Friday, May 06, 2022

An Inflation Puzzle

A common story about the recent inflation surge in the United States--especially among members of Team Transitory--is that the surge is largely due to global supply shocks, such as rising energy prices, chip shortages, and various bottlenecks in the wake of the worldwide pandemic. Why then do we not see a similar inflation surge in Japan? There, inflation is running at about the same rate as it was pre-pandemic. See below. (Click on image to enlarge.) I am puzzled.

Thursday, May 05, 2022

My Latest

Click here to read my new working paper, Government Debt and Capital Accumulation in an Era of Low Interest Rates.

Wednesday, March 30, 2022

Webinar Tomorrow

Tomorrow, I will be giving a webinar on the 40-year decline in real interest rates. If you are interested, click here.

Friday, March 25, 2022

Government Debt and Capital Accumulation in an Era of Low Interest Rates

I spoke at a Brookings panel today on the topic in the title of this post. Here you can watch my presentation. I am the first speaker.


Monday, March 14, 2022

Mr. Pigou, Meet Mr. Putin

Harvard's Ricardo Hausmann says a large tax on energy imports from Russia is a policy worth considering, perhaps better than an embargo.

Saturday, March 12, 2022

A Great Question

 ...from Jon Steinsson:

Imagine going 3 years back in time and asking any Fed official what they would do if CPI inflation was 7.9% (and core CPI inflation 6.4%).

Does "We will raise rates by 25bp" sound plausible?

Could add to the question: And the unemployment rate is 3.8 percent.

Saturday, February 26, 2022

Links Regarding Ukraine

Friday, February 25, 2022

My Heart is Breaking

I was born in New Jersey, grew up in New Jersey, and have spent most of adult life in Massachusetts, but I have always felt a kinship with Ukraine. All four of my grandparents were born there. They left as teenagers early in the 20th century, before World War I and the Russian Revolution made a return to their homeland untenable. 

I grew up attending a Ukrainian Orthodox Church. Every week, we would pray for a free Ukraine, independent of the Soviet Union. As a snarky, know-it-all teenager, I rolled my eyes, thinking the idea preposterous.

My family celebrated Ukrainian Christmas on January 7 every year. We ate Ukrainian food.  My parents sent me to Ukrainian School to learn the language (though the effort was unsuccessful, as I have never been a good student of languages). At Easter, my family made Pysanky, Ukrainian Easter Eggs. Below is a picture of a bowl of these eggs that to this day sit in my home study. 

I have visited Ukraine only once, when my intermediate macroeconomics textbook was translated in Ukrainian and I was invited to give a series of lectures. I took my mother on the trip. She was then in her 60s, and she was visiting the land of her parents' birth for the first and only time. The two of us spent about 10 days there, mostly in Kyiv.

As I have watched recent events unfold, I cannot help but feel endless sadness. I am sure that I have distant relatives there. When I was a child, my grandmother corresponded with her family in Ukraine. This occurred during the days of the Soviet Union, and she would send them blankets and other basic supplies. Never money, because she feared it would never make it. After she died, this connection to our relatives was lost to history.

I will not comment on the Biden administration response to this crisis. I have no expertise in foreign policy, and I know that the tradeoffs involved are too complex for me to fully comprehend. But I pray that our leaders have the courage and wherewithal to do the right thing. For the long haul. For humanity.

Sunday, February 20, 2022

An Upcoming Interview

On March 3, I will be interviewed by my old friend Linda Ghent. Click here if you are interested in attending this virtual event.

Thursday, February 10, 2022

Econ Theory Summer Camp

Graduate students with an interest in economic theory and/or international trade should look into this opportunity, run by my colleague Eric Maskin.

Thursday, February 03, 2022

Song of the Day

Wednesday, February 02, 2022

My Recent Talk at UCL

Friday, January 28, 2022


In today's WSJ, here is the funniest thing I have read recently:

Mr. Kurtz and his then-wife kept a 6-acre parcel for themselves, where they built a roughly 30,000-square-foot mansion with a 65-foot saltwater pool, tennis court and indoor basketball court. As the home was nearing completion, Mr. Kurtz said they realized it was too big for their needs.

Saturday, January 15, 2022

History of Economics Summer Camp

Readers of this blog might like to know: 

The Center for the History of Political Economy at Duke University will be hosting another Summer Institute on the History of Economics this summer from June 20-29, 2022. The program is designed for students in graduate programs in economics, though students in graduate school in other fields as well as newly minted PhDs will also be considered.

More information on the Summer Institute is available at this website.

Sunday, December 19, 2021

What I've Been Reading

The Genetic Lottery by Kathryn Harden is one of the best books I've read in the past several years. It offers a clear and smart discussion of the current state of behavioral genetics and what it means--and, equally important, what it doesn't mean--for public policy. Highly recommended holiday gift for the social science geek in your life. 

Tuesday, December 14, 2021

BBB's Ugly Fine Print

I have long favored a carbon tax to deal with global climate change. But I understand that if our leaders lack the political courage to propose one, targeted subsidies, such an electric vehicle tax credit, can be a substitute, albeit an imperfect one. In today's paper, I learned that, unfortunately, the design of this credit in the so-called Build Back Better bill aims not only at addressing climate change but also at reducing competition in the labor market and impeding international trade: 

The credit is $8,000 if the vehicle is made at a non-union U.S. plant, but rises to $12,500 if it’s made in a union-organized plant. The credit drops $500 if the car’s battery isn’t made in America, and after 2026 only cars assembled in the U.S. would qualify for the basic $7,500 credit.

So the bill neglects the obvious first-best policy, starts with a second-best policy, and adds various extraneous provisos to make it worse.

Thursday, November 18, 2021

Macro 11e

The 11th edition of my intermediate macroeconomics text is now available. Those interested in obtaining a copy can click here.

Sunday, November 14, 2021

"It's not inflationary because it's paid for."

In the discussion of President Biden's so-called Build Back Better plan, a common refrain among its proponents is that the bill will not increase inflation because it is paid for with tax increases on corporations and wealthy individuals. There are four problems with this logic:

1. The bill is likely to include permanent tax increases along with spending provisions that will sunset. The proponents want the spending to be extended later. So, in a true sense, it is not paid for.

2. The key issue is not what the plan does to the economy over a 10-year budget window but what it does over the next few years. So look at the path of fiscal policy, not just the 10-year totals. While I wait for CBO's budget projections, I will guess the bill will expand the budget deficit in the near term.*

3. Even paid-for increases in spending can expand aggregate demand and thus be inflationary. Recall the balanced budget multiplier.  

4. If the wealthy have especially low marginal propensities to consume, as some research suggests, and they are the people on whom the new taxes are to be levied, then the increase in aggregate demand could be large. That is, the reduced spending by the wealthy taxpayers would not offset the increased spending that the new taxes are financing.

A final thought: The BBB plan should not be judged by its impact on inflation. Whatever its inflationary effect is, monetary policy can offset it. The plan should be judged by whether we want a substantial increase in the size and scope of government social spending.

*Update (11/18): As predicted, the CBO says the bill will increase the budget deficit by about $750 billion over the first five years. The additional revenue will cover less than a quarter of the additional spending.

Tuesday, November 02, 2021

Happy Kevin Hassett Day!

Dow closes above 36,000 for the first time. Here is my old review of the book.

Coincidentally, Kevin has released a new book today, which I have not yet read.

Saturday, October 30, 2021

Woke, Inc.

I recently had the opportunity to interview Vivek Ramaswamy about his book Woke, Inc. The interview will air this Sunday on Book TV on C-SPAN 2 at 10am ET, 1 pm ET, and 10pm ET. The program will also be available on the Book TV website once the discussion has aired on the network.