Markus' Academy

Follow the link for the full summary:https://markusacademy.substack.com/p/a-q-and-a-on-digital-innovation-privacyLink to sign up for the webinar series:https://markusacademy.substack.com/On July 27, 2020, Eric Schmidt, Princeton Class of ‘76, joined Markus' Academy for a Q&A on digital innovation, privacy, and cybersecurity. Eric Schmidt is the former chairman and CEO of Google and co-founder of Schmidt Futures.Download the slides here.Timestamps:Markus Brunnermeier introduction: 0:00Technology and society: 0:59Privacy - “free to think”: 9:51Free to speak, fake news: 13:26Algorithms and AI: 25:57Cyber Security: 31:10Innovation: 35:16Money/ payment system: 47:44Regulation/Taxation: 52:12Concluding remarks: 57:54

Follow the link for the full summary:https://markusacademy.substack.com/p/climate-policy-moving-beyond-ostrichesLink to sign up for the webinar series:https://markusacademy.substack.com/On Friday, July 17, 2020, Richard Zeckhauser joined Markus' Academy for Finance to discuss recent research on prudent climate policy. Zeckhauser is a Professor of Political Economy at the Harvard Kennedy School.Download the slides here.Timestamps:Markus Brunnermeier introduction: 0:00Beginning of Zeckhauser presentation: 16:10Prudent climate policy: 22:28Three prongs for climate policy: 23:30Next ten years are last the chance policy: 24:34Basic argument: 26:38Prospects for reversing these trends: 28:02Likely dates of reaching 2° celsius warming: 30:00Likelihood of climate catastrophe is extremely high: 31:15Resources required by policy prong: 32:34Outline of analysis: 33:33Moral hazard concerns: 35:57Approaches to substitute instruments: 39:15Awful Action Alert: 41:38Deleterious Deterrence: 43:42Types of climate policy observers: 49:32Infeasibility and political economy of targets: 51:09Concluding remarks: 54:32Q&A: 55:36

Follow the link for the full summary:https://markusacademy.substack.com/p/narrative-economics-and-covid-19Link to sign up for the webinar series:https://markusacademy.substack.com/On July 10, 2020, Robert J. Shiller joined Markus' Academy for a discussion of narrative economics in light of the COVID-19 epidemic. Shiller is a Professor of Economics at Yale University and a 2013 recipient of the Nobel Prize in Economics.Download the slides here.Timestamps:Markus Brunnermeier introduction: 0:00Beginning of Shiller presentation: 13:42JSTOR counts of word “narrative” as percent of all articles, by discipline: 17:17Volatility of financial market: 18:22Long time-series on home prices: 19:39Learning from medical epidemiology: 21:19Kermack- McKendrick SIR disease epidemic model: 23:33Flattening the curve: 27:20Epidemics in waves: 27:52Mutations (in virus, narratives) can cause waves of epidemic: 29:06Examples of narrative epidemics: 30:34Percent of articles that mention the “Great Depression” each year: 36:00Technological unemployment: 37:26The future of narrative economics: 39:33Q&A: 41:08Highlights:Our social world is driven by narratives. Narratives can spread like epidemics. “Most people do not respond to analytic discussion,” Shiller said. “They like stories.” There are lessons for narratives in the “epidemic curve,” which rises and falls like a bell-shaped curve. Importantly, the contagion rate of stories may increase as the effectiveness of the storytelling improves (more details, etc.).Narratives about economics drive both big events and individual behavior during those events. As stories spread, ideas can go viral and move markets. We saw this during the Great Depression and other financial crises. After the 2008-2009 crisis, the market crashed but came back strong. One reason for the rally was that a strong narrative about “not losing out on the rise” led many investors to stay in the market when they otherwise might have left.It’s difficult to predict how narratives will spread, but studying them can help us prepare for and respond to economic crises. Despite availability of digitized text, it’s still difficult to track popularity of narratives. Shiller says we should start collecting information on economic narratives now.

Follow the link for the full summary: https://markusacademy.substack.com/p/corporate-debt-overhang-and-covid Explore the webinar series: https://markusacademy.substack.com/archiveOn June 29, 2020, Arvind Krishnamurthy joined the Princeton Bendheim Center for Finance to discuss a new paper co-authored with Markus Brunnermeier on COVID credit policy. Krishnamurthy is a Professor of Finance at the Stanford Graduate School of Business.Download the slides here.*● This crisis is different from the 2008 crisis in many ways, and a main goal of policy should be to avoid economic scarring post-pandemic. Today, supply and demand disruptions have required that the Fed and the U.S. Treasury also prop up the corporate sector, with the goal of preventing scarring that extends beyond the pandemic.● The COVID recession is straining both large corporations and the SME sector, but efforts to reduce scarring require different policy approaches, since $1 injected into a large corporation has a different effect than $1 injected into an SME.● For small, owner-run enterprises, the best way to avoid scarring is to provide cheap liquidity, to avoid inefficient bankruptcies and erosion of firm value. Large corporations with low bankruptcy restructuring costs, however, should not be subsidized — directing subsidies to large corporates would enable equity-holders to delay Chapter 11 filing longer than is socially valuable.● Instead, the Federal Reserve and the U.S. Treasury should create a facility to reduce the direct costs of bankruptcy and to shore up bank balance sheets to reduce indirect costs. The Fed should also act now by switching on the countercyclical buffer and asking banks to raise equity while equity prices are high.

Follow the link for the full summary: https://markusacademy.substack.com/p/understanding-the-ecbs-pandemic-emergency Explore the webinar series: https://markusacademy.substack.com/archiveOn June 22, 2020, Philip Lane joined the Princeton Bendheim Center for Finance to discuss the ECB's pandemic emergency purchase program (PEPP). Lane is the Chief Economist of the ECB, a member of the ECB Executive Board, and a former Governor of the Central Bank of Ireland.Download the slides here.*● PEPP is different from previous EU QE measures in that its main goal is market stabilization, while the ECB's asset purchasing program (QE) is focused on fighting downside risk to inflation. PEPP is also more flexible in how it can respond.● There's lots of evidence that PEPP has contributed to market stabilization. According to several measures—including systemic stress, corporate bond spreads, the stock market, and 3-month Euribor rates—the EU has seen significant stabilization. Lane argues sovereign yields are an important indicator for the ECB because they are closely reflected in bank funding and passed onto households.● Without such aggressive intervention by the ECB and central banks, we would have seen a much bigger amplification of the pandemic shock driven by flight-to-safety capital flows. Still, national and EU fiscal responses are/will be essential.● New data show that wholesale funding is fickle while retail funding remained stable. Domestic banks provided missing funding to national sovereigns, while institutional investors were the big sellers of bonds in March. By April, the pullback effect dissipated for both less and more vulnerable countries, indicating stabilization.

DESCRIPTION:Follow the link for the full summary: https://markusacademy.substack.com/p/the-economic-impacts-of-covid-19 Explore the webinar series: https://markusacademy.substack.com/archiveOn June 17, 2020, Raj Chetty joined the Princeton Bendheim Center for Finance to discuss new research with John Friedman, Nathaniel Hendren, Michael Stepner, and the Opportunity Insights Team. The new paper uses private sector data to document the real-time impacts of COVID-19 on people, businesses, and communities. Chetty is a Professor of Public Economics at Harvard University.Download the slides here.*● Economists often study the effects of shocks with household survey data, but these data have limitations, including time lags, low frequencies, and the inability to be disaggregated. Private sector data addresses many of these limitations, though researchers must benchmark to public sources and protect confidentiality.● In the first few months of the pandemic, spending fell much more for the rich than the poor, with the bulk of the reduction resulting from a drop in spending on in-person services. Business revenue dropped more severely in high-income areas, suggesting a supply shock rather than a lack of purchasing power.● CARES Act stimulus increased spending but didn't fill the hole created by the COVID shock. Stimulus checks increased spending among low-income Americans, but the vast majority of the increase was on durable goods, not in-person services. The Paycheck Protection Program (PPP) had limited impact on employment.● Effects of this shock on employment and inequality may be long lasting and require policy interventions. 70% of low-income workers who had jobs in wealthy parts of Manhattan lost their jobs, and there are potentially big implications for inequality, including in education.

Follow the link for the full summary: https://markusacademy.substack.com/p/the-economic-and-social-implicationsExplore the webinar series: https://markusacademy.substack.com/archiveOn June 8, 2020, Lisa Cook joined the Princeton Bendheim Center for Finance to discuss the economic and social implications of racial disparities in the U.S., with a specific focus on research that examines how violence impacts innovation among black Americans.Cook is a Professor of Economics and International Relations at Michigan State University and was previously a senior economist in President Obama's Council of Economic Advisers.Download the slides here.*● COVID-19 exposed many economic and societal fissures in America, and a common feature of these inequities—from health to wealth gaps to police violence—is systemic racism. There has been a lot of literature on the origins, channels, and implications of systemic racism, but it largely hasn't examined macro inputs and outcomes like innovation and GDP.● Innovation is a key driver of the economy, contributing to 10% of GDP and, through business investment, driving 20% of GDP.● In studies on innovation and violence, Cook and co-authors find that violence significantly diminishes innovation and economic activity with persistent effects. Lynchings affected patents of African Americans significantly, and segregation laws hurt the most valuable patents of African Americans—electrical patents.● As a result of African Americans not being more engaged in the innovation process, we're losing 4.4% of GDP each year, compared to 2.7% for women not being more engaged in innovation. Cook outlines several policy prescriptions, including improving the STEM pipeline, addressing the racial wealth gap, and pursuing structural change to combat systemic racism.

Follow the link for the full summary:https://markusacademy.substack.com/p/the-feds-longer-term-challenges-afterLink to sign up for the webinar series:https://markusacademy.substack.com/On June 1, 2020, Bill Dudley joined Markus' Academy to discuss the IMF’s perspective on COVID-19. Dudley is a Senior Research Scholar at Princeton University’s Griswold Center for Economics Policy Studies and former President of the Federal Reserve Bank of New York.Download the slides here.Timestamps:[0:00] Markus’ introduction[10:48] Four Longer-Term Issues for the Fed[12:52] The Fed’s Balance Sheet[23:10] Independence of Monetary Policy[30:36] The Longer Run Macro Implications[37:34] The Moral Hazard Problem[43:20] Other Lessons of the Crisis[46:59] Audience Q&A

Follow the link for the full summary:https://markusacademy.substack.com/p/covid-19-and-the-global-economyLink to sign up for the webinar series:https://markusacademy.substack.com/On May 22, 2020, Lawrence H. Summers joined Markus' Academy for a webinar on reopening the economy after COVID-19. Summers is a Professor at Harvard’s Kennedy School of Government, a former U.S. Treasury Secretary, President Emeritus of Harvard University, and former Chief Economist at the World Bank.Timestamps:[2:05] How to accelerate vaccine invention?[19:30] Testing[27:48] How do great powers compete economically?[40:23] 3 likely future scenarios of US-China relations[49:39] Free market vs more government? [57:56] Speed of recovery and how to pay for current expenditures? [1:00:11] Macroeconomic points[1:12:29] Should governments use COVID to push other agendas? [1:24:44] Are there dangers we are ignoring?

Follow the link for the full summary:https://markusacademy.substack.com/p/the-audacity-of-slope-how-fast-aLink to sign up for the webinar series:https://markusacademy.substack.com/On May 15, 2020, Paul Krugman joined Markus' Academy for a webinar on COVID-19 and the pace of economic recovery. Krugman is Professor Emeritus at Princeton University, the Distinguished Professor of Economics at the Graduate Center of the City University of New York, a columnist at the New York Times, and a 2008 recipient of the Nobel Prize in Economics.Download the slides here.Timestamps:[0:00] Markus’ introduction[13:06] Beginning of Krugman’s presentation[17:32] Discussion of two recent papers[19:26] Dynamics coming from labor market search[28:12] Fed action has contained financial spillover[34:17] Fast recoveries followed severe monetary tightening; slow followed slumps caused by private sector excesses[39:20] Slow recoveries followed periods of unsustainable spending, ending in Minsky/Wile E. Coyote ending[46:19] How does this apply to COVID-19 shock? [52:37] Bond market seems to be predicting slow recovery, but has been wrong in the past[1:08:07] Audience Q&A

Follow the link for the full summary:https://markusacademy.substack.com/p/the-benefits-of-targeted-policiesLink to sign up for the webinar series:https://markusacademy.substack.com/On May 8, 2020, Daron Acemoglu joined Markus' Academy for a webinar on his paper on the benefits of targeted policies for lifting lockdowns and recovering from COVID-19 (Acemoglu et al., 2020). Acemoglu is a Professor of Economics at MIT.Download the slides here.Timestamps:[0:00] Markus’ introduction[7:58] Beginning of Acemoglu’s presentation[8:45] Background[9:47] Varieties of heterogeneity[12:12] What we do[12:43] Summary of main findings[16:53] Key equations[25:13] Parameter choices[28:18] Optimal uniform policy[31:36] Optimal semi-targeted policy[34:26] Optimal fully-targeted policy[35:28] The Pareto frontier[37:57] With greater value of life, another interesting contrast[42:09] Bigger gains with between-group distancing[43:18] Even bigger gains with testing-tracing[44:34] Conclusion[45:20] Audience Q&A

Follow the link for the full summary:https://markusacademy.substack.com/p/encouraging-the-development-and-manufacturingLink to sign up for the webinar series:https://markusacademy.substack.com/On May 1, 2020, Michael Kremer joined Markus' Academy for a webinar on COVID-19. Kremer is a Professor of Developing Studies in the Department of Economics at Harvard University and a 2019 recipient of the Nobel Prize in Economics.Download the slides here.Timestamps: [1:06] Markus’ introduction[10:19] Beginning of Kremer’s presentation[13:40] Is it worth building large-scale capacity in parallel with trials?[17:57] Back of the envelope calculations[21:46] Calculating the optimal number of vaccine candidates[25:40] Structuring funding[28:27] Proposed funding structure[32:39] Calculating required pull funding[34:48] Pull funding[35:48] Supply chains: For want of a vial, the vaccine may be lost[37:09] Could international cooperation be incentive compatible?[50:01] Innovations to speed vaccine trials[1:07:19] Conclusion