Monday, June 30, 2014


Sorry that I have been out of touch with regular blog readers.  I have moved to Nantucket for the summer, and the weather here has been too great to spend much time in front of a keyboard.  (The three best reasons to be a professor: June, July, and August.)

The past few days I have been attending the Nantucket Film Festival.  I have had a chance to see some great movies before they are in general release.  Two are worth mentioning: Arlo and Julie, a small quirky comedy/mystery that is a bit Woody Allen-esque. Also, Happiness, a documentary about a boy and his family in Bhutan. 

This morning I am off to see Begin Again, which won the award for Best of Festival.

Monday, June 23, 2014

The Saddest Chart I've Seen Today

Saturday, June 21, 2014

On Inherited Wealth

How much has the Affordable Care Act reduced potential GDP?

The Affordable Care Act added "about six percentage points to the marginal tax rate faced, on average, by workers in the economy."  So estimates the University of Chicago economist Casey Mulligan

Given that labor income was already taxed by income and payroll taxes, that figure indicates the return to working fell by about 10 percent. If we apply a plausible aggregate labor supply elasticity of 0.5, this in turn suggests a decline in labor supply of about 5 percent. In the long run, as the capital stock adjusts, a fall in labor supply leads to a proportionate fall in output. So we end up with a 5 percent fall in long-run potential output.

That calculation is very, very rough, but it does indicate that the ACA could well be a significant reason why the economy is not returning to its old growth path.

Update: Casey emails me that he believes the GDP effect will be smaller than this (about 2 percent or a bit more) because the impact on less skilled workers is greater than that on more skilled workers.  As a result, the mix of skills will change, and GDP will fall by less than total hours worked.

Friday, June 13, 2014

Almost back to (the new) normal?

Torsten Slok of Deutsche Bank Research sends along the above graphic.  At face value, it indicates the labor market is almost back to normal. If so, this fact suggests that the Fed may soon need to back off its policy of near zero interest rates, and that the slow pace of economic growth experienced in recent years reflects slow growth in potential due to adverse structural forces rather than inadequate aggregate demand.

Wednesday, June 11, 2014


Tuesday, June 10, 2014

Retire the Penny

My long-time readers know that I have long favored getting rid of the penny.  If you agree, you can now let the White House know via this petition.

Saturday, June 07, 2014

A Wonderfully Amusing Student Talk, from Princeton University Class Day 2014

Friday, June 06, 2014

From the Harvard Class of 2009

A video for their 5th year reunion, featuring a couple of econ profs.

Thursday, June 05, 2014

Inequality in the UK