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Date: Wednesday, 08 Oct 2014 11:41
NPR takes a look.  Generally, a good and balanced treatment. But they play a bit too fast and loose with the difference between high and rising.  Some of the hypotheses they suggest can explain high prices but not rising prices.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Sunday, 05 Oct 2014 15:07
Teachers of intermediate macroeconomics will find this new book of interest:
This Vox EU Course Companion, the first in the series, is a collection of carefully selected Vox columns designed to supplement Mankiw’s Macroeconomics textbook. Vox Course Companions provide relevant examples of economic theory in action and offer thought-provoking perspectives on arguments that come up time and again in exam-style questions. They bring together analyses of economic phenomena by leading economists as they happened, while applying and comparing the suitability of competing economic theories.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Wednesday, 01 Oct 2014 08:58
The IMF endorses the free-lunch view of infrastructure spending. That is, an IMF study suggests that the expansionary effects are sufficiently large that debt-financed infrastructure spending could reduce the debt-GDP ratio over time. 

Certainly this outcome is theoretically possible (just like self-financing tax cuts), but you can count me as skeptical about how often it will occur in practice (just like self-financing tax cuts).  The human tendency for wishful thinking and the desire to avoid hard tradeoffs are so common that it is dangerous for a prominent institution like the IMF to encourage free-lunch thinking.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Friday, 26 Sep 2014 08:14
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Thursday, 25 Sep 2014 09:22
Here is a website that gives up-to-date graphs of several policy rules.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Wednesday, 24 Sep 2014 07:17
An instructor in introductory economics asks:
I have a question that may be of interest to the students and faculty who read your blog. In searching the archives of your blog, I did not see a blog post on the following: 
How do you assess and evaluate those students? 
I have a colleague who administers only one assessment - a final. Most of the rest of my department uses a variety of activities, assessments and evaluations - homework sets, reading quizzes, writing, midterm and final.
 
Here is the weighting we use to grade each semester in ec 10 at Harvard: 40 percent on the final exam, 20 percent on each of two midterm exams, and 20 percent on work done with section leader (mostly grades on problem sets done as homework, though class participation may be given some weight as well).  In addition, we have an optional "unit test program" in which students can take practice tests throughout the semester and, if they pass, earn extra credit.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Sunday, 21 Sep 2014 09:14
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Wednesday, 17 Sep 2014 16:53
Lars Christensen plots with recent data a version of the Taylor rule I proposed some years ago (published here).  I suggested this rule as an approximate description of Alan Greenspan's monetary policy in the 1990s. Here is Lars's plot:

Click on graphic to enlarge 
 
I based this rule (the green line) on data only from the 1990s, but notice that it does reasonably well until 2009.  The red line is the rule with parameters estimated from the later period.

Taken at face value, the rule suggests that it is time for the Fed to start raising the federal funds rate.  If you believe this rule was reasonably good during the period of the Great Moderation, does this mean the Fed should start tightening now, as the economy gets back to normal? 

Maybe, but not necessarily. There are two problems with interpreting such rules today.

The first and most obvious problem is that odd things have been happening in the labor market for the past several years. The unemployment rate (one of the right hand side variables in this rule) may not be a reliable indicator of slack.

The second and more subtle problem is the nagging issue of the zero lower bound.  For several years, the rule suggested a target federal funds rate deeply in the negative territory.  We are out of that range now, but should the past "errors" influence our target today?  An argument can be made that because the Fed kept the target rate "too high" for so long (that is, at zero rather than negative), it should commit itself now to keeping the target "too low" as compensation (that is, at zero for longer than the rule recommends).  By systematically doing so, the Fed encourages long rates to fall by more whenever the economy hits the zero lower bound. Such a policy might lead to greater stability than strict adherence to the rule as soon as we leave negative territory.

The time for the Fed to raise the target rate may be soon, but I don't think we are quite there.

Update: Ricardo Reis writes to me the following useful observation:

There is another (related) argument for not raising rates now to offset shortfalls in the past. It is not about the interest rate. It is about the price level, the ultimate goal of monetary policy and measure of its performance.

If you plot the PCE deflator, there is a clear shortfall relative to a 2% price-level target. A 2% price level target fits very well during Greenspan's time.  By the end of 2008, we were exactly on the 1992-target. But when I look at that plot starting in 2009 until the most recent data I see a gap.

A price-level target rule is optimal in normal times (Ball, Mankiw, and Reis) but is also an optimal policy in response to the dangers of the zero lower bound (Woodford). We have to catch up for the shortfall in the price level right now. And if you look at inflation expectations from surveys or markets, there seems to be no catch up expected, indicating that policy is still too tight.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Wednesday, 17 Sep 2014 09:11
A friend sends the following puzzle.  Find the X that fits in this sequence:

16  06  68  88  X  98

For those who don't get it, I will post a hint in a few days.

Hint: Try looking at the problem upside down.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Saturday, 13 Sep 2014 10:10
Noah Smith puts it well:

most of our arguments are over things like Obamacare, or antipoverty programs, or financial regulation-- issues on which reasonable people can and do disagree. If you’re uncivil in this sort of situation -- if you call your opponent an idiot, or a liar, or a nastier name simply because you think his or her argument is bad -- you’re basically being overconfident. You’re assuming that there’s essentially no chance that you’re in the wrong, so it’s in the public interest for you to rail against your opponent and score points with the crowd. If you do this, there’s no chance that you yourself will learn anything from the encounter.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Monday, 08 Sep 2014 15:44
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Sunday, 07 Sep 2014 06:35
I much enjoyed this article by Steven Pinker.  An excerpt:

It seems to me that educated people should know something about the 13-billion-year prehistory of our species and the basic laws governing the physical and living world, including our bodies and brains. They should grasp the timeline of human history from the dawn of agriculture to the present. They should be exposed to the diversity of human cultures, and the major systems of belief and value with which they have made sense of their lives. They should know about the formative events in human history, including the blunders we can hope not to repeat. They should understand the principles behind democratic governance and the rule of law. They should know how to appreciate works of fiction and art as sources of aesthetic pleasure and as impetuses to reflect on the human condition.

On top of this knowledge, a liberal education should make certain habits of rationality second nature. Educated people should be able to express complex ideas in clear writing and speech. They should appreciate that objective knowledge is a precious commodity, and know how to distinguish vetted fact from superstition, rumor, and unexamined conventional wisdom. They should know how to reason logically and statistically, avoiding the fallacies and biases to which the untutored human mind is vulnerable. They should think causally rather than magically, and know what it takes to distinguish causation from correlation and coincidence. They should be acutely aware of human fallibility, most notably their own, and appreciate that people who disagree with them are not stupid or evil. Accordingly, they should appreciate the value of trying to change minds by persuasion rather than intimidation or demagoguery.

I believe (and believe I can persuade you) that the more deeply a society cultivates this knowledge and mindset, the more it will flourish. The conviction that they are teachable gets me out of bed in the morning.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Thursday, 04 Sep 2014 14:12
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Thursday, 28 Aug 2014 11:56
In the Business & Money category:

Source
 
And in all books:

Source

To users of my favorite textbooks: Thank you!  Have a great semester.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Thursday, 28 Aug 2014 11:21
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Wednesday, 27 Aug 2014 18:11
Here is a list.  By the way, six are at Harvard, more than any other school.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Saturday, 23 Aug 2014 13:41
Click here to read my column in Sunday's NY Times.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Tuesday, 19 Aug 2014 10:58
I will be speaking at the annual conference of the National Economics Teaching Association, which this year is being held on Thursday, November 6th and Friday, November 7th, 2014 in San Diego, CA.  If you want to consider attending, click here for more information.
 
You can potentially win a free trip to the conference, as well as some cash, by entering this contest.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Saturday, 09 Aug 2014 13:55
In The New Republic.  A tidbit:
Only very extreme scenarios, where every wealthy individual does all of the following at the same time can lead to the sort of explosive inequality dynamics Piketty fears:
  1. Marries someone at least as wealthy or bequeaths all wealth to one child.
  2. Consumes very little.
  3. Avoids paying most taxes.
  4. Contributes little to charity or politics.
  5. Invests optimally while avoiding Bernie Madoff and his ilk.
And it is hard to imagine why anyone would care about the existence of such an inbred, self-denying, and politically-removed class, if it could ever exist.
Author: "Greg Mankiw (noreply@blogger.com)"
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Date: Sunday, 03 Aug 2014 08:11
Larry Kotlikoff's comment on Paul Krugman's debating style in my previous post reminded me of an email I received earlier this summer:

Hi Professor Mankiw,
 
I'm an entering graduate student at [withheld] and a long-time reader (reading your blog when I was in high school introduced me to and got me interested in economics). I was reading Thomas Sowell's A Conflict of Visions and stumbled upon a passage that immediately reminded me of you, and your debates with Professor Krugman. I think it accurately describes a lot of disputes I've seen among intellectuals.
 
If you're familiar with the basic premise of the book, you can skip this paragraph. If you aren't (or need a refresher) Sowell creates a spectrum of political visions. At one end, there is the unconstrained vision, which sees a more malleable human nature in which the reason of experts has great efficacy in solving society's problems. At the other end, there is the constrained vision, which sees man's reason as inherently limited to narrow fields, with the best social progress coming through less deliberate and more evolutionary means. Sowell would see you as closer to the perfectly constrained vision, and Professor Krugman as closer to the perfectly unconstrained vision.
 
Here is the passage that reminded me of your debates with him. I think you'll see what I mean:
 
Sincerity is so central to the unconstrained vision that it is not readily conceded to adversaries, who are often depicted as apologists, if not venal. It is not uncommon in this tradition to find references to their adversaries' "real" reasons, which must be "unmasked." Even where sincerity is conceded to adversaries, it is often accompanied by references to those adversaries' "blindness," "prejudice," or narrow inability to transcend the status quo. Within the unconstrained vision, sincerity is a great concession to make, while those with the constrained vision can more readily make that concession, since it means so much less to them. Nor need adversaries be depicted as stupid by those with the constrained vision, for they conceive of the social process as so complex that it is easy, even for wise and moral individuals, to be mistaken -- and dangerously so. They 'may do the worst of things without being the worst of man,' according to Burke. (pg 59-60)
 
You may have already​ seen this and had similar thoughts, but if you hadn't, I thought you would find it interesting.
 
Best,
[name withheld]
Author: "Greg Mankiw (noreply@blogger.com)"
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