Sunday, July 31, 2016
Friday, July 29, 2016
Wednesday, July 27, 2016
Big Idea #1
The Economist is running a series on six big ideas in economics. First up: Akerlof and lemons.
Tuesday, July 26, 2016
Sunday, July 24, 2016
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.
Tuesday, July 19, 2016
Tuesday, July 12, 2016
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.
Which would
you prefer?
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.
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.
Sunday, July 03, 2016
Saturday, July 02, 2016
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?
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?