Stephen Dupont: Do you affiliate yourself with any particular school of economic thought or philosophy?
Timothy Taylor: The great health care economist Victor Fuchs used to say that he was a “radical moderate.” He argues that moderates need to be radical, too, or else they will be drowned out by noise from radicals who are on the extremes. Of course, the problem with trying to be middle-of-the-road is that you get hit by ideological traffic going both directions.
Stephen Dupont: As the managing editor of the Journal of Economic Perspectives for more than 30 years, you’ve been a keen observer of economic trends, theories and policies. As you look back, is there anything that has surprised you over the past 30 years in the world of economics?
Timothy Taylor: For me, economics is an ongoing parade of surprises. I was surprised when the Berlin Wall came down, and a number of economists turned to the problem of “transition economies.” I am stunned that China has become the largest economy in the world. I was shocked that the countries of Europe—and Germany in particular—actually gave up their traditional currencies for the euro. I thought U.S. health care spending already sky-high back in 1980 at 9% of GDP, and now it’s approaching 18% of GDP. I did not suspect that the U.S. financial system and economy was as fragile as it turned out to be in the Great Recession of 2007-2009. I never would have thought that the Federal Reserve would take its policy interest rate down to near-zero, and hold it there for seven years. I flatter myself that my understanding of the economy is pretty good—except that I only learn to understand what has happened with a time lag of about two years.