This issue starts with a speech given by Nobel Laureate Angus Deaton at last year’s TEC conference. In the talk, Deaton reiterated the message of his work that he and Anne Case have done on “Deaths of Despair”: the disturbing increase in mortality and worsening economic results for much of the large share of the US population without a college education. Deaton notes that in general, relative conditions for this group have worsened since the onset of the pandemic. While there are policies that can ameliorate the situation, he sees little prospect for the political system to deliver then.

David Altig’s NABE Presidential address is more upbeat. He talks about how economists have a tool kit that allows us to explain much of the world with only a few assumptions, with the theory of comparative advantage noted as a key insight. He notes in his conclusion that economics assumes that people are more alike than different, which is something to keep in mind nowadays, in particular when considering the problems Angus Deaton addressed.

In her paper, Dana Peterson explores the concept of “full employment.” As is likely well-known, the standard US unemployment rate does not provide an unambiguous answer since, by itself, it does not take into account labor force participation or the differing results across demographic groups, as well as the need to take into account changes in estimates of the natural rate. Puzzles also appear when looking at the numbers from elsewhere, including Europe, China, and Saudi Arabia (where the experience of native and non-native workers—the majority of employees—has been quite different).

In a further analysis of data, a panel consisting of Sonya Waddell, John Abowd, Camille Busette, and Mark Hugo Lopez, discusses how the concept of “race” is presented in the numbers. The major source of US racial data is the decennial Census. The results here depend critically on the precise classifications included and how the questions are worded, and what may seem like dramatic changes in the composition of the population may in part reflect changes in these. Also, people can have multiple and changeable senses of what “race” they belong to. Failure to be aware of these issues can lead to failures in the design of policies intended to ameliorate social and economic problems.

This year’s Mennis-award winning paper takes a new look at the old idea that an inverted yield curve is a strong advance indicator of a recession. Kajal Lahiri and Chen Yang show that the size of the gap between long and short rates that can provide a good recession signal has shifted over time. It is now the case that the short rate merely needs to be within one point below the long rate to provide a recession signal. Of course, that threshold was passed in the last year.

Baby-boomers are by now probably mostly retired, and this huge older cohort will likely be looking to move into senior housing arrangements of various types. In his Contributed Paper winning piece, Daniel Lindberg examines a common idea that the demand for senior housing is essentially price-inelastic (take-up of facilities will be done largely independent of price). Lundberg finds that, in fact, the demand for senior housing looks fairly price-elastic——contrary to what some may think, senior housing is in large part something that is used by higher-income people, whose take-up is often a matter of choice (and so sensitive to all of what is on offer, including price).

Michael Weber’s paper, based on a presentation made at this year’s NABE Annual Meeting, deals with household formation of inflation expectations. In general, individuals form such expectations in a nonsystematic manner, with wide dispersions across the population, focusing on price changes (especially increases) for particular products (most notably, gasoline), rather than taking account general economic conditions and the outlook, or the statements of the Fed. There may be ways in which the Fed can better communicate to the public and enhance the value of observed household inflation expectations.

The first book review in this issue is by Catherine Triosi, of Gregory Zuckerman’s book on the development of Covid vaccines. In the press of events since the grimmest days of the pandemic, it is perhaps now overlooked how simply astonishing it was to develop effective vaccines. The book shows how this accomplishment rested on a long background of research, as well as the expedited process by business and government to get the vaccines designed, approved, and distributed. Triosi recommends the book for anybody interested in how this type of science and business operates.

The remaining reviews deal with books that address the challenges monetary policy has faced since the 2008 financial crisis, and with the policymakers themselves. The first is a review by a heavyweight of a book by a heavyweight: Charles Goodhart’s look at Ben Bernanke’s 21st Century Monetary Policy. Goodhart finds much to praise in the work, which is basically a history of the Fed over the last half-century and what looks to be the future situation. However, Goodhart is critical of the case that QE policies should be standard, even outside of crises, that money and credit aggregates have lost their usefulness for policymakers, and, most importantly, the implicit notion that low inflation is in the cards for the indefinite future (the book was published before the recent inflation surge).

Donald Kohn, who was, of course, Vice Chair of the Fed in Bernanke’s first term, reviews Scott Sumner’s The Money Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy. Market monetarism is interpreted at the idea that monetary policy should target the growth of nominal GDP. The rationale it that it provides a fairly ideal response to demand shocks, and a good response to supply shocks—preventing policy from generating a large recession in response to what may be a brief upward jolt to prices. Kohn acknowledges these plusses, but notes that persistent supply shocks would create problems, the considerable practical difficulties to calibrating policy to movements in nominal GDP (ranging from data release timing, and revisions, to communications), and differs strongly with Sumner’s view that policy mistakes in 2008 could have been avoided by then paying more attention to nominal GDP.

Takeo Hoshi reviews the memoir of Masaaki Shirakawa, who was Governor of the Bank of Japan from 2008 to 2013, and thus, coped with the financial crisis as well as the now-chronic lackluster performance of the Japanese economy. Hoshi agrees with Shirakawa’s view that structural problems, such as demographics, are at the root of Japan’s longer-term situation, and that deflation in Japan has been of such limited extent that it has not been a major concern. He disagrees with Shirakawa’s views that monetary policy was unable to help in the wake of the financial crisis and that stronger growth of aggregate demand would not have aided Japan over the longer run.

Turning back to the US., Patrick Parkinson—who spent many years as a senior staff economist at the Federal Reserve Board—looks at Lev Manand’s The Fed Unbound… Menand is concerned at problems posed by the expansion of “shadow banking, “which may be loosely defined as financial intermediation outside traditional commercial banking. Of course, in 2008–2009 the Fed, using its emergency lending authority, provided massive support to these markets, instruments, and instituions. Manand interprets the events of early 2020 as another breakdown in shadow banking requiring further Fed intervention. He finds such actions as raising issues about the Fed allocating capital and calls for increased regulation of shadow banks and the issuance of a Central Bank Digital Currency (CBDC). Parkinson notes, though, that regulations applying to, and supervision of, shadow banks have increased substantially, and that the 2020 crisis had little to do with shadow banks. Like Manand, though, he is concerned about growing Fed interventions into financial markets and suggests that legislation to sharply curtail the scope of sketchily collateralized Fed emergency lending is needed.

Ellen Meade, who was an adviser to then Fed Vice Chair Richard Clarida, reviews Nick Timiraos’ Trillion-Dollar Triage, an account of the brief but terrifying financial crisis in early 2020. The work is also an account of Jerome Powell’s life and career, most importantly the review of Fed strategy and communication policy launched prior to the pandemic, but the gist is an account of the crisis and how the Fed responded. Also noted are developments since the Fed’s adoption of a “flexible average inflation targeting” policy, the onset of what is now acknowledged to be persistent, rather than transitory, inflation and Powell’s reappointment to a second term as Fed chair. In contract to the above four reviews, Meade has no negative comments about this work.

My review is of Jon Hilsenrath’s biography of Janet Yellen. Yellen’s long and varied career as an academic and policy official has coincided with radical changes in the economy, and in economics, and the work does a nice job of putting it in that context. Yellen’s concern with questionable mortgage lending prior to 2008, and her skilled navigating the Fed’s (first) “exit” from QE and zero interest rates are well-described. I found the book’s many shifts in focus to other people (especially to George Akerlof, Yellen’s husband) to be somewhat distracting, and there are some glithches I saw in the discussions of the development of economics, but it is well worth reading for anybody who wants to know more about Yellen.

Finally, note should be made of the passing of two people who in different ways were important contributors to NABE: Mary Ann Greenwood, who was a NABE Fellow and a valued member of the NABE Board, and Nobel Laureate Edward Prescott, who was the 2015 winner of the Adam Smith Award (in his speech, David Altig noted Prescott as an inspiration).