Articles
Tell me about how America's 100% tariffs on Chinese EV's are a bad policy?
China has a comparative advantage to produce low-cost, effective EVs. Tariffs on Chinese EV's limit the ability of US consumers to access strong, cheap green technologies, while coddling more ineffective and expensive EV producers in the US. Overall this leads to a reduction in total welfare.
Tell me about potato cartels?
The potato cartel maintained market power by enforcing planting quotas, crop destruction, and storage control to restrict supply, resulting in higher consumer prices and significant losses in market efficiency through artificial scarcity.
Cartels are inherently unstable because there is always a motivation to cheat and as an individual get more profit.
Talk to me about taxing sodas or alcohol? Who bears the burden of the tax?
In the soda tax article (Allcott et al.), researchers show consumers bear more of the tax when demand is inelastic. Producers can pass more of the tax forward without losing many buyers. Elasticity therefore determines who actually bears the burden.
Why Do Natural Monopolies Arise in Declining Average Cost Industries?
The CAP drug financing report describes industries with high fixed costs and low marginal cost. As output expands, average cost falls, making one large firm more efficient than many smaller ones. This creates natural monopoly tendencies.
How Does Mispriced Risk Distort Real Estate Markets?
The WSJ article on Florida development shows underpriced insurance encourages overbuilding in high-risk areas. Because prices do not reflect true climate risks, resources are misallocated. This leads to higher eventual social costs.
Tell me about 'Bonanza Denied' and the flaw's with Trumps plan on reducing income tax through tariffs on imports?
Trump claimed that revenue from tariffs would be enough to cut income taxes for US households under 200k, but they will likely make less money than Trump thinks. Because import consumption is not perfectly inelastic, as tariffs raise the price of goods, demand will shrink and therefore lessen potential gov't income. Tariffs are an inefficient and volatile tax base because they reduce trade flows, raise domestic prices, and distort production away from specialization, limiting both revenue and decreasing economic welfare. BOO!
[Not in class] Talk to me about oligopolies in the US?
Rising oligopoly power in the U.S. has reduced economic dynamism by slowing innovation, limiting new firm entry, and weakening competitive pressure across major industries. The article argues this decline makes stronger, more proactive antitrust enforcement essential to restore healthy market competition and protect long-run consumer welfare.
The wolf-management article describes ranchers and conservationists bargaining to compensate each other based on damages or ecological benefit. This illustrates the Coase Theorem: with low transaction costs and defined property rights, externalities can be privately resolved. Bargaining internalizes the external cost or benefit.
How Is Expected Value Used in Risk Decisions around Insurance? Talk to me about moral hazard too!
The Economist piece on cheap insurance shows pricing often fails to reflect expected losses, distorting incentives. Risk-neutral agents base decisions purely on expected value.
The Economist article on cheap insurance describes drivers taking more risks because they don’t bear full accident costs. This change in behavior after obtaining insurance is moral hazard. Insurers respond with deductibles and monitoring.
What is free riding and why do we care?
The free-rider problem occurs when individuals benefit from a non-excludable good without paying for it, causing them to understate their true willingness to contribute. Because each person hopes others will bear the cost, private markets underprovide public goods relative to the socially optimal level. In “China’s government is surprisingly redistributive”(The Economist, 2024), redistribution and public spending are necessary precisely because individuals would not voluntarily contribute enough to fund widespread social insurance and public services. Government taxation overcomes free-riding by ensuring everyone contributes, allowing efficient provision of goods that would otherwise be underfunded.
Tell me about the impacts of 'platform monopolies' like Google, Amazon, etc.?
Over time, restrictions on mergers in the US have diminished, allowing a few firms to consolidate market power. Now "platform monopolies" like Amazon, Google, etc. face a trade-off where allowing firms to grow very large can generate dynamic efficiency through innovation and better technology, but this same scale also creates monopoly power that reduces allocative efficiency by raising prices, limiting entry, and shrinking consumer and total welfare.
In short, if your monopoly is allowing you to invest in innovation -- that innovation should be weighed against the deadweight loss from monopoly market control.
Tell me about how game theory might be applied to American Medicine?
he article directly applies repeated-game theory to the healthcare payment system. Fee-for-service generates one-shot incentives—each party (insurer, provider) acts in its own short-term interest, leading to inefficient, high-cost outcomes. Capitation turns the system into a repeated cooperative game, where aligning incentives encourages stable, trust-based strategies that maximize joint payoffs. This mirrors classic microeconomic models where cooperative equilibria arise only when players interact repeatedly and internalize future consequences.
Tell me about why car insurance is too cheap in the U.S.?
The article illustrates how individuals make poor decisions under uncertainty because most Americans choose extremely low liability coverage—often as little as $25,000, even though severe crashes routinely generate costs far beyond that, such as the $180,000 hospital bill in the DuBarry case and the NHTSA’s estimate of $340 billion in annual economic crash costs. This underinsurance reflects classic decision errors: people underestimate low-probability, high-loss risks, discount the true social cost of accidents (which the NHTSA places at $1.4 trillion), and focus narrowly on cheaper premiums today rather than the catastrophic downside risk of rare but financially devastating events.
How do firms choose an optimal input mix? Use an article example.
The port automation article shows firms weighing whether to invest in machinery or labor. Optimal input choice satisfies MPLw=MPKrwMPL=rMPK. Deviating from this condition means costs can be reduced.
How does game theory apply to decisions made by hospitals and insurers?
The Forbes article shows how insurers and hospitals make strategic choices affecting costs and care quality. Game theory explains why cooperative outcomes (better health, lower cost) may be hard to sustain without incentives. Strategic misalignment can cause inefficiency.
Tell me about how EU and US markets treat monopolies differently?
U.S. markets increasingly show features of oligopoly/monopoly—higher markups, reduced entry, lower investment—leading to textbook deadweight loss. While, EU’s stronger regulatory enforcement reflects microeconomic principles that competitive markets push price toward marginal cost, increasing consumer surplus.
Tell me about how in cartel structures, like OPEC, each firm has an incentive to cheat?
OPEC is a textbook example of a cartel prisoner’s-dilemma game. Each member benefits if all reduce output (higher prices), but each has a strong individual incentive to cheat and sell more at the elevated price. Because monitoring is imperfect and incentives are misaligned, the cartel struggles to sustain the cooperative equilibrium. This reflects a classic non-cooperative game in microeconomics where dominant strategies lead to cheating, causing the cartel to unravel unless strong enforcement or repeated-game punishments exist.
Tell me about China's focus on public goods?
China’s redistribution demonstrates the power of public goods: while direct taxes and transfers only reduce inequality modestly (Gini 54.5 → 51.6), public spending on education and healthcare cuts it further to 44.2, offering more redistributive impact than several Latin American peers despite lower fiscal outlays. The article shows how targeted social spending can generate high marginal social benefits—boosting demand during deflation—and why expanding these public goods is more effective than relying on limited cash transfers.
Talk to me about signaling in a labor market, like licensing?
The Blair & Chung paper argues licensing serves as a costly signal of worker competence. Low-quality workers avoid the cost, allowing employers to distinguish types. However, licensing may also restrict market entry.
What are tradable pollution permits, and why do economists view them as an efficient way to reduce emissions? Illustrate using insights from one of the assigned readings.
Tradable pollution permits set a fixed cap on total emissions while allowing firms to buy and sell the right to pollute, ensuring that reductions occur where they are least costly. Because firms with low abatement costs will sell permits and those with high costs will buy them, the market equalizes marginal abatement costs across producers, achieving the environmental goal at minimum total cost. The IMF’s “Destination Net Zero” (2023) report emphasizes that market-based tools—such as carbon pricing—are more efficient than command-and-control regulations, and tradable permits are a prime example of this approach. By combining a clear emissions target with flexible compliance, permit systems reduce pollution while preserving economic efficiency.
Tell me about Live Nation's tactic in creating a sustaining monopoly?
The Live Nation–Ticketmaster case shows how a dominant firm can use tactics like exclusive long-term venue contracts, retaliation against rivals, and vertical control over artists and venues to maintain its monopoly, resulting in higher fees, fewer alternatives, and worse outcomes for consumers. For this, the DOJ is suing and planning to break up the company from their 2010 merger
Tell me about the cost-benefit analysis we might consider around using plastics?
Plastics illustrate cost-benefit analysis because their massive benefits—such as plastic bottles weighing only 5% of glass, enabling cheaper global food transport and reducing resource use like ivory for 10 million piano keys—far exceed the costs when waste is properly managed. The article shows that the true economic failure is a public-goods problem in waste disposal, with only 9% of plastics recycled and 20 million informal workers handling 59% of global waste, demonstrating why coordinated policy is needed to manage environmental externalities.
[Unclear if in class] Tell me about the cost-benefit around taxing unrealized gains of the rich?
Taxing unrealised gains fails a basic cost-benefit test: while Biden’s proposal could raise $500 billion, the administrative burden—like the IRS taking 12 years to value Michael Jackson’s estate—and volatility inherent in $6 trillion of unrealised gains held by the wealthy would impose far greater social costs and distort investment. The article argues that more efficient tax reforms—such as ending the step-up in basis, which alone might raise ~25% of the target revenue—deliver the public goods government needs at substantially lower economic distortion.
What is a public good, and why do private markets underprovide them? Use an example from the assigned readings to illustrate.
A public good is defined by non-rivalry (one person’s consumption does not reduce availability for others) and non-excludability (people cannot be prevented from using it). Because individuals can benefit without paying, they have an incentive to free-ride, causing private markets to underprovide these goods relative to the social optimum. In “Pigouvian Taxes” (The Economist, 2017), the article highlights how pollution reduction has the characteristics of a public good—everyone benefits from cleaner air, but individuals or firms have little incentive to pay for it on their own. Government intervention becomes necessary to fund or incentivize the efficient level of the public good.
What are dominant and dominated strategies in game theory, and why are they important for predicting strategic behavior? Illustrate using an example from one of the assigned readings.
A dominant strategy is one that yields a higher payoff for a player regardless of what the other player does, while a dominated strategy always yields a lower payoff than some other available strategy. Because rational players never play dominated strategies, eliminating them simplifies the game and often reveals the equilibrium. In “OPEC heavyweights are cheating on their targets” (The Economist, 2024), cheating on output quotas can function like a dominant strategy: regardless of other members’ behavior, a country often gains by quietly exceeding its target. This dynamic makes cooperation fragile and helps explain why collusion frequently breaks down in repeated games.