…models posit an entirely different underlying mechanism for why fiscal stimulus works: If you want to use new-Keynesian models to defend stimulus, do it forthrightly: ‘The government should spend money,…

…Demand Version of the IS-LM curve In a normal IS-LM model, the interest rate is on the y-axis and output on the x-axis. The following model will keep the interest…

…model, economists say they are wrong and appeal to the standard model. This can make the orthodoxy invulnerable to data. It can be noted that it is rejected by data…

In the study of economics, one learns the circular flow of the economy between firms and households. This post however presents another circular flow model based on capital and labor….

With the temperature reaching 120 degrees here today in Phoenix (almost a record), allow me to have a little fun with my theoretical model of Effective Demand. There are two…

…that are impossible in the simplified spending-equals-expenditures circuit diagram. Nevertheless, a huge amount of economic thinking quietly operates inside that simple circular model. It’s the model most economists unconsciously run…

…spending-equals-expenditures circuit diagram. Nevertheless, a huge amount of economic thinking quietly operates inside that simple circular model. It’s the model most economists unconsciously run in “native mode” in their heads…

Interest rates and jobs: a variation on the model Friday is nonfarm payrolls day, so in the absence more noteworthy economic news, let me follow up on Monday’s post in…

…will have guessed that I am more liberal than utilitarian and would reject the Pareto improvement in the unhappy alternative universe. The model is a case of the Matsuyama model…

…Also known as the buffer stock employment model, the program posits that government manages a buffer stock of unemployed workers by providing jobs to all those willing and able to…