Tuesday, November 27, 2012

Assorted Thoughts & Links

1) This week I am covering moral hazard in my intermediate microeconomics class. Here's an article on the moral hazard of federal flood insurance and rebuilding after Sandy via the WSJ.

2) Speaking of hurricane economics, how do goods like gas get rationed in shortages when prices are prevented from rising (e.g. "price gauging" laws prevent fast increases in prices in some states like New Jersey)? Usually by waiting in line. But that is very costly as Tony makes clear

3) Microeconomic theorists (good ones!) at tech firms have a big impact. 
The desire to use theory to challenge conventional thinking is one reason economists are valuable to firms, says Susan Athey, of Stanford University and Microsoft.
They get better access to data to test theory, too!

4) For stimulus spending to work it needs to be temporary (otherwise it's not really stimulus!). John Taylor produces a graph that is further evidence the stimulus spending has become permanent. Note the "pro-growth" proposed path is what should have been the default path if the stimulus bill was a true temporary stimulus. The fact that stimulus spending has become permanent and increased government spending without Congress (really, the Senate) passing a budget in 3 years is a scandal. The fact that this never became a big story in the news is sad. 

5) Elect-a-Dictator game: There is one fair election, then the winner becomes dictator for life! This is worse for the decisive voter's welfare than regular elections with quality challengers because there is no electoral pressure on the dictator to behave or any ability for the people to throw out a particularly bad leader. Is Egypt playing the elect-a-dictator game?

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