Real-world economics

Use AEA materials to illustrate concepts in economics

The used car market is a useful example of the lemons problem, but after a while, it can get old. There must be other ways of discussing asymmetric information – ways that illustrate the concept while sparking conversation and grounding the idea in a real world example. The AEA’s Research Highlight series can help. These short articles talk about recent papers, their findings, and how they relate to the world around us. Many focus on a central concept and can supplement more traditional classroom readings. The Journal of Economic Perspectives (JEP) also has accessible material that relates to everyday economics. You can find selections of these highlights and JEP articles organized alphabetically by concept below and in this downloadable PDF.

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Adverse Selection
  • How health insurance markets work (and fail)  | article
Asymmetric Information
  • Giving Pakistani parents more information about their children’s schools changed the educational landscape | article
  • What health choices do doctors make, and why are they different than most people’s medical decisions? | article
Cartel
  • Many cartel members undercut the other members without retribution. How? | article
  • The NCAA might be a cartel | article
Contracts
  • Contracts are relationships, and trust is important | article
  • Contracts may be able to prevent sovereign debt defaults | article
Comparative Advantage
  • Is water a source of comparative advantage? | article
Culture
  • Economists are studying culture more and more | article
Deadweight Loss
  • Gift exchanges tend to create deadweight loss | article
  • England’s 17th century window tax meant 150 years of deadweight loss | article
Externality
  • Electric cars export pollution to other states | article
  • Why spam email has externality issues | article
  • Why local officials in China began to clean up rivers | article
Federal Reserve
  • The downside of central bank transparency | article
  • A history of the Fed’s role in preventing crises | article
Financial Crisis
  • What does growing bank interconnectedness mean for future crises? | article
  • How investors viewed systemic risk in 2008 | article
  • US policymakers faced limits when responding to the 2008 financial crisis | article
  • How a modern-day run on a UK bank happened | article
Game Theory
  • A history of game theory and where it might be headed | article
Human Capital
  • Impatience contributes to lower educational attainment and earnings | article
  • How increasing human capital can help China’s economy | article
Incentive
  • Do parents skew their children’s birth dates for tax purposes? | article
  • Citizenship could disincentivize immigrants from pursuing illegal work | article
  • Confused taxpayers may be responding to incentives that don’t exist | article
  • How can you motivate yourself to go to the gym? | article
  • Why local officials in China began to clean up rivers | article
Inflation
  • China’s reported inflation might be too stable to believe | article
Monopoly
  • When sports leagues have monopoly power, cities end up paying for stadiums | article
Moral Hazard
  • Patients don’t seem to care about how much their hospital visit costs | article
Opportunity Cost
  • How citizenship changes the opportunity cost of crime | article
Public Good
  • Sample public good classroom game | article
Resource Curse
  • The 2000s commodity boom spurred Africa’s economy, but at what cost? | article
Risk Aversion
  • Why don’t investors invest more in stocks? | article
  • After a flood, the probability of another is low. Still, people buy more insurance | article
Social Capital
  • How the printing press may have bolstered social capital | article
Specialization
  • Can household specialization explain the gender gap? | article
  • Specialization has made online crime more productive | article
Subsidy
  • Should people receive subsidies to buy energy efficient light bulbs? | article
Supply and Demand
  • When illegal goods become legitimate, everything changes | article
Tax
  • Scandinavian countries have high taxes but maintain economic growth. How? | article
  • England’s 17th century window tax meant 150 years of deadweight loss | article
Technology
  • Technology leads to more job turnover, which might make people happier | article
Trade
  • Trade policy contributed to South Korea’s spectacular economic growth | article
Uncertainty
  • Comprehensive survey of the uncertainty literature | article
Unemployment
  • The US housing boom may have disguised a deeper decline in manufacturing | article
  • Has the natural rate of unemployment increased since the recession? | article