Solomonic Judgment vs. Sophists, Economists and Calculators[1] [2]

Given the choice, would you accept to live in a society where happiness and prosperity is guaranteed for all on the condition that one single person be kept permanently unhappy?  Is the well-being of thousands of people “worth” the sacrifice and suffering of a single innocent child?  Such is the dilemma to which the inhabitants of the utopian city of Omelas are confronted in Ursula Le Guin’s philosophical short-story “The Ones Who Walk Away from Omelas”.  In her parable, most people are ultimately able to come to terms with the atrocity. Read more

Our Hansen Moment

The main goal of the macroeconomist is to understand the sources behind business cycles and the behavior of financial markets in the modern economy.

As in any science, economics offers many ways to accomplish its tasks. What sets economics apart, however, is that this year two models that are in sharp contrast with each other in explaining the dynamics of financial assets, and were created by two high-profile economists, were selected to receive the discipline’s highest honor - the Noble Prize in economics. Read more

In which MIT decided to teach micro first so as to make economics more relevant

I've already blogged on how undergraduate education evolved at MIT in the postwar era here and here, but since Mike Konczal and Paul Krugman make the case that, to bring introductory economics closer to the real world, macro should be taught before micro as Samuelson did in the first 13 editions of his Economi Read more

Apply Now: Free Undergraduate Seminar with Michael Sandel

The Institute for New Economic Thinking is seeking a select group of undergraduate students to participate in the filming of a free, three-day series of discussions on ethics and economics with Harvard Professor and philosopher Michael Sandel, the Institute's newest Senior Fellow. Read more

Mature history of economics

In the past decade, the volume of literature in the history of economics has been of 500 articles and just under 50 books a year. The graph below traces the count in two year intervals (articles left axis, books right axis). The absolute volume is stable but given the growth of economic literature in the period, stable might be rebranded as static.

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[PART 2] U.S. Current Account Deficits and German Surpluses: The Role of Income Distribution in Global Imbalances

Till van Treeck, Jan Behringer, Christian A. Belabed, and Thomas Theobald

In our two papers, we analyze how changes in personal and functional (wages versus profits) income distribution interact to produce different macroeconomic outcomes in different countries. On the basis of a stock-flow consistent model calibrated for the United States, Germany, and China, simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the United States since the early 1980s can be explained by the interplay of rising (top-end) household income inequality and certain institutions (e.g. easy access to credit, privately financed education and health care systems). Read more

[PART 1] U.S. Current Account Deficits and German Surpluses: The Role of Income Distribution in Global Imbalances

Till van Treeck, Jan Behringer, Christian A. Belabed, and Thomas Theobald

Germany’s economic policies are under attack from all sides. Read more

In the thick of it (labels and research)

Historians like labels. X history. History of y. The labels carve out subjects, set boundaries in time and space, at times even suggest methodological commitments. Read more

Shadow banking and the global financial ecosystem

Originally Posted 7 November 2013 at VoxEU

The aim of this article is to present a more comprehensive approach to the way we conceptualize, regulate and measure the financial eco-system than what has been done to date. It provides a global macro context for the intellectual framework developed by the Shadow Banking Colloquium at INET (see Mehrling et al, 2013) to better understand shadow banking. Read more