Monthly Archives: December 2010
If cows were money (a response to Brad DeLong)
If cows were money, an increased demand for milk would cause a recession. People would stop spending their cows to buy goods and services, because if you spend your cows you don't have as much milk. Was the recession caused by an excess demand for milk, or an excess demand for money?
Radical tax policy ideas – or just bad ones?
In a recent article in Policy Options, Professor Tom Kent proposed bewildering variety of tax policy suggestions. Most are, in my opinion, bad ideas. His most radical one is to abolish the corporate income tax and the dividend tax credit.
Does Canada need a progressive consumption tax?
Robert Frank argues that the US should replace its income tax with a progressive consumption tax: By replacing federal income taxes with a steeply progressive consumption tax, the United States could erase the federal deficit, stimulate additional savings, pay for valuable public services and reduce overseas borrowing — all without requiring difficult sacrifices from taxpayers. […]
Forecast the target, not the instrument
Should the Bank of Canada announce what it expects the future overnight rate to be? There are two good articles in the Financial Post: Pierre Siklos argues "yes"; Andrew Spence argues "no". There's more by both authors in this C.D. Howe backgrounder (pdf). I'm against it. I'm going to try to explain why I believe […]
Are the rich capitalist? Are capitalists rich?
A short answer to both of these questions is "typically not," and an even shorter answer is "no". A longer answer is below the fold.
Why blogging is hard
Imagine the following question on a PhD comprehensive exam: "Using a macroeconomic model with monopolistically competitive firms, explain how an increase in the expected future price level will cause an increase in the current price level. Also explain whether there is an effect on real output.
Sovereign insolvency and illiquidity
If a country has a debt/GDP ratio of 100%, and is paying 9% interest, and nominal GDP is not rising, then it's got a solvency problem. It needs to run a budget surplus of 9% of GDP just to stop the debt/GDP ratio rising further. And that is very hard to do. But why would […]
The political economy of porkbarrel politics
The headline in the Ottawa Citizen proclaimed "Tory ridings won more tourism grants." In ridings currently held by Canada's governing Conservative party, 3/4 of requests for tourism grants were approved. In other ridings, just half of requests were. Now, Conservative ridings tend to be rural and suburban ridings, while non-Conservative ridings are more likely to […]
What we research, and what we believe
Suppose you believe in theory X. You want to do research in theory X. But all the interesting ideas in theory X have already been well-researched. You can't think of anything interesting and new to say about theory X. There might be some unresolved problems in theory X that need to be tackled. But you […]
Eurozone Adjustment Asymmetry
Adjustment to resolve asymmetries should be symmetric. Both sides should adjust. But sometimes it isn't symmetric. One side may choose to adjust; but the other side is forced to adjust. Like under the Gold Standard. So if the Eurozone does break apart to resolve the asymmetry: I think it will not be through Germany choosing […]
Worthwhile Canadian Initiative 
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