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folks welcome um I'm Anna galper and I teach law Georgetown uh and I am beyond thrilled
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to introduce our uh final uh featured speaker um Professor Larry Summers Who's the who
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a needs no introduction but hey um is uh Charles Elliott professor and president Emeritus at Harvard former
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treasury secretary and from my perspective probably the most stimulating free associator and funnest
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person to brainstorm with of all I know um we are thrilled to lure him to this conference and very grateful
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to have an opportunity to ask some questions um and perhaps free associate together some
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so um if you have a question please put it in the Q a not in the chat we will try
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to leave some uh q a sometime for the Q a towards the end of the conversation um and to those watching us on TV
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um now or later sorry you can't ask the questions um okay um Larry well again thank you so much
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for joining us um and if you don't mind uh let's Jump Right In because you know
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only so much time um so first I want to ask you uh a couple of current events uh questions but really the focus for us
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is to figure out to what extent we can make the relationship between the study of
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macroeconomics and macroeconomic policy and uh law lawmaking practice of Law and
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legal scholarship um in conversation productive conversation with each other um with that
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um I was excited to see that you had nice things to say about the inflation reduction act uh my excitement which is
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not so much for the merits of the legislation but your angle on it um and what it tells us about the law so
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you said that uh you know it's a good bit of legislation it promises stories
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revenues help boost Supply and key areas reduced prices and thereby on net have a
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uh uh help reduce inflation over time so to what extent does something like this
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a model for lawmaking um and more broadly other legislative and Regulatory interventions in the
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economy and it's good to be with you um when you and I first uh met um I was uh Senate confirmed official in
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the treasury Department and a fairly young one and you were a young lawyer in the treasury Department and you brought
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um wisdom not just saying what was legal and what was illegal but figuring out how we could do things that we wanted to
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do in the most efficient and the most protective uh way and I learned a lot about the positive functioning of
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lawyering um from my experiences uh working with you look I think the inflation reduction Act
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is good law I think it's good law because I think the benefits of substantially uh subsidizing a variety
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of renewable Technologies exceed the costs I think there are measures included in
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the bill that will cause taxpayers to get a better deal when they buy Pharmaceuticals and cause Health Care to
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be more widely available for disadvantaged Americans and I think there's some vitally
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important investments in uh turning the IRS around and I think those are all good things
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I think the cumulative impact of the bill is likely to be to reduce a little bit
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the inflation rate by reducing Energy prices through more Supply by reducing pharmaceutical prices through better
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bargaining power and through some reductions over time in the government budget deficit which uh
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reduced demand at a time when the economy is overheated I don't think if you were describing the
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primary impacts or primary thrusts of the bill you probably would have titled it the inflation reduction act and that
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was a reflection of the moment and uh the various political imperatives involved but I think it was a good thing
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uh for our country uh to uh do I think no one should be under an illusion that that bill can be the center of a
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national effort to control inflation I think that such an effort has to be centered on monetary policy and insofar
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as there are other policies they are probably Regulatory and uh tariff uh policies of a Kind primarily not
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addressed in uh the inflation reduction Act well this is super helpful and and and
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and generous now um on you mentioned and thank you regulatory um should regulation then be more
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counter-cyclical than it is right so I I think [Music] um I think something I mostly disagreed
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with in the law and macroeconomics movement is a desire to center of the analysis of a variety of
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microeconomic policies around macroeconomic considerations and there's always a question when you
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envision any change what you hold uh what you hold constant if I if I want to analyze the effect of
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moving my left foot forward on my Locomotion I have to make an assumption about what my right foot is going to do
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and we sort of make a natural Assumption of what's going to happen is my right
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foot is going to move along with uh a walking motion and there's a question when we consider
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a regulatory action um say you mandated that firms hire more people and one line of analysis would be that
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that would have a multiplier effect because the firms would pay people uh would pay the extra workers they hired
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and uh those workers would spend money and those workers would spend money and you'd have a multiplier effect and you'd
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stimulate the economy a different view would be that the FED has a view about how much aggregate
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demand it wants to achieve and it targets the aggregate demand level that it wants to achieve and so if
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other things happen those will be offset by the FED because it's still targeting the same aggregate
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uh demand level so if you have a room with a thermostat and you open the window a little bit
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you will not change the temperature of the room you will change how much the heating
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system uh operates and I think inside I'm not deeply familiar with it but insofar as I've
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been exposed to the law and macroeconomics movement it has a tendency to forget that lesson
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and it has a tendency as as I see it to and by the way I'm not authoritative
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about what's true but I am authoritative about what I perceive um the um has a tendency to forget that lesson
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now you know you can argue that sometimes we're at the zero lower bound and sometimes policy operates with lags
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and so it's more complicated than I just said but I think as a general matter if
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we ignored aggregate demand effects when we thought about regulatory questions we would get it more right than if we
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try to always analyze the aggregate demand consequences so for example when people in the financial industry say
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that we're cutting back on lending by imposing excessive Capital regulations
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on financial institutions I mostly disregard that because if that's causing a shortage of demand I
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imagine we'll have lower interest rates as a consequence uh of that so while
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there are some particular exceptions that one can do I think that far more Mischief is accomplished
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by allowing Keynesian aggregate demand effects to enter the conversation about micro policies
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than any benefits that ever result so let's pull back a little bit and this is extremely helpful and also kind of
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defining the terms on the bright side online macroeconomics movement Trend ethos whatever we want to call it
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um is at least at this stages sort of open enough to definition that I think we can play around quite freely
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um with that but and really the big question to my mind and I certainly don't have a monopoly on this is sort of
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how to we engage with macroeconomic Concepts and um several of the things you mentioned
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uh actually raised interesting kind of legal institutional questions so let's
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say you know regulations should not um primarily uh Target aggregate demand maybe not even you know take account of
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it let's just rely on the FED but then the FED does not operate in an Institutional vacuum nor does the ECB
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nor does you know so of what I'm the way the transmission mechanisms right operate quite differently well I
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okay wait like Europe and the US did very different things about unemployment in the middle of covet right sort of the
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how we deal with recessions crises downturns institutionally either makes things
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easier or more complicated for let's say the fed and and not even just easier I think I really I I think I
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pretty much disagree with everything you just said all right I I think that the right assumption for microeconomic
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analysis is that the level of demand is determined and it's determined by monetary policy out of some set of
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considerations having to do with unemployment having to do with inflation having to do with financial stability
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whatever and that any effects on those things that come from your microeconomic policies are going to be sterilized
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and so I don't think in rooms with thermostats it's very interesting to think about the impact of uh opening the
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window on the temperature or or having a fire or uh putting on a sweater or anything right I mean it's all the
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things like that so that doesn't mean it's not an important question whether
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you should open the window right you should decide the question about opening the window on the basis of whether you
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think the air is going to be fresher on the basis of what you think is going to happen to the electricity bills if you
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do it on uh the basis of weather bad stuff's gonna blow in uh when you open the window but not base not based on
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anything much about the temperature of the room so I don't know whether the approach of paying people on employment
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insurance or the approach of paying people to paying firms to retain uh their uh workers or the approach which
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of those approaches is the was the right one to respond to the downturn but my judgment about that would be
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based on which would be microeconomically efficient in finding the right balance between on the one
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hand promoting labor Mobility which is good and on the other hand preventing the severance of important attachments
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um which is bad and those would be the considerations that I would think was important not one of them will lead to
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more demand in the economy or less demand in the economy and therefore do more recession prevention than the other
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solar like got it but it also I think it depends on whether you're you know sort
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of operating the windows or are you know are in charge of the thermostat right and what you're doing in the room
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relies on the thermostat working properly so right and I think the I think all who designs
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I'm sorry so who designs the thermostat who pushes the buttons you know like the
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easy thing I I think almost every time somebody tries to do a microeconomic policy
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that is Promised on some theory of some flaw in the way the macroeconomic things work
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we're much more likely to see a confused mistake than an affirmative benefit
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so macro Prudential regulation eh no macro Prudential regulation if the reason we're doing macro Prudential well
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I'm Sorry by macro Prudential regulation do you mean variable Capital requirements and the like variable
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Capital requirements that should be based on judgments about preventing Banks from failing and that
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it's inefficient and costly when Banks fail not based on prevent not based on
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maximizing employment by maintaining continuous aggregate by maintaining continuous aggregate demand
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in fact I'm pretty skeptical of macro Prudential regulation because my general
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view is that by and large the smartest macro traders in the world can't time markets and so I'm highly
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highly skeptical that politically motivated 150 000 a year bureaucrats will be able to time uh markets and so
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when people are deciding whether there's a speculative bubble or not and then
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adjusting the capital requirement or whatever I think they're much more I think there is likely to be wrong as uh
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to be right and I'm pretty familiar with the academic literature on this which is
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a bunch of regressions showing that when credit expansion is high then you're
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more likely to have a bubble and stuff like that and my reaction is if those regressions were so terrific and were so
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substantially predictive there would be people who would be able to make huge sums of money shorting Bubbles and going
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long troughs based on those regressions and mostly there aren't and I think that's because there are a variety of
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sort of epistemological problems of what constitutes certainty but I have no objection in principle to macro
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Prudential uh regulation I would note that the poster child for macro Prudential regulation in 2006 and 2007
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was Spain which had roughly the worst egregious overbuilding of uh capital I would note that Alan Greenspan was a
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pretty shrewd guy and he declared irrational exuberance in the stock market when the Dow was at 6300 and
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proceeded to double over the next uh to over the next two years I think four next uh four years
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um so I sort of skeptical of the Enterprise but insofar as it's a useful Enterprise it's an Enterprise that's
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about the micro economic efficiency of the financial intermediation sector not the efficacy of counter-cyclical
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aggregate demand management okay um so and also something that you said earlier about uh the bankers complaining
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about high Capital requirements Etc et cetera so that that it's sort of it this
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position strikes me as going with that yeah it's a position that um by and large
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um I think it is better to have more focused policies with more specific outcomes accountability for outcomes
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close to those policies so this in general for example I tend to think that we have a whole set of tax and transfer
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instruments in the society if it were up to me I would make them more generous um but we have all of those instruments
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and so if somebody says how should we regulate trains and somebody says well we should do x with
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trains because that will benefit poor people I tend to think no if we want to benefit
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poor people more we should do different taxes and transfers and the taxes and transfers we do reflect some political
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equilibrium and if we do something with railroad policy that has a major change has a Major Impact it will intend it
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will tend to be in political equilibrium offset by other things so I tend to prefer my prefer the conduct of
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microeconomic policy to be focused on efficiency within its sphere so let's talk about can we just spend a
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nanosecond on thermostat design right it's all macroeconomic policy it's
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all in one place but we have a wide variety of Central Bank designs um both uh you know objectives mandates
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instruments uh you know most recently there was a paper in the conference on um uh you know the TPI the transmission
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protection instrument um I may be mingling the you know of the ECB um there are certain things that to play
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eyes and maybe two lawyer lay eyes um don't necessarily look like adjusting the thermostat
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um but look more like messing around with the room right and my sense is that their the design of central banks and
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the instruments that the central banks deploy um differ quite a lot and so does that is
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that uh just sort of noise to your mind does that matter does it matter that the
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fed's authorities were expanded in some ways you know constrained in other ways
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and Dodd-Frank right does it matter that the ecb's Mandate is what it is does it
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matter the way the banking Union you know fits in with the ecb's um monetary policy mandate I'm just
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trying to get it I think there are a few different things to say there okay the first is that
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institution design is profoundly important the rules on what Boards of directors do in companies and what
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powers and authorities they have in what ways shareholders can and cannot select
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challenge Boards of directors are very important and it's something similar is
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true with respect to public institutions so the questions to which the federal Federalist Papers were addressed were
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profoundly important questions and an important part of legislation is the design of Institutions will a regulatory
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Authority be an independent agency or will it report to the president will it have one chairman one person in charge
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of it like the EPA or will it have a council of five people like the SEC these are all immensely important
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questions and there's a body of learning um about how to think about those kinds
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of questions and it's more of a legal body of learning than an economic body
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of learning so I'm not that knowledgeable about it but I think it's an immensely important question
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there's a second broad set of questions which is in a Democratic Society where you have
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independent institutions how should one think about the remit of those institutions and which choices are
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delegated to Independent institutions and which choices need to be politically accountable and that's the subject of a
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very good book Paul Tucker has written called unelected Power focusing on central banks but also considering a
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wide variety of institutions my general view there is that institutions that are
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independent um Independence needs to be reciprocal that if the president doesn't get to
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tell the FED what to do about monetary policy the FED should not be using its moral authority to tell the president
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what to do about climate change or criminal justice uh policy in general I think that independent that
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power should be more circumscribed to areas where there's an important Dynamic
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consistency problem which is what led to the creation of the independent institutions so I am
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pretty spectacularly unenthood I was extremely unenthusiastic when the Minneapolis fed chose to participate in
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the debate over some kind of education referendum in uh Minneapolis when uh central banks
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seek to um get involved in green issues if there's anything that's going to
00:26:50
cause Banks to fail their supervisory authorities should pay attention to them but I don't think the fact that there's
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some conceivable Nexus between um an issue and a bank failing means that central banks should get centrally
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involved in environmental policy I think the idea that for example a central bank
00:27:18
that is doing corporate QE should favor green bonds rather than non-green bonds is an appalling one
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um because I don't think that's I don't think making those choices is the
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appropriate uh remit of uh uh of uh Central central banks um so and then there's a yeah
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just I just want to ask about this particular so then on again going back to the sort of thermostat setup the
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Central Bank buys all of the bonds no amount you know green purple yellow with polka dots
00:28:03
but then say the fiscal Authority or The Regulators adjust to the extent that this has undesirable
00:28:12
effects on environmental policy on distribution etc etc is that is sort of the division of the institutional
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division of labor ensures that we're not all confused with feedback effects and
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various kind of Dynamics I think something I think yeah I think I think something like that I mean there there
00:28:33
are complicated cases to sort out um I think we kind of make a model in the United States
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um we had moments like the first few years of the Obama Administration where the Fed was proudly doing QE and
00:28:52
explaining that selling long-term debt and buying back short-term debt was going to stimulate the economy in a
00:28:59
desirable way and the treasury was proudly announcing that it was taking advantage of low long-term interest
00:29:06
rates to term out the debt and was issuing less short-term debt and more long-term debt and between the two of
00:29:15
them there were some Brokers making money and the whole thing didn't seem to
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me to make any sense it seemed to me the United States ought to have one debt management policy and there ought to be
00:29:26
some mechanism for arriving at the one uh debt management uh policies I think there are hard cases as there always are
00:29:36
you know just like in private life there aren't just competitors and mergers
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they're people there are firms that in some spheres compete and in other years
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cooperate and part of what good lawyers do is structure agreements and policies that in an imperfect world of greedy
00:29:58
people cause that to work out as well as it can be worked out and I think that kind of thinking is important in uh the
00:30:07
public sector as well and and just what you just said though I mean it really does get to
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at least in my view what lawyers tend to be very good at which is you know figuring out where the institutional
00:30:24
structure leads us to stumble all over one another and saying all right you know fire exit to the right
00:30:31
um but it's not just sort of the traffic tweaks right it's building design that I think matters and
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in some ways it's a more challenging um yeah I think it's I I think that's I
00:30:46
think that's right I I I sort of believe in social science and I I tend to I tend to find and maybe
00:30:59
this is unfair and reflects the limits of uh my knowledge whereas I I find your pronouncements on debt to be uh
00:31:13
substantially informed by empirical study of a substantial range of debt restructurings and what happened and
00:31:23
what didn't happen and when it worked better and when it worked worse I find a substantial part of legal
00:31:32
scholarship on these matters to consist somewhat more of identifying what various thinkers have said at various
00:31:43
points and the author offering an opinion as to what the author thinks is best with less grounding
00:31:55
in uh the world of experience so where um #bless you and thank you and um the uh I do think that we need to uh
00:32:12
fix up your pipeline of legal scholarship somewhat even though I'm I find myself to be a an unwitting
00:32:20
beneficiary of the distortions in that I'm sure that's I'm sure that's right
00:32:24
and I I welcome all uh I I welcome all of that but I think it's um you know I was uh I was involved in the
00:32:36
creation of the cfpb and uh the Consumer Financial products Bureau and there were
00:32:45
a set of questions should it have one had should it be should it report to the President should it be independent how
00:32:56
should its budget be set there were a set of institutional design questions and I would say I was concerned to get
00:33:07
empirical Knowledge from the carefully considered experience of the hundred or so government agencies that
00:33:16
exist and as of that time I was not hugely impressed by the body of empirical evidence on the question as
00:33:31
distinct from consideration of the wise but that was 13 years ago and I may have been poorly
00:33:39
advised at uh that time we just need to we need to curate that Pipeline and um I would like to take them this moment
00:33:49
to tell all the people who are dming texting and emailing me God love you to put questions in the Q a
00:33:57
um where you will get uh preference um and uh again with massive thanks to all my friends Larry you're uh
00:34:07
eight being insightful and provocative as expected but I'm also being a disproportionate beneficiary of that so
00:34:16
Caleb um Nygaard is uh asking a very interesting question here about the recent scandals that the FED
00:34:27
um and uh this question of uh structural governance reform um that is percolating perhaps more
00:34:37
actively than uh than it uh has been um are there any structural changes that you might recommend and then we have
00:34:47
um a few more questions here but let's start with fed uh structure and uh and reform
00:34:59
I would um probably allow the uh Board of Governors to appoint the presidents of the regional feds
00:35:15
and I would probably um cause the current Boards of directors of the regional feds to be
00:35:26
um advisory boards because I think the I I think it's just hard to it's just
00:35:33
really hard to understand why um Bankers should be involved in the governance of their regulators
00:35:40
and you know the extreme case which has been fixed was when the board chairman of Goldman sat when he was before the
00:35:52
financial crisis when the New York fed had three categories of directors Banker directors business directors and public
00:36:02
interest directors and the chairman of the board of the Goldman Sachs Corporation was a public interest
00:36:09
director that was a kind of extreme absurdity and that is no longer the case but I still think there's a kind of
00:36:19
private sector involved business private sector involved in its own regulation that I think is inappropriate so I would
00:36:28
put more responsibility for the whole Federal Reserve System on the governors and I would take the various governance
00:36:37
structures surrounding the regional feds and I would make them into a Advisory Board type structures I would not
00:36:51
um I would I would not um favor the proposals to make uh presidents of regional feds subject to
00:37:02
Senate confirmation because I think if anything the FED is too atomized right now after all if we
00:37:10
can make decisions about War and Peace with one Secretary of Defense why do we make why do we need to have a committee
00:37:18
of 13 voting on monetary uh policy um I think the reason we have a committee is because given that the job
00:37:31
is given that uh the agency is independent and not subject to political oversight you can't give it to just one
00:37:42
person um because suppose they go wrong and so in a sense the function of having a
00:37:48
committee is to act as a check and balance on that but that requires that there be a committee but not that each
00:37:58
member of the committee be overly uh empowered so in general I think the FED where there's a kind of moderately
00:38:12
strong quite strong presumption of deference to the chairman is a more effectively functioning institution than
00:38:21
the bank of England where the chairman is more like the Chief Justice of the Supreme Court kind of first among equals
00:38:30
but sometimes they get out voted and that's just kind of the way it happens and you've sort of got a jury of people
00:38:38
each of whom gets one vote who make their decision so that would be the change I would make uh in administration
00:38:46
so this is fast in a number of ways including because it tells our historian friends uh about you know it sort of um
00:38:58
the importance of um their work on things like the FED founding and the FED structure and the
00:39:05
historical path dependence and the political factors animating this beyond the functional uh reasons that you've
00:39:14
articulated and I wanted to commend to the folks of uh Post in the Q a by um my dear friend and co-host Rosa
00:39:24
lastra on kind of some of these factors in the European context of course but I want to turn to a set of questions on
00:39:34
uh fiscal policy in particular and um then ask a uh kind of a culture uh slash Personnel governance question but
00:39:48
then I am not letting this go without turning to IMF and World Bank and the international uh economy which is in uh
00:39:58
area that obviously is uh uh of great concern to both of us and so just planting that
00:40:07
um on fiscal policy I guess there are two sets of questions um one is uh the what you're describing in terms of
00:40:20
again Windows thermostat uh May well be the platonic ideal but in a world where um the thermostat is broken or the
00:40:31
window locks are broken right instead of where one channel is shut off isn't that the unusual case where the
00:40:40
other channels should somehow try to figure out how to compensate and then I would add so how should legal designs
00:40:47
and mandates and institutions that have accommodate that possibility if at all or should we just force a crisis in
00:40:57
order to force reform in other words shouldn't we should we not try to compensate for the dysfunction in one
00:41:03
channel um through the if the IMF isn't working should the World Bank shouldn't be doing
00:41:09
its job and vice versa or by any means necessary that's sort of one translation
00:41:14
but the other is you know why um and I'm reading uh so uh this is based on Alex uh mechanics
00:41:23
question here um and then yair listiken uh asks why should there be any role for fiscal
00:41:31
policy macro stabilization given fed offset why shouldn't fiscal policy also
00:41:37
strive to get it right on micro grounds entirely without worry about macro considerations isn't this in line with
00:41:45
the thermostat analogy so look let me say a few things I um first of all Anna just show everybody
00:41:54
who's listening is clear I made a judgment coming on here that I hope is appropriate that I would most usefully
00:42:04
contribute to your dialogues if I said what I really thought based on what I based on what I know recognizing that I
00:42:14
this is not a literature in which I've been uh fully immersed and with the view
00:42:19
that a clearly stated opinion even if wrong is a more useful Target for inquiry than a bunch of polite mush
00:42:29
absolutely so I have tried to very much take that position I actually think that
00:42:36
yair kind of got it right um the basic premise of clintonomics was exactly that the basic premise of
00:42:44
clintonomics was that for a set of microallocative reasons even though the economy was somewhat sluggish at the
00:42:53
beginning of 1993 the right thing to do in order to have lower Capital costs lower interest rates and more investment
00:43:03
was to reduce the budget deficit even though ceteris paribus that might be contractionary
00:43:13
um but that the FED would the fed and the markets would offset that so for the most part I would apply the logic and I
00:43:22
think in the vast majority of normal times fiscal policy should not be used as a stabilization uh policy instrument
00:43:33
I think there is a particular extreme in case around uh the zero lower bound and
00:43:42
possibly a particular extreme case around circumstances where interest rates being too low or too high would
00:43:53
have various other kinds of distortionary effects which might cause one to deviate from uh that Doctrine but
00:44:03
that that is not um but that is uh not uh the uh usual case and that the more usual case is
00:44:13
that fiscal policy decisions should not be made on uh aggregate demand and macroeconomic stabilization grounds I
00:44:24
think there's a kind of common fallacy in this area which is macroeconomic policy is not being
00:44:34
carried on very well or we don't like the way it's being carried on therefore we should try to use these
00:44:44
other instruments to serve macroeconomic objectives you know if you think the FED is too
00:44:52
contractionary I don't think that's particularly a reason to forgive student loan debt in
00:44:58
order to stimulate demand because I think if the fed's too contractionary that will also influence
00:45:06
its response to the fact that you stimulated Demand with uh your student loans so it's back to uh the thermostat
00:45:20
and I think one has to be careful and this is a kind of General point where you sort of have to
00:45:31
use your judgment if you're a smart creative person you're likely in any context to be able
00:45:41
to think of some reason why the thermostat analogy is not perfect but you also have to think about all the
00:45:50
flaws that come in terms of less Focus diverted accountability all of those uh things when you start
00:46:03
licensing all arguments on all subjects so it's like the idea that I think is a
00:46:12
common feature of naive economics courses particularly taught by progressives which is you should only
00:46:19
have a you should only have government intervention if there's a market failure
00:46:25
but if you have a market fee or anything goes and anytime something if if something is bad for my health will make
00:46:33
you sad that's an externality and that's a market failure and when you go down
00:46:39
that road you get a um you can easily get on a very slippery slope to an enormously interventionist
00:46:48
approach about which I think one should be cautious recognizing that there are a
00:46:56
variety of failures that come uh from public sector interventions as well as private sector uh interventions so Larry
00:47:08
I want to say that I'm really grateful and I think we all are recognizing that
00:47:14
um you know this is not only have you got into an sort of unknown uh um field shall we say but one that doesn't
00:47:25
that may or may not exist in quite the form than it will end up in so really I do appreciate and I think we all are
00:47:33
engaging in kind of the finding the elephant project in good faith and um absolutely and I I think you know I
00:47:44
think to be clear I think the institution design aspects of all this are the most
00:47:56
institutional design and institutional conduct are I think to me the most interesting
00:48:07
and profound of these questions to take for example a question that it seems to me that a group of
00:48:17
policy-oriented lawyers ought to be good at thinking about where I have never seen good systematic
00:48:26
thought uh how should one think about transparency to take a setting apart from the public
00:48:34
sector why don't transparency is good firms have information why don't we require them to share their
00:48:43
information every day or every week rather than just do a quarterly statement and presumably it's because we think at
00:48:54
a certain point too much information becomes noise um well you know there's the same set of
00:49:01
questions around the fed maybe the Fed chair he sees every piece of data market participants would be really interested
00:49:09
in knowing what he thought about it it would give them more predictability and more clarity if they knew maybe the Fed
00:49:16
chair should have a press conference every Monday but probably not but what are the set of
00:49:24
considerations and how should one think about those aspects of the conduct of policy
00:49:32
um to take another example in the FED context I've always found it mysterious
00:49:37
that when I was treasury secretary and you and others would gather and we would discuss a policy issue we always
00:49:49
regarded it as important that our discussions be private and we regarded as inappropriate if either a summary was
00:50:00
provided of our discussions apart from whatever decision I announced as secretary
00:50:07
um if a full discussion of a summary of our deliberations were provided or if several years later
00:50:16
a full transcript of our meeting was provided we would have regarded that as appalling
00:50:22
I think the Supreme Court would regard it as appalling uh if it was suggested that with a 10-year lag all judicial
00:50:31
conferences be recorded and made available to historians and Scholars who wanted to better understand
00:50:39
the basis of Supreme Court decision making and yet it's somehow taken as axiomatic
00:50:45
that it's appropriate for the minutes of the FED to be given in partial form
00:50:51
after three weeks and after five years for them to be made public maybe that's
00:50:57
the right thing to do because there's something different about the FED but I
00:51:02
don't know what it is and how those kinds of decisions should be designed and thought through seems like an
00:51:09
enormously important question uh well secretary Summers it's quite fascinating that
00:51:16
in the process of you know freelancing and us re-associating to some extent I think you've gotten a couple of PhD
00:51:24
dissertation topics out there um for which we are grateful and also you've given some of the friends who've
00:51:31
written in these areas um uh another reason to tweet out their research but um I want to ask two
00:51:39
completely unrelated questions um in the um 63 seconds we've got remaining because I'm getting kicked out of my
00:51:48
hotel room quite literally um and we've imposed on your time one is how do we deal with
00:51:57
um group think at central banks um and is there a reform project there and two is
00:52:09
um should we ditch or radically reform the Bretton Woods system after what you've described as a massively
00:52:16
disappointing outcome of the annual meetings and you can take either both or neither depending on how much time you
00:52:23
want to uh spend on the Bretton Woods institutions I think it's more a matter of they need to
00:52:34
make different policy decisions that are wiser and better rather than that there needs to be a new
00:52:43
set of Articles of agreement or a new institution um established um and I think so I think it's a matter
00:52:53
of the judgments that uh those ins those institutions um are uh are making not sure that the problem in
00:53:08
central banks is group think rather than wrong thing um I obviously have thought over over
00:53:20
the last year that the U.S central bank has not so much recently but in the in the in the
00:53:29
12 months from uh May uh April or May of 2021 to April or May of 2022 I haven't
00:53:39
been shy about saying that I thought our Central Bank lost its way I don't think they lost their way
00:53:48
because they were unaware of what I was saying or unaware of the arguments that I was making I just think they were
00:53:58
wrong and so I don't know whether and I think it's another good research
00:54:04
question how to think about um group think versus um you know excessive Group Thing versus
00:54:15
successive wrong thing and are they the same thing I am aware of the streams of research
00:54:26
suggesting that more diverse groups of decision makers make wiser to make wiser decisions
00:54:36
I'm not hugely convinced by all of that uh by all of that research and I think
00:54:46
there are a lot of different dimensions of uh diversity that go into it and I suspect that an important element
00:54:58
is missing in all the experimental work which is that if I'm a group of if I'm
00:55:05
part of a decision-making group two elements are really important one is that there be a variety of perspectives
00:55:14
and they all get feeded in and the other is that people can be completely candid
00:55:22
relaxed and willing to change their minds with each other and there tends to be some tension
00:55:30
between those two things if you let me be advised by three people who I've known for 20 years I'm probably there's
00:55:37
probably going to be more risk of group think but I'm probably going to be more
00:55:41
comfortable putting forth an idea and then withdrawing it and I suspect that some of the
00:55:50
experiments are done in ways that capture the benefit but don't really capture some of the
00:55:57
potential cost of force and choice so you could say for example corporate board of directors will always
00:56:07
be better if you insist on you know every oil company deliberation will be better if you
00:56:17
insist on there being a staunch environmental Advocate pressed and that that's a reasonable argument most of the
00:56:26
time when it's considered the fact that probably if you do that given the nature
00:56:32
of human nature you will substantially increase the probability that something will be leaked from the
00:56:41
meetings um probably Bears on um how that will impact on the deliberations so I I'm open to the idea
00:56:52
that there should be some set of policies to uh resist a group thing but I'm I don't regard that at all as being
00:57:04
a uh proven case