Blanchard o tem, kaj je šlo narobe z makroekonomijo

Zanimiv intervju z odhajajočim glavnim ekonomistom IMF Olivierjem Blanchardom, ki je pustil izjemen pečat v raziskovaalni usmerjenosti IMF v sedmih letih svojega službovanja. Blanchard govori o tem, kako je za spremembo ustaljenih prepričanj znotraj takšne gromozanske institucije treba neortodoksne ugotovitve raziskav tudi uspešno “prodati” ostalim delom “hiše”, kako je priznavati napake, kaj je šlo narobe z makroekonomijo in s katerimi raziskovalnimi vprašanji se bo ukvarjal v svoji novi inštituciji (Peterson Institute for International Economics).

IMF Survey: You have at times pushed the envelope of IMF thinking and policy positions. How has this been received inside and outside the IMF?

Blanchard: It would have been intellectually irresponsible, and politically unwise, to pretend that the crisis did not change our views about the way the economy works. Credibility would have been lost. So, rethinking, or pushing the envelope was not a choice, but a necessity.

The fact that the economic counsellor, or the research department, has a view on a particular topic does not move things very much by itself. An essential part of the job is to convince, or try to convince, the rest of the building, from management to the department desks, of that view. This can be hard work. To treat all countries in a consistent way, the Fund must have a corpus of beliefs, and this corpus is not easily changed. Ideas do not only need to be developed, they need to be sold to the rest of the building. It does not happen overnight.

With respect to outside, the issue I have been struck by is how to indicate a change of views without triggering headlines of “mistakes,’’ “Fund incompetence,’’ and so on. Here, I am thinking of fiscal multipliers. The underestimation of the drag on output from fiscal consolidation was not a “mistake’’ in the way people think of mistakes, e.g., mixing up two cells in an excel sheet. It was based on a substantial amount of prior evidence, but evidence which turned out to be misleading in an environment where interest rates are close to zero and monetary policy cannot offset the negative effects of budget cuts. We got a lot of flak for admitting the underestimation, and I suspect we shall continue to get more flak in the future. But, at the same time, I believe that we, the Fund, substantially increased our credibility, and used better assumptions later on. It was painful, but it was useful.

IMF Survey: In pushing the envelope, you also hosted three major Rethinking Macroeconomics conferences. What were the key insights and what are the key concerns on the macroeconomic front? 

Blanchard: Let me start with the obvious answer: That mainstream macroeconomics had taken the financial system for granted. The typical macro treatment of finance was a set of arbitrage equations, under the assumption that we did not need to look at who was doing what on Wall Street. That turned out to be badly wrong.

But let me give you a few less obvious answers:

The financial crisis raises a potentially existential crisis for macroeconomics. Practical macro is based on the assumption that there are fairly stable aggregate relations, so we do not need to keep track of each individual, firm, or financial institution—that we do not need to understand the details of the micro plumbing. We have learned that the plumbing, especially the financial plumbing, matters: the same aggregates can hide serious macro problems. How do we do macro then?

As a result of the crisis, a hundred intellectual flowers are blooming. Some are very old flowers: Hyman Minsky’s financial instability hypothesis. Kaldorian models of growth and inequality. Some propositions that would have been considered anathema in the past are being proposed by “serious’’ economists: For example, monetary financing of the fiscal deficit. Some fundamental assumptions are being challenged, for example the clean separation between cycles and trends: Hysteresis is making a comeback. Some of the econometric tools, based on a vision of the world as being stationary around a trend, are being challenged. This is all for the best.

Finally, there is a clear swing of the pendulum away from markets towards government intervention, be it macro prudential tools, capital controls, etc. Most macroeconomists are now solidly in a second best world. But this shift is happening with a twist—that is, with much skepticism about the efficiency of government intervention.

IMF Survey: How about longer-term economic worries? And how would these longer-term issues affect the Fund’s policy advice?

Blanchard: There is a good chance that we have entered a period of low productivity growth. There is a chance that we have entered a period of structurally weak demand, which will require very low interest rates. And low growth combined with increasing inequality, is not only unacceptable morally, but extremely dangerous politically.

In assessing policies, we cannot just concentrate on short run issues, and we have to address these longer run issues. In doing so, we have to realize two things. First, that this is not our natural expertise, and we have to work with other institutions like the OECD, the World Bank. Second, that there are no magical solutions: We have to be realistic as to what structural reforms are politically feasible, and what they can reasonably achieve.

IMF Survey: You will not be going too far. What will you focus on at Peterson Institute?

Blanchard: I want to go back to doing research on a few specific issues. For the past seven years, I’ve been answering a thousand questions, but not in a very deep way. I want to take ten of these thousand questions and answer them more deeply.

I want to go back and examine what happened in Portugal, in Ireland, in Iceland, in Greece, and do the in-depth work that none of us has the time to do. I want to think harder about the various measures countries can use to control and mold capital flows.   In short, I want to continue to “rethink macro’’…

Vir: IMF Survey Magazine

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