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.
| Time | Podcast Episode Highlights |
|---|---|
| 1:00 | Keynesian economics, IS-LM. Do government budget deficits stimulate the economy? Do the big statistical models work? |
| 6:54 | The Keynesian multiplier. Does government spending crowd out private spending? Natural rate of unemployment. Do tax cuts stimulate the economy? Incentives, tax rates. |
| 13:40 | Do government budget deficits matter? Medicare, Medicaid, Social Security. Does the annual budgetary process itself help rein in spending? |
| 19:17 | Laffer 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. |
| 27:56 | Income tax progressivity. Political incentive is for base to keep narrowing. Rawls vs. Nozick. What is government's role? role of economics? |
| 33:19 | Pigou 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? |
| 43:09 | Does 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. |
| 54:55 | What 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? |
READER COMMENTS
Saeed
Jan 27 2007 at 8:43am
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
Jan 28 2007 at 2:59pm
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
Jan 29 2007 at 8:30am
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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