Category Nick Rowe
Two simple games, for game theorists and Neo-Fisherites
I'm hoping some game theorists will chime in here; it doesn't matter if you don't get macro. I need your help, and want your thoughts on my intuitions: Not all Nash equilibria are created equal. Game A. There are n identical players who move simultaneously. Player i chooses Si to minimise a loss function Li […]
Interest-free loans from the central bank to the government
What is the difference between: A. I print $100, and give it to you as an interest-free loan. B. I print $100, lend it to you at 5% interest, so you give me $5 per year, and then I give that $5 per year straight back to you. C. I print $100, lend it to […]
“King of deficits”??
I normally stay out of politics on this blog. But with the upcoming election, the political conversation on fiscal policy is starting to get stupid. In particular, for Paul Martin to accuse Stephen Harper of being the "King of deficits" was really stupid. Is there anything Stephen Harper could have done to have prevented a […]
Good shocks, bad shocks, and shocks that cause a monetary coordination failure
Just because a shock is a bad shock doesn't mean it should cause a recession. A recession is a monetary coordination failure. Monetary coordination failures are caused by monetary policy. Start with a Robinson Crusoe economy. By assumption, Robinson Crusoe always allocates his resources perfectly to maximise his expected utility given his information about the […]
Why did (Canadian) inflation-targeting work in 1996 but fail in 2008?
In both 1996 and 2008 the Canadian economy was hit with a big shock. The 1996 shock was the change in fiscal policy, turning a large deficit into a large surplus. The 2008 shock was the global financial crisis. (Canada didn't really have much of a financial crisis; no banks failed, as usual.) In both […]
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, […]
Interest rate control as beta-anachronism
I want to make a minor point to follow up on something important that David Glasner said: "Nevertheless, our basic mental processes for understanding how central banks can use an interest-rate instrument to control the value of money are carryovers from an earlier epoch when the value of money was determined, most of the time […]
Open borders vs forced emigration
Let's start simple. There are two physically identical islands, Alpha and Beta. There are two agents, A and B. Initially, A lives on Alpha, and B lives on Beta. Under "Open Borders", each agent has the right to move to either island, if he wishes to. Under "Forced Emigration", each agent has the obligation to […]
Maybe profs should haggle over textbook prices?
Mark Perry shows that textbook prices have been increasing, a lot. I don't know why that is. But maybe there's something that profs could do about it. The publisher's rep drops by your office. She asks which book you will be adopting for your course. She really wants the sale. You say:
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. […]
Worthwhile Canadian Initiative 
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