Monthly Archives: August 2011
Understanding another’s theory
Two field linguists are trying to translate a foreign language from scratch. So they are following a native speaker around. The first linguist knows the difference between a rabbit and a hare. The second linguist doesn't know the difference between a rabbit and a hare.
Are faith and health care substitutes?
"Every single 1st world nation that is irreligious shares a set of distinctive attributes. These include handgun control, anti-corporal punishment and anti-bullying policies, rehabilitative rather than punitive incarceration, intensive sex education that emphasizes condom use, reduced socio-economic disparity via tax and welfare systems combined with comprehensive health care…" Gregory Paul and Phil Zuckerman. People in […]
Does inflation mean the earnings yield on stocks is seriously understated relative to bonds?
That's a question, and not a rhetorical one. I can think of a reason why it would be understated. But I lack the practical knowledge of corporate accounting to know if my reasoning is correct in practice, or if there's some offsetting effect I'm ignoring, and if the effect I'm talking about is big enough […]
The more things change…
A cartoon by Low on the 1932 banking crisis (HT Luke Ashworth):
The MX6 bitch bolt and technical progress
I need a mental health break from macro/money. It's stressing me out too much. Plus, things like the MX6 bitch bolt are just as important in the big scheme of things. On the rear ("right") side of the V6 engine on a Mazda MX6, next to the firewall, is a small metal bracket. It's about […]
Robust and fragile models, and fragility in the limit
Assume prices are perfectly flexible. Assume full information rational expectations. Assume money is neutral, super-neutral, and super-duper-neutral, etc. The Fisher equation holds exactly. And, the central bank sets the nominal rate of interest. And the economy is always in equilibrium. The model predicts that if the central bank increases the nominal interest rate by 1%, […]
The Keynesian case for government wage cuts
Park your politics at the door for this one. Yes, I know that will be hard for some. But it's OFF TOPIC. [Update: now that the macroeconomics have been thoroughly discussed in comments, I can relax this. Civilised discussion of politics is now OK.] Yes, I understand Keynesian macroeconomics at least as well as most […]
The Economic Journal of Negative Research Findings
There are inevitably times in the career of any academic when an original hypothesis is not supported by subsequent research findings. In the past this has often meant that such findings went unpublished and did not therefore contribute either to personal advancement or departmental research rankings. All that has now changed. The European Journal of […]
Does the equity premium still exist? And, if not, so what?
Allegedly, stocks generate, on average, higher real returns than bonds, that is, there is an equity premium. The equity premium can be observed over certain time periods. For example, during the 1950s stocks outperformed bonds by 19 percent. But I've never understood why there should be a large premium on equities.
Dealing with the Current Financial Crisis
Well, I'm certainly not a macroeconomist and I have even less expertise when it comes to the world of money and banking and international finance. Yet, given the current situation in financial markets and the world economy, I cannot help but wonder if the problem is also institutional. So, here it goes.
Worthwhile Canadian Initiative 
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