Economic Logic

Economics is based on a small set of very powerful axioms that a the foundation of utility theory, general equilibrium theory, and more. Exp...

IS-LM models have always left me puzzled. To me, they are the equivalent to a reduced-form regression with omitted variables and endogeneity...

Snnk cost do not matter once spent. Yet, we just cannot help thinking that if we already paid so much for something, we should rather use it...

When we think about a social planner that maximizes welfare by assigning optimal allocations without an explicit price system, we are really...

In Economics, it is standard practice to discount future periods and generations. This is done throughout economics fields, even in the valu...

The elasticity of intertemporal substitution is one of the most estimated parameters in Economics. Why is it estimated over and over again? ...

In dynamic stochastic models, standard utility function specifications imply that the curvature of this function determines directly both th...

Modeling the labor market, we tend to postulate that wages are either posted by employers or negotiated, typically by Nash bargaining. This ...

The Lucas Critique in 1976 has been a major motivation behind the building of RBC models, the folow-up DSGE models as well as the structural...

The typically way we model uncertainty is by assuming economic agents know the stochastic process they are facing, and we call this uncertai...

The game of heads and tails with a coin toss is universally recognized as a game where the odds of each outcome are exactly 50%. In monetary...

It has become very fashionable to run economic experiments in the laboratory. Typically, undergraduate students are lured into the lab with ...

There are times were we kind of feel we have done something stupid and do not want to know the result. For example, the grade of a test or h...

Economists do not dismiss theories easily. Although Popper taught us that once a falsifiable theory is reject by the data we should move on ...

Everyone is familiar with homo œconomicus , the greedy economic agent that brings an economy to its most efficient allocation under perfect ...

Humans are social animals and they benefit from interactions with others, most of the time. Personally I enjoy spending time with family, co...

In biology, all is about the survival and dominance of the species. It would then be logical that we only care about our offspring and its p...

How can one entice people to behave more honestly? An economy where people trust each other works much better, and deals come by more easily...

Apologizing can be very hard, especially when your pride is hurt. And sometimes one opts for a fake apology, not really meaning it. But this...

Social scientists interested in the biological origins of human behavior have a strange obsession with finger length, and specifically with ...