texts: Understanding the construction of stochastic processes

texts:
I've seen stochastic processes modeled/constructed in the following way.

  Consider the
  probability space $(\Omega, \mathcal F, Pr)$ and let $\mathbb S$ be the (measurable)
  transformation $\mathbb S: \Omega \rightarrow \Omega$
  that we use to model the evolution of the sample point $\omega$ over time.
  Also, let $X$ be the random vector $X: \Omega \rightarrow \mathbb R^n$.
  Then, the stochastic process $\{ X_t: t=0,1,...\}$ is used to model
  a sequence of observations via the formula
  $
X_t(\omega) = X[\mathbb S^t(\omega)]
$
  or
  $
X_t = X \circ \mathbb S^t.
$

How should I understand the sample points $\omega \in \Omega$ and
the transformation $\mathbb S$ in this construction? (Could $\omega$ be something
like a sequence of shocks in certain cases?)

For more concreteness,
how would I write these two processes in this notation?

Process 1:
$$
X_{t+1} = \rho X_t + \varepsilon_{t+1} \tag{1}
$$
where $X_0 = 0$.

Process 2:
$$
X_{t+1} = \varepsilon_{t+1} \tag{2}
$$


texts:
Why do co-ops dominate in certain markets rather than more-conventional enterprises?

For example, the US dairy processing market seems to be dominated co-ops like Land'O Lakes and Dairy Farmers of America, while meat processing (a nominally-similar market) is dominated by multinational public companies.

Are there significant barriers to entry for co-ops trying to move into markets already dominated by conventional enterprises?  Or vice versa, are there barriers to entry for conventional enterprises wanting to enter markets controlled by co-ops?  If barriers to entry are overcome, does either form of enterprise have an ongoing competitive advantage?


texts: Is the steady state of $k$ enough to show $Y$ grows at the rate $n+g$?

texts:
To provide some context for the question: I was approached by a student needing help for a an empirical thesis based on Solow-Swan model. She had trouble solving the theoretical model she wanted to showcase in her work. She already put a lot of efforts and had a problem just with last steps of derivations so I helped her to solve simplified version of Solow-Swan model where:

$$ k^*= \left( \frac{s}{d+ n + g} \right)^{\frac{1}{1-\gamma}}$$

where $k$ is the capital per effective labor, $n$ population growth and $g$ technology growth and $d$ depreciation, and told her that this results implies that $K$ is growing at the rate $n+g$ which implies due to the assumption of constant returns that $Y$ grows at the same rate. Since $g$ and $n$ are exogenous the growth must be exogenous as well.

But her supervisor told her that the above is not enough to show that economic growth is driven by exogenous factors and she has to expand her model.

Hence my question is: was my statement incorrect or is her supervisor making mistake? If my advice was incorrect whats the missing link that unambiguously shows that economic growth depends on $n+g$?


texts: How did the Price/Value of any goods measure in money determined in the first place

texts:
Nowadays most value/price of goods and services are determined by the supply and demand in the market. And most of the time we use money which back by the credit/trust of the country to exchange these goods and services.
But one thing keep puzzling me. When money first created by the country (let say a new country just form and they start making their own currency/money), without any credit or trust for the newly created currency and any reference whatsoever. How did anyone can determine the price/value for goods using that money. Did the government of the country just announce or set the price for some high demand commodities (say foods/water that everyone needs) as a anchor for everyone to reference? Or did the people just make there own assumption and start a complete chaotic process of natural selection in the market until most of the price settle?
I just can't figure what process did the first country in the past, that created money go through to settle market. It would be very helpful if anyone could give me some insight about this question.


texts: How does the US have gross national savings while running a trade deficit?

texts: If a country has a positive savings rate, that means that more money had to come into the country from somewhere outside of the country. However, we run a trade deficit, so we're actually sending more money out than we are bringing in. How is this possible?


texts: Productivity and wages in a task-based model

texts:
In a task-based model like the one developed in Acemoglu&Autor 2011 with two types of worker, can the low type have a higher wage with respect to the high type?

More specifically: if the productivity of the "high type" is greater for each task in the economy, can we say that, regardless of the aggregate supply of labor, the equilibrium relationship is $w_h>w_l$?

Thank you in advance for any help!


texts: I want to know the cost of milk on a year by year basis, say for the last 10 or 20 years. similarly I may want to know price of other items also (petrol, rice, biryani, etc). I just need the average values. What is the best source of knowing these things. I'm particular about India. Please give me any website name or so that provides such statistical data.


texts: Relative importance of the federal funds market in the post-2009 US economy

texts:
In the pre-financial crisis US economy, depository institutions had almost no excess reserves. Hence, it would make sense for some banks to have shortages of reserves and some with excess of reserves. This would mean that there would be overnight loans made between the banks. However, in the post-financial crisis US economy, banks now have levels of reserves that significantly exceed the minimum reserve requirements. Would there still exist banks that are in need of reserves and thus would want to borrow from others in the federal funds market? It seems to me that there would be a large number of lenders and a relatively small number of borrowers.
Or are there other reasons why banks would want to borrow from the federal funds market in addition to meeting reserve requirements set by the Fed?


texts: Democratic elections of board members by employees?

texts: Would switching the selection of board members away from shareholders to employees (subject to bribery controls within campaigns, for salaries and stuff) limit the short-termism that the current corporate world seems to face?


texts: Why does supply equal demand? Problem if large increase of price, decreases demand only by a bit

texts:
I have looked at my coursenotes and this thread here:Why does supply equal demand?, but they did not adress, why I do not understand the law of supply and demand.
The way I understand this law is the following: Supply is the amount of goods that can be produced,given the price of the good. Demand is how much of the good is demanded, given the price of the good. Supply is equal to demand.
The reasoning from my coursenotes is:If supply is higher than demand, sellers will decrease the price, so they can still sell everything they have. If Demand is higher than supply, there is no reason for the sellers to keep the price low, so they increase the price in order to get more profit.
I still dont understand one aspect. If we are in a situation, where a high increase of the price leads to only a small decrease of demand, the cost of potentially not selling a proportion of your goods is outweighed by the gain in profit from each good. So sellers do not have a reason to decrease the price.
I must be missing something, so I am very happy to see some explanation.


texts: I am currious to know if there has been any work of estimating the BLP model with micro data. Could you give me a reference list.


texts: What was Milton Friedman's opinion of Supply-side economics?

texts: I realize Friedman was a part of the Reagan Administration, so even if he disapproved of supply-side, he may have moderated his remarks, but what kind of things did he say about it, and what can be determined about his real opinion?


texts:
My textbook (Economic Issues and Policy by Jacqueline Murray Brux) says:

  In addition to health and environmental concerns about biotechnology,
  the most likely economic effects will be large increases in world food production, causing lower prices of agricultural products and
  preventing poor farmers from succeeding in agriculture. And it is the
  latter outcome that may serve to increase, rather than decrease, world
  hunger.

This statement seems utterly nonsensical to me. Are we actually to believe that large increases in world food production may serve to increase world hunger? Poor farmers using outdated technology may be forced to upgrade or find other jobs, but the lower prices will surely help non-farmers. Thus they (non-farmers) will have more money and this will create new demand and thereby new jobs for farmers who have lost their jobs.

Am I right? This isn't the first error I've encountered in this textbook.


texts: Citing non-economics studies in an economics research paper

texts:
I am currently working on a paper in economics that has some dimensions that discuss women's social value. As is the case in developing countries a lot of economic studies do not exist whereas there are tons in Sociology. While I am not convinced by the sociology results, is it ok (from the perspective of a reviewer) to borrow from that to build a narrative.
For example, if I am looking at fertility levels in a country and there is a sociological study that speaks of the link of women's perceived value and her fertility which is rarely discussed in econ literature, could I potentially use this to discuss a point in my paper? Ergo, there is anthropological/sociological arguments that indicate that a woman's value in country x is linked to her fertility? Or is that too speculative from the standpoint of an economist?
As an economist myself, I am confused but then again I would use this to argue my point.


texts: How to interpret fixed effect regression R-sq. results for panel data?

texts:
I runned a fixed effect regression in Stata (xtreg, fe) for panel data. I obtained below R-sq. results. How should I interpret them? Which one is my main interest(within,below or overall)? How can I derive the exact Adjusted R-sq. by using these 3 values?

R-sq:
     within  = 0.8226
     between = 0.4727
     overall = 0.5311

Thanks a lot!


texts: Assessing risk in a decision problem with repeated toss

texts:
The problem starts at time t0.
At each time step, the participant can choose to opt out and claim a loser's reward Rl.
At each time step, the participant has a probability p to win a winner's reward Rw, the participant is aware of p.
Rewards decrease after each time step, at the same rate, and Rw > Rl always.
After tn the 'game' is over and the participant claims Rl - the participant is aware of time tn.

For example at t0 Rw = 100, Rl = 50, p = 0.05, reward decay rate is 1 each turn and the tn = 30.
First participant wins at t10 and claims a reward of (100 - 10 * 1) = 90.
Second participant opts out at t20 and claims a reward of (50 - 20 * 1) = 30.
Third participant loses at t30 and claims (50 - 30 * 1) = 20.

I'm interested in assessing the risk behavior of the second participant.
I'm thinking that the second participant considers the remaining number of turns, probability p to win each turn, and average amount that the participant would win, and weights it against the current loser's reward at time t20.
But I'm not sure this is the right way to consider the risk involved.

I've read the early works by Kahneman and Tversky but this seems a bit more complex, I would appreciate any hints on where to find solutions in literature as well.


texts: Effect of change in discount rate on consumption -- (Samuelson, 1958)

texts:
I was reading this paper by Paul Samuelson. I am puzzled by a bit on page 470, left column. Here he claims that $\frac{\partial C_3}{\partial R_{t+1}}>0$. Let me give a short description of what exactly this means and then I'll explain why I disagree.
In this model every individual lives 3 periods. Every person produces 1 unit of output in period 1, one unit in period 2 and no output in period 3. He can however trade some of his output in the first 2 periods for consumption in the last period and this gives rise to his consumption pattern $(C_1, C_2, C_3).$
Suppose a person is in period 1 at time $t$. So he is in period 2 at time $t+1$, and in period 3 at time $t+2$. He can earn an interest rate of $i_t$ on savings at time $t$ for all $t$ (that is $i_t$ is the interest rate earned on savings you carry from time $t$ to period $t+1$). Now define $R_t=1/(1+i_t)$ for all $t$.
The claim by Samuelson is that $\frac{\partial C_3}{\partial R_{t+1}}>0$. Or equivalently: $\frac{\partial C_3}{\partial i_{t+1}}<0$. How can this be true? If $i_{t+1}$ goes up (down), sacrificing a fraction of $C_1$ and $C_2$ to increase $C_3$ becomes more (less) profitable. So common sense would suggest: $\frac{\partial C_3}{\partial R_{t+1}}<0 \Leftrightarrow \frac{\partial C_3}{\partial i_{t+1}}>0$.
Samuelson gives no proof of his claim but he does claim it can be inferred from the following: "Of course, these functions are subject
to all the restrictions of modern consumption theory of the ordinal utility or
revealed preference type. Thus, with
consumption in every period being a
"superior good," "
Please enlighten me. Is Samuelson wrong/am I wrong?


texts: Lucas' islands model and a firm's profits

texts:
I was doing some reading on Lucas' islands model and how aggregate supply can change depending on agent's expectations regarding monetary policy.
It's always assumed that there are "n" isolated islands and "n" agents producing output all by themselves. There are no firms in this setting and output supplied depends on (pi/p) with pi is price of the product producer receives and p is the general price level.
I want to assume in a situation which instead of individuals producing by themselves, firms exist and they produce output and hire labor according to the point where their marginal cost equals their marginal supply (which indicates perfect competition).
Let's suppose nominal money supply double with general price level being doubled but the demand for the firm's product is unchanged due to consumers' preferences. Although nominal monetary amount of profit would not change, the inflation-adjusted amount of profit would decrase by half.
Here's where I'm having a confusion, I presume a decrease by half in firm's inflation adjusted profits would cause firm's owner to decrase production, thus a shift of supply curve to the left. I'm making this assumption by assuming firm's owner also have a utility function where real profits induce firm's owner to spend less time running the firm, because leisure is more prefable now.
I'm unable to come across this type of a situation searching through the papers.
Are my assumptions correct?
Thanks in advance.


texts: Reference request on "post-scarcity" economics?

texts:
Some friends and I have been discussing, speculatively, what might happen in the future after technology/increased automation greatly reduces the need for human labor.

The Marxists / leftists among us think that there will be a coming class conflict as more and more of the productivity gains from automation are captured by an elite, and that there will be a widespread political push from the left for something approaching a basic income.

Other, less left-leaning folks among us worry that there will be a collapse in aggregate demand as the purchasing power of a sizable, jobless part of the labor market essentially exits the economy. How government might respond to that is unclear.

I have the equivalent of an undergrad degree in economics and figured that there had to be some good discussion out there.

Can anybody point me to any papers or extended discussions of this topic?


texts: Introductory or Primer text on Economics?

texts:
I've been meaning to learn more about economics, and am looking for an introductory text or a primer on the topic.

I've already taken a subject on this back in high school, but I guess what I'm looking for is more on breadth. Something that'll introduce me to the things that I should know if I am to read an article on the news concerning updates on the world's economy and the local market.

I just want to get into being updated on such things. And thought of asking because maybe you guys who're more experienced can point me to the right direction instead of me reading about on different things, when in fact there are better references.

I'm a computer engineering undergrad, and my reason for wanting to learn about this is to be updated about the economy (it interests me), and because I want to get into stocks and forex eventually. I've already been reading books and articles on stocks, but I guess I'm just looking for something comprehensive and structured.

So a recommended text on stocks or forex would be nice too! Something on terms and the likes I guess :D same for the references I'm looking for concerning economics. Thanks a lot for the help!

My interest on the topic also concerns my intention to eventually focus on a field regarding energy consumption, the smart grid and the likes, and environmental sustainability.

So being able to understand and gain a working knowledge about economics seems like something that I should know.


texts:
I always understood that high interest rates in country A attract investors and cause the currency to appreciate. However, the interest rate parity theory suggests that high interest rates weaken a currency and currency arbitrage is impractical.

How can these theories be reconciled? Are they rival theories?


texts: Monetary policy and potential output growth

texts: Can monetary policy affect potential output growth? And if yes, how is this consistent with the neoclassical thesis's of money neutrality in the long run?


texts: Wooldrige says that ‘intuitively, to estimate k+1 parameters, we need at least k+1 observations’. Why is this the case?


texts: Land is an indestructible capital asset that offers a perpetual revenue flow. You own a piece of land that returns $20,000 per year forever. The relevant real interest rate to consider is 4%. What is the present value of this land at time 0?I need to use integration here


texts: Drug pricing, amount of sales and R&D costs

texts:
I've recently learned about Zolgensma drug that is currently priced at \$2.1 million (read more here)
Since the biggest factor in price is probably R&D costs I wonder why won't they decrease the price in order to sell more of it in a given year and hence get more revenue and pay back R&D costs faster.
With current price of $2.1 million the potential customers are incredibly limited:

Millionaires, but the chance that some of them might need this specific drug is so low that this category probably can be dismissed.
Governments. Some countries may pay for expensive drugs, but I suppose there is always a limit of how much they can spend on this kind of things, so it's a bit risky for the pharmaceutical company to hope they will be stable primary customers.
Charity organizations. While it might be possible for charity to raise this amount of money I wouldn't expect that it is certain that every charity campaign aiming to raise \$2 millions will be successful. There is one campaign right now in Russia that aims to buy this drug, but they barely even got 40% of the price despite being quite visible in the media.

So it seems that with this kind of price tag there is absolutely no guarantee that even 1 package of this drug will be purchased in a given year, so the risk of returning \$0 revenue in the end of the year is highly probable. I might be wrong because I don't have enough understanding of economics of this kind of drugs, but at least from layman perspective it sure looks risky.
Then why won't they decrease the price substantially, for example make it only \$200000? This would be much more manageable amount of money for governments, individuals and charities. Of course you'd need to sell 10 packages of the drug to get the same amount of money as with current price, but at least the risk of turning \$0 by the end of the year seems much lower.


texts: What are the drivers of the price of land?

texts:
I'm interested in what factors lead to changes in the price of land. I'm interested in this question in general across a whole country, say (as opposed to land in particular places).

So I'm interested in this question, because I'm interested to build a stock flow consistent model of 'Georgist' effects: integrate georgist understanding into a  post keynesian model framwework.

As a follow up issue, I'm also interested to what extent the macro drivers of land value are shared with shares in companies that have extensive market power (e.g. coca cola). Can land be thought of as an archetype of other 'monopoly' assets.


texts: Possible mistakes in Stigler, 1970 -- what am I missing?

texts:
Find the complete paper here: https://www.jstor.org/stable/724835?seq=1

I am reading Director's Law of Public Income Redistribution by George Stigler, published in the Journal of Law and Economics (Vol. 13, No. 1 (Apr., 1970), pp. 1-10) and I came across some things which seem to me to be obvious mistakes. Yet a google search for possible errata of the paper turned up nothing. Since the paper passed peer review and is cited by scholars, I can't believe I found a mistake that didn't catch their eye. Therefore I'd like someone else's opinion on the matter.

The part of the paper I am talking about are the Mathematical Notes, to be found at the end of the paper.

There are three questions I have about the above analysis.

First, in the equation just above (4) $(\Delta x)_L=(\Delta x)_u\frac{v(x_1)}{y(x_0)}$ is the substitution that was made, while I think it should be: $(\Delta x)_L=(\Delta x)_u\frac{v(x_1)}{v(x_0)}$ based on equation (3). Where does the $y(x_0)$ come from?

Second, the proposed alteration of the voting coalition is to add $(\Delta x)_u$, that is to add a small number of rich households to the coalition who were previously excluded; also $(\Delta x)_L$ is removed from the coalition, that is, a small number of poor households are removed from the coalition, such that the vote share of the coalition remains the same (see equation (3)). Then the statement that aggregate taxes will be reduced if $t[y(x_1)(\Delta x)_u-y(x_0)(\Delta x)_L]<0$ must be false. Why? Rich people are added to the coalition, thus taxes will decrease by what they payed, so $ty(x_1)(\Delta x)_u$. Poor people are removed from the coalition, thus taxes increase by what they will pay, so $ty(x_0)(\Delta x)_L$ Thus aggregate taxes will be reduced if $ty(x_0)(\Delta x)_L-ty(x_1)(\Delta x)_u)<0$. Which is exactly the reverse of Stiglers condition for a tax reduction. As a consequence, every following inequality up to and including (4) should be the other way around, I think. Could someone explain to me if I'm missing something?

My last issue is the following: Even if I were to be wrong and equation (4) is right, then the statement that $\frac{v(x)}{y(x)}$ is decreasing in $x$ for all $x$ doesn't seem to be necessarily true. If $v(x)$ were constant it would be trivially true, but the paper earlier makes the statement that votes per household rise with income! In which case the change would be ambiguous of $\frac{v(x)}{y(x)}$ when changing $x$. So again: what am I missing?

I hope someone can explain where I went wrong, since it really bothers me when I try to follow the author's argument and get hung up on this kind of stuff.

Thanks a lot in advance!


texts: Determining the Gini Coefficient in a 2 person economy

texts:
In a 2-person economy, the owner of a firm pays 20% of the total output to the worker.

What is the Gini coefficient in this economy?

The answer is supposed to be 3/5 but I end up getting 3/10 instead.


texts: Does mathematical education imply a better salary?

texts:
In some sense this is a follow-up to

Correlation between salary level and housing prices in a town

There I was reminded to ask for causality, not correlation. I am interested in the causal effect of mathematical education on salaries even if I do not use those words below.

Now, my question is the following: does mathematical education result in a better salary? Here, by mathematical education, I do not mean mathematics as a major but rather a major with heavy mathematics in it. Probably a better formulation is this: is there any literature on whether studying applied mathematics pays off? Again not an Applied Mathematics as a curriculum per se, but a course with heavy applied math content.


texts: How is the choice of banknote denominations made?

texts:
I'm not sure which SE network this question belongs to, but this seems to be the most appropriate one.

What determines the choice of banknote denominations?

Obviously, the first factor is the numeral system used (base-10 means it will be easy to work with 1, 10, 100, etc. denominations). It seems like most of the world also issues 2 and 5 multiples of of the above denominations (2, 5, 20, 50, etc.). One exception I can think of is that USSR used to issue banknotes of 3 and 25 rubles.

Most currencies also have subunits. Why is this often the case and why is the unit usually divided in 100?


texts: How to interpret Employment Elasticity in this text?

texts:
In this VoxEU text, «Promising ideas for future research on the employment effects of minimum wages », how do I interpret the elasticity of employment?

I would think of it as percentual change in quantity of labour demanded over percentual change in minimum wage. However, if I google the concept, I get % change in employment associated with a % change in output. Ok, Factor Incomes = Expenditures = Output. However, although at a national level they are the same, at a micro level, I don't see how both definitions would equate...

Any help would be appreciated.


texts:
Let $\succeq$ be a preference relation on $X$. Is it true that $x \succeq y$ if and only if $\lnot (y \succ x)$?

I think it is true and my proof is as follows. To prove $\implies$ direction, we have $\lnot (y \succ x) \equiv \lnot(y \succeq x)$ or $x \succeq y$. So clearly if we assume $x \succeq y$, then $\lnot (y \succ x)$ is true. To prove $\impliedby$ direction, assume $\lnot (y \succ x)$ is true. Then either $\lnot(y \succeq x)$ or $x \succeq y$. If $x \succeq y$ then we are done. If $\lnot(y \succeq x)$, then since $\succeq$ is a preference relation it must be complete, which implies $x \succeq y$.

Is my proof correct? Also, in general, I just want to ask, is it true that whenever we have a preference relation $\succeq$, instead of proving all these facts, can we "informally" pretend $\succeq$ is like the inequality $\ge$, and everything works analougously? For example, we could prove that $\lnot (x \sim y)$ if and only if $x \succ y$ or $y \succ x$, but if we just wanted to use deduce this fact without actually proving it, we can clearly see it from $\lnot(x=y)$ if and only if $x>y$ or $y>x$.


texts: Why, in such a debt-heavy era, is inflation still such a Bad Thing(TM)?

texts:
Going through the Wikipedia article on inflation, a number of pros and cons to inflation are covered. Most of the "cons" of inflation (cost-push inflation, hoarding, hyperinflation, diminished allocative efficiency, etc.), don't become a problem until inflation is well above the levels currently targeted by The Fed.

A number of "pros" are also covered, but one I don't see addressed anywhere I've looked is this: the average U.S. household debt is 3x the average annual income. Our government is also in debt to the tune of \$21T, which comes at a cost of \$400B per year in interest paid. I do see acknowledgement that higher inflation eases debt, but nothing on why increased debt hasn't incentivized us to increase inflation.

Wouldn't a higher inflation rate be a good thing? It would devalue those (household and federal) debts, making them easier to pay off, and saving the interest paid for other budget items. If the Government (and most Americans) were running closer to the black, I can see why you'd want to keep interest low, but given the unprecedented situation, why not allow inflation to float higher?


texts: Derivation of the elasticity of substitution of a general production function with labor-augmenting technological progress

texts:
I am following and trying to fully understand a famous and interesting work of Bentolila and Saint-paul (2003). They try to explain movements of the factor's share in terms of a relationship between the labor share ($LS$) and the capital-output ratio ($k$). To summarize as much as possible they start from a general production function with labor-augmenting technological progress and constant returns to scale:

$$Y_{i} = F(K_{i},B_{i}L_{i})=K_{i}f(l_{i}),$$

where $l_{i}=\frac{B_{i}L_{i}}{K_{i}}.$ And show that under the usual microeconomic assumptions of equilibrium (i.e. labor its paid its marginal product), there exists a unique function $g(\cdot)$ such that:

$$S_{Li} = g(k_{i}).$$

where $S_{Li}=\frac{w_iL_i}{p_iY_i}$ the labor share in the industries revenues, with $w_i$ denoting the wage, $p_i$ the product's price and $k_i=\frac{K_i}{Y_i}$ is the capital-output ratio.

Then, at page 6 of the paper, they employ the standard definition of elasticity of substitution to production function above, i.e. $\sigma_{i}=\frac{d(K_i/L_i)}{d(r/w)}\cdot \frac{r/w}{K_i/L_i}$ to obtain the following result:

$$\sigma_{i}=\frac{f'(l_{i})}{l_{i}f''(l_{i})}\left [1-\frac{l_{i}f'(l_{i})}{f(l_{i})} \right ]$$

I am trying to do all the derivations, but I can't find a way to derive this last formula with the same result. Is there someone who could kindly help me and show me the steps?.


texts: Does the separation of FinCEN, and The Federal Reserve protect the integrity of a representative democracy?

texts:
From my understanding, FinCEN is controlled or heavily influenced by the UN.  In addition, The Federal Reserve is not a governmental body, yet it has appointees from the current administration.

I'm concerned that a democratic influence in economics (currency, M1, etc) could remove the "purity of intent" of an election, or the policy resulting from an election.

What have we learned from FinCEN, the IMF, and The Federal Reserve in relation to maintaining the integrity of the democratic voice?

I suspect that if the two are combined, the democratic "wants" will re-prioritize its actions based financial matters, not the democratic consensus.  If taken to an extreme, this lack of "democratic consent" consensus could result in chaos, anarchy, or other frightening outcomes.

What review boards, governance controls, or other systems prevent the academic research of financial systems from contaminating democratic outcomes?


texts: Help with Income Elasticity Exercise in Becker's Economic Theory

texts:
On page 18 of his book Economic Theory, Gary Becker provides the reader with the following exercise (no answers given):

Exercise Statement:

Write the formula $\sum_j K_jN_j = 1$ where $N_j$ is the market income elasticity of demand for the $j$th good and $K_j$ is the fraction of total market income spent on $j$, in terms of the $\eta_{ij}$ and $k_{ij}$, where these are the income elasticities and shares of the $i$th person for the $j$th good. First derive the $N_j$ in terms of the $\eta_{ij}$. Is $N_j$ a simple average of the $\eta_{ij}$, or do higher income persons have a greater weight than lower income persons?

My Question:

What does $\sum_j K_jN_j = 1$ represent?

My first intuition was I understand why the sum of all $K_j$ shares would add up to a whole. The sum of all shares equals the total income which could be 1. So $K_j$ would then just be a percentage of the whole. But what then would $K_jN_j$ represent? This is where I got stuck.

EDIT:

Okay here's my first stab at the problem:

We know $\eta_{ij}$ represents the income elasticity of individual $i$ with respect to the $j$th good. So by definition, the income elasticity is defined as
\begin{equation}
\eta = \frac{\partial Q}{\partial I} \frac{I}{Q}
\end{equation}

We also know the fraction of total market income individual $i$ spends on good $j$ is $k_{ij}$. I reason that this should be just the amount spent on the good divided by the total income of individual. So it should be
\begin{equation}
k_{ij} = \frac{p_jq_j}{I}
\end{equation}

I still don't see how this should come out to $1$ though. Unless we are thinking that elasticities cancel out, such that for every $\eta_i$, $\exists$ $\eta_j = \frac{1}{\eta_i}$ such that $\eta_i\eta_j=1$.


texts: In the discussion about why and how countries develop or industrialize, is there a debate about “related” or “linked” industries?

texts:
There is a fairly recent literature about "networks" (Barabasi, “Linked” 2003, Basic Books; Hausmann et al. “The Atlas of Economic Complexity 2014, MIT Press) that emphasize that some industries are more “related” or “linked” than others and that poorer countries often do not “exploit” these linkages as effectively as richer countries. Has the idea that some industries are “related” been discussed before in the literature of the industrial revolution or economic development?

I presume the answer is “yes” but I couldn’t find much, though I may have looked in the wrong places. I conclude this question by clarifying what the literature mentioned above understands by industries being “linked”.

Industries may be linked by their input or output flows. When for example one is a supplier of the other or both use inputs from a third industry.
Industries may be linked because they require similar infrastructure (e.g. schooling, universities). Switzerland, for example, has a well-developed watchmaking industry and is strong in precision engineering. If the education required to work in these industries overlap to some extent—which seems reasonable—both industries would be linked by their human capital requirements.


texts: Clarification of iterated prisoners dilemma

texts: In the description of an iterated prisoner's dilemma on Wikipedia, it states that in order for a game to be considered iterable, it must conform to the rule 2R > T + S, where R is the reward for cooperation, T is the temptation payoff, and S is the sucker's payoff. Could someone provide an example of a dilemma in which this would not be the case, i.e. it would be non-iterable?


texts: Uniform price vs. pay-as-bid auctions in energy markets

texts:
These two types of auctions are most commonly used in the energy trading markets. What would be advantages and disadvantages of each? And in the end, can we expect them to deliver similar outcome?
One, quite obvious disadvantage of PAB auction is the need to "guess the clearing price". If not all generators correctly predict the MCP, more expensive generators may be scheduled at the expense of cheaper ones, resulting in higher costs for the same payment by consumers. But what can be considered as a disadvantage of uniform price auction here? And what are the advantages of each auction type?
As for the second question, I think we can expect the same (or at least very similar) outcome when we consider the perfect competition? Under perfect competition all players would know what the marginal production unit is for any given level of demand, so that under pay-as-bid they would all bid at the marginal cost of that unit - achieving the same outcome they would obtain under uniform price auction by bidding at cost. How would the outcome change if we consider (bit more realistic) case of oligopoly?


texts: Question regarding couple economic terms and concepts

texts:
I am trying to read some economic articles for future use.

However, as a statistics major student, I am quite unfamiliar with couple of economic vocabs and concepts. Followings are the very vocabs.

-Aggregate Fluctuations/Shock

-Idiosyncratic Shock

-Granular economy

And the following is the concept

-What does it mean to have a fat tailed distribution. What does "fatter-tailed" distribution indicate? ex) A prominent exception is a recent contribution by Gabaix (2011), which argues that because the firm size distribution is extremely fat-tailed – the economy is ‘granular’.

If I may could any one of you awesome experts explain this for me ? If there is a great website where I could learn simple economic concepts please give me some ideas. Thank you so much and have a great day!


texts: What policies can a government adopt to promote economic equality?

texts:
As per the Oxfam survey, Top 1% owns more than the bottom 50% of the population. There is also an enormous wage gap emerging, such as that our average CEO makes something like 200x much more than their average worker.

If we put aside the normative question of whether or not it is desirable, what measures can governments adopt to redistribute wealth more evenly?


texts: Explanation of differential equation for Price Elasticity of Demand

texts:
I understand that Price Elasticity of Demand (PED) measures the percentage change in quantity demanded of a good with respect to a percentage change in its price.

However, I don't quite understand the intuition behind the formula for PED being:

$e_{{\langle p\rangle }}={\frac  {{\mathrm  {d}}Q/Q}{{\mathrm  {d}}P/P}}$

and not simply described by the following:

$e_{{\langle p\rangle }} = {\frac  {{\mathrm  {d}}Q}{{\mathrm  {d}}P}}$

This might be quite an elementary question, but I'm hoping for a bit of clarification.


texts: Do perfect complements have to be normal goods? If so, why?

texts:
Two goods $x,y$ are perfect complements if they have the utility function
$$U(x,y) = \min \lbrace ax,by \rbrace $$
$$a,b \in \Bbb{Q}^+$$
My professor said $x,y$ have to be normal goods but didn't explain why well enough that I could understand.

My Question:

Are perfect complements always normal goods? If so, why?


texts: Can individual consumers ever be price-makers, and can they thereby have major effects on welfare?

texts:
Suppose there's a big demand shock on some good X. As long as X has fairly standard supply and demand curves, that'll raise the price. And all of the buyers who would have bought at the lower price will be slightly harmed -  they all have to pay a bit more for the good. And the producers are benefited - they make a greater profit. And the new buyers would presumably benefit from buying the good as well.
In \$ terms, this should balance out to be slightly positive. But, in welfare terms, it seems like it might not be. The buyers could all be a lot poorer than the producers, so an extra \$1 in profit might be far less valuable to the producers than it was to the buyers, so the demand shock could overall be a bad thing - it's effectively a transfer from the poor to the rich. Or it might be other way around, with producers poorer than buyers, in which case the demand shock would be a great thing - it's a transfer from the rich to the poor. Is that right?
But here's the actual question: do individual consumers ever trigger price changes like this? If I choose to go to the supermarket and buy an apple (rather than not do so), is there any probability at all that that very slight increase in the demand for apples will trigger a price rise on all apples, even for a short time? Or if I choose to buy and consume a bit more gas, which is much more divisible than apples, could I potentially raise the price of gas by $0.01, whether the price rise just happens at my local gas station or the world over?
I realise that, even if it's possible that this could happen, it'd be extremely unlikely. That's okay. I'm curious about whether I could have even a 1 in a billion chance of having this sort of effect. After all, raising the price of, say, rice or wheat by even \$0.01 across the entire world could have enormous welfare impacts. For at least some of the extreme poor, a \$0.01 price difference may mean that they go hungry for the day, or that they can't afford other essential goods, like medicine. So, is there any probability at all of individual consumers having this effect?
If you know of any papers which look at this sort of phenomena, I'd love some recommendations! Likewise, any papers which look at which individual goods are overwhelmingly produced by the poor and consumed by the rich, or vice versa. (I'm guessing there might be some stuff in the literature on trade?)


texts:
I'm considering some question, and I'm not sure what it asks me to do:

  Consider a two-bidder auction with two types of players, high type and
  low type ($v_h>v_l$). The probability of a low type is $0.3$. The high
  type plays a continuous mixed strategy with support
  $s\in[\underline{S},\overline{S}]$. For some bid $s$ the probability
  of winning is given by the
  cdf$$\frac{3}{4}\bigg(\frac{S-v_l}{v_h-S}\bigg)$$

  What is the value of the upper bound of the support $s$?

I guess the derivation should be roughly as follows. First, it is easy to verify that the chance of high valuation player to win against another high value player is

$$\frac{S-v_l}{v_h-S},$$

Then we have something like this

$$\big(\frac{3}{4}\bigg(\frac{S-v_l}{v_h-S}\bigg)+0.3\big)(v_h-S)=\frac{S-v_l}{v_h-S}$$

Which doesn't quite give the right answer. I suspect I need to weight some arguments by probabilities.

If it helps, the answer is $$\overline{S}=\frac{7v_h+3v_l}{10}$$


texts: Why do falling oil prices take stocks with it?

texts:
The price of oil fell again today and is now below $30/barrel for the first time in 12 years. Along with the fall came most of the US stock markets. If I didn't know any other information except for "the price of oil fell today", my gut reaction would be that the oil companies stock would fall, but the rest of the markets would rise (on average) due to the lower operations cost (and/or increased consumer spending) leading to an increase in profits. This should be especially true for the transportation industry, such as airlines, which consume a lot of gasoline. Yet, in the sharpest decline of the oil price in the past month, airline stock prices have dropped as well. Is my gut feeling incorrect, or is it being overpowered by a stronger force than the price of oil?

Update: Not long after I asked this question I did some more research on it and came to the conclusion that the premises for this question were wrong. I had been basing my question on what I had regularly been hearing/reading in the news, which was something similar to "stocks fell again today due to oil taking another dive". I added an answer which shows my conclusions. (I don't like to accept my own answer to my questions, so as of yet I've left it open.)


texts: FX - Reconciling monetary policy and interest rate parity

texts:
Theory suggests that as rates rise domestically, the home currency (call it currency A) will appreciate against currency B (all else equal).
What we see with currency forward rates though seems to be the opposite. If currency A's monetary authority sets higher rates than currency B, arbitrageurs have a risk-free opportunity to buy at the spot and invest in the higher-yielding currency and convert back.
Here is an example:
The spot rate on the New Zealand dollar (NZD) is NZD/USD 1.4286, and the 180-day forward rate is NZD?USD 1.3889. This difference means:
a. interest rates are lower in the US than in NZ
b. interest rates are higher in the US than in NZ
c. it takes more NZD to buy one USD in the forward market than in the spot market

The correct answer is said to be B. However, this isn't very intuitive if we look at it through the lens of rate policy alone. I'm probably missing something obvious.
Question
Why do these two views seem to suggest different outcomes and is there a preferred situation for either?


texts: Shopping example in Kőszegi / Rabin (2006)

texts:
In "Section IV Shopping" of Kőszegi / Rabin (A model of reference-dependent preferences, QJE 2006), the example of consumer buying a pair of shoes is given.

They claim that "her disutility from spending on the shoes is between $(1+\eta)p$ and $(1+ \eta \lambda)p$" (p. 1146).

How do they get this result?

I can see where the second term comes from, namely buying at $p$ when expectations were to buy at 0, which generates money-related utility of

$$ -p - \eta \lambda p = - (1+\eta \lambda) p$$

But the first term is beyond me: If she buys at $p$, but expected to buy at some $p' > p$, I would obtain

$$ - p + \eta(p' - p) = -(1+\eta)p + \eta p' $$

which is not the same as the $(1+\eta)p$ stated in the paper.

What am I missing here? Thank you.


texts: How to obtain standard surveys / measures to use at end of experiment to "control for altruism" etc?

texts: When running an economics experiment, how and where are experimental graduate students supposed to obtain the surveys (such as standard measures of altruism, risk aversion, social dominance...) that often come at the end of experiments (so that researchers can "control for altruism" etc)? Do researchers purchase such measures / inventories, or are they part of the public domain and can be freely copied from previous research papers that use them? I am interested in using those from my own field as well as using one that is not from my own field (the Bem Sex Role Inventory) that appears to not be readily available online -- at least not for free.


texts: The Econometrics of the Stone Geary Production function

texts:
The Stone-Gerry production function generally takes a form of:
$$f(x_{i})=\prod_{i=1}^n(x_{i}-a_{i})^{\gamma_i}$$

where $x_i$ represents all inputs in the model, $a_i$ is a constant representing the initial investment which does not contribute to production and $\gamma_{i}$represent output elasticies.

when running a regression and converting it into a production function (which was already discussed on the site) how should our inital regression look when we have constants $a_i$ included?


texts: How is Regression different from Econometrics?

texts:
I am an undergraduate student and am planning to take a course in Regression Analysis next semester whose description is

"The analysis of continuous response data. The focus is on linear and multiple regression with theoretical and practical training in statistical modeling. A hands‐on, applied course where students will become proficient using computer software to analyze data drawn from a variety of fields, and will learn what assumptions underlie the models, how to test whether the data meet the assumptions, and what can be done when the assumptions are not met. "

I am signing up for it because the university I attend currently does not offer a course in Econometrics and Regression is the closest thing to Econometrics that is offered. I want to understand Econometrics at the level of Stock and Watson's Introduction to Econometrics and/or Jeffrey Woolridge's Introductory Econometrics textbook.

Can someone please explain what the differences might be between the Regression course mentioned above and a course that would be taught out of the Econometrics textbooks mentioned above? If in a hypothetical world, I could take a course next semester supplementing the Regression course to patch up my understanding of Econometrics, what book/ source would you recommend that I read? Any advice is greatly appreciated!

Aside: I want to get acquainted with the world of economic research and eventually pursue a doctoral degree in Economics.


texts: Why are German bonds used as the reference for the calculation of Eurozone bond spreads?

texts: I can't find the source, either on the the ECB homepage or any other internet source to verify why German bonds are used as a reference point in the eurozone when talking about risk spreads for other European bonds.


texts: Basic question about why supply/demand should move to the equilibrium price?

texts:
This is probably an extremely basic question, however I'm still unclear about the answer. In a typical supply and demand curve graph, such as

the equilibrium price is said to be

  the only price where the plans of consumers and the plans of producers agree—that is, where the amount of the product consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied)

and

  if a market is not at equilibrium, then economic pressures arise to move the market toward the equilibrium price and the equilibrium quantity.

But why should this be so? In the above figure, at the \$1.80 price the demand is 500, netting the supplier a 500*\$1.8=\$900 revenue. Which is higher than the $1.4*600=\$840 revenue it would get at the equilibrium price. And even though at the \$1.80 price the supply exceeds demand, the supplier could just choose not to produce more than the 500 demanded at that price. Or if it does produce it, it could store it somewhere for the future, for example. As a rational agent, the supplier wants to maximize its revenue, so dropping their price to the equilibrium price would be counterproductive to that goal.


texts: Falling oil prices but no benefits passed on to the end user; government's strategy

texts:
Even though the oil prices have fallen rapidly in the recent years, the cost of petroleum products hasn't gone down in India.

Apart from raising more revenue, what are the other benefits the government derives from such a strategy?


texts: Relationship between CURRCIR, CURRENCY, and MBCURRCIR?

texts:
The FRED website has

Currency Component of M1 (CURRENCY)
Currency in Circulation (CURRCIR)
Monetary Base; Currency in Circulation (MBCURRCIR)
Monetary Base; Total (BOGMBASE)
M1 Money Stock (M1)

Based on the accompanying information, I think (but am not sure) we have:

M1 = CURRENCY + Traveler's checks of nonbank issuers + Demand deposits + Other checkable deposits (OCDs)
MBCURRCIR = CURRENCY + Currency held in vaults of depository institutions
BOGMBASE = Total balances maintained + CURRCIR

But how is CURRCIR related to CURRENCY and MBCURRCIR?


texts: Homogenous of degree one in utility function.

texts:
Question

    My solution is as follows. Please check my solution. If I make a mistake, please tell. I am really not sure about my solution. Thank you

U(x) is homogenous of degree one i.e. u(tx)=tu(x)

  Firstly I show that the indirect utility function is homogenous of degree one in m.

By the utility maximization,

V(p,m)=max u(x) subject to px$\le$ m

tv(p,m)=max tu(x) subject to px$\le$ m

Since u(tx)=tu(x),  tv(p,m)=max u(tx) subject to px$\le$ m

Then v(p,tm)=tv(p,m)

That is the indirect utility function is homogenous of degree one.

  I show that the expenditure function is homogenous of degree one in u by using previous result.

I know that

      v(p,m)=v(p, e(p,u))=u(x)

Since u(x) is homogenous of degree one and v(p,m) is homogenous of degree one in m, v(p, e(p,u)) have to be homogenous of degree one in e(p,u).

In other words, v(p, e(p,u(tx)))=v(p, e(p,tu(x)))=tv(p, e(p,u)) holds iff e(p,tu(x))=te(p,u(x))

i.e. The expensive function e(p,u) is homogenous of degree one in u.

    Now I will show that the marshallian demand x(p,m) is homogenous of degree one in m.

By Roy's identity,

$$\frac{\partial v(p,m)/\partial p}{\partial v(p,m)/\partial m}=x(p,m)$$

By the first result, since v(p,m) is homogenous of degree one in m, then x(p,m) is homogenous of degree one in m.

  now lets show that the hicksian demand is homogenous of degree one in u.

I know that

      x(p,m)= x(p,e(p,u))=h(p,u) ........(1)

x(p,tm)=tx(p,m)=tx(p,e(p,u))=x(p,te(p,u))

Since e(p,u) is homogenous of degree one by the second part,

x(p,te(p,u))=x(p,e(p,u(tx))=h(p,u(tx))=h(p,tu(x))=th(p,u(x)) must hold since the equality(1) exist.

That is the hicksian demand is homogenous of degree one in u.


texts: How does the russian interest rate raise will defends the Ruble from devaluation?

texts:
This strategy (interest raise to minimize currency devaluation) is being adopted in countries like Brazil and Russia:

Brazil interest rate http://www.tradingeconomics.com/brazil/interest-rate

Russia interest rate http://www.tradingeconomics.com/russia/interest-rate

How does the interest rate rise protect the currency value?

I'm used to see news about governments raising the interest rate with the aim of protect the currency value. But I never saw an explanation about how these two things are related.


texts: Do banks really have people on the boards of corporations, and why?

texts:
I read somewhere that in the United States, there are often people from banks on the boards of executives of corporations. Note, I don't mean ex-bankers who now work for that corporation, I mean people who are actually employed by the bank, and who are on the board in their capacity as a representative from the bank.

This surprised me very much, since the board of directors in principle represents the equity-holders, not the debt-holders of corporations.

How often does this really happen?

Why do banks do this, and why do corporations allow this?


texts: How do I calculate consumer surplus and producer surplus from this?

texts:
Calculate the consumer surplus, producer surplus and total surplus in the market equilibrium.

Market for beef and home demand and home supply:

$$ Q_d(p) = 50 - p $$

and

$$ Q_s(p) = p $$

With $p$ representing the price of 1 kg of beef

I understand that consumer surplus is consumer's willingness amount to pay minus consumer actual paying price.

But how do I derive from only information from above?


texts: Imputing # of unemployed from Labor Force Survey

texts:
I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates.
Specifically, the unemployment rate went down from 12% in Q4, 2019, to 11.8% in Q1, 2020, and the labor force survey had the following data:
Q4, 2019
Employed Persons =                            3,170,272
LFPR(15) years and above=                     46.7%
Unemp Rate                                    12%

Q1, 2020
Employed Persons =                          3,203,423
LFPR(15) years and above=                   46.2%
Unemp Rate                                  11.8%

Therefore, I algebraically rearranged the figures as follows:
Q4, 2019    Q4 2019
LFPR = (# of workers + #of unemployed)/population

0.467 = (3,170,272+#unemployed)/population
So total individuals in the LF ==  3,170,272/0.467
==6,788,591
And the Unemployed individuals are == Unemp rate *6,788,591 or .12* 6,788,591
==814,630.92
Q1, 2020
LFPR = (# of workers + #of unemployed)/population
0.462 = (3203423+#unemployed)/p
So total individuals in the LF == 3,203,423/0.462
                 ==  6,933,816

And the Unemployed individuals are == Unemp rate * 6,933,816 or .118* 6,933,816
=
818,190.29

Assuming the imputation method above is correct, then the number of the unemployed has increased
by approximately 4,000 workers between Q4, 2019 and Q1, 2020, despite the apparent decline in the U rate.
Is this a correct imputation approach?


texts: How can a free market be operated in a way that significant social and environmental costs are intrinsically covered?

texts:
More precisely, is there any practical way to operate a free market so that external costs, namely negative social and environmental impacts, become naturally (intrinsically) covered (paid for or mitigated) by the market itself?
History suggests that capitalism inherently incentives production processes which externalize as much of the cost of production as possible.
This economic tendency to externalize costs wasn't a big problem in a world of seemingly infinite resources. More recently, however, globalization appears to both intensify and conceal the externalization tendency, as large international corporations seek to increase profits and/or stockholder earnings through any available means, including unethical and/or illegal means which remain concealed by the sheer size and complexity of the global marketplace.
[The next two paragraphs are probably not necessary for the question, and may be inflammatory.]

But the damage being done by externalized costs is also global, and is apparent to us all. We call them "wicked problems". We are becoming like the laboratory rats that, under conditions of severe crowding, go crazy and start eating their young. For all of its incredible efficiency and historical success -- creating a huge increase in global wealth -- free market capitalism in its current form is like a cancer, sacrificing the host in its pursuit of unlimited growth, both environmentally (e.g. global warming) and socially (e.g. the middle class shrinks while the financial sector expands).
There is hope, and there is still time. Perhaps all that is needed is a tweak to our economic system. At the local level externalized costs can be identified, controlled and mitigated by government regulation. But at the national level, regulatory mechanisms are expensive and inefficient, and regulators will always be playing catch up to corporate ingenuity. The regulatory challenge is even greater at the global level.

It would be far more efficient and sustainable if the tendency to externalize costs were managed by market mechanisms that, ideally, were built into the economic system, rather than imposed from the outside.


texts: Why is three weeks of increasing jobless claims significant?

texts:
I see stories like this one on occasion in my news feed.

http://www.bloomberg.com/news/articles/2016-10-27/jobless-claims-in-u-s-decline-for-first-time-in-three-weeks

Mainstream news outlets never seem to cite sources, but I think this is the data the link article is in reference to:

https://www.dol.gov/ui/data.pdf

The chart is at a different scale but the overall trends have been down for the last year, and seems that rolling-average volatility has decreased in the last few months too.

The reports appear to be made weekly and we have to known deltas for two of the weeks, one positive 1 000 and another negative 3 000.  Guessing from the range on the chart that is about 10% range of change over the year, which might be of note but compared to the 150+ million people that are of working age in the US, that seems awfully small.

Additionally, we are have only four data points, which would seem ridiculous to make any conclusions based upon.  Also from a layman's perspective, the labour market seems very volatile and with only two directions the market can go, up or down, three times in a row seems like fair odds and would likely happen one if not a few times a year.

From an economics perspective is significant at all or just garbage news?


texts: Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

texts:
I see this to be a prevalent trend - companies too often launch products at much higher prices than they know is gonna lead to good sales numbers, only to reduce the price drastically after a few months. And by the time they do so, they lose any competitive advantage they might have had, and thus can't "recover" any more as far as product sales are concerned.

Let's take a concrete example - the Razer Phone 2. They knew people didn't know much about the brand when it was launched, as Razer is new into making phones. Thus, it only made sense to have launched it for something more reasonable, like $600 perhaps. But no, they launched it for \$800-850. And of course, it didn't sell well. And now after 2-3 months, its price is \$500. But it lost traction - all the excitement that was there when it was first launched about its gaming capabilities is not so fresh in people's minds anymore. Moreover, there are other products at competitive prices that are more value for money. Why couldn't they have launched it for \$600 in the first place?

Another example - Blackberry. They were all but practically dead after a few years of not catching on the Android train. Then they decided to adopt Android a couple years back, and launched a phone (I can't remember its name). It was a good product, but again, they priced it ridiculously high for a company coming back from dead, and making a first product with a new technology for them. Of course it didn't sell well. But had they launched for half the price, I strongly think the phone would have sold well. I know I for one would have bought that phone, but for around \$400 - not for \$750.

Is the reason greed or over-optimism? Surely that can't be right? Don't they want to sell more products, and thus get more profits?

P.S. I am not a finance student or economics student. Just a layman trying to understand why so many companies go for seemingly stupid product pricing.


texts: Are these two different cases when it comes to Forex Reserves?

texts:
In a forex reserve, what is the difference between "Buying US Dollars to pile up reserves" and "Using FPIs, remittances or exports to build up reserves" ?
How differently do they impact the economy?


texts:
Would I be "mining the data" in a time series analysis if I add more lags than theory suggests? For instance, for annual data analysis, it is recommended that two lags would be sufficient to capture the dynamic interactions among the variables and account for potential serial correlations. Similarly, in models that use quarterly data, using four lags is a norm. However, in many instances, there is a conflict between what theory says and what one could observe in actual data.

Just wondering if it amounts to "data mining" when I augment the model with more than 2 lags of annual data. Assume the lag order is selected using an information criterion.


texts:
The interesting paper Calvo and Obstfeld (1988) uses two-stage optimization on an OLG model which then reduces to a standard representative agent framework.

First stage optimization consists on a static optimization which makes the optimal allocation between different cohorts vertically(c.f equation (9) in the paper.) Authors solve this first stage problem as:

$$\mathcal{L}=u\left[c\left(t-n,t\right)\right]\Delta\left(n\right)P\left(n\right)e^{\rho n}+\lambda\left[C\left(t\right)-\int_{0}^{\infty}c\left(t-n,t\right)P\left(n\right)d\left(n\right)\right]$$

where $C\left(t\right)=\int_{0}^{\infty}c\left(t-n,t\right)P\left(n\right)dn$.

$n, P(n), \Delta\left(n\right)$ are given in the paper and not relevant for my question at this moment.

Normally, in this paper, the dynamics of capital accumulation are given as follows:

$$\dot{K}\left(t\right)=Y\left[K\left(t\right)\right]-C\left(t\right)$$

In fact, my question is trivial but I could not be sure.

Is the part with bracket in Lagrangian comes from $\dot{K}=0$ which gives us the equality $Y\left[K\left(t\right)\right]=C\left(t\right)=\int_{0}^{\infty}c\left(t-n,t\right)P\left(n\right)dn$ ?

As the Lagrangian is for a "static" problem, I think it makes sense but I can not be sure if this is the case.

Any suggestion or hints are welcome.


texts: Do the stock performances of various companies have a measurable correlation with exchange rate?

texts: For example if the values of big companies in a country decrease, will the value of that country's currency measurably decrease?


texts: Why does South Korea's economic curve is much steep than that of China?

texts:
GDP per capita (constant 2010 US$) - Japan, Korea, Rep., China

Why is South Korea's GDP per capita growing slower than Japan?
Why is China's GDP per capita growing slower than South Korea?
All of these three countries have almost a similar population growth rate which is falling.


texts: Why do we say that trade and specialization according to comparative advantage lead to one-time increase in PPF of given country?

texts:
PPF shows us different combinations of goods that we would be able to produce if we employed existing resources of our country in the most efficient way.

One thing to notice about PPF: It's completely independent from our agregate utility function. For an example, if we have only two types of goods, wine and cheese, then maximum production of only cheese (like 100;0) will be on our PPF, even if we would want to have some wine too or if we don't need so much cheese.

Now suppose we (Cheesetopia) trade with another country (Winetopia) and specialize in our comparative advantage (cheese). We will be able to consume, for an example, 50 cheese and 50 wine at the same time, a feat impossible for us under autarky. We would be consuming outside our production capabilities, outside of our PPF. But our current production would be on our good old PPF.

Thus I fail to see how free trades causes any shift in PPF or causes a country to produce outside its PPF. At the least for the Ricardian model.


texts:
In a nutshell

Supply-side economists support reductions in tax, because government revenue can increase (according to the Laffer curve) and businesses and consumers will be incentivised to invest (Mohr, Fourie, et al 2009:470). However, I do not see how is this supply-side. Tax and investment form part of the aggregate expenditure function, which determines aggregate demand (AD). So, surely a cut in tax will shift AD to the right?

More detail

I am currently trying to answer this question, related to cost-push inflation:

  Provide two different methods for which a supply shock may revert back to the long-run equilibrium, without any external intervention. Give reasons to each answer provided.

When researching this question (vide Mohr, Fourie, et al 2009; Parkin, et al 2010; Arnold 2012), I could not find any mention of a self-regulating phenomenon in a free-market economy which results in the output being at potential GDP in the long-run. The textbooks that I consulted all assume that the government will step in to resolve the supply shock and to prevent stagflation from occurring. I am thus answering the question by outlining different strategies that the government can take. The one strategy (which is more interventionist than the others) is to decrease interest rates, which increases AD. Another strategy is an anti-inflammatory incomes policy. The third strategy is what Mohr, Fourie, et al. call "supply-side economics" (2009:470), which includes cuts in government spending, deregulation and reductions in tax.

$$$$

References

Arnold, R. 2012. Macroeconomics: Economics 144. 2nd custom edition. Hampshire: Cengage Learning.

Mohr, P, Fourie, L, et al. 2009. Economics for South African students. 4th ed. Pretoria: Van Schaik Publishers.

Parkin, M., Kohler, M., Lakay, L., Rhodes, B., Saayman, A., Schöer, V., Scholtz, F. & Thompson, K. 2010. Economics: Global and Southern African perspectives. Cape Town: Pearson Education.


texts:
In context of European research projects, they invest into development of digital platforms.

Here is a source to give a definition  but not really, and every time people refer directly or indirectly to Apple, Google and Facebook.

Somehow, they try to replicate the business model, but not culture.

But, the question is: is there a formal definition of what digital platform is?


texts: Second welfare theorem and non-continuous preferences

texts: Are there any monotonic and strictly convex preferences that are not continuous but the second welfare theorem does not hold for them?


texts: How are cryptocurrencies reported in GDP?

texts:
Apparently the total market value of cryptocurrencies is currently close to $118 billion.

Is any of this reflected in GDP figures over the years? For example, if I start mining bitcoin today, I will consume electricity and produce bitcoins. How does this affect GDP?


texts: I am working at lists like these, filling them with numbers about UK's trade with it's biggest partners. The problem is, I can't find such data for the years before 2010. I know that the institution (Office for National Statistics - ONS) changed it's website in 2009 or so, and maybe it has to do something with that, but I can't find the data on the older site also.


texts: Monopoly pricing under constant elasticity of demand

texts:
While reading Ch. 24-Monopoly from Intermediate Microeconomics by Hal Varian (8 th edition), on pg. 441, he writes that a monopolist will never choose to operate where the demand curve is inelastic. I understand the argument, but, if we have constant elasticity demand curve with

$|\epsilon| < 1 $

then how this effect the monopolist's choice?


texts: Why use marginal rather than average tax rates in incentive analysis?

texts: Why do tax analysts worry about marginal tax rates, not average effective rates, in looking for incentive effects of taxes


texts: Do companies have non compete agreements between each other?

texts: Do companies also know for a better lack of words armistice? When searching for non compete agreements everything that comes up are agreements between companies and employees, but do whole companies also have non compete agreements with other companies? This is akin to price fixing, but would include more, since competition is not only restricted to price. I wonder if companies which are not allowed to merge because of monopoly laws have such non compete agreements. What are such non compete agreements called? Because right now this term seems to only apply to contracts between companies and employees.


texts: Price discrimination- how much is optimal?

texts:
I am of the understanding that as a general rule, price discrimination does not benefit consumers. Yet I can think of a situation where it does. Look at two countries, Australia and India. The price levels are very different. If there is no price discrimination, prices are identical. Suppose firm profits were higher if they priced out Indians and sold just to Australians.

I am of the impression consumer surplus will be higher if a firm could choose two different prices, one to India and one to Australia.

Under what conditions would partial price discrimination be beneficial?

I am thinking, for simplicity, this firm is a monopolist and there are >2 types of consumers, each with a different valuation of the good.


texts: Providing subsidies affects Marginal Private cost but not Marginal Social Cost?

texts:
According to the theory that I'm seeing on the internet and in textbooks, when a government wants to correct underproduction due to a positive externality of production, they can decide to subsidize the good.

The subsidy would reduce the costs of production for the firm, and hence shift their Marginal Private Cost to the right towards the Marginal Social Cost curve. In an ideal situation, the curve could be made to actually lie on the MSC curve, and the underproduction would be completely solved.

The problem I have with this is that nobody talks about why it's possible for the MPC to ever get closer to the MSC curve. The formula for Social Cost is Private cost + external cost (which is negative in the case of positive externalites of production). So if I were to reduce the private cost of the good, then it's social cost would also reduce. In other words, if I move the MPC curve forward, the MSC curve should also move forward by the same amount.

Doesn't that mean the only way to get the MPC curve to actually get closer to the MSC curve is to reduce the positive externality itself (which obviously isn't done)? Or is it that people already know that the MSC curve will move, so when they're talking about the MPC curve touching the MSC curve, they're talking about the old MSC curve and not the new one?


texts: How long do stock markets usually take to process complex new public information?

texts:
Here is a question that I've been thinking about for a while:

Theoretically, assuming investors are rational, a stock's price will be equal to its its intrinsic value (present value of discounted expected future cash flows). Therefore, when a share's price is $S_t$ at time $t$, and a new piece of information $I_t$ comes in that signals to investors that the expectation of future cash flows should go up, then at time $t+\epsilon$, the share price $S_{t+\epsilon}$ should immediately jump discontinuously to reflect this new fact.

However, in practice, investors' cognitive capacities are limited. Depending on the complexity of the information, $\epsilon$ could be longer or shorter.

For example, when news of an acquisition comes out, this will have various complex implications, for the stock price of the acquirer, the target company, and the competitors in both their markets. Compare this with the implications of a simple increase in the interbank rate set by the ECB for example, on the exchange rate between the Euro and the dollar.

The second information probably has a more simple effect on the exchange rate, than the first type of information has on the various companies that are involved.

Now my question is: In practice, how long do investors generally take before they've processed complex new information, like the announcement of a lateral acquisition deal? That is, how long till they've reached a new, relatively stable assessment of expected value?

I've seen data where the exchange rate adjusts literally within a matter of seconds to information about the ECB interest rate. But a reaction to such an acquisition should perhaps take days, instead of minutes?


texts: What portion of our annual deficit is financed by bonds?  Compared to say, treasury notes (such as checks and printed currency), or private lending?


texts: How to measure home value distribution in a city?

texts:
I would like to know how I can measure and compare the distributions of home values across cities. I have collected the following data for each city:

a) median price in the city;

b) number of housing units by value range, such as
500 units between \$100k-200k,
300 units between \$200k-300k,
600 units between \$300k-400k, etc;

c)Lower value quartile of housing units;

d)higher value quartile of housing units.

I know some of these cities have a lot high-end homes but few low-end homes while others have a lot of low-end homes but few high-end homes. Can I develop an index to measure that?


texts: References on mathematically rigorous general equilibrium theories

texts: I'm looking for a relatively recent survey on the state of the art for mathematical general equilibrium. I'm especially interested in questions of uniqueness, stability and dynamics. (I'm planing on giving a talk on general equilibrium at the level of Jehle and Reny to some mathematicians who have no economics background, and I'd like to be as up to date as possible.)


texts: How would you draw a MSB,MSC,MPB,MPC graph for this?

texts:
'farmers would get 100% subsidy for installing micro irrigation gadgets like dripper, sprinkler etc.  the farmers should make use of this opportunity to have better yield in sugarcane, coconut, oil palm, groundnut, grams, cotton etc. while saving a lot of water.'
I am very confused how the graph will look like for this situation where farers are given subsidies , which give them a better yield thus increasing supply and helping them save water.


texts: What does long-run level mean for exchange rate

texts:
I am reading a paper by the economist Dornbusch. It says that exchange rate will converge to its long-run level. The rate appreciate if prices are initially below their long-run level, and, conversely, if prices are initially exceed their long-run level.

Now what does long-run level mean?


texts: According to Wikipedia, Econometrics is the application of mathematics, statistical methods, and computer science to economic data and is described as the branch of economics that aims to give empirical content to economic relations. It sifts through mountains of data to extract simple relationships. Generally for positions like Analytic Consultant, Data Scientist, Statistician, Quantitative Analyst, background in maths, stats or econometrics is required. What separates econometricians in terms of what they learn in school and how they apply acquired knowledge in work? Or do these fields overlap so much that there is not much to distinguish?


texts: Simplest model of an economy exhibiting (hyper)inflation

texts:
I would like to find a minimal mathematical model for describing financial crises of the type that produces hyperinflation.

Here's a naive attempt, just to give the idea of what I'm thinking of.

There are n actors, each initially has 1 dollar. There are two operations:

actor i can transfer x (potentially a fraction) dollars to actor j
actor i can make promises to actor j (maybe of the type: if you transfer 1 dollar to me today I will transfer 2 dollars to you tomorrow).

One can then define the quantity of money in various ways: the first way is that it is always n. Then there is no inflation of course. Or one could define it to be the sum of money that people owe to you. Et.c. I don't know what is the most reasonable defintion.

The model ignores commodities (one can suppose that transfers of dollars involve transfers of commodities, but the latter are ignore). I would the following to happen: I postulate some rational behavior and preferences on the actors, and the result is that the quantity of money has dramatic behavior as a function of time.

I suppose many people have attempted to do this, but I don't know how to find it in the literature (I'm not an economist).


texts: Why are bond yields so low when Fed is cutting rates?

texts:
Fed cut its rates for the first time in 10 years in July and it is about to cut the rates at least by 25 basis points during its September meeting.

Usually, when Fed cuts the rates the bond yields should go up as the economy will expand instead of contracting. But why are the yields of the bonds so low?


texts: Can we see the computer age in the productivity statistics?

texts:
Robert Solow famously said:

  You can see the computer age everywhere but in the productivity statistics

This quote is often linked with the productivity paradox (https://en.wikipedia.org/wiki/Productivity_paradox), such that we don't see mayor productivity growth from new tech.

But there is something I don't understand. Economic growth is about percentage growth. A graph of GDP looks like an exponential function. So nominally a 5% growth is much much higher when the economy is that of the US than that of Malawi.

So we might not see an acceleration of economic growth, but we at least see continued growth, which allegedly becomes harder and harder as economies develop. This is the idea behind Solow's model, where without an exogenous percentage growth in A, output converges to the steady state.

So I don't really understand the problem. To me, computers are clearly visible in a growing economy. But this seems to be unsatisfactory for Solow, who wants to see what, a 10% growth rate?

What's wrong in my thinking?


texts: Is it correct to say that wealth is "destroyed" when an asset bubble bursts?

texts:
I was reading this article from the World Economic Forum, when I came across this passage:

  When the global equity and real estate markets hit their lowest points in March 2009, \$34.4 trillion of global wealth was destroyed. US households lost almost \$8 trillion in the stock market, on top of the \$6 trillion loss in the market value of their homes.

Is it fair to truth to say that the wealth was "destroyed"? I ask this because that type of phrasing gives the impression that the wealth was really there at one point, and that it wasn't merely an illusion.

I can think of a few reasons why this may be true:

The wealth really did exist elsewhere at first, but when resources were diverted from other assets/resources and invested into real estate – which turned out to be a bubble – those resources had been spent on assets that weren't productive (i.e. didn't give a positive return). The wealth was moved over from valuable assets to less valuable/worthless assets. Capital and labor was spent for nothing.
Wealth is never really expressed in intrinsic "real" terms, but is always a subject of valuation. Wealth is only worth what people value it to be, i.e. what resources they would give up for a transaction of that wealth.

So, is it correct to say that wealth can be destroyed if there was nothing substantial to back it up?


texts:
Three firms are in Cournot competition. The inverse demand curve is denoted p(q) where p is the price if a total of q units are produced. Assumptions are: p(0)>0 and p'(q)<0 and p''(q) $\le 0$ whenever p(q) >0. The firms have identical and continuous cost functions, c($q_i$) >0 for all $q_i$>0. Assume c'($q_i$)$\ge 0$ , c''($q_i$) $\ge$ 0 for all $q_i$ $\ge 0$ and p(0) > c'(0). We consider pure strategy Nash equilibria. For interior quantities , derive firm i's first order condition.  Do you agree that all firms must supply the same quantity in any equilibrium? Do you agree that there is a unique equilibrium? Prove and explain your answers.

What I did is that

First I agree that all the 3 firms will supply the same quantity in the equilibrium and this equilibrium is unique. The Profit Maximization Problem for firm 1 is:

max  p($q_1$ + $q_2*$ + $q_3*$)$q_1$ -c($q_1$)

and the FOC is :

p'($q_1$ + $q_2*$ + $q_3*$)$q_1$ +p($q_1$ + $q_2*$ + $q_3*$) -c'($q_1$) = 0

If i had the inverse demand function and the cost function, I could have derive the best response function. But now the only that I can say is that $BR_1$($q_2$*, $q_3*$). Similarly for the other two firms : $BR_2$($q_1*$, $q_3*$) and $BR_2(q_1* , q_2*$). But I stuck to this point and I cannot show how this quantities are equal.
Any help will be appreciated. Thank you.


texts: What would happen to the economy if the Fed's discount window completely stopped?

texts: I'm curious what would happen the the US economy (and perhaps others) if the overnight lending capability of the Fed ceased operation for some reason (perhaps a cyber attack) for a non-trivial period of time (a week or more).  What are the possible implications of that?  Would there be panic, massive loan defaults, lack of operating capital or other nasty things?  Also, for the sake of argument, that we didn't know how long the overnight lending capability of the Fed would be down and only speculated at the reason.  Would banks just weather the storm for a week or so, or would thing get ugly?


texts: A question about the property of quasi-linear preference

texts:
In case of quasi-linear preference, why would one unit more of the numeraire good (good 1) give the same additional utility as spending an additional amount of wealth equal to the cost of one unit of good 1 on all other goods no matter how much unit of this good 1 have already been present in the consumption bundle? How would one prove it? (Interpretation would also be welcome.)

It seems that it has something to do with the fact that utility maximization implies identical marginal utility per unit currency spent on each good.


texts: What is the tolerable level for multicollinearity? and possible remedial measures for it?

texts:
My data has issues of multicollinearity. Upon estimating, I found out that my data have high levels of VIF In however I was confused as to what level of VIF can I possibly ignore the issue of multicollinearity.

As I search the web, some says that it should be less than 2.5, others 10 or 14.

My VIF results is this:

varA: 18.74
varB: 11.14
varC: 10.03
varD: 5.99
varE: 2.86

What step should I probably do to address the issue? I have fixed sample size and I can't log transform my model since one of my variables ranges from a negative to positive number.


texts: With a depreciation of real exchange rate, what happens to the trade balance equilibrium output?

texts:
Let the real exchange rate $Q=\frac{P^*e}{P}$, where $P^*$ is the 'world' price level (everything with '*' is of the 'world'), $P$ is the domestic price level, and $e =\frac{\text{Home Currency}}{\text{Foreign Currency}}$ the nominal exchange rate. The domestic country doesn't influence economic world fundamentals.

By depreciation, I mean an increase in $Q$.

In real terms, I'm going to define:

Exports: $X=\sigma(Q)y^*$, with $\sigma(Q)$ being a function of $Q$ that gives the share of the domestic country in world trade. With an increase in Q, foreign goods are more expensive relative to home goods, so home share of world trade increases.
Imports: $Y=Q m(Q)y$, with $m(Q)$ being the marginal propensity to import (increase in Q $\rightarrow$ decrease in $m(Q)$), and $y$ domestic output.

From the above definitions for exports and imports, we're able to define the trade balance equilibrium output $y_{BT}=\frac{\sigma(Q)}{Qm(Q)}y^*$.
So, assuming the Marshall-Lerner condition, we know that a depreciation in $Q$ will make the $y_{BT}$ to increase.

I'm reading a textbook that states: assuming the world real interest rate $r^*$(=domestic real interest rate $r$) is constant, when the $Q$ increases, $y_{BT}$ will increase by more than the domestic output $y$.

Well,I'm trying to check this assertion.

For that I define IS (with keynesian consumption function) as $y=\frac{1}{1-c_1(1-t)+Qm(Q)}(c_0+I(r)+G+\sigma(Q)y^*)$. In this definition I'm trying to keep everything simple, i.e. no lags for the interest and exchange rate.
So, when there's a depreciation in $Q$ from $Q_1 \rightarrow Q_2$, we have

$\Delta y_{BT}=\left(\frac{\sigma(Q_1)}{Q_1m(Q_1)}-\frac{\sigma(Q_2)}{Q_2m(Q_2)}\right) y^*$
$\Delta y=D(\frac{1}{1-c_1(1-t)+Q_2m(Q_2)}-\frac{1}{1-c_1(1-t)+Q_1m(Q_1)})+(\frac{\sigma(Q_2)}{1-c_1(1-t)+Q_2m(Q_2)}-\frac{\sigma(Q_1)}{1-c_1(1-t)+Q_1m(Q_1)})y^*$

where $D$ is the spending independent of $Q$.

From this, how we can conclude $\Delta y < \Delta y_{BT}$?

Any help help would be appreciated.


texts:
If a company files for bankruptcy, how come its stock still trades ?
E.g. On June 17, Wirecard was valued at more than $14 billion. Eight days later, it filed for the German equivalent of bankruptcy. Its stock is still trading. Why is it not suspended as is the case for Finablr ( fraud probe ). What is the usual practice ?
Can we say that Wirecard defaulted ? i.e if they filed for bankruptcy earlier.


texts: Methodology of Estimating Economic Costs?

texts:
To be specific, I am currently devising an honours thesis proposal to estimate the effects of a lack of competition in consumer electronic repair markets on variables such as firm profits, consumer social welfare, and environmental outcomes.
The issue is, I am not sure of the methodology of doing so (I am an undergrad so excuse my lack of technical knowledge). I would presume I need data on my choice variables in an environment with a competitive repair market, and then take the difference to quantify the cost. However, is this possible without a suitable example of a competitive repair market (eg. for iphone repairs)?


texts: How to specify a Diff-In-Diff Regression with multiple time periods?

texts:
I'm working on analysing experimental data for a thesis project. The data consists of subjects performing the same task over five rounds, and I'm interested in the difference in trends between subjects in two different treatments. The two treatments are identical until round 3.

I planned on using a diff-in-diff model to estimate the difference of Effort levels of subjects across these treatments. The problem is, I have five rounds, two of which are before-treatment and three of which are after-treatment. Currently, I'm using this specification, but I'm not sure if it's correct:

$$
Effort_{it}=\beta _{0} + \beta_{1}Treatment_{i}+\sum_{n=2}^{5}\beta _{n}Roundn_t+\beta_6Treatment*After_{it}
$$

Where treatment is a dummy for being in the treatment groub, Roundn is a dummy for being in Round N, and Treatment*After is an interaction dummy for being in the treatment group after round 2 (when the treatment "begins").

I'm confused mostly on what to do with the different time periods. Would it be best to use dummies for each round like above, or to just include a Round variable that is equal to the number of the round. Also should I just include one interaction term, or one for each round?


texts:
Consider a preference relation $\succeq$ on $X=\mathbb{R^2_{+}}$. If $\succeq$ satisifies:
$$
\begin{align}
&1.\mbox{ }(a_1,a_2)\succeq (b_1,b_2)\implies(a_1+t,a_2+s)\succeq (b_1+t,b_2+s),\forall t,s\\
&2.\mbox{ }a_1\geq b_1 \mbox{ and } a_2\geq b_2 \implies (a_1,a_2)\succeq (b_1,b_2)\mbox{ (and the analogous for }\succ\mbox{)}\\
&3.\mbox{ Continuity }
\end{align}
$$
Then: exists a linear representation for $\succeq$.

Could anyone give me some hints on how to prove this?

Thanks for helping! :D


texts: R's felm() fixed effects vs. factor() within lm()

texts:
I am wondering why using felm's fixed effect option versus using the factor() function is different? I was under the impression they were one in the same?
I am running a panel regression where i is the a unique FIPS code and t is every quarter. The variable of interest, a binary of whether the FIPS flooded or not, is constant across time. However, my y, housing prices, varies each with each t. When I use felm()'s fixed effect option for FIPS, flooded is NA. However, using factor(FIPS), gives an estimate for the variable of interest.
I'm under the impression felm()'s fixed effect function is working correctly. Since being flooded is time constant and has no variation within a given FIPS, the fixed effect is absorbing the effect of flooding. However, I'm not sure why factor(FIPS) within the regression would return an estimate since a fixed effect essentially the same thing?


texts:
How do such digital currencies such as Bitcoin affect the independence of Central Banks?

Thank you


texts: Why are oil prices increasing in India despite countervailing trends in the international market?

texts: Crude oil price is decreasing in the international market. But in India, the price of petrol and diesel is gradually increasing. Why?


texts: If Germany is the largest exporter, why do Chinese products pervade the the US market?

texts: Despite Germany being the third larger exporter in the world, I have not once seen German products on online retail sites such as Amazon.com, NewEgg, BestBuy, or any retailer in the US really. Why is this the case? Amazon in particular is plagued with Chinese counterfeits, so why haven't market forces led to the appearance of an Amazon alternative, focused on original German (or Japanese) products, for customers that are more quality-sensitive than price-sensitive?


texts: Direct revelation mechanism's sets of strategies and types

texts:
Mas-Colell, Whinston and Green in Microeconomic Theory describe the direct revelation mechanism as it follows:

The employed notation is the following:

$θ_i$: Player i's type

$Θ_i$: Set of types for player i

$S_i$ Set of strategies for player i

f: Social choice function

g: Mechanism outcome function

X: Set of collective choices

If $S_i$ is a set of strategies and $Θ_i$ is a set of types, how can $S_i = Θ_i$ ?


texts: What would happen if the US defaults on its debt?

texts:
As has been widely discussed already, the situation in Greece is considered more serious than in the US, as they have dollar-denominated debt and can only print Greek currency. The US, has the benefit of World Reserve Currency status. All of that does make sense, but I'm thinking there might be more to the story. So I would like to invite speculation on the consequences if the US one day defaulted on its debt.

A country going bankrupt is hardly a novel event, but few countries of the wealth and influence of the US are can be found in historical precedent. One of the only examples that came to mind is when Russia defaulted in 1998. That had global repercussions to North and South America and beyond. Also it destroyed the business model of Long Term Capital Management, an investment fund headed by a team of nobel-prize winning economists and mathematicians.

World Reserve Currency aside, is the Russian default a fair comparison? What different things might we expect if it were the US to default in the coming years?


texts: Which utility function yields a constant price elasticity of demand function?

texts:
How do I know which utility function I can use to find an isoelastic demand function, e.g., $x(p)=Ap^a$?
And similarly, which cost function can I use to find an isoelastic supply function?
Does it work through trial and error, or is there a particular method?


texts: Ultrafilters in Social Choice Theory Literature Request

texts: I am an undergraduate math major who is intrigued about social choice theory. I am in the early stages of planning my senior project and was wondering if anybody had some recommendations of literature about the applications of ultrafilters in social choice theory, along with any other literature you think may be beneficial. The more math the better! Thanks in advance!


texts:
Question
What would happen to Eurozone and EU if Italy defaults on its debt?
Background & disclaimer
This direct question is an attempt to amend the more expanded question.
Given that this question is not closed speculative, my hope is this one is equally well posed.


texts: Do any UBI Proposals include a Universal Basic Inheritance UBI† Component?

texts:
Are there any UBI proposals that include a 'Universal Basic Inheritance' UBI† Component?
This could be either a lump sum that is received by citizens when they reach the age of majority, or just folded into the existing weekly or monthly payment.
The UBI† would be funded by inheritance tax.


texts: Which macroeconomic issues can be considered "curable" and which can't?

texts:
I like the comparison between economics and medicine. Both study complex phenomena and both are limited in ways to run experiments (though medicine has much more freedom here).

We all know medicine has found a cure for lots of previously dreadful diseases, like plague, flu, TB. Doesn't mean that no one dies from TB now, but it's a problem with medical service in developing world, not with medical science. And there are issues medicine is still struggling with (AIDS, cancer, aging, etc.)

By analogy, can you give examples of macroeconomic issues which are proven to be curable if properly treated and ones not so curable?


texts:
Consider an exponential discount factor $\delta\in(0,1)$.

Similarly, consider an exponential discount $\textit{function}$: $g(t)=\delta^t$.

Then, is defining the discount $\textit{rate}$ as below a correct way of defining one? My intuition is that the discount rate represents the rate at which the discount function decays:

$\rho=\frac{\frac{-dg(t)}{dt}}{g(t)}.$


texts:
Let's assume that there is a firm that produces a single good, $q=f(x)$, where $x$ is a single input. The firm can sell it on the market at a  price $p$. It's production cost is given by a cost function $c(x)$.

In the most microeconomics textbooks the profit maximization problem is expressed as

$maxΠ=max\{pq-c(x)\}$, where $q$ is assumed to be linear function of $x$.

I am wondering if there is a textbook (or a resource in general) in which profit function is expressed as

$Π=pf(x)-c(x)$, where $f$ is concave in $x$ and $c$ is convex in $x$.


texts: Graphically detecting heteroscedasticity in OLS

texts:
I wonder how do I check heteroscedasticity in the OLS regression model using graph.

What kind of plot should I use? Plotting residual against what? Independent variables?


texts: If US capital income taxation were eliminated, which ordinary income tax brackets would be equally progressive?

texts:
This question only considers federal taxes in the United States. Also, by "capital income" I am including dividends, interest, capital gains, corporate incomes and estates.

The Chamley-Judd result states that under certain assumptions, capital income should be untaxed to maximize economic efficiency. More recently work has called some of those assumptions into question and suggested that a positive capital income tax is optimal, but I believe that there is more or less of a consensus across economists that from a pure economic efficiently standpoint, capital income taxes should be significantly lower than they currently are.

Nevertheless, many economists oppose lowering the capital income tax rate (possibly offset by a uniform increase in the ordinary income rates) on fairness/distributive grounds, as people who earn capital income tend to be wealthier than average, so the capital gains tax is significantly progressive (at least in the short term, when we can neglect changes in economic growth), and so such a change would probably be regressive.

Opponents of capital income taxation respond that any decrease in the overall progressivity of the federal tax system brought about by eliminating capital income taxation can simply be compensated for by making the ordinary income tax rates more progressive. While there would certainly be individual winners and losers under such a change (e.g. people who earn significantly more or less of their income from capital than most people at their same income level), in principle the distribution of effective overall federal tax rates across the entire US population could be left completely unchanged by sufficiently precise tweaks to the ordinary income brackets. Such a change would boost the tax code's efficiency while leaving its progressivity unchanged. (I'm assuming that everyone pays their taxes honestly and neglecting any changes in tax evasion that this change might cause.)

If all capital income taxation were eliminated in the US, how would the ordinary income tax brackets need to change in order to keep the federal tax system's overall progressivity the same?


texts: if the richest 85 people give away all their money?

texts:
I once heard a fact that the richest 85 people are as wealthy as half the world's population put together. My question is, what does that mean?

Does it mean that there is some feasible method in which these 85 people can double the wealth of half the world's population? What would happen if they decided to do so? How would they go about doing this?


texts: Very elastic supply + very inelastic demand

texts:
Suppose we have a very elastic supply curve and a very inelastic demand curve. Further suppose there is a decrease in input prices which shifts the supply curve outward. By taking an extreme representation (vertical demand curve and horizontal supply curve), I can see that it will be mainly price that is affected: the equilibrium price decreases while equilibrium quantity hardly changes.

How can I show this more intuitively or mathematically?

Edit: Just thought about this. I don't think the elasticity of the supply curve matters. Only the elasticity of the curve that isn't shifting does. Is this the answer?