When a crisis occurs, often the only thing a person can control is how they respond. This is true not just for individuals, but for families, companies, and governments.
How governments respond to crises, specifically financial crises, can have profound effects on their economies and the livelihoods of their constituents. For Pawel Janas, a new assistant professor of economics at Caltech, understanding how governments respond to crises is also an academic pursuit. Janas is an economic historian with an interest in how local governments react when they face financial hardship.
We recently spoke with him about his research, what brought him to Caltech, and the sport he plays semiprofessionally.
Can you tell us about your research?
I consider myself an economic historian who also knows finance. To me, economics is telling stories with data and some fancy math, but I think it's very dangerous for people to have the same story in their minds without ever challenging that story. A large part of what economic historians do is revisit these economic stories that have been told through generations and see what we can learn from those episodes.
What are some specific examples of things that you study?
I research financial crises—what happens when there's a huge downturn in the economy. My specific research interest has so far been the Great Depression and what happened when cities all of a sudden couldn't pay their debts and became financially constrained. I want to see what cities and their administrations did to cope with a financial crisis.
Why is this kind of research important? What can you learn that is applicable today by looking at things that happened during the Great Depression?
That's a great question, but I think I want to push back on that. I don't think all the research that we do at Caltech should be about policy or about being relevant today, because we have no idea what the future is going to bring.
But cities and counties are borrowing a lot of money today, and we want to know what happens when financial markets freeze and they can't borrow as much as they want to. That's going to happen at some point, and it turns out that historical episodes give us the right environment and the right laboratory to look at these core economic questions without having a very direct 2022 policy implication.
When you look at how the Great Depression affected local municipalities, what do you see?
You see trade-offs. Cities have a variety of things that they do, right? They provide education; they provide police; they provide fire protection; they paid welfare back in the day, and they also build a lot of infrastructure. So, cities do a lot of things, and they of course borrow their money and they pay off those debts.
My research shows that the cities that were very highly indebted were also the same cities that were cutting back on the public services and public goods that we would expect them to continue funding.
What are some of the projects that you are working on right now?
I have three projects that deal with the Great Depression. The first project is what I just described with the cities when they go bankrupt.
My second project is about schools, again during the Great Depression. Schools back in the day were funded mostly through local property taxes, and the Great Depression decimated the local property tax base, so schools were being severely underfunded. This project looks at which types of students kept going to school during the Great Depression and which ones dropped out. I'm trying to understand the implications for those people down the road, whether they returned to education and what their labor outcomes were.
The third project looks at the question of what happens when banks close. During the Great Depression, banks in this one region closed at a higher rate than similar looking banks in other regions. This actually offers us a really nice experiment for studying the effect of bank closures on economic activity.
How do you like to spend your free time?
My biggest and only hobby is playing Ultimate Frisbee, and I've been doing it for 15 years now. I played on my high school team in Colorado. I also played during college in Colorado, and when I moved to Chicago for my PhD, I played in all the club teams in Chicago and the semi-pro teams in Chicago. Right now, I'm still traveling to play on the club team in Chicago.
What is it about ultimate frisbee that appeals to you?
The fact that these grown adults spend a lot of money and time playing this game means that the community is very strong. I don't know in what other area of life you'll find a bunch of men and women in their late 20s and early 30s spending a lot of money and time doing a sport that's not professional, and that they don't get paid for. It's a really special group of people.