texts: Sources of Growth and co-integration: production function approach

texts:
I am experimenting with time series data to gauge the importance of factors of production i.e. labour force, capital stock, energy, land, etc. in output growth. One venue I am looking into is the estimation of co-integration model within production function framework.

Assuming Cobb-Douglas function for the functional form, I wonder what
could be a very good proxy for the technical change or TFP. Some studies include trend term in the cointegration equation to account for TFP/technological change.
I could back out the TFP or Solow residuals using growth accounting method,
but I wonder if I can use the derived TFP series in the cointegration
equation.

Highly appreciate your thoughts!


texts:
I am trying to solve the following problem:

  Debtor issued a bond on 20 000€ (including interest rate) with
  maturity rate of 8 months and interest rate of 8% per annum. Month
  later, the creditor sold the bond to a different person, who discount
  the bond with 9% interest rate p.a.

  How much did the creditor receive for the bond?

My solution is the following:

$FutureValue$ $= P(1+i*t*t/12) = 20000(1+0,08*8*8/12) = 28533$

Is it correct? Thanks


texts:
Finland plans to give every citizen 800 euros a month and scrap benefits. Will it become successful?

http://www.independent.co.uk/news/world/europe/finland-plans-to-give-every-citizen-800-euros-a-month-and-scrap-benefits-a6762226.html


texts:
Ms. A earns 25,000 dollars in period 1 and 15,000 dollars in period 2. Mr. B earns 15,000 dollars in period 1 and 30,000 dollars in period 2. they can borrow money at an interest rate of 200% and can lend money at an interest rate of 0%. They both like consumption in period 1 ($C_1$) and consumption in period 2 ($C_2$) and their preferences are such that their chosen consumption bundles will always lie on their budget lines.

a) Write down the equations of their budget constraints and draw their budget lines in the same figure by plotting consumption in period 1 ($C_1$) on x-axis and consumption in period 2 ($C_2$) on Y-axis.

(b)Given the income profile and the market interest rates, Mr.B chooses to borrow 5000 dollars in period 1. Give an example of a consumption profile (i.e, $C_1, C_2$) such that, if Ms.A chooses this profile we know for sure that Ms.A and Mr.B have different preferences for consumption in period 1 ($C_1$) and consumption in period 2 ($C_2$). Give an explanation.

(c)Suppose now that ms.A and Mr.B have the same preferences for $C_1$ and $C_2$ and as in part (b), Mr.B borrows 5000 dollars in period 1.

i. Suppose that ms.A chooses to be a lender in period 1. Find out, with a clear explanation, the maximum amount that she will lend in period 1 consistent with the fact that they have the same preferences for $C_1$ and $C_2$.

ii. Explain whether Mr.B is better off than Ms.A

my attempt:

a) for A:

$C_2^A=(Y_1^A-C_1^A)(1+r) + Y_2^A$

for borrow this becomes: $C_2^A=(C_1^A-25,000)(1+200/100)+15,000$

or, $ C_2^A=3C_1^A-60000$

for lend this becomes: $C_2^A=(25,000-C_1^A)(1+0/100)+15,000$

or, $C_2^A=40,000-C_1^A$

my idea was to supersede one over the other and draw the kinked budget line but the borrow budget line in this case is totally below the x-axis and similarly for Mr.B. So, my initial plan fails. I'm clueless about (b) and (c). Please shed some light. Thank you in advance!!


texts: Why did the hybrid Phillips Curve become flatter (as empirical data shows) after the crisis?

texts:
The Phillips Curve equation is:
$$\pi_t=\pi_t^e + \beta_1 (\beta_2 Y_t + (1-\beta_2) Z_t) + \varepsilon_t^\pi$$
where $\pi_t$ is the inflation, $\pi_t^e$ is the expected inflation, $Y_t$ is the output level, $Z_t$ is the real exchange rate, and $\varepsilon_t^\pi$ is a stochastic shock.

In a small open economy (semi-structural framework), the impulse response functions to a domestic demand shock are the following:

After the crisis, the Phillips Curve became flatter. My question is, how can one interpret the change in the slope of the Phillips Curve after the crisis?


texts: How can a one currency gain against the other if it is pegged aginst it?

texts:
I have been reading about when the Swiss national Bank decided it would no longer peg its currency against the euro and this caused massive turmoil in the markets.

But my question was before this the Swiss Franc was pegged against the euro. So how is it the you could have place a bet the euro would rise against the swiss franc when the Swiss Franc was pegged against the euro . Surely they would rise by the same amout.


texts: Does learning economics lead to richness?

texts:
I have started to learn economics from Adam Smith's "Wealth of nations" because I think that learning economics (or narrow fields of it) will allow me to become rich.

Does knowing economics allow me to make money?


texts:
I want to find out how money flow works in the country.  Imagine I leave in country X. Country has 100$ in general, 50 dollars have a government, 50 dollars have peoples. My part is 10 dollars, this means that other peoples have 40 dollars,  I am an entrepreneur,I've made goods on 10 dollars, peoples, buy it, they have spent , 20 dollars for my goods, they have less money on 20 , Then I pay tax from this amount , for example 5 dollars, let's do the math

General - 100$
government - 50$
me - 10$
peoples - 40$

I've earned 20$ , peoples spend 20 dollars, I've paid 5 dollars tax

general - 100$
government = 55$
me - 25 dollars
peoples = 20 dollars

country pay salary to peoples to return this 20$ to peoples back

general  = 100 dollars
government = 35 dollars
me = 25 dollars
people = 40$

This mean that governent (budget) , have less money, and even If I will pay in future some tax from next iteration , it will not cover 20$ dollars which they paid to people, how then government compensate it ? Or I've misunderstood the process ?


texts: Understanding Rabin's Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion

texts:
I am trying to understand Rabin's Diminishing Marginal Utility of Wealth Cannot Explain Risk Aversion.

I am struggling to completely understand the following:

  Suppose you have initial wealth of $W$, and that you reject a 50-50 lose
  10/gain 11 gamble because of diminishing marginal utility of wealth. Then it must be that
  $U(W+11) - U(W) ≤ U(W) - U(W-10)$. Hence, on average you value each of the dollars between $W$
  and $W+11$ by at most $\frac{10}{11}$ as much as you on average value each of the dollars between $W$ and
  $W-10$.

  By concavity, this implies that you value the dollar $W+11$ at most $\frac{10}{11}$ as much as you value the dollar $W-10$.

  Iterating this observation, if you have the same aversion to the lose
  10/gain 11 bet at wealth level $W+21$, then you value dollar $W+21+11 = W+32$ by at most
  $\frac{10}{11}$ as you value dollar $W+21-10 = W+11$, which means you value dollar $W+32$ by at most
  $\frac{10}{11}\times \frac{10}{11} \approx \frac{5}{6}$ as much as dollar $W-10$.

May someone please provide the mathematics to the bolded italic part in the quote above?

Thank you very much

Gus


texts: Where can I find an endogeneity proof for bias by LLN?

texts: It is intuitive that E[xe] is non-zero but the result E[xe]=sigma(x)*sigma(e)*corr(xe) seems odd. Please help point me in the right direction.


texts: Difference between short run and long run supply curves?

texts: We know that in short run supply curve is horizontal which means that prices remain rigid while quantity of supply adjusts according to demand. However, in long run this reverses. I know about some explanations to these different supply curves and they sound contradictory. Like in short run there are wage contracts, labor laws etc so prices cannot adjust but still I am not clear what are the exact reason of such different supply curves.


texts: Efficiency-related reason for net social benefits from income taxation

texts:
Found a question that I cannot really find an answer to. I am being asked to consider an economy with many households and assume that the government can only generate revenue by taxing households' labor income. I should also assume that the government is not constraint to use constant tax rate.

Now, in this set-up I am being asked to discuss one efficiency- and one equity-related reason that there can be "net social benefits" from income taxation.

Normally, I'd argue that government faces a tradeoff between efficiency and equity: as higher levels of taxation on the rich create revenue that can be used to redistribute to the poor, which raises social welfare because the marginal utility of income is (assumed to be) higher for the poor than the rich BUT at the same time taxation reduces the incentive to work, and so leads to labor supply below the optimal level.

What could be considered an efficiency-related reason for labor income taxation?

The only thing kind of connected to efficiency I can think of is the argument that taxing capital can affect investment more than taxing labor can actually affect labor supply. (I believe I read somewhere that it is capitalists' point of view in a debate whether to tax workers or capitalists.) So therefore, if we care about efficiency, we should probably tax labor income rather than capital income. But does that really answer the question?


texts: Fundamental Theorem of Asset Pricing (Linear Algebra)

texts:
I saw this question in a textbook that I was recently reading and don't really know how to aprpoach this problem.

Let $H$ be a finite dimensional vector space with inner product ($\cdotp$, $\cdotp$). Suppose $C\subset H$ is a closed convex cone such that $C\cap(-C) = \{0\}.$ Then there exists a nonzero vector p such that ($p \cdot x$) $>0$ for all nonzero $x \in C$. The book suggests to use the proof of the fundamental theorem of asset pricing and make a substitution. Could anyone let me know how to answer this problem?

(Edit: This is the theorem in the textbook with the definition of present day value.


texts: Can a government or central bank work to reduce inflation without hiking interest rates and causing the currency to appreciate?

texts:
Since trying to lower inflation will have some undesirable consequences, such as currency appreciation, which hurts exports, should governments and central banks keep hands off on inflation?
But exports would become uncompetitive anyway when inflation is high (as prices increase).
In a high inflation scenario, what should government or central bank do to protect exports (in an export dependent economy)?


texts: Econometric analysis of mergers from a company's point of view

texts:
I am learning about financial analysis of mergers and acquisitions: most of the models are based on accounting principles and simple assumptions.
I wanted to delve deeper into more statistical/ econometric methods to analyse mergers from a company's point of view: how would profitability be affected, synergies, debt etc., what variables are usually taken into account etc. But I have no idea of how that is done (although I have studied econometrics before, I haven't studied it in this context).
I read an article by Christopher Rybak and Loren Smith titled "the Use of Econometrics in Merger Reviews" but this article is not from the company's point of view, it is from the regulator's point of view instead, focusing on the merger's impact on market competitiveness, anti-trust etc. They say that in this case, three things are usually used: Demand Estimation and Merger Simulation, Event Studies and Price-Concentration Studies and then goes on to explain them.
I wanted to know if similar to the regulator's point of view, there are also commonly used practices to analyse mergers from the company's point if view, and where can I learn about them


texts: Perfect substitute- Pepsi and Coca-Cola and Imperfect substitute- Tea and Coffee . Here why tea and coffee considered imperfect substitute?


texts: What is the reason why ARIMA(0,1,0) on $y_t$ and ARIMA(0,0,0) on diff($y_t$) are not identical time-series models?

texts:
I studied at BA level, that ARIMA(0,1,0) on $y_t$ and ARIMA(0,0,0) on diff($y_t$) are the same models. I am doing the Box–Jenkins model estimation on the historic data of US unemployment rate.

My results (in R):

> arima010a

Call:
arima(x = munrate, order = c(0, 1, 0))

sigma^2 estimated as 19.23:  log likelihood = -2126.56,  aic = 4255.11
> arima010b

Call:
arima(x = diff(munrate), order = c(0, 0, 0))

Coefficients:
      intercept
         0.0708
s.e.     0.1618

sigma^2 estimated as 19.23:  log likelihood = -2126.46,  aic = 4256.92

As you can see, the information criterion (AIC) differs and the $log(L)$, too. My question is, why do they differ in the two model?

I'm looking forward to any answer.

I tried the same later in gretl, and there wasn't any difference between the two models.


texts: Rate of convergence and asymptotic dominance in $\Vert x \Vert \gg \Vert(\hat\beta-\beta)\cdot u\Vert $

texts:
Let $\Vert A \Vert$ denote the spectral norm of a random matrix. Let $x$ and $u_k$ be N$\times$T matrices. Denote $\beta \cdot u = \sum_{k=1}^K\beta_ku_k $, where $\beta$ is a K-vector and $\beta_k$ a scalar. Further, let $\Vert x \Vert = O_p(\sqrt N)$ and $\Vert u_k \Vert = O_p(\sqrt{NT})$ for all $k=1,...,K$ as N and T grow at the same rate.

Why do we have $\Vert x \Vert \gg \Vert(\hat\beta-\beta)\cdot u\Vert $ asymptotically if the convergence rate of $\hat\beta$ to $\beta$ is faster than $\sqrt N$?


texts: Where to learn financial modelling concepts and skills?

texts:
I'm looking to learn more about the financial analysis of a business. Things like unit economics calculation, income statement, free cash flow analysis, a valuation calculation, etc.
Can you recommend a website or book that has simple explanations, formulas for these concepts without lengthy useless explanations?
Thank you!


texts: Does cornering a market has any "bad" economic consequence?

texts:
(Not sure If this question is suited for here or it should be asked at money or law SE)
As the title reads, Does any specific economic inefficiency arises when someone corners or tries to corner a market e.g. a commodity like silver?
My limited knowledge as a economics undergraduate student tells me that if the cornering leads to higher demand, then in a perfect market that would lead to a increase in supply (and the price could go up or down or stay flat depending on the industry costs).
For cases when perfect competition is not present or the supply is already limited (like precious metals) I can't be sure what could go wrong other than that the party who cornered the market can establish a monopoly on supply now.


texts: Is there any academic paper documented about firms' trade credit collection approach?

texts: I am looking for some papers that documented some trade credit collection approaches, especially when the market becomes more competitive. In another word, what should the managers do to improve the efficiency in collecting the account receivable?


texts: Finding an intercept on percentage based data and using dummy variables

texts:
How do I find an intercept on a percentage data? My data has percentage of grades ( I have converted to numbers where $A^*=8, A=7,B=6...U=0$) by ethnicity and other indicators which I want to test for using dummy variables. For example 90.3% of Chinese students got $A^*-C$ grade, Mixed race students got 87.3% etc. How do I interpret this to get an intercept? I have chosen the median 32.5 as the grades are 5 $A^*$ to $C$ (between $A^*(8\cdot5=40)$ and $C( 5\cdot5=25)$. Is the use of median in this case sensible?

My equation is going to be

$y =b_0 +b_1 +b_2+b_3+b_4+b_5+b_6+u$

where $y$ is the grade, $b_0$ is the median ( constant), $b_1$ is the free school meal, $b_2$ is Chinese, $b_3$ is Black, $b_4$ is Asian, $b_5$ is male,    $b_6$ is female, and $u$ is the error term.
White is the default.

Therefore if a Chinese male pupil does not get free school meals(proxy for poverty)it is $b_0 + b_2 + b_5$.

My question is as above, does my use of median make any sense and secondly since I already know that Chinese pupils perform better than the rest of the group do I need to use the percentage difference or use the dummy binary variables.

I want to simply find out the effect of poverty and race on the pupils expected grades. I do not have access to individual grades or panel data for income etc hence why I want to use the free school meal.

Thanks again for your answers.

Please see image below.


texts: Are there some nice properties for a finite two-player game having an increasing differences utility and a decreasing differences utility?

texts:
Nice properties of the set of Nash equilibria can be shown for supermodular games(see here). But for a two-player game in which

Strategy spaces for two player, $S_1$ and $S_2$ are finite, and both of them are subsets of $\mathbb R$.
$u_1$ exhibits increasing differences while $u_2$ exhibits decreasing differences.

What can we say about it?


texts: Equivalence of definitions of upper contour sets

texts:
Mas-Collel, Winston and Green's Microeconomic Theory (3rd editions) offers two definitions of the upper contour set:

How can the equivalence between the two definitions be proved?


texts: Calculating the cost of a year without land-tilling

texts:
The motivation to this question is the Biblical commandment of Sabbatical year, in which the land should be allowed to rest and should not be cultivated. I am trying to estimate how much would it cost to actually implement this commandment in an industrial economy.

For concreteness, I use data about the Israeli agricultural product; my main problem is the interpretation of the data, which is probably applicable in other countries.

Here are the relevant data for 2013 (rounded and in billions of ILS):

INPUT (excluding compensation for employee jobs) = 19.7. Of these: Input (purchased and from intermediate produce) = 17.5;  depreciation = 2.2.
OUTPUT: 30.0. Of these: crops = 18.1, animals = 11.9 (note that only land-cultivation is prohibited, while growing animals is permitted).
DOMESTIC PRODUCT: Gross = 12.5, Net = 10.3 (the difference between them is the depreciation.)
INSURANCE COMPENSATION AND OTHER RECEIPTS: 1.0.
INCOME ORIGINATING IN AGRICULTURE: 11.1.  Of these: Compensation for employee jobs: 5.3 (Q1: where do the other 5.8 go to?)

My assumptions are as follows:

The consumers should still eat fruits and vegetables. So, instead of growing fresh fruits and vegetables, some of these will be imported, while others will be preserved from the previous year (e.g. dried fruits and other products with long shelf life).
The farmers should be compensated on giving up the right to till their land, by giving them the same gross income that they have in a usual year.
However, other workers that deal with agricultural produce, such as: truck drivers, traders, workers in fruit markets, etc., should not be compensated because they can still work with imported produce (Q2: do the figures in the table include the income of these workers? Or do they belong to a different branch of economics?)

I did several calculations and got different results:

When there is no land-tilling, there is no depreciation and no insurance reception. Hence, only the 10.3 net domestic product is relevant, and from this we should extract the 1.0 insurance, for a total of 9.3. This should be multiplied by 60%, which is the relevant part of "crops" (since the other 40% are "animals" which can be grown as usual). We get: 5.6.
take only the compensation for employee jobs (5.3), since only employees should be compensated (should the insurance receptions be subtracted?). Again multiply by 60% and get 3.2.
in a different source, I found the fact that the total number of crop farmers is only about 7000. Assuming a gross annual income of 240,000, which a top decile income, I got to only 1.7 (billion). AFAIK, most farmers make less than that, so the actual figure should be even lower.

Since the numbers in each calculation are quite different, I am interested to know what causes the difference, and which calculation should be used?


texts: Impacts of Suspending Mortgage and Rent Payments

texts:
Recently, there has been some support for suspending rent and mortgage payments, the goal being to provide financial relief during the Covid-19 response.

I'm wondering what the impacts for the economy would be if this was put in place.  Here is what I could think of...

Obviously, this would provide relief for those feeling the economic effects
It could impact the bank's reserve rate, because they aren't getting payments
The Fed owns a considerable amount of mortgage backed securities, a market that I assume would be impacted.

Are these valid concerns, or are there larger ones I'm missing? I'm not advocating for or against the policy, just trying to think through it's impact.


texts:
Different people become rich for different reasons, such as:

Developing/selling a great product
Investing
Winning the lottery
Inheriting family money

Some of these seem more fair than others, which leads me to wonder: Are there any studies that attempt to measure what percentage of people get rich in different ways?


texts: Adjustment to equilibrium in Cournot model with 2 firms

texts:
In pg. 509, of Hal Varian's Intermediate Microeconomics Ch. 27, writer discusses the Cournot equilibrium.

In the figure, the reaction curve of firm 1 f1(y2) was steeper than firm 2 f2(y1).

When we started from the point (y1t, y2t), we were able to reach the stable equilibrium. But what if f2(y1) was steeper than f1(y2)? I cannot find any adjustment process. Can such condition be viable? If not, then why?![Adjustment process when f1(y2) was steeper than f2(y1)]1


texts:
Suppose that PPI is increasing while CPI is decreasing. interpereting this is somewhat tricky because different contexts are at play: CPI is largely domestic driven while PPI has global determinants.
Here is an overview of my research findings:
Assuming perspective of the general, Asian economy:
Factors that could explain increase in PPI

central bank liquidity tightening
currency appreciation
reducing reliance on imports
Improving expectations in the West (vaccine/stimulus package)

Factors that could explain decrease in CPI

central bank liquidity tightening
aggregate demand < productive capacity
weakening sentiment

Question
What is the standard interpretation of diverging price indicators? What I gathered thus far, is that there are a multitude of possible explanations, and I'm having trouble knowing what to pay closer attention to to accomplish my task of explaining the divergence.


texts:
I would like to get a better understanding of part c of the following problem. It appears to me that Walrasian allocations do not change but I want to confirm whether I am right or not. Thanks.

Effect of distortionary taxes Consider an economy with two individuals,
$i = {A, B}$, each with identical Cobb–Douglas utility function $u(x_{1i},x_{2i}) = x_{1i}x_{2i}$, and
initial endowments $e_{A} = (200, 100)$ and $e_{B} = (100, 200)$.

a. Find the Pareto optimal allocation (PEA).
b. Find the WEA. (For simplicity, you can assume that $p_{1} = p_{2} = 1$)
c. Assume that the government sets a tax $t$ on purchases of good 1, which is refunded to the consumers as a lump-sum payment, $T_{i} = tx_{1i}$. Find the post-tax WEA, and compare it with your results in part b.
d. Show that the WEA when taxes are absent in part b is efficient, whereas the
WEA when taxes are present found in part c is not necessarily efficient for all
values of t.

What I did is that I set up the agent's problem as follows:

Max $U(x_{1i},x_{2i}) = ln(x_{1i}) + ln(x_{2i})$

with the constraint being $(1+t)(x_{1i}) + (x_{2i}) = 300 + tx_{1i}$

Obviously the $tx_{1i}$'s cancel out which turns out as if no tax has been implemented. To me, it is an example of the second welfare theorem but again, my approach might be wrong.


texts:
In a recent article, Paul Krugman showed these equations:

Which model is this? What do the symbols denote? Is the first symbol a v or nu?


texts: Is it correct to say that import tariffs are unilateral?

texts: Is it correct to say that import tariffs are unilaterally decided by the nation or bloc applying the tariff?


texts:
I was looking the currency exchange board, and I saw the value of "exotic" for the parameter Group, what is the meaning of this value?

I dont know if this is a local figure or is used in currency.


texts: Pure exchange economy: Given an initial endowment are multiple equilibria possible?

texts:
Consider a pure exchange economy with two goods ($x_1,x_2$) and two consumers $A,B$. Both users have an initial endowment, $(\omega_1^A,\omega_2^A)$ and $(\omega_1^B,\omega_2^B)$ respectively. A price ratio $p^*$ is an equilibrium price ratio if after both users maximize their utility given their budget, that is $\forall i\in \left\{A,B\right\}$ they solve the problem
\begin{align*}
\max_{x_1^i,x_2^i} \ & U(x_1^i,x_2^i) \\
\\
\mbox{s.t. } & p \omega_1^i + \omega_2^i = p x_1^i + x_2^i,
\end{align*}
the maximizing bundles $(x_1^A,x_2^A),(x_1^B,x_2^B)$ are such that the markets are in equilibrium, meaning
\begin{align*}
x_1^A + x_1^B & = \omega_1^A + \omega_1^B \\
\\
x_2^A + x_2^B & = \omega_2^A + \omega_2^B.
\end{align*}

Suppose that $U$ fulfils the usual conditions of convexity, monotonicity (or local non-satiation, pick whichever you like) and continuity. Given an initial endowment is it possible to have two different equilibrium price ratios? The ideal answer would give a simple example, but non-constructive proofs are also okay. I am especially interested in examples where both equilibria are interior points of the Edgeworth-box.

A graphical representation of the problem:

Green is the set of Pareto-optimal points, red and blue are indifference curves, thin lines are budget lines.


texts: maximize profit of competitive firm in short-run

texts:
Consider a competitive firm with the short-run cost function $C(q) = 20 + 6q +5q^2$. The firm faces a market price of $p$ for its output.

(1) Find the firm's Profit Maximization problem.

(2) Find F.O.C and S.O.C.

I'm uncertain how to write the maximization problem up. As I understand competitive firm in short-run, we simple need to maximize profits minus cost by choosing the optimal quantity $q$.

So my guess is that the answer is:

$\max_{q} p-C(q)$.

Assuming that is correct, I am then uncertain how to make sense of the S.O.C.


texts: Government spending and revenue statistics

texts:
I am looking for thorough statistics of budgetary spending and revenues by category for approx all oecd countries. If not for all oecd i will be happy to have data only for Switzerland. I am interested in time period from 1995 to 2013. Unfortunately i am not able to find comprehensive source for those data. Could you give me some hints with regard to possible source of such data?

EDIT: Precisely i am looking for something ( http://en.wikipedia.org/wiki/Federal_budget_of_Switzerland ) like 4.1.  i.e. this table (but for both expenditures and revenues) with example budget but i want to have this year by year.


texts: Is it possible to repay the world debt? If not, why do we care?

texts:
Let me apologize if my questions sound stupid to experts. I have no training in economics. I am just curious and puzzled. I couldn't find any answer to the questions below.

As far as I have understood, broadly speaking, money is created by central banks and landed to governments with interest and creating debt.

Now, let's take a simple example. Let's imagine a world with 10 countries and 1 central bank. The central bank gives 10B (billions) to each country (100B in total) at a 1% interest rate. At the end of the year, the world owes 101B.

Where is this extra 1B coming from?
Since 1B was never created in the
first place, how can the 1B be paid back?
If it turns out that   the world cannot actually ever pay back the full debt, then why do we care? What is the use of the 1B in debt?

Of course, the countries are in business with each other. During the year some will gain money, some will lose money. The countries that managed to gain that 1% can pay back the interest, but hardly the full debt. In general, for each 1% gained by some country, others must have lost that money.

So it appears to me that with such a design 1) the debt cannot ever be paid back, 2) someone must go bankrupt in the long run and 3) the debt can only grow over time (since it cannot be fully paid back). Is that true or am I missing something?

Just to be clear, I get why we need money. I don’t get why we need debt. Wouldn’t capitalism work as well if central banks could just distribute money around as needed without asking them back?

I don't think this question duplicates  this one. While the linked question does explain the mechanism of money and debt creation, it doesn't shine light on WHY we care about debt, nor whether  it is possible to ever pay back the world debt if it is destined to steadily increase over time.


texts: How to solve for the internal rate of return IRR in terms of MARR?

texts:
I have a question that gives the following cash flows:

Year
Cash Flow

0
-100

1
250

2
-152.25

In the first part of the question it asks for what values of the interest rate (MARR) would the company accept the project if it used the NPV method?
I calculated that the company would accept the project only if 5%≤MARR≤45%, assuming company accepts project at break-even points.
The second part of the question then asks:
"Let the cost of capital k = MARR. Using the IRR method, solve for the internal rate of
return IRR. It will be a function of MARR: IRR = f(MARR)."
My understanding is that to find the IRR, solve for NPV = 0. However, this was already done in the first part of the question, and if I were to express IRR as a function of MARR, using this logic, wouldn't IRR=MARR? I feel as though I am missing something or taking the wrong approach here, could anyone please guide me towards the right track?


texts:
What is the rationale behind government not including discouraged workers who have given up looking for jobs out of frustration given the state of economy?

This under-reports the job market and at the outset looks ridiculous.


texts: If North American stock markets are semi-strong efficient, why are indices like S&P500 expected to grow?

texts:
I'm narrowing this question on Reddit's r/investing to North America. But don't hesitate to discuss other Five Eyes (FVEY)  – Australia,  Canada,  New Zealand,  UK,  US. I'm posting here because I prefer self-contained answers. I hate scrolling reddit's long-winded dialogue!
It's common to postulate that

stock market indices are semi-strong efficient, so that "all available information about a company has already been priced in".

in the long term, indices such as the S&P500 and NASDAQ100 are expected to grow, so that investing in them will usually profit you in the long term.

How are these two postulates compatible? Doesn't semi-strong Efficient Market Hypothesis mean that the market semi-strong-efficiently values X's share price, so that on average, X's share price remains steady?

News may arrive in the future and affect this semi-strong-efficient stock price, but shouldn't such news average out to 0? Because there's no reason to expect more negative news that positive news, or vice versa? If there was, such news should have already been priced into X's current share price.

As an example, let's postulate that the market behaves semi-strong-efficiently and values X's stock at 100 tomorrow. This means X's stock today should also be Net Present Value of 100, correct? If not, then X's stock is  undervalued today, and thus not semi-strong-efficiently valued by the market.

Similarly, if X's share price is expected to value 1000 next month, this 1000 should also be reflected into today's share price, so that today's share price is the Net Present Value of 1000.

This comment mentions "discount rate (risk free rate plus the equity risk premium", but Discount Rate is already incorporated into Net Present Value. Correct?


texts: Does my research prove market inefficiency?

texts:
The long story short, I have developed an index based on a certain distribution. Then I aligned NYSE stocks according to this index i.e. the stocks with the best fit are first and the worst are last. The index is irrelevant with economic theory.

Afterwards, I created a group of portfolios with equal number of stocks and equal observations and then I calculated the minimum variance per portfolio.

The result suggests that the portfolios with better fit have lower variances than the ones with "bad" fit. Does this prove market inefficiency assuming that it didn't occur just by chance?

Edit: According to efficient market hypothesis, asset prices reflect all information given and "patterns" should not occur. However, according to the results, patterns occur and they are independent to the information given.


texts: Why utility should be bounded (or unbounded)?

texts:
For Expected Utility and SEU, people make axioms to ensure that the utility is bounded. However, I personally believe that the utility function must be unbounded, especially if we are considering cardinal utility. I'll explain my point in a though experiment.
Even if I have a diminishing marginal utility, there will be always some increase in money that will improve my utility by one unit. For example, it is possible that doubling money means one unit of utility for me, or it is possible that tripling money means one unit of utility for me. Either way, the range of my utility function must be unbounded. In a more rigorous language, if a utility function of money is bounded, then, when the money is approaching infinity, the utility function becomes arbitrarily close to a constant function, which violates non-satiation.
My question is, which economist argue that utility in real life must be unbounded, and who argue that a bounded utility is more normative, rational, or natural? Did economists reached a consensus that utility function must be bounded in real life? Any literature will be very helpful.

Sources for bounded utility: EU: Bounded expected utility, PC Fishburn (1967)


texts: Implications of differentiable demand function on the utility function properties

texts:
Suppose you know that the (Marshallian) demand function $x(p,m)$ that satisfies the consumer's problem of utility maximization is such that $\frac{\partial x_i(p,m)}{\partial m}$ is always well-defined for each good $i\in\{1,\dots,L\}$. In other words, the demand function is differentiable with respect to income.

What does this necessarily implies about the properties of the utility function $U(x_1,\dots,X_L)$?


texts: Are charitable donations on someone's behalf generally an effective incentive?

texts:
A study done in Sweden on 153 female, would-be blood donors showed
  surprising results. The women were divided into three groups–
  voluntary donation, paid donation, and paid donation with the
  immediate option to donate to children’s charity. Contrary to what you
  might expect, the paid women decided to donate at a significantly
  lower rate– only 30% compared to the 52% by voluntary donors and 53%
  by paid-with-donation-option donors. The selfish reward “tainted” the
  altruistic desire.

You can find the cited article here.

The original article is Mellström, Carl, and Magnus Johannesson. "Crowding out in blood donation: was Titmuss right?." Journal of the European Economic Association (2008).

This one data-point suggests that donations on your behalf have no effect. Are there other studies that can help answer whether charitable donations on your behalf are

valued
as effective as other incentives (e.g. money)?


texts: Why is the Market-Clearing Price also an Equilibrium Price?

texts:
When the price is such that supply equals demand for e.g. bicycles, everybody who wants to buy a bike at that price gets one, and every bike gets sold. Everybody goes home happy and the marketplace clears. Hence the price at which the supply and demand curves cross is the Market-Clearing Price.

This isn't enough to make it an equilibrium price. "Equilibrium" means that if the price is there, it'll stay there. If it's a stable equilibrium, then even if it starts above or below that price, it'll get pushed towards it.

I feel like I understand why prices starting below the market clearing price, will get pushed up. Of course a firm will raise prices: they can charge more per unit, and sell more units (assuming a rising supply curve).

If you start above market-clearing price, there is a trade-off, because sales are demand-limited (assuming the demand curve is decreasing). Raised prices would mean more revenue per sale, but fewer sales. Lowering the price would mean more sales, but less revenue per sale. Intro textbooks (e.g. Mankiw) seem to claim that the mere fact of there being a trade-off at all, is sufficient to push prices down, but it doesn't seem like that to me. Whether lowering prices would increase profits depends on the slope of the demand curve; if it's shallow enough, then the large increase in revenue-per-sale could make up for the small decrease in number of sales.

If I'm not wrong then a firm with a monopoly on bicycles would set prices to maximize revenue, i.e. the area of a rectangle whose length is quantity and whose height is price. The corner of this rectangle would lie somewhere on the demand curve, at or above the market-clearing price. The profit-maximizing price might be one where there's excess potential supply (bikes you would have been willing to make and sell - presumably you didn't actually bother making them).

I assume that competition is what makes the difference, and somehow forces prices down to (but not below) the market-clearing price, making that the equilibrium for competitive markets. But I don't get how this works, e.g. why underselling won't stop being worth it until there's excess demand.


texts: What would be the results of improved goods manufacturing efficiency?

texts: Improved manufacturing efficiency could cause price reduction of goods, increase manufacturer's profit (still asks for the same price, but has less expenses), and what else? Is it possible to predict what would be more dominant? If not, is there historical statistical data about this?


texts: What is the difference between contract theory and mechanism design?

texts: Can someone explain the difference between contract theory and mechanism design?


texts: Is there any software to implementing quasi-hyperbolic discounting into DSGE model?


texts:
Abenomics seems to me like a straightforward and modern plan of economic reflation through monetary easing and some attempt at structural reform.

While it's still early, it looks like many of the predicted effects of this approach have begun to materialize:  unemployment is lower, earnings are higher, currency has deflated resulting in a rise in exports and improvements to corporate earnings.  Capital has, unfortunately, accumulated on corporate balance sheets rather than re-entered the economy, but even this is a known effect of easing.

One thing I don't understand (aka my question) is:  why did the Japanese government seek to raise consumption tax (VAT) during this process?

It would seem that the whole point of easing is to stimulate productive money circulation, and implementing a consumption tax when consumers are likely to suffer in the initial stages from currency devaluation seems very counterproductive to the cause.  If the government actually needed the funds then surely there were other approaches available (borrowing or deferred taxation) which would have had less negative impact on the overall easing programme?


texts: What kind of tax diagram can show the full consumer tax burden?

texts:
If a government increases a purchase tax on an apartment, the tax will be fully burdened by the consumer, as the "producer" will simply be the owner of the house.
But in a diagram, should this be shown by a perfectly inelastic demand diagram where the consumer has full tax burden? However, how can we justify the demand for apartments being "perfectly inelastic?" Are there other types of diagram that could be used to show full consumer tax burden without an extreme demand/supply?


texts: Is there a relationship between stock market hedge fund leveraging and the repo market?

texts:
Lately there have been many articles attempting to link repo-market borrowing with equity market increases. 1

I can see a link if the hedge fund is buying treasuries or mbs and financing it by using the treasuries or mbs as collateral in the repo market. For example, I put up \$1B in equity and buy 30 year treasuries. I then use those treasuries as collateral in the repo market to raise more funds to buy treasuries (less any haircut). Rinse and repeat to lever up the \$1B in equity to whatever.

However, if the hedge fund invests in equities (the stock market) with that same \$1B how does the repo market enable hedging? I can't use the stock I bought as collateral in the repo market right? What am I missing?


texts:
The argument goes that if there is deflation, the real interest rate rises, and so the burden on debtors increase (Paul Krugman says so in https://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-bad/).

I understand why the real rate rises, since $r = i - \pi$, but why does that mean there's more of a "burden" on debtors?

If I take out a loan for 1000 dollars today, and have to pay it back a year from now, why would it affect me negatively if suddenly everything became cheaper? Sure, the money I'd be paying back (1000 dollars + interest) is "worth more", in the sense of being able to buy more stuff, but ... so what? Those 1000 dollars + interest had to be paid back no matter what. Who cares if its "worth more"? It's not my money anyways, and is due to be paid back? How exactly has my "burden" increased?


texts: Why did US dollar appreciate during the Global Economic Crisis (2007-09)

texts: We know that the US dollar exchange rate increased during the global recession while usually when an economy performs weakly its currency should depreciate. How was there still a huge demand for USD in foreign markets even when subprime mortgage crisis was at its peak.


texts: Any drawback from printing money to pay for national services such as the NHS?

texts:
Why can't we just print money to build national infrastructure services such as an additional hospital for the NHS? This would create growth, allowing more doctors and nurses to come through but more importantly create additional bed space.

Kind regards


texts: Economic theory / papers on sovereign debt?

texts:
I am an undergraduate student who does some research on sovereign debt and its sustainability.

Which papers are essential to understand how sovereign debt works and which implication it has for the economic policy of the country?


texts: Elasticity of subsitution: a redundant calculation?

texts:
Elasticity of subsitution is a measure of the curvature of an isoquant1 and can provide us information regarding the nature of the production functions we are dealing with. this is visualized in Advanced Microeconomic Theory
by Geoffrey A. Jehle (Author), Philip J. Reny  (page 130 in the book) as:

However I wonder, isn't this information regarding the curvature of a isoquant given by the production function? what novel information does the calculation of elasticity of substitution provide us with?

1. I'm aware that elasticity of substitution can also be applied to consumer theory, just that its dominant in producer theory.


texts: Name of scheme where two entities collude

texts:
Consider the following scheme that I remember from the sitcom Zach and Cody:
One person is selling very spicy food in a hotel lobby, and another person is selling glasses of milk at exorbitant prices nearby, taking advantage of the newly created demand for milk.
This can be extended to more complex scenarios, but what is the name of this type of scheme?


texts: What are good dataset alternatives to estimate value functions?

texts:
Suppose we want to estimate for many goods in the economy (or classifications thereof) the preferences of each household for these goods. We may want to restrict the analysis to specific utility classes, e.g. translog or CES utility. Naturally, we can not obtain the utility function but only the value function.

To my knowledge the Nielsen Datasets from U Chicago seem to provide such a possibility, but have highly restrictive access. What are good alternatives?


texts: Proof: Risk averse; Certainty Equivalent smaller than expected value

texts:
I would like to show for a randomly distributed variable $x$ with CDF $F(\cdot)$ , given a Bernoulli utility function $u(x)$ the following property holds:

The certainty equivalent, $CE(\cdot)$, is smaller than the expected value, $\mathbb E(\cdot)$, if and only if the decision maker is risk-averse.

$$CE(F,u) \leq \int_{-\infty}^{\infty} x dF(x) \quad  \forall F(\cdot)$$

By Jensens Inequality for risk-averse agents we have:
$$\int_{-\infty}^{\infty} u(x) f(x)dx \leq u(\int_{-\infty}^{\infty} x f(x) dx)$$

I know that the CE is defined as:
$u(CE) = \mathbb E(U(X)) = \int_{-\infty}^{\infty} f(x)u(x)\,dx$

Hence,

$$u(CE)  \leq u(\int_{-\infty}^{\infty} x f(x) dx)$$

and

$$CE \leq \int_{-\infty}^{\infty} x f(x) dx$$

Is it possible to kind of invert the u() function is we assume it is strictly increasing?

I also thought about rearranging it to:

$$u(CE) = \int_{-\infty}^{\infty} f(x) dx * \int_{-\infty}^{\infty} u(x) dx$$

but I fail to see how that helps.

I thought perhaps showing that the risk premium is positive for risk-averse agents is equivalent but I could not get started either.

I would be glad for a hint to work out the solution myself.


texts: What is the rate of new house construction in Auckland, New Zealand?

texts:
What is the rate of new house construction in Auckland, New Zealand, where the housing market seems to have gone to the roof? Assuming that the current high prices of Auckland houses are a result of less supply compared to demand (and not a bubble), is the number of houses to number of buyers going to stabilize anytime soon?

Also, if so many new houses are warranted in Auckland, is it also having high activity in the construction industry?


texts: What predictions do economic models make for an economy where 50% of the population earn less than the cost of living?

texts:
These are the admittedly somewhat disparate pieces of information gleaned from separate sources that the question arose from.

According to The living wage foundation the real cost of living in the UK is £9 an hour.

Assuming a 37 hour week this comes to £17,375 a year.

According to the OECD half those in the UK between 35 & 44 have incomes (not necessarily from earnings) of £17,000 or less.

From the OECD link provided tab through to the third page (selecting the age range & nation as you go), then drag the marker on the ring around to the 17,000 GBP point & tab on through to "Where your household stands: In reality"

Put together those statements would seem to suggest half or more of the UK population may not be being paid enough to do much more than subsist (it doesn't but the question stands).

Though it should be noted that the OECD figures are after tax & I believe that the Living Wage Foundation's figures are pre-tax, also that the OECD sight compares like with like, results from one set of circumstances can't be used to extrapolate average results for the whole population.

Some comment on the validity of the information provided is OK of course but the real question is what do current economic models predict as the outcomes for an economy with a disparity like this?


texts: Which model produces the correct revenue-maximizing rate?

texts:
Model 1:

The tax rate $\tau$ which maximizes tax revenue equals $\frac{1}{1 + a\epsilon}$ where $\epsilon$ is the elasticity of how taxable income responds to changes in the tax rate across and $a$ is some parameter. See this paper: https://eml.berkeley.edu/~saez/saez-slemrod-giertzNBER09.pdf (see page 6)

We can estimate $a$ to be about 1.5 and $\epsilon$ to be about 0.4 or less, hence the maximizing rate is about 60 % or more.

Model 2:

Tax revenue is $\tau Y(\tau)$ where $Y(\tau)$ is total production which depends on the tax rate. If we say that a 1 % increase in the tax rate leads to a 2.5 % decrease in total output, we get that $Y'(\tau) = -2.5Y(\tau)$. So, $Y(\tau) = Ce^{-2.5\tau}$.

So revenue is $\tau C e^{-2.5\tau}$. Maximizing this simple equation in $\tau$ gives a tax maximizing rate of 40 %.

These two models give highly different results. Which one makes more "sense"?

Model 2 is simple to understand, but I have not read the paper which uses Model 1, it seems a bit advanced for me.


texts: What is the definition of social welfare in monopoly?

texts:
I'm studying problem that requires me to calculate social welfare in a monopoly setting.

But I dont know what social welfare is, and I can't find it in my book or by googling. What am I asked to compute?


texts:
I'm having difficultly understanding what my professor taught in class.

I thought, like cobb-douglas, when finding $U_1$ we take partial derivative with respect to $q_1$ and hold everything else constant. Why does gamma($q_2$) disappear? Same with $U_2$. and what is gamma? a variable?


texts: I feel like this is quite a stupid question, but I can't wrap my head around it. Why do suppliers make less of a good as profits drop? Intuitively, shouldn't they make more of the good in order to cope with the drop in profits? I understand that someone might say that the producers time is better used to work on supplying some other sort of good, but if an entire aggregate price level increases, what other options are there besides trying to make more of the item (as other industries have suffered the same drop in price level)?


texts: The mathematical proof of a monotonic utility transformation does not restrict the use of strictly decreasing monotonic functions. Why bar them?

texts:
I understand from an intuitive sense that decreasing monotonic transformations will skew the choices and ordinality.

But mathematically the $F'(U(x,y))$ just cancels out each other out in numerator and denominator when we take the MRS and thus gives us the same MRS as our old utility function. But this cancelling out can also happen with decreasing monotonic transformations. Then why bar them from use ?


texts: What separates "rich" developing nations from "poor" developed nations?

texts:
What separates relatively high income developing nations, such as Argentina, from relatively low income developed nations, such as Portugal?

If you look at things like HDI numbers, Argentina and Chile are classified as very high and even rank above Portugal. If you look at per capita GDP then Argentina, Chile and Portugal are all pretty close and fall between 22K and 27K.

Despite this, Argentina and Chile are generally considered developing countries despite being on par with or exceeding some countries that are generally considered developed.

This makes me wonder, what exactly separates developed countries from developing countries?

When comparing the United Kingdom and Uganda the answer is obvious, however it isn't as obvious (at least not to me) when comparing countries like Portugal and Spain to Chile and Argentina.


texts:
let's say we have a consumer with a demand curve $q^d(p)=10-p$ and the good its price is $5$. So the consumer will consume 5 units. The surplus of the consumer would then be equal to $(10-5)+(9-5)+(8-5)+(7-5)+(6-5) = 5+4+3+2+1 = 15$. However, when solving this in the conventional manner it gives me $(10-5)\times 5/2 = 12.5$
What am I doing wrong? Or is surplus just an approximation?


texts:
I am currently studying Pareto distributions and their relation to Lorenz curves but I am having a hard time understanding the concept. If I am understanding correctly, Lorenz curve describes the wealth distribution and Lorenz curve of a Pareto distribution means that we are assuming that the income is Pareto distributed. Is this correct? But if Pareto distribution itself describes wealth distribution, why do we need to take a Lorenz curve of it?

Also, assume the cumulative distribution function for a Pareto distributed random variable $X$ with parameters $\alpha$ and $x_m$ is

$F_X(X)=\begin{cases} 1-(\frac{x_m}{x})^{\alpha}, \quad x\ge x_m \\ 0, \quad x<x_m \end{cases}$

and the Lorenz curve of it to be

$L(F)=1-(1-F)^{1-\frac{1}{\alpha}}$.

What do the parameters $\alpha$ and $x_m$ mean in the Lorenz curve? Is $\alpha$ the income level? What does the variable $x$ mean?

Apologies if this is a sort of stupid question but I cannot seem to understand it.


texts: Value function iterations with hyperbolic discounting

texts:
I am currently working to the numerical solution of a model similar to the consumption-savings decision model with hyperbolic discounting as in Krussel et al. (2003).

Even if hyperbolic discounting implies that the value function does not generally have the standard contraction property, some solutions to the problem have been implemented; for example Judd (2004) proposed perturbation methods from the exponential case and a local solution for small departures of hyperbolic discounting.

I have already implemented the basic model without hyperbolic discounting, using value function iterations on discretized policy grids.

Do you have suggestions for the extension to hyperbolic discounting? Is it possible to extend the basic model without moving to iterations in the Euler equation? Any advice or reference is welcomed.

  Krusell, Per, and Anthony A. Smith Jr. "Consumption–savings decisions
  with quasi–geometric discounting." Econometrica 71.1 (2003): 365-375.

  Judd, Kenneth L. "Existence, uniqueness, and computational theory for
  time consistent equilibria: A hyperbolic discounting example." (2004).


texts: Proving there are infinitely many strictly dominant strategies

texts:
My attempt:

$(0, 1/3, 2/3)$ works as a strategy that strictly dominated $L$.

To prove that there are infinitely many of them:

Let $A_n=(0,1/2+\epsilon_n,1/2-\epsilon_n)$ where $\epsilon_n=1/n$ for $n=1,2,3,...$. We can see that for $n > 10$, $A_n$ strictly dominates L. So, since $n$ diverges, there are infinitely many $n$ for which $A_n$ is a strictly dominant strategy.

I chose $n> 10$ since $2<2.5-5\epsilon_n \Leftrightarrow 0,1> \epsilon_n$ and $1/n<0,1$ for $n>10$. The other inequalities don't require $\epsilon_n$ to be restricted.

Would this be a correct way to prove this?


texts: What would be the GDP of Algeria without Oil & Gas?

texts:
Facts :

*Algeria's GDP is 230 B$,
*Oil & Gas account for 30% (70 B$)

My simplistic reasoning would say : Substract 70 from 230 and get a new GDP of 160 B$.

But I know that the concept of GDP is more complex than that: it also includes government spending :

*Government consumption accounts for 30% (70 B$)
*60% of the budget comes from Oil & Gas : 42 B$

So I'll continue substracting: 160 - 42 = 118 B$, the new GDP...

But still, I think it's too high: the household consumption accounts for 35%. Most purchasing power comes from fake jobs created by the government, if there were no Oil & Gas these fake jobs would not exist.

Should I still substract this component from the total GDP?

Is my reasoning correct?

NB: All data come from this website (and I'm not sure if I picked up the right values):


texts: Are there strictly dominated strategies?


texts: What are the economic disadvantages of a single payer system in the USA?

texts:
To me, medicare for all seems like a no-brainer economically.

The money individuals, local and state governments pay into insurance premiums, deductibles and medical costs... we simply redirect that into federal taxes that go towards medicare for all.

Plus we give some of that money back, because we no longer have to pay for the income to the insurance company... plus we give back money in administrative costs.

So the country saves money overall with medicare-for-all. What's the downside?


texts: Is quantitative easing part of the ECB's and Fed's mandates?

texts: Is quantitative easing part of the ECB's and Fed's mandates or is it an exceptional policy that they used, especially in the financial crisis 2007-2008?


texts: Must a market-based economy constantly expand?

texts: I vaguely recall from my reading of Adam Smith’s “The Wealth of Nations”, during college, that he opined that a market-based economy must constantly expand.  Is this recollection correct and, if so, what is the specific quote/reasoning?  Is it not possible for such an economy to be static and self-contained?


texts: Why is perfect price inelasticity of demand not considered an exception to the law of demand?

texts:
Assume a case of perfect price inelasticity of demand.

In such a case,

  PED = 0

The quantity demanded does not respond to changes in price, i.e. it remains constant, even when price increases or decreases (instead of falling or rising, as it should if it conformed to the inverse relation defined by the law of demand).

Thus, shouldn't perfect price inelasticity also be considered as an exception to the law of demand, just as Giffen goods and Veblen goods are?


texts: Are revealed preferences normative or positive notion?

texts:
I always thought from my understanding of the terms normative and positive that revealed preferences are a positive concept. For example, saying Anakin prefers grass to sand (i.e. $U(g)\succ U(s)$) is a positive statement.

My thinking is as follows:

It’s a value free statement
It’s empirically objectively testable statement. We can just make an experiment where we give Anakin choice of sitting in sandy room vs grassy room and observe preference.
Independent observers would agree on the observed outcome Anakin picking the grassy room.

However, I encountered an opinion that since all preferences derive from underlaying values they are all strictly normative and considering them positive even in the strict sense of revealed preference is a fallacy.

Is the opinion correct? If the opinion is not correct how would you refute it? Just by stating my points 1-3?

Also I tried to find some sources that would discuss this but google scholar just gives me results that are unrelated to this philosophical issues. I looked in Julian Ress’ philosophy of economics, and Hausmanns anthology but I could not find satisfactory answer there either. Are there any good references for this issue?


texts: «Behavioural economics is also useful in macroeconomics»

texts:
In this VOXEU article, the authors talk about a model in which behaviour economics is applied to macroeconomics.

I'm trying to understand fig.1, and the following sentence: «This means that if the central bank keeps its inflation control unchanged, increasing flexibility creates a new trade-off, which is negatively sloped – that is, more flexibility then reduces output volatility at the expense of more inflation variability.»

Why is there a trade-off when b2 increases? doesn't the std dev of inflation gap decreases as the std dev of output gap decreases? where's the trade-off?

I just don't see how there's a trade-off when the flexibility parameter b2 increases... Also, the authors sometimes say that b2 is the «sensitivity of inflation to the output gap», and others «[wage/price] flexibility».

Any help would be appreciated.


texts: Why is a company allowed to change the number of shares it’s divided into after its IPO?

texts:
I read that even after an IPO, a company can change the number of shares that it’s divided into based on a board vote. What’s to prevent them from arbitrarily increasing the number of shares to raise capital, thereby diluting the value of the outstanding shares?
I understand that a company might refrain from releasing all of their stock into the market initially so they can sell it later to raise capital, but it seems strange that they would be allowed to raise money by decreasing the value of an asset that shareholders have already bought.


texts: Wooldridge's Microeconomics book vs Cameron and Trivedi's textbook

texts:
I'm debating between 2 Microeconometric classes at my college, (I realize I'm fortunate to have a choice). One class uses Wooldridge's "Econometric Analysis of Cross Section and Panel Data" the other uses Cameron and Trivedi' book "Microeconometrics: Methods and Applications".

The question is, will I learn mostly the same content from both of these book or is one much better than the other?

P.S. I've been told the class using Wooldridge's book is much harder which is somewhat scary and intriguing at the sametime. Tuition is a lot of money and I don't want to take a class that is more advanced that I can handle then fail/drop. However, I want to be a good economist and be very knowledgeable on all things econometrics.


texts: Credit risk of interest rate on excess reserves vs fed funds rate?

texts: I noticed that the interest rate on excess reserves and the fed funds rate are almost exactly the same at all times. Why is this the case? Shouldn't the credit risk of a bank be higher than the Federal reserve and shouldn't this premium be reflected in the Fed Funds rate?


texts:
As now many people are talking about the inflation of US dollar on the account of the COVID-19 pandemic and the printing of trillions of US dollar bills, the price of decentralized cryptocurrencies like Bitcoin, which are not controlled by any central banks has skyrocketed. Also these cryptocurrencies are deflationary, i.e. they tend to get value increasingly more expensive.
However, many economists state that deflation is worse than inflation. I just can't understand why. Will it not be good for people to have their money valued? Or the prices go down? Why is it bad for economy? Or is it just a story told to make people believe in it?


texts: In 2017 some countries have adopted the Universal Basic Income as an alternative to Welfare Payments, my question is, is it economically feasible by governments?


texts:
I am working with some data that express the environmental byproducts for the manufacturing of specific broad product categories (e.g. milk, soap, leather). The statistics are given per dollar of producer price, e.g. 1$ of soap products results into 0.1kg of CO2 emissions.

I was wondering, where can I find the average producer price for the relevant product categories, so that I can roughly calculate for example how much CO2 emissions are  emitted in average for 100g of soap products?


texts:
My understanding of structural estimation follows the lines beautifully lectured by Christophe Taber (U. of Wisconsin):

Identify the policy question to be answered
Write down a model that can simulate policy
Think about identification/data
Estimate the model
Simulate the policy counterfactual

Here is also a nice discussion about the difference between structural and reduced form estimations. What I am looking for are simple and practical examples of structural estimations. Code examples that I can work out using R, Stata and/or Matlab.


texts: Dynamic optimization with assets as state variable: interpreting capital gains and losses

texts:
Given a hamiltonian of the form:
\begin{equation}
H_{t} = ln(c_{t}) \dot{} e ^{-\rho t} + \lambda_{t}(w+ra_{t}-c_{t}),
\end{equation}
with $c_{t}$ consumption at time t (the control variable), $\rho > 0$ time preference, $w$ a constant (for example wage), $a$ assets held in period t (this is the state variable for which the dynamics are described by: $\frac{da_{t}}{dt}=\dot{a_{t}}= w+ra_{t}-c_{t})$ and $r$ the return on assets.

The first order conditions are:

$\frac{\partial H_{t}}{\partial c_{t}}=0$

$\frac{\partial H_{t}}{\partial a_{t}}=-\dot{\lambda_{t}}$, or equivalently, $\frac{\partial H_{t}}{\partial a_{t}}+\dot{\lambda_{t}}=0$.

We were taught that $\frac{\partial H_{t}}{\partial a_{t}}$ can be interpreted as the marginal return on assets in t, and $\dot{\lambda}$ as a capital gain. Together they are the overal return. An accompanying sketch with $a_{t}$ on the horizontal and $H_{t}$ on the vertical axis shows $H_{t}$ is a concave function with a maximum.

The growthpath for consumption is given by $\frac{\dot{c_{t}}}{c_{t}}=-\frac{\dot{\lambda_{t}}}{\lambda_{t}}-\rho$, so that consumption grows over time if $\rho+\frac{\dot{\lambda_{t}}}{\lambda_{t}}<0$, that is: consumption grows if the relative capital losses exceed time preference. As such, the optimizing agent should let his consumption grow when there are sufficiently big capital losses.

My questions are the following:

Why can $\dot{\lambda_{t}}$ be interpreted as a capital gain?
If there are capital gains or losses ($\dot{\lambda_{t}} \neq 0$), how does this intuitively and/or graphically (in the $(a_{t},H_{t})$-diagram) effect optimization?
Why would consumption grow only in the case of capital losses? Is there an intuitive explanation?


texts: Why imports increase if higher relative inflation?

texts:
I'm reviewing a previous AP Macroeconomics exam and I saw the following question:

  The United States and South Korea are trading partners, and the United
  States has a zero current account balance. Assume now that the
  inflation rate in the United States decreases relative to the
  inflation rate in South Korea.

Based on the decrease in the inflation rate in the United States, will United States exports to South Korea
increase or decrease?

The answer is that US exports to South Korea will increase.

But my intuition says the opposite. If South Korea has high relative inflation, their currency will not be worth as much compared to the U.S. dollar, so it will depreciate. Thus, the South Korean currency cannot buy as much from the U.S. and will thus not be able to import as much, so I would think exports from the U.S. would decrease to South Korea. Why is my intuition wrong?


texts: If I have information that an asset will increase or decrease in value, I can profit on that information by buying or shorting the asset. Why, then, would anyone trade derivatives when they can just profit by directly trading the asset? How does this work from a theoretical perspective (game theoretic, etc)? This is a very simple question, I'm not sure if this is the right place for it, but thought I would try asking.


texts: How to find the corresponding APR to a given APY?

texts:
Suppose that $6000 is invested in a 3-month CD with an APY of 1.5%
I want to find the corresponding APR to a given APY. If 6000$ is invested in a 3 month CD with an APY of 1.5% then according to my calculations, the corresponding APR is 1.491%
I used this relation between APY and APR to get this result: $$APY=(1+ \frac{APR}{n})^{n} -1$$
Where $n$ denotes the $n$ compounding periods per year, I'm not sure what value $n$ should take, but in my case, I guessed that $n=4$ (based on the 3 months CD). So according to this formula by writing the APY in decimal point I got the result that the APR is 1.491% but I'm not really sure if that's tru.


texts: How are rotation matrices used in structural VAR identification through sign restrictions?

texts:
I saw this identification method is used in several working papers but to me it is impossible to understand how it works by simply reading them.
I have searched many books and lecture notes in order to read something about it but I found either nothing clear or nothing at all.

Does anyone know what is the sense of this methodology and how it helps in the identification process?

Thanks a lot in advance


texts: Reference request: Development economics

texts:
I am looking for some good books on Development economics. My background is in mathemathics and statistics (with working knowledge of intermediate micro and macro), so a "good" book needs to be rigorous yet also provide intuition.

What are people reading these days when it comes to this topic?


texts: Sources on Educational intervention changing consumer preferences?

texts:
I'm doing some research on how education can change a consumers preference for a given good or service. Im looking for more research papers or books that discuss such a topic.

I've looked around online a little bit and read
The Effects of Consumer Education on Consumer Product Safety Behavior by  Richard Staelin, however I'm looking for more sources on the topic.

Any suggestions?


texts: Linearization of VES production funtions

texts:
I know that the linearization of a CES (constant elasticity of substitution) funtion is a bit complicated. There is even an R package dedicated just for that - the econometric estimation and calculation of a CES function (of wich Cobb-Douglas, Leontief and linear production functions are special cases) - micEconCES. However, I can't find anything about the econometric estimation of a VES (variable elasticity of substitution) production function.

Is it (linearisation and/or econometric estimation) possible at all, or do the characteristics of the function not permit linearisation?

P.S. I'm aware that there are different forms of the VES function.


texts: Graduate level texts/notes that cover the Short Run and Long Run Costs of firms' production

texts:
In undergrad econ we learned that it would cost a firm more money to increase its production in short term than in long term.

MWG does not seem to cover this topic. I need a Graduate level texts/notes/papers that cover the Short Run and Long Run Costs of firms' production (or supply curve).


texts: Pareto efficiency analysis of level of M1 growth from quantitative easing

texts:
BMO recently conducted an analysis on US monetary policy and noted that quantitative easing has had diminishing effects on M1 growth. Daniel Krieter wrote:

QE has fed through to the real economy in a slower manner than
previous QE campaigns and for each dollar the Fed's balance sheet has
grown, M1 money supply has increased about 32 cents, compared to 96
cents and 74 cents in QE1 and QE2.

Here is a diagram I quickly drew up to approximate the issue in pareto terms, assuming:

QE translates into either consumption or financial assets

Taking the Federal Reserve at their word: "steadfast commitment to stable employment and prices," it would appear that it's policy objective is becoming harder to achieve as measured by QE's penetration into M1 (point of sale of goods/services). Clearly, there are some disruptions to the world economy recently, but I wonder if that is enough to dismiss BMO's broader point.
One explanation could be that the "diminishing returns" effect we see above is the result of reaching a saturation point. Perhaps QE can only redistribute a limited amount of future consumption to spur consumption today.
Question
Is there anything in the literature that contradicts these findings and/or the notion that there is a limit to the amount of future consumption that can be pulled into the current period? I would consider either empirical or theoretical evidence.
Note: Answers building off of the pareto framework above are preferred, but not obligatory.


texts: Simplifying a monoplist's objective function under incomplete information

texts:
I am working through Rochet and Stohle (2003) chapter on multi-dimensional screening, and I am struggling filling in the blanks between equation (2.1) p. 154, and its simplified form on page 155. In particular, my question concerns:

Consumers are of type $\theta$ $\in$ $\Theta$ = [$\underline\theta$, $\bar\theta$] with associated cdf $F(\theta)$, which is absolutely continuous, and associated density function $f(\theta)$ = $F'(\theta)$. This is the distribution of types.

There also is a preference relation for each consumer for $q \in Q = [0,\bar q]$: $u = v(q, \theta) - P$ with the single crossing property $v_{q\theta} > 0 $. I am adding this for context, but all information may not be necessary for my particular question.

This renders an indirect utility function defined by:

$u(\theta) = \max_{\rm {q\in Q}} \{v(q, \theta) - P(q)\}$

The monopoly firm is using a non-linear tariff, $P(q)$, and wants to maximize its expected payoff (I am skipping some information not needed for my question on what renders this equation):

$E(\pi) = \int^\bar\theta_\underline\theta [S(q(\theta), \theta) - u(\theta)] dF(\theta)$ equation (2.1) in text

subject to:

$du/d\theta = v_\theta(q(\theta), \theta)$

$dq(\theta)/d\theta\geq0 $

$IR\space constraint$

Note that the function $S(q(\theta), \theta)$ is not important for my question, hence, I am not including its definition here.

Now to my question. The authors makes a simplification of the problem:

$E(\pi) = \int^\bar\theta_\underline\theta [S(q(\theta), \theta) - \frac {1-F(\theta)}{f(\theta)}v_\theta(q(\theta), \theta) - u(\underline\theta)]dF(\theta)$

subject to:

$dq(\theta)/d\theta\geq0 $

$IR\space constraint$

Now, this to me is the same as saying:

$\int^\bar\theta_\underline\theta u(\theta) dF(\theta) = \int^\bar\theta_\underline\theta [\frac {1-F(\theta)}{f(\theta)}v_\theta(q(\theta), \theta) + u(\underline\theta)]dF(\theta) $

And here is where I need help to fill in the steps. As the authors explain, this is done by integration by parts, and using one of the constraints. I get something like this:

$\int^\bar\theta_\underline\theta u(\theta) dF(\theta) = u(\theta)F(\theta)|^\bar\theta_\underline\theta - \int^\bar\theta_\underline\theta F(\theta)v_\theta(q(\theta),\theta)d\theta$

I can simplify this a bit further, but it does not simplify to the authors' expression. Hence, can anybody help me fill in the blanks?

I hope that I have left sufficient information, otherwise, please let me know what I need to clarify.


texts: Approximately Optimal Mechanism Design vs. Revelation Principle

texts:
The abstract of the article "Impossibility Results for Truthful Combinatorial Auctions with Submodular Valuations" (Dobzinski, Vondrak, 2016) states

  A long-standing open question in algorithmic mechanism design is whether there exist computationally efficient truthful mechanisms for combinatorial auctions, with performance guarantees close to those possible without considerations of truthfulness. In this article, we answer this question negatively: the requirement of truthfulness can impact dramatically the ability of a mechanism to achieve a good approximation ratio for combinatorial auctions.

My question is--  given that the revelation principle says we can WLOG restrict our attention to direct-revelation IC mechanisms in mechanism design, how can there be a loss of revenue/lower approximation ratio by restricting the search of approximately optimal (i.e. revenue maximizing) mechanisms to IC ones?


texts:
Is there any literature that considers the benefits of ethical behaviour or teachings in Economics in terms of its value added to human capital?

If there is no difference in value added, then is there any economic value contributed by humanities faculty in a given university to the labour market? If so, is such an education a waste in terms of the labour market?


texts: Understanding the proof using the mean value theorem

texts:
This is from Hopkins and Kornienko (2004) : Running to keep in the same place. The above proof is for the proposition 1 in this paper. I don't understand how the mean value theorem is applied in this case.

As far as I am concerned, the mean value theorem is $\frac{f(b) - f(a)}{b-a} = f'(c)$ for $c \in (a,b)$. Rearranging this, it should be $f(b)-f(a) - f'(c)(b-a) = 0$.

However,  this definition is not exactly used in this case. If we see the first application of the mean value theorem,  I think that $f'(c)$ is equivalent to $(V_1(x_1, z-px_1) - pV_2(x_1, z-px_1))(\alpha + G(\check{z}))$. I don't understand why it is $G(\check{z})$ instead of $G(z)$.

Also, I think $f(b)- f(a)$ is equivalent to $    V(x(z), z-px(z)) (G(z) - G(\check{z})) $ in this case. But, I don't understand how do this.

I appreciate if you give some help or hint.


texts: When the base year changes, does it affect data at current prices as well?

texts: I'm trying to collect current GDP data for India from 1990-2016. But, India changed its base year in 2011. So, to get a continuous series, do I have to change the data to a common base?


texts:
The questions say two lotteries are denoted L1 = (0.3,0.7,0.0) and L2= (0.9,0.0,0.1) and denote c(L1) and c(L2) the certainty equivalents of those two lotteries.
Then prove L1 ≻ L2 if and only if c(L1) > c(L2) and state any assumptions needed to arrive at the result.
Isn't this very straight forward because u(CE)=E(u(x))?!?


texts: How to calculate Tobin's Q as a measure of banks' performance?

texts: Basically, my question is regarding the calculation of book value of assets in tobin's q formula.


texts: I have seen that generically any finite games have odd number of equilibria. So for $2\times 2$ games can we say that generically they must have $3$ equilibria? If not can you give an example of games which have $5$ or $7$ equilibria? Many thanks!


texts: Why aren't there more super-stars in educational content delivery?

texts:
The super-star phenomena seems to happen in any field where the marginal cost of distribution is very low. I think teaching could be that way just as much as acting or playing basketball - at least as far as educational content delivery. And many other aspects of teaching can be automated or in some way taken care of without the need of a teacher.

I think khan academy is one example of the super-star phenomena in the teaching field.

But for the number of kids (and even adults) in school, it seems like a super-star would have happened earlier, or that there would be more than one super-star, or that the teaching field would mirror the musician or professional athlete or acting fields more closely. (Maybe Barney was a super-star in teaching? Or some other educational kids TV show star? Bill Nye?) Maybe not so much as far as hype goes, but at least as far as competitiveness at the top, and how far ahead the top few are from the rest in income.

So my question is, why doesn't it? Am I missing some point about the super-star phenomena? Or am I overlooking some super-stars in teaching? Etc?


texts: What does non degeneracy mean for a preference?

texts:
I saw a non-degeneracy assumption in Gilboa and Schmeidler's paper (maxmin expected utility with non-unique prior).

The statement is "Not for all $f$ and $g$ in $L$, $f \geq g$".

So can you explain the intuition for this assumption and give some example so that I can understand the "non-degeneracy" property better?


texts: Determining the elasticity of a supply/demand curve visually

texts:
Hi, I am self-studying microeconomics in preparation for a future course. I am confused about whether or not it is possible to visually determine the elasticity of a demand/supply curve by looking at its slope. Some sources I read tell you that the elasticity can be determined visually based on the steepness of the slope of the demand/supply curve.
However, I encountered other sources that say the opposite--that elasticity cannot be judged by the steepness of the slope. I read that the elasticity of demand changes at different points of a linear demand curve, but I can't find the same assertion repeated for linear supply curves.
Even more confusingly, I read from some sources that any supply curve that is upward sloping from the origin has a constant unitary elasticity regardless of the value of the slope of the supply curve. Doesn't this also contradict the assertion that the slope of the supply/demand curve indicates its relative elasticity, if a curve of ANY slope crossing the origin can be constant unitary elastic?
I am having trouble studying this from different sources. If someone can give an intuitive explanation for what is true (whether or not you can visually determine the elasticity of a demand/supply curve) I would be grateful.


texts: I'm looking for a good book that gives an (introductory) overview about the existing economic theories and the different schools of thought (optimally with focus to those that affect governments and institutions). Presentations that use  mathematical formalisms and that give a little bit of historical background to the respective theory are very welcome. I don't have any economic education, so I am hoping that there exist some "standard works" that compare the different theories and schools of thought.


texts: Converting price for service in the foreign market to local price

texts: I am a student researching 3D scanning service and developing it for a specific centre in my country, where the service does not exist in the way it does in USA. I know the price for the service in US. My supervisor suggests that the US prices can be converted to local prices by means of some economic indexes or tools. None of us is an economist and I don't really see how it can be done. Is there really a way to do this?


texts: Mixed strategy Nash equilibrium in 3x3 game

texts:
What is the MSNE for the following game?

I think you can eliminate strategies $A$ for player 1 and $C$ for player $2$, as these will are weakly dominated by all other strategies. Then, the game becomes a 2x2 game with $B,C$ for $1$ and $A,B$ for $2$.

let $q$ and $1-q$ be the probability $2$ plays $A$ and $B$ resp, and $p$, $1-p$ the probability $1$ plays $B$ and $C$. Then in equilibrium $q=1/4$ and $p=1/3$. Then the equilibrium is

$$(0,1/3,2/3); (1/4,3/4,0).$$

Is this correct?


texts: How to calculate average buy price when you buy, sell and rebuy

texts:
I wanted to get my avaerage buy price for some stocks I bought and see if I made money.

So far for just buying and then later selling I have been calculating the avaege buy price using this formula

((stockamount * price) + (stockamount * price)) / (stockamount + stockamount)

so If I buy 10 shares at 2.00 and 5 shares at 3 I would get average buy price of

((10 * 2.00) + (5 * 3.00)) / (10 + 5) = 2.33

This is how I have calculated the average sell price as well.

Recently I have bought some shares, sold them at a higher cost, and then re bought some when they slightly went under what I sold them at.

I have no idea how to figure out my average buy price in this situation because I re bought some.
here is sample data
bought 10 @ 2.00
sold 7 @ 3.00
bought 2 @ 2.50
I thought maybe doing something like this

((10 * 2.00) - (7 * 3.00) + (2 * 2.50)) / (10 - 7 + 2) = 0.8

It does not make any sense that my average buy was 0.8

I have searched but cant find the answer to a buy, sell and rebuy. if someone knows what the correct formula is to calculate the average buy price when you buy, sell and rebuy please let me know.

Thanks!


texts:
Macroeconomists tend to study GDP in terms of macro variables.

Microeconomists study general equilibrium (among other thinga of course).

Is there theory about the relation between general equilibrium and GDP? Where should I look for this?


texts: What is an unconditional model for a time series variable?

texts: If I am being asked to do an unconditional analysis of a time series variable, lets say GDP starting in 2000, what model am I supposed to estimate?


texts: Why US growth is stagnant even though unemployment is significantly low . Not only US but all developed nations are facing this problem. Is limited population the cause of this , I mean lower human resources.


texts: What is the economic incentive to cheat? How does an experiment capture exogenous deviations?

texts:
In my undergraduate career an economic experiment was conducted on my class:

one class was the control
two classes were the experimental (I was in an experimental class)

The basic premise was a modified prisoner's dilemma whereas two individuals had to make a decision regarding whether or not to 'cheat'. As this was a two stage game, the first person can choose whether or not they will cheat the second. The second can choose to cooperate or cheat. Each individual are in different classes to prevent collusion.

The monetary value (USD) was 1 for both individuals choosing to cheat, 5 if one cheated the other, and 3 if both cooperated.

Nonetheless, the experiment itself went well with no hiccups. But I approached the PI's of the experiment with the following:

This would a be a poor measure of individuals within a population willingness to deviate from established rules as you've established what the options to cheat are, issues that are prevalent within society are often based upon individuals looking for overlooked loopholes, obscure mechanisms, or outright illegal means to obtain an advantage over their competitors. As a result, the results in this experiment are predetermined and not representative of a random and at times chaotic economic structure.
If you wanted to explore an alternative measurement of behavioral economics, look for individuals who are unique in their attempts to cheat. Who go beyond the rules that you place in front of them and seek alternative means to maximize gains.
An example: Given that the experiment happened sequentially, a student who was in a previous class holds the details of the experiment as leverage in return for a greater monetary reward, threatening to disclose the details (effectively blackmail). The individual-level analysis concludes that the student realizes that there is a greater 'pot' of money that can be had (if the total class sizes is 100, then there is a budget of at least $500 to cover the situation where everyone cooperated) and the options at hand: to play according to the experiment rules (1, 3, or 5 payoff) or not to and blackmail the experimenters for a greater payoff (>5 but <500). From the experimenter's perspective, a slightly higher expense to payoff the rogue student and in the process, preserve the integrity of the experiment (and the research value of the expended monies of conforming students).

Of course, I am in full knowledge that the the deviation itself in the real world would constitute a crime and liable to criminal prosecution then and now. But this does not deter crime given the prevalence of well... crimes committed for monetary gain.

Although the reply was along the lines of "We hope you don't tell the other classes about the experiment" I retorted that my goal wasn't monetary gain, but wanted to learn more about experimental methodology and parameters.

The basic premise remains unanswered. When an economic experiment is designed to have predetermined outcomes of ethical and unethical decisions, how does it address the extreme levels of deviation that is present within historical record? Enron, Bernard Madoff, Arthur Anderson, to name a few.

I am sure I am missing a couple of literary research pertaining to the experiment and would be open to any suggestions.


texts: How to interpret the sum of company revenues?

texts:
The introduction to the Fortune 500 states:

  In total, Fortune 500 companies represent two-thirds of the U.S. GDP with $13.7 trillion in revenues.

I checked, and this is indeed the sum of those 500 companies' individual revenues.

However, I'm wondering how meaningful this statistic is. Some of these companies will sell goods to each other (for example Apple to Walmart), so I would expect double-counting of those sales when taking the sum of all individual company revenues.

How should I correctly and soundly interpret an aggregate of individual revenues and use it to assess the combined 'impact' of the companies?


texts:
I wanted to keep myself aware of the latest research news and trends etc. in economics. What are some good sources (newsletters, magazines, websites etc.) for that?

I did find one from Nature. How comprehensive is it? If it is not that comprehensive, what sources shall I read from to have a comprehensive summary of latest developments?


texts: is endogeneity a problem in the first-stage regression in a two-stage least square regression?

texts:
We have this model:
$$D=\alpha_1+\gamma_1 Z + \epsilon_1$$
$$Y=\alpha_2+\gamma_2 D + \epsilon_2$$
Notations are as usual: Y is the outcome, D is the treatment, Z is the instrument
Two conditions for instrument variable to work in the literature: relevance (there is a correlation between Z and D) and exogeneity (no correlation between Z and error term $\epsilon_2$)
However, it seems no one cares about endogeneity in the first stage regression, which is the correlation between Z and $\epsilon_1$. Why is that the case? I have never seen any applied micro paper addressing this.


texts: Signalling in a moral hazard contract with informed principals (that know their own type before contracting)

texts:
I was studying Laffont & Martimort textbook for a paper, but their section on moral hazard contract with informed principals assumes that the principal only knows his own type after contracting.
But I need a model where principal knows the type before contracting (probably with signalling issues).
Laffont & Martimort manuscript reads that such contract would be explored in a Vol. III of the textbook, but I think this volume do not exist (as Laffont got cancer and deceased right after the publishing of Vol. I). Is there any other textbook or paper that describes this model?
Thank you.


texts: Scholarly papers on Cryptocurrencies/Electronic Money

texts:
Does anyone know of any peer-reviewed papers on the topic of Cryptocurrency or Electronic Money and its acceptance and practice in the financial market?

Thanks!


texts: Why are prices of stocks not very very high with very very low r?

texts:
The theory of present value states that the price of a stock is the discounted value of the infinite stream of future income of the company.

Several countries have had very very low interest rates, very close to zero. Yet, stock prices have not gone to very very high values, or even infinity.

Why is this the case? Is this a proof that the theory of present value is incorrect? Or maybe investors think companies will not last "forever" (which they cannot, as earth's lifespawn is finite)?


texts: Why did the Dollar weaken after interest rate increase?

texts:
Yesterday the Fed increased the interest rate of the Dollar yet it's value decreased against various currencies (Source).

According to this article it should be the other way around :

  In economic theory, if the interest rates in one country increase, then the currency value of that country will increase as a reaction. If the interest rates decrease, then the opposite effect of depreciating currency value will take place.

Source

So why did the value of the Dollar decrease?


texts:
The usual answer is either "foreign debt" or "Foreign Direct Investment". But:

Why does that make sense?
And why wouldn't be financed otherwise like from importers taking out bank loans domestically rather than from foreigners?
Finally, it is said that a trade deficit can be financed by Foreign Direct Investment because the domestic currency given in exchange for the imports can only be spent back into the importing country. How does this work when whoever we're importing from is paid in THEIR currency rather than the domestic currency of the importer?

I hope someone more knowledgeable can help me out. Thanks.


texts: Intuition behind Engel Aggregation and Cournot Aggregation

texts: Could anyone provide a possibly intuitive and friendly explanation to the Engel Aggregation $(\sum s_i \eta_i = 1)$ and Cournot Aggregation$(\sum s_i \epsilon_{ij} = -s_j)$? Here, $s_i = \frac{p_i,x_i}{I} \ge 0$ is the income share, $\epsilon_{ij}, \eta_i$ are price and income elasticities, respectively. I was not sure how this theory of aggregation of consumer demand tell us about the consumption behavior. Thank you in advance for your help!


texts: How bad is piracy hurting the entertainment industrie's economy? Are they going bankrupt or have a good outlook?

texts:
By entertainment I mean book publishing, music uploads like on iTunes or even movies whether DVD, Blue Ray, Netflix, Hulu whatever.  So much is moving online, that's the future.  Piracy cannot be stopped, Sean Parker of Napster a site that was hit hard and sued for piracy lawsuits of releasing music for free, he even said, "The war on piracy is a failure."  If a war is something to be won, piracy will win, but how much is what I and others are worried about.

Along with the big suits and artists/writer/actors/singers whatever, there are movie theater employees, Apple store employees, programmers for online entertainment companies, etc...the economy for this industry is huge and can be hurt a lot since as online media is growing so is online theft, hacking, and piracy.  While it is good to go into a field of medicine, engineering, business (which this is), entertainment is a cultural classic and the people in it mostly work hard and moved up to get where they were in turn making jobs for everyone.

Star Wars made like a billion last month, but that's now and that a big movie.  Kick@ss 2 stars said another sequel can't be made because the last two were pirated too much.  Scary.  Is the industry's outlook more collapse than still being profitable in the future?


texts: When learning about derivatives, we learnt about risk-free hedges and portfolios. However, one of the concepts was about borrowing and lending at the risk free rate. Now, for lending it's as simple as buying government bonds. However, how does one borrow at the risk free rate? I doubt it's about selling your own bonds. I'm just trying to work out how to apply these economic theories in real life, so any help will be greatly appreciated.


texts: Intertemporal choice with no income flow in the second period

texts:
Question:

  Suppose Mr X maximises his utility for two periods, his total utility is given by  log $c_1$ + $\beta$ log $c_2$ where $\beta$ $\in$ ( 0,1) and $c_1$ and $c_2$ are his consumption for period 1 and period 2 respectively. Suppose he earns a wage only in period 1 and it is given by W. He saves for the second period on which he enjoys a gross return of (1+r) where r > 0 is the net interest rate. Suppose the government implements a scheme where T $\geq$ 0 is collected from agents ( this is also from Mr. X) in the first period and returns the same amount T back in the second period. What is the optimum T for which his total utility is maximised?.

My working: I tried putting $c_2= [(M -  c_1- T ) ( 1 + r )] + T$ and plugged in the values that helps the consumer achieve optimum utility for the given budget constraint. Using the lagrangean method of optimisation I got the following
$$\frac{c_2}{\beta c_1} = 1+r$$
Solving the budget constraint using this, I got $$ c_2=\frac{\beta[ M ( 1 + r) - Tr ]}{\beta+ 1}$$Next I tried differentiating $c_2$ with respect to T so as to find the optimum T that maximises $c_2$ and in turn the utility function. This method doesn't seem to work. Could somebody correct me ?. Thank you.


texts: Low interest rates - who benefits, rich or poor?

texts:
I just heard Andy Haldane, chief economist at the Bank of England make the following statement about the bank's ultra low interest rate policy and accusations that it disproportionately benefited the rich:

  "on average those that have debts tend to be poorer than those that
  have savings which has meant that our monetary policy actions with
  interest rates have if anything shrunk the the degree of inequality in
  incomes between rich and poor."

This struck me as being wrong because its the rich home-owners that may borrow four or five times annual income, whereas the poor (non-home owners) would be hard pressed to ever borrow more than half a years wages.

Is there any published analysis that would justify (or refute) the Bank of England's claim?


texts: Name of robustness check where you exclude individuals?

texts: I have a panel dataset and to check the robustness of the results, I'm re-estimating the models with each panel unit excluded once. Does this robustness check habe a particular name?


texts: Why would governments sell bonds when the economy is in recovery?

texts:
China confident of meeting 2020 fiscal targets, CGTN, 7 August 2020.

The article states that China is selling "special government bonds".

Why do this? Especially when economy is just recovering?

What is the direct effect on the economy, both in the short and long terms?