The Economics of Questioning Everything

In his State of the College address to the general faculty in October, President Philip J. Hanlon ’77 talked about Jackson Spurling ’23 to illustrate how a Dartmouth liberal arts education equips students with the leadership skills, confidence, and hands-on experience to succeed in an increasingly complex world.

President Hanlon noted that Spurling had co-authored a paper with his economics professor, David “Danny” Blanchflower, that immediately caught the attention of the White House Council of Economic Advisers.

“The Council was particularly interested in Jackson’s key finding, which built upon Danny’s earlier research and identified a broader measure of labor market slack that better explains wages than the unemployment rate,” Hanlon said. “The finding not only showcased the depth of Jackson’s intellect, but helped advance U.S. economists’ understanding of wage equations.”

Last spring, Spurling, an economics major and government minor from Bermuda, took Econ 62: Topics in Macroeconomics with Blanchflower, the Bruce V. Rauner 1978 Professor of Economics. Spurling says the class was energizing and inspiring.

As part of the class, he read Blanchflower’s book, Not Working: Where Have All the Good Jobs Gone?, which asks why wage growth is so sluggish even though the unemployment rate is low. Blanchflower’s arguments for including other employment data in monetary policymaking, central to this work, are widely discussed in U.S. and international government, banking, and business circles.

“One of Professor Blanchflower’s home-run hits of a research finding, which he found in 2016, was this thing called underemployment, which is not accounted for in the unemployment rate,” Spurling says. “What I wanted to do was find other variables, variables to better gauge the degree of slack in the labor market.”

This labor market slack, reflected in the number of people working part-time who want to work more, and by people who have left the labor market, is not accounted for in the unemployment data, which is a primary metric used by economists and monetary policy makers such as the Fed.

Blanchflower and Spurling, along with University College London professor Alex Bryson, published their research, The Wage Curve After the Great Recession, in the National Bureau of Economic Research in August 2022, and co-wrote an op-ed for the European-based Center for Economic Policy titled Labour Markets Are Not As Tight As You Think.

“It has been extremely rewarding to work on such intriguing research as an undergraduate, and I am beyond grateful for the opportunity. Getting to work alongside distinguished professors, like Professor Blanchflower, speaks volumes to the undergraduate experience at Dartmouth and the value of a liberal arts education,” Spurling says.

“I’ve felt that it’s not only taught me to think critically about complex economic relationships, but helped me distill this research into something presentable and digestible to a wide audience.”

Earlier this month, Blanchflower, who is off campus for the winter term, and Spurling talked by Zoom with Dartmouth News about the research and about Blanchflower’s approach to teaching. The call was in the style of a segment on Bloomberg TV, where Blanchflower is a contributing editor and frequent guest.

“If you look at the data, the data tells you something entirely different from what all the central bankers are saying,” Blanchflower says. “The data is not in any way consistent with anything they’re saying, and what’s interesting, and we do a lot on this in class, is that there is very little dissent. They all think the same and the likelihood—Jackson?—the likelihood is they all think the same but … they’ve probably got it wrong.”

Nodding, Spurling says, “They got it wrong in 2008, they got it wrong when they raised interest rates in 2015 unanimously eight times in a row. They all voted with little dissent, little debate, and I think the only one who did was Professor Blanchflower on the Monetary Policy Committee in ’08. He was the lone dissenter.”

Blanchflower came to Dartmouth in 1989 to “work on the relationship between wages and unemployment, the workhorse for monetary policy makers,” he says. He was a member of the Bank of England’s interest rate-setting Monetary Policy Committee from June 2006 to June 2009.

In the classroom, Blanchflower pushes his students to think about markets and economic data in real time, skills that he says will equip them for the world of finance.

“I would come into class knowing what happened in the last two hours, but often in class we would update it to what happened in the last 20 minutes. That’s what’s different about what we do,” Blanchflower says.

“It’s not what an economist thought about what happened eight years ago. The data comes in this morning. What is the banks’ position? What does the Bank of America think? There are all these people who are focused on the markets, on what happens by the hour, and that’s what I do, and I try to pass it on to the students,” Blanchflower says.

Spurling, a Dartmouth Economics Research Scholar who has lined up a job after graduation as an equity analyst for the New York hedge fund Millennium Management, calls Blanchflower “a data guy” who always pushes back against the status quo.

“He’s driven by the data. And for us, the interesting thing is, most of the time we’re getting all this data, and at the same time we’re hearing this narrative being pushed by the conventional actors out there, by the large banks, institutions, and the Fed,” says Spurling.

“What you get to is, if you look at the data and seek to challenge them, most of the time they have it wrong,” he says.