[[{“value”:”From Steve Landsburg in the WSJ: Here’s an economics brain teaser: Apples are provided by a competitive industry. Pears are provided by a monopolist. Coincidentally, they sell at the same price. You’re hungry and would be equally happy with an apple or a pear. If you care about conserving societal resources, which should you buy?
The post What aspiring economists aren’t being taught appeared first on Marginal REVOLUTION.”}]]
From Steve Landsburg in the WSJ:
Here’s an economics brain teaser: Apples are provided by a competitive industry. Pears are provided by a monopolist. Coincidentally, they sell at the same price. You’re hungry and would be equally happy with an apple or a pear. If you care about conserving societal resources, which should you buy?
Most of my sophomore-level economics students can solve this problem, which I posed on an exam. Almost nobody else can. I’ve tried it out on a lot of smart lawyers, accountants, entrepreneurs and scientists. Neither can the latest version of ChatGPT.
First I’ll tell you the answer; then I’ll tell you the moral. In a competitive industry, prices are a pretty good indicator of resource costs. Under a monopoly, prices usually reflect a substantial markup. So a $1 apple sold by a competitor probably requires almost a dollar’s worth of resources to produce. A $1 pear sold by a monopolist is more likely to require, say, 80 cents worth of resources. To minimize resource consumption, you should buy the pear.
Agree or not? The entire piece is of interest. Ben Golub is upset, but for an economist at Northwestern he doesn’t have much of an argument, as Robin Hanson points out. Which is in fact the best argument against Landsburg’s claim?
The post What aspiring economists aren’t being taught appeared first on Marginal REVOLUTION.
Economics
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