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Chapter 20: Income Inequality and Poverty

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

 

November 22

McCloskey on Piketty

Thomas Piketty's book, Capital in the Twentieth Century, has created a huge stir by claiming that capitalism is doomed to ever-increasing inequality. Deirdre McCloskey has written a thoughtful 50-page essay about it. She finds Piketty's argument (as well as that of many other economists) scientifically inadequate and unconvincing.

Textbook References:

Chapter 20 “Income Inequality and Poverty”

October 24

Profile of an Ec 10 Student

A student in Mankiw's Principles of Economics course at Harvard was orphaned during the genocide in Rwanda. His story is inspiring, but it also reminds us of what the lives of the world's poorest are like.

Textbook References:

Pages 417-418 “Inequality around the World”

October 19

Charles Murray on Ayn Rand

Charles Murray discusses Libertarian icon Ayn Rand. Despite her deeply flawed personality, she wrote two great novels ("Atlas Shrugged" and "The Fountainhead") that powerfully express important truths.

Textbook References:

Page 427 “Libertarianism”

October 14

Inequality and Parenting

Cultures in which parents try to teach their children the importance of hard work tend to have more unequal income distributions.

Textbook References:

Pages 417-418 “Inequality around the World”

June 21

On Inherited Wealth

Mankiw argues that inherited wealth is not the evil that some people suggest it is.

Textbook References:

Pages 416-424 “The Measurement of Inequality”

June 5

Inequality in the UK

An eight-minute video contrasts what people think inequality in the UK is to what they think it should be. It then compares that to what it actually is.

Textbook References:

Pages 417-418 “Inequality around the World”

May 23

Is Inequality Back to the 1920s Level?

Gary Burtless points out that the income statistics used to measure inequality do not reflect taxes paid, transfers received, or changes in median household size over time. If one adjusts for these things, inequality is not as severe as it first appears.

Textbook References:

Pages 416-424 “The Measurement of Inequality”

May 23

David Autor on Inequality

David Autor claims that the focus on inequality between the "1 percent" and the "99 percent" ignores the growing inequality within the 99 percent. He argues that the inequality within the 99 percent is both growing more rapidly and is more important than the inequality between the 1 percent and the 99 percent.

Textbook References:

Pages 416-424 “The Measurement of Inequality”

May 10

Rogoff on Piketty

Kenneth Rogoff points out that rising within-country inequality has coincided with the greatest global reduction in absolute poverty in history.

Textbook References:

Pages 416-424 “The Measurement of Inequality”

April 20

Transitory Income and the One Percent

Year-to-year fluctuations in income mean that over time, an individual's place in the distribution of income is likely to change. Recent research suggests that a surprisingly large portion of the U.S. population will spend at least some time in the upper echelons of the income distribution.

Textbook References:

Page 421 “Transitory versus Permanent Income”

April 20

Transitory Income and the One Percent

Year-to-year fluctuations in income mean that over time, an individual's place in the distribution of income is likely to change. Recent research suggests that a surprisingly large portion of the U.S. population will spend at least some time in the upper echelons of the income distribution.

Textbook References:

Page 421 “Transitory versus Permanent Income”

March 31

Some Surprising Facts about Income Growth and Inequality

Gary Burtless discusses a recent report from the Congressional Budget Office. Burtless says that, contrary to the conventional wisdom, since 2000 people in the bottom 90% of the income distribution have seen both their pre-tax and after-tax incomes rise. In addition, real incomes of those in the top 1% have declined.

Textbook References:

Pages 416-417 “U.S. Income Inequality”

March 22

The Economist as Philosopher

Economic policy advice is almost inevitably grounded in some political philosophy. Utilitarianism is behind many policies, and assumes, among other things, that we know enough to understand all of the complexities of the economy. Mankiw recommends we be more humble, and to follow the dictum, "first, do no harm."

Textbook References:

Pages 424-425 “Utilitarianism”

February 25

Gauging Mobility

A recent National Bureau of Economic Research working paper suggests that there is a significant amount of intergenerational economic mobility in the United States.

Textbook References:

Pages 423-424 “Economic Mobility”

February 22

The Draft

Allen R. Sanderson argues that restoring military conscription would help reduce inequality in the U.S. He also suggests that it would make U.S. foreign policy less Hawkish.

Textbook References:

Pages 427-432 “Policies to Reduce Poverty”

February 15

Defending the One Percent (Again)

Mankiw argues that many of the people who receive high incomes earn them.

Textbook References:

Page 427 “Libertarianism”

February 5

Solow vs Mankiw on the One Percent

Robert Solow and Greg Mankiw debate the causes and consequences of income inequality. They debate the extent to which the richest Americans became rich because of valuable contributions to society or because of rent seeking. They also consider the effect of economic inequality on political outcomes.

Textbook References:

Pages 416-424 “The Measurement of Inequality”

February 1

Humility-based Libertarianism

Michael Heumer argues that we have a limited understanding of the complexity of society and do not have the ability to forecast the future. As a result, "the best advice for political actors is very often to simply stop trying to solve social problems, since interventions not based on precise understanding are likely to do more harm than good."

Textbook References:

Page 427 “Libertarianism”
Pages 812-814 “Should Monetary and Fiscal Policymakers Try to Stabilize the Economy?”

January 29

Does income inequality increase mortality?

Conventional wisdom suggests that mortality rates are lower for rich people than for poor people. Yet a recent study by Angus Deaton suggests that once one controls for race, the relationship between income and mortality disappears. In other words, there is an omitted variable problem if one looks at income inequality and mortality rates without including race.

Textbook References:

Pages 47 “Omitted Variables”
Pages 416-417 “U.S. Income Inequality”

January 27

On Assortative Mating

Assortative mating is the tendency for people to mate with people who have similar characteristics. For example, college graduates tend to mate with other college graduates, and tall people tend to mate with other tall people. A paper from the National Bureau of Economic Research suggests that assortative mating has been increasing, and contributes to income inequality, especially as more college-educated women work.

Textbook References:

Pages 416-417 “U.S. Income Inequality”

January 24

How much income inequality is explained by varying parental resources?

Rich parents can give their children more opportunities than poor parents. But how big of an effect does this have on subsequent income inequality? A recent paper from the National Bureau of Economic Research suggests that the effect is fairly small.

Textbook References:

Pages 423-424 “Economic Mobility”

January 23

Has economic mobility declined?

A new paper from the National Bureau of Economic Research suggests that children entering the labor force today have the same chance to move up in the income distribution as children born in the 1970s.

Textbook References:

Pages 423-424 “Economic Mobility”

January 13

Minimum Wage as an Antipoverty Tool

David Henderson argues that raising the minimum wage is a poorly targeted way to fight poverty.

Textbook References:

Pages 427-432 “Policies to Reduce Poverty”

January 4

How to Help the Working Poor

Mankiw explains why increasing the earned-income tax credit is a better way to help the working poor than increasing the minimum wage.

Textbook References:

Pages 427-432 “Policies to Reduce Poverty”

December 16

On Measuring Changes in Income

How one measures income matters. From 1979 to 2007, median real income as measured by pre-tax, pre-transfer cash income of "tax units" rose by only 3.2 percent. But when we convert "tax units" into households, use post-tax and post-transfer-payment income, count employer-provided health care and fringe benefits, and adjust for falling household size, median real income rose 36.7 percent over the same period.

Textbook References:

Pages 420-423 “Problems in Measuring Inequality”

December 10

EITC is better than the Minimum Wage

David Neumark explains why the Earned Income Tax Credit helps the working poor much more than a higher minimum wage, and is more precisely targeted.

Textbook References:

Pages 427-432 “Policies to Reduce Poverty”

November 30

The Pope's Rhetoric

Mankiw responds to Pope Francis's populist, anti-market remarks.

Textbook References:

Pages 424-427 “The Political Philosophy of Redistributing Income”

November 13

Spreading the Wealth Around

A chart from the Congressional Budget Office shows that the U.S. Federal government redistributes a significant amount of income.

Textbook References:

Pages 424-427 “The Political Philosophy of Redistributing Income”

November 11

Is community rating fair?

Is it fair to require people to pay higher insurance rates in order to subsidize others?

Textbook References:

Pages 424-427 “The Political Philosophy of Redistributing Income”

August 12

The One Percent

The Journal of Economic Perspectives presents six academic papers on the richest one percent.

Textbook References:

Pages 416-417 “The Measurement of Inequality”

July 25

Geography and Mobility

M. Daniele Paserman studied intergenerational mobility in the U.S. during the 1800s and early 1900s. She says that the degree of mobility varied by region of the country.

Textbook References:

Pages 423-424 “Economic Mobility”

July 19

The Changing Distribution of Income

A chart shows that over the past 50 years the percent of the U.S. population defined as "middle income" has been shrinking. Yet contrary to conventional wisdom, it is because a larger share of the population has become "upper income;" the share of the population defined as "lower income" has actually fallen slightly.

Textbook References:

Pages 416-417 “U.S. Income Inequality”

July 18

Observations on the Great Gatsby Curve

The "Great Gatsby Curve" is a scatterplot of nations showing the relationship between income inequality and social mobility. Countries with higher income inequality tend to have lower social mobility. Mankiw suggests that the relationship does not have the policy implications that others have suggested.

Textbook References:

Pages 423-424 “Economic Mobility”

June 21

The Left on Just Deserts

The Economic Policy Institute approaches the issue of income distribution from the standpoint of what people deserve. This is different from the Utilitarian approach that is based on the principle of diminishing marginal utility of income.

Textbook References:

Pages 424-425 “Utilitarianism”

June 15

Defending the One Percent

Mankiw presents a wide-ranging essay on income inequality. Among other things, he challenges the logic behind Utilitarianism and Liberalism.

Textbook References:

Pages 424-427 “The Political Philosophy of Redistributing Income”

May 30

A Critique of Utilitarianism

A cartoon points out how concepts in social science are sometimes fuzzier than we think.

Textbook References:

Pages 424-425 “Utilitarianism”

March 3

Christy Romer on the Minimum Wage

Christina Romer argues that an increase in the Earned Income Tax Credit is a better way to help the working poor than an increase in the minimum wage.

Textbook References:

Page 428 “Minimum Wage Laws”

March 2

A Lecture on Income Inequality

A 42-minute video shows a lecture by Emmanuel Saez on income inequality in the United States. It shows how the share of total income received by the high income brackets have changed over the last century, and relates the changes to tax policy.

Textbook References:

Pages 416-417 “U.S. Income Inequality”

February 12

The Growth of the Welfare State

Federal spending on means-tested "welfare" programs increased from one percent of GDP in 1972 to four percent of GDP in 2012.

Textbook References:

Pages 427-432 “Policies to Reduce Poverty”

December 27

Glaeser on Disability

The number of people collecting Social Security Disability payments has increased by 24 percent since 2007 and the proportion of the labor force collecting Disability has more than doubled in the past thirty years. Edward Glaeser explains how policy has created incentives that encourage people to go on Disability.

Textbook References:

Pages 431-432 “Antipoverty Programs and Work Incentives”

December 11

The Poverty Trap in France

An article from Forbes explains how the French welfare system provides strong incentives to stay unemployed.

Textbook References:

Pages 431-432 “Antipoverty Programs and Work Incentives”

November 21

Response to Diamond and Saez

A paper by Peter Diamond and Emmanuel Saez argue that top marginal tax rates should be about 73%. Their analysis is fundamentally based on Utilitarian principles. A response by Aparna Mathur, Sita Slavov, and Micheal R. Strain provide three reasons why Diamond and Saez are wrong.

Textbook References:

Pages 424-425 “Utilitarianism”

September 1

The Entitlement Society

A chart shows that almost half of U.S. households receive transfers from the government. There is also a link to an article that details the steady rise in entitlements since the 1960s.

Textbook References:

Pages 424-427 “The Political Philosophy of Redistributing Income”

July 14

The Progressivity of Taxes and Transfers

The bottom three quintiles of income earners receive more in government benefits than they pay in taxes. In other words, only the top two quintiles are net contributors to the government.

Textbook References:

Pages 247-249 “The Ability-to-Pay Principle”
Pages 424-427 “The Political Philosophy of Redistributing Income”

July 13

Anti-poverty programs raise effective marginal tax rates

As income rises, poor people lose benefits. As a result, the effective marginal tax rate on the poor can be punishingly high.

Textbook References:

Pages 7-9 “Principle 4: People Respond to Incentives”
Pages 431-432 “Antipoverty Programs and Work Incentivess”

May 8

Fact of the Day: CEO Pay

Relative to their workers, the pay of CEOs skyrocketed in the 1990's, and has come down a bit since then.

Textbook References:

Pages 416-424 “The Measurement of Inequality”

February 8

Five Books on Public Finance

Jonathan Gruber recommends five books about public economics. In the process he discusses tax policy, health care, and social welfare programs.

Textbook References:

Chapter 12 “The Design of the Tax System”
Chapter 20 “Income Inequality and Poverty”

January 4

De Gustibus non est Taxandum

Differences in income may be the result of differences in goals and preferences.

Textbook References:

Chapter 20 “Income Inequality and Poverty”

December 27

How do the rich earn their livings?

Jon Bakija, Adam Cole, and Bradley T. Heim investigate the professions of the top one-percent of income earners from 1979 to 2005.

Textbook References:

Pages 398-405 “Some Determinants of Equilibrium Wages”
Pages 416-424 “The Measurement of Inequality”

December 14

Books on Inequality

Daron Acemoglu discusses inequality and recommends five books on the subject.

Textbook References:

Chapter 20 “Income Inequality and Poverty”

December 6

A Discussion of Inequality

Leading social scientists discuss inequality in an 81 minute video.

Textbook References:

Pages 398-405 “Some Determinants of Equilibrium Wages”
Chapter 20 “Income Inequality and Poverty”

November 15

The British 1 Percent

Over time, the share of income going to the top 1 percent of income earners in Great Britain has changed in roughly the same way it has changed in the U.S.

Textbook References:

Pages 417-418 “Inequality around the World”

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”

October 25

The Rich Get Poorer

High income earners tend to have more volatile incomes. This is illustrated by the recent sharp decline in the incomes of the top 1% and 0.1% of U.S. earners.

Textbook References:

Pages 416-417 “U.S. Income Inequality”

October 16

The Increased Role of the Minimum Wage

The increase in the minimum wage means that it now covers a larger fraction of workers.

Textbook References:

Pages 117-119 “The Minimum Wage”
Page 428 “Minimum Wage Laws”
Pages 606-608 “Minimum Wage Laws”

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”

June 22

Health Inequality

Better-educated people tend to be healthier and live longer than poorly educated people.

Textbook References:

Chapter 20 “Income Inequality and Poverty”

May 25

A regression I would like to see

Holding SAT score constant, what effect does family income have on a student's performance in college?

Textbook References:

Pages 22-30 “The Economist as Scientist”
Chapter 20 “Income Inequality and Poverty”

May 10

Libertarian Paradise

A short video satirizes extreme Libertarianism.

Textbook References:

Pages 8-10 “Principle 6: Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 444-445 “Libertarianism”

May 4

Increasing Inequality around the World

Income inequality has grown worse in most developed countries over the past few decades.

Textbook References:

Pages 434-441 “The Measurement of Inequality”

January 29

Tax Justice

A PBS video discusses the difficulties of establishing a fair tax code.

Textbook References:

Pages 249-253 “Taxes and Efficiency”
Pages 253-257 “Taxes and Equity”
Pages 258-260 “Conclusion: The Trade-Off Between Equity and Efficiency”
Pages 442-445 “The Political Philosophy of Redistributing Income”

January 12

The Half-Full Glass of Economic Mobility

How much economic mobility is there in the U.S.? There are different interpretations of the data.

Textbook References:

Pages 34-36 “Why Economists Disagree”
Pages 440-441 “Economic Mobility”

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 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 10

Fairness and Tax Policy

Jonathan Weinstein responds to a paper by Greg Mankiw and challenges some of its assumptions. The discussion centers on competing views of fair taxation.

Textbook References:

Pages 34-36 “Why Economists Disagree”

Pages 253-257 “Taxes and Equity”

Pages 419-421 “The Superstar Phenomen”

Pages 442-445 “The Political Philosophy of Redistributing Income”


July 10

The Root Cause of the Crisis

Raghuram Rajan suggests that government policy to mask stagnant real wages was the ultimate cause of the financial crisis.

Textbook References:

Pages 415-416 “The Increasing Value of Skills”
Page 417 “The Loss of Manufacturing Jobs”
Page 441 “What to Make of Rising Inequality”
Pages 654-655 “The Financial Crisis of 2008”


June 15

Glaeser on Libertarianism

Edward Glaeser discusses Jeffrey Miron's book, Libertarianism from A to Z.

Textbook References:

Pages 444-445 “Libertarianism”

May 31

Is the New Measure of Poverty Better?

Robert Samuelson critiques both the current measure of poverty and a proposed alternative measure.

Textbook References:

Pages 434-441 “The Measurement of Inequality”

May 26

Modesty, Gradualism, Balance

David Brooks makes the case for evolutionary, as opposed to revolutionary, change.

Textbook References:

Pages 442-445 “The Political Philosophy of Redistributing Income”

April 28

Libertarianism A to Z

Jeffrey Miron has published a book titled "Libertarianism from A to Z."

Textbook References:

Pages 444-445 “Libertarianism”

April 19

Egalitarianism: the Next Step

European Union commissioner for enterprise Antonio Tajani claims that "travelling for tourism today is a right," so those who cannot afford it should receive subsidies.

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 442-445 “The Political Philosophy of Income Redistribution”
Chapter 20: Income Inequality and Poverty
Archived Posts

 

April 17

Spreading the Wealth Via Healthcare Reform

The Tax Foundation estimates the extent of income redistribution implicit in the new healthcare bill.

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 442-445 “The Political Philosophy of Income Redistribution”

April 11

How to Lie Without Statistics

Mankiw points out how Parade magazine's "Annual Salary Survey" gives a distorted view of the American income distribution.

Textbook References:

Pages 434-441 “The Measurement of Inequality”

April 5

Is "Unpaid" Below the Minimum Wage?

The U.S. Labor Department claims that unpaid internships violate minimum wage laws.

Textbook References:

Pages 119-121 “The Minimum Wage”
Page 446 “Minimum Wage Laws”
Pages 627-629 “Minimum Wage Laws”

February 26

Spreading the Wealth Around

Mankiw presents some facts about the distribution of income and the distribution of the tax burden. He then offers some thoughts on optimal taxation.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Pages 249-253 “Taxes and Efficiency”
Pages 253-257 “Taxes and Equity”
Pages 258-259 “Questions and Answers about Tax Reform”
Pages 442-445 “The Political Philosophy of Income Redistribution”

November 11

The Poverty Trap

Government tax and transfer policies provide very little incentive to earn more income for people with income in the range $15,000 and $20,000.

Textbook References:

Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 449-451 “Antipoverty Programs and Work Incentives”

October 25

A Question for Class Discussion

How would a utilitarian social planner allocate a limited quantity of a flu vaccine?

Textbook References:

Pages 4-5 “Principle 1: People Face Trade-offs”
Pages 442-443 “Utilitarianism”

October 13

The Incidence of the Cadillac Tax

Kevin Hasset argues that the Baucus health care reform bill would raise taxes on the working and middle classes. The tax is on insurance companies, but will likely be passed on to their customers.

Textbook References:

Pages 123-130 “Taxes”
Pages 442-445 “The Political Philosophy of Redistributing Income”


October 10

Marginal Tax Rates from Health Reform

The CBO estimates that the Baucus healthcare reform bill will add about 22 percentage points to the marginal tax rate of many working-class people.

Textbook References:

Page 7-8 “People Respond to Incentives”
Pages 127-128 “Can Congress Distribute the Burden of a Payroll Tax?”
Pages 166-167 “The Deadweight Loss Debate”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 449-451 “Antipoverty Programs and Work Incentives”


October 6

David Brooks at his Best

The current debate about health care reform reflects two very different views about the proper role of government in our economy.

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 442-445 “The Political Philosophy of Redistributing Income”


October 7

A 70-Percent Marginal Tax Rate

James Capretta argues that the Baucus healthcare bill will impose a marginal tax rate of 70 percent on workers just above the poverty line.

Textbook References:

Page 7-8 “People Respond to Incentives”
Pages 127-128 “Can Congress Distribute the Burden of a Payroll Tax?”
Pages 246-248 “The Fiscal Challenge Ahead”
Pages 449-451 “Antipoverty Programs and Work Incentives”


Mar. 8

Soaking the Rich?

A Washington Post article presents the views of a variety of people on the redistributive effects of Obama’s plan.

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: Government Can Sometimes Improve Market Outcomes”
Chapter 8 “Application: The Costs of Taxation”
Chapter 12: “The Design of the Tax System”


Mar. 3

The Case for Moderation

David Brooks argues that the Obama administration wants to fundamentally change government’s role in the economy and society.

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 442-445 “The Political Philosophy of Redistributing Income”
Pages 489-493 “Political Economy”


Feb. 12

Who Bears the Burden of Downturns?

Jonathan Parker and Annette Vissing-Jorgensen argue that the consumption of high-consumption households fluctuates more than that of low-consumption households.

Textbook References:

Chapter 20 “Income Inequality and Poverty”
Page 515 “The Components of U.S. GDP”
Pages 740-742 “Three Key Facts about Economic Fluctuations”


Feb. 7

Stimulus for Libertarians

Jeff Miron presents a Libertarian’s view of what should be done.

Textbook References:

Pages 8-10 “Principle 6: Markets are Usually a Good Way to Organize Economic Activity”
Pages 444-445 “Libertarianism”


Jan. 13

There is a link to an editorial by Ed Glaeser that argues that the stimulus should be focused on ordinary people. That implies that a cut in the payroll tax would be better than large construction projects that disproportionately help owners of big construction firms.

Textbook References:

Pages 254-255 “Vertical Equity”
Chapter 20 “Income Inequality and Poverty”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 838-841 “Should the Government Balance its Budget?”