Monthly Archives: February 2009
The progressive politics of pricing publicly-provided products
Whenever I make the points summarised in this post, someone invariably counters with the following median-voter argument: A policy in which only low-income households benefit will not command majority support. Making the program universal will ensure a more stable electoral base. This argument is not without merit, and it's pretty convincing in certain contexts. But […]
The perils of pricing publicly-provided products
One of the more resilient errors in policy analysis – in Canada, anyway – takes the following form: a) Public goods should be provided at zero price by the government. b) Therefore, goods provided by the government should have zero price. The former assertion is correct, but b) is a non sequitur: not all publicly-provided […]
Does the public demand for lower interest rates cause higher interest rates?
I read this in the Globe and Mail this morning. I interpret the argument to be that a cut in the Bank of Canada's overnight rate would lower the spread between borrowing and lending rates at the commercial banks, and so cause a decline in banks' profits. This argument reminded me of two previous posts […]
What next for the Bank of Canada?
The Bank of Canada currently sets the overnight rate at 1%. Markets expect it to cut by about 50bp on Tuesday. I think it should cut to zero (or 0.25%, which is effectively zero, given the traditional spreads). I thought it should cut to zero back in December. But if it does cut to zero, […]
Can Canada recover alone? Why not, exactly?
If Canada gets its macroeconomic policies right, is it possible for Canada to recover from the recession, even if the rest of the world does not? The same question could be asked for any individual country. And if not, why not?
Location, location, location: Canadian house prices by city
The Teranet-National Bank Housing Price Index has begun to make regular appearances in the media ([1], [2]), which is all to the good. But it's important to note – as the producers of the index take great care to emphasise – that the Composite-6 index masks considerable variation in movements in house prices across major […]
The silence of the keynesian econ-bloggers
OK. I'm trying to attract your attention. But I'm not knocking Keynesians. I'm more or less a Keynesian myself, especially under current circumstances. And I'm coming at this question from a Keynesian perspective. Is it good economic policy for Hillary Clinton to try to persuade China to continue to buy US Treasuries? Why have economics […]
Why Canadians should be grateful that Joe Clark lost the 1980 election
Ed Glaeser lists five problems with the US policy of letting homeowners deduct mortgage interest payments. Megan McArdle (among others) agrees, but isn't very optimistic about the chances of getting rid of it: Current homeowners bought their homes on the expectation not only that they would enjoy tax deductibility, but that they would be able […]
I hope Hillary fails
Nothing personal, but I just do not understand why she is asking China to buy more US treasuries. This just doesn't make any sense to me. She ought to be doing the exact opposite. Can someone explain it? Regardless of the ultimate cause of the crisis (and China and perhaps Japan saving too much and […]
A very simple macro model of the last few years
Here is a very simple model of interest rates, debt, asset prices, and recession. It seems to fit the facts of the last few years reasonably well. There are two types of people: the A's and the B's. The A's have normal interest-elastic savings and investment functions. They save less and invest more if the […]
Worthwhile Canadian Initiative 
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