Monthly Archives

August 2018

Meeting #5: Uncertainty Traps

DateTimeLocation
Monday, September 10, 2018 (19 Shahrivar 1397)15:00 – 16:00Khatam University, Room 202

“We develop a theory of endogenous uncertainty and business cycles in which short-lived shocks can generate long-lasting recessions. In the model, higher uncertainty about fundamentals discourages investment. Since agents learn from the actions of others, information flows slowly in times of low activity and uncertainty remains high, further discouraging investment. The economy displays uncertainty traps: self-reinforcing episodes of high uncertainty and low activity. Although the economy recovers quickly after small shocks, large temporary shocks may have long-lasting effects on the level of activity. The economy is subject to an information externality but uncertainty traps may remain in the efficient allocation. Embedding the mechanism in a standard business cycle framework, we find that endogenous uncertainty increases the persistence of large recessions and improves the performance of the model in accounting for the Great Recession.”

Required Reading(s)Uncertainty Traps

Meeting #4: The Economist as Plumber

DateTimeLocation
Monday, August 20, 2018 (29 Mordad 1397)15:00 – 16:00Khatam University, Room 202

“As economists increasingly help governments design new policies and regulations, they take on an added responsibility to engage with the details of policy making and, in doing so, to adopt the mindset of a plumber. Plumbers try to predict as well as possible what may work in the real world, mindful that tinkering and adjusting will be necessary since our models gives us very little theoretical guidance on what (and how) details will matter. This essay argues that economists should seriously engage with plumbing, in the interest of both society and our discipline.”

Required Reading(s)The Economist as Plumber