Category Quick Posts

Why would a government fix an exchange rate?

My answer on Quora: A Central Bank may decide to fix the exchange rate of its currency relative to another currency to (1) anchor expectations and provide stability, (2) reduce fluctuations in import prices for local consumers and producers, and (3) reduce exchange rate risk in foreign financial transactions. Fixing the exchange rate comes at […]

How can innovation help improve the economy?

My answer on Quora: The kind of innovation that helps improve the economy could do so by improving the efficiency of production, the quality of goods and services, and the availability (access) of goods and services. Before saying a quick word about those three areas, it is important to note that innovation by itself is […]

What are the reasons why GDP may understate or overstate economic well-being?

My answer on Quora: There is a distinction between welfare and output in economics. Gross Domestic Product (GDP) is a measure of how much an economy produces in a given period of time. This can typically be done by looking at aggregate expenditures, income, or value-add throughout the production process. It does not measure welfare or well-being, and by definition, is […]

What is the difference between economic and non-economic activity?

My answer on Quora: Sometimes it is easy to distinguish economic from non-economic activity, like buying a T-shirt vs. swimming in a lake. Other times, it is not so clear. For example, is the activity of Quora users considered economic? Users exchange a lot of information free of charge, and Quora is a very valuable […]

When is “good for the economy” not “good for the people”?

My answer on Quora: Let’s begin with a narrow view, then zoom out. With a very narrow view, I can think of an example or two, but they don’t amount to much. In the end, there is no durable example of something that is good for the economy but not good for the broad majority […]

How will the economy survive automation?

My answer on Quora: This is the question of our time, and of past times as well. I do not have an answer for our time, but the 20th century has an answer for the last time this question dominated society – at the onset of the industrial revolutions of the 18th century (in the […]

During a crisis, people invest in US bonds. However, wouldn’t a crisis increase the risk of default?

My answer on Quora: One of the most telling and paradoxical events in the world of finance happened when Standard & Poor’s downgraded US government bonds in August 2011 for the first time ever. Instead of investors reducing their demand for a bond that is now deemed by a leading credit rating agency as riskier than previously […]