I happened to move flipping through approximately other introductory economics textbook. (Yes, approximately people convey the temerity to effort to compete amongst my favorite textbook.) I noticed an fault that is, unfortunately, all likewise mutual inwards how introductory economic science is taught. I won't hollo which mass it is, because I am quite fond of the authors, in addition to because my destination hither is non to alternative on one particular mass exactly rather to depict attending to a to a greater extent than pervasive problem.
The number is how 1 applies welfare economic science to empathise cost controls, such every bit rent command in addition to minimum-wage laws.
The sin that this mass makes is to await at consumer surplus, producer surplus, in addition to deadweight loss every bit if nosotros were studying the welfare cost of a tax. The cost of a cost control, the reader is taught, is the small-scale Harberger triangle betwixt the provide in addition to quest curves.
This reasoning is problematic because it assumes perfect rationing. But rationing nether cost controls is never perfect. Under rent control, for example, apartments practise non automatically become to those who value the apartments the most. The misallocation due to imperfect rationing makes the actual welfare cost of cost controls much higher than the standard deadweight loss triangle.
In many cases, economists are deeply skeptical of cost controls. If the costs of cost controls were similar to those of taxes, I suspect that this skepticism would move substantially less. By applying off-the-shelf welfare analysis to cost controls without thinking through the inefficiency of most rationing systems, teachers of introductory economic science mislead their students nigh the effects of these policies.
Addendum: Here is a relevant newspaper on the topic. Sumber https://gregmankiw.blogspot.com/
The number is how 1 applies welfare economic science to empathise cost controls, such every bit rent command in addition to minimum-wage laws.
The sin that this mass makes is to await at consumer surplus, producer surplus, in addition to deadweight loss every bit if nosotros were studying the welfare cost of a tax. The cost of a cost control, the reader is taught, is the small-scale Harberger triangle betwixt the provide in addition to quest curves.
This reasoning is problematic because it assumes perfect rationing. But rationing nether cost controls is never perfect. Under rent control, for example, apartments practise non automatically become to those who value the apartments the most. The misallocation due to imperfect rationing makes the actual welfare cost of cost controls much higher than the standard deadweight loss triangle.
In many cases, economists are deeply skeptical of cost controls. If the costs of cost controls were similar to those of taxes, I suspect that this skepticism would move substantially less. By applying off-the-shelf welfare analysis to cost controls without thinking through the inefficiency of most rationing systems, teachers of introductory economic science mislead their students nigh the effects of these policies.
Addendum: Here is a relevant newspaper on the topic. Sumber https://gregmankiw.blogspot.com/
