Continuing Education... Scott Sumner on Interest Rates
By Amy Willis
EconLog’s Scott Sumner argues in this episode that too many people reason (incorrectly) from a price change, causing confusion about the factors behind today’s continuing low interest rates. The conversation also touches on the role of the Federal Reserve and its monetary policy, and the effects of regulation on issues such as inequality.
Use the prompts below to spark conversation in your classroom or at the dinner table. Or simply use them to help further your own understanding.
1. What is Sumner’s explanation for why interest rates have fallen so low? How does he describe the state of the economy’s health today, especially in comparison to the immediate aftermath of the financial crisis? To what extent do you agree with his diagnosis of the current state of the macroeconomy?
2. In discussing the “secular stagnation” thesis, Sumner argues that the economy today has two distinct sectors. What are they, and how do they help explain variations in interest rates today? What does this suggest to you about the future of individual investment and employment opportunities? Explain.
3.Toward the end of the interview, Roberts bemoans his 15 year old son’s incentives to save in the face of low interest rates. How is Roberts’ complaint the opposite of Piketty’s, according to Sumner? How do you think Piketty would respond to this claim? (Hint: You might want to revisit Roberts’ interview with Piketty from September.)
If Piketty is right, why isn’t @EconTalker’s son getting rich?Tweet