Economists From The United States

"For consumers, the price message is clear: economize on goods that are in short supply relative to demand, and splurge on those in ample supply: eat raspberries in summer, and ski in winter. But the accommodating is not done just by consumers: resorts in the Caribbean are much cheaper in July than in January, precisely because people are not so eager to vacation in hot, humid places."

"Lacking education, lacking a tenacity of purpose, lacking a willingness to work hard, he will not be an object of employers' competition. What leader of Negro thought is fostering the ancient virtues of diligence and honesty and loyalty? It is so much easier to seek quotas for Negroes?"

"Unexpected changes, on the contrary, lead to windfall gains or losses for those who are in the right or wrong places at a given time."

"Economic theories are infinitely diverse in their predictive power. Entirely too many have zero predictive power-they are statements of tautologies. Thus the statement that to maximize profits one should operate a firm where marginal revenue equals marginal cost is a mere mathematical statement of the condition for a maximum. The example we gave of search theory is not a tautology because we can identify the factors that influence costs and returns.· Some theories have negative power: they predict the opposite of what happens (and then become useful in the hands of a sophisticated user)."

"The essence of scientific progress is to edge up this ladder from ignorance to knowledge, and it is complicated by the fact that the ladder keeps getting longer!"

"The user of a theory has a simpler task: his not to reason why, his but to sigh and try. If the right element in the diverse situations has been isolated, the theory will work: it will yield predictions better than those which can be reached with any alternative theory."

"A modern economic system is of extraordinary complexity. Imagine a three-dimensional jigsaw puzzle, consisting of roughly 100 million parts. Some parts touch against, let us say, 1,000 other parts. (That is, each family deals at one time or another with that many employers, banks, retail stores, domestic servants, and so on.) Other parts touch—let us be conservative—50,000 other parts (firms that sell to retailers and buy from other firms and hire laborers and so on). It would be enough of a task to fit these 100 million pieces together, but the real difficulties have yet to be mentioned. The pieces change shape quite often—a family has twins; a firm does the next best thing and invents a new product. The economist has the interesting task of predicting (in the aggregate) each of these movements. Meanwhile a busy set of people—congressmen, members of regulatory bodies, central bankers, and the like—are changing the rules on who or what the jigsaw pieces will be and how they are shaped. And of course there are other jigsaw puzzles (foreign economies) of comparable complexity, and these other puzzles are connected at literally a million points with our puzzle."

"Prices instruct us on what people desire, but prices do not tell us why those things are desired. Our desires are accepted as a datum by economists: desires are some amalgam of biological needs, the cultural values of the society in which we grow up, and our own experiments."

"Consider the Negro as a neighbor. He is frequently repelled and avoided by the white man, but is it only color prejudice? On the contrary, it is because the Negro family is, on average, a loose, morally lax group, and brings with its presence a rapid rise in crime and vandalism. No statutes, no sermons, no demonstrations, will obtain for the Negro the liking and respect that sober virtues commend. And the leaders of Negro thought: they blame the crime and immorality upon the slums and the low income—as if individual responsibility could be bought with a thousand dollars a year."

"A rational man must be guided by the incentive system within which he operates. No matter what his own personal desires, he must be discouraged from certain activities if they carry penalties and attracted toward others if they carry large rewards. The carrot and the stick guide scientists and politicians as well as donkeys."

"Whether one is a conservative or a radical, a protectionist or a free trader, a cosmopolitan or a nationalist, a churchman or a heathen, it is useful to know the causes and consequences of economic phenomena."

"Economists are neither distinctively good nor bad, no more or less virtuous or brave or generous or faithful than the sum of mankind, and certainly no more modest."

"Footnotes are not an occasional token of respect for an obsolete and purposeless tradition. It will come as a shock to many, I am sure, even to realize that references can be checked."

"And anyway, although a fancy theory is not so good as a simple one (more things can go wrong with the fancy one), a fancy theory is better than none. Let the reader try to contrive an alternative explanation of the fact that prices of washing machines vary relatively more than prices of automobiles. He may come up with a rule such as the more expensive the commodity, the less its price varies, which seems to fit our facts-in fact, it makes the same prediction. But quite aside from the fact that it has no logical basis, this alternative explanation will often be wrong: the price of sugar varies much less than that of tea, although sugar costs less per pound. This is not a contradiction of our theory, which in a fuller version says that the aggregate amount spent on a commodity governs the amount of search."

"Capitalism must be regarded as an economy of unpaid costs, ‘unpaid’ in so far as a substantial portion of the actual costs of production remains unaccounted for in entrepreneurial outlays; instead they are shifted to, and ultimately borne by, third persons or by the community as a whole."

"K. William Kapp's book "The Social Costs of Private Enterprise" was one of the first economic treatise that called attention to the ecological and social external costs of the market economy. His book is considered one of the origins of and a foundation for ecological economics."

"They (social costs) are damages or diseconomies sustained by the economy in general, which under different institutional conditions could be avoided. [. . .] if these costs were inevitable under any kind of institutional arrangement they would not really present a special theoretical problem. [. . .] to reveal their origin, the study of social costs must always be an institutional analysis. Such an analysis raises inevitably the question of institutional reform and policy."

"Had there been a computer in 1872... it would probably have predicted that there would be so many horse-drawn vehicles that it would be impossible to clear up all the manure."

"Social costs... are all direct and indirect losses sustained by third persons or the general public as a result of unrestrained economic activities."

"To ignore social costs because they require an evaluation by society... and to leave social losses out of account because they are 'external' and 'non-economic' in character, would be equivalent to attributing no or ‘zero’ value to all social damages which is no less arbitrary and subjective a judgement than any positive or negative evaluation of social costs."

"Whenever social costs are shifted onto economically and politically weaker sections of society without compensation, a redistribution of the costs of production, hence real income is involved."

"If it makes sense to transfer income from rich to poor people within a generation, why shouldn't we transfer income from rich to poor generations?"

"Some argue that an income tax is unfair because it taxes capital income twice: once when the original income is earned, and again when the investment produces a return."

"A second justification for corporate taxation is that the corporation receives a number of special privileges from society, the most important of which is limited liability of the stockholders. The corporation tax can be viewed as a user fee for this benefit."

"Why should the central government be in the business of giving unconditional grants to states and localities? The usual response is that such grants can equalize the income distribution. It is not clear that this argument stands up under scrutiny. Even if a goal of public policy is to help poor people, it does not follow that the best way to do so is to help poor communities. After all, the chances that a community with a low average income will probably have some relatively rich members and vice versa. If the goal is to help the poor, why not give them the money directly?"

"The mere ability to postpone taxes may not seem all that important, but its consequences are enormous."

"During the 1980's, the top statutory marginal income tax rate in the United States fell from 70 percent to 28 percent."

"Public decision making is complicated and not well understood. Contrary to simple methods of democracy, there appear to be forces pulling government expenditures away from levels that would be preferred by the median voter."

"From a theoretical point of view, lifetime income would be ideal, but the practical problems in estimating it are enormous."

"Government grows because low-income individuals use the political system to redistribute income toward themselves."

"Plato argued that in a good society the ratio of the richest to the poorest person's income should be at the most four to one."

"It must be emphasized that free ridership is not a fact; it is an implication of the hypothesis that people maximize a utility function that depends only on their own consumption of goods."

"Dioxin is the outcome of the operations of markets. Does this mean that having dioxin in the environment is efficient?"

""Welfare" in the United States is a patchwork of more than 80 programs that provide benefits primarily to low-income individuals. These programs are means tested - only individuals whose financial resources fall below a certain level can receive benefits."

"Government is essentially a big computer that elicits from citizens their preferences and uses this information to produce social decisions."

"Only empirical work - analysis based on observation and experience as opposed to theory - can answer the question of how labor force behavior is affected by changes in the tax system. Even intense armchair speculation on this matter must be regarded with considerable skepticism."

"It may be worthwhile to spend a few million dollars to determine the efficacy of program that would involve spending billions of dollars."

"In this country, the number of individuals on the government payroll certainly underestimates the importance of government."

"A social welfare function is simply a statement of how society's well-being relates to the well- being of its members."

"The First Welfare Theorem holds only if all consumers and firms are price takers. If some individuals or firms are price makers (they have the power to affect prices), then the allocation of resources will generally be inefficient."

"In an experiment in Illinois, members of a randomly selected group of unemployed individuals were offered a bonus of $500 if they found a job within 11 weeks and kept that job for four months. On average, people who were offered the bonus received UI for one week less than the control group, and the program saved more on UI benefits than it spent on bonuses."

"Peoples views on how the government should conduct its financial operations are heavily influenced by their political philosophies."

"Before becoming governor, Nelson Rockefeller offered to buy the Dodgers to keep them in New York."

"Baseball performance is an outcome of opposing forces."

"Consider for instance, the facts that Jose Canseco was picked in the fifteenth round of the amateur draft, Roger Clemens the twelfth, Ryne Sandberg the twentieth, and Nolan Ryan the tenth."

"The first baseball game ever televised was a battle for fourth place in the Ivy League between Columbia and Princeton on May 17, 1939."

"It is well to recall that in 112 years of major league baseball, there has been only one bankruptcy filing."

"While Babe Ruth's $80,000 in 1930 was eighty times the average U.S. income, Don Mattingly's $3.4 million in 1991 was 160 times the average."

"Baseball's popularity and, more so, it's revenues continue to increase."

"How is it that the average CEO in Japan receives an annual income of $300,000 while the average CEO in the United States earns $2.8 million?"