What if your tax rate was lower?
Well, I would probably get more post-tax income.

For every dollar less of taxes, would you get one dollar of additional post-tax income?
No, because I might get a lower salary.

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What if the government dictated that rent in my area was not to increase more than 1% a year?
My rent would probably be cheaper than rent in other areas.

Isn't that great?
Well, not if the house falls into disrepair because the landlord find it not worthwhile to maintain the property after a few years.

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What if the government raised taxes on companies?
Companies will pay more taxes.

Isn't this a good thing?
Well, things might get pricier too, as those new costs are passed on.

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Cross-elasticity is a very broad phenomena. Any profit-generating activity that involves multiple inputs and outputs has many ways of adjusting those inputs and outputs to maximize value (be it profit or consumption), and when prices are changed for one input or output it will affect the demand / supply of the other inputs and outputs in some way that can be difficult to anticipate.

To assume that the only change would be in the adjusted input / output is naive.

Related video: http://www.youtube.com/watch?v=9b-w7GOTqSY

 

I've now completed 21 days of consecutive blog posts! Frequency will be reduced going forward, hopefully meaning I will be able to write longer pieces.

I have a friend who organizes board game night every few weeks (thanks LCH), and I try to attend whenever I can. Most of the time I find that game instructions often sound intractable but are in fact not all that difficult to get comfortable with if you forge ahead and just go through the motions.

Unlike computer games, there is nothing that guarantees that you are in fact playing a board game correctly. People learn to apply a set of correctness checks to the game - it can't be that the first mover always wins, it can't be that certain pieces are always ignored, and it can't be that losing a small part of the game means you would never catch up. Whenever a game seems bad, the first thing that occurs is always that you've read the manual wrongly, and the response to that is to figure out some way to play differently so that the problem does not occur.

I've always found good social games to contain an equalizing dynamic, where those who are behind are provided with certain advantages that help them to catch up, whereas those that are ahead have to be wary of defending their lead. This is related to the fact that games differ greatly in the shape of their learning curves - in games like Go, with very steep learning curves, the chances of a novice beating an expert are pretty much zero, and there is pretty much no equalizer built in.