of the COVID-19 pandemic. We focus on hand sanitizer and toilet paper, two staples predominantly bought in-stores in regular times, which experienced substantial in-store shortages since the onset of the pandemic. We find robust evidence indicating anti-price gouging laws are associated with significant increases in online searches for hand sanitizer, and some evidence that these laws increase searches for toilet paper as well. These results imply the possibility that anti-price gouging laws lead to shortages for consumer staples during pandemics. Our results inform the ongoing and rigorous debate surrounding anti-price gouging laws and their potential effects during public health emergencies like COVID-19.
During the 1970s, the US federal government enacted an evolving set of detailed price controls on crude oil. Yet by early 1981, almost all vestiges of the command-and-control regime had been removed, with a return to a normal market for the resource. This paper explores the factors leading to such a rapid deregulation, distilling lessons that may be useful for other areas of free-market reform. I conclude that absurd unintended consequences, academic unity, public choice considerations, and luck all played a role.
This educational note helps instructors to utilize the Cowen/Tabarrok dynamic AD-AS model. I use it to interpret some major shocks and policy responses that hit the UK economy from 2002 through 2010 and I describe how to incorporate the model into a classroom setting.
In the aftermath of the financial crisis, the Federal Reserve pursued a “near zero” overnight interest-rate floor and initiatives to manipulate the size and composition of central bank assets. Bernanke referred to this policy as “credit easing.” I provide an overview of the succession of unconventional Fed measures that have yielded a more than fivefold increase in its balance sheet since September 2008 but with economic growth below trend. I highlight three areas of concern: the distortion of asset prices and interest rates, the Fed as a debt enabler, and the $2.6 trillion overhang of bank reserves.
Over the past decade, a number of non-traditional approaches have emerged for teaching introductory economics beyond chalk and talk lectures. This note highlights two music-related websites for economic educators. The first uses animations to present music in class. The second takes song lyrics and formulates a series of economic questions that can serve as useful exercises. The resulting synergies create a new medium for communicating market processes.
Entrepreneurs' outside wealth is positively related to their firm-level financial leverage. Entrepreneurs have more incentive to use financial leverage when they can accumulate wealth and not risk their personal assets when seeking business loans. My results indicate that wealth tax cuts on entrepreneurs will encourage self-employment and give entrepreneurs the ability to use more financial leverage.
Roger Garrison has played a key role in advancing ideas in Austrian macroeconomics throughout his career. We discuss a number of “Garrisonian wisdoms” that have provided important lessons for economists in navigating a “middle ground” and seeking professional advancement within academic economics. Taken together, Garrison’s lessons reveal how one can successfully build and sustain an academic career while staying committed to the advancement and further development of the intellectual tradition of the Austrian school of economics.
Calls for increased government spending or transfer payments under the guise that they will increase economic growth as measured by Gross Domestic Product are tautological at best. If one defines growth as more government spending, then more government spending will by default increase "growth." By reassessing historical data in light of voluntary transactions, this paper illustrates how the use of Gross Domestic Product has influenced policy makers to engage in policies that have slowed wealth creation. The authors demonstrate how GDP itself has been used as a tool to increase the size and scope of government and propose an alternative measurement to better measure growth.
This paper explores key ideas in constitutional political economy by analyzing the writings of H.S.H. Prince Hans-Adam II of Liechtenstein. As a hereditary head of state, His Highness has significant political power. However, the constitution and political institutions of Liechtenstein give each element of the government—the monarch, the parliament, and the people—checks on the ability of the others to behave arbitrarily. Through examining His Highness’s ideas on constitutional governance in his recent book, The State in the Third Millennium, this paper offers a new perspective on the balance of political power necessary to keep state activity within its appropriate bounds.
Adam Smith perceived just how much spontaneous order there is in the world, and just how little it needs top-down explanation or regulation. In his day, championing markets and mistrusting government was considered “left-wing”—radical, populist, and liberal. After Marx, however, the left switched to championing government against markets. Yet it is the market that has delivered not just prosperity, but freedom, while governments have been responsible for the worst atrocities of the past century. Populist revolts against oligarchies today can be either hopeful (Brexit) or worrying (Trump) for libertarians. Being promarket does not mean being probusiness.
Private property rights are often viewed as contradictory to the advancement of human rights by social critics. However, supporters of this position fail to understand the crucial role of property rights in establishing human rights. This paper explores why human rights are nonexistent in the absence of property rights. Additionally, this paper argues that property rights have been dismissed by many social critics because of the treatment of property rights in academia and the inflation of the issues that are included as human rights. Finally, the relationship between property rights and the attainment of other social goals is examined.
Africa is poor because it is not free. It is the mostun-free continent in the world. Only 10 of the 54 African countries can be classified as economic success stories. Efforts to promote economic freedom in Africa have failed due to resistance from the leadership, Chinese forays into Africa, and adherence to a flawed Washington Consensus approach. Progress can be made by beginning with intellectual and institutional reform before economic liberalization as well as restoring Africa's rich heritage of free village markets, free trade, and free enterprise.