The following article first appeared in the INOMICS Handbook 2024.

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Professor Marcel Fratzscher, esteemed macroeconomist and president of the DIW Berlin, once again asks questions about economics and life in general to a peer in the 2024 edition of the INOMICS Handbook Questionnaire. This time, he poses the questions to Dr. Olivier Blanchard, a prominent macroeconomist, who graciously took to the spotlight in this latest round. Thus, the back-and-forth has been dubbed Fratzscher vs. Blanchard, as is tradition. Dr. Blanchard offers us some interesting food for thought: the interview touches on the joy of conducting research with former students, the sometimes counterintuitive things we learn from economics, an analysis of Real Business Cycle Theory, and more.

Olivier Blanchard is the C. Fred Bergsten Senior Fellow at the Peterson Institute for International Economics and the Robert M. Solow Professor of Economics emeritus at the Massachusetts Institute of Technology (MIT). After obtaining his PhD in economics from MIT in 1977, he taught at Harvard University before returning to MIT in 1982. He was chair of the economics department from 1998 to 2003. In 2008, he took a leave of absence to serve as economic counselor and director of the research department at the International Monetary Fund, where he stayed until 2015. He then joined the Peterson Institute.

Blanchard has worked on a wide set of macroeconomic issues, including the role of monetary and fiscal policy, speculative bubbles, the labor market and determinants of unemployment, economic transition in former communist countries, the nature of the Global Financial Crisis, and the recent burst of inflation. He is the author of many books and articles, including two textbooks on macroeconomics (one at the graduate level with Stanley Fischer and the other at the undergraduate level). He is a past editor of the Quarterly Journal of Economics and the NBER Macroeconomics Annual; he is also a founding editor of the American Economic Journal: Macroeconomics. He is a fellow and former Council member of the Econometric Society, a past president of the American Economic Association, and a member of the American Academy of Arts and Sciences.

Marcel Fratscher: What is your favorite place on earth?

Olivier Blanchard: The French island where I have spent most of my summers, and, with time, a longer and longer period of time each year. Zen, sea, and fortunately and unfortunately, zoom.

MF: Outside of economics, what occupation would you choose if you could be absolutely anything?

OB: Concert pianist (although there is zero evidence that I have the slightest gift in that particular direction). But music moves me more than nearly anything else.

MF: What is your favorite piece of music?

OB: Gymnopediés by Eric Satie.

MF: What is the virtue you appreciate the most?

OB: Straightforwardness, honesty.  

MF: Your all-time favourite figure in economics?

OB: I shall choose close to home: my advisor, Bob Solow. I admire him for the importance and the beauty of his work, but also his human qualities. I admire, but am not sure I would have loved him, Keynes.

MF: Your #1 economics blog?

OB: I do not read economic blogs. Nothing personal. (I am more a short Twitter person). On general blogs, Ezra Klein.

MF: Your ideal student?

OB: Somebody from whom I learn. I have written papers with many of my students, learned a lot and always enormously enjoyed it.

MF: What should be done to address a gender bias in research in economics?

OB: I am proud of what we have done at the American Economic Association. I think the right institutions and rules are in place. (Some) male behavior unfortunately will take more time to adjust.*

^{*Editor’s note: Aside from making policy changes to improve the environment for women in economics, the AEA launched the Committee on the Status of Women in the Economics Profession. An update on the Committee and the AEA’s work can be found in the 2023 CSWEP News Issue IV on the AEA’s website.}

MF: What is the most misguided research agenda in economics?

OB: Let me avoid labeling it misguided, but Real Business Cycle theory and methodology is the quintessential example of a disrupting technology. 50 years after its inception, I am still not sure whether the benefits are offsetting the costs.

It is definitely becoming more useful by incorporating more distortions and more heterogeneity, but it suffers from nearly genetic problems, such as the black box aspect. This is actually made worse by the increased complexity of modern DSGE versions.

MF: What is the most promising current research field or issue in economics?

OB: Quite clearly, all the fields that benefit from the increasing availability of large data sets. But, in general, looking for examples at the NBER working paper list each week or so, I am amazed at the richness and the scope of current research. They include forays in behavioral issues, use of experiments, forays at the border of sociology and psychology, and work on institutions.

MF: Where does economic research have the most influence on policy-making?

OB: In a lot of places, antitrust, macro, etc. But, and this is a plaidoyer pro domo, there have to be people with one foot in research, and one foot in the real world, to be able to translate the conclusions of research to specific policy recommendations.

MF: On what issues should policy listen more to economists?

OB: All the time…but especially when economists derive conclusions at odds with what would seem to be common sense. The paradox of saving, the incidence of taxes, the market for lemons, etc.

MF: What is your career advice to a young economics researcher?

OB: You need to demonstrate two things. Your analytical abilities, i.e. your ability to cleanly formalize an issue and derive implications. And more importantly, your creativity, i.e. thinking in a new way about an essential issue. The challenge: Balancing the two in your thesis. Start with a question to which you do not know, but would like to know, the answer (and one where you think the answer will be interesting to others too). Preferably not from an extension of another paper.

^References:

^{The Peterson Institute for International Economics’s bio page for Dr. Olivier Blanchard was referenced when writing the introduction to this article. It can be found at the following address: https://www.piie.com/experts/senior-research-staff/olivier-blanchard}