Crossing to Safety

I rarely read books for a second time, mainly because I am a slow reader and there are so many good books I haven't yet read. But recently I decided to reread Crossing to Safety by Wallace Stegner. 

It had been about 30 years since I first read it. I did not remember it well, but I did remember liking it very much. After the second read this summer, I can report that I liked it just as much, maybe more.

Crossing to Safety is not a book of high drama. It is a book about friendship, marriage, aging, and life's other challenges, focusing on two couples as they traverse their lives from their youth as struggling academics to their later years of greater wisdom and inevitable loss. 

I read somewhere that, though fiction, the book is autobiographical. That makes sense. It reads like a thoughtful and honest memoir, which is a genre I love.

Maybe Ms. Harris needs some economists

The response to the rollout of Kamala Harris's economic plan, especially the price gouging regulation, has not been good. 

When you lose the ever-reasonable Catherine Rampell, you should doubt whether you are positioning yourself to attract swing voters. Rampell writes, "It’s hard to exaggerate how bad this policy is. It is, in all but name, a sweeping set of government-enforced price controls across every industry, not only food. Supply and demand would no longer determine prices or profit levels. Some far-off Washington bureaucrats would....At best, this would lead to shortages, black markets and hoarding, among other distortions seen previous times countries tried to limit price growth by fiat." 

The centrist editorial page of the Washington Post titles their piece "The times demand serious economic ideas. Harris supplies gimmicks." 

What is happening here? I have two hypotheses.

One is that the Harris campaign believes that the remaining persuadable swing voters are economically ignorant, so the campaign is offering them economically ignorant economic policies. Bryan Caplan's wonderful book The Myth of the Rational Voter documents a lot of mistaken beliefs among the general public, including an anti-market bias. Ms. Harris's political advisers may be steering her to pander to these mistaken beliefs,

A second hypothesis involves campaign personnel. The people I see mentioned as Harris economic advisers are Brian Deese, Gene Sperling, Mike Pyle, Deanne Millison, and Brian Nelson. All smart people, no doubt. But as far as I know, none of these people is trained as a PhD economist. They all seem to be lawyers. Maybe lawyers are more inclined to see a problem and think, "I know what new law will fix that." True economists are more respectful of the invisible hand and more worried about the unintended consequences of heavy-handed regulation.

Where is Jason Furman when you need him?

I talk with Jon Hartley

Kamala Harris...sigh

I plan to vote for Kamala Harris. Why? Simply because she is not Donald Trump. In my judgment, Trump is (1) an authoritarian narcissist whose rhetoric is mean-spirited and untethered from reality and (2) an isolationist with wrong-headed views on trade and immigration and downright scary views on national security issues like NATO, Ukraine, and Taiwan.

But every time Harris says something specific about economic policy, she makes my voting for her more painful. For example: No taxes on tips, stricter rules against price gouging, expanded price controls on pharmaceuticals. 

My take on these issues:

1. The janitor who cleans the restaurant after it closes should not face a higher tax rate than the waiter who earns much of his income in tips.

2. Inflation is about supply and demand, not price gouging. Ask Janet Yellen or any of the other excellent economists in the Biden-Harris administration.

3. Greater pharmaceutical price controls mean less research and fewer cures in the future, as the Wall Street Journal points out today.

I read that, in the coming days, Harris plans to be vague about her policy plans. I hope that is true because by advocating specific ill-advised (if politically attractive) policies during the campaign, she might feel compelled to follow through on them after she is elected. After the election, good policy is more likely to win out against good politics. At least I hope so.

Ms. Harris, you have my vote, but please, don't make it any more painful for me.

I am on Wall Street Week

 You can watch here.

Two headlines that make me wish more people studied the principles of economics

 

The Wisdom of Referees

 From the New York Times:

One peer reviewer suggested that Darwin drop all the evolution stuff and expand the chapter on raising pigeons. (“Everybody is interested in pigeons,” the reviewer explained.) 

Six Beliefs I Have About Inflation

I was recently a panelist at an NBER conference, organized by Larry Ball and Yuriy Gorodnichenko, on inflation. You can read my remarks here.

Why do people feel bad about the economy?

A question that many pundits have been asking is: Why does the general public seem to feel bad about the current economy, when many traditional indictors suggest it is doing okay? Here is a hypothesis: People are comparing things to 2021, the first year of the Biden administration, when things looked much better for them.

Consider real disposable income per capita. In the latest reading, for May 2024, it was $50,491. For the year 2021, the figure was $51,567. That is, average income is down about 2 percent over this period. By contrast, average income grew by more than 3 percent per year from 2017 to 2021.

Similarly, consider credit card debt. From 2017 to 2021, it was up a mere 4 percent (in nominal terms). From its trough in April 2021 until now, it is up 44 percent.

To be sure, one might say that 2021 was an unusual year. Disposable income was goosed by numerous, temporary fiscal policies aimed to ease the pain of the pandemic. Covid also reduced consumers' ability to spend, so they used more of their incomes to pay off their debts. No economist expected these unusual conditions to persist. 

That is all true. But do most people take this fact into account? Maybe they think, "A few years ago, my income was higher, and my debts were lower. So, yes, I am glad the pandemic is over, but my finances are worse."

A Biography of Milton Friedman

I just finished reading the biography of Milton Friedman by Jennifer Burns, which came out last year. It is great. The reader is taken through not only the life of one of the great economists of the 20th century, but also the economic and political events that surrounded and motivated him. If you are looking for a nerdy economist beach read, I highly recommend it.

Ghostlight

I just saw a great movie at the Nantucket Film Festival called Ghostlight. It is now opening at theaters nationwide. Strongly recommended. For more information, click here.

Macro 12e

 The 12th edition of my intermediate macroeconomics textbook is now available. For more information, click here.

Happy 40th Anniversary, to the love of my life

 

Biden takes a wrong step

I was sorry to see President Biden threaten steel tariffs on antidumping grounds. For my views on this topic, see this old piece I wrote with Phill Swagel, who is now CBO director.

It's all about shelter

 
Click on image to enlarge.

This figure shows that the PPI for final demand tracks the CPI less shelter very closely. By both measures, inflation is now very much under control. The problem is that the CPI for shelter is up 5.6 percent, so the overall CPI looks quite hot.

Some would argue that leaving out shelter is misleading because shelter is such a large fraction of the typical household budget. On the other hand, the CPI for shelter is well known to be a lagging indicator of rents by virtue of how it is constructed, and other more current series show no recent inflation in rents. This latter argument puts me in the optimistic camp on inflation.

By the way, I recently made a bet with my friend Larry Ball that the overall CPI from February 2024 to February 2025 will rise by less than 2.5 percent. I am writing the bet here as a sort of contract. We will check back next year.

The bet is for $5. That is in nominal terms. So, in real terms, I get more if I win than Larry gets if he wins.