Coming Attractions: Hubbard and O’Brien Principles of Economics Updated

It’s customary for textbook authors to note that “much has happened in the economy” since the last edition of their book appeared. To say that much has happened since we prepared our last edition in 2019 would be a major understatement. Never in the lifetimes of today’s students and instructors have events like those of 2020 and 2021 occurred. The U.S. and world economies had experienced nothing like the Covid-19 pandemic since the influenza pandemic of 1918. In the spring of 2020, the U.S. economy suffered an unprecedented decline in the supply of goods and services as a majority of businesses in the country shut down to reduce spread of the virus. Many businesses remained closed or operated at greatly reduced capacity well into 2021. Most schools, including most colleges, switched to remote learning, which disrupted the lives of many students and their parents.

During the worst of the pandemic, total spending in the economy declined as the unemployment rate soared to levels not seen since the Great Depression of the 1930s. Reduced spending and closed businesses resulted in by far the largest decline in total production in such a short period in the history of the U.S. economy. Congress, the Trump and Biden administrations, and the Federal Reserve responded with fiscal and monetary policies that were also unprecedented.

Our updated Eighth Edition covers all of these developments as well as the policy debates they initiated. As with previous editions, we rely on extensive digital resources, including: author-created application videos and audio recordings of the chapter openers and Apply the Concept features; figure animation videos; interactive real-time data graphs animations; and Solved Problem whiteboard videos.

Glenn and Tony discuss the updated edition in this video:

Sample chapters will be available by October 15.

The full Macroeconomics text will available in early to mid December.

The full Microeconomics text will be available in mid to late December.

If you would like to view the sample chapters or are considering adopting the updated Eighth Edition for the spring semester, please contact your local Pearson representative. You can use this LINK to find and contact your representative.

New 09/03/21 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss the recent jobs report, Fed comments, and financial stability!

Authors Glenn Hubbard and Tony O’Brien discuss the recent jobs report falling short of expectations. They also discuss the comments of Fed Chairman Powell’s comments at the Federal Reserve’s recent Jackson Hole conference. They also get to some of the recommendations of a Brookings Task Force, co-chaired by Glenn Hubbard, on ways to address financial stability. Use the links below to see more information about these timely topics:
Powell’s Jackson Hole speech: 

https://www.federalreserve.gov/newsevents/speech/files/powell20210827a.pdf 

The report of Glenn’s task force: 

https://www.brookings.edu/wp-content/uploads/2021/06/financial-stability_report.pdf 

The most recent economic forecasts of the FOMC: 

https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20210616.pdf

WELCOME BACK! New 08/20/21 Podcast – Authors Glenn Hubbard & Tony O’Brien return to discuss delta variant & inflation!

Join authors Glenn Hubbard and Tony O’Brien as they return for a new academic year! The issues have evolved but the importance of these issues has not waned. We discuss the impact of closures related to the delta variant has on the economy. The discussion extends to the active fiscal and monetary policy that has reintroduced inflation as a topic facing our economy. Many students have little or no experience with inflation so it is a learning opportunity. Check back regularly where Glenn & Tony will continue to wrestle with these important economic concepts and relate them to the classroom!

NEW! – 04/16/21 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss monetary policy and the tools available to the Federal Reserve.

Authors Glenn Hubbard and Tony O’Brien follow up on last week’s fiscal policy podcast by discussing monetary policy in today’s world. The Fed’s role has changed significantly since it was first introduced. They keep an eye on inflation and employment but aren’t clear on which is their priority. The tools and models used by economists even a decade ago seem outdated in a world where these concepts of a previous generation may be outdated. But, are they? LIsten to Glenn & Tony discuss these issues in some depth as we navigate our way through a difficult financial time.

Just search Hubbard O’Brien Economics on Apple iTunes or any other Podcast provider and subscribe! Today’s episode is appropriate for Principles of Economics and/or Money & Banking!

Please listen & share!

NEW! – 04/09/21 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss the longer-term impact of several post-pandemic fiscal policy efforts and the new Biden administration infrastructure investment proposal.

Authors Glenn Hubbard and Tony O’Brien discuss the long-term impacts of recent fiscal policy decisions as well as the proposed infrastructure investment by the Biden administration. The most recent round of fiscal stimulus means that we’re spending almost 4.5 Trillion which is a high percentage of what we recently spent in an entire fiscal year. They deal with the question of if the infrastructure spending will increase future productivity or will just be spent on the social programs. Also, Glenn deals with the proposed corporate tax increase to 28% which has been designated to fund these programs but does have an impact on stock market values held by millions through 401K’s and IRA’s.

Just search Hubbard O’Brien Economics on Apple iTunes or any other Podcast provider and subscribe!

Please listen & share!

NEW! – 02/19/21 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss early thoughts on the Biden Administration’s economic plan.

Authors Glenn Hubbard and Tony O’Brien discuss early thoughts on the Biden Administration’s economic plan. They consider criticisms of the most recent stimulus packages price tag of $1.9B that it may spur inflation in future quarters. They offer thoughts on how this may become the primary legislative initiative of Biden’s first term as it crowds out other potential policy initiatives. Questions are asked about what bounce we may see for the economy and comparisons are made to the Post World War II era. Please listen and share with students!

The following editorials are mentioned in the podcast:

Glenn Hubbard’s Washington Post Editorial with Alan Blinder

Olivier Blanchard’s comments on the Stimulus in a Peterson Institute for International Economics post

Larry Summer’s WaPo editorial about the risks of the stimulus:

Just search Hubbard O’Brien Economics on Apple iTunes or any other Podcast provider and subscribe!

Please listen & share!

How the Effects of the Covid-19 Recession Differed Across Business Sectors and Income Groups

The recession that resulted from the Covid-19 pandemic affected most sectors of the U.S. economy, but some sectors of the economy fared better than others. As a broad generalization, we can say that online retailers, such as Amazon; delivery firms, such as FedEx and DoorDash; many manufacturers, including GM, Tesla, and other automobile firms; and firms, such as Zoom, that facilitate online meetings and lessons, have done well. Again, generalizing broadly, firms that supply a service, particularly if doing so requires in-person contact, have done poorly. Examples are restaurants, movie theaters, hotels, hair salons, and gyms.

The following figure uses data from the Federal Reserve Economic Data (FRED) website (fred.stlouisfed.org) on employment in several business sectors—note that the sectors shown in the figure do not account for all employment in the U.S. economy. For ease of comparison, total employment in each sector in February 2020 has been set equal to 100.

Employment in each sector dropped sharply between February and April as the pandemic began to spread throughout the United States, leading governors and mayors to order many businesses and schools closed. Even in areas where most businesses remained open, many people became reluctant to shop in stores, eat in restaurants, or exercise in gyms. From April to November, there were substantial employment gains in each sector, with employment in all goods-producing industries and employment in manufacturing (a subcategory of goods-producing industries) in November being just 5 percent less than in February. Employment in professional and business services (firms in this sector include legal, accounting, engineering, legal, consulting, and business software firms), rose to about the same level, but employment in all service industries was still 7 percent below its February level and employment in restaurants and bars was 17 percent below its February level.

Raj Chetty of Harvard University and colleagues have created the Opportunity Insights website that brings together data on a number of economic indicators that reflect employment, income, spending, and production in geographic areas down to the county or, for some cities, the ZIP code level. The Opportunity Insights website can be found HERE.

In a paper using these data, Chetty and colleagues find that during the pandemic “spending fell primarily because high-income households started spending much less.… Spending reductions were concentrated in services that require in-person physical interaction, such as hotels and restaurants …. These findings suggest that high-income households reduced spending primarily because of health concerns rather than a reduction in income or wealth, perhaps because they were able to self-isolate more easily than lower-income individuals (e.g., by substituting to remote work).”

As a result, “Small business revenues in the highest-income and highest-rent ZIP codes (e.g., the Upper East Side of Manhattan) fell by more than 65% between March and mid-April, compared with 30% in the least affluent ZIP codes. These reductions in revenue resulted in a much higher rate of small business closure in affluent areas within a given county than in less affluent areas.” As the revenues of small businesses declined, the businesses laid off workers and sometimes reduced the wages of workers they continued to employ. The employees of these small businesses, were typically lower- wage workers. The authors conclude from the data that: “Employment for high- wage workers also rebounded much more quickly: employment levels for workers in the top wage quartile [the top 20 percent of wages] were almost back to pre-COVID levels by the end of May, but remained 20% below baseline for low-wage workers even as of October 2020.”

The paper, which goes into much greater detail than the brief summary just given, can be found HERE.

11/06/20 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss the economic outlook given where the Presidential election stands.

Authors Glenn Hubbard and Tony O’Brien look at the economic outlook given the current status of the presidential election. Will a divided government lead to economic prosperity or result in more gridlock? They discuss how much the President actually controls economic policy by setting the tone but that other instruments of our government likely have more effect in creating long-term growth in the Economy.

Just search Hubbard O’Brien Economics on Apple iTunes or any other Podcast provider and subscribe!

Please listen & share!

5/13/20 Podcast – Glenn Hubbard & Tony O’Brien Welcome Their First Guest – Penn State Economics professor, James Tierney

Glenn Hubbard and Tony O’Brien continue their podcast series with a first – hosing a guest – Penn State Economics Professor, James Tierney. We learn about the transition James had from an early return from spring break to now teaching hundreds of students exclusively online in response to the pandemic. Glenn and Tony also discuss with James the struggles of the housing market in a small college town like State College, PA. We also learn the reasons behind James becoming the founder of an adult Improv company in the State College-area and the impact it had on his teaching. Please listen and share!

5/4/20 Podcast – Glenn Hubbard & Tony O’Brien Discuss Why It Was So Difficult To Predict the Pandemic and the Economic Downturn

Glenn Hubbard and Tony O’Brien continue their podcast series by spending just under 15 minutes discussing why it was so difficult for economists to see this pandemic and the associated economic downturn coming. Just as scientists lacked the indicators to see the pandemic coming, economists also didn’t have the tools available to see where the economy was headed even though some early signs were present. Please listen and SHARE with your students.