Category Nick Rowe
Apples, wheat, and haircuts: output and demand
What happens to output when the quantity of output demanded suddenly and unexpectedly falls below and stays below the existing level of output? (And prices either do not or cannot adjust to bring the two into balance). I'm going to sketch three different economies, which give three different answers to that question. In an "apple […]
I=S
There's a lot of people wandering around the internet who are very confused about Investment = Saving. Maybe they have been mistaught, or maybe they have mislearned? I don't know. But I'm doing this as a public service, even though it's a thoroughly boring job for me. Someone's got to do it. And since I've […]
Employed vs unemployed wage rigidity
Suppose you believe that (nominal) wage rigidity in the face of a decline in the (nominal) demand curve for labour is what causes unemployment in a recession. Is it wage rigidity of the employed workers or of the unemployed workers that's the problem? Scott Sumner and Alex Tabarrok say it's (mostly) the wage rigidity of […]
Understanding another’s theory
Two field linguists are trying to translate a foreign language from scratch. So they are following a native speaker around. The first linguist knows the difference between a rabbit and a hare. The second linguist doesn't know the difference between a rabbit and a hare.
Does inflation mean the earnings yield on stocks is seriously understated relative to bonds?
That's a question, and not a rhetorical one. I can think of a reason why it would be understated. But I lack the practical knowledge of corporate accounting to know if my reasoning is correct in practice, or if there's some offsetting effect I'm ignoring, and if the effect I'm talking about is big enough […]
The MX6 bitch bolt and technical progress
I need a mental health break from macro/money. It's stressing me out too much. Plus, things like the MX6 bitch bolt are just as important in the big scheme of things. On the rear ("right") side of the V6 engine on a Mazda MX6, next to the firewall, is a small metal bracket. It's about […]
Robust and fragile models, and fragility in the limit
Assume prices are perfectly flexible. Assume full information rational expectations. Assume money is neutral, super-neutral, and super-duper-neutral, etc. The Fisher equation holds exactly. And, the central bank sets the nominal rate of interest. And the economy is always in equilibrium. The model predicts that if the central bank increases the nominal interest rate by 1%, […]
The Keynesian case for government wage cuts
Park your politics at the door for this one. Yes, I know that will be hard for some. But it's OFF TOPIC. [Update: now that the macroeconomics have been thoroughly discussed in comments, I can relax this. Civilised discussion of politics is now OK.] Yes, I understand Keynesian macroeconomics at least as well as most […]
The macroeconomics of double pole dancing
The stupidest thing we do in macroeconomics is draw a downward-sloping IS curve. It's the stupidest thing we do, because we know it's stupid. (And I've done it hundreds of times.) And because we do this stupid thing, we associate tight money with high interest rates. Unless of course we are someone like Scott Sumner, […]
US AAA: bleg and random thoughts
First the Bleg: since I'm so useless at questions like this, what is Canada's own history of bond ratings? Have Canada's federal bonds been upgraded or downgraded often in the past? What were the circumstances? Did it make much difference to anything? (Or any other countries, other than Canada and the US, for that matter, […]
Worthwhile Canadian Initiative 
Recent Comments