Aug. 18, 2017 - Rubin Report - Dave Rubin
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| Joining me today is a senior economist for the Institute of New Economic Thinking | ||
| whose research has focused on economic, biological, and sociological approaches to human welfare, | ||
| Dr. Pia Malani. | ||
| Welcome to The Rubin Report. | ||
| It's great to be here, Dave. | ||
| I am looking forward to talking to you because we've gotten to know each other a bit as people. | ||
| We have. | ||
| And I enjoy your company, and we've had some interesting discussions, some stuff that we agree on, some that we disagree on. | ||
| We're gonna get into all of that right here, but before we get into your work and economics and all the heavy lifting of that, you have an interesting personal story, childhood, growing up in India, and all that stuff. | ||
| So let's start there. | ||
| Tell me a little bit about your background. | ||
| Okay. | ||
| Well, I grew up in India. | ||
| My mother is Jewish. | ||
| My father is Hindu. | ||
| So, I grew up Jewish within what I would say is the closest thing to a multicultural community that I have ever seen. | ||
| So, growing up, my best friend was Muslim. | ||
| I'd go over to her home on Christmas to decorate the Christmas tree. | ||
| My other best friend was half Parsi, half Hindu. | ||
| And it really was an environment where we didn't really even think so much about our different backgrounds. | ||
| We just all were. | ||
| And I didn't really even understand what anti-Semitism was until I left India and saw | ||
| it in other countries, because it's perhaps the most welcoming country to Jews. | ||
| And so it's been really interesting for me to watch the country change over the last | ||
| 10, 15 years, where Hindu fundamentalism has come in and taken over in a way that I could | ||
| never have imagined when I was growing up there. | ||
| Yeah, it's interesting because even though there has been a historic Jewish community in India for a long, long time, people don't realize that there are any Jews in India. | ||
| When you tell people that, they go, what? | ||
| Come on now. | ||
| A number of conversations I've had where someone will sit across from me in a completely straight face say, I can always recognize a Jew when I see one, and I have no idea that they're talking to me. | ||
| Right, right, right. | ||
| Well, somehow it's been associated with being white or something, although my brother-in-law is half Moroccan, half Iraqi, and he is brown. | ||
| Right. | ||
| So, my mother's community comes from Syria, Iraq, the Middle East, and they call them Sephardic Jews, though technically they're Mizrahi Jews. | ||
| And we actually have three Jewish communities in India. | ||
| Two of them claim to be lost tribes. | ||
| So, they've been there since before the destruction of the Second Temple and are much more integrated in Indian life and, you know, speak the local languages. | ||
| And they have their own synagogues. | ||
| Bombay has nine synagogues. | ||
| So, you know, I grew up going to one of the Sephardic synagogues. | ||
| They have seven Ben-Israeli synagogues, and, you know, it's the old Jewish joke where that's the synagogue I pray at, that's the one I used to pray at, that's the one I wouldn't be caught at. | ||
| And, you know, it really was sort of a divided community, and then we had this It was a horrendous attack in India a few years ago, where we had a group of 10 Pakistani militants who landed on the shores of Bombay and held the city hostage for, I don't know, 48 hours. | ||
| And they went for the Jewish community. | ||
| And they actually went for the European Jewish community that was living—that was traveling mostly through. | ||
| So, we have a small Chabad group, and they found the Chabad house, and it was—it was Really horrendous. | ||
| But the one effect that it did have was that it brought the rest of the Indian Jewish community together. | ||
| And we were there very soon after that. | ||
| And it was so interesting celebrating Hanukkah. | ||
| They actually had this giant menorah in front of the Gateway of India and huge police presence. | ||
| But, you know, we were out there in whatever little force we could muster. | ||
| It's a really small community now. | ||
| But we were all out there celebrating Hanukkah together at the Gateway of India. | ||
| Yeah, I remember when that happened. | ||
| How many years ago was that, roughly? | ||
| I want to say four or five. | ||
| Yeah, about five years ago. | ||
| And I remember reading articles about how it wasn't just the Jewish community that came together, but it was the entire community, that they were like, we are not going to stop being as multicultural as you're talking about. | ||
| You know, in many ways that was true. | ||
| I think that's definitely something that came out of that. | ||
| The flip side of that is that Hindu fundamentalism has seen this very ugly rise in India now. | ||
| And, you know, we're now seeing What they're calling cow debts, where they're attacking Muslims, claiming that they're carrying beef or they're eating beef, and the push is to ban the consumption of beef, because Hindus worship the cow, and traditionally the job of butchering beef has gone to Muslims. | ||
| But, you know, it's one of these things, where they're using these the accusation of beef-eating much the way blasphemy | ||
| is being used in Pakistan. | ||
| So if you don't like what your next-door neighbor is doing or you have a property dispute, | ||
| you can simply claim blasphemy and you've got a mob to take care of them for you. | ||
| Similarly, they're lynching Muslim kids in India with very little evidence. | ||
| Yeah, why do you think we don't hear that much about that? | ||
| Even the idea of hearing, when you say the phrase Hindu extremist, it almost doesn't even sound like something that would make sense for the average Westerner to put together. | ||
| It's a good question. | ||
| You know, I think we're so careful about wanting to be politically correct that we're not always willing to look at some of the more Difficult stuff that's coming out of cultures that we want to believe are peace-loving. | ||
| And, you know, getting directly to some of the issues that, you know, I think about when I hear the issues that you deal with on your show with respect to Islam and some of the Islamic extremism that you see. | ||
| I always struggle with it a little bit because we think of Hinduism as being such a peaceful religion. | ||
| And I see the extremes within Hinduism and I see it targeted against the Islamic community. | ||
| And so it's very hard for me to look at the text of any one religion and say, look, that one in particular has a problem. | ||
| This one has a text that doesn't look as horrible. | ||
| Therefore, we're not going to have the same issues. | ||
| Yeah. | ||
| And, you know, I tend to have much more of a sense of this being a sociopolitical issue. | ||
| An economic issue, a cultural issue. | ||
| I have a much harder time seeing it as coming out of the text because I see it as coming from texts that I see as being really not that toxic within the Hindu context. | ||
| And we've talked about some of this stuff privately and I've actually, when we spoke about it last time, it did help me frame a little bit about the way I try to be very careful with my language and I never certainly want to be bigoted towards people and I want to talk about ideas and all that. | ||
| But it's nice hearing and experience, you know, someone that's lived another experience and, oh, maybe you're not thinking of something in this particular way or any of that. | ||
| So, and we're gonna talk, of course, about the economic reasons that a lot of this stuff happens, because that's why, that's what a lot of your research is. | ||
| But tell me a little bit more, so growing up in India, and then you get involved in economics and fields that were pretty, and probably still are, pretty male-dominated, right? | ||
| Yes. | ||
| What were you thinking? | ||
| What was I thinking? | ||
| You know, it's interesting. | ||
| It was just what I found intellectually interesting, and it was the way my mind worked analytically, and it never occurred to me that there would be gender issues. | ||
| And then I show up in a graduate department, and there are just very few women. | ||
| And, you know, it's changed a little bit now, but especially when I was going through it. | ||
| I was at the Harvard Economics Department and Larry Summers was actually a professor at the department while I was there and it wasn't until a few years later that he ended up making comments about why one might not see women in technical fields as much and he had a number of comments which got him into a fair amount of trouble. | ||
| What was the thrust of what he said? | ||
| Well, he went through a few different reasons. | ||
| He said, well, it couldn't be child-rearing and it couldn't be this and it couldn't be that. | ||
| And the implication was essentially that there were intellectual differentials between men and women. | ||
| And, you know, he didn't say it explicitly, but there was enough there. | ||
| And I think my sense is that he had probably rubbed enough people the wrong way already by that point, that there was a desire to To push on that. | ||
| But it was interesting because when I heard this, my sense is that, you know, I was in the department while he was a professor in the department and it was very clear to me that what I was seeing was not the straight discrimination that he was commenting on because I think he was pointing to the fact that he didn't really see that kind of discrimination and I would agree with him. | ||
| I don't think that's what the problem was. | ||
| I think the problem As I saw it was much more that the female temperament is very different than a male temperament. | ||
| And there tends to be much more of a focus amongst women towards building networks and building relationships. | ||
| And if you think about the fact that evolutionarily women have had the job of kin work and men | ||
| have had to be more alpha and be aggressive and be competitive, it sort of makes sense | ||
| that this is the temperament that we're bringing and men are bringing a much more alpha temperament. | ||
| So from the beginning, I'd see the men sitting around comparing what questions people asked, | ||
| how many different graduate programs they had gotten to amongst the top programs, who | ||
| was going to win the first Nobel Prize, and the women had this different approach of let's | ||
| work together, let's do our problem sets together, how do we encourage each other. | ||
| But I really have to wonder then how much of the end result in terms of the differences | ||
| that we see is an issue of male-dominated fields really not being as open to a female | ||
| approach to doing things and sort of a less competitive, less aggressive way of inserting | ||
| Yeah, I assume you can see pros and cons to both of that. | ||
| On one hand, the competitive side, perhaps, of the men going, you know, how many, you know, graduate students do you get into this? | ||
| So competition is good. | ||
| On the other hand, working together is also good. | ||
| Absolutely. | ||
| Absolutely. | ||
| And, you know, clearly you want to be able to encourage the risk-taking that I think men are better at, because women tend to have a need to really deliver on what they promise, probably because if you look at the roles we've traditionally taken on as homemakers, mothers, caregivers, there's a need for consistency. | ||
| And if you look at what men are doing, there's often a need for greater risk-taking because if you don't | ||
| shoot for something that you might not be able to hit, you're not necessarily going to be able to | ||
| achieve as much. I believe they're both really important, but I think where we are now is that | ||
| we're in a situation where we are so focused on one end of the skill spectrum that we are not | ||
| necessarily incorporating some of the other values that we want to be bringing into | ||
| the workforce. | ||
| And this leads to... | ||
| So meaning what? That we're so focused on just results, you mean? | ||
| Or... | ||
| On risk-taking, on competitiveness. And I do think if we... | ||
| Get into some of the diversity issues, which I assume we will at some point. | ||
| I think that just in terms of greed, one needs to be thinking about how do we tap into the great resource that women have to offer us. | ||
| If you think about the fact that out of 900 odd Nobel prizes, less than 50 have gone to women. | ||
| You've got to imagine that that's some huge set of resources that we're not tapping into sufficiently. | ||
| And then the question is, how do we build up these resources so that we actually do access the analytic abilities that women are able to bring to the table, even if they don't have as much of the temperament, necessarily? | ||
| Yeah. | ||
| Tell me a little bit more about your mind, because you mentioned, you said, I think, my mind always worked that way, or that was what my mind was always attracted to, was economics. | ||
| What does that mean? | ||
| So, like, you're 15. | ||
| Like, did you think, you know, like, you really cared about this kind of stuff? | ||
| I really did. | ||
| So when I was very young, my father used to do some nonprofit work on family planning. | ||
| So he had his regular business, but this was what he was doing philanthropically. | ||
| And I remember sitting at the dining table talking about the issue of population growth and how do we actually think about it. | ||
| And it was the first time that I started thinking in terms of opportunity costs. | ||
| So, it turns out, the best way to reduce population growth is to educate women so that they have a higher opportunity cost of having children. | ||
| And you see this happening naturally as countries develop, but to the extent that you can encourage it, it's one of the most effective ways of increasing birth control and increasing—improving family planning. | ||
| And, you know, just this concept that if you think one level deeper, you start thinking in terms of opportunity costs, you start thinking in terms of marginal costs. | ||
| Just the entire sort of economic toolkit and how that leads you to think about incentives was very much the way my mind worked. | ||
| That's interesting. | ||
| So then you got your doctorate in economics at Harvard. | ||
| You say Harvard, people get all these, it's almost like it's become like Hogwarts in a weird way, you know what I mean? | ||
| People think it's like this mythical place. | ||
| What was it like for you there? | ||
| If you had to just describe Harvard, because I just feel like it just has this connotations attached to it that people don't associate with other colleges. | ||
| It's like this other thing altogether. | ||
| Well, that's interesting. | ||
| I sort of see where it comes from, if nothing else, because they have access to such an impressive application pool, applicant pool, that the people they let in, you're in an environment which is very intellectually alive. | ||
| So, you know, some of the best conversations I've ever had was sitting around the dining table of friends when I was in graduate school, because just the level of discourse is so exposed and conscious of what's going on in the world and | ||
| erudite and you just you can just tap into a different level of conversation | ||
| You know sitting in a cafe in Harvard Square you hear conversations all around you which are fascinating | ||
| that being said my actual experience within the economics department was | ||
| considerably less pleasant and I remember someone saying to me that if you're not depressed in graduate school, you're not doing it correctly. | ||
| But it really was quite extreme, I ran into. | ||
| Is that mostly because of the workload, or did that have something to do with being a woman in a male-dominated field? | ||
| I think I was part of it. | ||
| I think a big part of it was when I started working on my dissertation. | ||
| I ran up against some of the deep cultural issues that economics faces, and I think I really wasn't ready for it. | ||
| I think I was somewhat oblivious to just what happens within mainstream economics departments. | ||
| How constrained one is in terms of how one is able to think and what one is allowed to talk about. | ||
| And this seems to be a trend in a lot of the things that I talk about on this show, about what you can talk about, what you can't talk about, how you will be treated if you talk about things that, you know, people don't want you to talk about. | ||
| That's right, and you know this is why working at INET for me has been such a revelation because I was really interested in heterodox economics and there really wasn't a community back then and it's only post-2008, since the creation of INET, that I feel like We just have this ability to gather heterodox economists from everywhere so that we actually believe that there are enough of us, that there's a community, that we have the freedom to be able to think and talk about this sort of stuff amongst our community, which has been just really wonderful. | ||
| So there's that community thing again, so it does have some value. | ||
| So now let's get into some economics. | ||
| I thought to start a conversation about economics, I took Econ 101 a long time ago. | ||
| Didn't do particularly well. | ||
| Math in general is not my thing. | ||
| I like the social sciences more. | ||
| For my audience that's watching that really doesn't care particularly about economics, or know that much, but it's a little curious, can we do some basic economics? | ||
| If someone says to you, what is economics? | ||
| Give me a definition. | ||
| Sure. | ||
| So my kids ask me this, and the one thing that I always say to them is try not to think about economics as the study of money, because that's really the most limited and probably incorrect way of thinking about it. | ||
| It's really the study of incentives. | ||
| And when you think about, you know, the two concepts that I mentioned earlier, I think really drive my understanding of the field, the concept of opportunity cost and the concept of thinking in marginal terms. | ||
| So, once you understand diminishing marginal utility, for example, how every additional unit of a good that you consume, it means just that much less to you. | ||
| So, you know, these are very simple concepts, but define so much of how we actually behave in the world. | ||
| And, you know, one of the ways that I've talked about it is that you can think of—what's really fascinating about the subject to me is that you can start with five very simple assumptions on human behavior. | ||
| You can assume that you have rational human beings, you have perfect information, that you have freedom of entry and exit. | ||
| You know, there are five very simple assumptions you can make. | ||
| And something miraculous happens, which is that it allows you to tap into an entire world of mathematics, which you can then impose on human behavior. | ||
| And you can set up models so that you can actually try to understand how people will behave, | ||
| and you can understand how markets will behave based on individual behavior. | ||
| And there's something really amazing about the idea that you can take something as messy as human behavior | ||
| and link it to something as pure as mathematics and actually get an understanding of how our world works. | ||
| Yeah. | ||
| Which is a thing that I found really amazing. | ||
| The problem with that is that these assumptions, because they're so simple, don't quite capture human behavior sufficiently. | ||
| It gets you to the point where you can create models that capture some things very effectively, but also lead you down some paths that are probably not correct. | ||
| And it also, very interestingly, ends up leading you towards certain political orientations. | ||
| And it's interesting how a mathematical framework sort of pushes you politically towards a particular | ||
| direction. | ||
| But what it really does is that it holds up the idea of efficiency above everything else, | ||
| because what you're trying to do then is you're trying to maximize efficiency. | ||
| That is what economists hold as the holy grail. | ||
| And so then we get very focused on this concept of efficiency, and it turns out that there's | ||
| sort of a tradeoff between efficiency and distribution, equality, inequality. | ||
| And because we as economists get so caught up in the beauty of what it takes to get efficiency, we lose track of the other side of this. | ||
| And so, while I started off being fascinated by what we call the neoclassical model, which | ||
| is just this very simple form of economics that you get from thinking in marginal terms | ||
| and being able to apply calculus, because we're thinking in marginal terms, to starting | ||
| to try and understand what are the assumptions that maybe we are not in a position to make, | ||
| where are we going wrong, what are some of the other things that we need to bring in, | ||
| And that leads you to an entirely different way of thinking about the economy. | ||
| And this is why heterodox economics is so much more interesting to me now. | ||
| Interesting. | ||
| So, it's funny, I'm always very upfront with my audience. | ||
| There are certain guests that I try to do a little less research with because I want to go in with sort of a really blank slate and ask sort of the simpler questions. | ||
| There are some guests that I have to do a little more research on or know a specific quote or a chronology or something. | ||
| And for you, you definitely, for me, were one of the people that I had to do more research on and read more of the stuff that you've done, because I wanted to have a handle on it enough to ask the right questions. | ||
| So you wrote a really interesting piece on the economics of despair. | ||
| And I've read it now three or four times, actually, and I thought it does sum up So much of what's happening right now in the political system it shows to me it shows the the truth true through line between economics and politics. | ||
| So first off can you can you recap what the what the piece was? | ||
| Sure so this was actually really interesting to me because about Fifteen, twenty years ago, I was looking at Russia post-collapse of the Soviet Union. | ||
| And what we were finding was that there was a mortality crisis. | ||
| Death rates amongst middle-aged white men were rising dramatically. | ||
| And when we started looking at what the causes were, it was essentially people drinking themselves to death because their lives had suddenly become so uncertain their economy had collapsed, they had no idea how to | ||
| transition to this new way of being, and they were just lost. And so, you know, heart attacks | ||
| were on the rise, alcohol poisoning was on the rise, and it was very much the sense that these were | ||
| deaths of despair. And I hadn't looked at that work for a long time. | ||
| And then recently, two Princeton economists, Angus Deaton and Anne Case, came out with some research looking at how mortality is actually starting to increase amongst lower middle class white men in this country. | ||
| And the more they explored it, it was fascinating to me. | ||
| It was exactly the same phenomena that we were seeing in Russia post-collapse of the Soviet Union. | ||
| And, you know, it's what they have termed debts of despair, the opioid epidemic, alcohol, suicides, heart attacks. | ||
| And it's really the burden is falling amongst whites with a high school education or lower. | ||
| And so then the question is, what is causing this? | ||
| And to me, this was linking directly with some of the other stuff that we have been talking about with respect to politics with this question of what's happening in Rust Belt America. | ||
|
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Yeah. | |
| What is the sudden rise in populism? | ||
| You know, the word I hear more often than any other now is populism. | ||
| And, you know, what is driving this? | ||
| Where is this coming from? | ||
| And if you look at what's happening to the lives of these people, you're seeing really a collapse of an economic system that they knew. | ||
| And you're seeing a decline in wages and no ability or path that they can see to climbing out of this. | ||
| And this tied so closely with what I was seeing happening politically. | ||
| So if you just look at some of the numbers coming out of there in this last election, | ||
| many of the counties that voted for Obama in Wisconsin and in Michigan ended up voting for Trump | ||
| in this last election. | ||
| And if you look at which counties in particular went from Obama to Trump, In so many of the cases, in a huge majority of the cases, | ||
| they were counties that had voted for Bernie Sanders in the primaries. | ||
| And to me, this was saying, "Look, you're seeing populism on the left. | ||
| You're seeing populism on the right." | ||
| There is something that is driving this way of thinking on both sides of this. | ||
| And there's a similarity that we're somehow not understanding. | ||
| And I know you've used the word economic nationalism a fair amount in your talks. | ||
| And to me, it was really this question of when did economic nationalism go from being a fundamentally democratic to something that we're hearing from the mouth of Steve Bannon, | ||
| and we're hearing from Trump's people. | ||
| And there really is some kind of an overlap that we're seeing, where we're seeing, I think, | ||
| the same issues of despair coming in the face of globalization and the collapse of the manufacturing | ||
| sector that is driving a lot of the politics in this country today. | ||
| Yeah, so there's so much there. | ||
| We could go in a thousand different directions, but what strikes me immediately is that it's sort of like Trump had a very keen understanding of that Which is why he kept saying during the primaries, you see the way Hillary's treating Bernie? | ||
| Because he was trying to give a signal to the Bernie guys going even once she takes him out, which she was gonna do one way or another, I'm your guy, not her. | ||
| So do you think he really had an awareness of that sort of at the economic level or was that just sort of real politic in his mind, do you think? | ||
| I know you're not a Trump psychiatrist. | ||
| I'm not a Trump psychiatrist. | ||
| You'd make a lot of money as a Trump psychiatrist. | ||
| [laughs] | ||
| Not going to touch that one. | ||
| I think that it was increasingly clear to a lot of people who were looking at this | ||
| that the rank and file of the Democratic Party were very, very disillusioned with what we were seeing coming from | ||
| them. | ||
| And, you know, there's another whole area that I would want to talk about, which is the investment theory of party competition that was developed by Tom Ferguson and some of my colleagues, where the idea is really that At some point, it became so expensive to run a campaign that the only way to do it was to get a tremendous amount of money in from corporate America, the billionaire class. | ||
| And I think that really changed the conversation that was happening within the Democratic Party. | ||
| I think it has been very much the conversation that's been happening in the Republican Party for a long time. | ||
| And I think Bernie was able to tap into something, and I think Trump understood very clearly that there was this populist rise, and he was able to tap into it, too. | ||
| Now, I will say that even though a lot of the Trump counties—sorry, the Obama counties that went for Trump were Bernie supporters, there was another statistic that I found fascinating, which was that in Michigan, There were apparently 80,000 ballots that people had filled out, where they had filled out both sides of the ballot, and they had left the space for President blank. | ||
| And to me, this is a very strong indication. | ||
| If you think about the fact that Trump won Michigan by 10,000 votes, we're talking about 80,000 ballots. | ||
| This is a very strong indication that this was people who were just really fed up with what they see happening at the conversation with both these parties. | ||
| They just have the sense of none of this is real. | ||
| And my sense about it is that they're actually correct. | ||
| And when I hear Liberal economists talk about what happened in the wake of the election. | ||
| I'm hearing a fair amount of stuff which talks about—oh, God, what was it? | ||
| The other day I heard someone on Bill Maher say the knuckle-dragging Midwesterners or something like this. | ||
| And, you know, there's just this idea that they've been had. | ||
| Trump promised them something. | ||
| He's never going to give them things that he promised. | ||
| You know, for all I know, that may be true. | ||
| I don't know that he's actually going to come through. | ||
| And, you know, if you ask me, I'd say it's probably unlikely that he'd come through on some of his more nationalist promises. | ||
| I think trade and immigration are the first, you know, immigration he may actually push hard on. | ||
| But with respect to trade, I think there's just too much It's political support and financial support that he's going to get that pushes him away from his economic nationalist arguments. | ||
| But I think it was very clear that the people who were reacting this way were just sick of the lies that were coming from both sides with respect to real economic issues, with respect to trade, with respect to immigration, with respect to financial globalization, just all of these things which have really been very bad for lower middle class America. | ||
| These people in the Rust Belt that were losing their jobs and watching their way of life disappear, they're going for anything. | ||
| So in some ways you had Bernie supporters that voted for Trump, even though economic policies were hugely different. | ||
| Like you're just grasping for anything that kind of makes sense. | ||
| So when you hear a liberal economist in this case, I'm not sure who it was on Bill Maher, but when you hear this person talk about these knuckle draggers or whatever, Isn't that also, it's almost feeding into that thing again, like these people are so sick and tired of being abused and beaten and ridiculed by the system that even if that guy is right, whoever this person is, that they're still doing the very thing that pushes people to vote potentially what could be for against their interests. | ||
| Absolutely. | ||
| And I think this was one of the genius parts of Trump's campaign, where he actually understood that he needed to bring a different level of respect to the real issues that these people were facing. | ||
| I think Bernie did it, and I think my sense is that Bernie actually would have come through on a lot of these promises, but for campaign finance | ||
| reasons, various other reasons, he couldn't push past the Hillary machine. | ||
| It would have been a much more interesting contest if it was Bernie against Trump. | ||
| But regardless of whether or not Trump actually comes through on any of these promises, I | ||
| think he's already giving these people a lot of what they're looking for just in terms | ||
| of respect for their ideas and some acknowledgment that what they're saying and what they're | ||
| seeing is real, which I believe we as liberal economists have not really come through on. | ||
| Yeah, because then you're just saying, they get belittled and then you're saying, "I see | ||
| you bunch of morons, you're getting exactly what you sowed." | ||
| And it's like, well, that's not gonna help them come to your side. | ||
| How much of this do you think is just... | ||
| That systems just get to this place where this happens. | ||
| You know what I mean? | ||
| So in the Rust Belt, the jobs that are going away, it's like any other thing that exists for a certain amount of time and it doesn't. | ||
| I don't know, is there an example in history when a whole industry started disappearing but everyone figured out the way to get out properly? | ||
| Is there any example of that that you can think of where it was prepared for people Because they realized that one thing was going away and they were going to have to do something else. | ||
| Or is this just the natural order of things? | ||
| It may be. | ||
| And you know, one of the things that I'm really interested in now, we recently moved from New York to Silicon Valley. | ||
| One of the lines of research that I have been following is someone named Peter Temin, an MIT economist, just came out with this book where he talks about the dual economy and the dying middle class of America. | ||
| And he points out that while we are very focused on the notion of secular stagnation and how | ||
| we're not seeing sufficient growth in the economy, we're really seeing a stagnation | ||
| of real wages, especially with the manufacturing sector. | ||
| But what he does point to is that there is one sector of the economy that or three sectors of the economy that have traditionally been doing really well, which is finance, technology and electronics. | ||
| And so even though much of our focus has been on secular stagnation, we really are doing well in areas of innovation and areas of finance. | ||
| And the question for us, then, is how do we actually take lessons from this area and try | ||
| to bring it to the rest of the economy? | ||
| More importantly, how do we try to smooth the path of the rest of the economy so that | ||
| we can make this a lot less painful than it might otherwise be? | ||
| And one of the things that one hears a lot in Silicon Valley is, how do we bring new | ||
| ideas to this? | ||
| Why don't we start thinking in terms of basic income? | ||
| Because we are going to be disrupting the job market at some very serious level. | ||
| We need to make sure everyone's taken care of. | ||
| Left-leaning economists tend to be very suspicious of the notion of basic income, because the | ||
| fear is that we're going to use this to basically upend our current welfare systems. | ||
| And if we decide we're going to give everyone $10,000 a year and then we're going to forget | ||
| about them, that's probably not going to do what we want it to do. | ||
| So it's really a question of how do we approach something like basic income, so we make sure we are taking care of the people whose lives we're disrupting. | ||
| But regardless, you know, we are going to see this huge change in the nature of jobs in this country, and we need to be getting ahead of this to try and think about how do we address it. | ||
| And, you know, part of it is that we need to think about how our company is structured. | ||
| What are the incentive structures? | ||
| To the extent that maximizing shareholder value has been the driving push for many American corporations, We're going to find incentives built in that are going to want to encourage globalization and marginalize workers who are lower down on the income scale, because that's what improves shareholder value. | ||
| So if we change some of the incentive structures around this, I do think there's a lot we can do to actually smooth the transition. | ||
| But eventually, I do think you're right. | ||
| We're going to see these changes, and it's a question of how do we get ahead of them. | ||
| Yeah, it's interesting, because a couple weeks ago I had Dr. Mike Munger from Duke University, who's a political science professor at Duke, or he's in charge of the politics philosophy department. | ||
| I think it's politics philosophy and economics department. | ||
| And he's more of a libertarian, but he was making a sort of libertarian argument for universal basic income. | ||
| And I've never heard it described the way you thought that. | ||
| I always would have thought that left-leaning economists would have been for it. | ||
| But it's interesting that you're saying not necessarily. | ||
| And he was actually making a libertarian argument for universal basic income. | ||
| So there is a lot of room to come together with people of different thinking, traditionally, in this regard. | ||
| Absolutely, which is something that I really hope to be able to do now. | ||
| How do we bring some new economic thinking to the innovations that we're seeing coming out of Silicon Valley? | ||
| I think basic income is a disruptive idea, but I really do think we need to play with it, and we need to try and take it on in a way that we aren't He wanted it to completely co-opt welfare systems. | ||
| His argument was that the welfare systems are failing, so let's do this with that money. | ||
| See that's interesting, he wanted it to completely co-opt welfare, so his argument was that | ||
| the welfare systems are failing, so let's do this with that money, | ||
| but I can see why both arguments have merit. | ||
| Well the question is, are you really gonna do this Are you going to really try and bring in the disenfranchised and make sure that they're properly taken care of? | ||
| What are you going to set your basic income at? | ||
| You know, how are you going to ensure transition out of it once people go into the workforce? | ||
| How are you thinking about—you know, my point on this is that we really need to be thinking about the economics of it when we structure it. | ||
| I am not against the idea of universal basic income. | ||
| I think it may be a solution to actually handle The fact that we're going to be seeing a tremendous amount of disruption in our job market, but we really need to think about how we're implementing it and how much resource we're going to be willing to put into this. | ||
| And, you know, it's interesting because in Silicon Valley, people really think in terms of an abundance economy. | ||
| On the East Coast, people still think in terms of scarcity with capital S, small s, you know, the notion of economics is built around the idea of scarcity. | ||
| You really do have the ability, I think, to use some of what's coming out of Silicon Valley to start rethinking some of our fundamental economic notions. | ||
| Has automation and machines and robots and drones and all that completely changed the discussion? | ||
| I mean, are the discussions that economists are having now widely different than they were having even five years ago, even though it was obvious that we were trending in this direction? | ||
| Has it just completely altered the landscape? | ||
| I think the problem is that it hasn't, and I think it has to. | ||
| Really? | ||
| I think it's coming. | ||
| And, you know, people will do analyses of how much of the destruction of the manufacturing sector is coming as a result of trade, as a result of immigration, how much of it is automation. | ||
| So, you know, these are the three things people talk about, and it's like, you know, what part of it is globalization, what part of it is automation. | ||
| I don't think we're thinking in terms of how do we get ahead of this? | ||
| How do we need to change the conversation? | ||
| Because eventually this is coming. | ||
| And what do we do to position ourselves for when it comes? | ||
| Yeah, that's so interesting to me that it's not being discussed as much as you'd think | ||
| because there's so many people in Silicon Valley, especially that are like, guys, this is the game changer. | ||
| This is the one. | ||
| I mean, there's so many things that I think are game changers. | ||
| If you look at just what's happening with cryptocurrencies, I think it's really gonna change the nature | ||
| of transactions, of macroeconomics. | ||
| And I think we need to be coming up with new economics to think about that as well. | ||
| So I think there's a lot of things that we're gonna have to be thinking about differently. | ||
| I'm... | ||
| Underlying it all, though, I think one does need to, you know, going back to the earlier point, I think underlying all of this is going to be incentives and we really need to think about how do we build the correct incentives in so that we're taking care of people through this entire process. | ||
| So with all this in mind, do politics At its core, does it really just come down to economics? | ||
| I would imagine as an economist, you at least probably want to believe that, but the more I talk to economists and think about this stuff, I mean, the idea of if you've got a job, then you can afford to hopefully have a home, whether you're owning it or renting it, and you can put some food on the table, and that basically takes care of 90% of what we talk about in the political scheme of things. | ||
| I think it's true. | ||
| I did warn you that from the age of 15 this was the way I viewed the world, so if you're going to ask me, that's going to be the answer I give you. | ||
| But I actually do think there's more to it than that. | ||
|
unidentified
|
I thought maybe you had changed from your 15-year-old self as you learned a little bit about things. | |
| Well, you know, I have because I think What I'm coming to realize, if I look at what our current political situation is, and I see the role that identity politics is taking in our society, I do have the sense that the heart of identity politics is—or the driving force is really coming from the economics, as well. | ||
| So, you know, I talked a little bit earlier about the investment theory of party competition, How campaign finance changed everything. | ||
| And, you know, it's become increasingly clear that money drives elections in a way that we never really have acknowledged. | ||
| So, you know, recent studies done by some of my colleagues will show that there's almost a one-to-one correspondence between the amount of money spent on a congressional race and whether or not—and who wins that congressional race. | ||
| If it's really money that's driving it, then you would imagine that politicians are going to have to raise a certain amount of money, which they can't really do with small donations anymore. | ||
| So, as much as we heard about how Obama raised money through small donations, if you actually look at what was driving his campaign, especially the second time around, there was a lot of really big corporate finance in there. | ||
| And if you think about what that does to the incentive structure of politicians when they're in power, very quickly it becomes really expensive to actually come through on the economic nationalism that the Democrats traditionally promise their base. | ||
| So, if you can't actually give them the economic things that you've promised them, Well, identity politics is a really inexpensive way to feed them. | ||
| And, you know, my sense, with watching the increase of this conversation in our society, is that this is really a distraction. | ||
| This is a way to take people's focus away from the fact that they're really unhappy about what's happening economically and say, let's give you something else to focus on. | ||
| You know, I think it sort of blew up for the Democrats this time. | ||
| And it's blown up in a way where I think the identity politics has gotten really toxic, and the economic issues aren't being addressed either. | ||
| So, you know, I really think—I'm waiting until the Democratic Party finally wakes up and understands that they're just not going to be able to get away with substituting identity politics for the real economics that they need to be providing their base. | ||
| In a weird way, does that almost seem too late? | ||
| Like they've traded in it for too long that even though I would suspect some of the party heads or the consultants that they bring in or even the economists that they bring in are probably going, guys, this is the losing game here. | ||
| But you're sort of in so deep, how would you then publicly put a face on that to be like, we gotta change what we're doing here? | ||
| It's tough. | ||
| I mean, I think they're grappling with that right now. | ||
| I think they're grappling with that. | ||
| You know, one of the problems is that you say even the economists they bring in. | ||
| The one thing I found economists to be particularly weak at is looking at their own incentive structures. | ||
| So the phrase that my co-author and I have coined is the economics of economics. | ||
| Who's actually going to look at the incentive structure of the economists? | ||
| And if I look at the economics that was coming out before this last election, Economists know that free trade, increasing trade liberalization, is going to come with a redistributive consequence. | ||
| And they know that the burden is going to fall very specifically on a particular group of people. | ||
| So, if you look at what happened with NAFTA, NAFTA had efficiency effects that were positive, | ||
| but they were really small compared to the redistributive effects, and, in particular, | ||
| the effects on very specific segments of population, geographically and in terms of particular | ||
| manufacturing sectors. | ||
| And the economists working for the Democratic Party very often were whitewashing this. | ||
| They weren't being honest about what they knew were the redistributive effects of trade. | ||
| And as a result, my sense is that you've got the system feeding itself, where the politicians | ||
| are looking for a particular kind of economics. | ||
| The economists are happy to feed that to them, because that's what's going to write their | ||
| paychecks. | ||
| And so no one's willing to actually stand up and say, hey, there's a problem. | ||
| And Bernie Sanders actually did. | ||
| And he had a few economists who actually came up with his economic plans that said, you | ||
| know, we can make this work. | ||
| And the backlash amongst mainstream economists was huge. | ||
| Very few people were really willing to take seriously some very serious economics that went into these plans and say, yeah, there's a real point here. | ||
| There's something workable here. | ||
| So, you know, I really think underlying a lot of this, once again, is incentives. | ||
| And in this case, I think the incentives that economists are bringing... So even the economists studying the economy have their own incentive structure, and you have to be wary of that. | ||
| I think especially the economists studying the economy. | ||
| You know, I think... | ||
| This came to light very strongly with the 2008 financial crash, where I think we—you know, the Queen of England apparently walked into an investment bank and had one question for the economists there, why didn't we see this coming? | ||
| And, you know, that simple question, I think, has been something that has driven many of us in the last several years to say, where did we go wrong as economists? | ||
| It's really interesting that economists have been so hesitant to look at their own incentive structures in this. | ||
| That's so interesting to me because I remember before the crash, I remember being at a bar with a friend of mine who worked for Lehman Brothers, and he was talking to another guy, and it was my friend Chris, and he kept saying, this thing is going to be a disaster. | ||
| You have no, like I remember, and I don't even know that I ever heard about it before or realized that there were any problems even. | ||
| I don't know if I just wasn't paying attention to that sector or something, but it's so interesting that some people some people didn't, some people were gonna profit | ||
| off of the disaster, that all of those competing interests just lead us to-- | ||
| That's right, and then you look at where it leads us to with the political interest. | ||
| So if you look at what happened after the crash and once Obama was in office, | ||
| it turns out that a lot of the mortgages that underlay the crisis were really badly constructed. | ||
| So they really didn't have even the legal grounds for the banks to be able to push on foreclosures. | ||
| And so had the Obama administration chosen to come down hard on the banks and force them to negotiate, they could have really prevented a lot of this foreclosure crisis. | ||
| And, you know, one of my One of the things I say today is that Trump is really a symptom of the problems within the Democratic Party, because I think there was such a backlash. | ||
| People were so disillusioned with Obama at the end of what we saw was the resolution of this crisis. | ||
| Yes, we got growth rates back up, but if you look at what a burden the housing crisis placed on Main Street America, because he really wasn't willing to go after Wall Street, I think it becomes very clear where this disillusionment is | ||
| coming from. | ||
| And, you know, once again, why wasn't he willing to go after Wall Street? | ||
| Well, take a look at where some of those campaign funds came from. | ||
| So is that sort of the biggest issue with Obama then, that he was a two, you know, forget after the crash, or go fast forward to after the crash, he was a two-term president. | ||
| He could have done things about campaign finance, or at least talked about it more. | ||
| Or I remember sort of even at the end, his last few months when he was a lame duck, he'd still be headlining $30,000 a head place, then saying that the Republicans only care about money, money, money. | ||
| And it's like, well, you had an opportunity to do something. | ||
| And by the way, I don't even begrudge him any of that because they all do the same freaking thing. | ||
| And a Republican would have done it too. | ||
| But at that point, he wasn't running for reelection. | ||
| And perhaps that even hurt Hillary in some regard. | ||
| Oh, there's no question. | ||
| I mean, what was Hillary doing with those Goldman Sachs talks, right? | ||
| I mean, none of this made any sense. | ||
| But, yeah, just rewind to 2010, where, you know, he didn't do so well in the congressional elections. | ||
| He realized that people were really angry about the fact that... Well, that's the understatement of the year. | ||
| They got banged up. | ||
| Exactly. | ||
| And he realized it's because people were really angry that no one had actually paid for this financial crisis. | ||
| You know, bonuses actually went up that year on Wall Street as opposed to going down. | ||
| And, you know, Obama was apparently shocked that bonuses on Wall Street had gone up. | ||
| He had the chance to do something about it. | ||
| He came out with the Volcker Rule in 2010. | ||
| But it was so watered down that even Paul Volcker was shocked, because it really didn't stop banks from involving themselves with hedge funds and all this other stuff that got us to the too-big-to-fail. | ||
| Yes, there was so much that could have been done to actually change our financial economy so that we do not have to deal with this kind of crisis in the future. | ||
| And he didn't do it. | ||
| And then, you know, again, you just have to ask, what was the incentive structure? | ||
| So one of the things people ask me, so people always say, you know, why are you liberal? | ||
| Why do you still call yourself a liberal? | ||
| You sound like a libertarian. | ||
| And I always try to lay out my liberal cred. | ||
| But I do say, I think if I were 90 percent of the things that I believe, I haven't moved at all. | ||
| And I would argue that the left has moved left and I've stayed here. | ||
| I do think I've shifted a little bit right economically when it comes to taxes, particularly now that I'm a small business owner and have employees and things like that. | ||
| When you hear someone say that they're for small taxes and small business and all of those things, as a left-leaning economist, is there something that I could be missing in this regard? | ||
| I think my strongest feeling about this is, if I look at some of the rent-seeking behavior that I believe drives a lot of how things are structured institutionally within this country, I see policies where you have the billionaire class that has a certain incentive structure that very often is | ||
| going to take from the millionaire class and those below, and they're perfectly willing to | ||
| redistribute to the bottom end of the spectrum as long as it doesn't touch them. | ||
| So, you know, it's one thing to talk about taxes on small business owners. | ||
| It's another thing to talk about carried interest, right? | ||
| And it's these questions that we really are not going to be allowed to touch because the | ||
| forces behind wanting to hold those in place are so powerful financially and economically. | ||
| Yeah, so in my specific instance as a small business owner, you don't have an issue with | ||
| small taxes or low taxes? | ||
| [BLANK_AUDIO] | ||
| You know, I mean, we have a progressive tax system. | ||
| I think it's really important to me that we have a progressive tax system. | ||
| You know, I think what we really need to be thinking about is inequality in this country. | ||
| If you look at the fact that in the 1970s, the top 1% had something like 10% of the income, and it's gone up now to 20% of the income. | ||
| The 0.1% of the economy, of our population, is earning eight times as much as it was then. | ||
| We've gone completely crazy with respect to inequality, and I don't think the problem is the middle class. | ||
| It really is the billionaire class. | ||
| And, you know, the huge distinction we're seeing, I think that's where we need to be looking at. | ||
| Well, that's why I want to put an emphasis, my small business is not in the billionaire class. | ||
| But, you know, I think this goes further. | ||
| I think when we think about the issue of globalization as well, We should be very clear about the fact that globalization has had very positive consequences for the developing world. | ||
| So, China was able to raise a tremendous amount of—a number of people out of poverty because they were able to open up their manufacturing sector to the West. | ||
| And the only problem with that is that we are doing good in terms of poverty at absolute levels across the world. | ||
| But who's bearing the brunt of it? | ||
| It's not the richest people in this country who are the ones who are all for free trade. | ||
| It's the lower middle class. | ||
| And my feeling is, you know, if you're willing to actually redistribute your income, that's fine. | ||
| What really bothers me is that you want policies that you say are going to help the rest of the world that are going to fall on the backs of the lower middle class in this country. | ||
|
unidentified
|
Yeah. | |
| All right, so we have about 10 minutes left. | ||
| Okay. | ||
| I want to talk about a guy that we both know for just a moment. | ||
| Have you heard of this Eric Weinstein fella? | ||
| You know this guy that I'm talking about? | ||
| Yeah, I tend to hang out with him a fair amount. | ||
| Yes, so you are married to Eric Weinstein. | ||
| Putting aside marriage for just a sec, I won't go too deep into your personal marriage, but you guys have done work together. | ||
| I mean, real work together. | ||
| You coming at it really from an economist's point of view, him coming at it from a mathematical point of view, and you've sort of married these two ideas. | ||
| So can you, I guess tell me, you know what, before we get into fully that, first off, what's it like working with someone? | ||
| Or tell me how you met, actually. | ||
| I know a little bit. | ||
| I know a little bit about this. | ||
| I'm asking 17 questions at once. | ||
| A little bit about how you met, how you started working together, and then what actually you guys came up with. | ||
| Yeah, we keep saying we have to come up with a better meeting story. | ||
| Yeah, he was cruising women's college. | ||
| He came for one party at my undergraduate college and that was it. | ||
| Wow. | ||
| Yeah, yeah. | ||
| And you know, working together was really interesting because on the one hand it can be very, very challenging. | ||
| On the other hand, you really get to know someone at a different level than you could ever imagine because you're functioning in this Very, very abstract space, where I found that each of us was bringing our own intuition honed in a very different context, so that sometimes he'd say something that I'd know just intuitively from understanding the economics couldn't be correct, and sometimes I'd say something that he'd know couldn't be correct from the math. | ||
| But, you know, we were in very, very abstract space when we were talking about this. | ||
| You really get to see the inner workings of someone's mind in a way that's really incredible. | ||
| It's something that I'm so glad we were able to do. | ||
| You know, we still talk about many issues together. | ||
| We're not working as much on the technical stuff now. | ||
| Yeah, but let's talk a little bit about the technical stuff. | ||
| Sure. | ||
| So, he and I worked together on a project where we were using gauge theory, which is a kind of calculus, to look at some issues in economics. | ||
| And so, when I talked a little bit earlier about how economics allows you to bring a physics metric to looking at humans, It can, but the problem is sometimes the math we use is limited enough that it forced economists to make some very incorrect assumptions. | ||
| So, the case that we were working on was where we were looking at measures of the economy, so the consumer price index or GDP measures, so measuring inflation or growth. | ||
| And what we found was that the assumption that economists had placed was that we have | ||
| to assume that preferences don't change in order for us to actually be able to come up | ||
| with an index that makes sense. | ||
| And it turns out that if you're working with standard calculus, it is very hard to do an | ||
| index number that allows you to have changing preferences. | ||
| But if you shift to using gauge theory, in fact, you can develop an index which comes | ||
| Close to—well, which actually accurately keeps track of an individual's utility, so the actual growth in a person's consumption basket, or what the actual inflation is that a person experiences, given the basket that they were consuming. | ||
| So, you know, when—it was very, very interesting work, theoretically, and then it had this from very strong real-world application. | ||
| The problem was the timing was just really bad, because we were working on issues of | ||
| inflation right about the time that two senators, Packwood and Moynihan, had put together a | ||
| commission to try and adjust the way we calculate CPI. | ||
| And it was really interesting how this thing came about, because what they realized was | ||
| that Social Security was going to be in trouble, and they wanted a way to cut back on Social | ||
| Security. | ||
| But it's very clear that Social Security is the third rail. | ||
| You cannot touch it, because politically it's suicide. | ||
| So they figured out this ingenious backdoor where they said, if we point out that the | ||
| consumer price index is actually overvalued, that the way we're calculating it is incorrect, | ||
| and we scale it back—and specifically, if we scale it back by saying that we are miscalculating | ||
| by 1.1 percent, we can save a trillion dollars over 10 years. | ||
| So, they got a group of economists together. | ||
| With the hope that they would find that the CPI was, in fact, overvalued. | ||
| And it just so happened that one of the people on this commission, two of the people on this commission, were the Harvard Economics Department right when I was writing my thesis. | ||
| And, you know, I was this naive graduate student and I walk into Dale Jorgensen's office and say, guess what? | ||
| I've got this great way to calculate the CPI. | ||
| And he took one look at this thing and he's like, you've got nothing. | ||
| Get out of here. | ||
| And, you know, I ended up working with Eric Maskin, who later won a Nobel Prize for more theoretical work, and he loved it. | ||
| And then he met with Dale Jorgensen and then came back and said, no, it's not going to work. | ||
| And, you know, when I talk about the economics of economics and I talk about the incentive structures of economists, to me this was really initiation by fire, learning very quickly how the field actually works and what is driving academic knowledge within this field. | ||
| Yeah, boy, there's so much richness there. | ||
| I feel that we should go personal for the last question here because we can talk economic theory all day long. | ||
| So what is it like to be, I mean, you guys are sort of an intellectual powerhouse couple. | ||
| That's gotta be kind of interesting. | ||
| You must meet all sorts of interesting people, constantly be having those discussions. | ||
| How do you remain normal people? | ||
| I mean, we've gotten to know each other now and have had dinners and things. | ||
| I mean, how do you, you know, How do you get out of that world together sometimes? | ||
|
unidentified
|
I don't know. | |
| We go hiking, we go swimming, we go biking. | ||
| We're normal people, but we have really interesting dinner table conversations. | ||
| So, it's just what life is. | ||
| Indeed, and we're having dinner tonight, so you better not... I'm so looking forward to it. | ||
| You better not let me down. | ||
| It's going to be a really interesting dinner conversation. | ||
| Well, it's been an absolute pleasure talking to you. | ||
| I'm glad we finally did this. | ||
| And, you know, I realize that you got on Twitter just in the last, like, hour or something. | ||
| Do you even know what your Twitter name is? | ||
| I think it's Pia Malani. | ||
| Just Pia Malani, that's it? | ||
| I believe that's correct, yes. | ||
| At Pia Malani? | ||
| All right, well, if Pia is right, it's just at Pia Malani. | ||
| And if not, or even if she is, we're gonna link down to a Big Think video that she did that I think captures a lot of what we've talked about and some stuff that we didn't quite get to. | ||
| And thanks for watching. |
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