Business Cycles, Growth, Misallocation, and AI with Pete Klenow | Hoover Institution

[upbeat music] This is the Capitalism and Freedom in the Twenty-First Century podcast, an official podcast of the Hoover Institution's Economic Policy Working Group, where we talk about economics, markets, and public policy. I'm Jon Hartley, your host. Today my guest is Pete Klenow, who's Professor of Economics at Stanford University and one of the world's leading authorities on economic growth. He's made really fundamental contributions in, you know, areas like misallocation, on sticky prices, development accounting, uh, and many other areas. It's a real honor to have you on, Pete. Uh, I think economic growth is one of the most important areas in economics and, uh, it's amazing to be able to talk to, uh, really, uh, one of the field's, uh, leading scholars.

Well, thank you so much for having me on. I'm excited to talk with you.

W-Well, before we get into what I think is economics' most important question, what causes economic growth, I wanna get into your background. So you grew up in the Bay Area, and you got your PhD from Stanford. I mean, what influenced you to become an economist in the first place?

I would say in the first place, I was totally attracted to its relevance to policy, um, in particular things like trade policy, but also industrial policy, whether we should favor certain sectors and, and kind of like what causes economic growth. I was already as an undergrad at Berkeley, by the way, um, although I did get my PhD at Stanford. At Berkeley, I was a business major and, and I was very drawn to, you know, technological progress, generated a lot of growth. And, and in fact, even from high school, there was like a high school project where they wanted us to put like, um, by date major political events on one side of the, the chronology and on the other side, like other events that are not necessarily politics, and I filled that up with technological innovations. So I was always kind of taken with technological innovations and their importance for economic growth. And so I was motivated even as an undergrad then to think about the, that as some of the most important questions, uh, for economists. But I was just very drawn to economics from its policy relevance, um, including levers that could affect growth rates, but also, you know, all kinds of policies. And so it seemed like a powerful paradigm in terms of its use of data, but also math and statistics, and then it had like a, it had like a public, you know, debate and, uh, element to it that I, I found appealing as well.

Very good. And, um, yeah, I mean, it, it, um, it... I, I think the story is similar for me. I mean, you know, this idea that, you know, people in academia could argue so much, uh, over, you know, these ideas, I always felt sort of attracted, uh, me in a sense that, you know, this, these must be interesting. There must be work to be done if there's so much disagreement over all these issues. Um-

Yeah. That's a great way to put it.

So you did your, uh, PhD at, at Stanford and, you know, at that time, my, my sense is, you know, the big macro folks around at that time, uh, you know, uh, in, in the department, folks like, you know, Bob Hall, folks like John Taylor, um, folks