Alex and Tyler put three classic models through their paces. Alex starts with Spence on how a monopolist chooses quality and applies it to how the New York Times’ paywall flipped its audience incentives. Tyler pushes back, arguing that network effects and loyalists matter more than marginal customers. They move to Harberger on tax incidence and the hidden winners and losers of corporate taxes, minimum wages, and congestion pricing. Finally, Solow’s growth model frames a conversation on why some countries catch up and others stall, including what it gets right about China, and what it misses. Together, their debate shows why the best models keep earning their place—not because they’re perfect, but because they still shape how we think even when they’re wrong.

Transcript: https://www.mercatus.org/marginal-revolution-podcast/favorite-models-spence-monopolies-harberger-incidence-solow-growth

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Timestamps:

00:00 Intro
00:19 Spence's monopoly model
07:08 How Spence applies to NYT and HBO
16:13 Alex and Tyler's approach to writing a textbook
20:43 Harberger's model of who pays tax
24:44 Harberger's model as applied to congestion and minimum wages
33:54 Solow's growth model
42:22 What Solow's model misses

The Incidence of the Corporate Income Tax

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