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Interview with Austan Goolsbee: Being at the Fed, House Prices, AI, and More - Conversable Economist
Tyler Cowen serves as interlocutor in "Austan Goolsbee on Central Banking as a Data Dog: The data-driven Fed President on why human judgment still matters in monetary policy" ("Conversations with Tyler," June 25, 2025, video, audio, and transcript). As Cowen notes, Goolsbee "had a long-standing teaching post at the University of Chicago, served in the Obama administration,
The US Trade Balance With the EU: The Role of US Multinationals - Conversable Economist
Consider this international trade conundrum: Say that a US-based multinational provides technology and managerial know-how to a firm in Europe. The firm uses these inputs to produce goods, which are then exported back to the US economy. As a result, the European economy has a trade surplus in goods vis-a-vis the US economy. However, a
A Fed’s-Eye View of Labor Markets - Conversable Economist
Twice each year, the Federal Reserve is required to report to Congress, a process which involves both testimony from Fed Chair Jerome Powell and also the publication of the Monetary Policy Report, which comprises a broad statement of how the Fed is perceiving the US economy. The most recent report has a section on the
New Zealand: The Birthplace of Inflation Targeting - Conversable Economist
There is a widespread consensus that the policy goals for any central bank should be set through the legislative and political process. But should there be one goal or several? Should the goals be fixed or changing? Should the legislative and political process both set the goals and also tell the central bank how to
US Bond Markets: The Intimidators - Conversable Economist
There are not a lot of memorable quotations about bond markets, but one of my personal favorites is from James Carville, the chief political strategist for President Clinton, who still shows up as a talking head doing news commentary from time to time. Early in Clinton's presidency, a particular focus was reducing budget deficits, with
Is Macroeconomics a Mature Science? - Conversable Economist
Macroeconomics is at times unfavorably compared to weather forecasting. But weather forecasts have in fact become more accurate over time: a forecast for four days inthe future, made today, today is as accurate as a one-day forecast 30 years ago. Can macroeconomics make at least a broadly similar claim to improvement? Olivier Blanchard makes the
Taxing Capital Gains Only After Realization - Conversable Economist
Many of the wealthiest people on earth hold their wealth in the form of a financial asset, like stock in a succesful company. When it comes to capital gains, there is a choice to be made between a tax on "wealth," which seeks to estimate the value of these gains whether or not the assets
The US Tax Code Reduces R&D Incentives - Conversable Economist
The leading economies of the future will be driven by technologies that are now only in research and development stage, as those technologies diffuse across production processes and types of products that are available. At some level, I think pretty much everyone knows this. But policymakers often don't seem to take the next logical steps,
Some Economics of Africa’s Struggle - Conversable Economist
Back in 2000, the World Bank published a report with the provocative title, "Can Africa Claim the 21st Century?" The tone of the report was carefully-hedged optimism. For example, it said: The question of whether Sub-Saharan Africa (Africa) can claim the 21st century is complex and provocative. This report does not pretend to address all
Bernanke on Federal Reserve Communication - Conversable Economist
Thirty years ago and further, before 1994, the Federal Reserve did not make any announcement at all when it altered monetary policy. Instead, market-watchers had to detect changes in interest rates as they occurred. Now, the Fed announces a target range for the specific interest rate that it targets (the "federal funds interest rate") and
Will the Courts Save Trump from His Tariffs? - Conversable Economist
The US Court of International Trade has acted to block pretty much all of President Trump's tariffs. I guess the first question is "what the heck is the US Court of International Trade? The story seems to be that back in 1890, Congress created a "Board of General Appraisers, a quasi-judicial administrative unit within the
Permitting Reform: The Supreme Court Weighs In - Conversable Economist
The National Environmental Policy Act, commonly known as NEPA, requires that large projects obtain federal environmental permits if they cross state borders or federal property (including not just parks, but also interstate highways). Many states and localities have permitting processes as well. If you believe that the US needs to have a wave of building--perhaps
US State-Level Abortion Regulations: Causes and Effects - Conversable Economist
Regulations about abortion are often wildly controversial. But what effects to they actually have? Caitlin Myers addresses these issues in "From Roe to Dobbs: 50 Years of Cause and Effect of US State Abortion Regulations" (Annual Review of Public Health 2025, pp. 433-446). As a starting point, consider the years before and after the 1973 US Supreme Court
Update on the Military Base Realignment and Closure Process - Conversable Economist
One of the strongest examples of how a commission report can overcome problems with a legislative process involves the Base Realignment and Closure Process that started in 1988, and has now gone through five rounds. The challenge was that the number of active duty US military personnel had rise to about 3.5 million during the
The Import-So-That-They-Can-Export Firms - Conversable Economist
Much of the discussion about trade and imports is based on discussions of products and sectors of the economy. But among the researchers who study international trade, a major shift has been a focus on relatively small firms that are directly involved in international trade. It turns out that many of these firms are both
Prepping for the Next Pandemic - Conversable Economist
If you are like me, you spend a certain amount of time trying not to remember the pandemic experience. But COVID-19 pandemic did cause more than one million American deaths. In a world of sane and sensible prioritizing and policy-making, spending some time and effort focused on how to reduce the risks and costs of
How a Small Share of Firms Drive Economic Growth - Conversable Economist
My guess is that everyone would be happier if economic growth was evenly distributed, so that everyone's income rose in lockstep. Instead, growth is a disruptive process, with some firms and sectors rising while others decline. As a wise economist once put it, the process growth could in theory be like "yeast," with everything expanding
What’s a New Drug Worth? - Conversable Economist
In a a juxtaposition of events that redefines the meaning of "coincidence," President Trump announced a new policy for prescription drug pricing this morning, and the the Spring 2025 issue of the Journal of Economic Perspectives, released three days ago on Friday morning, begins with a four-paper symposium on drug pricing. (Full disclosure: I work
Spring 2025 Journal of Economic Perspectives Freely Available Online - Conversable Economist
I have been the Managing Editor of the Journal of Economic Perspectives since the first issue in Summer 1987. The JEP is published by the American Economic Association, which decided back in 2011–to my delight–that the journal would be freely available online, from the current issue all the way back to the first issue. You can download individual
How Can You Tell if Health Insurance Helps Health? - Conversable Economist
It may seem obvious that health insurance helps health, but very few cause-and-effect conclusions are obvious to economists. For example, suppose that we just compared the health of everyone who has health insurance and everyone who doesn't. It would be unsurprising to find that those with health insurance are healthier, but the two groups will
Why Is the US Economy Surging Ahead of the UK? - Conversable Economist
The US economy has emerged from the pandemic growing at a faster pace than the UK and other high-income countries. Simon Pittaway tackles the question of why in "Yanked away: Accounting for the post-pandemic productivity divergence between Britain and America" (Resolution Foundation, April 2025). The average standard of living in any economy, over time, will
Korea’s Low Fertility Rate - Conversable Economist
Fertility rates are falling around the world, but Republic of Korea is the outlier, with a fertility rate of 0.72 in 2024. The International Monetary Fund, in its report on Korea's economic situation (generally quite good), thought that Korea's low fertility justified adding an "Annex" to its most recent report on Korea's economy: "Addressing Korea’s
US Holders of Foreign Assets, Foreign Holders of US Assets, and Exorbitant Privilege - Conversable Economist
US investors put money in assets of other countries, including "portfolio investment" which focuses on ownership of stocks and bonds without a management interest, and "foreign direct investment" which is owning enough of a foreign company to have a management interest. Conversely, foreign investors put money into US dollar assets in the US economy. Erin
Interview with Kenneth Rogoff: Prospects for Debt and Inflation - Conversable Economist
Tyler Cowen has one of his characteristically wide-ranging "Conversations With Tyler" with "Kenneth Rogoff on Monetary Moves, Fiscal Gambits, and Classical Chess" (April 30, 2025, audio and transcript available). Here, I'll pass over the comments about the economies of China, Pakistan, Latin America, Japan, the EU, and Argentina, and focus on Rogoff's comments on the
What if the Good Samaritan Had Been in a Hurry? - Conversable Economist
In his new book on how to reduce gun violence, Jens Ludwig Jens Ludwig tells the story of a classic social science Good Samaritan experiment (the book is Uuforgiving Places: The Unexpected Origins of American Gun Violence). In a canonical study from the 1970s, a team of social psychologists enrolled forty students from the Princeton
A Primer on the Economic Effects of Tariffs - Conversable Economist
If you are looking for a fairly easy read that describes how economists view the effects of tariffs, you could do worse thatn start with tbhe overview essay by Kyle Pomerleau and Erica York, "Understanding the Effects of Tariffs" (American Enterprise Institute, April 2025). Here, I'll skip past their historical discussions of US tariffs, and
Interview with Robert Barro: Empirical Macroeconomics - Conversable Economist
Jon Hartley serves as interlocutor in "Revisiting Empirical Macroeconomics with Robert Barro" (Hoover Institution, Capitalism and Freedom Podcast, March 25, 2025, audio and transcript available). Here are a few of the comments from Barro that especially caught my eye. One basic question in economics is about "the multiplier"--that is, how much will an increase in
The Silver (-Haired) Economy - Conversable Economist
In its most recent World Economic Outlook report, the IMF includes a chapter on "The Rise of the Silver Economy: Global Implications of Population Aging" (April 2025). Here are the big trends in a nutshell. The red line (measured on the right-hand axis) shows that the average age of the global poulation was about 27
A China Problem: When Local Officials Shift from Facilitating Growth to Generating It - Conversable Economist
China's economy is an unconventional mixture of central control and subsidies, especially involving the large state-owned firms and the financial sector, mixed with widespread use of privately owned firms and market mechanisms. One common mechanism has been to reward local government officials for meeting the goals that the central government has set for economic growth
Russia: An Unhealthy Population - Conversable Economist
The welfare of a country's population goes well beyond economic statistics, of course. In one classic example from 2006, Kevin Murphy and Robert Topel offered an attempt to meaure in economic terms the gains to the US population from greater life expectancy and disease reduction over time. Of course, this task requires choosing values for
Poland’s Economy Flexes - Conversable Economist
The economy of Poland has done very well in the last couple of decades, especially in comparison to other countries of eastern Europe that escaped from Soviet political and economic control back in the 1990s. The IMF does semi-regular reviews of national economies in what are called "Article IV" report. Here are some insights from
Tax Privacy - Conversable Economist
In an era where many people are highly sensitive to what personal information is being collected about them, and how that information is being used, one sometimes hear the question: Why should the government have any power to know your income? In a US context, the question is often asked around April 15, when income
Cement In Africa - Conversable Economist
Cement is an intermediate ingredient for making concrete, which in turn is an ingredient for construction of roads and buildings all around the world. The price of cement and the quantity produced is thus a marker for the extent of economic development. A few years ago (I haven't seen more recent data), China was producing
Why Tariffs Don’t Cause and Won’t Fix Trade Deficits - Conversable Economist
There's a fundamental misconception at the root of President Trump's tariff policies, which is the mistaken claim that the existence of a US trade deficit proves that trade is unfair. There are two related mistaken claims. One is a claim that if tariff and non-tariff barriers to trade were removed, then trade would be balanced.
A Lack of Government Capability at the State and Local Level - Conversable Economist
In the US system of government, the federal government has shifted its empahasis toward becoming a pass-through device for money: it passes through funds to individual through Social Security and various safety net programs; it passes through money to the health care industry through Medicare and Medicaid; it passes through money in the form of
Thoughts on the Trump Tariffs - Conversable Economist
It will take some time for the effects of President Trump's "Liberation Day" announcement of higher US tariffs to become apparent. Here, I'll just offer some notes and quick reactions. 1) The announced tariffs represent a very large increase. Here's a figure showing historical US tariff rates. You will notice that the average rates have
The Ocean-Related Economy - Conversable Economist
A new OECD report on "The Ocean Economy to 2050" begins its "Executive Summary" in this way: The ocean covers 71% of Earth's surface, comprises 90% of the biosphere, provides food security for over three billion people, enables the transportation of over 80% of global goods, and hosts sea cables carrying 98% of international Internet
The AI Market Ecosystem - Conversable Economist
For users of AI tools, the discussion often focuses on the newest version of ChatGPT or Gemini or DeepResearch. But the point of contact of the AI industry with users is of course just one part of the AI industry as a whole. as a whole. Leonardo Gambacorta and Vatsala Shreeti lay it out in
A View from the IMF on Nuances of Industrial Policy - Conversable Economist
Industrial policy can be defined as government policies that seek to shift the sectoral structure of an economy: for example, toward a certain high-technology industry, or toward a manufacturing industry, or in a lower-income country away from a heavy production of raw materials and agricultural goods and toward a greater emphasis on processing those outputs.
The Benefits and Dangers of Decision-making by Algorithm - Conversable Economist
It's crystal-clear that decision-making by algorithm can be imperfect. It's also crystal-clear that decision-making by humans can be pretty imperfect, too. However, the imperfections across these two types of decisions are probably not the same. How and when should society make use of decision-making by algorthm? Cass R. Sunstein provides a thoughtful overview in "The