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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keen with

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Speaker 1: David Gura. Daily we bring you insight from the best

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Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance

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Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course,

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Speaker 1: on the Bloomberg David Gara, Tom Keine Here in New York,

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Speaker 1: I'm gonna have a conversation now with Kevin Hassett, the

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Speaker 1: chairman of the White House Council of Economic Advice. We's

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Speaker 1: been waiting into this subject of tax reform here recently

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Speaker 1: went into the lion's den last week delivered a major

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Speaker 1: speech at the Tax Policy Center, an event convened by

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Speaker 1: the Tax Policy Center in the Tax Foundation. I think

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Speaker 1: the most provocative lines in that speech might have been

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Speaker 1: I look forward to your questions. After some criticism of

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Speaker 1: the analysis the Tax Policy Center did of the proposal

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Speaker 1: put forward by the Big Six a couple of weeks, aw,

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Speaker 1: Kevin has a great to have you with us here

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Speaker 1: on our phone lines. You you were intended to make

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Speaker 1: a speech about tax from you were critical of the

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Speaker 1: way the Tax Policy Center went about its analysis. What

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Speaker 1: prompted you to do that? What struck you as as

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Speaker 1: most wrong about what they did. I think the most

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Speaker 1: wrong thing about the Tax Policy Center study was just

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Speaker 1: that they not only didn't allow for any growth effects

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Speaker 1: of tax reform, but they said at the beginning of

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Speaker 1: their study that if they did allow for growth effects,

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Speaker 1: they expect that they would find none. And that's just

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Speaker 1: inconsistent with a massive amount of scientific literature. I mean, honestly,

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Speaker 1: if we cut the corporate tax rate from thirty and

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Speaker 1: have a big tax cut across the board on the

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Speaker 1: individual side, I mean, that's gonna affect the economy. It's

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Speaker 1: going to affect economy maybe a lot if people, you know,

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Speaker 1: for the optimists, to mean not so much for the pessimists,

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Speaker 1: but that there's really anybody that's ever modeled it. This

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Speaker 1: has no effect except the Tax Policy Center. And they

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Speaker 1: put this analysis out, you know, pretty early in the process,

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Speaker 1: clearly in a political attempt to stop the process before

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Speaker 1: it even gets going. In fairness to them, they were

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Speaker 1: trying to analyze something that it's still, I think you

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Speaker 1: can agree, is rather thin. We're waiting for Congress to

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Speaker 1: apply some meat to the bones of this tax reform proposal.

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Speaker 1: Uh are you? Are you are you convinced that we're

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Speaker 1: going to get there, that we're going to get to

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Speaker 1: a full fledged tax reform proposal here over these next

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Speaker 1: few months, and life the fact that we only have

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Speaker 1: nine pages at this point. Yeah, you know, honestly, if

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Speaker 1: you think about a set up for having a great

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Speaker 1: bipartisan tax reform, there's never been a better one. When

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Speaker 1: has there ever been a Republican president who said, look,

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Speaker 1: on the individual side, I'm looking for a revenue neutral

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Speaker 1: reform um, i want these rates, but you get to

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Speaker 1: set the brackets. And oh, by the way, if in

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Speaker 1: order to be fiscally responsible or satisfy your equity concerns,

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Speaker 1: you need a higher top rate, then you can think

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Speaker 1: about that too. I mean, that's like an open invitation

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Speaker 1: to collegial bipartisan tax reform. And I think that that

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Speaker 1: offer was just not taken seriously by the Tax Policy Center.

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Speaker 1: You know, they didn't allow for where the brackets might be.

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Speaker 1: They just used an old report from the House for

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Speaker 1: putting the brackets there. And they didn't allow for a

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Speaker 1: higher top rate either. And now folks were now that

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Speaker 1: Kevin Hassett is on the same page is Larry Summers.

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Speaker 1: This has happened once in the history of all of economics.

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Speaker 1: Both of you rave about one of our great losses

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Speaker 1: of the twentieth century, Arthur Oakin in his classic Equality

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Speaker 1: and Inefficiency and the Larry Summers wonderful forward to this

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Speaker 1: must read book is the idea the rules have changed.

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Speaker 1: It's now a much more different and open economy than

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Speaker 1: when that classic was written. Can you guarantee us growth

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Speaker 1: off of tax reform? Given the new American economy, the

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Speaker 1: new use of technology, the new use of crushing labor

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Speaker 1: in labor share, you know, thank you for mentioning an

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Speaker 1: Art Oakin, who uh you know, I'm humbled to be

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Speaker 1: sitting in a job he once held. And and he

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Speaker 1: also Tom tragically died at the age of fifty one.

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Speaker 1: Can you imagine all he would have done if he

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Speaker 1: had just lived a longer life. But yeah, I think

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Speaker 1: Art okin is right that if we have high taxes

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Speaker 1: in order to redistribute, then that undermines growth. And that's

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Speaker 1: what the leaky bucket analogy is that he talks so

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Speaker 1: much about that if we try to, you know, carry

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Speaker 1: water from a rich guy to a poor guy, then

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Speaker 1: we're gonna drop. But but but the rep but I

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Speaker 1: think that's true, and and so and so, if you

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Speaker 1: think that the tax cut won't affect growth, Tom, then

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Speaker 1: what your basic But cock, don't weak, Kevin. The basic

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Speaker 1: idea is Oakin's bucket is different. Now it's made of

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Speaker 1: titanium fancy aluminum that Elon Musk figured out at Tesla

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Speaker 1: or whatever. In the benefits of the leaks in the

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Speaker 1: modern bucket only go to people pay an alternative minimum

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Speaker 1: tax of living in six thousand square feet in some

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Speaker 1: fancy abode. That's the wrap, right, Well, it's it's incorrect, right,

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Speaker 1: I mean so, so in an open economy, the leaks

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Speaker 1: are worse, not better, because now if we, you know,

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Speaker 1: try to raise the tax rate, it used to be, well,

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Speaker 1: you know, what's the rich guy going to do? He

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Speaker 1: stuck here in the US. But now he can move

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Speaker 1: his income, you know, to the Caymans or the Ireland

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Speaker 1: or or whatever. And so in the big wide, open economy,

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Speaker 1: the leaks are worse, not better. That's the prob might

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Speaker 1: have with what you just said. His Secretary Minution and

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Speaker 1: the others that are being criticized, do they need to

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Speaker 1: skew tax reform and negotiation towards the middle class. I

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Speaker 1: think that the process that the Big Six set up

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Speaker 1: is one where the Senate and the House members are

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Speaker 1: now encouraged to set the parameters in a way that

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Speaker 1: they think balances equity and efficiency in an acceptable way

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Speaker 1: they can get a majority of votes. And you know,

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Speaker 1: we a hundred percent support that process. That's the right

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Speaker 1: way to do by partisan tax reform, That's the way

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Speaker 1: we've done it for years in the past. Kevin, for

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Speaker 1: those of us who hear the terms Council of Economic

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Speaker 1: Advisors National Economic Council, what role are you playing in

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Speaker 1: all of this? Help us understand the lane that the

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Speaker 1: the c e A is in right now? Oh? Thanks, Yeah, Well,

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Speaker 1: ACT established the Council of Economic Advisors as a group

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Speaker 1: of economists that sit in the White House and offer

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Speaker 1: objective advice to the president. And you know, they're about

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Speaker 1: thirty five or thirty six people from all over the country,

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Speaker 1: many professors on leave from adversities and so on. And

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Speaker 1: you know we're right here in the E O B,

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Speaker 1: right across the street from the White House, and our

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Speaker 1: job is to provide objective analysis of all the economic

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Speaker 1: decisions that the president's making. And that's what we do, so,

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Speaker 1: do you have to send euclidean I s l M

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Speaker 1: model through General Kelly? Like, if you work something, Kevin,

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Speaker 1: if you work something out on a cocktail napkin at

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Speaker 1: the Trump Hotel, do you have to send that through

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Speaker 1: General Kelly to get to the president? Okay, so Tom,

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Speaker 1: you asked the kind of funny question. But I've got

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Speaker 1: to give you like a completely accurate answered, Kelly. But

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Speaker 1: but but for the CEO to publish a document that

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Speaker 1: we have to go through something that's that's approved, requires

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Speaker 1: approval from like the whole White House process, the staff

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Speaker 1: Secretary and so on that so that other people who

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Speaker 1: have an interest in it can review the papers. And

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Speaker 1: you know, we're already seeing that when our papers go

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Speaker 1: through with equations and things like that, that everybody's got

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Speaker 1: to give it. This funny look, we're the only ones

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Speaker 1: with math at So what is to speak to if

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Speaker 1: I may speak with great respect for the wonderful economics profession,

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Speaker 1: including the extinguished Richard Taylor out at Chicago, how will, yes, Kevin,

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Speaker 1: with all seriousness, how will you as the pen PhD?

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Speaker 1: How will you push against the tone against academic economics

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Speaker 1: at Pennsylvania Avenue you know, I don't think there's anything

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Speaker 1: for me to push against. If you look at the president, Oh,

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Speaker 1: come on the president's ob Jack, look at the president's

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Speaker 1: tax plan. Tom. I've been on your show how many

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Speaker 1: hundreds of times over the years, and it's exactly Honestly,

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Speaker 1: if if you were to, you know, sit up at

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Speaker 1: night and think of a tax plan that would please

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Speaker 1: the has that you do five years ago or something

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Speaker 1: like that, it would be exactly this and then so

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Speaker 1: on the subsidence matters that I work on every day.

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Speaker 1: You know, I'm completely in you know right now? Do

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Speaker 1: you model? And I don't want to get out front

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Speaker 1: of your published models. I understand that pressure. But can

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Speaker 1: you model sustain three g d P? It depends on

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Speaker 1: the meaning of sustained that that certainly if you know,

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Speaker 1: I'm a solo modeler in the long run that I

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Speaker 1: think that things like population growth determined really really long

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Speaker 1: run growth. But to get average growth of three over

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Speaker 1: the next ten years, you know, that depends on the

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Speaker 1: big tax reform um and for sure you can do

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Speaker 1: that as well. But but you're right, Tom, I mean,

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Speaker 1: you know these models that that that in the end,

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Speaker 1: you know, if you don't have population go of growth

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Speaker 1: or technological change. You know that then there's a limit

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Speaker 1: to how far the economy can grow over like forty

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Speaker 1: year periods. David, we'll come back here just a minute.

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Speaker 1: But in the minute we have left before we go

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Speaker 1: to break here, Kevin, let me ask you just about

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Speaker 1: the difficulty that you face modeling this tax reform proposal.

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Speaker 1: We've talked about the challenges facing the tax policy centers say,

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Speaker 1: but but when you look at what's still undetermined, are

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Speaker 1: still in cod about this this plan. What's the biggest

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Speaker 1: variable yet? Oh, I think that that on the individual side,

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Speaker 1: the biggest unknowns are still exactly where the politicians on

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Speaker 1: the hill are going to decide they need to set

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Speaker 1: to put the brackets, and of course whether they need

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Speaker 1: a higher top rate. Those would be the two on

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Speaker 1: the individual side, and I think that on the corporate

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Speaker 1: side it will be you know, what the international tax

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Speaker 1: rules look like to those are still being negotiated as well.

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Speaker 1: Kevin hasst with it. He is the with us. He

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Speaker 1: is the chairman of the President's Council of Economic Advisers.

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Speaker 1: People have been fascinated to see how you would try

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Speaker 1: to drive the economic conversation forward, Kevin. We spoke with

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Speaker 1: Jim Jordan's a congressman from the fourth District of Ohio,

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Speaker 1: strong supporter of President Trump, etcetera, etcetera. And we did

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Speaker 1: note the little Switzerland niche of Ohio and that out

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Speaker 1: in the areas the territories of Trump is um there

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Speaker 1: are a building businesses. How can we incentivize investment in

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Speaker 1: small and mid sized businesses that are below the big

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Speaker 1: cap radar. Oh yeah, And that's exactly the thing that

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Speaker 1: we're focused on here at the White House because if

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Speaker 1: you look back at even you know, I'm like the

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Speaker 1: nineteen late trade literature, we started to see the at

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Speaker 1: as the US opened up to trade, that a heck

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Speaker 1: of a lot of factories in places like Ohio and

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Speaker 1: Pennsylvania and Michigan started to close. And then those communities

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Speaker 1: started to have extreme distress and repeated problems with high

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Speaker 1: unemployment rates and even things likes ubstance, the beauties, the divorce,

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Speaker 1: and you know, these are the people that are crying

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Speaker 1: out for help that nobody has been listening to. And

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Speaker 1: you know, we've designed a plan that is hopefully going

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Speaker 1: to put a lot of activity back there. Because right now,

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Speaker 1: if you want to avoid the high U S tax.

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Speaker 1: You just put the factory in any of the country

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Speaker 1: and transfer price the profits over there, and then you

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Speaker 1: do And so what we're trying to do is reward

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Speaker 1: people who create jobs in places like Ohio and Michigan.

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Speaker 1: We'll go surgical, go surgical off of what was it

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Speaker 1: nine pages, David or something on the Big six report?

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Speaker 1: Can you do? Can you? Yeah, can you do an

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Speaker 1: lb J like policy prescription of investment tax credit to

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Speaker 1: jump start you know, so it doesn't help Apple, come puter,

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Speaker 1: do this, this and this, But so a jump starts

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Speaker 1: manufacturers to create a Switzerland of manufacturing in America. Can

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Speaker 1: we do that? You know, we can definitely make America

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Speaker 1: great again. We can make manufacturs copy that down be sure.

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Speaker 1: It's amazing. So but we can do that. But I

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Speaker 1: don't think that we have to micromanage you know, going

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Speaker 1: here versus going there, because the fact is that once

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Speaker 1: factories start going up here instead of Ireland, then the

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Speaker 1: people who are planning the location of the factory, you

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Speaker 1: are going to want to go where there are workers.

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Speaker 1: And you know the good news is that you know,

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Speaker 1: people are pretty mobile when they're moving a whole factory

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Speaker 1: and they're going to locate in places where there are

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Speaker 1: a lot of available workers. Right now, for example, in Colorado,

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Speaker 1: there's about half an unemployed person per job listening, you know,

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Speaker 1: but there are other states where there are a lot

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Speaker 1: of unemployed people per job listing. And so if you're

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Speaker 1: trying to build a new factory, you know which place

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Speaker 1: are you're going to go. You're going to go to

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Speaker 1: the place where there are workers, especially places like Ohio.

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Speaker 1: Kevin the Act to your time in Philadelphia, you alluded

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Speaker 1: to being an all our box class at pen when

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Speaker 1: the night lass taxive Form was passed. This was a

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Speaker 1: part of your your speech, and I wonder if you

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Speaker 1: could touch upon that a little bit more, how that

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Speaker 1: moment was formative as you began to think about what

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Speaker 1: taxi form might look like in its next generation. Yeah,

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Speaker 1: so when the Tax Act was happening, then there are

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Speaker 1: all these changes to the corporate side, and um, I

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Speaker 1: started studying, you know what, well, what do we expect

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Speaker 1: these changes are going to do? And I found that

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Speaker 1: the whole literature said that taxes never have an effect

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Speaker 1: on the economy. And it was kind of puzzling to

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Speaker 1: be because I couldn't quite understand why it would be.

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Speaker 1: In fact, I'll even say the thought that came into

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Speaker 1: my head, which is that if you have individuals that

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Speaker 1: behavior rationally, then there's not really anything that drives them

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Speaker 1: out of the market. But if you have firms that

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Speaker 1: behavior rationally they don't respond to things like taxes, well

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Speaker 1: then smart firms should come and drive them out of

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Speaker 1: the market. And so if we've got a market where

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Speaker 1: there are firms that don't respond to rationally economic incentives,

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Speaker 1: then there's something really, you know, malfunctioning about in the economy.

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Speaker 1: And so so that made me kind of dig deeper.

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Speaker 1: And Allen and I wrote a paper long long ago

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Speaker 1: look at at the Act, and we found really big

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Speaker 1: effects of tax policy on business fixed investment once we

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Speaker 1: accounted for some problems econometric problems that the previous literature had.

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Speaker 1: You said that bipartisanship has been good for tax reform,

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Speaker 1: and TAXI form, as we shall see, has been good

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Speaker 1: for America. From your perch there in the old Executive

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Speaker 1: Office building, are you optimistic we're going to see more

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Speaker 1: bipartisanship here? I look back at the speech and all

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Speaker 1: that led to it in the speech itself, and there's

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Speaker 1: still a lot of partisanship just in this realm in particular.

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Speaker 1: Are there are there silver linings that you see that

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Speaker 1: you think that there will be some bipartisan effort on

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Speaker 1: taxiform I think that the substance of what the president

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Speaker 1: is trying to do deserves bipartisan support. It really does.

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Speaker 1: It's the kind of thing that people on the right

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Speaker 1: and the left have an argument we should do forever again,

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Speaker 1: even putting the top marginal rate on the table. Uh.

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Speaker 1: Larry Kotlikoff, who's the echnologs professor you wrote it, wrote

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Speaker 1: a piece at Forbes a few ks ago where he said, look,

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Speaker 1: you know, red steet, red people, blue people, and purple

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Speaker 1: people have all been supporting things like this forever. You

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Speaker 1: know it really deserves but right, but come on, the

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Speaker 1: analysis by a wide set of people is the gains

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Speaker 1: go to the upper x per cent. Granted they pay

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Speaker 1: the huge share of tax As you mentioned earlier, Dr Hassett,

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Speaker 1: the idea that this would be negotiated out in Congress,

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Speaker 1: what do you if you were sitting with the president

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Speaker 1: on the couch today, hopefully not with your legs up

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Speaker 1: on the couch, but if you were sitting with a

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Speaker 1: president in the Oval office today, what would you say

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Speaker 1: to make the Big Six reform more amenable to the red, blue,

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Speaker 1: and purple middle class. Well, look, the first of all,

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Speaker 1: the Big Six reform is exactly where it's intended to

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Speaker 1: be right now. The what's happened is that we've agreed

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Speaker 1: on parameters that have been handed up to the Hill

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Speaker 1: for them to work out amongst themselves. The art of

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Speaker 1: can debate like how much do you think they to

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Speaker 1: trade off efficiency in equity? And that we're extremely respectful

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Speaker 1: of that process. We understand that we're not going to

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Speaker 1: change the tax code if they can't pass something through

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Speaker 1: the House and through the Senate if they've got all

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Speaker 1: the parameters that they need. And you know, so that's

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Speaker 1: I saw working number, Kevin, Kevin, I saw one point

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Speaker 1: for a trillion. I saw three point one trillion dollar

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Speaker 1: number the other day. What does this do to the deficit?

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Speaker 1: Ol You remember you worked at a EI ages ago.

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Speaker 1: What does this due to the deficit? Well, the uh

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Speaker 1: budget Reconciliation Rule will allow for a static score of

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Speaker 1: about one and a half trillion. I think that's what

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Speaker 1: we all expect. It's been covered in the press and

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Speaker 1: that and that that is small enough, you know, in

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Speaker 1: this massive economy over ten years, you know, it's just

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Speaker 1: a hundred fifty billion a year that you don't need

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Speaker 1: really big dynamic effects for the dynamic score of that

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Speaker 1: to be revenue neutral. And that's the objective. Had some

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Speaker 1: plan that has that effect. Had some good fun talking

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Speaker 1: with Alan Krugan coodbrneing to uh everyone listening to Mercer County,

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Speaker 1: New Jersey. But he talked a lot about how he,

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Speaker 1: in that position as chair the Council of Economic Advisors,

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Speaker 1: able to shape the economic focus of that group of economists.

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Speaker 1: You mentioned those thirty plus economists. We've been talking about

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Speaker 1: taxi from What else do you want to tackle during

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Speaker 1: your tenure? Is the chair of the ce A? You know,

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Speaker 1: I think that the job of the c A has

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Speaker 1: provide objective analysis for everything that's going on in the

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Speaker 1: White House. And you know, since I've been here, you know,

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Speaker 1: there's been so many topics that have come up that

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Speaker 1: have been really important, like thinking about how we recover

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Speaker 1: from hurricanes and so on, that a lot of it

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Speaker 1: is responding to the needs of America that that come

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Speaker 1: up today. I think that the long run objective right

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Speaker 1: now is to take this tax reform thing and analyze

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Speaker 1: it and convince people that it's going to have a

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Speaker 1: big positive effect and help it become law. And then

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Speaker 1: I think if we accomplished that, honestly, it changed. It's

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Speaker 1: so fundamentally alters the expected growth path of the economy

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Speaker 1: that it's just like a different path to go down

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Speaker 1: than if this doesn't path. Do you play golf? I

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Speaker 1: used to play golf a lot, but you know, when

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Speaker 1: my oldest sudden was bored, I stopped playing golf and

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Speaker 1: started coaching the league. Okay, here's your here's your swave

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Speaker 1: tip for the day, pick up the irons. Let's go

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Speaker 1: get back out there on the course. That way you

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Speaker 1: get some face time with His worship I do. Yeah.

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Speaker 1: Actually I used to caddy with a bow tie, which

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Speaker 1: was sometimes required. That was a few years ago. Anyways,

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Speaker 1: Kevin has a thank you so much congratulations on your

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Speaker 1: being annointed as Chairman of the President's Council of Economic

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Speaker 1: Certainly an historic time for economics within the within the capital, David,

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Speaker 1: and this dialogue is the witness the President's tweets this

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Speaker 1: morning is unique. Yeah, I'll go back to what you said,

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Speaker 1: which is. We've talked to a lot of academic economist

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Speaker 1: economist who've been in Washington before, and as you said,

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Speaker 1: many were very excited to have Kevin hasn't confirmed for

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Speaker 1: that position. They were excited to see the name floated

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Speaker 1: and nominated and confirmed. So good to have him there

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Speaker 1: on the ground and get that office up and running again. Yeah,

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Speaker 1: they and they've been over the years. They've they've been

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Speaker 1: uniformly have a great quality of different quality along the way.

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Speaker 1: The chairman of the President's Council of Economic Advisors like

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Speaker 1: a think tank. I remember Alan Kruger saying that within

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Speaker 1: the White House, Kevin's gonna learn to play golf. What

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Speaker 1: a joy. Yesterday had a major shout out of the

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Speaker 1: surveillance team. We don't here in advance who will win

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Speaker 1: the Nobel Prize, and as a religion, we don't try

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Speaker 1: to guess who it will be. It's considered tacking in

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Speaker 1: the economic business to try to game who will be.

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Speaker 1: But clearly there was a joy when Richard Taylor of

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Speaker 1: the both School of Chicago was selected for his work

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Speaker 1: in behavioral science. And we had a great team of

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Speaker 1: people yesterday lined up, including Robert Schiller of Yale University,

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Speaker 1: Mr Krosner, Governor Krosner of the Boost School. And now

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Speaker 1: the first name I mentioned yesterday after Robert Schiller, the laureate,

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Speaker 1: I said, and get that zingalas guy from Italy and

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Speaker 1: Chicago who may have a little bit of knowledge here,

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Speaker 1: Luigi'salis of the Boost School, Chicago. Luigi, what a set

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Speaker 1: of photographs yesterday at Chicago as Mr Taylor spoke to

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Speaker 1: the assembled faculty, What was it like to be in

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Speaker 1: that room? Oh, it was very exciting. I think that

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Speaker 1: the wink I got is great and it becomes a

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Speaker 1: big and fat from me. Was really a standing ovation

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Speaker 1: called the Big You learn models in economics. Richard Taylor

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Speaker 1: looked at the constraint line in the utility curve and

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Speaker 1: he said, this simplicity of math at a tangent point

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Speaker 1: is way too simplistic. How much is Mr Taylor and

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Speaker 1: Mr Schiller? How much have they influenced more rigorous model building.

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Speaker 1: I think that they really have changed a big chunk

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Speaker 1: of economics. First of all, is impossible today to think

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Speaker 1: about economics without behavior. Economics is an important part of

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Speaker 1: the field, but also not more rationally. If you want

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Speaker 1: to uh S call us UH had to deal with

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Speaker 1: this paradigm, and many of them have accepted at least

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Speaker 1: some part of it. There was a moment in that

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Speaker 1: press conference yesterday in the Winter Garden, as you mentioned,

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Speaker 1: in which Dick Taylor was talking about the way that

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Speaker 1: he's been able to convince or not convince colleagues of

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Speaker 1: his age are older. The behavior economics is important, and

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Speaker 1: he said, I've used the strategy of corrupting the youth

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Speaker 1: whose minds aren't already made up. How much traction have

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Speaker 1: his ideas gotten among his contemporaries, and how how how

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Speaker 1: on fire are his ideas now among younger economists in

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Speaker 1: the field. I think that there is a lot of excitement,

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Speaker 1: but also there is a new thing, and this is

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Speaker 1: Dick was instrumental at poking holes in the existing paradigm.

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Speaker 1: I think the young st callars now are trying to

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Speaker 1: UH produce a better paradigm that incorporates, incorporate his objections,

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Speaker 1: but try to model it reaches out of behavior. And

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Speaker 1: this is the natural progression of science. Science is establish

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Speaker 1: a paradigm, and then you find the problems to the

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Speaker 1: paradigm and you develop a new pardigm that incorporate the

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Speaker 1: old problem. I think that we are now past the

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Speaker 1: phase of celebration of Dick in the profession. We're in

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Speaker 1: the phase of trying to develop a new product. Luigi,

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Speaker 1: we've talked a lot about his contributions to the academic literature.

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Speaker 1: How about to investing generally? What is he What has

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Speaker 1: his influence been on the art of investing. I think

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Speaker 1: that he has pointed out that some strategies that were

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Speaker 1: dismissed by the standard academics actualist in to walk, and

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Speaker 1: then other people are contributed and trying to find out

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Speaker 1: why they walk. So I think that part of the

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Speaker 1: new paradigm of the three or four factor models that

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Speaker 1: now is attributed to Jean Simon and his carts. I

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Speaker 1: think he was born as a response of some of

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Speaker 1: the anomalies that Deacon calls was a found Luigi. The

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Speaker 1: laureate Douglas North of Washington University in St. Louis would

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Speaker 1: talk of institutional economics, which is about culture and the

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Speaker 1: fabric of societies. Does Richard Taylor play in America the

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Speaker 1: same way he plays in a country like Italy. Yes,

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Speaker 1: I think that to some extent around the world, people

431
00:22:47,240 --> 00:22:50,399
Speaker 1: might be puzzled and say what is the contribution of

432
00:22:50,440 --> 00:22:53,440
Speaker 1: this guy because some of the things he says are

433
00:22:53,520 --> 00:22:56,320
Speaker 1: so obvious to ask why did he get another price

434
00:22:56,400 --> 00:23:00,679
Speaker 1: for this? And sometimes sort of you get a waded

435
00:23:00,720 --> 00:23:03,560
Speaker 1: also forceded in the obvious went other people don't understand

436
00:23:03,560 --> 00:23:06,720
Speaker 1: the obvious, and sometimes is the obvious. We are the

437
00:23:06,760 --> 00:23:10,240
Speaker 1: Luigis and gals of the bus schools Chicago. Luigi a

438
00:23:10,320 --> 00:23:13,640
Speaker 1: big controversy. And then we went back to Arthur Oakin's

439
00:23:13,680 --> 00:23:18,480
Speaker 1: classic Worker forty years ago where Lawrence Summers and Kevin

440
00:23:18,560 --> 00:23:24,000
Speaker 1: Hassett both agree leaky buckets are a big deal in economics.

441
00:23:24,040 --> 00:23:26,399
Speaker 1: But we see out in the Twitter escape this morning,

442
00:23:26,440 --> 00:23:31,159
Speaker 1: both Paul Krugman and Lawrence Summers going after the chairman

443
00:23:31,200 --> 00:23:34,520
Speaker 1: of the President's Council of Economic Advisors, and all of

444
00:23:34,560 --> 00:23:40,639
Speaker 1: this over the idea contax reform spur lower taxes, which

445
00:23:40,680 --> 00:23:47,480
Speaker 1: spurs economic growth. What says Zingalis about this debate. First

446
00:23:47,480 --> 00:23:49,960
Speaker 1: of all, I think what is important is to have

447
00:23:50,440 --> 00:23:56,439
Speaker 1: permanent lower taxes. At a temporary tax cut fables arbitrage,

448
00:23:56,520 --> 00:24:00,800
Speaker 1: but not really investment in gals u s. The tax

449
00:24:00,840 --> 00:24:05,160
Speaker 1: carts should be sustainable. I think that if this comes

450
00:24:05,160 --> 00:24:08,000
Speaker 1: at the cost of much larger deficits. I think that

451
00:24:08,400 --> 00:24:12,359
Speaker 1: that's a problem. So I think that corporate taxation United

452
00:24:12,359 --> 00:24:15,720
Speaker 1: States is too high. But also a lot of corporation

453
00:24:15,840 --> 00:24:19,760
Speaker 1: paved available taxes. So it's a copper tax reform is

454
00:24:19,960 --> 00:24:23,840
Speaker 1: long overdue. Uh. And I'm not so sure that this

455
00:24:24,040 --> 00:24:26,000
Speaker 1: plan is going to fix all the problems, but I

456
00:24:26,000 --> 00:24:30,040
Speaker 1: think a reform is over due. Yeah. I go back

457
00:24:30,040 --> 00:24:32,199
Speaker 1: to a question that Tom asked of Kevin Hasket. I

458
00:24:32,200 --> 00:24:34,239
Speaker 1: think it was such an important one, That is, how

459
00:24:34,280 --> 00:24:37,400
Speaker 1: do you incentivize companies if they bring these profits back.

460
00:24:37,400 --> 00:24:40,679
Speaker 1: If they're incentivized to bring profits back from overseas, to

461
00:24:40,800 --> 00:24:45,520
Speaker 1: invest that, to spend that on hiring new facilities, to

462
00:24:45,640 --> 00:24:50,000
Speaker 1: invest that money back into the American economy. But one

463
00:24:50,040 --> 00:24:53,920
Speaker 1: to say that if it's profitable to invest, why they shouldn't.

464
00:24:54,119 --> 00:24:57,720
Speaker 1: So if you make it profitable by creating the white

465
00:24:57,760 --> 00:25:01,080
Speaker 1: business condition, all by creating the low tax environment, they

466
00:25:01,119 --> 00:25:05,280
Speaker 1: should invest more. What is certainly not going to walk

467
00:25:05,520 --> 00:25:08,720
Speaker 1: is what George W. Bush did at this time. That is, basically,

468
00:25:09,040 --> 00:25:12,800
Speaker 1: gave a temporary tax, we leave to bring the money back.

469
00:25:13,160 --> 00:25:16,600
Speaker 1: There was at this that Since then, companies have accumulated

470
00:25:16,640 --> 00:25:21,080
Speaker 1: cash abroad waiting for the next tax release, So adding

471
00:25:21,080 --> 00:25:25,119
Speaker 1: a temporary tax change creates more damage than good. I

472
00:25:25,160 --> 00:25:29,800
Speaker 1: think what you want is a lower, permanent, stable tax rate.

473
00:25:30,960 --> 00:25:36,159
Speaker 1: Within that is the distribution of those benefits. Is the

474
00:25:36,280 --> 00:25:41,120
Speaker 1: distribution now because of technology, because of the skew between

475
00:25:41,160 --> 00:25:46,200
Speaker 1: service and goods producing America? Is the distribution or diffusion

476
00:25:47,040 --> 00:25:52,439
Speaker 1: of tax benefit gains only going to the rich. But

477
00:25:52,640 --> 00:25:57,040
Speaker 1: first of all, we need to realize that corporate taxes

478
00:25:57,080 --> 00:25:59,600
Speaker 1: are just one part of the tax you pay on

479
00:25:59,760 --> 00:26:04,000
Speaker 1: those profits. Because when those profits are true to individuals,

480
00:26:04,240 --> 00:26:07,240
Speaker 1: they play taxes a second time in the form of

481
00:26:07,920 --> 00:26:11,040
Speaker 1: a tax and dividends of tax and capital games. So

482
00:26:11,160 --> 00:26:15,720
Speaker 1: if we want to in a sort of influence the distribution,

483
00:26:16,440 --> 00:26:20,240
Speaker 1: what you can do is reduce the copper tax rates

484
00:26:20,280 --> 00:26:24,520
Speaker 1: and increase the tax on dividends and an capital game.

485
00:26:24,920 --> 00:26:27,960
Speaker 1: I think that's the way to lower copper tax rates,

486
00:26:28,320 --> 00:26:32,960
Speaker 1: but make sure that the games are not disproportionately enjoyed

487
00:26:33,000 --> 00:26:36,560
Speaker 1: by a small faction the population. How do you watch

488
00:26:36,560 --> 00:26:39,040
Speaker 1: all of this unfold from from Chicago? Of course, there's

489
00:26:39,119 --> 00:26:41,359
Speaker 1: so much politics. It played despite with Kevin Hassett was

490
00:26:41,359 --> 00:26:43,800
Speaker 1: saying he's calling for bipartisanship. He hopes that this is

491
00:26:43,800 --> 00:26:46,800
Speaker 1: an opportunity for by partisanship. How optimistic are you that

492
00:26:46,840 --> 00:26:49,919
Speaker 1: we're going to see tax reform versus tax cuts in

493
00:26:50,000 --> 00:26:53,000
Speaker 1: light of what you've seen in recent weeks from politicians,

494
00:26:53,000 --> 00:26:55,760
Speaker 1: and certainly from that nine page document itself, from the

495
00:26:55,800 --> 00:26:58,320
Speaker 1: outline from the framework that was released by that group

496
00:26:58,359 --> 00:27:02,320
Speaker 1: called the Big Six. I'm sorry. I'm generally a pessimist

497
00:27:02,359 --> 00:27:05,240
Speaker 1: by nature, but I think the environment here that's not

498
00:27:05,960 --> 00:27:09,640
Speaker 1: forced me to change my normal attitude. I think expecting

499
00:27:10,440 --> 00:27:13,800
Speaker 1: a major tax overall is daily difficult because it does

500
00:27:13,880 --> 00:27:19,960
Speaker 1: require a reaching out across the Let's remind ourselves that

501
00:27:20,040 --> 00:27:21,720
Speaker 1: the last time there was a major tax of at

502
00:27:21,760 --> 00:27:25,840
Speaker 1: all was when Reagan was president and there was an

503
00:27:25,840 --> 00:27:28,560
Speaker 1: effort to reach across the had Kennedy was part of that.

504
00:27:29,480 --> 00:27:33,159
Speaker 1: So I think he's not that easy to envision a

505
00:27:33,200 --> 00:27:36,119
Speaker 1: situation like this. Now. Let me shift gears here a

506
00:27:36,160 --> 00:27:38,200
Speaker 1: little bit, if I could just we have I think

507
00:27:38,240 --> 00:27:40,480
Speaker 1: we had a conversation about bitcoin in some time, and

508
00:27:40,480 --> 00:27:43,040
Speaker 1: obviously the conversation has shifted over these last few weeks,

509
00:27:43,040 --> 00:27:45,520
Speaker 1: beginning with what the head of JP Morgan had to

510
00:27:45,560 --> 00:27:49,119
Speaker 1: say about about the cryptocurrency and analogizing it to a

511
00:27:49,720 --> 00:27:52,399
Speaker 1: the Dutch tool of crisis as well. What do you

512
00:27:52,400 --> 00:27:54,720
Speaker 1: make of that, the discourse surrounding bitcoin at this point,

513
00:27:54,720 --> 00:27:57,159
Speaker 1: the fluctuations that we've seen in the market, and how

514
00:27:57,160 --> 00:27:59,960
Speaker 1: do you dovetail that with the future of a fine

515
00:28:00,200 --> 00:28:01,680
Speaker 1: when you hear the head of a big bank talking

516
00:28:01,680 --> 00:28:06,800
Speaker 1: about the negatively. So I think that the technology that

517
00:28:07,000 --> 00:28:11,080
Speaker 1: is behind bit kind is a very interesting and valuable technology,

518
00:28:11,200 --> 00:28:12,879
Speaker 1: and I think that there is no doubt in some

519
00:28:12,920 --> 00:28:15,600
Speaker 1: way or another will become a technology of the future.

520
00:28:16,000 --> 00:28:20,119
Speaker 1: Whether this will go ne society through big coins, I

521
00:28:20,200 --> 00:28:24,160
Speaker 1: am very doubtful, And and I think that because there

522
00:28:24,200 --> 00:28:26,199
Speaker 1: is a lot of speculation of what would be the

523
00:28:26,320 --> 00:28:31,040
Speaker 1: next sort of currency, I think that the evaluation all

524
00:28:31,080 --> 00:28:35,440
Speaker 1: over the place. But I think that, yes, it's the

525
00:28:35,840 --> 00:28:39,960
Speaker 1: evaluation today of bit coins are a bit crazy. But

526
00:28:40,080 --> 00:28:43,560
Speaker 1: you know, it's very hard to predict because nobody knows

527
00:28:43,640 --> 00:28:47,400
Speaker 1: what the final demand for this thing is. So and

528
00:28:47,440 --> 00:28:50,680
Speaker 1: how much of that demand is sort of demand for

529
00:28:50,720 --> 00:28:53,760
Speaker 1: illegal activities and a match is legitimate demand for trading.

530
00:28:54,520 --> 00:28:57,840
Speaker 1: Do you equate it to what Kindleberger wrote about years ago?

531
00:28:57,920 --> 00:29:03,560
Speaker 1: Are we talking about being the edge of tulips? I

532
00:29:03,600 --> 00:29:07,400
Speaker 1: think they're definitely a truly component in the super excitement,

533
00:29:07,920 --> 00:29:10,840
Speaker 1: but let's in mind our stuff that generally, and maybe

534
00:29:10,840 --> 00:29:14,360
Speaker 1: Tulip is an exception, but in general, the super excitement

535
00:29:14,440 --> 00:29:18,640
Speaker 1: comes at the time of major transformation. Uh. There was

536
00:29:18,840 --> 00:29:21,920
Speaker 1: a dot com bubble, but at the same time there

537
00:29:21,960 --> 00:29:24,960
Speaker 1: was a major transformation of the economy brought by Internet.

538
00:29:25,680 --> 00:29:29,680
Speaker 1: There was a railway bubble and electricity bubble. But it's

539
00:29:29,720 --> 00:29:33,320
Speaker 1: not like railways electricity have gone away. They really transform

540
00:29:33,400 --> 00:29:37,440
Speaker 1: our economy. So I think it's important not to be

541
00:29:37,480 --> 00:29:40,600
Speaker 1: too excited about the coin passy, but not to be

542
00:29:40,680 --> 00:29:44,400
Speaker 1: too blind about what is coming the wig you thank

543
00:29:44,400 --> 00:29:46,760
Speaker 1: you so much, greatly appreciate your joining us today and

544
00:29:46,840 --> 00:29:51,120
Speaker 1: proticcuted your comments and the Laura Richard Taylor of the

545
00:29:51,160 --> 00:30:07,760
Speaker 1: Boost School, Chicago, this is what it's all about, folks.

546
00:30:08,440 --> 00:30:10,280
Speaker 1: Richard Taylor to join us later in the hour. And

547
00:30:10,320 --> 00:30:14,480
Speaker 1: now Olivia Blunchard of the Massachusetts Institute of Technology formally

548
00:30:14,480 --> 00:30:17,680
Speaker 1: with the International Monetary Funding now holding court at the

549
00:30:17,720 --> 00:30:21,840
Speaker 1: Peterson Institute in Washington. Professor wonderful to have you back

550
00:30:21,880 --> 00:30:26,080
Speaker 1: on again. UH. January of two thousand and fifteen, Dark

551
00:30:26,200 --> 00:30:31,760
Speaker 1: Corners reassessing macro economics after the crisis, and Professor Taylor

552
00:30:31,960 --> 00:30:35,880
Speaker 1: introduced you to the American Economic Association. How do you

553
00:30:35,960 --> 00:30:40,080
Speaker 1: bring your new Kenzie and World, your seventh edition macro

554
00:30:40,160 --> 00:30:44,040
Speaker 1: Economics The Rigor of Olivier Blanchard. How do you bring

555
00:30:44,160 --> 00:30:49,120
Speaker 1: Richard Taylor's World into your work? Oh? I I bring

556
00:30:49,160 --> 00:30:54,200
Speaker 1: it with a great pleasure. I've always thought that, you know,

557
00:30:54,280 --> 00:30:57,400
Speaker 1: the assamptimes we made about the rationality of individuals in

558
00:30:57,480 --> 00:31:01,480
Speaker 1: almost was excessive. We assume too much question and it

559
00:31:01,600 --> 00:31:04,640
Speaker 1: is too much foresight. And I've been waiting for the

560
00:31:04,760 --> 00:31:08,720
Speaker 1: time when what Dick Failer has started, and this field

561
00:31:08,760 --> 00:31:12,800
Speaker 1: of behavior economics would become sufficiently strong and developed that

562
00:31:12,920 --> 00:31:16,200
Speaker 1: we could actually formalize the behavior of people and firms,

563
00:31:16,560 --> 00:31:18,720
Speaker 1: not as we think they should be, but as the

564
00:31:18,760 --> 00:31:22,040
Speaker 1: way they are. And I think that what he has

565
00:31:22,080 --> 00:31:24,480
Speaker 1: done and what that field has achieved over the last

566
00:31:24,720 --> 00:31:28,000
Speaker 1: ten years is incredible. I think we're ready to introduce

567
00:31:28,040 --> 00:31:30,080
Speaker 1: it in macro and understand a lot of things that

568
00:31:30,120 --> 00:31:33,640
Speaker 1: are much more difficult to understand under the or more

569
00:31:33,680 --> 00:31:38,680
Speaker 1: economicus view of people that we had earlier. So this

570
00:31:38,800 --> 00:31:41,280
Speaker 1: is great news, and I think it's great news for him,

571
00:31:41,320 --> 00:31:43,880
Speaker 1: but it's great news for macroeconomics. It's great news for

572
00:31:43,920 --> 00:31:46,120
Speaker 1: economics in general. Well, let's play that out a little bit.

573
00:31:46,160 --> 00:31:48,560
Speaker 1: If if you do introduce some more economics, as you say,

574
00:31:48,560 --> 00:31:50,800
Speaker 1: into macro economics, what does that look like. Where do

575
00:31:50,840 --> 00:31:53,280
Speaker 1: you see that the possibility for some application of behavior

576
00:31:53,360 --> 00:31:58,760
Speaker 1: economics in macroeconomics at large? I think, you know, the

577
00:31:58,800 --> 00:32:02,120
Speaker 1: main place is probably in the behavior of consumers. From

578
00:32:02,120 --> 00:32:06,240
Speaker 1: a macroeconomic point of view, consumption is you know, most

579
00:32:06,360 --> 00:32:09,400
Speaker 1: most of spending is consumption, and so we have to

580
00:32:09,480 --> 00:32:14,360
Speaker 1: understand how consumers act. And under the usual traditional assumptions,

581
00:32:14,360 --> 00:32:18,840
Speaker 1: consumers were formalized as incredibly smart people who could make

582
00:32:18,840 --> 00:32:23,840
Speaker 1: incredibly complex computations, look into the infinite future, and they

583
00:32:23,920 --> 00:32:27,240
Speaker 1: make extremely of ractional decisions. Now we knew, we knew

584
00:32:27,280 --> 00:32:29,800
Speaker 1: that wasn't right, but the question was hard to go

585
00:32:29,840 --> 00:32:33,040
Speaker 1: away from that, And what they can others have done

586
00:32:33,200 --> 00:32:35,520
Speaker 1: is say, well, you know, in practice, this is the

587
00:32:35,600 --> 00:32:38,280
Speaker 1: kind of horizon that people have, the advocinds of rules

588
00:32:38,320 --> 00:32:40,520
Speaker 1: of fund that they have, and I think we're at

589
00:32:40,560 --> 00:32:42,760
Speaker 1: the point where if I'm to write down what we

590
00:32:42,840 --> 00:32:45,760
Speaker 1: call a consumption function, you know, the behavior of consumers

591
00:32:46,160 --> 00:32:48,240
Speaker 1: would do a much better job than I did ten

592
00:32:48,320 --> 00:32:51,760
Speaker 1: years ago. In your Wonderful Book seventh edition, forests can't

593
00:32:51,760 --> 00:32:57,000
Speaker 1: say enough about Planchard macroeconomics. Chapter ten is the facts

594
00:32:57,280 --> 00:33:01,000
Speaker 1: of growth. The debate this morning is Paul Krugman and

595
00:33:01,080 --> 00:33:05,280
Speaker 1: Lawrence Summers going after Kevin Hassett of the Trump administration

596
00:33:05,840 --> 00:33:11,280
Speaker 1: over the certitude the tax reform can generate economic growth.

597
00:33:11,400 --> 00:33:14,800
Speaker 1: Now that's not in your chapter ten, per se. But

598
00:33:14,880 --> 00:33:19,880
Speaker 1: are you optimistic the Trump tax reform can lift sustained

599
00:33:20,160 --> 00:33:26,160
Speaker 1: gross domestic product? Absolutely not. You know, on these things,

600
00:33:26,200 --> 00:33:30,000
Speaker 1: theory says it could be unlikely, But the theory says

601
00:33:30,040 --> 00:33:32,600
Speaker 1: it could when we look at the umpirical evidence, and

602
00:33:32,680 --> 00:33:35,239
Speaker 1: basically there is very little evidence that they kind of

603
00:33:35,240 --> 00:33:38,600
Speaker 1: tax reform does a lot for golf productivity. Golf is

604
00:33:38,680 --> 00:33:43,280
Speaker 1: law for many reasons. I'm not sure that the tax

605
00:33:43,320 --> 00:33:45,720
Speaker 1: reform is going to change things very much. So, yes,

606
00:33:45,760 --> 00:33:51,040
Speaker 1: I think the assumptions of the administration utterly optimistic. Nothing

607
00:33:51,120 --> 00:33:53,680
Speaker 1: is impossible. Maybe golf will pick up. This has happened

608
00:33:53,720 --> 00:33:56,520
Speaker 1: in the past. It may pick up for various reasons

609
00:33:56,560 --> 00:33:59,240
Speaker 1: having nothing to do with tax reform. But the idea

610
00:33:59,240 --> 00:34:02,360
Speaker 1: of and tax reform is going to unleash GOV has

611
00:34:02,440 --> 00:34:06,000
Speaker 1: absolutely no basis in historical fact. David Girl, There'll be

612
00:34:06,040 --> 00:34:11,240
Speaker 1: a POPCORNI Friday thinking about growth former to to page

613
00:34:11,239 --> 00:34:14,040
Speaker 1: to thirty five. What do you you make around of

614
00:34:14,320 --> 00:34:19,600
Speaker 1: the rhetoric Dr Blanchard's surrounding just the scholarship into taxing form.

615
00:34:19,600 --> 00:34:21,840
Speaker 1: At this point we're talking with Kevin Hassett. He exchanged

616
00:34:21,840 --> 00:34:24,480
Speaker 1: some appointed words with the Tax Policy Center. Obviously a

617
00:34:24,480 --> 00:34:26,880
Speaker 1: lot of politicians have taken that organization into account for

618
00:34:27,280 --> 00:34:29,960
Speaker 1: releasing an analysis. So so early on, I think of

619
00:34:29,960 --> 00:34:32,359
Speaker 1: what we read about a paper being taken down from

620
00:34:32,360 --> 00:34:35,520
Speaker 1: the Treasury Department's website. How worried are you about the

621
00:34:35,520 --> 00:34:39,880
Speaker 1: the the the sanctity of nonpartisan, academically minded research in

622
00:34:39,960 --> 00:34:45,960
Speaker 1: Washington today. First, I think it's always bad to get personal.

623
00:34:46,719 --> 00:34:49,320
Speaker 1: I think that the argument gets the tax REFILM is

624
00:34:49,400 --> 00:34:53,880
Speaker 1: efficiently strong, but there's no reason to to go at hominem.

625
00:34:54,080 --> 00:34:56,799
Speaker 1: But on your question, I completely agree. I think that

626
00:34:56,920 --> 00:35:01,640
Speaker 1: the way the Senate and how have treated the CBO

627
00:35:01,719 --> 00:35:05,400
Speaker 1: of a Congressional Budget Office is unacceptable. I think it

628
00:35:05,520 --> 00:35:09,040
Speaker 1: is essential to have neutral institutions which try to do

629
00:35:09,080 --> 00:35:11,600
Speaker 1: the best job they can, and not insult them and

630
00:35:11,640 --> 00:35:14,400
Speaker 1: not dismiss their results when the results don't fit what

631
00:35:14,520 --> 00:35:16,440
Speaker 1: you would like them to say. I think this is

632
00:35:16,480 --> 00:35:19,920
Speaker 1: a very very serious issue. You will have a session

633
00:35:20,800 --> 00:35:24,480
Speaker 1: with Professor Summers to continue the courage you've done over

634
00:35:24,520 --> 00:35:27,360
Speaker 1: I believe, for sessions from your days at the i

635
00:35:27,600 --> 00:35:31,320
Speaker 1: m F on the state of macroeconomics. We just spoke

636
00:35:31,320 --> 00:35:35,480
Speaker 1: with Vice Chairman Fisher about the view forward. How have

637
00:35:35,560 --> 00:35:39,640
Speaker 1: you changed your view, Professor Blanchard since you initiated that

638
00:35:39,800 --> 00:35:42,960
Speaker 1: study that seminar at the i m F a number

639
00:35:42,960 --> 00:35:46,960
Speaker 1: of years ago. So it has been very interesting, as

640
00:35:47,000 --> 00:35:49,080
Speaker 1: you've said, and there has been four conferences on that

641
00:35:49,160 --> 00:35:51,520
Speaker 1: theme every two years since the beginning of the crisis.

642
00:35:51,719 --> 00:35:53,760
Speaker 1: I think the first one was very much the fog

643
00:35:53,800 --> 00:35:56,680
Speaker 1: of war. We were doing things, but we really didn't

644
00:35:56,680 --> 00:35:59,399
Speaker 1: have a much understanding of exactly what was going on

645
00:35:59,480 --> 00:36:02,200
Speaker 1: and what the measures we're doing, so it was more

646
00:36:02,280 --> 00:36:04,680
Speaker 1: time to clear a bit of a fog. The second

647
00:36:04,719 --> 00:36:07,880
Speaker 1: look like we actually can were converging to something. The

648
00:36:07,960 --> 00:36:10,399
Speaker 1: third one was more skeptical, and this one, which will

649
00:36:10,440 --> 00:36:13,560
Speaker 1: take place this Thursday and this Friday, say well, no,

650
00:36:13,719 --> 00:36:16,480
Speaker 1: in fact, are quite many issues which are not solved,

651
00:36:17,080 --> 00:36:18,920
Speaker 1: on which there is a lot of work, a lot

652
00:36:18,960 --> 00:36:22,880
Speaker 1: of good work in the in the academic sphere, and

653
00:36:22,880 --> 00:36:25,160
Speaker 1: and and some in policymaking. But we are a very

654
00:36:25,200 --> 00:36:29,040
Speaker 1: long way found fully understanding this beast, which is a

655
00:36:29,080 --> 00:36:32,680
Speaker 1: financial crisis, what makes it gone, how we can avoid it,

656
00:36:33,080 --> 00:36:36,200
Speaker 1: how the financial system really works, how much we can

657
00:36:36,320 --> 00:36:38,680
Speaker 1: use much policy, how we should use it, whether we

658
00:36:38,680 --> 00:36:42,319
Speaker 1: should use fiscal policy or These are all questions which

659
00:36:42,520 --> 00:36:44,920
Speaker 1: you know, ten years after the beginning of the crisis,

660
00:36:44,960 --> 00:36:47,960
Speaker 1: are still very much on the table, Professor Blanchard, Thank

661
00:36:47,960 --> 00:36:50,240
Speaker 1: you so much, Olivia blanch Out at the Peterson Institute

662
00:36:50,320 --> 00:36:53,160
Speaker 1: really beginning our coverage of the International Monetary Fund and

663
00:36:53,200 --> 00:36:55,680
Speaker 1: World Bank means, David, what do you see in the

664
00:36:55,680 --> 00:36:58,960
Speaker 1: world economic out Like Maurice hobbs Felt at Berkeley his

665
00:36:59,120 --> 00:37:03,080
Speaker 1: co rte with Ken Rogue off a classic international economics test,

666
00:37:03,160 --> 00:37:06,160
Speaker 1: he took Blanchard's place at the i m F. What

667
00:37:06,239 --> 00:37:08,600
Speaker 1: does Marie Sobsfeldt say to that he's pointing to to

668
00:37:08,760 --> 00:37:11,560
Speaker 1: growth in China still is an engine of growth globally,

669
00:37:11,600 --> 00:37:13,480
Speaker 1: and I think that'll be something that we've paying particular

670
00:37:13,480 --> 00:37:15,720
Speaker 1: close attention to. Is we head to this People's Congress

671
00:37:15,760 --> 00:37:17,400
Speaker 1: which is convening in just a few weeks time. A

672
00:37:17,400 --> 00:37:20,759
Speaker 1: great conversation yesterday we then occur in visiting from Hong Kong,

673
00:37:20,800 --> 00:37:22,799
Speaker 1: filling us in on the political import of that, but

674
00:37:22,840 --> 00:37:25,160
Speaker 1: also the potential economic import of that as well, that

675
00:37:25,239 --> 00:37:28,240
Speaker 1: once that's through, we could get some new economic policy

676
00:37:28,239 --> 00:37:30,640
Speaker 1: announced in China and we'll see where that takes us.

677
00:37:30,719 --> 00:37:33,080
Speaker 1: I went into the European numbers and it was it

678
00:37:33,160 --> 00:37:36,839
Speaker 1: was interesting the number of countries where year to year

679
00:37:37,800 --> 00:37:41,799
Speaker 1: GDPs ebbing away, even with the vaunted recovery of your

680
00:37:41,920 --> 00:37:44,720
Speaker 1: about to read more about that. The value of those books,

681
00:37:44,719 --> 00:37:47,080
Speaker 1: they really can't say enough about him, folks. You can

682
00:37:47,080 --> 00:37:49,520
Speaker 1: get them full access on the web. They're great, and

683
00:37:49,520 --> 00:37:51,239
Speaker 1: they paid. They do the hardcover. I think you have

684
00:37:51,360 --> 00:37:54,840
Speaker 1: to pay for the hardcover copy, the actual printed copy.

685
00:37:54,960 --> 00:37:59,839
Speaker 1: But these are terrific sidebars for economic thinking into next year.

686
00:38:00,160 --> 00:38:16,480
Speaker 1: This is Bloomberg. Good morning, now joining us Alia Richard

687
00:38:16,520 --> 00:38:21,080
Speaker 1: Taylor of Chicago, Professor, Congratulations. I'm sure it's been an

688
00:38:21,160 --> 00:38:23,719
Speaker 1: endless scene of interviews and love having you with us

689
00:38:23,760 --> 00:38:28,040
Speaker 1: this morning. Long agoing far away at Case Western University,

690
00:38:28,600 --> 00:38:31,239
Speaker 1: you were not an engineer. You were in a d

691
00:38:31,680 --> 00:38:34,120
Speaker 1: L which was a pariah. You had to go over

692
00:38:34,160 --> 00:38:38,799
Speaker 1: there because it was none engineering undergraduates. When did economics

693
00:38:38,920 --> 00:38:41,960
Speaker 1: get your interest? Was it at case Western or did

694
00:38:42,040 --> 00:38:46,480
Speaker 1: that wait for Rochester? Uh No. I was an economic

695
00:38:46,560 --> 00:38:49,400
Speaker 1: student after I realized that I wasn't smart enough to

696
00:38:49,440 --> 00:38:53,080
Speaker 1: be a physicist. There's a lot of there's a lot

697
00:38:53,080 --> 00:38:56,360
Speaker 1: of commonality there which has to do with the plague

698
00:38:56,400 --> 00:39:00,319
Speaker 1: of math. I talked to Steve Lovett about this years

699
00:39:00,320 --> 00:39:03,960
Speaker 1: ago off economics. Are we over Mathey now? And is

700
00:39:04,080 --> 00:39:08,239
Speaker 1: your ascension here to laureate dumb? Is it about we

701
00:39:08,320 --> 00:39:13,399
Speaker 1: need less math? Well, you know, the Nobel Prizes are

702
00:39:14,400 --> 00:39:19,879
Speaker 1: lagging indicators by thirty years or so. So I don't

703
00:39:19,880 --> 00:39:24,200
Speaker 1: know whether you want to take this is evidence for

704
00:39:24,320 --> 00:39:27,360
Speaker 1: anything more evidence of what was happening in the eighties

705
00:39:27,360 --> 00:39:32,200
Speaker 1: and nineties. But I think, um, there was a period

706
00:39:32,360 --> 00:39:41,399
Speaker 1: where economics was um infatuated with math and laws touch

707
00:39:41,480 --> 00:39:46,000
Speaker 1: with reality, and really what's going on in economics now

708
00:39:46,400 --> 00:39:51,000
Speaker 1: be a behavioral or otherwise is a boom of empirical

709
00:39:51,040 --> 00:39:57,759
Speaker 1: work spurred by the availability of big data. And so

710
00:39:59,600 --> 00:40:02,120
Speaker 1: I think for the most part economics is in a

711
00:40:02,120 --> 00:40:05,000
Speaker 1: pretty good place right now. Professor. We toasted your your

712
00:40:05,000 --> 00:40:07,640
Speaker 1: award yesterday with that Randy Crost and with that Robert

713
00:40:07,640 --> 00:40:10,560
Speaker 1: Schiller as well, and something that he talked about in

714
00:40:10,560 --> 00:40:14,080
Speaker 1: in great detail was a more holistic view of economics,

715
00:40:14,719 --> 00:40:17,520
Speaker 1: getting economists to talk to folks in other departments across

716
00:40:17,520 --> 00:40:20,520
Speaker 1: the university campus. Are you seeing more of that at

717
00:40:20,600 --> 00:40:23,359
Speaker 1: Chicago and elsewhere? Do you sense that there's a more

718
00:40:23,360 --> 00:40:28,720
Speaker 1: inclusive form to economics today, Well, a little bit. Um.

719
00:40:28,880 --> 00:40:35,160
Speaker 1: The truth is that the academy is less interdisciplinary than

720
00:40:35,480 --> 00:40:41,200
Speaker 1: we would think or hope. Um, for various reasons. You know,

721
00:40:41,360 --> 00:40:44,239
Speaker 1: I thought way back at the beginning, when I was

722
00:40:44,360 --> 00:40:50,359
Speaker 1: working with Daniel Conoman the names Diversky, that behavior economics

723
00:40:50,400 --> 00:40:54,879
Speaker 1: would be a series of collaborations between psychologists like them

724
00:40:54,880 --> 00:40:58,959
Speaker 1: and economists like me. And that really hasn't happened. It's

725
00:40:59,040 --> 00:41:03,279
Speaker 1: more the economists learned a tiny little bit of psychology

726
00:41:03,360 --> 00:41:08,279
Speaker 1: and then they go do economics a little bit differently. Uh.

727
00:41:08,480 --> 00:41:14,360
Speaker 1: Most psychologists find us endlessly boring. Uh. They may have

728
00:41:14,400 --> 00:41:21,120
Speaker 1: a point, and um, so I think there is there

729
00:41:21,239 --> 00:41:25,640
Speaker 1: is interest Like at Chicago, there's also interest in behavior

730
00:41:25,719 --> 00:41:29,960
Speaker 1: economics at the Harris School, which is the public policy school,

731
00:41:30,520 --> 00:41:35,799
Speaker 1: and at the law school. Um. But you know, there

732
00:41:35,840 --> 00:41:39,799
Speaker 1: may be one psychologist in the psychology department too. Well,

733
00:41:39,840 --> 00:41:44,000
Speaker 1: there is one. There's one. Uh, there may be more

734
00:41:44,040 --> 00:41:48,560
Speaker 1: than one. But you know, for the most parts, many

735
00:41:48,600 --> 00:41:54,200
Speaker 1: psychologists are now interested neuro and um, it's almost going

736
00:41:54,480 --> 00:41:57,160
Speaker 1: in the other direction for seeing you. Today, we spoke

737
00:41:57,160 --> 00:41:59,960
Speaker 1: with Olivia Blanchard and he talked about his his willing

738
00:42:00,080 --> 00:42:02,680
Speaker 1: us and an eagerness to get more behavioral economics into

739
00:42:02,719 --> 00:42:05,560
Speaker 1: macro economics generally, and I asked him sort of how

740
00:42:05,600 --> 00:42:08,720
Speaker 1: he envisions that playing out, where he sees likely practical

741
00:42:08,719 --> 00:42:12,360
Speaker 1: applications of behavioral economics to macroeconomics broadly, Where do you

742
00:42:12,400 --> 00:42:14,719
Speaker 1: see the field going? In other words, it seems like

743
00:42:14,719 --> 00:42:18,400
Speaker 1: you've you've achieved greater acceptance of the field of behavioral economics.

744
00:42:18,400 --> 00:42:22,760
Speaker 1: What's the future look like to you? Well, I wrote

745
00:42:22,760 --> 00:42:26,799
Speaker 1: at the end of my recent book Misbehaving that my

746
00:42:26,880 --> 00:42:30,480
Speaker 1: hope was that the next big frontier for behavior economics

747
00:42:30,520 --> 00:42:35,239
Speaker 1: would be in macro and uh. Olivia and I have

748
00:42:35,440 --> 00:42:38,480
Speaker 1: a at least a three or four year old tradition

749
00:42:38,560 --> 00:42:41,560
Speaker 1: of having dinner together at the annual meeting. And maybe

750
00:42:41,560 --> 00:42:46,560
Speaker 1: I'm starting to corrupt him, although I typically aim at

751
00:42:46,640 --> 00:42:51,920
Speaker 1: younger people. UM, but I think so. Here's a sample

752
00:42:52,080 --> 00:42:57,880
Speaker 1: question that uh, UM, Jason Furman and I have talked

753
00:42:57,920 --> 00:43:03,680
Speaker 1: about when UH at the beginning of the Obama administration

754
00:43:03,880 --> 00:43:08,080
Speaker 1: when they passed a tax cut. The administration had decided

755
00:43:08,280 --> 00:43:12,680
Speaker 1: had to decide whether to send people one big check

756
00:43:13,239 --> 00:43:19,040
Speaker 1: or distributed over the year, and they wanted people to

757
00:43:19,080 --> 00:43:23,600
Speaker 1: spend the money. And they did what I would have done.

758
00:43:24,239 --> 00:43:29,240
Speaker 1: Nobody asked me, but um, they did it in dribs

759
00:43:29,239 --> 00:43:35,120
Speaker 1: and drabs. So they just reduced your withholding tax. And

760
00:43:35,400 --> 00:43:37,839
Speaker 1: I think that's there was a It was the right

761
00:43:37,920 --> 00:43:42,720
Speaker 1: call for the economy because they're aiming this at people

762
00:43:42,719 --> 00:43:47,560
Speaker 1: who are living paycheck to paycheck, and they'll spend what

763
00:43:47,680 --> 00:43:50,760
Speaker 1: they get it, and if you give them a lump,

764
00:43:50,840 --> 00:43:53,040
Speaker 1: they're more likely to say that if you're just joining

765
00:43:53,080 --> 00:43:55,719
Speaker 1: us out worldwide. Richard Thayer joined us some Universe of

766
00:43:55,760 --> 00:43:58,799
Speaker 1: Chicago Boost School, winner of the Nobel Prize this year.

767
00:43:59,320 --> 00:44:02,800
Speaker 1: In econ Comics, I look, professor at the back and forth,

768
00:44:02,840 --> 00:44:05,719
Speaker 1: and we must comment on the present state of our

769
00:44:06,239 --> 00:44:11,319
Speaker 1: economic politics or political economics in Washington. Part of that

770
00:44:11,520 --> 00:44:14,319
Speaker 1: has been a dose of certitude. I go back to

771
00:44:14,360 --> 00:44:18,080
Speaker 1: the economist Mark Twain and the idea of the certitude

772
00:44:18,080 --> 00:44:20,120
Speaker 1: of the second of the third of the fourth rate.

773
00:44:20,920 --> 00:44:24,040
Speaker 1: It seems a little humility is an order if you

774
00:44:24,040 --> 00:44:28,240
Speaker 1: were to advise the president now on the proper behavioral path,

775
00:44:28,440 --> 00:44:34,320
Speaker 1: what would it be, I mean, this president, this president,

776
00:44:33,719 --> 00:44:41,080
Speaker 1: this president of vacuum. Yeah yeah, well, um, you know

777
00:44:41,280 --> 00:44:47,360
Speaker 1: I would say his ratio of certitude to UH knowledge

778
00:44:48,200 --> 00:44:54,319
Speaker 1: is uh nearing record highs Um yeah, we we we

779
00:44:54,440 --> 00:45:00,720
Speaker 1: all need a lot of humility, and especially about the economy. Um.

780
00:45:00,760 --> 00:45:03,880
Speaker 1: You guys who get to make fools of yourselves daily

781
00:45:06,680 --> 00:45:11,000
Speaker 1: know this better than anyone. Um. You know, most of

782
00:45:11,040 --> 00:45:14,720
Speaker 1: the time to dumb things I say, nobody hears except

783
00:45:14,760 --> 00:45:19,359
Speaker 1: my wife, who reminds me. But um, you know, I mean,

784
00:45:19,840 --> 00:45:23,719
Speaker 1: who would have thunk that the stock market would just

785
00:45:25,719 --> 00:45:30,760
Speaker 1: continue to go up with valet? It looks barely alive.

786
00:45:30,920 --> 00:45:38,120
Speaker 1: It's a snail crawling up with barely a slip in

787
00:45:38,320 --> 00:45:42,759
Speaker 1: what has to be the most uncertain uh times of

788
00:45:42,800 --> 00:45:49,360
Speaker 1: my life, which is a long time. And UM, I

789
00:45:49,400 --> 00:45:54,040
Speaker 1: don't know what it's based on, um, but surely it

790
00:45:54,160 --> 00:45:56,840
Speaker 1: can't be based on the certitude that there will be

791
00:45:56,880 --> 00:46:04,160
Speaker 1: a massive tax cut give in the uh seeming inability

792
00:46:04,320 --> 00:46:08,879
Speaker 1: of the Republican Congress to get their act together. So

793
00:46:09,040 --> 00:46:11,440
Speaker 1: I don't know where. I don't know where it's coming from.

794
00:46:11,480 --> 00:46:13,719
Speaker 1: I want to ask you about two popular economics. And

795
00:46:14,040 --> 00:46:15,760
Speaker 1: you've dabbled in this sum you were in a movie,

796
00:46:16,200 --> 00:46:18,360
Speaker 1: you had a short live film career. You were in

797
00:46:18,400 --> 00:46:26,279
Speaker 1: The Big, the Big Short. Have you heard from Ms Gomez?

798
00:46:27,080 --> 00:46:30,800
Speaker 1: But Professor Taylor, have you heard from miss Gomez given you?

799
00:46:32,440 --> 00:46:37,920
Speaker 1: Uh not yet. It's it's surveillance for Selena Gomez. Second

800
00:46:37,960 --> 00:46:40,319
Speaker 1: on the on the call the call list. But let

801
00:46:40,360 --> 00:46:41,839
Speaker 1: me ask you just about your sense of how people

802
00:46:41,880 --> 00:46:44,560
Speaker 1: regard economics. Today's economics doing a good enough job of

803
00:46:44,600 --> 00:46:51,640
Speaker 1: explaining itself, explaining its importance to to everyday americans. Um. Look,

804
00:46:51,719 --> 00:46:57,960
Speaker 1: I think that there's more accessible economics both in all

805
00:46:58,120 --> 00:47:03,880
Speaker 1: forms than there have ever been in from um, in

806
00:47:03,880 --> 00:47:09,280
Speaker 1: in all the media, you know, shows like shows like yours. Uh.

807
00:47:09,320 --> 00:47:16,920
Speaker 1: There are um popular books as you've mentioned, um Babel

808
00:47:16,960 --> 00:47:21,200
Speaker 1: economists of written some of them. Um you know the

809
00:47:21,239 --> 00:47:27,480
Speaker 1: freakonomics guys, both Theeves are buddies of mine. So UM,

810
00:47:27,520 --> 00:47:30,800
Speaker 1: you know there was nothing like that when I wrote

811
00:47:30,800 --> 00:47:36,279
Speaker 1: a book called The Winner's Curse back in UM. But

812
00:47:36,480 --> 00:47:42,399
Speaker 1: people didn't buy economics books that And I think if

813
00:47:42,440 --> 00:47:49,879
Speaker 1: I had written that book now, um you know, uh,

814
00:47:50,440 --> 00:47:53,880
Speaker 1: it would have sold a professor very quickly. Here at

815
00:47:53,880 --> 00:47:57,160
Speaker 1: fourty eight pm Chicago time. Are you going to use

816
00:47:57,200 --> 00:48:00,360
Speaker 1: your new cloud to go see Nationals Cubs Bay Spoil?

817
00:48:01,280 --> 00:48:06,480
Speaker 1: Absolutely well, I'm not using any cloud. I already had tickets.

818
00:48:07,320 --> 00:48:12,320
Speaker 1: Uh and I told the PR department at Chicago boots

819
00:48:12,360 --> 00:48:15,879
Speaker 1: that go away. I'm going to the Cubbies. Very good,

820
00:48:16,000 --> 00:48:18,960
Speaker 1: Richard Taylor, Thank you so much. Professor Taylor will continue

821
00:48:19,000 --> 00:48:21,520
Speaker 1: this dialogue on Bloomberg Television here in a bit. We

822
00:48:21,600 --> 00:48:26,560
Speaker 1: greatly appreciate his attendance day two of his move to

823
00:48:26,600 --> 00:48:29,680
Speaker 1: frequent flyer minds. That's what laureates end up doing fine

824
00:48:30,200 --> 00:48:42,560
Speaker 1: a lot. This is Bloomberg. Thanks for listening to the

825
00:48:42,560 --> 00:48:49,440
Speaker 1: Bloomberg Surveillas podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

826
00:48:49,800 --> 00:48:53,640
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

827
00:48:53,640 --> 00:48:58,360
Speaker 1: Tom Keene. David Gura is at David Gura Before the podcast,

828
00:48:58,640 --> 00:49:02,040
Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio