Big Idea #2

The second article in The Economist series is on Hyman Minsky.

Anxiety about Globalization

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

Big Idea #1

The Economist is running a series on six big ideas in economics.  First up: Akerlof and lemons.

GDP and Its Discontents

I have a book review in Science.  Here is an ungated version.

Why did Lehman fail?

Larry Ball has an important new monograph arguing, contra Bernanke, that during the recent financial crisis, the Fed could have saved Lehman Brothers but, unadvisedly, chose not to.  Here, James Stewart of the NY Times covers the Ball piece, and it includes this tidbit:

an internal Fed team assigned to value Lehman’s collateral reached a preliminary finding that the firm was narrowly solvent and the Fed could have justified a loan. But everyone was too busy to listen, and the report was never delivered to Mr. Geithner, Mr. Bernanke or Mr. Paulson. This is consistent with Professor Ball’s findings.

Pigou Club News

1. Progress in Washington State.
2. Progress in Canada.

A Quick Note on a Universal Basic Income

Consider an economy in which average income is $50,000 but with much income inequality. To provide a social safety net, two possible policies are proposed.

A.  A universal transfer of $10,000 to every person, financed by a 20-percent flat tax on income.

B.  A means-tested transfer of $10,000.  The full amount goes to someone without any income.  The transfer is then phased out: You lose 20 cents of it for every dollar of income you earn.  These transfers are financed by a tax of 20 percent on income above $50,000.

 Which would you prefer?

I have seen smart people argue as follows: Policy A is crazy. Why should Bill Gates get a government transfer? He doesn’t need it, and we would need to raise taxes more to pay for it.  Policy B is more progressive. It targets the transfer to those who really need it, and the transfer is financed by a smaller tax increase levied only on those with above-average incomes.

But here is the rub: The two policies are equivalent.  If you look at the net payment (taxes less transfer), everyone is exactly the same under the two plans. The difference is only a matter of framing.

Summer Reads

Some suggestions from Harvard profs.

Some Questions for Mr Trump

I see you recently opened up a golf course in Scotland. I presume that part of your business plan is for some Americans to take vacations to play there. But this raises some thorny questions.

You complain constantly about American firms moving jobs overseas. But couldn't you have opened up your golf course here in the United States?  Wouldn't that have created jobs for American caddies and groundskeepers?  Should we be concerned when Americans import golfing services from your foreign course? Would you as President slap a tariff on American tourists traveling to your course, as you have proposed for goods coming from China?  Do you think such a tax would Make American Golfing Great Again?

Brexit in a Snapshot 2