UNIT 1. Introduction to Microeconomics1. How Much for a Life? Try $3 Million to $5 Million, Peter Passell, New York Times, January 29, 1995.
A great deal of economic reasoning is based on the opportunity cost principle--the idea that any decision involving scarce resources must involve costs in terms of forgone alternatives elsewhere. Peter Passell applies this principle to an age-old question: What is the value of human life? New! 2. The Company We'll Keep, Joseph B. White, Wall Street Journal, December 31, 1999.
Joseph White argues that in the new millennium, corporations will be little more than brand names, covers for frequent-flying, cyberspace-cruising freelancers who form virtual teams on wireless networks. New! 3. The Chaos at the Core of Prosperity, David Leonhardt, New York Times, November 5, 2000.
Has corporate America entered a new stage of instability, one in which seemingly ascendant companies can quickly lose their way? David Leonhardt demonstrates how some of the insights of the great economist Joseph Schumpeter can help us to understand what is happening. New! 4. Following the Money, but Also the Mind, Louis Uchitelle, New York Times, February 11, 2001.
For more than a half-century economists have based their theories on the rigid assumption that people act with rational, unemotional self-interest. Recently, however, a new approach--known as behavioral economics--has emerged, which recognizes that human beings have another, feisty, side to them. 5. Statistics and Even Lore of the Dismal Science, David Cay Johnston, New York Times, September 15, 1997.
A vast and growing trove of online information is available to track the domestic and world economy. David Cay Johnston shows how the Internet can be used to find it. UNIT 2. Competition in Product MarketsA. GENERAL CONCEPTS6. Why You Can't Tell What Things Cost, David J. Morrow, New York Times, March 2, 1997.
The traditional laws of supply and demand once imposed a semblance of order and clarity on prices. Yet, as David Morrow explains, today they are being so haphazardly amended by technological changes that the American marketplace now offers no certainty. 7. Smoke Signals, New York Times, New Jersey Sunday Edition, January 10, 1999.
One of the more useful concepts in microeconomics is demand elasticity, which measures the responsiveness of consumer demand to changes in prices. In 1998, the New Jersey legislature doubled the state cigarette tax in an effort to reduce smoking. This article examines the impact that this has had on cigarette sales in both New Jersey and nearby states. New! 8. Entree Economics, Eileen Daspin, Wall Street Journal, March 10, 2000.
What does that restaurant meal really cost? Eileen Daspin calculates the price that six American eateries pay for the food they serve and finds some surprises. New! 9. Buying Power by the Hour, Jane Bryant Quinn, Newsweek, April 30, 2001.
In the late 1990s, with prosperity in full swing, consumers stopped worrying about their energy bills. Utilities and states--California among them--closed or scaled back their conservation programs. Today, with the emergence of an energy crisis in California, Jane Bryant Quinn asks: Would consumers change the way they use electricity if they paid the real-time cost? 10. I Got It Cheaper Than You, Scott Woolley, Forbes, November 2, 1998.
Scott Woolley says price discrimination seems destined to become more frequent and complex with the growth of electronic commerce. 11. The Law as the Free Market's Rogue: Hostage to the Prisoner's Dilemma, Peter Passell, New York Times, March 25, 1994.
Peter Passell notes that the market for legal services fails in a particularly perverse and fascinating way, known as the prisoner's dilemma. New! 12. The New Economy's 'Network Society' Plays by Old-Economy Rules, Jeff Madrick, New York Times, July 6, 2000.
Many business gurus are saying that the theoretical principles underlying the "old economy" don't apply. Jeff Madrick disagrees, and he demonstrates the usefulness of the time-honored principle of economies of scale. B. CASE STUDIESNew! 13. The Core of the Problem: Three Hard Years Push West Michigan Apple Growers Out of the Business, Kathleen Longcore, The Grand Rapids Press, September 23, 2000.
Increased global competition, plus smaller crops resulting from freezes and blights, have recently forced many apple growers out of business. 14. Ever Wonder Why Furniture Shopping Can Be Such a Pain?, James B. Hagerty, Wall Street Journal, November 2, 1998.
The U.S. furniture industry demonstrates many of the characteristics of monopolistic competition, including a large number of sellers, product differentiation, low capital requirements, and ease of entry into the market. 15. Regional Differences in the Economic Impact of Wal-Mart, Nora Ganim Barnes, Allison Connell, Lisa Hermenegildo, and Lucinda Mattson, Business Horizons, July/August 1996.
The Wal-Mart chain of discount merchandising stores has surged past all other competitors to become the largest U.S. retailer in net sales. This report discusses the strategies Wal-Mart used to gain this position and the economic impact of such strategies on different parts of the country. New! 16. How Burger King Got Burned in Quest to Make the Perfect Fry, Jennifer Ordonez, Wall Street Journal, January 16, 2001.
This case study provides interesting details on the importance of product differentiation as a strategic device used by highly competitive firms. New! 17. The Joys of Oligopoly, The Economist, March 10, 2001.
Is consolidation in the American airline industry a good thing? United Airlines, American Airlines, U.S. Airways, and TWA has unveiled their latest plans for carving up the American market among them. 18. The UK Package Holiday Industry, G. K. Bullock, Management Accounting, April 1998.
G. K. Bullock traces the role that horizontal integration, vertical integration, and diversification have played in the development of the industry. 19. Electricity Deregulation and the Consumer, Resources, Winter 1997.
Traditionally, electric utilities have received government protection against competition in exchange for state regulation of their rates and the quality of their service. This essay examines possible consequences of industry deregulation for utility companies, their customers, and the environment. New! 20. OPEC and the Voice of Doom, The Economist, September 9, 2000.
Not quite 2 years ago, oil was $10 a barrel and the OPEC cartel was on the brink of collapse. Today the oil price is well above $30 a barrel, and it shows little sign of coming down. The Economist demonstrates how policy decisions within OPEC affect the rest of the world. New! 21. Phoning Long Distance Is No Longer Such a Deal, Kim Clark, U.S. News & World Report, January 15, 2001.
A new trend of limited growth and plummeting stocks among long distance companies is causing many to quietly raise rates despite consumer protests. New! 22. As Mergers Get Bigger, So Does the Danger, Louis Uchitelle, New York Times, February 13, 2000.
Seldom since the late nineteenth century, when corporate trusts dominated oil, steel, copper, and railroads in the United States, has there been such a march toward concentration. Louis Uchitelle considers the ramifications of megamergers. New! 23. Patent Medicine, Dean Baker, The American Prospect, January 29, 2001.
Absurdly high prices have put lifesaving prescription drugs out of reach for millions of Americans and for hundreds of millions of people in developing countries. According to Dean Baker, in large part, patent protection is to blame. UNIT 3. Labor Markets and UnionsNew! 24. Downsized & Out? Job Security and American Workers, Charles L. Schultze, Brookings Review, Fall 1999.
Over the past 20 years, intense media attention and some dramatic downsizing among large companies have created a widespread perception that corporate layoffs among senior workers, at all skill levels, have seriously eroded the prospects for job security as a reward for long service. New! 25. Tight Job Market Pinches Temporary-Help Firms, Robert Johnson, Wall Street Journal, August 24, 2000.
For many low-skill workers, temporary-help companies have become the "port of entry" to the permanent job market because of the training they offer, but a recent MIT study indicates that two-thirds of all temporary workers would prefer to be in permanent jobs. New! 26. Where Supply and Demand Meets Wages and Myth, Richard Rothstein, New York Times, November 1, 2000.
In the past 20 years, the wage premium for a college degree has soared. However, as Richard Rothstein explains, that the relative earnings of college graduates are climbing does not necessarily mean that the demand for these workers must also be climbing. New! 27. Debating the Minimum Wage, The Economist, February 3, 2001.
According to conventional economic analysis, increases in the minimum wage could result in two things: those who remain employed get high incomes, while other, less productive workers lose jobs as employers trim payrolls. The Economist examines recent evidence and finds that this view may be incorrect. 28. Homemaker as Worker in the United States, Margaret Coleman, Challenge, November/December 1998.
Margaret Coleman uses historical data on women's labor-force participation to show that, for most women, and except during brief periods, the exclusive role of housewife has not been an option. New! 29. Immigrants Fill Critical Gap in Wide-Open Job Market, Dina Temple-Raston, USA Today, June 23, 2000.
With more than 9 million legal immigrants arriving on its shores in the past decade, the current immigration wave is the largest in U.S. history. Dina Temple-Raston traces the impact of this wave on U.S. job markets and wages. New! 30. Union Membership Hits Low Point, Society, May/June 2001.
The percentage of American workers belonging to unions fell last year to 13.5 percent, the lowest point in six decades. In this article economists offered several explanations for the decline. 31. New Unions for a New Economy, Stephen A. Herzenberg, John A. Alic, and Howard Wial, The New Democrat, March/April 1998.
How will American trade unionism fare in the twenty-first century? The authors recommend ways in which unions can meet these challenges of the new economy. 32. Building Prosperity From the Bottom Up, Thomas Palley, Challenge, September/October 1998.
Thomas Palley explores the possible outcomes of an increase in the minimum wage. New! 33. Worker Capitalists? Giving Employees an Ownership Stake, Margaret M. Blair and Douglas L. Kruse, Brookings Review, Fall 1999.
In survey after survey, members of the general public, working people in particular, say they believe that employees in substantially employee-owned firms work harder and better and are more likely than outside shareholders to vote their shares in the long-term interests of the company. 34. Workers De-Compensation: Benefits Evaporate for Repetitive Stress Sufferers, Kimberly Patch, Dollars and Sense, January/February 1997.
As many as one million American workers are afflicted annually by repetitive strain injury. Over the past decade state legislatures have scaled back workers' compensation benefits, often at the behest of insurance companies that are eager to cut costs. Kimberly Patch considers the implications of this for those who suffer from such a condition. UNIT 4. Market Failures and Public Microeconomics35. Everything for Sale, Robert Kuttner, BusinessWeek, March 17, 1997.
In this excerpt from his new book, Everything for Sale, Robert Kuttner explains how a mixed economy, combining competition with some form of government oversight, works better than a pure market economy. 36. Staking Out the High Ground on Government Regulation of Business, Murray Weidenbaum, Business and Society Review, Number 96, 1996.
The American public has a genuine desire for a cleaner environment, a healthier workplace, and safer products--all of which involve some degree of government regulation of business. Murray Weidenbaum asks, What can be done to improve such regulation? 37. Cable Rates Rising as Industry Nears End of Regulation, Stephen Labaton, New York Times, March 8, 1999.
The Telecommunications Act of 1996 provided for a 3-year phaseout of federal controls over television cable rates. But while the prospect of competition was supposed to drive prices down, cable rates continue to rise, with many companies announcing increases for this year that are more than double the projected rate of inflation. New! 38. Can Antitrust Keep Up? Competition Policy in High-Tech Markets, Jonathan B. Baker, Brookings Review, Winter 2001.
Not since the 1911 breakup of the Standard Oil trust has a government antitrust case attracted as much public attention as the Justice Department's suit against high-tech giant Microsoft. Jonathan Baker suggests that competition in high-tech markets is based on five core principles likely to withstand shifting political winds. New! 39. The Real Price of Gas, International Center for Technology Assessment, November 1998.
The retail price that Americans pay for gasoline appears to be very low in comparison with prices prevailing in most other nations. Adding in the many external costs that consumers pay indirectly by way of increased taxes, insurance costs, and retail prices in other sectors, this study estimates the real per gallon price to be in excess of $15. New! 40. Making Green Policies Pay Off: Responsible Climate-Change Package Can Benefit Environment, Workforce, James Barrett and J. Andrew Hoerner, EPI Issue Brief, April 21, 2000.
The authors show how responsible policies might benefit both the environment and the economy. 41. Travelers Benefit from Airline Deregulation, John H. Anderson Jr., Consumers' Research, July 1996.
The Airline Deregulation Act of 1978 phased out the federal government's control over airfares and service. According to Consumers' Research, a survey of 112 airports reveals that airfares 20 years later were below what they were when the process of deregulation was begun. 42. How the Antitrust Wars Wax and Wane, Laurence Zuckerman, New York Times, April 11, 1998.
A debate is emerging over the issue of predatory pricing. How it plays out could end up influencing how much Americans pay for everything from airline tickets to computer software, from beer to cellophane tape. 43. Prove It: The Costs and Benefits of Sprawl, Peter Gordon and Harry W. Richardson, Brookings Review, Fall 1998.
Has the process of urban sprawl gone too far? The authors consider implications of this development for public policy. 44. "Does Prison Pay?" Revisited: Returning to the Crime Scene, Anne Morrison Piehl and John J. DiIulio Jr., Brookings Review, Winter 1995.
Economists frequently employ cost-benefit analysis for the purpose of assessing the relative merits of public projects. Anne Morrison Piehl and John DiIulio conducted a study of New Jersey correctional institutes in order to determine whether they "cost too much" or "protect too little". 45. Congested Parks--A Pricing Dilemma, Dan M. Bechter, Monthly Review (Federal Reserve Bank of Kansas City), June 1971.
Overcrowding at public parks creates a classic microeconomic dilemma: outdoor recreationists face insufficient parking space, which must be allocated through adjusting park fees. 46. Drug Legalization? Time for a Real Debate, Paul B. Stares, Brookings Review, Spring 1996.
Paul Stares says the time has come for a real debate over the pros and cons of drug legalization. New! 47. A New Medicare for the New Economy, Jeff Lemieux, Blueprint, Winter 2001.
Jeff Lemieux argues that Medicare reform requires not only improving benefits for recipients but also using market forces to shore up the system's creaky inner workings. 48. The Free Market for Clean Air, David B. Webster, Business and Society Review, Summer 1994.
Recent amendments to the Clean Air Act of 1990 allow companies to buy and sell the right to pollute. Pollution trading has the potential to help society decide how much pollution we are willing to live with, and who will pay the cost of reducing it. 49. How Uncle Sam Could Ease the Organ Shortage, Gary S. Becker, BusinessWeek, January 20, 1997.
Gary Becker proposes a scheme for reducing the shortage of organ donors by having the federal government offer incentives to induce more people to allow their organs to be used for transplants after they die. UNIT 5. Income Distribution and Economic Justice50. Growing American Inequality: Sources and Remedies, Gary Burtless, Brookings Review, Winter 1999.
Gary Burtless asks: Should we care about the growing earnings gap? And, if we do care, what should we do about it? 51. Inequality in the United States, Brian Motley, FRBSF Economic Letter (Federal Reserve Bank of San Francisco), January 31, 1997.
For the better part of three decades, the gap in earnings between rich and poor Americans has increased steadily. While it is true that many persons move up (and down) the income scale over their lifetimes, there is no clear evidence that mobility has improved as income inequality has increased. New! 52. The Victimless Income Gap?, Robert H. Frank, New York Times, April 12, 1999.
Some economists maintain that inequality doesn't really matter as long as no one ends up with less in absolute terms. Robert Frank disagrees. 53. The State of the Poor, Challenge, November/December 1996.
Using information on family expenditures, home ownership, and health care, this essay demonstrates what it really means to be poor in America. New! 54. The 'Undeserving Poor' Deserve More Help, Stephen H. Bell, The Christian Science Monitor, February 21, 2001.
A powerful tool for "making work pay" is the Earned Income Tax Credit (EITC), which raises the after-tax incomes of low-wage workers. Stephen Bell argues that it is now time to raise the value of this credit for adults without dependents. New! 55. Without a Net: Whom the New Welfare Law Helps and Hurts, Christopher Jencks and Joseph Swingle, The American Prospect, January 3, 2000.
Christopher Jencks and Joseph Swingle demonstrate why the impact of welfare reform has been neither as grim as its critics feared nor as encouraging as its advocates promised. 56. Corporate Welfare Remains Unchecked, Doug Bandow, Business and Society Review, Number 97, 1996.
Corporate welfare is expanding rapidly. Doug Bandow describes the many ways in which businesses benefit from government largesse at public expense. New! 57. How to Slip Out of America's Housing Squeeze, Christopher Farrell, BusinessWeek Online, February 16, 2001.
A close look at the supply-and-demand equation suggests that the affordable housing squeeze is relatively easy to fix. As Christopher Farrell demonstrates, it is politics, not economics, that makes this problem so difficult. 58. Should We Retire Social Security?, Henry J. Aaron and Robert D. Reischauer, Brookings Review, Winter 1999.
Most Americans understand that Social Security faces a long-term imbalance between the cost of benefits promised under current law and the program's projected income. The authors evaluate major proposals currently under consideration to reform or replace the nation's pension system. New! 59. Equality in Hiring Remains the Key to Civil Rights Goals, Alan B. Krueger, New York Times, June 22, 2000.
Since 1965, when the Civil Rights Act went into effect, median earnings of black full-time workers have gained ground on the earnings of their white counterparts. Alan Krueger shows that discrimination still persists, however, taking on more subtle forms that are less amenable to correction by legislation.
