Monthly Archives: October 2011
Three goods means two markets, if one good is money.
Paul Krugman says: "I guess my question is, why can’t we walk and chew gum at the same time? I like to introduce the subject with IS-LM as a representation of three-market economics, then say look, in practice short-run policy involves setting an interest rate target and adjusting M to get there, so that’s how […]
It’s still ISLM to me
There are some policy-relevant substantive questions that are being ignored in the current futile blogosphere debate over ISLM. I'm coming back to that below. Brad De Long says it's tribalism. People want to show their tribal allegiance by using or not using ISLM. Or at least appearing to use or not use it. That may […]
Hysteresis in the teaching of econometrics
When I was a graduate student – some 25 years ago – there was a practical reason for why Bayesian methods played little or no role in the textbooks. Even though classical methods asked the wrong questions* and forced people to wade through a myriad of complicated and contradictory ways of answering them, it was […]
Wicksell and the hot potato
There is no monetary hot potato in standard Keynesian and New Keynesian models. That is because those models make wildly implausible assumptions about people's knowledge. They assume people have perfect knowledge about how much money everybody else is borrowing from the banking system, and how much they are planning to spend from what they borrow.
Medieval Monetary Thought
In my final class lecture this week on ancient and medieval economic thought, I discussed the work of Nicholas Oresme (1320 to 1382), a French Roman Catholic bishop who was also a philosopher, mathematician and an economic thinker. I found it interesting to see a career link between mathematics and economics so early on. More […]
In praise of cookbook econometrics
Cookbook econometrics has few fans. I am one of them. Cookbook econometrics provides clear algorithms for solving econometrics problems, without providing detailed explanations of why these algorithms work, or why specific steps in that algorithm are required.
Nine steps to cleaner data
Real world data is messy. Dirty. Untidy. Before you can even think about using all of those pretty techniques you learned in econometrics class, you need to clean up the data. Here is my nine step approach.
The world wants more US government debt. The US Treasury should supply it.
This fascinating story came out during the psychodrama of the US debt ceiling: U.S. Treasury debt prices soared on Friday on fears a U.S. default could trigger a shortage of Treasuries and even push the world's largest economy back into recession. On the face of it, this makes no sense. The market's reaction to a […]
Bike banks
Bear with me on this one. I'm trying to get my head straight on money and banking, by thinking weird thoughts. Suppose, just suppose, that (for some unknown reason) the only asset that banks liked owning was bicycles. They refused to own any other sort of asset, except, of course, central bank currency and reserves […]
My answers to Steven Landsburg’s two questions
Steven Landsburg asks two questions, in two related blog posts. I'm going to give my answers, taking the two questions in reverse order.
Worthwhile Canadian Initiative 
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