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Tag Archives: 02: The One Lesson of Business

Do criminals respond to incentives?

In Oakland they do. Operation Ceasefire is an expansive strategy that requires cooperation between law enforcement, prosecutors, human services, community groups, faith-based organizations and, crucially, people who are involved in violent crime. Law-enforcement investigators gather intelligence about groups of people who may be involved in violent crime or are at risk of committing a violent crime. Those people are called to a meeting, where they’re offered social services and support. ...

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Venezuelan incentives

The collapse of Venezuela illustrates the power of incentives, albeit in a negative way.  When the daughter of the former president is one of the richest people in the country, it is a sign that the wrong activities are rewarded. From Tyler Cowen: By boosting government spending so quickly, the Venezuelan government was sending a message that the key to future riches is courting government favor, not starting new businesses. Particularly by nationalizing its major export industry, the...

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The Opportunity Cost of Socialism

New report by the Council of Economic Advisors on the effects of socialist policies.  Here are some highlights: In assessing the effects of socialist policies, it is important to recognize that they provide little material incentive for production and innovation and, by distributing goods and services for “free,” prevent prices from revealing economically important information about costs and consumer needs and wants. To this end, as the then–prime minister of the United Kingdom, Margaret...

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A policy that achieves exactly the opposite of its original goal

Landlords reacted to rent control in San Francisco with three strategies: landlords moved into the property themselves, known as move-in eviction;  landlords evicted tenants to convert the units to condos; and  landlords offered tenants monetary compensation for leaving. So who benefitted and who was harmed? control operated as a transfer between the future renters of San Francisco (who would pay these higher rents due to lower supply) to the renters living in San Francisco in 1994...

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Commonly held, but mistaken, economic beliefs

From Folk-economic beliefs: An evolutionary cognitive modelFEB 1. International trade is zero-sum, has negative effects. ...This belief may take many forms. For instance, trade is said to create unemployment at home because foreigners instead of locals are making the things we need (Wood 2002, pp. 53–55). ...FEB 5. Markets have a negative social impact ...The belief is that markets as such produce negative outcomes for most participants. ...FEB 6. The profit motive is detrimental to general...

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