1 00:00:15,356 --> 00:00:23,156 Speaker 1: Pushkin from Pushkin Industries. This is Deep Background, the show 2 00:00:23,196 --> 00:00:26,196 Speaker 1: where we explore the stories behind the stories in the news. 3 00:00:26,596 --> 00:00:30,076 Speaker 1: I'm Noah Feldman. According to a report released by the 4 00:00:30,076 --> 00:00:34,236 Speaker 1: Commerce Department this week, US consumer spending in September sunk 5 00:00:34,236 --> 00:00:37,596 Speaker 1: to its lowest rate in seven months. This is just 6 00:00:37,796 --> 00:00:41,116 Speaker 1: the latest data point of many that seemed to suggest 7 00:00:41,236 --> 00:00:45,236 Speaker 1: we may be headed for a recession. Prakash Langani is 8 00:00:45,276 --> 00:00:48,796 Speaker 1: an advisor at the International Monetary Fund. Before that, he 9 00:00:48,916 --> 00:00:52,596 Speaker 1: was an analyst at the Federal Reserve Board's International Finance Division. 10 00:00:53,076 --> 00:00:55,916 Speaker 1: He has spent a lot of time thinking about recessions 11 00:00:56,436 --> 00:01:00,876 Speaker 1: and how economists predict them or don't. Prakash, thank you 12 00:01:00,916 --> 00:01:03,916 Speaker 1: so much for joining me. I want to start with, 13 00:01:04,396 --> 00:01:06,876 Speaker 1: as it were, recessions one oh one. You know, the 14 00:01:06,916 --> 00:01:10,396 Speaker 1: other day, my fourteen year old son said to me, Dad, actually, 15 00:01:10,396 --> 00:01:13,236 Speaker 1: what's the definition of a recession? And I got up 16 00:01:13,276 --> 00:01:16,356 Speaker 1: to my two quarters in a row of negative growth 17 00:01:16,356 --> 00:01:20,476 Speaker 1: of GDP and then I had to pause. So tell us, 18 00:01:20,596 --> 00:01:22,596 Speaker 1: first of all, you know, what is the definition of 19 00:01:22,636 --> 00:01:26,156 Speaker 1: recession that economists use? And also how did they come 20 00:01:26,236 --> 00:01:28,596 Speaker 1: up with this definition, because you know, two quarters in 21 00:01:28,596 --> 00:01:32,796 Speaker 1: a row seems vaguely arbitrary. Well, I think I think 22 00:01:32,836 --> 00:01:36,196 Speaker 1: the first thing, if I was in charge, I would 23 00:01:36,196 --> 00:01:38,196 Speaker 1: do is to ban the world real GDP. I think 24 00:01:38,236 --> 00:01:41,596 Speaker 1: we should just call it incomes, and that resonates more 25 00:01:41,636 --> 00:01:45,956 Speaker 1: with the general person. So a recession is a year 26 00:01:46,036 --> 00:01:49,556 Speaker 1: in which incomes fall, and you're right that there's nothing 27 00:01:49,596 --> 00:01:52,636 Speaker 1: magical about saying they should fall two quarters in a row. 28 00:01:52,676 --> 00:01:55,396 Speaker 1: We could have picked one, or we could have picked three. 29 00:01:55,796 --> 00:01:57,596 Speaker 1: Two was just kind of a rule of thumb that 30 00:01:57,676 --> 00:02:00,196 Speaker 1: seemed to suggest that bad things were going to happen. 31 00:02:00,996 --> 00:02:03,396 Speaker 1: So I think it's better to just think of a 32 00:02:03,436 --> 00:02:06,996 Speaker 1: recession as a year in which your income is going 33 00:02:07,036 --> 00:02:12,916 Speaker 1: to fall. That's an extremely superior that's definitely a much 34 00:02:12,956 --> 00:02:16,996 Speaker 1: superior definition of recession. Why don't economists all use that, 35 00:02:17,076 --> 00:02:19,516 Speaker 1: considering how much clearer it is. I don't know. I 36 00:02:19,556 --> 00:02:23,796 Speaker 1: think we got addicted to this word real GDP, which 37 00:02:23,876 --> 00:02:27,356 Speaker 1: means nothing to your son or to an ordinary person. 38 00:02:27,476 --> 00:02:29,476 Speaker 1: I think if you told my son his income was 39 00:02:29,516 --> 00:02:32,796 Speaker 1: going to fall, you'll get his attention immediately. But you know, 40 00:02:32,836 --> 00:02:35,636 Speaker 1: I think there is you know, each each profession has 41 00:02:35,676 --> 00:02:37,276 Speaker 1: its jargon. I don't want to be too harsh on 42 00:02:37,356 --> 00:02:40,956 Speaker 1: my fellow economists, but it could be worse. You could 43 00:02:40,956 --> 00:02:44,036 Speaker 1: be lawyers, believe me, right, always get worse. So a 44 00:02:44,156 --> 00:02:47,676 Speaker 1: recession basically is a year in which your income is 45 00:02:47,716 --> 00:02:52,556 Speaker 1: likely to fall. And that's unusual because at least since 46 00:02:52,756 --> 00:02:57,036 Speaker 1: the Industrial Revolution the last two hundred three hundred years, 47 00:02:57,396 --> 00:03:00,716 Speaker 1: incomes generally go up every year. So that's been a 48 00:03:00,756 --> 00:03:04,436 Speaker 1: good thing that's happened to us as a species. But 49 00:03:05,036 --> 00:03:10,396 Speaker 1: so recessions are unusual, but not that rare. Recessions happen 50 00:03:10,516 --> 00:03:14,276 Speaker 1: about twelve fifteen percent of the time, so it's something 51 00:03:14,316 --> 00:03:15,996 Speaker 1: to keep an eye on, and that's why I've been 52 00:03:15,996 --> 00:03:19,956 Speaker 1: trying to study them. Well, that's actually conceptually very interesting 53 00:03:19,996 --> 00:03:22,636 Speaker 1: and also very helpful. So the first point you made, 54 00:03:22,716 --> 00:03:26,316 Speaker 1: namely that we treat a recession, at least colloquially, like 55 00:03:26,356 --> 00:03:29,636 Speaker 1: it's this terrible thing. But that's against the backdrop of 56 00:03:29,676 --> 00:03:33,796 Speaker 1: the assumption that our incomes should somehow always go up. 57 00:03:34,476 --> 00:03:36,876 Speaker 1: And as you say, it's great for our species that 58 00:03:36,876 --> 00:03:41,716 Speaker 1: that be the case. But what underpins that commitment to 59 00:03:41,756 --> 00:03:44,476 Speaker 1: the idea of steady growth? I mean, that's even before 60 00:03:44,476 --> 00:03:46,956 Speaker 1: you reach the thought that nothing grows all the time. 61 00:03:47,036 --> 00:03:48,916 Speaker 1: And as you say, twelve to fifteen percent at the 62 00:03:48,916 --> 00:03:53,316 Speaker 1: time we're actually not growing. But starting with the background assumption, 63 00:03:53,876 --> 00:03:56,476 Speaker 1: this is a good opportunity to ask an economist, why, 64 00:03:56,676 --> 00:03:59,076 Speaker 1: in the view of most people in the field, should 65 00:03:59,076 --> 00:04:02,516 Speaker 1: we assume that somewhere between you know, eighty eight and 66 00:04:02,556 --> 00:04:05,236 Speaker 1: eighty five percent at the time, our incomes will go up. 67 00:04:05,876 --> 00:04:08,996 Speaker 1: I think, you know, what's happened is that since the 68 00:04:09,156 --> 00:04:13,636 Speaker 1: industrial Revolution, we've generally found a way of doing things better. 69 00:04:13,756 --> 00:04:16,556 Speaker 1: Every year, you know, you and I kind of find 70 00:04:16,596 --> 00:04:19,756 Speaker 1: a way of doing our jobs better, aided by technology, 71 00:04:19,876 --> 00:04:23,236 Speaker 1: aided by our own brains. Would say, you know, I 72 00:04:23,316 --> 00:04:25,836 Speaker 1: screwed up on this and that last year. I'm not 73 00:04:25,876 --> 00:04:29,596 Speaker 1: going to repeat it. I think because of what economists 74 00:04:29,596 --> 00:04:33,996 Speaker 1: in their jargon called technological progress, our incomes have been 75 00:04:34,036 --> 00:04:36,716 Speaker 1: going up at about two percent a year in sometimes 76 00:04:36,876 --> 00:04:39,996 Speaker 1: the United States. Now, so the United States has had 77 00:04:40,596 --> 00:04:44,356 Speaker 1: adjusted for inflation, it has had incomes go up two 78 00:04:44,356 --> 00:04:48,116 Speaker 1: percent a year. And so because of technological progress, Now, 79 00:04:48,316 --> 00:04:51,716 Speaker 1: should we always assume that will be the case as 80 00:04:51,716 --> 00:04:53,836 Speaker 1: long as you know, we can find ways of doing 81 00:04:53,836 --> 00:04:57,596 Speaker 1: our jobs better. Probably should we as we grow richer 82 00:04:57,876 --> 00:05:01,156 Speaker 1: gets obsessed about having a two percent increase every year. 83 00:05:01,196 --> 00:05:04,636 Speaker 1: Probably not, But still I think most people would say, 84 00:05:05,116 --> 00:05:08,716 Speaker 1: having incomes go up at some reasonable rate is better 85 00:05:08,756 --> 00:05:13,116 Speaker 1: than having them fall for sure. Yeah. So let me 86 00:05:13,196 --> 00:05:18,196 Speaker 1: ask you a push about cycles. So if we had 87 00:05:18,636 --> 00:05:21,836 Speaker 1: you know, a regular prediction of two percent growth over 88 00:05:21,876 --> 00:05:25,036 Speaker 1: some period of time, you know, over say ten years, 89 00:05:25,716 --> 00:05:28,916 Speaker 1: and yet we had some we knew that with some probability, 90 00:05:28,956 --> 00:05:32,036 Speaker 1: there is going to be you know, randomness in the system, 91 00:05:32,076 --> 00:05:35,436 Speaker 1: and sometimes it would go down, then we would expect that. 92 00:05:35,516 --> 00:05:38,076 Speaker 1: You know, again, if you're around twelve to fifty percent 93 00:05:38,356 --> 00:05:40,916 Speaker 1: more than one in ten times in a ten year period, 94 00:05:41,436 --> 00:05:44,916 Speaker 1: we would have a recession. Right, So is that cyclical 95 00:05:44,956 --> 00:05:47,516 Speaker 1: way of thinking about recessions a healthier way to think 96 00:05:47,556 --> 00:05:49,876 Speaker 1: about it? In other words, don't panic and think that 97 00:05:49,916 --> 00:05:53,116 Speaker 1: every recession is the harbinger of things in general getting worse. 98 00:05:53,516 --> 00:05:55,276 Speaker 1: But just see it as you know, we're flipping the 99 00:05:55,316 --> 00:05:58,876 Speaker 1: coin and you know over time it's going to even out. Yeah. 100 00:05:58,876 --> 00:06:02,196 Speaker 1: I think you know. That's why you're seeing people worry 101 00:06:02,196 --> 00:06:05,716 Speaker 1: about a recession right now, is because we've had an 102 00:06:05,716 --> 00:06:09,276 Speaker 1: expansion of eight, nine, ten years, and people know that 103 00:06:10,036 --> 00:06:13,076 Speaker 1: in the past at least expansions have not gone on 104 00:06:13,236 --> 00:06:16,436 Speaker 1: for twenty years. So I think you're seeing a lot 105 00:06:16,436 --> 00:06:19,516 Speaker 1: of people correctly worrying about the fact that if you 106 00:06:19,636 --> 00:06:23,276 Speaker 1: have an expansion that's long in the tooth, it's about 107 00:06:23,476 --> 00:06:26,556 Speaker 1: time to start worrying about whether it's going to keep going. 108 00:06:26,756 --> 00:06:29,156 Speaker 1: And I think that, as you say that is the 109 00:06:29,836 --> 00:06:31,956 Speaker 1: healthy way to think about it is that you know, 110 00:06:32,076 --> 00:06:35,676 Speaker 1: recessions are kind of like the hurricanes of economic life. 111 00:06:35,836 --> 00:06:38,956 Speaker 1: I mean, you know, with hurricanes, you have a hurricane season, 112 00:06:38,996 --> 00:06:40,676 Speaker 1: so you have a bit of an edge, you know, 113 00:06:41,036 --> 00:06:43,996 Speaker 1: went to look for them. But still we know that 114 00:06:44,396 --> 00:06:49,836 Speaker 1: expansions don't go on forever, so having a long expansion 115 00:06:50,676 --> 00:06:53,836 Speaker 1: means that we should start thinking about is the next 116 00:06:53,836 --> 00:06:56,436 Speaker 1: one around the corner. And I think it's actually healthy 117 00:06:56,476 --> 00:06:59,276 Speaker 1: that there has been all this concern about whether we're 118 00:06:59,316 --> 00:07:04,436 Speaker 1: going into a recession. Speaking about hurricanes and predictions, you 119 00:07:04,516 --> 00:07:08,676 Speaker 1: when your co authors wrote a much cited and very 120 00:07:08,716 --> 00:07:14,796 Speaker 1: interesting paper which you published last year, suggesting that economists 121 00:07:14,876 --> 00:07:20,076 Speaker 1: don't do that well at predicting recessions because they're, on 122 00:07:20,156 --> 00:07:23,916 Speaker 1: the whole economists are too optimistic about growth and so 123 00:07:23,956 --> 00:07:27,116 Speaker 1: they miss a significant number of the recessions that are 124 00:07:27,316 --> 00:07:30,236 Speaker 1: out there. Tell me a little bit about what motivated 125 00:07:30,236 --> 00:07:32,796 Speaker 1: you to do the study and what takeaway we should 126 00:07:32,796 --> 00:07:37,116 Speaker 1: have from it. What sort of motivated me was, frankly, 127 00:07:37,156 --> 00:07:42,196 Speaker 1: my own horrible forecasting record. So twenty years ago, I 128 00:07:42,316 --> 00:07:45,916 Speaker 1: was my job when I was at the FED was 129 00:07:45,956 --> 00:07:51,396 Speaker 1: to forecast economic growth for Korea. And you know, my 130 00:07:51,476 --> 00:07:54,596 Speaker 1: boss had given me the job, saying, you know, God, 131 00:07:54,636 --> 00:07:57,276 Speaker 1: I'm giving you the job of a lifetime. These countries 132 00:07:57,356 --> 00:08:01,236 Speaker 1: grow seven percent a year, nothing changes, and I'm giving 133 00:08:01,276 --> 00:08:03,676 Speaker 1: you the job of forecasting this. You should be thanking me. 134 00:08:03,716 --> 00:08:07,676 Speaker 1: And this was, you know, nineteen ninety seven, and you know, 135 00:08:07,916 --> 00:08:11,196 Speaker 1: people said, oh, something's going wrong in Korea. I said, okay, fine, 136 00:08:11,276 --> 00:08:14,516 Speaker 1: I'll cut my forecast down from seven percent to three percent, 137 00:08:14,596 --> 00:08:18,476 Speaker 1: which for me was like a huge deal. And people said, no, no, no, 138 00:08:18,556 --> 00:08:20,916 Speaker 1: we think there's something else going on. These were, you know, 139 00:08:21,276 --> 00:08:24,076 Speaker 1: people who were not even following Korea. These were people 140 00:08:24,116 --> 00:08:27,156 Speaker 1: who were just talking to friends, reading the newspaper. And 141 00:08:27,236 --> 00:08:31,036 Speaker 1: here I was kind of the sophisticated forecaster, and you know, 142 00:08:31,076 --> 00:08:35,956 Speaker 1: I dug in my heels. I've very grudgingly, towards the end, 143 00:08:36,756 --> 00:08:40,276 Speaker 1: cut my forecast to minus three as the year was ending. 144 00:08:40,556 --> 00:08:43,076 Speaker 1: You know, Korea ended up at minus seven that year. 145 00:08:43,196 --> 00:08:46,556 Speaker 1: So you know, I've always been intrigued about whether it 146 00:08:46,636 --> 00:08:50,196 Speaker 1: was just me being terrible or if this was something 147 00:08:50,556 --> 00:08:54,356 Speaker 1: that all my friends were also subject to. And lo 148 00:08:54,556 --> 00:08:56,876 Speaker 1: and behold, as you said, I found that the record 149 00:08:56,996 --> 00:09:01,316 Speaker 1: is just terrible. I mean, as you saw in that study. 150 00:09:01,596 --> 00:09:04,276 Speaker 1: You know, we studied one hundred and fifty s recessions 151 00:09:04,796 --> 00:09:09,316 Speaker 1: and only five were predicted a year in advance. And 152 00:09:10,156 --> 00:09:13,036 Speaker 1: you might say that's a very very high bar to set, 153 00:09:13,116 --> 00:09:16,076 Speaker 1: but you know, you can lower the bar and still 154 00:09:16,076 --> 00:09:20,876 Speaker 1: the forecasting performance remains really bad. And you know, one 155 00:09:20,916 --> 00:09:24,716 Speaker 1: fourth of recessions remain undetected even as the year is ending. 156 00:09:24,796 --> 00:09:29,836 Speaker 1: So it's like forecasters are just not aware that the economy, 157 00:09:29,996 --> 00:09:32,036 Speaker 1: it will turn out, has been in a recession the 158 00:09:32,076 --> 00:09:35,556 Speaker 1: whole year, and one fourth of we can't even tell 159 00:09:35,796 --> 00:09:39,636 Speaker 1: that the economy. It's only later and then the following year, 160 00:09:39,716 --> 00:09:42,476 Speaker 1: the year after the rains have gone, that people will say, oh, 161 00:09:42,476 --> 00:09:45,036 Speaker 1: it was raining, did you know so? But that makes 162 00:09:45,036 --> 00:09:46,916 Speaker 1: it seem a little less bad, because if it's so 163 00:09:46,956 --> 00:09:50,516 Speaker 1: difficult to detect the recession even when it's actually in action, 164 00:09:50,876 --> 00:09:52,276 Speaker 1: it makes it seem like it will be much more 165 00:09:52,356 --> 00:09:55,156 Speaker 1: difficult to predict it in advance, right, I mean, as 166 00:09:55,156 --> 00:09:58,156 Speaker 1: you say, when it's raining, we know that it's raining, right, 167 00:09:58,236 --> 00:10:02,396 Speaker 1: So that implies that rain is a binary, which maybe 168 00:10:02,436 --> 00:10:04,236 Speaker 1: is not true if you live in England or Scotland. 169 00:10:04,276 --> 00:10:05,796 Speaker 1: Maybe it's always a little bit raining. But I mean, 170 00:10:05,876 --> 00:10:07,836 Speaker 1: imagine that rain is a binary either it's raining or 171 00:10:07,876 --> 00:10:11,676 Speaker 1: it's not raining, and then it makes it easier to detect, 172 00:10:11,676 --> 00:10:13,436 Speaker 1: and that, in turn, you would think would have some 173 00:10:13,476 --> 00:10:16,276 Speaker 1: effect on our capacity to predict it. But if something's 174 00:10:16,356 --> 00:10:18,876 Speaker 1: very hard even to detect, surely it should be even 175 00:10:18,876 --> 00:10:21,556 Speaker 1: more difficult to predict. I mean, maybe only a handful 176 00:10:21,596 --> 00:10:23,516 Speaker 1: out of one hundred and fifty three recessions doesn't seem 177 00:10:23,556 --> 00:10:25,556 Speaker 1: like a very good success rate. Maybe we just have 178 00:10:25,676 --> 00:10:27,836 Speaker 1: the wrong baseline. Maybe it should be hard to predict. 179 00:10:28,116 --> 00:10:32,036 Speaker 1: That's the defense that many of my fellow economists offer. 180 00:10:32,156 --> 00:10:34,156 Speaker 1: I mean I don't I don't fully buy it. I 181 00:10:34,196 --> 00:10:39,396 Speaker 1: think that there is a bit of complacency. I think 182 00:10:39,756 --> 00:10:44,396 Speaker 1: the suffering that in recessions inflicts on people is not 183 00:10:44,596 --> 00:10:50,076 Speaker 1: really felt by my fellow economists and the salary jobs 184 00:10:50,156 --> 00:10:52,196 Speaker 1: that you know, Yeah, I think we have to protected. 185 00:10:52,356 --> 00:10:54,276 Speaker 1: I mean we are an I mean many of us 186 00:10:54,316 --> 00:10:58,236 Speaker 1: are have high levels of education. We kind of managed 187 00:10:58,236 --> 00:11:00,956 Speaker 1: to hold our jobs through recessions. I think if we 188 00:11:00,956 --> 00:11:04,556 Speaker 1: were the common person, we would demand that economists try 189 00:11:04,596 --> 00:11:07,076 Speaker 1: to do a better job. I mean, you know, fifty 190 00:11:07,116 --> 00:11:11,276 Speaker 1: sixty years ago, we would completely bad at predicting hurricanes, 191 00:11:11,316 --> 00:11:15,156 Speaker 1: and you know, hurricanes had used to have major loss 192 00:11:15,156 --> 00:11:17,916 Speaker 1: of life following that, and we didn't. We said this 193 00:11:17,996 --> 00:11:21,636 Speaker 1: is not acceptable because you know, people are dying. And 194 00:11:21,716 --> 00:11:25,836 Speaker 1: I think we just don't see the damage that recessions 195 00:11:25,876 --> 00:11:28,076 Speaker 1: inflict in the same way. And if we did, we 196 00:11:28,116 --> 00:11:32,436 Speaker 1: would demand that economists try to do a better job. 197 00:11:32,916 --> 00:11:34,676 Speaker 1: I mean, you're right that we may not be able 198 00:11:34,676 --> 00:11:38,396 Speaker 1: to do so with complete success. I mean weather forecasters 199 00:11:38,396 --> 00:11:42,436 Speaker 1: who are predicting hurricanes often, as we know, get us 200 00:11:42,476 --> 00:11:44,956 Speaker 1: all worried, and then the hurricane changes course and they 201 00:11:44,996 --> 00:11:48,036 Speaker 1: say sorry, falls along. But we don't blame them, you know, 202 00:11:48,116 --> 00:11:50,156 Speaker 1: we said they're doing their best job. They're trying to 203 00:11:50,196 --> 00:11:53,956 Speaker 1: protect us. I think economic forecasters should be treated the 204 00:11:53,996 --> 00:11:55,876 Speaker 1: same way. I mean, these are people who are trying 205 00:11:55,876 --> 00:11:59,716 Speaker 1: to protect us from job loss, which has you know, 206 00:11:59,796 --> 00:12:03,196 Speaker 1: just as devastating consequences as what hurricanes do. I mean, 207 00:12:03,916 --> 00:12:06,596 Speaker 1: you were asking me what got me motivated? One thing 208 00:12:06,796 --> 00:12:09,956 Speaker 1: that also got me motivated in addition to My own 209 00:12:09,996 --> 00:12:12,556 Speaker 1: poor forecast was that I was unemployed for a year 210 00:12:12,596 --> 00:12:14,356 Speaker 1: and I could see the effects it had on me. 211 00:12:15,076 --> 00:12:17,836 Speaker 1: And I've been studying the effects of what unemployment does 212 00:12:17,836 --> 00:12:21,676 Speaker 1: to people, and so I've become very passionate about saying, 213 00:12:21,956 --> 00:12:24,356 Speaker 1: you know, we should try to forecast recessions, we should 214 00:12:24,396 --> 00:12:27,596 Speaker 1: try to take steps ahead of time so that we 215 00:12:27,596 --> 00:12:31,836 Speaker 1: can prevent job loss during recessions. Well, those are That's 216 00:12:31,876 --> 00:12:35,876 Speaker 1: a very fascinating perspective on it, and I appreciate that 217 00:12:36,036 --> 00:12:39,476 Speaker 1: having had the experience of unemployment must raise your awareness 218 00:12:39,476 --> 00:12:42,636 Speaker 1: and consciousness. And that actually brings me to the question 219 00:12:42,676 --> 00:12:45,596 Speaker 1: that I wanted to follow up on, which is, let's 220 00:12:45,596 --> 00:12:49,356 Speaker 1: think a little bit about the incentives of predictors. So 221 00:12:49,436 --> 00:12:53,756 Speaker 1: you mentioned that when the meteorologists predict a hurricane and 222 00:12:53,756 --> 00:12:56,756 Speaker 1: then the hurricane misses us or doesn't happen, we don't 223 00:12:56,796 --> 00:12:59,876 Speaker 1: get that angry at them, yep. But that goes to 224 00:12:59,916 --> 00:13:04,196 Speaker 1: their incentives, right, I mean, when they predict a hurricane 225 00:13:04,316 --> 00:13:06,956 Speaker 1: and it doesn't come, we just think, instead of directing 226 00:13:06,956 --> 00:13:09,436 Speaker 1: anger towards them or blaming them for the research us 227 00:13:09,476 --> 00:13:13,316 Speaker 1: that we might have spent in preparing for the hurricane, unnecessarily, 228 00:13:13,356 --> 00:13:16,156 Speaker 1: we say, oh, we're so glad, so overwhelmingly please that 229 00:13:16,156 --> 00:13:19,396 Speaker 1: we weren't hit by a hurricane that that outweighs any irritation, 230 00:13:19,396 --> 00:13:22,916 Speaker 1: and we might feel towards the meteorologists. And you know, 231 00:13:22,956 --> 00:13:26,956 Speaker 1: if we expand from hurricanes to let's call them winter storms. 232 00:13:27,276 --> 00:13:28,876 Speaker 1: You know, I'm from Boston and I still live in 233 00:13:28,876 --> 00:13:33,036 Speaker 1: the Boston area, and you know, the prediction of great 234 00:13:33,076 --> 00:13:38,156 Speaker 1: sizeable winter storms is an industry where great profits are 235 00:13:38,196 --> 00:13:41,716 Speaker 1: made by local media, by local radio and television, because 236 00:13:41,956 --> 00:13:45,076 Speaker 1: people will watch them if they predict a storm, and 237 00:13:45,156 --> 00:13:47,316 Speaker 1: so they systematically I mean I've never read a study 238 00:13:47,316 --> 00:13:48,756 Speaker 1: about this, but I would bet almost anything that you 239 00:13:48,756 --> 00:13:51,836 Speaker 1: could show it into study that they systematically over predict 240 00:13:51,876 --> 00:13:54,476 Speaker 1: storms because it's good for ratings, and as you point out, 241 00:13:54,516 --> 00:13:57,956 Speaker 1: there's not that much downside for them if there's there's 242 00:13:57,996 --> 00:14:01,516 Speaker 1: no storm. They don't internalize the full externality of the 243 00:14:01,676 --> 00:14:06,156 Speaker 1: full spillover costs of their having made predictions. What about economists, 244 00:14:06,236 --> 00:14:10,396 Speaker 1: I mean, if they predict recession, do they have something 245 00:14:10,436 --> 00:14:13,436 Speaker 1: to lose? And I'm looking for some motivational account. I'm 246 00:14:13,436 --> 00:14:15,396 Speaker 1: trying to be a good economist or a good you know, 247 00:14:15,476 --> 00:14:18,476 Speaker 1: rational actor economists and see if there's some motivational explanation 248 00:14:18,996 --> 00:14:23,036 Speaker 1: for why economists underpredict recession. Yeah, I've I've been studying 249 00:14:23,076 --> 00:14:25,356 Speaker 1: that a lot too. I mean, I you know, many 250 00:14:25,396 --> 00:14:29,076 Speaker 1: of these forecasters who have been studying are actually you know, friends, 251 00:14:29,116 --> 00:14:33,036 Speaker 1: and I can talk to them, and for them, the 252 00:14:33,556 --> 00:14:39,036 Speaker 1: reputational loss from falsely calling a recession would be huge. 253 00:14:39,276 --> 00:14:42,996 Speaker 1: That's that's how they perceive it. And what they tell 254 00:14:43,076 --> 00:14:47,436 Speaker 1: me is that they will make a forecast that things 255 00:14:47,476 --> 00:14:49,276 Speaker 1: could be kind of bad, but they don't go into 256 00:14:49,316 --> 00:14:52,556 Speaker 1: negative territory. But when they go to meet their clients, 257 00:14:52,636 --> 00:14:55,036 Speaker 1: they may say, well, you know, I didn't want to 258 00:14:55,076 --> 00:14:59,556 Speaker 1: move my forecast down into negative, but privately, I'm telling 259 00:14:59,556 --> 00:15:02,676 Speaker 1: you I'm really worried. So they say they would prefer 260 00:15:02,796 --> 00:15:06,916 Speaker 1: to do that then to go out and make a call. 261 00:15:07,476 --> 00:15:10,516 Speaker 1: And there's a very good example from some years ago. 262 00:15:10,556 --> 00:15:15,836 Speaker 1: There's this really nice place called the Economic Cycle Research Institute, 263 00:15:15,836 --> 00:15:22,516 Speaker 1: which really tries to forecast recessions. And in September twenty eleven, 264 00:15:22,996 --> 00:15:28,316 Speaker 1: their lead guy, Lakshmanachuthan, went on Bloomberg and said, there's 265 00:15:28,356 --> 00:15:31,316 Speaker 1: going to be a recession called. He said, We've been 266 00:15:31,316 --> 00:15:34,076 Speaker 1: telling our clients privately, but I feel I have an 267 00:15:34,076 --> 00:15:37,876 Speaker 1: obligation to tell everyone else the public, that there's going 268 00:15:37,916 --> 00:15:40,996 Speaker 1: to be a recession, and that recession didn't happen. And 269 00:15:41,516 --> 00:15:44,956 Speaker 1: you know, for a year, Bloomberg would keep inviting this 270 00:15:45,036 --> 00:15:46,956 Speaker 1: guy back. He would say, it's going to happen, It's 271 00:15:46,956 --> 00:15:48,876 Speaker 1: going to happen. And then one year later he had 272 00:15:48,876 --> 00:15:51,996 Speaker 1: to say, well, it turned out to be a false alarm. 273 00:15:52,036 --> 00:15:54,796 Speaker 1: And my sense is that that did not do wonders 274 00:15:54,836 --> 00:15:58,916 Speaker 1: for his reputation or the reputation of his company. And 275 00:15:58,996 --> 00:16:02,356 Speaker 1: to me, that's unfortunate because I don't see that he 276 00:16:02,436 --> 00:16:07,116 Speaker 1: was making that call either to become famous or to 277 00:16:07,236 --> 00:16:11,676 Speaker 1: make money. He had already told his clients privately, but 278 00:16:11,716 --> 00:16:14,796 Speaker 1: he just felt, here, we've just gone through the Great Recession. 279 00:16:15,676 --> 00:16:19,116 Speaker 1: He was truly worried his company, based on their indicators, 280 00:16:19,596 --> 00:16:22,076 Speaker 1: that twenty twelve would be a recession, and he thought 281 00:16:22,076 --> 00:16:25,756 Speaker 1: it was a public duty. Just as with hurricanes, we 282 00:16:25,876 --> 00:16:28,356 Speaker 1: think it's a public duty of forecasters to tell us 283 00:16:28,356 --> 00:16:30,636 Speaker 1: if a hurricane is coming. He thought it was his 284 00:16:30,716 --> 00:16:34,076 Speaker 1: public duty to do so. And the experience didn't end 285 00:16:34,116 --> 00:16:38,796 Speaker 1: up well. I can picture two different stories about why 286 00:16:39,356 --> 00:16:42,076 Speaker 1: in this case that you describe, it's so costly for 287 00:16:42,116 --> 00:16:44,676 Speaker 1: an economist to predict a recession and not have it happened. 288 00:16:44,716 --> 00:16:48,276 Speaker 1: So one is a story about safety in numbers. Right 289 00:16:48,316 --> 00:16:51,316 Speaker 1: on this story, it's sort of conventional that most of 290 00:16:51,356 --> 00:16:55,196 Speaker 1: the time there isn't a recession, and so economists defaults 291 00:16:55,196 --> 00:16:57,676 Speaker 1: to predicting that there won't be a recession. And then 292 00:16:57,676 --> 00:17:00,076 Speaker 1: if one person wants to say there will be a reception, 293 00:17:00,396 --> 00:17:02,436 Speaker 1: he or she has got to put himself on the 294 00:17:02,476 --> 00:17:04,916 Speaker 1: wine go out there. And then if he's right, sure, 295 00:17:04,956 --> 00:17:07,476 Speaker 1: people might say he's a genius. But more of the 296 00:17:07,516 --> 00:17:10,236 Speaker 1: time he's going to be wrong than right, and it's 297 00:17:10,356 --> 00:17:14,636 Speaker 1: very costly because he's an outliers. He's stuck his neck 298 00:17:14,676 --> 00:17:19,876 Speaker 1: out and others have not done so. And in that story, 299 00:17:20,116 --> 00:17:22,476 Speaker 1: you might be able to fix this if more economists 300 00:17:22,796 --> 00:17:27,796 Speaker 1: were willing to predict recessions simply by virtue of there 301 00:17:27,796 --> 00:17:30,156 Speaker 1: being more numbers. You know, we're getting a group together, 302 00:17:30,196 --> 00:17:32,436 Speaker 1: you might be able to fight off that that cost. 303 00:17:33,076 --> 00:17:35,716 Speaker 1: The other story, though, is a story about self fulfillment. 304 00:17:35,756 --> 00:17:38,116 Speaker 1: It might be that we sort of imagine that if 305 00:17:38,236 --> 00:17:41,396 Speaker 1: enough economists say there's going to be a recession, that 306 00:17:41,396 --> 00:17:44,196 Speaker 1: that has a recursive effect and helps drive a recession. 307 00:17:44,556 --> 00:17:47,596 Speaker 1: Since there is some element of expectation having an effect 308 00:17:47,596 --> 00:17:50,996 Speaker 1: on real world events, and so on that theory, we 309 00:17:51,156 --> 00:17:54,236 Speaker 1: collectively we really don't want economists to say there's going 310 00:17:54,276 --> 00:17:56,516 Speaker 1: to be a recession. We might know that they are 311 00:17:56,596 --> 00:17:59,836 Speaker 1: under predicting recessions, but we like that because as a 312 00:17:59,916 --> 00:18:04,076 Speaker 1: social matter, we prefer the optimism because we know that 313 00:18:04,116 --> 00:18:06,636 Speaker 1: once in a while, too much pessimism can actually bring 314 00:18:06,636 --> 00:18:09,236 Speaker 1: about a bad result. Do either these stories make any 315 00:18:09,276 --> 00:18:10,956 Speaker 1: sense to either of them? Correspond to how you see 316 00:18:10,996 --> 00:18:13,276 Speaker 1: the world? Yeah? No, I think the second thing that 317 00:18:13,316 --> 00:18:17,396 Speaker 1: you mentioned is the only to me justifiable reason for 318 00:18:17,556 --> 00:18:21,916 Speaker 1: caution in predicting recessions, because of the self fulfilling nature. 319 00:18:22,396 --> 00:18:26,116 Speaker 1: You know. That's that's the difference between economic forecasting and 320 00:18:26,116 --> 00:18:29,156 Speaker 1: weather forecasting. You know, we take preventative actions, but we 321 00:18:29,196 --> 00:18:31,756 Speaker 1: don't influence whether or not there will be a hurricane, 322 00:18:31,756 --> 00:18:37,036 Speaker 1: whereas with recessions there can be the self fulfilling nature. 323 00:18:37,156 --> 00:18:40,156 Speaker 1: But to me, we are so far from having to 324 00:18:40,196 --> 00:18:42,356 Speaker 1: worry about that, because, as I said, we are in 325 00:18:42,356 --> 00:18:46,396 Speaker 1: a corner where we almost never predict a recession, even 326 00:18:46,436 --> 00:18:49,156 Speaker 1: though they happen twelve to fifteen percent of the time. 327 00:18:49,596 --> 00:18:54,796 Speaker 1: So to me, it's worth the risk of saying, let's 328 00:18:54,876 --> 00:18:58,476 Speaker 1: try to move to a sort of world where we 329 00:18:59,436 --> 00:19:02,956 Speaker 1: are always somewhat worried about recession. If a recession has 330 00:19:02,996 --> 00:19:06,476 Speaker 1: just happened, I would say, then don't worry about it, 331 00:19:06,556 --> 00:19:10,916 Speaker 1: because you know, if recovery has taken hold, it tends 332 00:19:10,916 --> 00:19:14,636 Speaker 1: to be self perpetuating for a while, and it's fine. 333 00:19:14,756 --> 00:19:17,876 Speaker 1: But once you get two, three years, four years into 334 00:19:17,876 --> 00:19:21,636 Speaker 1: an expansion, then you start judging and trying to see 335 00:19:21,676 --> 00:19:23,516 Speaker 1: what the odds are. So I think the language and 336 00:19:23,556 --> 00:19:28,156 Speaker 1: the terminology should shift into more about, you know, what 337 00:19:28,356 --> 00:19:31,396 Speaker 1: is the likelihood, and then you know, to be open 338 00:19:31,436 --> 00:19:34,636 Speaker 1: about the fact that at at some times there will 339 00:19:34,716 --> 00:19:38,676 Speaker 1: be a divergence in opinion, and then people can decide 340 00:19:40,036 --> 00:19:42,876 Speaker 1: on that basis whether or not they want to make adjustments. 341 00:19:43,476 --> 00:19:46,076 Speaker 1: So now we're in a moment when some economists really 342 00:19:46,076 --> 00:19:48,156 Speaker 1: are starting to talk about a prediction of recessions. So 343 00:19:48,236 --> 00:19:51,396 Speaker 1: let's talk a little bit about some of the indications. 344 00:19:52,396 --> 00:19:55,436 Speaker 1: One is, you mentioned already that when a recovery has 345 00:19:55,516 --> 00:19:57,796 Speaker 1: lasted for a good long time, it's getting I think 346 00:19:57,796 --> 00:20:00,596 Speaker 1: you said long in the truth. Just statistically it seems 347 00:20:00,636 --> 00:20:03,476 Speaker 1: probable there will there will come to an end at 348 00:20:03,476 --> 00:20:05,556 Speaker 1: some point because you know, if you just look at 349 00:20:05,596 --> 00:20:08,836 Speaker 1: the probability distributions, it's been the X number of years 350 00:20:08,876 --> 00:20:12,356 Speaker 1: and so it's probably going to be over soon. Another 351 00:20:12,756 --> 00:20:17,196 Speaker 1: is the so called inverted yield curve in the bond markets. Yeah, 352 00:20:18,436 --> 00:20:20,196 Speaker 1: maybe let's take them in order. Let's start with the 353 00:20:20,276 --> 00:20:22,316 Speaker 1: just the numbers game. You know, it's been a while, 354 00:20:22,796 --> 00:20:25,116 Speaker 1: and then from there we can you can explain the 355 00:20:25,156 --> 00:20:27,076 Speaker 1: inverted yield curve to us, and we can we can 356 00:20:27,076 --> 00:20:29,556 Speaker 1: try to look at that a little more closely. Yeah. No, 357 00:20:29,676 --> 00:20:33,196 Speaker 1: I think the you know, the duration of expansions has 358 00:20:33,276 --> 00:20:36,036 Speaker 1: some predictive power for whether or not there will be 359 00:20:36,036 --> 00:20:39,596 Speaker 1: a recession. So I think that's certainly one factor. But 360 00:20:39,716 --> 00:20:42,676 Speaker 1: I think, off the other indicators, the yield curve is 361 00:20:43,436 --> 00:20:47,956 Speaker 1: the most promising one, and the fact that it has 362 00:20:47,996 --> 00:20:51,796 Speaker 1: inverted now, and that it had inverted prior to the 363 00:20:51,796 --> 00:20:55,596 Speaker 1: previous five recessions, is something that we should take into account. 364 00:20:55,996 --> 00:20:58,236 Speaker 1: So let me run by what I try to I'll 365 00:20:58,276 --> 00:21:00,676 Speaker 1: give you my attempt to explain to my fourteen year 366 00:21:00,716 --> 00:21:02,916 Speaker 1: old what the inverted yield curve was, and tell me 367 00:21:02,916 --> 00:21:06,076 Speaker 1: where I where I went wrong. What I said to 368 00:21:06,156 --> 00:21:09,396 Speaker 1: him was, look what's going on in an inverted yield 369 00:21:09,396 --> 00:21:14,996 Speaker 1: curve is that people who are setting interest rates believe 370 00:21:15,836 --> 00:21:19,836 Speaker 1: that the economy is likely to be much better over 371 00:21:19,916 --> 00:21:23,156 Speaker 1: a long term than they expect it to be over 372 00:21:23,276 --> 00:21:26,316 Speaker 1: the short term. And that's why it's a higher interest 373 00:21:26,436 --> 00:21:29,516 Speaker 1: rate over the long term than it is over the 374 00:21:29,556 --> 00:21:33,676 Speaker 1: short term. And that reflects I suggested, I think, maybe wrongly, 375 00:21:34,116 --> 00:21:37,236 Speaker 1: a prediction that things are going to get worse before 376 00:21:37,356 --> 00:21:40,036 Speaker 1: they're going to get better, as opposed to the more 377 00:21:40,076 --> 00:21:43,036 Speaker 1: normal set of circumstances, where we think that that something 378 00:21:43,076 --> 00:21:45,876 Speaker 1: out in the future is more uncertain and in the 379 00:21:46,316 --> 00:21:49,676 Speaker 1: nearer future we're able to identify with a greater probability 380 00:21:49,676 --> 00:21:52,196 Speaker 1: that things will go well, and so therefore the usual 381 00:21:52,236 --> 00:21:54,556 Speaker 1: model is for the interest rates to be the other 382 00:21:54,636 --> 00:21:57,676 Speaker 1: way around. Right, So where in that analysis did I 383 00:21:57,716 --> 00:22:00,596 Speaker 1: go wrong? And I think that's that's exactly right. That 384 00:22:00,796 --> 00:22:04,236 Speaker 1: is one of the channels. One channel that we typically 385 00:22:04,356 --> 00:22:08,076 Speaker 1: used to say was that the FED or policymakers had 386 00:22:08,476 --> 00:22:11,636 Speaker 1: somewhat more information about which way the economy was headed, 387 00:22:11,956 --> 00:22:14,036 Speaker 1: and they were worried about the near term, and so 388 00:22:14,716 --> 00:22:18,596 Speaker 1: short term interest rates were being lowered. But the problem 389 00:22:18,636 --> 00:22:21,156 Speaker 1: this time is that the short term interest rates have 390 00:22:21,236 --> 00:22:25,276 Speaker 1: been low for almost a decade now, right, So it 391 00:22:25,316 --> 00:22:26,916 Speaker 1: can't be a good predictor that they think things are 392 00:22:26,916 --> 00:22:29,236 Speaker 1: going to get Yeah, it can't be seems to switch 393 00:22:29,276 --> 00:22:31,236 Speaker 1: to being some other thing. It's like now it's a 394 00:22:31,236 --> 00:22:33,556 Speaker 1: feature of political economy that Yeah. So I think there 395 00:22:33,556 --> 00:22:36,756 Speaker 1: are pressures on the FED, including from the president, but 396 00:22:36,876 --> 00:22:39,436 Speaker 1: even before this president, other people were putting pressure on 397 00:22:39,476 --> 00:22:41,356 Speaker 1: the FED to try to keep the interest rates low 398 00:22:41,596 --> 00:22:44,236 Speaker 1: and to keep the markets happy. Yeah. I mean that's 399 00:22:44,236 --> 00:22:48,596 Speaker 1: a constant of presidential wish list, is you know? Right 400 00:22:48,636 --> 00:22:51,436 Speaker 1: every president, every president would like people to be able 401 00:22:51,476 --> 00:22:55,076 Speaker 1: to borrow for relatively little money, right, Yeah. So going 402 00:22:55,076 --> 00:22:57,276 Speaker 1: back a bit to our discussion on the recession, I 403 00:22:57,316 --> 00:23:01,436 Speaker 1: think at this point, given the imprecision of our forecasts, 404 00:23:01,476 --> 00:23:05,636 Speaker 1: it's ridiculous to be worrying about decimal places on our forecast. 405 00:23:05,676 --> 00:23:08,836 Speaker 1: I mean, you know, changing a forecast from three point 406 00:23:08,876 --> 00:23:11,796 Speaker 1: four to three point two is just meaningless given the 407 00:23:11,876 --> 00:23:14,116 Speaker 1: range of error. So I think if we shift the 408 00:23:14,156 --> 00:23:18,356 Speaker 1: discussion more to likelihoods of bad things happening, like recessions, 409 00:23:18,476 --> 00:23:21,796 Speaker 1: then the discussion will also be more about what policy 410 00:23:22,356 --> 00:23:25,756 Speaker 1: steps can we take now, either to keep the recession 411 00:23:25,836 --> 00:23:29,476 Speaker 1: from happening or if we see a recession happening, what 412 00:23:29,556 --> 00:23:32,996 Speaker 1: steps will we take? And I think fiscal policy is 413 00:23:33,036 --> 00:23:36,716 Speaker 1: going to play a very big role, namely finding ways 414 00:23:36,716 --> 00:23:41,076 Speaker 1: to put money quickly in the pockets of people and companies. 415 00:23:41,116 --> 00:23:44,276 Speaker 1: And I think I see a bit of hope there 416 00:23:44,316 --> 00:23:48,116 Speaker 1: because all this talk about whether or not a recession 417 00:23:48,156 --> 00:23:53,516 Speaker 1: will happen is provoking at least some very sensible people 418 00:23:53,596 --> 00:23:56,596 Speaker 1: to think about, you know, what would we do if 419 00:23:56,836 --> 00:24:00,196 Speaker 1: if he really started to think that a recession was 420 00:24:00,356 --> 00:24:02,916 Speaker 1: on its way, or if we recognized it early enough, 421 00:24:03,676 --> 00:24:06,636 Speaker 1: you know, what would we do? What do you consider 422 00:24:06,676 --> 00:24:09,556 Speaker 1: to be the most the most promising. I think money 423 00:24:09,556 --> 00:24:11,636 Speaker 1: in people's pockets is what you're talking about. Yeah, exactly. 424 00:24:11,716 --> 00:24:14,276 Speaker 1: I think that some of the things that were done 425 00:24:14,356 --> 00:24:17,356 Speaker 1: during the Great Recession kind of you know, either through 426 00:24:17,516 --> 00:24:21,556 Speaker 1: some kind of cash transfer or some other schemes which 427 00:24:21,596 --> 00:24:26,476 Speaker 1: turned out to be pretty promising in countering the depth 428 00:24:26,516 --> 00:24:29,276 Speaker 1: of the Great Recession, are what people are talking about. So, 429 00:24:30,196 --> 00:24:34,196 Speaker 1: you know, Heather Bouchet at the Washington Center for Equitable 430 00:24:34,236 --> 00:24:40,236 Speaker 1: Growth and Jay Shamba of the Hamilton Project at Brookings, 431 00:24:40,276 --> 00:24:43,236 Speaker 1: they have a new book basically on you know, how 432 00:24:43,276 --> 00:24:46,556 Speaker 1: to be recession ready, and to me, Again, this goes 433 00:24:46,596 --> 00:24:49,356 Speaker 1: back to the kind of analogy with hurricanes. I mean, 434 00:24:50,116 --> 00:24:53,036 Speaker 1: we don't know when it's coming or where it will 435 00:24:53,116 --> 00:24:56,236 Speaker 1: hit the most, but we ought to be recession ready 436 00:24:56,276 --> 00:24:59,396 Speaker 1: and think about what schemes we have, And indeed, the 437 00:24:59,956 --> 00:25:03,516 Speaker 1: most promising thing in my view, is to just have 438 00:25:03,956 --> 00:25:07,716 Speaker 1: ways of providing direct stimulus, basically finding ways of giving 439 00:25:07,756 --> 00:25:10,196 Speaker 1: cash to people who will be a acted. So there 440 00:25:10,236 --> 00:25:12,756 Speaker 1: are people, including at the fair, who are thinking about 441 00:25:13,236 --> 00:25:15,716 Speaker 1: some kind of rules that would go into place, which 442 00:25:15,796 --> 00:25:20,516 Speaker 1: says if unemployment in a certain region goes up x percent, 443 00:25:20,596 --> 00:25:23,756 Speaker 1: we would immediately start giving checks to people there and 444 00:25:23,796 --> 00:25:26,756 Speaker 1: so on. And I think that that's exactly the way 445 00:25:26,796 --> 00:25:30,316 Speaker 1: we do with hurricanes. We say who's getting affected? You know, 446 00:25:30,356 --> 00:25:33,396 Speaker 1: where are the floods, what do people need? And we 447 00:25:33,476 --> 00:25:35,836 Speaker 1: provide that help. And I think that's what we should 448 00:25:35,876 --> 00:25:39,516 Speaker 1: be doing with recessions. Well, that's an optimistic way of 449 00:25:39,556 --> 00:25:42,636 Speaker 1: thinking because it offers us some tool to address it, 450 00:25:42,676 --> 00:25:44,076 Speaker 1: and I want to I just want to close by 451 00:25:44,116 --> 00:25:47,596 Speaker 1: asking Percash, how bad do you think this one is 452 00:25:47,636 --> 00:25:49,836 Speaker 1: going to be? I mean, you've been pretty clear that 453 00:25:49,876 --> 00:25:52,316 Speaker 1: you think a recession is is coming. Do you think 454 00:25:52,316 --> 00:25:54,156 Speaker 1: it will be a long one? Do you think that 455 00:25:54,596 --> 00:25:56,876 Speaker 1: it has the capacity to be more than a recession, 456 00:25:57,396 --> 00:26:01,436 Speaker 1: and that obviously will have serious consequences for the policy 457 00:26:01,916 --> 00:26:04,956 Speaker 1: recommendations that you make. Well, first, to be clear, so 458 00:26:04,996 --> 00:26:08,236 Speaker 1: I don't lose my own jobs. Everything I've said is 459 00:26:08,316 --> 00:26:10,396 Speaker 1: my view and not the IMFs. I think the IMA 460 00:26:11,196 --> 00:26:15,876 Speaker 1: is still predicting two percent growth in the United States 461 00:26:15,876 --> 00:26:19,476 Speaker 1: and mostly and elsewhere, and you've told us exactly why 462 00:26:19,996 --> 00:26:24,036 Speaker 1: go on? Yeah, so you know, making clear that these 463 00:26:24,036 --> 00:26:25,836 Speaker 1: are my own views, but my own views that are 464 00:26:25,876 --> 00:26:28,356 Speaker 1: based on the fact that, as I said, expansions that 465 00:26:28,716 --> 00:26:32,036 Speaker 1: get long in the tooth tend to end, and so 466 00:26:32,556 --> 00:26:35,516 Speaker 1: in terms of probabilities, I think we should be prepared 467 00:26:35,596 --> 00:26:37,796 Speaker 1: based on the yield curve, based on a couple of 468 00:26:37,796 --> 00:26:42,236 Speaker 1: other indicators, consumer sentiment, there is the Institute of Supply 469 00:26:42,316 --> 00:26:44,836 Speaker 1: Management's index. I think based on all these there's enough 470 00:26:44,876 --> 00:26:48,516 Speaker 1: reason to be prepared for one. My own personal view 471 00:26:48,596 --> 00:26:50,556 Speaker 1: is that, you know, this doesn't need to be a 472 00:26:50,676 --> 00:26:55,196 Speaker 1: d procession. I think we went through essentially the next 473 00:26:55,596 --> 00:26:59,956 Speaker 1: Great Depression just a decade ago. So I think with 474 00:27:00,076 --> 00:27:04,596 Speaker 1: preparedness and particularly with an attitude that says we have 475 00:27:04,636 --> 00:27:07,676 Speaker 1: to think about what policy responses we can put in place, 476 00:27:08,516 --> 00:27:11,516 Speaker 1: we should be well to write it out. Thank you 477 00:27:11,636 --> 00:27:14,956 Speaker 1: very much, Percussion. Those are very very helpful points, and 478 00:27:15,356 --> 00:27:17,396 Speaker 1: I'm very very grateful to you for your description. Thank you. 479 00:27:17,636 --> 00:27:26,436 Speaker 1: Thanks No, it's a pleasure. Now for our sound of 480 00:27:26,436 --> 00:27:40,676 Speaker 1: the week. That was the sound of victory, specifically victory 481 00:27:40,716 --> 00:27:44,276 Speaker 1: in the National League pennant for the Washington Nationals, sending 482 00:27:44,316 --> 00:27:46,436 Speaker 1: them to the World Series for the first time in 483 00:27:46,476 --> 00:27:50,516 Speaker 1: the recent history of their franchise. The truth is that 484 00:27:50,636 --> 00:27:53,396 Speaker 1: for a Washington DC team to go to the World 485 00:27:53,436 --> 00:27:57,836 Speaker 1: Series is a kind of world historical event. The last time, 486 00:27:57,956 --> 00:28:00,996 Speaker 1: and indeed the only time a baseball franchise in our 487 00:28:01,076 --> 00:28:04,756 Speaker 1: nation's capital one a World Series was in nineteen twenty four. 488 00:28:05,076 --> 00:28:07,796 Speaker 1: That's nearly a century ago, and Walter Johnson, one of 489 00:28:07,836 --> 00:28:10,276 Speaker 1: the greatest pitchers of all time, was still pitching for 490 00:28:10,316 --> 00:28:13,796 Speaker 1: the club. Then. Not only was there a long period 491 00:28:13,836 --> 00:28:17,956 Speaker 1: of mediocrity, but ultimately, between nineteen sixty and two thousand 492 00:28:18,036 --> 00:28:21,236 Speaker 1: and five, there was a forty five year drought of 493 00:28:21,356 --> 00:28:25,676 Speaker 1: any baseball at all in Washington, d C. That's right, 494 00:28:25,996 --> 00:28:29,716 Speaker 1: the national pastime was not played at their professional level 495 00:28:30,076 --> 00:28:34,836 Speaker 1: in the nation's capital. This opportunity for the Nationals then 496 00:28:35,076 --> 00:28:38,436 Speaker 1: isn't just something for DC fans, long suffering though they 497 00:28:38,476 --> 00:28:42,596 Speaker 1: may be. It's actually about something much bigger. It's actually 498 00:28:42,676 --> 00:28:47,196 Speaker 1: about the question of whether baseball truly is and remains 499 00:28:47,516 --> 00:28:52,876 Speaker 1: a national pastime for Americans. The statistics make you think 500 00:28:52,996 --> 00:28:56,236 Speaker 1: that it isn't really the case any longer. There was 501 00:28:56,276 --> 00:28:59,236 Speaker 1: a time when nearly every American child, or at least 502 00:28:59,236 --> 00:29:02,596 Speaker 1: the boys, played baseball in a serious way. There was 503 00:29:02,636 --> 00:29:07,476 Speaker 1: a time where baseball dominated national consciousness. During World War Two. 504 00:29:07,516 --> 00:29:09,636 Speaker 1: If American troops wanted to make sure that their lines 505 00:29:09,676 --> 00:29:12,996 Speaker 1: weren't being infiltrated by clever spies from the other side 506 00:29:12,996 --> 00:29:15,756 Speaker 1: who happened to speak English, they would ask them baseball 507 00:29:15,876 --> 00:29:19,596 Speaker 1: questions on the assumption that every legitimate American would know 508 00:29:19,716 --> 00:29:23,916 Speaker 1: the answers, while a foreigner might not. Today, there's just 509 00:29:24,076 --> 00:29:26,916 Speaker 1: no way that questions like that would work. If we 510 00:29:26,956 --> 00:29:29,596 Speaker 1: have a national sport in statistical terms, it might be 511 00:29:29,676 --> 00:29:32,396 Speaker 1: American football, and if you look at the sport from 512 00:29:32,396 --> 00:29:35,756 Speaker 1: the United States that's garnering the greatest degree of world attention, 513 00:29:36,036 --> 00:29:40,316 Speaker 1: that would be professional basketball. Baseball in some sense, has 514 00:29:40,316 --> 00:29:44,396 Speaker 1: come to be seen then as old fashioned, as too slow, 515 00:29:44,836 --> 00:29:49,356 Speaker 1: as unexciting. In some way, not as up and coming American. 516 00:29:50,196 --> 00:29:52,156 Speaker 1: The fact that the Washington Nationals now have a shot 517 00:29:52,196 --> 00:29:55,396 Speaker 1: at the World Series is not going to save baseball 518 00:29:55,636 --> 00:29:58,756 Speaker 1: from the duldrums to which it has to some degree entered. 519 00:29:59,396 --> 00:30:02,436 Speaker 1: It might, however, remind us that baseball could still have 520 00:30:02,556 --> 00:30:06,756 Speaker 1: a central place in our national consciousness, even without needing 521 00:30:06,756 --> 00:30:11,156 Speaker 1: to dominate all of the other sports. After all, even Washington, 522 00:30:11,236 --> 00:30:13,916 Speaker 1: d c. Doesn't stand in the same kind of civic 523 00:30:13,956 --> 00:30:18,076 Speaker 1: position relative to the United States as it once did. True, 524 00:30:18,076 --> 00:30:21,236 Speaker 1: it's still our nation's capital. Still many tourists come and 525 00:30:21,356 --> 00:30:23,516 Speaker 1: visit it to try to learn about civics, but the 526 00:30:23,556 --> 00:30:27,876 Speaker 1: city itself is royaled in political controversy. An impeachment inquiry 527 00:30:27,996 --> 00:30:31,316 Speaker 1: is going on. No one right now would think that Washington, 528 00:30:31,396 --> 00:30:34,276 Speaker 1: d c. Is a shining ideal of what the capital 529 00:30:34,356 --> 00:30:38,556 Speaker 1: of a great republic should be. Under these conditions, the 530 00:30:38,636 --> 00:30:40,916 Speaker 1: fact that the World Series will come to the capital 531 00:30:41,396 --> 00:30:45,556 Speaker 1: is just a pleasant recognition that our system still has 532 00:30:45,676 --> 00:30:49,436 Speaker 1: some nice parts to it. Lots of countries in the 533 00:30:49,476 --> 00:30:52,676 Speaker 1: world play baseball, some today play it better than the 534 00:30:52,756 --> 00:30:57,156 Speaker 1: United States. The unique association of baseball with the country 535 00:30:57,196 --> 00:31:00,236 Speaker 1: and with the capital is not what it was, and 536 00:31:00,356 --> 00:31:02,876 Speaker 1: that might just be a good thing. Maybe we can 537 00:31:02,916 --> 00:31:05,836 Speaker 1: be a little more realistic about what sport is, a 538 00:31:05,836 --> 00:31:09,556 Speaker 1: little more realistic about what politics is, a little more 539 00:31:09,556 --> 00:31:13,396 Speaker 1: modest about whether the United States of America can ever 540 00:31:13,516 --> 00:31:16,356 Speaker 1: function as a shining light to the rest of the world. 541 00:31:20,676 --> 00:31:23,596 Speaker 1: Deep Background is brought to you by Pushkin Industries. Our 542 00:31:23,636 --> 00:31:26,996 Speaker 1: producer is Lydia Genecott, with engineering by Jason Gambrell and 543 00:31:27,116 --> 00:31:30,996 Speaker 1: Jason Rostkowski. Our showrunner is Sophie mckibbon. Our theme music 544 00:31:31,076 --> 00:31:34,316 Speaker 1: is composed by Luis GERA special thanks to the Pushkin Brass, 545 00:31:34,516 --> 00:31:38,356 Speaker 1: Malcolm Gladwell, Jacob Weisberg, and Mia Lobel. I'm Noah Feldman. 546 00:31:38,476 --> 00:31:40,996 Speaker 1: You can follow me on Twitter at Noah R. Feldman. 547 00:31:41,356 --> 00:31:42,716 Speaker 1: This is Deep Background.