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Nick Rowe
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That's tougher. I have far too many weak spots myself. Like economic history. But I think my favourite low-brow history show is on tonight: Time Team. (or one of its spin-offs). So I am going to retire from economics and watch it. http://en.wikipedia.org/wiki/Time_Team
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Robert: OK. You are right that such fluctuations are possible. And sometimes we even observe something similar at the micro level (no boys go to the disco because there aren't any girls there; and no girls go because there aren't any boys there). And maybe industrial clusters (hi-tech towns?) are like that too. But business cycles don't look like that. In a recession it's harder than normal to find buyers of illiquid goods (including labour), but it's *easier* than normal to find sellers of illiquid goods. It's money that is hard to buy.
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Done: http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/03/david-levines-accidental-monetarism.html
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Thanks Brad! Notice something about this bit?: "What happens is clear enough: the phone guy produces a phone, trades it to the tattoo artist in exchange for a tattoo, who trades the phone to the hairdresser in exchange for a haircut, who trades it to burger flipper in exchange for a burger." In this economy, ***phones are used as the medium of exchange!*** OK, let's run with that metaphor. So the question is: ***Who is the (lazy) phone guy, who won't produce enough phones???*** It's the Fed.
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djb: I am afraid you are confused. Land is not capital; capital is land. A screwdriver is just land, shaped into a different form. And the labour that helped shape it into that form is itself a product of the land. Nick van Rowe
Toggle Commented Mar 4, 2015 on Links for 03-04-15 at Economist's View
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Dunno. But as someone whose knowledge if history is roughly that of "a California high-school student cribbing from Wikipedia" I find this stuff fascinating. But I don't understand how David Graeber's book got as far as it did if it's that wrong. Didn't publisher and editor get historians to review it first?
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pgl is basically right. But in the olden days macroeconomists like Friedman did not have formal models except those with perfect competition, so they had to wave their hands a bit when they talked about macroeconomics with monopoly power. But since 1987 we (the New Keynesians especially) have got those formal models with monopolistically competitive firms, and monopolistic (not perfect) competition is now the standard assumption in macro, but it turns out it doesn't really contradict what Friedman said, and actually makes it easier to see that what he said makes sense. (And the really weird thing is, if ALL firms become more monopolistic at the same time, their relative prices don't change at all (though output and employment falls), and the effect on inflation (if any) depends only on how the central bank responds to this.)
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anne: Paul doesn't mention inflation there. See Dan's comment below. Dan explains it as clearly as I can.
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Dan: yep. It's even (just) possible that both X and Y will fall, with Y falling proportionately more than X. We don't know until we say something about monetary (and other) factors.
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anne: that's the fallacy of composition.
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Thomas: " But fiscal "microeconomic knitting" will look a lot like "fiscal policy" during a recession because at low borrowing rates and shadow prices that are less than market prices for some inputs (unemployment), proper microeconomic decision making will result in lots of deficit financed investment in infrastructure, job training, etc." True. Government investment spending should respond to interest rates too.
Toggle Commented Dec 29, 2014 on Links for 12-29-14 at Economist's View
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Matt: take a 1 year $1,000 Treasury, for simplicity. Price = $1,000/(1+yield) Yes. Price and yield are mathematically related. They are two different ways of describing the same thing. I know this. I teach it every year, in ECON 1000. By the way, if I decided to start blogging about physics, what advice would you give me? (Apart from the obvious, like writing clearly.) pgl: yep. I know. When you replied to my reply about a year ago, I decided to check what you said, and found that you were right, unfortunately.
Toggle Commented Nov 28, 2014 on Links for 11-28-14 at Economist's View
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Gene: exactly. And the *how much* question is central to this post. God, the anti-intellectualism of some of these sneering artsies!
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Mike: please check out my new post, where I attempt to define a "fragile/robust" Nash equilibrium, based on the trembling hand idea. Tell me what you think.
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Nice data Matt. But 0% relevant to Simon's post, which is not about the population distribution.
Toggle Commented Oct 25, 2014 on Links for 10-25-14 at Economist's View
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Tim: adding my twopenceworth: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/10/how-to-test-whether-the-lmi-lmci-is-a-good-indicator.html The Bank of Canada also constructs an "LMI" for the US. Here's what it looks like: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/labour-market-slack-in-canada-and-the-us.html
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Yep. But how confident are we that the downward spike in 2008 was all a liquidity squeeze? If in 2008 you thought there was a non-zero probability of a big 1930's style drop in the price level, and you wanted to buy insurance against that risk, you would have shorted indexed bonds. A lot of people were very frightened back then, and scared of something much worse than the recession we actually had. I'm trying to remember my own subjective probability distribution for the future (say 5 year ahead) price level back in 2008. I remember it had a very big variance, and all of that extra variance was on the downside. It was a very skewed distribution, with the mean a long way below the mode. Maybe I would have put a 10% probability on the Fed *totally* failing to respond properly, and the price level falling by 30% or more.
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Three thoughts: 1. Your 4, 5, and 6 *might* be like your 2. 2. Would we say that the US economy goes into a "recession" every night and every weekend? I expect we could. But the symptoms are different from a normal recession. 3. "...if we ever shift from a pure fiat money system back to a system in which liquid cash requires costly resources to produce and can be produced (i.e., gold standard, silver standard, BitCoin mining)." Or if we ever have a workfare system run by the central bank.
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Thanks Brad. Successfully trolled. I will gather my thoughts, and respond later.
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Ah! (And I initially thought is was some new California slang for a national income accounting identity! "Hello! Their spending *is* their income in aggregate!")
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Are academic conferences just rent-seeking? Plus travel and party at someone else's expense? You could read it all on-line, and argue online too. What can conferences do that blogs can't? And blogs are a lot cheaper. Genuine question.
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Thanks Brad. I'm on board with this. On your 3: plus, even if we did accept their argument about the risk of low interest rates, the longer we postpone recovery, and postpone expected recovery, the longer rates will stay low. (Upward-sloping or dynamic IS curve).
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Nah. Just a way to keep them off all the other students.
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Dan: "And what I am proposing is that that would only be the case if the barter economy was so small that these kinds of coordination problems could all be easily solved, but that in a more complex barter economy they might not get solved and the economy could remain stagnant." Totally agreed. A real world complex barter economy would be a total mess. (Unless someone sets up a centralised exchange, which mimics money). Worse than even the worst monetary policy. It takes an absolutely terrible monetary policy before more than a few people resort to barter (but we did see some do it in the US in the 1930's and Greece etc recently). My thought-experiment is of a purely hypothetical frictionless barter economy. A good monetary system ought to run approximately like an imaginary perfect barter system. My argument is that, since an excess of savings (for example) would not cause unemployment in an imaginary perfect barter system, it would not cause unemployment in a good real world monetary system. People would be unable to find a good outlet for their savings (everybody would want to lend and nobody would want to borrow), but that wouldn't stop them working and buying goods. The problem is that people can save by holding money. If that excess of saving spills over into an excess demand for money, then we get a recession.
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Nathanael: suppose there is a terrible drought in an agricultural economy. Output, and probably employment too, would drop a lot, and there is nothing monetary policy can do to prevent a drop. Even a hypothetical perfect frictionless barter economy, with no coordination problem, would see a drop in output. But would it have *all* the symptoms of a recession, where it is hard to sell things for money and easy to buy things with money? I don't call it a "recession" unless it has that symptom. Maybe I am "cheating" a little, by defining "recession' differently. (No true Scotsman fallacy.) But I think mine is a useful definition. The OPEC crisis was a bit of both.
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