jamesz

Our competitive nature is not natural

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The heart of economics is an understanding of human choice. Our theories are almost all constructed on a utilitarian model of preferences and choice so understanding how we can improve that model is crucial to progress. Plenty of work has been done by behavioural empiricists on the heuristics that guide our behaviour and the anomalies in our choices. Now a paper by Leibbrandt, Gneezy, and List demonstrates that preferences also change over time in a predictable way. Read more

jamesz

When forward guidance doesn’t guide

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VoxEU have recently launched a book on forward guidance and it has demonstrated wonderfully my ignorance of central banking. I thought that when bankers issued ‘forward guidance’ they were doing it to escape the zero lower bound by promising to keep rates lower for longer than they normally would. Something like this:

Source: VoxEU eBook

Source: VoxEU eBook


The ‘Odyssian’ guidance seeks to lift nominal expectations by promising not to tighten policy in future. For a while, the bank’s policy rate will dip below the level you’d expect if they were never at the ZLB. That is the sort of guidance that the Bank of England has explicitly disavowed. Read more

Matt Nolan

Quote of the day: Lambert and value judgments

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I was excited to see James post about value judgments this morning – as that is exactly what I was about to throw a brief post on!  Partially motivated by this:

But also motivated by the fact I’ve been reading a bunch of ‘normative economics’ recently.  Here in the book “The Distribution and Redistribution of Income” by Peter Lambert is a quote about value judgments (with reference to, in this case, income inequality measures)”

It is hard to avoid making (often well-concealed) value judgments when assessing inequality

The points he goes on to make regarding valuing income distributions given certain measures are relatively well known, but worth repeating: Read more

jamesz

That ‘values talk’ will get you respect

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Economists love to distinguish between facts and values, positive and normative. We think of ourselves as scientists examining society and pronouncing truths that policy-makers can use to make a decision. Regular readers of this blog will know that we employ this rhetoric at every opportunity. I’ve read three people comment on it recently but I don’t know how I feel so I’ll put them here without judgement: Read more

Shamubeel Eaqub

Translating central bank speak

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Am I the only one who spends a lot of time trying to translate RBNZ communication into English? Below is a quick take in 200 fewer words what I think the key messages are from the October OCR announcement:  Read more

Tex

Home ownership causing higher unemployment. Just how would we react?

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Interesting article here on the ‘Oswald Hypothesis’ – a link between housing ownership and unemployment.

The basic argument seems to be if you live in a house your less likely to move to where jobs are because of the transaction costs associated with selling your house and moving from one community to another. So when you are made redundant – you opt for welfare rather than moving to another place.

This seems more plausible in the provinces than in cities. Read more