The use of the ceteris paribus, or “other things equal” assumption, is an essential aspect of economic education. It is an important caveat that helps make sense of a complicated world by clarifying the stories that comprise the core of economics.
Unfortunately, acceptance of that phrase has also provided an opening for misrepresenting economic reality when analyzing government interventions.
At its heart, economics focuses on the implications of scarcity, which forces self-interested individuals to make choices.
If the price of a good rises (ceteris paribus), the opportunity cost of acquiring a particular good in terms of other goods foregone increases, so self-interested people will buy less of it. Similar assumptions also lead us to the parallel law of supply: If the price of a good rises (ceteris paribus), the benefits from producing and selling it rise, making self-interested people willing to incur higher opportunity costs to do so, increasing the...
Two federal agencies have backed off—slightly—from a program critics say has been intimidating banks into canceling services for legitimate, law-abiding businesses and making it difficult if not impossible for them to operate.
The Federal Deposit Insurance Corporation (FDIC) and U.S. Department of Justice (DOJ) launched “Operation Choke Point” without warning or public discussion in March 2013.
Some businesses were classified as “high risk,” and banks were informed they would come under...
[Editor’s note: “Politicians wanted upfront cash from a legal victory over Big Tobacco, and bankers happily obliged. The price? A handful of states promised to repay $64 billion on just $3 billion advanced.” So reads the teaser headline on this report from the independent, non-profit ProPublica news organization. The beginning of the article follows, with a link to the full story.]
By Cezary Podkul
In November 1998, attorneys general from across the country sealed a historic deal with the...