Free Trade and Prosperity offers the first full-scale defense of pro-free-trade policies with developing countries at its center. Arvind Panagariya, a professor at Columbia University and former top economic advisor to the government of India, supplies a historically informed analysis of many longstanding but flawed arguments for protection. He starts with an insightful overview of the positive case for free trade, and then closely examines the various contentions of protectionists. One protectionist argument is that “infant” industries need time to grow and become competitive, and thus should be sheltered. Other arguments are that emerging markets are especially prone to coordination failures, they are in need of diversification of their production structures, and they suffer from market imperfections. The panoply of protectionist arguments, including those for import substitution industrialization, fails when subject to close logical and empirical scrutiny.
This paper examines the impact of highway expansion on congestion. Because highway expansion lowers travel times, expanded highways attract additional vehicle traffic—so-called induced travel. The empirical evidence indicates that the magnitude of induced travel is economically significant. Some researchers find cases where, despite highway expansion, congestion changes very little owing to high levels of induced travel. These results suggest that costly highway expansion will increase access, which is beneficial to a community, but highway expansion is generally an inefficient solution to the high time costs of urban congestion. Instead, variable tolling of some or all lanes could manage traffic flows efficiently and reduce congestion.
My guest today is Matthew Curtis, founder of the startup Vice Lotteries. Vice Lotteries is a new startup that aims to challenge state governments’ legal monopolies over lotteries.
State lotteries are amazingly and bizarrely unethical. They drain billions of dollars out of communities, primarily poor ones. Lottery spending has increased substantially over the past decades, with the average lotto player spending $600 per year, and many spending significantly more than that.
Vice Lotteries aims to create a more ethical alternative to state lotteries, allowing people to have the fun of gambling without losing significant amounts of money. From the Vice Lotteries website:
Vice Lotteries was founded with one purpose: Allow our customers to enjoy gambling while saving money. With Vice Lotteries, you can enjoy the tremendous pleasure of tossing the dice without losing your ability to afford all the other things in life that you love.
However, it is currently illegal to run a private lottery. Before Vice Lotteries can start operating, they need to win one of the multiple lawsuits they are filing in state courts to challenge state lotteries.
The choice of college major is a key stage in the career search, and over a third of college students switch majors at least once. We provide the first comprehensive analysis of major switching, looking at the patterns of switching in both academic and non-academic dimensions. Low grades signal academic mismatch and predict switching majors – and the lower the grades, the larger the switch in terms of course content. Surprisingly, these switches do not improve students’ grades. When students switch majors, they switch to majors that “look like them”: females to female-heavy majors, and so on. Lower-ability women flee competitive majors at high rates, while men and higher-ability women are undeterred. Women are far more likely to leave STEM fields for majors that are less competitive – but still somewhat science-intensive – suggesting that leaving STEM may be more about fleeing the “culture” of STEM majors than fleeing science and math.
The United States suffers from a shortage of well-placed homes. This was true even at the peak of the housing boom in 2005. Using a broad array of evidence on housing inflation, income, migration, homeownership trends, and international comparisons, Shut Out demonstrates that high home prices have been largely caused by the constrained housing supply in a handful of magnet cities leading the new economy.
The same phenomenon is occurring in leading countries across the globe. Gentrifying cities have become exclusionary bastions in the new postindustrial economy. The US housing bubble that peaked in 2005 is more accurately described as a refugee crisis than a credit bubble. Surging demand for limited urban housing triggered a spike of migration away from the magnet cities among households with moderate and lower incomes who could no longer afford to remain, causing a brief contagion of high prices in the cities where the migrants moved.
Today’s guest on Economics Detective Radio is Anja Shortland of King’s College London, discussing her new book Kidnap: Inside the Ransom Business, where she brings an economist’s perspective to the shady world of the kidnapping for ransom business and to the professionals who specialize in getting hostages home safely. The book’s description reads as follows:
Kidnap for ransom is a lucrative but tricky business. Millions of people live, travel, and work in areas with significant kidnap risks, yet kidnaps of foreign workers, local VIPs, and tourists are surprisingly rare and the vast majority of abductions are peacefully resolved – often for remarkably low ransoms. In fact, the market for hostages is so well ordered that the crime is insurable. This is a puzzle: ransoming a hostage is the world’s most precarious trade. What would be the “right” price for your loved one – and can you avoid putting others at risk by paying it? What prevents criminals from maltreating hostages? How do you (safely) pay a ransom? And why would kidnappers release a potential future witness after receiving their money?
Kidnap: Inside the Ransom Business uncovers how a group of insurers at Lloyd’s of London have solved these thorny problems for their customers. Based on interviews with industry insiders (from both sides), as well as hostage stakeholders, it uncovers an intricate and powerful private governance system ordering transactions between the legal and the criminal economies.
Mark Thornton returns to the podcast to discuss his new book The Skyscraper Curse (available digitally for free). The book discusses the connection between record-setting skyscrapers and economic recessions. Here’s an excerpt from the book’s introduction:
The Skyscraper Index expresses the strange relationship between the building of the world’s tallest skyscraper and the onset of a major economic crisis. This relationship only came to light in 1999 when research analyst Andrew Lawrence published a report noting the odd connection between record-height buildings and noteworthy economic crises — that is, the skyscraper curse, a relationship that dated back nearly a century. Without a theory to support it, journalists largely dismissed Lawrence’s report as the fun story of the day.
Mark relates these skyscrapers to the Austrian Business Cycle Theory (ABCT). He shows how record-setting skyscrapers and recessions can be caused by a common factor: excessively cheap credit. We discuss this theory in the interview.
Many economists have analyzed the efficiency of a volunteered army relative to a conscripted army. However, they have rarely studied the working of real-world alternative, market-based, military institutions where military obligations are traded among the citizens. This paper fills this gap by studying the rise and fall of the Remplacement Militaire in 18th and 19th century France. This system endured for more than three-quarters of a century until the French government progressively moved toward universal conscription after 1872. We explain why, as the proportion of men drafted increased, the State systematically restricted the trade of military obligations.