ZOMG MICRO ECONOMICS WTFFFF

[DannyOcean_]

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i one time got a 46 % on an upper level macro test

turned out to be a B

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Set the curve in my Economics of Organization and Management. BOOYA

[eviljeff]

there's midterms in grad school?

[ADLinden]

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i one time got a 46 % on an upper level macro test

turned out to be a B

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Set the curve in my Economics of Organization and Management. BOOYA

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ass

[dkgojackets]

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wdead you seem confused with regards to price elasticity and in the process are confusing me. It has nothing to do with producing more land or ice cream.

If the price goes down, people will demand more (hey at less $ per acre I will buy more acres). If the price goes up, people will demand less. Thus it is not inelastic.

The closest to perfectly inelastic would be like insulin, since no matter what the price if you need it to live you will consume the same amount.

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Also, you are talking about demand elasticity. Supply elasticity has to do with how suppliers change their output based on price changes. If the price of ice cream changes, ice cream suppliers will adjust. However, when the price of land changes, there is no supply to change, so land demand is a classic example of inelastic price elasticity of supply

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Supply does shift though. There will be someone willing to sell for x dollars but not y dollars, thus when the market price increases from y to x the supply increases.

[DannyOcean_]

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All three schools really agree on most practical matters. The main difference betweem the Austrian School and the Chicago L&E & Public Choice Schools is that the latter two claim to be pro free market schools, but spend a lot of intellectual capital spinning new apologetics for state intervention.

This is not to say that the Chicago & Public Choice schools have not produced some great work; they definitely have. Public Choice really illuminates a lot of government, and Coase did some really great things, although he missed the mark with his most famous thing (the so-called "Coase Solution").

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Is the Coase Solution separate from the Coase Thereom, because we just covered that in one of my classes. Good stuff

[Borodog]

Bingo.

[DannyOcean_]

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when the price of land changes, there is no supply to change,

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Wrongo. Do you see why?

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Don't they make land in teh netherlands and such?



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Yeah but that's not what I'm talking about.

Edit: Oh noes I outed mah gimmick.


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looooooooooooooooooooool makes sense huh?

[Borodog]

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All three schools really agree on most practical matters. The main difference betweem the Austrian School and the Chicago L&E & Public Choice Schools is that the latter two claim to be pro free market schools, but spend a lot of intellectual capital spinning new apologetics for state intervention.

This is not to say that the Chicago & Public Choice schools have not produced some great work; they definitely have. Public Choice really illuminates a lot of government, and Coase did some really great things, although he missed the mark with his most famous thing (the so-called "Coase Solution").

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Is the Coase Solution separate from the Coase Thereom, because we just covered that in one of my classes. Good stuff

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Yeah, basically. The problem is that the Coase theorem, which says that the most efficient allocation of property will tend to result regardless of the initial allocation of property rights (true) gets used as a justification for coercively reallocating property rights, i.e. it essentially repudiates the entire concept of private property itself, which leads to craziness like the Kelo decision. Not to mention such a policy depends on all sorts of shady things like interpersonal utility comparisons, aggregation of social utility, and the pretense of knowledge (i.e. there is no way to know a priori which allocation will in fact prove to be the most efficient ex post).

[NT!]

so wait this guy coates thinks that the most efficient allocation of property occurs regardless of other stuff.

how long does he think this will take?

what is his definition of 'efficient'? most productive? most stable? etc

[Borodog]

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so wait this guy coates thinks that the most efficient allocation of property occurs regardless of other stuff.

how long does he think this will take?

what is his definition of 'efficient'? most productive? most stable? etc

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It's Coase, and it isn't that it *must* happen, it is that it *tends* to happen, and by "efficient" he means, essentially, "lowest monetary cost".

The classic example is that a railroad runs past a farmer's wheat field, throwing off sparks that set fires and do say X dollars in damages per week to the field. Meanwhile for the railroad to change their equipment (or whatever) might cost Y dollars per week. Coase says that the market will tend to resolve the dispute so that cost is minimized. Say X (damage to the farmer's field) is $1000 per week. If it costs the railroad more than $1000 per week to stop throwing off sparks, they will have a financial incentive to simply pay off the farmer for the damages rather than changing their equipment. Meanwhile if it costs them less than the $1000 per week to change the equipment, they will do that. In either case the property goes to the most economically efficient use (farming or catching sparks).

Coase's problem is that he takes this idea and perverts it; he says that it's a case of "reciprocal harm." The sparks harm the farmer, but to stop the sparks harms the railroad. And the solution to the problem of who gets to decide what to do with the property (the farmer to keep it spark free or the railroad to keep it sparky) is whichever would be more harmed in the transaction. So if the damage to the farmer's field is $1000 and the cost to the railroad is $1200, then the railroad wins. But if the cost to the farmer is $1000 and the cost to the railroad $800, the farmer wins.

The problems with this are numerous. The pretense of knowledge. How the [censored] does the judge know a priori which allocation of property rights will be the most efficient in the future? That's an entrepreneurial task. And it can change over time. It essentially boils down to who can convince the judge that he'll put the property to the best use, which is entirely subjective. It repudiates the entire idea of property rights, if anyone can come along at any time and claim that they could put the property to better use than the current owner, therefore it should be taken away from the current owner and given to them. Until the next person came along and claimed that they could. Property rights are supposed to avoid and resolve conflicts; this idea creates conflict.

The real answer to the question of who is in the right between the farmer and the railroad is obvious: Who was there first? If the farmer was there first, the railroad is damaging his property and should either pay for it or cease and desist. If the railroad was there first, throwing off sparks, then the farmer bought "dirty" property, and has no claim against the railroad to put it into a better condition than that in which they bought it. Another way to put it would be that the railroad had a prior easement to throw sparks onto the property.

Property rights resolve the "problem" trivially, and Coase & friends at the Chicago School act like they don't even exist, and there is some huge conundrum to be solved.