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gration 29 incentives 11 india 9 inequality 10 international markets 62 italy 14 japan 9 labor market 199 macroeconomics 88 measurement 44 money 79 monopoly 29 nobel 3 off topic 11 petition 4 politics 108 power of markets 12 public goods 49 rationality 24 recessions 74 regulation 31 religion 4 research 66 retirement 18 russia 5 south america 12 spain 9 sports 28 students 35 subsidies 35 taxes 135 teaching 21 this blog 23 tributes 2 united kingdom 16 welfare 31 useful resources econ academics blogs econdesk ese ideas inomics intute nep rfe useful blogs marginal revolution works in progress grid connection auctions greg mankiw s blog the invite the repec blog repec in may 2026 calculated risk this is the end and a new beginning dani rodrik s weblog iea world congress 2021 economists do it with models ask and you shall receive economic superhero edition against monopoly against monopoly fdsfs paul krugman the blog moves on voxeu org recent articles the us treasury s missed opportunity econbrowser wisconsin in last place for start up activity free exchange improve your life by making huge decisions with a coin toss the becker posner blog farewell freakonomics angry bear saturday july 19 2025 quick update i just logged in for the first time in five years i am occasionally thinking about restarting this blog but blogging is not what it was plus current circumstances in the world and privately make it difficult for me to concentrate on another endeavor eventually i ll get back to it once things improve help make the world a better place and i ll be here posted by economic logician at 1 57 pm 2 comments tuesday august 11 2020 i am still alive i logged in for the first time in years i am surprised by the sustained traffic this blog is still getting after all those years and this tempts me to pick up the blogging again we shall see but i am not too optimistic yes this has been a long silence i have been busy with new projects and challenges i still am although i have a bit more free time now it has been interesting to say the least i have gone through a long list of comments to moderate lots of spam but some genuine comments too i will try to be much more diligent on this at least 2023 11 19 update i logged in again after several years i still have not picked up blogging again very busy professionally and privately facing several challenges eventually i ll get back to this i promise posted by economic logician at 11 37 am 7 comments labels this blog wednesday april 2 2014 not dead yet sorry for not posting but i just cannot find the time and will to do so at the moment and to be frank i have seen rather little research worth reporting lately so please be patient i will restart posting in due time posted by economic logician at 7 29 am 15 comments tuesday march 4 2014 a long silence it is now over a month that i have not posted on this blog sorry i am very busy and i have to focus on my day job while juggling with my private life i ll get back to blogging once i have the time and the energy again posted by economic logician at 7 34 am 0 comments labels this blog friday january 31 2014 a debt free stimulus economies may need to be stimulated sometimes through tax reductions or public expenditures the problem is that this costs opposition to such stimulus programs is typically grounded on the unavoidable debt run up which implies that at some point in the future taxes will need to be raised at a level that is higher than before the stimulus would there be a way to pacify this opposition according to laurence seidman there is it involves the federal reserve or the corresponding central bank making a loan to the government treasury for the amount engaged in the stimulus and then the fed conveniently forgiving this debt that is a different way of putting what seidman proposes the fed makes simply a transfer to the treasury that satisfies the dual mandate of the fed full employment and stable prices despite what seidman claims this is monetizing the debt even if no debt is explicitly created the government is still financing its stimulus by virtually printing money and with the same effect on inflation which guarantees that the dual mandate will not be satisfied for stable prices and one can have doubts about full employment too seidman argues that there would be no inflation if aggregate demand gets back to the normal level with the stimulus but you still have increased the money supply for the same quantity of goods the price level needs to increase accordingly the only way to avoid the inflation is if the treasury returns the transfer to the fed the transfer is thus again a debt i find it really strange that a chaired professor at the university of delaware would write this the only way i can rationalize his writing is that he confuses real and nominal quantities he also seems to reason in partial equilibrium not thinking that prices adjust to such large changes in macroeconomic aggregates especially in the medium run we are used to seeing this from crackpots with little economics education but not with apparently well educated economists posted by economic logician at 6 58 am 8 comments labels bad research money thursday january 30 2014 capitalism s rapture economics is based on a small set of very powerful axioms that a the foundation of utility theory general equilibrium theory and more experiments have contradicted every one of these axioms one way or the other we still keep them because they seem to apply most of the time and the occasional violation does not invalidate the general picture but it is good to keep an eye on their validity and think about alternative scenarios especially if they bring us better theories egmont kakarot handtke decides to start afresh with a completely new set of axioms and instead of choosing some that have some subjectivity he takes some that are as objective as any axiom could be four accounting identities and definitions yes you read that right 1 definition of national product income approach 2 a linear production function in labor 3 definition of nominal consumption as the product of real consumption times a price and 4 the values of all economic variables this year are last year s variables times one plus their respective growth rate plus an independent and random component for each easy from this kakarot handtke builds an elaborate theory that demonstrates with a mathematical proof it is in the title so it must be true that capitalism is on the verge of collapsing to me it looks more like his readers could collapse from hyperventilating over this amazing pile of rubbish this bizarre scientist has trademarked his models i am afraid i cannot go into more details about this work without violating some law trademark law law of sanity so i leave it at this posted by economic logician at 7 59 am 8 comments labels bad research fundamentals wednesday january 29 2014 the best justification for is lm is lm models have always left me puzzled to me they are the equivalent to a reduced form regression with omitted variables and endogeneity issues through a lot of hand waving you can have any model fit the data but what i find the most bizarre is this strange obsession with justifying the is lm models from micro foundations somehow is lm is taken as an ultimate truth and one needs to reverse engineer it to find what can explain it the ultimate truth is the data not the model pascal michaillat and emmanuel saez bring us yet another paper that tries to explain the is lm model from some set of micro foundations the main ones this time are money in the utility function and wealth in the utility function and matching frictions on the labor market which are not objectionable i find it very hard to believe that by now anybody would consider this a valid starting point rarely does anybody enjoy simply having money the reason why people like having money is that they can buy things with it things that are already in the utility function or that money facilitates transactions something that you can easily model the same applies to wealth true some people may be obsessed with getting richer just for being rich but for the remainder of the citizen they like wealth for what it brings in future consumption for themselves and their heirs and for the security it brings in the face of future shocks all this easily modelled in standard models it seems to me this paper is a serious step back macroeconomists try to understand why there are frictions on markets so that one better determine the impact of policy on such markets simply sweeping everything in the utility function where in addition one has a lot of freedom in choosing its properties does not help us in any way and it is wrong because it is again some sort of reduced form that is not immune to policy changes suppose the economic environment becomes more uncertain are we now supposed to say that suddenly households like wealth more they could also like wealth more because of changes in estate taxation or because of longer lifetimes and these imply very different policy responses in better flushed out models i just do not get it maybe some is lm fanboys can enlighten me posted by economic logician at 7 45 am 4 comments labels bad research fundamentals macroeconomics tuesday january 28 2014 ageing and deflation in japan inflation rates across industrialized economies have been remarkably low in the past decades and at the same time these economies have been subject to considerable demographic ageing nowhere has this been more true than in japan what are the government s or the central bank s incentives to set policy that triggers lower inflation if the population gets older i do not see where monetary policy would matter but the fiscal theory of inflation may tell us something hideki konishi and kozo ueda study the latter in an overlapping generation model where the fiscal authority has a shorter lifespan than residents but takes into account the impact of its actions on future governments the fiscal theory of the price level tells us that inflation goes up when more debt is accumulated and that is certainly the case when the population gets older and requires more retirement benefits but the authors point out that this does not necessarily hold once you take into account the endogenous responses of income tax rates and public expenses then because of the policy response it matters why the ageing is happening lower mortality or lower fertility deflation is more likely in the former case now we just need someone to bring this to the data posted by economic logician at 7 49 am 0 comments labels demographics japan money retirement monday january 27 2014 tax refunds and myopia from anecdotal evidence it appears that many americans like to use the refund from their yearly tax filing for various home improvement projects that seems like a strange habit but could be explained by its timing spring season and the unexpected nature of this windfall that is large enough to allow some major purchase that would not happen during the rest of the year for perennially cash constrained households being forced to put a little aside for a one time cash out is the only way to do some capital purchase does this theory make any sense it does in developing countries where roscas are popular for this reason it looks like the same holds for us households brian baugh itzhak ben david and hoonsuk park look at purchase patterns when the tax forms are filed and when the tax refund check arrives the first finding is that consumption does not move at the filing even though uncertainty about the refund resolves in other words a change in the permanent income here does not matter presumably because there is some constraint when the refund check is cashed though consumption jumps up and returns to the previous levels within weeks it looks like households are cash constrained but the composition of the purchases indicates that there is a substantial amount of non durables in the basket showing also they are rather impatient in fact very little remains for savings i would have expected that at least credit card debt would be drawn down one can thus conclude that their myopia dominates the cash constraint sad posted by economic logician at 6 50 am 1 comments labels consumption friday january 24 2014 exchange rate commitment always beats capital controls the recent financial crisis has scared a lot of countries into adopting so called macro prudential policies that introduce frictions into capital market that can be best summarized as capital controls the idea is that you want to make sure that market participants are constrained in a way that makes them consider the consequences of their actions onto others the imf has encouraged a lot of countries to adopt such policies in stark contrast to previous stances and this is backed up by a recent literature that shows these policies are welfare enhancing gianluca benigno huigang cheng christopher otrok alessandro rebucci and eric young show this is right but suffers from the absence of other policy options specifically once you add a policy to the mix that would be to stabilize the real exchange rate of the local currency in times of crisis then macro prudential policies are dominated i suppose one could then even imagine better policies or policy combinations but the point is that you need to expand the set of policy options why is this exchange rate commitment better capital controls act like pigovian taxation that applies always and leads to a constraint efficient outcome a commitment to a real exchange rate applies only at particular times and leads to a conditionally efficient outcome that flexibility is key posted by economic logician at 7 08 am 1 comments labels financial markets regulation thursday january 23 2014 why firms do not like cutting wages nominal wage downward rigidity is a feature of many macro models that help justify positive optimal inflation rates in fact that is pretty much the only way to get a monetary monetary model not to conclude that the friedman rule and its deflation is optimal this rigidity is always assumed on the presumption that somehow employers and employees do not like to reduce nominal wages are they subject to a nominal fata morgana or is there more to it instead of pontificating from theory and limited data maybe asking market participants could help philip du caju theodora kosma martina lawless julian messina and tairi rõõm conducted a survey of firms across 14 european countries they conclude that issues with unions contracts or collective bargaining were of secondary importance to worker morale and staff retention this means that including renegotiation costs seems misguided this does however not explain why this is so important to staff morale after all what really matters is the real wage what is this psychological factor that makes us think foremost in nominal terms or is it that managers only have the i...