Celebrated economist, presidential instructor

The dialogue between Martin Feldstein, Harvard professor, and SaKong Il, chairman of the Institute for Global Economics and advisor to the JoongAng Ilbo, took place at the National Bureau of Economics Research (NBER) in Cambridge, just three minutes away from the Harvard campus.

Established in 1920, the NBER is the leading think tank that announces the beginning or end of an economic recession.

The research on national income accounts by Simon Kuznets, which is considered part of mainstream modern economics, took place at the NBER from 1930 through 1940. The research on national income helped the U.S. government devise sophisticated policies to boost the economy. That helped the U.S. economy put an end to the Great Depression. Kuznets received the Nobel Prize in 1971.

It is impossible to explain who Feldstein is without describing the NBER. Feldstein served as the president & CEO of the bureau for 30 years. Now he is the president emeritus of the institute.

The economist foresaw the eurozone crisis far earlier than others. In the late 1990s, there were many who saw rosy prospects about the European Monetary Union. But Feldstein had a different view. In 1997, he wrote in Foreign Affairs that the single currency in Europe will have adverse effects on unemployment and inflation, which undermines benefits from trade and capital movements. His prediction that the single European currency would cause conflicts became reality.

In early 2008, he warned that the U.S. economy is in a recession and it could turn more serious. His diagnosis on the economy was correct again. The U.S. economy fell into another recession that is the worst since the Great Depression.

Feldstein is today called the “mentor” of economic policy makers. Many of his apprentices are currently serving at the government. Lawrence Summers, former U.S. Treasury Secretary, is one of them. But Feldstein and Summers had quite contrasting views about the economy. While Summers is concerned about a long-term recession, Feldstein dismissed the risks of deflation. He worried about the fact that inflation soars drastically once it starts to rise, citing historical records.

Feldstein is also an adviser to several U.S. presidents, including Ronald Reagan, George W. Bush and Barack Obama, on the economy.

BY LEE SANG-RYEUL [song.suhyun@joongang.co.kr]