It's all Ben's fault!

Have lunch with me

To current ec 10 students (only):

I will take up to ten students out to lunch after Wednesday's lecture at Yenching, my favorite Chinese restaurant in Harvard Square. Email me if you are interested in joining the group. First come, first served.

Richard Epstein on Inequality

Watch on PBS. See more from PBS NEWSHOUR.

What Milton Friedman might say to the Occupy movement

Some classic clips.  Thanks to Mark Perry for the pointer.

happy thanksgiving!

Today I am thankful for my family, especially healthy babies, modern medicine, and my sister-in-law's delicious chocolate pie.

Speaking of babies ... remember how I just had one?  Without further ado, I'd like to introduce Cora Margaret:

Cora is such a peaceful, sweet baby.  We just love her!  I was so worried about Ruby (a.k.a. "the brute") using her muscles on the baby, but so far it is just hugs and kisses all around.   Oscar, of course, is smitten as well  (it probably helps that she looks just like him).

We had a few hiccups in the hospital, so it has taken me longer to get back to the computer.  Between needing to recover and the holidays coming up, posting is going to be really light around here for the foreseeable future.  But can you blame me?  We are all super busy snuggling Cora.

For Thanksgiving, I crocheted Cora a silly turkey drumstick hat:

Funny, right?  After seeing it on Pinterest, I just couldn't resist!   I made up the the pattern as I went along and didn't write it down, so I don't have instructions to share with you.   You might be able to find a crochet turkey leg pattern online, and just add it to a simple hat.  After the holiday, I think I might take the drumsticks off and add some teddy bear ears for a more useful everyday hat.

At first it seemed like Cora really liked it:

But then she started making sour faces at me:

One-week-olds are so fickle.  :)

In completely unrelated news ...

I have a Black Friday Deal to share with all you Silhouette fans.  Silhouette is having a great Black Friday sale where everything in the online store (except the CAMEO, subscriptions, download cards, and gift cards) is 30% off.  You can get an extra 10% off using the online code, JILL, for a total of 40% off!

Also, the CAMEO will not be found in the regular online store, but you can find it on the "secret" Black Friday Page.  The Cameo is not 30% off, and my extra code will not apply, but it will be nicely discounted. The Black Friday Cameos are expected to sell out fast.

All shapes will be 50% off.

The Black Friday sale starts at 12:01 a.m. (MST) on Friday, November 25th.  Codes will be valid through the 28th.

Happy shopping!

Thanksgiving Shopping Advice

Don't overemphasize local foods. 

And tomorrow, be grateful to the principle of comparative advantage.

Advice for Lost Graduate Students

From Ariel Rubinstein.

Polling Economic Experts

Chapter 2 of my favorite textbook has a table showing various propositions about which economists largely agree.  It is based on the published results from several surveys.  A new project by the IGM Forum is now regularly polling a diverse group of top economists on a variety of policy-related questions.  It is a good way to see whether a professional consensus exists.  You can follow the project by clicking here.

If you are curious, I declined being a member of the panel, mainly because time is scarce.  Moreover, I have various other ways to let my opinions be known.

Straight No Chaser

Last night was date night. My wife and I went to a concert by Straight No Chaser, the a cappella group famous for its rendition of the Twelve Days of Christmas.  The tickets were a gift from our daughter.  Thank you, Catherine.

The concert was terrific! A wonderful mix of music, from traditional holiday songs to Elvis Presley and Lady Gaga. You can find out if they are giving a show near you by clicking here.

The View from Penn (a shameless plug)

My favorite textbook is used at the University of Pennsylvania.  The student newspaper writes:

[Mankiw's] textbook, Principles of Economics, has sold more than one million copies worldwide. It is used in his own class and in Economics 002, Introduction to Macroeconomics, at Penn. The class, taught by Luca Bossi, enrolls about 200 students in the fall semester and 500 in the spring. 

Bossi chose the textbook because he believes it is one of the best introductory macroeconomics texts available in the market. He adds that the material is “clearly explained” and does not contain any partisan slants. 

“I think the fact that Professor Mankiw has advised and still is advising Republican candidates running for office gives the impression to people that he is a conservative in the way he approaches economics,” he said. However, this “is not reflected in the content of the book.”

Ugly Discrmination

Chapter 19 of my favorite textbook has a case study on the economics of beauty, highlighting research by economist Dan Hamermesh.  So I thought some blog readers might enjoy this Daily Show clip featuring Hamermesh and his work on this topic.

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The British 1 Percent

This figure, via Paul Krugman, shows the income share of the top 1 percent in the United Kingdom.  The broad pattern is very similar to what U.S. data shows.  The figure suggests that the explanation of growing inequality over the past several decades cannot be U.S.-specific but must have broader applicability.

You can generate more plots like this here.  You find a similar U-shaped pattern in Australia, Canada, Ireland, and New Zealand but much less so in France, Germany, Japan, and Sweden. Might the rising share of the top 1 percent be related to the increasing use of English as a global language?

bringing home baby - she'll probably need something to wear

Unbelievably, the week has already arrived when we get to welcome our new baby - we'll meet her on Friday!  Some of my friends started asking about her "coming home" outfit, and I realized I didn't have anything planned.  Come to think of it, I have never planned a special coming home from the hospital outfit for my own kids.  I'm not super sentimental about that kind of stuff.  But this baby needed something, poor third child that she is.

First, I made her a really simple knot-top cap.  It is modeled after my favorite store-bought newborn cap that I bought for Oscar years ago.  I sketched out a simple template for you, which you can print out HERE.  You'll need to cut two pieces of stretchy knit fabric from the template, and then another rectangular piece for the border at the bottom.  I cut my border piece to 3 inches tall, and double the width of the bottom of the template piece.  I'm not going to go into detail how to piece it together, but Make It and Love It has a really great baby hat tutorial that should give you a pretty good idea.  Keep in mind that her hat brim folds up, but mine does not.

I also have basic instructions for a really easy baby hat from a t-shirt sleeve from my early sewing days - you can find it HERE.

Besides long sleepers, my favorite newborn clothes are the basic kimono-style snap shirts you can buy in packs.  I even did a tutorial a few years ago about how to dress one up with ric-rac and some pretty buttons (find it HERE). For this shirt, I simply added a lace trim around the shirt's opening - really easy, really fast.  This is actually the exact shirt that Oscar wore home from the hospital, and possibly Ruby, too (I don't actually remember what I put her in).

So there you have it, possibly the easiest coming home from the hospital outfit, ever.  Add a pair of leggings and some cute socks, and you're all set.

The Long, Sad History of Industrial Policy

Solyndra is only the latest chapter.

Supply-side Policies as a Way to Boost Aggregate Demand

A new paper from the Philadelphia Fed makes an important point:

This paper examines how supply-side policies may play a role in fighting a low aggregate demand that traps an economy at the zero lower bound (ZLB) of nominal interest rates. Future increases in productivity or reductions in mark-ups triggered by supply-side policies generate a wealth effect that pulls current consumption and output up. Since the economy is at the ZLB, increases in the interest rates do not undo this wealth effect, as we will have in the case outside the ZLB. We illustrate this mechanism with a simple two-period New Keynesian model. We discuss possible objections to this set of policies and the relation of supply-side policies with more conventional monetary and fiscal policies.

On Leverage and Financial Regulation

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

A Profile of Daniel Kahneman

By Michael Lewis.

Darkness in Europe

Berkeley economist Barry Eichengreen surveys the situation.

A Profile of OWS

A Harvard colleague recommends this article on Occupy Wall Street.

Input from Cornell

A student defends mainstream economics and endorses my favorite textbook:

Having used Mankiw’s textbook in an Introductory Economics class at Cornell, I can attest to the fact that the book lays a thorough and necessary foundation upon which to continue the study of economics and outlines the basic economic principles through which we understand much of our economy and society.

Why I am waking up so early

I am scheduled to be on Fox and Friends this morning.  The hit will be around 6:50 am, if you are awake, curious, and happened to be near a TV.

Update: Here is the clip.

What would John Maynard Keynes have said about Obamacare?

It is impossible to know, of course, but this passage from an open letter Keynes wrote to FDR in 1933 offers some hints (emphasis added):

You are engaged on a double task, Recovery and Reform;--recovery from the slump and the passage of those business and social reforms which are long overdue. For the first, speed and quick results are essential. The second may be urgent too; but haste will be injurious, and wisdom of long-range purpose is more necessary than immediate achievement. It will be through raising high the prestige of your administration by success in short-range Recovery, that you will have the driving force to accomplish long-range Reform. On the other hand, even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action, before you have had time to put other motives in their place. It may over-task your bureaucratic machine, which the traditional individualism of the United States and the old "spoils system" have left none too strong. And it will confuse the thought and aim of yourself and your administration by giving you too much to think about all at once.

I know that some people would dismiss this appeal to the "confidence fairy," but clearly Keynes was a big believer in her importance to the short-run business cycle.

Race Against the Machine

MIT economist Erik Brynjolfsson emails me:

I agree with your recent blog post that "the timing suggests that the two trends--the increasing value of education and the rising share of the top 1 percent--may be related." But how are they related?  I think the biggest single factor is the digital revolution, which is boosting the economy and benefitting you, me and Paul Krugman, while leaving many people behind.  The median worker's skills and our institutions aren't keeping up with accelerating technological change.

I discuss this in my very short new ebook (about 20,000 words) with Andrew McAfee called "Race Against the Machine: How the Digital Revolution Accelerates Innovation, Drives Productivity and Irreversibly Transforms Employment and the Economy".  In it, we seek to reconcile the fact that the 2000s has been the best decade since the 1960s for productivity growth, better than the roaring 1990s even. And yet median wages have largely stagnated and employment actually has fallen since 2000. We attribute this in part to the fact that tech. progress is driving productivity even has it leaves many types of workers behind.  In fact, a large group has been made worse off, even as those with education and talent have gained immensely, and opportunities for entrepreneurs are better than ever.  In my judgment, the underlying trends are on track to accelerating in coming years.

Educating Oligarchs

In a couple of recent posts (here and here), Paul Krugman claims that it is just wrong to think that increasing income inequality is largely about education, because much of the income gains have accrued to the very top of the income distribution--the much discussed 1 percent.  Instead, he says, increasing inequality is about the growing influence of oligarchs.

I have been puzzled by Paul's argument.  My initial reaction was that it struck me as a non sequitur.  Even if the income gains are in the top 1 percent, why does that imply that the right story is not about education?

I then realized that Paul is making an implicit assumption--that the return to education is deterministic.  If indeed a year of schooling guaranteed you precisely a 10 percent increase in earnings, then there is no way increasing education by a few years could move you from the middle class to the top 1 percent.

But it may be better to think of the return to education as stochastic.  Education not only increases the average income a person will earn, but it also changes the entire distribution of possible life outcomes.  It does not guarantee that a person will end up in the top 1 percent, but it increases the likelihood.  I have not seen any data on this, but I am willing to bet that the top 1 percent are more educated than the average American; while their education did not ensure their economic success, it played a role.

Let me give you a couple examples.  I am comfortably in the top 1 percent.  I believe that Paul, with his Princeton professorship, regular Times column, speaking fees, and moderately successful textbook, is there as well. I suspect (although cannot prove) that if he and I had stopped our educations after finishing high school, we would not have been anywhere near where we are in the income distribution.  If that is correct, might it be better to think of education as the key rather than focusing on the growing influence of oligarchs?

I am inclined to think that education is important here in part because the large increase in the share of the top 1 percent from the 1970s to the present occurred together with the increase in the rate of return to education during this period documented by labor economists.  It is possible, of course, that the the two phenomena just happened to occur simultaneously.  But the timing suggests that the two trends--the increasing value of education and the rising share of the top 1 percent--may be related.

Addendum: Here is a related old post.

a very halloween birthday

I'm sure by now you are all sick of hearing about Halloween, but I had to share a few more photos of Oscar & Audrey's double birthday party.  My friend, Sonja, and I put so much work into it, but it was such a great time!  Both of the birthday kids were in Halloween heaven.

I wish I had taken more photos of the decorations!  Sonja's house looked awesome - she made several cute felt buntings, including the bats pictured above.  There were also decorated lanterns, lots of bat silhouettes, and a gigantic yarn spiderweb that covered an entire wall in her hallway.

I made a simple cake (vanilla with blackberry filling and chocolate frosting), and decorated the top with cardstock cutouts to look like a haunted house, or "house of spooks" as Oscar called it.  Sonja made yummy nutella mini cupcakes, decorated with the cupcake toppers.  Sonja's husband, Jake, cooked up a delicious dinner of pulled pork burritos with all the fixings, and we also had clementines dressed up as jack-o-lanterns, spooky mummy sugar cookies on a stick, cookie bones, and brownies with cute jack-o-lantern wrappers (there was no shortage of treats).

Since the kids were mostly 3-years an under, we kept the activities simple.  After handing out the treat bags Sonja and I made, we sent them on a mini trick-or-treat to the doors inside her house.  The kids received stickers, spider rings, a piece of candy, and a pumpkin-wrapped brownie.  Afterward, we sent them outside to break open a pinata to fill their bags with a few more treats.

We ended the evening with cake, of course.  After Audrey beat Oscar to the punch of blowing out the candles, we re-lit them at least five more times.  I hope they got all their wishes in.

You can find many of the ideas and tutorials from projects mentioned above linked on my Halloween Party Pinterest Board.

I speak with NPR

ruby's wonder woman costume

Hello! You'll find me over at Lil Blue Boo today, sharing a bit more about Ruby's Halloween costume.

If you aren't already keeping up on Ashley's story, you'll want to check out her posts on her recent battle with cancer.  I've always admired Ashley's work, but even more I admire her positive attitude and tenacity.  She is truly an inspiration, and it sounds like things are finally turning around for the better.  Hurray! 

Keep fighting, Ashley!  We love you.

Occupy Wall Street comes to Ec 10

The Harvard Crimson has the story.  Ironically, the topic for today's lecture is the distribution of income, including the growing gap between the top 1 percent and the bottom 99 percent.  I am sorry the protesters will miss it.

Updates:

1. The open letter that attacks ec 10.
2. A student comes to ec 10's defense.
3. Here's what happened: About 5 to 10 percent of the class participated in the walk-out. At the same time, some previous ec 10 students came in to sit in the lecture as counter-protesters. The lecture then proceeded as planned.
4. The Crimson offers an editorial on the protest.

The Distributional Effects of the Perry Plan

...as estimated by the Tax Policy Center.