Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)
Stocks are cheap
Two economists from the New York Fed surveyed predictions from 29 of the most widely used equity risk premium models. The models suggest that the S & P 500 will enjoy unusually high returns in the next five years. But can the models be trusted?
Textbook References:
Pages 557-558 “The Stock Market”Larry Summers on Reinhart and Rogoff
Larry Summers reminds us that 1. Economics at the best of times is an inexact science, so policy should not be based on a single study, and 2. Despite the errors in Reinhart and Rogoff's work, debt is still something to be avoided.
Textbook References:
Pages 570-572 “The History of U.S. Government Debt”Preventing the Next Catastrophe
David Romer points out that financial crises are common. Consequently, policymakers must fundamentally reform the financial system.
Textbook References:
Page 561 “Financial Crises”Stevenson-Wolfers on Reinhart-Rogoff
Despite an error in their calculations, Reinhart and Rogoff's main finding still holds: High levels of public debt relative to GDP harms growth.
Textbook References:
Pages 570-572 “The History of U.S. Government Debt”Solow on Bernanke
Robert Solow reviews a book that reproduces four lectures that Ben Bernanke gave in March 2012. The focus of the book is the role of the Fed during the recent financial crisis. Solow concludes by wondering if the financial sector has grown too large, i.e. "that the last x percent of financial activity absorbs more resources (especially intellectual resources) and creates more potential instability than its additional efficiency-benefits can justify."
Textbook References:
Page 561 “Financial Crises”Is the financial sector too large?
From 1980 to 2007, the U.S. financial services industry grew from 4.9% to 7.9% of GDP. Two papers discuss whether this has been socially beneficial.
Textbook References:
Pages 556-561 “Financial Institutions in the U.S. Economy”The Effects of Government Debt on Growth
Michael Boskin argues that the U.S. must reduce its debt-to-GDP ratio or face a significant reduction in economic growth. If it fails to do so, there will be a "growth disaster."
Textbook References:
Pages 570-572 “The History of U.S. Government Debt”Niall Ferguson on the Generational Compact
Niall Ferguson argues that the current generation is running up a huge debt that will burden future generations.
Textbook References:
Pages 570-572 “The History of U.S. Government Debt”CBO looks at the president's budget
The CBO forecasts that, compared to current law, the president's proposed budget will increase output from 2013 to 2017, but will reduce it after that. It illustrates the short-run ability of fiscal policy to boost growth and the long-run crowding out of productive investment by government borrowing.
Textbook References:
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”Pages 767-773 “How Fiscal Policy Influences Aggregate Demand”
January 16
Steady saving leads one to accumulate wealth. The wealth can be used as a potential bequest that might induce children to take care of their parents.
Textbook References:
Pages 566-567 “Policy 1: Saving Incentives”December 30
The Burden of the Debt
Paul Krugman argues that the Federal debt is not much of a problem. Laurence Ball and Greg Mankiw argue that the debt has distributional effects and that too much debt might trigger a collapse in demand for government bonds.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Pages 704-706 “Government Budget Deficits”
Pages 823-827 “Should the Government Balance Its Budget?”
October 29
My Lecture at Princeton
An hour-long video shows Mankiw's recent lecture at Princeton. In a wide-ranging presentation, he discusses the current state of macroeconomics. In the process he addresses the policy difficulties created by the current slump and the long-term debt crisis.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Page 561 “Financial Crises”
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Pages 631-632 “Bank Capital, Leverage, and the Financial Crisis of 2008-2009”
Pages 745-748 “The Recession of 2008-2009”
Pages 758-767 “How Monetary Policy Influences Aggregate Demand”
Pages 767-773 “How Fiscal Policy Influences Aggregate Demand”
Pages 773-779 “Using Policy To Stabilize The Economy”
Pages 812-814 “Should Monetary And Fiscal Policymakers Try To Stabilize The Economy?”
October 27
The Budget Deficit
In a 90 minute video, Peter Diamond, Jeff Leibman, Deborah Lucas, Greg Mankiw, and Robert Solow discuss the federal budget deficit. The discussion addresses both short-term and long-term concerns.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Pages 745-748 “The Recession of 2008-2009”
Pages 767-773 “How Fiscal Policy Influences Aggregate Demand”
Pages 773-779 “Using Policy To Stabilize The Economy”
Pages 823-827 “Should the Government Balance Its Budget?”
October 22
Fates to Avoid
Mankiw warns against the policy blunders made by Zimbabwe, Japan, Greece, and France.
Textbook References:
Pages 7-9 “Principle 4: People Respond to Incentives”Pages 238-240 “The Fiscal Challenge Ahead”
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Page 654 “Hyperinflation in Zimbabwe”
Page 662 “Inflation Is Bad, But Deflation May Be Worse”
October 4
Alan Blinder and Glenn Hubbard Agree
Alan Blinder and Glenn Hubbard are from different parts of the political spectrum, but agree on a plan to bring the national debt under control.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
October 2
Optimal Stabilization Policy
Mankiw's new paper suggests that fiscal policy is not necessary to stabilize the economy unless the Fed hits the zero lower bound on nominal interest rates AND cannot commit to future monetary policy actions that would boost present demand. When fiscal policy is required, tax changes that boost investment might be preferred to increases in government purchases.
Textbook References:
Page 568 “Policy 2: Investment Incentives”Pages 758-767 “How Monetary Policy Influences Aggregate Demand”
Pages 767-773 “How Fiscal Policy Influences Aggregate Demand”
Pages 773-779 “Using Policy To Stabilize The Economy”
September 28
Robert Shiller on Stock Valuations
Robert Shiller points out that the price-to-earnings ratio in the stock market is still above its long-run average.
Textbook References:
Page 559 “Key Numbers for Stock Watchers”Pages 584-589 “Asset Valuation”
September 24
A Conversation with Robert Lucas
Robert Lucas talks about the effects of high marginal tax rates on growth, about the recent financial crisis, and about rational expectations.
Textbook References:
Pages 7-9 “Principle 4: People Respond to Incentives”Page 561 “Financial Crises”
Pages 631-632 “Bank Capital, Leverage, and the Financial Crisis of 2008-2009”
Pages 745-748 “The Recession of 2008-2009”
Pages 789-795 “Shifts in the Phillips Curve: The Role of Expectations”
September 22
Kotlikoff on the Corporate Tax
Laurence Kotlikoff argues that the corporate income tax harms workers more than investors. This is in part because capital can easily move to countries with lower tax rates, but workers can not. Kotlikoff proposes an overhaul of the U.S. tax system.
Textbook References:
Pages 250-251 “Pays the Corporate Income Tax?”Page 568 “Policy 2: Investment Incentives”
September 10
Fixing Our Sick Economy
Two essays, one by Mankiw and the other by Robert Barro, address the causes of the weak recovery, and suggest possible solutions.
Textbook References:
Pages 7-9 “Principle 4: People Respond to Incentives”Pages 250-251 “Who Pays the Corporate Income Tax?”
Pages 250-251 “The Value-Added Tax”
Page 568 “Policy 2: Investment Incentives”
Pages 745-748 “The Recession of 2008-2009”
Pages 767-773 “How Fiscal Policy Influences Aggregate Demand”
August 21
Split-Rated
Curtis Threadneedle (a.k.a. Merle Hazard) sings a humorous song about the downgrade in the U.S. credit rating.
Textbook References:
Pages 745-748 “The Recession of 2008-2009”Pages 570-572 “The History of U.S. Government Debt”
August 8
I Talk to Reuters
Mankiw discusses the current U.S. debt crisis and what the Fed can do to boost the weak recovery.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Page 561 “Financial Crises”
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Pages 745-748 “The Recession of 2008-2009”
Pages 758-767 “How Monetary Policy Influences Aggregate Demand”
August 4
Rogoff on the Great Contraction
Kenneth Rogoff argues that it is wrong to compare the recent recession to a typical recession. The real issue is that the world economy is badly overleveraged, and "and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation."
Textbook References:
Page 561 “Financial Crises”Pages 631-632 “Bank Capital, Leverage, and the Financial Crisis of 2008-2009”
Pages 745-748 “The Recession of 2008-2009”
July 23
Spending in Disguise
Donald Marron explains how a significant amount of government spending is hidden in the tax code.
Textbook References:
Chapter 10 “The Design of the Tax System”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
July 21
The Subprime Mortgage Crisis
Christopher Foote and Paul Willen examine two different theories of why the subprime mortgage crisis occurred.
Textbook References:
Pages 468-473 “Asymmetric Information”Pages 480-481 “People Aren't Always Rational”
Page 561 “Financial Crises”
Pages 745-748 “The Recession of 2008-2009”
July 14
Reinhart and Rogoff on the Debt Problem
Carmen Reinhart and Kenneth Rogoff argue that public debt above 90 percent of GDP is associated with slower growth.
Textbook References:
Page 552 “The Importance of Long-Run Growth”Pages 570-572 “The History of U.S. Government Debt”
July 12
GSE Fact of the Day
By 2008 half of all mortgages were excessively risky, and government sponsored enterprises such as Fannie Mae owned 12 million out of 27 million such loans.
Textbook References:
Pages 11-13 ldquo;Principle 7: Governments Can Sometimes Improve Market Outcomes”Page 561 “Financial Crises”
Pages 745-748 “The Recession of 2008-2009”
July 10
Choices for Greece
The Greek debt crisis has no easy solutions.
Textbook References:
Pages 568-572 “Policy 3: Government Budget Deficits and Surplusses”Page 683 “The Euro”
June 30
Economist as Movie Reviewer
Economist Phillip Swagel critiques two movies about the recent financial crisis.
Textbook References:
Page 561 “Financial Crises”Pages 745-748 “The Recession of 2008-2009”
June 11
How to Grow the Economy
Bruce Bartlett reminds us that saving and investment, education, infrastructure, and technological advancement ultimately drive growth.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 540-552 “Economic Growth and Public Policy”
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
June 4
The Demagoguing of Medicare reform
Mankiw wonders why politicians on both the left and the right seem more interested in scoring political points than solving a serious problem.
Textbook References:
Pages 238-240 “The Fiscal Challenge Ahead”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
May 31
How to Fix the Long-Term Fiscal Problem
Six think tanks offer their solutions to the long-term fiscal crisis faced by the U.S.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 560-572 “Economic Growth and Public Policy”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
May 17
Google Plays the Yield Curve
Why is Google borrowing money in the bond market when it has $37 billion in cash?
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”Pages 576-577 “The Bond Market”
April 28
Keynes vs. Hayek Round Two
The views of Keynes and Hayek are dramatized in a music video.
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 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize The Economy?”
April 25
Shiller vs Siegel on Stock Market Valuation
Robert Shiller thinks that stocks are a bit overvalued. Jeremy Siegel disagrees.
Textbook References:
Page 579 “Key Numbers for Stock Watcher”Pages 606-610 “Asset Valuation”
April 16
My Talk From Yesterday
A video shows Mankiw's talk at the University of Cincinnati. He provides a brief history of macroeconomics, discusses current monetary and fiscal policy, and discusses the long-run fiscal situation.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 539-541 “Real and Nominal Interest Rates”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 654-655 “The Financial Crisis of 2008”
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”
April 13
The Ryan Plan
Paul Ryan offers his plan to reduce the federal debt, and he contrasts it to the Bowles-Simpson plan.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
April 13
Two Visions for Medicare
Mankiw is pleased that the long-run fiscal health of the nation is now taken seriously by both parties. Yet there are fundamental philosophical differences between the two sides.
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 246-248 “The Fiscal Challenge Ahead”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
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”
March 28
Stiglitz on the Deficit
Joseph Stiglitz explains why he does not endorse the report produced by the bipartisan National Commission on Fiscal Responsibility and Reform.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 253-257 “Taxes and Equity”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
March 26
Our Children's Financial Crisis
Mankiw writes a speech for a future president that discusses the cost of not acting sooner to reduce the Federal debt.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
March 24
CEA Chairs on the Budget Deficit
Ten former chairs of the Council of Economic Advisers urge Congress to consider seriously the report produced by the bipartisan National Commission on Fiscal Responsibility and Reform.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
February 25
MIT Symposium
A 2-hour video presents a wide-ranging discussion of macroeconomic issues. Participants are Olivier Blanchard, Pedro Aspe, Robert Gordon, Paul Krugman, Greg Mankiw, and Christina Romer.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 654-655 “The Financial Crisis of 2008”
Chapter 32 “A Macroeconomic Theory of the Open Economy”
Page 750 “The 2008 Fiscal Stimulus”
Pages 778-787 “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”
January 1
Letter to the President
Mankiw offers advice to President Obama on how to work with Republicans.
Textbook References:
Page 6 “Principle 3: Rational People Think at the Margin”Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 442-445 “The Political Economy of Income Redistribution”
Pages 563-565 “Education”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
December 24
Economists on Ebenezer Scrooge
Three economists discuss the virtues of Scrooge, and a fourth claims there is a humbug industry.
Textbook References:
Pages 4-5 “Principle 1: People Face Trade-offs”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”
Page 560 “Saving and Investment”
Pages 584-585 “Supply and Demand for Loanable Funds”
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”
December 9
Hear me Squawk
Mankiw discusses the tax deal reached between President Obama and Congressional Republicans. He argues that it is a good deal that will help stimulate the economy. Mankiw also endorses the Simpson-Bowles plan to reduce the long-run deficit.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
December 9
Simon Johnson and Me on NPR
Simon Johnson and Greg Mankiw discuss the tax deal reached between President Obama and Congressional Republicans. Johnson fears that the deal adds too much to the tax deal. Mankiw argues that it is positive for the short run, but that the administration needs to get serious about reducing the deficit in the long run.
Textbook References:
Pages 34-36 “Why Economists Disagree”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”
November 16
Hubbard on the Bowles-Simpson Tax Plan
Glenn Hubbard likes the idea of broadening the tax base so as to reduce tax rates.
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”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
November 14
You Fix the Federal Budget
How would you reduce the federal deficit?
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 842-843 “Dealing with Deficits”
November 10
Good Signs from the Deficit Commission
The Bipartisan Deficit Commission was appointed to find ways to reduce the federal deficit. Mankiw approves of some of the options the Commission is considering.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
November 6
Laura Tyson and Me on NPR
Laura Tyson and Greg Mankiw discuss current fiscal policy on National Public Radio.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Page 560 “Saving and Investment”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 654-655 “The Financial Crisis of 2008”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 830-832 “Should Monetary And Fiscal Policymakers Try To Stabilize The Economy?”
Pages 842-843 “Dealing with Deficits”
October 24
Christy's First Column
Christina Romer argues against calls to cut the federal deficit now. She says that while the deficit must eventually be reduced, the economy is too weak to do so now.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
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 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”
September 13
Viard on Marginal Tax Rates
Alan Viard argues in favor of keeping the Bush tax cuts because they will promote growth.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”Page 560 “Saving and Investment”
Page 586 “Policy 1: Saving Incentives”
Pages 587-589 “Policy 2: Investment Incentives”
September 11
Miron on the Bush Tax Cuts
Jeffrey Miron argues in favor of making the Bush tax cuts permanent.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”Page 560 “Saving and Investment”
Page 586 “Policy 1: Saving Incentives”
Pages 587-589 “Policy 2: Investment Incentives”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
August 17
What I've Been Reading
Mankiw recommends "More Money Than God," Sebastian Mallaby's book about hedge funds.
Textbook References:
Pages 578-580 “Financial Intermediaries”Pages 654-655 “The Financial Crisis of 2008”
August 7
How Is Medicare Doing?
Rick Foster, the chief actuary for Medicare, says that planned Medicare cost reductions are not likely to happen.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 838-841 “Should the Government Balance Its Budget?”
August 6
On Congressman Paul Ryan
Paul Krugman argues that Paul Ryan's plan to cut federal spending and taxes actually raises the deficit. This is contrary to Ryan's claim. Ted Gayer suggests that Krugman's reading of the evidence is flawed.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 838-841 “Should the Government Balance Its Budget?”
August 4
Rogoff on the Current Policy Challenge
Kenneth Rogoff worries that an excessive concern with short-run aggregate demand management may cause us to ignore long-run issues such as productivity growth and innovation.
Textbook References:
Pages 554-560 “Productivity: Its Role and Determinants”
Pages 560-572 “Economic Growth and Public Policy”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 830-832 “Should Monetary And Fiscal Policymakers Try To Stabilize The Economy?”
July 31
Stocks Look Cheap
By one measure, stocks look under-priced.
Textbook References:
Pages 577-578 “The Stock Market”Page 579 “Numbers for Stock Watchers”
Pages 606-610 “Asset Valuation”
July 31
The Risk of a Fiscal Crisis
The CBO considers the possibility of a fiscal crisis in the U.S. brought on by excessive government debt. If it happens, there could be a sharp rise in interest rates and substantial crowding out.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
July 23
The Mid-Session Review
The administration's mid-session budget review assumes rapid growth and hopes the fiscal commission will fix the deficit problems.
Textbook References:
Pages 242-249 “A Financial Overview of The U.S. Government”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
July 21
The Dodd-Frank Anti-Stimulus Bill
The new financial-reform bill has had the unintended consequence of shutting down the bond market because of uncertainty about legal liability.
Textbook References:
Pages 566-567 “Property Rights and Political Stability”Pages 576-577 “The Bond Market”
July 21
Harvardians in the FT
Kenneth Rogoff argues against more fiscal stimulus. Lawrence Summers supports short-term stimulus combined with medium and long-term deficit reduction. Niall Ferguson argues that Keynesian policies are misguided.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Page 750 “The 2008 Fiscal Stimulus”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 842-843 “Dealing with Deficits”
July 20
Merle Hazard on the Greek Debt
Merle Hazard presents a humorous song about the current Greek debt crisis.
Textbook References:
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”Page 704 “The Euro”
July 20
Government Spending By Another Name
Martin Feldstein points out that a significant portion of government spending is in the form of special tax rules called tax expenditures. Deficit reduction should include reducing such expenditures.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
July 19
Jeremy Siegel's Forecast
Jeremy Siegel is Bullish on stocks.
Textbook References:
Pages 577-578 “The Stock Market”Pages 606-610 “Asset Valuation”
July 7
Are Stimulus Skeptics Logically Incoherent?
Paul Krugman wonders why private spending would create jobs but public spending won't. Mankiw replies.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”
July 1
The Influence of Alberto Alesina
Alberto Alesina argues that governments should take large, credible steps to reduce their deficits. That would calm bond markets and increase confidence for investors and consumers.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 560-572 “Economic Growth and Public Policy”
Pages 576-577 “The Bond Market”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
June 27
Links
There are five links sent in by readers. Four of them are humorous, but one, "Ten Commandments for Fiscal Adjustment," is serious.
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 560-572 “Economic Growth and Public Policy”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Page 750 “The 2008 Fiscal Stimulus”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-797 “Using Policy To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”
June 15
Stock Market Valuation
By two common measures, the stock market is substantially overvalued.
Textbook References:
Pages 577-578 “The Stock Market”Page 604 “Market Risk”
June 14
Are Bonds Sexy?
The Japanese government is running ads claiming that women like men who own bonds. The purpose is to increase the demand for government bonds.
Textbook References:
Pages 576-577 “The Bond Market”June 7
CBO on Health Spending
The CBO argues that health-care spending "will put tremendous pressure on the federal budget during the next few decades and beyond."
Textbook References:
Pages 246-248 “The Fiscal Challenge Ahead”Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 842-843 “Dealing with Deficits”
April 17
The Latest from the CEA Chair
CEA Chair Christina Romer reports on what has been done to fight the current recession and discusses what else can be done.
Textbook References:
Pages 30-33 “The Economist as Policy Advisor”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 589-593 “Policy 3: Government Budget Deficits and Surpluses”
Pages 654-655 “The Financial Crisis of 2008”
Page 750 “The 2008 Fiscal Stimulus”
Chapter 34 “The Influence of Monetary and Fiscal Policy on Aggregate Demand”
Pages 830-832 “Monetary And Fiscal Policymakers Try To Stabilize The Economy”
Pages 842-843 “Dealing with Deficits”
April 10
The Enormity of the Fiscal Gap
The Tax Policy Center argues that income taxes must rise by 40 per cent just to reduce the deficit to 3 per cent of GDP.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”Pages 160-164 “The Deadweight Loss of Taxation”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 589-593 “Policy 3: Government Budget Deficits”
Pages 838-841 “Should the Government Balance Its Budget?”