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Cardiff Garcia

Cardiff Garcia

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

Articles by Cardiff Garcia

Podcast: Angus Deaton on his Nobel prize-winning career (encore)

1 day ago

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Season 3 of Alphachat starts next week, but today we’re re-upping a wonderful conversation we had with Angus Deaton in October 2015, just after he’d won the the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel — or just the economic Nobel, to the non-pedants among you.Further down is a time guide to the topics we discuss. And as we wrote at the time of the interview, several threads run consistently throughout his academic work and his writing (copied from our original post), including:— Persistent, repeated appeals to intellectual humility.The Nobel Committee writes in their summary of his work that he ends some of his early papers on consumer demand “in an agnostic way: we need more research

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Podcast: Tim Harford on the lessons of technology for economic history

8 days ago

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Tim Harford joins the show this week to talk about his new book, 50 Things that Made the Modern Economy (US, UK), a companion to his delightful podcast series for the BBC World Service.Tim also shares the lessons of past inventions that we often miss, the topic of his recent FT Magazine cover story. Here’s an excerpt:Forecasting the future of technology has always been an entertaining but fruitless game. Nothing looks more dated than yesterday’s edition of Tomorrow’s World. But history can teach us something useful: not to fixate on the idea of the next big thing, the isolated technological miracle that utterly transforms some part of economic life with barely a ripple elsewhere.Instead, when we try to imagine the

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Slower US inflation isn’t just the result of “transitory” factors

15 days ago

Despite cautionary remarks from a few of its dovish members, the Federal Reserve seems determined to continue uninterrupted down its course of gradual policy tightening. The slowing of inflation since the start of the year is not yet a deterrent.From the FOMC minutes to the June meeting released this week, our emphasis:Recent readings on headline and core PCE price inflation had come in lower than participants had expected. On a 12-month basis, headline PCE price inflation was running somewhat below the Committee’s 2 percent objective in April, partly because of factors that appeared to be transitory.Core PCE price inflation–which historically has been a more useful predictor of future inflation, al­though it, too, can be affected by transitory factors–moved down from 1.8 percent in March

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Podcast: Encore episode — Heidi Williams on gene sequencing, patent design, and innovation incentives

15 days ago

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Alphachat is hard at work preparing for its third season, which starts in just a few weeks. We’ll soon feature interviews with Michael Pettis on the economics and politics of trade rebalancing, Tim Harford on technology and the making of the modern economy, and Gabriel Zucman on tax havens and inequality.This week we are running again one of our favourite episodes from last year — a chat with Heidi Williams of MIT. Below we re-post the show notes from that episode. Enjoy!—–MIT economist Heidi Williams won a MacArthur genius grant last year and her work has been cited in US Supreme Court briefs. She isn’t (yet) well-known outside the economics profession, but she and her collaborators have done fascinating and important

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Retail hype vs retail facts

22 days ago

The decline in US retail employment this year might signal the start of a long-expected collapse, caused by automation and the unrelenting infiltration of e-commerce into the habits of the American household — or it might just be a temporary blip, the result of a modest slowdown in consumer spending growth.We don’t pretend to know. A recent note from Credit Suisse titled, appropriately enough, “Slight slowing, major metamorphosis”, at least helps to distinguish between fact and hype. From this and a few other useful reports we’ve come across lately, we present a few facts that help to understand the sector.1) The retail sector has lost jobs this year, but only a small fraction of its total.From Credit Suisse, our emphasis:The retail sector has lost 80K jobs in the past four months, but

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Snap AV: US corporate return on equity falls to new low

24 days ago

Torsten Slok of Deutsche Bank charts the return on equity for US corporates, which has fallen to a new low:On the one hand, perhaps the trend shouldn’t be too surprising given the continued rally in equities, which of course has coincided with sluggish overall economic growth.On the other hand, you’d think that the impressive rise in corporate debt issuance and relative paucity of initial public offerings in the past half-decade would have offset some of the trend. (Higher leverage should push up ROE, all else equal.) This is especially the case given how much of the borrowings from that debt has been used to fund buybacks.So we’re not entirely clear what to think about this, but it’s one more indicator to worry people who are already nervous about the sustainability of equities at current

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Podcast: Michael Mandel on the case for productivity optimism

29 days ago

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Michael Mandel, chief economic strategist at the Progressive Policy Institute, joined Alphachat to talk about his report, “The Coming Productivity Boom”, co-authored by Bret Swanson of Entropy Economics.Mandel argues that the decades-long productivity stagnation will end once companies in the “physical” industries — transportation, construction, manufacturing, healthcare, wholesale and retail trade — start investing in information technology the way that companies in the digital industries have.From the summary of their paper:The digital industries, which account for around 25% of U.S. private-sector employment and 30% of private-sector GDP, make 70% of all private-sector investments in information technology. The

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Short-termism is as much consequence as cause of weak growth

June 20, 2017

If you want companies to return less money to shareholders, then you should be able to defend an alternative choice for what they should do instead with their cash.But in times of slow economic growth, all options are problematic. That’s the premise of my On Wall Street column from the Weekend FT, and it’s a direct extension of two earlier posts discussing the idea that investment is as much a function as a cause of weak economic growth. (I think it’s both.)An excerpt:A useful prism through which to understand the issue is to consider the other options themselves in the context of the current recovery — the slowest-growing US expansion of the postwar period.First, a company might use the money for fixed investment, superficially the most pleasing option. But what if opportunities are

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Snap AV: A globalisation Rorschach test

June 19, 2017

Judging by the replies on Twitter, one’s instant reaction to the chart above from Barclays is largely a reflection of one’s attitude towards globalisation.Sceptics tend to note that the coinciding periods of rising protectionism and economic misfortune do not mean causation. Champions of an open global economy appear to see the chart as a kind of warning: Look what happened the last time we experienced a shift towards protectionism.For what it’s worth, my own reaction was to again remember the trade deepening in the three decades after the Second World War, which were considered a Golden Era for the US economy. There are many differences between those decades and the time since in the US, including faster productivity growth, higher taxes on high incomes, a more goods-intensive economy and

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Podcast: Is Ireland an austerity poster child or a “beautiful freak”?

June 16, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Our guest for this episode was Stephen Kinsella, an economist at the University of Limerick and contributor to a new book, Austerity and Recovery in Ireland, edited by William Roche, Philip O’Connell, and Andrea Prothero.Stephen’s chapter in the book provides the best concise explanation I’ve come across of the macroeconomic forces at work throughout Ireland’s experience of crisis, austerity, and unexpectedly quick recovery. Stephen’s thesis is not that the Irish economy managed to recover because of austerity and “confidence fairies”, but rather that a combination of elements specific to Ireland allowed it to recover in spite of austerity.Those elements included, foremost among them, an economy unusually open to the

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The Fed’s perception flaw

June 14, 2017

Economists and commentators will spill the usual number of opinionated pixels assessing the Fed’s decision to raise rates on Wednesday and to start shrinking its balance sheet later this year.Critics will note that the hike arrives even as US inflation is beneath the Fed’s target and trending lower, with wage growth also subdued. They might emphasise that it would be wholly appropriate for the Fed to explicitly attempt a temporary overshoot of the inflation target to give the economy a chance to offset hysteresis effects on the labour market and private investment. Among the critics will be many who believe it is long past time for the Fed to adopt a new policy regime altogether.Non-critics will counter that subdued inflation was due to one-off effects related to prescription drugs and

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Why expansions die

June 12, 2017

The current US expansion is now the third-longest in the post-war period. Here’s a chart from Deutsche Bank economists comparing it against the rest:Expansions following a severe financial crisis typically last longer than their average and grow at a shallower angle. This one is no different in both regards, and at 2 per cent annual growth it has the slowest pace of any recovery since the Depression. (Also worrying is the observation from the chart that every subsequent expansion since 1970 has grown at a slower pace than its predecessor, regardless of what caused the downturn from which it was recovering.)Age is therefore not deterministic. But with the Fed likely to raise interest rates again on Wednesday, the Deutsche Bank note provides a useful overview of the three main reasons that

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Follow-up questions for econ blogger Ben Bernanke

June 8, 2017

Jim Tankersley has published a long, thoughtful interview with Ben Bernanke over at Vox, during which the former Fed chair says (my emphasis):The Federal Reserve has a limited set of tools. The tools it has are aimed at trying to help the economy use the resources that it has, and at the same time, trying to keep inflation at the Fed’s target, which is currently 2 percent. And that was what we were focused on, and people can debate whether we could’ve been a little more aggressive or a little less aggressive. Even now, in retrospect, there’s a lot of debate about exactly which monetary policies were most effective and the like.But the fact is that between 2009, which was the peak of the unemployment rate, and today, the economy has recovered in a cyclical sense, very successfully, with

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US capex, investment, and growth — re-re-upped

June 6, 2017

Srinivas Thiruvadanthai of the Jerome Levy Forecasting Center has passed along his interesting new note about capex, which addresses some of the issues I raised in my recent post.About the long-term factors that affect capital spending, Thiruvadanthai writes:Many observers have been puzzled by the capital spending weakness in this cycle in the face of an aging capital stock, relatively high profitability, and strong cashflow. Cashflow and aging capital stock are important influences on capital spending but are overshadowed by capacity and growth expectations.One major influence on weak net private nonresidential fixed investment over the past 15 years has been the growing and pervasive overcapacity. The peaks in industry capacity utilization have trended lower over that time, implying a

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Podcast: Richard Ocejo on old jobs in new urban economies

June 2, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.On the show today we talk to Richard Ocejo, a sociologist and author of the new book, Masters of Craft, about the manual, traditionally middle-skill jobs that have been upscaled and transformed by educated urbanites. We also discuss the societal changes responsible for the trend and what it hints to us (and doesn’t) about the future of the modern workforce.

Introducing Alphachat, the FT

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Transcript of our Alphachat with Tyler Cowen about “Stubborn Attachments”

June 2, 2017

This transcript arrives later than promised, apologies. As a reminder, Stubborn Attachments is Tyler Cowen’s online philosophical essay, whose URL hadn’t been made public until our podcast episode.Click HERE for a pdf version of the transcript, which we also run in full below; HERE for our original post about the conversation; and HERE for the Alphachat iTunes page.Cardiff Garcia “Stubborn Attachments” strikes me as maybe the first Foundational Tyler work. It comes after Culture Tyler — you had a series of books about culture and economics. And it comes after a self-help version of Tyler with Discovering Your Inner Economist and a couple of other books, including your food book. And then there was the Stagnationist trilogy.This is different altogether. Why did you write it?Tyler Cowen Let

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Brainard turns cautious, just a bit

May 30, 2017

When Lael Brainard signals that rate hikes are appropriate or that a balance sheet wind-down is nearing, it’s almost certain that the rest of the committee has already come round to that view as well.Her views appear to exist near the boundary between FOMC majority-opinion and the committee’s dovish flank, though at a given time it’s not always clear on which side they’ll be. Her speech last September argued that a “new normal” of lower interest rates had likely begun, citing among other factors a flatter Phillips Curve and the effects of activity abroad transmitted through global economic and financial channels back to the US. Yet she also voted in favour of both the December 2016 and March 2017 rate hikes.And in a speech in mid-January of this year, three days before Donald Trump’s

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Podcast: A chat with Alice Rivlin on her career in economic policymaking

May 26, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Within the world of economic policymaking, Alice Rivlin has seemingly done it all. She was the first director of the Congressional Budget Office, worked in different capacities for three presidential administrations (Johnson, Clinton, Obama), was vice chair of the Fed for a period in the 1990s, has written many books, and was even the Washington Post’s economics columnist for a couple of years in the early 1970s. She continues to publish research and columns at the Brookings Institution.We discuss her storied career and how it informs her understanding of the current moment for economic policymaking.

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The capex call, reconsidered and re-upped, hopefully with more success this time

May 15, 2017

“We couldn’t help but notice our inbox’s recent accumulation of economist and analyst notes predicting a healthy pickup in capex this year. We do find the case mostly convincing. But this recovery has made all predictions of accelerating growth look foolish, and quite a bit of humility about this one is appropriate.”I wrote those lines in March 2014. Good thing I added the caveat about humility because everyone was dead wrong, as capex and business investment overall continued to lag right through the autumn of last year.*(Source: 2017 Economic Report of the President.)Recent notes from Deutsche Bank and Goldman Sachs have spotted anew the favourable circumstances for US capex, using most of the same arguments as before: the capital stock is old, borrowing is cheap and easy, corporate

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Podcast: Jason Furman on economic policymaking

May 5, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Jason Furman actively contributed to economy policymaking throughout the entirety of the Obama administration, first as deputy director of the president’s National Economic Council and, from 2013 until the Obama administration concluded earlier this year, as chair of the Council of Economic Advisers.Our conversation focussed on how Obama’s economic team debate and formulated economic policy, but we also discussed how Jason honed the way he communicates economic ideas to the public, his background and the economists who influenced him, and of course his views on a number of contemporary economic issues.Special thanks for this episode to producer Aimee Keane and editor Lauren Leatherby. We’ll update this post with a full

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US inflation back to undershooting 2 per cent ahead of FOMC meeting

May 1, 2017

A note from JP Morgan economists on this morning’s release of the Personal Income and Outlays report for March, in which both the consumption and inflation measures arrived weaker than expected (our bold):On consumption, real consumer spending increased 0.3% in March while nominal spending was basically unchanged. These figures were softer-than-expected and included a 6.5% surge in real spending on household utilities. Excluding this jump (which was weather-related), overall real spending ticked up only 0.1% in March. … Elsewhere in the report, the core PCE deflator declined 0.138% in March, bringing the year-ago change in the index down from 1.77% in February to 1.56% in March. The March figures were close to, although slightly below, expectations. They are still notable, however, because the monthly change was the second weakest on record. Even excluding the very large drop in prices for cellular telephone services (which we estimate subtracted 0.08%-pt from the monthly change in the core PCE deflator), it still looks like March was a weak month for core inflation. The headline PCE deflator was also weak, declining 0.2% in March.

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Podcast: Tyler Cowen’s stubborn philosophical attachments

April 28, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Did you know that Tyler Cowen, the economist and polymathic blogger at Marginal Revolution, has published a philosophical essay at a secret url? Well, secret-ish, as Tyler did offer to send the link to buyers of The Complacent Class, the third book in his series about productivity and economic stagnation.I wanted to discuss the essay, Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals, on Alphachat, so Tyler said he’d be okay with sharing the link publicly for the first time here on Alphaville.Tyler’s vision relies on two fundamental philosophical moves. From the essay:First, I do not take the productive powers of economies for granted. Production could be much greater than it is today and our lives could be more splendid. Or if we make some big mistakes production could be much less and we could all be much poorer. This simple observation helps us put the idea of production at the center of moral theory, as without production value is problematic. …Second, I will seek to revise some of our intuitions about “moral distance.” Which individuals should have a pull on our choices and which should have less influence? I will argue for instance that the individuals who will live in the future should be less distant from us, in moral terms, than many people believe.

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Podcast: Anne Case on mortality and morbidity in the 21st Century

April 21, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.This week’s episode is a long, absorbing conversation with economist Anne Case, author of a blockbuster trilogy of papers on mortality and morbidity in the US. (The papers were co-authored by Angus Deaton, a previous Alphachat guest.)The first paper in the series was published in the summer of 2015, the second paper a few months after that, and the third paper was released just last month by Brookings.This research is best known for the startling discovery that middle-age mortality for American non-Hispanic whites had started climbing at the end of the 1990s after decades of progress, among other pessimistic trends. But the work goes much deeper than that, with Case and Deaton offering a tentative theory of “cumulative disadvantage” to explain their disturbing findings. The authors also investigate why these trends are affecting America but not European countries with similar socioeconomic characteristics.And finally, the work did lead to methodological disputes with other researchers and commentators, some more substantive than others.

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Trump to nominate pro-immigration free-trading globalist as CEA chair

April 7, 2017

Shot:America Needs more workers… With lackluster GDP growth threatening to become our new normal, allowing more immigrants to enter for the sake of employment is one of the few policies that might restore our old normal. If the U.S. doubled its total immigration and prioritized bringing in new workers, it could add more than half a percentage point a year to expected GDP growth.Chaser: Understanding the role of the United States in the global economyLiberalized trade — in broadly multilateral, regional, or bilateral agreements — is a key ingredient in the recipe for prosperity. … An absolute prerequisite for long-term economic growth is full participation in the global economy and trading system.Maybe one more shot, it’s Friday: Analysis of the economic effects of immigration reform … This paper explores the economic consequences of expanded immigration on the U.S. economy. It begins by reviewing the immigration practices of our OECD trading partners, and documenting that immigration, as a share of the work force, is well below international norms. The literature identifying the economic impact of immigration is reviewed, suggesting that economic growth could expand significantly if immigration in the U.S. were expanded.These passages are by Kevin Hassett, the economist who will be nominated by Donald Trump to be the next chair of the Council of Economic Advisors.

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Podcast: An all-media Alphachat episode

April 7, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Long form recommendations:Shannon — Lincoln and the Bardo, George Saunders essay in The GuardianCardiff —

Introducing Alphachat, the FT Alphaville podcast
Podcast bleg: Alphachat returns
Sal Arnuk on high frequency trading
Alphachat returns
Snap Cyprus edition
The cunning plan edition
Dragons of Ljubljana edition
That dang negativity edition
Lee Buchheit edition, featuring Lee Buchheit
Abenomics gets the Alphachat podcast treatment
Alphachat Noah Smith on the Japanese economy
Alphachat Manmohan Singh on collateral chains
Michael Pettis edition (well, the second one)

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Snap AV: deflation to reflation to stability to…

April 4, 2017

Our running theory behind the ongoing reflationary trend has always been that it was less about hopes of a bigly stimulative fiscal agenda enacted by Donald Trump, and more about the reality that last year’s acute fears of a significant global slowdown proved unfounded.But a good narrative is seductive, and the election of Trump provided a neat one:The graphic comes via the latest quarterly economics update by the Credit Suisse economics team. A bit more of interest from the report:The recent focus on “reflation” is reminiscent of the mania surrounding “deflation” in early 2015 (Figure 1). And for all the thought about risks, and the market repricing that occurred at the time, we would observe that two years later the world is not in deflation, and everyone is now talking about “reflation.”Acceleration is most apparent in the tradeable sector (Figure 2 and Figure 3). Having run close to zero in 2015 and 2016, global industrial production growth should sustain a trendlike 3.0% pace in 2017. Although business activity surveys in the US may be buoyed by political sentiment (US ISM marks the top of the shading in Figure 2), the improvement in global manufacturing surveys has been unusually synchronized. …It has also been a synchronized reflation. Most economies and regions should see stronger growth and higher inflation this year.

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Podcast: Robert Cialdini on how persuasion works in business and politics (transcript)

April 3, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Joining me this week was Robert Cialdini, a psychologist who pioneered the systematic study of persuasion with his book Influence, published in 1984. He has just published a sequel, Pre-Suasion.In our chat, we discuss the outburst of recent commentary on persuasion in a “post-fact” world, why our decisions don’t belong exclusively to us, how attention is best captured and kept, and the ethics of persuasion tactics. But perhaps the timeliest part of our conversation came at the end — the use of persuasion in politics, why incumbents have such a powerful advantage, and a look at the methods of persuasion deployed by Donald Trump and Barack Obama. (Cialdini was part of a team of behavioural scientists that advised President Barack Obama as a candidate, and has included numerous passages in his books about persuasion in politics.)Click here for a full transcript, edited only slightly for clarity, and below I’ve pasted the excerpts from our chat that concerned politics, which I suspect will be of most interest.Robert Cialdini There’s a great book title by a couple of social psychologists, Elliot Aronson and Carol Tavris, it’s called Mistakes Were Made, But Not By Me. So that’s the common human response to the idea of a mistake.

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Podcast: How economics has evolved since the crisis

March 17, 2017

[embedded content]Alphachat is available on Acast, iTunes and Stitcher.Noah Smith, an economist who writes at Bloomberg View and on his personal blog, makes his second appearance on Alphachat. Economics methodology is a frequent subject of Noah’s columns, and I was keen for a podcast segment appraising how economics has evolved since the crisis.Among the issues discussed:— How the study of inequality became prominent and more granular— Productivity-growth stagnation (supply-side stagnation)— Secular stagnation (demand-side stagnation)— GDP measurement— Resurgence, or at least re-acceptance, of Keynesian economics (specifically the use of fiscal policy as demand management to escape from a deep recession, plus IMF volte-face on austerity, etc)— Separability of supply and demand questioned, especially in labour markets; immigration, minimum wage effects— Monetary policy moving beyond interest rate management, innovative tools to complement (QE, forward guidance, etc), more intellectual space for considering different regimes than just inflation targeting (NGDPLT, helicopter money)— Shift towards empiricism and away from pure theory— A few others briefly mentioned: insights from behavioural economics in macro modelling, “narrative economics”, randomised control trials, “economist as plumber”Enjoy the chat!

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Donald Trump: Peronist? A chat with Sebastian Edwards on populist economics (transcript)

March 13, 2017

Along with the late Rudi Dornbusch, the Chilean economist Sebastian Edwards produced seminal work on the economics of populism starting in the late 1980s and has continued to study the topic for decades.I cited the work of Edwards and Dornbusch in a recent FT column and then asked Edwards to join me for an episode of Alphachat.For those of you who don’t listen to podcasts, the full transcript is below, lightly edited for clarity and length. Or just click here to open a pdf version if you prefer that format. Enjoy the chat.Cardiff Garcia How did you first start becoming interested in the economics of populism?Sebastian Edwards Well, anyone that was born in Latin America and is interested in economics unavoidably ends up, sooner or later – sooner, in general – worrying about populism.The early work started when Alan Garcia took over the presidency of Peru for the first time. There was Alan Garcia I and Alan Garcia II. [Garcia was first president of Peru from 1985 to 1990, and then again from 2006 to 2011.]And Rudi Dornbusch and I were absolutely fascinated by the disregard that Garcia had for anything that resembled good economic policy, and how he just wrecked Peru. And we said, well, this is one more manifestation of a more general phenomenon that comes back again and again and again in Latin America. And we decided then to write our first paper, an article.

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