The Fisher Hypothesis and the Forecastability and Persistence of Inflation

For the period 1860 to 1939, the simple correlation of the U.S. commercial paper rate with the contemporaneous inflation rate is -.17. The corresponding correlation for the period 1950 to 1979 is .71. Inflation evolved from essentially a white noise process in the pre-World War I years to a highly persistent, nonstationary ARIMA process in the post-1960 period. I argue that the appearance of an ex post Fisher effect for the first time after 1960 reflects this change in the stochastic process of inflation, rather than a change in any structural relationship between nominal rates and expectedi nflation. I find little evidence of inflation non-neutrality in data from the gold standard period.This contradicts the conclusion of a frequently cited study by Lawrence Summers, who examined the low frequency relationship between inflation and interest rates using band spectrum regression. Deriving and implementing a frequency domain version of the Theil misspecification theorem, I find that neither high frequency nor low frequency movements in gold standard inflation rates were forecastable. Thus even if nominal rates responded fully to expected inflation, one would expect to find the zero coefficient obtained by Summers.

Oil and the Macroeconomy Since the 1970s

Increases in oil prices have been held responsible for recessions, periods of excessive inflation, reduced productivity and lower economic growth. In this paper, we review the arguments supporting such views. First, we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining macroeconomic fluctuations, and we trace how the arguments of proponents of the oil view have evolved in response to these difficulties. Second, we challenge the notion that at least the major oil price movements can be viewed as exogenous with respect to the US macroeconomy. We examine critically the evidence that has led many economists to ascribe a central role to exogenous political events in modeling the oil market, and we provide arguments in favor of 'reverse causality' from macroeconomic variables to oil prices. Third, although none of the more recent oil price shocks has been associated with stagflation in the US economy, a major reason for the continued popularity of the oil shock hypothesis has been the perception that only oil price shocks are able to explain the US stagflation of the 1970s. We show that this is not the case.

An Intuitive Approach to Geometric Continuity for Parametric Curves and Surfaces (Extended Abstract)

The notion of geometric continuity is extended to an arbitrary order for curves and surfaces, and an intuitive development of constraints equations is presented that are necessary for it. The constraints result from a direct application of the univariate chain rule for curves, and the bivariate chain rule for surfaces. The constraints provide for the introduction of quantities known as shape parameters. The approach taken is important for several reasons: First, it generalizes geometric continuity to arbitrary order for both curves and surfaces. Second, it shows the fundamental connection between geometric continuity of curves and geometric continuity of surfaces. Third, due to the chain rule derivation, constraints of any order can be determined more easily than derivations based exclusively on geometric measures

21st Century Ergonomic Education, From Little e to Big E

Despite intense efforts, contemporary educational systems are not enabling individuals to function optimally in modern society. The main reason is that reformers are trying to improve systems that are not designed to take advantage of the centuries of history of the development of today's societies. Nor do they recognize the implications of the millions of years of history of life on earth in which humans are the latest edition of learning organisms. The contemporary educational paradigm of "education for all" is based on a 17th century model of "printing minds" for passing on static knowledge. This characterizes most of K-12 education. In contrast, 21st Century education demands a new paradigm, which we call Ergonomic Education. This is an education system that is designed to fit the students of any age instead of forcing the students to fit the education system. It takes into account in a fundamental way what students want to learn -- the concept "wanting to learn" refers to the innate ability and desire to learn that is characteristic of humans. The Ergonomic Education paradigm shifts to education based on coaching students as human beings who are hungry for productive learning throughout their lives from their very earliest days.Comment: plain latex, 13 pages, 1 tabl

Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative

This paper argues that major oil price increases were not nearly as essential a part of the causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence for this view. In contrast, we show that monetary expansions and contractions can generate stagflation of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations help to explain the historical movements of the prices of oil and other commodities, including the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase. Thus, they can account for the striking coincidence of major oil price increases and worsening stagflation.

Real Wages Over The Business Cycle

This paper is an examination of cyclical real wage behavior in the United States since World War II. Like most previous aggregate studies. ours finds little cyclicalitv in aggregate industry real wage data. On the other hand, our analysis of longitudinal microdata from the Panel Study of Income Dynamics reveals substantial procyclicality. We find that this procyclicality is obscured in industry average wage statistics, and to a lesser extent in economywide averages, because those statistics are constructed in a way that gives greater weight to low-wage workers during expansions. The almost complete absence of evidence for countercyclical real wages suggests that movements along labor demand curves have not played a dominant role in cyclical employment fluctuations over the last 40 years. Instead, the procyclicality of real wages indicates that cyclical employment fluctuations have been generated mainly by shifts in labor demand. The sources of these shifts and of the positive slope of the effective labor supply curve, however, remain open to alternative interpretations.

Comparison of Molecular Dynamics with Hybrid Continuum-Molecular Dynamics for a Single Tethered Polymer in a Solvent

We compare a newly developed hybrid simulation method which combines classical molecular dynamics (MD) and computational fluid dynamics (CFD) to a simulation consisting only of molecular dynamics. The hybrid code is composed of three regions: a classical MD region, a continuum domain where the dynamical equations are solved by standard CFD methods, and an overlap domain where transport information from the other two domains is exchanged. The exchange of information in the overlap region ensures that momentum, energy and mass are conserved. The validity of the hybrid code is demonstrated by studying a single polymer tethered to a hard wall immersed in explicit solvent and undergoing shear flow. In classical molecular dynamics simulation a great deal of computational time is devoted to simulating solvent molecules, although the solvent itself is of no direct interest. By contrast, the hybrid code simulates the polymer and surrounding solvent explicitly, whereas the solvent farther away from the polymer is modeled using a continuum description. In the hybrid simulations the MD domain is an open system whose number of particles is controlled to filter the perturbative density waves produced by the polymer motion.We compare conformational properties of the polymer in both simulations for various shear rates. In all cases polymer properties compare extremely well between the two simulation scenarios, thereby demonstrating that this hybrid method is a useful way to model a system with polymers and under nonzero flow conditions. There is also good agreement between the MD and hybrid schemes and experimental data on tethered DNA in flow. The computational cost of the hybrid protocol can be reduced to less than 6% of the cost of updating the MD forces, confirming the practical value of the method.Comment: 13 pages, 8 figure

Gibson's Paradox and the Gold Standard

This paper provides a new explanation for Gibson's Paradox -- the observation that the price level and the nominal interest rate were positively correlated over long periods of economic history. We explain this phenomenon interms of the fundamental workings of a gold standard. Under a gold standard, the price level is the reciprocal of the real price of gold. Because gold is adurable asset, its relative price is systematically affected by fluctuations inthe real productivity of capital, which also determine real interest rates. Our resolution of the Gibson Paradox seems more satisfactory than previous hypotheses. It explains why the paradox applied to real as well as nominal rates of return, its coincidence with the gold standard period, and the co-movement of interest rates, prices, and the stock of monetary gold during the gold standard period. Empirical evidence using contemporary data on gold prices and real interest rates supports our theory.