Wednesday, January 11, 2017

What Do Economists Say?

The American Economics Association recently held their annual meeting in Chicago. One session entitled "Nobels on Where is the World Economy Headed?" featured the following speakers and topics:
Presiding: Dominick Salvatore
Where in the World Is the World Headed? Angus Deaton
Seeking Political Keys for Economic Growth Roger Myerson
How the Left and Right Are Failing the West Edmund Phelps
Economic Risks Associated with Deep Change in Technology Robert J. Shiller
New Divisions in the World Economy Joseph E. Stiglitz
As you might expect, much of the discussion was wonkish, (for the nuggets, skip to final 12 minutes or so) but quite accessible to non-economists. With regard to the current swirl of events in the U.S., a couple of comments stood out. Edmund Phelps expresses many concerns, one of which is DJT's boosting of the prospects of specific corporations, such as Ford and Google," a type of corporatism not seen since the German and Italian economies of the 1930's." He is concerned the DJT administration "by expanding protection and interference in the business sector will block the innovation of outsiders more than innovation will be stimulated. Not content with the subtle reference to fascism he goes on to say "Hitler... by controlling the economy caused productivity growth to stagnate in the second half of the 1930s. Economists in the U.S. must wake up to the dangers presented by a return to corporatism. The new threatening to drive a silver spike into the heart of innovation."
Speaking after Phelps, Robert Shiller envisioned a 100 year projection of what might happen, given new technologies. He expressed optimism - "Donald Trump doesn't matter. He'll only be here for 4 years", which prompted some laughs in the audience of economists.

Stiglitz mentioned that the panel shared a broad consensus on policies for the bottom 90% or bottom 50% that would work and policies that would not work, but that the kinds of policies that the president-elect has proposed are among the policies that will not work and he has not talked about the kind of policies that would work."

Myerson spoke positively about how "Constitutional democracy is sustained". "People who rise to the lower levels developed a reputation for respecting the rules.." "When the people have a revulsion against ...the elites, they always bring in an outsider who looks a lot like Donald Trump. ", but that "we've just elected a president whose team has helped him to get around constitutional and legal norms for his own benefit." and "Once you are in the Oval Office, you have no particular incentive to change that part of your operation. That's the most dangerous thing and we need a strong Congress and ...strong state governments."

Angus Deaton said that economists tend to exaggerate the impact of the president on the economy. He expressed more concern about international politics especially in China where a lot of dangerous things are already happening and the "possibility of an accident is very large, potentially disasterous."

Stiglitz expressed concern about election of a president who says he wants to tear up international agreements and we in America thought we were setting an example for the rest of the world ...since WWII and DJT is a man who, "in his own business has shown an abuse of those kinds of obviously very dangerous and will not elicit the kind of cooperation we need" and "Cooperation and trust is being eroded."

Myerson also worries that DJT will cause other governments to stop buying and holding U.S. debt.

In the Q&A that followed, the first questioner asked Shiller about not having to worry so much about Trump and his optimism that the next four years will be of little consequence. Shiller deflected the topic of pessimism to the other panelists, at which Phelps spoke up - "I gave you Hitler, isn't that enough.?"

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