Larry Summers on Macroeconomics, Mentorship, and Avoiding Complacency | Conversations with Tyler
Larry Summers, a renowned economist and former Treasury Secretary, shares his insights on a variety of topics including macroeconomics, mentorship, and the future of higher education.
He also discusses his views on the American economy, philanthropy, and the importance of avoiding complacency.
Rethinking Tax on Capital Income
The optimal tax rate on capital income should be closer to the tax rate on other income, rather than zero.
This is because a significant portion of capital income reflects rents, is held by those at the high end, and often goes untaxed in the form of unrealized capital gains.
The Evolution of Economic Models
Economic models from the 1980s have been proven mathematically incorrect, and the idea of an infinitely elastic supply of capital now seems unrealistic.
This undermines the argument for a zero tax rate on capital income.
The Uncertain Future of Capital Supply
While it’s possible that we could return to an era where the supply of capital is high relative to the rate of return, it’s unlikely.
The savings rate could fall for various reasons, but that doesn’t necessarily mean the supply of capital will increase.
Philanthropists should focus their efforts on a few targeted interventions rather than spreading their resources too thinly.
It’s crucial to ensure that donations are being used as intended and not reallocated to other areas.
Innovating Within Existing Systems
Successful innovation often happens alongside big systems.
Philanthropists should consider supporting initiatives that work constructively alongside public schools, such as after-school or summer programs.
The Role of Literature in Understanding Work
Literature can highlight the non-pecuniary aspects of work, such as feelings of alienation and depersonalization, that are often overlooked when considering work in economic terms.
The main thing to say about innovation in higher education is that there’s much too little of it. – Larry Summers
The Benefits of Labor Unions
Labor unions can provide non-pecuniary benefits, such as job satisfaction, respectful grievance procedures, and better job safety.
Stronger unions can advocate for policies that benefit everyone, such as the preservation of social security and the expansion of the healthcare safety net.
Advocating for Workers’ Rights
The current system, where workers trying to organize can be fired by their employers with little recourse, does not provide a level playing field.
More bargaining power for workers would be beneficial, especially in an economy where corporate profits are rising but wages are stagnant.
The Importance of Technique and Training
A good table tennis player needs a deft wrist, the ability to concentrate, and a lot of practice.
This highlights the importance of technique, training, and equipment in improving performance in any field.