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Economy of New York (state)

From Wikipedia, the free encyclopedia

Economy of New York
GDP$1.607 trillion (2017)[1]
GDP per capita
$80,940 (2017) [2]
Population below poverty line
Labour force
9,633,503 (2018)[5]
Unemployment4.6% (3/2018)[6]
Public finances
Revenues$63,529.354 million[7]
Expenses$54,607 million[8]

The economy of the State of New York is reflected in its gross state product in 2017 of $1.607 trillion, ranking third in size behind the larger U.S. states of California and Texas. If New York State were an independent nation, it would rank as the 12th or 13th largest economy in the world, depending upon international currency fluctuations. However, in 2013, the multi-state, New York City-centered Metropolitan Statistical Area produced a gross metropolitan product (GMP) of nearly US$1.39 trillion,[9] while in 2012, the corresponding Combined Statistical Area[10] generated a GMP of over US$1.15 trillion, both ranking first nationally by a wide margin and behind the GDP of only twelve nations and eleven nations, respectively.[11]

New York City and the surrounding New York metropolitan area dominate the economy of the state. Manhattan is the leading center of banking, finance, and communication in the United States and is the location of the New York Stock Exchange (NYSE) on Wall Street. Many of the world's largest corporations locate their home offices in Manhattan or in nearby Westchester County. Manhattan contained over 500 million square feet (46.5 million m2) of office space in 2015,[12] making it the largest office market in the United States,[13] while Midtown Manhattan, with nearly 400 million square feet (37.2 million m2) in 2015,[12] is the largest central business district in the world.[14] The state also has a large manufacturing sector, which includes printing and publishing and the production of garments, furs, railroad rolling stock, and bus line vehicles. Some industries are concentrated in upstate locations also, such as ceramics and glass (the southern tier of counties), microchips and nanotechnology (Albany), and photographic equipment (Rochester). New York's agricultural outputs comprise dairy products, cattle and other livestock, vegetables, nursery stock, and apples.

A tree map showing New York State's economy, by industry by percent of total employment, according to the American Community Survey in 2014.
A tree map showing New York State's economy, by industry by percent of total employment, according to the American Community Survey in 2014.

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  • ✪ Economic Outlook 2019: New York
  • ✪ What Is The Current State of New York's Creative Economy?
  • ✪ How Does German Economy Compare to United States Economy?
  • ✪ New York City and Los Angeles Compared
  • ✪ What Are the Economics of the Creative Economy?


Good evening everyone it's a pleasure to be here. Happy New Year to all of you. Welcome to Economic Outlook 2019 my name is Madhav Rajan, as the voice of God said. I'm the Dean and George Pratt Shultz Professor of Accounting at Chicago Booth. It's great to be back in New York. I've been Dean for 18 months. This is the the second time that I've had the pleasure of participating in EO in New York .The series will continue from here. We have Economic Outlook in Chicago next week and then we have Economic Outlook in Hong Kong on January 29th. It's great that all of you are here it's wonderful that you have chosen to engage with the school in this fashion. Economic Outlook, I think, is a unique event. It provides a wonderful way for our path-breaking faculty to bring their research to you. It's a great way for you to meet the thought leaders at Booth, talk to them about the ways that they are thinking about the future, ways that they are evaluating emerging trends, and ways for them to share with you key insights to try to reframe our understanding of the world around us. We have a great program this evening. We have amazing panelists. Professors Randy Kroszner and Erik Hurst from Chicago Booth who are here to share their insights and I'll introduce them in detail in just a bit. We're also very grateful to Kathleen Hayes from Bloomberg who has come here to moderate this event. I thought I might maybe spend a couple of minutes giving you a little update on the school .aAd if you think back to what is the mission of the school, right? Our mission has always been very clear: It's to create knowledge that has enduring impact and to influence and educate current and future leaders of the world. And I think on both dimensions it's fair to say that we're doing very well. We have excellent momentum across many, many dimensions thanks to our outstanding faculty and our staff, students, and our incredible alumni community. We have great alumni. I think more than 53,000 alumni now across the globe who help us in many many ways. Thinking about the school and this past year, many of you maybe saw the deans report that I sent out. I'm sure all of you read through it pretty carefully but I'll summarize anyway. One of the things I think that we're most proud of and I think excited about as a school is that we had a pretty amazing recruiting year in many ways. I think probably the best year that we've ever had. We hired a total of 18 faculty members who began at Booth as of July and another five who took a deferred admission and will begin next year. And this is across a wide variety of fields: accounting, finance, economics, and operations. I think at the junior level we were incredibly successful. I think in some ways one might say overly successful. We have very little room at Harper now for faculty offices which is a problem. But in addition to being successful at the junior level we've also done some very exciting senior level hires .wW hired Amy Ward from USC to come and be a full professor of operations management so we really have a leader now who looks at operations applied to service industries in particular and we're very excited about the direction that that's going to take the school in. I think operations is a field where we really should be the best in the world at what we do and and bringing Amy in is a huge step in that direction. We also hired Ralph Koijen back. I mean Ralph had been a finance faculty member at Booth for many years and then left, went to LBS and NYU and was going to move to Princeton but chose to come back to Booth and started in July as a professor of finance. We also had a great hire in microeconomics Sendhil Mullainathan, who many of you may have heard of, from Harvard economics department moved to Chicago Booth, Central of course very renowned scholar, winner of the MacArthur Genius Grant for his work, and has done work in a wide variety of areas including core microeconomics work on poverty, social enterprises, machine learning. So, you know, obviously incredibly, eclectic person and he is going to be at the forefront of putting together a new Institute at the school that deals with human and machine intelligence. And in fact, Sendhil right now he's just starting. He's going to teach a new course on artificial intelligence as an elective at Booth, which is sort of an incredible thing you know. It's a class I wish I could take. It's an amazing thing for us. And the faculty that we're bringing in continue to do amazing things, get worldwide recognition for what they do. Last year, when I was here, that was when Richard Thaler had won his Nobel and I made the joke that we have three active Nobel Prize winners on our faculty which is three more than every other business school combined. Which is certainly a true statement. And we're very proud this year that the winner, Paul Romer, was both an undergrad at Chicago and a Ph.D. from Chicago. We not only have great faculty but they produce great students as well who go on to do amazing things. Bob Zimmer did point out to me that he was an undergrad in mathematics not economics but so he took credit for that but so we continue to do amazing things. And I'd mentioned we hired Ralph Koijen back to to Booth and just this past Sunday Ralph was named the winner of the the Fischer Black Prize which is given every two years by the American Finance Association for the best financial economist in the world under the age of 40. And the last winner of that prize two years ago was Amir Sufi who's of course also at Chicago Booth. I think the eight times this award has ever been given, four of those awards have gone to Booth faculty including the last two. So it just speaks volumes to sort of a caliber of the the faculty we have and the great things that they have done and I think the eminence extends not just to fields in economics and related areas, but also to fields like behavioral science. Just this past June, Nick Epley and Ayelet Fishbach were both awarded the Career Trajectory Award by the Society for Experimental Social Psychology. Now this is the highest award in that field and no university has ever had more than one winner on their staff at any given time and the fact that both faculty from Booth won at the same time this year again, it's just incredible testament to the quality of faculty we have. We're very proud and excited about the school - the great faculty that you knew, the great work that was being done; I'm proud to say that that we do continue along that great trajectory to this day. When I was hired as as Dean one of my goals, one of my KPIs that Bob gave, was to do more to connect Booth with the University. I think he felt that this was something where there were great synergies and great value to be had and which I completely agree with Bob on. One of the big things that we did just this past year is that we have now partnered with the college which has done amazing things in terms of the growth in its eminence over the past 15 to 20 years. So we've recently partnered with the Economics Department and we've introduced a new undergraduate major called business economics. This is the biggest move by Booth into undergrad teaching, I think, in over 60 years .When, from the time when Booth was kicked out of teaching undergraduates, so they're now happy to have us back. Not everybody is but most people are happy to have us back and the demand for what we teach has been overwhelming. As an undergrad you can now major in business economics, including taking classes in accounting and corporate finance, and marketing, in addition to the core liberal arts and the core classes you take in the department. So I think this is going to be a huge success story for the university. In the MBA program itself we continue to do really well. The incoming class at Booth was the highest caliber class that we have had in terms of scores and other things and also in terms of diversity. The entering class, 42% of the entering class was women which is the highest number that that we have ever had I would say that it's not all I would say diversity isn't great on all the dimensions in the sense that we had probably the least international class we have had in quite a while. So the number of students applying from overseas has gone down largely for reasons having to do with the difficulty of getting visas and and so on. So we tend not to have students applying from places like you know Eastern Europe and the Middle East where it's hard to get student visas even if you get in. Hopefully this problem goes away soon. We'll see. It was supposed to be a joke. But anyway let me let me not go there. On the programs, one other thing I'll point out is that our Executive MBA program celebrated its 75th anniversary this past year. We had the very first EMBA program in the world, started in 1943 and I think for 20 years there was no other MBA program. After that we were then the first school to have programs on three continents. We began a program in Barcelona, one in Singapore. The Barcelona one now is in London and the Singapore one moved to Hong Kong. One of the key things we achieved this past year is that we completed the new building in Hong Kong that's going to host not just Booth's EMBA program but also study abroad programs for college students in Hong Kong. So this is a true partnership between us and the university to raise the funding and complete the building. We had the grand opening at the end of November. Joe Neubauer, who's here, our chair of our board of trustees was there to do the opening. It's a spectacular facility and I urge all of you, if you have the opportunity to be in Hong Kong, to to go take a look at that. Lastly, just setting up this event, Booth has a long tradition of informing public discourse through forums like Economic Outlook through our Initiative on Global Markets, through Chicago Booth Review, which is our research publication, and we also have our annual management conference, which I would like to give a plug for, that will be held May 3rd in Chicago. We'll have a keynote conversation with Howard Marks the co-chairman of Oaktree Capital and, obviously, a Booth Alum. And conversation to be moderated by Professor Anil Kashyap. The conference also is going to have breakout sessions, networking receptions, and so on. I strongly encourage all of you to come there as part of reconnect weekend. With that, let me introduce the panel for today. We have Erik Hurst and Randy Kroszner as I mentioned and the discussion on “Trade Wars, Deficits and Inflation: Rhetoric or Reality?” Erik, who's sitting in the middle, is the V. Duane Rath Professor of Economics at Chicago Booth. He also is the co-director of the Becker Friedman Institute and the John E. Jeuck Faculty Fellow at Chicago Booth. EriK is a macro economist but with very sort of eclectic tastes. His work focuses on the housing markets, labor markets, household financial behavior, and one strand of his research, which he spoke a little bit about last year, looks at the factors underpinning the decline in employment rates of young and middle-aged workers in the U.S. He talks about what is the importance of technological advances in explaining both the decreased labor demand as well as the decreased labor supply for less educated workers. Erik's work has been extensively covered in in the New York Times, Washington Post, Economist, and so on. He won the 2006 TIAA-CREF Paul Samuelson Award for outstanding scholarly writing on lifelong financial security. And in 2012 he won the Ewing Marion Kauffman Prize medal for distinguished research in entrepreneurship.He also got the 2017 McKinsey Award for Excellence in MBA teaching. Thanks to Erik for coming back to Economic Outlook this year. Randy Kroszner, who many of you know, is the Norman R. Bobins Professor of Economics and i'm very pleased to say he's now a deputy dean at Booth. We managed to twist his arm so in july he joined the dean's office, oversees all of our executive programs, and all of our global programs. Randy was of course Governor of the Federal Reserve from 2006-2009, he chaired the Committee on Supervision and Regulation of Banking Institutions and the Committee on Consumer and Community Affairs. Currently, Randy is the Chair of the Federal Research Advisory Committee to the U.S. Treasury's Office of Financial Research. Randy, during his term in the government, took a leading role in developing responses to the financial crisis and new initiatives to improve consumer protection and disclosure including rules related to home mortgages and credit cards. And prior to that, Randy served in the White House in the President's Council of Economic Advisers from 2001 to 2003. He comments frequently in the international media, provides advice to financial institutions, central banks, government organizations throughout the world. It's great to have Randy back with us again. And finally, I wanted to thank Kathleen Hayes, our moderator, global economics and policy editor for Bloomberg television and radio. Kathleen has covered the US economy and the Federal Reserve for more than 30 years. For the past two years, she's also broadened out her coverage to do more work related to the economies and central banks of Asia, traveling regularly to Japan. Now some of you may have seen a little preview of some of what we will cover today last night on Bloomberg where Kathleen interviewed Randy Kroszner. Thanks Kathleen for moderating the panel. Please join me in welcoming, formally, Kathleen. Okay well, what a year huh? Think back a year ago, if it was early January, right? Everybody was waiting to see how much the Federal Reserve would raise interest rates, we'd come off another year of a bull market in stocks, Mark is kind of wondering if the Fed could raise rates as much as they thought, labor market looked pretty good, unemployment already low expected - to get lower. And here we are at the end of the year and the Fed did enforce interest rate increases and some would say labor market's looking better than ever. The latest employment report, if you follow these things closely you know, even people who think the labor market is that strong said wow, that was blockbuster in December. But the stock market had a very, very bad year, a very bad quarter, a very bad December, and it seems like in so many ways, and I was going to also mention a couple other things of course, we've got a government shutdown, we've got a trade war that continues and gets worse, and if we want to go global we're gonna see what happens to Theresa May. I'm actually rooting for Theresa May at this point. But it's an interesting juncture. And I think if you were to take one track of that, one set of data, once one set of news flows, you'd say yeah things are looking pretty good like the Federal Reserve did in December. If you take another flow of data or news stories and, of course some things that Randy looks like the opioid crisis which gets some jawboning from time to time but nobody really seems to do much about, it and it does seem very linked to some of the structural problems in the labor market now we're at a place where you wonder, "ok where were there where are we going?" It's so easy for a while it seems but particularly for investors and now, it suddenly is a lot harder. So with that we have two people who are going to take well you know, the same questions and I think a lot of different angles. And I want to ask you both, you know, from from your vantage point, Randy you were at the Fed, Erik you have this concentration on labor markets, entrepreneurs, though many aspects of what's really part of the economy and how it works. How does the economy look to you? Let's start with you Randy. We have a lot of jitters in the in the financial markets and of course people have suddenly changed their view from well things are looking pretty good to we're going off the cliff. Markets tend to be much more volatile than the underlying economy is and if you look at the underlying economic data it's hard to see the economy going off the cliff. Now having been at the Fed from 2006 to 2009 I never say never about anything so anything could happen. But I don't really see that being the case. The labor markets are solid, sound. Erik I'm sure will comment more detail on that. Consumption is sound, investment is up, and so the fundamentals seem to be there. We may not have quite as much optimism as we had from both the consumer and the and the business side but still a fair amount of a fair amount of optimism. Maybe not the peak, but still still a fair amount. And so I think it's perfectly reasonable the Fed has said that the economy is strong. They don't see the economy falling off the cliff and they're gonna be sensitive to where the data are. But they see things looking pretty strong. Now that seemed to spook the markets when they said that which is a bit of a surprise because they've been saying that all along and the underlying data were quite quite solid. Obviously there are a lot of clouds on the horizon whether it's sort of trade war issues, whether it is fiscal deficits, whether it is just kind of the broader dysfunction in Washington and it's not unique to Washington but sort of around the world. So it's not that there aren't concerns about about what could go wrong. But I think the fundamentals are looking reasonably good. Will we grow as strongly as we did this last year? Growing more than 3%? Highly unlikely. Are we going to go into recession? It's certainly possible but that's certainly not my modal forecast and just because of the volatility over the markets of the last month, that hasn't really changed my view materially of whether we're likely to see a downturn not. Professor Hurst. One thing Randy said that I could focus in on a little bit - the going off the cliff part - I think that's pretty much well in the tail of the distributions. That doesn't happen relatively frequently in most periods of time. So I think what we're thinking about is you know how much is a slowdown going to look like when it happens and what is the probability of that happening. And so I'm kinda get the feeling now what we're kind of in the last year or so? Kind of similar to where we were maybe '99, 200 or so. Where you go through a period of a decade plus growth period. We came out of a recession 2009 ish and we've now had about ten years where the economy has grown from a really low base when we had the in the depths of the recession. But it's been about ten years of growth which by historical standards in peak to peak kind of you know business cycle, that's a relatively long period of time. And I believe we're about four months away, five months away from the longest expansion in you know post-war U.S. history. So we're going along and people are saying well flipping coins or probabilistically, eventually these things happen and we've kind of gone through a cycle and even though things are looking pretty good there seems to be a fair bit of uncertainty in the markets. And when I say the markets, I mean you all - I mean the people, the agents in the economy - because it's showing up in prices. So that uncertainty is out there and you can see that through little pieces and news lead to big movements in in prices. And you know where is that uncertainty coming from? Well, Europe might be slowing for different reasons. What's Brexit gonna look like? How our trade war is gonna play out how, long are government shutdowns going to exist? You know, we have rising deficits in the background. How are we gonna deal with those? So all of these things are creating some uncertainty and that's why little pieces of news are moving markets up and down. And you know, from my perspective, I don't think we're gonna go off a cliff just like we did in 2000. We had a recession; it was a very mild recession, there was a slowdown. But I don't think you know off the cliff is something that I don't, like Randy, I don't see much signs of that. But there could be recessions. They happen from time to time. A lot of the time they are things like we grow a little fast and then we have to correct a little bit and we grew a little fast and maybe we have to correct a little bit. And so I think that is in the distribution. And so we could go a period of time where the economy slows down a little bit more. And we have to remember a part of last year's growth came from really large fiscal stimulus. We had a big tax cut. That big tax cut put more money in my pocket, more money in your pockets, and we spent that money and that boosted GDP. That gave us a little bit of kick and eventually we might think, as deficits are rising, we're gonna have to pay that back. As those tax cuts expire we might spend a little bit more. So that's an adjustment the fiscal slowdown contributed to our growth last year and some of that's just going to correct naturally to begin. Well if I listen to Erik, I think well, gosh you know it's in the distribution maybe not, could be just a little recession throughout that time. It seems to me, if I'm the Federal Reserve, I would be thinking about that pretty hard. And we can assume the Fed is thinking about that pretty hard because they've signaled they can be patient. I think there's there's there's a couple of angles here and I think the one for you Eric, is the labor market looks strong on the surface, right? You've got good jobs growth, wages - they're up to about three percent year-over-year. To me, they're showing some improvement. I guess if you're the Fed, you say, well those wages eventually help boost inflation. Do you see that happening now? Because we were also talking about inflation, we're talking about the Fed. From from your labor market expertise, is that's something you'd be worried about? If you could take one of those seats on the board like Randy did. Yeah, so where inflation come a wage pressure is a big predictor of inflationary pressures occurring. So when the economy overheats in some extent. You know prices, wages rise that passed on in terms of prices. You start getting inflationary pressure when you're thinking about where is inflation coming from. The labor market is a good is a good signal. It's the biggest cost of firms and when wage pressure starts rising you start seeing inflationary pressure. Let me just flip the question around now and ask why aren't wages rising? And so now this is not a 2018 question or a 2016 question or 19 yeah our 2008 question. This has been twenty years in the U.S. where wage growth has been muted at best. And in real wages for the median worker you know are slightly above 2007 levels. Not much above. You know which in your mind you got to contrast that with you know the 40 years to 2000 where on average, median wages were growing about you know one and a half two percent real for for about a forty year period. So why is it that the wage growth has been so muted? And this is where you've seen me last year many of you you can if you see me tomorrow I might say the same thing. Where while cyclically the labor market is doing pretty well, there are structural forces in the labor market that are weak. In the labor market today in those structural measures are still weaker than they were in 2007 and much weaker than they were in 2000. How do I measure those structural forces? You could take a look at the you know employment-to-population ratio for prime age workers. Okay so not the unemployment remember the unemployment rate measures only those people who are looking for a job who are going to find a job. Some people just aren't looking for jobs in their prime age and these workers tend to be less educated and they tend to be concentrated in the Midwest in places where manufacturing was predominant and they are sitting idle relative to where they were. Now there's less of them sitting idle in 2018, than there was in 2016, in 2012. So there is a cyclical component that happens in every business cycle. When the longer the recovery goes you know the employment-to-population ratio goes up, the unemployment rate goes down. But the trend - if you look from peak to peak - that is a downward trend that has been occurring for pretty much you know 20 years strongly and then slightly in the two decades before that. But you know from 2000 on the employment-to-population ratio is well below trend for prime age workers. It has nothing to do with the aging of the population, it's just for prime age workers. And what that means is there is some labor sitting on the sidelines. They're not looking for a job. And when they're sitting on the sidelines that mutes wage pressure and even more so the wage pressure for us tends to be going up. so When you look at our wages - wages for those of us with a bachelor's degree or more - that's been going up. Where the wage pressure has been most muted - which is most of the population - is for people without a bachelor's degree and that has been stagnating quite a bit and that's keeping wage pressure in the aggregate economy down. So I think when you hear these statements where the news sometimes, this is an historically strong labor market, they are focused on one metric of the labor market which is the unemployment rate. But by these other metrics - wage growth, and employment-to-population ratio for prime age workers - we're not at historic highs you know and we're still below 2007 and 2007 was below 2000. So there is you know in a historical sense, the labor market for certain types of workers are not at these historic highs that you're seeing. So Randy, with all that, I mean the Federal Reserve still, and you're right, Jay Paul made it very clear in December, he still made it in anything he said recently, that the economy looks stronger than, particularly when they look the labor market and they think then employments going to fall more and we're going to get inflation. And I think that's one of the reasons why people are there's more agitation. Like, why you keep raising interest rates at a time when inflation, what's the big accelerant? Is the Fed making a mistake? Because that's a lot how about a lot of people interpret the big stock market itself particularly at the end of the year saying, you guys you keep you keep raising rates you are going to be the force that helps precipitate the recession as central bank's occasionally are. Alright a few different pieces in there then we've built up some of the things that Eric was saying and then get to some of the other pieces of the question. So the labor market has so there's certainly those cyclic components as you said, employment population ratio overall, as well as even for this group, has improved in the last year. Because Eric was very pessimistic last year about this and continues to be on that pessimistic in the long run. We have gotten a little bit better in the shorter run. But the other point is an important one. We're not at the peaks of 2007. Now some might argue that the peaks of 2007 were somewhat artificial and we wouldn't sort of get get back there. So we have seen some improvement even for the low-skill prime aged males. We certainly seen it in a lot of a lot of other areas.That's helpful but there is a longer-term challenge in the market. But for the short intermediate run of what the the the Fed is thinking about, they're welcoming these changes. They're not bringing us back to 2007, but what helping us. Then on the inflation front, exactly's Eric was saying, the vast majority of expenses for U.S. corporations are related to to wages. So the key thing that the Fed will be looking at and is debating is, we're starting to see a little bit more increase in wages both nominal and real wages, not dramatically more but but a little bit more, and so does that portend a spike up in wages and inflation? And the key is wages and inflation. So when can wages rise and inflation overall not rise? Well that can happen when productivity growth is strong. We've had relatively muted productivity growth in the last last few years and that's one of the reasons why real wages have not gone up very much. As Eric had said, over the longer in history, basically real wage increases have been very closely related to overall productivity growth. It's very hard to get productivity growth unless you have a lot of increases in the education of the labor force. You can't really say we've had a lot over the last decade or a lot of investment so that people are working with things that make them more productive. And that I think is going to be the real challenge going forward - and this relates to the interpretation of the fiscal issues - so was what passed a year ago a short-term fiscal stimulus or was it a fundamental reform? So if it was primarily a short-term fiscal stimulus then a lot of boost up of consumption over the last year maybe that'll still have some legs in the first quarter but then it'll fall off and we'll be in much more difficulty in the rest of rest of the year. If there's something more fundamental that happened that is changing the incentives for investment and improving the efficiency of the allocation of investment, so getting rid of some of the kind of crazy pieces of the of the of the tax code that led people to do investments purely for tax reasons rather than for substantive reasons, and of course we haven't gotten rid of that, but if we can reduce some of that and we can increase incentives for investment then we'll be able to have higher wage growth and higher productivity growth without the Fed having to respond and kill the growth. And that's a debate that people are having. We don't know. We did see in Q2, and not as much in Q3, an increase in investment. So that's consistent with some of the reform interpretation, but we have to see whether that's going to persist or not. One or two quarters is not enough to really be able to judge that. If we continue to get that then I think the Fed is going to be comfortable in saying, it's okay that wages are starting to rise more rapidly. This is going to be a moment like the Greenspan epiphany in the late 1990s where he said we don't need to raise rates because even though the economy is roaring ahead, even though the labor market is very strong, we're gonna have a lot of productivity growth and that's gonna be okay. And so that's I think it's one of the key debates that people are having right now inside of the Fed and I don't think I don't think they know and I don't think we know because we need more data to be able to figure that out. Yeah I just want to emphasize two things. I'm hearing things in the news lately that I just think should be more nuanced than, I know but even for the point of my eye, which takes a lot for me to get there. And so the first is the Fed Reserve, I don't think and I would argue strongly, should not be the solver of structural problems in the labor market. The Federal Reserve is designed to measure model keep inflation in check and to mitigate cyclical fluctuations. And so that is their goal. And the structural problems in the labor market about, we could talk later on about automation or trade or you know barriers to skill acquisition, that is not the job of the central bank and their mandate is to keep inflation in check and to keep the economy kind of rolling on. So those issues I've been talking about if I was sitting on the board, would not be part of my decision-making in terms of making Federal Reserve policy again. To the extent that it affects wages, I might be. And on the other side the Federal Reserve has been dealing for 20 years with low wage growth in the U.S. This is not a recent phenomenon. The 2000s, despite how well the labor market was doing on all metrics - unemployment rate, employment-to-population, etc. - wage growth was rather low during the 2000s as well. And yet, interest rates were still doing up and down as the Federal Reserve saw fit to manage the economy. So just because wage growth is low the Federal Reserve could do different types of policy for exactly the same reason that Randy said there's a whole bunch of stuff that affects wages that are outside the Federal Reserve's control - productivity growth, and barriers in human capital, and trade. So as a central banker, my goal is to keep inflation in check and mitigate cyclical fluctuations. And I think the Federal Central Bank is doing that right now. And if I was sitting there too, I would not be deviating from my policy to try to normalize interest rates to some historical norm that'll give me more room to act when I need to act ten, five, seven years down the road for bigger recessions as opposed to smaller recessions. Okay I would put to both of you, and you're not a stock market guy. I am NOT. However you just mentioned that I think okay so should the Federal Reserve keep raising interest rates right now? I mean it seems you've got again, you've got a stock market that's sold off and you've got a strong labor market. Both of you, is it time to pause? I mean, because you're right. They can't solve structural problems. But in trying to manage the cyclical aspects of the economy, they can make mistakes. I think they can make mistakes but there's nothing that tells me now that would make me want to deviate from my plan of just gradually slowly returning rates to normal levels to keep the the economy in check. Do you agree with him Randy? I mean I think the Fed has followed a very sensible policy and this has been one of the slowest pace of increases of interest rates ever. And it's been, Greenspan had talked about at a pace that was likely to be measured. This makes Greenspan look like a rabbit. I'll leave that for others to decide. And it's a very gradual pace and also it's been very interesting Is usually what happens is the Fed can get behind the curve like historical mistakes. They sort of let the economy get rolling, inflation starts to move up, they're hoping that it'll be productivity growth it's not and then they have to raise rates really, really rapidly and then that often ends up, either taking the economy of itself for being a signal of the economy getting into trouble anyway. Slow gradual path. Now they have a very rough estimate of where they they try to see where interest rates would be that are neither causing expansion or contraction being relatively neutral and that sometimes this sort of neutral rate or technically it's called r-star. And so they're getting into the realm of roughly where they estimate that to be. And if that's a perfectly reasonable place to pause. This inflation is around two percent which is rough their goal. Growth is reasonably strong but uncertain to be as strong going forward. And this is a good time to sort of take stock and seeing where things are going. And I thought that's more or less what Powell and others had said for the last few months of last year. Apparently they didn't see that or didn't hear that when when Jay was speaking back in December and caused some tremors in the market. I think they've now made it very clear that it's time to sit back reassess, take a pause, see where things are. If inflation takes off without productivity growth then they'll have to move. The economy moves down, they'll come down. But it strikes me as perfectly plausible. I know Jim Bullard, who was a good friend, who was on the board when I was there, has said, we're one interest rate hike away from recession. And gosh if the entire U.S. economy hinges on one quarter of one percent, the issues are much more fundamental than that. It's not the Fed's problem. So I think it's a bit of an exaggeration. The Fed's a very powerful organization with a lot of other stuff that's going on and one quarter of a percentage point, I can't really see being... Well no, but that's signaling discounting a Federal Reserve it's gonna keep raising rates in the face a lot of stuff. I think you being a little unfair to Jim, but that's okay. We'll call him right now. Speaking of things that are out there. Trade war. Okay let's go there because as economists, you know that for the longest time no economist could question that free trade was the perfect thing. Meanwhile a president got elected at least in part because he noticed some of those people in certain states that somehow trade, what might have been free, but it didn't really work for them, this freer trade. And I think it made a lot of people start thinking, well, gee, maybe, there has been something wrong about the model of how trade actually works. Not in a model for an economist. So is there any benefit in this trade war? Are we making progress? Are the U.S. and Chinese making progress? Is it going to help jobs? That's kind of a loaded question because I know what you think, but that is certainly from a political standpoint from this whole sense of populism you know rising more in the US and around the world, that is an element. What do you think? So I think there's two parts of that. One is related to things we were talking about earlier which is something that is going on which is the displacement of certain types of jobs and certain types of industries that affect certain types of people that have occurred rather rapidly in a historical context during the 2000, particularly the 2010 period. So we lost about six million manufacturing jobs on a base of 18 million manufacturing jobs between 2000 and 2010 with more than two-thirds of that occurring before the recession started. So it was occuring pre- recession. And so there is something going, now we've gone through technological shifts in the labor markets in the past. A hundred years ago, we were all farmers, a robot comes along, we called the robotic tractor and we all left, we all left the farms and got reallocated to other sectors. And so that happens and that's kind of the way our models work is people, sectors rise sectors fall. As sectors fall, people reallocate to the new sectors. Some of those sectors have different skills so people acquire skills to move to those sectors. And it's not like labor falls when 80 percent of us used to be farmers and now four percent of us are farmers. Those shifts happen and we readjust. The question that I think more economists including myself are thinking about now is, what affects the speed of that adjustment? So how quickly do we adjust? And are some shocks easier to adjust to and some shocks harder to adjust to? And so when we were all farmers and then manufacturing comes along the skill mix of a farmer and the skill mix of the manufacturer aren't that different from each other. They're very similar in the skill mix. And now manufacturing goes away and we're gonna eventually in the long run, however that long that occurs, gonna move to other sectors. But it takes time now to take a manufacturer and turn him into a computer programmer or a high-skilled service provider, or even a low skilled service provider. My dad was a manufacturer, Randy's heard me say this before, he would have been an awful Walmart greeter. Awful. We would have been miserable just all the time. So there's a certain skill set he had that didn't translate even to the labor market that we have today. So some of what's going on is that speed of adjustment is slow. Now what does that bring us back to the trade question. In our mind, when we're thinking about where that decline in manufacturing came from, how much of it came from trade and the answer is some of it. There're some studies going on my buddy David Autor at MIT has some work showing that, causally, the rise of China actually put pressure on manufacturing employment in the U.S. But that's not all the story and how do I know it's not all the story? Because despite manufacturing employment falling by almost a third during the early 2000s, manufacturing output was up. So how do you get manufacturing output going up with inputs going down? There was a shift in the production process of manufacturing where we moved from producing with a very larger amount of labor to a larger amount of capital. And so what has happened now is even if China was an original shock that might have caused the manufacturing sector to adjust, part of the adjustment was automation. And that means if we go back now and start putting barriers to trade it's not like the manufacturing jobs come back. Why? Because the manufacturing jobs now we're just fundamentally different than the manufacturing jobs that have left. And I think one of the reasons where I think a trade war now, in a job sense, is not going to actually help these displaced workers is just that the manufacturing sector has changed fundamentally. It's more automation now than it is in trade. If you listen to the trade record rhetoric well I think it started in a job since, now it's more about intellectual capital and trying to protect technology transfer across countries and that's a different issue. But even those issues I don't think are gonna help the labor market that we're seeing today. What we're really thinking about with these structural issues is we just got to somehow take people who had a skill in this kind of you know low to middle skill manufacturing and somehow get them to have the skills that work in the labor market today. Trade wars aren't gonna do that and energy, environmental contracts aren't gonna do that. It's gonna be something around human capital and adjustment and it'll happen naturally. So the question is, are there policies that we could do to speed it up and we might be able to talk about that later but it's not a trade issue that is a drag on the labor market. I think it's interesting though that if we're going into a more high-skilled technological economy and that's where the jobs are gonna come from that again, the whole issue of protecting the intellectual property is very important. But Randy what's your take on trade, where it is, where it's going, does it have benefit, is it going anywhere actually, at this point? I think, exactly as Eric was saying towards the end, it seems to have been transformed much more to be a focus on intellectual property and technology transfer or technology thefts, depending on what your view is of that. I think what that means is that this is not going away. So there might be some face saving measures about something to do with cars or a few other narrowly trade-related issues. But I think it's a much bigger much much bigger issue that the administration has with the Chinese and it's really, the whole approach of the regime. And I think, so when I worked in the the White House back in the early 2000s was you know bringing China into WTO. And and then the idea was that China would be a bit like Japan. If you look back 40 years, Japan was the China of its day. Really rapidly growing economy, there were a lot of questions about enforcement of intellectual property, there were a number of lawsuits about exactly these issues. The thought was if you bring them into these global institutions, and as they become wealthier, they will become innovative, they will want patents to be enforced, etc. So the analogy was sort of like Japan. That was wrong. China's not acting like Japan. I think for a few reasons, one is sort of a fundamental difference in the regime. But two, technology is dramatically different today than it was in the old days. In the old days it was about making cars and selling cars. Now it's largely about data. Because of the scale that China has, they have enough technology that now you can feed the AI machine with a billion observations of people's WeChat information or other things like that. You can you can make a lot of technological progress today even if you're not engaged with the rest of the world given where China is just because of the scale of what they have. They don't have to engage as much. Japan is a, as you know, is a relatively large economy, but still a 120 million people, not ten times that amount. Technology was different because you're making cars and selling cars there just weren't that many cars to sell. One, you've got a gigantic internal market and two if it's about technology you've got this this bigger ability to make progress internally just because of the data. I think this issue is not going to be going away. I think this is one that is a very important and fundamental one. I think that even if there may be some trade agreements related to cars or a few other things, this is going to be an ongoing thing and I think the analogy that we had that we could just bring people into these global institutions and they would then be like us it was a false one and I think that has to do both with regime and has to do with technology. Do you think the trade war is the best way to solve that issue should they be decoupled or bundled? Right now the approach is to bundle and, I don't know, that comes with cost not only on one side but also on the other. Farmers and manufacturers it's a drag in lots of different sectors and it creates uncertainty as well. So I'm just trying to get a sense of, is the best way to do this to decouple the issues or not? I don't know the answer. It's really tough because I think the administration said, ok we've been trying on this for a while and we've gotten nowhere and so we've got to try something that's really gonna hurt. I think exactly this Jay Powell said, it's very hard to see any imprint on the U.S. economy, at least so far, of any of these trade disputes. On China, I think it's had more of an impact and will have a significantly greater impact if there were to raise the tariffs that have now been been deferred for a few months. Regardless of what you think of the president, the president someone who is a negotiator and he can tell when he has the upper hand. And I think he thinks he has the upper hand on these issues right now. That may not be true in a few years but I think right now he feels he has that and so that was the lever that I think he and the administration felt that they had. I think they think an alternative would have been to build sort of a grand international coalition since he and his children would be dead and buried by the time you'd get that together and they wanted to get something done. High-risk. Very much high-risk. But I can understand why they might take a higher risk strategy because the traditional strategies weren't working. Before we open up to questions in a few minutes I want to get a couple more things in here. And and, I'm thinking about the government shut down for months maybe years who knows? We've got this shift that you could certainly have expected. Trump gets elected, my God, I got this Republican Trump president in the White House and then the Democrats get the House and the tables sort of turn again. So it's just such a great juxtaposition, right? Because now you've got Trump on one end and the people supporting him, Republicans whether they want to or not kind of thing, got this new wave of Democrats right? And you've got progressives and somebody even probably some a socialist, right? And the Bernie Sanders group is there. And it seems like you know where is this debate going? And when you look at any part of it you want to Eric. You want to look at deficits? Do you want to look at taxes? We need to redistribute money to people who don't have it because they can't find jobs because of all these forces, they can't make enough money. Or you tax the wealthy. As economists looking at this what do you see? What makes sense? Are we moving in a crazy way in some kind of right direction? There's lots of questions there. In periods of slow growth, particularly in disruptive growth where there are some winners and losers, so think about automation and recent periods, where there's gonna be an adjustment that happens, but during the transition, there is winners and losers. There tends to be movements to pull both sides of the political spectrum. So people move towards you know certain types of you know isolationist populism some people move to more socialist populism. So you get that kind of movement cuz why? People are struggling. They don't know how to process it. Life doesn't look as good as I thought it was going to be. But that guy, I'm pointing to you particularly, your life looks pretty good. That guy looks pretty good. So we're sitting here in the Wall Street-Main Street people we know you who is who. We're seeing that. So they move to the extreme. So you're seeing both of that going on now. Both types of policies might have short run support but come at kind of long run costs. Whether that be what we're seeing now where we're potentially getting backlash against immigration and trade, there are benefits to that in the long run. That comes out you know some short-run benefits though of stomping it down you forego those long run. When you start talking about seventy percent tax rates on you know marginal tax rates on income, that sounds nice to some people now but that comes at a cost. Once you start telling me you're gonna tax income at seventy percent at the upper end, that spills over. Might not affect my labor supply today but it might affect my human capital. People going less going to school, less starting businesses and that has effect on growth in the long run. To navigate this period of time where you go through these periods of adjustment, where there are observable winners and losers, and that comes with this political movement to extremes and those could be very disruptive to the long-run prospects. When you're hearing now movement in both extremes, so moving towards some very liberal elements of Democratic Party very conservative elements. Can I just interrupt you for a second because one thing I want you on the table with you and Randy too is this because I think it's easy to talk about how things change is when there're winners and losers. It's easy to talk about farmers going into we're going into factories. But I think a lot of people are looking at AI, artificial intelligence, robots the increasing use of robots. Robots displace people you can say, oh but people are going to make robots. But it takes far fewer people to make the robots that are displacing people. It's not an equal trade there necessarily. It wasn't the same with the tractor either. What happens is we start moving now to an economy which we've been doing for a long period of time of high skilled services, okay? You'd like to come, you know, have some people who come and give you some high-skilled service which you'll be us sitting here giving you information or you have a doctor who could actually stay ahead of the robot terms of diagnosis. But somebody has to be working. Somebody has to be working to buy your service and somebody has to be making something people will buy and I think this whole thing about universal income and taxes and where they're going I think even with regular people who don't have sophisticated economics there's something they kind of feel that is changing and that's why they're kind of worried and people are you know even middle-of-the-road people who are not considering themselves socialist, they're kind of going where's this all heading? But I'm saying that same fear, if you go back and look at newspapers, was exactly the same when we were moving off the farms and it's all about transition dynamics. And it's about the speed of that transition dynamic. So every one of these types of adjustments or these innovations come with some disruption. They always do. And it's all about, in the long run, people will adjust. One way would be moving up the chain and getting human capital. Now the question that we're thinking about now as a profession is, how much human capital can people get? Put it another way, can everybody get the human capital that is needed to be successful in the labor market right now. I don't know the answer to that, but that to the extent, if you can't move up that human capital chain, and you don't need everybody to move up, but if you don't have enough people moving up, that could cause periods of prolonged sluggishness. Randy? It's exactly the move from using just human labor to then using donkeys and horses and then moving to tractors and other things and there had been all these concerns you know the Luddites were concerned that all of these these things would destroy the ability to generate jobs and generate income and obviously that hasn't been the case. A lot more income a lot more jobs. But very dramatically different ones with dramatically different skills that are necessary. The concern that a lot of people have is and, Eric was getting at this from before, that this transition is going to happen much more rapidly. And so you're gonna have this very rapid transition from traditional activity to needing very high skills to make the robots, exactly what you were getting at Kathleen. And then so a lot of people will be left behind for a significant amount of time. Can we give enough skills to people so they can be successful in that realm? And that's been one of the motivations behind this idea of so-called universal basic income that you provide people with some sort of income because they won't be able to be successful in the future. One, I think that's too pessimistic. I think perhaps some transition or to just assume that no one will ever be able or that very few people you will have those skills or be able have those skills, I think that's exactly what people would have said back in the late 1800s. And then in the eighteen twenties, yeah it is what they said, It it's actually very instructive to go back and look at some of these these books from those periods about about these things. It's extremely interesting because if you take off the some of the specifics, they could be the same rhetoric that's being used today. But what's interesting is there's an interesting book called "Give People Money" by Anne Lowry that is about universal basic income. She's a very big advocate of universal basic income but actually the first half of the book could have been meant written by Milton Friedman. How could this be? Here's someone who's on the super left saying, give people money. But if you actually look at what Friedman said about providing support for lower income people, he was not someone who said, forget about them, don't worry about it, he said, we can do things that will be helpful to people. And so of course no one paid attention. So we have welfare policy that gives people food stamps, gives them this, gives them that, we basically try to micromanage low-income people's lives. Friedman's approach was like, no, no we don't do that. We have something like the Earned Income Tax Credit to give people incentive to work but effectively subsidize them so that they have more income and they then build skills, etc., etc. through that. The first part of this book I think it's totally sensible because it's basically Milton Friedman's critique of what if he were alive today, how he would treat welfare policy. The second half the book gets back to what Kathleen was saying, is this sort of Cavalier approach, well to do this at the level that many people have proposed well that'll cost like an extra thirty or forty percent of GDP. We'll get that from somewhere. Forgetting about the budget constraint is a little bit is a little bit crazy. I think there's some issues in universal basic income that makes sense. Thinking about, are we doing our welfare policies in a sensible way that give people the right incentives to build skills and not try to micromanage their lives. But the big picture is like, well we'll just kind of give up and just give people money and the money will come from somewhere. One I'm not sure where it's gonna come from. And two, I think that's far too pessimistic and it's just is a very bad way to think about people's lives and what and and how they want to be. People don't want to be on welfare. People want to be able to acquire skills and be productive and enjoy being able to make a contribution. And I think the Friedman type approach where you might have an earned income tax credit where people have an incentive to work and you effectively subsidize their income, that's a much more sensible way to go than this other approach and it's also one that is potentially affordable. This other approach is not yeah and so for me it's a besides the hugely expensive component in a period where we have you know deficits are jumping now where some forecasts are coming in at 180 percent of GDP debt in you know 15 years or ten years at current tax play and so so that's I don't even know if we'd be able to afford something like that in the wild district there's another issue that I have with the universal basic income in that it slows down the adjustment and so part of what we want to be doing is we want people to adjust in anything that provides some sluggishness in the adjustment it has a cost now on the other hand people are suffering so how do you manage these two things one my four policies are always like you know they have the expansion of the Earned Income Tax Credit so if you work I will subsidize you so that gets them to take the incentive to where they think they might be able to find some jobs and then start building some skills second I do believe in expanding apprenticeship programs in the manufacturing sector and I might even tack subsidize that and the reason I'd have to tack subsidize that is these programs are very inefficient if I do it well the if I only I do it and Randy doesn't it's not an equilibrium because as soon as I do it Randy's gonna hire all my workers sure I've got trained for free so we needed to coordinate the equilibrium where all of us provide these types of incentives simultaneously so I might try to do a tax incentive for that third I probably would also think about changing the skill acquisition in you know the high schools around the world you know we used to have a little bit more vocational training I wouldn't track like Germany does but I would I would actually offer options where not everybody needs to take trigonometry in order to be successful in the current labor market so you might have some tasks that actually could start providing some skills that the labor market is developing now the downside of these is you train them in skill X and that goes away ten years from now but I figure once you have a little bit experience in you know getting this it's easier to reallocate that at some point down the line and lastly I'm a huge fan of high skilled immigration as well bringing in high skilled immigration and against do two types of things one is there tends to be some strong evidence that they create a lot of jobs where they do spill over to some lower skilled workers and second anything that keeps our income in check I think is a good thing so income inequality it's something on my mind and we tend to know the current track is it is growing over time and that tends to end in very disruptive outcomes for societies so things that can mitigate that type of transition I think high-skilled immigrants would be one way to keep that in check but also also provide some spillover to to lower skilled workers okay well I think we're ready to open this up to some questions we've touched on a number of things and probably there's a number of things we haven't touched on that you all have questions you'd like to ask and I'm going to say for starters there's a number of people in the audience you never know how many people want to ask questions but frequently lots of people do so I have a couple of rules one of the rules is you get pretty much one question at a time try to keep it contained not a speech in other words you can you can present your your basic point right but then get to your question and and that way we can get as many different thoughts and ideas and questions on the table and I reserve the right as moderator to cut you off if you're going to so keep that in mind these lovely people are going to come around with mics and so it basic reason you're here let's get that guy ready back there and this I think there's a person over here this this young woman up here yes and then we'll have to - in the - in the cube and if you want to you know you can say your name and when you graduated from the University Chicago and great hi Dean cronut I graduated in 1996 thank you guys for for doing this my question is to Professor Hirst and it's right at the end right is what you said at the end which was this notion of income inequality is it enough to say that we're focused on allowing the the bottom part of the skills spectrum and the bottom part of the distribution of wages we're gonna focus on rising that on taking that to the next level or is the income inequality itself part of the problem from your perspective so that's a it's a great question so I think it is more the stagnation of the middle as opposed to the middle relative to the top so I think it is you know I think again I don't have evidence on this yet it's something I'm pondering but I think the societies are growing from generation to generation at the the the middle or the lower part of the distribution that is very different when they are contracting now I think contracting and then seeing the top grow could even potentially be more unsettling but I do believe it's it's more the contraction at the muscle so part of the the income inequality I think is really about how do we get the top of the distribution to kind of gain in the current in the current economic landscape like they had historically how do we manage this transition to the new steady state I think is something I'm more more interested I always like to say in my mind I think for a long time Americans like I don't care if there's people with gazillions of dollars as long as I can have a job a decent home my kids get an education and get health care and I think that it isn't so much about we've got super wealthy it's as you saying I think I've got a nice solid group of people in the middle who can have a good life over here so hello everyone I'm Eva Singh I'm a class of 2015 my question is around debt to equity app depth to GDP ratio so as you know that the u.s. is about like 105 percent like highly leveraged and flinch has actually threatened to look downgraded the credit ratings of us so can you talk about like is this sustainable can oh that's us actually tends to like we paste that or it basically doesn't have his agenda so this is this is a an extremely important issue and so I think you know in the end you all have to pay or you go bankrupt and but that can be a very long way off and so I think the the u.s. is not on a sustainable path I think most people would agree that the long-run path is not sustainable but that hasn't prevented the u.s. from continuing to borrow more at relatively low rates another example of this would be Japan debt-to-gdp has ballooned to more than 300 percent three hundred three hundred fifty percent and the Japanese still can borrow at very low rates now some of this has to do with with quantitative easing policies with the central bank purchases of assets but it's not not just that and it's a challenge because there's a lot of savings that wants a relatively relatively safe place to put their money and so Switzerland and Germany are just too small they're small relatively small countries and because they're very fiscally responsible they have very little debt outstanding and so where else is it going to go so we benefit from that because we are I wouldn't want to say that we're where the model of fiscal responsibility but there are many others who are even a lot worse than we are and and so a lot of it is on the relative it's sort of relative to wealth it might go and so it gives us a it gives us if you think of it in the positive way breathing space if you think of it the negative way more room to hang ourselves and so I would like to see more I wish others were more responsible and we were facing more competition so we couldn't get away with as much as we're getting away with but I do think in the short-term immediate run we have more breathing space and I think Japan is an example of that about how you can kind of you can have a very significant increase in your your debt to GDP without a crossing crisis but the credibility of your institutions are fundamental Argentina has blown up twice when debt to GDP gets to about 40 to 50 percent of 40 or 50 percent so if you start undermining the the credibility of the institutions then you don't get to 40 or 50 Japan is pretty extremely getting to 350 I don't think we could we could get there but we're in depending on exactly measure it sort of around 80 percent and so I don't think it we're at a fiscal cliff but I do think it's it's irresponsible for us not to sort of like just say well we can get a wait with this for a while so let's just away with it I think we do have to think about that longer run issue someone's gonna had two things to do it Randy he said the credibility institutions comes from one particular thing which is the third way we can handle with that which is to inflate it away and so we don't have to pay or default we could also inflate and in a lot in the latin-american countries get into crumpled earlier because historically they have chosen that latter method to deal with their fiscal positions and so that's where the credibility in Japan they're anything they are even more anti inflation than we are so they could hold a larger amount of debt without that fear of inflation away and the markets will respond to that the second point I just want to kind of add some color to with Randy's point which is just the the reason that you know being a safe haven for assets it allows us to hold the debt is because it keeps interest rates low anything that raises interest rates whether it be we are no longer a safe haven whether the world get we get faced competition or whether we get normal increases that interest rates from Federal Reserve policy is going to put a large strain on federal positions so one downside to rising interest rates what the Fed is doing is going to be it's going to have a fiscal effect on the fact that there's larger interest payments now if all debt was held internally this is just reallocating you know people from one pocket to the other within the economy that is only problematic if the death is held outside the system which a large chunk of our debt is held outside the system and so in that case raising interest rates is now providing a transfer from US taxpayers to debt holders around around the rest of the world and so you know as interest rates rise for whatever reason in terms of managing you know short-run fluctuations in the u.s. that has a cost on on the fiscal position going forward maybe we should have sold more long-term paper when the tenure got to 1.3 huh okay there's a gentleman on the aisle right here let's give him the microphone and then just to keep it even between the right and left or the left on the right let's start this gentlemen off upper side and we'll get some people over there too so Dwayne he'll class of 73 professor I don't have as inform sense of history as you so I can't be as optimistic about the the adjustment in the the the structural labor problems that you talked about and in this environment of political extremes how do we introduce those solutions who proposed into the political dialogue and and make more progress yeah it's a to be fair I am NOT optimistic undecided if I came across as optimistic that is my bad today I think in the long run these types of adjustments occur but I think in this case the adjustment is slow for some of the reasons we were talking about now how do we get this into a political discourse I don't know I try around the margins but you know it doesn't sell as well as bringing in more high-skilled immigrants or we got to start investing in some vocational training or those types of issues as much as you know let's keep all immigrants out or let's build trade walls because it sounds like those could be very fast solutions we are feeling something now and you just want to blame or let's tax the rich and then just get that money and redistribute and those are easy solutions and then trying to move towards more I would think I don't want to say realistic solutions but I mean solutions that could actually affect change you know the the transition in the long run it is a hard process so part of my you know even if we could get these policy implemented it is still a process that will that will occur you know we talked about an invention this early on me you know one of the things that corporate tax cut was supposed to do was to help lower parts of the distribution by having firms invest I was very worried about that because that investment usually means in automation which actually could make the effects on the hore skilled workers worse so you know as we were talking about this might be grow great for us at the top of the distribution but things like corporate tax reform could actually go the wrong way if it is actually accelerating the excitation process as opposed to letting it take its natural course so I wish I had easier solutions I will keep talking in any venue I can that these are these are not easy fixes and that we will have periods with this adjustment that we're gonna have to go through but I am NOT if I came off as optimistic I apologize Mannis that is my bad yeah there he goes again just quick I mean you were the council becoming visors you've been in these institutions that where you're doing look you know working on pull up policy issues more from the economic and financial side and a lot with banks and banging's and all that so and when you and I but I also think it was a little whiff earlier of you thinking that the corporate tax cuts maybe are part of a longer-term positive trend so you know can we extract some positive note from you if Eric wants to disavow any kind of optimism right now well I mean I I sure the concerns that Eric has I think the the politics are very different difficult and to get those get the best policy changes through I think are may be nearly impossible right now or at least for the next couple of years with a divided Congress and and so I think that's going to be going to be particularly tough one thing that I want to mention though is that this is not unique to you us and it's not also it's not unique to just in the u.s. where these income and equality issues have taken a more prominent role for example in Germany or in Sweden so Sweden now has a very large and anti-immigrant party it's one of the largest it's almost the largest party in the Swedish parliament and you know they have you know they're famous for their you know income equality there and there hasn't been any transition there same thing in Germany now you have the alternative for Germany and anti-immigrant party that has risen up and that's not due to rising income inequality and so it's it these issues are coming coming up around the world and and I think there are other things that are driving it rather than just the income inequality issues but these other countries are not solving these these issues either so in terms of policy I'm not sure how we're gonna be able to do it it's I think it's going to be a painful transition but I'm a bit more optimistic about some of the forms that we've had that may be helpful at least in the short-term intermediate run for for growth and it's one because the people things are better today than they were yesterday that is true but that happens in every cycle goods and parts of cycle is better than bad parts of cycle all the time but that's cycle and without you know what I'm talking about now is Trent and it's the trend that is important sometimes when we get into periods where the cycle is good and I look out to you all it's look at man things are better than they were yesterday and I say that is true but still relative in trend they are always better at this part of the cycle than they were the year before at this part of the cycle that's just the part that's the inherent in the words PCM get excited yeah okay but it's the cycle part but it's also the trend part and that's what I've been looking for so when I'm talking about some of my pessimism not today versus yesterday because that's always gonna be there and tomorrow might be worse because we're in a recession that part I swipe out of my mind what I've been interested in is just you know how do we make these adjustments and how do I know things are not working well for some people the suicide rate in some of you know prime age individuals in the Midwest it is at all-time highs opioid use in those same places are at all-time highs so how do I know if the cycle isn't curing the problem because we still have these other symbols besides labor market mode more you know socio-economic you know general measures of health that are still struggling in a lot of these places and that's what's part of my pessimism is coming from not today versus yesterday or yesterday versus the day before or today versus tomorrow in a business cycle sense it is more about how we deal with these types of adjustments broad yeah well it's gonna be one thing for sure until we get the government open again it's gonna make it hard to solve anything and anybody I think we've got a gentleman hi my name is Elle the class of 2011 but from the Wharton School so friend of food welcome well can we take all types here happy to be here my question is on climate changing carbon pricing even though it might not be immediate concern near-term concerns do show climate climate change as a threat to not only US economy global economy too how do you see that actually being implemented in policy we have yet another climate summit with nothing and substantial in terms of carbon pricing globally once you hear our thoughts on that you know I I don't think we're gonna get much movement on that it's a hard problem to solve because there's such a big coordination problem and the reason is that the you know pollution you do on your side of the room affects me and my side of the room and I might want you know us to have no pollution on this side of the room but you're the one who controls that and vice-versa so because it's so integrated in the climate is really hard to to make progress on and so you know I think this is an issue we should be grappling with I don't think any one country could do it by themselves I think you need some you know coordination but once you get to that coordination there's a high incentive for any one country to defect once you get the court I would much prefer all of you impose strong you know actions to reduce your carbon and I'd say yes to that as well and I would be have a high incentive to deviate i strictly prefer me not doing anything in you doing everything and because you have those types of equally you know coordination problems it is a really hard problem to solve now it doesn't mean it doesn't shouldn't be solved it just means the you know the political reality of it is it is a really hard problem to solve and then I just throw out quickly and that's I think why Mike Bloomberg has said you know the all full disclosure he's my boss and but he was mayor of New York and then philanthropy is big on this one of the big issues has said it's gonna come from mirrors it's gonna come in at the more local level and that's where you're really gonna see the change for climate who else wants to ask a question this person right there and she's this way I'm gonna ring yo Mike Megan med yard Chicago Booth class of 2013 - my favorite professors we've talked about a bit about the economic model today but I feel like we haven't talked about population did you think about the long-run and I know you mentioned labor market consumption those things are in check it seems some the data points in population right now that population growth has declined and I want my curiosity is one are you serving similar data points as you think about both the US population growth that around the world - does it influence how you think about the macroeconomic model in the long run and could there be disruption to that on a region by region basis and three as you think about the ability to influence and in the near term in the long term particulars you think about some of the deficits and where we're spending now and expecting to pay back in the future does it raise any of your concerns for you both sure the population issues are very very important ones and and obviously Japan as I'd mentioned before has been hit with a dramatic demographic change and and it's actually very instructive to look at how Japan has dealt with it to see what consequences might be for other countries China is also a country that is having it's going to have a very rapid aging of its population partially because the one-child policy and just parts the because of other other factors they are going to age even more rapidly than than Japan did that has impacts on savings rates for example biggest is there are a lot more older people relative to younger people so mechanically savings rates are how much are you consuming relative to your income and then what's left over is savings will be a lot of people aren't working your savings rates are going to go down japanese savings rates used to be famously high like 20% then personal savings rate is now down two or three percent china is that 40 percent as they age rapidly maybe they won't be down at 2 or 3 percent they're gonna be down at maybe 20 percent and that's going to have that's going to have a very important impact some global interest rates one of the reasons that interest rates have come down over a 35 year horizon is because of the integration of high savings very rapidly growing China into the world economy they're not going to be growing as rapidly they are going to and and they're going to be aging and so they are they're gonna be far less savings coming in that's what I think one of the reasons why interest rates will will move back up maybe not to where they were before but but up up a bit and and so there are a lot of different pieces that as you said if you were if there big increase in population you can get away with spending a lot more because you have a lot more people who are going to be able to pay for it down the line if that's shrinking it becomes very difficult one of the reasons for the very high and growing debt and and debt in in Japan and there's not a there's not a simple solution to that it's one we're getting back to what Eric was talking about before thinking about sort of long-run solutions people don't want to think about that kind of thing it's yeah there's gonna add two things quick to that so the first is then we're thinking about public budgets it's you know on the other side we promise stuff to old people a lot and it's not just the population there it's basically how long people are living in a interesting thing has happened bad from the budget standpoint but probably good in general we keep living longer and then we expect it and when we keep promising people we're gonna pay you until you die certain types of policies and you don't die when we plant that has a strain on types of us so the innovations in health have I think put strains on people's budget because people are now more and more in the transfer part a lifetime and that's something some countries are going to have to think about fiscally no on the other side unlike other types of shocks that hit an economy the population is pretty poor castable okay I am very good at predicting the amount of 21 year olds next year I'm just gonna count the 20 year olds this year and so that allows me time to adjust to these types of shocks and what that mean it means when population changes both the capital stock will adjust and you know even technology with it so the smooth you know transition could happen you take the problem in Reverse population grew really fast for a long periods of time and we're able to manage that transition as well people thought we'd run out of resources the dismal science and such the same will work in Reverse because we'll have time to adjust so the the movements tend to be slower than some of these other things that gives us time to plan okay the older I get the more like all that money being paid to older people anyway we've got time for one more and I'm going to say this John right here last one no pressure David Matthews tell out graduate I just wanted to ask you I'm a nice guy this is my best friends this is the tough room anyway I just want to ask you with like in New York the governor and the mayor both really beaten your chest about being so progressive they're going to the $15 minimum wage now they want it they want to give you guarantee you pay time off and also paid sick leave so sick leave vacation I just wonder if this how do you feel this is going to affect New York and if this spreads around the country how will it affect the labor markets in terms of companies investing in these different states so let me just say two things one is $15 in the same in New York is not the same as $15 other where so - you know because of cost-of-living differences across place you know my guess is we wouldn't see $15 I wouldn't imagine if we thought there was a good minimum wage for New York it would be the same as it would be for for Austin or or Decatur or some other place so that my guess is their brief some tailoring the other thing I mean with minimum wage I think neither the cost or the benefits probably or as large as other people say they are okay so there's a worry about the minimum wage that people might not want to come in and hire and I think that happens empirically though it's not like places have flooded out of Seattle or flooded out of Portland even now four or five years in and I think part of the reason for that is there's other adjustments for Hermits could make when they get the minimum wage when they were imposed a minimum wage one of those is they just make wage growth lower conditional and getting a job you know the people who usually get paid you know below the minimum wage usually make more overtime and what happens is it flattens the wage profile in those places so that's one way the firms are going to adjust to a minimum wage the second is they're gonna pass it on in prices and so they're gonna have consumers are going to pay a little bit more as a result of this so the firm's themselves have ways to manage around the minimum wage and that could kind of reconcile why empirically you don't see big effects on hiring when these minimum wages have been put in and there's been lots of studies that find either no effect or at best small effects and I think part of the reason is firms have so many margins of adjustment that they could deal with and the flattening of the wage profile and raising prices is is two of the ones I'd imagine final weird yeah and it's a very inefficient way to try to do redistribution policy because exactly as Eric said there's a lot of evidence that sort of let's say like you know fast-food places for example that use a lot of minimum wage labor two things about that one they raise the prices it's typically a higher proportion of lower-income people's spending will be at fast-food restaurants than at other kinds of food establishments so they're gonna bear the cost disproportionately in their and their families second many people who are working at and these minimum wage jobs are not the the breadwinners for their families they are often the sons and daughters of middle-class families who are getting their first jobs and so do we really need to subsidize those people that seems like a very inefficient way if you want to get at a problem of you know certain people not your feeling that they don't have if you that there's not enough income for the family I think something like we were talking about before an Earned Income Tax Credit is a much more efficient way to do that subsidizing you know middle-class kids and raising the prices for what lower-income people are spending a lot of disproportionately large fraction of their their their consumption basket on is extraordinarily inefficient it sounds great because the first and this is and as I'll conclude with this is because you're getting back on policy and this is one of the challenges in policy so economists are always thinking about the second around effects so what I just described that's not what's what's on the surface on the surface someone's getting paid more and that's great $15 an hour and you know people should get paid for don't you agree of course because you could pay that to go through all these other effects you know you gotta have a lot of machinery it takes a lot of time and now what people want to move on from that and so it's very difficult and this is when the challenges in policymaking this is when things that the ideal is if you can you it's very hard to make a two-step argument in policy the one-step argument is the one that gets the support people are getting paid more the second round argument that well maybe there aren't they're not gonna get the same kind of wages there's gonna be more expensive and you know and it's really not getting at the right people that's for the academics to worry about and that gets kind of left left behind so part of it is our job as academics as as much as possible to try to compact things into a single-step argument without losing the fundamentals and part of it is more broadly trying to get people to the broad public to understand that there are second-round effects that are our first order important and and so you just don't go by the the slogan go by the substance and that's what Chicago's all about alright incredibly interesting and enlightening all around so please once again give a great round of applause to Kathleen and to our panelists thank you so thank you all again for coming I hope you found this useful and a valuable use of your time the reception this concludes the formal evening but we have the reception still continuing outside till 9 p.m. so we'll see you outside then thanks a lot


New York City

Long Island

The counties of Nassau and Suffolk have long been known for their affluence. Long Island has a very high standard of living with residents paying some of the highest property taxes in the country. In opulent pockets of the North Shore of Long Island and South Shore, assets have passed from one generation to the next over time.

From about 1930 to about 1990, Long Island was one of the aviation centers of the United States, with companies such as Grumman Aircraft having their headquarters and factories in the Bethpage area. Grumman was long a major supplier of Carrier-based aircraft. Parts are still made for assembly elsewhere.

Long Island is home to the East Coast's largest industrial park, the Hauppauge Industrial Park. The park has over 1,300 tenant companies employing over 55,000 Long Islanders.

Long Island has played a prominent role in scientific research and in engineering. It is the home of the Brookhaven National Laboratory.

Tourism thrives primarily in the summer, especially on the east end of Suffolk County. The east end of the island is still partly agricultural, now including many vineyards and pumpkin farms as well as traditional truck farming.

Fishing also continues to be an important industry, especially at Northport and Montauk. A moderately large saltwater commercial fishery operates on the Atlantic side of Long Island. The principal catches by value are clams, lobsters, squid, and flounder. There was in past centuries a large oyster fishery in New York waters as well, but at present, oysters comprise only a small portion of the total value of seafood harvested.

Perhaps the best known aspect of the fishing sector is the famous Fulton Fish Market in New York City, which distributes not only the New York catch but imported seafood from all over the world. At the turn of the 21st century the market moved from Fulton Street in Manhattan to The Bronx.


New York's mining sector is concentrated in three areas. The first is near New York City. Primarily, this area specializes in construction materials for use in the city, but it also contains the emery mines south of Peekskill in Westchester County, one of two locations in the U.S. where that mineral is extracted. The second area is the Adirondack Mountains. This is an area of very specialized products, including talc, industrial garnets, and zinc. The Adirondacks are not part of the Appalachian system, despite their location, but are structurally part of the mineral-rich Canadian Shield. In the inland southwestern part of the state, in the Allegheny Plateau, is a region of drilled wells. The only major liquid output at present is salt in the form of brine; however, there are also small to moderate petroleum reserves in this area. New York produced 211,292,000 barrels (33,592,700 m3) of crude oil and 55.2 billion cubic feet (1.56×109 m3) of natural gas in 2005 worth $440M. 1.58 billion US gallons (6,000,000 m3) of Salt Brine were produced in 2005 at a value of about $100M. Geothermal energy potential is being explored in the state, with 24 drilling applications being submitted to the Division of Mineral Resources in 2005.


New York exports a wide variety of goods such as foodstuffs, commodities, minerals, manufactured goods, cut diamonds, and automobile parts. New York's top five export markets in 2004 were Canada ($30.2 billion), United Kingdom ($3.3 billion), Japan ($2.6 billion), Israel ($2.4 billion), and Switzerland ($1.8 billion). New York's largest imports are oil, gold, aluminum, natural gas, electricity, rough diamonds, and lumber.

Canada has become a very important economic partner of New York. 23% of the state's total worldwide exports went to Canada in 2004. Tourism also constitutes a significant part of the economy.


black and white spotted cows grazing in a field, with a red barn and house in the background, and a tree line further behind
Dairy farming is the largest component of the New York agricultural economy

The Erie Canal, completed in 1825, opened eastern markets to Midwest farm products. The canal also contributed to the growth of New York City, helped create large cities, and encouraged immigration to the state. Except in the mountain regions, the areas between cities are agriculturally rich. The Finger Lakes region has orchards producing apples, which are one of New York's leading crops.[15] The state is known for wines produced at vineyards in the Finger Lakes region and Long Island. The state also produces other crops, especially grapes, strawberries, cherries, pears, onions, and potatoes. New York is a major supplier of maple syrup and is the third leading producer of dairy goods in the United States.[16]

According to the Department of Agriculture and Markets, New York's agricultural production returned more than $3.6 billion to the farm economy in 2005. 36,000 farms occupy 7.6 million acres or about 25 percent of the state’s land area, to produce a variety of food products.[16] Here are some of the items in which New York ranks high nationally:

New York is an agricultural leader and is one of the top five states for agricultural products, including dairy, cattle, apples, cabbages, potatoes, beets, viniculture, onions, maple syrup and many others.[17] The state is the second largest producer of cabbage in the U.S.[16] The state has about a quarter of its land in farms and produced $3.4 billion in agricultural products in 2001. The south shore of Lake Ontario provides the right mix of soils and microclimate for apple, cherry, plum, pear and peach orchards. Apples are also grown in the Hudson Valley and near Lake Champlain. The south shore of Lake Erie and the southern Finger Lakes hillsides have vineyards. New York is the nation's third-largest grape-producing state, after California and Washington.[16] In 2004, New York's wine and grape industry brought $6 billion into the state economy. The state has 30,000 acres (120 km²) of vineyards, 212 wineries, and produced 200 million bottles of wine in 2004.

New York was heavily glaciated in the ice age leaving much of the state with deep, fertile, though somewhat rocky soils. Row crops, including hay, corn, wheat, oats, barley, and soybeans, are grown. Particularly in the western part of the state, sweet corn, peas, carrots, squash, cucumbers and other vegetables are grown. The Hudson and Mohawk Valleys are known for pumpkins and blueberries. The glaciers also left numerous swampy areas, which have been drained for the rich humus soils called muckland which is mostly used for onions, potatoes, celery and other vegetables. Dairy farms are present throughout much of the state. Cheese is a major product, often produced by Amish or Mennonite farm cheeseries. New York is rich in nectar-producing plants and is a major honey-producing state. The honeybees are also used for pollination of fruits and vegetables. Most commercial beekeepers are migratory, taking their hives to southern states for the winter. Most cities have Farmers' markets which are well supplied by local farmers.


In 2017, New York State consumed 156,370-gigawatthours (GWh) of electrical energy. Downstate regions (Hudson Valley, New York City, and Long Island) consumed 66% of that amount. Upstate regions produced 50% of that amount. The peak load in 2017 was 29,699 MW. The resource capability in 2017 was 42,839 MW.[18][19] The NYISO's market monitor described the average all-in wholesale electric price as a range (a single value was not provided) from $25 per MWh to $53 per MWh for 2017.[20]


  1. ^
  2. ^
  3. ^
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  9. ^ "Gross Metropolitan Product (GMP) of the United States in 2013, by metropolitan area (in billion current U.S. dollars)". Statista. Retrieved April 10, 2016.
  10. ^ "Revised Delineations of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and Guidance on Uses of the Delineations of These Areas" (PDF). Executive Office of the President – Office of Management and Budget. p. 106. Retrieved April 10, 2016.
  11. ^ "U.S. Metro Economies (note CSA 2012 GMP total includes sum of New York, Bridgeport, New Haven, Allentown, Trenton, Poughkeepsie, and Kingston MSA 2012 GMP values cited)" (PDF). IHS Global Insight, The United States Conference of Mayors, and The Council on Metro Economies and the New American City. November 2013. pp. 9 through 18 in Appendix Tables. Archived from the original (PDF) on March 5, 2015. Retrieved April 10, 2016.
  12. ^ a b Andrew Nelson. "Top CBDs See Solid Growth in 2nd Quarter, US - Canada Performance Diverges" (PDF). Colliers International. Retrieved February 14, 2016.
  13. ^ "Understanding The Manhattan Office Space Market". Retrieved July 20, 2014.
  14. ^ "Marketbeat United States CBD Office Report 2Q11" (PDF). Cushman & Wakefield, Inc. Archived from the original (PDF) on May 8, 2013. Retrieved July 20, 2014.
  15. ^ Gelman, Amy. "PEOPLE & ECONOMY: America's Melting Pot." New York (0-8225-4057-6) (2002): 42-53. Book Collection: Nonfiction. Academic Search Complete. Web. 17 Feb. 2016.
  16. ^ a b c d New York Agriculture Statistic Services. New York Agricultural Statistics 2004-2005 Annual Bulletin. Albany, New York: State of New York Department of Agriculture and Markets, 2004. Web. 19 Feb. 2016.
  17. ^ "New York." Funk & Wagnalls New World Encyclopedia (2015): 1p. 1. Funk & Wagnalls New World Encyclopedia. Academic Search Complete. Web. 19 Feb. 2016.
  18. ^ "NYISO 2018 Gold Book (pdf)" (PDF). p. 13. Retrieved November 26, 2018.
  19. ^ "2018 Power Trends" (PDF). April 2018. pp. 11, 12, 14. Retrieved November 29, 2018.
  20. ^ Chen, Jie; LeeVanSchaick, Pallas; Naga, Raghu Palavadi; Patton, David B. (May 2018). "2017 State of the Market Report" (PDF). pp. ii, 3, A-2, A-6. Retrieved November 30, 2018.

See also

This page was last edited on 15 March 2019, at 00:25
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