- [Christina] The most important thing that I try to pass on
is the sense that economics is an empirical field,
and if you get new empirical evidence,
you're going to have to change the way
you think about the economy.
I think being open to that
is the most important thing for a young economist to know.
♪ [music] ♪
- [Narrator] Economists -- not a group with a lot of Marys,
Natashas or Juanitas,
and that's caused a lot of controversy.
However, what's often overlooked are the actual female economists
who are pushing economics forward by addressing real-world issues.
Welcome to Women in Economics.
- [Christina] I grew up in a family
where public policy was discussed a lot.
I was planning to be a lawyer,
so I was going to major in Government.
And as part of the Government major at my college,
you had to take a year of Economics.
I was about three weeks in, and I was hooked,
like the Government major's gone, the Lawyer's gone --
I was an Economist.
- [Narrator] Christina Romer is a macroeconomic historian.
She takes the tools of modern economics,
statistics, and data
and applies them to historical questions.
- [James] Christy's researcher agenda throughout her career
has focused on a course set of topics
about economic fluctuations and business cycles.
- [Narrator] She's been asking and answering
fascinating questions about our economy,
starting with her dissertation as a graduate student at MIT.
There, she changed her understanding
of how the economy has grown over time.
- [Christina] I think the questions that came to me
were about monetary policy and business cycles
and the Great Depression.
- [Narrator] It was widely believed that government policies
led to less fluctuations and unemployment
after World War II.
However, the data before World War II was unreliable.
- [Nancy] But Christy came up with the ingenious insight --
that while you couldn't clean up the historical data,
you could fuzzy up the more modern data,
and that's exactly what she did.
And when she did it, lo and behold,
all these differences basically collapsed.
- [Narrator] Amazingly, if she applied
the old techniques to the new data,
the post-World War II economy
looked just as volatile as the pre-World War economy.
This contradicted the consensus
on the role of government stabilization policies.
Her research rattled the economic community.
- [David] It made a splash.
I remember one of the prominent economist MIT --
his first reaction was,
"Well, I'd be very upset about this if I believed it.
So I'm not going to believe it."
- [Narrator] Throughout her academic career,
Christine continued to challenge
our understanding of the Great Depression.
As just one example, most economists believed
the Great Depression ended
because of higher government spending
and investment in public works.
She showed that the impact of those policies
were relatively small compared to
the monetary policy changes taking place.
- [David] Starting as soon as Roosevelt
took the U.S. off the gold standard
when he took office in 1933,
over the next decade,
there's just an enormous increase in the money supply.
What she showed was that
that is what caused the very rapid growth that we had.
- [Narrator] Christina's research has often focused on the effect
economic events have on people's everyday lives.
- [James] It's tough to manage to have
new ideas on the same thing
again and again and again.
One of the remarkable things
about Christy and David's research program is
that they have done that very successfully.
- [Narrator] Over 35 years,
Christina has done meticulous research,
frequently, with her collaborator and husband, David Romer.
- [David] We'll have a paper, and I think it's almost done.
We've worked really hard on it,
and each do one last read.
She says, "You know, I think there's a logical tension
between where we end up in Section 4b
and how we set out what we're going to do
in Section 2a."
And I'm thinking, "Oh, no one's going to notice."
And we spend weeks more on the paper because she's right.
And the paper gets much better.
- [James] One of the remarkable things about her work
is the coherence that spans literally her graduate school days
and her work on her dissertation,
and connects up to some of her most recent work
on thinking about ways of identifying
turning points in the economy.
- [Narrator] Christina's work would be put to the test
during the devasting crash of 2008,
when the U.S. economy was in free fall.
- [Christina] We often described the economy
as [if we were] at the edge of a cliff.
Well, the truth is, we were not only at the edge of the cliff,
we were headed down.
- [Narrator] Financial markets were plunging,
and the risk of contagion from the U.S. to the global economy
was very real.
- [James] Even people who'd seen a lot
were really worried about what was happening.
- [Narrator] Just as the nation was turning
to President-elect Obama to confront the economic crisis,
a mysterious email showed up in Christina's inbox
with the subject line: "Obama Transition."
- [David] And I will take a little bit of credit here
because Christina was just about to delete it,
and I said, "Why don't you at least google the person?"
And she discovered that he was the head
of the economic side of the transition.
- [Narrator] The Obama administration wanted to meet with Christina
as soon as possible.
- [David] On the next day, she was on a plane to Chicago
to meet with the President-elect.
- [Narrator] Christina was asked to chair
the Council of Economic Advisers.
The council was set up to bring academics
into the policy-making process
and make recommendations to the President.
- [Christina] I was talking to Rahm Emanuel, and I said,
"So tell me again, how did I get this job?"
And he said, "You were an expert on the Great Depression,
and we thought we might need one."
- [Janet] She's tried to understand what caused the Depression,
what ended the Depression,
what role monitoring and fiscal policy could play,
and no one could have been better positioned to know
what the right strategy would be.
- [Christina] We were talking to bankers,
we were talking to employers,
we were talking to the people
that where collecting the statistics.
- [Narrator] Christina's research revealed that the economy
was in even more of a perilous position
than previously thought.
She got on the phone with Obama to give him the bad news.
- [Christina] Saying, "This is terrible.
We've lost three-quarters of a million jobs."
I'm just going on like this, and, finally, he stops me,
and he said, "Christy, it's not your fault... yet."
- [James] The challenge that Christy and her other team members
on the Economic Advisory Team confronted
was how large a stimulus the U.S. economy needed
in order to right the ship,
and trying to calibrate that
depended critically on the estimates
of how much bang for the buck you get
when you use fiscal policy as a tool
and try to then reflate the economy.
- [Narrator] Christina helped design a fiscal package
that she thought was necessary to get the economy moving.
- [Gabriel] The American Recovery and Reinvestment Act
was a piece of legislation
that was signed in February of 2009,
and it was a combination of direct government spending --
so think of repairing highways,
transfers to State governments,
transfers to individuals, and tax cuts.
And the rationale for it was that at a time
when households were spending less
and businesses were spending less --
that's a time when it's appropriate
for government to spend a little more
to fill in that gap.
The recessions leave long scars,
and people who lose their jobs during recessions
and they're unemployed for a while --
even ten years later, often are earning less
than they were before the recession occurred.
So by making the case,
both in academic research and then as a policymaker,
then the government could do more to mitigate recessions --
that really has an impact.
- [David] Probably hundreds of thousands of people
kept their jobs during the Great Recession
because she had become an expert on the behavior of the economy,
on the effects of fiscal policy.
- [Janet] And she was really passionate
about the role that she played
after the financial crisis in the Great Recession,
and fought passionately for policies
that would address the 9 million people
who lost their jobs
and get the economy moving.
- [James] Christy was a very fortunate person to have in that role
because much of her work, academically,
over the 25 years before that,
had been focused on trying to understand
the nature of the linkages
between fiscal policy, monetary policy,
and economic outcomes.
- [David] That's an unusual case.
We can really see a pretty direct connection
between ivory tower research and real lives on a big scale.
- [Narrator] Romer's work at Berkeley
continues to ask and answer these important questions
about the macroeconomy.
- [Christina] If you think about what matters to a typical person:
Do they have a job? Can they support their family?
Can they give their children a better life
than they themselves had? --
you realize that economic issues, how well the economy operates
is probably one of the things that affects people's lives
more than anything else.
♪ [music] ♪
- [Narrator] Want to better understand Romer and business cycles?
Click here for related materials and practice questions,
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