Sad News from China

Via the NY Times:

Some universities have replaced textbooks by Western academics such as Milton Friedman and N. Gregory Mankiw with books written under a program called “Marxist theory research and building project.”

Blanchard on the Fed's Target

Olivier Blanchard suggests that the Fed consider a target for nominal wages rather than for the prices of goods and services. Ricardo Reis and I agree. (ungated pdf)

Piketty and Saez Revisited

This paper by Gerald Auten (Office of Tax Analysis, U.S. Treasury Department) and David Splinter (Joint Committee on Taxation) seems important.  The abstract (emphasis added):

Top income share estimates based only on individual tax returns, such as Piketty and Saez (2003), are biased by tax-base changes, major social changes, and missing income sources. Addressing these issues requires numerous assumptions, especially for broadening income beyond that reported on tax returns. This paper shows the effects of adjusting for technical tax issues and the sensitivity to alternative assumptions for distributing missing income sources. Our results suggestthat top income shares are lower than other tax-based estimates, and since the early 1960s, increasing government transfers and tax progressivity resulted in little change in after-tax top income shares.

A key figure:

Click on graphic to enlarge.

Yang vs Warren

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

The Trophy Wife Tax Credit

As I have pointed out, Elizabeth Warren's wealth tax, as described, involves a substantial marriage penalty. Now Bernie Sanders comes along with his own wealth tax proposal. He solves the marriage penalty problem by halving the thresholds for singles.  This approach introduces the opposite problem--a marriage bonus.

As I understand the plan, if a single man is worth $30 million, he pays $140,000 per year under the Sanders wealth tax. If he marries his assistant, who has a wealth of less than $2 million, their tax liability falls to zero.

For a single man with higher wealth, the marriage bonus is even larger. Under the Sanders plan, for someone worth $100 million, marriage can reduce the tax liability by $410,000 per year.

Put another way, this plan can be viewed as imposing a tax on widows and widowers. A married couple worth $30 million does not pay anything. When one spouse dies, the surviving spouse then owes $140,000 per year.

Economics Teaching Conference

I will be talking at the annual conference of the National Economics Teaching Association, to be held October 24-25, 2019, in Kansas City. If you are interested in learning more about the meeting, click here for more information.

From the conference organizers:  The deadline to have a teaching session considered for the conference has been extended to Monday, September 23. Be sure to get your submission in ASAP! You can submit here.

Should grad students teach?

A student emails me a question:

Dear Prof. Mankiw, 

I am in the first week of my PhD in economics. I follow your blog and I have read the advice you have posted for graduate students. 

I have heard competing hypotheses about whether PhD students should teach during their studies. On one hand, teaching is a great experience and a CV-builder for hopeful future academics. On the other hand, teaching is a lot of work, and the opportunity cost of time for any PhD student is high. 

Do you have any advice about how a PhD student (and a big fan of your blog!) can reconcile these points? 

Cheers,

[name withheld]

Teaching is not necessary while pursuing a PhD, but it is usually a good idea for several reasons.

1. Grad students can usually use the money, and teaching is often a good way to make some.
2. Teaching improves your oral presentation skills, which will be crucial when you go on the job market.
3. You will learn whether you enjoy teaching. If not, you might consider alternatives to an academic career.
4. When you apply for jobs, teaching experience will be a plus for many schools that might hire you.
5. Teaching will help remind you why you fell in love with economics in the first place. That can be useful during those inevitable days when your dissertation research is not going well.
6. Teaching will provide greater variety to your day than if you are solely focused on research. The personal interaction with students will often lift your spirits.
7. When you are teaching, you can be confident that you are making positive contributions to society, and that feeling is also good for your mental health.

Let me also mention one risk: If you enjoy teaching, you might use it as a distraction from getting your dissertation done. The key is moderation. Teach some, but not too much.

Writing Advice

An unwitting collaboration with John Cochrane.

News from Amazon

To users of my favorite textbooks: Thank you. Have a great semester.

Macro Policy Seminar

This fall, Ben Friedman and I are organizing the Macro Policy seminar in the Harvard economics department. (I am taking over this role from Marty Feldstein, who recently passed away.) Some local blog readers might enjoy attending.

The seminar will meet on Tuesday afternoons, from 1:30 to 2:45, in Littauer M-15. Here is the schedule of speakers.

September 3                Kevin Warsh (former governor, Federal Reserve System)

September 10              Jim Stock (Harvard economics department)

September 17              Larry Ball (Johns Hopkins)

September 24              Arvind Subramanian (Kennedy School; former chief economic adviser, Government of India)

October 1                    Ioana Petrescu (former finance minister, Romania)

October 8                    Steve Cecchetti (Brandeis; former chief economist, Bank of International Settlements)

October 15                  Ignazio Angeloni (Kennedy School; former supervisory board member, ECB)

October 22                  Matt Weinzierl (HBS)

October 29                  Ivan Werning (MIT)

November 5                Philippe Andrade (Federal Reserve Bank of Boston)

November 12              Karen Dynan (Harvard economics department)

November 19              Robert Lawrence (Kennedy School)

November 26              No meeting – Thanksgiving break

December 3                 Jeff Frankel (Kennedy School)

The Inflation-Unemployment Tradeoff

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

Competing with Shakespeare

What authors appear on the greatest number of syllabuses for college courses? The Open Syllabus Project collects the data that answer exactly this question. Here is the ranking. Shakespeare is number 1, and Plato is number 2. I show up at number 22, between Martin Luther King and Virginia Woolf.

Demand Curves Slope Downward (even for socialists)

This is a wonderful story. Staffers in the Sanders campaign, who are working on salary, complain that they are paid less than the $15 per hour that Senator Sanders advocates for the minimum wage. So Sanders raises their hourly wage. Does that increase their income? No, because he raised the hourly wage by cutting the number of hours they work!

Of course, if a President Sanders raised the federal minimum wage, I am sure he would be confident that the change would not have any adverse employment effects. Downward-sloping demand curves may describe socialist political campaigns, but back in the actual capitalist economy, the laws of supply and demand work completely differently.

Happy Semicentennial, Econ Nobel

Allen Sanderson and John Siegfried look back at 50 years of the Nobel Prize in economics.

Review of Bernanke et al.

Larry Ball reviews Firefighting by Ben Bernanke, Tim Geithner, and Henry Paulson.

Freshman Seminar 2019

I have written in the past about the freshman seminar I run at Harvard. I am teaching it again this fall, and I thought my blog readers might be interested in my current reading list. I always mix it up a bit to keep it fresh and, to be frank, more fun for me. Here it is:

The Worldly Philosophers, by Robert Heilbroner

Capitalism and Freedom, by Milton Friedman

Equality and Efficiency: The Big Tradeoff, by Arthur Okun

The Haves and the Have-nots, by Branko Milanovic

The Wisdom of Finance, by Mihir Desai

Open: The Progressive Case For Free Trade, Immigration, and Global Capital, by Kimberly Clausing

Priced Out: The Economic and Ethical Costs of American Health Care, by Uwe E. Reinhardt

The Wealth of Religions, by Robert Barro and Rachel McCleary

Scarcity, by Sendhil Mullainathan and Eldar Shafir

Phishing for Phools, by George Akerlof and Robert Shiller

The Myth of the Rational Voter, by Bryan Caplan

Matt's Best Consumer Purchase

Wise Advice from Josh Angrist

Here. Especially useful for young academics.

Movie Recommendation

I saw the movie Yesterday yesterday. It is excellent. The best romantic comedy (an underrated genre, imho) I have seen since The Big Sick.

Not So Fast

Washington Post columnist Robert Samuelson argues "It’s time we tear up our economics textbooks and start over." He uses my book as a prime example. Perhaps not surprisingly, I disagree. My summary of Samuelson's article: Economics textbooks should be more like economics journalism, says an economics journalist.

Mr. Samuelson fails to fully appreciate the difference between journalism and textbook writing. Journalists are always looking for things that are new, for how the world has changed. That's why we call it the news. The editor of the science section of a newspaper would not be interested in a article explaining that Isaac Newton figured out the workings of gravity. Not newsworthy, the editor would say.

Textbook writers, on the other hand, emphasize those things that are true, important, and unknown to the typical reader (an 18 year old college freshman). Newness has little relevance. The lessons of Adam Smith do not apply only to the 18th century, the lessons of David Ricardo do not apply only to the 19th century, and the lessons of John Maynard Keynes do not apply only to the 20th century. They are timeless ideas that may not make good news stories but should be central to introductory economics. Just as Newtonian mechanics should remain central to introductory physics.

Yes, textbooks need to evolve as we learn more and as the world changes. New examples also show students how to apply the classic ideas to the issue of today. (The 9th edition of my principles text, available in about six months, includes a feature discussing social media like Facebook as a common resource.) But it would be a mistake for teachers of introductory economics to focus excessively on today's hot topics at the exclusion of timeless truths.

I had a 6th grade teacher who used to refer to newspapers as a "perishable commodity." That seems right, given their relentless focus on newness. Good textbooks, however, are more like durable goods. They do not go out of date nearly as quickly.