Homines libenter quod volunt credunt
Posted in Market Failures on Mar 10th, 2011
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 […]
Posted in Market Failures on Mar 8th, 2011
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 […]
Posted in Market Failures, You Can't Have it Both Ways on Mar 7th, 2011
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 […]
Posted in Market Failures, You Can't Have it Both Ways on Feb 24th, 2011
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 […]
Posted in Market Failures on Feb 10th, 2011
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 […]
Posted in Government Gone Wild, Market Failures on Feb 10th, 2011
Peahens select their mates by looking for the largest, most colorful and shapely tail among the males. Thus, in the evolutionary process, the males have developed extremely ornate and large tails. To an outsider, this might seem like an extremely bizarre and inefficient outcome. After all, peacocks are tasty. Those tails are large and cumbersome, […]
Posted in Market Failures on Feb 9th, 2011
We’ve been studying Harold Demsetz’s terrific paper, “Barriers to Entry,” slowly over the past few weeks. We’ve already analyzed what it might possible mean to say that a firm’s practices are predatory, and we have discussed how difficult it would be to identify using a purely economics approach. Today we’ll discuss a legal test as […]
Posted in Environment, Market Failures, You Can't Have it Both Ways on Jan 27th, 2011
Two common arguments made against market systems are: Left to their own devices, capitalist economies are prone to monopoly. Private, profit-seeking interests over-exploit environmental resources. Let’s grant that both of these are 100% true. What would the implication be? Well, consider the problems of “monopoly” as the standard market-failure critique goes. Monopolies are “bad” because […]
Posted in Market Failures on Jan 25th, 2011
Last week, we started to discuss how it was impossible to identify whether a low price was a “predatory” price. We continue in this post to work our way through Demsetz’s paper. Another way to potentially identify predatory behavior is not to look at prices, but rather to look at how firms’ output levels change […]
Posted in Environment, Market Failures, You Can't Have it Both Ways on Jan 18th, 2011
We’ve recently spent some time thinking about the issue of predatory pricing. The most important lesson learned thusfar is that it is virtually impossible to look at a pricing policy for a firm and ascertain whether it is truly predatory. You will learn in the future whether, even if this knowledge problem could be overcome, […]
