Jason Furman Profile picture
Professor of Practice at Harvard. Teaches Ec 10, some tweets might be educational. Also Senior Fellow @PIIE. Was Chairman of President Obama's CEA.
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May 21 9 tweets 3 min read
Does deficit reduction reduce inflation? It depends.

A brief 🧵 on *one* aspect of the question: it matters whether the deficit reduction is exogenous (e.g., you raise taxes by $25) or endogenous (e.g., your income goes up by $100 leading you to pay $25 more in taxes). 1. You raise taxes or cut spending by $25. That will reduce demand and inflation. Is called discretionary fiscal policy or exogenous fiscal policy.
May 19 4 tweets 2 min read
Nice discussion of recession risks from @abhabhattarai. A lot of people I respect are more worried than I am right now. I see strong consumer spending that can continue given health balance sheets, workers returning & inventory rebuilding.
washingtonpost.com/business/2022/… Yes, a lot of reasons to be afraid (well documented in the article). But many factors on the other side & a lot of momentum (in the key inertial categories).

My T+3 months to T+15 months baseline is always 15%. Now maybe 20%.

For T+3 months to T+27 months I'm closer to 50%.
May 17 4 tweets 3 min read
Thanks for the careful read @Econ_Marshall. Curious if your concerns are of the way economics approaches these issues or you think I'm misrepresenting economics. To the degree it is the later happy to update and reflect.

Two specifics on your comments below. 1. The structure-price correlation was from @QJEHarvard co-authored by @zackcooperYale, @stuartcraig, @MartinSGaynor & Van Reenan.

They can chime in, but I often present suggestive evidence, correlations etc. to motivate issues.

academic.oup.com/qje/article/13…

May 17 5 tweets 3 min read
Another very strong retail sales report. Good news for GDP & recession prospects. Bad news for a normalization of the economy w/ slowing inflation.

Nominal sales +0.9% in April after a big revision for March.

A short 🧵 People have been steadily spending more dollars month after month at motor vehicles and parts dealers (+2.2% in April). But with prices up so much the amount of stuff they are buying has been down, although rising every so gently.
May 17 9 tweets 3 min read
Ec10 competition policy class Part 4: The Digital Giants

I conclude with the debate over the digital giants. Note, this is limited to purely economic issues, not the broader questions about their role in democracy and society more broadly. We discuss why most products have two or three major companies (social networking, cloud, office, search, mobile operating systems, computer operating systems, etc.) And how the winners have been persistent.
May 17 7 tweets 3 min read
Ec10 competition policy class Part 3: The Increase in Concentration

This topic has gotten a lot of discussion, not sure if it shows up in many intro classes.

Key point: we've seen an increase in concentration. Can debate the degree to which it reflects more or less competition. Lots of markets have fewer and fewer businesses. Most of the beer, ketchup, cat food, fertilizer, etc., are made by two or three major companies.
May 16 26 tweets 8 min read
Ec10 competition policy class Part 2: Competition Policy in Practice

This is where it starts to get more fun, material generally not covered in intro classes (possibly because it does not lend itself to psets/tests), but frequently misunderstood--and very important. I poll the students in advance and most of them agree that competition policy should protect smaller businesses that might be driven out of business by larger competitors.

Many of them think low prices can be unfair.

Competition policy strongly disagrees.
May 16 4 tweets 2 min read
Ec10 competition policy class Part 1: Govt Policy Towards Monopolies.

Previously we learned deadweight loss (monopolies restrict quantity, preventing beneficial exchanges). Also discussed distn (higher prices raise profits hurt consumers) & innovation.

dropbox.com/s/ncgy1h590mv6… We start this class by talking about the classic public policy solutions to monopoly: government provision (e.g., subways), government-regulated price (e.g., electricity), "legal monopoly reform" (e.g., reducing patent lives or lowering tariffs), and antitrust.
May 16 8 tweets 2 min read
Time for a lecture on competition policy! Over the course of today will do 4 🧵's covering an entire 75 minute Ec10 lecture on competition policy. And just like in class questions and comments are most welcome.

Full slides here.

dropbox.com/s/ncgy1h590mv6… Note, in Ec10 we do a blend of more analytic classes (the one before this was about solving the monopoly problem by deriving marginal revenue, setting it equal to marginal cost, lots of curve shifting etc.) & broader classes like this one.
May 16 22 tweets 5 min read
After the greedflation kerfuffle, I wanted to step back and reflect on the role of polemics and open mindedness in approaching policy debates.

I'll do it by talking about how to talk about the notion that tax cuts pay for themselves.

A longish 🧵without a clear conclusion. Broadly speaking two poles in approaching ideas you are skeptical of:

1. Charitably, giving them the best possible interpretation. Disagreeing but doing it with humility and uncertainty.

2. Polemically, taking the worst versions of the idea and explaining whey they are wrong.
May 14 8 tweets 3 min read
Actually the economists who pay the most attention to market power do not think that it is playing a major role in inflation. See for example @ThomasPHI2. Even in perfect competition profits will go up temporarily when demand rises. Even in monopoly prices are too high but it is theoretically ambiguous whether they rise more or less than under perfect competition when demand increases.
May 13 6 tweets 2 min read
I've tried to be respectful but this is despicable ad hominem and insinuation and makes me respect you much, much less. Really sorry you wrote it. You didn't seem to like the tone in my tweet either (others shared that view too). Maybe fair but I don't think I've mischaracterized. I try to be broadly thoughtful on Twitter (see some threads on this topic in the addendum), but sometime write quickly.
May 13 8 tweets 3 min read
Hey old friend and colleague @sarahmillerdc, you raise a lot of points here. Let me do my best to address them in this thread. Your core argument is that certain Democratic economists (including me it seems) have wielded "enormous ideological gatekeeping power" and the result has been rising inequality and other terrible outcomes.
May 11 10 tweets 3 min read
Last inflation thread of the day.

This month's report--like always--had a lot of special factors that affected the numbers. You could say it was driven up by unusual one-time increases in airfare and new cars.

But, there were unusual declines like gasoline and used cars. I prefer to focus on some of the same categories every month to avoid inadvertently cherry picking (e.g., looking at core CPI, core services, a breakdown of core that takes out autos and pandemic services, etc.) Many of them were in my thread this morning.
May 11 7 tweets 2 min read
In January I had an out-of-consensus view that inflation would be 3 to 4 percent this year (closer to 3 for core PCE and closer to 4 for core CPI), much higher than most forecasts at the time.

I likely underestimated inflation. Why?

wsj.com/articles/four-… 1. Global events are part of the story but only a small part. The China shutdowns are not a surprise and might even be less than I had expected. Ukraine is more than I expected but not much more and not a huge impact on core.
May 11 9 tweets 4 min read
This is the inflation story to worry about: core services inflation has increased for four straight months. We're getting the much predicted/hoped for reprieve on goods price increases but services matter 5X in the computation of the CPI. You can see the handoff from goods to services in the 12-month changes. This graph will only get more extreme in the coming months as the big goods price increases last spring drop out of the data.
May 6 8 tweets 3 min read
New @PIIE blog on the jobs numbers w/ Willie Powell.

The headline is 428,000 jobs added and the unemployment rate unchanged at 3.6 percent. But the real news is the increased signs that nominal wage growth is slowing--which could mean inflation too.

piie.com/blogs/realtime… Here's job growth. A touch higher than expected. A touch below the recent pace. And more than sufficient to keep the employment rate rising (although it didn't in April, possibly data noise because they are two different surveys). Image
May 5 6 tweets 2 min read
Not everyone agreed with this view. It's definitely easier to criticize the Fed than to say they did something right--especially when the outcome is still more likely to be bad than good.

But let me explain my reasoning in a very short 🧵. 1. The market (mistakenly in my view) thought they were slightly dovish relative to expectations in ruling out 75 bps. BUT, that was relative to the expectation the market had at 1:59pm yesterday. Compared to the expectation three months ago they are MASSIVELY hawkish.
May 3 8 tweets 3 min read
For the intl agreement on a 15 percent minimum tax to work requires Congress to pass legislation. The clock is ticking. Not just good economic policy but also a chance to usher in a new mode of global economic cooperation.

A 🧵on my latest @WSJopinion.

wsj.com/articles/globa… I've long been interested in intl tax policy because there is generally no perfect answer. You want tax policy to not affect many different types of business decisions like where to have your HQ, where to produce, where to report profits, supply chains, etc.
Apr 29 5 tweets 2 min read
The story in the personal income data this month is much the same as last month:

1. Real incomes falling

2. Real consumption rising (driven by services)

3. Consumers financing this by dipping into their still large excess savings 1. Real disposable personal income and real compensation are both slightly below pre-COVID trends and falling as inflation outpaces compensation growth.
Apr 29 4 tweets 2 min read
Nominal compensation & wage growth both picked up in Q1 after slowing in Q4. But running way below inflation--so real wages continue to slide:

Down 3.6% over the last yr
Down 2.6% since pre-COVID
Down 5.0% relative to trend

(All based on the ECI which is composition adjusted.) Here is the monthly nominal series for wages. It looked like a lot of deceleration in Q4 but a lot of that was incentive pay. Overall picked up again in Q4. Is running at a ~5% annual rate (slightly higher for overall comp including benefits).