Tag Archives: Economics

Tired of the disposition effect yet? This one’s short, I promise- just shows how the incentives for tax-motivated selling of losing stocks change over the year and cloud the disposition effect test statistics. As usual, you can see the whole behavioral economics playlist here in case you want to catch up or need a review.

[unable to retrieve full-text content]On The Increasingly Unfortunate Economics Of Peanut Allergies…: Things get awkward when companies decide to maximize profit, if for no other reason than it highlights where policy makers have procrastinated on regulation in hopes that self-interested oganizations would just behave.

I didn’t tell you last time that the disposition effect result I discussed suffered from a potential econometric problem, so I make up for that here. As usual, you can see the whole behavioral economics playlist here in case you want to catch up or need a review.

Lucas’ Copernican revolution — nonsense on stilts In Michel De Vroey’s version of the history of macroeconomics, Robert Lucas’ declaration of the need for macroeconomics to be pursued only within ‘equilibrium discipline’ and declaring equilibrium to exist as a postulate, is hailed as a ‘Copernican revolution.’ Equilibrium is not to be considered something that characterises real economies, but rather ‘a property of the way we look at things.’ De Vroey  —...

Microfoundations — contestable incoherence Defenders of microfoundations and its rational expectations equipped representative agent’s intertemporal optimization often argue as if sticking with simple representative agent macroeconomic models doesn’t impart a bias to the analysis. I unequivocally reject that unsubstantiated view, and have given the reasons why here. These defenders often also maintain that there are no methodologically coherent...

So the internet seems pretty much obsessed with this story right about now… The headline, taken at face value, isn’t particularly surprising to economists- we are quick to point out that a pretty wide variety of items can count as “money”, provided that they perform a few functions: A medium of exchange A unit of account A store of value By this characterization, sure, ramen could serve as money- I guess ramen packs aren’t so large as to be too cumbersome to be traded, you could quote...

Robert Lucas’ warped methodology Economic theory, like anthropology, ‘works’ by studying societies which are in some relevant sense simpler or more primitive than our own, in the hope either that relations that are important but hidden in our society will be laid bare in simpler ones, or that concrete evidence can be discovered for possibilities which are open to us which are without precedent in our own history. Unlike anthropologists, however, economists...

[embedded content] Ricardian equivalence basically means that financing government expenditures through taxes or debts is equivalent, since debt financing must be repaid with interest, and agents — equipped with rational expectations — would only increase savings in order to be able to pay the higher taxes in the future, thus leaving total expenditures unchanged. Why? In the standard neoclassical consumption model — used in DSGE macroeconomic modeling — people are basically...

Bank stress testing — not particularly helpful  [embedded content]

Keynes-Hicks macrotheory — a ‘New Keynesian’ unicorn fantasy Paul Krugman has in numerous posts on his blog tried to defend “the whole enterprise of Keynes/Hicks macroeconomic theory” and especially his own somewhat idiosyncratic version of IS-LM. The main problem is simpliciter that there is no such thing as a Keynes-Hicks macroeconomic theory! So, let us get some things straight. There is nothing in the post-General Theory writings of Keynes that suggests...