Economics in Two Lessons, Chapter 10

Thanks to everyone who commented on the first nine chapters of my book-in-progress, Economics in Two Lessons.

Here’s a draft of Chapter 10: Market failure -Externalities and pollution. Comments, criticism and praise are welcome.

The book so far is available
Table of Contents
Introduction.
Chapter 1: What is opportunity cost?
Chapter 2: Markets, opportunity cost and equilibrium
Chapter 3:Time, information and uncertainty
Chapter 4:Lesson 1: Applications.
Chapter 5: Lesson 1 and economic policy.
Chapter 6: The opportunity cost of destruction
Chapter 7: Property rights, and income distribution
Chapter 8:Unemployment
Chapter 9: Market Failure

Feel free to make further comments on these chapters if you wish.

6 thoughts on “Economics in Two Lessons, Chapter 10

  1. Fine as far at it goes. The Goldilocks footnote pursues a red herring down a rabbit hole: I suggest nipping it in the bud.

    I miss a discussion of the pervasiveness of externalities. Like asymmetric information, they are a feature of most business relationships. A typical market transaction takes place under asymmetric information, and with a cloud of positive and negative externalities, many trivial but some significant. In the standard case, there is a mismatch in JQ’s terms of opportunity costs, and a case for a welfare-improving government intervention. Since such interventions are themselves systematically prone to fail, and cannot be envisaged in every case in a free society, it’s second- and third-best all the way down.

    Punditry is a nice field of rich externalities. Suppose both dishonest ideologues and upright thinkers (h/t to John Quiggin) initially sell their skills to readers, as in the pre-Internet days of print newspapers. They can charge similar fees. But both propaganda and true arguments are repeated by readers and spread into the general culture. Speech has huge externalities, both positive and negative.

  2. I’m working my way through this with detailed comments (mainly while travelling on the tram so it’s a bit disjointed). I was finishing my thesis when you (JQ) started this, so I got a late start and am only up to chapter five yet.

    I really want to do a comprehensive critique because I’ve made some severe criticisms of economics in my thesis (particularly in the 100 word statement, where it’s hard to get qualifying statements in the word limit) and feel very obliged to engage with ‘progressive economics’, if I can call your work that? (I don’t know what you call yourself, except maybe you are now a socialist economist?). I hope I get my comments finished before the book is published!

  3. I should add that even though there’s a lot I don’t agree with (or think I don’t agree with – some things are discussed further in chapters I’m not up to yet), as a ‘non-economist’ I have found it very engaging and easy to read, to the extent that I missed my tram stop one morning because I was engrossed in reading about economics! You def deserve some kind of prize for that!

  4. The Great London Smog 1952, which killed more than 10 000 people, was the point at which the problem became too big to ignore

    There’s an episode of The Crown, Season 1, devoted the Great London Smog of 1952. Churchill dismisses it as “weather”, with the penny not dropping (for him) until his young secretary is run over and killed by a bus.

  5. Some of the comments from the old site seem to have gone missing. Anyway I wanted to add, in reply to a comment from JQ that is no longer here (at least as far as I can see on my phone) that I think it is important to define key terms, regardless of whether they are ‘technical’ or not, since in practice people use terms like ‘work’ or ‘production’ in differing ways. For example sometimes people use ‘work’ to mean ‘paid work’ and sometimes to mean any kind of work, whether paid or unpaid. Important to be clear about this since one of the big problems in our society is that useful unpaid work is ignored (eg in GDP etc) while socially or ecologically destructive work is valued. Similarly, people sometimes appear to use ‘production’ apparently in a narrow sense meaning ‘manufacture of material goods’ while sometimes they appear to use it to mean ‘production of any good or service’ (again, the unpaid/unpaid question also further complicates this).
    As Marilyn Waring has shown, official economic measures (don’t have reference with me at present but think it is UNNSA? – UN national standards of accounting?) don’t include subsistence and unpaid work in households and communities, yet these forms of work are basic to the way societies operate (or fail).

  6. Yes,many recent comment threads look severely truncated. Hopefully, they can be restored. This must be some sort of law of the internet. Good stuff disappears quickly. Bad stuff hangs around seemingly forever.

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