Home/Economics for Life

Federal Reserve U-Turn and the Phillips Curve

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 [...]

Federal Reserve U-Turn and the Phillips Curve2020-05-10T09:57:21-04:00

Bank of Canada Cuts Rates as Coronavirus Delivers ‘Negative Shock’

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. [...]

Bank of Canada Cuts Rates as Coronavirus Delivers ‘Negative Shock’2020-05-09T16:49:06-04:00

Women’s Unpaid Labor is Worth $10,900,000,000,000

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, [...]

Women’s Unpaid Labor is Worth $10,900,000,000,0002020-05-09T12:36:17-04:00

Why Toronto Is Not Building Rentals

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 [...]

Why Toronto Is Not Building Rentals2020-05-09T12:36:17-04:00

Why a Medical Chief Opposes Universal Flu Shot

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 [...]

Why a Medical Chief Opposes Universal Flu Shot2020-05-11T08:08:51-04:00

Secret Reason for Airline Basic Economy Fares

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 [...]

Secret Reason for Airline Basic Economy Fares2020-05-09T16:56:34-04:00

Big Business Is Overcharging You $5000 a Year

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 [...]

Big Business Is Overcharging You $5000 a Year2020-05-10T09:15:58-04:00

Next Capitalist Revolution

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 [...]

Next Capitalist Revolution2020-05-09T16:32:48-04:00

Removing Rent Controls Won’t Ease Toronto’s Housing Crisis

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, [...]

Removing Rent Controls Won’t Ease Toronto’s Housing Crisis2020-05-10T09:42:05-04:00

Changes to Ontario Tuition Are Unfair

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 [...]

Changes to Ontario Tuition Are Unfair2020-05-10T09:25:50-04:00

Benefits to Raising Ontario Minimum Wages

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. [...]

Benefits to Raising Ontario Minimum Wages2020-05-10T09:04:50-04:00

Taxing Housing Negative Externalities?

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 [...]

Taxing Housing Negative Externalities?2020-05-10T08:50:34-04:00

Unintended Consequences in Mortgage Regulations

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 [...]

Unintended Consequences in Mortgage Regulations2020-05-10T08:31:09-04:00

Why Surge Pricing Makes Us So Mad

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. [...]

Why Surge Pricing Makes Us So Mad2020-05-10T08:18:58-04:00

Bank of Canada Models as Art and Science

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 [...]

Bank of Canada Models as Art and Science2020-05-10T07:55:12-04:00

Planned Rentals Turned to Condos after New Rent Controls

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 [...]

Planned Rentals Turned to Condos after New Rent Controls2020-05-10T07:28:53-04:00

More Potato Chip Deficit Forecasts

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 [...]

More Potato Chip Deficit Forecasts2020-05-09T10:38:48-04:00

Do Higher Minimum Wages Benefit Workers AND Employers?

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 [...]

Do Higher Minimum Wages Benefit Workers AND Employers?2020-05-09T10:37:28-04:00

How Elasticity Helps AirBnB Owners Make More Money

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 [...]

How Elasticity Helps AirBnB Owners Make More Money2020-05-09T10:55:29-04:00

Bell Pays $1.25 million Penalty for Fake Online Reviews

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 [...]

Bell Pays $1.25 million Penalty for Fake Online Reviews2016-05-03T14:46:14-04:00

The Demise of Black’s Photography

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 Demise of Black’s Photography2015-12-12T22:43:36-05:00

Who Would Buy a Bond with a Negative Yield ?

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 [...]

Who Would Buy a Bond with a Negative Yield ?2020-05-09T13:08:45-04:00

Plunging Oil Prices as a Positive Supply Shock ?

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 [...]

Plunging Oil Prices as a Positive Supply Shock ?2020-05-07T16:08:42-04:00

What Determines the Value of the Loonie ?

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 [...]

What Determines the Value of the Loonie ?2015-10-30T19:46:35-04:00

Uber Teaching Moments Galore!

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 [...]

Uber Teaching Moments Galore!2020-05-09T11:18:01-04:00

The Five Minute University

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, [...]

The Five Minute University2020-05-07T16:24:53-04:00