Category The 2008-9 recession
On the role of house prices in the last expansion
I have at various points (here and here) been driven up the wall by lazy journalists who have worked under the assumption that if the US housing market was crashing and burning, then so was Canada's. This premise has led to any number of articles cut-and-pasted from the south with 'US' being replaced by 'Canada'. […]
Can rent controls cause a recession? A response to Scott Sumner and Bill Woolsey
There is a perfectly sensible theory that says that rent controls reduce labour mobility and can therefore worsen structural unemployment. I'm going to ignore that sensible theory and put forward a silly theory — one I believe is wrong. But I'm putting forward a silly theory to make (what I think is) a sensible point, […]
The hub and spoke model of money — a rejoinder to Arnold Kling
The textbooks say that money serves as: store of value; medium of account; and medium of exchange. Arnold Kling seems to miss the importance of the fact that money is a medium of exchange. Worse, he misunderstands me, thinking that I am one of those economists who makes a big deal of money's role as […]
Dark Age in Macroeconomics? A History of Taught approach
(Or maybe the title should be: "Notes from the Phelps/Lucas Administration"; or "Notes to supplement our fading memories of the late 1970's".) Is this a Dark Age in macroeconomics? In other words, have we collectively forgotten some (important) stuff that we used to understand? I want to approach this question by looking at what was […]
On the form of the Canadian recovery
There's a certain amount of speculation about the form of the US recovery, based on scenarios of how its economy will work its way out of a balance sheet recession. As I understand it, the main candidates are (in alphabetical order): U: The US economy grinds along as households deleverage themselves, and the economy picks […]
All Microeconomics gets Say’s/Walras’ Law wrong
It's not just John Cochrane; it's not just (modern) Chicago; it's (nearly) all of us. Which economist has not written, said, thought, taught, or learned, the following: "Let there be n goods (including money, if it exists). Max U(X1,X2,..Xn) subject to SUM over n[P(X-E)]=0. Aggregate over all people. Therefore the sum of the n excess […]
A “proof” of Say’s Law; and why money is weird
For a whole economy, does planned expenditure on newly-produced goods necessarily equal planned income from the sale of newly-produced goods? That's what I mean by "Say's Law" in this context. Say's Law is wrong, and the fact that it is wrong is really important for macroeconomics. But it's not obvious why Say's Law is wrong. […]
John Cochrane, Paul Krugman, and Say’s Law, again
Via Casey Mulligan and Karl Smith, here is John Cochrane's response to Paul Krugman. It's a very good response. But there is one part where John Cochrane is definitely wrong. It's small, but important. And it's all about Say's Law, and the crucial difference between a monetary exchange and a barter economy.
Long-term unemployment in Canada and the US
The more I look at the US, the more I see unpleasant parallels to Canada's experience of the 1990's – what Pierre Fortin called The Great Canadian Slump. Even after we emerged from the worst of the 1990-91 recession, we still had to deal with a large current account deficit, out-of-control government deficits and significant […]
“The most severe recession since the last one!” Or, how Canadian economic forecasters got it right
The August LFS release is out, so it's time to update my series of graphs comparing job losses in this recession with those of recessions past. And it's also time for Canadian economic forecasters to take a bow – their predictions for how the recession would proceed out turned out to be pretty much on […]
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