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Mankiw to the President-Elect
Greg Mankiw's memo to the president-elect is excellent.
Posted by Alex Tabarrok on November 8, 2008 at 07:26 PM in Economics | Permalink
Comments
Will the President-Elect read this?
Posted by: Devon Steven Phillips at Nov 8, 2008 7:33:54 PM
If these are advices that Mankiw, another rif-raff of Bush Administration, provided to Bush and was taken then I hope Obama does not read them.
Posted by: gloucester12000 at Nov 8, 2008 7:49:21 PM
I'd appreciate someone pointing me to a convincing argument in favor of the McCain plan vis-a-vis adverse selection. I'm not sold on Obama's plan, but McCain's entire plan, including his enthusiastic endorsement of a race to the bottom among insurers didn't sound all that great to me. A tax credit would help ease the imbalance between employer-sponsored care and self-employed individuals who must buy their own. But I wasn't a big fan of McCain's deregulation strategy.
Posted by: mrshl at Nov 8, 2008 7:51:32 PM
Yes, I'm sure that what the public really meant when they elected a bunch of Democrats was for Obama to listen to a former Bush adviser and adopt a nice conservative course. So, according to Mankiw, if Republicans win, it means the public wants conservatism. If Democrats win, it means the public wants...conservatism?
Posted by: Sure at Nov 8, 2008 7:55:40 PM
The discussion of the budget constraint is unpersuasive--the examples are bad.
Social Security is a minimal problem, regardless of how much people seem to enjoy belaboring it, nor is there any reason a proper health care system has to cost more than what we spend now, and in any case reform is necessary to deal with Medicare and Medicaid which are actual fiscal problems.
And while Obama should certainly listen to his economic advisors--what is the point of having them otherwise--learning about the McCain health care plan is not a good example of why. McCain didn't figure out a reasonable way to pay for it, and while it might be sensible economically, it would be disastrous in its practical effect on people's health coverage. This might be a good example of listening to your economic advisors and then not taking their advice for good reason.
The other two points are fine.
Posted by: matt wilbert at Nov 8, 2008 8:06:43 PM
I think Mr. Mankiw is rather naive. For one thing, it is not Obama, who is something of a stooge, but those behind him who will make the decisions, and they are very definitely leftists who despise economics. They will characterize it, as posters here already have, as "conservative," although it is only sound middle-of-the-road economics. We are in for a very bad few years -protectionism, counterproductive taxes imposed for ideological reasons. The whole lot.
Posted by: at Nov 8, 2008 8:14:41 PM
All these Libertarians worship markets. Yet in the market of ideas (as election season represent an imperfect one), they get thumped (unless of course Ron Paul is President-elect). Why is that? As they keep being rejected by American people (and pretty much people every where else as well), should not they take that to be that their ideas are bogus as market deemed them to be inferior. Libertarians need a host like Republican Party to smuggle their ideas so they could be implemented since they can't win in market of ideas. Sometimes this relationship between host and guest is symbiotic but mostly it is parasitic.
Posted by: gloucester12000 at Nov 8, 2008 8:16:46 PM
"We are in for a very bad few years -protectionism, counterproductive taxes imposed for ideological reasons. "
Last eight years has been what utopia? That must be the reason people stampeded to a "stooge". Stop listening to Rush Limbaugh instead sniff glue which will kill less brain cells.
Posted by: at Nov 8, 2008 8:21:01 PM
Bill Clinton was the most laissez faire President we ever had. He did nothing, he did not interfere with the markets. And the markets still went overboard into tech stocks. Yet the markets recovered. Now we have the markets heavily into real estate. Will the President/Government not interfere and let things improve themselves? That is the major question.
I think McCain's doubling of the standard deduction retroactive to 2008 would provide an economic boost in the spring and increase disposable income every payroll period. The tax credits for health care benefits would benefit people in the lower income tax brackets while the higher brackets may pay more.
Posted by: jorod at Nov 8, 2008 8:21:01 PM
Wow, amazing how what the president should do is precisely what all the right wing economists think he should do.
Tell me how that goes, eh?
Posted by: Hal at Nov 8, 2008 8:57:22 PM
Wow, another economist mentioned on this blog warning of a leftist government takeover by President Obama.
A number of observations on Mankiw:
1.) I don't care where he stands, I don't care if he's a liberal or a conservative, a microeconomist or a macroeconomist. I just feel like he, along with a lot of other economists, are genuine liars. The only economists I admire are those that study history, Gregory Clark for example. They may cause less harm to society at large.
1.) He wrote a terrible principles of economics book for undergraduates
2.) He was a terrible economist for the Bush administration, certainly without the mental agility of previous leading economic advisors like those under JFK.
3.) He might've been better off as a lawyer from Harvard Law School as he probably would not be associated so negatively with the Bush administration. (So, by advising Obama to listen to his economists, is Mankiw implying Bush never listened to his wise policy advice? And so your hands are clean, as Greenspans's hands are clean, and Bernanke's too).
Now, about his advice:
Economics is not a science. Stop acting like it's one, and stop offering advice like you know what you're talking about. He talks about the imbalance between government spending and tax revenue in reference to social security without mentioning the disasterous tax cuts W. Bush enacted while Mankiw himself was his economic policy advisor (got hypocrisy?). Everything he says has a tinge of political ideology to it. He's basically saying, We know you're going to go Left, but please don't go too far as it might make some Right-Wing economists look bad if your policies actually end up working. And he's saying this with a straight-face without admitting that the fundamental facets of conservative economics as practiced since the Reagon administration has proved disasterous for the country culminating in the current situation.
By the way, I do not predict any great economic recovery under Obama as he seems to have embraced the so-called "Chicago" school of economics.
I don't care if Mankiw works for Harvard. Harvard has graduated some of the worst white-collared offenders in business history. Read AHEAD OF THE CURVE if you're interested in this topic. I no longer have any respect for economists, especially when considering the fact that, in all probability, none of them ever had to come home to their families and tell them that they had just gotten laid off. Any economists know what it feels like to live on minimum wage? Any economists have trouble getting health insurance for their children?
So, while douchebag economists like Mankiw at Harvard and T.C. at GMU are busy drawing neat little diagrams of Xs and curves and various budget constraints, there are real people out there who have to make a choice between food or medicine or maybe even suicide. I'VE BEEN THERE! I take care of a father with emphysema without a job. I make $13 dollars an hour and every morning I wake up scared to death of being laid off. FDR did what he did because he knew people were going hungry, not because he felt that economists had some kind of moral obligation to come up with prescriptive policy measures.
I'm also an economics major at a university made up mostly of kids from blue-collared families, and I'm in my senior year.
Last summer I read Nassim Taleb's FOOLED BY RANDOMNESS and THE BLACK SWAN, and things kind of made sense to me. The mumbling economist before me, who loved to pause thoughtfully like he was in his own chocolate factory during his lectures, drawing meaningless diagrams and explaining models and talking about financial innovations, and equating MR to MC (check out the book WHY MOST THINGS FAIL, especially the part where it says most firms just implement a simple cost-plus markup pricing strategy, rather than the theoretical nonsense contained in micro textbooks), it all made sense to me. Like NNT said, it was pure snakeoil.
Forgive me if I go off topic, and forgive me if I'm not even a tenth smarter than some of the people who comment on this respectable economist's blog, but this is how I feel. And Mankiw has no business advising President Obama while people lose their jobs left and right.
Posted by: sammy at Nov 8, 2008 8:59:30 PM
There is no issue that economists agree on more than the issue of trade. While there are legitimate disagreements about the merits of wealth redistribution and the costs and benefits of that endeavor, there is nearly unanimous support of free trade. Freer trade really should be off the table in terms of political agendas... We just need to free the decision makers from the grip of organized minorities.
The signing of a free trade agreement requires exactly 0 government expenditure and immediately makes people in that country, on average, better off. Being more open to trade is like magic - you can create wealth by simply doing a trivial task of signing an agreement.
Now, as a liberal and a person who voted for Obama, I find his stances on trade to be embarrassing. If the Republicans can stop nominating people like Sarah Palin to higher office and meddling in people's lives (drugs, gay marriage, etc.) I might start voting for them.
Posted by: a person at Nov 8, 2008 9:06:13 PM
Pay attention to the government’s budget constraint.
This makes sense, but coming from a Bush advisor it is quite droll. Sorry to be snarky, but staunchly Republican economists have a long way to go to regain credibility on fiscal issues.
Posted by: Bernard Yomtov at Nov 8, 2008 9:07:20 PM
This makes sense, but coming from a Bush advisor it is quite droll.
I didn't realize Mankiw was a socialist. You know, like the current occupant of the White House.
Posted by: at Nov 8, 2008 9:57:51 PM
sammy sounds like a would-be fan of Mr Mugabe.
Posted by: Acton. at Nov 8, 2008 10:00:51 PM
So, while douchebag economists like Mankiw at Harvard and T.C. at GMU are busy drawing neat little diagrams of Xs and curves and various budget constraints, there are real people out there who have to make a choice between food or medicine or maybe even suicide.
Tyler, I didn't realize you were a "douchebag economist". Didn't realize there was such ... demand.
Sounds like Sammy could use some of your direct aid.
And PLEASE, for the sake of all you hold dear, stop drawing such neat little diagrams. Make them messy.
And put on a sad face.
No, make that a very sad face.
Because the fact that I didn't get a pony is all your fault. You and all those other douchebag economists.
(I did get soft fuzzy slippers that look like little puppy dogs, but those were from Santa.)
Posted by: at Nov 8, 2008 10:16:45 PM
It's amazing how often people read Nicholas Nassim Taleb's books critiquing the use of Gaussian estimation methods, and consequently believe economists' opinions on international trade are useless. "If economists can't predict a random walk accurately, surely they can't advise on TFP growth!" Fooled by randomness, indeed.
Sammy, you may also be interested to know a whole range of macroeconomic models assume firms price at a fraction over cost. Most menu cost models work under this assumption, and most New-Keynesian models use menu costs. Perhaps the most prominent New-Keynesian's name is... Greg Mankiw.
Posted by: Enda at Nov 8, 2008 10:26:45 PM
Will the President-Elect read this?
No, but one of his more astute economic advisers, "sammy", has.
Posted by: at Nov 8, 2008 10:27:35 PM
Economics is not a science. Economists like to pretend (hence all this math and modelings that gives the field patina of science) that they can predict based on theory de-jure as hard science is able to but they have not been able to predict much of anything yet (dot com bubble, housing bubble). They can't even agree causes and solutions of past events such as Great Depression (for evidence Krugman's blog vs this blog's post on that topic). It's a pseudo-science with some useful heuristics like alchamey as opposed to chemistry.
So, we should not take the economists's opinion all that seriously. Let them doddle. It keeps them occupied and employed.
Posted by: gloucester12000 at Nov 8, 2008 10:48:41 PM
Who is the frequent commentator on this blog who has decided that all cries of inequality, unfairness, or deliberate obfuscation have something to do with "getting a pony?" It's starting to grate.
Sammy may be spraying vitriol at economists like buckshot, but his point is clear: He thinks Mankiw's comments are condescending and hypocritical.
Posted by: at Nov 8, 2008 10:49:08 PM
I can't take it!!! Call it "expressive commenting" if you want.
@sammy:
I'm sorry your economics profs suck. Number 1, they should have told you the standard micro model is a simplification - hence the term "model" - and that's it's the easiest model to deal with mathematically. Number 2, I would like to ask how you know that cost-plus markup is NOT a marginal cost pricing rule? Marginal cost in the traditional model refers to opportunity cost, which includes things like sitting down and figuring out if 13.06 is the profit maximizing price or 13.09 is. Then again, if you are selling a large quantity of items this calculation could be important - I recall a story about Rockefeller who reduced the number of drops of solder to seal a barrel by one and saved his company a lot of money. I was sure that there were some models with cost-plus markup pricing, although not sure who wrote them. Enda (previous commenter) suggests an area to look into.
And save your sob story for Oprah - not all of us had silver spoons. Some of us worked daily labor/daily pay in addition to our jobs that paid only about 1.5x minimum wage. And I wouldn't have gotten laid off at my near minimum wage jobs unless the entire place went under - but that's because I was PHENOMENAL at my job (strong mind and a strong back), and those managers understood that by having me there they could have one less person there and save a few $$$/hour.
@gloucester
I see no prices in this market for ideas, only votes. Markets without prices ... well, they aren't really markets, are they? I assure there are certain things I can predict, only at a more micro, and controlled, level. That's the whole point of experimental economics. You think an evolutionary biologist can predict exactly how a species will evolve? Is that not "science"? That's what kind of predictions you are talking about when trying to predict the macroeconomy. Here, I'm not a macroeconomist, but let me predict something for you at the macro level: Enact policies at the macro level which give people the incentive to not be productive and watch the whole economy suffer. Comparing the macroeconomy predictions to those of a chemist, who mixes a few items in a CONTROLLED environment, is not even a remotely accurate comparison.
Posted by: AZ at Nov 8, 2008 11:04:19 PM
Economics isn't a pseudo-science, it's a soft-science. Chemistry is a hard science because a chemist can take all these different elements, measure them out near perfectly, and do a bunch of experiments where only a single element changes with each run. Thus any change in the result can be directly correlated to the change in inputs.
Economics deals with people and the real world. Economists can't change this or that element of the real world and run experiment after experiment. They have to look for good data and do their best to correct for whatever biases or unknowns are in the mix. Taleb points out that there is always an unknown that you can't correct for, but he doesn't discredit the entire field, only a portion of it (what he refers to as extremistan).
Posted by: Matthew at Nov 8, 2008 11:12:18 PM
Re: "I see no prices in this market for ideas, only votes."
There is a price in market in the form of performance of economy which determines if people will have a job or not. Hence, high voter participation in bad economic time. Having wrong ideas mean people will lose jobs, houses, etc. So price is there and it's very high. If Libertarian ideas (i.e. Austrian economic school) are as salubrious as promised then you should be able to convince voters of that as their livelihood depend on it. Also, free market without government intervention does not lead to competition but to monopoly.
"Economics isn't a pseudo-science, it's a soft-science"
Either something follows scientific methods and therefore it is a science or else it's not. By this standard, economics is not science just as AI (I'm a CS graduate student) is not a science unlike algorithm. Economics fall somewhere between science and pure B.S. of lots of liberal arts majors.
Posted by: gloucester12000 at Nov 8, 2008 11:32:49 PM
"Being more open to trade is like magic - you can create wealth by simply doing a trivial task of signing an agreement. "
There ain't no such thing as a free lunch.
Posted by: Robert Olson at Nov 8, 2008 11:35:00 PM
What is wrong with Mankiw? Doesn't he know that Obama is the second coming you will repeat the miracle of the loaves and fishes. Really, Oprah told me so.
Posted by: DanC at Nov 8, 2008 11:39:09 PM
