Emmy Nakamura is a pioneer in the field of empirical macroeconomics, using actual data to untangle mysteries and find satisfying answers in the field.
Nakamura's research on how companies set prices reveals that the 'invisible hand' doesn't always ensure efficient price adjustments, raising questions about policy interventions and macroeconomic stability.
Deep dives
The Rise of Empirical Macroeconomics
Emmy Nakamura, a professor at UC Berkeley, is at the forefront of empirical macroeconomics, a branch of economics focused on using actual data to answer big questions about the economy. Unlike traditional macroeconomics, which relies heavily on theories, empirical macroeconomists like Nakamura are searching for clues in real data to settle long-standing economic debates. This shift towards empirical analysis is driven by the recognition that the macroeconomic environment is continually changing, and historical data alone is insufficient to make accurate predictions. By studying actual data and patterns, Nakamura aims to bring more clarity and understanding to the field of macroeconomics.
The Challenge of Studying Prices in Macroeconomics
Emmy Nakamura's research on how companies set prices in the economy sheds light on the role of prices in macroeconomic stability. The concept of the 'invisible hand,' where prices adjust to ensure supply equals demand, is central to understanding market economies. However, Nakamura's work reveals that prices do not always adjust quickly or efficiently, leading to deviations from equilibrium. This raises important questions about the effectiveness of policy interventions, such as government spending or monetary policies, in the face of slow price adjustments. By analyzing detailed price data and identifying patterns, Nakamura contributes to the ongoing debate on the speed and effectiveness of price adjustment in macroeconomics.
Progress and Challenges in Macroeconomics
Emmy Nakamura's research has made significant strides in answering major macroeconomic questions and challenging conventional wisdom. By accessing and analyzing data from the 1970s and combining it with modern data, Nakamura has uncovered insights about inflation, the impact of government spending, and the role of expectations. Her work demonstrates that while progress is being made, macroeconomics remains a complex and evolving field due to the ever-changing economic landscape and the limited availability of high-quality data. Nevertheless, Nakamura's empirical approach offers hope for a better understanding of macroeconomic phenomena and the development of more effective policies.
When it comes to big questions about the economy, we're still kind of in the dark ages. Why do some economies grow so much faster than others? How long is the next recession going to last? How do we stop inflation without wrecking the rest of the economy? These questions are the domain of macroeconomics. But even some macroeconomists themselves admit: While we have many theories about how the economy works, we have very few satisfying answers.
Emi Nakamura wants to change all that. She's a superstar economist who is a pioneer in the field of "empirical macroeconomics." She finds clever ways of using data to untangle some of the oldest mysteries in macroeconomics, about the invisible hand, the consequences of government spending, and the inner workings of inflation.
Recently we called her up to ask her why the economy is so difficult to understand in first place, and how she's trying to find answers anyway. She gets into all of that, and how Jeff Goldblum shaped her career as an economist, in this episode.
This show was hosted by Jeff Guo and Nick Fountain. It was produced by Dave Blanchard with help from Sam Yellowhorse Kesler. It was engineered by Josephine Nyounai and fact checked by Sierra Juarez. Keith Romer edited the show. Alex Goldmark is our executive producer.