Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy. Tracy, you said something
Speaker 1: on a recent episode, and I don't remember which one
Speaker 1: it was, um, one of our macro ones, maybe like
Speaker 1: Neil and Connor or something like that. This idea is
Speaker 1: still that we sort of talk about, like relief at
Speaker 1: the idea of labor market soft right, it's kind of perverse.
Speaker 1: First of all, thank you so much for listening to
Speaker 1: what I say. I really appreciate that. Secondly, I think
Speaker 1: what I said is it feels really weird that you
Speaker 1: have a central bank, specifically the Federal Reserve, that is
Speaker 1: saying basically that they want to push the unemployment right up. Yeah,
Speaker 1: and significantly. Right. So we're at round three and a
Speaker 1: half percent unemployment right now fifty which sounds great. That
Speaker 1: seems unambiguously good, and especially you know, after coming after
Speaker 1: years of slow labor market growth. Um, some of the
Speaker 1: fears during the worst of the COVID pandemic about how
Speaker 1: how much unemployment there is, and yet here we are,
Speaker 1: and it's almost always talked about as a problem to
Speaker 1: be solved rather than an opportunity to be embraced. Yeah,
Speaker 1: there's always concern that you're running an economy too hot
Speaker 1: if employment gets too low, But then that just brings
Speaker 1: up all these really big picture questions about well, what
Speaker 1: is the economy for anyway? Shouldn't we be aiming for
Speaker 1: a system that kind of works for everyone where you know,
Speaker 1: hopefully the unemployment rate is very very low. But I
Speaker 1: guess the risk is and the concern is that you
Speaker 1: don't want to run it in such a way that
Speaker 1: it starts pushing up prices and you get this unrelenting inflation, right,
Speaker 1: and inflation is bad and people, it hurts people, and
Speaker 1: people don't like it. But nonetheless, I think people find
Speaker 1: it strange that the central bank is part of what
Speaker 1: they see as an outcome of optable monetary policy would
Speaker 1: put so many, you know, at least another million to
Speaker 1: have people out of work. They find it's strange when
Speaker 1: weak labor market data often leads to a stock market
Speaker 1: railly right, the whole bad news is good news for
Speaker 1: stocks perverse. And you know, you think, like, Okay, a
Speaker 1: lot of people have jobs, that means a lot of spending,
Speaker 1: corporate profits really high, Like do you think these are
Speaker 1: like good things? And yet at some level it's like
Speaker 1: all of this is bad, and I do and I
Speaker 1: think like we shouldn't just jump away from that, like
Speaker 1: we shouldn't sort of move on. And of course there's
Speaker 1: a room to discuss soft land things and all that,
Speaker 1: but some of these route questions I think are still
Speaker 1: worth out thinking about, Like why do investors hate full employment? Yeah, yeah,
Speaker 1: exactly right. So I'm really excited about our guests. So
Speaker 1: one of the one of the economists from the old
Speaker 1: days that people sometimes talk about when they're talking about
Speaker 1: the political economy of full employment or maximum employment. On
Speaker 1: economist named Michael Kalski um has talked about this his
Speaker 1: work uh comes up every once in a while. So
Speaker 1: we're gonna be speaking to an economist who himself has
Speaker 1: studied a lot of Kletzki's work and has done an
Speaker 1: own his own work on a lot of these questions,
Speaker 1: trying to understand a little bit more about this attention
Speaker 1: that full employment, full employment brings. We're gonna be speaking
Speaker 1: to a Yan Toparowski, a professor at so Is University
Speaker 1: in London, and uh So, Professor Taparowski, thank you so
Speaker 1: much for coming on odd lots, Thank you very much
Speaker 1: for inviting me. Why don't you tell us a little
Speaker 1: bit about your what your your work and your research
Speaker 1: and sort of like what what drove you to sort
Speaker 1: of focus on some of these topics When I came into, uh,
Speaker 1: this kind of work, I actually came across Kalski when
Speaker 1: when I was when I first came to study economics.
Speaker 1: Now at the time when I actually didn't do my
Speaker 1: undergraduate studies in economics, it was more in sociology and
Speaker 1: political science, um and what. The first job that I
Speaker 1: got was in fund management for the Church of England
Speaker 1: for an institution called the August Institutional, the Church Commissioners
Speaker 1: for England. And because I had had I had done
Speaker 1: one course in introductory economics, they thought, well, he knows
Speaker 1: something about it, and they put me into the best
Speaker 1: Change Investments department. Now this was in nineteen seventy four.
Speaker 1: You're you're obviously too young to remember what happened around
Speaker 1: nineteen seventy four, But there was an oil price shock
Speaker 1: which in England was rapidly followed by a collapse in
Speaker 1: the real estate market, a collapse on the in the
Speaker 1: stock market. A couple of brokers brokerage houses went bust,
Speaker 1: UH banks started some some of the mark fringe banks
Speaker 1: UH went bust, A major bank tottered. The Bank of
Speaker 1: England had to call in the senior City of London
Speaker 1: figures to try and shore up the position. UH. And
Speaker 1: for me, you know, as as a newcomer to all
Speaker 1: of this, I thought this was tremendously exciting. But I thought, well,
Speaker 1: I need to find out more about it. I need
Speaker 1: to study economics. So I went. I registered at Birkbeck College,
Speaker 1: part of the University of London, for an MSc in economics. UH.
Speaker 1: And I was actually greatly disappointed. Was all my professors
Speaker 1: would stand up and say, look, we have this general
Speaker 1: equilibrium model at the economy and my my my senior professor,
Speaker 1: the senior professor there, a very distinguished American British economist.
Speaker 1: I remember standing in class and saying, look at the
Speaker 1: economy out there, it's in equilibrium. We know it's in equilibrium.
Speaker 1: You know the models say so. And I remember sitting
Speaker 1: there thinking, I don't know what world this man lives in.
Speaker 1: You know what he was saying. You had no bearing,
Speaker 1: should no understanding of what was really going on. I
Speaker 1: remember going down into the library and flicking through some
Speaker 1: books and coming across a Polish name Kalitsky, and I thought, oh,
Speaker 1: I wonder what he has to say about this. I
Speaker 1: didn't realize that there was there any distinguished Polish economists.
Speaker 1: So I started reading the book and it was his
Speaker 1: early essays on the business cycle, and suddenly it all
Speaker 1: made sense, uh, And it's continue to make sense since then. Albeit,
Speaker 1: I think I take a rather different for you too,
Speaker 1: many followers of of me, how Kalitski in a sense
Speaker 1: that I'm I have this background in in banking and
Speaker 1: finance side. This has always been my approach to the
Speaker 1: work of Kalitzski. So I think your your question issues
Speaker 1: that you're raising are absolutely fundamental to my understanding of Klitzki,
Speaker 1: and I wish they were more fundamental to the understanding
Speaker 1: of many, uh, many of my friends and colleagues who
Speaker 1: uh you know follow Klitski. Well, yeah, talk to us
Speaker 1: then about what it was that you read that made
Speaker 1: sense to you. And I'm particularly interested in the relationship
Speaker 1: between the business cycle and you know, theoretical equilibrium levels
Speaker 1: and full employment as as you kind of just alluded to,
Speaker 1: the general equilibrium approach is essentially a static approach. It
Speaker 1: tells you what situation will arise where there will be
Speaker 1: no further change. Uh. And this actually doesn't happen in
Speaker 1: the real world. What you have in the in the
Speaker 1: real world is a constant state of flux. And this
Speaker 1: is why Kalitzki's approach to economics, focusing on a business
Speaker 1: cycle uh, I think, is really much more satisfying than
Speaker 1: than the approach, for example, of Kines in the general theory,
Speaker 1: which is which was essentially a static approach to a
Speaker 1: problem that is fundamentally dynamic. So what don't you explain?
Speaker 1: Because when I think of you know, Canes also wrestled
Speaker 1: with these topics of why don't why doesn't a market
Speaker 1: economy on its own create full employment? Why is investment
Speaker 1: inadequate in typical times? Why do we tend to these
Speaker 1: periods of stagnation? How did Kollecgi differ from Canes and
Speaker 1: these questions? Well, let me start off with what he
Speaker 1: agreed with Kane's on and he agreed with Kanes that
Speaker 1: capitalism is fundamentally a system that in which the level
Speaker 1: of output, the overall level of output, and the overall
Speaker 1: level of employment is determined by the level of investment,
Speaker 1: the level of business investment. Now, obviously in the in
Speaker 1: the post war, post Second World War economy, the government
Speaker 1: also has Government spending also has a lot to do
Speaker 1: with it. But fundamentally the in the the private sector.
Speaker 1: The level of activity in the private sectors really determined
Speaker 1: by the level of investment. And the question is what
Speaker 1: causes that level of investment to be unstable, much much
Speaker 1: more unstable than for example, consumption. Uh and they This
Speaker 1: was an answer that in many respects tormented Coltsky throughout
Speaker 1: his life. He would put forward various models and then
Speaker 1: reflect on them and decide that no, they that they
Speaker 1: were wrong. Kane's sort of tried to cover up this
Speaker 1: problem by saying, or what it was all due to
Speaker 1: animal spirits. It's all due to uncertainty. And the problem
Speaker 1: with this is that you know uncertainty and um an
Speaker 1: animal spirits are not um measurable in the same way
Speaker 1: that for example, steel production is measurable. It's really pushing
Speaker 1: the solution onto what cannot be seen and cannot be observed.
Speaker 1: And Clitski. Clitki's background was as an engineer, and he
Speaker 1: found this deeply, deeply unsatisfactory. Tried to resolve it. Certainly,
Speaker 1: he thought that the rate of interest didn't have uh
Speaker 1: much impact. He businessman, he thought, were on the whole
Speaker 1: much more much more cynical, much more hard bitten than
Speaker 1: to be influenced by let's say, ephemeral moods uh and
Speaker 1: and temperament. In fact, the way in which corporations are constructed,
Speaker 1: that the hierarchical, bureaucratic way in which business corporations are
Speaker 1: constructed is is really in order to eliminate the effect
Speaker 1: of you know, passions and biases on issues like investment.
Speaker 1: In the end, what what critic you thought was really
Speaker 1: most importantly it was the issue of capacity utilization. Businesses
Speaker 1: will invest if there if they've got customers that cannot
Speaker 1: be satisfied from existing production, uh even at full capacity.
Speaker 1: And what they will then do is if let's say,
Speaker 1: if the restaurant is full and there are still customers
Speaker 1: at the door, then the restaurant owner will invest in
Speaker 1: more tables more, you know, expanded his premises. So and
Speaker 1: he then explained it, interestingly enough in in the form
Speaker 1: of a very nice parable. He said in in uh,
Speaker 1: in the United States, there are cities which are joined
Speaker 1: by more than one railway line, and the effect of
Speaker 1: their camp if you have, if they're both operating at
Speaker 1: less than full capacity, uh, the effects of competition between
Speaker 1: them will be that eventually one of those railway lines
Speaker 1: will uh go out of business and you'll end up
Speaker 1: in a situation with much less capacity uh and actually
Speaker 1: much less employment, much much much less output. So what
Speaker 1: is the answer to this problem of under utilization of capacity?
Speaker 1: And build a third railway exactly you've read the article, Uh,
Speaker 1: it's it's a lovely parable. And then, of course the
Speaker 1: first two railway lines will be busy ferrying all the
Speaker 1: workers and the steel and required to for building the
Speaker 1: third railway line. And then of course you've now got
Speaker 1: three railway lines. At the end of this year, you
Speaker 1: now have three railway lines. What you do then? And
Speaker 1: so he said, well, the answer is you build a
Speaker 1: fourth railway line and then problem and ye and he said, well,
Speaker 1: you know, all this sounds paradoxical, and but he said, well,
Speaker 1: it's the system that's paradoxical. And the reason why it's
Speaker 1: paradoxical is that it's a system that depends on the
Speaker 1: level of investment. And what's critical about the level of
Speaker 1: investment is that it's the level of investment that, according
Speaker 1: to Kalitsky but also Kines uh determines how much profits
Speaker 1: businesses will make. Businesses invest a lot, they will make
Speaker 1: a lot of in profits. If they don't invest so much,
Speaker 1: then it's uh, it doesn't you You you have this
Speaker 1: problem of excess capacity, uh, discouraging economic activity, discouraging investment.
Speaker 1: So my understanding of Knes is that, you know, Canes
Speaker 1: also wrote a lot about the business cycle and believed
Speaker 1: that the business cycle could be managed in one way
Speaker 1: or another through monetary policy or smoothed in some way.
Speaker 1: What does Kletski say about managing the business cycles or
Speaker 1: investment given its importance in the cycle. Well, Kletski thought
Speaker 1: that managing the economy by trying to influence the level
Speaker 1: of investment, it's really a fool's game because you, uh,
Speaker 1: for example, you may lower the rate of interest or
Speaker 1: lower the rate of taxation. Uh, you know, give additional
Speaker 1: tax allowances, and uh then you find that, okay, business
Speaker 1: takes it takes up a certain amount of investment, does
Speaker 1: some investment, and then requires further tax cuts, further cuts
Speaker 1: in the rate of interest in order to invest further.
Speaker 1: And it really, um, it really doesn't make sense. It
Speaker 1: doesn't make It didn't make sense for Kalitzky because the
Speaker 1: purpose of investment shouldn't be to maintain full employment. There
Speaker 1: are other instruments for doing this. Uh, the purpose of
Speaker 1: investment should be to provide the capacity for the amount
Speaker 1: of consumption that is required in the economy. That you know,
Speaker 1: that's that's how a rational economy would operate. So this
Speaker 1: again was a small difference between Canes and Kaletski. Canes
Speaker 1: wanted UH investment to be the leader. Kaletski argued that
Speaker 1: in fact, you can create the equivalent of an investment
Speaker 1: boom through fiscal stimulus. It has the same effect of
Speaker 1: expanding profits and in particularly using the fiscal stimulus to
Speaker 1: provide additional public goods and public services which would be
Speaker 1: provided free. So this gets around the problem of raising wages.
Speaker 1: You can increase real wages by providing free public goods.
Speaker 1: And then, of course the other way is to redistribute
Speaker 1: income from hiring incomes to lower incomes again by by
Speaker 1: various transfer payments. So to bring it up to today,
Speaker 1: and I don't know if we have full employment because
Speaker 1: I'm not even I'm not even sure what that means.
Speaker 1: But we have very low unemployment, the lowest in fifty years. Um.
Speaker 1: Some might say, okay, that's close to full employment, but
Speaker 1: that's a separate debate. But people there's like this, it's
Speaker 1: it repels people. It's ah, there's it's almost like there's
Speaker 1: like these white blood cells of the economy and it's
Speaker 1: like the Fed is coming in, it wants to raise rates.
Speaker 1: It talks about how the optimal situation would be at
Speaker 1: least a one percent increase, one and a half billion
Speaker 1: people laid off. You have investors who gets sort of
Speaker 1: a sense of relief every time the labor market data
Speaker 1: comes in week. Why is there this discomfort in a
Speaker 1: state of the economy which, on paper you think lots
Speaker 1: of spending good, lots of reason to invest do capex good,
Speaker 1: that's everyone's investment to someone else's income. Why is there
Speaker 1: this sort of like rebellion against that? Can let's keep
Speaker 1: put it in A argued that it's it's purely political. Um.
Speaker 1: He said that this he argued his faith in his
Speaker 1: famous article, uh, political aspects of full Employment, which I
Speaker 1: would recommend to anyone who doesn't know much Klitzki is
Speaker 1: very very easy to read. It. Not a single equation,
Speaker 1: but he oughta good he argued. There, but you know,
Speaker 1: there's no doubt that full employment is more rational for
Speaker 1: the system as a whole. It's more rational. Profits are higher,
Speaker 1: employment is higher. Everything is better if you have full employment. However,
Speaker 1: full employment strikes at the heart of another feature of capitalism,
Speaker 1: which is the question of labor discipline. If you have
Speaker 1: a state of full employment, then uh, it's very It
Speaker 1: becomes difficult to discipline workers in the factory or in
Speaker 1: the office. If if a worker can leave his or
Speaker 1: her place of employment and immediately get another one, then
Speaker 1: where is the labor discipline? It's about control. It's it's
Speaker 1: really about the control of labor. And Keletski argued that
Speaker 1: in in what would tend to happen is that in
Speaker 1: a state of m full employment you would get a
Speaker 1: political coalition UH, put together by major employers, UH, the
Speaker 1: people in finance UH, central bank, central bankers, all of
Speaker 1: whom would argue that the situation is somehow manifestly unsound.
Speaker 1: Will unsound in what way? Well? Inflation? And sure enough,
Speaker 1: you know we we have had inflation, but we also
Speaker 1: know at the moment that inflation is coming down quite rapidly.
Speaker 1: As well, because so much of the current inflation was
Speaker 1: simply an energy market adjustment two sanctions on on Russian energy.
Speaker 1: Uh So it's a kind of future inflation because the
Speaker 1: future is unknown, and it's very very easy to to say, oh, well,
Speaker 1: you know, things may appear okay at the moment, but
Speaker 1: we know we have these these and these economists with
Speaker 1: all these models showing that there's some terrifying inflation around.
Speaker 1: This kind of reminds me of the debate over work
Speaker 1: from home, which is, you know, post pandemic UM, people
Speaker 1: started working from home and there didn't seem to be
Speaker 1: much of a hit on productivity, and a lot of
Speaker 1: companies still met whatever their internal benchmarks are. So then
Speaker 1: you had a lot of bosses who started talking about
Speaker 1: a degradation of corporate culture and how you know it's
Speaker 1: bad people are working from home. They might be doing
Speaker 1: okay um on a pure numbers basis, but in the
Speaker 1: long run it's going to impact the company by hitting culture.
Speaker 1: Uh yeah. Can you maybe connect more of what we've
Speaker 1: seen over the past year or two to Colletski's ideas,
Speaker 1: Do you think the post pandemic maybe shift um towards
Speaker 1: worker power has vindicated some of his ideas. I think
Speaker 1: it has um it's it's it's vindicated a lot of
Speaker 1: these ideas because it's actually weakened, uh, the the the
Speaker 1: power of many businesses who uh, particularly businesses in uh
Speaker 1: in activities retail, hospitality, UH, these kind of these kinds
Speaker 1: of activities which transport even which I just saw that
Speaker 1: their markets shrinking, shrink shrinking quite drastically. The the what
Speaker 1: then happened, however, was that the speed of the recovery
Speaker 1: as uh you know, lockdown was removed. I think a
Speaker 1: lot of those businesses took advantage of that situation to
Speaker 1: start raising their price And my view is that they
Speaker 1: were raising their prices because many of them had got
Speaker 1: seriously into debt, many of them had got had found
Speaker 1: their political position weakened. They had to go knocking at
Speaker 1: the door of uh of governments asking for loans, asking
Speaker 1: for tax free bates, various other uh you know, public subsidies.
Speaker 1: Governments had responded by insisting on on no layoffs. UH.
Speaker 1: This kind of thing put UH companies, particular corporations into
Speaker 1: a difficult bind, and a lot of them got out
Speaker 1: of this by borrowing at record low rates in trust
Speaker 1: and then seeking to recover that borrowing by raising raising
Speaker 1: their prices. So you have my my explanation of the
Speaker 1: inflation is would be twofold. One is that you have
Speaker 1: this energy costs, which is a temporary phenomenon. But the
Speaker 1: other one is really the what Richard Coup referred to
Speaker 1: as it is a type of balance sheet effect where
Speaker 1: firms are trying to clear off debt by by raising
Speaker 1: prices and I think doing it. Uh, they were doing
Speaker 1: quite successfully. But that then feeds into a narrative that
Speaker 1: the uh, that all this is the consequence of full employment,
Speaker 1: and therefore, uh, you know, must be it must show
Speaker 1: that the state of full employment is is financially unsound.
Speaker 1: It isn't, of course, because the the the inflation has
Speaker 1: very little to do with with what's happening in the
Speaker 1: labor market. Wage increases have lagged lagged price increases. UH.
Speaker 1: Unions and workers in general have a much weak have
Speaker 1: a match weaker position in the labor market. Um to
Speaker 1: some degree, actually individual workers are benefiting from labor shortages,
Speaker 1: but in terms of organization, in terms of powering in
Speaker 1: what politically called the power in the factories, workers still
Speaker 1: remain weak because worker worker organizations are weak. So we
Speaker 1: just have a couple of minutes left. But I just
Speaker 1: want to on the inflation question. A term that you
Speaker 1: hear political activists sometimes in the US probably around the world,
Speaker 1: like greed inflation, And I'm curious whether you think that's
Speaker 1: a useful frame. It kind of doesn't sound like it
Speaker 1: listening that, of course, there are opportunistic situations and that
Speaker 1: for balance sheet reasons, corporations feel the impulse to uh
Speaker 1: to raise prices, But like greed kind of seems like
Speaker 1: one of these things that's kind of immeasurable. I'm curious,
Speaker 1: like in your perspective or collect keys perspective, like, is
Speaker 1: that a useful analytical mode Perstally, I wouldn't use the word, uh,
Speaker 1: the term greed because it seems to be a kind
Speaker 1: of moralizing the fact that it's it's business practice to
Speaker 1: get the best possible price, uh for for your output.
Speaker 1: I think there is a there is a sense in which,
Speaker 1: if you have excess capacity, uh, the excess capacity may,
Speaker 1: under certain circumstances, um cause a business to um not
Speaker 1: to raise prices to moderate greed. But on the whole,
Speaker 1: I think business decisions are not made on a kind
Speaker 1: of moral issue. You try to get the best out
Speaker 1: of the market. That's uh, it's it's the nature of
Speaker 1: the system. So one thing that I always like to
Speaker 1: ask economists who have written biographies of other econom miss
Speaker 1: or who have studied their work, is is there any
Speaker 1: area in which you disagree with COLLECTI or think that maybe,
Speaker 1: you know, maybe he got it wrong, or maybe this
Speaker 1: particular theory could be improved or expounded upon. Yes, I
Speaker 1: think actually he well, he I think his political judgment,
Speaker 1: uh sometimes was when when when to skew for it?
Speaker 1: I mean, if I can give a particular example from
Speaker 1: from the United States, he thought that the student movement
Speaker 1: against the Vietnam War or you know, was headed for failure. Uh.
Speaker 1: And I think this was this was a misjudgment. He
Speaker 1: thought that American capitalism would it would be divided between
Speaker 1: the international capitals and American multinationals would be much more
Speaker 1: sensitive to the way in which America's perceived abroad, and uh,
Speaker 1: the domestic or business American businesses that only operating within
Speaker 1: the United States, who would be you know, maybe much
Speaker 1: more bullish. I'm not sure that this is a distinction
Speaker 1: that that works quite well in the United States. I
Speaker 1: think I wished he I regret that he didn't write
Speaker 1: more about money, uh and finance, because I think he
Speaker 1: um in this way he um uh. It's it's too
Speaker 1: easy to dismiss his ideas as being characteristic of the
Speaker 1: long period between nine and let's say, the nineties seventies,
Speaker 1: when you know, really the stock market and finance were
Speaker 1: not terribly important and could and we're in a fact
Speaker 1: dependent on on state support. M I think that they
Speaker 1: the situation now it's rather it's rather different and really
Speaker 1: needs um needs more working on. So I think this
Speaker 1: would be um kind of my my, my regret and
Speaker 1: my criticism. Plus the fact that I think he his um.
Speaker 1: He was a he was an engineer, and a feature
Speaker 1: of the type of economics of his time was that
Speaker 1: you had to you want success in profession by putting
Speaker 1: forward in a neat mathematical model. Now he knew that
Speaker 1: this was this wasn't enough. You had to have some
Speaker 1: kind of roots in the way in which the system operated.
Speaker 1: But uh, you know, he tended to believe that once
Speaker 1: he'd once he'd put forward the equation and that was enough.
Speaker 1: And I don't think it was Jean Taparowski I'm afraid
Speaker 1: rut of time, but that was a fantastic Really appreciate
Speaker 1: you coming on. And I feel like perhaps, you know,
Speaker 1: Kine sort of got this revival after the Great Financial Crisis,
Speaker 1: and it feels like with collects thoughts right now is
Speaker 1: people wrestle with some of this thing. More people are
Speaker 1: going to be discovering him. So appreciate you coming out
Speaker 1: odd lots. Thank you, Thank you very much for this opportunity, Tracy.
Speaker 1: I really enjoyed that. It does feel like, um, well,
Speaker 1: I mean there's a lot there. The political aspects of
Speaker 1: the question you brought about working from home, the sort
Speaker 1: of rebellion against worker autonomy, worker power, what happens when
Speaker 1: it's really easy, potentially to find another job. I think
Speaker 1: it's like, for one thing, that's like a pretty important
Speaker 1: idea right now. Absolutely. I also thought the question of
Speaker 1: why so if you argue that, you know, private sector
Speaker 1: activity is dependent on the level of investment, but then
Speaker 1: why why does the level of investment change? Why is
Speaker 1: it more unstable that than consumption. That is a question
Speaker 1: that comes up all the time here on all plots,
Speaker 1: right like why do these business cycles exist? Why do
Speaker 1: firms seem to you know, potentially overreact to slow periods
Speaker 1: and then overreact to um more active periods. I don't know,
Speaker 1: like I think it's still open to debate, but it
Speaker 1: was definitely interesting to hear Coletsky's ideas on that. Yeah,
Speaker 1: and this idea that like and you know, um change
Speaker 1: like is UM pointing out like animal spirits uncertainty Like
Speaker 1: these are like it's like vibes, you know, like there's
Speaker 1: I think vibes are important, but also like they're a
Speaker 1: little bit unsatisfying to choose capacity utilization over vibes. Yea, yeah,
Speaker 1: I mean why do vibes change? Right? That's like if
Speaker 1: you're if you sort of like lean too heavily into
Speaker 1: the vibes theory of economic cycles, then you have then
Speaker 1: you're just moved onto the question of like well why
Speaker 1: do vibes change? And so some of these questions about
Speaker 1: like capacity utilization, I do think they're helpful. I love
Speaker 1: like I love the railroad example of like, Okay, the
Speaker 1: problem is just keep building railroads, which you will maintain
Speaker 1: like full demand. Then you'll end up with a hundred railroads.
Speaker 1: And this idea like this is the sort of like
Speaker 1: contradiction of the system is very As a regular user
Speaker 1: of amtrack, I say, build all the railroad build build
Speaker 1: them all. Now I am open to any and every
Speaker 1: possible explanation, um or I should say policy suggestion for
Speaker 1: smoothing business cycles, and this was a fascinating one. Absolutely
Speaker 1: All right, shall we leave it there? Let's leave it there.
Speaker 1: This has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joe Why Isn't Thal? You can
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