A Common Error inwards Pedagogy

I happened to endure flipping through closed to other introductory economic science textbook. (Yes, closed to people convey the temerity to endeavour to compete amongst my favorite textbook.) I noticed an fault that is, unfortunately, all likewise mutual inwards how introductory economic science is taught.  I won't advert which majority it is, because I am quite fond of the authors, together with because my finish hither is non to alternative on one particular majority simply rather to depict attending to a to a greater extent than pervasive problem.

The number is how 1 applies welfare economic science to empathize cost controls, such every bit rent command together with minimum-wage laws.

The sin that this majority makes is to expect at consumer surplus, producer surplus, together with deadweight loss every bit if nosotros were studying the welfare cost of a tax. The cost of a cost control, the reader is taught, is the modest Harberger triangle betwixt the render together with ask curves.

This reasoning is problematic because it assumes perfect rationing. But rationing nether cost controls is never perfect. Under rent control, for example, apartments practise non automatically larn to those who value the apartments the most. The misallocation due to imperfect rationing makes the actual welfare cost of cost controls much higher than the standard deadweight loss triangle.

In many cases, economists are deeply skeptical of cost controls. If the costs of cost controls were similar to those of taxes, I suspect that this skepticism would endure substantially less. By applying off-the-shelf welfare analysis to cost controls without thinking through the inefficiency of most rationing systems, teachers of introductory economic science mislead their students virtually the effects of these policies.

Addendum: Here is a relevant newspaper on the topic.
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