Monthly Archives: November 2013
Minimum Wages as Macroeconomic Stimulus?
The minimum wage debate has heated up in Ontario given the Ontario Ministry of Labor’s Minimum Wage Advisory Panel is travelling the province looking for input on how to adjust the minimum wage in the province and sparking debate as to whether the minimum wage should be raised from the current general minimum of $10.25 […]
On understanding and spinning your own New Keynesian model
If I were a different sort of person, I would now be accusing some macroeconomists of deliberately misrepresenting the policy implications of their models in order to further their own political agenda. But I am not that sort of person. I don't generally go for conspiracy theories. And I myself used to make the same […]
New Keynesian multipliers, and the expansionary effects of falling government spending
Microeconomic models usually have negative feedback. Take a simple demand and supply model. Suppose there is a shock that causes the demand for apples to increase by 100 apples. That creates an excess demand for apples that causes the price to rise, that causes the quantity demanded to fall. If the supply and demand curves […]
The Incredible Shrinking Federal Government
The Federal government will be releasing their fall economic update today and so this is as good a time as any to review Canadian federal government finances. Contrary to my earlier expectations, I guess the Federal government may indeed be about to balance its budget by 2015/16 judging by early press reports regarding today’s Federal […]
House prices “bubbled” because Turgot’s land beats Samuelson’s “money”
This post won't be as clear as I want it to be. I'm trying to get my head straight on something. Sorry. Why are real interest rates positive? Turgot's answer was "Well, suppose they weren't, and never would be. Then the price of land would be infinite, because the present value of the rents would […]
Why Ontario Will Not Be Balancing the Budget Anytime Soon
Ontario released its fall economic statement this week and the government insists that it will be balancing the budget by 2017-18. From an actual deficit of 9.2 billion dollars for 2012-13, it is anticipated that the deficit will be 11.7 billion dollars in 2013-14 and will go down to 3.5 billion dollars by 2016-17. Yet, […]
Naive vs rational expectations is a (partly) false dichotomy
[Update: short version. It is not stupid to use rules of thumb. Rules of thumb can be rational. It is stupid to use rules of thumb that don't work well in the world you live in; and never change those rules of thumb if the world changes. And in the olden days, before rational expectations, […]
What determines long run private debt/GDP ratios?
Are you concerned about high and rising private debt/GDP ratios? Then look at this World Bank data, and you will get a whole new perspective on the question. Would you feel less worried if Canada had the same ratio as Afghanistan? You will see massive cross-country differences in private debt/GDP ratios. The ratios range from […]
Pictures of adverse selection in an insurance market, with and without death spirals
This is a simple model, with diagrams, of adverse selection in an insurance market. It's mostly for teaching purposes. (Adverse selection is currently very topical in the US, but it's a perennial problem that applies to all forms of insurance markets, and many other markets too.) I don't know if these diagrams are in any […]
Marriage, Canadian style
Canadians are less inclined towards marriage than Americans. How much less?
Worthwhile Canadian Initiative 
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