Developing a theory of decision making in the face of unknown unknowns

By Marie-Louise Viero, Queen’s University

“There are known knowns: There are things we know we know. We also know there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns. The ones we don’t know we don’t know.”

–Donald Rumsfeld, former U.S. Secretary of Defense

Until recently, economic analysis has only been able to deal with known knowns and known unknowns. According to the way uncertainty has been modeled, economic agents (e.g. consumers, managers, investors, etc.) start out with a detailed understanding of all things that can possibly happen. When the agent receives new information, it narrows down that list of possibilities, so that the agent’s knowledge becomes more precise over time. But, the set of possibilities never changes. Economic agents never discover new possibilities that they didn’t recognize before. There are no “unknown unknowns.”Read More »

An open letter to Stephen Poloz on interest rates

By Thorsten Koeppl, Queen’s University

In an open letter to Stephen Poloz, Thor Koeppl compares Canada’s interest rate policy to a kiwi–a cute flightless bird. 

This week, the Bank of Canada left interest rates unchanged.  Business as usual one might think.  But far from it.  In your remarks to the Standing Senate Committee on Banking, Trade and Commerce, you all but made the argument for a possible future cut in interest rates.  Your reasoning, however, seems to reflect a brave new world in central banking where interest rates have to do all the heavy lifting and may even never rise again; in other words, a world in which doves become kiwis, a cute flightless bird.

The main reasoning for a cut in interest rates would be the dire state of Canadian exports – especially from the manufacturing and resource sector.  Growth has remained anemic due to what the Bank admits is a competitiveness challenge.  Uncertainty regarding future growth in the US and emerging economies have caused businesses to not make up for lost export capacity and to engage in productivity enhancing investment.

continue reading at the C.D. Howe Institute blog

Why economic stimulus should be directed to cash strapped consumers

Queen’s PhD candidate and JDI Student Fellow, Jenny Watt, discusses recent research from the November 4, 2016 Economic History conference at Queen’s. 

By Jenny Watt, JDI Student Fellow, Queen’s University

Josh Hausman of the University of Michigan presented a paper on the role that farmers played in the recovery from the Great Depression. The paper argues that an effect called “the farm channel” explains 25% to 50% of the economic recovery occurring in America in the spring of 1933.Read More »

On the benefits of capital controls in developing economies

By Adugna Olani, Queen’s University PhD student

Government capital controls are typically viewed with skepticism because they impede capital movement across countries. Recently, the financial crisis has brought crisis transmission through capital flows to the forefront.

In recent research, I show how imposing capital controls on a short term, volatile, and potentially speculative capital flows to developing countries can improve the wellbeing of residents in those countries.Read More »

Canadian universities top new North American ranking of school desirability

By Christopher Cotton, Queen’s University

Last night, Donald Trump was elected President of the United States of America. Half of the US is excited. The other half scared. Over the last 12 hours, there has been a spike in internet searches for “move to Canada” and the Canadian immigration website crashed.

What better time to release a new ranking of North American universities.

Top 10 most-desirable North American Universities as of November 9, 2016Read More »