Monday, June 28, 2010

Mankiw on the Crisis

Greg Mankiw has a longer, interesting piece in National Affairs. The article examines the recent recession and the problems inherent in measuring the effect of government policy as a corrective. It provides a couple of great items for you to consider integrating into your discussions of business cycles and aggregate demand.

The analogy of the economy as a sick patient, with unique symptoms is helpful. The inability to determine whether worsening condition means the diagnosis was wrong, or the prescribed treatment was ineffective or insufficient, would be thought-provoking for students, who sometimes approach economics as if it were a cut-and-dried science.

Also of interest were the discussions about fiscal policy, particularly the spending multiplier vs. the tax multiplier. Mankiw provides some specifics about the assumptions of the Obama administration and insights into research that question at least some of those assumptions.

As I said, it’s a longer article but it’s worth a quick read at least, and some deeper thought if you see uses in your classroom.

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