Measuring prices and their rate of change accurately is central to almost every economic issue, from the conduct of monetary policy to measuring economic progress (see economic growth) over time and across countries to the cost and structure of indexed government spending programs and taxes. Most of us are familiar with the prices of many […]| 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
To economists, efficiency is a relationship between ends and means. When we call a situation inefficient, we are claiming that we could achieve the desired ends with less means, or that the means employed could produce more of the ends desired. “Less” and “more” in this context necessarily refer to less and more value. Thus, […]| 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 earth’s natural resources are finite, which means that if we use them continuously, we will eventually exhaust them. This basic observation is undeniable. But another way of looking at the issue is far more relevant to assessing people’s well-being. Our exhaustible and unreproducible natural resources, if measured in terms of their prospective contribution to […]| Econlib
Compound Rates of Growth In the modern version of an old legend, an investment banker asks to be paid by placing one penny on the first square of a chessboard, two pennies on the second square, four on the third, etc. If the banker had asked that only the white squares be used, the initial […]| Econlib
There are many different measures of environmental quality, and most of those in use show that environmental quality is improving. For example, from 1970 to 2000, concentrations of carbon monoxide, a pollutant, fell by 75 percent in the United States and by 95 percent in the United Kingdom. From 1975 to 2000, nitrogen oxides declined […]| Econlib
Investment is one of the most important variables in economics. On its back, humans have ridden from caves to skyscrapers. Its surges and collapses are still a primary cause of recessions. Indeed, as can be seen in Figure 1, investment has dropped sharply during almost every postwar U.S. recession. As the graph suggests, one cannot […]| Econlib
The Internet and Economics “The Internet changes everything”—or so we were told at the height of the Internet craze. According to a prominent Wall Street Journal article titled “Goodbye Supply and Demand,” one of the changes it was claimed to have brought about was a transformation of the basic economic forces at work in the […]| Econlib