Christina Romer | Women in Economics

The fourth episode of our Women In Economics series is on Christina Romer, macroeconomic historian and former chair of the Council of Economic Advisers during the Great Recession.

Christina began her career at William & Mary and fell in love with economics, so much so that she changed her career path from law to econ. Her research since has fundamentally changed the way we think about the Great Depression and business cycles.

Because of her groundbreaking work, she was tapped by President Obama in 2008 to chair the Council of Economic Advisers and help lead the country through the Great Recession.

Learn more about Christina Romer: https://mru.io/tem

More Women in Econ: https://mru.io/pl9

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- [Christina] The most important thing
that I try to pass on

is the sense that economics
is an empirical field,

then 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.

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.

♪ [music] ♪

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 in an Economist.

Christina Romer
is a macro economic historian.

She takes the tools
of modern economics,

statistics, and data

and applies them
to historical questions.

- [Narrator] Christy's researcher
agenda throughout her career

has focused
on a course set of topics

about economic fluctuations
and business cycles.

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.

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 pose 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.

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."

Throughout her academic career,

Christine continued to challenge

her 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.

- [ ] Starting as soon as Roosevelt
took the US off the gold standard

when he took office in 1933,

over the next decade,

there's just an enormous increase
in money supply.

What he 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.

- [ ] 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 her 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.

- [ ] 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 US economy
was in free fall.

- [Christina] We often
describe the economy

as at the edge of a cliff.

Well, the truth is, we're not only
at the edge of a cliff,

we were headed down.

Financial markets were plunging,

and the risk of contagion
from the US to the global economy

was v ery real.

- [ ] Even people who'd see a lot

were really worried
about what was happening.

Just as the nation was turning
to President-elect Obama

to confront the economic crisis,

a mysterious email
showed up in Christina'a inbox

with the subject line:
"Obama Transition."

- [ ] 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 fitst."

And she discovered that he was the head of the economic side of the transition.

The Obama administration wanted to meet with Christina as soon as possible.

- [ ] 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 wa sset up to bring academics into the policy-making process

and make recommendations to the President.

- [Christina] I was taking 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 oculd play

and no one could be better positioned to know what the right strategy woulf be.

- [CHristina] We were talking to bankers,

we were talking to employers,

we were talking to the people that where collecting the statistics.

- [Marrator] Christina'a research revealed

that the economy was even more of a perilous position

than previously thgoutt.

SHe got on the phone with Obama to give him the bad news.

- [Christina] Saying, you going, 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."

- [ ] The challenge that CHristy and her team members on the Economic Advisory Team confronted

was how large a stimulus the US 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 inflate the economy.

- [Marrator} CHristina helped design a fiscal package

that she thought was necessary to get the economy moving.

- [Gabriel] The American Recovery and Reinvestment Act

is 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 for the time when households were spending less

and busniesses 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 recession

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 acaedemic research, and then as a policymaker,

the government could do more to mitigate recessions

that really has an impact probably hundreds of thousands of people

kept their jobs during the Great Recession

because hse had become an expert on the behavior of the economy,

on the effects of fiscal policy.

- [ ] And she was realy passionate about the role that she played

after the financial crisis and the Great Recession