Category Archives: Economics

Milton Friedman’s Scientific Legacy

I wrote the following for the celebration of Friedman’s centenary by the Becker Friedman Institute in November 2012. By any measure, Milton Friedman has had a tremendous impact on our world. Friedman is one of the most recognizable economists of … Continue reading

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Graceful Failure and JPMorgan’s Loss

The biggest challenge facing regulators and politicians following the financial crisis is to engineer a regime that allows graceful failure for systemically important financial firms. Failure is, ironically, one of the great strengths of a market-based economy – the creative … Continue reading

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Personal Income and Consumption

Summary I have argued for some time that a robust recovery will occur after households adjust spending downwards. The “savings rate” in the U.S. has risen since the financial crisis, but this reflects changes in taxes, not changes in household … Continue reading

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Risk, Black Swans, and Brown Turkeys

The mathematics of volatility and VaR alone are just not enough for understanding risk in today’s environment. We are living in extraordinary times – probably the most extraordinary in three generations. (Don’t get me wrong – I’m not arguing that … Continue reading

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Employment and Unemployment Flows

This is the summary of a 45-page paper (.pdf) available for download at SSRN SUMMARY Unemployment in the U.S. has risen dramatically since the start of the recession in December 2007, going from about 6.8 million people in May 2007 … Continue reading

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Household Debt and Spending

My fear is that the current recovery is storing up problems for the future. Household debt continues to decline, and the savings rate has increased. This should be good news for the recovery of the economy: much of the recent … Continue reading

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Inflation Background and Current Situation

As Milton Friedman said, “Inflation is always and everywhere a monetary phenomenon.” Bernanke in his textbook says “The existence of a close link between the price level and the money supply in an economy is one of the oldest and … Continue reading

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Thoughts on the Current Macroeconomic Environment

The current macroeconomic environment may appear complicated but is much simplified by focusing on two issues: First, the recent speculative boom and bust and the consequences following there from; Second the increases in spending (fall in “savings rate”) over recent … Continue reading

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A Dynamic Model of Labor Supply Under Uncertainty 1985

This paper lays out the model as in the 1981 paper but also discusses estimation and identification in some detail. Simplifies to a stationary environment with a single wage and then fits gross flow data. Includes empirical results showing interesting … Continue reading

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A Dynamic Model of Labor Supply Under Uncertainty 1981

This paper lays out the theory of a three-state model of labor supply (job, unemployed, and out of the labor force) in full detail – stationary and non-stationary, discrete and continuous time. Proves existence and uniqueness of the value function. … Continue reading

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