Russ Roberts

Russ Roberts

Russell Roberts is a research fellow at the Hoover Institution. He is also professor of economics at George Mason University. A three-time teacher of the year and an award-winning author, his latest book is The Price of Everything: A Parable of Possibility and Prosperity. He is the host of the weekly podcast "EconTalk," which features hour-long conversations with authors, economists, and business leaders; it was voted Best Podcast in the 2008 Weblog Awards.


Why has the current recovery from the Great Recession been so mediocre? Ed Leamer of UCLA points out that the last three recessions have all had mediocre recoveries of both output and employment. His explanation is that changes in the manufacturing sector have changed the pattern of layoffs, recalls and hiring during recessions and recoveries. The conversation concludes with a discussion of the forces driving the changes in the labor market and the implications for manufacturing.

1) Why the last three recessions all look different (1:44)
2) Employment growth for last eight recessions (4:12)
3) Why have the last three recessions been so different? (6:13)
4) The jobs cycle in manufacturing (8:52)
5) Excess capacity in construction has created a lag (10:33)
6) Manufacturing output versus manufacturing employment (11:14)
7) What’s the solution to the downturn? (12:20)

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By historical standards, the current recovery from the recession that began in 2007 has been disappointing. This is part 3 of a three-part series with John Taylor of Stanford University’s Hoover Institution and Department of Economics.

Taylor puts the recovery in historical perspective and explores possible explanations for why the recovery has been so mediocre.

In Part 1 of this discussion of the recovery, Taylor quantified how unusual this recovery is by historical standards. In Part 2, Taylor looked at a number of standard explanations for the sluggish recovery.

Here in part 3, Taylor argues that the slow pace of the recovery is due to poor policy decisions made by the Bush and Obama administrations that have increased the amount of uncertainty facing investors, consumers, and employers. Examples include the rising debt forecast, the fiscal cliff, expiring tax provisions, and quantitative easing. Taylor argues that the uncertainty surrounding these policies in the future along with increased regulation have held back the recovery.

By historical standards, the current recovery from the recession that began in 2007 has been disappointing. As John Taylor of Stanford University’s Hoover Institution and the Department of Economics argues in Part 1 of this discussion on the economy, GDP has not returned to trend, the percent of the population that is working is flat rather than rising, and growth rates are below their usual levels after such a deep slump.

In this episode, Taylor and Number’s Game host Russ Roberts discuss possible explanations for the sluggish recovery: the ongoing slump in construction employment, the effect of housing prices on saving and spending decisions by households, and this recovery’s having been preceded by a financial crisis. Taylor rejects these arguments, arguing instead that the sluggish recovery can be explained by poor economic policy decisions made by the Bush and the Obama administrations.

1) On the argument that there are structural problems in the labor market (0:25)
2) Comparisons to the 1981 recession (2:16)
3) Is this recession special because it followed a financial crisis? (2:46)
4) What can the Great Depression tell us? (3:55)
5) Why is the current recovery so mediocre? (5:32)

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The insanity of health insurance

I just received a lovely email from my old friend, Donna Brazile. OK, we’re not old friends. For some reason she has decided to put me on her email list. She writes:

This week, the Senate votes on a GOP amendment that would let your employer decide what health care you can receive. If they morally object to birth control, it’s gone. If some corporation thinks cancer screening is too expensive, forget it.

This amendment is dangerous, and the people pushing it need to lose their jobs.

It is insane that we get our health care from our employers. That happens because we have given a tax advantage to in-kind compensation such as health care. It’s a horrible idea and it leads people to complain about our employers deciding what health care we can receive. Our employers are just a conduit for government mandates, rent-seeking and inefficiency related to health care. What the government has done is tax-advantage health care via employers and then tell them what has to be covered. So the real outrage is that because of this, the government mandates the mix of my compensation package, biasing it toward a luxury health-care package that is the result of special interest clamoring.


The people who think it’s normal–the ones who work in the big white domed building downtown from where I live–should lose their jobs.

Inequality and Stagnation

There is now a widely held view that the last 10 or 20 or even 40 years have been a time of great stagnation for the average American. Yes, the overall economy has grown, but all or most or nearly all of the gains have gone to the top 1% or top 10% or top 20%.

These claims are accompanied by various data that seem to confirm the claim.

These claims conflict with casual evidence available to people over a certain age who remember the 1970′s or 1980s. We are an immensely more prosperous nation than we were back then. Our cars are nicer. Our homes are bigger. Our toys are more clever. And more people have more of them. Some things are more expensive but that is because more people have access to those things–such as health and education–they are labor intensive and we’ve driven up their price. But these kind of claims are not totally convincing, nor should they be. The fact that the world looks dramatically more prosperous may be due to cloudy vision, or bias. But they do cause you to wonder if the data that are being used to measure stagnation are not completely accurate or perhaps the data are distorted by the way they’re collected.

Don and I have both written about these issues and the data problems with the claims many times.

Continue reading Russ Roberts…

Mitch Daniels’ news flash

There was actually a news-worthy moment in Mitch Daniels response to President Obama’s State of the Union address. He said:

Decades ago, for instance, we could afford to send millionaires pension checks and pay medical bills for even the wealthiest among us.  Now, we can’t, so the dollars we have should be devoted to those who need them most.

The mortal enemies of Social Security and Medicare are those who, in contempt of the plain arithmetic, continue to mislead Americans that we should change nothing.  Listening to them much longer will mean that these proud programs implode, and take the American economy with them.  It will mean that coming generations are denied the jobs they need in their youth and the protection they deserve in their later years.

I would prefer to slowly dismember Social Security and Medicare and instead let us re-learn how to take care of ourselves and our neighbors without going through Washington.

Continue reading Russ Roberts…

In this recent post, I suggested that Wallison and Pinto were wrong in their relentless arguing that Fannie and Freddie caused the financial crisis because of government requirements that F and F buy loans made to low-income borrowers. For one, Wallison and Pinto ignore the role of the investment banks in generating subprime loans and bundling them into mortgage-backed securities. I also pointed out the possibility that Fannie and Freddie seemed to be a lot like the investment banks–maybe they bought up risky loans simply to make money:

One more point–the SEC suit doesn’t really fit the “government made Fannie and Freddie buy up lousy loans” story.  The whole point of the suit is that these were secret behaviors by Fannie and Freddie. They were buying a lot of loans that were a lot like subprime–loans with high default risk. But were these to satisfy ever more demanding affordable housing requirements imposed by the government? Who knows? I suspect they were just trying to make money like the other players. They just stayed in too long.

William Black, in this lengthy essay, makes the same point but also provides some evidence rather than just speculating as I did. He takes down Wallison and Pinto as well as critiquing some of those such as Joe Nocera who have dismissed Wallison and Pinto entirely.

Continue reading Russ Roberts…


I hope I find the time to comment more fully on this recent column in the WaPo by Robert Samuelson defending the Fed. But for now, let me pull out one paragraph:

After Lehman Brothers’ failure in September 2008, American credit markets began shutting down. Banks wouldn’t lend to banks. Investors balked at buying commercial paper — a type of short-term loan — and many “securitized” bonds. Fearing they’d lose credit, businesses dramatically cut spending. Layoffs exploded: 6.3 million jobs vanished between that September and June 2009. Firms canceled investment projects in plants and equipment. In the first quarter of 2009, business investment spending fell at a 31 percent annual rate.

This is a common view–that Lehman’s collapse and the failure of the policymakers to rescue Lehman precipitated the crisis. It could be true but the evidence is quite cloudy. The claim also ignores the possibility that it once the Fed had rescued the creditors of Bear Stearns in March of 2008, lenders to Lehman (such as Reserve Primary–a money market fund!) figured they were safe. It was the unexpectedness of the government actually letting creditors lose money that caused the dislocations, not the failure of Lehman, per se.

Continue reading Russ Roberts…

One standard narrative of the cause of the financial crisis coming from people generally on the left is that a free-market ideology blinded policy-makers. They foolishly followed a policy of deregulation that allowed banks to run amok. And calls for regulation, such as attempts to regulate the derivative market, were ignored.

This theory is partly correct. There was some deregulation–various policy changes that let banks expand their activities. What this narrative ignores are other government policies that raised the likelihood of irresponsible investing but that were not based on a free-market ideology. In the particular, there were the relentless bailouts of large creditors that took place in the run-up to the crisis–interventions that were inconsistent with free-market ideology and that destroyed the feedback loops that might have prevented the crisis from occurring.

Continue reading Russ Roberts…