texts: Why was the price of gold lower when gold confiscation act was issued but raised afterwards?

texts:
I was reading up on the gold reserve act which made it illegal for US citizens to own gold with some minor exceptions.

According to the gold confiscation act which was issued before the gold reserve act the government paid 20.67$ per troy ounce.

  Executive Order 6102 required all persons to deliver on or before May 1, 1933, all but a small amount of gold coin, gold bullion, and gold certificates owned by them to the Federal Reserve, in exchange for 20.67\$ (equivalent to $408 in 2019)[5] per troy ounce.

However shortly afterwards the government raised the price for gold to 35$ an ounce.

  The price of gold from the Treasury for international transactions was then raised by the Gold Reserve Act to \$35 an ounce (equivalent to $691 in 2019)[5]. The resulting profit that the government realized funded the Exchange Stabilization Fund established by the Gold Reserve Act in 1934.

The reason gold was confiscated was to end deflationary tendencies . But why does the government raise the price of gold AFTER the confiscation? Wouldn't the effect on deflation be the same if they fixed the price of gold at 35$ in the beginning?
It is stated that the governement used the profit to fund the Exchange Stabilization Fund Is this the only reason the government set the price of gold AFTER all the gold has been collected?


texts: How will the value of the pound affect the British economy?

texts: Given the recent massive decrease in the value of the pound, does this not equally devalue the British economy by a similar amount? Why does that not lead to an immediate large crash in Britain as spending power is reduced?


texts: Software used for solving demands of different functions

texts:
I'm currently doing some research on demand systems and have been experimenting with different underlying utility functions which will generate different systems of demands. However I've been doing most of this work with pen and paper and often it seems that a machine would be better regarding solving some routine questions regarding marshallian and hicksian demands.

Is there a software which I can use to solve Lagrangian where I can obtain a specific functional form for Marshallian demands and Hicksian demands?


texts:
Hello I'm working through Microeconomic Theory : Basic Principles and Extensions of Nicholson and Snyder 10e, for an exam and I fail to get how to answer this question (p.517) :

  A specific tax is a fixed amount per unit of output. If the tax rate
  is t per unit, total tax collections are tQ . Show that the imposition
  of a specific tax on a monopoly will reduce output more (and increase
  price more) than will the imposition of an ad valorem tax that
  collects the same tax revenue.

So I state that both tax collects the same (s for specific and a for ad valorem)
$$q_s^m \times \tau_s =A$$
$$q_a^m \times p^m_a \times \tau_a=A  $$

Then I have tried some identities of $q^m$ and $p^m$ but I can't get to the proof.

$$q_s^m=\dfrac{C'(q_s^m)+\tau_s-p^m_s}{P'_s} $$
$$q_a^m=\dfrac{C'(q_a^m)}{(1-\tau_a)P'_a}-\dfrac{p_a^m}{P'_a}$$

where $P'_i$ is the derivative of the inverse demand function at the equilibrium point of the monopolist under the tax type $i$

I tried replacing $\tau$ as $\tau_s=\dfrac{q_a^m \times p_a^m \times \tau_a }{q_s^m}$ and then replacing it in $q_s^m$ but I get a quadratic form of no use...


texts:
Credit spreads are a key economic indicator. They are the difference between yields on corporate and government debt. They are a measure of confidence in the private sector, they provide insight into economic culture.

Where can I find a free and reliable online daily historical data source that indicates how credit spreads are moving by region?

CDX and iTraxx quotes provide exactly this information but as an individual, you struggle to even pay Markit to provide them - they generally only have corporate clients.

Quandl.com has databases of bond yield by credit rating which could be used in conjunction with government interest rates to get an indication of how spreads are moving but the data is not reliable and there is little explanation of what regions/markets the databases cover.


texts:
As I know, Marx economics did not solve the problem of transformation as Samuelson argued.

And at least, it has been known as a dead end.

How does Marx economics get evaluated in modern economics? Is it considered as a kind of pseudoscience or something similar?


texts: Does the income from a product or art count as passive income?

texts: When a writer publishes his book, can we classify the income from the book as passive? Or another example, when a musician publishes his album, does the album generates passive income, making any form of art or production process as passive income?


texts:
For instance, the ECB accepts green bonds as collateral. And also they are more likely to include green bonds in a QE program.
Does this face make a green bond more valuable? How would it work in a real life example?


texts: Is It Possible for a Country to have a Gold Standard without a Fixed Price of Gold?

texts:
It is my understanding that at the beginning of the 20th century, many, if not most, countries had a monetary system that was based on a gold standard. However, by the end of the 20th century, most countries had abondoned it.
(1) Is it possible to have a gold standard without a fixed price of gold?
(2) Are there any countries left today which tie their currency directly to gold or some other precious metal?
Thank you.


texts: finding the returns to scale of a production function

texts:
Find the returns to scale for he following production function- $(x_1 + 1)^.5 (x_2)^.5$

My attempt,
Let $f(x_1,x_2)=(x_1 + 1)^.5 (x_2)^.5$
And $g(x_1,x_2)=(x_1)^.5 (x_2)^.5$
Now,
$(x_1 + 1)^.5 (x_2)^.5$
$>$
$(x1)^.5 (x_2)^.5$
Therefore,
$f(x_1,x_2)>g(x_1,x_2)$
Or, $f(tx_1,tx_2)>g(tx_1,tx_2)$ for some t>0
$>(tx_1)^.5 (tx_2)^.5$
$=t(x_1)^.5 (x_2)^.5$
$=tg(x_1,x_2)$
The function g exhibits constant returns to scale. The function f being bigger than it should exhibit increasing returns to scale. The answer given, however, is decreasing returns to scale. Where am I wrong? Thank you in advance.


texts:
There are several metrics used to identify market power. Such as ...

the 'n' concentration ratio (the proportion of overall sales given by the top n firms) and the Herfindhal index.

However, there is also the Price cost margin (Lerner index).

These indicators may not always agree with one another.

Is there some way we can understand which of them is most relevant as an indicator of market power? For example by examining the local characteristics such as what kind of imperfect competition is present, and consumer demand patterns?


texts: What does Adam Smith mean by equality of condition?

texts:
According to Chomsky, Adam Smith distingushes between equality of opportunity and equality of condition and that he supported the latter over the former.

Although I have come across the former term and have some appreciation of what it means, I have not come across the latter term. What does Adam Smith mean by it?


texts: Professors Salary vs Alumni Earning: is the relation causal?

texts:
Elyase İskender posted in his blog an interesting plot correlating Professors Salary and Alumni Earnings Relation in US Universities. Is there a good way to establish causality here?

Did the highest paid alumni receive a better education from the highest/best profs leading to higher wages? Or, is this a question of selection: the best/highest paid alumni self-selected into places offering the highest prof salaries and the best prospects?


texts: How to estimate "necessary" economic output using Leontief input-output impact analysis? In particular: how to handle imports

texts:
I'm trying to estimate what the "necessary" economic output of a society is using Leontief input-output impact analysis. The data I have available is OECD input-output tables (see link). I'm not a trained economist, so please correct any mistakes you see in my thinking.
My idea for how to make this estimation is the following: proceed with a standard impact analysis and get the Leontief matrix L. Then check how much economic output x_need that remains  if we let the consumers spend only a "living-wage budget" proportionally to the different sectors of the economy (so if 50% of spending in the original demand goes to say food, then 50% of the living-wage final demand should also go to food). So basically: calculate x_need by f_need, where f_need is the new final demand vector that has been altered by letting private consumers only spend their living-wage-budget. Then we can compare x_old and x_need to see the differences in economic output.
I hope that this so far is not controversial.
Now here's the question: how do I handle imports (and exports) in the construction of f_need?
I want f_need to represent the final demand of the domestic private consumers when spend precisely their living-wage-budget. Exports can probably simply be removed since they don't provide goods and services to the domestic population. But what about imports? How do I best deal with them in my estimation? I see two general strategies for how to do so:

Ignore imports. Alter private domestic consumer according to their living-wage-budget, remove exports, and ignore imports (i.e. don't make any changes in how imports affect final demand f_need). This gives us f_need, which we can use to create x_need for comparison with the original economic output x_old.
Assume that all imports are domestically produced. Create and compare x_need to the economic output x_own_produce the country would have if all imports were produced domestically. Get x_own_produce from a final demand vector f_own_produce that we get by assuming that all imports are domestically produced. Get f_need by removing exports and assuming that domestic consumers only spend according to their living-wage-budget. We can then get x_need from f_need, and finally compare x_need with x_own_produce.

I hope that the above is understandable. Let me know what I need to clarify otherwise.
Detailed questions:
Which of the two general strategies gives a better estimation? Are there better strategies that I can use to make my estimation?
Any (constructive) feedback is appreciated.


texts: Calculating growth rate of capital when not in steady state

texts:
Given a Cobb-Douglas production function, the annual population growth rate, savings rate, alpha, annual depreciation rate, and annual technological progress rate, how would one calculate the growth rate of capital?

We're assumed to not be in steady state so we would need a growth rate in order to calculate how long it takes to reach the true steady state.


texts: How did the authors of the (Credit Suisse) Global Wealth Databook calculate the Gini coefficient?

texts:
how are you doing? I read the Global Wealth Reports from Credit Suisse and I wondered how the authors calculated the Gini coefficient. For example, on page 84 of this databook from 2010, how did they calculate it? Can somebody show me how they did it? I would like to recalculate it in excel. Thank you very much.
Example from the Databook 2010


texts: What interesting insights can be gleaned from specific data on imports and exports.

texts: There is a ton of open data available on how much of a particular good is imported/exported.  So, let's say I have 20 years of data on how many tomatoes are imported to each country in Scandinavia? Who might care, and what theoretical insights on international trade are supported by such data?


texts: Is it appropriate to change the base year of the real GDP to a more recent one?

texts:
I have a dataset containing Venezuela's nominal GDP, real GDP, GDP deflator and population from 1997 to 2013. I am interested in calculating real GDP per capita, but the base year of the GDP deflator is 1997=100, which is the current base year used by Venezuela's Central Bank in all the national accounts.

Would it be correct to change the deflator's base year to 2010=100 in order to recalculate real GDP?

Or should I just use real GDP reported by the Central Bank even though the base year is outdated?


texts: Why couldn't the Karush-Kuhn-Tucker optimization find the solution?

texts:
I have the following utility maximization problem:
$$\max (xy)$$
$$(x+y-2)^2 \leq 0$$
Conditions:
$$y-2\lambda (x+y-2) =0$$
$$x-2\lambda (x+y-2) =0$$
$$\lambda(x+y-2)^2=0$$

When I set $\lambda>0$, I get:
$$(x+y-2)^2=0 \Rightarrow (x+y-2) = 0$$
$$y-2\lambda (x+y-2) = y = 0$$
$$x-2\lambda (x+y-2) = x = 0$$

But the obvious solution is $x=y=1$.

When I set $$\lambda=0$$ that's not a case with a valid solution either. Is the constraint too low? What is the explanation to this?

I would greatly appreciate your help.


texts: Does every allocation have a maximal Pareto-improvement?

texts:
Consider an economy with a finite number of goods and a finite quantity of each good. Each agent $i$ has a preference-relation $\succeq_i$ which is a total, reflexive and transitive relation over the set of bundles. Given an allocation $x$ of the goods among the agents, say that $x^*$ is a maximal Pareto-improvement of $x$ if:

$x^*$ is Pareto-optimal,
Every agent weakly prefers the allocation $x^*$ over the allocation $x$.

What is the weakest condition on the preference-relations $\succeq_i$ that guarantees that every allocation has a maximal Pareto-improvement?

I would guess that it is somehow related to compactness, however, I do not see how to define this condition on preference-relations.


texts: Is it possible to make a trillion dollar invention or exploration? I mean an invention or exploration that will be valued at trillion dollars.


texts: How to distinguish between nominal and real GSP growth?

texts: What is the process used to distinguish the change in Gross Domestic Product (GDP) due to an increased output of goods and services from the change due to an increased prices? Why do we make it distinction?


texts: How do excessive foreign reserves cause inflation?

texts:
I have studied that accumulation of foreign reserve has the potential to raise inflation levels in economy as the money base increases (= domestic currency + foreign reserve increases) and if it overshoots the money demand in the economy then it will raise price levels.
My question here is that how the foreign reserves which are under the custody of the central bank go into the system and cause inflation. Say, China has huge reserves of USD but it rests with the central bank mostly. So, how does it get into the economy and raise prices ?


texts:
I am currently reading the book "Where does money come from?" which is co-authored by Richard Werner after I took the "Money and Banking"-class in coursera by Perry Mehrling.

There are certain questions which always pop up in my mind and which I find them either to remain unanswered or I simply don't understand the procedures.

Assumption:
I assume that Banks do not function as financial intermediaries as in neoclassical economics, which has been proven wrong by Richard Werner in his 2014 empirical study at the latest (but was well known to specialized economists, central bankers and bankers whose daily business are money market operations). Instead, I assume that money is created at the push of a button by a bank deciding to grant a loan to a customer. From this follows, that money in the form of cash/reserves is equally accepted by other agents as deposit accounts, which is why they are exchanged at par (i.e. at face value).

Now, as long as customers make electronic transactions within their bank or to other banks, the reserves of the respective bank remain unchanged. It is only when the customer withdraws cash that the reserves of the bank have to be converted to cash for the case that the bank doesn't hold enough.

There exists basically two ways of a bank accessing reserves (at least in the Euro-area, the UK and the US):
1) Borrowing reserves in the interbanking market at the Fed Funds Rate (US), the LIBOR rate (UK), the EURIBOR rate (Euro-zone)
2) By selling government securities to the central bank (or doing repos)

So far, I get the part with the interbanking market and why it works. What I don't understand is the following:

1) If a bank is selling government securities to the central bank in order to get reserves (or making a repo), where does this government security come from?
It is obvious that the security is issued by the government, but the government issues the security against receiving liquidity from the bank that buys the security. However, at the initial stage the bank doesn't have other liquidity than being able to open a deposit for the government to the amount of bought securities that the government in turn can access. Let's assume the government would like to access instantly the account of, say, 1 bn Euros and to withdraw the money in cash - will the central bank provide this 1 bn Euros without any discount?

2) As a follow up question: How could money be created if a government does not issue securities?

Thanks in adanvace.
BR


texts: What happened to the Zimbabwe cash dollar after the introduction of Dollarization?

texts:
Let's say, before dollarization, I owned 1 million Zimbabwean dollars in cash and the next day dollarization went into effect.
So in dollarization, the current Zimbabwean dollars will be invalid and only USD will work in the economy. So what happened to my 1 million Zimbabwean dollars that I had in cash.
Did the banks exchange it for USD or did something else happened?


texts: Contract curve for firms with linear utility functions

texts:
I am attempting to find a contract curve for a production economy with two linear utility functions.

Normally, I would find the point where the Marginal Rate of Technical Substitution were equal for the two firms. However, in this case, this does not seem to work (I end up getting an equation of two numbers).

How must I proceed?

Is it all places where both functions are equal?


texts: Bounded rationality with Quantal Response Equilibrium model for an Extensive Form game

texts: I am working on my Master thesis based on bounded rationality in behavioral game theory models, I wanted to know if QRE(Quantal Response Equilibrium) can be applied to games where players have different strategy sets as opposed to what I have seen in resource allocation games, if yes, how?


texts: Why does quantity supplied increase with price in economics?

texts:
The Law of Supply is my worst enemy in economics because I could never truly understand it, and as a result, the stuff I learned after that was built on a weak foundation. The Law of Demand is totally different though, it makes perfect sense to me. I have spent hours thinking about this and I've figured out exactly what I don't understand.

The Law of Supply would make perfect sense to me if price was substituted with revenue. With each good supplied, revenue would increase in a linear manner. However, as I realized, it is not revenue we are dealing with. The way the Law of Supply works, revenue would increase in an exponential manner if we took a supply schedule and multiplied price and quantity for each price level.

I don't understand why price has to increase if quantity increases. Shouldn’t the increase in quantity supplied already generate more revenue to cover the extra costs of production? Why should the price be spiked up to further increase revenue? Why wasn’t the price that high in the first place if the good could be sold like that?

The Law of Supply seems counterintuitive to me in some ways. If you have only a small amount of something to supply, shouldn't you make the price HIGH so that those rare fools willing to pay for overpriced things (the ones at the top of the demand curve) would clear your stock and maximize your revenue?

One explanation that almost made sense is that the more you tried to produce, the higher the costs of production would get. A producer would have no choice but to raise prices if costs of production were that high. But this only makes sense if costs of production increase EXPONENTIALLY, which I don't understand why would happen with EVERY good! Why is it always assumed that marginal cost is increasing and not remaining constant?

On a side-note: how would the Law of Supply work in the digital realm, where stock is basically infinite? What would a supply and demand graph look like there?

On a side-side-note: why are the supply and demand graphs really considered CURVES when they are almost always represented by lines?

Maybe there's something fundamentally wrong about my understanding of this. It's supposed to be easy to understand, but for me it's not. I would be so grateful if someone could clear this up for me!


texts: Measuring economic growth in GDP (in USD) vs Real GDP (domestic currency)

texts:
I've noticed that a lot of data online seems to measure a non-US country in USD. This seems odd to me, because doesn't that mean that US fiscal/monetary policies, politics, and economics would affect the GDP numbers for this other country?

From what I understand, the reason for measuring in USD is because it factors in the country's fiscal policy. If the country's government runs a deficit and borrows money, then that is somehow factored in when the GDP is converted to USD. But doesn't that also factor in things unrelated to the given country?

I would have thought that measuring Real GDP would be a better metric for factoring in things like deficits and borrowing. If the government borrows, I that increases inflation, and therefore, measuring Real GDP would factor that in. Is that not the case?


texts: Lexicographic Preference Relation on the QxR

texts:
I would like to ask for your help. I recently learned that the Lexicographic Preference relation can be represented by a utility function $u:X\to\mathbb{R}$ on $\mathbb{Q}\times\mathbb{R}$ (but not $\mathbb{R}\times\mathbb{Q}$).

To recall, a lexicographic preference relation says that on $\mathbb{R^2}$, $x\succeq y$x if and only if $x_1>y_1$  or $x_1=y_1$ and $x_2\geq y_2$ where $x=(x_1,x_2)$ and $y=(y_1,y_2)$.

Thus, I would have liked to see a proof of this statement and how is it possible to build such a utility representation. I guess that we must assume first that there exist a utility representation for the Lexicographic preference on $\mathbb{Q}\times\mathbb{Q}$ since the latter is countable, but I am lost after.

Infinitely many thanks for your help!


texts: One-shot deviation principle for infinite repeated games and dynamic programming

texts:
In a context that future return is discounted by a constant parameter, one-shot deviation principle holds for both repeated games and dynamic programming.

Because, in repeated games, a one-shot deviation refers to one history, so on equilibrium path, a one-shot deviation could produce a play that differs on more than one stages from the original equilibrium path.

Is it true for the sequence of state variables and control variables in dynamic programming? In other words, can a one-shot deviation generate an aforementioned sequence that differs for more than one stage?


texts: The introduction of Single Transaction Tax would help to curb out Tax Evasion & Black Money?

texts:
The Arthakranti (a NGO working on Economic Reform in India) suggests the proposal of Tax Reform.

In the proposal they suggest that All Taxes and Duties of Central ,State and Local body Government except customs or import duties which functions as International Trade Balancer should be withdrawn and replaced with single point Tax deductible at Source.

The full details & suggestions from the proposal are here:http://arthakranti.org/proposal

Key Points from Proposal are here:-

Would such Tax System Work and stop Tax evasion?

Or since Tax is to be levied on Actual transaction, one can just Note Down (Kind of book keeping of Transactions between Two people) the Transaction between two people (the way it is done in Hawala) and settles the trade between Two people after certain fixed period of Time and pays much less Tax..

e.g. Let the rate of such Single Point Tax is 2% (as suggested by Arthakranti to be Low)

If 'A' pays Rs. 100 to 'B' And after some time (days), now 'B' pays Rs. 200 to 'A'

In these transactions if tax is paid after each transaction, the Government would receive total Rs. 6 (Rs. 2 + Rs. 4) in Tax.

But instead actually transaction money each time, if both A & B decides to just note down the amount of money they owe to other & amount they going to receive and decided they will clear their book after six months (Fixed Period agreed by both).

Then in this case after Fixed period only transaction that takes place is 'B' pays Rs. 100 to 'A' and in this case the tax paid to government is Rs. 2 (Rs. 4 in Tax is avoided)..

This system of Book Keeping Transaction can be easily extended from Two people who frequently transact with each other to any Large Scale using Blockchain technology to note down the transactions (without actually making any transactions) and transaction can be settled in such a way that minimum Tax is to be paid to Government. (The same way Akamai Technology deliver content to the user from Nearest Server).

Does this model for avoiding Tax would work?

More precisely, what are the evasion/avoidance rates for similar transaction taxes that have been implemented in other countries (if any country have implemented such tax)?

and

Compared to traditional taxes on income, consumption, profits or wealth, how will Single Transaction Tax will perform in respect to Tax Evasion or in curbing Black Money?

Also Does Flat Tax like this would be regressive in nature?


texts: why did the 2008 financial crisis happen inspite of banks having 85% insurance on deposits in U.S.?

texts:
I read What Happened in 2008?  which gives some idea and similar things are happening in India. Seems India's 2019/2020 is similar yet different as millions are educated unemployed. While I can understand people having losses who had mortage, what about those who didn't have any mortage or loans. Did they escape ? From what I have been reading 85% of the money invested in a bank account upto some agreed amount is insured. Although I don't know whether that 85% figure insured amount was agreed after or before the 2008 financial crisis.

At the end, my question is simple, did people who had no loans of any sort, did they escape the 2008 financial crisis, or were they also caught in unexpected ways ?


texts: If an ordinal-scaled utility function is defined via strictly increasing transformation, how can it represent a case of indifference?

texts:
Problem: According to Wulf Gaertner’s (2009, p. 13) A Primer in Social Choice Theory, any strictly increasing transformation of an individual’s ordinal utility function is informationally equivalent. He says that:

  “The only thing which matters in terms of available information is
  whether, say, commodity bundle $a$ is preferred to or indifferent to or
  dispreferred to commodity bundle $b$ or, expressed in terms of utility
  indices, whether $a$ has a higher or equally high or lower utility index
  than $b$.”

This makes sense, however, when I looked up the definition of a `strictly increasing function/transformation’ I became confused regarding how this would allow one to represent cases of indifference as well as cases of strict preference.

Ken Binmore’s (1983, p. 109) Mathematical Analysis: A Straightforward Approach formally defines an increasing and strictly increasing function as:

Increasing function: $\forall x,y \in X: (x > y) \Longrightarrow ( \ f(x) \geq f(y) \ )$

Strictly increasing function: $\forall x,y \in X: (x > y) \Longrightarrow ( \ f(x) > f(y) \ )$

So a strictly increasing transformation in utility terms–––for individual $i$–––would (I think) be defined formally as:

Strictly increasing transformation: $\forall x,y \in X: ( \ u_i(x) > u_i(y) \ ) \Longrightarrow ( \ f(u_i(x)) > f(u_i(y)) \ )$

But, since this is defined solely in terms of strict inequality ($ \ u_i(x) > u_i(y) \ $) I’m confused as to how this can allow for cases where an individual is indifferent between two alternatives: $xI_iy = ( \ u_i(x) = u_i(y) \ )$. Or cases of three or more alternatives where $i$ strictly prefers some and is indifference regarding others: e.g. $ ( \ u_i(x) = u_i(y) \ ) > u_i(z) $. Wouldn’t these be ordering cases, where the orderings are not characterised by strict inequality of utilities?

Duplication information: I am aware that a question very similar to this has been asked before by Eric '3ToedSloth' (Ordinal utility and monotonic transformations). Eric '3ToedSloth'’s question was focused on the definitions of both ordinal-scaled utility functions and monotone transformations. He also mentioned the difficulty of representing indifference. The reason that I have asked this question is that the accepted answer (by 201p) was focused on answering the question by showing that increasing (/weakly monotone) transformations destroy ordering information, rather than the issue which I am most confused about: how ordinal utility functions (defined in terms of strictly increasing transformations) can represent indifference. (There is a chance that 201p’s answer did cover this, but I am too stupid to be able to see it). Ideally I would have posed this as a clarificatory comment, but I lack the reputation level to post one. I am happy for my question to be closed if the community thinks it is too similar :).


texts: The pricing of complementary goods if one of them is purchased only once

texts:
Sorry for asking a homework question, however, I'll try to generalize it as much as possible for a future use.

There are two complementary goods (A and B). B is produced under perfect competition, while A is produced under monopoly (yes, and A and B are produced by separate companies). The customers have a combined demand curve for both (as they don't need A without B or B without A) that can be expressed by a particular demand function. Of course, each product has its production cost functions c(A) and c(B).

It looks like a classic textbook "nuts and bolts" case, where Q(a)=Q(b) and prices must be consistent (basically the equilibrium price there is the intersection of both demand curves), however, there's one big difference. The good A is purchased only one time while B can be purchased two, three or more times (the good A may be a CD player and good B a music CD). The example asks how should the monopolist who produces A behave if he wants to maximize his profits.

The standard approach of drawing the two demand curves for A and B does not work here as the only quantity of product A that can be purchased is 1. Alternatively, the straightforward way of monopoly pricing (solving MR=MC for Q and then determining the P(Q)) does neither, as we can't ignore the good B and the only Q(A) available is 1. The solution must be simple enough, but I really got stuck and will appreciate any help or guiding advice.

Paul


texts: Market behavior when consumer must choose product before knowing price?

texts: What forces influence the price in a market, wherein the consumer must choose a good before knowing the price, and afterwards only knows the price of the good purchased, not that of any competing goods? For instance, in the US healthcare industry, a patient wanting to assess the cost associated with treating a particular condition - historically, at least - cannot receive quotes for the treatment.


texts: Example of social choice rule that does not satisly the unrestricted domain condition

texts: Can any social choice rule that is not complete said to be violating the unrestricted domain condition? Could you provide an example of SCR other than Pareto dominance that is not complete or violates unrestricted domain property?


texts: Can banks 'create' money on their own or do they need help from other banks?

texts:
My current understanding of the banking money multiplication process goes as follows: Alice comes along and deposits 100 cash into Bank A. Bank A gains 100 in vault cash (reserves) as an asset and 100 in liabilities in the form of Alice's checkable deposit. Bank A then loans out 90 (they cannot loan more since RR=0.1) and so the banks asset are 10 reserves and 90 loans and everything balances. The individual who gets the loan from Bank A takes the 90 and deposits in say Bank B and the multiplying process continues until total nation-wide deposits=10*reserves=$1000.
But now my textbook (Mishkin) states that

Because a single bank can create deposits equal only to the amount of its excess reserves, it cannot by itself generate multiple deposit expansion.

He then goes on to say that

A single bank cannot make loans greater in amount than its excess reserves

as well as

the banking system as a whole can generate a multiple expansion of deposits, because when a bank loses its excess reserves, these reserves do not leave the banking system, even though they are lost to the individual bank

But this doesn't make sense to me at all. I see no reason why Bank A in my earlier example is not able to multiply deposits all on its own. Say that in my example, the original 90 loan goes out to Bob to finance one of his business endevours. Bob does not want 90 in cash so instead he opens up a checkable deposit account at bank A and so bank A's reserves go back to 100 with 90 in loans and now they have deposits =190 . Clearly they have excess reserves. So they now make another loan to Mary equal to to 81 who then also does not wish to hold cash and so she stores the money in a deposit account at bank A. This process then repeats as Bank A makes loans and each borrower gets a deposit at bank A until bank A has 100 in reserves, 900 in loans and 1000 in deposits.
Thus Bank A, a single bank, has generated multiple deposit expansion. But Minkish seems to say this is only possible if the borowers deposit their money in other banks instead of the original lending bank. So is he wrong or am I wrong and missing something here? Any help on this would be most appreciated!


texts: How come the average studio rent in Vietnam is bigger than the average salary?

texts:
A studio in Ho Chi Minh city center : roughly 500 USD/month
Average salary in Vietnam : 300 USD/month
I have noticed the same thing in other "poor" countries : a studio rent is so expensive compared to the average salary. Is there an explanation ? And how do vietnamese people pay their rent ??


texts: Why is 10% the necessary upper bound for a negative interest rate?

texts:
Source: p 710, Economics, 3 Ed, 2014, by N G Mankiw, M P Taylor

  ... In that same article, Professor Mankiw recounted a
  discussion with one of his graduate students at Harvard about a scheme, put forward by the student,
  whereby the central bank announces that in one year’s time it would pick a digit from one to nine out of
  a hat and any currency ending in that number would cease to be legal tender. People would thus know
  that in one year’s time 10 per cent of the cash would cease to be legal tender, so what would they do? The
  logic is to spend it. The additional spending would increase aggregate demand and act as a boost to the
  economy. Such a policy might enable central banks to set negative interest rates provided the rate was
  less than 10% because there would then be an incentive to lend at (say) −4% rather than
  potentially losing 10%.

Please explain the last sentence (that I bolded). I don't understand the significance of the 10% and −4%. The foregoing discusses NEGATIVE interest rates, the maximum of which must be 0%.
So why bound the interest rate above, with a POSITIVE number (10%)?


texts: I have 3 endogenous variables in my model and I have identified 3 (or max 4) instruments. I wanted to know appropriate test for identifying whether the instruments are weak or not given that I have heteroskedaticity (cluster option is being used) in my data. I read that one should employ the Kleibergen-Paap F statistic in this case and compare with Stock and Yogo Critical values but in the case of 3 endogenous variables the table in their paper starts with a min of 5 instruments. I am confused as to which test to employ in this case. Any suggestions would be useful in this regard.


texts: Why has M1 grown a lot faster than M3 after the financial crisis?

texts:
While the fed has printed a lot of money the last decade and the M1 money quantity growth rate has gone up significantly (red), the M3 growth rate (blue) is almost exactly the same as before the financial crisis.

In the euro area, M1 (red) has grown in the same rate as before, while M3 growth (blue) is significantly lower.

Why have M3 not followed the same quantitive expansion as M1?

And can this be an explanation for why we have not seen stronger inflation?


texts: Is the S&P 500 now in a boom-bust cycle?

texts:
This question was originally posted at money.stackexchange but was moved here per a commentor's suggestion after the question was put on hold for being opinion-based.  The original question was:

  When I google "SP500" I get the following chart:

  Isn't this a boom-bust cycle, that's overdue for a "correction" that
  drops everything back down to below the 1,000 level like in 2002 and
  2009? What are the arguments against such a prediction?

The first comment someone posted argued against a drop but was confusing because it claims drops can happen from "causal forces" other than cycles.  That actually sounds like an additional reason for a drop (causal forces, not just cycles) although I wouldn't understand how a cycle would be established or maintained without causal forces in the first place.

It also claims "you would only expect it to come back down on schedule if you believe that it goes up and down on schedule".  That sounds like "if there's a cycle, it will go up and down", but doesn't make it clear how you determine if a cycle is happening.

The second comment says "markets always move in cycles" although the first half of the graph doesn't seem to back that up.

The third comment says "in the long term the markets have exponential growth" although it then cherrypicks the portions of the graph that reflect that (in effect replacing a "long term" argument with "short term" examples).  And exponential growth can't happen forever, right?

The final comment suggest a log graph, though none is offered.  My first search result for a log graph led to this page, which actually seems to make the case the market is always cyclic, although it throws so many numbers around in such a complicated fashion I'm not left with a sense of real understanding.  (I also find it odd to compute things like annualized growth rate over 140 years, when any individual's investing career probably rarely exceeds 60 years, and most investors probably average much less.)

Returning to the original question, is there any argument the market is not cyclic, and not overdue for a substantial drop?  Also, is there any measurement indicating whether investors believe that, and are exiting index funds?


texts:
I'm trying to look at the balance of payments and whether or not a given entry is a debit or a credit in terms of the money flow. Is there an easy way to tell which it is?
We know BOP = CAB + CA +FA + BI where
CAB = current account balance
CA = capital account
FA = financial account
BI = balancing item
BOP = Balance of payments.
For example looking at Russia 1994 it has the following info (Millions of dollars) in the Balance of Payments file on their website.
The current and capital account balance = 10,369.
Net error = -342
Net lending (+) / net borrowing (-) (Balance from financial account) = 10,027
I am not sure of the balance from the financial account is classified as a debt or a credit. Since the figure is a positive I guess this corresponds to net lending. But if I take this as a negative figure and sum the current and capital account balance I get +342?


texts:
What is the name for the phenomenon/principle that a government subsidy or other benefit, tends to fail to reach the people that need it the most or for whom it was intended?

The reason being that the knowledge that the subsidy exists is found more in those who are well off to begin with, while the most poor or marginalized are not in the position to learn about it.


texts: Is there a pull of skilled workforce from rural to urban areas?

texts:
Is there a pull of skilled workforce from rural to urban areas, i.e. is this scientifically described?

Especially in the European Union.


texts:
I'm reading this paper on credit lending cycles and trying to understand how it works for the case of one bank. This is the set-up of the model:
There are two players, a bank and the market. There are also two states of the world: adverse and normal.

The banks lends across time t=0,1 and 2. The bank can be of two types: High type, which generates profitable loans with a high probability $\theta$ in normal times and generates profitable loans with probability 0 in adverse times. Low type, which generates profitable loans with a probability lesser than $\theta$ in normal times and probability 0 in adverse times.

The bank lends loans in period 0 and becomes aware of the state of the world in period 1 when the loans turn out good or bad. If the loan is bad the bank can either terminate the loan with a cost of -1 dollars or can decide on a credit policy ( for eg extending the term of the bad loan). The credit policy varies between [0,a] and comes with a cost c in period 2 for the bank. After the credit policy is implemented the market observes the bank's earnings and updates its reputation, which is given by p+ = Prob( H/positive earnings in period1) and p- = Prob (H/negative earnings in period 1). Having implemented the credit policy, the bank's earnings can remain unaffected with probability a, and can become negative with probability 1-a.

Now in such a scenario, given the utility function of the manager as shown in equation (1) of the image attached, how do I formulate the incentive compatibility problem of the manager. I should reach equation(3) from the ICC, but I'm not able to at the moment on my own.

image of equ (1) and (3) : https://i.stack.imgur.com/6hlyi.jpg


texts: How do you stop Hyperinflation in a Nation?

texts:
In history, I learned that the Weimar Republic had hyperinflation as a consequence of leading and striving war during World War I and placed a new currency named German Rentenmark which would be about 1 trillion German Mark to stabilize the purchasing power. Would it be therefore that more money will not be printed, just put worthless money in another currency to then reboot the purchasing power of real currency? How does someone actually get out of Hyperinflation and do Hyperinflation have any, really any positive factors as in the Weimar Case the Economy boosted later on?
Note: I am new to economics and I'm grateful for any contribution to this question whether long or short and accept if the question is taken down when not with guidelines of Economics SE or other specific reasons.
https://www.spiegel.de/geschichte/hyperinflation-1923-a-948427.html


texts: GDP versus GNP. Which is a better gauge of a country's economy size and prosperity?

texts: Country A's GDP is larger than Country B's GDP. However, Country B's GNP is larger than Country A's GNP. Which country has a stronger economy? Which country's citizens is more likely to enjoy prosperity?


texts: Is FDI the principal route for funds directed offshore to return to a country?

texts:
Is foreign direct investment the principal route for funds directed offshore to return to a country?

For example, the UK has perpetual trade deficit. But the sterling sent overseas must make its way back into the UK economy at some point?


texts: How will asteroid mining impact the economy?

texts:
Just a side note, I'm not sure if this goes here, or in a science exchange...

Asteroids are expensive, and can easily be worth billions of dollars. They contain many types of precious metals, like gold, and platinum.

In the future, asteroid mining will be a huge business. With new advancements  in technology, and cheaper launches, we can ship asteroid material to Earth, with a huge ROI.

But how will bringing back all these metals impact the economy?


texts: Would an $8 National Minimum Wage Work in the US?

texts:
For those who advocate a \$15 minimum wage, would the benefits espoused also come from an \$8 minimum?

The reason I ask, is that it’s often said that the minimum wage needs to be updated as it was legislated years ago, and hasn’t kept up with inflation. But, given the fact that the wage was last increased in 2009, the rate of inflation is only 14.1%.

Thus we see a marked difference between the ostensible goal of modernizing the wage (\$8) and the \$15 wage frequently talked about.

Are the problems reformers seek to address only addressable via a \$15 minimum, or is it simply that the wage hasn’t kept up with inflation, in which case \$8.26 would suffice?


texts: TFP estimation in R by using prodest and estprod packages

texts:
I am writing my Bachelor Thesis and I really need help with the TFP estimation. so far I have a dataset with log values of Value added (va), Labour (l), Capital (k), and Materials (m). The initial dataset is available here:
https://drive.google.com/file/d/1aedWYABus1fQjKWxkOmYOmxv-qSja7hF/view?usp=sharing
So far my code is:
remove(list=ls())

library(plm)
library(dplyr)
library(ggplot2)
library(prodest)
library(estprod)
library(broom)

setwd("C:/Users/vadya/Desktop/baka")

Data <- read.csv("LV.csv", header=TRUE, sep=",")
str(Data)

summary(Data)

DataA <- Data %>%
  filter(NACE == 'A') %>%
  filter(VA > 0, L > 0, K > 0, M > 0) %>%
  mutate(l = log(L),
         va = log(VA),
         k = log(K),
         m = log(M))

wooldridge(data = DataA, va ~ l | k | m, id = "ID", time = "Year", bootstrap = TRUE, gross = FALSE)

levinsohn_petrin(data = DataA, va ~ l | k | m, id = "ID", time = "Year", bootstrap = TRUE, gross = FALSE)

olley_pakes(data = DataA, va ~ l | k | m, id = "ID", time = "Year", bootstrap = TRUE, gross = FALSE)

mod1 = estprod::levinsohn_petrin(data = DataA,
                                 formula = va ~ l | k | m,
                                 id = "ID",
                                 time = "Year",
                                 reps = 20,
                                 gross = FALSE)
mod1

mod2 = prodest::prodestLP(DataA$va,
                      fX = DataA$l,
                          sX = DataA$k,
                      pX = DataA$m,
                          idvar = DataA$ID,
                      timevar = DataA$Year,
                          opt='optim',
                          exit = FALSE,
                          tol = 1e-100)

omega = prodest::omega(mod2)

So far, the problem is the following - with estprod package I get only coefficients estimated for l and k, without m

With prodest package, the problem is the following:

A saw the same discussion in another theme on StackExchange where a guy was asking the same question, but he had provided some part of his data, and everything worked. But in my case the problems are different.
Does anyone faced the same problem, and is it possible to solve these issues, since I only have begun studying TFP in R, so I would really appreciate your help and any impact provided. Thanks in advance!!!


texts: Doubt on a simple problem from Mankiw's Macroeconomics

texts:
I've just started studying Macroeconomics and I have a quick doubt about the following problem from Mankiw's Macroeconomics 7th edition, page 81:

  Consider how each of the following events is likely to affect real GDP. Do you think the change in real GDP reflects a similar change in
  economic well-being?

  a) A hurricane in Florida forces Disney World to shut down for a
  month.

According to the solution manual, the answer is that "real GDP falls because Disney does not produce any services while it is closed". However, I wonder if it's not possible that real GDP remains constant in that scenario, for instance, if people decides to spend whatever they were going to spend at Disney on other goods and services? Then, if the fall in Disney's production were fully offset by the increased production of substitutes for Disney's services, could real GDP remain unchanged? Is my reasoning correct? Thanks.


texts: Doesn't the semi-strong form of the EMH conflict with expecting stock indices to increase in the long run?

texts:
I willfully don't define "long run", as I'm certain you economists can do this better! Please edify me on a reasonable number, and I can edit this post.

I quote Malkiel's definition of "semi-strong" beneath. As he doesn't believe in the EMH's strong form, and he knows far more about finance than I, I too don't believe in it.

Doesn't the EMH's semi-strong form jar with explanations on Personal Finance SE on why stocks can be expected to rise in the long run?

Burton Malkiel. A Random Walk Down Wall Street (12 edn 2019). Anyone know the page numbers?
THE SEMI-STRONG AND STRONG FORMS OF THE EFFICIENT-MARKET HYPOTHESIS (EMH)
The academic community has rendered its judgment. Fundamental analysis is no better than technical analysis in enabling investors to capture above-average returns. Nevertheless, given its propensity for splitting hairs, the academic community soon fell to quarreling over the precise definition of fundamental information. Some said it was what is known now; others said it extended to the hereafter. It was at this point that what began as the strong form of the efficient-market hypothesis split into two. The “semi-strong” form says that no public information will help the analyst select undervalued securities. The argument here is that the structure of market prices already takes into account any public information that may be contained in balance sheets, income statements, dividends, and so forth; professional analyses of these data will be useless. The “strong” form says that absolutely nothing that is known or even knowable about a company will benefit the fundamental analyst. According to the strong form of the theory, not even “inside” information can help the investors.
      The strong form of the EMH is obviously an overstatement. It does not admit the possibility of gaining from inside information. Nathan Rothschild made millions in the market when his carrier pigeons brought him the first news of Wellington’s victory at Waterloo before other traders were aware of the victory. But today, the information superhighway carries news far more swiftly than carrier pigeons. And Regulation FD (Fair Disclosure) requires companies to make prompt public announcements of any material news items that may affect the price of their stock. Moreover, insiders who do profit from trading on the basis of nonpublic information are breaking the law. The Nobel laureate Paul Samuelson summed up the situation as follows:

If intelligent people are constantly shopping around for good value, selling those stocks they think will turn out to be overvalued and buying those they expect are now undervalued, the result of this action by intelligent investors will be to have existing stock prices already have discounted in them an allowance for their future prospects. Hence, to the passive investor, who does not himself search for under- and overvalued situations, there will be presented a pattern of stock prices that makes one stock about as good or bad a buy as another. To that passive investor, chance alone would be as good a method of selection as anything else.

      This is a statement of the EMH—the efficient-market hypothesis. The “narrow” (weak) form of the EMH says that technical analysis—looking at past stock prices—cannot help investors. Prices move from period to period very much like a random walk. The “broad” (semi-strong and strong) forms state that fundamental analysis is not helpful either. All that is known concerning the expected growth of the company’s earnings and dividends, all of the possible favorable and unfavorable developments affecting the company that might be studied by the fundamental analyst, is already reflected in the price of the company’s stock. Thus, purchasing a fund holding all the stocks in a broad-based index will produce a portfolio that can be expected to do as well as any managed by professional security analysts.


texts: Interpreting how graphs of Cobb-Douglas utility functions. How does MRS vary as we vary $\alpha$?

texts:
Suppose I have the following Cobb-Douglas function $$U(x,y) = x^\alpha y^{1-\alpha} = 1$$ where $\alpha \in [0,1]$.

$$MRS = -\frac{U_x}{U_y} = - \frac{\alpha}{1-\alpha} \frac{y}{x} $$
$$\frac{\partial MRS}{\partial \alpha} = -\frac{1}{(1-\alpha)^2}\frac{y}{x}$$

So suppose I have the following set of graphs:

Here I just picked some values. Red is $\alpha = \frac{1}{4}$, blue is $\alpha = \frac{1}{2}$, black is $\alpha = \frac{3}{4}$

I understand how the steepness and flatness of the different curves change as I vary $\alpha$. But I am confused as to what $\frac{\partial MRS}{\partial \alpha} $ tells me about the graph. In particular, $\frac{\partial MRS}{\partial \alpha} $ is dependent on $\alpha$. So even though I know $\frac{\partial MRS}{\partial \alpha}$ tells me how much $MRS$ changes as I change alpha....changing $\alpha$ changes $\frac{\partial MRS}{\partial \alpha}$...so I am very confused!

My Question

What is $\frac{\partial MRS}{\partial \alpha}$ telling me about the graph? Since $\frac{\partial MRS}{\partial \alpha}$ is dependent on $\alpha$, how does this affect things?


texts: What is the difference between the demand schedule and the demand curve?

texts: What is the difference between the demand schedule and the demand curve that a monopolist or monopsonist has? Could someone provide details for both cases or even some paradigm or a graph. I can not clarify this concepts.


texts: Total Derivative of a Max Function: Maximizing Social Welfare Function

texts:
I'm studying public economics but my question here is purely mathematical in nature. I have a function:
$$
V(1-\tau, R) = \max_zu((1-\tau)z+R,z)
$$
I need to take the total derivative of this, in my notes, I'm told it is equal to
$$
dV=u_c [-zd\tau + dR] + dz[(1-\tau)u_c + u_z]
$$
where $c^i=(1-\tau)z^i+R$, $\tau$ is the tax rate, R is government revenue, z is income, V is the indirect utility function.
and the notation $u_c$ denotes the derivative of u with respect to c.
Is the first bracket the partial derivative with respect to c and the second the partial derivative with respect to z?


texts: Inflation - Output Trade-off in the Adaptive and Rational Expectations Philips Curve

texts:
In the Adaptive Philips Curve, $E(\pi_t|I_{t-1})=\pi_{t-1}$.
I'm reading a macro book, and the authors state that there is no long-term trade-off, i.e., when making the economy run at a level other than the equilibrium level of output, the policy makers must allow for inflation growth in the same direction, meaning $sign(\Delta \pi_t)=sign(y_t-y_e)$.

However, the way they write in the book is as if some sort of trade-off could still be allowed by this adaptive Philips Curve, if not in the long-run, then at short/medium-run. How could this possible?

Also, in the Rational Expectations Phillips Curve, we have $E(\pi_t|I_{t-1})=\pi_{t}$. How can we deduce this equality just by using $\pi_{t}=E(\pi_t|I_{t-1})+\alpha(y_t-y_e)+\epsilon_t$, where $\epsilon_t$ is the error/shock term, and $E(\epsilon_t|I_{t-1})=0$?

Any help would be appreciated.


texts: What are the advantages using Otree to progam economic experiments?

texts: I need to decide between learning Ztree and Otree. The added cost of complicating the server setup severely should have some benefit. Apart from Ztree being ugly, are there any other advantages of Otree to program experiments?


texts: Isn’t a zero-coupon perpetual bond not worthless if the relevant government has some probability of buying them back?

texts: A government issues perpetual bonds with no interest payments, no coupons: Most economists that are not hyper-dovish would argue such a bond is intrinsically worthless. However, if a government were desperate for some form of credit in regard to these instruments, wouldn’t there be some probability of the government buying these instruments back and thus granting them value?


texts:
On days like Black Friday, everyone rushes out expecting huge savings on everything they buy. The level of demand seems to reach ludicrous levels, and one would expect smart merchants to react by increasing all of their prices in response to demand.

Yet year after year we see videos of people beating each other up and trampling each other on Black Friday in a display of seemingly mindless consumerism.

Is Black Friday really just a marketing ploy that creates the illusion of savings where really none exist? Has the market just not caught up with consumer behavior? Or is there another mechanism driving Black Friday?


texts: What does commitment in adverse selection mean?

texts:
In this slide deck, p15. it says
"The revelation principle requires that the principal can fully commit to the terms of the contract. If this is not the case, an indirect mechanism, which allows for some commitment, may strictly outperform any direct revelation mechanism, which allows for no commitment."

It sounds contradictory, because the first sentence sounds like "For revelation mechanism to outperform indirect mechanism, the principal must be fully committed." But then why does direct revelation mechanism allow for no commitment in the later part of the paragraph?
What exactly does "if this is not the case" mean here?
What exactly does commitment mean here?


texts: Solving a two stage game by backward induction: which is the equilibrium notion?

texts:
Take a two-stage game with complete information and simultaneous actions in each state:

(1) Player 1 and 2 simultaneously choose action $a_1\in A_1$  and
$a_2\in A_2$ respectively.

(2) Player 1 and 2 observe the outcome of the 1st stage
$(a_1, a_2)$, then simultaneously choose action  $a_3\in A_3$ and
$a_4\in A_4$ respectively.

Payoffs are $u_i(a_1, a_2, a_3, a_4)$ for $i = 1,2$.

Suppose that I do the following (typically called backward induction):

(A) find the functions $a^*_3(a_1,a_2)$  and $a^*_4(a_1,a_2)$ such that

$$
\begin{cases}
a_3^*(a_1, a_2)\in argmax_{a_3(\cdot)}u_1(a_1, a_2, a_3(a_1, a_2), a_4(a_1, a_2))\\
a_4^*(a_1, a_2)\in argmax_{a_4(\cdot)}u_2(a_1, a_2, a_3(a_1, a_2), a_4(a_1, a_2))\\
\end{cases}
$$

(B) find $a_1^*, a_2^*$ such that
$$
\begin{cases}
a_1^*\in argmax_{a_1}u_1(a_1, a_2, a^*_3(a_1, a_2), a^*_4(a_1, a_2))\\
a_2^*\in argmax_{a_2}u_2(a_1, a_2, a^*_3(a_1, a_2), a^*_4(a_1, a_2))\\
\end{cases}
$$

Which equilibrium notion I'm I applying?

Basically, in (A) I find the pure strategy Nash Equilibrium of stage 2, for each possible action played in stage 1; in (B) I find the pure strategy Nash Equilibrium of stage 1, given the solution from (A).

How is $\{a_1^*, a_2^*, a^*_3(a_1, a_2), a^*_4(a_1, a_2)\}$ called?


texts: Calculating the impact of a per-unit Subsidy given to Consumers?

texts:
I am somewhat confused about the concept of calculating the prices payed by consumers and producers after a subsidy has been applied.

For example, say a good is being traded at 100 dollar at the market equilibrium. If the government were to give a 50 dollar subsidy to the consumer, would the price the consumer actually pays now (post-subsidy) be greater than 50$ due to differing elasticities? Would some of that subsidy be translated over to the price the producer receives? Or, would the price the consumer pays always be the (Equilibrium Price - Subsidy)?

Is the price reduction for the consumer (as a result of the subsidy) a function of the elasticity of demand or would the subsidy always fully fall on the consumer?


texts: Is there any standard measure of economic significance?

texts:
One measure is to look at standard deviations. If a one standard deviation increase in X leads to a more than a 0.5 (or 1, or ⅓, or whatever) standard deviation increase in Y, then we say that X has a economically significant effect on Y.

Is this standard? And if not, what other measures are there to formalize the notion of "economic significance"?


texts: Why must there be an equilibrium in the money market?

texts:
Probably this question is a bit(or very) stupid.

I'm self-teaching by reading a book on macro, and the author states that in the Money Market, when the output increases the demand for money also increases, and given a certain money supply, the interest rate must go up to maintain the equilibrium. So, in this case, the Central bank(CB) would just sell bonds => diminish price of bonds=> increase interest rate.
My question is, why should this equilibrium be maintained? Isn't there a situation, when people may want more money to acquire/trade, but the CB just won't sell bonds?

Any help would be appreciated


texts: Hypothetical price of a city (e.g. Munich)

texts:
At lunch we pondered, how much a hypothetical investor would have to pay for a whole city.

What would the combined value of all real estate in a large city (like Munich) be?
Is there a way to estimate this even halfway reliably?

Of course there are buildings, that won't ever be for sale, like public buildings or cultural heritage. These should probably be excluded from the computation.


texts: Link between Automated market makers and Logarithmic scoring rules

texts: In most articles I read about AMMs (automated market makers), there is a link or a mention to Hanson's work about the Logarithmic scoring rule. But I don't clearly see the link between AMM's and the LMSR. Can someone help me ?


texts: If markets are types of "information systems", how do they assist in the attainment of a future common objective that is beneficial or even necessary to a society?  Since markets are driven by individual needs and wants, are such future planning objectives beyond the scope of markets?  So, if markets are inherently short sighted, does that mean we are at the mercy of fate when it comes to large scale global problems that evolve over decades?


texts: Does the Marginal Propensity to Import = negative Marginal Propensity to Tax?

texts:
the multiplier $= \frac{1}{(1-MPC)}$

and

the multiplier $= \frac{1}{MPW} = \frac{1}{MPS+MPM+MPT}$.

Now since $MPC + MPS = 1$ it follow that $1-MPC = MPS$,

therefore the multiplier = $\frac{1}{(MPS+MPM+MPT)} = \frac{1}{MPS}$

and so $MPS = MPS + MPM + MPT$

from this, we can see that $MPM = -MPT$

Therefore, Marginal Propensity to Import = negative Marginal Propensity to Tax

I am unable to see what the flaw in the logic is or if there is something I am missing. Any explanation or help would be great.


texts:
What is the difference between screening game and moral hazard game?

I know that in screening game, TYPE is not known by the principal, while in moral hazard game, EFFORT is not observed by the principal. But what is the key difference between two settings, rather than what we call it? I mean, effort can also be considered as type....

Thanks


texts: What is the implication of perfectly reversible capital?

texts:
I am reading the lecture note in labor economics by Acemoglu and Autor. In the chapter of basic search model, they assume capital is perfectly reversible, and argue that  "Perfect reversibility implies that $w$ does not depend on the firm's choice of capital ... Suppose $k$ is not perfectly reversible then suppose that the worker captures a fraction $\beta$ all the output in bargaining. Then the wage depends on the capital stock of the firm, $w(k)=\beta A f(k)$ ;$A f^{\prime}(k) =\frac{r+\delta}{1-\beta}$ capital accumulation is distorted." (page 241.)
I don't understand how is the reversibility of capital related to the determination of wage?


texts: What is the privilege of a primary dealer?

texts:
Primary dealers have a privileged position, so there is value in being registered as a primary dealer. - https://economics.stackexchange.com/a/13450/8387

I was previously under the assumption that primary dealers were the only ones allowed to bid on treasuries during regular auctions. But apparently that is not the case.

  Who Can Participate?

  All auctions are open to the public. The following Treasury services
  enable various categories of investors to participate directly:

  TreasuryDirect accounts: Individuals and various types of entities including trusts, estates, corporations, partnerships, etc. ...

  TAAPS: Institutional Investors

  - www.treasurydirect.gov

Additionally, according to the New York Fed, being a primary dealer isn't a public endorsement.

  In light of the foregoing, third parties are reminded that the
  designation of an entity as a primary dealer by the New York Fed in no
  way constitutes a public endorsement of that entity by the New York
  Fed, nor should such designation be viewed as a replacement for
  prudent counterparty risk management and due diligence.

It looks like primary dealers get their voice represented on surveys that may affect monetary policy.

  [primary dealers] provide the New York Fed’s trading desk with market commentary and market information and analysis helpful in the formulation and implementation of monetary policy

So do primary dealers apply for this reason? Or is there some other reason in applying to become a primary dealer?


texts: Sample weights in Stata: fweight vs. pweight

texts:
I'm working with IPUMS ACS and Census data in Stata.  I'm interested in learning about income distributions and variability for specific subpopulations defined by education level, occupation, race and sex.

The survey data has probability weights, but I want to use commands that don't accept probability weights.  They will accept frequency weights, though.

I want to estimate:
Kernel density distribution
Mean
Coefficient of Variation
Standard Deviation
Percentiles

Can I just use frequency weights instead of probability weights?  These seem to give me accurate point estimates for the mean, but standard errors that are too small.

Will that throw off the kernel density, standard deviation, and coefficient of variation?


texts:
I am using the following theorem:

To better understand how I can transform expected utility functions.

An example with which to work:

I want to show that the preferences represented here satisfy the three axioms [A1,A2,A3] that characterize expected utility. [order, continuity, and independence]

Where $$E_{\pi} \mu = \sum_{z \in Z} u(z)\pi(z) $$

What I want to do is transform the given E.U.F.  s.t.:

$$U(\pi) = h + k....$$
$$U(\pi)= k...$$

Then by multiplying by $\frac{1}{k}$ and using $ln$

$$U(\pi) = \sum_{i=1}^n \pi_i ln(\alpha_i)$$

EDIT

Perhaps this is actually the solution. Any feedback?

This is not Homework. I am studying because I do not understand this well


texts: Does a perfectly price discriminating natural monopoly cause externalities or any type of market failure?

texts:
In perfect price discrimination, all mutually beneficial trades take place, the natural monopoly captures 100% of the surplus, and pareto efficiency is achieved.

However, I've read various sources that mention that, despite this, economists still advocate various taxes, regulations, or nationalization to "fix" the monopoly problem even in theoretical cases of perfect discrimination. Why would these things be advocated if pareto efficiency is achieved?

The only thing I can think of is that, while the lack of competition doesn't remove the incentive for a monopoly to innovate, it hugely slows down the rate of innovation, which would essentially rob society of potential improvements.

Is there anything to this logic? What inefficiency would exist if not pareto inefficiency?


texts: Repeated betting game with positive expected value

texts:
Consider the following basic repeated betting game:

A player can enter the game with an amount of money x.
The game consists of multiple rounds.
In each round a fair coin is flipped. If it shows heads, the player's current balance triples to 3*x (i.e., they get twice the amount of money on top of their current balance). If it is tails, they lose everything.
The player can decide before each round, if they want to stop and keep the winnings, or continue.
The game ends if either the players stops, or the balance drops to zero.
The player only gets a single, once in a lifetime chance to play the game.

This game confuses me. Basing a decision purely on maximizing the expectation value, it seems like in each round the best decision is to continue playing, because tripling the money with a probability of 0.5 simply has a positive expectation value. On the other hand, this strategy will force the player to continue playing indefinitely, and by definition the game will end with the player losing everything, i.e. losing their initial bet x.
My questions are:

Is it somehow possible to incorporate the stopping criteria (game ends if you lose) into the mathematical model? Somehow it feels like math should give a better strategy then losing everything eventually, i.e., is there something more meaningful than the naive "expectation value maximization"?
If math doesn't have a better answer, this may be a fundamental game theory dilemma. Does the game have a name in game theory, or are there any related dilemma I could read up on?


texts: To what extent can cryptocurrencies be influenced by monetary policy?

texts:
Background
In modern economies, at least up until ~10 years ago, it was assumed that a currency would be technically able to be subjected to monetary policy, that is, where more money is created or removed via typically monetary policy means.
However, certain assets/currencies whose quantity is determined purely through software and cryptography may not be able to be subjected to the same monetary policies.
Question
To what extent can a typical cryptocurrency whose quantity is deterministic be influenced by monetary policy on that currency?
My thinking

Technically, an organisation (e.g. a central bank), or even individual, could technically hoard a cryptocurrency in very large quantity, and then affect some sort of monetary policy by:

spending more of their currency holdings to cause inflation (depreciation of the currency's worth against goods and services), or
buying more of the currency to make it less abundant and promote deflation as appreciation causes goods and services to be cheaper.
Note: the orchestrator would have to control a significant sum in order to have a detectable effect.
Also: although an orchestrator couldn't create more of the currency, they could permanently destroy or decrease the supply (if they were willing to pay to do so) by destroying their cryptographic account keys, which creates an interesting asymmetry in capabilities.

However, no organisation/government could simply print or create more of the currency, at least not in a way that wasn't predetermined by the software.

One other thing
If the practical word 'cryptocurrency' throws anyone, please substitute it with 'a currency whose quantity is deterministic'.


texts: Static and Dynamic models: Testing the Quantity Theory of Money

texts:
The quantity theory of money is stated as a simple equation which states that the general price level of goods and services is directly proportional to the amount of money in circulation. This is written as:

$$\text{MV}=\text{PQ}$$

I got interested in testing this relationship econometric relationship however found that this neat equation got alot messier more complected in applied work using VARs and the like to test it.(1)

How can such a simple equation be presented? Any help would be appreciated.

(1)see: a)http://www.bu.edu/econ/files/2011/01/Lucas2illustrations1.pdfb)https://www.researchgate.net/profile/Erdal_Ozmen/publication/233505652_Testing_the_quantity_theory_of_money_in_Greece/links/53f32d400cf2da8797445547/Testing-the-quantity-theory-of-money-in-Greece.pdf  c)https://pdfs.semanticscholar.org/377f/13a3e57742d5f279c097835266d43db16c0d.pdf


texts: Why are nations engaging in austerity when bond yields are historically low?

texts:
In the UK and EU austerity programmes are rife. However, bond yields are also historically low, and have even been negative! At a time when debt is cheaper than ever, and below the accepted long term rate of inflation, why do governments not take this "free" money to maintain their states? Or, is it the austerity itself that is driving the rates?

UK bond yields:
http://www.tradingeconomics.com/united-kingdom/government-bond-yield
EU bond yields:
http://www.tradingeconomics.com/euro-area/government-bond-yield


texts: Is a home (primary residence) purchase a form of investment in macroeconomics?

texts: From Wikipedia, investment in macroeconomics is the purchase of goods that are not consumed within a short amount of time (say 3 years). In this sense, home purchase seems to be a form of investment. However, as per my understanding, investment should also involve purchasing new capital goods, which seems to me that primary residence does not qualify. I'm quite confused here: do we consider homes which are only used by their owners as investment, even if these homes are newly built?


texts: Does only enough money exist to pay the principal on all debts, and none for the interest or for anything else?

texts:
This is reported to be the testimony of Marriner Eccles, Governor of the Federal Reserve Board, before the House Committee on Banking and Currency, on September 30, 1941.

Does this mean that only enough money exists to pay the principal on all debts that exist, leaving nothing to pay the interest and nothing for anything else? One hears that credit card companies like to have customers who run up a lot of debt and then make the minimum payments every month for decades, but that seems like nothing compared to this. The inventors of such a "money system" appear to want the whole universe in that position, and it appears that they've got what they want.

  Congressman Patman: "How did you get the money to buy those two billion dollars worth of Government securities in 1933?"

  Governor Eccles: "Out of the right to issue credit money."

  Patman: "And there is nothing behind it, is there, except our Government's credit?"

  Eccles: "That is what our money system is. If there were no debts in our money system, there wouldn't be any money."


texts: How to find the elasticity of substitution for the general CES-function?

texts:
I have to find the EOS for the general CES-function defined as

$$
y = (a_1x_1^p+a_2x_2^p)^{1/p}
$$

I first find $MP_1$ and $MP_2$ to find $MRTS$. We have that

$MP_1 = \frac{\partial y} {\partial x_1} = \frac{1}{p} (a_1x_1^p+a_2x_2^p)^{1/p} \cdot pa_1x_1^{p-1}$

$MP_2 = \frac{\partial y} {\partial x_2} = \frac{1}{p} (a_1x_1^p+a_2x_2^p)^{1/p} \cdot pa_2x_2^{p-1}$

and thus

$MTRS = - \frac{MP_1}{MP_2} = - \frac{a_1x_1^{p-1}}{a_2x_2^{p-1}}$

By definition EOS is given by

$$
\sigma = \frac{d(x_2/x_1)}{dMTRS} \frac{MTRS}{(x_2/x_1)}
$$
so to find $x_2/x_1$ I have done the following. Let $\theta = - \frac{a_1x_1^{p-1}}{a_2x_2^{p-1}}$ then we have
$$
\frac{1}{\theta} = - \frac{a_2x_2^{p-1}}{a_1x_1^{p-1}} \Rightarrow \frac{x_2^{p-1}}{x_1^{p-1}} = - \frac{1}{\theta} \frac{a_1}{a_2} \Rightarrow \frac{x_2}{x_1} = (- \frac{1}{\theta} \frac{a_1}{a_2})^{\frac{1}{p-1}}
$$
Thus
$$
\sigma = \frac{d(- \frac{1}{\theta} \frac{a_1}{a_2})^{\frac{1}{p-1}}}{d \theta} \cdot \frac{\theta}{(- \frac{1}{\theta} \frac{a_1}{a_2})^{\frac{1}{p-1}}} = -\frac{1}{p-1}
$$
which does not give the desired result that $\sigma = \frac{1}{p+1}$. Where am I doing wrong?


texts: Malaysia's national debt - who's correct?

texts:
Malaysia recently changed governments. The new finance minister claimed the national debt is actually RM1.087 trillion, and that the previous government had understated the national debt by some RM400 billion:

The official Federal Government debt is RM686.8bil
"In addition, the Government is already committed to pay for government guarantees for various entities which are unable to service their debts. This amounts to RM199.1bil."
"...the Government also must make lease payments for "Public-Private Partnership" (PPP) projects such as construction of schools, roads, hospitals and police stations, which amount to RM201.4bil."

The former finance minister promptly responded by claiming that the new minister is overinflating figures, and that the original RM686.8 billion was according to "universally accepted" defined by the IMF and World Bank.

I don't understand what they're saying very well. Two questions:

What are the two extra terms mentioned by the new minister?
Is Malaysia's national debt RM1 trillion or RM686 billion?


texts:
Conside the following Cobb-Douglas Production Function:
$$Y_t=\bar AK_t^{1/3}\bar L^{2/3}$$

The growth rate of per capita GDP for this equation in continuous time is $\frac{y'_t}{y_t}= \frac{1}{3K_t}$ where $y_t=\frac{Y_t}{\bar L}$

Using the Law of Motion of Capital:

$$\Delta K_{t+1}=\bar sY_t-dK_t \implies \frac{\Delta K_{t+1}}{K_t}=\bar s \frac{Y_t}{K_t}-d$$

where $\bar s$ represents the savings rate.

And Capital-Output Ratio in Steady State:
$$\frac{K^*}{Y^*}=\frac{\bar s}{\bar d}$$

where $\bar d$ represents the depreciation rate

Prove that the growth rate of per capita GDP is equal to
$$\frac{1}{3} \bar s \frac{Y^*}{K^*} (\frac{(K^*)^{2/3}}{K_t^{2/3}} -1)$$

I have no idea how am I supposed to get the equation from $\frac{y'_t}{y_t}= \frac{1}{3K_t}$, because it seems like this is not derived by substitution.

After some work, I realised that the following equation looks somewhat like:

$$\frac{1}{3} \bar s \frac{Y^*}{K^*} (\frac{(K^*)^{2/3}}{K_t^{2/3}} -1) =\frac{1}{3} \bar d \frac{\Delta K_{t+1}}{K_t}$$

Appreciate it if anyone can provide me with some advice on how I should go on further! Many thanks!


texts: (Universal) Basic Income as a type of insurance

texts: I was thinking about UBI a lot and I can see that it has many up and down sides. What I would like to know is if there is a concept like UBI, which is not paid by the government through taxes, but rather a voluntarily kind of insurance where you agree to pay back a percentage of your future income or something. It could also be seen as some kind of loan. Are there any concepts like these? Are there any economic advantages between a voluntary, private UBI compared to a "forced" state-funded one?


texts: How does Perfect Elasticity imply infinite quantity for any higher price?

texts:
I reference Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw. The graph above is from p 100.

  [p 99:] ...supply
  is perfectly elastic. This occurs as the price elasticity of supply approaches infinity
  and the supply curve becomes horizontal, meaning that very small changes in the
  price lead to very large changes in the quantity supplied.

Please explain the red box? How's it true? The graph itself shows that at \$4 exclusively, all quantities $\ge 0$ are supplied. The graph depicts nothing for prices above \$4? (Footnote: I tried this)


texts: What is the Relationship between expected return and risk of corporate bonds?

texts:
So from my past studies i know that if the interest rate is expected to decrease, then the expected return will increase and the demand for long term bonds shifts to the right.

If investors believe that interest rates will decrease in the future, then investors will buy more bonds now. If you believe interest rates will fall, then bond prices will increase. You will buy bonds now, because you will be  buying bonds for a cheaper price (high IR) and resell bonds in the future for a higher price, when market IR decrease.

As a conclusion , if IR decrease in the future, it will make people expect higher return on long term bonds today , since there is more risk. There is a negative relationship between IRs and and expected returns.

Then why , all of a sudden , my text book says :

'If the possibility of a default increases because a corporation begins to suffer large losses, the default risk on corporate bonds will increase, and the expected return on these bonds will decrease'.

SO now all of a sudden expected return decreases when there is more default risk ? Shouldn't expected return increase when there is more default risk?

What am i missing?


texts:
A consumer has an endowment vector $w$; at prices $p$ his demand for the first good exceeds his endowment; $x_1^+(p; pw)>w_1$ then a small increase of $p_1$ will lower his utility.
I was discussing this with a friend and he believes that it's based on the walras law. Prices go up, demand goes down and converges to walras law equilibrium in order to find the $z(p)$ vector which makes excess demand 0, price goes up, excess demand goes down, walras eq. will be satisfied  and this is optimum so the utility cannot decrease. (something along those lines as far as I remember)
But I'm more concerned that it has to do with the Income and Substitution effect more than the Walras law. But we both agree that it won't lower the utility level. However, I'm kind of stuck on the math proof behind it.


texts: To calculate cross elasticity of demand, does percentage change in quantity demanded have to be market demand instead of individual demand?

texts: If I try to calculate cross elasticity of demand (XED or CED) with individual demand quantity, it seems to break down since even small increase when the base number is small is a big increase in percentage. e.g. 1 to 2 is a 100% change.


texts: What were the problems with the gold standard?

texts:
I was reading this answer to a question about bitcoin vs gold standard which includes

As a consequence, if Bitcoin standard would ever become adopted it would likely perform even worse than Gold standard did (which is saying something), and would likely go the same way.

It is pretty explicit in stating that the gold standard was pretty bad. I am no economics expert so I don't know why that was the case. Could someone explain it to me to satisfy my curiosity?


texts:
In the DMP family of labor models, we typically have $V$ denoting a vacancy and $J$ denoting the value of a job. $V$ typically becomes 0 through free entry.

Say a firm get matched with a worker of value $J_i$ and could reject him, to search again. In order to do so, it would need to hold that $V > J_i$. But as (through free entry) $V = 0$, that would only be the case if the worker has zero value to the firm.

However, in the real world, we see firms rejecting applicants and searching for new applicants. How do DMP models achieve to generate this observation?


texts: Why do there seem to be relatively few imports from India into the United States?

texts: In the United States I see significant quantities of manufactured good imports made in Taiwan, Japan, China and Korea. However, there seem to be relatively few imports from India. Why is this?


texts: Did the Nixon shock cause skyrocketing real estate prices in the US?

texts:
Ca. 1970 the prices of real estate started skyrocketing in the US: Real estate prices chart. Same with gold: Gold prices chart.

So my conclusion is that real estate did not increase in value, it was the USD that decrased its value.

Further my theory is that Nixon taking US out of the gold standard in 1971 was what caused this. I assume that after this the US started printing a lot of dollars and paid down their foreign debt with the new less valuable dollars.


texts: Derive utility function with both substitutes and complements

texts:
I know that in the 2-good world it is easy to derive the demand functions from a utility function for imperfect substitutes or complements, but what if I have N goods that include many combinations of substitutes and complements?

For example if you have hot dogs $D$, hamburgers $H$ (substitutes of each other), and mustard $M$, mayo $Y$ (substitutes of each other, complements with hot dogs and hamburgers), I can try something like this:

$$
U(D, H, M, Y) = (D^{0.5} + H^{0.5})(M^{0.5} + Y^{0.5})
$$

Unfortunately the math gets pretty hairy for this one pretty quickly. Before I dive in much further with solving these equations, is there a well-known function that is used in the literature for this type of analysis?

Note: I am interested in the more general N-good case, not just the 4-good one.


texts: Why Banks give more discounts/offers on Credit Card as compared to Debit Cards?

texts:
Whether a credit or debit card is used to make a payment at a merchant, there will be outflow of money from the bank. What extra benefit do the bank get from promoting credit more than debit card?
Is it just the obvious answer that by promoting credit card, there is a chance that user will default on the payment and allow bank to charge interest?
On the downside, by paying through credit card, the user still has money in her savings account and so from bank has to maintain higher reserve ratio with the central bank.
Finally, does it have something to do with the fee bank charges with merchants? Is the fee higher for use of credit cards as compared to debit cards?


texts: Auction with one buyer and multiple sellers

texts:
In the standard auction model, there are one seller and multiple buyers, the bidders are the buyers.
Consider now an auction with one buyer and multiple sellers, where the bidders are the sellers. Does it fundamentally changes the nature of the auction compared to the standard model? What changes does it make?


texts: Year effects inconsistent between random effects and fixed effects

texts:
I am running a panel data estimation, where I am including year effects. My goal is to see if there is a time trend in the data, after controlling for other factors.

Using random effects, I find the trend is upward sloping. Using fixed effects, I find the trend is downward sloping.

Is this a bad result? A Hausman test rejects the RE with p-value of 0.000. Does it mean that the trend values from the RE can be inconsistent? Or is the FE capturing something different than the RE model? Differences in differences perhaps?


texts:
I have the following inter temporal utility function:

$U(t)=(\frac{s(t)}{1-\sigma})(c_t/c_{t-1}^\gamma)^{(1-\sigma)} - \chi*h(t)$

where $h(t)$ is the hours worked.
I know that gamma is responsible for consumption smoothing as I have achieved the following results after a positive shock on $s(t)$:

The problem is i do not know how to prove mathematically that when gamma=1 consumption is smoother


texts: Group contamination in Regression Discontinuity

texts:
I'm an undergraduate student I have an empirical question regarding Regression Discontinuity and Diff-in-Diff methods. I'm currently evaluating the impact on fertility of a Conditional Cash Transfer in Brazil.

This is an oversimplified example of the problem we encountered.
A family will receive the benefit if their income per capita is, for example, $150, and will not receive it otherwise. We would use this fact to use a RD design to evaluate casual effects. The problem is, those above the threshold have incentives to get another child and reduce their per capita income to enter the "control" group.

Anyone has good references (articles, textbook), where I can find something that would help me? Helpful comments are greatly appreciated.


texts:
The term "public bad" is sometimes used for "goods" which, like public goods, are non-excludable and non-rival, but which tend to lower rather than raise welfare.  Air pollution is an example.

For a public good, non-excludability is normally taken to mean that the provider of the good is unable to exclude individuals from benefiting from the good . It can normally be assumed that individuals would not want to exclude themselves from benefiting.

For a public bad, however, individuals will want to exclude themselves (if they can do so at reasonable cost) and it would seem that non-excludability could mean either or both of the following:

The provider of the bad (eg a factory causing air pollution) is unable to exclude individuals from the bad.
Individuals (eg living in a polluted neighbourhood) are unable to take protective measures to exclude themselves from the bad.

The case of noise from aeroplanes illustrates the distinction. Airlines are unable to exclude residents (in affected areas) from receiving noise.  But residents can, at a cost, take measures such as double glazing to keep the noise out of their homes or at least mitigate it.

Question: Where the term "public bad" is used in economics, is there a consistent understanding of what is meant by non-excludability?


texts: Does Household final consumption Expenditure include Consumption expenditure of Imported Goods

texts:
From World Bank, I got the Household final consumption Expenditure for many countries across time. I wonder if this consumption includes Consumption expenditure of Imported Goods / Import Volume?

If I want to compute the share of consumption of home goods in total consumption, should I use the following formula?

$\frac{Household final consumption Expenditure - Import Volume}{Household final consumption Expenditure}$

or should I use:

$\frac{Household final consumption Expenditure}{Household final consumption Expenditure + Import Volume}$

Many thanks for your help.


texts: Addressing endogenity in price elasticity and the Promotion Optimization Problem

texts:
I have data on

purchases
gross prices
discounts (like coupons)
net prices (i.e. gross price - discounts)
number of leads (potential customers at any given time)
conversion rates (# purchases / # leads) over time

A business wants to know how price elastic its consumers are and to use this information in part to set their net price by changing either gross price and/or discounts.

The problem is that there's some endogeneity (or recursion) in the system -  when the business predicted higher conversion rates it raised prices. The business also varied the discount levels based on the conversion rates and gross price.

While the business is clearly selling a normal good, the endogeneity/recursion makes it looks like higher prices are associated with more sales and higher conversion rates. I need to disentangle these effects. Perhaps there's some great IV I'm not thinking of, but barring that, is there any other strategy to address this situation?

We can think of this as a single good case (I can add complexity later, but based on my subject matter knowledge it would be safe to ignore other goods and cross-price effects, etc).


texts: Relation between foreign currency reserve and exchange rate and others

texts:
What is the relationship between foreign currency reserve(USD) of a country with it's exchange rate (against USD), and also with export and import strength ?

And if it's too complicated to explain, which books I should head over to read more to know it better ?


texts: What does increase or decrease in marginal utility mean in terms of quantity demanded?

texts:
According to the definition of marginal utility " it is the utility or satisfaction derived from the consumption of an additional unit of any commodity."
So, the question is what does increase or decrease in Marginal Utility of a good, let's say X, will mean and how we can relate it to quantity demanded?
This whole thing came while I was going through Edgeworth-Pareto definition of Complementary and Substitute goods. Thanks in advance.


texts: GDP/PPP influence - Adjusted savings: carbon dioxide damage

texts:
I found this variable and I'm not a native english speaker, so I'm a little bit confused with "adjusted savings" right in front of "carbon dioxide damage". I'd like to know what does this variable really means for GDP/PPP.

I have this variable in some big data table and it highly and positively correlates with GDP/PPP value(the higher value, the higher GDP). Should I take this variable in a way that it expresses how much money each country saves(which explains GDP increase) because the country harms less with carbon dioxide than other countries, or what does it actually mean?


texts: Conditions for an additive value function

texts:
In a standard problem of fair cake-cutting, there is a real interval which is called "cake", and it has to be divided among $n$ partners. Each partner $i$ has a subjective value function $v_i$, which is an additive function on subsets of the cake. This means that, for every two disjoint subsets $A$ and $B$:
$$v_i(A\cup B)=v_i(A)+v_i(B)$$
Suppose that, instead of a value function, each partner has a preference relation $\succeq_i$.
A preference relation $\succeq_i$ is represented by a value function $v_i$ iff:
$$A\succeq_i B \iff v_i(A)\geq v_i(B) $$
What properties on the preference relation guarantee that it can be represented by an additive value function?
NOTE: The Wikipedia page Ordinal utility describes some conditions under which a preference relation can be represented by an additive value function. But, it deals with preferences on bundles of homogeneous goods. Here, the preferences are on subsets of a heterogeneous good.
EXAMPLES:
$$u_1(A) = \text{len}(A)^2$$
$u_1$ is not additive, but the preference relation it represents can be represented by the additive function $v_1(A) = \text{len}(A)$.
$$u_2(A) = \min[\text{len}(A\cap[0,4]),\text{len}(A\cap[4,8])]$$
The preference relation represented by $u_2$ cannot be represented by an additive function. Proof: suppose by contradiction that the preference relation is represented by an additive function $v_2$. Then, because:
$$u_2([0,1])=u_2([4,5])=u_2(\emptyset)$$
this must also be true for $v_2$:
$$v_2([0,1])=v_2([4,5])=v_2(\emptyset)$$
By additivity:
$$v_2([0,1]\cup[4,5])=v_2(\emptyset\cup\emptyset)=v_2(\emptyset)$$
This must also be true for $u_2$:
$$u_2([0,1]\cup[4,5])=u_2(\emptyset)$$
a contradiction.


texts: Optimal Production Input in Relation to Cost Minimization Problem

texts:
I was doing my homework and got really confused about how to approach the optimal levels of inputs when there are three variables. My current understanding is that the problem is to solve the optimization problem

$$\min_{H, L, K}\;{sH + wL +rK}$$
subject to
$$q = \min\{H,L\} + \min\{H,K\}$$

However, I don't know how to determine the inputs of H, L, and K. Below is the problem:

  A monopolist can hire high skill labor $H$, low skill labor $L$, and robots $K$. The per-unit price of these inputs are $s$, $w$, and $r$. High skill labor is more expensive: $s > w$. The production function is $f(H, L, K) = \min\{H, L\} + \min\{H, K\}$. The demand curve that the monopolist faces is $D(p) = A-p$, where $A > w + r + s$. Suppose that robots are cheap: $r < w + s$.

Essentially, we're asked to find the optimal levels (yields lowest costs) of input in terms of q for H,L,K

I initially thought since $r<w+s$, and $w<s$, we can deduce that $r<s+s$, and for this reason, the production function would give either $q = H+K$, $q = L+H$, or $q = L+K$ (making $H+H$ the only impossible combination). However, I'm super unsure if this is the right thought process, and I don't know how to proceed from here.

Any help is greatly appreciated.


texts: why is labor $h_t$ often average working time percentage of non-sleeping time in RBC?

texts: Cobb-Douglas production is often given by $Y=AK^{\alpha}L^{1-\alpha}$, and $L$ is often just labor. But in RBC model, I notice that labor $h_t$ is restricted to $[0,1]$, and interpreted as working-time perecentage of non-sleeping time. Is this necessary restriction for RBC? Or can we allow $h_t$ to be in $[0,100]$ (with utility function $U(c_t,100-h_t)$)?


texts:
As a self-employed business owner, I am paying approximately 15% of my income to social security, yet I keep hearing that they're "running out of money for it."  I'm a little confused about this: 15% is how much I currently save for retirement and over 25-30 years, it should fund my retirement comfortably and that's at a rate of around 8%.

I realize social security isn't invested in anything returning 8% or higher, but it's hard for me to imagine that they government is running low on money with my 15% of income (if I always made 60000 I would have paid 270000 into social security and at 3% interest, that's 8100 a year).

So where is my social security money going?


texts: Open/modern question in labor economics?

texts: What are some of the modern lines of inquiry in labor economics and what are some good sources of them (especially, succinct ones)?


texts: Why was the term 'Economic Rent' chosen? How does it relate to the ordinary meaning of 'rent'?

texts:
Pindyck, Rubinfeld. Microeconomics (2017 9 ed). pp. 314-315.

Etymonline substantiates that 'rent'  originally didn't mean the microeconomics meaning overhead: no surprise, as microeconomics is a recent discipline. So please see the titled question. Why worsen the ambiguity and polysemy of 'rent', rather than using some other word?
Is Economic Rent related to the mainstream meaning of "payment for use of property"?


texts:
If the government prints money to build housing for cheap rental.  Is that a good idea? Or will it damage the economy causing inflation?

Rent will generate income.

Low rent will give poorer more spending money.

This would be government housing, rental only.  Not for sale.

This is looking at the UK, based on the idea of one of the opposition leader candidate's idea.