Transcript: Angus Deaton – The Big Picture

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, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

~~~

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 allof 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 tosee some criticism, at least in terms of political correctness and even what young and not particularlyexperienced college students say about things in the Middle East. President of of Harvard was essentiallyshouted 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, Ithink and, and huge. And it’s affecting all parts of American society in ways that we really have not seenbefore. 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 neverencountered that at Princeton. So I, I never felt that I had to issue trigger warnings or that studentswouldn’t let me talk about certain things. Or they put their hands up with their face when I said thewrong words.00:10:43 [Speaker Changed] That, that really goes on in college these00:10:45 [Speaker Changed] Days. Well, I’m told it does, but you know, I’m a consumer of this just asyou are read about it in the newspapers. And it makes me scared. I worry, I have grandchildren, twogranddaughters 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, Iread 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 godown to the registrar, drop the class there, there was a market system there that if you really said stuffthat enough students didn’t care for, they wouldn’t take your class. They’d take somebody00:11:29 [Speaker Changed] Else’s. That rarely happened to me. I remember one student who didn’t likethe grade I’d given and the00:11:34 [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 thecourse. And00:11:40 [Speaker Changed] Then the other thing I, I have to ask you about having grown up in the ukwhat was your experience like being an immigrant to the United States in the 1980s and having to adoptto a very different set of economic circumstances? We’ll talk more about healthcare, which obviously isa 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 bookwas Shock and Awe really. Which was in the sense, you know, I felt a lot of awe at the amazing thingsthat 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 betweena 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 neededsomething 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 practitionerswere gatekeepers to, you know, more advanced care or specialized care. And I think that worked prettywell for us. So that was quite a shock. I also liked having a lot more money that was certainly differentand I’d worried about money my whole life. My00:13:02 [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 professorswere paid the same. And it wasn’t very much, really, I had a lot more money00:13:15 [Speaker Changed] Here in the United States. Yes. I have a vivid recollection of being in the UKduring the financial crisis for work. And you walk down the streets from New York in mid 2008, thetension is palpable. And I didn’t get that same sense in Europe. I was in the UK in Brussels on one tripand my conclusion was, Hey, if you’re not stressing about losing your healthcare ’cause you’re gettingfired, it still sucks to lose your job. But the stress level seems to be a little less. Is that anoversimplification or is that a,00:13:51 [Speaker Changed] A fair description? I didn’t notice that. But it’s certainly true that not havingto 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 moretaxes there. But the, one of the biggest single contributors to inflation here, not the past few yearsduring the post covid surge, but the past 40 years it’s been growing at seven, eight, 9% your, yourinsurance costs in your hospital costs. That’s a lot relative to 2% inflation rate for most00:14:25 [Speaker Changed] Of the time. Absolutely. And that’s not happened in Britain and it hasn’thappened in other European countries and it hasn’t happened in Canada. So00:14:31 [Speaker Changed] It’s just specific00:14:32 [Speaker Changed] To the United States. It’s, it’s just specific to the United States. And wecould talk about some of the reasons for that. But when I first came here, I mean, the other bits about itthat I really liked is, you know, I worked with and got to know and hung out with a lot of really greateconomists 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 knewabout X right. And X was something I’d just gotten interested in. Whereas in Britain that would’ve beenmuch 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 themathematics, you know, I would have colleagues who knew how to do some obscure piece ofmathematics or I would say, this person’s using this estimator. You know, how does that work? Iremember John Campbell and I, when he was a young assistant professor, he is now a very seniorfinance guy at Harvard. He and I went down to the engineering library to discover how to what thespectrum at zero meant sort of idea. And then we used that in our work, you know, so it was awonderful place to do that. Whereas at Bristol it would read much harder, quite apart from the fact thatat Bristol University, the library was unionized and shut at four o’clock in the afternoon and was notopen on weekends.00:15:49 [Speaker Changed] Wow. Plus, just off the top of my head, at Princeton you had some guynamed Ben Bernanke. I think he did something in00:15:57 [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 beenthere 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 Kahnemanwas there. Oh, of course Danny. I, yeah, I forgot about that. I worked, Chris, Danny and I wrote a papertogether. The, the one I don’t wanna forget is Arthur Lewis who got the Nobel Prize the year I wasvisiting. And he remains the only black scientific Nobel laureate ever. Is that00:16:29 [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’mnot arguing with that premise. I’m curious what led you to make that the, the subtitles? Why is that sodefining 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 theinequalities 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 inthe world. And you know, you have the richest people in the world and you don’t seem to have quitethose same extremes in Europe to the same extent. But if you come to inequality itself, that’s prettywide too. So, you know, we economists like to use things called genie coefficients and so on. And thegenie coefficients are, you know, Americas of one of the champion genie coefficients. Now a lot of my00:17:39 [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 youwant the mathematics, that’s a good way of thinking about it, right? It’s this sort of average distancebetween any two pairs of people divided by the mean,00:17:55 [Speaker Changed] The dispersion of the wealthiest it’s disper and00:17:57 [Speaker Changed] The poorest. Yes. Well, or everybody. So, and a lot of that is good, youknow, it is the land of opportunity, right. And, you know, people are encouraged to get very, very richand very rich people are celebrated in America. In Britain where I grew up, they were described as fatcats. And the newspapers really liked the00:18:18 [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, inAmerica, 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, youknow, greater riches than previously imagined. Do these go hand in hand? And and how doesopportunity play into that?00:18:54 [Speaker Changed] Well, that’s something that people have thought about in economics forhundreds of years, perhaps thousands of years, really. So that, you know, these two things certainly areconnected for sure. And a lot of it’s also got to do with mobility. So societies that have a lot of mobilitytend to be relatively equal, where societies where everybody inherits everything like Britain land on aclass 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 alanded gentry? Well then00:19:28 [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 inthose 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 yousee 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 butthe European thing. And like when the toque ville came here, you know, there were none of those kingsor dukes or all the rest of it. And that was, you know, a big difference. And that made them very unequalcompared with here. So America at its founding was a very equal place. And you know, the foundingfathers sort of assumed that democracy would work and would require a fairly equal class of artisansand farmers and so on. So it was only when it became a sort of industrial society and finance crept inand 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 thathelp spread we wealth around that creates jobs that makes other people well off too. But there’s apotential dark site, which is the takers, as it were, the people who use government or who useregulations 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 thanrentier. I mean, a rentier is someone who owns land and rents it out, right? Whereas, or someone wholives off capital. But rent seeking is people who use the political system to try and butter their bread alittle more thickly. And of course you get that in Britain too. I mean the corn laws, which were, youknow, 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 aboutpeople getting rich through lobbying, through restrictive practices. Minor ones, major ones. You worryabout 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. Andthen 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 lotof stuff that’s being done. So that, that’s the negative side of high inequality, which is inequality is notdoing anyone any good. Sometimes we talk about takers versus makers and you know, makers are goodand 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’twe talk first before we get to healthcare. Let’s talk about minimum wage. Okay. All right. So CardinKrueger very famously wrote a paper about right changes in changing in the minimum wage. They werelooking at fast food restaurants in southern New Jersey and Pennsylvania. I think New Jersey had anincrease in the minimum wage. And it’s not like there’s a, a very robust border there. You can hardly tellwhen you’re in one area or the other. It didn’t, the rising minimum wage, a modest increase in minimumwage did not seem, according to the data, to cause an increase in unemployment as was widelypredicted. They got pushed pushback on that paper for literally decades before Card won the NobelPrize in was that 21? Yeah, I’m00:23:22 [Speaker Changed] Not sure that it’s died down. I quote Jason Ferman as saying, even todaythey persuaded about half of the profession in the other half of the profession think it’s not right. It’simportant too. They wrote a book called Myth and Measurement, which had many studies in it, andthey did a really very good job of reconciling their findings and other findings. And that’s in some waysmuch more important work. I mean the, the Pennsylvania and New Jersey thing, it sounds like, youknow, one’s on either side of the Delaware water gap sort of idea, but some of the New Jerseyrestaurants were on the shore and some of the Pennsylvania ones were in Pittsburgh or something, youknow? 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 quitelarge and it went in the opposite direction to what people have predicted. But the action was actually inPhiladelphia, in Pennsylvania rather than in New Jersey. But in their book and in dozens and dozens anddozens of studies since that resulted being pretty strongly rec replicated that for modest increases in theminimum 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 thepoorest or the lowest paid people in a region, a dollar or two more an hour, they’re just gonna go outand spend that on, you know, frivolous things like food and medicine and rent. But if, if you are freezingthat so that the profits are higher for either the corporation or the franchise owner, that’s probably notgonna be spent locally, it’s gonna be saved or invested, but that’ll be elsewhere. It won’t be in that localtown, I would assume the higher salary is just gonna stimulate the local economy. Is that anoversimplification of what they found? Or is that00:25:30 [Speaker Changed] No, I think that’s there, but I don’t think they would’ve thought of that asthe major effect. I mean, after all that, that many fast food workers in, you know, Pennsylvania or NewJersey compared with everyone. So the amount of extra money they get from the minimum wage isgonna be pretty small relative to the00:25:46 [Speaker Changed] Size of, I drive down the New Jersey turnpike. It looks like 90% of thepeople 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 forin Princeton for a long time, they wouldn’t let fast food joints in the town. Right. Because there are afew places like that, such snooty place. Yeah. Now there, there are a few places.00:26:03 [Speaker Changed] So it’s a small impact00:26:06 [Speaker Changed] On, on the macro economy, the local macro00:26:08 [Speaker Changed] On, on the local economy. Why is the, as is the assumption just, Hey, if youmake 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 labormarkets. It’s just that the textbook model doesn’t do a very good job. But there’s a very important issuewith this that I talk about in the book. And I think this over the last, the years since that paper waswritten and that book was written, not only has there been a lot of replication, but what it’s suggestingis 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 alittle buffer.00:26:56 [Speaker Changed] Well, that what economists call that is monopsony, which means they havesome power over the workers, so they can actually deliberately lower their wages because it’s hard forthe workers to go somewhere else. Whereas in the textbook, if you lower someone’s wage below theprevailing 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, thereis 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 Ijust know her work. Joan Robinson. Joan Robinson, yeah. She, she has one of my all time favorite quotesabout economics, which is we study economics, not to predict the future, but so as to not be fooled byeconomists. I, there’s a, that’s just so full of insight and so interesting. I I think she’s finally getting herdue these days and, and she hadn’t for a long time. Let’s stay with minimum wage. You implied this stillisn’t accepted. There’s a Nobel Prize to card and, and I guess indirectly to Krueger there, there’s tons andtons of studies that have validated their original research. There still seems to be a lot of resistance toaccepting those facts. Is this a case? I forgot what physicist I’m stealing this from. Physics advances onefuneral 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 inBritain where they have a much, much higher minimum wage than here, it’s supported by everyone onthe 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 onthe 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 havethe lobby that they have here by the fast food industry to help keep wages done. And you, that’s a bigdeal. A lot of the opposition against Card and Krueger was from the EPI, which is a lobbying institute forfast food. Now00:29:07 [Speaker Changed] That changed. EPI is also the Economic Policy Institute. There’s a00:29:11 [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 wageand it hadn’t increased in a while. And the big opponents were not just fast food, but the big boxretailers like Walmart. Yep. And what’s kind of ironic by fighting minimum wage, they ended up givingthe upstart Amazon an opportunity. At one point, I wanna say this is about 5, 6, 7 years ago, Amazonjust said our minimum is $15 an hour. They went out and scooped up all the best people in areas for, forwarehouses and delivery. And suddenly places like Walmart were scrambling. And there was a longperiod of time where Walmart couldn’t get enough workers to stock their shelves. It ultimately, theyended up hurting themselves.00:30:04 [Speaker Changed] Yep. But another part of this that’s very important is most states, or I don’tknow what fraction of American workers above00:30:11 [Speaker Changed] The federal00:30:11 [Speaker Changed] Have minimum wages that are above the federal ones. It’s also true that’ssomething 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 atthe most recent one. And yet, you know, it doesn’t go through in Washington because the lobbyists arevery 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 yourMcDonald’s cost a buck or so more. We’re all gonna end up paying for it through Medicare Medicaideventually. Right. Indirectly it it between diabetes and god knows what else in a country that has ourhealthcare issues. So let’s transition, let’s talk a little bit about healthcare. Okay. In the UK it’s cradle tograve, right? Yes. You’re covered from, you’re born a UK citizen, you got full healthcare coverage, not00:31:05 [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 privatehealthcare in Britain where people avoid the lines. So if you need00:31:22 [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 mighthave 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 boththings, about some of the weights for specific surgeries and the rise of this sort of concierge medicinefor the people who can afford it. They wait a week to, to get in to see a doctor if that00:31:51 [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 because00:31:55 [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 ukyou’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 GDP00:32:09 [Speaker Changed] D So that’s where I was gonna go. Why if, if the US has the supposedlymore efficient private sector than big, slow, incompetent, bureaucratic government, why does UShealthcare 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 aboutbefore. I mean there’s a lot of people getting very wealthy out of that. That they’re devicemanufacturers, they’re pharma companies, there’s hospitals, which are a huge part of this. Alsoremember, 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 soexpensive though, that’s in there too. But it’s just that they exist. I mean, there’s00:32:59 [Speaker Changed] A giant middleman in between the doctor and the patient00:33:01 [Speaker Changed] Who’s spending a lot of time trying to stop you. The stop you getting thehealthcare you need.00:33:06 [Speaker Changed] That is very true. My personal experience has been, insurers are very happynot to have you do anything. To be fair, a lot of times people will make an appointment and it’s a monthoff and by the time the month rolls away, the issue is, especially if it’s like a sports injury. But if you havesomething really serious, don’t we want people to get in and and engage in preventative medicinebefore it gets worse?00:33:34 [Speaker Changed] It’s not entirely clear. Preventive medicine sounds like a great idea, but it’snot always such a great idea. So for instance, one thing about preventive medicine I worry about a lot issmart watches for instance, right? So if you’ve got one of those, you’re gonna get all sorts of falsepositives, 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 aretypes of preventive medicine like taking anti-hypertensives or taking statins for instance, which save anenormous number of lives. They don’t cost hardly anything. And those have been the things that havebeen largely responsible for the rapidly de increase. Well, the decrease in mortality and the increase inlife expectancy in the last quarter of the 20th century. I mean00:34:30 [Speaker Changed] I, I saw some, not the studies themselves, but some articles about themthat found, there are all these proactive things that are a little expensive that insurers could do, but theydon’t because their experience has been the average person switches either insurers or jobs andtherefore you’re gonna switch your coverage provider something like every 4.7 years. And if the payofffor these expensive preventative things are seven to 10 years down the road, they have no incentive todo 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 notgonna 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 Statesversus elsewhere?00:35:17 [Speaker Changed] Well the, the major thing, my, my colleague, my late colleague, UweReinhardt, who was our sort of local healthcare expert, and it was a very fine researcher and lecturer is avery funny man, very witty man. He wrote a book called It’s the Price is Stupid Sort of Idea. And theargument 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, everything00:35:44 [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 numberof 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 thantwice the price here than they do in other countries. Now, in Britain for instance, they have a thingcalled nice, which is the National Institute for Healthcare Excellence or something. And what they do isthey evaluate new drugs and they look, they do a cost benefit test and they disallow it if it doesn’t saveenough lives as it were, or cause enough extra health route per dollar. So then what happens is thepharma 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 arearguments for that that you hear from the pharma companies all the time, which they say, we are doingthe research here. And you know, Britain is just piggybacking off that. Right? I think those arguments arewearing a little bit thin nowadays, but it’s, I can’t disprove that00:36:59 [Speaker Changed] What do do any other countries And, and I don’t watch a whole lot oftelevision commercials. Everything I watch is either streaming or dvr. So I fast forward through it, but itseems every other commercial is for some pharma product. When I was a kid, none of these obscuremedicines advertised on tv. I, I still don’t even know who asked their physicist about restless legsyndrome. Their00:37:26 [Speaker Changed] Physician probably00:37:27 [Speaker Changed] Right? Physicist, their physician, not their physicist. But it just seems sort ofbizarre that we have all these ads. Does any other country in the world have00:37:36 [Speaker Changed] Question? I think there’s one, which it may be New Zealand, either NewZealand or Australia, forget, that’s illegal everywhere else in the rich world. And it’s true. I went off tomy 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 verylarge amount of relatively low value stuff that’s quite profitable and is done on a regular basis. So forinstance, 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 thesethings, right? They’re lying idle most of the time that costs a lot of money. So there’s just a lot more ofthose 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, Iwanna say Medicaid recipients. I, I, I could be getting that wrong. At some very moderate modest cost. Ithink 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 that00:38:58 [Speaker Changed] The inventor sold it to a hospital in Canada for a dollar each, and that wasit. 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 aplace like the United States?00:39:15 [Speaker Changed] Well, because it’s allowed to become crazy. Penn State, you know, theyhave different delivery systems or slightly different drugs. So they’ll tell you the drugs are a little bitbetter and all the rest of it. So they, they can keep rolling this out and then get patents on things thatdon’t change the basic thing very much. And so that happens. And I think it’s not Medicaid, I think it’sanyone 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’spretty 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 veryluxurious compared with hospitals in Britain. If you go into a hospital in Britain, there might be 12people 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 arecheaper ways of doing that. And it seems to have very little effect on life expectancy. And, you know, itdoesn’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 stoppedgrowing. And there are people who were involved in the writing of Obamacare who claim that theprovisions in Obamacare are actually kicking in. But I don’t think anyone knows the answer to that00:40:47 [Speaker Changed] Yet. I, I’m gonna tell you, my single biggest observation about the A CA inObamacare 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 togo to your regular physician and you didn’t have to go to the emergency room. You could walk in, showan insurance car card, they would diagnose you for something. Half the time it’s an antibiotic and theysend you on your way. And those are everywhere, especially in, in cities that were kind of medicaldeserts for a while. I’m curious what the, the impact of that might00:41:33 [Speaker Changed] Have been. Some of them are very cheap. They don’t do very much. Mostof 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 getthings and you know, I didn’t get what I wanted to go somewhere else. But I think there are things likethat which are helping control costs. But I’m now out of my zone of expertise Gotcha. Here. But I meanthe, the one thing that Ann and I spent a lot of time writing about in our book was that if you haveinsurance through your employer, right, that costs nowadays about $11,000 a year per employee andabout 20 odd thousand dollars for a family policy that costs about the same for the CEO as it does forthe CEO’s driver. Right? Because you’re insuring the body, not the salary. Right? That’s right. So this putsan enormous burden on low wage workers. And it’s been a big contributor to outsourcing jobs so thatmost 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 ofthat. So that’s one of the ways in which this very expensive healthcare is eating the heart of oureconomy.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 annualconference where they were looking ahead for the pricing and all that rest of it. And he said, we havebad 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 uplike crazy. So00:43:43 [Speaker Changed] 9% a year for as long as00:43:45 [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’snot gonna happen. And what should we do? And they said, you get McKinsey and you fire all your lowpaid staff00:44:00 [Speaker Changed] Really. And then hire ’em back through some company that is going00:44:05 [Speaker Changed] To the Ram Jam cleaning company. Right. You know, a wheels drivingcompany. And you know, this CEO at least. And I have no way of verifying this thought that many ofthese workers were undocumented00:44:19 [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 gettinghealthcare benefits. So you’ve shifted the healthcare benefits outta the company, essentially. And youknow, it, it means you’re much more interested in hiring high, high income workers and veryuninterested than you said. As someone who’s being paid 30,000 a year or 40,000 a year, you don’twant 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. Itseems like the total numbers of legal US immigrants have been falling over the fa past few decades, atleast 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’sstill 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 youknow, I am obviously a well-documented alien. I’m not an alien, I’m now an American citizen, though ittook me 30 years to get around to doing that. Dual00:45:32 [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 wouldnot 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 committeesthat you’ve no idea who are members of those, of the great and the good who decide who they’regonna give knighthoods to or other honors. And I have friends who British who have a Nobel Prize whodid 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 theknighthood.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, butit does come from the British consulate here in New York City and say, would you accept a knighthood ifit was bestowed on you? And I said, well, are you kidding? Of course I of00:46:31 [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 SeanConnery did and insist that it’d be given to me in Scotland, which where I grew up at Holly Ru Palace. Butthere’s a whole bunch of dates over the years. And it’s an interesting thing because the royal familyalways does it. They’ve never delegated even during wartime to civil servants, however elevated or, anda thing. So there’s about four members of the royal family who do this. And the queen, you know, didvery few towards the end of her life. But you know, Charles did a lot, princess Anne does a lot andWilliam Wills does a lot. He did me. That’s00:47:15 [Speaker Changed] Fantastic.00:47:15 [Speaker Changed] And he knew quite a lot about my work and he hit me with a sword thatwas his grandfather’s son.00:47:21 [Speaker Changed] I I, I think it’s hilarious that Sean Connery said, oh, knighthood, bring me thequeen, send the royal family to me, me, I, I’ll be right here in Scotland. Right. Who else could havegotten away with00:47:32 [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 aboutwhat you see in terms of, of legal immigration. What, what’s happening here in the States and and howimportant is it? Yeah,00:47:47 [Speaker Changed] Okay. I mean, the legal immigration is a lot of, it’s high-end immigration. Imean00:47:53 [Speaker Changed] Skilled,00:47:54 [Speaker Changed] Skilled people,00:47:55 [Speaker Changed] Semi wealthy00:47:57 [Speaker Changed] Who are gonna work for, you know, and you see the CEOs of people likeMicrosoft. And00:48:02 [Speaker Changed] So all of Silicon Valley, something like 25% of the C-suite, maybe evenmore. Were not not born in the00:48:08 [Speaker Changed] United States. Were not born in the United States. Right. And there’s also along literature of creativity in immigrants. So that many of immigrants into the United States. Tesla, notElon 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 muchhealthier 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 certaintype 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 aboutthat 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 theborder in large numbers. Right. And we have no mechanism for stopping that. So I don’t wanna talkabout that because that’s not my area of expertise. And you hear about it in the newspapers and on theradio and television all the time. But just about this question as to whether immigration lowers thewages of Native Americans. Huh. Now David Card is one of the big authors who claims it doesn’t haveany such effect at all. And Paul Krugman, who you’ve talked about, has been writing blistering pieces inthe New York Times saying it doesn’t decrease local wages. Denouncing the lump fallacy, which says thatthere’s only finite number of jobs in America and if immigrants get them, there’s none left or there’sfewer 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 highnow is because 15% of the population is foreign born, which was also true during the Gilded Age. Andwe had this huge dip, I dunno if you’ve seen these pictures, but if you go back to 1890, but 15% of thepopulation was foreign born. If you look at it now, 15% is foreign born. And in the trough in the latesixties, it was down to, I don’t know, seven or 8% or00:50:25 [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 immigrantsmaking it almost impossible were in the twenties. So it took a long time to come down. Gotcha. Andthen there was this heart cellar act, which was passed in I think 1968, and it was passed under thepromise that there would be no increase in immigration at all. And that turned out to be completelyfalse. And it was completely false because they weren’t counting the family members who were allowedto come in afterwards. And that’s what’s driven the huge increase00:51:03 [Speaker Changed] Back to 15% what we saw a century00:51:06 [Speaker Changed] Ago. It’s come back to 15%. Right. And if you look at income inequality inAmerica, 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, isthere 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 economistfriends are gonna denounce me. And Paul Krugman tonight is probably gonna beat me over the headwith 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 didrecently 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 objectionto this book. So I think it is true that what’s happened is if you bring in large numbers of unskilledimmigrants, then that is good for rich people because it provides, and it’s good for employers andprovides a very large, very cheap labor force pool00:52:14 [Speaker Changed] Of, of low wage workers00:52:15 [Speaker Changed] Who work in agriculture, who work. You know, if you go to Princeton, NewJersey and walk around town, there are all these beautifully maintained houses covered with velvetgreen lawns, you know, and everything’s immaculately maintained. Well, I don’t think anyone who youwould see doing that work, you would hear them speaking English, all00:52:36 [Speaker Changed] Farm00:52:36 [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 SouthAmerica who were skilled workers. These aren’t unskilled workers. And they paid, they were paid apretty decent wage for building houses. You still see that’s a pretty substantial slice. And when peoplecomplain they can’t find farm workers or they can’t find roofers, it’s because they’re very often, it’sbecause there, there’s been some shift in, in who is working where, who is staying where. Right. Again,all anecdotal, not, not hard data, but00:53:35 [Speaker Changed] No, but it’s just, if you look at these inequality patterns in the Gilded agewhen you had these huge houses and you know, many servants and all the rest of it. Now we don’t havedomestic servants, but we do have people who do the same things. Right. Who look after our yards andwho look after it. And you know, if you go to European countries, you just don’t see that. I mean, Iremember talking to some Danish friends and they say they can’t afford to have the roof on their housereplaced because, you know, relative to their salaries, it cost four or five times what it would cost inPrinceton. Really?00:54:05 [Speaker Changed] Yeah. So we pay more for healthcare, but less for landscaping andcontracting. Absolutely. Huh. That’s really fascinating. So, so what other factors are driving inequalitywhen it comes to immigration? I have like a very distorted perspective because I think of the people likeyourself or Silicon Valley or Elon Musk coming into the United States, either starting businesses orbringing over a highly regarded stem. We call it skillset science, technology, engineering and math. I i Isthat 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 arefamilies of unskilled people. Not particularly skilled, but you also compared with the general populationwhere you think it would probably be a normal curve. Right. With skills in the middle. Immigrants, I thinkin 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 inAustralia 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 orthey have a wealth test or whatever, so.00:55:25 [Speaker Changed] Oh really? Yes. And where are those immigrants coming from? Are theycoming 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 Greekcommunities. Huh. But also a lot of them from East Asia nowadays pr pretty00:55:44 [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 newimmigrants, they call them boat people. And that’s ’cause the first thing they do when they get toAustralia is buy a boat.00:55:54 [Speaker Changed] That’s very funny because when we talk about boat people in the UnitedStates, they’re coming over from Cuban elsewhere on a boat. Yes, exactly. Not buying a boat that, that’sreally fascinating. So we haven’t really talked about education very much other, other than the whole PCthing. 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 thiseducation inequality, because I think this distinction that is so important here between people who havea four year college degree and people who do not, that inequality is threatening to bring us down. Ithink 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 ofpeople who aren’t even high high school graduates,00:56:56 [Speaker Changed] But that’s the client. Overtime, it’s00:56:57 [Speaker Changed] Pretty small. That’s faded to a, a very small percentage. What00:57:01 [Speaker Changed] About a third of the population has a four year BA or more? About a thirdof the population has some college. Okay. Which means they went to four, two00:57:10 [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, anadditional 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, whateverthe thing that you get from a junior college. The00:57:32 [Speaker Changed] GED, the equivalent degree.00:57:33 [Speaker Changed] No, no, no, no. GED is equivalent for high school. This is00:57:36 [Speaker Changed] Like, oh, the, so the two year00:57:38 [Speaker Changed] Degree you’ve to medical college. Right. It’s called an associate’s degree orsomething. Right. Or they’ve been to college but didn’t finish. Right. So the people with the two yeardegree and been to college but didn’t finish are another third. Got it. And then there’s a third who havehigh school or less, and the people who didn’t graduate from high school and not all that manyanymore.00:57:57 [Speaker Changed] It’s becoming a small, so, so let’s bring this back to the college. Howsignificant, I assume a college degree is very significant or even a two year degree is significant to yourfuture 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 a40% 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 fromtheir jobs because of the rising healthcare costs, whereas the people without that degree or not. Andwhat had really changed my mind about, you know, and this happened to me very late in life after withabout pride, was this realization that when Ann and I were working on these people who were dyingfrom death00:58:58 [Speaker Changed] Of00:58:58 [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 goeson rising today, that’s all among people without a ba. Hmm. So you got a ba you’ve like, got a vaccineagainst these things00:59:18 [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 couldwork 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 outat Brookings. If you look at what happened during Covid, the people with a college degree had a slightdrop 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 inequalitybecause, 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 thenonly fell a little during the pandemic. But if you don’t have that, your life expectancy had been fallingsince 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 twoyears. It’s not like 13 years.01:00:35 [Speaker Changed] And, and this is driven by the opioid crisis. And the tendency for peoplewithout 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 reallyincredibly important. And suicide’s just a horrible thing. You know, the suicide researchers have believedsince 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. Andour suicide rate is like it used to be in Lithuania or in the Soviet Union before it collapsed. So this is, tous, is a signal that there’s something really, really wrong. But the, the fallen life expect a lot of it hadbeen driven by cardiovascular disease, which is, you know, this drop that was falling like a stone in theseventies 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 todayfor a different project I was working on. I I think it’s something like, I, I’m doing these numbers off thetop of my head, so I’m gonna get it wrong. I think there’s something like 40,000 automobile deaths ayear in the United States. A slightly higher number of gun related deaths, of which something like twothirds 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 atabout 40,000 Americans a year. Oh. So01:02:06 [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 toshoot themselves. Right. They take poison or suffocate.01:02:16 [Speaker Changed] The numbers are really quite astonishing. How does the US compare toother developed modern wealthy countries?01:02:24 [Speaker Changed] Incredibly badly. Really? Well, you know, first of all, the, the US is the onlycountry that let pharma companies like Purdue Pharma Right. Poison the population. Right. You know, itjust doesn’t happen in other countries because that’s not allowed. And, you know, Purdue Pharma waspaying enormous sums of money for campaign finance for politicians. Some of those politiciansintervened to stop pharma being, you know, that stop that. The DEA investigating these people. There’sa 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. Sonow 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, someungodly 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 forPurdue, 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 attorneyfull employment legislation. Well,01:03:33 [Speaker Changed] Except, you know, the thing about the pharma was once the docs realizedwhat they’d done Right. And pulled back and said, we’re not giving you any more of that. Right. Theillegal drug dealers moved in. Ah. And so it’s now a fentanyl epidemic. Fentanyl is in some sense a legaldrug, 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 bypharma, you know, j and j, which is one of the most, you know, prized names in corporate America, wasgrowing puppies in half of opium, puppies over half of Tasmania to feed this thing. Oh01:04:23 [Speaker Changed] Really? Yes. That that, that’s01:04:25 [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 differentaudience. 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 thechallenge. 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 UnitedStates.01:05:04 [Speaker Changed] We certainly haven’t figured it out. So the alcohol is another way of killingyourself, you know, like suicide and like opioid01:05:11 [Speaker Changed] Slowly over time. Yeah.01:05:12 [Speaker Changed] Just takes01:05:13 [Speaker Changed] Longer. Yeah. I, it, it’s, there’s no doubt about that. So I’m kind of fascinatedyou, you’re bringing up deaths of despair from the book you wrote, co-wrote with your wife. When welook at consumer sentiment in the United States, despite lowest unemployment rate in 50 years, a fairlyrobust economy, stock market at all time highs. The consumer sentiment, especially in 2022, during thatinflation surge, it, it collapsed. It was worse than during covid ID worse than the financial crisis, worsethan the.com implosion worse than the 87 crash, is this spate of negative consumer sentiment, lessrelated to inflation than perhaps all of these other things. Inequality, deaths of despair and, and a, astreak 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 wassort 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 duringcovid 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 we01:06:58 [Speaker Changed] Gone none. There’re obviously suicides in Europe and01:07:01 [Speaker Changed] Some Sure. But I mean, 1.2 million is a low estimate. I’ve seen numbers ashigh 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. But01:07:26 [Speaker Changed] I’m not sure Lithuania is the country. I want to con, you know, to me, I lookat 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 hugeupsurge since the late nineties in deaths of despair. And, and to some extent in, in cardiovasculardisease, going the wrong way is unique. You don’t see that rise in any other rich country. There’s oneother 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’remethamphetamines and things. And I don’t really know enough about that. It’s very hard to get the sortof 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 improvingfor 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’sbeen, the literature is not really picked up on the fact that it’s cardiovascular mortality is going up forpeople 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 theirantihypertensives that they used to obesity. It’s possible, but it’s a little hard to tell the story because ifyou look across different states, there are different obesity levels. It doesn’t really seem to01:09:06 [Speaker Changed] Correlate, generally speaking, if you don’t have a college degree, are youmore 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 upsetwith you when you say that. It’s like blaming the victim sort of idea. But it’s01:09:28 [Speaker Changed] Possible. We’re trying to figure out why the victims are victims. Yep. Andwe, 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 getaccess to doctors. And so, ah-huh. And also, I mean, there’s a positive side, but the gaps are stillincreasing, which is in cancer. So, you know, Nixon declared war on cancer in what, 19 60, 5001:09:49 [Speaker Changed] Years01:09:50 [Speaker Changed] Ago. Nothing happened until 1990. Right. And then cancer deaths havebeen falling quite rapidly, but they’ve been falling much more rapidly for people with a college degreethan people without. So for instance, breast cancer, mortality for women used to be higher amongpeople who were not educated. And as the higher, sorry, it used to be higher among women who wereeducated, college women had much higher mortality rates from breast cancer. And that’s not trueanymore. Well,01:10:19 [Speaker Changed] Were, I kind of remember seeing something about that. Was it that therates 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 thenumber of years you survive after diagnosis. Okay. Which is why we should never pay any attention tothat number. Okay. While people do, but mortality rates are not affected by, you know, well, except thatyou might save someone’s life by detecting it early. But the, the, the statistic that’s very dubious is theone that says, you know, how many years you get to survive after diagnosis. Huh? ’cause you coulddiagnose 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 intrying 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 havebeen focused on money or the amount of money that people spend, you know, on consumption, onincome. And some economists, the marches sin would be the leading figure here has always said, you’vegotta look at mortality rates, you gotta look at health. But there’s happiness measures. There’s lots ofother 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, butwe’re dying in droves. You know, the bodies are piling up in the street. In what sense can you say we’redoing well? And I think economists just have to get much broader about what they think about doingwell means01:12:21 [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 ina simple textbook. And that was a James quack coin that term. But it’s, no, I think it’s just wheneconomists do policy and they think about people getting better off or worse off, they’re thinking aboutunemployment and jobs and money, and they’re not really thinking about whether people are, youknow, flourishing or not.01:12:50 [Speaker Changed] Let, let’s take that another step. When I think of how economists play intothe role of things like this, the focus seems to be things like efficiency, productivity, not sat lifesatisfaction or happiness. How do you steer the profession towards being a little more holistic andlooking 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 youcan’t talk about them in ordinary economics language. There’s something else going on. And I think thesociologists, many of the good sociologists have really a much better handle on what, how people’s livesare 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 woeis us, these are the deaths of despair. You, you correlate it to regional income and health educationlevels. You really bring in a lot of things I think of as classical economics into analyzing deaths ofdespairs. Is that fair?01:14:02 [Speaker Changed] Yes. But not only we talk about levels of religion, how people have checkedout of going to churches anymore. We talk about01:14:09 [Speaker Changed] That’s community as well. It’s, it’s not just01:14:11 [Speaker Changed] Community, but that’s a big difference. Economists don’t talk aboutcommunity at all. Whereas sociologists spend a lot of time thinking about community. And so their chainwould be, here’s the wages in some place in the rust belt or something. The wages go down, the jobs goaway. 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 sectoranymore. You know, and that was an important sort of power for ordinary working people. So I thinkpower is incredibly important and I think economists have just lost it01:14:53 [Speaker Changed] There. So, so I wanna tie this back to economics, and I’m gonna share ananecdote with you. Okay. So during the pandemic in the first few months, we’re locked down. You can’treally do anything. You’re a little bored. My wife and I, we live out on Long Island. We would get in thecar and go for a ride and just drive around different towns where perhaps we might not have beenpreviously. And to me, everything is a economic study. What whatever I do, I try and find a way to turn itback into economic data. And, and one of the things I noticed is that towns that had robust publicspaces could be a, a waterfront beach, could be a large park, athletic fields, whatever, seemed to beopen to the public and was a useful recreational, an area. Those seem to be affiliated more withwealthier towns. Now, I, I can’t figure out which came first. Did the town become wealthy because theyhad this attractive area and a lot of people wanted to live by it. Or do only wealthy towns are only theyable 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 ifthere’s a robust sense of community, what does that mean for inequality? What does it mean forgeneral 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 todisentangle the chicken and egg, and I think we’re on the same page here that, you know, I, I’m aneconomist, 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, but01:16:45 [Speaker Changed] The wage and the wealth that’s coming into the immunities is the driving ofthis thing. Right. But, you know, if people lose their jobs, for instance, you can’t just give them themoney to make it up and any, we don’t. Right. And those things that happen in the community, like thedestruction 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 bythe amount of money they spend. So the, the, those public goods, those public spaces are important topeople, 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 youwon the Nobel Prize was saying, why are we looking at people’s income? We should really look at howconsumers spend their money. And that gives us a better way to evaluate, especially the, the bottomquartile or So tell us about the, this kind of error by economics focusing on income instead of focusingon consumption.01:17:54 [Speaker Changed] Well, I th I’ve, in the current speak that I’m talking about now, I think ofincome and consumption as sort of the same thing, right? I just want to get away from money. I want tosay that their marriages are really important to them. Sure. And marriages are disintegrating amongpeople 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. Andwhat happened was divorce went up for everybody and then it stopped going up for people with acollege degree. And it’s still going up for people without a college degree. Really? So you get these serialcohabitation, you know, in which men and women get together. They don’t get married. The womandoesn’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 havemaybe six kids, but they don’t know any of them. They’re all living with other men. Right. What wouldthat do to your life? And that’s not just sort of a consumption thing. That’s your life coming apart. Youknow, 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 tomeasure, 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 some01:19:41 [Speaker Changed] Doesn’t do it from01:19:42 [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 thejobs they’re doing in McDonald’s or an Amazon warehouse, they may not be ideal, but they’re not asdangerous working in a car assembly plant or whatever they01:19:57 [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 painby 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 thep well that’s, I don’t want to quote a number, but a large number of Americans suffer from non-specificlower 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 allof us, what should we be trying to do to improve the overall standard of living throughout the UnitedStates? 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’sthe social function of the college degree rather than the college degrees. So I, one of my favorite thingsthat gets me into trouble that would get me into trouble in this building is I think we ought to be muchmore friendly to unions and that working people need more power. There’s hardly any members ofCongress who don’t have a college degree, for instance. Right. I think something like 2% of all statelegislators have, do not have a college degree. Wow. And I always think of going back to Britain in 1945when Clement Atley was the socialist prime minister measly at the war, seven members of his cabinethad their first jobs down a coal mine. Wow. Right. And so that was just a completely different, youknow, and those people had their hands on the lovers of power, probably the greatest foreign secretarythat Britain ever had. Ernest Bevin, who was the driving force behind nato, was the illegitimate child of aprostitute 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 prettymuch 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 thaneconomists 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 latelyabout reshoring as opposed to offshoring and deglobalization. We’ve just passed a lot of legislation andfunded building semiconductor plants, building automobile plants. A anything that’s decarbonizedmanufacturing has gotten the green light in the United States. Might this have a positive impact oninequality?01:23:20 [Speaker Changed] Absolutely. I think so. I’m quite enthusiastic about it. And it’s not anaccident. You know, Janet Yellen is a good friend, and she has promoted our deaths of despair bookevery time she gets a chance, for example. And we have other friends in the administration who arevery 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 ChipsAct, the Inflation Reduction Act, the infrastructure bill, these are all 10 year funded policies, 10 yearsfrom now, might we see a country where the deaths of despair has fallen? And some of the healthcareoutcomes, 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 tomy favorite questions that I ask all our guests. Okay. Starting with what, what has been keeping youentertained 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 likethis. And some of the people like, I like Cardiff Garcia’s podcast, the new01:24:37 [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 TheNew Bazaar, which I like01:24:44 [Speaker Changed] A lot. The New Bazaar. Okay, I’ll check that01:24:46 [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 differentis the New Yorker has writers and Es essays choose one of their favorite pieces of fiction and reads it ona 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 editorof the New, the New Yorker, Deborah ResMan, who was Danny Kahneman’s daughter-in-Law, I thinkHuh. Discusses the, in a lengthy conversation after the reading. And I find those absolutely fascinating. Imean, I’ve always liked short stories and hearing people really, people who spend their lives thinkingabout short stories, talking about them is, is quite a revelation. So those are two of my favoritepodcasts.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, whowas a, who worked for Keynes during the war on helping to pay for the war when Keynes was workingon that. And he got an Nobel Prize for his work on national income accounting. And I always wanted tobe like him. And he was very kind to me. And you know, he had a wonderful dinner table where all alsosof interesting people came for meals. He was a real wine connoisseur and he wrote beautifully and hewas 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 somemorably unsuccessful, he had a research project funded by someone or other, and I was a lowlyresearch assistant on that for five years or something. So about the lowest job you can ever have inacademia. I think.01:26:52 [Speaker Changed] So, so let’s talk about books. What are some of your favorites and what areyou reading right now?01:26:57 [Speaker Changed] Well, I like detective novels though. I think of that as a sort of guiltypleasure and being a good Calvinist. I try to ration that a little bit. I love the, the Ian Rankin books aboutEdinburgh, for instance, and01:27:14 [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 theseemotionally underdeveloped cops who is very smart, but has problems with these emotions. I like thosea lot. And, but I read a wide, I try to alternate between work and, you know, so I’ve been reading and I atMarty’s book on the bankers have no clothes Right. About how banks ought to have be made to havemore capital than they have, which I was reading the newspaper yesterday. They’re now taking out hugeads 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 they01:28:01 [Speaker Changed] Do well, that’s right. But they’re getting profits at the, at the expense ofputting all the rest of us at risk. Right. And, you know, that that’s one of the takers that we’re talkingabout as opposed to makers that we need to do something about. And we haven’t really talked aboutbanks, and I don’t know as much about them as I know about healthcare, but there’s a similar amount ofrent 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 Thousin new book about George Arro. Huh. And it’s about, it’s a novel and it’s a novel about oral’s early daysin the Burmese police.01:28:41 [Speaker Changed] Huh. That sounds really interesting. It01:28:43 [Speaker Changed] Is. Very good.01:28:44 [Speaker Changed] Our final two questions. What sort of advice would you give a recentcollege 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’sstill true, which is you really need to learn as much math as you can handle. And in finance and in manyother things too. I mean, I don’t really subscribe to the view that you can’t think straight unless you cando 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 notlike you. So I, I think that’s, a lot of these people have done very, very well. So that’s, that’s a piece ofadvice. I would, it’s a bit late by the time you graduated from college. Right. If you graduate in the SOCdepartment, that’s probably not the best advice.01:29:46 [Speaker Changed] And, and our final question. What do you know about the world ofeconomics 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 Ilove 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 whatboth of us are best known for, was done after that. Really? So it’s like a whole new career for me01:30:31 [Speaker Changed] With, with the Nobel Prize focusing attention on that01:30:34 [Speaker Changed] Work. It certainly did, because the first paper in the proceedings, theNational 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 hourafter 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 six01:30:58 [Speaker Changed] In the morning. I knew the person I was talking to you. I knew them prettywell. Oh, you did? Yeah. So I, and he said, Angus, this is not a prank. And I said, Torsten, I never thoughtit 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 wifeanswered 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 by10 buses because it had this enormous impact. Right. And you know, the, one of the best stories I think Itell in the book was in those days, and I think they’ve resumed it again, the American Nobels got to go tothe Oval Office and meet the president. Right. And when we were in, there’s a little anti room outsidethe Oval Office, which had these Norman Rockwell paintings, which are not there anymore. They belongto someone else. And a voice, someone came from inside and said, would Deaton and Case go to thefront of the line, please? Which we would know there alphabetically. And the door opened, and it wasnot a flunky, it was Obama. Oh, really? Yeah. And so I said, Mr. President, I’m delighted to meet you andI’d like to introduce you. And he said, professor Case needs no introduction to me. Oh, really? I amfamiliar with the work and I’m a great fan. Wow. And then we spent almost all the time in the OvalOffice 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. Wehave been speaking with Sir Angus Deaton, winner of the 2015 Nobel Prize in Economic Sciences. Hislatest book, economics in America, an Immigrant Economist, explores the Land of Inequality is outtoday. If you enjoy this conversation, well be sure and check out any of the previous 500 discussionswe’ve had over the past nine and a half years. You can find those at iTunes, Spotify, YouTube, whereveryou find your favorite podcasts. And check out my new podcast at the Money. It’s in the Masters inBusiness Feed. And it’s short 10 minute conversations about Money with some of our favorite masters inbusiness guests earning it, spending it, and most importantly, investing it at the money wherever youfind your favorite podcasts. I would be remiss if I do not thank the crack team that helps us put theseconversations together. My audio engineer is Meredith Frank Atika. BR is our project manager. AnnaLuke is my producer. Sean Russo is my head of research. Sage Bauman is the head of podcast here atBloomberg. And I’m Barry, you’ve been listening to Masters in Business on Bloomberg Radio.

~~~