Trifecta!

The University of Chicago is a phenomenal place.  I had a once in a lifetime opportunity to attend a presentation of three- count them- three Nobel Laureates in economics this weekend:  Robert Lucas, Jr., Lars Peter Hansen, and James Heckman.  Moreover, I had the opportunity to spend some one-on-one time with Mr. Hansen at the cocktail reception that followed.  It was an amazing experience to have so much real intellectual heft in one room at one time...and an even more marvelous experience to be able to spend some time with Mr. Hansen.

Lucas spoke about the tremendous progress that the world has made since the industrial revolution (chart below), and pointed out that in Adam Smith's time, sustainable economic growth simply did not exist. And over the past 35 years, the per capita GDP of Asia has shifted completely over to the right.  He chided the Left's claim that income equality is THE MAJOR issue of our time.  "If Jeff Bezos has more money than I do, so what?"  The overall progress has been astounding. "We live in a lucky time," he said, "and it's going to get better.  If you really like equality, 1750 was your year," he joked, referring to the universally low per capita GDP.  

Heckman spent most of his presentation debunking the commonly held notion that Europe has more social mobility than the U.S. and showed that the U.S. pays a greater premium for education than European countries.  Denmark, in particular, provides free tuition because it has to.  There is no great economic incentive to pursue higher education.   Absent government transfer payments, there really isn't much difference.  Heckman also argued that the one place that government should spend money is in basic research.  "There is a huge return on that.  There is no return on police pensions."

Lars Peter Hansen talked about his work in risk and uncertainty and the limitation of models.  His slide of Mark Twain's quote that, "Education is the path from cocky ignorance to miserable uncertainty," was a succinct summary of his comments.  "Models are often very wrong," he asserted, and this notion has applicability in the current debate on climate change.

In my private conversation with him, I asked, "You said in your presentation that you had your own thoughts on the macro-economy, but then didn't elaborate.  What are they?"

"We are going to get back to historical growth levels.  Larry Summers is trying to argue that our economic performance is permanently altered and that we are in an era of secular stagnation.  He is trying to make the case for permanent stimulus [i.e. permanently bigger government].  I do not believe that."

After 6 1/2 years of a tepid, halting recovery, I came away with some optimism for the future.  And in any event, it was a tremendous experience to get the thoughts of three truly brilliant, world class minds.

I couldn't help but make the observations that Mr. Hansen won a Nobel Prize for what Yogi Berra recognized a long time ago, "It's hard to make predictions, especially about the future."