Worthwhile Canadian Initiative

Macroeconomics when all goods are non-rival

Sometimes it's good to build really weird models. Because bits of the real world are a bit weird, even if the whole world isn't as totally weird as the model, and taking an extreme case can help us understand the effect of those weird bits. Plus it's fun.

I'm going to assume that all produced goods are strictly "non-rival".

Economics of the Apocalypse

Well December 21^st is almost upon us and with it the end of the Mayan calendar cycle and the anticipated arrival of the end of the world or the end of the world as we know it.  Well, what do the economic indicators tell us about how this fundamental shift may be accounted for by individual economic behaviour? 

Darwin = Malthus + Sebright? Diffusion of technical change.

Just throwing out some random ideas, on subjects I know little or nothing about, that are only vaguely related, hoping someone better than me might pick some up and run with them properly. Read at your own risk.

Bond Villains as Fiscal Stimulus

I’ve known my friend Harold since high school and over the years both of us have given a lot of thought to the problems of the Northern Ontario economy while watching much of its traditional economic base in resource extraction and processing slowly disappear.  Harold has spent a good many years in the economic development field and recently shared with me some partly tongue in cheek thoughts that what most depressed rural remote economic areas need is a good Bond Villain to pick things up. 

Dumb econometrics questions/bleg on forecast probabilities

I'm bad at econometrics. I've got a couple of simple questions, that ought to have a simple answer. Noah Smith's post (HT Mark Thoma) reminded me of it. There are probably other students at the back of the econometrics class who don't know the answer either, so I'm going to ask for all of us.

Liquidity, bubbles/ponzis/chain letters, and money

I might as well join in the fun. Along with Steve Williamson, Noah Smith, Karl Smith, Paul Krugman, David Glasner, and Steve again. [Update: and Brad DeLong and JP Koning. And David Andolfatto.]

Some assets are more liquid than others (they have lower transactions costs of buying and selling). More liquid assets will have a lower desired rate of return than less liquid assets (that means people will be willing to own them even if they expect to earn a lower rate of return than less liquid assets).

An Economic Salute to US Presidents!

Well tonight is the next US Presidential debate and what better way to help set the stage than an economic retrospective on American Presidents and their relative performance when it comes to economic growth.  I went onto Eh.Net and have obtained real per capita US GDP in 2005 constant dollars for the period 1790 to 2010 and used it to calculate the annual growth rate of real per capita GDP.  From this, I then calculated the average annual growth rate for real per capita GDP for 44 US Presidents and ranked them from highest to lowest. 

Rat choice theory

The magnificent edifice of modern microeconomics is built on a simple model of human behaviour: rational choice theory.

The rational person has goals; things she wants and values. She makes choices; she acts to achieve her goals. Saints can be rational, and so can sinners. What matters is having preferences and making choices, whatever those choices happen to be. 

The assumption of rationality captures something so essential to survival that it explains non-human behaviour as well. Indeed, with a few simple experiments, it is possible to test the rationality of a wide range of animals.

"The Invisible Hand" on CBC radio

CBC radio is running a new program this summer on economics; it's called "The Invisible Hand". The first episode is scheduled to be broadcast Wednesday morning (this Wednesday - June 27) at 9:30 am and will be re-broadcast the following Saturday morning at 11:00 am. (Half an hour later in Newfoundland, of course.)

I am well-placed to tell you that the show is much, much better than you may be thinking and that you should give it a listen.

Abolish the Equity Premium Now!

This post is slightly whimsical. I can't decide myself if I'm being totally serious. My argument is certainly less than watertight. But it's not (to me) obviously wrong either. So I'm just throwing it out there.

Visualizing GDP Performance

Statistics Canada just released its GDP statistics by industry for the provinces and territories for 2011. 

The rejection letter I'm tempted to send

Dear Dr Untenured,

Thank you for your submission to Review of Economic Theory of Consumer Habits (RETCH), dated May 8, 2011. 

After contacting ten reviewers, all of whom have declined to read your manuscript, I have given up, and am rejecting your paper due to lack of interest.

Yours,

Frances Woolley, Co-Editor.

A very simple derivation of the balanced budget multiplier in a very monetarist model

This is mainly a brain-teaser. But I hope you find it useful, as well as fun.

1. Assume initially there is no government. So G=T=0, and Y=C+I. (You can add in net exports too if you want, or delete I if you want to make the model simpler still.)

2. Assume MV=P(C+I), where V is fixed and C+I is output of consumption plus investment goods that are bought and sold for money.

The Gambling Economy: A Zero Sum Game?

Two stories in the Toronto Star this week have left me wondering if there is a new grand strategy at work for transforming Ontario’s economy in the wake of its manufacturing decline.

Capital Formation in Canada: The Sequel

I decided to do a bit more work with my Canadian gross-fixed capital formation series for the period 1870 to 2010 to see if I could estimate a simple regression model that might explain its fluctuations.  If everything can be explained by a few simple economic variables, then the downward trend in the ratio since the 1970s might also be accounted for by economic determinants. 

Crank it up to 11 for Nigel Tufnel

Nigel Tufnel, lead guitarist of Spinal Tap, gave an unforgettable illustration of the difference between ordinal and cardinal numbers. 

A three minute clip with lead-in is here, a one minute clip with just the highlights is here.

And if you just want to savour the words...

Existentialism and the non-neutrality of money language

OK, this post is a little on the whimsical side. The argument is a lot less strong and clear than I would like it to be. But sometimes you just have to say what's in your head, and hope that will help it get clearer. Read at your own risk (as if that needed saying).

Suppose, just suppose, that the Governor of the Bank of Canada became an existentialist. And everyone knew that.

How to borrow money

The process is quite easy, provided you borrow enough.

Have you ever, dear readers, had occasion to borrow money? Have you ever borrowed ten dollars under a rigorous promise of your word of honor as a Christian to pay it back on your next salary day? Have you ever borrowed as much as a million at a time?

If you have done these things, you cannot have failed to notice how much easier it is to borrow ten thousand dollars than ten, how much easier still to borrow a hundred thousand, and that when you come at last to raising an international loan of a hundred million the thing loses all difficulty.

Here below are the little scenes that take place on the occasion of an ascending series of loans.

The macroeconomics of Big Wedding cultures

How do you build a macroeconomic model of a "Big Wedding" culture? Do Big Wedding cultures spend too much on consumption and too little on saving and investment? If so, what's cause and what's effect?

I don't know the answer. I don't even really need to know the answer. But this question has been stuck in my mind for the past couple of days, so I'm writing this for self-therapy.

Questions always come from somewhere. Here's where this one came from.

Bike banks

Bear with me on this one. I'm trying to get my head straight on money and banking, by thinking weird thoughts.

Suppose, just suppose, that (for some unknown reason) the only asset that banks liked owning was bicycles. They refused to own any other sort of asset, except, of course, central bank currency and reserves at the central bank. Banks buy bikes, and rent them out for people to ride. Banks are bike intermediaries.