How to make global poverty history

There are two schools of thought on this question--and the chasm that divides them is deep and wide.

One group of people believe the answer lies in spending a whole lot of money on schools, clinics, and new drugs in poor countries. What keeps poor people poor is that--well, they are too poor to help themselves. So the best thing that we can do is increase the resources they have command over.

But then there are those who think that poverty is caused by not inadequate resources--which is after all sort of tautological--but with inadequate opportunities. People do not invest in education or in health, or save enough, because they do not see enough (private) returns to doing so. So the way to get them to climb from poverty is to enhance the incentives that they face to help themselves and their community...more>>

Inflation: Local or Global?

What does the empirical literature say about the sources of inflation movements in an era of globalization?

In a recent ">paper, Borio and Filardo of the BIS fire an opening shot in the debate over the best way to envisage the inflation process. In line with the view that the world is becoming ever more integrated along a number of dimensions, they conjecture a qualitative change in inflation dynamics. In "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation", they summarize their results thus:...more>>

Greg Mankiw's Blog: The Economics of the Iraq War

Greg Mankiw's Blog: The Economics of the Iraq War

Oil price shocks, international risk sharing and external adjustment

Critically, our analysis recognises that oil price changes do not take place in isolation; they are driven by demand and supply shocks, each of which have different effects on the price of oil, the world economy and countries’ external accounts. It is useful to differentiate between three distinct demand and supply shocks in the global market for crude oil:⁵

• Shocks to the production of crude oil (“oil supply shocks”);
• Shocks to global demand for all industrial commodities including crude oil (“aggregate demand shocks”); and
• Oil-market-specific demand shocks such as shocks to the precautionary demand for crude oil driven by shifting expectations about future oil supply shortfalls (“precautionary demand shocks”)...more>>

Comparing Economies

How to value the size of an economy, or the wealth of its citizents? ...more>>

"Marginal Productivity Theory and the Mainstream"

Marginal productivity theory gives an explanation for why income is distributed in a particular way. The question is whether it provides an adequate theory for understanding the flow of income to the factors of production, and I think it does provide such a basis. So it helps us to understand why income is distributed as it is, but arguing about whether the result is equitable or not is fruitless since it will depend upon the definition of equity used to evaluate the outcome, and the definition can differ across individuals.

My own view is that we don't need, at least not yet, to discard the standard theoretical model....more>>