Try This One

Source.

More on a Nominal GDP Target

Christy Romer makes the case for a new framework for monetary policy.  She is kind enough to remind us of this old paper that Bob Hall and I wrote on the topic.  For more on this subject, including further links, click here.

The Impact of Economics Blogs

If this study is right, my providing you with this link will greatly increase its visibility.

My Lecture at Princeton

I gave a lecture at my alma mater last week.  You can watch it by clicking here.  It's a bit over an hour.

The Budget Deficit

A panel discussion at MIT, with Peter Diamond, Jeff Leibman, Deborah Lucas, Robert Solow, and yours truly.  It takes about 90 minutes.

The Rich Get Poorer

Here is a fact that you might not have heard from the Occupy Wall Street crowd: The incomes at the top of the income distribution have fallen substantially over the past few years. 

According to the most recent IRS data, between 2007 and 2009, the 99th percentile income (AGI, not inflation-adjusted) fell from $410,096 to $343,927.  The 99.9th percentile income fell from $2,155,365  to $1,432,890.  During the same period, median income fell from $32,879 to $32,396. 

These recent numbers illustrate the broader phenomenon, discussed in this paper, that high-income households have riskier-than-average incomes.

Fates to Avoid

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

Nordhaus on Energy Economics

A smart friend recommends this article by Yale economist Bill Nordhaus.  The Pigou Club endorses the conclusion:

The need for taxes on energy externalities such as carbon emissions is central to our ability to reduce the harmful side effects of economic growth. It is striking how the political dialogue in the US has ignored a policy that has so many desirable features. Perhaps, in the near future, faced with the deadline of a dire economic situation, negotiators will formulate such a policy. It would generate substantial revenues while bringing so many long-run economic and environmental benefits. Simply put, externality taxes are the best fiscal instrument to employ at this time, in this country, and given the fiscal constraints faced by the US.

After Keynesian Macroeconomics

A reenactment of a famous collaboration, starring Ellen McGrattan as Robert Lucas and Pat Kehoe as Tom Sargent.

The Latest from Merle Hazard

The Distributional Effects of 9-9-9

...as evaluated by the Tax Policy Center.

A Target Path for Nominal GDP

...is a monetary policy endorsed by Goldman Sachs economists.

The Increased Role of the Minimum Wage

I am in the process of revising my intermediate macro book.  As I was updating the section on the minimum wage, I was struck by how much the data has changed over three years.  The minimum wage has a much larger role now than it did three years ago, in large part because of the legislated increase in the minimum wage from $5.15 to $7.25 an hour.  For example, comparing the 2010 data with the 2007 data, one finds the following:

• The percentage of all hourly-paid workers paid at or below the minimum wage rose from 2.3 to 6.0 percent.
• The percentage of part-time workers paid at or below the minimum wage rose from 5 to 14 percent.
• The percentage of teenage workers paid at or below the minimum wage rose from 7 to 25 percent.

Question for class discussion:  In light of what is occurring with the overall economy during this period, how would you evaluate the policy change regarding the minimum wage?

Even leftists believe in property rights

...at least when it comes to their property. 

From one of the recent protests:

Photo by Elizabeth Fama
Click on photo to enlarge.

The Monetary System of the Future?

A friend sends me this photo from some of the recent protests.

The sign says, "1. End Debt-based Fiat currencies. 2. End Fractional Reserve and Compound Interest Banking. 3. End the Fed."

Question for class discussion: What kind of monetary system would satisfy these demands?  What are the pros and cons of this alternative system?

The Nobel Prize

Congratulations to this year's winners of the Nobel Prize in economics: Thomas Sargent and Christopher Sims.  Richly deserved!

Nobel Speculation

Here and here.

A Fun New Search Tool

Google's Ngram Viewer has been around for a while, but I just learned about it, so I thought I would mention it to my blog readers.  This new search tool allows you to track and compare how often words or phrases appear in published books (at least those books in Google's database, which I gather is quite large).  For example, here you can see how often Irving Fisher and John Maynard Keynes are mentioned, and here you can you see how several words associated with my career have risen over time.

Krugman on IS-LM

Paul defends the IS-LM model.  I agree completely!

In some circles, there is now a push to skip the IS-LM model in intermediate macro courses and teach students more modern dynamic macro.  Like Paul, I think that is a mistake.  In my intermediate macro book, I have added a chapter with a dynamic macro model (which one might consider a baby DSGE model).  But students are best equipped to appreciate this model after they understand IS-LM logic.

Updates: Mark Thoma reminds me that I have written on this topic before.  Steve Landsburg weighs in.

Policy Uncertainty

Scott R. Baker, Nicholas Bloom, and Steven J. Davis report:

A major factor behind the weak recovery and gloomy outlook is a climate of policy-induced economic uncertainty. An index we devised shows U.S. policy uncertainty at historically high levels.

Solow on the History of Thought

Bob reviews Sylvia Nasar.

Obama versus Clinton on Tax Policy

One of the common memes about tax policy is that President Obama just wants to return the tax code to where it was during the Clinton years.  The problem is, this is just not true.

This table from the Tax Policy Center is useful in dispelling the myth.  Compare the far left column (Clinton-era tax policy) and the far right column (Obama's proposed tax policy).    It shows the following: Compared to President Clinton, President Obama would cut the effective tax rate by about 2 percentage points for the bottom 99 percent of the population and raise the effective tax rate by about 2 percentage points for the top 1 percent of the population.

You can agree or disagree with that policy choice.  But the facts are clear.  President Obama's policy preferences are more focused on income redistribution (aka "class warfare") than President Clinton's tax policy ever was.

Advice for College Freshmen

Click here.  Produced for Princeton students, but lots of good advice here wherever you are enrolled.

Fantasy Nobel Picks

From NPR.

David Brooks on Mitt Romney

Brooks defends my favorite candidate.  He says that Romney has "the gold standard of adviser teams." 

I presume David did not have in mind that Keynes once called the gold standard a "barbarous relic."

Alan Blinder and Glenn Hubbard agree

A joint op-ed, from a D and an R.

Sin Taxes on College Sports?

The University of Chicago's Allen Sanderson makes the case.

Optimal Stabilization Policy

You can now access the published version of my recent paper with Matthew Weinzierl by clicking here.  A significant change from the working paper version is the addition of thoughtful comments by the discussants Olivier Blanchard and Gauti Eggertsson.

In case you forgot what the paper is about, here is the abstract:

This paper examines the optimal response of monetary and fiscal policy to a decline in aggregate demand. The theoretical framework is a two-period general equilibrium model in which prices are sticky in the short run and flexible in the long run. Policy is evaluated by how well it raises the welfare of the representative household. Although the model has Keynesian features, its policy prescriptions differ significantly from those of textbook Keynesian analysis. Moreover, the model suggests that the commonly used “bang for the buck” calculations are potentially misleading guides for the welfare effects of alternative fiscal policies.

Nobel Prize Pool

Click here to learn how to enter.

The Darwin Economy

A review of Robert Frank's new book.