Supply and Demand Is Not a Neoclassical Concern
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Introductory Discussions of Supply and Demand and of the Working of the Price Mechanism Normally Treat Quantities Demanded and S
STRATHCLYDE DISCUSSION PAPERS IN ECONOMICS ‘ECONOMIC GEOMETRY’: MARSHALL’S AND OTHER EARLY REPRESENTATIONS OF DEMAND AND SUPPLY. BY ROY GRIEVE NO. 08-06 DEPARTMENT OF ECONOMICS UNIVERSITY OF STRATHCLYDE GLASGOW ‘ECONOMIC GEOMETRY’: MARSHALL’S AND OTHER EARLY REPRESENTATIONS OF DEMAND AND SUPPLY ROY GRIEVE1 ABSTRACT Does an apparent (minor) anomaly, said to occur not infrequently in elementary expositions of supply and demand theory, really imply – as seems to be suggested – that there is something a bit odd about Marshall’s diagrammatic handling of demand and supply? On investigation, we find some interesting differences of focus and exposition amongst the theorists who first developed the ‘geometric’ treatment of demand and supply, but find no reason, despite his differences from other marginalist pioneers such as Cournot, Dupuit and Walras, to consider Marshall’s treatment either as unconventional or forced, or as to regard him as the ‘odd man out’. Introduction In the standard textbooks, introductory discussions of demand and supply normally treat quantities demanded and supplied as functions of price (rather than vice versa), and complement that discussion with diagrams in the standard format, showing price on the vertical axis and quantities demanded and supplied on the horizontal axis. No references need be cited. Usually this presentation is accepted without comment, but it can happen that a more numerate student observes that something of an anomaly appears to exist – in that the diagrams show price, which, 1 Roy’s thanks go to Darryl Holden who raised the question about Marshall's diagrams, and for his subsequent advice, and to Eric Rahim, as always, for valuable comment. -
Unemployment Insurance and Macroeconomic Stabilization
153 Unemployment Insurance and Macroeconomic Stabilization Gabriel Chodorow-Reich, Harvard University and the National Bureau of Economic Research John Coglianese, Board of Governors of the Federal Reserve System Abstract Unemployment insurance (UI) provides an important cushion for workers who lose their jobs. In addition, UI may act as a macroeconomic stabilizer during recessions. This chapter examines UI’s macroeconomic stabilization role, considering both the regular UI program which provides benefits to short-term unemployed workers as well as automatic and emergency extensions of benefits that cover long-term unemployed workers. We make a number of analytic points concerning the macroeconomic stabilization role of UI. First, recipiency rates in the regular UI program are quite low. Second, the automatic component of benefit extensions, Extended Benefits (EB), has played almost no role historically in providing timely, countercyclical stimulus while emergency programs are subject to implementation lags. Additionally, except during an exceptionally high and sustained period of unemployment, large UI extensions have limited scope to act as macroeconomic stabilizers even if they were made automatic because relatively few individuals reach long-term unemployment. Finally, the output effects from increasing the benefit amount for short-term unemployed are constrained by estimated consumption responses of below 1. We propose five changes to the UI system that would increase UI benefits during recessions and improve the macroeconomic stabilization role: (I) Expand eligibility and encourage take-up of regular UI benefits. (II) Make EB fully federally financed. (III) Remove look-back provisions from EB triggers that make automatic extensions turn off during periods of prolonged unemployment. (IV) Add additional automatic extensions to increase benefits during periods of extremely high unemployment. -
The Neoclassical Economics of Consumer Contracts
University of Chicago Law School Chicago Unbound Journal Articles Faculty Scholarship 2007 The Neoclassical Economics of Consumer Contracts Richard A. Epstein Follow this and additional works at: https://chicagounbound.uchicago.edu/journal_articles Part of the Law Commons Recommended Citation Richard A. Epstein, "The Neoclassical Economics of Consumer Contracts," 92 Minnesota Law Review 803 (2007). This Article is brought to you for free and open access by the Faculty Scholarship at Chicago Unbound. It has been accepted for inclusion in Journal Articles by an authorized administrator of Chicago Unbound. For more information, please contact [email protected]. Exchange The Neoclassical Economics of Consumer Contracts Richard A. Epsteint There is little doubt that the major new theoretical ap- proach to law and economics in the past two decades does not come from either of these two fields. Instead it comes from the adjacent discipline of cognitive psychology, which has now morphed into behavioral economics. Starting with the path- breaking work of Amos Tversky and Daniel Kahneman in the 1970s, the field has asked one question in a thousand guises: do ordinary people obey the principles of rational choice in making their decisions?' The usual answer given in the field is that in at least some domains they do not.2 The new law and economics literature uses these behavioral findings, especially in the study of cognitive bias, to open a new chapter in the long- standing debate over the extent to which market failures pave t The James Parker Hall Distinguished Service Professor of Law, The University of Chicago, and the Peter and Kirsten Bedford Senior Fellow, The Hoover Institution. -
A Post-Keynesian Approach As an Alternative to Neoclassical in the Explanation of Monetary and Financial System
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Zachariadis, Savvas Article A Post-Keynesian approach as an alternative to neoclassical in the explanation of monetary and financial system Financial Studies Provided in Cooperation with: "Victor Slăvescu" Centre for Financial and Monetary Research, National Institute of Economic Research (INCE), Romanian Academy Suggested Citation: Zachariadis, Savvas (2020) : A Post-Keynesian approach as an alternative to neoclassical in the explanation of monetary and financial system, Financial Studies, ISSN 2066-6071, Romanian Academy, National Institute of Economic Research (INCE), "Victor Slăvescu" Centre for Financial and Monetary Research, Bucharest, Vol. 24, Iss. 1 (87), pp. 21-35 This Version is available at: http://hdl.handle.net/10419/231693 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. -
FACTORS of SUPPLY & DEMAND Price Quantity Supplied
FACTORS OF SUPPLY & DEMAND Imagine that a student signed up for a video streaming subscription, a service that costs $9.00 a month to enjoy binge- worthy television and movies at any time of day. A few months into her subscription, she receives a notification that the monthly price will be increasing to $12.00 a month, which is over a 30 percent price increase! The student can either continue with her subscription at the higher price of $12.00 per month or cancel the subscription and use the $12.00 elsewhere. What should the student do? Perhaps she’s willing to pay $12.00 or more in order to access and enjoy the shows and movies that the streaming service provides, but will all other customers react in the same way? It is likely that some customers of the streaming service will cancel their subscription as a result of the increased price, while others are able and willing to pay the higher rate. The relationship between the price of goods or services and the quantity of goods or services purchased is the focus of today’s module. This module will explore the market forces that influence the price of raw, agricultural commodities. To understand what influences the price of commodities, it’s essential to understand a foundational principle of economics, the law of supply and demand. Understand the law of supply and demand. Supply is the quantity of a product that a seller is willing to sell at a given price. The law of supply states that, all else equal, an increase in price results in an increase in the quantity supplied. -
Macroeconomics: an Introduction the Demand for Money
Lecture Notes for Chapter 7 of Macroeconomics: An Introduction The Demand for Money Copyright © 1999-2008 by Charles R. Nelson 2/19/08 In this chapter we will discuss - What does ‘demand for money’ mean? Why do we need to know about it? What is the price of money? How the supply and demand for money determine the interest rate. The Fed controls the supply of money, so the Fed can control the interest rate. Why Study the Demand for Money? Fed controls the supply of money through open market operations. The demand for money depends on the interest rate. Interest rate is a price, and it adjusts to balance the supply and demand for money. That means the Fed can control interest rates by changing the supply of money. 1 Why are interest rates important? Low interest rates stimulate spending on - plant and equipment - and consumer durables. High interest rates discourage spending, - affect GDP and employment, - finally, prices and wages too. Control over interest rates gives the Fed a lever to move the economy. What is the Demand for Money? How much money would you like to have? - One billion? - Two? That can’t be it. Instead ‘How much money (currency and bank deposits) do you wish to hold, given your total wealth.’ Puzzle - Why hold any money at all? It pays no interest. It loses purchasing power to inflation. 2 Motives for holding money: 1. To settle transactions. - Money is the medium of exchange. 2. As a precautionary store of liquidity. - Money is the most liquid of all assets. -
A Primer on Modern Monetary Theory
2021 A Primer on Modern Monetary Theory Steven Globerman fraserinstitute.org Contents Executive Summary / i 1. Introducing Modern Monetary Theory / 1 2. Implementing MMT / 4 3. Has Canada Adopted MMT? / 10 4. Proposed Economic and Social Justifications for MMT / 17 5. MMT and Inflation / 23 Concluding Comments / 27 References / 29 About the author / 33 Acknowledgments / 33 Publishing information / 34 Supporting the Fraser Institute / 35 Purpose, funding, and independence / 35 About the Fraser Institute / 36 Editorial Advisory Board / 37 fraserinstitute.org fraserinstitute.org Executive Summary Modern Monetary Theory (MMT) is a policy model for funding govern- ment spending. While MMT is not new, it has recently received wide- spread attention, particularly as government spending has increased dramatically in response to the ongoing COVID-19 crisis and concerns grow about how to pay for this increased spending. The essential message of MMT is that there is no financial constraint on government spending as long as a country is a sovereign issuer of cur- rency and does not tie the value of its currency to another currency. Both Canada and the US are examples of countries that are sovereign issuers of currency. In principle, being a sovereign issuer of currency endows the government with the ability to borrow money from the country’s cen- tral bank. The central bank can effectively credit the government’s bank account at the central bank for an unlimited amount of money without either charging the government interest or, indeed, demanding repayment of the government bonds the central bank has acquired. In 2020, the cen- tral banks in both Canada and the US bought a disproportionately large share of government bonds compared to previous years, which has led some observers to argue that the governments of Canada and the United States are practicing MMT. -
Nber Working Paper Series David Laidler On
NBER WORKING PAPER SERIES DAVID LAIDLER ON MONETARISM Michael Bordo Anna J. Schwartz Working Paper 12593 http://www.nber.org/papers/w12593 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2006 This paper has been prepared for the Festschrift in Honor of David Laidler, University of Western Ontario, August 18-20, 2006. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2006 by Michael Bordo and Anna J. Schwartz. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. David Laidler on Monetarism Michael Bordo and Anna J. Schwartz NBER Working Paper No. 12593 October 2006 JEL No. E00,E50 ABSTRACT David Laidler has been a major player in the development of the monetarist tradition. As the monetarist approach lost influence on policy makers he kept defending the importance of many of its principles. In this paper we survey and assess the impact on monetary economics of Laidler's work on the demand for money and the quantity theory of money; the transmission mechanism on the link between money and nominal income; the Phillips Curve; the monetary approach to the balance of payments; and monetary policy. Michael Bordo Faculty of Economics Cambridge University Austin Robinson Building Siegwick Avenue Cambridge ENGLAND CD3, 9DD and NBER [email protected] Anna J. Schwartz NBER 365 Fifth Ave, 5th Floor New York, NY 10016-4309 and NBER [email protected] 1. -
Eco 252 Principles of Macroeconomics Course
ECO 252 PRINCIPLES OF MACROECONOMICS COURSE DESCRIPTION: Prerequisites: ENG 090 and RED 090 or DRE 098; MAT 070 or DMA 010, 020, 030, 040, 050, or satisfactory score on placement test Corequisites: None This course introduces economic analysis of aggregate employment, income, and prices. Topics include major schools of economic thought; aggregate supply and demand; economic measures, fluctuations, and growth; money and banking; stabilization techniques; and international trade. Upon completion, students should be able to evaluate national economic components, conditions, and alternatives for achieving socioeconomic goals. This course has been approved to satisfy the Comprehensive Articulation Agreement for the general education core requirement in social/behavioral sciences. Course Hours Per Week: Class, 3. Semester Hours Credit, 3. LEARNING OUTCOMES: Upon successful completion of the course, students will be able to: a) Understand that economics is about the allocation of scarce resources, that scarcity forces choice, tradeoffs exist and that every choice has an opportunity cost. Be able to demonstrate these concepts using a production possibility frontier diagram. b) Understand how comparative advantage provides the basis for gains through trade. c) List the determinants of the demand and supply for a good in a competitive market and explain how that demand and supply together determine equilibrium price. d) Understand the causes and effects of inflation and unemployment. e) Describe the macroeconomy using aggregate demand and aggregate supply analysis. f) Demonstrate an understanding of monetary and fiscal policy options as they relate to economic stabilization in the short run and in the long run. OUTLINE OF INSTRUCTION: I. Economics: what it’s all about A. -
Housing Supply and Affordability: Do Affordable Housing Mandates Work?
April 2004 HOUSING SUPPLY AND AFFORDABILITY: DO AFFORDABLE HOUSING MANDATES WORK? By Benjamin Powell, Ph.D and Edward Stringham, Ph.D Project Director: Adrian T. Moore, Ph.D POLICY STUDY 318 Reason Public Policy Institute division of the Los Angeles-based Reason Foundation, Reason APublic Policy Institute is a nonpartisan public policy think tank promoting choice, competition, and a dynamic market economy as the foundation for human dignity and progress. Reason produces rigorous, peer-reviewed research and directly engages the policy process, seek- ing strategies that emphasize cooperation, flexibility, local knowledge, and results. Through practical and innovative approaches to complex problems, Reason seeks to change the way people think about issues, and promote policies that allow and encourage individuals and volun- tary institutions to flourish. Reason Foundation Reason Foundation’s mission is to advance a free society by develop- ing, applying, and promoting libertarian principles, including indi- vidual liberty, free markets, and the rule of law. We use journalism and public policy research to influence the frameworks and actions of poli- cymakers, journalists, and opinion leaders. Reason Foundation is a tax-exempt research and education organiza- tion as defined under IRS code 501(c)(3). Reason Foundation is sup- ported by voluntary contributions from individuals, foundations, and corporations. The views are those of the author, not necessarily those of Reason Foundation or its trustees. Copyright © 2004 Reason Foundation. Photos used in this publication are copyright © 1996 Photodisc, Inc. All rights reserved. Policy Study No. 318 Housing Supply and Affordability: Do Affordable Housing Mandates Work? By Benjamin Powell, Ph.D. and Edward Stringham, Ph.D Project Director: Adrian T. -
Chapter 4: the Market Forces of Supply and Demand Principles of Economics, 8Th Edition N
Chapter 4: The Market Forces of Supply and Demand Principles of Economics, 8th Edition N. Gregory Mankiw Page 1 1. Supply and demand are the most important concepts in economics. 2. Markets and Competition a. Market is a group of buyers and sellers of a particular good or service. P. 66. b. These individuals are assumed to be rational attempting to maximize their welfare subject to the constraints that they face. c. A competitive market is a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. P. 66. d. What is Competition? i. Perfectly competitive markets are defined by two characteristics: (1) homogeneous products and (2) many buyers and sellers so no one influences the price. ii. Under perfect competition, firms are price takers. iii. A market with only one seller is called monopoly. iv. A market with few sellers is called an oligopoly. v. A market with many sellers who sell slightly differentiated products is called monopolistic competition. vi. Some degree of competition is present in most markets. e. The different environments in which firms operate: Type of Product Number of Sellers Many Few One Homogeneous Competition Oligopoly Monopoly (Wheat) (Airlines) (Patent Holder) Differentiated Monopolistic (Automobiles) Price Competition Discriminating (Retail Shoes) Monopolist (Publisher) f. We can also think about markets in terms of the difficulty of entry with i. competitive markets being easy to enter and ii. monopolistic markets being difficult to enter. 3. Demand a. The Demand Curve: The Relationship between Price and Quantity Demanded i. -
The Transformation of Macroeconomic Policy and Research
K4_40319_Prescott_358-395 05-08-18 11.41 Sida 370 THE TRANSFORMATION OF MACROECONOMIC POLICY AND RESEARCH Prize Lecture, December 8, 2004 by Edward C. Prescott* Arizona State University, Tempe, and Federal Reserve Bank of Minneapolis, Minnesota, USA. 1. INTRODUCTION What I am going to describe for you is a revolution in macroeconomics, a transformation in methodology that has reshaped how we conduct our science. Prior to the transformation, macroeconomics was largely separate from the rest of economics. Indeed, some considered the study of macroeconomics fundamentally different and thought there was no hope of integrating macroeconomics with the rest of economics, that is, with neoclassical economics. Others held the view that neoclassical foundations for the empirically deter- mined macro relations would in time be developed. Neither view proved correct. Finn Kydland and I have been lucky to be a part of this revolution, and my address will focus heavily on our role in advancing this transformation. Now, all stories about transformation have three essential parts: the time prior to the key change, the transformative era, and the new period that has been impacted by the change. And that is the story I am going to tell: how macro- economic policy and research changed as the result of the transformation of macroeconomics from constructing a system of equations of the national accounts to an investigation of dynamic stochastic economies. Macroeconomics has progressed beyond the stage of searching for a theory to the stage of deriving the implications of theory. In this way, macroeconomics has become like the natural sciences. Unlike the natural sciences, though, macroeconomics involves people making decisions based upon what they think will happen, and what will happen depends upon what decisions they make.