Not doing things is a nonrival good (and while we’re on the subject, can you have a nonrival good with a monopsony?)

As mentioned before, Matt Levine has become on of the essential writers on the business and finance beat and I strongly recommend that everybody sign up for Levine's free Money Stuff newsletter mentioned at the bottom of the post.

Here's a choice bit from the August 30th newsletter. 

The most interesting field of economics might be the economics of not doing things. The main way that people make money, in the world, is by doing things that other people want: drilling oil, brewing coffee, maintaining social media sites, writing newsletters. But there are a few lines of business where you can get paid for not doing things that you’d otherwise do. Blackmail, for instance, is a classic: “I will go around distributing these compromising photos of you, unless you pay me money, in which case I will do nothing.” Coasean bargaining: “I will build a smelly polluting factory on my land next to yours, unless you pay me money not to, in which case I will leave it undeveloped.” Demand response in electric grids: “I will turn my lights on and use electricity, unless you pay me not to, in which case I will use less electricity.” And, in the modern world, all sorts of environmental credit schemes: “I will chop down these trees, drill this oil, etc., unless you pay me not to, in which case I won’t do anything at all.”

There are so many ways in which the economics here are unintuitive. Consider the (Read more...)