Federal Tax Rates by Income Quintile

Recently updated by CBO.  Click on the graphic to enlarge.

Links

Here are a few things readers sent me while I was away:

1. Economics is harder than most bloggers think.
2. Merle Hazard's latest song, Legal Tender.
3. A Cash Award for Nice Professors.
4. Ten Commandments for Fiscal Adjustment.
5. The BP Coffee Spill.

My Latest

Click here to read my article in the new issue of National Affairs about the recent debate over fiscal stimulus.

Ten Days without the Internet

Sorry about my recent absence.  I have spent the past ten days in Italy (mostly in Florence) on a family vacation.  The hotel there, while wonderful in most ways, offered an internet connection that was so slow as to be effectively useless.  But I am now back in town, ready to deal with the several hundred email waiting for me and to work off the extra three pounds from all that wonderful pasta and gelato.  I will also return to posting here more regularly.

Glaeser on Libertarianism

Ed looks at Jeff Miron's new book.

Stock Market Valuation

Click on graphic to enlarge. Source.

Are bonds sexy?

The Japanese government wants its citizens to think so:

Women Prefer Men Holding State Bonds, Japan Ad Says

June 9 (Bloomberg) -- Japanese women are seeking men who invest in government bonds, according to an advertisement being run by the Ministry of Finance.

“I want my future husband to be diligent about money,” a 27-year-old woman says in an ad being run in free magazines promoting a fixed-rate, three-year note that Japan started selling last week. “Playboys are no good.” She’s one of five women featured in the page, which says “Men who hold JGBs are popular with women!!”

The ministry commissioned the ads to appeal to citizens for money at a time when record government borrowing threatens to outstrip demand.

The Value of Student Evaluations

Fascinating findings from Scott E. Carrell  and James E. West:

Results show that there are statistically significant and sizable differences in student achievement across introductory course professors in both contemporaneous and follow‐on course achievement. However, our results indicate that professors who excel at promoting contemporaneous student achievement, on average, harm the subsequent performance of their students in more advanced classes. Academic rank, teaching experience, and terminal degree status of professors are negatively correlated with contemporaneous value‐added but positively correlated with follow on course value‐added. Hence, students of less experienced instructors who do not possess a doctorate perform significantly better in the contemporaneous course but perform worse in the follow‐on related curriculum.

Student evaluations are positively correlated with contemporaneous professor value‐added and negatively correlated with follow‐on student achievement. That is, students appear to reward higher grades in the introductory course but punish professors who increase deep learning (introductory course professor value‐added in follow‐on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice.

Amazon Number One

Can you guess what book is now the #1 bestseller according to Amazon's ranking?  Hint: It is written by an economist.

Click here for the answer.

Here's why.

A Bit More on the Soda Tax

David Leonhardt comments on my soda tax article, and he pushes the case for the tax on the grounds of budgetary externalities.

I have not seen the article in Health Affairs that he cites, but I wonder if it nets out the appropriate budgetary savings from shorter lifespans.  When writing my article, I contacted several prominent health economists to ask whether a complete accounting of both budgetary costs and benefits has been done for obesity, as has been done for smoking.  A typical response was the following:

"I don't know of anything on obesity. Good topic for an econ or health policy doctoral student!"

Another said,

"My impression is that the net effects are relatively small, all things considered."

He added,

"Two factors make the obesity case stronger, however. One is that we subsidize agriculture a lot, and one could view the soda tax as an offset to that (of course, it would be better just to get rid of the subsidies, but let's stick to what is feasible). Second, there are internalities associated with people not being able to do what they would like. As in smoking, these would be huge."

I agree that the agricultural subsidies should go. (I did not address this issue in my column, but I doubt anyone would be surprised about my views on it.) I did address the second argument. When he says "internalities," he means the externalities that impinge on one's future self. As I said in my column, this is, I believe, the key issue at stake in this debate.

Updates: A reader alerts me to this study, which concludes:.

Although effective obesity prevention leads to a decrease in costs of obesity-related diseases, this decrease is offset by cost increases due to diseases unrelated to obesity in life-years gained. Obesity prevention may be an important and cost-effective way of improving public health, but it is not a cure for increasing health expenditures.

Add savings on pension costs such as Social Security into the mix and the argument against obesity-related budgetary externalities seems even stronger.  Tim Worstall reaches a similar conclusion.

Note also that the impact of obesity on the cost of insurance may not be an externality: Some work suggests that the obese bear that cost themselves in the form of lower wages.

CBO on Health Spending

From a recent CBO presentation (via Keith Hennessey):

Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure....Putting the federal budget on a sustainable path would almost certainly require a significant reduction in the growth of federal health spending relative to current law (including this year’s health legislation).

Soda and Other Sins

Click here to read my column in Sunday's NY Times.

More Competition

Raghu Rajan is blogging.

When will the Fed raise rates?

Click on the graphic to enlarge.

Not anytime soon, says Andy Harless. The graph above, from Andy based on a version of the Taylor rule I once proposed, illustrates why.

Lessons from the BP Spill

As seen by my Harvard colleague Ken Rogoff.