No, I haven’t looked at the empirical evidence because I didn’t think it would be as convincing as the 2 theoretical arguments I made in the original post; let me know if you are aware of any such analysis.
Would you accept the results we find from an analysis of Big Macs as relevant?
Since Big Macs aren’t generally transported across national boundaries, we can think of the market for Big Macs in each country as largely independent.
While we would both expect various factors such as the price of labor to affect the price of Big Macs differently in each country, you would expect the price of Big Macs to positively correlate with # sold in that country (or possibly # sold per person), right? I would not expect such a correlation. (I think looking across countries is better than in one country across time, since then technology or other time-dependent factors would bias the results.)
If we had time we could control for all the other factors we don’t want to bias the results like price of labor; but maybe even without these we might see some interesting initial patterns.
Empirical evidence is nice and often more convincing than theory, but I don’t think it’s necessary for an argument to be convincing (to believe otherwise would be quite… burdensome).
In this case, the original articles I am critiquing used purely theoretical arguments to claim that there will be long term price elasticity of supply, and I think that a theoretical critique is sufficient to show that the strength of their arguments is currently too weak to support the complexity of their theory.
I’m certainly open to any empirical evidence that may exist. Would you find a quick analysis of Big Macs moving (or if not, do you have a suggestion for a different empirical analysis)?
Empirical evidence is nice and often more convincing than theory, but I don’t think it’s necessary for an argument to be convincing
The first question is whether you’re interested in being convincing or in getting an accurate map.
Economics, in particular, is well-known for its fondness for theoretical arguments which tend not to hold up in real life.
empirical evidence
You’ll have to specify what you are looking for. In particular, how long is “long term”? What kind of goods or industries you want to include and exclude?
For example, it wouldn’t be hard to find both price and supply (=production) data for major commodities (oil, copper, wheat, etc.). You could plot a scatter graph, attempt to fit a model....
Empirically, some industries are approximately constant-cost, others are increasing- and decreasing-cost. OP mentioned certain factors pushing one way or the other, but ultimately the slope of the long-run supply curve of an industry is determined by which factors predominate, so we’d have to measure it to be sure. What is generally true, however, is that long-run supply is typically highly elastic, so cost doesn’t change much from marginal changes in demand.
No, I haven’t looked at the empirical evidence because I didn’t think it would be as convincing as the 2 theoretical arguments I made in the original post; let me know if you are aware of any such analysis.
Would you accept the results we find from an analysis of Big Macs as relevant?
Since Big Macs aren’t generally transported across national boundaries, we can think of the market for Big Macs in each country as largely independent.
While we would both expect various factors such as the price of labor to affect the price of Big Macs differently in each country, you would expect the price of Big Macs to positively correlate with # sold in that country (or possibly # sold per person), right? I would not expect such a correlation. (I think looking across countries is better than in one country across time, since then technology or other time-dependent factors would bias the results.)
If we had time we could control for all the other factors we don’t want to bias the results like price of labor; but maybe even without these we might see some interesting initial patterns.
Heh. It seems we have pronounced… methodological differences :-D
Empirical evidence is nice and often more convincing than theory, but I don’t think it’s necessary for an argument to be convincing (to believe otherwise would be quite… burdensome).
In this case, the original articles I am critiquing used purely theoretical arguments to claim that there will be long term price elasticity of supply, and I think that a theoretical critique is sufficient to show that the strength of their arguments is currently too weak to support the complexity of their theory.
I’m certainly open to any empirical evidence that may exist. Would you find a quick analysis of Big Macs moving (or if not, do you have a suggestion for a different empirical analysis)?
The first question is whether you’re interested in being convincing or in getting an accurate map.
Economics, in particular, is well-known for its fondness for theoretical arguments which tend not to hold up in real life.
You’ll have to specify what you are looking for. In particular, how long is “long term”? What kind of goods or industries you want to include and exclude?
For example, it wouldn’t be hard to find both price and supply (=production) data for major commodities (oil, copper, wheat, etc.). You could plot a scatter graph, attempt to fit a model....
Empirically, some industries are approximately constant-cost, others are increasing- and decreasing-cost. OP mentioned certain factors pushing one way or the other, but ultimately the slope of the long-run supply curve of an industry is determined by which factors predominate, so we’d have to measure it to be sure. What is generally true, however, is that long-run supply is typically highly elastic, so cost doesn’t change much from marginal changes in demand.