Question A:
Current institutional arrangements mean that small firms will be able to renegotiate with creditors and landlords to avoid bankruptcy during the lockdown.
Responses
Responses weighted by each expert's confidence
Question B:
A program that allows small businesses to skip rent and utilities during the lockdown, but repay them slowly over time afterwards, would be a net benefit to the economy.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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Renegotiation is hard at the best of times. Casual evidence suggests it hasn't worked out well with banks in many cases so far.
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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It will be in the interest of many creditors to renegotiate, and some will. But I don't know how widespread this will be.
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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That's the intention! Remains to be seen how well it works...
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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 Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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The question is the extent. Sure there will be plenty of renegotiation. But how efficient? And at what cost?
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Some small firms anyway. Friends in the small-firm space tell me that they renegotiate contracts all the time (anecdotal economics I know).
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 Liran Einav |
Stanford | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Amy Finkelstein |
MIT | Bio/Vote History | ||
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 Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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Let’s hope.
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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 Robert Hall |
Stanford | Bio/Vote History | ||
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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I would say should rather than will. They should also be encouraged to do so.
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Did Not Answer | Bio/Vote History | |
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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Renegotiation is possible in theory but there is not enough time for the huge number of changes necessary to avoid inefficient bankruptcies.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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huge frictions, plus the b'rutpcy courts could be overwhelmed. Greenwood & Thesmar identify a real problem. Not sure about their solution
-see background information here |
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 Pete Klenow |
Stanford | Bio/Vote History | ||
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The holdout problem?
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 Jonathan Levin |
Stanford | Bio/Vote History | ||
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Many may be able to do so, especially with a scarcity of alternative tenants, but this is uncharted territory.
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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Small firms may try to re-negotiate their way out of bankruptcy, but it's not clear how successful this will be.
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 William Nordhaus |
Yale | Bio/Vote History | ||
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 Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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One hopes this will be the case, but the result is yet to be seen.
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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Landlords and suppliers to small firms are often small firms themselves; not all have regular banking relationships.
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Anecdotally, some firms have been able to renegotiate. It is unclear how many will be able to
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 James Stock |
Harvard | Bio/Vote History | ||
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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The default options are all bad for those with liquidity constraints. Cutting some slack is both humane and ma well be long-run maximizing.
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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There is substantial uncertainty about how lenders and landlords will deal with obligations of small businesses.
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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Caveat: perhaps some allowance when landlord is a small business or an individual.
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Alberto Alesina |
Harvard | Bio/Vote History | ||
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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Simply allowing non-payment would do damage. Requiring immediate payment would do damage. This is a half-way house.
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Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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Judith Chevalier |
Yale | Bio/Vote History | ||
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I don't think it is obvious that, say, landlords are always better able to provide financing than tenants.
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Possibly. It is a mess. Should the rule be that rent is forgiven or accrues at 60 percent, or 80 percent, or 100 percent on the dollar?
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Since moral hazard is not an issue. Consequences for landlords and utility companies would have to be addressed, of course.
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Bio/Vote History | ||
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Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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As long as we get control of the virus. If this thing lasts, extensions won’t work
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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i don't understand whether the government is involved and might step in with this scenario. too many moving parts to judge
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Robert Hall |
Stanford | Bio/Vote History | ||
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We have so much trouble defining a small business that the benefits would be unfocused.
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Oliver Hart |
Harvard | Bio/Vote History | ||
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There is something to be said for such a program but some people rely on rent for their income, and it would be bad for them.
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Caroline Hoxby |
Stanford | Did Not Answer | Bio/Vote History | |
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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US government pays ~0% interest. Many businesses are sound but need time to recover. Many fewer will fail with this policy.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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depends how long the lockdown lasts, the people not getting paid matter too, and targeting will be hard. details on design really matter
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Might be effective, but it is very hard to anticipate the full effects of this sort of policy.
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Eric Maskin |
Harvard | Bio/Vote History | ||
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If these firms go under, the economy will be dealt a serious blow. Better to try to keep them going until the economy opens up
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William Nordhaus |
Yale | Bio/Vote History | ||
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Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Depends on position of those to whom they owe money, and if they have alternative resources.
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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This would help keep firms, workers and productive capabilities intact, which will be important in the recovery.
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José Scheinkman |
Columbia University | Bio/Vote History | ||
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Small businesses need help but no reason to tax only utilities or landlords to finance this subsidy. Also payment chains are complex.
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Utilities can generally wait; less clear that most landlords can.
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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There is risk to the commercial mortgage market from this, but it already faces a difficult period
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James Stock |
Harvard | Bio/Vote History | ||
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Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Make flexibility the default.
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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There will, however, be difficult issues in designing a program like this.
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