In this paper, I numerically simulate the path of economy in an economic depression. It is not easy to perform a numerical simulation of the path to a steady state if households are assumed to behave by generating rational expectations. It is much easier, however, if households are assumed to...

Macroeconomics has been often criticized for being useless particularly since the Great Recession. In this paper, I show that macroeconomics is still important, useful, and needed on the basis of the concept of a “Nash equilibrium of a Pareto-inefficient path” (NEPIP). On a NEPIP, the...

Information or disinformation is more likely to be believed if it comes from a trusted person or source. This means that the impact of disinformation will greatly differ depending on the level of trust. Moreover, one person’s judgement can be influenced by other people’s judgements, which...

Why are most products in retail stores designed, packaged, and decorated attractively? In this paper, I present a model of how consumers obtain utility from a “sense of play” with the designs and decorations of products that are separate from their practical usefulness. Here, “play” has...

There has been a deep-rooted view that economic rents are the main cause of high levels of economic inequality, but if economic rents are temporary, they may not be the cause. By employing numerical simulations, I show that even if economic rents are temporary, they can generate a high level of...

A theory of total factor productivity (TFP) is needed to explain why substantial differences in international income have been observed. This paper presents a theory of TFP that incorporates workers’ innovations. Because workers are human and capable of creative intellectual activities, they...

Progressive income taxes have usually been justified on the basis of the ability-to-pay (ATP) and equal sacrifice principles, but how ATP and sacrifice should be measured remains unsettled. In this paper, I present an alternative rationale for progressive taxes on the basis of the concept of...

Most explanations for the necessity of an independent central bank rely on the time-inconsistency model and therefore assume that governments are weak, foolish, or untruthful and tend to cheat people. The model in this paper indicates, however, that an independent central bank is not necessary...

The Friedman rule is strongly immune to most model modifications although it has not actually been observed. The Friedman rule implicitly assumes that a government is perfectly under the control of the representative household. This paper shows that, if a government is not perfectly under the...

This paper shows that a Nash equilibrium consisting of strategies of choosing a Pareto inefficient transition path is selected by households even without frictions as a result of the revealed government failure in supervision of financial markets. The Pareto inefficiency causes the generation of...