Quotulatiousness

January 8, 2016

Home again, home again, jiggety-jig

Filed under: Administrivia, Personal — Tags: — Nicholas @ 16:36

I’m finally home again from the hospital. It was, by far, the longest hospital stay of my life (the previous being two days when I got my tonsils out at age 11 or so). Just the walk from the ward down to the parking garage left me feeling I’d put in a full day’s work down in the mines. Nearly two weeks of pretty much no physical activity leaves a mark. On the bright side, I lost ten pounds or so … but now I’ve got a bunch of pills I’ll need to take at various points during the day. Plus the joy of trying to find a doctor to provide after-care and monitoring (there may be parts of the GTA where doctors accepting new patients are plentiful, but Durham Region isn’t one of them).

Blogging will probably continue to be below normal volume, but I should manage a bit more than just the auto-posted QotD entries from now on.

Thanks again to those of you who’ve contacted me through various channels. Your words of support were very welcome.

QotD: Thinking like an economist – incentives matter

Filed under: Economics, Quotations — Tags: , — Nicholas @ 01:00

A lot of what constitutes “thinking like an economist” involves asking the right questions. Those questions typically involve looking for the incentives people face in a particular situation.

For instance, one response to inflation — a sustained increase in an economy’s general price level — is to think that making it illegal to charge more a fixed amount for any given product would solve the problem. That is, you see an outcome you don’t like, and without understanding why it is the way it is, you try to impose what you think is a better outcome. In the case of price ceilings, the consequence is chronic shortages.

Similarly, a common response to rising residential rents in some cities is to declare, “the rent is too damn high!” (In fact, there’s a political party in New York that actually calls itself The Rent Is Too Damn High Party.) This declaration is usually followed by a demand for regulations that would make it illegal to charge more rent than someone in authority thinks is necessary.

On the other hand, if an economist determines that rents are indeed too high in a district, she will then ask how they got that way. (The all-too-common answer — greed — doesn’t go far, because self-interest is no more a cause of high rents than air is a cause of fire.) In many cases, it’s because the supply of residential property has been artificially restricted — perhaps by building codes, minimum parking requirements, and landlords “warehousing” livable buildings in order to escape existing rent-control policies. Armed with some basic economic principles, she would try to figure out what choices people made that caused rents to rise and why they made those choices.

This is another way of saying that incentives matter.

Sandy Ikeda, “Incentives 101: Why good intentions fail and passing a law still won’t get it done”, The Freeman, 2014-11-13.

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