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He's ignoring the fact that having Mankiw work less may be a good thing. If Mankiw makes that $1000 for an article, he'll sock it away and it won't get spent fo

He's ignoring the fact that having Mankiw work less may be a good thing. If Mankiw makes that $1000 for an article, he'll sock it away and it won't get spent for 10+ years. If a starving writer instead takes the job, he'll spend it immediately. I do not see the downside.

jamesaguilar 16y ago
A few problems with your analysis. - Money that is "socked away" in savings accounts or investment portfolios reenters the economy through lending or through decreasing cost of capital for businesses. - It is inherently better for Mankiw to write articles than it is for starving writers to do so. If anyone derived value from what the starving writer was writing, they would be getting paid for it and therefore not be starving (generalization -- there may be a few cases of highly valued writers being paid almost nothing and sharing their works for free to a wide audience, but I'm not aware of such). In the common case, that means that we are paying the starving writer for producing ~0 value, and decreasing the value that Mankiw produces, resulting in an overall decrease of wealth for society. The fundamental misunderstanding you seem to be embracing is that the function of any individual in an economy is to pass the money they receive in wages forward to the next person in the chain. But this is not so: from an economic perspective, value is lost when less overall wealth is produced, so it's important not to encourage people in pursuits that hold no value to society as a greater whole. For example, society ought not pay artists that produce nothing other people want to look at for their services, nor should society pay programmers who produce software no one uses. On the other hand, society should avoid decreasing the output of those whose work is valued highly, like Mankiw's. (If you derive some perverse value from having money wasted, then it would of course be fine for you to pay starving artists, but I'm arguing that society as a whole through the government should not.)
- hdctambien 16y ago
  Isn't the problem right now that people aren't spending money, though? Banks have plenty of money to lend (see the TARP and the Fed throwing money at them). Companies have money to spend. Neither are doing anything because the economy isn't churning because people aren't spending their money. They either have no money to spend (the unemployed), or they are saving their money because they don't trust their company to not fire them/the government to not tax it away. Today, what it seems we need is money going to people that would buy things from companies so the companies will hire people to make more of those things. And then more people can buy things from companies. Once the economy is working again, then we can worry about rich people earning extra money and putting it in the banks for them to loan out.
  - jamesaguilar 16y ago
    I know that people not having money to spend is an ongoing symptom of the problem with our economy. If it were true giving poor people $N thousand would fix our problems, I would support that move. But I haven't seen a credible argument to this effect besides gut reactions from people writing comments like yours. Do you have any links to articles from experts making similar claims? Any evidence of consensus on this topic among experts?
    - MaysonL 16y ago
      Go read Paul Krugman on why the stimulus was way too small, and stop trolling.
      - jamesaguilar 16y ago
        That was unnecessarily rude. What I've written is far from trolling, and it's irresponsible and uncharitable of you to call it that. If you mean this [1], I have read the Krugman article on the stimulus' size. I'm sure Mr. Krugman's analyses are correct in the short term, although I suspect there's some question of how much you can increase GDP through government spending before other effects start working against you (like uncertainty about future taxes, decreasing ability of the country to borrow more money, etc.). Regardless, like an ice bath is to a fever, this may treat one symptom, or even temporarily make things better, but it may also make things worse in the long run. There's nothing even remotely like a consensus that increased government spending and extra money for the poor is the correct solution to the current economic climate. [1] http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithme...
        MaysonL 16y ago
        1) Future taxes were made inevitable by a) the unfunded Bush tax cuts b) the unfunded Bush Medicare part D prescription drug benefits c) the unfunded Bush war in Iraq. To spend is to tax. If you (as a government) spend, you are going to have to tax, either now or in the future, either directly or by devaluation (inflation) of the currency. Presently, there is zero indication of any decreasing ability of the US government to borrow money. The reason there isn't any consensus on increased stimulus spending at present is mainly because of Republican lies, and the economists like Mankiw (a Bush advisor) who spin in support of them. As you may gather from this post, I'm somewhat pissed off at the situation, and probably vented at you because of my anger. Sorry for the overreaction.
- subwindow 16y ago
  The problem with the economy right now is not that there isn't enough money to fund corporations, it's that the average person isn't making enough regular income.
  - jamesaguilar 16y ago
    Look, I see what you are trying to say. But I don't think anyone knows exactly what the problem with the economy is, and if they did, I would not expect to hear about it for the first time in a comment on hacker news. The average person not making enough income is a symptom of almost every kind of problem that can occur in a free economy, but it is not a cause.
    - natrius 16y ago
      If you're hearing that point for the first time today, then you've been paying very little attention to the discourse about the recession over the past couple of years.
      - jamesaguilar 16y ago
        Of course I have heard the contention that people are not able to buy things because their incomes are lower than they need to be. I'm saying that is a symptom, not a cause, of the current problems with our economy, and I have not seen it described credibly as a cause.
        natrius 16y ago
        "This strongly suggests that it’s a weak labor market for everyone out there, and businesses have no trouble finding the workers they need; they just don’t know what to do with those workers, given weak demand." http://krugman.blogs.nytimes.com/2010/09/20/structural-impediments/ http://krugman.blogs.nytimes.com/2010/09/20/structural-imped... People aren't buying things (presumably because they can't afford them), so businesses aren't hiring. Look at the graph. Businesses aren't concerned about "Interest Rates & Finance", which means they can get the money they need. They just don't have anyone to sell things to. I don't think my accusation that you weren't paying attention has any merit since this is the article I was thinking of at the time, and it's only three weeks old. I apologize. I think there were other things said along these lines, though.
hexis 16y ago
Savings with a bank would typically continue to circulate in the loans the bank makes. Even if one were to hide money under a mattress, the effect would be very, very slightly anti-inflationary (by withdrawing currency from the market), which anyone else with savings, or just cash, would appreciate.
spamizbad 16y ago
> He's ignoring the fact that having Mankiw work less may be a good thing Indeed. His tenure in the Bush administration was mediocre. Then again, he could be a great public speaker.
wiredfool 16y ago
Yet, here's an article, which presumably he got paid for. Perhaps the value in the article to him is more than what he got paid for? Or perhaps his premise is wrong. (Yeah. I'm calling a Harvard Economist wrong.) Comparing the untaxed value + 8% over 30 years to the taxed value is a straw man. I could push that horizon out another 30 years, and the 'marginal rate' would get worse. I could shorten it and it would get better. It's a meaningless number. Also, no company pays a 35% tax on the returns to their stock, they pay 35% on taxable income. There's a huge difference. Unless he's planning on dying soon, (which he's not, because of compound interest assumptions) there's no way he can tell what the estate tax is going to be. It's a crapshoot. Roughly, the marginal change of the rollback in taxes is going to be a couple percent, though he talks about the new percentages, not the old. The net marginal change is going to be tens of dollars. If that's enough to keep him from writing articles like this, bring it on.

jamesaguilar 16y ago

A few problems with your analysis. - Money that is "socked away" in savings accounts or investment portfolios reenters the economy through lending or through decreasing cost of capital for businesses. - It is inherently better for Mankiw to write articles than it is for starving writers to do so. If anyone derived value from what the starving writer was writing, they would be getting paid for it and therefore not be starving (generalization -- there may be a few cases of highly valued writers being paid almost nothing and sharing their works for free to a wide audience, but I'm not aware of such). In the common case, that means that we are paying the starving writer for producing ~0 value, and decreasing the value that Mankiw produces, resulting in an overall decrease of wealth for society. The fundamental misunderstanding you seem to be embracing is that the function of any individual in an economy is to pass the money they receive in wages forward to the next person in the chain. But this is not so: from an economic perspective, value is lost when less overall wealth is produced, so it's important not to encourage people in pursuits that hold no value to society as a greater whole. For example, society ought not pay artists that produce nothing other people want to look at for their services, nor should society pay programmers who produce software no one uses. On the other hand, society should avoid decreasing the output of those whose work is valued highly, like Mankiw's. (If you derive some perverse value from having money wasted, then it would of course be fine for you to pay starving artists, but I'm arguing that society as a whole through the government should not.)

hdctambien 16y ago
Isn't the problem right now that people aren't spending money, though? Banks have plenty of money to lend (see the TARP and the Fed throwing money at them). Companies have money to spend. Neither are doing anything because the economy isn't churning because people aren't spending their money. They either have no money to spend (the unemployed), or they are saving their money because they don't trust their company to not fire them/the government to not tax it away. Today, what it seems we need is money going to people that would buy things from companies so the companies will hire people to make more of those things. And then more people can buy things from companies. Once the economy is working again, then we can worry about rich people earning extra money and putting it in the banks for them to loan out.
- jamesaguilar 16y ago
  I know that people not having money to spend is an ongoing symptom of the problem with our economy. If it were true giving poor people $N thousand would fix our problems, I would support that move. But I haven't seen a credible argument to this effect besides gut reactions from people writing comments like yours. Do you have any links to articles from experts making similar claims? Any evidence of consensus on this topic among experts?
  - MaysonL 16y ago
    Go read Paul Krugman on why the stimulus was way too small, and stop trolling.
    - jamesaguilar 16y ago
      That was unnecessarily rude. What I've written is far from trolling, and it's irresponsible and uncharitable of you to call it that. If you mean this [1], I have read the Krugman article on the stimulus' size. I'm sure Mr. Krugman's analyses are correct in the short term, although I suspect there's some question of how much you can increase GDP through government spending before other effects start working against you (like uncertainty about future taxes, decreasing ability of the country to borrow more money, etc.). Regardless, like an ice bath is to a fever, this may treat one symptom, or even temporarily make things better, but it may also make things worse in the long run. There's nothing even remotely like a consensus that increased government spending and extra money for the poor is the correct solution to the current economic climate. [1] http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/ http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithme...
      - MaysonL 16y ago
        1) Future taxes were made inevitable by a) the unfunded Bush tax cuts b) the unfunded Bush Medicare part D prescription drug benefits c) the unfunded Bush war in Iraq. To spend is to tax. If you (as a government) spend, you are going to have to tax, either now or in the future, either directly or by devaluation (inflation) of the currency. Presently, there is zero indication of any decreasing ability of the US government to borrow money. The reason there isn't any consensus on increased stimulus spending at present is mainly because of Republican lies, and the economists like Mankiw (a Bush advisor) who spin in support of them. As you may gather from this post, I'm somewhat pissed off at the situation, and probably vented at you because of my anger. Sorry for the overreaction.
subwindow 16y ago
The problem with the economy right now is not that there isn't enough money to fund corporations, it's that the average person isn't making enough regular income.
- jamesaguilar 16y ago
  Look, I see what you are trying to say. But I don't think anyone knows exactly what the problem with the economy is, and if they did, I would not expect to hear about it for the first time in a comment on hacker news. The average person not making enough income is a symptom of almost every kind of problem that can occur in a free economy, but it is not a cause.
  - natrius 16y ago
    If you're hearing that point for the first time today, then you've been paying very little attention to the discourse about the recession over the past couple of years.
    - jamesaguilar 16y ago
      Of course I have heard the contention that people are not able to buy things because their incomes are lower than they need to be. I'm saying that is a symptom, not a cause, of the current problems with our economy, and I have not seen it described credibly as a cause.
      - natrius 16y ago
        "This strongly suggests that it’s a weak labor market for everyone out there, and businesses have no trouble finding the workers they need; they just don’t know what to do with those workers, given weak demand." http://krugman.blogs.nytimes.com/2010/09/20/structural-impediments/ http://krugman.blogs.nytimes.com/2010/09/20/structural-imped... People aren't buying things (presumably because they can't afford them), so businesses aren't hiring. Look at the graph. Businesses aren't concerned about "Interest Rates & Finance", which means they can get the money they need. They just don't have anyone to sell things to. I don't think my accusation that you weren't paying attention has any merit since this is the article I was thinking of at the time, and it's only three weeks old. I apologize. I think there were other things said along these lines, though.

hexis 16y ago

Savings with a bank would typically continue to circulate in the loans the bank makes. Even if one were to hide money under a mattress, the effect would be very, very slightly anti-inflationary (by withdrawing currency from the market), which anyone else with savings, or just cash, would appreciate.

spamizbad 16y ago

> He's ignoring the fact that having Mankiw work less may be a good thing Indeed. His tenure in the Bush administration was mediocre. Then again, he could be a great public speaker.

wiredfool 16y ago

Yet, here's an article, which presumably he got paid for. Perhaps the value in the article to him is more than what he got paid for? Or perhaps his premise is wrong. (Yeah. I'm calling a Harvard Economist wrong.) Comparing the untaxed value + 8% over 30 years to the taxed value is a straw man. I could push that horizon out another 30 years, and the 'marginal rate' would get worse. I could shorten it and it would get better. It's a meaningless number. Also, no company pays a 35% tax on the returns to their stock, they pay 35% on taxable income. There's a huge difference. Unless he's planning on dying soon, (which he's not, because of compound interest assumptions) there's no way he can tell what the estate tax is going to be. It's a crapshoot. Roughly, the marginal change of the rollback in taxes is going to be a couple percent, though he talks about the new percentages, not the old. The net marginal change is going to be tens of dollars. If that's enough to keep him from writing articles like this, bring it on.