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Hello everyone and welcome back to conversations with Tyler, which occasionally aspires to be a conversation.
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Today I'm talking with Scott Sumner.
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Scott is an extremely well-known economist known perhaps most for his blog The Money Illusion, where he was and still is in fact the world's leading champion of nominal GDP level targeting.
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Scott has numerous books on monetary theory and history.
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He also blogs at EconLib and he is a long-standing Mercatus affiliate among other things.
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For many years he was a professor at Bentley in Massachusetts. Scott, welcome. Oh, thank you. It's good to be here.
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Now for your books on the Great Depression you once said that you read the New York Times for many years in a row for I think the 1920s and the 1930s.
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Monetary theory aside, what was the biggest surprise that you learned about that era?
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Oh, it's kind of hard to say.
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I think the the thing that felt interesting about it was to see how people saw things as the events played out in real time.
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So you know, before I read the New York Times it was always sort of looking back on history knowing what we know now about how things played out and seeing how people interpreted events like the rise of the Nazi Party in
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Germany in real time I found uh kind of enlightening and uh it's kind of hard to put into words exactly why it's enlightening, but it gives you a different perspective I think even on current events and um And you think they weren't panicked enough? Or there was a high variance of being
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Or there was a high variance of being panicked or how would you describe it?
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Well, I think you know, in the case of the rise of the Nazi Party there was no awareness of how transformative in a negative way the events would be.
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You'd see things in the New York Times like um experts expect Hitler to moderate his views as he as he gets closer to power and uh obviously that did not occur.
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Um and also uh you know, in the field of economics just seeing how policy shocks were interpreted at the time as compared to how we think of them today.
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Monetary policy decisions, decisions by Franklin Roosevelt and the New Deal and so on.
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And I found that very enlightening.
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So when FDR abrogates the gold clause, what was the typical response?
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Well, uh I think there was different responses uh depending on if you were a conservative finance type in New York, you probably would regard that as an outrageous abuse of power.
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But Roosevelt was pretty popular at the time.
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So he was doing a lot of things and I think overall his actions were widely popular in the United States partly just because of the difference from what had happened right before.
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We'd had four very bleak years under Herbert Hoover.
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The public was ready for I think it was called bold and persistent experimentation.
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And so even though some of the actions would have been perhaps regarded as abuse of power in previous period of American history the public was ready for those kind of decisive actions.
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And so overall I think his decisions were relatively popular.
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Now Sweden at that time, as you well know had fiat currency and floating exchange rates and they had a much milder Great Depression.
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When is it in economic history do you think that it was possible for relatively developed countries to actually just do fiat currency?
3:51
It didn't work during the French Revolution.
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There's a monitoring problem, a hyperinflation problem.
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When did it become the better thing to do?
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Well, that's a hard question.
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Um I've thought about this a lot and never made much progress on it, but I feel in 1830 it was still impossible.
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And in the '20s it's clearly possible, right?
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How well countries did it is a different matter, but some countries did it well.
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So one way of answering that question is to think about why didn't countries move sooner and I think one of the problems is that previous experience and says with fiat currency tended to be highly negative.
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So uh highly inflationary episodes, most notably the period right after World War I where a number of European countries, especially Germany, suffered hyperinflation.
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So at that time fiat currency was associated with hyperinflation.
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Highly irresponsible monetary policies.
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Even John Maynard Keynes had very negative things to say about pure fiat currency regimes.
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He's today viewed as an opponent of the gold standard, but he didn't really favor fiat currency.
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He favored something more like a Bretton Woods system with some sort of gold peg that could be adjusted in an emergency.
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And because of those negative experiences, it took a a tremendous amount of pain before countries were willing to abandon gold and switch over to fiat money.
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A modern analogy to that might be the situation in Argentina at the end of the 1990s and the early 2000s.
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So Argentina went through four very painful years of deflation with a currency board regime.
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And if you wonder, well, why didn't they abandon that sooner, devalued, try to get the economy out of depression?
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Argentina had previously had decades of painful history with high inflation.
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So the public was strongly opposed to inflationary fiat money regimes and they were willing to tough out the currency board for longer than most other modern political systems would have stuck with it.
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So I think you have to look at the the painful experience with fiat currency in the recent past remember the post-World War I hyperinflation in Europe was a recent event for them.
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And I think that colored the views of policy makers in the early 1930s, made them reluctant to move away from fiat until the pain was so intense that politics forced them off of um gold standard to fiat money.
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What's the key missing analytical variable?
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At some point fiat money becomes quite workable.
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Is it ease of monitoring the Fed or is it climate of ideas in society?
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What is it that was different from what the economists worried about?
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Well, you see, I'm not sure it wasn't even workable in the late 19th century.
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I don't It's very possible that the US political system was responsible enough in the late 19th century to run a fiat money regime with relatively low and stable inflation.
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But people just didn't conceive of that as a realistic possibility or a responsible possibility until it was tried and it was discovered.
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Here's another modern example.
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Remember when Milton Friedman was proposing floating exchange rates?
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So that's sort of like a uh an aspect of fiat currency regimes, right?
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If each country has its own fiat currency regimes, you're likely to end up with floating exchange rates.
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When he proposed that it was viewed as kind of irresponsible, almost uh extreme or or fringe view of foreign exchange regimes.
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And a couple decades later it was the norm.
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So sometimes there's a lot of um just inertia in how people think about policy possibilities and until these new options are tried they're simply not viewed as plausible, realistic policy proposals.
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Was there ever a serious case for bimetallism? In favor of bimetallism? In favor of it, yeah.
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Yeah, I guess it's it's generally viewed as being slightly superior to the gold standard in terms of stabilizing uh properties.
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I think Milton Friedman thought it was slightly better.
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Um there's also a variant called symmetalism which is not sort of either or gold-silver.
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It's like the medium of account is a weighted average of the two.
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So much gold plus so much silver becomes defined as a dollar.
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And that also has some advantages.
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And you could think of like inflation targeting as symmetalism going from two commodities to all the commodities in the economy, right?
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So under a gold standard you only stabilize one price, the price of gold.
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Under symmetalism you stabilize essentially the average of gold and silver prices.
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And under consumer price index targeting you stabilize the entire average of all prices in the economy.
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So there's sort of a continuum from gold all the way up to inflation targeting and everything in in in between including targeting, you know, commodity price indices and so on.
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To witness events, monetary or otherwise to where would you like to go back in time?
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Assume you have immunity against disease and you speak the appropriate languages.
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Like I would want to go back to uh Mexico before the Spanish conquest, probably. But what's your pick?
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Um probably not that far back because of my interest in economic history I think the period of the 19th and 20th centuries the most interesting for me.
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I don't know exactly I mean, the 1890s might be interesting for me because I don't know as much about it as the Great Depression, which I studied intensively, but I think the 1890s probably saw some similar dynamics play out as we saw in the Great Depression.
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You know, hoarding of gold, deflationary period, uncertainty about the stability of the monetary system.
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So, going back and seeing that in real time, what were the political issues involved, how did people think about those?
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That would have been interesting.
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William Jennings Bryan's famous speech about the cross of gold was during that period.
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So, you've researched extensively the 1920s and 30s, and you've seen a large number of movies from those decades.
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What do you feel are the biases in the movies?
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What do we get wrong if we only watch the movies?
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Well, a lot of the Hollywood movies from that period are fairly glamorous because people wanted to escape from the hard times.
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So, you'd see these elegant Art Deco New York City apartments, and um obviously conditions were very, very bleak during that period.
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I just watched a TV series called Babylon Berlin, which was in Germany about that time around 1930, and it really portrayed the poverty of that era in a way that you don't see in Hollywood movies, certainly, and the sort of desperation a lot of people felt at that time.
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Um I guess there's probably cultural differences as well.
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Maybe the culture was more conservative in some sense than the image you get from the movies, which is again a sort of a glamorous uh free-spirited uh uh you know, cultural scene.
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But, Hollywood is sort of pushing the envelope to entertain people.
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But, the actual views on many cultural issues were probably more conservative than comes across in those films, I would imagine.
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The reputation of the 1920s is that it was sexually radical, and you've seen plenty of movies made before the Hays Code, which feel a bit radical in that regard. What do you think?
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But, I think it was only radical relative to what came before, not radical relative to today.
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So, um Yeah, that's I'm not really an expert on the culture of that period, but my sense is that there there were still much more rigid rules about, you know, sexual behavior and so on in that period than in the period I grew up in in the 60s and 70s.
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Um but but the movies are presenting a a certain image that is different from reality.
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Um I think you recently saw the film Lenora, right? I didn't like it.
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I didn't watch the whole movie.
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Well, someone watching that film might get the idea that things are a little bit more free-spirited or crazy in America today than they actually are. Right? Maybe they are that way. We don't know, do we? Right?
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Well, you and I maybe aren't in that scene, I don't know.
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So, that that's all I could give you on that one.
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Let me ask you some questions about NGDP targeting.
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Now, Carl Schmitt, as you know, is an important thinker from the 20s, and he has the famous saying, it goes something like the sovereign is he who decides the exception.
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If that is the case, can there ever be a monetary rule at all, whether or not it's desirable?
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Can we ever get discretion out of the hands of the central bank and treasury?
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Maybe not, but I don't think that's really the right way to think about monetary rules.
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So, to me, rather than think of either or rule versus discretion, think about in terms of how rule-like is the policy regime.
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Like, so we can see, for instance, over the last 30 years or so in the United States, inflation's averaged about 2%, and that's probably mostly because the Fed has decided that's the appropriate rate of inflation.
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That is more rule-like behavior than the previous three decades, where inflation ranged from zero almost zero in some years to double digit for a considerable period of time.
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And so, I would say monetary policy has become somewhat more rule-like over the last 30 years compared to the previous 30 years, and it has the potential to become even more rule-like, despite the fact that ultimately it'll never be a perfectly automatic rule because of the influence of politics.
14:35
Let's say we think of monetary policy as a kind of game between the Fed and Congress, and Congress is always threatening to intervene in the economy, and most of those interventions are ill-considered.
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So, the Fed is not just trying to achieve monetary policy goals, but it's trying to keep Congress at bay.
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And one of the reasons why it ends up with more discretion rather than less is to limit Congress.
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So, after the pandemic or the tail end of the pandemic, the Fed is fairly inflationary, but maybe in part it knows well, if it doesn't do something, Congress will.
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Is that a useful way to think about some parts of monetary policy?
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And does it lead us to having to tolerate yet more discretion than we might like?
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It's probably a useful way in some countries, but I think less so in the United States than you might imagine.
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I think that what happened in the case of COVID and and other monetary policy mistakes, it's more a question of the Fed just getting things wrong, misjudging the situation.
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So, I mean, you can imagine countries where the central banks are kind of forced to inflate for political reasons, to accommodate deficit spending, to monetize the debt, but I don't think that was foremost on the you know, the Fed's mind in terms of the decisions that were made in 2020 and 2021.
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There had been a a shift in sort of the zeitgeist in terms of the way policymakers think about monetary policy after a decade of below-target inflation, and a perception that the Fed had been too not expansionary enough during the previous decade.
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So, they were determined to not repeat the mistakes of the recovery from the 2008-9 recession by being more aggressive the next time around.
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Now, they ended up being too aggressive, but I think that was actually the view of of Powell and the others at the Fed, that they needed to be more aggressive.
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They needed to try for what are called makeup policies, to explicitly promote above-target inflation for a while to get a quicker recovery.
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And uh I don't think it was pressure from Congress that pushed them to be as aggressive as they were.
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Um and I don't think that that Congress was going to do a lot of fiscal stimulus, whether they set interest rates at zero at or at 1% during that period.
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Congress is determined to push a lot of money out in the economy for a variety of reasons, partly for relief, partly for stimulus reasons.
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And I don't think the Fed was foremost on the minds of policymakers in Congress when they made those fiscal decisions.
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But say, during the Great Financial Crisis, the Fed knows if it does nothing on the bailout front, Congress will just do more.
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And the Fed would rather do it through lending facilities and monetary policy than have Congress get involved. Or no?
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Um again, I think the Fed felt that the the crisis was very severe and that they needed to do a lot.
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I think to some extent they did the wrong things, but in terms of their mindset, they worried as particularly Ben Bernanke, who was a scholar of the Great Depression, right?
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So, he was in a sense the perfect person to be in that role.
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And he didn't want to repeat what he saw as the key mistakes during the early 1930s, allowing the banking system to partially collapse and bring the economy down with it.
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So, I don't think, again, they were thinking that much about what Congress might do instead of their actions, but just the crisis right in front of their face that they had to address.
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But, how did we end up with this one institution, which by your account is so nonpolitical in its decision-making?
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That feels quite miraculous in a way.
18:31
And in response to the last few questions, you seem to be saying, well, the Fed just does what it thinks is best.
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Uh that's a nice place to be, right?
18:39
But, no other part of the government works that way. How did we get to that?
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I don't think the Fed always does what it thinks what it thinks is best on all issues.
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So, I think the Fed is somewhat political or aware of political constraints in many areas of policymaking.
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That would include areas like bank regulation, where they have to think about what Congress wants.
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And even some of the bailout, which I I would separate uh unconventional monetary policy bailouts, asset purchases, and so on, from more traditional monetary policy that's just aimed at stabilizing inflation or nominal GDP growth or things like that.
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So, it's the sort of traditional monetary policymaking where I think the Fed is actually trying to achieve an optimal path for spending and inflation over time, and they believe if they do that, that will also be politically good for them.
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Like, if if things go bad for the economy in either direction, too much inflation or too much recession, the Fed will be criticized and face opposition in Congress.
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But, if things are going well, like think about the long green span period, where things were going relatively well in terms of the macroeconomy, the Fed's reputation was pretty high.
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So, instead of trying to sort of second-guess like what does Congress want us to do here or there, the Fed's actually better off in just achieving good outcomes for the macroeconomy and hoping that that results in their reputation uh being high among the public and among Congress.
20:18
Uh but when you get to more specific areas like bank regulation, where there's special interest groups that differ in terms of their political interests, yes, politics does play a role in what the Fed does.
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And you know, perhaps under the new administration, the Fed will back off a little bit on some of the tightening of bank regulation that's been in the works recently.
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So, there I think politics does play a role.
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But I think it's it plays less of a role in macro uh policy making than you people might think.
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With the exception that if you go back in history, yes, you can find examples Burns and Nixon and so on and and President Johnson as well, where pressure was put on the Fed.
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That seems to be to me to be less of a factor in recent decades.
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And even under Trump, I don't think the Fed was pressured that much to change its macroeconomic approach.
21:16
Way back when, I recall Brad DeLong saying something like the following, and here I'm paraphrasing.
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Well, stabilizing the growth path of nominal GDP, that can be a good thing.
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What it really means is that we ought to bail out General Motors, because that will make it easier to stabilize nominal GDP without having too high a rate of price inflation.
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Do you agree or disagree?
21:39
Yeah, I disagree with that.
21:39
Um and and pretty much with all similar statements. I would even go further.
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I don't even think bailing out the financial system was the essential uh problem we faced in 2008.
21:55
I believe the financial crisis was mostly a symptom of rapidly falling nominal GDP expectations.
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So, in other words, if you stabilize the path of nominal GDP, that takes care of most of the other structural problems in the economy.
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At that point, you have individual companies failing here or there, individual banks that perhaps were poorly managed.
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You know, we had Silicon Valley Bank fail recently during an otherwise healthy period in the economy. Those things happen.
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But um I don't think those kind of sectoral shocks are crucial in driving the business cycle.
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As long as monetary policy keeps the total path of spending along a stable growth path, uh we can let other policy makers address those issues.
22:45
Congress can decide if they want to bail out a General Motors, for instance.
22:49
But can't credit markets break down on their own?
22:51
So, say today a large private equity firm turned out to be more leveraged than it seems at the moment, and they became insolvent, and that would be a macroeconomic crisis.
23:04
So, I certainly would agree it would be a good idea to stabilize the expected growth path of nominal GDP, but is any kind of credit market intervention needed?
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And again, Congress is not going to do it well, we know that.
23:16
So, what should monetary policy do?
23:19
Well, so here, if I if I told you what I I'll tell you in a moment what it should do, some people would interpret my answer as a bailout, but I don't think it is a bailout. So, let me explain.
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Let's say there's a large institution that fails, and it potentially has ripple effects on other parts of financial system.
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That's essentially going to lower the equilibrium interest rate in the economy.
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So, the Fed, in order to stabilize nominal GDP growth, might have to cut interest rates sharply and might have to do some QE or whatever, merely to stabilize the path of nominal GDP growth given that shock.
23:59
If they do that, then the ripple effects from the original crisis become far smaller.
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So, the but I think what happens when people look back at previous financial crises that seem to have um that seem to spread on their own, what they're missing is the role of the effect on the macroeconomy.
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So, when there is a banking crisis that starts in one place and spreads, the initial crisis might have been due to mistakes made by that individual bank, but the spread across the financial system is usually because the policy makers allowed nominal GDP to fall sharply.
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And any sort of decline in nominal GDP that occurs for any reason will tend to make financial crises worse.
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Uh we saw this in Argentina in the early 2000s, and even in the Great Depression in the United States, when we look back on it, we think of it as like a financial crisis causing a Great Depression, but that's not actually what happened.
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The Great Depression in the US began in late 1929.
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The banking system didn't get into any kind of serious trouble until more than a year later, when the depression was already quite deep.
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So, the causation clearly ran from falling nominal spending to financial distress.
25:20
And that shouldn't be surprising at all, because nominal GDP is the key variable determining the health of the financial system, given that almost all of our financial contracts are nominal contracts. Right?
25:35
So, think of the total nominal income in the economy as the resources that people, companies, and even governments have to repay their debts.
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If that falls sharply, you will have a lot of financial distress.
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On the other hand, if there's a financial crisis and that lowers the equilibrium interest rate and policy makers don't respond appropriately, nominal GDP will fall, the crisis will get worse, and it'll look to the average person like the crisis is sort of just building on itself.
26:09
An analogy I sometimes use is like a cold that turns into pneumonia. Right?
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It starts as one illness.
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It might seem to a person like it's just a bad cold, but actually the nature of the illness has changed.
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And this is what often happens in these periods of financial crisis combined with falling nominal GDP.
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It starts with one type of problem, financial distress, and it turns into a very different type of crisis when nominal GDP falls sharply because of all these nominal debt contracts.
26:40
So, if the Fed had listened to you during the Great Financial Crisis, what would have been the rate of price inflation in 2009, roughly?
26:49
Uh I think it would have been a little bit higher than the Fed's target, um but not a lot higher.
26:56
But say real GDP was going to fall by 2%.
26:58
But you see, I that's what I don't accept.
27:03
See, I believe that the fall in real GDP was mostly due to the fall in nominal GDP.
27:09
So, in a counterfactual, we know that the trend rate of growth in nominal GDP had been 5% a year going into the slump, and it fell to -3.
27:18
So, it's like an 8-point decline in the growth rate.
27:23
Now, in a counterfactual, where they keep nominal GDP growing at 5% a year, let's say, most of the difference shows up in stronger real growth, and only a small part of the difference shows up in higher inflation.
27:39
So, the inflation rate in um 2009 was actually around zero.
27:46
It might have been no more than two or three percent if nominal growth had been that much higher, and real growth might have been 5% higher.
27:55
But this is a point where I think I disagree with you, even though I agree with much of what you've said up until now.
28:01
I worry that by attributing the decline in real GDP to a decline in nominal GDP, that it's on the verge of being tautologous, not a literal tautology, but given prices don't move that much, that you're explaining a thing by itself.
28:19
And I think it would have been quite possible for real GDP to fall by a few percent, and if we had stabilized the growth path of nominal GDP, we would have had price inflation of say 5%, which I would have greatly preferred to what we did, to be clear.
28:33
Uh but I think it's one reason why central banks are reluctant to institute your kind of advice, because they know they'll be blamed for a price inflation rate of 5%.
28:42
Do you see what I'm saying?
28:45
I see what you're saying, but I think that in a way, your instincts that it's almost tautological reflects the fact that you sort of buy into what I'm saying about the interrelationship between real and nominal shocks.
28:59
I mean, we both know that they're not necessarily at all closely correlated, right?
29:04
In 2008 and 9, Zimbabwe had a recession and hyperinflation at the same time.
29:09
So, their nominal and real economies were going in dramatically different directions.
29:12
And we also know that real and nominal variables are radically different variables.
29:18
So, when our instincts tell us that there's something tautological about the correlation between real and nominal GDP in the United States, it's because our instincts have recognized the fact that in fact, most of the US business cycle is due to nominal shocks interacting with sticky wages.
29:38
And if that hypothesis is true, that model of the business cycle is true for the United States, but not for Zimbabwe, then what it's telling us is that if we can control nominal GDP growth, probably the path of real GDP will also be more stable.
29:55
Now, it's possible that we do succeed in stabilizing nominal GDP growth and we find out it doesn't help.
30:03
But, there's an awful lot of circumstantial evidence to support my claim because we observe, for instance, in the United States that when real GDP, I'm sorry, nominal GDP is more volatile, so is real GDP.
30:15
That's one thing we know.
30:20
We also know that some of the volatility of nominal GDP comes from very clear monetary policy mistakes that have been made at various periods of time that can be clearly identified.
30:33
And so, when we see this show up in uh similar movements in real output, uh there's just a strong presumption that there's a causal relationship there.
30:43
Financial markets also seem to treat it like there's a causal relationship.
30:47
Financial market responses to Federal Reserve policy shocks seem to reflect a view in the financial markets that these things are important for the real economy.
30:59
I think my view would be when you get a very bad recession, it's typically the combination of negative nominal shocks and significant negative real shocks, often to credit markets.
31:11
And the negative real shocks are not just an epiphenomenon or result of the nominal problem mixed with sticky wages.
31:18
You have both happening and the credit market problems don't just go away if you do your nominal job.
31:25
And then you get back to these situations where you'll need a fairly high rate of price inflation to stabilize growth path of nominal GDP.
31:33
So, you just think credit market shocks are not that important?
31:34
Like what Charles Kindleberger wrote, you don't wouldn't really agree with that economic history or how should I frame your view here?
31:43
Yeah, I think the financial market problems are mostly a symptom.
31:46
Um here here's another example I could give you.
31:48
At the beginning of the 2008 recession, the view in Europe was that America was paying a price for our kind of reckless cowboy capitalism, deregulation of banking, uh less stable financial system than in Europe.
32:07
And uh there was almost a little bit of gloating in some quarters in Europe at that time.
32:14
Now, we now know that the Great Recession ended up being much worse in Europe than the United States.
32:18
So, let's say the standard view is correct that the Great Recession was caused by the American housing bubble combined with the banking crisis.
32:28
The recession should have been much worse in the United States.
32:30
We're the ones that had the big subprime crisis.
32:35
And that was what was expected in early 2008.
32:37
The recession was going to be much worse in the US than in Europe.
32:39
But, here's one difference.
32:42
Monetary policy in Europe was clearly tighter throughout 2008 than the US.
32:46
The ECB was much more hawkish than the Bernanke Fed.
32:52
That led to the recession being more severe in Europe.
32:55
In addition, 2 years later in 2011, the Europeans got spooked by rising commodity prices and a pickup in inflation, which was a little bit misleading because nominal growth was very weak still.
33:12
They tightened monetary policy twice in early 2000 level 11.
33:14
They had a double-dip recession.
33:19
The financial problems ended up being more severe in Europe than the United States.
33:24
And they were more severe because the path of nominal GDP was much more unfavorable in Europe compared to the United States, even though the United States did not do particularly well.
33:35
And so, I think that again and again, when you look at these cases where there's some sort of monetary policy mistake, America 1929, Argentina in the late 1990s, you see the monetary policy mistake occurring first in an otherwise healthy economy, then you see the financial crisis developing as nominal GDP is falling sharply.
33:58
But, there are other occasions like 2008 where the financial distress occurs first, and this is why I believe it gets misdiagnosed.
34:06
Because the financial distress occurs first, people think that everything that happened afterwards was an implication of just a worsening financial crisis.
34:18
Whereas, what actually happened is the financial crisis causes changes in the equilibrium interest rate that the Fed misjudges. Policy gets off course.
34:28
Because it's off course, aggregate demand falls sharply, and that is the factor that actually worsens the financial crisis as you get deeper into the process.
34:40
Now, in very late 2024, I was reading a Wall Street Journal article that reported on how many different price indices in China were showing deflation, sustained deflation. Now, in which year? Sorry. This year, now.
34:54
The people listen to these in future years, so I'm just benchmarking when we're talking.
34:59
So, there's ongoing price deflation in many Chinese price indices.
35:01
This is considered to be bad for the Chinese economy.
35:07
Uh Chinese aren't stupid.
35:07
They have a sophisticated central bank.
35:11
Why is China tolerating this?
35:13
Why don't they end the deflation with a more activist monetary policy? Okay, good question.
35:17
So, first of all, the deflation they're going through, I would argue is very similar to the deflation they went through in the in the late '90s and early 2000s.
35:29
It's due to the Chinese government being reluctant to weaken the currency sufficiently in the foreign exchange market to maintain positive inflation.
35:41
And that reluctance seems to be uh partly due to political reasons, but as you know, governments around the world have traditionally viewed the exchange rate as a very important variable.
35:53
And so, if you focus on a certain set of goals for your exchange rate, you're inevitably going to uh let go of your ability to control macroeconomic aggregates like nominal GDP and inflation.
36:07
The most extreme example of that is Hong Kong, which has pegged their currency to the dollar for 40 years.
36:14
And so, essentially, the Hong Kong business cycle and the periods of deflation in Hong Kong are completely correlated with the strength of the US dollar.
36:24
So, if we go back to the late 1990s, most countries in East Asia devalued sharply.
36:29
There was a severe crisis. China did not.
36:34
The consequence of China's decision not to devalue when all its competitor countries were devaluing was deflation.
36:41
That was a political decision they made.
36:44
More recently, China has allowed a little bit of weakening of the yuan, but not nearly the extent that you see in places like Japan.
36:53
And Japan, despite large depreciation in the Japanese yen, has still only suffered very mild inflation.
37:01
In China, where the currency is much stronger than in Japan, you get outright deflation.
37:06
So, it's a question of prioritizing exchange rate over macroeconomic stability that leads to these kind of unfavorable outcomes in terms of inflation.
37:16
Anytime you prioritize any variable above your core goal of either inflation targeting or nominal GDP targeting, you will end up with negative outcomes.
37:27
But, why don't the Chinese just give up the exchange rate target?
37:31
It's on your account, it sounds like a big mistake.
37:33
You're saying they're stupid in a sense, right?
37:34
They don't import that much, so it's not going to be a problem there.
37:38
It would help their exporters marginally.
37:40
It certainly wouldn't hurt them.
37:43
Why not just push the button and do what Scott Sumner says?
37:47
I'll give you an example.
37:47
Um And I hope I get the facts right on this.
37:51
In the early 2000s, there was a lot of criticism from American economists like, why don't the Japanese just devalue the yen if they want to create inflation?
37:58
They can get out of the liquidity trap.
38:02
At the very time the economists were making this uh suggestion to the Japanese, uh Treasury officials were putting a lot of pressure on Japan not to depreciate the Japanese yen with the implied threat of protectionist response if they did.
38:18
So, you can argue that essentially, to the extent that the US is able to influence Japanese policy makers, we may have pressured Japan into a long period of deflation by discouraging them from devaluing the yen in a way that would have been required to get Japan out of deflation in the '90s and early 2000s.
38:39
But, we can't push China around the same way.
38:41
but maybe part of the reason is fear of the way the US would respond with uh protectionist measures if there was a sharp fall in the yuan.
38:48
Now, I'm not certain that's the case, and I'm not certain that China is making the right decision.
38:55
On balance, I think they'd be better off allowing a little more weakness in their currency.
39:02
I'm not exactly certain all of the reasons why.
39:04
It it could reflect different interest groups within China, some which benefit from a strong currency, some from a weak currency.
39:14
I don't know enough about the Chinese situation, but if you're asking me, does China have the ability to get out of deflation with a weaker currency? Yes, they do. They have that ability.
39:26
Um I I don't think there's even any question.
39:28
One economist, Lars Svensson, called currency depreciation a foolproof way of escaping a liquidity trap.
39:35
You can always weaken a currency and create inflation under a fiat money system if you're are to do so.
39:39
If you haven't done so, there is some sort of political barrier to taking the steps that would be required, or there's simply a sort of a cognitive error, like you're not thinking about the problem in the right way.
39:53
Which has also been an enormous problem in monetary economics because of confusion about what low interest rates mean and other things about monetary policy that confuse even policy makers often into thinking their policy stance is different from what it actually is.
40:11
Let me give you an alternative hypothesis and tell me what you think of it. This is for China.
40:14
Their banking system is radically undercapitalized.
40:19
They keep on shoveling money into it.
40:19
A lot of their credit channels are broken.
40:24
They believe a more activist monetary policy won't work through credit channels.
40:30
They do in fact know they could get higher price inflation by doing something like printing up currency.
40:33
But they don't feel they can control that process because they don't have a good theory of how their own monetary base relates to their own price level.
40:42
And they're afraid to do that so much as justifiably.
40:47
And that's why they keep on suffering under deflation.
40:51
Okay, good good question.
40:51
So, I think you could have made a similar argument about Japan say 12 years ago right before Abe took office.
41:02
And Japan had suffered a long period of deflation.
41:04
There was problems in the banking system and so on.
41:06
So, it was easy to view the Japanese situation in some sense as structural and to blame it on whatever demographics or whatever you want to point to.
41:17
So, Abe ran for office on a platform of inflation.
41:23
He promised higher inflation.
41:26
And by the way, that's worth thinking about because of all the recent discussion about how unpopular inflation is.
41:32
Roosevelt in 1930s also ran on higher inflation and was very popular on that platform.
41:37
So, Abe runs for office in 2012 on a platform of high inflation or sorry, not high, but say up to 3% a year.
41:48
And things do improve in Japan under his changes in monetary policy.
41:56
So, I think that that's a piece of evidence in favor of the view that these problems that look structural actually have a deeper cause and that is a failure of policy to achieve the desired objective.
42:15
And a lot of times, I know that the mistake theory is unpopular among intellectuals, you know, a certain policy is in effect because policy makers just don't understand things.
42:24
It's much more fashionable to view dysfunctional policies like tariffs as reflecting say special interest politics of one sort or another.
42:35
But I think monetary policy is different.
42:36
I think monetary policy is one area where mistakes actually do occur fairly often and you get outcomes that governments actually don't want because they're not thinking about the situation in the correct way.
42:47
And even the policy makers themselves have often failed to really understand the nature of the problem.
42:55
And um it's sort of an Alice in Wonderland world where things look one way, but are very different.
43:02
Like high interest rates look like tight money and low interest rates look like easy money, but often low interest rates are actually reflective of a previous tight money policy that's created deflation.
43:15
And in that upside down world where it's hard to really understand the meaning of policy indicators, it's easy to make mistakes.
43:25
You know, as you know, there's currently a debate now between Keynesians and what are called neo-Fisherians about whether low interest rates are easy money or tight money.
43:36
You'd think a basic question like that would have been settled decades ago in the field of economics.
43:41
And if it's that confusing to even high-level theorists, why should we expect policy makers at central banks to always get these decisions right?
43:51
I have a very different question and this is from a reader. I'm paraphrasing.
43:55
Scott Sumner's mantra, quote, "Never reason from a price change."
43:57
is perhaps his best contribution to economic thinking.
44:02
Are you the one who came up with this and when did you first use it?
44:08
I don't remember when I first used it, um but I'll I'll tell you a story on this.
44:13
I I think I started mentioning this phrase 10 or 15 years ago either to my class when I was teaching at Bentley College or um in my blog.
44:26
But when I thought back on my early career in academia and my research, I realized that I'd actually been thinking about this all along.
44:33
So, I did a paper in 1989 with Steve Silver on real wages.
44:39
It's in the JPE and um it's basically a paper that looks at the question of real wage cyclicality and it criticizes the previous literature as reasoning from a price change.
44:52
So, there was this debate about whether real wages were procyclical or countercyclical and we ended up with a view that real wages are countercyclical when there's demand shocks and procyclical when there's supply shocks.
45:09
driving the price level, right?
45:09
So, it isn't just don't reason from an individual price change, it's don't reason from a price level change.
45:16
Like don't ever talk about whether inflation is popular or unpopular without thinking about whether it's supply or demand-side inflation or whether it's inflation trying to get out of deflation.
45:29
Don't reason from an interest rate change.
45:31
Never say the interest rate went up, therefore this will happen, or the exchange rate depreciated, therefore this will happen because the impact of those price changes always depends on what's driving the change.
45:43
Is the interest rate changing because of the liquidity effect or the Fisher effect or the income effect and so on.
45:53
So, I actually have been thinking about this since the late 1980s, but I didn't really come up with that phrase until more recently.
46:01
And um once I started thinking in those terms, I started to see this mistake appearing in all sorts of context.
46:10
And probably even myself, I've reasoned from a price change at various times.
46:14
And I've seen prominent economists make statements that to me seemed to be an example of this fallacy.
46:21
Now, you might be my favorite movie critic of all time since you are in my opinion always correct.
46:25
So, I have a few questions about film.
46:29
What's your general process for discovering movies to watch? How do you decide?
46:35
Well, first of all, I can't always be correct cuz sometimes I change my mind about films. Um and I Maybe I do too.
46:42
feel like What's What's that? Maybe I do too.
46:47
Well, um so, just the way my brain is wired, I'm much better at visual things than at verbal things.
46:56
Probably listeners can already suspect that.
46:58
Um so, when I look at film, I'm focusing mostly on the visual aspect of the film.
47:03
And that's sort of hard to put into words.
47:08
Um I think that a lot of people tend to look at film from the perspective of a screenplay.
47:20
It's sometimes said that cinema is about cinematography and TV is about screenplays. All right.
47:27
So, people that are really interested in film tend to like movies a lot better than TV shows because the visual aspect comes to the fore.
47:37
And um that's what I look for in a film is something that is visually interesting that that expresses artistic ideas in a in a visually compelling way.
47:50
But I find it difficult to put into words exactly what that quality is because it's just sort of intangible.
47:59
You You know it when you see it.
47:59
Like there's certain directors that in the first 30 seconds of the film, you just see their signature visual style.
48:05
All right, a Wes Anderson film has a very distinctive visual style. David Lynch and so on.
48:14
But it isn't just visuals, it's the way visuals are combined with music and editing and dialogue that has made film such a rich art form during the 20th century especially.
48:29
It combines all these things in a way that some other art forms, by comparison, seem a little more one-dimensional.
48:35
Like I'm a big fan of all the visual arts including painting, but I think painting as an art form was kind of played out by the early 20th century.
48:43
At least the visual ideas were exhausted and then goes into conceptual art and so on.
48:51
But film, because it has all these different aspects combined together, was a very dynamic art form throughout much of the 20th century.
49:01
And I think that's what especially drew me to film.
49:05
Which is the best Hitchcock movie?
49:09
Well, my favorite is Vertigo.
49:12
I That's not necessarily better in a you know, artistic sense than say Rear Window or some of his other classics, but um I think Vertigo is Hitchcock's maybe most personal film where Jimmy Stewart is sort of a stand-in for Hitchcock. In a sense, right?
49:40
So, as I recall the plot, Jimmy Stewart is at some point trying to sort of mold or reshape this woman into this dream woman he had met earlier.
49:53
And Hitchcock as a director is also sort of trying to do that same thing and and maybe failing in the end.
50:03
So, it seems like Vertigo is in some sense a critique of a certain aspect of a masculine personality.
50:14
And it just seems to be more of a serious deep film than a lot of Hitchcock films, which are brilliant films, but are made to be kind of light entertainment in many cases.
50:29
In the 90s, yes, absolutely.
50:31
You know, for me it's Vertigo and Rear Window.
50:33
So, on that I suppose we agree.
50:36
Yeah, I like Rope very much.
50:36
I wouldn't put it at the top, but it's one of the most underrated ones and Trouble with Harry also I'm very fond of.
50:44
Very That whole era was his peak period, I believe.
50:46
I'm never sure which are the excellent for a long time, but I'm never sure which are the deep Hitchcock movies though.
50:53
So, ones like North by Northwest, To Catch a Thief, I think of as light and frothy, but I don't know, there's some underlying sense of menace.
51:04
And maybe having more frothiness in it is part of the depth as well.
51:10
Yeah, yeah, it's it's hard to say.
51:15
There's so many great ones and some of them are probably less known to people, some of the black and white ones that younger people don't tend to watch as much.
51:23
You know, Strangers on a Train, Notorious.
51:27
Some of those, but things like Jamaica Inn I don't love.
51:30
They they do feel a bit creaky to me. Yeah, that's right.
51:35
Now, if we think of the 1990s, the late 90s, Taiwanese film is quite special.
51:40
A bit later South Korean film becomes the thing.
51:43
Iranian movies for a while, though that probably is mostly over.
51:48
There's a blip in in Romanian cinema, but what's the next location where you're excited about the movie making?
51:58
I don't know, I kind of feel like I've already gone through sort of the peak period for my life.
52:01
Like everybody has eras that resonate with them.
52:04
For me the East Asian films from places like Taiwan in the 90s were maybe what the French New Wave was to a generation older than me.
52:18
And I don't know if I'll ever really recreate that feeling.
52:23
And it's that's not a knock on the movie industry.
52:25
I think the directors coming along now are perhaps as talented as ever, more talented, but it's my receptivity to what's being done is maybe not as high as when I was younger.
52:39
So, there's a certain period when you're at your peak ability to receive a certain type of film.
52:48
And like I just looked at a list of Manohla Dargis's favorite films.
52:57
And three of them that I'd seen, Dune, Enora, and Challenger, I mean, they seem like good films, but they just I felt like I was too old for them.
53:07
I didn't really connect with them.
53:09
But Matt does not watch enough maybe a generational thing.
53:11
I love Matt, but he does not watch enough foreign movies.
53:14
Like I think right now Hollywood is pretty terrible and foreign cinema in this hard to predict diverse way is pretty wonderful, but it's not in any single place the way it had been in East Asia.
53:26
But even I'm going to sound like an old film snob here, but like if I go back to the 70s and 60s and 70s when you had those Kubrick and Coppola masterpieces one after another, I don't feel like I'm seeing that now.
53:41
But it's possible that they're out there that I'm just missing them.
53:43
Or it may be that like the directors may be just as talented, but the fact that they're coming later makes them not seem that way.
53:53
They're they seem more driven.
53:53
Like you can look at like the Coen brothers, clearly extremely talented directors, but if they had been on the scene 40 years earlier, would they be viewed more highly because they would have been more innovative at that time? I think so. They bore me a bit. Like they're fine.
54:10
I agree they're super talented, but I don't really look forward to seeing the next thing they do.
54:18
But then ask this question, well, what happened to Coppola after the 70s?
54:20
So, he has those four masterpieces. Why can't he continue?
54:24
Like he he was presumably just as talented, but maybe he had just run out of ideas.
54:32
And you know, my view is that cinema's evolved in a way where the more interesting directors today are ones that have sort of a more weird or edgy style, you know, more unusual style because the conventional masterpieces like The Godfather have already been done.
54:48
So, you have more quirky filmmakers like Wes Anderson, David Lynch, and so on that are pushing the envelope in kind of a mannerist mannerist direction.
55:01
Do you think there are Hollywood movies, recent ones, that 50 years from now will be viewed as classics and still watched?
55:09
I'm not sure there will be actually.
55:11
Like right now it's Christmas season, people watch Wizard of Oz again perhaps.
55:15
I don't myself like It's a Wonderful Life, but I would grant it's become a classic.
55:19
Die Hard, which is pretty good, right?
55:21
That's become a sort of classic, Christmas classic.
55:25
Are we producing ones like that?
55:25
And they're not even the best movies, right? But they've lasted.
55:32
Yeah, no, I think that you know, that's my view.
55:34
There's there's in any art form there's like a golden era and or there's multiple in some cases.
55:42
Like if you take the art of painting, there was an enormous number of masterpieces produced between 1600 and say 1675.
55:55
The next 75 years, I don't think it's anywhere close to being comparable to that previous 75 years when you know, Rembrandt, Velasquez, Vermeer, Rubens, all those were so spectacular.
56:10
And I think they painting didn't get a lot of momentum again until the 19th century when there was new innovations which opened up new possibilities.
56:21
So, yeah, I think that in film certain styles get played out and then eventually somebody develops something new.
56:32
I'm actually surprised by how vibrant the novel is as an art form.
56:34
It's done fantastically well. Yeah.
56:36
Can also guard for it seems like inexhaustible almost.
56:41
How did you like Solenoid by the way?
56:41
I know you were reading it. Did you finish it? I loved it.
56:45
I thought this is one of the the best novels of the last 10 years. Same here.
56:53
And I think you know, it's like it's an unusual novel.
56:56
Like it seems to me to be kind of a depressing novel, but on the other hand I consider myself a middlebrow reader, not a highbrow reader.
57:05
And when I say it's depressing, that may be just superficial and maybe at a deeper level it's inspiring in some way.
57:11
But I found it kind of mesmerizing in a similar way to My Struggle by Knausgård in that sometimes you finish a novel and it's you know, okay, on to the next one. That was a nice novel.
57:24
And then there's some novels where you feel like a whole world has been sort of opened up in front of you.
57:30
And I think My Struggle was like that and I think Solenoid was like that.
57:34
You know, the author earlier ones like In Search of Lost Time and you know, some of the classics, but you know, it's more than just a novel.
57:40
It's a whole world in a sense.
57:42
The author of Solenoid has a new novel out. It's not in English yet.
57:47
I bought a German language copy.
57:51
It's long enough, I'm not sure if I'll read it in German, but at some point it will be coming.
57:54
So, you can look forward to that.
57:57
But I think it suggests you don't have less enthusiasm for wonderful new creations and that you should at least by your own standards decide a lot of cinema is worse.
58:06
It's not that you're incapable of appreciating it.
58:11
Well, there was I I can't get the quote right exactly, but Susan Sontag said something to the effect of like are artistic masterpieces still possible?
58:21
And then she said, or are we not receptive to the possibility of future masterpieces?
58:26
Is the problem they're not being produced or that we're no longer receptive to them?
58:32
I think it is somewhat of an open question.
58:34
You can become you can consume so much of any art form or multiple art forms that you become a bit jaded.
58:41
And I don't know, it'd be interesting to to think about what younger viewers that are very talented at, you know, the arts think of directors like say Kubrick as compared to how I view Kubrick.
58:58
So, I saw the Kubrick films when they first came out, but he's been very much imitated.
59:03
So, maybe younger viewers would be less impressed by some of his his films because they would think, well, I've seen that before.
59:15
But of course, what they saw before was actually after he created that innovative style.
59:22
But we've just had so much material flooding our senses that it it may be more difficult.
59:30
Like could could you imagine someone coming along like Bach or Beethoven in classical music in the next decade and having that impact?
59:39
I I It seems quite unlikely.
59:41
Yeah, extremely unlikely.
59:45
But Philip Glass had real impact on me.
59:47
The early works not the equal of Bach or Beethoven, of course, but it shook my world when I heard Einstein on the Beach and some of the other operas. Mhm.
59:55
And it was genuinely new and it's held up, I think people still love it and 50 years from now it will still be with us.
1:00:05
So, there were some things in in classical music, if if Glass is even that.
1:00:12
And certainly in popular music there's been plenty.
1:00:15
Not in the last 10 15 years, but pretty recently.
1:00:18
Yeah, I think so and you you asked what might hold up.
1:00:20
I don't know if they'll be classics like It's a Wonderful Life and that sort of classic, but I think films by like Wes Anderson may hold up well because his style is so distinctive.
1:00:35
His visual style especially.
1:00:37
And Christopher Nolan, what's your view there?
1:00:42
Um Yeah, I mean I think that the films are usually pretty entertaining, but um he's not one of my top directors. What's missing?
1:00:57
Fairly conven- They're they're very skillfully made, but stylistically I see them as fairly conventional.
1:01:04
Um so, if did he do the Batman film with the Joker?
1:01:11
Oh, he he he did a Batman film, but it's escaping me which one.
1:01:16
Yeah, I think I sort of thought So, like if you look at the Batman films, the one where the actor who passed away, unfortunately I forgot his name.
1:01:24
Uh who played the Joker, um that one kind of caught my attention because of that performance.
1:01:31
But generally speaking, those sort of big budget modern action films don't interest me all that much.
1:01:40
But his his films are certainly more interesting than typical.
1:01:44
Inception, Interstellar and so on are you know, intriguing to watch. Um visually dazzling.
1:01:54
Um But as I get older I guess I tend to migrate more towards sort of like quiet films.
1:02:05
So, when I go to the theater now, I'm often seeing something that's a fairly quiet film, but the previews that appear before the movie are just non-stop you know, car chases and explosions and I feel sort of overwhelmed and I think to myself, well, that's probably not for me even though the actual film might be much less intense than the preview.
1:02:24
Ozu gets better and better, right?
1:02:28
Yeah, Ozu would be a classic example and to be honest, many of the films I like today I would have been bored by when I was young.
1:02:36
So, when I was young, I would have liked Christopher Nolan much more than Ozu.
1:02:42
And it's it's sort of I cultivated a little more patience and I've learned that with patience comes the ability to absorb certain types of art that you're not able to absorb um if you don't make the effort.
1:02:59
For our final segment, I have just some basic questions about your history.
1:03:04
Just How did you end up going to the University of Chicago for an economics PhD?
1:03:11
Well, I was a fan of um uh Milton Friedman But how'd that happen?
1:03:17
Like, what's what's your origin story?
1:03:19
You know, Batman has one. Where'd you come from?
1:03:23
So, I grew up in Madison.
1:03:23
I went to the University of Wisconsin as an undergraduate.
1:03:28
Uh I actually was accepted at Chicago, but for financial reasons I went to Madison for my undergraduate years.
1:03:38
And then for graduate school, um I only applied to Wisconsin and Chicago. That was it.
1:03:46
And um so I should say that at that time I was very ignorant about how the world worked and I wasn't very career oriented, very ambitious, very um sort of linked into what was going on and um so, I'm not recommending my career path to anyone else.
1:04:07
But I applied to those two schools and Madison was my fallback school in case I didn't get into Chicago.
1:04:15
But I was interested in free market economics at that time and so that's what drew me to the University of Chicago and and actually again, this may be nostalgia on my part, but I feel like it was almost at its peak in the 1970s. It was, of course.
1:04:28
There There was a lot of interesting stuff being done there.
1:04:30
A lot of people that were getting Nobel prizes or would get them in the next few decades for their work done about that time.
1:04:39
How did you fit in with your other Chicago classmates?
1:04:41
Were you an outlier or loner or center of attention or how did that all work?
1:04:49
my personality was uh kind of shy, so the biggest problem I had is I didn't interact much with faculty.
1:04:57
Um but I did have some students that I studied with.
1:05:01
Um in those days grad school is very different.
1:05:04
So, first of all, it was very non-technical.
1:05:07
You didn't have to know a lot of math or statistics.
1:05:11
In addition, they would admit about 60 students a year and they would basically flunk out half the class within a few years.
1:05:18
They had pretty strict core exams and prelims.
1:05:24
So, there were big classes.
1:05:24
It wasn't like small seminars like I imagine you get in a lot of places now except the upper level classes were smaller.
1:05:34
Um it was very kind of contentious and it didn't bother me at all, but many years later I began to read about you know, gender problems in higher education, how a lot of women don't like the kind of style that was used in Chicago seminars, very argumentative and aggressive.
1:05:55
Um I just accepted that as normal when I was young.
1:05:59
But that was I suppose a distinctive feature.
1:06:02
Um definitely the Chicago students tended to be really good at uh intuition.
1:06:08
So, the the view at that time was like the MIT students were really good at the technical side of economics and the Chicago students were good at the intuition cuz we were constantly being trained on sort of real world story problems where you'd apply Chicago price theory.
1:06:22
So, that education was helpful to me later on when I got into blogging.
1:06:28
I think it gave me intuition to think about certain issues in a way that I wouldn't have had maybe if I'd gone through a more technical program somewhere else.
1:06:41
And why do you think it is in your career you were a late rather than early bloomer?
1:06:49
I guess it's personality flaws.
1:06:53
I Well, probably actually wasn't, right?
1:06:54
There's plenty of people who never bloom.
1:06:57
My parents probably should have held me back one year even to go go to kindergarten.
1:07:03
So, I was you know, I I wasn't a particularly good student um or as an uneven student all along the way and uh um I wasn't particularly ambitious. I'm not sure why.
1:07:17
Um and yeah, it's kind of weird.
1:07:22
I mean, I got into blogging 15 years ago and it it put me into a different world where I was interacting with a lot of people, mainly, you know, electronically interacting.
1:07:33
But I'd been much more of a loner for most of my life, so I when I look back on that earlier period of life, it almost feels like a different person now.
1:07:42
Um but I can't analyze exactly why I was a late bloomer, but it was clearly an aspect of my personality.
1:07:50
It wasn't like I was held back by something artificial.
1:07:52
I just wasn't applying myself as aggressively or forcefully as I could have.
1:07:59
Um and uh so but when I would get under the gun, I would at the last minute somehow get things done that I need.
1:08:08
Like, I almost didn't even stay at Bentley and then I did my dissertation very quickly right before they were going to fire me. I went in ABD.
1:08:21
And then a few years later, I actually got turned down for tenure for lack of publications and um then quickly got a few publications including the JPE article I mentioned and so I got tenure by reapplying under different circumstances.
1:08:39
So, I was treated actually very well.
1:08:41
Like, many schools I wouldn't have even survived at.
1:08:45
And then unlike a lot of faculty, I did most of my research after getting tenure, almost none before.
1:08:51
And so, I had a very odd career that didn't fit the normal mold.
1:08:54
I didn't pursue topics that were trendy.
1:08:57
I just pursued things I was interested in.
1:08:59
Even my dissertation Lucas was my chair at Chicago and I did currency hoarding.
1:09:06
Well, that's an odd thing for someone to do studying under Lucas who's known for rational expectations theory and so on.
1:09:13
So, I just pursued what interested me and for decades I pursued work on the Great Depression.
1:09:20
I think my book on the Great Depression is the one book I'm proud of.
1:09:26
Uh I think there's some you know, useful academic contributions in that book.
1:09:30
The other books I wrote are more just popularizing my blog posts.
1:09:34
But that book I did a lot of real research on.
1:09:37
Um So, it's been I guess kind of an unusual career in that sense.
1:09:44
Not following the conventional path. Final question. What will you do next?
1:09:52
Uh well, I'll be 70 next year so. That's young. No.
1:09:58
So, I'll tell you I think that in my mid-30s I just quickly transitioned from young to middle age.
1:10:03
And I think in my mid-60s I just transitioned from middle age to old.
1:10:08
And after that transition it's no longer about what I'm going to do.
1:10:12
It's like, okay, I've basically done what I'm going to do.
1:10:16
I'm not going to write any more books.
1:10:19
And I'm going to do try to just sort of enjoy life.
1:10:22
But I think enjoying life does involve being productive in some sense.
1:10:28
So, I I rebooted my blog a few months ago trying to make it better and more enjoyable.
1:10:34
And um so, I'll pursue that as kind of a half job, half hobby type of activity. So, I'll keep busy.
1:10:45
But other than that, I'll just do things like travel and movies and read novels and so on. Things I enjoy.
1:10:53
I don't have any major career objectives.
1:10:56
Not to sound too morbid, but I really feel like my life is 95% over or 98% over because even if I have another 20% of my life left in front of me time goes by so much faster when you get older that in a subjective sense that 20% of my life is only a few percentage points.
1:11:20
Because when you're young, time goes so slowly.
1:11:24
So, it it makes you kind of look at things a different way than when you're middle-aged or young.
1:11:31
Um And uh I'm hope I'm not depressing your listeners, but uh don't tell yourself, oh, I'll wait till I'm retired and then do all these fun things because you may find you don't have the energy at that point.
1:11:45
Scott Sumner, thank you very much. It's been a pleasure. Thank you.