VoxTalks Economics

VoxTalks
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  • Social Sciences
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Learn about groundbreaking new research, commentary and policy ideas from the world's leading economists. Presented by Tim Phillips.

  1. Addressing Global Imbalances

    1h ago

    Addressing Global Imbalances

    Episode recorded on 19 June 2026 at the PSE-CEPR Policy Forum in Paris. Twice before, the world's savings and debts have piled up in the wrong places, and twice the imbalance broke something. The first time it took the Plaza Accord to fix it. The second time it took a global financial crisis. Now we are in a third wave. Gita Gopinath (Harvard, former IMF Chief Economist and First Deputy Managing Director) and Philip Lane (European Central Bank, CEPR) join Tim Phillips to ask what is different this time. Household and bank balance sheets are stronger than before 2008. But the fragility has moved to governments carrying much higher debt, and to non-bank financial institutions whose exposures and links to banks are only partly visible. Foreign investors hold US$40.7 trillion of US equities, 44% of world GDP outside the US, much of it riding on the AI boom. Lane's overriding principle: central banks can calm bond markets under stress, but they must be just as clear about what they will not do if debt is unsustainable. The research behind this episode: Bai, Chong-En, Gita Gopinath, Hélène Rey, and Axel Weber. 2026. "G7 Economists Memo on Global Imbalances." Prepared for the French Presidency of the G7, 28 March. The panel also draws on the fourth CEPR/Bruegel Paris Report, Paris Report 4: The New Global Imbalances, edited by Hélène Rey, Beatrice Weder di Mauro and Jeromin Zettelmeyer (CEPR Press and Bruegel, 2026), free to download at cepr.org. Gopinath made the keynote presentation “The Third Wave: Addressing Global Imbalances” on 19 June at PSE. To cite this episode: Phillips, Tim, Gita Gopinath, and Philip Lane. 2026. "Addressing Global Imbalances." VoxTalks Economics (podcast). About the guestsGita Gopinath is the Gregory and Ania Coffey Professor of Economics at Harvard University, where her research spans international finance and macroeconomics, dollar dominance, exchange rates and sovereign debt. She was First Deputy Managing Director of the International Monetary Fund from 2022 to 2025, and the Fund's Chief Economist from 2019 to 2022.  Philip Lane is Chief Economist and a member of the Executive Board of the European Central Bank, and a Fellow of CEPR's International Macroeconomics and Finance programme. He was Governor of the Central Bank of Ireland from 2015 to 2019, and remains an honorary professor of economics at Trinity College Dublin, where his research covered financial globalisation and European monetary integration. Research cited in this episodeThe three waves of global imbalances. Gopinath frames today's imbalances as the third episode since the 1970s in which national savings and investment have pulled badly out of line, a framing she titled "The Third Wave" in her Atlanta Fed presentation. The first, in the early 1980s, produced the 1985 Plaza Accord, when the US and its G5 partners agreed to talk the dollar down after years of a strong currency and a widening trade deficit. The second built through the 2000s and unwound in the 2008 global financial crisis. In both, the US was the deficit country; the surplus moved from Japan to China. Foreign holdings of US equities. Gross foreign holdings of US equities stood at US$40.7 trillion, 44% of world GDP excluding the US (Gopinath 2026, citing US Treasury data). Gopinath's slides show 54% of gross foreign inflows into US government debt since 2007 and estimate that 61% of the deterioration in the US net international investment position since the global financial crisis has been driven by valuation effects rather than trade deficits. Non-bank financial institutions (NBFIs). Hedge funds, private credit funds, insurers and other institutions outside the regulated banking system now intermediate a large and growing share of global finance. Gopinath's slides show leveraged intermediation migrating from households and banks before the 2008 crisis toward government and non-bank financial institutions today, echoing the concerns set out in the G7 memo and the CEPR Paris Report. The 2020 "dash for cash." In March 2020, US Treasury yields rose sharply even as investors would normally be expected to flee to safety, a sign that market functioning, not just prices, can break down under stress. Gopinath cites the episode as evidence that hedge funds, now bigger players in Treasury market-making, can amplify rather than absorb shocks. ECB crisis tools: PEPP, OMT and TPI. Lane describes three instruments built since 2012 to separate monetary policy from market functioning: the Outright Monetary Transactions programme (2012), designed to backstop governments already in an ESM assistance programme; the Pandemic Emergency Purchase Programme (2020), the ECB's flexible, country-varying response to Covid-19; and the Transmission Protection Instrument (2022), intended to calm unwarranted bond market panic without financing unsustainable debt. US federal debt and the fiscal deficit. Gopinath's slides put federal debt at 108% of GDP in 2025, up from 41% in 2007 and 39% in 2000 (source: Federal Reserve, FRED). In conversation she cites the US fiscal deficit at close to 7% of GDP, at a point in the cycle when the economy is strong. Note this is federal debt specifically; the G7 memo cites a broader measure, US general government debt, at around 120% of GDP, projected to reach around 140% by 2031. The two figures are not directly comparable and should not be conflated in the notes or on air. More VoxTalks Economics episodesThis episode sits alongside three earlier VoxTalks Economics conversations built around the CEPR/Bruegel Paris Report 4, The New Global Imbalances. Global Imbalances Redux, in which Maurice Obstfeld sets out the history of the three waves of imbalances and what today's policymakers can learn from how the first two were resolved. Rebalancing the Chinese Economy, in which Yiping Huang explains why decades of investment-led growth suppressed Chinese household consumption, and what it would take to reverse that. Stablecoins and Global Imbalances, in which Gilles Moec examines how dollar-backed stablecoins help fund the US deficit, and the regulatory gaps that leaves behind. Related reading on VoxEUWhy global imbalances matter again, and what to do about them, a VoxEU column drawn from Chapter 1 of Paris Report 4, setting out why imbalances have widened since 2018 and the risks of a disorderly unwind. Industrial policy, tariffs, and the return of global imbalances, which finds that tariffs are a weak tool for correcting current account imbalances and that industrial policy's effects run mainly through its impact on domestic saving and consumption.

    25 min
  2. Helping the over-50s find work

    2d ago

    Helping the over-50s find work

    Lose your job at 25 and someone will help you find another. Lose it at 55 and the talk quietly turns to how you might wind down towards retirement. Policymakers tend to assume job search training works for the young and not the old, so they rarely spend money trying. Bas van der Klaauw (Tinbergen Institute) thinks they got that wrong. In this week's VoxTalks Economics, he tells Tim Phillips about a Dutch experiment that put older unemployed workers through an intensive programme built on one idea: teach people over 50 to find work the way younger workers already do, by working their social network. Participants left unemployment faster, there was a 10% increase in job finding, and the savings in benefits more than covered the cost. The catch: it helped the better educated most and was tested in a recession. Will it work just as well in today's labour market, where even the young and well-educated are struggling to find good jobs? The research behind this episode: de Groot, Nynke, and Bas van der Klaauw. 2026. "A Randomized Experiment on Improving Job Search Skills of Older Unemployed Workers." CEPR Discussion Paper 21464. (Gated) To cite this episode: Phillips, Tim, and Bas van der Klaauw. 2026. “Helping the over-50s find work.” VoxTalks Economics (podcast). About the guestBas van der Klaauw is professor of economics at Vrije Universiteit Amsterdam and director of the Tinbergen Institute. An applied microeconometrician, he uses causal methods to study labour markets, education and health, and is a research fellow of CEPR and IZA. His work on unemployment insurance, active labour market programmes and job search includes several field experiments run with the Dutch benefits administration. The paper is co-authored with Nynke de Groot, an economist at the National Health Care Institute (Zorginstituut Nederland) who took her PhD at Vrije Universiteit Amsterdam. Her earlier work with van der Klaauw includes a study of how cutting the unemployment insurance entitlement period affects job finding. Research and concepts discussed in this episodeOlder workers and long-term unemployment. Older unemployed workers tend to have job finding rates around half those of younger workers, and during the recession the study covers, more than half of older job seekers risked becoming long-term unemployed. Van der Klaauw attributes the gap to a combination of factors rather than any single cause: more generous and longer benefit entitlements that weaken the incentive to take a lower-paid job quickly, and employers who favour younger hires expected to grow with the firm over a longer horizon. STEP (Successfully to Employment Program). A Dutch job search assistance programme developed during the post-2008 recession for unemployed workers aged 50 and above who had not found work within a few months of claiming unemployment insurance. It ran to 10 group sessions of around four hours each plus two individual meetings, covering interview practice, CV writing and social media, with a particular emphasis on activating the participant's social network. Participants were encouraged to have at least one conversation a week with a contact about possible work. The programme cost roughly 470 euros per participant. The experiment. The study covers everyone aged 50 to 63 who entered unemployment insurance in the Netherlands between November 2014 and July 2015 and remained unemployed for three months, about 50,000 people. Assignment to treatment or control was based on the last digit of the social security number, putting roughly 20% in the control group. Because participation was voluntary (an encouragement design), the authors report both the effect of being offered the programme and, using random assignment as an instrument, the effect of actually taking part. Around 54% of those in the treatment group took up STEP. What it did to job search behaviour. The job application register lets the authors watch how people searched. Participants made fewer applications to posted vacancies and did more networking, exactly the shift the programme was designed to produce. The change in method did not raise the number of job interviews, but it was accompanied by faster exits from unemployment. Cost effectiveness. Participation cut cumulative benefit payments by about 715 euros within 18 months, comfortably above the 470 euro cost, making STEP cost effective for the benefits administration. For participants, the lost benefits were almost fully offset by higher earnings from working sooner, so there was no large income gain to the individual, but no loss either. Who it helped. Effects were strongest for the better educated, those with higher pre-unemployment earnings and those not previously working through a temporary work agency. There was little or no effect on the lowest educated, who also had the lowest take-up. The authors find no significant difference by gender or by age band within the 50 to 63 range. Trainers and group composition. Effectiveness varied significantly across trainers, but no observed characteristic (gender, age, experience, contract type) explained which trainers did better. Group composition mattered too: participants did better when their group contained some lower-educated members, which argues for mixed rather than streamed training groups. One reading is that trainers may concentrate their attention on the more employable members of a group. Does it generalise? Two caveats. The programme was evaluated in a recession, when people were losing jobs through no fault of their own (frictional unemployment), and it may do less when work is easier to find. And it was designed for that kind of unemployment, not for the structural problem of workers whose skills no longer match available jobs, where van der Klaauw suggests training or retraining, rather than job search help, is the relevant tool.

    19 min
  3. The success of the embedded state

    Jun 26

    The success of the embedded state

    Who kept the courts sitting and the streetlights lit when the state had almost no money to pay anyone? Two hundred years ago, British local government ran on unpaid labour. In a parliamentary survey of the boroughs from 1835, two in three of the people doing local government work were not paid at all. James Robinson (University of Chicago, CEPR) explains how this succeeded in this week's episode of VoxTalks Economics. Robinson and his co-authors call this the "embedded state". Members of the elite willingly took the unpaid jobs because the postings carried prestige and led to Parliament, promotion or a paid post. Less glamorous or dead-end postings -- the jailer for example -- had to be paid But the unpaid officers were more productive than the paid ones. Robinson argues this is not a quirk of England at that time. Rwanda runs a high-capacity state today on much the same basis, without ever raising the taxes the IMF says a proper government needs. The lesson for anyone trying to make government work: start with the society, not the tax code. New episode of VoxTalks Economics. Link in bio. Image: William Benjamin Watkins by George Patten / Manchester Town Hall. The research behind this episode: Heldring, Leander, Davis Kedrosky, James A. Robinson, and Matthias Weigand. 2026. "The Success of the Embedded State in England." CEPR Discussion Paper No. 21460. Centre for Economic Policy Research, London.  To cite this episode: Phillips, Tim, and James A. Robinson. 2026. "The success of the embedded state." VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestJames A. Robinson is University Professor at the Harris School of Public Policy and the Department of Political Science, University of Chicago, and a Research Fellow at the Centre for Economic Policy Research. His research spans comparative political and economic development, state capacity, and the long-run relationship between institutions and prosperity, with fieldwork across sub-Saharan Africa and Latin America. He shared the 2024 Nobel Memorial Prize in Economic Sciences with Daron Acemoglu and Simon Johnson. Research cited in this episodeThe 1835 parliamentary report. After the 1832 Reform Act, Parliament sent lawyers to roughly three hundred of the largest boroughs to record who worked for each borough government, what they did, whether they were paid, how much, and how well the job was done. The commissioners graded public goods directly; whether a jail existed, and if so whether its condition was satisfactory. The 3,500-page report is the factual basis for the paper, and it survives because Parliament itself did not know how these idiosyncratic, often medieval borough governments worked. The fiscal-military state. The dominant account of British state formation comes from John Brewer's The Sinews of Power (1989), which traces the rise of a tax-raising, salaried fiscal state after the Glorious Revolution of 1688. Robinson's point is that this describes 20,000 officials in London; across the rest of the country, where fiscal resources were thin, most government work was done for free. Mark Goldie and the unpaid office-holder. The historian and political theorist Mark Goldie documented the scale of unpaid local office-holding in earlier work; Robinson and his co-authors took that observation and asked how to study it systematically, which led them to the 1835 report. The embedded state. A state has high capacity when it can implement policy and provide public goods. The embedded state does this without the fiscal resources to fund a modern bureaucracy, by drawing on the social structure of the society it governs to motivate people to do government work unpaid. Because that social structure differs from place to place, embedding looks different in 1830s Britain, in modern Rwanda, and in 1970s South Korea; understanding the state means understanding the sociology beneath it. Rwanda's state capacity. Robinson and Leander Heldring also study the organisation of the state in Rwanda, where most government workers are unpaid and the country has never raised the 15% of national income in taxes that the International Monetary Fund treats as the threshold for a functioning state, yet implements policy effectively. Elinor Ostrom and the commons. Elinor Ostrom won the 2009 Nobel Memorial Prize for showing that communities can organise to provide and govern shared resources without the state. Robinson's argument is that the interface between such collective provision and the state is productive rather than antagonistic. Somaliland and the Guurti. Somaliland has an elaborate clan structure, and its upper house, the Guurti, represents the clans. Robinson offers it as a case where anyone trying to improve public good provision should start from the existing social structure rather than from tax reform. The History of British Local Government. Beatrice and Sidney Webb's nine-volume history of English local government documents the medieval charters, inherited land and bequests that determined how much fiscal capacity each borough had. That historically determined variation in whether a borough could afford to pay its officers is what the paper uses to identify the effect of pay on performance. More VoxTalks Economics episodesNobel Special - James Robinson on antisocial norms. The saying “don’t be a toad” in Colombia tells people to mind their own business and not to tell on others. The warning that “snitches get stitches” is common to many societies. It’s easy to imagine why groups adopt prosocial norms like sharing and volunteering. But what sustains an “antisocial” norm?

    20 min
  4. Making defence spending pay

    Jun 19

    Making defence spending pay

    Defence spending is rising whether voters like it or not. The UK has committed to 2.5% of national income and aims for nearer 3.5% over the next decade, £30bn a year for each percentage point. What does the country get back? Can defence spending be pro-growth? In this week's VoxTalk, John Van Reenen (LSE) argues that getting a return on investment based on innovation need not be left to luck. For example nuclear power, GPS and the internet all began as military projects. The spillovers can be planned for; the trick is to make defence spending innovation-rich, and make procurement work better. Traditional top-down procurement mostly produces lock-in: the same firms winning over and over. Van Reenen's study of a project at the US Air Force shows the difference: when it asked firms what they could build, rather than telling them what to make, the competitions brought in startups, generated more original patents, and spilled ideas into the civilian economy.  The research behind this episode: Moretti, Enrico, Claudia Steinwender, and John Van Reenen. 2025. "The Intellectual Spoils of War? Defense R&D, Productivity, and International Spillovers." The Review of Economics and Statistics 107 (1). An ungated version is available as NBER Working Paper No. 26483. Howell, Sabrina T., Jason Rathje, John Van Reenen, and Jun Wong. 2025. "Opening Up Military Innovation: Causal Effects of Reforms to US Defense Research." Journal of Political Economy 133 (11). An ungated version is available as NBER Working Paper No. 28700. To cite this episode: Phillips, Tim, and John Van Reenen. 2026. “Making defence spending pay.” VoxTalks Economics (podcast).Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestJohn Van Reenen is the Ronald Coase School Professor at the London School of Economics and Director of the Programme on Innovation and Diffusion at the Centre for Economic Performance. He chairs the Council of Economic Advisors to the Chancellor of the Exchequer and is a Research Fellow of the Centre for Economic Policy Research and the NBER. His research spans innovation, productivity, industrial organisation, and the public policies that shape them. Research cited in this episodeCrowding in, not crowding out. Moretti, Steinwender and Van Reenen tracked industries across twenty-three economies over several decades and found that higher defence R&D spending raised private R&D rather than displacing it, with knock-on gains for productivity growth in the following decades. The SBIR Open Topics reform. The US Air Force Small Business Innovation Research programme traditionally ran "conventional" competitions specifying the technology wanted; from 2018 it added "open" competitions inviting firms to propose any idea useful to the Air Force. Howell, Rathje, Van Reenen and Wong compared near-winners with near-losers and found the open awards produced new military technology, more original patents, and civilian spillovers such as venture capital funding; the conventional awards mostly produced lock-in. Spin-offs from military research. Nuclear power, GPS and the internet each began as military projects before becoming civilian technologies; Van Reenen reaches back further to the claw of Archimedes, built to fend off the Roman fleet at Syracuse, as an early example of defence invention finding a wider use. The Draghi report. Van Reenen worked with Mario Draghi on his 2024 report on European competitiveness; he draws on it to argue that fragmented standards and duplicated procurement across Europe waste money, and that common standards and joint procurement would let countries specialise where they hold a comparative advantage. More VoxTalks Economics episodesIn January, Tim spoke to Moritz Schularick of the Kiel Institute for the World Economy about whether Europe can convert its industrial base into credible deterrence. Listen to Can Europe Defend Itself?

    26 min
  5. Did the sewing machine liberate women?

    Jun 12

    Did the sewing machine liberate women?

    In January 1860 the New York Times gave its blessing to a new machine: the sewing machine. These "iron needle-women", it wrote, were the only invention that could be claimed “chiefly for women's benefit”. Sewing was women's work in the nineteenth century, rich or poor, and a machine could now do it in a fraction of the time. So did it set women free? Philipp Ager and Davide Coluccia have traced the adoption of the sewing machine in Massachusetts between 1850 and 1900, using census records and digitised business directories to work out who was exposed to it, in the factory and in the home. For poorer women the machine meant work, in garment factories and in boot and shoe production; they married later, had fewer children, and many never married at all. For wealthier women, who had few acceptable jobs open to them, the hours it saved went into earlier marriage and earlier motherhood. Philipp tells Tim Phillips the story of a machine that had very different impacts in different social classes. The research behind this episode: Ager, Philipp, and Davide Coluccia. 2026. "Liberation Technology? The Impact of the Sewing Machine on Women." CEPR Discussion Paper No. 21496. CEPR Press, Paris and London. CEPR Discussion Papers are gated; CEPR members and subscribing institutions can download the paper at the link. To cite this episode: Phillips, Tim, and Philipp Ager. 2026. "Did the Sewing Machine Liberate Women?" VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestsPhilipp Ager is professor of economics at the University of Mannheim, a Research Fellow of the Centre for Economic Policy Research, and an editorial board member at Explorations in Economic History. His research spans the economic history of the United States, technological change, and the long-run effects of crises and disasters; his work on the Great Fire of London of 1666 featured in an earlier episode of VoxTalks Economics. Research and sources cited in this episodeThe Song of the Shirt. Thomas Hood's poem about a destitute seamstress was first published anonymously in Punch in December 1843. Hood based it on the case of Mrs Biddell, a London widow prosecuted after pawning clothes she had been given to sew.  Godey's Lady's Book. The most widely read women's magazine in the US at the time crowned the sewing machine "the queen of inventions" in 1860, having calculated that a man's shirt took 20,620 stitches and 14 hours to sew by hand, against an hour and a quarter by machine.  Singer and the Sewing Machine: A Capitalist Romance. Ruth Brandon's 1977 biography of Isaac Singer (Google Books) is the source for both Singer quotations read in this episode. . How the Other Half Lives. Jacob Riis, a Danish-born police reporter in New York, published his account of tenement and sweatshop life in 1890 (free at Project Gutenberg). The shirtmaker's testimony read in this episode was given to the State Board of Arbitration during the shirtmakers' strike and reported by Riis in his chapter on the working girls of New York. The household appliance revolution. Philipp contrasts the sewing machine with the washing machines and vacuum cleaners that arrived two generations later, which economists have credited with freeing women to join the workforce; "Engines of Liberation" by Jeremy Greenwood, Ananth Seshadri and Mehmet Yorukoglu, Review of Economic Studies, 2005, covers this topic. The sewing machine saved time in the same way, but in the 1860s far fewer acceptable jobs awaited the women whose time it saved. More VoxTalks Economics episodesThe economic effect of the Great Fire of London. Philipp Ager's previous visit to VoxTalks Economics, with Paul Sharp, on what contemporary records reveal about London's uneven recovery after 1666. Related reading on VoxEUGender norms and the labour market, a VoxEU column on how norms, both internalised and enforced by peers, constrain women's labour market outcomes; the modern counterpart of the stigma that kept married women in Massachusetts out of paid work.

    19 min
  6. The digital money supply

    Jun 5

    The digital money supply

    Every day, billions of transactions settle between strangers who have no idea which bank the other uses. That lack of friction is not automatic. Nine-tenths of the money in daily circulation has been created by commercial banks, but it stays trustworthy only because central banks stand behind it, and keep the system in balance. In this week’s episode Tim Phillips talks to Stephen Cecchetti (Brandeis University, CEPR) about what happens when new forms of digital money test that architecture. Cecchetti is one of the authors of the eighth Barcelona Report in The Future of Banking series, part of the Banking Initiative at IESE Business School, just published by CEPR as a free download. Will retail central bank digital currencies, tokenised deposits, and stablecoins upset the delicate balance of system that has been running for decades? Stablecoins, for example, do not create money, but they claim the status of money without the institutional guarantee that makes money trustworthy. Three jurisdictions — the US, the EU, and the UK — are each resolving the same underlying contradiction in different ways. None has fully resolved it. The research behind this episode: Niepelt, Dirk, Stephen G. Cecchetti, Hélène Rey, and Xavier Vives. 2026. Digital Money: The Future of Banking 8. London: CEPR Press. Available as a free download from CEPR. To cite this episode: Phillips, Tim, and Stephen G. Cecchetti. 2026. “The digital money supply.” VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestStephen Cecchetti is the Rosen Family Chair in International Finance at Brandeis University, a Research Fellow of the Centre for Economic Policy Research (CEPR), and a Research Associate at the NBER. He was previously Economic Adviser and Head of the Monetary and Economic Department at the Bank for International Settlements, and Director of Research at the Federal Reserve Bank of New York. His research spanning monetary policy, financial stability, and banking regulation has shaped both academic and policy debate over three decades. He blogs at moneyandbanking.com. Research cited in this episodeWalter Bagehot's lender of last resort doctrine. In Lombard Street: A Description of the Money Market (1873), Bagehot argued that a central bank under stress should lend freely against good collateral at a penalty rate. The prescription remains the intellectual foundation for how central banks manage runs and systemic crises. Cecchetti invokes it to make the point that no private substitute for a central bank backstop has ever proved durable, and that the doctrine is now, one hundred and fifty years on, being tested by instruments its author could not have imagined. Monetary uniformity, mobility, and elasticity. The three institutional conditions underpinning general acceptance of money, developed in analysis by the Bank for International Settlements and discussed extensively in the report. Uniformity means a pound is a pound regardless of which bank holds it. Mobility means claims move between users and institutions at low cost and settle with finality. Elasticity means the supply of money can expand when it is under stress. Together they explain why we accept a deposit at face value without doing any analysis of the bank that issued it; and together they identify exactly where new forms of digital money create institutional gaps. Silicon Valley Bank failure, March 2023. SVB's collapse illustrates both the lender of last resort functioning and the limits of no-bailout commitments. Cecchetti notes that SVB's liabilities were still trading at par on the Thursday before its Friday failure because the Federal Reserve stood behind them. He also notes that Circle, the issuer of USDC, held $3.3 billion of its reserves at SVB and was effectively bailed out in the resolution. The episode is one of two occasions in the past twenty years where money market fund-like instruments have been backstopped by the Federal Reserve under stress. Genius Act (United States). Principle-based stablecoin regulation expected to come into effect in the US around 2027. Under its provisions, only stablecoins issued by bank-affiliated issuers will have access to the Federal Reserve; only those will therefore have the institutional backing needed to function as money. Stablecoins issued by non-bank entities will not. Markets in Crypto Assets Regulation (MiCA), European Union. The EU framework for crypto assets, which entered into force in 2024. For stablecoins, MiCA requires issuers to hold 30 to 60% of their reserves in bank deposits, with no provision for central bank backing. The stated rationale is to keep deposits within the banking system; Cecchetti notes this creates a different category of vulnerability and leaves the question of what happens under stress unresolved. Bank of England stablecoin proposal (United Kingdom). The Bank of England's approach differs from both US and EU frameworks by explicitly requiring large stablecoin issuers to hold significant reserve deposits at the Bank of England, making them in effect narrow banks with a direct central bank backstop. Cecchetti regards this as the most coherent of the three approaches in terms of institutional logic, though the same fundamental question applies: whether holding to that design under stress would be politically sustainable. Tether and the jurisdictional challenge. Tether, the largest stablecoin issuer, is registered in El Salvador having previously operated out of the British Virgin Islands. Its tokens are held by users in multiple countries, traded on exchanges in multiple jurisdictions, and backed by US Treasury securities. Cecchetti uses this to illustrate why local regulation, however well-designed, is necessary but not sufficient; effective oversight of instruments that are genuinely global requires international standards and coordination. Fractional reserve banking and the goldsmith model. The institutional structure described in the episode has roots in mid-seventeenth century England, when goldsmiths began issuing more paper receipts than they had gold in their vaults. The goldsmiths became bankers; the paper became money; the vulnerability to runs became a structural feature of private money creation that persists today. Cecchetti uses the history to make the point that while technology changes how we store and transmit information, the underlying architecture of trust in private money is as old as Newtonian physics. More VoxTalks Economics episodesMaking banking safe, Stephen Cecchetti and Kermit Schoenholtz. Our financial system is supposed to be more resilient than before the global financial crisis, but that didn’t save Silicon Valley Bank, Signature Bank or First Republic. So what went wrong? Related reading on VoxEUNew coins on the block: Digital currencies and the financial system. The authors of the Barcelona Report warn that “Digital money will be reliable only where sound institutions and robust technology come together.”

    27 min
  7. How well does patent screening work?

    May 29

    How well does patent screening work?

    Someone once held a patent on the swing. A piece of wood. Two ropes. The US Patent Office granted it. How often does that actually happen, and what does it cost when the system gets it wrong? Or, how often is a valid patent claim rejected? Until now, no one knew. Tim Phillips talks to Mark Schankerman of LSE and CEPR, who with co-authors William Matcham spent eight years building the tools to find out. Using natural language processing across a dataset of around one million patent applications, twenty million claims, and fifty-five million examiner decisions, they measure how similar each incoming claim is to the hundred million claims that preceded it, going back to 1976. They find that 81% of initial patent claims fall below the patentability threshold; examiners must negotiate that figure down round by round. And they do a pretty good job. But around a third of all abandoned applications contain at least one valid claim the system failed to protect. You don’t see patents that aren’t awarded, so those errors have, until now, been invisible. The research behind this episode: Matcham, William, and Mark Schankerman. Forthcoming. "Screening Property Rights for Innovation." Econometrica. Available as CEPR Discussion Paper DP18334 (gated). Current version dated January 2026. To cite this episode: Phillips, Tim, and Mark Schankerman. 2026. “How “well does patent screening work? VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestMark Schankerman is Professor of Economics at the London School of Economics, where his research spans innovation, intellectual property, and the economics of technology. His work has examined how patent rights shape R&D incentives, the market for technology, and the behaviour of innovative firms, with particular attention to the institutions that govern how property rights are allocated and enforced. Research cited in this episodePrior art. In patent law, prior art is any publicly available knowledge that predates a patent application. Examiners are required to search prior art and reject claims insufficiently distinct from it. The concept defines the outer boundary of what can be granted protection; the closer a claim is to prior art, the weaker the case for granting it. Type I and Type II errors in patent screening. A Type I error occurs when an examiner grants a claim that should have been rejected, typically because it is too similar to prior art. This allows the holder to charge royalties and, in the US context especially, to bring litigation. A Type II error occurs when a valid claim is refused or abandoned, depriving the applicant of protection they deserve and reducing future incentives to innovate. Schankerman argues that Type II error is systematically under-discussed in public debate: you can point to a patent that should not have been granted; you cannot point to the invention that was never protected. Structural model. The paper uses a dynamic structural model, meaning it models the actual institutional rules, incentives, and decision sequences that govern patent prosecution at the USPTO. Structural models allow researchers to run counterfactual experiments, asking what would happen if specific rules or incentives were changed, without running those experiments for real. This is the methodological basis for the paper's policy analysis. Patent distance measure. The paper's key methodological innovation is a quantitative measure of how similar a patent claim is to existing claims, constructed using natural language processing. The algorithm is trained on existing patent documents and compares the textual content of each incoming claim against all prior claims, covering roughly a hundred million filings going back to 1976. This produces a scalar distance figure that can be compared against an estimated patentability threshold. Deadweight loss. The standard economic term for the welfare cost created when prices are raised above competitive levels. In the patent context, a wrongly granted claim allows its holder to charge higher licensing fees than the market would otherwise bear, generating a cost for users without a corresponding social benefit. Request for Continued Examination (RCE). A procedural mechanism in the US patent system that allows applicants to re-open a finally rejected application in exchange for a fee. Unlike the European Patent Office or China's patent system, the USPTO places no hard limit on how many times an applicant can return. Schankerman's counterfactual analysis finds that restricting rounds to one substantially reduces screening costs and discourages strategic padding of claims. Unified Patent Court (UPC). A specialised European court that began operating in June 2023. Its remit covers the enforcement of patent rights across participating EU member states; it does not conduct patentability examinations. Schankerman argues that by reducing the cost of enforcement, the UPC raises the stakes of the upstream screening process: a wrongly granted patent becomes cheaper and easier to assert. Amazon one-click patent. Amazon received a US patent on the one-click online purchasing process. Schankerman uses the case to illustrate the core economic argument: the relevant question is not whether an invention is valuable, but whether patent protection was necessary to induce its development. If the invention would have occurred regardless, the grant creates costs without providing the intended innovation incentive. Intrinsic motivation. The tendency for individuals to pursue a task for its own sake rather than for external rewards. Schankerman's model estimates that USPTO examiners exhibit substantial intrinsic motivation and that this is the primary driver of screening quality. In counterfactual simulations, removing intrinsic motivation causes outcomes to deteriorate markedly; removing the credit-based extrinsic incentive system has a much smaller effect. Padding. Schankerman's term for the strategic behaviour in which patent applicants include claims that are broader than what is strictly novel, hoping some will survive examiner scrutiny and expand the scope of their eventual property right. The paper measures the extent of padding directly from the distance data and confirms it is widespread. More VoxTalks Economics episodesPatent pools for generic drugs, Mark Schankerman talks about how diffusion of new drugs is painfully slow in low-income countries. Do patent pools accelerate the process, and how we could still do a better job of licensing life-saving medicines? Related reading on VoxEUPatent screening, innovation, and welfare, Florian Schuett and Mark Schankerman, 6 Nov 2020. Critics of the patent system claim that patent rights are becoming an impediment to innovation, and an instrument to extract rents through patent litigation. This column develops a framework to quantitatively assess the effectiveness of the current US patent system and the welfare impact of reforms.

    33 min
  8. Redefining the monetary standard

    May 22

    Redefining the monetary standard

    The fiat money system has survived the Great Inflation, the global financial crisis, and a pandemic. But can it survive digital currencies? Bitcoin and the blockchain solved a genuine problem in computer science: how to stop people spending the same money twice. Forty years of successful inflation control means central bank money is stable; that is the stability in stablecoins, attempting to solve the volatility problem. What's next? What if the unit of account itself were indexed to consumer prices? Digitalisation might finally make that approach viable at scale. Price stability, by design. Will we still need cash? Maybe not now, But if you never use it, it may not be there if the blackout comes. The research behind this episode: Stracca, Livio. 2025. Redefining the Monetary Standard in the Digital Age: Digital Innovations and the Future of Monetary Policy. Springer Nature. To cite this episode: Phillips, Tim, and Livio Stracca. 2026. "Redefining the monetary standard." VoxTalks Economics (podcast). Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.About the guestLivio Stracca is Deputy Director General for International and European Relations at the European Central Bank, where he has worked for more than two decades. His research spans monetary economics, international finance, and the implications of digitalisation for central banking, with extensive work on exchange rates, capital flows, and the architecture of the international monetary system.  Research cited in this episodeThe double-spend problem. The fundamental challenge in any decentralised digital payment system: how to prevent a participant from spending the same unit of money twice when there is no trusted central authority to verify transactions. Bitcoin's 2008 white paper offered an innovative solution by making the transaction ledger public, cumulative, and computationally expensive to rewrite. The trade-off is that transparency sacrifices privacy; every transaction is visible to all participants in the network. The blockchain. A distributed ledger in which transactions are grouped into sequential blocks, each cryptographically linked to the one before. Reversing any transaction requires rewriting every subsequent block, which demands enormous computational effort. This design solves the double-spend problem in a decentralised network but makes the system slow and costly to operate at scale. The payment trilemma. A framework discussed in the episode and in Stracca's book: any digital payment system can optimise for at most two of three properties simultaneously (universal access, security against fraudulent transactions, and privacy). Cash is the only instrument that escapes the trilemma; digital systems must accept a trade-off among the three, and the choice is often made implicitly by the designer of the system rather than through democratic deliberation. Hayek, Friedrich A. 1976. Denationalisation of Money. London: Institute of Economic Affairs. The classic argument for currency competition: let currencies compete freely and the one providing the most stable prices will win. Economists, including Milton Friedman, largely rejected the proposal on the grounds that money exhibits strong network externalities; the more people use a currency, the more attractive it becomes to the next user, producing a natural tendency towards monopoly. A formal modern revisitation, finding similar conclusions, is Fernández-Villaverde, Jesús, and Daniel Sanches. 2019. "Can Currency Competition Work?" Journal of Political Economy 127 (3): 1017 to 1058. Irving Fisher's compensated dollar. A proposal published in Fisher, Irving. 1913. "A Compensated Dollar." Quarterly Journal of Economics 27 (2): 213–235 (the same year the Federal Reserve was created). Fisher argued for a dollar whose purchasing power was held constant by adjusting its gold content in line with prices. The mechanical details of his proposal are no longer relevant, but its animating idea (indexing the unit of account to a price level) has gained new plausibility in a digital context. The Unidad de Fomento. Chile's inflation-indexed unit of account, in operation since 1967 and updated daily against the consumer price index. It is used widely in long-term contracts, including mortgages, and functions as a security that can be traded. Stracca cites it as evidence that an indexed monetary standard is operationally feasible, and as a prototype for what a digital equivalent might look like at larger scale. The Great Moderation. The period of low and stable inflation in advanced economies running roughly from the mid-1980s until the inflation episode of 2021 to 2023. Economists attribute it to improved monetary policy frameworks, particularly central bank independence, inflation targeting, and (crucially, in Stracca's account) the introduction of interest on reserves, which gave central banks precise control over the short-term interest rate without draining liquidity. Stracca treats the Great Moderation as the benchmark against which any proposed reform of the monetary standard must be judged. Programmable money. A form of digital money in which payment is conditional on an independently verifiable event, potentially confirmed by a machine rather than a human intermediary. Example: a payment that executes automatically when a delivery is confirmed by a sensor. Decentralised ledgers make such conditional payments technically straightforward; traditional banking systems can approximate them but with far greater friction. Stracca notes significant enthusiasm for programmable money but also real scepticism about whether the benefits outweigh the complexity in practice. More VoxTalks Economics episodesStablecoins and Global Imbalances, Gilles Moëc explains why we can think of stablecoins as a radical macroeconomic experiment that has arrived at exactly the moment the US external position is showing signs of stress. Can blockchain decentralise money, contracts, and finance? Bruno Biais on blockchain’s potential, its flaws, and its future. Do stablecoins threaten financial stability? Richard Portes thinks so.

    26 min
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Learn about groundbreaking new research, commentary and policy ideas from the world's leading economists. Presented by Tim Phillips.

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  • Creator
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  • Years Active
    2018 - 2026
  • Episodes
    464
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