Wednesday, January 23, 2019

Who is the prototypical rich person?

I recommend this op-ed by Emmanuel Saez and Gabriel Zucman. Not because I agree with its recommendation of super high tax rates on the rich, but because it makes clear the perspectives and motives of the Left.

In the standard economic approach to optimal redistribution (such as Okun and Mirrlees), the case for progressive taxation is based on diminishing marginal utility. But that is not the essence of the matter, according to Saez and Zucman. They view rich people as fundamentally undermining democracy. It is more a political argument than an economic one.
Saez and Zucman seem to think that rich people are like Henry Potter, the conniving banker in It's a Wonderful Life. Mr Potter makes his money dishonestly and uses it to control the instruments of the government to further enrich himself and impoverish the lives of those around him.
Another kind of rich person is someone like Taylor Swift. She is fabulously wealthy (net worth > $300 million) but earned that wealth by enhancing the lives of others through great music. As far as I know, she does not have significant political clout.
So are most rich people more like Henry Potter or Taylor Swift? Obviously, they come in both kinds. Unfortunately, we now have a Henry Potter living in the White House. 
But most rich people I know seem more like Taylor Swift. They make their money honestly by providing value to others. And they have less political influence than is often supposed.

Indeed, most rich people I know would have been happy to spend vast sums of money to keep Mr Trump out of the White House. And many tried. The Trump phenomenon is not an argument that the moneyed elites have too much influence on politics. If anything, it is an argument that they have too little.

The Radical Alternative

Users of my principles textbook might enjoy reading this critique of the ten principles in my first chapter.The authors are members of the steering committee of the Union for Radical Political Economics (URPE). 

I don't find their arguments persuasive. In many cases, they are responding to things I did not say but they think I am suggesting. (How else can someone complain about the statement "People face tradeoffs"?) In other cases, their message is, "Things are more complicated." (Of course! But you can't include everything in Chapter 1.) 

But I am surely not the most objective person regarding this. Decide for yourself.

Friday, January 18, 2019

You Can Support Putting a Price on Carbon

If you are an economist and want to support a carbon tax and dividend plan, click here.

Update: Here is a somewhat over-the-top video by a student group backing the plan:

Wednesday, January 16, 2019

History of Econ Summer Camp

Those with an interest in the history of economic thought might want to consider this summer program. I have been told that the program is designed primarily 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.

Humor from ASSA 2019

Thursday, January 03, 2019

ASSA 2019

I just arrived at the ASSA meetings in Atlanta. Readers of this blog might be interested in the following public events that I am involved with.

First, I will have a book signing to celebrate the publication of the 10th edition of my intermediate macro text. It is Saturday at 2:10 pm at the Worth Publishers booth. (I understand that copies are already going fast, so if you want one, you might stop by the booth earlier to pick it up.)

Second, I will be speaking at this session:

Saturday, January 5
What Should Students Learn From Intermediate Theory Classes?
Saturday, Jan. 5, 2019 10:15 AM - 12:15 PM
Atlanta Marriott Marquis, A706

Friday, December 28, 2018

Four Questions for the Year Ahead

Click here to read my column in Sunday's NY Times.

Tuesday, December 25, 2018

Merry Christmas

A Christmas message (be sure to check out the mouse-over text).

Sunday, December 23, 2018

How the Govt Shutdown Affects GDP

In this interview, CEA chair Kevin Hassett (around minute 4:00) dismisses the adverse impact of the government shutdown on real GDP. It seems to me that he is more wrong than right. Kevin appears to be assuming that government workers don't produce anything of value when they are at work, or that they will make up all the undone work when they return, so making them stay at home has no significant economic impact. If that were really the case, we should give them all shorter work weeks, so they can enjoy more leisure.

To me, that does not seem tenable. Take, for example, the national parks that are now closed because of the shutdown. Those families that would otherwise be enjoying them are suffering a true reduction in economic well-being that is forever lost.

My very rough calculation is that economic cost of the government shutdown is in the ballpark of about $100 million per day.

Tuesday, December 11, 2018

Trumponomics

Click here to read my review of  Trumponomics by Stephen Moore and Arthur Laffer.

Saturday, November 17, 2018

A Recent Interview

I am interviewed in N Magazine, starting on page 63.

Friday, October 26, 2018

Macro 10e

The 10th edition of my intermediate macro text is now available. Click here for more information.

Friday, October 19, 2018

Fun Fact of the Day

Support for free trade seems to be rising:











Source. Click on graphic to enlarge.

Friday, October 05, 2018

Surprising Truths About Trade Deficits

Click here to read my column in Sunday's NY Times.

Monday, October 01, 2018

Congratulations, Gita

Tuesday, September 25, 2018

Economics Teaching Conference

I will be talking at the annual conference of the National Economics Teaching Association, to be held October 25-26, 2018, in Phoenix, Arizona. If you are interested in learning more about the meeting, click here for more information.

Friday, September 21, 2018

Now I love Mike Pompeo

How can you not after this story?

Wednesday, September 05, 2018

Job Opening

I am looking to hire a couple part-time RAs.  Information here. These positions tend to go to Harvard students, but I will consider applicants from comparable institutions.

Update: Positions are filled.

Friday, August 17, 2018

Bill Gates's Freshman Year

By the second semester of my freshman year at Harvard, I had started going to classes I wasn’t signed up for, and had pretty much stopped going to any of the classes I was signed up for – except for an introduction to economics class called “Ec 10.” I was fascinated by the subject, and the professor was excellent.
Mr. Gates does not say who the professor was. And since this predates my time at Harvard by about a decade, I don't know. Perhaps Otto Eckstein, who taught the course for many years.

Update: Mystery solved. Otto was indeed the head professor, but Mr. Gates was probably referring to his section leader Robby Moore, who is now at Occidental College. Professor Moore emails me:
Hi Professor Mankiw -- I was reading your blog, and just wanted to let you know that I was the teaching fellow who had Bill Gates in my Ec. 10 section.  (I actually sat next to you at the memorial service for our friend, Chip Case).  In any event, it was the Currier House section that met up in Radcliffe Yard, and the academic year was 1974-75.  Steve Ballmer was also in the section of about 25 students.  (I am sure it was the fall semester since Bill Gates dropped out of Harvard after the micro portion of the course and I believe Bill Gates was a sophomore at the time.)  Anyway, when he did come to class, which wasn't actually all that often if truth be told, he was quite argumentative, which is why I remembered him..  In fact, when I presented the standard theory of how a monopoly maximizes profits, and drew the standard diagram with the profits box at that Q where MR = MC, he jumped right up at the end of class and declared, "this theory is all wrong".......he drew a new diagram but with a different AC curve and his showed more profits at a Q where MR didn't equal MC.  I tried to explain to him that you couldn't just draw in any old AC curve.......it had to be consistent with the MC curve, and the profit box had to be the biggest where MC = MR, but I'm pretty sure he felt his analysis was better.   (In any event, that's my absolutely true Bill Gates Ec. 10 story.)

The rest is history.......I became a lowly Head Section Leader of Ec. 10 and created the first Readings/Workbook for the course, with all the course wide problem sets, past exams, and solutions, etc., and he started Microsoft.

Friday, August 10, 2018

What I have been reading

Great book by UCLA economist Sebastian Edwards about a key moment in American economic history. Many economists believe that the most important thing FDR did to help the economy recover from the Great Depression was to go off the gold standard. As part of that policy, he pursued laws that rewrote many bond contracts, annulling gold clauses. It was controversial then (and surely would be again if such an issue were ever to arise). Edwards does a wonderful job telling the story.