Economics

Only about ___% of college break even on their revenue from athletics...

1%

The Barbary pirates of North Africa captured _____ slaves from Europe....

1-1.25 million between the 16th and 19th centuries, most of these slaves were sold to the Ottoman Empire

In the 1928 German elections the Nazis got

1.8% of the vote, and the Communists didn't do well either

One study estimated that....

1/10th of private property in Africa is legally recognized, in many places Africans can legitimize their private property but it takes too long to do so

In 1905 _______ of cars were electric.....

1/3 and there was a steam powered one that could go 127 miles per hour

IQ is quite stable once you reach...

10 or so years old, it seems somewhat malleable in your younger years but only by 0.2-0.3 SDs

The Heavenly Twins initially argued for a reparations payment of....

100 billion (8x 1914 GDP), the eventual payment was 33 billion.

In 1913 Argentina was the world's....

10th largest economy by GDP per capita

In 1982 ----- of the wealthiest 100 people in the world made their wealth through inheritance compared to ------ in 2020...

60, 27

There are around _______ homeless people in the US....

600,000

The informal sector is around ____ % of the American economy

7%, 20% in Italy, 40% in many developing countries

Women initiate ______% of divorces.....

70

Around ____% of American money is currency.....

8

Median worker captures around....

85% of their marginal product with the rest going to uncertainty about worker productivity, search costs, and training costs; CEOs capture around 70% of their marginal product

Jensen, Fama, and Richard Rolle found that...

85-90% of adjustments to new information are factored into a stock price before the information becomes public

Around _____% of wikipedia edits are done by men....

87

Stocks declined _____% between 1929 and 1932....

89

Out of pocket health spending was 33% in 1970 compared to...

9% in 2020, government spending increased from 22 to 40% in the same period

The wage gap is around...

9% out of college and 33% if you return to the labor force after having children

In Britain during WWII the top marginal tax rate was...

99.25%, in 1971 Britain had a 98% capital gains tax

Ed Prescott argues that....

If there was no business cycle that would be a greater mystery, many industries are not correlated with each other and thus the business cycle is often a sum of small, unrelated negative effects

One flaw people make is to imagine growth as a scaling up process....

If they had done so in the Stone Age they would have imagined bigger caves and more meat, growth is always different and better than you imagine

Villages which are close to cities have higher yields....

If you are a farmer you can't spend your savings because you're scared of starving to death in the case of a famine (you can't afford to buy fertilizer and increase your yields), but if you live near a city you can have a backup plan in case of a famine and spend more on your farm

You can potentially overstate the Keynesian multiplier....

If you don't take into account the increase in taxes which will occur at some point

One study by David Autor found that the banning of rent control by Massachusetts in 1994....

Increased the value of real estate by 2 billion dollars and that 80% of this came from neighborhood effects.

Increasing the size of scientific grants....

Increases the salaries of scientists but doesn't lead to more or better scientific research, this is intuitive, many scientists are paid more than they would be in the private sector

An important work in the study of business cycles...

Is Measuring Business Cycles (1946) by Arthur Burns and Wesley Mitchell, one of their key insights is that many variables move together during recessions

Schelling notes that climate change...

Is a complicated coordination problem with rich nations bearing most of the costs and developing nations reaping most of the benefits

A tax on intermediate processes...

Is a disincentive for making complicated multi-step goods and an incentive for vertical integration

Sam Peltzman argued that redistribution...

Is a normal good and is purchased by societies which are wealthy enough to do so

The economic machine....

Is an overused metaphor, an ecosystem is a better metaphor because the economy is composed of many independent beings in equilibrium and so it's difficult to fix a problem without creating an additional problem

In many industries productivity measurement...

Is impossible, you can measure airline productivity by miles flown but how do you measure the value of other changes in the airline experience?

Mercantilism

Is never really explained in any book-length form, it is more an alliance between businesses which want protection and governments which want more bullion

When versioning its important for the company to make sure its inexpensive version....

Is not attractive to buyers who can afford the better version, incentive to lower quality

A common mistake in financial markets....

Is people mistaking stocks with similar names for each other which causes unjustified price changes, that being said these usually adjust quite quickly

One of Hayek's core insights....

Is that everyone contains private information which is necessary for the economy to run smoothly. What's more a lot of this knowledge is unconscious, the knowers themselves are unaware of their knowledge

One theory of COVID shortages...

Is that people don't profit-maximize during crises and dislike raising prices. For example, store owners don't price gouge during crises as much as you'd expect

One way to think about the difference between Cournot and Bertrand....

Is that prices can be changed instantly and competitor price is easily observable but quantities have a lag and competitor quantity is harder to determine

One problem in the exit-voice dichotomy...

Is that you can use voice and then exit, but you can't exit and then use voice. Exit and voice are viewed as opposites but voice is meaningless if exit is impossible (authoritarian regime)

One theory for Jewish success....

Is the importance of education after the Temple was destroyed in 70 AD and Judaism became a textual religion

After WWII the Allies banned the use of foreign currencies in Germany and marks were useless....

So Germans used cigarettes, these cigarettes could be used at 20x their retail value for a period -- a huge tax on smoking

Economics is a net exporter of ideas into...

Sociology and political science and a net importer from psychology

Its unclear what 16th century growth constraints really were or if they even existed....

Some 16th century farms near major cities were able to reach 19th century agricultural productivity

If two people are married and one wants to stay married and the other wants a divorce but staying married is welfare-maximizing we would expect by the Coase theorem that the one party offers enough marital goods to keep the marriage intact....

Some marital goods are public goods however (like love or children's happiness) and can't be traded. Since you can't trade your entire allocation there will be divorces which are not welfare-maximizes and marriages which should have been divorces, note this is most extreme the more the marriage is based around love/children

The opposite way to think about automation.....

Some resources aren't substituted, we reached peak horse in 1910

Hotteling's Model

Sometimes it makes sense for producers to be as similar as possible, for example gas stations often open right next to each other. It would be socially optimal for each station to move in opposite directions but neither station is willing to do so.

There are reasons to want to avoid bankruptcy at all costs...

Sometimes the assets of the company have a synergy and auctioning them off separately leads to huge losses

Slaves outnumbered free persons in...

South Carolina and Mississippi

One explanation for low African growth...

They tend to live in weird places because of the history of the slave trade -- they're much more likely to live in mountains and away from rivers/coasts

Principals seem to say they don't randomly assign kids into classes....

They try to be super-random, assign kids so that each class is similar in ability

It is estimated that interest rates have consistently gone down...

They were 25% in Babylon, 10% in Ancient Greece and Medieval Europe. Interest rates seem high even compared to the rate of default, one possibility is that nobody knew how important investing is

At Jamestown 67 of the first 105 died in the first year....

They worked 4-6 hours and still struggled to survive after the land was privatized in 1614 -- the colony was reduced by the export crop of tobacco

William Stanley Jevons' worst prediction was...

Thinking business cycle fluctuations were based on the 11-year cycle of waxing and waning sun spots

Several components from the Challenge shuttle were made by private companies....

Thiokol, the company that made the O-ring, had a 12% decline in stock price just hours after the disaster even though nobody from the company or NASA traded

If prices are distorted in one market....

This can distort every other price in the market (depending on the ties between markets)

Development models originally modeled poor people as irrational...

This changed in the 1960s when Theodore Schultz noted that farmers respond to price changes much more than one would expect

There is debate as to whether slaves should be counted as capital or labor...

This changes wealth to GDP ratios from 350% to 460% potentially, Sumner argues that buying a slave is equivalent to spending all your labor costs upfront, otherwise 1865 brings abrupt changes in national wealth

The South tried to procure funding during the Civil War with cotton-backed bonds....

This failed after the North captured New Orleans in 1862 and also made it clear that they would not honor the South's debt

Declines in total fertility rate can take a long time....

To manifest themselves fully because not only are fewer babies born but there are fewer people to have babies in the following generation even if fertility rate improves

In 1900 40% of Americans worked in agriculture....

Today it's around 1%, 40% of American jobs were destroyed and that's a good thing

European drug prices are based off an index...

Which has an average of other European country drug prices, but since every European country uses the index (all their indices are somewhat different) the whole system is very self-referential

David Friedman has a theory that large nations could extract more rents from trade (smaller nations have no market power because the trade route can always be moved away from a small nation)....

Which means that the collapse of East-West trade led to the fall of the Roman Empire because there were now no rents from trade

The explanation for Zipf's law is probably Gibrat's law....

Which states that the rate of population growth for a city is uncorrelated with the city's initial population size, random growth leads to Zipf-like outcomes

Cartels seem to be highly unstable because...

a). It's difficult for businesses to agree on price and quantity, b). It increases the returns to starting a new business, c). It's not legally binding and there's nothing to stop a business from cheating or leaving the cartel

Friedman's k-percent rule didn't work as well as he imagined because...

a). It's unclear whether M1 or M2 should be used, b). The relation between inflation and the money supply is not as linear as Friedman believed

Labor theory of value contradictions....

a). Labor intensive industries should have higher profits, b). Finding a diamond on a hike, c). Labor doesn't accurately predict the prices of goods, d). People who advocate for the LTV are usually doing so in a normative way

Irving Fisher was the first to formalize some macro ideas...

a). MV=PT (T is number of transactions), b). The money illusion (people don't take inflation into account instantly), c). The idea of a nominal interest rate

RBC is best explained was a Robinson Crusoe type island, one week it rains all the time....

and the next week there are loads of fish, so he works much more the second week

On average modern apartment buildings in big cities are shorter than ...

apartment buildings from the 1970s

Two types of belief in free will:

compatibilism and libertarian free will

linear programming

the process of finding the maximum or minimum values of a function for a region defined by inequalities. Pioneered by Leonid Kantorovich in the Soviet Union and Tjalling Koopmans in the West

Corporations spend 200 billion dollars a year on advertising compared to _____ on lobbying...

3 billion

Home appliances are the type of good....

With the greatest price decline, they are around 10% of their 1950 price

Supply and demand still operates...

Without a currency

The rationale for shareholder-management separation is...

If shareholders are themselves managers they won't fire themselves when they are doing badly

Lerner Index

(P-MC)/p=-1/e, inelastic demand is associated with market power

Many in the 1940s said things like 'sure, Communism will outperform capitalism but freedom is the important thing.'

.....

Raj Chetty found that a 1 standard deviation increase in teacher quality leads to a ____ increase in test scores in the following year

0.1 SD

Smet-Wouters a commonly used DSGE model predicts growth four quarters out at an r of....

0.28, not great -- DSGE models often lose to univariate regressions

Correlation between parent's and child's income is....

0.5, about the same as measurable traits

Furman notes that the highest unemployment recovery by an OECD country was...

0.7% per year

IQ correlates with GDP per capita at...

0.82, who knows how meaningful that is

Only around ____% of the UAE are citizens

15

Highest single-day stock market increase....

15.3% in 1933

Early fiat attempts took place in....

1780s America and 1790s France, countries tended to move to fiat during war like 1800s Britain (returned in 1821) and 1860s US (returned in 1879)

Convicts were sent to Australia (162,000) between...

1788 and 1868, they were previously sent to America but that was no longer possible

Hong Kong became a British colony in

1840, in 1897 England promised to hand the land off to China in 100 years

The corn laws were passed in 1689 and repealed in

1845

The energy intensity of the economy peaked in...

1880, when it was 4.5 times higher per dollar of GDP than it is today. Similarly carbonization has fallen by 10x per dollar of GDP since 1800

Pendleton Civil Service Act

1883 law which stated that civil appointments must be made on the basis of merit, Chester Alan Arthur was president at the time

America became the largest economy in

1900, but it was close in 1860 and 1880 before faltering

American government spending was roughly constant between 1800 and....

1917 at 2% of GDP, the Civil War is the major exception

In Britain the property ownership clause for voting remained until.....

1918, it was loosened over time, for example by the late-19th century you could vote if you paid a certain amount in rent

The Soviet Union was the First Nation to legalize abortion doing so in....

1920, this was repealed in 1936 however and reinstitute in 1955

The Dawes Plan

1924 committee led by Charles Dawes which delayed German payment of reparations and moved French forces out of the Ruhr. Dawes won a Nobel Peace Prize in 1925 and served as Coolidge's VP

Advertising as a percentage of GDP peaked in...

1925 at 3% of GDP, today it's around 2%

The US did not bailout the Bank of the United States in...

1930, an early case of a non-bailout, this bank failure caused widespread panic because people incorrectly believed it was associated with the government in some way, Milton Friedman supported a bail out in this case

Steel companies in Germany were allowed to take private contracts until...

1941, every business became focused on the war effort starting in 1943

The great leap forward took place between

1958 and 1962, some sources suggest they killed one billion sparrows, their two techniques for farming were close seeding and deep plowing

TFP did not increase at all between....

1973 and 1982, despite a 2.6 year increase in life expectancy, Moore's Law continuing, and corn yields improving; TFP is too dependent on macroeconomic conditions to be a good measure of innovation

Portfolio insurance was created by Hayne Leland in...

1976, he realized it could increase total market risk but didn't think it would ever become popular enough to do so

Advertising has stayed constant at....

2% of GDP since the 1920s

Americans give what percent of their income to charity?

2% of their income to charity

Unexpected CEO deaths led to a.....

2.32% drop in stock prices, which if taken literally suggests that CEOs are underpaid

German in its worst year paid...

2.5% of GDP in reparations, American loans to Germany were 4x the level of reparations payments

Chad Jones found that reduced discrimination is responsible for....

20-40% of growth between 1970 and 2020

Suicide rates have increased recently but less noted is that they actually were lowest in the year.....

2000 (10.4 per 100,000) and their rates today (13.4 per 100,000) are about the same as suicide rates in 1950 and 1970 (13.1) -- the deeper question is not why they rose but why they ever fell

Slave prices peaked at ____ for women and _____ for men...

22, 25

Murder rates increase by _____% as city size doubles....

25, murder is the best proxy for crime since all other crimes are underreported

Cotton production was ______x higher in 1860 than in 1800....

25. Some see this as a prime-mover in the American economy, as cotton trade expanded so did financial and insurance markets

In 1890 China had 10 KM of railroads, India had...

26,400

France's share of gold reserves increased from 7% in 1926 to ____% in 1932....

27%

In 1927 France controlled 7% of the world's gold, in 1932 they controlled...

27%

In 1860 government spending was 178 million and the total value of all slaves was....

3.4 billion dollars -- note that by 1865 government spending was up to 1.48 billion dollars

In the transatlantic slave trade what percentage of slaves were taken to the US?

3.6%

In an analysis of the Oregon Medicaid experiment by Amy Finkelstein, a dollar of healthcare was worth...

30 cents of welfare to recipients

Doubling prison sentences seems to reduce crime about....

30% and a large portion of this seems to be the fact that criminals are off the streets for that period rather than incentive effects

The Emancipation Proclamation provided ______ dollars for those who freed their slaves.....

300, this actually wasn't a bad price considering the market price in 1860 was 800 dollars and the South had a poor chance of winning the war. Only around 3,000 slaves were freed in this way

There are around ________ landmarked buildings in NYC....

33,000

The Philips curve model in the 1970s had...

4-4 as the intersection between inflation and unemployment

The top 1% pay....

40% of taxes and more than the bottom 75% combined

Under the NEP tax rates fell from 100% to...

41%, unsurprisingly revenues increased

Americans spend around 6 billion dollars a year on pet services...

5 billion was spent on all presidential and congressional elections combined during the last cycle, Comcast spent more on advertising per year (6 billion) than all candidates combined

In the first 20 years of the US...

5/6 of the budget was spent dealing with Indians

The US Treasury has received....

50 million dollars since 1996 to help pay for the debt

Homosexuality is genetic but not as genetic as one might imagine, when one identical twin is homosexual there is a....

50% chance that the other will be homosexual

The price of automobiles is....

50% what it was in 1950, but the price of fixing automobiles is 175% what it was in 1950

Between 1970 and 2000 household income increased by 6% and individual income increased by...

51%

One analysis of bond underwriting cost by number of buyers found...

A 24.5% decrease in price from the second customer, a 2.3% decrease from the second, perfect competition reached at six

The Federal Reserve was created in 1913...

A belated offspring of the Panic of 1907

PCE is...

A broader measure of inflation (personal consumption expenditures) than CPI, they sometimes differ by a point or more, PCE is usually higher in large part because of healthcare

Infant industry protection has an economic logic behind it, regions of France which were blocked by the British blockade in the early 19th century saw their textile industries survive while areas which did not saw their textile industry stamped out...

A counterargument is that protectionism generally lasts longer than it needs to and is hard to reverse, France banned the import of British textiles for 50 years after the blockade

Samuel Upham

A counterfeiter of Confederate money living in Philadelphia, the Union supported his efforts, at one point 2.5% of money in the South was made by him

California just has a different kind of resource curse...

A curse based around tech rather than oil, the average state employee in California makes 130,000 a 53% premium over private sector employees -- the highest number out of any state

Alchian-Allen Theorem

A fixed price increase applied to substitute goods will increase the market share of the higher end goods

Nomothetic vs idiographic

A focus on the general vs a focus on the particular, is thought to divide fields

Solow thinks that endogenous growth theory is overrated....

Everyone knew technology was important but the rate of technology seems random/impossible to predict

Sahm rule

A heuristic for measuring when the economy enters a recession, 0.5% increase in unemployment in the three-month moving average over previous 12-month low. Strong detection rates but its a lagging indicator

Property rights are always a bundle of separate rights, rights which have high-value in a bundle are bundled together....

For example, nobody has the right to prevent radio waves from passing over their property because this is of no value

Financial danger may have...

A leverage x-axis and an interconnectedness y-axis

One idea from Ed Glaeser is the Curly effect...

A mayor can raise taxes, people who hates taxes will leave, thus he can increase his popularity by following a policy that makes people leave the city

Gary Becker's immigration idea...

Auction off immigration to the US, immigrants can take a 10% downpayment and pay back the rest of the loan. This has the following advantages: a). It reduces the arbitrariness of immigration policy, b). The money can be used to compensate the losers, c). Raises revenue without raising taxes, d). Potentially increases American support for immigration

Coase conjecture...

A monopolist is unable to extract monopoly rents if he is in competition with himself over multiple periods. Imagine someone owns all land in the US, he will sell the initial chunk for a high price and each later parcel will sell for a lower price as competition increases -- but why would anyone buy the first parcel if they know the price will go down?

John Law, a Scotsman who convinced the 7-year old French King to start....

A national bank. He created the Mississippi company to rival the Dutch East India company, they created New Orleans to trade with the American Indians but this was highly unprofitable. Ballooned in part because Law was in charge of both the company and the central bank

Satisficing....

A portmanteau of satisfying and sufficing, introduced by Hebert Simon in 1947, under sufficient uncertainty it is too difficult to solve for the optimal value and so a decision maker will choose an option that meets some acceptable threshold

The US has the highest statistical value of a life in the world....

Between 7-10 million compared to 2-6 million for other developed countries

Coase's original example was...

A rancher who wants to let his cattle graze in a field and a farmer who wants to grow crops in the field

Penn effect...

GDP numbers overstate the difference between rich and poor countries (Samuelson-Balassa effect), PPP is a method to adjust for this

Immiserizing growth

A theoretical situation proposed by Jagdish Bhagwati in 1958 where export-based growth worsens terms of trade so much that the citizens are actually worse off

Stationarity

A time series that does not fundamentally change, for example a linear time series which remains linear (the values may change but the trend itself does not). Stationarity is a simplifying assumption, macro relations can fundamentally change over time

Ireland's GDP is 23% higher than its GNP...

GNP is often considered a better measure of well-being because it doesn't include income from foreign multinationals

Manufacturing is important for developing countries because....

A). It can be expanded rapidly, b). Unlike the service sector it can be exported, the service sector needs domestic consumers, c). Unlike agriculture it can be done in every climate, d). Manufacturing processes are roughly the same in all countries and so can be exported easily, e).

Since a lot of government spending is non-rival the positive fiscal externality of a baby in the US is....

About 100,000 dollars

The price level contracted by.....

About 24% between 1930 and 1932

What percentage of Americans own stocks?

About 55%

Milton Friedman estimated that inflation can follow monetary policy by...

About a year but be suspicious of effects later than that

Arrow's Impossibility Theorem

Also applies to managerial dilemmas, you can have Condorcet preference cycling with 4-5 managers who disagree

Perfect price discrimination gives no consumer surplus but....

Also no deadweight loss. Price discrimination in general has an ambiguous effect on consumer surplus.

Liberia's constitution was similar to...

America's, they were founded in 1822, their initial population was black American immigrants

There was initial debate as to what constituted national income...

Adam Smith didn't think the service sector should be included, some countries like the Soviet Union would follow his advice

The UK productivity puzzle

After WWII the UK has had poor productivity growth in every region besides London and in every sector besides finance when compared to their Western European rivals

Annuities were a method to get around the Medieval laws.....

Against usury, it was used frequently in Northern Europe

Taxes were ten times higher for.....

American citizens in 1800 than 1775; Americans paid lower taxes than British citizens, colonial tariffs no longer seem so absurd

All the gold is worth 12 trillion dollars, all equities are worth 115 trillion dollars...

All crypto assets in the world are worth around 1 trillion dollars

Pre-IR growth is suspect because it is based upon...

An arbitrary level of subsistence income, 400 dollars in Angus Maddison's 1990 work. In 1000 26/27 nations are at roughly subsistence income, if subsistence income is 700 dollars instead of 400 then there is no growth between 1000 and 1800

Nicholas Bloom has argued that research productivity....

Has fallen about 5% per year, for example Moore's Law has remained constant even though there are 20x as many researchers as there were in 1970

Changes in quantity have played....

An outsized role in total health spending

Stolper-Samuelson theorem...

An increase in the price of a good benefits the factor which is used more extensively, for example an increase in the price of computers benefits capital

Corlett-Hague rule

An optimal tax system would be to tax goods complementary to labor and equate these taxes with the labor market disincentives

In Columbia they had a program where they hired mimes to mock jaywalkers, they also had a program where people could voluntarily pay a 10% higher tax rate...

And 0.87% of people did it

Coke had the same price between 1886....

And 1959, one nickel. Coke wanted the treasury to create a 7.5-cent coin. In 1959 in many places the price of Coke doubled overnight

There are almost no coherent anti-market writers in the early 19th century....

And every economist we admire from the period tends to be pro-market; people are naturally anti-market when left to their own devices and so pro-market ideology needed to develop for true anti-market ideology to develop

The economist Henry George ran for Mayor of NY in 1886.....

And finished second ahead of T.R.

Amartya Sen was the first non-white person to win the Nobel Prize in economics...

And he won in 1998

A variable road tax was introduced in Singapore in the 1970s...

And increased road speed by 61%

A lot of soldiers don't fire their guns in war....

And many more don't aim, one study estimated that only 20% of soldiers both shot and aimed their guns -- on average militaries spends 100,000 bullets shot per enemy killed. Soldiers exert more effort aiming when giving more effective guns.

During the 1920s the Soviet currency became overvalued....

And people started using the Czarist currency -- it was valuable not because it was backed by a government but because the quantity was fixed

One method to determine methodological bias is to take many studies....

And plot their findings on a graph, if they don't form a normal distribution you often have some type of bias in publication

There doesn't seem to be any systematic profit difference between companies that advertise a lot....

And those that don't. For example, Coke advertises around six times as much per percent of revenue as Pepsi

The Rothschild's did business with many European governments....

And were original in that they made the governments come to London to do business and do their business in English Pounds

The Federal Reserve makes decisions by vote through the board of governors....

And yet almost all of the credit or blame is put on the Chairman -- this would be like if the Chief Justice was blamed for every Supreme Court decision

Elasticity of demand for cotton in the 19th century was about 1....

Another way of saying that increases in price have no change on output

We give firms intellectual property (excess rents) but then also have....

Antitrust law (regulation of excess rents)

Since the rich outcompeted the poor in TFR over the last 1000 years....

Any trait in which these two groups differed has shifted towards the rich's value in that time period

The advantages of ex post punishment (for example an accident) and ex ante (speeding ticket) are....

Ex post has the advantage that you can't measure effort and so have to use a proxy of some kind (driving speed), ex ante has the advantage that the punishment is smaller (in an accident the damage caused might be much higher than what an average person can pay)

Zipf's law does not....

Approximate city sizes before the modern Industrial Age

Estimates of Ancient Greek economic growth...

Are based around the fact that houses got larger and age at death rose, unconvincing but suggests total growth was 50-100% between 800 and 300 BC

Foreign diplomats from countries with high rates of corruption...

Are much less likely to pay parking tickets accrued in the US

45% of illegal immigrants....

Are overstaying a legal visa

Oliver Hart

Argued that people outside of the firm will respond to incentives the same way as people within the firm and so transaction costs cannot be the explanation. He thought of the firm from a property rights point of view

Cambridge capital controversy...

Argument about whether or not the level of capital in an economy can be measured, if not then the Solow residual cannot be calculated

The University of Michigan has a diversity staff of.....

Around 100 people

Implicit carbon taxes are around 2 dollars per ton, optimal would be.....

Around 30 dollars per ton

Tied aid is when the aid money needs to be spent on products from companies from the country giving aid...

Around 50% of aid is tied, it is divisive. On the one hand it limits the options of the poor country, on the other other hand it offers a way to see how the money is spent.

The French revolutionaries stole land from the Catholic Church....

Around 7% of France, they initially used it to back their currency and then auctioned it off. Agricultural productivity saw larger increases in regions with lots of church land

Michael Woodford criticized quantitative easing for....

Artificially decreasing the cost of government borrowing and for transferring risk (in 2007 it was the purchase of mortgage-backed securities) from businesses to the Fed -- this doesn't solve the problem of risk and it actually forces the problem on the taxpayers directly

Wagner's Law

As a country grows the government takes up a higher percentage of GDP

Medical error is the third most common cause of death in the US....

At 250,000 deaths per year

Between 1880 and 1914 unions went on strike....

At least fifty times to prevent employers from hiring black workers

Herbert Simon is notable...

For creating the idea of bounded rationality

OPEC lowered the long-run cost of oil by making people look for it harder...

For example, Venezuela did not discover how oil-rich it was until this period

In Zimbabwe there was price controls on bread...

Bakers got around this by putting sesame seeds on bread, sesame seed bread had no price controls because it was a luxury item

In 1680 10,000 European colonists settled in

Barbados, they devised a Draconian rule of law and their new colony failed miserably

Tort law

Based on the damage done by accidents or negligence. Tort law in the 1950s was mostly reserved for auto accidents, this expanded to strict liability for products including "failure to warn" and assigning transfers based on mental harm

Often price changes are asymmetric..

For example, an increase in oil cost causes a greater increase in prices than a decrease in oil prices

Support for bad policies is highest when things are worst...

For example, during hyperinflation people tend to blame speculators rather than the monetary authority. Support for Communism was higher in the mid-30s when life in the Soviet Union was most brutal

Technology will always be underproduced....

Because firms can just free-ride off other companies' R and D

Africans are more likely to be polygamous today...

Because more men were taken as slaves than women and so the gender imbalance created a rationale for polygamy

The replacement rate varies from country to country....

Because of infant mortality, it's 3-4 in many developing countries and around 2.1 in developed countries

There is a disproportionate number of discharges between 20 and 25 days....

Because of medicare payments, this is even more pronounced in for-profit hospitals

Inflation targeting is a bad idea if your central bank is bad...

Because people will realize how incompetent they are and it will be hard to make excuses, this also applies to countries where their interest rates are highly correlated with American monetary policy

Cities have lots of poor people...

Because poor people are attracted to cities not because cities make people poor. Cities have free transportation, profitable panhandling, and a community of similar people

Romer notes that growth always appears less volatile than it is...

Because the numbers involved are so small. Developed countries have a smaller possible range of growth rates, African growth rates for example can be highly volatile

In some South American countries it seems inequality was good...

Because there were individuals powerful enough to lobby the kings for public goods

Net zero externalities or transfer externalities are not illegal....

Because they are zero-sum. If selling my house at the same time as my neighbor lowers his price 5,000 dollars this is not a crime because the person who buys my neighbor's house just received 5,000 dollars

In the 16th and 17th centuries Japan banned firearms...

Because they believed it unfair for a skilled swordsman to be killed by a guy with a gun -- when Matthew Perry came in 1854 this was a serious problem

Alberto Alesina argued that women should pay lower taxes...

Because they have higher labor supply elasticity and thus this is just the Ramsey rule

People could have argued in 1870 that we should curb our use of lighting....

Because whale oil is limited and we're going to run out soon

Ill-defined property rights are rational in an authoritarian state...

Because you want to prevent coalitions from forming against you

It might be advantageous to have more focused monetary policy...

For example, falling oil prices hurt Texas and Alaska while helping New York and California

The fall of interest rates over time can be explained either by....

Better property rights or more patience, there's not enough data to be sure either way

Sweden had the first floating currency....

Between 1931 and 1933, Canada moved in the 1960s

Combinatorial auction

Bidders place bids on a combination of goods rather than a single good, this is done when goods have super additive value (100% of a factory may be worth more than 70% of the same factory)

The IR may have had a Simpson's paradox type decrease in well-being...

Both rural and urban life improved but more people moved into urban life

If America hadn't revolted in 1776 Michigan would probably have been part of Canada....

Britain expanded Quebec's territory in 1774 into Michigan, Ohio, Indiana, Illinois, Wisconsin, and Minnesota

England is a cohesive state much earlier than other European states....

British nationalism is evident in 14th century written sources, 100 years war aided this by forcing the British elites to commit to English over French

Oliver Hart argues that takeovers don't happen if the shareholders think the raider will do a good job....

If shareholders expect a share price increase from the takeover then they all have an incentive to stay on and ride the price increase

In the early 20th century electricity was replacing kerosene lamps and so it seemed like the oil industry might collapse...

But automobiles became popular at almost exactly the same time

The US government bailed out the states in 1789....

But chose not to do so in the 1840s forcing several state governments to rewrite their constitutions requiring balanced budgets

It is often said that the Fed kept interest rates too low in the early 2000s....

But credit expanded most quickly in 2006-2007 after the Fed had raised rates considerably

The Greeks had no word for homosexuality...

But did have a stigma for men who enjoyed being penetrated

Bretton-Woods caused large increases in the variance of interest rates...

But didn't have any direct effect on other macro variables (like inflation or consumption)

We used to think average cost was u-shaped with firm size...

But empirically it's closer to an L, increasing firm size leaves average cost unchanged

Humans are irrational, John Cochrane says...

But government officials are also irrational and what's worse they rarely have incentive alignment

It is assumed that capital has diminishing returns in Solow growth model...

But human capital can have increasing returns because of network effects so it's unclear which direction it actually goes

Buffalo almost went extinct in 1879, they were not killed in large numbers before then....

But in 1871 technology developed for tanning buffalo hides

Love and affection cannot be measured....

But is subject to diminishing returns, opportunity cost, and tradeoffs

There were no explicit laws prohibiting slavery in England until the 18th century....

But it was extremely rare in the 16th century onward

Interest groups have a major impact on the fine print of legislation and on regulations....

But it's tough to find interest groups dominating the passage of major policies like tax reform or immigration

Several states had full liability companies in the 19th century...

But limited liability simply works better, California didn't move to LLC until 1931

Breaking windows can sometimes increase output.....

But never wealth. Wealth is more important than income but we resort to focusing on income but it's less volatile and easy to measure.

The Ancient Greeks and Romans had well-functioning markets....

But no concept of the Platonic concept of a "market." Markets function even when nobody is thinking about them

Michael Woodford notes that its important for the Fed to undertake forward guidance....

But optimal forward guidance is explaining how you will make decisions rather than what the interest rate will be in two years

The Soviet Union originally did away with brand names....

But reintroduced them for specific factories because they saw a decline in quality

Head start does indeed give kids a head start....

But the impact seems to fizzle out by high school

Investing gurus like Benjamin Graham argued for diversification in the 1930s....

But the mathematical justification for diversification was not formalized until Harry Markowitz in 1954

In Thomas Phillipon's model TFP growth is linear....

But the slope is not constant over time, there was a kink point in 1930. GDP per capita is not linear because of changes in worker to nonworker (which was increasing rapidly in the 1950s for example)

We understand for the most part why the Great Depression lasted so long...

But there is still the mystery a). Why did it start, and b). Why was it so severe?

Mokyr's response to Allen is that English workers were paid more...

But they were probably more productive which means induced innovation would not have occurred, another problem is that Europe as a whole seems more innovative than before even places where wages were low

It may be that living standards are roughly constant over time...

But this ignores the very real short-term effects. The equilibration process is people dying, sometimes millions of people

Firms in concentrated areas have higher profits...

But this may not be because of market power, note for example that there is no attempt to raise prices

England is known for being a tolerant country for Jews and saw little slavery....

But was not so tolerant towards Catholics or Irish.

Mt. Pinatubo lowered global temperatures...

By around 1 degree farenheit in 1991

Sharp economic downturns can squeeze the lending process...

By lowering the value of collateral, this is especially important when housing prices collapse

Friedman notes that the 1937 recession was caused....

By the Fed doubling reserve requirements for banks, trying to prevent inflation

David Ricardo

CORRECT ABOUT: Ricardian equivalence, comparative advantage, free trade, diminishing returns, quantity theory of money, argued for a national bank, opponent of slavery. INCORRECT ABOUT: Law of rents (thought landowners would control all rents), iron law of wages, 85% labor theory of wages

Ricardo and Malthus both wrote books....

Called the Principles of Political Economy

The first attempt at GDP....

Came from William Petty in the 1660s, he analyzed national income to try and determine if Britain could finance a war with the Dutch

Large improvements in worker productivity...

Came simply from better worker nutrition, France in 1700 had the caloric intake per capita of Rwanda in 1960

In the Harrod-Damar model...

Capital is the main driver of growth and a country increases its growth rate by saving more

Frontier growth has remained remarkably constant over time even though....

Catch-up growth and world GDP growth have vaccilated wildly

Deaton and Heckman have argued that external validity are much more important then....

Causal identification, if you are focused on external validity you are more likely to use a model

State governments tried to auction off land in the 19th century but it usually failed....

Cause the land had many squatters who were willing to fight

In RBC the main thing monetary policy does is...

Change the speed/cost of price adjustment, Robert Lucas has argued that menu costs are low

One theory is that the Roman destruction of the Jewish temple in 70 AD...

Changed Judaism from a ritualistic religion into a textual religion

There are two types of path dependence...

Changing the path and changing the long-run outcome. For example, 19th century railroads changed the path of West coast settlement but probably didn't have a huge effect on the modern population distribution of California

One idea to increase charitable giving is...

Charitable giving is taxed at -5%

ESG portfolios often have stocks of companies like...

Chevron, oil companies which are slightly less polluting, and then 490 stocks from the S and P

One rationale for female infanticide in poor countries is that...

Children are an investment and need to contribute agricultural labor to justify that investment, thus making male babies more valuable

The Wool Act of 1954...

Created to deal with wool shortages that resulted during WWII, during its peak the subsidy was 127%, so producers received 127 dollars in subsidy for each 100 dollars of wool they produced. It was discontinued in 1996

Polanyi's paradox

Comes from Michael Polanyi, a lot of people's most important knowledge is unconscious, this is a potential problem for AI in some areas

Collective innovation

Comes from Robert Allen, in some industries (furnace industry in the 19th century) there are very few innovations that can be traced back to specific people even though the industry changed a lot over time

One regression discontinuity looked at net worths of politicians in close elections who are running for MP....

Conservative MPs who won had a 2x increase in their lifetime net worth, labor MPs saw no change

There was a Theban military band called the Sacred Band which....

Consisted of homosexual lovers, they didn't retreat because they cared so much for their fellow soldiers and were slaughtered by Philip of Macedon

Notable ideas from Schumpeter....

Creative destruction, larger companies are better for innovation (especially monopolies), every democracy will slowly vote its way out of capitalism, economic growth is mostly spurred by entrepreneurship, and work on the length of the business cycle

Cotton as prime mover makes sense until you consider....

Cotton was 4% of national income and 20% of Southern agricultural output (corn was actually the dominant Southern crop)

Heckscher-Ohlin Theory

Countries will export those goods that make intensive use of locally abundant factors of production, especially labor and capital

Home market effect

Countries will specialize in goods for which there is high domestic demand, they often produce more than the domestic market can contain and become a net exporter

Bairoch hypothesis

Countries with low tariffs have higher GDP growth post-WWI, but countries with high tariffs have higher GDP growth before that period. Doug Irwin argues this is not causal and comes from the fact that some countries (like the US) got almost all their revenue from tariffs while also having strong growth

Keynes argued that WWI couldn't last very long because....

Countries would run out of gold -- of course, in reality they just abandoned the gold standard in 1914

Samuelson-Bergson social welfare function...

Created in response to the fetishization of Pareto optimality, Samuelson argued that individuals can have preferences so groups should as well

Walter Isard

Created the gravity model of trade in 1954

Children have an evolutionary urge to get resources from their parents....

Crying increases their bargaining power, making it costly to deny them something they want

Service recovery paradox

Customers sometimes have higher satisfaction after customer successfully deals with a problem than when a product never breaks in the first place, replication attempts have found mixed results but it's surprising they're even mixed

New Trade Theory

Dealt with the problems which existed in Ricardian models. Specifically Krugman argued that there are large economies of scale and that consumers prefer a wide array of choice. Some see the economies of scale as providing a justification for protectionism

Gompertz Law

Death rate doubles every 8 years, formulated by British actuary Benjamin Gompertz in 1825

Between 1554 and 1696 Spain....

Defaulted on its debt fourteen times despite being the most specie rich country on the earth

Defensive medicine constitutes 5-9% of medical spending....

Defensive medicine is medicine which protects the hospital from litigation, for example female doctors are less likely to have a hysterectomy than the general population

Paradoxically immigration is....

Deflationary, if you keep the money supply constant because you've decreased money per person

Mancur Olson noted that the free rider problem also exists in lobbying...

Every firm in an industry can benefit from lobbying but the individual firm will only be willing to lobby if the benefit is greater than the cost. There's little lobbying in industries with low concentration and more lobbying when one company has a huge market share

Cobweb Model

Describes how agricultural products often move in cycles, because of the lag between planting and harvesting, you estimate consumer demand based on last year and things can change while your crops are growing. In practice it can apply to a wide variety of fields.

Canada had a similar decline in output during the Great Depression...

Despite not having bank runs or deflationary monetary policy, it could just be that the negative effect on their trade partners

The endowment effect potentially...

Destroys the Coase theorem

Kelly Criterion

Developed by JL Kelly in 1956, gives optimal bet size when expected value is known. The formula is f=p-q/b where f is percentage of payroll, p is probability of victory, and b is the odds. So the optimal bet when you have 100 dollars on a coin that comes up heads 70% of the time is 40 dollars. This formula has been used for investing but is less helpful because expected value is not known and bets are continuous rather than discrete. It maximizes the geometric growth rate and expected utility if the agent has logarithmic utility

VI Lenin's argument on Imperialism...

Developed nations have surplus capital which means they want to move their capital abroad, their extract surplus value from developing countries while offering quasi-bribes to keep the proletariat from revolting. This explains the poor economic performance of developing countries

Countries not on the gold standard...

Did very well during the Great Depression, China and Spain weren't on the gold standard (silver and fiat respectively), Australia and Argentina got out in 1929 and also had mild recessions. Britain exited in 1931, US in 1933, and France in 1936.

James Hargreaves (spinning Jenny) and Samuel Crompton (spinning mule)...

Didn't try to make money off of their inventions

Researchers who get money with no strings attached.....

Do better in terms of citations than researchers who have to follow their grant proposals

Persistence in GDP levels....

Does not imply persistence in growth levels

Ways in which income data can be misleading

Doesn't include people who aren't in the workforce, doesn't include rising cost of healthcare, increasing quality of goods, changing household size, for blacks doesn't consider what a high percentage are in prison/out of the labor force

The 2-20 structure originally comes from...

Either Venetian sailors who got 20% of the sales for their spices or early hedge funds which had 2-20

The Japanese had a field called....

Dutch studies, where they studied technology and science from the Dutch. The Dutch were the principle trading partners because they were the least interested in converting the Japanese to Christianity

It's not clear education actually helps with economic growth...

Egypt invested a lot in education and nothing happened, Hong Kong invested very little while they were a growth miracle, many African countries had poor growth despite increasing educational levels, similarly African test scores did not improve (70s to 90s) even as students spent more time in schools

Geographical determinism....

Engermann argued that countries which have the ability to grow tobacco and sugar suffered as a result, Acemoglu notes that Diamond does nothing to explain more recent wealth differentials

Robert Allen's view of the Industrial Revolution...

England had high wages post Black Death and this encouraged the adoption of labor-saving technology, one piece of evidence for this is that most of the inventions are very simple and could have been invented thousands of years prior if the incentives were right

Leon Walras before he became an economist...

Enrolled in engineering school, wrote novels, and was an art critic

Buying local makes sense from a game theory perspective....

Every small business owner realizes their product is in some way inferior and thus welcomes the bullshit ideology that buying local is somehow virtuous and this logic applies to every locality

Eisenhower Doctrine

Established in 1957, middle eastern countries can ask America for military assistance

In many cases it is rational to plead guilty....

Even if you're innocent, pleading guilty leads to a favorable plea bargain

My dad will mow our lawn for free....

Even though I would do it for five dollars, he would not mow our neighbor's lawn for twenty dollars

Growth regressions often count each country equally...

Even though India probably teaches us more than Grenada

In economics the phrase double coincidence has become popular....

Even though coincidence in this context also means double

Universities follow private industry in paying professors more as they age....

Even though researcher productivity peaks early and older professors also tend to teach fewer classes

You see vast differences in productivity between countries...

Even though these countries use the same technology. It is clear that wealth comes from productivity: name a country which is rich but has low worker productivity.

Barro estimated that

Every time you half your distance to the growth frontier you lose 2% of potential growth

A society which is not permissive of homosexual acts may not even understand that such a preference....

Exists because every homosexual hides their homosexual preference and so homosexual sex will appear to be motivated by pure expediency

Platform markets are markets that...

Facilitate interactions where both sides benefit (newspaper-ads, singles bar, credit cards); often we have differential pricing (ladies drink free night, newspapers often sold at less than cost and made their revenue from ads)

A utilitarian should be risk neutral...

For example, imagine you are given a bet. You have a 51% chance of creating an equally happy, populous earth trillions of lightyears away and a 49% chance of destroying this earth. This bet has positive expected value.

It is better to tax....

Final goods than intermediate goods, and human/physical capital are intermediate goods.

Dividend puzzle

Firms continue with dividends despite their tax disadvantage, they also will dispense capital while also trying to raise capital on the stock market, bizarrely cutting dividends is considered a terrible sign for companies

In a fixed exchange rate....

Fiscal policy becomes more important because monetary policy is so algorithmic, in a floating exchange rate the opposite is true

Benford's Law

For complicated data sets the number 1 will appear more often than any other number followed by 2, 3, 4....This is an effective way to detect fraudulent data sets

Generally governments practice a form of conditional tolerance...

For example, non-harmful eccentric movements like the Franciscans were tolerated. Christians were tolerated in Rome until 250 -- they were tolerated until they became large enough to be cause problems. A religion may be nominally illegal but a government often lacks the incentive to go out of its way to find followers of the that religion

People overweight evidence that occurred in their lifetime and underweight evidence that happened before...

For example, people who were born in 1910 were more risk-averse for their entire lives because of the Great Depression

Moses Finley argued that many modern economic concepts didn't apply to Ancient Rome....

For example, status was tied to land ownership. There aren't really any good merchant books from the time period to examine -- people try to prove that no one thought capitalistically in Rome from available letters but this is difficult when most Americans don't think explicitly capitalist thoughts much less write them down

History shows that people have a very narrow view of value...

For example, the physiocrats thought it came from agriculture, the mercantilists thought it came from gold, and the Marxists thought it came from labor. People today still believe that 10 dollars of iron is worth more than 10 dollars of tennis lessons

In many countries punctuality is not a cultural norm...

For example, when Toyota started factories in Brazil it had to aggressively fire people

Financial innovation has been good on average...

For example: automated ATMS, paypal/venmo, ability to pay bills online, Bitcoin

Median voter theorem...

Formalized by Duncan Black in the 1940s. It works best on issues where there's a clear continuum (like income taxes) and worse when the issue is a binary (like abortion)

The Oregon Medicaid experiment of 2008....

Found that those with insurance did have better blood pressure and cholesterol but that these changes were not statistically significant

Property damage is a civil crime where you owe about as much as the damage you caused....

If theft was a similar civil crime you could just steal things and basically purchase them without the owner's consent

Impossible trilemma

Free capital flows, stable exchange rates, monetary independence

GDP fell by 30% in the 1790s...

GDP also fell around 30% during the Great Depression

Bayesian games

Games where the players have limited information, for example they may not have access to the other player's payoffs

A huge portion of Paris was designed by one man....

Georges-Eugene Haussman between 1853 and 1870 after Napoleon III ordered the destruction of many old buildings

Shock therapy worked for all former Soviet states except Russia and Ukraine...

Georgia, Azerbaijan, and Aremia all have 300%+ growth since 1995

Previously foreign aid was sometimes used as a bribe to not go Communist, a newer strategy is too...

Give aid to countries whose past actions are good instead of trying to influence future actions. This has the downside of giving money to countries which are on their way out of poverty and preventing countries which need it the most

One way to redistribute without incentive effects...

Give people who grew up poor income in middle age, this doesn't incentivize more children or less working to any large degree

The fall of the Roman Empire increased European heights...

Heights in 700 were equal to heights in 1600, European heights were lowest in 1000

The name Austrian school came from...

Intellectual opponent and empiricist Gustav von Schmoller who argued that the Austrians were behind the more modern Prussians

In 1792 the US established a bimetallic standard at a rate of 15:1 between the price of gold and silver, the rate soon changed....

Gold was more expensive and so the US was on a de facto silver standard until 1834 when Andrew Jackson switched the ratio to 16:1 to hurt the national bank -- this put the US on a de facto gold standard

Buying experiences not goods doesn't follow utility maximization...

Goods have consistently gotten cheaper while experiences continue to get more expensive

One potential problem with GDP....

Government products are listed at cost since there is no market. This means that countries with poor government spending can have over-reported GDP and governments which spend well can have under-reported GDP. The TSA has a budget of 8 billion dollars, has never stopped a terrorist attack, and most people would pay money not to have to interact with the TSA

One potential method to eliminate absurd subsidies is to...

Group all government transfers together, make these transfers of finite size so everybody cares about what's in it

From 1959 on the Soviet Union....

Had a relatively free labor market.

European countries with Roman civil law (France, Spain, Portugal)...

Had low rates of protection for investors and private property

In 1800 America had dozens of universities while England....

Had only two, England did not get its third university until 1824.

For evolutionary reasons the duration of pain....

Has almost no effect on how we remember it, intensity of pain is the main thing that matters

Probabilistic patents are patents which....

Have a small probability of being upheld in court but are maintained because it's not worth it for anyone to bring them to court

People neglect to mention that US fertility rates....

Have been below replacement level since 1970 and have remained quite constant over the last 50 years

Premarital sex was illegal in previous eras but individuals got around this by.....

Having sex with the stipulation that the man would marry the woman if she became pregnant, in Sweden in 1911 1/3 of women were pregnant on their wedding day

Ed Lazear was influential in developing the tournament theory of corporate pay...

He argued that the CEOs salary is in part motivation for the CEO, but more importantly motivation for the potential CEOs, the rise in CEO pay may have more to do with CEOs being underpaid in the 70s/80s

Malthus did not advocate contraceptives....

He believed that people should voluntarily marry late

Serhiy Bubka was a Soviet pole-vaulter who got a bonus every time he broke the world record...

He broke it thirty-five times, often by less than an inch

Paul Douglas is an interesting guy...

He co-invented the Cobb-Douglas function, won two Purple Hearts, was an Illinois senator for 18 years, was a committed georgist, supported civil rights and was MLK's favorite senator, he was considered a favorite to run as a Democrat for president in 1952 when Truman was unpopular

Judge Lord Mansfield declared slavery illegal in Britain in 1772.....

He did not comment on the colonies and it remained legal there until 1833. The abolition movement was virtually nonexistent in Britain at the time

When Andrew Jackson broke up the national bank in 1832....

He distributed the reserves to pet banks, these pet banks took excessive risk and many failed. This was an important part in the Panic of 1837 and the depression of the 1840s

Sen's analysis of famines hasn't aged well...

He generally blames speculators and hoarders and argues that markets don't adjust. In reality famines tend to occur during bad harvest years or natural disasters. The government of Bengal found little hoarding and had every incentive to find it (they had already publicly blamed hoarders for the famine). Sen notes that Ireland exported food during their famine, he doesn't notice that exported expensive wheat for cheap maize to bring in a net caloric surplus.

In Fibonnaci's book Liber Aci (1202, The Book of Calculation)....

He introduced fractions, present value, and the Hindu-Arabic numeral system

Joseph Bertrand was an interesting fellow, Frenchman lived between 1822 and 1900....

He is known not just for Bertrand competition but also for Bertrand's postulate (always a prime between n and 2n) which Chebyshev proved and for a paradox in probability theory which seems to form a counterexample to the principle of indifference

Adam Smith did not subscribe to a labor theory of value...

He subscribed to a production cost theory of value which is still incorrect

Bentham argued for giving all men the vote in 1832...

He wanted all women to have the vote as well but said that this was too much to ask if he wanted to succeed

The creators of utility used cardinal utility, this changed when...

Hicks showed that ordinal utility could do everything cardinal utility did, this changed agains when von Neumann showed that cardinal utility could not measure decisions made under uncertainty; Alfred Marshall was an avowed utilitarian and is usually seen as the popularizer of utility functions

Tyler's response to Piketty....

His thesis comes down to 'real rates of return will be high', is that really such a powerful prediction? High returns to capital historically have bid up the price of labor

One response to the Tiebout model is that...

Homeowner's associations are the lowest level of organization and yet seem to be the most dysfunctional

Since humans have logarithmic utility functions the St. Petersburg paradox is not paradoxical...

However Carl Menger's son Karl Menger noted that you can save the paradox by making the payouts e^2^(n-1)

Paul Heyne disagrees with the statement 'hunger is an injustice'....

Hunger is not an injustice he argues because nobody actually wants anyone to go hungry. Furthermore in many cases trying to help the hungry person doesn't improve the long-term situation

Our 'just price' inclination as humans may go back to.....

Hunter-gatherer times when population was scarce enough that each person was a bilateral monopoly and could negotiate prices down

Every society has some gendered jobs....

Hunting is almost always male-dominated, childcare is almost always female dominated. Many jobs are gendered even when males and females are equally good at them (pottery, making spears)

Coase argues that property rights are not easily defined...

If I own a house do I own the land below the house? How about the air above? Am I allowed to start a business in the house? A brothel?

Predatory pricing works less well than most imagine.....

If Standard Oil (90% of market) tries to force a competitor out (1% of market) by lowering prices they are imposing a cost on their competitor but a 90x higher cost on themselves, for this to work you have to convince the competition that you're willing to endure serious loses

Altruism is not predictive of any behavior in politics.....

If a politician disagrees with the citizen's priors he will be more paternalistic as his altruism increases, if he agrees he will be more libertarian as his altruism increases

Samuelson's response to Friedman's famous essay was that...

If incorrect assumptions lead to correct predictions then there must be a repair function in the model

Patents can be very negative for sequential innovation...

If one component of an innovation is patented it can block the entire chain for years

It's difficult to go faster by changing lanes on the highway when in a traffic jam....

If one line is going faster people will switch to that lane until the speeds are equal

Risk aversion may be related to clan size...

If you have a winner take all mating system in a large clan you have a). Larger payoffs, and b). A lower probability of winning. This means you want to increase the variance of your outcome. If you are in a smaller clan you want to lower your risk because in a winner-take-all system it doesn't matter if you win by a lot or a little

It makes sense to choose egalitarian institutions....

If you live in a high-risk society

If you think the world will end in 50 years there's no point in economic growth.....

If you think it will end in 100,000 then risk prevention plays an outsized role

The paradox of activist investing...

If you want to punish an oil company you can sell its stock but then you are probably selling it to someone who cares less about the environment. You can buy the stock but then you raise the price. You can buy the company and tell it to drill for less oil but then you will bear the majority of the costs and the benefits will be lightly dispersed throughout the world -- what's more it will raise the profits of oil companies you do not own

Trying to optimize for the future in a specific way can backfire...

Imagine the Romans wanted to optimize for the future -- what could they have done? Probably very little. They had no idea what was going to become important.

The Edgeworth Paradox is a solution to the Bertrand Paradox but a paradox in its own right....

Imagine there are two producers neither of which can meet total demand on their own. Firm A sets prices equal to marginal cost, firm B realizes that since firm A cannot meet total demand it can set its prices much higher. A responds by raising its prices as well. But now that A has raised its prices B has the incentive to undercut A's price and increase its market share. There is no equilibrium price and the two firms move back and forth indefinitely

It is logically possible for a supply curve to slope downwards...

Imagine you need 500 dollars but hate working, the higher the wage the less you work. Similarly some demand curves have no slope because there's one point -- you don't want more open heart surgeries when the price goes down

New Holland was created

In 1630 in Northern Brazil and lasted until 1654

The Federal Income Tax was declared unconstitutional...

In 1895.

In 1914 America controlled 40% of the world's gold....

In 1923 they controlled 70%, pegging your currency to gold effectively pegs it to the dollar as well

Friedman's ideas were adopted in New Zealand....

In 1988 under Don Brash, for a long time central banks had a large number of goals (growth, employment, inflation, lender of last resort), in New Zealand the only mandate was 1-3% inflation.

Bagehot's Rule

In a crisis a). Lend at high rates, b). Lend freely and without limit, c). Still require collateral during a crisis

There are still bank runs...

In an efficient market. If your growth rate is higher than your interest rate you never have to pay back your debt.

It makes sense we have different standards of proof for civil and criminal cases.....

In civil cases the punishment is a payment and so the case is zero-sum, in criminal cases the punishment is jail time which is negative sum

Neil Wallace has the idea that money is a form of memory....

In groups which lack a currency like the Amish or the Kibbutz there are strong interpersonal relationships. Everyone in the community helps in an Amish barn-building though they receive no compensation, if you miss too many of these barn buildings you will eventually be kicked out of the community.

In theory the supply of status is fixed because people have a limited bandwidth to spend on memorizing the names of celebrities....

In practice however it has expanded greatly and probably at a faster rate than population. In the early 20th century the supply of fame came from newspapers and books, now Wikipedia is an easily accessible database which includes every mildly famous person

Fischer's principle explains why the sex ratio is 1:1 even though....

In many societies it would be optimal for population if there was more women than men. In theory it would be genetically optimal for one man to impregnate all women in a society

A strict application of either oligopoly model works best....

In oligopolies where there is little product differentiation like mining or agriculture. More sophisticated models need to add a variable for product differentiation

Manumission was illegal in most Southern states...

In part because freed slaves were typically old or disabled, it was illegal to teach a slave to read in about half of slave states

People looked beyond the Solow model of growth...

In part because the American growth rate is much more volatile than either capital or labor and in part because convergence didn't happen

Education doesn't function like capital...

In that it doesn't depreciate, it's not like you need to go back to school every once in a while

Doctors make 5.5x as much....

In the US as in Great Britain

Mobile phones caught on faster in Africa than the US because...

In the US the alternative was a well-functioning landline system in every building and in Africa the alternative was nothing

In the late 1920s Politburo was still in place and they debated, though they feigned anonymity in public...

In the late 1920s they met weekly, by 1932 they met a couple times a year. Stalin's dictatorship was complete.

Nonprofits are exempt from competition...

In the sense that you cannot buy up all the shares of a non-profit and kick out management

Women are as likely as men to have affairs....

In their 20s but the gap widens until men are 4x as likely in their 80s

Chris Wickham is a historian notable for defending the peasant mode of production....

In this model trade rarely occurs, there's lots of exchanges based on reciprocity, and labor curves are highly inelastic. This implies that when we see lots of exchange this must be caused by pressure from elites. The peasant mode of production seems correct but is not, labor curves tend to be inelastic when there are few consumer goods.

In surveys supports for interracial marriage....

Increased continuously throughout the second half of the 20th century from 10% in 1960 to 50% in 1994 at which time there is a kink point

In 1900 India and Japan had similar textile productivity, by 1930 Japan surpassed Britain as the number one textile manufacturer...

Indian unions limited hours worked and technological adoption, often destroying machines as a form of protest. Japan squashed all of their labor unions. Countries that use high tariffs for growth (US, South Korea, Japan) all had significant labor repression.

Advertising tends to be highest for....

Inexpensive consumer goods which have a wide variety of options (cereal, soft drinks, over the counter drugs)

In a society where women need dowries to marry there tends to be a higher rate of female....

Infanticide, most families are too poor to afford multiple dowries and so will pool their resources for one dowry

Unions are most important when

Inflation is high, leading to intense wage negotiations

Biased technological change/induced innovation

Innovation occurs to save on the most expensive inputs, cheap prices can sometimes slow innovation

CEO contracts usually have bonuses for high absolute performance....

Instead of high performance relative to competitors

Arthur Burns...

Interesting guy, convinced Milton Friedman to go into Econ, was chair of the CEA under Eisenhower, advisor to Nixon, and chairman of the Federal Reserve between 1970 and 1978

America had no central bank for most of the 19th century and also had laws against....

Interstate banking, this meant until the 20th century America was a patchwork of small, regional banks

One way to limit racial problems is to tweak dating apps...

Into making lots of interracial couples

A GM engineer named Thomas Midgeley...

Invented CFCs (which deplete the ozone), tetraethyl gas for cars (highly polluting), and in old age created a system of pulleys to help him get out of bed (the system strangled him)

William Nordhaus found that on average...

Inventors capture only 2% of rents from their inventions

Barro's solution to the equity premium puzzle...

Investors believe there is a small chance of a huge disaster where stocks have massively negative returns

The only developed country with a fertility rate above replacement....

Is Israel (about 3), the US and France lead developed countries at about 1.8

Statistical discrimination can be self-fulfilling....

It also lowers the incentive for women to get education

Note that utility doesn't describe happiness or what you should do...

It describes what you're going to do

Barro writes that Ricardian equivalence is Modigliani-Miller of macro....

It doesn't matter if you raise revenue today or tomorrow, the distortionary problem is rapid increases in tax rates

Econometrics may be considered its own branch of statistics because...

It has a stronger focus on a). Models with theoretical backbones, and b). Simultaneous determination of variables

The TSA is a net taker of lives...

It has probably convinced many people to drive instead of fly and driving is much more dangerous per-mile

Per capita income in a Malthusian world is not predictive of economic prowess...

It is higher when a). Lots of people die, b). You have a norm which limits population growth, or c). People just decide to work less

Homosexuals are more likely to locate to cities....

It is unlikely that they will find a suitable mate in a small town. This becomes even more true once you remember that homosexuals relocate to cities

When you see a homeless person with a shopping cart you know they stole it...

It is worth around 100-200 dollars but cops never arrest the homeless for this

If housing prices are inelastic then....

It makes sense to restrict supply from the point of view of the average Californian, the gains from price increases are higher than the losses from homelessness

A increase in quality is functionally the same as a decrease in price but...

It may effect consumers differently (wealthy consumers for example are less likely to tolerate a decrease in quality)

Indian socialism lasted from 1947 (independence) until the 1980s...

It saw top marginal tax rates of 97.75%, no foreign investment, and price controls

If you take every 50th letter of Genesis....

It spells the word Torah, same with Exodus

Gold mining was a negative sum activity in the 19th century.....

It took a lot of resources and the output just served to increase the price level

In 1960 government R and D was 2/3 and private was 1/3 today....

It's around 25% public and 75% private

There seems to be something important about adopting agriculture early but...

It's only explanatory on a macro scale, it doesn't help to adopt agriculture before your neighbors

The natural interest rate comes from Austrian economists and Knut Wicksell. Keynes argued against it because he said there are multiple natural rates of interest. The downsides to the concept are....

It's unclear if you mean the natural rate of interest for employment stability or inflation stability. Even once you define it in terms of inflation stability your definition is still arbitrary -- today inflation stability means 2% but Wicksell meant 0%

Saudi Arabia is the wealthiest oil nation in the world per capita and yet...

Its GDP per capita is 1/3 of Singapore which has no natural resources whatsoever

When a demand for a currency is high....

Its price increases and imports become cheaper and exports become more expensive

The Bertrand paradox

Joseph Bertrand noted in that if our oligopolists choose price rather than quantity then the Nash equilibrium is setting price = MC, this is paradoxical because in a market with two producers there is zero producer surplus.

If there is a limited amount of economic growth then increasing growth now....

Just leads to stagnation earlier

The US is something of a special case in infrastructure, spending as a percentage of GDP started to decline in 1970....

Just when government spending and deficits started to balloon, this is not a pattern which is seen in other countries

On what scale does Tiebout even apply?

LA has about the same population as Sweden, when a city is that large it will have such great benefits that it can afford poor governance

Keynesianism was more applicable in the 30s because...

Labor was more substitutable, a construction worker could become a railroad worker quickly, it's unclear how building roads in Texas will help an unemployed accountant in Maine

Lack of exchange doesn't constitute...

Lack of a market, it could be that everyone prefers to consume their endowments, for example in Medieval Europe there was less exchange because most people grew wheat and there was no point in exchanging their wheat for other wheat

Summers notes that the ability to make predictions in science often is overrated....

Lamarckism explains the variability we see in nature, ships were guided by Ptolemy's astronomy for centuries. Multiple theories can explain the same set of data points

A folk theorem in Econ is that combining different groups into one entity...

Leads to an initial low-trust state. For example, reservations with unrelated tribes have lower incomes today. This also relates to the Apache which were grouped together despite being a part of a very loose alliance.

Level-targeting vs rate-targeting

Level-targeting nominal GDP means that if your goal is 2% and you have a year of 0% you go for 4% next year

Healthcare products with transparent pricing

Like in vitro fertilization and Lasik eye surgery have beaten price inflation in the last few years

One important consequence of Amazon is that it removes....

Local monopoly pricing. Prices were often 10% higher in rural areas since the local monopolist could charge their normal price plus transportation costs

An interesting paper by Dave Donaldson...

Looks at railroads built in Colonial England, these railroads had widely varying effects. Specifically he looks at how building railroads which lead into towns changes the composition of goods in those towns, leading to specialization and Ricardian rents of some kind

In the M-A literature it seems like the acquiring firm....

Loses money on average.

Woodford has an interesting paper where he shows IQ is quite predictive of responding to interest rates and inflation even after controlling for income and education....

Lots of behavioral econ papers look at bias but very few sort by IQ

Martin Feldstein's criticism of social security stems from the fact that it....

Lowers the US savings rate

Medium or short-term investors are often better for the company than long-term because...

Many long-term investors are buying and holding regardless of what the company does, short-term investors want to profit and the best way to profit is to increase projections of the company's discounted growth

Keynes was quietly critical...

Of some aspects of the New Deal, for example the NIRA (1933) which added 10,000 pages of new regulations overnight and was declared unconstitutional in 1935

Polanyi is anti-market but in a way antithetical to Marx....

Marx believed that the capitalist mode of production was necessary, Polanyi believed it was contingent and was invented by the pro-market ideology of the 19th century

In economics you have correlations between....

Measurable variables and unmeasurable variables

Nobody would design the American welfare system this way if they had designed it from scratch, instead of UBI we have...

Medicare, medicaid, food stamps, unemployment insurance, housing benefits, earned income tax credit, disability insurance, TANF, supplemental security income (given to disabled and elderly), and social security

The Mita system required 1/7 of males to work in the mines in Peru....

Melissa Dell found that areas within the boundary have 25% lower incomes today

The Alchian-Allen theorem applies to prostitutes as well...

Men are willing to put in high search costs for high quality prostitutes and almost no search cost for low quality prostitutes. Thus the quality goes from call girls to brother prostitutes to street walkers

Sexual orientation may respond to incentives, in HIV-heavy regions...

Men were less likely to report being homosexual, and women were more likely to report being homosexual

Adam Smith's initial explanation of trade is that people naturally enjoy trading...

Menger noted if that was true people would just trade things back and forth

A lot of interventions help women but not men....

Mentorship, education subsidy, job training, etc often have strong positive returns for women and sometimes even negative returns for men. For example, the Kalamazoo Project paid for college for a set of students -- the women saw a return of 12%, the men a return of -4%

The Austrian view of the business cycle is that it is caused by an overextension of credit...

Mises thought this came from central bankers incorrectly setting interest rates, Hayek thought this was an inherent property of leveraged banking even if the central bank behaved perfectly

Louis Bachelier

Modeled stocks as a stochastic process in 1900, strongly analogous to the work Einstein did in 1905 on Brownian motion, in his model stock returns were centered around 0% return, Poincare was not impressed by this dissertation

War was different in pre-Industrial times....

Modern war does little economic damage because capital needs to be replaced eventually anyway -- older forms of war were very damaging. They lowered the incentive to become a merchant or a farmer (areas which were constantly raided moved to pastoralism)

When the city of Boston wanted to repair a 360-foot bridge it took them six years....

Patton built a bridge of that length in a day, Julius Caesar did it in nine days

Robert Lucas described recessions as...

Moments when the neoclassical model fails, changes in macro variables are too large to be explained by changes in micro variables

Macroeconomics in the early 20th century was divided into...

Monetary theory and business cycle theory, Wicksell helped to unite them -- monetary injections lower the safe rate of return and influence the business cycle

An underrated factor in the IR is that banks funded very little of it....

Most inventors were funded by personal savings, this necessarily takes time

Britain wanted to return to the gold standard because....

Most other developed nations had and they didn't want to lose their position as reserve currency

Revolutionary regimes seem surprisingly durable because of selection bias....

Most revolutions face an intense counterrevolutionary period in their early years, surviving this gives you the institutional capacity to stop further revolts

In Medieval Europe people gave to charity....

Much more than would be expected from their income level, to them it may have been like investing in a superior asset class. Those who gave to charity had lower reproductive success

Weak governments may be hesitant to put money into their military because the military has a possibility of initiating a coup and it may be difficult to shrink the size of the military post-war....

Oddly a medium strength state is most vulnerable. A weak state isn't worth taking over because tax revenue is too small and a strong state isn't worth it because it's too strong.

There's no reason why the natural rate of unemployment...

Must be stable over time, equilibrium is not stable in other markets

Bad behavior by a member of one group exerts a....

Negative externality on all other members of the group

If producers adjusted inflation immediately money would be...

Neutral even in the short-run, but of course this is not possible for producers to do. Often they adjust their prices slowly over a period of months incurring menu costs along the way.

Excess burden of taxation estimates...

Normal estimates range from 25%-50%, 30% is a common estimate

Firms describe their low-price products as....

Normal price minus a discount rather than describing higher-price products as normal price with a surcharge

Pericles

Notable Athenian leader between 461 and 429, presided over both the Persian and Pelopennesian wars

Lenin's theory of imperialism is easily falsifiable...

Note that many wealthy countries don't need to find places to put their excess capital, the US has been a capital importer for decades

Caplan has argued that the best strategy for decolonization is a explicit commitment towards staying in the country until a reasonable government is formed....

Note the difference between England abruptly leaving India and Allied forces in Germany waiting a couple years and making sure the new German government didn't have Nazi sympathies

Financial accelerator

Noted by Bernanke, recessions seem to be more correlated with changes in credit conditions than with the market as a whole. This sort of makes sense, the financial sector is the only sector with a link to every industry

Fenno's Paradox

Noted by Richard Fenno, people hate congress as a whole but like their individual congressman

Linder Hypothesis

Noted by Saffan Linder in 1961, countries with similar tastes trade with each other more than would be expected from Ricardo

It is a stylized fact that as you build more roads....

Number of miles increases 1:1 with the number of roads built and traffic is not lowered

Around 90% of the effect.....

Of a good teacher is gone within two years. Teacher quality here is measured by VAM (value-added modeling) which only has a 0.3 correlation year to year implying it may not be a strong measure of quality

Holmstrom's work in mechanism design showed that....

Often a worker has multiple jobs some of which are measurable (giving tickets) others which are not (solving murders). This means you don't want to put too strong an incentive on the measurable task and if someone is working mostly on the unmeasurable task you'll want to place more restrictions because effort will be more difficult to measure

The standard method in health Econ is quality-adjusted life years....

Often measured at 100,000 dollars

Cournot competition

Oligopoly model where each form chooses its production quantity, gives strong positive profits for the oligopolists, developed by Cournot in the 1838

In Finland they have progressive speeding tickets....

One of the richest men in Finland once paid 217,000 dollars

One potential problem with private police agencies is that it would be easy to set the agencies on people you don't like (gays for example)...

One response is that people aren't really willing to pay that much for this and gays would be willing to spend a lot to defend themselves

The recession of 1920-1921 had a rapid recovery.....

One theorized reason is that wages were allowed to adjust unlike during the Great Depression, inflation was -16% (trough of -11% during the GD) but wages fell 20%. It's worth noting government spending fell 82% between 1919 and 1922

Peoples who do not have a long history of agriculture struggle to move into capitalist economies, nobody is really sure why....

One theory is that analytic thinking isn't valued much among hunter-gatherers, perception and memory are more important

During the Greek financial crisis....

Only 3% of people left

Amy Finkelstein's work has found that most low-income groups place a very low value on health insurance.....

Only 30% would purchase actuarially fair insurance and 25% would not purchase health insurance which was 90% subsidized

Of the ten largest American companies in 1910....

Only three were in the top one hundred in 1990

The Dutch East India company (founded in 1602) has claim to be the first corporation.....

Originally a 21-year charter with shareholders the charter was extended indefinitely, the Dutch planned to create factories and trade spices but originally ended up mostly fighting with the Portuguese for access

Stigler-Becker argue that human behavior can be explained primarily by...

Price changes, often implicit, for example listening to classical music lowers the cost of listening to classical music in the future

Social security was instituted under...

Otto von Bismarck in 1889, did not occur in the US until 1935

Theoretically housing prices have an ambiguous effect on TFR....

Parents want houses with lots of space for their kids, and so maybe a). High housing prices deters fertility because people cannot afford large houses, b). High housing prices makes people move away from cities which increases fertility. Empirically housing prices seem to lower fertility rates but the evidence is not great

Early American bailouts include....

Penn Central Railroad (1970), Lockheed Martin (1971), Franklin National Bank (1974), Continental Illinois (1984)

Pain of paying

People like paying before or after consumption, people enjoy meals less when they pay per bite even if they end up paying less than they would have

One variable with a large predictive value for TFR is....

Percentage of young people who live with their parents, has a very high correlation in Europe. In Italy 47% of people aged 25-34 live with their parents, in the US it's around 14%

People tend to have 'just price' type thought processes and this just price is usually whatever they're used to paying for something, this explains why.....

Price controls are almost always instituted to keep a price from rising rather than to lower a stable price

Sales occur because

Price discrimination, overstocking, fashion changes. In France you're only allowed to have sales twice a year.

Countries with high GDP seem to do better on public goods cooperation games....

Poorer countries do badly but for different reasons, for example Oman participants arbitrarily punished people who weren't free-riding and Greek participants didn't punish free-riders

Potato famines tend to be especially bad because...

Potatoes are both food and seeds for next year and so eating more reduces your potential crop

Robert Lucas notes a lot of macroeconomic models...

Predict what the economy will do in absence of a crisis, if there is a crisis the rules change and the models are invalidated

Since the majority of women marry a man of there own ethnicity, high incarceration rates for black men....

Predicts high rates of single motherhood

Public sector employees are fired around once every 500 work years...

Private sector employees are fired once ever 7 years, you are more likely to be arrested for drunk driving than to be fired from your public sector job, an EPA employee once stole thousands of dollars of equipment and received a 30-day suspension, often takes 200-400 days to fire someone

A sector's cost is....

Productivity versus wage increases, cost disease occurs when productivity can't keep up with wage growth

Immigration is perhaps the best way to improve national productivity and yet...

Productivity was highest in the 50s and 60s when we had very low rates of immigration

What was the second most popular book in late-19th century America?

Progress and Poverty, Henry George, 1879

The Cournot-Bertrand model is a combination of the two models....

Proposed in the 1970s, some firms choose quantity and some firms choose price. This makes sense in the alcohol market. For example, wines need to be aged and so winemakers have to choose quantity. Beers don't need to be aged and so its easier for producers to compete on price

Tyler argues that if economics and methodological individualism is so powerful....

Try writing a biography of a person using these tools and see how much you can actually explain

It makes sense that punctuality norms are widely divergent in different cultures....

Punctuality and lateness are both Nash equilibria

Irving Fischer's interpretation of the Great Depression....

Put a lot of blame on the Fed for not stabilizing the price level, this was considered absurd at the time

Rabin fairness/inequity aversion

Rabin fairness is a taste for punishing mean people even if it hurts your own income. Inequity aversion is a taste for punishing people whose gains exceed their contribution, noted by Ernst Fehr.

In 1947 the Indian government created a system called the License

Raj, you had to have a government permit to own a bicycle

Jean Tirole wrote on the fact that in psychology experiments incentives often fail to motivate...

Relationship is important, for example if I offer 1,000 dollars to get an A the student may be insulted or may think 'if the monetary reward is that high it must be too difficult to do'

The two conditions for instrumental variables are...

Relevance (weather effects the price of strawberries) and exclusion (weather does not determine demand for strawberries), in this case we are using weather to estimate the elasticity of demand

Hedonic damages were developed by a U-Chicago PHD student....

Stan Smith, 1986. They are heavily based upon the discretion of the judge, one judge may award 10x as much as another in the same case

Fama-French three factor model includes

Risk, book to market, and small caps

It is a stylized fact that existing is worth around 20% of the vote...

Rodrik's explanation is to imagine a policy which benefits 40% of people with p=1 and 60% of people with p=1/3, the policy will not pass but if it is adopted people will support it

The best examples of states trying to increase fertility rates are....

Romania and Albania under Nicolae Ceausescu and Enver Hoxha, their strategies included taxes on childlessness, banning contraception, and discrimination against the childless. This led to an overflow of orphanages and many street children

Hubbert's Curve

Roughly Gaussian curve, originally created for oil but applies to other resources. Originally the resource is difficult to extract, a new technology makes it easier to extract, and either it is depleted or is rendered useless

Hodrick-Prescott Filter

Smooths a time series so that long-term trend is more important than short-term fluctuations

High state capacity increases the variance of outcomes....

Rwanda and Nazi Germany both had state capacity that was too high

American gold eagle coins....

Say 5 dollars on them but are regularly sold for 100+

The Conditions of Agricultural Growth by Esther Boserup was written in 1965 and is viewed as the most prominent anti-Malthusian book....

She argues that agriculture was defined by fallow lengths and that these in large part determined culture. For example, long fallow lengths of 15-20 years are associated with low density and unclear property rights. If you are alone you have property rights in a tautological sense, but true property rights only occur in high-density areas where others respect your property. She said that population determines agricultural methods rather than the other way around. Long fallow lengths are inefficient on a per land basis but efficient on a per hours worked basis.

China created a charter city in

Shenzen in 1980, notable for experimenting in what was considered a backwater at the time

The Homesteading Act of 1862 is a subsidy for inefficient farming....

Settlers moved westward, there was no infrastructure at the time so farming in the west was inherently unprofitable but the land increased in value as the country moved westward. Settlers paid a small cost every year (inefficient farming) for a large eventual payment (valuable land)

There is a national cotton council....

Should there not also be a national anti-cotton council

The second Modigliani-Miller paper....

Showed that it doesn't matter if firms hold on to earnings or pay them out in dividends, this went against writers like Ben Graham who thought companies should be evaluated by their dividend payments

In WWII Germany's submarine blockade lowered British food imports by 50% and lowered calories consumed by 3% (the British just grew more food)....

Similarly Britain targeted German ball bearing factories and the Germans just substituted plain bearings

William Niskanen

Since bureaucrats salaries are quite constant it is rational for them to increase their power/budget since they have nothing else to optimize for

Unions bargaining for higher wages is one of the more innocuous things they do...

Since it just changes the factor going to labor instead of capital. The more destructive union practices relate to employment. Since they want to maximize employment they tend to be a). Opposed to the introduction of new technology, b). In favor of lowering productivity per worker, for example longshoreman unions had a stipulation that they spend part of their day watching other longshoreman

Some goods have productivity improvements....

Spread out over time, for example electricity was first used in the 1870s but it wasn't adopted by 80% of households until 1940

One pricing anomaly....

Stocks increase in price when they are added to the S and P even though their fundamentals have not changed, comes from high demand for S and P ETFS, Andrei Shleifer noted it

In Pennsylvania where coal mining was common there were three classes of ownership....

Surface class, support class, and mineral class. If you had surface class you owned the house, if you had mineral class you could mine below the property, and if you had support class you could sue if the miners did damage to your house

There are theoretical alternatives to deposit insurance for example....

Suspending convertibility (has the downside of prolonging the bank run). You could offer a bonus to people who don't ask for their money back. You can also create a bank where some loans are liquid and some are illiquid with the illiquid loans having a higher interest rate

America spends more on education than every OECD country except...

Switzerland, teacher's benefits negate a 17% wage penalty, teachers have low rates of job turnover relative to other professions

Mankiw estimated that in the US.....

Tax cuts on labor pay for around 20% of their lost revenue, capital pays for around 45%

Hicks neutral change

Technology which doesn't change the factor shares going to labor and capital

Indentured servitude worked as you'd imagine....

Terms of service were longer for young people and in hostile climates like the West Indies. Slavery replaced indentured servitude between 1680 and 1720 as slave prices declined

Examples of failed economics studies...

Testing the effectiveness of Aids drugs didn't work because AIDS patients shared drugs with the control group, Head Start was difficult because the control group generally sought out an analogous program

The Laffer curve is much more valid in cities....

Than in countries, raising taxes has little to no effect on revenue in most cities

In the 1500s lighting was so expensive....

That almost everybody went to bed at the same time, when it got dark

Sugar and tobacco were both old world crops...

That grew better in the New World

Albert Hirschmann is notable for being one of the most important economists of all-time despite the fact...

That he spawned no school or imitators, was a poor teacher, and quite bad at math compared to his contemporaries

Regression discontinuity tends to be much more positive on the effects of education than OLS but has the potential downside....

That students often have a fair amount of control over which side of the regression they fall into, meaning the no sorting across the cutoff assumption is violated

Larry Summers argued that macroeconomics is so complicated and non-linear....

That the most convincing studies will take evidence from a wide variety of sources instead of trying to hypothesis test on some restricted data set

The definition of efficiency in law....

That which maximizes the sum of societal utility when measured in willingness to pay

Early GDP work was done by Colin Clark and Simon Kuznets in the 1920s, it was adopted by governments in...

The 1930s as they wanted macro information on the Depression, initially government spending wasn't included but this changed as spending ballooned during WWII

The rate of healthcare cost increase actually peaked in....

The 1960s at 6.2%

Levitt's abortion paper attempted to explain...

The 30-40% decrease in crime in the 1990s

Dependency theory

The original theory was that poor countries are just rich countries in an earlier stage of their development, dependency theory is that poor countries are not like rich countries and will need a different strategy

Larry Summers notes that 220 times a country had positive growth in year n and negative growth in year n+1....

The IMF published growth predictions. They predicted zero of these reversals.

Between 1938 and 1962...

The FDA had 60 days to approve or disapprove a drug, in 1962 new drugs fells by 63%, average time to get through the FDA is 12 years, in 1986 the FDA stopped Orange Die No. 7 because they estimated it carried a cancer risk of 1 in 20 billion,

Indian textile manufacturing was less efficient than British even though...

The workers were paid 1/3 as much. They had access to the same technology and often had British managers, culture must be the explanation.

An underrated factor in the payment of reparations is that....

The German budget was mostly spent on the military which had just been shrunk 40x over

Johann von Thunen

The founder of spatial economics. He noted that steel companies used to locate themselves near coal mines because transporting coal was expensive. Land is more expensive in the center of the city so buildings will be taller, manufacturing will necessarily be located on the periphery. There is a tradeoff between agglomeration and dispersion for an industry (it's expensive for a tech company to be in San Francisco)

The country with the highest wealth inequality is...

The Netherlands, which has a highly progressive tax system.

Triffin dilemma

The global reserve currency has to supply a lot of its currency to the world and this naturally causes a trade deficit

Solow notes that it's extremely difficult for a poor country to become wealthy..

Without international capital flows. If you're poor where else can you raise capital from?

The Athenian drachma kept its value for centuries....

The Roman denarius began to be devalued under Nero (54 AD) and by the fall of the empire what had once been solid silver was now copper with a thin coat of silver

The Austrian view of the business cycle...

The government never wants assets to decline in price and it will overreact to harmless minor shocks, paving the way for more dangerous shocks later on. A criticism is that investors seem to be too easily fooled by low interest rates into making unprofitable investments,

Hegemonic stability theory

The world is most stable when there is a clear dominant power, associated with Charles Kindleberger for whom the Great Depression was the greatest example. The dominant power supplies a disproportionate quantity of international public goods in exchange for lots of bargaining power.

Underrated factor holding Africa back....

The Tsetse fly was devastating to cows and prevented many areas of Africa from transitioning into agriculture

In the 1960s before the collapse of Bretton Woods....

The US had 2/3 of the world's supply of gold

David Friedman argues that each person has a line beyond which he believes that consumption is frivolous.....

The number is 2x whatever the person makes

In Latin America it is not uncommon for a middle class family to have servants...

The number of servants falls as a society's wealth increases because it becomes too expensive

A 1995 pronatalist policy in Quebec paid parents between 1,000 and 10,000 dollars to have a child (depending on their situation).....

The number of women who had a child increased by 16.9%, if you believe the fiscal externality note above then this policy had a high ROI

Internality

The opposite of an externality, a cost imposed on your future self by your current self

There was de facto polygyny in Medieval cities...

Women died from childbirth at such high rates that wealthy men might cycle through several wives and kill them with their sperm

It is often said that women are less happy now than they were in the 1960s....

The actual change has been small, 27% said they were very happy in 1960 and 23% today whereas male rates have been roughly constant at 25%

In the O-Ring model...

The amount of talent increases throughout the production process as mistakes are more costly later in the process, it is named after the failed O-ring in the Challenger mission

The classical dichotomy...

The belief among pre-Keynesian economists that the economy could be studied just looking at real variables because inflation was neutral

John Cochrane notes a natural experiment where...

The central bank of Sweden increased interest rates 175 basis points for no apparent reason, as expected inflation fell and unemployment rose

Empirical estimates attempt to take the British Empire as a package and suggest that for the US...

The defense and trade restrictions even out

Market predictions of inflation are taken from....

The difference between normal bonds and inflation protected bonds.

Sowell notes that...

The economy will work even if nobody understands it

Ed Prescott was the first to note...

The equity premium puzzle (1985), Barro's explanation is that it makes sense if there's a small chance of 100% loss

Why does the firm exist? Coase and Oliver Williamson's answer is that....

The firm exists to deal with transaction costs, it's difficult to measure the level of transaction costs in an industry and so it's tough to test this hypothesis

The US, UK, and France did not have passports until....

The first World War

The fly shuttle could have been invented by the Romans, they had looms...

The fly shuttle involved no new materials, it was invented in the 1730s and is little more than a piece of wood, luddites burned the inventors house down

If you take education as a proxy for social status...

Then social status is more constant than wealth, it has a correlation of 0.75 between generations, this is roughly constant throughout societies

Bell Labs helped create...

The laser, the transistor, cosmic microwave background radiation, the solar cell, several programming languages, and information theory

Inequality Possibility Frontier

The maximum rate of inequality in a society -- note that 19th century China had low inequality but if inequality was any higher people would have just starved, they had low possible inequality

One paper suggests that Germany lost more long-term national income from....

The migration of scientists than from British bombings. Losing physical capital can hurt you for years, losing human capital can hurt you for generations

Ed Prescott posits that...

The monetary policy in the GD was bad but this was all exacerbated by uncertain politics in many countries (Italy, Germany, etc)

The Iron Law of Prohibition

The more intense the law enforcement the more potent the drug will be because you want to minimize space.

Zipf's law

The most common word in a language occurs twice as often as the second and three times as often as third. In English the three most common words are the, of, and

Gale and Shapley showed that if men and women have stable preferences...

The optimal outcome is men proposing to their top choice and going down until they reach a stable match (this is optimal for men, women proposing would be optimal for women)

Aristotle argues in Nichomachean Ethics that....

The pursuit of wealth for self-sufficiency is noble, but the pursuit of wealth for its own sake is not. Aristotle argues that it is immoral to buy something for one price and sell it for another.

Hume is a forerunner of two ideas in Econ...

The quantity theory of money and the long-run neutrality of money -- he even seems to have realized the short-run non-neutrality of money

If the endogenous theory of growth is correct and fertility rates continue to decline....

The rate of economic growth may decline so much that nobody even aims for it

Both genders have more friends of the same sex....

The ratio is 4:1 for women and 6:1 for men

Knut Wicksell was the first to realize...

The relationship between the safe rate of return and the rate of return on capital

The main thing is that resources flow to the person that wants them most....

The social surplus is the same when someone sells an apple as when the person who wanted to buy the apple finds the apple

Herfindahl-Hirschmann Index

The square of the percentage market share of each firm summed over the 50 largest firms (or summed over all the firms if there are fewer than 50) in a market.

George Knapp is notable for creating in 1905....

The state theory of money, that money's value comes from its approval by the state rather than its usage as a medium of exchange, Keynes was in support of this theory

One view of the financial crisis...

The supply of safe assets was too low to meet the demand and so people repackaged volatile assets as safe assets

Between 1697 and 1851, England had a tax based on windows because they were easy to measure (originally they had a tax on fireplaces but people didn't like tax agents coming inside their house)...

The tax increased at ten windows so a large percentage of houses from this period had nine windows -- Adam Smith was a notable opponent

One could argue there are three events in human history....

The third is the development of stable property rights, which occurred in some regions but not others

If a CEO publishes an over optimistic report of the future has he committed fraud? He has hurt those who bought, but he has benefited those who sold.

The typical answer is that the CEO has a responsibility to current shareholders not all stock buyers and thus is responsible

Reed's Law

The usefulness of a network increases faster than the network itself, this is why networks can take off, their usefulness has exponential growth even with a linear increase in users

There is no reason to assume inflation should be constant...

The variations in volume during a symphony contribute to the performance. What matters is whether or not the changes in inflation are expected, this is the rationale for having a stated nGDP target

Revenue equivalence theorem

Theoretically English, Dutch, Vickrey (second-price) all yield the same revenue under some assumptions. English auctions work best in practice because a). It raises more than second-price when buyers are risk-averse and b). When buyers valuations are interdependent buyers will prefer English to second-price

The Diamond-Dybvig model (1983) says that....

There are two equilibria: bank run and not bank run. A bank run can destroy even a healthy bank because their loans are illiquid and if they could sell them it would have to be at a loss. This leads to the introduction of deposit insurance

Arrow-Lind principle is that the social cost of investment risk approaches zero as population approaches infinity....

There is an argument that investment should be taxed lower than consumption because there is a risk-component to investment (small increases in tax rates can theoretically make many investments not worth it)

Milton Friedman talked about a growth ceiling...

There is no natural rate of growth but there is a maximum rate of growth which we never reach because of policy mistakes

Some tribes have part-time private property....

There is private property during growing season that becomes public property during hunting season

In the labor market we focus on dissatisfied sellers...

There may be lots of dissatisfied sellers in other markets, people who want to sell but couldn't find a buyer they considered good enough

A less noted point in mercantilism....

There was a focus on importing raw goods and exporting more complicated goods, doing the opposite was considered a mark of an immature company

One sign that the US was not a unified region in the colonial period and a more general test for how unified regions....

There was essentially no regional growth correlation in the US

The people with the best claim to have predicted the housing bubble did so in 2002 or so...

There was no actionable trade they could have made to profit

Religious persecution may have been so intense in Medieval Europe because...

There was such an interplay between religion and state. The Pope could declare any law illegitimate. This was a hassle and so governments often tried to signal their commitment to religion -- one way to do this is to harm the outgroup

"In a world of stupid people....

There would still be profits." - Armen Alchian

One model of conflict in Africa is....

There's bargaining for rents paid to different interest groups, negative economic shocks lead to renegotiation of these rents often in a violent way

The Marshall Plan did not work...

There's no correlation between how well countries did and how much money they received, the money sent was not large enough to create a significant difference (Britain received the most with 3 billion dollars given over several years)

Medical expansion can lead to changes in the way diseases are diagnosed....

There's no use diagnosing for a disease which has no treatment, after Prozac-type drugs became common depression was diagnosed at twice the rate

RBC argues that monetary policy costs are low and business cycle costs are low, Robert Lucas said that...

These costs were once high (Great Depression) but we learn lessons along the way

On a national level the elderly are a net fiscal burden, but on the local level....

They are benefactors. They don't send children to public schools, the largest source of local spending in most areas. They are also less likely to commute daily and so decrease the traffic/parking burden in an area

A tontine is an annuity that increases until a large payout when the last subscriber dies...

They are quite common in France

Cities don't make people poor....

They attract poor people because a). They have free transportation, b). Lots of jobs, c). Are easiest to panhandle in

Prizes for innovation can be distortionary if they are over specified...

They crowd out similar but superior products which would not qualify for the prize money

Michael Spence has argued that firms produce too much variety because....

They fail to recognize that their new products cannibalize demand for their old products

During extreme crises people tend to move out of cities...

They get closer to the food supply. This happened in Moscow in 1920 and during the German hyperinflation, and in Japan/Germany after WWII for example

Louis Benezet has an early 20th century where students were not taught math until middle school....

They got to normal levels of math ability in 1-2 years

Ghana's GDP increased by 60% overnight in 2010...

They hadn't changed their price index in thirty years

Country growth rates are highly unstable over time...

They have a decade to decade correlation of 0.2, country's characteristics are quite stable over time (0.6-0.9)

Because volcanic eruptions can lead to major crop failures....

They may explain several wars/regime changes. For example, the fall of the Pharaonic empire (30 BC) and the Second Barons' War in England

Murder rates are tough to predict....

They rose a lot between 1960 and 1975 for no clear reason

In South Africa during apartheid the anti-business rhetoric came from the racists...

They said of course businesses will hire blacks they have no solidarity with us whites

The Netherlands has a subsidy which allows disabled people...

To have sex with prostitutes up to 12 times a year

Human capital is difficult to measure and so education is used as a proxy and unskilled workers are given equal human capital...

This is misleading because American unskilled workers have much higher marginal products than Nigerian unskilled workers. Human capital is highly context dependent, speaking Mandarin isn't that important if you live in America but it's extremely important if you live in China

Interesting example of the substitution effect. When electricity became common in the 1920s many household chores became less labor intensive but women spent more time on household chores rather than less....

This is probably explained by the fact that it no longer made sense to hire a maid and so now women did the chores on their own

Isaac Newton overvalued the price of silver in 1717 when he was master of the mint....

This led to a de facto gold standard in Britain which did not become official until 1819

Women could sue men who got them pregnant but refused to marry them for breach of contract, this was removed from US law between 1930 and 1950....

This led to the rise of diamond rings before marriage, a commitment mechanism which prevented men from leaving

Pedophilia, voyeurism, and masturbation are all more common among men....

This may be because men are more likely to struggle to find mates and so it is optimal for some number of men to have non-procreative desires, women who engaged in this behavior would lower the birth rate

People have a tendency to punish unfair offers in the ultimatum game....

This may be for three reasons. a). We want to punish unfairness, b). We act as though we are playing the game over multiple periods, c). The money is too low to induce optimal behavior

Mexican cartel violence has increased over time...

This may come from Mexican government arresting cartel leaders which leads to lots of fighting during the power vacuum

Left-number bias is the observation that people pay more attention to the far left number when making consumption decisions..

This means that demand curves actually have lots of little kinks

Between 1803 and 1873 France used a gold:silver ratio of 15.5:1....

This meant they switched between gold and silver regularly, sometimes the two coexisted at the same time, they also helped to stabilize the prices of the two commodities

When England reduced its anti-Catholic laws in 1778...

This provoked the Gordon riots (500 dead). At some point Catholic priests could be imprisoned, Catholics couldn't graduate from college, and couldn't inherit land. The Catholic Emancipation Act was passed in 1829.

Easterly notes that 2 billion dollars was given too Tanzania...

To improve their roads, there was no improvement in roads just a bureaucracy which worked to convince donors that roads were improved

Paul Samuelson policy mistakes

Thought the Soviet Union was doing well in 1989, supported price controls in the early 1970s, thought America would enter a deep recession in 1946 as government spending fell

Mincer showed that when you don't take into account...

Time foregone from a commodity you get biased price elasticities, a theater ticket is much more expensive than the ticket price

America went from a 6 billion dollar current account surplus in 1981....

To a 161 billion dollar current account deficit in 1987

Gordon Tullock notes that most ideologies are quite weak and revolutions need to promise....

To distribute loot if they want to gain members

The United States was the last of the major countries....

To establish a national bank

One reason why China was so unified so early is that it has....

Two main regions (Yangtze and Yellow river deltas), once you conquer those you can raise a large army and conquer the rest.

Using household income data...

Understates black income levels because they tend to have smaller households

Risk aversion cannot truly be calculated....

Unless you were able to adjust for all a person's other assets and liabilities -- lab tests can only approximate risk aversion

Economic history was written by historians...

Until about the 1960s when cliometrics became popular

David Ricardo did not write on economics....

Until the age of 37, he had already amassed a small fortune by this time

American Indians were declining as a percentage of the population...

Until they began to increase faster than is biologically possible as whites started to claim Native American ancestry

Innovation by monopolists is thought to be an....

Upside down u. You don't want too much or too little competition. Nicholas Bloom has a paper corroborating this but the correlation isn't huge.

There are several dictators who voluntarily gave up power....

Usually choosing to have elections and then losing the election (Joao Figuerido of Brazil and Daniel Ortega of Nicaragua) or stepping down to allow an election (Pinochet, Chun doo-Hwan of Korea)

Thirlwall's Law

Variance in growth rates is partially predicted by the elasticity of goods exported, these countries will have worse downturns

How many Supreme Court justices have been removed from office?

Zero, though several have come close

The Netherlands of the 17th century had lottery loans...

Where you could lend money to the government while trying to win the lottery

Labor participation rate among men under 55 has fallen from 95% in 1960 to 85% in 2020...

Which a 10% decline but also a 3x increase in the number of men not trying to work

Our best data points for analyzing the effects of stimulus on the economy....

WWII, Great Depression, Financial Crisis, and COVID-19; have nothing to do with each other, it's tough to aggregate them as evidence

Bartels result

Wage growth is higher when democrats are in office, the actual cause seems to be that democrats are less hawkish and will tolerate inflation (Jimmy Carter is the exception here but he really only cracked down in his final year)

German hyperinflation was a continuation of....

Wartime inflation, Germany chose not to raise taxes only to inflate -- Britain did the opposite, France was in between

Keynes believed that his system...

Was a method to maintain high growth rather than a way of fighting recessions

In the early 20th century investing in stocks...

Was considered dangerous and speculative -- many considered bonds to be a wiser choice. Irving Fischer would argue against this

Friedman is criticized for having a 45-minute meeting with Pinochet, but Keynes...

Was director of the British Eugenics Society for seven years

The European practice of wearing bright uniforms and marching their militaries in geometric formations....

Was done because it was the cheapest way to prevent soldiers from deserting

Bernanke's main contribution to the Great Depression literature....

Was noting that the decline in money supply was bad but was exacerbated by the decline in credit supply, after several banks failed this magnified the effects of deflation. You can see his preoccupation with saving banks in 2007

Paul Samuelson said that the St. Petersburg paradox...

Was offset also by the knowledge that the person offering the game does not have an infinite amount of wealth

The US issued paper money in 1862, the Secretary of the Treasury Salmon Chase....

Was on the Supreme Court in 1870 and declared what he did unconstitutional. Chase sought the Democratic nomination in 1868 despite being a Supreme Court justice

The phrase the dismal science....

Was originally used by Thomas Carlyle in a jab at Mill when they were debating whether slavery should be reintroduced into the West Indies

The most difficult GDP estimates are for third world governments....

Which are clearly lying/doctoring statistics -- everything becomes guesswork.

Bronislaw Malinowski found that there is sexual jealousy even in societies...

Which do not believe in male physiological paternity

USDA created a program out of thin air in 2018-2019....

Which gave 28 billion dollars in aid to farmers because of the trade war, this program did not go through congress

In 1970 housing prices in San Francisco...

Were average for a city of its size, the city of Las Vegas tripled in population between 1980 and 2000 without an increase in housing prices, Paolo Alto once saw housing prices triple in ten years with no increase in population

Jack Treynor argued that individual stock returns....

Were based upon how their variance compared to that of the market as a whole (1961). Markowitz's model had only looked at how the covariance of the stocks in a portfolio related to each other rather than the market as a whole

In Egypt the majority of houses...

Were built illegally because it was too expensive to build legal housing

Hoover's budget deficits...

Were higher than FDR's pre-WWII

Gold, silver, bronze.....

Were the coins in the Roman Empire, in that order of value. They are in the same column of the periodic table (bronze is copper mixed with tin), gold is rarest because it is heaviest.

In many African countries...

Western aid is higher than total fiscal expenditures

Forward guidance....

When a central bank influences people's decisions by being more transparent about its intentions, lowers the amount of real shocks, comes primarily out of Robert Lucas' research

X-inefficiency

When a firm produces at a higher cost than necessary because they don't face enough competition. Theorized by Harvey Leibenstein in 1966.

Gilboa and Schmeidler preferences..

When agents are confronted with ambiguity they will assume the worst

During the hyperinflation in Germany after WWI a man went to a store with a wheelbarrow of money....

When he returned from inside the store he found his wheelbarrow had been stolen and his money had been dumped on the ground

Corporations are run best...

When somebody has a large interest, when you have millions of small shareholders it isn't worth it for any of them to try and change the direction of the company

Zipf's law fails to hold.....

When you break the country down into a grid of equal geographical areas

In Romer's first model (1986) he had a learning by doing term....

Where firms improved as they learned and their learning was approximated by their capital. This had the downside of predicting a monopoly in most industries, something we do not see

Robert Shiller has an idea called trills....

Where instead of financing government operations through debt they finance it through issuing trillionth shares of their GDP. This has the advantages of a). Incentive alignment, b). Deleveraging, and c). It becomes a good way to analyze the effects of potential policies

China is a Communist country....

Where the citizens pay less in tax than Americans

In Colonial India to lessen the number of cobras in Delhi they offered a reward to each person.....

Who killed a cobra. People started breeding cobras and killing them for the money.

Investors who earn high returns are often unable to explain...

Who they are profiting off

People argue housing prices are higher in cities because of a locational premium but if that's the case...

Why don't they just build taller buildings, it would be easy money considering adding ten stories to an NYC apartment building would only increase cost by 4%

Tullock's paradox

Why is there so little money in politics? One, the bribes look bad for both parties and so are disincentivized. Two, politicians don't negotiate well and are bribed for little or no money. Perhaps politicians compete for bribes and that lowers the cost

Regulation goes up over time...

With the exception of antitrust and price controls, the two regulations the Chicago school was most worried about

Some charges in the US system are criminal, others are civil (trespassing, defamation, child custody, destruction of property)....

With civil charges you have the right not to press charges, Stigler/Becker argued for a fully civil legal system. For example, we usually spend more than 100 dollars dealing with a 100-dollar theft. Civil cases are decided by a judge rather than a jury

People conflate equality among firms...

With equality among individuals, large firms actually pay higher salaries

Non-organized crime tends to be low in areas...

With high levels of organized crime, one is sacred of accidentally mugging the boss' mother

Romer-Mankiw used a Solow-style growth model....

With human capital as an additional input and it seems to fit growth patterns quite well

One study found length of colonization has a positive correlation...

With modern day incomes among colonial islands. Another found that colonial public goods provision in Africa is predictive of modern public goods provision. One of the biggest problems with African colonialism was the artificial borders which Europeans created

Ecologists thought in the 1970s that resource depletion....

Would be the major problem in the 21st century, in a sense it was the opposite. We used so many resources that pollution became the problem

Smith argued that rates of return from different types of capital...

Would equalize, Stigler once called this the central proposition of economics

Baumol argued that firms will sometimes have less market power than their market structure...

Would suggest because they are also competing with hypothetical potential new entrants and so will struggle to extract monopoly rents

Milgrom's multitasking problem...

You can change people's behavior by an explicit incentive or by changing their opportunity cost, for example you can make a policeman patrol more by paying them more or by making their office work more boring

It is expensive to prevent soldiers from retreating, you can burn bridges but that may backfire....

You can commit to chasing deserters down or you can shoot deserters during the battle. This explains the glorification of heroic death in almost every culture

Advantages to algorithmic distance learning...

You can have personalized questions, economies of scale, and more flexible schedules

When labor's bargaining position improves....

You can just double-down on oppression (especially in the pre-Industrial period), for example wages didn't rise in Poland following the Black Death

In the Southern US after the Civil War farm equipment wasn't implemented because there was lots of cheap labor.....

You can pay someone less than their marginal product if it is costly to move and it was. The Mississippi Flood of 1927 saw aid relief which helped many black people move North (14% in the median flood-affected county). This led to improvements in agricultural technology

Rothbard rejected continuous preferences...

You can't use calculus, if supply and demand aren't continuous then they may not intersect and there may be no equilibrium

When the price of peanut butter doubles...

You cannot immediately tell whether prices have doubled or whether peanut butter is in short supply, this is one problem with inflation, it distorts information

Impossible trinity

You cannot simultaneously have a fixed exchange rate, free capital flows, and monetary independence. The idea comes from the Robert Mundell in the early 1960s

Prescott and Heckman disagreed on the elasticity of labor supply....

You seem to get different answers when you look at micro data and business cycle data, you can also get divergence when you model based upon individuals or based upon families. Heckman believes elasticity is low and Prescott believes it is high.

For women on dating sites it seems to be optimal to increase the variance of your rating...

You want men who are very interested in you -- men will be more interested when they believe that other men are not interested because they want to insulate themselves from competition

Thomas Schelling says that if you're kidnapped...

You'll do better with your ex-wife negotiating than your current wife

How many natural resources have gone extinct?

Zero, as far as I can tell.

The tradeoff in government spending between a large and a small nation is that...

a). A small nation can better agree on spending and that spending can be more targeted, b). A larger country needs to spend proportionally less because some public goods, like defense, are not proportional to population

European success is based around two main variables....

a). Access to the Atlantic Ocean, and b). A weak monarchy; this would indeed predict the Netherlands and England as the most successful European countries

Two arguments for Baumol's cost disease in education.....

a). Administrative spending has stayed constant as a percentage of total spending, b). Lower education and higher education have increased in lockstep

In hunter-gatherer societies....

a). Death curves are surprisingly flat (when you are healthiest you are also most likely to be killed in war), b). People often live to 70+ but rarely to 90+

There are three ways a case can go to federal courts...

a). Diversity cases (unclear which state has jurisdiction), b). Cases which deal with federal laws (narcotics for example), c). Cases where the state constitution may be in violation of the federal constitution

Welfare is by definition zero sum...

a). Excess burden of taxation, b). Lowers hours worked, c). Bureaucracy required to administer it

The poverty rate is 2% among people who follow the success sequence...

a). Graduate high school, b). Work full-time, c). Don't have a child out of wedlock

Industries with high concentration usually have...

a). High upfront costs (petroleum engineering), b). High regulatory costs (health insurance, pharmaceuticals), c). Network effects (Facebook), and d). Brutal learning process (automobiles, plane manufacturers)

Inequality was used as an input to social welfare functions in the 70s, this is difficult because...

a). If the desire for money is constant inequality is an enormous variable, b). If the desire for money is not constant then poorer people just value leisure more; a priori these two hypotheses are equally valid

Single payer can theoretically work better because...

a). If the government has monopsony power it can bid down prices, b). People don't consume unnecessary healthcare

The problems with game theory as a predictive system is....

a). In many games there are too many equilibria, b). In many games the payoffs are unclear (for example nuclear standoffs)

Problems with the institutions literature....

a). Institutions are difficult to rank and impossible to measure, b). Institutions may be country-specific, c). It's unclear how we would change institutions even if we could, d). We are often measuring outcomes rather than institutions themselves, e). Many of the most successful countries post-WWII were dictatorships (China, South Korea, Singapore)

National education is easy to measure but you are probably measuring....

a). Intelligence, b). Learned skills, c). Institutional capacity; it's tough to tell which is which

Using historical P/E ratios to determine if the stock market is overvalued may not work because....

a). Interest rates are lower now and that raises P/E, b). If the demand for stocks increases that also raises P/E

It's often irrational to pay based on output because....

a). It can lower the quality of the output, b). It will lower inputs to aspects of the job not based upon that output, c). Output is noisy, d). They will require higher than normal salary to compensate for the variability in compensation, e). When there is noise the agent will put in less effort

The patent system sucks for the following reasons....

a). It doesn't seem to induce innovation, b). It creates monopolistic pricing, c). In some cases it prevents innovation by preventing innovators from using recently-invented components, d). It brings a lot of legal fees

Defaulting on your debt is bad because....

a). It increases the cost of borrowing for companies in your country which did no wrong because a company cannot borrow more cheaply than the country it is in, and b). Government spending may pause, spending is constant throughout the year but tax revenues are lumpy and you need to borrow in the in-between time

Single payer has the downsides....

a). It lowers the salaries and thus talent of doctors, b). It leads to healthcare workers unionizing and becoming political actors, c). It can be difficult to keep people where you want them if the system is slow to adjust salaries

Sanctions can work when...

a). Many powerful countries undertake them (doesn't work if it's just one), b). The goods are non-fungible (Saudi Arabia can only make the US pay more for oil by making everywhere pay more for oil), c). Diplomatic protest is too weak an action, military intervention is too strong; note that the average cost of a sanction is 2% of GDP, they don't work well in creating a regime change

Criticisms of RBC are....

a). Models are based upon potentially incorrect parametrization of the economy (percentage of time working, elasticity of labor, interest rates may all be wrong in early models), b). Inability to point to actual real shocks, c). Hours worked seems to vary much more than wage rates

The market for human children might have the following stipulations...

a). No sale after the age of 18 months, b). All rights belong to the mother, c). There is no resale. By some accounts there are twenty willing adopters for each potential child. In many states its illegal for a mother to contact a potential adopter unless it's through an adoption agency

Its unclear if the firms which go bankrupt during recessions are...

a). Perpetually low-performing firms that are finally pruned, or b). Perfectly good firms which would have done fine otherwise

Unemployment wouldn't occur during recessions if businesses could reduce everyone's pay and/or everyone's hours but this never happens because...

a). Some unions don't allow it, b). This decreases everyone's morale, c). Recessions are a good time to fire employees you consider to be low-performing. Consequently recessions usually have little effect on wages. Germany is a notable exception, they had a larger decrease in output during the Great Recession than the US but very little unemployment

Problems with nGDP targeting...

a). Structural rates of growth change over time, Japan had 9.5 nGDP growth in 1980 (7.5% growth, 2% inflation), in 2015 they had 0% growth which would imply 9.5% inflation, b). nGDP targeting may be unrealistic during extreme recessions or wars (note that growth was highly unpredictable in the 1940s)

Angus Deaton has been critical of effective altruism....

a). Surveys make it seem like the poor aren't that interested in the interventions made (they would probably just prefer additional income), b). Poor people aren't dying for want of a couple hundred dollars but because their country's institutions are low-performing, additional aid can prop up these governments

Securities fraud is an odd way to prosecute companies but has the advantages...

a). The amount of harm is clear (fall in share price), b). It's easy to make a class action (the class is the shareholders, sexual harassment can be hard to make a class action lawsuit for example because they are not really a class); however the company just pays money to the shareholders who already own the company

The Peter principle would seem to be true in any competent organization Ed Lazear notes....

a). The job is more difficult and b). There's a natural regression to the mean

Researchers tried to get a cheap water filtration system adopted in rural Bolivia and only got 32% despite the fact that....

a). The system was free, b). 15% of children die from diarrhea. This implies either they have no trust in science or don't want to look poor

Crime rates are higher in cities because...

a). There are more poor people, b). There are more potential victims, c). It is harder to solve the crime

When slavery was abolished slaves mostly struggled to become middle class workers because....

a). They had little education, b). They had no saved money to start businesses, c). In most plantation-based economies there was no manufacturing and so workers had few options, d). The rule of law usually has an intermediate period where slaves are free but have less protection than whites

People in developing countries consistently invest in low-returning assets like cows because...

a). They want to diversify, b). They need an additional food source in case of a famine, and c). They usually don't have insurance or asset markets to invest in

The Confederates struggled to raise revenue because....

a). This was ostensibly about state's rights and so the states in the Confederacy would not allow a centralized tax, b). No tariffs could be collected because of the Union blockade -- this essentially forced them into inflation

Three properties of property law....

a). Universality (everything is owned), b). Exclusivity (it is owned by one person, c). It is transferrable

The Dutch tulip craze was based around a rare type of infected tulip called Semper Augustus which had a beautiful red-white combination....

a). You can more easily have a bubble in commodity prices than asset prices because they are ruled by fashion, b). This started in the 1620s, ending in 1637, c). Some aspects of the mania were exaggerated, bulb prices fell around 90%, d). Dutch parliament considered passing a bill that nullified some tulip contracts

Alberto Alesina argued that close elections produce more debt because...

a). You want to get all of your programs passed before you lose power, b). High debt will constrain your rival party in the future