Kenneth Rogoff

Olivier Blanchard

Raghuram Rajan

Lawrence H. Summers

Leading economists consider the shape of future economic policy: will it resume the pre-crisis consensus, or contend with the post-crisis “new normal”? What will economic policy look like once the global financial crisis is finally over? Will it resume the pre-crisis consensus, or will it be forced to contend with a post-crisis “new normal”? Have we made progress in addressing these issues, or does confusion remain? In April of 2015, the International Monetary Fund gathered leading economists, both academics and policymakers, to address the shape of future macroeconomic policy. This book is the result, with prominent figures—including Ben Bernanke, John Taylor, and Paul Volcker—offering essays that address topics that range from the measurement of systemic risk to foreign exchange intervention. The chapters address whether we have entered a “new normal” of low growth, negative real rates, and deflationary pressures, with contributors taking opposing views; whether new financial regulation has stemmed systemic risk; the effectiveness of macro prudential tools; monetary policy, the choice of inflation targets, and the responsibilities of central banks; fiscal policy, stimulus, and debt stabilization; the volatility of capital flows; and the international monetary and financial system, including the role of international policy coordination. In light of these discussions, is there progress or confusion regarding the future of macroeconomic policy? In the final chapter, volume editor Olivier Blanchard answers: both. Many lessons have been learned; but, as the chapters of the book reveal, there is no clear agreement on several key issues. Contributors Viral V. Acharya, Anat R. Admati, Zeti Akhtar Aziz, Ben Bernanke, Olivier Blanchard, Marco Buti, Ricardo J. Caballero, Agustín Carstens, Jaime Caruana, J. Bradford DeLong, Martin Feldstein, Vitor Gaspar, John Geanakoplos, Philipp Hildebrand, Gill Marcus, Maurice Obstfeld, Luiz Awazu Pereira da Silva, Rafael Portillo, Raghuram Rajan, Kenneth Rogoff, Robert E. Rubin, Lawrence H. Summers, Hyun Song Shin, Lars E. O. Svensson, John B. Taylor, Paul Tucker, José Viñals, Paul A. Volcker

The State of Macroeconomic Policy

Progress and Confusion

World Bank Technical Paper 244. This report on the experiences of several Pacific island nations indicates that in remote villages, solar photovoltaic (PV) technologies are supplying reliable power at costs lower than those of the more commonly used diesel systems. Although the supply of electricity to households is limited, PV does provide isolated peoples with access to light and to information through television and VCRs. The study shows that the success of these programs depends not only on the technology itself but on personnel training, good fee collection systems, and careful financial management. Where managerial and technical expertise was lacking, maintenance by local, cooperatively owned utilites proved to be the best option. The authors present a case study from Tuvalu, where the solar PV system exemplifies the program's effectiveness in serving remote areas. The successful Tuvalu Solar Electric Cooperative Society (TSECS), formed in 1984, has been maintained by a well-trained technical staff with local and visiting technicians. It has also benefited from fee collection through an outside agency that prevents diversion of funds to other projects, local user committees to communicate with the utility, and an exclusive focus on PV systems. Environmentally attractive at both the global and local levels, PV solar technology appears highly promising for small-scale applications in developing countries.

Educating Women in Developing Countries

Investing in All the People

In Understanding Unemployment, Lawrence Summers and colleagues Kim Clark, James Poterba, Gregory Mankiw, Julio Rotemberg, and Olivier Blanchard explore new theories of joblessness that could eventually explain why unemployment remains high despite relatively healthy economic growth.

Understanding Unemployment

Leading economists discuss post–financial crisis policy dilemmas, including the dangers of complacency in a period of relative stability. The Great Depression led to the Keynesian revolution and dramatic shifts in macroeconomic theory and macroeconomic policy. Similarly, the stagflation of the 1970s led to the adoption of the natural rate hypothesis and to a major reassessment of the role of macroeconomic policy. Should the financial crisis and the Great Recession lead to yet another major reassessment, to another intellectual revolution? Will it? If so, what form should it, or will it, take? These are the questions taken up in this book, in a series of contributions by policymakers and academics. The contributors discuss the complex role of the financial sector, the relative roles of monetary and fiscal policy, the limits of monetary policy to address financial stability, the need for fiscal policy to play a more active role in stabilization, and the relative roles of financial regulation and macroprudential tools. The general message is a warning against going back to precrisis ways—to narrow inflation targeting, little use of fiscal policy for stabilization, and insufficient financial regulation. Contributors David Aikman, Alan J. Auerbach, Ben S. Bernanke, Olivier Blanchard, Lael Brainard, Markus K. Brunnermeier, Marco Buti, Benoît Cœuré, Mario Draghi, Barry Eichengreen, Jason Furman, Gita Gopinath, Pierre-Olivier Gourinchas, Andrew G. Haldane, Philipp Hildebrand, Marc Hinterschweiger, Sujit Kapadia, Nellie Liang, Adam S. Posen, Raghuram Rajan, Valerie Ramey, Carmen Reinhart, Dani Rodrik, Robert E. Rubin, Jay C. Shambaugh, Tharman Shanmugaratnam, Jeremy C. Stein, Lawrence H. Summers

Rethinking Macroeconomic Policy after the Great Recession

Evolution or Revolution?

Chrystia Freeland

Lawrence H. Summers presents a new paradigm for thinking about the current economic and technological revolution We are buffeted by the sense that everything is accelerating: digital technology is changing the way we work, shop, and socialize. And yet for all the talk about disruptive innovations, economic growth is largely stagnant. We are told that with new technologies average citizens are empowered as never before, and yet wide swaths of the population feel powerless and can no longer count on stable careers and a better life for their children. As Lawrence H. Summers shows in The Post-Widget Society, these are the paradoxes that define the economic revolution that is transforming our world. At the heart of this revolution are two dramatic developments in Western economies: the declining significance of widgets (mass-produced goods) and the rise of design goods (products that cost a lot to design but little to produce); and the controversial prospect of secular stagnation, the long-term phenomenon of negligible economic growth and depressed employment in a dynamic market economy. Written with Chrystia Freeland, Summers’s trenchant analysis of these trends reveals that they have profound implications not only for the future of jobs and widening income inequality but also for the nature of the state and the very stability of society. A bold, path-breaking book by one of our most important economists, The Post-Widget Society is necessary reading for every American concerned about our economic and political future.

Lawrence H. Summers

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