Predictably Irrational Chapters 9 & 10 – The Effect Of Expectation & The Power Of Price

In Chapter 9 and 10 (I combined them as they’re quite similar) of “Predictably Irrational” by Dan Ariely, the concept of how are expectations affect our decision making is discussed. We are not rational actors making choices in a vacuum but rather we are deeply affected by our expectations. If we expect a movie to be good, then it often is. This placebo effect is always to be found with prices. If we pay more for something, we value it more and get more from it. This creates serious problems for those who claim that market distortions will be corrected by market forces pushing a return to equilibrium. Ariely conducted an experiment involving free beer (I knew that would get … Continue reading “Predictably Irrational Chapters 9 & 10 – The Effect Of Expectation & The Power Of Price”

January 18, 2013EconomicsBehavioural Economics, Books, Economic Theory, Economics, Economy, Free Market, Libertarian, Predictably Irrational Leave a comment

The Mythical Laffer Curve

Conservatives everywhere condemn the use of tax increases for fear of the Laffer Curve. This is the idea that if taxes are too high, people will lose the incentive to work and therefore revenue will actually decrease. It is most famous for its counter-intuitive argument that a tax cut could increase revenue. Unfortunately there is little or no evidence to support this claim. History clearly shows that cutting taxes does not increase revenue. The Laffer curve is a political idea used to justify tax cuts for the rich. It is not based on sound economics. Most economists know the Laffer Curve isn’t true. An IGM survey of economists found that not a single one of them agreed that a tax … Continue reading “The Mythical Laffer Curve”

September 7, 2012The othersDemocrats, Disincentive To Work, Economic Theory, Economics, Economy, Election 2012, Entrepreneurs, Free Market, Incentive, Laffer Curve, Myth, Obama, Opinion, Politics, Punish Job Creators, Reaganomics, Republicans, Supply Side, taxes, Taxes Penalise Rich, Taxes Too High, Wrong Leave a comment

How Rich Countries Got Rich . . . And Why Poor Countries Stay Poor

I have just finished reading How Rich Countries Got Rich . . . And Why Poor Countries Stay Poor by Erik Reinert. The book is interesting for it engages what should be the main question of economics, why are some countries rich and other countries poor? This crucial question is woefully under researched and barely discussed in mainstream economics. I have completed two years of economics study in university without yet having heard an explanation for this phenomenon. Reinert’s main argument is that the wealth of a nation is based upon the economic activities it specialises in. Poor countries are poor because they specialise in agriculture and the production of raw materials. This is an economic dead end as it … Continue reading “How Rich Countries Got Rich . . . And Why Poor Countries Stay Poor”

July 1, 2012BooksBook, Books, Comparative Advantage, Development, Economic Theory, Economics, Economy, Free Trade, History, poverty, Protectionism, Review, Wealth Leave a comment