Monthly Archives: February 2010
“Fire-and-forget” fiscal policy
If you wanted to build a "fire-and-forget" fiscal policy, or where you at least minimised the chances you would ever again want to change any of the tax and spend rules, what would it look like? I was thinking about Stephen's question: if we had a good enough social safety net, wouldn't that create a […]
Is a need for fiscal stimulus a symptom of a poorly-designed social safety net?
In the debates on the need for a fiscal stimulus, both sides generally agreed that this particular policy instrument is one of the clumsiest available to policy makers. The dangers are well-known and well-documented: getting the timing wrong, getting the targets wrong, political interference, the risk of seeing a temporary spending program turn into a […]
Saturday Night Fever: Roger Farmer, multiple natural rates, search theory, and share prices
Roger Farmer is an old grad skool buddy. We were in the same MA and PhD class at UWO in the late 1970's, though we have lost touch a bit over the decades. That's a sort of disclaimer. Roger preferred punk to disco; I think he was right on that score. But Peter Diamond's "A […]
How increasing tuition fees can increase university participation rates
I'm recycling this old post in celebration of Lucien Bouchard's call for an increase in Quebec university tuition fees. The Quebec government has just released a collection of studies on financing education, including this one (121-page pdf, in French) written by Valérie Vierstraete, a professor of economics at the Université de Sherbrooke. It addresses exactly […]
Even more on the ineffectiveness of minimum wages as an anti-poverty measure
As was the case in Ontario, recent evidence from the US illustrates the pointlessness of using the minimum wage as a way to reduce poverty (h/t Craig Newmark): Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor? Using data drawn from the March Current Population Survey, we find that […]
Confusing good news with bad: Government procurement edition
Today's entry is courtesy of an op-ed in the Toronto Star; the topic is the deal that exempts Canada from the 'Buy American' provisions of the US stimulus package. Canada gives away the store in return for scraps from U.S.: In return for these meagre scraps, the provinces and municipalities have offered up temporary market […]
The simple money supply multiplier model and simple keynesian multiplier model
These two first-year textbook models — the simple money supply multiplier model; and the simple keynesian income-expenditure multiplier model — are formally identical. Translated into math, or game theory, you can't tell the difference between them. They contain exactly the same important insight: that what is true for the individual bank/household is not true for […]
Rethinking Canadian macroeconomic policy
Olivier Blanchard and a couple of colleagues at the IMF have circulated a paper with the title "Rethinking macroeconomic policy". Some of the ideas that are touched upon include Increasing inflation targets to 4% instead of the 2% goal that is more popular among central bankers. The idea is that when inflation and interest rates […]
Creation myths and economic history
Economists have their "creation myths", like Carl Menger's theory of the origins of money. What is the relation between these creation myths and economic history? Was there ever a time at which people used barter, and then monetary exchange evolved in the way Menger said it did? Political philosophers also have their creation myths, like […]
Don’t read too much into the year-over-year inflation numbers
Today's CPI release has core inflation up 1.9% over last January. This is 45 bps higher than December's y/y numbers, renewing speculation that the Bank of Canada may increase interest rates sooner rather than later. But it's important to remember that there's nothing particularly special about the y/y numbers; we could write headlines for core […]
Worthwhile Canadian Initiative 
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