Nick Rowe

Amateur Mechanic.
Professional Economist (retired).
Better at fixing cars, because I can usually figure out what the designer intended.

[Nick Rowe @MacRoweNick]

@BrianCAlbrecht @ecurrnomics Yep. Would depend on all the supply & demand, income & price elasticities.
But to put my point in an (overly) extreme way:
"Countries should avoid specialising in producing goods with high productivity growth, because those goods will have falling prices."

[Nick Rowe @MacRoweNick]

@ecurrnomics @BrianCAlbrecht Think the Baumol effect can (sometimes) function without movement of labour.
If demand for haircuts grows (from productivity and income growth in other sectors), we don't need hairdressers to switch to other sectors to get increased wages.
Dunno if it's been modeled.

[Vivek Dehejia @vdehejia]

@MacRoweNick @nfergus @HooverInst Updated note on my paper with @MacRoweNick : https://t.co/XI1JxkMxwS The note does two things: (1) sketches an explicit microfoundation for our reduced form deadweight cost function, establishing that marginal DWC must be convex; and (2) numerical example with our special case.

[Nick Rowe @MacRoweNick]

@susan_p_riley Yes.

[Nick Rowe @MacRoweNick]

I think the answer is Yes.

Simplest model: the only goods are: apples; apple trees (an asset).
Diminishing MU of apples means harvest fluctuations reduce E(U(C)).
If I raise/cut my C more in good/bad harvests, my E(U) falls, but your C fluctuates less, so your E(U) rises.

[Nick Rowe @MacRoweNick]

Possibly stupid (shower thought) Micro question:

If I make my demand curve more elastic than is privately optimal, does that benefit others?
(I adjust more to supply shocks (both directions), so others don't need to adjust as much.)

(Thinking gas prices, of course.)

[Nick Rowe @MacRoweNick]

@bswud Ah! Sorry, I missed the link.

[Nick Rowe @MacRoweNick]

Has anybody dared call it "Trickle Down Theory"?
(Seems to work, applied to housing.)

[Nick Rowe @MacRoweNick]

@AndyHarless I think it's useful to distinguish "long-run", in the sense of full price & wage adjustment, from "very long-run", in the sense of the stocks of capital goods adjusting too.

[Nick Rowe @MacRoweNick]

A new technology (AI/whatever) will not cause real wages to fall unless it causes a rise in land rents (natural resources) or machinery rents (capital).

(Otherwise workers/employers could/would just revert to the old technology, and increase their wages/profits.) 1/

[Nick Rowe @MacRoweNick]

But anyway, if the relative price of labour falls, then the relative price of some other input must rise.
And I don't see this point being made much. 3/3

[Nick Rowe @MacRoweNick]

IMO (which isn't worth much), the biggest risk to real wages is if AI causes land rents (natural resource prices) to rise.
Sorta like a Malthus/Ricardo model, except you're adding robot labour to human labour. 2/

[Nick Rowe @MacRoweNick]

@ritwik_priya Well, *almost* no one, and it was *almost* 7,000ft.
https://t.co/bQqK81wAQX

[LorenzoFromOz @LorenzoFrom]

@Noahpinion @ScottSumnerTMI @GarettJones @GlennLoury @DrSamuelGregg @MacRoweNick @C_Harwick 6. But the reality is that conventional centre-right politicians are being displaced by national populists not because they did not pay attention to economists, but because they did.
https://t.co/gn0tWspnMd

[Nick Rowe @MacRoweNick]

My utility is measured in Celsius, your utility is measured in Fahrenheit.
Both cardinal, but interpersonal comparisons are tricky.

[Nick Rowe @MacRoweNick]

@robinhanson Optimal Currency Areas

Optimal Open Border Areas

[Nick Rowe @MacRoweNick]

"Affordability" is the same as "real incomes".

But it's funny how changing the framing leads you to think differently about policies that might improve it.

[Nick Rowe @MacRoweNick]

The key assumption, that we can't relax, is that the government has a *downward-sloping* demand curve for goods, as a function of the *nominal* (not real/relative) price of goods.

Did I interpret you *roughly* right, @wbmosler ? 5/end

[Nick Rowe @MacRoweNick]

I understand what Warren is saying here (at least, I *think* I do).
Let me give my (massively over-) simplified interpretation: 1/

[Warren B. Mosler @wbmosler]

@farmerrf Markets (in the context of institutional structure) sort out relative value, but not 'absolute' value in terms of a currency. That information comes exogenously, in this case prices paid by gov. when it spends provides information for market prices to then be in that numeraire.

[Nick Rowe @MacRoweNick]

That was massively over-simplified, of course.
We can relax the assumption that the govt buys only rifles, and we can relax the assumption that the govt has a *perfectly* elastic demand curve at a given nominal price. 4/