Young Economics.

Interesting Stuff: The Canadian Tire Money Edition

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— Paul Krugman comments twice (here and here) on the Christiano et al. and Cogan et al. fiscal multiplier papers to which I linked the other day.  I’m pleased to report that Krugman’s guess about the reason for the conflicting results is basically the same as my guess:

My guess — but it’s really hard to decipher — is that in Cogan et al the zero lower bound isn’t really binding; they think the Fed is being too expansionary.

Of course, he goes on to say a lot of much smarter things than I am able to do.

— A new NBER paper on technological progress in the automobile sector:

This paper estimates the technological progress that has occurred since 1980 and the trade-offs that manufacturers and consumers face when choosing between fuel economy, weight and engine power characteristics. The results suggest that if weight, horsepower and torque were held at their 1980 levels, fuel economy for both passenger cars and light trucks could have increased by nearly 50 percent from 1980 to 2006; this is in stark contrast to the 15 percent by which fuel economy actually increased. I also find that once technological progress is considered, meeting the CAFE standards adopted in 2007 will require halting the observed increases in weight and engine power characteristics, but little more; in contrast, the standards recently announced by the new administration, while certainly attainable, require non-trivial “downsizing”.

— From Macleans: Why free trade with the EU goes nowhere.

“Most people who are usually in favour of free trade, both in Canada and the EU, have been served.  They have free trade. They have no obstacles.” But those in other sectors who want protection have it and won’t give it up easily.

In the comments section, someone chimes in with this:

I told a conference on Canada-EU trade a year ago, exaggerating only a little for effect, that if this falls apart, it will be because Europe is a real country and Canada isn’t.

A new study followed “at risk” young boys in Quebec for over twenty years and found that jailing young offenders makes them worse.

The euthanasia debate may soon heat up in Quebec.

— Will Wilkinson at the Cato Institute has a new paper, “Thinking Clearly about Economic Inequality.” One major theme with which I (mostly) agree is this:

The pattern of incomes is affected by both morally desirable and undesirable mechanisms. When injustice or wrongdoing increases income inequality, the problem is the original malign cause, not the resulting inequality.

Here is Wilkinson discussing the paper (among other topics) with non-libertarian journalist Ezra Klein.

I will say more about economic inequality on this blog someday.

A good post at Worthwhile Canadian Initiative about whether or not California is different from Canadian Tire.  Also be sure to read the comments for stuff like this:

Wallace and Eichenbaum (http://www.minneapolisfed.org/research/QR/QR911.pdf) explain how the decision by Rona to accept Canadian Tire money at face value as payment in 1983 forced Canadian Tire to go to court. After all, had Rona continued to accept Canadian Tire money (and been copied by others in a Mengerian manner), it might be interpreted that Canadian Tire was creating a circulating generally accepted currency, and would have put the company in contravention of the law.

In sum, the reason Canadian dollars circulate rather than CT money could be largely due to the legal restrictions that subsidize trades in C-dollars but prevent CT money from being accepted, and not any intrinsic advantage of C-dollars. No large company will accept CT money as payment, for were they to do so they might be pursued by Canadian Tire in court. Without these laws, it might be that CT money would have displaced C-dollars years ago.

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Written by Alex

July 17, 2009 at 11:55 am

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