Speaker 1: This is Masters in Business with Barry Ridholts on Boomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest.
Speaker 1: His name is Danny blanche Flower. And if you are
Speaker 1: all interested in all manner of economic wonkery, well then
Speaker 1: this is the podcast for you. We talk about everything
Speaker 1: from unhappiness to unemployment, to what really constitutes full employment,
Speaker 1: to the rise of pain complaints in the United States
Speaker 1: and how it's related to the stresses caused by the
Speaker 1: financial crisis, as well as the ongoing flat wages that
Speaker 1: the United States have seen over the past thirty years.
Speaker 1: We get into all manner of fascinating discussion of beverage
Speaker 1: of kens of Skadewski, of why the United States is
Speaker 1: fairly unique both in terms of our housing market and
Speaker 1: our employment mark get and why the US is now
Speaker 1: exporting stress and discomfort and economic anxiety to the rest
Speaker 1: of the world. It's really an absolutely fascinating conversation. I
Speaker 1: enjoyed it and I think you will also. With no
Speaker 1: further ado, my conversation with Danny blanch Flower. This is
Speaker 1: Masters in Business with Barry Ridholtz on Boomberg Radio. My
Speaker 1: special guest this week is Danny blanch Flower. He has
Speaker 1: a storied history in the world of monetary policy and
Speaker 1: labor economics. He is currently a professor at Dartmouth where
Speaker 1: he teaches economics. He is a former member of the
Speaker 1: Monetary Policy Committee at the Bank of England. Currently he
Speaker 1: is a research associate at the National Bureau of Economic Research,
Speaker 1: and he is the author of a new book called
Speaker 1: Not Working, Where Have all the Good Jobs Gone? Danny
Speaker 1: Lane for that hour, Welcome to Blomberg. Great to see
Speaker 1: your parents, Good to be here. Yes, it's good to
Speaker 1: see you again. So so let's get into your background
Speaker 1: a little bit before we start getting to the specifics
Speaker 1: of the book. You're a labor economist. What exactly is
Speaker 1: that and how did your way find your way into
Speaker 1: that specialty? Um? Well, labor labor econonomics is the study
Speaker 1: of work. It's the study of jobs. It's about why
Speaker 1: people have got jobs, why they haven't, and it's about
Speaker 1: the price of labor. So it's about wages, it's about compensation. Actually,
Speaker 1: I got into it started to think about kids, starting
Speaker 1: to think about unemployment of the young, and in the
Speaker 1: nineties in the UK that was a really big deal.
Speaker 1: So I started to think about that and it just
Speaker 1: grew from there. And then then in the end I
Speaker 1: became a monitary policy maker and the labor market turned
Speaker 1: out to be central to everything. So started out being
Speaker 1: a labor economists, did some macro but it turns out
Speaker 1: now the big issues around the world in macroeconomics are
Speaker 1: about labor economics. So it's been a long journey, but
Speaker 1: it's been kind of a good one. So let's talk
Speaker 1: a little bit about your time at the Monetary Policy
Speaker 1: Committee at the Bank of England. We're recording this on
Speaker 1: a day when Mario Monty basically is announcing that they'll
Speaker 1: do anything to support the economy, which President Trump here
Speaker 1: in the United States declared unfair. For listeners who may
Speaker 1: not be familiar with you, You joined the Bank of
Speaker 1: Englands in two thousand and six, just as the financial
Speaker 1: crisis was starting to blossom for laugh of a better word,
Speaker 1: what was that experience? Like, Well, I was told at
Speaker 1: the beginning. I remember Gordon Brown told me that the
Speaker 1: hope is for you that central bank is going to
Speaker 1: be boring. That's not that's not exactly how it turned out, um,
Speaker 1: And I think the big deal for me was I
Speaker 1: was going back and forth every three weeks between the
Speaker 1: US and the UK, and I think the big insight
Speaker 1: for me was that the things I saw in the
Speaker 1: US started to occur in the UK a few months later.
Speaker 1: And the first big deal for me was the failure
Speaker 1: of Northern Rock. There were thousands of people in the
Speaker 1: streets standing outside the branches of that bank for the
Speaker 1: first time in a hundred years, So that was your
Speaker 1: sort of starter. We had bear Sterns here, not a
Speaker 1: depository bank. The closest thing was probably washing a mutual
Speaker 1: or there was some other bank right where there was
Speaker 1: a run on the banks. What is the guarantee from
Speaker 1: the UK equivalent of the federal departs an insurance company. Essentially,
Speaker 1: that was the issue. There really wasn't one, and so
Speaker 1: by the by the end of the week where and
Speaker 1: when essentially the money at the Northern Rock ran out,
Speaker 1: the website failed on the Wednesday, there was no guarantee
Speaker 1: essentially from the government, and the only way to stop
Speaker 1: it was to actually introduce one, and that's what stopped
Speaker 1: the run. But that was a year before the market collapsed.
Speaker 1: I started to think that we were really disappearing into
Speaker 1: a whole. So I started on my own to start
Speaker 1: to vote for rate cuts, and I voted for rate
Speaker 1: cuts for a really long time on my own, and
Speaker 1: I kept saying, there's a horrible session coming. Nobody else
Speaker 1: on the committee was really along with me. And then
Speaker 1: we got to September two thousand and eight and hell
Speaker 1: broke loose, and I remember thinking, Um, I did not
Speaker 1: expect to be in a position where three successive months
Speaker 1: my committee, including me, voted for fifty one, fifty and
Speaker 1: a hundred basis point cuts in three months. And then
Speaker 1: we kept going and then we did queie. I mean,
Speaker 1: this was literally like the world was just dropping off
Speaker 1: a cliff. So it certainly was not boring. It was scary,
Speaker 1: um And in a sense, the story I think was
Speaker 1: that economics told us very little about what to do there.
Speaker 1: How low could we go? Could we go to zero?
Speaker 1: Could we go below zero? When you do quantitative easy?
Speaker 1: How much? What sort of easy? When do you do it?
Speaker 1: How many auctions a week do you have? So we
Speaker 1: didn't know any of that stuff, So I think it
Speaker 1: was really scary and exhausting. So I have a pet theory,
Speaker 1: which I'll come back to again later, that economists always
Speaker 1: used the normal cyclical expansion contraction cycle as a frame
Speaker 1: of reference. And so when you see something much more
Speaker 1: substantial coming along a credit driven crisis, financial crisis, unless
Speaker 1: you're looking at it from the correct perspective to a
Speaker 1: regular economic analyst, they're not seeing it very I think
Speaker 1: that's right. And what's happened. Economists said to me you
Speaker 1: should never expect central banks or economists to see turning points.
Speaker 1: I think that's a complete nonsense. I think what you
Speaker 1: have to have is you can't just look at the
Speaker 1: mechanical things. You have to look at what I call
Speaker 1: the economics of walking about. Exactly as you said, think
Speaker 1: about what happened at the last great financial crisis, the
Speaker 1: Great crash, and think about what happened. And there were
Speaker 1: lots of indicators, the best indications actually at the bank
Speaker 1: what's called the banks agents schools, and the agents would
Speaker 1: go around the country and report. And when you looked
Speaker 1: at that, the world had dropped off a cliff by
Speaker 1: around May oh, and nobody was listening to it. The
Speaker 1: economists weren't listening to it. So in fact, at those
Speaker 1: big turning points, you have to look around, you look
Speaker 1: at different measures, and it was quite clear across Europe
Speaker 1: and in the Nited States. All these countries were going
Speaker 1: down together and that was a really big deal. So
Speaker 1: I agree with you completely. Let's talk about a quote
Speaker 1: right in the beginning of the book, What's the Whole
Speaker 1: World wants is a good job? Discuss. Yeah. I started
Speaker 1: working on this book, UM, and I was reading some
Speaker 1: results from Gallop and for some reason I went to
Speaker 1: the front of their of their page and they literally
Speaker 1: and I started out with this, They literally say, Um,
Speaker 1: here's one of Gallup's most important discoveries. They've been doing
Speaker 1: this since the nineties. What the whole World wants is
Speaker 1: a good job. So that's the theme of the book.
Speaker 1: And I think what we've seen in the last decade
Speaker 1: is the loss of those good jobs, um, and the
Speaker 1: result of it has been populous movements around the world,
Speaker 1: people hurting. And the connection I make in the book
Speaker 1: is that central banks and other policymakers in the US
Speaker 1: especially say we're at full employment. And the theme of
Speaker 1: the book is when if we were at full employment,
Speaker 1: people wouldn't be hurting this way, and so I document that.
Speaker 1: And a good example in the UK is we're eleven
Speaker 1: years in now from the start of that Great Recession.
Speaker 1: Real wages today in the UK a six percent below
Speaker 1: what they were in February two thousand and eight. And
Speaker 1: this in the UK anyway, it's the third slowest recovery ever.
Speaker 1: The last one three hundred years ago was the South
Speaker 1: Sea Bubble and the one before that six hundred years
Speaker 1: ago is the Black Death, which was good for productivity.
Speaker 1: So anyway, so the logic is that we have had
Speaker 1: very slow recoveries and I think driven by macro errors.
Speaker 1: And now we see economy is slowing. But after ten
Speaker 1: years of recovery, still people are hurting. So the big
Speaker 1: question is what's going on and why is it that
Speaker 1: that people are hurting? And I think the story is
Speaker 1: lack of good jobs if you like, an expectation that
Speaker 1: things are going to be better in the future and
Speaker 1: deton in case of documented that essentially the driving force
Speaker 1: behind the deaths of despair. They talk about as a
Speaker 1: failure in the labor market. So let's talk about some
Speaker 1: of those mistakes and we'll start with the UK. Before
Speaker 1: we moved to the US, the UK had a policy
Speaker 1: of a misguided policy I would call it of austerity.
Speaker 1: We've learned the lesson from Keynes in the midst of
Speaker 1: a financial crisis. You cut taxes, increased government spending, let
Speaker 1: the public sector step in for the private sector. That
Speaker 1: didn't happen in the UK. When it happened, we saw
Speaker 1: the crash, the downturn, and then the bank having and
Speaker 1: through everything it had at its monetary policy no, but
Speaker 1: then fiscal policy Gordon Brown through all sorts of things
Speaker 1: at it reduced taxes, increased spending, but it was it
Speaker 1: was not like a hey, this is a depression, can
Speaker 1: kick out the gems. It was sort of sort of modest,
Speaker 1: modest recovery came, a pretty reasonable recovery, and then austerity
Speaker 1: came in two thousand ten and every data series you
Speaker 1: can show in the UK just turned flat. So output
Speaker 1: was growing and then auster rity, which I call reckless,
Speaker 1: failed turned downwards. Knees precisely warned what There's an article
Speaker 1: I talked about in the book in Kine's warned about
Speaker 1: the long dragons of dragging, conditions of semi slump that
Speaker 1: follow the crash, and unless you come in there and
Speaker 1: put public spending in, then you'll see slowing. The argument
Speaker 1: that George Osmond, who was Chancellor, made was that if
Speaker 1: you cut public spending, the private sector will step into
Speaker 1: the fold completely contrary to Canes also failed. It's also
Speaker 1: not how it works. Not how it works, you have
Speaker 1: to look at history. So didn't anybody say, dude, what
Speaker 1: are you doing? This is not reality. You're making this
Speaker 1: up me a lot. I called him Slasher Osborne, Lord Skidelski,
Speaker 1: and I wrote them who was Kne's biography? We wrote
Speaker 1: a series of articles together saying this is an absolute disaster.
Speaker 1: So what you basically see is very weak recovery, no
Speaker 1: growth in real wages. And I think that austerity almost
Speaker 1: exactly leads to the vote for Brexit, precisely in the
Speaker 1: places that hurt most, the cold towns, the towns that
Speaker 1: have not seen much growth over the years. Brexit is
Speaker 1: directly attributable to the failures brought about by reckless, failed austerity.
Speaker 1: Sterity leads to breakfast. Let's bring this to the United States.
Speaker 1: There was a whole bunch of government interventions, both on
Speaker 1: the monetary side and the fiscal side, designed to free
Speaker 1: up the frozen credit market. And then when we moved
Speaker 1: to fiscal stimulus, some people have called it an eight
Speaker 1: billion dollar stimulus, when it should have been three or
Speaker 1: four trillion, and it was temporary tax cuts and temporary
Speaker 1: extension of unemployment benefits. But it wasn't the sort of
Speaker 1: large post depression policies we saw, and into that void
Speaker 1: step the FED. I have made the argument that the
Speaker 1: fedital let it all crash and burn, let everybody in
Speaker 1: Congress get fired and bring in a new batch. Had
Speaker 1: they done that, we wouldn't have had the teapot already,
Speaker 1: we wouldn't have had the rise of populism. It would
Speaker 1: have hurt more at the time, but the recovery would
Speaker 1: have been faster, or tell me I'm wrong, Well, hindsight perhaps,
Speaker 1: Well that's fine, I mean, but I think the answer
Speaker 1: is that all the things you say about there was
Speaker 1: not enough fiscal stimmers think about in a sense that
Speaker 1: the impact on growth of the two trillion dollar tax
Speaker 1: cut not that great. Perhaps would have been better earlier.
Speaker 1: The big thing that Cain's talked about that should have happened,
Speaker 1: and the big deal would have been an infrastructure spend
Speaker 1: which would have put construction workers. It was this was
Speaker 1: a housing market crash, all these construction working You to
Speaker 1: put those folks back to work. So what's happened and
Speaker 1: I think the best indicator. Forget the unemployment rate. We'll
Speaker 1: get to talking about the underemployment rate now in the SEC.
Speaker 1: But the employment rate, that's just the proportion of people
Speaker 1: who are working today. That's two and a half percentage
Speaker 1: points below what it was in two thousand and eight
Speaker 1: and about three below what it was in two thousand
Speaker 1: three four. So that says the economy hasn't recovered. It
Speaker 1: says the labor market hasn't recovered. Um, And that's the
Speaker 1: result of not doing what you said. But I think
Speaker 1: you're completely right. Um. The lack of public spending was
Speaker 1: actually the big effect. So in the book I talk
Speaker 1: about now what's happened is we central banks say, oh,
Speaker 1: we're at full in ploy We clearly are not. And
Speaker 1: now you've put the brakes on. And basically what you've
Speaker 1: done is you've you've slowed the economy down at a
Speaker 1: time when there's a there's essentially a global slow, and
Speaker 1: you've generated a trade war. And as I say, the
Speaker 1: Fed raised rates and now we've got another era slow
Speaker 1: in coming. Looks much like what happened earlier, perhaps or
Speaker 1: a lesser degree, but it looks to me like the
Speaker 1: economist turn. So in the book, you talk about the
Speaker 1: rise of something fairly specific to America, not only stress
Speaker 1: and unhappiness, but physical pain. Pain is rising in America.
Speaker 1: It's shocking. Um. The evidence is, actually, that's exactly right.
Speaker 1: We've done a survey we looked at in a paper's
Speaker 1: accompanies the book out this month, where we ask people
Speaker 1: around the world for their levels of pain, and essentially
Speaker 1: Americans are twice as likely to say they're in pain
Speaker 1: than other places I know. And so there's evidence from
Speaker 1: doctor's visits. A quarter of all visits to a primary
Speaker 1: care physician people report they're in chronic pain. So so.
Speaker 1: And the other thing to say about it, of course,
Speaker 1: is that at the same time as this the huge
Speaker 1: rise in opioid to deal with the pain. So what
Speaker 1: you see is, I mean, what you're seeing is a
Speaker 1: rise in the opio prescriptions to deal with the pain,
Speaker 1: and the pain keeps on rising. But the reality is
Speaker 1: we're not exactly sure whether people really are in pain
Speaker 1: or they say they're in pain. I mean they say
Speaker 1: they're in pain. Maybe they are in pain very very
Speaker 1: often when people are stressed out, what looks like a
Speaker 1: minor ailment or pain becomes magnified exactly, so how how significant.
Speaker 1: And I have to share a quick anecdote. In the
Speaker 1: middle the financial crisis, I had a trip to London
Speaker 1: or an Amsterdam, and I was shocked that, look, unemployments
Speaker 1: over ten percent in the United States. You can walk
Speaker 1: down the streets of New York and admittedly New York
Speaker 1: is a finance town and and the crisis hit finance
Speaker 1: really intensely, but you can just feel the stress levels
Speaker 1: in Manhattan much higher. Amsterdam was like people having a
Speaker 1: beer in the middle of the afternoon. The stress levels
Speaker 1: even in the midst of the storm, they were moderate
Speaker 1: compared to here. Well, you're starting to see a big
Speaker 1: rise in the UK. So we have another paper where
Speaker 1: we actually tracked something which is pretty interesting, which is
Speaker 1: in the UK and since two thousand thirteen, happiness on
Speaker 1: various measures has been rising steadily, but worryingly, so has
Speaker 1: depression and anxiety. So you have the two things rising.
Speaker 1: Some people are doing just fine, others aren't doing just
Speaker 1: And obviously the problem is that the ones who aren't
Speaker 1: doing just fine see the others who are, and so
Speaker 1: that's a big part of the story. But around the
Speaker 1: world we see arise in sort of isolation, loneliness, anxiety, depression.
Speaker 1: In the US, which is a really big deal. Happiness
Speaker 1: measures have been basically flat for college educated and for
Speaker 1: the least educated they have been plummeting for the last
Speaker 1: thirty years, so this is a big worry. So so
Speaker 1: measures of unhappiness, disconnection from society, all of those things
Speaker 1: are a worry, particularly for prime age, less educated folks,
Speaker 1: mostly white, but there's some evidence of other groups. But
Speaker 1: essentially amongst white less educated there's a disaster and it
Speaker 1: relates to as well to opioid deaths, destince roces of
Speaker 1: the liver, and suicide. So this this is all going
Speaker 1: on at the same time we've seen recovery, but lots
Speaker 1: of folks around the world, especially in the United States,
Speaker 1: are hurting. So so let's see if we can find
Speaker 1: the cause for this. Some people are blaming social networks
Speaker 1: and that when you go on Instagram, everybody else's life
Speaker 1: looks great and makes you feel terrible. There's a ton
Speaker 1: of new studies on that, and don't I don't know
Speaker 1: if that's the cause. We're at levels of income inequality
Speaker 1: that we haven't seen for a long long time, and
Speaker 1: if you look at the middle class or or the
Speaker 1: paid people paid less than the middle class, they're essentially
Speaker 1: have not seen a raise in three decades. So is
Speaker 1: it all of these or are some of these factors
Speaker 1: more important than others. We don't exactly know. I mean,
Speaker 1: it's it's all of those. But I think I've been
Speaker 1: working on happiness behavior economics for a really long time,
Speaker 1: and I think if I would choose one thing we've
Speaker 1: learned from it, it's that relative things matter. People compare
Speaker 1: themselves to others. I mean a funny statistic, not funniest,
Speaker 1: sad statistic. The three countries in the world that are
Speaker 1: the happiest up in Denmark, Norway, Sweden, they're the happiest
Speaker 1: countries in the world. That are also the countries in
Speaker 1: the world that have the highest suicide rates. Really yeah,
Speaker 1: so so exactly what you say is true. But I
Speaker 1: think what's in a decent amount of alcoholism if I
Speaker 1: recall right, absolutely, I mean obviously part of it is
Speaker 1: you say, oh, it's because of the hours of daylight,
Speaker 1: But why would you have so many people happy? You
Speaker 1: can explain in the suicide that way. So I think
Speaker 1: what we're seeing is people compare themselves to others. Perhaps
Speaker 1: with social media it's easier to compare yourself to others,
Speaker 1: so so that really matters. And that's the As the
Speaker 1: income in equality has risen, wealth inequality has risen, the
Speaker 1: contrast becomes greater. So I think that's what's going on.
Speaker 1: And we've also I mean the think of that. Why
Speaker 1: why is happiness not risen in the United States? Perhaps
Speaker 1: it's that people compare themselves to others. So Barry Piser
Speaker 1: a new BMW and is it going to make you happy? Well,
Speaker 1: it's gonna make you happy as long as Danny doesn't
Speaker 1: buy one. That's what the evidence looks like. So it's
Speaker 1: a surprise the happiness is flat. People clearly compare themselves
Speaker 1: to others. Let's talk about some of the really interesting
Speaker 1: things you discovered while doing your research for this book. Yes, um,
Speaker 1: let's talk about productivity. Do we have a productivity problem
Speaker 1: or do we have a measurement issue? Well, a bit
Speaker 1: of both. Um. Clearly the forecasts for productivity have been wrong,
Speaker 1: I mean especially the greatest The greatest era was made
Speaker 1: back to what we were talking about in two thousand
Speaker 1: and ten, austerity was imposed and the government was forecast
Speaker 1: with this that would have no effect on productivity, and
Speaker 1: they've continued to forecast that productivity would rise. And we
Speaker 1: have to think called a productivity puzzle, which is that
Speaker 1: we don't actually seem to have had much productivity at all,
Speaker 1: and in fact, in the UK for the last three
Speaker 1: quarter's been falling um, which is shocking to me. And
Speaker 1: the reason I always asked that question of like you
Speaker 1: is that in my office we were on an asset
Speaker 1: management firm, and what we do with the ten people
Speaker 1: in the Manhattan office twenty years ago would have taken
Speaker 1: a staff of a hundred and so the ability to
Speaker 1: deploy sophomore and technology and really crank out an enormous
Speaker 1: amount of work and content, and the ability to reach
Speaker 1: both clients. And so whenever I see there's these productivity figures,
Speaker 1: I'm like, I don't know where they're looking, but they're
Speaker 1: not looking at a service. Let's go with two bits
Speaker 1: to it. So productivity is just output divided by people
Speaker 1: or ours or something. So you kind of argued about
Speaker 1: output measure on the top, but I probably shouldna argue
Speaker 1: about what you divide through by I mean, what's your hours?
Speaker 1: What's my hours? Started around noon and by two o'clock
Speaker 1: I'm heading home. I mean, the problems now, I started early,
Speaker 1: I started four thirty in the morning, and I and
Speaker 1: the last thing I do before I go to bed
Speaker 1: is log onto Slack and look at what's going on.
Speaker 1: But the problem, of course is that if you if
Speaker 1: you're not I mean the days where people went to
Speaker 1: a factory, they logged on at eight o'clock and they
Speaker 1: went home. You got eight hours. So not only is
Speaker 1: there a problem measuring the output, there's a problem of
Speaker 1: measuring the labor input. That's a really big deal. I mean,
Speaker 1: I think, however, it's it is clear that there is
Speaker 1: a problem, and the problem is that wages haven't been rising.
Speaker 1: I mean the sort of connection everybody makes this, if
Speaker 1: productivity was rising, wages ought to be rising. So they
Speaker 1: infer back that the lack of wage for it. Therefore
Speaker 1: there must be approach ativity. Plus some of it, of course,
Speaker 1: has to do with distribution. I mean, workers understand that
Speaker 1: if they get gains from productivity, they get higher ways,
Speaker 1: but perhaps not these days. Perhaps they think, Okay, there's
Speaker 1: a big rising productivity and the bosses are going to
Speaker 1: take all the gains, and there's an issue of that
Speaker 1: with the rising inequality issue, Do the workers actually think
Speaker 1: that if productivity was to rise, they would actually get
Speaker 1: a share of the spoils and perhaps that's something that's changed,
Speaker 1: So that's kind of interesting. They are you surprised at
Speaker 1: how quickly the blush has come off the rose for
Speaker 1: the gig economy, Like between Airbnb and Uber and even
Speaker 1: selling crap on eBay. There was an expectation that hey,
Speaker 1: there's a way for a lot of people to pick
Speaker 1: up some money on the side. Hasn't worked out the
Speaker 1: way people and expect It hasn't worked out, And there's
Speaker 1: a big question about how big that gig economy is.
Speaker 1: I mean, there's a set of studies which were suggesting
Speaker 1: it's really really big, and then a couple of years
Speaker 1: later had new data and they had to sort of
Speaker 1: pull it back. But it's still it's substantial how you
Speaker 1: look at it. But it depends how you define it.
Speaker 1: But I mean there's an issue saying the the UK,
Speaker 1: it gets go to there. There's been a huge rise
Speaker 1: in the UK and the self employment rate, right, you said,
Speaker 1: this is fantastic. Turns out that the earnings of the
Speaker 1: self employed over the last five years have fallen in
Speaker 1: real terms, just when people get laid off, especially in
Speaker 1: a service or consulting world, you call yourself self employed, right,
Speaker 1: So I think in a sense, the gig economy, this
Speaker 1: self employed stuff, this is about fragile work. Many of
Speaker 1: these people can't get enough hours. That's the big story
Speaker 1: in my book. So there's there's two unn interrupt you
Speaker 1: right here because there's two really interesting things. I want
Speaker 1: to talk about underemployment generally, but let's start with the specific.
Speaker 1: So I'm gonna two completely different companies, and you and
Speaker 1: I have discussed this previously. Walmart on the low end
Speaker 1: and then Starbucks on the high end. They are both
Speaker 1: somewhat notorious for telling people in the beginning of the week, hey,
Speaker 1: you were your hours. And for a while Walmart store
Speaker 1: managers were incentivized to save money by slashing hours, which
Speaker 1: is why the stores look like junk for a couple
Speaker 1: of years. And workers don't have any connection to the firms.
Speaker 1: And I think what you've talked about is an inherent
Speaker 1: instability of work and inhering insecurity of workers. And that's
Speaker 1: the sense that they have in some sense that explains
Speaker 1: the lack of wage growth they're more concerned about keeping
Speaker 1: their jobs. Just before two thousand let me tell you
Speaker 1: a story. Just before two thousand and eight, I had
Speaker 1: a big discussion argument with the government of the Bank
Speaker 1: of Being. He thought there was a huge wage rise coming.
Speaker 1: So I knew, I wait for this. I knew the chairman,
Speaker 1: the head of the British trade union Movement. I went
Speaker 1: to tuc House Penthouse Suite tuc House and I said,
Speaker 1: his name is Brendan Barber. And I said, Brendan, you
Speaker 1: have to be the rbit. I won't tell anybody. Tell me,
Speaker 1: are you about to be able to go and get
Speaker 1: a huge wage increase? And he said, not for love
Speaker 1: nor money. He said, just acted what you and I
Speaker 1: have just talked about workers, and many of the workers
Speaker 1: representsive women. He said, they care about security, they care
Speaker 1: about being a flexibility, being able to keep the job.
Speaker 1: They can drop the kids off at school, and if
Speaker 1: they need to take two hours off to go to
Speaker 1: the doctor with the kids, they can. And he said,
Speaker 1: there is no chance on the God's green earth that
Speaker 1: was in pre two thousand and eight that there's big
Speaker 1: wage increases coming. And I think that's where the world is.
Speaker 1: The point of the story is that balance probably wouldn't
Speaker 1: be existing if we were at full employment. As you
Speaker 1: would move towards full employment, workers, we'll be able to
Speaker 1: say I'm not taking that kind of job, thank you
Speaker 1: very much. Warm up. There's lots of better jobs out there,
Speaker 1: and I'll go there. So I think the fact that
Speaker 1: this continues to exist says we're a long way from
Speaker 1: full employment. So how underemployed is the labor force in
Speaker 1: the United States, Well, let's see, and let's let me
Speaker 1: get more specific. How many people are working multiple part
Speaker 1: time jobs and they wish they were working one full time,
Speaker 1: permanent position. We don't exactly know that. We do have
Speaker 1: pretty bad men of that in the United States. That
Speaker 1: made and I've worked on it a lot. You six, well,
Speaker 1: you seven, I'm talking about earlist better. I mean we're
Speaker 1: talking about I'm just looking at the latest numbers. In
Speaker 1: terms of the unemployment numbers, it's about six million. But
Speaker 1: if you simply want to look at this group, which
Speaker 1: is a particularly important group, which is part time for
Speaker 1: economic reasons, it's about four and a half millions. So
Speaker 1: it's about three quarters of the size or two thirds
Speaker 1: three quarters of the size of the unemployed. But what
Speaker 1: really matters with those meaning those people want a full
Speaker 1: time job but they can't find one of them. And
Speaker 1: of course, the big story in the United States, which
Speaker 1: we don't have for other countries, is there's lots of
Speaker 1: other people, it turns out, that want more hours. To
Speaker 1: give an example that we'll call those folks involuntary part timers.
Speaker 1: What we know from around the world, we don't have
Speaker 1: a measure of this in the US. You say, I'm
Speaker 1: part time, I've got twelve hours a week, but I'd
Speaker 1: like twenty. And that turns out to be a really
Speaker 1: big phenomenon around the world. Yep, yep. That seems to
Speaker 1: drive wage growth around the world. So we have a
Speaker 1: whole series of papers on this. Now you reference a
Speaker 1: phenomena called zero hour jobs. Explain what that is. So
Speaker 1: this is much like you're much like the story of Walmart.
Speaker 1: So in the UK there's a thing called zero hours
Speaker 1: contract um and most people absolutely hate it, but they
Speaker 1: can't get anything better. It's the following. You can only
Speaker 1: have a contract with me. On a Sunday night, I
Speaker 1: will tell you how many hours this week you're going
Speaker 1: to have. I'm going to tell you which days they
Speaker 1: are on and what time they are. So I said
Speaker 1: you on Sunday night, You're going to work from four
Speaker 1: pm to midnight on Thursday. That's it. Um And so
Speaker 1: obviously these workers say, hey, this stinks mostly and b
Speaker 1: I would like more hours than I can get. And
Speaker 1: essentially what we see as we've moved towards full employment
Speaker 1: a little bit, those numbers have fallen, but huge numbers
Speaker 1: of these workers. We're talking to you about a million
Speaker 1: workers in these and this is an exclusive contract with
Speaker 1: anybody else, exclusive contract, So they're they're waiting to know
Speaker 1: what it is. They can't fill another hour, they can't
Speaker 1: fill other hours elsewhere. So and it's not just the
Speaker 1: number of hours, it's the timing of the abster. It's
Speaker 1: how do you do childcare or how do you organize
Speaker 1: your life? Daddy? You do that, And that's a really
Speaker 1: big deal. And I think if you just look at
Speaker 1: those contracts, if you were at full employment, workers would
Speaker 1: be able to say, I'm not taking that. The definition
Speaker 1: of fulling I always like from Beverage, he says a
Speaker 1: full employment work as a standing by waiting for and
Speaker 1: I mean good the word goods in there, waiting for
Speaker 1: good offers of jobs to come in. We're a very
Speaker 1: long way from that. So if those contexts exists, how
Speaker 1: can the FITS or the Bank of Benglans say we're
Speaker 1: any clear close to full employer? Makes no sense. So
Speaker 1: the standard description or the standard explanation for why the
Speaker 1: labor market is where it is is a combination of
Speaker 1: lots of people are under educated, we're under credentials, which
Speaker 1: are two distinct issues. And you add that to the
Speaker 1: rise of globalization where good factory jobs leave, and the
Speaker 1: rise of technology and automation. You know, just routine repetitive
Speaker 1: jobs are easily replaced by a robot or software changes
Speaker 1: the skill sets that are needed in a modern economy.
Speaker 1: How much is are those issues to blame and how
Speaker 1: much is it something else? Well, I think those issues
Speaker 1: are clearly to blame. So the globalization phenomenon was going
Speaker 1: on prior to two thousand and eight, But I think
Speaker 1: we should think of two thousand and eight is a
Speaker 1: structural break, and a structural break in the sense that
Speaker 1: employers are aware that their bargaining position is stronger, but
Speaker 1: workers were scared. Workers were scared that the phrase safe
Speaker 1: as houses, Well that's no longer true, their houses went,
Speaker 1: their their assets went, and that and that's a really
Speaker 1: big I would just go back into I've tried to
Speaker 1: get people to think about the capital, how capital displaces
Speaker 1: labor in some sense. The reason it's doing it so
Speaker 1: strongly now is the relative prices. You can change the
Speaker 1: capital labor mix by changing relative prices. Price of capital now,
Speaker 1: I mean you could capital is practically free these well exactly,
Speaker 1: so that in a sense, what you can do is
Speaker 1: to say, well, maybe what we should do is lower
Speaker 1: to firms the relative price of labor. We have been
Speaker 1: speaking with Danny bland Flower. He is the author of
Speaker 1: Not Working, Where Have all the Good Jobs Gone? If
Speaker 1: you enjoy this conversation, we'll be sure and come back
Speaker 1: for the podcast extras, where we keep the digital technology
Speaker 1: rolling and continue recording our conversation about all things employment,
Speaker 1: financial crisis, and underemployment related. You can find that at iTunes, overcast, Stitchers, Spotify, Bloomberg,
Speaker 1: wherever finer podcasts are sold. We love your comments, feedback
Speaker 1: and suggestions right to us at m IB podcast at
Speaker 1: Bloomberg dot net. Be sure to check out my daily column.
Speaker 1: You can find that at Bloomberg dot com slash Opinion.
Speaker 1: Follow me on Twitter at rit Halts. I'm Barry rit Halts.
Speaker 1: You're listening to Masters in Business on Bloomberg Radio. Welcome
Speaker 1: to the podcast. So let's let's get to some of
Speaker 1: the questions that that we didn't get to during the
Speaker 1: broadcast portion, because so much of this is quite fascinating.
Speaker 1: So first let's talk out optimism. The least optimistic people
Speaker 1: in America are poor whites, not we're blacks or Hispanics.
Speaker 1: How does this play into populism? Is it which came first? Well,
Speaker 1: hard to know which came first? On almost every measure,
Speaker 1: you see the least educated, particularly prime age, least educated,
Speaker 1: I can say in a number of ways, least optimistic,
Speaker 1: most anxious, most unhappy. I have a pretty interesting measure,
Speaker 1: which is in one of the big surveys, they ask
Speaker 1: people about how many bad mental health days did you
Speaker 1: have in the last thirty meaning clinical and mental health
Speaker 1: days or just just just popular just taking a mental
Speaker 1: health day, just just straight asking them. They're really defined
Speaker 1: this state, so it's it's sort of done in the
Speaker 1: consistent way for everybody. And the number of the number
Speaker 1: of bad mental health days for this group is when
Speaker 1: we're talking ten twelve a month, really ten twelve of
Speaker 1: and I can just draw you a picture by aide
Speaker 1: which is just a huge hill shape. So these folks
Speaker 1: have a high level anyway, and it rises maximizing out
Speaker 1: at around forty three forty four. So this is so
Speaker 1: it starts lower. So that's the opposite chart of what
Speaker 1: Scott Galloway showed in his book um the Algebra of Happiness,
Speaker 1: exactly where you're very happy when you're young, Bottom's middle age.
Speaker 1: I've written lots of stuff on what I call the
Speaker 1: U shaping happiness, but just flip it over the last
Speaker 1: thing over, and what it turns out is that on
Speaker 1: all these measures that I can use words like anxious, depressed, lonely,
Speaker 1: not optimistic, all the isolated. So all of these things
Speaker 1: appear to be um central to what's going on. These
Speaker 1: are entirely consistent with these deaths of despair. These same
Speaker 1: folks are are disproportioned of the ones that are committing suicide.
Speaker 1: So this is a new phenomenon in America. And what
Speaker 1: are we doing about it? I mean, these not these
Speaker 1: are nothing. People talk about deaths of despair. I talk
Speaker 1: about cries of helplessness cries for help. So in a sense,
Speaker 1: the story is these are cries for help that are
Speaker 1: remaining unanswered. So I'm curious as to the role that
Speaker 1: healthcare plays in this on two sides of this. First,
Speaker 1: I referenced when I was in the UK and Amsterdam
Speaker 1: during the crisis, people were pretty blase. I think the
Speaker 1: United States, especially if you have a family, you have kids,
Speaker 1: and you lose your job, you lose your healthcare. That's
Speaker 1: got to be an enormous source of stress for people
Speaker 1: who are not working full time or in danger of
Speaker 1: losing their jobs versus the Europeans. But I think that's
Speaker 1: absolutely right. And I think and by the way, ps
Speaker 1: on the other side, when they do have a mental
Speaker 1: health issue, they can't afford to get the treatment exactly.
Speaker 1: I think a good example is the state that I
Speaker 1: live in, which is New Hampshire. New Hampshire is I
Speaker 1: think ranks second third in um opioid deaths. Really absolutely so.
Speaker 1: New Hampshire is a very straight why frere dying? There
Speaker 1: is no basically no provisions there for drug rehabilitation. Live
Speaker 1: free from that what you're implying, live free from the
Speaker 1: safety net? I mean, why is New Hampshire a place
Speaker 1: where we're having all I mean low unemployment rates, I
Speaker 1: mean this hugely low unploy beautiful stage so obviously and
Speaker 1: really nice people there. They're almost Canadian, almost Canadians me.
Speaker 1: So I didn't realize New Hampshire like West Virginia. You
Speaker 1: can understand get West Virginia, but New Hampshire. So I
Speaker 1: think the provision of healthcare is a really big deal.
Speaker 1: The other big deal actually if you go back to
Speaker 1: opioid overdoses. I have friend of mine who's a psychiatrist
Speaker 1: in the UK, and he says, what happens in America
Speaker 1: is that dr patients can doctor shop. They can go
Speaker 1: to Barry and say give me opios and you say no,
Speaker 1: and they'll find keeping the more for myself. They'll find
Speaker 1: some other doctor. This is not a phenomenon that's true
Speaker 1: in any other country. Really not true. And my friend says,
Speaker 1: what happens is they come to him as a sarchatrist
Speaker 1: and he writes down in their national health record, you know,
Speaker 1: Barry's records requested, requested. And I said, this by this
Speaker 1: guy is not in no way I'm going to give
Speaker 1: it to. So the next doctor goes he sees that
Speaker 1: he sees. Dr White says, no, I'm not giving it.
Speaker 1: So there's actually a national recor national record. We don't
Speaker 1: have that here. So what's interesting is that presumably the
Speaker 1: doctors around the world, I mean, I think of this,
Speaker 1: The doctors in Germany and France and Australia and Canada
Speaker 1: read the same academic journals. Should the doctors here do
Speaker 1: And they don't prescribe opioids, They don't have an opioid crisis,
Speaker 1: they don't have an entire middlewear group of salesman on
Speaker 1: a regular basis, and they have a national health service which,
Speaker 1: just by the records we've talked about, prevents people going
Speaker 1: around doctor shopping. Can't happen, can't do it, doesn't happen.
Speaker 1: So this is an American phenomenon which we have not
Speaker 1: dealt with, and people have talked about it, and the
Speaker 1: presidents talked about, oh we have we have to worry
Speaker 1: about the other plan I was told he had. Christie said,
Speaker 1: of all sorts of really sensible things. I read the plan.
Speaker 1: Christie came out with a sense of various work for everything. No,
Speaker 1: it's a great plan about what to do about done nothing.
Speaker 1: So this is a terrible American phenomenon that we need
Speaker 1: to fix, and it's within our powers and ability to
Speaker 1: fix to help these people who are dying from despair.
Speaker 1: That that that's just shocking. So the other thing in
Speaker 1: the book that really, um was a little bit surprising,
Speaker 1: the bright side to an otherwise dark story. The happiness
Speaker 1: of Black Americans has risen strongly since the nineties seventies.
Speaker 1: It is today almost equal to that white Americans. So
Speaker 1: here's the question, is black happiness rising is white unhappiness falling?
Speaker 1: But a little bit of both, Yeah, a bit of both. Um.
Speaker 1: I mean, one of the things which is interesting, as
Speaker 1: I say, the phenomena and I have just been talking about,
Speaker 1: was not actually a phenomenon for any any racial group
Speaker 1: other than whites. So the deaths of despair have not
Speaker 1: really been happening for Asians, Hispanics, or after An Americans.
Speaker 1: So that's an obvious thing in a way that in
Speaker 1: a way you get happiness to rise because they haven't
Speaker 1: had the big burst of unhappiness. By construction means that
Speaker 1: that that that that that's happened. So yes, we've seen
Speaker 1: some some evidence of that in some ways. The labor
Speaker 1: economist in me learns this, and I remember my old
Speaker 1: teacher told me it's many moons ago. The people who
Speaker 1: do worst in the slump are the people who do
Speaker 1: best in the boom. Is that true? That's true, because
Speaker 1: I don't think we've seen that here in the cycle.
Speaker 1: Well in general, that's true. But I mean that sort
Speaker 1: of explains the question you just asked me about blacks. Um.
Speaker 1: I mean, I always thought the good example always was
Speaker 1: the young African Americans. The young The unemployment of young
Speaker 1: African American used to be horrific, used to be horrific.
Speaker 1: That's fallen more than any other. I mean, it's not
Speaker 1: great now, it's for what it was and where it's
Speaker 1: a third of what it was actually yea, So those
Speaker 1: numbers tend to fo So we've seen we've seen some
Speaker 1: improvement of the of the least of the ones who
Speaker 1: do worst. I mean, in essence, what you're likely to
Speaker 1: see in the downturn is though, that that turn comes
Speaker 1: quickest for those groups. I suspect as we get into
Speaker 1: this downturn, the story we've just been talking about will
Speaker 1: change quickly, right, Um, So so that so that the
Speaker 1: unemployed rate of UM college educated, middle aged white men
Speaker 1: is not going to rise that much. If we go
Speaker 1: into a slump, other groups will. So it's a sicklicality.
Speaker 1: That's a big deal. But we have we have seen
Speaker 1: some improvements over time. So when your research for the book,
Speaker 1: what else popped out is really counterintuitive? Well, lots of things.
Speaker 1: I've just got a more recent one which I've actually
Speaker 1: been working on. So the one thing in the happiness
Speaker 1: results that I was always puzzled by was that it
Speaker 1: appears in the data that children make you unhappy. I've
Speaker 1: I've heard that I have a nation and a new paper.
Speaker 1: I worked really hard on this, and the story always
Speaker 1: with me was, well, if children made you unhappy when
Speaker 1: I had three kids, wouldn't you think after the first
Speaker 1: one you go, I've had enough of this. Well by
Speaker 1: the time you figure out what a pen the but
Speaker 1: there are your three Well maybe it's not till they're teenagers,
Speaker 1: but but that's so we've been working when it turns
Speaker 1: out that we have a data on a million Europeans
Speaker 1: and it turns out that once you control for the
Speaker 1: fact that having kids is really expensive, and so we
Speaker 1: have this data on how how much problems do you
Speaker 1: have paying your bills. Well, it turns out what's your
Speaker 1: control for that children make you happy? It's actually about
Speaker 1: I mean my and I use stories of my kids.
Speaker 1: I have two daughters with babies, and one of them says,
Speaker 1: we buy hundred bucks a week in diapers and a
Speaker 1: bottle a gallon of milk every day, and the cost
Speaker 1: of childcare is so high, and it's it's just the
Speaker 1: cost and a book I talk about when we need
Speaker 1: to somehow rather help these fogs, help the kids, help
Speaker 1: parents deal with the look at the high cost of children. Um.
Speaker 1: But that's so once you do that, it turns out
Speaker 1: the sign flips. It's a very nice result because I
Speaker 1: think it never made any sense, right. It didn't make
Speaker 1: sense to say that, you know, kids didn't make you happy.
Speaker 1: You need to meet more you mean more people's other
Speaker 1: people that make me happy. So that's pretty counterintuitive, but
Speaker 1: it makes sense once you explain it. Give me one
Speaker 1: more that really jumped out. Oh gosh, well I've got
Speaker 1: another one. Here's another puzzling one. In the happiness literature,
Speaker 1: women are always happier than men, really, but when you
Speaker 1: go to unhappiness equations, women are also more unhappy than
Speaker 1: Is that just a confirmation bias. If you're looking for it,
Speaker 1: you know, I don't think so. I don't think so.
Speaker 1: I mean, there are the great thing about being a
Speaker 1: data person. Well you do this toime all the time.
Speaker 1: You look at the data and there are puzzles that
Speaker 1: jump out. I mean, I think that the obviously big
Speaker 1: puzzle in economics is actually why, at the at the
Speaker 1: given levels of unemployment that we have, why is wage
Speaker 1: growth so weak? I mean, that's the big puzzle for
Speaker 1: a labor economists today. That's the great puzzle. At unemployment
Speaker 1: rates of four percent and lower in the past, around
Speaker 1: the world, wage growth will be near to five than
Speaker 1: anything else. And in this psych all that's something we
Speaker 1: haven't seen and policymakers have not been able to grapple
Speaker 1: with it. And the book explains it basically, So are
Speaker 1: you and Reinhardt and Rogoff's camp that says, following a
Speaker 1: financial crisis, we tend to get subpar GDP, subpar wage growth,
Speaker 1: slow gradual recovery, but not like the two traditional regular
Speaker 1: cyclical recession slash recovery. That it's a much more drawn
Speaker 1: out and much more modest recovery. Look at Japan, look
Speaker 1: at Sweden, look at Mexico. Couldn't have said it better.
Speaker 1: I completely agree. But I think in a sense that's
Speaker 1: a really big problem because I don't think policymakers got that.
Speaker 1: I mean clearly they just didn't see it, and they
Speaker 1: sort of and all the forecast they made and we
Speaker 1: think about the fensays we're gonna be able to raise
Speaker 1: rates because everything's gonna be back to normal and fine,
Speaker 1: the bankoping that says, you know, within eighteen months will
Speaker 1: be back and everything. So they absolutely what you said
Speaker 1: is true. It's the biggest era that policymakers have made.
Speaker 1: They didn't get it, and that's exactly where we are
Speaker 1: now that there's a structural break and what it means
Speaker 1: is actually four percent unemployment. When the book spends a
Speaker 1: lot of time thinking about four percent unemployment is nowhere
Speaker 1: near full employment. Mark Carney asked me the other day,
Speaker 1: he said, I was at a meeting. He said, Danny,
Speaker 1: how low do you think the narrow is in the UK?
Speaker 1: That means the full employment rate of it? And I
Speaker 1: said around two and a half. I was gonna say
Speaker 1: two percent, two two two and a half some number
Speaker 1: like that, and I think the reality said, yeah, gas,
Speaker 1: and I've said, and now what you think is okay.
Speaker 1: So now we see unemployment rates of three point six
Speaker 1: the big deal Actually in the last six months or so,
Speaker 1: unemployments continue to fall and the wage growth, which looked
Speaker 1: like it was picking up, has reversed itself. It's actually
Speaker 1: slowed back down again. And when you're around the world,
Speaker 1: I can explain that with because I saw this coming,
Speaker 1: because a big chunk of that wage growth came from
Speaker 1: new minimum wage laws as the state and municipality labs
Speaker 1: and and in the UK actually this month we've seen
Speaker 1: in a little bit of a pickup and the reason
Speaker 1: was exactly that you saw a big rise in the
Speaker 1: public sector pay, which hadn't happened for a long time.
Speaker 1: And one of the big deals around the world, I
Speaker 1: mean the UK is that a good example. In two
Speaker 1: thousand ten the government imposed a one pay freeze in
Speaker 1: the public sector, which free which feeds through the rest
Speaker 1: of the economy. So you push down on wages. What
Speaker 1: problem last month they spend less. But what it means
Speaker 1: is the full employment rate of unemployment has got lower lower,
Speaker 1: and the and the FED made the FED has been
Speaker 1: saying all along, oh the narrows four and a half
Speaker 1: five and because unemployments at three and we have to
Speaker 1: raise rates. Turns out they got it wrong. Raising rates
Speaker 1: was an error. As I said, you probably not. I
Speaker 1: said every month of the last twenty five that that
Speaker 1: was a complete error, and it looks to be right.
Speaker 1: So let me let me push back on on the
Speaker 1: FED in the United States, where are we like around
Speaker 1: two percent? There were that range to So so here's
Speaker 1: the question that I think people like President Trump and
Speaker 1: people who are very dovish on rates, Um, here's the
Speaker 1: pushback to them. We took rates to an extraordinarily low
Speaker 1: level that we were at zero for how many years
Speaker 1: plus quee, and that now that we're a decade past
Speaker 1: the financial crisis, these ultra low rates have rewarded capital,
Speaker 1: but they haven't rewarded labor. And what we need to
Speaker 1: do is normalized rates so that they're at a more
Speaker 1: reasonable level that will force people back into a traditional
Speaker 1: economic environment. I'm not saying I buy into that. So
Speaker 1: that's the pushback, No, that's the pushback. Well, the first
Speaker 1: thing I think policymakers like me, central bankers like me
Speaker 1: who sat in two thousand and eight and saw what
Speaker 1: was going on. I mean, remember, we watched RBS fail,
Speaker 1: the largest bank in the world by assets. We watched
Speaker 1: Lloyd's Bank fail. So the scale of this shock was
Speaker 1: has been underestibate, underestimated by many, I think, And that
Speaker 1: goes back to your well said statement about why the
Speaker 1: recovery has taken so long. Was the scale of that
Speaker 1: shock was so huge. And I think the argument to
Speaker 1: say we need to normalize, well, maybe that's true. That
Speaker 1: doesn't tell you when to normalize. You probably need to
Speaker 1: wait and look and see. Um the problem about a
Speaker 1: normalization if this shock is greater than you think and
Speaker 1: you're further from the neru than you think, you say,
Speaker 1: we need to raise rates for when the recession comes.
Speaker 1: But by raising rates you cause the recession. I mean
Speaker 1: an obvious and obvious twist in the place like the UK.
Speaker 1: I mean, I was on a airplane and what happens
Speaker 1: it I'll tell the story. So what happens in the
Speaker 1: UK is people on variable rate mortgages at the start
Speaker 1: of the crisis there, which, by the way, the US
Speaker 1: fixed rate is is kind of unique. So let's go
Speaker 1: with this story. Five and a half percent most people
Speaker 1: are paying pay a hundred and fifty over over bank rates,
Speaker 1: so five and a half percent interest rates. That gives
Speaker 1: you seven. I'm on an air so rates get cut
Speaker 1: to one. I'm on an airplane. The captain of the
Speaker 1: British Airways plane is standing in front of me with
Speaker 1: the bottle of champagne. I said you aren't you supposed
Speaker 1: to be fly in the plane and he says no.
Speaker 1: But the guys in the front sent me back to
Speaker 1: say thank you very much for getting their mortgages down
Speaker 1: to me. The captain hands the captain hands me the
Speaker 1: spratler's champagne and they all the people applaud me and stuff.
Speaker 1: But that's because you lowered them. So now in the
Speaker 1: UK think of this. So so the mortgage price in
Speaker 1: the UK bank rates point seven five. So let's make
Speaker 1: it easier. People are paying two and a quarter. The
Speaker 1: second you start to raise rates, those mortgages are going
Speaker 1: to go up. And the people who are hurting, remember
Speaker 1: the people who who have who are a six percent
Speaker 1: real terms less than they have had a pick up
Speaker 1: because of the mortgage. As soon as you do that,
Speaker 1: take it away. So the answer is that UM clearly
Speaker 1: looks like it was a mistake. To raise rates. I mean,
Speaker 1: who knows by how much? And the market has now
Speaker 1: essentially priced in what I say in the book, this
Speaker 1: was a huge era. The markets are pricing in I
Speaker 1: think I haven't looked in the last twenty minutes, but
Speaker 1: last time I looked, they're pricing in three cuts by
Speaker 1: by Christmas. We's amazing cuts in the market. Is it
Speaker 1: safe to say the Bank of England has a greater
Speaker 1: So let me back up a sec The argument in
Speaker 1: the US is the FED only affects the FED funds rate,
Speaker 1: and the bond market determines the long bond rate and
Speaker 1: through that mortgages. However, the UK, what you're saying is
Speaker 1: the FED the Bank of England has a much greater
Speaker 1: impact on people's pocketbooks than in the US. A little
Speaker 1: has to work its way through. I gotta tell you
Speaker 1: a story. I was in the UK las k last
Speaker 1: week and going and doing the rounds in the financial papers.
Speaker 1: Was a guy in Denmark. So I think we're talking
Speaker 1: this morning about drog You talking about rate because they
Speaker 1: showed someone's new way a new mortgage contract in Denmark
Speaker 1: with a negative interest rate. That's amazing, right, So I mean, right, yeah,
Speaker 1: I'll let you in a little secret. I'm in my house.
Speaker 1: September is five years. My expectation for interest rates were
Speaker 1: such that I did the two seventy two point seven
Speaker 1: five mortgage that was very well, thinking I get seven
Speaker 1: years before this goes up, and seven years from now,
Speaker 1: I don't think rates are going to be much higher.
Speaker 1: And so far, so far I've been right. Well, we'll see, well,
Speaker 1: we'll see how accurate that ends up being. My wife
Speaker 1: was not happy, but it's worked out, okay. I mean,
Speaker 1: I just having my head and people listening to this podcast.
Speaker 1: In two thousand and eight August in the UK interest
Speaker 1: rates for five and a half and the markets have
Speaker 1: priced in five and a half percent for the next
Speaker 1: three years. Right, totally wrong, totally and completely right. Markets
Speaker 1: get it wrong, all getting wrong. But I think in
Speaker 1: the UK, particularly on the mortgage front, there's been an
Speaker 1: impact and the balance between savers and borrowers has really
Speaker 1: been impact. But what it means is the ability of
Speaker 1: the bank having that to do what you've talked about,
Speaker 1: we need to raise rates so we can normalize things.
Speaker 1: You wipe out the housing market if you do that.
Speaker 1: So the ability of the bank of being almost ever
Speaker 1: now to raise rights, say above one is basically off
Speaker 1: the table. I don't know if you know Torsten Slack,
Speaker 1: he has this fabulous the chart where he's where he
Speaker 1: talks about the markets got it wrong. I saw that
Speaker 1: last week. Always the market always gets fed up and
Speaker 1: fed actions wrong. You would think the market would have
Speaker 1: some insight. So much for the wisdom of crowd. Well,
Speaker 1: it's not just that. I mean remember that in a sense,
Speaker 1: what they plotted was what the FED said it was
Speaker 1: going to do. I mean that the market does the
Speaker 1: FED know what it's going to do? Honestly, Well, the
Speaker 1: dot plots are really interesting right now, and I've been
Speaker 1: giving presentation recently. If you look at the dot plots
Speaker 1: from March um, it looks like half the people think
Speaker 1: that we a rate rise in two thousand nineteen, and
Speaker 1: the majority think there will be at least two in
Speaker 1: two thousand and twenty, and the concreases increases, and that
Speaker 1: if you look as to say, I'm about three hours
Speaker 1: out of data here, But over the last week, by
Speaker 1: April of next year, the market has been moving back
Speaker 1: and forth between four or five cuts by April, and
Speaker 1: the FED says, so this is a really big disconnect folks.
Speaker 1: So the question and toss this chart is a good one.
Speaker 1: The question is whether the markets have got it right
Speaker 1: this time. My suspicion is they do. So let's talk
Speaker 1: a little about Jerome Powell and his relationship with President Trump.
Speaker 1: This is not the typical president and presidential appointee. You
Speaker 1: would think this is an Obama deep state holdover. This
Speaker 1: is his guy. So is Richard and Think and so
Speaker 1: are a number of others. I mean to put it,
Speaker 1: the chairman and the vice chairman have been appointed to
Speaker 1: to be frank and the book. Does the book actually
Speaker 1: site actually of the view that Trump is right? I mean,
Speaker 1: I think Trump is right in this case that interest
Speaker 1: rates are too high and they've made a mistake. So
Speaker 1: let's put that on the table for different reasons, but
Speaker 1: for reasons I lay out obviously the issue about the
Speaker 1: independence of the of the central as a big but
Speaker 1: I think the discussion is not quite right. I think
Speaker 1: the question is the assumption is you allow the central
Speaker 1: bank to be independent because disproportionately it gets things right,
Speaker 1: more right than any any other way. The problem is
Speaker 1: if the central banks gets it wrong, and it does
Speaker 1: as occasion, and it's certainly got it wrong in two
Speaker 1: thousand and eight. By September eight, they still really didn't
Speaker 1: know that US have been in recession since the event,
Speaker 1: since December oh seven, So obviously over the last decade,
Speaker 1: the fact that the Fed has got it wrong so
Speaker 1: many times does kind of bring the argument that changes
Speaker 1: the argument a bit to say they should be independent.
Speaker 1: So the pressure on them, obviously is really how they're
Speaker 1: supposed to be in But in this case it's hard
Speaker 1: to argue Trump isn't right but for the wrong reasons. Whatever,
Speaker 1: he's right right, for the wrong reason. He's concerned about
Speaker 1: re election. Right, forget that reason. Economically, Economically, it's clear
Speaker 1: everything is slowing down and there's a recession eventually out there.
Speaker 1: And I take the views of me as a person
Speaker 1: voted on interest rates, well, for goodness sake, folks, what
Speaker 1: we did last time, we didn't get there soon enough,
Speaker 1: we got there late. I think there's very little downside
Speaker 1: risk to an early rate cut. That might calm markets,
Speaker 1: it might cause some inflation, great, we'll have a bit.
Speaker 1: So let's let's talk about two things. They're both a
Speaker 1: little wonky. The first is northern rock, which you mentioned
Speaker 1: so in the US following the Great Depression, we set
Speaker 1: up Federal Deposit, an insurance company where all the banks
Speaker 1: pay a tiny, tiny fraction of their deposits and in
Speaker 1: the event of a collapse there account holders are made
Speaker 1: whole and theoretically bank runs are a thing of the past.
Speaker 1: The UK doesn't have that identical setup, doesn't something a
Speaker 1: little different. I actually learned something about Northern Rock last week,
Speaker 1: which was actually, well, why is Northern Rock in the North.
Speaker 1: It turns out it's just in the north. The reason
Speaker 1: it was there, apparently, people tell me, was that the
Speaker 1: other banks wouldn't lend there, and so Northern Rock went
Speaker 1: there and could start making loans. Two people had no
Speaker 1: incomes and no real ability to pay. One was making
Speaker 1: pretty bad loans. So that was the reason it was there. Okay,
Speaker 1: something else that happened. They lose a little on each loan,
Speaker 1: but they make it up volume. And they actually didn't
Speaker 1: have many branches. There was only at forty brands, so
Speaker 1: when the bank failed many of there were were two
Speaker 1: branches in London there was, and basically they were really tiny.
Speaker 1: So when you have two desks and a thousand people
Speaker 1: kind of outside you're in a little you're in a
Speaker 1: little trouble, I think is something that people haven't noticed.
Speaker 1: And actually people tried to hire me and I refused
Speaker 1: to go. So what happened was one of them. So
Speaker 1: here's a big deal. Many of the people who worked
Speaker 1: at Northern Rock had their pensions and had had shares
Speaker 1: in Northern Rockets part of their as part of so
Speaker 1: they were wiped out. The savers were protected, but unlike
Speaker 1: in the US, the shareholders were wiped out, meaning the bank,
Speaker 1: the Bank of England valued the shares of Northern Rockets zero. Right, Well,
Speaker 1: holders suddenly have something, but the equity holders that's the
Speaker 1: same as yes. But the other thing, of course is
Speaker 1: I say that the employees. The employees were really hurt
Speaker 1: because a lot of them had share options and all
Speaker 1: the rest of it. And that you know, how many
Speaker 1: en Rons and Lehmans do we have to see before people,
Speaker 1: you know, look at look at General Electric, look good
Speaker 1: g how many this comes up over and over again
Speaker 1: and and unfortunately people don't learn that. Less Barry here
Speaker 1: was the other big less. I mean, I remember at
Speaker 1: the time and I was I got into trouble because
Speaker 1: I said, well, obviously, if you look at Northern Rock.
Speaker 1: There are other there are other institutions who look very
Speaker 1: like that. Turns out in the UK there was Bradford
Speaker 1: and Bingley, an Alliance and Lester who look just like
Speaker 1: Northern Rock. And how did they do failed? Just the
Speaker 1: only issue Barry was when wasn't it? If it was
Speaker 1: when they're gonna so who makes the account holders hall? Well,
Speaker 1: I I suspect we have to well unclear, maybe maybe
Speaker 1: these macro predential instruments maybe ways of ensuring that in
Speaker 1: the good times, you know, coverage is made so that
Speaker 1: so that in the end, in the bad times, the
Speaker 1: public don't have to come in and rescue those folks.
Speaker 1: It's a it's a big issue. But there is no
Speaker 1: fd I c T now there is now now After
Speaker 1: Northern Rock the government had to come and step in
Speaker 1: and say we will protect all that told. There was
Speaker 1: actually a funny story. The government went in in the morning.
Speaker 1: If I recall and said, right, we're going to protect
Speaker 1: everybody who's a saver in Northern Rock. Then they had
Speaker 1: a little problem, which is everybody had money in an
Speaker 1: Irish banquin. Ha ha, I can move all my money
Speaker 1: to Northern So on the day that they did it
Speaker 1: money poured into Northern Rock and then the government had
Speaker 1: to say, hang on, folks, we're not going to guarantee
Speaker 1: the world's savings. It's only going to relate to people
Speaker 1: who were here last week. So that but that was
Speaker 1: a big fundamental change and savers are now protected. But
Speaker 1: remember the big difference in a way in the UK,
Speaker 1: the big turn down in the world, crist which the
Speaker 1: world didn't know, was the failure of RBS. Much more
Speaker 1: important than much more important than Layman Brothers or anything else.
Speaker 1: And the reason, oh, oh the world so so let's
Speaker 1: so the story was Alster Darling tells the story that
Speaker 1: he was at the financial meeting of the European Finance
Speaker 1: Ministers on October the seventh, two thousand and eight, and
Speaker 1: he gets a call from our yes and the chairman
Speaker 1: says to him, I can't make a payment today, Chancellor,
Speaker 1: and I need I can't make a fifty billion dollar
Speaker 1: payment tomorrow. And they told him that if you had
Speaker 1: told Alistair, if you don't rescue RBS, there's a very
Speaker 1: good prospect that every credit card and cash machine in
Speaker 1: the world will fail. So six central banks together, that's
Speaker 1: the that's the biggest moment of the crisis, six central
Speaker 1: banks together cut rates. And if anybody in the world
Speaker 1: sees six central banks together cutting rates and led by
Speaker 1: the UK, you should have been told the global markets
Speaker 1: are collapsing, and something happening in Britain. So it was
Speaker 1: the fed ecb Bank of Japan, Bank of Switzerland, Bangas,
Speaker 1: the Reeks banking and the Bank of England. That was
Speaker 1: the day that everything collapsed. Quite fascinating, all right. And
Speaker 1: then the last wonky thing I have to ask you
Speaker 1: before we start our speed round has to do with
Speaker 1: the Phillips curve. You do a lot of work with
Speaker 1: that for the lay person. Explain what the Phillips curve
Speaker 1: is and why it's so wrong. Well, that's that's hard
Speaker 1: to do in simple The answer why why it's all
Speaker 1: wrong is that we used to think that the unemployment
Speaker 1: rate is what drove wages down. Turns out that's not
Speaker 1: true anymore. They're disconnected. They're disconnected. So what happened in
Speaker 1: the past firms pay was impacted by the unplayed outside
Speaker 1: the firm. Well, what's happened today is under employments. The
Speaker 1: story two thirds of the workers over here got the
Speaker 1: hours that they want and they've got temporary workers, all
Speaker 1: sorts of freelances in there, paid less, and the workers
Speaker 1: on the one side of the room know that they
Speaker 1: can be replaced by the people on the other side
Speaker 1: of the room. Turns out the Phillips has to be
Speaker 1: written in underemployment under employments the story post two thousand
Speaker 1: and eight. All the stuff about the unemployment rate is
Speaker 1: wrong because it doesn't do anything since two thousands and
Speaker 1: the and the big deal is the underemployment rate hasn't
Speaker 1: returned to its prerecession level, which makes me raise the
Speaker 1: final question, which is we've seen union membership plumbing in
Speaker 1: the US plumbing world. How important is the failure of unions,
Speaker 1: the death of unions to to driving both the underemployment
Speaker 1: and the economic insecurity of the employed. I mean, that's
Speaker 1: how to really be a big impact. But in some
Speaker 1: sense you have to step back and say, well, what
Speaker 1: caused the decline in unions, And the answer is pretty
Speaker 1: much global forces. Globalization made it very much harder for
Speaker 1: a union to raise the price. So I think in
Speaker 1: a global market with selling at ten, union comes along
Speaker 1: rate gives benefits to its workers. The prices eleven and
Speaker 1: the firm gets wiped out because there's global forces. So
Speaker 1: the problem for unions is that you know they've been
Speaker 1: wiped out by global forces. So that's that's further made
Speaker 1: workers more jobs, more insecure, more unstable, and less well paid.
Speaker 1: Good answer, All right, So let's go to our speed round.
Speaker 1: These are our favorite questions we ask all our guests.
Speaker 1: Um and I've terlored them specifically to you. Um So
Speaker 1: tell us what was the first car you ever owned?
Speaker 1: Year making model? I can't be remember. I mean I was,
Speaker 1: I'm an interesting person. I didn't know driving lines until
Speaker 1: I was twenty seven. I lived in London, so you didn't.
Speaker 1: I didn't need one. And I mean if you had
Speaker 1: a parking space in London, you could never leave the car,
Speaker 1: take the car away from it because you could never
Speaker 1: find one to get. So I had a Mini was
Speaker 1: my first car, and a real Mini, a real Mini
Speaker 1: with wooden panels on it, little doors that you break
Speaker 1: down all the time. They are great. What's the most
Speaker 1: important thing people don't know about? Danny Blanchflower. Um, Oh,
Speaker 1: it's a very tough one. I used to be a
Speaker 1: school teacher. You're still a school teacher. That maybe that
Speaker 1: is the best. Maybe right there you go. So you
Speaker 1: used to teach grammar school. I actually taught in a
Speaker 1: school that got I got paid danger money, the teacher,
Speaker 1: the school. I decided it was easier to go and
Speaker 1: talk to people like you, Barry and get that kind
Speaker 1: of aggravation, that kind of aggravation. Tell us who your
Speaker 1: early mentors were. Well, the big deal actually was my
Speaker 1: dear friend Richard Freeman. He was a darker class of
Speaker 1: sixty four, the famous man to always always wear hats,
Speaker 1: who was famously wears hats to everything. But he's a
Speaker 1: great empirical economist and just taught me to go and
Speaker 1: look at the data. And that was that was not
Speaker 1: something the economists did. They for a very very long time.
Speaker 1: The role of data was seen as, you know, second
Speaker 1: second to what other people do. So everybody's favorite question.
Speaker 1: Tell us some of your favorite books fishing, nonfishing, market related,
Speaker 1: economy related whatever. I always liked um Gas Gabrielle Gussie,
Speaker 1: Marquees is Hundred Years of Solitude. That just there's something
Speaker 1: I've read so many times. It just seen that man
Speaker 1: was a genius, and I didn't really realize that every
Speaker 1: other people thought he was a genius too, and gave
Speaker 1: him the Nobel Prize in in Literature. But I've been
Speaker 1: a nonfiction wonk forever. I mean, I just I mean,
Speaker 1: it's my wife's so bored of really economics books, So
Speaker 1: give us what what do you think is the most
Speaker 1: interesting unexpected economics book you read recently? Oh my goodness, Well,
Speaker 1: I actually I read this great book by Kane's written
Speaker 1: a pay I've been reading endlessly that nobody knows about
Speaker 1: written in one and the reason I really like, what's
Speaker 1: the name of the point? It's it's about it's about
Speaker 1: his theories on unemployment. But I think it's I think
Speaker 1: it's a great unemployment. Well, but I don't remember reading now,
Speaker 1: but you didn't. What you read was Kane's talking about
Speaker 1: unemployment rise after it had happened. This is a book,
Speaker 1: I mean, it's exactly what you've kind of been talking about.
Speaker 1: He's asked in what do you think is coming? And
Speaker 1: he says, it's not really about the crash, So it's
Speaker 1: not Reinhardt Road got it's actually Canes who has it.
Speaker 1: And he talks about if you don't do the things
Speaker 1: that we've talked about that you need to do I mean,
Speaker 1: this is phrase I've used many times, the long dragging
Speaker 1: conditions of semi slump. So I keep going back to that.
Speaker 1: But the other one I read, and I think it's
Speaker 1: a really important one, is that I read a book
Speaker 1: by Beverage. I think, you know, Beverage, it's a great
Speaker 1: story when when Churchill said, what's the world going to
Speaker 1: look like after I come, after we get over the war?
Speaker 1: Tell us what full employment would look like? And Beverage
Speaker 1: writes this thing, and he says, I have thought, and
Speaker 1: he says, I think unemployment the full employment rate of
Speaker 1: unemploy is three p but in the probably said Kines
Speaker 1: wrote to me and said, I can think it could
Speaker 1: be much lower. And in the UK it turns out
Speaker 1: unemployment average one and a half percent for that whole period.
Speaker 1: So that's that's about what the full employment means for
Speaker 1: the work for people coming back from the war. And
Speaker 1: I think that's a great book to read, Beverage on
Speaker 1: full employment. So in you know, they thought about these things,
Speaker 1: and in ninete they thought about and the world repeats
Speaker 1: and we today have the Beverage curve correctly directly from Beverage.
Speaker 1: But it's a great and he talks that he said,
Speaker 1: he talks about what the welfare state should look like.
Speaker 1: But I would encourage people to go and look at it,
Speaker 1: think about what full employment means, and it's you can
Speaker 1: just cross out and you can write in two thousand
Speaker 1: and twenty and the same thing. And so what a
Speaker 1: policymakers do? They didn't read that stuff. I have to
Speaker 1: ask you about a book that you reference the author
Speaker 1: of that is sitting at myself at home waiting to
Speaker 1: find its way into my queue, which is Lord Sadelski's
Speaker 1: Biography of Canes. He's a dear friend of mine. We've
Speaker 1: written things. I gotta tell a great story. Um. He
Speaker 1: has a great book called The Master right the Return
Speaker 1: of the Master, and he sent it to me, and
Speaker 1: the whole time in my life, this is there. He
Speaker 1: sent it to me. I got home, my dog had
Speaker 1: eating it. This is completely true, and I had to
Speaker 1: get another one. My dog had torn it to pieces.
Speaker 1: I've literally had that literally. Um. William Goldman's book and
Speaker 1: Ventures in the Screen Trade I'm reading because Goldman's position
Speaker 1: is nobody in Hollywood knows anything. They passed on Star Wars,
Speaker 1: they passed on Raiders. They're all terrible. I made the
Speaker 1: mistake of putting it down for two minutes. The poppy
Speaker 1: destroyed it. We have a Portuguese water dog, and I
Speaker 1: had to order a new one and keep it at
Speaker 1: a high So that and then there's another story to
Speaker 1: tell you. So Skidelski is not only the biographer of Kanes.
Speaker 1: There's a there's a there's a good kind of story
Speaker 1: about what's special about Skidelsky. He lives in Kane's house.
Speaker 1: Oh really, that's a coincidence. Did he seek it out?
Speaker 1: Seek it out? To seek it out? So there's a great,
Speaker 1: great story to talk about inhabiting somebody's He writes in
Speaker 1: the back of my book as well, Son Robert and
Speaker 1: I have written the Lord, the Lord's you got to
Speaker 1: call him the Lord. He was. I think he briefly
Speaker 1: met him here at Bloomberth. He came through they do
Speaker 1: launches for different authors and stuff, and he's somebody else
Speaker 1: I have to he's yes, he's great and he and
Speaker 1: he talks about the return of the Master. But in
Speaker 1: the book he talks about sadly the return of the
Speaker 1: Master was not as you know, it was not a
Speaker 1: as big a return as it ought to write it
Speaker 1: should it should have been a big drum roll roll um.
Speaker 1: So tell us about a time you failed and what
Speaker 1: you learned from the experience. Goodness, Well, I I think
Speaker 1: I failed. The biggest failure I have made was in
Speaker 1: August two thousand and eight, and I've been calling a
Speaker 1: recession and we got the first call of what output
Speaker 1: in Q two was going to be and it and
Speaker 1: it was plus point two point two plus point two.
Speaker 1: And I've been saying forever I and I didn't believe,
Speaker 1: and I'm sure the revisions eventually took it minus point seven, right,
Speaker 1: But that was I mean, I just I mean in
Speaker 1: the sense it was the biggest fail because I doubted
Speaker 1: myself so seriously. Oh, I really thought I've got this
Speaker 1: so wrong. And we did this terrible report in August
Speaker 1: two thousand and eight that I signed up to, which
Speaker 1: said no recessions coming. And I went home and I thought, well,
Speaker 1: I've either got to work this out. I gotta work
Speaker 1: out either I'm an idiot and I'm completely wrong and
Speaker 1: I have to quit, or I'm right. And I went
Speaker 1: away and I thought it's one of these. And I
Speaker 1: talked to everybody, and eventually I decided that I was right,
Speaker 1: But that was in a sense, the big fail was
Speaker 1: getting it wrong, doubting what I'd said before, and just
Speaker 1: being tortured and then eventually deciding, Okay, I'm right, and
Speaker 1: then I did a big interview and then I went
Speaker 1: a whole hog on it. But I just doubt that
Speaker 1: number just made me think I got this so wrong.
Speaker 1: So heading into the financial crisis, so I'm all about,
Speaker 1: what do we really know? What meta cognition? What do
Speaker 1: we think we know that we're wrong about? What do
Speaker 1: we not know that we not know? But heading into
Speaker 1: the financial crisis, I had no doubt that my forecast
Speaker 1: for a deep recession in the market crash was right.
Speaker 1: And the reason you have a moment of doubt, no,
Speaker 1: never the whole time. What what was shocking to me
Speaker 1: was that nobody else saw it. I couldn't understand. And
Speaker 1: the data point, the data point that made it wholly
Speaker 1: unambiguous was this chart. I want to say I first
Speaker 1: picked it up from ned Davis and like oh three
Speaker 1: or O four, and then I started looking So I
Speaker 1: should have been looking for disconfirming data um which I
Speaker 1: could not find, and I started looking for confirming data,
Speaker 1: which was everywhere. So it's a historical relationship in the
Speaker 1: United States between median home price and median income. It's
Speaker 1: the same. I have the same in the UK exact.
Speaker 1: So you look at that data series and for decades, decades,
Speaker 1: decades it you know, it bounces around two and three,
Speaker 1: two and two and suddenly goes four or five, six,
Speaker 1: It's like orders of magnitude. So so based on that chart,
Speaker 1: I tried to find other things. When you looked at
Speaker 1: the quest of homeownership versus the cost of renting, same things,
Speaker 1: you know, a longstanding relationship, and then it spikes. And
Speaker 1: then the third one. The third chart was the value
Speaker 1: of the housing stock in the United States relative to GDP,
Speaker 1: and that was a little more volunteer volatile, but like
Speaker 1: around oh two or three or four, it just spiked.
Speaker 1: So my takeaway was either everybody's getting a giant raise
Speaker 1: or housing drops. So the second one I didn't really
Speaker 1: know about. The first I did, but it's effectively the
Speaker 1: same chart of rent is lighted. Basically, is a different
Speaker 1: way to look at the same thing. Read is related
Speaker 1: to income and read to have ownership is ends up.
Speaker 1: If you've got in the UK exactly the same we
Speaker 1: call it house price to earnings ratios in the UK
Speaker 1: averages about three to three and a half. By two
Speaker 1: thousand and six seven it had got to two to
Speaker 1: five point nine and twelve in London twelve. So then
Speaker 1: what was interesting if you look back, a series of
Speaker 1: people on the NPC, some before me coming to it,
Speaker 1: spent an awful lot of time arguing why this time
Speaker 1: was different and why the why the ratio had permanently changed.
Speaker 1: It was something about demographics. There was something about I mean,
Speaker 1: let's go, let's go exactly, let's go with nonsense. And
Speaker 1: they said, you shouldn't read anything into this because this
Speaker 1: is all permanently changed, and they think they, um, yeah, nonsense.
Speaker 1: And so the justification for this rise was that, you know,
Speaker 1: literally the markets are so much more efficient than they
Speaker 1: would be. And they read Lucas who said, you know,
Speaker 1: in his Nobel Prize winning speech, I have shown me
Speaker 1: that depressions can't ever happen again. All is absolutely wonderful,
Speaker 1: and Barry rightly laughs, that's right. You're you're listening to
Speaker 1: Confirmation Bias Radio with Danny and Barry. Um. So our
Speaker 1: last couple of questions, Um, so what do you do
Speaker 1: outside of the office for fun, What do you do
Speaker 1: to relax or when I'm back. Yeah, I like to
Speaker 1: go cycling with my white wife and I go cycling,
Speaker 1: but I had trouble with my ankles sometime ago. I
Speaker 1: used to pay quite a lot of golf. So you
Speaker 1: and I met, I think the first time fishing. That
Speaker 1: So I've taken up a lot of fishing with our
Speaker 1: old friend David Kotoks here this morning, and I've I've
Speaker 1: become an avid fisherman. I'm going next week back to
Speaker 1: Florida to go fishing again, but a little bone fishing. No, Actually,
Speaker 1: I'm a snoot guy. I like, I've never gonnof fishing,
Speaker 1: but invited me. I have a house. I have a
Speaker 1: house on the water. When you come in, let's go.
Speaker 1: I actually like the west coast of Florida. And then
Speaker 1: we discussed so we've not just for fishing, but you're inviting.
Speaker 1: It's the Midwesterners as opposed to us New Yorkers. They're
Speaker 1: much nicer, and you're a catch and release fishing hashtag
Speaker 1: catching release. What sort of advice would you give to
Speaker 1: a millennial or someone beginning their career who was interested
Speaker 1: in either economics, or later labor economics or monetary policy.
Speaker 1: Um I I would go and read an article out
Speaker 1: yesterday by Nobel Prize winner Akoloff, who talks about the
Speaker 1: importance of trying to understand problems. Economics has become just math.
Speaker 1: People are trying very math, very mathy, and I think
Speaker 1: the story is focus on the patterns in the data,
Speaker 1: try and think, you know, what are what important question
Speaker 1: are you trying to answer? Focus on an important question? Okay,
Speaker 1: that's sort of contrary to many of the things that
Speaker 1: have been in Economist. And yes, you have to publish
Speaker 1: in the top five question of journals, and I think
Speaker 1: it's a really good place to come and think, well,
Speaker 1: what what what are people in the world actually care about?
Speaker 1: Tell them focus on issues where you can answer questions.
Speaker 1: So your I think that your approach is the right approach.
Speaker 1: Is that is that? No? Sorry, it's it's George Jakolov. Yes,
Speaker 1: in his in his paper is about hard economics, which
Speaker 1: is go and do the math and lose sight of
Speaker 1: lose sight of what the heck can we do? I mean,
Speaker 1: I was taught the Great Star. I was taught that's
Speaker 1: the walk about and walking about and my old supervisor
Speaker 1: said to me, Danny care about the well being of
Speaker 1: the man or the woman on the clapp of omnibus
Speaker 1: for American audience, clap was a part of London, and
Speaker 1: an omnibus is the bus before which was towed by
Speaker 1: the horse. But it's about I think about the well
Speaker 1: being of the ordinary person, perhaps the ordinary prime age,
Speaker 1: less educated person living in Pennsylvania West Virginia. Don't lose
Speaker 1: sight of that. And I think, if that's what you do,
Speaker 1: I mean, think of what Deeton in case of doing.
Speaker 1: They're trying to understand how to improve the well being
Speaker 1: of the that's an honorable estate. And hence you're focused
Speaker 1: on unhappiness, stress, physical pain, and under employment. And I
Speaker 1: say to my students, this is so much better than
Speaker 1: so much of economics that focuses on, you know, trying
Speaker 1: to add a squiggle to a diddle. When I download
Speaker 1: and go to read an economics paper, I will go
Speaker 1: through the first five, ten, twelve pages, and then I'll
Speaker 1: hit the page that's just a sheet of calculations and
Speaker 1: formulas and I tap out because I can't follow that,
Speaker 1: and neither kill most of the lap. And we don't
Speaker 1: have to because I mean go back to the greatest
Speaker 1: story of the Maybe we can end on this great story.
Speaker 1: So the Queen goes to the London School of Economics
Speaker 1: and opens the new Department of Economics, and the chair
Speaker 1: says to her, there's a hundred and fifty economists here.
Speaker 1: And the Queen turns to him and says, what if
Speaker 1: there are a hundred and fifty economists here? How come
Speaker 1: they missed the great recession? And they turned her and
Speaker 1: they said they were working on something else. That's great.
Speaker 1: Our final question, what do you know about the world
Speaker 1: of labor economics today that you wish you knew thirty
Speaker 1: years ago when you were first ramping up in this space? Wow?
Speaker 1: I mean everything everything. I mean, I didn't really understand
Speaker 1: that there were patterns in the data. I didn't really
Speaker 1: understand how related things were um and that in the
Speaker 1: thirty odd years that I've been looking at the labor market,
Speaker 1: how little improvement that I had seen for the average person. Shocking.
Speaker 1: That's a shocking story. You started just as the majors
Speaker 1: decided to phrase right. I mean, in a sense, the story,
Speaker 1: the story is about the spread of global forces, and
Speaker 1: it's just about the spread of inequality. So I mean
Speaker 1: we've done well. We've done very well. People people around
Speaker 1: us have not done so well. We have family members,
Speaker 1: I mean my my, I have three kids, and they're
Speaker 1: all struggling. They're struggling to leave home, they're struggling to
Speaker 1: put the kids in child at they're struggling to buy
Speaker 1: they're struggling to pay off their huge student debts. And
Speaker 1: I think that the word I used there was was
Speaker 1: you advisedly, it's life's a struggle. Quite quite fascinating. We
Speaker 1: have been speaking with Danny Blancheflower, author of not Working
Speaker 1: We'll have all the good jobs gone, and uh current
Speaker 1: economics professor at Dartmouth. UM. If you enjoy this conversation,
Speaker 1: we'll be sure and look up an inch or down
Speaker 1: an inch on Apple iTunes, where you could see any
Speaker 1: of the previous two hundred and fifty such conversations that
Speaker 1: we've had over the past five years. We love your comments,
Speaker 1: feedback and suggestions right to us at m IB podcast
Speaker 1: at Bloomberg dot net. I would be remiss if I
Speaker 1: did not thank the crack staff that helps us put
Speaker 1: these conversations together each week. Michael Batnick is my head
Speaker 1: of research Atika val Bron is our project manager. Michael
Speaker 1: Boyle is my producer. I'm Barry Ridholtz. You've been listening
Speaker 1: to Masters in Business on Bloomberg Radio.