Brad DeLong: evaluation

Transcript context

…Their debt-to-GDP ratio — it’s only at 80 percent, right? Which is — Yes, that is the people who have . . . Milton Friedman hoped that noise traders would lose money and go away, simply because they were being irrational. It was Larry Summers who pointed out that rational people don’t maximize expected wealth. They maximize utility. As a result of that insight of his, I actually have had a good career in economics, which I might well not have had otherwise, being as scatterbrained as I am. But I think that insight is much deeper. It’s not just that there’ll be a lot of noise — noise trading will be persistent — it will be that the largest and most influential financial players will be people who have not only taken positions that are overly risky in a beta sense. They will be overwhelmingly people who have massively failed to diversify and who have been very lucky three times in a row and who, as a result, think that they’re absolute geniuses. We’re selecting for a market in which the celebrity participants, at least, are people with positively bad financial judgment, prone to bubbles and enthusiasms, and relatively right-wing in their politics because the right wing will offer them low taxes. The great and good financially of Britain have been told for 15 years that “austerity is an important thing to have, so that’s why you need to have us [Conservative Party] rather than the Labour Party in control. ” As near as I can see, the result has been a Britain that’s 10 percent poorer as a result of a failure to make public and private investments over the past decade and a half, and another 10 percent poorer because of the disaster of Brexit that was never supposed to happen. It was just supposed to demonstrate that Boris Johnson was on the side of the little people of England. Maybe the fiscal theory of the price level was only there because they believed what Cameron had told them, and that maybe you could actually bull through this. If I were advising Liz Truss, I would say, “Go back and tell the European Union it was all some horrible mistake. We’ve come to our senses.” But they wouldn’t take them back at this point, right? They can’t credibly commit to staying in all the time.…

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