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Category Archives: Specialization and Trade Economics Intro
Kirzner vs. Samuelson
David Glasner writes, In Kirzner’s view, the divergence between Mises and Hayek on the one hand and the neoclassical mainstream on the other was that Mises and Hayek went further in developing the subjectivist paradigm underlying the marginal-utility theory of … Continue reading
Non-marketable Outputs and Executive Compensation
I have suggested that one can think of firms as taking marketable inputs and producing non-marketable outputs. These non-marketable outputs ultimately contribute to marketable outputs. It is the non-marketable outputs that bind the firm together. If instead all outputs were … Continue reading
Non-marketable Outputs
A non-marketable output is something that has relatively little value outside of one firm. One company’s tax return won’t help any other firm file its return. A half-finished Chevy is not of much use to Toyota. 1. I claim that … Continue reading
The Computer as Economic Metaphor
Cesar Hidalgo says, So countries with a lot of trust and good institutions can create very complex computers that are able to process large volumes of information and create complex products that are rare and have a big premium on … Continue reading
More Essential Hayek
Again, the book will be released next week. Another point Boudreaux makes is that in a specialized economy, our production activities are much narrower than our consumption activities. This makes rent-seeking more prevalent on the production side. This point is … Continue reading
When Marginal Product is Undefined
In an Alchian-Demsetz firm, marginal product is not defined. Think of a business that has exactly one full-time tax accountant (TA). In a sense, the marginal product of the TA is zero, since the TA contributes zero output. On the … Continue reading
Don Boudreaux on The Essential Hayek
It is a project for Canada’s Fraser Institute. It will launch next week. Boudreaux starts with a “nobody knows how to” introduction. He uses paper and ink as examples of mundane goods that require many different people and specialized tasks … Continue reading
Alchian and Demsetz on Specialization and Firms
A reader pointed me to their classic paper, which is exactly on point. there is a source of gain from cooperative activity involving working as a team, wherein individual cooperating inputs do not yield identifiable, separate products which can be … Continue reading
Specialization, Bilateral Monopoly, and Firms
A bilateral monopoly is when there is one buyer and one seller. When the first IBM PC was introduced, there was one buyer for Microsoft’s operating system (DOS) and one seller. However, IBM allowed other companies to make “clones,” with … Continue reading
Specialization, Externality, and Firms
Suppose that a production process is divided into tasks. Think of Adam Smith’s example of a pin factory, or think of a software application developed by many people. It is unlikely that this process will be coordinated by decentralized market … Continue reading