Intermediate Micro (Donkey Edition)

Late in Tuesday's Democratic presidential debate, Brian Williams gave some of the candidates a chance show off their intermediate microeconomics knowledge (or lack thereof).

We learn that Chris Dodd understands externalities (and what to do about them). From the transcript:

MR. WILLIAMS: ...Are you truly prepared to lead on a national scale the kind of sacrifice it would require where it intersects with the environment?

SEN. DODD: Well, I think you've got to -- I find it somewhat startling here that Ronald Reagan's former secretary of State and George Bush's first economic -- chief economic adviser are, frankly, more courageous and bold on energy policy than my fellow competitors here for this job, the presidency.

I've called for a corporate carbon tax. All of us share the same goals here of achieving energy independence, reducing our dependency on fossil fuels and the carbons they emit. But you're not going to achieve that unless you deal with price, quite frankly, here...

The advisor he refers to is Greg Mankiw, who advocates "Pigouvian" taxes.

The next question went to John Edwards, who must have missed the class on moral hazard (perhaps he had a bad hair day):

MR. WILLIAMS: Senator Edwards, should there be a bottomless well of federal dollars for people who knowingly live in areas of this country that are disaster prone to rebuild their homes if lost in a disaster?

MR. EDWARDS: Well, I think that when families are devastated -- and we've lived with this in North Carolina because we've been regularly hit by hurricanes, and I've spent an awful lot of time in New Orleans. When families are hit by natural disasters, I think it is for the national community to be there for them. I think that's our joint responsibility as a national community to be there for them.

I would have been very keen to learn Mike Gravel's views on resale price maintenance, but, alas, he was not invited. Its not the same without him.