This year’s economics Nobel Prize has gone to Oliver Hart and Bengt Holmström, for their work on the theory of contracts. It’s about incentives, and imperfect information, and long-term relationships. But it’s related to lots of real-world economic issues — performance pay, mergers and acquisitions, and bank lending.
Since the Great Recession, macroeconomic discussion has been dominated by discussions of aggregate demand, and how to create more of it through monetary and fiscal policies. That has led to a strange state of affairs where those topics still dominate the debate, even though they’ve done the job economics expects of them.
Traders and investors trying to parse the statements coming from the world’s most important central bank are at a loss: Will an interest-rate increase come in September? And will there be one, two or no hikes this year?
One of the less heralded truths of economics is that growth miracles, while they make for good press, are overrated. It’s an insight that could help us better understand the outlook for developing countries such as China.
How many times have you heard someone say that the Federal Reserve’s asset-purchase program known as quantitative easing was ineffective? At least, that’s what I keep hearing from the usual pundits arguing their case.