Thursday, January 10, 2013

What do markets do?

In the aftermath of Sandy, it became patently obvious that there are no politicians in New York and New Jersey who learned the basic lesson of economics:

A free market ensures that all who are willing to pay the prevailing price can obtain as much of a good as they want and all who can produce at a marginal cost at or below the prevailing price can sell as much of the good as they want.

If supply in a location falls, consumers bid more for the same goods (price increases) which signals to other suppliers to get their goods to that locality.

etc etc etc.

I used to mention to my colleagues at Cornell that I would be happy if at least 10% of my students remembered these fundamentals of how our society ought to function (i.e., via rationing by market price, not by your willingness to wait in lines or bribe gas station attendants) 10 years after having taken Intermediate Micro.

That probably explains why I feel so miserable these days.

In any case, I saw a brilliant comic in The Economist's "Holiday" Issue — I seem to remember it as the "Christmas" issue until recently. For the record, I gave up on The Economist seven or eight years ago, but the "Holiday" issue is still a good collection of stuff if you are travelling the across the Atlantic in steerage.

I had never heard of Saturday Morning Breakfast Cereal before. It is simply brilliant and Zach Weiner now has my eternal gratitude for this particular strip:

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