Category Nick Rowe
Hume’s Sailing Ships correcting Samuelson’s Icebergs
Paul Samuelson said (PITA gated) that David Hume's price-specie flow mechanism (ungated) was wrong. And I am saying, nervously biting my fingernails, that Samuelson was wrong. Assume that durable sailing ships are costly to build, but have low (or zero for simplicity) operating costs. Assume apples are the only tradeable good, and one ship can […]
AD/AS: a suggested interpretation
Many macroeconomists don't like the Aggregate Demand/Aggregate Supply framework often used in Introductory macro textbooks. Maybe that's because it isn't explained properly. So I am going to explain it my way. If you explain the AD/AS framework my way, you will see that it portrays a deep and realistic understanding of macroeconomics that is lost […]
Staghunt and (the) IRS
"IRS" stands for "Increasing Returns to Scale". It means if you double all the inputs, you more than double the output. I first worried that US readers might think "IRS" stands for Internal Revenue Service (the US tax people). Then I realised that I want it to stand for that too. Staghunt is a simple […]
Understanding Banks and Two Monetary Policy Instruments
Sometimes I write posts about things I don't understand and want to understand. (Or don't understand very well and want to understand better.) This is one of those posts. Suppose the government nationalises all the commercial banks, and merges them into the Bank of Canada. And suppose the Bank of Canada abolishes paper currency. So […]
John Cochrane On Neo-Fisherianism, again
First I am going to give you the intuition behind the model in John Cochrane's new paper. It's a very good paper, though I confess I've only skimmed it, because it's very long, and I don't understand all the math. Then I'm going to explain what I think is wrong with it. Then I'm going […]
Price Level vs Inflation Rate: semantic clarity
I write this for journalists, first year economics students, and the general (non-economist) public. Yes I'm being pedantic. But I hope it helps. I'm trying to clear up a very common confusion in how we talk about inflation. Your car has an odometer, which measures kilometers driven. And your car has a speedometer, which measures […]
From ISLM to NK Macro
Let me try it this way. This is written for macro students, and their teachers. But it's aimed at researchers too. It's about the role of money in macro models. Ignore what New Keynesian macroeconomists say about their own models. Listen to me instead. Start with the second-year textbook ISLM model. The price level P […]
Financial Assets > Liabilities
Take Bitcoin for example. It's a financial asset to whoever holds it. To whom is it a financial liability? I suppose you could say "it is a liability to the whole community of those who accept Bitcoin in exchange for goods". But that answer seems like a desperate attempt to salvage the assets=liabilities dogma. Nobody […]
Green Bitcoin vs Red=Green LETS: Nominal Anchor vs Needs of Trade
Both Bitcoin and LETS are monetary exchange systems. There are many differences between Bitcoin and LETS. I am going to ignore all of those differences except the one I want to focus on. Those other differences are off-topic. [Yes, this post is not really about Bitcoin vs LETS. I am just using Bitcoin and LETS […]
Why I=S is a bad place to start doing macro, again
I was reading Philip Cross's article "The Limits of Economic 'Stimulus': How monetary and fiscal policy have sown the seeds of the next crisis". I came to this bit in the Executive Summary: "Low interest rates also depress savings and therefore investment." It is clear from the context that he is talking about the Bank […]
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