"Econ 102" with Noah Smith and Erik Torenberg The Macro Episode
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Jun 19, 2024 Dive into the complexities of macroeconomic predictions and the Federal Reserve's cautious approach to interest rates. Discover how the housing crisis reshaped banking risk assessments and the ongoing debate over coordinated economic policies. Explore the pressing need for innovation in industrial policy against global competition, and unravel the impacts of interest rates on investment strategies. The discussion even touches on existential risks from technology, emphasizing the importance of proactive policy solutions in today's economy.
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Inflation Control and Credibility
- The Fed keeps interest rates high despite housing costs to maintain credibility and manage inflation expectations.
- Allowing inflation to settle above 2% could lead to a dangerous upward spiral, according to Milton Friedman's theory.
Macroeconomic Prediction Challenges
- Macroeconomic prediction hasn't significantly improved; recent periods like costless disinflation defy easy explanation.
- Macroeconomics is shifting towards micro-level analysis of pricing, consumer behavior, and wages to improve understanding.
GOAT Economists
- Noah Smith suggests Alfred Marshall and Paul Samuelson as top economists, citing supply/demand graphs and mathematical tools respectively.
- He finds Keynes and Hayek too literary, preferring economists with more rigorous and less interpretable approaches.