Economists have two roles. As scientists, they develop and test theories to explain
the world around them. As policy advisers, they use their theories to help change
the world for the better. The focus of the preceding two chapters has been scientific.
We have seen how supply and demand determine the price of a good and the
quantity of the good sold. We have also seen how various events shift supply and
demand and thereby change the equilibrium price and quantity.
This chapter offers our first look at policy. Here we analyze various types of
government policy using only the tools of supply and demand. As you will see,
the analysis yields some surprising insights. Policies often have effects that their
architects did not intend or anticipate
the world around them. As policy advisers, they use their theories to help change
the world for the better. The focus of the preceding two chapters has been scientific.
We have seen how supply and demand determine the price of a good and the
quantity of the good sold. We have also seen how various events shift supply and
demand and thereby change the equilibrium price and quantity.
This chapter offers our first look at policy. Here we analyze various types of
government policy using only the tools of supply and demand. As you will see,
the analysis yields some surprising insights. Policies often have effects that their
architects did not intend or anticipate
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