EconLog Archive
International Trade
The “Trade Deficit” is a Misnomer
The United States, like most other countries, use a method of double-entry accounting to track certain aggregate statistics known as National Income Accounting. One of the statistics tracked is the balance of trade. The balance of trade reports the difference between imports and exports. When imports exceed exports, we are said to have a trade .. MORE
Microeconomics
A Fairness Trilemma in Hiring
Economists like to draw triangles. In trade, you can’t have high tariffs, no retaliation, and unchanged prices. In monetary policy, you can’t fix interest rates, fix the money supply, and promise perfect stabilization. In hiring under unequal starting conditions, there is a similar triangle that most debates about fairness in hiring glide past. When firms .. MORE
Economic Methods
Is Economics Finally Becoming Trustworthy?
“There are two things you are better off not watching in the making: sausages and econometric estimates. This is a sad and decidedly unscientific state of affairs we find ourselves in. Hardly anyone takes data analyses seriously. Or perhaps more accurately, hardly anyone takes anyone else’s data analyses seriously.” That is the scathing critique that .. MORE
Incentives
Markets and Reputations vs Shenanigans
Why do factory seals matter? If you look at trading cards on eBay, you’ll find that factory-sealed sets, packs, and boxes command a premium over anything opened. If you have listened to any episode of EconTalk featuring Michael Munger, you will know that “the answer is transaction costs.” You probably understand why: the factory seal .. MORE
Sam's Links
Sam’s Links: April Edition
Sam Enright works on innovation policy at Progress Ireland, an independent policy think tank in Dublin, and runs a publication called The Fitzwilliam. Most relevant to us, on his personal blog, he writes a popular link roundup; what follows is an abridged version of his Links for February and Links for March. Blogs and short .. MORE
Money and Inflation
Making Money…Less Useful?
One of my brothers recently joked that he would love to meet the person who first pitched gift cards. Who ever thought that consumers would agree to make their money less useful? This is an important question for economists as well. Carl Menger’s famous book On the Origins of Money argues that money could have .. MORE
Regulation
AI vs the Rent Seekers
Mancur Olson’s The Rise and Decline of Nations doesn’t provide a particularly optimistic picture: once your nation has been stable for a while, and may even have risen to wealth, it becomes more and more vulnerable to “institutional sclerosis.” This happens because small groups are better able to overcome free-riding, resulting in their ability to .. MORE
Monetary Policy
Policy Dominance in Argentina
There are at least two meanings for “dominance” in relation to monetary and fiscal policy. The first one, proposed by Milton Friedman in 1968, is that when monetary policy and fiscal policy are in contradiction, that is, one is expansionary and the other contractionary, the effects of monetary policy tend to prevail. The other meaning, .. MORE
Growth: Consequences
Tech Troubleshooting in Space
When astronaut Christina Koch, the first woman to fly around the moon, reported an issue from space that could have been copy-pasted from any IT helpdesk ticket, something clicked for Americans. Her grievance? “No joy seeing the device in the list of available devices when I attempt to re-pair it after doing the Bluetooth forget.” .. MORE
Adam Smith
Of Course We’re Still Reading Wealth of Nations at Econlib
Today, we’re our joint celebration with our friends at Liberty Matters of the 250th anniversary of the publication of An Inquiry into the Nature and Causes of the Wealth of Nations through a series of six weekly essays. In this final essay, Craig Smith asks about Wealth of Nations’ legacy and what we can still get from .. MORE
Adam Smith
The Nations in Wealth of Nations
Much of Adam Smith’s writing in An Inquiry into the Nature and Causes of the Wealth of Nations (WN) is concrete. He explores examples of contemporary and ancient economic, political, religious, and military situations to better understand the world he lived in. As a result, his commentary touched on the economic situations of many nations. .. MORE
Adam Smith
Wealth of Nations’ Full Title
Imagine that you spent 250 years being called the wrong name. That’s basically what’s happened to Adam Smith’s treatise. Everyone refers to it as “The Wealth of Nations,” and sure, that’s a reasonable shorthand for those in the know and those who are simply being expedient. But for politicians and pundits, it turns a rigorous .. MORE
Adam Smith
“Very difficult, perhaps altogether impossible”: Smith’s political science at Econlib
We’re joining our friends at Liberty Matters in their celebration of the 250th anniversary of the publication of An Inquiry into the Nature and Causes of the Wealth of Nations through a series of six weekly essays. In this fifth essay, Jacob T. Levy explores one of Smith’s most famous claims in Book V of Wealth .. MORE
Adam Smith
Adam Smith on Slavery
There were two types of slaves in Scotland during Adam Smith’s lifetime. The first were chattel slaves of African descent. This is what most people envision today when they think about slavery—people who are regarded solely as property with no recourse or relief, even in the face of the most torturous conditions. The second were .. MORE
Adam Smith
Adam Smith and Reciprocal Tariffs
This month marks the 250th anniversary of Adam Smith’s magnum opus, The Wealth of Nations. The Liberty Fund print edition is 950 pages (excluding material added by the editors) and just about every page is chock full of wisdom. While there are some flaws, we rightfully celebrate this book as the monumental leap forward to .. MORE
Adam Smith
Political Economy as Moral Philosophy at Econlib
We’re joining our friends at Liberty Matters in their celebration of the 250th anniversary of the publication of An Inquiry into the Nature and Causes of the Wealth of Nations through a series of six weekly essays. In this fourth essay, Brianne Wolf explores Book IV of Wealth of Nations, where Smith discusses the mercantile system, .. MORE
Price Theory
Cutsinger’s Solution: Housing Quantity and Price
Question: Housing is a highly durable good and often lasts for many decades. Consider the housing market in Cleveland. Suppose that in 2026: Cleveland has 250,000 existing homes, all built before the year 2000. Homes never depreciate. No new homes have been built in Cleveland over the past 26 years. The marginal cost of building .. MORE
Adam Smith
The Wealth of Nations: A Classic of English Literature
The Wealth of Nations is a true classic of English literature. It is just not one that has ever been widely loved or popularly read. When The Wealth of Nations was published in 1776, Thomas Strahan, its publisher, said “the sale … has been more than I could have expected from a work that requires .. MORE
Adam Smith
Why Adam Smith Embraced Commercial Society: The Wealth of Nations, Book 3 at Econlib
We’re joining our friends at Liberty Matters in their celebration of the 250th anniversary of the publication of An Inquiry into the Nature and Causes of the Wealth of Nations through a series of six weekly essays. In this third essay, Dennis C. Rasmussen explores Book III of Wealth of Nations, where Smith uses a story .. MORE
Adam Smith
Adam Smith on the Labor Theory of Value
There are many things Adam Smith got right about economics, including the discipline’s fundamental insight about the unplanned nature of market-driven economic and social order. He is rightly called the founder of economics for that reason. However, he did not get everything right. One of his most important errors, and one he shared with .. MORE
Adam Smith
Bargaining with the Butcher, Baker, and Brewer: A New Look at Smith’s Most Famous Sentences
“Give us this day our daily bread.” Adam Smith was at best an indifferent Kirk of Scotland churchman, but he would have known these words, which Jesus prescribes to his followers in the Sermon on the Mount, very well. The Lord’s Prayer speaks to one of the most basic questions of human survival. How will we .. MORE