« Freakonomics Radio

303. Why Larry Summers Is the Economist Everyone Hates to Love

2017-09-28 | 🔗
He's been U.S. Treasury Secretary, a chief economist for the Obama White House and the World Bank, and president of Harvard. He's one of the most brilliant economists of his generation (and perhaps the most irascible). And he thinks the Trump Administration is wrong on just about everything.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
If you'd like to listen to free economic radio without ads the place to do that is sticker premium five dollars a month and you can get a free month trial by going to stick your premium dot com and use a promo code freak. You also get access to all our bonus. Episodes and you'll be supporting our show to that sticker premium: dot, com, promo code, freak thanks, we'll start today with a quiz first name, a former president of Harvard Gate, now, name a secretary of the Treasury underpinning Clinton, now name a chief economist in the Obama way now name a one time. Chief economist for the World Bank, now name a White House, economic adviser under President Reagan,
the now mean when the most outspoken policy critics of President Trump how'd you do, but that too easy. I, let's make a little harder name. A former harboured President Clinton Treasury Secretary Obama, chief Economist World Bank chief economist Reagan, adviser Trump critic were all the same person. hello, hey it Stephen Debonnair, settlers summers, high sea, are you Larry Summers or Lawrence
Summers are tat. We signed your money when you ran Treasury is considered. One of the most brilliant opinionated and influential economists of his generation summit is reputation. Is that he's so smart that if you have a huge position open, you would be an idiot did not consider him, but that he so irascible so radically candid such a non sufferer, a fool's. You may live to regret it as Harvard learned when summers after five years as its president quit before he could be fired Harvard now as professor, how does he spend his days? I teach classes, I advise students on research on their future. a blog on various aspects of public policy. I write economics, research papers on topics ranging from global health too,
future of the banking system and the prospects of financial. stability. I speak with government officials around the world I advised A number of companies and he's been publishing in the washing imposed in the financial times some the most incendiary anti trump rhetoric around here's the thing he's also been carrying on a multi year campaign about the dangers of what economists call secular stagnation, long term period of slow growth summers calls it the defining macro economic challenge,
our times, you can see a similar latitude in the institutions where he's a board, member or fellow or adviser, the centre for american progress, for instance, which is essentially an offshoot of the Clinton wing of the Democratic Party, but also the much less doctrinaire Petersen Institute for International economic swear. He dispenses macro economic insights that are considered without peer today on free economics. Radio summers tell that's what the White House felt like during the first days of the great recession very tense time, and they were any thought we might be seeing a precursor to the depression. He talks about his policy, successes and failures. Perhaps, given what happened? You can say it was a mistake. He lists as current economic priorities. I think we're completely mismanage infrastructure investment in the United States. He talks about policy,
decisions. He would have made differently. Only an idiot would put a sign on the library door, saying no amnesty now thinking about one next month and why he's not a big fan of the current White House? It's disregard for ascertaining fact and disregard for analysis of the consequences of policy actions. w and Y see studios. This is for economics, radio, the podcast that explores the hidden side of everything. Here's your house, Stephen Governor, Let's say the year is nineteen. Fifty four
and you are running some kind of experimental breeding lab for supernaturally, talented economists. The most prized product of your lab, surely would have been young Lawrence. You come from a most distinguished economics, lineage, your father and mother were both economists who were to uncles who each one a Nobel Prize, Paul Samuelson, Kenneth Arrow. When you grow up with economics in Europe bud and in the air. How does that inform your worldview? So I suppose I learned supply and demand a little earlier than the average child did, and certainly one of the First Lessons learned ass, a child was that the most important things in life had nothing to do with money, and so I was always someone who took the statement economists to someone who knows the price of everything and the value of nothing
as a definition or description, but as a cautionary warning. So you served many roles in government and institutions, but you ve also spend a lot of your career in academia and talk briefly, first of all just about the central difference, but queen, academia and government, especially when it comes to the relationship between empirical evidence and policy decisions by it. I always joker that when I moved from Harvard to work in the: U S, Treasury tat, the worst thing you could do as a Harvard professor sign your name to something you had not written yourself, on the other hand, is a under second the Treasury was a mark of effectiveness. To do so is frequently is passed, it's an interesting joke for summers to tell
one thousand nine hundred and ninety one. As chief economist at the World Bank. He did sign off on an internal memo that he reportedly didn't write. It was about pollution in poor countries. Just between you and me, the memo read shouldn't the World Bank be encouraging more migration of the dirty industries to the ldcs or less developed countries. I think the economic logic behind dumping. A load of toxic waste in the lowest wage countries is impeccable under populated countries in Africa are vastly under polluted. The memo was leaked, after which Brazil's secretary of the environment wrote this to summers. Your reasoning is perfectly logical, but totally insane, and he called a concrete example: the unbelievable alienation, reductionist thinking social ruthlessness and the arrogant ignorance of many conventional economist. Concerning the
feature of the world we live in. Here's. How summers ultimately responded to the so called toxic memo? He said, I think the best that can be said is to quote the Guardia and say when I make a mistake: it's a whopper, so that's one difference between academia. politics and of course, there was another difference, which is that, as a scholar, if you work on a problem, you work our problem and it's just too hard. You can't find a good solution, Will you do if you move on to a different problem and as a policymaker, you don't have that luxury You know one huge difference between the needs of scholarship and then AIDS of policy making is in scholarship, if you point up an important aspect of a problem that nobody's really thought much.
Before, and you show that it's important and explore in its various aspects. You ve made a very valuable contribution, and so it's the essence of scholarship too abstract from many things. In order to highlight a particular point is the essence of policy making to be able to see all the aspects of a given situation and if you ve neglected, Any important aspect: you're, probably not doing your job very well, because that can lead you to me. A wrong decision. in nineteen ninety three summers, one the John Bates Clark Metal given to the best american economist under forty
He was still young, but he was also an old hand Harvard had awarded him a professorship back in eighteen. Eighty three: when he's just twenty eight had taken a leave to work at the World Bank then back to Harvard, but then it was backed DC. As under secretary of the Treasury for international affairs, he was at Treasury for six years before Bill Clinton named him Secretary toward the end of Clinton's final term. By the way summers is chief of staff at the time. Cheryl said Berger now of Facebook and lean in fame summers. His time as head of Treasury was marked by push for modernizing the financial and regulatory systems. We welcome you all here today for the signing of this historic legislation with this bill. American financial system takes a major step forward,
the twenty first century, along with the new Republican administration under George W Bush, came a new treasury secretary, Paul O Neill, but within seven months, Larry Summers went from being the seventy first secretary of the Treasury to the twenty seventh President of Harvard tell me about this world's richest university that you are taking the helm of Harbour, diverge special institution and a challenge for the next decade is to maintain Harvard excellence. His agenda for Harvard was ambitious. Physical expansion of the campus, greater emphasis on science, more financial aid and making sure students, especially undergraduates, had good access to faculty. He made some progress, but along the way he also made enemies. Maybe was his background
in academic economics were intellectual firepower, counts for a lot more than manners. In any case, summers infuriated some people alienated even more, which turned out to be the final straw was talk. Summers gave it a small economics conference in Cambridge. The theme was diversifying the workforce in science and engineering. Summers made it clear that he was speaking quote unofficially and not using this as an occasion to lay out the many things were doing at Harvard to promote the crucial objective of diversity, in other words, he'd, be speaking as an account
not a bureaucrat the question he sought to address. Why are women so under represented in tenured positions in science and engineering at top universities and research institutions? You made clear this was hardly a unique case to take a set of diverse examples. His lecture read the data will. I am confident, reveal that Catholics are substantially under represented in investment bank which is an enormously high, paying profession in our society that white men are very substantially under represented in the National Basketball Association and the Jews are very substantially under represented in farming and in agriculture when it came
Do the under representation of women in science. Summers identified several possible factors, discrimination, gender differences in preferences and in social innovation from an early age, but also as he put it quote, there are issues of intrinsic aptitude. He went on, say quote. I would like nothing better than to be proved wrong, because I would like nothing better than for these problems to be addressed, able simply by everybody, understanding what they are and working very hard. the to address them, but once summers his remarks became public no amount of new wants or wishful thinking could save him. His good will account and run dangerously low, and with the writing on the wall, he resigned as you can imagine. Summers is not fond of talking about the end of his harboured rain. I did want to ask him, however, about some interesting new research concerning women in science.
no idea. If you ve seen it or know anything about by David Cardan, Abigail Pain, and it argues that for stem students in college, it's not so much a case that women are under represented as that men are over represented the region. being that many more women in role in college now generally than men, and that men are typically much worse than women in non stem field. So basically, the men who are good enough to go to college tend to be more appropriately suited to stem. I don't know if you know anything about this paper, but I'm really curious to know your thoughts on it, since it obviously picks up on a topic that lead to your demises president at Harvard stay away from that aspect of my time. At Harvard Stephen- and I am afraid I haven't seen the card in pain, paper, It is, I believe, a fact that, if you look at
men who have extremely high test scores in mathematics and women who have extremely high test scores and mathematics that if you look at the test outside of mathematics. The women will, on average, have higher scores and that may have
something to do with the respective choices, precisely because the women have the greater intellectual strength in the verbal areas, but I'm not gonna say any more about this, and because I, as I say, I have not had a chance to read the carbon pain paper summers. His comments at that conference would continue to dog him when Barack Obama was elected in two thousand, eight installed summers as head of the National Economic Council. There is a lot of push back. This is a man who only listened to what he wants to hear said. A female MIT scientist does Obama care that someone says fifty percent of the population is genetically inferior to the other. Fifty percent. During his first white House, Correspondence Association dinner Obama tried to joke.
our summers, his reputation not very successfully. We have also begun to change the culture in Washington. We ve even made the White House a place where people can learn and can grow just recently. Larry summers asked if he could chair the White House Council on women and girls, coming up on economics, radio summers on the great recession, summers on Trump and some reasons- you think you'll serving government again Larry. You never know what's gonna happen, that's coming up rate after this
here are a few headlines of the articles and blog posts. Larry summers has ridden legally Trump CEO resigned. His staff should do the same. What history can tell us about trumps budget fantasy, western civilization and presidential the Pakistan in his denunciations of trump? He has begun to out crook men, Paul Krugman, as the economist
likely to start a bonfire, but there's a difference matter. How indignant summers gets his analysis isn't received as mere ranting. His bona fides in government seem to have earned him the right now. Why had Barack Obama been willing to install someone with summers his baggage as head of the national economy? council, because if you are a new young president whose just inherited the scariest recession in generations, you want experience and you want brilliance, and that is what Larry Summers come to represent and is one of the great economic minds of our time. Larry has earned a global reputation for being able to cut to the heart of the most complex and novel policy challenges with respect to both our current financial crisis and other pressing economic issues of our
time is thinking. Writing and speaking have set the terms of the debate. I am glad he will be by my side playing the critical role. coordinating my ministrations economic policy in the White House and our Why heavily on his advice as we navigate the uncharted waters of this economic crisis? What Was it lake to be on the inside of the Obama administration during the and shall melt down, especially those early weeks where really the future of the economy was in question. a very tense time. We would meet with the president each morning and talk about what will happen and what had happened in the markets the previous day, what we are hearing about, the health of different financial institutions, but the president was very clear, he said you
This is why I was elected to do the right thing. Whatever the right thing is, and so don't tell me about the political problems. Tell me what the right thing to do is that's what TIM Gate in her and I tried to do in while battlefield medicines, never perfecting the things you could look back on and ask questions. About? I think you'd have to say that the fact that we had such a dramatic turn Lenny economy. William May June of the President's first year means that at least on some of the big broad picture aspects that the approach we chose effective, and certainly it wasn't a priori clear that it would be, as effect visit was there were many thought we might be seeing a precursor to the depression, so you were Co. Chair of the President's Otto Task Force, one of the biggest and most difficult decisions was whether the bail out GM increase or you
argued in favour of a bail out, and you won the argument, though, not without a fight, the other side represented by Austin ghouls. We and others give us briefly your perspective on this chapter and even though You won the argument and even though, from what I can tell your argument, turned out to be correct in retrospect, wondering if there's anything, you might have done differently. No, I think that question was as it all These is in prison. hiding emergency merging lending that on the one hand, the cost of key been Chrysler alive was about the same as the cost of providing for unemployment benefits for all the workers
and pension benefits for all those who the pension insurance company would be on the hook for if Chrysler went belly up. So at one level you could say the really wasn't a net cost to keeping Christ going. The problem, of course, was that a few didn't succeed in keeping Chrysler going. You pay twice once fear, failed attempt to keep Chrysler gone and then again when he failed you'd end up not having avoided the costs of so one had to make a judgment. Give The dynamic said that time about the prospects that with Support Chrysler, be able to turn things around and you had to be to make a judgment about how widespread the consequences would be for the rest of the economy. If Chrysler work to go down
and the judgment that I believed was that there were no certainties, but I thought there was a substantial chance that, given this support, Chrysler would be able to make it forward and GM would be able to me forward, and that you would avoid dealing with something for magic a moment. When the economy was least in a position to deal with something traumatic, and I think that judgment has been borne out by subsequent events there have been slightly different conditions could have been a slightly different allocation between bond Alderson workers of the costs could d,
chairs that the government talk have been put back on the market with different timing. These are all questions where reasonable people can argue, with the benefit of hindsight There would be people who would have made different judgments and the ones we did. Time we made our judgments, but I think the broad strategic judgment has in overwhelmingly borne out by what's happened. Now there are some people who would argue that the financial crisis itself was a product inside. Part based on decisions that you and others had made in a previous democratic administration. The Clinton administration, specifically as part of the financial services innovation act, the repeal of Glass Steagall, which Frida banks to be more aggressive, and also that you argued quite heavily against the regulation of derivatives of financial instruments, which, of course, turned out to be quite dangerous. So looking back at the
as potential consequences for the melt down again same question. What do you think you might have done differently knowing now, if you knew What you now look, Stephen with, with the benefit of hindsight and with if you wave away the political problems that would have existed at that time it surely would have been much better to have put in place all the kinds of safeguards that were contained in the Dodd Frank legislation that was passed in two thousand and ten and to have anticipated of those needs and to have put them in place joint. Ninety. Ninety, I think that in assessing the actions that were taken, in the ninety nine these there, a number consider useful to keep in mind with respect to Glass Steagall
There's nothing in the crisis. They had to do with the combination of commercial, banking and investment banking, which is why Glass Steagall was all about You think about the main institutions that were involved Lehman brothers nothing to do with commercial Banking Bear Stearns, had nothing to do with commercial, banking, Fanny and Friday had nothing to do with either. A g was an insurance company and I could go on with the list and in fact, some of the key measures that resolved occur. Such as cheaply, Morgan's taking over of bears terms, Bank of America is taking over of marrow Lynch involved, the combination of commercial banks and investment banking. So I don't find it plausible that Glass Steagall Reform had anything to do with causing the crisis
and I think it's a mistake that economies should be able to move beyond to simply phrase these questions, as already relation is good and all deregulation is bad. I think the question of derivatives is much more complicated US story. Our desire was not to heap derivatives deregulated. We ran into a problem which was that statements that have been made by the sea of TC called into question. Whether the enforcement of all the huge trillions of dollars. Derivatives contracts out there would be possible and began,
so the way they made the statements. They seem to be questioning the enforceability of those contracts and under those circumstances there was huge pressure from Congress to provide legal certainty, and it was a republican, very much a free market Congress and they insisted as part of providing legal certainty that there be some removal of certain regulatory issues with respect to derivatives. Should we go along with that. Perhaps. Given what happened you can say it was a mistaken Certainly, I worry that it may have been a mistake, On the other hand, there were issues that seemed pressing
to the experienced attorneys. Vs Ie, see the Treasury and fed about legal certainty to which we were responding and is certainly true, that If we had preserved authority, I dont think very much would have happened because, while we did sign legislation, reduced regulatory authority, the Bush administration, which was the frustration in power from two thousand until the crisis hit it used. Only a small fry show the regulatory authorities that it had. In fact, ran major, photo ops
where they showed all the regulatory officials taking the kind of saws you used to cut wood to books of regulations, and so it's hard to believe that whatever authority had been preserved would have been used by the officials who were staging book burnings of regulatory books. So I'm not completely objective on it and again, I would wish more than anything that we had had the foresight in the political strength to put in place irrevocably the kind of protection that wherein put in place in two thousand and ten without fear.
But I think that the narrative is at least much much more complicated than that of many who simply say. Well, they were for deregulation, and then we had a crisis, so it must have been a mistake, no matter how complicated that was whether summers made mistakes or not. The fact is that he accumulated plenty of critics even on the democratic side, in two thousand thirteen, when the White House floated the idea of summers as a possible replacement for member nankeen, the outgoing Federal Reserve chairman a chorus rose against him three Democrats on the Senate banking committee recently said they would not support summers. The prospect of his appointment of Unified Washington against level both sides, both parties- people want a new. Seems like the present was the only person, Larry Summers corner. I just didn't hear anybody in Washington or across
We come out in support of the left. Flank of the Democratic Party had grown, particularly frustrate with summers. He had become the face discredited brand of economic centralism that was considered to friendly to the big banks he did have. Is renders, like former President Bill Clinton, well he's a friend of mine, and I think that a lot of them criticism which has been subject about what he did in my. Information is not accurate. I think. There's this a cartoon image. That's been develop that somehow. Larry Summers was a one know Johnny just trying to let big financial titans ravage the land, and it's this ludicrous, but it was clear which way the wind was. Blowing summers wrote a letter to President Obama withdrawing his name from consideration for the FED Chair Post
Larry Summers may no longer be the political player he used to be least for now, but in the age of Trump he's more vocal than ever. Give me a thumbnail. assessment, if you can of the two men who are serving in two roles at you, served under different administrations, Gary Cone directed and any see national Economic Council, Steve, Newton Treasury, secretary I think one of the crucial functions of the Treasury department is to be a bulwark of financial integrity for the federal government, and I disturbed by the number of things that secretary termination has said, There were not actually true his claim that the prompt tax cuts would not, provide any relief to the
where's with the highest incomes, his claim rather strong defence of the president's behaviour with respect to the tragedies in. Charlotte's veil. A variety of his statements about the possibility that the present policies would stimulate economic growth seem too We too have put his credibility in considerable doubt and that's not a person Often we don't know when there's gonna be some kind of crisis or serious economic problem, and it will be necessary for the Treasury secretary to provide reassurance and at the moment when it is necessary for him to provide reassurance, his credibility is the crucial asset, and if he is said that
tromp didn't provide any aid and comfort to racism. If he has said that the tax cuts are not for rich people there, and his credibility will be less there when the moment comes when it is asked in the same way, I have been surprised, I used by the number of statements that Gary Cone has made that just are matters of fact and are right. He asserted that dog fur and could cost banks a few hundred billion dollars a year in compliance costs. While about Frank, I happened to support Dodd Frank regulations by reasonable people agree or disagree as to whether there are a good idea, but given that the total pay of all the banks and the country is four hundred billion dollars. It seems unlikely that complying with Dodd Frank
is costing a few hundred billion dollars in compliance costs. current asserted tat, he was working. I'm doing the first tax cuts thirty one years, while we attacks cuts in eighteen. Ninety seven tax cuts the ninety nine tax cuts in two thousand and one to death. three and a variety of other years. there are a variety of miss statements that are made. Nay, you can say that everybody exaggerates and service of an argument, and you can say that it's all pilot, Dixon and it's not a seminar room. On the other hand, I think in the economic, in financial arena. It's very important for public officials to maintain their credibility, and I would add that, on the evidence so far, and of course things may change the president
talked about a variety of things in the economic area. He talked about what regarding the economic benefits of repealing Obama care that didn't happen. He talked about the benefits of infrastructure investment, nine months, and there is not even a plan from the administration for infrastructure investment. He talked about How he would bring about dramatic changes in our trade relations, but he didn't do what he said. He was going to do with respect to China or with respect to now So if you judge thereby has the administration been successful in bringing into place, the policy should campaigned on or, if you ask the question, Has the administration been successful,
in bringing into place significant policies to have the prospect of spurring economic growth, one would have to say the answer to both questions so far as now. Just pretend for a minute that you're on their team that year on the republican team, presumably you could make an argument that its early days, indeed there is a tax reform plan under discussion at least, and that these things take time right. Well, if you look at some past presidencies, I support them, but President Reagan's signature policy, his tax cuts were passed in July or August of nineteen. Eighty one, President Clinton's. Signature economic initiative, the budget deficit reduction ACT of ninety ninety three was passed in July of ninety. Ninety three,
President Obama's signal Economic policy. The economic recovery act from the recession was pass in February of two thousand and I am the economy had had its biggest. Turn from a negative quarter into a positive corps in the post. Second World war period. we in the second and third quarter of two two thousand and nine, and I could go on with examples like the decision that L b J achieved in the summer of the year after his re election in nineteen, sixty five were in the summer after he took office in nineteen sixty four with the Civil Rights ACT. I think the experience is actually very compelling large deeds by president's in the economic area tend to have been
is slated by this phase in the presidency, or at least tend to be very much in prospect, so I dont think its unfair to apply the standards that history has applied in judging other presidents and I left out, what's obviously the most important example, which is empty Ares hundred days, where we now pass to days, let's say a Democrat like Hillary Clinton and one, and that say, Hillary Clinton brought Larry Summers back to DC In sum, we know to be determined policy position if you're making your to do list right now, two thousand seventeen for the american economy in America is part of the global economy. What are your top three items? Where do you most one to accomplish? I think we're completely mismanage infrastructure investment in the United States we have a way an adequate level of spending. It's not that went into
creates are lower than they ve been any time in fifty years that were also investing less net of depreciation, then it almost any time in the last fifty years, it's not We have a regulatory apparatus. That means that it, took far longer to repay. air, a single exit of the Oakland Bay Bridge than it did to build the entire open bridge two generations ago. Small bridge across the Charles River that I'm looking at outside my office. It's about three hundred feet, long It was under repair with a lane of traffic closed for five years, Julius Caesar built. bridge over a span of the Rhine. That was now in times of lawn in nine days, so both on the quantity
expenditure and on the efficiency of the expenditure then the streamlining of the effort there's plenty of room for improvement and that's not a partisan thing. Democrats tend to be bigger more spending republicans tend to be bigger on the streamlining infrastructure number one. Yet. Second, I think the president's right on the principle. Even if he is wrong on the specifics. With respect to tax reform, look, we have two and a half million dollars sitting abroad. Indulge me if you will Stephen in an analogy. Suppose you ran a library. suppose you had a lot of overdue books from your library. You might decide if a library amnesty so people would bring the books home, you might decide to say that there would never be an amnesty and people better bring the books back, because otherwise the fines are just gonna mount
but only an idiot would put a sign on the library door, saying no amnesty now thinking about one next month and yet what have we done? As a country we ve said to all the businesses with that two and a half trillion dollars abroad. That if you bring it home right now, you have to pay thirty five percent tax, but we're talking about and think about and plan, and maybe we'll have some kind of tax reform where the We'll go down getting to resolution one way or another on the corporate tax regime. I think, is a very important issue. I'd like to see us TAT ex global income more heavily than we do now, even if it's not repatriated brought back into the United States and then I'd like to see some more favourable rate, if it is right back into the United States, so that we go
YE narrow the gap that provides an incentive to keep capital outside the country right now and you get rid of carried interest. Loop, Are you keep it? I think that we have a variety of tax breaks for financial engineering like carry interest like various breaks that let you engage in complicated loan transact the wealthy, engage in complicated loan transactions with their children that facilitate the avoidance of tax. I think all of these things if they were repaired, would help us have a more dynamic and more efficient economy, and I think the third Thing is adapt to the knowledge economy. The truth is that value used to resolve
I'd heavily it. How heavy a thing was and now resides, have in how knowledgeable it is and that means a whole set of things starting with strengthening an education system you know in many ways one of the triumph in this country is that we have over the last generation, largely conquered price inflation and inflation rates have been very low, but we certainly having conquered greater, Malaysia and when the most common graded, our leading universities is a, I don't think I can reverse rising when those various kinds of misrepresentation and various kinds of exaggeration of profits by the graduates of those universities down the line when they're in positions of responsibility in business. You talk about us having come, could inflation, but I know lately, you ve been writing about the reasons why federal government
shrink, and one of those reasons that I found really interesting. You talked about how changes in structural pricing that disproportionately affect government are huge, and you talk about the consumer price index from nineteen. Eighty three versus today in the things that have gone relatively cheaper and the things that have gone to be much more expensive. Can you talk about that for a moment, and I I assume where that leads to is a conversation about what you economists call pos disease? Yes, just as a point of fact, wing users, so called consumer price index to measure what happens to the price of different goods and it's an index. So it sat at us level at a certain year and the consumer price index for all, products are set to stick. invention to be one hundred in nineteen. Eighty three of you look at the consumer price index for television sets its now about sex. If you look at the consumer price
index for a day and a hospital room or a year and a college it's about six hundred, in other words since nineteen. Eighty, three, the relative price of this measure of education and health care. As opposed to this canonical products, the tv set has changed by a factor of a hundred lapse, got a number of consequences. One is in government is much more involved in buying education and health care than it is in buying tvs. There's gonna be upwards pressure on the size of government relative to the rest of the economy Another is that, because there's been far greater productivity growth in the production of television sets, then in the production of government goods, a larger fraction of the workforce is going to find itself working. The
in the areas where there is less productivity. Growth like education and health care and this is the phenomenon that was first noticed by the late Princeton economist William bowel did sometimes referred to bowels disease or cause disease, and it refers to the fact that he, if workers become much more per active doing some things and their wage has to be the same in all sectors. Then there's gonna be a tendency for the price the areas in which labour is not becoming productive to rise and that's, why costs more to go the theatre relative to other things than it did when I was a child? That's why tuition and colleges has risen. That's why either Cost of mental health counselling has risen all kinds of activities where it takes inherently.
A person one hour to provide a given kind of service and we're productivity growth is sort of defeating the point to me: productivity growth in it you should, after all, is a higher ratio of students, teachers, which is exactly the opposite of what we all want for our kids than the What kinds of structural changes are going to define our economy. You are known to admire and respect raw intelligence or perhaps even better cultivated intelligence. How smart do you think Donald Trump is? Oh, I'm not Going Vienna physician of evaluating that. I dont think TAT, raw intelligence in the IQ sense is terribly important attribute in being present. and tour. I in leadership by think sovereign wealth funds,
standing the issues with which ones grappling and honesty and integrity about facts are much more important values. And I therefore been very troubled by the president's fairly constant statements of historical events that distort them substantially statements of matters of objective, act like the size of crowds of his inaugural. There are inaccurate statements of intention, like the extent to which his tax cuts will favour wealthy people that are inconsistent with the reality of those tax cuts. So I think it's not issues of intelligence that have troubled me,
Both the president and some of his officials, its disregard for ascertaining fact and disregard for analysis of the consequences of possible policy actions, and so when the President proposed a budget that included obvious double counting of what we're, probably to start with vastly exaggerated claims for Thee revenue benefits that would come from
extra economic growth caused by tax cuts, but then to double counted because of an alimentary logical error. You don't necessarily expect the president to catch that type of thing, but you do expect the president to surround himself with people who are sufficiently competent, that that type of thing won't happen, and you do expect the president to be alarmed. If things of that kind happen, certainly President Clinton or President Obama would have been very disturbed if somehow the budgets they put forward had had the kind of blatant lodge the errors that were contained in president trumps budget. You think he'll serving government again Larry, you never know what's gonna happen, but right now and for the foreseeable future. My focus is very much on my teaching and research in writing. Are there any potential democratic candidates into
me twenty or twenty twenty four. Whatever that you'd get particular excited about you I just try to focus on the issues, not the personalities, you think President Trump will serve out at least one full term we'll have to see what have it's. That proposition is certainly more in doubt. Then it's been with any president that we had in September of his first year Do you bet? Are you a gambler at all, even like a football? Not really a gambler. Stephen
near the end of my time here I, let's, let's say goodbye. I thank you very much for your time. Our I face very much if you're a gambler and if a Democrat gets back to the White House anytime soon. What do you think of the odds, though, invite Larry Summers backed DC? That's what I think to coming up next time on freedom of trade, you just about every public place. You go these days, you'll hear music being played or some kind of a sound scape. So that's a lot of sound to deal with. After all, we are born with ear lids, but the one place where you really want some noise, it's quiet as to its disgusting, but honestly I'd really try to avoid restaurants, where there are lots of men doing fireworks enough time to take back the toilet its next time and for economic reasons,
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Transcript generated on 2021-01-23.