Paul Romer: evaluation

Transcript context

…And the Solow model. Yeah. But the origins of that article were that I read some books that said economists got a lot more influence and things got worse in the United States, and this was a really troubling argument for me because it’s not easy to dismiss. What I concluded in that article saying we should do a cost-benefit analysis — look at the big things that economics has done well, the things it may have done badly, and just see how it works out. The point you’re alluding to is something that my colleague, Peter Henry, has also made, which is that one of the areas where economics may really have been helpful is in the development process or the catch-up phase of growth. So that should go on the plus side, I think, on the benefit side of the cost-benefit analysis, no question there. And I think there’s some other ones that belong there too. My point was that there may have been some things that have also been significant negatives, and it’s time to do the numbers and see what the net is. So if I ask myself, “What do I think has been the biggest negative?” I suppose I would say around 2000 date, economists for the most part did not understand the importance of the shadow banking system. What seemed to be a kind of ordinary real estate bubble, like the early 1990s, was far, far worse, and we totally missed that. That seems to be a defect of institutional knowledge, but you tell me what you think the greatest problem has been.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.