Berkeley economist David Romer, co-host of last week’s IMF Conference on Macro and Growth Policies in the Wake of the Crisis, was disappointed by a failure to discuss the high levels of unemployment we are experiencing today.
I had one major source of unhappiness with last week’s conference: the participants were largely silent about the dismal outlook in the advanced economies for the next several years. The current outlook for unemployment in the United States, Europe, and Japan is probably worse than it was in late 2008. Then, mainstream forecasts for 2009–2011 showed unemployment rising sharply—but generally to levels below what we are experiencing today—and then returning toward normal at a moderate pace. Today, not only is unemployment higher than most 2008 forecasts of its peak levels, but the expected pace of recovery is weaker.
Despite this deterioration, the dire sense of urgency in late 2008 has not increased. Indeed, it has largely disappeared. I find this complacency in the fact of vast, preventable suffering and waste hard to understand.
With the exception of that one critical omission, I was impressed by the discussion. One striking feature was the consensus that there is no consensus. That is, no one argued that there was widespread agreement about a simple set of rules for achieving macroeconomic stability, robust growth, and shared prosperity. Indeed, no one proposed such a set of rules. The crisis has, appropriately, made macroeconomists and policymakers humble about what we know.
David H. Romer, “An Important Starting Point—with One Gap“, iMFdirect, 16 March 2011.