This is the second part of my discussion of N. Gregory Mankiws column asserting that governmental competition is desirable for the same reason that private competition is. Mankiw was Chairman of President Bushs Council of Economic Advisors from 2003-2005. He was one of the principal architects of the perverse incentive structures that proved so criminogenic and drove the ongoing financial crisis. He gave no useful warnings of the necessity for containing the developing crisis even after the FBIs September 2004 warning that mortgage fraud was become epidemic and would cause a financial crisis if it were not contained. He is now Mitt Romneys principal economic advisor. His column favors the competition argument that led him to support crippling financial regulation even as private sector competition led to endemic fraud. Mankiw is a moral failure as well as a failed economist. His infamous response to Akerlof and Romers 1993 paper (Looting: the Economic Underworld of Bankruptcy for Profit) was that it would be irrational for CEOs not to loot their corporations. He ignored all of the prescient warnings we made about how accounting control fraud drove our crises and he continues to ignore those warnings and the reality of our recurrent, intensifying financial crises. He wants the U.S. to move even more rapidly downward in the competition in regulatory laxity that is driving those crises. Mankiw is serving as Romneys propagandist in chief. He is writing columns trying to defend Romneys vulnerabilities, e.g., claiming that Romney should pay a marginal income tax rate that is lower than the marginal rate his secretary pays. In the column I am responding to, Mankiw chose this frame for his analysis: SHOULD governments of nations, states and towns compete like business rivals? (The capitalization is in the original.) He answered his question in this self-referential manner.
[K]nowing that I have to keep up with the Paul Krugmans and the Glenn Hubbards of the world keeps me on my toes. It makes me work harder, benefiting the customers in this case, students. The upshot is that competition among economics textbooks makes learning the dismal science a bit less dismal.
For much the same reason, competition among governments leads to better governance.
The title of Mankiws article reflects his claim: Competition Is Healthy for Governments, Too.
It is inevitable that Mankiw thinks that competition makes his textbook superior. I leave analysis of that claim to future columns to be written with the aid of readers. I am announcing a competition among readers of our New Economic Perspectives blog at UMKC. I will provide Mankiw Mendacity and Morality t-shirts to the providers of the three top suggestions from readers of our blog (and Mankiws textbook) for the worst predictive and policy follies contained in that textbook. See details on our website.
Suffice it to say here that Mankiws belief that his ability to sell a textbook famous for its failed predictions and theories demonstrates the success of private markets in helping students learn actually constitutes proof of the markets folly.
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