Plain Sense Economics

Freidrich Hayek and the Austrian school of economic policy argue for a laissez faire approach to the economy – emphasizing individual actions and criticizing government intervention. John Maynard Keynes acknowledged that economies could, over time, correct themselves, but argued that government had a responsibility to intervene and stimulate demand when the economy is in a [...]

The price of gold has gone over $1,400 an ounce recently. In addition to the raft of stories and questions about investing in gold, I get questions about whether we should return to the gold standard. Blogger confession – I’m going to use the opportunity to organize my own thoughts on the issue.
The quick answer [...]

This rap video comes with a hat tip to Prof. Brad DeLong at Berkeley. It’s something of an inside joke to economists, but it reveals a fundamental tension between those who say we should use our understanding of economic forces to intervene for the sake of the country and the globe and those who place [...]

James Surowiecki writes in The New Yorker that a combination of thoughtful, but less visible stimulus decisions and some less effective decisions made it hard for the American people to believe the 2009 fiscal stimulus worked.
[The] Washington stimulus has become the policy that dare not speak its name. This wouldn’t be surprising if we [...]

Catharine Rampell in The New York Times Economix blog wonders if the most recent recession has earned the title, The Great Recession. She is leaning towards, “yes”.
Here is one graph that illustrates the impact on economic output from 10 post World War II recessions. No contest.

In my summer Principles of Macroeconomics class we’ve been discussing the reasons why China has surged to be such a strong economic power.
In an article in The New York Times, Turkey is described as another surprising country showing remarkable growth.
Today, Turkey is a fast-rising economic power, with a core of internationally competitive companies [...]

Jasen Hartford, a friend and past student, recently asked me,
As we all know, the European Union has recently been under the lime light with their budget deficit problem – causing a lot of anxiety for investors in the U.S. I’m curious if there’s a reason why the even greater deficit in [...]

N. Gregory Mankiw posted a semi-tongue-in-cheek note on his blog suggesting that we consider a system where email senders pay to send a message. One of Mankiw’s readers opined…
I think an excellent Pigouvian tax would be a tax on emails. Many emails involve a negative externality (I don’t really want to receive [...]

Arthur Laffer is credited with the eponymous theory that a decrease in tax rates can lead to an increase in tax revenues. Even if the original theory may have been scribbled on a napkin, it still holds sway with the supply side contingent. The simplified explanation is that by reducing tax rates, income earning individuals [...]

At about the 6th or 7th week of my Principles of Macroeconomics class we have a kind of broad (though not deep) understanding of how the economy works, how we measure it, and some of the things government does to influence it. We’ve learned about fiscal policy and monetary policy; we have a rough idea [...]