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KPCC and the Supermarket Guru Jointly Fail

It seems to me there is a simpler and more direct explanation: demand. Higher prices for any product reduce quantity demanded. And for a specific item such as beef, demand elasticity is likely to be fairly high. The reason firms are not raising retail prices is simple: it would not be profitable because they would lose more unit sales than they would gain from the higher price. Continue Reading →

Free Lunch, Carbon Tax Edition

For the moment, I’ll ignore the redistribution problems with this plan. And I’ll even agree that cutting income taxes stimulates the economy. But what about the tax increase? If implemented as described, net tax revenue will be zero — and that is also exactly the size of the net tax cut. And a net tax cut of zero has zero impact on the economy, no matter what size tax multiplier you apply. Continue Reading →

What Is A “Rigid Market?”

The real problem in 1973 was the price controls on gasoline that kept the legal ceiling price below equilibrium. Quantity demanded exceeded quantity supplied and some form of non-price rationing was required. In this case, it was one of the most common forms, namely queues. Period. No economist worthy of the name doubts this. How Marketplace can get things this wrong is, well, a wonderment. Continue Reading →