An Economist Explains (January 2011)

An Economist ExplainsMaximizing utility with marginal advice

Dear EE,

I have a friend, let’s call him “The Economy”, who for the past year or so has not been experiencing the kind of growth he’s used to. Even when he tries prolonged stimulus he just can’t get it up. His wife’s interest rate is essentially zero at this point. If he can’t produce an expansion soon, he’s in for a real domestic crisis. Help!

-Not Me, Really

Dear Not Me,

Aside from a bigger package, “The Economy” may want to try certain unconventional tools to satisfy his domestic constituency. For more adventurous folks, there is a technique known as “quantitative easing,” although in order for that to work one needs to have a lot of very open-minded neighbors.


Dear EE,

China China China China China China China!!!


Dear World,



Dear EE,

To impress the guys in the union, I pretended that my grandfather was Samuel Gompers and that I had a personalized copy of his biography to prove it. Now they want to see my books! What do I do?

-Enthusiasm Unexpected

Dear EU,

Borrow my friend I.M.F’s copy. He loves lending out his Americana.


Dear EE,

Home has 70 units of labor. It can produce two goods: complicated financial derivatives and film adaptations of chick lit featuring Julia Roberts. The unit labor requirement for derivatives is P(S,t) – Ke-r(T-t) – S + (SN(d1) – Ke-r(T-t)N(d2)), while for chick flicks it is James Franco’s credibility as an actor. Basically, hooray for free trade, no?

-Eat Pray Specialize

Dear EPS,

Trade brought us Mel Gibson. Trade brought us the Spice Girls. Trade brought us soccer and then took it away and gave it to Qatar. Basically, I would take autarky, AIG, and “America’s Sweethearts” over Wannabe and a World

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