Category Macro
Targeting the stickiest price.
Suppose the price of apples is sticky, but the price of everything else adjusts instantly to its equilibrium value. There is then an old, and strong, argument that monetary policy should target the price of apples. The economy performs best when all prices are at equilibrium. If the price of apples won't move (quickly) to […]
Stag Hunt and macroeconomics
A coordination failure is when rational individual behaviour leads to a bad outcome. Some other outcome would be preferred by all. Keynesians especially emphasise coordination failures, though nearly all macroeconomists say that coordination failures sometimes happen, and say the US economy is in one right now. That makes us optimists. Maybe this isn't the best […]
P-data, Q-data, and L-data
Economists have got lots of P-data and Q-data, and we pay a lot of attention to it. I think we don't have much L-data, except anecdotal, and we don't pay much attention to the hard L-data we do have. P-data is data on the prices at which goods are traded. Q-data is data on the […]
Poor sales MINUS quality of labour
Update 3: I wish I had titled this post: "Labour quality: the dog that stopped barking". I see something a bit different in that graph that all the macro-bloggers have been blogging about. Sure, I see the "poor sales" that everyone else sees. But what about "quality of labour"? What's important is that "quality of […]
Hayek, Keynes, Hicks, money, and New Keynesian macroeconomics
Hayek said that individuals make current plans for future actions based on their expectations of the future actions of others. And others might be planning to do something different from what you expect them to do. And economists need to look at what happens when those plans and expectations are not mutually consistent, and look […]
The Bank of Canada and the Fed: rules vs. discretion
I just can't get interested in the Bank of Canada right now. I can only think about the Fed. The Bank of Canada is just too boring. Which it should be.
Time-shifting planned demand vs. permanently increasing actual demand
Most policies aimed at increasing demand merely time-shift planned demand. Does that mean they don't really work? Does it mean we get recovery now at the expense of an even bigger recession later? Do we just have to cross our fingers and hope that something else eventually comes along to increase demand in future? A […]
Re-learning the New Keynesian IS curve
I want to return to a topic I struggled with in the past. I think I understand it better now. I understand it better because I watched the video of George Evans that Mark Thoma made and posted. What I understand better now is not so much the answer; it's the question I was trying […]
The Fed should buy pro-cyclical assets, not bonds
Suppose you believe that the US economy needs increased Aggregate Demand, and needs looser monetary policy to accomplish that, and needs asset purchases by the Fed to accomplish that. (I believe those things, but am not going to argue them here). What sort of assets should the Fed buy? I want to divide all assets […]
Taylor = Wicksell + Fisher + Friedman
Note to all genuine historians of economic thought: yes, I know. There's real history, then there's Whig history, and then there's this blog post.
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