Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast.
Speaker 1: I'm Tracy Hallaway and I'm Joe. Wasn't thal Joe? Uh?
Speaker 1: Let's see. I know we keep putting caveats on all
Speaker 1: our episodes recently, but we are recording this with less
Speaker 1: than a week to go before the presidential election in
Speaker 1: the US. Yeah, just just five days to go. Yeah,
Speaker 1: so the whole world could be different by the time
Speaker 1: people are listening to this. This whole episode could just
Speaker 1: be like this weird time capsule from some normal time
Speaker 1: or I guess not really normal these days, but from
Speaker 1: some totally different time. So hello from the past. So
Speaker 1: on that note, you know, everyone in DC is getting
Speaker 1: ready for the election, and at the same time, you
Speaker 1: can just imagine there are rooms filled with people, um,
Speaker 1: you know, with policy waks who are trying to figure
Speaker 1: out what policy might look like under both you know,
Speaker 1: another four years of Trump and also potentially four years
Speaker 1: of Biden. Yeah. So I think, like, you know, the
Speaker 1: first order of business most people assume, if there's say
Speaker 1: a Biden administration, would be some sort of major spending stimulus,
Speaker 1: sort of heavy running up the deficit in order to
Speaker 1: get the economy back to trend or accelerate the return
Speaker 1: to full employment. Then you know, that's the kind of
Speaker 1: thing that people imagine could get past in February. But
Speaker 1: if you know, we're talking about a Biden administration or
Speaker 1: any Democratic administration in the future, then there would also
Speaker 1: be further policy questions beyond that, and one of those,
Speaker 1: of course would be, uh, the future of the tax system,
Speaker 1: which was reformed in the first Trump administration. Yeah, I mean,
Speaker 1: taxes have been a big talking point, you know, ever
Speaker 1: since Trump came in in six and did a lot
Speaker 1: of stuff, including reducing the corporate tax rate. But the
Speaker 1: Biden tax program is also getting a lot of attention
Speaker 1: at the moment because he's talking about doing a tax
Speaker 1: hike for very wealthy individuals and also I think talking
Speaker 1: a little bit about maybe um upping or imposing tax
Speaker 1: on capital gains. So clearly this is all in focus. Uh,
Speaker 1: death and taxes are inevitable. Um the fact that all
Speaker 1: lots would do an episode on taxes, I suppose, is
Speaker 1: also inevitable. But I think one really interesting thing when
Speaker 1: it comes to tax policy is, you know, there is
Speaker 1: this idea among economists and among policy makers that they're
Speaker 1: trying to balance a number of things here, you know,
Speaker 1: they're trying to balance I guess you would say the
Speaker 1: efficiency cost of taxes um with their benefits, so, you know,
Speaker 1: making society more equal, bringing revenue for the government obviously,
Speaker 1: and there's a tendency to look at that in a
Speaker 1: really rational way. But as hopefully a lot of people
Speaker 1: know already, the average person on the street might have
Speaker 1: different ideas about the drawbacks or the benefits of taxes
Speaker 1: um depending on their personal position. Right, They're not necessarily
Speaker 1: thinking about it rationally. No, people don't necessarily think about
Speaker 1: taxes rationally other than most people don't like paying them,
Speaker 1: and most people, all else equal, would like to pay less.
Speaker 1: But I do think, you know, it's interesting, and we'll
Speaker 1: get into this in the conversation. I have a I
Speaker 1: feel like the salience of taxes as a political issue
Speaker 1: has gone down, that there are a lot of people
Speaker 1: for whom cutting taxes. You know, it's this huge mantra
Speaker 1: for years. Is probably one of the defining elements of
Speaker 1: the GOP in the US is that they're the party
Speaker 1: of tax cuts. And of course Trump did cut taxes,
Speaker 1: but it feels like, you know, everything else going on
Speaker 1: these days we have so many cultural fights and COVID
Speaker 1: and other question the salience of the tax number, which
Speaker 1: has already been a lot, feels like it has a
Speaker 1: less political residence. But we'll discuss that with our guests.
Speaker 1: Maybe that's just my bias. I don't know, who knows
Speaker 1: if that's actually true. No, I think you're right. It
Speaker 1: just feels like there are like, you know, like tax
Speaker 1: cut Republicans. It used to just be such a thing,
Speaker 1: and it feels like that people have sort of moved on.
Speaker 1: But who knows the good old days when the only
Speaker 1: thing people were really getting worried about was higher taxes. Yeah,
Speaker 1: easier times, a simpler time. All right. Well, uh, that
Speaker 1: brings us um quite nicely to our guest for this episode,
Speaker 1: I suppose. So we have Stephanie Sancheva. She's a professor
Speaker 1: of economics over at Harvard. She's done a lot of
Speaker 1: really interesting research on all types of policy, but specifically,
Speaker 1: she did a very good paper about taxes. Recently. She also,
Speaker 1: I think, just won the Elaine Bennett Research Prize, very
Speaker 1: prestigious award in economics, and I think she's also been
Speaker 1: tipped as a future Nobel Prize winner. Hopefully we're not
Speaker 1: chinxing it by saying that. But Stephanie, thank you so
Speaker 1: how much for coming on. Thank you. It's my pleasure
Speaker 1: to be here. So I guess just to begin with.
Speaker 1: You know, you published this paper, I think it was
Speaker 1: back in August, and it was called Understanding Tax Policy
Speaker 1: How do People Reason? And the really interesting thing about
Speaker 1: this was you went out and you did a really
Speaker 1: massive and detailed survey about how people individually feel about taxes.
Speaker 1: Why did you decide to take that approach? Yeah, So
Speaker 1: when I decided to do this project, it came from
Speaker 1: having experience with other such types of research where I've
Speaker 1: been trying to understand how we as citizens think about
Speaker 1: our public policies, the economy and society. You know, how
Speaker 1: we reason, what we perceive as fair, what shapes our views.
Speaker 1: I think this is very important both our researchers and
Speaker 1: then for policymakers to understand in order to design policies
Speaker 1: that are better in line with our views of society.
Speaker 1: And I found it for this the Social Economics Lab
Speaker 1: at Harvard, where we do these large scale social economic
Speaker 1: surveys um sometimes on several countries to try and see
Speaker 1: how people reason, um, how people understand things, and you know,
Speaker 1: the key idea is, basically, we need to listen more
Speaker 1: to people. Um. And so this project on tax policy
Speaker 1: came from the idea that you hear a lot of
Speaker 1: things in the policy debate. Some of them economists would
Speaker 1: say are accurate, others you may say are quite misleading.
Speaker 1: And so I was very curious, what are sort of
Speaker 1: the mental maps, the mental models people use when they
Speaker 1: decide what tax policy to support, what tax policy to
Speaker 1: vote for. So do people ever like higher tex So
Speaker 1: there's a lot of complex considerations that go into thinking
Speaker 1: about taxes for people. UM. What I find is actually
Speaker 1: that the key factor in people's minds is how fair
Speaker 1: is the tax system? Um. People care first and foremost
Speaker 1: about fairness. And what's interesting is that, of course fairness
Speaker 1: is in the eye of the beholder. So do people
Speaker 1: like high taxes? Yes, for some people who believe that
Speaker 1: it's actually unfair to have a lot of income inequality
Speaker 1: or a lot of wealth inequality. For those people, higher
Speaker 1: taxes would actually be considered fair. And so perhaps the
Speaker 1: you know, the complexity here is that fairness truly is
Speaker 1: in the eye of the beholder and means very different things.
Speaker 1: To different people. So one of the interesting things about
Speaker 1: your paper is that you also, um, do this research
Speaker 1: and you sort of talk to people along partisan lines.
Speaker 1: So I'm curious, does the idea of fairness change substantially
Speaker 1: depending on whether you're Republican or Democrat. So our ideas
Speaker 1: about taxes actually look very divided along political lines, and
Speaker 1: not just in the final policy views. If you want
Speaker 1: whether we want higher lower taxes, um, that we we
Speaker 1: already knew and we can easily see. But actually, at
Speaker 1: every step of the reasoning about taxes, uh, they're big
Speaker 1: political divides. So what are the considerations if you want
Speaker 1: that people that people have in mind? And how are
Speaker 1: they divided along partisan lines? Well, the first thing people
Speaker 1: care about is what will be the economic effects of
Speaker 1: raising taxes or lowering taxes. The second thing they care
Speaker 1: about is who will benefit, who will gain, who will lose?
Speaker 1: And then the fanness concerns I would summarize us, how
Speaker 1: do we wait the gains and losses? Um, how much
Speaker 1: weight do we put on the losers? How much weight
Speaker 1: do we put on the winners? Here, people also care
Speaker 1: about their views of the government, Um, how the government
Speaker 1: will spend that revenue is the government efficient, does the
Speaker 1: government have a lot of waste um? And then finally,
Speaker 1: people also care out what they already know on the
Speaker 1: current tax system. And so at each of these steps
Speaker 1: there's actually big political divides. So to make this simple,
Speaker 1: if you're more on the left, on the Democrats side,
Speaker 1: then you actually think taxes have lower economic costs, so
Speaker 1: higher taxes don't hurt the economy as much. You also
Speaker 1: think that in general, tax cuts you know at the
Speaker 1: at the top will really mainly benefit higher income people,
Speaker 1: as opposed to if you're on the right, where you
Speaker 1: believe in trickle down, namely that tax cuts on high
Speaker 1: incomes will benefit everyone else as well, it would be
Speaker 1: the tide that lifts all boats. Um. If you're on
Speaker 1: the left, you also tend to think that it's much
Speaker 1: more unfair to have so much income inequality or wealth inequality,
Speaker 1: and you believe fundamentally people are not entitled to infinitely
Speaker 1: high incomes and that it's fair to tax away at
Speaker 1: least part of it. What's perhaps most striking is that
Speaker 1: there is artisan divide even on the perception of reality.
Speaker 1: That's what I call polarization of reality, which is even
Speaker 1: about the current tax system how high is the top
Speaker 1: tax rate, where does the top tax bracket start, how
Speaker 1: high is these stay tax et cetera. Even there there's
Speaker 1: actually uh divergence along political lines. So in a nutshell,
Speaker 1: people who are on the left tend to think taxes
Speaker 1: are lower, less progressive, there's more incoming equality than people
Speaker 1: on the right do. And what is striking is that
Speaker 1: these are things that one can actually look up. Um,
Speaker 1: this is not a matter of opinion. This is a
Speaker 1: matter of current factual realities. So I'm I want to
Speaker 1: talk a little bit more. You know, I'm curious obviously
Speaker 1: about what you found, but I want to talk a
Speaker 1: little bit more about your methodology and your approach and
Speaker 1: why you think the survey going out and asking people
Speaker 1: is a good idea, Because I'm curious if, like, you know,
Speaker 1: someone came to me and said, like, oh, what are
Speaker 1: your use on the tax system or why do you
Speaker 1: support higher lower taxes? You know, I might come up
Speaker 1: with some thoughtful thing about fairness because I'm talking to
Speaker 1: someone and I want to sound reasonable and I want
Speaker 1: to say, oh, well, it's very important for me to
Speaker 1: know that it's being spent well, and I want to
Speaker 1: say smart sounding sophisticated things. But then then then they leave,
Speaker 1: and then I'm thinking and just want lower taxes because
Speaker 1: I want to keep more money. So I'm curious about
Speaker 1: what you see is the advantages, the costs, and benefit
Speaker 1: of the survey method for getting people's opinions on what
Speaker 1: you just described are very political questions. This is a
Speaker 1: great question, And let me give a bit of background
Speaker 1: to this methodology, so you know, the key idea is
Speaker 1: really that it's important to get into people's minds, into
Speaker 1: our minds of citizens, and there are things which we
Speaker 1: cannot see in other data and that we cannot extract
Speaker 1: with other methods. And these are these invisible things like perceptions,
Speaker 1: these attitudes, reasoning, and so we as economists have many
Speaker 1: tools based on large scale data sets, but these invisible
Speaker 1: things will still not be seen in these other data sets.
Speaker 1: So in some sense, directly asking people is perhaps the
Speaker 1: best way to go here. What's important is, of course,
Speaker 1: that these surveys are not just you know, opinion polls
Speaker 1: on the street, but actually carefully designed, rigorous research tools.
Speaker 1: So they're done online in a way that's very interactive, intuitive,
Speaker 1: walking people through a controlled order series of questions. Uh
Speaker 1: and they're done in a completely anonymous way, so there's
Speaker 1: absolutely no social pressure. Um. You can take it on
Speaker 1: your phone, you can take it alone in front of
Speaker 1: your browser. There is no surveyor in front of you,
Speaker 1: so there's actually very little mispers, very little incentive to misreport.
Speaker 1: Let me just resay that sentence. There's actually very little
Speaker 1: incentive to misreport um your opinions, as there is absolutely
Speaker 1: no social pressure around it. Now, the design is very critical,
Speaker 1: so I go through several blocks here too get a
Speaker 1: sense of really what's going on in people's minds. And
Speaker 1: I actually start with what you suggested, which is a
Speaker 1: plane open ended question to get actually people's gut reaction,
Speaker 1: which is, what are your main considerations about taxes? And
Speaker 1: then I can analyze these answers, you know, in a
Speaker 1: freely open ended way, and it's very clear what sort
Speaker 1: of considerations come out. Everybody mentions fairness, people mentioned the
Speaker 1: middle class a lot, People worry about loopholes. But then
Speaker 1: I can drill down by walking people through more detailed questions,
Speaker 1: so on the mechanisms of taxes. For instance, if taxes
Speaker 1: increased on higher incomes, what would you think the effects
Speaker 1: would be? Do you think higher incomes with less entrepreneurial
Speaker 1: save less move states, um, workless great less jobs, et cetera.
Speaker 1: And so you can want people through all these detail
Speaker 1: reasonings and elicit much more detailed you know, beyond the
Speaker 1: gut reaction responses, and so taken together, this relatively long
Speaker 1: and well designed survey actually really shed some good light
Speaker 1: into what's going on in people's heads. One of the
Speaker 1: things that you did, UM in the survey was you also,
Speaker 1: I think you showed people short videos that kind of
Speaker 1: explain how tax policy actually works. Could you maybe talk
Speaker 1: a little bit about that aspect of UM of the research. Yes.
Speaker 1: So my idea here was to see whether if we
Speaker 1: actually showed people simple explanatory videos, which are fully neutral,
Speaker 1: non part is and pedagogical, the way you may see
Speaker 1: in a plain introductory economics course, whether that could actually
Speaker 1: help improve understanding of taxes. And I designed these videos
Speaker 1: to be UM, short and fun hopefully easy to understand,
Speaker 1: and I simply vary the frame UM with which with
Speaker 1: which I show them. So, for instance, one video will
Speaker 1: focus mainly on the distributional consequences of taxes, essentially who
Speaker 1: gains who loses, you know, to the best of our
Speaker 1: economics knowledge today. The other will focus only on the
Speaker 1: economic costs of benefits, So what would be the effects
Speaker 1: on the economy, um, will output be lower? Will there
Speaker 1: be economic costs? And then the third one actually brings
Speaker 1: these two together, and very much like economists would think,
Speaker 1: points out that there's always a trade off between the
Speaker 1: costs and benefit of taxes. The benefits in terms of
Speaker 1: raising revenues possibly re distributing income, you know, as much
Speaker 1: as is in line with your fairness and distributional inclinations.
Speaker 1: And there's the economic costs because taxes always change people's
Speaker 1: behaviors to some extent or company's behaviors, and so entails
Speaker 1: some economic costs, and that the right tax system is
Speaker 1: the one that actually balances these costs and benefits. And
Speaker 1: what I see is that these videos are actually quite effective,
Speaker 1: although they're pretty short, they're actually quite effective in making people, uh,
Speaker 1: you know, more aware of the tax system and also
Speaker 1: more supportive of progressive income taxes and more supportive also
Speaker 1: of the state tax. And I I noticed that the
Speaker 1: arguments that actually people care most about, very much in
Speaker 1: line with what I said earlier, are really the distributional
Speaker 1: impacts and the fairness impact. So when people see the
Speaker 1: distributional impacts of taxes, how it could actually help you know,
Speaker 1: lower income people or the middle class, uh, and actually
Speaker 1: smooth the income distribution a little bit. Even if they
Speaker 1: become more aware of the economic costs as well, on balance,
Speaker 1: they tend to then side more with being in support
Speaker 1: of progressive taxes. So you mentioned estate taxes just then.
Speaker 1: I'm curious, did you find out the way people feel
Speaker 1: about estate taxes is different to the way they feel
Speaker 1: about income taxes or I don't know. I don't think
Speaker 1: your paper went into corporate taxes, but I'm just curious
Speaker 1: what your take is on on variations and how people
Speaker 1: think about different types of taxes. So how do people
Speaker 1: think about different types of taxes? In the paper, I
Speaker 1: look at two major tools on the personal tax side,
Speaker 1: which are um income taxes and the estate tax, which
Speaker 1: is a tax that is paid when someone passes away
Speaker 1: on the estate they pass on UM to their heirs
Speaker 1: and UM. I think that for other types of taxes,
Speaker 1: the the major considerations, which is, you know, what are
Speaker 1: your finn as views will also be probably the most
Speaker 1: important ones. UM in the case of income in the
Speaker 1: state taxes, the biggest difference is that people are actually
Speaker 1: much more unaware of how these state tax works. Uh.
Speaker 1: The state tax is a very unpopular tax in the US.
Speaker 1: It's sometimes called the death tax, which is obviously not
Speaker 1: a not a great name, and it's very disliked. UM.
Speaker 1: What I find is that it's very disliked because people
Speaker 1: believe it's ultimately a double tax, which is a taxes
Speaker 1: income that has already been taxed at some point. Uh.
Speaker 1: And it's also very unpopular because it's very misunderstood. So
Speaker 1: for instance, UM, in general, respondents think that around a
Speaker 1: third of all estates will end up paying these state
Speaker 1: tax and that couldn't be further from the truth. In fact,
Speaker 1: less than one in thousand estates will be subject to
Speaker 1: these state tax So it's actually a tax that gives
Speaker 1: in very high in the wealth distribution that you may
Speaker 1: pass on, and people are unaware of that. UM. So
Speaker 1: they believe, for instance, the chances that they are people
Speaker 1: they know or people like them will end up paying
Speaker 1: it is much higher than it actually is. But even there,
Speaker 1: the major considerations relate to fairness, and the state tax
Speaker 1: is actually a great example to illustrate how complex fans
Speaker 1: views can be and you are, you know, the listeners
Speaker 1: can can think about themselves. How do you feel about
Speaker 1: the fairness of taxing away wealth that's passed on from
Speaker 1: parents to their children. Well, it's actually a very thorny
Speaker 1: ethical issue because if you take the perspective of children,
Speaker 1: then many people across the political spectrum agree that it's
Speaker 1: unfair for children, you know, just by virtue of being
Speaker 1: born in wealthier families to start with better amenities and life,
Speaker 1: start with more advantages in life, and then receive higher inheritances.
Speaker 1: So many people taking the perspective of children would feel
Speaker 1: that this is unfair and that we like equality of
Speaker 1: a poor unity. Um, we like they give everybody equal chances.
Speaker 1: And so if you just think about the children's perspective,
Speaker 1: most people actually agree that it's fair to try to
Speaker 1: level the playing field a little bit by having an
Speaker 1: estate tax. But then flip it around and take the
Speaker 1: perspective of parents. So parents, you know, who have perhaps
Speaker 1: worked hard and saved in order to transmit wealth to
Speaker 1: their children. Once we take that perspective there, people feel
Speaker 1: quite differently. They feel, oh, it's actually perhaps not that
Speaker 1: fair to tax away the wealth of parents who have
Speaker 1: worked so hard to give money to their children. And
Speaker 1: by the way, even if parents have themselves inherited and
Speaker 1: we're you know, already wealthy when they were young, even
Speaker 1: there people think it's not great from the perspective of
Speaker 1: the parents attacks this away. And so this is in
Speaker 1: conflict with each other because these two perspectives are fundamentally
Speaker 1: opposing each other. And so in the end, people have
Speaker 1: to face this ethical dynama. And what I see is
Speaker 1: that on balance, in the end, people who are more
Speaker 1: on the left, on the Democrats side, tend to on
Speaker 1: balance say, okay, I'd rather have less inequality among children.
Speaker 1: I'd rather have more equality of opportunity among children, even
Speaker 1: if that means I need to penalize some parents and
Speaker 1: tax away part of their states. And on the right,
Speaker 1: people tend to side perhaps more with the parents and thinking, well,
Speaker 1: it's too bad there will be unequal opportunities and inequality
Speaker 1: for children. But I still prefer to leave parents, you know,
Speaker 1: the right to pass on their wealth to their children
Speaker 1: tax free. So how much the upshot of your research
Speaker 1: is essentially applicable to the political language that has to
Speaker 1: be used in any campaign or policy debate. So people
Speaker 1: have their views. I want to raise taxes, who want
Speaker 1: to cut taxes? How much does your research essentially sort
Speaker 1: of inform for either side the sort of framing that
Speaker 1: can be used to gather public support. So I want
Speaker 1: to be very clear about my motivations here. UM. My
Speaker 1: goal is to actually try and help people understand the
Speaker 1: workings of taxes better. And for that the first step
Speaker 1: is actually you know the diagnostics state, which is where
Speaker 1: does the disagreement lie, Where is the misunderstanding hidden, what
Speaker 1: is incoherent perhaps in the reasoning or in the chain
Speaker 1: of reasoning. And so this is why I'm doing this project,
Speaker 1: to actually identify how people think about tax policy. The
Speaker 1: goal also by showing, for instance, these instructional videos, is
Speaker 1: to really see whether explanations improving understanding can help people.
Speaker 1: And I have, you know, no wish to um encourage
Speaker 1: people in one direction or the other, especially when it
Speaker 1: comes to fanness considerations, which have very much you know,
Speaker 1: your own individual or our own social you know, prerogative
Speaker 1: to have. But it's actually really about improving understanding. And
Speaker 1: I think that's very important because many people sometimes actually
Speaker 1: from disadvantage groups by not understanding what policies do are
Speaker 1: not able to assess what benefits or costs they will
Speaker 1: have to them, And I think giving people the tools
Speaker 1: to understand that means them being able to stand up
Speaker 1: more for themselves and make better decisions for themselves. And
Speaker 1: you know, perhaps which we're thinking, but I'm also hoping
Speaker 1: that for many of these things, we can approach it
Speaker 1: from a more objective, nonpartisan angle and actually, you know,
Speaker 1: improve understanding rather than foster political differences. So I think
Speaker 1: your survey just on that point, Your survey is a
Speaker 1: sort of snapshot in time. But do you get the
Speaker 1: sense that people's views on taxes have solidified more along
Speaker 1: partisan lines in recent years? Like do you think had
Speaker 1: you've done this survey twenty or thirty years ago, do
Speaker 1: you think it would have shown as stark split between attitudes.
Speaker 1: It's a really hard question to say whether polarization has
Speaker 1: increased or not in the US. It depends on the issues,
Speaker 1: and there isn't you know, so much detailed like the
Speaker 1: way we would do today survey data going back in
Speaker 1: time to be able to say this. However, what is
Speaker 1: clear is that because there's partisan gaps at every single step,
Speaker 1: including on the views of reality, uh, they are clearly
Speaker 1: quite deeply anchored, and so I think it's um. It's
Speaker 1: unsurprising in the end, going through these chains of reasonings
Speaker 1: that we have very different views about tax policy on
Speaker 1: both sides of the political spectrum. Now, this is not
Speaker 1: true for all policies. This is only part of the
Speaker 1: of the big research agenda, and I've looked at other
Speaker 1: policies like health insurance or trade policy, and partisan gaps
Speaker 1: are actually um not that large or look very different
Speaker 1: on other policies. So on health policy, for instance, people
Speaker 1: on the left and the right actually reason very similarly
Speaker 1: about the economic effects of health insurance, of the benefits
Speaker 1: in terms of distribution, or helping the sick, or helping
Speaker 1: lower income families. The reasoning is actually extremely similar on
Speaker 1: both sides of the political spectrum. However, once we go
Speaker 1: to the final policy views, and for instance, ask would
Speaker 1: you support, you know, a single payer health insurance, would
Speaker 1: you support a version of Medicare for all, they're actually
Speaker 1: regardless of the previous reasoning, people revert very much back
Speaker 1: to party lines um, and so a gap appears in
Speaker 1: the final policy views. Although it's very hard to detect
Speaker 1: any difference in how people actually reason about these policies.
Speaker 1: That's super interesting to me. I mean, one of the questions,
Speaker 1: and you know it comes up in all sorts of
Speaker 1: political discussions, is do people really ever change their minds
Speaker 1: when presented with new evidence? So maybe some people have
Speaker 1: some have some idea, they're like, oh, I think the
Speaker 1: tax rate is here, turns out the tax rate is
Speaker 1: much lower. Did they actually change their minds on policy?
Speaker 1: Or do they come up with some some new reason?
Speaker 1: Does the mind automatically backfill some new sort of empirical
Speaker 1: explanation to support what is uh, They're they're sort of
Speaker 1: a political leaning. So obviously our brains are very complex,
Speaker 1: uh instruments, and we tend to have a lot of biases.
Speaker 1: And I say we because it really affects all of us.
Speaker 1: But I think it depends very much on the issue
Speaker 1: whether information can improve or change people's minds. So in
Speaker 1: the case of tax policy, as I explained, actually people
Speaker 1: are open. It seems to explanatory videos or clear but
Speaker 1: a logical explanation of how tax policy works. That's not
Speaker 1: true for all issues. So I've looked at issues like immigration,
Speaker 1: um mobility, social mobility in the US, inequality, views of
Speaker 1: the government, and it really varies, for instance, when it
Speaker 1: comes to immigration, and that's not just true for the US,
Speaker 1: that's true for um all the countries in the survey,
Speaker 1: which includes many European countries. On immigration, people seem to
Speaker 1: be very sensitive mostly to narratives, to stories about immigrants,
Speaker 1: but facts about the actual number of immigrants, how well
Speaker 1: educated they are, where they come from, how much they
Speaker 1: contribute to the economy. That barely shifts anyone's minds. And
Speaker 1: so it really varies, and it depends on the issue
Speaker 1: under consideration. But I have to say one thing, which
Speaker 1: is that as economists, I think we have a very
Speaker 1: big duty to actually remain incredibly neutral and scientific. You know,
Speaker 1: economics is a science. It's a difficult one because we
Speaker 1: deal with complex systems like the economy and people, and
Speaker 1: so it's it's a difficult science, but it is a
Speaker 1: science using models, using data, and I think it's our
Speaker 1: really our duty to remain very nonpartisan, very neutral, and
Speaker 1: to do our best to actually inform people about what
Speaker 1: we find, what we discover on the workings of the economy,
Speaker 1: and hopefully that will also grant people some trust and
Speaker 1: confidence that you know, we're we're simply trying to convey
Speaker 1: the knowledge that we have, not to influence them in
Speaker 1: one direction or the other. I have a slightly weird question,
Speaker 1: but you know, a lot of the concepts we're talking about, well,
Speaker 1: we're talking about how people perceive fairness, but a lot
Speaker 1: of it also seems to touch on collectivism versus individualism.
Speaker 1: So what's best for all of society or the economy
Speaker 1: versus what's best for me? Specifically, how much of your
Speaker 1: research could be applied, UM, for instance, to the policy
Speaker 1: response to coronavirus in the US and how people are
Speaker 1: reacting to that. So the response to the coronavirus is
Speaker 1: obviously a very topical and pressing issue right now. UM.
Speaker 1: We did a very large scale survey in fifteen countries,
Speaker 1: So we have more than respondents across fifteen countries, among
Speaker 1: which the US, and it's been running since since March
Speaker 1: UM and so we've been able to follow people's views
Speaker 1: on the restrictions put in place and how much they're
Speaker 1: willing to tolerate, how they trade off health risk, whether
Speaker 1: it's their own health risk or the public health risk
Speaker 1: against their civil liberties UM, and civil liberties means you know,
Speaker 1: the right to move around the right for free expression,
Speaker 1: freedom of the press, democracy being respected, et cetera. And
Speaker 1: what we can see is that this trade off fundamentally
Speaker 1: differs in in in across countries. Uh So, actually, a
Speaker 1: country like the US relative to some European countries like
Speaker 1: Spain or Italy, is much less willing to trade off
Speaker 1: their civil liberties uh for health benefits. Actually the country
Speaker 1: that's most willing to trade off those liberties is China.
Speaker 1: And then at the other end of the spectrum, we
Speaker 1: have US and Japan, which are the least willing to
Speaker 1: give up their rights. France and Germany trail very closely
Speaker 1: behind the US, so they're also reluctant to give up
Speaker 1: civil liberties for health. And then countries that were hit
Speaker 1: perhaps very dress stically early on and had a real
Speaker 1: traumatic experience, like Italy, are much more willing to give
Speaker 1: up servi liberties. But this varies within country across people.
Speaker 1: So people who are themselves at a higher health risk
Speaker 1: um and you can predict health risk based on the
Speaker 1: medical models, so their inputs are you know, age, pre
Speaker 1: existing conditions. So people who are at higher health risk
Speaker 1: themselves are much more willing to have restrictions imposed and
Speaker 1: give up their own liberties and accept restrictions for all
Speaker 1: of society, you know, for the public health benefit. So
Speaker 1: that's true within country. And the other thing that's uh
Speaker 1: that's true is that these things are changing over time.
Speaker 1: So as we're able to track people, the willingness to
Speaker 1: give up rights mirrors the worries about health. And so
Speaker 1: as the worries about health have declined um over the
Speaker 1: summer and actually are now only ticking up again, we
Speaker 1: see exactly the same pattern or your willingness to accept
Speaker 1: restrictions or to give up rights. The willingness to give
Speaker 1: up rights declined, you know, or the whole summer, and
Speaker 1: then now it's ticking up slightly again in different places
Speaker 1: as we see second or even third waves appearing. And
Speaker 1: so I think what this implies is that, you know,
Speaker 1: first of all, it's very important to have safeguards in place,
Speaker 1: because clearly, if people are willing to give up their rights,
Speaker 1: it's only temporary. And so it's important in democracies that
Speaker 1: this is you know, ensured to be temporary. And this
Speaker 1: can actually then encourage people to accept restrictions in the
Speaker 1: short run because they know they will be temporary. Another thing,
Speaker 1: again related to the understanding part is in that project too,
Speaker 1: we actually explain to people, you want the benefits of
Speaker 1: various restrictive measures. Uh, you know, what's the benefit of
Speaker 1: having partial or full lockdowns, of imposing some restrictions, what's
Speaker 1: the gain in terms of flattening the curve or we're
Speaker 1: using cases. And once people actually see these nations, they
Speaker 1: become much more willing to comply with those restrictions. And
Speaker 1: so I think the second big lesson is that it's
Speaker 1: important for policymakers to explain to people why something is
Speaker 1: being done, to explain the reasoning behind it, and to
Speaker 1: give people, you know, the tools to understand why something
Speaker 1: is happening or not. So especially as our medical understanding
Speaker 1: is progressing about how this virus looks like and what
Speaker 1: is beneficial, what is not. Obviously we didn't know everything
Speaker 1: at all back in March. We're still figuring so many
Speaker 1: things out. It's very important to inform the public and
Speaker 1: be very you know, neutral and rigorous about how that's done.
Speaker 1: Do you feel as though the salience of tax is
Speaker 1: diminished as a political hot button issue When I hear
Speaker 1: a politician say I'm going to come out and cut
Speaker 1: taxes there's something kind of retro about it, to be like,
Speaker 1: it makes me think of like political fights in the
Speaker 1: eighties and nineties or when I was growing up. And
Speaker 1: I'm just curious if in your research that's the case,
Speaker 1: Um that maybe it's like in terms of people's main
Speaker 1: things they think about the case that it's diminished, and
Speaker 1: b does that create openings for more flexibility for tax
Speaker 1: policy changes if it isn't the number one thing on
Speaker 1: people's mind, So our taxes diminishing an importance in people's minds. Well,
Speaker 1: the first thing to say is that taxes are actually
Speaker 1: all the time they're and they're an incredibly powerful tool
Speaker 1: because they affect basically all stages of the economy, and
Speaker 1: if we get taxes wrong, it can have very damaging effects.
Speaker 1: On the other hand, you know, a well designed tax
Speaker 1: system can both raise revenues redistributed income trying client to
Speaker 1: do so, and at the same time not hurt productivity, competitivity, etcetera.
Speaker 1: So taxes will always be, you know, a gigantic public
Speaker 1: policy issue. How much people focus on them depends obviously
Speaker 1: on what else is going is going on. But the
Speaker 1: current COVID nineteen crisis actually really highlighted some fault lines
Speaker 1: in the economy between people you know, who are able
Speaker 1: to weather such a crisis as well and people who
Speaker 1: are really left behind from it. In addition, it cost
Speaker 1: you know, governments throughout the world gigantic terms of money,
Speaker 1: and so very quickly the issue of how to make
Speaker 1: up for that fiscal deficit, how to make up for
Speaker 1: the shortfall in revenues, will come to the table and
Speaker 1: we will have to take a very hard look at
Speaker 1: how to change the tax system, how to design it better,
Speaker 1: and what to do ultimately to get this revenue. So
Speaker 1: I think, perhaps sadly, it will become a very pressing issue,
Speaker 1: um in the not too distant future. Stephanie, thanks for
Speaker 1: coming on a really interesting approach to a lot of
Speaker 1: these topics. And uh yeah, I just recommend that people
Speaker 1: who are listening to this actually go and check out
Speaker 1: some of your research, including the paper on tax understanding
Speaker 1: tax policy, having people reason. Thank you some much. Thank you,
Speaker 1: Thanks Tracy and Joe, bye bye. So Joe. I enjoyed
Speaker 1: that conversation, even though, UM, I guess not many people
Speaker 1: like talking about taxes, but I do think Stephanie's approach
Speaker 1: to examining the topic is really interesting, and I kind
Speaker 1: of wonder what other policy insights you could get from
Speaker 1: these big surveys. Yeah. You know, something that she said
Speaker 1: that really struggle with me was her point about how
Speaker 1: a lot of people with different viewpoints actually share some
Speaker 1: common assumptions and even common reasoning, and then the flip
Speaker 1: actually happens with a partisan association. So it's like, yeah,
Speaker 1: I think it's wrong that some some children get a
Speaker 1: huge leg up from inheritance or whatever it is, And
Speaker 1: there may be a lot of agreement on that, but
Speaker 1: ultimately in the end, it's like the sort of like
Speaker 1: political affiliation of the estate tax ends up trumping um,
Speaker 1: one sort of prior intuitions that you would uh that
Speaker 1: people that you would theoretically use to arrive at a conclusion. Right.
Speaker 1: It sort of reminds me of like math homework, where
Speaker 1: everyone is working out the problem in a similar way
Speaker 1: but coming to very different answers. They would actually be like,
Speaker 1: you know, it's an interesting question though, like whether that's
Speaker 1: changed over time, um, whether you know, it's like someone
Speaker 1: who identifies as a Democrat, regardless of their reasoning, ends
Speaker 1: up ends up supporting the Democrat policy. Someone who identifies
Speaker 1: the Republican regardless of their personal atuitions, end up ends
Speaker 1: up supporting the policy that's the official plank of Republicans.
Speaker 1: I mean, it seems like because people are just the
Speaker 1: level of partisanship is extremely high these days. Yeah, but
Speaker 1: I think that's going to be like now that we
Speaker 1: have some of these surveys going on, I think it's
Speaker 1: going to be really interesting to see this data evolve
Speaker 1: over the next ten or twenty years. Right, we have
Speaker 1: it now, um, and you can sort of trace how
Speaker 1: attitudes are shifting in whether or not polarization is actually increasing. Yeah,
Speaker 1: and you know, look, I think, Um, obviously, I'm kind
Speaker 1: of skeptical. I mean, again, by the time people are
Speaker 1: listening to this, we'll probably know who the next president
Speaker 1: it is. But man, it's tough to rate. It seems
Speaker 1: politically tough to raise taxes period in any in any
Speaker 1: in any environment, doesn't it. Yeah, I think you'd have
Speaker 1: to calibrate. Well, I don't know, the world may change,
Speaker 1: but you may have an answer to that question very
Speaker 1: very soon. I think less than we'll find out less
Speaker 1: than a week now. Yeah, Okay, well we'll see. I'm
Speaker 1: really worried when this episode comes out that that everything
Speaker 1: we've just spoken about will be irrelevant and all our
Speaker 1: work will be for not But um, well we'll just
Speaker 1: apply to the election. Okay, how much to rerun everything? Okay? Um.
Speaker 1: To those of you who are listening, thank you very
Speaker 1: much and this has been another episode of the All
Speaker 1: Thoughts Podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway, and I'm Joe wisn't thought you
Speaker 1: could follow me on Twitter at the Stalwart. And you
Speaker 1: should follow our guest on Twitter, Stephanie Stancheva, She's at
Speaker 1: s Stancheva. Follow our producer Laura Carlton, She's at Laura M. Carlton.
Speaker 1: Follow the Bloomberg head of podcast, Brancesca Levi at Princesca Today,
Speaker 1: and check out all of our podcasts under the handle
Speaker 1: at podcasts. And if you enjoyed this episode or any others,
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Speaker 1: discovered Odd Lots. Thanks for listening.