EconoFact Chats

Uncertainty affects companies’ investment and hiring decisions, as well as people’s choices about buying big-ticket durable goods like cars or houses. There are different types of uncertainty. Risk arises when you know the likelihood of outcomes but not what will occur, as happens with flipping a coin. Ambiguity reflects a situation in which the likelihood or effects of outcomes are much less clear, as with the consequences of COVID or climate change. Both play important, and somewhat distinct roles in decision-making. Nicholas Bloom (Stanford) joins Michael Klein on EconoFact Chats this week, to discuss the role of uncertainty, and its patterns across countries and time. Nick is the William D. Eberle Professor of Economics at Stanford University. He was awarded a Guggenheim Fellowship in 2022. Note: This podcast was first posted on 19th February, 2023.

A central result from economic theory is that nations benefit from international trade (even as there is a recognition that not all people within a country may benefit). But recently there have been calls for the United States to restrict trade by creating incentives or rules that favor domestic production over purchases from abroad. Will these efforts ultimately strengthen or weaken the United States economy Chad Bown of the Peterson Institute for International Economics joins Michael Klein on EconoFact Chats to discuss this issue. Chad is the Reginald Jones Senior Fellow at the Peterson Institute, and the host of the podcast Trade Talks.

After reaching a four-decade high in June 2022, U.S. inflation has been on a steady downward trend. Part of the reason for this is the aggressive response of the Federal Reserve in raising interest rates. While this is good news, there are concerns that the Fed’s actions could push the economy into a recession, much like in the late 1970s and early 1980s, in the wake of the so-called 'Volcker disinflation.' What are the similarities and differences between high inflation in the 1970s and today? How have previous periods of high inflation, as well as the 'great moderation' -- the multi-decade long period of very low inflation -- informed the Fed's thinking in tackling the current crisis? And what might Fed policy look like moving forward, given the easing of inflation over the past half year? Dan Sichel joins EconoFact Chats to discuss these questions. Dan is the Stanford Calderwood Professor of Economics at Wellesley College. Prior to joining Wellesley, he worked at the Federal Reserve Board for over 20 years.

The UK's budget crisis last September led to a plunge in the value of the pound, the sacking of the Chancellor of the Exchequer after 39 days in office, and a vote of no confidence against the Prime Minister. These events highlight how fiscal policies can have wide-spread political and economic consequences. As the U.S. Congress fails to raise the debt ceiling in a timely manner, what lessons might U.S. policy-makers draw from the British experience? How does failure to raise the debt ceiling affect faith in U.S. Treasury debt? And what are the rammifications of eroding trust in U.S. debt? Adam Posen joins EconoFact Chats to discuss these issues. Adam is the President of the Peterson Institute for International Economics. He served seven terms as an advisor to the U.S. Congressional Budget Office, and a three-year term on the Bank of England’s Monetary Policy Committee.

The homicide rate in the U.S. is over seven times that of other industrialized nations. Gun deaths accounted for nearly 80% of all U.S. homicides in 2020. In contrast, gun deaths represented about one-sixth of all homicides in other industrialized countries. What interventions could prove effective in reducing gun violence in the U.S.? Are there ways to identify those at high risk, and reduce the likelihood of them becoming victims? Sara Heller and Max Kapustin join EconoFact Chats to discuss these critically important questions. Sara is an Assistant Professor of Economics at the University of Michigan, and Max is an Assistant Professor of Economics at Cornell University. Sara and Max’s research focuses on interventions to reduce crime, and improve life outcomes for disadvantaged youth.

The U.S. dollar is a refuge at times of uncertainty – and in these uncertain times, the dollar is at its strongest point since the mid-1980s. This presents problems. Commodities like oil and wheat, which are priced in dollars, become more expensive in terms of euros, yen, or pesos, fueling inflation, and reducing people’s purchasing power. Additionally, dollar-denominated debt of emerging market and developing countries becomes harder to repay as the dollar strengthens. In the face of these challenges, what would be appropriate policy responses by countries whose currencies are weakening? And by the Federal Reserve and the U.S. Treasury? Professor Maurice Obstfeld, widely recognized as a preeminent expert on the world economy, addresses these questions, and others, in this EconoFact Chats episode. Maury is a Professor at the University of California at Berkeley. He served as the Chief Economist at the International Monetary Fund from 2015 to 2018. Prior to that, he served as a Member of President Obama’s Council of Economic Advisers.

As of October 2022, the U.S. national debt stood at over $31 trillion. That amounts to nearly $90,000 of debt per citizen. But is there an upside to a government spending more than its tax revenues? How much should we worry about debt of this magnitude? Does history offer lessons for today? Barry Eichengreen joins EconoFact Chats to discuss these issues. Barry is the George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California at Berkeley. He has served as a senior policy advisor at the International Monetary Fund. His latest book is "In Defense of Public Debt."

The recent strength of the dollar highlights the impact exchange rate movements can have. In addition to economic impacts, these include far-reaching social and political effects too. Jeffry Frieden, a leading scholar on the political economy of exchange rates joins EconoFact Chats to discuss who gains and who loses from swings in exchange rates, their political implications, how political considerations affect the choice of whether to allow a currency to be determined by market forces or government policies and, in particular, how this applies to the adoption and maintenance of the Euro. Jeff is Professor of Government at Harvard University. His research focuses on the politics of international economic relations.

The United States economy is currently marked by high inflation, a strong dollar, rising food and energy prices, and historically low unemployment. The shortage of microchips presents another challenge, as do the ongoing consequences of climate change. Can the Federal Reserve lower inflation without sending the economy into a deep recession? Should the United States be incentivizing domestic manufacturing of advanced microchips? What will the Inflation Reduction Act mean for a transition to a greener economy? To address these questions, EconoFact Chats welcomes back Binyamin Appelbaum of the New York Times, Scott Horsley of NPR, Greg Ip of the Wall Street Journal, and Megan Greene, a columnist at the Financial Times and the Global Chief Economist at Kroll.

Given their critical role in everything from complex weapons guidance systems, to medical devices, video games, and watches, semiconductors today have much the same pervasive effects oil did in the 20th century; determining the economic fortunes of countries, the outcomes of wars, and the everyday lives of individuals. This week, Chris Miller of the Fletcher School joins EconoFact Chats to discuss his new book 'Chip War: The Fight for the World's Most Critical Technology,' highlighting among other things, the extraordinarily complicated, and geographically concentrated chip fabrication process, the geopolitical vulnerabilities that concentration raises, and the scope for the U.S. to onshore chip production. Chris is an Assistant Professor of International History at the Fletcher School at Tufts University. Chip War comes out on October 4th, 2022.