Skip to content

Posts from the ‘Interviews’ Category

Economist Amar Bhidé on the Fed

http://bhide.net/Amar Bhidé is a professor at the Fletcher School at Tufts University, and the author of four books, including A Call for Judgment: Sensible Finance for a Dynamic Economy (2010) and The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World (2008). We spoke with Bhidé about his op-ed in the New York Times, in which he advocated a reduced roll for the Fed.

Q) In your op-ed for the New York Times, you call for a Fed chair that will return the organization “to dullness.” Looking at the two most likely candidates (Lawrence Summers and Janet Yellen), do you see either one moving the organization back into obscurity?

A) You know, there is only so much you can say in an op-ed. I basically said in an original draft that it’s up to the President and Congress to redefine the job such that it’s more boring. I really don’t think that a Fed Chair can actually do this, since he or she is legally bound to pursue mandates and appear before congress. It would help if there was a Fed chair who could go along with a reduced mandate, but such a thing [coming from congress right now] is a bit of a pipe dream.

What is less of a pipe dream is the Fed being made more accountable. We have a debt ceiling, which congress has to legislate. What if we had a similar ceiling on the size of the Fed’s balance sheet? You could set whatever kind of limits needed, but if the Fed wanted to do anything extraordinary, like they did in the last three years, it would take a vote of congress. There needs to be, at the minimum, more checks and balances than we have now. We need to scale back what we expect the Fed to achieve.

If you want to start a war, you need approval from congress. Why not do the same with the Fed’s balance sheet?

Q) You say that economics is a “professions of faith as much as science.” Do you think the average person understands that distinction, or is it something people don’t quite grasp?

A) I think people’s eyes glaze over [when it comes to economics], but the most compelling evidence that this is a guessing game is this: you get people from the most distinguished universities, people with the best publishing track records, and you get them saying the exact opposite things, ‘The Fed is too tight, the Fed is too loose.’ Now, you could attribute this to ideology, but given that these differences exist, that’s as powerful evidence as you can find.

Then the question becomes ‘if no one really knows what they know, what principles do our elected officials follow, when trying to handle these disputes that even the best and the brightest can’t solve?’

Q) Since there is so much guesswork involved in economics, do you think the U.S. government is hesitant to regulate the Fed? Is it a matter of understanding or not understanding?

A) Military strategy is at least as complicated as monetary policy, and yet we still say that the President is Commander in Chief, and he can change military leadership and debate military issues. [Our government] has way more experience with both its judiciary and military sections. Relatively speaking, the Fed is a new institution, only 100 years old, and only the chair really has a say in what it does right now. I think that’s a dangerous precedent.

Economist Paul Osterman on America’s Jobs Crisis

Paul Osterman is a professor of Human Resources and Management at the M.I.T. Sloan School of Management and a member of the Department of Urban Planning at M.I.T. His research focuses on labor market policy, economic development, urban poverty, and job training programs. Osterman’s most recent book, Good Jobs America: Making Work Better for Everyone, argues that the U.S. can transform its employment landscape with policies that improve job quality without slowing economic growth. This week, we spoke about the roots of America’s jobs crisis and the solutions that Osterman says could revitalize the country’s future.

In your book Good Jobs America, you write that the U.S. faces two major employment problems. First, there aren’t enough jobs to go around. Second, many of the jobs that do exist fall below the standards of decent work—pay is low, and they offer no health insurance or opportunity for upward mobility. What are some of the causes of our jobs crisis?

Our current lack of jobs is largely the result of fallout from the 2007-2008 financial crisis. There’s an ongoing debate about the extent to which current unemployment is due to a lack of aggregate demand or a structural mismatch between available jobs and people looking for work. My view is that the issue is lack of demand. The number of open job vacancies relative to job-seekers is very low. Moreover, while it’s true that people with higher levels of education are much more likely to be employed, in the aftermath of the crisis we’ve seen an increase in unemployment across every education level. The unemployment rate for educated workers has gone up in proportion to that of lower-skill workers, which points to a lack of aggregate demand.

As to the quality of jobs, that’s a more long-term problem of a large, low-wage labor market in the U.S. One reason for that is that we have a far higher level of earnings inequality than other countries, which tends to lead to more low-quality jobs. Another reason is that we have much weaker labor standards: a relatively low minimum wage, unequal wages, issues with enforcing labor standards. We also have a history of racial discrimination in the labor market, which further contributes to the low-wage issue.

So what would you recommend that we do? Let’s start with the problem of high unemployment.

In terms of quantity of jobs, the irony is that we know what we have to do. We should stimulate aggregate demand, not simply through the Federal Reserve and the money supply, but with fiscal policy. But it’s been very difficult for the President to do that, because Congress simply hasn’t been cooperative with fiscal policy. A variety of policies would help: more government spending on infrastructure, more support for state and local governments, and increased public service employment.

What would you say to those who argue that the government has too much debt to take on those kinds of programs?

The issue of government debt is something you worry about once the economy gets to full employment. Then you can think about addressing the debt issue. And in fact, as we got closer to full employment, the debt issue would automatically start to be addressed, since tax revenues would go up as people’s incomes rose. Read more

Economist 101: Questions for Jeffrey Miron

Jeffrey Miron is the director of undergraduate studies in the Department of Economics at Harvard University and a senior fellow at the Cato Institute. His most recent book, Libertarianism: from A to Z, was published in 2010. He took a few moments to respond to AIER’s questionnaire for economic thinkers.

In one sentence, describe what you do at your job everyday.

Run the undergraduate program in Economics at Harvard.

What’s the most important economic concept for the average person to understand?

Resources are scarce, so all decisions face tradeoffs.

Name three people, living or dead, who you’d invite to your dream economics-themed dinner party.

Milton Friedman. John Maynard Keynes. Greg Mankiw.

What’s one policy change you would make to help aid the recovery?

Slash entitlements.

Tell us one thing about the economy that the media often gets wrong.

That stimulus spending is necessarily good for the economy.

What book do you think everyone should read?

Capitalism and Freedom, by Milton Friedman.

What do you refuse to spend money on?

Fancy cars.

Check out past interviews with Mike Konczal, Michael Munger, Emily Oster, and other economic thinkers here.

Questions for Mike Konczal

Mike Konczal is a fellow with the Roosevelt Institute who blogs at the Next New Deal and writes a weekly column at The Washington Post’s Wonkblog. His work has appeared in publications including Salon, The Atlantic, and The American Prospect. A former financial engineer and mathematical analyst, he writes about unemployment, financial reform, and inequality.

In one sentence, describe what you do at your job every day.

I work at a non-profit think tank called the Roosevelt Institute, and I try to keep track of the latest in the efforts to reform the financial sector in light of the recent crash, as well as understanding the arguments and data behind why the economy remains so sluggish, and unemployment so high, in the Great Recession.

What’s the most important economic concept for the average person to understand?

Well, right now, I think the idea that while any one market might be self-regulating, all the markets together in the macro-economy can end up far away from their potential if the Federal Reserve and government spending isn’t prepared to meet aggregate demand.

Name three people, living or dead, who you’d invite to your dream economics-themed dinner party.

William Beveridge, Oskar Lange and Henry George. I’d have pizza and beer and a ton of history and economics books, and ask them to make sense of how their specific political-economic projects had evolved since they died.

What’s one policy change you would make to help aid the recovery?

Have the Federal Reserve move to a higher inflation target, say 4 percent. We’ll need to eventually. Beyond that, extending the payroll tax cut, building up some infrastructure while everything is cheap and sitting idle, and modifying bankruptcy would help.

Tell us one thing about the economy that the media often gets wrong.

The deficit in the Great Recession wasn’t the result of an out-of-control Congress. It was largely the result of automatic stabilizers which led to spending increases, while unemployment and idle resources caused low revenues.

What book do you think everyone should read?

I think Barbara Fried’s The Progressive Assault on Laissez Faire is a masterpiece of economic theory, legal thought and intellectual history, and also just a fun and interesting read. More progressives nowadays should read it.

What do you refuse to spend money on?

Haircuts.

Check out past interviews with Robin Grier, Michael Munger, Emily Oster, and other economic thinkers here.

Economist 101: Questions for Robin Grier

Robin Grier is a professor of economics and international and area studies at the University of Oklahoma. She writes about development economics at the blog Cherokee Gothic, with a focus on Latin America and Mexico in particular. Her most recent article, “Explaining the Rise of the Left in Latin America,” was published in the spring 2013 issue of the Latin American Research Review. Check out her free online course on Mexico’s economy at Marginal Revolution University.

In one sentence, describe what you do at your job every day.

I pretty much have the best job in the world, in that it allows me the freedom to read, research, study, write, and teach about topics that I find fascinating.

What’s the most important economic concept for the average person to understand?

Just because the market isn’t doing a great job at something doesn’t mean the government can do it better.

Name three people, living or dead, who you’d invite to your dream economics-themed dinner party.

Bill Easterly, Jeffrey Sachs, and Lee Kuan Yew.

What’s one policy change you would make to help aid the recovery?

A permanent payroll tax cut to give businesses an incentive to hire new workers.

Tell us one thing about the economy that the media often gets wrong.

The idea that the government can create jobs and growth at will.

What book do you think everyone should read?

Henry Hazlett’s “Economics in One Lesson.” It was one of the first I ever read on economics and it blew me away.

What do you refuse to spend money on?

In general, I don’t tend to spend a lot of money on anything except travel and art.

For more of AIER‘s Economist 101 interviews with Michael Munger, Emily Oster, and more, click here.

Economist 101: Questions for Emily Oster

Emily Oster is an associate professor of economics at the University of Chicago Booth School of Business. Her book Expecting Better: Why the Conventional Pregnancy Wisdom is Wrong–and What You Really Need to Know comes out this August. She offers advice on Costco trips and breakups in The Wall Street Journal‘s economic advice column “Ask Emily” and contributes to Slate’s DoubleX. Check out her TED talk on how incentive-based analysis can help combat AIDS in Africa and follow her on Twitter.

In one sentence, describe what you do at your job every day.

On a great day, think and write; on a less-great one, management, administration and table formatting.

What’s the most important economic concept for the average person to understand?

Opportunity cost.  People undervalue their time to an incredible extent.

Name three people, living or dead, who you’d invite to your dream economics-themed dinner party.

Gary Becker, Paul Krugman, and Larry Summers.  Dinner parties are most fun with arguments.

What’s one policy change you would make to help aid the recovery?

I’d recommend not asking a health economist like me to weigh in on the macro economy.

Tell us one thing about the economy that the media often gets wrong.

That economics is just about interest rates and the Fed (although this is changing).

What book do you think everyone should read?

Becker’s Treatise on the Family.  And, of course, mine (Expecting Better, due out in August).

What do you refuse to spend money on?

Fixing dents in my car.  And it shows.

For more of AIER‘s Economist 101 interviews, click here.

Economist 101: Questions for Michael Munger

Michael C. Munger is a professor of political science, public policy, and economics at Duke University. He is the co-author of economics blog Kids Prefer Cheese and a regular contributor to EconTalk. His most recent essay, “The Political Economy of Recycling,” was published on June 3 by CATO Unbound.

In one sentence, describe what you do at your job every day.

I try to teach people about how societies can cooperate, both in the classroom and through my writing.

What’s the most important economic concept for the average person to understand?

Voluntary exchanges make both parties better off.  So the more exchange, the better.  Rules or laws that prevent exchange, or make it more expensive, harm people in ways that are hard to see.  Much of the harm that markets appear to cause are actually caused by misguided attempts to direct and regulate exchange.

Name three people, living or dead, who you’d invite to your dream economics-themed dinner party.

Let’s assume my French to be much better than it is.  Than I’d like to have dinner with Frederic Bastiat, Anthony de Jasay, and Bertrand de Jouvenal.  I probably wouldn’t get to talk much, but then just listening would be fine.  I would hope I could get them talking about current French economic and social policies.  It would be better than The Daily Show!

 What’s one policy change you would make to help aid the recovery?

I read much of our current economic malaise as a capital strike.  It’s not organized, or overt.  But investors and corporations are sitting on piles of cash, because they are not sure whether current tax and regulatory policies are going to change.  This happened in 1935 and 1936, in the Roosevelt administration, also, as documented by Amity Shlaes in her terrific book, The Forgotten Man.  This insistence that the government should constantly experiment, and try different tax policies and new regulations, is extremely damaging to investor confidence.  Almost any commitment to a stable policy, even with much higher taxes, would be better than the current uncertainty.  Making this even worse is the current administration’s apparent dithering over environmental policy, health policy, and other regulations.  No one has any idea what is going to happen next.  The Roosevelt administration extended the Depression by refusing to choose a policy and stick to it, insisting that they be allowed constantly to regulate prices, redefine property rights, and pass sweeping new regulations.  Unfortunately, we learned nothing from that disaster, because we are doing it again. Read more

Economist 101: Questions for Craig Richardson

craig at oxford (2)A new series that offers a sneak peak inside the minds of economic experts.

Dr. Craig Richardson is an associate professor of economics at Winston-Salem State University in North Carolina and a longtime AIER visiting research fellow. He is the author of the recent Cato Institute study, “Zimbabwe: Why Is One of the World’s Least Free Economies Growing So Fast?”

In one sentence, describe what you do at your job every day.  

I always start my day reading the news and various economics articles that pique my interest on blogs like Marginal Revolution, and from there I am either teaching, writing, thinking or just musing.

What’s the most important economic concept for the average person to understand?

There’s an old Woody Allen movie where a wizened rabbi says to him, “Your life is defined by the choices you make.” It seems so obvious, yet it’s not–a lot of people want to blame their lives on external events.

I particularly like to observe people (and myself!) when the costs of our choices start going up. You can find out the depth of people’s value systems only when they have to pay some price, and it’s interesting to see people “flip” when the price goes up too high.

Sometimes it’s difficult to observe these “prices,” other times not. I know someone who was outraged about Chick-fil-A’s president making negative comments about same-sex marriage. I asked her if she was joining the boycott that week against the company. She said with a wry smile, “No, I just like their sandwiches too much.” Read more

Richard Brewer Talks Economics

733802_421469131282385_190280505_nRichard Brewer is the chairman of AIER’s board of trustees. We sat down for a quick chat about Friedrich Hayek, job creation, and which news outlets get economics right.

You’ve got plenty of leadership experience under your belt. Before you became AIER’s chairman of the board, you served as the director of American Investment Services and as president and CEO of Arbella Insurance. What’s your management philosophy?

I don’t think leaders are necessarily born—they have to learn leadership behaviors. Good leaders have a genuine interest in people, they communicate. They’re respectful of others, gracious, fair, and firm.

Ronald Reagan is a good example. He was a good communicator. He and Tip O’Neill showed their ability to relate to and work with others when they worked together on revisions to Social Security in the 1980s. He also had a good sense of humor. “There you go again,” that line he said to Jimmy Carter–people still remember that.

What’s the most important economic concept for the average person to understand?

People understand how important jobs are—that’s a no-brainer. But they also need to understand what drives job creation and what deters it. When the government does something, how will that impact jobs? For example, will the Affordable Health Care Act hurt jobs because it will be more expensive for employers to hire?

Understanding the drivers of job creation is important for personal planning as well, as people decide which careers they’ll pursue. It’s important to know which ones will allow you to make a viable salary, along with personal satisfaction and other individual factors.

Read more

Economist 101: Questions for Ronnie J. Phillips

RonnieJPhillips

A new series that offers a peek inside the minds of economic experts.

Ronnie J. Phillips is Professor Emeritus of Economics at Colorado State University, author of Rock and Roll Fantasy? The Reality of Going from Garage Band to Superstardom, and a longtime AIER Visiting Research Fellow.

In one sentence, describe what you do at your job every day. Since I have retired from my regular teaching job at a university, I now read and do research only in areas that I am very interested in, such as the financial system or the music industry.

What’s the most important economic concept for the average person to understand? The relationship between private, or individual, marginal cost and marginal benefit and social marginal cost and marginal benefit.

Name three people, living or dead, who you’d invite to your dream economics-themed dinner party. Adam Smith, Franklin D. Roosevelt, and Joseph Schumpeter.

What’s one policy change you would make to help aid the recovery? Government spending on basic physical infrastructure, such as a high speed rail throughout the country. Better long-term ideas, but more specific, would be to end the home mortgage deduction and tax medical benefits paid for by an employer.

Tell us one thing about the economy that the media often gets wrong. The belief that without the intervention of the Federal Reserve, the financial system would collapse.

What book do you think everyone should read if they really want to understand the world we live in today? The biography of Steve Jobs.

What do you refuse to spend money on?  Information about the economy and news in general.

Please send ideas for future profile subjects to sarah.todd@aier.org.