We Need to Get Our Groove Back

Question: How did you get into economics?

Mark Zandi: Well, it happened in 4th grade.  I did a project on: Why was Detroit the center of the vehicle industry?  This was a 4th grade project.  I remember -- it was a group project and I enjoyed it tremendously and I didn't now what an economist was in the 4th grade, but I knew that I wanted to do something like that.  And so from that time on, I sort of focused on things related to business and economics.  So, I remember that day and I remember that project and I remember how much I enjoyed it and I thought I was good at it.  I thought I had insight and so from that day forward I was headed towards being an economist. 

Question: How should economics be taught at different levels of school?

Mark Zandi: I think it's not taught properly at high school.  If I were teaching in high school, I would focus on personal finance issues.  When I got out of high school, I could make a pretty good omelet, but I didn't even know what a mortgage was.  And I think that's a mistake.  And I think that's one of the reasons why we are in the mess that we are in.  Why all those millions of bad loans were made because people really did not, truly did not understand what they were getting into.  So, I think the high school curriculum should change and home economics should be more about the economic than the home.  I think.  That would be my view. 

And then I think in universities, it tends to be – the teaching seems to move towards the highly theoretical.  Very mathematically oriented and it kind of loses touch with the reality of what's happening in our economy and in the real world.  And I think that's to the detriment of the profession and it's relevancy to our everyday lives.  So, I think it's important that universities, at least, make an effort to get back to more practically oriented kinds of economic analysis.  Or, at least do economic theory that they can ground in terms of something that is practical. I think we've lost that and are losing that and there are very few economists that can really step out of the theoretically world and make an impact on what's happening to people's daily lives. 

Question: What keeps you up at night?

Mark Zandi: What keeps me up at night is the fact that businesses seem to be still very, not panicked, but they're very, very cautious.  Unusually cautious.  And I guess it's understandable because many a business people suffered near death experiences in the last year and just aren't stepping up and the longer they wait to step up and begin to invest and begin to hire, the more likely this recovery that we are now in unravels back into a recession.  And if we get back into recession, I don't think that's going to be easy to get out.  People's wages will start to decline and we'll be engulfed in a deflationary cycle.  You've already used up most of our policy ammunition, the funds rate target is at zero, and we have a $1.4 trillion budget deficit.  So, we have to guard against that and it worries me that businesses haven't gotten their groove back.  At least not yet. 

Recorded on November 10, 2009

Moody’s chief economist Mark Zandi is worried that businesses are being overly cautious.

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