The only thing I can remember from my A-Level Economics class is a Fiscal stimulus package.
The Economics Thread
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Economics as a field just really loves its equations. This, for instance, is a pretty simple Keynesian macro model you might encounter in the first year of Uni:
It might look complicated if you're not familiar with it, but it's actually pretty easy to understand. If I for some reason wanted to talk about it in this thread I'd use my words instead of this equation because it would just be confusing. There's no complicated maths involved, just a bunch of equations substituted into a single one.
Are these all equations that allow for real calculations? I'm asking cause in social sciences, I have regularly seen equations that serve only to express the sort of causal relationship between things, but cannot actually be calculated since they include factors that cannot be quantified. I could imagine it's similar in economics. (Although I feel like economics loves to pretend otherwise.
Economics as a field just really loves its equations. This, for instance, is a pretty simple Keynesian macro model you might encounter in the first year of Uni:
It might look complicated if you're not familiar with it, but it's actually pretty easy to understand. If I for some reason wanted to talk about it in this thread I'd use my words instead of this equation because it would just be confusing. There's no complicated maths involved, just a bunch of equations substituted into a single one.
)Are these all equations that allow for real calculations? I'm asking cause in social sciences, I have regularly seen equations that serve only to express the sort of causal relationship between things, but cannot actually be calculated since they include factors that cannot be quantified. I could imagine it's similar in economics. (Although I feel like economics loves to pretend otherwise.
Sort of, but not really. Depends what you mean. The terms represent things that happen in the world, so if you want actual values then you have to estimate them empirically. For instance, the fraction outside of the parenthesis is the multiplier. c_1 is the marginal propensity to consume, i.e. the share of disposable income that is spent on consumption, so if you want to get a number for the multiplier then you'd have to estimate that and the other terms. There are a number of papers that do estimate the size of the multiplier, but I can't remember how they go about it.
Mostly it's just a formalization of the relationship between things, yes. All of the things here can be quantified, though, they're things like expected inflation, trade balance, interest rates, exchange rates, etc.
Makes sense, thanks.
I suppose in those equations I mentioned everything could also somehow be quantified if you really wanted to - I guess what I meant to say is that it's just not really the point, it's rather to formally state the relationship, as you say.
The Institute’s head of research Daniel Pryor said: "Property rights play a key role in boosting living standards, innovation and human dignity here on Earth.
"The same would be true if we applied this logic to space which presents a unique opportunity to start afresh when designing effective rules of ownership.
Economic researcher Rebecca Lowe, who compiled the report said: "A clear, morally justified and efficient system for assigning and governing property rights in space would present vast benefits that go beyond financial rewards for people who would become owners.
Oh boy.Not to mention it's empirically obvious we're great at designing clear, morally justified and efficient systems for assigning things
That's... a comedy site, right? Please tell me it is. Please tell me no-one can say any of these things with complete seriousness...
I need to sit down I think. And I'm writing this while seated.
How fecked is the US macro-economically speaking?
By 2035 (maybe sooner), 50% of their debt is going to consist of interests alone.
Not only that, by 2026, their social security runs out of money (They could stretch the gum a bit further if they cut the benefits down to 75%).
I guess some major structural changes will have to happen soon enough? Any guesses?
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Does anyone really care about the US national debt? Economics have been telling us not to worry about it.
How fecked is the US macro-economically speaking?
By 2035 (maybe sooner), 50% of their debt is going to consist just of interests.
Not only that, by 2026, their social security runs out of money (They could stretch the gum a bit further if they cut the benefits down to 75%).
I guess some major structural changes will have to happen soon enough? Any guesses?
It's perfectly sustainable at the moment, but if you extrapolate it might be an issue in the future along the same path.
There's not much debt in the world you can buy with less risk than US bonds.
It's interesting for sure, but not that striking is it really? You can find a couple of well known behavioral mechanisms that could explain these flawed perceptions of where you exist in a distribution (not just income).
What would be really interesting is to credibly argue whether this is rational inattention, this salient bias stuff, narrow bracketing etc. Or whether they all have the same testable implications so it's indistinguishable. For policy the mechanism matters a lot.
What would be really interesting is to credibly argue whether this is rational inattention, this salient bias stuff, narrow bracketing etc. Or whether they all have the same testable implications so it's indistinguishable. For policy the mechanism matters a lot.
What's the latest on Turkey's low interest rates? Is it working?
Important point here. We're seeing more and more industries becoming oligopolistic.
With the Russian invasion, Russia has talked about demanding payment for gas from "unfriendly states" in Rubles, and it has been suggested that this is a ploy to prop up the value of the Ruble. Maybe I'm being dumb, but I don't get it.
Out of the income from selling gas, Russia wants to hold some amount of foreign currency and some amount of Rubles. If Russia receives payment in Dollars and Euros, then Russia will keep the amount of Dollars and Euros they want to hold, and sell the rest to buy Rubles. If Russia receives payment in Rubles, then foreign states will first buy Rubles, while Russia keeps the amount it wants and then sell the rest to buy Dollars and Euros.
The gas is still being exchanged. The net exchange of foreign currency for Rubles is still the same. Why does it matter?
To make it even simpler, say that you want to buy a thing from me. You have Pounds, I want Euros. Either you sell your Pounds to buy Euros, and then use your Euros to buy my thing. Or, you buy my thing with Pounds, and I sell those Pounds to buy Euros. In this example it's obvious that it doesn't matter with currency we use, what's different with Russian gas?
Out of the income from selling gas, Russia wants to hold some amount of foreign currency and some amount of Rubles. If Russia receives payment in Dollars and Euros, then Russia will keep the amount of Dollars and Euros they want to hold, and sell the rest to buy Rubles. If Russia receives payment in Rubles, then foreign states will first buy Rubles, while Russia keeps the amount it wants and then sell the rest to buy Dollars and Euros.
The gas is still being exchanged. The net exchange of foreign currency for Rubles is still the same. Why does it matter?
To make it even simpler, say that you want to buy a thing from me. You have Pounds, I want Euros. Either you sell your Pounds to buy Euros, and then use your Euros to buy my thing. Or, you buy my thing with Pounds, and I sell those Pounds to buy Euros. In this example it's obvious that it doesn't matter with currency we use, what's different with Russian gas?
I'll try to give an example. The numbers are made up just to explain the principle.
Current situation: EU buys Russian gas for 100 billion Euro. Russia puts 60 billion away as cash reserve, uses 20 billion to pay for imports of other stuff, and buys Rubles for 20 billion to pay their workers etc. So 100 billion Euro worth of gas only create demand for 20 billion Euro worth of Ruble.
If the EU is considered to be unfriendly states and forced to pay in Ruble, it has to buy the equivalent of 100 billion Ruble up front (instead of just 20 billion later), that Russia can and will use internally to cover the costs of war, while the can pay their limited imports with the Euros they acquired and saved earlier. Russia won't sell any Ruble for their trading, it will be a pure buyers market for Ruble, therefore stabilising its value.
Obviously there is more ongoing, but this is the basic principle. It doesn't work this way forever (as at some point the cash reserves will be gone), but for the near future it is a smart idea. And if this whole situation stays longer, Russia will have massive trouble, so this is a solution for months, not for years.
Right, but the difference here is that Russia is changing their spending. Instead of receiving 100 billion Euros worth of Rubles and spending those Rubles, Russia can take their 100 billion Euros, sell them for Rubles, and then use those rubles internally to cover the costs of war. Russia's change in spending is what's causing increased demand for Rubles, not the currency used to pay for gas.
Why is Turkey not raising interest rates?
https://www.reuters.com/markets/rates-bonds/turkish-lira-slips-again-down-20-year-2022-06-06/
https://www.reuters.com/markets/rates-bonds/turkish-lira-slips-again-down-20-year-2022-06-06/
Is Turkey holding to the currency value guarantee? If so its on the hook for hundreds of billions of dollars if the currency folds.
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What does this imply?
I probably should have posted this in the replication thread. Its a good example of questionable research approaches.
Recently a meta-analysis was published and came to the conclusion, that nudging is quite effective (https://www.pnas.org/doi/10.1073/pnas.2107346118) . There have been multiple critical replies to that, which disagreed with tthis conclusion. One of them is the study that I linked.
Meta-Analysis are very suitable to estimate publication bias. The original authors of the meta-analysis addressed this issue only lightly. The result was that they found a pretty substantial average effect of nudging. There are different approaches to control for publication bias, so the results are only estimations, but with proper adjustments, the average effect, vanishes or gets very small. Its mostly a consequence of publication bias. At least that is the gist of the criticism, which is obviously also open to scrutiny.The authors of the meta analysis replied to the criticism and for most part agreed with it (https://www.pnas.org/doi/10.1073/pnas.2202928119 ) .
What does this mean for the effectiveness of nudging? Some nudges are still going to have an effect and many probably don't. Careful replication would probably contradict many previous findings. On average the effect size is probably a lot smaller than whats reported in previous studies. This isn't groundbreaking stuff in itself.
At least for me the interesting and also troubling part is the publication of this meta-analysis. I don't know the authors, they seem to be fairly young, but they don't come across as hacks or idiots. Yet they still published it, including pr release, which is geared to be picked up by mainstream media, who care mostly about creating a catchy headline. If I'd find their effect-size, first thing I'd do is question the analysis and re-do it. My take is, that these are not necessarily bad researchers, but once you set your career in a field, its almost inevitable that you end up being invested in the topic. Academics who start to research XYZ (here: nudging) want nudging to be true and they want their research to be meaningful. On top of that comes the harsh reality of incentives, that force (young) academics to churn out large quantities of papers, that find positive effects.
https://www.cnn.com/2022/07/14/economy/china-property-crisis-homebuyers-bad-debt-intl-hnk/index.html
Good on the Chinese homebuyers!
feck those inmoral real state firms.
Will the government side with the people on this one I guess?
Otherwise say bye to the People's Republic of China.
Good on the Chinese homebuyers!
feck those inmoral real state firms.
Will the government side with the people on this one I guess?
Otherwise say bye to the People's Republic of China.
Very interesting to see how the CCP will deal with this. If there's one thing they're afraid of, it's losing control.
If you're on twitter, Michael Pettis (@michaelxpettis) is a pretty good source on Chinese economics. He has written a fair bit about this specific issue, and will undoubtedly follow it further.
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Imagine if we just removed the taxable income ceiling. It currently sits at $147,000.
Cheers, I'll take a look at his feed.
I can't believe some ordinary people are advocating for the Bank of England to raise interest rates, which will inevitably lead to higher unemployment and, possibly, a recession.
Especially since the primary causes of rapid inflation are food and energy costs, not this nonsense wage price spiral nonsense.
And, as usual, the usual suspects appear unconcerned about the loss of identity and purpose that joblessness causes, as well as the frightening effect it has on their job prospects and the increase in suicide that joblessness causes.
It's bonkers.
Especially since the primary causes of rapid inflation are food and energy costs, not this nonsense wage price spiral nonsense.
And, as usual, the usual suspects appear unconcerned about the loss of identity and purpose that joblessness causes, as well as the frightening effect it has on their job prospects and the increase in suicide that joblessness causes.
It's bonkers.
Can anyone recommend any interesting and informative books on inflation?
I've started a book on the UK in the first half of the 70s (State of Emergency by Dominic Sandbrook) which is fascinating, and has increasingly obvious parallels with today.
But I'm looking for something that actually deals with the mechanics of inflation and the theories around it and any ways to get out of its death spiral - or is the answer simply that 'it's too complicated' and 'the only way out is to destroy demand and make everyone poorer in the process'...? Hard to see how we're not completely fecked, without energy costs collapsing before wages create a domestic inflation loop.
I've started a book on the UK in the first half of the 70s (State of Emergency by Dominic Sandbrook) which is fascinating, and has increasingly obvious parallels with today.
But I'm looking for something that actually deals with the mechanics of inflation and the theories around it and any ways to get out of its death spiral - or is the answer simply that 'it's too complicated' and 'the only way out is to destroy demand and make everyone poorer in the process'...? Hard to see how we're not completely fecked, without energy costs collapsing before wages create a domestic inflation loop.
Haven't read the piece, so I don't know how they've calculated it. E.g. how they deal with the fact that increasing energy prices lead to higher prices.
The principle is important; higher interest rates to deal with the energy part is probably dubious.
Surely that's only true if you don't believe that higher energy prices = inflation = companies putting up prices = employees demanding higher wages = domestic inflation, which seems to be exactly what's currently happening.
I'm not sure what you mean, are you referring to the last sentence? If so then no, I don't agree. There's a reason central banks usually don't include energy prices in the indices they use when deciding policy: they're volatile and not necessarily connected to the rest of the economy the way other goods and services are. With inflation driven by increased energy prices you'd expect inflation to go down when energy prices go back down, or if energy prices stay high you'd expect the price level to stabilize at a higher level but not a higher trend. Why increase rates, which aims at slowing inflation by lowering aggregate demand (so a contracting economy and higher unemploymen), for something so specific?
A thread.
What do you all think of Murphy's views?
That's part of the usual definition of inflation though isn't it? Any increase drops out after 12 months.
Yes - referring to your last sentence.
I think your point only makes sense in a vacuum, whereby a period of inflationary pressures (caused in large part by volatility in energy markets) doesn't feed through to 'domestic inflation' (i.e. inflation caused by higher corporate prices and wages). But it doesn't work like that - if we have a sustained period of higher energy prices, companies will put prices up, and workers will demand above-trend salary increases, both of which will then continue to push inflation higher, and become a tough cycle to break out of without lowering demand.