Regular readers of this blog know that I often disagree with Paul Krugman. But I come here today to agree with a recent post of his on the analysis put out by two Trump economic advisers. The Trump advisers' analysis is truly disappointing (though perhaps not surprisingly so, given what the candidate has said over the course of the campaign).
Their analysis of trade deficits, starting on page 18, boils down to the following: We know that GDP=C+I+G+NX. NX is negative (the trade deficit). Therefore, if we somehow renegotiate trade deals and make NX rise to zero, GDP goes up! They calculate this will bring in $1.74 trillion in tax revenue over a decade.
But of course you can't model an economy just using the national income accounts identity. Even a freshman at the end of ec 10 knows that trade deficits go hand in hand with capital inflows. So an end to the trade deficit means an end to the capital inflow, which would affect interest rates, which in turn influence consumption and investment.
I suppose that their calculations might make sense in the simplest Keynesian Cross model, in which investment is exogenously fixed and consumption only depends on income. But that is surely not the right model for analyzing the impact of trade policy over the course of a decade.
Trumponomics
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Fight for Fifteen?
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Harvard Scholars on President Obama
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How Trump paid so little in taxes.
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New Videos from the NBER
1. "The Dramatic Economics of the U.S. Market for Higher Education," Caroline Hoxby's Martin Feldstein Lecture.
2. "Matching Markets and Market Design," the 2016 Methods Lectures, which were presented by Atila Abdulkadiroglu, Nikhil Agarwal, Itai Ashlagi, Parag Pathak, and Al Roth.
3. "The Economic Consequences of Brexit," a panel discussion with presentations by Richard Baldwin, Jeffrey Frankel, Anil Kashyap, Helene Rey, and Thomas Sampson.
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The Nobel
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Trump's Economist
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What I've been doing
Today and tomorrow, I am attending this conference at the Federal Reserve Bank of Boston. Papers and some videos available at the link.
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Why Are Interest Rates So Low? Causes and Implications
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Normative Ethics and Welfare Economics
For the next couple days, I will be hanging out at this conference. Various papers available at the link.
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In Praise of High Prices
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An Upcoming Interview
This coming Friday, I will be interviewed by Frank Conway at an Economics Teaching Conference. You can hear a live broadcast of the interview by registering here.
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Update on Carbon Washington
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Worst of Both Worlds
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Coming soon
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Before the Flood
A movie, approximately 1 1/2 hours, on climate change, with yours truly making a brief appearance at around 59:40. (Update: Sorry, it seems no longer to be freely available.)
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What is it like to win a Nobel Prize?
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On the Election Results
I did not support Mr. Trump, but now that he is our President-elect, I wish him well.
To my many friends who are now freaking out, I encourage you to take a deep breath and calm down. Our political and economic system is more robust than you sometimes give it credit for being.
Earlier this year, I wrote:
People often ask me whether it is frustrating to work in Washington, noting how hard it is to get anything done. Yes, in some ways, it is. This episode is only one example where our good policy (as my White House colleagues and I saw it) was subverted by an uncooperative legislature.
Yet, over time, I have come to appreciate that frustration for those in policy jobs is not a bug in the system but rather a feature. The founding fathers, in their great wisdom, built this tension into the system. In high school civics classes, it goes by the name âchecks and balances.â
A common lament is that there is too much gridlock in Washington, and maybe there is. But imagine that your least favorite candidate wins the next presidential election. Might you be grateful when the new President and his or her CEA chair become frustrated while trying to implement their new ideas for economic policy?
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The podcast is live
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The Triumph of the Less Educated
In a Times column back in July, I noted that the Brexit vote was strongly correlated with education. The recent presidential election shows the same pattern: "College graduates backed Clinton by a 9-point margin (52%-43%), while those without a college degree backed Trump 52%-44%." The graph below shows that it is unusual for the more educated and less educated to be in such substantial disagreement.
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More Pages to Explore .....
