Government Externalities and the Friedman Criterion

"Our principles offer no hard and fast line how far it is appropriate to use government to accomplish jointly what is difficult or impossible for us to accomplish separately through strictly voluntary exchange. In any particular case of proposed intervention, we must make up a balance sheet, listing separately the advantages and disadvantages. Our principles tell us what items to put on one side and what items on the other and they give us some basis for attaching importance to the different items. In particular, we shall always want to enter on the liability side of any proposed government intervention, its neighborhood effects in threatening freedom, and give this effect considerable weight."

Pierre Lemieux, Econlib, July 2022

Why Studying Economics Requires Curiosity

"Gratitude may be a result of studying economics, but what antecedents undergird enriching encounters with economics?

To my mind, the preeminent intellectual antecedent is curiosity."

"To be a successful student of economics, therefore, one must come ready to understand the world—not to judge it. My experience with teaching Econ 101 suggests that “judging” is the single most relevant barrier to understanding"

Caleb S. Fuller, AIER, July 11, 2022

Peloton to Stop Making Bikes Itself

"Peloton Interactive Inc. PTON 2.41%▲ will outsource all manufacturing of its stationary bikes and treadmills as the money-losing maker of connected fitness equipment races to overhaul its business model."

Sharon Terlep, WSJ, July 2020.

D0 economies of scale, specialized investments, and contracting costs suggest that outsourcing or in-sourcing is the best way to acquire bikes and treadmills?

It’s Time to Streamline the Hiring Process

The piece discusses the importance of information flows, decision rights, and incentives in the hiring process. 

Atta Tarki, Tyler Cowen, Alexandra Ham, HBR, July 2022

"Here are few measures you can take to nudge your organization in the right direction.

1. Reduce the number of interviewers in your process. If you have more than four or five interviewers, chances are that the costs associated with the additional complexity in your process have exceeded the benefits they produce.
2. Be explicit about whose decision it is. Steer your organizational culture away from a consensus-oriented approach. Instead, for each role make it explicit whose decision it is, who else might have veto power, and that other interviewers should not be offended if a candidate is hired despite not getting their approval. And then keep repeating this message until most of your colleagues adapt to this new approach.
3. Ask interviewers to use numerical ratings when evaluating candidates. We’ve experienced that doing so helps hiring committees focus on the holistic view rather than on one-off negative comments. Having interviewers submit their ratings before getting input from their colleagues will have the further benefit of reducing the chance of groupthink in your evaluations.
4. Remove the “Dr. Deaths” from your hiring committee. Track which interviewers turn down the most candidates, and if they are not better at picking good hires, communicate with them that they will be removed from the hiring committee if they don’t correct their behavior.
5. Change your culture to reward those who spot great hires, not penalizing those who end up with an occasional poor performer. You can further do this by emphasizing the difference between good decisions and good outcomes. Sometimes a fully logical bet will result in a poor outcome. If needs be, call out those spreading negativism.

"Changing your company’s consensus-oriented hiring culture will not be easy. But the steps listed above can help you gain an edge in your industry by hiring highly productive employees that are overlooked by your competitors."

Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?

"Our key conclusions are as follows: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults and the less educated; (iii) the evidence from studies of directly affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided."

David Neumark,Peter Shirley, Industrial Relations, April 2022

St. Paul’s Rent-Control Backfire

"“If your costs of doing business are going through the roof but your cap is 3% forever, that’s an equation for losing business,” says Donna Hanbery, an attorney who has represented residential property owners and managers in the St. Paul area for some 45 years.

St. Paul’s rent control creates an incentive for developers to build luxury apartments to recoup their construction costs. But builders are also opting to leave St. Paul."

From WSJ, July 2022.