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Click here to read my column in Sunday's NY Times .Last month, I had the pleasure of hearing Christy Romer give a great talk about Japanese monetary policy at the NBER Macro Annual conference. You can now read it here .In a recent blog post , Paul Krugman writes: As far as I know, among basic textbooks only Krugman/Wells even talks about the liquidity trap. This is probably a true statement. It is not that other books don't cover the topic, however. It is just that Paul Krugman doesn't know it. FYI, here is what the leading introductory text says about the topic: The Zero Lower Bound As we have just seen, monetary policy works through interest rates. This conclusion raises a question: What if the Fed’s target ......say two NY Fed economists . From Olivier Blanchard and Daniel Leigh.Wisdom from David Romer .They write : In the end, all the corrections advocated by the critics shift the average GDP growth for very-high-debt nations to 2.2 percent, from a negative 0.1 percent in Reinhart and Rogoff’s original work. The finding remains that economic growth is lower in very-high-debt countries (see chart). It has been disappointing to watch those on the left seize on the embarrassing Excel errors but ignore this bigger picture. Click on graphic to enlarge. Photo credit: JACOB BELCHER/HARVARD OFAHe and Michelle seem inattentive to their own finances : The Obamas paid $45,046 in mortgage interest in 2012, which appears from the disclosure statement to be at a 5.625% interest rate with Northern Trust. That suggests an outstanding principal balance of about $800,000. On the other hand, the bulk of their investments are in Treasury notes. Based on the disclosures, I estimate they hold about $3 million in Treasury notes (also held by Northern Trust), yielding 0.71% if averaging a five-year maturity. ...Several people have asked me to comment on the coding error found in one of the Reinhart-Rogoff papers. I have avoided the topic, since I don't think I have a lot to add to the discussion. But because so many people have asked, here are a few observations: 1. Everybody makes mistakes. I once made an analytic error in one of my published papers and, after it was pointed out to me, subsequently wrote a correction ( published version ). Finding and correcting errors is a part of the research process. ...Europe's Cap-and-Trade Scheme Failing SpectacularlyFrom Megan Amram, Tommy Amaker, and Larry Summers . More to come at this link in the coming days.A student I know (specifically, my older son) is trying to collect some survey data. Click here if you are willing to participate . The survey will take about 15 minutes. Update : No more data is needed. Thanks to the more than 1000 of you who participated.A performance not to be missed .The IMF is holding a conference "Rethinking Macro" on April 16-17. You can watch a live webcast. Click here for information .My Harvard colleague Raj Chetty has won the John Bates Clark Medal .For information about submitting papers or registering, click here .In The New Republic , with thoughtful and thought-provoking commentary on the financial system.Apparently , President Obama's budget is going to include some kind of penalty for people who have accumulated more than $3 million in retirement accounts. The details are not yet known, but I think we know enough to say that this is a terrible idea. A sizable body of work in public finance suggests that consumption taxes are preferable to income taxes. Completely replacing our tax system with a better one is, however, hard. Retirement accounts, such as IRAs and 401k plans, are one way our tax code has ...My duties as chairman of the Harvard economics department have left me too little time to work on textbook revisions. As a result, I have decided to crowdsource the next edition. Anyone who wants to make a change in the book is free to do so. Like Wikipedia. If you want to learn more about how you can participate in the revision, click here . Yes, this was an April 1 joke.Click here to read my column in Sunday's NY Times .Students at Yale have started a new journal, called the Yale Journal of Economics , which aims to publish the best undergraduate papers, not just from Yale, but from any school. Click on the link to read the first issue or to find out how to submit. The editors hope professors will encourage their students who write noteworthy papers to send them in. Yesterday, I had the pleasure of being the featured speaker at the event where the inaugural issue was released. Below is a picture of me with the new ...A friend points me to this passage : At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can't be compared to the comprehensive coverage available under the law. "Some of these folks have very high catastrophic plans that don't pay for anything unless you get hit by a bus," she said. "They're really mortgage protection, not health insurance." I have the same problem with my other insurance policies. My ...Due to the recent tragic events in Boston.Phill Swagel reviews Escape Artists by Noam Scheiber on President Obama's first term . Ask Emily is slated to be the economist's version of Dear Abby .Tyler Cowen's new column in the NY Times reminds us that the worldview of economists often extends beyond economic issues.The Harvard economics department is now recruiting teaching fellows for its popular undergraduate principles course, Ec 10, for the next academic year. If you are a Boston-area graduate student with a solid background in economics, please consider interviewing for the chance to introduce the next Andrei Shleifer, Ben Bernanke, or Marty Feldstein (all former Ec 10 students) to the power of economic thinking. If interested, email ec10@fas.harvard.edu for more information and to request application ...The Economic Report of the President was released today .In a blog post about the minimum wage , Bryan Caplan makes note of a tension in some of David Card's research. For those who don't know him, Card is one of the great empirical labor economists of his generation. In some of his research , joint with Alan Krueger, Card finds that increases in the minimum wage have negligible effects on employment. In other research , on the Mariel boatlift, Card finds that increases in the supply of unskilled workers have negligible effects on wages and employment of ...US News and World Report has released its updated rankings of graduate programs in economics. Click here to see them . The top programs are: #1 Harvard #1 MIT #1 Princeton #1 Chicago #5 Stanford #5 UC-Berkeley #7 Northwestern #7 Yale #9 Penn #10 Columbia #11 NYU #11 Minnesota #13 Michigan #13 Wisconsin #15 Caltech #15 UCLA #15 UC-San Diego #18 Cornell #19 Brown #19 Carnegie Mellon #19 DukeJeff Sachs on Paul Krugman Bill Gates on Acemoglu and Robinson Thanks to our friends over at Marginal Revolution for both pointers.A terrific, very quick, and nontechnical introduction in economics (more macro than micro) is Greg Ip's Little Book of Economics . In case you don't know him, Greg writes for The Economist magazine and was previously at the Wall Street Journal . He now has a new edition of his book, together with an online guide to suggested readings .Update : A reader suggests an edit of the above Bastiat-inspired comic.In today's NY Times . I agree with a lot of it. She concludes with a view that is common among economists: An expansion in the earned income tax credit would be a lot better than an increase in the minimum wage. I would have added a related fact: Over the years, we have already seen substantial expansions in the EITC. (See below.) Since we already have the better policy, let's not pursue the worse one. Source .From UC Berkeley economist Emmanuel Saez. It takes about 40 minutes.A student emails me a question: I have read all the advice on your blog, and have not found an answer to the following question. With some modifications I think it's a question a few pre-PhDs from Harvard/MIT/etc. have, so I hope I'm not being too selfish in asking. Suppose, for the sake of argument, that I have good reason to believe I'm in the top 1% of academic-economists-to-be in my generation, possibly better. Suppose further that I want to devote my career to important, and mostly policy-relevant, ...Here is an interesting fact: Women earn a higher rate of return from a college degree than men. In particular: After controlling for various demographic factors, the researchers found that female graduates earned more than $6,500 more per year than women with just a high school diploma, and more than $4,500 more than women who dropped out of college. Male graduates, by contrast, earned only about $2,700 more than high school graduates, and about the same amount as male college drop-outs. The findings ...If you are a high school student, or teach economics to high school students, you most definitely will want to click here .In the Washington Post . Stan was my PhD dissertation adviser.Since the State of the Union address, the minimum wage has heated up again as a political issue. You can read my previous posts on the topic by clicking here . (Unfortunately, some of the links in these old posts are now dead.) There is one question I would like to see some reporter ask Alan Krueger, the president's chief economist: How did they decide that $9 per hour is the right level? Why not $10 or $12 or $15 or $20? Presumably, the president's economic team must believe that the adverse ...Those with an interest in the history of economic thought might want to consider this summer program . I have been told that the program is designed primarily for faculty members in economics, other social sciences, and the humanities, though three of the twenty-five slots are reserved for graduate students.Source . Click on the graphic to enlarge.Click here to read my column in Sunday's NY Times ....when it is the utility-maximizing thing to do .Chapter 19 of my favorite textbook has a case study on research establishing that resumes with names more common in the black community get less response from employers than resumes with names more common in the white community. Today's Boston Globe has a related article about the results you get when you google a person.In April at Georgetown . Click through if you might be interested.President Obama has appointed my Harvard colleague Jim Stock to be a member of the Council of Economic Advisers.Grad students in economics can click here to learn about 2013 Jerusalem Summer School in Economic Theory. It is ten-day program run by my Harvard colleague Eric Maskin.From Econ Journal Watch : Paul Krugman Denies Having Concurred With an Administration Forecast: A Note by David O. Cushman Abstract In a previous article for Econ Journal Watch, I attributed to Paul Krugman a concurrence with the optimistic economic forecast put forward in early 2009 by the incoming Administration. Krugman reacted by denying that he had concurred with that forecast, pointing to a blog entry of his from January 2009. But Krugman apparently did not read my paper. It concerned not a blog ...Some news from across the atlantic: Fake Portuguese economist unmasked And to some lighter news out of Portugal, where a fake economist duped the nation for months. Our correspondent Giles Tremlett reports: Artur Baptista da Silva had become one of the most authoritative voices on Portuguese television, using his experience as an economist and United Nations consultant to explain why so much austerity was bad for the bailed-out country's economy. But now it turns out that the 61-year-old economist who ...Here are two attempts at addressing this question: Robin Greenwood and David Scharfstein . John Cochrane .From the National Journal .Here is a good topic for class discussion. Background: The Congress allocates free tickets to the presidential inauguration, often by lottery. Some winners of the lottery try to sell them for thousands of dollars. Senator Schumer objects to the resale. Question 1: When David, a lottery winner, sells his ticket to Anne, both David and Anne are better off. Who is worse off? Question 2: Senator Taxcut proposes auctioning off the tickets and rebating the revenue lumpsum to all taxpayers. Who would be ...A story of how a model employee outsourced his own job .A friend recommends this comic as a way to motivate a class discussion of GDP.My older son and I saw Zero Dark Thirty over the weekend. Great movie. On par with Argo . Much better than Lincoln , which seems to be the Oscar favorite. By the way, I have heard that the revival of Pippin I saw and loved is moving to New York after its Boston run is over. Highly recommended.And also about the Pigou Club, from the NY Times .The Tax Policy Center has a calculator to answer that question .Many of the world's professional economists are spending the next few days in San Diego for the annual ASSA meeting, where economists network, get some publicity for themselves, and learn what other economists are up to. I am skipping this year's meeting to spend more time with family. You might think that is lazy of me. But heck, my marginal tax rate just went up. A bit of extra laziness is optimal. If I were there, one event I would certainly attend is the annual humor session. Here is some ...Last October, Amazon introduced a new feature: a list of bestselling authors, aggregating across all books an author has written. Here is the list of the top 100 authors. For an economist, perusing the list is a humbling experience. As far as I can tell, not a single member of our profession made the list. I wonder whether Galbriath might have made it in his day, as he had written a large number of books accessible to general audiences. But these days, not a single one of us has wide enough readership to ...Here are the effective federal tax rates (total taxes as a percentage of income) for 2013 under the new tax law, as estimated by the Tax Policy Center , for various income groups: Bottom fifth: 1.9 Second fifth: 9.5 Middle fifth: 15.6 Fourth fifth: 19.0 Top fifth: 28.1 80-90 percentile: 21.5 90-95 percentile: 23.4 95-99 percentile: 26.3 Top 1 percent: 36.9 Top 0.1 percent: 39.6All ec 10 students know David Johnson, the course's charismatic head teaching fellow. What they likely do not know is that David's lovely wife, Anne Pringle, is also on the Harvard faculty. Today's NY Times has an article about Anne and her research .The fiscal deal struck last night makes one thing clear: President Obama must have really hated the recommendations of the bipartisan Bowles-Simpson commission that he appointed. The commission said that we needed to reform entitlement programs to rein in spending and that increased tax revenue should come in the form of base broadening and lower marginal tax rates. The deal appears to offer no entitlement reforms, no tax reform, and higher marginal tax rates. After all the public discussion over the past ...I just listened to President Obama's latest remarks on fiscal policy . This passage caught my attention: I want to make clear that any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced, because, remember, my principle always has been let’s do things in a balanced, responsible way. And that means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts, as ...Click here to read my column in Sunday's NY Times .For those in the Boston area: Yesterday, my family and I enjoyed one of our Christmas presents from Santa and went to the new production of the musical Pippin at the American Repertory Theater in Cambridge. I recall seeing the original Broadway production in the 1970s when I was in high school and liking the play then. I went to see it yesterday with a bit of trepidation, wondering whether my sensibilities had changed too much over the past four decades for me to still enjoy it. But the play did not ...Ed considers what might be behind this fact: Thirty years ago, there was a 40-to-1 ratio between the total labor force and those workers receiving Social Security disability payments. Today that ratio is less than 18-to-1.My favorite Christmas-themed economics article is this one by Steve Landsburg . From 2004, but truly timeless.I often disagree with Paul Krugman, but I usually understand him. Lately, however, I have been puzzled about his view of the bond market. In a recent post , he takes President Obama to task for believing that the failure to deal with our long-term fiscal imbalance might cause a spike in interest rates: America can’t run out of cash (except politically, if Congress refuses to raise the debt ceiling); it basically can’t experience an interest rate spike unless people see an increased chance of economic ...Previous installments are here .Warren may be a great investor, but he really doesn't cut it as a policy wonk .Marty offers his recommendation .My friend and sometime coauthor Larry Ball sends me his quick analysis of the Federal Reserve's recent announcement: I think the FOMC announcement is big news: for the first time, the Fed clearly says it will be more dovish in the future than the pre-crisis Taylor Rule (TR) dicates. In my estimation, the pre-crisis TR is something like the following for the real interest rate r: r = 2.0 - (1.5)(u-u*) + (0.5)(pi-2.0). Let’s say u* is still 5.0. Then if u=6.5 and pi=2.5, the TR says r = 0, which ...In the negotiations over the fiscal cliff, many people think the House Republicans are in a tough spot. The logic is that they have little leverage, because they face only two choices: A. Concede to most of the president's demands. B. Take the economy over the cliff, and get blamed for it. As a result, the logic goes, they will end up doing A, because B is so much worse. Keith Hennessey points out that there is also option C: Extend the tax cuts, except at the top, for one year. Apparently (and I was not ...From Forbes : Let’s take an unemployed mother living alone with two children between six and 10 years old. In 2010, there were 284,445 French families in this situation that were on welfare. This mother will be given the “Active Solidarity Income.” Since she has two children, the amount will be $1,100. If she is renting an apartment with a $650 rent, she will be given the “Housing Customized Aid,” amounting to $620. Then she will receive “Family Allowances,” which amounts to another $160. ...The Wall Street Journal's interactive graphic lets you choose from a menu of options .Click here for the previous installment.As reported in the NY Times : Even if Republicans were to agree to Mr. Obama’s core demand — that the top marginal income rates return to the Clinton-era levels of 36 percent and 39.6 percent after Dec. 31, rather than stay at the Bush-era rates of 33 percent and 35 percent — the additional revenue would be only about a quarter of the $1.6 trillion that Mr. Obama wants to collect over 10 years.Not quite fair to Keynesianism, but fun nonetheless:Back in 2008, when President Obama was running for his first term, he promised to be a post-partisan leader. While a Democrat, he said he would accept good ideas when they came from Republicans. At the time, I believed him, at least to some degree. And I wrote about it in this NY Times column . Sadly, I was wrong. The short version of the story is this: As a candidate, President Obama campaigned on a platform of raising taxes on the rich. Yet he and his economic advisers also said they wanted to raise ...From The New Yorker . One disappointing quotation: "We would never propose a carbon tax, and have no intention of proposing one," [White House spokesman Jay] Carney told reporters.I don't normally give advice on personal finances, but in light of the fiscal situation we are facing, I will pass along one tidbit. Consider converting some of your retirement savings into a Roth IRA . Over the past few years, I have converted all that I can, which is about half of my retirement savings. To make the best of a Roth conversion, you need liquid assets outside of retirement accounts to pay the resulting tax liability. But if you can do this, you will shelter more of your savings from ...From the White House blog . Bottom line: If you apply a $25,000 deduction cap only to households with income above $250K, phase in the cap gradually as income rises above $250K, and exclude charitible giving from the cap, you increase revenue by only $450 billion over ten years.Over my coffee this morning, I read the following headline on the front page of The New York Times : "Complaints Aside, Most Face Lower Tax Burden Than in the Reagan ’80s." Below it was a graphic comparing average tax rates for various income groups in 1980 and 2010. The problem is that Reagan did not become president until January 1981, and his tax policy was not fully implemented until a couple of years later (and arguably not until his second term, when we got very significant tax reform). So the ...Over the last week, I saw two of the movies that critics have been raving about: Lincoln and Argo . Lincoln was okay but a bit disappointing compared to expectations. It is too hagiographic for my taste. Argo was great.Donald Marron of the Urban-Brookings Tax Policy Center explains the tax increases that are part of the upcoming fiscal cliff.Advice from economist Emily Oster . A good reading to assign when teaching the theory of comparative advantage.My Harvard colleague Michael Sandel has been getting a lot of attention lately with his book What Money Can't Buy: The Moral Limits of Markets. To get a flavor of the debate, read A short essay by Michael Sandel . A review of his book by economic historian Deirdre McCloskey . A commentary from erstwhile ec 10 sectionleader Jodi Beggs . A review by Chicago's Raghu Rajan .Warren Buffett has an op-ed in today's NY Times on one of his most popular themes: The rich should pay more in taxes. At first blush, his position seems noble: A rich guy says that people like him should pay more to support the commonweal. But on closer examination, one realizes that Mr Buffett never mentions doing anything to eliminate the tax-avoidance strategies that he uses most aggressively. In particular: 1. His company Berkshire Hathaway never pays a dividend but instead retains all earnings. So ...Click here to read my column in Sunday's NY Times .In a widely discussed recent paper , Peter Diamond and Emmanuel Saez have suggested that the top tax rate should be very high--about 73 percent. Tax Notes has a new commentary on their conclusion .The Congressional Budget Office has a new study of effective federal marginal tax rates for low and moderate income workers (those below 450 percent of the poverty line). The study looks at the effects of income taxes, payroll taxes, and SNAP (the program formerly known as Food Stamps). The bottom line is that the average household now faces an effective marginal tax rate of 30 percent. In 2014, after various temporary tax provisions have expired and the newly passed health insurance subsidies go into ...A great topic for class debate. Some readings: John Carney says yes . (Also, look here .) Mark Thoma raises concerns about fairness . (Also, look here .) Carney replies to Thoma ....by Bob Litterman . (A great piece to assign undergrads when teaching about financial markets and institutions.)According to the Tax Policy Center, if we cap itemized deductions at $50,000 and keep tax rates as they are today, we would raise $749 billion in tax revenue over ten years. Moreover, according to the TPC's distribution table , 96.2 percent of the extra revenue would come from the top quintile, with 79.9 percent from the top one percent. This may be the germ of a possible deal between President Obama and Speaker Boehner: The speaker agrees to this tax hike if the president agrees to some fundamental ...With the President reelected and the House and Senate largely unchanged in composition, the first thought that came to my mind was the classic Sartre play No Exit , with President Obama, Speaker Boehner, and Majority Leader Reid playing the three characters.Today is the day. If you are a reader of this blog, it is a good bet that you are better informed than average on the key economic issues of the day. So get to the polls. BTW, for two of my three children, this is the first presidential election in which they can vote.An assessment of a new, promising field . (HT to MR).The NY Times reports : [T]he people who tend to derive the greatest dollar benefit from the mortgage interest deduction are households earning $100,000 to $500,000 a year. “About two-thirds of the total benefit go to that group in the 80th through the 99th income percentiles,” Mr. Rosenberg said. For those households, by the center’s calculations, the tax benefit of the deduction amounts to about 1.5 percent of after-tax income. By way of comparison, the value to households earning $40,000 to ...______________________________________________________An analysis from Stanford's Michael Boskin .No, it is not an oxymoron, but a new blog .Alan Blinder and I will be speaking at the 8th Annual Gulf Coast Economics Association Teaching Conference on November 8th and 9th, 2012. Even if you can't make it to the conference in Orlando, Florida, you can watch us via a free webcast. For more information, click here .Taylor: Simple Proof (of weak recovery) Krugman criticism: Financial Crisis Denialism Taylor response: Weak Recovery DenialA nice, accessible analysis of the economics of higher ed from Michael Greenstone and Adam Looney .Even in France : France's new 75 percent income tax on the rich may not be popular with millionaires. But it's being cheered by another group: Paris real-estate buyers. Real estate agents say that the number of multi-million-dollar real-estate listings in Paris has jumped more than 25 percent over last year -- due in part to the threat of the new income tax....[B]rokers say the 75 percent tax on the wealthiest French citizens has contributed to the decision by many of the them to sell their homes in ...A group of top economists was asked what they thought about this statement: "Taxing capital income at a permanently lower rate than labor income would result in higher average long-term prosperity, relative to an alternative that generated the same amount of tax revenue by permanently taxing capital and labor income at equal rates instead." There was not unanimity, but about three times as many economists agreed than disagreed.Congratulations to Al Roth and Lloyd Shapley for winning the Nobel Prize today! It is well deserved. FYI to teachers of introductory economics: I use Al's article on Repugnance as a Constraint on Markets as an ancillary reading in ec 10.As seen by Larry Summers : "If there is no consensus on the causes or solutions to serious problems, it is unreasonable to ask a political system to implement forceful actions in a sustained way. Unfortunately, this is to an important extent the case with respect to current economic difficulties, especially in the industrial world.""As a young man, Ryan held numerous amusing summer jobs, including a stint as an Oscar Mayer salesman in which he drove a Wienermobile. He envisioned eventually going to the University of Chicago for an advanced degree in economics and becoming an economist/academic, but he says he 'kept getting lured into politics.'" Source .A nice discussion of his research using field experiments .If you go to the recent release from the BLS , you can find these two sentences a few paragraphs apart: Total employment rose by 873,000 in September. Total nonfarm payroll employment increased by 114,000 in September. To a layman, this may seem confusing. The first statement suggests a robust labor market, the second a more lackluster one. What is going on? The issue is that there are two surveys. The first estimate of employment comes from the survey of households; the second is from the survey of ...University of Maryland economist Phill Swagel reviews the new book by the former FDIC head .The economics of video games .I have been reading Bob Woodward's new book, The Price of Politics . It is a detailed recounting of the back-and-forth negotiations among President Obama's White House, the Republican leaders in the House of Representatives, and the major players in the Senate regarding the debt ceiling and long-term fiscal outlook. The book is primarily an objective narrative, rather than a foaming-at-the-mouth polemic (unlike the over-the-top book The Amateur , which I read over the summer). Nonetheless, the ..."Economics undergraduates have been found to be the most promiscuous students on campus." Source .Click here to vote for a carbon tax .Many economists believe capital income should be taxed at a lower rate than labor income, perhaps even at a zero rate. Matthew Yglesias explains why .You can still register for the economics teaching conference on November 8 and 9 in Orlando, Florida. Early bird registration is open until October 10. Click here for more information . FYI, I am among the keynote speakers .This post takes its title from a new article at Econ Journal Watch . Here is the abstract: In early 2009, the incoming Obama administration’s Council of Economic Advisers predicted real GDP would rebound strongly from recession levels. In a blog post, Greg Mankiw expressed skepticism. In their blogs, Brad DeLong and Paul Krugman sighed. Of course there would be strong growth, they maintained, because the recovery of employment would mandate it via Okun’s Law. Mankiw challenged Krugman to a bet on the ...My younger son and I attended a great concert last night by Florence + The Machine. If you aren't familiar with their music, here is a sample:Duke economist Marc F. Bellemare has a cool in-class experiment to demonstrate the gains from trade.Here . A tidbit: According to economists crunching the numbers, this makes mileage standards somewhere between 2.4 and 13 times more expensive than a gasoline tax as a tool to reduce our use of fuel. Indeed, by some calculations, raising fuel-economy standards is more costly than climate change itself.I am looking to hire a Harvard student to work with me as I revise my principles textbook (along with several other less time-consuming tasks). The part-time job requires strong writing/editing skills, the ability to proofread carefully, some facility with data, and an interest in pedagogy. Work would start soon, and it would continue throughout the academic year. If you are interested, please drop off a brief letter, resume, and transcript with my assistant Lauren LaRosa in Littauer 236.You can read what the Princeton public finance expert says at this link . Here is the bottom line: I analyze the Romney proposal taking into account the additional income that might be generated by economic growth. The main conclusion is that under plausible assumptions, a proposal along the lines suggested by Governor Romney can both be revenue neutral and keep the net tax burden on high-income individuals about the same. That is, an increase in the tax burden on lower and middle income individuals is ...From University of Maryland economist Phill Swagel .Last month, the Center for World-Class Universities at Shanghai Jiao Tong University released the 10th edition of its annual global university ranking. Click here to see the economics ranking .Here is a paper I wish I had written,...I mean, not written.I am happy to lend this space to my Harvard colleague Martin Feldstein. -- Greg Feasibility of the Romney Tax Plan – Reply to Comments Martin Feldstein This note is a reply to those who commented on my August 28 WSJ article (available here ) about the Romney Tax Plan. The Romney income tax plan includes a 20% cut in all individual tax rates, eliminating the AMT, and eliminating the taxes on interest, dividends and capital gains for those with incomes under $100,000. The resulting revenue loss is ...Next week you can listen in on a Nobel symposium on growth and development and another conference on climate change. For more information, click here .Marty runs some numbers . Updates : The TPC responds to Marty , and Marty responds to his critics .A nice summary from Keith Hennessey : Over the past 50 years federal taxes have averaged 18% of GDP. Governor Romney proposes taxes “ between 18 and 19 percent ” of GDP. The House-passed (“ Ryan ”) budget proposes long-term taxes of 19 % of GDP. President Obama’ s budget proposes long-term taxes at 20 % of GDP. The Bowles-Simpson plan proposes long-term taxes at 21 % of GDP.Glenn Hubbard and Tim Kane have started a blog .New research by Alberto Alesina, Carlo Favero, and Francesco Giavazzi suggests an answer: This paper studies whether fiscal corrections cause large output losses. We find that it matters crucially how the fiscal correction occurs. Adjustments based upon spending cuts are much less costly in terms of output losses than tax-based ones. Spending-based adjustments have been associated with mild and short-lived recessions, in many cases with no recession at all. Tax-based adjustments have been associated with ......on the Amazon list of bestselling books . I believe it is the first time one of my texts has made it into the top 100.NPR has a list of policies that economists across the political spectrum love. It has some overlap with my list from few years back.Here are several things to read on the topic: A white paper from economists advising Mitt Romney . An attack from Paul Krugman (natch) . A response from John Taylor . Addendum : Here is a list of economists who support Romney.Every year around this time, I take a trip to do an extensive study of economy of Nantucket. As you might imagine, this activity requires large quantities of hard work and concentration sun screen. One implication is that I won't be blogging much until classes start up in September. And if you are a reporter trying to get a quote for a story, sorry, but you are out of luck.Click on graphic to enlarge.Economist John Diamond offers some simulations from a computable general equilibrium model .The most common question I have been asked lately is, "Why the hell did you agree to become department chairman?" It is a bullet I have been dodging for some years, but I finally capitulated when the dean asked me this time. Why, at the age of 54, did I change my mind? David Brooks's wonderful column today offers as good an answer as any I have come up with. Then in your 50s and 60s, you will become a sociologist, understanding that relationships are more powerful than individuals. The higher up a person ...I have been looking through the Obama administration's midsession review , which was released a few days ago. I found the comparison between the adminstration's economic forecast and the Blue Chip consensus of private forecasters noteworthy. (See the table called "Table 3. Comparison of Economic Assumptions.") Here is the projected growth of real GDP, fourth quarter to fourth quarter, of Team Obama in red , and private forecasters in blue . 2012 2.6 2.0 2013 2.6 2.5 2014 4.0 3.1 2015 4.2 3.0 2016 3.9 ...Eight young stars take a shot at the answer .I am down here on Long Beach Island, NJ, visiting my mom with my younger son. It has given me a chance to catch up on some reading, and I have a recommendation to pass along: Unintended Consequences by Edward Conard. The subtitle ( Why everything you've been told about the economy is wrong ) is unnecessarily contentious and not really an accurate description. But the book, written by a former Bain partner, gives a good overview of the forces behind the financial crisis. It is far smarter and more ...I am a latecomer to this, but a friend suggested to me that I would enjoy the TV show Breaking Bad , and boy was he right. It has occupied me almost every evening for the past month, as I have caught up to the current season five. The show tells the story of a particularly destructive mid-life crisis, as a mild-mannered high school teacher slowly descends into the underworld of drug manufacturing. It is not the best TV drama of all time (I would probably vote for The Wire ), but it is close. It is ...Having learned that the U.S. olympic uniforms were manufactured in China, Senator Harry Reid said , "I think they should take all of the uniforms put them in a big pile and burn them and start all over again." Will some enterprising reporter please ask Senator Reid for the opportunity to inspect the senator's closet and check the labels of his clothing to make sure they are all American-made? I look forward to seeing Mr. Reid's bonfire. In the alternative, I would be happy to send the senator of copy of ...To update one of the tables for the next edition of my favorite textbook, I have been looking at the new CBO report on the distribution of income and taxes. I found the following calculations, based on the numbers in the CBO's Table 7, illuminating. Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received. For 2009, the most recent year available, here are taxes less transfers as a percentage of market ...Eugene Steuerle calculates the effective marginal tax rates from the system of taxes and transfers : we calculate the effective average marginal tax rate if this household increases its income from $10,000 to $40,000. That is, how much of the additional $30,000 of earnings is lost to government through direct taxes or loss of benefits? The average marginal tax rate in the first bar of Table 3, 29 percent , is based simply on federal and state direct taxes, including Social Security and the EITC. The rate ...Here are some words from David Romer, spoken at the beginning of the NBER Summer Institute, Monetary Economics program: Before we begin, we have a sad milestone to note. Anna Schwartz, who was a towering figure not just in the Monetary Economics program of the NBER, but in the field of monetary economics, died last month. The usual way to mourn someone’s passing is with a moment of silence. I think everyone who knew Anna even a little realizes that that would be absolutely the wrong way to remember her. ...Yes, say Betsey Stevenson and Justin Wolfers .From Yoram Bauman and Shi-Ling Hsu.From my inbox: I thought you might be amused to see this. At Metrovino, a restaurant in Portland, Oregon where I run the bar, we needed a name for a drink we serve that's a slight variation on the Pegu Club (a classic gin cocktail). "Pigou Club" was the first thing to come to mind. I doubt many guests know what the name alludes to but it makes me happy and the drink has become one of our bestsellers. A photo of the menu is attached. The recipe and background are here . Also, by the way, Australia has ...The folk over at the Council on Foreign Relations say that Paul Krugman's analysis of Iceland lacks a certain..., let's say, robustness .From his recent opinion on the health care law, page 24: To an economist, perhaps, there is no difference between activity and inactivity; both have measurable economic effects on commerce. But the distinction between doing something and doing nothing would not have been lost on the Framers, who were "practical statesmen," not metaphysical philosophers.Well, the Supreme Court said today that the health care mandate is ok. I am no constitutional scholar, but from what I can tell from the news reports, the Court's logic is similar to mine in this old blog post .Yes, say Ken Griffin and Anil Kashyap .The Harvard historian says it is badly frayed .Here is the NY Times obituary of the great monetary economist .The folks over at New Economic Perspectives are sponsoring a contest "offering t-shirts to the top three readers who identify passages that contain the worst predictive and policy follies in Mankiw’s textbook ." That is very helpful. Thanks! I am always trying to find mistakes, omissions, and ambiguities in the book so I can improve the next edition. I look forward to seeing what they come up with.Here is the Nobel prize winner's NY Times obituary .Emi Nakamura, Jon Steinsson and Nicolas Vincent stand up for data collection .A new book by economist Ariel Rubinstein . You can read it for free by clicking here . (And in case you are wondering, the second link is legit, not pirated.) Addendum : Here is a review of the book.Robert says incentives are the key : Consider the expansion of social-safety-net programs, including food stamps, unemployment insurance, Medicaid (prospectively) and housing and mortgage programs. In a study published last month by the National Bureau of Economic Research, University of Chicago economist Casey Mulligan observed that, because these programs were means-tested (falling or ending as income rises), expanding them raised the effective marginal tax rate on labor income. Specifically, Mr. ...Larry is skeptical : There is also an oddity in this renewed emphasis on quantitative easing. The essential aim of such policies is to shorten the debt held by the public or issued by the consolidated public sector comprising both the government and central bank. Any rational chief financial officer in the private sector would see this as a moment to extend debt maturities and lock in low rates – exactly the opposite of what central banks are doing. In the U.S. Treasury, for example, discussions of ...Click here to learn more .About a year ago, I pointed out a fashionable trend : Some pundits were saying that long-term interest rates couldn't go much lower. Since then, the yield on a 10-year Treasury bond has fallen from 3.18 to 1.65 percent. The lesson: Don't try to time the market. My own asset allocation remains 60 percent stocks, 40 percent bonds, with wide diversification in each category.University of Michigan economist Miles Kimball is now blogging . Incidentally, many years ago, Miles was my very first PhD dissertation advisee.Marty says it will remain a source of trouble .Rock star Jack White understands how to set prices to clear markets .A friend sends along this snapshot from an Occupy protest at Harvard's commencement this week. For the record: I fully support sunshine.Larry Summers once said that goverment is a "crappy venture capitalist." He was right .The Crimson reports : For a Statistics 104 final project, a group of students asked 1,035 undergraduates to gauge their impression of Occupy on a scale of one to ten, with ten being most positive. They found that the average ranking of Occupy Harvard was 2.84 out of 10.The NY Times reports : An economics book used in some high schools holds that the Antichrist — a world ruler predicted in the New Testament — will one day control what is bought and sold.In November, I will be speaking at the annual conference of the Gulf Coast Economics Association, which this year is being held in Orlando, Florida. If you are interested in attending, registration is now open .No, say Ted Gayer and Phill Swagel .In watching various news talk shows over the past few weeks, I have seen Democratic partisans make the following argument: President Obama just wants to return top tax rates to where they where in the 1990s under President Clinton. And that was a great time for the U.S. economy. So one shouldn't be concerned about the impact of higher tax rates. There are two things wrong with this. First, the premise is incorrect. President Obama wants to raise income tax rates to where they were during the ...The Senate confirms Jeremy Stein and Jerome Powell to the Federal Reserve Board ."A ballot initiative this November would give California a whopping 13.3 percent top marginal rate for state income taxes." Source .Yale economist John Geanakoplos discusses his view of the financial crisis. It takes about an hour.Source . The relative pay of CEOs skyrocketed during the 1990s and has since fallen by about half.Might the greenback lose its special status?She says we should reduce it , financed by a tax increase on dividends and capital gains at the personal level.A wise essay by Raghu Rajan .Allen Sanderson reminisces about the great economist .As reported by the Harvard Crimson .There has been a lot of chatter lately about monetary policy under Ben Bernanke's leadership and how his Fed has dealt with the zero lower bound on interest rates. One of the more thoughtful analyses of this topic I have seen is this paper by Larry Ball .As seen by Jim Capretta (with whom I had the pleasure to work when I was in DC some years ago).From the NY Times , a great article for teaching Chapter 6 of my favorite textbook.From economist Jim Hamilton .The CBO reports : CBO estimates that the President’s budgetary proposals would boost overall output initially but reduce it in later years. For the 2013–2017 period, under most of the estimates CBO produced using alternative models and assumptions, the President’s proposals would increase real (inflation-adjusted) output (relative to that under current law) primarily because taxes would be lower than those under current law, and, therefore, people’s disposable income and their demand for goods and ...A new paper on cyclical income risk reports the following: we study the cyclical nature of idiosyncratic shocks, once observable factors are accounted for. Contrary to past research, we find that income shock variances are not countercyclical. However, uncertainty does have a significant countercyclical component, but it comes from the left-skewness increasing during recessions. That is, during recessions, the upper end of the income shock distribution collapses—large upward income movements become less ...Click on graphic to enlarge. Click here to read my column in Sunday's NY Times .As of July 1, I will become the chairman of the Harvard economics department. I will continue teaching ec 10 and revising my favorite textbooks, but I will have to cut back on my other teaching roles and various professional activities. In particular, over the next three years, I will blog less and travel less to give talks at other venues. I will be spending my time trying to make the world's best economics department even better. Addendum : If you are curious, the current chairman is John Campbell. ...Dan Marcin, a economics PhD student at the University of Michigan, is running for Congress. Here is his website . Notice that he is a proud member of the Pigou Club.My Harvard colleague Alberto Alesina and Francesco Giavazzi say it matters. A lot.Click on graphic to enlarge.Consider two passages. First, a definition : Social Darwinism is a belief, popular in the late Victorian era in England, America, and elsewhere, which states that the strongest or fittest should survive and flourish in society, while the weak and unfit should be allowed to die. Second, a statement about public policy : Public goods and Pigovian subsidies lead naturally to a tax system in which higher income individuals pay more in taxes. Surely, those with higher income and greater property benefit more ...As seen by my Harvard colleague Martin Feldstein ....according to The Princeton Review . I cannot judge the reliability of the list, but it is still nice to be included.The NY Times reports an example from the pizza market . My favorite line: Mr. Kumar said he was contemplating checking with a lawyer to see if there might be a city law that somehow prohibits a business from selling pizza at outlandishly cheap prices.Good pedagogical advice from Nick Rowe . It works, however, only if you have some international students in your class....has passed away . He was truly a great econometrician.I recently received an email with the subject line "musical writers who are fans of economics." It continues as follows: Hi Dr. Mankiw, Thanks for giving a shout to musical theater in your recent post about Smash! My writing partner Leah (an econ major) introduced me to your blog several years ago and I've been a regular reader and huge fan ever since. We develop musicals and license the performance rights to college, high school, and community theatres. We're currently working on an adaptation of It's a ...Courtesy of my older son, Nicholas, who is in the 11th grade, here is a fun question: What does the function y = x^x look like? If your answer works only for positive x, you get at most a B-. Hint : If you want help, click here .The NY Times profiles MIT's Jonathan Gruber .Unfortunately : On Sunday, the United States gets a distinction no nation wants -- the world's highest corporate tax rate. Japan, which currently has the highest rate in the world -- a 39.8% rate on business income between national and local taxes -- cuts its rate to 36.8% as of April 1. The U.S. rate stands at 39.2% when both federal and state rates are included.By Rachael Meager, via Joshua Gans .As regular readers of this blog may have noticed, I am a fan of musical theater. So I was intrigued when I heard about the new TV show Smash , which is a drama about the back-story of putting on a musical. It has not disappointed. Indeed, it has quickly turned into one of my family's favorite shows. I do recommend, however, starting the story from the beginning, rather than jumping in the middle. I have had good luck with streaming TV shows via Amazon .Brad DeLong and Larry Summers on fiscal policy . Unfortunately, because of a family commitment, I missed the Brookings meeting where this paper was presented yesterday. Update : Scott Sumner comments on the paper .As seen by my Harvard colleague Martin Feldstein .From Matthew Yglesias . By the way, I have read the book--not for the economics, but because it is my 13-year-old son's favorite novel.Yoram Bauman's Principles of Economics, Translated has exceeded 1 million views on YouTube. Addendum : Here are Yoram's updated grades of how economics textbooks handle climate change:A clear application of difs-in-difs methodology. By the way, Karthik was a grad student at Harvard not long ago.Stevenson and Wolfers report the results of an unusual natural experiment: The Tea Party came into prominence in a series of protests around the country on tax day, April 15, 2009. Sunny skies in some parts of the country encouraged large and boisterous rallies, while in other places rain suppressed the attendance. If the areas that nature randomly selected to have good weather that day subsequently became more conservative, that would suggest the Tea Party had a real impact beyond what would have ...Thanks to the reader who sent this along. Update : Obviously, this is a joke. If anyone was truly offended, I express my surprise, and I offer my apology.On Sunday, my family and I saw Les Miserables , which is touring the United States and is now in Boston. It is one of my favorite musicals, and I have seen it many times. This revival was particularly fun, however. The staging has been significantly altered from the original production. (The revolving stage is gone, for example.) This change was enough to give the performance a certain freshness that made me feel like I was seeing the play again for the first time. Once, when I mentioned to one of my ...The 8th edition of my intermediate macroeconomics text will come out in June, ready for fall classes. One significant change in this edition is that some of the existing material has been reorganized. Over the past several years, monetary policymakers at the Federal Reserve have engaged in a variety of unconventional measures to prop up a weak banking system and promote recovery from a deep recession. Understanding these policies requires a strong background in the details of the monetary system. As a ...The NY Times reports : Bo Xilai, the brash Communist Party chief of China’s sprawling Chongqing municipality, has been removed from his post....The news, announced Thursday morning in a brief dispatch by the official Xinhua news agency, said that Vice Prime Minister Zhang Dejiang, a North Korean-educated economist , would replace him as Chongqing party secretary. I wonder: What is economics education like in North Korea?... has good taste in textbooks .I kicked off a fun discussion: My article in the NY Times from a couple weeks ago . Uwe Reinhardt comments on my article . Steve Landsburg comments on Uwe's comment .Nick Rowe has a thoughtful post about his discomfort with teaching shocks to the short-run aggregate supply curve. Larry Ball and I once pondered this topic, which eventually led to this paper . Whether we were successful at addressing the issues is a topic I will leave for others, including Nick, to judge. |