About me and this page
Welcome to my web page. Here you can find just about anything I've ever written.
The Research link will take you to all my academic writing, including published books, papers, working papers and comments. It includes comments and talks given at academic conferences. It also has information about my textbook, Asset Pricing
The News, Op-eds link takes you includes op-eds, blog posts, links to media coverage, slides and videos of talks, and other items of interest to the average non-academic.
I usually post slides of any talk I've given, so if there was some delicious graph you saw at a talk, you're likely to find it in the Research (for academic talks) or News (for other talks) links.
In December 2011 I started a blog with news and opeds and commentary.
Teaching takes you to class web pages. Students: these are the right web pages. Booth sometimes echoes old and out-of-date information to other sites. Visitors: you are welcome to use any of my materials that you find useful, so long as you cite their source. All: yes, the problem set answer links don't lead anywhere when I'm not teaching.
Data and Programs takes you to a webpage with data and programs for older papers. Starting 2011, I'm posting links to data and programs next to the paper on these pages, but I haven't yet cleaned up the old papers to that method.
If you're a sailplane pilot looking for Soaring writing, go to the soaring link. If you're an economist but flying gliders sounds a lot more interesting than whatever else brought you here, go ahead and take a look.
I'm a proud father and husband of a creative family. Check out the Family web page, with art, comics, animation, music, plus the famous Hippo pages. Warning: If you click this link you may not be back for an hour or two. My wife, Elizabeth Fama is a young adult book author, elizabethfama.com is her web page and blog, her latest books are Monstrous Beauty and Plus One. My daugher Sally's paintings and blog are worth a detour.
This is (July 2011) a big web site redesign. Please let me know about inevitable bugs, broken links, etc.
Academic articles and working papers
- The Fragile Benefits of Endowment Destruction. November 2014. A rejoinder to Ljungqvist and Uhlig "Optimal Endowment Destruction under Campbell-Cochrane Habit Formation." The benefits of endowment destruction depend sensitively on how you discretize the model. Lesson, it's better to use the the continuous time version and make sure discretizations make sense. Computer program.
- U. S. Federal Debt in the 21st Century November 2014 (Preliminary draft prepared for the U. S. Treasury 2014 Roundtable on Treasury Markets and Debt Management.) I propose a restructuring of U. S. Federal debt. All debt should be perpetual, paying coupons forever with no principal payment. The debt should be composed of 1) Fixed-value, floating-rate, electronically transferable debt. Such debt looks like a money-market fund, or reserves at the Fed, to an investor. 2) Nominal perpetuities: This debt pays a coupon of $1 per bond, forever. 3) Indexed perpetuities: This debt pays a coupon of $1 times the current consumer price index (CPI). 4) All debt should be sold in two versions, one of which is free of all income, estate, capital gains, and other taxes. In addition, long term debt should have explicitly variable coupons. 5) Swaps. The Treasury should adjust maturity structure, interest rate and inflation exposure of the Federal budget by transacting in simple swaps among these securities. This structure will help to achive the goals of debt managment, macroeconomic, and financial stability.
- Monetary Policy with Interest on Reserves October 2014, major update
I analyze monetary policy with interest on reserves
and a large balance sheet. I argue for the desirability of this regime on
financial stability grounds. I show that conventional theories do not
determine inflation in this regime, so I base the analysis on the fiscal
theory of the price level. I find that monetary policy -- buying and selling
government debt with no effect on surpluses -- can peg the nominal rate, and
determine expected inflation. WIth sticky prices, monetary policy can also
affect real interest rates and output, though not with the usual signs in this
model. Figure 2 is the best part -- the effects of monetary policy with and without fiscal coordination. I address theoretical controversies, and how the fiscal backing of
monetary policy was important for the 1980s disinflation. A concluding section
reviews the role of central banks. Matlab program here.
This paper was presented at the conference "Frameworks for Central Banking in the Next Century" at the Hoover Institution May 29-30 2014 and will be published in a special issue of the JEDC.
- Toward a run-free financial system. November 4 2014. In Martin Neil Baily, John B. Taylor, eds., Across the Great Divide: New Perspectives on the Financial Crisis, Hoover Press. This is an essay about what I think we should do in place of current financial regulation. We had a run, so get rid of run-prone liabilities. Technology and financial innovation means we can overcome the standard objections to "narrow banking." Some fun ideas include a tax on debt rather than capital ratios, the Fed and Treasury should issue reserves to everyone and take over short-term debt markets just as they took over the banknote market in the 19th century, and downstream fallible vechicles can tranche up bank equity.
- Challenges for Cost-Benefit Analysis of Financial Regulation. Journal of Legal Studies 43 S63-S105 (November 2014). Is cost benefit analysis a good idea for financial regulation? I survey the nature of costs and benefits of financial regulation and conclude that the legal process of current health, safety and environmental regulation can't be simply extended to financial regulation. I opine about how a successful cost-benefit process might work. My costs and benefits expanded to a rather critical survey of current financial regulation. It's based on a presentation I gave at a conference on this topic at the University of Chicago law school Fall 2013, with many interesting papers. JSTOR link with HTML and nicer pdf. The JLS issue with all conference papers.
- A mean-variance benchmark for intertemporal portfolio theory Journal of Finance, 69: 1–49. doi: 10.1111/jofi.12099 (February 2014) (link to JF) (Manuscript) Applies good old fashioned mean-variance portfolio analysis to the entire stream of dividends rather than to one-period returns. Long-Run Mean-Variance Analysis in a Diffusion Environment is a set of notes, detailing all the trouble you get in to if you try to apply long-run ideas to the standard iid lognormal environment, and also discusses shifting bliss points a bit.
- The New-Keynesian Liquidity Trap Revised again, Sept 2014. In standard solutions, the new-Keynesian model produces a deep recession with deflation in a liquidity trap. Useless government spending, technical regress, and capital destruction have large positive multipliers. The recession, deflation and policy paradoxes are larger when prices are less sticky. I show that these features are all artifacts of equilibrium selection. For the same interest-rate policy, different choices of equilibria overturn all these results. A set of "local-to-frictionless" equilibria, for the same interest rate policy, predict mild inflation, no output reduction and negative multipliers during the liquidity trap, and its predictions approach the frictionless model smoothly. Skip to the pictures if you're busy. A new last paragraph defends the basic NK model. The current slides
- Finance: Function Matters, not Size May 2013 Journal of Economic Perspectives 27, 29–50 JEP link (Previous title "Is Finance Too big?" December 2012.) Is finance "too big?" Is this the right question?
- A Brief Parable of Overdifferencing January 2012. This is a short note, showing how money demand estimation works very well in levels or long (4 year) differences, but not when you first-difference the data. It shows why we often want to run OLS with corrected standard errors rather than GLS or ML, and it cautions against the massive differencing, fixed effects and controls used in micro data. It's from a PhD class, but I thought the reminder worth a little standalone note. .
Op-eds, blog posts, essays, articles, and other digestible writing
Note: I started a blog in January 2012, and don't echo the blog posts here.
- What the Inequality warriors really want. Wall Street Journal, November 19 2014. A review of the arguments for punitive 1% taxes.
- Who's Afraid of a Little Deflation Wall Street Journal, November 14 2014. Fears of "tipping" into deflation are overblown. I poke a little fun at sticky wages, Fed headroom, deflation-induced defaults and the long-predicted Keynesian deflationary spiral that never seems to happen, and the doom and gloom language from the ECB, IMF and other worriers who just happen to (of course) want to spend trillions to fix this latest "biggest economic problem."
- A few things the Fed has done right, Wall Street Journal August 21, 2014.
- Ideas for Renewing American Prosperity July 4 2014 Wall Street Journal. Local copy. Limit Government and Restore the Rule of Law.
- The Failure of Macroeconomics June 8 2014 Wall Street Journal. local copy. A review of alternative theories of slow growth.
- Interview, in the Richmond Fed "Econ Focus," December 2013. Shorter pdf (print) version here and longer web version here. Local pdf. A wide ranging interview: Dodd-Frank, financial regulation, monetary policy, fiscal theory, recessions, inequality, and who are my heroes.
- What to do when Obamacare Unravels Dec 26 2013 Wall Street Journal . A free-market manifesto with emphaasis on freeing the supply of health care, like "After the ACA." local pdf
- Collection of blog posts on 2013 Nobel Prizes in Economics.
- The Work Behind the Prize. The best short summary of Gene Fama's Nobel, presented at the University of Chicago Syposium Nov 4 2013. Blog post with Video. Here is a Spanish translation courtesy of Pedro Cervera. Spanish Translation of the Lars Hansen Nobel Prize post
- Gene Fama's Nobel Prize. October 2013 I attempt to explain some of his most important work at length.
- The danger of an all-powerful Federal Reserve. August 26 2013 Wall Street Journal. Macro-prudential policy is a license to discretionary financial dirigisme. Clear lessons of monetary policy warn us not to go down this path.
- Financial Reform in 12 Minutes. October 2013 A short paper on where we are. Dodd Frank and Resolution won't work. Regulate run prone liabilities not assets. A regulatory tax on debt will work better than arguing about a red line capital ratio.
- Think government is intrusive now? Wait until E-Verify kicks in. August 1 2013 Wall Street Journal. Congress wants every person in the country to get the Federal Government's approval before he or she can get a job. They must be kidding. See chapter 1 of Capitalism and Freedom
- Stopping Bank Crises Before They Start June 24 2013 Wall Street Journal. Don't try to regulate the riskiness of bank assets, while keeping in place government guarantees. Instead, don't let banks issue run-prone liabilities.
- America Needs an Alternative Maximum Tax April 15 2013 Wall Street Journal.
- The interest rate paradox. April 9 2013 Slides for a talk at Grant's spring conference. I haven't written up the talk yet, but if you were there and want the pictures here they are.
- Treasury needs a better long game March 4 2013 Wall Street Journal. Local pdf. (Better:) Blog post with a few cuts restored and some notes. If the Fed wants to raise rates to 5%, it will raise the deficit by $900 billion. Will Congress let it do that? Fiscal policy limits monetary policy in a time of large debt. A much longer maturity structure would help.
- Running on empty (pdf) (link to WSJ (html)) March 2 2013 Review of "The Banker's new Clothes" by Anat Admati and Martin Hellwig. Banks should issue a lot more equity, a lot less debt, and a heck of a lot less nonsense.
- Having your cake and eating it too: The maturity structure of US debt Update November 15 2012 How the US Treasury can both lengthen and shorten its debt at the same time, to buy insurance against interest rate rises and provide "liquidity." A short paper diguised as comments on Greenwood, Hanson, and Stein “A Comparative Advantage Approach to Government Debt Maturity” at the Second Annual Roundtable on Treasury Markets and Debt Management , US Treasury, Nov. 15 2012
- After the ACA: Freeing the market for health care Revision Feb 6 2013 (Oct 19 2012) An essay on health care, presented at the conference, “The Future of Health Care Reform in the United States,” at the University of Chicago Law School. Most of the policy discussion is focused on health insurance. But the health care market is dysfuctional, and needs to be fixed as well. Where are the Southwest Airlines, Walmart and Apple of health care, bringing cost saving, efficiency, and innovation? I argue that we need a big freeing up of health care markets, both supply and demand.
- CBO and the fiscal cliff Sept 4 2012 Bloomberg.com "Business class" OpEd. local copy ; blog post. A review of the CBO's forecast that the "fiscal cliff" will cause a recession. It's Keynesian, ignoring all incentive effects, and thus right but for the wrong reasons. Policy models should be much more transparent quantiative parables, showing the logic of their foreasts and not pretent to be authoritative black boxes.
- The future of central banks. Sept 1 2012 Wall Street Journal Op-Ed. local pdf ; blog post
- Myths and Facts about the Gold Standard July 28 2012 Wall Street Journal WSJ link, local pdf, blog post a with a few cuts restored (recommended)
- Forget about the mandate. July 12 2012 Bloobmerg Business Class. The health law debate needs to stop worrying about legalities. The mandate was never the central economic problem. A reminder of all the other problems, and alternatives to the health care law. Local html
- What to do on the Day after Obamacare April 2 2012 Wall Street Journal Local pdf. Deregulation and competition. Yes, it can work, even in health insurance. Mostly aimed at the widespread and incorrect view that markets can't provide health insurance.
- “Austerity or Stimulus: What we need is Growth” March 21 2012 IGM/Bloomberg Business Class series. Austerity of high taxes is hurting Europe. Lack of spending isn't their problem. Get rid of the distortions, now, is the only answer. Local pdf
- The Real Trouble With the Birth-Control Mandate Wall Street Journal February 9 2012 Local pdf. Critics complain that religious institutions have to buy health insurance that covers birth control. They're missing the point. Why does health and human services mandate that any and all of us have to buy health insurance that covers regular predictable expenses?
European debt crisis
Current economic situation and policy
Financial crisis, Financial rgulation
Monetary policy; inflation, deficits, fiscal theory
General economics, philoisophical debates
Academic Talks and Comments
- Comments on Gauti Eggertsson and Neil Mehrotra, "A Model of Secular Stagnation," slides presented at the NBER EFG meeting, July 2014.
- Comments on Aytek Malkhozov, Philippe Mueller, Andrea Vedolin, and Gyuri Venter, "Mortgage Risk and the Yield Curve," slides presented at the NBER AP meeting, July 2014.
- Having your cake and eating it too: The maturity structure of US debt November 12 2012 How the US Treasury can both lengthen and shorten its debt at the same time, to buy insurance against interest rate rises and provide "liquidity." A short paper diguised as comments on Greenwood, Hanson, and Stein “A Comparative Advantage Approach to Government Debt Maturity” at the Second Annual Roundtable on Treasury Markets and Debt Management , US Treasury, Nov. 15 2012
- Comments on "Volatility, the Macroeconomy and Asset Prices, by Ravi Bansal, Dana Kiku, Ivan Shaliastovich, and Amir Yaron, and “An Intertemporal CAPM with Stochastic Volatility” by John Y. Campbell, Stefano Giglio, Christopher Polk, and Robert Turley. Also slides. April 13 2012 Comments presented at the spring NBER asset pricing meeting. I took the opportunity to offer a sceptical apparisal of long-run risks, and whether stochastic volatilty really works as a state variable, especially in the long run.
- The Fiscal Theory of the Price Level and its Implications for Current Policy in the United States and Europe November 19, 2011 This is the text of my presentation at the concluding panel of the conference, “Fiscal Policy under Fiscal Imbalance,” hosted by the Becker-Friedman Institute and Federal Reserve Bank of Chicago.
- Hedge Funds. February 20 2012. (Updated again) Extensive slides for various talks about hedge funds. Returns, alphas, betas, fees, how to form portfolios of hedge funds.
- Nova/Atrium Lecture in Macro/Finance. (Video) (Also web page on the event) Lecture given at NOVA school of business and economics in Lisbon, Portugal, 2010. Thinking through fiscal and monetary policy, along the lines later written up in Inflation and Debt and Understanding fiscal and monetary policy in the great recession.
More talks and comments in Research talks and comments. ...
News, TV, Radio, other media
- Stelldichein mit dem «Muffel» May 2014 Interview in Neue Züricher Zeitung, on occasion of receiving an honorary degree from the University of St. Gallen. In german, but google translate does a decent job.
- Education and MOOCs. Interview with Russ Roberts on EconTalk podcast. March 31 2014
- The future of global finance. Video interview with Jeff Garten at Yale SOM, February 2014, broadly covering financial markets and regulation. Part of a series by the same name.
- The debt dialogues Podcast interview on free market health care with Don Watkins at the Ayn Rand Institute, March 25 2014.
- Debt and growth video All the world's troubles in 10 minutes. Posted 4/14/2013 but the event was March 2012.
- "Chicago tonight" interview on the fiscal cliff. Jan 2 2013 Video
- EconTalk podcast with Russ Roberts, on "After the ACA" November 19 2012
- Bloomberg TV interview, with Betty Liu November 13 1012 on the fiscal cliff.
- NPR Marketplace also here November 7 2012 10 minute audio on what the election means for economic policy. Related blog post.
- Bloomberg TV interview, Betty Liu, "In the loop" show, Sept 5 2012 The ECB's huge "sterilized" bond buying announcement, and the future of the Federal Reserve.
- Unraveling the Mysteries of Money. September 2012 An extensive interview by Gideon Magnus of Morningstar, with Harald Uhlig. What is money, fiscal theory of the Price Level, European debt crisis, and more. The Video; a cleaned-up magazine article (pdf)(html)
- Bloomberg TV interview, Tom Keene show, August 16 2012
- Bloomberg TV interview June 18 2012. On Greece, Euro, defaults, bailouts and so on.
- Corriere Della Sera interview. 2/22/2012 In Italian.
- Apperance on Tom Keene's Bloomberg TV show. Fun.
Materials provided are for educational use only. Published articles are the Copyright of their respective publishers. All other material is Copyright © John H. Cochrane. You're welcome to use any of my material for eductional or non-commercial use, provided it is in its original form, and I am recognized as its author. Please post links rather than post copies of the files, so that your users get any updates which I post here.