Consider a country with two left-wing and two right-wing parties. In each side of the political spectrum one of the parties is a radical and the other is a moderate. Consider also that the moderates attract more voters than the radicals. To fix ideas consider that the percentage of supporters are 15, 33, 30 and […]
Unlike in perfectly competitive markets, there are many instances of economic situations in which selfish rational behavior does not imply an efficient allocation of resources. One example is the financing of a public good. Say some neighbors are asked to contribute to the construction of a park of one hectare (10,000 m 2 ) in […]
Until the 80’s all Olympic Games took place in rich countries, with the only exception of Mexico 68. In the 80’s, Moscow 80, Seul 88 and Sarajevo 84 started a trend that encouraged bids from developing countries with the result that after 2000 over half of all bids have come from this group. This fact […]
The last issue of the American Economic Review contains three articles on the performance of three different policies to fight poverty. Chetty et al . (2016) study a program in which families where moved from high-poverty neighborhoods to low-poverty ones, Hoynes et al . (2016) examine Food Stamp programs, and Aizer et al . (2016) […]
When I buy in a market I only deal with myself regardless of whether the market is competitive or in the hands of a monopoly. Given the price, I choose how much to buy. In an auction to get a Government project a firm has to anticipate what the other firms are bidding, but and […]
Energy sources in the modern world are mostly based on fossil fuels like oil, natural gas, and coal. They all share two main characteristics of the utmost importance for their economic analysis. First, they are depletable resources. The amount of reserves for these resources may be small or large, but definitely not large enough to […]
“We asked for workers. We got people instead.” Max Frisch In a past article, I reviewed the recent literature on the effects of immigration on the labor market. To sum up, it finds no significant negative effects on employment or wages of native workers while it boosts the local economy. From here, one may be […]
I consider an offer for a gym membership and decide to accept it after being overconfident that I will use it regularly, but in the end I will not. In other words, I overvalue the offered contract. The opposite is also possible, for instance, I may undervalue car insurance because I underestimate the likelihood of […]
Standard supply and demand analysis shows that competitive markets will deliver a given commodity up to the point where costs (as perceived by producers) equal benefits (as perceiver by consumers). When both producers and consumers internalize all costs and benefits, the result is efficient in the sense that the market does not dilapidate resources. An […]
“‘Is there no way,’ said I, ‘of escaping Charybdis, and at the same time keeping Scylla off when she is trying to harm my men?’” -Homer, The Odyssey Conventional cost-benefit studies are based on marginal analysis. A decision to undertake a project should be made if, with respect to the actual situation, it provides more […]