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Foreign
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It's Wednesday, April 2, 2026 from Peach Fish Productions. It's the gist. I'm Mike Pesca. I saw a big headline that seemed to be big news about npr. I'll read where I used to work and I'm very interested in I'll read the Washington Post treatment headline and subhead Judge Rules Trump Order Eliminating NPR PBS Funding is Unconstitutional. Trump's order violated the First Amendment rights of the public media giants of federal judge in Washington found. So you might say, ah, they're getting their funding back. They Congress clawed back the funding that wasn't touched by this ruling. What this ruling does is it talks about a Trump executive order. And that Trump executive order was titled Ending Taxpayer Subsidization of Biased Media. Trump saying NPR is the biased media. He put his cards on the table, gave away the game, as it were, and said we don't want NPR to have money. We don't want you to do business with NPR because we don't like what NPR says and that is indeed a First Amendment violation. But I was thinking about this and it's not as if the media reported this incorrectly. It's not as if NPR reported this incorrectly. They had some of the best coverage of this that I came across. But there is an implication or there is a specter of what could happen if this judge's ruling were to stand up to appeal and perhaps be over interpreted. So I'm not reading an NPR report. I am reading an NPR press release. Federal Court Delivers Victory for Press freedom in the First Amendment in NPR's challenge to executive Order they were very happy. NPR was very happy. They won their case. And I'm sure all the people that love NPR will be very happy too and feel very vindicated. There were some quotes by Catherine Marr, President CEO of NPR that I had some questions about. The court made clear that the government cannot use funding as a lever to influence or penalize the press, whether as national news service or a local newsroom. But of course the government did, the government, Congress did claw back funding and that's totally permissible. And in fact you could even concoct a scenario where clever Trump ise fund their own version of media. And there are some versions of this where, I mean what Kari Lake has done to Voice of America is one. And did you know that Kristi Noem is now a spokesperson for the Shield of the Americas, which is like an anti cartel government organization. So if she speaks incorrectly or in a way that violates, I don't know, truth or just the sensibilities of democratic funders. There are mechanisms by which the government can go in there and say nuh or take what MAHA has done. They issue reports. All government entities issue reports or fact sheets. And so government funding can be and should be on the line. That's a mechanism by which the people get to say we want to support this or we are trying to correct this. So when the big report on chronic diseases in children by the Make America Healthy Again Commission, RFK gets all these facts wrong based on and that's in dispute, the MAGA and MAHA people say the facts aren't wrong. It's similar to Trump saying NPR is biased and NPR saying no, we're not. We have a First Amendment right. I mean, I know it's complicated because NPR actually is a news service and this report is just an extension of, of a government entity. But they too have First Amendment rights. My point is the government can and should, though not in this ham handed way, say to the entities that it funds what you are saying is in violation of truth, facts or the interest of the American people. You know, other parts of that press release and the fair reading of what happened, that the case affirms a principle that the Constitution does not permit the executive branch to punish media organizations for their coverage by barring them from federal funding. That is true. The executive cannot do that. But the government is not just the executive. And in this case, NPR did get defunded, largely defunded by actions other than that executive action. So Trump loses, but he wins. And NPR wins, but it loses. On the show today, I give you a full show interview with Tyler Goodspeed. He used to be the chair of the President's Economic Council. That president being Donald Trump. He is now the Exxon Mobil chief economist. That's pretty cool, right? He has written a book that doesn't talk about Trump or Exxon. It talks about recessions. All the recessions. Recessions going back to the 18th century. And he talks about the sinking of important ships in the 1800s and he talks about locust plagues in 1931. He thinks we get a lot of recessions wrong. So don't worry. This is a great interview. Well, I should say this was a great book and it was a pleasure to talk to Tyler. And he has an interesting take on recessions. But I of course am not going to ignore the exigencies of the moment.
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And I shall ask him now.
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We are what, Tyler, do you think on the verge of recession? And since you are an oil man, perhaps we should Talk about Hormuz and the Straits thereof. So, Tyler Goodspeed, author of Recession the Real Reasons Economy Shrink and what to Do About It.
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Up next,
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foreign.
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The Economic Cycle. Just think of it like the cycle. The boom and the bust, they go together. But a new book asks the question, must the bust be thrust upon us? The name of the book is Recession. It is written by Tyler Goodspeed, the Real Reasons Economies Shrinking and what to do about it. Mr. Goodspeed is currently the chief economist at ExxonMobil and previously he chaired the White House Council on Economic Advisors. Welcome to the gist.
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Great to be with you, Mike.
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So as well in all your jobs. But let's say you're running the Council of Economic Advisers, which you were for a time.
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Could you come out and just say,
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you know, I don't kind of really agree with recessions. I think you've got it wrong. Or was that, would that cause too much of a panic in the markets?
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Well, first of all, I should begin with the disclaimer that the book was written entirely in my personal capacity. It's my own views and not those of any other person or entity. With regard to recessions. I do think that we, and I mean we in a very broad sense, have fundamentally misunderstood what drives economic recessions. We tend to tell this story about recessions, as you indicated, as the sort of inevitable response and result to an unsustainable boom, in a sense, that the recession is a, is a remedy to what came before. But the reality is that when you look back over the past, as I do four centuries, it turns out that there's really nothing in the height, the speed, the duration, the composition of an economic expansion of growth that tells you anything about the probability, the depth, the speed, the duration or the composition of the subsequent economic recession.
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Right. So that means they're not predictable. And then I guess maybe there is a philosophical question. Well, if something defies prediction, is it that it doesn't fit into this narrative of correction, or is it that prediction just evades us? That's one question. But what you're saying there is that, and I read the whole book, we as narrative seeking creatures seek to press or push these stories into boxes, and we make stories. But sometimes not only are we wrong, but we fundamentally misunderstand that we're not in the middle of a dawn of invention and a dawn of correction. We're not in the middle of a going forward and pulling back. It could be something else entirely. So what are the other things that it might be?
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Yeah. So as you as you indicated in the book, I note that we are pattern seeking mammals. And it actually serves us well in a lot of contexts that you ingest colorful mushrooms or imbibes stagnant water and you get sick, therefore, you know to avoid that in the future. And so we're constantly looking for patterns to painful stimuli, and recessions are painful stimuli. I mean, we lose income, we lose jobs, and so we're constantly in search of past behaviors that appear in retrospect to have been proximate to subsequent recession so that we can avoid that recessionary pain and even the guilt and in the future. But our, our minds don't really deal well with randomness because randomness defies the assignment of pattern. And I liken this in the book to the difference between an epiphany, which is the identification of a genuine pattern in data, versus an apophony, which is a technical term. I actually didn't know it until I started the book. But an apophony is when we assign a false pattern to data or we assign a pattern where simply none exists. The reality of recessions is that they are about adverse shocks. So some of these shocks are big aggregate shocks, like the 2020 pandemic recession, but a lot of them are specific to certain sectors like energy or steel, or if you go farther and back farther back in time, cotton. And these shocks impact certain sectors, but those sectors happen to be very highly linked to the rest of the economy. And over the near term, say about 12 months, which happens to be the duration of the typical recess. And it's just very hard for households, for businesses to find substitutes.
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Yes. So I want to get into that, but also the narrative part of it, it strikes me and most of your study, there's recessions in Ireland and there's recessions in places that aren't the U.K. but a lot of it is side by side, U.S. and U.K. information. Right. The railroads built in the United States and then the railroads built in the UK around that time. And a lot of it appeals to me or strikes me as very much a part of an idea of the Puritan work ethic, an idea of that punishment was deserved. And that I think, is a narrative that we impose on it and it seems oftentimes to make sense. This is the price of your greed, people.
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Yes. And that narrative often sets in very early. So you mentioned railroads. If you read a lot of contemporary accounts and now historical accounts of recessions in the 19th century on both sides of the Atlantic, you would think that overbuilding of railroads was a perennial accomplice to the murder of economic expansions. But if you actually plot the cumulative mileage of installed railroad track in the United Kingdom or the United States, it is remarkably smooth. It adheres to a long run trend. It's your classic technology s curve that it sort of ramps up slowly, then more quickly, and then it plateaus. And the same thing holds if you look at fiber optic cables, if you look at canals in earlier periods. But the narrative of there was some excess sets in very early. So there was a recession in the 1870s that very much mimics some of the narrative of the 2001.com recession that there was allegedly overinvestment in railroads. In truth, there were a lot of other shocks going on. There was a locust plague, there was a demonetization of silver, a lot of things going on. But as soon as the recession hit, contemporary press reports were that we've been living too fast. And this is what happens when you try to build a railroad from nowhere, through no man's land to no place. Well, it turns out that alleged folly, that railroad, it was completed and it is today owned by Berkshire Hathaway, Warren Buffett, the most legendary value investor of all time.
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Oh yeah, you mentioned locust plague. That wasn't even the locust plague you're talking about. Right. In the book there's a good map of 1931 and you have a statistic I didn't know or a fact that. About how good grasshoppers are at what they do.
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So a perennial contributor to U.S. economic recessions in the 19th century and right up into the Great Depression was the eighth plague of Egypt. So it impacted in 1857 and 1870.
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Murain. Wait, I'm trying to count my plagues. Murine. Oh no, you're right.
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Locust locusts. Yeah. So in, in his first inaugural address, FDR actually referenced, he said we have no plague of locusts in March 1933. Now why would he be referencing the eighth plague of Egypt in, in March 1933? And it was because just two years prior, much of the United States was adversely impacted by an historic drought that then gave rise to a plague of locusts of really providential proportions. And if you map farm distress and banking distress onto vulnerability to that drought and locust plague, it actually maps perfectly on. Now, I'm not saying, and I don't say in the book that the 1930, 31 drought and locust plague were the cause of the Great Depression, but they are a reminder that the Great Depression wasn't about a Single continuous monolithic shock, but rather a succession of really severe and often inter overlapping and inter interacting shocks.
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Right, but that's probably true with every phenomenon ever. There are cross currents always going on. Look, it goes like this. There are bad things happening, but if in the macroeconomic trend, the macro economy is in nosedive, then it'll look like a lot of the other things maybe contributed to it or we can't bail our way out of it. It could give us a lot of signals. And I know you're not saying locusts caused the Great Depression, but I would think something like when there is a Great Depression going on, locust management will become that much harder.
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Yes. And you, you highlight an important point which is actually something that's difficult about assigning causality to economic recessions is because you have this singular event and lots of things are going on at any given time. So you're, you're getting building height records. So a lot of people say, oh well, there was a new skyscraper record, therefore the recession must have been because we overbuilt. And a good recent example of this is the 2001 recession that we all call, and I used to call it the dot com recession. But when you actually look at the data and you look at the empirical evidence, the decline in tech stocks that began in 2000, just quantitatively, it cannot explain the decline in consumer spending that followed. And indeed, by the start of the recession in 2001, April 2001, the NASDAQ had already started to recover. So that was just one of at least four shocks impacting the US economy in 2001. And I argue in the book it was the least important. There was also an energy supply shock as East Asia rebounded sharply from the 1998 Asian crisis. There was also the establishment of permanent normal trade relations, that is permanent most favored nation status with the People's Republic of China, a multi trillion dollar non market economy that immediately resulted in a precipitous halt in net new hiring in manufacturing and industry. And then the fourth shock is the most important. And I actually argue in the book that there wouldn't have been a recession in 2001 were it not for this shock. And that's the terrorist attacks of September 11th. All of the output contraction in 2001 occurred in the quarter in which this terrorist attacks and consequent closure of US Airspace occurred.
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Do the things for which we keep account, maybe even a second by second count, and we call the that count part of a market, are those more likely to be the things that we Blame a recession on.
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So I think a lot of things that we count on a day to day basis are records. So the stock market is hitting multiple records over the course of an economic expansion. I mentioned building height records. Employment often reaches new records. Home prices reach new records. And that's why I think this, the storytelling is very appealing because it's not hard to look around and identify what ex post was some excess because it declined and to relate it causally to the proximate recession. And this has all the ingredients, all the essential ingredients of a good story because it has plot, often Wall street or the City of London. It has, it has. Sorry, it has setting, you know, often Wall street or the City of London. It has plot, it has characters. Your antagonists, your greedy bankers. Your protagonists Hank Paulson and Tim Geithner and Ben Bernanke liken themselves to firefighters. And then it has resolution. Every recession has ultimately ended in renewed economic expansion. And it has theme, it has that moral lesson that don't live too fast, don't build too high, because then you'll hit harder and faster.
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I actually meant with the things we count that we're more likely to blame a recession on a stock or an equity or something that trades on Wall street because we kind of expect that to go down. So it would be harder, it would take a lot more time to tease out what most favored nation status with, with China did. I mean there are some economists who over time could do that. But when the bottom falls out and it turns out that pets.com was trading at 80, now it's trading at 20. Voila. That's.
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Yes. And also some of the shocks that really are the ultimate contributors, the ultimate causes of recession, sometimes they take a while to actually generate that, that output contraction. So you have a harvest failure in the plains states because of a locust plague. It may take time for that to result not only in output loss, but also in bank failures, because the locust plague impacts in the summer. But it's not until the harvest time that you start to get those waves of bank failures and the consequent financial cris. So the financial crisis might look like the proximate cause, even though the underlying cause is this exogenous adverse shock.
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So we don't really understand what causes recession. Are you arguing that we don't even understand, even in retrospect, when there was a recession?
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So in the book I referenced the late Supreme Court Justice Potter Stewart, who when remarking about pornography, said he could never satisfactorily define it, but he knew it when he saw it. And I think so. I think something similar could be said here about recessions is that it might be difficult to come up with a perfectly satisfactory answer. I say it's a broad based economic contraction that spread across the economy affecting multiple sectors. It involves outright job losses and it lasts more than a few months. That's sort of the standard National Bureau of Economic Research definition.
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Yeah, that's what I was going to understand when someone says, mike, what's pornography? I said, I don't know it, but I trust the National Bureau of Economic Research. I'm a weird guy. That's my thing. But go ahead.
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Well, and I would say that you don't have to be an economic expert to identify most historical recessions because most historical recessions are characterized in the first instance by a sudden, sharp, sharp increase in the unemployment rate. I mean, you can pick it out in a graph and you would do a pretty darn good job matching the official NBER recession chronology that there is a sharp increase in unemployment of workers.
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So when the Biden administration was arguing, at a time when many Republican critics, and I don't literally know if you were among them, but certainly some of your ideological bedfellows were were saying, the Republicans were saying we're in recession and Biden was saying, no, look at the unemployment numbers on that score. Historically you more or less agreed with what the Biden administration was saying.
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I think that the Biden administration was correct that in 2022 when we initially, it appeared initially that there were two consecutive quarters of negative growth. I don't adhere to the two consecutive quarters of negative growth as an indicator of recession because there were no outright job losses, the unemployment rate was still pretty low and subsequently those, the estimates of GDP for those quarters was revised up. So I there is now one quarter that was negative, one quarter that was slightly positive. And also I don't think that the two quarter rule is particularly helpful because if you go back to the 19th century, it's of no use whatsoever because you don't have GDP estimates on a quarterly basis.
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So I just wanted to establish when I asked do we even know when it was a recession, what you are arguing and aren't so you are arguing we get recessions Wrong. You're not arguing that these things that we think are recessions largely are. Are you arguing that recessions are bad?
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Yes, recessions are bad. We are constantly looking for the upside to recession, that these are painful experiences. Therefore, we hope that at least the pain must be worthwhile, that there's some cleansing or rejuvenating function that the recession is performing. Unfortunately, the reality is recessions impede the process by which people and capital migrate from less efficient enterprises to more efficient enterprises. They are rampant age discriminators. They're more likely to destroy younger, more dynamic firms than they are older, more mature firms. They're more likely to terminate employment for younger marginal workers than for older, more established workers. Research and development tends to decline during recessions rather than increase. And also when people are unable to find employment during recessions, it means they spend longer spells in unemployment. And then even when they get back on the job ladder, they tend to have to spend a succession of jobs in sort of lower quality jobs, poorer quality matches and shorter duration. And then finally, if you look at the composition of an economy a few years on from a recession, the allocation of people across sectors, the allocation of output across sectors, typically the economy looks pretty darn similar to how it would have looked had it continued uninterrupted along long run trends. So the recession is sort of a painful deviation from that trend. And then economic expansions are recovery from that.
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So we should do what we can to prevent recessions. Or is that one of those situations where the cure might be worse than the disease?
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I think the book does caution policymakers against presuming that they can inoculate the economy against recession because recessions will continue to happen because history continues to happen. We will continue to have energy supply shocks, we will continue to have pandemics and other shocks will continue to be amplified by financial markets. And so insofar as recessions, and I contend that they are, they are a function of random adverse shocks, then I would caution policymakers against over medicating or otherwise sedating economic expansions that fundamentally die innocent and healthy.
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So just live with them. You listed all the negatives, but because there's not much we could do or we don't even understand where they come from, we come up with solutions that are never going to solve the next one that is a constant. So is that. I don't want to mischaracterize your analysis. Nothing we could do. Help people when they're on the downturn. Help people to correctly forecast them. What could we do to ameliorate the negative effects that you talk about?
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Well, it depends on what we mean. Who, who we mean by. By we. If we're talking about policymakers, then one of the lessons of the book is, is that policymakers should adhere to some form of the Hippocratic oath. So first, do no harm. And what that means is that contractionary fiscal policy, contractionary monetary policy in the middle of a recession can make things much worse. So even though, yes, expansionary policy doesn't, is, is not likely to cure recession or end a recession, contractionary policy can make it much worse.
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That basically what Ben Bernanke proved about the Great Depression. But then when trying to implement the obverse, you criticize him for some of his stimulus during the Great Recession. Am I getting that right?
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I haven't necessarily criticized him for, for stimulus during the Great Depression during the Great Recession, but I think his conclusion about the the Great Depression is correct, that contractionary monetary policy and fiscal policy did make things worse. Now that said, I think there's a strong social argument for the provision of relief where relief is needed. Because while economies in the aggregate may recover from economic recessions, that doesn't necessarily mean every individual or every household will. So the provision of relief through the unemployment insurance system maybe even supplement that during periods of really high unemployment. I think there are compelling social welfare arguments for that. But policymakers shouldn't presume that they can end recessions. Now, if by we we mean households and businesses here, I would say that the book ends on a very optimistic note because businesses and households, we are learning over time how to better absorb the kinds of shocks that historically would have contributed to recessions. Expansions have been living longer. Recessions have become rarer because we have diversified risk. Our banking system is now less fragmented than it used to be, so we can spread risk across an entire national economy. Households are more financialized than they were in the 19th or early 20th century. So if by we we mean businesses and households, then I think that there's cause for optimism from the long run.
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Friends, we'll be back with more of Tyler Goodspeed in a second. We're back with Tyler Goodspeed talking about his book Recession the Real Reasons Economies Shrink and what to do about it.
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Even though we often misunderstand where the recessions come from. Are there some constants, are there some of the data points that are more correlative to actually us being correct about this was a recession? I mean, okay, I'll take your point with the dot com recession wasn't but several of the ones that we call, I don't know, the credit Mobile scandal or some of these others, we did get them right. And then my further up, my further question is do we usually get it right when it's a certain kind of recession?
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So in terms of identifying recessions, we get it right in Terms of identifying the recession with high confidence, when there is a clear increase in unemployment, a clear decrease in output. And so the farther back in time you go, the lower the degree of confidence one has that there was a recession.
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Do we get the why right?
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The why right. So very often I think more often than not we get the why wrong. Because. Because we are so tempted by these moral stories. So I gave the example of 2001, the example of the 1870s when what mattered more than vague over investment in railroads was the fact that there was a locust plague that caused investment in railroads to dry up, so work had to halt. There was the 2001.com recession. But also most recently, we tell a very moral story about the 2008, 2009 crisis in which there are people who allegedly should never have been able to buy homes. They were egged on by reckless mortgage originators who were in turn pushed by greedy bankers. And this was all supervised by lax regulators who, who should have and could have seen the pending recession. But if you actually look at what was going on in 2007, 2008, this was one of the worst energy crises certainly of the post war period, if not of the past century and a half. So by summer 2008, the average American household was having to spend over $2,000 more per year on energy goods and services than they had just a few years prior. So faced with that and their mortgage payments resetting higher by about $800 per year, a small minority of American homeowners were late on their mortgage. And the rest, as we, as they say, is history.
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What I was leading up to was it does seem to me that energy crises and energy shocks do have a repeated demonstrable pattern of economic contraction or at least real economic headwinds. And we're going through that now, so it'll be a two part question, but am I right about that? I could go through Kuwait and the Iranian revolution and the Yom Kippur War and these were all energy shocks? Oh no. The American economy and the world economy very often does suffer.
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That is correct. So if you look back since 1945, since World War II, energy supply shocks have been major contributors to all but but two of 12 US recessions, 1960 and 2020 were the exceptions and all but one of the five British recessions since 1945. So the one exception for Britain was the 2020 pandemic recession. These are examples of sector specific shocks. So before oil and gas it was coal, before coal it was biomass and in particular turf or peat which was combusted for home heating, for industrial power generation. And the reason energy more than other sectors, although other sectors have similarly contributed to economic recessions. I mean steel, automotives, cotton, if you go farther back in time, the reason energy is the most frequent of these sector specific contributors is because it permeates everything. So you, from residential heating to transportation to industrial power generation to a lot of materials, I mean a lot oil enters into a lot of materials that we use in everyday life. So it's just very difficult over a 6 to 12 month time horizon when there is a supply shock for households and businesses to find substitutes.
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So now, and this is like taking calls to Newcastle, I'm telling the guy from Exxon what oil prices have done, but they've gone up what, 80, 90 cents a barrel. Now let's also caveat the fact that you know, compared to the 20 year average, it's not actually higher. But right now we're at a point that maybe could be called an energy shock or an oil crisis. What's the argument? That this won't lead to recession.
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So the way I would think about it, and the book sort of equips readers to do this, is to think about which historical recession you think is the appropriate analog and ask what are the similarities? What are the differences?
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So you should have an interactive, an online interactive like put in your favorite, your, your favorite circumstance, put in your favorite portion of his history and then we'll give you the recession that bets best fits your worries of the moment. That could be cool.
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It's not a bad idea.
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Which recession are you? Yeah.
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So to my mind, if one looks back on the past century, there are certainly similarities and differences when it comes to the 1973 US recession, which was actually a transatlantic recession affecting the United Kingdom as well. So the differences would be that compared to the 1970s, the 2000s US economy, global economy, it's relatively less dependent on core OPEC than in the 1970s. Non OPEC supply is more elastic than it was in the 1970s because of the rise of unconventional production. A dollar of output today is less energy and oil intensive than it was in the 1970s. And also we learned a lot of lessons during the 1970s and in the immediate aftermath. And because of those lessons, we now in advanced economies maintain strategic petroleum reserves that can provide a near term buffer. The similarities would be that in 1973 you were looking at a disruption to the physical flow of barrels and the physical flow of cubic feet. And that's sort of different from say 20, 22, where there wasn't at the end of the day much disruption of physical flows. There was just a reconfiguration of flows in the aftermath of the Russian invasion of the Ukraine.
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What about the fact that the United States thumbnail or back of the envelope phrase of this is energy independent, which is to say we produce more energy than we consume. How much of a buffer is that? Given that the commodity is fungible on
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the world market, you identify a key point which is that you're talking about a globally traded commodity, one of the most, no pun intended, liquid commodities in the world. So that price is generally going to be set on world markets. However, there was a great Brookings paper on this a few years ago asking whether this time is different when it comes to energy shocks. And the conclusion of that paper was that it is a little bit different now because the demand effects of energy supply shocks are still similar to say in the 1970s in that consumers pullback may pull back on discretionary spending, particularly on durable goods like automotives. That demand effect may still be there, but to a certain extent it's offset because now if there is a supply shock elsewhere in the world, there's a lot more investment in the United States. So I would recommend folks check out that Brookings paper because there is, some things are still the same, but there are some, some differences. Given the rise in US unconventional production,
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if there is no recession based on or largely influenced by what we're seeing in Iran and the Middle east, will it be because of all the factors, all the mitigating factors that you presented, or will it be because the prices we're seeing now will come down? So another way to you can answer it that way, or if we continue to see oil prices as high as they are or higher for many, many months, does a recession become much, much, much more likely?
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I could just say that at current levels this would be below what we've historically seen for recessions. If you inflation adjusts the price of a barrel or the price of a cubic foot in 1973 or 1980 or 1990 or 2008, then this would seem to be below those historical shocks. One thing that's interesting is that if you look back farther in time, the price didn't necessarily rise that much. So that the oil shocks of 1948 to 1980 inclusive, the price, real price, didn't increase that much. But you had a lot of non price rationing, which most economists would say was not the most efficient response. So I wasn't old enough. I'm not old enough to remember the gas queues of the 1970s and early 1980s, but there was a lot of rationing by Q. And the problem there is that then you're not allocating the scarce resource to where the utility or the return is highest. And you're also not really lowering the effective costs because you're just transferring that cost from price to an effective price because people have to queue. And there's a high opportunity cost to that.
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Given everything that ExxonMobil wants for the world, is there an argument to be made that the introduction of EVs, the widespread introduction and adoptance of EVs, is actually good in a way, not just for the environment or anything like that, but actually for the price sensitivity of oil and maybe even Exxon's interest. So, overall.
- [37:33]
C
So one of the interesting things when you zoom out over the past four centuries, as I do in the book, is that you see that diversification generally helps absorb shocks. I mean, think about it like a broadly diversified portfolio. You can have weakness or challenges in one area that are offset by resilience in another. And so in the United Kingdom, for example, and then later in the United States, the data is better for the United Kingdom. But you have this period when the UK economy was highly vulnerable to adverse harvest shocks, because, as I noted, that means less peat, less turf, less biomass, less provender for your ground transportation, which is mostly animal draft power in the 18th and 19th centuries. Then you get this period where energy price shocks aren't having as much of an effect on the UK economy because there's this mix of biomass and coal. And then you get to the transition to an oil gas era where the British economy, like the US Economy, was vulnerable to shocks, geopolitical shocks in the Middle East. Britain had a recession in 1973 and 1979 and 1990. So generally speaking, I think if you look in the broad sweep of history, greater diversification almost by definition implies greater resilience.
- [38:52]
A
Now, I want to just ask you a couple questions that are off, off the book, but based on your experience and the fact that you obviously love history, there's so much, I would say, obscure history, or at least obscure to me, things I didn't know. So you're walking around full of this information about what happened in 1771 and what happened with the sinking of different ships in the Ohio loan company. But you're also, as from the time you're chairing the Council of Economic Advisors, you have to give succinct economic messages to important political players. Tell me about navigating that. Do you know not to go deep into the history if you think your audience is not receptive of it, or is there part of you that has to say, ooh, I have the greatest lesson on this. Unfortunately, it takes place in the 18th century.
- [39:43]
C
So the farther back in time one goes, the, the greater the effort one has to make for relevance. I will say that from my time in both the public sector and the private sector, I will say a lot of my colleagues have found historical analogs to be valuable because, and I, I sharp penciled economists. I do a lot of, of quantitative modeling. I do a lot of economy econometrics. I do a lot of econometrics in the book, although I try to hide it in the appendix. But the problem is the limit is that even if you have the perfect mathematical model of how the world works, you still need to calibrate it against real data. And that can be very hard to do because some of these events, like, like pandemic recession are rare. So it's just hard to calibrate a model on that. And history and in particular analogs allow one to, as we just did with 1973, sort of analyze, okay, what's similar, what's different, how might this play out? How has it played out in the past? And so it helps with scenario building in a way that pure econometric analysis can't.
- [40:57]
A
Yeah, the human, human tendency towards narrative giveth and taken away. Can you think of a specific example where you connected to an audience you were trying to convince? I mean, probably a specific person, an important decision maker through a possibly obscure historic example.
- [41:18]
C
So where it most, where it most came through was in 2021, 2022, when inflation was just starting to take up, pick up, particularly in 2021. And you know, we hadn't experienced really high inflation since the 1970s. And so I and colleagues, I was working at the time for Green Mantle llc. It's a macroeconomic and geopolitical advisory firm. And what we did was we looked back to the last period in American history when inflation really accelerated, when the price level really accelerated, inflation really rose and inflation expectations came unanchored. So we did a series of pieces on the 1960s. So even before you get to the 19, the inflation and oil shocks of the 1970s, the period in the 1960s when inflation expectations really became unanchored. And those were some of the best pieces that we did for clients. We're looking at, okay, what was going on in policy? How was the Fed thinking about inflation and to a large extent, The Fed in 2021, 2022, were repeating a lot of the mistakes of the fed in the 1960s.
- [42:31]
A
Tyler Goodspeed is the author of Recession the Real Reasons Economies Shrink and what to Do About It. Thank you so much.
- [42:39]
C
Thanks, Mike.
- [42:45]
A
And that's it for today's show.
- [42:46]
B
Cory War produces the Gist. Kathleen Sykes runs the Gist list, Ben Astaire is our booking producer, and Jeff Craig runs our Socials. Michelle Pesca oversees it all benevolently. And thanks for listening.