In February 2019, the US Federal Reserve stopped worrying about inflation that might come from economic growth (and reduced unemployment) and instead focused on the possibility of stagnant growth. That shift in focus led the Fed to stop talking about raising interest rates to reduce inflation, and instead talk [...]
The Bank of Canada cut interest rates dramatically in March 2020 in attempting to counter the depressing effects of COVID-19 on economic activity. But the Bank makes clear that monetary policy will not be enough and the government must respond with aggressive fiscal policy spending. [...]
This article, which appeared around International Women's Day, estimates what women would have earned if paid the minimum wage for unpaid labour cooking, cleaning, childcare, caring for relatives, .... The almost US$11 trillion globally is missed by GDP measures. There is also a table showing, for each county, [...]
Why don't more apartments get built when markets rents rise? Even without rent controls, there are powerful financial incentives that favour building condominiums (where presales generate returns on investments immediately) over rental apartments (where rental income tickles in slowly over decades). Condos have other advantages -- property taxes [...]
Although this story goes back to 2004, I am including it because it is one of the best illustrations of the importance of opportunity cost, as opposed to money cost, for making smart choices. A universal flu-shot for all Canadians would cost about $125 million per year and improve [...]
Basic economy fares in the air travel industry and not primarily intended to compete with low-cost carriers or attract price-conscious consumers with elastic demands. The many restrictions on travel, luggage, cancellation fees are designed to make corporate travel agencies not even consider basic economy fares, and instead spend for [...]
Many argue that globalization requires large companies with economies of scale. The result can be market concentration, and reduced competition, leading to higher prices. By comparing prices in Europe and the US, this article argues that higher prices are not the inevitable result of concentration but are a function [...]
The pro-market, Economist Magazine is concerned about increasing concentration of production among a few businesses in many industries, reducing competition and incentives to innovate. The Economist argues for increased government regulation (!) in the form or relaxing intellectual property laws (patents) from providing too much protection to existing businesses [...]
The Ontario government changed rent controls with the aim of protecting existing tenants. But the policy change allows landlords to raise rents for new tenants. The unintended consequence provides landlords with incentives to try and get existing tenants to move. This may lead to reduced maintenance, ignoring tenant rights, [...]
In 2020, Ontario announced a 10 per cent cut in tuition fees for domestic students, while eliminating many OSAP tuition grants. While most students favour tuition cuts, this article points out that the changed policies most benefit higher-income families who never qualified for grants, while low income families who [...]
While simple demand-and-supply economic models predict that an increase in the minimum wage increases unemployment, this story looks at what happens to those predictions when you take into account how the increased incomes of minimum wage workers leads to increased demand for business products and services. [...]
Many cities, including Seattle, have rising housing and rental prices because of demand from hi-tech workers who earn good salaries and want to live in downtown neighbourhoods. This op-ed suggests that we look at the higher housing prices as a negative externality caused by the tech businesses. Accordingly, the [...]
While the topic of the article is mortgage regulations, the main economic lesson is the importance of identifying unintended consequences of economic policies. Incentives are key to understanding unintended consequences. Examples of unintended consequences include how seat belt laws initially increased injuries, reasons for deductibles on insurance policies, and [...]
This article addresses tradeoffs between efficiency and equity by examining what gives when prices don't. There are examples of concert tickets, essential supply prices following natural disasters, Uber surge pricing, and more. Richard Thaler, Nobel Prize Winner in Economics for work in behavioural economics, is quoted extensively. [...]
This 2018 article includes most of what you have learned, or will learn, about monetary policy. See the tags for this post for a list.
The Bank of Canada is changing the sophisticated models it uses to forecast the economy because those models failed to predict "the deep and persistent aftershocks of the global financial crisis" of 2007-2009. This is a perfect example of the quote from Keynes that "Economics is a science of [...]
Speculators play the major role in foreign exchange markets. This 2017 article shows the importance of speculators in reinforcing the causes of currency appreciation or depreciation.
In 2017, the Liberal Government in Ontario decided to expand rent controls beyond apartments built before 1993 to cover all apartment buildings. The housing industry objected, and argued that expanded rent controls would discourage new apartment construction by reducing profitability. All other things equal, that is a [...]
Robert F. Kennedy gave a poetic speech describing what the measure of GDP misses. While the descriptions are U.S. - specific, the issues are common to any country, and the 2 minute message, is inspiring.
Justin Trudeau and the Liberals were elected on an economic platform that included running deficits to finance infrastructure during a period of slow growth and low borrowing costs. In a Globe & Mail column, Jeffrey Simpson reviews the causes of slow growth, and recognizes the legitimate economic argument for federal [...]
Andrew Jackson, of the Broadbent Institute, argues in a Huffington Post article that the recent increase in Alberta's minimum wage to $12.20 (on a path to $15 in 2018) not only benefits workers, but also employers. He presents the cons and pros of minimum wages, including a claim by the [...]
The Toronto Star reported on a startup called Beyond Pricing that is helping AirBnB owners increase revenues from their short-term rentals by figuring out the highest price they can charge. The company using a dynamic pricing algorithm like those used by airlines and hotels that raises prices when demand [...]
The Globe & Mail reported in October that "BCE Inc. has agreed to pay a $1.25-million penalty after the company's staffers wrote online reviews of Bell products and services without disclosing their ties to Bell. It is the first penalty of its kind imposed by the Competition Bureau in response [...]
After 85 years, Black's Photography, one of the largest Canadian retail photography chains, went out of business in August 2015. As the Globe & Mail reported, Black's was a "victim of a fast-changing digital industry and high-quality smartphone cameras and Instagram posts." This is a classic example of Joseph Schumpeter's [...]
The recent discussion by Stephen Poloz of charging negative interest rates to chartered banks on their deposits at the Bank of Canada was preceded earlier in the year by stories about negative interest rates on bonds in Europe. If February 2015, a Globe & Mail story reported on negative [...]
A year ago, oil prices had plunged from $110/barrel to around $70/barrel. There was much concern then, as there is today with oil prices under $40/barrel, about the effects on the Canadian economy. The Globe & Mail ran a story "Oil's Plunge to Buoy Global Economy: A $1.3 Trillion [...]
Statistics Canada has a 3 minute video showing how data for the CPI basket are collected, weighted and compiled to create the CPI. This is a useful visual introduction to Macroeconomics for Life, Chapter 7.3.
Statistics Canada released a nice 4 minute animated video showing how GDP is calculated using the value-added approach. It begins with the definition of GDP as "The value of output less intermediate consumption plus any taxes less subsidies on products not already included in the value of output." [...]
The Globe & Mail reported that the value of the Canadian dollar fell on foreign exchange markets, after the Bank of Canada forecasted slower GDP growth and lower oil prices. This is a classic reaction of the Canadian dollar to changes in two of the main forces affecting exchange rates [...]
After meeting an Uber developer at a University of Waterloo hackathon, a student posted a paper - "The Effects of Uber's Surge Pricing - A Case Study" - by Jonathan Hall (Head of Economic Research, Legal and Public Policy at Uber Technologies), Cory Kendrick (Data Scientist at Uber Technologies) and Chris Nosko [...]
As economists and teachers, what do we want our lasting “economic footprint” to be? There is a wonderful old Saturday Night Live skit by Father Guido Sarducci called “The Five Minute University.” His premise is to teach in five minutes what an average college or university graduate remembers five years after graduating. For economics, [...]