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,

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 a 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.

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.

- [Gabriel] 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,

and 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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