Congress will soon be passing a new Covid-19 stimulus package worth nearly $900 billion. This new package provides relief for individuals that are unemployed by extending federal unemployment insurance programs as well as providing an additional $300 per week benefit. It also includes loans for businesses, testing and vaccine funds, as well as funding for schools.
Adam Smith (1723-1790), explained why some countries were rich while others were poor in his 1776 seminal book The Wealth of Nations. Since Smith, and despite efforts by economists and government to explain differences between wealthy and poor nations, the wealth gap continues to widen. Several factors may determine to some degree the wealth of a nation. These include, but are not limited to decentralization, corruption, democracy, education, trade, and institutions.
Barriers to entry such as fees, licensing, or educational requirements, make it more difficult to start businesses in many countries. Problematically, many barriers to entry are due to regulatory capture and only serve to benefit incumbent firms and businesses. These regulations that are created and enforced by the government often make it exceedingly difficult for low-income individuals to start new businesses or new careers in many industries. By discouraging or even denying individuals access to higher paying occupations, barriers to entry tend to increase income inequality. In this analysis, we estimate empirically the effect that barriers to entry have on income inequality.
Although Adam Smith lived in the 18th century, the father of modern economics still has much to teach the world today. Smith's world famous book Wealth of Nations is arguably the most important piece on economics in history. It greatly influenced other scholars, thinkers, and eventually policymakers away from the then-dominant global policy of mercantilism toward freer trade.
The practice of price gouging has become a concern in the wake of the COVID-19 pandemic. Many consumers are stockpiling essential goods ranging from food, medical supplies, to even toilet paper. A natural consequence of a sharp influx in demand is a substantially larger price tag, falling within the parameters of the immutable Law of Supply and Demand.