2008 Woodie Awards
Fed Chairman Ben Bernanke was here earlier to give a speech marking the 75th anniversary of the Woodrow Wilson School. Replete with economic theory and economic history, Bernanke’s speech really demonstrated his strong grasp of both subjects. The speech also demonstrated how obscure monetary policy is. I hope because of this speech, more Woodrow Wilson majors will choose the less mainstream path of studying monetary policy. There’s definitely more to it than what they teach in eco101.
A 2004 study conducted by the Department of Economics at University College Dublin found that left-handed men have more earning power than their right-handed counterparts. However, female lefties are paid significantly less compared to right-handed women.
Can handedness really factor so prominently in a person’s professional success? It seems implausible. But hey, it’s a provocative read that will no doubt raise questions about the historic stigmatization of southpaws, the cognitive differences within brain hemispheres, and the treatment of men and women in the workplace.
Admittedly, I like seeing Princetonians nominated to top government positions (even if it is by a Republican President). But what I really enjoy is reading the fascinating history of their lives. Take Ben Bernanke, former Princeton Professor of Economics, whose confirmation hearings for Fed. chairman are set to begin. The Post features a truly excellent article entitled “Bernanke Unwrapped.” His life story reads like a riveting narrative (maybe even as good as the novel he wrote in high school about “white and black football players coming together to form a team at a new high school”).
He’s one of Princeton’s own: the cool-headed CEA Chairman Ben Bernanke. Take a look here.
I am pleased to announce the “One Nation Campaign,” which will ask people to give up a portion of the money they received from Bush’s tax cuts to Hurricane Katrina-related charities. The cleverness of the campaign lies in the fact that participants kill two birds with one stone: they make a political statement about the irresponsibility of Bush’s tax cut bill and they give money to charity at the same time. We’re just getting the ball rolling (we had our first organizers meeting earlier tonight), but we’ve already attracted a lot of interest and support.
Check out the campaign’s website:
MyTaxCutforKatrina.org or
OneNationCampaign.com
Stay tuned for more information . . .
As Robert Reich reminds.
Any frequent reader of Princeton’s own New York Times columnist Paul Krugman knows he doesn’t much like Alan Greenspan. So it was no surprise that Krugman came out shooting and slashing at the Chairman today right after a weekend of celebration in honor of Greenspan’s legacy as, perhaps, the best Fed Chairman and central banker in history. Krugman has previously called Greenspan a political hack, and today he likened the chairman to “a man who suggests leaving the barn door ajar, and then - after the horse is gone - delivers a lecture on the importance of keeping your animals properly locked up.” But there are a number of points in Krugman’s op-ed where he sullies reality.
-Krugman writes that Greenspan “gave decisive support to the Bush administration’s irresponsible tax cuts.” But Greenspan never supported the Bush tax cut specifically. Rather he supported tax cuts with “triggers” that would automatically kill the cuts if certain conditions were met (like projected deficits). Greenspan’s thoughts are never simple or unqualified, and it is purely the media’s fought that Greenspan is indicted by Krugman as such. Headlines appearing in major newspapers after he testified before Congress about the cuts tout that the Fed Chairman “Supports Bush’s Tax Cuts.” The problem is the media errs (and often does when reporting about Greenspan) on the side of simplicity in characterizing the very complex positions the Chairman takes.
Greenspan’s triggers were ignored by Bush and the consequences of the big tax cuts, long-term deficits, thus are strictly the fault of our President, not the Fed Chairman.
-Krugman also accuses Greenspan of changing positions by first supporting risky interest-only loans and exotic forms of adjustable-rate mortgages, but then going against them in the span of a year. I don’t see this as a valid point of criticism, given how financial markets tend to overdo things and go to extremes (like huge up and down swings in the stock market, for example). A year ago, interest rates were still very low and the existence of other options besides the traditional fixed-rate mortgage (such as the adjustible-rate where the rate swings with the interest rate) were limited. Greenspan made the observation that in other countries fixed-rate mortgages were not prevalent because such mortgages charged too high of a fee to maintain the fixed rate (so getting an adjustible-rate mortgage may be cheaper). A year ago, we also saw a wave of mortgage refinancing as people took advantage of lower interest rates. Greenspan’s point was that had adjustible rate mortgages existed in further abundance earlier, then people would have saved considerably if they chose that type to start out with since no refinancing would then be needed, thus eliminating extra costs.
People in the finance world saw the housing boom as an opportunity to sell more interest-only and other exotic forms of mortgages: they took advantage of the situation and ordinary folks persuing a house. Like financial derivatives which have grown in complexity and foolishness, mortgages got riskier and more complex. This was an overdoing of Greenspan’s relatively innocent and uncorrupt call for wider mortgage variety, thus his call for caution about them now. Times change, and it’s fortunate that we have a chairman who changes his opinions when reality presents new facts. Krugman was right that Greenspan was inconsistent, but it was a completely rational move on his part.
As Greenspan heads toward his retirement date of January 31, 2006 (he’s not out yet yet), we should appreciate his efforts and accomplishments as Fed Chairman. Whoever is out to replace him, be it Ben Bernanke, Glenn Hubbard, Martin Feldstein or someone else, the Greenspan record over the past eighteen years will be tought to match.
The word on the street for the last few months among many economists has been that Greenspan would retire and be replaced with Princeton professor Ben Bernanke. The former has now happened. Let’s see if the latter transpires as well.
Note: I am now holed up in Dallas, Texas, far away from Linda’s devastation. By turning ever so slightly to the east, the storm spared the city and our nation the worst devastation it has seen in who knows how many years. However, the massive level of destruction and the number of deaths are only beginning to be discovered. Because I am currently a bit preoccupied with these events, the frequency of my writing here may be erratic for a while.
Greece’s finance minister could announce a transition from a graduated to a flat income tax as early as next month. By doing so, it would follow Estonia, Latvia, Russia, Ukraine, as well as Hong Kong.
The problem with flat-tax thinking is the way it oversimplifies the role of taxes. The assumption is that the only consequences will be the decreased incentive for capital to move abroad or underground.
But what about the state? Doesn’t this impinge on the state’s ability to shape domestic outcomes that are favorable to it, instead of just corporations who now get to pick from a list of countries using lower taxes as a panacea for real factoral advantages?
But if flat taxes are empirically more efficient, why not? I certainly don’t have any philosophical objections to them. I don’t see any advantage to a large tax system as such - but the problem is that it isn’t that simple.
I’ve always been surprised at how many ‘progressives’ act as if Tom Friedman is some sort of godly analyst of economics and international affairs who we dare not meddle with. Actually, as John Gray reminds in the NYRB review of The World is Flat, Friedman’s oversimplistic view of globalization’s workings is stunningly similar (gasp!) to Marx’s oppositional tendencies.
Go read, and stop pretending like Tom Friedman is some sort of prophet.
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