Some key takeaways: 1. President Richard Nixon, 1970s, 90-day price and wage freeze to fight inflation. Milton Friedman, 'One of those plausible schemes with very pleasing commencement that have shameful conclusions'. 2. Price ceiling - Maximum price for a specific good or service 3. Price floor - Minimum price in a specific market. Keeping price artificially high and not allowing price to fall to equilibrium. 4. In terms of helping consumers and producers, price controls are counter-productive. However minimum wage is a better solution. 5. Economists generally agree that rent control results in reduced quantity and quality of housing that is available. 6. A subsidy is a government payment given to individuals, organizations or businesses to offset costs to advance a specific public goal.
Subsidies (especially farming subsidies) have another negative aspect. Let's look at Burkina Faso. One time, Burkina Faso was leading the world's cotton production. The price was low, the quality was great. Naturally, their cotton was bought. US cotton farmers were not able to produce cotton as good as the cotton from Burkina Faso. So they called for subsidies and they got subsidies. That distorted the market: US cotton was far more cheaper and the Burkina Faso cotton was not bought anymore. The Burkina Faso cotton industry got destroyed even when they made better cotton. Burkina Faso was in the WTO and the WTO ruled, that the US subsidies were illegal but that was no problem for the US. So: Subsidies have the ability to destroy developing markets.
+Johny Bänger That's a good point. It all depends really. Nothing can really be said for sure. No policy is 'good' or 'bad', it just depends on the situation.
+Johny Bänger Well, that's the problem with a globalized market-- it drives the US towards poverty as other countries soak up our loss in wealth. Also, volatility is always going to be a risk when you have one customer. Further also, it's difficult for me to care that the US chose to support it's people than a foreign economy.
CW AtWork A globalized market is a wonderful thing. International interdependencies are build up that insures peace. Shortages in one nation can be compensated through import. It is highly efficient. It's the hypocrisy that upsets me. They tell developing countries to open their markets (what is a good thing, when they play by the rules) to export in those countries. But they only want the positive aspects of globalization. Of course some other country can be more efficient in production but instead of working to compensate the disadvantage, they call for subsidies. The problem is that small, developing countries can't do that. The US is always for capitalism and free trade but once the negative aspects affect them, they call for the help of the government. Furthermore this is an issue of international security. Terrorists and civil wars are created by bad economy situations. When the western world destroys developing markets with their subsidies it is likely that those countries turn rogue. And that affects the western world.
CW AtWork yes, corporations profit from it. And the people that work there and earn their money. And their families. And the people that own the shops where they spend the money. A lot of people that live in the US profit from globalization. They can effort much more things. They have a way higher living standard.
I always love crash course lessons, and they are very well rounded for the most part, which is why I feel I should point out something that I felt missing in this video. In the context of developed countries, especially the US, it may be true that farmers are well-off and gov. subsidies may not be required. But it should be pointed out that this is definitely not the general case. I think, in most developed countries, farmers are not rich and aren't well protected by the government. In fact, in a country like India, with a population of almost 1.3 billion, we are heavily dependent on our very few numbers of farmers to provide for such a big number of people. On top of this huge demand, most farmers here are not highly educated (a consequence of many factors), and are therefore not able to upgrade to the latest techniques or don't know how to deal with situations such as water shortages which leads to crop failure and shortage of supply. They don't how to deal with their crops getting infected, or properly treat and take care of their soil. So without government intervention, our farmers would be at a loss :(
+David Williams Depends on what agricultural production is produced. Milk in UK is so cheap because the supermarkets have squeezed milk so farmers go broke. New Zealand produces a lot of sheep which is largely exported; which helps the economy.
+Duck Man There can be other factors in play in the UK. If you can import milk from a country that can produce milk at a lower cost while the UK economy is less efficient that would cause many farmers to go broke. Again subsidies create incentives for less efficient farming.
***** I don't quite follow you. US farms currently are required to sell their food at a loss to the federal government for school lunches etc. It was a supreme court case on Raisins last year that over turned that. There are so many ways that the government restricts supply to artificially boost to which hurts both suppliers and the consumers. Farmers were asked raisin farmers to buy their own crop. th-cam.com/video/A8S4S49TyDk/w-d-xo.html
***** So when has that happened? Long term food shortages after a disaster? After a disaster Walmart does a much better providing food and necessities that occur due to shortages. i think there should be emergency assistance for people to buy food. But it is totally clear that Walmart and other large retailers do a better job at getting food to the people the affected after a national disaster. What your plan is, is not as simple as you make it out to be. First what price are you going to pay farmers? Which farmers will you buy the food from? What food will you buy? Where is the food going to be held in reserve? Then how is the food going to be distributed? All of that costs money, money that could be used to help the poor. Instead of creating an alternative distribution network just allow Walmart to do what they do best and allow the money to go where it's needed most to the individuals themselves. Allow which allows the victims to choose what food is right for them instead of the government. All things being equal the simplest solution is the best.
+jakuara kamak There are lots of reasons the Venezuelan economy is doing terribly at the moment (eg. crazy low oil price), and somehow I don't think price controls are the most significant factor. Also, imagine what it might have been like over the past year or more without price controls.. If the majority of the population became unable to afford essentials, you might have major civil unrest on your hands (or other longer term problems, like health impacts for the population), which could be another drag on the economy in its own right. The real world is far more complex than these simplistic economic theories.
+Gareth Ham No, low oil prices aren't the problem. The problem was that the government decided to stop any type of exportation except oil because of the oil buoyancy and when it stopped we got screwed. Add that to price control and exchange control (producers cannot produce because they lose money and we can't get external money because the government controls that, which also is a way to steal money) with no savings whatsoever (a waste of money when it could have been used to invest on national production and infrastructure) and extreme corruption and you get the exact reason why we are so bad. Is ridiculous to say that low oil prices are the cause when we got our best moment of economy and progress (1948-1958) when the oil price was at 2$. in other words: these "simplistic economic theories" explains perfectly why we are so bad, or are you a follower of the current minister of economy who says that "inflation doesn't exist" and thus try to search for "the fifth paw of the cat"?
+Gareth Ham Price controls don't have to be disastrous if they are set effectively. In Venezuela they priced products far below the cost of production causing domestic producers to stop producing. They also had a massively overvalued official exchange rate which made imports cheap and their exports uncompetitive. The result of these measures was a greater dependence on imports and a near total dependence on oil as a source of foreign exchange. At the very least they should unify and float the exchange rate (eliminating arbitrage opportunities), restructure the price controls on essential goods to fair prices (with an appropriate profit margin for producers), eliminate an assortment of energy subsidies (cheap petrol etc) and institute some sort of universal basic income or negative income tax to distribute the nation's oil wealth and reduce poverty.
MicroLabrat123 No, what should be done is stop the pricing control and start subsiding the industry and eliminate the control exchange so external money can enter into the country, also start exporting more than just oil among other things.
I remember my high school economics teacher telling us about when he was a kid, he and his friends had a farm that they got just for collecting subsidies not to plant anything.
It's quite sad that my country, Venezuela, is only mentioned to talk about how badly we fucked it up. And yes, it's worse than they said. For reference: an iPad mini is around 30 months worth of work at around minimum wage.
+Christian Weibrecht Which neighbors? Colombia? I am unsure because i haven't been there, but people are leaving the country and Bogota is a popular destination, with the borders closed it's now more expensive to get there but people still finds a way.
+Nihar Baijal The Venezuelan governments imposes a three-tier currency exchange (they declare what US dollars costs in the national currency, this was mentioned in a previous episode of Crashcourse IIRC) instead of letting the markets dictate the price. The price of the dollar in the "black market" is around 140x times greater than the lowest official rate. The monthly minimum salary in Venezuela based on the black market dollar is less than $12. The UN definition of extreme poverty is a family income of less than $1 per day. I think this is one big reason (the other is corruption) Venezuela keeps the low official exchange rate.
+RapiBurrito It also has one of the highest crime rates in the world AFAIK, and high corruption, in part driven by crime and gangs. The place has rolled back a lot. What happened over the last 5 years? :(
The takeaway is: The real world is complicated and doesn't perfectly obey simplified models in textbooks. While price floors, ceilings and subsidies are usually a bad idea, occasionally they aren't.
+Vectored Thrust Simple models found in economics 101 courses (like this one) certainly don't model anything of significance -- instead, they help students understand some basic concepts. In the real world of economics, however, different situations call for different models, so economists are constantly constructing new mathematical models depending on the situation. These models help us to better understand the social world. I like to think of economics as a hybrid between sociology and applied mathematics.
+Zero Sum Game I know it sounds like I'm stating the obvious, but try telling that to a hardline libertarian, or for that matter try to a hardline centrally-planned communist (I run into libertarians more often on the Internet). They can't seem to grasp this idea that their ideal worlds are not as ideal as they envision. This is why nearly all economies today aren't on either end of the extreme, they're somewhere on a spectrum
What if price controls are used to cap the prices of goods which have artificially high prices. Like pharmaceuticals which sell on 2000% profits. Their demand hardly goes down so market can't bob the price.
While you might not see a shortage in the specific drug, you will see fewer resources going into researching pharmaceuticals. In that case, you'll have a shortage of new drugs.
Brantley Straub or better, abolish patents so they don't have a monopoly. The fact that they need a patent to beable to make a profit out of discovering new drugs, means the cost to discover the new drug exceed the benefits society as a whole get out of discovering that new drug.
Pharmacare. Some people view it as a public good like fire and police. A healthy public had positive externalities. I still find something funny in america - public k-12 education is a public good and lauded, but go to 13th grade + (college) and its evil socialism to some. ?!!
I always figured that Rent Controls would help protect people from potentially Unreasonable price increases on the places they are currently living, since it is difficult and expensive to have to uproot yourself yearly. So it is a protection against unethical landlords. Kind of gets into something of a Monopoly type of situation, or at least similar. The other issue is that what if your only employment is in NYC, but then you can't afford to live there due to price increases? I have friends in Toronto who find that the city is the only place where there is sufficient population to support their type of work, even though the businesses are still unwilling to pay a wage appropriate to actually living in Toronto. But people are desperate, so they just scrape by.
+David Learmonth yes it is very simplified and dont take into account other factors like lets say in europ there is a lot of big cities with regulations saying you aint allowed to build higher then 4 floors, and thereby putting a natural cap to the amount of apartments posibel to build esp. in cities like tokyo or other cities that is cramed in between a mounten range and the osian and thereby there simply aint any way to increase surply and the prices will sky rocket only giving the riches posibility to buy apartments and in that case its very usefull with rent caps. at it makes the city function as if u didnt have any low wage employees availabel the city whould grind to a hold. other expampels chould be cigeret prices what have a floor to decrease demand or petrol. to improve health and the envirement. so it is really about when is the right time to employ the right tool in the toolbox thou ofc it is not a catch all method. and the market aint allways good even thou most amarican economist want it to look that way. thou ofc the market is allways great for the once with money ;)
I hate to be that guy, but when you look at the biggest supporters of rent control it's generally the urban rich because it decreases the cost of their living without really providing the landlord neglect.
+Quinn Bailey I assumed that Rent Controls only applied to a cheaper level of housing, like a form of Subsidized housing for poorer people? I would assume that the mega-rich would pay the full price for those penthouses and such. Or maybe it is just somewhere in-between that the line is not at an optimal point?
+David Learmonth The better way to respond to high rents is to allow people to build more houses and apartments for people to live in. Imagine a city with 1000 houses and 2000 households who wish to live in the city. Rent will be what the 1000th richest household is able to pay. If we impose rent control on 100 houses, 100 households from the poorer half can get a home instead of the 901st through 1000th families. It doesn't mean that more people can afford to live in the city. It just shifts who gets a house. If instead the city allows people to build more homes, the rent will fall to cost to build another home (because if a landlord tries to raise rents, someone could build a new home and charge less). This would allow a lot more than 1000 people to be able to live in the city. The poorest households might not be able to afford even these lower rents, but they can be helped by income subsidies if the city thinks that everyone being able to live there is a valuable thing.
+Quinn Bailey the rich can BUY those urban properties genius, it's the austerity-driven millennial rent generation that DOESN'T HAVE MONEY TO GET ON THE PROPERTY LADDER, who'd want to pay inflated rents in perpetuity if they can just buy the damn thing??? So no, rent control establishes an equilibrium, say in Berlin where annual rent increase cannot go above 10 percent of inflation rates, ensuring rent is neither deflated nor inflated. Remember what caused the flipping austerity in the first place? The God damn property bubble nobody thought could burst and so didn't seek to control? Do you people never learn your lessons???
+Mathias Signebøen yep, look at Britain, the economy is, in theory, doing well *cough*housing bubble*cough* but the poor are getting poorer, and the rich are getting richer
+Field Marshal Fry That's why economists are very interested in fixing income inequality and other problems like that. A lot of economic research these days goes into health, environment, education, and inequality.
+Field Marshal Fry actually as long as GDP is growing in a developed country both the rich and the poor are getting richer. Just that the rich are getting richer faster than the poor, hence growing inexquality.
Crash Course - double check where you have the DWL at the 3 minute mark. You can't have DWL where there wasn't consumer or producer surplus in the free market previously. You have the base of the triangle being where the shortage was and the tip of the triangle where the eq-price was. The triangle should be the reduction of CS and PS caused by the decreased Q.
I'm glad the mentioned that minimum wage is complicated. When people use these simple explanation to explain why raising the minimum wage is bad is a lot like people trying to explain the we can design the space shuttle to look like a brick because you can ignore wind resistances.
The argument for rent control (and other price ceilings on items that are a basic human need - food, water, shelter) is that the demand curve is nothing close to a slope. The demand curve in its purest sense for housing is a vertical line, with any true slope being leisure housing - holiday homes etc. Every human needs somewhere to live. The only curve is on the quality of housing -- one person can live in half of a 2 bed flat, or have a mansion to themselves. Rental ceilings tend to apply only to specific home types. Modest homes, it makes sense to keep a price ceiling. As a society, it's deeply wrong that there should be any income level where it is impossible to buy a basic warm roof over your head. Humanitarian philosophy argues that even someone out of work (either out of the employment marker, such as disabled, or the frictional unemployed between jobs) should be able to receive basic shelter. The argument is that any product a person could die without access to, is dangerous when exposed to an unregulated free market. When you option is pay or die, market pressures will drive a person to sacrifice absolutely everything else for that need. Housing, medical care, food, water. These things are insulated from the usual freemarket factors, by exploiting the absolute need of the consumer. The closer the demand curve gets to zero, the more regulation that industry needs to remain ethical - if you can make 50% of your consumers pay 25% more, while 5% of your potential consumers die from lack of access to your services, fiduciary responsibility demands you do so.
however not having price ceilings on rent means that people can no longer afford to live in certain areas, look at London, housing there is massively overpriced, because the government refuse to build, preferring to leave it to the market which does not build many houses as it makes a greater profit building a handful and selling them at extortionate prices
I'm not sure of the particular case of London, but in general the reason builders don't build in response to market demand isn't because they benefit from higher prices (doubling the price of one housing unit isn't nearly as profitable as opening up 100 new units). The typical reason things don't get built is excessively restrictive regulations regarding zoning, expensive building codes, expensive and often difficult to get approved at all construction permits, etc. If the government rejects new buildings or makes it too expensive to make a profit, then obviously new buildings don't get built and the price of existing buildings goes up.
+BobWidlefish In the case of London we can arguably see a mismatch in objectives. If your goal is to ensure that people born in a certain area of the city can afford to live there then there may be a case for price controls when physical limits (i.e. space) prevent an increase in supply. If however your goal is simply to house as many people without specifying where then price controls are a bad idea for the reasons given in the video.
***** *"when physical limits (i.e. space) prevent an increase in supply."* Physical limits aren't a limiting factor yet. Look at Tokyo. One can always build taller structures, and replace low-density housing with higher-density housing. The typical reason such solutions aren't used in a given area is because of regulations that prevent it (e.g. regulations against having tall buildings). I would argue price controls are not a solution to anything, it's just a band-aid that tries to cover up the wound of excessive regulation with even more regulation. :) It reminds me of a saying about government: _"If you think the problems we create are bad, just wait until you see our solutions!"_ The thing is, if you prevent new construction with overly burdensome regulations then the only way to get new construction is to increase the prices until the very high prices are sufficient to overcome the huge costs imposed by regulations. Price controls prevent the price from ever getting high enough to pay for new construction that overcomes the expensive regulations. So in the final analysis price controls ensure there will be a shortage forever.
+Field Marshal Fry London is a complex subject, there's a lack of supply there not because people don't want to build (as stated by other person, it is often more profitable to build 100 houses than 40) but London has huge green belts that takes away a lot of land to build and NIMBYsm is also a problem in London, where it is difficult to get building permits without the locals supporting the project. It is a more complex subject that can't be fixed with a price ceiling, since the supply is already low and construction will be lower with a price ceiling (even if, paradoxically, building will lower prices probably more than the price ceiling). There's also the problem that a price ceiling could create a black market, which could potencially distort the prices and hurt the consumer even more (people charging a black market rate for housing that would be twice the one they could find without the price ceiling just because the supply of housing at the legal price is low and prices higher than the legal price will be higher than normal because of the distortion)
"The amount of gas society wants is where supply meets demand". 2:57 Not so. I have often wanted MORE (demand) than what was available (supply). What's described is supply being equal to USE. And subsidies have ZERO effect on the economy. Why? Because it's nothing more than the bill being paid by someone else.
I disagree that they assert that all economists don't agree with subsidies and market loans. I am an Ag economists and my university is responsible for much of the research and writing of Ag policy for things such as the Farm Bill. They recognize problems and have to identify the needs of producers and the market. The biggest hurdle is that Americans expect a constant supply of goods. If a catastrophic event such as drought or rain wipes out a farmers crop, many often wouldn't have the resources to plant another year, or they might stop production. Crop insurance and loan rates are meant to protect the supply of agricultural goods. So I disagree that all market controls are bad and they say that too with the minimum wage. My experience with non-ag economists has shown that they don't fully understand or encompass the entire Ag industry when they make assertions. But this is why it's such a huge field of study.
"Some economists argue that all government intervention creates a distortion" ARGUE? What is there to argue? if the government wanted things to stay the way they are it wouldnt interfere at all. When someone interferes they WANT to change (AKA distort) something. And the thing with complex economies is that you cant touch one thing without touching everything else at the same time.
+isphus They say distortion to imply the message: "GOVERNMENT INTERVENTION = BAD" If they were being educational and honest, they would say "alteration" or "change" instead of a negative word like "distortion"
+Attila the Fun No, it's definitely a distortion. It has the effect of a lie (hence the "negative" language) on people, who plan their lives around the economy; if prices are not accurate, one's buying/selling plans cannot be accurate, and they are doomed to come to harm once the other shoe drops. So yes, distortion.
I think the word "distortion" is used because it affects more than just what was intended to affect. Because it's all interconnected, a change meant for a positive effect somewhere might end up having negative effects somewhere else. It's not just a change, it's a distortion, because it's unpredictable and unintended.
Distortion is basically loss of efficiency. In economy, allocation of resources happens with repeating Prisoner’s Dilemma, which allocates resources with Pareto efficiency. When government intervenes, it encourages Pareto-inefficiency by changing values in the matrix with subsidies. Before subsidies AA: 1-1 AB: 10-0 BB: 20-20 BA: 0-10 After subsidies AA: 1-1 AB: 1-0 BB: 10-10 BA: 0-1 Thus, encourages to competition are blown. There is no Pareto-efficiency.
I am disappointed at the dead seriousness and annoyed sarcasm of these comments... Ah well, at least there's still a comment about Mr. Clifford's ACDC belt.
I farm 3,000 acres of crops and raise 4,000 head of cattle and I hate farm subsidies. I have neighbors that get hundreds of thousands every year from the government. Nothing wrong with crop insurance but it also should not be subsidized so that you are not inflating land prices
Renewable subsidies have worked though, renewables are now on a path, and in some instances probably already is, cheaper than for instance coal. But some renewable subsidies are wrong, like guaranteed income subsidies removes incentives for innovation. Subsidies should instead be targeted towards RnD, like matching dollar-by-dollar in RnD investment and raising demand through state capitalism, like setting up renewable investment funds that partner with the private sector (including crowd investments, which we see too little of) to invest in new installations, technology start ups and give low interest loans for the expansion of existing business.
Am I the only one who thinks that Adrienne was more cheerful in the initial videos? No doubt about her work, she's explaining perfectly well throughout. Just observing this slight change.
@@JacobAClifford Question. Why does this video treat labor markets differently than markets in corn or anything else? Markets work like markets work. A price floor on corn is like a minimum wage for farmers and a minimum wage is a price floor for labor. A price floor on corn leads to less demand for corn and a price floor on labor leads to less demand for labor. It leads to more people wanting to produce corn and more people wanting to work in usually lower paid fields. My state has now raised the minimum wage to $15 which is nearing the wage for some skilled labor and exceeding the wage paid for some semi-skilled labor. So what's the motivation to learn skills and knowledge to get a job that has responsibilities greater than showing up and flipping burgers. Also, given that restaurants run on slim profit margins this has necessitated laying people off and automating certain tasks and, in some cases, restaurants closing. Incredibly, there are some in state government blaming employers that offer in house cafeterias to their employees free of charge as a perk of employment for the restaurants closing their doors instead of minimum wage increases. These in house cafeterias were around before the minimum wage increase. What next? Not allowing people to bring lunch from home? There are also those in state government who want to outlaw replacing workers with robots. This interference in private business is disturbing. All I can say is thanks that these people weren't around in 1800 or we'd still be harvesting by hand and hewing lumber by hand. Think what a house would cost.
This might be a silly question but if the prices are set really low by a price ceiling, won't producers think to produce more because now many people will be buying it? Why there would be a shortage if producers can make up for it by an increased number of buyers at low prices?
I literally change the speed of the video to 1:25 because they are too slow to me and I get bored otherwise lol (but I pause the video a lot to take notes on the important points)
I think the key to "good" subsidies must be its instrumental capacity for a bold agenda. I mean, instead of handing them blindly, do it on a conditional basis: improvements in water saving, crops diversity, less dependance on industrialized seed-pesticides packages... The same goes for energy. There's a monstrous subsidy on nuclear and fossil fuels that critics of the renewables hide under the carpet: the enviromental and health costs and degradation neither estimated or charged.
One problem that subsidies should (and can) solve are entry barriers. A big problem of new technology is that it does not pay for itself right away. On top others may copy a successful concept without going through the trouble of having to develop it by themselves and prove it. In this case subsidies might help to make investments to future technology. The other part is to support core industries or infrastructure ones like mail service. It is much more efficient to only deliver mail in the big cities. However other businesses rely on the possibility to deliver to any location. Therefore it makes sense to run an agency like the USPS that operates at cost to facilitate business in the whole country. Or subsidies electric infrastructure.
@CrashCourse Loved the video, but I do have one question for you. Given the tremendous price gouging that the healthcare industry in this country accomplishes, would it not be better off to institute price controls in the healthcare industry to prevent [price gouging, especially among pharmaceuticals. This is common practice in most countries with single payer system and seems to be the best solution. What are your thoughts?
I have to say that I am surprised to hear this video speak honestly about price ceilings and floors, most are not. I cannot wait to see the video about minimum wage now if they remain honest.
3:45 Rent Control WRONG! Rent control fights real estate fraud where the same apartment units get sold over and over and over and over again, which cause tenants rents to rise (due to negative equity), but ZERO improvements in the property or value added. Plus "discouraged construction" has nothing to do with rent control because this is about existing units being sold as abused assets. Farmers Subsidies WRONG! Conveniently leaving out a BRUTAL yet MANDATORY economic term here called EXTERNALITIES. Unchecked external disruptions to the market = market failure. This is why there is subsidies to begin with!
Question: What about Price Controls for public services, e.g. Education, Transport, Health Care and others? The intention has been to keep these public services accessible to most other people, but because it is the government who provides these services (most of the time), the government could ensure there are enough services/products being produced through its other sources of funding, i.e. taxes. These would cause government financial deficit in specific sectors sometimes but I think the arguments against/for price controls are slightly different?
Honda motor corporation provided my means of transportation. Of course, I had to pay for it. Health care has nothing to do with government. Government is horrible at providing health care. Perhaps government shouldn't be in the education business, but it still isn't provided by government any more than a public highway is.
Anon54387 I don’t know which country u r in. But in this situation I’m talking about most OECD countries. In the UK, government provides national health services. And transport is not just about driving, it’s railways, buses, subways and airports. These are normally provided by the government. This question is about price control for public services not what constitutes public services.
+ForrestSCS Some of these laws are necessary to incentivize innovation. The price of researching anything in the field of human health is extraordinarily expensive, and the price is climbing exponentially due to an effect dubbed "Eroom's law," which is essentially the inverse of Moore's law. Becoming more precisely targeted (aka safer and more effective) while working within chaotic biological systems becomes more complex the deeper into the "nitty gritty" of it's functioning you get. As an example, Tylenol simply blocks an enzyme's active site and lowers it's activity, slowing down a pathway that causes pain, but also coincidentally fits into several other proteins, which give it numerous toxic interactions with other drugs. Many drugs being developed now go through several stages of metabolism before reaching their destination, allowing them to be delivered to a more specific target with fewer side-reactions. These are just de facto more difficult to develop, and the amount of testing required to pass the (extremely necessary and important) regulatory hurdles of the FDA is staggering. The price of drug development is driven partly by the fundamental laws of nature, not *just* capitalistic greed, although greed is still a major part of the high prices we pay. This is an area where I believe government subsidies for research costs can dramatically reduce the cost to the consumer. This isn't to say the laws do not need to be reformed, they do, but doing away with intellectual property laws surrounding drug patents altogether is a huge mistake. These laws ensure that those who innovate are paid for their work, and without them research would stagnate, which is bad for everyone.
+ForrestSCS The Indian government has done EXACTLY what you said. It does not recognize intellectual property rights for healthcare. The result? Millions of people, I repeat MILLIONS of people, who would otherwise die receive healthcare.
in the uk in a place called Cambridge the house prices are so high that the basic infrastructure of the society is unsustainable because they lower paid jobs such as nurses teachers store assistants can't afford to live there
This whole discussion assumes that the real market follows supply and demand curves. Unfortunately it doesn't. Profit and production doesn't move elastically. The conclusion that price controls are always bad is only correct if this basic idea of supply and demand is also correct. If you lower prices, and companies were making a HUGE profit, they're not necessarily going to cut back production if they're still making a LARGE profit. They certainly don't *have* to. However there are reasons they might. A business may not increase production to meet demand, because they would rather drive up prices (particularly when they have a partial or full monopoly, which often happens in unregulated markets). Lower total profit isn't always bad if it leads to higher margins and lower risk. This is the same reason that companies that were making several billion dollars a year in profit cut jobs during the recession. The recession hardly hurt some of them at all, and their operations were still profitable. But they cut back to reduce risk exposure, despite the fact that future new staff will need to be trained, costing them more in the long term. These are the kinds of short-term decisions that make make sense from a business perspective, but are irresponsible from a social perspective. Economic theory is great. The problem is that the real world is much more complicated, and any system that is based on greed is going to have flaws. The government needs to step in not to make the market work better, but to protect people from the whims of that same market, which in truth, cares nothing for them beyond their checkbook.
+David Wood The market absolutely follows supply and demand curves. It does not do so perfectly, which should be obvious since nothing is perfect, but in general the rules do apply.
+Joe Lima there may be demands but the supply, when overly inflated, the demand simply cannot afford it. China's ghost cities, yes there at hundreds of millions of rural migrants flooding urban cores, so by logic more housing meets more demand, creates social security for the poor, uplifts them, gives them expendable income so they can graduate to middle class to feed back into the consumerist society, no? No, houses are inflated to absurd levels no migrant can afford it (when they can build their own house), they'll just earn money and save it for themselves so they're taking capital out of the flow and enclosing it into their isolated closed loop. Great for sustainability, disaster for the national coffer. So the funny thing is there are tonnes of upmarket condos and nobody living in them, or bought up by landlords hoping to inflate rents further to ransom back their investment. Correctly meeting the demand means curbing profit margins to create realistic prices, a lesson most opportunistic capitalists don't get. This is where rent control and and subsidies come in, or the selfish few don't break the system.
Da ve Ghost cities in China have nothing to do with any market, that is the Chinese government manipulations and mandates. When you say "selfish few" do you mean politicians who set bad policies and destroy housing markets? Because obviously if a "capitalist" doesn't understand the market well enough he will just go out of business and someone better prepared will take his place while a politician setting a bad policy might create giant ghost cities that nobody can afford to live in and since his only concern is GDP and building empty buildings raises GDP then he has done his job well.
+David Wood Government has a role in assisting people who are unemployed. But as this video demonstrates price controls and subsidies are counter-productive.
+David Wood Exactly. You can see how entrenched massive corporations inflate prices within the US because no one can really compete. Especially if you look at the prices of internet around the world. It's ridiculously more expensive in the US because we don't really have a choice. The big ISPs feign competition with each other while they try to suck us dry. De Beers sits on diamonds to keep the prices jewelry up. Pharmaceutical companies are well versed in extortion. And as you alluded to, everything about the oil industry is chicanery. While all of these corporations avoid being labeled a monopoly, they have the leverage that makes them functionally identical. Sometimes I wonder if the only way to get these entities to really compete is to set up government-owned equivalences. These government equivalences, while initially created with tax money, these national companies would be required to be self-sustaining and even pay back the initial investment. But everything that happens within these companies would be transparent-- from the costs of building maintenance to materials to the salaries of the employees. And given the inefficiencies that everyone accuses the government of, this shouldn't create stiff competition, but it should help curb the excessive abuse we see all the time.
its really helpfull everytime. plz doing the good work of making education this accessible and responsible among the people. i intend to contiribute to this great work once when i have the resources to do so
The negative effect of agricultural subsidies only occur in rich countries. Here in the Philippines, the farming industry could almost die if the government won't subsidies them.
+Albion Laster The problem with Supply and Demand is when there are basic needs in play. You don't absolutely need a couch, so couches have to be affordable for couch makers to earn money. But you do need a wage, so companies like Walmart and McDonald's could just pay you $3 an hour, and if you don't like it, there's a dozen other people who want a job who can replace you. It wouldn't result in more jobs either, since there is only so much low skill labour needed at any moment.
There is no problem with supply and demand, its a universal market force. Its funny you mention mc donalds, and 3$ an hour. I worked at macdonalds for 3.15 per hour in high school. Back to your point, If there was no minimum wage there would be more jobs. Employers would just pay based on the skills required for the job..
that has more to do with technology than the price of wages. coal mines suck less with conveyors and electricity. farms suck less with combines than with mules
4:41 "One argument... we will run out of food and die." Any economist who seriously proposes that market demand for food can be so low that we simply won't buy it should be fired immediately. They obviously don't understand how humans work.
+Jere Mitch It's defined as a social science. If you study economics at a high level, you realize how scientific it really is; it operates no differently than other scientific fields. In the macro environment, there is certainly room for ideology and politics. But in the micro environment it's quite objective. It's arguable more scientific than psychology, meteorology, epidemiology etc. Here's a nice article to look at: www.nytimes.com/2013/10/21/opinion/yes-economics-is-a-science.html?_r=0
+blownspeakersss Meterology and epidermiology are incredibly bad examples for your argument. Both can use the scientific model to prove or disprove hypothesis and can PREDICT outcomes based on known variables. Of all the soft sciences economics has proven to be the least predictive; with massive amount of known variables available to be studied. Macro economics can be used to define and understand behaviors but does horribly at predictive analysis and policy making. Even Psychology, with it's constantly redefined theories and subjective analysis, still can predict behavior far more accurately than Economics has ever been able. Economics can only work in hindsight and is often only useful as a political tool.
Jere Mitch First of all, macroeconomics is not about predicting recessions -- it's about understanding the "big picture" by utilizing data analysis techniques. It addresses questions like how can we reduce poverty or unemployment? What is the effect of education or healthcare on society, and how can we make these resources more accessible to all? How can we promote economic growth in developing countries without jeopardizing the environment? A subject's predictive ability is not a measure of how scientific it is. What can anthropology/archaeology predict? Or ecology? Computer science? Epidemiology? (you can't predict disease outbreaks, but you can study how to prevent them). etc... Notice how in my previous post I said that the MICRO environment is arguable more scientific than meteorology, epidemiology, etc. Both macro and micro have become increasingly scientific, but micro in particular has become quite objective in many regards.
The disclaimer in this video suggesting that these principles are universal with one exception, wages (minimum wage) is baffling to me. Either the principle stands or it doesn't. These laws don't just change because the prices being set by the government are for wages (in this case, a price floor). The same devastating consequences can happen.
Can you put some of the ideas from these videos into historical perspective? You could do a show about the price controls that were enacted in the french revolution, and how disastrous that was, for example.
I've got a different view of rent control. Rent control is kind of similar to the minimum wage and is rather complex. Because you're locked in to a 12 month lease often and you often don't fully know the condition of a property until you've lived there for a while, a lot of landlords get away with not maintaining their property.
Hi CrashCourse! I may be late for a request, but can you explain the relationship between the increase of wealth and the diversification of assets (tangible, financial and intangible) in the last decades. I can't seem to find information about it.
And yet in cities like London, lax rent control leads to prices that are 108% higher than the rest of the country. And London still has a housing shortage.
The government can push innovations without having to cut subsidies, an obvious fact that people seem to be missing. Incentive doesn't have to come from an empty bank account. The government could give grants to potential innovators, subsidize loans for technology adoptors and even use advertisement and seminars to encourage innovation.
Price Controls, Subsidies, and the Risks of Good Intentions - Early 1970s, Nixon established a 90 day price and wage freeze (purposed to deter inflation) to the dismay of economists - “One of those plausible schemes with pleasing commencements, [that] have often shameful and lamentable conclusions.” - Price control - Price ceiling - when the government sets a maximum price for a specific good or service (producers no longer find production profitable due to cheap prices and thus the lower price will decrease the amount of product produced - a shortage) - Rent control - Idea is to increase affordability for tenants, which enables long-term tenants to stay in their homes when real estate prices rise - Lower rent discourages renovation and new construction, reducing quantity supplied - Result is a shortage of apartments with landlords that have few incentives to maintain their buildings and be responsible to tenants needs - Economists are not at all split on rent control. Pretty much all of them think that price ceilings on rent reduce the quantity and quality of the housing that’s available - Price floor - a law that sets a minimum price in a specific market - Keeping the price artificially high and not allowing it to fall down to equilibrium - Higher price would give producers an incentive to produce more, but, at that high price, consumers are instead encouraged to opt for substitutes - Argument for price floor - if producers cannot get a high enough price, they’ll stop producing and, in the case of essential products, we will run out of food and suffer - In terms of actually helping consumers and producers, the vast majority of economists consider price controls counter-productive. But there is one notable exception: minimum wage - The amount of gas society wants is where supply meets demand. Producing any quantity less than that will result in deadweight loss. - The quantity produced at the price ceiling is not allocatively efficient - As long as it is below the equilibrium price, the lower the price ceiling, the lower the deadweight loss and inefficiency - Subsidy - a government payment given to individuals organisations or businesses designed to offset costs to advance a specific public goal - While these maintain the market at equilibrium with no shortage or surplus, stable living, limited food price inflation, and encouragement of stable food supplies, many farmers are not poor (and are argued by economists to have the income they need to handle price shocks), and may discourage farmers from innovating (over reliance) as they have guaranteed income from the government - A survey of economists found that 85% think the US should eliminate agricultural subsidies - Economists recognise that market prices are set for a reason - If corn prices decrease because of decreased demand, it is inefficient and wasteful to spend money on subsidies - If there is a natural disaster affecting farmers then short-term aid may be required - but this is not the reality of farm subsidies - In the US, agricultural subsidies have been around since the Great Depression. They were meant to help prop up farm prices and farmers. - Direct payments - basically government grants handed out to farmers based on land ownership and historical production levels - In the US - received regardless of the market price for crops or production rates (proved inefficient and eliminated in 2014) - A large portion of US agricultural subsidies go to crop insurance - Some economists argue any form of government interference distorts the market, resulting in unintended consequences - Crop insurance guarantees farmers and income and could encourage them to take more risks (planting on less fertile land) - If demand is greater than production, the result is a deadweight loss (underproduction of this product). A subsidy would aid society and improve efficiency - Govt subsidies in research and development in energy stave underproduction - Some economists argue for this reason, deadweight loss is reduced - Other economists argue businesses already have an incentive to innovate and that subsidies create false demand and that there is no deadweight loss (and even if there is, markets will adjust) - In conclusion, subsidies aren’t inherently good or bad and depend on societal and and market values
"Because of NASA we have memory foam, scratch proof lenses, and moon base alpha." We provide them with over $18 billion a year and their impersonating a manufacturing company. Totally worth it.
This video is not only offensively simplistic, it also ignores the many cases were we accept price controls because they are useful. Most of these examples are under explored and there is almost an addiction to supply and demand curves. Rent controls, for example, have worked in many cities and, yes, rentals landlords still ignore tenants in cities without rent control. Lack of affordable housting is a nation wide problem. Healthcare, water prices, education, these are important examples where price controls work.
Rent control does work because it adverses an externality. Conservatives and libertarians HATE the word externality because it thrown that curve ball of economic dynamics that change the supply and demand curve from their warped "equilibrium at all times" world view.
The concept of artificial price manipulation is generally bad because it's like treating an infection with a band aid. Even though you're covering the problem in the short term, in the long term price manipulation is unsustainable. If people are starving, for example, then a natural reaction would be to demand that farmers reduce the price of rice. However, from the farmers perspective, that means if you were going to invest in a new plot to grow more rice, you can't afford it. Farmers end up producing less rice, even though the problem you're trying to address is mass starvation. What's better is government to fund more efficient technology that expedites the farmers work and allows them to expand their plots so that they can actually produce more rice with less man hours, therefor naturally lowering the price of rice and increasing its quantity. The same concept also applies to real estate in New York City (although it's more nuanced). Rather than worrying about the price by itself, people should address the reason why prices are so high, perhaps over-regulation leading to a market that stifles innovation in housing options.
As far as the farming arguments, the primary reason government intervention is continuing is not due to farmer's plights. Nor is it unwarranted. We easily forget that of all the natural resources the USA has food is by far the most politically powerful. We often don't think of food in the international sense but our ability to provide aid to foreign nations without much pain has been one of our greatest tools to force open borders or begin/continue dialogues with even our most stout enemies. Paying to leave farming land fallow but capable is a collective interest that politicians don't often explain.
"The law of equilibrium" they say it's a law except when it's about minimum wage... it's either not a law... or you just don't want to acknowledge that minimum wage produces a price floor above equilibrium...
one argument that i've seen in favor of food subsidies is the possibility that a foreign supplier could get all shitty with us and decide to cut off shipments, or that they could experience a severe drought or calamity or something and just not have the ability to meet demand.
So many videos based on theories with false assumptions about rationality and perfect competition. Can you talk about Ostom? Or Pickety? or any theories backed up with data collection instead of pure speculation (e.g. structural models and game theory)
+Nicholas Garcia Who needs market saturation, profit margins etc. when you have a chart that translates to: Humans live next to a river -> the river is gone... because humans had "free water" and who needs data, when you can quote well known newspapers, who looked at the data for you. crash course really dropped the ball on this one
Nicholas Garcia Jesus this isn't a college course meant to solve the worlds problems... Its a "crash course" on the basics on economics, just to get people started, maybe do your own research after that. Oh wait I forgot people are inherently lazy and dont want to do the work themselves
It's meant to be highly simplified to introduce the concepts. It's like learning about trajectory in basic physics without accounting for air resistance and other factors. It's obviously not totally accurate, but it makes it easier to understand the concept.
This is a CRASH COURSE. They simplify to explain a concept. And the concepts DO generally work in real life. Not every time, but that’s never the point. For all intents and purposes, supply and demand DOES explain how pricing works in real life.
America's current policy on agriculture is subsidies for agriculture and tariffs on foreign fruits. This is supposed to help farmers in America. The problem is that this policy comes at the cost of the American taxpayer who has to pay for these subsidies. Only 2% of Americans work in agriculture and even most of them don't benefit from subsidies. The ones who benefit are usually farming companies.
In their analysis of "the benefit to society", they are only considering what is seen within this market. They are not considering the fact that the money collected to provide a subsidy has been taken in small portions from all Americans through taxation. This money would have been equally effective in providing incentives to increase the supply of agricultural products in the hands of private individuals as it would be in the hands of the government and also be less costly to the nation as a whole. If there are corn shortages due to a bad year in the US, prices would rise, which would make it more profitable to import corn from other countries. In time, the higher prices of corn will provide the incentive to American farm investors to rebuild failed farms, thus restoring American corn output and prices to their original levels. Government subsidies presuppose the government's ability to know what demand there is and will be for corn. They also inevitably give way to corruption and further extortion of the public as recipients of farm subsidies lobby to retain and expand their subsidies. This leads to large amounts of money given by agricultural bodies to candidates in the form of campaign contributions, with the candidate promising to pay them back once in office. Not good.
While I would agree that price controls are something of a government sledge hammer to a nail sized problem the other end of the issue is based on a false assumption; specifically that the market always works to find the correct balance between supply and demand for a price. One of the flaws with that line of thinking is that it ignores the human element. Simply put, people are not economically driven computers. People make choices on what they think is optimal but that doesn't mean that choice truly is. There are drug addicts that know they are slowly killing themselves but the immediate need to alleviate their addiction due to biological and psychological reasons more often than not appears to be more optimal than quitting because of how difficult that is. Just because a company sets a price doesn't mean that price is based on some kind of objective verifiable reason.
"except for maybe physicists, because they have unbreakable laws and controlled experiments" oh my sweet summer child, you have no idea how wrong you are. (Quantum physics, AKA: everything you know is wrong.)
No, I want enterperneurs to step in when free markets fail. I don't want our government doing the "real" work. I just want our government to enforce laws, keep our military/police maintained, and some infrastructure maintained.
Thanks for this video! It’s an economics course for idiots, I didn’t go to college but if I did I probably wouldn’t have listened anyways, when you get older you find this information to be valuable!
They totally neglect price gouging. Without any government limits and regulations goods and services that are the necessities of life corporations tend to gouge the public. We see this in healthcare insurance prices, higher education and housing costs. Funny how the one thing they bring up time and time again as examples is food production. Have you noticed that food generally is pretty inexpensive. There is a balance point and that point is where the good of the people and the greed of the corporations and held in check to allow everyone to thrive. Yes you can't set the price of gas too low so that it is below the cost it takes to make it. You can't set the price too high to satisfy the greed of the corporations because then the public will suffer. A completely free market with no limitation set by the government only serves the needs and wants of the corporations and CEOs and and not the people.
between farmers and consumers are the middlemen Floor on prices of corn may mean middlemen will have to reduce their cut to keep their ware selling, while farmer still gets it
It's almost like the free market is better at maintaining the economy than the government is. hmm, who possibly could've known? And by the way, what the hell is crop insurance? they just have insurance for everything these days don't they
I don't understand how there can simultaneously be a fear that price controls might stump innovation AND a fear that subsidies might induce risk. Innovation involves risk and it doesn't seem like subsidies and price controls are different enough - both are giving money - to produce opposite results...
+Ozziedood Because there is a social ill that can be had from trying to be maximally efficient with human life and effort. Imagine someone who is working a job that pays just enough to cover their regular living expenses, thus the employer is getting the labor he or she needs and the employee the food, shelter, and water he or she needs, and each gets nothing more or nothing less because the laborer is not particularly skilled nor is the employer looking for someone exceptional. Now, say that person gets sick and thus has his or her cost of living go up, and this cost is more than it would cost the employer to train a new random person. It could be thought that it is a better use of resources to simply fire the employee and hire a new one, leaving the former employee without a means to acquire basic necessities and thus die without the charity of others. There are few people who are so without compassion that they would see the trimming of excess humans in such a way as an acceptable state of affairs. Now, you can argue that the people who cannot get jobs because the price floor on labor would be greater than the number who would be adversely effected by the lack of one. But seeing as statistics like this money.cnn.com/2013/06/24/pf/emergency-savings/ are out there, I would need to see some rather amazing evidence to agree with that hypothesis.
nick holmgren My argument is that you are selling your labor and as a result your skills determine your wage. This makes the job market competitive in a way that if you feel like you are not compensated enough for your skills, then you can look for another buyer who will pay you more and leave the previous client. As for the case of not being able to buy basic necessities, it would be very bad for companies to not lower the price of their goods as a result of paying their workers less. It's obvious that if clients can not buy the companies products, then the company is in trouble and has to cut the cost of the product which will be simple since they cut the cost already in their labor. I also do not understand how pulling up a statistic on Americans not saving money will prevent lower skilled workers getting more jobs.
+TheMostAugustCaesar One thing they didn't bring up was the idea of differing elasticity of supply and demand. People need to earn wages no matter what, and some is better than nothing. So, it is possible for suppliers of jobs to artificially lower the price of labor to the point where it does more harm than good. Another example of this is Martin Shkreli, infamously raising the price of a drug from a few dollars to hundreds. Demand for life-saving drugs are inelastic, and therefore people have no choice but to swallow a bitter pill. That is where price ceilings and floors may come into helping a greater good.
+artemisfowl52 wait, the drug you're talking about just got the competition of a $1 alternative. www.cbsnews.com/news/express-scripts-will-offer-1-alternative-to-750-daraprim-pill/
Economist need to go work on a farm for a while. While not all subsidies are necessary, crop insurance is. Many farmers make lots of money but have as many (or more) expenses as a business
I'm guessing that economists won't necessarily disagree with the need for crop insurance... it is a useful tool for risk minimization at the very least. But, I'm guessing that there is more to subsidies than just insurance...
+BobWidlefish What happens when the taxpayers are forced to pay for things we don't need like more tanks and stealth fighters? We waste way more money on the military than on farmers.
+David Underwood +TheChosenOne Crop insurance is a classic example of where regulation can be useful. Unlike a normal insurance market a drought can make many farmers in an area need to claim insurance at once. This makes insuring crops less economical than normal insurance so the government underwrites it. In America there's less need to do that as companies & individuals can absorb regional losses to an extent but in low income countries the lack of government underwriting makes crops un-insurable.
+lieutenantbears even if he did, I think he would still hold the same stance on a lot of issues. There are ways to fix income disparity and have a healthy economy. A lot of people have been brainwashed that it isn't possible.
+WoodsmanTA Please learn what communism is before you call people that word. Every one of Bernies proposals is already being done in other industrialized countries in Europe and it is working great for them. Why not us.
I can see this working with examples of needs like food or gas but what about items that are price gouged like electronics or college textbooks or say health insurance. Would a ceiling be beneficial in those areas?
+Ozziedood Evidence suggests that when minimum wages are instituted, they don't have the negative effects many economists used to predict. They increase prices slightly, but nowhere near the amount you would expect. There are many possible explanations for this. One example is that fact that paying low-wage workers more money means that this money gets immediately spent and returns to the economy. This increases the multiplicity of the money supply, which is beneficial to the economy. But the truth most likely has several layers. We clearly can't keep increasing the minimum wage forever --- there's a point where it stops working. So we need to figure out what determines that point.
+David Wood I don't see how you can make that conclusion. When the raised the minimum wage in Seattle and DC the number of workers employed by restaurants had their largest decline since 2008. When you raise the price of something people buy less of it. Yes we should provide a assistance for the poor but a minimum wage is a really really poor way of accomplishing that goal.
David Wood I'm not worried about the amount of money that will be spent by workers. This money will be spent regardless of how low or high minimum wage is. My concern is that when you set a minimum wage you take out the lower bars of the economic ladder. It makes it harder for a low skilled worker to find a job and work his way up. People are always complaining about how much experience factors in to get a job. I'm sure they wouldn't care how much money they would be paid if they could just get their foot in the door and work to higher wages. Now you have adults with college degrees working in occupations that are appropriate for a teenager out of high school. But they stay in these jobs because they have no confidence to find another employer, they get married, have kids, and are suddenly shocked to find out that their job doesn't cover the costs of four people and want to raise it again. Do you see where the issue is?
+David Williams That's not what the data says. When you look at data collected scientifically using correct statistical procedures, you find what I described in the vast majority of cases. Something should ring false in your response immediately in that you mention Seattle. It's FAR too early for anyone to have any credible data about Seattle -- we'll need to wait several years to make any conclusions there. Anyone who is making claims either way (positive or negative) right now is jumping the gun.
Some key takeaways:
1. President Richard Nixon, 1970s, 90-day price and wage freeze to fight inflation. Milton Friedman, 'One of those plausible schemes with very pleasing commencement that have shameful conclusions'.
2. Price ceiling - Maximum price for a specific good or service
3. Price floor - Minimum price in a specific market. Keeping price artificially high and not allowing price to fall to equilibrium.
4. In terms of helping consumers and producers, price controls are counter-productive. However minimum wage is a better solution.
5. Economists generally agree that rent control results in reduced quantity and quality of housing that is available.
6. A subsidy is a government payment given to individuals, organizations or businesses to offset costs to advance a specific public goal.
Thankyou
"Deadweight isn't just a good description of your ex" 😂
Subsidies (especially farming subsidies) have another negative aspect. Let's look at Burkina Faso. One time, Burkina Faso was leading the world's cotton production. The price was low, the quality was great. Naturally, their cotton was bought. US cotton farmers were not able to produce cotton as good as the cotton from Burkina Faso. So they called for subsidies and they got subsidies. That distorted the market: US cotton was far more cheaper and the Burkina Faso cotton was not bought anymore. The Burkina Faso cotton industry got destroyed even when they made better cotton. Burkina Faso was in the WTO and the WTO ruled, that the US subsidies were illegal but that was no problem for the US.
So: Subsidies have the ability to destroy developing markets.
+Johny Bänger
That's a good point. It all depends really. Nothing can really be said for sure. No policy is 'good' or 'bad', it just depends on the situation.
+Johny Bänger
Well, that's the problem with a globalized market-- it drives the US towards poverty as other countries soak up our loss in wealth.
Also, volatility is always going to be a risk when you have one customer.
Further also, it's difficult for me to care that the US chose to support it's people than a foreign economy.
CW AtWork A globalized market is a wonderful thing. International interdependencies are build up that insures peace. Shortages in one nation can be compensated through import. It is highly efficient.
It's the hypocrisy that upsets me. They tell developing countries to open their markets (what is a good thing, when they play by the rules) to export in those countries. But they only want the positive aspects of globalization. Of course some other country can be more efficient in production but instead of working to compensate the disadvantage, they call for subsidies. The problem is that small, developing countries can't do that.
The US is always for capitalism and free trade but once the negative aspects affect them, they call for the help of the government.
Furthermore this is an issue of international security. Terrorists and civil wars are created by bad economy situations. When the western world destroys developing markets with their subsidies it is likely that those countries turn rogue. And that affects the western world.
Johny Bänger
Yes, globalization is great for everyone else. The only people it's really good for in the US is corporations.
CW AtWork yes, corporations profit from it. And the people that work there and earn their money. And their families. And the people that own the shops where they spend the money. A lot of people that live in the US profit from globalization. They can effort much more things. They have a way higher living standard.
"physicists ... they have unbreakable laws and perfectly controlled experiments"
*Laughs in failed graduate research experiments*
I always love crash course lessons, and they are very well rounded for the most part, which is why I feel I should point out something that I felt missing in this video. In the context of developed countries, especially the US, it may be true that farmers are well-off and gov. subsidies may not be required. But it should be pointed out that this is definitely not the general case. I think, in most developed countries, farmers are not rich and aren't well protected by the government. In fact, in a country like India, with a population of almost 1.3 billion, we are heavily dependent on our very few numbers of farmers to provide for such a big number of people. On top of this huge demand, most farmers here are not highly educated (a consequence of many factors), and are therefore not able to upgrade to the latest techniques or don't know how to deal with situations such as water shortages which leads to crop failure and shortage of supply. They don't how to deal with their crops getting infected, or properly treat and take care of their soil. So without government intervention, our farmers would be at a loss :(
"You watch Crash Course Economics, which means you're smart and funny and attractive" HAHAHAH
Fine. Except for you, friend.
New Zealand removed agricultural subsidies and the value of farms and the farm output increased.
+David Williams Depends on what agricultural production is produced. Milk in UK is so cheap because the supermarkets have squeezed milk so farmers go broke. New Zealand produces a lot of sheep which is largely exported; which helps the economy.
+Duck Man There can be other factors in play in the UK. If you can import milk from a country that can produce milk at a lower cost while the UK economy is less efficient that would cause many farmers to go broke. Again subsidies create incentives for less efficient farming.
??? Non sequitur.
***** I don't quite follow you. US farms currently are required to sell their food at a loss to the federal government for school lunches etc. It was a supreme court case on Raisins last year that over turned that. There are so many ways that the government restricts supply to artificially boost to which hurts both suppliers and the consumers. Farmers were asked raisin farmers to buy their own crop. th-cam.com/video/A8S4S49TyDk/w-d-xo.html
***** So when has that happened? Long term food shortages after a disaster? After a disaster Walmart does a much better providing food and necessities that occur due to shortages. i think there should be emergency assistance for people to buy food. But it is totally clear that Walmart and other large retailers do a better job at getting food to the people the affected after a national disaster.
What your plan is, is not as simple as you make it out to be. First what price are you going to pay farmers? Which farmers will you buy the food from? What food will you buy? Where is the food going to be held in reserve? Then how is the food going to be distributed? All of that costs money, money that could be used to help the poor. Instead of creating an alternative distribution network just allow Walmart to do what they do best and allow the money to go where it's needed most to the individuals themselves. Allow which allows the victims to choose what food is right for them instead of the government. All things being equal the simplest solution is the best.
You know, it felt like you weren't explaining "subsidies" as much as you were explaining "agricultural subsidies in the United States".
Agricultural subsidies are likely the most common example I have seen for subsidies in economics and the real world; it's fitting.
I like his ACDC belt.
As a venezuelan, I can confirm this video. Price controls and a limited amount of dollars a person can buy, have destroyed the economy.
If only this had spanish subs, I could show this to a lot of people here...
+jakuara kamak There are lots of reasons the Venezuelan economy is doing terribly at the moment (eg. crazy low oil price), and somehow I don't think price controls are the most significant factor. Also, imagine what it might have been like over the past year or more without price controls.. If the majority of the population became unable to afford essentials, you might have major civil unrest on your hands (or other longer term problems, like health impacts for the population), which could be another drag on the economy in its own right. The real world is far more complex than these simplistic economic theories.
+Gareth Ham No, low oil prices aren't the problem. The problem was that the government decided to stop any type of exportation except oil because of the oil buoyancy and when it stopped we got screwed. Add that to price control and exchange control (producers cannot produce because they lose money and we can't get external money because the government controls that, which also is a way to steal money) with no savings whatsoever (a waste of money when it could have been used to invest on national production and infrastructure) and extreme corruption and you get the exact reason why we are so bad.
Is ridiculous to say that low oil prices are the cause when we got our best moment of economy and progress (1948-1958) when the oil price was at 2$.
in other words: these "simplistic economic theories" explains perfectly why we are so bad, or are you a follower of the current minister of economy who says that "inflation doesn't exist" and thus try to search for "the fifth paw of the cat"?
+Gareth Ham Price controls don't have to be disastrous if they are set effectively. In Venezuela they priced products far below the cost of production causing domestic producers to stop producing. They also had a massively overvalued official exchange rate which made imports cheap and their exports uncompetitive. The result of these measures was a greater dependence on imports and a near total dependence on oil as a source of foreign exchange. At the very least they should unify and float the exchange rate (eliminating arbitrage opportunities), restructure the price controls on essential goods to fair prices (with an appropriate profit margin for producers), eliminate an assortment of energy subsidies (cheap petrol etc) and institute some sort of universal basic income or negative income tax to distribute the nation's oil wealth and reduce poverty.
MicroLabrat123
No, what should be done is stop the pricing control and start subsiding the industry and eliminate the control exchange so external money can enter into the country, also start exporting more than just oil among other things.
I remember my high school economics teacher telling us about when he was a kid, he and his friends had a farm that they got just for collecting subsidies not to plant anything.
So your teacher admitted he's totally unethical.
It's quite sad that my country, Venezuela, is only mentioned to talk about how badly we fucked it up. And yes, it's worse than they said. For reference: an iPad mini is around 30 months worth of work at around minimum wage.
is their worse than their neighbor's?
+Christian Weibrecht Which neighbors? Colombia? I am unsure because i haven't been there, but people are leaving the country and Bogota is a popular destination, with the borders closed it's now more expensive to get there but people still finds a way.
+Nihar Baijal
Its because living costs are low in India. Inflation in Venezuela renders their high minimum wage useless.
+Nihar Baijal The Venezuelan governments imposes a three-tier currency exchange (they declare what US dollars costs in the national currency, this was mentioned in a previous episode of Crashcourse IIRC) instead of letting the markets dictate the price. The price of the dollar in the "black market" is around 140x times greater than the lowest official rate. The monthly minimum salary in Venezuela based on the black market dollar is less than $12.
The UN definition of extreme poverty is a family income of less than $1 per day. I think this is one big reason (the other is corruption) Venezuela keeps the low official exchange rate.
+RapiBurrito It also has one of the highest crime rates in the world AFAIK, and high corruption, in part driven by crime and gangs. The place has rolled back a lot. What happened over the last 5 years? :(
The takeaway is: The real world is complicated and doesn't perfectly obey simplified models in textbooks. While price floors, ceilings and subsidies are usually a bad idea, occasionally they aren't.
i.e., when markets fail. And the reasons and circumstances for market failure is indeed rather complicated.
And the water is wet.
+Vectored Thrust Simple models found in economics 101 courses (like this one) certainly don't model anything of significance -- instead, they help students understand some basic concepts. In the real world of economics, however, different situations call for different models, so economists are constantly constructing new mathematical models depending on the situation. These models help us to better understand the social world. I like to think of economics as a hybrid between sociology and applied mathematics.
+Zero Sum Game I know it sounds like I'm stating the obvious, but try telling that to a hardline libertarian, or for that matter try to a hardline centrally-planned communist (I run into libertarians more often on the Internet). They can't seem to grasp this idea that their ideal worlds are not as ideal as they envision. This is why nearly all economies today aren't on either end of the extreme, they're somewhere on a spectrum
+Vectored Thrust Price floors and ceilings are never a good idea. Subsidies are arguable, but also generally not a good idea.
Who’s here in 2024!!???
Taking me back to my AP Microeconomics class days. Never thought I'd miss graphs so much!!
This guy is actually really funny lol! Thanks for this series and video, it's truly helpful for my online economics class
What if price controls are used to cap the prices of goods which have artificially high prices. Like pharmaceuticals which sell on 2000% profits.
Their demand hardly goes down so market can't bob the price.
While you might not see a shortage in the specific drug, you will see fewer resources going into researching pharmaceuticals. In that case, you'll have a shortage of new drugs.
Brantley Straub or better, abolish patents so they don't have a monopoly. The fact that they need a patent to beable to make a profit out of discovering new drugs, means the cost to discover the new drug exceed the benefits society as a whole get out of discovering that new drug.
Pharmaceuticals have high prices because they operate as state backed monopolies by means of patents. That's not free market.
Pharmacare. Some people view it as a public good like fire and police. A healthy public had positive externalities. I still find something funny in america - public k-12 education is a public good and lauded, but go to 13th grade + (college) and its evil socialism to some. ?!!
Tran Son patents are necessary for innovation
I always figured that Rent Controls would help protect people from potentially Unreasonable price increases on the places they are currently living, since it is difficult and expensive to have to uproot yourself yearly. So it is a protection against unethical landlords. Kind of gets into something of a Monopoly type of situation, or at least similar.
The other issue is that what if your only employment is in NYC, but then you can't afford to live there due to price increases? I have friends in Toronto who find that the city is the only place where there is sufficient population to support their type of work, even though the businesses are still unwilling to pay a wage appropriate to actually living in Toronto. But people are desperate, so they just scrape by.
+David Learmonth yes it is very simplified and dont take into account other factors like lets say in europ there is a lot of big cities with regulations saying you aint allowed to build higher then 4 floors, and thereby putting a natural cap to the amount of apartments posibel to build esp. in cities like tokyo or other cities that is cramed in between a mounten range and the osian and thereby there simply aint any way to increase surply and the prices will sky rocket only giving the riches posibility to buy apartments and in that case its very usefull with rent caps. at it makes the city function as if u didnt have any low wage employees availabel the city whould grind to a hold. other expampels chould be cigeret prices what have a floor to decrease demand or petrol. to improve health and the envirement. so it is really about when is the right time to employ the right tool in the toolbox thou ofc it is not a catch all method. and the market aint allways good even thou most amarican economist want it to look that way. thou ofc the market is allways great for the once with money ;)
I hate to be that guy, but when you look at the biggest supporters of rent control it's generally the urban rich because it decreases the cost of their living without really providing the landlord neglect.
+Quinn Bailey I assumed that Rent Controls only applied to a cheaper level of housing, like a form of Subsidized housing for poorer people? I would assume that the mega-rich would pay the full price for those penthouses and such. Or maybe it is just somewhere in-between that the line is not at an optimal point?
+David Learmonth The better way to respond to high rents is to allow people to build more houses and apartments for people to live in. Imagine a city with 1000 houses and 2000 households who wish to live in the city. Rent will be what the 1000th richest household is able to pay. If we impose rent control on 100 houses, 100 households from the poorer half can get a home instead of the 901st through 1000th families. It doesn't mean that more people can afford to live in the city. It just shifts who gets a house.
If instead the city allows people to build more homes, the rent will fall to cost to build another home (because if a landlord tries to raise rents, someone could build a new home and charge less). This would allow a lot more than 1000 people to be able to live in the city. The poorest households might not be able to afford even these lower rents, but they can be helped by income subsidies if the city thinks that everyone being able to live there is a valuable thing.
+Quinn Bailey the rich can BUY those urban properties genius, it's the austerity-driven millennial rent generation that DOESN'T HAVE MONEY TO GET ON THE PROPERTY LADDER, who'd want to pay inflated rents in perpetuity if they can just buy the damn thing???
So no, rent control establishes an equilibrium, say in Berlin where annual rent increase cannot go above 10 percent of inflation rates, ensuring rent is neither deflated nor inflated.
Remember what caused the flipping austerity in the first place? The God damn property bubble nobody thought could burst and so didn't seek to control? Do you people never learn your lessons???
What is good for the economy is not always what is good for the people.
+Mathias Signebøen yep, look at Britain, the economy is, in theory, doing well *cough*housing bubble*cough* but the poor are getting poorer, and the rich are getting richer
+Field Marshal Fry That's why economists are very interested in fixing income inequality and other problems like that. A lot of economic research these days goes into health, environment, education, and inequality.
+Mathias Signebøen Yeah, it is. It is just worse for some INDIVIDUALS in the economy and not other individuals, while being better for the aggregate.
+Field Marshal Fry actually as long as GDP is growing in a developed country both the rich and the poor are getting richer. Just that the rich are getting richer faster than the poor, hence growing inexquality.
+Mathias Signebøen The economy is people buying and selling goods. That is what a market is.
"Sometimes market fail, and that is why the government needs to step in."
F.A Hayek: "I have a word for you."
Crash Course - double check where you have the DWL at the 3 minute mark. You can't have DWL where there wasn't consumer or producer surplus in the free market previously. You have the base of the triangle being where the shortage was and the tip of the triangle where the eq-price was. The triangle should be the reduction of CS and PS caused by the decreased Q.
crash course has been helping me through my exams since the 1st semester. now im in 5th. thank youuuuu crash course!
I'm glad the mentioned that minimum wage is complicated. When people use these simple explanation to explain why raising the minimum wage is bad is a lot like people trying to explain the we can design the space shuttle to look like a brick because you can ignore wind resistances.
The argument for rent control (and other price ceilings on items that are a basic human need - food, water, shelter) is that the demand curve is nothing close to a slope. The demand curve in its purest sense for housing is a vertical line, with any true slope being leisure housing - holiday homes etc. Every human needs somewhere to live. The only curve is on the quality of housing -- one person can live in half of a 2 bed flat, or have a mansion to themselves.
Rental ceilings tend to apply only to specific home types. Modest homes, it makes sense to keep a price ceiling. As a society, it's deeply wrong that there should be any income level where it is impossible to buy a basic warm roof over your head. Humanitarian philosophy argues that even someone out of work (either out of the employment marker, such as disabled, or the frictional unemployed between jobs) should be able to receive basic shelter.
The argument is that any product a person could die without access to, is dangerous when exposed to an unregulated free market. When you option is pay or die, market pressures will drive a person to sacrifice absolutely everything else for that need. Housing, medical care, food, water. These things are insulated from the usual freemarket factors, by exploiting the absolute need of the consumer. The closer the demand curve gets to zero, the more regulation that industry needs to remain ethical - if you can make 50% of your consumers pay 25% more, while 5% of your potential consumers die from lack of access to your services, fiduciary responsibility demands you do so.
thanks for mentioning venezuela, we've been suffering thanks to some ridiculous price control policies.
however not having price ceilings on rent means that people can no longer afford to live in certain areas, look at London, housing there is massively overpriced, because the government refuse to build, preferring to leave it to the market which does not build many houses as it makes a greater profit building a handful and selling them at extortionate prices
Diana, the Inorganic Vegan
or, what is good for the economy and markets is not always good for the people
I'm not sure of the particular case of London, but in general the reason builders don't build in response to market demand isn't because they benefit from higher prices (doubling the price of one housing unit isn't nearly as profitable as opening up 100 new units). The typical reason things don't get built is excessively restrictive regulations regarding zoning, expensive building codes, expensive and often difficult to get approved at all construction permits, etc. If the government rejects new buildings or makes it too expensive to make a profit, then obviously new buildings don't get built and the price of existing buildings goes up.
+BobWidlefish In the case of London we can arguably see a mismatch in objectives. If your goal is to ensure that people born in a certain area of the city can afford to live there then there may be a case for price controls when physical limits (i.e. space) prevent an increase in supply.
If however your goal is simply to house as many people without specifying where then price controls are a bad idea for the reasons given in the video.
***** *"when physical limits (i.e. space) prevent an increase in supply."* Physical limits aren't a limiting factor yet. Look at Tokyo. One can always build taller structures, and replace low-density housing with higher-density housing. The typical reason such solutions aren't used in a given area is because of regulations that prevent it (e.g. regulations against having tall buildings). I would argue price controls are not a solution to anything, it's just a band-aid that tries to cover up the wound of excessive regulation with even more regulation. :) It reminds me of a saying about government: _"If you think the problems we create are bad, just wait until you see our solutions!"_
The thing is, if you prevent new construction with overly burdensome regulations then the only way to get new construction is to increase the prices until the very high prices are sufficient to overcome the huge costs imposed by regulations. Price controls prevent the price from ever getting high enough to pay for new construction that overcomes the expensive regulations. So in the final analysis price controls ensure there will be a shortage forever.
+Field Marshal Fry London is a complex subject, there's a lack of supply there not because people don't want to build (as stated by other person, it is often more profitable to build 100 houses than 40) but London has huge green belts that takes away a lot of land to build and NIMBYsm is also a problem in London, where it is difficult to get building permits without the locals supporting the project.
It is a more complex subject that can't be fixed with a price ceiling, since the supply is already low and construction will be lower with a price ceiling (even if, paradoxically, building will lower prices probably more than the price ceiling). There's also the problem that a price ceiling could create a black market, which could potencially distort the prices and hurt the consumer even more (people charging a black market rate for housing that would be twice the one they could find without the price ceiling just because the supply of housing at the legal price is low and prices higher than the legal price will be higher than normal because of the distortion)
"The amount of gas society wants is where supply meets demand". 2:57 Not so. I have often wanted MORE (demand) than what was available (supply). What's described is supply being equal to USE. And subsidies have ZERO effect on the economy. Why? Because it's nothing more than the bill being paid by someone else.
Where is the *main outtakes from this lesson* guy?
I disagree that they assert that all economists don't agree with subsidies and market loans. I am an Ag economists and my university is responsible for much of the research and writing of Ag policy for things such as the Farm Bill. They recognize problems and have to identify the needs of producers and the market.
The biggest hurdle is that Americans expect a constant supply of goods. If a catastrophic event such as drought or rain wipes out a farmers crop, many often wouldn't have the resources to plant another year, or they might stop production. Crop insurance and loan rates are meant to protect the supply of agricultural goods.
So I disagree that all market controls are bad and they say that too with the minimum wage. My experience with non-ag economists has shown that they don't fully understand or encompass the entire Ag industry when they make assertions. But this is why it's such a huge field of study.
"Some economists argue that all government intervention creates a distortion"
ARGUE? What is there to argue? if the government wanted things to stay the way they are it wouldnt interfere at all. When someone interferes they WANT to change (AKA distort) something. And the thing with complex economies is that you cant touch one thing without touching everything else at the same time.
+isphus
They say distortion to imply the message: "GOVERNMENT INTERVENTION = BAD"
If they were being educational and honest, they would say "alteration" or "change" instead of a negative word like "distortion"
+Attila the Fun No, it's definitely a distortion. It has the effect of a lie (hence the "negative" language) on people, who plan their lives around the economy; if prices are not accurate, one's buying/selling plans cannot be accurate, and they are doomed to come to harm once the other shoe drops. So yes, distortion.
Coolidge Dollar The point is to not use connotatively negative words since there are times where it is good and other times where it is bad.
I think the word "distortion" is used because it affects more than just what was intended to affect. Because it's all interconnected, a change meant for a positive effect somewhere might end up having negative effects somewhere else. It's not just a change, it's a distortion, because it's unpredictable and unintended.
Distortion is basically loss of efficiency.
In economy, allocation of resources happens with repeating Prisoner’s Dilemma, which allocates resources with Pareto efficiency. When government intervenes, it encourages Pareto-inefficiency by changing values in the matrix with subsidies.
Before subsidies
AA: 1-1
AB: 10-0
BB: 20-20
BA: 0-10
After subsidies
AA: 1-1
AB: 1-0
BB: 10-10
BA: 0-1
Thus, encourages to competition are blown. There is no Pareto-efficiency.
Awesome helped me learn lots
I am disappointed at the dead seriousness and annoyed sarcasm of these comments...
Ah well, at least there's still a comment about Mr. Clifford's ACDC belt.
I farm 3,000 acres of crops and raise 4,000 head of cattle and I hate farm subsidies. I have neighbors that get hundreds of thousands every year from the government. Nothing wrong with crop insurance but it also should not be subsidized so that you are not inflating land prices
Renewable subsidies have worked though, renewables are now on a path, and in some instances probably already is, cheaper than for instance coal. But some renewable subsidies are wrong, like guaranteed income subsidies removes incentives for innovation. Subsidies should instead be targeted towards RnD, like matching dollar-by-dollar in RnD investment and raising demand through state capitalism, like setting up renewable investment funds that partner with the private sector (including crowd investments, which we see too little of) to invest in new installations, technology start ups and give low interest loans for the expansion of existing business.
Am I the only one who thinks that Adrienne was more cheerful in the initial videos? No doubt about her work, she's explaining perfectly well throughout. Just observing this slight change.
Mr. Clifford, didn't you teach at San Pasqual?!
+FelixWing1999 Yep, that's me:)
@@JacobAClifford Question. Why does this video treat labor markets differently than markets in corn or anything else? Markets work like markets work. A price floor on corn is like a minimum wage for farmers and a minimum wage is a price floor for labor. A price floor on corn leads to less demand for corn and a price floor on labor leads to less demand for labor. It leads to more people wanting to produce corn and more people wanting to work in usually lower paid fields. My state has now raised the minimum wage to $15 which is nearing the wage for some skilled labor and exceeding the wage paid for some semi-skilled labor. So what's the motivation to learn skills and knowledge to get a job that has responsibilities greater than showing up and flipping burgers. Also, given that restaurants run on slim profit margins this has necessitated laying people off and automating certain tasks and, in some cases, restaurants closing. Incredibly, there are some in state government blaming employers that offer in house cafeterias to their employees free of charge as a perk of employment for the restaurants closing their doors instead of minimum wage increases. These in house cafeterias were around before the minimum wage increase. What next? Not allowing people to bring lunch from home? There are also those in state government who want to outlaw replacing workers with robots. This interference in private business is disturbing. All I can say is thanks that these people weren't around in 1800 or we'd still be harvesting by hand and hewing lumber by hand. Think what a house would cost.
That AC/DC belt is serious though, lol I love it
This might be a silly question but if the prices are set really low by a price ceiling, won't producers think to produce more because now many people will be buying it? Why there would be a shortage if producers can make up for it by an increased number of buyers at low prices?
This is the most civilized comments section I've ever witnessed on a video with more than 10 000 views
I’ve read almost every comment but NONE are about how fast they talk!
I literally change the speed of the video to 1:25 because they are too slow to me and I get bored otherwise lol
(but I pause the video a lot to take notes on the important points)
I think the key to "good" subsidies must be its instrumental capacity for a bold agenda. I mean, instead of handing them blindly, do it on a conditional basis: improvements in water saving, crops diversity, less dependance on industrialized seed-pesticides packages... The same goes for energy. There's a monstrous subsidy on nuclear and fossil fuels that critics of the renewables hide under the carpet: the enviromental and health costs and degradation neither estimated or charged.
how could you talk about subsidies and not mention oil subsidies? I am dissapoint
One problem that subsidies should (and can) solve are entry barriers. A big problem of new technology is that it does not pay for itself right away. On top others may copy a successful concept without going through the trouble of having to develop it by themselves and prove it. In this case subsidies might help to make investments to future technology.
The other part is to support core industries or infrastructure ones like mail service. It is much more efficient to only deliver mail in the big cities. However other businesses rely on the possibility to deliver to any location. Therefore it makes sense to run an agency like the USPS that operates at cost to facilitate business in the whole country. Or subsidies electric infrastructure.
@CrashCourse Loved the video, but I do have one question for you. Given the tremendous price gouging that the healthcare industry in this country accomplishes, would it not be better off to institute price controls in the healthcare industry to prevent [price gouging, especially among pharmaceuticals. This is common practice in most countries with single payer system and seems to be the best solution. What are your thoughts?
Thanks, this helped me out with my classwork.
I have to say that I am surprised to hear this video speak honestly about price ceilings and floors, most are not. I cannot wait to see the video about minimum wage now if they remain honest.
I wish you could also comment on economies of different countries like India and China and highlight the differences. It will be great to watch
3:45 Rent Control WRONG!
Rent control fights real estate fraud where the same apartment units get sold over and over and over and over again, which cause tenants rents to rise (due to negative equity), but ZERO improvements in the property or value added. Plus "discouraged construction" has nothing to do with rent control because this is about existing units being sold as abused assets.
Farmers Subsidies WRONG!
Conveniently leaving out a BRUTAL yet MANDATORY economic term here called EXTERNALITIES. Unchecked external disruptions to the market = market failure. This is why there is subsidies to begin with!
Question: What about Price Controls for public services, e.g. Education, Transport, Health Care and others?
The intention has been to keep these public services accessible to most other people, but because it is the government who provides these services (most of the time), the government could ensure there are enough services/products being produced through its other sources of funding, i.e. taxes. These would cause government financial deficit in specific sectors sometimes but I think the arguments against/for price controls are slightly different?
Honda motor corporation provided my means of transportation. Of course, I had to pay for it. Health care has nothing to do with government. Government is horrible at providing health care. Perhaps government shouldn't be in the education business, but it still isn't provided by government any more than a public highway is.
Anon54387 I don’t know which country u r in. But in this situation I’m talking about most OECD countries. In the UK, government provides national health services. And transport is not just about driving, it’s railways, buses, subways and airports. These are normally provided by the government. This question is about price control for public services not what constitutes public services.
We need this for Healthcare. Most of the money the pharmaceutical companies make is spent on advertising.
***** Yeah that hast to do with the generic drug laws that let corporations charge what ever they want.
Hooya2 Yes you miss understood me I said the generic drug laws. Which allow drug companies to hold on to a monopoly for 8 years of certain drugs.
Hooya2 I agree.
+ForrestSCS Some of these laws are necessary to incentivize innovation. The price of researching anything in the field of human health is extraordinarily expensive, and the price is climbing exponentially due to an effect dubbed "Eroom's law," which is essentially the inverse of Moore's law. Becoming more precisely targeted (aka safer and more effective) while working within chaotic biological systems becomes more complex the deeper into the "nitty gritty" of it's functioning you get. As an example, Tylenol simply blocks an enzyme's active site and lowers it's activity, slowing down a pathway that causes pain, but also coincidentally fits into several other proteins, which give it numerous toxic interactions with other drugs. Many drugs being developed now go through several stages of metabolism before reaching their destination, allowing them to be delivered to a more specific target with fewer side-reactions. These are just de facto more difficult to develop, and the amount of testing required to pass the (extremely necessary and important) regulatory hurdles of the FDA is staggering.
The price of drug development is driven partly by the fundamental laws of nature, not *just* capitalistic greed, although greed is still a major part of the high prices we pay. This is an area where I believe government subsidies for research costs can dramatically reduce the cost to the consumer.
This isn't to say the laws do not need to be reformed, they do, but doing away with intellectual property laws surrounding drug patents altogether is a huge mistake. These laws ensure that those who innovate are paid for their work, and without them research would stagnate, which is bad for everyone.
+ForrestSCS
The Indian government has done EXACTLY what you said. It does not recognize intellectual property rights for healthcare. The result? Millions of people, I repeat MILLIONS of people, who would otherwise die receive healthcare.
in the uk in a place called Cambridge the house prices are so high that the basic infrastructure of the society is unsustainable because they lower paid jobs such as nurses teachers store assistants can't afford to live there
I feel this video is a very right sided view, maybe the next could be less biased, thanks, big fan of the show
Watching this 2022!! Amazing, I can gather so many current examples
This whole discussion assumes that the real market follows supply and demand curves. Unfortunately it doesn't. Profit and production doesn't move elastically. The conclusion that price controls are always bad is only correct if this basic idea of supply and demand is also correct.
If you lower prices, and companies were making a HUGE profit, they're not necessarily going to cut back production if they're still making a LARGE profit. They certainly don't *have* to. However there are reasons they might.
A business may not increase production to meet demand, because they would rather drive up prices (particularly when they have a partial or full monopoly, which often happens in unregulated markets). Lower total profit isn't always bad if it leads to higher margins and lower risk.
This is the same reason that companies that were making several billion dollars a year in profit cut jobs during the recession. The recession hardly hurt some of them at all, and their operations were still profitable. But they cut back to reduce risk exposure, despite the fact that future new staff will need to be trained, costing them more in the long term. These are the kinds of short-term decisions that make make sense from a business perspective, but are irresponsible from a social perspective.
Economic theory is great. The problem is that the real world is much more complicated, and any system that is based on greed is going to have flaws. The government needs to step in not to make the market work better, but to protect people from the whims of that same market, which in truth, cares nothing for them beyond their checkbook.
+David Wood The market absolutely follows supply and demand curves. It does not do so perfectly, which should be obvious since nothing is perfect, but in general the rules do apply.
+Joe Lima there may be demands but the supply, when overly inflated, the demand simply cannot afford it.
China's ghost cities, yes there at hundreds of millions of rural migrants flooding urban cores, so by logic more housing meets more demand, creates social security for the poor, uplifts them, gives them expendable income so they can graduate to middle class to feed back into the consumerist society, no?
No, houses are inflated to absurd levels no migrant can afford it (when they can build their own house), they'll just earn money and save it for themselves so they're taking capital out of the flow and enclosing it into their isolated closed loop. Great for sustainability, disaster for the national coffer.
So the funny thing is there are tonnes of upmarket condos and nobody living in them, or bought up by landlords hoping to inflate rents further to ransom back their investment.
Correctly meeting the demand means curbing profit margins to create realistic prices, a lesson most opportunistic capitalists don't get. This is where rent control and and subsidies come in, or the selfish few don't break the system.
Da ve Ghost cities in China have nothing to do with any market, that is the Chinese government manipulations and mandates.
When you say "selfish few" do you mean politicians who set bad policies and destroy housing markets? Because obviously if a "capitalist" doesn't understand the market well enough he will just go out of business and someone better prepared will take his place while a politician setting a bad policy might create giant ghost cities that nobody can afford to live in and since his only concern is GDP and building empty buildings raises GDP then he has done his job well.
+David Wood Government has a role in assisting people who are unemployed. But as this video demonstrates price controls and subsidies are counter-productive.
+David Wood
Exactly. You can see how entrenched massive corporations inflate prices within the US because no one can really compete. Especially if you look at the prices of internet around the world. It's ridiculously more expensive in the US because we don't really have a choice. The big ISPs feign competition with each other while they try to suck us dry.
De Beers sits on diamonds to keep the prices jewelry up.
Pharmaceutical companies are well versed in extortion.
And as you alluded to, everything about the oil industry is chicanery.
While all of these corporations avoid being labeled a monopoly, they have the leverage that makes them functionally identical.
Sometimes I wonder if the only way to get these entities to really compete is to set up government-owned equivalences. These government equivalences, while initially created with tax money, these national companies would be required to be self-sustaining and even pay back the initial investment. But everything that happens within these companies would be transparent-- from the costs of building maintenance to materials to the salaries of the employees. And given the inefficiencies that everyone accuses the government of, this shouldn't create stiff competition, but it should help curb the excessive abuse we see all the time.
its really helpfull everytime. plz doing the good work of making education this accessible and responsible among the people. i intend to contiribute to this great work once when i have the resources to do so
Wait, wasn't gas inelastic?
The negative effect of agricultural subsidies only occur in rich countries. Here in the Philippines, the farming industry could almost die if the government won't subsidies them.
The universal laws of supply and demand work everywhere EXCEPT the minimum wage? Thats too complex for the market to figure out?
+Albion Laster The problem with Supply and Demand is when there are basic needs in play. You don't absolutely need a couch, so couches have to be affordable for couch makers to earn money. But you do need a wage, so companies like Walmart and McDonald's could just pay you $3 an hour, and if you don't like it, there's a dozen other people who want a job who can replace you. It wouldn't result in more jobs either, since there is only so much low skill labour needed at any moment.
There is no problem with supply and demand, its a universal market force. Its funny you mention mc donalds, and 3$ an hour. I worked at macdonalds for 3.15 per hour in high school. Back to your point, If there was no minimum wage there would be more jobs. Employers would just pay based on the skills required for the job..
+Albion Laster That's totally why the early 1900's were a worker paradise, right? Oh wait, no they weren't, they were f**king terrible.
+Albion Laster That's totally why the early 1900's were a worker paradise, right? Oh wait, no they weren't, they were f**king terrible.
that has more to do with technology than the price of wages. coal mines suck less with conveyors and electricity. farms suck less with combines than with mules
Great primer on microeconomics!
When you guys say " economist says/means/claims x", who are these economists?
99% of economists & Nobel prize winning economists.
4:41 "One argument... we will run out of food and die."
Any economist who seriously proposes that market demand for food can be so low that we simply won't buy it should be fired immediately. They obviously don't understand how humans work.
It is not about one’s propensity to consume, but rather about one’s ability to consume.
Oh my gosh, the mention of Moonbase Alpha made me laugh.
They incorrectly identified the DWL from price ceilings at 3:10, right?
I agree. They shaded in the wrong triangle.
The lesson? Economics is not a science, it is politics.
+Jere Mitch
Anybody who says Economics is a science is a fool.
+Jere Mitch It's defined as a social science. If you study economics at a high level, you realize how scientific it really is; it operates no differently than other scientific fields. In the macro environment, there is certainly room for ideology and politics. But in the micro environment it's quite objective. It's arguable more scientific than psychology, meteorology, epidemiology etc.
Here's a nice article to look at: www.nytimes.com/2013/10/21/opinion/yes-economics-is-a-science.html?_r=0
+blownspeakersss Meterology and epidermiology are incredibly bad examples for your argument. Both can use the scientific model to prove or disprove hypothesis and can PREDICT outcomes based on known variables. Of all the soft sciences economics has proven to be the least predictive; with massive amount of known variables available to be studied. Macro economics can be used to define and understand behaviors but does horribly at predictive analysis and policy making. Even Psychology, with it's constantly redefined theories and subjective analysis, still can predict behavior far more accurately than Economics has ever been able. Economics can only work in hindsight and is often only useful as a political tool.
Jere Mitch First of all, macroeconomics is not about predicting recessions -- it's about understanding the "big picture" by utilizing data analysis techniques. It addresses questions like how can we reduce poverty or unemployment? What is the effect of education or healthcare on society, and how can we make these resources more accessible to all? How can we promote economic growth in developing countries without jeopardizing the environment?
A subject's predictive ability is not a measure of how scientific it is. What can anthropology/archaeology predict? Or ecology? Computer science? Epidemiology? (you can't predict disease outbreaks, but you can study how to prevent them). etc...
Notice how in my previous post I said that the MICRO environment is arguable more scientific than meteorology, epidemiology, etc. Both macro and micro have become increasingly scientific, but micro in particular has become quite objective in many regards.
It's a social science that is, like everything: History, sociologie etc, related to politics :)
Please make an episode on Universal Basic Income.
The disclaimer in this video suggesting that these principles are universal with one exception, wages (minimum wage) is baffling to me. Either the principle stands or it doesn't. These laws don't just change because the prices being set by the government are for wages (in this case, a price floor). The same devastating consequences can happen.
Can you put some of the ideas from these videos into historical perspective? You could do a show about the price controls that were enacted in the french revolution, and how disastrous that was, for example.
I've got a different view of rent control. Rent control is kind of similar to the minimum wage and is rather complex. Because you're locked in to a 12 month lease often and you often don't fully know the condition of a property until you've lived there for a while, a lot of landlords get away with not maintaining their property.
Hi CrashCourse! I may be late for a request, but can you explain the relationship between the increase of wealth and the diversification of assets (tangible, financial and intangible) in the last decades. I can't seem to find information about it.
And yet in cities like London, lax rent control leads to prices that are 108% higher than the rest of the country. And London still has a housing shortage.
The government can push innovations without having to cut subsidies, an obvious fact that people seem to be missing. Incentive doesn't have to come from an empty bank account. The government could give grants to potential innovators, subsidize loans for technology adoptors and even use advertisement and seminars to encourage innovation.
Price Controls, Subsidies, and the Risks of Good Intentions
- Early 1970s, Nixon established a 90 day price and wage freeze (purposed to deter inflation) to the dismay of economists
- “One of those plausible schemes with pleasing commencements, [that] have often shameful and lamentable conclusions.”
- Price control
- Price ceiling - when the government sets a maximum price for a specific good or service (producers no longer find production profitable due to cheap prices and thus the lower price will decrease the amount of product produced - a shortage)
- Rent control
- Idea is to increase affordability for tenants, which enables long-term tenants to stay in their homes when real estate prices rise
- Lower rent discourages renovation and new construction, reducing quantity supplied
- Result is a shortage of apartments with landlords that have few incentives to maintain their buildings and be responsible to tenants needs
- Economists are not at all split on rent control. Pretty much all of them think that price ceilings on rent reduce the quantity and quality of the housing that’s available
- Price floor - a law that sets a minimum price in a specific market
- Keeping the price artificially high and not allowing it to fall down to equilibrium
- Higher price would give producers an incentive to produce more, but, at that high price, consumers are instead encouraged to opt for substitutes
- Argument for price floor - if producers cannot get a high enough price, they’ll stop producing and, in the case of essential products, we will run out of food and suffer
- In terms of actually helping consumers and producers, the vast majority of economists consider price controls counter-productive. But there is one notable exception: minimum wage
- The amount of gas society wants is where supply meets demand. Producing any quantity less than that will result in deadweight loss.
- The quantity produced at the price ceiling is not allocatively efficient
- As long as it is below the equilibrium price, the lower the price ceiling, the lower the deadweight loss and inefficiency
- Subsidy - a government payment given to individuals organisations or businesses designed to offset costs to advance a specific public goal
- While these maintain the market at equilibrium with no shortage or surplus, stable living, limited food price inflation, and encouragement of stable food supplies, many farmers are not poor (and are argued by economists to have the income they need to handle price shocks), and may discourage farmers from innovating (over reliance) as they have guaranteed income from the government
- A survey of economists found that 85% think the US should eliminate agricultural subsidies
- Economists recognise that market prices are set for a reason
- If corn prices decrease because of decreased demand, it is inefficient and wasteful to spend money on subsidies
- If there is a natural disaster affecting farmers then short-term aid may be required - but this is not the reality of farm subsidies
- In the US, agricultural subsidies have been around since the Great Depression. They were meant to help prop up farm prices and farmers.
- Direct payments - basically government grants handed out to farmers based on land ownership and historical production levels
- In the US - received regardless of the market price for crops or production rates (proved inefficient and eliminated in 2014)
- A large portion of US agricultural subsidies go to crop insurance
- Some economists argue any form of government interference distorts the market, resulting in unintended consequences
- Crop insurance guarantees farmers and income and could encourage them to take more risks (planting on less fertile land)
- If demand is greater than production, the result is a deadweight loss (underproduction of this product). A subsidy would aid society and improve efficiency
- Govt subsidies in research and development in energy stave underproduction
- Some economists argue for this reason, deadweight loss is reduced
- Other economists argue businesses already have an incentive to innovate and that subsidies create false demand and that there is no deadweight loss (and even if there is, markets will adjust)
- In conclusion, subsidies aren’t inherently good or bad and depend on societal and and market values
"Because of NASA we have memory foam, scratch proof lenses, and moon base alpha." We provide them with over $18 billion a year and their impersonating a manufacturing company. Totally worth it.
This video is not only offensively simplistic, it also ignores the many cases were we accept price controls because they are useful. Most of these examples are under explored and there is almost an addiction to supply and demand curves.
Rent controls, for example, have worked in many cities and, yes, rentals landlords still ignore tenants in cities without rent control. Lack of affordable housting is a nation wide problem. Healthcare, water prices, education, these are important examples where price controls work.
Rent control does work because it adverses an externality. Conservatives and libertarians HATE the word externality because it thrown that curve ball of economic dynamics that change the supply and demand curve from their warped "equilibrium at all times" world view.
I really love this series. Keep it up!
The concept of artificial price manipulation is generally bad because it's like treating an infection with a band aid. Even though you're covering the problem in the short term, in the long term price manipulation is unsustainable. If people are starving, for example, then a natural reaction would be to demand that farmers reduce the price of rice. However, from the farmers perspective, that means if you were going to invest in a new plot to grow more rice, you can't afford it. Farmers end up producing less rice, even though the problem you're trying to address is mass starvation. What's better is government to fund more efficient technology that expedites the farmers work and allows them to expand their plots so that they can actually produce more rice with less man hours, therefor naturally lowering the price of rice and increasing its quantity. The same concept also applies to real estate in New York City (although it's more nuanced). Rather than worrying about the price by itself, people should address the reason why prices are so high, perhaps over-regulation leading to a market that stifles innovation in housing options.
As far as the farming arguments, the primary reason government intervention is continuing is not due to farmer's plights. Nor is it unwarranted. We easily forget that of all the natural resources the USA has food is by far the most politically powerful. We often don't think of food in the international sense but our ability to provide aid to foreign nations without much pain has been one of our greatest tools to force open borders or begin/continue dialogues with even our most stout enemies. Paying to leave farming land fallow but capable is a collective interest that politicians don't often explain.
"The law of equilibrium" they say it's a law except when it's about minimum wage... it's either not a law... or you just don't want to acknowledge that minimum wage produces a price floor above equilibrium...
Bob Sagit It's a law in certain models of competition but not in others.
one argument that i've seen in favor of food subsidies is the possibility that a foreign supplier could get all shitty with us and decide to cut off shipments, or that they could experience a severe drought or calamity or something and just not have the ability to meet demand.
So many videos based on theories with false assumptions about rationality and perfect competition. Can you talk about Ostom? Or Pickety? or any theories backed up with data collection instead of pure speculation (e.g. structural models and game theory)
+Nicholas Garcia I'd be interested to see if they do a video on the utility & limits of structural models or ideas like economically rational actors.
+Nicholas Garcia Who needs market saturation, profit margins etc. when you have a chart that translates to: Humans live next to a river -> the river is gone... because humans had "free water"
and who needs data, when you can quote well known newspapers, who looked at the data for you.
crash course really dropped the ball on this one
Nicholas Garcia Jesus this isn't a college course meant to solve the worlds problems... Its a "crash course" on the basics on economics, just to get people started, maybe do your own research after that. Oh wait I forgot people are inherently lazy and dont want to do the work themselves
It's meant to be highly simplified to introduce the concepts. It's like learning about trajectory in basic physics without accounting for air resistance and other factors. It's obviously not totally accurate, but it makes it easier to understand the concept.
This is a CRASH COURSE. They simplify to explain a concept. And the concepts DO generally work in real life. Not every time, but that’s never the point. For all intents and purposes, supply and demand DOES explain how pricing works in real life.
America's current policy on agriculture is subsidies for agriculture and tariffs on foreign fruits. This is supposed to help farmers in America. The problem is that this policy comes at the cost of the American taxpayer who has to pay for these subsidies. Only 2% of Americans work in agriculture and even most of them don't benefit from subsidies. The ones who benefit are usually farming companies.
In their analysis of "the benefit to society", they are only considering what is seen within this market. They are not considering the fact that the money collected to provide a subsidy has been taken in small portions from all Americans through taxation. This money would have been equally effective in providing incentives to increase the supply of agricultural products in the hands of private individuals as it would be in the hands of the government and also be less costly to the nation as a whole.
If there are corn shortages due to a bad year in the US, prices would rise, which would make it more profitable to import corn from other countries. In time, the higher prices of corn will provide the incentive to American farm investors to rebuild failed farms, thus restoring American corn output and prices to their original levels.
Government subsidies presuppose the government's ability to know what demand there is and will be for corn. They also inevitably give way to corruption and further extortion of the public as recipients of farm subsidies lobby to retain and expand their subsidies. This leads to large amounts of money given by agricultural bodies to candidates in the form of campaign contributions, with the candidate promising to pay them back once in office. Not good.
Economics is a social science
While I would agree that price controls are something of a government sledge hammer to a nail sized problem the other end of the issue is based on a false assumption; specifically that the market always works to find the correct balance between supply and demand for a price.
One of the flaws with that line of thinking is that it ignores the human element. Simply put, people are not economically driven computers. People make choices on what they think is optimal but that doesn't mean that choice truly is. There are drug addicts that know they are slowly killing themselves but the immediate need to alleviate their addiction due to biological and psychological reasons more often than not appears to be more optimal than quitting because of how difficult that is. Just because a company sets a price doesn't mean that price is based on some kind of objective verifiable reason.
FINALLY SOMEONE SAID IT
You had me at "funny, smart and attractive."
"except for maybe physicists, because they have unbreakable laws and controlled experiments"
oh my sweet summer child, you have no idea how wrong you are. (Quantum physics, AKA: everything you know is wrong.)
thanks guys
No, I want enterperneurs to step in when free markets fail. I don't want our government doing the "real" work. I just want our government to enforce laws, keep our military/police maintained, and some infrastructure maintained.
Thanks for this video! It’s an economics course for idiots, I didn’t go to college but if I did I probably wouldn’t have listened anyways, when you get older you find this information to be valuable!
They totally neglect price gouging. Without any government limits and regulations goods and services that are the necessities of life corporations tend to gouge the public. We see this in healthcare insurance prices, higher education and housing costs. Funny how the one thing they bring up time and time again as examples is food production. Have you noticed that food generally is pretty inexpensive. There is a balance point and that point is where the good of the people and the greed of the corporations and held in check to allow everyone to thrive. Yes you can't set the price of gas too low so that it is below the cost it takes to make it. You can't set the price too high to satisfy the greed of the corporations because then the public will suffer. A completely free market with no limitation set by the government only serves the needs and wants of the corporations and CEOs and and not the people.
between farmers and consumers are the middlemen
Floor on prices of corn may mean middlemen will have to reduce their cut to keep their ware selling, while farmer still gets it
It's almost like the free market is better at maintaining the economy than the government is. hmm, who possibly could've known?
And by the way, what the hell is crop insurance? they just have insurance for everything these days don't they
As long as it's voluntary I have no problem with that at all...
I don't understand how there can simultaneously be a fear that price controls might stump innovation AND a fear that subsidies might induce risk. Innovation involves risk and it doesn't seem like subsidies and price controls are different enough - both are giving money - to produce opposite results...
"price ceilings or floors just don't work" does this include labour and therefore the minimum wage?
Labor is pretty much a product everyone sells so it does have a market. I'm confused as to why a price floor on it would be an exception.
+Ozziedood Because there is a social ill that can be had from trying to be maximally efficient with human life and effort.
Imagine someone who is working a job that pays just enough to cover their regular living expenses, thus the employer is getting the labor he or she needs and the employee the food, shelter, and water he or she needs, and each gets nothing more or nothing less because the laborer is not particularly skilled nor is the employer looking for someone exceptional.
Now, say that person gets sick and thus has his or her cost of living go up, and this cost is more than it would cost the employer to train a new random person.
It could be thought that it is a better use of resources to simply fire the employee and hire a new one, leaving the former employee without a means to acquire basic necessities and thus die without the charity of others.
There are few people who are so without compassion that they would see the trimming of excess humans in such a way as an acceptable state of affairs.
Now, you can argue that the people who cannot get jobs because the price floor on labor would be greater than the number who would be adversely effected by the lack of one. But seeing as statistics like this money.cnn.com/2013/06/24/pf/emergency-savings/ are out there, I would need to see some rather amazing evidence to agree with that hypothesis.
nick holmgren My argument is that you are selling your labor and as a result your skills determine your wage.
This makes the job market competitive in a way that if you feel like you are not compensated enough for your skills, then you can look for another buyer who will pay you more and leave the previous client.
As for the case of not being able to buy basic necessities, it would be very bad for companies to not lower the price of their goods as a result of paying their workers less.
It's obvious that if clients can not buy the companies products, then the company is in trouble and has to cut the cost of the product which will be simple since they cut the cost already in their labor.
I also do not understand how pulling up a statistic on Americans not saving money will prevent lower skilled workers getting more jobs.
+TheMostAugustCaesar One thing they didn't bring up was the idea of differing elasticity of supply and demand. People need to earn wages no matter what, and some is better than nothing. So, it is possible for suppliers of jobs to artificially lower the price of labor to the point where it does more harm than good. Another example of this is Martin Shkreli, infamously raising the price of a drug from a few dollars to hundreds. Demand for life-saving drugs are inelastic, and therefore people have no choice but to swallow a bitter pill. That is where price ceilings and floors may come into helping a greater good.
+artemisfowl52 wait, the drug you're talking about just got the competition of a $1 alternative.
www.cbsnews.com/news/express-scripts-will-offer-1-alternative-to-750-daraprim-pill/
Economist need to go work on a farm for a while. While not all subsidies are necessary, crop insurance is. Many farmers make lots of money but have as many (or more) expenses as a business
I'm guessing that economists won't necessarily disagree with the need for crop insurance... it is a useful tool for risk minimization at the very least.
But, I'm guessing that there is more to subsidies than just insurance...
Nobody is opposed to farmers getting insurance. The pushback comes when farmers force taxpayers to pay for it.
+David Underwood If they make a lot of money, how can they not buy insurance?
+BobWidlefish What happens when the taxpayers are forced to pay for things we don't need like more tanks and stealth fighters? We waste way more money on the military than on farmers.
+David Underwood +TheChosenOne Crop insurance is a classic example of where regulation can be useful. Unlike a normal insurance market a drought can make many farmers in an area need to claim insurance at once. This makes insuring crops less economical than normal insurance so the government underwrites it.
In America there's less need to do that as companies & individuals can absorb regional losses to an extent but in low income countries the lack of government underwriting makes crops un-insurable.
Bernie Sanders 2016 #FeelTheBern
To bad he has not seen any of these videos
+lieutenantbears PLOT TWIST!!! He's reading this TH-cam comment section RIGHT NOW!! That would be funny
+lieutenantbears even if he did, I think he would still hold the same stance on a lot of issues. There are ways to fix income disparity and have a healthy economy. A lot of people have been brainwashed that it isn't possible.
+WoodsmanTA Please learn what communism is before you call people that word. Every one of Bernies proposals is already being done in other industrialized countries in Europe and it is working great for them. Why not us.
Libertarians, you mean
I can see this working with examples of needs like food or gas but what about items that are price gouged like electronics or college textbooks or say health insurance. Would a ceiling be beneficial in those areas?
WAAAAALUIGI!
Oh, oops, wrong video.
Awkward.
my boy Jacob Clifford making it mainstream? the GOAT
Geez, why do I have a feeling that Crash Course will try to justify minimum wage?
+Hooya2 Because they just said that minimum wage was an exception. I can't figure out why.
+Ozziedood Evidence suggests that when minimum wages are instituted, they don't have the negative effects many economists used to predict. They increase prices slightly, but nowhere near the amount you would expect. There are many possible explanations for this. One example is that fact that paying low-wage workers more money means that this money gets immediately spent and returns to the economy. This increases the multiplicity of the money supply, which is beneficial to the economy. But the truth most likely has several layers. We clearly can't keep increasing the minimum wage forever --- there's a point where it stops working. So we need to figure out what determines that point.
+David Wood I don't see how you can make that conclusion. When the raised the minimum wage in Seattle and DC the number of workers employed by restaurants had their largest decline since 2008.
When you raise the price of something people buy less of it. Yes we should provide a assistance for the poor but a minimum wage is a really really poor way of accomplishing that goal.
David Wood I'm not worried about the amount of money that will be spent by workers. This money will be spent regardless of how low or high minimum wage is.
My concern is that when you set a minimum wage you take out the lower bars of the economic ladder. It makes it harder for a low skilled worker to find a job and work his way up. People are always complaining about how much experience factors in to get a job. I'm sure they wouldn't care how much money they would be paid if they could just get their foot in the door and work to higher wages. Now you have adults with college degrees working in occupations that are appropriate for a teenager out of high school. But they stay in these jobs because they have no confidence to find another employer, they get married, have kids, and are suddenly shocked to find out that their job doesn't cover the costs of four people and want to raise it again.
Do you see where the issue is?
+David Williams That's not what the data says. When you look at data collected scientifically using correct statistical procedures, you find what I described in the vast majority of cases. Something should ring false in your response immediately in that you mention Seattle. It's FAR too early for anyone to have any credible data about Seattle -- we'll need to wait several years to make any conclusions there. Anyone who is making claims either way (positive or negative) right now is jumping the gun.