Links - 2022-08-20 v.5

Highly Linkable - links you need and deserve - economic lessons

The always excellent Don Boudreaux has two complimentary posts up on AIER. One is Five Negative Consequences of Price Ceilings where he lays out exactly how and why price controls preventing prices from rising to where the market would have them be is very bad. The other sister post is On the Negative Consequences of Price Floors where he does the same on the other end of the spectrum—showing how not letting prices fall to where the market would direct them is very bad. Absorb the lessons in these two posts well, and you will understand more economics than perhaps ~90% of humans alive today.

Monopolies are bad, right? Well, yes, but they are bad for reasons the common thinker generally gets wrong. Namely, they are not bad because they are more profitable to owners or because they create higher price levels but simply because they restrict output. Similarly predictions made about what type of market (perfect competition or monopoly) would bring about greater output and price volatility are subject to mistake based on a lack of economic thinking. Zachary Bartsch demonstrates this insight using straightforward graphical examples. One takeaway is that “while monopoly does constrict supply and elevate prices, Monopoly also reduces price and output volatility when there are changes in the marginal cost”. Another is that monopolies do not cause nor worsen inflation.