texts:
I hope this question is not too general in nature; I just wanted to ask the members of this community their opinion on the following question:  How can one choose between the Bayesian approach and the Frequentist Approach? In what context is one approach better than the other?
The reason I ask this is because whenever I attempt to answer causal empirical questions, I immediately think of trying to estimate Treatment Effects (for instance using difference in means, Difference-in-differences or matching estimators). On the other hand, when I wish to forecast, Ive heard that Bayesian Model Averaging Techniques often outpeform linear projections. On what basis can I choose between the two approaches? Thanks!


texts:
This question may require some explanation. Also, I'm way out of my depths so please let me know if this question is misguided.

The standard Leontief utility seems to assume the goods are consumed in order to create the output (think tires and wheels to create a car). For comparison, producer goods are not consumed to create the output and the time to create the output becomes interesting. Considering the time with the producer goods seems an interesting extension of Leontief utility. Specifically, if an agent has a bundle of goods for a time less than it takes to produce the output than the bundle should provide low utility and if the agent has a bundle of goods for more than the time to produce the good than the utility should be flat (until it could produce another output).

Are you aware of any work that considers Leontief utility in reference to producer goods or that considers the time to produce the output as part of the utility?


texts:
Following is a question that did not receive attention at math.SE at all. I am aware that is would be better suited there, but given its Economic background, perhaps it will get more attention here. If not, I'm happy to call this a failed attempt and delete it.

I need to solve $Ag=b$ for $b$, where $A$ is not symmetric.

$$A g = b \\
A = \left(\begin{matrix} A_1 \\ E_{IJ} \otimes \mathbb 1  \end{matrix}\right)$$

For some positive integers $I, J$: $A$ has size $(IJ\cdot J)\times IJ$, $g$ has size $IJ \times 1$, and $b$ has size $IJ \times 1$. $A$ is vertically stacked $A_1, A_2$, where $A_1$ is $IJ\times IJ$.  $\mathbb 1$ is $J\times 1$ vector of ones, and $E$ is the identity matrix.

I need to solve this for $g$ on a computer for the case where $J$ small and $I$ large. I am fairly certain (through the way I get $A_1$ and $A_2$) that with $A_1$ being singular, my system of equations is exactly identifying $g$.

I'm used to the case where $A$ is symmetric and invertible. How do I proceed here?


texts: Marshallian demand with Leontif preferences

texts:
Consider a utility function on the form $u(q_{1},q_{2},q_{3}) = min\{\alpha ln(q_{1}) + (1 - \alpha) ln(q_{2}), ln(q_{3})\}$

I know that optimal behaviour requires $\alpha ln (q_{1}) + (1 - \alpha) ln(q_{2}) = ln(q_{3})$

I tried substituting this into the budget constraint (after raising both sides to the power of $e$)

$p_{1}q_{1} + p_{2}q_{2} = y$

But I am unsure how to proceed in finding the Marshallian demand, since I have two variables $(q_{1}, q_{2})$ and only one equation. I have tried different transformations but my main problem is that it feels like I'm missing an equation.

Any help is greatly appreciated.

EDIT: I just re-read the question and I misspecified the budget constraint! The consumer only spends on $q_{1}$ and $q_{2}$.


texts: I know that Germany has huge external debt. I don't know how to find out which entities own this and especially which country they belong to.


texts: How much does a public sector pay rise actually cost the UK government?

texts:
This is something that's in the UK news at the moment. Public sector workers have experienced a 1% annual cap on pay increase since 2013.

Government ministers are appearing on TV saying that they don't have the multiple billions required to fund an increase to bring it in line with the private sector.

Despite the headline figure (let's call it £6 billion), how much does the pay increase actually cost the government?  I'm thinking that VAT receipts, income tax receipts and corporation tax receipts (from an increase in spending) would surely all go up?


texts: How did the Joint Committee on Taxation calculate the distribution of individual income tax rate increases for the Tax Cuts and Jobs Act of 2017

texts:
According to the Joint Committee on Taxation's JCX-68-17 Distributional Effects Of The Conference Agreement For H.R.1, The "Tax Cuts And Jobs Act", there will be a significant increase in income tax for tax brackets under $50,000.

In the chart titled DISTRIBUTIONAL EFFECTS OF THE CONFERENCE AGREEMENT FOR H.R.1, THE "TAX CUTS AND JOBS ACT" on the fifth page, it claims that by 2027 the tax bracket at $20,000-30,000 will have a 26.6% increase in Federal Taxes. Does anyone know how this increase was calculated. I'm having trouble finding what was referenced in the H.R.1 — 115th Congress (2017-2018) resolution to come up with these values.


texts: What are the likely effects on the distribution of income if the rate of indirect tax is reduced?

texts:
To narrow down the focus of the question, I want to know how would one depict a reduction of indirect taxes on the Lorenz Curve of a country. In my opinion, the reduction of taxes will increase the level of inequity and so the Gini Index must increase. Thus, the initial Lorenz Curve of a country must shift outwards. However, I came across a problem where the very opposite has been done. Please explain the flaw in my reasoning.

For more clarity the question is laid out as follows:

Introduction

Main Question

Answer


texts: I was wondering what software/libraries everyone uses to simulate games? For instance finding the Nash Equilibrium. I see that Gambit is a popular one, but I was wondering if there are any other good ones? (good=robust, reliable and not slow)


texts: Interpretation of Impulse Response Functions for VAR models using Log First Differences

texts:
I am exploring a VAR model with 9 variables but for simplicity let us consider a model with only two variables and one lag. The VAR model would look something like this:
$$
y_t = \alpha_{11}y_{t-1} + \alpha_{12}x_{t-1} + \epsilon_y
$$
$$
x_t = \alpha_{21}y_{t-1} + \alpha_{22}x_{t-1} + \epsilon_x
$$
I first take natural logarithms of both variables and then take first differences to address non-stationary of the time series. The first equation (for the sake of brevity) would look like this
$$
\log(y_t)-\log(y_{t-1}) = \beta_{11}\left[\log(y_{t-1})-\log(y_{t-2})\right] + \beta_{12}\left[\log(x_{t-1})-\log(x_{t-2})\right] + \xi_y
$$
How would I interpret an impulse response analysis that shocks $\xi_y$? If I plotted the impulse response, would it show me the impact of a 1% increase in $\log(y_t)-\log(y_{t-1})$ on
$\log(x_t)-\log(x_{t-1})$ or would it just be the impact of a 1% increase in $y_t$ on $x_t$ at time $t$?

One of my plots looks like this (note I just use logdiff("variable") as labels, this may not be correct, it is just an IRF on the above system):


texts:
I need help drawing the Pareto Set for an Edgeworth economy. I know how to find the contract curve given an allocation, and I think that ends up being the competitive equilibria, but drawing the Pareto line is much harder than anticipated.

We are given 2 goods and 2 agents, with log utility $(\alpha_i > 0)$:

$$u_i(x_i) = \alpha_i \ln x^1_i + \ln x^2_i$$

We get the tangency condition:

$$\alpha_1 \frac{x_1^2}{x_1^1} = \alpha_2 \frac{x_2^2}{x_2^1}$$

And combine with the resource constraints:

$$x_1^1 + x_2^1 = r^1$$
$$x_1^2 + x_2^2 = r^2$$

A lot of algebra:

$$\alpha_1 \frac{x_1^2}{x_1^1} = \alpha_2 \frac{r^2 - x^2_1}{r^1 - x^1_1}$$

$$\implies \alpha_1 (x^2_1 r^1 - x^2_1 x^1_1) = \alpha_2 (x^1_1 r^2 - x^1_1 x^2_1)$$

$$\implies \alpha_1 x^2_1 r^1 - \alpha_2 x^1_1 r^2 = (\alpha_1 - \alpha_2) x^1_1 x^2_1$$

$$(\alpha_1 \cdot \frac{1}{x^1_1} \cdot r^1) - (\alpha_2 \cdot \frac{1}{x^2_1} \cdot r^2) = \alpha_1 - \alpha_2$$

Which gets us:

$$\boxed{x_1^1 = \frac{\alpha_1 r^1 x_1^2}{\alpha_1 x_1^2 - \alpha_2 x_1^2 + \alpha_2 r^2}}$$

For our Pareto Set. (You could also solve in terms of $x_1^1$.)

As denesp notes, if $\alpha_1 = \alpha_2 - r^1 = r^2$, then $x_1^1 = x_1^2$.

The question is, how would I draw this for different values of $\alpha$? What is the intuition behind the slope of it?


texts: Examples of risk-neutral firms or people in business

texts:
I am looking for examples of approximately risk-neutral firms or people in business.
Is there an industry where risk-neutrality is common for some agents (firms or people)?
Are there perhaps time periods when some agents in some industries turn risk neutral?
Could some investors be argued to be risk neutral?
Is there a literature on risk-neutrality with real-world examples?
I would especially appreciate examples of non-extreme cases if such ones exist.


texts:
I am an econ master student and I need a bit of help understanding an issue, for my thesis. I have two related questions.

Assume a firm producing a good with labor and capital, $Y=F(L,\bar K)$. Capital is fixed, so the firm optimizes only labor. Consider two alternative scenarios:

1) Workers have monopsonistic power in the labor market: the supply of labor is $w(L)$, upward slopping, with elasticity $\eta$. In this case, profits are:

$$ \Pi(L) = pY - w(L)L - rK $$

It can be shown that optimal labor is given by:

$$ \frac{\partial Y}{\partial L} =  \left(1+\frac{1}{\eta}\right)\frac{w}{p} $$

If the elasticity of supply is infinity (competitive market), there is no wedge between MP and wages. If the elasticitity is below infinity (for example 2), there is a positive wedge (term is 1.5) so workers are paid LESS than their competitive wage. This is counterintuitive. Why can the firm pay LESS than competitive wage, if workers are the ones with the power? This is question 1. It is also strange that if supply is perfectly inelastic ($\eta=0$), the term is infinity, which means competitive wage is zero? I am lost. Now to question 2.

2) Firms have monopolistic power in the product market: the demand for output is $p(Y)$, downward sloppoing, with elasticity $\epsilon$ (which is negative)

$$ \Pi(L) = p(Y)Y - wL - rK $$

It can be shown that optimal labor is given by:

$$ \frac{\partial Y}{\partial L} =  \frac{1}{\left(1+\frac{1}{\epsilon}\right)}\frac{w}{p} $$

Here I am very very lost. So, in the case of competitive markets ($\epsilon=-\infty$), workers are paid their MP. If the elasticity is between negative infinity and -1, the wedge is positive. However, if the elasticity is $\epsilon=-1$, the wedge is infinity. What does this mean? What is so special about $\epsilon=-1$? Even worse, if the elasticity is between 0 and -1, the wedge is negative!! What the heck does this mean?

Thanks for taking the time to read this question. If you have any further question, let me know.

Bob.


texts: Why use empirical macroeconomic models when they are not policy invariant (Lucas Critique)?

texts:
With high probability this question is duplicate, and I tried to find one already in the community, but I was unsuccessful.

According to the Lucas Critique, in its more general terms, the problem with empirical macroeconomic models is that they are not invariant to policy changes, and hence we cannot take any policy conclusions out of them.

My question then is why do we still use them?

Any help would be appreciated.


texts: Does dollar cost averaging actually have any advantage over one time investment?

texts:
Some banks promote savings plans by stating that investing a fixed amount of money in regular time intervals minimizes the average buying price or the downside risk (dollar cost averaging). Since the regular saving amount is fixed, they claim that, when the stock price is low more shares will be bought, and when the price is high fewer shares will be bought, so in total, you will buy more shares when they are cheap and fewer when they are expensive, hence investing more efficiently.

Although this seems to be a valid argument, intuitively (at least for me) it still feels rather like some sort of fallacy than a sound investment strategy, however I cannot show exactly why. So my question is whether there is an actual mathematical proof that dollar cost averaging has a definite advantage over one time investment (or the opposite)? To be precise, is it really possible to somehow reduce risk and keep the same expected return (or raise expected return and keep the same risk) using this stragegy?


texts: Why decreasing co-state variable (over time) is Compulsory?

texts:
I have a short question.

In the continuous time infinite horizon optimal control maximization problem Like

$$\max \int^{\infty}_0 u(c_t)e^{-pt}dt$$

I use current hamiltonian function and I obtain FOCs and solve them.

In this case, co-state variable must be decreasing? That’s $\frac{\dot{q_t}}{q_t}<0$ is this negativity compulsory ? Why?


texts: Best formula for price depending on amount

texts:
What is the best formula of price of the product depending on amount. I mean "best" in psychological, marketing, stock rotation, profit maximizing, etc sense (any of them or all together, if possible).

Say, I often see that prices on Coca Cola bottles growing not as fast as volume of them.

I sure there is the best formula, invented by psychologists or derived empirically then proved in use.


texts: Unsure how to go about computing GDP for the following problem

texts: I came across this question where the GDP for the years 1995-1997 is given. Then I was asked to compute the growth rate every year which I'm aware of.The next question was to compute the average which is simple divison.However, the final question asks me to predict the GDP for the year of 2012 using the average rate of GDP between 1995-1997. I understand the tedius way to go about solving this problem is to keep computing the GDP from 1997 all the way upto 2012. Is there a simplar way I can determine the GDP of a particular year, using an average growth rate?


texts: why does income of executives level out in the long term after tax increases?

texts:
Marginal Revolution University has the following question in its Elasticity unit:

In 1993, then President Clinton passed a law raising income taxes.
This tax hike was fully expected: He campaigned on it in 1992. What do
you expect happened to executive income in the first year of the tax
increases? What about in subsequent years? Hint: Top executives have a
lot of power over when they get paid for their work: They can ask for
bonuses a bit earlier, or they can cash out their stock options a bit
earlier. Literally, this isn’t their “labor supply,” it’s more like
their “income supply.”

Their answer:

In the first year income will decrease; in the long run it will remain
nearly the same

I don't understand this answer; it made sense to me that the income would increase in the short term, as:

the practices of assigning salaries and bonuses, etc, would be difficult to adjust in the short term (i.e. more inelastic), so they'd tend to stay the same, but also
in anticipation of a higher tax burden, CEOs would want to give themself higher bonuses before the tax hike goes into effect, so income in the first year would be high

And it would make sense to me that, once companies adjust for higher taxes, the income of CEOs would tend to decrease to compensate in the long term.
Could anyone point out where my reasoning is falling short?  I'm new to economics and haven't really developed my intution on the subject yet.  Thanks.


texts: What statistics and linear algebra book do i need before reading Hayashi's econometrics

texts:
What statistics and linear algebra book do I need before reading Hayashi's Econometrics?

Basics linear algebra book seems too simple for the linear algebra part, and
Casealla's statistical inference is missing out detail/too basic for the statistical part


texts:
What are public sources for US firm/plant sizes, in order to characterize the firm size distribution? And what are stylized facts about the firm size distribution: What does it approximate to?

Somewhat related: What about the firm age distribution? That is, the distribution of firms given their age. I understand the latter is a soft concept in the data, but are there first-order approximations for age, and how does its distribution look?


texts: Trying to apply Solow model to the US econmy

texts:
In a textbook application I try to apply Solow model to the US economy. What will be a ballpark estimate of the saving rate and the depreciation rate?

Edit: To follow up, assume Cobb-Douglas with labor share 0.3. Assume Y=16916*10^9 and K-22541*10^9 and L=151.4*10^6. Then A=3*10^3. Then s-0.3 and delta-0.05. Does this seem make sense?


texts: Steady state Solow model with exogenous technological change

texts:
Consider the following question:

So, assume the standard function for production:

$$Y_t = A_t K^\alpha_tL^{1-\alpha}$$

where $L$ is fixed.

Then, the growth rate of output is:

$$g_Y \approx g_A + \alpha g_K $$

Case without technological change

In the standard Solow model with constant $A$, $g_A=0$. In the steady state, $sY=dK$ (investment equal depreciation), and $g_Y = g_K = 0$, consistent with the above equation.

Case with exogenous technological change

Here, $g_A=2\%$ (as per the question). But then, there is clearly no steady state, as the marginal product of capital is permanently increasing, thereby expanding capital. In the standard diagram, this means a shift of the function $sY_t$ upwards every period, meaning an ever increasing "steady state", which is never achieved. Hence, to me the question does not make sense.

Finally, here is the official answer:

Now, to me this answer is wrong. How can $Y$, $A$, and $K$ growth at the same rate? The equation of growth written above denies this!

Is the question and/or answer wrong? Am I missing something? Am I wrong?


texts: If the Number of Workers in an Economy Doubled, Would Productivity Fall to Half its Former Value?

texts:
I am assuming that the production function for the economy has constant returns to scale, and all other inputs stay the same.

These are the steps I have made to try to answer this question:

1) Y/L = Productivity

2) Therefore, if Y=3 and L=2 (There were 2 workers in the economy), so Productivity = 3/2

3) L doubled, so now L=4

4) Now Productivity is equal to 3/4.

5) Productivity has therefore fallen by half of its former value.

Am I right in stating this? If not, can you please explain to me where I am going wrong?


texts: Derivation of Arrow-Pratt risk aversion measure

texts:
This is a question about the derivation of Arrow-Pratt relative risk aversion measure $R(w)=-\dfrac{U^{''}(w)}{wU^{'}(w)}$.

I have an own way to derive it, but I really want how did the authors themselves come up with it.

I do not own the book "Essays in theory of risk-bearing" (1971), where this has been done, and neither does the library in my university, so I can't settle this question on my own.

All I can read in online reviews is that measure was designed to stay stable under positive affine transformations, and that it's a measure of the curvature since it has the second derivative in the denominator, but that still does not answer the question of why and how the authors actually derived it.

Any help would be appreciated.


texts: Are energy and capital complementary factors of production?

texts:
Why energy and capital are complementary factors of production?

In the literature of environmental taxation, it's often argued that energy and capital are complementary factors of production. So for instance if price of energy goes up, so will the price of capital. I am struggling to understand the relationship.


texts: Why can anyone buy insurance of an, without owning the, underlying asset?

texts:
A Random Walk Down Wall Street (2015 11 ed, but an 2019 ed. is upcoming). p. 100 Top.

    To make matters even more complicated, there was not just one bond issued against a package of mortgages. The mortgage-backed securities were sliced into different “tranches,” each tranche with different claim priority against payments from the underlying mortgages and each with a different bond rating. It was called “financial engineering.” Even if the underlying mortgage loans were of low quality, the bond-rating agencies were happy to bestow an AAA rating on the bond tranches with the first claims on the payments of interest and principal from the underlying mortgages. The system should more accurately be called “financial alchemy,” and the alchemy was employed not only with mortgages but with all sorts of underlying instruments, such as credit card loans and automobile loans. These derivative securities were in turn sold all over the world.
    It gets even murkier. Second-order derivatives were sold on the derivative mortgage-backed bonds. Credit-default swaps were issued as insurance policies on the mortgage-backed bonds. Briefly, the swap market allowed two parties—called counterparties—to bet for or against the performance of the mortgage bonds, or the bonds of any other issuer. For example, suppose I hold bonds issued by General Electric and I begin to worry about GE’s creditworthiness. I could buy and hold an insurance policy from a company like AIG (the biggest issuer of credit default swaps) that would pay me if GE defaulted. The problems with this market lay in the fact that the issuers of the insurance such as AIG had inadequate reserves to pay the claims if trouble occurred. And anyone from any country could buy the insurance, even without owning the underlying bonds. [I bolded.] Eventually, the credit-default swaps trading in the market grew to as much as ten times the value of the underlying bonds, pushed by demand from institutions around the world. This change, where the derivative markets grew to a large multiple of the underlying markets, was a crucial feature of the new finance system. It made the world’s financial system very much riskier and much more interconnected.

Please see the bolded sentence and the titled question. I believe that personal life insurance requires the beneficiary to be related to the insured. Why not for credit-default swaps?


texts:
When I Google "GDP of 1950", I get ~$300 Billion.

Looking at the graph @ https://fred.stlouisfed.org/series/GDP . I see

Q1 280 billion
Q2 290 billion
Q3 308 billion
Q4 319 billion

My questions:

Does last quarter value represents the GDP of the year? I thought we generally add all 4 quarters to get the annual number in finance?
Does GDP reset to 0 every year? So Jan 1st 12:00am, value starts at 0?
Is GDP culimnative? So the GDP created Q2 1950 is actually ~10 billion, and we just add that to the value of the previous quarter (to get ~290 billion)?
If the GDP value is culminative,  and you only add to the value of last quarter, the only reason why you can have a lower overall GDP is export is higher? The GDP equation is (GDP = C + I + G + (X – M)). The only subtraction I see in the equation is export. Or can  consumer spending, business investment, and goverment spending be negative???


texts: Useful models/theory private debt and borrowed constrained households

texts:
In macro oriented research papers the role of private debt is discussed and that apparently when there is a lot of private debt in the economy, households tend to be borrowed constrained..

Could someone explain why we link private debt to borrowed constrained households? I understand that when households are borrowed constrain they have a larger marginal propensity to consume out of additional income. But, why is private debt linked in the background as a variable that influences this borrowing constrain, i.e. when consumers are borrowed constrain, the economy is in a state of high private debt.
I mean, you could also say that when a lot of private debt is in the economy, households are actually getting debt easier so they are not borrowed constrained, right?

Suggesting a model, theory and/or a paper that explains this would be appreciated...


texts: How to handle the missing values' issue of newly listed stocks?

texts: I am trying to test some asset pricing models on 10 portfolios for the period of 2010-2020. The problem is that three of these portfolios included stocks that are newly listed in 2017 and 2018, so I only have three years of historical data for these stocks. Can anyone help how to solve this problem? I don't want to exclude these stocks; does imputation makes sense for such a long period?


texts: Why is instantaneous utility of current period discounted?

texts:
Consider a two period model of consumption.

I'm confused by the fact that in the optimum condition it is the marginal utility of the current period that is discounted, not the marginal utility of the next period.

Could someone give me an intuition behind this result?

Below, the derivation is presented.

$$ \max_{c_{t},c_{t+1}}u_{t}\left(c_{t},c_{t+1}\right)$$

such that

$$c_{t}+\frac{1}{1+r_{t+1}}c_{t+1}=w_{t}+\frac{1}{1+r_{t+1}}w_{t+1}$$

FOC: (MU denotes marginal (aka instantaneous) utility)

$$\begin{cases}
MU_{t}=\lambda\\
MU_{t+1}=\lambda\frac{1}{1+r_{t+1}}\\
c_{t}+\frac{1}{1+r_{t+1}}c_{t+1}=w_{t}+\frac{1}{1+r_{t+1}}w_{t+1}
\end{cases}\Rightarrow\frac{1}{1+r_{t+1}}MU_{t}=MU_{t+1}$$


texts: How to calculate the maximum willingness to pay? (Reservation price)

texts:
I have to solve the following exercise. I cant figure out what I have to do know. I hope i can get some help.

Suppose you have the following utility: $U (x_1, x_2) = 4x_1 ^ .5+2x_2 ^ .5$ and you have the income m = 20.
If you stay in Aarhus over the weekend you can buy these two goods at prices $p_1 = 4$ and $p_2 = 2$.

Alternatively you can borrow a car and drive down to Mutter Poetz in Flensburg and buy the goods at prices $p_1 = 1$ and $p_2 = 2$.

Suppose you get neither the benefit nor the dis-benefit of anything other than these two benefits (ie you don't care that you spend time on the drive for example).

What is your maximum willingness to pay to borrow the car? (Fuel cost is included in the amount you have to pay to borrow it)

I have tried to solve a maximization problem in both situations.

The first situation, where i stay in Aarhus and buy the goods to the prices $p_1=4$ and $p_2=2$ with the following budgetconstraint:
$4x_1+2x_2=20$

$x_1^\star=3.33$ and $x_2^\star=3.33$

in the second situation, where i drive to Flensburg and buy the goods to the prices $p_1=1$ and $p_2=2$. With the following budgetconstraint:
$x_1+2x_2=20$

$x_1^\star=17.78$ and $x_2^\star=1.11$

The optimal $x_1$ and $x_2$ is given by the following

$x_1^\star=\frac{m}{p_1+\frac{p_1^2}{p_2\cdot4}}$

$x_2^\star=\frac{m}{p_2+\frac{p_2^2\cdot4}{p_1}}$

I dont know if im doing it right and whether i should use it to solve the exercise.


texts: Why are high/rising property values considered a good thing?

texts:
Increasing prices for housing are pretty much universally treated as positive in the news and in political discourse: newspapers run headlines like "Good news: Home values are up" and talk about "housing recoveries" when home prices go up and housing's "remaining depressed" (as opposed to "remaining moderate" or "remaining affordable") when they don't. (See here for several more examples.) But as with any other good, rising home prices are good for sellers and bad for buyers. I can't see any reason why everyone seems to treat the sellers' status as more important.

In fact, when people move between (owned) homes, they usually sell one house and buy another in quick succession. Any overall change in housing prices is a wash for them. Many people buy a home and then die before selling it - high housing prices don't seem to help them much. By the time people sell a home to move to a rental retirement home, they are usually receiving Social Security, Medicare, and a pension, and don't have a long life expectancy, so it seems to me that they would prioritize the money they receive from a sale less than a young first-time homebuyer would prioritize the amount that they lose. And of course, most people don't sell their homes very often, so higher prices don't seem to do them much good over the vast majority of their lifetimes. The most concrete impact I can think of that changes in the average homeowner's house price have on their day-to-day life is through their property taxes, in which case rising house prices are a bad thing for the homeowner.

(It's true that it's good for you if your neighbors' house prices rise, because then they pay higher property taxes which go to local services that you can take advantage of. But people seem to focus more on their own house's price then on their neighbors'.)

It seems to me that for anyone other than the tiny percentage of the population who are professional real estate agents, roughly speaking, rising housing prices are a bad thing until you buy your first house, and then after that are fairly neutral, at least until you're very old and about to move into a retirement home. Housing is a notoriously illiquid good, so an increase in the fraction of total wealth tied up in housing would seem to decrease overall economic flexibility. Am I missing an obvious reason why rising prices are a good thing for the economy as a whole?


texts:
I am trying to understand the whole Johansen procedure via wikipedia and some other articles and I'm a noob in econometrics so there is a lot of notation and jargon that I think I am not familiar with.

https://en.wikipedia.org/wiki/Johansen_test

First off, the test itself. I'm confused by how we test for the cointegration vectors. Where do these vectors come from? Based on this

https://en.wikipedia.org/wiki/Error_correction_model

It states that

Step 1: estimate an unrestricted VAR involving potentially non-stationary variables
Step 2: Test for cointegration using Johansen test
Step 3: Form and analyse the VECM.

So is it that we first estimate a VAR, then run the trace or eigenvalue test on the pi matrix, then estimate the VECM? Then when we estimate the vecm, is that where, ultimately, the cointegration vectors come from? And do those ultimate cointegration vectors reside in the pi matrix? How do we know which cointegration vectors to use?

Also I need some slight clarification on the models.

I'll start with the VAR(p) model

I'm relatively confident that Xt is a vector of values at time t, et is a white noise term at time t. I'm not quite sure what mu, phi, and Dt are (although I've heard read it's some sort of "seasonal" term). I'm also assuming that the pi's are matrices that we need to estimate. I'm asking for clarification here but in general I think I understand this VAR(p) representation.

This is where I need some more clarification for the VECM model. What exactly are the delta's? Are they just the first difference i.e. (1-L)?

Sorry for the noob questions but I'm trying to learn this on my own and haven't found many good resources for johansen test and vecm in particular.


texts: Relationship between Elasticity of substitution of sectoral outputs and elasticity of substitution of inputs

texts:
There are two sectors Y1 and Y2.

Composite output is given by CES form -

Each sector employs Capital and Labor in combination through Cobb-Douglas Production Technology.

The paper mentions that elasticity of substitution between products will be less than one if and only if the (short-run) elasticity of substitution between labor and capital is less than one. They donot provide any motivation behind it. Why should this be true? - Any technical or non-technical explanation will be useful.


texts: What would happen if a country bans the trading of its currency against foreign currency?

texts:
The iranian rial has been losing its value rapidly recently. The dollar went from 40,000 rials to 60,000 rials in less than 6 month, most of the loss of value happening in the last few weeks. Iran responded by banning the trade of its currency until further notice.

I wanted to ask the economists here their opinion on the implication of this ban? Also example of precedents of such bans by other nation states would be appreciated.

news source:
https://en.radiofarda.com/a/iran-ban-sale-foreign-currency-exchange-bureaus/29168476.html


texts: Will printing more money during COVID cause hyperinflation?

texts:
When COVID started, many countries started printing loads of money and handing it out to their people. Here are some examples
US is printing money to help save the economy from the COVID-19 crisis
We’re Paying for Coronavirus Stimulus by Printing Money
14 countries that are paying their workers during quarantine
Coronavirus bailouts
Why Countries Are Giving People Cash Amid the Pandemic
There are definitely people that need the support but also many that won't bother finding work because the handouts are more than what they were earning before. So if there are less people working, doesn't that imply a drop in 'Goods and Services' produced by the country? And with all the money being printed and handed out, that's an increase in money being circulated.
The article The problem with printing money does a good job of explaining the effects of unrestrained money printing when the 'Goods/Services' of a country remains constant. However, I'm arguing that goods and services are decreasing but the money being circulated has increased which is even worse.
I know of hyperinflation in Germany after WWI and Zimbabwe in more recent times from all the money printing. I'm sure there are other examples in history.
So are the countries doing all this money printing on road to hyperflation? If not, why not?


texts:
What is the difference between $\hat{e}^2_i$ and $\sigma^2_i$?

In regression, we assume that $var(e_i)=E(e_i^2)=var(y_i)=\sigma_i^2$.

Does this imply that $\sigma_i^2$(the sample variance) is equal to $\hat{e}_i^2$?

When we calculate FGLS (feasible generalized least squres), we consider $\ln(\hat{e}_i^2)=\ln(\sigma_i^2)+v_i$, where $v_i$ is just the error term. This seems that we distinguish $\sigma_i^2$ from $\hat{e}_i^2$.

But, when we calculate the robust robust standard error, we simply repalce $\sigma_i^2$ with $\hat{e}_i^2$. Thus, theses two are considered to be equal.

I am confused with these two terms. Can anybody clarify this?

Thank you in advance.


texts: Where can I find the statistics of import crude oil to China?

texts: Is there any website that shows statistics of import crude oil and commodities to China daily or monthly?


texts: Why is $\Delta p \Delta q$ in this diagram infinitely small?

texts: I am curious why the area $\Delta p \Delta q$ is so small that it can safely be neglected.


texts: How can you know which is the "current dollar value" of a dollar value from another decade?

texts: Is there a mathematical ecuation or some method, which allows you to have the "current dollar value" of an amount dollar from other year, let's say, decades ago? For example, it's said that the Marshall Plan where United States gave 13 billions dollars to Europe is equivalent to $130 billion in current dollar value as of June 2016.


texts: Solow model - max steady state output per worker vs max steady state consumption per worker

texts:
$$Y=K^{1/3}G^{2/9}(AL)^{4/9}\\\frac{\dot{A}}{A}=\frac{\dot{L}}{L}=0.01\\\dot{G}=tY-0.03G\\\dot{K}=0.2(1-t)Y-0.03K$$
So far, we have a system that shows a basic Solow model with public and private capital and a tax rate to fund the public capital (t). The 0.2 corresponds to the saving rate by consumers in the economy.
It can be shown that steady state output per worker is:
$$ \left(\frac{Y}{L}\right)^* = A*(4(1-t))^{3/4}(20t)^{1/2} $$
And steady state consumption per worker is:
$$ \left(\frac{C}{L}\right)^* = \frac{(0.8*4^{3/4}*20^{1/2})A*(1-t)^{7/4}t^{1/2}}{L} $$
You can show that the t that maximises SS output per worker is 0.4, whilst to max SS consumption per worker, the t is 2/9.
I don't understand why these tax rates are different. My question is why are they different?
If the gov't switch from t = 2/9 to t = 0.4 to go from maximising consumption per worker to maximising output per worker, we've presumably increased output per worker, at the expense of consumption per worker. Where does this surplus output go if it doesn't increase C nor flow abroad (as we have a closed econ)? Does it go into gov't coffers? Does the gov't count as 'workers?' Or do even those who have physical capital count as 'workers'?
I hope my question is clear!
EDIT: https://www.desmos.com/calculator/idgbddo7ch
I've charted all of this on a graphical calculator, and interestingly, consumption per worker doesn't evolve over time (the A and L differ by a factor, so A/L is a constant). I still don't understand why the additional capital (which leads to higher output per worker) from raising t to 0.4 from 2/9 decreases consumption. What have we achieved here - what else is increasing from this increase in output if we decrease consumption per worker? It seems to be just an increase in output for its own sake...) Oh, and x-axis is the tax rate, t is time in the graph!
Note to self: check steady state of capital per worker tomorrow.


texts: Why is the U.S. economy more responsive to monetary stimulus than the euro zone, Japan, China and other major trading partners?

texts:
I've read in a Reuters article that

  The U.S. economy tends to be more responsive to monetary stimulus than the euro zone, Japan, China and other major trading partners.

Is this unambiguously true regardless of time frame? (There isn't any data or reference provided to back up the statement.) If so, why is that the case?

(As an aside, the M2:GDP ratio, sometimes taken as a measure of the "depth" of the banking sector in the economy, seem greater in China & Japan than in the US. I couldn't find unambiguous data for Europe/EU/eurozone on that page.)


texts:
Does higher frequency data have a larger effect on next day crude oil prices than data with lower periodicity?

Looking at demand and supply indicators for crude oil, such as opec / non-opec production, storage and consumption, the frequency at which this data becomes available seems inadequate to explain short term / next day volatility.

Naturally, trading volumes and trade data related to the specific product / derivative plays a role, but can it explain all the volatility in between the relatively slow drip feed of macro information?


texts: What is the relation beween Granger causality and Rubin's causality?

texts: Granger proposed a test for causality based on time series, is there any relation with the notion of causality by Rubin that seems prevalent on applied micro work. The latter deals with the notion of counterfactual and how we can use an experimental set-up to capture the expected value of this parallel world situation to infer about the average effect of the intervention.


texts: Pareto efficient allocation and core allocation in 2 person exchange economy with discontinuous utility

texts:
I understand that with continuous and strictly increasing utility function we can find Pareto efficient allocations by looking at the allocation that satisfies $MRS_1 = MRS_2$. However, I was not sure how we can find Pareto Efficient Allocations for discontinuous utilities (or one continuous and one discontinuous utility).

For instance, given exchange economy with one unit of initial endowment of the good $x$ and $y$, if we have person A's utility function as $$u_A(x,y) = x^\alpha y^{1-\alpha}$$
and person B's preference is represented by lexicographic: given $(x,y)$ and $(x',y')$, B prefers the former if
$$x>x'$$ or
$$x = x', y>y'$$
In this case, we can't calculate $MRS_B$. Does anyone have any suggestion how can we find the Pareto Efficient Allocation and Core Allocation? Thank you very much for your help in advance!


texts: Why don't we transact with securities rather than fiat money?

texts:
I don't know a whole lot about economics besides for an intro course I took once so bear with me please...

I'm a software developer working with cryptocurrencies, and I got to thinking that it would be technically possible to tokenize securities (ideally giving legal ownership of that security to the token holder) and use them for transactions within an economy instead of currencies like the USD. One token would represent a certain percentage share in a holding company or a mutual fund or maybe even a government bond.

After looking into this, there seems to be some large legal barriers preventing this sort of thing from happening, and it would be more of a feat in that regard than on the technical side of things (I think), but, more theoretically, it got me thinking about what the effects of replacing fiat with securities might be.

One thing I've heard is that a mildly positive inflation rate is desirable in a stable economy because it increases the opportunity cost of holding money thus stimulating more spending. A deflationary means of exchange might reduce spending and cause bad things? I'm also aware that using fiat allows the Federal Reserve some control over the economy via monetary policy, which is definitely needed in this boom and bust situation we're in now.

On the other hand, securities actually have what all those gold-standard nutjobs want a currency to have, actual intrinsic value! It allows for anybody taking part in an economy to necessarily own part of it. It could be a kind of free-market socialism where the means of production is actually owned by the people (redistribution of wealth still needed of course). Furthermore, In today's world, the very rich tend to have proportionally more of their wealth tied up in investments compared to the working class, further widening the divide. If securities were currency, investing wouldn't be a choice but a requirement.

My main question is, why isn't this the way it works today? Certainly it would be possible for just a regular US dollar to be legally backed by equity or debt with no crypto hacking involved, so why haven't we done so?


texts: Pareto set with Cobb-Douglas and Leontief preferences

texts:
If $U_A(x_A,y_A)=x_Ay_A$ and $U_B(x_B,y_B)=min(x_B,y_B)$ and the total endowments are (8,4), is the Pareto set given by the line joining the kinks of B (black line shown in the diagram)? Shouldn't the bottom left origin and the flat portion on the horizontal axis also be Pareto efficient?
Suppose we are at the bottom left origin, there is no way to improve one person's utility without hurting the other. By this definition, the origin should be included in the Pareto set. Please point out any flaw in the logic.


texts: Calculating elasticity between terms in a regression equation

texts:
Given the following regression: $ln(w_i)=\beta_1+\beta_2age+\beta_3age_i^2+\beta_4Y_i+\beta_5T_i+\beta_6Mar_i+\epsilon_i$ I am asked to calculate the elasticity of wages with respect to age. Is the following attempt valid?

$$\frac{\partial ln(w)}{{\frac{\partial age}{age}}}=\frac{\partial ln(w)}{\partial age}age=(\beta_2+2\beta_3age)(age)$$

Is this consistent with the definition of an elasticity as percent change over percentage change? Thank you.


texts:
'Everybody' knows that prices are generally governed by offer & demand, but I am wondering on the details of the stock exchange here.

How are stock prices (the ones which are nicely listed every day in charts) are actually computed to a specific number based on various simultaneouse bids?

Do they change, if no transaction is actually taking place (but there are bids)?
And how are concurring bids dealt with?


texts:
"The reduction seen in US government debt in the late 1990s has led to a redution in the supply of intermediate and long-term government bonds, and some concern has arisen over this fact. In the United States, some efforts have been made to promote the long-term debt of Fannie Mae and Freddie Mac as substitute benchmark bonds."

This comes from a passage connected to US treasury bond futures.

I cannot understand why Freddie Mac and Fannie Mae have been chosen as closest to government debt? Didnt one of them go bust in the recession making them not quite default free (as one usually assumes in US debt)?


texts: Fisher Effect vs Quantity Theory of Money and how an increase in the money supply lowers interest rates?

texts:
I was under the impression that in the long run, a larger money supply resulted in lower interest rates. According to the Quantity Theory of Money, see below figure, an increase in the money supply -> An increase in price levels.

Increasing price levels == increasing inflation rate.

Fisher Effect:

According to the Fisher Effect:

Nominal Interest Rates = Real Interest Rates + Inflation

Changes in the money supply should not affect the Real Interest Rate in the long term therefore there is a 1 for 1 increase in Nominal Interest Rates and Inflation in order to maintain the equation.

The Chart suggests that an Increase in money supply => Higher prices == Inflation, which i believed meant lower interest rates.

But the Fisher Effect seems to be suggesting the opposite, hence my confusion.

I would appreciate any help in clarifying this, thanks in advance.


texts: Are there any economic theories around the concept of companies focusing on that which is easier to calcuate?

texts:
A lot of the organisations I have worked for have focused on that which is easy to calculate.

For example, direct cost savings are often easy to calculate, but analysing the wider implications of a cost cutting exercise are complicated.

A company might save money on their IT budget if they reduce the number of printers they use and this is relatively simple to calculate. However, the implications for productivity of having fewer printers is much more complicated and is often ignored (in my experience).

Are there any economic theories that investigate this effect?


texts:
The long run equilibrium of a perfectly competitive market is well established. My question is - are the concepts of a long run equilibrium in a perfect competition extendable (analogous or otherwise) to an oligopoly, specifically considering the the Cournot model and the Bertrand model.

Suppose I want to find the equilibrium number of firms $ N $ in a Cournot model, for example - will the approach be similar to that of a perfect competition?


texts: Why did Malthus thought that population increases geometrically while resources increase arithmetically?

texts:
Thomas Robert Malthus is a 18th century demographer and economist that is famous for the study of population growth, especially for the support of laws that would limit the growth of (poor) population. The basis of his reasoning is summarized by Wikipedia:

The main point of his essay was that population multiplies geometrically and food arithmetically, therefore whenever the food supply increases, population will rapidly grow to eliminate the abundance.

On which basis are these two claims in bold funded?
The fact that a population grows geometrically (in other words, exponentially) in a situation of abundance of resources is now classic and known as the exponential growth or natural growth. This Wikipedia page claims that the model was in fact introduced by Malthus himself.
Why did Malthus consider that resources grow arithmetically?
Actually, the same Wikipedia page quotes Malthus (emphasis added):

"Through the animal and vegetable kingdoms, nature has scattered the seeds of life abroad with the most profuse and liberal hand. ... The germs of existence contained in this spot of earth, with ample food, and ample room to expand in, would fill millions of worlds in the course of a few thousand years. Necessity, that imperious all pervading law of nature, restrains them within the prescribed bounds."

The text does not mention arithmetic but bounded resources. It is more in line with a logistic model with a constant carry capacity, or seasonal variations.
Did Malthus really consider resources growing arithmetically, or is it a later misattribution?


texts: Are high R square and low t-stats a signal for multicollinearity? What is the nature of this problem and correction? Also, how do you generally decide if the problem is high enough to be corrected?


texts: effective and annual interest rate compounded monthly?

texts:
I just started my Enginnering Economic and I met this question in my quiz

PromInvest Inc. invested 5.5 million in a project ten years ago. As of
today the worth of this project is 24.7 million. What annual interest
rate has the project been earning if interest is compounded monthly?

This was how I tried to do it but the answer was wrong
24.7/5.5=4.49
120√4.49=1.012
(1.012)^12=0.162=16.2%
The other options are 14.2%, 14.8%, 15.8%, 15.2%.
Which one is correct and how to get it?


texts: Why are firms taken to be profit-maximizing? Shouldn't that make them risk-neutral?

texts:
Intro texts normally explain that insurance firms (casinos, etc.) "work" by diversifying risk from many clients. Unsaid, then, seems to be that risk is bad for both firm and client.

But why should a firm even need such diversification, if they merely seek to maximize profits? Likewise why would a firm ever itself be a purchaser of insurance, or spend resources trying to "manage" risk? This seems to be a rather deep oddity in the basic picture we're taught from square one.


texts: What is the point of the indirect utility function?

texts: Where does this have application? I understand how the demand function may be arrived at using the utility maximization problem but I don't understand where the indirect utility function is used and I think the two are somewhat related... Please excuse me if this is a very fundamental question. I have only started Intermediate Microeconomics.


texts: Testing Roberts's Law: data request on CEO pay and company characteristics

texts:
I posted here regarding sources for Roberts's Law.

In this paper it gives a clear qualification of what Roberts's law is. (Page 9, ...Cross-sectional prediction..)

  ..In a given year, the compensation of a CEO is proportional to the size of the firm to the power of 1/3, S(n)1/3, an empirical relationship sometimes called Roberts’ (1956) law.

This gives us the following formula:

$ Pay$~$Size^b$ with $b ≃ 1/3. $

I could not find much info on how to calculate firm size so I dug around and found another paper titled "What Determines Firm Size?
"

I found that there was an equation given and explained on page 10.

  The average firm
  size in each size bin is first calculated by dividing the number of employees by the number of
  firms. The average size for the entire sector is then calculated as the weighted sum of these bin
  averages, using as weights the proportion of the total sectoral employment in that bin. This
  produces a “employee-weighted” average of firm size.

  Employee Weighted Average Number of Employees =$${\sum_{bin=1}^n}(\frac{N^{Emp}_{bin}}{N^{Emp}_{Sector}})(\frac{N^{Emp}_{bin}}{N^{Firm}_{bin}})$$

  Emp
  bin is the total number of employees in a bin, N
  Emp
  Sector is the total number of employees
  in the sector, and NFirms
  bin is the total number of firms in a bin. In contrast to the firm-weighted
  simple average, the employee-weighted average emphasizes the larger firms; note the squaring
  of bin employment in the numerator.

Robert's law is now:

$$Pay={\sum_{bin=1}^n}\left[\left(\frac{N^{Emp}_{bin}}{N^{Emp}_{Sector}})(\frac{N^{Emp}_{bin}}{N^{Firm}_{bin}}\right)\right]^{b}$$
Now I am aware I'm kinda just copying and pasting and my research may be incorrect. But i'd like some data to test Roberts's law.

Where can I find data on CEO pay and company information?


texts: Are businesses and individuals buying clean / green / renewable energy contribute to slowing down the climate change?

texts:
I'm not sure if an individual choosing a "green energy supplier" is making any difference.

My (potentially naive, uneducated) logic is as follows:

higher demand for green energy = less demand for other energy

Less demand, therefore lower price, those who are polluting the most now have fewer incentives to switch. Supply and demand, elementary market forces.

I would like to better understand if choosing green energy makes any difference?

Personal note: I'm in the camp of effective altruism. In my version of reality, giving £1 to a homeless is a selfish "feel good" act that does solve the underlying problem of education, employability, affordable housing, mental health support, resilience and life skills.


texts: Is the European Single Market a Free Trade Area?

texts:
The European Single Market is (obviously) a Single Market.

Are Single Markets also free trade areas?


texts: Deriving Marginal Product For Hecksher-Ohlin

texts:
I'm using the second edition of applied international trade by Bowen and for the HO model, the marginal product with respect to capital ought to be the first term of the final answer (as given in the textbook) but I'm unable to derive it.

I'm pretty sure I'm wrong somewhere as the final answer I derived is negative (average product > marginal product) but I can't figure out where I'm wrong.

Please help, thanks!


texts: What gives value to precious, luxury things?

texts:
What makes things precious? For example Gold, Silver, Diamonds, etc. Once they were unknown to human being. And now they are the more pricey things.

I guess its just the way these things were marketed into the world, Demand and Supply control makes them pricey, there are a lot of other metals too in the world, which are more expensive then gold, but they are not that much poplar or in demand.

Similarly if we look into brands, Gucci, Armani, Micheal Kors, etc. Once they were unknown, no one knew about them. But now, they are the most expensive brands in the market.

I know in brands companies cash their name, that's why they are too pricey. But my concern is what exactly makes things precious and pricey.


texts: Do reserves at Bank of Canada count as money?

texts:
I read the following three statements concerning M1 and M2 in Canada:

a) "M1 consists of currency held outside the banks and chequable deposits of individuals and businesses."

b) "M1 does not include currency held by banks, and it does not include currency and bank deposits owned by the government of Canada."

c) "M2 consists of M1 plus all other deposits."

My questions about these quotes are:

1) Does "currency and bank deposits owned by the government of Canada" in (b) mean currency and deposits at the Bank of Canada? If not, are these deposits just deposits by the Canadian government at some other bank? And where does the government of Canada keep its currency?

2) If the above ^^ is correct that these are currency and deposits at the Bank of Canada, does "M2 consists of M1 plus all other deposits" in (c) imply that while deposits at the Bank of Canada are part of M2, currency held by Bank of Canada (ie its reserves) are not part of M2, ie Bank of Canada's reserves are not money?


texts: Why did the stock of consumer loans held by commercial banks jump in March 2010?

texts:
The graph below refers to "Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks", from here.

What happened in March 2010? The data come from the balance sheets of commercial banks in the US. Did an entity that was previously not a commercial bank somehow change status?


texts:
I'm reading a paper that tries to estimate the following model:
$$y = \alpha x+\beta z+\gamma xz+\epsilon$$
where x,z are dummy variables and y isn't.
The estimated coefficient of $\alpha$ is positive (0.02), and the sum of $\alpha+\gamma$ is negative (-0.01,insignificant). The writer examines the marginal effect of x, conditional on z and finds a positive (0.01, with significant of 90%).
My question is what is the difference in interpretation of marginal effect VS. $\alpha+\gamma$?

The paper is "Terrorism and Voting: The Effect of Rocket Threat on Voting in Israeli Elections" by Anna Getmansky and Thomas Zeitzoff (link: https://www.zeitzoff.com/uploads/2/2/4/1/22413724/zeitzoff_getmank_rockets_main.pdf).
The marginal analysis is on page 11.


texts: How exactly does removing labor market rigidities reduce structural unemployment and increase potential output in an economy?

texts: Here I want to focus primarily on the potential benefits of labor market reforms such as a reduction in job security and trade union power and not their controversies. I wish to learn a few thoroughly explored reasons for how labor market reforms may decrease structural unemployment and increase the productive potential of the economy through improvement in efficiency.


texts: How do I work with the growth accounting framework in a regression?

texts:
I am currently writing my master's thesis with the topic "The impact of digitalization on economic growth in China and Germany".
My idea is to take a technology such as Industry 4.0, IoT or AI and determine its influence with a regression.
I have already found similar approaches in the literature and have repeatedly come across the "growth accounting" approach. Unfortunately, I do not understand the approach and therefore cannot use it in my regression.
My questions are:

how do the individual steps towards the economic model explain themselves?
how do you make the regression from this model?
(For example, what do I do with the alpha in the regression)?

At the end I link a paper in which the approach and explanations were applied, maybe that helps.
https://www.tandfonline.com/doi/full/10.1080/10438599.2019.1695941
Thanks a lot for any help!


texts: Can Direct Taxes on the consumers have a impact on the Demand (rather than supply)?

texts: I'm a 12th-grade student doing a school research paper evaluating the effectiveness of the recent increase in Additional Buyers Stamp Duty in the Singapore Housing market. This tax is directly imposed by the government on the consumer after the purchase of housing has been made. So will this have a demand-side effect (I know this isn't really applicable because it's macroeconomics, but contractionary fiscal policy like increasing income tax decreases Consumption and is responsible for a leftward shift in Aggregate Demand) like income taxes? Or will it have the conventional leftward shift in Supply curve (but I'm not sure how this is the case as there is no tax incidence on the producer)? Any help would be great, Thanks!


texts: How is the defintion of the mean preserving spread (MPS) not too general?

texts:
The mean preserving spread is defined as follows:

Consider two lotteries g and h. Let $x_g$ und $x_h$ denote the corresponding random variables. Then h is a mean preserving spread (MPS) of g, if:
$x_h = x_g + z$ for some random variable z with $E[z|x_g] = 0\ \forall\ x_g$.
(This definition is supposed to be complete and exhaustive and I have found it in multiple sources)

An example for an MPS is the following:

Lottery g is replaced with a new lottery (lets call it h) by adding some noise, which makes the payoffs more extreme but preserves the mean.

My problem is: As far as I understand it, g (the old lottery) is also a mean preserving spread of h (the new lottery). At least the definition from the beginning allows for this: If I set z in a manner that the first outcome becomes larger and the second one smaller, I can still have $E[z|x_g] = 0\ \forall\ x_g$, but the total risk is now smaller. I have basically spread the lottery negatively. Just that MPS is now an entirely useless concept, since it does not allow for judgements with regards to the value of utility for an individual with concave utility functions (or any other shape for that matter.


texts: What is the $\beta$-$\delta$ model? How does it relate to present bias and the present value calculation?


texts: What would be the effect on the economy if the United States legalized counterfeiting?

texts: If today the United States legalized counterfeiting, what would be the effect on the economy? The counterfeit must look authentic to be legal, thus requiring some skill.


texts: Positive Monotonic Transformations and Nested Functions

texts:
Suppose there is an economic agent with the utility function $u(x,y)$. A second agent has the utility function $h(g(f(u(x,y))))$.

Am I correct in thinking that if $f'(x)>0$, $g'(x)>0$, and $h'(x)>0$, then  $h(g(f(u(x,y))))$ must also be positive and therefore  $h(g(f(u(x,y))))$ is a positive monotonic transformation of $u(x,y)$?

If not, how come?


texts: Deriving demand function from utility function

texts:
How do I derive the demand function from

$$U=y + 2\sqrt{x}$$

Currently I have $MRS = \frac{1}{\sqrt{x}} = \frac{P_x}{P_y}$, so, $P_y = P_x\sqrt{x}$

Using the budget line: $$I = xP_x + yP_y \implies I = xP_x +y(P_x\sqrt{x})$$

Which simplifies to $$x = \frac{2I + y^2 P_x \pm y\sqrt{Px(4I+y^2P_x)}}{2P_x}$$

I'm not sure if this is correct, should I have did $MRS = \frac{1}{\sqrt
{x}} = \frac{P_x}{P_y}$, so, $P_x = \frac{P_y}{\sqrt{x}}$ instead and substitute $\frac{P_y}{\sqrt{x}}$ into budget line? How do I determine what to substitute into the budget line?


texts: Probability transition matrix as a function of the variance in Matlab?


texts: Restrictions on goods and capital, but freedom of labour movement

texts:
I recently had a discussion with a left-wing friend in the UK about about Brexit, and the possible repercussions of restriction of labour when the UK leaves Europe. He argued that as someone who is quite left-wing, he would be in favour of large tarrifs and other restrictions to prevent the flow of goods and capital, but little or no restrictions of the flow of labour between countries.

Can anyone outline the repercussions of such a policy?


texts: Utility function for introductory microeconomics

texts:
What are the utility functions standardly used in introductory microeconomics courses. My own list would include

Perfect substitutes: $U(x,y) = ax+by$
Perfect complements: $U(x,y) = \min(ax,by)$
Cobb Douglas: $x^\alpha y^{1-\alpha}$
Quasi-linear: $x + y^\alpha$
CES: $U(x,y) = (x^\rho+y^\rho)^{1/\rho}$

Anyone else that would be typically included?
EDIT:
To be more specific I am primarily interested in different types of preferences not positive monotone transformations of the above specifications.


texts:
I was wondering of my thinking here was right:
Given $$ e=\frac{dQ}{dp}*\frac{p}{Q}, $$ where
$ e $ is elasticity, $ dQ/dp $ is first derivative of demand function, $p$ is price and $Q$ is quantity.
With this expression for $e$, could you then state that:
$$ \frac{dp}{dQ} = \frac{p}{(e*Q)} $$
where $ dp/dQ $ expresses first derivative of inverse demand.
Is this correct?


texts: Does the reciprocal of the price elasticity of demand have an interpretation?

texts:
I have 2 related questions that i think are straightforward but am worried I have over-simplified!

(i) Suppose the demand curve is downward sloping and the supply curve is upwards
sloping. Suppose also that I have estimated the price elasticity of demand $ \frac{\partial ln(D)}{\partial ln(p)}  $,

Can I obtain the responsiveness of price to demand simply by taking the reciprocal?

$ \dfrac{1}{ \frac{\partial ln(D)}{\partial ln(p)}} = \frac{\partial ln(p)}{\partial ln(D)}  $

By analogy to discrete changes, the rearrangement below seems to work

$ \dfrac{1}{ \frac{\Delta D}{\Delta p} \cdot\frac{p}{D}}  = \frac{\Delta p}{\Delta D} \cdot \frac{D}{p} $

Or do I also need an estimate of the price elasticity of supply?

(ii) Relatedly, now suppose I also have the price elasticity of supply, and that I want to estimate the responsiveness of the supply curve to shifts in the demand curve (with the mechanism being that some positive shock to the demand curve raises prices, which incentivises firms to supply more output). Is the following valid?

$ \dfrac{ \frac{\partial ln(S)}{\partial ln(p)}}{  \frac{\partial ln(D)}{\partial ln(p)}} = \frac{\partial ln(S)}{\partial ln(p)} \cdot \frac{\partial ln(p)}{\partial ln(D)} = \frac{\partial ln(S)}{\partial ln(D)}  $

Thanks loads for your help, and apologies if I missed a similar question


texts: What is the difference between quarterly GDP and annual GDP?

texts: I didn't understand how quarterly GDP is calculated. If GDP means Gross Domestic Product in a year, then what does quarterly GDP mean Gross Domestic Product in a quarter? OR it is multiplied by $4$ to estimate for a annual number? I appreciate the help. I tried google but cannot seem to find a page that explains it.


texts: demand curve shift in a monopolistic competitive market

texts:
As more firms enter the market, the quantity demanded at a given price level will thus decline. Therefore, the perceived demand curve for any individual firm will continue to shift leftward until the excess profit dries up.

But my question is, will the slope of the demand curve change as it moves leftward?

Also, there's something that caught my eyes when studying this chapter. I understand that the demand curve won't stop moving to the left until the excess profit disappears. And by that point, the following two statements will be satisfied: (a) the demand curve will be tangent to ATC, and (b) MR=MC.

But I am wondering, is it possible that the demand curve intersects ATC at a point where MR = MC?


texts: Why is there a big change in the money supply at the beginning of each month?

texts:
I was watching Argentina's daily change in monetary base for a selected period and there is a clear spike at the beginning on each month. Then during the month it slowly goes down until reaching similar nominal levels at the end of each month. Why is there a spike?

I had the hypothesis that the spikies were because of businesses redemptions in T+1 mutual funds in order to pay for wages, but on August 1st "the spike" was actually negative.

Context: during the selected period Argentina was doing a contractionary monetary policy and transfers from the Central Bank to the Federal government were forbidden.


texts: Solve for the bundle component that makes one as 'well off' as earlier

texts:
Suppose we have a (presumably time independent?) utility function $U(x_1,x_2)$ for consumer Rita.

1.

  What is Rita's MRS of $x_2$ for $x_1$?

$$MRS_{x_1, x_2} = \frac{MU_{x_1}}{MU_{x_2}} = \frac{\frac{\partial U}{\partial x_1}}{\frac{\partial U}{\partial x_2}}$$

(or in some strange books $-\frac{MU_{x_1}}{MU_{x_2}}$)

Is that right?

2.

  If Rita consumed $a$ of $x_1$ and $b$ of $x_2$, what was her MRS?

$$MRS_{x_1, x_2}(a,b) = \frac{MU_{x_1}(a,b)}{MU_{x_2}(a,b)}$$

Is that right?

3.

  3.1 If Rita is currently consuming $c$ units of $x_1$, how many units of $x_2$ must she consume in order to leave her just as well off as she was in #2?

  3.2 What is the MRS at $(c,x_2)$?

What's the equation to solve here?

$$U(a,b) = U(c,x_2')$$

?

Or

$$\frac{MU_{x_1}(a,b)}{MU_{x_2}(a,b)} = \frac{MU_{x_1}(c,x_2')}{MU_{x_2}(c,x_2')}$$

?

I'm thinking the former because 'well off' seems to call for 'utility' and not 'MRS', and the latter answers 3.2 easily...

Anyway, if the former then for 3.2 I just compute

$$\frac{MU_{x_1}(c,x_2')}{MU_{x_2}(c,x_2')}$$

?


texts: General Equilibrium allocation holding fixed a consumer's utility

texts:
I'm having some issues with solving this general equilibrium exercise.

The way I started off is by assuming that since consumer 2's utility is fixed, he will have a fixed utility function. Then consumer 1 would shift his indifference curve to the point where they are tangent to maximise his own utility. Thus deriving the contract curve, by $$MRS^1=MRS^2$$
$$64x_1=117x_2-5x_1x_2$$
Then using the utility function: $$6=x{_{1}}^{1/2}x{_{2}}^{1/3}$$
I should be able to solve this because it's only 2 unknowns with 2 equations, but I cannot get anywhere without using an online calculator. I think the solution is allocation for consumer 1 is (4,8) and consumer 2: (9,8), but I am not sure how to get to this.

Can anyone find a similar exercise, where one consumer's utility was held fixed? Any advice on how to solve this?

My workings so far


texts: Is the Paradox of Value relevant to the value of labour?

texts:
I trust we're all familiar with the Paradox of Value -- that queer state of affairs in which diamonds, which are not good for anything, are very expensive, while water, which we all need to not die, is very cheap.

This has always reminded me of similar oddities in the labour market -- that a professional player of sports is paid millions of dollars a year, while a kindergarten teacher is paid much more modestly.

Am I correct in thinking that these are two sides of the same coin?  Do the various resolutions of the Paradox also serve to explain the labour market?  Or are there important differences between goods and labour that make this sort of approach unhelpful?


texts: How many cars do Chinese brands produce outside China?

texts:
Some Chinese car manufacturers have factories outside China. For example FAW produces trucks in South Africa. How many cars do Chinese brands manufacture in factories outside China? Say for example in 2017 or 2018.
For example: Nearly six million vehicles are produced in Germany each year, and approximately 5.5 million are produced overseas by German brands.


texts: Currency Devaluation and the causes of the Tequila Crisis

texts:
I was reading about some of the famous crisis that happened in the past and i came across "the tequila crisis" in mexico during 1994-96.

As a background, The Tequila crisis (also known as the Mexican Peso Crisis or December mistake crisis) was a currency crisis sparked by the Mexican government's sudden devaluation of the peso against the U.S. dollar in December 1994, which became one of the first international financial crises ignited by "capital flight", as investors pulled out of Mexico.

The extended issuance of Tesbonos, a mexican bond also contributed to the crisis

What are the mechanisms for a currency devaluation in a case like this?


texts: Is Price Level equivalent to Inflation when looking at AD/AS and Phillips Curve graphs?

texts:
Fairly straight forward, Can I assume that Price Level and Inflation are interchangeable when looking at these graphs together?

Generally, are they equivalent in Macroeconomics?


texts: Is quadratic voting efficient in multiple winner elections?

texts:
Quadratic voting approximates efficiency for a large collective making a sequence of binary decisions. What if a group can take multiple actions? Say, for example, a series of decisions where 2 out of 5 outcomes can be chosen each time.

I'd like to know if anything about the efficiency of quadratic voting is known in such situations. Does it depend on if non-winning choices can occur in later decisions? Also, what if different decisions use differing amounts of a finite resource that must be apportioned?


texts: How should one expand the information set in VAR models?

texts:
I am trying to use VAR for an undergraduate class but keep having degrees-of-freedom issues. I am using quarterly data, have 3o years of data, and have 10 time series.

I want to look at the effects of monetary policy shocks. But we learned that this method produces a price puzzle and that one way to fix the price puzzle is to include commodities prices.

My problem is that this seems like it treats a symptom and not a problem. I thought it might be a better idea to include a broad set of variables instead of just that one. It is justifiable to include lots of information but not justifiable to cherry-pick information, I think.

Anyone know how to include more variables in that set?


texts: Is there any specific significance of inverse demand?

texts: Why do we need separate form of demand? Where do we use inverse demand form? concept only.


texts: Effect on Large Company on Redistributing Profit from Shareholder to Employees

texts:
Looking over the information in the tour I'm aware this might be too opinion based or require too long answers, so I apologies in advance if this is off topic.

In an attempt to keep the question tightly focused I'll restrict it to one specific example.

Recently Bernie Sanders has been taking aim at large corporations that make significant profits while leaving employees struggling to buy food and healthcare. One of the more prominent examples is the Disney Corporation.

According to online information in 2017 Disney made a net profit of 9.8bn USD and employed approx 200,000 people. If we assumed that 80% of these employees were the low wage earners referred to by Bernie Sanders, taking approximately 10% of this net profit and redistributing it as wages would allow for a pay rise for each individual of over $2 an hour.

A net profit of $8bn would still seem to indicate a very healthy company that would presumably be attractive to shareholders and investors. What other economic impacts would be expected if Disney reduced it's net profit margin by 10% purely by increasing low wage employee remuneration? Or what is wrong with the publicly available numbers/my understanding that means these figures are inaccurate?


texts: Looking for the title of a short (~100 page) Herbert Simon book about "Bread-bricks"

texts: I'm trying to find a short (~100 page) book by Herbert A. Simon in which he presents a simplified economics in which there is only one item of value and it is called the 'Bread-brick'. One can eat a breadbrick, or sell it, or store it, etc. He uses this simple world to illustrate certain topics in the study of economics. I have been looking for it for ages, and I don't know the title. I've googled endlessly, and perused all Simons books on google reader but I have come to nothing.


texts:
Suppose u(x,y)=min{x+y,4(x)^1/2,4(y)^1/2} , Px=1, Py=2, M=5 . Here, Px, Py and M are the price of x, price of y, and the Income.

Give an example of the optimal consumption bundle of x and y for this consumer.

I know to plot the Indifference Curve given a value of Utility,however how could I know what is the maximum utility that can be obtained in this case?


texts: Is this equivalent to the game of chicken?

texts:
In the beginning of the mahjong anime/manga Akagi, the titular character has just come in from what is called a game of chicken, which is described as follows:

  Two cars head for a cliff at full speed. It's a game of reckless disregard for life where the person who first brakes loses.

No conditions for ties were given in the anime, but I will assume that:

Driving over the cliff is the least preferable outcome regardless of what happens to the other person
Losing is preferable to driving over the cliff
Being in a tie is preferred over losing, and winning is the most preferred outcome

I believe that the games aren't equivalent:

Unlike the description of the game of chicken given on Wikipedia, there is a weakly dominant strategy in the game in Akagi (i.e. braking at the edge of the cliff). But I'm not sure if the existence of weakly dominant strategies are preserved under isomorphisms of games.
The Akagi version of chicken has a pure Nash equilibrium where both players take the same action (and both obtain an outcome that isn't their most preferred outcome). This outcome (in terms of preference rankings) doesn't exist in the standard formulation of the game of chicken. However, thinking about it, it might be better to view the Akagi case as something continuous that might then permit mixed strategies (with regards to when the player chooses to brake).

Is my reasoning here correct, or is there a better way to view this?

Update: I should add that in the Akagi version, the choice is when to brake, which lies on a continuum in some interval of $\mathbb{R}$. (I'm not entirely sure how to formulate this mathematically, since we also need to allow for the possibility that the player drives off the cliff, but this is beside the point.) However, as previously stated, braking right at the edge should be weakly dominant, at least from an intuitive perspective.

Conversely, in the standard version, there is a binary choice ("swerve" or "straight") at a single point in time. Unless it's possible to rule out all but a few cases in the Akagi version, it would seem that the games can't possibly be equivalent, since we can't "reduce" the Akagi case to the normal game of chicken. (There should be no isomorphism between them if the cardinalities of the set of choices are different.) But that's exactly the thing that I'm not completely sure about.

Moreover, I'm not sure if I'm analysing the equilibria of the Akagi case properly, particularly since it strikes me as a scenario where mixing might do better (but I'm not familiar with mixed strategies in continuous cases, and I'm too busy at the moment to test somewhat "simpler" cases).


texts: What does economics say about "price gouging" during an emergency?

texts:
Many states have laws against "price gouging" during an emergency.

Are these laws counterproductive?

Take the current situation with toilet paper and water. When someone sees rolls of toilet paper on the shelf, they buy them all. Not because they necessarily need it, but out of fear the next person will buy them all and there won't be any left when they do need it. This creates a positively reinforcing feedback loop of negative cause-and-effect a/k/a/ a "vicious cycle."

But if prices spiked in response to meet demand, the feedback loop cycle would slow because two good things would happen that aren't happening now.

Supply would increase. Increased prices signal suppliers (whose marginal costs remain constant) to manufacture and ship more product in order to maximize profit.
Hoarding would mitigate. Hoarders would have less incentive to hoard supplies of water, toilet paper, etc. unnecessarily if they were paying significantly higher prices than normal. Then there would be adequate supply left for those who need it and aren't simply overstocking out of an abundance of caution. Moreover, would-be hoarders would feel like the next guy also has less incentive to hoard and thus quell their fear of being left with no supply when needed.

Is this a correct economic analysis or am I missing something that justifies "anti-price-gouging" laws?


texts: If I had a new economical theory, how could I share it with academical environments? I call it “algorythmic economy”

texts:
If I had a new economical theory, how could I share it with academical environments? I call it algorythmic economy.
I have made this same question on Quora.
https://www.quora.com/unanswered/If-I-had-a-new-economical-theory-how-could-I-share-it-with-academical-environments-I-call-it-algorythmic-economy
I am still writting the paper, and my intention is to prepare a proof-of-concept software to show easily demos to children, for them to not be lied anymore about wealthness.
Further than opinions, what I ask for is how can I share the paper and the software to truly interested people, with a genuine interest in the very deep nature of Economics.
Thank you.


texts: Whats the difference between local non-satiation and monotonicity?

texts: Is there a practical difference between local non-satiation and montonicity? Can one exist in a utility function without the other?


texts: Two Players Different Strategies in infinitely repeated game

texts:
I am vexed by a Game Theory question regarding infinitely repeated games. Usually, strategies such as Grim Trigger or Tit-for-Tat are discussed in a context where both players have the same strategy.

However, I am wondering how to proceed when two players play different strategies, say Player 1 plays Grim Trigger and Player 2 plays Tit-for-tat.

My question is whether there exists any $\delta\in(0,1)$ for which a profile of {Grim Trigger, Tit-for-tat} constitutes an equilibrium.

The stage game payoffs are as follows:

\begin{array}{|c|c|c|}
\hline
& C & D \\\hline
C & 3,3 & 0,4 \\\hline
D & 4,0 & 2,2 \\\hline
\end{array}


texts: How is inheritance classified in Adam Smiths profit/wage/rent classification?

texts: It seems to me that inheritance can't be classified as profit or wage. So does it fulfill the definition of rent, or are there some economic activities that don't fit into this classification?


texts: Textbook claims that price level accompanied by decrease in interest rates?

texts:
I read from this textbook the following, quoted as:

  In addition, a decline in the price level is usually accompanied by a
  fall in the rate of interest...

I interpret this as meaning: "A fall in price causes interest rates to fall".
This quote, in context, was meant to explain the interest rate effect - a reason why the aggregate demand curve slopes downwards.
Can someone verify and explain why this is the case? Additionally, is my interpretation correct?


texts: Economic Profit and the Return on Invested Capital

texts:
In my finance classes, I always learned that the a firm earning an "economic profit" is one for which its return on invested capital (ROIC) is greater than it's opportunity cost of capital (usually calculated using the Weighted Average Cost of Capital). But, in my economics classes, I learned that economic profit accrues to a firm that has the ability to price above marginal cost (the demand curve for its product is not infinitely elastic).

Are these two definitions compatible? Is there a way to connect the two? The reason for my question is that I have noticed situations in which the two don't concur. For example, oil companies have negligible market share (when considered globally; e.g. Exxon, the largest U.S. oil major, has about 3% market share - will try to find the reference for this, can't currently remember) and sell a commodity product, and so that's pretty close to the "competitive ideal" as depicted in any Intermediate Micro class. However, if you look at Exxon's ROIC, it has at times been in the 30% range, much higher than any reasonable estimate of WACC (usually around 7-12%). So there appears to be a discrepancy between two different measures of "economic profit".


texts: What is the economic meaning of distribution parameter in a CES-production function?

texts:
This is the production function (two input factors: $x_1$ and $x_2$)

$$q=A[δx_1^ρ+(1-δ)x_2^ρ]^{\frac{1}{ρ}} $$

If distribution factor $δ$ is set to increase, what are the economic impacts on these two input factors? Substitution elasticity remains unchanged.


texts: Does the duality of utility maximization and cost minimization hold in practice?

texts:
I recently learned about the relationship between utilization maximization and cost minimization.

Are there studies on whether this duality holds in real life?

Any information on this topic for a beginner to consumer choice theory would be appreciated. Any tips on key things to consider when starting to learn about the topic would also be helpful.


texts: What would be the economic impact of disallowing the renting of housing?

texts:
I'm just trying to think through the implications of the theoretical scenario of disallowing the renting of housing.
My goal would be to reduce wealth inequality - as rent is generally a wealth transfer from the poor to the rich - but this would pull on so many threads in the economy that I wanted some other opinions.
So a builder or investor could own an apartment complex and sell the individual apartments, and the buyers could pay in installments that would be essentially the same as renting, from the perspective of the person living there, with the difference being that after 10 or 20 or 30 years the occupant would own the apartment and not owe anything but taxes and maintenance.
If someone knows that they are only going to stay someplace for a year or two then the buying/selling process would need to be much simpler and cheaper to avoid all of the transaction costs and paperwork.
How to distinguish apartments from hotels is another question.


texts:
Consider the problem of an individual that must choose how much of his initial wealth
w0 > 0 to allocate to a risky asset X. The risky asset X has n ≥ 2 possible return rates,
namely r1, . . . , rn, and P rob(r = ri) = pi > 0 for all i ∈ {1, . . . , n}. The individual’s utility
function over wealth u is increasing, strictly concave and differentiable everywhere. Suppose now that there exists a second independent risky asset Y that has the same possi1ble return rates happening with the same probabilities as X..
Is the existence of Y beneficial to the individual?
When I first read the question, I think if they both have exactly the same probability and return value, it shouldn't be an advantage for us. But at the same time, I am wondering if there is any other situation that I am missing and that could take advantage of this situation. I wonder your comments.


texts: What is meant by the abbreviation 'MSV solution', used in the context of DSGE modeling?

texts:
What is meant by the abbreviation MSV solution, used in the context of adaptive learning in DSGE modeling? E.g. see Bullard and Mitra (2002)

minimum state variable (MSV) solutions it is in full, but what does that mean?


texts: Is it possible that the minimum point of a short run cost curve does not touch the long run cost curve?

texts:
In the answer to this question, the answerer said "the minimum point of a short run cost curve will be above the long run cost curve". Is it true? If so, how would it be so?

I thought that if e.g. the short-run capacity is too small or too big, it would just be represented as different short-run cost curve tangent with the long-run cost curve.


texts: Could anyone here be able to explain gambling addiction and its debt with Microeconomics theory?

texts: I am a research master student in Cognitive and Clinical Neuroscience, with the specialization/track Neuroeconomics and have to come up with a master thesis subject soon. I was thinking about gambling addiction and had some ideas of first theoratically explaining it with utility functions that are risk-seeking and use Arrow-Pratt measure of risk aversion. Does anyone have other theories in mind that can contribute to the microeconomical explenation of gambling addiction? Or perhaps someone having a "theory" of their own? I would love to see some ideas from others to get some inspiration!


texts: Is there a relationship between the elevation/altitude of a city and its GDP?

texts:
A year or two ago, I recall watching a YouTube video that looked at the GDP of various cities and argued that there was a weak positive correlation between their elevation and their GDP. I can't find the video again and I haven't been able to find many supporting documents for this - I did find one about China but not the world at large. https://link.springer.com/article/10.1007/s11629-017-4393-0

Has anyone seen this argument and know the details?


texts: Decreasing Yield Curve: Infer expected future trend?

texts:
If the yield curve for zero coupon bonds is decreasing does it mean (in general)
that investors are thinking that country's economy has gloomy future? Or unpredictable?


texts: The 2015 Economics "Nobel": Angus Deaton

texts:
Angus Deaton is only the sixth economist to not share the "Economics Nobel" (the "Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel") in the last 20 years (i.e. from 1996 onwards).

The Press Release reads:

  Press Release

  13 October 2015

  The Royal Swedish Academy of Sciences has decided to award The
  Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel
  for 2015 to

  Angus Deaton, Princeton University, NJ, USA

  "for his analysis of consumption, poverty, and welfare".

  Consumption, great and small

  To design economic policy that promotes welfare and reduces poverty,
  we must first understand individual consumption choices. More than
  anyone else, Angus Deaton has enhanced this understanding. By linking
  detailed individual choices and aggregate outcomes, his research has
  helped transform the fields of microeconomics, macroeconomics, and
  development economics.

  The work for which Deaton is now being honored revolves around three
  central questions:

  How do consumers distribute their spending among different goods?
  Answering this question is not only necessary for explaining and
  forecasting actual consumption patterns, but also crucial in
  evaluating how policy reforms, like changes in consumption taxes,
  affect the welfare of different groups. In his early work around 1980,
  Deaton developed the Almost Ideal Demand System – a flexible, yet
  simple, way of estimating how the demand for each good depends on the
  prices of all goods and on individual incomes. His approach and its
  later modifications are now standard tools, both in academia and in
  practical policy evaluation.

  How much of society's income is spent and how much is saved? To
  explain capital formation and the magnitudes of business cycles, it is
  necessary to understand the interplay between income and consumption
  over time. In a few papers around 1990, Deaton showed that the
  prevailing consumption theory could not explain the actual
  relationships if the starting point was aggregate income and
  consumption. Instead, one should sum up how individuals adapt their
  own consumption to their individual income, which fluctuates in a very
  different way to aggregate income. This research clearly demonstrated
  why the analysis of individual data is key to untangling the patterns
  we see in aggregate data, an approach that has since become widely
  adopted in modern macroeconomics.

  How do we best measure and analyze welfare and poverty? In his more
  recent research, Deaton highlights how reliable measures of individual
  household consumption levels can be used to discern mechanisms behind
  economic development. His research has uncovered important pitfalls
  when comparing the extent of poverty across time and place. It has
  also exemplified how the clever use of household data may shed light
  on such issues as the relationships between income and calorie intake,
  and the extent of gender discrimination within the family. Deaton's
  focus on household surveys has helped transform development economics
  from a theoretical field based on aggregate data to an empirical field
  based on detailed individual data.

His account in Google scholar provides the following "impact" data

\begin{array}{| r | r |}
  \hline
\hline
  \text {Index name} &  \text{All} & \text{Since 2010} \\
  \hline
\text {Citations}   & 53,873 & 20,851 \\
\text{h-index}   & 92 & 66 \\
\text{i10-index} & 184 & 143\\
  \hline
\end{array}

See for starters the wikipedia article, for the "h-index"

For the "i10-index" it reads:

  The i10-index indicates the number of academic publications an author has written that have at least ten citations from others. It was
  introduced in July 2011 by Google as part of their work on Google
  Scholar.

My question?

Have you used A. Deaton's work in your studies or in your research? How?


texts: Recently there have been reports of China devaluating its currency against the U.S Dollar. I'm a layman and I am unable to understand the need for a country  devaluating  it's own currency. How would it help that country? Moreover newspapers report that this move by China could result in a currency war. So what exactly is a currency war? Please try to keep it simple, as I'm a layman in the field of economics.


texts: Continuous time optimization with two laws of motion (the Hamiltonian with two laws of motion)

texts:
How would we deal with a continuous time optimal control problem with two laws of motion? Suppose we have the following RCK like environment with human capital investment.
$$\max_{c(t),k(t),h(t)}\int_{t=0}^\infty e^{-\rho t} u(c(t)) dt$$
subject to:
$$\dot{k}(t)=Ak(t)^\alpha h(t)^{1-\alpha}-\delta_k k(t)-h(t)-c(t)$$
$$\dot{h}(t)=Ak(t)^\alpha h(t)^{1-\alpha}-\delta_h h(t)-k(t)-c(t)$$
$$Ak(t)^\alpha h(t)^{1-\alpha}=c(t)+k(t)+h(t)$$
$$u(c(t))=\frac{c(t)^{1-\theta}}{1-\theta}$$
If the logic extends over from an environment with a Lagrangian I'd check the optimal of maximizing over each constraint separately and then verify the solution with it with the other constraint. for example if we were discussing utility maximization with calorie and budget constraints we would conciser only one constraint at a time. In this context however we are looking at laws of motion.
Does the logic change?


texts: A stable equilibrium with demand and supply?

texts:
My doubt pertains to something that is mentioned in the book by Koutsoyiannis for microeconomics (in the chapter for general equilibrium).

http://www.upload.ee/image/5306829/1.jpg
http://www.upload.ee/image/5306839/2.jpg

I do not understand why the partial equilibrium is unstable in the case of the upward sloping demand and downward sloping supply curve.

Are we implicitly assuming that the natural reaction for price setters to positive excess demand is to increase the price and negative excess demand (excess supply) to decrease the price?

If that is not the case then I cannot understand why the equilibrium is unstable.

I'm also confused because the book does mention in the case of upward demand and downward supply that prices will react in a stability forming manner (or is this the book trying to say that this is how prices SHOULD work to ensure stability, then saying that this is not the case due to the implicit assumption above).

Thank you!


texts: Can a progressive marginal taxation be regressive in terms of average tax rate?

texts:
Or does progressive marginal taxation imply that it is a progressive average taxation?

Here, I mean that if $T(Y)$ is a tax function of income, marginal tax rate would be $dT/dY$ and average tax rate would be $T(Y)/Y$.


texts: Raise/Lower Seller Fees on Platform - Expected Seller Behaviour?

texts:
Say there is a marketplace company that facilitates buy/sell of digital content (i.e. marginal cost = 0). And that content is somewhat substitutable but not completely so. As an example, for a particular category of digital goods we see the majority of sellers pricing at $100, while some price lower and higher based on whether their good is clearly much higher quality (or has more inclusions or whatever) or lower if lower quality/less inclusions/more simple.
The marketplace levies a commission on the sellers, say 30% of the sale value.
And now the marketplace decides to increase the fee to 40%.
How would the sellers respond?
Do they just soak up the extra fee? Do they pass it through to customers?
The marginal cost of additional unit sold is zero. The company is somewhat of a market leader (but by no means the only option for buyers).


texts: A question about time-varying treatment effect

texts:
I know that a treatment is considered as heterogenous, when treatment affect different experimental subjects in different ways.
Can we say that time-varying treatment effect ( treatment occurs at different time for different facilities) is heterogenous treatment effect?


texts: How does Bolivia maintain its high economic growth and the highest direct foreign investment in South America, despite its economic policies?

texts: Nationalization of industries has always been anathema to foreign investment yet Bolivia now has the highest foreign direct investment despite Evo Morales' policies. Also not that it is always bad but in many countries like the Philippines, Korea, Peru and Chile, it was nationalization that stagnated their economies and it was privatization that saved them from stagnation and unlocked huge economic growth. In my simple understanding, this is because privatization removes the corruption inherent in nationalized industries as well as attract foreign investors that provide new capital. President Evo Morales' economic policies were the opposite of this. I even remember reading  that he had a confrontation with foreign investors threatening to pull out of Bolivia because of his policies. Yet somehow and someway he was not only able to keep foreign investment but he was also able to increase it. Bolivian growth also experience widespread growth. This is in widespread contrast with Venezuela where similar policies under Chavez and Maduro is currently causing an economic crisis. How is Evo Morales and Bolivia achieving this growth contrary to Neoliberal and free market capitalism teaching?


texts:
I want to understand when and why multi-way clustering is necessary.

Could anyone give a good example that provides intuition of when and why to use multi-way clustering that also illustrates why clustering at a group level is not sufficient?


texts: Best financial model to proportionally distribute the company's income to all employees?

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I'm planning to start a project of something "innovative". And among some of the parts of the project that I'm thinking about, it's in the term of how money (profits) should be distributed.

The truth is, I personally am not a connoisseur of finance and economics at the level I desire. That's why I go to this platform.

In a nutshell, my idea is this:

Of all the capital (income) that the company receives for the sale of its products (suppose it is "coffee"), I want 30% for the company, 40% for research and development terms (in favor of improve the product and everything related to it and its services), and the remaining 30%, that is distributed among absolutely ALL those involved, from the people who collect the coffee beans (even if they are located in other latitudes, make them receive their retribution proportional), an employee like the one who is dedicated to the services of cleaning and maintenance, up to the highest positions or positions. All proportionally and depending on the value that is contributed to the company, as if each employee (no matter how small the position), was their own company.

As if each one was a shareholder of the company.

The questions are: Does this type of model exist? and more specifically, what would be the best financial model to proportionally distribute the company's income to all employees, also according to the value they contribute?

Thank you for reading.


texts: How to prove that profit function is convex in price (with smaller price)?

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According to this site, if output price increases from $p*$ to $p'$ and factor prices remain constant, then a new production bundle chosen must yield at least the same amount of profits as the old bundle, as the old profit would yield at least as much profit in higher output price. The reasoning behind which is understandable.

However, how does it also apply for the case when output price decreases from $p*$ to e.g. $p"$? How does one be sure that the maximum profit at $p"$ would definitely be higher than the one at $p*$ (instead of lower)?

Also what does it mean by "reverse convexity" in "A reverse convexity will be obtained if we plot $\pi (p, w)$ against a particular factor price, $w_i$." in the aforementioned proof on the same site? I can not even find a proper definition of the term on internet.