Unfinished Business in the Macroeconomics of Low Inflation: a Tribute to George and Bill by Bill and George

1 The retirement of George Perry and Bill Brainard gives us an opportunity to say publicly what we have often said privately: Brookings Papers is an important national institution. It is important because it has set the right tone for US macro policy. George and Bill are both Keynesians, not just in the narrow tradition of IS-LM models with Phillips Curves, but also in their broader methodological approach to macroeconomics. Brookings Papers has always reflected their view that macroeconomics should be a pragmatic and judicious mixture of theory and common sense informed by statistical analysis. That of course reflects the methodology of Keynes, throughout his life, and especially in The General Theory. We think that US macro policy has benefited enormously from being based on such a balanced pragmatic-empirical approach. If we doubt the benefits of such an approach to macroeconomics we need only look to the North—to Canada—where doctrinaire use of an extreme form of natural rate theory in the 1990's led them to push inflation too low resulting in an unusual unemployment gap relative to the United States. This is just one example where a more empirical, more nuanced, macroeconomics—such as presented for the last thirty years in Brookings Papers—has implications for national welfare. Macroeconomic policy, as no one appreciated better than Keynes, oftentimes even makes the difference between prosperity and depression. It will be a hard task for the new editors to take the place of George and Bill, and we wish them luck. Neither this Bill nor this George has ever envied them their difficult job. George and Bill have edited Brookings Papers the hard way. The easy way is to trawl the conferences and the economics department hallways for the best of what already exists. But, instead, for the most part, George and Bill recruited people to push forward their agenda, which 2 in turn was shaped by their vision of the important issues in macro policy. Doing so, they have done the impossible; admittedly with some very good help from their authors, they have produced something like eight to twelve significant and relevant new papers on macroeconomics per year. In addition to commissioning these papers, they have also edited them. We have continued to be amazed at how George and Bill could take first drafts, which were not always in the best of shape, and, quickly turn them into interesting, readable gems.