From My Inbox

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 Wonderful Life set in the recent recession, and it features some economics-inspired songs that you might get a kick out of. Here are a few you might enjoy:

Potter (a female in our version) and Sam Wainwright reflect on the economy. Inspired by a Rogoff article you linked to: Game We Play

Asleep at his desk, George has a Schumpeterian dream: Steve Jobs

Violet reflects on opportunity costs: Live for Today

Anyway, I want to thank you for contributing so much to my education through your blog and for helping to inspire an interest in economics. Maybe someday I'll write a musical explicitly about economics. "The Dismal Science" would make a great title, don't you think? :)

Cheers!

Kevin

GoMusicals.com

A Math Puzzler

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.

Eric Maskin

...comes home.

Mr Mandate

The NY Times profiles MIT's Jonathan Gruber.

We're number one!

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.

A Guide for Prospective PhD Students

By Rachael Meager, via Joshua Gans.

A TV Recommendation

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.

A Reading for the Pigou Club

From Barron's.

Macro 8e

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 result, this edition covers the topic earlier in the book than did previous editions. A complete treatment of the monetary system and the tools of monetary policy can now be found in Chapter 4.

The biggest change in the book, however, is the addition of Chapter 20, “The Financial System: Opportunities and Dangers.” Over the past several years, in the aftermath of the financial crisis and economic downturn of 2008 and 2009, economists have developed a renewed appreciation of the crucial linkages between the financial system and the broader economy. Chapter 20 gives students a deeper look at this topic. It begins by discussing the functions of the financial system. It then discusses the causes and effects of financial crises, as well as the government policies that aim to deal with crises and to prevent future ones.

All the other chapters in the book have been updated to incorporate the latest data and recent events.

If you want more information about the new edition, click here.  To see the new chapter on the financial system, click here.

On My To-Read Pile

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.

The Looming Recession Threat

As seen by my Harvard colleague Martin Feldstein.

The Economics of The Hunger Games

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.

Congratulations, Yoram

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:

Free Bikes and Girls' Education

A clear application of difs-in-difs methodology.  By the way, Karthik was a grad student at Harvard not long ago.

The sun shines on the Tea Party

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 happened in its absence.

How much of a difference can a rainstorm make? It turns out a lot. At least that’s the message from some striking research by four young scholars spanning the political spectrum -- Andreas Madestam of Bocconi University and Daniel Shoag, Stan Veuger and David Yanagizawa-Drott of Harvard University.

Their research demonstrates that in politics, success begets success. The initial boost from the weather generated substantial momentum. Counties that enjoyed better weather on tax day had more people sign up to become Tea Party organizers, greater donations to an affiliated political action committee, and larger rallies a year later.

A Fiscal Solution

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.

Les Mis

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 Harvard colleagues how much I like Les Mis, he expressed surprise.  He had not seen the play, but based on what he had read, he thought it had a heavy-handed left-wing theme, which he thought I would find off-putting.  From my perspective, while the play has a strongly political setting, it is not really about politics at all.  Instead, it is about the potential and power of personal redemption in the face of adversity.  The theme of the show is summed up in a line from the protagonist Jean Valjean near the end: "To love another person is to see the face of God."  That moves me every time I hear it.

Question of the Day

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?

NPR's David Kestenbaum

... has good taste in textbooks.

On the Taxation of Capital Gains

I kicked off a fun discussion:

1. My article in the NY Times from a couple weeks ago.
2. Uwe Reinhardt comments on my article.
3. Steve Landsburg comments on Uwe's comment.

How to Teach Aggregate Supply Shocks

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.

The Price of Parking

This NY Times article gives an update on San Francisco's attempt to set parking prices closer to levels that equilibrate supply and demand.

A Profile of Ben Bernanke

From the always reliable Roger Lowenstein.

The Limits of Monetary Policy

A thoughtful essay from Brad DeLong.

Personalized Pages at Google Scholar

I recently learned that Google Scholar lets people set up personalized pages.  You can find mine here.  You can find other economists who have signed up, ordered by total citations, here.  You can learn how to set up your own page by clicking here.

Larry Kotlikoff runs for president

Really.  As far as I know, he is the first economist to run for president directly from an academic position (rather than running for the House or Senate first, as Phil Gramm did).

Romer on DSGE Models

My favorite macro textbook for upper-level undergraduates and first-year graduate students is Advanced Macroeconomics by David Romer.  I learned recently that his chapter on DSGE models is available as a free sample.  You can read it here in pdf format.

Toro Y Moi Red Bull Music Academy Lecture

Obama shifts stance on dividend taxes

Alex Brill and Alan Viard write:

In the summer of 2008, the Obama campaign's two top economists proudly proclaimed that their candidate favored a dividend tax rate of 20 percent, "lower than all but five of the last 92 years." Well, that was then. In a sharp break from that campaign stance and the Administration's first three budgets, President Obama is now calling for an all-in dividend tax rate of almost 45 percent, the highest rate in 27 years. The president's about-face bodes ill for the economy.

While the president's proposal raises dividend tax rates only on high-income stockholders, Americans at all income levels will feel the economic impact of the tax hike. Higher dividend taxation will impede the investment that fuels long-run growth, depress stock prices, and weaken incentives for good corporate governance.

The president's proposal would allow the 2003 dividend tax cut to expire for high-income households at the end of the year, pushing the top dividend tax rate up from 15 to 39.6 percent. That's a dramatic increase in its own right. But, other provisions make the true increase even larger. The president also wants to bring back a provision phasing out deductions for high-income taxpayers, which will cause each additional dollar of dividends to trigger 1.2 cents of extra taxes. And, beginning next year, the president's health care law will impose an additional 3.8 percent tax on dividends and other investment income of high-income households. Under the president's proposal, the top all-in dividend tax rate will be 44.6 percent - almost triple today's 15 percent rate.

An Award for Economics Educators

The publisher of my favorite textbook is sponsoring an award for economics educators.  If you have a classroom technique that is particularly noteworthy, you might win several thousand dollars and a trip to a teaching conference in Orlando.  Click here for information.

What do Larry Summers, Doug Elmendorf, and Greg Mankiw have in common?

Only one of us won a John Bates Clark Medal.
Only one of us is Director of the Congressional Budget Office.
Only one of us wrote a best-selling textbook.

But all three of us were ec 10 section leaders early in our careers.

Being an ec 10 section leader is one of the best teaching jobs at Harvard. You can revisit the principles of economics, mentor some of the world’s best undergraduates, and hone your speaking skills. In your section, you might even have the next Andrei Shleifer or Ben Bernanke (two well-known ec 10 alums). And believe it or not, we even pay you for this!

If you are a graduate student at Harvard or another Boston-area university and have a strong background in economics, I hope you will consider becoming a section leader in ec 10 next year.  Applications are encouraged from PhD students, law students, and master's students in business and public policy.

If you think you might be interested, please come to one of the information sessions we are holding.

Tuesday (tonight) at 6:30 pm in the Littauer 3rd floor lounge.
Wednesday (tomorrow) at 6:30 pm at KSG Taubman 275.

What is Chu-Mankiw convergence?

Answer in the Washington Post.  (Hint: Chu and Mankiw both rhyme with Pigou.)

Taxing Carried Interest

Click here to read my column in Sunday's NY Times.  The piece is an attempt to explain the taxation of carried interest and is more pedagogical than opinionated.  For the truly wonky who want to learn more about this topic, I recommend this article by Alan Viard.

Rogoff reflects on Jeremy Lin

Ken writes:

What amazes me is the public’s blasé acceptance of the salaries of sports stars, compared to its low regard for superstars in business and finance. Half of all NBA players’ annual salaries exceed $2 million, more than five times the threshold for the top 1% of household incomes in the United States. Because long-time superstars like Kobe Bryant earn upwards of $25 million a year, the average annual NBA salary is more than $5 million. Indeed, Lin’s salary, at $800,000, is the NBA’s “minimum wage” for a second-season player. Presumably, Lin will soon be earning much more, and fans will applaud.

Yet many of these same fans would almost surely argue that CEOs of Fortune 500 companies, whose median compensation is around $10 million, are ridiculously overpaid. If a star basketball player reacts a split-second faster than his competitors, no one has a problem with his earning more for every game than five factory workers do in a year. But if, say, a financial trader or a corporate executive is paid a fortune for being a shade faster than competitors, the public suspects that he or she is undeserving or, worse, a thief.

In case you are curious: Yes, Jeremy Lin did take ec 10.

Jeff Sachs submits a job application

via the Washington Post.