Thread by @LHSummers

My interview with @Noahpinion where we discuss the 2008-2009 financial crisis, the threat of inflation, economic policy priorities and the culture of the economic profession.

noahpinion.substack.com/p/interview-la…

I am confident that any reasonable observer will conclude that the constraints on stimulus proposed & enacted were political rather than economic in '08/'09. This view is supported by the fact that Congress cutback the Admin's proposals before passing them by a razor thin margin.

My arguments re: inflation do not derive from a specific econometric model. I believe the problem with much of the conventional wisdom is that models fit to the last 40 years of data, where inflation has never accelerated, will almost definitionally yield complacent conclusions.

Transitory goes both ways. When in the next few months used car prices mean revert the CPI will be distorted down. How clearly this is acknowledged by the inflation optimists will be a test of integrity.

I strongly doubt the delta virus economic dislocations can be addressed w easy money. Many of issues are on supply side (parents not working). Others are narrowly sectoral (travel). In neither case, will general demand stimulus be efficacious. Likely it will generate inflation.

I think QE is very hard to justify given the level of output and inflation currently and prospectively and its toxic impacts on inequality & financial stability. I think we should already be tapering and should be moving to taper as rapidly as we can, without panicking markets

I think the single highest return investment opportunity for US is a major Marshall Plan for Covid containment. Beyond moral case w millions dying around the world & global economy losing trillions, there is the reality that no one is safe until everyone is safe b of mutations.

There are the further considerations that there is no better way for us to garner international goodwill, contrasting ourselves favorably with China, or assure the world is ready for the next pandemics that will surely come.

I think there is no question that economics has become more empirical over time. And it’s range has increased into more social policy oriented topics. There has also been a big upwards drift in the extent of collaborative work.

All of this has reduced the cult of veneration of raw smartness that was more part of the profession when I entered it than it is today. That makes economics more welcoming and congenial for more people. That is progress.