Month: March 2013

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Distinguishing demand effects and supply effects

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 “Distinguishing demand effects and supply effects”

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Is it better to own nothing?

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 “Is it better to own nothing?”