Collected Links 03/2016: New Principles

If you are in Graz next week: Don’t miss the Economics Club’s guest lecture “The Myths and Realities of the European Migration Challenge” by Prof. Martin Kahanec from Central European University in Budapest. Here is the Facebook event page with more info.

We usually measure economic activity by multiplying the quantity of each final good with its price and summing over all final goods. The development of new technologies during the past few years has replaced CDs with online downloads and streaming services, telephone calls with Skype, books with ebooks. Many of these goods are delivered at zero (or close to zero) prices and financed through other means such as advertising. Hence GDP probably underestimates the volume of economic activity. What should we do about it? Sir Charles Bean has dealt with this issue and now produced a short summary here.

“Are we teaching the wrong principles of economics in the introductory course?”, asks David Collander. Greg Mankiw, not surprisingly, answers in the negative.

For those who don’t have a clue what I’m talking about, here’s Yoram Bauman’s classic translation of Mankiw’s principles.

If you believe, as I have long believed, that the criminalization of cannabis probably causes more harm than good, this paper may change your mind: It exploits the specific cannabis policy of the city of Maastricht which grants legal access based on individuals’ nationality. They find that “academic performance of students who are no longer legally permitted to buy cannabis increases substantially.”

Women, I am told, are under-represented in economics. As a partial remedy, I shall henceforth include a link to a female economist in every edition of the collected links. This month: Who was Mabel Frances Timlin?

Not entirely unrelated: The social and economic determinants of violence against women in Sub-Saharan Africa.

A new school in macroeconomics is on the rise. They are called Neo-Fisherians because they place strong emphasis on the Fisher equation, which says that the real interest rate equals the nominal rate minus expected inflation. The equation itself is not controversial – it’s part of every sensible macro model. What is controversial is the Neo-Fisherians’ claim that the Fisher equation implies that raising nominal interest rates increases inflation – quite the opposite of conventional wisdom. John Cochrane, one of the most prominent Neo-Fisherians, has come up with a simple model plus a good intuitive explanation of that point of view.

Helicopter money sounds scary, but is just normal textbook monetary policy, as Simon Wren-Lewis points out.

New Graz Economics Papers:

We all know Arrow’s theorem, right? Few of us, I guess, know Alfred Tarski. What the one has to do with the other is explained by Daniel Eckert and Frederik Herzberg in their new paper.

Providing public goods is hard. Even harder is providing public goods in a welfare maximizing way. Still harder (for me, at least) is reading this new paper about welfare-maximizing ways to deal with the binary public goods provision problem (let’s build the bridge/ let’s not).

Can one make sense of recent global imbalances in overlapping generations models? Karl Farmer and Bogdan Mihaiescu are trying.

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