Month: August 2013

Scott Sumner nods with approbation toward this Ychuan Wang post at Noahpinion. For which hat tip I must thank him because Wang so clearly explicates what he calls the “canonical” understanding, and illustrates so perfectly the wackiness and incoherence of of the Walrasian view: Prices don’t always adjust instantly, so we can have excess supplies…

Unlearning Econ: The story goes like this: an Israeli day care centre found that parents were picking up their children too late, so they introduced a small charge of $3 to try and disincentivise lateness. However, instead of discouraging this behaviour, the payment served to legitimise it and buy the parents piece of mind. The…

DIN. We should print up lapel buttons. I suggested this campaign some time ago: This would: • Transfer relative purchasing power (hence power) from holders of financial assets to holders of real assets — from Wall Street to Main Street — and from (relatively few) creditors to (many more) debtors. • Spur both consumption spending…

No, not that kind of “special.” Though it sure is tempting… Paul Krugman, Scott Sumner (seemingly unlikely bedfellows, but…), and most other mainstream economists want to argue that banks are not special — that there’s no reason for economists to understand and analyze their operations in detail, or incorporate those understandings in their (mental and formal) economic…

Says John Aziz, “Economics, broadly defined, is the study of human action and interaction.” Which reminds me to post this, which has been long brewing in my head. More carefully and precisely defined, I posit the title of this post: Economics is (should be) the study of how individuals and groups react to changing circumstances (which circumstances include…

Gentle Readers: I remember learning many decades ago that Fama and French’s seminal research had demonstrated that very few trades and very few traders are necessary for a market to achieve “efficiency.” (Either strong form — “the price is right” — or weak form — “individual traders can’t tell if the ‘the price is right,’…

It can be tough to articulate a cogent argument against high-frequency trading in the context of highly liquid, efficiently functioning securities markets, but I think Rajiv Sethi has done so (riffing off Michael Lewis’s typically scathing and revealing article on Goldman’s recent bad behavior). In brief, in my words: 1. Value investors are trying to buy shares in…