Xavier Gabaix discusses why economies fluctuate, and postulates that firm-level shocks, meaning when a large company struggles or fails, are responsible for some macroeconomic shifts in an economy. He then talks about his work building economic models that take into account bounded rationality—that is, models that break with orthodoxy to better reflect real-life situations and decision-making among diverse economic actors. Finally, he explains why, in his view, poverty is a more urgent concern than the inequality that results from concentrated income and wealth at the top. His argument begs the question, though: Are poverty and inequality separable? Is it possible to maintain an adequate floor on poverty in a world of extreme inequality, money-driven politics and rent seeking?
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