Monday, April 14, 2008

Which Economic Theory is the Most Underappreciated?

Which theory in economics deserves more attention and thought? One of the reasons I am such an avid EconTalk listener is that I get to spend time listening on topics like the division of labor or opportunity cost that seem to have a deeper level than I had previously realized. So I’d like to invite the readers to comment on which economic concept or theory they feel is underappreciated by the science.

My answer, by the way, is the Homevoter Hypothesis by William Fischel. To boil it down to the idea that homeowners vote based on the potential impact on their housing price sterilizes the real power of this idea. Empirical evidence by researchers not named Fischel is limited but very supportive. Classical liberals should use it as support for sharpening the focus of the EPA to non-local pollutants and push for greater replacement of Federal powers with local government control.


Matt E. Ryan said...

Perhaps this is just a tip of the hat to what we're currently reading, but I think that the full implications of Mancur Olson's work on collective action don't get enough attention in my mind. A plain reality of life is that decisions must oftentimes be made by groups, and because of that, the results that come from acting as a group is of primary importance to understanding the results we see in the real world.

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