Economics Is Not a Subject—It's a Toolkit
My conversation with Larry Kotlikoff on why economics has no borders
This was a fun one.
I recently sat down with Larry Kotlikoff for an episode of Economics Matters. Larry opened by saying nicer things about me than economists ever say to each other’s faces. Then we got down to work.
I’m a bit self-conscious talking about myself, but I figure that I was talking with Larry, so I can share this conversation with you. He asked me how I ended up writing papers on everything from gender discrimination to prediction markets to NBA referees. The truth is: mine is a story of my generation. My generation of economists inherited Gary Becker’s belief that economics is not so much a subject matter, but a toolkit. And it’s helpful no matter the domain.
Then Larry asked me a question that can be quite provocative in our circles: should economists stop simply describing people’s decisions and start prescribing them? That is, instead of “studying disease,” should we be trying to actively cure economic problems? Economists are quite comfortable telling Congress what to do, but much less so when it comes to the lives and decisions of individuals. Both Larry and I see room for our tribe to embrace the role of advisor a bit more fully. But in truth, we’re talking about folks like you. So I wonder: What’s your view? Should we be helping you with the economic issues you’re wrestling with? Or are we just observers who use what we observe to analyze how the economy works?
Next we discussed some of the work I’m most proud of. This includes much of the research I did early in my career with my life partner, Betsey Stevenson. Ironically, one of the first papers we ever wrote together was on marriage, divorce, domestic violence, and suicide. But it was part of a broader research program that generated fascinating insights about the evolving nature of family and marriage. What we found: marriage has shifted from being driven primarily by production complementarity to consumption complementarity. In non-economist speak: today, we marry our partners not because we need them to fill gaps in our skillset but because we genuinely enjoy spending time together. (Technical aside: For the non-economists, you already have a word for this: Love.)
Larry and I ended our discussion by touching briefly on what I see as some of the most important challenges of our day. There’s no shortage of big questions (young economists take note!): My list includes the widening gender gap in higher education, the to-be-transformative impact of AI on our economy, and the not-so-subtle erosion of the very institutions that made America the richest country in the history of the world. And there’s so much more that really matters.
This was the kind of conversation that reminded me why I fell in love with economics: it’s not the models or the math, but the chance to make sense of the lives we actually live. I hope you enjoying listening to the conversation half as much as I enjoyed having it.
Justin, love your work. As a retired CIO I am amazed at the lack of discussion in the media of a historical blowout in US bond yields. The affordability hoax is in part due to the 30 year treasury (reference for mortgages) going from 4.8 pre-inauguration to 5.2% at the end of July. The US 10 year provides a yield premium of 106 bps over the equivalent Canadas. What really startled me was Vietnam yields are lower than treasuries. Greece trades at 85 bps below the US.
There is nothing Handsome Kevin can do to solve the problem of a President who insists on lower interest rates and a country that cannot finance it's deficits internally.
Two unusual market actions recently. In late May and early June Amazon and Alphabet financed 30 year bonds in the Maple (CAD denominated) market. They were priced at 106 bps over the 30 year Canada. At the time US 30 year treasury bonds were 106 over the equivalent Canadas. Very unusual for Corporates to be priced flat to their sovereign The other was last week's US intervention into currency markets. In 2007/8 one of the harbingers of equity market moves was the Yen:Euro cross. Is something up in the Yen:USD cross?
This was a great listen and setting! Not with the usual economics journalist--nothing wrong with that by the way--but instead a sit-down with another economist.