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1500 questions
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votes
2 answers
When can one safely talk about decreasing marginal utility?
One thing I hear a lot is talk of decreasing marginal utility—the idea being that additional units of a good become progressively less attractive the more units of that good one has already.
However, this always made me a little uncomfortable…
Ubiquitous
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Inflation and economic growth
Noticeable works about the impact of inflation on economic growth are dated back to the 90s.
For example, Barro (1995):
the impact effects from an increase in average inflation by 10 percentage points per year are a reduction of the growth rate of…
Anton Tarasenko
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Neo Keynesian Modelling and the Lucas Critique
Some people from the more extreme microfoundations/internal consistency camp keep bashing the Neo Keynesian model for the Calvo pricing being not micro founded and hence the whole model not being immune to the Lucas critique.
However, one could…
FooBar
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11
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When should a receiver randomize across actions in a signaling game?
Suppose there is a signaling game with a finite message space $M$, finite action space $A$, and finite type space $T$. Even simpler, all sender types have identical preferences (the receiver just prefers different actions in response to different…
Pburg
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Difference-in-differences in 2SLS regression
Usually when we do a difference-in-differences estimation, we do it in a OLS reduced form as follows:
$$
Y_{it}=\alpha After_t+\gamma Treatment_i+\delta After*Treatment_{i,t}+X_{it}\beta+\epsilon_{i,t}
$$
However, I was wondering, if the…
Wright
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Influential Theory in the Economics of Poverty
As far as I can tell, research on the economics of poverty is very empirically driven, and this is probably appropriate. What kind of economic theory has been developed though? I'd also be interested in theory of some influence too. To avoid wholly…
Pburg
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11
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3 answers
Price discrimination- how much is optimal?
I am of the understanding that as a general rule, price discrimination does not benefit consumers. Yet I can think of a situation where it does. Look at two countries, Australia and India. The price levels are very different. If there is no price…
Jamzy
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11
votes
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Under what conditions is a monopoly undesirable?
First of all, I realize that "undesirable" is an ambiguous term. So, to clarify, when is a monopoly undesirable under the following metrics?
Pareto efficiency
Reduces consumer surplus
Social Welfare (could this possibly be different from the pareto…
jmbejara
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Can the stock market grow faster than GDP indefinitely?
My understanding of conventional wisdom is that average long-term growth of advanced economies is expected to be significantly lower than the average long-term growth of the value of the largest firms in the stock market (e.g. the total value of the…
Dan
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Why is Roy's Identity so important?
I've been reviewing some of my microeconomics theory and have been reading up on Roy's Identity. Recall that Roy's identity is defined as:
$$x^*_{i}(\text{p},m)=-\frac{\frac{\partial v}{\partial p_{i}}}{\frac{\partial v}{\partial m}}$$
being that…
EconJohn
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Effect of a permanent increase in government expenditure in an open economy?
In Krugman & Obstfeld's International Economics, 8e, Chapter 16, an involved argument is given showing that a permanent fiscal expansion will not affect output even in the short run. It seems to me that this is a saddlepoint stability argument in…
Jyotirmoy Bhattacharya
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11
votes
5 answers
Definition of capitalism
Does the discipline of economics have an accepted rigorous definition of capitalism?
I.e. not something like "some economists would quote Hayek and say that so and so constitutes capitalism" but an if and only if definition that most economists…
Giskard
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11
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Why plug deficits with bonds rather than printing money?
The UK is running a budget deficit £107 billion a year. Inflation is currently running at 1%.
Given these facts, why do they plug the gap by selling debt rather than just creating the money to cover the gap?
Just creating the money seems like it…
Simon Johnson
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Collusion and number of firms
How would you answer the following question?
You work for a CEO of a large firm. He says to you, "In my experience collusion is less likely to be sustained as the number of firms in the market increases. Demonstrate this using a model of Bertrand…
Jamzy
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Can the stock market show indefinite exponential growth?
In a comments on a question on money.SE, the following dialog took place:
Eventually there will not be enough matter to represent all the money, so we know for certain that the answer is "No" for a long enough term.
--yters
What do you mean by…
user13736