David Morris of the Institute for Local Self-reliance in Minneapolis skewered Mankiw about a year and a half ago. I think there was a discussion on Pen-l at that time. Here's the David Morris reference: http://www.ilsr.org/occupy-economics-departments/.
The Mankiw paper Morris addressed was both more subtle and more clever than the forthcoming one in the Journal of Economic Perspectives. The earlier paper was the Presidential address at the Eastern Economics Association. I amuse myself by imagining some audience economist standing up at the end to say Mankiw's views are nonsense. Alas, things like that seldom happen. But Mankiw and his ilk must be feeling a lot of pressure from both the Occupy movement, econ students, and the general public re income distribution, as evidenced by Mankiw''s return to the issue. In his Eastern Economics Association address Mankiw has this passage: One implication of the Just Deserts Theory is that it gives a new normative interpretation of the equilibrium of a competitive market economy. Under a standard set of assumptions, a competitive economy leads to an efficient allocation of resources. But we economists often say that there is nothing particularly equitable about that equilibrium. Perhaps we are too hasty in reaching that judgment. After all, it is also a standard result that in a competitive equilibrium, the factors of production are paid the value of their marginal product. That is, each person’s income reflects the value of what he contributed to society’s production of goods and services. One might easily conclude that, under these idealized conditions, each person receives his just deserts. A standard phrase of the neo-classicals is this, found in Mankiw above: "Under a standard set of assumptions, a competitive economy leads to an efficient allocation of resources." Once the reader or audience lets that sentence go by unchallenged it is home free for workers being paid their marginal contribution. CEOs get what they deserve, and so do the janitors. What could be more fair? There is something amazing in all this: Mankiw believes it. He thinks the economy is competitive, as defined in his standard set of assumptions. Why don't his students put a stop to this? In the new paper he lists Steve Jobs, Steven Spielberg, and JK Rowling of Harry Potter fame introducing some new item for $100. Mankiw doesn't notice that all three rely on Patents or Copyright for being able to charge more than Marginal Cost. Oooops, there goes the argument. Shame on Mankiw. Shame on the rest of us for not stopping this stuff. Gene _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
