economic theory

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Doctor, do I really need this: An insight into the motivations behind medical overservicing

I don’t know about you, but I often feel like I’m being called back to the doctor for no reason – to take another ‘all-clear’ blood test, have a six-monthly examination I didn’t know I needed, or simply undertake a fitness check - all to be told that, at the end of being poked and prodded I am just as healthy as I was beforehand. Go figure.
While being able to access healthcare so readily is no doubt a good thing (and puts Australia above most of the rest of the world in terms of living standards), over recent years researchers have identified a curious phenomenon unique to the health market – the idea of ‘supplier-induced demand’.

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Auction theory wrap up!

My previous article looked at a very common type of auction, the open outcry auction. In this article let’s have a quick engagement with other auctions economists study in the static, independent values framework. The last few words may sound slightly unfamiliar. ‘Static’ simply refers to the fact that we are looking at single period models as opposed to ‘dynamic’ models and the term ‘independent values’ is alluding to the idea that the agents valuation of the good being sold by the seller are independent of each other’s valuation.
The auction we should naturally look at after last week’s article is the sealed bid second price auction.

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My Perspective: Day 1 – Australian Conference of Economists 2012

This is the first of four blog posts I will be writing for ESSA from the 41st Australian Conference of Economists, co-hosted by Economics Society of Australia and Victoria University. This blog aims to give its readers an insight into the key discussion topics at the ACE conference which created hearty debate amongst some of Australia’s pre-eminent economists.

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Real Estate

The secret pact forged in Xiaogang

Prior to 1978 in China, communal farmland was assigned to individuals to work for the government. Farmers gave anything that they produced from their land to the government, which then distributed the crops out to the people. Agricultural land was less productive in 1978 than it had been in 1949, when the communists took over. This was because the farmers did not have any incentive to produce more than the minimum; any extra work would result in the same food rations from the government.

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Paying your Dues

Ben Franklin, one of the fathers of the United States said that death and taxes are the only constants in life.  Indeed, beyond printing money taxes are one of the cornerstones that keep the world as we know it turning round by providing governments with a source of revenue, so they can provide essential public services and infrastructure and the like, so that we can go about our business. Naturally, the more governments collect, the more services and free stuff the management can afford to hand out: free schooling, free healthcare, wider roads, free internet cables etc.

Source: Wells, H. G. (1920). The Outline of History. p.199. Garden City, New York: Garden City Publishing Co., Inc.

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A Game of Theories (Episode 1)

Psychologists refer to game theory as the theory of social situations. More specifically, it is the study of the strategic decisions, available to rational agents, producing outcomes with respect to the utility of those agents. Through analysis of different courses of action a ‘player’ can take, the outcomes which these actions lead to, and the actions which other ‘players’ might take, an optimal outcome – oftentimes a counter-intuitive one – can reveal itself. In the movie ‘A Beautiful Mind’ (2001), starring Russell Crowe as Robert Nash, game theory is explored in one scene.

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The concept of microfinance has gained popularity recently through stories of grand success and its promise as a panacea for global poverty. Microfinance institutes provide financial services to low-income people who would otherwise be rejected by more commercial banking institutions. Microfinance includes products such as savings, insurance and loans. Microcredit is a specific name for the loans given through microfinance, and is generally the main focal point of discussion.

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Economics is for the People

By Collin Li
When an economic debate descends into something along the lines of “the economy exists in order to benefit the people – not the other way around,” you should reply:
But what is an economy other than many millions of people interacting daily?
Let’s not understate the reach and application of economics – it infects every facet of society.
(By definition in economics, individuals in a marketplace trade according to their “utility” – a term used to capture the personal values of each individual, thus allowing the individuals to maximise their well-being in the marketplace.)

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