My conversation with @HarvardHBS Prof. Robin Greenwood on public health, economic policy, politics, financial markets and what the crisis means to higher education. Watch here: hbs.edu/mba/blog/post/…
These events are not a huge surprise. As President of @Harvard, I said global health should be a priority b/ two of most important things to happen in 21st century were the rise of developing world & the century of biology. Those two things come together @ global health issues.
It’s mostly not our policy that is reducing the performance of the economy, it’s the disease itself. You can open the economy all you want but not many people are going go shopping when they think 10 percent of their neighbors have a potentially fatal, contagious disease.
We can create near a near term bit of economic growth by opening it all up but if that takes us back to widespread spread of contagious disease, ultimately we will be behind.
There will be come a point when its right to open the economy. There may even be some debate about what that point is but no one who sensibly looks at data could possibly believe that point is this week or next week.
That is what I mean when I say right now the decision would be the same if you were trying to maximize society’s welfare or if you were trying to maximize the present value of future GDP. Either way, you have to knock the prevalence of the virus down.
If we had a more competent federal government, there would be more reliance on the federal government & more efficiency because we would have more coherent and centralized policies where gains to scale like producing ventilators, arranging large scale testing and procuring masks.
Its not a steady march from darkness to light. We will see a series of movements in both directions. Moments when we step too far & then need to lock things down. If there were no moments when we had to lock things down in some area, it would mean we weren't moving rapidly enough
Robin asked what I would be worried @ if I were in the government: I would worry the global system was cause to collapse by this. I would worry US and China were going to mis-manage the relationship into a new cold war and this would have consequences far beyond this crisis.
I would be worried that a country that can do extraordinary things was somehow going to suffer substantial economic loss, lose a substantial number of lives and seem slightly pathetic to world because we were unable to produce enough swabs & masks & unable to test people
Lastly, I would worry we didn’t have clear thinking and adequate systems to make money flow to people who need it and not flow to people who don’t need it.
My assessment of @federalreserve response: In terms of towers of money, compared to history, what we have done this year has been Himalayas, what we did in 2008 was the Rockies & everything else was the foot hills of Vermont. We are getting to more & more unprecedented territory.
