Published on 18 Mar 2015
What are externalities and what are the different kinds of costs? And what does this have to do with the rise of “superbugs”? This video is an introduction to externalities, including the concepts of private cost, external cost, and social cost. Using the example of antibiotics and viruses, we take a look at how costs are passed along to different members of society beyond the producer and consumer. We’ll use a chart to illustrate how to calculate the effects of a Pigouvian tax, and we provide definitions for the other key terms that will be used throughout this video series.
September 14, 2015
An Introduction to Externalities
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September 7, 2015
Arguments Against International Trade
Published on 25 Feb 2015
In this video, we discuss some of the most common arguments against international trade. Does trade harm workers by reducing the number of jobs in the U.S.? Is it wrong to trade with countries that use child labor? Is it important to keep a certain number of jobs at home for national security reasons? Can strategic protectionism increase well-being in the U.S.? Join us as we discuss these common concerns.
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September 6, 2015
How the Division of Knowledge Saved My Son’s Life (Everyday Economics 3/7)
Published on 24 Jun 2014
In this video, Professor Boudreaux explains how the specialization of knowledge helped his two-year old son overcome a life-threatening illness. The science of medicine has enjoyed significant progress since the 19th century thanks to the vast size of the market and demand for health care services. Despite his foresight, Adam Smith never could have imagined the degree of expertise held by some of today’s medical specialists.
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September 2, 2015
Tariffs and Protectionism
Published on 25 Feb 2015
We’ll look at the costs and consequences of tariffs, quotas, and protectionism. How do tariffs affect consumers? What about producers? Who wins and who loses? Find out with this video.
We’ll apply the fundamentals we learned in the supply, demand, and equilibrium section of this course to real-world examples — like that of protectionism in the U.S. sugar industry — to determine lost gains from trade or deadweight loss, the tariff equilibrium vs. the free trade equilibrium, and the value of wasted resources as a result of tariffs.
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August 27, 2015
Comparative Advantage Homework
Published on 25 Feb 2015
Make sure you’ve completed the homework introduced in the Comparative Advantage video before you watch this video, as we’ll be going over the answer. We take a look at our example which compares shirt and computer production and consumption in Mexico and the United States. At the end of this video, you’ll have a better understanding of why it makes sense for countries to engage in trade.
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August 24, 2015
Comparative Advantage
Published on 25 Feb 2015
What is comparative advantage? And why is it important to trade? This video guides us through a specific example surrounding Tasmania — an island off the coast of Australia that experienced the miracle of growth in reverse. Through this example we show what can happen when a civilization is deprived of trade, and show why trade is essential to economic growth.
In an economy with a greater number of participants trading goods and services, there are more ways to find a comparative advantage and earn more by creating the most value for others. Let’s dive right in with an example from our new friends, Bob and Ann.
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August 22, 2015
Division of Labor: Burgers and Ships (Everyday Economics 2/7)
Published on 24 Jun 2014
A simple example of hamburgers being made at home versus at a restaurant can help illuminate the explosion of prosperity since the Industrial Revolution. The story of the division of labor and development of specialized tools is not a new one — Adam Smith began The Wealth of Nations with this concept. Yet it still has tremendous explanatory power about the world we inhabit.
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August 19, 2015
The Big Ideas of Trade
Published on 25 Feb 2015
Trade makes people better off, but how? In this video we discuss the importance of specialization and division of knowledge. Specialization leads to improvements in knowledge, which then lead to improvements in productivity. For instance, physicians who specialize are able to learn more about one specific area in medicine, and we benefit from better health care because of this.
What does specialization have to do with trade? What can we learn from Star Trek about the division of knowledge? Is globalization a good thing? We’ll answer these questions and others in this introductory video on the big ideas of trade.
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August 10, 2015
Price Controls and Communism
Published on 25 Feb 2015
What happens when the prices of all goods are controlled? Under communism, or a command economy, this is exactly what occurs. As a result, all of the effects of price controls become amplified: there are even more shortages or surpluses of goods, lower product quality, longer lines and more search costs, more losses in gains from trade, and more misallocation of resources. As we have seen, universal price controls destroy market coordination and create a system of planned chaos in which it becomes more difficult for consumers to get the goods and services they want and need.
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August 3, 2015
Why Do Governments Enact Price Controls?
Published on 25 Feb 2015
If price controls have negative consequences, why do governments enact them? Let’s revisit our example of President Nixon’s wage and price controls in the 1970s. These price controls were popular, as is demonstrated by Nixon being re-elected after they went into effect. The public didn’t think that the price controls were to blame for things such as long lines at the fuel pump. Without knowledge of the economics behind price controls, the public blamed foreign oil cartels and oil companies for the shortages.
In this video we’ll also address questions such as: do price controls — like rent controlled apartments and the minimum wage — help the poor? Are there better ways to help the poor? If so, what are they? Let’s find out.
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July 22, 2015
Price Floors: Airline Fares
Published on 25 Feb 2015
In this video, we cover how price floors lead to wasteful increases in quality and a misallocation of resources. Using the real-world example of airline regulations from 1938-1978, we show how price floors can be used to restrict entry and reduce competition within an industry. When the Civil Aeronautics Board regulated airline fares, airlines couldn’t compete on price so they instead had to compete by increasing quality. This may sound like a good thing, but we’ll show how this actually created quality waste since the cost of that quality was higher than the value to the customers. Price floors also lead to the misallocation of resources by preventing competition and responsiveness to consumer demand. In this video, we’ll show you how consumers are negatively affected by price floors.
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July 20, 2015
Price Floors: The Minimum Wage
Published on 25 Feb 2015
Price floors, when prices are kept artificially high, lead to several consequences that hurt the consumer. In this video, we take a look at the minimum wage as an example of a price floor. Using the supply and demand curve and real world examples, we show how price floors create surpluses (such as a surplus in labor, or unemployment) as well as deadweight loss.
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July 15, 2015
Price Ceilings: Rent Controls
Published on 25 Feb 2015
Rent controls are a type of price ceiling. We’ll use our diagram to show how rent controls create shortages by reducing the supply of apartments available on the market. Rent controls also result in reduced product quality, since they reduce the returns to landlords from renting apartments. Landlords respond by cutting costs or performing less maintenance, leading to lower quality. There are search costs associated with rent controls, and they also lead to a misallocation of resources since apartments are not allocated to renters who value them the most.
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July 9, 2015
Price Ceilings: Misallocation of Resources
Published on 25 Feb 2015
Suppose there is a mild winter on the West Coast and a harsh winter on the East Coast. As a result of the weather, people on East Coast will demand more home heating oil, bidding up the price. Under the price system, entrepreneurs will be incentivized to take oil from where it has lower value on West Coast to where it has higher value on the East Coast. But when price controls are in place, even though the demand is still there from the East Coast, there is no signal of a higher price, eliminating the incentive for entrepreneurs to transport oil from west to east. In fact, this happened in the 1970s, resulting in oil going to lower valued uses on the West Coast while many people on the East Coast didn’t have enough oil to heat their homes. In this video, we’ll look at a diagram to visualize this misallocation of resources.
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July 6, 2015
Price Ceilings: Deadweight Loss
Published on 25 Feb 2015
In this video, we explore the fourth unintended consequence of price ceilings: deadweight loss. When prices are controlled, the mutually profitable gains from free trade cannot be fully realized, creating deadweight loss. With price controls, less trading occurs and both buyers and sellers miss out on the mutually profitable gains that could have occurred. We’ll show how to calculate deadweight loss using our example of a price ceiling on gasoline.
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