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Friday, February 28, 2003

The Dog Ate My Textbook

So for once the rumourology got it right. Hot on the heals of the departure of Glenn Hubbard comes news of the entry stage left of Greg Mankiw. This is an interesting decision whose significance will need time to evaluate. Greg is clearly a first class economist, and his views aren't those that you usually associate with the present Bush administration. The FT has one plausible explanation, George W doesn't seem to be too hot at following complex arguments, so Greg's facility in keeping things simple may well be a strong point. At the same time I cannot help feeling that this is another case where you need to apply what is proving to be an important key to undestanding the White House these days: look at what they do, not what they say. Following this thought up: in the recent speculation about the future of Alan Greenspan, where is the fact and where is the game playing, seeing is not always believing. Could it be that someone up there really is having second thoughts about the folly of balooning deficits, and is looking for a let-off. With Greenspan, Bernanke, Rogoff, and now Mankiw all effectively playing for the other team its hard to read this decision any other way. We just have to hope that this professor isn't planning an early re-edition of the textbook. Still, if there's any life left in the adage that by their friends shall you know them, then somehow I doubt it. Oh, I can't resist this: but what happens if the dog gets to eat the textbook?

Gregory Mankiw, the man nominated by President George W.Bush to become the next chairman of the White House Council of Economic Advisers, is a highly regarded Harvard economics professor considered one of the nation's foremost experts on deficits, interest rates, monetary policy, inflation and economic growth. But what much of the world might want to know about him could be boiled down to his famous textbook and his dearly departed dog.

The textbook, Macroeconomics, is a bestseller - something almost unprecedented among academics, especially economic professors. Mr Mankiw received a $1.7m (€1.6m, £1.1m) advance in 1997 for its predecessor, Principles of Economics. The appeal of those books is their brevity and clarity: the ease with which Mr Mankiw describes economic principles, theories and models so often viewed as obtuse, counter-intuitive and complicated.........Mr Mankiw's skill in boiling down economics could prove a virtue in the Oval Office - Mr Bush is famous for his preference for brevity and conciseness.

Mr Mankiw has repeatedly asserted in his textbooks, academic papers and other writings that deficits reduce national savings and raise interest rates, crowding out investment and reducing future income.As part of its aggressive campaign to sell its economic plan, the White House has given priority to marginalising the point. But Democrats were already leaping on this history as the news broke of Mr Mankiw's nomination. But Mr Mankiw also has the credentials of a strong, market-oriented economist who has argued that the widening trade deficit is not an immediate concern as long as the US remains a relatively attractive place to invest. Mr Mankiw's other notable feature is his recently departed dog, Keynes - still described on the professor's website as his "best friend". The original Keynes, of course, was a strong believer in the usefulness of government-led economic stimulus.
Source: Financial Times

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