Sunday, November 30, 2008

Das Kapital: Illustrated Version

A comic (manga, if you so prefer) version of Das Kapital hits bookshelves this week. Here's the best quote:
The comic is expected to sell tens of thousands of copies in its first weeks on sale, but is up against stiff competition: anti-capitalist books are the hottest sellers in capitalist Japan at the moment, and it will take something extraordinary to beat the sales of Hideki Mitani’s “Greedy Capitalism and the Self Destructiveness of Wall Street.”

Saturday, November 29, 2008


Many Conservatives had been gleeful about the "poison pill" item in the update: the plan to slash $30 billion in taxpayer subsidies for political parties. But as the political fallout takes hold, Harper's move is widely seen as a terrible political miscalculation.

If I had a nickel for every time some journalist (actually, in this case, three journalists and presumably their editor) screwed up the difference between a million and a billion, I'd have a truckload of nickels. I'll refrain from taking pennies, given I support their abolishment.

For the record, the author does not support cutting the vote subsidy, but it's not something that pushes my buttons, either.

Thursday, November 27, 2008

On Purchasing Gold

Fundamentally, I think gold is a stupid investment. That doesn't stop this from being interesting:
You can go into the main Scotiabank branch in downtown Toronto and buy gold coins, wafers or bars, ranging in size from one-twentieth of an ounce to 400 ounces (which will set you back more than $320,000). You can also buy gold in other bank branches around the country, but you have to make arrangements for delivery in advance. There is no GST on most gold products, if they are very pure (above 99.5 per cent) and bought for investment purposes. There may be provincial sales taxes, depending on which province you live in. And you'll usually pay manufacturing, shipping and storage fees on top of the spot price.

I did not know that. If I wasn't living on the budget of a graduate student and several hours drive from Toronto (not that I have a car), I'd be tempted to go, inquire, and back out at the last moment, just to see what the process is like.

In more important news, my exams start in two weeks today. Hopefully updates will be scarce.

Wednesday, November 26, 2008

Should This Be Illegal?

I received junk mail today, and nanoseconds before I tossed it, I noticed that the front page advertised a Playstation 3 for $89.99. Waitaminute. That's impossible.

Double-take. Ah. $89.99 a month - for twelve months. Written underneath is "Every Day Low Price: $854.99". (The store is called Aaron's, not Wal-Mart.)

Surfing over to Amazon, you can find them at $399.99. If one was willing to buy at that price, it implies your monthly discount rate is approximately 0.7, i.e. you value $700 today just as much as you do $1000 at Christmas.

Equivalently, it means you value (in real terms) $80 today as $1000 this time next year. I can't help but think that anyone taking this "deal" is not only extremely short-sighted, but very poor at mathematics.

I'm almost tempted to proclaim this should be illegal. But not quite.

Tuesday, November 25, 2008


The Globe on GDP in Ontario. Let me quote:
The report says that if Ontario were able to raise its GDP per capita to even the median of its peers in North America, the after-tax disposable income per household in the province would rise by $9,200.

That didn't seem quite right to me. So I went and read the report, available here.

If you care to reference figure 2, you can observe that the difference in per capita GDP between Ontario and the median of a bunch of arbitrary US states plus Quebec is $6500 (Canadian). This statistic is completely useless, but it's also pre-tax!

Indeed, the $9,200 extra in disposable income seems (the report doesn't actually mention this) to come from computing 'what if Ontario became richer than any state in the bunch of arbitrary states we've selected', the state in question being New York. They then use this figure to denote the "prosperity gap", by which they imply 'Ontario should be this much richer'.

I also can't tell whether New York's GDP has been computed in Canadian dollars by multiplying by an exchange rate, or via a PPP-based computations. Either way, let's condemn both the Globe for not reading the report and the authors for being totally misleading by effectively saying that bad government policy is why the average Ontarian is out $9,200 after tax.

Somehow, I don't think most people reading the article are going to reach these conclusions, though...

Tuesday, November 18, 2008

Resource Wealth and Purchasing Power

Statscan has a nice graph showing that real gross domestic income per capita in Newfoundland grew by 9.5% annually from 2003 to 2007, the vast majority of which stems from increased resource prices. That's a lot. Not that I would have predicted that degree of change from simply from observing changes to the capital region. The permanent income hypothesis is true, I guess.

Of course, this will reverse this year as the decline in oil prices puts government in a real fiscal bind. Anyone who thinks that Newfoundland is structurally off equalization is crazy.

Monday, November 17, 2008


Back in undergrad, I remember writing a paper on aquaculture for an environmental economics class. I am glad that this wasn't part of any lecture I can remember:
As long as the price of farm-raised salmon, cod and tuna is lower than wild caught species then the production costs are lower.

I suppose the demand curve just wanders off somewhere into the distance to be forgotten about. One of the most important lessons in economics is that there is no such thing as a "fair markup price". Price is set by demand and supply (and the market structure, and the information available, and...), but certainly not by an arbitrary percentage added on over and above the cost of production.

To be fair, he lets the demand curve wander back in near the end, but still. You can't endorse the teaching of fair price doctrines.

Aquaculture is a particularly tricky thing because it generates hard-to-capture externalities. Taxing the farmed fish is difficult because the methods used by the operators and the geographical location of the fish farm can substantially affect the amount of ecodamage, so a levy based on output isn't appropriate. There's also more obscure things, like interbreeding with native populations and passing on weaker genes. Imposing correct incentives is difficult.

And of course any plan to deter aquaculture expansion in Newfoundland would be met with heavy opposition.

POSTSCRIPT: Why the heck do we index transition matrices (i,j), when i is tomorrow and j is today, but j follows i in the alphabet? Drives me foolish.

Saturday, November 15, 2008


Apparently I've been published in Maclean's. Living south of the border, I obviously can't check out a local newsstand to verify.

When I'm sure the article showed up in the print edition, I'll put up a page for questions at the Maclean's site proper for discussion.

Thursday, November 13, 2008

The Environmental Benefits of Free Trade

The paper version of the last WTO deal in 1994 weighed about 100 kilos.

From Free Exchange. Imagine what fourteen years of inflation would do to that. Save some trees, support free trade, i.e. without an uncountable set of loopholes and catches.

A link that may be interesting but I haven't had time to peruse.

Wednesday, November 12, 2008

Expected Utility Fact of the Day

The brief overview of expected utility: faced with a choice where the outcomes are uncertain, you will opt for the alternative where you would, on average, be happiest after the dust settles. The average person is likely risk averse to some degree - would you take a bet to lose everything or double your wealth?

Mathematically, this is represented by the concavity of the utility function. This has some troubling consequences: suppose someone offered you a bet. With a 50% chance, you will win $110, with a 50% chance, you will lose $100.

Thought about that? It doesn't matter how wealthy you are, by the way. Go ahead, take a stance.

Now, suppose another bet magically appears. With a 50% chance, you lose $1000. With a 50% chance, you win $1,000,000,000. If you turned down the first bet, you must also turn down the second bet, if you behave in accordance with expected utility theory. And if we stop assuming concavity, large parts of economics starts exploding.

Does it seem like the first bet is a more attractive proposition than the first? It doesn't appear so to me. Citation: Matthew Rabin, 2000, Risk-aversion and expected utility theory: a calibration theorem.

Monday, November 10, 2008

Canadian Housing Prices Update

I realize September is ancient history now, but you have to admit the data is interesting: over the last year, home prices in St. John's are up about 23%. (Admittedly, they were flat over the last month.) Still, we'll ride the oil boom for as long as it lasts - which is somewhat less than ten years. That is a physical constraint imposed by the oil extraction profiles. It's a good thing, but it's a band-aid nonetheless.

Anyway, for Canada as a whole, home prices were up - up! - for the month of September. File that under 'we're not the United States, volume infinity'.

Sunday, November 9, 2008

Fiscal Stimulus

Okay, I'm on a little shaky ground here because all we do in macro is consider coconut trees, determine how many coconuts should be consumed and how many planted, how the decision changes when global warming wipes out the island in finite time periods and when the villagers live forever, how different islands will trade coconuts, how many coconuts is a coconut tree worth, etc. Then you do it all over again when you don't know how many coconuts a coconut tree will bear, so on and so forth. Rochester fully embraces the ideal of macroeconomics as stochastic calculus porn.

Anyway, if I recall correctly, fiscal stimulus is only really effective when there's been a contraction in real GDP relative to potential GDP. If potential GDP is actually contracting, well, one just has to suck it up, the fiscal stimulus is simply an intergenerational transfer as opposed to a welfare-improving policy.

As such, there's relatively good reason, I think, for China's recently announced fiscal stimulus (even if most of it would have been spent anyway, and it's dragged out over several years) compared to the justification for American fiscal stimulus, where I think there's a real argument to be made that the economy is actually contracting, not just experiencing weakness, i.e. lots of capital in the financial and automotive sectors is not that useful as it was two years ago or twenty years ago, respectively.

Therefore I'd advocate Obama focus the little room for new spending he has on initiatives he finds personally compelling, rather than trying to spend where he's told it'll produce the biggest fiscal multiplier. Besides, this is at least in part a crisis of confidence and it would be a lot easier for him to give good speeches on health care initiatives, say, than auto bailouts.

Thursday, November 6, 2008

Sample Macro Homework

Sample macro homework. I've been meaning to do this for awhile. The macro assignments are certainly the most notable. They're a weekly thing.

And a pretty neat link.

Tuesday, November 4, 2008

Approaching Record Territory

Monthly inflation has hit 500,000% in Zimbabwe. The annual rate is running about 2,790,000,000,000,000,000%. Terrifyingly enough, it still has got to grow to set new records. Right now, prices are doubling somewhat more quickly than every two days - the record requires every fifteen hours.

The most interesting thing will be seeing what eventually makes it come back down, though.

Monday, November 3, 2008

Job Market Season

Rochester has nine candidates on the job market this season. Frankly, I'm not qualified to judge which ones have the best shot at good placements. But I can give you a taste of what the program is spitting out. Each candidate has two or three fields of expertise attached, here's how it breaks down.

-5 in labour economics
-5 in some version of microeconomics 'applied microeconomics, applied microeconomic theory, microeconomic theory', etc
-4 in macroeconomics

After that we're down to singletons, which I won't bother to list. Labour is obviously good here these days, game theory is also pretty good. Ron Jones is the only person here for international, I believe - a number of this year's graduates wrote field exams in international, but nobody stuck with it, perhaps because they couldn't find someone to work with. Nobody listing monetary, either. Anyway, there you have it. We had someone go to Northwestern last year, but he had an Econometrica paper under his belt, I don't think we'll be able to repeat that feat.


Newfoundland is officially off equalization.

This will last a handful of years, after which point the oil starts to dry up, and the budget probably goes back to the way it looked for the prior hundred years - not so great.

I don't believe anyone knows how to fix this. Certainly some oil is better than no oil, but it's by no means any sort of long-term cure-all for the province, unless I'm really missing something, and I don't hold out a lot of hope for developing sustainable spinoff industries, like cold/deepwater/harsh conditions expertise with platforms.

Theorem Search

I have no clue who actually reads this space, so I'll throw this out there. Help would be much appreciated.

Okay, we have Berge's Maximum Theorem, which basically says that when the objective function is well-behaved, we can be assured of structure on the value function (continuity) and on the maximizer correspondence (upper hemi-continuity, compact-valuedness).

If anyone knows of a theorem that works in the complex field as opposed to R^n (not that important) and guarantees both upper and lower hemi-continuity on the maximizer correspondence (rather more important), please take the time to post it.

The problem seems to be that the maximum theorem makes all the assumptions already, there's nothing left to strengthen.

EDIT: Upon scant reflection, there's something I'm missing. I believe the objective is convex. Otherwise strict quasiconcavity is a sufficient condition.