Friday, August 17, 2018

Bill Gates's Freshman Year

By the second semester of my freshman year at Harvard, I had started going to classes I wasn’t signed up for, and had pretty much stopped going to any of the classes I was signed up for – except for an introduction to economics class called “Ec 10.” I was fascinated by the subject, and the professor was excellent.
Mr. Gates does not say who the professor was. And since this predates my time at Harvard by about a decade, I don't know. Perhaps Otto Eckstein, who taught the course for many years.

Update: Mystery solved. Otto was indeed the head professor, but Mr. Gates was probably referring to his section leader Robby Moore, who is now at Occidental College. Professor Moore emails me:
Hi Professor Mankiw -- I was reading your blog, and just wanted to let you know that I was the teaching fellow who had Bill Gates in my Ec. 10 section.  (I actually sat next to you at the memorial service for our friend, Chip Case).  In any event, it was the Currier House section that met up in Radcliffe Yard, and the academic year was 1974-75.  Steve Ballmer was also in the section of about 25 students.  (I am sure it was the fall semester since Bill Gates dropped out of Harvard after the micro portion of the course and I believe Bill Gates was a sophomore at the time.)  Anyway, when he did come to class, which wasn't actually all that often if truth be told, he was quite argumentative, which is why I remembered him..  In fact, when I presented the standard theory of how a monopoly maximizes profits, and drew the standard diagram with the profits box at that Q where MR = MC, he jumped right up at the end of class and declared, "this theory is all wrong".......he drew a new diagram but with a different AC curve and his showed more profits at a Q where MR didn't equal MC.  I tried to explain to him that you couldn't just draw in any old AC had to be consistent with the MC curve, and the profit box had to be the biggest where MC = MR, but I'm pretty sure he felt his analysis was better.   (In any event, that's my absolutely true Bill Gates Ec. 10 story.)

The rest is history.......I became a lowly Head Section Leader of Ec. 10 and created the first Readings/Workbook for the course, with all the course wide problem sets, past exams, and solutions, etc., and he started Microsoft.

Friday, August 10, 2018

What I have been reading

Great book by UCLA economist Sebastian Edwards about a key moment in American economic history. Many economists believe that the most important thing FDR did to help the economy recover from the Great Depression was to go off the gold standard. As part of that policy, he pursued laws that rewrote many bond contracts, annulling gold clauses. It was controversial then (and surely would be again if such an issue were ever to arise). Edwards does a wonderful job telling the story.

Sunday, August 05, 2018

Thumbs up for DAFs

Today's NY Times has a long but ultimately unconvincing article about Donor-Advised Funds (DAFs). The headline and tone of the article suggest something nefarious is going on. But unless you think that future charitable spending is less admirable than current charitable spending, nothing of the sort is the case.

True, the money managers make some money from these funds, but they do for every pool of money they manage. Is contributing to a college endowment suspect because some money manager will be paid to invest the money? Of course not. Moreover, these fees need not be excessive. At the Fidelity DAF, which I use, I put the assets in low-cost index funds.

True, there is lack of transparency. But charitable giving need not be public. There is no law against anonymous giving to charities. Nor should there be.

Most important, the donor of the funds cannot get the money back to finance his consumption or that of his heirs. The money has to eventually go to IRS-approved charities. Putting money into a DAF is essentially a commitment to give that part of your wealth, plus all future returns on it, to charity. As such, DAFs should be applauded.

Wednesday, August 01, 2018

Singer, Songwriter, Central Banker

A friend emails me:
I’ve just been listening to Rich Clarida’s CD, Time No Changes.  It’s on Spotify.  Might be an amusing item for your blog!  The press has been talking about the fact that Goldman’s David Solomon is also DJ D-Sol, but it’s equally unusual to have a singer-songwriter as nominated Vice Chair of the Fed.
I recall seeing Rich perform years ago when he was a grad student at Harvard. (I was a grad student at MIT at the time.) He is indeed very talented.

FYI, you can hear a preview of the CD on itunes.