黑料传送门 Booth Review Podcast When Will the Fed Start Cutting Interest Rates?

Charles Evans: They were able to pull off getting the funds rate to a level that's restrictive, but not overshooting to the point where they're going to crunch the economy. And so now the question is, with inflation clearly coming down and the economy's still doing well, the unemployment rate's 3.7%, they're going after a soft landing. And the question is, when did they start lowering rates just to reduce the restrictiveness?

Hal Weitzman: Inflation in the US has proved remarkably stubborn. The most recent figures show it fell less than expected in January, to 3.1 percent, well above the Federal Reserve’s target rate of 2 percent.

In response, the futures markets slashed their expectations that the Fed will lower interest rates any time soon from its current level of 5.25-5.5 percent. The labor market is still relatively tight, and consumers keep spending. Many observers think a recession is increasingly unlikely, but a soft landing is hardly guaranteed. So how is the Fed thinking about the US economy?

Welcome to the 黑料传送门 Booth Review Podcast, where we bring you groundbreaking academic research in a clear and straightforward way. Today, a conversation about the challenge facing central bankers between two experts on that topic: Charles Evans, President of the Federal Reserve Bank of 黑料传送门 from 2007 to 2023, and 黑料传送门 Booth’s Anil Kashyap, who was an external member of the Bank of England’s Financial Policy Committee from 2016 to 2022, and has advised several other governments and central banks.

Their conversation was staged at an event hosted by Booth’s Kent A. Clark Center for Global Markets in late January.

Anil K Kashyap: When I first joined Booth, I used to go to events like this or alumni events, and often Merton Miller would be there. And Mert had this funny habit of walking up to alums or strangers and say, "What do you think's going to happen to interest rates?" And after watching this happen for about three events, I finally said, "Mert, why do you care if a random person that you're never going to see again has an opinion on interest rates?"

He says, "Well, if I ask them, they can't ask me." So, what do you think is going to happen to interest rates? The FOMC's meeting today, as you know, and I'm curious for what your outlook is for what might come out of the meeting today. Well, tomorrow there'll be the press conference and then in the near term.

Charles Evans: Thanks for that nice introduction. That was a good joke. I hadn't heard that one before. I'll have to try using that. Yeah. Well, the FOMC is meeting now. Let's see, I retired in January, and your colleague, Austan Goolsbee, is now at this meeting representing the Seventh District, 黑料传送门. And I'm pretty confident that this is going to be advertised as a pretty boring meeting. They're not going to do anything in the sense that they're not going to change the federal funds rate target. Nobody is predicting that.

But this must be a setup meeting for, when are they actually going to take some different actions than what they've done over the last two years? So, the Fed... And I was part of this mess when inflation started rising rapidly in 2021 and it really manifests itself in '22, the Fed started raising rates quite briskly once we got started in June of '22. And the Fed did four 75 basis point increases in a row, and then slowed down to 50 and then did 25.

So now, we're targeting the range of five and a quarter, to five and a half percent. For the central bank, that probably was later to address things where things got out of hand. We seem to be as high as anybody, the ECB's only at four. So, there are a bunch of differences that I don't fully appreciate, but the Fed's at a very high level. I think they were able, this was after I left, they were able to pull off getting the funds rate to a level that's restrictive, but not overshooting to the point where they're going to crunch the economy.

And so now, the question is, with inflation clearly coming down and the economy still doing well, the unemployment rate's 3.7%, how do you get inflation down from above 6% on the PCE measure, down to... Six month core PCE is under 2% now, but the 12 month is 2.9%. How do you get inflation down? Usually, you have to crunch the economy, but the unemployment rate's 3.7%. They're going after a soft landing. And the question is, when did they start lowering rates just to reduce the restrictiveness of where they are now? 5.3 minus inflation, two, two and a half, whatever. You've got a pretty restrictive funds rate.

They're going to be talking a lot. They're going to be trying to describe how to resist cutting too soon. All the policymakers came out since the... I think Chair Powell probably enjoyed the holidays, and I don't think he spoke very much, if at all, after the press conference. But everybody else came out and they said, "We're not in a hurry. Rate cuts are not around the corner. We need to make sure we get inflation down." I think what's really been amazing to me, once I looked at the data, I had not quite realized that core inflation, PCE has really come down.

Six month average is under two, and there are a lot of people looking at the data thinking that in April or May, the 12-month might be at two. That's a sea change if it happens. So, I think it's all getting set for the March meeting. And then, in the March meeting they'll have a summary of economic projections and they'll tell us more about what they're looking at. And the markets have backed off of saying they're definitely going to cut rates in March to now it's about one in three chance. But pretty good chance that they start cutting rates certainly by the June meeting.

Anil K Kashyap: Okay. Let's come back to the inflation dynamics. Certainly people were really wrong on the way up and it sounds like you're prepared to say they're looking like they're going to be wrong on the way down, or maybe it's coming faster than many of us would've expected.

Charles Evans: Did you think it was possible to get inflation to come down as far and as fast as it had without the unemployment rate being four and a half or five?

Anil K Kashyap: No.

Charles Evans: I mean, this is not the mechanism that you normally think about for Central Bank. So, it's an unwinding of a bunch of things that...

Anil K Kashyap: Yeah. There's still the question of the last mile.

Charles Evans: Absolutely.

Anil K Kashyap: But curious as to what you think we've learned, and whether there was something that we were carrying around is received wisdom prior to all of this, or something that we had forgotten about that we need to relearn or anything, really, about how you would change the way you would be making decisions going forward based on what we've just seen.

Charles Evans: It's not hard to coax academically inclined economists to talk about inflation. And somewhere along the lines say, "We really don't have a good idea at all where inflation comes from or how to forecast inflation." I think policymakers often think the same way. Dan Tarullo, after he left the Fed, gave speeches like, "I had no idea. I had to be in charge of inflation when nobody knows how inflation is created."

It's not the money growth that we all love so much in the 50s and 60s and things like that, but we've taken this looking at interest rate movements and adjusting that in line with inflation, which has been low for quite some time. The bread and butter way of forecasting inflation is looking at resource slack. And if you don't have slack, if you've got an economy that's really hot, that tends to be correlated with rising inflation.

So, the Phillips curve is the workhorse mechanism, but it's been very flat ever since inflation expectations became anchored, unlike the 70s, but in the 90s and after that. Inflation has just stayed in a range and the Fed has adjusted policy, it's kind of worked out at least in it hasn't really gone up. So now, you get to the point in 2020 where the Fed comes out and says, "We just spent 10 years of under running our inflation objective. Almost ever since we said 2% is our objective, we haven't been able to hit two."

And so, we put in place a strategy where we said, "If we've been under running for a particular period of time, and it's a material underrun, we're going to try to average that out a little bit by overshooting, moderately. Moderately." Moderately is the word that's always used. I think people envision getting inflation up from 1.7 to two, to 2.2, and having it settle in like that. We were at the effective blower bound, we had a lot of accommodation in place. COVID had already been taking place, inflation went down at the onset of COVID.

And then, the supply gyrations were taking place. You couldn't get semiconductor chips, people weren't working, they were closing down businesses. I don't think this was a great insight at the time, but it kind of looked like a wartime economy where you took General Motors and took away their automobile making capacity and made them do tanks and military things. And you had to change everything, and there's a lot of supply problems that happened with that. Prices started to go up, relative prices started to go up for cars, used cars and shelter and some other things.

Next thing you know, inflation's at 7.9% in February of 2022. And the question is, is it transitory? Is relative price increases? Was it money? Is it going to be sticky? And things like that. This gets at your question, is it a new mechanism? What did we think before? I've characterized this as, we were expecting inflation to come through the front door, through strong demand and a Phillips curve. Demand was strong because of the Biden third fiscal support after COVID, and that was very strong. Still, it wasn't so much above potential output growth. It was, but not in the category that you would think you would get a lot.

The supply shocks just kept coming. And so, I guess one thing maybe I would be thinking about a lot more is I guess when you get supply shocks, maybe they keep coming. You have to inspect the mechanism and understand what's causing that for the semiconductor chips. You look into that, you learn that so many of them are put together in Malaysia and Indonesia. They start off in Taiwan, then they get shipped in the final part. And they weren't very good at COVID, keeping people in the factories, and so it just kept coming.

At any rate, you listen long enough and it's like, "Well, Evans is just making excuses. They didn't see these things, the team transitory stayed on board too long." That's why Jay Powell, through his leadership, started raising rates very quickly. And I think a lot of people probably expected, well, the playbook is you cause a recession, especially if you're at 7.9, or now you're up to 9% inflation on the CPI.

And then, things started to turn around, supply conditions began to get better and inflation came down while the labor market is still strong. Unemployment's below 4%. So, this is not the playbook, it's a bit of unwinding of the supply. It's a long transitory kind of thing. Maculate disinflation. I think the question now is, and this is the way the policymakers have stated this in their most recent speeches, we need to be confident that we're going to get inflation to 2%. They're at 2% by the six-month average, but not the 12.

They need to be confident that it's going to be sustainable, sustainable 2%. Now, I will tell you we've never experienced sustainable 2% inflation. Nobody knows what that is. We had sustainable one and a half percent inflation and sustainable one and three quarters percent, but they were trying to get it up above two. I'm making fun of this. But it's like you've got six months in the bag at under two, and you're wondering about the forward six. And you're going, "Is it going to be a repeat of things that happened last year or what's it going to be?"

A lot of this is conservatism and you don't want to... Oh, God. What was that football game where the guy fumbled on the goal line? You don't want to do that. You want to make sure you've worked really hard to get this to work. And so, I think because of that, it's as if there's an add factor in the reaction function that's probably going to add some time to when they actually turn it around.

But inflation has come down, and the policy rate is high. And it's getting more restrictive as inflation comes down. And so, it makes sense to make an adjustment. The trick is, how do you signal we're really only going to do three rate cuts this year. Because the markets are going as soon as they cut rates at least 25 every meeting. You start in March, you get six rate cuts.

Anil K Kashyap: Okay. Maybe we'll come back to that one at the end with some Q&A, but let's turn to the economy. I mean, the other thing that's been, I believe, puzzling is 500 basis points on the funds rate and long rate's up to levels hadn't been seen, mortgage rate's way up. And yet unemployment remains low, job growth is strong, spending is really strong. How do you explain that?

Charles Evans: Again, I think part of this is continuation of the fiscal support through COVID. There was a lot of support for households. Actually, for households, businesses too, and read a lot of reports about excess savings. People at all income levels had more savings than you would expect. I always figure at the lower income levels, if this is the group of households that have difficulty making an emergency $400 payment, it's unlikely that they're going to have excess savings for very long, but they can pay down debt and be in a better situation.

And then, other households that didn't need the support as much or at all have more wherewithal to undertake spending. So, the consumer has been very strong and the consumer has been the big surprise throughout the last year, even though confidence has been very low. In the Michigan survey, somebody asked me a question, I don't know what question I'm going to answer. It's like, "Of course things stink. I don't like the way things are going in the country." And all of that. It's hard to know what to make up a bunch of surveys.

The conference board is more business focused. Confidence survey came out today and that was higher still, the Michigan survey has been higher. But the consumer has been strong. There's not a lot of indication that they're going to slow down. Labor market is good, wages have been growing. Now, inflation has been high. And so, real wages haven't kept up for all labor segments. Most recently, the lower wage quartile has done better. They've received stronger wages and their real wages have grown, which is very unusual in the most recent 10 year period. Salaried workers above median probably have not kept up.

There's still a good strong basis for the consumer being in good shape. Did I mention student loans? I mean, there's also a whole bunch of people who were making loan payments on their college education and they didn't have to continue those payments. And so, that clearly was an inducement for better financial wherewithal until things picked up again. I think businesses have been careful in manipulating the challenges that they've faced coming out of COVID, picking their spots to make investments. There's also been the infrastructure bill, which is starting to come online and people are planning for that. State and local governments that have been strong.

I mean, bottom line is, fundamentally, there continues to be pretty decent financial well worth out there even with high interest rates. Now, a lot of people also refinanced their mortgage. And so, if you refinanced into a 2% mortgage and mortgage rates went up, you kind of go, "I don't have to worry about that." So, that delayed the impact of the restrictiveness for a lot of economic agents.

Anil K Kashyap: In terms of everybody talks about soft landing, it sounds like you just think if we just keep rinse, lather, repeat, it's going to be okay. But what are you going to watch to determine whether or not we're on this, what Austan call, the golden path or something?

Charles Evans: Clever turn of the phrase. Yes, I think it's coming into the soft landing, is what that phrase tends to have in mind. There's also been a lot of pent-up demand. So, another reason for this is when you couldn't buy a car, when cars were so expensive, if you had a lot of financial wherewithal, you could buy the car at that price. And if you didn't, you waited. And now, there are more cars and the prices are better. And so, there's just been one development after another, which has been mean reversion to some extent, returning to more trend growth.

I'm not predicting in any way above trend growth. And in fact, I'm expecting below trend growth this year, although nobody expected 3.2% growth last year. I'm expecting below trend growth for probably 12 months, and then glide to trend growth. Now, why do I have that forecast? Well, I'm not forecasting a recession. I don't see the... There are shocks that could hit, but shocks are unexpected. At the moment, I think the glide path is to mean revert after undershooting trend growth for 12 months, so then you get back.

Labor market. Businesses have been careful with their employees. They had a hard time hiring workers after COVID, the wages were high, they had to pay up on all of that. And I think they're now getting to the point where they're more comfortable identifying the workers. They absolutely are going to keep around identifying the workers who maybe have been a little more challenging, this whole remote work back to the office. I mean, if businesses didn't like the composition of that, they might be changing how many can work remotely and things like that.

Anil K Kashyap: Okay. Let's start talking about shocks then, if your expected path is good. We're just about a year on from all these regional banks that failed. Failed in ways that I think lots of us would've said, "There's just no way banks could be that badly supervised to blow up like that."

Charles Evans: Supervised. What's supervision?

Anil K Kashyap: Yeah, what's that guy?

Charles Evans: I thought that banks took care of themselves, right?

Anil K Kashyap: Okay. I mean, what do you...

Charles Evans: I'm sorry. It's 黑料传送门, right? Okay.

Anil K Kashyap: Yeah. This is a business school, though. We actually think regulation can work. I mean, two things. First of all, do we need to rethink any of the financial regulation given what we've seen? And are you surprised that it came and went without more trouble?

Charles Evans: After Silicon Valley Bank blew up Republic Bank, I did expect that there would be added financial restrictiveness in markets that everybody would be facing. And I think the Fed, obviously, thought that could be the case too, because they were probably set to raise the funds rate back in March, last March. But then, with Silicon Valley, it's like, "Well, let's see how this is going to play out." And you figure things weren't going to be more restrictiveness. Now, there doesn't seem to be a lot of lingering restrictiveness coming out of all of that.

I mean, banks have to manage the current situation. Interest rates are high. They had a book portfolio where interest rates were lower, and so the value of their portfolio. And if they had securities, obviously, as the 10-year rate's going up, if you've got a lot of those securities, then that's going to be a capital loss. Now, I guess what was surprising... I don't get to talk to supervisors again. Usually, when I would talk to supervisors, they'd go, "I wasn't surprised by certain things happening because this is how they behave." Or whatever.

But banks will hold loans on their portfolio for a longer period of time, and they've got other parts of their portfolio that are doing better, and they managed through these periods. What was surprising was that they had managed it so badly at Silicon Valley Bank. I mean, they were taking in more money than they knew what to do with literally, practically. And so, they were just chasing 40 basis points on long rates when that was exactly the wrong thing to do. I mean, it's ought to be viewed as a good thing when poorly performing institutions are punished and they make way for others. We don't tend to think about banks that way as much as perhaps we should.

Anil K Kashyap: Okay. You're content, though, that we've got the right regulatory system in place?

Charles Evans: I mean, what did you want the supervisors to do?

Anil K Kashyap: Shut them?

Charles Evans: Do what?

Anil K Kashyap: Shut them down. They were insolvent in plain daylight.

Charles Evans: I mean, it would be, somebody must have cases on these things. I mean, do you want a supervisor, who you don't know what their experience is and whatnot, to be able to go into a bank and assume an ownership responsibility and basically say, "You guys shouldn't be in business." And shut them down. They don't own the bank. They're supposed to be making sure that the bank is following the rules.

Anil K Kashyap: It's $20 billion. You know how much we spent on Ukraine compared to SVB. It's an amazing number. I'm not asking you to defend this, but I mean, the whole-

Charles Evans: If the argument is that you can endow another entity, the government to make decisions which might be positive, net present value of some sort, then I suppose we could talk about that. But this is capitalism and they're supposed to be allowed to do that. You wouldn't trust the government entity to make those choices. And if they get it wrong eight out of 10 times...

Anil K Kashyap: I don't know. There's so many analogies to Lehman, fire your chief risk officer, have no chief risk officer, chase all this yield, break all your internal risk controls, have phony bony accounting. I mean, this was not super sophisticated fraud or anything like this. This was just really-

Charles Evans: They weren't good at their job. No, that's absolutely right.

Anil K Kashyap: Ward that was asleep.

Charles Evans: And they had all these supervisory actions loaded on them. MRIs, matters requiring attention. MRAs. MRIs, matters requiring immediate attention. Right? I'm reminded of my good colleague Dan Sullivan, who one time said that somebody he knew from England where they don't have guns, and they tell the story about the Bobby's chasing somebody down who's stolen something, and they'd go, "Stop. Stop, I say. If you don't stop, I'll say stop louder." You can do a MRA, and then you can call it a MRIA, but it's still not public. You're still working with the institution and the management and the board of directors.

If they still won't do it, then you can do a cease and desist, that becomes public. As soon as Cisco is public, the market reaction would've been exactly what we finally saw. So, there's a tension as to how you manage that and what the right way to do that is. I went to a conference soon after that where Sheila Bear, the former chair of the FDIC, was asked about this very type of issue, and she practically laughed and she goes, "Banks will sometimes spend a couple of years trying to get these MRAs right."

Anil K Kashyap: It's not comforting. All right. Other shocks. How about the politicization of economic policy? I mean, it used to be the case that things like appointments to the Fed just were like watching paint dry. I mean, nobody talked about it, it just kind of happened. You could have administrations change, you could have all kinds of turmoil. And yet, a place like the Fed was pretty apolitical. Even if the president's appointing people had very different views and were pointing people with different views, it wasn't the case that you'd have 35 dissents in the Senate for somebody that looked like the last 20 people that had been appointed.

That seems to be out the door. And it seems to be more broadly just getting people confirmed for spots in the government seems to get ever harder. How much time do you spend worrying and thinking about that? Do you have any ideas on what we might do to try to turn the temperature down?

Charles Evans: From a Fed perspective, I mean, you're right. There was an era where... I was with the Fed for 31 years. I was president for 15 years. But during that time, just looking at governors that were appointed by presidents, Democrats, Republicans, they all seemed to be highly qualified individuals. They were people who when they came to the Board of Governors on the monetary policy stuff, you really couldn't tell Democrat-Republican. It was like looking at the way the economy works in all of that. I was never involved in the policy side of the regulatory side where, I don't know, I don't think there's really a political perspective there, although you get small banker, big banker and different kinds of perspectives for sure.

But I think that presidents by and large made very good nominations to the Federal Reserve Board. Now, I didn't participate during the 80s, and I think if you talk to people inside the Fed, and you were at the Board of Governors briefly in the 80s, there were differences of opinion about governors and things like that. But eventually, they got to this point where, forget who started it exactly, but it's like we're not going to confirm your person. And then, there's tit-for-tat. And that just has gone on.

Now, that's one thing at a confirmation level, but it steamrolled to the point where now, after Dodd-Frank, or whenever there's something that one party in Congress doesn't like, they threatened to change the Federal Reserve Act in really difficult ways that would challenge how well the Fed can do this. Some of this 13.3 Authority, which is like, "Okay. I understand you guys aren't really supposed to do lending to non federally guaranteed entities, but under unusual and exigent circumstances, like after Lehman Brothers, then maybe it's okay to do certain things." And you got a big balance sheet and all that.

And Congress didn't really understand that the Fed had that authority. I think many in the Fed didn't really understand that they had that authority. I think they came up with new ways to interpret that authority after TARP, where the fiscal authority could put a first loss safeguard into things like some of these liquidity programs. And you say, "See? It's safe." And so, they changed that. And you'd like to know that they had a series of hearings where they listened to experts and thought about it carefully and came to a good, well considered decision in the new legislation. But it doesn't always appear that way.

And then, there are a lot of threats as well. And so, I think that that's really made... We like to say that the Fed has some measure of independence from the government, and I think the question is, what's the measure of independence? It's not as much as so many people always think. That's a real challenge. That's on the monetary policy side. And then, the other thing you think of is when the economy's really in a bad place, like after Lehman Brothers in the slow recovery, you would hope that the Congress would do the right thing in terms of fiscal support.

And there are differences of opinion on the value of austerity after 2011, but there wasn't forthcoming fiscal support. And so, it did push the Fed to take on more in terms of getting inflation up and dealing with the economy. And I think that's a challenge.

Anil K Kashyap: But look at the fiscal position of the United States right now, it's dreadful. And there's no sign of that abating.

Charles Evans: Yeah, that's right. You could go through the various... You might not remember this, but it was as recently as '99, 2000, the federal government was running a budget surplus. And in fact, at the Fed, inside the Fed, chairman Greenspan had a task force do some studies. It's not likely, but how do we conduct monetary policy if we don't have treasuries? What if there's no debt, and the way that we get currency into circulation and liquidity is to buy and sell treasuries? What if we don't have it?

And they looked at that, that was 2000. Then we cut taxes, then we had some poorly thought out wars. Other things have happened, and we had the housing crisis. And on top of that, you've got social security and Medicare that aren't well funded, aren't funded, what they had in mind-

Anil K Kashyap: A trillion here, a trillion there. It adds up, huh?

Charles Evans: What I find personally most frustrating is they don't sit down and think about what a shared vision for government expenditures ought to be. And it's always, "I want lower taxes. And if I cut taxes low enough, you're going to have to cut spending, because see..." Is what happened, the burning platform kind of thing. And if you don't deal with social security and Medicare, Medicare in particular, then it's only going to get worse. And so, you'd be well served if you... I don't think a commission or a task force is going to solve this, but if people thought about that, we'd be in a better place, hopefully.

Anil K Kashyap: Okay. A couple more questions, It looks like this de-fragmentation, de-coupling, whatever you want to call it of the global economy is something that's going to be here for a while. Presumably that's going to mean that people are going to have to relabel their supply chains and do all kinds of other stuff. Does that strike you as a first order concern about your outlook for growth and what you think productivity can be and just what trends can be sustained if everybody's rebating everything to their home countries or to their friends or whatever?

Charles Evans: Concern in the COVID economy where all of a sudden people aren't enjoying in-person services, but instead of buying goods, you've got this big shift in the structure of the economy, and how does the economy perform? How persistent is that going to be? Or are they going to unwind that? The trade ramifications here with increased tariffs, more geopolitical uncertainty. So, do you really want military grade things produced outside of your control just when you need it? You might not be able to get hold of it. A whole bunch of other issues come into play.

That's obviously going to have implications for how efficient you are at production, how expensive it is to do it. Also, whether or not you have the labor force to do that. Is it skilled? Do they have the right skills? And all of that. So, I think it should be a full employment act for economists and business people to think this one through. But you could easily imagine that there would be adverse productivity implications.

You could imagine that it has some kind of income smoothing type of implications where if jobs are created in locations in the US where we don't currently have them, then more people might enjoy higher incomes than that. It wouldn't necessarily be the most productive, efficient way to do it, but there are all kinds of things that could come out of that.

Anil K Kashyap: Two last questions, Let's hear your biggest upside and downside risks to your outlook. What keeps you up worried about? I mean, these shocks, maybe I failed to list one that you think about. Or what do you think would just be bliss if it could happen that's not in your central scenario?

Charles Evans: Well, the ones that worry me are geopolitical risks where you've got greater war in the Middle East, elsewhere. You've got emerging powers, big powers now, China, Asia, all kinds of things that could lead to different supply chains and things like that, but also create a war or things like that. That's a concern. Any type of rearrangement of existing alliances in Europe and things like that would be a really big deal.

I take very seriously that trend growth is much lower than most people out in public think it is. We used to enjoy three, three and a quarter percent growth back in the 80s when the economy was growing. And now, trend growth... I have to go back and ask some people about updating this, but one in three quarters strikes me as a pretty big number. And if you think that real rates are going to be somehow related to that, that leads you into the view that the previous low real rate environment might continue.

Of course, there are a bunch of things that could happen that cause term premium and other dysfunctions to add to real costs. If people don't want to lend to the United States because they don't view us as credit worthy and things like that, that would be really bad. But I think that addressing growth as best you can, from a public policy standpoint, would be good. We always would love to have higher productivity growth, that would be the holy grail. But it comes out of nowhere. I mean, you invest, you invest and computers and you don't get productivity growth. We had the grand years from '95 to about 2005, and then it...

Anil K Kashyap: 40 minutes with no AI.

Charles Evans: AI is not just the dot com bubble, right? I mean, it's really going to deliver-

Anil K Kashyap: I'll ask ChatGPT about that.

Charles Evans: Yes. It's only as good as the work that you do to help it learn that type of thing. Yeah. No, AI is a big... Yeah. That could be a big boon for sure. But I think that somehow addressing that... But productivity works out, you want the tax structure to incent all of this. But labor input, I mean, the demographics continue to be very bad, especially if you don't allow for immigration. Some sensible immigration policy would be really important for getting higher growth rates, it seems to me.

Anil K Kashyap: Okay. So now, my last question. We've got a lot of MBA students here. What do you tell somebody who's just thinking about entering the job market beginning of their career? Do you have any advice?

Charles Evans: Well, I think this is the market segment. Yeah. I mean, I think that a business school like Booth is very successful. And working hard and finding the right spot where you want to contribute and do the best, I think, is what's really important. I know that, in my own career, it's like, "I always wanted to do something that I found to be interesting."

Even when I was coding uninteresting aspects of that, I knew that the payoff could be an important, interesting project. And so, finding the niche that you would like. Doesn't have to be finance. Finance is really, very successful, obviously, but there are other important areas.

Anil K Kashyap: Okay. Well, thank you very much. Go to the Clark Center webpage to find out when our spring policy talk will be happening. Hope to see you there.

Hal Weitzman: That’s it for this episode. To learn more, visit our website at chicagobooth.edu/review. When you’re there, sign up for our weekly newsletter so you never miss the latest in business-focused academic research. This episode was produced by Josh Stunkel. If you enjoyed it, please subscribe and please do leave us a 5-star review. Until next time, I’m Hal Weitzman. Thanks for listening to the 黑料传送门 Booth Review Podcast.