Economic Forces

Economic Forces explores complex economic concepts, theories, and debates, blending historical context, empirical evidence, and theoretical analysis. It discusses the implications of economic policies on society, the economy's dynamic nature, and the intricacies of price theory, offering insights into both macroeconomic and microeconomic phenomena and their real-world applications.

Economic Theory and Price Theory Monetary Policy and Central Banks Labor Market and Inequality Supply, Demand, and Market Dynamics Technological Advancements and Economic Growth Environmental Economics and Degrowth Trade Policies and Tariffs Economic Policy and Optimal Policy Design Financial Markets and Cryptocurrency Economics Education

The hottest Substack posts of Economic Forces

And their main takeaways

What is Antitrust Law Really About?

1 implied HN point • 29 Apr 21
  1. Antitrust law aims to prevent big companies from being too powerful by addressing monopoly problems.
  2. Enforcement of antitrust laws focuses on consumer welfare, discouraging actions that harm consumers or create social waste.
  3. Antitrust laws seek to rationalize business practices by determining whether they benefit consumers or are harmful, with a focus on consumer welfare.

Don't Waste My Time

1 implied HN point • 25 Mar 21
  1. Time is valuable in economic decision-making, not just money.
  2. Stores use coupons and rebates to differentiate between customers with varying values of time.
  3. Price discrimination through coupons and rebates can increase a firm's revenue by catering to different customer preferences.

Costs and Outputs

1 implied HN point • 18 Mar 21
  1. Alchian's paper emphasizes the distinction between rate and quantity of output.
  2. Alchian defines costs as a stock variable, focusing on capital value concepts.
  3. Alchian discusses using calendar time for output instead of the traditional short-run vs. long-run approach.

Failures of The Law of One Price

1 implied HN point • 04 Mar 21
  1. In price theory, there isn't always a single price for a good; there can be price dispersion due to varying value to buyers and costs to sellers.
  2. Disequilibrium pricing can lead to price dispersion as trades may occur at different prices before reaching market equilibrium.
  3. Search costs and strategic firm pricing can also contribute to price dispersion, presenting challenges and generating testable predictions.

What About Bubbles?

1 implied HN point • 11 Feb 21
  1. Historical bubbles like the South Sea Bubble and Tulipmania had political and economic factors at play, not just emotional reactions or market inefficiency.
  2. Understanding the context of historical events can provide a different perspective on financial markets and investor behavior.
  3. Tulipmania, often cited as a speculative bubble, was actually influenced by Dutch legislation and option contracts, challenging the narrative of irrationality in markets.
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Regulation-as-Exchange

1 implied HN point • 04 Feb 21
  1. Regulation theories in economics predict effects of regulation on prices and profits.
  2. Peltzman's theory of regulation considers the demand and supply of regulation, predicting that prices will be above competitive levels.
  3. Lee's theory suggests regulation can lead to efficiency gains and is mutually beneficial for consumers and producers.

Are Financial Markets Efficient?

1 implied HN point • 28 Jan 21
  1. Efficient Markets Hypothesis (EMH) is often misunderstood and mischaracterized.
  2. Random Walk Diversion and Joint Hypothesis Problem confused some people about EMH.
  3. Efficient financial markets aren't about prices reflecting all information, but about no one systematically beating the market.

Who Pays for the Minimum Wage?

1 implied HN point • 25 Jan 21
  1. Workers want higher wages, firms want lower wages regardless of market conditions.
  2. Increase in minimum wage can lead firms to adjust in different ways, like reducing hours or increasing productivity.
  3. Higher minimum wages can lead to costs being passed to consumers through higher prices and longer wait times.

We Need a Theory of Publicly Provided Goods

1 implied HN point • 14 Jan 21
  1. Public goods are non-excludable and non-rivalrous, like national defense.
  2. There is a need for a theory to explain why certain goods are provided by the government.
  3. The differing incentive structures for publicly and privately provided goods impact decision-making.

What the Heck is Welfare?

1 implied HN point • 24 Dec 20
  1. Welfare analysis involves comparing gains from different scenarios.
  2. Changes in demand can affect consumer welfare, but the overall welfare impact needs to be considered.
  3. Welfare is more than just the sum of individual market welfare, as markets interact through prices.

Do Acquisitions Help or Hurt Innovation?

1 implied HN point • 10 Dec 20
  1. Acquisitions can have both positive and negative effects on innovation depending on factors like price, quantity, and quality.
  2. Incentives for innovation can be influenced by the possibility of being acquired, affecting the number of new products introduced.
  3. Coordination problems in acquisitions can lead to failures and impact the innovation process.

What Do Taxes on Goods Actually Tax?

1 implied HN point • 03 Dec 20
  1. Taxes on goods can be more complex than they seem at first glance.
  2. Different types of taxes can impact consumer behavior and market dynamics.
  3. Tax strategies can influence product quality and characteristics in the market.

Giving Thanks for Price Theory

1 implied HN point • 26 Nov 20
  1. Opportunity costs go beyond monetary values, also including time and other factors.
  2. Efficiency is a key tool in economics for analyzing and understanding the world as it is.
  3. Profits and losses act as selection mechanisms, guiding the allocation of resources in market-based economies.

Take Supply and Demand Seriously, Not Literally

1 implied HN point • 19 Nov 20
  1. Market competition involves more than just price and quantity.
  2. It's important to take economic models seriously but not always literally.
  3. Understanding the implications of economic concepts beyond formal modeling is valuable.

Why Price Gouging Laws Aren't So Bad

1 implied HN point • 12 Nov 20
  1. Prices are often slow to adjust to fluctuations in demand due to search costs and brand loyalty.
  2. Price gouging during sudden shortages or natural disasters is unlikely to occur, as firms with brand names prioritize maintaining loyal customers over short-term profit.
  3. Search costs play a significant role in determining price flexibility, with prices being more flexible when search costs are low.

Thank You Google for Subsidizing my iPhone

1 implied HN point • 22 Oct 20
  1. Google's 'anti-competitive' behaviors can benefit customers in the competitive process.
  2. Paying to be the default search engine can lead to lower prices for consumers.
  3. Exclusive contracts with manufacturers can intensify competition and benefit consumers.

What (and who) in the world are we trying to tax when we tax corporate income?

1 implied HN point • 15 Oct 20
  1. Corporate income tax is not just a tax on capital but also impacts risk-sharing and incorporation decisions.
  2. The corporate income tax ultimately affects individuals, like high-skilled entrepreneurs and workers, rather than just corporations.
  3. Determining who pays the tax and the size of the deadweight loss is complex and depends on various assumptions about the differences between corporate and non-corporate entities.

Empirical Price Theory

0 implied HN points • 12 Aug 21
  1. Data and empirical work are essential in price theory.
  2. Empirical supply and demand analysis is a powerful tool in price theory.
  3. Measuring transaction costs and case studies are valuable empirical approaches in economics.

Cooperation and Conflict

0 implied HN points • 11 Nov 21
  1. Economics is not just about markets and prices; it also includes studying resource allocation through cooperation and conflict.
  2. Price theory can be applied to analyze both cooperative behavior and conflict, helping understand how people make choices between the two.
  3. Economics plays a crucial role in shaping societal institutions and rules to reward productive activity and discourage conflict.

What's in a Name?

0 implied HN points • 17 Jun 21
  1. Brand names serve as a form of quality assurance in a world where contracts aren't perfectly enforced.
  2. Brands create a relationship between buyers and sellers that goes beyond a transactional exchange.
  3. Brand names play a crucial role in incentivizing quality and allowing consumers to make informed choices in the marketplace.

In Praise of Lumpiness

0 implied HN points • 22 Apr 21
  1. Economists focus on small changes in smooth worlds, but
  2. When things are not smooth, lumpy situations can make
  3. Lumpiness can sometimes lead to more efficient outcomes

Why Regulate Prices?

0 implied HN points • 07 Jan 21
  1. Price theory is centered on prices coordinating buyer and seller desires.
  2. Regulation can be driven by industry capture or public interest.
  3. Economists generally prefer public interest regulation over capture regulation.

Not Exactly a Nobel for Price Theory

0 implied HN points • 14 Oct 21
  1. The Economics Nobel Prize was awarded for work on natural experiments and causation.
  2. There is a need to bring together economic theory and empirical work in the profession.
  3. Quality research should combine methodological soundness, economic theory, and avoid biases towards specific methodologies.

Externalities and the Numbers Problem

0 implied HN points • 25 Feb 21
  1. In cases of externalities, when there is one imposer and one victim, a contractual solution can work.
  2. With a large number of imposers and victims of an externality, a Pigouvian tax might be needed.
  3. If there is one imposer and many victims of an externality, a Pigouvian tax may not be effective due to strategic behaviors.

Policy as a Contract

0 implied HN points • 22 Jul 21
  1. The assignment of property rights matters in a world with transaction costs.
  2. When transaction costs are high, the assignment of property rights can affect outcomes.
  3. Public policies can be viewed as contracts to facilitate mutually beneficial exchanges.

Why Might Firms Offer Free Services?

0 implied HN points • 19 Aug 21
  1. Firms can offer free services to increase demand for their products or make consumers more sensitive to price changes.
  2. Monopolistic competition can lead to firms offering free services to compete effectively.
  3. Offering free services in a competitive market can benefit both firms and consumers.

It's Infrastructure Week!

0 implied HN points • 08 Apr 21
  1. Infrastructure like roads and bridges is a type of durable good with value over time.
  2. When evaluating infrastructure replacement, consider the present value of benefits and costs.
  3. Uncertainty in infrastructure value can lead to decision-makers setting lower replacement thresholds.

Is Apple's App Store Competitive?

0 implied HN points • 03 Jun 21
  1. Judge Gonzalez Rogers raised issues with Apple's App Store commission, questioning the real competition in the market.
  2. Steady prices are valued in many markets, including restaurants and retail, creating predictability for customers.
  3. The 30 percent commission in Apple's App Store is not necessarily unfair, as it is seen across similar platforms and could be a result of competitive forces.

Year in Review + Exciting (?) Announcement at End

0 implied HN points • 26 Aug 21
  1. The newsletter celebrated surviving a year, with over 1,500 subscribers.
  2. Popular posts included topics like minimum wage, monopolies, and supply and demand.
  3. Exciting announcement of launching a podcast to supplement the newsletter content.

Hey Jealousy

0 implied HN points • 29 Oct 20
  1. Inequality discussions often lack clarity on why it's a problem.
  2. Poverty and inequality are distinct concepts, and declining poverty can coexist with rising inequality.
  3. Consumption inequality can stem from people comparing their consumption to others rather than focusing on their own needs.

Pricing Electricity Markets

0 implied HN points • 18 Feb 21
  1. Marginal cost pricing is important but may not always work for natural monopolies.
  2. Peak-load pricing for electricity involves fluctuating demand and the real problem of covering capacity costs.
  3. Excess capacity is necessary, prices need to cover capacity costs, and dynamic pricing is beneficial for electricity markets.

Evergreen Price Theory

0 implied HN points • 01 Apr 21
  1. The cost of the Suez Canal blockage was estimated at millions of dollars per day.
  2. Ship owners need proper incentives to avoid getting stuck and may face liability for damages caused.
  3. Efficient removal of a stuck ship can be influenced by factors like technology feasibility and economic costs.

What I've Been Writing

0 implied HN points • 15 Apr 21
  1. Brian Albrecht shares his recent writings and projects in economics.
  2. He discusses a paper on the Hayek Hypothesis, challenging ideas about competition.
  3. Informational efficiency in markets is highlighted in a working paper award.

Where Are the Vaccine Subsidies?

0 implied HN points • 16 Sep 21
  1. Vaccine subsidies could help promote voluntary compliance without enforcement costs.
  2. Taxation on the unvaccinated could lead to significant enforcement costs and may not raise much revenue.
  3. Optimal vaccination policy may involve considering the cost-effectiveness of subsidies versus taxes.

When Duopolies are the Same as Monopolies

0 implied HN points • 23 Sep 21
  1. Hugo Sonnenschein made significant contributions to economic theory.
  2. Cournot's duopoly model shows how two firms compete on quantity, affecting pricing.
  3. Cournot's complementary monopolies model illustrates how separate entities can impact prices in a similar way to a merged monopoly.

Reader Questions: On Price-Taking and Competition

0 implied HN points • 18 Nov 21
  1. Price-taking is a simplifying assumption for teaching competitive equilibrium models.
  2. Competition does not require price-taking behavior; it is based on substitutability of consumers/producers.
  3. In some markets, firms can have market power and still face competition; competition intensity varies.

Economics and Ethics

0 implied HN points • 16 Dec 21
  1. People's choices on cars depend on their willingness and ability to pay.
  2. Economics uses Pareto efficiency to determine if outcomes are good or bad.
  3. Economics helps understand subjective values in decision-making, but evaluating outcomes as good or bad requires value judgments.

Crypto Hacks and Efficient Markets

0 implied HN points • 31 Mar 22
  1. Blockchain records every transaction, but not everyone checks it unless necessary.
  2. Having superior information does not always guarantee profits in financial markets.
  3. Markets are a discovery process, different perceptions lead to trading and arbitrage involves risks.

Price Theory and Cryptocurrency

0 implied HN points • 05 Aug 21
  1. Ben Klein's paper on competitive fiat money and stable equilibrium relates to the emergence and dynamics of cryptocurrency.
  2. The problem of dynamic inconsistency in currency issuance is addressed in price theory by considering profit maximization and equilibrium in the market for money.
  3. Cryptocurrency offers a new type of solution to the dynamic inconsistency problem through algorithms and decentralized systems, potentially enabling circulation without looming concerns.

Modern Day Bills of Exchange

0 implied HN points • 21 Apr 22
  1. Historically, bills of exchange were used for international payments to solve currency exchange issues.
  2. The Lightning Network can be used for instant settlement in modern international transactions, reducing costs.
  3. Using services like Strike, one can send money in one currency and have it received in another, bypassing currency manipulation and controls.