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If Candidates Cared about Economists:

What policies would presidential candidates support if they sought to court the support of economists? Greg Mankiw has a list (all but the last one I basically support):

  • Support Free Trade

  • Oppose Farm Subsidies

  • Leave Oil Companies and Speculators Alone

  • Tax the Use of Energy

  • Raise the Retirement Age

  • Invite More Skilled Immigrants

  • Liberalize Drug Policy

  • Raise Funds for Economic Research

On that last one, Mankiw comments:

The government subsidizes economic research through an arm of the National Science Foundation. The amount of money is relatively small — measured in the millions, not billions — and spending has been about flat in inflation-adjusted terms over the last decade. If Senator McCain or Senator Obama wants to endear himself to economists, there is no easier way than by promising an extra few million dollars to improve our understanding of how the economy works.

You might view this policy as nothing more than a way to buy a few votes. Perhaps you view economists as mere mortals, as tempted as anyone else by special interests. Maybe you would regard more funding for economic research as not very different from the billions thrown every year at farmers.

If you are that cynical, I won't try to dissuade you.

Jake (Guest) (mail):
How cynical does one have to be to question the argument that sweet reason dictates that the government give money to the arguer?
7.13.2008 10:33am
Modus Ponens:
Indeed, Jake.

One would have to be pathologically anti-cynical not to conclude otherwise.
7.13.2008 10:56am
JDS:
"Tax the use of energy"? Maybe a tax on the external costs of various fuels makes sense, but not energy.
7.13.2008 11:03am
WWJ (mail):
Why is taxing the use of energy a good idea on a net basis? Those industries that are heavy users of energy will relocate or (more likely) not expand any operations where energy costs are artificially high due to taxes.

Isn't it sort of a given if you increase the cost of employing someone via labor taxes, you will get less employment? So if energy taxes are increased, then wouldn't you get less industry where energy is a significant cost?
7.13.2008 11:31am
J. F. Thomas (mail):
What on earth does "leave the oil companies and speculators alone" mean? Considering that the vast majority of oil extraction in this country (and most others for that matter) takes place on publicly owned land, how exactly are we supposed to leave the oil companies alone?

Mr. Mankiw also seems to think that there is a lack of skilled labor in this country. He needs to actually ask any IT professional, or other skilled professional, if there is a lack of skilled labor in this country, rather than listen to the protestations of employers who are more concerned with access to cheap, compliant and exportable labor, rather than skilled labor.
7.13.2008 11:32am
Sam Hall (mail):
"What on earth does "leave the oil companies and speculators alone" mean? "

Windfall profit taxes come to mind.
7.13.2008 11:39am
Annonymous Coward (mail):
Given the computing power available to all these days simply offering the economic data in the hands of the government free to all in easy to use - some trade secrets redacted or obscured - form combined with paying NBER to do the same would spur more research than the publications could handle.
7.13.2008 11:41am
Annonymous Coward (mail):
Given the computing power available to all these days simply offering the economic data in the hands of the government free to all in easy to use - some trade secrets redacted or obscured - form combined with paying NBER to do the same would spur more research than the publications could handle.
7.13.2008 11:41am
seadrive:
One way or another, the private sector spends billions to figure out how the economy works.
7.13.2008 11:54am
Oren:
One way or another, the private sector spends billions to figure out how the economy works.
Yes, but it does considerably more good when that knowledge is shared freely, debated, rebutted and generally churned about rather than confined to a single private entity.
7.13.2008 12:26pm
Gregory Conen (mail):
I think the list is worded poorly, but the sentiments are mostly good.

By leave oil companies and speculators alone, I assume he means don't support the expanded regulation for futures markets, nor the windfall profits tax. As opposed to, say, ditch environmental regulations.

By "Tax the use of energy" I assume he means carbon based energy (which the majority of it is), while excluding renewables from the tax, either directly or via credits.
7.13.2008 12:35pm
JRL:
Just adding my name to those questioning the "tax the use of energy" bullet. The rest, except for the last, sound good.
7.13.2008 1:24pm
fishbane (mail):
Oppose Farm Subsidies

[...]

Raise Funds for Economic Research

[...] You might view this policy as nothing more than a way to buy a few votes.


"Stop subsidizing them, subsidize me! I'm cheaper!"
7.13.2008 1:37pm
jim47:

If you are that cynical ... [that you believe that] economists as mere mortals ... I won't try to dissuade you. (quote only slightly manipulated)


Yeah, I think I'll at least remain cynical until Marvel puts out its superhero movie "The Economists." Then maybe I'll believe they aren't mere mortals.
7.13.2008 1:41pm
Prof. S. (mail):
By energy tax, I'm guessing he means a European style tax. As a basic concept, a fat energy tax (particularly on oil) offset by an commensurate cut in income taxes would mean effectively no tax increase, but would leverage cartel profits from oil producers. Obviously, this isn't perfect, but I've heard it thrown around and tend to agree with the proposition.

Not sure I agree with the liberalizing drug policy. I'd have to see the proposal.
7.13.2008 1:44pm
Javert:
Tax the Use of Energy & Raise Funds for Economic Research versus Oppose Farm Subsidies & Leave Oil Companies and Speculators Alone

Typical, unprincipled argument that has done great harm to the case for capitalism: I'm against coercion, except for my pet projects.

And then he uses an obvious ad hominem attack to squelch any criticism of his call for subsidies for his industry. Shameful.
7.13.2008 2:07pm
Don Meaker (mail):
There should be a tariff, a low one, on all ocean going imported goods and services, just because it is US Naval Supremacy (Caps intentional) which enables this trade.

This would encourage use of oil from Domestic sources, and to a lesser extent from Mexico and Canada. It would also encourage development of alternatives.
7.13.2008 2:17pm
Don Meaker (mail):
I would suggest that anything the federal government does, whether on the tax side or the spend side, should be closely connected to powers granted in the Constitution.

(Hey, you in the back, quit giggling!)
7.13.2008 2:19pm
teqjack (mail):
Old (by today's standards) saying - "Ask three economists a question, get five answers."

As bullet points, not a bad list. But some of the specifics...

"Tax energy" because it has already caused people to use bicycles more? Well, why not bring back the company store - heck, the company town - so people won't have to (or be able to) move around so much. And who cares that a chauffer-driven stretch party-limo costs only a bit more in fuel taxes than the old beater they use to get to work?

OTOH, almost OK with sub-specification of "Legalize [some] drugs." Almost. I think leaving marijuana classed as a dangerous drug "with no medical use" is asinine and it should be changed to a lesser classification, possibly but not necessarily one requiring prescription. At least allow hard-core sailors to import hempen rope from Canada!
7.13.2008 2:40pm
Snarky:
I do not see any good reason to be opposed to more funds for economic research.

If better knowledge could have helped us identify and take action to ameliorate the housing bubble, to take one example, we would have been able to pay for the additional research many times over.

Also, there is something to be said about having more empirical research.
7.13.2008 2:55pm
Harry Eagar (mail):
The only real economic problem we have right now is lack of regulation of financial markets.

Obviously, economists wouldn't put that on their lists.

That's why I don't pay much attention to economists.

Sheesh.
7.13.2008 3:11pm
Bruce Hayden (mail) (www):
What on earth does "leave the oil companies and speculators alone" mean? Considering that the vast majority of oil extraction in this country (and most others for that matter) takes place on publicly owned land, how exactly are we supposed to leave the oil companies alone?
Does this mean that you agree that there shouldn't be "windfall taxes", etc. on either then? Or are you creating a straw man here for argument?
Mr. Mankiw also seems to think that there is a lack of skilled labor in this country. He needs to actually ask any IT professional, or other skilled professional, if there is a lack of skilled labor in this country, rather than listen to the protestations of employers who are more concerned with access to cheap, compliant and exportable labor, rather than skilled labor.
Not sure what you are getting with with exportable labor. The intent here seems to be to import skilled labor.

My experiences are different I think from JF's. It isn't the IT organizations that are really hit hard, but rather their suppliers. My view is that we shouldn't put limits on scientific or engineering PhDs, and minimal limits to those with master's degrees in those areas. A lot of the brain power that goes into designing the electronics that make up the computers we use is foreign born. And, my experience is that much of it that has moved here is paid comparably to native born talent.
7.13.2008 3:14pm
Snarky:

Obviously, economists wouldn't put that on their lists.


That isn't true.

There are plenty of economists out there who are Democrats. And who would support appropria
7.13.2008 3:20pm
TLB (mail) (www):
Many who call themselves economists are actually just "economists", and Mankiw fits squarely in that definition. The more skilled people we import, the less will be available for other countries. That leads to problems down the line, including costs for us. Mankiw didn't mention those costs, thus he's not really an economist, just a hack.
7.13.2008 3:22pm
Snarky:

Obviously, economists wouldn't put that on their lists.


That isn't true.

There are plenty of economists out there who are Democrats. And who would support appropriate regulations of financial markets. That are also plenty of economists out there who are Republicans, who also recognize the need for reasonable regulations.

I think that the extremely loud voices of extremist libertarian economists is drowning out the more reasonable voices for you.
7.13.2008 3:22pm
David M. Nieporent (www):
Many who call themselves economists are actually just "economists",
And many are just economically ignorant bloggers.
and Mankiw fits squarely in that definition. The more skilled people we import, the less will be available for other countries.
I'm pretty sure that "importing" people has been banned since 1808. He said "invite," not "import."
7.13.2008 3:26pm
Sam Hall (mail):
"Not sure I agree with the liberalizing drug policy. I'd have to see the proposal."

We need to look at the entire racket. Do you know you have to have a prescription to buy oxygen or a blood oxygen meter? There are lots and lots of similar stupid laws. This just raises the cost. (and my blood pressure)
7.13.2008 3:56pm
Cody (mail):
1) Energy taxes - that almost certainly means a carbon tax. Economically speaking, this isn't really controversial. Does burning fossil fuels have at least some negative externalities? Even if you're a hardline AGW skeptic the answer to that is probably "of course". And once you've decided that there are negative externalities, the correct answer to that is a tax. That's quite non-controversial.

2) Financial regulation - there are indeed some economists who support more financial regulation (although even among them, there's nothing remotely like a consensus as to what those new regulations should be). But that doesn't include all economists, and Mankiw is trying to just list the policies that would interest all economists, not just ones on one side of the political spectrum. A few policies I'm quite sure Mankiw himself would support are also missing from the list, and for the same reason.

3) More funds for research - again, the list is supposed to be "things that will make economists want to vote for you". It's not that bad an idea though; it's certainly a better use of tax dollars than a lot of OTHER things the federal government spends money on. In fact, as a general rule, I like the government spending more money on basic research, especially research that is unlikely to be funded (or funded well enough) by private industry. That's essentially a public good, and even libertarians tend to think that's one of the (only) things governments are for.
7.13.2008 4:07pm
BillW:
Cody: 3) More funds for research - again, the list is supposed to be "things that will make economists want to vote for you".

Indeed, the headline is explicit: "What if the Candidates Pandered to Economists?"
7.13.2008 4:41pm
Javert:

And once you've decided that there are negative externalities, the correct answer to that is a tax. That's quite non-controversial.
Really? There are "negative externalities" from obesity. Should there be a fat tax?
7.13.2008 5:19pm
Perseus (mail):
And once you've decided that there are negative externalities, the correct answer to that is a tax. That's quite non-controversial.

That answer is only non-controversial among Pigouvian economists, not Coasian (or Public Choice or Austrian) economists.
7.13.2008 5:39pm
arbitraryaardvark (mail) (www):
What policies would presidential candidates support if they sought to court the support of [x]?
Well, I'm going to say the answer depends a great deal on which rigorous definition you use of x.
I'm thinking of the guy my high school paid to teach me economics. Nice guy, competent political science teacher, taught the received Keynesian dogma. I don't know if he believed it or was just doing what he needed to to keep his job. In college, when I finally took an economics course, it turned out to be all that stuff I'd been reading by libertarians, and nothing like the high school course.
Let's suggest that people called economists respond to incentives. Different sectors of the industry have different sets of incentives for what are they looking for from a presidential candidate.
7.13.2008 6:15pm
Sam Hall (mail):
"1) Energy taxes - that almost certainly means a carbon tax. Economically speaking, this isn't really controversial."

Really? I think, and a lot of scientists agree with me, that the more CO2 the better. More plant mass, which means more animals. Return earth to the lush place it was before the Middle Age cold spell.
7.13.2008 6:20pm
Elliot123 (mail):
I wonder how many first time home buyers want government regulations and laws that will keep the prices of houses at levels reached in the real estate boom? Is it OK to call home owners a special interest group, even if they are working families?
7.13.2008 6:45pm
David M. Nieporent (www):
Really? There are "negative externalities" from obesity.
Such as? (In answering, please don't count negative externalities that stem from government policies rather than obesity itself.)
7.13.2008 7:06pm
Cody (mail):
Javert: The negative externalities of obesity are debatable, and in any case just because something HAS a negative externality doesn't mean you should do anything about it. All I'm arguing is that if you feel compelled to do something about obesity, a tax is a lot likely to do less harm than the alternatives. (Banning, rationing, Public Health police to enforce diets, mandatory excercise, etc.)

Perseus: Either I've missed your point, or your criticism is offbase. When possible it's nice to assume zero transaction costs, in which case, yes, the Coase Theorem renders Pigovian taxes unnecesary. However transaction costs are rarely zero, and in this case are actually very high.

Sam Hall: You've outlined a possible (and highly controversial) positive externality of burning fossil fuels. That doesn't address the question of whether or not there are other negative externalities. (And, in any case, while higher CO2 levels are clearly good in some ways for some plants in some conditions, that doesn't neccesarily mean much. For example, some research indicates that if both CO2 and temperature rise, the positive effects are negated.)
7.13.2008 7:10pm
Elliot123 (mail):
"Such as? (In answering, please don't count negative externalities that stem from government policies rather than obesity itself.)"

They spill out of their airplane seat into the next seat.
7.13.2008 7:15pm
Javert:
Really? There are "negative externalities" from obesity.
Such as?


(In answering, please don't count negative externalities that stem from government policies rather than obesity itself.)
Health care. Plane travel, but not as stated by Elliot123. They cost more to transport but don't pay more for a ticket.
7.13.2008 7:56pm
Perseus (mail):
When possible it's nice to assume zero transaction costs, in which case, yes, the Coase Theorem renders Pigovian taxes unnecesary. However transaction costs are rarely zero, and in this case are actually very high.

Even if that's true, it does not demonstrate that a tax is the most economically efficient solution (as opposed to cap-and-trade, other forms of regulation, doing nothing at all, etc.), nor does it demonstrate that the long-run political and administrative dynamics associated with a tax are superior.
7.13.2008 7:57pm
Javert:
Sorry. Bad formatting. And I did preview.
7.13.2008 7:57pm
Harry Eagar (mail):
Sam Hall sez: 'Do you know you have to have a prescription to buy oxygen'

No, I don't know that. I used to buy medical oxygen and never had to have a prescription (unless I wanted insurance to reimburse me). Who changed that?
7.13.2008 8:48pm
Doc W (mail):
Maybe the last item on Mankiw's list was the quiz. You pass if you tell him to buzz off.

On most of the other points, Mankiw is one of those mainstream economists who seem to have got the basic message: government meddling in the market creates problems, which get blamed on the market, leading to calls for more government intervention (and more problems), etc. Stop the cycle.
7.13.2008 9:14pm
TJIT (mail):
What on earth does "leave the oil companies and speculators alone" mean?
Not keeping mutually exclusive policies in place would be a good start.

An example of this would be refraining from:

1. Holding kangaroo court hearings in congress to savage the oil company execs for not producing enough domestic petroleum

2. While congress simultaneously keeps the most prospective domestic lands for petroleum production inaccesible to the oil companies
7.13.2008 9:27pm
Cody (mail):
Perseus: Oh, granted. But do note that a tax is indeed the most economically efficient option. (Well, alright, if you assume perfect knowledge - and that permits will be auctioned - a cap and trade system is functionally identical but not better.)

Politically, it's an entirely different matter. For example, many proponents of a carbon tax assume that there will be corresponding tax cuts so that the overal tax burden and progressiveness doesn't change. Anyone who really expects this to happen are, perhaps, being unrealistic. (Then again, proponents of cap and trade systems seem to think that an fairly chosen number of permits will be allocated in an honest and transparent process. Heh.)
7.13.2008 9:48pm
Thomas B. (www):
No "eliminate the minimum wage?"
7.13.2008 10:58pm
Andy Freeman (mail):
> They cost more to transport but don't pay more for a ticket.

So what? Airlines clearly think that price discrimination on this point is a bad idea. If you think that they're wrong, feel free to start an airline and do pricing correctly. If you're right, they'll either adopt your strategy or you'll get rich.

What? You're unwilling to risk your money on the correctness of your beliefs? If you're not, why should anyone else believe them?
7.13.2008 11:28pm
Andy Freeman (mail):
> They spill out of their airplane seat into the next seat.

That's the airline telling you that it values their biz more than it values yours.

That's not a problem that govt should address.
7.13.2008 11:32pm
AF:
Mankiw has the annoying habit of claiming to speak for economists in general when in fact he speaks, at best, for the median American economist.

Plenty of economists support restrictions on trade, windfall profit taxes, and current retirement ages. On the right, many oppose increased energy taxes and subsidized economic research.

Though I believe Mankiw's comments about subsidizing economic research are made with dry irony.
7.14.2008 10:44am
J. F. Thomas (mail):
Not sure what you are getting with with exportable labor. The intent here seems to be to import skilled labor.

Despite what the IT companies claim, they are using the H1B and even shorter-term work visas to suppress wages in this country. Also even more insidiously, they are bringing temporary workers over here to train and send back to their home countries so they can eliminate jobs here.

There is no shortage of native born or trained engineers and knowledge workers. Jobs are being off-shored at a prodigious rate, not because their is a lack of native talent, but because companies think they can save money by offshoring technical jobs. Unless this offshoring trend can be reversed and companies care more about the long term technical base of this country than next quarter's stock and dividend statement (which is why economists should stfu), we will continue to hear about how we don't have enough engineers, scientists and IT people while those very same people struggle to find jobs, get laid off as their jobs go to India and get paid less than the geniuses who invented negative amortization mortgages and loaned money to people with no credit and no income.
7.14.2008 12:09pm
Pon Raul (mail):
I generally don't agree with J.F. Thomas, but it is BS that we don't have enough native Engineers. We have plenty of native born people who go into Engineering, or at least consider an engineering major. It is just that it doesn't pay as well as going into law, for instance. That doesn't mean that we shouldn't allow competition around the globe and allow for the importation of the world's best and brightest engineers, but we should also quit going on about how we don't have enough people going into engineering. We have plenty of people who do, or think about going into engineering, but then find that being an engineer doesn't exactly pay the bills as well as being a doctor or lawyer.
7.14.2008 8:08pm
q:
<blockquote>
Jobs are being off-shored at a prodigious rate, not because their is a lack of native talent, but because companies think they can save money by offshoring technical jobs.
</blockquote>
One and the same. Unless by "think" you mean "falsely think." In which case, I remain unconvinced, unless you can show every CEO of every tech company is somehow irrational.
<blockquote>
companies care more about the long term technical base of this country than next quarter's stock and dividend statement</blockquote>
Tech companies are much more incentivized to care and do care about the "long term technical base" than a regulatory body. It's the shareholders that are more concerned about short-term profits. I suppose you're an advocate of more corporate board control?
<blockquote>
Unless this offshoring trend can be reversed</blockquote>
The offshoring trend can be reversed by liberalizing immigration policies, which is what Mankiw advocates. Or by making it illegal, but that would probably ruin the U.S. economy.
7.14.2008 8:09pm
Kazinski:
I think an energy tax or a carbon tax would just be a job exportation tax. China, India and the rest of the developing world would snap up energy intensive industries, using either coal power or manpower for the relatively clean energy used in the developing world.

It may be possible to design a tariff system based on the energy content of products, but there are problems with that too. Food has a lot of energy in it, anything high tech would have to be considered a high energy import because nothing uses more energy than the lifestyle of a well paid technical employee.
7.14.2008 11:23pm