Category Nick Rowe
Horizontalism, black holes, and liquidity traps
The same "horizontalist" macroeconomic theories that predict the existence of black holes also predict that standard monetary policy is useless in a liquidity trap, and for the very same reason. But we do not observe any economies ever falling into black holes, so black holes probably don't exist. So if those macroeconomic theories are wrong […]
Why don’t we observe (macroeconomic) black holes?
Like physics, modern macroeconomic theory predicts the possibility of "black holes". The analogy with physics is close, but not exact. Because unlike physics, where it's not easy to see a black hole, there should be no difficulty in macroeconomists seeing a black hole, if one exists. At the very least, we should certainly see any […]
What is it with Microeconomists?
They are certainly not stupid. And they are certainly not ignorant either. I know that the ones I'm complaining about are smarter than me, and more knowledgeable than me. And that includes economics smarts and knowledge. Some of them make me feel totally inadequate on a daily basis (I read their blogs daily). Some of […]
Greece, the Eurozone, and Canada
I have been following the story about Greece. Like some other Eurozone countries, Greece has high deficit/GDP and debt/GDP ratios. Unlike Canada, but like Canadian provinces, Greece cannot print money. Eurozone countries are like Canadian provinces, as I argued in here back in January. But the Eurozone, unlike Canada, lacks a federal fiscal authority. The […]
Random Thoughts
Sometimes my brain can't concentrate on any one topic long enough to write a serious post. Or maybe I just don't know enough to give a good answer to some question I want to answer. So here is a random collection of thoughts:
What is “the natural rate of interest”?
"The natural rate of interest" is a theoretical construct. It is a theoretical construct that only has a defined meaning within a certain class of economic models. And even within that class of models, the exact definition may vary from one model to the next.
House price risk is negative covariance with your PV desired rents
If you buy a house, the risk is minus the covariance between the price of the house and the present value of the rents of the house you would desire to live in. I disagree with Felix Salmon. Strangely, Felix seems to have misplaced the significance of an idea he had earlier: we are born […]
Car insurance, home ownership, and efficient markets
I don't insure my car. Well, I have liability insurance, but I don't insure the car itself. So if I drive it into a ditch, or it gets stolen, I have to pay to repair or replace it, out of my own pocket. Why did I take this decision? I could have estimated the probability […]
Why do (bad) banks (really) matter?
I'm going to put forward two perspectives on why bad banks might be important in understanding the recession: an orthodox perspective; and a heterodox perspective.
Reflections on teaching very basic finance to first year economics students
Today I taught basic finance to my first year economics class. We don't have time to cover all the micro chapters, so have to skip some. In the past we skipped the finance chapter. This year we decided to include the basic finance chapter, and skipped consumer choice (indifference curves and budget constraints) instead. That […]
Worthwhile Canadian Initiative 
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