Category Archives: Economics

Hernando de Soto Documentary on PBS

Posted on October 8, 2009 | Comments Off on Hernando de Soto Documentary on PBS

radicals_desoto

Hernando de Soto, one of the world’s top development economists, has a documentary airing on PBS tonight. If it’s anything like his books, it is well worth watching.

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Posted in Economics

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Precisely Backwards

Posted on October 8, 2009 | Comments Off on Precisely Backwards

People buy less of something when it becomes more expensive. That’s what economists call the law of demand. It is one of the key drivers of every facet of human behavior. And it’s a simple concept. Easy to understand. Easy to apply.

Or maybe it only seems that way. 366 members of Congress just voted to attract tourists to the U.S. by taxing them $10 when they enter the country.

That noise you hear may well be Adam Smith rolling over in his grave.

Few things are more taxing than our elected officials’ economic illiteracy. How sad that visiting a wonderful country like America may soon be one of them.

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Posted in Economics, International, Taxation, Trade

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Regulation of the Day 57: Minimum Price Agreements

Posted on October 7, 2009 | Comments Off on Regulation of the Day 57: Minimum Price Agreements

A new Maryland law makes it illegal for manufacturers to set a minimum retail price for their products in sales contracts. The law is meant to increase competition. Unfortunately, it will have the opposite effect.

As Wayne Crews and I explain in the The American Spectator, it could prevent retailers from competing with each other on non-price grounds, such as customer service, product demonstrations, and advertising.

Some products, such as televisions or cars, have high information costs. Customers want to know a lot about these products before they commit to a purchase. They want to know what they’re getting. Try before they buy.

By forcing retailers to compete against each other to give customers more and better information and service, minimum price agreements can help consumers get what they want and boost sales at the same time.

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Posted in Economics, Regulation of the Day

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Regulation of the Day 56: Kahlua in Ohio

Posted on October 6, 2009 | Comments Off on Regulation of the Day 56: Kahlua in Ohio

Kahlua contains 20% alcohol in 49 states. But in Ohio, it is 21.5%. Weird, huh?

Turns out regulations are the reason. My friend Jacob Grier pointed me to an article showing that Ohio groups alcoholic beverages into two categories: wine/beer and spirits. Any beverage below 20% alcohol is in the wine/beer category and can be sold in grocery stores. Anything above 20% is classed as a spirit and can only be sold in state-run liquor stores.

Drinkers often mix Kahlua with spirits such as vodka. So the company actually changed its recipe in Ohio to ensure that Kahlua would appear in stores next to its complementary products. The benefit to consumers from this regulatory scheme is unclear.

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Posted in Economics, Regulation of the Day

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Net Neutrality and Rent-Seeking

Posted on October 5, 2009 | Comments Off on Net Neutrality and Rent-Seeking

Here is a letter I sent recently to The Wall Street Journal:

September 22, 2009

Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281

To the Editor:

Your article “Bad News for Broadband” (editorial, Sept. 22) hints at, but does not make, a key point: net neutrality proposals are driving a wedge between service providers like AT&T and content providers like Google.

Strange, is it not? Their interests are actually closely aligned. If AT&T upgrades its network, Google benefits from the increased bandwidth. If Google improves its products, AT&T benefits from increased demand for broadband.

Net neutrality proposals give companies the incentive to seek rents at each other’s expense when they could be benefiting from each other’s innovations instead. This must be music to the ears of lobbyists, but how sad for consumers.

Ryan Young
Fellow in Regulatory Studies
Competitive Enterprise Institute
Washington, D.C.

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Posted in Correspondence, Economics, Public Choice, Technology

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Intel’s Human Rights

Posted on October 5, 2009 | Comments Off on Intel’s Human Rights

While I was away on vacation, the Detroit News ran an article by Hans Bader and me about Intel’s claim that the EU’s $1.45 billion fine against them violates its human rights.

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Posted in Antitrust, Economics, Publications, Technology

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The Economics of Net Neutrality

Posted on September 23, 2009 | Comments Off on The Economics of Net Neutrality

Over at the Washington Examiner‘s Opinion Zone, I apply what I learned back in Economics 101 to the net neutrality debate. It’s all about scarcity.

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Posted in Economics, Publications, Technology

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Regulation of the Day 55: Home Environmental Inspections

Posted on September 23, 2009 | Comments Off on Regulation of the Day 55: Home Environmental Inspections

In today’s Politico, I take a look at one of the 397 new regulations in the House version of cap and trade legislation. If the bill passes, almost all homes for sale would be required to undergo an environmental inspection. The home cannot be sold until it is up to code.

One unintended consequence could be the end of fixer-upper homes.

Another would be lower home ownership rates. Which, of course, directly contradicts of decades of federal policy.

UPDATE: A coworker informs me that Fox News is linking to the article in the opinion section of their website.

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Posted in Economics, Publications, Regulation of the Day, The New Religion

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Regulation of the Day 52: Bar Food

Posted on September 16, 2009 | Comments Off on Regulation of the Day 52: Bar Food

This one comes courtesy of Jacob Grier, blogger extraordinaire and former colleague.

In Arlington County, Virginia, there exist twelve restaurants that are required to sell $350 of food per gallon of liquor sold.

Isn’t that weird?

Stranger still, this gang of twelve voluntarily opted in to that bizarre requirement. They think it works better than what all other Arlington restaurateurs have to deal with – sales must be no less than 45% food, and no more than 55% liquor.

Again, what a strange regulation.

The reason for the switch from a dollar to a volume ratio is that Arlingtonians are developing a taste for more sophisticated – and more expensive – cocktails. Restaurants are finding themselves pushing up against that 55% barrier even without serving more drinks.

Jacob, who has thought about opening his own establishment, adds:

“this kind of regulation is one reason among many that I can’t imagine ever opening a bar in Virginia. It would be much smarter to eliminate ratios entirely and simply require that food is available to patrons who want it.”

Way to encourage entrepreneurship, Virginia.

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Posted in Economics, Regulation of the Day

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Bernanke Says Recession Likely Over

Posted on September 16, 2009 | Comments Off on Bernanke Says Recession Likely Over

Wonderful news if he’s right. We won’t know for sure until the GDP figures come out for the third quarter. Or the fourth quarter, depending on when the growth started and how fast it is. But leading indicators have been looking good for some time, so Bernanke’s guess seems reasonable.

Just beware of any declarative statements that come out before the data do.

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Posted in Business Cycles, Economics, Predicting the Future

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