This episode explores the question of whether economics is a declining discipline, featuring an interview with Larry Summers. Against the backdrop of Summers' assertion that economics is not in decline, he points to improved forecasting accuracy and the increasing influence of economists in various sectors like government and law. More significantly, the conversation pivots to the limitations of economic models, exemplified by the Federal Reserve's model failures in 2021, which Summers attributes to organizational inertia rather than fundamental flaws in the discipline. As the discussion progresses to trade and fiscal policy, Summers criticizes the Trump administration's tariffs as self-imposed supply shocks, leading to higher inflation and unemployment. For instance, he highlights the illogical targeting of steel and aluminum tariffs, harming far more downstream industries than those directly benefiting. Finally, the conversation touches upon the impact of AI on the economy, with Summers suggesting a potential for transformative growth comparable to the Industrial Revolution, while acknowledging the uncertainties involved. This means for the future of economics is a continued evolution and adaptation, incorporating both historical context and technological advancements.
