Law and macroeconomics: Using regulations to combat recessions

Ten years after the 2008 economic recession, the government is ill-prepared to defend itself against the next economic downturn. Interest rates remain low, partisanship remains intractable, and the federal debt is rising at an unprecedented rate. These factors will hamstring traditional monetary and fiscal stimulus.

In his new book, “Law and Macroeconomics,” Yale Law Professor Yair Listokin argues that we can respond more quickly to the next economic crisis by deploying a policy approach whose proven success is too rarely acknowledged: regulation. He proposes that we take seriously the idea that law can function as a macroeconomic tool, capable of stimulating demand when needed and relieving demand when it threatens to overheat economies. And though history has demonstrated that law is an unwieldy instrument of macroeconomic policy, Listokin argues that under certain conditions it offers a vital alternative to the monetary and fiscal policy tools.

On Tuesday, September 10, at an Urban-Brookings Tax Policy Center event, Listokin presented the key findings of his research, and panelists deepened the discussion by addressing the following questions:

• What role does the law play in stimulating aggregate demand?
• How can laws and regulations complement traditional fiscal and monetary policy approaches to stabilizing the business cycle?
• Can regulations act as an effective alternative to fiscal and monetary policy during economic downturn?
• Which regulations should lawmakers implement to combat economic shocks?