1 00:00:00,160 --> 00:00:02,440 Speaker 1: The future may not be clear, but our commitment is 2 00:00:02,600 --> 00:00:04,440 Speaker 1: so when you sit with an advisor at Meryll Lynch, 3 00:00:04,519 --> 00:00:07,160 Speaker 1: we'll put your interests first. Visit mL dot com and 4 00:00:07,240 --> 00:00:09,640 Speaker 1: learn more about Merrill Lynch. An affiliated Bank of America, 5 00:00:09,760 --> 00:00:12,240 Speaker 1: Mary Lynch makes available products and services offered by Mery Lynch. 6 00:00:12,280 --> 00:00:14,600 Speaker 1: Pierrece veneran Smith Incorporated or registered broker dealer remember s 7 00:00:14,640 --> 00:00:21,040 Speaker 1: I PC. This is Masters in Business with Barry Ridholts 8 00:00:21,040 --> 00:00:26,479 Speaker 1: on Boomberg Radio. This week on the podcast, I have 9 00:00:26,560 --> 00:00:29,800 Speaker 1: an extra special guest, a professor from m I T 10 00:00:30,680 --> 00:00:35,280 Speaker 1: named Darren Assumoglu. He is how do I describe him? 11 00:00:35,320 --> 00:00:38,680 Speaker 1: He's just a rock star. This guy is one of 12 00:00:38,720 --> 00:00:43,240 Speaker 1: the most cited economists in the world. Uh. He's published 13 00:00:43,720 --> 00:00:49,159 Speaker 1: numerous papers. His curriculum vite list of grants and awards 14 00:00:49,159 --> 00:00:54,040 Speaker 1: I'm not exaggerating runs pages and pages and pages. He 15 00:00:54,160 --> 00:00:57,680 Speaker 1: was the recipient of the John Bates Clark Medal in 16 00:00:57,720 --> 00:01:00,360 Speaker 1: two thousand and five that goes out to the anymist 17 00:01:00,480 --> 00:01:06,640 Speaker 1: under forty with the biggest impact, most influence on the profession. He's, 18 00:01:06,680 --> 00:01:10,320 Speaker 1: you know, highly highly regarded and and really a rock 19 00:01:10,400 --> 00:01:13,600 Speaker 1: star up in M I T. If you are at 20 00:01:13,640 --> 00:01:19,080 Speaker 1: all interested in things like the impact of institutions on economies, 21 00:01:19,200 --> 00:01:24,840 Speaker 1: the role of technology and globalization on inequality, and how 22 00:01:25,240 --> 00:01:31,240 Speaker 1: we think about and evaluate global economic growth. Uh. This 23 00:01:31,360 --> 00:01:34,560 Speaker 1: is a deep dive, very much wonky and in the 24 00:01:34,600 --> 00:01:38,480 Speaker 1: weeds sort of conversation. Anybody who's a fant of economics, 25 00:01:38,520 --> 00:01:43,240 Speaker 1: anybody who is at all familiar with Professor Asimo Glue's work, 26 00:01:43,640 --> 00:01:46,479 Speaker 1: is going to really enjoy this. Uh. It's about an 27 00:01:46,520 --> 00:01:52,080 Speaker 1: hour of us really getting far into the uh weeds 28 00:01:52,120 --> 00:01:56,840 Speaker 1: about all manners of economic conversation. So, with no further ado, 29 00:01:57,120 --> 00:02:06,400 Speaker 1: here is my conversation with Professor Darren Asamoglu. I'm Barry 30 00:02:06,480 --> 00:02:09,880 Speaker 1: rit Helts. You're listening to Masters in Business on Bloomberg 31 00:02:10,000 --> 00:02:14,640 Speaker 1: Radio this weekend. On the show, I have Professor Darren Asamoglu. 32 00:02:14,800 --> 00:02:18,320 Speaker 1: He is the killing professor of economics at m I T. 33 00:02:18,960 --> 00:02:22,600 Speaker 1: And I'm just gonna give you an abbreviated version of 34 00:02:22,680 --> 00:02:25,560 Speaker 1: his curriculum vitae, because if I went over the whole thing, 35 00:02:25,960 --> 00:02:28,400 Speaker 1: we wouldn't have time to ask any more questions. He 36 00:02:28,520 --> 00:02:31,680 Speaker 1: got both his masters and PhD from the London School 37 00:02:31,960 --> 00:02:35,480 Speaker 1: of Economics, where he stayed on as a lecturer. He 38 00:02:35,560 --> 00:02:39,799 Speaker 1: has been at M I T. Since, where he has 39 00:02:39,880 --> 00:02:44,079 Speaker 1: become one of the world's most cited economists. His lists 40 00:02:44,120 --> 00:02:48,239 Speaker 1: of awards and grants one pages. I cannot mention them all, 41 00:02:48,320 --> 00:02:52,440 Speaker 1: but I must at least mention the John Bates Clark Medal, 42 00:02:52,680 --> 00:02:56,200 Speaker 1: awarded to economists under the age of forty who are 43 00:02:56,320 --> 00:03:00,280 Speaker 1: judged to have made the most significant contribution to economic 44 00:03:00,400 --> 00:03:03,600 Speaker 1: thought and knowledge. He is the author of numerous books, 45 00:03:03,800 --> 00:03:09,240 Speaker 1: most recently Why Nations Fail, which was published to widespread acclaim. 46 00:03:09,360 --> 00:03:12,520 Speaker 1: Professor Darren Asimo Blu, Welcome to Bloomberg. It's great to 47 00:03:12,520 --> 00:03:15,800 Speaker 1: be here. Unfortunately I'm no longer under forty. That's true, 48 00:03:15,880 --> 00:03:18,440 Speaker 1: but in O five when you won the Clock Award, 49 00:03:18,480 --> 00:03:22,760 Speaker 1: you were on forty. So let's let's I'm gonna go 50 00:03:22,960 --> 00:03:26,920 Speaker 1: way back and start with your doctoral thesis, which I 51 00:03:27,080 --> 00:03:31,600 Speaker 1: was tickled by the by the title Essays in micro 52 00:03:31,840 --> 00:03:37,560 Speaker 1: Foundations of macro Economics. What are micro foundations of macroeconomics? 53 00:03:37,960 --> 00:03:41,040 Speaker 1: It's that dreaded term, But what it really means is 54 00:03:41,840 --> 00:03:47,720 Speaker 1: macro is so complicated we all struggle with it, and 55 00:03:47,800 --> 00:03:50,600 Speaker 1: the micro foundations is to try to make it a 56 00:03:50,640 --> 00:03:53,760 Speaker 1: little bit more comprehensible by looking at what's going on 57 00:03:53,800 --> 00:03:57,080 Speaker 1: at the micro level, so rotter than say there is 58 00:03:57,080 --> 00:04:01,640 Speaker 1: this relationship between unemployment and inflation or technology inequality. Let's 59 00:04:01,640 --> 00:04:04,200 Speaker 1: dig deep and try to see what's going on at 60 00:04:04,200 --> 00:04:06,800 Speaker 1: the micro level. What is it that new machines are doing, 61 00:04:07,200 --> 00:04:11,880 Speaker 1: What is it that workers are trying to achieve, and 62 00:04:12,000 --> 00:04:14,440 Speaker 1: what sorts of jobs they're looking for and what sorts 63 00:04:14,440 --> 00:04:17,920 Speaker 1: of jobs they are matched for and all that. Now, 64 00:04:18,120 --> 00:04:21,520 Speaker 1: now that's very um when you say micro, that's really 65 00:04:22,520 --> 00:04:25,960 Speaker 1: going down to chunking it to small pieces. But you 66 00:04:26,080 --> 00:04:31,360 Speaker 1: also write a lot about broad overarching themes such as 67 00:04:31,520 --> 00:04:35,560 Speaker 1: economic institutions, and let's let's read a quick quote of yours. 68 00:04:36,160 --> 00:04:41,200 Speaker 1: Economic institutions shape the incentives to become educated, to save 69 00:04:41,240 --> 00:04:45,279 Speaker 1: and invest, to innovate and adopt new technologies. It is 70 00:04:45,320 --> 00:04:50,400 Speaker 1: the political process that determines what economic institutions people live under, 71 00:04:50,839 --> 00:04:55,200 Speaker 1: and the political institutions that determine how this process works. 72 00:04:55,480 --> 00:04:59,760 Speaker 1: So let's talk a little bit about economic and political institutions. 73 00:04:59,760 --> 00:05:03,440 Speaker 1: What sorts of institutions are you paying close attention to 74 00:05:03,960 --> 00:05:08,679 Speaker 1: these days? When we talk of institutions, they're the broad 75 00:05:09,600 --> 00:05:14,080 Speaker 1: fabric of society that, as the quote that you mentioned 76 00:05:14,400 --> 00:05:19,800 Speaker 1: tries to capture, that shape opportunities and incentives. So central 77 00:05:19,920 --> 00:05:23,440 Speaker 1: to our financial and economic world are the economic institutions 78 00:05:23,480 --> 00:05:27,160 Speaker 1: that regulate how economic transactions take place. What sorts of 79 00:05:27,240 --> 00:05:32,039 Speaker 1: loans can you give? Are supported by the political process. 80 00:05:32,600 --> 00:05:37,159 Speaker 1: You know, if you have any chance of understanding why, say, 81 00:05:37,240 --> 00:05:40,239 Speaker 1: Russian economic institutions look the way they ask in Russia, 82 00:05:40,600 --> 00:05:45,359 Speaker 1: that puts most political power in the hands of a 83 00:05:45,400 --> 00:05:48,520 Speaker 1: single person or a small clique around him. So in 84 00:05:48,560 --> 00:05:51,960 Speaker 1: the same way, if we want to understand how economic 85 00:05:52,000 --> 00:05:55,719 Speaker 1: institutions in the United States have evolved, we have to 86 00:05:55,800 --> 00:05:59,320 Speaker 1: think about the political process also. So so you're referring 87 00:05:59,360 --> 00:06:04,520 Speaker 1: to very broad systems like the legal system, the banking system, 88 00:06:04,920 --> 00:06:08,640 Speaker 1: the educational system. These are the broad institutions that all 89 00:06:08,720 --> 00:06:12,800 Speaker 1: work to shape our daily economic life. Absolutely absolutely, and 90 00:06:13,360 --> 00:06:16,520 Speaker 1: we have to go from the broad, but sometimes you 91 00:06:16,560 --> 00:06:19,279 Speaker 1: have to go down in the weeds. So if you 92 00:06:19,360 --> 00:06:24,040 Speaker 1: want to think about, for instance, how the US labor 93 00:06:24,120 --> 00:06:29,480 Speaker 1: force is going to adapt to the ever changing technological 94 00:06:29,600 --> 00:06:33,440 Speaker 1: landscape or the globalization process, it's very important to like 95 00:06:33,560 --> 00:06:36,359 Speaker 1: to look at these macro institutions, but also such things 96 00:06:36,360 --> 00:06:44,279 Speaker 1: as vocational training, disability insurance system, lack thereof, lack of 97 00:06:45,000 --> 00:06:49,040 Speaker 1: unemployment insurance. Those things are actually going to matter quite 98 00:06:49,160 --> 00:06:52,279 Speaker 1: a bit. So it's both the micro and the macro. 99 00:06:52,560 --> 00:06:58,040 Speaker 1: So why is it that some nations become democracies and 100 00:06:58,120 --> 00:07:02,600 Speaker 1: the adjacent nation with similar natural resources in a similar 101 00:07:02,600 --> 00:07:07,640 Speaker 1: cultural history make a turn and become either dictatorships or 102 00:07:07,839 --> 00:07:12,560 Speaker 1: or something similarly unappealing. Well, I think that's another great question, 103 00:07:13,400 --> 00:07:21,840 Speaker 1: and it gets to the bottom of the great paradigmatic 104 00:07:22,000 --> 00:07:25,440 Speaker 1: question of how we should think of political development. And 105 00:07:26,320 --> 00:07:30,760 Speaker 1: you know, going back to Marks and before Marks and 106 00:07:31,000 --> 00:07:34,720 Speaker 1: also early twentieth century sociology, most people think of it, 107 00:07:35,240 --> 00:07:39,240 Speaker 1: you know, using structural factors. You know, for instance, they think, oh, 108 00:07:39,280 --> 00:07:42,600 Speaker 1: if a country gets rich, that it's going to become democratic, 109 00:07:42,720 --> 00:07:45,640 Speaker 1: or you know Marxist thinkers, you know, oh, if a 110 00:07:45,680 --> 00:07:49,040 Speaker 1: country has enough of a quote unquote capitalist class, they're 111 00:07:49,040 --> 00:07:53,120 Speaker 1: going to become democratic. Actually, going back to our earlier discussion, 112 00:07:53,400 --> 00:07:56,680 Speaker 1: it's really very much the devils in the details. It 113 00:07:56,800 --> 00:08:01,040 Speaker 1: depends on how different groups are organized and whether the 114 00:08:01,080 --> 00:08:04,840 Speaker 1: ability of a narrow segment of the population that could 115 00:08:04,880 --> 00:08:09,040 Speaker 1: be coming from the old communist apparatic in the case 116 00:08:09,120 --> 00:08:12,440 Speaker 1: of the transition economies, it could be some landowners or businessman, 117 00:08:12,640 --> 00:08:18,040 Speaker 1: military personnel, or just like political machine operators, and whether 118 00:08:18,080 --> 00:08:21,840 Speaker 1: they're strong enough to capture the system and set aside 119 00:08:21,840 --> 00:08:25,440 Speaker 1: the demands of the broader population, or there is enough 120 00:08:25,520 --> 00:08:29,760 Speaker 1: mobilization and contribution from political parties and civil society and 121 00:08:29,800 --> 00:08:34,440 Speaker 1: the media so that the democratic process actually gaels and 122 00:08:34,720 --> 00:08:39,319 Speaker 1: is able to act as the vehicle for sort of 123 00:08:39,360 --> 00:08:43,760 Speaker 1: having people's voices heard, resolving conflicts, deliberation, and so on. 124 00:08:44,160 --> 00:08:46,720 Speaker 1: Let's talk a little bit about the minimum wage, which 125 00:08:46,760 --> 00:08:49,960 Speaker 1: has been an area of some debate in the country. 126 00:08:50,679 --> 00:08:54,200 Speaker 1: We've seen a number of cities and some states razor 127 00:08:54,520 --> 00:08:58,640 Speaker 1: minimum wage, and in some cases pretty substantially San Francisco, 128 00:08:59,000 --> 00:09:02,559 Speaker 1: l A. Seattle. When when Seattle raised their minimum wage, 129 00:09:02,559 --> 00:09:05,320 Speaker 1: I heard all sorts of dire warnings, this is it. 130 00:09:05,400 --> 00:09:07,880 Speaker 1: They're going to cause a recession, They're going to cause unemployment, 131 00:09:08,200 --> 00:09:12,000 Speaker 1: and yet Seattle seems to be booming. Um, what's the 132 00:09:12,040 --> 00:09:14,959 Speaker 1: state of minimum wage in the United States and and 133 00:09:15,000 --> 00:09:18,000 Speaker 1: what do we need to know about that ongoing debate. 134 00:09:19,360 --> 00:09:23,320 Speaker 1: I think that's an area of considerable controversy within the 135 00:09:23,320 --> 00:09:28,760 Speaker 1: economics profession, and I'm not an active participant in that debate, 136 00:09:28,800 --> 00:09:32,040 Speaker 1: so I can give you sort of the outsider's perspective, 137 00:09:32,280 --> 00:09:35,480 Speaker 1: and my summary of it would be that we know, 138 00:09:36,800 --> 00:09:40,160 Speaker 1: if there is a very high level of minimum wage 139 00:09:40,679 --> 00:09:49,040 Speaker 1: that destroys jobs, it creates the very opposite of the 140 00:09:49,080 --> 00:09:52,600 Speaker 1: economic process that it intended to create, which was to 141 00:09:52,679 --> 00:09:56,080 Speaker 1: help low wage workers they're priced out of jobs. On 142 00:09:56,120 --> 00:09:58,840 Speaker 1: the other hand, if there's a moderate to low level 143 00:09:58,880 --> 00:10:01,280 Speaker 1: of minimum wage, which is what you know US minimum 144 00:10:01,280 --> 00:10:04,400 Speaker 1: wage has been for the last thirty forty years, if 145 00:10:04,559 --> 00:10:06,880 Speaker 1: small increase in the minimum wage doesn't seem to have 146 00:10:06,960 --> 00:10:11,000 Speaker 1: much of an adverse effect unemployment, and it might force 147 00:10:11,120 --> 00:10:15,840 Speaker 1: employers to pay a little bit higher UH wage to 148 00:10:15,880 --> 00:10:19,040 Speaker 1: their workers while at the same time reorganizing work in 149 00:10:19,120 --> 00:10:23,400 Speaker 1: such a way that perhaps the lowest pay workers are 150 00:10:23,440 --> 00:10:27,720 Speaker 1: doing a little bit more productive. So, in particular, UH 151 00:10:28,120 --> 00:10:30,760 Speaker 1: workers can be trained a little bit more when they 152 00:10:30,800 --> 00:10:32,760 Speaker 1: have to be paid more so that they are actually 153 00:10:32,840 --> 00:10:37,760 Speaker 1: able to UH produce something commensurate with what they're being paid. UH. 154 00:10:38,200 --> 00:10:40,360 Speaker 1: Employers are going to use a little bit more capital 155 00:10:40,400 --> 00:10:43,000 Speaker 1: to go with these workers. So at the lower levels, 156 00:10:43,240 --> 00:10:45,480 Speaker 1: there are going to be a lot of options for 157 00:10:45,520 --> 00:10:50,000 Speaker 1: employers to make adjustments that don't lead to huge job losses. 158 00:10:50,240 --> 00:10:53,560 Speaker 1: So when we are talking of the federal minimum wage 159 00:10:53,559 --> 00:10:55,920 Speaker 1: in the United States, that's still at the very low level. 160 00:10:56,240 --> 00:10:59,320 Speaker 1: When we are sort of getting up to fifteen dollars 161 00:10:59,360 --> 00:11:04,400 Speaker 1: an hour, now, I think we are beyond the level 162 00:11:04,440 --> 00:11:06,520 Speaker 1: where we are most comfortable that this is not going 163 00:11:06,559 --> 00:11:09,319 Speaker 1: to create huge job losses. And if you think of 164 00:11:09,360 --> 00:11:13,320 Speaker 1: twenty dollars there, we're really getting close to European or 165 00:11:13,480 --> 00:11:15,800 Speaker 1: lower end of the European levels of minimum wages, and 166 00:11:16,080 --> 00:11:18,640 Speaker 1: we have to be much more careful. So you're on 167 00:11:18,679 --> 00:11:21,640 Speaker 1: the outside of that debate. Let's talk about a debate 168 00:11:21,679 --> 00:11:25,640 Speaker 1: that you're not on the outside. Let's discuss inequality. I'm 169 00:11:25,640 --> 00:11:29,880 Speaker 1: gonna pull a quote of of yours. The default position 170 00:11:29,920 --> 00:11:34,439 Speaker 1: of economists is that inequality reflects unequal human capital of 171 00:11:34,559 --> 00:11:39,560 Speaker 1: product productive capabilities. Some people make more than others measure 172 00:11:39,640 --> 00:11:44,120 Speaker 1: to their contributions to their employees, to their employers. Why 173 00:11:44,200 --> 00:11:48,600 Speaker 1: is that thesis wrong? I think there is a fairly 174 00:11:49,520 --> 00:11:55,640 Speaker 1: broad consensus within economics that not all, but the bulk 175 00:11:55,960 --> 00:11:59,560 Speaker 1: of inequality we observe in the labor market. And here 176 00:11:59,600 --> 00:12:02,760 Speaker 1: I'm not talking about, like, you know, Warren Buffett making 177 00:12:02,800 --> 00:12:05,800 Speaker 1: billions of dollars because he has billions of dollars to invest. 178 00:12:06,080 --> 00:12:09,200 Speaker 1: So the fact that some engineer is being paid, you know, 179 00:12:09,400 --> 00:12:17,480 Speaker 1: fifteen times as much as a technicians exactly. That is 180 00:12:17,800 --> 00:12:23,840 Speaker 1: related to the human capital, skills, talents, creativity, expertise, problem 181 00:12:23,880 --> 00:12:27,880 Speaker 1: solving ability of workers. It's not the whole thing because 182 00:12:27,920 --> 00:12:30,200 Speaker 1: there is discrimination. It's not the whole thing because some 183 00:12:30,240 --> 00:12:32,280 Speaker 1: people just turn out to be lucky. It's not the 184 00:12:32,280 --> 00:12:35,840 Speaker 1: whole thing because some people get paid because they're doing 185 00:12:35,880 --> 00:12:39,200 Speaker 1: really awful jobs and they need to be compensated for it. 186 00:12:39,640 --> 00:12:42,760 Speaker 1: But the bulk of it is that human capital. But 187 00:12:43,280 --> 00:12:46,720 Speaker 1: and here is the big butt. How that human capital 188 00:12:46,800 --> 00:12:52,640 Speaker 1: is compensated is very much a function of technology and institutions. 189 00:12:52,679 --> 00:12:56,679 Speaker 1: So by technology, for instance, I mean what's going on 190 00:12:56,840 --> 00:13:01,920 Speaker 1: with robots, artificial intelligence, automation, all these new machines. Many 191 00:13:02,000 --> 00:13:05,680 Speaker 1: of those may make certain types of skills and certain 192 00:13:05,720 --> 00:13:11,640 Speaker 1: workers redundant and therefore act as a powerful generator of inequality. 193 00:13:12,040 --> 00:13:15,160 Speaker 1: By institutions, I mean things like what we just talked 194 00:13:15,200 --> 00:13:19,520 Speaker 1: about minimum wage unions. Those are going to be able 195 00:13:19,559 --> 00:13:24,199 Speaker 1: to sometimes protect certain segments of the population from wage drops. 196 00:13:24,360 --> 00:13:27,080 Speaker 1: So as a result, let's make a cross country comparison 197 00:13:27,200 --> 00:13:31,640 Speaker 1: US and Germany to rich and highly complex economies. If 198 00:13:31,679 --> 00:13:34,320 Speaker 1: you look at many trends like technology, how quickly they're 199 00:13:34,320 --> 00:13:38,520 Speaker 1: adopting computers, robots, how their occupational structures are changing. There 200 00:13:38,520 --> 00:13:41,840 Speaker 1: are many parallels between these two countries, but look at wages, 201 00:13:42,280 --> 00:13:47,199 Speaker 1: you see quite major differences. Inequality has also increased in Germany, 202 00:13:47,440 --> 00:13:51,600 Speaker 1: but they haven't experienced the same extent of the bottom 203 00:13:51,640 --> 00:13:54,640 Speaker 1: of the wage distribution falling out in the United States. 204 00:13:54,640 --> 00:13:58,120 Speaker 1: Over the last thirty years, for instance, we see that 205 00:13:58,920 --> 00:14:02,040 Speaker 1: workers at the autom of the wage distribution does say, 206 00:14:02,080 --> 00:14:07,000 Speaker 1: earning uh less than the median wage. They've had a 207 00:14:07,160 --> 00:14:10,400 Speaker 1: terrible run. They've had periods of ten fifteen years where 208 00:14:10,400 --> 00:14:12,840 Speaker 1: the real learnings have fallen or they have been stagnant, 209 00:14:13,080 --> 00:14:15,160 Speaker 1: and you don't see a parallel to that in Germany. 210 00:14:15,440 --> 00:14:20,080 Speaker 1: Let's let's talk about another comparison across countries, and I 211 00:14:20,080 --> 00:14:23,520 Speaker 1: pulled this from one of your earlier papers. The comparison 212 00:14:23,600 --> 00:14:29,400 Speaker 1: between CEO and worker salary varies dramatically by country. In Japan, 213 00:14:29,520 --> 00:14:32,320 Speaker 1: it's eleven to one between the CEO and the lowest 214 00:14:32,320 --> 00:14:35,880 Speaker 1: paid worker. In Germany, it's twelve to one. In the 215 00:14:35,960 --> 00:14:40,320 Speaker 1: United States, it's almost five to one. How does that 216 00:14:40,440 --> 00:14:46,160 Speaker 1: sort of gap versus are closest economic competitors developed. It's 217 00:14:46,200 --> 00:14:51,120 Speaker 1: exactly the same thing. It's these institutional aspects, but perhaps 218 00:14:51,160 --> 00:14:54,760 Speaker 1: with a little bit of the globalization process working out 219 00:14:55,160 --> 00:14:58,240 Speaker 1: a little bit differently, So it didn't wouldn't globalizations similarly 220 00:14:58,320 --> 00:15:00,960 Speaker 1: impact Japan and Germany? It does, and it is, but 221 00:15:01,880 --> 00:15:04,520 Speaker 1: and I don't think that's that's the most important part. 222 00:15:04,720 --> 00:15:09,880 Speaker 1: But US companies are more globalized and that has often 223 00:15:10,240 --> 00:15:13,960 Speaker 1: led to more rewards for their CEOs, for for good 224 00:15:13,960 --> 00:15:16,400 Speaker 1: and bad reasons. But I think the most important part 225 00:15:16,920 --> 00:15:20,280 Speaker 1: is what's going on with the social norms and what's 226 00:15:20,360 --> 00:15:24,800 Speaker 1: acceptable for CEOs to be paid. So Germany and Japan 227 00:15:24,840 --> 00:15:27,640 Speaker 1: are very modern economies in many ways, but they still 228 00:15:27,720 --> 00:15:31,480 Speaker 1: have a sort of a corporative culture leftover, and that's 229 00:15:31,800 --> 00:15:37,320 Speaker 1: got some costs, but it also creates a more cohesive 230 00:15:37,440 --> 00:15:42,360 Speaker 1: internal organization for many structures, and it imposes that, you know, 231 00:15:42,600 --> 00:15:45,240 Speaker 1: a rising tide should lift all boats, at least within 232 00:15:45,280 --> 00:15:49,800 Speaker 1: the company. So you cannot have the workers using their 233 00:15:49,880 --> 00:15:53,840 Speaker 1: wages and jobs and masses while the CEOs are getting 234 00:15:54,800 --> 00:15:58,480 Speaker 1: tens of millions of dollars of bonuses, and that's totally 235 00:15:58,520 --> 00:16:01,280 Speaker 1: acceptable in the United States. Let's talk a little bit 236 00:16:01,280 --> 00:16:07,440 Speaker 1: about technology. You wrote on robots and jobs. Evidence from 237 00:16:07,680 --> 00:16:11,760 Speaker 1: US labor market. An analysis that looked at the effect 238 00:16:11,800 --> 00:16:16,800 Speaker 1: of the increased use of industrial robots between and two 239 00:16:16,840 --> 00:16:20,320 Speaker 1: thousand and seven on on the labor markets. What did 240 00:16:20,360 --> 00:16:26,760 Speaker 1: you find? Summarizing it briefly, I would say we found 241 00:16:26,880 --> 00:16:33,320 Speaker 1: that more robots is associated with lower employment and lower 242 00:16:33,360 --> 00:16:38,560 Speaker 1: wages in the local labor market. The effects are not enormous, 243 00:16:38,680 --> 00:16:42,440 Speaker 1: meaning that we're not talking millions of people losing their 244 00:16:42,520 --> 00:16:45,200 Speaker 1: jobs or anything like that, but they are also large 245 00:16:45,240 --> 00:16:49,240 Speaker 1: if you look at it from the viewpoint of what 246 00:16:49,320 --> 00:16:53,680 Speaker 1: does the stock of robots that we have imply, And 247 00:16:53,840 --> 00:16:57,000 Speaker 1: roughly speaking, what we are finding is something like one 248 00:16:57,040 --> 00:16:59,800 Speaker 1: more robot is leading to the loss of jobs but 249 00:17:00,080 --> 00:17:04,600 Speaker 1: between three to six workers in the local labor market. Now, 250 00:17:05,840 --> 00:17:08,879 Speaker 1: that's not a huge effect because we don't have that 251 00:17:08,920 --> 00:17:13,399 Speaker 1: many robots, but projecting it in the future, we have 252 00:17:13,600 --> 00:17:19,119 Speaker 1: to be quite aware that we are going to be 253 00:17:19,240 --> 00:17:23,720 Speaker 1: facing both great opportunities because these robots and artificially intelligence 254 00:17:23,760 --> 00:17:27,200 Speaker 1: technologies are going to increase productivity, but huge challenges also. 255 00:17:27,720 --> 00:17:29,960 Speaker 1: So let's not talk about robots a second. I want 256 00:17:29,960 --> 00:17:33,639 Speaker 1: to talk about software and technology. I run a small 257 00:17:33,720 --> 00:17:38,800 Speaker 1: office where fourteen people, and I know based on my 258 00:17:38,880 --> 00:17:43,320 Speaker 1: experience at firms ten and twenty years ago. What we 259 00:17:43,400 --> 00:17:46,719 Speaker 1: managed to do with fourteen people it would have taken 260 00:17:46,880 --> 00:17:51,800 Speaker 1: fifty or a hundred people twenty years ago. Everything from 261 00:17:51,920 --> 00:17:55,639 Speaker 1: the content we generate to the sort of tax loss 262 00:17:55,680 --> 00:17:59,239 Speaker 1: harvesting and portfolio rebalance you push a button today that 263 00:17:59,359 --> 00:18:02,680 Speaker 1: used to be for accountants in green ice shades working 264 00:18:02,720 --> 00:18:06,840 Speaker 1: for a week to get all that done. How significant. 265 00:18:07,600 --> 00:18:10,640 Speaker 1: Let me let me phrase that differently. Is the fear 266 00:18:10,720 --> 00:18:13,040 Speaker 1: that technology is going to take all our jobs away 267 00:18:13,160 --> 00:18:16,560 Speaker 1: unfounded or is there a genuine reason to be concerned? 268 00:18:16,840 --> 00:18:18,880 Speaker 1: Yes and no. So let me put it this way. 269 00:18:18,960 --> 00:18:21,119 Speaker 1: Let me first start with the yes part, which is 270 00:18:21,200 --> 00:18:28,159 Speaker 1: that people are somewhat complacent about what the future of 271 00:18:28,200 --> 00:18:30,960 Speaker 1: the labor market will look like. And that's for two reasons. 272 00:18:31,359 --> 00:18:35,320 Speaker 1: The first one is that we are told, and with 273 00:18:35,480 --> 00:18:40,520 Speaker 1: good reason, that technology is what brings economic growth, what 274 00:18:40,640 --> 00:18:45,920 Speaker 1: brings prosperity, So why should we be afraid absolutely right. Second, 275 00:18:46,359 --> 00:18:50,679 Speaker 1: there have been economists in the past, some of the 276 00:18:50,720 --> 00:18:56,320 Speaker 1: greatest minds of our profession, who predicted the end of work, 277 00:18:56,720 --> 00:19:01,120 Speaker 1: John Maynard Keynes, the founder of macroeconomics, Leon tv, Herod Simon, 278 00:19:01,800 --> 00:19:04,040 Speaker 1: and they didn't turn out to be right, at least 279 00:19:04,080 --> 00:19:06,399 Speaker 1: in the medium term. So we say, why should it 280 00:19:06,400 --> 00:19:10,480 Speaker 1: be different this time? But I think the truth of 281 00:19:10,520 --> 00:19:15,639 Speaker 1: the matter is that many technologies, and automation technologies and 282 00:19:15,800 --> 00:19:18,639 Speaker 1: parts of software being examples of it as well as 283 00:19:18,800 --> 00:19:23,239 Speaker 1: robots do displace workers. They replace workers and tasks that 284 00:19:23,320 --> 00:19:25,840 Speaker 1: labor was previously performing, and they do it better, they 285 00:19:25,880 --> 00:19:28,560 Speaker 1: do it faster, they do it more cheaply. The reason 286 00:19:28,640 --> 00:19:34,880 Speaker 1: why this doesn't spell doom for the workforce its two folds. 287 00:19:34,880 --> 00:19:37,480 Speaker 1: First of all, at the same time that they do that, 288 00:19:37,880 --> 00:19:41,800 Speaker 1: they reduce costs, and as we become richer, we deploy 289 00:19:41,880 --> 00:19:45,879 Speaker 1: these workers into other sectors. We consume more cars, we 290 00:19:45,920 --> 00:19:50,560 Speaker 1: consume more information, we consume more widgets, and we consume 291 00:19:50,600 --> 00:19:54,080 Speaker 1: more services, and all of these require workers. And secondly, 292 00:19:54,400 --> 00:19:57,680 Speaker 1: we also create new tasks, new jobs, new industries to 293 00:19:58,400 --> 00:20:01,400 Speaker 1: soak up all of the labor that's been freed from 294 00:20:01,440 --> 00:20:05,439 Speaker 1: the task that they were previously performing. So it's a 295 00:20:05,480 --> 00:20:08,040 Speaker 1: good picture on the one hand, but it's a difficult 296 00:20:08,040 --> 00:20:11,040 Speaker 1: picture because it does involve people losing their jobs and 297 00:20:11,119 --> 00:20:14,760 Speaker 1: going through the painful process of reallocation. And sometimes that 298 00:20:14,880 --> 00:20:18,320 Speaker 1: process can be slow, Sometimes that process can be incomplete, 299 00:20:18,480 --> 00:20:21,000 Speaker 1: and I think what we are finding with robots and 300 00:20:21,040 --> 00:20:23,760 Speaker 1: what we are finding with some other automation technologies is 301 00:20:23,840 --> 00:20:29,720 Speaker 1: that those pains of reallocation, and in particular, perhaps because 302 00:20:29,760 --> 00:20:33,440 Speaker 1: these technologies are a little bit more disruptive than other 303 00:20:33,520 --> 00:20:36,640 Speaker 1: ones that we've implemented over the last twenty years, it's 304 00:20:36,680 --> 00:20:41,159 Speaker 1: more painful. Let's talk about your book Why Nations Fail, 305 00:20:41,440 --> 00:20:47,159 Speaker 1: which origins of power, prosperity and poverty. Uh, this is 306 00:20:47,200 --> 00:20:54,280 Speaker 1: really an epic magnum opus which has been wildly received 307 00:20:54,320 --> 00:20:58,720 Speaker 1: and highly regarded. In the book, you talk about institutions, 308 00:20:58,720 --> 00:21:04,160 Speaker 1: institutions institution, as we discussed, You discuss how significant institutions 309 00:21:04,200 --> 00:21:09,960 Speaker 1: are to a robust and well functioning economy. How different 310 00:21:10,280 --> 00:21:15,600 Speaker 1: is this framework for analyzing um economic progress from from 311 00:21:15,600 --> 00:21:21,760 Speaker 1: what preceded anything in science built on the shoulders of giants. 312 00:21:22,400 --> 00:21:28,480 Speaker 1: I think we very much benefited build on the work 313 00:21:28,520 --> 00:21:31,440 Speaker 1: of others. Douglas North, who is a Nobel Prize winner, 314 00:21:32,200 --> 00:21:36,520 Speaker 1: was the first person perhaps to really push this institutional perspective. 315 00:21:36,920 --> 00:21:41,040 Speaker 1: But what we have done is go beyond that, try 316 00:21:41,119 --> 00:21:47,000 Speaker 1: to explain more varied sorts of economic and political relations 317 00:21:47,000 --> 00:21:50,320 Speaker 1: with institutions, be much more systematic about how they work, 318 00:21:50,440 --> 00:21:55,200 Speaker 1: and bring both empirical and historical analysis to further understand 319 00:21:55,400 --> 00:22:00,680 Speaker 1: how these institutional equilibria emerge and why these institutional objectories 320 00:22:00,800 --> 00:22:06,719 Speaker 1: diverge across countries. So define for us what is institutional drift. 321 00:22:07,359 --> 00:22:11,840 Speaker 1: Here we are talking of institutions as the broad organization 322 00:22:11,880 --> 00:22:17,280 Speaker 1: of society. Who has political power, how do you regulate trade, 323 00:22:18,040 --> 00:22:21,280 Speaker 1: how do you enforce property rights, how do course function? 324 00:22:21,880 --> 00:22:25,440 Speaker 1: Who has opportunities in society? And if you look at 325 00:22:25,760 --> 00:22:28,720 Speaker 1: two societies that look very similar at a point in time, 326 00:22:28,800 --> 00:22:33,720 Speaker 1: say go back to the fourteenth century, and observe them 327 00:22:33,760 --> 00:22:38,640 Speaker 1: over decades, perhaps even centuries, what you're going to see 328 00:22:38,760 --> 00:22:42,080 Speaker 1: is that, even though they look similar at a certain 329 00:22:42,119 --> 00:22:45,880 Speaker 1: point in time, they will start drifting apart a little bit. 330 00:22:46,240 --> 00:22:48,800 Speaker 1: You're going to see that they're going to face somewhat 331 00:22:48,800 --> 00:22:51,480 Speaker 1: different challenges, They're going to respond to these challenges a 332 00:22:51,520 --> 00:22:57,480 Speaker 1: little differently, and the nature of the social relation is 333 00:22:57,520 --> 00:23:02,200 Speaker 1: going to look quite different in fifty or one hundred years. 334 00:23:02,200 --> 00:23:04,960 Speaker 1: So you see that, for instance, in the Middle Ages, 335 00:23:05,480 --> 00:23:08,040 Speaker 1: Eastern Europe and Western Europe at some point look very 336 00:23:08,080 --> 00:23:15,760 Speaker 1: differ very similar. They have similar hierarchies, aristocrats and kings, 337 00:23:15,800 --> 00:23:21,760 Speaker 1: and some parliamentary institutions feudal labor relations, cities providing some 338 00:23:21,840 --> 00:23:26,520 Speaker 1: industrial output, and then roll forward one hundred years and 339 00:23:26,560 --> 00:23:30,200 Speaker 1: suddenly you see Western Europe has somewhat bigger cities, merchants 340 00:23:30,200 --> 00:23:34,159 Speaker 1: are a little bit more assertive, feudal relations have just 341 00:23:34,400 --> 00:23:39,200 Speaker 1: slightly eroded relative to Eastern Europe. And then that institutional 342 00:23:39,280 --> 00:23:42,560 Speaker 1: drift comes into contact with a big shock like a 343 00:23:42,560 --> 00:23:46,320 Speaker 1: demographic collapse during the Black Death or new trading or 344 00:23:46,320 --> 00:23:49,639 Speaker 1: political opportunities. And then those societies that have drifted a 345 00:23:49,640 --> 00:23:55,000 Speaker 1: little bit apart suddenly see their trajectories diverged much more radically. 346 00:23:55,600 --> 00:23:58,640 Speaker 1: So let's talk a little bit about the opposite sort 347 00:23:58,640 --> 00:24:02,280 Speaker 1: of question, which is, you're building on the work of 348 00:24:02,400 --> 00:24:09,560 Speaker 1: previous economists who looked at institutions. Where does traditional political science, sociology, 349 00:24:09,680 --> 00:24:16,160 Speaker 1: or economics fail the evaluation of uh poverty and economics. 350 00:24:16,160 --> 00:24:20,159 Speaker 1: We we have persistence, persistent poverty in all sorts of 351 00:24:20,200 --> 00:24:25,240 Speaker 1: places around the world. What do we misunderstanding about those geographies? 352 00:24:25,960 --> 00:24:30,880 Speaker 1: I think understanding poverty is a very difficult question, so 353 00:24:31,040 --> 00:24:34,800 Speaker 1: from a societal From a societal point of view, I mean, 354 00:24:34,880 --> 00:24:37,800 Speaker 1: look at it this way. We live in such great comfort, 355 00:24:37,840 --> 00:24:42,760 Speaker 1: we're uh surrounded by widgets, the hardest type of work 356 00:24:42,880 --> 00:24:47,960 Speaker 1: is gone. We have amazing abundance around us, and then 357 00:24:48,000 --> 00:24:51,760 Speaker 1: we think what's going on in parts of Sub Saharan Africa. 358 00:24:52,280 --> 00:24:58,440 Speaker 1: People have access to income per capita daily income one 359 00:24:58,680 --> 00:25:01,000 Speaker 1: or one eightieth of what we have here. It's just 360 00:25:01,160 --> 00:25:04,280 Speaker 1: so difficult for us to understand how that could exist 361 00:25:04,320 --> 00:25:08,800 Speaker 1: in this globalized, connected, unified world. It is a difficult problem. 362 00:25:09,119 --> 00:25:13,199 Speaker 1: But we have also failed to some degree because we 363 00:25:13,240 --> 00:25:18,480 Speaker 1: have gone after some somewhat facile answers such as geography 364 00:25:18,600 --> 00:25:23,560 Speaker 1: or culture or oh just it's inspired leadership that gets 365 00:25:23,560 --> 00:25:26,080 Speaker 1: out of us out of poverty. And I think the 366 00:25:26,119 --> 00:25:28,879 Speaker 1: truth of the matter is that you really need to 367 00:25:28,920 --> 00:25:32,639 Speaker 1: think much more systematically about what opportunities people have, what 368 00:25:32,800 --> 00:25:36,360 Speaker 1: incentives they have to use those opportunities, and then that's 369 00:25:36,359 --> 00:25:39,880 Speaker 1: going to bring you to these institutional equilibria that we've 370 00:25:39,920 --> 00:25:44,680 Speaker 1: already talked about briefly. Why our economic institutions different, why 371 00:25:44,720 --> 00:25:48,240 Speaker 1: political institutions are different. Why is it that people in 372 00:25:48,520 --> 00:25:52,440 Speaker 1: Sierra Leone or Chat or the Central African Republic don't 373 00:25:52,480 --> 00:25:56,320 Speaker 1: have those opportunities? Why don't they try to create those opportunities? 374 00:25:56,359 --> 00:25:59,560 Speaker 1: And you see there, you really need to get into 375 00:25:59,560 --> 00:26:02,480 Speaker 1: the d tales of these political equilibria. Who has political power, 376 00:26:02,560 --> 00:26:04,439 Speaker 1: what do they benefit from? How is it that they 377 00:26:04,520 --> 00:26:08,320 Speaker 1: can to get away with creating wealth for themselves and 378 00:26:08,400 --> 00:26:13,919 Speaker 1: poverty for millions. So let's talk about extractive institutions. What 379 00:26:14,040 --> 00:26:18,359 Speaker 1: are extractive institutions and how do they differ from the 380 00:26:18,440 --> 00:26:22,879 Speaker 1: traditional rent seeking epithet we've seen tossed about. So what 381 00:26:23,000 --> 00:26:25,600 Speaker 1: I just described a second ago without using the term, 382 00:26:26,680 --> 00:26:32,080 Speaker 1: were the extractive institutions. Extractive institutions are any institutional arrangement 383 00:26:32,200 --> 00:26:38,360 Speaker 1: that enable a group of people to extract resources directly 384 00:26:38,440 --> 00:26:41,800 Speaker 1: or indirectly from the rest of society, and they do 385 00:26:41,920 --> 00:26:47,400 Speaker 1: so by creating a tilted playing field, by destroying opportunities 386 00:26:48,400 --> 00:26:52,840 Speaker 1: and by destroying incentives for the rest of society. So 387 00:26:53,200 --> 00:26:58,680 Speaker 1: it is similar to what people talk of rent seeking, 388 00:26:58,920 --> 00:27:02,359 Speaker 1: but it's broader because when you toko rent seeking, you 389 00:27:02,480 --> 00:27:06,520 Speaker 1: you're thinking of corruption and what government officials do or 390 00:27:06,600 --> 00:27:11,480 Speaker 1: sometimes what some businesses might do in with the politicians, 391 00:27:11,520 --> 00:27:16,680 Speaker 1: as in the chronic capitalism. But extractive institutions, by putting 392 00:27:16,720 --> 00:27:21,159 Speaker 1: the emphasis on this opportunity incentive and the tilted playing field, 393 00:27:21,480 --> 00:27:25,200 Speaker 1: brings out the parallels between say a system like what 394 00:27:25,280 --> 00:27:28,760 Speaker 1: you had in Egypt under Wabarek, where every businessman had 395 00:27:28,800 --> 00:27:31,600 Speaker 1: to be connected to his m DP party and give 396 00:27:31,680 --> 00:27:35,160 Speaker 1: him kick bads to say, feudal Europe where you don't 397 00:27:35,160 --> 00:27:38,040 Speaker 1: have corruption. You don't have any one of those things, 398 00:27:38,080 --> 00:27:41,359 Speaker 1: but you have a system that makes people servile, labor 399 00:27:41,440 --> 00:27:44,320 Speaker 1: produce under coercion, and the benefits go to a well 400 00:27:44,359 --> 00:27:47,800 Speaker 1: defined group of people. You discuss equality in terms of 401 00:27:47,840 --> 00:27:54,200 Speaker 1: political power, opportunity and economic outcomes. Does more equality always 402 00:27:54,200 --> 00:28:00,879 Speaker 1: equal more prosperity. No, because we need the economic system 403 00:28:00,960 --> 00:28:05,920 Speaker 1: to reward success m hm. And that means there will 404 00:28:05,960 --> 00:28:10,160 Speaker 1: have to be some inequality. You cannot success. You cannot 405 00:28:10,200 --> 00:28:13,520 Speaker 1: reward economic success if you pay everybody the same amount, 406 00:28:14,359 --> 00:28:17,600 Speaker 1: And rewarding success means that some families are going to 407 00:28:17,720 --> 00:28:23,280 Speaker 1: do better than others. But what's important is not just 408 00:28:24,000 --> 00:28:28,520 Speaker 1: whether we have equality or inequality of outcomes. That matters, 409 00:28:28,600 --> 00:28:34,240 Speaker 1: and excessive inequality of outcomes could be quite costly for society. 410 00:28:34,520 --> 00:28:37,320 Speaker 1: But what matters much more is whether we have equality 411 00:28:37,320 --> 00:28:42,000 Speaker 1: of opportunity and whether we have political inequality. So by 412 00:28:42,080 --> 00:28:45,240 Speaker 1: inequality or equality of opportunity, I mean the same thing 413 00:28:45,240 --> 00:28:47,520 Speaker 1: as I was referring to with the tilted playing field. 414 00:28:48,640 --> 00:28:53,160 Speaker 1: If you qualify for the best jobs and I don't 415 00:28:54,240 --> 00:28:59,520 Speaker 1: because of my hair color, skin color, social class. That 416 00:28:59,600 --> 00:29:03,120 Speaker 1: means it's inequality of opportunity. Go back to the apartheid 417 00:29:03,240 --> 00:29:09,560 Speaker 1: system under uh in South Africa before it collapse of 418 00:29:09,600 --> 00:29:13,120 Speaker 1: the population Black South Africans. Not only could they not 419 00:29:13,240 --> 00:29:16,760 Speaker 1: go to school high quality school or could they not 420 00:29:16,880 --> 00:29:20,280 Speaker 1: become policeman or politicians or anything like that, but they 421 00:29:20,320 --> 00:29:25,400 Speaker 1: could not perform anyone over over one hundred semi skilled 422 00:29:25,480 --> 00:29:28,479 Speaker 1: or skilled occupations. They couldn't become technicians, they couldn't become teachers, 423 00:29:28,480 --> 00:29:32,000 Speaker 1: they couldn't become formant. So that was an extreme version 424 00:29:32,200 --> 00:29:35,000 Speaker 1: of this tilted playing field, a huge amount of inequality 425 00:29:35,040 --> 00:29:38,720 Speaker 1: of opportunity, but it could take more subtle forms. You know, 426 00:29:38,760 --> 00:29:42,200 Speaker 1: in the United States, everybody is free to do whatever 427 00:29:42,240 --> 00:29:44,120 Speaker 1: they want. But you know, if you grow up an 428 00:29:44,160 --> 00:29:48,240 Speaker 1: inner city and you don't get access to high quality schooling, 429 00:29:48,280 --> 00:29:50,760 Speaker 1: you're not going to be able to be competitive against 430 00:29:50,800 --> 00:29:53,080 Speaker 1: people who go to the best schools. So that's the 431 00:29:53,120 --> 00:29:58,080 Speaker 1: inequality of opportunity. But even more pernicious, it's politically inequality. 432 00:29:58,360 --> 00:30:01,880 Speaker 1: You know, the United States was would as the country 433 00:30:01,880 --> 00:30:04,840 Speaker 1: of the common man. Robert dal a sort of prominent 434 00:30:04,880 --> 00:30:07,840 Speaker 1: political scientist. You know, he asked the question who rules? 435 00:30:07,880 --> 00:30:10,120 Speaker 1: And his answer was the common man rules. That was 436 00:30:10,480 --> 00:30:13,880 Speaker 1: forty five years ago. Today we have a political system 437 00:30:13,920 --> 00:30:18,200 Speaker 1: where the rich are much more vocal than the regular person. 438 00:30:18,280 --> 00:30:22,640 Speaker 1: So politically inequality has crept in. Who do our congressman 439 00:30:22,760 --> 00:30:26,160 Speaker 1: or senators listened to the very rich? Whoever's writing them 440 00:30:26,160 --> 00:30:28,479 Speaker 1: a check? Where he was writing them a check? Who's 441 00:30:28,880 --> 00:30:34,200 Speaker 1: policy positions are reflected in their campaigns, wherever's writing the check, 442 00:30:34,200 --> 00:30:37,000 Speaker 1: wherever is more visible, whoever is more vocal? And I 443 00:30:37,040 --> 00:30:39,760 Speaker 1: think that's the politically inequality we have to watch out against. 444 00:30:40,240 --> 00:30:43,840 Speaker 1: We have been speaking with Professor Darren Asamoglu of m 445 00:30:43,880 --> 00:30:48,160 Speaker 1: I T, author of the book Why Nations Fail. If 446 00:30:48,200 --> 00:30:50,880 Speaker 1: you enjoy this conversation, be sure and check out our 447 00:30:50,960 --> 00:30:55,840 Speaker 1: podcast extras. You can find those at iTunes, Bloomberg dot 448 00:30:55,840 --> 00:31:00,120 Speaker 1: com and SoundCloud. We keep the tape rolling continuing to 449 00:31:00,120 --> 00:31:04,520 Speaker 1: talk about all things economic. Check out my daily column 450 00:31:04,560 --> 00:31:08,440 Speaker 1: on Bloomberg View dot com. Follow me on Twitter at 451 00:31:08,600 --> 00:31:10,760 Speaker 1: ri Halts. If you would like to read any of 452 00:31:10,760 --> 00:31:15,200 Speaker 1: the professors written work, his papers are all available on 453 00:31:15,400 --> 00:31:19,360 Speaker 1: his m I T page. Just google Darren Asamoglul and 454 00:31:19,440 --> 00:31:23,360 Speaker 1: you'll be presented with a wealth of reading opportunity. You 455 00:31:23,400 --> 00:31:27,080 Speaker 1: can also check out his book Why Nations Fail Origins 456 00:31:27,120 --> 00:31:31,200 Speaker 1: of Power, Prosperity and Poverty. I'm Barry H. Halts. You're 457 00:31:31,280 --> 00:31:44,880 Speaker 1: listening to Masters in Business on Bloomberg Radio. What could 458 00:31:44,920 --> 00:31:47,360 Speaker 1: your future hold more than you think? Because at Merrill 459 00:31:47,400 --> 00:31:49,360 Speaker 1: Lynch we work with you to create a strategy built 460 00:31:49,400 --> 00:31:52,120 Speaker 1: around your priorities. Visit mL dot com and learn more 461 00:31:52,160 --> 00:31:54,720 Speaker 1: about Merrill Lynch. An affiliated Bank of America. Mery Lynch 462 00:31:54,720 --> 00:31:57,000 Speaker 1: makes available products and services offered by Merrill Lynch Pierce 463 00:31:57,000 --> 00:31:59,440 Speaker 1: Federan Smith Incorporated or registered broker Dealer remember s I PC. 464 00:32:04,160 --> 00:32:06,760 Speaker 1: Welcome to the podcast. Thank you, professor for doing this. 465 00:32:06,840 --> 00:32:09,520 Speaker 1: I've been looking forward to chatting with you for a 466 00:32:09,560 --> 00:32:13,840 Speaker 1: long time. I find your work absolutely intriguing. And I 467 00:32:13,880 --> 00:32:17,240 Speaker 1: didn't say this in the introduction, but I wasn't exaggerating. 468 00:32:17,320 --> 00:32:21,680 Speaker 1: Your CV is literally eighteen pages long. People give me grief. 469 00:32:21,680 --> 00:32:23,920 Speaker 1: I'm like, no, I have a page and a half. 470 00:32:24,480 --> 00:32:29,000 Speaker 1: That's that's a CV. I'm a piker um and I 471 00:32:29,440 --> 00:32:32,800 Speaker 1: you also make all of your papers readily available, which 472 00:32:32,880 --> 00:32:36,640 Speaker 1: not the data does not. Everybody does that. I was 473 00:32:36,720 --> 00:32:40,719 Speaker 1: up late last night reading a run of different um PDFs, 474 00:32:40,760 --> 00:32:43,760 Speaker 1: which I found quite quite interesting. I threw away a 475 00:32:43,760 --> 00:32:46,440 Speaker 1: bunch of questions that we worked a bunch of others. 476 00:32:46,840 --> 00:32:49,160 Speaker 1: I know, I only have you for a finite amount 477 00:32:49,160 --> 00:32:51,120 Speaker 1: of time before you have to run back to the conference. 478 00:32:51,440 --> 00:32:53,800 Speaker 1: But there's some questions I didn't get to that I 479 00:32:53,880 --> 00:32:56,640 Speaker 1: have to ask before I jump into some of my 480 00:32:57,240 --> 00:33:01,640 Speaker 1: standard questions. We we talked about inequality, We talked about technology, 481 00:33:01,680 --> 00:33:05,400 Speaker 1: but we didn't talk about the impact of technology and inequality. 482 00:33:05,840 --> 00:33:10,080 Speaker 1: What does technology mean in terms of increased globalization and 483 00:33:10,120 --> 00:33:14,800 Speaker 1: what does it mean in terms of rising levels of inequality. 484 00:33:15,360 --> 00:33:19,400 Speaker 1: You know, technology is what creates prosperity, but that prosperity 485 00:33:19,440 --> 00:33:23,200 Speaker 1: is not equally distributed. If you look at robots or automation, 486 00:33:24,280 --> 00:33:28,360 Speaker 1: they help some workers much more than others. In particular, 487 00:33:28,440 --> 00:33:33,120 Speaker 1: many of these technologies display certain groups of workers, and 488 00:33:33,160 --> 00:33:36,280 Speaker 1: they're not going to translate into higher earnings for these workers, 489 00:33:36,520 --> 00:33:39,080 Speaker 1: while the managers are the more skilled workers who are 490 00:33:39,120 --> 00:33:42,080 Speaker 1: being complemented by these technologies are going to be the winners. 491 00:33:42,120 --> 00:33:46,560 Speaker 1: So economists talk skill biased technological change, and that's what 492 00:33:46,640 --> 00:33:50,280 Speaker 1: we have experienced over the last sixty seventy years in 493 00:33:50,400 --> 00:33:53,880 Speaker 1: terms of the effects of technology. That's not to say 494 00:33:53,920 --> 00:33:56,640 Speaker 1: that all of the increasing equality in the United States 495 00:33:56,680 --> 00:33:59,080 Speaker 1: is an outcome of technology. I don't think you can 496 00:33:59,120 --> 00:34:02,960 Speaker 1: explain why the top zero point one percent is doing 497 00:34:03,040 --> 00:34:07,160 Speaker 1: so well just by technology, But a lot of it 498 00:34:07,200 --> 00:34:10,600 Speaker 1: is really a technological phenomenon. So you mentioned the top 499 00:34:10,680 --> 00:34:14,839 Speaker 1: zero point one percent. I love this UH data set 500 00:34:14,880 --> 00:34:18,279 Speaker 1: I pulled from one of your pieces. You wrote, the 501 00:34:18,440 --> 00:34:22,719 Speaker 1: zero point one percent in the United States accounts for 502 00:34:22,960 --> 00:34:27,319 Speaker 1: eight percent of the national income. In other countries that's 503 00:34:27,360 --> 00:34:30,000 Speaker 1: more like one or two percent, and in the nineteen 504 00:34:30,080 --> 00:34:32,719 Speaker 1: fifties in the US it was more like three pc. 505 00:34:33,400 --> 00:34:37,200 Speaker 1: So how did the top point one percent capture so 506 00:34:37,280 --> 00:34:39,840 Speaker 1: much of the national income? Is that a function of 507 00:34:39,960 --> 00:34:44,120 Speaker 1: tax policies, at a function of UM stock options? What 508 00:34:44,239 --> 00:34:51,759 Speaker 1: accounts for the tripling of income captured by UM that 509 00:34:52,080 --> 00:34:55,240 Speaker 1: zero point one percent of the population, all of the above, 510 00:34:55,280 --> 00:34:59,160 Speaker 1: it's a huge phenomenon and its consequences are really transformative. 511 00:34:59,360 --> 00:35:03,400 Speaker 1: The occupy movement, the Tea Party, what's going on right 512 00:35:03,440 --> 00:35:06,040 Speaker 1: now with all sorts of populism. I think they're all 513 00:35:06,120 --> 00:35:08,719 Speaker 1: related around the world, around the world than in the 514 00:35:08,800 --> 00:35:11,600 Speaker 1: United States. They're all related to this feeling and it's 515 00:35:11,640 --> 00:35:15,200 Speaker 1: the reality also that the pie is being distributed more 516 00:35:15,200 --> 00:35:17,680 Speaker 1: and more unequally. And when we look at that top 517 00:35:17,719 --> 00:35:21,600 Speaker 1: point top zero point one percent, technology has played at all. 518 00:35:21,920 --> 00:35:25,840 Speaker 1: But I think changing institutions, changing tax policy, and changing 519 00:35:25,880 --> 00:35:29,720 Speaker 1: social norms are very important. Also, we talked about CEOs. 520 00:35:29,840 --> 00:35:33,480 Speaker 1: It's not just that CEOs are so much more productive 521 00:35:33,520 --> 00:35:35,799 Speaker 1: today than they were twenty five years ago, but it's 522 00:35:35,800 --> 00:35:38,480 Speaker 1: become more acceptable for them to be paid huge stock 523 00:35:38,520 --> 00:35:43,719 Speaker 1: options and especially being paid huge sums while they're laying 524 00:35:43,760 --> 00:35:47,439 Speaker 1: off workers are cutting wages at the bottom of their organization. 525 00:35:48,120 --> 00:35:51,640 Speaker 1: So another data point I pulled from one of your papers, 526 00:35:52,200 --> 00:35:55,560 Speaker 1: not so much about the point one percent, but generally 527 00:35:55,600 --> 00:36:01,479 Speaker 1: about the widening inequality gap. You wrote, um, the gap 528 00:36:01,520 --> 00:36:06,440 Speaker 1: between relatively high earners meaning nine percentile of income distribution 529 00:36:07,040 --> 00:36:13,240 Speaker 1: versus the bottom ten percentile has widened. Also, same factors 530 00:36:13,320 --> 00:36:16,399 Speaker 1: driving that gap question. You're not talking CEO is necessarily, 531 00:36:16,920 --> 00:36:20,920 Speaker 1: but you're talking professional class top ten percent a little 532 00:36:20,960 --> 00:36:24,799 Speaker 1: different than than that one or or point one. I 533 00:36:24,840 --> 00:36:28,520 Speaker 1: think the same factors, but they're relative importance would be different. 534 00:36:28,560 --> 00:36:32,319 Speaker 1: I think technology is really the dominant factor when we 535 00:36:32,360 --> 00:36:35,920 Speaker 1: are thinking about, say the workers at the shop floor 536 00:36:36,120 --> 00:36:39,839 Speaker 1: versus the technicians. Engineers are the middle managers. So back 537 00:36:39,880 --> 00:36:44,920 Speaker 1: to your institutional focus. Clearly, technical skills, high end education 538 00:36:45,520 --> 00:36:47,600 Speaker 1: is going to make a big difference in those sort 539 00:36:47,600 --> 00:36:50,279 Speaker 1: of folks, obviously, and I think part of it is 540 00:36:50,760 --> 00:36:54,480 Speaker 1: that we have to run faster in terms of upgrading 541 00:36:54,480 --> 00:36:57,719 Speaker 1: our skills, creating the skills for the new age. Otherwise 542 00:36:57,760 --> 00:37:00,320 Speaker 1: the bottom is not going to benefit. That's a across 543 00:37:00,440 --> 00:37:04,560 Speaker 1: the entire economic strata. Everybody has to move. Absolutely, we 544 00:37:04,600 --> 00:37:07,080 Speaker 1: have to be more flexible, we have to be more adaptable. 545 00:37:07,320 --> 00:37:10,400 Speaker 1: This was really fascinating quote. Um, and a lot of 546 00:37:10,440 --> 00:37:12,440 Speaker 1: this comes This is going to come back to a 547 00:37:12,480 --> 00:37:14,840 Speaker 1: lot of the same answers, but the quote is so interesting. 548 00:37:15,440 --> 00:37:20,120 Speaker 1: The quest for general laws of capitalism is misguided because 549 00:37:20,160 --> 00:37:25,120 Speaker 1: it ignores the key forces shaping how an economy functions, namely, 550 00:37:25,360 --> 00:37:30,080 Speaker 1: how the gains from various different economic arrangements are distributed. 551 00:37:30,480 --> 00:37:33,279 Speaker 1: So when you talk about the quest for general laws 552 00:37:33,280 --> 00:37:37,120 Speaker 1: of capitalism, what you're really saying is it's not the 553 00:37:37,160 --> 00:37:41,160 Speaker 1: input that matters, it's the output that's so significant, right, absolutely, 554 00:37:41,200 --> 00:37:45,200 Speaker 1: And I think again this goes back to social scientists 555 00:37:45,280 --> 00:37:51,880 Speaker 1: desire to simplify things, and we always seek to find commonalities, 556 00:37:52,400 --> 00:37:56,240 Speaker 1: and that's great, but sometimes we see commonalities where non exist. 557 00:37:56,760 --> 00:38:01,279 Speaker 1: So there is this effort to find some general trends 558 00:38:01,360 --> 00:38:04,920 Speaker 1: and ways in which all capitalist economies function, and I 559 00:38:04,960 --> 00:38:08,640 Speaker 1: think that's so misguided at some level. You know, look 560 00:38:08,680 --> 00:38:12,880 Speaker 1: at Egypt. I think under Mubile, Egypt is a private 561 00:38:12,880 --> 00:38:16,479 Speaker 1: ownership economy. There are capitalists. They own the firms, They 562 00:38:17,200 --> 00:38:20,719 Speaker 1: act in profit profit maximizing man or labor markets. You know, 563 00:38:20,800 --> 00:38:24,720 Speaker 1: people uh decide how much to pay for the workers 564 00:38:24,719 --> 00:38:28,080 Speaker 1: that they hire. But the Egyptian economy has so little 565 00:38:28,120 --> 00:38:30,360 Speaker 1: in common with the United States. I would say it 566 00:38:30,400 --> 00:38:33,680 Speaker 1: has much more in common with North Korea. So that's 567 00:38:33,719 --> 00:38:36,480 Speaker 1: why I think this sort of looking for general laws 568 00:38:36,480 --> 00:38:41,360 Speaker 1: of capitalism is a misguided activity. So let's jump into 569 00:38:41,480 --> 00:38:45,440 Speaker 1: some of my favorite questions. I ask all my guests, Um, 570 00:38:45,480 --> 00:38:48,440 Speaker 1: your background. You pretty much went from l C to M. 571 00:38:48,480 --> 00:38:51,640 Speaker 1: I T you've been in academia your whole career. Yeah, 572 00:38:51,760 --> 00:38:56,400 Speaker 1: no real job. Any thoughts on ever leaving academia or 573 00:38:56,480 --> 00:38:58,960 Speaker 1: is that your home for the foreseeable future. I like 574 00:38:59,080 --> 00:39:01,560 Speaker 1: what I do I or what I do? I mean, 575 00:39:01,600 --> 00:39:03,759 Speaker 1: I can't. I would have never thought people would be 576 00:39:03,800 --> 00:39:07,400 Speaker 1: paying me good money for investigating things I find interesting 577 00:39:07,440 --> 00:39:10,000 Speaker 1: and sharing my thoughts. Now most people do that over 578 00:39:10,040 --> 00:39:12,319 Speaker 1: a glass of beer. Right that that sounds like a 579 00:39:12,360 --> 00:39:15,359 Speaker 1: fun a fun job. Let's talk about some of your 580 00:39:15,360 --> 00:39:18,600 Speaker 1: early mentors. Who who are the people who influenced your 581 00:39:18,640 --> 00:39:22,960 Speaker 1: thinking when you were first beginning your career. Many people 582 00:39:23,640 --> 00:39:26,560 Speaker 1: shaped the way I think about it. But you know, 583 00:39:26,640 --> 00:39:28,880 Speaker 1: perhaps it's my character, Perhaps it's the topics that I 584 00:39:29,000 --> 00:39:34,000 Speaker 1: focused on. I did not strictly follow anybody. So if 585 00:39:34,000 --> 00:39:38,200 Speaker 1: you look at you know, people I found inspiring. You 586 00:39:38,239 --> 00:39:42,719 Speaker 1: know Bob Solo, who was a Nobel Prize winner thinking 587 00:39:42,719 --> 00:39:46,000 Speaker 1: about economics, economics, his work was fugially influential. But I 588 00:39:46,040 --> 00:39:50,520 Speaker 1: went in a very different direction. Uh. Bank Homstrom, who 589 00:39:50,560 --> 00:39:52,560 Speaker 1: was an early mentor for me, who was the Nobel 590 00:39:52,600 --> 00:39:54,919 Speaker 1: Prize winner this year, and it's a good friend of mine. 591 00:39:55,440 --> 00:39:58,080 Speaker 1: You know, I found it very inspiring both his approach, 592 00:39:58,239 --> 00:40:02,279 Speaker 1: but but I approached things is very differently uh than 593 00:40:02,400 --> 00:40:04,880 Speaker 1: he did, and went in a very different direction. You know, 594 00:40:04,920 --> 00:40:07,680 Speaker 1: when I started thinking of the bigger picture questions, you know, 595 00:40:07,719 --> 00:40:10,480 Speaker 1: I read Jared Diamonds, Couns, Germs and Steel. I thought 596 00:40:10,680 --> 00:40:13,600 Speaker 1: that was spell bounding, you know, it's was he was 597 00:40:13,840 --> 00:40:18,000 Speaker 1: so good at bringing different pieces of information on the 598 00:40:18,040 --> 00:40:23,800 Speaker 1: table and making it interesting, and I very much try 599 00:40:23,840 --> 00:40:26,600 Speaker 1: to emulate that, you know, James Robinson and I when 600 00:40:26,600 --> 00:40:29,640 Speaker 1: we wrote Why Nations fairly said, well, we're gonna try 601 00:40:29,880 --> 00:40:32,040 Speaker 1: to learn from Jared, But at the end of the day, 602 00:40:32,040 --> 00:40:35,280 Speaker 1: our thesis is so different from Jared. We were triggered 603 00:40:35,280 --> 00:40:37,080 Speaker 1: to write the book in some sense because we have 604 00:40:37,120 --> 00:40:39,480 Speaker 1: a very different story to tell. So in some sense, 605 00:40:39,880 --> 00:40:44,000 Speaker 1: my mentors are often the people I sort of learned 606 00:40:44,040 --> 00:40:47,920 Speaker 1: from but moved away from all push back against or 607 00:40:48,040 --> 00:40:50,759 Speaker 1: or or head in a different direction. Who's influencing you 608 00:40:50,880 --> 00:40:53,799 Speaker 1: thinking today? Oh, that's a difficult question. That is a 609 00:40:53,800 --> 00:41:00,080 Speaker 1: difficult question, isn't it. Economics is a very broad and 610 00:41:01,320 --> 00:41:03,680 Speaker 1: doesn't It doesn't have to be economics. It could be 611 00:41:04,040 --> 00:41:08,520 Speaker 1: any subject, anybody making you think about whatever. Well, you 612 00:41:08,520 --> 00:41:13,960 Speaker 1: know in economics, often people who make me think differently 613 00:41:14,800 --> 00:41:18,359 Speaker 1: are the people I work with closely, you know, in 614 00:41:18,400 --> 00:41:22,880 Speaker 1: the context of technology. For instance, I've been working on 615 00:41:23,000 --> 00:41:25,840 Speaker 1: and off with my colleague David Otter, and I've learned 616 00:41:25,840 --> 00:41:29,400 Speaker 1: so much from him in terms of thinking about the 617 00:41:29,560 --> 00:41:32,960 Speaker 1: role of technology and how it affects different tasks and 618 00:41:33,040 --> 00:41:37,799 Speaker 1: different types of workers, but also on the political aspects, 619 00:41:37,840 --> 00:41:41,640 Speaker 1: sort of bringing the politics and the economics together. You know, 620 00:41:41,760 --> 00:41:46,200 Speaker 1: I have for a long time being building on the 621 00:41:46,239 --> 00:41:49,920 Speaker 1: work that Dog North did, as I mentioned, but for instance, 622 00:41:49,960 --> 00:41:53,839 Speaker 1: his collaborator Barry weinast very much, you know, when we 623 00:41:54,040 --> 00:41:56,960 Speaker 1: Whenever I turn to a different area, I see Barry 624 00:41:57,160 --> 00:42:00,440 Speaker 1: has also written on that. Again I differ from him 625 00:42:00,440 --> 00:42:03,839 Speaker 1: in many ways, but it's always influential and fascinating. Let's 626 00:42:03,920 --> 00:42:09,600 Speaker 1: let's talk about authors, not again, not necessarily economics. What books, 627 00:42:09,680 --> 00:42:15,120 Speaker 1: what authors influencial? You mentioned um, guns, germs and steals, steal. 628 00:42:15,280 --> 00:42:20,879 Speaker 1: What other books did you find especially interesting, worthwhile or influential? 629 00:42:21,560 --> 00:42:26,600 Speaker 1: You know, early on, I think I started reading a 630 00:42:26,600 --> 00:42:31,560 Speaker 1: lot of the history of how the Western world was shaped, 631 00:42:32,080 --> 00:42:36,000 Speaker 1: and many of the authors who sort of tried to 632 00:42:36,200 --> 00:42:41,680 Speaker 1: capture that in a broad social science framework were hugely 633 00:42:41,760 --> 00:42:44,880 Speaker 1: influential on me. Fernand Brodell Mark Block, the sort of 634 00:42:44,960 --> 00:42:50,040 Speaker 1: French historians, and then again Douglas North and his collaborator 635 00:42:50,680 --> 00:42:55,400 Speaker 1: Robert Thomas. In all of these instances I found what 636 00:42:55,440 --> 00:42:58,799 Speaker 1: they did fascinating but also insufficient. So I try to 637 00:42:59,040 --> 00:43:01,560 Speaker 1: sort of build and and move away from them in 638 00:43:01,600 --> 00:43:06,440 Speaker 1: some sense. But Also, you know, many authors who have 639 00:43:06,600 --> 00:43:11,680 Speaker 1: written beyond uh you know, the social sciences have been 640 00:43:12,200 --> 00:43:17,440 Speaker 1: hugely influential. Uh. You know, more most recently, I've enjoyed 641 00:43:17,800 --> 00:43:22,319 Speaker 1: Paul Loster and Hilary Montell's recent books. But uh, I 642 00:43:22,400 --> 00:43:27,160 Speaker 1: always find sort of different approaches to literature as inspiring 643 00:43:27,320 --> 00:43:31,000 Speaker 1: as as reading the history or the economics of it. So, 644 00:43:31,200 --> 00:43:36,000 Speaker 1: since you've joined the world of economics, what has been 645 00:43:36,160 --> 00:43:39,520 Speaker 1: the sea changes? What are the major shifts that took 646 00:43:39,560 --> 00:43:44,200 Speaker 1: place that are are noteworthy, especially in your space? Obviously 647 00:43:44,840 --> 00:43:48,399 Speaker 1: Picketty's publication was one. What what else do you think 648 00:43:48,560 --> 00:43:51,719 Speaker 1: is a well too? That I would mention that I 649 00:43:51,760 --> 00:43:57,120 Speaker 1: think are much more deep rooted and will have longer 650 00:43:57,560 --> 00:44:01,880 Speaker 1: run effects on economics. Is and this is of course 651 00:44:02,000 --> 00:44:06,160 Speaker 1: from my vantage point, the importance of institutions. You know, 652 00:44:06,200 --> 00:44:10,320 Speaker 1: it's not again that people didn't realize institutional factors matter, 653 00:44:10,400 --> 00:44:17,319 Speaker 1: but it's now become such an inseparable, vital part of economics, 654 00:44:17,960 --> 00:44:24,280 Speaker 1: political economy. How institutions context determines how different technological, demographic, 655 00:44:24,400 --> 00:44:27,439 Speaker 1: and other factors impact the economy. I think that's now 656 00:44:27,480 --> 00:44:31,640 Speaker 1: second nature to many economists. Second, technology, you know, for 657 00:44:31,680 --> 00:44:35,880 Speaker 1: a long time we thought of technology as just a 658 00:44:35,960 --> 00:44:40,360 Speaker 1: fairly uniform process. It improves productivity, it then leads to 659 00:44:40,440 --> 00:44:43,839 Speaker 1: higher wages. And now we are seeing that technology does 660 00:44:44,239 --> 00:44:47,200 Speaker 1: lots of good things but creates lots of challenges, also 661 00:44:47,320 --> 00:44:52,719 Speaker 1: displacing workers, creating unemployment, sometimes reducing wages, increasing inequality, creating 662 00:44:52,880 --> 00:44:58,000 Speaker 1: hugely costly, socially difficult adjustment processes. And I think in 663 00:44:58,040 --> 00:45:00,680 Speaker 1: the next twenty years we're going to see both more 664 00:45:00,719 --> 00:45:03,920 Speaker 1: of that. But as an economics profession of social science, 665 00:45:03,920 --> 00:45:06,560 Speaker 1: we're also going to get much deeper into it. So 666 00:45:06,920 --> 00:45:11,640 Speaker 1: the coming shifts are more focused on institutions, more focused 667 00:45:11,640 --> 00:45:15,839 Speaker 1: on technology, anything else. We haven't really noticed what what's 668 00:45:15,840 --> 00:45:18,879 Speaker 1: going to surprise us in the next few decades that 669 00:45:20,200 --> 00:45:23,280 Speaker 1: I'm really asking what what shift is coming that people 670 00:45:23,520 --> 00:45:26,680 Speaker 1: haven't really given a lot of thought to organizations. I 671 00:45:26,680 --> 00:45:31,280 Speaker 1: think we are going to see very different organizations, and 672 00:45:31,520 --> 00:45:36,520 Speaker 1: how organizations are able or are not able to change 673 00:45:36,600 --> 00:45:39,600 Speaker 1: is going to be a crucial factor in our ability 674 00:45:39,640 --> 00:45:44,359 Speaker 1: to use technology to create prosperity. Organizational economics has been 675 00:45:44,360 --> 00:45:47,920 Speaker 1: another growth area within economics, but I think the challenge 676 00:45:47,920 --> 00:45:52,319 Speaker 1: of understanding how organizations are able to recreate, reshape themselves 677 00:45:52,360 --> 00:45:55,880 Speaker 1: in the face of technology that's an area we have 678 00:45:55,960 --> 00:45:58,319 Speaker 1: to be much more serious about. So the next few 679 00:45:58,400 --> 00:46:03,719 Speaker 1: questions comes from leaders and listeners. We get these on occasion. 680 00:46:04,440 --> 00:46:06,880 Speaker 1: Tell us about a time you failed, what did you 681 00:46:07,000 --> 00:46:10,600 Speaker 1: learn from the experience, and how different was that experience 682 00:46:11,120 --> 00:46:14,439 Speaker 1: in terms of learning than a than a success. Well, 683 00:46:14,480 --> 00:46:17,920 Speaker 1: I mean, my beginning and the economics profession was just 684 00:46:18,000 --> 00:46:21,960 Speaker 1: a huge failure. I came out of the PhD program 685 00:46:22,040 --> 00:46:26,160 Speaker 1: at the Landon School of Economics, and and I thought 686 00:46:26,200 --> 00:46:28,759 Speaker 1: I could just take my PhD dissertation and all of 687 00:46:28,760 --> 00:46:31,319 Speaker 1: my ideas and write them as papers and published them 688 00:46:31,320 --> 00:46:35,080 Speaker 1: in good places. And I tried that, and then one 689 00:46:35,120 --> 00:46:38,520 Speaker 1: rejection after another, and then I realized I wasn't ready, 690 00:46:38,600 --> 00:46:41,640 Speaker 1: that I wasn't, you know, writing just the right way. 691 00:46:41,719 --> 00:46:44,200 Speaker 1: I had to improve my exposition. And some of my 692 00:46:44,320 --> 00:46:47,800 Speaker 1: ideas were I think, still not bad because they became 693 00:46:48,320 --> 00:46:50,879 Speaker 1: the basis of a lot of the more influential work 694 00:46:50,880 --> 00:46:55,600 Speaker 1: that I did later, But they weren't They weren't totally 695 00:46:55,680 --> 00:46:58,600 Speaker 1: accepted at the time, and I wasn't making the right 696 00:46:58,719 --> 00:47:04,360 Speaker 1: effort to uh to to make them presentable and understandable 697 00:47:04,400 --> 00:47:08,080 Speaker 1: for the for the audience. So I came close to saying, look, 698 00:47:08,200 --> 00:47:10,200 Speaker 1: I'm gonna throw in the towel. It's been like three 699 00:47:10,280 --> 00:47:12,960 Speaker 1: years since my PhD. I'm still not getting going anywhere. 700 00:47:13,440 --> 00:47:17,359 Speaker 1: But then the problem was with me. The failure was 701 00:47:17,520 --> 00:47:20,560 Speaker 1: largely my fault, and I learned, and then once that 702 00:47:20,800 --> 00:47:24,720 Speaker 1: learning was partly done, I was able to improve myself, 703 00:47:24,719 --> 00:47:28,280 Speaker 1: my research, and my ability to appeal and communicate with others. 704 00:47:28,680 --> 00:47:31,600 Speaker 1: What do you do for fun or relaxation outside of 705 00:47:31,680 --> 00:47:35,560 Speaker 1: the office, outside of work? What's the relaxation? You know, 706 00:47:35,600 --> 00:47:39,880 Speaker 1: I have two young boys. They don't allow me to relax, 707 00:47:40,080 --> 00:47:43,400 Speaker 1: but it's fun. Okay, that's a fair, fair enough answer. 708 00:47:43,920 --> 00:47:47,160 Speaker 1: You work with a lot of students, a lot of millennials. 709 00:47:47,640 --> 00:47:50,200 Speaker 1: What sort of advice would you give to someone who 710 00:47:50,239 --> 00:47:53,040 Speaker 1: came to you, uh and said, I'm interested in the 711 00:47:53,160 --> 00:47:57,560 Speaker 1: career in economics? What would you advise them? Be serious 712 00:47:57,600 --> 00:48:01,120 Speaker 1: about it? You know what I mean by that is, 713 00:48:01,239 --> 00:48:07,320 Speaker 1: don't lose your humor or sense of playfulness, but just invest. Invest, invest, 714 00:48:08,000 --> 00:48:11,920 Speaker 1: Learn more history, learn more math, learn more statistics, learn 715 00:48:12,480 --> 00:48:15,440 Speaker 1: more of the context, and try to bring them together. 716 00:48:15,600 --> 00:48:18,360 Speaker 1: Most of the good ideas we have come from synthesizing 717 00:48:19,360 --> 00:48:23,120 Speaker 1: existing lines of thoughts in a new way, And for 718 00:48:23,239 --> 00:48:26,879 Speaker 1: that you really need to have a lot of background 719 00:48:26,920 --> 00:48:29,560 Speaker 1: in many different fields. And I think people often don't 720 00:48:29,640 --> 00:48:33,200 Speaker 1: realize that they specialize in something. They do their homework, 721 00:48:33,560 --> 00:48:38,040 Speaker 1: but they just don't invest in that reservoir of knowledge 722 00:48:38,080 --> 00:48:40,840 Speaker 1: that's going to be necessary for going to the next stage. 723 00:48:41,160 --> 00:48:43,839 Speaker 1: And our final question, what is it that you know 724 00:48:43,880 --> 00:48:47,879 Speaker 1: about economics today that you wish you knew twenty years 725 00:48:47,880 --> 00:48:51,520 Speaker 1: ago when you were first getting started? Boy, I mean, 726 00:48:51,760 --> 00:48:54,439 Speaker 1: I think if I knew the things that I think 727 00:48:54,480 --> 00:48:58,359 Speaker 1: I've found out in the last twenty five years, I 728 00:48:58,400 --> 00:49:00,719 Speaker 1: don't know I what I would have on because first 729 00:49:00,719 --> 00:49:04,759 Speaker 1: of all, there wouldn't have been all this amazement that 730 00:49:04,840 --> 00:49:07,880 Speaker 1: was in front of me that motivated me to to 731 00:49:07,880 --> 00:49:10,680 Speaker 1: to go after them. But of course if I had 732 00:49:10,880 --> 00:49:15,279 Speaker 1: inkling all the things that I sort of discovered later on, 733 00:49:15,680 --> 00:49:20,040 Speaker 1: say ten fifteen years after my sort of after the 734 00:49:20,080 --> 00:49:22,000 Speaker 1: beginning of my career, of course I could have gone 735 00:49:22,000 --> 00:49:24,520 Speaker 1: there much faster. I could have started working on this 736 00:49:24,560 --> 00:49:28,319 Speaker 1: issue of how technology is a much more complex phenomenon 737 00:49:28,360 --> 00:49:33,360 Speaker 1: that displaces workers and creates both the gains and the losses, 738 00:49:33,680 --> 00:49:36,560 Speaker 1: or the sort of institutional equilibria that you know really 739 00:49:37,160 --> 00:49:39,840 Speaker 1: was was there? Part of my interest from the beginning, 740 00:49:39,840 --> 00:49:42,680 Speaker 1: but it really sort of matured over time. But I 741 00:49:42,680 --> 00:49:44,319 Speaker 1: think it would have taken the fun away. I think 742 00:49:44,320 --> 00:49:48,280 Speaker 1: that's struggled at failure, discovering it slowly. That's what really 743 00:49:48,560 --> 00:49:52,320 Speaker 1: sort of made it worthwhile, the journey, not the destiny exactly. 744 00:49:52,800 --> 00:49:56,400 Speaker 1: We have been speaking with Professor Darren Assamoglu of m 745 00:49:56,440 --> 00:50:00,919 Speaker 1: I T, author of the book Why Nations Fail. If 746 00:50:00,960 --> 00:50:03,840 Speaker 1: you enjoyed this conversation, be sure and looked up or 747 00:50:03,920 --> 00:50:07,400 Speaker 1: down an inch on Apple iTunes or on Bloomberg or 748 00:50:07,400 --> 00:50:10,880 Speaker 1: SoundCloud for any of the other hundred and forty seven 749 00:50:10,960 --> 00:50:15,160 Speaker 1: or so such previous conversations. I would be remiss if 750 00:50:15,200 --> 00:50:18,160 Speaker 1: I did not thank Taylor Riggs, my booker and producer, 751 00:50:18,239 --> 00:50:22,839 Speaker 1: Michael bat Nick, my head of research, and Medina Parwana, 752 00:50:23,040 --> 00:50:27,440 Speaker 1: my recording engineer. I'm Barry Rihults. You've been listening to 753 00:50:27,600 --> 00:50:37,040 Speaker 1: Masters in Business on Bloomberg Radio. Our world is always moving, 754 00:50:37,160 --> 00:50:39,280 Speaker 1: so with Mery Lynch, you can get access to financial 755 00:50:39,320 --> 00:50:42,359 Speaker 1: guidance online, in person, or through the app. Visit mL 756 00:50:42,400 --> 00:50:44,759 Speaker 1: dot com and learn more about Merrill Lynch. An affiliated 757 00:50:44,760 --> 00:50:47,240 Speaker 1: Bank of America, Merrill Lynch makes available products and services 758 00:50:47,239 --> 00:50:49,480 Speaker 1: offered by Merrill Lynch Pierce Veneran Smith Incorporated or registered 759 00:50:49,520 --> 00:50:50,680 Speaker 1: broker Dealer remember s I PC