Re: income and substitution effect

[Alex T Tabarrok]

I do agree that one of the few applications of i. and s. effects is to labor supply (this was mentioned in my first post). (This is because labor is one of the few goods where the income effect is likely to be large.) Hence that is the context in which I teach the material. It is appalling, therefore, that most textbooks teach i. and s. effects early on and leave labor supply to an entirely different part of the text.

Bill, do you really mean to say that you think that Giffen goods are a real phenomena???! Even the classic, Irish potato famine has much better explanations (e.g. Rosen recent JPE) than in terms of Giffen goods.

As to what to teach instead there are many choices e.g. most intermediate classes don't cover the Coase theorem or any law and economics, finance is another topic that could be taught more at the i. level.

Alex


--
Alexander Tabarrok Department of Economics, MSN 1D3 George Mason University Fairfax, VA, 22030 Tel. 703-993-2314

Web Page: http://mason.gmu.edu/~atabarro/
and
Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621 Tel. 510-632-1366