Applied Economics: Thinking Beyond Stage One

Quotes

In short, (for politicians) killing the goose that lays the golden egg is a viable political strategy, so long as the goose does not die before the next election and no one traces the politicians’ fingerprints on the murder weapon. — P.8

Another major difference between private and governmental institutions is that, no matter how big and successful a private business is, it can always be forced out of business when it is no longer satisfying its customers — whether because of its own inadequacies or because competing firms or alternative technologies can satisfy the customers better. Government agencies, however, can continue on despite demonstrable failures, and the power of government can prevent rivals from arising. — P.13

Slavery is one of the oldest and most universal of all human institutions. Slavery has existed among peoples around the world, as far back as recorded history goes, and archaeological explorations suggest that it existed before human beings learned how to write. No one knows when slavery began. It is the idea of freedom for the great masses of ordinary people that is relatively new, as history is measured — and this idea is by no means universally accepted around the world, even today. — P.31

Sellers in general maintain the quality of their products and services for fear of losing customers otherwise. But, when price controls create a situation where the amount demanded is greater than the amount supplied — a shortage — fear of losing customers is no longer as strong an incentive. For example, landlords typically reduce painting and repairs when there is rent control, because there is no need to fear vacancies when there are more tenants looking for apartments than there are apartments available. — P.70-71

If a thousand children die from a new drug allowed into the market with less testing and ten thousand would die while more testing was going on, the public outcry over the deaths of those thousand children would bring the wrath of the whole political system down on the heads of those officials who permitted the drug to be approved with “inadequate” testing. But then if a hundred times as many people die while prolonged testing goes on, there will be few, if any stories about those people in the media. — P.91

“Four things have almost invariably followed the imposition of controls to keep prices below the level they would reach under supply and demand in a free market: (1) increased use of the product or service whose price is controlled, (2) Reduced supply of the same product or service, (3) quality deterioration, (4) black markets.” — P.93

Politics offers attractive solutions but economics can offer only trade-offs. For example, when laws are proposed to restrict the height of apartment buildings in a community, politics presents the issue in terms of whether we prefer tall buildings or buildings of a more modest height in our town. Economics asks what you are prepared to trade off in order to keep the height of buildings below some specified level. In places where land costs may equal or even exceed the cost of the apartment buildings themselves, the difference between allowing ten-story buildings to be built and allowing a maximum of five stories may be that rents will be twice as high in the shorter buildings. The question then is not simply whether you prefer shorter buildings but how much do you prefer shorter buildings and what price are you prepared to pay to mandate height restrictions in your community. A doubling of rents and three additional highway fatalities per yet? A tripling of rents and six additional highway fatalities per year? Economics cannot answer such questions. It can only make you aware of a need to ask them. — P.127

-whether judgments or actions toward particular groups are favorable or unfavorable, these actions cannot be automatically equated with prejudgments. Indeed, it is a sweeping prejudgment to do so, especially when those who attribute prejudice to others often have less direct knowledge of the groups in question at the times in question, than those who made the favorable or unfavorable judgments. -- P. 164

institutions, laws, and policies to get those prices paid by somebody else. For society as a whole, there is no somebody else. Yet few of those in politics seem prepared to face that fact. Economists may say that there is no such thing as a free lunch but politicians get elected by promising free lunches. -- P. 93

-there are two competing sets of people who wish to use the same resources in different ways. Property rights allow this competition to take place in the marketplace, while court-sanctioned abridgements of property rights allow the competition to take place through a political process in which only one set of competitors can vote. -- P. 104

Despite the depiction of property rights as mere protections those who own substantial property, it has often been the affluent and the wealthy who have abridged property rights through the political process, in order to keep working class and other less affluent people from coming into their communities and changing its character via the developers and the financial institutions which supply developers the capital to bid away land from existing owners. -- P. 106

-many of these same advocates of land use restrictions would also proclaim their concern over a need for 'affordable housing.' -- P. 107

All the while, people in such places speak of a need for 'diversity' and 'affordable housing'- neither of which that have or are likely to get, as their populations become whiter and older with rising prices. -- P. 109

Recycling is not categorically justified or unjustified, but is incrementally either worth or not worth the costs...-studies of government-imposed recycling programs in the United States have shown that what they salvage is usually worth less than the cost of salvaging it. -- P. 14 - 15

Another and very different kind of bias is based on favoritism for one‘s own group, which may exist independently of any belief, presumption, or bias about inferior abilities in other groups. -- P. 166

It is not only theoretically possible to have more discrimination where there is less bias or prejudice, and less discrimination where there more bias and prejudice, this has in fact happened in more than one country. The degree to which subjective attitudes are translated into overt acts of discrimination depends on the costs of doing so. Where those costs are very high, even very prejudiced or biased people may engage in little or no discrimination...Personal costs can lead to actions either more adverse or less adverse than the individual‘s own beliefs or feelings. -- P. 168 - 169

Too often, those opposed to discrimination are also opposed to free competitive markets that make discrimination more costly. They do not think beyond stage one. -- P. 177

-the crucial factors in the cost of discrimination have been the presence or absence of competition and whether those making the decisions have been spending their own money or someone else‘s money. -- P. 178

Where discrimination is distinguished from differences in life chances, the empirical question is whether individuals of similar qualifications have similar prospects of employment, college admission, and other benefits when they come from different groups. Where there are substantial differences in qualifying characteristics among groups, as there often are, the question then becomes: What of those particular individuals who have the same qualifying characteristics as members of other groups? Do they have the same prospects or results? -- P. 180

For much of the media- and often even in academia- it is sufficient to find inter-group differences in outcomes to conclude that there has been discrimination. This happens, however, only when the conclusion fits existing preconceptions. -- P. 184

Sometimes a variety of favorable geographical features exist in combination within a given region, as in northwestern Europe, and sometimes virtually all are lacking, as in much of tropical Africa, while still other parts of the world have some of these favorable features but not others. The consequences include not only large variations in economic well being, but more fundamentally, large variations in the skills and experiences- the human capital- of the people themselves. -- P. 209

Some of the worst poverty in the world today can be found in thinly-populated regions like sub-Saharan Africa. Meanwhile, population density is several times higher in much more prosperous Japan. There are also densely populated poor countries, such as Bangladesh, but there are even more densely populated places like Switzerland and Singapore, with far higher standards. -- P. 215

As a young man, John Stuart Mill brooded over the fact that there was an ultimate limit to the amount of music that could be produced by using the eight notes of the music scale. But, at that time, Brahms and Tchaikovsky had not yet been born nor jazz yet conceived, and rock music was more than a century away. Ultimate limits alone tell us virtually nothing useful about whether there is or is not a practical problem. -- P. 216

place. Moreover, the actual behavior of those described as exploiters often shows them shunning those that they are said to exploit, in favor of dealing with more prosperous people, from whom they expect to earn more money. -- P. 219

Alternatives to a market economy may express nobler sentiments but the bottom line is whether this in fact leads to better behavior in terms of serving their fellow human being. -- P. 25

Rights in the sense of exemptions from the power of government are very different from rights to things that can be provided only by incurring costs. Your right to free speech does not require someone else to pay for broadcasting what you say or to publish it in a newspaper or magazine. But if you have a right to water, then others are forced to pay the inescapable costs of getting it for you. -- P. 28

While the pay of such workers is often low by comparison with that of workers in more affluent industrial societies, so too is their productivity. An international consulting firm determined that the average labor productivity in the modern sectors in India is 15 percent of that in the United States. In other words, if you hired an average Indian worker and paid him one-fifth of what you paid an average American worker, it would cost you more to get a given amount of work done in India than in the United States. -- P. 41

Contrary to theories of 'exploitation,' most multinational corporations focus the bulk of their operations in countries where pay scales are high rather than in countries where pay scales are low. -- P. 42

It is easy to say 'crime does not pay,' but the real question is: Does it pay whom- and compared to what? -- P. 47

-criminal activity in general has tended to vary inversely with the risk of imprisonment. -- P. 48

The side effects of slavery were not negligible, especially in the United States, where the staggering economic and human costs of the Civil War seemed to fit Abraham Lincoln‘s premonition that all the treasure built up from unpaid labor might be sunk in the ensuing war and every drop of blood drawn by the lash might be paid in blood shed with the sword. -- P. 65

-the very need to pass laws to keep slavery from self-destructing piecemeal was further evidence of it economic deficiencies, quite aside from its violations of moral and humanitarian principles. -- P. 67

The normal weighing of costs against benefits, which causes more urgent things to be done ahead of less important things when prices ration scarce resources, is less effective when costs are paid by someone other than the actual decision-makers. -- P. 74

-killing the goose that lays the golden egg is a viable political strategy, so long as the goose does not die before the next election and no one traces the politician‘s fingerprints on the murder weapon. -- P. 8

By ingredients they mean physical ingredients, which are usually inexpensive, rather than the knowledge ingredient which is usually astronomically expensive because of years of research, including much trial and error. -- P. 82

In every aspect of our lives, we all stand on the shoulders of giants, and all those giants were not in the past. The principles of aerodynamics were not discovered by the Wright brothers. They were simply the first to get a plane off the ground. -- P. 84

-absolute certainty is still not achievable by human beings, no matter how much testing goes on...If a thousand children die from a new drug allowed into the market will less testing and ten thousand would die while more testing was going on, the public outcry over the deaths of those thousand children would bring the wrath of the whole political system down on the heads of those officials who permitted the drug to be approved with 'inadequate' testing. But if ten or a hundred times as many people die while prolonged testing goes on, there will be few, if any, stories about those people in the media...Sometimes safety precautions can be carried to the point where they are fatal -- P. 90 - 91

Doctors and the producers of modern pharmaceutical drugs have been rhetorically transformed into villains by those who would present themselves as our rescuers in politics or in the courtrooms. -- P. 94