Greg Mankiw on Gasoline Taxes, Keynes, and Macroeconomics

Listen to the EconTalk podcast Greg Mankiw on Gasoline Taxes, Keynes, and Macroeconomics and consider these questions.

1. To what extent does Mankiw credit the economic growth of the last twenty years to the persistence of deficit spending?

2. In discussing the Keynesian multiplier effect, Mankiw stresses two important caveats. What are these caveats?

3. Interviewer Roberts suggests that tax cuts are a political promise of a free lunch: they are often “sold” to the public using the language of the multiplier effect. What does Roberts see as the flaw in this reasoning?

4. How much do Roberts and Mankiw each suggest we should worry about budget deficits currently and in the long run?

5. What is the Laffer curve? What evidence do we have of its descriptive accuracy?

6. Roberts cautions that we ought to distinguish between tax cuts and changes in tax rates. Why is he so adamant on this point?

7. When Mankiw is asked to consider an optimal level of progressivity (in taxation), he replies that “not all economic policy is about economics”. What does he mean? Do you agree?

8. What is the “Pigou Club”? According to Mankiw, what situations merit such (Pigouvian) taxes?

9. Why does Roberts object to taxes levied on particular goods?

10. What is the Coase Theorem? What role do transactions costs play in this theory? Who offers a better interpretation of the theory: Roberts or Mankiw?

11. Roberts asks Mankiw to imagine being the “economic czar” for a day. What policies does Mankiw say he would pursue in that hypothetical day and why?