Russ Roberts

Greg Mankiw on Gasoline Taxes, Keynes and Macroeconomics

EconTalk Episode with Greg Mankiw
Hosted by Russ Roberts
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Greg Mankiw of Harvard University and Greg Mankiw's Blog talks about the state of modern macroeconomics and Keynes vs. the Chicago School. He defends his proposal to raise gasoline taxes and discusses the politics of tax policy.

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Readings and Links related to this podcast

Podcast Readings
HIDE READINGS
  • Greg Mankiw's Home Page
  • Greg Mankiw's Blog
  • The Pigou Club Manifesto, blog entry
  • Milton Friedman on Money and on inflation and macroeconomics. EconTalk podcast.
  • "Rational Expectations", by Tom Sargent in the Concise Encyclopedia of Economics (CEE).
  • "Keynesian Economics" and Natural Rate of Unemployment, by Alan Blinder in the CEE.
  • "Revolution and Evolution in Twentieth-Century Macroeconomics", by Michael Woodford, on the state of macroeconomics.
  • Michael Woodford's Home Page.
  • Bio of Arthur C. Pigou in the CEE.
  • When Pigous Don't Have Wings. Blog entry at CafeHayek by Russ Roberts about this podcast.
  • An Interview with Greg Mankiw. Greg Mankiw's experiences at the Council of Economic Advisers (CEA), and more on his role as an advisor.
  • "Why I can't join Pigou Club", Terence Corcoran, blog entry
  • Listening Guide to Greg Mankiw on Gasoline Taxes, Keynes, and Macroeconomics. On Econlib
  • Highlights

    Time
    Podcast Highlights
    HIDE HIGHLIGHTS
    1:00Keynesian economics, IS-LM. Do government budget deficits stimulate the economy? Do the big statistical models work?
    6:54The Keynesian multiplier. Does government spending crowd out private spending? Natural rate of unemployment. Do tax cuts stimulate the economy? Incentives, tax rates.
    13:40Do government budget deficits matter? Medicare, Medicaid, Social Security. Does the annual budgetary process itself help rein in spending?
    19:17Laffer Curve. Do tax cuts stimulate growth, thereby recouping or even increasing tax revenue? Tax rates and incentives, tax structure. "Broaden the base, lower the rates." Political process complicates those changes.
    27:56Income tax progressivity. Political incentive is for base to keep narrowing. Rawls vs. Nozick. What is government's role? role of economics?
    33:19Pigou Club: Some economists argue that taxes can correct externalities, e.g., gas taxes reduce fumes, congestion, etc. Pigou and Marshall anecdote. Second-best solutions, Pigouvian taxes. But what happens with revenue collected? Does government just spend more, or does it simultaneously lower other taxes?
    43:09Does taxing individual products, as suggested by Pigouvian taxes, open the political door to more inefficient taxes? Pigouvian taxes do not take taxes out of the political process. Glaeser, Thaler podcasts on libertarian paternalism. Mankiw's experience as Chairman of the Council of Economic Advisers. Stigler vs. Friedman debate: Do economists merely observe politics as scientists or do they involve themselves in the political process? Tobacco settlement. Friedman podcast. Coase vs. Pigou. What is the optimal solution to an externality? Unintended consequences.
    54:55What would you do if you were an economic czar for the day? What policy changes do you think have the biggest bang for the buck?

    Comments and Sharing



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    COMMENTS (3 to date)
    Saeed writes:

    Enjoyed the podcast; as always, a stimulating discussion. Russ is at his best when he doesn't fully agree with a guest, yet finds ways to allow both his and the guest's point to come across. That happened a number of times during this podcast, such as during the Pigou Club debate. The back and forth between Dr. Mankiw and Russ made for great listening. I hope Russ tries to get Krugman, Galbraith or Stiglitz for future podcasts.

    I was a bit disappointed about the approach on externalities, particularly with the somewhat detached perspective of both Russ and Dr. Mankiw. Assuming that there is a scientific controversy over this, or suggesting, albeit somewhat glibly, that for some people air conditioners may be the answer for global warming, was disheartening.

    There is no scientific controversy. Climate change is the most important externality of our generation, and of others to follow. It is important that academic economists, particularly those with stature and share of voice, as both Russ and Dr. Mankiw have, take a more nuanced view on this.

    enronal writes:

    I enjoy your econtalk podcasts and this interview of Mankiw was no exception. I have two comments. One, I was surprised at your view that moderating entitlements would become easier as we become wealthier. I wish you were right, but if anything the evidence of history goes the other way. We are far wealthier now than we were in the 50's, or any other earlier time, but it seems to me the sense of entitlement has done nothing but grow stronger and more encompassing. In fact, entitlements seem to be self-feeding. How developed was the sense of entitlement in, say, the 19th century?

    Second comment, is while the discussion and exchanges with Mankiw was stimulating, I wish you had asked him a bit about his experience as chairman of the COEA. After all, that's an experience only a small number of economists have had. Or maybe that was a topic he wanted to stay away from, for now?

    Russ Roberts writes:

    Saeed and Enronal,

    Thanks for you comments. My point about global warming (and many other issues) is that our ability to deal with these challenges in a decentralized, voluntary way increases as we get wealthier. In the 1500's, the ability of individuals to deal with climate was very limited--the only real option was migration to a more pleasant climate. Today, we have many more choices because of the technology we haveavailable. Didn't mean to be detached or glib about air-conditioning--I meant it as an example of a general principle. I hope to write something more extensive on this topic in the next few months at econlib.org

    It was my choice to stay away from Greg's White House experience. You can find the transcript of an interview I did with him (pre-podcast) in the links related to the podcast--"Interview with Greg Mankiw," where we talk more about his work in the White House.

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