Category Nick Rowe
Interest on holding money vs interest on lending/borrowing money
Prerequisite: intermediate macro. I reckon some people might be getting those two things muddled. The difference matters. Actually, the difference is the only thing that matters. It's the spread between those two interest rates, not the levels of those two interest rates, that matters for Aggregate Demand. Simplify massively. There are two rates of interest. […]
Focal points, and how beta money becomes alpha money
This is my response to Tony Yates' lovely fairy tale about escaping the zero bound. There is a Nash equilibrium in which each individual tosses a coin to decide which side of the road to drive on that day. But it's not a stable Nash equilibrium, in the old-fashioned sense of "stable". If I switch […]
Some thoughts on banning 100% reserve banking
In the olden days, economists would argue about whether fractional reserve banking should be banned, and 100% reserve banking should be mandatory. In today's mirror world, economists are arguing about whether fractional reserve banking should be mandatory, and 100% reserve banking banned. Or at least strongly discouraged. What JP Koning calls "cash escape inhibitors" (designed […]
Negative interest rates, hot potatoes, and banks
Let's start out very simple. The central bank issues banknotes, and those banknotes are the only type of money that people use, to buy and sell everything else. It really doesn't matter if people keep those banknotes in their pockets or if they keep them in a shoebox at the central bank with their name […]
Targeting, Tautologies, and Double Divine Coincidence
For Tyler Cowen. I think I see his point, and I've been trying to get my own head around this question. 1. Suppose I live in a world where the central bank targets the price level, as measured by the GDP deflator. And suppose I believe the central bank should target Nominal GDP instead. Given […]
Anti Urban Economics
I'm just throwing this out there. Read at your own risk. I don't know what I'm talking about (even more than usual). I'm just thinking out loud, and being ornery. I will explain where I'm coming from after I've made my point. There's a difference between "strategic complementarity" and "positive externalities". Strategic complementarity is what […]
Importing people is not like importing apples
Remember all the old Canadian nationalists? The ones who said that the (Canada-US) Free Trade Agreement would destroy Canadian culture? The ones we economists defeated back in the 1988 election? I'm beginning to wish we hadn't defeated them quite so thoroughly. They were wrong. But they sorta, kinda, did have a point. Social/economic institutions are […]
Musical chairs with heterogeneity
There are two problems with musical chairs: The obvious problem: there aren't enough chairs for the kids that want to sit on them. The less obvious problem: chairs and kids are heterogeneous, so if kids grab any chair they can get, some tall kids will be sitting on short chairs and some short kids will […]
External validity, fallacies of composition, and the Wawa multiplier
The Canadian government decides to run an experiment to see if fiscal policy works. It throws 100 darts at a map of Canada. One dart lands on Wawa Ontario, so it spends an extra $1 million in Wawa. Local GDP in Wawa, and local GDP in all the other 99 places where the darts land, […]
Place for comments on “Keynesian Parables of Thrift and Hoarding”
This is not really a blog post; it's an experiment. I have no idea if it will work, but the downside costs seem trivial. If you subscribe to Review of Keynesian Economics, or if your university has a subscription, you can read my article "Keynesian Parables of Thrift and Hoarding". (Anyone can read the abstract […]
Worthwhile Canadian Initiative 
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