texts: Interpretation of Difference-in-Differences Regression Results when Only the DID Coefficient is Significant

texts:
I have a standard DID regression of the form:
Y= β0 + β1*[Time] + β2*[Treatment] + β3*[Time*Treatment] + ε
where Time is a dummy equal to 1 for period after policy change and Treatment is a dummy for the treatment variable.
Based on my results β0, β1 and β2 are all insignificant. However, the difference-in-difference estimator β3 is significant. How can I interpret these results? Does that mean that I cannot say anything about the exact behavior of the treatment and control pre or post period other than the fact that there is a significant difference between them in the period after treatment? Is there still value in this DID regression if all other coefficients are insignificant?


texts: Do I understand correctly that taxation-based government expenditures allow GDP to grow?

texts:
Suppose (it's an example) GDP= $1 000 000, Marginal Propencity to Consume(MPC)=0.25, that borrowing money is an absolute taboo for our government and that said government wants to increase GDP.

What can the government do to increase GDP of its country? Well, it can increase government spendings. The expenditures multiplier is equal to 1.33, meaning that for each \$1 spent by the government the GDP increases by \$1.33. But with borrowing out of question our government will have to tax population first in order to raise the money. But additonal taxation will decrease our GDP. Will our expenditure multiplier be big enough to compensate for effects of our tax multiplier? Yes, because the absolute value of the tax multiplier will always be less than the absolute value of expenditure multiplier, no matter what MPC we will have (except if we will have MPC=1, but in this case we will get divizion by zero error), consequently meaning that EM-TM always >0. In our particular example we will lower GDP by 0.33 for each dollar that we taxed, but at the same time increase by 1.33 for each dollar that we spent, meaning that taxation and consequent spending of N dollars will give us +N dollars to GDP, 1.33x-0.33=x(1.33-0.33)=x*1=x

1.Is my understanding of given model correct?

2.If it's correct, then why don't government tax and spend tax money much much more actively than they are doing today? It looks like it would be a "cheat code" for unlimited exponential growth. Maybe there are other factors that prevent it, but that our simple model ignores?


texts: Macroeconomic model of the open economy - NCO and loanable funds

texts:
Can anyone explain to me why a capital flight from a country increases the demand for loanable funds in that country. Here's the standard explanation.
https://policonomics.com/lp-open-economy-loanable-funds/
In this explanation the NCO shifts left (lower NCO) & the demand curve for loanable funds goes right (increases at every level of r).
I get I+NCO = demand curve. But if I talk it through, then my mental modle always comes up with -
capital flight, no one wants the currency  less people want the loanable funds so at any R demand is less, hence a shift to the left of the  demand curve - not right.
I have a second problem scenario which I can't make fit the model. Gvt encourages investment throught tax credits. Demand curve must shift right in the loanable funds market, but surely NCO would shift to the left (or is therejust a move leftwards along the curve?)...thus according to the textbooks shifting the D loanable funds left not right.
None of the textbooks really explain why a capital flight means people want more "loanable funds".
And if a country becomes more attractive to invest in the demand for loans in that country must go up, not down.
I just can't get my head around this 3 market model.
What's wrong with my thinking.


texts: Bayes Correlated Equilibrium with complete information

texts:
Model

Consider a game where a decision maker (DM) has to choose action $y\in \mathcal{Y}$ possibly without being fully aware of the state of the world.

The state of the world has support $\mathcal{V}$.

When DM chooses action $y\in \mathcal{Y}$ and the state of the world is $v\in \mathcal{V}$, she receives the payoff $u(y,v)$.

Let $P_V\in \Delta(\mathcal{V})$ be the DM's prior.

The DM also processes some signal $T$ with support $\mathcal{T}$ distribution $P_{T|V}$  to refine his prior and get a posterior on $V$, denoted by $P_{V|T}$, via the Bayes rule.

Let $S\equiv \{\mathcal{T}, P_{T|V}\}$ be called "information structure".

A strategy for the DM is $P_{Y|T}$. Such a strategy is optimal if it maximises his expected payoff, where the expectation is computed using the posterior.

Let us now define the concept of 1-player Bayesian Correlated Equilibrium provided in Bergemann and Morris (2013,2016,etc.).

$P_{Y,V}\in  \Delta(\mathcal{Y}\times \mathcal{V})$ is a 1 player Bayesian Correlated Equilibrium if

1) $\sum_{y\in \mathcal{Y}}P_{Y,V}(y,v)=P_V(v)$ for each $v\in \mathcal{V}$

2) $\sum_{v\in \mathcal{V}}u(y,v) P_{Y,V}(y,v)\geq \sum_{v\in \mathcal{V}}u(k,v) P_{Y,V}(y,v)$ for each $y$ and $k\neq y$.

Theorem 1 in Bergemann and Morris (2016) claims  that $P_{Y,V}$ is a 1-player Bayesian Correlated Equilibrium if and only if there exists an information structure $S\equiv \{\mathcal{T}, P_{T|V}\}$ and an optimal strategy $P_{Y|T}$ for the DM such that $P_{Y,V}$ is induced by $P_{Y|T}$, i.e., for each $(y,v)\in \mathcal{Y}\times \mathcal{V}$
$$
(\star) \hspace{1cm}P_{Y,V}(y,v)=\sum_{t\in \mathcal{T}}P_{Y|T}(y|t)P_{T|V}(t|v)P_V(v)
$$
[for simplicity, I have assumed that $\mathcal{T}$ is finite]

Question 1:

How does the 1-player Bayesian Correlated Equilibrium induced by the complete information structure look like?

This is my attempt to answer.

The way in which I represent the complete information structure is
$$
S^{c}\equiv \{\mathcal{T}\equiv \mathcal{V}, P_{T|V}(t|v)=1\text{ if $t=v$ and $0$ otherwise}\}
$$
Under $S^c$, $P_{Y|T}$ is an optimal strategy if for each $t\in \mathcal{T}$ and for each $y\in \mathcal{Y}$ such that $P_{Y|T}(y|t)>0$ we have that
$$
u(y,t)\geq u(k,t) \text{ }\forall k\neq y
$$
[Note that, even under the complete information structure, the optimal strategy may be mixed, if two actions lead to the same payoff $u$.]

Hence, from ($\star$) and for each $(y,v)$
$$
P^{c}_{Y,V}(y,v)=\sum_{t\in \mathcal{T}}P_{Y|T}(y|t)P_{T|V}(t|v)P_V(v)=
\sum_{t\in \mathcal{V}}P_{Y|T}(y|t)P_{T|V}(t|v)P_V(v)=
P_{Y|T}(y|v)P_V(v)
$$

For example, suppose $\mathcal{Y}\equiv \{1,2,3\}$, $\mathcal{V}\equiv \{1,2,3\}$, $P_V(1)=P_V(2)=P_V(3)=1/3$, and
and
$$
u(1,1)=2, u(1,2)=4, u(1,3)=3\\
u(2,1)=2, u(2,2)=3, u(2,3)=3\\
u(3,1)=1, u(3,2)=3, u(3,3)=3\\
$$
Then, a possible optimal $P_{Y|T}$ under $S^c$ is
$$
P_{Y|T}(1|1)=1/2, P_{Y|T}(1|2)=0, P_{Y|T}(1|3)=1/3\\
P_{Y|T}(2|1)=1/2, P_{Y|T}(2|2)=1/3, P_{Y|T}(2|3)=1/3\\
P_{Y|T}(3|1)=0, P_{Y|T}(3|2)=1/3, P_{Y|T}(3|3)=1/3\\
$$
and the corresponding 1-player Bays Correlated Equilibrium is
$$
P^c_{Y,V}(1,1)=1/6, P^c_{Y,V}(1,2)=0, P^c_{Y,V}(1,3)=1/9\\
P^c_{Y,V}(2,1)=1/6, P^c_{Y,V}(2,2)=1/9, P^c_{Y,V}(2,3)=1/9\\
P^c_{Y,V}(3,1)=0, P^c_{Y,V}(3,2)=2/9, P^c_{Y,V}(3,3)=1/9\\
$$

Question 2:

Is it true that, for each $v\in \mathcal{V}$, $P^{c}_{Y|V}(y|v)\equiv \frac{P^{c}_{Y,V}(y,v)}{P_V(v)}$ should be equal to $1$ for a $y\in \mathcal{Y}$ and zero otherwise?

Is it true that, for each $y\in \mathcal{Y}$,  $P^{c}_{V|Y}(v|y)\equiv \frac{P^{c}_{Y,V}(y,v)}{\sum_{v\in \mathcal{V}}P^c_{Y,V}(y,v)}$ should be equal to $1$ for a $v\in \mathcal{V}$ and zero otherwise?

Question 3:
Is it true that by adding the constraint $P_{Y,V}(y,v)>0$  (strictly) for all $(y,v)\in \mathcal{Y}\times \mathcal{V}$ in the definition of 1-player Bayes Correlated Equilibrium above  we exclude $P^c_{Y,V}$? Why?


texts: How can I motivate a dynamic model using utility and consumer preference where only one good is affected by past consumption?

texts: I've been looking how I can motivate the model I want to estimate using a utility optimization framework. Basically, I want to write a model using two goods: x and y, in two periods: 1 and 2, where the optimal amount of $x_2$ is negatively affected by the amount $x_1$ that was consumed in the previous period. For example, a person's preference between Italian (x) and Thai (y) restaurant at period t should depend on whether or not a person Italian food at period t-1, so consuming $Italian_{t-1}$ should negatively affect the optimal amount of $Italian_{t}$ by some proportional amount. The nature of the problem rules out the Discounted Utility Model because it assumes consumption independence. I read about alternative such as habit forming models,but these models describe the opposite of what I want and can lead to intractable. Any reference or help will be greatly appreciated.


texts: How does Egypt prevent people from arbitraging their currency?

texts:
Apparently Egypt uses a fixed exchange rate so there is a substantial difference between the government rate for the Egyptian pound and the price on the street. What prevents someone from just buying pounds on the street using dollars and then depositing the pounds in a bank and converting them back to dollars at the official rate, thus allowing the person to instantly make a large profit?

I assume that there is some mechanism to prevent this. Is there?


texts: Can aggregate risk to the economy be insured, and how?

texts:
There has been a lot of discussion for a while now over how the short market on Tesla is quite crowded.  This got me thinking of what possible benefits the short market bestows upon the economy as a whole.

Specifically, supposing some hypothetical company $C$ (that isn't Tesla), that has random payoff at time $t$ of $P_t(x)$ where $x$ is the investment.  Supposing that $P_t$ is 'risky' (e.g. $p(P_t(x) = x) = 1$ is 'non risky', and $p(P_t(x) = 2.5x) = 0.5; p(P_t(x) = 0) = 0.5$ is 'risky').

I can vaguely imagine that a mixture of investors and shorters would somehow even out the expected risk for the economy as a whole.  Does this intuition hold in reality?  If so, what is the mechanism and reasoning here?

I can see at least one avenue by which aggregate risk to the economy can be insured under the right circumstances.  Suppose that we have the "risky" business $C$ as defined above.  Ceate another business $C_2$ with the same payout, but which succeeds or fails exactly when $C$ fails or succeeds, respectively.  If we invest $x/2$ into each company, the payout at time $t$ is exactly $1.25x$ with probability 1.  Thus, $C_2$ "evens out" the risk of $C$, and vice versa.

Do short positions also fill this role?  Does anything else?


texts:
Jeff Gore has suggested scrapping the 1 cent coins a few years ago. Why doesn't the US cancel the pennies? Is it that terrible to the economics to keep the copper coin?
As mentioned in the comments, Greg Mankiw has also discussed it here:

Per year, the average citizen wastes 12 minutes paying with pennies.
That’s like half of an episode of The Office. Twelve minutes is also
the length of the first human spacewalk by Soviet cosmonaut Alexey
Arkhipovich in 1965.
Mankiw also estimated this 12 minutes of wasted time costs the U.S.
economy approximately $1 billion every year.


texts:
What publicly available resources are there, with sample code, that can be used to build my own macroeconomic model? A search on Github shows that some people have posted code, but I think we can do better.
Ultimately, I am looking to use this model to forecast key economic indicators such as components of GDP and the labour market.
I am method agnostic, so would be happy to see VARs, DSGEs and machine learning examples.


texts: Empirical set-up for measuring elasticity with respect to quality in an environment without price

texts:
I want to answer the broad question: In the absence of prices, how are decisions made?

I have data on the determinants of market share in an environment without prices. So, imagine, person A chooses technology C at time X of a certain size, speed, and resolution (all measurable). And I have data for thousands of people and the technologies they choose over a time period of about 10 years. So again, imagine, changes in quality (a newer high-quality technology is developed) and this shocks the system, therefore demand changes as technology A is replaced by technology B, and then a few years later, technology C is available, etc., in an environment where everything is free and only 3 technologies are available, for example.

How do I model elasticity with respect to quality?

The data is stored in MySQL and I typically use Stata for statistical regression. Can you link me to a good example of an empirical test for this type of problem, or, at least, a step-by-step description of what info I need?


texts: China approval for US company acquisition

texts:
Why does China has to give approval to two US companies merging together?

There have been quite a few examples in the last time, as UTC & Rockwell Collins as well as Qualcomm acquiring NXP Semiconductor.

Why does in this case UTC need approval from China : https://edition.cnn.com/2018/11/27/business/united-technologies-breakup-conglomerate/index.html


texts: What is the mechanism that triggers a stock price change?

texts:
When discussing with my son basic economics (how the price is driven by demand, among others), I came to wonder which exact mechanism triggers a price change in a stock exchange.
In everyday life, prices are fixed (in practical terms) by the provider (a shop for instance). The consumers either buy it or not, which can drive the provider to lower the price (or not). In any case, there is a trigger (the decision of the owner to set a price) that probes the market.
What is the equivalent in a stock market? Specifically, what exact mechanism modifies the price to get a reaction of the ones who would like to buy or sell stock? I understand that globally the demand drives the price, but once the price is, say, 10 EUR - what triggers a change?

Is it a random mechanism ("we, the stock exchange organization, will fluctuate the price around 10 EUR to see whether more will buy or sell")?
Or an offer is done by some of the ones who would like to sell or buy ("I will ask around to buy for 9 EUR and see if someone sells", or "I will set the price of my share to 11 EUR instead of 10 and see if someone buys from me"?)
Or something else?


texts: When a company decides to import goods, are the tariffs paid on those goods collected by customs? Or do companies treat tariffs as tax expense? In any case, can a company write off these tariffs and eventually receive a tax refund on the import taxes they paid?


texts: What is the difference between Herfindahl Index and the Concentration Ratio

texts: I was recently reading about the Herfindahl Index and from what I've learned so far, is that HHI is preferred over the Concentration Ratio. However, I didn't quite understand the reasoning that lead to this conclusion. What impact does squaring have on the final result? Any hints or suggestions for further reading will be appreciated.


texts: How long can I live in the United States with my German monthly income?

texts:
I see different (more or less abstract resp. specific) approaches to compare wealth (of individuals, regions, and countries):

by living standards
by living expenses
by incomes/salaries
by purchasing powers
by price levels

One such approach – to talk at large – could be:

  How long can I – coming from country X – live in country Y by spending
  my last monthly salary converted by nominal exchange rate:

  as a backpacker or as a convenience tourist?
  adapting to the other country's standards which may be lower?
  adapting to higher standards than I am used to?

  How much does this period deviate from a month?

My question is: Where do I find this approach taken?


texts:
Wikipedia explains the difference between products that are "gross substitutes" and products that are "net substitutes". However, the mathematical explanation doesn't give much intuition about these concepts. So my questions are:

What is the intuitive difference between gross and net substitutes?
What are good real-life examples of these?
Why is the requirement for competitive equilibrium, "gross substitute" and not "net substitute"? I.e., why does a competitive equilibrium not exist if the products are net-substitute?


texts: How to do test statistic on difference in two independent variables?

texts:
If i have time series regression $R_{i,t} = \alpha + \beta x_1 + \gamma x_2 + \delta x_3 + \varepsilon_i$

In this case, how can I conduct test statistic of $\beta - \gamma$? Is it to use unpaired two sample?

(http://www.sthda.com/english/wiki/t-test-formula)


texts: Representing these lexicographic preferences by non-continuous utility function?

texts:
I have the following preferences and I am wondering whether I could represent them by a utility function:

$R_1 \succ R_2$ <-> $R_1\leq Q$ and $R_2 > Q$,

$R_1 \succ R_2$ <-> $R_1 \leq Q$ and $R_2 \leq Q$ and $R_1>R_2$,

$R_1 \sim R_2$ <->  $R_1 > Q$ and $R_2 > Q$

R is positive and real-valued, Q is kind of the "threshold" of R for the first criterion (below Q everything prefered to above Q). These are lexicographic preferences, right?

Can't I represent these preferences by the utility function:

$U(R)=a+bR$ for $R\leq Q$ and positive a,b

$U(R)=0$ otherwise ?

Because now

$U(R_1)>U(R_2)$ <-> $R_1 \succ R_2$

$U(R_1)=U(R_2)$ <-> $R_1 \sim R_2$

So, is it finally possible to represent lexicographic preferences by anon-continuous utility function?

Thanks a lot for help!

Felix


texts:
I'm struggling to find a macroeconomic index which embodies the cost to run an average production plan.

My problem is that I wanted to divide the annual average cost per employee (which I already found to be gross income per capita) with the cost of running an average asset (e.g rent, energy and other expenses).

Did such an index exists?


texts: Calculating volatility forecast errors - how to obtain "actual volatility" for comparison?

texts:
I have to replicate Liu & Morley (2009) on Polish data. They compare different methods of forecasting volatility in terms of Mean Absolute Error and other metrics. They use Hang Seng Index.

What I don't understand is where do they take "actual volatility" from to compute these errors? They claim to use a formula

$$MAE = \frac{1}{\tau}\sum^{T+\tau}_{t=T+1}|h_t-s_t^2|,$$

where $\tau$ is the number of forecasted periods, $h_i$ is obtained from GARCH and $s_i^2$ is this "actual volatility".

If I had to forecast rates of return, I could calculate ex post errors with no problem because rates of return is what I have in raw data to compare forecasted values to. But volatility?

Liu, W., & Morley, B. (2009). Volatility forecasting in the hang seng index using the GARCH approach. Asia-Pacific Financial Markets, 16(1), 51-63.


texts:
Suppose we have an economy with a representative consumer with the following utility function: $$U=\sum_{t=0}^\infty\beta^t\frac{c_t^{1-\sigma}}{1-\sigma} $$ There is no uncertainty and the household can invest in a single risk-free asset bearing a fixed one-period rate of return $R > 1$. Its budget constraint is $$c_t+R^{-1}a_{t+1}\leq y_t+a_t$$ with $a_0$ given. Its borrowing constraint is $$a_{t+1}\geq \bar{a}_{t+1}$$ For simplicity, assume $R\beta = 1$.  The stream of endowments $$y_t=\lambda_t$$  where $1 < \lambda < R$ so that $\sum_{t=0}^\infty \beta^ty_t$ holds. The borrowing constraint $\bar{a}_{t+1}$ is either a borrowing limit given by $\bar{a}_{t+1}=0$  in the case of the no-borrowing constraint or given by $\bar{a}_{t+1}=\tilde{a}_{t+1}$ in the case of the natural-borrowing constraint.
Now I guess the maximization problem of the household and the Euler equation would look something like this:
$$\text{max}\ \sum_{t=0}^\infty\beta^t\frac{c_t^{1-\sigma}}{1-\sigma} $$
$$\text{s.t}\ c_t+R^{-1}a_{t+1}\leq y_t+a_t $$
$$a_{t+1}\geq \bar{a}_{t+1} $$
FOC w.r.t $\{c_t\}$ : $\beta^t c_t^{-\sigma}=\lambda_t$
FOC w.r.t $\{c_{t+1}\}$ : $\beta^{t+1} c_t^{-\sigma}=\lambda_{t+1}$
FOC w.r.t $\{a_{t+1}\}$ : $R^{-1}\lambda_t=\lambda_{t+1}+ \mu_t$ where $\mu_t$ is the multiplier on the borrowing constraint.
The EE is : $u'(c_t)=\underbrace{R\beta}_{=1}u'(c_{t+1})+\mu_t$ this is for the non-binding case but the situation when the borrowing limit is binding. $\rightarrow$ I guess we would have $c_{t+1}>c_t$, so consumption is a nondecreasing sequence.
My question is if we assume $a_0=0$ and the agent is exposed to the no-borrowing constraint. How can we prove that the economy will always be borrowing constrained? And if $\tilde{a}_{t+1}$ is equal to the natural debt limit (present discounted value of future endowment stream), why is now the case that the economy will never be borrowing constraint?


texts:
Suppose we have a Solow model:

$$
Y(t)=C(t)+I(t)
$$

$$
I(t)=sY(t)
$$

$$
\dot K=I(t)-δK(t)
$$

With a given Cobb-Douglas:

$$
Y(t)=Z(t)K^aL^{1-a}
$$

$$
y(t)=Y(t)/L(t)
$$

$$
k(t)=K(t)/L(t)
$$

$$
y=Zk^a
$$

We also know these:

$$
L=L(t), \dot L/L=n
$$

$$
Z=Z(t), \dot Z/Z=g
$$

Therefore we have:

$$
L(t)=L(0)e^{nt}
$$

$$
Z(t)=Z(0)e^{gt}
$$

We get to this point:

$$
\dot k=sZk^a-(n+δ)k
$$

In the steady state:

$$
k=k^*
$$

$$
k^*=\left(\frac{sZ}{n+δ}\right)^{1/(1-a)}
$$

The question has to do with the time dimension in Z. Time enters the final expression if we substitute Z with what we found above, but I'm not sure what to make of this.

$$
k^*=\left[\frac{sZ(0)e^{gt}}{n+δ}\right]^{1/(1-a)}
$$

Surely there's something this neophyte is mixing up. I thought that in a steady state capital per worker remains the same.


texts: Proving the existence of Nash Equilibrium using alternate approaches

texts:
Most of the standard books/papers/reading materials prove/state the existence of a Nash Equilibrium by appealing to Sperner's Lemma, or to Brouwer's/Kakutani's FPT. However, I've recently come to know that the existence can be proved in other ways, although I wasn't able to find any relevant material regarding the same.

My question is, that is it really possible to prove the existence of a Nash Equilibrium using some other result(s)?

I would really appreciate any kind of help.


texts: Why would banks not want to lend, under Federal Reserve's Main Street Lending Program?

texts:
The Fed is paying 95% of the loan, so why would the banks be scared of lending?
Even if the bank loses their 5% because they partaked in Fed's Main Street Lending Program, can't the Federal Reserve or US Treasury can bail out and rescue the bank?

The Trump Administration Says a New Bailout Program Will Help 35 Million Americans. It Probably Won’t. — ProPublica

  Banks Might Not Lend

  Another problem is the mechanism by which the program will be implemented: through banks.

  The Federal Reserve doesn’t normally lend to nonfinancial companies. So, as with the Paycheck Protection Program, banks will take on the responsibility of studying the finances and prospects of each business that wants a Main Street loan and decide whether to approve it.

  To protect taxpayers and incentivize the banks to make good loans, the program requires banks to keep between 5% and 15% of the debt — and thus a portion of the risk — on their own books. But that clause also deter banks from participating.

  Putting their own money on the line could be an obstacle, said Christy Hester, director of growth and development at the Independent Bankers Association of Texas. “It means they’ve got accounting and reporting requirements,” she said. “Just setting up the accounting side of that and the servicing side of that, if it’s not already set up, that’s a pretty big burden for a small community bank.”

  The Small Business Administration, which is administering the lending program, has said it will disclose the names of companies that got loans — just not yet. News organizations are suing to stop the delay.

  The Main Street program compensates banks by allowing them to charge an origination fee of up to 1% of the loan, plus an annual servicing fee. Because it’s so difficult to assess the risk of lending money in the climate of pandemic-induced uncertainty, that might not be enough.

  It’s not surprising that banks would prefer to receive higher fees and take on less risk. But it does mean that running the program through the banks could slow things down.

What Is the Federal Reserve Main Street Lending Program? - SmartAsset

  More specifically, once your company gets its loan, the Federal Reserve will buy up 95% of the loan from the bank, leaving just 5% with the bank that originated the loan. The term of these loans is four years, and amounts generally range between \$1 million and \$25 million. These loans cannot be used to pay off any other existing debt the borrower has.

  The Federal Reserve will be purchasing up to \$600 billion in loans.


texts: In order to make an econometric model for explaining the evolution of the US Real GDP, does it make sense (from an economic point of view, not from a statistical one) to include CPI (as a proxy for inflation) among the regressors?


texts: Why does the Loanable Funds Market model use the real interest rate instead of the nominal interest rate?

texts: As far as I understand, the majority of loan contracts specify a nominal interest rate, NOT a real interest rate. So a hypothetical loanable funds markets would have people suggesting potential borrowers different loan contracts with different nominal intrerest rates.


texts: Showing that a transformation is measure preserving

texts:
Note: This question is related to this question about the construction of stochastic processes. Specifically, it relates to the transformation $\mathbb S: \Omega \rightarrow \Omega$ that is mentioned. The following is an example to help understand such transformations. If such transformation are measure preserving, then the distribution function of $X_t$ is identical for all $t \geq 0$.

If we suppose that $\Omega = [0,1)$ and that $Pr$ is the uniform measure and that
$$
\mathbb S(\omega) =
\begin{cases}
2 \omega & \omega \in [0, 1/2) \\
2 \omega - 1 & \omega \in [1/2, 1),
\end{cases}
$$
how would we show that $\mathbb S$ is measure-preserving?

It definitely suffices to verify this property for just the open intervals in $\Omega$. But trying to so explicitly for an arbitrary interval $(a,b) \subset \Omega$ is complicated by the fact that it's hard to say more than $\mathbb S((a,b)) \subset [0,1)$ when $(a,b) \subset [0,1/2)$ and that again
$\mathbb S((a,b)) \subset [0,1)$ when $(a,b) \subset [1/2)$. Given this, what is an easy way to go about arguing that
$\mathbb S$ is measure-preserving?


texts: What is the difference between a loan and an investment?

texts:
IMF, WB, ADB, IDB, AIIB are known to give loans. On the other hand, China is said to be investing in Pakistani project termed as CPEC.

What is the difference between these two terms in these two particular cases?


texts:
Why does the narrowing of trade deficit cause an increase in bond prices?
I do understand that narrowing of trade deficit leads to narrowing of capital account surplus. Also, investor confidence rises which might push the demand for bonds high and cause an increase in bond prices?

But is there any other reason?


texts: Incentive differences payroll and income tax

texts:
Do payroll and income tax create different incentives? Is there any difference at all economically speaking?
I suppose different tax deductions and tax rates may or may not apply. If so, what deductions, rates. Are there any books/research on the topic?


texts:
I'm looking for economic data on China's main sectors (output, factor prices etc). I haven't really seen anything with a long sample -- with the possible exception of Cheremukhin/Golosov/Guriev/Tsyvinski (2015). The Economy of
People’s Republic of China from 1953.

Does anyone know if there are any good sources available? thanks.


texts:
How would we expect US GDP to be affected by oil prices dipping into the 30-50 USD/bbl range?  If you need to make additional assumptions to answer this question, please note these, but still answer the question.

I would expect that this would lower the cost of a major fundamental input and therefore increase the US GDP dramatically.  The US is both the largest producer and consumer of oil.  However, the US produces more oil these days from more expensive sources (shale) -- so perhaps this is a naive assumption?

This article suggests a slight increase -- but perhaps a drop larger than $10 would change this analysis?


texts: Which think-tanks on economics do you use to keep up with the news?

texts:
Whenever I have spare time, I like to go to Bruegel site and check their section on publications in macroeconomics. Here I usually find small publications of 20 something pages. The size is just about right. It's not as difficult as some papers, but it has as much content as one. For me it strikes the exact balance between a small article in the newspaper and a scientific paper.

I was wondering which think-tanks, or which other sources for this type of publications, do you use?  And why?


texts: Understanding the shape of a Marginal Cost Curve

texts:
My class IB has just discussed allocative efficiency and hence consumer and producer supply. They explained the concepts with a diagram like this:

It all made perfect sense to me until it was mentioned that the supply curve can also be seen as a marginal cost curve. If this is the case, I don't understand why it is only sloping upwards. I know that marginal cost curves (at least at short-term) look something like...
But the curve in the first diagram is different.

Is is an oversimplification of a real marginal cost diagram, or am I missing something?


texts:
Which industries reduced the most in the USA as a result of outsourcing and imports?
Maybe textiles is one of them. I heard about a rust belt. Which ones are the others?


texts:
I have data of total exports of fish from my country in the time period 2010-2020. Since our currency (NOK) has gotten weaker to the currencies we are trading with, we have gotten a lot more value from our exports the last decade.
I have made data who shows how much we have earned from every month the last year. To get precise data for further analysis, I have taken the total value from our exports and divided it by the quantity we have exported.
I want to remove the seasonality of the data. For an example, we will export more every october then january.
This is what I have done:
library(rio)
library(ggplot2)
library(forecast)
library(tseries)
library(tidyverse)
library(zoo)

VM = value/quantity of our exports
data_ma = ts(na.omit(data$VM), frequency = 12)

decomp = stl(data_ma, "periodic")
deseasonal_cnt <- seasadj(decomp)
plot(decomp)

adf.test(data_ma, alternative = "stationary")

Result shows p-value at 0.04
Acf(data_ma, main = '')

Pacf(VM_ma, main = '')

I now want to remove the seasonality, but the I dont know what to do with the ACF and PACF tests as there is so much lags. Can someone please help?
Data:
https://drive.google.com/file/d/17QEiXrV8Zvx5IrIFjBbQGtpODu6ktT8o/view?usp=sharing


texts: Repeatedly playing an equilibrium in a repeated game

texts:
What is a formal proof to this known fact about repeated games?

  The situation in which, in every time step, the players play a Nash equilibrium in the basic game unconditioned on history, is a Nash equilibrium in the repeated game.


texts: How is the currency value estimated? Why India has lowest prices to dollar? For example if you buy bread in India it will cost you 1 dollar and in USA 5 dollars


texts: What happened to the money multiplier after QE?

texts:
QE meant that the monetary base increased dramatically, yet we don't see such a large reaction in money supply (I am thinking of M4 for the UK) nor in inflation. Why is this money not being lent out? Are banks keeping large excess reserves for fear of a crash?

I know this is a quite common question but I still don't understand what the accepted answer is here.


texts:
I'm trying to define which hotel offers the best value.

Let's say we have two hotels - A and B.

For A, you pay $10 a night and the rating for the hotel is 9.8.

For B, you pay $8 a night and the rating for the hotel is 9.6.

So for A, you pay $2 more and get one with a higher rating of 0.2. But is it the better value?

How would you solve this?

Thanks!


texts: (Evolutionary Game Theory) Argue informally there can no longer be an ESS in which only b is played

texts:
Here is a problem in evolutionary game theory: (So the term I am using should be familiar for people in this field)

The game is called 'Clever Mutants' which is a symmetric two-player game:

For this game, I have managed to find three symmetric Nash Equilibria.
They are $(a,a), (b,b)$ and $((1/4,3/4),(1/4,3/4))$, in which the first two are evolutionary stable (ES) and the last one is not.

  Now, suppose that mutants have a 'secret handshake'. That is, suppose
  that mutants can recognize other mutants and play different pure strategies against normal
  and mutant opponents. For example, a mutant could play $b$ against another mutant but
  play $a$ against a non-mutant. Argue informally there can no longer be an $ESS$ (Evolutionary Stable Strategy) in which
  only $b$ is played.

I don't know how to argue for that statement, even informally. Can someone help me, please? Thanks so much.


texts: Nash Equilibria in Target Destroying-Guarding Game

texts:
Army A has a single plane which can strike one of three possible targets, A, B and C. Army B has one anti-aircraft gun that can be assigned to one of the three targets to guard it. The value of each target, $v_k$ is $v_A>v_B>v_C>1$. Army A can destroy the target only when it is unguarded and A attacks. Army A wishes to maximize the damage whilst Army B wishes to minimize the damage. Find all Nash Equilibria.

I tried formulating the game into a $3*3$ payoff matrix game, by giving Army A $0$ if the target it aimed at was guarded and the value of the target if it was unguarded.
Similarly, for payoffs of Army 2, I assigned $-v_k$ added to the valuations of other two target which were not destroyed, if Army A succeeded in destroying the target and $v_A+v_B+v_C$ if Army A failed to destroy any target, i.e., by aiming at a guarded post.
Given this setup, I found that there was no Pure Strategy Nash Equilibria in the game. I do not know how to proceed with the Mixed Strategy Nash Equilibria, if any.

I'm very doubtful of the approach that I tried to employ. I would really appreciate a little help!


texts: theoretical macroeconomic topic for bachelor project?

texts:
A lot of my peers are writing empirically oriented bachelor projects, where they take some topic ("tax evasion", "pollution", "ricardian equivalence", "liquidity trap", "fiscal multiplier") and look at the data, and seek to explain the mechanics behind the data by use of models. So it's mostly empirical and investigative, with a bit of theory to support the arguments made.

My question is, what would be a good idea for a purely theoretical bachelor project in macroeconomics? Is there something like that which would be a good idea for a bachelor project, as opposed to an empirical study?

The reason is that I have a very strong background in mathemathics, so I would like to use that to my benefit and write a technical project, but I am not sure what kind it would be.


texts: Publishing fixed and random effects in one model

texts:
I am a health economist working with panel data for a paper I am working on, I use Hausman tests to determine if I should use fixed or random effects estimators in my analysis. For some outcomes random effects are supported, for others fixed are. For the main table of results in my paper would it be acceptable to report the results of the fixed effects models for those outcomes that the Hausman suggests should use a fixed effects estimator and the results of the random effects estimator for those outcomes that a random effects estimator is suggested for?

Are there any examples of this approach in the literature?


texts: Calculating Nash Equilibrium prices for Bertrand duopolists

texts:
I am attempting to solve the following problem.

Suppose that firms' marginal and average costs are constant and equal to c and that inverse market demand is given by $P = a - bQ$ where $a,b > 0$.

Calculate the Nash Equilibrium prices for Bertrand duopolists, which choose prices for their identical products simultaneously.

Now I attempted to solve this problem and got $P_1 = P_2 = \frac{a+c}{2}$ where $P1, P2$ are prices.

My professor lists the answer as $P_1 = P_2 = c$.

Can someone please tell me where I messed up? Thanks!


texts: What made The Wörgl Experiment successful?

texts:
Background:

  In 1932, in the midst of the Great Depression, the small town of Wörgl in Austria successfully experimented with its own local currency (in the form of a stamp scrip) ...  They not only re-paved the streets and rebuilt the water system and all of the other projects on Mayor Unterguggenberger’s long list, they even built new houses, a ski jump and a bridge ... every one of the schillings in stamp scrip created between 12 and 14 times more employment than the normal schillings circulating in parallel. (Source)

I would like to understand better what made the currency successful. The article offers this short explanation:

  Because a stamp needed to be applied each month (at 1% of face value), everybody who was paid with the stamp scrip made sure he or she was spending it quickly, automatically providing work for others.

What does it mean to "apply a stamp each month"? Does the scrip lose 1% of its face value every month? Is that the incentive for spending? Isn't that economically the equivalent of a normal currency with high inflation? Why was this experiment so successful, and if it truely was, why haven't we seen more experiments like it?


texts:
I have always thought that variation in regressors are a good thing. In fact, one can show that the precision of the estimated coefficients is increasing in the variance of the regessors.
I have also heard that simple randomized controlled trials (RCTs) are very good to gauge causal effects. Consider the following regression:$$
Y_{i}=\alpha+\beta X_{i}+\epsilon_{i}
$$ where $X_{i}$ is a dummy variable that takes on the value 1 if the individaul $i$ is treated and 0 otherwise. My question is as follows: in this setting, $var(X)=p(1-p)$, This value takes on a maximum at 0.25. I do not think this variance is that 'large.' Can someone please clarify if this is indeed then a shortcoming? Given that we do not observe that much variation at all, how are we able to gauge so much ? Is it because the variation is random? Thanks!


texts: Could you recommend literature on the economy of ancient rome?

texts: As the title states, I am looking for some sources on the economy of ancient Rome. To be more precise, I am interested mainly in the republican era (509BC - 27BC). Thanks.


texts: Updated International patent protection index from Park (2008)

texts: Park (2008) provides an international patent protection index between the years of 1960-2005 with 5 years intervals. I was wondering if an updated version of such an index exist?


texts: Intuitive explanation of $S(p,w)\cdot p=0$

texts:
Can anyone provide an intuitive explanation of why the Slutsky matrix right multiplied by the price vector yields a zero matrix?

I know this is true but I do not really understand why it is true. Can anyone help here?


texts:
Highly contrived example with 3% reserve ratio:
Lets say I deposit $100 in a bank.
Bank loans $97 PersonA, keeps $3 as reserve
PersonA buys something from PersonB for $97
PersonB deposits it in Bank, bank loans 97%of $97 to PersonC, keeps 3% in reserves.
PersonC buys something from PersonD for $94
This cycle goes on until until 100/0.03=$3333 is in deposits,
$3233 in loans and $100 in reserves.

Is it accurate to say, if a bank starts with $100 as reserves, they can loan out $3333 assuming reserve ratio is 0.03%?
In the above example, if everyone repays the loan ($3233) can bank lend it again? That doesn't sound correct. Where am I going wrong here?


texts:
Usually the definition of necessary goods is the income elasticity between 0 and 1. But can a good with -0.5 income elasticity be considered necessary? There is this link that says that all the inferior goods are necessities:
“Lastly, note that all inferior products are clearly necessities, but necessities include normal products with elasticities between zero and one.”


texts: Efficient Scale is necessarily equal to zero if $MgC(q=0) >$ Fixed Cost?

texts: Assume the marginal cost is strictly increasing and always larger than the fixed cost - in particular, at $q=0$ (no production). Does it imply that the efficient scale is equal to zero? (Define efficient scale as the non-negative level of production q that minimizes the average cost.) Assume $q$ is one-dimensional and all cost functions are continuously differentiable.


texts: A utility function that gives a regressive tax rate

texts: I see some discussion that the reasoning for the construction of a tax rate function is the utility function. Whould $u=\ln\ln w$ function where $u$ is the utility and $w$ the wealth give a regressive tax rate?


texts: Cointegration in stock market between different market places

texts:
Hi guys im interested in cointegration in stock market between Brazil, USA, London, China, India, Argentina and Hong Kong.
Since I want to  compare each country’s index to the BR index, how do i do to to convert all prices into BRL?  Should i use the variation, close or adjusted close?


texts: What exactly is "quantity of money per unit of output"?

texts:
When making the case about inflation being monetary phenomena, Milton Friedman shows a graph where "quantity of money per unit of output" move together with CPI. What is "quantity of money per unit of output"? Is it real GDP?
Update:
Link to presentation


texts: Existence of solution to maximization problem

texts: I'm a first year grad student and we're learning about the utility maximization problem and the producer's problem now. We have been assuming that a solution to these problems exists. But every now and then there's an exercise problem asking us to show that a solution exists. I have encountered once that "A maximization problem on a compact set has a solution". I wonder if there's any good reference on this? We're using MGW's Microeconomic Theory as our textbook; I thought I could find something in the appendix but I failed.


texts:
I have a question in regards to the use of Lagrange multipliers in macro models.

I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) Unindexed. For example, in order to solve the Ramsey model in discrete time, in the simplest possible version, one would write the Lagrange as follows:

$$
L=\sum_{t=0}^{\infty}\bigg\{\beta^t u(C_t)-\lambda_t[C_t+K_{t+1}-(1-\delta)K_t-w_t-r_tK_t]\bigg\}
$$

and here the Lagrange multiplier is indexed in time and written as $\lambda_t$.

But when solving a simple lifetime consumption problem for an individual, one would write the Lagrange as follows:

$$
L=\sum_{t=0}^{\infty}[u(C_t)+\lambda(A_0+Y_t-C_t)]
$$

and here the Lagrange multiplier is not indexed in time, so we write it just as $\lambda$.

Hence, my question is when is it appropriate to use each type of multiplier?

Thank you.


texts:
I need to show that the residuals from the regression of $x_{it} - \bar x_i $ on a constant and $\bar x_i $ is just $x_{it} - \bar x_i $ itself.

By stnadard OLS regression results, in the simple regression

$$y_t = \alpha + \beta z_t + v_t, \;\;\;t=1,...,T$$

we have that

$$\hat \beta = \frac {\sum_{i=1}^T (z_t - \bar z)(y_t-\bar y)}{\sum_{i=1}^T (z_t - \bar z)^2}$$

and

$$\hat \alpha = \bar y - \hat \beta \bar z$$

So the residuals are

$$\hat v_t = y_t -(\hat \alpha +\hat \beta z_t)$$

Then, substitute for your particular $y_t$ and $z_t$ in all the above.

However, since my $z_t$ is $\bar x_i$ ($x_{it}$ averaged over time), what is the value of the average of $\bar x_i$ i.e $\bar z$. Do I average over time again? (in which case the average would be itself). Or do i average over individuals i? (so that the average of $ \bar x_i$  is $\bar x$?) I need this for the numerator of $\hat \beta$


texts:
I want to decompose stock index movements. I know the estimated  12 months earnings growth rate ($g_1$), estimated long run earnings growth rate ($g_2$) and the index value.

I am about to use two-stage dividend discount model:

$$P=\frac{1+g_1}{1+r} + \frac{\frac{(1+g_1)\cdot(1+g_2)}{r-g_2}}{1+r},$$

which can be simplified as:

$$P=\frac{1+g_1}{r-g_2}.$$

The percentage change is then:

$$\frac{P(t+1)}{P(t)}-1= \frac{1+g_1(t+1)}{1+g_1(t)} \cdot \frac{r(t)-g_2(t)}{r(t+1)-g_2(t+1)}.$$

The problem here is that I don't know $r$. Variable $r$ cannot be solved because I am considering stock index, not a single equity. What would be the best way to decompose stock market movements using the information I have?


texts: If the government builds a bridge, how do we know it's the best possible usage of real resources (i.e. steel, labor, etc) at the time?

texts:
I would assume the "goal" of any economic activity is to make the largest amount of people the "happiest" -- i.e. Pareto Efficiency or sum-total 'utility.'
How do we know if this occurs? Either before, during, or after construction?


texts: How to calculate expected revenue in reverse auctions (procurement)

texts:
I'm trying to find the correct formula to calculate de expected revenue of a reverse auction, properly, a second-price sealed-bid procurement auction to identify the lowest cost supplier.

Prices are private, independent, and uniformly distributed between 50 to 100. no bidder will go below 50. And the number of bidders are 10

We know that it does not matter whether we use a first-price or a second price auction - the expected final price is the same.

The formula E(p)=(n-1)/(n+1) stems from the fact that it is the valuation of the (n-1)th bidder that determines the expected price.

Now, this is a reverse auction, so the expected price stems from the ordering of bids.  In a reverse auction, the price is not dependent on the value of the (n-1)th bidder, but on the second bidder. So we get that instead,
E(p)=2/(n+1).


texts: Is there a difference between deadweight loss and welfare loss?

texts: I've heard these two terms crop up quite frequently, and suspect they may be interchangeable. Deadweight loss - I'm sure I've encountered this in tariff evaluation; for effects of indirect taxes, I've seen textbooks that use deadweight loss. Welfare loss - I've seen textbooks refer to the social costs of profit-maximising monopolies who set prices higher and output lower than that of perfectly competitive firms as welfare loss. Is there really a difference between deadweight loss and welfare loss?


texts: Print money to buy and nationalise companies

texts: If there's a water company worth £4 billion making £500 million a year profit, the government "prints" £4 billion and buys the company, then every year "burns" half the profit and reinvests the other half.  Would this work or create damaging inflation in the economy?


texts: Use MLE to calculate exponential distribution parameter

texts:
The question is from A Guide to Econometrics by Peter Kennedy (5th edition, page 504.)

Suppose you have a random sample of workers, from several localities,
who have recently suffered, or are suffering, unemployment. For those
currently employed, the unemployment duration is recorded as $x_i$.
For those still unemployed, the duration is recorded as $y_i$, the
duration to date. Assume that unemployment duration w is distributed
exponentially with pdf $\lambda e^{-\lambda w}$. Find the MLE of
$\lambda$.

The official solution is as follows:

I am not sure about the solution, specifically, the PDF of $y_i$. It seems for those who are still unemployed, the probability of observing them unemployed for $y_i$ length is:
$P(Y = y_i) = \int_{y_i}^\infty P(w)P(y|w)dw$
where $P(w) = \lambda e^{-\lambda w}$, and $P(y|w)=1/w$, because the events are evenly distributed. In other words, the PDF of $y_i$ is the probability of the entire length being $w_i$, multiplied by the probability of observing a length of $y_i$ conditional on $w_i$. The integral is from $y_i$ to $\infty$ because observing a length of $y_i$ means the total duration should at least $y_i$.
Any thoughts on which answer is correct? Thank you!


texts:
Problem
Given demand $D(p)=A-ap$, and $A,a>0$ and a fixed price $0<p_1<A/a$ by some company.
My solution so far
CS is
$CS=\int_{p}^{A/a}D(p)dp=\int_{p}^{A/a}(A-ap)dp=\frac{1}{2a}(A-ap)^2=\frac{(A-ap)^2}{2a}$
Problem
Find the CS now with a tax $p_1+t>A/a$
My solution so far
Just let $p_2=p_1+t>A/a$. Insert $p_2$ into the previous result since the integration would be the same and we get
$\frac{(A-a(p+t))^2}{2a}$
Main Problem
Find the DWL
My solution so far
I get the general formulas
$(p_2-p_1)p_1-\int_{p_1}^{p_2}A-ap\;dp$ and $1/2 \cdot (p_2-p_1)\cdot (Q_1-Q_2)$
And then the answer with the second formula that
$1/2*((p+t)-p)*((A-ap)-(A-a*(p+t)))=1/2\cdot t(a(p+t)-ap)$
Is this approach correct throughout the taxation influence on CS and the DWL?


texts: How could Pablo Escobar earn so much money?

texts: I read it's about 30 billion. But I read there were 6 million users in 1985. Let's say he gets 10 percent of the sales price, it means each person paid 50000 dollars for cocaine. It sounds way too much. Any calculations how they reached this amount?


texts: The average variable cost will generally fall as output increases from zero to the normal capacity output due to the occurrence of increasing returns. But beyond the normal capacity output average variable cost will rise steeply because of the operation of diminishing returns.


texts: How do you reconcile the Law of Increasing Opportunity Costs and Economies of Scale?

texts:
Marginal cost of production always increases, while marginal benefit of production decreases. As far as I understand, that is why the supply curve has positive slope and the demand curve negative slope.

I don't understand, though, how this can be compatible with the "economies of scale" everyone is always talking about. One theory says increased production should increase marginal opportunity costs, while another says it should decrease marginal opportunity cost. So, what is actually going on?


texts: How would a firm increase price in such a scenario?

texts:
I have the following question: If a firm with a lower marginal cost wants to increase prices in a homogenous goods industry in which demand is perfectly inelastic and supply is in excess, what should it do ?.
I'm thinking along the following lines: In a homogenous goods industry, the only differentiating element is the price of the product. By setting a lower price near to its marginal cost, the firm can grab the entire demand for the product ( the demand wont increase but the demand that otherwise went to other firms could be supplied by this firm, assuming no capacity constraints). After the excess supply from inefficient firms are removed from the market, the firm can then reduce its quantity and therefore reach a higher equilibrium price. Is this reasoning conceptually correct ?.
I also have this follow-up question, if the overall industry demand is inelastic what can I infer about the firm level demand ?. Can any inference be made from the question on the degree of competition in the industry ?. Thank you!.


texts: What happens in a bartering system when a resource is plentiful but cannot be paid for?

texts:
Here is a hypothetical scenario:

Let's say there are two tribes which barter goods. Tribe A has an fairly large amount of fish, but no bricks. Tribe B has an extreme abundance of bricks, but no water in their land to go fishing.Tribe A trades 5 fish with Tribe B for 100 bricks.  This arrangement exists peacefully for many years.

At some point Tribe A creates tools to create bricks and no longer requires the bricks of Tribe B. Tribe B still requires the fish of Tribe A but now has nothing to pay for the fish.

What would happen in this instance? Is there historical evidence in which a similar scenario has occurred? Is there an economic theory that explains what will happen?


texts: Is undervaluing environmental impact a subsidy?

texts:
This is in relation to a recent question on skeptics which to me seems to broil down to whether you accept that form of accounting, i.e. consider undervaluing environmental impact a hidden subsidy.

So, is it this a common or uncommon practice in economics research? Or is it somewhere in between, e.g. does it vary with the school of thought?


texts: How big is the consumer surplus for typical consumer goods?

texts:
Economic transactions happen when both think it will benefit them - that is, when there are gains from trade on both sides.  But that says nothing about the size of that gain.  If you're a consumer, then the amount you value a consumer good minus the cost of the good is called the consumer surplus, and in principle it could be arbitrarily small.  You could buy an apple for a dollar, which you value at a dollar and ten cents, and thus your consumer surplus would only be 10 cents.

My question is, what is the typical consumer surplus of consumers goods as a percentage of their price?  If it varies by the type of consumer goods, I'd appreciate an answer giving percentages for different types of goods. Like groceries, clothing, cars, etc. Is there data on this?

I just want to get a rough idea of whether the percentage is typically low or high.  I have a feeling that the percentage is a lot lower than most people would expect.


texts:
The production of 'goods and services' and 'innovation' is the usual answer. I feel that doesn't really answer the question.
These things can be traded for wealth but they don't generate new wealth. They essentially take wealth from others and depend on there being wealth already. At least that is how I understand it.

My question is, how is the world so much more well off than it was a century ago? (Please don't mention the industrial revolution)

How did China raise a million people out of poverty without plunging another million into poverty?

How does trade create wealth?


texts: Book recommendations: National income accounting and IS-LM model

texts: Basically I'm interested in solving tricky thought provoking exercises based on National income and on IS LM model. I've read mankiw but it didn't satisfy my needs.


texts:
Standard production functions are Cobb-Douglas, CES, Leontief.

The most exotic production function I have seen is the Ethier production function.

I am wondering whether there is a book/list of other exotic production functions. i.e. production functions with heterogeneous capital, integrals, etc.

I could not find it doing a google scholar search.


texts: difference between demand for money and credit

texts:
As far as I understand in both cases we are seeking money that we don't have and would like to borrow.

That being said what I find even more misleading is the fact that as a nominal interest rate increase credit increases.

If anyone could clarify this that would be absolutely amazing.


texts:
I was wondering if anyone could give me some advice / lectures / introduction to stochastic optimization that could be applied to monetary policy. I have heard of the Dynamic stochastic general equilibrium modeling (DSGE) but I think that this is more linked to the consumer theory and not really to monetary policy. Correct me if I am mistaking ...

Also, I am familiar with convexity and linear optimization, but a little bit shaky when it comes to stochastic optimization. Therefore I would welcome the opportunity to also get some recommendations on that if you have some, in order to deepen my understanding of it !


texts: In what kind of economic environment would the cliche of "keeping money under the mattress" be warranted?

texts:
I'm trying to apply (ideally empirical-backed) economic theory to an age-old cliche.

We must be very articulate about the assumptions, because if it's a total collapse of the dollar, then that money would just be as useful as tinder. Maybe it would be warranted if there was a run on the banks but the dollar still retained value. It's a difficult call though.

Question

What must we assume in terms of underlying economic conditions for someone with a giant pile of cash under their mattress to be favored over someone with their savings in a bank?


texts: Are there any analysis of what is the net benefit of NASA program to US economy?

texts: I am looking for some study that tries to calculate whether the NASA program on a net basis benefits the US economy. The program is very expensive, but it generates lots of patents, research, jobs and other things that must have some value for the US economy.


texts: The most frequent causes of economic downfall?

texts:
In retrospect what are the major parameters, most frequently causing countries' economy to reduce its size and/or growth.

Global Financial Crisis?
Regional instability?
Local Banking Sector failure?
Long-term inefficient governmental fiscal, civil, law policies, corruption?


texts:
Are there any resources available that provide typical books or accounts for the farming or indeed other industries?

Something that would list, employee numbers, wage bills, expenditure income (sales vs subsidies) and so on in terms understandable to a layman?


texts: If the company were to buy back all their shares, does that mean the company would own itself?

texts: If a publicly traded company buys back all it's shares from the public, majority holder and every last person that owns it's shares who would own the company? Obviously, it wouldn't be a normal privately owned entity because all it's shares are owned by the company itself hence the company owns itself. So, who will act as the decision maker of the company and who will get the voting rights of the shares? Because a corporation is technically a person but not a physical person at the same time.  it has the necessary rights to own itself but  it won't be able to think and make decisions. So, how will such a company function?


texts: Won’t paying wages to temporarily unemployed due to Coronavirus result in inflation?

texts: UK government promises to pay 80% of wages for people unemployed due to coronavirus. I am not economist, so I am probably missing something, but shouldn’t paying wages to unemployed due to coronavirus result in inflation due to decreased products and services created by economy? Is that just a mechanism to redistribute wealth?


texts: Compute variables in perfect competition, in monopoly and duopoly

texts: There are a given demand and MC value. How could I calculate quantity, price, and profit from these values in case of perfect competition, in monopoly and duopoly(Cournot and Stackelberg)?


texts: Computing pure strategy Nash equilibria in finite games

texts:
I am trying to compute the (pure strategy) Nash equilibria of some discrete auctions.

More precisely, let us define the strategy of each player as a function mapping from every valuation that they might have to their bid (i.e. the 'bidding function'). Let us suppose that each player's valuation is drawn from some finite set and that their bid must belong to this same (finite) set. I am interested in finding the set of bidding functions, one for each player, such that each player's bidding function is optimal given the bidding functions of all the other players.

If it makes things easier, we can assume that valuations are symmetric (i.e. each player's valuation is generated by the same probability distribution) and that there are only two players. Ideally, however, we would proceed without these simplifications. I am interested in computing the equilibrium for the first price sealed bid and all pay auctions (in the latter, you pay your bid even if you lose; in the former, you don't.)

I have considered writing down the discrete auction game in normal form and finding the equilibria using software like Gambit. However, this would seem tricky since the strategy space is so large.  For example, if a player chooses bids from $ \{1,...,10\} $ and draws values from $ \{1,...,10\} $, then already they have $10^{10}$ pure strategies.

Does anyone have any ideas about how to proceed here?


texts: Controling the level of hours worked in the multiplicative formulation of KPR

texts:
KPR preferences are generally given by

$$ \frac{c^{1-\sigma}}{1-\sigma} \cdot v(l)$$

with $l$ being leisure. Let's focus on the case where $\sigma \in (0, 1)$, where we know that $v(l)$ must be increasing and concave. Let total time be $T$, and denote $n$ by working hours. The standard problem then is

$$ \max_{n\in[0, T]} \frac{(wn)^{1-\sigma}}{1-\sigma} \cdot v(T-n) $$

An interior solution requires

$$ v(T-n) = v'(T-n)\frac{n}{1-\sigma} \tag 1$$

One increasing and concave function would be $v(x) = \frac{x^{1-\gamma}}{1-\gamma}$, $\gamma \in (0, 1)$. This yields

$$\frac{T-n}{1-\gamma} = \frac{n}{1-\sigma}$$

or

$$ n = (1-\sigma)\frac{T}{1 - \gamma + 1 - \sigma} $$

Now, generally, we should be able to pick the level of working hours - for each level of IES ($\sigma$). So let's fix $\sigma = 0$, the case of risk-neutrality, and we yield

$$ n = \frac{T}{2 - \gamma} \tag 2$$

As $\gamma \in (0, 1)$, that means that we have no fully control about the level of working hours: We cannot get that $n<0.5$ is an optimal choice with these preferences.

Note that a constant factor in $v(l)$ wouldn't help either, that would just drop out in (1). What am I missing - how can I control the level of working hours better in the multiplicative setup of KPR? That is, where $U = U(c, v(l))$ and not $U = \log c + g(v(l))$.


texts: Seemingly simple consumer theory problem

texts:
A function $v: \mathbb{R}^K_+ \xrightarrow{} \mathbb{R}_+$ is is said to be a valuation function if

The value of function $v$ at $x = \textbf{0}$ is $0$: $v(\textbf{0}) = 0$
$v$ is continuous on the domain $\mathbb{R}^K_+$, strictly increasing and strictly concave on $\mathbb{R}^K_{++}$
For any $p \in \mathbb{R}^K_{++}$, the set $A(p) = \{x \in \mathbb{R}^K_+| v(x) \geq p \cdot x\}$ is compact, the set $A^*(p) = A (p)-\{\bf{0}\}$ is nonempty and lies inside $\mathbb{R}^K_{++}$.

Show that a if $v$ is a valuation function, for every $p \in \mathbb{R}^K_{++}$, for every $x \in \mathbb{R}^K_{++}$, there exist $t>0$ small enough that
$$
v(tx) > p\cdot tx
$$
In other word, for every $p>\bf{0}$, if you zoom the set $A(p)$ sufficiently close at the origin, it contains all the points near the origin in first quadrant.
Remark 1: This is the problem I reduce from a microeconomics problem I am working on.  I want to extend the Inada condition to multivariate case in a topological way. My prototype function is $f(x,y)=x^{\alpha}y^{\beta}$ where $\alpha+\beta <1, \alpha>0,\beta>0$.
This family of functions satisfy (1),(2),(3) and the property I want to prove, say (4). I am trying to show either (1),(2),(3) => (4) or should I include (4) as an additional axiom?
Remark 2: A few examples of $A(p)$

An example of A(p) when p is small

An example of A(p) when p is large

(4) is demonstrated by the geometric fact that the contours approach vertical and horizontal axis near $0$.


texts:
Are there any good textbooks/books for capital flows?

I have found some from searching online, but they are a bit older:
International Capital Flows by Feldstein in 1999
Capital Flows and Crises by Eichengreen in 2002

I am wondering if there is anything out there that is more recent?


texts: Download original spreadsheet from Reinhart-Rogoff "Growth in a Time of Debt"

texts:
I want to access the infamous Excel spreadsheet from Reinhart and Rogoff's 2010 paper "Growth in a Time of Debt". I see the paper here, and in the 2013 errata I see a link to the raw data, however I'm not an economist and I don't know how to find the data in the link (it looks very comprehensive). Also it doesn't have the spreadsheet, and I'd like to reproduce the error in that.

How do I find Reinhart and Rogoff's original 2010 spreadsheet from "Growth in a Time of Debt"?


texts: Why would a government choose to impose a price floor for agricultural commodities when subsidies would prove to be more beneficial for not only consumers, but also the government itself, since they would not have buy up the surplus and then price it lower if they want to export it?


texts: If petrol/gas prices were locked down, how would normal consumers and the producers be affected?

texts:
Hey economics stack exchange! Congrats on getting to beta! I wanted to ask a question that was running through my head on a road trip earlier today.

Let's say a magic fairy grants a person his wish, and gas prices would instantly be solidified (locked) to their current state for the next five years. (I understand logistically how complicated this would be). It's currently about $1.63/gallon where I live.

So now gas prices is more like milk, and we can go into the future planning road trips, and commutes with more accurate budgeting for how much we spend on fuel.

But what would life really look like for consumers with fuel prices locked down? in 6 months? In a year? And the same for fuel producers - how would locked fuel prices affect their future operations and business?

Would it be possible for gas to exist as a fixed-price commodity?


texts: How does one find values of constants in a value function?

texts:
Problem:
suppose I have the following maximization problem:
\begin{align}
&\max_{(c_t)_{t \geq 0}}E_0\left[\sum^{\infty}_{t=0}\beta^{t}\ln c_t\right]\\[2mm]
\text{s.t.} \quad & k_{t+1}=A^{1-\alpha}_tk^{\alpha}_t - c_t\\[2mm]
& c_t \in [0,A^{1-\alpha}_tk^{\alpha}_t]
\end{align}
with $\beta \in (0,1)$ and $\alpha\in (0,1)$.
I know that I am supposed to “guess” the value function and I have this $V(A_t,k_t)=X+Y \ln(A_t)+Z \ln(k_t)$.
Derive the values of the constants.
This value function comes from bellman equation that is not given.
We are given this other bit:
$\ln A_{t+1}=\rho \ln A_t +\epsilon _{t+1}$ $\rho \in (0,1)$
My question: should I start off this problem by setting up a Lagrangian function and then calculating the values or no?


texts: Log-linear ordinary least squares specification coefficient loses its interpretation when we change an explanatory variable by a unit?

texts:
Ok, so something that's common to the econometrics literature is that we interpret the coefficients in OLS log-linear models like such.
To spell it out in the main body:
$ln(y_i)=\beta_0+\beta_1X+u_i \Rightarrow \text{if } \Delta x = 1, \text{then } \text{%}\Delta y \approx 100\beta_1 $
I think that this is a very bad approximation, although my reasoning is probably incorrect (although I do understand the derivation of why this approx holds).
Ok, so an aside:
$\frac{\dot{y(t)}}{y(t)} = g \Rightarrow ln(y_t) = gt + c $
It also follow that:
$y_{t+1} \approx y_t (1+g \Delta t) $
So here, if I plug in a change of t = 1, and let g = 1, y would be doubling with each unit change in t, and so we should approx y as 2^x instead of something of the form e^x. Of course, large-ish changes in x mess up the calculus.
However, isn't plugging in a unit change in t (in the econometrics textbook, x is t) what the econometrics textbooks are doing? A unit change in x -> 100% change in y (g and beta_1 are analogous, so g = 1 -> beta_1 =1) -> y approx doubles with each change in x -> y should be modelled as something of the form 2^x, not e^x, and there's a sizeable difference between the two, and so this contradicts that fact that the specification implies that y is in the form e^x (rather than 2^x).
I hope this makes sense.


texts:
Prove that Choice Coherence implies Independence of Irrelevant Alternatives (IIA).
From the definition of choice coherence, we have this:
A choice function c satisfies choice coherence if, for every pair x and y from X and
A and B from A, if x, y are in A and B, x in c(A), and y not in c(A), then y is not in c(B).
From the definition of IIA, we have this:
If A is preferred to B out of the choice set {A,B}, introducing a third option X, expanding the choice set to {A,B,X}, must not make B preferable to A.
The converse is not true (IIA does not imply choice coherence) since we can construct a counterexample, as per here:
C({x,y,z}) = {x}
C({x,y}) = {x}
C({x}) = {x}
C({y}) = {y}
C({x,y}) = {x,y}
Since IIA is the weaker assumption of the two, how can we show that choice coherence implies IIA? Thanks for your help.


texts: Why doesn't Aggregate Demand mean National Income whereas Aggregate supply is equal to national income?

texts:
Aggregate Demand is Basically

$$
AD = C + I + G + X - M
$$

Is not this national income Through Expenditure Method ?

Then why don't we treat AD equal to National Income ?


texts: What does "capital used as structure" means?

texts:
I'm in the progress of reading a paper and I came across the fragment below:

Second, we assume that producers rent machines from a capital stock. Capital can also be used as structures in both automated and nonautomated firms.

My question is: what "structures" mean in economics ? These are just buildings or the definition is broader ?


texts:
Consider a 2 player all-pay auction, bidding for $1.

Each submits a bid that is a real number, thus $S_i=[0,\infty)$. The player with a higher bid wins $1, but both players must pay the submitted bid.

Player $i$'s payoff function is:

$v_i(s_i,s_{j})=$

$-s_i$ if $s_i<s_{j}$

($\frac{1}{2}-s_i$) if $s_i=s_{j}$

($1-s_i$) if $s_i>s_j$.

Suppose player $j$ plays a mixed strategy in which she is uniformly choosing a bid between 0 and 1.

I am only interested in the expected payoff from player $i$'s bidding less than 1, because if $s_i$>1, he would win, but also incur a negative payoff.

My question:

Why is Pr$(s_i=s_j)$=0 for any $s_i\in[0,1]$ if player $j$'s mixed strategy is U[0,1]?

My confusion is: the PDF of player $j$ is 1 for any $s_j\in(0,1)$. So if I only consider $s_i<1$ and Pr$(s_i=s_j)$, how do I justify it becomes $0$?


texts: Is there an economic analysis of how piracy allows a product to take a hegemonic position?

texts:
There's an interesting situation with the likes of Photoshop, where the software being pirated actually increases its market usage, and the software becomes the de facto standard, in part due to software piracy.

In the instance of Photoshop for example, it's likely that people creating funny doctored ('photoshopped') images and spreading them via the internet, were using pirated Photoshop software.

Here's a Life Hacker article on it.

What it means, is that especially for a creative software like Photoshop, or Ableton (music production software), the developers shouldn't make their copyright protection too strict. It should be easy enough to crack so that people can actually use it, but pain enough to get people to fork out if they're serious enough.

My question is - is this a well researched phenomena in economics?

Is there an optimal either pricing strategy, or copyright protection strategy, that takes this into account?


texts: In the question about the minimum wage found here, I have heard several times that an increase in the minimum wage can, as one of several competing effects, "boost the economy" by increasing the income of some workers. Under what conditions could this happen, if at all? Are there any papers (peer-reviewed journal articles) out there that make this claim?


texts: Removal of tax excise on producers, will increase supply?

texts:
If the government removes an excise tax on producers, will their supply increase?

For example,

Price of gasoline is $2 a gallon
Producers are taxed at 50 cents per gallon by the government
Weekly demand is 400 million gallons per week at 2 dollars a gallon
Weekly supply is 300 million gallons per week at 2 dollars a gallon

In essence if a excise is removed from the producers, to make gasoline more affordable. Would their supply increase as they are paying less to produce a gallon of gasonline?


texts:
I don't understand why the price of oil futures went negative today.

News say it is because sellers cannot sell it. But, why don't they just hoard it until the coronavirus crisis is off?
Why don't speculators jump in and bring up the demand again to positive?
Alternatively, I would like to get paid for receiving a barrel of oil (I can keep it in my back garden) and then sell it in the future.


texts: Difference between double auction and continuous double auction?

texts: What is the difference between double auction and continuous double auction?  Sometimes I feel that they were types of two-sided auction but sometimes I feel as if they were two separate concepts.


texts:
I am supposed to solve the problem:

A 24-year-old man decides to invest 200,000 euros at a 7% annual interest rate to bring him a regular annual pension from 31 to 50 years inclusive. What will be the pension?

What I did was that I used the formula for the future formula of pension:

$$FV=A\frac{\left ( 1+i \right )^{n}-1}{i}\left ( 1+i \right )=200,000\frac{\left ( 1+0,07 \right )^{7}-1}{0,07}\left ( 1+0,07 \right )=1851960.514$$ and then I divided it for twenty years which is 92598.02

But that is incorrect. The correct solution is 28331.

Can someone tell me, where I made a mistake?


texts: Are that models that explain how companies become more efficient?

texts:
I'm trying to model/understand the following intuition:

Company makes a product
Product gets sold, company makes a profit
Company does something with the profit to become "better" at what they do: hire better people, improve their technology, etc
Company makes a better product

Most of the theories I've come across seem to assume companies operate at a constant efficiency. How do you model company improvements (both product and process innovations) that come from profits?

The broader question I'm trying to understand is - how to you measure/correlate/predict company improvements from profitability?


texts: In modern economics, what are the least restrictive conditions shown to theoretically achieve Pareto Efficiency?

texts:
In researching this question, I've come across plenty of sources that regurgitate intro econ textbooks that say markets equilibrate to Pareto efficiency in conditions of perfect competition (where specific and minimal definitions are also hard to find). I'm sure they're correct that this happens in perfect competition, but I've also read that various economists have simplified and minimized the conditions necessary for a market to theoretically reach pareto efficiency, but I can't find any details on those.

So what are the least restrictive conditions necessary for all markets that fit those conditions to theoretically progress toward a Pareto efficient equilibrium?


texts: To obtain the distribution/variance of two random coefficients

texts:
I want to estimate the distribution/variance of the ratio $WTP=\frac{\gamma}{\alpha}$. The problem is, both $\gamma$ and $\alpha$ are random coefficients.  In other words, both are random to begin with (please note that here their true values are random; this is different from the usual regression models where the true values are fixed constants but the estimators are random). For those interested, the model in mind is a random coefficients model (BLP).

Assume $\gamma \sim F(\mu_{\gamma},\sigma_{\gamma})$ and $\alpha \sim G(\mu_{\alpha},\sigma_{\alpha})$.  Assume that $\alpha$ is bounded away from zero so that we do not worry about 0 in the denominator.

When we estimate the model, the estimation package produces $\hat{\mu}_{\gamma}$, $\hat{\sigma}_{\gamma}$, $\hat{\mu}_{\alpha}$, and $\hat{   \sigma}_{\alpha}$, plus their standard errors $\mbox{se}(\hat{\mu}_{\gamma})$, $\mbox{se}(\hat{\sigma}_{\gamma})$, $\mbox{se}(\hat{\mu}_{\alpha})$, and $\mbox{se}(\hat{\sigma}_{\alpha})$.  For simplicity, assume all estimators follow normal distributions.

If $\gamma$ and $\alpha$ are not random coefficients, once I estimate the parameters I can simply use the Delta method or the Krinsky-Robb method to obtain the variance of WTP.  When they are random coefficients, things get complicated.

To obtain the variance or distribution of WTP, Daly, Stephane Hess, and Train (2011) and Rischatsch (2009) seem to suggest taking random draws $\gamma \sim F(\hat{\mu}_{\gamma},\hat{\sigma}_{\gamma})$ and $\alpha \sim G(\hat{\mu}_{\alpha},\hat{\sigma}_{\alpha})$. But I think this is wrong, because this completely ignores the sampling error in the estimated parameters of the distributions. In other words, this procedure ignores $\mbox{se}(\hat{\mu}_{\gamma})$, $\mbox{se}(\hat{\sigma}_{\gamma})$, $\mbox{se}(\hat{\mu}_{\alpha})$, and $\mbox{se}(\hat{\sigma}_{\alpha})$ (by assuming they are all zeros).

To me, a "correct" simulation approach would require some sort of double randomization:

First randomly draw $\mu_{\gamma}^m$ from $N(\hat{\mu}_{\gamma},\mbox{se}(\hat{\mu}_{\gamma}))$ and ${\sigma}_{\gamma}^m$ from $N(\hat{\sigma}_{\gamma},\mbox{se}(\hat{\sigma}_{\gamma}))$.
Then randomly draw $\gamma_i$ from $F(\mu_{\gamma}^m,\sigma_{\gamma}^m)$.
Do the same for $\alpha_i$.  Obtain the ratio.
Repeat this process to get a distribution of WTP.

The "typical" simulation approach to find the distribution of WTP seems to ignore step 1 and thus underestimate the variance of WTP by treating the estimated quantities as true ones.

Anybody can shed light on whether my approach is right or wrong? And are the approaches in the two references right or wrong?

Thanks in advance.


texts: When I analyzed a data set with two categories, I used a dummy variable $z=1$ for category 1, and 0 otherwise, and added the extra term $\beta z$ to the regression model. Suppose the least squares estimate for $\beta$ is $b$. I tried to calculate some prediction intervals for the two categories. For category 1, since $z=1$, I needed to count the variance for $b$, but for category 2, since $z=0$, I did not count this variance. It then appeared that the variance for category 1 includes an additional variance because I happened to code it as $z=1$. I am new to study econometrics. Could anyone please help with this puzzle? Am I missing anything here?


texts: What does the value of bitcoins depend on?

texts:
I've been looking up stuff about bitcoins for some time now and i have two question stuck in my mind:

How is the value of bitcoins so unstable?

And can there be bitcoin inflation?


texts: Substitutive or supportive factors of production

texts:
Given the function:
$y=A K^\alpha L^\beta, A,\alpha,\beta >0$

$y=aK+bL^{0.5}, a,b>0$

Decide whether capital and labour are substitute or supportive factors of production. How to solve this question? To answer your possible questions i want to highlight the fact that this is neither my homework assignment nor anything i need to submit, furthermore i have simply no idea how to answer this question that is why i am not able to show any attempt to solve this question.

EDIT: My ideas where to somehow look for the slope of MRTS curve if negative this will imply perfect substitutes if not existing then theoretically it should imply supportive factors, however the answer key states that:

if $\frac{\Delta MP_L}{\Delta K}>0 \rightarrow$ supportive

if $\frac{\Delta MP_L}{\Delta K}<0 \rightarrow$ substitues

if $\frac{A\beta K^\alpha L^{\beta-1}}{A\beta \alpha K^{\alpha -1} L^{\beta-1}}>0 \rightarrow $ subsitutes.

And here i am utterly lost.


texts: Increasing prevalence of price discrimination

texts:
It seems to me that the variation of prices for similar or identical products has grown over the last decade. A few examples:

On major air routes, price differences between low-cost and traditional carriers are extreme.
Retail sales appear more frequent and significant than ever.
At a grocery store, on any given day, it seems like some 30% of products are discounted. And I have received up to seven non-negligible coupons (for future use) even when making negligible purchases (under $5).
"Deal sites" like Groupon (and a thousand others) have become prevalent.
Single consumer electronics items are released as many different versions (with many different prices) with only slightly differing specifications.

All in all, it just seems like companies are getting more sophisticated (and more aggressive) about extracting as much of each consumer's willingness-to-pay as possible. This begs the question:

  Can you think of any data that could be used to quantify the increase
  of price discrimination across time?

Note on edit: I originally asked about welfare considerations also, but found a fantastic answer to that question here.


texts: «public-sector debt must now also include the central bank’s sharply rising debts». It didn't before?

texts:
In this text by Carmen Reinhardt, there's the following sentence:

  For Greece, Italy, Portugal, and Spain, public-sector debt must now also include the central bank’s sharply rising debts.

What does she mean by this? Isn't all public debt usually considered?


texts: Help trying to find Economic Profit for a Monopoly

texts:
I'm given a demand function ( $p = 60-.002q$), Marginal Cost (\$10) and Fixed Costs (\$300,000) for a monopoly.

I've figured the profit maximizing output and price:

Marginal revenue function $MR = 60 -.004q$.

$10 = 60-.004q$  # To find monopoly output.

$q = 12500 \implies$ Price of monopolist is $35$  #  $p = 60-.002(12500)$.

Now, I usually figure out the economic profit by taking the area of the rectangle formed by the bounds of the demand function (at monopolist output) down and stopping where it meets the AC function, and then across to the y-intercept of the graph; but they didn't give me an average cost function.

How can I figure out the economic profit? Please help and thanks for your time.

P.S. Is there a way of finding what Average Cost is at output(12500) with the given information?


texts: How can austerity and quantitative easing happen simultaneously?

texts:
In 2010 the UK government simultaneously started an austerity program which cut public spending, taking money out of the economy, while enacting a quantitative easing program which injected hundreds of billions of pounds into the economy.

How can these two seemingly conflicting programs co-exist?


texts: Why is money super neutral in Brunnermeier and Sannikov's I theory of money?

texts:
I'm wondering why money is super neutral in Brunnermeier and Sannikov's "I-theory of money", but is not super neutral in their 2016 AER paper "On the optimal inflation rate".

In the I-theory of money, they show the super neutrality of money by arguing that the real return on money is $dp_tK_t/p_tK_t$, so the growth rate of money supply has no effect on the real return on money.

In the AER paper "On the optimal inflation rate", they show that the real return on money is $dpK_t/pK_t-dM_t/M_t$.

My question is, why don't they subtract the growth rate of money in the "I-theory of money"? Or, in other words, why is $dp_t/p_t$ not affected by money growth rate?


texts:
I already read and ask NOT about pp 52-54, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw. I understand such numerical examples that corroborate Comparative Advantage, but how can I intuit comparative advantage? I wish to quash my need to revisit these numerical examples to recollect this idea. i start with definitions from pp 52 and 53 (supra):

  absolute advantage = the ability to produce a
  good using fewer inputs
  than another producer

  comparative advantage = the ability to produce
  a good at a lower
  opportunity cost than
  another producer

I read this by Prof Steven M. Suranovic and understand the gardening example, but still lack intuition.

  First, ... comparative advantage is clearly counter-intuitive. ... Secondly, the theory is easy to confuse with ... the theory of absolute advantage. The logic behind absolute advantage IS quite intuitive. This confusion between these two concepts leads many people to think that they understand comparative advantage when in fact, what they understand is absolute advantage.

  However, instead of assuming, as Adam Smith did, that England is more productive in producing one good and Portugal is more productive in the other; [David] Ricardo assumed that Portugal was more productive in both goods. Based on Smith's intuition, then, it would seem that trade could not be advantageous, at least for England.


texts: How do you formulate a distance constraint and a budget constraint?

texts:
Everybody knows about budget constraints and how they are represented:

but what if I want to represent a distance constrain from the shop you buy the goods?  How can I build that?


texts:
Even though there is a massive literature on behavioral economics, i couldn't find anywhere a list of economist that focus on that discipline.

Since i am interested in environmental economics, i would be grateful if you could mention those in academia that apply "behavioral theories" into environmental economics.

Thanks in advance!


texts: What are examples of natural monopolies that don't have overwhelming economies of scale?

texts:
On wikipedia, I read that the currently-used formal definition of a natural monopoly is where “[a]n industry in which multi-firm production is more costly than production by a monopoly”.

I tried looking up things related to monopolies and subadditivity, but couldn't find anything that made it easy to understand.

To further quote wikipedia, "Baumol also noted that for a firm producing a single product, scale economies were a sufficient but not a necessary condition to prove subadditivity."

Note that in the above quote, I'm almost certain the "scale economies" they're talking about are cases where the optimum scale is large enough to serve the entire market.

So my question is, what is another set of conditions that don't involve "scale economies" that is a sufficient condition to prove subadditivity, and thus show that a situation is a natural monopoly?


texts: What would happen to US economy before US government lose control over its national debt?

texts:
From this wiki page we can clearly see that US national debt is growing steadily after 2010 and now it's larger than US GDP already (at the end of 2019).

Still it's commonly believed the debt is maintainable. At least, neither the Obama administration nor the Trump administration care to spend (enough) effort to eliminate the debt.

To overly simplify, the absolute death sentence to this debt problem is that the whole government budget is not enough to pay the interest, but I suppose the actual critical point arrives much earlier than that.

Regarding US debt problem today, the only referenceable example of to me is Hyperinflation in the Weimar Republic
. Yet they are only remotely parallel: Weimar Republic back then was hardly a major world power (politically and economically) while US being today's only global hegemony, let alone its Petrodollar policy and other global influence.

So I wonder, being such super power, what would happen to US domestic economy along the debt growing towards such critical point?

To make this question simpler, let's assume that during such progress

There is no war between US and the other major powers against each other.
The external force disturbing US policy remains minimal.


texts: What would be the economic effects of a reduction in the general level of protectionism on the Australian economy?

texts:
Protectionism methods including: tariffs, subsidies, quotas, local contents rules and export incentives

Would would be the effects of a reduction of these methods, not complete free trade.


texts:
What is the difference between present value and face value?
When I search this question on Google is says they're the same in some cases and different in others. It says they are the same when the market interest rate is the same as the contractual interest rate.

I need help understanding what this means. I do not understand the difference between these  types of interest rates, etc.
And also does this have anything to do with discounting vs. coupon bonds, etc?


texts: Constrained Optimization using Lagrangian method

texts: The stationary points that we derive by solving the first order conditions of the Lagrangian are those points global optimum points or local optimum points?


texts: How does burning a huge amount of cash money affect the monetary supply?

texts:
I am not an economist by default. In other words, I am a newbie here.

Assume there is an extremely rich man who withdraws an extremely huge amount of cash money. He then burns all of it.

How does this action affect the monetary supply?


texts:
I am currently reviewing some stuff on capital flight and self-fulfilling crises.

In this scenario, investors generally think that a low availability of reserves could imply that the central bank may not be able to hold a fixed exchange rate. Consequently, investors quickly convert their domestic assets into foreign assets.

Given that this implies that the money supply decreases (as currency in circulation reduces), shouldn't this automatically increase interest rates? (Under IS-LM framework, a decrease in money supply increases interest rates). As a result, domestic assets should automatically become more valuable, thus fixing the problem naturally. Is there a problem in this line of reasoning?


texts: Is Dollarization a good decision for a small open economy with an economic cycle that weakly correlates with the anchor country?

texts:
I have been reading the work of Alesina http://scholar.harvard.edu/files/alesina/files/dollarization.pdf, about the pros and cons of dollarization (i.e. adopting the currency of other country, say the dollar). It is not the case of the European Union by the way, here the small open economy completely gives up on having its own currency.
Countries like Panama, El Salvador, and Ecuador have adopted such monetary policy and have done well during expansionary part of the cycle. Now, most commodities prices, of which these countries depends are down, and evidence will be available of the costs of dollarization. However, here I ask about theoretical reasons of why this extreme fixed exchange rate is better with a flexible scheme. The trade-off is between stable and credible monetary policies and flexible possibly manipulable ones in countries with weak institutions.


texts: Is there really a Nash equilibrium in this example?

texts:
I was watching this video on Coursera and worked out the example before the solution was presented. The example begins at 4:20
The presenter says that the Nash equilibrium is achieved with 2,2 at the bottom right but I don't see it. My solution shows no Nash equilibrium.

I have two 1, 3* with the * asterisk representing the preferred value of player, P2 in the 3rd (Right) column.
I have two 3*, 1 on the bottom row (Down) for player, P2 because if P1 picks Down, the best outcome is achieved with 3 when P2 picks Left or Middle.

What am I missing here? All my other values agree with the example except for the 3 row and 3rd column.


texts: Does real GDP control for changing preferences?

texts:
This claims that real gdp does not account for changing preferences.
However, if preferences were to change for sneakers and subsequently pushes the price up, won't this be reflected in the changed price of a basket of goods?


texts: Can one use the standard deviation of a variable as a regressor?

texts:
I am wondering if you could use the standard deviation of a variable as a regressor in an econometrics model? Consider the following hypothetical model:

$$y_{it} = \alpha_0 + \alpha_{1}T_{it} + \alpha_{2}\sigma_{it}^T + u_{it}$$

Where $y$ is the some outcome variable (e.g. crop yields) in country $i$ at time $t$, $T$ is temperature, and $\sigma^T$ is the standard deviation of temperature. Could one interpret $\alpha_2$ in such a way that would indicate how increased volatility in temperature would impact crop yields?

i.e. testing if countries with greater temperature volatility $\implies$ more severe weather $\implies$ negatively impacts yields

What comes to mind is the use of volatility indices as independent variables, and I wonder if this would lead to a similar interpretation.


texts: "Tightness" of political elections and public attention

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Are there any empirical studies on political elections that focus on the "tightness" of the race and how much attention the election receives from the public (or perhaps voter turnout).

By "tightness" I mean ex ante probabilities of winning the election are not too different among the candidates.

I suspect that tight races should be able to garner more public attention, but I would like some evidence to back this up.


texts: LIBOR rates: Are these monthly or yearly interest rates?

texts:
If I have, for instance, a Libor security with maturity of one month, with interest rate $r$. Is $r$ the amount to be paid after one month, or is it the annualized interest rate?

(My gut tells me that it is the annual interest rate, but I have not found a source to confirm this.)

And if it is the annualized rate, how is the (actual) interest payment that is due after one month calculated? Is it $1+r/12$ or is it of the form $e^{r/12}$


texts: What is the difference between Margin and Markup?

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Please clarify the difference in meaning behind markup and margin. Why would I use one or the other?

Markup = (Price - Cost)/Cost

  useful for examining how much actual profit is made on each sale.

Margin = (Price - Cost)/Price

  useful for helping ensure that a sale generates a profit.

Sources:

https://www.linkedin.com/pulse/margin-vs-markup-two-sides-same-coin-steve-raye/.
https://www.inflowinventory.com/blog/calculate-margin-vs-markup/


texts: What is the term for the cannibalization of one tax by another?

texts: The context for the question is a situation where a government-owned lottery pays corporation tax, but an additional betting duty levied on individual gamblers reduces the lottery's profits, thereby decreasing the amount of corporation tax received by the State.


texts: Find value of $\beta$ for which there is a strictly dominant strategy

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The question is as such: $N$ firms are lobbying for subsidies. Let $h_i$ be the number of hours spent by form $i$ for lobbying, with cost $wh_i^2$ where $w$ is a fixed constant. The subsidies granted to each firm will be $\displaystyle\alpha\sum_i h_i+\beta\prod_i h_i$, where $\alpha$ and $\beta$ are constants. We are supposed to find value of $\beta$ such that there exists a strictly dominant strategy for each firm, and with this value of $\beta$, find the Nash equilibrium.

My attempt so far: for firm $i$, the payoff will be $\displaystyle\alpha\sum_i h_i+\beta\prod_i h_i-wh_i^2$; by FOC, we have $\displaystyle\alpha +\beta \left(\prod_{j\neq i} h_{j}\right)-2wh_i=0$.

My question is: do I attempt to find $\beta$ from here? There will be $N$ such equations, with a product of $N-1$ terms, so solving the system of equations do not seem that feasible. However if I take value of $\beta$ as it is, then there will be many different values.

I feel that the value of $\beta$ should be zero here, but I am not sure how I can show this.


texts: Short call in binomial option pricing model

texts:
I am pretty new at this, so my apologies in advance if the question is too out of place.
I have been reading about portfolio replication models, and stumbled upon this example that I don't quite understand. It goes like this: there's a stock with current price $S_0 = 100$, and a call option on it with strike price $K = 100$. The up-state and down-state values of the underlying are $S_u=110$ and $S_d = 90$, respectively. Now the problem states

Let's assume we take a position $\Delta$ in shares and short one call option to create our portfolio, which is then comprised by two assets: the underlying and the call option.
If the price goes up, then the shares will be worth $110\Delta$ and we will loose 10. Therefore, the value of the portfolio is $110\Delta \color{red}{-10}$.
If, on the other hand, the price goes down, the call expires worthless and the value of the portfolio is $90\Delta$

My question is: why would I include this call option in my portfolio at all? Clearly I am not profiting from it in any sense, I either would loose money or not gain anything.


texts: what results can be derived from the average cost curve?

texts:
What is the practical use of knowing a firms average cost curve?

The reason why I ask is because computational problems that a firm faces are either with regards profit maximization or cost minimization and average cost curves are never used in computations.

If I can refine the question, what economic theory is derived from the average cost curve that are not given by marginal cost curve?


texts: Is there some kind of consensus on the determinant factors of education achievement?

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There is quite a bit of literature on the economics of education. One of the most debated aspects of it arises when estimating the achievement of the student (usually in the form of standardized test scores). Which are the most relevant inputs? Which are not?

A few usual suspects are:

Parent's education
Teacher "quality", which is by itself an issue. Sometimes it is represented by years of experience, majors acquired, certification, test scores, etc.
School inputs
Peer effects
Teacher absenteeism
The list goes on...


texts: What are directional derivatives used for in economics?

texts:
In a basic mathematics for economists course one is exposed to the concept of directional derviative. Recall that a directional derivative is defined as:

$$\nabla f \frac{\mathbb{v}}{\|\mathbb{v}\|}$$

I know that it mathematically tells you the direction the function is increasing on a two or three dimensional graph, however I am yet to see an application of such a formula in any economics problems.

What are some applications of the directional derivative in Economics?