Gregory Mankiw has an absolute advantage over many economists. He’s the Robert M. Beren professor of economics at Harvard University, his published articles have appeared in distinguished academic journals as well as the big newspapers, and his textbooks have sold over 1 million copies and been translated into 20 different languages. But, as he pointed out in his November lecture at Vanderbilt, his comparative advantage stems from his role as the Chairman of the President's Council of Economic Advisers from 2003-2005. Many economists have impressive academic credentials, but few can say they’ve been in the front-line discussion of the US government’s economic decisions.
What makes good economics does not necessarily make good politics. Take, for example, Mankiw’s proposed gas tax increase. Economically, it would makes sense: it increases government revenue, demand for gasoline, and avoids the inefficiencies of the income tax. On the other hand, a call to raise the price of Americans’ gasoline would be political suicide.
In economics classrooms, professors make many assumptions to simplify the models – assume this tax is passed, this tariff is increased, this price ceiling is imposed, etc. But as we know, passing and repealing taxes and tariffs is much more complicated in real life. We must deal with special interest groups who have enough lobbying power to make their voices heard, however detrimental their goals may be to the overall US economy. Professor Mankiw gave us the example of the Byrd amendment. This law levies duties on foreign companies which sell goods in the US “below cost price” and gives these revenues to US producers. This bill, supported by the domestic manufacturing industry, is an enormous economic faux-pas. It greatly decreases the competitiveness of US firms and increases prices for American consumers. However, the American public thinks it helps the United States by protecting American companies, and many senators support it enthusiastically to gain their constituents’ support.
How can we educate the public about fascinating economic issues such as decreased benefits for the elderly, the deduction of state and local taxes, and an elimination of the mortgage interest reduction? Certainly not through the media – these issues require too much knowledge, interest, and time to be included in a front page article of almost any newspaper. Perhaps the most interesting part of professor Mankiw’s discussion was his treatment of the national media. According to professor Mankiw, we can compare the average media reporter to the average college student. When assigned a 15-page paper, the student usually collects data and scholarly sources, but doesn’t really begin writing his paper until very close to the due date. When he finishes writing about his scholarly materials, he finds he has only written 5 pages – leaving him a full 10 pages to go. Would he go back to the library and look up more material? Or would he fill the remaining 10 pages with opinion and conjecture? Professor Mankiw thinks the second option is more popular for college students and reporters. Reporters are always pressed for time, and they are pressured to find quick, insightful, and above all, interesting topics – topics which sometimes serve to persuade rather than inform.
When the Council of Economic Advisors drafted a 300 page economic report to the president, they inserted a one-page section explaining the difficulty of classifying manufacturing jobs: for example, is a hamburger flipper a service provider (he sells customers food) or is he a manufacturer (he cooks their food)? Based on a rhetorical question on one page of a 300-page report, the New York Times claimed the president had a secret plan to re-classify hamburger flippers as manufacturers (in order to make manufacturing data look better). Congress immediately passed a law preventing him from doing so, and America wasted precious time and effort to solve a problem that did not exist. How can the American public be informed in this world of misinformation and opinion?
For professor Mankiw, the answer is education. He will return to Harvard and continue teaching freshmen and undergraduates the fundamentals of economic thought. Economics departments are growing more popular across the country, and more and more students graduate from colleges with economics degrees. The only way to make the government more economically savvy, Mankiw argues, is to educate the voters – elected officials cater to the voters’ interests, and if the voters know what makes sense, then the government will follow. It seems surprising that a world-famous economist would speak about the difficulty of passing laws or the ineptitude of the national media. But then again, it makes sense that he would use his comparative advantage to try to make America a better place.
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