Why Do Economists Disagree?

00:00:01 uh welcome to the Helix Center for this round table on why economists disagree uh before we start the round table and Rob penzer will introduce the panelists I have a few uh remarks to make first it's about the program tomorrow uh which is the 14th from 3: to 4:30 p.m. we have the inauguration of our poetry series and it's called collaborations Jazz and poetry and Louis Porter the noted jazz

00:00:34 pianist and the educator and author of The celebrated book on col train will be here along with jazz poet Shan singer who is winner of the Yale series of younger poets prize then on Friday October 26th and Saturday um October 27th uh philosopher and interdisciplinary scholar maxines Johnson will be moderating two round tables the first is from 7 to 9: on Friday evening the 26th it's called life

00:01:07 and movement exploring Evolution coordination Dynamics Sports social interactions neuroscience and Aesthetics as a way of understanding those who know Maxin Johnson's work wouldn't be surprised by this description as a she's a philosopher a interdisciplinary scholar but also used to be a dancer

00:01:38 um but it's a way of understanding movement and life the other participants are professors Linda korel Jesus elen ausa and Scott Kelo then s on Saturday the 27th uh Rob has written here one to three but I thought it was 230 to 4:30 also we we'll let you know it's uh again the

00:02:08 subject is a male male competition and um the participants are Randall Collins Brian Ferguson James liberman and the science journalist John Horan the uh Round Table is uh going to also touch on issues such as implications of globalizations war and violence then on Sunday October 28th from 5:30 to 9: we have the Helix

00:02:41 Center's first benefit it will be at J Supper Club at the Red Rooster a Jazz Ensemble led by Jane Ira Blum uh will play and the mark mitton the internationally known magician will perform some magic uh if you want ticket information if you go on to our website www theix center.org you can get the information

00:03:12 or you can email to the center and we will send you invitations if you can't attend the dinner we invite you to consider making I would say I would urge you uh Rob wrote this for me I don't think put strong enough it should be I urge you to uh to make a contribution because without it we can't survive and so uh we hope the benefit will help us some and

00:03:43 we also hope that contributions from people who are interested in these programs will be helpful in continuing it uh just the last comment or programs are webcast live and they're archived and um if you sign to our webs sign up at our website then you can participate in ongoing discussions that follow these roundtables and we urge you to do that so Rob will introduce the panelists and then we move

00:04:15 on thank you Ed and thank you all for coming here on such a a beautiful fall day which guarantees we have a very committed audience uh and uh I think you'll be pleased with our uh panel of noted economists who are going to be exploring their philosophical uh convergences and divergences around the question why do economists disagree Graciela chisi is Professor of economics and mathematical statistics and a university Senator at Columbia

00:04:46 University she has worked extensively in the Kyoto Protocol process creating and designing the carbon Market that has become international law in 2005 working closely for several years with negotiators of the United Nations framework convention on climate change the organization in charge of deciding World policy with respect to global warming Dr chelski acted as a lead author of The intergovernmental panel on climate change which received the 2007 Nobel Prize for their work in this area she is currently the co-founder and CEO of global thermostat a company that has developed and is commercializing unique

00:05:17 technology for the direct capture of carbon dioxide from the atmosphere and other sources the author of 15 books and some 250 scientific articles publishing academic journals covering economics finance and Mathematics Dr Dr chiny is a frequent keynote speaker in Academia public events and the media speaking extensively on globalization and the global environment Robert H Frank who is our moderator today is the Henrietta Johnson Lewis professor of management and professor of Economics at Cornell's Johnson Graduate School of Management and the co-director of paduana seminar

00:05:48 in business ethics at nyu's Stern School of Business his economic view column appears monthly in the New York Times his papers have appeared in American Economic Review econometrica Journal of political economy and other leading professional journals his books which include choosing the right Pond passions within reason microeconomics and behavior principles of economics with Ben banki luxury fever what price the moral High Ground falling behind the Eon the economic naturalist and the Darwin

00:06:19 economy have been translated into 22 languages the winter take all Society co-authored with Philip cook received a critic's choice award it was named a notable book of the Year by the New York Times and included in business week's list of the 10 best books of 1995 he is a co-recipient of the 2004 Leon Tiff prize for advancing the frontiers of economic thought and was awarded the Johnson School Steven Russell distinguished teaching award in 2004 Jeffrey myON is senior lecturer and director of undergraduate studies in the department of Economics at Harvard

00:06:50 University and a senior fellow at the KO Institute Dr myON previously served as department chairman at Boston University for six years he's been the recipient of an Olen fellow ship from the National Bureau of economic research an earheart Foundation fellowship and a Sloan Foundation faculty research Fellowship Dr myON has published more than 25 articles in referee journals and 50 op-eds in CNN.com New York times.com forbes.com and other outlets Dr Myron's commentary on economic policy has appeared on CNN CNBC MSNBC NPR Bloomberg

00:07:22 and Fox Television BBC Radio and in dozens of other television radio and print media around the world he has written extensively on the economic case against drug prohibition and he has been a vocal critic of the treasury bailout in the Obama administration's fiscal stimulus Dr Myan is also a star teacher in for of the past five years the senior class at Harvard has chosen him as one of their favorite teachers his most popular offering is a course titled a Libertarian perspective on economic and social policy which has attracted more than 900 students in just five years Joseph sno is Professor of economics in

00:07:54 the finance and graduate economics Department in the lubben School of Business of Pace University he is the the editor of the quarterly Journal of Austrian economics and the academic vice president of the ludd GES Institute he's a research associate of the foundations of the market economy and the economics Department of NYU and a policy expert for the Heritage Foundation he's on the board of editors of processus Des Merado and studia Humana Dr s has published over 50 refereed articles and essays and is the author of the recent money sound and unsound and has edited or co-edited

00:08:26 several books including prices in production and other works fa on money the business cycle and the gold standard a history of money and banking in the United States by Murray and Roth Bard Human Action the scholars Edition by lck Von mes he is co-editor of the forthcoming five volume collection monetary reform and the bagio group selected letters and papers of Fritz matchup am I saying his name m uh Robert triffin and William felner he's testified before Congress on the topics of inflation and of fractional Reserve banking has been frequently

00:08:57 interviewed on broadcast and online radio shows including from Bloomberg Radio and has appeared on C-Span and Fox News Fox Business Network and New York lawline television so without I'm sorry oh and uh the books uh there there are a number of books by uh uh by our panelists that are for sale in the back and there will be uh book signing as as well so we encourage you to uh uh stop there after the audience discussion so without further Ado I turn things over to our moderator Bob Frank

00:09:28 yeah thank you very much it's a real treat to be uh able to participate in a forum like this I've been here once before uh to to a forum in this room and it it's not like the forums that you see on the Sunday news shows or or other other popular forums where people shout at each other I think here here there's an audience that's intelligent enough to tell a good argument from a bad argument and so

00:09:59 speakers are under some pressure not to say things that are demonstrably false and and and there are there are issues that are hard to reach agreement on and I think uh when you're ever ever in a a forum like this it's it's good to steer clear of most of those issues there's no way you could have a discussion about what the right public policy posture is on issues like abortion or other things you couldn't get agreement in a diverse group on issues like that and I think there are

00:10:30 many things that we quarrel about where intelligent people could listen to a discussion of the pros and cons on each side and Come Away with a clear sense that there was a right answer and so it's always been my inclination in events like these to stick exclusively to the lwh hanging fruit the the kinds of things where where it is possible to to make uh real Headway in debate and so I'm I'm not going to say anything at all that any reasonable person could disagree with

00:11:00 presentation today we will see we and and and reason people have will have a chance to say whether they agree with whether I've done that uh and I'm going to take the the what I think to be the most important issue we face now uh and describe how it's not a difficult issue to to make genuine progress on that's the lingering economic downturn uh it began in 2008 with the financial crisis as always happens in financial crisis uh it takes a long time to work off

00:11:32 overhanging debt and get the the economy back spending again we're in the midst of what remains a classic demand shortfall downturn there's not enough spending to put everyone to work who wants to work uh if you took an economics course long ago you'll remember the famous national income identities yal C plus i+ g y That's national income C that's consumption consumption has been very sluggish because consumers are still paying down

00:12:03 debt they've made some progress but it's still a long way to go uh many of them have have remained jobless or are fearful that they'll lose their jobs they're not going to spend us out of the downturn uh businesses we've all read are sitting on mountains of cash why aren't they investing some say it's because of uncertainty in the environment maybe that plays some role but far more important than that is the fact that they already have facilities that are more than adequate to produce what people want to buy today at the depressed demand levels if there were

00:12:34 demand for more output they would build bigger factories and hire more workers but there's not and so they don't so C plus I those two aren't going anywhere what does that leave as KES was was uh the first to point out clearly in in a downturn like this the solution is for G to get bigger uh people will say we tried G with the stimulus package and it didn't work so that that puts uh rest to that lie well at at the time we were confronting the the steepest downturn in employment

00:13:04 and output that we'd seen even uh through the early months of the Great Depression output unemployment were falling faster during this financial crisis the demand shortfall was something like $2 trillion per year it was uh uh met by a stimulus program whose total outlays were slated to be 787 billion about onethird or so of the demand shortfall and that was a $2 trillion year shortfall and the stimulus was spread out over three years it wasn't an ideally constructed stimulus

00:13:37 package as the people who are skeptical about government will will give us uh reason to remember anytime you send the legislative body into a room to make a bill all sorts of bad things happen along with whatever good things might happen in the process so the stimulus wasn't up to the task but studies of it have shown it did some good uh what should we do now I I say stop arguing about whether stimulus makes sense that's an abstract argument that can play out in the economics journals I think it will be resolved in favor of

00:14:09 the stimulus approach but in the meantime uh I'm going to make a proposal that I made in a debate I had with PJ oor last fall uh he he and I met at the Cornell Club to discuss what should we do about the ailen economy he wasn't inclined at the outset to agree with anything I might say on that subject but uh at at the end of the the session we went and did a radio interview together and pushed a common set of proposals which we then elaborated in an oped we published a month later so let me just

00:14:40 say what the solution is that I think every reasonable person ought to be able to embrace and that is we've got the American Society of civil engineers report card on America sitting in front of us they've identified $2 trillion worth of Desperately overdue maintenance projects in the National infrastructure sphere now you could say their Engineers are just trying to drum up business for themselves a fair point but as anyone who's driven around New York can attest from firsthand experience there is

00:15:11 really quite a big inventory of unmet infrastructure repair around the country Manhattan dumped how many hundreds of millions of gallons of raw sewage into the East River uh last summer their Systems Failing all around the country if we want to rebuild infrastructure there's never going to be a time cheaper to do it than now the department of uh Transportation Nevada identified a 10m stretch of Interstate 80 in that state that could be brought up to speed today it's very badly uh tattered could be

00:15:43 brought up to speed today for $6 million outlay that's the for the 10 Mile Stretch if we wait two years they estimated the repairs the same repairs will cost 30 million uh not taking into account any of the temporary uh shortfall in in demand that we're facing now just because the road bed would get more heavily disrupted and we'd have to dig it out deeper and and the repairs would escalate fivefold with two years weit throw on top of that the observation that the people who could do

00:16:14 those jobs uh are many of them sitting idle today uh they would not have to be bid away from other useful tasks as they would be uh if we wait until the economy is back on its feet before we attend to that there are equipment uh uh that there's equipment that is needed to do those jobs sitting idle in The Yards materials are cheap down World Markets because the whole world is in a downturn still the interest rates on the money needed to finance these projects have never been lower than they are right now if we wait all those costs are going to

00:16:45 go up uh the capital Dome is crumbling the the the uh Northeast rail Corridor desperately needs Capital Improvements uh when is the time to do that right now is the time to do that that would increase spending it would put money into the hands of people who would go out and spend it on other things and it would begin to circulate that's the traditional stimulus of but even if it did none of those things we would get jobs done that need to be done at a fraction of the cost that will end up incurring if we have to wait so again

00:17:16 that's what I see as the the most important and pressing problem and I think there's an easy way to make progress on that problem that all people of Goodwill ought to be able to agree on so what PJ a and I recommended was send a bipartisan commission into a room with a report card on the American infrastructure and allow them to identify which projects should not be funded for immediate uh uh green light all others get the green light and we start work on them right away if people

00:17:48 want to object we can't borrow more money to finance more government spending the debts is already crippling our grandchildren that's that's an incoherent objection if you think about it more carefully think about a family uh trying to decide whether to put insulation in its attic because Energy prices went up it's going to have to borrow money to do that we have to go into debt further than it's already in debt should it do it uh the answer to the question uh can't be determined without looking at the logic of the

00:18:20 investment if the investment is going to cost 50 a month to pay off the loan for doing the work and it's going to reduce their utilities bill by 100 a mon month there's no cogent argument against doing that investment right away and the sooner you do it the better that's the situation we're in with infrastructure and we could get the economy back on its feet in a hurry once we get the economy back on its feet we'll have to worry about what to do about budget deficits which are truly an important longrun problem what to do about uh health care

00:18:50 costs which are a big uh important part of that problem and a host of other things we'll get into that as the panel unfolds but uh that that's my claim uh about what what we could do now that no no reasonable person should object to and let me just invite in clockwise fashion Jeffrey do you want to take first track at all that okay so I'm not gonna I'm going to come back to your specific remarks in a second the question that was posed was why do economists disagree and just to prove

00:19:20 that economists are truly disagreeable I'm going to disagree with the proposition that economists disagree okay of course they do disagree but I I want to argue that in an important sense they agree and they agree way more than many other disciplines okay what they agree upon is a methodology economists across political perspectives across which school they were trained at or whatever they agree that we should have models that are mainly mathematical models sometimes are

00:19:50 written down in words but could be written in mathematical equations that we should think about those models as generating testable hypothesis meaning statements about the world or forecasts about the world that one could examine with data and in principle if you had the right kind of data either reject or fail to reject and so like any science we would be able to see which models which hypotheses about the world seem to fit the world and which one didn't now of course s you say you

00:20:22 should say to me if all economists agree with that okay then how come there's so much disagreement about many things including relatively technical factual type things why because we can't do controlled experiments for the most part now there is a branch of Economics that does a lot of experiments okay I'm going to leave that aside because they're not quite experiments in the same sense as a biologist can do an experiment on whether watering plants helps them grow or not when economists experiment on people they know they're being experimented on okay and that might affect the outcomes of the experiments

00:20:54 for a whole bunch of things we care about such as the stimulus it is impossible to do a real double blind Placebo controlled experiment we don't have a parallel universe in which Ben Bernan did not increase the money stock or in which the Obama Administration did not propose a stimulus so we can't really know whether the Keynesian model is accurate or not or to what parts of it are accurate and things like that can historical information have historical episodes are always almost always

00:21:24 frequently contaminated by the fact that there are many things going on some of which we can't control for and we don't always know which came first the treatment or the response or the anticipation of the treatment and then the Observer response so in Professor Frank's example he one issue that comes up is uh how people responding to the fiscal cliff and how are people responding to the debt and things the stimulus if people knew it was coming okay they might have changed their behavior before it went into effect that

00:21:56 makes it harder to draw inferences from the data so what we generally try to use is these historical act sort of Quasi experiments but they're highly highly imperfect it's really hard to disentangle the cause from the effect so given that if we agree on a methodology that says we would like to be able to do experiments but we can't do experiments then what happens then I think two really important things take over first of all economists because they people have very different views about efficiency versus redistribution okay if

00:22:28 you can make Economist across any political persuasion answer questions in a very specific way and say which of these two policies is likely to increase the size of the pie I think you get a lot of agreement okay so in a textbook in a setting of an academic paper in a seminar room there's not so much disagreement on how the model would work what effect will have on who gets to eat the pie versus how big the pie is but different economists have D very different views on whether they think policies that emphasize making the pi

00:23:00 bigger or trying to get the pi divided up in a fashion that's regarded as Fair secondly an auxiliary problem is economists disagree a lot or they just don't really know because we have even less evidence on which policies will end up being implemented by the political process in a successful way so say in the setting of global warming economists might tend to agree that the ideal policy is a harmonized global carbon tax and yet they know that it's not lik that we're going to end up with a global

00:23:30 harmonized carbon tax and so then you're asking well which of the imperfect policy responses to global warming some kinds of cap and trade or Kyoto protocols or certain types of regulation on the use of carbon-based energies which of those will get us closer to a decent policy that depends an awful lot on politics and economists don't know much about that at all so I think we do agree on a methodology we disagree because we're people we put different weights on the objectives of policy and we have different understandings about

00:24:01 how to get particular policies to actually be adopted uh and implemented so just really quickly but I'll just leave it at a sentence or two for now I disagree with some parts of what Bob said about the stimulus and about doing lots of civil engineering projects except that if you think the way I think about he basically said we should use cost benefit analysis to decide what Transportation projects we should do if that's exactly the way the stimulus had

00:24:31 been done I would have been behind it 100% but I think large parts of it did not satisfy the reasonable cost benefit standards Joseph okay I want to follow up on something Jeff said and that is you know why do economists disagree Milton Freeman gave an answer to that a long time ago when he said well economists really disagree on ends everybody's in favor of prosperity most people except the worst misanthropes but we disagree about the means and the means are basically the different

00:25:02 theories that you use to implement ways to achieve prosperity and stability and supposedly all these ends that we all agree on um I I used to believe that I I don't really believe that much anymore what I think is that um we also disagree on ends very very deeply um disagree on ends uh because once you begin to prescribe um policies uh tax increase would be good you've stepped outside your role as an economist um you can you can describe what would happen if you

00:25:33 increase the tax and and and you can disagree on that with other economists but once you say that I think it's good and therefore we should implement it you are then making a value judgment and economics just like medicine is a value-free subject so a doctor can say the point of confidence of a physician is to say well if you put arsenic in that person's drink then that person will will um certain bodily functions will cease and that person will will will die um if the the uh physician goes beyond that and says something like and

00:26:04 that's murder and you shouldn't do that well he's no longer speaking as a physician he's speaking as a citizen with a certain scale of values and there might be someone that wants to kill Hitler or or kill a dictator um and so we don't all agree on on on on on the ends and that's the point I would like to make um uh for example I don't think a dollar spent by government um on its favored interests or or bailing out big corporations and especially financial institutions I don't think that's equal

00:26:35 to a dollar spent by um a family who earns earns the money in other words I would make a distinction between taxpayers people who produce and earn through exchange on the market and tax consumers that distinction was made a long time ago by a pol political theorist John C Calhoun and what Calhoun said was look Society the only two classes in society forget about men and women blacks and whites gays and rates the only two real classes that you see in every society throughout history are the tax consumers those that live by

00:27:05 either taxing without giving something in exchange or printing money and those who live by the sweat of their brow so I look at the economy as as as as in class conflict from the beginning to its very very depths between those who live through government and those who live um by by earning by producing what consumers desire whether or not an outside Observer like myself or Bob likes what's being produced by the market whether it's pornography or Beethoven caneros um

00:27:37 that's besides the point so just to get to Bob's Point um I do want to say that I disagree there's a spending shortfall um I think in fact that what has occurred is that we have a regime uncertainty that is entrepreneurs after coming off the Euphoria of the boom from 2001 to 2005 realized that they were deeply wrong about things now the Federal Reserve during that period increased the money supply by official fed statistics at about $1 billion per day for five straight years beat the

00:28:08 interest rate down to 1% I think this caused tremendous profit and loss miscalculations caused overdevelopment of certain sectors housing and so on and instead of allowing prices to asset values to drop now they pumped up household net worth that is the value of your homes and the value of your 401ks by$ 23 trillion okay in the course of three years when the crisis struck you had a

00:28:39 drop of about $15 trillion in household Network which was equal to the G annual GDP of Japan Great Britain and Germany instead of allowing asset prices to adjust instead of allowing other prices to adjust other costs and so on to adjust in a downward Direction which is what should have happened what happened was that that that we had stimulus then we had qe1 QE2 and QE Infinity now right there's $40 billion every month being pumped in to buy mortgage back Securities I think that is

00:29:11 giving pause to entrepreneurship in this country they don't know what's going to happen with the fiscal cliff beyond that is is the huge debt that's going to continue to grow um and I I think that the the uncertainty about Obamacare is something else that's causing all of this to happen if we're really worried about spending and I'll stop after this sentence um let's suspend the income tax the personal income tax for one year let's just suspend it okay that that that was actually put forth by a few economists right after the um the financial crisis I'm all in favor of that two years okay then we'll have

00:29:44 people with productive saving um instead of expanding credit to get to to to get more spending we have productive saving and we'll have consumers the earners arranging their Affairs in a way that that brings them greater satisfaction I'll stop there it it was proposed to eliminate the payroll tax was that a proposal that you favored as well Jose well it I mean the the income tax brings in between 42 and 47% of of of federal revenues uh the um the uh payroll tax may be I don't know 40%

00:30:16 38% either one is fine with me yeah that was proposed and defeated in Congress yeah yeah gra did you have an a to grind in any of this or or feel free obviously to go off in your own Direction well first of all the question that we are uh meeting

00:30:46 here about why Economist disagree excuse me we can't hear you so maybe you can uh there is there is can you increase the hello go ahead continue you're fine they'll turn you up they they'll turn you up you just continue okay so can you hear me now no not enough not enough just keep talking how about how about keep talking okay can you hear me

00:31:18 now okay yes the lady there yes good thank you so the question that we're here to address first of all why do economists disagree and here I have to uh agree with Jeff that um in fact we agree too much let me explain what I mean the um the human being has several nervous

00:31:50 systems at least three we have the central nervous system we have the uh uh brain we have the um uh the gut which is a sympathetic nervous system they don't agree with each other as a matter of fact when you your gut wants to eat but your brain wants to lose weight has anybody anybody faced that phenomenon all the time right so uh we

00:32:23 are a composite as a matter of fact 95% of the DNA of a human body is microbial DNA it's not even human so it it would be seriously surprising that people that have so different um nervous systems which are the uh reactions that we have to the environment and how we want to act and make decisions would agree because we I don't think we can agree with ourselves

00:32:55 number one and there is a good reason for that nevertheless um some of what was said here I have to agree with and uh some I have to disagree with but I want to take a slightly different perspective I do understand the importance of focusing on the crisis and getting out of it I do understand that there are many people unemployed and most families I know are

00:33:25 in trouble one way or the other I understand this is a very painful situation for the majority of people in the nation and therefore I don't want to skirt that issue but I have to agree here with Joseph that I didn't do anything yeah sorry no I know just I had to agree agree with Joseph that uh the The Proposal in fact I made to uh uh to the

00:33:56 Obama Administration in 2008 which is partly being implemented now really goes back to an artificially inflated uh market and we have to allow somehow those prices to adjust and if we just did that in the right way and there are right ways of doing it uh we can get to a Balan situation without so much pain and here is where I

00:34:27 probably will disagree with Joseph in that everybody has to uh pit in and not just the homeowners and this includes the banks and the banks have been part of the problem not the only part of the problem but the significant part of the problem and as far as I can see we didn't get around to correct the situation with the financial and the banking system the way most most

00:34:57 people would like to see and there is no reason why the unemployed people and the taxpayers should pay for that enormous bubble that was created by the financial institutions and that created so much suffering that has to be resolved and one of the reasons there is such a lingering of this uh current crisis in terms of the press demand is because we haven't dealt with that problem and there are ways to do it and

00:35:28 renegotiation properly done and affecting everybody not just the home owners and including the banks yes sir including the banks a sacred cow that uh shouldn't be a sacred cow it's an institution like anything else we created it and in fact you know they are under revision so for all of these reasons I partly agree with Jeff I partly agree with Joseph I partly agree with Bob

00:35:59 but I have to say all of this in a way is the topic that was chosen by Bob very important po topic he wants us to focus how to get out of the recession we all need to know that but I want to uh be a little bit more demanding where is the rationale of an economy that were the way out of the recession and the situation in which

00:36:29 there is so much suffering let me put the emphasis on suffering I I I am shocked about the amount of unemployment in the United States right now I'm shocked about the amount of suffering it's unnecessary and it's cruel it's cruel and it's going to be felt for generations and we ought to be doing something about that right now I I don't want to Gil the but have you said that the situation now should not be one

00:37:02 where we resolve the issue by inflating consumption and that was a first C in the equation that Bob was telling us I'm not criticizing Bob he's right that's the equation we learn where the economy output has you know 75% or 2/3 whatever is consumption I got it okay but I think everybody around here realizes that an economy that can only resolve its

00:37:32 problems and stop suffering by inflating consumption when we are the highest consuming nation in the world something is wrong there okay so uh without going into much detail we are in a moment of change we're changing values we have to face that change getting out of this depression this recession depression are

00:38:03 and the future ones and the volatility that will continue to come should not be about increasing consumption we need to fundamentally restructure our thinking about the economy I call this the green Eisenhower moment and here I agree with Bob Eisenhower would know so well what to doing the situation think about it he created the network of Roads uh in the 50s he created the

00:38:36 waterways in California he even put the first uh satellites on and created in a way the telecommunication system which is fundamental for globalization Eisenhower would know what to do about this and nobody will be sitting here criticizing Eisenhower because of government action as far as I know so so this is the Eisenhower moment but I want to say it must be green Eisenhower and here I go into to Oscar wild you will

00:39:07 excuse me Oscar wild said not the only one that an economist like all of us are people who know the price of everything and the value of nothing yeah I I suspect we're going to end up agreeing on quite a lot amongst this panel and and that's that's not bad thing uh even if people are disappointed that they didn't see more fireworks uh but the value of nothing means that we start to change our values we are

00:39:38 changing our values and here I wanted to add something that Jeff mentioned the carbon Market that he mentioned of the Kyoto Protocol in which I did a writing which I designed is really about changing values Global values because that's what market prices represent they represent our value has gone out of work right now and we're trying to change values and in creating these new markets and by the way here I disagree the new values don't pit equity and efficiency

00:40:11 against each other we are no longer in the zero some economy because the foundation of this economy now and this change that is coming is a public good is knowledge and knowledge can be shared without losing it so right then and there believe it or not we are no longer in the zeram economy so we can take advantage of what coming we can do this change of value and we can incorporate all these changes and we have to do it because I think particularly the young

00:40:42 people and I there is a few here but not that many I think the young people feel and they're right we screwed up the world economy for them and another way of saying is I'm just looking at this single young person I see there look guy let me just tell you either you do it nobody else is going to do it except the young people I tell that my students are Colombia we got to change the way we're going around the economy which is what Oscar wild was talking about and the young will have to do it

00:41:14 because it's true that we screwed it up so in that direction the the the public goods aspect is an important part of the conversation uh but go to go back to one of Joseph's points uh I think the agreement is much broader among economists than your analysis of the the equity versus uh efficiency issue might have suggested because right now we are uh in meshed in such deeply inefficient

00:41:46 situations I think this is part of graciella's work that the the old saying that economists like to to throw out there's no such thing as a free lunch that means if you get more of this you have to settle for less of that that's true when you're doing things as well as they can be done at the moment but when you're being grossly inefficient it's possible to make the pie bigger that's what inefficient means in our par Lance and here's a graph I show my students 50 times if I show it to them once during

00:42:17 the term it's two pies side by side one bigger than the other and the the the slogan that they can all uh shout out in unison after the third or fourth time is that when the pie gets bigger everyone can get a bigger slice than before and so when you're moving from inefficient to efficient it's just a failure of WID not to be able to come up with a a scheme for dividing up the new larger pie in such a way that everybody sees advantage

00:42:47 in making that move so so there's that doesn't sound like a recipe for controversy if you can if you can actually talk about policies that would make the pie and I think your carbon taxes people's exhibit carbon Market not thatx carbon Market difference tax goes to govern you you can you can educate the rest of us about why a carbon market and a carbon tax are two different things uh but get getting people to take the right price uh on on activities that

00:43:18 discharge carbon to the air is a very important part of of doing things efficiently we're not doing that now and if we do that then that's not going to make the economy have to scramble for more resources it's going to save resources and if you if you have a bigger pie than before you ought to be able to sell that to the electorate because there's a way to divide up a bigger pie that that makes everybody happier and so so I think there we we could get into arguments I mean on once we have a fixed pie and we have to decide who gets what share of it there's

00:43:48 there's obvious room for argument but while we have room to expand the pie there ought to be low hanging fruit for agreement and what is the pie made though the the pie is the economist metaphor for the total value of everything we care about it's it's got to be we have to stress that it's a very inclusive measure it it's got to include the nuisance value of noise the the the risks to life and safety the the concerns you have about everything that

00:44:18 might matter to you so so that's the pie and if people are making decisions ignoring costs that they impose on others one simp example I can get on a congested roadway for free in most parts of the country when I do that I make everybody who's on that roadway take longer to get where she's trying to get to I impose a big cost on it might be worth a dollar extra to me to go at that time on that roadway the cumulative nuisance to everybody else having to wait longer to get where they're going

00:44:49 might be tens of thousands of dollars so my case for being able to get on that roadway for free is a non-starter I have no right to assert in that situation uh unless you think I have a right to harm others willy-nilly without compensation that's a strange political system if you think people would bargain freely for a A system that gave you that right so there are all sorts of things we do now that cause harm to others that we don't take into account and if you want to think about long run budget solvency uh nobody who's looked at the

00:45:21 numbers thinks we can get there by cutting out wasteful government spending uh there is waste government spending uh but when we try to cut government spending we cut what we can uh every program has its Defenders we cut the ones uh whose Defenders scream least loudly what did Bush cut Bush cut the energy Department's program for rounding up poorly guarded nuclear materials in the former Soviet Union these are materials that are uh in poorly fortified uh centers guarded by soldiers

00:45:51 who aren't paid regularly who drink too much uh terorists want these materials we shouldn't cut the the budget for that program we should increase it but we cut it uh we cut the National Science foundation's budget for scientific research the the backbone of our competitive Advantage historically so cutting government spending yeah if you find wasteful government spending that you can get legislators to agree to cut well and good but everybody who's really looked at the numbers thinks we need additional Revenue especially when you look at the tens of millions of

00:46:22 retirements that are coming in the next years and so that means you got to figure out out where to get the extra revenue and I think a good place to focus attention in that discussion is on things that we do too much of to begin with a tax has two effects it raises Revenue but it also discourages the thing you tax and if there are things we do now that cause harm to others that we're not taxing voila that's a a possibility for killing two birds with one stone you can no killing

00:46:54 birds all right give me give me your metaphor of choice uh we we can we can solve two important problems at once if we if we shift our focus in that way so uh let's just this is a Loosely organized panel Jeffrey I I can't tell you what to talk about I want to come back to grail's statement that the banks should have paid more of the cost of recognizing that housing prices had been inflated to values which weren't true values and related to arguments about policy and the response to the financial

00:47:26 crisis and is UST a of Economist disagreeing so lots and lots of people were very upset that there were bailouts that Banks were helped out because Banks seem to have been sort of very very importantly involved in the fact that housing prices got excessive that too much mortgage lending was extended and so on so one view was well these Banks did silly things they're about to lose a lot of money let them lose money they're the ones who should take the hit of course some owners would take hits as well because they no matter what they couldn't afford the mortgages they they

00:47:57 had but make Banks take a large share now that's not what happened for the most part in DC for the most part the federal government the treasury and combination with the FED Ben Bank in particular basically pushed really hard for the banks to take money why because they had a model in their heads it's actually the model that Ben banki more or less is responsible for in the economic literature in conjunction with a few other Scholars um that was work he did in the 1980s when he was still an academic Economist in his model of the

00:48:27 world okay when Banks fail it's not just or any in big institutions fail it's not just that some wealth is redistributed the really simple view the sort of pre- buranki view if you will of a bank failure is well some loans were made based on expectations that something good projects were going to happen a lot of profits were going to made but somebody was mistaken those profits didn't occur and so now that loan can't be repaid somebody has to take the hit if a meteor had come down and destroyed half the Housing St stock there's no

00:48:58 magic wand that magically recreate that housing stock it's just gone somebody has to take the hit so one view was housing is worth much less than we thought somebody has to eat that maybe it's the homeowners maybe it's the banks but somebody has to take it and to give it to say that the banks were insulated was a kind of redistribution was a statement about who Bears the cost that clearly lots of people from many economists to Occupy Wall Street found really unappealing so why did Ben banki

00:49:28 and Paulson and a republican Administration after all which gave us tarp defend the notion that we had to protect all these banks that we didn't want to let them just fail and whatever Bank survive survived their claim was based on beran's model that there's an externality there's an inefficiency when Banks fail that when one big Bank especially when very big Banks fail it affects the whole lending process it affects the intermediation between good uh borrowing projects between good borrowers and Bank s and it would make the whole it would have made the

00:49:58 recession much worse than it already was going to be by virtue of the fact that clearly a lot of housing wasn't worth as much as we thought so if you believed Ben's model his story that there was this negative spillover this negative externality inefficiency from letting big Banks fail well then you could convince yourself that it was actually in everybody's interest once you understood what was really happening to protect the big Banks now if you were right I think almost every Economist would sign on lots of economists did

00:50:29 sign on and agreed with that but there was a a vocal minority for example there was a letter in Wall Street Jal Wall Street Journal of New York Times signed by 166 economists of whom I was one saying no we shouldn't be bailing out these Banks we should let them go bankrupt he bankruptcy is the better approach now there's lots of variations on bankruptcy but for the moment just think that it meant letting them fail so how do we resolve that okay you'd like to resolve it by having observed a parallel

00:51:00 universe in which okay there was a different Ben beran who had let the banks fail and then we could see what happened as Ed suggested a few minutes ago well we can't obviously do that but maybe we can look at historical examples there're not a ton of historical examples that one can point to I've asked a bunch of my friends my colleagues are economists what's the evidence that letting really big bring this to Argentina some years ago in terms of what happened to Argentina isn't that historical evidence it it's historical evidence but it's contaminated by a lot of things most of the places where a lot of big banks have

00:51:31 gotten in trouble have been places where a lot of bad things are already happening how do you figure out how much of what happened after those big banks failed was going to happen anyway because a bunch of bad things were already in process and how much was actually caused or exacerbated by the fact that those banks failed so every single one of my friends pointed to the same academic study as proof that bank failures okay cause these big externalities it happens to be paper written by Ben banki it was published in the American Economic Review in 1983 and it's about the Great Depression now

00:52:02 first of all it wasn't about big Banks it was about small Banks the distribution of Bank sizes was very different so at a minimum it's not entirely on point because it was a somewhat different experiment but secondly the paper turns out to be not very robust okay it turns out the results are fragile so and it's one piece of evidence in a non-experimental setting so there's room for economists to disagree and I don't want to necessarily I mean I have taken sides but that's not my purpose here my point is we disagree because we can't do

00:52:35 experiments we can't figure out things where everyone would agree if we could have that parallel universe run the experiment then we would all based on this common methodology okay have common policy recommendations can I respond um Bob brought up the point about the the political feasibility of cutting um spending but I I I think that there is room even politically to cut spending um the US is a big welfare Warfare State there's a lot of spending on welfare mainly corporate welfare by the way and

00:53:06 a lot of spending on on on warfare again goes into the pockets of big corporations um what I want want to suggest is that um cutting cutting a defense budget is is a beautiful thing I mean right now the US um spends about 750 billion to1 trillion per year depending on our budget items um that's about 5 to 7% of our GDP um we spend 43% of world military spending the US spends that

00:53:36 much uh we have we have um we spend eight times more than China next biggest military spend spending 14 times more than Russia we spend 53% more than the other top 10 military Spenders 53% more than all other nine combined including Germany and Great Britain and France and so on um we spent 106 billion on on intelligence we have 9600 Warheads China has 300 it's estimated that with a thousand you can kill everybody instantly with 300 you can kill a lot of

00:54:07 people instantly and then pretty much the rest of the world through through disease and so on to make a long story short there's a a big area to cut and that is to stop the wars in Afghanistan and Iran which have cost us over $1.3 trillion or 1.5 trillion depending on who you believe stop the war spending close the military bases we have uh I wrote down a figure last night we have we have 700 to 900 depending on who you believe military bases in 130 countries close them all down China has zero

00:54:38 Russia has three or four in foreign countries close them all down you can cut the defense budget in half now there's billions there so you so so you can you can you can you can satisfy the Democrats by cutting Warfare or or at least left Democrats most Democrats want to cut uh Warfare a little bit and increase welfare that's what we saw with with Obama the Republicans want to want to increase Warfare spending and cut welfare spending well once you've done that that's what Reagan should have done in the early 80s when he had the chance say we were in a deep crisis we're going

00:55:09 to cut across the board then and this will will disagree with I'm sure um you can zero out some some some of the so-called welfare agencies the agriculture Department which is just a big subsidy to Agra business you can zero that out get rid of that get rid of the Commerce Department which basically is a marketing program for big firms overseas to increase their exports you can get rid of the Department of Education which we did not have for most of American history and so on so you can cut on both sides and and and and you can get a coalition of both groups to

00:55:40 support that by saying that look we have a tremendous crisis here and by the way those resources would then be infused back into the the um uh private economy to be used productively what's the example of a country where this Grand bargain has ever been carried out what's the example of a superpower that spends half of what everybody I agree the US spends way too much in defense and I agree that with almost everything you said about what would be desirable but I have to agree with Bob that the political prospects for any kind of

00:56:10 grand bargain like that seem infimal based on our observation all countries are in that shape at least we four agree that it would would be a good idea to make very large Cuts in the defense budget I agree with that Jeffrey you agree with that r do you do you agree with that yes uh I think the main thing is to stop these unnecessary Wars yeah that would be a start that those Wars cost much more than what is recorded under the billions of dollars that are

00:56:40 spending defense Which is less than 8% of the GDP those Wars are you know are they are sinking our reputation globally we they are unnecessary they are not getting anything for the nation and they are costing trillions they're making us hated they're making us hated the world over we've developed endless enemies um quite frankly so we can add that the list of lwh hanging fruit that we could all all agree but on the other hand if we were in but remember that's bad from a stimulus

00:57:12 perspective you'd want to replace that spending with some other spending Paul krugman's make up a Marg Invasion and and he's suggested exactly the opposite of we agreed to he said we should convince the country that the Martians are invading and so we need to build a ton anti Marian missiles and tanks or whatever because that would be more government spending and and and I think he believes it who is Paul K Krugman print you give me Excuse there another

00:57:45 there's another way to do there's another way to do something like that but without necessarily focusing on Military expansion okay and again I want to say the last speech of Eisenhower was about an unnecessary military expansion I'm sorry to emphasize Isen Howard so much but I think the guy was a genius my anyway so but what I wanted to say about that is that there are things like that which are low hanging fruit and could

00:58:16 play that role and do good at the same time instead of kill people over over the over all over the innocent people civilians all over the world uh the the Chinese the Indians and the essentially the brick countries but mostly China and India have benefited to the tune of $50 billion doar just 50 billion for in the last six years from the Kyoto Protocol carbon Market clean development mechanism long words which means

00:58:49 that this Market that doesn't cost money to anybody the carbon Market which is now mandatory in California and yes as of 2012 and which is now growing in four continents Australia Asia the European Union where it's trading $215 billion do a year on the Americas this Market has the cost nothing to nobody no nobody has to put money for it

00:59:20 it makes money it is different from a carbon tax because a carbon tax give money to the government and if you want to have a global government to give tax to I don't think so not it's not going to happen at least not in many years that they will the United States will contribute to a global government that collects taxes on the other hand the United States is moving through the California carbon market and through the federal March 27

00:59:52 2012 uh limits on carbon emissions from Power plants who kill a lot of children through asthma the US is moving in this the direction of conversions with the global carbon Market why it's called No Arbitrage markets you can have two Market side by side One charging one price and another one charging another so the California carbon market and the federal carbon Market that this March 12th 20 sorry March 27 2012 resolution

01:00:26 supported by the Supreme Court will sponsor will create I can explain will Converge All of These markets are going to converge they created the largest exporter of solar and wind equipment in the world in five years through those $50 billion I told you about who is this China wait why is China benefiting from it and not us simple because

01:00:57 China uh not only signed like we did but it also ratified the Kyoto Protocol we could be benefiting from that we have the best technology in the United States the best Innovation we need that new energy clean energy that changes values in the right directions in the right direction and involves the best thing that this nation has how do I know because I benefited from it I was born in Argentina and I did my educational system here and let me tell you this is

01:01:30 the best educational system in the world particularly The Graduate level and in terms of risk Capital respect of property rights is the best territory for the knowledge economy and the knowledge economy we're leading it we're there so why not Embrace this and do what uh Krugman was suggesting but instead of doing it for destructive purposes for constructive purposes energy that is clean and essentially stop the unnecessary consumption of

01:02:03 environmentally degrading uh Commerce that nobody wants anymore nobody wants big cars anymore nobody wants to have more clothes nobody wants to spend more money okay well he may here is L people want more clothes so the the the whole the there is a direction it is happening globally we need our economy is moving in that direction we know don't know it that is happening and this is change staring Us

01:02:34 in the face instead of disagreeing about what's happening now can we move forward to the future and have a positive disagreement about what the future should look like or it is easier to create the future than to anticipate it and we should be I sound like a fortune okay it's true it's true so let's do it let's do it okay let's let's talk about uh the

01:03:05 subject you raised earlier consumption uh this this is one that I've been interested in for many decades and it's uh I think important to understand the forces that drive it whether Ed questions whether people really have turned away from wanting big things uh I think the fundamental driver of consumption has been how the income distribution has changed over the last three decades what we saw right after World War II for three decades was pretty uniform growth across all the

01:03:36 income classes about 3% a year for Rich middle and lowincome families Al likee since the the mid 70s virtually all the income growth has gone to people at the top of the income ladder it's the same pattern when within every group if you look at college graduates it's the same pattern those at the bottom aren't doing very well compared to 30 years ago the ones in the middle have gained a little ground not much the gains have been uh the Lion Share of them at the top and if you look at the top 5% most of the gains

01:04:06 there are in the top 1% there the the biggest gains have been in the top 110th of 1% so that's that's the that's the demand shifter that's been going on for 30 years what's happened is that the people who've gotten a lot more money are spending more money that's totally the expected response from people in every income group you get more money you you build bigger you buy buy more expensive and what's what's equally clear is that people in the middle don't seem offended by that they seem to they

01:04:38 want to see pictures of the yachts and the Mansions they're not not shaking their fists in Anger they kind of think they'll be rich someday or their kids will be let's see what's in store for us so there's there's not any case to be made that the P public is made indirectly less Happy by the spectacle of the rich buying fancy things but here's what has happened the rich spend more on their daughter's wedding they spend 2 million 3 million that means the people who are just below the top rung uh have a new standard they want their

01:05:08 daughter's wedding to seem special too but special is a relative concept so they spend a little more now it's to it's cascaded all the way down the income ladder the average American Wedding cost $30,000 in real dollars in 1980 it was $111,000 and no one I don't think anybody on this panel would be willing to say with a straight face that couples are happier now because their weddings cost three times as much it's just that the standards have shifted why have they shifted because spending at the top went up dramatically and then

01:05:39 there's this sort of indirect Cascade that that ripples throughout the economy and talking about waste uh much of that extra spending has been pure wheel spinning is a CEO happier with a bigger Mansion why does he need one it's because other CEOs have a bigger one if he didn't then his company would appear to be in Jeopardy uh and and he couldn't entertain in the style that was expected and so if we could just figure out some way to steer the dollars that are going into more expensive Coming of Age

01:06:11 parties bigger mansions and are then cascading down putting a bigger burden on people in the middle the the median new house in 2007 the height of the housing bubble 2,300 Square ft in 1980 it was, 1600 ft why is the median house bigger because of this Cascade the people in the middle aren't earning more that's not why they're building and if they didn't spend in in in line with what their peers were spending their kids would be the ones that went to the schools with the metal detectors out front you know if you don't keep Pace

01:06:42 with spending standards for your community your kids don't go to even schools of average quality so so that I think is is probably the biggest source of of found money to address more important problems is to figure out how to steer money that's now going into that so so my my simple proposal is scrap the income tax and have a much more steeply progressive tax on consumption you report your income you report your savings the difference between those two numbers that's how much you consume during the year that

01:07:13 amount minus a big standard deduction is your taxable consumption and then the tax rate starts low and it goes higher and higher the more you consume it's a it's it's fiscal Alchemy you get you you sort of squeeze squeeze the Mansion growth rate down a little bit you squeeze the spending on coming of age parties down all those dollars are freed up to do green investment or or or things that really would make a palpable difference in the quality of people's lives I I read that and I like it I read you wrote this in I think in one of your

01:07:44 articles in the New York Times I've been writing about this for 15 years I thought it was a great proposal uh I want to make may I just say two things one is I was struck because your argument that economy is exactly the same as psychoanalysis that is it is exactly the same because the argument is that we cannot if we are seeing somebody in our office how can we do a double blind study and so the problem with that is eventually it becomes a a a science of

01:08:16 opinions and what you described is that what we are seeing now is bank's opinion it is not proven it is not factual you undercut it even more by saying that in fact the data isn't even very good so that's I'm surprised that we have this to share as psychoanalyst and Economist but the other question I wanted to ask which relates to what you said and what gra said in fact all of you have said is what is the goal of economy yeah good question we should ask

01:08:49 the aians do we will come to them in a few minutes oh let's go let's go there's lots of room to to argue about that but one thing we shouldn't argue about is whether it makes sense to make the pie as big as it could be but also because if we made it bigger everyone could get a bigger slice which just means that everybody could do could come closer to fulfilling his his life's Vision right but that doesn't mean consuming more no so the C of consumption the ey is everything we care

01:09:20 about right so we that's what we should be talking about yes one there are our hands from the audience do we want to open it up if you're anxious you're ready for it I'm sure sure you have to come here you cannot ask from where you are sitting sorry people with questions J very good thank you all very much um it's

01:09:50 kind of building on where your conversation's at is there any common agreement among you the heck with all economists about the role or the notion of the common good uh defining the common good in economic terms of economic priorities does does the notion of the common good is it relevant to Economist professional economists it's not a term we use frequently we much more tend to use the terminology that Bob used which is the size of the pi versus the way the pi is

01:10:22 distributed up and we almost always agree on things that are going to expand the total size of the pi but much of the time any given policy might simultaneously both affect the size of the pi and affect the way it's divided up and so then there's lots of room for people to disagree because it depends which one of those two things you care about the most is the avoidance of environmental degradation a shared common good yes of course but that's we can we would describe that as increasing the size of the P we want the pie to include bads we we net out bads as we

01:10:54 add Goods there is more agreement on that yet than Jeff is letting on uh in fact there is a set there is a set of nations in the world economy that lead the world economy and it has changed over time G7 then G8 now is G20 and it includes both the industrial and the developing nations why because For the First Time in our recorded history developing Nation are now the

01:11:26 engine of growth of the world economy the most important segment of economic growth in the world is the developing nations is no longer the oecd Nations so the G20 now has prominently Nations who are have not even gone through the period of industrialization think about it and in Pennsylvania when the G20 was created 2009 n they made a big declaration and I

01:11:58 have the Declaration and anybody who sends me an email I'll send it to you because it is focused on sustainable development and sustainable development is what you were talking about what you were just asking Jeff in your words which are golden words because this is what people think about okay but also from the economic point of view sustainable development is connected to how we use resources in the planet and how we organize ourselves in a moment of

01:12:30 change this is a major question your question is very major to come to a point of agreement I think I think we could say most people will agree that survival of our species is an overall agreed objective survival of the species well guess what there are serious ious questions about whether the economic the way it is structured today

01:13:00 with its limits on resources and environmental use the way use we are changing the atmosphere of the planet its bodies of water and the complex wave of species that makes life on Earth is consistent with the survival of our species or is it driving towards Extinction this is a big question so we should be addressing that question right now if we are interested in survival go ahead thank you um one of

01:13:31 the questions that Dr nessian brought up towards the end I thought was one of them I'm sorry I'm sorry speak into it one of the questions that Dr nessian brought up or the points that he brought I thought was particularly relevant to the discussion that wasn't really included in this discussion it was touched upon by several individuals and it's also something that I believe is missing from the national narrative on econom and that is that um the relevance of personal individual psychology and

01:14:01 the role that that plays in the decision- making the purchase decisions the the prioritization that that plays in buyer Behavior or economic behavior Investments and that sort of thing I realize that there is a science called axiology I'm not sure if anyone's ever heard of that but what is it axiology it's a Rel relative measure of one's individual values and and the psychological propensity to to drive Behavior or drive actions um

01:14:31 making choices um if that I'm I guess my general question to the to the panel would be if there were a way to somehow evaluate that if there were a way to to somehow measure that as a backdrop economic policy in theory would that change would that be able to impact or change your your perspectives as as economists and would that change the impact of economic decisions they're made just to add to that doesn't sty talk about something which replaces the GDP with some other G happiness index

01:15:04 yeah there have been systematic attempts to bring in non-market aspects of behavior that we assign value to and somehow Factor them into a measure of how well we're doing GDP clearly leaves out a bunch of things we care about there's another way of looking exactly the same thing that Bob is saying which is that by introducing new systems of property rights and the new markets that go along with trading them like the carbon Market but also markets for

01:15:35 biodiversity markets for S sulur dioxide emissions that exist in the Chicago Board of Trade markets for water Etc we create the values that will change the GDP so it's not just to throw the you know the baby with a bath time bath water but actually you can transform the market by creating new property rights on the limits that matter for survival of humankind and let letting people trade on them creates the values that

01:16:08 then change the GDP is the tail that Wags The Dog and one thing that showed up clearly in this was the the sense of human motivation and how people respond to tax changes I think there's been a longstanding assertion that if taxes go up on people at the top of the income distribution they'll begin withholding their effort uh and it it it resonates because I think we all accept the idea that people respond to

01:16:39 incentives and it seems like if you raise people's taxes you're reducing the incentive to work but in fact economics is really quite silent on what the effect of a tax increase would be it makes you poorer so it might make you feel like you have to work harder to achieve whatever you're trying to to achieve it also makes taking time off cheaper so that cuts the other way if you look historically uh people worked many more hours 100 years ago when the real reward to working was a tiny fraction of what it is now so there's

01:17:10 there's no compelling reason to think that if the tax rate on people went up they would suddenly quit the game I mean the the the more subtle view of human motivation is that people at that level are getting all sorts of Rewards from being a CEO other than the take home after tax pay they're they're a player they're they're they're in charge of something and so I think uh once economists begin to embrace that a lot of these debates about the sort of narrower assertions about incentives go

01:17:41 go off to the side thank you yes um do economists really think that their models and theories can increase the size of the pie I'm thinking of uh Kyle cow's great stagnation hypothesis that main reason for our problems is that there's been no new invention no New Wealth created no new ideas I mean I'm sure that a new cheap source of energy was found say

01:18:12 Fusion Energy all these economic problems would be small and go away and all the policies are really rather meaningless it's what's creates wealth is new knowledge and new advances in science I wonder if people can give their names because you're anonymous to me what's your name Mel M say that again Mel Mel Mel Mel thanks and your name Fran franches Cho okay you want to you

01:18:43 want to tackle this question I think I go ahead I you go ahead I mean I think lots of economists believe that various policies will affect the incentive to innovate and will affect whether people who innovate can take advantage of their new ideas because their intellectual property is protected bya patents and copyright and things like that so that's one way of reconciling your two statements that do policies matter or is the Innovation that matters but secondly I think a lot

01:19:14 of econom think that policies matter too whether they're well fund property rights whether the government is intervening in places where regulation is beneficial or is intervening in places in in ways that are mainly protecting some Industries relative to other Industries I think economists think that has a lot to do with whether economies have a big Pi or a small piie I think that's I mean communist countries versus roughly capitalist countries would sort of the the Bas the most obvious comparison most econom I think believe that because Central planning was leading to a lot of

01:19:44 inefficiencies not letting market prices signal what was scarce and what was not that those economies tended to be poorer than economies that mainly use capitalism to allocate resources do you think that Steve Jobs or Bill Gates did what they did because of tax policy or any other policies uh based on Steve Jobs's biography he actually cared a lot about tax policy he cared a lot about the Innovation he cared a lot about the Innovation policy he cared he worked very very hard to make sure the Innovations he created were protected so

01:20:17 that he could earn a profit that was after that that was after you became wealthy I think that was through the history of just wrote an article that said he doesn't care anything about and he never did about tax policies that he would have done what he did regardless of what the tax structure was I don't quite believe that but I think a lot of these guys are driven by other motives as Bob has pointed out but I did want to say one thing about C's book and that is innovation is not enough I me you can put a bunch of scientists and really bright guys Engineers on an island and

01:20:47 not have other resources I think saving and capital investment allows these Innovations to be put developed into commercial form I think that's very important that's where tax policy matters more okay my question is about Brett my name is Brett U my question is about historiography of your field um there are historians and even in the 19th century have written about the kinds of money and institutions that have gotten

01:21:17 behind promoting certain schools or suppressing others um the American economic Association 1880s um back Rockefeller Carnegie Etc when they were doing a lot of building of institutions in this country um Katherine CER in book Patriot acts does a great job of showing how economists were used um selectively used by institution by the owners of

01:21:48 banks more or less um it doesn't surprise me then to hear this story about beran's paper and his theory that he would be the one put into the position um by the many people who fund the presidential elections it wouldn't surprise me given kathern Cryer's book um recent Eric bin Hawker in in his book about complexity economics talks about opens the book with the kind of suppression of Behavioral economics by

01:22:19 Chicago School neoliberal efforts probably in the 7 herb Simon is um is is featured in that story so I I wonder if you can talk about the institutions and the money that has shaped you um continues to shape you given your CVS and why the creation of this panel um doesn't include other fields of Economics that some of you allude to but they're not here today and why would the panelist

01:22:51 the curator of the panel pursue this binary which we're so used to and that get so much money behind it the two sides not just the one you've said that you even always you even often agree on things quite quite a lot but those things where you disagree are also well known to us those points start the center and do what you want let me say just on one part of what you said I in no way shape or form think that bernanke's position on the crisis or anything else has anything to do with being in the pocket of banks okay I think banii is one of the most objective

01:23:22 he's one of the best economists despite the fact that I'm a hardcore libertarian and a lot of Libertarians are not very happy with Ben veran the fed and I disagree with him about some things the notion that he did what he did for any reason other than his objective attempt to try to fix the economy is not you didn't it's just wrong it's just everything I know about Ben he he's a co-author of mine and I know him very well and that's absolutely accurate though though you might might say very quickly that as a profession economics in some sense took over the

01:23:53 the function of of the old crown and church the CR the king needed needed people sell his um descent from the gods to to to the to the to the masses uh and before that you had the chief and the witch doctor well I think here you do have e economics after the Progressive Era starting World War I going through World War II the economists began to be the new intellectuals or the new priesthood that sort of sold a larger and growing State now as to whether any particular Economist is is any in

01:24:23 anybody's pocket that's another question what alog together I agree with what they said about about um banki what what the research that's been done on conflict of interest shows very clearly is that no one everyone recognizes that others are subject to conflict of interests but almost no one thinks he itself is subject to it and and uh we all agree on that yeah I'm I'm guessing many people in the audience saw the film inside job uh many

01:24:53 economist who were interviewed in that film I think had good reason to be embarrassed by positions they had taken on behalf of the financial services industry and Regulators I was thinking of one in particular uh watching him squirm uh is that I'm not going to say he had been hired by Iceland to do a review of their of their financial regulatory system and and I'm not in the finance uh field but it was so easy to

01:25:25 imagine that if I had been an accomplished Finance scholar and had been approached by the government of Iceland and and somebody told me what a brilliant scholar I was and and and why it was really worth $300,000 or whatever the fee was to do a a review of their regulatory system how I could have allowed myself to believe that I was uniquely positioned to give an objective evaluation of it and and how easy it would have been knowing that they had paid me that much and and they've been

01:25:56 really nice to me and might hire me to do something again in the future not to want to say anything horribly nasty about them you're you're you're not in the world we live in if you don't recognize those kinds of influences on people and I think I think you just have to design institutions in a way that pushes back against that and we and we haven't done a good job of that I think there's two uh two facts that explain much of what uh Brad where is Brad yeah what was asking about um and

01:26:28 they're not so uh evil as they seem but the first one is people desperately want to be useful and this is Mis uh value generally but it is really the only source of happiness I know when people feel they're really useful and the second fact is the way that uh the brain operates has nothing to do with my observation but it is has to do with neurobiology the brain constructs uh structures Frameworks to think and is extremely

01:27:00 reluctant for good reasons to move of the Frameworks and the reason is that we have very limited capability so we screen all the information that we get by having Frameworks for example you walk into a tennis C court you don't think from scratch what you are going to do with the ball you walk into tennis court and you go into framework okay this is a tennis court and then you automatically play and you can actually talk about what the players say they do play automatically unconsciously and

01:27:31 talking about psycho analysis but there is one more thing that was discovered recently which I find is fascinating which is that the cortex uh makes it acknowledges a decision of what he going to be doing watch this after the decision has been made so most of the brain is dedicated to justifying and the court is justifying

01:28:01 the decisions you have made now if the brain is doing that how can you B blame bernicki go ahead that's my name is Patrick I am a commercial credit manager um I'm a credit manager for a bank um I am I'm with Mr Professor solerno I'm an Austrian um an Austrian because of what I saw at a micro level 10 years ago I saw the r go down and I saw people whatever their motivation was

01:28:32 for buying the big house they could get it with a 3% arm and why save when the CD rates are 1% um I saw a lot I saw we the banks pumping and pumping credit that was you know created credit not savings cuz people weren't saving created credit into an asset and there were lots of reasons why we did that but our calculations are a lot simpler than yours we have income over Debt Service which changes when debt service is lower uh the cap models The Wack models the capm models it assumes a a rate of

01:29:04 return and if that's higher than the interest the C the capital cost that changes we're going to we're going to fund more deals and they're going to do more deals because it does cash flow at the temporarily low rates uh we saw I saw guys going into construction uh building a couple of mcmansion a year making 120 $180,000 a year with a high school education it seemed like this can't last forever and it seemed obvious that it was driven by the rates and the credit flowing into the flowing into this to what extent does everybody else

01:29:35 agree that you know now that I've read more about economics it's the haki and triangle seems to explain it and and to what extent does that matter does it matter if if the alre are basically right about how how we got here does is that relevant to does that mean that they get that we should put them first in terms of uh how do we get listening to how how do we get out of it can I just let me give some anecdotal empiricism I know a vice president of former vice president of loans um who was in Las Vegas during that time and

01:30:05 one of the loans that they made was to a fire a retired fireman from New York City wanted to buy a home for himself and and a home for um to rent for for rental income they talked him into buying 25 homes without without a down payment I mean thatan that was it was crazy and and but I think it has to do it's not just everyone going mad it's not due to necessarily Sinister motives it's due to the fact that we had a tremendous falsification of monetary

01:30:36 calculation throughout the interest rate structure and and I and that's what hyek the Nobel Prize winner has emphasized with this hayekian triangle I mean that's just one sort of model of it but I I think that that's a key um I don't think it was just a sudden onset of greed no but much more important dimension of of that whole dynamic was the lifting of effective constraints on leveraging up exactly the the the banks uh in most countries are permitted from

01:31:08 loaning out more money than a certain multiple of what they have in assets the deregulation of the banking system here effectively loosen those limits severely and and when you're in a financial asset bubble you can can make even more money by borrowing and buying even more of the bubble whose price is inflating and and there were people I know who thought well the prices are already too high this doesn't seem safe but then here's here's the one thing we know about people they can't sit on the sidelines

01:31:40 while neighbors who are stupid than they are are making a lot of money without doing anything so so so you you you had to dance while the music was playing that's been one of the comments that's been made about this and and and the the the parents who borrowed when the banks let them borrow think about the situation they were in John McCain was very critical of people who had visions of grandeur buying vated ceilings and granted countertops but when I bought a house I needed 25% down

01:32:10 I it was a a short short loan my kids could buy houses with nothing down and and balloon payments and and if you don't spend what people in your income level spend on a house it's your kids that go to the the bad schools and so others were borrowing more they were allowed to borrow more they spent more so what am I to do as a parent send my kid to the school where the metal detectors are out front uh or or borrow more myself and hope for the best I'm going to do the the second thing and that and that's not a a prescription to

01:32:41 deregulate the banks that's a prescription to regulate the banks more tightly yes absolutely and here is the thing just before the crisis erupted you could see the uh leveraging Factor was close to to 40 times 40 times now here's he that was at the end of the quarter when they cleaned up their books was 300 times in the middle of the court but the point is that that leveraging itself is something that you cannot do in Las

01:33:11 Vegas taking your example if you try to play in Las Vegas at those stakes and you don't show that you have money to play they won't let you play so my question is why can the banking system and the US economy have a regulation which is as good as Las Vegas here you know Bob touched on a good point um about the deregulation only the the asset side was deregulated when you have a fractual reserve banking

01:33:41 system and you still have FDIC insurance and you have too big to fail Doctrine you can't I'm an Austrian I'm anti-regulation but you can't deregulate the the asset side and allow all of these imprudent Investments there when you have fractional Reserve banking that's sort of guaranteed to be bailed out but as far as deregulation I just want to mention that under the bush years spending on on the SEC increased 11.3% per year every single year and and and and the staff grew by 1% a year and we also had um a tripling of of spending

01:34:13 from 1980 to 19 to 2005 or so on all um uh agencies that had to do with financial regulation so I don't think more regulation is necess necessarily the story that comes out of this but we can agree to disagree on that thank you hi my name is Bob um you know we talking about why economists disagree and there was really I think very little

01:34:43 disagreement on this panel um okay we get no I I I I don't mean that in in a derogatory manner but um the values of the people on the panel are pretty much in line with one another um you mentioned happiness is what everybody's seeking I don't know about that I think power is what a lot of people are seeking um and I think the kind of disagreements that we have politically and the inability of of the

01:35:15 parties to talk with one another um far transcends economics I think that the disagreements have have so much to do with bad will and with the lack of shared values and and with our political system and I I as much as I learned and I learned a lot in this in this discussion but I didn't learn anything that's going to help us make that leap um to the political Arena and get more agreement there so that things can

01:35:46 get moving I hope I'm wrong but that's my sense of things I if I could just say when I wrote a piece advocating the progressive consumption tax I described uh in 1997 I got a very warm letter from Milton fredman a week later uh saying he didn't agree with me that the government should be raising and spending more money this was at a time when the Clinton budgets were edging into Surplus but he went on to say that

01:36:17 if it did need to raise more money I think most people now think that it does the progressive consumption tax would be the ideal way to do it and he enclosed in his letter A a reprint of his 1943 paper from the American Economic Review in which he had advocated a progressive consumption tax as the best way to pay for world World War II so there's a concrete proposal I've now seen a book from AI the American Enterprise Institute where two Scholars are advocating it uh and that would make the

01:36:48 econ make the pie bigger and generate a lot of Revenue to pay bills that we need to pay so don't say you didn't get any proposal for moving forward into the future because I tried to get that one out there you know I think of the climate change issue and and I think of the tremendous amount of money that's being spent with people who want to deride climate change science and then say that it's false science um that whatever you're doing with economics kind of doesn't doesn't work with that it's a

01:37:19 tremendous I don't know what to call it but it's a it's more than a fly in the ointment it's more ointment than the Flyers of course understand gra has to leave in I I wanted to apologize for that but this was known in advance I have to go to I have to fly to London so so we will kind of move faster if we can you can you can leave but we can and that's an important question I I I wish I had more time it is very important hi I'm Steve Miller from

01:37:52 Bridgeport Connecticut at the home of PT baram who said there's a sucker born every minute and two to take him um I was going to agree with Professor solerno until he said there was nothing Sinister what I want um Professor Salerno to comment about is when when this cash is going to be worth absolutely nothing but I want to put into that context please on top of

01:38:22 bernanke's crazy Ike would fire banki in a second crazy uh creation of of uh fake money that he lies about every time he testifies before Congress under oath what about the $680 trillion which I love to hear the word notional but that's not the deal there's 680 trillion Dollar in in off balance

01:38:56 sheet accounts I mean that is a number that's so crazy I don't nobody wants to you mean unfunded unfunded you know liability federal government I'm talking about off balance sheet accounts yeah that that the banks never uh deny they don't say no that's not true okay That Grew From like in the late 1980s from about 15 trillion to this number of 680 trillion

01:39:27 supposedly there's 400 trillion in swaps that are in these off balance sheet accounts okay that nobody ever even mentions and it's like wow I don't see how where does this money actually come from and and how how crazy can it get and and the one question that I just want to throw in here and then I'll sit down is is the idea that Bankers are going to seduce people to take money

01:40:00 like the 25 condos or something and get a fee okay that's what they're doing they're getting fees they're putting the money in their pocket and then they go ship it down the street to their buddies at the rating agencies who who who put triaa on everything you know I mean if that's not Sinister you know PT Barnum hit it right on the head there's a sucker born every minute who to take them so that's the problem here it's like we're we're in this political

01:40:31 correctness deal that that is the media just keeps the propaganda crashing into into the skulls of everybody I don't I don't know let I don't know anything about the the um off budget accounts of $68 trillion I mean that's my but I do want to say one thing well I do want to say one thing about hyperinflation and and the money being worth nothing I I don't think we'll have a hyperinflation in the United States what I do think is that after a while we're going to have Galloping inflation it's going to scare them and what I I fear and I think we'll

01:41:02 have within five years maybe even fewer years is wage and price controls I think that's what what we're we're headed for I think we're going to go on with a sort of inflationary recession or stagflation for a while the inflation is going to get worse and at some point they're going to slap on some form of incomes policy a way to price controls I I I I think that that has not been talked about and I think that that's uh possibly very possibly in our F very likely in our future the world economy is about $60 trillion it is known that the derivative

01:41:32 markets are a multiple of that that's more or less the number you're talking about 600 trillion yeah that's the number you spoke about so derivative markets originate from people being able to take position without having to make a deposit on the position that is the leveraging factor we talked about the he mentioned was as high as 300 and what I said about uh what happens is in Las Vegas is when you want to make a bet you

01:42:03 have to show that you have a proportion of that money on you before you can play otherwise it don't let you play you cannot make unbounded you put it right down on the table understood I'm trying proportion is there right there 100% is a proportion yes I'm trying to say no but there is more more than that you cannot make beds when you pay poker Etc going beyond what you actually can show you have and what I'm trying to explain

01:42:33 is that precisely is the opposite of the concept of derivative markets in which you can go short okay so that you can sell something you don't own and this is what requires regulation by the way this is no different than what already happened in the 1930s so this is not something we're inventing now I have to go thank you it's absolutely

01:43:03 new this way okay thank you ni to see you gra gra grael is on her way to London

01:43:37 that's they them tell Rob will take care of okay ask your question you want me to autograph for you um hi my name is uh Ron and uh I'm sorry to see graciella go because I was most sympath itic to what she had to say but uh I just like to make my points as briefly as I can um uh this uh Forum was about whether or not economists agree or they can agree uh I

01:44:09 would uh put forth a very simple proposal that um this crisis that we're facing now is basically it's a financial crisis it's not an industrial uh crisis uh this is all about money and banking um and uh one of the gentlemen mentioned that um yes they brought it on but um you know if we don't save them the host ship goes down um so they're too big to fail so

01:44:40 whether we like it or not um we we got to deal with it but I think we're all familiar with a a saying that you know when when you find yourself in a hole stop digging um nobody is addressing this too big to fail issue nobody is addressing the whole monetary banking system that got us into this crisis that is stronger than it ever was and that uh will probably lead us to the next one so um

01:45:10 so because because we have three more people just ask a question okay please so um two very brief points I do believe that uh all Economist do make moral um judgments before they form their models it's almost impossible for human being not to make moral judgments and then create models that work with their moral judgments but the final point I want to say is that uh as economists who do make moral judgments I think the most

01:45:41 important thing for you is to get on the same page on what you believe is the ideal solution not what is the doable solution put out to the public this is the best possible thing that we could do and then let the public decide whether it's doable or not instead of giving us proposals that are Band-Aids because you think well maybe politically feasible that's my point Thank you so just be clear I am not advocating too big to

01:46:11 fail I am one of the biggest critics out there of too big to fail I think it's a disaster I'm why was trying to explain why ber nanki thinks that too big to fail is something that we have to we have to do and many economists agree with bank I'm certainly the minority amongst economists eess elephant in the room because they're convinced incorrectly but they're convinced that the consequences of not bailing out big Banks would be even worse than the consequences of bailing out big Banks economists set an ideal proposal to create because we don't

01:46:42 agree on the ideal proposal I mean there are few areas where we do actually agree economists are pretty much unanimous that rent control is a bad policy that free trade is a good policy a handful of other things and yet millions of countries for for Millennia haven't followed those policies so just laying out something we agree on doesn't seem to be sufficient okay next question hi Maria cavalo a student at University go right up to the microphone I'm Maria cavalo a student at Columbia University so there's been a lot of talk about a pie but I think the first

01:47:13 question is who is making the pie and as Dr soleno said they're only taxpayers and tax consumers so if the government is in charge of the pie that means we have bigger government and bigger tax consumption and as HX says Central planning can't work so how would you respond thanks so that that sounds like a variation of the 47% the the makers and the takers argument I think that's that's the wrong way to think about government I think

01:47:43 uh government is what we do not what some disembodied institution does to us we make the government there are lots of countries where the citizens feel good about their governments they think the governments deliver good services and the the public officials are by and large free of corruption and government just recog the idea of government recognizes that the individuals own interests don't coincide in all cases with society's interests I mentioned the

01:48:14 example of my decision to get on a crowded roadway there's nothing I can do to prevent you from getting on a crowded roadway if it's not important for you to get on it you'll get on it if it's better for you than not getting on it but your presence there makes all the rest of us wait for hours longer to get where we're going but all of us acting together can Implement an Easy Pass technology that charges us we charge ourselves for the privilege of getting on a crowded roadway then we decide for

01:48:44 ourselves whether it's valuable enough to go at that hour or whether we'd save more money and not suffer much inconvenience if we went at a less crowed time that's government uh and to say that's social engineering well you know homicide laws are social engineering stop signs or social engineering there there's just no presumption that what the individual wants to do is for that very reason alone what ought to happen sometimes individual action is in harmony with social interests but not always okay um

01:49:16 my name is Walter and I'm I'm a neurologist so uh I usually engage in value-free judgments and that's a lie um what I'd like to pose as a question is obviously U there's got to always be disagreements among well-intentioned people looking at the same data uh we have a lot of data to look at we can look at Japan for example and uh look at its last 20 years not just the last 10 years and see a massive failure of advice coming from economists

01:49:47 we can also look at Europe and see that it's in full-blown crisis um that there also getting uh advice from well-intentioned economists and what they're on the verge of is a revolution in Europe possibly the next War we don't know um and it doesn't stop there uh it comes right back to our lap uh as to whether or not we're pursuing policies that have been demonstrated to have failed in the past simply repackaging them as the best we

01:50:19 can do there is one other country that's worth thinking about which is Germany at the end of World War I when reparations were literally destroying Germany from the inside and their economists gave way to their Bankers who said we can't afford to maintain Germany as it is therefore we're going to start the printing presses eventually they did dig them holes themselves out of that hole and were invested in heavily by Americans who accepted the German

01:50:51 solution which was not deflationary but rather the opposite and yet no one here has approached that aspect of uh agreement or disagreement as to whether or not that's a possible solution to some of the problems that we're having you know let me just quickly say there was a economist behind the German hyperinflation who was an eminent monetary Economist named Carl HCK um believ in the quantity Theory and so on but he was the one who said really it's import prices that are going up German the German Market is being attacked by

01:51:21 speculators and therefore we have to print more money to catch up um to allow people to pay the higher prices so um even though he wasn't the Central Bank chair he um chairman he was he was somebody who was very influential in that so economists can be wrong I mean economists um you know they have it's an art it's I don't quite understand the question is the proposal that the US economy would do better if we generated higher inflation it's not a proposal it's it's just a value free question in other

01:51:54 words would we be better off with an inflation versus a deflation it seems Z beraki is very worried about the US plunging into an uncontrollable deflation and a lot of the stimulus is exactly an attempt to prevent that well the risk of seems to offending Harry Truman I'm going to have to say it depends it depends why you're having inflation or deflation so there's not a really there's not a short enough answer to give to that but certainly there are risk of deflation there are periods in US history where we had very substantial

01:52:24 deflation and real economic growth was quite robust and some of the most robust growth in US history so deflation per se is not the issue it's things that have go are going along with particular deflation such as collapses and aggate demand as Bob was explaining earlier okay last question try to slip two in if I can get one for free out of a panel of economists my name is steuart um to begin with uh how could you compare the cost of bailing out the system through by bailing out the consumers uh putting a a FL that is a mortgage guarantee

01:52:56 program in place uh allowing the cash flow of structured bonds to go unimpeded what is there a way to compare the cost of the two approaches not sure I understand so to we bail out the banks bail out the consumers that are you know bail out the stop the foreclosures bail maintain the cas flow of the structured bonds some level we're trying do both the H program the other mortgage programs that were're trying to prevent defaults and transfer

01:53:27 money to home owners we're going in that direction if you do that yeah the mortgage bonds won't default and then the banks are in trouble and then you don't have to worry about whether to bail them out or not right but it may also have disincentive effects if it encourages people to not be as careful about taking out mortgages they can't afford I just am asking about the cost what would the difference of cost in cost have been if there's any way to to analyze that I'm sure some come with I think any of us knows but uh Bob Schiller and others have described this as a collective action problem that it

01:53:58 would be good for the banks even if collectively they would write down their their mortgage loans uh but any One bank would not find it in its interest to do that and so a way to circumvent that Collective action problem that's being experimented with in several areas that have had severe High incidents of underwater mortgages is imminent domain the the local level the city governments are seizing uh underwater mortgages and

01:54:28 under emminent domain and then essentially forcing them to be written down and then putting the the properties back on the market let me just add really quickly to that um you know there there is a cost to for to stopping foreclosures I mean what's wrong with falling prices as the housing prices fall to more natural levels to to Market adjusted levels at that point there are people who are the poor lower inome people and also people who are prudent during the boom didn't get caught up into it who can afford houses now don't forget the houses AR going to go unsold

01:54:59 if they're foreclosed they're going to be turned over to people that didn't make bad decisions I don't think that's such a bad thing but writing down those loans doesn't prevent the price from falling if would accelerate the it would have though at the beginning if it if we backed all the beginning all the arms right before they defaulted and before the assets that were structured upon the became toxic uh it would have propped up the price of the housing market and there would have been negatives that I'm sure you could associate with that as well but if I can try to squeeze my

01:55:30 second question in um is there a point at which we should Target uh diminishing the GDP are there circumstances under which we should Target contraction rather than growth yes contraction rather than growth not if it's being measured reasonably yeah you would not want to make the pi smaller but the pi cons exactly the same as GDP there are certain parts of the pie that we definitely want to make smaller and we we have instruments uh

01:56:02 that that can achieve that I think if if the overall Pie gets smaller everything will turn nasty in a hurry there's been some very convincing research that the the willingness of society to clean up the environment to assist the needy to do any number of things as your colleague Ben Friedman's uh uh work is way greater when economies are growing rapidly than when they're shrinking it's much easier to give up part of your gain for a common purpose than to take away from things that

01:56:33 you're already doing in order to fund a common purpose that really relies on how to what value we assign uh health and happiness in the pie yeah exactly you got to you got to be talking about the right ingredients in the pie for any of this conversation to make sense right I asked the question because it seems that it's the consider considering the the contraction of economy an intentional contraction is never considered and just from a philosophical background it seems like something that should be at least

01:57:03 in because we think that in almost any recession or any slowdown of growth all the aspects of that we care about material Goods like houses and toaster ovens and health okay go down hey lots more people become unemployed that's not good for the health fewer people can afford Healthcare when they recession that's not good for their health so most of these things we care about that are not explicitly in GDP are pretty highly correlated with GDP and so looking at measure GDP is a very good proxy for all of these things that we care about it's not perfect but it's a pretty good proxy

01:57:35 once more caveat to that I'm not in favor of targeting a government targeting anything but for example if people suddenly became Aesthetics and wanted to move to the hills and become hippies and communes and GDP shrunk as a result of those voluntary decisions it's fine with me what if they want to sacrifice no I think we have to stop thank you very much I thank the panelist and thank you go on no doubt we could go on forever thank

01:58:06 you great thank you sure