Who you believe deserves a hefty paycheck depends on what political party you’re in, according to economist Gregory Mankiw ’80.
Mankiw explained the importance of “deserving” in modern politics: that although people are okay with singer Taylor Swift making millions, many believe it is unfair for bankers to make a similar salary. Deserving, as Mankiw explained, is something that economists and politicians alike need to gauge.
Both professors served as chairs of the President’s Council of Economic Advisors. Mankiw served from 2003 to 2005, Rosen in 2005.
Rosen introduced the lecture by reciting his long history with Mankiw. Mankiw was a student in Rosen’s microeconomics course in the 1970s and soon after served as Rosen’s research assistant.
“I had just started out teaching and began to think that all undergraduate researchers were geniuses,” said Rosen, laughing. “After Greg, however, it was all downhill from there.”
Their relationship continued outside the classroom as Mankiw’s career as an economist progressed. When former U.S. President George W. Bush selected Mankiw to chair his economic council, he invited Rosen to the council.
As the conversation continued, the two waxed nostalgic about how the field of economics has changed dramatically over the past few decades. Rosen explained that he now devotes an entire lecture to the economics of discrimination, a field devoted to explaining unequal outcomes people of similar economic backgrounds experience as a result of non-economic factors such as race or sex. The field did not even exist until the 1970s, when Rosen was working on this Ph.D.
Both Mankiw and Rosen were skeptical about the field of behavioral economics. The subject has gained special attention over the past week after University of Chicago professor Richard Thaler earned a Nobel Prize for his work in the field.
Unfortunately, according to Mankiw, most behavioral economists do not have much to show from decades of research.
“The problem is that there’s only one way for a person to be rational, and many ways to be irrational,” Mankiw said. “I don’t believe it’s going to shake economics to its core.”
After the floor opened up to students, questions ranged from tax reform, where Rosen noted that a national sales tax higher than 10 percent would be a “complete disaster.”
As for healthcare policy, Mankiw, referring to Democrats, noted that if “you thought RomneyCare was so great, why would we need Obamacare?”
Mankiw also responded to a question about the financial crisis: “Even if we had seen the housing crisis coming, we’d have to tell Congress to stop giving loans to poor people, something that Congress doesn’t want to hear from a Republican administration,” Mankiw said.
In one final question about advising politicians, Mankiw expressed frustration with trying to advise politicians when they’re more likely to listen to their constituents than technocrats.
“As professors, we’ve probably done better service to society by educating students than advising politicians,” he said. Most of the fifty or so students stayed for the entire 90 minute event.
“One thing I learned was, always be nice to your undergrads,” Rosen said. “You never know when they’ll show up in your life.”
Ninan said she enjoyed seeing her microeconomics professor explain how the principles she learned in class applied to real life.
Hassan Ahmad ’21 said he didn’t realize how damaging government-subsidized enterprises could be.
“I was surprised at how closely Fannie Mae and Freddie Mac worked with the government,” he said.
After the talk, Mankiw explained that although he had spoken at Reunions before, this was the first time he was invited to a Whig-Clio event.
“Walking across campus, the waves of nostalgia always hit you,” he said.
The talk was held on Thursday at 4:30 p.m. in the Whig Hall Senate Chamber.