Friday, October 02, 2015

Olivier Blanchard

A profile (though I doubt the headline applies to readers of this blog).

Tuesday, September 29, 2015

What I am doing today

Today, I am wearing my political theory hat.  If you happen to be a student at Brown, you can find me here.

Hillary's Plan for Pharmaceuticals

Thursday, September 24, 2015

Nobel Predictions

Wednesday, September 16, 2015

Feel-the-Bern Fiscal Policy

From the Wall Street Journal (news article, not editorial page):
Sen. Bernie Sanders, whose liberal call to action has propelled his long-shot presidential campaign, is proposing an array of new programs that would amount to the largest peacetime expansion of government in modern American history. In all, he backs at least $18 trillion in new spending over a decade, according to a tally by The Wall Street Journal....To pay for it, Mr. Sanders, a Vermont independent running for the Democratic nomination, has so far detailed tax increases that could bring in as much as $6.5 trillion over 10 years, according to his staff.

Monday, September 14, 2015

What to do when the natural rate of interest declines

Increase the inflation target, according to this new paper, which uses the dynamic model of aggregate demand and aggregate supply from my favorite intermediate macroeconomics textbook.

Wednesday, September 09, 2015

Twelve reasons to like Jeb’s tax plan

Jeb Bush has released a tax plan.  Here are some elements of it that I find attractive:
  1. It lowers the top rate on personal income to 28 percent, the same rate as the bipartisan 1986 tax reform.
  2. It broadens the base by capping the use of itemized deductions.
  3. It eliminates the deductibility of state and local taxes, so low-tax states and towns no longer subsidize high-tax ones.
  4. It maintains the deductibility of charitable giving, encouraging private solutions to social problems.
  5. It reforms the tax treatment of secondary earners and seniors, who are more responsive to tax incentives than primary earners.
  6. It eliminates the stealth marginal tax rates from PEP and Pease.
  7. It eliminates the estate tax, so the tax system no longer penalizes those who want to help their children and grandchildren.
  8. It lowers the corporate tax rate to be close to international norms.
  9. It moves from a global to a territorial tax system, like most other nations have.
  10. It eliminates the deductibility of interest expenses, putting debt finance and equity finance on a more level planning field.
  11. It includes full expensing of investment expenditure, moving the system toward a consumption-based tax.
  12. It expands the earned income tax credit for childless taxpayers, strengthening the social safety net.
Here is an assessment of the plan by John Cogan, Martin Feldstein, Glenn Hubbard, and Kevin Warsh.

More Competition

Friday, September 04, 2015

The Path to a Carbon Tax

Click here to read my column in Sunday's NY Times.

Tuesday, September 01, 2015

The Game Theory of Heroism

Friday, August 28, 2015

A Career in Economics

Monday, August 24, 2015




Now I know how Jeb Bush feels.

Friday, August 21, 2015

An Unlikely Sentence

"Blanchard, Mankiw, and Romer are all in the Wu-Tang Clan."

From Dietz Vollrath, an economics professor at the University of Houston, in his Hip-Hop History of Macro.

Wednesday, August 19, 2015

Textbooks are a bargain

Compared with Harvard tuition, that is, according to Irwin Collier:
Excerpts from the Harvard Catalogue for 1874-75 with principal texts.... Incidentally, one finds that annual fees for a full course load at Harvard ran $120/year and a copy of John Stuart Mill’s Principles cost $2.50. Cf. today’s price for N. Gregory Mankiw’s Economics which is $284.16. If tuition relative to the price of textbooks had remained unchanged (and the quality change of the Mankiw textbook relative to Mill’s textbook(!) were equal to the quality change of the Harvard undergraduate education today compared to that of 1874-75(!!)), Harvard tuition would only be about $13,600/year today instead of $45,278.

In other words, over the past 140 years, textbook prices have risen only 114-fold, whereas Harvard tuition has risen 377-fold. 

Over this period, the CPI has risen 22-fold. So the real price of textbooks has increased about 5-fold, or a bit more than 1 percent per year.

Wednesday, August 12, 2015

At least someone is beating The Donald

From Amazon

Tuesday, August 11, 2015

Letter from Greece

Thursday, August 06, 2015


If you are looking for a new binge-worthy TV drama (and you have already seen The Affair from last year, the best recent TV show), let me recommend Bloodline.  Set in the Florida keys, it is the story of a seemingly successful but actually dysfunctional family and what happens when the black-sheep son returns.  The full first season was released by Netflix just a few months ago.

Monday, August 03, 2015

How Not to Pass a Carbon Tax

As long-time readers of this blog know, I have long advocated greater use of Pigovian taxes, such as taxes on carbon emissions. Such taxes can correct incentives by aligning private and social costs, and the revenue from such taxes can be used to reduce other, distortionary taxes.

Skeptics of Pigovian taxes on the right sometimes argue that such taxes are good in principle but in practice the left will co-opt them and, rather than using the revenue to reduce other taxes, will use it to fund ever larger government.

Sadly, that point of view is getting some support in Washington state.  The headline above from The Seattle Times reads 'Green' alliance opposes petition to tax carbon.  Why the opposition?  Because the ballot measure is revenue-neutral. Some environmentalists want to use the revenue from the proposed carbon tax to increase spending instead.

I believe that a carbon tax could someday win bipartisan support.  But before it does so, those on the left will need to convince those on the right that the tax would be a tax shift, not a tax increase.  The carbon tax needs to be evaluated on its own merits and should not be a stalking horse for a broader, big-government agenda.

Update: Responding to my post, John Whitehead writes, "The standard textbook treatment of a Pigouvian tax is agnostic on what happens to the revenue."

He is right, of course. So let me clarify. I was trying to make a point not about textbook economics but about practical politics.  Here are two propositions:

1. The tax system should be shifted in a Pigovian direction.
2. Government should be larger.

These are largely unrelated claims. Logically, one can believe both, neither, or only one of them.  In my view, it much easier to make the case to many voters, especially those on the right, for proposition 1 than for proposition 2.  As a result, if you strongly believe in proposition 1 and are trying to put together a coalition to make it happen, marrying it to proposition 2 is not the best move.

Milton Friedman on Politics

From this collection of Milton Friedman quotations, here is one I had not heard before:

“I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office.”

Saturday, August 01, 2015

Real Wages and Labor Productivity

A common meme is that workers aren't benefiting from productivity growth.  Robert Lawrence says, not so fast.  You can watch a video of him explaining this here.