Diary of Econ 4230, Spring 24

We have the third midterm.

We look at the problem of how to address the problem of what to do about climate change and we say some things about the nature of the solution. We also discuss the problem set and summarize the issues involved in climate change. We also consider alternative policies that are not optimal and look at there consequences.

We look at carbon budgets and at damages. We then look at what to do.

We look at non-structural carbon circulation models, their calibration, and then move to carbon budgets. We start damages.

We look at the carbon cycle (up to pg 48. Apr 15

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We finish the discussion of what to do about externalities with cases of alcohol and sugar in the UK. Please start reading the 2023 Intergubernamental Panel on Climate Change Summary for Policy Makers. We start with the model of climate change.

We start to look at externalities. Read The evidence on the effects of soft drink taxes by Rachel Griffith, Martin O'Connell, Kate Smith and Rebekah Stroud. Also look at its Longer Version.

There was no attendance to class. I suspect the eclipse.

We have the second midterm

We talk some more about Banking Troubles including The crimes in FTX. We talk about social insurance. The second homework is due in Canvas.

We talk about the banking crisis that we have had, especially the required reading, The Troubles of Silicon Valley Bank. I may ask you to read this weekend The Problem with Credit Suisse and The issues with Terra Luna. We further discuss about Social Security, especially how it affects household behavior.

We review how our theory accounts for international differences in hours worked. We talk about Social Security (247). As a plan for the subsequent classes, please read for Wed Mar 27 The Troubles of Silicon Valley Bank

We finish social welfare functions. We start looking at the problem of a household with consumption, and labor and capital income taxes. We look at the proposition that labor and consumption taxes are the same with and without labor income. We start looking at how our theory accounts for international differences in hours worked.

We talk a bit about marriage and the marriage tax penalty. Then the alternative minimum tax, the Earned Income Tax Credit, and capital gains. We discuss briefly the extent to which the U.S. has a progressive tax system (sort of, but there is a bit of regressivity around receiving some transfer payments, the issue of social security, and excise taxes). We talk about the Modern Monetary Theory and about crypto currencies, especially bitcoin. Then we go into normative stuff and social welfare functions .We discuss how politics relate to the choices of tax systems.

We talk about the meaning and properties of a tax code. We talk about the extent to which the U.S. has a progressive tax system. (sort of, but there is a bit of regressivity around receiving some transfer payments, the issue of social security, and excise taxes). Please read the stuff on the 2017 Tax reform in the main home page of this course.

We review the Ricardian Proposition. We start looking at The Fiscal Situation in the U.S. and Generational Accounting. We go over a summary of Gokhale's Generational Accounting findings. Please read Short Version of Generational Accounting. We talk about the U.S. income tax system, and the history of the U.S. income tax.

We discuss the budget constraint of the government. We describe how to link model and data in terms of fiscal policy and we start the Ricardian proposition and its exceptions: Borrowing constraints, transfers of the tax burden (to the extent that altruism is not operational), and non lump sum taxation. Please read Why do Retired Households Draw down their Wealth so Slowly?

We review constant relative risk aversion preferences. We start income risk. We talk about various issues involved with quadratic utility. We go over income risk in detail. We characterize the solution under quadratic utility. We pose the problem of expected utility maximization using the probabilities of each state. We finish uncertainty going over the problem of log utility. We start Part IV, Positive Theory of Government Activity.

We have the first midterm. It covers all we have seen except income uncertainty.

We finish the many period lifemodel including an example and how it fares with respect to the empirical evidence. We discuss various explanations for consumption over the life cycle to be humped shape. We look at constant relative risk aversion preferences.

We discuss the views of Elsby, Hobijn, and Sahin on the Decline of the U.S. Labor Share. We revisited the effects of fiscal policy with and without lump sum taxation. We start with Part III, the many period life cycle model.

We look at the fall of labor share and its 3 candidate explanations. We discuss distortionary taxation with lump sum transfers. We discuss the effects of distortionary taxation with a tax in first period consumption.

We talk about 2 special topics: first bankruptcy and some properties of the U.S. bankruptcy code and then some of the problems of measuring GDP. We review the general equilibrium model (the two period Overlapping Generations Model). We look at population growth.

We talk about inequality in the U.S. and Health. Please read the linked material before class to then have a thorough discussion.

We finish borrowing constraints. We went over a general equilibrium environment: the Overlapping Generations Model with Production discussing the steady state (capital, wages, interest rate, consumption) and dynamics. I asked you to go over a surprise change in the production function.

We continue the two period model. We discuss an example, and comparative statics, and solving the model with perfect borrowing. We look at the proposition of welfare consequences of interest rate changes. We start borrowing constraints.

We finish with the facts of the US. (cyclical behavior, debt). We start the two period model with the description of the objective function.

We go over the rules of the course and some of the facts of the U.S. Government sector (Slide 17).