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Saturday, March 11, 2006

Mankiw on Globalization: People Should Move

Greg Mankiw offers advice on dealing with globalization:

An Evening With (Economic) Champions Published, by Benjamin J. Salkowe, The Crimson: A week after strained relations with the faculty led to his resignation, University President Lawrence H. Summers was on his academic home turf last night, moderating ... N. Gregory Mankiw and Gene Sperling in a debate on the “Challenges to American Prosperity”... While the president spent much of the two-hour event staring into the audience, Summers occasionally prodded the scholars to a more aggressive debate on issues of tax policy, budget deficits, and globalization.

Summers urged the economists, who kept returning to nuanced policy discussions, to come up with more practical political advice. Referring to Flint, Mich., where workers’ jobs are being outsourced, he challenged the academics to come up with a realistic suggestion for the Buick-city mayor.

“That’s the political reality,” said Summers, pointing to former Senator Bob Graham D-Fla. in the audience who was nodding in agreement. ... “...Maybe the answer is [to] put an economics course in every high school and we’ll be OK,” said Summers, taking a jab at Mankiw who earlier suggested that introducing economic principles to Americans in high school would help people better understand globalization.

“I don’t know about the mayor, but I know what the people should do,” Mankiw said, “The people should move.”

Summers countered, “Where do you think the people in Flint should go?”...

Mankiw's answer was not reported. Here's a bit more from the Harvard Gazette:

Top economists take a close look at U.S. budget Discuss how to keep the good times rolling, by Doug Gavel, Harvard Gazette: Two of the nation's top economists, Gregory Mankiw and Gene Sperling, offered their perspectives on how to keep the American economic engine revving ...

"I would say the question is not whether we're going to have growth or productivity, because I believe we will have both, but whether or not that will lead to a strengthening of the middle class or a hollowing out of the middle class," said Sperling...

Mankiw ... said the economy looks "terrific" at the moment, although he warned of the looming federal budgetary squeeze... "the U.S. budget is on an unsustainable path" as a result of a combination of tax cuts and rising levels of promised government benefits.

Summers asked both economists how they would respond to the political pressures facing lawmakers in communities that are losing jobs as a result of globalization. Mankiw remarked that "our policy should be based on people, not on places," while Sperling noted the need for more substantive economic transition programs to help those communities and residents harmed by plant closures...

Update: I should have added this from a recent post on the work of Edward Glaeser who is also at Harvard:

Glaeser had already been thinking about the relationship between housing and urban poverty when one day he and Gyourko began to discuss ... cities like Philadelphia and Detroit... Why didn't everyone leave, Gyourko wondered, and go to a place like Charlotte, N.C., that had a fast-growing economy? This question addresses a puzzle of urban economics. ... Glaeser and Gyourko determined that the durable nature of housing itself explains this phenomenon. People can flee, but houses can take a century or more to finally fall to pieces. "These places still exist," Glaeser says of Detroit and St. Louis, "because the housing is permanent. And if you want to understand why they're poor, it's actually also in part because the housing is permanent." ... It is not just that there were poor people and the jobs left and the poor people were stuck there. "Thousands of poor come to Detroit each year and live in places that are cheaper than any other place to live in part because they've got durable housing still around," Glaeser says. The net population of Detroit usually decreases each year, in other words, but the city still attracts plenty of people drawn by its extreme affordability... The resulting paper, "Urban Decline and Durable Housing," caused a stir among urban economists ... (It was initially circulated with a subtitle along the lines of "Why Does Anyone Still Live in Detroit?" until the authors, thinking it politically insensitive, removed it.)...

    Posted by on Saturday, March 11, 2006 at 12:26 PM in Economics, International Trade, Unemployment | Permalink  TrackBack (2)  Comments (19)

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    From Mark Thoma yet again, an example of just how entrenched the unrealistic picture of perfect markets is. A lot of my book is spent arguing that the simplistic free-market picture of the world is too influential and that we [Read More]

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