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Economists have long recognized that changes in the quality of existing goods and services, along with the introduction of new goods and services, can raise grave difficulties in measuring changes in the real output of the economy. But despite the attention to this subject in the professional literature, there remains insufficient understanding of just how imperfect the existing official estimates actually are. After studying the methods used by the US government statistical agencies as well as the extensive previous academic literature on this subject, I have concluded that, despite the various improvements to statistical methods that have been made through the years, the official data understate the changes of real output and productivity. The official measures provide at best a lower bound on the true real growth rate with no indication of the size of the underestimation. In this essay, I briefly review why national income should not be considered a measure of well-being; describe what government statisticians actually do in their attempt to measure improvements in the quality of goods and services; consider the problem of new products and the various attempts by economists to take new products into account in measuring overall price and output changes; and discuss how the mismeasurement of real output and of prices might be taken into account in considering various questions of economic policy.

The United States faces a rising future ratio of debt to GDP that, if allowed to continue, would have serious adverse consequences for the American economy. Fortunately, policy changes can increase the size of the future GDP and shrink the future budget deficits. Relatively small reductions in future annual deficits could reverse the increasing ratio of national debt to GDP. Those annual deficit reductions could be best achieved by slowing the growth of Social Security and Medicare and by raising revenue by limiting tax expenditures or increasing the tax on gasoline.

The massive deficit in the U.S. trade and current accounts is one of the most striking features of the current global economy and, to some observers, one of the most worrying. Although the current account deficit finally began to shrink in 2007, it remained at more than 5 percent of GDP—more than $700 billion. While some observers claim that the U.S. economy can continue to have trade deficits of this magnitude for years—some would say for decades—into the future, I believe that such enormous deficits cannot continue and will decline significantly in the coming years. This paper discusses the reasons for that decline and the changes that are needed in the U.S. saving rate and in the value of the dollar to bring it about. Reducing the U.S. current account deficit does not require action by the U.S. government or by the governments of America's trading partners. Market forces alone will cause the U.S. trade deficit to decline further. In practice, however, changes in government policies at home and abroad may lead to faster reductions in the U.S. trade deficit. More important, the response of the U.S. and foreign governments and central banks will determine the way in which the global economy as a whole adjusts to the decline in the U.S. trade deficit. Reductions in the U.S. current account deficit will of course imply lower aggregate trade surpluses in the rest of the world. Taken by itself, a reduction in any country's trade surplus will reduce aggregate demand and therefore employment in that country. I will therefore look at what other countries—China, Japan, and European countries—can do to avoid the adverse consequences of the inevitable decline of the U.S. trade deficit.

As recently as two years ago there was a widespread consensus among economists that fiscal policy is not useful as a countercyclical instrument. Now governments in Washington and around the world are developing massive fiscal stimulus packages, supported by a wide range of economists in universities, governments, and businesses. This paper discusses the following questions: 1. Why has this change occurred? 2. What are the principles for designing a potentially useful fiscal stimulus? 3. What will happen if the current fiscal stimulus fails?

Traditional analyses of the income tax greatly underestimate deadweight losses by ignoring its effect on forms of compensation and patterns of consumption. The full deadweight loss is easily calculated using the compensated elasticity of taxable income to changes in tax rates because leisure, excludable income, and deductible consumption are a Hicksian composite good. Microeconomic estimates imply a deadweight loss of as much as 30% of revenue or more than ten times Harberger's classic 1964 estimate. The relative deadweight loss caused by increasing existing tax rates is substantially greater and may exceed $2 per $1 of revenue.

The intellectual and policy revolution in social insurance that is occurring around the world is among the most significant and positive developments of current economics. Social insurance programs have become the most important, the most expensive, and often the most controversial aspect of government domestic policy, not only in the United States but also in many other countries, including developing and industrialized nations. In the United States, these programs include Social Security retirement, disability, and survivor insurance, unemployment insurance, and Medicare insurance for those age 65 and older. Together these programs accounted for 37% of federal government spending and more than 7% of GDP in 2003. These ratios have increased rapidly in the past and are projected to increase even faster in the future because of the more rapid aging of the population. The author will discuss how the major forms of social insurance could be improved by shifting to a system that combines government insurance with individual investment-based accounts.

The U.S. corporate tax system is wrought with problems that have accumulated over many decades. The Tax Reform Act of 1986 (TRA86) provided a major overhaul of the personal income tax, reducing the top rate from 50 percent to 28 percent while maintaining revenue and distributional neutrality. But it did little to improve the corporate tax system. Indeed, TRA86 actually raised corporate tax revenue in order to pay for reductions in personal rates. Moreover, the specific changes in depreciation rules brought about by TRA86 reduced investment incentives, biasing the tax system in favor of owner-occupied housing instead of productivityenhancing investment in business structures and equipment. The House Republican plan, which was developed while Paul Ryan was chairman of the Ways and Means Committee, proposes to do five important things: (i) reduce the overall corporate tax rate; (ii) correct the tax treatment of the profits earned by the foreign subsidiaries of U.S. corporations; (iii) replace the traditional corporate tax with some form of cash-flow corporate tax; (iv) deal with pass-through businesses in an efficient and equitable way; and (v) avoid increasing the fiscal deficit while doing these things. I briefly comment on each of these five goals below.

The Mirrlees Review is an ambitious and comprehensive analysis of the British tax system with detailed recommendations for reform. This review essay focuses on those issues that are also likely to be of interest to an American reader. The Review has the technical sophistication that readers would expect from a team of ten economists, chaired by James Mirrlees, the distinguished theorist who received the Nobel Prize for his contributions to the theory of optimal taxation. But it is written for a broader audience, explaining concepts like deadweight loss and the elasticity of tax revenue with respect to tax rates and doing so without any mathematics.

Raj Chetty is eminently deserving of being awarded the John Bates Clark Medal at the age of 33. His research has transformed the field of public economics. His work is motivated by important public policy issues in the fields of taxation, social insurance, and public spending for education. He approaches his subjects with a creative redefinition of the problems that he studies, and his empirical methods often draw on experimental evidence or unprecedentedly large sets of integrated data. While his work is founded on basic microeconomics, he modifies this framework to take into account behavioral and institutional considerations. Chetty is a prolific scholar. It is difficult to summarize all of Chetty's research or even to capture the details of his most significant papers. I have therefore chosen a selection of Chetty's important papers dealing with taxation, social insurance, and education that contributed to his selection as the winner of the John Bates Clark Medal.

The current focus of Federal Reserve policy is on \"normalization\" of monetary policy-that is, on increasing short-term interest rates and shrinking the size of the Fed's balance sheet. Short-term interest rates are exceptionally low, and the Feďs balance sheet has exploded from $800 billion in 2008 to $4.4 trillion now.At the September 2017 meeting of the Federal Open Market Committee (FOMC), the Fed indicated its long-term goal for the federal funds rate and its near-term goal for shrinking the size of its balance sheet. In my judgment, the Fed's plan is too little, too late. I also believe the Fed's underlying goal is to increase inflation above its 2 percent target and that such a policy is wrong.I think the Fed should have begun raising interest rates and reducing its balance sheet back in 2013 or 2014. I think the current goal of raising the federal funds rate from 1.4 percent now to 2.1 percent at the end of 2018 (when it would be a 0.1 percent real rate using the Fed's median inflation forecast) is just too slow and will continue to encourage a dangerous bidding up of asset prices.In this article, I will begin by discussing the Fed's shift to the easy money policy. I will then turn to the adverse side effects of the quantitative easing (QE) policy, particularly the increases in asset prices that create a risk of financial instability. The next section considers the reasons that the FOMC members have continued to pursue the policy of excessively easy money. There is a brief concluding section.