texts: Labor Supply- how to do comparative statics?

texts:
Consider an economy with a competitive industry where the representative firm's production function takes the form of a Cobb Douglas production function $Y=z K^{\theta} L^{1-\theta}$.
$z$ is an index of TFP (fixed). Derive an expression of a firm's labor demand function as a function of $w, K, z$. (w = REAL WAGE)
Sol (My trial) Exogenow var $=[z, \theta, K, w]$
assuming short run and $K$ fixed.
Firm's labor demand:
$Y=z  K^{\theta}L^{1-\theta}$
$M P_{L}= w$ (Equlibrium condition)
$w=$ real wege $\therefore(1-\theta) \frac{Y}{L}=w$
$\Rightarrow(1-\theta) Y=w L \tag{1}$
$L=\frac{(1-\theta) Y}{w}$
Solving for $L=N^{d}$ we get
$N^{d}=\left[\frac{(1-\theta) z  K^{\theta}}{w}\right]^{\frac{1}{\theta}}$
Part (b)
Suppose Household preferences is given by
$$
u(c, l)=\ln c+\beta l, \quad \beta>0
$$
Find an expression for consumption, Employment, output leisure, and real wage
Assume $G=\lambda Y, \quad 0<\lambda<1$
What happens when $\beta$ increases?
Here I am getting 2 different solutions.
Method 1:
Tangency condition
$\frac{u_{L}^{\prime}}{u_{c}^{\prime}}=w$
$\frac{\beta}{1 / c}=w \Rightarrow \beta C=w \tag{2}$
or $\quad c=\frac{w}{\beta}$
$C=w[h-N^{s}]$ [ Income contraint] [h = total hours available]
$C=w [h-N^{s}]=\frac{w}{\beta}$
$\Rightarrow 1 / \beta=h-N^{s}$
$\Rightarrow \quad N^{s}=h-1 / \beta \tag{3}$.
$\Rightarrow l=1/\beta \tag{4}$
(Labor supply curve is verticat in $w-N$ space)
\begin{array}{l}
\text { Macro-Economy } \\
\qquad \begin{aligned}
Y &=C+G \\
Y &=\frac{w}{\beta}+\lambda Y \\
\Rightarrow \quad Y(1-\lambda) &=\frac{w}{\beta}
\end{aligned} \tag{5} \\
\Rightarrow \quad Y=\frac{w}{\beta(1-\lambda)}
\end{array}
We call this equation (5)
Also notice $C=Y(1-\lambda)$ we call this equation (5A)
Substituting Equation 3 into Equation 1, we get:
We call this Equation (6)
\begin{aligned}
\therefore w &=(1-\theta) z K^{\theta} L^{-\theta} \\
&=(1-\theta) z K^{\theta} \cdot\left[h-\frac{1}{\beta}\right]^{-\theta} \\
&=(1-\theta) z K^{\theta}\left[\frac{h \beta-1}{\beta}\right]^{-\theta}
\end{aligned}\
Substituting Equation (6) in (2) we get,
$C=\frac{(1-\theta) z K^{\theta}}{(h \beta-1)^{\theta}} \beta^{\theta-1}\tag{7}$
Substituting Equation (7) in (5)
$Y=\frac{c}{1-\lambda}=\frac{w}{\beta(1-\lambda)}=\frac{(1-\theta) z K^{\theta} \beta^{\theta-1}}{(h \beta-1)^{\theta}(1-\lambda)} \tag{8}$
Employment $N^{s}$ and leisure are given by Equation (3) and (4).
Now, by making some changes we can get simpler expressions which lead to easier Comparative statics for C,Y, w, N, l with respect to $\beta$.
I call this Method 2:
Substitute equation 5A in equation 2:
$\beta Y(1-\lambda)=w \tag{9}$
Equating Equation (9) and (1) we get:(Equation 10)
$$N^{s}= \frac{(1-\theta)}{\beta(1-\lambda)} \tag{10}$$
Substituting Equation (10) in (1):
$w=(1-\theta)zK^{\theta}\left(\frac{\beta(1-\lambda)}{1-\theta}\right)^{\theta}$
It is clear to see we will get extremely different expressions for C, Y and leisure, l from here.
Confession: This was my teacher's method. And from this method, he did some comparative static analysis which went all over my head!
How to reconcile both methods? How can we do comparative statics? from which method would be easier?
Can we do graphical analysis from any method? That is draw the labor demand and labor supply curves?


texts: Why can utility functions be continuous, and what does this imply for marginal utility?

texts:
I am studying microeconomics at the introductory undergraduate level and two related but distinct questions are puzzling me.

First, my textbooks express utility functions as continuous functions by default, but this is puzzling. If the consumer can only consumer in whole number quantities (indeed from what I've seen so far, the solutions for the optimal basket all involve whole number quantities), then surely the utility function should be a discrete function, not continuous? A continuous utility function implies that an optimal basket could be say, x=8.232324232342, y=3.23942, for instance.

Secondly, even we if we accept as fact that a utility function can be continuous, how exactly do we interpret the concept of marginal utility at a point? So for instance, given the utility function (single good) $U(X)=X^2+6X+7$, the marginal utility of consuming the 6th good should be $U(6)-U(5)$, because marginal utility is the increase in utility as a result of consuming an additional unit of the good. Instead, marginal utility is, in fact just, $U'(6)$ which is usually not equivalent to $U(6)-U(5)$ (it's not in this case, too). So what's going on here? Am I missing something? I know the former way is called the "arc" measure, and the latter the "point" measure - I understand the arc measure, but I cannot understand the point measure. Doesn't marginal utility always measure the increase in utility arising from consuming one additional unit of the good? The point measure seems to imply $U'(6) = U(6)-U(5.999999999...)$.


texts: What does liberal economic theory say about monopolies?

texts:
Ludwig von Mises in his book "Liberalism: In the Classical Tradition" writes that in liberal economic the monopolies are rare and have a tendency to disappear.

For an onlooker like me, however, his arguments sound not convincing, they give an impression of topics specially selected for polemics. For example, he doesn't explain the causes of the Great Depression (which is a standard argument against liberalism for his opponents).

Moreover, I would say, his style is strangely focused on examples, he seems to carefully avoid mathematical language, where chosen notations and premises give a possibility to deduce general statements from other general statements. As a result, his examples look like special cases which do not cover the whole picture. The examples that he gives look good, but a feeling appears that there are other, uncomfortable examples, which go unnoticed.

On the other hand, what happens in the real economy does not confirm his scheme well, for example (this is commonplace in the political debates in modern Russia) the "liberal reforms" of 1990-2000-ies led not to capitalist relations but directly to a feudal society with highly monopolized economical and political life.

I want to ask you if there exist theories/books/articles where the accusation against Liberalism --

  Liberalism leads to monopolies

-- is discussed in detail with convincing references, examples, and conclusions?

EDIT 29.09.2018. Gentlemen (and ladies), still I would like someone to enlighten me. Where do monopolies come from? Are they a result of state intervention, or do they arise by themselves, without a public policy? Where is this all described (i.e. which reading could you recommend)? If the school of Mises died, what does the rest of the economic science say about it?

EDIT 08.07.2019. I'd like to add this question: are there any ways to deal with monopolies except the government intervention?


texts: How does capital accumulation raise the demand for labor

texts:
in "Artificial intelligence, Automation and Work" by Acemoglu and Restrepo, the authors write:

  Capital accumulation: As our framework in the next section clarifies, automation corresponds to an increase in the capital intensity of production. The high demand for capital triggers further accumulation of capital (e.g., by increasing the rental rate of capital). Capital accumulation then raises the demand for labor. This may have been an important channel of adjustment of the British economy during the Industrial Revolution and of the American economy in the first half of the 20th century in the face of mechanization of agriculture, for in both cases there was rapid capital accumulation (Allen, 2009; Olmstead and Rhode, 2001).

The sentence "Capital accumulation then raises the demand for labor." is left unelaborated. I fail to understand why one should necessarily lead to the other. Can anyone explain?


texts:
I read this link and it is very helpful.

However, if log-returns are easier for time-aggregation, then why do economists work with discrete returns e.g. in GDP growth?


texts:
The market demand function can be either concave or convex. I am looking for conditions under which a general market demand function can be considered convex.
For example would convex preferences or a concave utility function imply a convex market demand curve?

I am not asking about the demand set, but rather the function.

I have a hard time imagining a concave market demand function, but the literature often takes this possibility into account, leading me to believe that it cannot be ruled out without imposing further conditions.

The reason I'm having a hard time imagining concave functions is that when we maximize with a standard utility function, what will come out with typical functions is somthing like:

Cobb-Douglas: $X=(\alpha/(α+β)) M/2p$
Perfect compliments (min): $X=αm/(βp1 + αp2)$
Perfect Substitutes: $X=M/p$; where X is demand for some good, M is the budget, p the price (of good 1 or 2) and α and β are just utility parameters.

which are all convex.

Further, since market demand is most often defined as the sum of individual demands (which above appear to be convex mostly) and the sum of convex functions is itself a convex function, then market demand should most often be a convex function it seems.

Can a more general statement be made here about when the market demand curve is convex?


texts: Why does slowly decaying ACF indicate that a time series is non-stationary?

texts:
I am a student studying time series econometric online and looking for help talking around some of the principles. There is one point I am trying to understand better.

I've come across some literature online which talks about how non-stationary data series have slowly decaying ACF. The graph of the ACF of VWAP in this post is a good example: https://coolstatsblog.com/2013/08/07/how-to-use-the-autocorreation-function-acf/

Could someone explain why a slowly decaying ACF is an indication that a series is non stationary? I think hearing an explanation will help me get a better understanding of the material.

Thanks very much,
Adrian


texts: How to interpret the proof that information cascades will form?

texts:
I am reading the 1992 paper of Bikchandani, Hirshleifer and Welch on information cascades. They claim and prove that, given an environment of sequential decision making, an information cascade will always form. The proof is in the appendix of their paper and involves some statistical arguments that are not clear to me. A simpler proof in the body of the paper is considering groups of two individuals making a decision in sequence. For n even, P(no cascade after n individual decisions in sequence) = P (no cascade after first 2 people) * P(no cascade after next 2 people) * ... * P(no cascade after last 2 people) that ends up being $(p-p^2)^{n/2}$.

This argument is clearer to me, but it seems made after the realization that two identical announcements are needed to start a cascade. Also, it seems calculated from the perspective of being outside the experiment, e.g. the moderator of the experiment who knows that p means a H (high signal) and 1-p refers to L (low signal) and not from the perspective of participants who should take into account being in both states of the world. This is my understanding of the above term.

Why is there no loss of generality in arriving at $(p-p^2)^{n/2}$ not considering both states of the world?

I have also been reading Banerjee's 1992 paper on herding. I would be very grateful for any sources that explain these papers and any notes on information cascades.

Addition: I understood how to interpret the formula above by reading Zhukov's slides and looking at the tree diagram he displays from Hirshleifer: http://leonidzhukov.net/hse/2014/socialnetworks/lectures2/lecture6.pdf. My problem was with interpreting the tree diagram that he shows, but I understood it after I accompanied Zhukov's slides with what Bikchandani et al. wrote. Thank you to the below commenter for the answer, too.


texts: Why is JPY considered a "safe currency"?

texts:
When the economic prospect around the world feels getting worse and/or getting higher uncertainty, usually the value of JPY is getting higher, because investors are said to start to buy JPY to shelter their money in a safer place. In some cases even if the bad economic prospect is not on US or Europe, it seems that JPY still tends to be stronger even compared to USD or EUR (e.g. near the French election this year or Brexit, JPY was getting stronger compared to USD).

But it seems ridiculous to think of JPY as a safe currency, given that Japan's insanely high amount of debt.

So what makes JPY considered so safe to buy in case the economic situation feels getting worse and/or getting higher uncertainty around the world? And is JPY a safe currency to begin with, even compared to other major currency such as USD, EUR, CHF, CHY, CAD, etc...?


texts:
In a recent article about the OECD latest report it reads as follows:

  Mr White said QE and easy money policies by the US Federal Reserve and
  its peers have had the effect of bringing spending forward from the
  future in what is known as "inter-temporal smoothing". It becomes a
  toxic addiction over time and ultimately loses traction. In the end,
  the future catches up with you. "By definition, this means you cannot
  spend the money tomorrow," he said.

What does he mean by "inter-temporal smoothing" and "bringing spending forward". How do you "bring spending forward"?


texts:
Im reading about labour markets, and the notes mention that the real wage 'w' = W/P, where W = the nominal wage, and P = the price level. Could someone please use some 'W' and 'P' as an example to show me how real wages emerge from the ratio W/P?

Thanks!


texts:
Excuse the naïve question, but I have a rather limited understanding of economics, and this question has been bothering me since my school economics teacher couldn't answer it satisfactorily many years ago.  It is also a question that is a prerequisite to many others I have.

Is money a conserved quantity, in the same sense as we have conserved quantities in physics (e.g. energy)?

In daily transactions that I have experience with, it obviously is. If I buy something from Joe, and give him \$10, I will have \$10 less and he will have \$10 more.  But the total amount we have together has not changed.

Does this apply to all transactions?  If not, when is it violated?  In what situations is money created, and when does it disappear (other than physically destroying paper based money)?

This then leads to a closely related question: Where can I find out how much is there of a given currency?  How much USD exists in total, if we combine the dollars owned by everyone in the world?

If this question is considered too basic, I would appreciate suggestion about where a mathematically minded person might read up on this topic.


texts:
I am interested in manufacturing economics - suppose I have to built an engine, I would like to learn a systematic approach to break down what the costs of building an engine would be and how I could eventually optimize the process. I am a complete beginner to this, and I would like to learn from a resource that is not math-heavy (but not totally void of it!) which prioritizes intuition and is generic enough to be applicable to many different scenarios (not just engines!).

The reason is I often hear people talk of fixed costs, variable costs, production costs, amortization, etc. I would just like to learn more about it to be able to "follow the discussion".

What good books could you recommend on this? I could not find any myself.


texts:
I thought of Central banks as the regulators of financial markets. But surplus reserves of some Central banks surpass giant corporate companies.

Please explain me how do they manage to make profit in just regulating activity and printing currency.


texts: Estimate the Utility function for the Principal-Agent problem (real case)

texts:
I have a company and I have to set the wage to my employer based on different levels of revenues.
Examples

W_1 if Revenue = 100k

w_2 if Revenue = 200k

w_3 if Revenue = 300k

I know how to solve this problem analytically, but I don't know how, in practice I will estimate the Utility function of the agent.
In book they say it's

$ U(w,s) = \sqrt{w} - s $

where $w$ is wage, and $s$ is their efforts. How do I apply this in pratice?


texts: Does endogeneity matter when neither independent variable nor error term are correlated with dependent variable?

texts: if the double arrows show that X and the error term are correlated, but that neither variable affects Y, is endogeneity a problem in this scenario? Why or why not?


texts: What are the applications of complex numbers in modern economics?

texts:
I wonder what the most interesting applications of imaginary numbers in mainstream economics are. I read about the unit root test (Dickey-Fuller test) in time-series analysis; and I studied System Dynamics about phase portraits that were determined by complex numbers. So maybe the maths of these numbers are necessary for econometrics and for more sophisticated macroeconomic modelling.

To sum up, what are the most important application of complex numbers in economics? Could you give me some examples, models relevant to complex numbers?

I will be grateful if you can send me this information.


texts: Is it possible for an equilibrium to be Trembling Hand Perfect for one player but not another in an asymmetric game?

texts: Is it possible for an equilibrium to be Trembling Hand Perfect for one player but not another (in an asymmetric game)?


texts:
Bergeman and Morris (2014) explain how the concept of Bayesian Correlated equilibrium contains all the robust predictions in games of incomplete information. In particular, their question is what are the possible Bayesian Nash equilibria of a game where we know each player has at least some information, but can potentially have more information.

Does anyone know of a useful reference to think of refinements of the set of BCE by imposing further assumptions? For example, what if we were willing to assume that one of the players has at least as much information as every other player? What kind of refinements can we expect to maintain the nice linear properties of BCE?

Any thoughts will be greatly appreciated.


texts: Solving a problem using CAPM and capital structure theory

texts:
I am given the following problem:

A firm currently owns assets worth $4$ milllion dollars that have a beta of 1. The risk-free interest rate is 10% and the market risk premium is 8%. Suppose the firm has the opportunity to invest in a project that will earn a 13% rate of return for certain into the indefinite future. The cost of the project is $1$ million dollars. Should the firm make the investment?

How do I solve it using CAPM or capital structure theory?

Is it correct to say that the firm should not invest because, using CAPM, the required rate of return should be:

$r_i = r_f + \beta_ * (E[R_{Mkt}] - r_f) = 18\%$


texts: Competitive equilibrium in Leontief economies

texts:
Consider an economy in which all consumers have, possibly different, Leontief utilities. Since preferences are not strictly convex, it is not guaranteed that a competitive equilibrium exists. I found some papers that discuss the computational problem of deciding whether a Leontief economy has a competitive equilibrium, but I am interested in general existence results:

A. What conditions on Leontief economies guarantee that a competitive equilibrium exists?

B. In particular, if the initial endowments are equal (each of $m$ agents receives a fraction $1/m$ of each good), is a competitive equilibrium guaranteed to exist?


texts: Derivation long run cost function of three inputs with Leontief-like characteristics

texts:
Suppose that a firm produces a good using capital, skilled labor, and unskilled labor.  Let $K$ denote the amount of capital,$L_1$ unskilled labor, $L_2$ skilled labor. The production function is $f(L_1, L_2, K) = K^2 min\{L_1, L_2^{\frac{1}{3}}\}$. Furthermore, let capital rental rate, $r=200$, unskilled wage rate is $w_1=5$, and skilled wage rate is $w_2=6$.

Find long run cost function.

I am unsure as to how to approach this problem given the K^2 term in the function.  Thus, I tried when $K=1$.  However, I would like to know how to approach it for all $K$, where $K$ is a natural number.

My Attempt

Assume $K=1$.  Then we have $$f(L_1, L_2, 1) = min\{L_1, L_2^{\frac{1}{3}}\}$$

From here we can see that in order to minimize cost at a particular level $q$, we have $L_1=L_2^{\frac{1}{3}}=q$ which leads to $$L_1=q$$ $$L_2=q^3$$.  Thus, $$c(q)=200+5q+6q^3$$


texts: Is inconclusive region in durbin watson a problem?

texts:
What to do if my durbin watson is found to be inconclusive?

Do I have to change my model?


texts: Heckscher-Ohlin trade model with non-homothetic preferences

texts:
$U^j = \prod^N_i \left(d^j_i-\bar{d}_i\right)^\oint$

where $d^j_i$ is the per capita consumption of good $i$ in any country $j$; $\bar{d}_i \geq 0$ denotes the minimum consumption of each good $i$, which are same across countries; $\displaystyle \sum_i \oint_i^j =1$. Assuming that per capita income $I^j$ is large enough to afford the minimum consumption. Derive the per capita demand for each good $i$ in country $j$.

I understand pi-product notation means it's a product function, but how do we differentiate a product function like this? I define my $I^j$ as $p_i d_i^j$; not sure if this is correct. Your help is much appreciated! Thank you in advance. :)


texts: We see stocks outperforming things like bonds in the long run (past 100 years), but could this be an artifact of that particular 100 year timeline?

texts:
When looking at historical return patterns for investments, one can clearly see the stellar performance of equities over the long haul. That being said, we know that we can center in on certain 20-25 year time spans throughout that century where the return characteristics look drastically different.

If this is the case, then couldn't the entire 100 year period demonstrating the attractive returns for stocks be an aberration over hundreds or thousands of years, especially considering how global growth has changed since pre-history? And how could we hope to know? Is there a statistical/probabilistic way to be understand whether our "long-run" returns are in fact indicative of some sort of deep principle regarding average returns in a market economy?


texts: Do credit cards create more printed money

texts:
As far as I know, when people take a loan from a bank, most of the loan value is electronically printed money, i.e. money that did not exist before.
Is it also what happens with consumer credit cards?

If so, are we not shooting ourselves collectively in the foot by using those cards?

All this fabricated money, eventually depreciates the value of our hard-earned money.


texts: Stability analysis and dimension of a dynamic control system

texts:
I have an optimal control problem where I have two control and one state variable.

$$max\int_{0}^{\infty}\left(u\left(c\right)-P_{M}M\right)e^{-\rho t}dt\tag{1}$$

where $P_{M}$ is the unit price of carbon abatement activity ($CO_2$ abatement at atmosphere) and $M$ is the control variable, which is the level of abatement that we choose optimally.

The state variable is

$$\dot{S}=R\left(S\right)-c+\eta\left(M\right)\tag{2}$$

where $S$ is the environmental quality, $c$ is consumption, $R(S)$ is the regeneration of environment (like the production function in models with capital accumulation) and $\eta (M)$ is the carbon abatement function, which is supposed to be increasing and concave function. As it is logical, this function contributes to the increase of environmental quality.

I write the Hamiltonian ;

$$\mathcal{H}=u\left(c\right)-P_{M}M+\lambda\left[R\left(S\right)-c+\eta\left(M\right)\right]$$

The FOC are ;

$$u_{c}=\lambda\tag{3}$$

$$P_{M}=\lambda\eta_{M}\left(M\right)\tag{4}$$

$$\dot{\lambda}=\rho\lambda-\lambda\left(R_{S}\left(S\right)\right)\tag{5}$$

So, in this model, I have 2 control variables, consumption $c$ and abatement $M$ and a state variable $S$.

I have a doubt about writing the Jacobian Matrix, If I did not have the second control variable $M$, I would write a 2 dimension differential system of $\dot{c}$ and $\dot{S}$ but as I have a second control variable $M$, I am not sure if I can always describe the whole dynamics of the economy by two differential equations.

When I try to see the dynamics of the control variable $M$, with differentiating equation $(4)$ according to time, I have ;

$$\frac{\dot{\lambda}}{\lambda}+\frac{\eta_{MM}}{\eta_{M}}\dot{M}=0\tag{6}$$

According to the equation $(6)$ the dynamics of carbon abatement $M$ is represented by the dynamics of costate variable.

In this case, can I represent all dynamics describing this economy by only two differential equations which are $\dot{c}$ and $\dot{S}$ ?

Thanks in advance for suggestions and hints.


texts: Bayesian Nash Equilibria: Strong and Weak Types

texts:
I need a little help with the question. I understand that since both players have two types each, there will be 4 different payoff matrices to be considered, $(S,S)$,$(S,W)$,$(W,S)$,$(W,W)$, each type occuring with equal probability.
I found that in each of these four payoff matrices, $(A,NA),(NA,A),(N,N)$ will have the respective payoffs: $(10,0),(0,10),(0,0)$.
The $(A,A)$ action will have payoffs $(-6,-6),(4,-8),(-8,4),(-8,-8)$ respectively.
Have I modelled the question correctly? Also, please help me with the BNE as well. I understand that we need to check for deviations, using prior beliefs; however, it seems too tedious to work out. How do I find all Pure Startegy BNE?


texts: Why don't prices of USA labor and Mexican labor equalise?

texts:
That Mexicans workers get paid less US workers is a dynamic which motivates the moving of production to Mexico.  This idea can be abstracted to Developed Markets (DM) labor and Emerging Markets (EM) labor.  This is driving many recent political upsets.

Do the proponents of free globalised trade expect the price of labor to converge?
Is there evidence of convergence?
When will meaningful convergence arrive (example metric EM labor being paid no less than half DM labor)?

So folding in some feedback from commenters about 'why should they?'.  Isn't this case analogous to supernormal profits being competed away?


texts:
Papers like Ng and Moench (2011) and Negro and Otrok (2007) use historical housing data to estimate latent variables that correspond to some "true" or "truer" measure of house prices or housing activity. I've put together a table of series one could use as inputs in such an exercise. However, as we can see in the table below, very little data is available before the mid-1970s. I would like to expand this list with U.S. historical data (free or to purchase) that help to characterize real and financial housing activity as far back as possible.  What other series am I missing?

+------------------------------------------------------+--------------+--------------+------------+
|                        Series                        |    Source    |  Frequency   | Start Date |
+------------------------------------------------------+--------------+--------------+------------+
| Median Sales Price of Single-Family Existing Homes   |  NAR         |  Monthly     |  Jan1968   |
| Median Existing Home Prices                          |  NAR         |  Monthly     |  Jan1999   |
| Median Sales Price of Single-Family New Homes        |  CENSUS      |  Monthly     |  Jan1963   |
| Average New Home Prices                              |  CENSUS      |  Monthly     |  Jan1975   |
| S&P National Home Price Index                        | S&P          |  Quarterly   |  Q1-1987   |
| Freddie Mac House Price Index                        |  FHLMC       |  Quarterly   |  Q1-1975   |
| FHFA Purchase-Only Index                             |  FHFA        |  Monthly     |  Jan1991   |
| FHFA Home Prices                                     |  FHFA        |  Quarterly   |  Q1-1975   |
| CoreLogic National House Price Index                 |  CoreLogic   |  Monthly     |  Jan1976   |
| Housing Starts                                       |  CENSUS      |  Monthly     |  Jan1959   |
| Existing Home Sales                                  |  NAR         |  Monthly     |  Jan1999   |
| New One-Family Houses Sold                           |  CENSUS      |  Monthly     |  Jan1963   |
| Housing Units Authorized by Permit                   |  CENSUS      |  Monthly     |  Jan1960   |
| Housing Units Under Construction                     |  CENSUS      |  Monthly     |  Jan1970   |
| Housing Completions                                  |  CENSUS      |  Monthly     |  Jan1968   |
| Private Residential Fixed Investment (PRFI)          |  BEA         |  Quarterly   |  Q1-1947   |
| Wilshire REIT Total Return Index                     |  Wilshire    |  Monthly     | Jan1978    |
| Ziman-CRSP Residential REIT Value Weighted Index     |  CRSP-Ziman  |  Monthly     | Jan1980    |
| Ziman-CRSP Residential REIT Equally Weighted Index   |  CRSP-Ziman  |  Monthly     | Jan1980    |
+------------------------------------------------------+--------------+--------------+------------+

Commercial real estate data is not ideal, particularly data that is contaminated with mine and oil and water well construction. Regional data is fine but national data is preferred.


texts: Equivalence of Definitions of Continuity of Preferences

texts:
We have two definitions of the continuity of preferences:

Def 1: $\succcurlyeq$ is continuous if for any sequences $\{x^n\} \subset X$ and $\{y^n\} \subset X$, then $n \in \mathbb{N}$ such that,

$\forall n, \quad x^n \succcurlyeq y^n$
$\lim_{n \rightarrow \infty} x^n = x, \quad \lim_{n \rightarrow \infty} y^n = y \quad (\text{where $x, y \in X)$}$

then $x \succcurlyeq y$

and

Def 2: $\succcurlyeq$ is continuous if whenever $x \succ y$, $\exists \ B_x, \ B_y$, open balls around $x, y$, such that $\forall \ x' \in B_x, \ y' \in B_y$, then we have $x' \succ y'$.

Show that the following definitions are equivalent to each other.


texts:
Suppose I have a multiperiod consumption-saving problem with two or multiple goods able to be consumed.

If the utility within a period is Constant Elasticity of Substitution, ie. $C = (c_1^\frac{\eta-1}{\eta} + c_2^\frac{\eta-1}{\eta})^\frac{\eta}{\eta-1}$ and utility across periods is $U = \sum_{t=0}^\infty C_t$, do these preferences correspond to risk neutral preferences?

Clearly if there was only one good and utility was $\sum C_t$ but I am just not sure with two goods.

Thanks,


texts: The intersection of geopolitical wrangling and economics

texts:
It seems that economic threats have become a mainstay in geopolitical saber rattling. For example:

http://www.nytimes.com/2016/04/16/world/middleeast/saudi-arabia-warns-ofeconomic-fallout-if-congress-passes-9-11-bill.html

Summary: Saudi Arabia has threatened to sell approximately $750 billion in U.S. treasuries if Congress passes a measure meant to facilitate the accountability of any Saudi Official found to have been complicit in/actively involved in the terror attack of 2001. In response to this economic threat, the Obama administration has taken a position against the Congressional action.

Such threats and subsequent responses make me curious:

Let us suppose the Saudi's are able to sell the $750 billion of treasuries. What is the likely outcome for each of the two economies.

Further, if such threats are feasible and serious, why are there no restrictions about who can hold (and in what amounts) US debt?

It seems reasonable for some Americans to argue that the benefits of allowing foreign nations (especially those who are not historically allies of America) are not worth the costs.


texts: What are the different use cases in economics for the different definitions of unemployment published by the Bureau of Labor Statistics?

texts:
The BLS releases the unemployment rate in the United States once every month. This unemployment rate (officially U-3) is defined as the total unemployed as a percentage of the the total civilian work force where unemployed people are those who are willing and available to work, and who have actively sought work within the past four weeks.
However, the BLS publishes 5 other unemployment statistics that measure different definitions of unemployment (U-1 to U-6). U-6 is often said to be the "true" unemployment rate as it includes people who are marginally attached to the labor force, plus those who are employed part-time for economic reasons.
That being said, what are the use cases in economics for the different unemployment measures? When would U-1, or U-5, or any of the others be used over any other definition?


texts: Economics of Education: Private School Behaviour

texts:
In producer theory, we assume the firm's objective is profit maximisation.

Can we make the same assumption when looking at private schools or does this assumption not apply?


texts: Why does BOJ unchanged rate lead to Nikkei and Topix declines?

texts: Why does the BOJ's decision to leave rates unchanged lead to a stronger yen and declines in the Nikkei and Topix? Thanks in advance!


texts: Does Abatement Cost Mean Cost of Reducing Emissions with Output Held Constant?

texts:
In the economics of pollution control, frequent reference is made to 'abatement cost' and/or 'marginal abatement cost'.  Is it normally implicit in the use of these terms in economics that output is held constant?  In other words, that the cost referred to is the cost of reducing emissions while producing the same output?

Common & Stagl (1) offer an explanation of abatement cost which explicitly states that abatement may be achieved by a reduction in the activity producing the emissions.  However, most presentations of abatement cost that I have seen do not make such a statement.  So would that perhaps be a non-standard usage from an ecological economics perspective?

Please note this is a question about correct or normal usage of 'abatement cost'.  There is of course a real issue about whether we should be producing and consuming less so as to reduce damage to the environment, but I'm not asking about that here.

Reference:
(1) Common M & Stagl S (2005) Ecological Economics: An Introduction Cambridge University Press  p 415


texts: Homework Question - Price Floor / Elasticity of Demand

texts:
I'm currently taking undergrad microeconomics and came across the following question:
The current price floor in the agricultural lettuce market makes it such that price of lettuce is 25% higher than equilibrium price and 100 heads of lettuce are demanded. Assuming that the elasticity of demand for lettuce is -0.50, what would be the equilibrium price and quantity of lettuce if the government removed the current price floor?
Here's how I've tried to solve the question: https://imgur.com/gallery/blUjgcu .
The answer is

 Price = $0.75, Quantity = 112.5.

but I don't know how to solve that.
Thanks


texts:
Do they use "Direct Stock Plans," or some other method?

Not sure if this is the right place to ask, but I'm curious.


texts: Cobb-Douglas and Logarithm Utility Functions

texts:
Suppose I have a consumer with a utility function $U(x,y) = x^\alpha y ^{1-\alpha} $ where $a \in (0,1)$. Suppose this consumer has wealth $w$ and the prices for $x$ and $y$ are $p_x$ and $p_y$ respectively. I have already set up budget constraints, calculated demand and expenditure functions.

But now I am given another utility function $\alpha \log x + (1-\alpha) \log  y$. Supposedly I can calculate the demand function for this without needing to do further calculation. I don't see how though. What property of logarithms are useful here? I know obviously the definition of a logarithm, but I haven't seen it in this context and am confused what kind of math I should apply to it to find a demand function. Is this just arithmetic? Is it calculus? What is pertinent here to solving this problem?


texts: What arguments are there in favor of national food self-sufficiency?

texts:
National food self-sufficiency is an idea that appeals to many non-economists.
For example, George W. Bush (2001):

It’s important for our Nation to be able to grow foodstuffs to feed our people. Can you imagine a country that was unable to grow enough food to feed the people? It would be a nation that would be subject to international pressure. It would be a nation at risk. And so when we’re talking about American agriculture, we’re really talking about a national security issue.

I believe that in contrast, most economists view this as a bad idea.
For example, The Economist (2008-05-29), writing during the 2007–08 food crisis:

The argument for self-sufficiency is easiest to counter. Anyone who believes autarky is the route to food security should look at starving North Korea. In world markets trade barriers, not the lack of them, have exacerbated the mess. The commodities that have seen the biggest price spikes are those which tend to be traded least. Only 6% of global rice production, for instance, flows across borders. Unilateral export restrictions, such as those imposed by Vietnam and India, have made matters worse. Global supply is disrupted and domestic farmers discouraged from producing more. The route to deeper, less volatile markets lies through freer trade and fewer distortions. The notion that free trade precludes food security is plainly wrong-headed.

Mohanty (2012):

in the long run, major rice-consuming countries that pursue self-sufficiency may be in danger. If these countries achieved self-sufficiency, import demand for rice would fall. This would push exporters, such as Thailand, Vietnam, and Pakistan, to cut back on their production to reduce exportable surplus and use their lands in planting other profitable crops.
The global rice market, which is relatively small compared with that of other major crops such as wheat, corn (maize), and soybeans, is likely to become even smaller if rice-consuming countries vigorously pursue self-sufficiency. A consequence of a smaller market is greater price volatility and, the smaller the market size, the more the prices have to move in response to any supply and demand shock.
In a year of low production, prices will rise rapidly; in a year of higher production, prices will fall rapidly with greater volatility. This is particularly worrisome since rice production can fluctuate greatly from year to year, at the whim of nature. And, if climate change predictions are realized, extreme weather conditions will be more frequent, leading to regular price spikes in the rice market. ...
A strong global market is essential to achieve global food security for rice. This does not mean that countries should give up rice production and depend on foreign rice. Every country has the basic right to produce enough food for its citizens and this is particularly true for rice, a staple for the world’s poorest of the poor. However, countries might be wiser to try to increase production by improving yield in a sustainable manner rather than pursuing self-sufficiency at any cost.

My question: Have there been any economists who have argued in favor of national food self-sufficiency and what are some of their arguments?

NB. The price of rice rose dramatically during the 2007–08 food crisis (source):


texts: Find a separating perfect Bayesian equilibrium

texts:
Exercise Question 2, Chapter 28, Strategy: An Introduction to Game Theory 3rd Edition by Joel Watson

In part (a) of the question, we have to check if any separating perfect Bayesian equilibrium exists.
Now the solution manual says that there is not any separating perfect Bayesian equilibrium.
My attempt:
The separating strategy profiles are AB’ and BA’.
Let us take AB’. P1 plays B’, then P2 knows that P1 must be L-type. P2 will prefer playing Y, so P1 will not prefer playing B’. No PBE here.
Let us take BA’. P1 plays B then P2 knows that P1 is H-type. P2 prefers playing X, so P1 will not prefer deviating from B since 6 > 4. So, A’B is a separating perfect Bayesian equilibrium here.
What is wrong with my understanding here?


texts: Marginal cost given (Cobb-Douglas) production

texts:
My function is $y=x_1^\alpha x_2^\beta$ with $\beta={1-\alpha}$.
I found: the minimization problem for demand to be
$x_1^{*}(w_1,w_2,y)=\left ( \frac{w_2}{w_1}\frac{\alpha}{\beta} \right )^{\frac{\beta}{\alpha +\beta}}y^\frac{1}{{\alpha +\beta}} \; \wedge \; x_2^{*}(w_1,w_2,y)=\left ( \frac{w_1}{w_2}\frac{\beta}{\alpha} \right )^{\frac{\alpha}{\alpha +\beta}}y^\frac{1}{{\alpha +\beta}}$
and the cost function to be
$C=w_1^{\frac{\alpha}{\alpha+\beta}}w_2^{\frac{\beta}{\alpha+\beta}}y^{\frac{1}{\alpha+\beta}}\left ( \left ( \frac{\alpha}{\beta} \right )^\frac{\beta}{\alpha+\beta}+ \left ( \frac{\alpha}{\beta} \right )^\frac{-\alpha}{\alpha+\beta} \right )$.
Now, how would I find Marginal cost (MC)? Why does it not depend on $y$ and only $w_1,w_2$?


texts: Here's a question which I don't quite know how to answer. Originally, my answer was (D), though when I checked it the correct answer was (A). As far as my knowledge goes, buffer stocks are buying/selling of stocks by the government to help manipulate supply. Please help provide some elucidations, many thanks.


texts: How to address PPP when doing price comparison across countries?

texts:
I'm measuring some very specific items (across 5 countries) using my country's currency as the base. My questions are:

How should I address PPP in this case? (Is it just like the example in Table 1 here?)
What are the limitations if I decided to just use the market exchange rate? Is it considered "fair"?


texts: Does price affect quantity or vice versa?

texts: On nearly all graphs found within economics textbooks, quantity is label on the x-axis and price on the y-axis, implying that the quantity supplied affects the price. Is this really so? Intuition would tell you (or me at least!) that the quantity someone wishes to buy is dictated by the price, which in turn is decided by whoever is selling the item.


texts: Profit maximization, when $MC = P$, in a simple supply table and curve

texts:
Our economics school book states that the profits of a company are maximized when MC = P.
However, I am having some trouble wrapping my head around that.
For example, I have the following exercise:

The question is: If the equilibrium p is $P_E = 72$, (in which the product is sold), what quantity $Q$ will the company have to produce and sell in order to maximize its profit?

So, we get that the supply table is:

The answer is: it will have to produce and sell quantity of $Q_E = 450$.
My questions are:

Is this because of the equilibrium p, which is $P_E=72$ equals the $MC = 72$?
If the equilibrium price was set as $P_E = 36$, then would the answer be $Q_E=400$?
If the equilibrium price was, for example, $P_E=71$, then would I be able to answer just with this data?

Thanks for your time!!


texts: Creating a pragmatic, useable (not theory heavy) proxy for a currency basket for a set of economies

texts:
This is currently, a gedanken experiment, but may well form the basis of a whitepaper - or better still, an actual project.
I am trying to come up with a practical way of creating a "currency index/basket" (of sorts) between a set of countries who want to form some kind of (geo?)political alliance, but currently, have their own currencies.
The idea is that if a freely convertible currency exists (ignore who "controls" the currency - for the purposes of this thought experiment), then the countries in the "allowed set" can freely interchange between each others currencies - without having to go through the Dollar, EUR, Reminbi or other external currency first.
The thinking is very much along the lines of the Euro (although the constituent countries need not be restricted to the same geographic zone in my case).
So, here are the salient points:

A set of independent sovereign states exist, and they would like to increase trading amongst themselves
Currently intra-set trading involves triangulation involving one of the majors.
Wish to create an index that is effectively a weighted index of the currencies within the aforementioned set
The index should be pragmatic, and ideally take into account inputs that affect people on the ground (i.e. cost of a basket of household items, factory inputs, market price of any natural resource that forms a portion of GDP revenue for the country  etc. - rather than things like M1,M2 and M3)
The index should be something that can be calculated on a daily basis - so the value can be set at the beginning of the day (akin to London metals price fixing - or indeed the fixing of LIBOR rates at the beginning of the day)

My questions are this:

What would be suitable inputs to capture (on a daily basis)?
How can these inputs be weighted to create the currency index? (i.e. suitable methodology etc).


texts: Why is VAR analysis all linear? Why not nonlinear?

texts: When doing VAR analysis, it is almost always a linear form that gets used. Is there any justifying reason (most DSGE models are non-linear unless linearized) to use a linear form?


texts: Are Preference Relations Robust to Aggregation

texts:
This is more a question of putting the theory into practice, or at least clarifying the theory in practice. The question has to do with the application of preference relation axioms and aggregation. Take the transitivity relation for example;

$\forall (x,y,z) \in X,$ if  $  x \succ y \wedge y \succ z \iff x \succ z $

Suppose I have a set of data on the preferences of $n$ consumers $C_1,C_2,...,C_n$ over products $a, b,$ and $c$ such that;

$C_1$ prefers $a \succ b \succ c$

$C_2$ prefers $a \succ c \succ b$

$C_3$ prefers $c \succ b \succ a$

and so on until consumer $n$, each with a respective WTP for each product.

So the question is, if the data were aggregated over $n$ consumers we would achieve an aggregate WTP for whichever preference dominates. Lets say that the aggregate data reveals $a \succsim b \succsim c $. Does this result violate transitivity and completeness since the individual consumer $C_3$ prefers $c \succ b \succ a$. Do individual and aggregate preferences have to be consistent.


texts:
i would appreciate titles on GDP--academic and lay.

ty


texts:
I am supposed to explain the rate of customer defaults by some macroeconomic variables, such as unemployment, GDP growth etc. For simple linear regression, I have promising results:

summary(lm(ratio2~lag(unempl,3),data=defaults))

Coefficients:
               Estimate Std. Error t value Pr(>|t|)
(Intercept)    -0.14580    0.25465  -0.573  0.56820
lag(unempl, 3)  0.15024    0.04763   3.154  0.00211 **

However, both of the used variables have unit roots, as confirmed by ADF and KPSS. When I take the first differences, the results are disappointing:

summary(lm(diff(ratio2)~diff(values), data = defaults))

Coefficients:
              Estimate Std. Error t value Pr(>|t|)
(Intercept)   0.001313   0.029896   0.044    0.965
diff(values) -0.120137   0.190690  -0.630    0.530

I know about spurious regression, but is it justified to ignore it in this case and use the "normal" variables? Or should I stick to the proper way and take first differences?


texts: I notice that US exports doubled between 2000 and 2011, imports also increasing greatly, but GDP only grew by 20%. Thus, trade in the United States seems to have grown substantially faster than production. Why is this?


texts:
Utility function

$$
U=4{q_1}^{0.5}+q_2 \\
Y=10
$$

$$
p_1=p_2=1
$$

Then $p_1$ rises to 2. I would like to ask how to calculate the substitution effect on the demand for q1?

What I have done is calculate the optimal bundle initially which is (4,6) then subs into the utility function and get $U=14$. However, I am stuck here for calculating the subs effect on $q1$.


texts: To use seasonally adjusted data or not seasonally adjust data?

texts:
Im currently doing research using some macroeconomic data.

I just want to know what are the pros and cons of using seasonally adjusted/non-seasonally adjusted data in terms of forecasting.


texts: What is the actual numerical value of the velocity of money?

texts: All the discussions of the velocity of money that I've come across (e.g. here, here, and here) only display relative changes in the velocity of the money (e.g. by normalizing it by an unspecified value). I've never seen any source report an actual numerical value (with the units of inverse time) for a given point in time, for any choice of money supply. Does anyone have a reference for such a value?


texts: Does exchange rate of local currency relative to US dollar mean LOC/USD or USD/LOC ?


texts: Tax imposed on customer affects demand or supply curve?

texts: I have a example of supply and demand. If there is a regulation that requires customers to pay additional tax when they purchase cigarettes, would supply or demand curve shift? I know that tax/subsidies is one of supply's non-price determinants, however, it is only applicable to producers. I doubt that this example is concerned with demand curve. Nevertheless, tax is not one of demand non-price determinants. Thanks!


texts: analyzing municipality school district finances

texts:
I live in a township which has relatively low property taxes but higher property values. The school districts are in the upper quartile with respect to standardized scores. There is no high school. The township pays an adjacent township to ship high school students. I presume my township pays the other township some stipend per student.

Recently, my township said they will layoff 50-60% of the teachers. Obviously, for parents it was a shock and some fear.

My question is how do I objectively analyze the township's track record on finances and economics?

My approach would be:

Find similar townships in the same county with similar population, +/- 15%
Look at the townships municipal bond offering to get a better view of their finances

How does this approach sound? Is there anything obvious I am missing?


texts: What does Battigalli really mean by "Players can not choose strategies, they can only choose actions."?

texts:
In this video (from 7: 30 to 9: 00)on Youtube, Battigalli mentions the state of world for a simple three-legged centipede game, which, in his own word, is

  "$\ldots$a description of everything matters, which in traditional theory, must include strategies that characterize Ann and Bob. I don't use the word 'Ann chooses a strategy'. The reason is very simple. The object of choice is action, not stategy. Players can not choose strategies, they can only choose actions. If Ann can choose strategies $(C, C^\prime)$, they are playing a different game."

What does Pierpaolo Battigalli really mean? If the actions for a player chooses has been specified, then it automatically specify a pure strategy. By this methodology, he seems to want to distinguish a game structure with commitment and a game without, but how?

Added: Here is the slides used in the video, and here is the corresponding paper.


texts:
My professor gave us the following problem, but it uses a notation/syntax I haven't seen before $(q_{luke} = max \{ \dots \})$. She hasn't explained it or introduced it to us prior to this.

What does this mean? I assume it must be somehow translatable into $y=mx+b$ form given the context of the problem, but I'm not sure how. Thanks!


texts: Is craigslist part of the Shadow Economy? Many if not most of the purchases that take place there are done without taxation.


texts: What's the economic argument (if any) for taxing dividends as ordinary income?

texts:
My (limited) understanding is that dividends and share repurchases are economically very similar: while share repurchases are slightly less direct, both transactions are effectively ways for publicly traded companies to transfer wealth to their shareholders.
From what I can tell, the only real difference between these two transactions is the way that the tax code treats them: (non-qualified) dividends are taxed as ordinary income, while the gains resulting from share repurchases are taxed as capital gains. Companies often prefer to make share repurchases because they are effectively taxed at lower rates.
It seems to me that there's a likely inefficiency whenever effectively equivalent transactions are taxed at different rates. Is there some important difference between dividends and share repurchases that I'm missing that justifies the tax code's differential treatment?


texts: How to interpret this regression coefficient?

texts:
I am performing a simple single variate regression on the variables crime rate (denoted by crrate) and the probability of getting arrested (denoted by prarrest). To be precise, the variables are defined as:

crrate: ratio of the number of crimes committed to county population
prarrest: 100* the ratio of arrests to offenses.

The slope coefficient value I got when I regressed crrate on prarrest is -0.067. How can this coefficient be interpreted?
My attempt:

Ceteris paribus, one percentage point increase in prarrest causes the number of crimes committed per 1000 county residents to go down by 67.

Is this interpretation correct? If not, how can it be improved?


texts: Why is a higher inflation rate bad for international competitiveness?

texts: Why if there's a higher inflation rate in country A then its exports are less competitive and its trading partners prefer to buy from countries with lower inflation rates?


texts:
I stumbled upon this notation, (cl co(A+C), while reading "Set Optimization—A Rather Short Introduction" by Andreas H. Hamel, Frank Heyde, Andreas Löhne, Birgit Rudloff and Carola Schrage.

Is it right for me to assume that cl co(A) means the convex closure of the set A?


texts: Check if a utility function represents a monotone preference

texts:
Given a function $u(x_1, x_2) = x_1 +x_2 + \min(2x_1, x_2)$, how do we mathematically prove that it monotonic or not?

Is there is a general algebraic technique to show monotonicity of suchlike functions?


texts: Are there any examples of tariffs working?

texts:
Nations have imposed tariffs on goods for many reasons throughout the ages.  Are there any examples of a tariff actually succeeding at its intended goals?

When I research tariffs, I find countless arguments that they never one have worked, and I find a lot of current events documents arguing why particular tariffs wont work, but I'm having it hard finding any economist pointing to a tariff that worked as intended.

Bonus points if the tariff worked as intended and was not considered to be a net loss for the country that imposed it.


texts: How to calculate rating of merchant in e-commerce

texts:
Could u help me to solve this case? Here's the case.. The first, There are 3 aspects for calculate Rating of each merchant. The scale of rating is from 1 until n ( Based on sum of Merchants). The first aspect is product's price and proportion of this price is 50% from 100%. The second aspect is product's Quality and proportion of this quality is 25 % from 100%. The last aspect is sum of product which is already sold and proportion of this quality is 25% from 100%. The sum of proportion from those aspects are 100%.

here is the simulation.. Merchant A is already join e-commerce for 3 years and the price of their product is 65 dollars.they are already fulfill those aspects that mentioned earlier. Merchant B is already join e-commerce for 4 years and the price of their product is 70 dollars. The position of product is affected from rating merchant. the cheap price and fulfill those aspects perfectly, it'd be get the first position in website e-commerce. so the simulation would be merchant A (1) is the first position and merchant B(2) is the second position.

If there are 2 new merchants which have the same price(both 50 Dollars) & same products but more cheaper that merchant A and B, and then those new merchant haven't fulfill the second and the third aspects, just fulfill the first aspect, how should we calculate the ratings? are there any aspect that needed to calculate this ratings?


texts:
So I understand that each market structure has their own characteristics, and that for instance Perfect Competition involves high competition, and I believe Monopolistic competition slightly less so, oligopoly even less, and monopoly virtually none.

However, is a market structure pretty much set in stone? Or does the structure change within a spectrum depending on competition for instance?

i.e. Would it be right to say that if competition in a market which was an oligopoly has increased and dominative firms have lost some of their market power, then the market is beginning to resemble that of monopolistic competition and less like an oligopoly?


texts: Does anyone here have experience with GARCH-MIDAS forecasting?

texts:
I'm a masters student looking for a thesis topic. Please note, I'm studying Finance and whilst the econometrics component of my course is rather lacking when compared to a straight Econometrics degree, thanks to the internet there is a vast wealth of resources out there for me to try and grasp it on my own - with some friendly help along the way of course :)

I'd like to use the thesis as an opportunity to learn a new regression model. Specifically GARCH models used to forecast volatility.

As I understand it, the GARCH-MIDAS model (as described by Engle et. al 2013) can and has been used with daily stock return data and macroeconomic data (typically quarterly or monthly) to produce volatility forecasts that contain both long and short-run components.
The GARCH model encompasses the mean-reverting short-run fluctuations in volatility, whilst the MIDAS component captures the long-run effects.

This is what I gather from briefly looking over the paper late last night. Any corrections are welcome!

In terms of time-series experience, I can implement AR, ARDL, VAR and VECM models. I have never used ARCH, GARCH, or any of their variations; though as I said I would really like to learn.

I guess all I am asking is whether this is feasible option for me as a student with no formal teaching, but a desire to learn by himself. If so, can anyone point me to some books with practical expositions of the GARCH and MIDAS regression methods? I presume an understanding in each method separately would greatly aid combining the two.

Your thoughts and opinions would be greatly appreciated!


texts: Calculating elasticity for $y^2e^{x+\frac{1}{y}}=3$

texts:
I want to calculate elasticity of y with respect to x  for $$y^2e^{x+\frac{1}{y}}=3$$
My attempt:
I calculate $y'$ using:
$$y'= -\frac{f_1'(x,y)}{f_2'(x,y)} = - \frac{y}{2-y}$$
I calculated this using implicit differentiation that can be used where $f(x,y)=c$, in my case $f(x,y)= y^2e^{x+\frac{1}{y}}$ and $c=3$.
Then elasticity should be just
$$y'\frac{x}{y} = -\frac{x}{2-y}$$
But I was told by professor that is a wrong answer  and that correct answer is: $\frac{xy}{1-2y}$.
I don't understand where I have made a mistake and how come its  $\frac{xy}{1-2y}$. Please can someone help me to understand it?


texts: At forecasting, should I calculate inflation rate daily, monthly or annualy?

texts:
For example, 100 dollars is going to be worth less in 30 years, how much less depends on the inflation rate. if we assume a constant annual inflation rate of 3%, should I compound the inflation rate daily or monthly or yearly?
I'm debating mostly between daily and monthly, since the data of inflation rate is collected on monthly  basis. But isn't it happening in real life on a daily basis??
Can someone help me to answer this question and please provide some explanation is possible

Thank you!


texts: Can lying be disincentivized without serious curtailments of free speech?

texts:
In the new age of Alternate Facts, one might argue that many actors personally benefit hugely from lying, at the expense of other sectors of society.
Economically speaking you might argue that this is a form of moral hazard -- the actors bear relatively small risks to themselves, receive benefits and may impose great costs or risks to others.

Some examples:

A politician may willfully lie to the public about intelligence facts concerning a country's weapons of mass destruction and receive increased political capital at the  expense of her country's cost of entering into an unnecessary war.
A populist news agency may willfully may lie about immigration or terrorism facts and receive increased circulation and advertising revenue at the expense of increased civil unrest, or in extreme cases contribute in driving a country into war justified by falsehoods.

Small risks to themselves, but great outsourced costs.

I think we can agree that, in general, lies are a generally 'a bad thing' that it would be wise to disincentivize them in many arenas (politics, science and academia, law, news media).

At the same time free speech seems like 'a good thing' that it would be unwise to curtail or disincentivize.
What, if any, incentives could be introduced to reduce lying without seriously curtailing free speech?

--

Legal systems (which are ideally a forum of free discourse in pursuit of the truth) disincentivize lies by imposing jail-time costs to people who make false statement.

Science (which depends heavily on free discourse) disincentivizes lying firstly by peer-review processes (which ideally would cause a liar to waste their time when submitting falsehoods for publication), and where this fails, by retracting published falsehoods, public shaming and loss of employment.

Yet in politics and media specifically, we rarely see costs incurred for distributing objective falsehoods. Can incentives be introduced in these arenas without seriously limiting the beneficial aspects of free speech to society?

For the purposes of this discussion, its probably good to focus of lying as "willfully making statements that the actor objectively (and provably) knows to be false", and leave the discussion on statements of opinion for another day.


texts: I don't understand how a graph would look like for this situation

texts: If there is a negative production externality of agriculture which is water wastage, and the government provides a 100% subsidy to the farmers so they can buy irrigation gadgets to reduce water wastage, thus eliminating the negative externality of production and increasing and improving their yield, will the graph look like what I attached as if MSC curve does shift to overlap with MPC (sorry for typo on graph) then they won't be intersecting at the optimal price and optimal quantity.


texts: Labor market model with subsidies homework

texts:
I would appreciate some help with my homework in comparative statics.

L is the demand of labor
F(L) is the production function
$ \frac{\partial F}{\partial L} > 0 > \frac{\partial^2 F}{\partial L^2} $
P is the price of goods
W is the wage
S is subsidy per hired worker
AA(W) is the supply of labor
$ \frac{\partial AA}{\partial W} > 0 $
$ max_{L} P*F(L) - (W - S)*L $ is what companies want to maximize

a) Analyze the effect of an increase in subsidies on the equilibriums of W and L.
b) Illustrate your findings in a graph. Chose Quantity of labor and W as axis.
c) Analyze the effect of an increase in subsidies on the slope of L in W.
My ideas for a):
The equilibrium conditions are $ L = AA(W) \Leftrightarrow L - AA(W) = 0 $. So lets call it $ H(W; L) = 0 $ and let´s call the profit function G so we get as the second condition $ \frac{ \partial G}{ \partial L} = P * \frac{\partial F(L)}{\partial L} - (W - S) = 0$, so we have $ g(L; P, W, S) = 0$.
I used the IFT:
$ \frac{\partial G}{\partial S} = - \frac{\frac{\partial g}{\partial S}}{\frac{\partial g}{\partial L}} = - \frac{ S}{P* \frac{\partial^2 F}{\partial L^2}} > 0$. This means L increases if S increases.
Now let´s take a look at the labor market:
$ - \frac{\frac{\partial H}{\partial L}}{\frac{\partial H}{\partial W}} = - \frac{1}{\frac{ - \partial AA(W)}{\partial W}} > 0$. Since L increases the wage also increases.
Regarding c):
I have to find $\frac{\partial L(W)}{\partial W \partial S} $, but I don´t really have an idea how to get it.


texts: Small question, is discount rates and interest rates the same/similar thing in economics? A bit confused regarding this.


texts:
When price is deflated according to some base year, what does the real value mean? E.g. if we are deflating \$5.000 from year 2000 (base year, deflator=1) to 1980, using the CPI 1.6 from 1980, we get \$3.125.

Is this real value equivalent to $5.000 in 1980?


texts:
I don't understand where inflation occurs in a video games. Assuming "free market" ie unlimited new players can enter any universe at will. You will say that for an economy to form, both sides must be willing to trade. This is true, here a player trades working hours for gold (g).

Universe A:
 working for 1 hour (killing rats) rewards 1g.
 a sword can be bought for 10g.

does inflation occur ?
Time required to buy a sword will always be the same ~ 10 Hours.
New players will have to exert the same effort as old players to get a sword in universe A.

Universe B:
 Denizens of universe B can buy swords from universe A for 10g + 4g (transpotation fees).
 working for 1 hour (killing slimes) destroys a sword and rewards 15g.
 slime jars can be produced for 10g.

Does inflation occur?
Both citizens get the same profit for their hourly work = 1g per hour.
Is this what they call zero sum rule? workers sacrifice 1 hour for 1g.

Universe C:
Aliens can buy slime jars from Universe B for 10g (teleportation magic).
Alien have to eat slime jars every hour or die.
Aliens produce 20g by materializing matter out of thin air.

Does inflation occur?
Aliens get x10 gold per hour for their work. Is this what they call inflation? But humans lack the capacity for such feat, shouldn't alien be paid more?

Universe D: modify universe C as follows:
A weather effect blocks teleportation magic. We dont know how long it will last.
Buying slime jars from B now costs 21g.

Does Inflation or Deflation occur?
aliens now lose money instead gaining. they lose -1g even if they work. Shouldn't they have been paid more in the first place for the risk they took eg dying if they run out slime jars.
Assuming infinite years pass, and the weather condition pattern is 100% known. What should be a fair alien wage? Approximate 0 if averaged out, same as humans (1g) or more ?

Universe E: mmorpg simulation. Assume this world becomes available after 1000 years
Everyone can switch to this universe by paying 10g.
Working accumulates experience and increases productivity. Every 10 hours switch to the next level.
Lv0. Working produces 0g per hour.
Lv1. Working produces 0.1g per hour.
Lv2. Working produces 1g per hour.
Lv3. Working produces 10g per hour.
Cap. No more levels.

Does this cause inflation?
What will happen to the rest of the world if introduced.
Since the level is capped. This means that inflation also has a maximum cap = new player vs old player money profit for hourly wage.

Universe F: modify universe E as follows:
a time hole speeds aging: Creatures living in it have a finite lifespan of 1 month.

Does this cause inflation?
What should be a fair wage? Approximate 0 if averaged out, same as humans (1g) or more ?

11. Can other types of economy form in video games? Seems to me that all economies in games are "free markets" with an initial entrance fee. There is no competition. The rewards remain the same for everyone regardless of the amount of workers that enter a universe. This is because in a game goods are produced from thin air. Will markets with competition make sense ? or will new players be harshly punished for arriving to play the game too late?


texts: What changes do I, as an individual, experience during a recession?

texts:
There is a lot of talk about how we're approaching an economic recession. There is plenty of talk about how that would affect the world at large, but I haven't really found much on the level of private individuals (other than increased unemployment rates). When the economy fell during 2008 my family didn't really notice it as neither of my parents lost their job (granted, I was a high school freshman at the time so I can't really tell whether or not my parents had any issues).

So, my question is more or less: As long as I don't lose my job, what changes to my life am I likely to see if we have another recession similar to the one in 2008?


texts: Infinite Horizon Transversality Condition

texts:
This question is an extension of Endogenous Growth: Balanced Growth Path with CRRA Utility

however, this question asks about a specific concept used in that question, and I think it would be helpful to have a question dedicated to this concept.

We will use the model in this question:

  $\textbf{Model:}$
  $$K_t=\frac{1}{n}\sum_{t=1}^nk_t$$
  In this model, $k_t$ is chosen by agents, and $K_t=\bar{k}_t$ (the average of all $k_t$).

  Now, agents want to dynamically maximize utility (under certain constraints) and they have CRRA (constant relative risk aversion) utility, so the maximization looks like:
  $$\sum_{t=0}^\infty\beta^t\bigg(\frac{c_t^{1-\gamma}}{1-\gamma}\bigg)$$
  $$s.t.\;Y_t=k_t^\alpha(E_tL)^{1-\alpha}$$
  $$c_t+i_t=Y_t$$
  $$k_{t+1}=(1-\delta)k_t+i_t$$
  $$c_t,i_t\geq0$$

  $E_tL$ is effective labor and the rest of the variables are typical  (I can give their definitions if requested).

  One last addition to the model is that there are two equilibrium constraints:
  $$E_t=\frac{K_t}{L}$$
  $$k_t=K_t$$

In the answers section, I was instructed to use transversality conditions and inada conditions in order to show that a balanced growth path is optimal. Below is my derivation of the transversality condition:

First, we must derive the finite horizon transversality condition. We do this by solving:
$$\underset{\{k_t\}_{t=0}^{T+1}}{max}\;\sum_{t=0}^{T}\beta^tU(\frac{}{})$$
$$s.t.\;k_{T+1}\geq0$$
With our model that means:
$$\underset{\{k_t\}_{t=0}^{T+1}}{max}\;\sum_{t=0}^{T}\beta^t\bigg(\frac{((1+1-\delta)k_t-k_{t+1})^{1-\gamma}}{1-\gamma}\bigg)$$
$$s.t.\;k_{T+1}\geq0$$

Our Lagrangian is:
$$\ell(\frac{}{})=\sum_{t=0}^{T}\beta^t\bigg(\frac{((1+1-\delta)k_t-k_{t+1})^{1-\gamma}}{1-\gamma}\bigg)+\lambda k_{T+1}$$

In order to get the transversality condition, we differentiate with respect to $k_{T+1}$ and use the constraint.

FOC:
$$\frac{\beta^T}{((1+(1-\delta))k_T-k_{T+1})^\gamma}=\lambda \qquad (1)$$
$$\lambda k_{T+1}=0 \qquad (2)$$
$$\lambda , k_{T+1}\geq 0 \qquad (3)$$
Solving this system, we get $\textbf{the finite horizon transversality condition is:}$
$$\bigg(\frac{\beta^T}{((1+(1-\delta))k_T-k_{T+1})^\gamma}\bigg)k_{T+1}=0$$
Now, in order to get the infinite horizon transversality condition, we maximize the discounted utility function again, but we set the limit of finite horizon transversality condition as $T\rightarrow \infty$ equal to 0 as the constraint.

This means that we have to solve:
$$\underset{\{k_t\}_{t=0}^\infty}{max}\;\sum_{t=0}^\infty\beta^t\bigg(\frac{((1+(1-\delta))k_t-k_{t+1})^{1-\gamma}}{1-\gamma}\bigg)$$
$$s.t.\; \underset{T\rightarrow\infty}{lim}\;\bigg[\bigg(\frac{\beta^T}{((1+(1-\delta))k_T-k_{T+1})^\gamma}\bigg)k_{T+1}\bigg]=0$$

This is where my question comes. How do we solve this? Can we use a lagrangian? If so, how do we take first order conditions in the presence of the limit? Any help would be greatly appreciated!


texts: Why are many railroad rights-of-way held in easement rather than in fee simple?

texts: In the United States it is said that many railroad rights of way are held by railroad corporations in easement rather than in fee simple. It seems strange that it would be done that way when one considers that many railroad tracks continue to function for well over a century. Some tracks have probably been used for more than 150 years. Perhaps the only reason we cannot (yet) say that they typically last more than 250 years, or more than 2000 years, is that railways have not yet existed long enough for us to know that. So why would a railroad buy an easement rather than buying the land unconditionally? Might it be because in the 19th and early 20th centuries people thought railroads would be replaced by some other technology within a few decades?


texts: Why is a fire service considered to be a non-rival service, while a highway is considered to be a rival good?

texts:
We consider highways to be an example of an impure private good because while it is non-excludable, it is a rival good. That is, another person's consumption (usage) of the highway affects my usage of it.

In that same sense, wouldn't a fire station also be rival, at least in theory?

For example, if a fire stations has five trucks for a locality, and 6 fires break out at separate places, why can't we consider this service as a rival service?


texts: Rent gradient in Alonso-Muth-Mills monocentric city with two transport technologies

texts:
Consider a mono-centric city, where all workers earn a wage $W$ in the centre of the circular city and rent out land $L$.
Rent $r(d)$ and transport costs $t(d)$ vary with distance from the centre, $d$.
Utility is constant by the spatial equilibrium assumption:

$U(C, L) = U(W - t(d) - r(d)L, L) = \underline{U}$

Differentiating with respect to $d$ gives:

$r'(d) = \frac{-t'(d)}{L}$

Two transport technologies are available:

$t(d) = \bar{t}d$ (no fixed cost)
$t(d) = \underline{t}d + K$ (fixed cost)

Workers will choose the no-fixed-cost technology at $d < K/(\bar{t}-\underline{t})$ and the fixed cost technology further out.
The rent is $\underline{r}$ at the edge of the city, $\bar{d}$.
What is $r(d)$? (For $d < K/(\bar{t}-\underline{t})$ and $d > K/(\bar{t}-\underline{t})$)


texts: Are there good step by step math intense books substitute for greene's and woolridge Econometric Analysis

texts:
Greene's book is a drudgery to read book since it is theoretically based however does not provide what a theoretical book should provide especially on poorly explained the statistics definition both in math motivation and historical background, also it left out math proof on 40 percent of the theorem. Woolridge's more advanced econometric book is even worse although it list out historical background and reference, since not only it is too wordy, it is impossible to use these words to replace the abundant missing math details. The description on how to applied the econometric theorem is also too technical on that book but that is useless to general user since they won't understand any of theoretic and applied econometrics. Overall, Greene's book is better compare to woolridge even it is bad since it give hint to how to fill out the missing details

That is why my friend sell these book back after he finish his courses

Are there good step by step math intense books substitute for greene's and woolridge more advanced Econometric Analysis books? I already had Hayashi's and Ruud's book and johnston's Econometric Method is also one of my books, however Johnston's book is also lack of detail to be a introductory graduate textbook. What else is a good one that cover general econometric topics and please explain in detail why do you think that they are as good as or even better than Hayashi and Ruud that cover some new topics other than the two that already teach?

contents of Hayashi and Ruud

1) http://press.princeton.edu/TOCs/c6946.html

2)http://ukcatalogue.oup.com/product/9780195111644.do


texts: Numerical Backward Induction Optimal portfolio choice

texts:
I am currently considering a simple life-cycle problem. We consider a market with equity risk only, which follows a geometric Brownian motion. We seek to maximize the terminal wealth of a CRRA utility individual over the investment strategies $\omega_t$ subject to the corresponding wealth dynamics. Of course, this has a known closed form solution, however I am trying to use this simple example to understand the method of dynamic programming, or, numerical backward induction.
Firstly, I understand we assume values for wealth $W(t-1)$ and then use Guassian quadrature to evaluate the expected value of wealth in this time period. I am confused in the next step. Somehow, interpolation is used and I fail to understand the intuition.
If there is someone out there who is knowledgeable on this subject, I would be ever-grateful if you can explain to me the procedure of numerical backward induction in this simple case, using both guassian quadrature and interpolation.


texts: What are the benefits to the overall economy and consumer of horizontal integration?

texts: I understand that limited vertical integration can lead to a lowering of prices for products and services, but it seems to me that even limited horizontal integration only leads to less competition.


texts: Question on Finding the Correct Emission Tax $t$

texts:
Let there be two companies $U_{1}$ and $U_{2}$ where, initially $U_{1}$ produces and sells $x$ units at $p=18$. Production costs are $C_{U_{1}}(x)=\frac{1}{6}x^3$ and in the process $a$ units of greenhouse gas is emitted, where $x=20a$.

  I then calculated the profit-maximizing output $x^{*}=6$, while the
  units of GHG emitted is $a^{*}=0,3$ and the profit is
  $G_{U_{1}}(x^{*})=72$.

Next assume that the second company $U_{2}$ starts producing. It produces $y$ units of a different good, so that $U_{1}$ profits from it. Namely $G_{1}(x)=18x-\frac{1}{6}x^3+4y$, while $U_{1}$'s production has a negative effect on the profit of $U_{2}$, namely $G_{U_{2}}(y)=24y-y^2-200a$

  I then determined the profit-maximizing output of $U_{2}$ which is
  $y^{*}_{U_{2}}=12$ as well as the profit
  $G_{2}(y^{*})=144-200\frac{6}{20}=84$

Now my problem:
How high would an emission tax $t$ have to be, so that $U_{1}$ selects the most efficient number of units to produce, meaning that the effects on $U_{2}$ are completely internalized.

Normally, if $U_{1}$ and $U_{2}$ were producing the same goods I would simply look at maximizing $G_{1}+G_{2}$, however, $U_{1}$ and $U_{2}$ are producing different goods. Surely, in order for $U_{1}$ to internalize the negative effects it has on $U_{2}$, it needs to completely halt its production.

What am I supposed to do?


texts:
I am currently reading this article.

If you are unfamiliar with the game, "The Price is Right", at the beginning, four bidders are selected who have to guess the price of some consumer object. Whoever gets closest to the retail value (rounded to the dollar) without going over goes on to play a different pricing game. Play is sequential, so you can imagine bidding last provides an advantage. This article is studying whether or not players behave rationally in this first part of the game, or whether it is bounded by some simpler decision rule.

The paper has a proposition:

  Suppose that contestants have rational expectations. Then in equilibrium,

  The fourth bidder must win at least as often as the third bidder; and the third bidder must win at least as often as either the first or second bidder.
  The fourth bidder must win at least 1/3 of the time.
  The first and second bidders together cannot win more than 4/9 of the time.

The appendix then, in its proof, starts the following explanation:

  First note that if a bidder believes that his probability of winning exceeds that of another bidder, then since every bidder has rational expectations, this belief must be correct. Thus to show that a bidder wins more often than another bidder, it is sufficient to show that he believes that he wins more often.

Which is fine.

  First consider the last bidder. Since his optimal strategy is to pick the interval that he believes gives him the largest probability of winning, he must believe that he does at least as well as any previous bidder.

I do not understand this part of the explanation. Is the logic that the last bidder will bid 1 dollar above whoever it will get the best distribution, and then if someone were to have a better chance of winning than the last bidder, the bidder would simply bid 1 dollar above that person?


texts: Which statstical method/model should I use with my study?

texts:
my dear fellows. I mainly do experimental research, so I run experiments in which participants play a game repeatedly (for 20 periods for example). The dataset I get after the experiments would be that each individual's decision is measured 20 times consecutively/repeatedly.
Consider a MWE of my data as follows (in R):
Subject_ID <- c(1, 2, 3 ,1, 2, 3)
Period <- c(1, 1, 1, 2, 2, 2)
DV <- sample.int(20, 6, replace = TRUE)
IV1 <- c(5, 2, 7, 5, 2, 7)
df <- bind_cols(Subject_ID = Subject_ID, Period = Period, DV = DV, IV1 = IV1)
df
# A tibble: 6 x 4
  Subject_ID Period    DV   IV1
       <dbl>  <dbl> <int> <int>
1          1      1    14     5
2          2      1     4     2
3          3      1    17     7
4          1      2    15     5
5          2      2     5     2
6          3      2    15     7

In this MWE, DV is the dependent variable, IV1 is the first independent variable. This is a dataset for one treatment, and usually, I would combine the dataset for all treatments together.
For data analysis, I usually do rank-sum test for treatment effects first, then I will do some regressions. If the outcome of the game in each period is only provided at the end of the experiment, the data would usually pass the serial correlation test, and thus I can use the pooled OLS regression like DV ~ Constant + IV1 + error(heteroskedasticity-robust standard errors can be used if heteroskedasticity is detected).
When the dependent variable is a binary variable, I would use the pooled logit regression or pooled probit regression.
However, recently, I read some articles and posts on generalized estimation equations, conditional logistic regressions, (generalized) linear mixed effects models, and I am a bit overwhelmed. I really don't know which is the right one to use for the kind of data that I collected from experiments.
Is there anyone who can help me? Or is there any book/article that you would recommend to me which clearly deals with the dataset that I mentioned at the beginning?
Thank you so much!


texts: Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?

texts:
Within the approach of New Institutional Economics associated with Oliver Williamson and others, emphasis is placed on transaction costs as a key factor in explaining why different forms of economic organisation arise in different circumstances.  Transaction costs have been defined, eg here, as including search and information costs, bargaining and decision costs, and policing and enforcement costs.

Question: Suppose I go to a supermarket that I know well, buy branded packaged goods of kinds that I have bought many times before, and transport the goods home.  Should the cost of my travel to the supermarket and transporting the goods home, in this situation in which any elements of search, information gathering, etc are minimal, be regarded as a transaction cost?


texts: What is the meaning of "labor input" in the context of incentive theories?

texts:
In the article "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design" (Holmström and Milgrom, 1991) it is said that two identical agents ($i=1,2$) devote attention $t_i(k)$ to a task $k$, i.e., they allocate $t_i(k)$ across a continuum of tasks indexed by $k\in[0,1]$. Later it is said that total labor input $\overline t_i$ is equal to $\int t_i(k)dk$.
With this in mind, my questions are the next: what is the meaning of labor input in this context? How can I graph attention $t_i(k)$ and labor input $\overline t_i$?
I have an intuitive idea of the general meaning of labor input, but I can't figure out its meaning in this context. For me, there is no difference between labor input and attention. The problem that I have is that I can't clearly understand the meaning of labor input beyond its mathematical definition as the summation of attention.
In particular, I'm more interested in a verbal and familiar (easy to understand for a freshman) interpretation of "labor input". For example, if attention is the derivative of labor input, does this mean that attention is a measure of the productivity of labor input? (this doesn't make much sense to me) How would you define "labor input" with familiar words?
I will appreciate any help.


texts: How should I evaluate my startup?(specific question)

texts: If I have a startup that produces a product that I estimate to sell 100/per month, with 50%profit, and $200 is the customer price of each product, How can I evaluate this business to find investors?


texts: How to interpret increases in percentage with different sample groups

texts:
Apologies if this question is not worded very well - this is not really my field of expertise but I'd like to see how to correctly understand some data.

Let's say I am studying the increase in cases of a disease over the last 100 years. I am comparing two different ethnicities, to see if one of them is more susceptible to the disease. The data I have is as follows; for the purposes of the example let's assume that all other factors are equal:

1917: General population consists of 70% Ethnicity A, 30% Ethnicity B

1917: 10% of Ethnicity A contracts the disease during their lifetime

1917: 30% of Ethnicity B contracts the disease during their lifetime

2017: General population consists of 60% Ethnicity A, 40% Ethnicity B

2017: 30% of Ethnicity A contracts the disease during their lifetime

2017: 60% of Ethnicity B contracts the disease during their lifetime

I can make two observations:

The percentage of infection has doubled in Ethnicity B, and tripled in Ethnicity A.
There is a 30 percentage point increase in Ethnicity B, but only a 10 percentage point increase in Ethnicity A

To someone who has a limited grasp of statistics and data analysis (i.e. me), these two outcomes seem contradictory - observation 1 indicates that Ethnicity A is worse off than Ethnicity B with regard to the rate of increase, while observation 2 seems to indicate the reverse.

From a data analysis and statistics point of view, what is the correct approach to take to determine the significance of the respective increase in percentages?

Also, does the changing ratio of ethnicities in the general population also affect how I should interpret the results?


texts: How does what companies produce and sell factor in GDP?

texts:
The usual GDP formula is

$$GDP = C + I + G + (X-M)$$

But suppose I am a company and I produce some goods $q$ which I sell at a price $p$. Suppose also I don't know how much of the units actually get sold.

How do I include this information into the GDP equation?


texts:
Calculating 3m annualised rates is a concept I've been struggling with for some time, but I think the below example illustrates what I am looking at trying to understand.

The past 6 months of monthly YoY inflation data for Hungary has been as follows:

From which is has been calculated that the 3m annualised rate is as follows:

How is this number calculated on a rolling basis?


texts: Basic microeconomics: supply, demand and substitutes in production

texts:
The question is: explain the change in the market for skim milk, if demand for ice cream rises.

I'd say these two are unrelated in consumption (saying they're substitutes is kind of stretching it), but complements in production: you extract the cream from whole milk to make ice cream, and the rest becomes skim milk. (Right? Please correct me if I'm wrong.)

Based on this assumption, my answer is that the supply for skim milk will increase (the supply curve shifts right). As demand for ice cream rises, the demand curve for it shifts to the right, and assuming the supply curve for it remains still, this shift will increase both the price and quantity of ice cream. In turn, as ice cream prices rise, producers make more of it, and thus more skim milk.

The thing is, my textbook doesn't describe demand for a complement in production as a factor that shifts the supply curve. So I was wondering, is the reasoning above valid? Thanks.


texts: Is there a way to characterize the distinction between simultaneous vs sequential games? I'm trying to describe a situation where players can only take actions without knowledge of other players' actions in a given stage of the game (i.e. where the actions taken in any stage of the game are simultaneous), but where repeated games are permitted. I've read Gibbons (1992) but am nowhere wiser.


texts: Choosing Data for CES Production Function

texts: So I am currently trying to write a paper estimating the Constant Elasticity of Substitution Production Function of the USA. I am using the simple version with two inputs capital and labour. Since the estimation is at the aggregate level I thought of using the perpetual inventory method to create the data for aggregate capital, but I wasnt sure what kind of data I need for aggregate labour. Maybe the number of employed people, work force, in the USA? I'd be glad if someone could help me out.


texts: What is the usefulness of Cobb Douglas functions? Why do we use them so often?

texts:
Hard to find much explanation as to why we generally use CD functions so often.
My understanding is that it is usually well behaved when used for utility functions and preferances, since it is

convex,
monotonic (utility increases when any input increases)
homogenous (constant MRS for a fixed ratio of 2 goods, or that utility curves move out radially)

Also, are there actual real world uses of CD, e.g. are they really still used in production for manufacturing companies? What is the strongest purpose of CD?
Thank you so much!


texts: Doesnt convexity prevent thick indifference curves aswell?

texts:
It is standard in many micro textbooks when analyzing the relationship between preference axioms and the shape of the utility function (and consequently the shape of indifference curves), to attributed the "non-thickness" of indifference curves to "local non-satiation".
While it is easily seen (and proven) that LNS preferences don't admit thick IC, my question is the following:

Thick IC violate as well strict convexity (notice that weak convexity appears to "survive"), so, isn't convexity alone another property that prevents thickness? Put it differently, can we find non monotonic, convex preferences that don't admit thick IC?

If any proof or reference to relevant literature would be very useful.


texts: Why does Mascolell define second-order stochastic dominance as such?

texts: Is not Mascolell's definition in his microeconomic theory of the second-order stochastic dominance narrower? He defines for distribution functions with the same mean only. Although he gives some motivation for doing this, somehow I do not get his motivation.


texts:
There have been many business cycles in the US over the past 50 years (although less so since the great moderation). Many of us youngsters are too young to remember many of these.

Is there some summary article / plot containing these, including their causes? For example:

1990: Gulf war, drop in oil supply
2000: crash of internet related stocks
2008: crash of mortgages/housing market in the US, amplified through banking sector


texts: Do modern economists still believe balance of trade is an important concept in economics?

texts: My understanding is that discussions about a nation's balance of trade was largely seen as important by mercantilists, but isn't really part of modern economics. Am I right about that?


texts: What is the name for a market where everyone is basically selling the same thing?

texts:
Consider the market for retail banking. Everyone is governed by the same interest rates, and it's not like one bank can offer something remarkably different from the others.

Retail pharmacies are the same way. They're all selling the same drugs.

In these markets, competitors have less "room to maneuver" when competing. They have to differentiate based on intangibles like service and amenities. They can't actually change the product.

It's like a 100-yard race. How do you win? You run faster than everyone else...full stop. There's no strategy. There's no way to subtly maneuver yourself into a better position. Everyone is selling the same thing -- speed in a straight line for 10 seconds.

Is there a name for this type of market? Or a name for the type of product?


texts: Why is it that when a bank provides loans to people, it is considered a 'liability' on the bank's balance sheet? (Khan Academy Video-Related)

texts:
I am watching the Khan Academy Banking Video Series:
(https://youtu.be/On3c86V5A_E) .
(https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/money-and-banking/banking-and-money/v/banking-7-giving-out-loans-without-giving-out-gold?modal=1)

If a person who is being loaned money opens a checking account at the very same bank that loaned it to him.. why is that a liability on the bank's balance sheet? Aren't liabilities only what the bank would owe to others (such as its customers who save their money in the bank and are hence loaning it to the bank?)...........
I understand that the concept of making it so that the money never has to leave the bank means that the person taking a loan from the bank just opens up a digital checking account, etc.. but Sal never made a mention that technically that checking account isn't a liability even if he's drawing/representing it on the liabilities-side of the balance sheet (the righthand side)

I would've posted a question in the khan academy website's comments, but these videos are quite old (and so are the comments) and from my previous experience my questions don't get replied on in those type of contexts on the khan academy website. Thus, I am asking on here.
.....
If this is the wrong place to post this, please let me know and direct me to where it should be posted. Thank you so much for your time, everyone!


texts:
Could be electricity considered as an inelastic good?

I am interested in the electricity delivered to final consumers in member countries of Nordpool Spot (Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania). I found that market prices in Nordpool Spot is not correlated with electricity consumption, therefore I explain this by considering, in this case, electricity as an inelastic good.

Is this reasoning correct?


texts: Is there a clear timeline of ECB/Eurosystem's changes to the defintion of M3 (with regard to repos)?

texts:
I found that circa 2012 the ECB/Eurosystem changed their definition of M3 to exclude at least some repos, which previously were included. According to a 2014 Bundesbank  publication, the change happened in 2012, but perhaps it was retroactively applied to indicators/statistics back to 2010 given some other graphs they show.

The increase in significance of the shadow banking system goes hand in hand with greater interaction between shadow banks and commercial banks. While an unconsolidated analysis of payment flows between the individual financial sector players is of interest from a financial stability perspective, monetary analysis seeks to adjust the monetary and credit aggregates affected by the interaction, if need be, so as to best capture the changes relevant to price developments.
Repo and reverse repo transactions
Secured money market transactions known as
repo and reverse repo transactions, which
commercial banks conclude with central counterparties
(such as Eurex Clearing AG, which
until recently was statistically classified as a
non-bank financial intermediary), are examples
of this. Repo transactions (reverse repo transactions)
were originally presented in the banking
statistics – which are crucial for monetary
analysis – as an outflow (inflow) of funds for
the money-holding sector. Yet for the most
part, these transactions inherently constitute
secured money market transactions between
commercial banks in which the central counterparty
merely acts as a go-between. Consequently,
the money supply is not expanded at
the macroeconomic level. These secured transactions
grew steadily in importance over the
course of the financial and economic crisis
owing to the high level of uncertainty in the
interbank market. They ultimately had such a
significant impact on short-term monetary and
credit developments, both in terms of quantity
and their month-on-month volatility (see the
chart on page 27), that the Eurosystem decided
to exclude them from the calculation of M3
and its counterparts in August 2012.

But a more recent ECB page doesn't seem to mention any of this, and just says:

M3 is the sum of M2, repurchase agreements, money market fund shares/units and debt securities with a maturity of up to two years.

So have they changed their mind again to include all repos in M3, or is it just that some details are omitted in this shorter ECB page? I can't imagine the Bundesbank being able to decide this on its own (they're part of the Eurosystem), so the change was probably at ECB level, every time. So I'd like to see a clear timeline of these M3 ECB/Eurosystem definition changes (up to 2020).


texts: In Mankiw's Macreoconomics, how come capital is assumed to be fixed while investment is assumed to be variable?

texts:
I'm looking at Greg Mankiw's Macroeconomics (7th edition), at the model presented in chapter 3:

$Y = C + I + G,$

where $Y$ is total output, $C = C(Y-T)$ is consumption, $T$ are net taxes (fixed by policy), $I = I(r)$ is investment, $r$ is the interest rate, and $G$ are government purchases (fixed by policy). The model further makes the assumption that

$Y = F(K,L),$

where $K,L$ are the factors of production, capital and labor, and are assumed to be fixed, so that $Y$ is therefore fixed as well. Using the fact that $Y,T,G$ are fixed, it follows that $C$ is also fixed and thus saving,

$S = Y-C-G,$

is fixed. But the model entails that $S = I(r)$ and therefore any movement in saving translates into a movement in investment (and thus the interest rate). How is it possible that investment is considered variable, if investment is the purchase of new capital goods and capital is taken as fixed? If investment increases, then so should capital.


texts: Does demand side economics only apply to manufacturing

texts:
For example, if investment falls then manufacturing falls. but there is no investment in secondary markets.

Wouldn't recessions cause factories to collapse but why would they affect realtors, used cars, secondary retialers etc?


texts: Ausubel (2004) auction, any implementation?

texts:
I'm looking for an implementation of the ascending-bid auction introduced in his 2004 AER paper. More specifically, a market using this framework which either

has been reviewed by other scholars or
has available data.

Or, on the contrary, an explanation of why this auction format is not broadly in use.