texts: Bayesian Correlated Equilibrium in a one player case: relation with literature

texts:
I am curious about the connection between one-player Bayesian Correlated Equilibrium (hereafter, BCE) introduced by Bergemann and Morris for a generic $n$-player setting with $n\geq 1$ (here)  and the Bayesian persuasion problem in Kamenica and Gentzkow (here) also discussed in Bergemann and Morris more recently (here).

I would like your help to summarise such  relation.

Preliminaries: DM denotes decision maker. $G$ is the basiline choice problem that consists of the DM's prior on the state of the world. $S$ is the information structure that contains the probability distribution of the signal used by the DM to update the prior. $(G,S)$ is the augmented choice problem.

$\underline{S}$ denotes the degenerate information structure, i.e., the information structure that does not convey additional information on the state of the world.

The set of one-player BCE of $G$ consists of the set of probability distributions over actions and states that are consistent with the prior and obedient.

Note that the set of one-player BCE of $G$ is equal to the set of one-player BCE of $(G,\underline{S})$.

This is my  attempt to link the two papers:

Suppose a mediator ("sender" in the Bayesian persuasion language)  could pick the information structure ("experiment" in the Bayesian persuasion language) that the DM ("receiver" in the Bayesian persuasion language) could process.

Kamenica and Gentzkow (here) characterize the set of distributions over actions and states
 that the sender could induce through picking the null experiment (i.e., $\underline{S}$) and having the DM choose
optimally. This set is equal to the set of one-player BCE of $(G,\underline{S})$.

Bergemann and Morris more recently (here) explains that such relation holds for any information structure. In other words, the set of distributions over actions and states
 that the sender could induce through picking ANY experiment $S$ and having the DM choose
optimally  is equal to the set of one-player BCE of $(G,S)$.

Is my connection correct?


texts: How to calculate CRRA bounds from Holt and Laury (2002) type lottery?

texts:
Lottery is between:

Option A: a certain choice of £5

Option B: £10 with probability 0.1 and £1 with probability 0.9

The probability of receiving £10 increases in each subsequent choice.

How do I calculate the CRRA bounds of this, using $U(x) = \frac{x^{(1-r)}}{1-r}$?


texts:
What is the value of an individual piece of currency itself based on the efficiencies it allows in trade, in contrast to the value it represents?

For example, people often talk (complain) about the cost of manufacture of a single US cent coin being greater than one cent — but to me, this seems an irrelevant comparison.  A single coin will be used in many, many transactions over its lifetime, facilitating the efficient transfer of (possibly) thousands — or tens of thousands — of dollars.  Surely that is worth far more than one cent.

Without use of that coin, the parties involved may have had to round prices up/down, purchase multiple items at once, or forego certain transactions altogether.  Smaller denominations are useful by the same logic that drives public companies to split their shares, making it possible for people to purchase just a single piece of "penny candy" if they would like, as opposed to being forced to buy "five for a nickel" (or none at all.)

Beyond that, physical currency has a value simply in facilitating efficient trade.  If there weren't enough coins to go around, merchants may have to wait for somebody else to spend them (or the government may have to mint more, which raises its own issues since that also involves introduction of additional inflationary value) before customers have enough to conduct trades.

I realize these are somewhat unrealistic scenarios, since in practice there are typically enough pieces of currency around that trade isn't significantly impacted.  But this shouldn't change the fact that the currency is still increasing the efficiency of trade, in however minor a way, and that in virtue of the large number of trades in which those pieces of currency will (likely) be involved, the aggregated value becomes quite significant.

I want to strongly emphasize here that I am not looking for answers that address things like forex value, etc.  I've found it extremely difficult to even research this topic because of the multiple meanings of all the terms involved (just try searching for "use value of currency" and you'll see what I mean) and a satisfactory answer need only point me in the direction of appropriate articles/books, so long as they directly address the aspect of currency in which I'm interested here.

EDIT: I should also clarify that I'm not primary interested in coins.  That's just an example.  I'm interested in how to estimate the value that a currency provides through facilitating financial transactions, regardless of the physical nature of the currency (e.g. paper, metal, whatever.)


texts: The envelope theorem and Viner's draftsman

texts:
In 1931 Viner wrote the paper "Cost Curves and Supply Curves" that famously contained the following mistake: Viner had asked the draftsman to draw the long run average cost curve so that it was tangent to the minimum of the short-run average cost curves. His draftsman told him this was impossible and it was only until after the publication of the paper that Viner realised his draftsman was right. (To see this is trivial because to be tangent to a minimum means having zero gradient, and a function with zero gradient everywhere is constant. So unless LRAC is constant it cannot be achieved.)

I have two questions:

Firstly, I have seen it commonly stated that this is related to the
envelope theorem. I understand the envelope theorem as a piece of
mathematics but I don't see the precise connection to Viner's
mistake.
Secondly, in later prints of the paper Viner kept the mistake in so
that others could use it for teaching purposes though he doesn't
explain what point such a teacher would be trying to make. The
(somewhat surprising) implication is that operating at long-run
average cost doesn't generally minimise short-run average cost.
Though surprising I don't immediately see its significance.


texts: GNI versus GNP for Measuring Development

texts:
In the calculation of the Human Development Index, Gross National Income (GNI) is used rather than GNP.

I've searched around on the internet, but I haven't found a clear explanation of what the precise difference between GNI and GNP is. Wikipedia defines GNI as "total domestic and foreign output claimed by residents of a country" and the GNP as "market value of all the products and services produced in one year by labour and property supplied by the citizens of a country." Just like the income and expenditure approaches to calculating GDP yielding the same result, it seems to me that GNI and GNP should be at least theoretically equal.

What is the difference between GNP and GNI, and why use one over the other for measuring development?


texts: What are all the countries that have a value added tax?

texts: I'm a web developer (not an economist) and i'm working on a program that deals with value-added tax (VAT), maybe it is a stupid question but, is the value added tax obligatory? I just want to know if this tax exists in every country all over the world?


texts: Necessary Goods, Price Elasticity, Long-Term Calculations

texts:
My question is a conceptual one, though it arose from a concrete calculation that I'm working on. I'm looking at the economic viability of thermal retrofits, and this author suggests including the fuel price elasticity when calculating the net-present value that would result from performing a thermal retrofit.

Though the concept is clear, I have the following issue: the price elasticity of heating fuel is low (in the paper he calculates -0.476), which is to be expected since the good is a necessity. Nevertheless, it is not zero, and since fuel prices increase with time, and the technical lifetime of a retrofit is quite long, it is not inconceivable that due the price elasticity, the expected "demand" for the fuel falls below that which is necessary to heat a home. This led me to this idea that there was possibly a concept of elasticity that was price or quantity dependent, which would essentially capture the idea that elasticity would fall to zero as the quantity approached the minimum threshold for keeping the consumer's home warm.

Is this line of reasoning sensible?

If so, it would seem as though the "point-price elasticity of demand" is the concept that I need, but perhaps you guys have other ideas?

If something like the point-price elasticity is the correct concept, I would be grateful for a reference to demand functions that result in a non-constant price elasticity for a necessary good, as explained above. A linear function seems to work; are there other examples?


texts: Where to get realistic data for ABC-Costing in textile industry

texts:
first, let me explain what I am trying to do. For my graduation work with focus on automation i would like to show the impact of "Sewbots" (SoftWear Automation) on garment manufacturing.

My teacher suggested doing so by applying activity-based costing for a production line and then, by hypothesy,  on a partly automated one. (I know one system of SewBots costs approx. 50.000 - 100.000, it can replace up to 17 workersand needs 1 supervisor for up to 5 production lines.

I found some data on abc in garment production but none of it seems complete.  (Ex. https://www.google.it/url?sa=t&source=web&rct=j&url=http://journal-archieves30.webs.com/602-625.pdf&ved=2ahUKEwjzgveL6JvbAhWKvBQKHXdgCTMQFjAAegQICBAB&usg=AOvVaw3rvr7q_1CVtTEZT2uU0mVH)

Can someone suggest some sources where to get complete realistic data ofactivities, cost drivers, rates etc.. in textile industry?

Every advice is appreciated.
Thank you very much
Martin


texts: Model of economic cycles consistent with efficient market hypothesis

texts:
I do not have background in economics, so my question may be naive or I might have taken incorrect assumptions somewhere. As far as I understand, efficient market hypothesis applies, saying that the stock prices already contain all the available information, so it is not possible to consistently beat the market without internal information on given stock.

I tried to build a simplistic toy-model of stock prices that have this property and I came with model, where each individual stock is in each time step multiplied by term $e^\varepsilon$, where $\varepsilon$ is randomly selected from uniform distribution centered around zero.

$$
p(t+dt)=p(t)e^{\varepsilon \,dt}\approx p(t)(1+\varepsilon \,dt)
$$

Now, since every positive $\varepsilon$ has equally probable negative counter-part and since $e^\varepsilon e^{-\varepsilon}=1$, the mean value of the stock price is zero. Unless I overlooked something, it should not be possible to extract profit from stock prices following such a law, because the information about the future price is not contained in the past and it is random. We can center the distribution around positive number to add growth of the overall economy.

Now I wanted to create similar toy-model, where economic cycles are included. First thing that came to my mind is to multiply the generated prices of stocks from the previous model by a periodic function, for example:

$$
p_\mathrm{cycled}(t)=\left(1+A\sin\left(\frac{2\pi t}{T}\right)\right)p(t)
$$

But this is clearly contradicting the efficient market hypothesis, because anyone knowing the period of the function could buy the stock when the prices are low and sell when the prices are high. I thought of possible ways how to make the model consistent with the efficient market hypothesis and I came with these points:

The cycle is not a cycle, but some kind of noise. What makes the strategy of making profit buying low and selling high impossible is, that nobody knows, when the prices will go up and when down.
When buying low, some companies go bankrupt before going up to high period of the cycle. Nobody knows which one though, and it is therefore not possible to make profit on the cycle.
Something else.

The question: Is there simple toy-model of stock prices that manifests the economic cycles and is consistent with the efficient market hypothesis? If there are more mechanisms at play, I would be very interested in seeing them all embedded as a toy model.

I am suspicious about 1., because either the noise is unbounded (as the exponential noise above), or there is memory in the noise. The memory can be used to extract the necessary information to make profit. If the noise is unbounded, then it is not really similar to how net world economy behaves. 2. seems plausible, but I didn't found any toy-model embedding such behavior yet.

-----------------------------

My takeaway:
From the answers here and after giving it some thought, I came to conclusion that if the EMH is true, there should not be any cycles with known oscillations in the prices, no autocorrelation in the noise to be exploited and the possible cycle up- and down- should not be bounded (otherwise, everyone would know when is the down-phase, even though they would not be able to predict it).

I came with example toy-model satisfying these requirements with three components:

Normal distribution random walk
Exponential growth of several % per year
Constant small probability of sudden crash with factor 0.75-1

In the model, there are "quasi-cycles" between the crashes and there is no exploitable future information. (I think.)


texts:
I'm having trouble with returns to scale mathematical notation which i found counterintuitive even I'm fine with its definition. Any help will be very appreciated.

There are three possible types of returns to scale: increasing returns to scale, constant returns to scale, and diminishing (or decreasing) returns to scale.

If output increases by the same proportional change as all inputs change then there are constant returns to scale : $F(aK,aL) = aF(K,L)$.
If output increases by less than that proportional change in all inputs, there are decreasing returns to scale : $F(aK,aL) < aF(K,L)$.
If output increases by more than the proportional change in all inputs, there are increasing returns to scale $F(aK,aL) > aF(K,L)$.

If we define (with $a > 0$) :

$F(aK,aL)$ : simultaneous and proportional inputs increase
$aF(K,L)$ : output increase

Then, to me increasing returns to scale should be written in this way : $F(aK,aL) < aF(K,L)$ since the change in the output is greater in proportion than the change in the inputs. And the other way for decreasing returns to scale. This is not clear to me.

I hope you will help me to fix this misunderstanding.

Best,
Marc


texts: Is there an easy way to create academic looking tables in LaTeX from R econometric tests and models

texts:
I have tried using the obvious choice - the Stargazer package in R. But, as far as I know, Stargazer does not support packages like 'vars' (for VAR and VECM models, the Johansen procedure, etc...) and 'urca' (for unit root tests). It's a shame, because linear models are represented very nicely in tables with Stargazer.
What do you use to simplify the table creation process?


texts: How is the GINI coefficient half the relative mean absolute difference?

texts:
I've tried to derive a proof myself and have looked through a lot of sources but can't seem to find an understandable mathematical explanation/proof for why this is the case. I found one at(https://www.dannybugingo.com/en/math/gini/ginius.pdf) but this proof seems to be wrong in how the integrals for the expected absolute difference is calculated.
Does anyone have any mathematical derivation for this?
Edit: Basically you would start with this...

...where g() is the absolute value function and try to prove that this divided by the expected value of the variable X is equivalent to the GINI index as defined by:

PS: I really wish I knew how to write LATEX so I could explain the mathematics I've tried but I don't have time to do so now. Hopefully someone still understands the question.


texts:
Does anyone know the meaning of the notation x%p.a.?

I'm reading a text on seigniorage, and the authors have used that notation to state the usual empirical limit to the seigniorage revenues just before the inflation rates effects outweigh the money growth effect.


texts: How important are capital requirements for controlling broad money supply?

texts:
Interestingly, the Bank of England (BoE) is one of the few central banks that does not have reserve requirements.

Canada, the UK, New Zealand, Australia, Sweden and Hong Kong have no reserve requirements.
This does not mean that banks can—even in theory—create money without limit. On the contrary, banks are constrained by capital requirements, which are arguably more important than reserve requirements even in countries that have reserve requirements. [...]
Even in the United States, which retains formal (though now mostly irrelevant) reserve requirements, the notion of controlling the money supply by targeting the quantity of base money fell out of favor many years ago, and now the pragmatic explanation of monetary policy refers to targeting the interest rate to control the broad money supply.

The first fact, i.e. that the BoE has no reserve requirements is easily confirmed from a 2014 BoE paper by McLeay et al.... which also strongly states the fact from the 3rd paragraph above (monetary policy as the ultimate control on broad money creation.)
On the other hand, the (unsourced) Wikipedia claim that capital requirements are (also) a brake on the creation of broad money is, interestingly, impossible for me to find the McLeay paper. So, how important are capital requirements for controlling broad money supply?
E.g., are there some [semi-]official statements by the major central banks:  Fed, ECB, or even BoE on this alleged importance of capital requirements as a control of broad money supply? (I know the central banks [probably] don't entirely control these capital requirements, in the EU at least. On the other hand, it looks like the Fed does have some control over the capital requirements.)

FWIW, I found a blog which is partially contradicting Wikipedia:

capital adequacy requirements don't limit the ability of banks to create money when the economy is doing well. However, they do limit the ability of banks to create money when the economy is doing badly.


texts: Applications of Trig functions in Economics?

texts: Are there any applications of trig functions (ie $\sin(x)$, $\cos(x)$,$\tan(x)$) in economics?


texts:
Why is a high government debt/GDP bad? It is frequently mentioned as something bad. Today here, for example.

I get that when the government spends, real resources like workers or raw materials are used, which is a real cost to society.

I also get that the government needs to tax, because otherwise the increase in money supply in the private sector would be too great. Perhaps the government also need to tax in order to ensure a demand for currency, I don’t know.

But why focus on the debt/GDP ratio? In Sweden, most of the government debt is to the central bank. Why does that matter?

Isn’t it more important to focus on how much the government should increase (or decrease) the money supply? Are these two things equivalent?


texts:
A firm has received an order at time $0$ for $M$ units of product to be delivered by time $T$. It seeks a production schedule for filling this order at minimum cost. Let $x(t)$ denote inventory accumulated by time $t$, hence $x’(t)$ denotes the firm’s production at time $t$. There are two sources of cost: cost of production is $[x’(t)]^2$, the cost of holding $x(t)$ is $2x(t)$. Assume the firm discounts future costs with a discount rate $r > 0$.

I am trying to formulate the Hamiltonian for this firm problem. However, I want to make sure my objective and constraints are correct:

Is the problem of the form: $$min \int_{0}^{T} e^{-rt} [2x(t)+[x’(t)]^2]dt$$ i.e. $$-max \int_{0}^{T} e^{-rt} [2x(t)+[x’(t)]^2]dt$$ Is this the proper objective or am I completely off tanget?


texts: How is workforce guaranteed in basic income system?

texts:
After reading an article on wiki and watching the Ted video on basic income system in a society and even M.Zuckerberg talks about it, nobody really addresses the issue of the workforce availability.

If every person is guaranteed a basic income who is there left to work/be employed? I think only more ambitious people will work. What will motivate the rest of the people?


texts: Did the idea of “making money” originate in the United States?

texts:
I am currently reading Atlas Shrugged by Ayn Rand and I came across an interesting paragraph related to Economics and American History.

  If you ask me to name the proudest distinction of Americans, I would choose—because it contains all the others—the fact that they were the people who created the phrase ‘to make money.’ No other language or nation had ever used these words before; men had always thought of wealth as a static quantity—to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money’ hold the essence of human morality.

Is this a true piece of history? Did we create the idea of "making money"?


texts: Comparing cost of living of one state with that of other states

texts:
In the past I read something like this:

  If basic expenses for family went from 100€ to 200€ but its wage
  went from 200€ to 400€ it can expend more than before.

  Weighting the costs of living in state X, in the median wage in state X,
  is the best way to compare state X's COL with COLs of other states.

I assume that weighting COL in MW particularly is better than weighting COL in average wage (AW), because, although there are few families with extremely high wages, their wages bias AW extremely upwards, while MW is less effected from such extreme cases.

Is weighting COL in state X in MW in state X the most accurate way to compare that COL to these of other states?


texts: Are businesses included in economic institutions?

texts:
1st definition from businessdictionary.com:
Network of commercial organizations (such as manufacturers, producers, wholesalers, retailers, and buyers) who generate, distribute, and purchase goods and services. See also financial institutions.

2nd definition from econlib.org:
1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.
2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids' allowances, customary tipping, and a system of property rights are examples of economic institutions.

Which one is correct? Also, on wikipedia it says businesses are a part of institutions. https://en.wikipedia.org/wiki/Institution


texts: Resources on the Rotterdam demand system

texts:
I've been doing some self study on the Almost Ideal Demand System, and have been hearing a lot about the Rotterdam demand system developed by  Henri Theil.

I've been looking for resources on google scholar that provide an overview on it however I'm having difficulty finding anything comprehensive. Anyone on Econ.SE with slides/papers to reccomend or have a basic overview of the model they can share here?


texts: Understanding Price Elasticity of Supply

texts: I understand that the price elasticity of supply is just the percentage change in quantity supplied for a percentage increase in price of an item. However, when I look on Wikipedia, I am struggling to understand why the Supply Elasticity for Oil would be more than 1, which is contrast to what is mentioned in Investopedia. However, I feel like Investopedia is right on this one, in that suppliers of oil will not be able to significantly change supply for an increase in oil price.


texts: Why is the path (T,C) not a subgame-perfect equilibrium for any value of $\delta$

texts:
I am doing an exercise in Steve Tadelis An Introduction to Game Theory:

(10.4)Trust Off the Equilibrium Path: Recall the trust game depicted in Figure
10.1. We argued that for $δ ≥ 1/2$
 the following pair of strategies is a subgameperfect equilibrium. For player 1: “In period 1 I will trust player 2, and as long
as there were no deviations from the pair (T , C) in any period, then I will
continue to trust him. Once such a deviation occurs then I will not trust him
forever after.” For player 2: “In period 1 I will cooperate, and as long as there
were no deviations from the pair (T , C) in any period, then I will continue to
do so. Once such a deviation occurs then I will deviate forever after.” Show
that if instead player 2 uses the strategy “as long as player 1 trusts me I will
cooperate” then the path (T , C) played forever is a Nash equilibrium for $δ ≥ 1/2$
but is not a subgame-perfect equilibrium for any value of $δ$.

My attempt: this is a Nash equilibrium: the equilibrium
path is followed because neither player benefits from deviating as they both
believe that a deviation will call for the continuation of grim trigger.

  But i'm not exactly sure why it is not a subgame perfect equilibrium. Could anyone please explain.


texts:
The following table lists the basket of goods in the
  Consumer Price Index for the nation of Astro (Assume 2014 is the base year.)

  Table 6.2
             2014     2014  2015     2015  2016     2016
             quantity price quantity price quantity price
  Sunglasses  8        $9      10      $11   7       $10
  Toothpaste  15        3      18       4    15       4
  Ferrets     6         12     4        15   9        18

  Using the information in Table 6.2, the percent increase in prices over the two year period from 2014 to 2016 is approximately

The correct answer is 31% but I kept on getting 35%.
My solution was (CPI of 2016 - 100)/100


texts: How could monetary policy be affected if cash "gifts" to consumers were more frequently used?

texts:
A few years ago in the US, everyone who filed taxes received a check for $1000.

If this method of inflation was logistically more feasible, how could this be used in monetary policy, and what existing monetary controls would it affect?


texts: MRS in Walrasian equilibrium price expression?

texts:
I have the utility function $U^A=\alpha ln(x^A)+\beta ln(y^A)$ for consumer $A$ and $U^B=\gamma ln(x^B)+\phi ln(y^B)$ for consumer $B$. They are endowed with $\omega^h_x$ and $\omega^h_y$ of $x$ and $y$, where $h=A,B$. $p_y = 1$.

They are allowed to trade and I have solved for the Walrasian equilibrium price $p^*_x$ and found that this is

$$ p^*_x=\frac{\alpha \omega^A_y+\gamma \omega^B_y}{\beta \omega^A_x+\phi \omega^B_x}
$$

I believe that I'm missing out on some basic intuition here. What is the significance of $\alpha$ being swapped from good $x$ (in the utility function) to $y$ (in the price), for instance? There also seems to be a link here to the MRS? It seems like the first term in the nominator divided by the first term in the denominator yields the MRS for $A$ and the same for the second terms for $B$?


texts: Which single letter abbreviations are typically used for the production factors Land, Labour and Capital?

texts: I often see "L" for Labour and "K" for Capital, as well as "M" for natural resources (i.e. Land) but they don't seem to be applied consistently.


texts: Isolating single campaign effects over a sales series

texts:
I'm trying to wrap my head around the concept of advertising effectiveness and hit a wall when I tried to measure the quantitative effect of an advertising campaign on the sales tendency of a business.
As far as I know, this is an econometrics question, since I have isolate the effect of said campaign from past and future campaigns, but also from distribution, macro effects, competitor activity and random effects.
Can you point me to a paper or a textbook that deals with this kind of problem?


texts: Fisher Separation with negative interest rate

texts:
In class we discussed Fisher Separation which states that the investment decision is independent of the financing decision. The optimality conditions are that MRS = MRT = (1+i) (i = interest rate).

The professor stated that for negative interest rates MRS becomes negative and investors now prefer less to more instead of more to less. Further he argued that investors will reduce production to zero.

However, from the optimality condition I would say that the MRS is only <1 (and not <0) for negative interest rates. Thus, the capital market line becomes flatter, the optimal amount of production increases and the relative amount of consumption in t=0 compared to consumption in t=1 increases. I agree with the statement that it is optimal to realize projects with negative returns (=destroy value), however they all have a positive NPV (less negative return than the negative interest rate). Might it even be the case that overall utility increases as we are now able to realize "more" projects (investments increased)?

What am I missing to come up with his statements?


texts:
Whom would you consider to be the father of rational choice theory?
My suggestions that would qualify for major publications:
Arrow (1959), Economica
Homans (1961)
Becker (1976)
Sugden (1991), Economic Journal

Plus, would you agree that inter-temporal choice theory was derived from rational choice theory? Or vice versa?


texts: Why is consumer surplus the area under the curve?

texts: So I understand that the definition of consumer surplus is the difference between what the consumer pays and what the consumer would have been willing to pay. I just don't understand why the consumer surplus is the area of the triangle, as shown in the diagram. Is it representing all the possible consumer surpluses?


texts: What is the ideal way to update an old value to today's currency value?

texts:
For example, how much is $25 million in 1790 considered today?  How do I update such value?  It doesn't make sense to me to use, say, price indices.  Shouldn't such update be done based on the expansion (or contraction) of monetary supply?
Clarification post-comments.  My thinking --- please educate me if it is nonsensical --- is that inflation is an expansion of the monetary supply, so I would like to do a computation from the phenomenon of inflation itself, not of its effect, one of which is an increase in prices. So I would like to be able to estimate a loss of value merely from the the increase in monetary supply.  I could then compare it against real facts --- which would be the market prices.  I'd be willing to read an entire book just to learn how to do this.  So feel free to advise.  Thank you!


texts: What is the difference between a Start-Up and a small company which is not a Start-Up?

texts: What exactly makes a small and youg company a "Start-Up", among other small and young companies which are not necessarly start-ups?


texts: What are the economics of bike sharing companies?

texts:
Bike sharing seems to have originated in China.

And it has spread to the UK.

And at least a decade on it continues to spread into the provinces.

So it has longevity.

So what are the economics of this industry?

At first glance it would appear to be a horrible model: lots of liability, lots of maintenance, lots of criminality and endless opportunity for annoyance through dumped bikes causing inconvenience.

So what is the economic model of bike sharing?


texts: Would saving money outside of banking system be able to reduce monetary base?

texts:
First of all, here is definition of monetary base taken from Investopedia

  A monetary base is the total amount of a currency that is either in general circulation in the hands of the public or in the commercial bank deposits held in the central bank's reserves.

Thanks to this definition we can see why the Fed is able to reduce monetary base by selling bonds. Money that the Fed gets from selling bonds fall to neither category (the Fed isn't the public, money are out circulation and although they can be deposited in Fed's vaults, they belong to Fed and not to any commercial bank), thus from the point of view of this definition these money just disappear.

It makes me wonder if just taking money from circulation (and consequently - from banking system. Because otherwise money will still "work") will decrease monetary base. Examples:

1.A person named Alex for some reasons keeps all their savings under their mattress

2.Corporation "MacDuck Industries" for some reason keeps its savings in its own building called "money bin". It doesn't loan them, it just sits on its money.

3.The government of Maxtopia has proficit budget and for some reason keeps its excess tax money in its own "money bin". Again, like MacDuck Industries it doesn't do anything interesting with the money, it just sits on piles of cash.

If I understand everything right (including the definition), in all of these cases money are taken from circulation, thus reducing monetary base in all cases. Am I right?


texts: Doesn't the concept of marginal utility speak to a cardinal utility function?

texts:
When we differentiate the utility function with respect to some input $x_i$, we get a number that tells us how "fast" the utility function is changing at some point with respect to $x_i$. Doesn't that mean that when we compare marginal utilities, we are comparing with something that is based on the structure of the numeric output of the utility function, which shouldn't be the case since it's ordinal?

I know I'm missing something here intuitively, but I can't seem to figure out what it is.


texts:
Why does the federal raising interest rates actually have an effect on the economy? The typical answer is that it reduces money supply by incentivizing saving and increasing cost of loans.

But couldn't market participants just react by adjusting FX rates, inflation, etc. by the appropriate amount? Then even though the money supply is reduced, the real rates are unchanged, resulting in no net effect. What are the factors preventing this from actually happening?


texts: Do capitalists in the Marxism world view create value?

texts:
As I understand it, capital is created through the surplus value, that is the difference between the value of a worker's work (i.e. the wage that he is paid) and the new value that is created through his work. A simplified example would be this:

Worker A makes 100 ice cream cones per hour and is paid 10$ per hour
Raw material for making a single ice cream cone costs 0.2$
Worker B makes 100 scoops of vanilla ice cream per hour and is paid 20$ per hour
Raw material for making a single scoop of vanilla ice cream costs 0.5$

That would make the cost for a single cone with a scoop of vanilla ice cream exactly 1.00\$.

Cone with ice cream is sold for 2$

That would leave a profit of 1\$ per sold cone with ice cream for the owner of the ice cream shop (assuming that the building itself does not require any regular payment).

Worker A and B are paid 0.3\$ for creating a value of 1.3\$. According to Marx they are paid 1\$ too little for their work.

Is the capitalist attributed any part in the creation of this value? I don't want to talk about the fact that he owns the means of production, but rather about this: Does the capitalist create a bigger value by aggregating the work of the two workers? This is obviously trivial for ice cream cones, but I could imagine something meaningful for example in the production of cars, where the organization itself requires work. Is this work done by the capitalist considered at all in Marxism? Or is any creation of value attributed to the individual workers who in turn are therefore exploited?


texts: Theoretical economy calculation of closed country

texts:
Is there any well-known theoretical solution to the problem as described below? I am considering an ideal very simplified case.
There is a closed country/community of N people. All people are working. Let's say they have A% out of N people producing food, B% out of N people working in the industry (producing everything from the phones to cars), C% work in government, D% work in the service like a haircut, cleaning, etc. Initially, the GDP of this community is G or maybe it is better to tell, that initially, they have G amount of money. Let's assume that everything that is produced will be bought by others.
In other words, I can formulate it like this. N people decided to leave this planet and move to Mars/another planet because they fed up with unfair live on The Earth :) They decided to take with them things with total costs G (initial GDP). Let's assume they have everything on the other planet like air, water, Sun, good climate, resources, etc. the same as on The Earth. They divided the people between different occupations as mentioned above.
The questions:

I am not an economist, but I would expect this kind of problem was solved already a long time back and it is well-known and has some specific name. Is not it?
How this economy (GDP) will depend on time G(t)?
Are there any conditions when it will grow or it always will go down at some point?
Does G(t) depend on how big is N?


texts:
Suppose $F(K,L)= 50L^{\frac{1}{2}}K^{\frac{1}{2}}$, the wage is $w = 5$
   (euros) and rent is $r = 20$ (euros). What is the cost of producing
  $1000$ units? Derive the cost function $TC(Q)$.

I know how to find out the cost.

$L = 40$ and $K = 10$. So the total cost is $400$.

But now I am stuck. The solution for the cost function should be: $$TC(Q) = 5\cdot \dfrac{4Q}{100} + 20\cdot \dfrac{Q}{100} = \dfrac{2}{5}Q$$
How do I get to this function?


texts:
I am doing a self study on behavioral economics and I am trying to solve behavioral version of the dictator game with following utilities for person 1 and 2.

$$     u_1( \sigma_1, \sigma_2 ) = \begin{cases}
   \sigma_1 - 2 \left( \frac{\sigma_1}{\sigma_1+\sigma_2}-\frac{1}{2}\right)^2 \text{ if } \sigma_1 + \sigma_2>0\\
    0 \text{ if } \sigma_1 + \sigma_2 = 0
    \end{cases}
    $$

$$ u_2(\sigma_1, \sigma_2) = \sigma_2 - 2 \max\{\sigma_1 -\sigma_2,0\} - \frac{1}{4} \max\{\sigma_2 - \sigma_1, 0\}$$

So to solve this I first try to derive best response functions for both players with respect to their own control variable $\sigma_i$. For the first person the best response function would be:

$$BR_1 = 1 - 4 \left( \frac{\sigma_1}{\sigma_1+\sigma_2}-\frac{1}{2}\right) \left( \frac{\sigma_2}{(\sigma_1+\sigma_2)^2} \right)= 0 $$

However, I have a bit problem deriving the best response  function of the second player because the function is kinky. I know that for example in standard consumer theory when there is kinky utility function like with perfect complements, lets say $\min \{\alpha x_1, \beta x_2\}$ the marginal utility of $x_1$ and $x_2$ would be  $\alpha$ and $\beta$ respectively, but I usually dont work with kinky functions so I kinda just learn that part by heart and I am not sure if I am correct by saying that the best response function of the second player is:

$$BR_2  = 1 + 2 -\frac{1}{4} = 2 \frac{3}{4}$$

I got $BR_2$ just by extending the logic from the perfect complements utility function, but it seems to me like its somehow missing something. Just thinking about it intuitively it seems to me that person 2 cares about equality since the expression includes both $\max \{\sigma_1-\sigma_2,0\}$ and $\max \{\sigma_2-\sigma_1,0\}$, but then I dont understand why we end up just with constant best response function? Shouldnt it depend on what actually $\sigma_1$ is or its just that my calculations are wrong?

Also, I know from a standard dictator game that to calculate the minimum acceptable payoff the utility just has to be higher then 0. An extension of that should of course also hold here, but since here the zero utility outcome occurs only if $\sigma_1+\sigma_2=0$ I am bit unsure of how to account for that.

So to sum up my questions are:

is my derivation of best response functions correct?
provided that 1 is correct what is the intuition behind constant BR in the case of second player?
How would I derive minimum acceptable payoff for this dictator game. Would it be just checking for which values of $\sigma_i$ the $u_i>0$ for $i=1,2$?


texts:
I am looking for any popular model to calculate sales of a new product under the assumption that some goodnesses of the product are given.

For example, the novelty $N$ and usefulness $U$ of a new product are given, the sales $S$ of it might be calculated as $S(N,U) = N^\alpha + U^\beta + c$ ($1 \leq \alpha, 1 \leq \beta$, and $c$ is a constant number).

I believe this model is too naive and a researcher proposed some popular model. But, I could not find it.


texts: Financial Crisis text book recommendation

texts:
I am looking for an academic textbook on the science of financial crises, such as bank runs, monetary crisis, bubbles, stock market crashes etc.
Ideally, the textbook would address what is currently known about why crises happen, explained in objective and scientific language, explaining the underlying mechanics and/or the known leading indicators.
Finally, the textbook does not need to focus on a particular crisis e.g. the 1929 or 2007 crisis, preferably it would be a general treatment of the subject.
Thank you!


texts: If $a_{t}$ is the asset at time $t$, $c_{t}$ the consumption at time $t$, and $r$ the interest rate, then $a_{t+1} - a_{t} = ra_{t} - c_{t}$ is the flow of $a$. But it seems that in macroeconomics people just write $\dot{a}_{t} = ra_{t}-c_{t}$ instead in continuous time setting. I do not see the passage from $a_{t+1}-a_{t}$ to $\dot{a}_{t}$ in general. I can justify it in some special cases. For instance, if $a_{t+1}-a_{t} = r$ for some $r$, all $t$, then $a_{t+h}-a_{t} = hr$, so taking limit of the difference quotient leads us to $\dot{a}_{t} = r$. But this depends on the fact that the right-hand-side term is linear in $t$.


texts: What is the best example social norm effect economy?

texts:
Here is my example.

I read the paper called "Social norms and Energy Conservation" (2010) by Hunt Allcott, about the energy conservation of households by providing them with the amount of energy individual household use and their average neighbor's energy usage. The first thing is this research discover at the first place that household did not use the best efficient method to conserve the energy. Interesting things are 1 ) the adding reference descriptive social norm for society to adjust 2 ) not only people decrease their energy usage toward that descriptive social norms but some who below average adjust toward social norm level.

So what are the another phenomena social norm affect individual decision ?


texts: U.S. Treasury defaulting on its bond obligations to China

texts:
I was listening to a podcast featuring Michael Lewis (author of Flashboys and Moneyball), who mentioned a black swan scenario where the administration would threaten to selectively not pay its Treasury bond obligations to China.  If this were to be, I understand it would undermine confidence in the global economic system, but I am unable to anticipate exactly what the concrete results would be.

What would an administration threat of a default trigger?
What exactly would a default trigger?


texts: What value does one set, in general, for the null hypothesis of $\beta_0$ ("Y-intercept")?

texts:
Say there is a linear regression model to estimate Y, that is:

$Y_i = B_0 + B_1X_i + u$

When testing the Betas of our sample's regression model for significance the null hypothesis for $B_1$ would naturally be set as zero (assuming X has no impact on Y).

However, what would the null hypothesis for $B_0$ be set as?
If it is set as zero, is that not assuming that a certain value is taken by Y in the absence of X, i.e. zero?
In general is there any non-arbitrary setting for $B_0$ we would test against?

Or does the value of $B_0$ vary from case to case?

I am aware that a sampling test is conducted on $B_0$ and as such am curious as to what the exact purpose of this test would be? Is there any actual null hypothesis $B_0$ is being tested against or is the data presented only to illustrate the confidence intervals and other statistics, such as variance?


texts: Complementarity in CES Production Function

texts:
I'm reading Fisher (1997, Journal of Monetary Economics). From the intermediate goods produced ($Y_t$), the final goods firm allocates into consumption ($C_t$), business capital investment ($I_{b,t}$), and household investment ($I_{h,t}$) s.t....

$C_t + (I_{b,t}^K + I_{h,t}^K)^{\frac{1}{K}} \le Y_t$

Fisher claims when $K>1$ there is complementarity in production, but my intuition is failing me. If $K>1$, $I_t = (I_{b,t}^K + I_{h,t}^K)^{\frac{1}{K}}$ is maximized when I invest all savings into either business or investment capital, while $I_t$ is minimized when I split my savings equally between the two. To me this sounds like anti-complementarity.

Can someone point one where my intuition is going awry? If it helps, on the utility side of things is log-utility w.r.t to $C_t$, $K_{h,t}$, and $L_t$ (leisure).


texts: What are the Economic reasons and explanations to make a referendum?

texts:
Australia is now conducting a survey on same sex marriage, to decide if they take the vote to the parliament or not. Although it is called a survey, the population is treating it as a referendum. The government could decide on its own to legalize the same-sex marriage, the same way it decides on topics such as immigration laws.

Are there any economic arguments that help a government to decide which topics are polled from the population and which are not?


texts: Insurance Company's Role after Natural Distaster

texts:
Is anything special expected of insurance companies after a natural disaster? Many different sectors have to cooperate to put affected urban communities back together. Recently there are reports of labor shortages that has stunted the rebuilding of some of the cities affected by the hurricane season of 2017. Likewise, I was wondering if there would also be a strain on the available insurance. Are there ever concerns about insurance shortages? The insurance companies typically try to create a "healthy" risk pool, but if several natural disasters hit, are they still expected to function as normal? Perhaps, insurance companies have policies in place for extremely uncommon events that are massive in scale, which may result in massive claims? Is there a historical precedent for how many natural disasters it takes for the insurance companies to "throw in the towel?" Let's assume the majority of victims have insurance (flood, house, ect).

I had in mind the case of the US/Caribbean in light of the recent hurricanes, but any country / case study will be acceptable as an answer as long as it is clearly explained.


texts: Intellectual property as a retarder of innovation

texts:
I am aware of some work such as

  O'Donoghue (1998): "A Patentability Requirement for Sequential
  Innovation", RAND Journal of Economics

and

  Hunt (1999): "Nonobviousness and the incentive to innovate: an
  economics analysis of intellectual property reform"

that discuss cases in which offering better protection for intellectual property (in these cases, by lowering patentability requirements) might reduce the incentive for firms to innovate.

Very roughly, the basic mechanism in these papers is that lowering the threshold for patentability means that an incumbent with a patent expects to be superseded by someone else with a better patent very quickly. Since the advantage to a patent does not last long, the incentives to invest in innovation to acquire such a patent are reduced.

I am curious whether people can suggest other mechanisms by which strengthening intellectual property protection (including moving from no protection to a positive degree of protection) can reduce innovation, and provide relevant references.


texts: The profit function is convex in prices. Are there any conditions under which it is linear in prices? (The property as written in most books doesn't mention strict convexity, so it seems to suggest that linearity is possible.)


texts: Does Average Total Cost (ATC) include implicit opportunity costs?

texts: Does the average total cost include opportunity costs? If so, are these opportunity costs considered fixed costs or variable costs? How are they calculated.


texts: Deriving Sufficient Conditions For Existence of Unique Non-Explosive Equilibrium In DSGE Model With Hybrid New Keynesian Phillips Curve

texts:
Consider the following New Keynesian DSGE Model with standard notation:

$\pi_t = \kappa y_t + \gamma_f \mathbb{E}_t[\pi_{t+1}] + \gamma_b \pi_{t-1},$

$y_t = \mathbb{E}_t[y_{t+1}] - \frac{1}{\sigma}(i_t - \mathbb{E}_t[\pi_{t+1}] - r_t^n),$

$i_t = \rho + \phi_{\pi}\pi_t + \phi_y y_t + v_t.$

How would one go about deriving sufficient conditions for the existence of a unique non-explosive equilibrium under rational expectations? I'm familiar with a method for doing this when $\gamma_b=0$ (such that the Phillips curve is non-hybrid), but I have been unable to find any litterature on the case of a hybrid Phiilips curve.

Any input is appreciated very much, thanks!


texts: VAR Models - Identifying Block Exogenous Variables Through Granger Tests

texts:
I have run a VAR model, and done granger causality tests (results pasted below) and am trying to answer a textbook question which asks:

Is there any variable that appears to be close to being block exogenous with respect to the other variables?  In any case, what does this mean?

To me it seems like DLRGDP is the closest. Exogenous means that one variable is not affected by changes in the other variables The p-values on the DLRGDP seem to indicate that we cannot reject the null hypothesis that DLRM2 does not granger cause DLRGDP. But the p-value that DRS granger causes DLRM2 is fairly low, at 0.0025.

What do you think, are any of these variables close to being block exogenous?


texts:
!

There's this statement in my Applied Economics book that I don't understand. Why is that when one person or group gets a good or service, someone else will have to live without it? I hope you answer this question. Thank you.


texts: How to understand the USDA Demand/Supply report ?

texts:
Need you help ..
Have couple questions about the Wheat Report

M Acres stands for ? Million acres ?
Yield Bu/Acre , can anybody explain this calculation ?
Stocks use ratio % , how the calculation works ?


texts:
Consider an exchange economy with two agents.
Each agent $i \in \{1,2\}$ derives utility $u^i(x_1,x_2) \in \mathbb R$ by consuming $(x_1,x_2) \in \mathbb R_+^2$.
Let $u_j^i(x_1,x_2) = \partial u^i(x_1,x_2) / \partial x_j$ for $(i,j) \in \{1,2\}^2$.
The set of efficient consumption bundles is given by
\begin{align}
C = \left\{(x_1,x_2) \in \mathbb R_+^2 ~ \bigg| ~ \frac{u_1^1(x_1,x_2)}{u_2^1(x_1,x_2)} = \frac{u_1^2(x_1,x_2)}{u_2^2(x_1,x_2)}\right\}
\end{align}
Suppose the function $x_2^c :\mathbb R_+ \to \mathbb R_+$ solves
\begin{align}
\frac{u_1^1(x_1,x_2^c(x_1))}{u_2^1(x_1,x_2^c(x_1))} = \frac{u_1^2(x_1,x_2^c(x_1))}{u_2^2(x_1,x_2^c(x_1))}
\end{align}
The contract curve is the graph $\mathcal G(x_2^c) = \{(x_1,x_2^c(x_1)) \mid x_1 \in \mathbb R_+\}$.
Let $\overline u^i(x_1) = u^i(x_1,x_2^c(x_1))$.
The Pareto frontier is now given by the following utility allocations
\begin{align}
P = \{(\overline u^1(x_1), \overline u^2(x_1)) \mid x_1 \in \mathbb R_+\} \subset \mathbb R^2.
\end{align}

Suppose that the Parento frontier is downward sloping w.r.t. $x_1$ such that
\begin{align}
\frac{\overline u_1^2(x_1)}{\overline u_1^1(x_1)} < 0.
\end{align}

  Q: What conditions must be met such that the Pareto frontier is concave?

I'm especially wondering if the following condition is sufficient:
\begin{align}
\frac{\overline u_{11}^2(x_1)}{\overline u_{11}^1(x_1)} < 0.
\end{align}


texts: What are accepted econometric methods to find out if a time series is I1 or not?

texts: An important issue in deciding how to specify an time-series econometric model is deciding whether to use series in levels or in differences (or second differences!). However, to decide this, you often have to find out if the series are integrated or order 1 or not (I1). What are the current accepted tests to find out? Are there trade-offs between the tests? It seems hard to know whether interest rates for example are I1 or not!


texts: The Price and Demand Index in Homothetic Kimball Utility

texts:
Suppose with Kimball preferences, utility $Q$ from consuming $\left\{q_{\omega}\right\}_{\omega \in \Omega}$ is implicitly given by $$\int_{\omega \in \Omega} Y\left(\frac{q_{\omega}}{Q}\right) d \omega=1$$. The consumer thus maximizes $Q$ subject to both budget constraint $\int_{\omega \in \Omega} p_{\omega} q_{\omega} d \omega=y$ and this implicit function.
By solving this problem, we can get $$\lambda \frac{p_{\omega}}{\delta}=Y^{\prime}\left(\frac{q_{\omega}}{Q}\right)$$ and thus the demand for each variety $$q_{\omega}=Q Y^{\prime-1}(\frac{\lambda p_{\omega}}{\delta})$$, where $\lambda$ is the Lagrange multiplier for the budget constraint and $\frac{1}{{\delta}}=\int_{\omega \in \Omega} Y^{\prime}\left(\frac{q_{\omega}}{Q}\right) \frac{q_{\omega}}{Q} d \omega$.
What I don't understand is that the papers using this preference often set price index $P \equiv \delta /\lambda$ and denote $\delta$ as a demand index. Whereas in CES case, the price index is $1/\lambda$. And I manipulate the FOCs in this Kimball case and find that $Q/\lambda=y$, thus it would make sense if set $P \equiv 1/\lambda$. So why set $P \equiv \delta /\lambda$? Moreover, why is the $\delta$ term a demand index? In particular, given the argument in this answer, it seems that $\delta$ is exactly the implicit function and thus should be 1, which makes me confused.
For some reference, in a recent wp by Baqaee & Farhi ("The Darwinian Returns to Scale") they discuss this issue: "this price index $P$ does not coincide with the ideal price index $P^{Y}$ for the representative consumer: deflating income by $P$ does not yield welfare. In fact, $d \log P=d \log \bar{\delta}+d \log P^{Y}$. Since in general, $\bar{\delta}$ is not a constant, $d \log P \neq d \log P^{Y}$. It is only in the CES two price indices coincide since then $\bar{\delta}=\sigma /(\sigma-1)$ is constant. Going forward, we refer to P as “the” price index without further qualification, despite the fact that it is not the ideal price index.".
Update: By reading Baqaee & Farhi I get the idea that this manipulation of price index offers a tidy expression of relative demand and relative price. However, I still don't fully understand what the role that $1/\delta = Q/\gamma$ plays in this revised demand function, and how as a result the Kimball utility differs from the usual CES case. Most importantly, I guess this is related to what Baqaee & Farhi argues that "Monopolistic competition models with Kimball demand are parsimonious in the sense that competition across varieties is mediated by the price index; every variety competes with the price index. The flexibility of the demand system comes from the fact that it allows different varieties to face different “intensities” of competition, as captured by the different elasticities of the demand curve at different points." This seems to be the essence of the Kimball demand, but I fail to understand how is "competition across varieties is mediated by the price index; every variety competes with the price index" and why this is not the case in the CES?


texts:
Definition of Investment that I have found:

Investment is the expenditure incurred on the procurement of such capital assets that would help in further production .

According to this, it means that investment is only made by producers.

Am I correct in saying that only producers invest? Or do consumers also invest?


texts:
What is the worth of something?

I was thinking that it is either how much someone is willing to pay, or is it how much someone is willing to sell it for? Or is it the point where those two meet?

What if it doesn't meet? Say I had an object and would give it up for \$100, but if no one wants to buy it for that much, only say \$90, then what is it worth? Because I won't be selling it and no one will be buying it.


texts: How many people in the world were living below 15 dollars a day in the last decades?

texts:
The question I really want to make is if poverty is decreasing of increasing worldwide, but since I guess there is no way to objectively define poverty, that question doesn't fit in here. I was always suspicious that when they release the poverty statistics, they always release the extreme poverty figures and not the poverty figures. For example, recently I found people living under 10 dollars a day either was increasing or it's stagnant (green line, as if they weren't poors). So this leads me to believe poverty is conveniently defined as for showing "poverty is decreasing worldwide". That's why I would like to know if there is a way to figure out how many people leaves under 15 dollars (or any other figure between 10 to 15 dollars, if you like) which according to my country statistics for poverty it would be poverty. By seeing the green and blue lines in this graph the best guess is it's increasing, but I don't have data to sustain that assumption.

So the question is, how many people in the world were living below 15 dollars a day in the last decades?


texts:
Introduction

Wage ratio caps prevent the wages of all employees from exceeding a maximum of a fixed multiple of the wages of the lowest paid employee in a given institution.

Wage ratio caps can apply to both the public and private sector. In some places they have been introduced as company policy. Though they are yet to have been implemented, they have also been proposed as legislation in some countries.

Question

What effect does a wage ratio cap have on the efficency of allocation of labour?

I'm having difficulty with comparing this to other policies which directly represent price ceilings.

I see one main difference with pay ratios: companies can always compete to provide high pay for their executives. A company can always offer a more competitive wage for its executives by paying its lowest earning workers more. This is different to price controls like a rent control, where a landlord does not have access to a lever which raises the rent they can charge.

I would accept an answer that can show that the policy has the same effects as a price ceiling, but I'd also like to see explanation of the consequences for the labour market.


texts: Why don't Governments do away with the optics of taking on debt against new currency, and instead issue a limited currency every year (say 5% of GDP)?

texts:
Governments engage in the optical illusion of taking on debt against issued currency.

The debt is effectively owed by the Government to itself.
The value of the debt is completely controlled and defined by the Government in realtime (insofar as it is denominated in the currency defined by the Government in realtime).

Each of the above two points independently are enough to render the debt meaningless.
What would happen if a Government decides to do away with the optical illusion of issuing debt against currency, and instead issue a limited amount of currency every year (say 5% of GDP) to finance its spending?
[I understand that there would be inflation, but that happens regardless of whether or not the Government takes on this cosmetic debt against issued currency.]


texts: Looking at forward rates, the exchange rate for the currency with the higher interest rate gets worse over time.  This makes sense or else there would be an arbitrage opportunity to borrow in the low rate currency, convert, lend in high rate, and buy a forward contract to eliminate currency risk.  However, this doesn't make sense given that low interest rates tend to increase inflation and weaken a currency while high rates do the reverse.  This implies that the low rate currency should weaken relative to the high rate currency, leading to better exchange rates for the high rate currency over time, not worse.  Why is this?


texts:
I am looking for a name and historical data for a concept. I think it is easiest to explain by example. Consider stock in XYZ Inc worth \$10 per share and there are 10 shares, so the market cap is \$100. I really want to buy a share, but the current owners are happy with it so I have to pay \$11. So I have added a new dollar to the stock ecosystem, but now the market cap is \$110. That means there are \$9 of new value that have appeared out of thin air.
Is there a name for my $1 that I added and the \$9 of new created value? Is there a name for the ratio of the two?
I am curious about these values because I suspect the ratio has been abnormally high for the stock market at large since the Great Recession. In other words, the value of the total stock market has outpaced the amount of new money invested in the stock market.
Is this suspicion accurate? Does anyone track this data?


texts: In panel data application, when using Fama and MacBeth regression is preferable over the fixed or random effect model? thought

texts:
When discussing panel data, many econometric books, usually, focus just on fixed or random effect model as means of estimating regression for panel data. Despite this tendency, I have seen many papers use Fama and MacBeth regression for this purpose, an approach I previously thought its application is constrained to asset pricing models like CAPM.
Now my question is: in panel data application, when using Fama and MacBeth regression is preferable over the fixed or random effect model? Is there a statistical test shedding light on this issue? Another question is: in Fama and MacBeth regression can individuals under study be different in different time periods? It would be very kind of you, if you guide me through a link or book dealing whit this subject.


texts: Does the FDIC's insurance of your money in your bank account cause inflation of the bank were to go under?

texts: If the fdic insures money in each account for a bank, and that bank goes under. Won't that mean the fdic will have to borrow more money from the fed and thus lead to substantial inflation?


texts: I am wondering why everybody uses Cobb-Douglas production functions? Nowadays they are so standard that they are just written down without further discussion. Does anybody know more about this and can point to references on the discussion why the characterization of production by means of Cobb-Douglas is accurate?


texts: Liquidity Trap Question? Return to equilibrium

texts:
As far as I inderstand a liquidity trap occurs when increasing the money supply is not able to stimulate the economy because people prefer hoarding the cash rather then investing in debt securities because of low yields. However will that not in turn cause the bond prices to drop and conseqeintly yields to rise due to lack of demand. And if so shouldnt these rising yields provide more and more incentive for people to start putting their money in bonds or other securities and thus solve the liquidity trap?

Thus my question is why are we not seeing this occur in places where a liquidty trap exists?


texts: An economy with no Pareto-efficient envy-free allocations

texts:
In a famous paper from 1974, Hal Varian proved (in Theorem 2.3) that:

  In an economy with homogeneous divisible googs, if all agents have monotonic and convex preferences, then there exists an allocation which is both Pareto-efficient and envy-free.

He said (after Theorem 2.8) that, if preferences are not convex, then Pareto-efficient envy-free allocations might not exist. As an example, he brings the following economy: there are two agents with the same preferences:

$$u_1(x,y) = u_2(x,y) = \min(x,y)$$

and the total bundle is $(2,1)$.

I do not see how this is a negative example. If we give each agent a bundle of $(1,0.5)$, then the division is envy-free, since the value of every agent is exactly 0.5. It is also Pareto-efficient, since to increase the utility of one agent, it is necessary to give him some y from the other agent, but this hurts the utility of the other agent.

Am I missing something?


texts: Values of A,K,N,a in Cobb-Douglas function expressing GDP

texts:
In many basic macroeconomics textbooks a Cobb-Douglas production function with constant returns to scale is used to express the output of the economy as a function of labor and capital: $Y=AK^aN^{1-a}$.
Question: Given that a is normally assumed to be between 0.3 and 0.5, that the current output of the US economy is around 22T\$/year, and that $N$ (number of worked hours in a year) could be around 0.3TH/year, is there any kind of consensus on what are the values of $K$ and $A$ (at least the current values for the US economy)?
If I assume $a=0.5$, $A=5.4$ and $K=54$, then $Y=A\sqrt{KN}=21.7$, is that an OK choice?
I am puzzled to why I can't seem to find actual values for these parameters. If a book or a paper says that the GDP is expressed with this function, shouldn't it also at least give a realistic example with a range and units for the involved parameters? Maybe I am just looking in the wrong places?
Any thought?
Thank you in advance


texts: Retailer Price Setting for Existing Inventory in the Event of an Increase in Price Paid for the Good

texts:
If you are a retailer, and the price you pay for one of your retail goods goes up, how do you price the inventory you already had (which you paid a lower price for)?

Here is an example of a TFD (True, False, Debatable) type question for this idea:

Suppose you run a hardware store, and the price you pay for sidewalk de-icer increases. You raise the price on the remaining stock of sidewalk de-icer in your store, for which you paid a lower price.

I think the answer to this question is false. Increasing your price on the inventory you already had violates the PMP, so any other price would lower profits.


texts: For the case of two goods, give an example of preferences that are represnted by a continuous utility function that allows for fat indifference curves

texts:
The question in the title sounds like a trick question, due to the monotonicity property that indifference curves have, such that for two goods x and y, strong monotonicity implies y > x.

Possible that you could answer the question by stipulating the area under a curve?


texts: Jordi Gali Book First Edition Page 47 (need help for derivation)

texts:
The below image is from P.47 of Monetary Policy, Inflation, and the Business Cycle by Jordi Gali. My question is "how can we derive the equation (15). If (15) is a correct equation, my guess is that $E_t[\hat{mc}_{t+k}] = 0$ for all $k \not= 0$ and $E_t[\pi_{t+k}] = 0$ for all $k \not= 0,1$. But, on what basis can we ensure these results?
Notation: $\theta \in (0,1)$ is the probability that the firm can change the price level. $\hat{mc}_{t+k} = mc_{t+k} - mc$ where $mc$ is the marginal cost at the steady state.
It is hard to put all relevant information to my question in this post. Here is the link for this book:https://perhuaman.files.wordpress.com/2014/06/gali_polc3adtica_monetaria.pdf (please look at page 47)


texts:
Firms A and B are in an oligopoly. They both face the linear market demand curve $X=A-\alpha P$, where $X$ is total market demand, and $P$ is price. Assume constant marginal costs $C_{A}$ and $C_{B}$, where $C_{B}<C_{A}$.

What will be the SPNE outcome if firm A sets price first? Is the following correct?

So long as firm A sets $P>C_{B}$, then it will get 0 profits (as firm B will profitably undercut and take all market demand). Therefore, it is indifferent between any $P>C_{B}$. If, however, A sets $P \leq C_{B}$, then firm B will not be able to profitably undercut, and so market demand will be split between the two firms, at some $P \leq C_{B}$. But then firm A will be making negative profits, and so can profitably deivate to setting some P>$C_{B}$.

Is this analysis correct? Or can firm A set some $p\leq C_{B}$ in an SPNE?


texts: Is there any cook book, in finance, for models in information asymmetry, so as to make some practice?


texts: Where does India fall in Peter Theil's matrix?

texts: In his  book "Zero to one"  Peter Theil describes a 2 X 2 matrix on how societies think about future.  Definite optimism (e.g. 1950s US), Definite Pessimism (Present day China), Indefinite Pessimism (Present Day Europe) and finally Indefinite Optimism (Present day US).  Does present day India fit in to one of these categories?


texts: Why doesn't AD curve self-correct to higher price level in LR?

texts: In textbooks it is usually taught that once actual price level is higher than expected, short-run aggregate supply will eventually shift up so that new expected price level is closer to the actual price level, until AD and AS intersect at the long-run AS curve. But why doesn't the AD do the same thing? When people start to expect a high price level, they will bargain for higher income and interest rates, so they can now buy more things at any price level, that means AD will shift up also. Why such an asymmetry exists between AD and AS?


texts: Showing that the elasticity of arrival rate for workers wrt $\theta$ is between $0$ and $1$

texts:
Let $L=E+U$ where $L$ is labour force, $E$ is number of employed, and $U$ is unemployed people.

Let $u = \frac{U}{L}$ and $v = \frac{V}{L}$.

Given $m(u,v)$ as a matching function that determines the flow of matches between workers and firms, and assume $m$ has constant return to scale (CRS) in the two arguments $u$ and $v$.

The elasticity of the arrival rate for workers is given by $$\theta q(\theta),$$ where $\theta = \frac{v}{u}$ represents "tightness" in the labour market.

Elasticity ($\epsilon$) = $$\frac{\mathrm{d} f(x)}{\mathrm{d} x} \frac{x}{f(x)} = \frac{\partial m}{\partial \theta} \frac{\theta}{m(1,\theta)},$$

where $\theta q(\theta) = m(\theta^{-1},1) = m(1,\theta)$ (by using CRS property of $m$ in the two arguments $u$,$v$).

The rate at which unemployed workers find job: $$\theta q(\theta) = m(\theta^{-1},1)=m(1,\theta),$$ since the matching function, $m$, is constant returns to scale in the each argument.

Since $\theta q(\theta) = m(1,\theta)$, $$\frac{\partial m(1,\theta)}{\partial \theta} = q(\theta) + \theta q'(\theta).$$

So the elasticity of the arrival rate for workers, $$\epsilon = \frac{\partial m}{\partial \theta} \frac{\theta}{m} = \left [q(\theta) + \theta q'(\theta)  \right ] \frac{\theta}{\theta q(\theta)} = 1 + \frac{\theta q'(\theta)}{q(\theta)}$$.

Since $q'(\theta)<0$, $\epsilon<1$, but how can I formally show that it is between $0$ and $1$?


texts:
I was reading about Marx's Crisis Theory. On one hand, there is this idea of the falling surplus. But on the other hand, he relates income inequality to the business cycle.

Have his ideas regarding the relation between inequality and the business cycle been formalized (mathematically)? Where can I read those? And are there other (Marxian or non-Marxian, including neo-classical/ Keynesian) mathematical models that relate income or wealth inequality and the business cycle? Where can I read those?


texts: Better Model for Dynamic pricing - Stackelberg model or Bertrand model

texts:
Objective - I am building a dynamic pricing tool for airline tickets which will consider the competitor prices. Taking competitor price as reference, this tool will price the ticket. Also instead of price simultaneously need to follow the lead player in the market and price the ticket.
In the research found out two models

Bertrand Model 2) Stackelberg Model

As per my knowledge Bertrand model is competing on prices and stackelberg competing with quantities.
As airline is a industry which has capacity constraints (i.e can't compete on quantities), I have mainly two queries related to stackelberg model

1). can I use stackelberg(leader-follower) model/concept,
if need to compete with prices instead of quantities.
2). Can stackelberg be used with multiple leaders (more than 2) ?
3). Or Is there any combination of both models for example something called
bertrand-stackelberg

Can anyone help with insights. Thanks in advance


texts: A graphic calculator for simple microeconomics problems

texts:
I can do simple calculations in micro-economics, such as: given the utility function of a consumer, calculate his demand curves; given utility functions of two consumers and initial endowment, calculate the competitive equilibrium; etc. However, the calculations become tedious and I am looking for a software that can do them automatically. For example, I am looking for a software where I can:

Define utility functions, e.g. $u_1(x,y) = x^2 y$, $u_2(x,y) = x y^2$;
Define initial endowments $(x_1,y_1)$ and $(x_2,y_2)$;
Find and plot all the Pareto-efficient allocations;
Find and plot all the envy-free allocations;
Find a competitive equilibrium.

Is there a software that can do this? Or maybe a package for a general symbolic math software?


texts: Are "lotteries" in the model for choice under uncertainty not just probability distributions?


texts: How to Interpret Coefficients in Regressions on Filtered Varaibles?

texts:
Suppose you have a logged variable $y_t$ which is comprised of a trend component $\tau_t$ and a cyclical component $c_t$. Thus:
$y_t=\tau_t+c_t.$
Then you apply a filter to that variable to extract the stationary cyclical component $c_t$. Then if you use $c_t$ as a dependent variable in a regression how would one interpret the response of that variable based on some regressor that is:
1.Already stationary and thus not filtered (say some stock market index)
2.Also a filtered variable.
Another side question I have is can you ever apply a filter (for instance the HP or BK filters) on data that isn't logged?


texts: What are some ways to add quality to the supply-demand model?

texts:
Please excuse me, I hardly know anything about economics yet.

When the quality of a product changes, the demand curve moves.  But what if there are different versions of a product, of varying qualities, on the market at the same time?  Is there standard way to model this?

For example, there are a lot of different restaurants of different qualities.  The quality is a subjective measure, but suppose it weren't.  I could draw one supply curve and one demand curve per restaurant.  Is there anything more interesting I could do?  For example something that takes account of the fact that a high-quality restaurant and a low-quality restaurant are to some extent substitutes for each other.  Does micro theory give any prediction about what the supply of different restaurants of different qualities will be?

If there's a better question like this that I could have asked, or a good keyword to search on, please tell me.


texts:
Consider a game in static, complete information environment, and the following definition of a strategy never being a best response to a player:

  A strategy $\sigma_i\in\Delta S_i$ is never a best response if there are no beliefs $\sigma_{-i}\in \Delta S_{-i}$ for player $i$ for which $\sigma_i\in BR_i(\sigma_{-i})$.

I want to understand the role of belief in this definition correctly. The definition of belief is given as:

  A belief of player $i$ is a possible profile of his opponent's strategies, $\sigma_{-i}\in \Delta S_{-i}$.

My understanding is:

  In situations where there is no strictly dominant strategy, a player asks herself "what do I think my opponents will do?". To resolve this uncertainty, the player assigns probability distribution over the set of pure strategies of opponent. One particular distribution produces a belief, one possible opponent's profile which is $\sigma_{-i}\in \Delta S_{-i}$.
  Now, I look at my simplex and say, is my particular strategy $\sigma_{i}\in \Delta S_{i}$ a BR to that of opponent? I strike out my $\sigma_i$ if I cannot find any probability distribution over the opponent's pure strategies such that $\sigma_i$ would be my BR.
  So, technically, I would have to compare my particular $\sigma_i$ against every possible probability distribution over the opponent's pure strategies to identify it as Not-BR, but in simple games, you often face with a situation where one of the pure strategies a player might have, say Column L of player 2, never gets underlined when you work out which ones for Player 2 is BR. This helps the process of eliminating all the strategies that are never a best response.

Is my understanding of belief and its role in finding the set of rationalizable strategies correct?


texts:
Home prices are at an all time high so according to supply and demand, that means suppliers will supply more homes due to the high prices. Demand for a house on the other hand is also at an all time high. I really am confused on why demand is high when prices are high. From my understanding of demand and supply when supply is low, demand will be high and so will prices. When the price is high, supply is also high but the demand is low.
There are some articles saying supply is low which is why home prices are at an all time high. But that doesn't make any sense to me since home prices are very high right now so it incentivize suppliers to make more to provide for the buyers. Also, bidding wars are very common when supply is low, but there is lack of bid wars happening in the housing market.
My questions are:
Are the principles behind demand and supply pointless in this scenario?
How come demand for a house is very high but the prices are high and the supply seem to be relevantly adequate?


texts: Are there big waves of entrepreneurship over time?

texts: In some models there are times when there are many entrepreneurs, and others when there are not. Is this a stylized fact of some kind? Are there any statistics about how entrepreneurial a particular generation is?


texts: What is the proper term for the "meta-value" of an object?

texts:
For instance, say I have a roll of quarters and a roll of dimes. I can use the dimes and quarters in a parking meter, but 50 cents in dimes gets me less time than 50 cents in quarters. Additionally, I can't even use dimes in the washing machine and dryer in my apartment, but I can use quarters. So even though both 50 cents in both dimes and quarters are worth 50 cents, quarters clearly have a higher "meta-value", if you will, thus making them worth more.

I'm new to economics and am unsure how to Google this question.


texts: How will economy find long-term equilibrium in AD-AS model in case of a negative supply shock?

texts:
Let's suppose that negative supply shock happened that affected SRAS, but not LRAS. Let's also assume that previously there was long-run equilibrium at point $A$. Due to negative supply shock SRAS decreased, meaning that economy will be either at point $B_1$ (real GDP supplied stayed the same, but price level increased) or at point $B_2$ (price level stayed the same, but real GDP supplied decreased). In both cases they will lead to short-term equilibrium at point $C$

But what will happen next? How will the economy find its long-term equilibrium in this situation? Judguing visually, there are two shortest ways to reach long-term equilibrium after negative supply shock. Either SRAS will increase to its old level or AD will increase so much that long-term equilibrium at point $B_1$ will be reached. But I don't see any reasons why would any of them happen (unless the government intervenes by detaxing/deregulating/subsidizing firms or by spending more). If anything, I would expect AD to decrease due to decreased real wealth (real wealth decreased because both inflation increased and GDP supplied decreased). But such shift wouldn't lead to long-term equilibrium. At the least not without consequent increase of SRAS. But why would such consequent increase happen (assuming no government intervention)?


texts:
How empirical was Adam Smith's The Wealth of Nations? What about some other "big books"?

That is, how much empirical research does it contain?

And thus, what kind of "epistemological accuracy" does it have?

Motive:

I want to understand whether books that are regarded as "standards" in political science and economics are actually "scientific" in the sense that they contain empirical proof for the theses that they put forward. Since I speculate that some portion of "economic belief" is "a priori opinion" or "normative statements" (what ought to be vs. what is).

Empirical research is more valid than philosophical, when the theses deal with things that are claimed to exist in other ways than mere beliefs. Empirical research (in the humanities) thus means validating theses through studying how people actually behave or formulating theses based on observing people.


texts: Measure of value of a product expressed as a price using the currency of the domain country (e.g. USA)

texts:
I do not really know much about economics, but I need to do a price comparision of a certain product between countries in Europe. The product is a pack of specific brand of cigarettes. We know that for instance in Spain the price of this pack of cigarettes costs 5 euros and just 2.6 euros in Bulgaria.
However, given the difference in average wage in these countries, it might actually be that these cigarettes are worth more in Bulgaria than in Spain as they took more of a person's income. How would you express such difference? Is this what PPP is doing? As in, is PPP expressing the price of how much something is worth in terms of american dollars? Or is it something else?


texts: I don't know why these two method yield different solutions for marginal product of labour

texts:
Given a homogeneous of degree one function
$$Y=F(K,N) \\
y=\frac{Y}{N}
=F(\frac{K}{N},1):=f(k)$$
I am looking for the partial derivative for $N$
Method 1
$$F_N=\frac{\partial F(K,N)}{\partial N}=\frac{\partial Nf(k)}{\partial N}\\
F_N=f(k)+N\frac{\partial f(k)}{\partial N}\\
F_N=f(k)+N\frac{\partial f(k)}{\partial k}\frac{\partial k}{\partial N}, \quad k=KN^{-1}\\
F_N=f(k)+Nf'(k)(-1)KN^{-2}\\
F_N=f(k)+f'(k)(-1)KN^{-1}=f(k)-f'(k)k
 $$
Method 2
$$F_N=\frac{\partial F(K,N)}{\partial K}\frac{\partial K}{\partial N}\\
F_N=\frac{N\partial f(k)}{N\partial k}\frac{\partial K}{\partial N}\\
F_N=f'(k)\frac{\partial Nk}{\partial N}=f'(k)k
$$
I have no idea where is the method 2 gone wrong.  Any help would be appreciated!
Re-edited Solved
$$\frac{dF(K,N)}{dN}=\frac{\partial F(K,N)}{\partial K}\frac{dK}{dN}+\frac{\partial F(K,N)}{\partial N}\frac{dN}{dN}\\
\frac{dNf(k)}{dN}=f'(k)k+\frac{\partial F(K,N)}{\partial N}\\
f(k)-f'(k)k=\frac{\partial F(K,N)}{\partial N}
$$


texts: How to find the variance co-variance matrix for 4 assets and market returns using the CAPM?

texts:
I understand the process on excel:
calculate betas, calculate covariance with $Cov(R_{i,t},R_{j,t}) = \beta_{i,m} \cdot \beta_{j,m} \cdot \sigma^2_m$

where m is the market return and i and j are assets.

I'm confused as to what the assumptions are in order to be able to do this?

Can I do this since I have market data 4 US stocks and the S&P500 meaning that I'm only considering systematic risk?

Please could someone give me the assumptions in order to use the CAPM relation to find a variance covariance matrix?


texts:
I was reading the paper by Berndt and Wood (1975), "Technology, Prices, and the Derived Demand for Energy". It was an interesting paper to read but there has not been anything done on this in nearly 40 years. I was able to track down the data (part of the data is in the paper) and played with their data. I also used the updated data from KLEMS from 1947 to 2014 because I am curious if the elasticities for energy substitutability, etc, have changed over time. The econometric specification used 3SLS which is not as robust as GMM.

What would be the value in exploring this topic? What are the pitfalls in the role of technology in US manufacturing? Capital has changed a lot since Berndt and Wood (1975) so it is possible that the updated KLEMS data could have harmonized it? Maybe or maybe not.


texts: How do I determine PED from price consumption curve with slope of zero?

texts:
Given a budget for two goods $x_1$ and $x_2$, a fixed price for good 2 and three prices for good 1 with the corresponding optimal amount of good 1 ($x_1$), I like to calculate the PED for good 1.
By looking at the three given points, I know that the price consumption curve for good 1 is a horizontal curve, i.e. the slope of the price consumption curve seems to be zero (connecting the three points).
Since I know the price ratio, I also know the MRS for the three given points.
So I have to find $x_1(p_1, p_2, m)$, where $p_2$ and $m$ are known constants, in order to determine $\partial x_1(...)/\partial p_1$.
What is the correct approach to this problem?


texts:
Context:
Delegation informed prime Minister that textile sector is working at fullest capacity due to government policies. They further said the energy package, timely refunds and other facilities had resolved different issues faced by the exporters and the business community. They also aimed that textile exports will reach to Rs.21 Billion from Rs.13 Billion next year. Further, delegation told that textile sector required 100,000 more workers. Prime Minister directed ministers to resolve the energy issues and to take measures for skilled workers in the shape of training etc. Prime Minister is also hopeful to make textile products more competitive in other countries by reducing electricity tariffs.
Main Question:
Being a student of economics you are required to express how government policies will impact the average cost of the firms in the long run? Also mention what type of economies will be attained by firms if training is provided to workers by government.
My Thoughts:
I believe that the firms will face economies of scale however I'm confused whether the average cost of the firms in the long run be constant or will it still be lowered due to more skilled workers provision and other government policies. Other suggestions highly appreciated.


texts: Can Eurozone countries issue their own bonds?

texts:
Can Eurozone countries issue their own bonds, or is this a delegated competency?

If not, how do such countries raise funds for big uncosted spending such as infrastructure projects?


texts: I often hear that developing economies can benefit from a weak national currency. For example China as exporter deliberately makes its national currency weaker, so that it gains an advantage. Are there some underlying mechanisms which can explain this?


texts: Any Resources for Micro Comprehensive Exams?

texts:
I'm currently preparing for a first year microeconomics comprehensive exam and have been looking for good resources for a while. Ideally, I was looking for any school site that has a list of (and links to) their old micro comps with solutions.

We cover what I'd imagine is a pretty standard course- a half semester each on partial equilibrium, general equilibrium, social choice and game theory; though all that's needed is any overlap between those and whatever the other school's comp covers.

Again, sorry if this isn't the right place, but if anyone has any sources off-hand, I'd very much appreciate it!


texts: Data for the distribution of US household annual income by year and state

texts:
I am looking for data regarding the annual household income distribution filtered by year and state (and finer geographical feature like cities). In other words, I am looking for data with the following features (label being the number of earners):

year
state
income range (e.g. 10K-20K, finer better)

Does anyone know if there is a publicly available dataset containing these?


texts: What is the purpose of multiple regression?

texts:
For instance, consider the following regression equation
$College Score=\beta_0+\beta_1HighSchool GPA+u$. We interpret this $\beta_1$as the effect of a higher High School GPA holding all other variables constant.
The second regression model adds a new term  and becomes $College Score=\beta_0+\beta_1HighSchool GPA+\beta_2ACTSCORE+u$. The interpretation of $\beta_1$ is still the effect of a higher High School GPA holding all other variables constant. So what is the difference?(and the values in two regressions are different). The textbook explanation is that, in the first equation, ACT score is assumed to be fixed. In the second equation, however, ACT score is explicitly controlled. I don't quite understand the real difference between 'assumed fixed' and 'explicitly held fixed'.


texts: How does lending money contribute to society?

texts:
I essentially asked this question here, but IMO didn't get an answer from anyone who knew what they were talking about.

Normally someone gets paid because they work in a job, i.e. they contribute to society. I get paid by lending money to other people and charging interest. What exactly am I being paid for? It doesn't feel that I'm doing anything to better society.

It enables them to buy things they otherwise couldn't afford... in the near term. But ultimately they have to pay back the debt plus interest, so they can actually afford less in the long term. Is it just that I'm being paid to satisfy people's impatient desires? It doesn't seem that I'm contributing to long-term economic growth, and it seems that I may even be hurting it.

Someone suggested that the loans can be used to finance investment, so I thought about it for a while. I considered an economy consisting of three agents: BANK, person A, and person B.

Suppose person A is destitute and BANK lends £100 to person A in exchange for £110 later. Then person A pays person B the £100 to build a factory. Then person A manufactures goods with the factory and sells them to person B for £150. It seems that BANK has made £10 for nothing, as person A and person B could have come to an arrangement where person B would build the factory + pay person A £50 in exchange for the goods manufactured by person A directly. Maybe it's different with more than three agents. But I still come to the conclusion that the agents could collectively come to an agreement that wouldn't involve the BANK "middleman". Maybe that wouldn't work in practice. But in any case, it doesn't feel that lending money does anything to contribute to society.


texts:
Suppose I wish to run the following gravity regression:
$$
Y_{ijt}=\boldsymbol{X_{ijt}'\beta+}ij+i_{t}+j_{t}+\epsilon_{ijt}
$$
where the LHS is bilateral trade between $i$ and $j$ in year $t,$
the first part of the RHS denotes control variables, specific to $i$ and $j$. The term $ij$
is the pair fixed effects term, which is a fixed effect for a particular
term. The third term is the importer-time fixed effect, and the fourth
term is the exporter fixed effect. Importantly, within each year,
I have bilatereal information between various possible combinations
of importers and exporters. My questions are as follows: 1) Are the
coefficients on $ij$, $i_{t}$ and $j_{t}$ identified? My first
inkling is yes. That is because, assuming a balanced panel, the total
number of observations are:
$$
T\times I\times J
$$
 whereas the number of coefficients to be identified as:
$$
IJ+IT+JT
$$
 which is less than $TIJ$ if:
$$
IJ\left(1-\frac{1}{T}\right)>I+J
$$
 which should generally be the case.

2) On what basis is $\beta$ identified? What variation is being used?
The $ij$ pair fixed effects would imply this is being identified
from within country pair- over time variation in $\boldsymbol{X.}$
What role does $i_{t}$ and $j_{t}$ play?

Thanks!


texts: Does the case of strategic complements always result in a situation where the Stackelberg leader is worse off?

texts: For example, in the case of Bertrand competition, is the Stackelberg leader worse off relative to the follower? If so, why? Is this because the first mover can always undercut until marginal cost is reached?


texts: Where can I find the data for income, equity, assets and sales of a company that is presented in terms of U.S. and outside of US.?

texts: I need to find the income, sales, equity and assets of Microsoft, Google and Apple for U.S. and outside of U.S. I see these information in the income stamens as a whole. But I need to know how much it is for the U.S. and how much it is for outside of U.S. I've been able to see in the annual report of Microsoft such a division for income and sales. But the other two isn't there. None of those are also available in Google's annual report. Can somebody please let me know where should I look?


texts: What is the relationship between inflation and imports/exports?

texts:
According to the aggregate demand curve, when the price level is higher, the real GDP demanded is lower. One of the explanations given is a consequence of the Mundell-Fleming model:

"As the price level drops, interest rates fall, domestic investment in foreign countries increases, the real exchange rate depreciates, net exports increases, and aggregate demand increases."

So this seems to suggest that increased inflation means more imports and less exports.

But increased inflation should also increase the exchange rate (currency depreciation). If you can trade foreign currency for more domestic currency, then exports should increase and (conversely) imports should decrease.

How do I reconcile these two models? Is this a difference of short run vs. long run? Or is it a matter of all other factors being held constant in each scenario?


texts: There is a lot of debate on whether or not consumers and investors are rational. Unfortunately, I haven't seen much qualification for what is called a rational consumer.  What are the requirements that must be met for us to consider a consumer to be rational?


texts: Hubzu.com bidding terminology - "value-based foreclosure auction"

texts:
The hubzu website often has properties for bidding that state "this is a value-based foreclosure auction, which means the beneficiary has provided a bid based on market value".

However, it then states: "This is a great opportunity for buyers since the final reserve may be priced at or below current market value."

These statements seem contradictory to me, so I think I must not understand the first statement properly.

I believe the first statement to mean, for example:  Beneficiary "Todd" has a property which he reasonably believes based on market conditions to be worth, say, 55,000 USD.  So as I understand the first sentence, Todd has already provided (or will provide) a bid of 55,000.  Therefore, 55000 is effectively the minimum bid if one wanted to attempt to acquire Todd's property which Hubzu.com is auctioning.

Other things I have assumed or seem apparent: The terms "market value" and "current market value" are interchangeable since "current" would be the default implication anyway.  Second, I assume the final reserve would be something somewhere at or below Todd's bid.  I did assume that the market value is not the final reserve, but some lower value.  However, I cannot see the purpose of a final reserve in this situation...

If so (and why I think my understanding is flawed), it is not possible to buy the property below the market value because, even if a buyer were to bid above the final reserve, but below the market value, Todd would win the bid and retain ownership.

I have tried to google this terminology in various manners.  Here is the latest search 'define "value-based foreclosure auction" -hubzu'

Can someone produce an example that demonstrates what this means and how a buyer could reasonably buy this property below the market value?


texts: Saddle path equilibrium on financial market with rational expectations

texts:
In his 1978 paper introducing the Tobin tax Tobin states that :

  As a technical matter, we know that a rational expectations
  equilibrium on markets of this kind is a saddle point. That is, there
  is only a singular path that leads from disequilibrium to equilibrium.
  If the markets are not on that path, or if they don't jump to it from
  wherever they are, they can follow any of a number of paths that lead
  away from equilibrium - paths along which, nonetheless, expectations
  are on the average fulfilled.

He seems to consider this result as common knowledge among the economists and gives no reference. To which result or paper is he referring ? Do you have an idea of what he means with "markets of this kind" ?


texts: Alternative measure for market capitalization, company "value"

texts:
I wonder what the term "value" of a company, currency, etc could mean. The most obvious, to me, is market capitalization (related: Clarifying the meaning of market capitalization)

Is there also something like measuring how much money has been spent for the shares that are currently circulating.

E.g. there is an IPO for 1000 shares each at 1\$, all of them are sold. Then the price rises to 2\$ and 500 of the shares get traded for this value. Then the classical market cap would be 2000\$, and the measure I wonder about would be 1500\$.

Does this have a name?


texts: Is there evidence that non-profits might have a tax or other competitive advantage in competing with for-profit corporations?

texts:
Lets say my non-profit's interest is to diminish co2 emissions in the city.
Are there useful forms of putting that tax money for better use and gaining competitive advantage against other for-profit car companies?


texts: How GDP by expenditure and GDP by income method are same in this case?

texts:
Suppose I earn factor wage ₹1000 in the year 2018 and I pay a tax of ₹100 to the government. So GDP by income method is ₹1000 as we ignore transfer payments.
Now if I spent all my 900 on domestic consumption good but government expenditure is zero. So GDP by expenditure method is ₹900.
What am I missing?