The transcript from this week’s, MiB: Angus Deaton on America’s Wealth & Inequality, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, SpotifyYouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

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This is Masters in business with Barry Ritholtz on Bloomberg Radio

Barry Ritholtz: This week on the podcast. What a delight. I got to spend about two hours with Sir Angus Deaton. He won the Nobel Prize in 2015 for his work on consumption, poverty, welfare wealth and health inequality. Really, the work he’s done on inequality came after the Nobel Prize based on a book him and his wife put out, and a number of papers. He wrote, what, what can I say? He is just so fascinating, such an interesting person born in the uk, grows up in Scotland, is becomes a professor in the uk and then says, let’s go check out that place America and starts teaching at, at Princeton 40 years ago. He is, he’s been here about half his life. I found this conversation to be just delightful. So interesting, so fascinating. He is so knowledgeable about so many unusual areas in economics. We, only got to scratch the surface on some of them. Healthcare minimum wage. What really makes people happy and how significant having or not having a, a college degree, you know, the United States has very much become a bifurcated nation.

And where Professor Deaton draws the line, I, if you don’t have a college degree, you are just at a huge disadvantage in this society. And he brings the receipts, he has all the data that proves it. I, I found this just to be fascinating, charming, delightful. And I think you will also, with no further ado, my conversation with Sir Angus Deaton.

Angus Deaton: Thank you very much for having me. It’s a pleasure to be here.

Barry Ritholtz: Well, I, I’ve left out about 90% of your CV. You’re the author of 200 plus papers, six books, deaths of Despair, which you wrote with Anne Case who happens to be your wife, was a New York Times bestseller and your latest book, economics in America, an Immigrant Economist, explores the Land of inequality. We’re gonna talk about in a few minutes, but let’s just start with what you cover, which is kind of fascinating. Health, happiness, development, poverty, wellbeing, inequality, and the best ways to collect and interpret evidence for public policy that is quite an eclectic broad set of interests. How do they all relate to each other?

Angus Deaton: Well, I think they’re all sort of sides of the same thing, which is, I’m interested in what makes people tick, you know, what makes people do what they do? I’m interested in their wellbeing in a fairly broad sense. I mean, in England we used to call it welfare, but welfare here means something else that

Barry Ritholtz:It’s got a dirty connotation in the United States.

Angus Deaton: I’m interested in people’s wellbeing, and that’s to do with how much they spend, how much they save. You know, it’s to do with getting from poor country, turning poor countries into rich countries. It’s to do with poverty, it has to do with inequality. All of these things hang together and I’m a data guy, so I’m really interested in how you interpret data.

Barry Ritholtz: Let’s just start with your career, which I, I love how you describe your early part of your career. “After a brief and undistinguished career at the Bank of England” You return to academia as a professor of econometrics at the University of Bristol Who puts that in their CV?

Angus Deaton: Well, I was not cut out to be a banker, but one of the things that was good about spending nine months there was I discovered that I wasn’t cut out to be a banker, and that it was much more fun to be an academic. There’s also, I had a girlfriend in Cambridge

Barry Ritholtz: So it worked out. One of the things I found fascinating in your Nobel Prize acceptance speech, for lack of a better word, you said you became an economist by accident. You’re gonna have to give us some more color on that.

Angus Deaton:  Well, I was always interested in a wide range of things. So when I was at this very fancy private school that I was at as a kid, I did math because it gave me a huge amount of free time to do the things I really cared about. Like reading books and playing the pipe organ and playing rugby and sports and things. But when I got to Cambridge, you know, the math was sort of serious there. And so I discovered this was, was not really for me. And like most students, you move up a grade and you discover you’ve been the smartest thing and there’s ever been until you get there. And all of a sudden there’s a whole lot of other people who are much better at

Barry Ritholtz: This, Hey, these guys are really good

Angus Deaton: At this, they’re really good at this. So after a couple of years in something of despair, my tutors said to me, you have to give up doing this. And I said, well, you know, what could I do? They said, well, you could leave. And I said, without a degree, my dad would be very unhappy. So I said, what’s the alternative? He said, there’s only one other thing for people like you, it’s called economics,

Barry Ritholtz: Right. Economics for people who are only fair at mathematics

Angus Deaton: Or something like that. I, I wasn’t a bad mathematician and I’ve used a lot of math in my career as an economist and it’s a very useful thing, but I just had lost interest it anymore. And as soon as I started studying economics, I was sort of hooked.

Barry Ritholtz: That raises a question. You’re a lad from Edinburgh. How do you become so interested in United States economics? It would seem that there’s a ton of history and a lot of stuff happening in the uk. What, what brought you here?

Angus Deaton: Well, I think I remember I was an academic economist and it was pretty clear from the very first economics book I read, which was by Paul Samuelson, that the most famous and most interesting economists were working in the us. I mean, it was a bigger country that had not been true 40 years before when Keynes was in Cambridge Right. And so on. But you know, the Keynesianism had sort of lost its, well he, he was no longer alive. Right. And the old keynesians were a bit grumpy and not so very interesting

Barry Ritholtz: At the time. You have Paul Samuelson at MIT, you have Milton Friedman at Chicago. You have a run of people, maybe it’s a little early for, for the Berkeley crowd and Princeton, Harvard, Yale crowd comes a little later.

Angus Deaton: There weren’t a lot of people. I remember reading the Princeton studies and international finance, which seemed to me very interesting at the time I had met Fritz Mope who was at Princeton when I was still in Britain, for instance. There was Bob Solo who was always sure, you know, a great hero of mine even long before I met him. I mean, that paper on economic growth is a transcendent piece of work and really sort of shaped the way generations of economists have thought. And it’s one of these things that really does tell you something that you’ve always thought is really not quite right. And it just comes from thinking about it harder. And boy was that an amazing example to all
of us. There were also a lot of econometricians here, and I was sort of into, my first job as a professor was a professor of econometrics at Bristol. So, you know, I took my math into statistics and things.

Barry Ritholtz: Am I remembering correctly as solo, the economist who said, productivity is everywhere except the economic data. Am I getting right?

Angus Deaton:  That’s one of the many clever things he said.

Barry Ritholtz: Right? He was quite an influential economist. So you have all of these big economic names in the United States taking the mantle from Keynes and other people in the UK and and and elsewhere. How do you translate that into a job at Princeton when you’re working at Cambridge or, or Bristol?

Angus Deaton: Well,I was working at Bristol. I was publishing papers. They were attracting a certain amount of attention. I’d met some of the Princeton people at a conference that I’d organized, helped organize in Italy, become very good friends with Orley Ashenfelter, who’s another incredibly influential person in modern economics. And I went to visit Princeton for a year in 79 and really liked it. And Bristol at that time was suffering from a real cash crunch. Mr. Thacher didn’t care for the universities very much. Really? Yeah, really

Barry Ritholtz: That’s surprising to someone in the United States because the, especially the elite universities, they always seem to have a ton of cash. The joke is Harvard is a $50 billion hedge fund with a small liberal arts college attached to it. I’m surprised to, to learn Of that.

Angus Deaton: Well, the really British universities are nothing like that now. And then they were a million miles away from there. So there were places like Cambridge, whose colleges were immensely wealthy. Right. So you could walk on Trinity Land all the way from Trinity College to the center of London. Wow. But that did not accrue to the university, which was relatively poor. Huh. And what had happened was that there was a five year financial settlement e every five years at co cornium with the universities. And unfortunately it was not indexed. So when we got this burst of inflation in the early seventies, the universities were going bankrupt. Wow. And Mrs. Thatcher, I think it’s not uncommon. I mean, I don’t think Mrs. Thatcher thought much of sort of pointy headed intellectuals as it were. Huh. And even though she’d been to Oxford herself, and I think it was probably true that most of  the university establishment was fairly hostile.

00:09:42 [Speaker Changed] Are you finding after 40 years here in the United States, we’re starting to
see some criticism, at least in terms of political correctness and even what young and not particularly
experienced college students say about things in the Middle East. President of of Harvard was essentially
shouted out of her, her office. How do you look at this?
00:10:05 [Speaker Changed] The mess that’s happening in Israel and Gaza is something very different, I
think and, and huge. And it’s affecting all parts of American society in ways that we really have not seen
before. But there’s a sort of separate issue of sort of political correctness within American universities.
It’s interesting that, I mean, I taught at Princeton for, you know, more than 30 years. I never
encountered that at Princeton. So I, I never felt that I had to issue trigger warnings or that students
wouldn’t let me talk about certain things. Or they put their hands up with their face when I said the
wrong words.
00:10:43 [Speaker Changed] That, that really goes on in college these
00:10:45 [Speaker Changed] Days. Well, I’m told it does, but you know, I’m a consumer of this just as
you are read about it in the newspapers. And it makes me scared. I worry, I have grandchildren, two
granddaughters at school in the city here, and I worry about the political correctness of their teachers,
for example. But I haven’t seen much of it in the university. So as far as Harvard, MIT, Penn, et cetera, I
read about it in the newspapers. I I don’t have anything original to say about that.
00:11:14 [Speaker Changed] Maybe it’s generational. But if I had a professor I didn’t like, I would go
down to the registrar, drop the class there, there was a market system there that if you really said stuff
that enough students didn’t care for, they wouldn’t take your class. They’d take somebody
00:11:29 [Speaker Changed] Else’s. That rarely happened to me. I remember one student who didn’t like
the grade I’d given and the
00:11:34 [Speaker Changed] Exam well by that, it’s too late.
00:11:36 [Speaker Changed] It was too late. But I don’t think she came back for the second half of the
course. And
00:11:40 [Speaker Changed] Then the other thing I, I have to ask you about having grown up in the uk
what was your experience like being an immigrant to the United States in the 1980s and having to adopt
to a very different set of economic circumstances? We’ll talk more about healthcare, which obviously is
a world of difference. What were your experiences like as a legal immigrant?
00:12:06 [Speaker Changed] A legal Yes. I was legitimate documented alien. The initial title of that book
was Shock and Awe really. Which was in the sense, you know, I felt a lot of awe at the amazing things
that went on in America and also a good deal of shock. So the healthcare system was a big part of it,
which was sort of feeling that I didn’t know how to negotiate this. I didn’t know the difference between
a podiatrist and a pediatrician, which turned out to be something I had to know.
00:12:34 [Speaker Changed] You you, you had a A gp. Yes, a general practitioner. And if you needed
something specific, they would send you that way. Or did everybody do everything in the uk?
00:12:43 [Speaker Changed] No, not everybody did everything but the gps, the general practitioners
were gatekeepers to, you know, more advanced care or specialized care. And I think that worked pretty
well for us. So that was quite a shock. I also liked having a lot more money that was certainly different
and I’d worried about money my whole life. My
00:13:02 [Speaker Changed] Are are professors higher paid in the United States than they are in the uk?
00:13:07 [Speaker Changed] They were then for sure in Britain in those days, pretty much all professors
were paid the same. And it wasn’t very much, really, I had a lot more money
00:13:15 [Speaker Changed] Here in the United States. Yes. I have a vivid recollection of being in the UK
during the financial crisis for work. And you walk down the streets from New York in mid 2008, the
tension is palpable. And I didn’t get that same sense in Europe. I was in the UK in Brussels on one trip
and my conclusion was, Hey, if you’re not stressing about losing your healthcare ’cause you’re getting
fired, it still sucks to lose your job. But the stress level seems to be a little less. Is that an
oversimplification or is that a,
00:13:51 [Speaker Changed] A fair description? I didn’t notice that. But it’s certainly true that not having
to worry about healthcare is something that is a big difference between the two places. Huge burden.
Right? It’s a huge burden. Yeah.
00:14:01 [Speaker Changed] And, and when people do the comparison, alright, you’re paying a lot more
taxes there. But the, one of the biggest single contributors to inflation here, not the past few years
during the post covid surge, but the past 40 years it’s been growing at seven, eight, 9% your, your
insurance costs in your hospital costs. That’s a lot relative to 2% inflation rate for most
00:14:25 [Speaker Changed] Of the time. Absolutely. And that’s not happened in Britain and it hasn’t
happened in other European countries and it hasn’t happened in Canada. So
00:14:31 [Speaker Changed] It’s just specific
00:14:32 [Speaker Changed] To the United States. It’s, it’s just specific to the United States. And we
could talk about some of the reasons for that. But when I first came here, I mean, the other bits about it
that I really liked is, you know, I worked with and got to know and hung out with a lot of really great
economists and I learned a ton. I deflected a little bit your question, but my interests are fairly eclectic.
So I work on a lot of different things. And at Princeton I could always find some colleague who knew
about X right. And X was something I’d just gotten interested in. Whereas in Britain that would’ve been
much harder.
00:15:06 [Speaker Changed] Really interdisciplinary sort of things.
00:15:08 [Speaker Changed] Or even within the discipline, huh. You know, and some of it was the
mathematics, you know, I would have colleagues who knew how to do some obscure piece of
mathematics or I would say, this person’s using this estimator. You know, how does that work? I
remember John Campbell and I, when he was a young assistant professor, he is now a very senior
finance guy at Harvard. He and I went down to the engineering library to discover how to what the
spectrum at zero meant sort of idea. And then we used that in our work, you know, so it was a
wonderful place to do that. Whereas at Bristol it would read much harder, quite apart from the fact that
at Bristol University, the library was unionized and shut at four o’clock in the afternoon and was not
open on weekends.
00:15:49 [Speaker Changed] Wow. Plus, just off the top of my head, at Princeton you had some guy
named Ben Bernanke. I think he did something in
00:15:57 [Speaker Changed] Economics. Yeah, I, I helped hire him. He was Did he He came after I did.
Yes. That,
00:16:01 [Speaker Changed] That’s amazing. And then Paul Krugman, another Nobel laureate has been
there for the longest time, I think he now is affiliated with City University.
00:16:09 [Speaker Changed] That’s right. And Chris Sims, who’s a Nobel laureate and Danny Kahneman
was there. Oh, of course Danny. I, yeah, I forgot about that. I worked, Chris, Danny and I wrote a paper
together. The, the one I don’t wanna forget is Arthur Lewis who got the Nobel Prize the year I was
visiting. And he remains the only black scientific Nobel laureate ever. Is that
00:16:29 [Speaker Changed] True? Yes.
00:16:29 [Speaker Changed] That’s amazing. All the others are peace laureates are literary.
00:16:33 [Speaker Changed] So let’s start with that subtitle. You call the US the land of any quality. I’m
not arguing with that premise. I’m curious what led you to make that the, the subtitles? Why is that so
defining to the economy of the United States?
00:16:54 [Speaker Changed] Well, it’s not just income inequality, it’s inequality in many spaces. So the
inequalities of extreme wealth and extreme poverty, which seem to exist here. I mean, you have people,
African Americans living along the Mississippi Delta, who are probably the poorest just about anyone in
the world. And you know, you have the richest people in the world and you don’t seem to have quite
those same extremes in Europe to the same extent. But if you come to inequality itself, that’s pretty
wide too. So, you know, we economists like to use things called genie coefficients and so on. And the
genie coefficients are, you know, Americas of one of the champion genie coefficients. Now a lot of my
00:17:39 [Speaker Changed] D define genie coefficients for the, for the lay people.
00:17:42 [Speaker Changed] It’s, it’s a measure of how far people are apart on average. And unless you
want the mathematics, that’s a good way of thinking about it, right? It’s this sort of average distance
between any two pairs of people divided by the mean,
00:17:55 [Speaker Changed] The dispersion of the wealthiest it’s disper and
00:17:57 [Speaker Changed] The poorest. Yes. Well, or everybody. So, and a lot of that is good, you
know, it is the land of opportunity, right. And, you know, people are encouraged to get very, very rich
and very rich people are celebrated in America. In Britain where I grew up, they were described as fat
cats. And the newspapers really liked the
00:18:18 [Speaker Changed] Here too. But that was the 1920s.
00:18:20 [Speaker Changed] Well, there’s some truth to that. And, and as I think I say in the book, in
America, ordinary people seem to like fat cats. They would like a dose of feline obesity for themselves.
Right.
00:18:30 [Speaker Changed] Which is, which is a great line. You are implying something I wanna explore.
’cause I I think you’re onto something, are these two sides of the same coin Is wealth inequality and, you
know, greater riches than previously imagined. Do these go hand in hand? And and how does
opportunity play into that?
00:18:54 [Speaker Changed] Well, that’s something that people have thought about in economics for
hundreds of years, perhaps thousands of years, really. So that, you know, these two things certainly are
connected for sure. And a lot of it’s also got to do with mobility. So societies that have a lot of mobility
tend to be relatively equal, where societies where everybody inherits everything like Britain land on a
class in the 17th century, right.
00:19:20 [Speaker Changed] Although being landed gentry doesn’t seem like a bad gig.
00:19:24 [Speaker Changed] No, it’s not a bad gig at all. But what happens if you’re the third son of a
landed gentry? Well then
00:19:28 [Speaker Changed] You’re in trouble.
00:19:29 [Speaker Changed] You’re in trouble.
00:19:30 [Speaker Changed] You better have some skills.
00:19:31 [Speaker Changed] You’re a lot of inequality there, right? For that sort of thing. And, and that I,
00:19:34 [Speaker Changed] You forget about Pima gen and, and it, the first son, we don’t really think in
those terms in the states.
00:19:41 [Speaker Changed] Maybe there’s, and here anyway, but the, the others,
00:19:45 [Speaker Changed] Well, well, correct me if I’m wrong, I I is that more of a UK thing or do you
see parallels in the United States?
00:19:52 [Speaker Changed] No, it’s, it is very much a, a UK thing and it goes with a, not just the UK but
the European thing. And like when the toque ville came here, you know, there were none of those kings
or dukes or all the rest of it. And that was, you know, a big difference. And that made them very unequal
compared with here. So America at its founding was a very equal place. And you know, the founding
fathers sort of assumed that democracy would work and would require a fairly equal class of artisans
and farmers and so on. So it was only when it became a sort of industrial society and finance crept in
and so on that you begin to get these enormous spread. Now the, that’s the good side of it. You know,
it’s very hard to complain about people who get rich in the public interest, right? So who do things that
help spread we wealth around that creates jobs that makes other people well off too. But there’s a
potential dark site, which is the takers, as it were, the people who use government or who use
regulations or who lose lobbying, for example,
00:21:03 [Speaker Changed] Rentiers,
00:21:04 [Speaker Changed] The term that we economists tend to use is rent seeking rather than
rentier. I mean, a rentier is someone who owns land and rents it out, right? Whereas, or someone who
lives off capital. But rent seeking is people who use the political system to try and butter their bread a
little more thickly. And of course you get that in Britain too. I mean the corn laws, which were, you
know, you had an aristocratic land owning class who passed the corn laws to keep the price of grain up.
And that’s what they lived off, was growing wheat and, and selling it. But here you worry a lot about
people getting rich through lobbying, through restrictive practices. Minor ones, major ones. You worry
about the way that banks sometimes behave. I mean, are banks really sucking blood from the rest of us?
Sort of idea, right? Some people tend to think we need banks, banks are very important, but banks. And
then of course you’ve got this healthcare system that seems to be making a huge amount of money,
which they don’t make in other countries. And there’s a lot of people get paid huge sums of money, a lot
of stuff that’s being done. So that, that’s the negative side of high inequality, which is inequality is not
doing anyone any good. Sometimes we talk about takers versus makers and you know, makers are good
and they benefit everybody, but takers are not good. They’re stealing from people essentially.
00:22:31 [Speaker Changed] So, so, so let’s, I there’s so many different ways to go with this. Why don’t
we talk first before we get to healthcare. Let’s talk about minimum wage. Okay. All right. So Cardin
Krueger very famously wrote a paper about right changes in changing in the minimum wage. They were
looking at fast food restaurants in southern New Jersey and Pennsylvania. I think New Jersey had an
increase in the minimum wage. And it’s not like there’s a, a very robust border there. You can hardly tell
when you’re in one area or the other. It didn’t, the rising minimum wage, a modest increase in minimum
wage did not seem, according to the data, to cause an increase in unemployment as was widely
predicted. They got pushed pushback on that paper for literally decades before Card won the Nobel
Prize in was that 21? Yeah, I’m
00:23:22 [Speaker Changed] Not sure that it’s died down. I quote Jason Ferman as saying, even today
they persuaded about half of the profession in the other half of the profession think it’s not right. It’s
important too. They wrote a book called Myth and Measurement, which had many studies in it, and
they did a really very good job of reconciling their findings and other findings. And that’s in some ways
much more important work. I mean the, the Pennsylvania and New Jersey thing, it sounds like, you
know, one’s on either side of the Delaware water gap sort of idea, but some of the New Jersey
restaurants were on the shore and some of the Pennsylvania ones were in Pittsburgh or something, you
know? Right. So, so there were a lot of, and what should happen was they, what happened was not,
there were certainly no decrease in employment in New Jersey. There was a decrease in employment.
Sorry. Yes. There was a decrease in employment in Pennsylvania,
00:24:19 [Speaker Changed] A rise in unemployment.
00:24:20 [Speaker Changed] So when you compare the difference of the two, it was big. It, it was quite
large and it went in the opposite direction to what people have predicted. But the action was actually in
Philadelphia, in Pennsylvania rather than in New Jersey. But in their book and in dozens and dozens and
dozens of studies since that resulted being pretty strongly rec replicated that for modest increases in the
minimum wage, it does not give rise to increases, you know, unemployment.
00:24:49 [Speaker Changed] If, if you just stop and think about it for a moment, if you’re paying the
poorest or the lowest paid people in a region, a dollar or two more an hour, they’re just gonna go out
and spend that on, you know, frivolous things like food and medicine and rent. But if, if you are freezing
that so that the profits are higher for either the corporation or the franchise owner, that’s probably not
gonna be spent locally, it’s gonna be saved or invested, but that’ll be elsewhere. It won’t be in that local
town, I would assume the higher salary is just gonna stimulate the local economy. Is that an
oversimplification of what they found? Or is that
00:25:30 [Speaker Changed] No, I think that’s there, but I don’t think they would’ve thought of that as
the major effect. I mean, after all that, that many fast food workers in, you know, Pennsylvania or New
Jersey compared with everyone. So the amount of extra money they get from the minimum wage is
gonna be pretty small relative to the
00:25:46 [Speaker Changed] Size of, I drive down the New Jersey turnpike. It looks like 90% of the
people are working in fast food. So,
00:25:51 [Speaker Changed] Well that’s because you’re on the New Jersey Turnpike, you know, and for
in Princeton for a long time, they wouldn’t let fast food joints in the town. Right. Because there are a
few places like that, such snooty place. Yeah. Now there, there are a few places.
00:26:03 [Speaker Changed] So it’s a small impact
00:26:06 [Speaker Changed] On, on the macro economy, the local macro
00:26:08 [Speaker Changed] On, on the local economy. Why is the, as is the assumption just, Hey, if you
make us pay more per hour, we’re gonna hire less workers.
00:26:16 [Speaker Changed] Well, that’s the belief and that’s what happens in textbook models of labor
markets. It’s just that the textbook model doesn’t do a very good job. But there’s a very important issue
with this that I talk about in the book. And I think this over the last, the years since that paper was
written and that book was written, not only has there been a lot of replication, but what it’s suggesting
is there really is some surplus in these joints, which could be dedicated to either profits or labor wages.
00:26:50 [Speaker Changed] In other words, they’re not working on such a tight margin that there isn’t a
little buffer.
00:26:56 [Speaker Changed] Well, that what economists call that is monopsony, which means they have
some power over the workers, so they can actually deliberately lower their wages because it’s hard for
the workers to go somewhere else. Whereas in the textbook, if you lower someone’s wage below the
prevailing wage, those people will just vanish,
00:27:17 [Speaker Changed] They’ll quit the job,
00:27:18 [Speaker Changed] They’ll quit the job. So that what what you’ve got here is you, you’ve, there
is monopsony in that you can force people’s wages down and it’s hard for them to move.
00:27:29 [Speaker Changed] I love that word, which I, I think, I don’t remember if you mentioned it or I
just know her work. Joan Robinson. Joan Robinson, yeah. She, she has one of my all time favorite quotes
about economics, which is we study economics, not to predict the future, but so as to not be fooled by
economists. I, there’s a, that’s just so full of insight and so interesting. I I think she’s finally getting her
due these days and, and she hadn’t for a long time. Let’s stay with minimum wage. You implied this still
isn’t accepted. There’s a Nobel Prize to card and, and I guess indirectly to Krueger there, there’s tons and
tons of studies that have validated their original research. There still seems to be a lot of resistance to
accepting those facts. Is this a case? I forgot what physicist I’m stealing this from. Physics advances one
funeral at a time is the same thing taking place in economics.
00:28:30 [Speaker Changed] There may be some of that. I think it’s rather more than a half. And in
Britain where they have a much, much higher minimum wage than here, it’s supported by everyone on
the right and the left. Really?
00:28:43 [Speaker Changed] Yes. Is the thinking, Hey, if the companies pay for it, well then it’s not on
the government to cover it.
00:28:47 [Speaker Changed] That I think is an important part of the story. And I don’t think they have
the lobby that they have here by the fast food industry to help keep wages done. And you, that’s a big
deal. A lot of the opposition against Card and Krueger was from the EPI, which is a lobbying institute for
fast food. Now
00:29:07 [Speaker Changed] That changed. EPI is also the Economic Policy Institute. There’s a
00:29:11 [Speaker Changed] Good one and a bad one.
00:29:13 [Speaker Changed] That’s very funny. I I recall about a decade ago looking at minimum wage
and it hadn’t increased in a while. And the big opponents were not just fast food, but the big box
retailers like Walmart. Yep. And what’s kind of ironic by fighting minimum wage, they ended up giving
the upstart Amazon an opportunity. At one point, I wanna say this is about 5, 6, 7 years ago, Amazon
just said our minimum is $15 an hour. They went out and scooped up all the best people in areas for, for
warehouses and delivery. And suddenly places like Walmart were scrambling. And there was a long
period of time where Walmart couldn’t get enough workers to stock their shelves. It ultimately, they
ended up hurting themselves.
00:30:04 [Speaker Changed] Yep. But another part of this that’s very important is most states, or I don’t
know what fraction of American workers above
00:30:11 [Speaker Changed] The federal
00:30:11 [Speaker Changed] Have minimum wages that are above the federal ones. It’s also true that’s
something like 70% of Americans would like to see a higher minimum wage.
00:30:20 [Speaker Changed] 70%.
00:30:21 [Speaker Changed] That’s the sort of number that comes out in these polls. I haven’t looked at
the most recent one. And yet, you know, it doesn’t go through in Washington because the lobbyists are
very powerful and they’re, you know, paying campaign contributions and all the rest of it.
00:30:34 [Speaker Changed] I mean, it wouldn’t be the worst thing in the world if Taco Bell or your
McDonald’s cost a buck or so more. We’re all gonna end up paying for it through Medicare Medicaid
eventually. Right. Indirectly it it between diabetes and god knows what else in a country that has our
healthcare issues. So let’s transition, let’s talk a little bit about healthcare. Okay. In the UK it’s cradle to
grave, right? Yes. You’re covered from, you’re born a UK citizen, you got full healthcare coverage, not
00:31:05 [Speaker Changed] For, there are some things where you have to pay like prescriptions,
prescription drugs, but very heavily subsidized. And also you have to wait. And so there’s a lot of private
healthcare in Britain where people avoid the lines. So if you need
00:31:22 [Speaker Changed] To, how bad, how bad are the lines?
00:31:24 [Speaker Changed] Well, it depends where you are. And it can be quite soon. But you might
have to wait a couple of years to get a hip replaced, for example. Really? And the same is true in Canada.
00:31:34 [Speaker Changed] I was gonna ask, ’cause I’ve heard the same thing in Canada about both
things, about some of the weights for specific surgeries and the rise of this sort of concierge medicine
for the people who can afford it. They wait a week to, to get in to see a doctor if that
00:31:51 [Speaker Changed] Yeah. But a lot of people in America have concierge medicine.
00:31:53 [Speaker Changed] Yeah. That, that’s matter what else they have because
00:31:55 [Speaker Changed] It,
00:31:56 [Speaker Changed] It’s so, so clearly it’s, it’s a huge difference. Ultimately in Canada and the uk
you’re paying for that through higher taxes. That’s right. You,
00:32:06 [Speaker Changed] You. But it only costs half as much as the share of GDP
00:32:09 [Speaker Changed] D So that’s where I was gonna go. Why if, if the US has the supposedly
more efficient private sector than big, slow, incompetent, bureaucratic government, why does US
healthcare cost twice as much as the rest of the world and create worse outcomes?
00:32:26 [Speaker Changed] Well, because it’s full of rent seekers, which is what we were talking about
before. I mean there’s a lot of people getting very wealthy out of that. That they’re device
manufacturers, they’re pharma companies, there’s hospitals, which are a huge part of this. Also
remember, if you’re in the UK and the government pays for everything, there’s no insurance industry,
right? So that insurance industry is a big chunk of change. And it’s not their profits they’re making, it’s so
expensive though, that’s in there too. But it’s just that they exist. I mean, there’s
00:32:59 [Speaker Changed] A giant middleman in between the doctor and the patient
00:33:01 [Speaker Changed] Who’s spending a lot of time trying to stop you. The stop you getting the
healthcare you need.
00:33:06 [Speaker Changed] That is very true. My personal experience has been, insurers are very happy
not to have you do anything. To be fair, a lot of times people will make an appointment and it’s a month
off and by the time the month rolls away, the issue is, especially if it’s like a sports injury. But if you have
something really serious, don’t we want people to get in and and engage in preventative medicine
before it gets worse?
00:33:34 [Speaker Changed] It’s not entirely clear. Preventive medicine sounds like a great idea, but it’s
not always such a great idea. So for instance, one thing about preventive medicine I worry about a lot is
smart watches for instance, right? So if you’ve got one of those, you’re gonna get all sorts of false
positives, right? And you’re gonna spend a huge amount of time getting tests for things that you know,
you probably don’t have. And so preventive medicine of that sort can cost a lot of money. There are
types of preventive medicine like taking anti-hypertensives or taking statins for instance, which save an
enormous number of lives. They don’t cost hardly anything. And those have been the things that have
been largely responsible for the rapidly de increase. Well, the decrease in mortality and the increase in
life expectancy in the last quarter of the 20th century. I mean
00:34:30 [Speaker Changed] I, I saw some, not the studies themselves, but some articles about them
that found, there are all these proactive things that are a little expensive that insurers could do, but they
don’t because their experience has been the average person switches either insurers or jobs and
therefore you’re gonna switch your coverage provider something like every 4.7 years. And if the payoff
for these expensive preventative things are seven to 10 years down the road, they have no incentive to
do it.
00:35:02 [Speaker Changed] I didn’t, I haven’t seen that. But it sounds entirely plausible.
00:35:05 [Speaker Changed] It was just kind of, Hey, don’t you wanna prevent these? No, they’re not
gonna be a client in five years. So they’re not,
00:35:10 [Speaker Changed] I mean, yeah. Well that could be.
00:35:12 [Speaker Changed] What other factors do you observe about healthcare in the United States
versus elsewhere?
00:35:17 [Speaker Changed] Well the, the major thing, my, my colleague, my late colleague, Uwe
Reinhardt, who was our sort of local healthcare expert, and it was a very fine researcher and lecturer is a
very funny man, very witty man. He wrote a book called It’s the Price is Stupid Sort of Idea. And the
argument is that almost everything in the US costs about twice as much as it costs in other countries.
Really? Yeah. So all these drugs, you know, everything
00:35:44 [Speaker Changed] Healthcare related you’re saying?
00:35:45 [Speaker Changed] Yeah, everything healthcare. So if you look at the price of drugs and you,
you can look at the identical drugs and you could look at them across countries and there’s any number
of papers who’ve done this, you know, in the New England Journal of Medicine and the JAMA and so on.
And you know, they cost, the same company is selling the same drug at twice the price or more than
twice the price here than they do in other countries. Now, in Britain for instance, they have a thing
called nice, which is the National Institute for Healthcare Excellence or something. And what they do is
they evaluate new drugs and they look, they do a cost benefit test and they disallow it if it doesn’t save
enough lives as it were, or cause enough extra health route per dollar. So then what happens is the
pharma companies, if they wanna sell it in Britain, they reduce the price to meet that cutoff. Right?
Right. In America, they don’t, they charge the full freight. So it just costs a lot more. There are
arguments for that that you hear from the pharma companies all the time, which they say, we are doing
the research here. And you know, Britain is just piggybacking off that. Right? I think those arguments are
wearing a little bit thin nowadays, but it’s, I can’t disprove that
00:36:59 [Speaker Changed] What do do any other countries And, and I don’t watch a whole lot of
television commercials. Everything I watch is either streaming or dvr. So I fast forward through it, but it
seems every other commercial is for some pharma product. When I was a kid, none of these obscure
medicines advertised on tv. I, I still don’t even know who asked their physicist about restless leg
syndrome. Their
00:37:26 [Speaker Changed] Physician probably
00:37:27 [Speaker Changed] Right? Physicist, their physician, not their physicist. But it just seems sort of
bizarre that we have all these ads. Does any other country in the world have
00:37:36 [Speaker Changed] Question? I think there’s one, which it may be New Zealand, either New
Zealand or Australia, forget, that’s illegal everywhere else in the rich world. And it’s true. I went off to
my doctor and he said, well, you know, if you were a pregnant woman, maybe it would be a good idea,
but you’re not. So we don’t really need that. But that’s part of it. The other part of it is there’s a very
large amount of relatively low value stuff that’s quite profitable and is done on a regular basis. So for
instance, if you wanna have an MRI in Britain, you might have to drive ways or travel in order to get one,
or you might have to wait a month or two. Whereas every doctor’s office in Princeton has one of these
things, right? They’re lying idle most of the time that costs a lot of money. So there’s just a lot more of
those procedures being done, which are helpful, but maybe not super helpful sort of idea,
00:38:30 [Speaker Changed] Kind, really kind of fascinating. What else accounts for this big gap? You,
you mentioned certain things that are inexpensive. We just passed a law here that capped insulin for, I
wanna say Medicaid recipients. I, I, I could be getting that wrong. At some very moderate modest cost. I
think insulin has been off patent for decades.
00:38:55 [Speaker Changed] It was off patent from the day it was invented. Oh,
00:38:58 [Speaker Changed] Is that, is that
00:38:58 [Speaker Changed] The inventor sold it to a hospital in Canada for a dollar each, and that was
it. They, no money, no patent, no nothing. It’s never been on patent.
00:39:09 [Speaker Changed] So, so how on earth does something like that become crazy expensive in a
place like the United States?
00:39:15 [Speaker Changed] Well, because it’s allowed to become crazy. Penn State, you know, they
have different delivery systems or slightly different drugs. So they’ll tell you the drugs are a little bit
better and all the rest of it. So they, they can keep rolling this out and then get patents on things that
don’t change the basic thing very much. And so that happens. And I think it’s not Medicaid, I think it’s
anyone on Medicare.
00:39:35 [Speaker Changed] Medicare. Okay.
00:39:36 [Speaker Changed] And who’s like anyone over 65 and there’s a limit on how much, and so it’s
pretty widespread.
00:39:43 [Speaker Changed] Given all of this, what has led to all of this inequality in the United States?
What, what policies are should we be pointing a finger at?
00:39:53 [Speaker Changed] Well, here’s something, maybe let, let’s just go back one second to the,
because the hospitals are a big part of this. They’re just unbelievably expensive and they’re very
luxurious compared with hospitals in Britain. If you go into a hospital in Britain, there might be 12
people in the ward. There’s no private rooms, for instance. And that sort of thing is very, very expensive.
And maybe we’re a rich country, maybe we want to have that. But it certainly costs a lot and there are
cheaper ways of doing that. And it seems to have very little effect on life expectancy. And, you know, it
doesn’t kill you is part of it. And one other thing that’s worth noting is no one really understands that,
but I think the last four or five years has stopped growing. The total expenditure on health has stopped
growing. And there are people who were involved in the writing of Obamacare who claim that the
provisions in Obamacare are actually kicking in. But I don’t think anyone knows the answer to that
00:40:47 [Speaker Changed] Yet. I, I’m gonna tell you, my single biggest observation about the A CA in
Obamacare is as soon as that became the law of the land, which is, what was that 2000 11, 13, 19,
00:41:02 [Speaker Changed] It was the law earlier, but it didn’t kick in for a couple years.
00:41:06 [Speaker Changed] All of these walk-in clinics popped up everywhere where you didn’t have to
go to your regular physician and you didn’t have to go to the emergency room. You could walk in, show
an insurance car card, they would diagnose you for something. Half the time it’s an antibiotic and they
send you on your way. And those are everywhere, especially in, in cities that were kind of medical
deserts for a while. I’m curious what the, the impact of that might
00:41:33 [Speaker Changed] Have been. Some of them are very cheap. They don’t do very much. Most
of them. And a lot of people go in there wanting an antibiotic, right. But they’ve got flu and it’s a virus,
right? We, it’s a cold. We’ll do, it’s a virus. They say you can’t do that. So I’ve gone in there to try and get
things and you know, I didn’t get what I wanted to go somewhere else. But I think there are things like
that which are helping control costs. But I’m now out of my zone of expertise Gotcha. Here. But I mean
the, the one thing that Ann and I spent a lot of time writing about in our book was that if you have
insurance through your employer, right, that costs nowadays about $11,000 a year per employee and
about 20 odd thousand dollars for a family policy that costs about the same for the CEO as it does for
the CEO’s driver. Right? Because you’re insuring the body, not the salary. Right? That’s right. So this puts
an enormous burden on low wage workers. And it’s been a big contributor to outsourcing jobs so that
most companies don’t hire their own security, their elevator operators, their transport people, they’re,
you know, food service people and all the rest of it. And a lot of good jobs have been lost because of
that. So that’s one of the ways in which this very expensive healthcare is eating the heart of our
economy.
00:43:00 [Speaker Changed] Huh. So in other words, people, companies, employers don’t wanna hire a
$40,000 employee, right. Still far above minimum wage, but on the bottom half of the wage spectrum.
’cause there’s an $11,000 Right. Tag on top of that for healthcare.
00:43:21 [Speaker Changed] One CEO told us that their HR people came around to the annual
conference where they were looking ahead for the pricing and all that rest of it. And he said, we have
bad news for you that your healthcare costs, the policies you have are gonna cost 40% more.
00:43:37 [Speaker Changed] 44 0.
00:43:38 [Speaker Changed] Wow. It was only one year. But as you said this, these things are going up
like crazy. So
00:43:43 [Speaker Changed] 9% a year for as long as
00:43:45 [Speaker Changed] I can remember. Yeah. So you get three or four years and it can be 40%.
Wow. So there’s this sort of thing. And so the company said, you know that we can’t do that. Right. It’s
not gonna happen. And what should we do? And they said, you get McKinsey and you fire all your low
paid staff
00:44:00 [Speaker Changed] Really. And then hire ’em back through some company that is going
00:44:05 [Speaker Changed] To the Ram Jam cleaning company. Right. You know, a wheels driving
company. And you know, this CEO at least. And I have no way of verifying this thought that many of
these workers were undocumented
00:44:19 [Speaker Changed] Aliens. So they would never get hired anywhere else anyway.
00:44:22 [Speaker Changed] Well, there’s an informal economy. Yeah. But they’re probably not getting
healthcare benefits. So you’ve shifted the healthcare benefits outta the company, essentially. And you
know, it, it means you’re much more interested in hiring high, high income workers and very
uninterested than you said. As someone who’s being paid 30,000 a year or 40,000 a year, you don’t
want to carry $11,000 worth of healthcare insurance.
00:44:47 [Speaker Changed] Huh. That, that’s really quite fascinating. Let’s talk about immigration. It
seems like the total numbers of legal US immigrants have been falling over the fa past few decades, at
least relative to the overall labor pool. Tell us what’s going on with immigration in the United States.
00:45:06 [Speaker Changed] I I actually didn’t know that though. I’d heard something yesterday, which,
00:45:09 [Speaker Changed] Well, it’s falling and then it’s starting to tick back up. Yeah. And it’s, but it’s
still below where we were. It’s had you just projected it out 20 years ago?
00:45:17 [Speaker Changed] Yeah. That, that could well be. No, I don’t know much about that. And you
know, I am obviously a well-documented alien. I’m not an alien, I’m now an American citizen, though it
took me 30 years to get around to doing that. Dual
00:45:32 [Speaker Changed] Passports or just one.
00:45:33 [Speaker Changed] I have dual passports, which in Britain they allow you to do. Right. I would
not be Sir Angus if I’d given up my British That’s right. Passport. And they check on that. Oh really?
00:45:42 [Speaker Changed] Well, so you get a phone call from the Queen Angus, what’s going on?
00:45:46 [Speaker Changed] No, no, no, no, no. But it, it’s a very British thing that are secret committees
that you’ve no idea who are members of those, of the great and the good who decide who they’re
gonna give knighthoods to or other honors. And I have friends who British who have a Nobel Prize who
did not get one for many, many years.
00:46:06 [Speaker Changed] Oh, so it wasn’t just the pride. ’cause you a year later got got the
knighthood.
00:46:12 [Speaker Changed] That’s right.
00:46:13 [Speaker Changed] What, what was that call like? As long as we’re we’re talking about it.
00:46:16 [Speaker Changed] Well, it doesn’t come from the Queen or even from the Prime Minister, but
it does come from the British consulate here in New York City and say, would you accept a knighthood if
it was bestowed on you? And I said, well, are you kidding? Of course I of
00:46:31 [Speaker Changed] Course. Yeah. You have to go fly back to London for this.
00:46:33 [Speaker Changed] Well there’s actually a bunch of places you could go. I could do what Sean
Connery did and insist that it’d be given to me in Scotland, which where I grew up at Holly Ru Palace. But
there’s a whole bunch of dates over the years. And it’s an interesting thing because the royal family
always does it. They’ve never delegated even during wartime to civil servants, however elevated or, and
a thing. So there’s about four members of the royal family who do this. And the queen, you know, did
very few towards the end of her life. But you know, Charles did a lot, princess Anne does a lot and
William Wills does a lot. He did me. That’s
00:47:15 [Speaker Changed] Fantastic.
00:47:15 [Speaker Changed] And he knew quite a lot about my work and he hit me with a sword that
was his grandfather’s son.
00:47:21 [Speaker Changed] I I, I think it’s hilarious that Sean Connery said, oh, knighthood, bring me the
queen, send the royal family to me, me, I, I’ll be right here in Scotland. Right. Who else could have
gotten away with
00:47:32 [Speaker Changed] That? I don’t know.
00:47:33 [Speaker Changed] But that, that’s absolutely hilarious. So, so let, let’s talk a little bit about
what you see in terms of, of legal immigration. What, what’s happening here in the States and and how
important is it? Yeah,
00:47:47 [Speaker Changed] Okay. I mean, the legal immigration is a lot of, it’s high-end immigration. I
mean
00:47:53 [Speaker Changed] Skilled,
00:47:54 [Speaker Changed] Skilled people,
00:47:55 [Speaker Changed] Semi wealthy
00:47:57 [Speaker Changed] Who are gonna work for, you know, and you see the CEOs of people like
Microsoft. And
00:48:02 [Speaker Changed] So all of Silicon Valley, something like 25% of the C-suite, maybe even
more. Were not not born in the
00:48:08 [Speaker Changed] United States. Were not born in the United States. Right. And there’s also a
long literature of creativity in immigrants. So that many of immigrants into the United States. Tesla, not
Elon Musk, but Elon Musk of course was born in South Africa. Yeah.
00:48:22 [Speaker Changed] South Africa. Africa, yeah.
00:48:24 [Speaker Changed] We’re immigrants. And there’s some suggestion immigrants are much
healthier than non-immigrants. And that’s partly because immigrants are sort of selected special people,
00:48:36 [Speaker Changed] Self-selecting you’re gonna pick up and move halfway around the world.
You, you have to be motivated, you have to be fairly robust to do that. And you have to have a certain
type of mental attitude and constitution I would imagine.
00:48:49 [Speaker Changed] I think that’s right. But of course the big controversy nowadays is not about
that end of things, it’s about the other end.
00:48:56 [Speaker Changed] The illegal immigration or well,
00:48:58 [Speaker Changed] Or the less skilled undocumented aliens who are swarming across the
border in large numbers. Right. And we have no mechanism for stopping that. So I don’t wanna talk
about that because that’s not my area of expertise. And you hear about it in the newspapers and on the
radio and television all the time. But just about this question as to whether immigration lowers the
wages of Native Americans. Huh. Now David Card is one of the big authors who claims it doesn’t have
any such effect at all. And Paul Krugman, who you’ve talked about, has been writing blistering pieces in
the New York Times saying it doesn’t decrease local wages. Denouncing the lump fallacy, which says that
there’s only finite number of jobs in America and if immigrants get them, there’s none left or there’s
fewer left for ordinary people. And I suspect that’s not true. I think we’ve been getting this wrong,
actually. Really? And I think it does, in fact. And so I think one of the reasons that inequality is so high
now is because 15% of the population is foreign born, which was also true during the Gilded Age. And
we had this huge dip, I dunno if you’ve seen these pictures, but if you go back to 1890, but 15% of the
population was foreign born. If you look at it now, 15% is foreign born. And in the trough in the late
sixties, it was down to, I don’t know, seven or 8% or
00:50:25 [Speaker Changed] Post-war era is that it dropped in half.
00:50:28 [Speaker Changed] Yeah. Well, what happened was it the, the laws, the banning of immigrants
making it almost impossible were in the twenties. So it took a long time to come down. Gotcha. And
then there was this heart cellar act, which was passed in I think 1968, and it was passed under the
promise that there would be no increase in immigration at all. And that turned out to be completely
false. And it was completely false because they weren’t counting the family members who were allowed
to come in afterwards. And that’s what’s driven the huge increase
00:51:03 [Speaker Changed] Back to 15% what we saw a century
00:51:06 [Speaker Changed] Ago. It’s come back to 15%. Right. And if you look at income inequality in
America, it looks exactly like that too.
00:51:11 [Speaker Changed] So, so that leads to the obvious question, how parallel is or, or what’s, is
there a mechanism between immigration and inequality?
00:51:22 [Speaker Changed] Yes, I think so, though I’m now out on a limb and lots of my economist
friends are gonna denounce me. And Paul Krugman tonight is probably gonna beat me over the head
with a chair or something. But, but even in that, you know, David Leonhart, he,
00:51:35 [Speaker Changed] By the way, he’s a very gentle debate.
00:51:37 [Speaker Changed] I know, I know Paul. It’s not like debating Larry Summers, which I did
recently too.
00:51:42 [Speaker Changed] Oh, I’m so sorry.
00:51:43 [Speaker Changed] Yeah. But you should watch the video. There’s a video.
00:51:47 [Speaker Changed] Oh really? I’ll, I’ll link to it in, in this,
00:51:49 [Speaker Changed] Which it was a very unpleasant, un encounter, but he took great objection
to this book. So I think it is true that what’s happened is if you bring in large numbers of unskilled
immigrants, then that is good for rich people because it provides, and it’s good for employers and
provides a very large, very cheap labor force pool
00:52:14 [Speaker Changed] Of, of low wage workers
00:52:15 [Speaker Changed] Who work in agriculture, who work. You know, if you go to Princeton, New
Jersey and walk around town, there are all these beautifully maintained houses covered with velvet
green lawns, you know, and everything’s immaculately maintained. Well, I don’t think anyone who you
would see doing that work, you would hear them speaking English, all
00:52:36 [Speaker Changed] Farm
00:52:36 [Speaker Changed] Born, they’re all foreign born.
00:52:39 [Speaker Changed] So I,
00:52:39 [Speaker Changed] Or at least that the children of foreign born people,
00:52:42 [Speaker Changed] I’ve noticed. So it’s landscapers, yes. It’s farm workers during the finance,
the, the building boom, leading up to the financial crisis, the, it was commonly understood that painters,
framers, stone, masons, ruthers, plumbers, electric, like a huge influx of people from Mexico and South
America who were skilled workers. These aren’t unskilled workers. And they paid, they were paid a
pretty decent wage for building houses. You still see that’s a pretty substantial slice. And when people
complain they can’t find farm workers or they can’t find roofers, it’s because they’re very often, it’s
because there, there’s been some shift in, in who is working where, who is staying where. Right. Again,
all anecdotal, not, not hard data, but
00:53:35 [Speaker Changed] No, but it’s just, if you look at these inequality patterns in the Gilded age
when you had these huge houses and you know, many servants and all the rest of it. Now we don’t have
domestic servants, but we do have people who do the same things. Right. Who look after our yards and
who look after it. And you know, if you go to European countries, you just don’t see that. I mean, I
remember talking to some Danish friends and they say they can’t afford to have the roof on their house
replaced because, you know, relative to their salaries, it cost four or five times what it would cost in
Princeton. Really?
00:54:05 [Speaker Changed] Yeah. So we pay more for healthcare, but less for landscaping and
contracting. Absolutely. Huh. That’s really fascinating. So, so what other factors are driving inequality
when it comes to immigration? I have like a very distorted perspective because I think of the people like
yourself or Silicon Valley or Elon Musk coming into the United States, either starting businesses or
bringing over a highly regarded stem. We call it skillset science, technology, engineering and math. I i Is
that who’s coming over as legal immigrants or is that sort of a, a distorted perspective?
00:54:48 [Speaker Changed] I think and legal immigrants, you’ve got both because a lot of them are
families of unskilled people. Not particularly skilled, but you also compared with the general population
where you think it would probably be a normal curve. Right. With skills in the middle. Immigrants, I think
in almost all countries are more like Bar Bell bimodal. Yes. You, you’ve got these very skilled people,
places like Australia. And someone told me the other day that sheriff immigrants foreign born in
Australia is over 30%.
00:55:18 [Speaker Changed] That wouldn’t surprise me.
00:55:19 [Speaker Changed] And they would like more And that’s because they have an income test or
they have a wealth test or whatever, so.
00:55:25 [Speaker Changed] Oh really? Yes. And where are those immigrants coming from? Are they
coming from the Philippines and Vietnam or are they coming from elsewhere?
00:55:33 [Speaker Changed] Many places I think, I mean they’re very, you know, strong Serbian Greek
communities. Huh. But also a lot of them from East Asia nowadays pr pretty
00:55:44 [Speaker Changed] Good for a penal colony.
00:55:45 [Speaker Changed] Right. Pretty good for a penal colony. You know, they call the latest the new
immigrants, they call them boat people. And that’s ’cause the first thing they do when they get to
Australia is buy a boat.
00:55:54 [Speaker Changed] That’s very funny because when we talk about boat people in the United
States, they’re coming over from Cuban elsewhere on a boat. Yes, exactly. Not buying a boat that, that’s
really fascinating. So we haven’t really talked about education very much other, other than the whole PC
thing. How significant is education to inequality, whether it’s on the immigrant side or, or domestically.
Born and raised.
00:56:24 [Speaker Changed] Okay. So let me go back to not income inequality again so much, but this
education inequality, because I think this distinction that is so important here between people who have
a four year college degree and people who do not, that inequality is threatening to bring us down. I
think that’s the most serious.
00:56:46 [Speaker Changed] So co so what, before we get to college, there is a relatively small group of
people who aren’t even high high school graduates,
00:56:56 [Speaker Changed] But that’s the client. Overtime, it’s
00:56:57 [Speaker Changed] Pretty small. That’s faded to a, a very small percentage. What
00:57:01 [Speaker Changed] About a third of the population has a four year BA or more? About a third
of the population has some college. Okay. Which means they went to four, two
00:57:10 [Speaker Changed] Thirds. So it’s two thirds?
00:57:12 [Speaker Changed] No, some college, but some college included two year. No,
00:57:15 [Speaker Changed] I mean there’s a third with a college degree. Yes. And then another, an
additional third with some college. Yeah. Meaning they have a high school degree?
00:57:23 [Speaker Changed] No, they have a high school degree, but they also have maybe a, whatever
the thing that you get from a junior college. The
00:57:32 [Speaker Changed] GED, the equivalent degree.
00:57:33 [Speaker Changed] No, no, no, no. GED is equivalent for high school. This is
00:57:36 [Speaker Changed] Like, oh, the, so the two year
00:57:38 [Speaker Changed] Degree you’ve to medical college. Right. It’s called an associate’s degree or
something. Right. Or they’ve been to college but didn’t finish. Right. So the people with the two year
degree and been to college but didn’t finish are another third. Got it. And then there’s a third who have
high school or less, and the people who didn’t graduate from high school and not all that many
anymore.
00:57:57 [Speaker Changed] It’s becoming a small, so, so let’s bring this back to the college. How
significant, I assume a college degree is very significant or even a two year degree is significant to your
future earnings and your standard of living. How, how wide is that gap?
00:58:13 [Speaker Changed] Well, the gap is enormous. If you look at the wages, we used to, you know,
when I first came to Princeton, what you were handed out with the ration was that a BA bought you a
40% premium in your wage.
00:58:25 [Speaker Changed] That much, 40%.
00:58:27 [Speaker Changed] It’s now over a hundred.
00:58:28 [Speaker Changed] Get outta here. Double.
00:58:30 [Speaker Changed] It’s double.
00:58:31 [Speaker Changed] That’s amazing.
00:58:32 [Speaker Changed] So not only that, but those are the people who are not getting fired from
their jobs because of the rising healthcare costs, whereas the people without that degree or not. And
what had really changed my mind about, you know, and this happened to me very late in life after with
about pride, was this realization that when Ann and I were working on these people who were dying
from death
00:58:58 [Speaker Changed] Of
00:58:58 [Speaker Changed] Desp death, the deaths of despair from opioid overdoses, from suicide,
from alcoholism, that those, that huge increase, which started, you know, in the late nineties and goes
on rising today, that’s all among people without a ba. Hmm. So you got a ba you’ve like, got a vaccine
against these things
00:59:18 [Speaker Changed] That, that’s, that’s amazing. I, I vividly recall during the pandemic lockdown,
if you had a college degree and you were working in what we think of as a white collar job, you could
work remote. Your job was pretty safe. And if you didn’t have a college degree, you were up for grabs.
00:59:39 [Speaker Changed] If you look at the data, and then we have a recent paper that’s coming out
at Brookings. If you look at what happened during Covid, the people with a college degree had a slight
drop in life expectancy, maybe half a year. But if you didn’t have a four year degree, it’s huge drop.
Really? So they really got hit.
00:59:57 [Speaker Changed] So not just income, but life expectancy.
00:59:59 [Speaker Changed] Life expectancy, yeah. Income. I don’t care about so much, you know,
because if you’re dead,
01:00:04 [Speaker Changed] Doesn’t really matter,
01:00:05 [Speaker Changed] Does it? Income doesn’t really matter. And this is a terrible inequality
because, you know, this third of it’s only a third of the population that have a four year college degree.
And they’re doing great. Their life expectancy continues to go up, at least until the pandemic and then
only fell a little during the pandemic. But if you don’t have that, your life expectancy had been falling
since 19 20 10.
01:00:26 [Speaker Changed] Really? Yes. That’s amazing.
01:00:28 [Speaker Changed] I mean, it’s just awful. And this gap in 1992 and life experience is about two
years. It’s not like 13 years.
01:00:35 [Speaker Changed] And, and this is driven by the opioid crisis. And the tendency for people
without education are just much more likely to find themselves on the wrong end of that.
01:00:45 [Speaker Changed] It’s not just the opioid crisis, the opioid is very important. Suicide’s really
incredibly important. And suicide’s just a horrible thing. You know, the suicide researchers have believed
since the 19th century that more educated people were more likely to commit suicide.
01:01:01 [Speaker Changed] Is that true?
01:01:03 [Speaker Changed] It was true for many years. It’s not true in the US anymore. It’s flipped. And
our suicide rate is like it used to be in Lithuania or in the Soviet Union before it collapsed. So this is, to
us, is a signal that there’s something really, really wrong. But the, the fallen life expect a lot of it had
been driven by cardiovascular disease, which is, you know, this drop that was falling like a stone in the
seventies and eighties and nineties for people that be stopped.
01:01:31 [Speaker Changed] Huh? That, that’s fascinating. I, I I was looking at gun deaths earlier today
for a different project I was working on. I I think it’s something like, I, I’m doing these numbers off the
top of my head, so I’m gonna get it wrong. I think there’s something like 40,000 automobile deaths a
year in the United States. A slightly higher number of gun related deaths, of which something like two
thirds or three quarters are suicides. Is, is, is, does that sound about right?
01:02:00 [Speaker Changed] I don’t know that number, but I know the, the suicide rate is running at
about 40,000 Americans a year. Oh. So
01:02:06 [Speaker Changed] That’s that.
01:02:07 [Speaker Changed] So, and much of that is, is guns, at least by men. Right. Women tend not to
shoot themselves. Right. They take poison or suffocate.
01:02:16 [Speaker Changed] The numbers are really quite astonishing. How does the US compare to
other developed modern wealthy countries?
01:02:24 [Speaker Changed] Incredibly badly. Really? Well, you know, first of all, the, the US is the only
country that let pharma companies like Purdue Pharma Right. Poison the population. Right. You know, it
just doesn’t happen in other countries because that’s not allowed. And, you know, Purdue Pharma was
paying enormous sums of money for campaign finance for politicians. Some of those politicians
intervened to stop pharma being, you know, that stop that. The DEA investigating these people. There’s
a 30 minute show, which is just incredibly horrible on that happening.
01:02:58 [Speaker Changed] To be fair, they made them take their name off of a wing of a museum. So
now they’ve certainly learned their lesson.
01:03:05 [Speaker Changed] Yeah, absolutely.
01:03:07 [Speaker Changed] I’m sure. And in fact, the, the settlement which cost eight or 10 or 12, some
ungodly amount of money keeps getting rolled back. I don’t know what the state of is now.
01:03:16 [Speaker Changed] There are a lot of lawyers out there. Half of the lawyers are working for
Purdue, and the other half are working for ex-President Trump.
01:03:25 [Speaker Changed] Well, that’s a, that that’s a, the, a challenge, I guess it’s the, the attorney
full employment legislation. Well,
01:03:33 [Speaker Changed] Except, you know, the thing about the pharma was once the docs realized
what they’d done Right. And pulled back and said, we’re not giving you any more of that. Right. The
illegal drug dealers moved in. Ah. And so it’s now a fentanyl epidemic. Fentanyl is in some sense a legal
drug, but it’s coming.
01:03:55 [Speaker Changed] It’s poison. I mean it’s poison. It’s how many the the number of overdoses,
the, it’s been a aligned straight up going back, you know, for almost 15 years now.
01:04:05 [Speaker Changed] Yeah. But it picked up once the doctor, you know, so this was ignited by
pharma, you know, j and j, which is one of the most, you know, prized names in corporate America, was
growing puppies in half of opium, puppies over half of Tasmania to feed this thing. Oh
01:04:23 [Speaker Changed] Really? Yes. That that, that’s
01:04:25 [Speaker Changed] Fascinating. They paid a huge fine for that.
01:04:26 [Speaker Changed] And, you know, you could get legal weed anywhere. I I know it’s a different
audience. No,
01:04:31 [Speaker Changed] I think it’s a terrible stuff. You do. Yeah, I do. I think it’s a great mistake.
Huh. And I think a lot of young people get their brains deformed.
01:04:39 [Speaker Changed] Well, you really shouldn’t be smoking or, or eating edibles when you’re 14.
You’re not supposed to have access to that. But they always had access to illegal drugs. That’s the
challenge. Do you take the money away from the illegal cartels who do marijuana and worse, you know,
we see the parallels with, with cigarettes and alcohol. We still haven’t figured this out in the United
States.
01:05:04 [Speaker Changed] We certainly haven’t figured it out. So the alcohol is another way of killing
yourself, you know, like suicide and like opioid
01:05:11 [Speaker Changed] Slowly over time. Yeah.
01:05:12 [Speaker Changed] Just takes
01:05:13 [Speaker Changed] Longer. Yeah. I, it, it’s, there’s no doubt about that. So I’m kind of fascinated
you, you’re bringing up deaths of despair from the book you wrote, co-wrote with your wife. When we
look at consumer sentiment in the United States, despite lowest unemployment rate in 50 years, a fairly
robust economy, stock market at all time highs. The consumer sentiment, especially in 2022, during that
inflation surge, it, it collapsed. It was worse than during covid ID worse than the financial crisis, worse
than the.com implosion worse than the 87 crash, is this spate of negative consumer sentiment, less
related to inflation than perhaps all of these other things. Inequality, deaths of despair and, and a, a
streak of hopelessness that seems to be at work in the bottom half of the United States.
01:06:15 [Speaker Changed] I, that’s my hypothesis too.
01:06:17 [Speaker Changed] I don’t, I read the book,
01:06:19 [Speaker Changed] But I I don’t have any, well, except that the consumer sentiment bit was
sort of more recent. And it’s not really in there, but it drives me nuts that people say, well, you know,
America is the most successful economy in the world. And if you look at all these European economies,
they’re doing terribly badly. And why don’t Americans realize that? Well, 1.2 million of them died during
covid and, you know, another 200,000 a year are dying from 250,000 a year are dying from alcohol,
opioids, and suicide. And none of that is happening in any of these European countries.
01:06:55 [Speaker Changed] Oh, really? The gap is that big. So, so clearly we
01:06:58 [Speaker Changed] Gone none. There’re obviously suicides in Europe and
01:07:01 [Speaker Changed] Some Sure. But I mean, 1.2 million is a low estimate. I’ve seen numbers as
high as 2 million. Clearly we didn’t do a great job during COVI. Hold that aside. Alcohol related deaths,
suicide go, go down the list. The US is far and away worse than, well,
01:07:20 [Speaker Changed] The, the right way to put this is, it’s not worse than if you go to Lithuania,
for instance, a lot of people die by suicide. But
01:07:26 [Speaker Changed] I’m not sure Lithuania is the country. I want to con, you know, to me, I look
at Switzerland, the uk, Japan, France, yeah. Germany, Italy, those should be US, Australia.
01:07:39 [Speaker Changed] Yeah. We have to be a bit careful about levels and changes. So there’s huge
upsurge since the late nineties in deaths of despair. And, and to some extent in, in cardiovascular
disease, going the wrong way is unique. You don’t see that rise in any other rich country. There’s one
other rich country. It’s where I come from Scotland. It has a drug epidemic almost as bad as humans.
01:08:04 [Speaker Changed] Oh. And where are those drugs coming from?
01:08:06 [Speaker Changed] If not, they’re Perdue, they’re drugs. Yeah. But they’re not opioids. They’re
methamphetamines and things. And I don’t really know enough about that. It’s very hard to get the sort
of data that Anna and I would like to get, even though people in Scotland certainly talk to us about it.
01:08:22 [Speaker Changed] So, so why is the US seeing the cardiac deaths, which have been improving
for so long, is this just a function of us obesity? Or what’s the driver of that?
01:08:34 [Speaker Changed] Don’t know. Dunno. And I don’t think anyone knows. Huh. And there’s
been, the literature is not really picked up on the fact that it’s cardiovascular mortality is going up for
people without a degree and it’s going down for people with a degree.
01:08:49 [Speaker Changed] Oh, really? So it’s very bifurcated also.
01:08:52 [Speaker Changed] Well, it’s bifurcating too. And it may be that people are not taking their
antihypertensives that they used to obesity. It’s possible, but it’s a little hard to tell the story because if
you look across different states, there are different obesity levels. It doesn’t really seem to
01:09:06 [Speaker Changed] Correlate, generally speaking, if you don’t have a college degree, are you
more likely to disregard doctor’s orders and, and not take medicine? Is that the implication here?
01:09:20 [Speaker Changed] It’s possible. It it, that’s a inflammatory statement. People get very upset
with you when you say that. It’s like blaming the victim sort of idea. But it’s
01:09:28 [Speaker Changed] Possible. We’re trying to figure out why the victims are victims. Yep. And
we, there, there should be no stone left unturned.
01:09:33 [Speaker Changed] Well, it also may be that it’s hard to get, in some places it’s hard to get
access to doctors. And so, ah-huh. And also, I mean, there’s a positive side, but the gaps are still
increasing, which is in cancer. So, you know, Nixon declared war on cancer in what, 19 60, 50
01:09:49 [Speaker Changed] Years
01:09:50 [Speaker Changed] Ago. Nothing happened until 1990. Right. And then cancer deaths have
been falling quite rapidly, but they’ve been falling much more rapidly for people with a college degree
than people without. So for instance, breast cancer, mortality for women used to be higher among
people who were not educated. And as the higher, sorry, it used to be higher among women who were
educated, college women had much higher mortality rates from breast cancer. And that’s not true
anymore. Well,
01:10:19 [Speaker Changed] Were, I kind of remember seeing something about that. Was it that the
rates were higher or the discovery of that’s what it was that was ultimately at fault?
01:10:29 [Speaker Changed] No, the discovery doesn’t affect mortality. The discovery affects the
number of years you survive after diagnosis. Okay. Which is why we should never pay any attention to
that number. Okay. While people do, but mortality rates are not affected by, you know, well, except that
you might save someone’s life by detecting it early. But the, the, the statistic that’s very dubious is the
one that says, you know, how many years you get to survive after diagnosis. Huh? ’cause you could
diagnose everybody with cancer at birth, and then they live a really long time.
01:11:00 [Speaker Changed] Well, I mean, credible diagnoses. So, so let’s bring this back to economics.
Okay. Because I have to ask, what is, what should be the role of economists in issues of public policy,
deaths of despair, wealth, health and, and income inequality? What role should your profession play in
trying to make this a little less terrible?
01:11:29 [Speaker Changed] Well, let, let me take back to one of the very first questions you asked me,
which is, I think about human wellbeing. And it’s much broader than just money. And economists have
been focused on money or the amount of money that people spend, you know, on consumption, on
income. And some economists, the marches sin would be the leading figure here has always said, you’ve
gotta look at mortality rates, you gotta look at health. But there’s happiness measures. There’s lots of
other things out there too. But, you know, this is what I was saying a few minutes ago, that, you know,
the American economy, just in terms of money doing so much better than the European countries, but
we’re dying in droves. You know, the bodies are piling up in the street. In what sense can you say we’re
doing well? And I think economists just have to get much broader about what they think about doing
well means
01:12:21 [Speaker Changed] Is is that the phrase communism? Is that where that comes from ignoring?
01:12:26 [Speaker Changed] Not really. I mean, economi is more like the minimum wage stuff you use in
a simple textbook. And that was a James quack coin that term. But it’s, no, I think it’s just when
economists do policy and they think about people getting better off or worse off, they’re thinking about
unemployment and jobs and money, and they’re not really thinking about whether people are, you
know, flourishing or not.
01:12:50 [Speaker Changed] Let, let’s take that another step. When I think of how economists play into
the role of things like this, the focus seems to be things like efficiency, productivity, not sat life
satisfaction or happiness. How do you steer the profession towards being a little more holistic and
looking at the whole picture, not just the dollars and cents?
01:13:14 [Speaker Changed] Well, what made me steer back was these deaths of despair, because you
can’t talk about them in ordinary economics language. There’s something else going on. And I think the
sociologists, many of the good sociologists have really a much better handle on what, how people’s lives
are coming apart with de-industrialization. For instance,
01:13:33 [Speaker Changed] Let, let me interrupt you a second in the other book, which I didn’t read,
but kind of skimmed an online outline. Sure. You do turn that into an economic analysis. It’s not just woe
is us, these are the deaths of despair. You, you correlate it to regional income and health education
levels. You really bring in a lot of things I think of as classical economics into analyzing deaths of
despairs. Is that fair?
01:14:02 [Speaker Changed] Yes. But not only we talk about levels of religion, how people have checked
out of going to churches anymore. We talk about
01:14:09 [Speaker Changed] That’s community as well. It’s, it’s not just
01:14:11 [Speaker Changed] Community, but that’s a big difference. Economists don’t talk about
community at all. Whereas sociologists spend a lot of time thinking about community. And so their chain
would be, here’s the wages in some place in the rust belt or something. The wages go down, the jobs go
away. But it’s not just the jobs. I mean, it’s the schools, it’s the police force, it’s the, you know,
community. Bob Putnam wrote this fabulous book on bowling alone, you know, and, and social capital,
right? His bowling alone guy was bowling in a union hall. There are no unions in the private sector
anymore. You know, and that was an important sort of power for ordinary working people. So I think
power is incredibly important and I think economists have just lost it
01:14:53 [Speaker Changed] There. So, so I wanna tie this back to economics, and I’m gonna share an
anecdote with you. Okay. So during the pandemic in the first few months, we’re locked down. You can’t
really do anything. You’re a little bored. My wife and I, we live out on Long Island. We would get in the
car and go for a ride and just drive around different towns where perhaps we might not have been
previously. And to me, everything is a economic study. What whatever I do, I try and find a way to turn it
back into economic data. And, and one of the things I noticed is that towns that had robust public
spaces could be a, a waterfront beach, could be a large park, athletic fields, whatever, seemed to be
open to the public and was a useful recreational, an area. Those seem to be affiliated more with
wealthier towns. Now, I, I can’t figure out which came first. Did the town become wealthy because they
had this attractive area and a lot of people wanted to live by it. Or do only wealthy towns are only they
able to afford these sorts of things. So, so it’s a little bit of a chicken or an egg, but it, it comes back to if
there’s a robust sense of community, what does that mean for inequality? What does it mean for
general happiness? And does that reduce those sort of deaths of despair that, that you’ve highlighted?
01:16:28 [Speaker Changed] I think it probably does. And I think that, I’m not sure you have to
disentangle the chicken and egg, and I think we’re on the same page here that, you know, I, I’m an
economist, you know, you’re an economist.
01:16:41 [Speaker Changed] I’m not really, I’m no, but okay. But, but I’m fascinated by, but
01:16:45 [Speaker Changed] The wage and the wealth that’s coming into the immunities is the driving of
this thing. Right. But, you know, if people lose their jobs, for instance, you can’t just give them the
money to make it up and any, we don’t. Right. And those things that happen in the community, like the
destruction of those open spaces, the destruction of the public library, the destruction of the schools,
you know, the loss of unions and things, those are aspects of people’s life that are not summarized by
the amount of money they spend. So the, the, those public goods, those public spaces are important to
people, but they’re not just the money they get. Right. If it was just the money that mattered to them,
they would never invest in those public spaces.
01:17:26 [Speaker Changed] Right. So, so I’m glad you brought that up because part of the reason you
won the Nobel Prize was saying, why are we looking at people’s income? We should really look at how
consumers spend their money. And that gives us a better way to evaluate, especially the, the bottom
quartile or So tell us about the, this kind of error by economics focusing on income instead of focusing
on consumption.
01:17:54 [Speaker Changed] Well, I th I’ve, in the current speak that I’m talking about now, I think of
income and consumption as sort of the same thing, right? I just want to get away from money. I want to
say that their marriages are really important to them. Sure. And marriages are disintegrating among
people without a ba, for example.
01:18:11 [Speaker Changed] Oh, is it? So US has been about a 50% divorce rate for since World War ii.
What is it for people who don’t have,
01:18:19 [Speaker Changed] I, I don’t know the rights, but there are graphs in Anonmized book. And
what happened was divorce went up for everybody and then it stopped going up for people with a
college degree. And it’s still going up for people without a college degree. Really? So you get these serial
cohabitation, you know, in which men and women get together. They don’t get married. The woman
doesn’t think the guy’s got enough prospects, she doesn’t stop her having a couple of kids with him.
Right. And then she trades them in for a better model as they were. Right. And so you get these families,
which the sociologists have studied in great depth of people, you know, men in their fifties who have
maybe six kids, but they don’t know any of them. They’re all living with other men. Right. What would
that do to your life? And that’s not just sort of a consumption thing. That’s your life coming apart. You
know, the things that give you meaning are just not there anymore.
01:19:11 [Speaker Changed] The, the household formation, failing to gel is very significant. Yeah,
absolutely. And, and more significant for people without college disease.
01:19:19 [Speaker Changed] Absolutely. And the same is true for pain, for instance. Now, pain’s hard to
measure, but if you look at something that people usually wouldn’t lie about, like sciatic pain, you know?
Right. Specific enough that if you had it, you would know about it and you wouldn’t say you had it.
That’s gone up through the roof for people without a ba,
01:19:37 [Speaker Changed] The the assumption is they’re more likely to be in a trade or some
01:19:41 [Speaker Changed] Doesn’t do it from
01:19:42 [Speaker Changed] Manual labor. Nope. That leads to that, or no, no.
01:19:46 [Speaker Changed] In fact, people have looked at that and it doesn’t work because actually the
jobs they’re doing in McDonald’s or an Amazon warehouse, they may not be ideal, but they’re not as
dangerous working in a car assembly plant or whatever they
01:19:57 [Speaker Changed] Were working for. Right. Well, they may have a college degree.
01:19:59 [Speaker Changed] Well, they may have, but the point is that you can’t explain the rising pain
by the changing job mix.
01:20:05 [Speaker Changed] So it’s not just physical labor. The degree is very, very significant.
01:20:10 [Speaker Changed] Seems to be, and we don’t really know what produces that. It’s like half the
p well that’s, I don’t want to quote a number, but a large number of Americans suffer from non-specific
lower back pain, for instance. Right. Which the medical system has no idea what to do with, again, less,
less than a college degree.
01:20:29 [Speaker Changed] Wow. That’s unbelievable.
01:20:30 [Speaker Changed] So this really is a story of people’s lives coming apart.
01:20:35 [Speaker Changed] So the question is, as a society, as a nation, and not just economists, but all
of us, what should we be trying to do to improve the overall standard of living throughout the United
States? What, what else can we be doing besides mandating a college degree?
01:20:56 [Speaker Changed] I don’t think mandating a college degree would necessarily do it because it’s
the social function of the college degree rather than the college degrees. So I, one of my favorite things
that gets me into trouble that would get me into trouble in this building is I think we ought to be much
more friendly to unions and that working people need more power. There’s hardly any members of
Congress who don’t have a college degree, for instance. Right. I think something like 2% of all state
legislators have, do not have a college degree. Wow. And I always think of going back to Britain in 1945
when Clement Atley was the socialist prime minister measly at the war, seven members of his cabinet
had their first jobs down a coal mine. Wow. Right. And so that was just a completely different, you
know, and those people had their hands on the lovers of power, probably the greatest foreign secretary
that Britain ever had. Ernest Bevin, who was the driving force behind nato, was the illegitimate child of a
prostitute who came up through the union movement.
01:21:58 [Speaker Changed] Wow. So, so I don’t see the unions reversing their negative fortunes. This is,
this has been a trend. I think you could go back to 1980 with the rescue of Chrysler. It’s been pretty
much such Patco Yeah. It’s been pretty straight down since, since that era. So besides the rise of unions,
what else could impact this challenge we face?
01:22:28 [Speaker Changed] Well, I think that the Deindustrialization is much more serious than
economists have had it to be. And they said, you know, lowering tariffs is a good thing. You know, it, it,
we can always compensate the losers, the gainers get more, but that’s all done in terms of money. Right.
And there’s no accounting for the community destruction and all the rest of it.
01:22:50 [Speaker Changed] So you raise a really fascinating point if people have been talking lately
about reshoring as opposed to offshoring and deglobalization. We’ve just passed a lot of legislation and
funded building semiconductor plants, building automobile plants. A anything that’s decarbonized
manufacturing has gotten the green light in the United States. Might this have a positive impact on
inequality?
01:23:20 [Speaker Changed] Absolutely. I think so. I’m quite enthusiastic about it. And it’s not an
accident. You know, Janet Yellen is a good friend, and she has promoted our deaths of despair book
every time she gets a chance, for example. And we have other friends in the administration who are
very much on the same page on this too.
01:23:38 [Speaker Changed] How long does it take?
01:23:40 [Speaker Changed] That’s a question, isn’t it?
01:23:41 [Speaker Changed] Right. It, so if we are in the midst of, you know, all this legislation, the Chips
Act, the Inflation Reduction Act, the infrastructure bill, these are all 10 year funded policies, 10 years
from now, might we see a country where the deaths of despair has fallen? And some of the healthcare
outcomes, wealth and income inequalities, might they be shrinking 10 years from now?
01:24:08 [Speaker Changed] That’s what I’d like to see.
01:24:10 [Speaker Changed] So I know I only have you for a limited amount of time. Why don’t I jump to
my favorite questions that I ask all our guests. Okay. Starting with what, what has been keeping you
entertained these days? What are you, what are you watching or listening to?
01:24:26 [Speaker Changed] Well, I, I, I was a late comer to podcasts, but I’ve done a fair number like
this. And some of the people like, I like Cardiff Garcia’s podcast, the new
01:24:37 [Speaker Changed] Bizarre VF ft. Is that where he is?
01:24:38 [Speaker Changed] He used to be the ft but now he’s independent. He has a podcast called The
New Bazaar, which I like
01:24:44 [Speaker Changed] A lot. The New Bazaar. Okay, I’ll check that
01:24:46 [Speaker Changed] Out. It’s not bizarre, but Bazaar as in an Arab market Right. Or something.
Right. And he has a very entertaining range of guests, and I like him. The other one that’s a bit different
is the New Yorker has writers and Es essays choose one of their favorite pieces of fiction and reads it on
a podcast,
01:25:10 [Speaker Changed] Reads their own fiction or someone else’s. No,
01:25:11 [Speaker Changed] It reads someone else’s fiction. Oh, really? And, and then the fiction editor
of the New, the New Yorker, Deborah ResMan, who was Danny Kahneman’s daughter-in-Law, I think
Huh. Discusses the, in a lengthy conversation after the reading. And I find those absolutely fascinating. I
mean, I’ve always liked short stories and hearing people really, people who spend their lives thinking
about short stories, talking about them is, is quite a revelation. So those are two of my favorite
podcasts.
01:25:42 [Speaker Changed] I, I have a flight coming up. I’m going to definitely download some of those.
Yeah,
01:25:47 [Speaker Changed] Absolutely.
01:25:48 [Speaker Changed] Let’s talk about mentors who, who helped shape your career.
01:25:53 [Speaker Changed] Someone we haven’t talked about was a man called Sir Richard Stone, who
was a, who worked for Keynes during the war on helping to pay for the war when Keynes was working
on that. And he got an Nobel Prize for his work on national income accounting. And I always wanted to
be like him. And he was very kind to me. And you know, he had a wonderful dinner table where all alsos
of interesting people came for meals. He was a real wine connoisseur and he wrote beautifully and he
was a real empiricist. So these were all the things I wanted to be.
01:26:30 [Speaker Changed] How, how did you, how did you know him?
01:26:32 [Speaker Changed] Well, I was just, when I came back from the Bank of England, which I was so
memorably unsuccessful, he had a research project funded by someone or other, and I was a lowly
research assistant on that for five years or something. So about the lowest job you can ever have in
academia. I think.
01:26:52 [Speaker Changed] So, so let’s talk about books. What are some of your favorites and what are
you reading right now?
01:26:57 [Speaker Changed] Well, I like detective novels though. I think of that as a sort of guilty
pleasure and being a good Calvinist. I try to ration that a little bit. I love the, the Ian Rankin books about
Edinburgh, for instance, and
01:27:14 [Speaker Changed] Ian Rankin.
01:27:15 [Speaker Changed] Ian Rankin.
01:27:16 [Speaker Changed] Ian Rankin. Gotcha.
01:27:17 [Speaker Changed] And he has a detective called John Rebus, who, who’s one of these
emotionally underdeveloped cops who is very smart, but has problems with these emotions. I like those
a lot. And, but I read a wide, I try to alternate between work and, you know, so I’ve been reading and I at
Marty’s book on the bankers have no clothes Right. About how banks ought to have be made to have
more capital than they have, which I was reading the newspaper yesterday. They’re now taking out huge
ads at National Air Union Station and so on, demanding that they don’t have to do that.
01:27:59 [Speaker Changed] Well, it’s gonna affect profitability if they
01:28:01 [Speaker Changed] Do well, that’s right. But they’re getting profits at the, at the expense of
putting all the rest of us at risk. Right. And, you know, that that’s one of the takers that we’re talking
about as opposed to makers that we need to do something about. And we haven’t really talked about
banks, and I don’t know as much about them as I know about healthcare, but there’s a similar amount of
rent seeking going on in both those to,
01:28:24 [Speaker Changed] To say the very least.
01:28:25 [Speaker Changed] To say the very least in both of those industries. And I’m reading Paul Thous
in new book about George Arro. Huh. And it’s about, it’s a novel and it’s a novel about oral’s early days
in the Burmese police.
01:28:41 [Speaker Changed] Huh. That sounds really interesting. It
01:28:43 [Speaker Changed] Is. Very good.
01:28:44 [Speaker Changed] Our final two questions. What sort of advice would you give a recent
college grad interested in a career in any of the sort of economics work that you’ve done?
01:28:55 [Speaker Changed] I think it’s, it’s advice that I would probably have moved away from, but it’s
still true, which is you really need to learn as much math as you can handle. And in finance and in many
other things too. I mean, I don’t really subscribe to the view that you can’t think straight unless you can
do it mathematically. Right. But, you know, I remember my son saying to me when he was 14, he said,
would you have regarded yourself as a well qualified mathematician in your time? And I said, but not
like you. So I, I think that’s, a lot of these people have done very, very well. So that’s, that’s a piece of
advice. I would, it’s a bit late by the time you graduated from college. Right. If you graduate in the SOC
department, that’s probably not the best advice.
01:29:46 [Speaker Changed] And, and our final question. What do you know about the world of
economics today? You wish you knew 40 or so years ago when you were leaving the Bank of England?
01:29:59 [Speaker Changed] Not much actually. I think for me it’s been a great adventure all along. And I
love learning new stuff and I love reading stuff. And there are real ideas there that I didn’t know before.
And I’ve been incredibly fortunate. I was gonna almost said unfortunate. I’ve been incredibly fortunate,
Mary, you know, I got the Nobel Prize in 2015. The work that Ann Case and I have done, which is what
both of us are best known for, was done after that. Really? So it’s like a whole new career for me
01:30:31 [Speaker Changed] With, with the Nobel Prize focusing attention on that
01:30:34 [Speaker Changed] Work. It certainly did, because the first paper in the proceedings, the
National Academy of Sciences came out three days after the Nobel Prize.
01:30:42 [Speaker Changed] By coincidence.
01:30:43 [Speaker Changed] By coincidence. Oh, really? And I can tell you when you get the Nobel Prize,
it really is being like, hit by a bus. Right. You know, there were reporters on our lawn about half an hour
after the announcement.
01:30:54 [Speaker Changed] You didn’t get the, did you get the phone call? Where, who is this really?
Yes. At six
01:30:58 [Speaker Changed] In the morning. I knew the person I was talking to you. I knew them pretty
well. Oh, you did? Yeah. So I, and he said, Angus, this is not a prank. And I said, Torsten, I never thought
it was a prank until you said that, but now I’m wondering.
01:31:12 [Speaker Changed] So I think it was Dick Thaler said he was in the shower and his wife
answered the phone. Tell he and yells from the shower, tell them thanks. But I’m busy thinking it’s a,
someone’s just pulling his leg. Right, right. I I could be getting it wrong. It may not be I,
01:31:26 [Speaker Changed] I hadn’t heard that story, but it’s, it’s,
01:31:28 [Speaker Changed] But you hear all sorts of things like that, right? Yeah. Yeah, sure.
01:31:31 [Speaker Changed] But then this paper came out about a week later and it was like being hit by
10 buses because it had this enormous impact. Right. And you know, the, one of the best stories I think I
tell in the book was in those days, and I think they’ve resumed it again, the American Nobels got to go to
the Oval Office and meet the president. Right. And when we were in, there’s a little anti room outside
the Oval Office, which had these Norman Rockwell paintings, which are not there anymore. They belong
to someone else. And a voice, someone came from inside and said, would Deaton and Case go to the
front of the line, please? Which we would know there alphabetically. And the door opened, and it was
not a flunky, it was Obama. Oh, really? Yeah. And so I said, Mr. President, I’m delighted to meet you and
I’d like to introduce you. And he said, professor Case needs no introduction to me. Oh, really? I am
familiar with the work and I’m a great fan. Wow. And then we spent almost all the time in the Oval
Office talking about the paper that had come out three days before. And he knew it inside out. Your,
01:32:39 [Speaker Changed] Your wife must have been walking on air.
01:32:40 [Speaker Changed] Yeah, she came out of the White House floating. I think I’m in love.
01:32:46 [Speaker Changed] Fascinating. Professor, thank you for being so generous with your time. We
have been speaking with Sir Angus Deaton, winner of the 2015 Nobel Prize in Economic Sciences. His
latest book, economics in America, an Immigrant Economist, explores the Land of Inequality is out
today. If you enjoy this conversation, well be sure and check out any of the previous 500 discussions
we’ve had over the past nine and a half years. You can find those at iTunes, Spotify, YouTube, wherever
you find your favorite podcasts. And check out my new podcast at the Money. It’s in the Masters in
Business Feed. And it’s short 10 minute conversations about Money with some of our favorite masters in
business guests earning it, spending it, and most importantly, investing it at the money wherever you
find your favorite podcasts. I would be remiss if I do not thank the crack team that helps us put these
conversations together. My audio engineer is Meredith Frank Atika. BR is our project manager. Anna
Luke is my producer. Sean Russo is my head of research. Sage Bauman is the head of podcast here at
Bloomberg. And I’m Barry, you’ve been listening to Masters in Business on Bloomberg Radio.

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