Author Archives: wciecon
The quick and dirty way of putting money into macro
This post is really about maths, dark ages, and understanding macro. There are two ways of putting monetary exchange into a macroeconomic model: the proper way; and the quick and dirty way. Keynesians generally use the quick and dirty way. That's OK. But there may be problems if people don't understand what you are doing. […]
Saving by buying lottery tickets
Another sad news day. An older woman, living on a fixed income. Faced with an emergency, she had paid for purchases with a department store credit card. The card's interest rate, including service charges, was 29 percent. She was barely able to pay the interest on the card. To reduce the amount owing was impossible. […]
Why would we assume that high earners are price takers in the labour market?
Greg Mankiw's column in the New York Times makes the point that available evidence – in the US as well as Canada – suggests that high earners have higher labour supply elasticities than do workers lower down in the income distribution. As a result, increasing income tax rates on high earners would have disproportionately stronger […]
Stocks and bonds, and capital and money
How will we know that "QE2" is working? Judging from rising stock and bond prices, some will conclude it's working already, even though we haven't seen it yet (which is no surprise, because expected future monetary policy matters as much or more than current monetary policy). But I'm waiting for stock and bond prices to […]
Referees: the ultimate scarce resource
Every paper published in an academic journal goes through "peer review". It is sent out to two or three external reviewers, who evaluate the manuscript for originality, sound research methods, and so on. Unfortunately the quantity of manuscripts submitted to journals outstrips the number of people willing to review them, and the system is in […]
Historical Voting Trends – The West
Like Stephen Gordon I am constantly frustrated with the backwards fiscal policies peddled by political parties. My frustration comes from a slightly different source – I believe they're unnecessary not just from an economic point of view, but also a political point of view . I don't believe policy affects voting behaviour in a significant way (with […]
“Canada’s Budget Triumph” – some additional context for the US
David Henderson* of GMU has a working paper (h/t Tyler Cowen) on the story of how Canada's federal government solved its budget balance woes during the latter half of the 1990's, with almost no apparent ill effects. Much of the paper sets out the political context that made this possible, and is very useful in […]
Firefighting is not a public good
In economics, public goods are ones that are (a) non-excludable and (b) non-rival. Non-excludable means that it is impossible to stop someone from enjoying the public good. For example, radio broadcasts can be picked up by anyone with a receiver. Non-rival means that one person's consumption of the good does not limit the amount available […]
Was Milton Friedman right after all???
Milton Friedman said a lot of things that were very controversial 40 years ago, but are now part of the economics mainstream. The natural rate hypothesis, and the view that monetary policy should have prime responsibility for aggregate demand and inflation, are now part of the New Keynesian orthodoxy. This shows how much Milton Friedman […]
Economy Lab: Why economic forecasting goes awry
My first post at the Globe and Mail's new Economy Lab site is now up.
Worthwhile Canadian Initiative 
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