Where I am today

Here, in New York City, helping promote economics education.

More Competition

Ben Bernanke has started a blog. Where did he ever come up with that title?

The Economics of Skyscrapers

A friend points me to this article in The Economist about the economics of skyscrapers.  Lots of good food for thought for micro and macro classes.

Getting Promoted

What do Larry Summers, Doug Elmendorf, and Greg Mankiw have in common?

Only one of us won a John Bates Clark Medal.
Only one of us became Director of the Congressional Budget Office.
Only one of us wrote a best-selling textbook.

But all three of us were ec 10 section leaders early in our careers.

Being an ec 10 section leader is one of the best teaching jobs at Harvard. You can revisit the principles of economics, mentor some of the world’s best undergraduates, and hone your speaking skills. In your section, you might even have the next Andrei Shleifer or Ben Bernanke (two well-known ec 10 alums). And believe it or not, we even pay you for this!

If you are a graduate student at Harvard or another Boston-area university and have a strong background in economics, I hope you will consider becoming a section leader in ec 10 next year.  Applications are encouraged from PhD students, law students, and master's students in business and public policy.

If you think you might be interested, please come to one of the information sessions we are holding:

1. Monday, March 30th at 6 p.m. in Aldrich 109 at the Harvard Business School
2. Thursday, April 2nd at 6 p.m. in the 3rd floor Littauer lounge of the Harvard Economics Department
3. Monday, April 6th at 6 p.m. in Taubman 401 at the the Harvard Kennedy School of Government
   

My Spring Break Reading

This week is spring break at Harvard, so I have time to catch up on some pleasure reading. First up is a recent recommendation by a blog reader: The Righteous Mind: Why Good People Are Divided by Politics and Religion by Jonathan Haidt. 

The book is a few years old, but I had not heard of it. It gives readers a lens into the field of moral psychology, together with dashes of philosophy, anthropology, behavioral genetics, political science,  and even some behavioral economics.

It is a great read.  Highly recommended.

3-14-15

Happy Pi Day!

Harvard Pre-Collegiate Economics Challenge

If you teach high school economics, you will most definitely want to click here to learn about a great opportunity for your students.

An Open Letter

March 5, 2015

The Honorable John Boehner

Speaker
House of Representatives
Washington, DC 20515

The Honorable Mitchell McConnell
Majority Leader
United States Senate
Washington, DC 20510
 
The Honorable Nancy Pelosi
Minority Leader
House of Representatives
Washington, DC 20515
 
The Honorable Harry Reid
Minority Leader
United States Senate
Washington, DC 20510

Dear Mr. Speaker, Mr. Leader, Madam Pelosi, and Senator Reid:

International trade is fundamentally good for the U.S. economy, beneficial to American families over time, and consonant with our domestic priorities. That is why we support the renewal of Trade Promotion Authority (TPA) to make it possible for the United States to reach international agreements with our economic partners in Asia through the Trans-Pacific Partnership (TPP) and in Europe through the Transatlantic Trade and Investment Partnership (TTIP). Trade Promotion Authority provides for an up or down vote on these agreements, without amendments, and thereby encourages our trade partners to put their best offers on the table.

Expanded trade through these agreements will contribute to higher incomes and stronger productivity growth over time in both the United States and other countries.  U.S. businesses will enjoy improved access to overseas markets, while the greater variety of choices and lower prices trade brings will allow household budgets to go further to the benefit of American families.

Trade is beneficial for our society as a whole, but the benefits are unevenly distributed and some people are negatively affected by increased global competition.  The economy-wide benefits resulting from increased trade provide resources to make progress on important social goals, including helping those who are adversely affected.

Increased global economic engagement will enhance U.S. global leadership in line with our values. Indeed, trade agreements signed under both Democratic and Republican Presidents have included provisions to combat corruption and to strengthen environment and labor standards.

It is not desirable for trade agreements to include provisions aimed at so-called currency manipulation. This is because monetary policy affects the value of currencies.  Attempts to penalize countries for supposedly manipulating exchange rates would thus impose constraints on U.S. monetary policy, to the detriment of all Americans.

We believe that agreements to foster greater international trade are in our national economic and security interests, and support a renewal of Trade Promotion Authority.

Alan Greenspan

Charles L. Schultze

Martin Feldstein

Michael J. Boskin

Laura D’Andrea Tyson

Martin N. Baily

R. Glenn Hubbard

N. Gregory Mankiw

Harvey S. Rosen

Ben S. Bernanke

Edward P. Lazear

Christina D. Romer

Austan D. Goolsbee

Alan B. Krueger

 

The letter writers were chairs of the President’s Council of Economic Advisers under Presidents Gerald Ford, Jimmy Carter, Ronald Reagan, George H.W. Bush, William J. Clinton, George W. Bush, and Barack Obama.

The Lee-Rubio Tax Reform

Senators Mike Lee and Marco Rubio announced a bold and attractive tax plan today. I especially appreciate their desire to eliminate the current tax code's bias for debt over equity finance.

No Way to Avoid It

In my column on dynamic scoring, I wrote:

[A]ccurate dynamic scoring requires more information than congressional proposals typically provide. For example, if a member of Congress proposes a tax cut, a key issue in estimating its effect is how future Congresses will respond to the reduced revenue. 

This raises important questions for which we have no easy answers. In the coming years, will these Congresses respond quickly to the revenue shortfall, or will they let budget deficits fester? When they act to close the budget gap, will they increase taxes, or will they cut spending? If they cut spending, will it be on consumption items, such as health care for the elderly, or on growth-promoting investments, such as education for the young? The impact of the initial tax cut depends crucially on the answers to these questions, but budget analysts usually have little to go on but speculation.

On this passage, John Cochrane comments:

Greg also opined on the second round effects, how policy might change economic outcomes which might change future policy. Here I'll go with the old fashioned approach -- let's not go there!

I understand the desire not to go there.  The problem is, you cannot avoid going there. 

Dynamic scoring requires the solution of a general equilibrium model.  To solve a dynamic GE model, you need to specify how the government is going to satisfy its present-value budget constraint. You might be tempted to ask the model what happens if the government cuts taxes and never does anything else. But you won't get very far. The model will tell you that the government has to do something else eventually, and it won't tell you what will happen if the government tries to do something impossible.