Bull Case On Productivity

Last week on our podcast, we had two very interesting conversations. The first half of the show focused on the economy, the Federal Reserve (Fed) and the future of productivity with Dan Sichel. Sichel worked on former Fed Chair Ben Bernanke’s team supporting the Federal Open Market Committee with analytic work and is currently a professor at Wellesley College. The second half of the discussion was with Chris Geczy, finance professor at the Wharton School of the University of Pennsylvania and the academic director of the Jacobs Levy Equity Management Center for Quantitative Financial Research. We profiled the Jacobs Levy New York quant conference being held September 15, from which we will be broadcasting live. There is still time to register for those reading midweek—search out the Wharton Jacobs Levy Conference in New York.

On the Economy with Sichel

There’s considerable uncertainty over who the Trump team will appoint to replace both Fed Chair Janet Yellen and now Vice Chair Stan Fischer, who made a surprise resignation last week. The markets worry Trump will appoint someone with little Fed experience. Yellen would be welcomed by the markets if it went in her direction, and Sichel believes chances are roughly 50-50 at this stage that she will get the renomination.

We recently had a bull/bear debate on the economy with Joel Mokyr and Robert Gordon, and Sichel sides with Mokyr on the bullish side. Sichel sees the slowdown in productivity over the last six to seven years as a pause before a period when productivity will improve significantly.

Boom-Bust Cycles: Throughout history, there have been alternating periods of faster and slower growth in productivity. We had a period of slower growth from the mid-1970s to mid-’90s, and then faster growth from 1995 to the mid-2000s. Why does Sichel think there is a pause now? He says to look at the world around us and you can observe it.