If developed countries' citizens want to feel slightly better about their economies' slow growth and high unemployment, they should contemplate how much worse matters could be without the institutions that they have.
Interpretation
This quote emphasizes the importance of institutions in stabilizing economies, particularly in developed countries with slow growth and high unemployment.
Raghuram Rajan's quote suggests that citizens of developed nations should appreciate the role of their institutions in mitigating economic challenges, such as slow growth and high unemployment. Rather than focusing solely on the negatives, contemplating the potential worse outcomes in the absence of these institutions can foster a sense of gratitude and perspective, highlighting how essential these frameworks are to maintaining economic stability and societal welfare.
In practice
In a discussion about economic challenges during a community meeting.
The U.S. should worry about the effects of its polices on the rest of the world. We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country.
Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
Too many years away from academia renders you pretty incompetent at research and teaching. So I had to go back.
The gap in India has always been between the promise and the execution.
Beneath the surface, unnoticed by many, an even deeper force was at work—the rise of creativity as a fundamental economic driver, and the rise of a new social class, the Creative Class.
Those on the downside of rising economic inequality generally do not want government policies that look like handouts. They typically do not want the government to make the tax system more progressive, to impose punishing taxes on the rich, in order to give the money to them. Redistribution feels demeaning. It feels like being labeled a failure.
There is a broad consensus, not only in the United States but in most of the world, that if you are in an economic downturn, you need to stimulate. Germany seems to be an exception.
Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency.
Markets can influence the events that they anticipate.
Inequality has risen to the point that it seems to me worthwhile for the U.S. to seriously consider taking the risk of making our economy more rewarding for more of the people.
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