U. of Chicago economics professor’s exam question sparks Twitter firestorm

Submitted ⁨⁨3⁩ ⁨years⁩ ago⁩ by ⁨Monarque@wolfballs.com⁩ to ⁨freeforum@wolfballs.com⁩

https://www.thecollegefix.com/u-of-chicago-economics-professors-exam-question-sparks-twitter-firestorm/

The question, which appeared on exam given by Senior Instructional Professor in Economics Allen Sanderson, took a dig at Vermont Sen. Bernie Sanders, a self-described socialist.

“An economist at the University of Massachusetts-Amherst, Bernie’s favorite institution of ‘higher education’, wrote an op-ed column on December 30 arguing that to tackle our current 40-year-high bout with rising price levels (an Econ 102 topic for sure) ‘we have a powerful weapon to fight inflation: price controls,’” Sanderson’s question read. “How would a real economist respond?”

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goldenballs@wolfballs.com ⁨3⁩ ⁨years⁩ ago
Twitter twatted it.

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sj_zero@lotide.fbxl.net ⁨3⁩ ⁨years⁩ ago
Frankly, it's obvious that price controls don't work. I laughed very hard when I saw them pushing price controls, because we know that they don't work.

We know that they don't work because they violate the fundamental law of economics. Supply and demand.

Ideally, prices should rise, and they should rise to the point where there isn't an oversupply of a thing and there isn't a lack of supply of a thing. Now, this relies on a whole bunch of different things including perfect markets and yada yada yada, but for fungible commodities it's more or less correct.

So what happens if you don't allow prices to rise? Two things. First of all shortages. You're going to have shortages because there's too much money in the system chasing a limited number of things, and so the number of dollars that it takes to buy a thing has to go up or there won't be any things left to buy. Second of all, black markets. In the event that there are no things to buy, and official channels are keeping prices low and therefore supply at essentially zero, unscrupulous actors will bypass official markets to sell these things at their actual price. If for example I can't get baby formula at the supermarket because there's none left, but a shady guy behind the supermarket offers to sell me baby formula for three times the price, it's pretty non-negotiable I'm going to go buy the baby formula for three times the price from the shady guy behind the supermarket.

We have evidence that this is the case. People have a bias towards the local. So Americans and Canadians and Europeans will look at their own countries for evidence of whatever they're talking about. The thing is, we already know what high inflation looks like. It exists in various countries in africa, it exists in South america, and what we see is exactly what I'm talking about. The government comes in and tries to control markets, and effectively it causes shortages which we see, and it causes black markets to form which we see.

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- goldenballs@wolfballs.com ⁨3⁩ ⁨years⁩ ago
  Did you also mention hoarding?
  
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