Would you say that OpenPhil’s grants in 2021 were negative impact, but that many of their previous grants were positive impact? You demonstrate quite convincingly that the 2021 grants were negative impact (if they had impact at all), pushing us from supporting employment and consumption post-Covid to triggering inflation. But OpenPhil’s macroeconomic policy grants date back to 2014, when the case for more expansionary monetary policy was much stronger.
The monetary consensus was significantly more hawkish during the recovery from the 2008 recession. The recovery was famously slow, and when OpenPhil began their grantmaking in the area in 2014, the US had not yet closed the output gap left by the 2008 recession. OpenPhil helped push us to a policy consensus that met the Covid-19 pandemic with swift and decisive rate-dropping and QE from the Fed, as well as the widely celebrated stimulus payments from Congress. Consider a counterfactual world where OpenPhil never made macroeconomic policy grants—would we have been in greater danger of underreacting to Covid just as we underreacted to 2008? What if greater concern for inflation had prevented the Congressional stimulus packages? How would the costs of higher unemployment, lower consumption, and stronger temporary shock to family consumption compare to the challenges of inflation we’re currently facing?
This deserves more attention and expertise than I have to offer, and your writeup is a stellar critique of a clear failure on the current margin. But the lessons learned from OpenPhil’s macroeconomics advocacy should cover the full extent of their program, and the case for positive impact seems much stronger in earlier years.
My vague sense is that you’re right and that until 2021, the program was very good and beneficial and helped with a faster recovery. I commend OpenPhil for engaging with this and I agree that we should evaluate the impact of the whole program, I just don’t have the capacity and means to do that. My vague sense is that the program would come out net positive on the whole, however, perhaps if there are large negative effects of current high inflation—like lots of populists getting elected and we can causally attribute this to high inflation- then it also doesn’t seem inconceivable that the overall impact might be negative. Similar to the China Trade Shock literature which showed that trade reform was beneficial for growth and lowered consumer prices slightly, but also might have helped Trump win, this might be similar, and I’d rather take a slightly slower recovery then another 4 years of Trump (but note that this could have gone the other way as well: perhaps a faster recovery in the past reduced the chance of Trump in 2016, helped Biden in 2020, and the low unemployment numbers will help the Democrats now actually—it’s really an empirical question).
Would you say that OpenPhil’s grants in 2021 were negative impact, but that many of their previous grants were positive impact? You demonstrate quite convincingly that the 2021 grants were negative impact (if they had impact at all), pushing us from supporting employment and consumption post-Covid to triggering inflation. But OpenPhil’s macroeconomic policy grants date back to 2014, when the case for more expansionary monetary policy was much stronger.
The monetary consensus was significantly more hawkish during the recovery from the 2008 recession. The recovery was famously slow, and when OpenPhil began their grantmaking in the area in 2014, the US had not yet closed the output gap left by the 2008 recession. OpenPhil helped push us to a policy consensus that met the Covid-19 pandemic with swift and decisive rate-dropping and QE from the Fed, as well as the widely celebrated stimulus payments from Congress. Consider a counterfactual world where OpenPhil never made macroeconomic policy grants—would we have been in greater danger of underreacting to Covid just as we underreacted to 2008? What if greater concern for inflation had prevented the Congressional stimulus packages? How would the costs of higher unemployment, lower consumption, and stronger temporary shock to family consumption compare to the challenges of inflation we’re currently facing?
This deserves more attention and expertise than I have to offer, and your writeup is a stellar critique of a clear failure on the current margin. But the lessons learned from OpenPhil’s macroeconomics advocacy should cover the full extent of their program, and the case for positive impact seems much stronger in earlier years.
My vague sense is that you’re right and that until 2021, the program was very good and beneficial and helped with a faster recovery. I commend OpenPhil for engaging with this and I agree that we should evaluate the impact of the whole program, I just don’t have the capacity and means to do that. My vague sense is that the program would come out net positive on the whole, however, perhaps if there are large negative effects of current high inflation—like lots of populists getting elected and we can causally attribute this to high inflation- then it also doesn’t seem inconceivable that the overall impact might be negative. Similar to the China Trade Shock literature which showed that trade reform was beneficial for growth and lowered consumer prices slightly, but also might have helped Trump win, this might be similar, and I’d rather take a slightly slower recovery then another 4 years of Trump (but note that this could have gone the other way as well: perhaps a faster recovery in the past reduced the chance of Trump in 2016, helped Biden in 2020, and the low unemployment numbers will help the Democrats now actually—it’s really an empirical question).