Category Nick Rowe
Economics and the art of automobile maintenance
I've been taking a mental health break from economics. I've been buying and fixing up a 1994 Mazda MX6. It's nearly fixed up now. And so am I. So here's a light Summer post. Why do some people fix their own cars?
In Praise of Dark Ages
This can't be quite right. But I'm going to run it by you anyway. An occasional Dark Age is a good thing. We sometimes need to forget. We sometimes need to torch libraries. That's the only way that knowledge can progress. Paul Krugman defined a Dark Age well. I forget exactly what he said, and […]
Cash as the real real option — to do anything
Option theory was originally about financial assets called options. A put option is a derivative that gives you the right to sell some asset at a pre-specified price. A call option is a derivative that gives you the right to buy some asset at a pre-specified price. They are called options because you have the […]
Rational vs adaptive expectations: a false dichotomy
Arnold Kling has posted another good installment of his Macro Doubtbook. But it contains what I think is a false dichotomy between adaptive (habit) and rational (model-based) expectations. Since Arnold is not alone in thinking this way, I thought I would do a short post to explain why I think it's wrong.
Canadian monetary policy if half the world turns Japanese?
The latest Statistics Canada Labour Force Survey confirms the impression that the Canadian economy is recovering well. Inflation is still a little below the 2% target, but should rise as the recovery continues. The Bank of Canada's overnight rate target is at 0.50%, which is much lower than normal, and is clearly negative in real […]
What would count as a satisfactory explanation of sticky prices?
Richard Serlin, in a comment on a Stephen Williamson post, explains why he thinks prices are sticky. What Richard says sounds plausible. And it's based on his real-world experience. He may very well be right. But it doesn't constitute a satisfactory explanation of sticky prices, in my eyes. I'm really just using Richard as an […]
The effect of expected future taxes on current investment: how big?
If the government runs a fiscal deficit now, that may mean that future taxes increase. The expectation of those future taxes may reduce the expected after-tax marginal return to current investment. That may reduce current investment, and may offset some of the effects of the fiscal deficit on aggregate demand. This mechanism for crowding out […]
HST and jobs: more studies in applied orthogonality
Some economic policy debates are about jobs. Most aren't about jobs, or shouldn't be. But far too many of them end up being about jobs, even though the policies have nothing to do with jobs. Frances once explained the advantages of the HST to me. (Note for non-Canadians: the Harmonised Sales Tax replaces a provincial […]
Why I’m still a sticky-price macroeconomist, despite everything
David Andolfatto has written a very good post criticising sticky-price macroeconomics. This post really needed to be written. It explains why a minority of macroeconomists don't like the mainstream assumption of sticky prices. After you have read it you should understand why those crazy freshwater macroeconomists aren't quite so crazy after all. I agree with […]
“Fire!” in Noah’s Flood. Optimal scare tactics?
Suppose I were an American blogger. Suppose I had a very large popular following, that believed everything I said. But suppose the people who actually influenced and controlled policy thought I was a total airhead. I'm not sure what I would do, but I know what I would be very tempted to do: yell "Inflation […]
Worthwhile Canadian Initiative 
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