The world is rife with principal-agent problems, and society suffers greatly as a result. What economists describe as principal-agent problems is roughly what the general public calls conflicts of interest, though the problems are broader in scope. Last week, clients…
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Next Fed chair: Academic, practitioner or both?
Which is more important, education or experience? This question arose this week in the Senate grilling of John Roberts, the president’s nominee to replace the late Chief Justice William Rehnquist. Did Roberts’ lack of experience with Congress, for example, make…
New Orleans culture has always been different
In many ways, New Orleans is a Third World city that accidentally ended up in the United States. A little history helps explain why events evolved as they did in recent weeks and how that evolution might continue as the…
How much can we really do to minimize disaster costs?
Nearly all of us will bear some of the cost of Hurricane Katrina’s destruction, so we all have a stake in minimizing future disasters. This isn’t as easy as it may sound. Decisions on how we spend now to reduce…
When labor grows faster than capital
Sometimes, economic forces sneak upon us, involving things so familiar or that develop so gradually, we ignore them. We attribute change to symptoms rather than the underlying forces themselves. This is occurring now, as “globalization” imposes difficult economic adjustments. People…
In wake of natural disaster, economic engine will restart
As the human and economic tolls from Hurricane Katrina continue to rise, it is becoming clear that this will be one of the worst national disasters in U.S. history. The human losses are the greatest cost of the storm, but…
What’s a hike in the woods worth to you?
Estimating values of “goods” that are never sold is difficult. Take, for example, the new U.S. Forest Service re-estimate of the recreational value of national forests, which dropped to $11 billion from $111 billion, a huge revision. Critics in conservation…
Safety is a legitimate issue
The mechanics strike at Northwest Airlines raises important economic questions: What role should government play in airplane safety? How can we maintain safety as airlines perform less maintenance themselves and contract more out, even to shops in other countries? Regardless…
Gasoline demand won’t fall overnight
When gasoline prices increase so much, why don’t the amounts purchased fall accordingly? Economists hear that question a lot. After all, we teach students that demand is an inverse relationship between price and quantity. At low prices, people typically buy…
A strike is a rarity these days
Threats of strikes at two major Minnesota employers raise issues about the role of labor unions and work stoppages in an economy. Qwest settled with its union on a new three-year contract, but the outcome of Northwest Airlines’ dispute with…