Band 10, Heft 1

In recent years, the art market experienced a price explosion for paintings. Frey and Cueni shed light on the reasons for the price increase, on the rate of return in the art market, on the emergence and decline of art hedge funds, and on the risks of art investments.

“Too Many to Fail” suggests that small and medium sized banks can cause a banking crisis if a large number of them fail simultaneously. We disagree and show that the fundamental cause of systemic banking crises is “Too Big to Fail” banks.

In July 2008, in a column in the Canadian newspaper National Post , David Frum, the former speechwriter for President George W. Bush, wrote: “The shapers of the American mortgage finance system hoped to achieve the security of government ownership, the integrity of local banking and the ingenuity of Wall Street. Instead they got the ingenuity of government, the security of local banking and the integrity of Wall Street.” He has a point.

Please note: An incorrect version of the article Spectrum Policy and the Evolution of the Wireless Internet: Some Thoughts on Where Economists Agree and Disagree by Robert Hahn and Peter Passell was published on pages 21-28 of this issue. This version has been removed. Please find the correct version of the article on page 29-37. Please note, the correct DOI of this article is 10.1515/ev-2013-0020.

This essay reviews public policies for spectrum use, distinguishing among them by whether economists agree on their value and why. Spectrum policy could have a large impact on the development of the Internet and the pace of technological change in the wireless industry. We conclude that economists agree on many aspects, but substantive disagreements remain on some important issues – notably on using spectrum policy as a tool for addressing potential sources of inefficiency in the wireless market.

The high price of some cancer drugs has recently come under attack by the medical profession. We examine the reasons behind the pricing strategies of cancer drugs. On the one hand, prices should reflect value and research demonstrates that the health benefits from novel cancer drugs have been enormous in terms of additional years of life patients can now enjoy. This provides some justification for the high price tag of these drugs. On the other hand, drug pricing is also a product of a hidebound reimbursement system that does a poor job in letting prices adjust to new information about value. Regulators set thresholds for cost-effectiveness, which establishes not only a price ceiling but also a price floor. Manufacturers often price drugs high at launch in efforts to recoup their initial investment, but a more efficient system would allow prices to both rise and fall over time. Removing distortions in the reimbursement system is crucial to ensuring continued success in saving lives.

Benefit-cost analysis is the applied side of welfare economics. Its broad use in support of public decisions draws both detractors and defenders. This tongue-in-cheek piece demonstrates that knowing how to lie provides insights into how not to lie; we assume the former is always accidental among economists and we hope it is so for others.