Published on 7 Apr 2015
Do unions raise wages for workers as a whole? If not, can unions raise the wages of some workers? The answer is, well, it depends. Unions have the ability to restrict the supply of labor to a job, which can increase wages for some workers. However, unions can also lower wages. For example, work stoppages and strikes supported by unions can slow down economic growth, lowering real wages. To illustrate this, we take a look at what happened to Great Britain’s economy during the 1970’s union strikes.
It’s important to note that unions are not just about wages — they can be helpful in protecting workers from arbitrary abuses and maintaining positive workplace relationships.
Finally, we ask — are there differences between professional associations and unions? How are they similar? Watch to learn more about how unions affect the economy.
June 30, 2016
Do Unions Raise Wages?
June 27, 2016
Compensating Differentials
Published on 7 Apr 2015
Firms have an incentive to increase job safety, because then they can lower wages. In this video, we explore this surprising claim in much greater depth. Bear in mind that wages adjust until jobs requiring a similar level of skill have similar compensation practices. Why do riskier jobs often pay more? Why has job safety increased over the years? How does a firm’s profit motive play a role?
June 1, 2016
The Tradeoff Between Fun and Wages: No Such Thing as a Free Lunch
Published on 7 Apr 2015
If you had to choose, would you rather be a sewer inspector spending your days underground or a lifeguard on the beach? Most would say that being a lifeguard is a more fun job, but a sewer inspector has higher wages to compensate for the less-fun aspects of the job. In this video, we discuss the tradeoff between fun and wages and show how this illustrates that “There ain’t no such thing as a free lunch!”
May 18, 2016
Human Capital and Signaling
Published on 7 Apr 2015
Wages in America differ greatly among workers. Why is that? One reason includes differences in human capital — tools of the mind. Education is one of the biggest investments people make to increase their human capital. Which college majors offer the greatest returns? And are all returns on education due to human capital? A college degree can “signal” other factors as well, and we discuss what is commonly known as the “sheepskin effect.” In this video, we also discuss how globalization has affected wages in the U.S.
May 4, 2016
Econ Duel: Is Education Signaling or Skill Building?
Published on 8 Mar 2016
What’s the point of education?
Do you learn about things, because the learning itself matters, or is education all about the signal you — and your degree — send out to the world? Is education really about building skills, or does it serve only to transmit intangible traits, like your level of talent or your persistence?
These are the questions we’ll be tackling in this new Econ Duel debate from Marginal Revolution University.
And since we believe that nothing beats a good friend-vs-friend duel, we’ve picked two friends, whom you’re probably familiar with. For this debate on education as signaling vs. skill building, we’ve got Tyler Cowen and Alex Tabarrok, ready to go head-to-head.
You’ll see them argue about nearly everything—from peacocks, to private markets, to street sweepers, to Scandinavian education laws, and even the real value of Harvard University. In the end, you’ll see them duke things out, in a quest to determine education’s effect on our lives and well-being.
The video also asks:
-Why do students tend to rejoice when their professor cancels class?
-When we’re talking education, what really counts? Is it the soft skills, or the hard facts?
-If evolution still can’t sort out good vs. bad, can we really expect the market to do any better?
-Can the things you learn today still matter 20 years down the line?
-Why do peacocks still sport huge, colorful tails, despite the fact that evolution should’ve come up with a better signaling device by now?
Once you reach the end of the video, we have one specific request. It’s hugely important.
Ask yourself: “Is education only about signaling, or is it really about skill building?”
Think it through and then let us know by voting at the end of the video!
BTW, Alex is right in this debate.
April 23, 2016
The Marginal Product of Labor
Published on 7 Apr 2015
In this video on the marginal product of labor, we discuss some commons questions such as: How are wages determined? Why do most Americans earn so much by global standards? What exactly is meant by ‘human capital’? Do labor unions help workers, and if so, by how much? How does discrimination affect labor markets? How is the demand for labor different than the demand for a good? We’ll discuss how to derive the demand for labor based on the marginal product of labor, and use real-world examples — such as the demand for janitors in a fast food restaurant — to illustrate this calculation. We’ll also cover an individual’s labor supply curve vs. market supply of labor.
March 30, 2016
Bundling
Published on 7 Apr 2015
Bundling refers to when two or more goods are sold together as a package. Microsoft Office, Cable TV, Lexis-Nexis, and Spotify all provide examples of bundling. What if there were no bundling and you had to pay for Cable TV by channel rather than purchasing channels in bundles? Would you end up paying more or less? We explore this question and others in this video.
March 24, 2016
Tying
Published on 7 Apr 2015
What is tying and how is this a form of price discrimination? An example of a tied good is an HP printer and the HP ink you need for that printer. The printer (the base good) is often relatively cheap whereas the ink (the variable good) has a high markup, and eventually costs you far more than what you paid for the printer. Other examples include cell phones and data plans or the Kindle Fire and the accompanying books or music you purchase from Amazon. The base good is sold close to marginal cost, and the variable good is sold at above marginal cost. Why do companies tie their goods? Tied goods make it easy to price discriminate in a way that increases output and social welfare. Does tying increase or decrease social welfare? What is the difference between bundling and tying? We discuss these questions and others in this video.
March 19, 2016
The Monopoly Markup
Published on 18 Mar 2015
Ever wonder why pharmaceuticals are so expensive? In this video, we show how low elasticity of demand results in monopoly markups. This is especially the case with goods that involve the “you can’t take it with you” effect (for example, people with serious medical conditions are relatively insensitive to the price of life-saving drugs) and the “other people’s money” effect (if third parties pay for the medicine, people are less sensitive to price).
March 16, 2016
The Social Welfare of Price Discrimination
Published on 7 Apr 2015
Now that we’ve learned a little about price discrimination, we can begin to think about whether or not price discrimination is bad for society. How does price discrimination affect output, and what is this effect on social welfare? If price discrimination increases output, it is likely beneficial for society. If output isn’t increased, social welfare is reduced. What are some examples of perfect price discrimination? Universities practice perfect price discrimination all the time. Students pay different amounts for their education based on many different factors surrounding each student’s ability to pay. This practice increases profits and also increases the number of students able to attend college. For this reason, price discrimination by universities likely increases social welfare.
January 16, 2016
Introduction to Price Discrimination
Published on 7 Apr 2015
Price discrimination is common: movie theaters charge seniors less money than they charge young adults. Computer software companies sell to businesses and students at different rates, often offering discounts to students. These price differences reflect variations in the elasticity of demand for these different groups. When demand curves are different, it is more profitable to set different prices in different markets. We’ll also cover arbitrage and take a look at some examples of price discrimination in the airline industry
January 15, 2016
The Costs and Benefits of Monopoly
Published on 18 Mar 2015
In this video, we explore the costs and benefits of monopolies. We cover how monopolies and patents breed deadweight loss, market inefficiencies, and corruption. But we also look at what would happen if we eliminated patents for industries with high R&D costs, such as the pharmaceutical industry. Eliminating patents in this case may result in less innovation and, specifically, fewer new drugs being created. We also consider some of the tradeoffs of patents and look at alternative ways to reward research and development such as patent buyouts and using prizes to foster innovation.
December 14, 2015
The Monopoly Markup
Published on 18 Mar 2015
Ever wonder why pharmaceuticals are so expensive? In this video, we show how low elasticity of demand results in monopoly markups. This is especially the case with goods that involve the “you can’t take it with you” effect (for example, people with serious medical conditions are relatively insensitive to the price of life-saving drugs) and the “other people’s money” effect (if third parties pay for the medicine, people are less sensitive to price).
December 2, 2015
Maximizing Profit under Monopoly
Published on 18 Mar 2015
AIDS has killed more than 36 million people worldwide. There are drugs available to treat AIDS, but the price of one pill is incredibly high in the U.S. — coming in at 25 times higher than its cost. Why is that? In this video, we show how patent rights have created a monopoly in the U.S. market for AIDS medication, causing pills to be very expensive. In other countries, however, such as India, which does not recognize patents on AIDS medication, prices remain low. Using this example, we go over how monopolies use market power to increase prices.
November 27, 2015
The Balance of Industries and Creative Destruction
Published on 18 Mar 2015
Why are price signals and market competition so important to a market economy? When prices accurately signal costs and benefits and markets are competitive, the Invisible Hand ensures that costs are minimized and production is maximized. If these conditions aren’t met, market inefficiencies arise and the Invisible Hand cannot do its work. In this video, we show how two major processes, creative destruction and the elimination principle, work with the Invisible Hand to create a competitive marketplace that works for producers and consumers.
