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Chapter 18: The Markets for the Factors of Production

Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)

 

June 11

Monopsony

A cartoon illustrates the effect of a monopsony.

Textbook References:

Page 389 “Monopsony”

February 17

CEOs are paid for performance

Steven Kaplan argues that even CEO pay reflects their contributions to the company.

Textbook References:

Pages 379-380 “The Value of the Marginal Product and the Demand for Labor”

February 11

If Obamacare reduces labor supply, will it raise wages?

The conventional wisdom seems to be that a decline in the supply of labor caused by Obamacare will raise wages. But that is based on partial equilibrium analysis. Mankiw argues that any increase in wages will be temporary. That is because the reduction in labor supply will have an adverse long-run effect on the economy. Aggregate income will be lower, which translates into less saving and investment, and hence lower productivity.

Textbook References:

Pages 384-388 “Equilibrium in the Labor Market”

February 9

Give Me Your Tired, Your Poor, and Your Economists Too

Mankiw explains why economists generally support immigration.

Textbook References:

Pages 386-387 “The Economics of Immigration”

February 16

Reflections on the Economics Job Market

Noah Smith explains how the market for new PhDs in economics works.

Textbook References:

Chapter 18 “The Markets for the Factors of Production”

November 7

Race Against the Machine

Erik Brynjolfsson argues that technological change has increased productivity but has also left many less-skilled workers behind.

Textbook References:

Pages 387-388 “Productivity and Wages”
Pages 399-400 “The Increasing Value of Skills”
Chapter 20 “Income Inequality and Poverty”

November 5

Educating Oligarchs

Would a better education system reduce income inequality? Mankiw and Paul Krugman debate the issue.

Textbook References:

Pages 387-388 “Productivity and Wages”
Pages 399-400 “The Increasing Value of Skills”
Chapter 20 “Income Inequality and Poverty”

July 7

Rogoff on Inequality

Kenneth Rogoff argues that "technological innovation will lead ultimately to commoditization of many skills that now seem very precious and unique." That implies that what are now high-skilled, high-paying jobs will become routine and will make the income distribution more equal.

Textbook References:

Pages 376-382 “The Demand for Labor”
Chapter 20 “Income Inequality and Poverty”

March 29

A Striking Scatterplot

There is a strong negative correlation between the unemployment rate and the ratio of fixed investment to GDP.

Textbook References:

Pages 397-399 “What Causes the Labor-Demand Curve to Shift?”
Pages 555-560 “How Productivity Is Determined”
Pages 581-583 “Some Important Identities”

December 16

The Economics of Seinfeld

Clips from the TV show "Seinfeld" are used to illustrate a variety of economic concepts.

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 5-6 “Principle 2: The Cost of Something is What You Give Up to Get It”
Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 67-72 “Demand”
Pages 73-76 “Supply”
Pages 144-153 “Controls on Prices”
Chapter 10 “Externalities”
Pages 226-227 “The Different Kinds of Goods”
Pages 227-232 “Public Goods”
Pages 230-232 “The Difficult Job of Cost-Benefit Analysis”
Pages 232-237 “Common Resources”
Pages 274-275 “Fixed and Variable Costs”
Page 281 “Economies and Diseconomies of Scale”
Pages 312-315 “Why Monopolies Arise”
Chapter 16 “Monopolistic Competition”
Pages 370-378 “The Economics of Cooperation”
Pages 399-400 “The Supply of Labor”
Page 414 “Compensating Differentials”
Page 442 “Utility”
Page 465 “Utility: An Alternative Way to Describe Preferences and Optimization”
Pages 484-489 “Asymmetric Information”
Pages 556-558 “Technological Knowledge”
Pages 578-580 “Financial Intermediaries”
Pages 598-600 “Present Value: Measuring the Time Value of Money”
Pages 603-604 “Diversification of Firm-Specific Risk”
Pages 606-609 “The Efficient Market Hypothesis”
Pages 630-631 “The Economics of Unions”
Pages 703-705 “The Prices for International Transactions: Real and Nominal Exchange Rates”
Pages 707-708 “The Basic Logic of Purchasing Power Parity”
Page 833 “Time Inconsistency”

October 18

Hear Me Squawk

Mankiw discusses a variety of issues including marginal tax rates, long-term deficits, and ways to stimulate the economy.

Textbook References:

Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 160-164 “The Deadweight Loss of Taxation”
Pages 246-248 “The Fiscal Challenge Ahead”
Page 399 “The Trade-off Between Work and Leisure”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 749-751 “Why the Aggregate-Demand Curve Might Shift”
Page 750 “The 2008 Fiscal Stimulus”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”

October 12

Response to Queries

Mankiw responds to questions about his New York Times article that was posted on his blog on October 10.

Textbook References:

Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 160-164 “The Deadweight Loss of Taxation”
Page 399 “The Trade-off Between Work and Leisure”

October 10

My Marginal Tax Rate

Mankiw explains how the marginal tax rate affects his decisions about how much to work.

Textbook References:

Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 160-164 “The Deadweight Loss of Taxation”
Page 399 “The Trade-off Between Work and Leisure”

August 12

A Challenge to Extreme Keynesians

Casey Mulligan suggests that the rise in summer teenage employment, even in a deep recession, offers evidence contrary to the demand-constrained Keynesian story.

Textbook References:

Pages 80-81 “Example: A Change in Market Equilibrium Due to a Shift in Supply”
Pages 400-402 “Shifts in Labor Supply”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”

January 13

The Rise of European Leisure

Mankiw discusses some possible explanations for Europeans working less than Americans.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 160-163 “The Deadweight Loss of Taxation”
Page 170 “On the Way to France”
Page 243 “Table 1: Total Government Tax Revenue as a Percentage of GDP”
Page 399 “The Trade-off between Work and Leisure”

November 30

How to Create Jobs

Nobel laureates Paul Krugman and Gary Becker offer different advice on how to create jobs.

Textbook References:

Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments can Sometimes Improve Market Outcomes”
Pages 400-405 “Equilibrium in the Labor Market”
Pages 614-623 “Identifying Unemployment”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”

October 26

The Public Plan, Again

Robert Samuelson, Paul Krugman, Richard Thaler and N. Greagory Mankiw discuss the proposed government health-insurance option.

Textbook References:

Pages 8-10 “Principle 6: Markets Are Usually a Good Way to Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 15 “Monopoly”
Page 406 “Monopsony”

September 6

Unemployment Update

Unemployment is higher than the administration predicted.

Textbook References:

Pages 392-399 “The Demand for Labor”
Pages 399-400 “The Supply of Labor”
Pages 400-405 “Equilibrium in the Labor Market”
Chapter 28 “Unemployment”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?


June 12

The Case Against a Minimum Wage Hike

The minimum wage is scheduled to increase in July, David Neumark argues that a recession is an especially bad time to increase the minimum wage.

Textbook References:

Pages 118-121 “How Price Floors Affect Market Outcomes”
Chapter 18 “The Markets for the Factors of Production”
Pages 627-629 “Minimum-Wage Laws”

Chapter 18: The Markets for the Factors of Production
Archived Posts

 

May 12

Measuring Jobs Created or Saved

Congress passed a bill that requires the Council of Economic Advisors to report on the number of jobs saved or created by the stimulus package. It is an impossible task.

Textbook References:

Pages 392-399 “The Demand for Labor”
Pages 399-400 “The Supply of Labor”
Pages 400-405 “Equilibrium in the Labor Market”
Chapter 28 “Unemployment”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?


May 4

Meltzer vs Krugman

Allan Meltzer is worried that the Fed’s easy money policy will lead to inflation. He is also worried that the Fed has lost its independence. Paul Krugman is worried about falling wages and the possibility of deflation.

Textbook References:

Pages 392-399 “The Demand for Labor”
Pages 399-400 “The Supply of Labor”
Pages 400-405 “Equilibrium in the Labor Market”
Pages 414-422 “Some Determinants of Equilibrium Wages”
Pages 648-649 “The Federal Reserve System”
Chapter 30 “Money Growth and Inflation”
Pages 778-787 “How Monetary Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”


Feb. 6

Wage Deflation?

Mankiw responds to Krugman’s claim that wages are falling.

Textbook References:

Chapter 18 “The Markets for the Factors of Production”
Pages 537-541 “Correcting Economic Variables for the Effects of Inflation