Welcome to economic-truth, a website for students of economics. Please see our about page to learn more.
- Notes and essays are grouped into subject area and academic level. Please see the site map on the right of the front page, or the menu above, for this content.
- Commentary on recent events from an economist’s point of view can be found below or via the link in the menu above.
Enjoy your visit, we hope you find this site useful.
Greg Mankiw has today highlighted how Bryan Caplan discusses fundamental inconsistencies in arguments over the minimum wage.
In some of his research, joint with Alan Krueger, Card finds that increases in the minimum wage have negligible effects on employment. In other research, on the Mariel boatlift, Card finds that increases in the supply of unskilled workers have negligible effects on wages and employment of existing workers.
Caplan notes that these results are hard to reconcile: The former suggests that labor demand is highly inelastic, whereas the latter suggests it is highly elastic. Continue reading
The Guardian reported last year on how fire engines in London had been sold to a private equity firm for £2. Although fire services grew from private insurance companies, the modern fire service is a clear example of how certain organisations benefit from being owned and run by the government. There are very large positive externalities from a fire service – they not only stop a building burning, but prevent damage to everything else in the neighbourhood. People’s willingness to pay for a fire service is much lower than society’s benefit. Continue reading
An increasing issue in the UK and across the European Union is the growth of high-risk credit and short-term loans, often called “payday loans” as they are marketed to give people an advance until the end of the month when they are paid. These services are generally aimed at the poorer members of society, who are unable to take out longer-term loans due to poor credit histories, and who are most likely to need fast access to money to pay bills or buy essential goods. Continue reading
Prior to yesterday’s announcement of the iPad Mini, there was a great deal of speculation as to its form, its capabilities, its existence and its price. Commentators saw the rumoured tablet to be a direct competitor to the Kindle Fire and the Nexus 7, indicating that they believed Apple was concerned about losing market share in that market. The price was rumoured to be around the same level as those competitors, so that the differences which would make people want to buy an iPad over an Android tablet would be the quality of the hardware and the app marketplace. Continue reading
Toyota is set to recall over seven million cars, following the discovery of issues with window switches, as reported on the BBC. Recalls can take a number of different forms – they can involve dealers carrying out an on-site repair, an immediate replacement, or a complete withdrawal of a good from sale. Continue reading
The phenomenon of economies of scale can be seen in many industries – particularly where there are large fixed costs, such as a mobile base station network, a graphics engine for videogames, or the turbines on a wind farm. In order to reduce costs as far as possible, operations should be made as large as is feasible. However, companies only have a fixed level of demand, which limits their ability to take advantage of this.
One way of increasing demand is to merge with a competitor, and therefore acquire a large number of extra customers. This, of course, is a major exercise and involves regulatory problems, costs of due diligence, changes to operations and governance, and many other factors. Rather than this drastic step, companies can collaborate to share costs across their combined userbase. Continue reading
The BBC reports today that Louise Mensch, an MP in the UK, has launched a “rival to Twitter”. Mensch herself argues that it is not a rival, but instead seeks to be somewhere where discussion is kept in a broad topic, unlike the free-for-all that Twitter represents. Continue reading
A fundamental concept in economics is that of trade. Two parties will want to share their possessions in a way that benefits them both. The Edgeworth Box is a graphical representation of this trading; before looking at the overall box, however, it’s important to understand an individual’s utility curves. Continue reading
Today sees local elections across the UK, with the highest profile battle being fought over the mayorship of London. While there are two high-profile candidates in Boris Johnson and Ken Livingstone, there are a number of other candidates who represent a whole range of political views from the far right to the far left.
There is a significant third candidate in the middle, Brian Paddick. While he is unlikely to get elected, he has a significant impact on the policies of the two front-runners. There are many differences in policies between the Conservatives and Labour, and this difference is driven by the existence of the third option. Continue reading
During the most recent Budget, the Chancellor of the Exchequer scrapped the 50% tax rate. Analysis carried out by HMRC indicates that, as theorised previously, the income from this tax rate is below that expected by the government. Continue reading