EconPapers    
Economics at your fingertips  
 

Targeting Teaching: The Welfare Costs of Market Restrictions

David Colander, Sieuwerd Gaastra and Casey Rothschild

Southern Economic Journal, 2010, vol. 77, issue 1, 213-223

Abstract: In most introductory and intermediate microeconomics textbooks, the measurable welfare effects of price controls, quantitative restrictions, and market restrictions more generally, are depicted as a Harberger triangle. This depiction understates these restrictions' inefficiency costs because it captures only the “top‐down” distortion caused by the wedge these restrictions drive between market‐wide quantity demanded and quantity supplied. It ignores the “bottom‐up” distortions caused by allocative inefficiencies on the constrained side of the market. In this article we describe a simple graphical exposition of these bottom‐up distortions. We argue that this graph can provide students with a picture of both the top‐down and bottom‐up inefficiencies. Moreover, it can be used for simple back‐of‐the‐envelope estimates of the magnitudes of the two inefficiencies.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.4284/sej.2010.77.1.213

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:77:y:2010:i:1:p:213-223

Access Statistics for this article

More articles in Southern Economic Journal from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-22
Handle: RePEc:wly:soecon:v:77:y:2010:i:1:p:213-223