Monthly Archives: April 2015
VAR vs WTF!?
Vector auto regressions (VARs) are supposed to tell us how the economy would respond over time if hit by a shock, by looking at past patterns of responses to shocks. A "shock" means "a deviation of one of the variables in the VAR from the level that was forecast by the VAR". And "shocks" include […]
When I really learned the David Ricardo idea
[Update: Tim Worstall has a beautiful response to this post, applying the Ricardian idea to trade between humans and robots (or the human owners of robots). Will the robots out-compete us in everything, causing mass unemployment? Nope. Robots will never have a comparative advantage in everything. Once again, Tim's Ricardian point seems totally obvious once […]
The mechanics of exchange and non market-clearing prices
[Update: on second thoughts, maybe this post was not quite ready for prime-time. But I think it's still fun to play with.] Here is a very simple model of a pure exchange economy where the mechanics of exchange (who can trade what with whom) determine whether very small departures of prices from market-clearing cause very […]
Deficit targeting vs Debt targeting
Is a "balanced budget law", even a flexible law that allows temporary deficits (and surpluses) in appropriate circumstances, the right way to think about prudent sustainable fiscal policy? A financial asset is just a bit of paper with a promise written on it. A promise is a commitment about the future actions of the promiser, […]
The Federal Deficit: A Long Term View
In honour of the 2015 Federal Budget and the balancing of the budget, why not a retrospective on Canadian federal government deficits since 1867. In the period from 1867 to 2014, the Federal government has run a deficit in 108 out of 148 years or 73 percent of the time. In nominal terms, the federal […]
Noah vs Steve: a suggested interpretation
Is Woodford's "cashless" economy a model of a monetary exchange economy, or a model of a barter economy? (In a monetary exchange economy, all other goods are only exchanged for one good called "money"; in a barter economy each good can be exchanged for any other good.) If you answer "barter economy", then modern New […]
Fiscal Ships
“We're two ships that pass in the night, And we smile when we say it's alright We're still here, It's just that we're out of sight Like those ships that pass in the night” Barry Manilow Next week is a double-header of sorts for economists interested in Canadian public finance – a Federal budget on […]
Secular stagnation, liquidity, and rent/price ratios
No answers here, only questions. By "secular stagnation" I mean "declining equilibrium real interest rates". Most explanations of secular stagnation say it is caused by a rising desire to save and/or a falling investment demand. Call this the "Saving/Investment Hypothesis". But there are lots of different real interest rates. For example, the real interest rate […]
Funding the gerontocracy
This year, the per-vote subsidy once enjoyed by Canadian political parties ends. Parties will have to raise funds entirely through donations. So, who gives? There is a generous federal tax credit for political donations, worth 75 percent of the first $400 donated, 50 percent of the next $350, and 33 percent of remaining donations. The federal tax credit […]
Worthwhile Canadian Initiative 
Ontario Budget Commentary
Well, another Ontario budget has come and gone. The government still plans to balance its budget by 2017. According to the budget projections it will do this largely by increasing revenues and restricting expenditure growth.