August 11, 2008
Mankiw: I Was Wrong!
No, not about the Pigou Club, dang it. But the good Professor suggests -- nicely -- that some of his earlier praise of Senator Obama "for having a good grasp of economic principles" might have been a tad too generous.
Obama is right about the amorality (not immorality) of oil companies. But he seems to suggest that oil markets are fundamentally different than others. In fact, in all markets, reduced production capacity would increase prices and, sometimes, would increase profits as well. That is why farmers can benefit from policies that induce them to leave land fallow. (I can't say about widgets--empirical studies of that market are hard to come by.)
Senator Obama is married to his windfall-profits-from-oil-compainies-to-finance-a-$1000-rebate idea. It makes a nice TV commercial (I guess) but in a debate or a serious Sunday interview, it is difficult to explain why you can tax an industry based on its unpopularity.
2008 Posted by John Kranz at August 11, 2008 12:18 PM