Assorted Interviews with Economists
PK: I’ve been trying to get a handle on this by looking at recessions over the past 40 years. Until now we’ve had two kinds: 1979–82-type slumps basically caused by tight money and the 2007–09 type caused by private-sector overreach. The first kind was followed by V-shaped “morning in America” recoveries; the second by sluggish recoveries that took a long time to restore full employment.
My take is that the Covid slump is more like 1979–82 than 2007–09: it wasn’t caused by imbalances that will take years to correct. So that would suggest fast recovery once the virus is contained. But some big caveats.
One is that we don’t know how long the pandemic will last. Right now, we’re probably opening too soon, which will actually extend the period of economic weakness.
Another is that even if we didn’t have big imbalances before, the slump may be creating them now. Think of business closures, which will require time to reverse.
And I also wonder how much long-term change we’ll experience as a result of the virus. If we have a permanent shift to more telecommuting and less in-person retail, then we’ll have to shift workers to new sectors, which will take time. That was an argument lots of people made, wrongly, in 2009, but it could be true now.
All that said, right now I don’t see the case for a multiyear depression. People expecting this slump to look like the last one seem to me to be fighting the last war.
See also Audacity of Slope
Are there any economic justifications for reducing wealth inequality?
The standard argument is redistributive. Our society may prefer less inequality because of a view that the value of money in the hands of people with lower incomes is higher than in the hands of people with higher income. Society may prefer to redistribute wealth, but that’s a matter of preferences. We might prefer one wealth distribution to another.
There is some research pointing to harmful economic consequences following from too much inequality. They are along the lines of inequality associated with maybe political power, maybe market power. To the extent that you believe that’s true that may take you into considering some types of instruments that target inequality. If you believe in those things, there might be some efficiency gains to be had from lower levels of inequality.
F: Going back to K-12, you did research with Victor Lavy on the effect of computer-aided instruction in Israel.
Angrist: Now computer-aided instruction is all the rage — personalized learning, using a lot of technology in the classroom. Victor and I had an early paper on the effects of that, taking advantage of something that happened in Israel.
EF: You found that the expected benefits didn’t come to pass and that for some grades the effects were even negative. Any thoughts as to what happened?
Angrist: I’m skeptical of computer-aided instruction. I don’t allow any electronics in my classroom. No laptops, no phones of course. They’re a huge distraction.
That’s actually been shown in a randomized trial by one of my former students, Kyle Greenberg, who’s now a professor at West Point. West Point is a college like any other; it has some special features, but they teach college courses and they teach a lot of economics. Kyle and two of his colleagues did a randomized trial on allowing laptops and iPads in the classroom, and the treatment effect of that is a big negative effect.
Another example of that is laptops. The One Laptop per Child program was promoted by people in MIT’s Media Lab, and they raised a lot of money for it. Eventually, the Inter-American Development Bank figured out that they ought to make them show that it’s worth doing. And the eventual randomized trial on One Laptop showed little in the way of learning gains.
In terms of other policies, we have just seen (March 24), a huge monetary policy response to this event, and we’ve seen a big response on the fiscal side as well. In certain ways, I think, [the monetary policy and fiscal] responses we’ve seen are part of the conventional arsenal of Keynesian stabilization tools, although the situation is quite different, as we discussed earlier.
I feel that the experience of the last recession has at least given us a framework to think about creative tools in both monetary and fiscal policy, and that’s a very good thing. Perhaps we’re more likely to see rapid action as a consequence of that.
On the other hand, the last recession also gave us much higher levels of debt. So clearly, one of the features of the discussion right now is the extent to which a large fiscal stimulus is sustainable in view of the much higher levels of debt we have today than in the last recession.