Immigration is once again a major component of demographic change in the United States. Since 1940, the number of legal immigrants increased at a rate of one million per decade. By 2002, approximately one million legal immigrants were being admitted each year, a rate of almost ten million for the decade (Table 1). Large numbers […]| Econlib
Between 1760 and 1860, technological progress, education, and an increasing capital stock transformed England into the workshop of the world. The industrial revolution, as the transformation came to be known, caused a sustained rise in real income per person in England and, as its effects spread, in the rest of the Western world. Historians agree […]| Econlib
The United States and all other modern industrial economies experience significant swings in economic activity. In some years, most industries are booming and unemployment is low; in other years, most industries are operating well below capacity and unemployment is high. Periods of economic prosperity are typically called expansions or booms; periods of economic decline are […]| Econlib
In 1974 the general public got a graphic illustration of the “tragedy of the commons” in satellite photos of the earth. Pictures of northern Africa showed an irregular dark patch 390 square miles in area. Ground-level investigation revealed a fenced area inside of which there was plenty of grass. Outside, the ground cover had been […]| Econlib
Many people believe that only government intervention prevents rampant discrimination in the private sector. Economic theory predicts the opposite: market mechanisms impose inescapable penalties on profits whenever for-profit enterprises discriminate against individuals on any basis other than productivity. Though bigoted managers may hold sway for a time, in the long run the profit penalty makes […]| Econlib
Judged by the huge strides that people all over the world have made in overcoming poverty and want, it is only a slight exaggeration to say that little of economic consequence happened before the last three centuries. Before that, most of the world not only took poverty for granted, but also assumed that little could […]| Econlib
K-12 In the 1980s, economists puzzled by a decline in the growth of U.S. productivity realized that American schools had taken a dramatic turn for the worse. After rising every year for fifty years, student scores on a variety of achievement tests dropped sharply in 1967. They continued to decline through 1980. The decline was […]| Econlib
Gunnar Myrdal, a Swedish economist, made an international reputation with his 1944 book, An American Dilemma, today considered a classic in sociology. The book was the end product of a study that the Carnegie Corporation had commissioned about what was then called the “Negro question.” Myrdal’s damning critique of the “separate but equal” doctrine […]| Econlib
The U.S. welfare system would be an unlikely model for anyone designing a welfare system from scratch. The dozens of programs that make up the “system” have different (sometimes competing) goals, inconsistent rules, and over-lapping groups of beneficiaries. Responsibility for administering the various programs is spread throughout the executive branch of the federal government and […]| Econlib
For well over a hundred years, the economic world has been engaged in a great intellectual debate. On one side of this debate have been those philosophers and economists who advocate an economic system based on private property and free markets—or what one might call economic freedom. The key ingredients of economic freedom are personal […]| Econlib
The European Union (EU) includes twenty-seven countries and 490 million people. In 2005, the EU had a $13 trillion (€11 trillion) economy, a single market, and for some member countries, a single currency. A growing number of political and economic decisions are made on a pan-European level in Brussels. The origins of the EU are […]| Econlib
Before the Russian Revolution of 1917, “socialism” and “communism” were synonyms. Both referred to economic systems in which the government owns the means of production. The two terms diverged in meaning largely as a result of the political theory and practice of Vladimir Lenin (1870–1924). Like most contemporary socialists, Lenin believed that socialism could not […]| Econlib
Economists use the term “inflation” to denote an ongoing rise in the general level of prices quoted in units of money. The magnitude of inflation—the inflation rate—is usually reported as the annualized percentage growth of some broad index of money prices. With U.S. dollar prices rising, a one-dollar bill buys less each year. Inflation thus […]| Econlib
Positive externalities are benefits that are infeasible to charge to provide; negative externalities are costs that are infeasible to charge to not provide. Ordinarily, as Adam Smith explained, selfishness leads markets to produce whatever people want; to get rich, you have to sell what the public is eager to buy. Externalities undermine the social benefits […]| Econlib
To most people, capital means a bank account, a hundred shares of IBM stock, assembly lines, or steel plants in the Chicago area. These are all forms of capital in the sense that they are assets that yield income and other useful outputs over long periods of time. But such tangible forms of capital are […]| Econlib
The Birth of the “Blues” In the 1930s and 1940s, a competitive market for health insurance developed in many places in the United States. Typically, premiums tended to reflect risks, and insurers aggressively monitored claims to keep costs down and prevent abuses. Following World War II, however, the market changed radically. Hospitals had created Blue […]| Econlib
Is Health Care Different? Health care is different from other goods and services: the health care product is ill-defined, the outcome of care is uncertain, large segments of the industry are dominated by nonprofit providers, and payments are made by third parties such as the government and private insurers. Many of these factors are present […]| Econlib
A worldwide depression struck countries with market economies at the end of the 1920s. Although the Great Depression was relatively mild in some countries, it was severe in others, particularly in the United States, where, at its nadir in 1933, 25 percent of all workers and 37 percent of all nonfarm workers were completely out […]| Econlib
In recent years, taxation has been one of the most prominent and controversial topics in economic policy. Taxation has been a principal issue in every presidential election since 1980—with a large tax cut as a winning issue in 1980, a pledge of “Read my lips: no new taxes” in the 1988 campaign, and a statement […]| Econlib
Social Security, or, to be precise, Old Age, Survivors and Disability Insurance (OASDI), is the U.S. government program that pays benefits to workers after retirement, to spouses and children of deceased workers, and to workers who become disabled before they retire. In 2003, the program had 47 million recipients, of whom 32.6 million were retired […]| Econlib
Saving means different things to different people. To some, it means putting money in the bank. To others, it means buying stocks or contributing to a pension plan. But to economists, saving means only one thing—consuming less out of a given amount of resources in the present in order to consume more in the future. […]| Econlib
Until the 1980s, property and liability insurance was a small cost of doing business. But the substantial expansion in what legally constitutes liability has greatly increased the cost of liability insurance for personal injuries. The plight of the U.S. private aircraft industry illustrates the extent of these liability costs. Although accident rates for general aviation […]| Econlib
Insurance plays a central role in the functioning of modern economies. Life insurance offers protection against the economic impact of an untimely death; health insurance covers the sometimes extraordinary costs of medical care; and bank deposits are insured by the federal government (see financial regulation). In each case, the insured pays a small premium in […]| Econlib
The growth of productivity—output per unit of input—is the fundamental determinant of the growth of a country’s material standard of living. The most commonly cited measures are output per worker and output per hour—measures of labor productivity. One cannot have sustained growth in output per person—the most general measure of a country’s material standard of […]| Econlib
On the topic of international trade, the views of economists tend to differ from those of the general public. There are three principal differences. First, many noneconomists believe that it is more advantageous to trade with other members of one’s nation or ethnic group than with outsiders. Economists see all forms of trade as equally […]| Econlib
The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it. The concept of unintended consequences is one […]| Econlib