texts: Mathematically optimal age to begin drawing Social Security retirement benefits as a function of expected life span?

texts:
So, for most of us Americans, our official retirement age is 66 and we get 100% of our retirement benefits.  If we delay retirement, that benefit increases by 8% each year (up to age 70) and if we retire early that benefit decreases 6.667% each year to age 63 (when it's 80%) and an additional 5% at age 62.

Now, if you expect that you might die (let's say you have ALS or cancer or something) before age 66, of course it doesn't make sense to wait until then to start drawing your retirement benefits.  Also, if you have a family history of dying sorta young (like cancer or heart disease) you might not expect to live to be 90 or even 80.  There is some judgement that might lead one to decide to draw retirement benefits early.  But when?

So given an interest rate (let's say it's the same as the rate of increase of the CPI) so that we attach more weight to present value vs. future value of dollars, and let's say you know how long you're gonna live.

So let $m_\text{R}$ be the month of one's "retirement" (actually the month one first begins to draw SS benefits) which is 12 times the age of retirement in years.  And let $m_\text{D}$ be the month of one's death.  Let $i$ be an assumed interest rate (or inflation rate) per month.  And let $B(m_\text{R})$ be the monthly SS retirement benefit which is a function of the month one retires (that is the function displayed above and I presume it's linearly interpolated on a per month basis).

The total lifetime SS payout adjusted for "interest" of inflation or future value is

$$ \sum\limits_{n=0}^{m_\text{D}-m_\text{R}-1} B(m_\text{R}) (1+i)^n $$

Now given a fixed date of death one can see that while $B(m_\text{R})$ decreases with decreasing $m_\text{R}$, the number of terms in the summation increases with decreasing $m_\text{R}$.

Of course, with no inflation (or increased present value over future value) and $i$ is considered to be zero, then this comes out to be

$$ B(m_\text{R}) (m_\text{D}-m_\text{R}) $$

which is simply the total number of monthly benefits one has received.

Has anyone published a good study on this, so that one can input $i$, $m_\text{D}$ and derive an optimal $m_\text{R}$ for their own total retirement benefit?  If so, where can I find it?


texts: What's the difference between public debt, national debt and government debt?

texts: When it comes to non-private debt, I hear these three terms the most, but I am not sure if they're interchangeable or discernible. Also, are they recorded in the balance of payments? I'm guessing if they are, they'd be recorded in the transfers part of the current account and the capital and financial accounts.


texts: EU-Canada Comprehensive Economic and Trade Agreement?

texts:
Once applied, CETA will offer EU firms more and better business opportunities in Canada and support jobs in the EU, it will remove customs duties, end restrictions on access to public contracts, open-up the services market, offer predictable conditions for investors, etc.

Having in mind the existence of the North American Free Trade Agreement (NAFTA), does the enabling of CETA provide the US corporations (at least some of) the opportunities cevered in TTIP? For example, is it possiblede jure for a US corporation just to register in Canada and to access the EU market, achieveing in this way indirectly the aims of TTIP?

Update: reflecting the remarks in the comments, a more direct version of the question would be:

Is there a legal path through which CETA could act as a back door for TTIP?


texts: When a relevant variable unnamed on either axis changes, can the curve NOT shift?

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Source: pp 40-41, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw

  her demand curve would shift to the left (to curve D3).
  In economics, it is important to distinguish between movements along a curve
  and shifts of a curve. ...
  ♦ There is a simple way to tell when it is necessary to shift a curve: When a relevant
  variable that is not named on either axis changes, the curve shifts. ♦ ...

Is the last sentence of the excerpt (within $\mathbb{R^2}$) above really true ? (I surrounded it with lozenges ♦)

What if ceterus paribus, a fixed number $> 1$, of relevant variables changes? Can they counteract each other, or even equilibrize all the changes so that the curve stands unmoved?


texts: Why is Double-entry Bookkeeping always equal? (Part 2)

texts: In this question, with answer here Destroying the Dollarhypothetically a hack is used to trick whatever programme is used to make sure accounts balance, so say a transfer is made from Bank manager A to Hacker's B account, the value of said transfer is deposited into B's account but when it is to be subtracted from A's account the hack tricks the bank programme to think the transaction bounced and so the amount is deposited back into A's account but is not reduced by B's account.  Would this be possible.  And if so, would this create wealth out of nothing, and assuming the hacker will go on to spend this money in the economy raise GDP?


texts: Properties of Financial Markets in Real Life

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When studying financial economics, three concepts appear everywhere

Equilibria (investors maximise utility, markets clear and aggregated demand equals aggregated supply)
Completeness (there are enough (linear independent) assets to match the number of states of nature, i.e. payoffs can be hedged/replicated)
Absence of arbitrage (there is no free lunch, no self-financing trading strategy with zero initial cost can generate positive payoffs with positive probability whilst negative payoffs are impossible). I guess a weaker form would be the law of one price.

Are today's financial markets close to be in equilibrium, complete and free of arbitrage (at least most of the time)? Of course, there are some frictions and nothing is as perfect as in theory but all in all, what is the academic consensus?


texts: The sequence of Money Supply - Interest Rate

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Until now I've learned that the Fed controls the interest rates and that affects the money supply. For instance,

The Fed increases Interest Rate ----> makes firms/households reluctant to borrow and Banks loan less ---> less money supply.

However, what is the economic intuition for the opposite sequence? So

"Fed increase money supply ----> interest rate decrease"
"Fed decrease money supply ----> interest rate increase"

I have never thought of this sequence - I have always thought of the interest rate as the causal factor and the money supply change as the result. I would appreciate it if somebody could explain how the opposite sequence is also possible. So to put it simply,

if Fed increases/decreases the money supply, why does interest rate decrease/increase? not in economic theory, but in real-life explanation please.


texts: Why have so many legitimate smaller biotechs sprung up and thrived?

texts:
I stumbled this question on r/AskScienceDiscussion, but I'd like to ask it from a microeconomics or competition standpoint.
Why can't Big Pharma accomplish what legitimate small biotechs have? Unquestionably Big Pharma has more money and can corner the market. Thus how could smaller biotechs have dawned at all? E.g. Regeneron collaborates with with Bayer and Sanofi. I'm not referring to potential pump-and-dumps like Moderna.

In Q1, Regeneron made over \$281 million from its Bayer partnership, primarily stemming from Bayer's sales of Eylea outside the U.S. It made nearly $247 million from its Sanofi collaboration, with immunology drug Dupixent the primary contributor.

FDA approved Neurocrine Biosciences`s valbenanzine in 2017. Neuocrine has collaborated with Eli Lilly and Company in 1996, GlaxoSmithkline in July 2001, Pfizer in Dec 2002, AbbVie Inc in 2010. But why didn't these Big Pharmas acquire Neurocrine?
On Jul 13 2020, Amgen doubles down on BeiGene investment. On Jul 15 2020, Nabriva inks Sivextro distribution with Merck.
On Aug 6 2020, FDA lets NeuroRx, Relief Therapeutics test RLF-100 in COVID-19 patients, but why haven't Big Pharma bought out or hostilely taken over these biotechs?
In R&D, small biotechs hold their own against big pharma | BioPharma Dive

Despite spending billions on R&D, big pharma doesn't punch its weight in discovering the new molecules that eventually make it to market.
Instead, it's often the smaller biotechs which are responsible for uncovering promising new therapeutic approaches, an industry maxim backed up by an April report from research group Iqvia.


texts: I am studying computer science and enrolled in an econometrics class. As of this I have very basic understanding of the subject. I am trying to figure out the following question but don't know where to start. Could someone please give me an outline of how to calculate the question or even the formulas to use please.


texts: How to visually present a simultaneous game with continuous strategies

texts:
I've been asked to model a game where two players have an infinite choice of strategies and move simultaneously.

The question asks to present the game in game table or extensive form, and to justify that choice. I understand that a game table wouldn't work, given the infinite strategies.

I understand the diagram below to be a game with continuous strategies and sequential moves. Is there any way to adapt it to show simultaneous moves?


texts: How do I solve this Game Theory Bargaining problem?

texts:
Let's say there are two players in a game. In the first period, P1 makes an offer to split 3 dollars with P2. P2 accepts or rejects the offer. If P2 accepts, they get the offer made by P1, and P1 gets what is left of the 3 dollars. If P2 rejects, then P2 makes an offer to P1 in period 2. P1 can then accept or reject the offer. If P1 accepts, then P1 gets the offer made by P2, and P2 gets the 3 dollars minus the offer they made to P1. If P1 rejects the offer, they both get 1 dollar. A discount factor of δ applies in the second period, i.e. one should consider 3δ dollars in the pot, and 1δ dollars as being the value of the outside option.

How do I find the Sub Game Perfect Equilibrium of this game?


texts: Fehr-Schmidt, Ultimatum game, Subgame-Perfect Nash Equilibrium

texts:
I'm studying the different variations of the ultimatum games. I've spent some time on this following game:
Assume now that each player does not only care about the amount of money she receives, but also about the equity of the allocation. Specifically, suppose that player i’s preferences are represented by the following utility function
$$u_{i}(s_{1},s_{2}) = s_{i} - \beta_{i}|s_{1}-s_{2}|$$
with $\beta_{i} > \frac{1}{2}$ and $|s_{1}-s_{2}|$ denoting the absolute value og $s_{1} - s_{2}$.
Find the SPNE.
First, we can see that a term is "missing" in the Fehr-Schmidt utility function, which implies that $\alpha_{i} = 0$. Thus, we only have the "own payoff" which is the first term in the utility function and the term which measures the loss from advantageous inequality.
My approach is to use backward induction because we have a dynamic game of complete (and perfect) information. So, logically we should start by solving the second stage and then move back to the first stage.
It is not written in the what payoffs players get if the responder declines the offer. But I guess we can assume that each get nothing i.e. 0. Apart from declining the offer the responder can also accept the offer in which he will receive
$$u_{2}(s_{1},s_{2}) = s_{2} - \beta_{2}|s_{1}-s_{2}|.$$
So, to solve for the second stage player 2(the responder) gets $s_{2}$ and player 1 (the proposer) gets $1 - s_{2}$. Thus, we can insert $1 - s_{2}$ in the utility equation for player 2
$$u_{2}(s_{1},s_{2}) = s_{2} - \beta_{2}|1 - s_{2} - s_{2}| = s_{2} - \beta_{2}|1-2s_{2}|.$$
Thus, the responder will reject the offer if
$$s_{2} - \beta_{2}|1-2s_{2}|<0 \quad \Rightarrow \quad s_{2} < \frac{b_{2}}{2b_{2}+1}, \frac{b_{2}}{2b_{2}-1} < s_{2}.$$
When $s_{2} - \beta_{2}|1-2s_{2}|=0$ player 2 is indifferent. In case of indifference we are allowed to assume that player 2 chooses to accept.
Now that we know the threshold for acceptance of player 2, we can turn to player 1. Player 1 has the same Fehr-Schmidt utility function as player 2. Since the Fehr-Schmidt utility function is strictly increasing in own payoff, player 1 wants to keep as much of the share as he can. Anticipating player 2's acceptance threshold, player 1 will offer $s_{2} = \frac{b_{2}}{2b_{2}+1}$ and $\frac{b_{2}}{2b_{2}-1} = s_{2}$. In which he will keep
$$s_{1} = 1 - \frac{b_{2}}{2b_{2}+1} \quad \text{and} \quad s_{1} = 1 -\frac{b_{2}}{2b_{2}-1}.$$
In that case the SPNE of the game is either of the two following
$$E^{SPNE}=\left(1 - \frac{b_{2}}{2b_{2}+1},\frac{b_{2}}{2b_{2}+1}\right) \quad \text{or} \quad E^{SPNE}=\left(1 - \frac{b_{2}}{2b_{2}-1},\frac{b_{2}}{2b_{2}-1}\right).$$
So, my concern is if this is done correctly or if there is another method which is easier. Any comment, constructive criticism, and in generel help is much appriciated.
Note I have looked at this post for some help:
Fehr & Schmidt, ultimatum game, inequaltiy aversion, perfect subgame Nash equilibrium
Thanks in advance.


texts:
Is there any way to tell if a paper used R instead of Stata or Matlab for the estimation? I know it doesn't matter for the quality of the paper, but I'd just be interested to see how many papers use one software over the other.

I'm thinking an easy way might be by looking at the figures- ggplot means R, for example.

Again, not really an economics question, but it's about economics papers.


texts: Is VCG mechanism applicable in reverse auction? If so, how?

texts:
The VCG mechanism I've learnt is from Roughgarden's Twenty Lectures on Algorithmic Game Theory. Given an auction, we first identify the allocation that maximize the social welfare and then compute the payment for each agent according to the formulas given. In the case of reverse auction, according to this thread, the social welfare in a reverse auction is defined as:
$$\sum_{i=1}^n x_i (v_0 - c_i)$$
where we have one buyer who values the good to be procured at $v_0$ and $n$ sellers who can produce the good at private cost $c_i$, and $x_i$ indicates the outcome(allocation).
I was wondering, in reverse auction, whether or not the VCG mechanism is implemented exactly the same way as in Roughgarden's Twenty Lectures on Algorithmic Game Theory (section 7.2) ?


texts:
I have a basic question

What are the different means/mechanisms available to address supply-demand imbalance?

The answers that come to my mind are :

Using pricing  (when demand > supply)
Using rationing (when demand > supply)
Preempting the imbalance by gathering precise demand information (when supply > demand)

Are there any other means available to address situations when demand > supply and supply > demand?


texts: Do large- and mid-caps try to shun low share prices?

texts:
As NASDAQ and NYSE stocks must be priced at least $1 per share, it feels intuitive and doubtless that large- and mid-caps fancy their share prices to outstrip and remain well over \$1. But what minimum (range of) share price do they desire? To wit, at what share prices would they  think about reverse stock splitting to boost their share price?

Why Some Companies Don't Split Their Stock explains why companies eschew low share prices.

  Why Not Split?

  There is not a whole lot of evidence to suggest that stock splits matter. Finance professors have examined stock splits and see no actual impact on a company’s value or performance.

  Many companies prefer to avoid splitting because they believe a high stock price gives the company a level of prestige. A company trading at $1,000 per share, for example, will be perceived as more valuable even though the firm's market capitalization may be the same as a company whose shares trade at \$50.

  Smaller companies may also wish to avoid stock splits because of a danger of share values falling too low. There have been cases where companies have split shares only to see the stock market dive, pushing shares below \$10. Psychologically, this may turn off some shareholders, and in extreme cases, share prices may be too low for a company to be listed on an exchange. Companies will avoid splitting to protect themselves from this possibility.


texts: What would happen if the U.S. "refinanced" its national debt?

texts: Interest rates are at historical lows. I believe they went negative in parts of Europe recently. Since interest on the national debt is one of the biggest, if not the biggest, expense item of the U.S. federal budget, would it make sense to "refinance" the national debt somehow by borrowing new money at these lower rates to payoff the old debt at the higher rates?


texts: Other factors that affect the supply of money

texts: I've read that it is not a hard-and-fast rule that the overall money stock growth rate speeds up in response to an accelerated expansion of the monetary base and a growing money multiplier. If this is the case, what factors unrelated to central bank policy and the lending propensity of commercial banks would cause this theoretical deceleration of money stock growth?


texts: At what rate can a multi-billionaire liquidate his assets without significantly affecting the stock price?

texts:
Let's consider three different billionaires: Jeff Bezos, Bill Gates and Warren Buffett. Now let's say the three of them (at different times) decided that they want to liquidate all their assets and get as much physical cash as possible. At what rate should they start selling their shares to end up with as much cash as possible?

I understand that this might depend on the stock trading volume but I can't really find the numbers.

I found in this article that Bill Gates sold $1.5 billion worth of Microsoft shares in 2015, so would that be the maximum?
If not, then at what rate can each of those billionaire liquidate his assets without significantly affecting the stock price and thus affecting his own net worth?


texts:
If employees’ salaries are increased by 20%, what is the increase in productivity required to break even?

Can someone assist me in solving this question?

Productivity =  (output per period)/(number of employees)

How is productivity related to the employees salaries?

Thank you


texts: If the (direct) utility is concave in all goods, is the indirect utility necessarily concave in wealth?

texts:
Suppose that the direct utility $u(x_1,...,x_n)$ is concave in each of its arguments.  Does this imply that the indirect utility $U(w,p)$ is concave with respect to $w$? If all goods are normal than this can proved. e.g. using Lagrange multipliers.  But, is it true in general?

One can assume that $u$ is differential as many times as necessary.

Thanks.


texts: UK: Is there a list published by the government for the amount of tax paid by companies?

texts: I know of the website for data.gov which provides data but is a publicly available list of taxes paid by publicly own corporations like Apple? If not how do we know how much is paid by them?


texts:
In the cobweb theorem it is assumed that the producers follow an adaptive expectation, however if the price they look to determine their production reflects all the available information at the moment, so this price is in the context of the efficient market hypothesis and therefore it is formed under the rational expectation.
What is wrong here?


texts: Marshalian and Hickisian Demands and Slutsky Equation

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everyone.

I have the following question:

A consumer has the following indirect utility function:

$ V(p_1,p_2,b) = (p_2k-b)p_1^{-1} \left[ \frac{2p_2k - 2b}{p_2} \right]^{-2}, x_2 < k$

a) Find the Marshalian demand for good 2.

b) Find the Hicksian demand for good 2.

c) Show that the Slutsky equation holds for good 2.

d) Why is it necessary to have $x_2 < k$

For a) I found:

$ \boxed{\boxed{ x_2(p_1,p_2,b) = \frac{2b-p_2k}{p_2} }} $

For b):

$ \boxed{\boxed{ x_2^c(p_1,p_2,\bar{U}) = k - \frac{P_2}{2P_1 \cdot \bar{U} }}} $

For c) after replacing $E(p_1,p_2, \bar{U})$ with $p_1 \cdot x_1(p_1,p_2,b) + p_2 \cdot x_2(p_1,p_2,b)$ I found $\bar{U} = \frac{p_2^2}{(p_2k-b) 4p_1}$ and using that in

$\frac{\partial x_2(p_1,p_2,b)}{\partial p_2} = \frac{\partial x_2^c(p_1,p_2,\bar{U})}{\partial p_2} - \frac{\partial x_2(p_1,p_2,b)}{\partial b} \cdot x_2(p_1,p_2,b)$

I was able to show that both sides are equal.

For d) here's what I've tried:

using Roy's identity we can find

$x_1(p_1,p_2,b) = \frac{p_2k - b}{p_1}$

assuming the demand for good 1 is positive, we must then have:

$ \frac{p_2k - b}{p_1} > 0  $

Since $p_1 > 0$, we can re-write the inequality as

$ p_2k - b > 0 $

but

$b = p_1x_1 + p_2x_2$,

so

$ p_2k - p_1x_1 - p_2x_2 > 0 \therefore p_2 \cdot (k - x_2) > p_1x_1 \therefore k-x_2 > \frac{p_1x_1}{p_2}$, because $p_2$ is positive.

Now, since $p_1 > 0$ and assuming $x_1 > 0$, we have $\frac{p_1x_1}{p_2} > 0$, which in turn implies that

$k-x_2 > 0 \therefore \boxed{\boxed{x_2 < k, Q.E.D.}} $

Are my answers correct? In c) is there a faster way to find $\bar{U}$ so I can replace it in the Hickisian demand and show that the Slutsky equation holds for good 2?

I appreciate any inputs.

Have a good one,
Pedro.


texts: Regarding the units of the shift produced by subsidies on supply curve

texts:
I am giving my first steps on microeconomics and I can't fully understand why by applying a per unit subsidy, the supply curve is shifted by a fixed amount. In wikipedia's words:

  Marginal subsidies on production will shift the supply curve to the right until the vertical distance between the two supply curves is equal to the per unit subsidy

But let's say that my supply curve is given by
$$ Q_s = -200 +3 \cdot P $$
If a per unit subsidy is applied, the new supply curve is now given by:
$$ Q_s = -200 +3 \cdot (P+50) $$
But if the unit of the subsidy is $[\frac{\$}{units}] $ the units of the equation don't match:
$$ Q_s [units] = -200[units] +3[\frac{units}{\$}] \cdot (P[\$]+50[\frac{\$}{units}]) $$
So shouldn't a per unit subsidy change the slope of the supply curve rather than shifting it?


texts: Utility theory and portfolio optimization: utility of what exactly?

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In finance, a common problem is selection of an optimal portfolio given some constraints (e.g. budget constraint and perhaps nonnegative allocation constraint). One can define the optimization problem based on maximization of expected utility. For example, if the utility function is $u(x)=x-\frac{A}{2}x^2$, then (in absence of constraints aside from the budget constraint) this yields the well-known mean-variance portfolio optimization.

Questions:

What is $x$? Is it (portfolio) return (in \$), % or logarithmic return, total wealth (initial wealth + portfolio return) or yet something else?
Which choice is typically used in portfolio optimization?
Which choice makes most sense from the perspective of utility theory?

I am interested in this in the context of trying to pick a sensible value of $A$ to represent preferences of a "typical" agent. In my experience, $A=2$ as commonly found in the literature does not seem to align well with $x$ being logarithmic return (yields funny portfolios). Thoughts on this will also be appreciated.

Given the popularity of mean-variance portfolio theory and how basic my questions are, I suppose they have been considered before (perhaps even treated in textbooks). References would be appreciated.

Edit: In addition to the answer I got for Question 2, I am still highly interested in obtaining an answer for Question 3 (as well as alternative answers to Question 2).


texts: Where does overseas money from exports go?

texts:
I am a bit confused about foreign exchange reserves.

I was reading this website (https://www.thebalance.com/foreign-exchange-reserves-3306258#targetText=Foreign%20exchange%20reserves%20are%20the,to%20manage%20their%20currencies'%20values) which talks about the export money, banks and the central bank.

So when exporters from a country (let's say from Australia) recieve money (let's say USD), does that money go to a local bank? If so, does the local bank convert the money into AUD, or does the money go to the central bank which converts it into AUD? And does the overseas money just sit there in the reserve bank? Sorry if this is confusing.


texts: what is the most comprehensive History of Economic Thought book for an undergrad?

texts:
Which Book or books would you recommend for an undergrad to learn about the history and evolution of economic thought and theory, and why?
There Just so many of them out there and I just don't know which one will be best.
the one I was thinking of getting was Ekelund & Hebert's A History of Economic Theory and Method but am not sure about it.


texts: Economic Overview of Pacific Island Nations

texts:
What are the key drivers of growth for these small pacific island nations? I would expect tourism and natural resources to be pretty central to these economies. Is there anything else? What are the key barriers to growth here? I would imagine tyranny of distance and small populations couldn't help.

I am interested in answers which related both to macro and microeconomics.

I would be happy with any references pointing me in the right direction as well.


texts: How can anyone possibly predict how the price of anything (stocks, Bitcoin, fiat, etc.) will change without "insider knowledge"?

texts:
Other than the fact that all centralized (and thus "quick") exchanges require KYC/AML nonsense, making it impossible for me to have an account there, I've never dared to even try once to "gamble" or "speculate" on the Bitcoin price. Instead, I've used a decentralized exchange software (Bisq) to simply buy more Bitcoin for fiat money. Never once sold any Bitcoin.
But then I see all these videos of (apparently) intelligent people (but who have very obnoxious personalities) showing advanced visualizations of the Bitcoin (and altcoin) price with tons of "visual aids" that the software adds or, more commonly, they add themselves because they "notice patterns".
They are always very careful to mention that they are "not giving financial advice" and it's "for entertainment purposes only". But clearly, that's just some legal disclaimer, and then they go on to mention that you get a $680 bonus if you sign up to this or that exchange with their referral link, "only if you are an experienced trader". But what kind of "experienced trader" would be watching YouTube videos about trading advice, and not already have an account set up for trading? It seems to make no sense.
Either way, what I'm wondering is how it's possible for these people to predict how the price will go, at least often enough for them to be making huge profits. Which they appear to be doing. I'm not doubting that part. But how can they dare to trust that what they think is going to happen, is going to happen?
I've stared endless hours on Bitcoin price charts and really tried to follow news and watch videos and discussions and think deeply about this in the shower and in the bed, but I just can't make any kind of prediction other than:
I think that it will slowly climb to a million dollars USD per Bitcoin over the next few years, probably with some serious "dips" along the way.

That's not exactly valuable knowledge. It's not something that I uniquely believe, and it doesn't say anything whatsoever about the short term. It's useless for any kind of "trading strategy". I have no more fiat money to buy more Bitcoin, so I can just sit here and watch the price climb (and possibly go South by 30-80% at any moment). I do not understand how these people are able to see patterns and have access to information that I don't.
It seems like this German Bitcoin trader often is right about his predictions, because he will make a video saying: "It went eeeeeeeeeeeexactly as predicted, guys! Whaaaaat a time to be alive!"
When I see his dashboard with 32 BTC just in one account/trade, I feel like an ant compared to an elephant. He must have so much BTC to be able to have such a fortune in just one trading account to "waste" (potentially). I have too few Bitcoin to ever dare to "gamble" with them. Because that's what it is: gambling. It's basically closing my eyes and and hoping that the roulette wheel stops on the number/color which I bet on.
Speaking of gambling, I've never been a gambler in general either. I've never had a single debt, because it just feels wrong to me. And I don't dare to get one, because I realize how high the risk is for me losing that money. But at the same time, I'm in serious need of increasing my Bitcoin "fortune". So I really don't know what to do.
What is the secret behind these people? I doubt that they have gone out of their way to fake it all. I do believe that they are successful, but I don't understand what their "trick" is. Are their brains simply able to see patterns which mine isn't? Have they spent a huge part of their life reading thick books which I'm too tired to even open? I wish I could understand how they can be so confident about the near-future price changes when, to me, it's a complete mystery. I see no patterns whatsoever.


texts: Effects of Eliminating Government Controls on Supply (organ donation)

texts:
I was having a discussion with somebody about organ transplants.   I gave the free market pov that allowing the sale of organs would greatly increase the supply, and the all-in price would come down greatly if everybody knew that they (or their heirs) could profit by making their organs available (it might even encourage a few people to adopt a healthier lifestyle in order to not destroy a valuable asset, and maybe encourage businesses - like financial middlemen - to get into the game).
The person I was discussing with agreed with the argument -- in theory -- but countered that it was unfair that a rich person would have a better opportunity to get a transplant and that, indeed, a poor person's best (and maybe only) chance was to use the current lottery system.
My question -- does anybody know an example of something analogous to human organs whose supply was controlled, whose cost was extremely high and supply very low, and then became available on the market and as a result became readily available because of increased supply and/or lower price?  My one possible answer is the abolition of rent controls.  I was hoping for an example that was more understandable to my friend.  Perhaps certain items that were, by law, exclusively available to the aristocracy in the past, and that later became something that everybody was able to afford.


texts: Show that the dividend price ratio is a ARMA(p, q) process

texts:
Let the log dividend growth evolve according to $\Delta d_{t+1} = \epsilon_{d, t+1}$ where $\epsilon_{d, t+1}$ is just white noise. Let the log returns be $r_{t+1} = x_t + y_t + \epsilon_{r, t+1}$ where $x_t = b_x x_{t-1} + \delta_{x, t}$ and $y_t = b_y y_{t-1} + \delta_{y, t}$ and $\epsilon_{r, t+1}$, $\delta_{x, t}$, and $\delta_{y, t}$ are all white noise. Solve for the dividend price ratio, $d_t - p_t$ and show that it is an $ARMA(p, q)$ process, find $p$ and $q$.

What I did was to start off with the famous Campbell-Shiller decomposition: $d_t - p_t  = E_t \sum_{j=1}^{\infty} \rho^{j-1}(r_{t+j} - \Delta d_{t+j})$ and one can easily show that $E_t(r_{t+j}) = b_x^{j-1} x_t + b_y^{j-1} y_t$ and $E_t(\Delta d_{t+j}) = 0$ and so we get

$$d_t-p_t = \frac{x_t}{1-\rho b_x} + \frac{y_t}{1-\rho b_y} $$

I'm now stuck with trying to show that this is an ARMA(p, q) process. What I've tried is substituting in $x_t$ and $y_t$ to get:

$$d_t - p_t = b_x \frac{x_{t-1}}{1-\rho b_x} + b_y \frac{y_{t-1}}{1-\rho b_y}+ \frac{\delta_{x, t}}{1-\rho b_x} + \frac{\delta_{y, t}}{1-\rho b_y}$$

But I am stuck on manipulating the RHS to form a $d_{t-1} - p_{t-1}$, specifically, I know that $d_{t-1}-p_{t-1} = \frac{x_{t-1}}{1-\rho b_x} + \frac{y_{t-1}}{1-\rho b_y}$ but the coefficients $b_x$ and $b_y$ on the RHS makes things difficult.

EDIT: I've done a bit more working out and here is what I've done:

\begin{align*}
d_t - p_t & = \frac{x_t}{1-\rho b_x}  + \frac{y_t}{1-\rho b_y} \\
& = \frac{b_x x_{t-1} + \delta_{x, t}}{1-\rho b_x} + \frac{b_y y_{t-1} + \delta_{y, t}}{1-\rho b_y} \\
& = b_x \frac{x_{t-1}}{1-\rho b_x} + b_y \frac{y_{t-1}}{1-\rho b_y} +  \frac{\delta_{x, t}}{1-\rho b_x} + \frac{\delta_{y, t}}{1-\rho b_y} \\
& = b_x\left(d_{t-1} - p_{t-1} - \frac{y_{t-1}}{1-\rho b_y} \right) + b_y\left(d_{t-1} - p_{t-1} - \frac{x_{t-1}}{1-\rho b_x} \right)+  \frac{\delta_{x, t}}{1-\rho b_x} + \frac{\delta_{y, t}}{1-\rho b_y} \\
& = (b_x + b_y)(d_{t-1} - p_{t-1})-b_x\left(\frac{b_y y_{t-2} + \delta_{y, t-1}}{1-\rho b_y} \right)-b_y\left(\frac{b_x x_{t-2} + \delta_{x, t-1}}{1-\rho b_x} \right) +  \frac{\delta_{x, t}}{1-\rho b_x} + \frac{\delta_{y, t}}{1-\rho b_y} \\
& = (b_x + b_y)(d_{t-1} - p_{t-1}) - b_xb_y\left(\frac{x_{t-2}}{1-\rho b_x} + \frac{y_{t-2}}{1-\rho b_y} \right) - b_x \frac{\delta_{y, t-1}}{1-\rho b_y}- b_y \frac{\delta_{x, t-1}}{1-\rho b_x}+  \frac{\delta_{x, t}}{1-\rho b_x} + \frac{\delta_{y, t}}{1-\rho b_y}  \\
& = (b_x + b_y)(d_{t-1} - p_{t-1}) - b_xb_y(d_{t-2} - p_{t-2}) - b_x \frac{\delta_{y, t-1}}{1-\rho b_y}- b_y \frac{\delta_{x, t-1}}{1-\rho b_x}+  \frac{\delta_{x, t}}{1-\rho b_x} + \frac{\delta_{y, t}}{1-\rho b_y}
\end{align*}

So it seems like there are two lags for $d_t-p_t$ but I am not sure how to manipulate the moving average terms...


texts: Economics of grid extension versus off-grid electrification in developing countries

texts:
Quite a bit of research is available on the local economic effects of electrification in communities in developing countries (this article and its references go into quite a bit of detail on the topic).

However, with the advent of microgrid technology, and the increasing cost-effectiveness of distributed energy resources (particularly solar), it seems that the calculus would change.

I am wondering what effect (if any) small-scale, local energy resources would have on a local economy, in contrast to simple extension of a centralized grid.

Most of the research I am able to find around "microgrid economics" or "distributed energy economics" is either in the context of communities moving from centralized to de-centralized energy (e.g., hospitals installing a microgrid to improve energy reliability), or is simply a cost comparison of the expense of electrification using the two different methods.


texts: Microeconomics: Question on Market for Factors

texts:
I am stuck and confused by a section of what I read in my textbook, could you please help me understand the paragraph?

  If you only vary one means of production and the market for it is competitive you should employ as many units of that means of production as you need to make its Marginal product equal its per-unit cost

  1) The Wage (in terms of good we produce) is  ω = w/px which is the nominal wage (W) divided by the price of the good and it must be the same as the marginal product of Labour for any given level of capital, which means that Money Value of the Marginal Product equals the nominal wage

My confusion stems from how can wage equal wage/price? That seems illogical to me!

Moreover, what does it mean by equals nominal wage? My understanding of Market for Factors was, you hire labour as long as the last labour output is higher than your costs, but I get confused by the term nominal.

Thanks


texts:
I'm struggling with what should be a simple concept: scarcity. For some reason, I just can't wrap my head around the fact that in this highly advanced technological society of ours, we can't fix scarcity.

Sure, we might not be able to produce an "infinite" amount of things. But then again, nobody wants an infinite amount of things. That's an absurd notion, and an even more absurd foundation to build a principle on.

Say, everybody wanted 4 cars on average. Some people might want less, some more. Can we really not ramp up production to facilitate this wish? Couldn't we ramp up production to dig out even more gold? To mine for even more diamonds? To grow even more food? To collect even more water?

We live in an age of advanced technology. Of algorithms, artificial intelligence and of highly automated large-scale production. How am I to believe that, given all these abilities, we couldn't achieve a solution to a reasonable form of scarcity? By reasonable I mean scarcity that makes sense within a human context: nobody wants an "infinite amount of cars", at least the vast, vast majority of people don't, and the few outliers that do shouldn't be relevant in an economic principle of this significance.

This seems like an idea that would have made sense a century ago, but not anymore. How and why does is still hold up, considering our unprecedented potential to produce goods?


texts: Macroeconometric models with wrong input but better fit/forecast

texts: Could you give an example of the situation when if you input wrong (economic-wise, but not mathematically) parameters the model could fit/forecast better?


texts: How did Bernanke et al obtained IRFs of variables not included in their baseline FAVAR model?

texts:
In the original FAVAR paper by Bernanke et al, how did the authors obtain the IRFs of industrial production (IP) and CPI in their baseline model (as shown in figure 1)? Their 'preferred' baseline FAVAR model include only one observed variable $Y_t$ (i.e., FFR) and three unobserved factors. They write their baseline model as follows: Baseline (Y = FFR, k = 3).
If I have data on FFR and the three factors and I estimate a standard VAR with these 4 variables, ordering FFR last. How is it possible to get IRFs of IP and CPI which are not explicitly included in the model?. I guess I am missing something which I cannot see.


texts: Why is South Korea classified as an Emerging Market economy?

texts:
I have recently found out that South Korea is part of the MSCI Emerging Markets Index, and that the South Korean Won (KRW) currency trades as a non-deliverable currency. Furthermore, the South Korean Interest Rate Swaps are also non-deliverable and trade with a relatively wide spread, signalling poor liquidity.
This came as a total surprise, because when I used to think of South Korea, I used to think of companies such as Samsung, Kia, Hyundai or LG (i.e. globally competitive, tech-savvy corporations). Also, the South Korean capital Seoul came to mind, which somehow has an image of a modern, western-type capital city.
For many years, I somehow had a mental image of South Korea as a tech-savvy country, along the lines of Japan, and certainly a developed economy.
As I am no expert on Asia and do lack deeper economic education, I wanted to ask for an economic explanation as to why South Korea is still an emerging economy, and also, what are the country's prospects of becoming a developed economy?
Thank you so much for any type of explanation, including perhaps a historical one which would explain why South Korea is economically where it is today.


texts: Current knowledge about the empirics of consumer theory

texts:
I would like to get up to speed on the current state of empirical work done to test the assumptions and predictions of consumer theory (think Chapters 1, 2, 3, and 6 of Mas-Colell et al.).

Can anyone recommend a good survey or provide a brief summary of what we currently know about how much empirical support there is for our primary means of modelling individual behavior?


texts: Why does borrowability of shares inversely correlate with probability of assignment or exercise?

texts:
I transcribe 5:26 of this video. I don't know that YouTuber's credentials.

So looking back here, what could possibly
cause you to get assigned early? If we
look right here, AMD shares are listed as easy to borrow.
That's really important to know,
and it means that the risk of early
assignment is almost non-existent.

If we put something like Tesla in,
they're listed as hard to borrow
and that slightly elevates your risk. If
shares are harder to borrow, calls are
more likely to get exercised, which puts you in a position where you
could be hitting max loss early on account of early assignment like we
just talked about. And there's some
smaller OTC stocks things like this [the YouTuber is pointing to ticker symbol TSOI] that
are less not available to borrow. These, pretty much the second that
they're in the money, are going to be
exercised so that's the risk that you
earn right there.


texts:
My understanding is that churches in the United States, as they are non-profit organizations, are exempt from pay tax which includes capital gains tax. If one were to start a church that had all the qualifications of a church such as member, a place of worship and a doctrine, could the "church" act as an investment company for non-church members that avoids paying tax?
If not, what measures are put in place to avoid such schemes, If so why isn't this more prevalent?
Thanks


texts:
To pre-face this, I am not an economist by education. Recently I have read a significant number of policy papers concerning climate change that make the claim, a priori, that a universal carbon price is the most efficient method for decarbonising the economy.

I am looking for a justification of this claim?


texts: Is Reinhart and Rogoff mistake also present in similar 'minded' studies?

texts:
In Reinhart and Rogoff (2010), the authors purported to have found empirical evidence that going over the 90% of public debt threshold was harmful for the country. However, in 2013 (I think), after reviewing their Excel calculations, and correcting a mistake, it was found that their conclusion was no longer warranted.
I would say that one bird does not constitute spring, but for example in Cecchetti, Mohanty, and Zampolli (2011), and Woo(2010), similar negative outlooks are produced after reviewing the empirical data.
Are these, and similar 'minded' studies also tainted by the same, or a similar mistake?
Part of my motivation for this question comes from the apparent - at least to me, but I may be wrong, though... - nowadays mainstream position that debt level and GDP are not so easily correlated, and that their relationship is much harder than a simple 90% threshold. How did the public debate change so much, even though there were other studies supporting similar conclusions, or the position of less debt equal (much) higher growth?


texts:
The GDP is sometimes given by
$$
GDP=P\cdot h\cdot e \cdot F
$$

Where $P$ is the Productivity, $h$ is the number of hours worked, $e$ is the employment rate and $F$ is the size of the labor force.

If we do a dimensional analysis, we see that the left hand side of that equation i $\left[ GDP \right]= \text{value / time}$

On the right hand side we have:

$$
[P]=\text{value/time}\\
[h]=\text{time}\\
[e]=\text{dimensionless}\\
[F]=\text{dimensionless}.
$$

This analysis yields that the dimension of the RHS is value.

Hence, the dimension of the left hand side and the right hand side is not equal, which would constitute a contradiction.

Does anyone know why that is?


texts: Acessible sources for Hierarchical Bayes?

texts:
I am trying to learn how to build hierarchical bayesian model, I can find some papers online on the topic but I am looking for some textbook or some treatment that is more student friendly than published papers.

Is there any good guide to hierarchical bayesian models out there? Something that has step by step explanation with some worked out examples with applications to economics would help me a lot.


texts: Reducing the working hours to 32 hours / week - how much it would affect the prices of commodities?

texts:
If the working hours would be reduced from 40 hours / week to 32 hours / week (4 days x 8 hours instead of 5 days x 8 hours), but maintaining the wages at the same levels, then I guess that the price of the commodities would increase.

I've seen various claims that working hours can be reduced (Carlos Slim Helu 2014, Google 2014) and I wonder about the negative effects of such a change.

If, for example, I am producing clothes with 10 workers, each producing 100 shirts per week (20 per day) and I sell the shirts for \$1 each, then I make \$1,000 per week, covering the production costs. Reducing the working hours from 40 to 32 / week means I can produce only 800 shirts per week (200 shirts per day x 4 days) but since I need \$1,000 per week in order to cover the costs, that means I have to sell the shirts for \$1.25 (that comes from dividing $1,000 to 800 shirts)

Therefore, at a first sight, it looks like reducing the working week to four days implies a 25% increase for the prices of the commodities.

Am I right?


texts: Why does changing the value a currency help/hurt exports if sellers can just inflate/deflate prices to match the change?

texts:
1) I make widgets and sell them for $10.

2) The government reduces the value of my currency by 10%.

3) The market value of my widgets is the same as before, so I raise my
prices to $11 and I can still sell them them because the (real) value hasn't changed.

Following this chain of reasoning means that devaluation of a currency wouldn't encourage exports, but that's not true.

An increase in the value of another currency relative to mine may allow you to buy more of MY dollars, but the market value of my goods is still the same.  The only people who would notice a difference when this happens would be those holding currency and not assets.  Are those people the target of currency devaluation/appreciation, or is there something wrong with my reasoning?


texts: Is Artificial Intelligence a completely new (and underestimated) production factor?

texts:
Accenture research defines Artificial Intelligence as completely new production factor along labour and capital. Is such notion acceptable by economists?

As far as I understand then every asset of AI - patented algorithms and software, proprietary knowledge bases and data bases - has its owner and therefore those assets can be considered simply as some form of capital and one should not make special conclusions about AI.


texts: What is the necessity of the FDIC in the US banking system?

texts:
A bank's basic function is to "borrow short and lend long". In other words, it borrows money from depositors over the short term, promising to repay it on demand, while it lends most of that money out over the long term to borrowers, for instance in the form of 30-year mortgages. This difference between these time frames, known as maturity mismatch, leads to systematic problems for banking. It makes banks vulnerable to crises, because if all the depositors show up one day asking for their money, the bank can't give it to them, because it's been lent out to borrowers, so the bank becomes instantly insolvent, even if it had no financial troubles before the depositors were worried about the bank's solvency.

Indeed, this used to happen frequently in the 1800's and early 1900's, most prominently in the Great Depression, until the FDIC came about. The FDIC makes all the banks pay a premium, and in exchange, whenever there's a run on a bank, the FDIC gives the bank money so that it can meet all its depositors' demands (at least up to a cap, like a hundred thousand dollars per account).

My question is, in the absence of the FDIC, why wouldn't banks just obtain private deposit insurance? Whenever people have significant risks, even if they're small, they tend to buy insurance. You don't have a very great risk of dying tomorrow, or having a car accident, or having a flood in your house, but still you buy insurance just in case. Companies of all kinds do the same: stores buy liability insurance, fire insurance, etc. So why wouldn't banks insure their risks similarly?

And it's not like banks don't buy private insurance already. For instance, when they lend out money, they buy insurance in case the borrower defaults on a loan - it's called a credit default swap. (Those were partially responsible for the financial crisis of 2008.) So what reason would they have for not buying insurance in case their depositors' demands exceed their reserves?

Is the problem that the premiums they would have to pay on the free market would be too high to make banking profitable anymore? If that's the case, then does that mean that the FDIC is not charging actuarially fair premiums to banks right now?

Any help would be greatly appreciated.

Thank You in Advance.


texts: Overlapping Generations model: Social Planner solution

texts:
Assume we have a model of OVG where there are 2 overlapping generations, youngs and olds, the agents are two period living. The utility function is logaritmic, and the production function is Cobb-Douglas.

I have to show that the solution for the social planner does not coincide with the equilibrium from the market.
The social planner solves:
$$\max  \ln(c_t^y)+\beta \ln(c_{t}^o)$$
$$s.t.$$
$$c_t^y+\frac{c_t^o}{1+n}+k_{t+1}(1+n)-k_t=f(k_t)$$
Where the units are expressed in per capita terms and $n$ represents the population growth rate.
 The FOC for the social planner is
$$\frac{c_{t}^o}{c_t^y}=\beta(1+n)$$
We know that in steady state the level of consumption is actually constant i.e.
$c_t^o=c^o$ and $c^y_t=c^y$.
What I am not getting is if I should replace this on the constraint in order to obtain the values of S.S. or if I need to take the FOC with respect to the $k$.
I am a little bit lost, since I've already solved the problem for the market economy but I am having a hard time figuring out how to proceed.
Any hint will be greatly appreciated.


texts: Does the Efficient Market Hypothesis Solve the Tragedy of the Commons?

texts:
My layman understanding of the Efficient Market Hypothesis is that there is so much brain power focused on the maximization of profit in the marketplace, that the market will find the best solution both in the short and in the long term.

The particular instance of "Tragedy of the Commons" I have in mind is global warming, for which there is a fair amount of scientific consensus that it will disturb our civilization to an extent that does not guarantee that markets will continue existing as usual (stable governments being somewhat important for markets).

So here is my question: It seems that market players are not investing in ensuring the effects of global warming are minimized (i.e. market players are not ensuring the continuing existence of a market place). Does this mean that the Efficient Market Hypothesis is a model that does not describe our actual reality? If that is the case, how is one supposed to know when the Efficient Market Hypothesis is a good model?

A side question: Is this whole "exploiting the commons before someone else exploits them, irrespective of the fact that we are all doomed without the commons" more closely described by a Prisoner's Dilemma? But if that is the case, would you not expect the intelligent efficient actors in the marketplace to decide to work together to save themselves?

My education is not in economics so maybe my question is not well defined. My hope is that even if this is the case, an explanation of why the question is not well defined would be useful on its own.


texts: Question about the relationship between Weak Axiom and Slutsky Matrix

texts:
We know that if a differentiable Walrasian demand function $x(p,w)$ satisfies Walras' law ($p^Tx=w$), homogeneity of degree zero ($x(\alpha p,\alpha w)=x(p,w)$), and the weak axiom of revealed preference, then at any $(p,w)$, the Slutsky matrix
\begin{equation}
S(p,w)=D_px(p,w)+D_wx(p,w)x(p,w)^T
\end{equation}
is negative semidefinite.

My question is: if $S(p,w)$ is negative semidefinite, then what can we say about the demand function $x(p,w)$? Can we conclude that $x(p,w)$ satisfies weak axiom?


texts: lowering minimum wage by half, effect on population of Puerto Rico

texts:
I am reading about a new bill to lower the minimum wage in Puerto Rico from \$7.25 to \$4.25 per hour.  This comes at a time, when both the New York and California have chosen to raise their minimum wages from \$9/hr to \$15/hr.

Are there any theories of how this affects work in a population?

Have any economists chimed in on the topic of minimum wage in general in general?  Can any of it be used to predict what will happen to PR?

Why might policy makers feel a decrease is warranted in one situation while an increase is warranted in another?


texts:
I have the impression that everyone has more net money than in the past. By net money I means cash + money lent to others - money borrowed from others. If this is true, where does the extra net money come from? Is it right to say that originally all the extra net money comes to the world as interest paid by the central bank for the reserve deposit of commercial banks?

I read that commercial banks create money by making loans. But when one person borrows money from banks, his net money doesn't increase. And when people make transactions, money just goes from one to another. How does it come that finally everyone has more net money than before?

Edit:

I have a second thought that my impression is simply wrong. It's only true to say that generally everyone is wealthier than in the past. If we look at the richest businessmen in the world, their "net money" as defined above can often be hugely negative, but they are still wealthy since they possess a lot of other things like buildings, factories etc.

And besides those business men, the "net money" of the government is also hugely negative(almost every country's government has a large public debt). So if the "net money" of the popluation as a whole remains more or less constant(in the spirit of "loans + cash == liability deposits" mentioned by @Lumi), a few entities having hugely negative "net money" make others's net money increase, so one could have the impression that the "net money" of the majority of the population has increased.


texts: In Diamond's OLG model, why is capital equal to saving by the young in previous period?

texts:
In Diamond's OLG model, why is capital in the next period equal to total savings by the young in the current period?

What happeend to the pre-existing capital? Surely it doesn't just cease to exist?
I know it belongs to the old who die, but just because they die doesn't mean the capital disappears?


texts: How are disaster effects calculated into GDP?

texts:
Assuming no income was lost, only assets were destroyed (e.g. homes), how does disaster event impact GDP numbers?

Or otherwise, is losing and rebuilding wealth neutral to GDP (e.g. spending on construction instead of entertainment)?

Is GDP calculated so well that all subtle effects are reflected in the numbers (e.g. lost home might affect work opportunities in mid-term)?


texts:
I have a very general question. I am reading this paper :

http://www.webmeets.com/files/papers/eaere/2015/177/Discounting-HelsinkiBlind.pdf

There is a catastrophic event probability and after the catastrophic event the consumption level is reduced to zero. However, authors are making a steady state analysis prior to the catastrophic event. The catastrophic event probability is $h\left(X\right)$ (let s say that it follows a Poisson process.) $X$ stands for the pollution for example.

Let $T$ be the event occurrence time and denote $F\left(t\right)=Pr\left\{ T\leq t\right\}$  and $f\left(t\right)=F^{'}\left(t\right)$ as the corresponding probability distribution and density functions respectively.

$$h\left(S\left(t\right)\right)\Delta=\frac{f\left(t\right)\Delta}{1-F\left(t\right)}=-\frac{d\left[ln\left(1-F\left(t\right)\right)\right]}{dt}$$

where $\Delta$ is an infinitesimal time interval. The term $h\left(S\left(t\right)\right)\Delta$ specifies the conditional probability that an abrupt event will occur between $\left[t,t+\Delta\right]$.

My question is that : Due to this specification, the probability distribution function will be equal to 1 when $t$ tends to $\infty$. Then, in this case, for sure that catastrophic event will occur at the long run.

So, how is it possible to discuss about a steady state with catastrophic events ? At some moment in time, the economy will change regime with the catastrophic event and this steady state will not be a "permanent" one. How can it be possible to justify this ?


texts:
In this text of voxEU, the author are trying to explain why helicopter money will not have it's expected effect. For that conclusion they try to explain the different schemes on how Central Banks pay on excess reserves to commercial banks.
The 1st graph they show is this one:

I'm having a hard time understanding how one interprets the graph, together with the explanatory text right below the figure. Can someone help me?
Also, if someone knows where they got their graphs, I would appreciate.


texts: Completeness of the strict binary relation

texts:
How do I show that considering the preference relation $\succsim$, then  $\succ$ is not complete?

I tried the following (which I don't know if it's right) but I'd also like to know if it's possible to generalize and say that $\succ$ will never be complete.

Suppose $X = \{a,b\}$ with preference relation $\{ a \succsim a, a \succsim b, b \succsim b\}$. Then, we $\succ$ can't be a complete relation on $X$ because neither $b \succsim a$ nor $b \not{\succsim} a$ are in $X$ and therefore it's impossible to conclude that either $a \succ b$ or $b \succ a$ is true.


texts:
Suppose an economic agent’s life is divided into two periods, the
first period constitutes her youth and the second her old age. There
is a single consumption good, C, available in both periods. The
agent’s utility function is given by

$$U(C_{1},C_{2}) = \frac{C_{1}^{1-\theta }-1}{1-\theta }+\frac{1}{1+\rho}\frac{C_{2}^{1-\theta }-1}{1-\theta }$$

with $0<θ < 1,ρ > 0$, and where the first term represents utility from consumption during youth. The second term represents discounted utility from consumption in old age, $1/(1+ ρ )$ being the discount factor.

During the period, the agent has a unit of labour which she supplies
inelastically for a wage rate $w$ . Any savings (i.e., income minus
consumption during the first period) earns a rate of interest $r$,
the proceeds from which are available in old age in units of the only
consumption good available in the economy. Denote savings by $s$. The
agent maximizes utility subjects to her budget constraint.

$i)$ Show that $θ$ represents the elasticity of marginal utility with
respect to consumption in each period.

$ii)$ Write down the agent’s optimization problem, i.e., her problem
of maximizing utility subject to the budget constraint.

$iii)$ Find an expression for s as a function of $w$ and $r$.

$(iv)$ How does s change in response to a change in $r$? In
particular, show that this change depends on whether $θ$ exceeds or
falls short of unity.

$(v)$ Give an intuitive explanation of your finding in $(iv)$

I am not being able to solve this problem. I proved the first part $i$.

$$C_{2}= (w-C_{1})(1+r)$$

So, $ii)$ Optimization Problem =

$$\frac{C_{1}^{1-\theta }-1}{1-\theta }+\frac{1}{1+\rho}\frac{C_{2}^{1-\theta }-1}{1-\theta }+\lambda (w-C_{1}-(w-C_{1})(1+r))$$

$iii) s=w-C_{1}$ How do we express this int terms of $w$ and $r$?

Any help with this sum will be appreciated.


texts: GDP of domestic and foreign economic activities of a country

texts: Is there an indicator which shows how much GDP of a country is generated by domestic economic activities (e.g. business between food production in Germany and agriculture in Germany) and how much GDP is generated by economic activities of that country with foreign countries (e.g. business between food production in Germany and agriculture in Brazil)?


texts:
I have found two great resources to learn about the distribution of goods (of any kind) all over the world:

gapminder (Hans Rosling)
ourworldindata (Max Roser)

By reading their "about" sections they seem to be quite similar in approach: "Things are not going perfect but better than they seem".

For me it's hard to find out which other providers next to gapminder and ourworldindata are there around: providing similar access to similar data in a similar way (visual), with a similar (but possibly quite different) approach.

Any hints are welcome.


texts: What happens to aggregate C, K, and Y when TFP increases permanently?

texts: I was wondering what would happen to aggregate capital, consumption and output (i.e. K, C, Y) in the Solow model with constant population growth (i.e. n > 0) and no technological growth (i.e. a = 0) if TFP suddenly increases permanently at time $t_{0}$ (i.e. $A_{0}$ --> $A_{1}$).  I am assuming that all three K, C, and Y will increase and converge to the new steady state level. But I wanted to know how it would adjust(i.e. would it be an instant increase or gradual increase from previous to new steady state level).


texts: What will happen to a poor country’s economy if it replaces its entire banking system with the Islamic banking system?

texts:
I don't know much about economics. So, I am just curious about the Islamic banking system.

What I understand is: I know that the USA is the dominant economy and the USD is the dominant currency in the world both as the reserve currency and the trading currency. So, each and every country on earth is dependent on the USA one way or the other. On the other hand, the banking system runs on interests that cause recession from time to time which affects poor countries.

So, I have the following question:

What will happen to a poor country’s economy if it replaces its entire banking system with the Islamic banking system only? Will it do better, or will it become bankrupt?


texts: Unable to resolve this linearized equation from a macro growth theory paper

texts:
$dk_{it}/dt = (W(\tilde K,\tilde l)/\tilde K)[(1+1/n)(\tilde k_i - \theta_i)(l_t - \tilde l)] + B(k_{it} - \tilde k_i)]$

This is a differential equation of individual capital stock $k_{it}$ linearized arond the steady states of $k_{it}$ & $l_t$. How do I go about finding the stable solution solution to this equation? Considering that there are fewer equations than variables, how is it even possible? (Or am I getting my differential math completely wrong!) The papers states that the stable path is:

$k_{it} = \tilde k_i + (1/(u- B))(W(\tilde K,\tilde l)/\tilde K)[(1+1/n)(\tilde k_i - \theta_i)(l_0 - \tilde l)](k_{it} - \tilde \theta_i)e^{ut}$

Where u is the eigenvalue. Can I get help in deriving this? Just a nudge to right kind of solution method would do, thanks!

Edit: The paper in question.

Search for (A.13) (1st equation) & (A.14) (the stable solution).


texts: Monetary Transmission in New Keynesian - Euler Equation

texts:
I get that NK model basically consists of the three equations: Taylor rule, Dynamic IS curve and the NK Phillips curve.

I want to know the effect of nominal interest rate reduction on the transmission channels.

My lecturer says ''nominal rate goes down, real rate therefore rises, raising actual output relative to potential through the euler equation.  this then feeds into the philips curve and raises actual inflation.''

Q: How does the real rate rise when nominal rate goes down? And what is the Euler Equation here?


texts: stylized facts about inflation and output: fat tails, excess volatility,

texts:
I can find papers about the stylized facts, which would be excess volatility, fat tails, persistence, etc., about asset prices, but not really about inflation and output, which presumely would show the same stylized facts..
Do you know of any survey and review papers that discusses this topic? In the boundedly rational adaptive learning literature, the refer to these stylized facts often, but never provide a reference ... .
Here is some context:
In addition, empirical investigations of time series of asset prices show a number of market phenomena, including bubbles, crashes, short-run momentum and long-run mean reversion (Dieci & He, 2018). Pagan (1996) and Lux (2009b) discuss some stylized facts for asset prices: excess volatility, excess skewness, fat tails, volatility clustering, long range dependence in volatility, and various power-law behaviors.
At the macro level, frequently overheating economies leading to asset price bubbles, and followed by deep lasting downturns are hard to reconcile with the behaviour of fully rational, homogenous agents. For example, overly optimistic expectations about the economic outlook may have exaggerated the excessive growth in housing prices in 2000–2008, while an overly pessimistic outlook by the public may have amplified the Great Recession of 2008 and deepened the following economic crisis (Hommes, 2011).


texts: Stable marriage problem with transferable utilities

texts:
I'm looking for a package or a code (preferably in R) that finds the solution to the stable marriage problem with transferable utilities (Shapley and Shubik 1971). Specifically, I'm looking for one or more of the following:

The stable allocation, given a matrix of the joint surplus
The set of transfers that support this allocation
Option to specify another matrix of acceptable matches

As far as I know, the package matchingMarkets in R find the solution to that problem only in the case of non-transferable utilities. Any ideas?


texts: Interaction term between lagged and non lagged variable Fixed/Random effect model

texts:
I am analyzing a panel dataset. I am wondering if I could use an interaction of a lagged variable ( one time step behind) and a non lagged variable ( both continuos indipendent variables) and still apply a fixed/random effect model. Given that I am new to econometrics I wanted to be sure not to violate any assumptions that could bias the estimation. Any reference would also be greatly appreciated.
Thanks in advance !


texts: If I computed an elasticity of substitution of f.e. 0.9 between capital and labour, does this implicate that the factors are rather well substitutable or not? Since for 0 they are perfect complements and for infinity perfect substitutes. So lets say if price for capital sinks there will still be some substitution between capital and labour right?


texts: Are lexicographic preferences strictly monotonic?

texts:
I'm a bit confused about lexicographic preferences and whether they abide by the strict monotonicity axiom.

The definition we were given for strict monotonicity is:

  For any two bundles $x$ and $y$, if $x_i \succsim y_i$ for each good $i$, then $x$ is strictly preferred to $y$

The preferences are summarized below:

  (1) The bundle that has more of good 1 is better, regardless of the amount of good 2.

  (2) If the amount of good 1 is the same, the bundle that has more of good 2 is better.

I'm confused about part (1), because a bundle can have much more of good 2 but still be preferred if it has a bit more of good 1, e.g. $(2,5)$ is preferred to $(1,100)$, even though it has so much more in it. Surely that can't follow the provided definition of strict monotonicity (or am I really thick)?

Thanks!


texts: How much can we trust macroeconometric analysis?

texts:
I am a student of economics in my masters and I have learned quite a lot about microeconometrics (I mean mainly quasi-experimental methods / causality determination). Here my current understanding is that obviously you can't ever fully trust any analysis, but basically you can get to a point where results are relatively convincing, i.e. when one can make a strong argument for the identification assumption to hold (so parallel trends in a Dif-in-Dif, exclusion restriction in an IV approach, etc.). Alternatively, you get identification through a well designed RCT. So basically you can find ways to solve problems of reverse causality and omitted variables.
I have now recently started to learn more about macroeconometrics (i.e. time series methods) and it kind of appears to me that reverse causality and omitted variable bias kind of get ignored here (I am thinking of 3-4 variable VARs that obvisouly don't capture all the variables that might explain e.g. output or inflation). Is there some mathematical argument that makes these problems disappear magically? Or is macroeconometrics in general less convincing?
I have heard of the credibility revolution in empirical micro and that nothing similar happened in macro, but how much can we trust results from something like an IRF estimation or how convincing are arguments based on IRF results?
PS. I know that in forecasting you can be kind of agnostic to any causality issues, so in this question  I am not asking about forecasts. Also I am not putting microeconomics vs macroeconomics in this question. I am only talking about two different econometric approaches.


texts: Sum of residuals and Matrix calculus (step by step)

texts:
Write the sum of residuals in matrix form.

Attempt: $(y-X\boldsymbol{\beta})^T(y-X\boldsymbol{\beta}) = y^Ty-\boldsymbol{\beta}^TX^Ty-y^TX\boldsymbol{\beta}+\boldsymbol{\beta}^TX^TX\boldsymbol{\beta} = y^Ty-2y^TX\boldsymbol{\beta}+\boldsymbol{\beta}^TX^TX\boldsymbol{\beta}.$

  Minimize this and verify that $\hat{\boldsymbol{\beta}} = (X^TX)^{-1}X^Ty$.

Attempt: $\frac{\partial SSR(\boldsymbol{\beta})}{\partial \boldsymbol{\beta}} = -2y^TX+2X^TX\boldsymbol{\beta} = 0 \rightarrow X^TX\boldsymbol{\beta}=y^TX \rightarrow \hat{\boldsymbol{\beta}} = (X^TX)^{-1}y^TX = (X^TX)^{-1}X^Ty.$

I haven't studied matrix calculus, so I am a little bit confused about the step in calculation. In the first problem, could you show me which rule is used for the first equality in the equation. And in the second problem, I am a little confused about the first step of differentiation.

I really appreciate if you show the calculation step by step.


texts:
A farmer has talent $\theta$ uniformly distributed on $[0,1]$. His payoff from farming his land is $\theta.$ Before setting up his farm, he chooses some $w\geq0$, which a plant owner can either accept or reject. If the owner rejects, then the farmer farms on his own, and the owner gets 0. If the owner accepts, then the farmer's payoff is $w$, while the owner's is $\frac{3}{2}\theta-w$.

I have found the following BNE: farmer offers some $w\geq\theta$ and the owner rejects all offers. Do others arrive at this as well? Thank you.


texts: Does net exports has to do with borrowing and lending?

texts:
In my course notes, it says that "when net exports is negative it means that the country is borrowing from other countries" but I do not get it if net exports is negative that only means that exports < imports so net exports is negative, how does that relate to borrowing from other countries? or does it does assume that we traded our exports for imports instead of paying in cash?
Thanks in advance.
Edit : and I apologize if my question sounds stupid
Edit : the answer by @BB King on A country borrowing from the rest of the world did not help me , what i do not get exactly is how net exports component works and how it is calculated, ik that net exports = exports - imports and that we subtract imports for the fact that GDP is concerned only with domestically produced products so we subtract imports from consumption component (C-M) but we "rearrange" the formula of GDP and call (X-M) net exports (tho it's still the same formula), if i as citizen made some purchases online from other countries, that would be subtracted from GDP only cuz it's not domestically produced and if for some reason citizens of my country imported more than what they exported , XN becomes negative simply cuz of rearrangement of the formula so why does that mean my country owes other countries anything (citizens paid for everything out of their own pocket)?, what i am saying is that net exports component only exists cuz of the rearrangement of the formula so if NX is negative, it means M>X , except if X,M are calculated with something like X = imports + amount of money borrowed from other countries, M = Exports + amount of money lent to other countries (of course I made those up , to explain my point of view)


texts: Terminology, is elasticity used as "mean elasticity"?

texts:
Given a demand $q$ and a price $p$ sutch that $q=q(p)$, the elasticity of demand is given by,
$\epsilon = \frac{p}{q}\frac{dq}{dp}$
which depends on the price.
But, when reading papers about estimation of elasticities (elasticity of oil or
elasticity of gasoline just to mention some examples), I typically find that there is one single value reported as elasticity but not clear how it is computed, is this just the plain mean elasticity?


texts: If a currency is pegged to another currency which collapses, what happens?

texts: If a currency X is pegged to another currency Y which collapses, what happens to currency X?


texts: Why is price a long run concept and interest rate a short run one?

texts:
Aggregate demand is used to show the long run effects of price on equilibrium, but how is price a long run concept and interest a short run one ?. I see price fluctuating on a daily basis, interest rates on the other hand fluctuate on a quarterly basis.

Forgive the simplicity of my doubt, I'm an Econ undergrad student. But these concepts were never clearly elucidated in class so I thought of taking to the internet where experts could help clear my doubts.


texts: Question about Strict Preference Relation

texts:
Strict Preference usually states that
x is strictly preferred to y if  :  < x is weakly preferred to y and not y is weakly preferred to x >.
Let me split the < > part into two segments:

x is weakly preferred to y

and

not y is weakly preferred to x

Why do you need the first condition to satisfy the strict preference relationship? The second condition seems to be enough to satisfy the strict preference relation. I mean, "not y is weakly preferred to x" means the same thing as "x is strictly preferred to y" right? So 1. seems to be unnecessary to me when trying to explain Strict Preference Relation.
Is it because we assume that "completeness" of preference isn't satisfied when we define strict preference relation? Therefore there is a third option of "I don't know" if we just write the 2nd condition which requires us to add the first condition as well to cover for "non-completeness"?


texts: Clarification about demand elasticity and monopoly

texts:
I am having a difficulty understanding certain things about elasticity and would like to clarify them.

What I understand.
Elasticity is the percent change in quantity due to a percent change in price, that is, how does output change due to a change in price.
A good is inelastic, if there is only 1(or few) producers of this firm, since, there are no perfect substitutes for this good. Which implies that if the price where to increase quantity would not decrease as consumers have no other options.
On the other hand, a good is elastic, when there are various other firms selling this same good. Thus if there is an increase in price of a good, consumers will chose to purchase from other firms who offer the same product.

Now, this is where I get really confused.
The sentence that "monopolists always operate on the elastic portion of their demand curve." The reason this confuses me, is that I thought if you are a monopoly then your good is inelastic as mentioned above.

The only explanation that I can provide to myself is that there are two levels of elasticity going on here. That is 1. elasticity between monopoly and perfect competition and 2. depending on which one there is another elasticity inside. To further explain what I mean, is if for instance we are dealing with a monopolist, we know that his demand will be inelastic. But not within this inelastic demand there is an elastic and inelastic portion. Am I completely incorrect? Please help me understand this concept.

If the assumption that there is one elasticity within the other is incorrect, this is my ultimate question.

If monopolists have inelastic demand (since they are the only producer of this good) how can they operate on an elastic portion?


texts: Is the Hicksian demand curve steeper or flatter than Slutsky demand?

texts: Putting price on the vertical axis and quantity on the horizontal axis, is the Slutsky demand steeper or flatter than the Hicksian demand curve? If I calculate the Slutsky and Hicksian substitution effects for a normal good (Cobb-Douglas), I get Slutsky substitution effect greater than Hicksian substitution effect. Shouldn' t that mean that Hicksian demand is steeper than Slutsky? I have seen the opposite being drawn in some lecture notes.


texts: How effective is progressive tax at regulating monopoly?

texts: Regardless of the morality of progressive taxes, the economical benefit of progressive tax is at least debatable. But could a highly progressive tax replace at least some of the american/european anti-trust regulations?


texts: Do new treasuries stop being issued during a debt suspension period?

texts:
Apparently the United States has been in a "debt suspension period" for the last 175 days, or almost 6 months.

Does that mean for the last 6 months no new US Treasury Notes and Bills have been issued?

If so, doesn't that create a problem for the Wall Street desks that broker such debt (participate in debt auctions), the so-called "primary dealers"?


texts:
I have the following equation
$$Q_1(K, L) = AK^α L^β, A, α, β > 0$$
I'm asked to derive the isoquant curve which yields the following diagram:

Could anyone please explain to me how the form of the graph was found?

I have 5 unknowns in this equation and I just can figure out how would it be possible to plot the graphs.

Thank you very much in advance for your help!


texts: Why are there estate taxes after the owner passes away?

texts: Isn't it unfair for estates to be taxed after death? The person who bequeathed the estate probably purchased it with after tax money, so wouldn't it then be taxed twice? What is the purpose of the tax other than to generate funding for government spending?


texts: How does an increase in domestic interest rate increase capital inflow?

texts: What I have typed in the title is all I want to know.


texts: Submodularity property in congestion games?

texts:
Let $G$ be a $n$-players and $m$-elements congestion game.

For an equilibrium $e$, denote by $$SUP(e)\triangleq<sup_1(e),sup_2(e),\ldots, sup_n(e)>$$

Where $sup_i(e)$ contains the support of the $i$'th player playing $e$ (the set of strategies $i$ play with positive probability).

Also, we say that $SUP(e)\subseteq SUP(e')$ iff $\forall i\in[n]: sup_i(e)\subseteq sup_i(e')$, that is every player in $e$ randomizes his action on a subset of the actions he could have chosen playing $e'$.

One last definition is the social cost, $SC(e)$ which is defined to be the sum of costs for the players.

Let $e,e'$ be two (possibly mixed) equilibriums for $G$.

  Does $$SUP(e)\subseteq SUP(e')$$ imply $$SC(e) \leq SC(e')$$?


texts: Why's Federal Reserve buying individual corporate bonds, when corporations have been selling them successfully?

texts:
On Jun 15 2020, the Federal Reserve is expanding its Secondary Market Corporate Credit Facility into corporate credit to now buy individual corporate bonds, on top of the exchange-traded funds it already is purchasing. I know the Fed is supposed to be apolitical.

  The program has the ability to buy up to $750 billion worth of corporate credit. Its March 23 initial announcement is largely considered a watershed moment for the financial markets, reeling from the coronavirus threat spread.

  The Fed says it is going to start buying individual corporate bonds

  Under the latest guidelines, the Fed said it will buy, on the secondary market, individual bonds that have remaining maturities of five years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced toward investment-grade indexes but also include some junk bond funds that track debt which had been investment grade before the crisis but had been downgraded after.

I'll  list just some corporations that succeeded in selling bonds. Total's over US$1 trillion at May 28 2020.

  Exxon Mobil Corp. and Verizon Communications Inc., braved the financial turmoil created by the coronavirus pandemic and sold a combined US$12 billion of bonds in a single day.

  Unlike previous years when companies deployed debt for acquisitions, almost all of the proceeds have been used to boost their cash. Boeing Co. sold US\$25 billion in the largest deal this year, followed by Oracle Corp.’s US\$20 billion. T-Mobile US Inc.’s US\$19-billion bond sale has been the only notably large offering for M&A, which helped finance its takeover of Sprint Corp.

  Companies even increasingly double-dipped to get additional funding, often within weeks of their first offering. Nearly 40 non-financial companies — especially consumer ones like Coca-Cola Co. and McDonald’s Corp. — raised more than US\$100 billion in debt through May 13, up from six that borrowed twice in the same period in 2019, Citigroup strategist Daniel Sorid said in a report.

  While several companies like Discovery Inc. and General Electric Co. have borrowed to refinance outstanding debt, many like Boeing and General Motors Co. have taken on additional obligations in what’s also been a period of rising net debt issuance. That may contribute to an even higher number of borrowers getting cut to junk this year.

  On April 13, 2020, Marriott International, Inc.  entered into a commitment letter providing for a 364-day senior unsecured revolving credit facility in an aggregate principal amount of $1.5 billion (the “364-Day Credit Facility”).

On June 5, Royal Caribbean Cruises Ltd. sold $2 billion of bonds on Thursday, the cruise liner’s second outing in the credit market in less than a month as its seeks to boost liquidity while the coronavirus keeps ships at port.

On June 8, General Electric Co said on Monday it reopened portions of its prior debt offerings for $3 billion in total proceeds to boost its cash reserves amid the coronavirus crisis.

On June 10, Delta Air Lines Inc. returned to the bond market within weeks of its last visit, looking to support its liquidity and repay outstanding debt.

On June 15 2020, American Airlines Group Inc. is in talks to raise new financing to help it weather the collapse in travel demand during the pandemic, according to people with knowledge of the matter.


texts: Advice on method for analyzing the effects of increase in minimum wage

texts:
As a hobbyist and generally curious person with a lot of free time at home, I was curious what would be a good method to analyze the effect of an increase in the minimum wage of a country if you only have access to public data?
What initially came to my mind would be to create a simple regression with three variables time, labor cost per employee and total employment numbers where

time would consists of maybe 3 years data prior and after the increase of the minimum wage
the labor cost per employee would be our predictable variable, which we will use to understand better the changes in employment numbers

However, I am having seconds thought about how accurate the output of the regression would be as there are many other factors that can influence the employment numbers. This, I decided to ask if any of you might have any idea of what other variables can be included or simply suggesting a different mathematical approach for this? Thank you in advance.


texts: Explanation of Dynamic Programming "Guess and Verify" Technique

texts:
According to my textbook, the analytical technique for solving a Bellman's Equation is as follows:

Guess a form for $V_0(x)$
Solve the maximization problem with respect to the control and obtain a policy function $x' = h_0(x)$
Update the guess by plugging the policy function such that $V_1(x) =F(x,h_0(x)) + \beta V_0(h_0(x))$
Repeat the above until $V_{i+1} = V_i$ At this point, the equation is solved.

My question is, why does this technique, specifically the step, $V_{i+1}= V_i$, solve the Bellman equation?
Thank you!


texts: Econometrics - Panel Data: Relationship between total, within and between

texts:
I need to prove the following statement, which is $\hat{\beta}_{total} = W(x)\hat{\beta}_{within} + (I-W(x))\hat{\beta}_{between}$,
where $\hat{\beta}_{within}$ is the fixed effect estimator(i.e. the estimator of the linear regression of $y_{it} - \bar{y_i}$ on $x_{it} - \bar{x_i}$), $\hat{\beta}_{between} $ is the estimator of the linear regression of $\bar{y_i}$ on $\bar{x_i}$, and $\hat{\beta}_{total}$ is just the regression of y on x, pretending it’s not a panel data. $W(x)$ is a matrix-valued function of the data $\{x_{it}\}_{i=1, t=1}^{N, T}$, and the question need us to find an explicit expression for $W(x)$ as well.
In the previous part, I have already proved that
$$
\sum_{i=1}^N\sum_{t=1}^T (x_{it} - \bar{x_i})’ (x_{it} - \bar{x_i}) + T\sum_{i=1}^N \bar{x_i}’\bar{x_i} = \sum_{i=1}^N\sum_{t=1}^Tx_{it}’x_{it}
$$
And
$$
\sum_{i=1}^N\sum_{t=1}^T (x_{it} - \bar{x_i})’ (y_{it} - \bar{y_i}) + T\sum_{i=1}^N \bar{x_i}’\bar{y_i} = \sum_{i=1}^N\sum_{t=1}^Tx_{it}’y_{it}
$$
I don’t know how to connect these two parts to prove the actual statement. The matrix algebra is so confusing, and I don’t know what $W(x)$ can be. Any help is welcome. Thanks!


texts: Proper definition of extensive form game

texts:
Consider the following game: Let $N := \{1,2,3,4\}$ denote a set of agents.
Going from 1 to 4 each agent can decide how many of the remaining agents he wants to integrate into a coalition.
The strategy sets are given by $S_1 := \{1,2,3,4\}$, $S_2 := \{1,2,3\}$, $S_3 := \{(1,1),(1,2),(2,1),(2,2)\}$ and $S_4 := \{(1,1,1)\}$.
I want to generalize the game for  $|N| = n$. So basically agent 1 picks a number $s_1 \in N$. Then agent $1 + s_1$ picks a number $s_{1+s_1} \in \{1,\ldots,n-s_1\}$ and so forth. Eventually there exists an agent who integrates all the remaining agents $\exists j \in N : s_j = 1+n-j$.

What's a proper definition of this simple game? What are the strategy sets?


texts:
What I've called "elastic pricing", has a true economics name that I believe I once heard.

Here's the notion:
I walked into a gas station to buy a fountain drink. I only brought a dollar with me, but when I went to purchase the drink, I found out it was actually \$1.89. The cashier accepted that as payment - making a real-time decision that he was able to capture my demand at only $1. I ended up trying this at a few other gas stations, sometimes bringing 90 cents, and it always works.

An alternative to this is that my University just started pricing football tickets at a variable rate based on the location of the seats. Invariably, they were trying to capture the additional value that the second market was instead capturing.

A second alternative is that a former company of mine negotiated every price. So we would usually price the product at $500/user/month. But, we would always assess the situation, and with negotiation offer discounts, or increase the pricing. Or, provide value added services for free or at an increased rate.

So how do I talk about this flexible pricing concept – where a business sets it's pricing based on some kind of average demand, but considers an additional spread based on an individual's demand?

Edit:
In my first example, the bargaining was only noteworthy because it informed a new mental model of mine – that the pricing was flexible. I don't believe it's an inherent component in the term I'm seeking.

As yet another example, consumer package good brands are known to alter their products slightly for online marketplaces – so that value savvy customers can't compare products directly online with those in the store. E.g. Duracell might offer a 6pk of batteries on Amazon vs. a 4pk at a retail outline. Or, they might package the item differently so it has a different SKU.


texts: Where UK finds money to sustain its negative trading balance?

texts: UK had a negative trading balance for the last 20 years. Where does it find money to finance it? Is such situation sustainable?


texts: The government does not need to gather capital via tax and Treasuries to spend? According to MMT

texts:
I have watched Warren Moslers interview. https://www.youtube.com/watch?v=W97s3zbFKvc&t=841s. At 7:26 he says that the Treasury does not issue securities for the purpose of financing spending (it is actually accomplished by the Fed debiting the Treasury and crediting somebody else). And at about 10:20 - 11:00 he says that it is not the governments problem if the Treasury notes are not bought. This logic is very unlike the usual understanding that the Treasury issues bonds to finance government spending.
He says they are spending first and only after that the bonds get sold.
But what if nobody buys the bonds then it is a problem, right? Am I understanding this correctly? Is this common knowledge? Because it sounds very different from what you read about elsewhere.
My questions: Does the government really not need taxes and debt to spend since it can just print money? Are taxes really only for reducing money supply. Are Treasuries only for controlling interest rates?


texts: Financial wellbeing overall components and datasets

texts:
I am currently doing a project on financial wellbeing, but on the level of entire countries. I am aware of studies and data pertaining to financial inclusion, as often studied in Development Economics, usually gauged by access to the banking system by seeing the total number of transactions/ number of ATMs in a region/ number of bank accounts/ account holders etc. (see a, b and c).
But financial wellbeing I am told is much broader, and includes control over timely expenses, the capacity to absorb a financial shock, being on track to meet one's financial goals and the financial freedom to make the choices to enjoy life (see d). These seem rather personal to me, and I am not sure if some aggregate measures on the level of nations are available or even which variables to use. There are individual-level primary data questionnaires for measuring financial well-being like this, used here too. The former also aggregates the individual level results into US state-level statistics.
Is such data available at the country level instead of state level, internationally? Any widely used index of a country's overall financial wellbeing?
Also, are there alternatives to using surveys like this, that use other statistics that can be measured at the level of countries, used in the literature? I can imagine using financial inclusion-like data for proxies, for example the percentage of people having a bank account, the average frequency of transactions in the last year from bank/ government data instead of asking in the survey etc. But is there a set of such variables that is usually used in the literature? Any composite measures of the components or maybe of wellbeing as a whole? What are some good usable datasets for this?


texts: Is there any reason deflation would reduce profits?

texts:
Profits are the difference between input and output prices. So profits would only fall in those industries where output price fell faster than input price.

Is there any reason deflation would reduce profits in all industries rather than just some?


texts: Why do we need the specific utility assumption?

texts:
In many microeconomic models, we read the assumption that agents have CARA normal utility preferences. We need the assumption of the utility to do pricing, but should someone do differently?

Namely, is there a case where we do not need utility functions to make pricing? I think this has to do with the probability measure, if it is unique or not.


texts: Contribution to change of a ratio with 3 terms

texts:
I have a micro dataset of firms' financial liabilities for 15 years. I would like to plot the contributions to change in leverage, decomposing the single contribution of bank loans, bonds and equity variations.
Leverage is built as:

Leverage=(Loans+Bonds)/(Loans+Bonds+Equity)

Therefore contributions to growth are positive if financial debt (Bank Loans or Bonds) increases or if its sum with capital decreases and vice versa.

I would be able to decompose with logarithm a simple ratio a/b but I have no clue on how to do it with 3 components. Any idea? Thanks


texts: Online stock portfolio selection algorithms applicable to forex markets?

texts: Are stock portfolio selection algorithms, like the universal portfolio algorithm, applicable to forex markets, treating each currency like a stock?


texts: Which measure to check in analysis (p-values or $R^2$)?

texts:
In an analysis e.g. OLS regression which measure would you look at?

$R^2$, $adjusted-R^2$ or $p-value$?

How would you consider a regression with p-values >0.15 but with an $R^2$ of 40%?
In general in economics, what have you seen?


texts:
I am having diffculty with this question:

Can we proceed using Lagrange here since the utility function is convex, or do we have to treat them as perfect substitutes? If latter or any other method, please explain.

My attempt:

$$L= U(X,y) +λ(y-p1-p2)$$.

By using Lagrange, I got these FOCs:
$$ α Ax1^{(α -1)} - λp1=0$$& $$1-λp2=0$$.

So, is it correct to use Lagrange method here?


texts: Is there a way to trade currencies several times and end up with more money than one starts with?

texts:
Conjecture: The foreign price value of a currency is not absolute.
Scenario:
If the euro appreciates relative to the British pound and the price of the US dollar stays the same relative to the euro, what would happen to the US dollar?
Would the US dollar also appreciate relative to the British pound? Or, would it cost the same amount of dollars to buy one British pound?
I'm trying to determine whether it is possible to trade currencies several times and end up with more money than one starts with; That is, assuming that there are no transaction costs involved in trading currencies. If it is possible then, it would essentially be a loophole.


texts: McCall Search Model: Present value of lifetime income

texts: In the Bellman for the search model, how is the present discounted value of future income equal to $\frac{w}{1-\beta}$? Sounds like a basic question but I just can't comprehend the math in my head, because for present value I tend to compare it with NPV and think $1-\beta$ should be raised to the power of something. If someone could show the math in the McCall model's bellman.


texts: Why not say the buyer will *definitely* buy at price X?

texts:
In supply-and-demand curve, we draw curves of indifference. Say the demand goes through (1, \$1). Then Bob the Buyer is indifferent between spending \$1 for 1 apple or just keeping the \$1. If Sally the Seller had 1 apple to sell, then the equilibrium quantity sold would be 0 or 1—we cannot say. Seen differently, Bob will buy 1 apple if the price is in the interval [\$0, \$1) (and he may buy it if the price is exactly $1).

Would it not be simpler to use closed intervals? In our example, Bob will buy 1 apple is the price is in the interval [\$0, \$1]. The equilibrium quantity sold will definitely be \$0. Seen differently, the demand curve represents the maximum price buyers will pay, and the supply curve represents the minimum sellers will sell for.

It's (literally) an infitesmal of a difference, but it seems, at least for discrete situations like the above, it would be nice to say exactly what will happen.

Why don't we do that? There must be some elegant reason.


texts: Effect of minimum wage on higher levels of pay

texts:
Suppose the minimum wage increases to \$$x$. Is there any evidence on the effect (if any) this is likely to have upon the wage profile of workers higher in the hierarchy, who are already paid more than \$$x$?

My question is inspired by the following comment from the Financial Times (paywalled link):

  As an employer with an annual payroll of around £650k pa the impact of the introduction of the minimum wage in 1997 led us to pay our lowest paid staff ( casual bar staff back then on about £3ph ) the increased minimum wage so they at least benefited. Everyone else higher in the hierachy ( full timers, supervisors, asst managers, managers) all suffered because at every opportunity ( as people left and needed to be replaced) we tried to replace these higher paid staff with the same caliber person but on lower wages. And we were successful at dong this; and we had to be because we could not afford our overall wage bill to increase. So in 2000 I was paying a General Manager 35k a year. Now I can find and pay a general manager 25k pa and thats a massive nominal decline over 15 years. So the real impact of the minimum wage introduction in the real world of small husiness was to pay the lowest casual staff a little more but most of the higher paid staff ended up being paid less .

Is there any evidence to support the claim that the described response is a widespread phenomenon?


texts: Is market failure the same allocative inefficiency?

texts:
From an IB Economics book (in the microeconomics section):

The part in blue suggests market failure is the same as allocative inefficiency, but the part in red seems to suggest that market failure is one cause or type of allocative inefficiency.

What is the difference between the two, if any?


texts: Utility representation of single peaked preferences

texts:
Is it true that a single-peaked preference (with the peak at some finite point) over the set of real numbers, always has a utility representation ??
If yes, can you please hint towards the proof or references.
Is this result generalizable to multi-dimensional single-peakedness?


texts: The range of subsidies that underpin China’s economic model

texts: I was watching the news the other day and the reporter said that America was complaining about "the range of subsidies that underpin China’s economic model". What exactly are those subsidies?


texts:
My background is not in economy, but I know that the indebtedness of the western countries is slowing the growth of the economy.

So my line of thinking is the following. Would it be feasible if a country's central bank (which would be state owned) prints money and then the government by various tenders for small businesses and startups distributes this money?

This created money would be granted for productive purposes only, interest free and not returnable if the company performs well. Also I think that this increase in the money supply would not generate inflation because the money will be backed by future products and services. By this measure the production and consumption would increase in the country. Therefore the state would need not to take foreign loans because the required sum of money for it's purposes would be covered with taxes. Of course small and medium sized companies would be taxed much less than big, multinational companies.

What are your thoughts on this?