P < AVC
Economics textbooks, including Chapter 14 of my favorite one, explain how firms shut down production when the price of output falls below average variable cost. Here is an example:NY apple growers leaving more fruit on treesNew York's apple orchards are being carpeted with red as unpicked apples drop to the ground. With the best of the crop off to market, growers say this year it's cheaper to leave leftovers on the trees than to pick and sell them for juice.... One reason is an abundant crop,

My Crib
The Harvard Crimson visits the Mankiw family abode.

A Reading for the Pigou Club
A profile of the club's namesake.

Is a Tobin Tax feasible?
The Tobin tax--a tax on financial transactions--is very much in the news. Before one gets to issue of desirability of such a tax, one has to address the question of whether the policy is even feasible. I am skeptical. Financial transactions are easy to move: If two parties to a financial contract can just as easily sign and enforce the contract in the Cayman Islands as in New York or London, there is little point in US or UK policymakers imposing a Tobin tax. Unless, of course, moving the finance industry offshore is the policy goal. In his column today, Paul Krugman raises and then dismisses this issue as f

Please Resend
A student (from abroad, I believe) sent me an email query this morning, which I inadvertently deleted before replying. If you are that student, please resend. Everyone else: Never mind.