Noted conservative economist and former Romney advisor Greg Mankiw has just written an article with the unabashedly conservative title “In Defense of the One Percent”. The pile-on has already begun, with an excellent takedown at the Economist American Politics blog, and good pieces as well at the left-leaning CEPR and Unlearning Economics.

Mankiw defends the rich because he believes they have brought us value commensurate with their wealth. This is the essence of conservative neoclassical economics: markets allocate value the way that value should be allocated. There are theoretical exceptions to this rule, of course, like rent seeking or other market failures, but real conservatives remain “unconvinced” that such exceptions are to be found in the real world.

Mankiw prefers the idea that markets can still work as intended (optimally allocating resources) without being entirely “fair”: insufficient high-skill workers and “superstar” gains can drive inequality even in perfect labor markets. Mankiw is sympathetic to these arguments because they allow him to claim that everything is working as intended: there’s nothing to see here, the markets are working, please move along.

But wait a minute.

What Mankiw would have … Read the rest

As a number of recent press articles, including this one from Reuters, attest, the U.S. business community is increasingly taking note of Indian trade practices that impose onerous localization trade barriers and compromise the interests of foreign intellectual property rights holders. In light of this, representatives from a diverse range of business and manufacturing sectors recently sent a letter to President Obama urging him to take a more forceful stand against India’s increasing embrace of “innovation mercantilist” trade policies. For example, as the letter argues, India’s recent “Administrative and court rulings have repeatedly ignored internationally recognized rights—imposing arbitrary marketing restrictions on medical devices and denying, breaking, or revoking patents for nearly a dozen lifesaving medications.”

It’s encouraging to see more organizations raising the profile on this important issue. ITIF has been monitoring India’s trade practices for some time now. In March, we submitted testimony to the U.S. House of Representatives’ Hearing on U.S.-India Trade Relations and last month we hosted a media teleconference during which ITIF called on the U.S. government to take a harder stance with India regarding protections for foreign intellectual property rights holders. We have also commented … Read the rest

On Monday at the G8 Summit, President Obama, U.K. Prime Minister Cameron, European Commission President Barroso, and European Council President Van Rompuy announced plans to launch negotiations for an ambitious trade deal between the European Union and the United States. The Transatlantic Trade and Investment Partnership (T-TIP) is an ambitious, comprehensive, and high-standard trade and investment agreement that promises to boost worldwide economic growth. During the negotiation announcement, Prime Minister Cameron said a successful deal could add £100 billion ($157 billion) to the EU economy, £80 billion ($125 billion) to the U.S. economy, and as much as £85 billion ($133 billion) to the rest of the world. While these numbers are impressive, as ITIF’s March 2013 report, Estimating the Benefits of a Transatlantic Trade Partnership found, citing data from the U.S. Chamber of Commerce, gains could be as high as $450 billion for the United States and $495 billion for the Europe Union, boosting both EU and US GDP by 3 percent.  “We’re talking about what could be the biggest bilateral trade deal in history; a deal that will have a greater impact than all the other trade deals on the … Read the rest

We had an interesting discussion about broadband policy today, International Broadband Quality: How’s that Policy Working?

For several years, policy wonks have debated the merits and demerits of two competing broadband policies, the “facilities-based competition” policy we have the U. S. and the “wholesale unbundling” or “open access” policy the Europeans favor. For a long time, it was thought that unbundling would yield lower prices at the expense of ongoing investment while robust facilities-based competition would yield better quality at higher prices.

Things are roughly going that way, but there’s an additional issue in terms of value for money. The average cell phone/broadband bill is lower in the  EU, but the quality is so much lower that the value per dollar tilts in favor of the U. S. even though the bill is a little higher. Americans consume four times as many cellular minutes and twice as much data usage over mobile networks than Europeans. We also have faster speeds.

On the wireline side, our speeds are higher than those all all but three EU nations: Latvia, Sweden, and the Czech Republic. Prices for middle tier broadband packages are lower … Read the rest

Singapore has an amazing record of economic growth, having transformed itself from an uneducated and poor country fifty years ago into one of the richest countries in the world today. Factoring in the cost of living, Singapore now ranks in the top 5 richest countries, well ahead of the United States. In purely nominal terms Singapore ranks in the top 10-20, lower but still ahead of the USA.

Despite this success Singapore has long been criticized for growing its economy through capital investment (“increasing inputs”) instead of productivity growth. Capital investment increases output per worker, but only by sacrificing consumption spending. Paul Krugman was a vocal critic in a 1994 article on Singapore and other Asian Tigers:

Mere increases in inputs, without an increase in the efficiency with which those inputs are used–investing in more machinery and infrastructure–must run into diminishing returns; input-driven growth is inevitably limited.

Singapore’s leadership vehemently opposed Krugman’s prediction of slowdown at the time, which was a wise thing, as history has shown that he clearly missed some important factors in his analysis. Furthermore, is easy to understand the government’s chagrin as they … Read the rest