Le Show; 2016-04-24

From deep inside your audio device of choice. From Rolly North Carolina, think about that. Well don't think about it too hard, especially if you're thinking about the bathroom. There will be a couple of my favorite prints songs on this program, but it's not going to be, you know, all prints all the time. It's being taken care of elsewhere, but in the meantime, news of the Olympic movement, produced by Jim Eversall, Jr. The new 12 and a half million dollar elevated bike path in Rio de Janeiro came crashing down into the rocks and sea below this week, killing at least two people.

A massive wave lifted 150 foot section of the bike path and took it down. Roughly three months after officials opened the path and held it as a legacy project, a top legacy project of the Rio Olympics. The problem is that this exceptional force when the wave raised the bridge was not included in the project. We think it was a design flaw, Antonio Yolalio, a civil engineer and advisor to the Rio de Janeiro Regional Council of Engineering, said to Global News, quoted it by popular mechanics in this country. He highlighted the stress caused when the wave came from below twisting the bike path upwards. Accusations of corruption and shoddy engineering flared up immediately due to the ongoing scandal in the Brazilian construction industry for the past several years. Media headlines have been filled with details about multi-million dollar bribes, kickbacks

and political corruption involving government-financed infrastructure projects, like those legacy projects for the Olympic Games. It's a movement and we all need one. And now news of the godly, sadistic nuns. Think of it. At a notorious Queensland, Australia orphanage dished out abuse in a toxic environment that festered due in part to inadequate government scrutiny, supervision and training. According to an Australian Royal Commission looking into child sexual abuse. It last year examined cruel treatment of 13 former residents of St. Joseph's orphanage, not connected to the aspirin, which was operated by the Sisters of Mercy between 1940 and 1975. The men and women aged from their 50s to their 80s were called abuse at the school ranging

from public flogging and being walked on by high heels to be made to drape urine-soaked sheets over their heads. Commissioners explored the responses of the Sisters of Mercy as well as the Catholic diocese and the Queensland government to complaints which often fell on deaf ears, not to be confused with deaf boys. The Commission found punishment administered by some nuns was, quote, cruel and excessive against regulations in place at the time. Some victims didn't report sexual abuse because they had a little or no opportunity to speak with department inspectors. We're also satisfied to the Commissioners that children who did complain of physical and-or sexual abuse to a department inspector, a sister, a priest or a priest or police, were not believed and or were often punished by the sister or priest for reporting the abuse. Well, yeah, you got to punish them, otherwise. And also, news of the godly, a Roman Catholic diocese in southern India.

So this week it consulted with the Vatican before it reinstated a priest who last year pleaded guilty to the sexual abuse of a minor in the good old United States. The suspension of the priest, Father Joseph Jayapal, 61, was lifted by the bishop of the diocese of Uttakamund in the southern Indian state of Tamil Nadu earlier this year. That's according to a spokesman for the diocese. Father Jayapal was serving in the diocese of Krix in the Minnesota in 2004. He returned to India a year later, two years later, criminal charges were filed against him in the US, accusing him of sexually abusing a girl between 2004 and 2005. He was suspended from the Indian diocese in 2010, arrested a couple years later, extradited to Minnesota. In May 2015, he pleaded guilty to criminal sexual conduct, released from jail after three years and four months, deported from the US.

He's now living in the residential premises of the diocese, meaning that time another woman alleges she too was sexually abused by him in 2004. He has no responsibilities whatsoever in the current diocese, when asked if he was prevented from having contact with children, the spokesman said, quote, it is not a jail, unquote. He didn't comment on why Father Jayapal was reinstated. He's not available for comment. His public defender in the United States couldn't be reached. The bishop lifted the suspension after consulting with higher officials according to the spokesman. There was guidance of the Vatican, he said, without revealing whether it approved the reinstatement. The Vatican spokesman declined to comment as well. Use of the godly ladies and gentlemen, a copyrighted feature of Hello, welcome to the show. He's now living in the residential premises of the diocese, meaning that time another woman

alleges she was sexually abused by him in 2004. He's now living in the residential premises of the diocese, meaning that time another woman alleges she was sexually abused by him in 2004. He's now living in the residential premises of the diocese, meaning that time another woman

alleges she was sexually abused by him in 2004. He's now living in the residential premises of the diocese, meaning that time another woman alleges she was sexually abused by him in 2004. He's now living in the residential premises of the diocese, meaning that time another woman alleges she was sexually abused by him in 2004.

He's now living in the residential premises of the diocese, meaning that time another woman alleges she was sexually abused by him in 2004. I'm Harry Scherer, welcoming you to this edition of the show, and now ladies and gentlemen,

the apologies of the week. First to Pennsylvania, where range resources executive Terry Bossert, he's a senior executive at the natural gas driller, apologized for suggesting the company tries to avoid putting its wells near big houses where residents may have the financial means to challenge them. The comment was made by Bossert, the vice president for legislative and regulatory affairs at a legal forum in Harrisburg, Pennsylvania, earlier this month reported first by the Pittsburgh Post Gazette. Let me apologize, as my attempt to interject dry sarcasm was clearly a mistake, he said in the statement release this week, we always work hard to create the biggest buffer between our operation and all residents. An attorney who attended the lawyer's forum and questioned Bossert shortly after he made the comment said, everyone who was there knows it wasn't a joke. Well, humours in the eye of the behearer after all, the bishop of Rockingham in Australia has restated his apology to the victims of abuse at the notorious Queensland orphanage,

St. Joseph's, no relation to the aspirin. That's the story we covered earlier, now there's an apology covering the story that was covered. Caroline Warsaw Catholic Church Authorities and Eastern Poland denounced nationalist views this week and apologized after a radical, extreme right organization held a mass in original cathedral. Father Andrej Debski, spokesman for the Church Authorities and Bialystok, said the apology came after believers complained that a mass was held in Bialystok Cathedral for the extreme right national radical camp. Founded in 1934, the ONR was built on Italian fascism and has promoted anti-Semitic ideas. In Poland, really, the Bialystok Curia apologized to all who felt hurt by the behavior of ONR members in Bialystok Cathedral, said a statement on its website. The Curia assures the Church in Bialystok region is non-party and nationalism is alien to it. The cathedral rector consented to the mass, led by a priest of the organization's choice, but he failed to seek the approval of his superiors.

UC Davis Chancellor Linda P. B. Kitehi apologized Thursday for mistake she and her staff made during her 7-year tenure, committed to setting up oversight committees to avoid further missteps. There will be mistakes. There will be controversy. There will be critiques. I have to tell you, she said, I'm a human being. You know I've made mistakes and I probably will make more. And what I can promise you is I'm not that I will not make another mistake. I will promise you that I will try not to. This is after a series of articles in the Sacramento Bee described her paid positions on corporate boards and the university's hiring of consultants to cleanse the school's online reputation after the 2011 pepper spraying of non-violent protesting students. She says she has no plans to leave despite calls from some lawmakers to resign. She said a proposal to clean up the internet from mentions of the pepper spray cop incident. While her mistake was allowing a contract with inappropriate language to exist, I take responsibility for that.

We never, never intended to delete. You cannot first of all do that, but we never intended to erase history. UC Davis and the pepper spray is a historic event that will remain with us, but it should not define the institution. And if I wanted to fix my own reputation, she said I would have done it privately. Unquote, the pepper spray chancellor. Just two weeks after the Chicago Black Hawks announced a partnership with the You Can Play project, which works to promote the inclusion of LGBT athletes in sports. Two members of the team appeared in a video, but Black Hawks forward Andrew Shaw must not have gotten the message. She was suspended by the NHL from the Blues Black Hawks playoff series after we've caught on video twice directing a homophobic slur at the referees after being called for a penalty late in game four. I want to apologize for my actions. He said appearing near tears at times. I have no excuses for anything I want to apologize to the gay and lesbian community. That's not the type of guy I am. This is hard for me. I saw the video last night and I had a rough time sleeping. I have motions.

I let my emotions get the better me. I'll never use that word again. That's for sure. Said the senior executive vice president of hockey operations at the NHL, the emotion of the moment cannot and will not be a mitigating factor for the conduct that is expected of an NHL player. Reminder, they're talking about hockey. This feat is apologize for a video it published last week that featured black people asking questions that seemed to generalize the black experience. We've heard your concerns about last week's video. We made a mistake. We want to get better at earning the trust of our black audience. The site tweeted. The apologies of the week. A copyrighted feature of this broadcast. This is the show and what I know about economics can go in the tip jar of any night club you might want to patronize, but it becomes increasingly important as we rattle through what's purported to be the recovery from the great recession. My guest today is invited because he has pointed out in a recent book something that I had no idea about and I wanted him to explain it to me and to us.

You may recognize his name, James Galbraith, Dr. James Galbraith, who is a professor of economics at the University of Texas and Austin at the Department of Government. He's also a senior scholar with the Levy. Is it Levy or Levy? Levy. Levy, economics institute of Bard College and part of the executive committee of the World Economics Association. Dr. Galbraith in Austin, Texas, welcome to the show. Thank you. Let me start at the basics. Economics purports to be a science, does it? Not if you know it as intimately as I do. Who was it that gave it the sober K, the dismal science, I forgot? McCauley in the 19th, um, um, um, calling McCauley in 19th century, it's around the time of David Ricardo had got that designation, uh, because of the, the views of Thomas Robert Malthus, uh, which held that, uh, uh, uh, the population would always, uh, exceed

the food supply or run up against the food supply and the subsistence of labor could never be improved. Um, and that was, uh, that was the, uh, message of classical political economy in the first half of the 19th century. Sounds pretty dismal indeed. So now one of the things that science purports to be able to do is to, uh, do experiments that can be replicated, that can explain and also have predictive power, uh, what an economist's use, um, for part of that purpose, a model. That is true. What is a model? A model is a mathematical representation of the, of the functioning of the economy. So it's a set of equations that, uh, purport to predict particular, uh, particular variables, usually variables that are recorded statistically in the national income and product accounts like consumption, investment, government spending, exports, imports, the interest rate, the exchange rate, things of that nature. And the, and the reason they use models is because to try to, uh, get your arms around

the entire economy, uh, is too hard. Now, it's that the individual components, uh, can be thought of as having, uh, mathematical relationships to each other being their behavior is governed by, by rules which, uh, work some of the time and not all of the time, uh, but that they have general, general regularities which, uh, economists arguably have observed, uh, in the data. So they write those into a structural model, the, a model of the economy and put them together in such a way as they hope to get a reasonably consistent, uh, forecast of what's going to happen going forward. So the, the, the, one of the basic uses, if not the, the primary abuse of, of economic models is for forecasting and, and predictive power, correct? Uh, it's, there certainly are used for forecasting, yes. Now one of the chief users of models in, in terms of public life in this country is the congressional budget office, is that fair to say?

This, uh, certainly an important part of what they do, yes. And they use models in order to, uh, as they call it in Washington, score, uh, various policy options to, to decide if you did this, it would have this effect on, uh, in, uh, tax income, jobs, that sort of thing, guys. Well, to put it a little more precisely what the CBO does is to calculate a baseline model for the performance of the economy so that when they score different pieces of legislation, they're doing so in a consistent way. And that's certainly a perfectly legitimate thing. But the issue then is whether that baseline model is really a realistic forecast of what is going to happen. And there's a certain, they publish it. It looks, it looks like a forecast to anybody with an undrained eye and, but, uh, whether it should be truly treated as such, uh, is, is, is, is the question. But what can happen, I could anticipate you just a bit to a forecasting model. Basically, there are, there are two kinds of problems.

One, one is that the model is necessarily calibrated on past behavior, and that is because that is, history is the only guide you have. So there's an implicit assumption in the forecasting model, uh, that the future is going to resemble the past, uh, and if the future doesn't resemble the past, you're in trouble. And a major reason why the future may not resemble the past is that some factor, some element which was in the background, let's say, of the model and was not perhaps explicitly accounted for because it did not appear to be sufficiently important, suddenly becomes important. So the world changes in some significant way. And this is something which a modeling approach, um, is simply always going to miss because the modeler is not trained to have the broad range of, uh, understanding of the wider world to be able to identify significant developments at the, when they occur, they'll, they will be identified in retrospect, but at that point, 10, 20, 30 years down the road, it's far

too late to use them for forecasting purposes. So that's the situation that I suggest actually happened really over the turn for the United States over the turn of the, of the millennium around 2000, uh, for the rest of the world in many ways much earlier than that in the 1970s. Well, is this a, is this a occupational hazard of being a modeler that you can't anticipate these, uh, or is this just human nature that, uh, we, we, in the same way that we look at a, a graph and assume that it will continue in a linear fashion forever. That's just a way human brains work. Uh, it's the way, um, human brains of a certain sort, the way all human brains work, uh, but, uh, it is, in fact, an occupational hazard of a bureaucratized enterprise, which modern economics has become, uh, enterprise of teams and of, of, of intellectual conformity, uh, standard set by groups to which everybody tries to, uh, to, to conform and professional

advancement is determined by just how conformist they are. Uh, so you have a, um, a community which is, uh, self governed by a form of group think. Um, now that is, in a sense, it's not necessarily a bad thing in itself, uh, but when the conditions change, that community is going to be wrong on mass and it's not going to provide any kind of internal checks or balances, uh, to its way of thinking that will enable it to be alert to the fact that it's made a catastrophic mistake. Well, that was going to be my next question because theoretically, uh, in a science, uh, one could have, uh, fairly, uh, not infinite, but a fairly large number of, of models that would compete, uh, for, uh, predictive power and the one that had the most predictive power would, uh, ultimately come out ahead, but you're suggesting that, uh, there's more of a monopolistic setup to, uh, economic modeling in this, in this world.

Well, and, and, and I think the problem that I, that I'd stated is a generic one, but in economics, in particular, the field remains, uh, quite contested, uh, but the dominant community has done an exceptionally good job of walling off, uh, itself from critical perspectives for the last half century or so, something that was not true actually in the 40s and 50s and 60s when, uh, the major departments were full of highly divergent, uh, figures with creative approaches. Uh, that was certainly the environment that I grew up in and was aware of when I was much younger. Uh, but from the 1970s and 1980s onward, it has become, uh, a highly hierarchical, uh, profession where advancement depends entirely upon being able to publish in a certain very small set of, uh, economic journals whose, uh, publishing decisions are governed by very narrowly chosen, uh, uh, boards, and they basically exclude anything that they

deemed to be non-mainstream. So the non-mainstream stuff is out there. It gets published in other journals. Those journals have no impact on, on being able to come into the more influential positions in the departments, uh, and in the profession and the result of that is that people like, while people I like to associate and consider to be, uh, my, uh, intellectual colleagues, uh, tend to be scattered around the landscape in a way which greatly diminishes their ability to influence the course of, of the debate. Well, let's get back to the Congressional Budget Office. It is supposedly non-partisan. It is supposedly the objective, uh, source of information for legislators considering, uh, different policy options. How did its economic model perform during the time, uh, did it predict the great, uh, meltdown of 2007-2008? No, it did not predict the meltdown, uh, the, uh, but more important than even that was that when the meltdown occurred, the Congressional Budget Office's model had built into it, uh,

a particular assumption which had become, uh, mainstream dogma over the previous 30 years. And that assumption was that the economy reverts to its previous trend, it recovers to its previous trend in a way that is a fundamentally automatic, uh, that is to say there is something called a natural rate of unemployment, uh, and something called a labor market, uh, and the labor market adjusts after you give it a shock and people are out of work, real wages fall, employers come back in and rehire everybody once the, uh, labor force is competitive again. It's the basic mechanism that's, uh, at least the underlying thought behind the mechanism that's built into this model, uh, and the result of having that in the model means that the Congressional Budget Office from the beginning in 2008, 2009 was predicting that they would be a relatively rapid recovery in a return to the previous trend by 2012, 2013, uh, and of course, it didn't happen. And the fact that it didn't happen tells you that that assumption,

uh, was a deeply unfounded assumption. Some of us have been arguing that for 30 years, uh, but once you build something into a computer model, the people who are operating that model, I think are barely conscious of the theoretical dogmas that they've become captured by. It becomes sort of consensus reality then. Uh, as far as their concern, no, I don't think these people are, are, are, are ideologues. And I think they're basically mechanics, uh, but they are mechanics who have not really got, uh, critical grip on the engine that they are working with. They don't really know how it, how it was designed. Uh, and so they believe it to have certain properties, which, in fact, it can't have, which contrary to, uh, contrary in some ways to the laws of physics. Um, so, uh, but they have a kind of metaphysical belief, uh, in the self correcting properties of the economy. Okay. And, and so now we're past the great meltdown and facing policy choices about how to either engineer or, or encourage a recovery. And now this model

does what? Well, the model basically says that, uh, the economy, as I said before, will recover on its own. But of course, there will be a period when it's operating below, uh, its potential. Uh, and that became the way in which mainstream economists frame the debate over whether one should stimulate the economy or not. Some of them argue that there should not be a stimulus, just wait for things to recover on their own. Uh, some of them argued that there should be, uh, and this was the position taken by the leading economists who came in with the, uh, with President Obama, Christina Romer, for example, his chair of the council of economic advisors, uh, that there should be a stimulus, uh, that there should be an effort to speed up the rate of recovery. But that at the best, even if you did a very big one, it would simply move forward the date, uh, at which you got full recovery by a matter of months. So even the administration's own forecast about what would happen, which was prepared in early 2009, held that the, uh, you know, their own

program would generate a recovery that would be complete six months earlier, uh, than it would be completed anyway. And that gives you an idea of how locked in they were to the, to the notion that the economy was self-repairing. If you don't believe the economy is self-repairing, you might argue, uh, that the package is absolutely necessary in order to get a recovery at all. And if you don't, don't pass a series of reforms, you're going to end up in, in stagnation or even in further economic decline. But they didn't actually make that argument. I said, yeah, the economy is recovering on its own, but we can speed it up and help it a little bit. I'm, I'm, I'm just going to throw a couple of really ignorant questions at you regarding this. We're in a time of, of, uh, almost, if not really, negative interest rates. Had there been a period like that in the, in the historical period encompassed by the model? Uh, no, that's an interesting question. Uh, and I think the answer to that is, um, not really. There was a period of very low interest rates right after, uh,

2001. But, uh, the period that was relevant was the period of the late 1930s when they, when the federal funds rate, when they, when the interest rate that the government set was practically zero as it has been, uh, in recent years, uh, and certainly since the crisis in 2007. So, uh, that period, as one before the time when there was, uh, a, uh, uh, established body of, of, of, of national income accounting data, and therefore it is not counted for, uh, in these models. But if you go back to the histories of that period, then people understood it. Uh, what they believed at the time, and I believe they were right, was that, uh, zero interest rate, and, uh, particular attitude people had toward holding money, holding reserves in an environment of fear meant that there was no way that the economy was going to recover on its own. And that would argue for a, a, a, a role to use a,

almost Dick Cheney word, a robust stimulus of the economy. Well, I would argue for that, that the recovery that did occur, uh, and that put the economy in that by 1950 on the track that carried it through 25 years of growth, uh, would not have happened without the new deal in the second world war. And the alternative view, uh, is equivalent to saying that even though we were in the greatest depression in world history in 1933, that 1950 would have been essentially what, what it was, even if there had been no new deal in no, no second world war, which when you put it in those terms and you understand the historical magnitude of what the new deal did and, what the second world war, uh, did to the economy is, is fundamentally a preposterous view. It just completely ignores the fact that when you make, first of all, physical investments, you change the underlying conditions for the production of the economy. And even more important than that, when you provide people with work and get them doing useful things, they become

disciplined, effective productive, uh, members of, of the economic society, which if you leave them on the dole, they don't become. So the fact that, that jobs were available in the 1930s and the new deal agencies and the fact, uh, that they are massively available during the second world war, meant that after the war, you had a very different population workforce, uh, and approach to, um, let's say the capitalist system, uh, then you would have had if those things hadn't happened. Another sort of, uh, almost naive question, we're told by certain political actors, uh, fairly frequently in, no, in certain terms, government doesn't create jobs. I don't know what they're talking about. No, well, I could go back again just to do a little list of, of, of what happened, uh, beginning in 1933, the government, uh, paved, uh, uh, 700,000 miles of roads. They built a thousand airfields. They rebuilt every rural school in the country. They built every courthouse in

the country. They built the Lincoln tunnel and they built the Triburo Bridge and they built, uh, Timberline Lodge on Mount Hood, where I stayed a few days ago. They built the tower at the University of Texas at Austin. They built practically everything you find from that period, uh, was built by, uh, by government money, uh, and, uh, under the supervision, uh, of government, of federal agencies. So, uh, they built battleships, too, by the way, and, uh, and aircraft carriers, which were crucial to the victory at Midway in the Second World War. So this is, uh, the notion that government doesn't do things, government does a great many things in our society and, uh, has continued to do so obviously in the period of our lifetimes and continues to do so today. It's an integral part of our economic life. There was an important role for the private sector, but, uh, uh, the, the public sector and the regulatory mechanisms that we have are, in fact, very important to distinguishing us from a state of, uh, of under development and, uh, economic

disorder, which you find in many other parts of the world. So if this, uh, model is, uh, so defective in terms of, uh, predicting shocks or unusual, uh, events in the economy and, and, in terms of, prescribing what will happen under various policy options given that, uh, weakness. How do we get out of this? Well, I think you have to approach the matter with an open mind. Uh, and that is what the models attempt to foreclose. Uh, I'll tell you a, a little story, uh, in the depth of the crisis, which would have been late November, maybe early December of 2008. After the election, I met with, incoming, uh, transition official, Jason Furman, who's now the chair of the Council of Economic Advisors, uh, and it was just a discussed strategy. And his first question was, what's your number, meaning what did I estimate would be necessary, uh, to get out of the, uh, of the crisis, uh,

and numbers for the stimulus package were going around, it was 400 billion a year or whatever it was. Uh, and I was baffled by that question at first, uh, because it didn't occur to me that it was sensible to calculate a number. My own approach, my preferred approach was to say, this is a crisis of unprecedented proportions. We cannot know how severe it will be. We cannot know what the psychological reaction will be, what the international repercussions will be. So what you need to do is to throw at it everything a half. You need to do whatever it takes and take an open-ended approach and be prepared to spend as much as it is required. And till you see the results that you want to see, uh, I adjusted that view because I realized that in order to get into the conversation at all, I had to have a number, uh, and, uh, when we started talking about that, Jason said, well, we're counting on you to come up with a big number. And the, uh, that was a strategic approach,

which was sensible. Uh, my job was to, uh, to, to press the envelope and make- You were to be the outlier. I was to be the outlier, which I would roll. I'm happy to play. It shouldn't bother me at all. Uh, in, but it enabled more cautious people with who were actually slated to take responsible positions, uh, to move their position, uh, closer to where they felt it might, they might possibly be in a zone that would work. Um, but as I say, the problem to begin with was the notion that you had to estimate the number that you needed and calculate your policy on the basis of that. Roosevelt didn't do that in 1933. He honestly didn't. He simply said, we're going to try and experiment and we're going to, if it doesn't work, we'll try something else. And they appropriated a big number and they started spending it and, you know, gradually, they began to see, uh, the effect on, on, on, on economic activity, even though they couldn't measure that either. There was no, no, no GDP growth accounts at the time, but they could tell, uh, that they were having an impact. And of course, by 1936, it was clear they'd had an enormous

impact, which is why Roosevelt got reelected with 46 states. You also say in, in your book that, partly because of political pressure, partly because of the, uh, limits of what people felt was necessary. The stimulus money that did go out was focused on so-called shovel ready projects. Uh, and that had, uh, an impact on what we could, uh, get out of this recovery. Yeah. There was an effort to focus it on shovel ready projects. I think it's a good thing that that was not entirely the case. A lot of money was spent, for example, on green energy that was very useful. Uh, but the focus to the extent that it occurred on things that were short term and temporary was in line with this, um, methodological pre-delection with this, with this preconception of how the system would work. Uh, and again, if you take a more open-ended approach and you realize

that you've got a problem whose dimensions you don't know, then you would deal with it in a more constructive way for the long term. You would sit down and say, okay, what are the most important problems we have to solve? How can we create institutions that will effectively tackle those problems? Let's, let's talk about our energy and environmental problem about the greenhouse gas issue. Uh, and, uh, and we'll, we'll put the resources that we need into a long-term and even permanent approach to dealing with, uh, with, with these crucial questions. Uh, and they didn't do that. Uh, they, they are operating on the assumption that the intervention could be time-limited. Uh, that the economy would be back on its own. It would be back to the previous status quo, uh, after five or six years. Uh, and that, again, means that, uh, we missed a big opportunity when, uh, we could have been dealing with not only the immediate economic problem, but also, uh,

potentially catastrophic longer term issues that we absolutely have to address, but which in the current political environment is absolutely no chance of addressing. Are we at this point in time back to where we were before the meltdown? No. Uh, the, uh, uh, level of employment in the population has barely changed since the, uh, trough of the crisis. Uh, we have had job growth, but it's only been basically in line with population growth. There's a much smaller share of the population is now active than it was then. About half of those have retired in my understanding, and another half have, uh, uh, of those who have left have retired. And another half has simply dropped out of the labor force because they don't think that the jobs will be available. No question. We are in a fundamentally different place, uh, not only than we were, but then the models predicted that we would be. Going back to that moment in time, uh, when you were called in, uh, there's been reporting on, uh, those discussions inside the Obama administration, which indicate

that, uh, it was made very clear to participants in those conversations that there was a political ceiling on the number that actually they were going to put forward that, uh, anything above that was observed and a political nonstarter. Was that your sense of what was going on there? Well, I think that's been accurately reported the phrase that Larry Summers used to, uh, Christina Romer was extra planetary. Larry's been very clear, uh, to me personally, and I think in other forum, that he was personally in favor of a larger number and pressed for it internally, uh, the forces that were actually opposed to that were associated, for example, with the secretary of the Treasury at the time, Timothy Geithner. Uh, but Larry, uh, was nevertheless aware, uh, that there was, there were political constraints that, uh, uh, that, and there was a judgment that, uh, they didn't have the, um, uh, let's say the political momentum that wouldn't have enabled them to carry,

let's say, a trillion dollar program. Uh, and so they had to keep it within the range of what they could sell. Um, and that, that's, they're, they're understandable reasons why that was the case. The crisis was only a few months old when Barack Obama took office, uh, whereas when Roosevelt took office, it had been going for four years and the entire fabric of the country was unraveling. Also, there, you know, Roosevelt took office, the Bolshevik revolution in Russia was only what 16 years old, 17 years old. So that, uh, there was, there was a, a concrete alternative emerging in the world to the capitalist system. Uh, certainly it's in 2009, Americans were not conditioned to see that kind of a threat, uh, to their way of life. So for various reasons, the Obama administration was not close to being in the political position that Franklin Roosevelt had been in. Now we're here. And, uh, uh, I would ask you, first of all, uh, I mean, I, I look around,

I see these, these stories about the, the, the either impending or current slowdown in China, the, the states, the stasis in Europe. Um, and, uh, depression in Europe. Yeah. And are we, are we heading towards a rerun of 2007, 2008? Well, 2007, 2008 were triggered by a massive financial collapse and panic. Uh, and it's the hard, well, at that time, uh, people who certainly knew that the real estate market were saying very loudly that this was going to occur because of the massive wave of fraud, uh, in the, uh, particularly in subprime mortgages, but in the, in the, the, marketing of those mortgages onto the world market. Uh, is there something similar going on in the world today? Uh, that's a little hard for me to judge. Uh, I would say the major financial

risks at the moment stem from international instabilities. Uh, that is to say money flooding back out of, uh, Latin America and other parts of the world where it has gone to search for yield, as the United States moves toward, uh, higher interest rates. Uh, and as that part of the world suffers currency devaluations in crisis and China above all could be, uh, a, a major source of financial instability, but, uh, it's a little hard from the outside to judge the extent to which that's the case and nobody knows where the derivative exposure of major banks may be at this point. We know there's a lot of it out there, but we don't know specifically who holds it or what the, uh, what the risks are because they're not required to report that. So one has to remain, this is for the financial authorities to be on top of, and it's hard to speculate from the outside. Is the economy slowing down? Yes, it is. Uh, and is it slowing down because international forces are bearing on it? Yes, that's true. There was a news report. I think this morning, uh, to that

effect that this was the, the most recent day to the external sector was weighing on the American economy. Uh, what is the appropriate response to that? Uh, I think one has to be very, this is a point where we really do need to think clearly and importantly, many people saying the economy is slowing down. I mean, so the budget deficit is going to be bigger. We have to tighten our belts at the governmental level. That's exactly the wrong response. The right response is to say the economy is slowing down. More people are at risk. We have to make sure that their insurance and their safety net is stronger, uh, not weaker than it was before. That means strengthening programs like social security, extending health insurance. It means making, uh, public services, like public education in particular, university education, more accessible. So that's the, that, that is, you know, to my mind, the fundamentally important debate is how you respond to difficult conditions. Do you do so in a way which throws a vast part of the population on to

effectively onto the trash piles is okay, there are no opportunities for you and no, uh, and you have to, uh, basically live out your life in, in precarity or destitution. Or do we say we are going to provide, continue to provide, uh, the basic opportunities and services, uh, so that people have a chance to make their own decisions and to, uh, first of all, lead lives and comfort and dignity, but beyond that to have the ability to think for themselves about how they're going to, make themselves part, uh, functioning an effective part of economic life. And as we look to this moment where there might be a slowdown or there is a slowdown and there might be something more wrenching in our future, has the dominant economic model now taken into account the events of 2000, 2000, 2007, 2008 are those part of the historical record that's now encapsulated in the mainstream model or, or not? There has been a little bit of adjustment of trends, for example,

to take account of the experience of the last seven years, but there's been no real learning about what is behind the change of trend. Uh, there's been no underlying rethinking. And in order to have rethinking in the mainstream, the mainstream has to admit people who think differently. Uh, there has not been, for example, to my, almost certain knowledge, a single senior appointment in any so-called mainstream economics department since the crisis that has gone to someone who was right about what was going wrong beforehand. Not one. None of these departments have said, gee, you know, we really need to reach out to people who were previously considered not mainstream and appoint them to senior positions. It's the most unbelievably, uh, circle the right wagons attitude, uh, in the profession. And it's extremely difficult, uh, even in, you know, schools like mine, public policy schools or other units that have some independence, uh, to get economists

to admit the need for diversity and choice and, uh, a wide-ranging thinking about economic problems. So this is a profession of, um, ostriches with their heads firmly buried in the sand. Uh, and, of people who continue to think that only their established colleagues are worth quoting, worth citing, worth referring to. Uh, so an idea does not penetrate into this until someone who's already inside picks it up from the outside. Uh, and that happens from time to time. And I congratulate people like Larry Summers and Paul Krugman who pick up these ideas from time to time. Uh, but, uh, you know, frankly, that's not a substitute for actually having the people who had those ideas brought in and, uh, taking a deep breath and listening to the fact that, uh, that there were people around who, uh, who understood these issues, uh, decades before, uh, the crisis actually happened. Now, you've mentioned two names that are, uh, in, uh, somewhat, uh,

contention in a, in a very contemporary, uh, controversy right now, uh, Krugman and Christina Romer. There was a, a, an analysis of Bernie Sanders, uh, uh, economic proposals by a certain, uh, Dr. Friedman, uh, the Jerry Friedman and was responded to with some force and vigor by, uh, among others, uh, Romer and Krugman. And I think you weighed in on this. I did. Tell me about that. Well, what happened there was that, uh, four former chairs of the Council of Economic Advisors, two of them under Clinton, two under Obama did a joint letter of a few paragraphs, uh, which pounced on, uh, Gerald Friedman's study of the economic effects of the Sanders program. And Friedman had looked at the programs, a big program. He ran it through a model which he carried carefully specified, basically, as I described earlier, rules of thumb. And he said, he put a big program into a, this kind of a model, you get a big result. That is to say strong

growth that goes on for quite a long period of time. What he got from the four senior figures, was a pompous note that said, uh, we are the guardians of what is rigorous in economics and your study isn't any good. Uh, and, uh, I wrote them saying, gee, I appreciate your, uh, your appreciation for rigor. But, uh, I looked for the rigorous rebuttal and I didn't see a line that actually analyzed what Gerald Friedman said. And I have to say, no, Jerry Friedman never met him. I still haven't met him. We've corresponded quite a bit in this last few weeks. But, uh, they, uh, I thought this was a, when, when you have people who have access to the New York Times and getting picked up by Paul Krugman, uh, going after someone who's simply conducted a, uh, an analytic, written an analytical paper, uh, that is not kosher. Uh, they need to, uh, to, to state exactly what it was that motivated them to hold this view. And not simply that they didn't like, uh, it can't simply be that the view

tended to support the program of a presidential candidate whom they're not backing, uh, which seemed definitely the case. And whom, as I understand it, Friedman isn't backing either. He's influenced. Well, Friedman wasn't backing. I, I, I strongly suspect he's, uh, become considerably more sympathetic to the Sanders camps since, since, uh, people who were on Bernie Sanders side, you know, came to, uh, to defend him. And while the Hillary Clinton people were jumping down his throat, even though we was a contributor to Secretary Clinton. So, uh, this is a, uh, uh, this was just a piece of professional bad behavior of rank pulling. Uh, and, uh, uh, I felt that as a former executive director of the Joint Economic Committee, which is the counterpart to the Council of Economic Advisors in the Congress, that I had at least a degree of standing that would permit me to, uh, write a letter, chiding my colleagues for, uh, for bad behavior, which I did. Uh, ultimately, Christina Romer and her husband did produce a paper in which interestingly enough, they stated there, uh, what their line of theoretical difference with Jerry Friedman was. And it

comes down to exactly the point we were talking earlier, which is that the Romers believe that the economy would recover anyway. Uh, and there was a 2% underlying rate of growth. And then, once you took that into account and built that into your model, uh, then the, uh, um, the effect of a, of a stimulus package is going to be much less because you've got 2% that's going to happen anyway. But if you take that model seriously, it comes back to the reduxio ad absurdum that, uh, the idea that the New Deal and the World War II did not contribute to the prosperity of the 1950s and 1960s, which is totally a historical and implausible position. Uh, so that debate can go on, but once one has actually, um, obliged the mainstream, uh, economist to state what their theoretical presumptions are, you can make a judgment about it and you can conceive it. It's, it would not be persuasive to any ordinary, uh, sensible person who looks at it with, uh, with, uh, unbiased eyes.

I want to, I think this is a part of the, uh, question here, but I, I, I wanted to ask this question anyway, uh, just because it's a technical term that I think gets thrown around a lot and we don't necessarily understand it. The multiplier, uh, the effect of, of, let's say, a dollar of government spending on the economy and, and there's an argument about what the multiplier is, isn't there? Yeah, and this was the, uh, essence of the, um, of the dispute was over the, what value to place there and, and for how long. Uh, the multiplier is, uh, drives from the fact that when the government spends a thousand dollars, that's not the end of the economic consequences of that expenditure because they pay that to someone, it becomes income and that person then spends a certain fraction, let's say, $800 or $750 on their own, uh, consumption needs and the people who

receive that money spend a certain fraction again. So when you add up all of the repercussions, you get a number that is larger than a thousand dollars. Uh, and, uh, when you take out taxes and imports, and characteristically, uh, the number is between one and two. If you take the Roma analysis, however, in which things are going to happen anyway, the number shrinks down towards zero. And even becomes negative after a certain period of time, uh, because they build in an effect of the burden, so-called burden of the government debt, which they believe crowds out private investment five or ten years down the road. Uh, so there are even models which say the economy is worse off now, uh, than, uh, would have been if the stimulus had not had been enacted in 2009. And that again is extremely hard for a sensible person to believe, particularly when the interest rates haven't gone up at all. And we clear that they're not controlled by the demand for investment, but rather by what Janet Yellen and her colleagues decide on any given six-week interval at the

federal open market committee. Um, finally, uh, because I know your time is limited and we have limited airtime, but I'm just curious. Uh, that's a shame. I'm enjoying this. I am, I'm as well. Um, but I want to ask a more personal question. Uh, I know how fraught it is for a lot of people in the entertainment and arts world to pursue the same career path as, especially their dad. Uh, was it fraught for you to follow in the footsteps of, of your famous father? There's a certain tradition in economics of doing this, uh, which I, uh, I won't, but name the people of Keynes and John Stuart Mill both followed their fathers. Uh, but now for me, uh, first of all was something that fascinated me at a certain stage of my life, probably more than than it does now. Uh, and secondly, I always felt that I was working in an extremely honorable tradition, uh, by, uh,

uh, aligning myself very much with, uh, with, with my father's point of view. He took, uh, a, an unconventional argument, uh, that he was making, uh, that was highly original to him that corresponded to the reality of his day. Uh, and, uh, he defended that, I think, with considerable eloquence and very great success, actually. So, uh, I suppose the fraught element here is that it's, uh, you know, it's, it's, it's, there may be something cleansing about having a youthful or an adolescent rebellion against your father, uh, and going off in your own direction. And I, maybe simply have a placid soul and never get that, but, uh, I haven't regretted it. I, um, I'm, uh, uh, uh, content to be in my tradition as, uh, I could be, oh, tell a little story. I ran into, uh, descendant of, uh, friend of mine, a professor of economics who was a descendant of, uh, Franklin

Roosevelt's, uh, and who bore Roosevelt's name. And he made a comment to me at once about how it was difficult to have names like his, uh, like ours. And I said, oh, what the hell are you talking about? And he looked at me with some surprise. And I said, you know, think about it. It's not bush. He said, ah, I feel much better already. And you're sitting in Texas saying that? Ah, yes. Well, there it is. I, I've always said in that I, I, it's a great follower of George W. Bush's. I followed him to and over to Harvard and Yale. And then I followed into Texas. And then I stopped following. I, I can't thank you enough, Dr. Galbraith for, uh, explaining, um, a lot of this and doing so in a way that, uh, clarifies for a lot of us what's going on, uh, really appreciate it. And the name of the book that I was referring to is the end of normal. And I have two new books, uh, the book called Inequality. What everyone needs to know, which is just

out from Oxford. And a book, uh, called Welcome to the Poison Chalice, the destruction of Greece and the future of Europe, which will be out in a few weeks from Yale. Well, hopefully we can have you back and talk about that. Thank you so much. Appreciate it. Thank you. A tip of the Lachosha Poe to the San Diego Pittsburgh, Chicago, and ex-Zalent Hawaii desks. Thanks as always to Pam Hallstedt and Thomas Walsh at WWI New Orleans. Scott Chris, but 48 windows in Santa Monica and Jake Perlman and Todd Callahan at KUT Austin, Texas for help with today's broadcast. The email address for the program and a playlist of the music available at harryshear.com. The show comes to you from Century of Progress Productions and originates through the facilities

of WWI New Orleans Flagship Station. The change is easy. Radio network. So long from Raleigh. Raleigh.