Thursday Sticky 7/16

Integralds · 3時間前

Everyone needs more homework.

Discussion point:

In your subfield of economics, what is a simple naive model of behavior, and how does your subfield's fancypants model beat it?

In macro, here are two examples:

Consumption. Naive view: people consume their income, C=Y. Fancy model: the Permanent Income Hypothesis, that people make consumption and saving decisions based on lifetime expected wealth. A good paper on the extent to which people actually follow the PIH is Hseih (2003 AER). People are more likely to follow the PIH when income streams are well anticipated and any shocks are large; people tend to react more naively to small income shocks.
Forecasting. The naive model for any stationary macro variable (GDP growth, inflation, unemployment) is "almost a random walk." My naive forecast of unemployment next month is unemployment this month, plus or minus a small factor based on whether unemployment is currently high or low by historical standards.

More sophisticated view: vector autoregressions. These tend to beat the naive forecast.

Even more sophisticated view: full-blown DSGE forecasts. These tend to beat the naive forecast, um, not as much.

lorentz65 · 1時間前

/r/nyc is complaining about uber's price gouging. How fun.

wumbotarian · 3時間前

So I've given a bit more thought to the ABCT and what we would expect to see happen in the economy if the ABCT were true.¹

Roger Garrison wrote that money and inflation/deflation don't have anything to do with the Hayekian ABCT. Okay.

But, what about when everything goes south? I'm trying to make heads or tails of what I wrote previously about the ABCT of whether or not we can generalize the ABCT as a "supply-side" or "demand-side" recession.

When firms start to realize that people are consuming on the short-end of the Hayekian Triangle and the investment spending they did will no longer be profitable, all the firms stop investing for the future. So investment falls. But, in broad terms, the ABCT is about an "overaccumulation of capital." If that were the case, then investment into capital falls and Y falls. We can see this in the Solow Growth model.

So I think we can classify the ABCT as a negative-supply shock. Why is this important? Well prices are sticky in the short run (even Roger Garrison agrees). So then we ought to see an increase in inflation during a recession that can be explained by the ABCT. Why? Because negative supply shocks are inflationary.²

What does that mean? That means we could probably take a look at recessions and if there's an increase in inflation that should at least exclude the Keynesian/Monetarist negative demand shock argument.

Here's a graph of inflation with grey areas representing recessions (data is quarterly). What do you see? Most recessions are associated with drops in inflation. Two exceptions pop out: the six month long recession in 1957-1958 and Stagflation. Not sure what '57-'58 was. But we know that the 70s was a huge oil price shock, so it can't be the Fed.

So really, we don't have any evidence that recessions are huge supply shocks and thus inflationary. This doesn't disprove the ABCT but it does show that the ABCT is not able to explain post-War business cycle fluctuations in the US. Just another nail in the coffin.

I was going to actually post this to /r/PraxAcceptance but someone asked for a new sticky so I thought I'd put it here.
This realization came to me today while eating a sandwich at Jimmy John's.

UltSomnia · 1時間前

I think the discussion thread is crowding out the regular posts. Someone needs to hold their nose, head to /r/politics or whatever, and fine some stuff to post. I will not be doing that however I am here to free ride.

CatFortune · 2時間前

Hello! I'm the same guy as SoyElGoddamnBatman. I don't know if I made an impression here, but this is my name now, so all your goodwill and/or contempt can be continued toward this account. Thanks!

commentsrus · 2時間前

If anyone's interested, a brief overview of the literature on the economics of prostitution in regard to the question of whether illegalization is bad economics.

Going back and reading my old thesis (which this post didn't borrow from, actually) and my old papers written on prostitution (yeah, there were many; I was rather edgy in college; my post borrowed mostly from a lit review paper I did) has made me want to study it all again. The models were very simple and I'd squeal audibly whenever I found a dank new novel data set on brothel or Craigslist prices. It also fit in rather well with my main interests: urban and development economics. I might make it my super secret sub-field in grad school.

Anyway, back to meming!

Meta-Cognition · 3時間前

In keeping with the theme of the five policies thing we've had going on in the past few stickies, I figured I'd try my hand at one. You have to choose one policy to improve these areas:

Healthcare:
Science/technology:
Taxation:
Fiscal/monetary stimulus:
Welfare:

However, there is a catch. You can't choose a "paradigm-shifting" policy. So no single-payer/SHI systems, nGDP futures markets or NIT. Go!

MoneyChurch · 2時間前

Why do we use the letter Y for output?

PopularWarfare · 1時間前

Do you like books? Do you like free? Do you hate the library, the librarians and the dewy decimal system? Then you'll love

http://bookos-z1.org

CALL_ME_ISHMAEBY · 53分前

Where my Houston badecons at? Let's go see Bernie on Sunday!

prillin101 · 43分前

I was just told that rent control works flawlessly in Berlin, is this true? I always believed rent control to be bad policy, but it's "allegedly" working in Berlin.

Integralds · 28分前

People are talking about my reading list upthread, which is super exciting and has led my mind to wander to the fall semester.

I'm teaching Macro 101 yet again, and need to revise my syllabus yet again.

Last semester I tried to supplement the lectures with articles. That worked pretty well, but even two articles per week was just too much for an intro course. I'm looking to slim things down.

Syllabus for this fall, version 0.1:

Introductory lectures: no extra reading

Comments: I've assigned Hayek's "Use of Knowledge in Society" in the past, but it's not generating enough discussion and I'm just dropping it. These lectures review supply, demand, and equilibrium.
Measurement of GDP: BEA, "Measuring the Economy: A Primer on GDP."

Comments: I assign the first dozen pages of this report. It introduces the circular flow diagram. More substantively, I love measurement issues and I love torturing my students, and this paper achieves both goals. Class discussion revolves around what GDP measures and the extent to which it measures "social welfare."
Long-Run Growth Facts: Clark, "The Sixteen-Page Economic History of the World."

Comments: I like to teach core concepts in a "triple" fashion: facts, theory, and applications. I ambitiously try to trace out economic growth since 1800. This set of lectures is absolutely exhausting to prep for.. My background reading list is expansive.
The Solow Growth Model: personal lecture notes

Comments: I kick off the course with Solow. No additional reading, because models are hard enough as is.
International Development: Collier, The Bottom Billion, chapter 1.

Comments: I begin this lecture by discussing Mankiw, Romer, and Weil in suitably simplified form. I then discuss the practical international development experience since 1945, with particular focus on Africa. This is a nice "applied" lecture after the "theory" lectures on Solow.
US Inequality: Saez, "Striking it Richer," and lecture notes

Comments: This is by far my students' favorite lecture. It's also exhausting to prep for. We talk about poverty, inequality, the productivity/wage gap, the 1%, and related issues. Piketty's Capital is directly responsible for this lecture.
Financial markets: Nobel Committee, "Trendspotting in Asset Markets: Popular Background"

Comments: I discuss saving and investment. Many of my students are finance majors, so I assign the recent finance Nobel article as optional reading. We briefly discuss the EMH as a no-arbitrage condition, which makes a lot of sense to intro students.
Labor markets: BLS, "How the Government Measures Unemployment."

Comments: Labor gets two lectures. In the first lecture I painstakingly go through U3, U6, LFPR, and E/P. We discuss what all of those things measure and how to read a BLS report. In the second lecture I discuss labor S&D.
Money and Prices: BLS, "The Consumer Price Index"

Comments: More measurement. We discuss CPIs vs COLAs. I show off my "270 Years of Consumer Prices" picture.
Money in the Long Run: McCandless and Weber, "Some Monetary Facts."

Comments: I also recommend Hume and Lucas. We discuss the concept of long-run monetary neutrality and the evidence for long-run neutrality.
Business Cycle Facts: Knoop, *Postwar Business Cycles in the US."

Comments: This is the second major "block" of the course, so begins another triple of facts, theory, application. This is the "facts" lecture of business cycles.
The AD/AS Model: personal lecture notes.

Comments: I spend some time building the short-run model.
AD/AS and US Economic History: re-read Knoop, but this time we use AD/AS to describe US economic history.

Comments: This lecture is entirely redundant, but the students love it, so it stays. We now re-do every recession since 1945, but through the lens of the AD/AS model. I've found Romer & Romer's "What Ends Recessions?" good prep material for this lecture.
Monetary Policy I: Federal Reserve, "The Federal Reserve System: Structure and Functions."

Comments: I talk about the history of the Fed and go through a few of the key legislative details.
Monetary Policy II: Friedman, "The Role of Monetary Policy."

Comments: we discuss anti-recessionary policy. The capstone to this lecture is a discussion of the Fed's "Statement on Longer-Run Goals and Monetary Policy Strategy."
Fiscal Policy I: Some CBO reports and personal lecture notes

Comments: This lecture is similarly exhausting to prep for. I provide a 30,000-foot overview of the microeconomic role of government: public goods, social insurance, regulation, and taxation. It's not macro, but students need to know the rough budget shares and tax shares, and justifications for each.
Fiscal Policy II: Elmendorf and Furman, "If, When, How: A Primer on Fiscal Stimulus."

Comments: the fiscal stimulus lecture. Thoroughly boring, but we have to do it.
The Macroeconomics of the Zero Lower Bound: personal lecture notes

Comments: This is where we do the Keynesian Cross. I motivate it by taking AD-AS to the ZLB. This lecture is necessary preparation for the next topic...
The 2008-09 Financial Crisis: BIS, "The Global Financial Crisis."

Comments: We talk about causes and consequences. We also talk about fiscal and monetary policy. Fiscal policy is supplemented with Romer's "What Have We Learned About Fiscal Policy Since the Crisis?" Monetary policy is supplemented with Mishkin's "Monetary Policy Strategy: Lessons from the Crisis." I don't assign the latter anymore, it's too hard, but I prep from it.
IS-MP: personal lecture notes

Comments: This is where we put literally everything together. When I started teaching, I thought this lecture was too hard. Now I think it's just right.

By this point the semester is basically over. I end with:

International Trade: Krugman, "Does Third World Growth Hurt First World Prosperity?"

Comments: we do trade in one lecture and finance in the other. Trade is motivated by beginning with a frictionless, no-borders benchmark. Finance is centered around LOP, PPP, and other no-arbitrage results. My finance students love no-arbitrage arguments, and they lead to fun exam questions.

0729370220937022 · 2時間前

What do you guys think of the financial transaction tax Sanders is advocating? What about the USA will make it work here when it didn't work in Sweden?

MildlyEoghan · 2時間前

Opinions on age discrimination in welfare payments? Example, 18-24 year olds receive €100, 25yo receive €144, 26+ receive €188.

CutOffUrJohnson · 1時間前

I've been in a libertarian hugbox since I started browsing voat. Quick! Somebody say something reasonably left wing to me!

badeconomics

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