Speaker 1: This is Master's in Business with Barry rid Holds on
Speaker 1: Bloomberg Radio.
Speaker 2: This week on the podcast what a Delight, I got
Speaker 2: to spend about two hours with Sir Angus Deeton. He
Speaker 2: won the Nobel Prize in twenty fifteen for his work
Speaker 2: on consumption, poverty, welfare, wealth and health inequality. Really, the
Speaker 2: work he's done on inequality tame after the Nobel Prize,
Speaker 2: based on a book him and his wife put out
Speaker 2: in a number of papers, he wrote, what can I say?
Speaker 2: He is just so fascinating, such an interesting person born
Speaker 2: in the UK, grows up in Scotland, is becomes a
Speaker 2: professor in the UK and then says, let's go check
Speaker 2: out that place America and starts teaching at Princeton forty
Speaker 2: years ago. He's been here about half his life. I
Speaker 2: found this conversation be just delightful, so interesting, so fascinating.
Speaker 2: He is so knowledgeable about so many unusual areas in economics.
Speaker 2: We only got to scratch the surface on some of them. Healthcare,
Speaker 2: minimum wage, what really makes people happy? And how significant
Speaker 2: having or not having a college degree. You know, the
Speaker 2: United States has very much become a bifurcated nation and
Speaker 2: where Professor Daton draws the line, if you don't have
Speaker 2: a college degree, you are just at a huge disadvantage
Speaker 2: in this society, and he brings the receipts, he has
Speaker 2: all the data that proves it. I found this just
Speaker 2: to be fascinating, charming, delightful, and I think you will also,
Speaker 2: with no further ado my conversation with Sir Angus Deeton.
Speaker 1: Thank you very much for having me.
Speaker 2: Well, well, I've left out about ninety percent of your CV.
Speaker 2: You're the author of two hundred plus papers, six books.
Speaker 2: Deaths of Despair, which you wrote with and Case Happens
Speaker 2: to Be Your Wife was a New York Times bestseller,
Speaker 2: and your latest book, Economics in America An Immigrant Economist,
Speaker 2: explores the land of inequality. We're going to talk about
Speaker 2: in a few minutes, but let's just start with what
Speaker 2: you cover, which is kind of fascinating health, happiness, development, poverty,
Speaker 2: well being, inequality, and the best ways to collect and
Speaker 2: interpret evidence for a public policy. That is quite an eclectic,
Speaker 2: broad set of interests. How do they all relate to
Speaker 2: each other?
Speaker 1: Well, I think there are all sort of sides of
Speaker 1: the same thing, which is, I'm interested in what makes
Speaker 1: people tick. You know what makes people do what they do.
Speaker 1: I'm interested in their wealth being in a fairly broad sense.
Speaker 1: I mean, in England we used to call it welfare,
Speaker 1: but welfare here means something else.
Speaker 2: You got a dirty connotation in the United States.
Speaker 1: I'm interested in people's wellbeing, and that's to do with
Speaker 1: how much they spend, how much they save. You know,
Speaker 1: it's to do with getting from poor country, turning poor
Speaker 1: countries into rich countries. It's to do with poverty, is
Speaker 1: to do with inequality. All of these things hang together.
Speaker 1: And I'm a data guy, so I'm really interested in
Speaker 1: how you interpret data.
Speaker 2: Let's just start with your career, which I love how
Speaker 2: you describe your early part of your career. After a
Speaker 2: brief and undistinguished career at the Bank of England, you
Speaker 2: return to academia as a professor of econometrics at the
Speaker 2: University of Bristol. Brief and undistinguished. Who puts that in
Speaker 2: their CV?
Speaker 1: Well, I was not cut out to be a banker.
Speaker 1: But one of the things that was good about spending
Speaker 1: nine months there was I discovered that I wasn't cut
Speaker 1: out to be a banker and it was much more
Speaker 1: fun to be an academic. There's also I had a
Speaker 1: girlfriend in Cambridge.
Speaker 2: So about that. One of the things I found fascinating
Speaker 2: in your Nopell Prize acceptance speech, for lack of a
Speaker 2: better word, you said you became an economist by accident.
Speaker 2: You're going to have to give us some more color
Speaker 2: on that. Well.
Speaker 1: I was always interested in a wide range of things.
Speaker 1: So when I was at this very fancy private school
Speaker 1: that I was at as a kid, I did math
Speaker 1: because it gave me a huge amount of free time
Speaker 1: to do the things I really cared about, like reading
Speaker 1: books and playing the pipe organ and playing rugby and
Speaker 1: sports and things. But when I got to Cambridge, you know,
Speaker 1: the math was sort of serious there, and so I
Speaker 1: discovered this was not really for me. And like most students,
Speaker 1: you move up a grade and you discover you've been
Speaker 1: the smartest thing there's ever been until you get there
Speaker 1: and all of a sudden, there's a whole lot of
Speaker 1: other people.
Speaker 2: Who are These guys are really good at this.
Speaker 1: They're really good at this. So after a couple of years,
Speaker 1: in something of despair, my tutors said to me, you
Speaker 1: have to give up doing this, And I said, well,
Speaker 1: you know what, could I do. They said, well, you
Speaker 1: could leave, and I said, without a degree, my dad
Speaker 1: would be very unhappy. So I said, what's the alternaty said,
Speaker 1: There's only one other thing for people like you.
Speaker 2: It's called economics, right, Economics for people who were only
Speaker 2: fair at mathematics or.
Speaker 1: Something like that. I wasn't a bad mathematician, and I've
Speaker 1: used a lot of math in my career as an economist,
Speaker 1: and it's a very useful thing. But I just had
Speaker 1: lost interest in it anymore. And as soon as I
Speaker 1: started studying economics, I always thought it hooked.
Speaker 2: That raises a question. You're a lad from Edinburgh, how
Speaker 2: do you become so interested in United States economics? It
Speaker 2: would seem that there's a ton of history and a
Speaker 2: lot of stuff happening in the UK. What brought you here?
Speaker 1: Well, I think I'd remember I was an academic economist,
Speaker 1: and it was pretty clear from the very first economics
Speaker 1: book I read, which was by Paul Samuelson, that the
Speaker 1: most famous, most interesting economists were working in the US.
Speaker 1: I mean, it was a bigger country. That had not
Speaker 1: been true forty years before when Keynes was in Cambridge, right,
Speaker 1: and so on. But you know, the Kynesianism had sort
Speaker 1: of lost its well, he was no longer alive, right,
Speaker 1: and the old Kynsians were a bit grumpy and not
Speaker 1: so very interesting.
Speaker 2: At the time. You have Paul Samuelson at MIT, you
Speaker 2: have Milton Friedman at Chicago. You have a run of people.
Speaker 2: Maybe it's a little early for the Berkeley crowd and
Speaker 2: Princeton Harvard Yale crowd comes a little later.
Speaker 1: There were a lot of people I remember reading the
Speaker 1: Princeton Studies and International Finance, which seemed to me very
Speaker 1: interesting at the time. I'd met Fritz Makhlop, who was
Speaker 1: at Princeton when I was still in Britain. For instance,
Speaker 1: there was Bob Solo, who was always, you know, a
Speaker 1: great hero of mine, even long before I met him.
Speaker 1: I mean, that paper on Economic Growth is a transcendent
Speaker 1: piece of work and really sort of shaped the way
Speaker 1: generations of economists have thought. And it's one of these
Speaker 1: things that really does tell you something that you've always
Speaker 1: thought is really not quite right, and it just comes
Speaker 1: from thinking about it harder. And boy, was that an
Speaker 1: amazing example to all of us. There were also a
Speaker 1: lot of econometricians here, and I was sort of into
Speaker 1: My first job as a professor was a professor of
Speaker 1: econometrics at Bristol, So you know, I took my math
Speaker 1: into statistics and things.
Speaker 2: Am I remembering correctly? Is Solo the economist who said
Speaker 2: productivity is everywhere except the economic data?
Speaker 1: Am I getting one of the many clever things right?
Speaker 2: He was quite an influential economist. So you have all
Speaker 2: of these big economic names in the United States taking
Speaker 2: the mantle from Kines and other people in the UK
Speaker 2: and elsewhere. How do you translate that into a job
Speaker 2: at Princeton when you're working at Cambridge or Bristol.
Speaker 1: Well, I was working at Bristol. I was publishing papers
Speaker 1: that were attracting a certain amount of attention. I'd met
Speaker 1: some of the Princeton people at a conference that i'd
Speaker 1: organized helped organize in Italy. Become very good friends with
Speaker 1: the Orly Ashenfelter, who's another incredibly influential person in modern economics.
Speaker 1: And I went to visit Princeton for a year in
Speaker 1: seventy nine and really liked it. At Bristol at that
Speaker 1: time was suffering from a real cash crunch. Missus Thatcher
Speaker 1: didn't care for the universities very much. Really, yeah, really.
Speaker 2: That's surprising to someone in the United States because the
Speaker 2: especially the elite universities, they always seem to have a
Speaker 2: ton of cash. The joke is Harvard is a fifty
Speaker 2: billion dollar hedge fund with a small liberal arts college
Speaker 2: attached to it. I'm surprised to learn of that.
Speaker 1: Well, they're really British universities are nothing like that now,
Speaker 1: and then they were a million miles away from there.
Speaker 1: So there were places like Cambridge whose colleges were immensely wealthy.
Speaker 1: So you could walk on Trinity Land all the way
Speaker 1: from Trinity College to the center of London. Wow. But
Speaker 1: that did not accrue to the university, which was relatively poor.
Speaker 1: And what had happened was that there was a five
Speaker 1: year financial settlement every five years at Conquinium with the universities,
Speaker 1: and unfortunately it was not indexed. So when we got
Speaker 1: this burst of inflation in the early seventies, the universities
Speaker 1: were going bankrupt. And Missus Stancher, I think it's not uncommon.
Speaker 1: I mean, I don't think missus Stancher thought much of
Speaker 1: sort of point he headed intellectuals, as it were, And
Speaker 1: even though she'd been to Oxford to herself, and I
Speaker 1: think it was probably true that most of the university
Speaker 1: establishment was fairly hostile.
Speaker 2: Are you finding after forty years here in the United States,
Speaker 2: we're starting to see some criticism, at least in terms
Speaker 2: of political correctness. And even what young and not particularly
Speaker 2: experienced college students say about things in the Middle East
Speaker 2: of Harvard was essentially shouted out of her office. How
Speaker 2: do you look at this?
Speaker 1: The mess that's happening in Israel and cause is something
Speaker 1: very different, I think, and huge, and it's affecting all
Speaker 1: parts of American society in ways that we really have
Speaker 1: not seen before. But there's a sort of separate issue
Speaker 1: of sort of political correctness within American universities. It's interesting that.
Speaker 1: I mean, I taught at Princeton for more than thirty years.
Speaker 1: I never encountered that at Princeton, So I never felt
Speaker 1: that I had to issue trigger warnings or that students
Speaker 1: wouldn't let me talk about certain things so they put
Speaker 1: their hands out with their face when I said the
Speaker 1: wrong words.
Speaker 2: That really goes on in college.
Speaker 1: Well, I'm told it does. But you know, I'm a
Speaker 1: consumer of this, just as you are read about it
Speaker 1: in the newspapers, and it makes me scared. I worry.
Speaker 1: I have grandchildren to granddaughters at school in the city here,
Speaker 1: and I wore by the political correctness of their teachers,
Speaker 1: for example. But I haven't seen much of it in
Speaker 1: the university so as far as Harvard, Mit pen et cetera.
Speaker 1: I read about it in the newspapers. I don't have anything
Speaker 1: original to say.
Speaker 2: Maybe it's generational. But if I had a professor I
Speaker 2: didn't like, I would go down to the registrar drop
Speaker 2: the class. There was a market system there that if
Speaker 2: you really said stuff that enough students didn't care for,
Speaker 2: they wouldn't take your class. They'd take somebody else's.
Speaker 1: That rarely happened to me. I remember one student who
Speaker 1: didn't like the grade at given.
Speaker 2: Way that it's too late.
Speaker 1: It was too late, but I don't think she came
Speaker 1: back for the second half of the course.
Speaker 2: And then the other thing I have to ask you
Speaker 2: about having grown up in the UK. What was your
Speaker 2: experience like being an immigrant to the United States in
Speaker 2: the nineteen eighties and having to adopt to a very
Speaker 2: different set of economic circumstances. We'll talk more about healthcare,
Speaker 2: which obviously is a world of difference. What we your
Speaker 2: experience is like as a legal immigrant.
Speaker 1: Legal Yeah, I was legitimate, documented alien. The initial title of.
Speaker 2: That book was shock and Awe, really.
Speaker 1: Which was in this sense, you know, I felt a
Speaker 1: lot of awe at the amazing things that went on
Speaker 1: in America and also a good deal of shock. So
Speaker 1: the healthcare system was a big part of it, which
Speaker 1: was sort of feeling that I didn't know how to
Speaker 1: negotiate this. I didn't know the difference between a pediatrist
Speaker 1: and a pediatrician, which turned out to be something I
Speaker 1: had to know.
Speaker 2: You had a GP, a general practitioner if you needed
Speaker 2: something specific, they would send you that way. Or did
Speaker 2: everybody do everything in the UK?
Speaker 1: No, not everybody did everything, but the gps. The general
Speaker 1: practitioners were gatekeepers too, you know, more advanced care or
Speaker 1: specialized care, and I think that worked pretty well for us.
Speaker 1: So that was quite a shock. I also liked having
Speaker 1: a lot more money. That was certainly different, and I'd
Speaker 1: worried about money my whole life.
Speaker 2: Our professors higher paid in the United States than they
Speaker 2: are in the UK.
Speaker 1: They were then, for sure in Britain in those days,
Speaker 1: pretty much all professors were paid the same and it
Speaker 1: wasn't very much. Really, I had a lot more money.
Speaker 2: Here in the United States. Yes, I have a vivid
Speaker 2: recollection of being in the UK during the financial crisis
Speaker 2: for work, and you walk down the streets from New
Speaker 2: York in mid two thousand and eight, the tension is palpable,
Speaker 2: and I didn't get that same sense in Europe. I
Speaker 2: was in the UK and Brussels on one trip and
Speaker 2: my conclusion was, Hey, if you're not stressing about losing
Speaker 2: your healthcare because you're getting fired, it still sucks to
Speaker 2: lose your job, but the stress level seems to be
Speaker 2: a little less. Is that an oversimplification or is that a.
Speaker 1: I hadn't noticed that, But it's certainly true that not
Speaker 1: having to worry about healthcare is something that is a
Speaker 1: big difference between the two much.
Speaker 2: It's a huge burden, and when people do the comparison,
Speaker 2: all right, you're paying a lot more taxes there. But
Speaker 2: one of the biggest single contributors to inflation here, not
Speaker 2: the past few years during the post COVID surge, but
Speaker 2: the past forty years it's been growing at seven eight
Speaker 2: nine percent. Your insurance costs and your hospital costs that's
Speaker 2: a lot relative to two percent inflation rate.
Speaker 1: Here, I'm a little time, and that's not happened in Britain,
Speaker 1: and it hasn't happened in other European countries, and it
Speaker 1: hasn't happened in Canada. It's just specifically specific to the
Speaker 1: United States. And we could talk about some of the
Speaker 1: reasons for that. But when I first came here, I mean,
Speaker 1: the other bits about it that I really liked is,
Speaker 1: you know, I worked with and got to know and
Speaker 1: hung out with a lot of really great economists, and
Speaker 1: I learned a ton. I deflected a little bit of
Speaker 1: your question, but my interests are fairly eclectic, so I
Speaker 1: work on a lot of different things. And at Princeton
Speaker 1: I could always find some colleague who knew about X,
Speaker 1: and X was something I'd just gotten interested in, whereas
Speaker 1: in Britain that would have been much harder, really interdisciplinary
Speaker 1: sort of thing, or even within the discipline, you know.
Speaker 1: And some of it was the mathematics, you know, I
Speaker 1: would have colleagues who knew how to do some obscure
Speaker 1: piece of mathematics, or I would say, this person's using
Speaker 1: this estimator, you know, how does that work? I remember
Speaker 1: John Campbell and I when he was a young assistant professor.
Speaker 1: He's now a very senior finance guy at Harvard. He
Speaker 1: and I went down to the Engineering Library to discover
Speaker 1: how what the spectrum at zero meant idea, and then
Speaker 1: we used that in our work, you know. So it
Speaker 1: was a wonderful place to do that, whereas at Bristol
Speaker 1: it would be much harder. Quite apart from the fact
Speaker 1: that at Bristol University of the library was unionized and
Speaker 1: shut at four o'clock in the afternoon and was open
Speaker 1: on weekend.
Speaker 2: Wow. Plus, just off the top of my head. At
Speaker 2: Princeton you had some guy named Ben Bernanke. I think
Speaker 2: he did something.
Speaker 1: I helped him. He came after I did.
Speaker 2: That's amazing. And then Paul Krugman, another Nobel laureate, has
Speaker 2: been there for the longest time. I think he now
Speaker 2: is affiliated with City University.
Speaker 1: That's right. And Chris Simms, who's a Nobel laureate, and
Speaker 1: Danny Knneman was there and I worked with that. Danny
Speaker 1: and I wrote a paper together. The one I don't
Speaker 1: want to forget is Arthur Lewis, who got the Nobel
Speaker 1: Prize the year I was visiting, and he remains the
Speaker 1: only black scientific Nobel Laureate ever true. Yes, on the
Speaker 1: others are peace laureates or literally.
Speaker 2: So let's start with that subtitle. You call the US
Speaker 2: the land of inequality. I'm not arguing with that premise.
Speaker 2: I'm curious what led you to make that the subtitles.
Speaker 2: Why is that so defining to the economy of the
Speaker 2: United States.
Speaker 1: Well, it's not just income inequality. It's inequality in many spaces.
Speaker 1: So the qualities of extreme wealth and the extreme poverty
Speaker 1: which seem to exist here. I mean, you have people
Speaker 1: African Americans living along the Mississippi Delta who are probably
Speaker 1: a poorest just about anyone in the world. And you know,
Speaker 1: you have the richest people in the world, and you
Speaker 1: don't seem to have quite those same extremes in Europe
Speaker 1: the same extent. But if you come to inquality itself,
Speaker 1: that's pretty why too. So you know, we economists like
Speaker 1: to use things called Genie coefficients and so on, and
Speaker 1: the Genie coefficients are you know, Americas are one of
Speaker 1: the champion Genie coefficients.
Speaker 2: Of fine Genie coefficients for the for the late people.
Speaker 1: It's a measure of how far people are apart on average,
Speaker 1: and unless you want the mathematics, that's a good way
Speaker 1: of thinking about it, right. It's the sort of average
Speaker 1: distance between any two pairs of people divided.
Speaker 2: By the mean, the dispersion of wealth.
Speaker 1: Yes, well or everybody so, and a lot of that
Speaker 1: is good. You know. It is the land of opportunities, right,
Speaker 1: and you know people are encouraged to get very, very rich,
Speaker 1: and very rich people are celebrated in America. In Britain
Speaker 1: where I grew up, they were described as fat cats,
Speaker 1: and the newspapers really.
Speaker 2: Like that here too, but that was the nineteen twenties.
Speaker 1: Well, there's some truth to that. And as I think
Speaker 1: I say in the book, in America, ordinary people seem
Speaker 1: to like fat cats. They would like a dose of
Speaker 1: feline obesity for themselves.
Speaker 2: Which is which is a great line. You're implying something
Speaker 2: I want to explore because I think you're onto something.
Speaker 2: Are these two sides of the same coin? Is wealth
Speaker 2: inequality and you know, greater riches than previously imagined? Do
Speaker 2: these go hand in hand? And how does opportunity play
Speaker 2: into that?
Speaker 1: Well, that's something that people have thought about it in
Speaker 1: economics for hundreds of years. Perhaps thousands of years really,
Speaker 1: so that you know, these two things certainly aren't connected
Speaker 1: for sure, And a lot of it's also got to
Speaker 1: do with mobility. So societies that have a lot of
Speaker 1: mobility tend to be relatively equal, where societies where everybody
Speaker 1: inherits everything, like Britain land on a class in the
Speaker 1: seventeenth century.
Speaker 2: Although being landed gentry doesn't seem like a bad gig, No, it's.
Speaker 1: Not a bad gig at all. But what happens if
Speaker 1: you're the third son of a landed gentry and you're
Speaker 1: in trouble. You're in trouble.
Speaker 2: You better have some skills.
Speaker 1: You're a lot of inequality there right for that sort
Speaker 1: of thing, and that you.
Speaker 2: Forget about prema geniture and the first son. We don't
Speaker 2: really think in those terms.
Speaker 1: In the States, maybe there's anyway.
Speaker 2: But the other one, well, well, correct me if I'm wrong.
Speaker 2: Is that more of a UK thing or do you
Speaker 2: see parallels in the United States?
Speaker 1: No, it's it's very much a UK thing, and it
Speaker 1: goes with not just the UK but the European thing.
Speaker 1: And like when the Tokeville came here, you know there
Speaker 1: were none of those kings or jukes or all the
Speaker 1: rest of it, and that was, you know, a big difference,
Speaker 1: and that made them very unequal compared with here. So
Speaker 1: America at its funding was a very equal place. And
Speaker 1: you know, the finding fathers sort of assumed that democracy
Speaker 1: would work and would require a fairly equal class of
Speaker 1: artisans and farmers and so on. So it was only
Speaker 1: when it became a sort of industrial society and finance
Speaker 1: crept in and so on, then you begin to get
Speaker 1: these normous spread Now that's the good side of it.
Speaker 1: You know, it's very hard to complain about people who
Speaker 1: get rich in the public interest, right, so who do
Speaker 1: things that help spread wet wealth around that creates jobs,
Speaker 1: that makes other people well love to But there's a
Speaker 1: potential dark site, which is the takers, as it were,
Speaker 1: the people who use government or who use regulars or
Speaker 1: you would lose lobbying. For example, the term that we
Speaker 1: economists tend to use is rent seeking rather than rentiers.
Speaker 1: I mean a rent here is someone who owns land
Speaker 1: and rents it out right, whereas or someone who lives
Speaker 1: off capital. But rent seeking is people who use the
Speaker 1: political system to try and butter their bread a little
Speaker 1: more thickly and of course you get that in Britain too,
Speaker 1: I mean the corn Laws, which were you know, you
Speaker 1: had an aristocratic land owning class who passed the corn
Speaker 1: laws to keep the price of grain up and that's
Speaker 1: what they lived off, was growing wheat and selling it.
Speaker 1: But here you worry a lot about people getting rich
Speaker 1: through lobbying, through restrictive practices, minor ones, major ones. You
Speaker 1: worry about the way that banks sometimes behave. I mean,
Speaker 1: our banks really sucking blood from the rest of us
Speaker 1: sort of ideas. Some people tend to think we need
Speaker 1: banks are very important, but banks and then of course
Speaker 1: you got this healthcare system that seems to be making
Speaker 1: a huge amount of money, which they don't make in
Speaker 1: other countries. And there's a lot of people get paid
Speaker 1: huge sums of money, a lot of stuff that's being done.
Speaker 1: So that's the negative side of high inequality, which is
Speaker 1: an equality not doing anyone any good. Sometimes we talk
Speaker 1: about takers versus makers, uh huh, And you know makers
Speaker 1: are good and they benefit everybody, but takers are not good.
Speaker 1: They're stealing from people.
Speaker 2: So let's there's so many different ways to go with this.
Speaker 2: Why don't we talk first before we get to healthcare.
Speaker 2: Let's talk about minimum wage. Okay, all right. So carden
Speaker 2: Krueger very famously wrote a paper about changing in the
Speaker 2: minimum wage. They were looking at fast food restaurants in
Speaker 2: southern New Jersey and Pennsylvania. I think New Jersey had
Speaker 2: an increase in the minimum wage. And it's not like
Speaker 2: there's a very robust border there. You can hardly tell
Speaker 2: when you're one area or the other. It didn't the
Speaker 2: rising minimum wage. A modest increase in minimum wage did
Speaker 2: not seem, according to the data, to cause an increase
Speaker 2: in unemployment, as was widely predicted. They got pushback on
Speaker 2: that paper for literally decades before card won the Nobel
Speaker 2: Prize in was that twenty one.
Speaker 1: I'm not sure it's died down. I quote Jason Furman
Speaker 1: as saying, even today they persuaded about half of the profession,
Speaker 1: and the other half of the profession think it's not right.
Speaker 1: It's important too. They wrote a book called method Measurement,
Speaker 1: which had many studies in it, and they did a
Speaker 1: really very good job of reconciling their findings and other findings.
Speaker 1: And that's in some ways much more important work. I mean,
Speaker 1: the Pennsylvania New Jersey thing, it sounds like, you know,
Speaker 1: ones on either side of the Delaware water gap sort
Speaker 1: of idea. But some of the New Jersey restaurants were
Speaker 1: on the shore and some of the Pennsylvania ones were
Speaker 1: in Pittsburgh or something, you know, So there were a
Speaker 1: lot of and what should happened was they what happened
Speaker 1: was not. There was certainly no decrease in employment in
Speaker 1: New Jersey. There was a decrease in employment. Sorry, yes,
Speaker 1: there was a decrease in employment in Pennsylvania.
Speaker 2: A rise in unemployment.
Speaker 1: So when you compared the difference of the two, it
Speaker 1: was quite large, and it went in the opposite direction
Speaker 1: to what people have predicted. But the action was actually
Speaker 1: in Philadelphia, in Pennsylvania rather than in New Jersey. But
Speaker 1: in their book and in dozens and dozens and dozens
Speaker 1: of studies since, that result has been pretty strongly replicated
Speaker 1: that for modest increases in the minimum wage, it does
Speaker 1: not give rise to increases unemployment.
Speaker 2: If you just stop and think about it for a moment,
Speaker 2: if you're paying the poorest or the lowest paid people
Speaker 2: in a region a dollar or two more in an hour,
Speaker 2: they're just going to go out and spend that on
Speaker 2: you know, frivolous things like food and medicine and rent.
Speaker 2: But if if you are freezing that so that the
Speaker 2: profits are higher for either the corporation or the franchise owner,
Speaker 2: that's probably not going to be spent locally. It's going
Speaker 2: to be saved or invested, but that'll be elsewhere. It
Speaker 2: won't be in that local town. I would assume the
Speaker 2: higher salary is just going to stimulate the local economy.
Speaker 2: Is that an oversimplification of what they found or is
Speaker 2: that no?
Speaker 1: I think that's there, but I don't think they would
Speaker 1: have thought of that as the major effect. I mean,
Speaker 1: after all of that, that many fast food workers in
Speaker 1: you know, Pennsylvania, and compared with everyone, so the amount
Speaker 1: of extra money they get from the minimum wage is
Speaker 1: going to be pretty small relative to the size.
Speaker 2: I drive down the New Jersey Turnpike, it looks like
Speaker 2: ninety percent of the people are working in fast foods.
Speaker 1: Well, that's because you're on the New Jersey Turnpike, you know.
Speaker 1: For in Princeton for a long time, they wouldn't let
Speaker 1: fast food joints in the town. Right There are a
Speaker 1: few places, snooty places, Yeah, there are a few. So
Speaker 1: it's a small impact on the macro economy the local.
Speaker 2: On the local economy. Why is this is the assumption just, hey,
Speaker 2: if you make us pay more per hour, we're going
Speaker 2: to hire less workers.
Speaker 1: Well, that's the belief, and that's what happens in textbook
Speaker 1: models of labor markets. It's just that the textbook model
Speaker 1: doesn't do a very good job. But there's a very
Speaker 1: important issue with this that I talk about in the book.
Speaker 1: And I think this over the last of the years
Speaker 1: since that paper was written and that book was written,
Speaker 1: not only has there been a lot of replication, but
Speaker 1: what it's suggesting is there really is some surplus in
Speaker 1: these joints which could be dedicated to either profits or
Speaker 1: labor wages.
Speaker 2: In other words, they're not working on such a tight
Speaker 2: margin that there is a little buffer.
Speaker 1: Well that what economists call that is monopsony, which means
Speaker 1: they have some power over the workers, so they can
Speaker 1: actually deliberately lower their wages because it's hard for the
Speaker 1: workers to go somewhere else Whereas in the textbook, if
Speaker 1: you lower someone's wage below the prevailing wage, those people
Speaker 1: will just vanish.
Speaker 2: They'll quit the job.
Speaker 1: They'll quit the job. So what you've got here is
Speaker 1: there is monopsony in that you can force people's wages
Speaker 1: down and it's hard for them to move.
Speaker 2: I love that word, which I think I don't remember
Speaker 2: if you mentioned it or I just know her work.
Speaker 2: Joan Robinson. She has one of my all time favorite
Speaker 2: quotes about economics, which is, we study economics not to
Speaker 2: predict the future, but so as to not be fooled
Speaker 2: by economists. There's a that's just so full of insight
Speaker 2: and so interesting. I think she's finally getting her due
Speaker 2: these days, and she hadn't for a long time. Let's
Speaker 2: stay with minimum wage, you implied, this still isn't accepted.
Speaker 2: There's a Nobel Prize to card and I guess indirectly
Speaker 2: to Kruger. There's tons and tons of studies that have
Speaker 2: validated their original research. There still seems to be a
Speaker 2: lot of resistance to accepting those facts. Is this a
Speaker 2: case I forgot what physicist I'm stealing this from Physics
Speaker 2: Advances One funeral at a time is the same thing
Speaker 2: taking place in economics?
Speaker 1: There may be some of that. I think it's rather
Speaker 1: more than a half. And in Britain, where they have
Speaker 1: a much much higher minimum wage than here. It's supported
Speaker 1: by everyone on the right and the left.
Speaker 2: Really, yes, is it thinking, Hey, if the companies pay
Speaker 2: for it, well, then it's not on the government to
Speaker 2: cover it.
Speaker 1: That I think is an important part of the story.
Speaker 1: And I don't think they have the lobby that they
Speaker 1: have here by the fast food industry to help keep
Speaker 1: wages done.
Speaker 2: And that's a big deal.
Speaker 1: A lot of the opposition against carden Kruger was from
Speaker 1: the EPI, which is a lobby against cute for Faster.
Speaker 2: Now that changed. EPI is also the economic policy and
Speaker 2: one that's very funny. I recall about a decade ago
Speaker 2: looking at minimum wage and it hadn't increased in a while,
Speaker 2: and the big opponents were not just fast food, but
Speaker 2: the big box retailers like Walmart. And what's kind of ironic,
Speaker 2: by fighting minimum wage, they ended up giving the upstart
Speaker 2: Amazon an opportunity. At one point, I want to say,
Speaker 2: this is about five six, seven years ago, Amazon just
Speaker 2: said our minimum is fifteen dollars an hour. They went
Speaker 2: out and scooped up all the best people in areas
Speaker 2: for warehouses and delivery, and suddenly places like Walmart were scrambling,
Speaker 2: and there was a long period of time where Walmart
Speaker 2: couldn't get enough w workers to stock their shelves. It
Speaker 2: ultimately they ended up hurting themselves.
Speaker 1: Yep. But another part of this that is very important
Speaker 1: is most states or I don't know what fraction of
Speaker 1: American above the federal minimum wages that are above the
Speaker 1: federal ones. It's also true that something like seventy percent
Speaker 1: of Americans would like to see a higher minimum way
Speaker 1: seventy percent. That's the sort of number that comes out
Speaker 1: in these polls. I haven't looked at the most recent one.
Speaker 1: And yet you know it doesn't go through in Washington
Speaker 1: because the lobbyists are very powerful and they're you know,
Speaker 1: paying campaign contributions and all the rest of it.
Speaker 2: I mean, it wouldn't be the worst thing in the
Speaker 2: world if your taco bell or your McDonald's cost a
Speaker 2: buck or so more. We're all going to end up
Speaker 2: paying for it through Medicare Medicaid eventually, right indirectly between
Speaker 2: diabetes and god knows what else in a country that
Speaker 2: has our healthcare issues. So let's transition. Let's talk a
Speaker 2: little bit about healthcare. Okay, in the UK, it's cradle great, right,
Speaker 2: You're covered from you're born a UK citizen, you got
Speaker 2: full healthcare coverage.
Speaker 1: Not for there are some things where you have to pay,
Speaker 1: like prescriptions prescription drugs, but very heavily subsidized, and also
Speaker 1: you have to wait. And so there's a lot of
Speaker 1: private healthcare in Britain where people avoid the lines.
Speaker 2: So if you how bad are the lines, well, it.
Speaker 1: Depends where you are and it can be quite soon,
Speaker 1: but you might have to wait a couple of years
Speaker 1: to get a hip replace for you. Really, and the
Speaker 1: same is true in Canada.
Speaker 2: I was going to ask because I've heard the same
Speaker 2: thing in Canada about both things about some of the
Speaker 2: weights for specific surgeries and the rise of this sort
Speaker 2: of concierge medicine for the people who can afford it,
Speaker 2: they wait a week to get in to see a doctor.
Speaker 1: If that a lot of people in America have concierge medicine, Yeah, they.
Speaker 2: Have, so clearly it's it's a you difference. Ultimately in
Speaker 2: canon and the UK you're paying for that through higher taxes, but.
Speaker 1: It only costs half as much as the charegy.
Speaker 2: So that's where I was going to go. Why if
Speaker 2: the US has the supposedly more efficient private sector, then
Speaker 2: big slow, incompetent, bureaucratic government. Why does US healthcare cost
Speaker 2: twice as much as the rest of the world and
Speaker 2: create worse outcomes.
Speaker 1: Well, because it's full of rent seecrets, which is what
Speaker 1: we were talking about before. I mean, there's a lot
Speaker 1: of people getting very wealthy out of that. Their device manufacturers,
Speaker 1: they're pharma companies. There's hospitals which are a huge part
Speaker 1: of this. Also, remember if you're in the UK and
Speaker 1: the government pays for everything, there's no insurance industry. Uh huh, right,
Speaker 1: So that insurance industry is a big chunk of change.
Speaker 1: And it's not their profits they're making it so expensive though,
Speaker 1: that's in there too, But it's just that they exist.
Speaker 2: There's a giant middleman between the doctor and the patient.
Speaker 1: Who's spending a lot of time trying to stop the
Speaker 1: stop you getting the healthcare you need.
Speaker 2: That is very true. My personal experience has been insurers
Speaker 2: are very happy not to have you do anything. To
Speaker 2: be fair, A lot of times people will make an
Speaker 2: appointment and it's a month off and by the time
Speaker 2: the month rolls away. The issue is especially if it's
Speaker 2: like a sports injury, but if you have something really
Speaker 2: serious don't we want people to get in and engage
Speaker 2: in preventive medicine before it gets worse.
Speaker 1: It's not entirely clear. Preventive medicine sounds like a great idea,
Speaker 1: but it's not always such a great idea. So, for instance,
Speaker 1: one of the thing about prevented medsine I worry about
Speaker 1: a lot is smart watches for it, right, So if
Speaker 1: you got one of those, you're going to get all
Speaker 1: sorts of false positives, right, and you're going to spend
Speaker 1: a huge amount of time getting tests for things that
Speaker 1: you know you probably don't have. And so prevented medicine
Speaker 1: of that sort can cost a lot of money. There
Speaker 1: are types of prevented medicine like taking anti hypertensives or
Speaker 1: taking statins, for instance, which save an enormous number of lives.
Speaker 1: They don't cost hardly anything, and those have been the
Speaker 1: things that have been largely responsible for the rapidly increase
Speaker 1: well the decrease in mortality and the increase in life
Speaker 1: expectancy in the last quarter of the twentieth century.
Speaker 2: I sort not the studies themselves, but some articles about
Speaker 2: them that found there are all these proactive things that
Speaker 2: are a little expensive that insurers could do, but they
Speaker 2: don't because their experience has been the average person switches
Speaker 2: either insurers or jobs, and therefore you're going to switch
Speaker 2: your coverage provider something like every four point seven years,
Speaker 2: and if the payoff for these expensive preventive things are
Speaker 2: seven to ten years down the world road, they have
Speaker 2: no incentive to do it.
Speaker 1: I didn't I haven't seen that, but it sounds entirely plausible.
Speaker 2: It was just kind of, hey, don't you want to
Speaker 2: prevent these No, they're not going to be a client
Speaker 2: in five years, so I mean, yeah, well that could be.
Speaker 2: What other factors do you observe about healthcare in the
Speaker 2: United States versus elsewhere?
Speaker 1: Well, the major thing my colleague, my late colleague, Ryan Hart,
Speaker 1: who is our sort of local healthcare expert, and it
Speaker 1: was a very fine researcher and lecturer, is a very
Speaker 1: funny man, very witty man. He wrote a book called
Speaker 1: It's the Price is Stupid sort of idea, and the
Speaker 1: argument is that almost everything in the US costs about
Speaker 1: twice as much as it costs another country. Really, yeah,
Speaker 1: so all these drugs, you know.
Speaker 2: Everything healthcare related.
Speaker 1: You're saying, yeah, everything healthcare. So if you look at
Speaker 1: the price of drugs, and you can look at the
Speaker 1: identical drugs, and you can look at them across countries,
Speaker 1: and there's any number of papers who've done this, you know,
Speaker 1: in the New England Journal of Medicine and the JAMMA
Speaker 1: and so on, and you know they costs. The same
Speaker 1: company is selling the same drug at twice the price,
Speaker 1: are more than twice the price here than they do
Speaker 1: in other countries. Now, in Britain, for instance, they have
Speaker 1: a thing called NICE, which is the National Institute for
Speaker 1: Healthcare Excellence or something, and what they do is they
Speaker 1: evaluate new drugs and they look, they do a cost
Speaker 1: benefit test and they disallow it if it doesn't save
Speaker 1: enough lives as it were, or cause enough extra health
Speaker 1: route per dollar. So then what happens is the farmer companies,
Speaker 1: if they want to sell it in Britain, they reduce
Speaker 1: the price to meet that cut off. Right in America
Speaker 1: they don't. They charge the full freight, so it just
Speaker 1: costs a lot more. There are arguments for that that
Speaker 1: you hear from the farmer companies all the time, which
Speaker 1: they say, we're doing their research here, and you know
Speaker 1: Britain is just piggybacking off that I think those arguments
Speaker 1: are wearing a little bit thin nowadays, but it's I
Speaker 1: can't disprove that.
Speaker 2: Do any other countries. And I don't watch a whole
Speaker 2: lot of television commercials. Everything I watch is either streaming
Speaker 2: or DVR, so I fast forward through it. But it
Speaker 2: seems every other commercial is for some pharma product. When
Speaker 2: I was a kid, none of these obscure medicines advertised
Speaker 2: on TV. I still don't even know who asked their
Speaker 2: physicists about restless leg syndrome. Their physician, right, their physician,
Speaker 2: not their physicists. But it just seems sort of bizarre
Speaker 2: that we have all these ads. Does any other country
Speaker 2: in the world.
Speaker 1: I think there's a one, which it may be New Zealand,
Speaker 1: either New Zealand or Australia forget me. And that's illegal
Speaker 1: everywhere else in the rich world. And it's true. I
Speaker 1: went along to my doctor and he said, well, you know,
Speaker 1: if you're a pregnant woman, maybe it would be a
Speaker 1: good idea, but you're not, so we don't really need that.
Speaker 1: But that's part of it. The other part of it
Speaker 1: is there's a very large amount of relatively low value
Speaker 1: stuff that's quite profitable and is done on a regular basis. So,
Speaker 1: for instance, if you want to have an MRI in Britain,
Speaker 1: you might have to drive ways or travel in order
Speaker 1: to get one, or you might have wait a month
Speaker 1: or two. Whereas every doctor's office in Princeton has one
Speaker 1: of these things. They're laying idle most of the time.
Speaker 1: That costs a lot of money. So there's just a
Speaker 1: lot more of those procedures being done which are helpful
Speaker 1: but maybe not super helpful.
Speaker 2: I really kind of fascinating. What else accounts for this
Speaker 2: big gap? You mentioned certain things that are inexpensive. We
Speaker 2: just passed a law here that capped insulin for I
Speaker 2: want to say Medicaid recipients. I could be getting that wrong.
Speaker 2: At some very moderate modest cost. I think insulin has
Speaker 2: been off patent for decades.
Speaker 1: It was off patent from the day it was invented.
Speaker 1: Oh is that the inventor sold it to a hospital
Speaker 1: in Canada for a dollar each and that was it.
Speaker 1: They no money, no patent, no nothing, It's never been.
Speaker 2: So how on earth does something like that become crazy
Speaker 2: expensive in a place like the United States.
Speaker 1: Well, because it's allowed to become crazy, pens you know,
Speaker 1: they have different delivery systems or slightly different drugs, so
Speaker 1: they'll tell you that drugs are a little bit better
Speaker 1: and all the rest of it. So they can keep
Speaker 1: rolling this out and then get patents on things that
Speaker 1: don't change the basic thing very much. And so that happens.
Speaker 1: And I think it's not Medicaid. I think it's anyone
Speaker 1: on Medicare Medicare who's like anyone over sixty five, and
Speaker 1: there's a limit on how much, And so it's pretty widespread.
Speaker 2: Given all of this, what has led to all of
Speaker 2: this inequality in the United States, what policies are should
Speaker 2: we be pointing a finger at.
Speaker 1: Well, here's something. Maybe let's just go back one second
Speaker 1: to the because the hospital's a big part of this.
Speaker 1: They're just unbelievably expensive and they're very luxurious compared with
Speaker 1: hospitals in Britain. If you go into a hospital in Britain,
Speaker 1: there might be twelve people in the ward. There's no
Speaker 1: private rooms, for instance, and that sort of thing is
Speaker 1: very very expensive. And maybe we're a rich country, maybe
Speaker 1: we want to have that, but it certainly costs a lot,
Speaker 1: and there are cheaper ways of doing that, and it
Speaker 1: seems to have very little effect on life expectancy, and
Speaker 1: you know it doesn't kill you as part of it.
Speaker 1: And one other thing that's worth noting is no one
Speaker 1: really understands that. But I think the last four or
Speaker 1: five years has stopped growing, the total expenditure and health
Speaker 1: has stopped growing. And there are people who were involved
Speaker 1: in the writing of Obamacare who claim that the provisions
Speaker 1: in Obamacare are actually kicking in, but I don't think
Speaker 1: anyone knows the answer to that.
Speaker 2: I'm going to tell you my single biggest observation about
Speaker 2: the ACA and Obamacare is as soon as that became
Speaker 2: a law of land, which is what was that two eleven.
Speaker 1: It was the law earlier, but it didn't kick in
Speaker 1: for a couple of years.
Speaker 2: All of these walking clinics popped up everywhere where you
Speaker 2: didn't have to go to your regular physician, and you
Speaker 2: didn't have to go to the emergency room. You could
Speaker 2: walk in, show an insurance card, they would diagnose you
Speaker 2: for something. Half the time it's an antibiotic, and they
Speaker 2: send you on your way. And those are everywhere, especially
Speaker 2: in cities that were kind of medical deserts for a while.
Speaker 2: I'm curious what the impact of that might have been.
Speaker 1: Some of them are very cheap. They don't do very
Speaker 1: much most of them, and a lot of people go
Speaker 1: in there wanting an antibiotic, but they've got flu and
Speaker 1: it's a virus. They say, you can't do that. So
Speaker 1: I've gone in there to try and get things, and
Speaker 1: you know, I didn't get what I wanted. To go
Speaker 1: somewhere else. But I think there are things like that
Speaker 1: which are helping control costs. But I'm now out of
Speaker 1: my zone of expertise here, But I mean, the one
Speaker 1: thing that Anna and I spent a lot of time
Speaker 1: writing about in our book was that if you have
Speaker 1: insurance through your employer, right, that cost nowadays about eleven
Speaker 1: thousand dollars a year per employee and about twenty thousand
Speaker 1: dollars for a family policy. That costs about the same
Speaker 1: for the CEO as it does for the CEO's driver, right,
Speaker 1: because you're ensuring the body, not the salary, right, Right.
Speaker 1: So this puts an enormous burden on low wage workers,
Speaker 1: and it's been a big contributor to outsourcing jobs, so
Speaker 1: that most companies don't hire their own security, their elevator operators,
Speaker 1: they're transport people their you know, food service people and
Speaker 1: all the rest of it, and a lot of good
Speaker 1: jobs have been lost because of that. So that's one
Speaker 1: of the ways in which this very expensive healthcare is
Speaker 1: eating the harm of our economy.
Speaker 2: Huh. So, in other words, people, companies, employers don't want
Speaker 2: to hire a forty thousand dollars employee right still far
Speaker 2: above minimum wage, but on the bottom half of the
Speaker 2: wage spectrum, because there's an eleven thousand dollars right tag
Speaker 2: on top of that for healthcare.
Speaker 1: One CEO told us that their HR people came run
Speaker 1: into the annual conference where they were looking ahead for
Speaker 1: the pricing and a lots of it, and he said,
Speaker 1: we have bad news for you that your health care
Speaker 1: costs the policies you have are going to cost forty percent.
Speaker 2: More forty forty zero.
Speaker 1: It was only one year, but as you said, these
Speaker 1: things are going up like crazy.
Speaker 2: Nine percent a year for yeah, again, three or.
Speaker 1: Four years and it can be forty percent. So there's
Speaker 1: this sort of thing. And so the company said, you
Speaker 1: know that we can't do that, it's not going to happen,
Speaker 1: and what should we do? And they said, you get
Speaker 1: McKenzie and you fire all your low paid.
Speaker 2: Staff really and then hire them back through some company
Speaker 2: that is gonna.
Speaker 1: The ramjam cleaning company, you know, a wheels driving company,
Speaker 1: and you know this CEO at least, and I have
Speaker 1: no way of verifying this thought that many of these
Speaker 1: workers were undocumented, ah.
Speaker 2: Alien, so they would never get hired anywhere else anyway.
Speaker 1: Well, there's an informal economy. Yeah, but they're probably not
Speaker 1: getting healthcare benefits, so you've shifted the healthcare benefits out
Speaker 1: of the company essentially. And you know it means you're
Speaker 1: much more interested in hiring high income workers and very uninterested.
Speaker 1: You said, as someone who's being paid thirty thousand a year,
Speaker 1: forty thousand a year, you don't want to carry eleven
Speaker 1: thousand dollars worth of health care insurance.
Speaker 2: Huh. That's really quite fascinating. Let's talk about immigration. It
Speaker 2: seems like the total numbers of legal US immigrants have
Speaker 2: been falling over the past few decades, at least relative
Speaker 2: to the overall labor pool. Tell us what's going on
Speaker 2: with immigration in the United States.
Speaker 1: I actually didn't know that, though i'd heard something yesterday which.
Speaker 2: Well, is falling and then it's starting to tick back up.
Speaker 2: But it's still below where we were had you just
Speaker 2: projected it out twenty years ago.
Speaker 1: Yeah, that could well be. No, I don't know much
Speaker 1: about that, and you know, I am obviously a well
Speaker 1: documented alien. I'm not an alien. I'm not an American citizen,
Speaker 1: though it took me thirty years to get run into
Speaker 1: doing that.
Speaker 2: Dual passports or just one.
Speaker 1: I have dual passports, which in Britain they allow you
Speaker 1: to do. I would not be sir Angus if I'd
Speaker 1: given up my b that's right passport and they check
Speaker 1: on that.
Speaker 2: Oh really, Well you get a phone call from the
Speaker 2: Queen Angus, what's going on?
Speaker 1: No? No, no, no no. But it's a very British thing.
Speaker 1: That are secret committees that you've no idea, who are
Speaker 1: members of those of the Great and the Good who
Speaker 1: decide who they're going to give knighthoods to or other honors.
Speaker 1: And I have friends who are British who have a
Speaker 1: Nobel prize who did not get one for many, many years.
Speaker 2: So it wasn't just the pride because you are a year
Speaker 2: later got the knighthood, that's right. What was that call like?
Speaker 2: As long as we're talking about it, well, it.
Speaker 1: Doesn't come from the Queen or even from the Prime Minister,
Speaker 1: but it does come from the British Consulate here in
Speaker 1: New York City and say would you accept a knighthood
Speaker 1: if it was bestowed on you? And I said, well,
Speaker 1: are you kidding?
Speaker 2: Of course, of course you have to go fly back
Speaker 2: to London for this.
Speaker 1: Well, there's actually a bunch of places you could go.
Speaker 1: I could do what Sean Connery did and insist that
Speaker 1: it'd be given to me in Scotland, which is where
Speaker 1: I grew up, at Holyrood Palace. But there's a whole
Speaker 1: bunch of dates over the years, and it's an interesting
Speaker 1: thing because the royal family always does it. They've never delegated,
Speaker 1: even during wartime to civil servants however, elevated or anything.
Speaker 1: So there's about four members that are all who do this,
Speaker 1: and the Queen, you know, did very few towards the
Speaker 1: end of her life. But you know, Charles did a lot,
Speaker 1: Princess Anne does a lot, and William Wills does a lot.
Speaker 1: He did me, he knew quite a lot about my
Speaker 1: work and he hit me with the sword that was
Speaker 1: his grandfather.
Speaker 2: So I think it's hilarious that Sean Connery said oh, knighthood,
Speaker 2: bring me the Queen, send the royal family to me.
Speaker 2: I'll be right here in Scotland. Who else could have
Speaker 2: gotten away with that? I don't know, but that's absolutely hilio.
Speaker 2: So so let's talk a little bit about what you
Speaker 2: see in terms of legal immigration, what's happening here in
Speaker 2: the States and how important is it?
Speaker 1: Yeah, okay, I mean the legal immigration is a lot
Speaker 1: of its high end immigration.
Speaker 2: I mean skilled, skilled people, semi wealthy.
Speaker 1: Who are going to work for you know, and you
Speaker 1: see the CEOs of people like Microsoft.
Speaker 2: And so all the Silicon Valley, something like twenty five
Speaker 2: percent of the c suite, maybe even more. We're not
Speaker 2: not born in.
Speaker 1: The United We're not born in the United States, right,
Speaker 1: And there's also long literature of creativity and immigrants, so
Speaker 1: that many of immigrants in the United States Tesla not
Speaker 1: Elon Musk, but Elon Musk of course was born in
Speaker 1: South Africa. Yeah, we're immigrants. And there's some suggestion immigrants
Speaker 1: are much healthier than non immigrants, and that's partly because
Speaker 1: immigrants are sort of selected special people.
Speaker 2: Self selecting. You're going to pick up and move halfway
Speaker 2: around the world. Yeah, you have to be motivated. You
Speaker 2: have to be fairly robust to do that, and you
Speaker 2: have to have a certain type of mental attitude and constitution,
Speaker 2: I would imagine.
Speaker 1: I think that's right. But of course the big controversy
Speaker 1: nowadays is not about that end of things. It's about
Speaker 1: the other.
Speaker 2: End, illegal immigration, well, or.
Speaker 1: The less skilled undocumented aliens who are swarming across the
Speaker 1: border in large numbers, and we have no mechanism for
Speaker 1: stopping that. So I don't want to talk about that
Speaker 1: because that's not my area of expertise, and you hear
Speaker 1: about it in the newspapers and on the radio and
Speaker 1: television all the time. But just about this question as
Speaker 1: to whether immigration lowers the wages of Native Americans now,
Speaker 1: David Carr is one of the big authors who claims
Speaker 1: it doesn't have any such effect as the toll. Paul Krugman,
Speaker 1: who you've talked about, has been writing blistering pieces in
Speaker 1: the New York Times saying it doesn't decrease local wages,
Speaker 1: denouncing the lump fallacy, which says that there's only finite
Speaker 1: number of jobs in America and if immigrants get them,
Speaker 1: there's none left, or there's fewer left for ordinary people,
Speaker 1: and I suspect that's not true. I think we've been
Speaker 1: getting this wrong actually, and really I think it does
Speaker 1: in fact, and so I think one of the reasons
Speaker 1: that inequality is so high now is because fifteen percent
Speaker 1: of the population is foreign born, which was also true
Speaker 1: during the Gilded Age, and we had this huge dip.
Speaker 1: I don't know if you've seen these pictures, but if
Speaker 1: you go back to eighteen ninety, but fifteen percent of
Speaker 1: the population was foreign born. If you look at it now,
Speaker 1: fifteen percent is foreign born. And in the trough in
Speaker 1: the late sixties it was down to I don't know,
Speaker 1: seven or eight percent.
Speaker 2: Post war era is that it dropped in half.
Speaker 1: Yeah, Well, what happened was the laws the banning of
Speaker 1: immigrants making it almost impossible were in the twenties, so
Speaker 1: it took a long time to come down. And then
Speaker 1: there was this Heart Cellar Act which was passed in
Speaker 1: I think nineteen sixty eight, and it was passed under
Speaker 1: the promise that there would be no increase in immigration
Speaker 1: at all, and that turned out to be completely false.
Speaker 1: And it was completely false because they weren't counting the
Speaker 1: family members who were allowed to come in afterwards, and
Speaker 1: that's what's driven the huge increase.
Speaker 2: Back to fifteen percent what we saw, or go.
Speaker 1: Back to fifteen percent, And if you look at income
Speaker 1: inequality in America it looks exactly like that too.
Speaker 2: So so that leads to the obvious question, how parallel
Speaker 2: is or what is there a mechanism between immigration and inequality?
Speaker 1: Yes, I think so, though I'm now out on a
Speaker 1: limb and lots of my economist friends are going to
Speaker 1: denounce me and Paul Krugman and that is probably going
Speaker 1: to beat me over the head with a chair or something.
Speaker 1: But even in that, you know.
Speaker 2: David Lee, by the way, he's a very genteel.
Speaker 1: I know, I know, Paul. It's not like debating Larry Summers,
Speaker 1: which I did recently.
Speaker 2: Oh I'm so sorry.
Speaker 1: Yeah, but you should watch the video as a video.
Speaker 2: Oh really, I'll link to it in there.
Speaker 1: Which it was a very unpleasant unkinnter. But he took
Speaker 1: great objection to this book. So I think it is
Speaker 1: true that once happened, if you bring in large numbers
Speaker 1: of unskilled immigrants, then that is good for rich people
Speaker 1: because it provides and it's good for employers and provides
Speaker 1: a very large, very cheap labor force pool of low
Speaker 1: wage workers who work in agriculture, who work you know,
Speaker 1: if you go to Princeton, New Jersey and walk around town,
Speaker 1: they are all these beautifully maintained houses covered with velvet
Speaker 1: green lawns, you know, and everything is immaculately maintained. Well.
Speaker 1: I don't think anyone who you would see doing that work.
Speaker 1: You would hear them speaking English.
Speaker 2: All farm born. They're all foreign so at least the
Speaker 2: children of farm board I've noticed. So it's landscapers, it's
Speaker 2: farm workers. During the financial the building boom leading up
Speaker 2: to the financial crisis, the it was commonly understood that painters, framers, stonemason,
Speaker 2: roof plumbers, electric like a huge influx of people from
Speaker 2: Mexico and South America who were skilled workers. These aren't
Speaker 2: unskilled workers, and they paid they were paid a pretty
Speaker 2: decent wage for building houses. You still see, that's a
Speaker 2: pretty substantial slice. And when people complain they can't find
Speaker 2: farm workers or they can't find roofers, it's because they're
Speaker 2: very often it's because there's been some shift in who
Speaker 2: is working where, who was staying where. Right, Again, all anecdotal,
Speaker 2: not hard data, but it's just if you look.
Speaker 1: At these inequality patterns in the Gilded Age when you
Speaker 1: had these huge houses and many servants and all the
Speaker 1: rest of it. Now we don't have domestic servants, but
Speaker 1: we do have people who do the same things. We
Speaker 1: look after our yards and to look after it. And
Speaker 1: you know, if you go to European countries, you just
Speaker 1: don't see that. I mean, I remember talking to some
Speaker 1: Danish friends and they say they can't afford to have
Speaker 1: the roof on their house replaced because you know, relative
Speaker 1: to their salaries, it costs four or five times what
Speaker 1: it would cost in prinsident.
Speaker 2: Really. Yeah, so we pay more for health care but
Speaker 2: less for landscaping and contract absolutely. Huh. That's really fascinating.
Speaker 2: So what other factors are driving inequality? When it comes
Speaker 2: to immigration, I have like a very distorted perspective because
Speaker 2: I think of the people like yourself or Silicon Valley
Speaker 2: or Elon Musk coming into the United States either starting
Speaker 2: businesses or bringing over a highly regarded stem we call
Speaker 2: it skill set, science, technology, engineering, and math. Is that
Speaker 2: who's coming over as legal immigrants? Or is that sort
Speaker 2: of a distorted perspective?
Speaker 1: And legal immigrants You've got both because a lot of
Speaker 1: them are families of unskilled people, not particularly skilled. But
Speaker 1: you also compared with the general population, where you think
Speaker 1: it would probably be a normal curve with skills in
Speaker 1: the middle. Immigrants, I think in almost all countries are
Speaker 1: more bimodal. H Yes, you've got these very skilled people
Speaker 1: places like Australia. And someone told me the other day
Speaker 1: that sheriff immigrants foreign born in Australia is over thirty percent.
Speaker 2: That wouldn't surprise me.
Speaker 1: And they would like more. And that's because they have
Speaker 1: an income test or they have a wealth test or whatever.
Speaker 2: Oh really, yes, And where are those immigrants coming from.
Speaker 2: Are they coming from the Philippines and Vietnam or are
Speaker 2: they coming from elsewhere?
Speaker 1: Many places, I think. I mean they're very you know,
Speaker 1: strong Serbian Greek communities, but also a lot of them
Speaker 1: from East Asia nowadays.
Speaker 2: Pretty good for a penal colony, right.
Speaker 1: Pretty good for a penal colony. You know, they call
Speaker 1: the latest the new immigrants, they call them boat people,
Speaker 1: and that's the first thing they do when they get
Speaker 1: to Australia is buy a bone.
Speaker 2: That's very funny because when we talk about both people
Speaker 2: in the United States, they're coming over from Cuban elsewhere
Speaker 2: on a boat, not buying a boat. That's really fascinating.
Speaker 2: So we haven't really talked about education very much other
Speaker 2: other than the whole PC thing. How significant is education
Speaker 2: to inequality, whether it's on the immigrant side or domestically
Speaker 2: born and raised.
Speaker 1: Okay, so let me go back to not income inequality
Speaker 1: against so much, but this education inequality because I think
Speaker 1: this distinction that is so important here between people who
Speaker 1: have a four year college degree and people who do not,
Speaker 1: that inequality is threatening to bring us down. I think
Speaker 1: that's the most serious.
Speaker 2: So before we get to college, there is a relatively
Speaker 2: small group of people who aren't even high school graduates.
Speaker 1: But that's the client over tirement.
Speaker 2: That's faded to a very small percentage.
Speaker 1: About what third of the population has a four year
Speaker 1: BA or more about a third of the population has
Speaker 1: some college, which means they went to So it's two
Speaker 1: thirds no some college, but some college include a two
Speaker 1: year no.
Speaker 2: I mean there's a third with a college degree, and
Speaker 2: then another an additional third with some college meaning they
Speaker 2: have a high school degree.
Speaker 1: No, they have a high school degree, but they also
Speaker 1: have maybe a whatever the thing that you get from
Speaker 1: a junior.
Speaker 2: College ged the equivalent degree.
Speaker 1: No, no, no, g d's equivalent for high school. This
Speaker 1: is oh, the community college. It's called an associates agree
Speaker 1: or something, or they've been to college but didn't finish. Right,
Speaker 1: So the people with a two year degree and being
Speaker 1: to college but didn't finish or another third got it,
Speaker 1: and then there's a third who have high school or less.
Speaker 1: And the people who didn't graduate from high school are
Speaker 1: not all that many anymore.
Speaker 2: It's becoming a small So let's bring this back to college.
Speaker 2: How significant I assume a college degree is very significant,
Speaker 2: or even a two year degree is significant to your
Speaker 2: future earnings and your standard of living. How why does
Speaker 2: that gap?
Speaker 1: Well, the gap is enormous. If you look at the
Speaker 1: wages we used to You know, when I first came
Speaker 1: to Princeton, what you were handed out with the ration
Speaker 1: was that a BA bought you a forty percent premium.
Speaker 2: And your wage that much.
Speaker 1: It's now over one hundred.
Speaker 2: Get out of here, double, it's double. That's amazing.
Speaker 1: So not only that, but those are the people who
Speaker 1: are not getting fired from their jobs because the rising
Speaker 1: healthcare costs. Whereas the people that degree or not and
Speaker 1: what had really changed my mind about it, you know,
Speaker 1: and this happened to me very late in life after
Speaker 1: with it about pride, was this realization that when Anne
Speaker 1: and I were working on these people who were dying.
Speaker 2: From deaths of despair, that's of.
Speaker 1: Despair from opioid overdoses, from suicide, from alcoholism, that those
Speaker 1: that huge increase which started, you know, in the late
Speaker 1: nineties and goes on rising today, that's all among people
Speaker 1: without a BA. So you've got a BA, you've got
Speaker 1: a vaccine against these things.
Speaker 2: That's amazing. I vividly recalled during the pandemic lockdown, if
Speaker 2: you had a college degree and you're working in what
Speaker 2: we think of as a white collar job, you could
Speaker 2: work remote. Your job was pretty safe, and if you
Speaker 2: didn't have a college degree, you were up for grabs.
Speaker 1: If you look at the data, and then we have
Speaker 1: a recent paper that's coming out at Brookings, if you
Speaker 1: look at what happened during COVID, the people with a
Speaker 1: college degree had a slight drop in life expectancy, maybe
Speaker 1: half a year. But if you didn't have a four
Speaker 1: year degree, it's huge drops. It really got hit.
Speaker 2: So not just income but life expectance.
Speaker 1: Expectance yeah, income, I don't care about so much, you know,
Speaker 1: because if you're.
Speaker 2: Dead doesn't really matter.
Speaker 1: It doesn't really matter. And this is a terrible inequality
Speaker 1: because you know, this third of it's only a third
Speaker 1: of the population. I have a four year college degree
Speaker 1: and they're doing great. Their life expectancy continues to go
Speaker 1: up at least until the pandemic, and then only fell
Speaker 1: a little during the pandemic. But if you don't have that,
Speaker 1: your life expectance had been falling since nineteen twenty ten.
Speaker 2: Really, yes, that's amazing.
Speaker 1: I mean, it's just awful. And this gap in nineteen
Speaker 1: ninety two and life experiences about two years, it's not
Speaker 1: like thirteen years.
Speaker 2: And this is driven by the opioid crisis and the
Speaker 2: tendency for people without education are just much more likely
Speaker 2: to find themselves on the wrong end of that.
Speaker 1: It's not just the opioid crisis. The opioid is very important.
Speaker 1: Suicides are probably important, and suicide just a horrible thing,
Speaker 1: you know. The suicide researchers have believed since the nineteenth
Speaker 1: century that more educated people more likely to commit suicide.
Speaker 1: Is that true? It was true for many years. It's
Speaker 1: not true in the US anymore.
Speaker 2: It's flip and.
Speaker 1: Our suicide rate is like it used to be in
Speaker 1: Lithuania or in the Soviet Union before it collapsed. So
Speaker 1: this is to us, is a signal that there's something really,
Speaker 1: really wrong. But the fallen life experiencing a lot of
Speaker 1: them being driven by cardiovascular disease, which is, you know,
Speaker 1: this drop that was falling like a stone in the
Speaker 1: seventies and eighties and nineties for people that to be
Speaker 1: it stopped.
Speaker 2: Huh, that's fascinating. I was looking at gun deaths earlier
Speaker 2: today for a different project I was working on. I
Speaker 2: think it's something like, I'm doing these numbers off the
Speaker 2: top of my head, so I'm going to get it wrong.
Speaker 2: I think there's something like forty thousand automobile deaths a
Speaker 2: year in the United States, a slightly higher number of
Speaker 2: gun related deaths, of which something like two thirds or
Speaker 2: three quarters or suicides does sound about right.
Speaker 1: I don't know that number, but I know that the
Speaker 1: suicide rate is running at about forty thousand Americans a year,
Speaker 1: oh so, and much of that is guns, at least
Speaker 1: by men. Women tend not to shoot themselves. They take
Speaker 1: poison or suffocatable.
Speaker 2: The numbers are really quite astonishing. How does the US
Speaker 2: compare to other developed, modern wealthy.
Speaker 1: Countries incredibly badly?
Speaker 2: Really?
Speaker 1: Well, you know, first of all, the US is the
Speaker 1: only country that let pharma companies like Purdue Pharma poison
Speaker 1: the population. It just doesn't happen in other countries because
Speaker 1: that's not allowed. And you know, Perdue Pharma was paying
Speaker 1: enormous sums of money for campaign finance for politicians. Some
Speaker 1: of those politicians intervene to stop Pharma being you know
Speaker 1: that stop that. The DEA investigating these people. There's a
Speaker 1: thirty minute show which is just incredibly horrible, and that happened.
Speaker 2: To be fair, they made them take their name off
Speaker 2: of a wing of a museum. So now they've certainly
Speaker 2: learned their lesson. Yeah, absolutely, And in fact, the settlement,
Speaker 2: which costs eight or ten or twelve, but some ungodly
Speaker 2: amount of money, keeps getting rolled back. I don't know
Speaker 2: what the state is now.
Speaker 1: There are a lot of lawyers out there. Half the
Speaker 1: lawyers are working for Purdue and the other half are
Speaker 1: working for ex President Trump.
Speaker 2: Well, that's a that's a challenge. I guess it's the
Speaker 2: attorney full employment legislation.
Speaker 1: Well, except you know, the thing about the FIRMA was
Speaker 1: once the docs realized what they'd done right and pulled
Speaker 1: back and said, we're not giving you any more of that,
Speaker 1: the illegal drug dealers moved in. And so it's now
Speaker 1: a fentanyl epidemic. Fentanyl is in some sense of illegal drug.
Speaker 2: But it's it's poison. The number of overdose is it's
Speaker 2: been a line straight up going back, you know, for
Speaker 2: almost fifteen years now.
Speaker 1: Yeah, but it picked up once the doctor you know,
Speaker 1: so this was ignited by pharma. You know, J and Jay,
Speaker 1: which is one of the most you know, prize names
Speaker 1: in corporate America, was growing poppies and half of opium
Speaker 1: puppies over half of Tasmania to feed this thing. Oh really, Yes,
Speaker 1: that's a huge fine for that.
Speaker 2: And you know, you could get legal weed anywhere. I know,
Speaker 2: it's a different body.
Speaker 1: I think it's a terrible stuff, you do, Yeah, I do.
Speaker 1: I think it's a great mistake.
Speaker 2: Huh.
Speaker 1: And I think a lot of young people get their
Speaker 1: brains deformed.
Speaker 2: Well, you really shouldn't be smoking or eating edibles when
Speaker 2: you're fourteen. You're not supposed to have access to that.
Speaker 2: But they always had access to illegal drugs. That's the challenge.
Speaker 2: Do you take the money away from the illegal cartels
Speaker 2: who do marijuana and worse. You know, we see the
Speaker 2: parallels with cigarettes and alcohol. We still haven't figured this out.
Speaker 1: We certainly haven't figured it out. So the alcohol is
Speaker 1: another way of killing yourself, you know, like suicide.
Speaker 2: And slowly over time.
Speaker 1: Yeah, it just takes longer.
Speaker 2: Yeah, it's there's no doubt about that. So I'm kind
Speaker 2: of fascinating you're bringing up deaths of Despair from the
Speaker 2: book you wrote co wrote with your wife. When we
Speaker 2: look at consumer sentiment in the United States, despite lowest
Speaker 2: unemployment rate in fifty years, a fairly robust economy, stock
Speaker 2: market all time, Hyes, the consumer sentiment, especially in twenty
Speaker 2: twenty two, during that inflation surge, it collapsed. It was
Speaker 2: worse than during COVID, worse than the financial crisis, worse
Speaker 2: than the dot com implosion, worse than the eighty seven crash.
Speaker 2: Is this spate of negative consumer sentiment less related to
Speaker 2: inflation than perhaps all of these other things, inequality, deaths
Speaker 2: of despair, and a streak of hopelessness that seems to
Speaker 2: be at work in the bottom half of the United.
Speaker 1: States that's my hypothesis too. I read the book, but
Speaker 1: I don't have any well, except the consumer sentiment bit
Speaker 1: was sort of more recent than It's not really in there.
Speaker 1: But it drives me nuts that people say, well, you know,
Speaker 1: America is the most successful economy in the world, and
Speaker 1: if you look at all these European economies, they're doing
Speaker 1: terribly badly. And why don't Americans realize that? Well, one
Speaker 1: point two million of them died during COVID, and you
Speaker 1: know another two hundred thousand a year are dying from
Speaker 1: two hundred and fifty thousand a year are dying from alcohol, opioids,
Speaker 1: and suicide, and none of that is happening in any
Speaker 1: of these European countries.
Speaker 2: Oh really, the gap is that big, So clearly we.
Speaker 1: Need They're obviously suicides in Europe.
Speaker 2: Sure, but I mean one point two million is a
Speaker 2: low estimate. I've seen numbers as high as two million.
Speaker 2: Clearly we didn't do a great job during COVID. Hold
Speaker 2: that aside, alcohol related deaths, suicide go down the list.
Speaker 2: The US is far and away worse than Well.
Speaker 1: The right way to put this is, it's not worse
Speaker 1: than if you go to Lithuania, for instance, a lot
Speaker 1: of people died by suicide.
Speaker 2: But I'm not sure Lithuania is the country I want
Speaker 2: to con you know, to me, I look at Switzerland,
Speaker 2: the UK, Japan, France, Germany, Italy, those should be Australia.
Speaker 1: Yeah, we have to be a bit careful about levels
Speaker 1: and changes. So this huge upsurge since the late nineties
Speaker 1: in deaths of despair and to some extent in cardiovascular
Speaker 1: disease going the wrong way is unique. You don't see
Speaker 1: that rise in any other rich country. There's one other
Speaker 1: rich country. It's where I come from, Scotland. It has
Speaker 1: a drug epidemic almost as bad as the.
Speaker 2: Oh And where are those drugs coming from?
Speaker 1: If they're illegal drugs? But they're not opioids, they're metem
Speaker 1: tedements and things. Huh. And I don't really know enough
Speaker 1: about that. It's very hard to get the sort of
Speaker 1: data that and I would like to get, even though
Speaker 1: people in Scotland certainly talk to us about it.
Speaker 2: So why is the US seeing the cardiac deaths which
Speaker 2: have been improving for so long? Is this just a
Speaker 2: function of US obesity or what's the driver of that?
Speaker 1: I don't know, and I don't think anyone knows, and
Speaker 1: there's been The literature is not really picked up on
Speaker 1: the fact that it's cardiovascular mortality is going up for
Speaker 1: people without a degree, and it's going down for people
Speaker 1: with a degree.
Speaker 2: Oh really, so it's very bifurcated.
Speaker 1: Also, well, it's bifurcating too, and it may be that
Speaker 1: people are not taking their antique hypertensives that they used
Speaker 1: to obesity. It's possible, but it's a little hard to
Speaker 1: tell the story because if you look across different states,
Speaker 1: they're different to beast levels that it doesn't really seem to correlate.
Speaker 2: Generally speaking, if you don't have a college degree, are
Speaker 2: you more likely to disregard doctor's orders and not take medicine?
Speaker 2: Is that the implication here?
Speaker 1: It's possible. That's an inflammatory statement. People get very upset
Speaker 1: with you when you say that. It's like blaming the
Speaker 1: victim sort of idea.
Speaker 2: But it's probably trying to figure out why the victims
Speaker 2: are victims and there should be no stone left on time.
Speaker 1: Well, it also may be that it's hard to get
Speaker 1: in some places, it's hard to get access to doctors
Speaker 1: and stuff. And also, I mean, there's a positive side,
Speaker 1: but the gaps are still increasing, which is in cancer.
Speaker 1: So you know, Nixon declared war on cancer in what nineteen.
Speaker 2: Sixty fifty years ago.
Speaker 1: Nothing happened until nineteen ninety and then cancer downs have
Speaker 1: been falling quite rapidly, but they've been falling much more
Speaker 1: rapidly for people with a college degree people without. So
Speaker 1: for instance, breast cancer mortality for women used to be
Speaker 1: higher among people who were not educated, and that's the higher. Sorry,
Speaker 1: it used to be higher among women who were educated.
Speaker 1: College women had much higher mortality rates from breast cancer,
Speaker 1: and that's not true anymore.
Speaker 2: Were I kind of remember seeing something about that. Was
Speaker 2: it that the rates were higher or the discovery of
Speaker 2: that's what it was that was ultimately at fault.
Speaker 1: No, the discovery doesn't affect mortality. The discovery effects the
Speaker 1: number of years you survive after diagnosis, which is why
Speaker 1: we should never pay any attention to that number. Well,
Speaker 1: people do, but mortality rates are not affected by you know,
Speaker 1: well except that you might save someone's life by tacticularly.
Speaker 1: But the statistic that's very dubious is the one that says,
Speaker 1: you know, how many years you get to survive after diagnosis,
Speaker 1: because you could diagnose everybody with cancer at birth and
Speaker 1: then they'd live a really long time.
Speaker 2: Well, I mean credible diagnosies. So let's bring this back
Speaker 2: to economics, okay, because I have to ask what should
Speaker 2: be the role of economists in issues of public policy,
Speaker 2: deaths of despair, wealth, health and income inequality? What role
Speaker 2: should your profession play in trying to make this a
Speaker 2: little less terrible.
Speaker 1: Well, let me take back to one of the very
Speaker 1: first questions you asked me, which is I think about
Speaker 1: human well being, right, and it's much broader than just money.
Speaker 1: And economists have been focused on money or the amount
Speaker 1: of money that people spend, you know, on consumption, on income,
Speaker 1: and some economists of March Sen would be the leading
Speaker 1: figure here, has always said you've got to look at
Speaker 1: mortality rates, you've got to look at health. But there's
Speaker 1: happiness measures, so lots of other things there too. But
Speaker 1: you know, this is what I was saying a few
Speaker 1: minutes ago, that the American economy, just in terms of money,
Speaker 1: doing so much better than the European countries. But we're
Speaker 1: dying in drops, the bodies are piling up in the street.
Speaker 1: In what sense can you say we're doing well? And
Speaker 1: I think economists just have to get much broader about
Speaker 1: what they think about. Doing well.
Speaker 2: Means is that the phrase economism is that where that
Speaker 2: comes from ignoring not really.
Speaker 1: I mean economism is more like the minimum wage stuff
Speaker 1: you use a simple textbook, And that was James Quack
Speaker 1: calling that term, but it's no. I think it's just
Speaker 1: when you economists do policy and they think about people
Speaker 1: getting better off or worse off, they're thinking about unemployment
Speaker 1: and jobs and money, and they're not really thinking about
Speaker 1: whether people are flourishing or not.
Speaker 2: Let's take that another step. When I think of how
Speaker 2: economists play into the role of things like this, the
Speaker 2: focus seems to be things like efficiency, productivity, not life
Speaker 2: satisfaction or happiness. How do you steer the profession towards
Speaker 2: being a little more holistic and looking at the whole picture,
Speaker 2: not just the dollars and cents.
Speaker 1: Well, what made me steer back was these deaths of despair,
Speaker 1: because you can't talk about them in ordinary economics language.
Speaker 1: There's something else going on, and I think the sociologists,
Speaker 1: many of the good sociologists, have really much better handle
Speaker 1: on what how people's lives are coming apart with de industrialization,
Speaker 1: for instance, So well.
Speaker 2: Let me interrupt you a second. In the other book
Speaker 2: which I didn't read but kind of skimmed an online
Speaker 2: outlearn you do turn that into an economic analysis. It's
Speaker 2: not just woe is us. These are the deaths of despair.
Speaker 2: You correlate it to regional income and health education levels.
Speaker 2: You really bring in a lot of things I think
Speaker 2: of as classical economics into analyzing deaths of despairs. Is
Speaker 2: that fair?
Speaker 1: Yes, But not only we talk about levels of religion,
Speaker 1: how people have checked out of going to churches anymore.
Speaker 2: We talk about that's community as well.
Speaker 1: It's not unity. But that's a big difference. Economists don't
Speaker 1: talk about community at all, whereas sociologists spend a lot
Speaker 1: of time thinking about community. And so their chain would
Speaker 1: be here's the wages in some place in the rust
Speaker 1: belt or something. The wages go down, the jobs go away.
Speaker 1: But it's not just the jobs. I mean, it's the schools,
Speaker 1: it's the police force, it's the you know, community. Bob
Speaker 1: Putnam wrote this fabulous book on bowling alone, you know
Speaker 1: and social capital. His bowling alone guy was bowling in
Speaker 1: a union hall, or no unions in the private sector anymore.
Speaker 1: You know, and that was an important sort of power
Speaker 1: for ordinary working people. So I think power is incredibly important,
Speaker 1: and I think economists have just lost it there.
Speaker 2: So I want to tie this back to economics, and
Speaker 2: I'm going to share an anecdote, will you. So during
Speaker 2: the pandemic in the first few months, we're locked down.
Speaker 2: You can't really do anything. You're a little bored. My
Speaker 2: wife and I, we live out on Long Island. We
Speaker 2: would get in the car and go for a ride
Speaker 2: and just drive around different towns where perhaps we might
Speaker 2: not have been previously. And to me, everything is an
Speaker 2: economic study. Whatever I do, I try and find a
Speaker 2: way to turn it back into economic data. And one
Speaker 2: of the things I noticed is that towns that had
Speaker 2: robust public spaces could be a waterfront beach, could be
Speaker 2: a large park, athletic fields, whatever seemed to be open
Speaker 2: to the public and was a useful recreational area. Those
Speaker 2: seemed to be affiliated more with wealthier towns. Now I
Speaker 2: can't figure out which came first. Did the town become
Speaker 2: wealthy because they had this attractive area and a lot
Speaker 2: of people wanted to live by it, or do only
Speaker 2: wealthy towns are only they able to afford these sorts
Speaker 2: of things. So it's a little bit of a chicken
Speaker 2: or an egg. But it comes back to if there's
Speaker 2: a robust sense of community, what does that mean for inequality,
Speaker 2: what does it mean for general happiness? And does that
Speaker 2: reduce those sort of deaths of despair that you've highlighted.
Speaker 1: I think it probably does, And I think that I'm
Speaker 1: not sure you have to disentangle the chicken and egg.
Speaker 1: And I think we're on the same page here that
Speaker 1: you know, I'm an economist, you know you're in cognist.
Speaker 2: I'm not really, but I'm fascinated by the wage and
Speaker 2: the wealth.
Speaker 1: That's coming into the community is the driving of this thing, right.
Speaker 1: But you know, if people lose their jobs, for instance,
Speaker 1: you can't just give them the money to make it up,
Speaker 1: and any we don't, okay. And those things that happen
Speaker 1: in the community, like the destruction of those open spaces,
Speaker 1: the destruction of the public library, the destruction of the schools,
Speaker 1: you know, the loss of unions and things. Those are
Speaker 1: aspects of people life that are not summarized by the
Speaker 1: amount of money they spend. So those public goods, those
Speaker 1: public spaces are important to people, but They're not just
Speaker 1: the money they get, right, it was just the money
Speaker 1: that mattered to them. They would never invest in those
Speaker 1: public spices.
Speaker 2: So I'm glad you brought that up because part of
Speaker 2: the reason you won the Nobel Prize was saying, why
Speaker 2: are we looking at people's income? We should really look
Speaker 2: at how consumers spend their money, and that gives us
Speaker 2: a better way to evaluate, especially the bottom quartile or
Speaker 2: so tell us about this kind of error by economics
Speaker 2: focusing on income instead of focusing on consumption.
Speaker 1: Well, in the current speak that I'm talking about now,
Speaker 1: I think of income and consumption is sort of the
Speaker 1: same time. Huh right, I just want to get away
Speaker 1: from money. I want to say that their marriages are
Speaker 1: really important to them. Sure, and marriages are dysenterating among
Speaker 1: people without a behavior exactly?
Speaker 2: Oh is it?
Speaker 1: So?
Speaker 2: US has been about a fifty percent divorce rate for
Speaker 2: since World War Two? What is it for people who
Speaker 2: don't have.
Speaker 1: I don't know the rates, but there are graphs and
Speaker 1: animized book. And what happened was divorce went up for everybody,
Speaker 1: and then it stopped going up for people with a
Speaker 1: college degree, and it's still going up for people without
Speaker 1: a degree. So you get these serial cohabitations, you know,
Speaker 1: in which men and women get together, they don't get married.
Speaker 1: The woman doesn't think the guy has got enough prospects,
Speaker 1: she doesn't stop her having a couple of kids with him, right,
Speaker 1: and then she trades him in for a better model,
Speaker 1: as they were. And so you get these families which
Speaker 1: the sociologists have studied in great depth of people. You know,
Speaker 1: men in their fifties who have maybe six kids, but
Speaker 1: they don't know any of them because they're all living
Speaker 1: with other men. Well, that du to your life, and
Speaker 1: that's not just sort of a consumption thing. That's your
Speaker 1: life coming apart. You know, the things that give you
Speaker 1: meaning are just not there anymore.
Speaker 2: The household formation failing to gel is very significant, yeah,
Speaker 2: and more significant for people without color absolutely.
Speaker 1: And the same is true for pain, for instance. Not
Speaker 1: pain is hard to measure, but if you look at
Speaker 1: something that people usually wouldn't lie about, like psiatic pain,
Speaker 1: you know specific enough if you had it, you would
Speaker 1: know about it, and you wouldn't say you had it.
Speaker 1: That's gone up through the roof. For people without a BEA.
Speaker 2: The assumption is they're more likely to be in a
Speaker 2: trade or some doesn't do it from manual labor that
Speaker 2: leads to that or no.
Speaker 1: In fact that people have looked at that and it
Speaker 1: doesn't work because actually the jobs they're doing in McDonald's
Speaker 1: are an Amazon warehouse. They may not be ideal, but
Speaker 1: they're not as dangerous working in a car assembly plant
Speaker 1: wherever they were working.
Speaker 2: Where they may have a college degree.
Speaker 1: Well they have, but the point is that you can't
Speaker 1: explain the rising pain by the changing job makes.
Speaker 2: So it's not just physical labor. The degree is very
Speaker 2: very significant, seems to.
Speaker 1: Be, and we don't really know what produces that. It's
Speaker 1: like half the pup Well's. I don't want to quote
Speaker 1: a number, but a large number of Americans suffer from
Speaker 1: non specific lower back pain for its rights, which the
Speaker 1: medical system has no idea what to do with. Again,
Speaker 1: less less than a college degree.
Speaker 2: Wow, that's unbelievable.
Speaker 1: So this really is a story of people's lives coming apart.
Speaker 2: So the question is as a society, as a nation, uh,
Speaker 2: and not just economists but all of us, what should
Speaker 2: we be trying to do to improve the overall standard
Speaker 2: of living throughout the United States? What what else can
Speaker 2: we be doing? Besides mandating a college degree.
Speaker 1: I don't think mandating and college degree would nestlely do
Speaker 1: it because it's the social function of the college degree
Speaker 1: or the college degrees. So think one of my favorite
Speaker 1: things that gets me into trouble, that would get me
Speaker 1: into trouble in this building is I think we ought
Speaker 1: to be much more friendly to unions and that working
Speaker 1: people need more power. There's hardly any members of Congress
Speaker 1: who don't have a college degree. For instance, I think
Speaker 1: something like two percent of all state legislators do not
Speaker 1: have a college degree.
Speaker 2: Wow.
Speaker 1: And I always think of going back to Britain in
Speaker 1: nineteen forty five when Clement Attlee was the socialist Prime
Speaker 1: minister immusiately out of the war. Seven members of his
Speaker 1: cabinet had their first jobs down a coal mine.
Speaker 2: Wow.
Speaker 1: Right, And so that was just a completely different you know,
Speaker 1: and those people had their hands on the levers of power.
Speaker 1: Probably the greatest foreign secretary that Britain ever had, Ernest Bevin,
Speaker 1: who was the driving force behind NATO, was the illegitimate
Speaker 1: child of a prostitute who came up through the union movement.
Speaker 2: Wow. So I don't see the unions reversing their negative fortunes.
Speaker 2: This has been a trend. I think you can go
Speaker 2: back to nineteen eighty with the rescue of Chrysler. It's
Speaker 2: been pretty much pat Co. Yeah, it's been pretty straight
Speaker 2: down since that era. So besides the rise of unions,
Speaker 2: what else could impact this challenge we face.
Speaker 1: Well, I think that the de industrialization is much more
Speaker 1: serious than economists have tended to be. And they said,
Speaker 1: you know, loring tariffs is a good thing. You know,
Speaker 1: we can almost compensate the losers the gainers get more.
Speaker 1: But that's all done in terms of money, right, and
Speaker 1: there's no accounting for the community destruction and all the
Speaker 1: rest of that.
Speaker 2: So you raise a really fascinating point. People have been
Speaker 2: talking lately about reshoring as opposed to offshoring and deglobalization.
Speaker 2: We've just passed a lot of legislation and funded building
Speaker 2: semiconductor plants, building wobile plants, anything that's decarbonized. Manufacturing has
Speaker 2: gotten the green light in the United States. Might this
Speaker 2: have a positive impact on inequality?
Speaker 1: Absolutely? I think so. I'm quite enthusiastic about it. And
Speaker 1: it's not an accident. You know, Janet Yellen is a
Speaker 1: good friend and she has promoted our Deaths of Despair
Speaker 1: book every time she gets a chance, for example, And
Speaker 1: we have other friends in the administration who are very
Speaker 1: much on the same page on this too.
Speaker 2: How long does it take?
Speaker 1: That's a question, isn't it right?
Speaker 2: So if we're in the midst of you know, all
Speaker 2: this legislation, the Chips Act, the Inflation Reduction Act, the
Speaker 2: Infrastructure Bill, these are all ten year funded policies. Ten
Speaker 2: years from now, might we see a country where the
Speaker 2: Deaths of Despair has fallen and some of the healthcare outcomes,
Speaker 2: wealth and income inequalities. Might they be shrinking ten years
Speaker 2: from now?
Speaker 1: That's what I'd like to see.
Speaker 2: So I know I only have you for a limited
Speaker 2: amount of time, Why don't I jump to my favorite
Speaker 2: questions that I ask all our guests? Okay, starting with
Speaker 2: what what has been keeping you entertain these days? What
Speaker 2: are you what are you watching or listening to?
Speaker 1: Well? I was a late comer to podcast, but I've
Speaker 1: done a fair number like this, and some of the
Speaker 1: people like I like Cardiff Garcia's podcast The New.
Speaker 2: Bar Ft is that where he is.
Speaker 1: He used to be the ft but now he's independent.
Speaker 1: He has a podcast called The New Bizarre which I
Speaker 1: like a lot. The New Bizarre Okay, it's not Bizarre,
Speaker 1: but bizzarre as an Arab market, right, and he has
Speaker 1: a very entertaining range of guests, and I like him.
Speaker 1: The other one that's a bit different is The New
Speaker 1: Yorker has writers and sas choose one of their favorite
Speaker 1: pieces of fiction and reads it on a podcast someone else's,
Speaker 1: and then the fiction editor of The New Yorker, Deborah Triesman,
Speaker 1: who was Danny Conneman's daughter in law, I think huh,
Speaker 1: discusses the in a lengthy conversation after the reading. And
Speaker 1: I find those absolutely fascinating. I mean, I've always liked
Speaker 1: short stories, and hearing people really people who spend their
Speaker 1: lives thinking about short stories talking about them is quite
Speaker 1: a revelation. So those are two of my favorite parts.
Speaker 2: I have a flight coming up. I'm gonna definitely download
Speaker 2: some of those.
Speaker 1: Yeah. Absolutely.
Speaker 2: Let's talk about mentors who helped shape your career.
Speaker 1: Someone we haven't talked about was a man called Sir
Speaker 1: Richard Stone, who was a who worked for Canes during
Speaker 1: the War on helping to pay for the war when
Speaker 1: Kines was working on that, and he got an l
Speaker 1: price for his work on national income accounting, and I
Speaker 1: always wanted to be like him. And he was very
Speaker 1: kind to me, and you know, he had a wonderful
Speaker 1: dinner table where all sorts of interesting people came for meals.
Speaker 1: He was a real wine connoisseur, and he wrote beautifully
Speaker 1: and he was a real imparasis. So these were all
Speaker 1: the things I wanted to be.
Speaker 2: How did you know him.
Speaker 1: Well, I was just when I came back from the
Speaker 1: Bank of England, which I was so memorably unsuccessful. He
Speaker 1: had a research project funded by someone or other and
Speaker 1: I was a lowly research assistant on that for five
Speaker 1: years or something, so about the lowest job you can
Speaker 1: ever have in academia, I think.
Speaker 2: So let's talk about books. What are some of your
Speaker 2: favorites and what are you reading right now?
Speaker 1: Well? I like detective novels, though I think of that
Speaker 1: as a sort of guilty pleasure, and being a good Calvinist,
Speaker 1: I tried to ration that a little bit.
Speaker 2: Uh huh.
Speaker 1: I love the uh the Ian Rankin books about Edinburgh,
Speaker 1: for instance.
Speaker 2: And Rankin Ian Rankin Ian Rankin gotcha.
Speaker 1: And he has a detective called John Reebis who's one
Speaker 1: of these emotionally underdeveloped cops who is very smart but
Speaker 1: has problems with these emotions. I like those a lot,
Speaker 1: but I read a wider I tried to alternate between
Speaker 1: work and you know, so I've been reading and Admati's
Speaker 1: book on the Bankers have No Clothes, but banks alto
Speaker 1: have been made to have more capital than they have,
Speaker 1: which I was reading the newspaper yesterday. They're not taking
Speaker 1: huge ads at National Air, Union station and so on,
Speaker 1: demanding that they don't have to do that.
Speaker 2: It's going to affect profitability if they do well, that's.
Speaker 1: Right, But they're getting profits at the at the expense
Speaker 1: of putting all the rest of us at risk. Right,
Speaker 1: And you know that that's one of the takers that
Speaker 1: we're talking about as opposed to makers that we need
Speaker 1: to do something about. And we haven't really talked about
Speaker 1: banks that I don't know as much about them as
Speaker 1: I know about healthcare. But there's a similar amount of
Speaker 1: rent seeking going on in.
Speaker 2: Both those to say the very least.
Speaker 1: To say the very least in both of those industries.
Speaker 1: And I'm reading Paul Thereu's in your book about George
Speaker 1: orwoll uh And it's a novel and it's a novel
Speaker 1: about Oral's early days in the Burmese police.
Speaker 2: Huh, that sounds really interesting.
Speaker 1: It is very good.
Speaker 2: Our final two questions, what sort of advice would you
Speaker 2: give a recent college grad interested in a career in
Speaker 2: any of the sort of economics work that you've done.
Speaker 1: I think it's it's advice that I would probably have
Speaker 1: moved away from. But it's still true, which is, you
Speaker 1: really need to learn as much method as you can handle,
Speaker 1: and in finance and in many other things too. I mean,
Speaker 1: I don't really subscribe to the view that you can't
Speaker 1: think straight unless you can do it mathematically. But you know,
Speaker 1: I remember my son saying to me when he was fourteen,
Speaker 1: He said, would you have regarded yourself as a well
Speaker 1: qualified mathematician in your time? But not like you? So
Speaker 1: I think that's a lot of these people have done very,
Speaker 1: very well. So that's a piece of advice I would
Speaker 1: it's a bit late by the time you graduated from college.
Speaker 1: If you cadure in the social department, that's probably not
Speaker 1: the best advice.
Speaker 2: And our final question, what do you know about the
Speaker 2: world of economics today? You wish you knew forty or
Speaker 2: so years ago when you were leaving the Bank of England.
Speaker 1: Not much actually, I think for me it's been a
Speaker 1: great adventure all along. And I love learning new stuff,
Speaker 1: and I love reading stuff and their real ideas there
Speaker 1: that I didn't know before. And I've been incredibly important
Speaker 1: to fortunate. I was going to almost said, unfortunately, I've
Speaker 1: been incredibly fortunate Mary. And you know I got the
Speaker 1: Nobel Prize in twenty fifteen. The work that and Case
Speaker 1: and I have done, which is what both of us
Speaker 1: are best known for, was done after that. Really, so
Speaker 1: it's like a whole new career for me.
Speaker 2: With the Nobel Prize focusing attention on that work.
Speaker 1: It certainly did because the first paper in the precedings
Speaker 1: in National Academy of Sciences came out three days after
Speaker 1: the Nobel Prize by coincidence. And I can tell you
Speaker 1: when you get the Nobel Prize, it really is being
Speaker 1: like hit by a bus. You know, there were reporters
Speaker 1: on our lawn about half an hour after the announcement.
Speaker 2: You didn't get the did you get the phone call?
Speaker 2: Where who is this? Really?
Speaker 1: Yeah? I knew the person I was took to. I
Speaker 1: know you did pretty well. Yeah, so and he said angus,
Speaker 1: this is not a prank, and I said, tourist. And
Speaker 1: I never thought it was a preak until you said that.
Speaker 2: And now I'm wondering, So I think it was Dick
Speaker 2: Taylor said he was in the shower and his wife
Speaker 2: answered the phone. Tell he's and yells from the shower
Speaker 2: tell them thanks. But I'm busy thinking it's someone's just
Speaker 2: pulling his leg, right, right, I could be getting it wrong.
Speaker 2: It may not be.
Speaker 1: I hadn't heard that story, but it's like you hear
Speaker 1: all sorts of things like that, right, yeah, yeah, sure.
Speaker 1: But then this paper came out about a week later,
Speaker 1: and it was like being hit by ten buses because
Speaker 1: it had this enormous impact. Right, And you know that
Speaker 1: one of the best stories I think I'm tell in
Speaker 1: the book was in those days, and I think they've
Speaker 1: resumed it again. The American Nobel's got to go to
Speaker 1: the Oval Office and meet the president, right. And when
Speaker 1: we were in, there's a little ante room outside the
Speaker 1: Oval Office which had these Norman Rocks whole paintings which
Speaker 1: are not there anymore. They belong to someone else. And
Speaker 1: a voice, someone came from inside and said, would Deaton
Speaker 1: and Case go to the front of the line please,
Speaker 1: which we were not there alphabetically, And the door opened
Speaker 1: and it was not a flunky. It was Obama. Oh
Speaker 1: really yeah, And so I said, mister President, I'm delighted
Speaker 1: to meet you, and I'd like to introduce you. And
Speaker 1: he said, Professor Case needs no introduction. Oh really, I
Speaker 1: am familiar with her work and I'm a great fan. Wow.
Speaker 1: And we spent almost all the time in the Oval
Speaker 1: office talking about the paper that had come out three
Speaker 1: days before. Hu and he knew it inside out.
Speaker 2: Your wife must have been walking on air.
Speaker 1: Yeah, she came out of the White House floating. I
Speaker 1: think I'm in love.
Speaker 2: Fascinating, Professor, Thank you for being so generous with your time.
Speaker 2: We have been speaking with Sir Angus Deaton, winner of
Speaker 2: the twenty fifteen Nobel Prize in Economic Sciences. His latest book,
Speaker 2: Economics in America, An Immigrant Economist, explores the Land of Inequality,
Speaker 2: is out today. If you enjoy this conversation, well, be
Speaker 2: sure and check out any of the previous five hundred
Speaker 2: discussions we've had over the past nine and a half years.
Speaker 2: You can find those at iTunes, Spotify, YouTube, wherever you
Speaker 2: find your favorite podcasts. And check out my new podcast,
Speaker 2: At the Money. It's in the Masters and Business feed
Speaker 2: and it's short, ten minute conversations about money with some
Speaker 2: of our favorite Masters and business guests are earning it,
Speaker 2: spending it, and most importantly, investing it. At the Money
Speaker 2: wherever you find your favorite podcasts. I would be remiss
Speaker 2: if I did not thank the Crack team that helps
Speaker 2: us put these conversations together. My audio engineer is Meredith Frank.
Speaker 2: Attika Vaalbrun is our project manager, and Wanna Luke is
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Speaker 2: Bauman is the head of Podcasts here at Bloomberg, And
Speaker 2: I'm Barry Griholtz. You've been listening to Masters in Business
Speaker 2: on Bloomberg Radio.