Markets fail, which is why we need markets

There are generally two views of markets. The first is that markets can do no wrong. The other is that markets fail—and fail often—which is why we need government intervention. But as Nick Schulz and Arnold Kling note, there is a third way that can be summarized as “Markets fail. Continue Reading...

Thinking about the ethics and economics of ‘price gouging’

A reporter posted a picture on Twitter yesterday that showed a Best Buy in Houston charging $42 for a case of Dasani water. The picture also showed a case of Smartwater for $29, with a sign noting there was a “limited supply.” Not surprisingly, the outrage on social media prodded Best Buy to quickly respond by claiming it was a mistake. Continue Reading...

How free trade promotes global peace

Thomas L. Friedman said in The Lexus and the Olive Tree that no two countries with McDonald’s within their borders have ever been in a war since having a McDonald’s. Since it was proposed in 1999 this explanation of how globalization affects foreign policy and conflict has become known as the Golden Arches Theory of Conflict Prevention. Continue Reading...

The cramped morality of trade protectionism

“If a product is seen only as the opportunity for work, it is certain that the anxieties of protectionists are well founded.” –Frédéric Bastiat, Economic Sophisms Drawing inspiration from a 1847 essay by the inimitable Frédéric Bastiat, economist Donald Boudreaux tackles a popular argument from today’s trade protectionists: namely, “that protectionism is justified if enough consumers or voters are willing to pay higher prices in order to help workers.” The problem, of course, is that such a perspective debases the value of labor to the value of products and vice versa, ignoring the many other relationships and ripple-effects that production and trade are bound to inspire. Continue Reading...