The Unbroken Window

All environmental problems arise from the existence of “externalities.” Many of the common worries about water quality, air quality, etc. result from negative externalities – value producing activities generating costs on unwilling third parties. Some worries are also the result of positive externalities – because free-riding is difficult to prevent for certain classes of goods. [...]

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The US government reports that each kilowatt-hour of electricity generated in the United States using coal as a fuel source releases about 2.1 pounds of carbon dioxide (that’s 2000 data, presumably coal is cleaner today). If you examine the 4th IPCC Assessment Report (i.e. the “consensus” scientific report) you will find that each metric ton [...]

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It is often claimed that “markets fail” because of free-riding. In other words, since creators and entrepreneurs are sometimes unable to “capture” the full-value of what they are creating, they will not be doing enough creating from society’s standpoint. If we were able to have “free-riders” compensate entrepreneurs for all of the great things they [...]

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I was asked to give remarks at the annual Colloquium of the Alexander Hamilton Institute in Clinton, NY regarding the establishment of a sister organization here in Rochester. A draft of that talk follows. Forgive me for taking the chance to talk a little bit about economics before I say a few words about our [...]

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Last Friday we asked why solar electricity generation requires subsidy. The “economic” case can be found in two places. Solar electricity generation is supposedly better for the environment than current fossil fuel generation. But neither consumers of electricity nor individuals around the world pay for the environmental benefits that solar produces, so that solar manufacturers [...]

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I find this insight a little weaker than the previous post on markets as public goods – I’ll blame it on cross-country travel. The entire theory of public goods always felt to me very much a castle in the air. Why is this? Well, the public goods problem is one that articulates how difficult it [...]

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Yesterday, we described the nature of the argument for government intervention into a voluntary exchange order. Today, let’s direct our attention to how these ideas apply to systems of voluntary exchange themselves. Just as a reminder, a market is simply any collection of (potential) buyers and sellers, physical or virtual. Critics of liberty of contract [...]

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Long-time readers are well aware of my extreme aversion to the blind invocation of “public goods problems” as either proof that freedom of exchange is a miserable rule by which a civilized society might operate or as justification for the government to expand its reach into more and more activities. More often than not, the [...]

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An interesting argument came up among students of mine recently. They are talking among themselves about the justification for allowing a closed shop. A closed-shop is perhaps the most objectionable and coercive aspect of unionization. Sure, people ought to have the right to associate and bargain collectively for compensation with an employer, but from that [...]

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Yesterday we examined what the legal test would be for identifying predatory pricing. That test ultimately requires us to determine what the intent of the price decrease was – was it for competitive survival reasons, or was it for anti-competitive reasons? Here are two examples of “predatory pricing” in music that to best of my [...]

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