As we have become more vigilant in our attempts to do so revive price theorywe scoured the archives for supporting material, and this early EconTalk episode with Richard McKenzie topped our list! (We recommend McKenzie’s book Why popcorn costs so much at the cinema, at!)
We invite you to listen (or re-listen!) to this classic episode and share your answers to the puzzles below. (Bonus points if you include graphs!)
1- The conversation starts with a discussion about the high price of water in California. Why is the price of water so high, if not for a shortage of rainfall?
2- How does flood insurance virtually guarantee? more flood damage, and why is there flood insurance in general? cheaper in a flood area?
3- McKenzie states that terrorists have been killed more Americans after the 9/11 attacks. How can this be?
4- What explains the sharp drops in retail prices after Christmas? Note that Roberts and McKenzie disagree on this answer. What is the nature of their disagreement? Whose solution do you prefer, and why?
This question, even more than the others, may seem old-fashioned to you. So I asked Richard McKenzie how he could update this story. McKenzie is not aware of any follow-up studies of this nature, especially regarding traffic fatalities. He doesn’t wonder Why there has been no follow-up research on highway deaths, especially given that econometrics are much more complex today than immediately after September 11? What would You Say the answer to McKenzie’s new question would be?
5- Finally, and with a nod to the title of McKenzie’s book: why do Popcorn costs that much at the cinema? How might this relationship have changed since this episode aired, especially given the advent of streaming?