Tepid Economic Growth in Japan

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Economic View: Why Emerging Markets Should Look Within

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DealBook: Stocks Slump Following Weak Economic Data

British Open Economic Debate Ahead of 2015 Election

The chancellor of the Exchequer, George Osborne, on Monday promised more austerity and further welfare cuts while warning that the task of repairing government finances was “not even half-done.”

That vow followed a call on Sunday by Ed Miliband, the Labour leader and head of the opposition, for better protection for low-wage workers.

Only a year ago, Britain faced the risk of a return to recession, and Mr. Osborne’s austerity program was getting much of the blame. But Britain is now expected to be one of the fastest growing advanced economies in 2014, and that turnaround has left political parties scrambling for advantage at the start of the new year.

While the economic uptick is good news for the Conservative government, led by Prime Minister David Cameron, Mr. Osborne warned against a “dangerous new complacency,” arguing that, if given the chance, the opposition Labour Party would squander the gains made rather than consolidate them.

Despite its claims that austerity has laid the foundation for recovery, the government was put on the defensive late last year when the Labour Party campaigned over the cost-of-living squeeze felt by many voters whose pay increases have lagged behind big jumps in energy and other bills.

Mr. Miliband, writing in the Independent newspaper on Sunday, called for tougher action against unscrupulous firms that he said exploit cheap labor.

Calling for stiffer fines for companies that breach minimum wage laws and a ban on recruitment agencies hiring only foreign workers, Mr. Miliband also sought to defuse the debate over immigration and worries that workers from Eastern Europe were undercutting pay levels.

“Unless we act to change our economy, low-skill immigration risks making the problems of the cost of living crisis worse for those at the sharp end,” Mr. Miliband wrote. “It isn’t prejudiced to believe that.”

Mr. Osborne, speaking on Monday at a factory in Birmingham, sought to put the focus firmly back on deficit reduction, asserting that his economic program “is working,” but that an additional £25 billion in spending cuts will be needed after the next elections, due in May 2015, including £12 billion from the welfare budget.

The speech effectively challenged Mr. Osborne’s opponents to say whether they would match his target and, if so, how they would achieve it — if not through restricting welfare payments.

Mr. Osborne highlighted some potential welfare savings including cuts to housing benefits for people younger than 25, and the new restrictions on subsidized housing for those over certain salary thresholds.

Yet, on Sunday Mr. Cameron made clear that significant increases in the state pension will continue, insulating many older people from the squeeze on public spending. Political parties are wary of upsetting retired people because they tend to vote more than other age groups.

Labour countered Monday that it would focus more on growth as a way to reduce the scale of cuts. “We will get the deficit down in a fair way,” Labour’s finance spokesman, Ed Balls, said in a statement. “We know that the way to mitigate the scale of the cuts needed is to earn and grow our way to higher living standards for all.”

Meanwhile, Nick Clegg, leader of the Liberal Democrats, the junior party in the coalition government, distanced himself from Mr. Osborne’s comments on welfare. The Conservatives are making a “monumental mistake” in a remorseless search for cuts and in focusing the burden of consolidation on the working poor, Mr. Clegg, who is deputy prime minister, said at a news conference on Monday in London.

Although Britain’s next general election is more than a year away, elections for the European Parliament in May this year will provide an earlier test of the parties’ relative popularity with the British public.

As the general election approaches, and with opinion polls pointing to an inconclusive outcome, Mr. Clegg’s party is trying to distinguish its image from that of the Conservatives.

Economic Scene: Rethinking How to Split the Costs of Carbon

I have some good news for them, and some bad.

No, Apple hasn’t managed to produce the device without adding heat-trapping carbon to the air. The company expects an iPhone 5s to inject 70 kilograms — about 154 pounds — of carbon dioxide equivalent into the atmosphere over its lifetime, 11 pounds less than the iPhone 5 that Apple introduced last year.

The “good” news is that under the standard accounting of carbon emissions bandied about at climate talks, it’s not, mostly, Americans’ fault. About three-quarters of the carbon dioxide is considered the responsibility of other people — in places like China and Taiwan, South Korea and Inner Mongolia — where the phone and its parts were made.

The bad news is not just that the effort to curb global warming is as stuck as ever, but that, whether we like it or not, we’re all in this together.

The obstacles remain significant. Countless summit conferences since the Kyoto Protocol on climate change was adopted more than 15 years ago have failed to budge the fundamental roadblocks standing in the way of collective action: How should the costs be divided? Who did what to whom?

Globalization — which in the process of “exporting” production and jobs from rich to poor countries also “exported” the carbon dioxide emitted to make the products consumed by the rich countries — adds another complex twist to allocating responsibility for the carbon in the air. The disquieting question is this: Are emissions the responsibility of the countries that made them or of the countries for whom the products were made?

Two years ago, some of the greenest constituencies in the country asked Elizabeth Stanton and colleagues at the Stockholm Environment Institute-U.S. Center to perform a set of calculations on their carbon emissions. Rather than tally the carbon they produced, they wanted an inventory of the emissions generated in making, transporting, using and disposing of what they consumed.

They were in for a surprise. San Francisco, for example, generated only eight million metric tons of carbon dioxide equivalent in 2008. The city’s consumption, by contrast, added nearly 22 million tons of carbon to the air. Using consumption-based measurements, Oregon’s emissions in 2005 jumped to 78 million tons from 53 million.

“The people who hired us to do it saw themselves as so green and innovative,” said Frank Ackerman, who led the Climate Economics Group at the center at the time and now works with Ms. Stanton at Synapse Energy Economics, a consulting firm in Cambridge, Mass. “They thought that because they had nice initiatives going on they would come out lower, never mind the fact that a lot of the manufactures they consumed were made abroad.”

The focus on consumption makes sense. Understanding its impact on climate change is a necessary first step for families, and municipalities, to take concrete action to mitigate carbon emissions. This sort of recalculation, however, could have an unforeseen effect on the international politics of climate change by shifting responsibility on a global scale.

With the concentration of carbon dioxide in the air zooming last spring to its highest level since mastodons roamed the earth some three million years ago, the United Nations, against all odds, hopes 2014 will finally deliver the breakthroughs needed for the big carbon-spewing nations to agree on a plan by 2015.

“I challenge you to bring to the summit bold pledges,” urged the United Nations secretary Ban Ki-moon, as he invited global leaders to a nuts-and-bolts horse-trading meeting in New York next September.

The diplomacy of climate change appears as stuck as ever. Poor carbon-spewers like China justify their opposition to tight carbon limits on the grounds that, on a per-person basis, their emissions are still very low. Moreover, most of the carbon in the atmosphere now, they argue, was put there by Americans and other wealthy carbon-spewers, who burned a lot of fossil fuels on the way to getting rich. Forbidding the Chinese from doing the same would be tantamount to condemning them to stagnation.

Policy makers in Washington retort that while all this may be true, a deal that only required rich countries to limit emissions would be pointless: their carbon savings would be negated by growing emissions elsewhere. Heavy emitters of greenhouse gases — like the agriculture and chemical industry — would decamp from rich nations to the less carbon-restricted shores of the developing world.

Email: eporter@nytimes.com; Twitter: @portereduardo

This article has been revised to reflect the following correction:

Correction: December 24, 2013

An earlier version of this article gave incorrect figures for some emissions data. A study said that at least 1.2 billion tons’ worth of annual carbon dioxide emissions were exported from the developed to the developing world between 1990 and 2008, not 1.2 million tons’ worth. And in 2011 Europeans emitted 3.6 billion metric tons of carbon dioxide, not 3.6 million, and 4.8 billion tons were emitted to make things Europeans consumed, not 4.8 million.

This article has been revised to reflect the following correction:

Correction: December 25, 2013

An earlier version of a caption with this article misstated the emissions of the iPhone 5S relative to the iPhone 5. The 5S will release 11 pounds less carbon dioxide equivalent into the atmosphere than the iPhone 5, not 11 pounds more.

China’s Economic Surge Has Roots Before Deng, Book Finds

The official position of the Chinese Communist Party is that the answer is easy: Mao Zedong. But as evidence has accumulated in recent years about the extent of the killings, torture and chronic economic mismanagement through much of Mao’s rule, academic assessments outside China and sometimes even inside have been increasingly damning about Mao’s legacy.

That has produced a search for who should be given the credit for China’s re-emergence as an economic juggernaut with growing military and political heft. Jung Chang, the author of one of the most scathing biographies of Mao, as well as the best-seller “Wild Swans,” has suggested an alternative in a new book: Cixi, the empress dowager who for practical purposes was the ruler of China for most of the years from 1861 until her death in 1908.

Using extensive access to imperial court archives in Beijing that have not been available to biographers outside China, Ms. Chang presents her subject as neither the cruel despot nor the easily manipulated ruler whom the Communist Party and other critics have long portrayed. Her book, “Empress Dowager Cixi: The Concubine Who Launched Modern China,” presents Cixi (pronounced tsuh-shee) as a powerful, strong-willed woman responsible for most of the modernizing programs undertaken during her rule, only to be thwarted on many occasions by men who were sometimes in the pay of foreign powers.

Ms. Chang gives Cixi credit for building China’s first rail artery from Beijing to Wuhan, although she initially opposed it, as well as for strenuously resisting Japan and other foreign powers, protecting freedom of the press and even seeking in her last days to give millions of Chinese men the right to vote.

Some historians have criticized the book as painting too rosy a picture of its subject.

John Delury, an assistant professor of Chinese studies at Yonsei University in Seoul, South Korea, who specializes in the Qing dynasty, said that, with most of the chapters ending with strong praise of Cixi, he was concerned about whether the archival material had been objectively assessed. “As a reader, you don’t know what to trust, because everything is the best possible” interpretation of her actions, he said. “Really what we need is a post-revisionist biography that is very scholarly and very careful.”

Speaking in Hong Kong last week, Ms. Chang defended her work as fair while acknowledging that she “did develop sympathy” for Cixi.

“I documented every single one of Cixi’s killings, some of which have not even been put out by the official propaganda,” she said. “What I did was to provide the context and why Cixi did it.”

Ms. Chang said: “It is a biographer’s job to enter the head of your subject. I mean that is my job — I felt I entered Mao’s head, and I felt I entered Cixi’s head.”

A few other authors have also begun offering somewhat favorable interpretations of Cixi, notably Sterling Seagrave in his 1992 book, “Dragon Lady: The Life and Legend of the Last Empress of China.” Chinese historians, too, have offered more sympathetic interpretations of Cixi and other Qing court figures who resisted more radical calls for change in the late 19th century. But Ms. Chang said the Beijing archival material to which she unexpectedly gained access after the international success of her biography of Mao showed that Cixi had played an even more central role and been even more important to modernization than previously believed.

Although Ms. Chang’s books are banned in mainland China, Ms. Chang said the government had continued to let her travel to China each year to visit her aged mother, but with restrictions.

“I’ve made a commitment not to speak at public gatherings, not to talk to the press and not even to see my friends — I just restrict my visits to my mother and very close, old friends who have nothing to do with politics,” as well as a few Chinese scholars, she said. “I just hope that I can still go back to China and see my mother.”

Economic View: A Dearth of Investment in Young Workers

For Americans aged 16 to 24 who aren’t enrolled in school, the employment picture is grim. Only 36 percent are working full time, down 10 percentage points from 2007. Longer term, the overall labor-force participation rate for that age group has dropped 20 percentage points for men and 14 points for women since 1989.

This lack of jobs will damage the long-term careers of a big chunk of the next working generation. Not working after you finish school very often means missing out on developing the skills and habits that will serve you well later on. The current employment numbers are therefore like a telescope into the future labor market: a 23-year-old who is working part time as a dog walker, yoga instructor or retail clerk may be having fun, but perhaps will receive fewer promotions as a 47-year-old.

One culprit in this situation may be the higher minimum wage enacted in 2009, but the root causes run much deeper.

Employers appear to be more risk-averse, more concerned about overhead costs and less willing to invest in developing young workers’ skills. And that seems true across a wide variety of sectors.

In the legal profession, for instance, there is less interest in hiring junior associates and grooming them for partner status. Colleges and universities are often more interested in hiring adjuncts than tenure-track young faculty members. And publishing houses, instead of providing a big advance upfront and investing in young authors over a series of books, now expect many writers to earn their share of a book’s revenue through royalties.

If we consider how many jobs are being advertised, without asking whether they are being filled, the labor market seems to be booming. If we measure labor market progress in terms of actual hiring, however, it’s clear that the economy is recovering slowly. Employers appear to be looking around for workers but then holding out for the very best candidates, and, if need be, making do with few new hires or none at all.

These are signs of a world where next year’s business income is less certain, and many employers take greater care to keep weaker workers off the corporate team. Some employers would rather spend on information technology than hire the wrong workers. Some prefer to invest in the developing world with its longer work hours and lower wages. I outline these processes in my forthcoming book, “Average Is Over: Powering America Beyond the Age of the Great Stagnation” (Dutton Adult).

Young people who are hired often fail to find desirable, high-paying jobs. If we consider four-year college graduates only, average starting salaries, inflation-adjusted, were higher in 2000 than they are today, a decline that started well before the financial crisis. On balance, though, college remains “a good deal,” in part because wages for nongraduates have fallen even more than those for graduates. That is hardly a reassuring sign for the broader economy.

THESE developments put economic pressure on higher education. If it’s harder to get a good and lucrative job after college, why should students pay ever-rising tuition rates? College doesn’t always prepare students very well for the work force, and most graduates don’t enjoy the relatively rosy job prospects of computer science and engineering majors.

As tuition increases slow because of a sluggish labor market, colleges will have to change, making their offerings more relevant. But significant improvements may be hard to come by. Slow-growing or even shrinking revenue will strip colleges of financial resources, and they may suddenly have to focus on managing a decline rather than building for a more innovative future.

Policy changes to bolster economic growth and employment, whether by simplifying the tax code, repealing some occupational licensing, bringing more rigor to K-12 schooling or accrediting cheaper online education, may help reverse or curb these trends. But to focus on policy alone is to miss the gravity of the situation.

Falling wages for new entrants to the job market suggest that a sizable chunk of the American labor force may never achieve middle-class wages in a relatively secure full-time job. And many young people don’t want to take physically demanding jobs, which are often filled by immigrants. Some young people are breaking out of these traps by starting new Internet or service-based businesses, in lieu of looking for traditional employment. But others end up in part-time, temporary or low-quality jobs, biding their time and hoping that something changes.

We may not like what the market is indicating here, but it would be a mistake to shoot the messenger — namely, the market itself. Businesses are measuring value more accurately and choosing more cautiously, and though that raises overall productivity, it isn’t good for all workers. Many face the burden of meeting the standards of a more demanding world, and not all are succeeding at that task. It’s a problem that won’t be solved by any kind of quick fix.

Tyler Cowen is a professor of economics at George Mason University.

Greek Prime Minister Says Positive Economic Data Points to Austerity Easing

“Greece is turning the page,” Mr. Samaras told politicians and entrepreneurs at an annual international trade fair in the northern port of Thessaloniki, traditionally used by Greek prime ministers to outline their government’s economic policy for the coming year. “There will be no more austerity measures,” he said.

Citing figures released on Friday by the national statistics agency, Mr. Samaras said the Greek economy shrank 3.8 percent in the second quarter, significantly less than an estimate of 4.6 percent. It was the smallest contraction since 2010, when Greece signed its first multibillion-euro loan deal with its so-called troika of creditors — the European Commission, European Central Bank and International Monetary Fund. The improvement is largely the result of an unexpectedly strong rebound in the country’s crucial tourism sector, with a record 18 million foreign visitors expected this year, he said.

Equally encouraging are early indications that the country will achieve this year a primary surplus — a budget surplus not counting debt financing, Mr. Samaras said. He said this would be the “first decisive step toward exiting the policy of memorandums,” referring to Greece’s two loan agreements since 2010, which are worth a total of 240 billion euros ($315 billion) and have been meted out in installments in exchange for a series of austerity measures.

Mr. Samaras said achieving the surplus would open the way for two things, in line with an agreement with creditors — some form of debt relief for Greece, but also the chance to help citizens who have been hardest hit by austerity. It remains unclear how large the surplus will be; Mr. Samaras put it at 1.1 billion euros for the first seven months of the year. Mr. Samaras said 70 percent of the surplus would go toward “lightening the injustices” suffered by Greeks on low pensions and by members of the police, fire service and coast guard whose salaries have been slashed as part of public sector cutbacks.

Greece remains wracked by political and economic instability and may even need additional bailout money. The I.M.F. warned in a report at the end of July that a persistent recession, now in its sixth year, and the government’s failure to accelerate overhauls might create an 11 billion-euro hole in Greece’s finances over the next two years.

The monetary fund said Greece’s economy could return to growth as early as next year. But that forecast comes with a question mark, given that output has fallen 25 percent since its peak in 2007, while unemployment has surged to 27 percent — the highest in the euro zone — and youth joblessness has exceeded 60 percent.

Mindful that representatives of the country’s troika of foreign lenders are expected back in Athens later this month for a new audit, Mr. Samaras was vague on details about potential handouts, including a potential subsidy for heating oil, which saw an increase in taxation last year. He also promoted the benefits of an economic reform program that was bolstered by a write-down of privately held Greek debt last year and the suspension of interest payments on foreign loans, which together helped cut Greece’s debt by 145 billion euros. It now stands at 321 billion euros.

“We stopped the debt from ballooning,” he said, claiming that Greece could return to precrisis levels of prosperity by 2020 by exploiting the potential of its tourism and energy industries and by pushing a program of state privatizations. “Five or six years of difficulties cannot wipe out 3,000 years of glorious history.”

The premier lashed out at the main leftist opposition, Syriza, which opposes the terms of Greece’s foreign loan agreements, saying it “does not want to govern.” He claimed that the leftists were as extreme as “the neo-Nazis” of the ultraright, anti-immigrant party Golden Dawn, which has soared to third place in opinion polls, after Syriza and the premier’s conservative New Democracy, which leads the coalition government.

In a statement, Syriza accused the prime minister of “suffering from delirium,” saying, “Mr. Samaras sees unemployment slowing down even as 1.5 million of our fellow citizens don’t have work.”

Alexis Tsipras, the leader of Syriza, joined anti-austerity protests in Thessaloniki on Saturday evening, which were expected to draw thousands of disenchanted workers. About 4,000 police officers were being deployed to prevent the violence that has marred previous rallies organized by trade unions.

Unionists are planning to scale up their opposition to austerity in the coming weeks ahead of the scheduled return to Athens of troika inspectors after German federal elections on Sept. 22. The problem of Greek debt, and how to handle it, has featured prominently in campaigns for the German elections, whose outcome is expected to set the tone for tough negotiations between the Greek government and the troika. Chancellor Angela Merkel of Germany has insisted there will be no second debt haircut for Greece but has suggested a third loan program, much smaller than the first two, might be extended to Athens to cover the anticipated 11 billion euros funding gap.

The gap is expected to be discussed in talks between Greek government and troika officials in Athens. Negotiations will also focus on a raft of tough proposed reforms that are sure to test the stability of Mr. Samaras’s fragile coalition. They include a lagging program aimed at selling off state assets, lax tax collection efforts, the progress of a system of forced transfers and layoffs in the Civil Service, the possible closure of state-owned defense companies that are running losses and a likely end to a moratorium on home foreclosures.

Economic Scene: Business Losing Clout in a G.O.P. Moving Right

How did corporate America lose control of the Republican Party?

From overhauling immigration laws to increasing spending on the nation’s aging infrastructure, big business leaders have seemed relatively powerless lately as the uncompromising Republicans they helped elect have steadfastly opposed some of their core legislative priorities.

The rift is not only unusual in light of the tight historical alignment between the business community and the G.O.P., but it is also outright incomprehensible after the Supreme Court’s Citizens United decision, which allowed companies to spend unlimited amounts from their corporate treasuries on the 2010 and 2012 elections.

Scholars have proposed many reasons for the rise of the anti-government activists that are pulling the G.O.P. to the right, leaving it at odds with a business community used to compromising and seeking favors from government.

But what may be most surprising is how reluctant big business has been to put its money on the line. To put it mildly, if companies could purchase the Congress of their choice, it’s unlikely they would buy the gridlocked Congress we have. The seemingly inexorable rise of political partisans — mainly on the right, but on the left, too — suggests that corporate money may be playing a much smaller role in the political process than expected.

Concern about the potential consequences of Citizens United stem from a not unreasonable belief that businesses will do anything on this side of the law — and sometimes beyond it — to produce legislation that serves their corporate interests.

So when the Supreme Court opened the sluice gate in 2010 allowing unlimited campaign contributions, pretty much every liberal voice in the country believed that a flood of corporate cash was about to deliver the political system to the Republican Party.

It was, President Obama said, “a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”

Three years later, however, these fears have not quite materialized. Money is flowing to elections like never before. The 2012 elections cost some $6.3 billion, $1 billion more than the 2008 elections, according to the Center for Responsive Politics, a nonprofit group that researches money and politics. Independent spending by outside groups on campaign advertisements and the like topped $1 billion last year.

Corporate America, however, accounted for a comparative trickle. Adam Bonica, a political scientist at Stanford University, points out in a recent working paper that companies openly spent about $75 million from their treasuries on federal elections last year.

Even if all the hidden money funneled into campaigns through private 501(c) organizations had come from businesses — unlikely given the contributions by noncorporate groups like Planned Parenthood and the N.R.A. — corporate spending would not reach $400 million, still a small share of the total.

Perhaps this should not be surprising. For companies, spending on elections can be risky. Business executives might prefer lobbying, where they spend far more than on campaign contributions, not because the limits are more relaxed but because swaying legislators on both sides of the aisle is more effective at getting what they want. And such lobbying is less likely to kindle anger among consumers, shareholders and other constituents than spending to change the outcome of elections.

“While Citizens alters the ability of corporations to contribute to campaigns, it does not alter their substantial risk in doing so,” the political scientists Wendy L. Hansen, Michael Rocca and Brittany Ortiz of the University of New Mexico, Albuquerque, argued in a recent study.

Still, corporations’ reluctance to open their checkbooks suggests an intriguing alternative explanation for the rise of Republicans who are willing to defy their will: companies may have spent too little. Their money was swamped by that of big individual donors who are more ideologically extreme. In 2012, the top 0.1 percent of donors contributed more than 44 percent of all campaign contributions. In 1980 their share of contributions was less than 10 percent.

Corporations have a pro-Republican bias, of course. But it is not quite as extreme as pop culture would have it, and is certainly less pronounced than organized labor’s pro-Democrat leanings.

Effective lobbying requires both Republican and Democratic friends. Political action committees run by businesses are known for spreading money on both sides of the partisan divide. They give to incumbents. They choose winners. They show little partisan loyalty.

In the 2006 elections, when the G.O.P. controlled Congress, corporate PACs gave 65 percent of their money to Republicans. In 2008 and 2010, after the Democrats had swept both the House and Senate, they split their contributions roughly fifty-fifty.

By contrast, substantial research in political science suggests that individual donors favor more ideological candidates and are less strategic in their giving. Big, frequent donors are particularly extreme.

E-mail: eporter@nytimes.com; Twitter: @portereduardo

Looking Ahead: Economic Reports for the Week of Sept. 2

ECONOMIC REPORTS Information to be released this week includes construction spending for July and the Institute for Supply Management index of manufacturing activity in August (Tuesday); the United States trade deficit for July, the Federal Reserve’s beige book regional economic report, and the Challenger, Gray & Christmas report on job cuts in August (Wednesday); weekly jobless claims, ADP employment for August, and factory orders for July (Thursday); and the United States unemployment report for August (Friday).

CORPORATE EARNINGS Companies scheduled to report results include H&R Block (Tuesday); Dollar General (Wednesday); Smith & Wesson (Thursday); and Smithfield Foods (Friday).

IN THE UNITED STATES On Monday, banks, financial markets, government offices and many businesses will be closed in observance of the Labor Day holiday.

On Wednesday, automakers are scheduled to report on North American vehicle sales in August.

OVERSEAS On Monday, the German finance minister, Wolfgang Schäuble, will brief a government budget committee on Greece’s third financial assistance package, and the governor of the Bank of England, Mark J. Carney, will hold a news conference before the meeting of the Group of 20 nations.

On Tuesday, the Organization for Economic Cooperation and Development will issue its assessment of the economies of the Group of 7 industrialized nations and China.

On Thursday, the Group of 20 nations will begin its annual two-day conference in St. Petersburg, Russia; and the Bank of England and the European Central Bank will issue decisions on interest rates and monetary policy.

Economic View: A Carbon Tax That America Could Live With

THIS summer, the Obama administration released the President’s Climate Action Plan. It is a grab bag of regulations and policy initiatives aimed at reducing the nation’s carbon emissions, which many scientists believe contribute to global warming.

This got me to thinking: What might I do to reduce my own carbon emissions? Here are some things I came up with. Think of them as Greg Mankiw’s Climate Action Plan.

• I could buy a smaller, more fuel-efficient car.

• I could swap my traditional car for one with new technology, like a hybrid or an electric vehicle.

• I could car-pool to work.

• I could use public transportation.

• I could move closer to my job.

• I could buy a smaller house that requires less energy to heat and cool.

• I could adjust the thermostat to keep my home cooler in winter and warmer in summer.

• I could put solar panels on my roof.

• I could buy more energy-efficient home appliances.

• I could eat more locally produced foods, which need less fuel to transport.

I could go on, but by now you get the idea. Every day, we all make lifestyle choices that affect how much carbon is emitted. These decisions are personal but have global impact. Economists call the effects of our personal decisions on others “externalities.”

The main question is how we, as a society, ensure that we all make the right decisions, taking into account both the personal impact of our actions and the externalities. There are three approaches.

One approach is to appeal to individuals’ sense of social responsibility. This is what President Jimmy Carter did during the energy crisis of the 1970s. He encouraged Americans to adjust their thermostats and insulate their homes. I can still picture Mr. Carter sitting in the chilly White House, wearing his cardigan sweater.

It’s true that as a socially responsible economist, I always weigh the global costs and global benefits before pushing the ignition button on my car. (Yes, my tongue is firmly planted in my cheek.) But expecting most people to act this way is unrealistic. Life is busy, everyone has his or her own priorities, and even knowing the global impact of one’s own actions is a daunting task.

THE second approach is to use government regulation to change the decisions that people make. An example is the Corporate Average Fuel Economy, or CAFE, standards that regulate the emissions of cars sold. The President’s Climate Action Plan is filled with small regulatory changes aimed at making Americans live more carbon-efficient lives.

Yet this regulatory approach is fraught with problems. One is that it creates an inevitable tension between the products that consumers want to buy and the products that companies are allowed to sell. Robert A. Lutz, the former General Motors executive, laments that CAFE standards are “a huge bureaucratic nightmare.” He says, “CAFE is like trying to cure obesity by requiring clothing manufacturers to make smaller sizes.”

Yet another problem with such regulations is that they can influence only a small number of crucial decisions. In a free society, the government can’t easily regulate how close I live to work, whether I car-pool with my neighbor or how often I don a cardigan. Yet if we are to reduce carbon emissions at minimum cost, we need a policy that encompasses all possible margins of adjustment.

Fortunately, a policy broader in scope is possible, which brings us to the third approach to dealing with climate externalities: putting a price on carbon emissions. If the government charged a fee for each emission of carbon, that fee would be built into the prices of products and lifestyles. When making everyday decisions, people would naturally look at the prices they face and, in effect, take into account the global impact of their choices. In economics jargon, a price on carbon would induce people to “internalize the externality.”

A bill introduced this year by Representatives Henry A. Waxman and Earl Blumenauer and Senators Sheldon Whitehouse and Brian Schatz does exactly that. Their proposed carbon fee — or carbon tax, if you prefer — is more effective and less invasive than the regulatory approach that the federal government has traditionally pursued.

The four sponsors are all Democrats, which raises the question of whether such legislation could ever make its way through the Republican-controlled House of Representatives. The crucial point is what is done with the revenue raised by the carbon fee. If it’s used to finance larger government, Republicans would have every reason to balk. But if the Democratic sponsors conceded to using the new revenue to reduce personal and corporate income tax rates, a bipartisan compromise is possible to imagine.

Among economists, the issue is largely a no-brainer. In December 2011, the IGM Forum asked a panel of 41 prominent economists about this statement: “A tax on the carbon content of fuels would be a less expensive way to reduce carbon-dioxide emissions than would a collection of policies such as ‘corporate average fuel economy’ requirements for automobiles.” Ninety percent of the panelists agreed.

Could such an overwhelming consensus of economists be wrong? Well, actually, yes. But in this case, I am confident that the economics profession has it right. The hard part is persuading the public and the politicians.

N. Gregory Mankiw is a professor of economics at Harvard. He was an adviser to President George W. Bush.

Economic View: Public Policies, Made to Fit People

I HAVE written here before about the potential gains to government from involving social and behavioral scientists in designing public policies. My enthusiasm comes in part from my experiences as an academic adviser to the Behavioral Insights Team created in Britain by Prime Minister David Cameron.

Thus I was pleased to hear reports that the White House is building a similar initiative here in the United States. Maya Shankar, a cognitive scientist and senior policy adviser at the White House Office of Science and Technology Policy, is coordinating this cross-agency group, called the Social and Behavioral Science Team; it is part of a larger effort to use evidence and innovation to promote government performance and efficiency. I am among a number of academics who have shared ideas with the administration about how research findings in social and behavioral science can improve policy.

It makes sense for social scientists to become more involved in policy, because many of society’s most challenging problems are, in essence, behavioral. Using social scientists’ findings to create plausible interventions, then testing their efficacy with randomized controlled trials, can improve — and sometimes save — people’s lives, all while reducing the need for more government spending to fix problems later.

Here are three examples of social science issues that have attracted the team’s attention:

THE 30-MILLION-WORD GAP One of society’s thorniest problems is that children from poor families start school lagging badly behind their more affluent classmates in readiness. By the age of 3, children from affluent families have vocabularies that are roughly double those of children from poor families, according to research published in 1995.

The research found that one of many reasons that poor children often have difficulty learning to read is that they suffer at home from what might be called a “word deficiency.” The caregivers of these children simply don’t speak or read to them as often as those in better-off families. The study estimated that by age 3, a poor child would have heard 30 million fewer words than a child growing up in a family of higher socioeconomic status.

Until recently, this word gap has been hard to address. One promising new approach is being tested by Dr. Dana Suskind, a professor of surgery and pediatrics at the University of Chicago. Parents or caregivers who want to improve their children’s language skills can be coached to improve their interactions with them. (For example, interactive exchanges are better than soliloquies.)

New technologies, like the digital language processor developed by the LENA Research Foundation, whose work focuses on language problems in young children, can aid in this effort by letting parents receive feedback on the frequency and nature of their verbal interactions with their children. (Think of it as a box score for those interactions.) Providence, R.I., has won a $5 million grant from the Bloomberg Philanthropies for a Providence Talks program to use these kinds of techniques to improve school readiness for low-income children.

In this domain, the team’s role is multifaceted. There is no silver bullet for closing the word gap, but by encouraging more trials nationwide, providing evaluation expertise and distributing results, we can help give poor children their best chance to succeed.

DOMESTIC VIOLENCE The team will primarily lend support and expertise to federal agency initiatives. One example concerns the effort to reduce domestic violence, a problem for which there is no quick fix. But a good place to start is to ensure that each component of a victim’s support system works as well as it can. One such component is the National Domestic Violence Hotline, which victims can call for advice and support. Like other call-in centers, it can become busy and put callers on hold. Many victims hang up before they’ve had a chance to speak with a counselor.

In this case, the Administration for Children and Families is building an alliance of call centers to collaborate on experimental trials to see how best to keep callers on the line long enough to get assistance. Avoiding long periods of silence with callers, and offering an estimate of the waiting time, can help achieve that goal. So can composing the initial message in a way that maximizes the chances that a caller won’t hang up.

HEALTH COMPLIANCE One reason for high health care costs is that patients fail to follow their treatment regimen.

A good way to approach this problem is via a behavioral assessment, identifying obstacles to that compliance. As Sendhil Mullainathan, a Harvard economist, discussed in this space recently, one such obstacle is the co-payment, the patient’s share of a treatment’s cost. He sensibly suggests that for some highly effective treatments, there should be no co-payment at all. That’s a good place to start.

A thorough assessment could also uncover other factors that reduce patients’ adherence to best medical practices. If forgetting to take a medicine is the problem, a variety of interventions can help — from changing the medication’s design (a once-a-day dose is easier to remember than one taken three times a day) to using technology that reminds patients to take their pills.

Similarly, offering phone or text reminders of medical appointments can reduce no-shows and ensure that lab tests are done on time. Information technology makes these mental crutches easy to use, and is the focus of the team’s collaboration with the National Coordinator for Health Information Technology.

All of these examples show that the role of behavioral science in policy isn’t for the government to tell people how to think or act. It is to help them achieve their own goals. Parents want their children to excel, callers to a victims’ hot line want help, and sick people want to get well. Offering aids is like providing an alarm clock: it may help people get to an appointment on time, but no one is forcing them to use it.

Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago. He has informally advised the Obama administration.

Economic View: Why Innovation Is Still Capitalism’s Star

The decisive role of the “spirit of capitalism” is an old concept, going back at least to Max Weber, but it needs refreshing today with new evidence and new thinking. Edmund S. Phelps, a professor of economics at Columbia University and a Nobel laureate, has written an interesting new book on the subject. It’s called “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change” (Princeton University Press), and it contains a complex new analysis of the importance of an entrepreneurial culture.

Professor Phelps discerns a troubling trend in many countries, however, even the United States. He is worried about corporatism, a political philosophy in which economic activity is controlled by large interest groups or the government. Once corporatism takes hold in a society, he says, people don’t adequately appreciate the contributions and the travails of individuals who create and innovate. An economy with a corporatist culture can copy and even outgrow others for a while, he says, but, in the end, it will always be left behind. Only an entrepreneurial culture can lead.

Is the United States really becoming corporatist? I don’t entirely agree with such a notion. Even so, President Obama has been talking a lot about innovation as a job creator this year, and while some of his intentions may be good, I’m afraid that some of his proposals look a little corporatist, and might suppress individual initiative.

In his State of the Union address in January, for example, the president proposed that the government should create 15 new “innovation institutes,” modeled on a public-private partnership that he helped start in Youngstown, Ohio, that is devoted to developing 3-D printers. There was more in this vein in his administration’s 2014 budget, offered in April. And in a speech on July 30 in Chattanooga, Tenn., Mr. Obama suggested extending the number of innovation institutes to 45, or almost one for every state. The institutes, he said, would be “getting businesses, universities, communities all to work together to develop centers of high-tech industries all throughout the United States.”

Will such measures work? Should the government really be trying to start a 3-D printer center? And why in Youngstown? It is easy to be skeptical of such a plan, especially when it was started in a swing state just before the presidential election. Web sites of the two senators and two representatives introducing bills this month supporting the president’s latest proposals are suggesting, in not-too-subtle terms, that the legislation would bring jobs to their own states.

Successful companies aren’t usually started this way. Professor Phelps, citing a McKinsey study, suggests that in free-market capitalism, “from 10,000 business ideas, 1,000 firms are founded, 100 receive venture capital, 20 go on to raise capital in an initial public offering, and two become market leaders.” It is easy to doubt, as Professor Phelps does, that the odds are favorable for a Youngstown 3-D printer center.

How you view the innovation institutes, and the topic of capitalism and culture, may depend on your own experience. Many people have never seen the hatching of a successful business idea. That makes it hard to judge the subtle changes that may be occurring in the nation’s culture and in its potential for innovation.

My own business experience has certainly helped shape my thinking. Yale, like many other universities, sensibly allows its professors to spend limited time in business, providing the opportunity for faculty members to gain valuable experience outside of the ivory tower and to offer their technical skill to the business world.

In 1991, I started a business with Karl Case, an economics professor at Wellesley College, and Allan Weiss, a former student of mine at Yale. We called it Case Shiller Weiss, Inc., and it was devoted to an innovation we dreamed up. The idea was a new “repeat sale” home price index — which would track the changes in the value of the same houses over time.

At the time, this was an entirely new line of business. And, at first, that posed a problem: we were spectacularly unsuccessful in raising money. We talked to venture capitalists and their committees, to no avail. They just didn’t seem to get our business plan. We must have appeared odd to them — overly academic, perhaps. One remarked that we’d do better proposing a new shopping center.

But we went ahead with our idea anyway. At first, Allan worked without pay. A friend of Professor Case, Chuck Longfield, contributed some money. And in 1995, I took out a home equity line of credit on my house in New Haven so I could personally lend more money to help keep our business afloat. The experience was stressful, especially when adding it to the burdens of my main job, as a professor. I have much to thank my wife, Virginia, for her tolerance of my overwork and my worrying, and for allowing me to put our family savings at risk.

In the end, our business was successful, and I think a big part of it was that we relied on our own ideas and energy and, to a large extent, our own money. In 2002, we sold the business to Fiserv Inc., then licensed Standard & Poor’s to create what are now known as the S&P/Case-Shiller Home Price Indices. In 2006, the Chicago Mercantile Exchange began trading futures on 11 of our indexes. Fiserv sold the index business to CoreLogic early this year.

In short, our business made its mark without any help from the government.

This little real-life experiment convinces me that committees of experts, even at smart venture capital firms, will often not recognize real innovation. I think that America’s business success through the decades has occurred because we have so many people with specialized knowledge who are willing to put their money, time and resources on the line for ideas that can’t be proved to a committee.

THAT experience may also help explain why I think the new crowdfunding initiative, started by the Jobs Act that the president signed last year, is an exciting step forward. It’s all about finding and mobilizing people who really understand specific, hard-to-prove ideas for important investments.

At the same time, other of my experiences incline me to think that government-appointed committees of experts can help set the stage for an entrepreneurial culture, under certain limited circumstances.

Long before I started any commercial ventures of my own, I received some federal government support — in the form of National Science Foundation research grants, awarded to me decades ago as a young professor. They allowed me to do research, and though it was not directly related to my later business endeavors, the process developed my expertise and reinforced a sense of entrepreneurial opportunity.

These grants were awarded competitively, based on the quality of the proposals, and gave me experience with a system focused on creating opportunities for those who try hard. Later, from 1983 to 1985, I evaluated others’ proposals when I served on the foundation’s panel for economics. Observing the process from the government side convinced me that the foundation really works. Maybe it’s because the panelists are chosen from successful scientists, who serve anonymously out of public spirit.

In any case, as Professor Phelps has argued, direct government involvement in capitalism is a delicate thing. The system’s success depends on subtle cultural factors — and these require careful nurturing.

Robert J. Shiller is Sterling Professor of Economics at Yale.

Economic Expansion Slows Down in Japan

TOKYO — Japan’s economic growth slowed in the quarter that ended in June to an annualized rate of 2.6 percent, government data showed Monday, clouding the outlook for the economic policies of Prime Minister Shinzo Abe and raising concerns that he may put off moves to tackle the country’s enormous public debt.

This was the third consecutive quarter of growth for Japan’s gross domestic product of about $5 trillion, the third-largest in the world, after those of the United States and China.

Still, the expansion fell short of analysts’ expectations for Japan, whose economy grew at a robust pace of 3.8 percent in the previous quarter, helped by the Abe government’s monetary and fiscal stimulus drive.

Economists polled by Reuters had expected Japan’s economy to grow at a similarly healthy clip in the April-to-June quarter. But weak capital expenditure, reflecting continued caution among Japanese corporations about the country’s long-term prospects, slowed growth, according to figures released by the Cabinet Office.

Compared with the previous quarter, the Japanese economy grew 0.6 percent.

Private consumption rose a better-than-expected 0.8 percent over the previous quarter, as a brightening mood in Japan pushed up spending on food, travel and luxury products. But capital expenditure fell 0.1 percent, below a market forecast for a 0.7 percent increase.

“Corporations’ cautious attitudes was the main factor limiting growth,” Harumi Taguchi, principal economist at the research firm IHS, said in a note. Companies, he added, “remained hesitant to increase capital expenditure and continued to cut inventory in light of the slow recovery of exports and uncertainty regarding the sustainability of the economic recovery.”

Though export growth slowed in the quarter, shipments were expected to pick up as recovery gathered steam overseas, Mr. Taguchi said, especially in the United States and Europe.

A weaker yen has also assisted Japanese exports.

Less robust growth in China, Japan’s largest trading partner, is a concern. A spat over islands in the East China Sea that are claimed by both countries, has also hurt trade between the two countries.

Signs of slowing growth could strengthen the hand of critics of Mr. Abe’s economic drive, known as Abenomics, which has relied heavily on monetary stimulus and government spending to revive growth in Japan’s long-deflationary economy.

Mr. Abe has promised to follow up with market deregulation and the easing of trade barriers to raise the long-term growth potential.

Weaker growth could also derail Japan’s plans to raise taxes and pare back soaring government debt, which reached ¥1 quadrillion, or $10.3 trillion, in the latest quarter, more than twice the size of its economy.

To start easing that debt burden, the government plans to raise the sales tax to 8 percent next April, from the current level of 5 percent, and to 10 percent in October 2015.

According to government calculations, raising the sales tax could double tax receipts to more than 5 percent of gross domestic product, compared with the current 2 percent to 3 percent.

Whether Japan goes ahead with raising the tax will depend on how sustainable the government deems economic growth to be. Under the current plan, the increase will be implemented if it is likely that the economy can sustain at least 2 percent real G.D.P. growth for the next decade.

Mr. Abe said Monday that he remained confident on Japan’s economic prospects and that he would stay on course with economic overhauls. He has been noncommittal about the consumption tax, however.

“The economy has been steadily rising,” he said at a news conference. “I’ll continue to focus on the economy, implementing further growth strategies in the autumn.”

Some economists warn that raising taxes too soon could derail Japan’s nascent recovery.

“A tightening in fiscal policy would almost certainly snuff out the current cyclical rebound,” Duncan Wooldridge and Silvia Liu, economists at UBS, said in a note to clients before the G.D.P. numbers.

“The desire for fiscal consolidation in the long run must not sacrifice the war on deflation in the short run,” the note continued. “To hike or not to hike the consumption tax is the only policy which matters over the next four quarters.”

Economic View: For Obamacare to Work, Everyone Must Be In

These may seem to be reasonable positions. But they are incompatible. That’s been shown by historical events, and it’s now being strikingly confirmed by recent experience in the emerging Obamacare insurance exchanges.

The crux of the matter is what economists call the adverse-selection problem. Uninsured people with pre-existing conditions often face tens or even hundreds of thousands of dollars in out-of-pocket medical costs annually. If insurers charged everyone the same rate, buying coverage would be far more attractive financially for people with chronic illnesses than for healthy people. And as healthy policyholders began dropping out of the insured pool, it would become increasingly composed of sick people, forcing insurers to raise their rates.

But higher rates make insurance even less attractive for healthy people, causing even more of them to drop out. Before long, coverage would become too expensive for almost everyone.

The adverse-selection problem explains why almost no countries leave health care provision to unregulated private insurance markets. It also predicts that requiring private insurance companies to charge the same rates to everyone will make it prohibitively expensive for most people to buy individual health insurance.

In the 1990s, lawmakers in New York State enacted just such a requirement, and the result was exactly as predicted. Rates for individual policies soared, making New Yorkers’ insurance among the most expensive in the nation. Now, rates quoted under the Obamacare exchanges place individual policies within reach for millions of New Yorkers. New York City residents who had been paying $1,000 a month for individual policies in the earlier environment, for example, will now be able to purchase similar coverage on the Obamacare exchanges for slightly more than $300 a month.

What’s changed? Insurers are able to offer more reasonable rates because the individual mandate — the requirement in Obamacare that everyone buy insurance or face financial penalties — is ensuring a high proportion of healthy people in the insured pool.

Early quotes for individual policies on the exchanges in several other states have exhibited a similar pattern. That’s true in California, for example, and in Maryland, the latest state to report, rates now compare favorably with those in employer group plans.

Despite this experience, many in Congress want to repeal the individual mandate. Some, such as Senator Marco Rubio of Florida, have even threatened to shut down the government unless Obamacare is repealed entirely.

What alternatives are there? One way of avoiding the adverse-selection problem would be to re-emphasize traditional employer-provided health plans. Adverse selection is less serious under such plans, because the favorable tax treatment they receive requires insurers to cover all employees irrespective of pre-existing conditions. (Insurers can meet the requirement because most people employed in any company are reasonably healthy.)

But Obamacare was enacted precisely because employer plans fell short in many other ways. Millions of people, for example, are ineligible for such plans because they don’t have jobs. And millions of others with chronic health problems are trapped in their current jobs, because leaving them would mean losing coverage.

Employer plans arose in the first place only because of a loophole created by wage controls during World War II. In an effort to curb the costs of the war effort, the government prohibited wage increases but, perhaps by oversight, did not prevent employers from offering additional fringe benefits as a way to combat labor shortages. Employer health plans proved an especially effective recruiting tool and had the additional advantage of not being taxed as implicit income.

BUT if universal access to health care is the goal, employer plans are not the solution. Because global competition has increased pressure to cut costs, the number of workers with such plans has been steadily declining for more than 40 years.

The challenge was to design a new system that could cover the more than 50 million Americans without health insurance. The Medicare-for-all proposal favored by many health economists was one approach that the administration considered.

But that approach would have required Americans to abandon their existing employer plans for something new and unfamiliar. In the light of survey evidence that most Americans were reasonably satisfied with their existing plans, it’s hard to second-guess President Obama’s conclusion that this step would have been politically infeasible.

The only remaining option was to supplement existing employer plans with regulated private insurance markets. This approach had been carried out successfully in Switzerland, and in Massachusetts under Mitt Romney when he was governor. Individual mandates were an essential ingredient of that strategy. And given that many people could not afford to purchase insurance, it was also necessary to include subsidies for low-income buyers.

Obamacare, in any event, is now the law of the land. Even its most ardent supporters concede that the program will need to be amended as experience accumulates. But evidence from the emerging insurance exchanges vindicates the basic policy choices underlying the legislation.

We must ask those who would repeal Obamacare how they propose to solve the adverse-selection problem. That problem is not an abstraction invented by economists to justify trampling individual liberties. As experience in most countries around the world has confirmed, it is a profound source of market failure that renders unregulated insurance markets a catastrophically ineffective way of providing access to health care.

Robert H. Frank is an economics professor at the Samuel Curtis Johnson Graduate School of Management at Cornell University.

Looking Ahead: Economic Reports for the Week of Aug. 5

ECONOMIC REPORTS The market will be closely watching remarks by Federal Reserve policy makers this week for more clues on when the central bank might begin to reduce its bond-buying stimulus policy, despite mixed signals from the job market. The latest job report on Friday showed nonfarm payrolls rose by 162,000 in July, below expectations, but the unemployment rate fell to 7.4 percent, its lowest since December 2008. On Monday, the president of the Federal Reserve Bank of Dallas, Richard W. Fisher, is to deliver a speech on the economy. On Tuesday, the president of the Federal Reserve Bank of Chicago, Charles L. Evans, is scheduled to speak.

The Institute of Supply Management releases its nonmanufacturing index (Monday); the Census Bureau releases its report on the balance of trade in June (Tuesday); the Federal Reserve releases its report on consumer credit in June (Wednesday); the Labor Department releases its report on initial claims for unemployment benefits (Thursday); the Census Bureau releases its report on wholesale inventories (Friday).

CORPORATE EARNINGS Companies scheduled to report results include HSBC (Monday); Archer Daniels Midland, CVS Caremark, Tenet Healthcare, Molson Coors, Walt Disney, Crédit Agricole, Porsche and Standard Chartered (Tuesday); Carlyle Group, Time Warner, AOL, Tesla Motors and Groupon (Wednesday); Dean Foods, T-Mobile, Apollo Global, Commerzbank, Deutsche Telekom, Nestlé and Rio Tinto (Thursday); and J.C. Penney (Friday).

July Rally Seems to Wane as Shares Slip, Pending Major Economic Reports

The July rally in the stock market appears to be fading.

Stocks edged lower on Monday as investors awaited major economic news this week. Several big-name mergers were not enough to push the main market indexes higher.

The government will report its first estimate of economic growth for the second quarter on Wednesday, and it will release its employment report for July on Friday.

The Federal Reserve may give some indication about the future of its economic stimulus program on Wednesday after the central bank’s two-day policy meeting. The Fed’s stimulus has been a major factor supporting a four-year rally in stocks.

The Standard & Poor’s 500-stock index dropped 6.32 points, or 0.4 percent, to close at 1,685.33.

Seven of the 10 sectors in the S.& P. 500 fell. The declines were led by energy companies and banks.

The S.& P. 500 is still up 4.9 percent in July, and it appears to be on track to have its best month since January. The index reached a nominal closing high on July 22, after Ben S. Bernanke, the Fed chairman, assured investors that the central bank would not cut its stimulus before the economy was ready. The Fed is buying $85 billion a month in Treasury and mortgage-backed securities to help keep interest rates low and encourage borrowing and hiring.

The Dow Jones industrial average fell 36.86 points, or 0.2 percent, to 15,521.97. The Nasdaq composite index dropped 14.02 points, or 0.4 percent, to 3,599.14.

Stocks may struggle to add to their gains, given that expectations for the economy remain modest, said Scott Wren, a senior equity strategist at Wells Fargo Advisors.

Economists estimate that the economy grew at an annual rate of just less than 1 percent in the second quarter. That would be about half the 1.8 percent annual growth rate in the first quarter.

“I don’t think you’re going to see the market sustain much higher levels than this,” Mr. Wren said. “All this data is going to show that we are slowly improving, but it’s a slow process and there’s not much to get excited about.”

Three corporate deals did not excite the broader stock market.

The luxury retailer Saks rose 64 cents, or 4.2 percent, to $15.95 after the Canadian retailer Hudson’s Bay, the parent company of Lord & Taylor, agreed to buy it for $2.4 billion, or $16 a share.

The Interpublic Group, a big advertising company, jumped 74 cents, or 4.7 percent, to $16.61 after the Omnicom Group agreed to combine with Publicis Groupe of France to create the world’s largest advertising company. Interpublic’s stock gained even after the company’s chief executive, Michael Roth, said that he saw no need for a major merger to keep the company moving forward.

Omnicom shares climbed as high as $70.50 in early trading, but ended the day down 36 cents, or 0.6 percent, at $64.75.

Perrigo stock fell $9.06, or 6.75 percent, to $125.17 after the drug maker agreed to buy the Irish biotechnology company Elan in a deal valued at $8.6 billion.

The deals should encourage more merger activity, said Dan Veru, chief investment officer at Palisade Capital Management. “Companies are struggling to grow organically,” he said. “So, how do they grow? They grow by buying other businesses.”

In government bond trading, the price of the 10-year Treasury note fell 9/32, to 92 23/32, while its yield rose to 2.60 percent, from 2.56 percent late Friday. The 10-year note’s yield is up nearly 1 percentage point since the start of May, when it hit 1.62 percent, its low point of the year.

Looking Ahead: Economic Reports for the Week of July 29

ECONOMIC REPORTS Data to be released will include pending home sales for June (Monday); the Standard & Poor’s Case-Shiller home price index for May and the consumer confidence index for July (Tuesday); the first estimate of second-quarter gross domestic product, ADP employment for July, and the Chicago Purchasing Manager Index report for July (Wednesday); weekly jobless claims, Institute for Supply Management data for July and auto sales for July (Thursday); and the United States unemployment report for July, factory orders for June and consumer spending for June (Friday).

CORPORATE EARNINGS Companies scheduled to report results include Express Scripts (Monday); Aflac, Banco Santander, Barclays, Deutsche Bank, Fiat, Merck, Pfizer, and UBS (Tuesday); Allstate, Anheuser-Busch, BNP Paribas, CBS, Comcast, EADS, MasterCard, MetLife, Volkswagen and Whole Foods Market (Wednesday); American International Group, BMW, ConocoPhillips, Exxon Mobil, Kellogg, Lloyds Banking Group, The New York Times Company, Procter & Gamble and Société Générale (Thursday); and Allianz, Axa, Chevron, Royal Bank of Scotland, Toyota Motor and Viacom (Friday).

IN THE UNITED STATES On Monday, the civil fraud trial of Fabrice P. Tourre, a former trader at Goldman Sachs, continues.

On Tuesday, the Federal Open Market Committee, headed by Ben S. Bernanke, chairman of the Federal Reserve, begins a two-day meeting, with a statement on monetary policy to be released on Wednesday; the chairwoman of the Securities and Exchange Commission, Mary Jo White, and the chairman of the Commodity Futures Trading Commission, Gary Gensler, are scheduled to testify before the Senate Banking Committee about how the Dodd-Frank Act is being carried out; and President Obama is scheduled to speak on the economy in Chattanooga, Tenn.

On Wednesday, the Treasury will announce its quarterly refunding plans.

On Thursday, the International Trade commission is expected to release a final decision on Apple’s patent-infringement case against Samsung Electronics.

On Friday, Dell is scheduled to hold its twice-adjourned shareholder meeting on a proposed buyout of the computer company by its founder, Michael S. Dell, and the private equity firm Silver Lake.

OVERSEAS On Monday, BMW will show off a production version of its i3 electric car in Beijing, London and New York.

On Thursday, the European Central Bank and the Bank of England will release statements on monetary policy.

Economic View: Budging (Just a Little) on Investing in Gold

A friend posed that question to me a few weeks ago, after watching gold’s wild ride over the last few years. The price of gold was less than $500 an ounce in 2005, but soared to more than $1,800 in 2011, before falling back to about $1,300 recently. He wasn’t sure what to make of it all.

My instinct was to say no. Like most economists I know, I am a pretty boring investor. I hold 60 percent stocks, 40 percent bonds, mostly in low-cost index funds. Whenever I see those TV commercials with some actor hawking gold coins, I roll my eyes. Hoarding gold seems akin to stocking up on canned beans and ammo as you wait for the apocalypse in your fallout shelter.

But I was also wary of imposing my gut instinct on my friend, who was looking for a more reasoned judgment. I knew that some investors saw gold as a key part of a portfolio. The author Harry Browne, the onetime Libertarian presidential candidate, recommended a permanent 25 percent allocation to gold. In 2012, the Federal Reserve reported that Richard Fisher, president of the Federal Reserve Bank of Dallas, had more than $1 million of gold in his personal portfolio.

So, before answering my friend’s question, I dived into the small academic literature on gold as a portfolio investment. Here is what I learned:

THERE ISN’T A LOT OF IT The World Gold Council estimates that all the gold ever mined amounts to 174,100 metric tons. If this supply were divided equally among the world’s population, it would work out to less than one ounce a person.

Warren E. Buffett has a good way to illustrate how little gold there is. He has calculated that if all the gold in the world were made into a cube, its edge would be only 69 feet long. So the cube would fit comfortably within a baseball infield.

Despite its small size, that cube would have substantial value. In a recent paper released by the National Bureau of Economic Research, Claude B. Erb and Campbell R. Harvey estimated that the value of gold makes up about 9 percent of the world’s market capitalization of stocks, bonds and gold. Much of the world’s gold, however, is out of the hands of private investors. About half of it is in the form of jewelry, and an additional 20 percent is held by central banks. This means that if you were to hold the available market portfolio, your asset allocation to gold would be about 2 percent.

ITS REAL RETURN IS SMALL Over the long run, gold’s price has outpaced overall prices as measured by the Consumer Price Index — but not by much. In another recent N.B.E.R. paper, the economists Robert J. Barro and Sanjay P. Misra reported that from 1836 to 2011, gold earned an average annual inflation-adjusted return of 1.1 percent. By contrast, they estimated long-term returns to be 1.0 percent for Treasury bills, 2.9 percent for long-term bonds and 7.4 percent for stocks.

Mr. Erb and Mr. Harvey presented a novel way of gauging gold’s return in the very long run: they compared what the Roman emperor Augustus paid his soldiers, measured in units of gold, to what we pay the military today.

They report remarkably little change over 2,000 years. The annual cost of one Roman legionary plus one Roman centurion was 40.9 ounces of gold. The annual cost of one United States Army private plus one Army captain has recently been 38.9 ounces of gold.

To be sure, military pay is a narrow measure, but this comparison offers some support for the view that, on average, gold should keep pace with wage inflation, which, thanks to productivity growth, runs slightly ahead of price inflation.

ITS PRICE IS HIGHLY VOLATILE Gold may offer an average return near that of Treasury bills, but its volatility is closer to that of the stock market.

That has been especially true since President Richard M. Nixon removed the last vestiges of the gold standard. Mr. Barro and Mr. Misra report that since 1975, the volatility of gold’s return, as measured by standard deviation, has been about 50 percent greater than the volatility of stocks.

Because gold is a small asset class with meager returns and high volatility, an investor may be tempted to avoid it altogether. But not so fast. One last fact may turn the tables.

IT MARCHES TO A DIFFERENT BEAT An important element of an investment portfolio is diversification, and here is where gold really shines — pun intended — because its price is largely uncorrelated with stocks and bonds. Despite gold’s volatility, adding a little to a standard portfolio can reduce its overall risk.

How far should an investor go? It’s hard to say, because optimal portfolios are so sensitive to expected returns on alternative assets, and expected returns are hard to measure precisely, even with a century or two of data. It is therefore not surprising that financial analysts reach widely varying conclusions.

•

In the end, I abandoned my initial aversion to holding gold. A small sliver, such as the 2 percent weight in the world market portfolio, now makes sense to me as part of a long-term investment strategy. And with several gold bullion exchange-traded funds now available, investing in gold is easy and can be done at low cost.

I will continue, however, to pass on the canned beans and ammo.

N. Gregory Mankiw is a professor of economics at Harvard.

Economic View: Wealth Taxes: A Future Battleground

The mathematical reality is that wealth is becoming more important, relative to income. In a new paper, “Capital Is Back: Wealth-Income Ratios in Rich Countries 1700-2010,” Professors Thomas Piketty and Gabriel Zucman of the Paris School of Economics have performed the heroic task of measuring wealth for eight leading economies: the United States, Canada, Britain, France, Italy, Germany, Japan and Australia.

Their estimates reveal some striking trends. For instance, wealth accumulation in these eight countries has risen relative to yearly production. Wealth-to-income ratios in these nations climbed from a range of 200 to 300 percent in 1970 to a range of 400 to 600 percent in 2010. Behind the changing ratios is some bad news, namely that slow productivity growth and slow population growth have depressed income growth, but also some good news — that relative peace and capital gains have preserved wealth.

Focusing on the wealth of economies lets us reframe our recent debates about government debt in useful ways. A look at the ratio of debt to gross national product, for example, can be scary, but the ratio of debt to wealth is far less forbidding. If, say, a nation’s debt-to-G.D.P. ratio is 100 percent — often considered a dangerous level — and national wealth is 10 times yearly national income, the debt-to-wealth ratio is thus 10 percent, which is comparable to owing $100,000 on a $1 million home. Not so scary.

Using the wealth numbers provided by Professors Piketty and Zucman, we can understand how Japan, despite a debt-to-G.D.P. ratio of more than 200 percent, can maintain low interest rates; Japan has a wealth-to-income ratio of about 600 percent. In essence, creditors think the Japanese political system will be able to drum up enough support for the requisite taxes, pulled out of national wealth if necessary, when the time comes.

But don’t relax too quickly, because fiscal problems remain very real for many countries. While virtually every government could pay off its debts by taxing wealth, such taxes are often politically unacceptable. In other words, fiscal problems are best regarded as problems of dysfunctional governance. In the recent elections in Italy, the incumbent government lost voter support partly because it addressed the nation’s revenue problems by levying a wealth tax on real estate; the policy remains contentious and may yet be repealed or limited.

And here is a related issue: If there is enough national wealth to pay off debts, it may be harder to arrange bailouts from outside.

In the European Union, countries like Germany may regard the union’s more troubled nations as shirking their fiscal duties, and that makes cooperation harder to achieve. Italy, for instance, is in a fiscal crisis, but it also has an especially high wealth-to-income ratio, at 650 percent, indicating that it could pay off its debt if more of that wealth were taxed. Germany, by contrast, has a much lower wealth-to-income ratio: 400 percent. And though the professors caution that the German data, in particular, may be incomplete, the figures do lend support or at least plausibility to the recent argument that Germany shouldn’t be viewed as the rich uncle of Europe.

Some forms of wealth taxation take hidden forms, such as financial repression. This occurs when a nation’s citizens are required to hold deposits in banks under unfavorable terms — meaning at low interest rates. The banks, in turn, may be required to buy government debt to help finance a budget deficit. For better or worse, this is likely part of a longer-run resolution of fiscal problems in the periphery of the euro zone.

In the United States, wealth taxes are currently limited to a few levies, such as property taxes and inheritance taxes. Capital gains taxes that aren’t indexed to inflation also serve as an implicit wealth tax, because they dig into the body of a person’s capital. Most likely those rates will rise. Like the bank robber Willie Sutton, revenue-hungry governments go “where the money is.”

The coming battles over wealth taxation may prove especially bitter and polarizing. Most wealth has already been subjected to income and other taxes, perhaps multiple times. It doesn’t seem fair to the holders of that wealth to suddenly pay additional taxes on assets that they thought were in the clear, and such taxes would signal that previous policy has failed.

Higher wealth in a nation means that there is more to take, and growing inequality means there are more problems that its government might seek to remedy. At the same time, however, this new economic configuration will mean greater political influence for the holders of that wealth, and that will make higher wealth taxes harder to achieve.

Historically, economists — including me — have generally favored taxes on consumption, on the grounds that they would do the least damage to long-term savings, investment and economic growth. Yet in some eyes, rising wealth will become a tempting target for short-term political gain. And note that while most Republicans currently oppose consumption taxes, they may dislike the relevant alternative, namely wealth taxes, even more.

Get ready to choose a side.

Tyler Cowen is a professor of economics at George Mason University.