Gary Becker's great and what he says makes a lot of sense. With the benefit of hindsight, maybe one can fault his favoring a mild form of austerity over further stimulus; however, he obviously didn't have the benefit of hindsight during this interview. Given the facts available at the time, his reasoning was cogent although it now seems quantitative easing did work (the US applied it more vigorously than Europe and the economy here seems stronger because of it). On the other hand, a more rigorous analysis might uncover other more compelling reasons for the disparities in rates of recovery. Even more importantly, however, I think he hit the nail on the head as far as the problem with QE, which is the lack of lending by banks. This may be due to uncertainty as Dr. Becker points out (which breeds hesitation among households and businesses); new financial regulations and the post-crisis landscape making banks more risk averse; or/and a lack of good projects to invest in even with ultra-low (and in certain places negative) interest rates. Even several years after the fact, this is a very interesting interview with one of the leading minds in the field of economics.
It needs explaining how rational self-interest is possible for the RATIONALIZING (as opposed to rational) animal. Bankers told themselves it would be alright until they believed it; borrowers told themselves "hey, the bankers believe it, it most be ok;" and Greenspan told himself god only knows before hitting the exit to start a consulting firm. Then, when $800 billion stimulus proved insufficient to fill a $3 trillion dollar hole, free marketers went "See?! We're right again!!!" As always!"
Babatunde 24 - you have not offered any counter argument but to say I don't know what happened. What happened is not unique but is illustrative of the failed government policies from time to time which are implemented mostly by sovereign governments through their reserve banks. Although the same mistake could be made by the Euro banking system at any time after all it is controlled by politics..
@GaiusIuliusTaberna just because some of the followers of austrian economics might be nuts, that doesn't mean anyone who follows this school will be a nut. the guy who killed john lennon read the catcher in the rye, i read the same book and i'm not a nut. austrian economists, like hayek or mises, were peaceful and wise people. so are their followers, like vernon smith and elinor ostrom
@richardcadbury from reading tons of lew rockwell, sheldon richman, and others from that ilk, i can say one thing i've learned from the austrian school is that they're insanely jealous of the success of the chicago school. it seems they have as much a bone to pick with miniscule differences in chicago style thought than they do with, like, marx. i've read sheldon richman articles calling milton friedman a statist, which is comical.
Hasn't it been empirically supported that certain forms of government spending have significantly higher growth multipliers than most tax cuts? Even though i'm coming from a keynesian perspective, I tend to agree with most of Gary's points here, but isn't it a bit dishonest to say the stimulus had no positive effect especially when you look at the almost immediate reversal in unemployment trends?
The concept of human capital is the reason many people feel like a complete failure. People who are healthy, study abroad and are mentally stable are more likely to be rich. Nowadays its in our hands to be happy, healthy. Social Structures are very much avoided when it comes to taking responsibilty therefore the only one who is blamable for not being mentally stable is yourself. When you are stuck in that time this failure feels unbarebal because your human capital has just sunk and therefore your Future income as well.
The winners are so fake. They are the ones taking pictures of their vegan meal (which i Support) and using a runningwatch. They are the ones who have an exchange Year. They are the ones who are as unhappy as us
I completely disagree. He dismisses post Keynesian Aggregate Demand as though it is a walk in the park. The fact that the regulatory power was not used to its max. is beside the point, it should have and could have been used properly. Without regulations could not and would not be able to mitigate the banks malfeasance. Gutting and not improving Dodd-Frank should be a malfeasance on its own. Banks are in the business of assessing risk/return relationships via the use of Black Scholes and Modigliani Miller type tools to assess such risk/ return determinations, this should be a key bank core competency. The inability to not correctly assess derivatives as it pertains to risk correlation coefficients is a poor excuse for incompetence. His point on not emphasizing Aggregate Demand increases to pump the prime to increase GDP being necessary, is insufficient because supply side economics, monetary policy and QE2 on their own are insufficient and needs to be coupled with Keynesian Aggregate Demand fiscal policy combined together. Productivity increases a key element of supply side economics are currently maxed and are now an element of secular stagnation. The banks are not lending because many "new" corporations are not simply borrowing, e.g. Google = secular stagnation. QE2 by itself and monetary policy are INSUFFICIENT on their own and needs to be coupled and leveraged by Keynesian Aggregate Demand and maximum use of the Multiplier effects and application of marginal tax rates with low interest rates. His point on healthcare bares no evidentiary support whatsoever. He is wrong when he says Republicans will not decide to repeal the ACA = they did unanimously. Single payer and improvements to the ACA all the way baby! The UK austerity program has been proven to be completely wrong. Krugman and Summers are completely right!
