Much of my work in this period was concerned with exploring the logic of economic models, but also with attempting to reconcile the models with everyday observation.

Capital market liberalization includes freeing up deposit and lending rates, opening up the market to foreign banks, and removing restrictions on capital account transactions and bank lending. The focus is on deregulation, not on finding the right regulatory structure.

I think in part the reason is that seeing an economy that is, in many ways, quite different from the one grows up in, helps crystallize issues: in one's own environment, one takes too much for granted, without asking why things are the way they are.

World War II was really unusual, because America was in the Great Depression before. So the war did help the US economy to get securely out of this decline. This time, the war [in Iraq] is bad for the economy in both the short and long run. We could have spent trillions in research or education instead. This would have led to future productivity increases.

Most people think the Iraq war has increased the probability of an attack. However, it's difficult to put this aspect into financial terms.

Not everybody is qualified to go to Stanford, but everybody should have access to the best qualify for which they are eligible.

For instance, one of the costs of the war is that soldiers today get very seriously injured but stay alive, and we can keep them alive but at an enormous price.