From Adam Smith on, we expect rivals to get together to conspire against consumers. But this shopping season, we have Amazon and Walmart engaging in cutthroat price competition.

The effect should be good for consumers in the short run, but bad for retailers generally. As the price war expands, however, it is almost prohibitively difficult to think of all of the general equilibrium effects of this, so it is a shame that we won’t be offering Industrial Organization until next year. Look for this example ad naseum in ECON 300 next term.

Efficient Market Theory is Dead! Long Live Efficient Market Theory!

Many pundits believe that the efficient market hypothesis as a way to describe financial market behavior has suffered a fatal blow from the recent financial crisis. These advocates have attempted to nail the coffin on the EMH. Jeremy Siegel, author of Stocks for the Long Run, begs to differ. Read his October 27th piece in the Wall Street Journal which I have posted on my website.

Efficient Market Theory and the Crisis

Is US health care more expensive because we have higher costs of provision, or is it simply that providers charge higher prices? Blogging wunderkind Ezra Klein at the WaPo gives us some insight into what appear to be exorbitant US prices. He also provides a link to the full pack of charts with the international price comparisons. Yowza.

I can think of reasons why the US might have higher costs and hence higher prices. For example, I’m told that Allegheny County in Pennsylvania has as many medical helicopters at the ready as the entire country of Canada. I will not stake my name on whether that is true or not, but it certainly could be the case that higher average costs lead to higher prices, even with robust competition. There are also arguments of waste, fraud, abuse, exorbitant overhead, what have you that could also contribute.

On the other hand, maybe it’s (just) the prices, stupid.

The debate over the utility of daylight savings comes up about twice a year, usually around the time the clocks change. This post at Tree Hugger takes on some of these issues, with a hat tip to yours truly. Watch your step, indeed!

The original intent of daylight savings was to save energy. Daniel Engber at Slate reviews some of the evidence on this front.

If the policy isn’t meeting its objective, why don’t we just repeal it? That’s not a rhetorical question.

The folks at Brookings have a consistently-interesting research agenda addressing questions that seem pretty central to economic growth and social welfare. Students have really enjoyed (and been disturbed by) Alesina, Glaeser, and Sacerdote’s Why Doesn’t the US Have a European-Style Welfare State published in Brookings Papers on Economic Activity. Gary Burtless’ work on the sources of American inequality is quite revealing.

And, most recently, Isabel Sawhill and Ron Haskins have identified Five Myths about Our Land of Opportunity. I particularly liked the discussion of Myth #4.

4. If we want to increase opportunities for children, we should give their families more income.

Of course money is a factor in upward mobility, but it isn’t the only one; it may not even be the most important. Our research shows that if you want to avoid poverty and join the middle class in the United States, you need to complete high school (at a minimum), work full time and marry before you have children. If you do all three, your chances of being poor fall from 12 percent to 2 percent, and your chances of joining the middle class or above rise from 56 to 74 percent. (We define middle class as having an income of at least $50,000 a year for a family of three.)