Presentation and Videos from Institute for New Economic Thinking (INET) is now posted online here. All in all, it’s pretty amazing stuff. This is the frontier of where the debate on macroeconomics, capital controls, financialization/banking/regulatory issues, globalization, and the issue of the dollar is, and through the full listing of videos and presentation you get a front-seat view. If you want to know what the people at the helm of the global economy are thinking about, this is what their debate looks like.
We’ll be talking about these panels and the discussions for some time here, but I want to direct you to this interesting talk between Martin Wolf and Larry Summers:
Summers is in rare form in the interview, and Wolf does a great job handling the conversation. Yves Smith asks about whether or not the financial sector should be a public utility around minute 54; Summer dodges it by saying the government shouldn’t run financing (ditching the more obvious question about political economy, regulation, and “innovation”). Boo on that, but I guess it was to be expected.
For instance, he talked about all the research papers that he got sent while he was in Washington. He had a fairly clear categorisation for which ones were likely to be useful: read virtually all the ones that used the words leverage, liquidity, and deflation, he said, and virtually none that used the words optimising, choice-theoretic or neoclassical (presumably in the titles or abstracts). His broader point—reinforced by his mentions of the knowledge contained in the writings of Bagehot, Minsky, Kindleberger, and Eichengreen—was, I think, that while it would be wrong to say economics or economists had nothing useful to say about the crisis, much of what was the most useful was not necessarily the most recent, or even the most mainstream. Economists knew a great deal, he said, but they had also forgotten a great deal and been distracted by a lot.
Even more scathing, perhaps, was his comment that as a policymaker he had found essentially no use for the vast literature devoted to providing sound micro-foundations to macroeconomics. (So that would be most macroeconomics since the original Keynesian revolution?) On the other hand, he pointed out that while there was clearly a need to be prudent while applying research to the real world, it would also be unwise to attack it wholesale. He surmised that it might be possible that some things that seem useless or of limited applicability now would turn out to be useful in years to come (microfoundations for macroeconomics, perhaps?).
He was sceptical, too, of those who put too much faith in regulation, while conceding that it was clear regulation was needed. It was refreshing to hear someone who had been in the thick of policymaking acknowledge a problem others have pointed to: that when it came to stuff like financial regulation, there was “basically no one” who is both knowledgeable enough about what is sought to be regulated and is not, in some way, co-opted. Which made his touching faith in Dodd-Frank, which he defended stoutly, a bit less than convincing.
Good times. I’m excited to see how the field may change over the next decade – if it changes for the better, hopefully it is because INET helped push the debate there.