{"id":336,"date":"2016-02-26T23:30:04","date_gmt":"2016-02-27T04:30:04","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=336"},"modified":"2016-02-25T22:40:23","modified_gmt":"2016-02-26T03:40:23","slug":"tinkering-with-equilibrium","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=336","title":{"rendered":"Tinkering with Equilibrium"},"content":{"rendered":"

The genesis of this week's column is mostly based on chance; a chance visit, a chance purchase, and a chance reading.\u00a0 Nonetheless, the end result is a nice example of how government interventions in a market can look good on the surface but have a less attractive side underneath.<\/p>\n

Let\u2019s start with the chance visit.\u00a0 Recently, I had an occasion to stop off at a used bookstore near a college campus.\u00a0 The basic function of this establishment is to buy back textbooks at a cheap price, resell the products back to others at the going rate for used textbooks, and to store the unwanted product as tastes and approaches in teaching and the professors who teach them change.\u00a0 The fact that the resell price is significantly higher than the buy-back price seems to irritate the bulk of the clientele (judged by my casual viewing of the interactions at the register).\u00a0 The reason for this cost differential \u2013 that this particular book store needs to pay for the storage of the books, the labor of the various people who catalog and handle the product, as well as the rent and upkeep of the shop \u2013 slips by the average consumer.\u00a0 And, although this column is not explicitly about this mismatch of expectations, the basic theme of the unseen cost is.\u00a0 Looking back in hind sight, these preliminary observations of mine were perhaps a foretaste of what fate had in store.<\/p>\n

In any event, I began to wander about the store; an adventure in and of itself considering the vast number of abandoned titles piled precariously all over the floor.\u00a0 Training in the high hurdles would definitely be an advantage when browsing the inventory.\u00a0 Turning a corner, I came across the store\u2019s collection of Schaum\u2019s outlines.\u00a0 Overall, I am a fan of these do-it-yourself study guides.\u00a0 Not so much due to their teaching style, which is often minimalistic and confusing, but rather the vast number of worked problems that one can immediately dig into.\u00a0 The effect they produce is a lot like finding a bunch of how-to videos on YouTube with the convenience of the at-your-own pacing that books afford.\u00a0 Glancing at the shelf, my eye caught the title Microeconomic Theory, 3rd<\/sup> Edition<\/em>, by Dominick Salvatore of Fordham University and, almost on a whim, I decided to purchase it for a mere $5 dollars (which goes to show that one can get a bargain if one is willing to settle for yesterday\u2019s textbooks and study guides).<\/p>\n

In odd moments, here and there, I began to dip into the outline and amuse myself with some of the questions and solved answers.\u00a0\u00a0 Early on in the book, Salvatore goes to some effort to set the scope of the study to be strictly microeconomics.\u00a0 Interconnections of one market to the next are to be kept to a minimum.\u00a0 So I can\u2019t blame him for what I found shortly thereafter but I thought it made for a good \u2018teachable moment\u2019 about ignored or unseen costs.<\/p>\n

The scenario he explores is clearly contrived for pedagogical purposes, but I reason that if it is sufficiently illustrative to go into a Schaum\u2019s outline, it is also sufficiently realistic to serve as a valuable thought experiment.\u00a0 In this scenario, the micro-portion of the economy that is being examined consists of 10,000 consumers and 1,000 producers of a particular product, which he calls \u2018X\u2019.\u00a0 For simplicity, each of the consumers possess the same demand curve given by<\/p>\n

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