|Mankiw was taller than I'd imagined.|
Mankiw's keynote address was titled Today's Economy and its Discontents, which was generally exploring the idea of "secular stagnation" without using that term. Graphs he presented came from usual sources you've seen over the years if you have followed this issue. I have typed my notes from his talk below:
-Piketty and Saez note income gains in the US are increasingly going to the top one percent.
-In the US, there is slower growth of per-capita income relative to the early 1970s (as measured in 15-year averages), the decline has been steady but more markedly slower since the 2008 recession.
- However, this data is distorted by US tax-code changes over the years. As the tax code changes, people report income differently (ex: pass-through entities) and the tax code was never meant to be a way to measure economic data.
But supposing the data on income growth generally is correct, what explains the slower growth?
- Labor-force participation has declined, a demographic problem.
- Mankiw highly recommends Robert Gordon's book on why productivity growth has slowed. (Gordon summarizes some of his research in this paper http://www.piketty.pse.ens.fr/files/Gordon2015.pdf )
- One paper finds we have many more researchers than ever but flat total-factor productivity growth.
- Without mentioning Tyler Cowen, he makes similar arguments as Cowen's book.
- The boost from women entering the workforce has now been fully experienced.
- The latest inventions do not bring about the gains to productivity that ones 50 years ago did. (My example: We have fancier toilets today, but indoor plumbing was the real revolution.)
- What about the spread of markets worldwide and rapid growth in developed countries like India and China?
- Stagnation in productivity is seen in most-developed countries but less so in developing ones.
- This is little comfort to the American or European voter.
On inequality of growth in income:
- Mankiw also recommends Goldin and Katz's book the Race Between Education and Technology, calling it "The best explanation of inequality."
- Technology is replacing low-skilled workers. (His example: the ATM. Driverless trucks can't be far from now.)
- Education is a force to make people more equal. But increasingly, gains in earnings are only to Masters degrees and above.
- Educational advance has slowed in recent years, fewer people in US are pursuing the most-advanced degrees.
What about trade?
- Surveys show economists unanimously believe America gains from allowing China to produce goods in which it can do so relatively more cheaply than the US while the US does likewise.
- But economists also overwhelmingly agree that workers in these industries are hurt. So, economists agree with both of these and the need is to do a better job of explaining gains from trade to the general public.
- Gains are increasingly to "Superstars." The #1 draft pick earns multiples of what the #10 draft pick earns, for example.
- The women's movement and assortive mating also play a role.
- High-educated/high-income singles marry eachother, concentrating the wealth divide.
- In the 1960s there was a negative correlation between husband/wife earnings-- if the husband got a raise, the wife could work less.
- Now, husband and wife income are positively correlated.
How do we address the root causes of slower growth and widening inequality?
- Prescriptions are difficult and filled with caveats.
1. Education, with patience for results.
- Knows one researcher who is convinced that early preschool really helps. Implementing the perfect preschool law, however, would take another 20 years to have an impact when the first beneficiaries enter the labor force.
2. Open the door to skilled immigrants. "We ought to be handing out green cards with diplomas." (This struck me as not a good idea for the less-developed countries these students came from, however.)
What about the tax code?
His graph illustrated that changes in tax rates among quintiles from 1980 to today is quite modest relative to the change in income distribution growth over these decades-- Obama's rates were not that different from Reagans and the tax code doesn't appear to matter much.
Business taxation (See Mankiw's article in Friday's NY Times, he summed up his points in this lecture.):
- The rate (not very interesting), worldwide vs. territorial, income vs. consumption, origin vs. destination-based.
- It's easier to tax at destination rather than at origin (how do you define where the multinational iPhone or pencil is made?)
Is there hope?
- Again, global extreme poverty and disease are in decline.
- US citizens at the federal poverty level are poorer than 85% of other US citizens, but richer than 85% of the world.
Rather than "Make America Great Again," Mankiw would like to "Make America Grateful Again," because we truly live in a wonderful age of prosperity.
Questions from the audience:
- I asked Dr. Mankiw whether he thought a NGDP level target would help. He admitted he had completely avoided monetary policy (because "that would require its own lecture") he voiced tacit support that it might be useful. But he felt like it's less useful when the instruments available (the interest rate, expectations channel, etc.) may not be as powerful as NGDP level target proponents hope, particularly when the interest rate is at the "zero lower bound."
- One person voiced a hypothesis that we have too many researchers researching things not really useful to productivity growth. (Ex: Trying to find whether there was ever water on Mars instead of finding water for starving people in Africa.)
- What about household formation, as outlined in Charles Murray's book Coming Apart?
- Mankiw really likes the Murray book, household formation and stability might matter.
- What about a carbon tax, any hope of that?
- Mankiw revealed he and another economist had met with Donald Cohn at the White House to speak specifically about a carbon tax, and now he was hearing news reports that there was a "debate" inside the White House. He was not optimistic given Trump's favoritism of coal on the campaign trail, but is optimistic that there are several "debates" about issues like trade more favorable to mainstream economics.
- On trade, he felt that Kevin Hassett was probably in agreement that trade deficit doesn't matter and that the Administration would be better off working on other policies.
- A student speculated that the rising cost of college tuition relative to return on investment might explain the graph of slowing educational attainment. Mankiw noted that education economics, education as a signalling device, etc. is its own problem.
Issues I felt he did not address:
- Tyler Cowen's hypothesis that since leisure time and activities have never been cheaper (think YouTube and Twitter), along with basic necessities, people need to earn less to have the basic standard of living they wanted, hence have traded more work for leisure.
- Similarly, Cowen's "complacent class" thesis.
- The role of consolidation of major firms (banks, Time Warner-AT&T, etc.) and market power pushing out competitive forces and massive economies of scale discouraging start-ups.
In all, it was a good time. Mankiw is taller than I expected for some reason.