Posts tagged with: marginal revolution

Blog author: jcarter
Tuesday, January 10, 2017
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Note: This is post #16 in a weekly video series on basic microeconomics.

Ten years ago this week, Apple unveiled the iPhone. It’s a product that was designed in California and produced by thousands of people all over the world. How exactly is that process coordinated? How do those people now how much of each part to make?

In this video by Marginal Revolution University, economist Alex Tabarrok explains how voluntary coordination and markets make possible such modern-day miracles as the iPhone.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Previous in series: A price is a signal wrapped up in an incentive

During a season such as Christmas, where hyper-consumerism and hyper-generosity converge in strange and mysterious ways, it’s a question worth asking: How much of our gift-giving is inefficient and wasteful?

For some, it’s a buzz-kill question worthy of Ebenezer Scrooge. For an economist, however, it’s a prod that pushes us to create more value and better align our hearts and hands with human needs.

In a new video at Marginal Revolution, economists Tyler Cowen and Alex Tabarrock explore this at length, asking how we might maximize the value of gift-giving:

For Cowen and Tabarrock, gift-giving typically suffers from knowledge and incentive problems. “When people buy something for themselves, value is created, because the buyer values the good more than it costs the seller to produce,” Tabarrock explains. “But when people give gifts that aren’t wanted, the recipient values the gifts at less than the cost. Gift-giving: it can be kind of a negative trade.” (more…)

Note: This is post #12 in a weekly video series on basic microeconomics.

Why do taxes exist? What are their effects? In this video by Marginal Revolution University, economist Alex Tabarrok explains how taxes affect consumer surplus and producer surplus. He also discusses the concept of deadweight by considering a real-world example from the 1990s: taxing luxury yachts.

(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)

Previous in series: Who pays the tax?

In Leonard Reed’s famous essay, “I, Pencil,” he marvels over the cooperation and collaboration involved in the assembly of a simple pencil — a complex coordination that is quite miraculously uncoordinated. 

In a short video from economist Alex Tabarrok, the same lesson is applied to Valentine’s Day roses:

“Behind every Valentine’s Day rose, there’s an extensive network of people from all over the world,” says Tabarrok, “from the farmer to the shipper to the auctioneer to the retailer—all cooperating to produce and transport roses from field to hand in a matter of days.”

But though these countless creative partners are surely acting out of some degree of self-interest, and though (in this case) they are working to enable and empower what we presume to be “loving” exchanges, there is something deeper going on throughout the activity. (more…)

The Economist reports on a new study by psychologists that looks into the problem of abuse of power. The researchers attempt to “answer the question of whether power tends to corrupt, as Lord Acton’s dictum has it, or whether it merely attracts the corruptible.”

These results, then, suggest that the powerful do indeed behave hypocritically, condemning the transgressions of others more than they condemn their own. Which comes as no great surprise, although it is always nice to have everyday observation confirmed by systematic analysis. But another everyday observation is that powerful people who have been caught out often show little sign of contrition. It is not just that they abuse the system; they also seem to feel entitled to abuse it.

HT: Marginal Revolution