As we grow more wary of our attempts to revive price theory, we dig back into our archives for supporting material, and this early EconTalk episode with Richard McKenzie tops our list. It was at the top of the page. (I also recommend MacKenzie’s book “Why is popcorn so expensive at movie theaters?”)
Please listen to this classic episode (or listen again!) and share your answers to the puzzles below. (Bonus points if you include a graph!)
1- The conversation begins with a discussion of the high price of water in California. If there is no shortage of rainfall, why are water prices so high?
2- How does flood insurance effectively insure against more flood damage? And why is flood insurance generally cheaper in flood zones?
3- McKenzie claims that terrorists killed more Americans after the 9/11 attacks. How can this happen?
4- What is the cause of the sudden drop in retail prices after Christmas? Note that Roberts and MacKenzie have different opinions on this answer. What is the nature of their disagreement? Whose solution do they prefer and why?
This question may seem even more outdated than the others. So I asked Richard McKenzie how he would update this article. Mr McKenzie is not aware of any follow-up studies of this type, particularly regarding fatal motorway crashes. He doesn’t wonder why there hasn’t been a follow-up study of highway fatalities, especially given that today’s econometrics are far more complex than they were in the immediate aftermath of 9/11. What do you think is the answer to Mackenzie’s new question?
5- Finally, after the title of Mackenzie’s book, why is popcorn so expensive in movies? How has this relationship possibly changed since this episode aired, especially considering the advent of streaming? Do you have sex?
