Category Macro
The efficiency wage case for maximum wage laws
I think Larry Summers is wrong, on a point of theory. He commits a fallacy of composition. (That's a brave way to start the day.) He says (HT John Cochrane): "Businesses will raise wages to a point where the cost is just balanced by the reduced bill for recruiting and motivating workers. At that point, […]
A question for beta bankers
This post covers the same ground as my previous post, but it's written for a different audience. It's written for those people who approach monetary policy from a banking/finance perspective. Suppose you are running a commercial bank. Let's call it "BMO". And let's simplify massively. On the asset side of your balance sheet you have […]
On defining “recession”
The precise definition of "recession" seems to be topical in Canada right now. (I know this because my daughter phoned to ask me the definition.) It's a mug's game. I won't play. (Do geographers waste their time arguing about the precise definition of "mountain"?) I hear that the "technical" definition of "recession" is two consecutive […]
Thoughts on reading Silvio Gesell on money
I hadn't read Silvio Gesell. I only knew about him from Chapter 23 of Keynes' General Theory, from Miles Kimball's post on Gesell's plan for negative interest rates on money, and from the Wikipedia entry. But I'm halfway through writing a paper on Keynes vs Gesell, so I thought I should probably actually read him. […]
Are all Eurozone GDP data “fake”?
The title is more inflammatory than I want it to be, but I can't think of a simple way to ask the question properly. And it is a genuine question, because I don't know how they construct GDP data for Eurozone countries. And I know there's no chance I will be able to figure out […]
Proxies for monetary disequilibrium
Perhaps we should think about monetary policy this way. If all prices were perfectly flexible, monetary policy wouldn't matter much. Monetary policy matters because not all prices are perfectly flexible, which means that bad monetary policy causes monetary disequilibrium, which is what happens when prices want to change but don't change. Recessions and booms are […]
Panglossian expectations and the Phillips Curve
[This post is unfinished. I was writing it yesterday, thinking it would work out, then I realised there was a problem. I slept on it, but can't see any obvious resolution. But sometimes we learn from seeing that things don't work out the way we thought they would. So I'm posting it anyway. I will […]
Individual and aggregate, marginal and total, incentives to cut prices in a recession
The purpose of this post is to lay out the intuition behind my discussion/argument with Steve Randy Waldman. (I'm not sure whether this post will help or hinder my discussion with Steve. But students of New Keynesian macro might find it useful regardless.) We need to distinguish between the individual and aggregate incentives of cutting […]
Coordination problems and discontinuities
Just a quickie. This is for Steve Randy Waldman, who says "Downward price stickiness is a coordination problem, plain and simple." It is a coordination problem (I think), but it's a bit more than just a coordination problem. There must be something else too, like a discontinuity, or something, to get that coordination problem. Let […]
WTF!? Neo Fisherianism as one social construction of reality
Macroeconomists need to pay more attention to finance sociology. Choke. Languages have multiple equilibria. If we all used the word "cat" to mean dog, then "cat" would mean dog. And if I walked into a pet store and said "I want to buy a cat", the people in the pet store would react differently to […]
Worthwhile Canadian Initiative 
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