Three Questions For Professor Mankiw
Gregory Mankiw, long-time Republican economist and current Yale professor, offers a disarming confession in the Sunday New York Times: he doesn’t know everything about economics. Here are three things he doesn’t know:
1. How long will it take for the economy’s wounds to heal?
2. How long will inflation expectations remain anchored?
3. How long will the bond market trust the United States?
Dean Baker takes the quiz here. He says number 1 is a trick question: it depends on the policies that the government adopts:
If the deficit hawks get full control over the levers of government and we start cutting spending rapidly, then it will take many many years before the economy recovers.
Similarly, if inflation hawks at the Fed can force increases in interest rates, like their counterparts at the European Central Bank, then recovery can take a very long time.
On the other hand, if we could get another big jolt of stimulus, a more aggressive monetary policy, or a big fall in the dollar to boost net exports, then we could see the economy recover fairly quickly.
As far as I can see, the other two questions are only interesting to people who own bonds, namely rich investors and the funds they control, and to the business press. They are really excited about these questions, because they want to dump their bonds just ahead of the herd.
It makes you wonder why he picked these three questions. This is the kind of mindless nattering one expects of an economic courtier, a servant of the rich, looking for approval and promotions. It’s David Brooks bedecked in doctoral robes.
Let’s try a real quiz, Professor.
1. Your theories, and the models you built from them when you ran the Council of Economic Advisors for the last President Bush, failed utterly. Which of your views have you changed to correct for your disastrous failures? For example, you supported the Bush tax cuts for the wealthy, which led to huge increases in the national debt and made it politically impossible to use Keynesian fiscal policy to deal with the Great Crash? What have you changed?
2. You are rich, and you don’t bear any of the pain from the Great Crash you and your failed economist buddies created and justified. What have you done to alleviate the misery you caused?
3. How did you develop the chutzpah necessary to keep talking in public?