Conor Clarke, an economic and financial journalist working at TheAtlantic.com, interviewed Professor Paul Samuelson. Here is part 1 and part 2. This interview is interesting, for Samuelson offers his personal views on the economic policy’s response to the crisis. Samuelson asserts an interesting recommendation for economists: do study economic history.
Q: Very last thing. What would you say to someone starting graduate study in economics? Where do you think the big developments in modern macro are going to be, or in the micro foundations of modern macro? Where does it go from here and how does the current crisis change it?
A: Well, I’d say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that’s the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that. The governor of the Bank of England seems to have forgotten or not known that there was no bank insurance in England, so when Northern Rock got a run, he was surprised. Well, he shouldn’t have been.
But history doesn’t tell its own story. You’ve got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to.
Next, Christina Romer, Professor of Economics at University of California at Berkeley on leave and current Chair of the Council of Economic Advisers in the Obama administration, wrote a guest article for The Economist, making the case of caring less about the deficit in such an early moment of the recession by recalling what happened in 1937. Two excerpts:
As someone who has written somewhat critically of the short-sightedness of policymakers in the late 1930s, I feel new humility. I can see that the pressures they were under were probably enormous. Policymakers today need to learn from their experiences and respond to the same pressures constructively, without derailing the recovery before it has even begun.
The 1937 episode provides a cautionary tale. The urge to declare victory and get back to normal policy after an economic crisis is strong. That urge needs to be resisted until the economy is again approaching full employment. If the government withdraws support too early, a return to economic decline or even panic could follow.
Well, it’s a great relief Christina Romer and Ben Bernanke are respected scholars of the Great Depression, aware of the lessons (and errors) of the past. I just hope they can manage to do things differently (and better) this time.