A Pigou Biography

Ian Kumekawa's biography of A.C. Pigou has been sitting on my shelf since it was published a few years ago, but I just got around to reading it, and I very much enjoyed it. The book tells the story of the arc of Pigou's career--from a top student of Alfred Marshall, to a leader of his field, to a fading star struggling with age and declining relevance, to finally a content elder statesman of academia. The general public won't find the book of much interest, but for economists like me, it is a great read.

Testing the Mill Hypothesis

My intermediate macro book begins with a quotation from John Stuart Mill, which ends with this conclusion:

"My advice to you is to study the great writers on Political Economy, and hold firmly by whatever in them you find true; and depend upon it that if you are not selfish or hardhearted already, Political Economy will not make you so."

A recent study suggests that Mill was right.

The Deficit Gamble

 Still relevant, maybe more relevant, after a quarter century.

Economic Theory Summer Camp

Run by my colleague Eric Maskin (aimed at graduate students in economics, now an online event).

Fair Share

Yesterday, President Biden said, "I will not impose any tax increase on people making less than $400,000. But it’s time for corporate America and the wealthiest 1 percent of Americans to just begin to pay their fair share....But I will not add a tax burden, additional tax burden on the middle class of this country. They’re already paying enough."

According to the nonpartisan Tax Policy Center, the middle class (defined here as the middle quintile of the income distribution) now pays about 13 percent of its income in federal taxes. The top 1 percent pays about 30 percent of its income in federal taxes.

I wonder: What constitutes a "fair share" in President Biden's eyes? On what basis does he conclude that the current distribution of the tax burden is not fair?

Ranking economists

 ...with google trends. (More complete ranking here.)

Market Power in Neoclassical Growth Models

Click here to read my most recent paper, coauthored with Larry Ball. Here is the abstract:

This paper examines the optimal accumulation of capital and the effects of government debt in neoclassical growth models in which firms have market power and therefore charge prices above marginal cost. In this environment, the real interest rate earned by savers is less than the net marginal product of capital. We establish a new method for evaluating dynamic efficiency that can be applied in such economies. A plausible calibration suggests that the wedge between the real interest rate and the marginal product of capital is more than 4 percentage points and that the U.S. economy is dynamically efficient. In addition, government Ponzi schemes can have different implications for welfare than they do under competition. Even if the government can sustain a perpetual rollover of debt and accumulating interest, the policy may nonetheless reduce welfare by depressing steady-state capital and aggregate consumption. These findings suggest that even with low interest rates, as have been observed recently, fiscal policymakers should still be concerned about the crowding-out effects of government debt.

Watch the Speed Limit

Click here to read my column in this coming Sunday's New York Times.

Upcoming Webinar

I will be giving a webinar open to all on March 5. You can find more information and register here.

My recent "visit" to the LSE

Fiscal Stimulus Around the World

CBO on the Minimum Wage

NPR reports:

Raising the federal minimum wage to $15 an hour by 2025 would increase wages for at least 17 million people, but also put 1.4 million Americans out of work, according to a study by the Congressional Budget Office released on Monday.

A phase-in of a $15 minimum wage would also lift some 900,000 out of poverty, according to the nonpartisan CBO. This higher federal minimum could raise wages for an additional 10 million workers who would otherwise make sightly above that wage rate, the study found.

Potential job losses were estimated to affect 0.9 percent of workers, the CBO wrote, adding: "Young, less educated people would account for a disproportionate share of those reductions in employment."

GameStop

Sebastian Mallaby was a good column on the GameStop phenomenon.

A family member also suggested a good hypothesis: The bubble is being being driven by internet trolls. The right model of a troll is a person willing to waste his time and money to get other people to waste their time and money. 

A Discussion about My Favorite Textbooks

ASSA 2021

 If you want to see me at the upcoming virtual ASSA meeting, you can do so at this session:

Sunday, January 3, 12:15 PM to 2:15 PM (EST)

What Does Critical Thinking Mean in Economics, the Big and Little of It?

Hosted By: American Economic Association & Committee on Economic Education

• Chair: Gail Hoyt, University of Kentucky

What Does Critical Thinking Mean in Economics, the Big and Little of It?

David Colander

, 

Middlebury College

 

John Siegfried

, 

Vanderbilt University

Discussant(s)

Daron Acemoglu

, 

Massachusetts Institute of Technology

Melissa S. Kearney

, 

University of Maryland-College Park

John A. List

, 

University of Chicago

Gregory Mankiw

, 

Harvard University

Deirdre McCloskey

, 

University of Illinois-Chicago

Betsey Stevenson

, 

University of Michigan

Should the stimulus checks be raised from $600 to $2000?

Larry Summers makes a good case that, on this issue, Mitch McConnell is right, and Donald Trump, Nancy Pelosi, and Chuck Schumer are wrong.

A New Interview

 ...of me at the website Academic Influence.

On the Low Rate of Interest

Click here to read my column in this Sunday's New York Times.

What I've Been Watching

I just finished The Queen's Gambit, the Netflix miniseries about a young woman who is an orphan and chess prodigy. Great show. Highly recommended.

Trump rallies have killed 700 people

 ...says new research by Bernheim et al.