T here are two major impossibility theorems in social choice: Arrow’s theorem (1951) : the only system to aggregate individual preferences into social preferences (e.g., a voting mechanism) that satisfies the properties of transitivity, monotonicity and independence of irrelevant alternatives for all possible individual preferences is the dictatorial system. Gibbard–Satterthwaite’ theorem (1973) : any voting […]
The share of the world’s population living below the global extreme poverty line has dropped from 42% in 1981 to 11% in 2013. This dramatic change has encouraged the UN to set the goal of ending it by 2030. Can it happen? In a recent article published in the Journal of Economic Perspectives, Page and […]
A tax on carbon emissions is an efficient way to make firms and consumers internalize the environmental costs due to climate change. However, there are many other aspects to consider in a transition from a fossil-fueled economy to a cleaner one. In a past article we presented the case for subsidies on research to develop […]
Very frequently, economic analysis must compare future and present magnitudes. Say that under policy A, the stream of payoffs for today and next year is (10, 10), while under policy B it is (13, 6). The total of payoff is higher under A, but policy B results in higher payoffs sooner. If later payoffs are […]
In this article I summarize the recently published paper by José Alcalde . In this article, the author discusses the current matching mechanism that is used in Spain to assign medical graduates who pass the MIR exam to residency positions. The system works as follows. Students are ranked according to their marks in the MIR […]
Ravallion (2018) questions the thesis that globalization has been a major driving force of inequality. While this is the conclusion of two recently published books (Bourguignon, 2016 and Milanovic, 2016 ), Ravallion argues that their interpretation of the data is not well supported and that is even contradicted by the economic research. Here is a […]
Let me leave aside for a moment our talk about scientists and papers, and bring up a topic that, at first sight, might seem totally unconnected: Ronald Coase’s economic theory about the firm and the allocation of property rights. As in the case of the problem we mentioned in our last entry (why scientists share […]
Conspicuous consumption can be broadly defined as the type of consumption that does not satisfy a direct need or want, but rather, a desire to be regarded as someone that occupies a higher position in a hierarchy. For example, I buy a Picasso not because I particularly like the painting, but because, hanging on a […]
One of the topics of discussion within behavioral economics is the motivation of effort. Although the typical economic model usually assumes monetary incentives, they do not preclude the existence of other factors, like preferences for being first or psychological and economical benefits from reputation. The growing experimental literature on this area will help to determine […]
In the two previous entries (1, 2) of this series I described the different diagnoses that Marina Garcés and Steven Pinker make of humanity’s current predicament, without concealing my sympathies for the latter’s: with up and downs, with unequal division of the benefits, without bringing us a literal paradise, with lots of problems still to […]