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Nombre: Alba Luz Llanos Medrano
Internacional Bussisnes

Chapter 1 begins with an interesting discussion of coffee shop location
and urban rent that applies David Ricardo’s well-established theory of
rent in interesting ways that readers are likely to find informative. Harford’s
discussion of the Green Belt’s relation to London rents is reminiscent
of Bernard Siegan’s analysis of theeffects of environmental protections
on land rents in California during the 1970s. Artificially imposed
scarcity changes rent at the margin by altering existing scarcity parameters.
From this insight, it is easy for an economist to search for such
restrictions everywhere and, when found, to isolate the winners and
losers. Better public understanding of the distributional effects created
byimposing artificial scarcity, in whatever form, might well dampen voter
enthusiasm for such policies in the future. By explaining the generally
overlooked wealth redistribution effects of such policies to his readers,
Harford performs a valuable service.
Chapter 2 discusses marketing in modern supermarkets and begins
with a discussion of how businesses try to segment their customers to
increaseoverall revenues through price discrimination. Supermarkets are
prime examples since they sell a variety of labels and quality and are
always seeking ways to get price-insensitive customers to pay more
through self-identification. One way is to offer so-called organic brands
that tout their environmentally friendly production process. “Free range”
meats are also popular asself-identifiers, being the supermarket equivalent
of “fair trade coffee” at Starbucks. Harford finds these tactics examples
of price gouging and, after digesting his analysis, readers might
well be inclined to agree with him. Harford sees price discrimination as
both good and bad depending on the context, and cites several interesting
examples that lead him to this conclusion.
Chapter 3introduces readers to perfectly competitive markets or, as
Harford calls them, the “world of truth,” since money prices in perfectly
competitive markets tell the precise truth about the opportunity costs of
all choices. All this is true as far as it goes, but the chapter ventures into
some unsettling avenues when Harford begins discussing “fairness issues.”
Implicit in his analysis (“. . . can anysituation that leads to highly
unequal distribution of cash be considered fair?” p. 75) is the assumption
that egalitarianism applied to wealth is correct and that, somehow, economists
or others with a social engineering bent can use policy—lump sum
taxes, for example—to adjust the “game” of perfect competition so that
it still generates efficient outcomes while maintaining equality ofinitial
starting positions. Harford advocates, in theory, a tax on people like Tiger
Woods—say a “few million”—and declares it fair and efficient because he
has unfair talent to make money relative to all the less gifted among us,
and the tax cannot be avoided so will not deprive Tiger of his manner of
earning money. (This tax, if enacted, would have to be a great deal more
than a few million atthis point because Woods is on track to become the
world’s first billionaire tour professional, and quite soon.)
But such a scheme is impractical, so Harford tweaks things a bit by
advocating subsidies (cash) rather than tweaking tax rates or offering
in-kind welfare. He uses the example of elderly pensioners in Britain
where, he asserts, 25,000 seniors die each year from exposure to cold. Ifthis is true, it is an appalling statistic. What to do? Just give them money.
All the real world complications of bureaucracy, entitlement legislation
and means testing are nowhere to be found in his analysis. He finishes
this chapter by appealing to perfect competition as a moral norm while
decrying deviations from it as “market failure.” In my regulation classes,
students are often...
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