0:00

The rising inequality and

0:02

growing political instability that we

0:04

see today are the direct

0:06

result of decades of bad

0:08

economic theory. The last five

0:10

decades of trickle-down

0:13

economics haven't worked. But

0:15

what's the alternative? Middle-out economics

0:17

is the answer. Because the

0:19

middle class is the source

0:21

of growth, not its consequence.

0:23

That's right. This

0:29

is Pitchfork Economics

0:31

with Nick Hanauer,

0:33

a podcast about

0:35

how to build

0:37

the economy from the

0:40

middle out. Welcome to

0:42

the show. On today's

0:44

podcast, Nick, we're going

0:47

to be talking to

0:49

a white male economist

0:52

from Harvard, which... I

0:54

really get gets into the

0:57

core topic of the conversation

0:59

today. Yeah, absolutely. We

1:01

are going to talk to

1:03

a white male economist from

1:06

Harvard. But our guest today

1:08

is a swell guy named

1:10

David. Despite all that, you're

1:13

telling me. David Deming, who

1:15

joins his day because he

1:17

wrote an article recently in

1:20

Atlantic where he insists that

1:22

Big Econ, much like corporate

1:24

monopolies, have become two. too

1:27

concentrated, too centralized stifling innovation,

1:29

and it's become a profession

1:31

that rather than challenging

1:34

the status quo

1:36

reinforces it. And we

1:38

couldn't agree more. Well, we

1:40

know this. We could ask

1:43

Ashley and Freddie about this,

1:45

our producers. We make an

1:47

effort. to try to have a

1:49

diverse list of guests on this

1:52

show and it's yeah it's not

1:54

easy much easier if this was

1:56

a physics or chemistry or any

1:59

other or medical podcast you know,

2:01

medical research podcast, then it is

2:04

with an economics podcast. That's right.

2:06

Because the profession is the least

2:08

diverse, if you consider it a

2:11

science, it's the least diverse of

2:13

the sciences and across the board

2:15

in every aspect. And as David

2:18

points out in his piece in

2:20

the Atlantic, which I think is

2:22

titled Break Up Big Econ. It's

2:25

concentrated, the leaders of the field

2:27

are concentrated around a handful of

2:29

elite universities. Harvard, where he is being

2:32

one of them. Yeah. And you know, I think

2:34

there have definitely been some downsides of

2:36

that. But with that, let's talk

2:38

to David, and we'll find out more.

2:43

My name is David Deming. I am

2:45

the Isabel and Scott Black Professor

2:48

of Political Economy at the Harvard

2:50

Kennedy School. I'm an economist. I

2:52

study labor markets, skills, technology, education,

2:54

future of work, AI, and all

2:56

things in between. You're one of

2:58

those Harvard economists, so that makes

3:00

you a member of the concentrated

3:02

elite, right? I suppose it does.

3:04

Yeah. I don't feel that way,

3:06

but you know, that's what's funny

3:08

about something like this is, you

3:10

know, I mean, I'm just, like

3:12

many of us in these positions,

3:14

they're just kind of a regular

3:16

guy who found himself here. So

3:18

I don't think very few people

3:20

who are in the quote unquote

3:22

elite feel as though they are.

3:24

Yeah, we're just, we're just three,

3:26

you know, white men, not part of

3:29

the elite, talking about the

3:31

discipline of economics. or you

3:33

know whatever orthodox you know

3:35

the orthodox the anyway and

3:38

you know one of the

3:40

really interesting angles that you

3:42

take and that we I

3:44

suppose we had not really

3:47

considered is how concentrated it

3:49

is how dominated it is

3:51

by relatively few institutions and

3:54

people and in particular how

3:56

different that is from the

3:58

other sciences so So for our

4:00

listeners to talk a little bit about

4:03

that and try to compare and contrast.

4:05

Sure. Well, I should say that one

4:07

of the reasons that the economics discipline

4:09

is concentrated is because economists do research

4:12

that's increasingly empirical, and that was the

4:14

topic of my column that we can

4:16

be talking about later, but relative to,

4:19

let's say, an engineer. or hard scientists

4:21

of any kind that has a lab

4:23

and materials. You know, economists' work is

4:25

much less capital intensive, and so it's

4:28

easier to move. So that's one reason

4:30

why economists are more concentrated, just to

4:32

be, I think fair and transparent about

4:34

that is that you see a lot

4:36

of patterns of people who start off

4:39

in departments that are not at the

4:41

very top who, you know, show their

4:43

ability to publish in top journals and

4:45

get grants and get cited and influence

4:47

the field and they end up. ranked

4:49

very highly and I think that's more true

4:52

in economics than in other

4:54

disciplines. Having said that, I think

4:56

a main reason that the economics

4:58

profession is relatively concentrated in my

5:00

view is that we in economics

5:02

are much more of an interpretive

5:04

field than we like to believe

5:06

by interpretive I mean something like

5:08

the humanities, which is an example

5:10

of a field that is reinterpreting

5:12

existing work. or existing things about

5:14

society in new ways for people.

5:16

This is an important function, but it's

5:18

much more subjective than something that I

5:21

would call purely empirical discipline. Like if

5:23

you think about physics or anything in the

5:25

natural science, is often the title of the paper

5:27

is the finding. You know, we found this protein

5:29

that did this. And you don't see paper, you

5:31

know, one thing I love about economics is it's

5:33

kind of a bit of both. You know, we

5:35

uncover new facts about the world, but we

5:37

also interpret them. And I think you see

5:40

this pattern. of greater concentration of major prizes

5:42

in fields that are more interpretive. You know,

5:44

so like in the humanities you see, you

5:46

know, much more concentration and art in history,

5:48

you know, you see those scholars in those

5:51

fields are much more likely to be in

5:53

the very top departments, whereas the top scholars

5:55

in, let's say, engineering or physics are much

5:57

more widely distributed because if you have some

6:00

great... discovery, it's just kind of, that's the

6:02

discovery. And you can win the Nobel Prize

6:04

for that, even if you're at, you know,

6:06

the University. And because there are much more

6:08

objective measures of whether it's significant or not,

6:10

like if you invent the airplane, you know,

6:12

now people can fly. Yeah, and I should

6:14

say to Nick, just to be clear, I

6:16

mean, I think that's, doesn't necessarily mean

6:18

that it's like anti theoretical. So, empiricism

6:21

in theory are not opposites or not

6:23

opposites. It's not that there's anything wrong

6:25

with being more theoretical, it's just you

6:27

have to understand that it's like whether

6:29

a theory is true is inherently more

6:31

subjective than whether an empirical result is true.

6:33

I have to think about that. Is that

6:35

true? It kind of puts economics in a

6:37

difficult position because it's not, you

6:39

can't categorize it as a natural science because

6:42

it's not. really a science

6:44

at least most of what

6:46

what Orthodox economics does but

6:48

you don't want to classify

6:51

it as humanity because over

6:53

the past 50 years it's

6:55

largely been inhumane well well I

6:58

don't know about I mean I'm

7:00

not sure I'm not sure I

7:02

agree with that oh come on

7:04

good joke good joke but To

7:06

be serious, I think it is

7:08

one of the things I love

7:10

about the field of economics and

7:12

when it's done right, is that

7:14

it's a combination of theory and

7:16

empirics, combination of interpretive and empirical.

7:18

So that's what's fun about it

7:20

when it's done right. Can we just go

7:22

back to the thing that you just said, which

7:24

is really interesting is that

7:26

empirics is easier to examine than

7:28

theory. What's amazing about economic

7:31

theory is how unaligned the theory is

7:33

with the evidence. Right? That's the

7:35

frustrating thing about economics,

7:38

is that in theory, as you

7:40

raise the minimum wage, you should

7:42

have fewer jobs, as long as you

7:44

assume a bunch of things which are

7:46

not true about the world. So what

7:49

I would say about that, Nick,

7:51

is it just means the existing

7:53

theory is incomplete, not the theory

7:56

per se is bad, right? So I'm

7:58

not saying theory is bad. But theory

8:00

should be connected to what actually

8:02

happens in the real world, right? I agree.

8:04

I agree. And so the right way to

8:07

proceed as a science is to develop theories

8:09

and then test them. Yes. And those are

8:11

two sides of the same coin. And so

8:13

I think, but I think when you have

8:16

scholars who are purely theorists and they're theorizing

8:18

about. how to interpret the world, so like

8:20

how should we think about big issues,

8:22

like here's what Karl Marx was a

8:24

theorist, you know, Adam Smith was a

8:26

theorist. These are people who were, you

8:28

know, the, the kind of titans of

8:30

early economics before we could really touch

8:32

data, before we could test a lot

8:34

of the claims. Those are things that

8:36

where the way I decide how much

8:38

I value that scholarship is much more

8:40

subjective. It's like, like, does it seem

8:42

like it has the ring of truth?

8:44

Is it internally consistent? kind of developed

8:47

mathematical tools to develop theories that are

8:49

sometimes beautiful. And sometimes they're right, like

8:51

auction theory, you know, was incredibly successful

8:53

in the real world. But oftentimes those

8:55

theories, you know, people win pride for

8:57

those theories actually before they're put to

8:59

the test. And so then what happens

9:01

is if somebody writes a really good

9:03

theory, everybody loves it, everything else they

9:05

write is brilliant too, because of the

9:07

early developments they made in theory. You

9:09

see that in a lot of interpretive

9:11

disciplines, you know, Foko, for example. once

9:13

somebody establishes a reputation as a leader

9:15

in their field everything they write has

9:17

the same halo effect to it whereas

9:19

empirical work it's much more one by one like

9:21

did you discover some really important

9:23

you know material compound did you

9:25

discover did you make a new invention and

9:28

when you do discover something in

9:30

empirically that just invites a Nobel

9:32

Prize winner to call you a camp following

9:34

whore I don't know what you're referring

9:36

to that sounds like the nick does

9:38

it's the famous James Buchanan op-ed in

9:40

the Wall Street Journal on the Kruger,

9:42

the first minimum wage study to show,

9:44

is that it... Yeah. Yeah. But you know, the

9:47

minimum wage is a great example of, in

9:49

my view, how in the longer sweep

9:51

of this theory and empirical work can

9:53

interact to develop something richer and more

9:56

interesting. So we had these, you know,

9:58

perfectly competitive, like, basically... There's some theories

10:00

of perfect competition in labor markets where

10:03

information was perfect. But you know, that

10:05

doesn't reflect the economic discipline today at

10:07

all. And part of the reason is

10:09

because people say, well, in this perfectly

10:11

competitive economy, it must be that the

10:14

minimum wage increases in the minimum wage

10:16

will lead to employment losses. We don't

10:18

find that. That must mean that maybe

10:20

firms have market power. There's some monopsy.

10:23

And so there's, you know, some of

10:25

the most exciting recent work in economics

10:27

is developing theories of monopsiny

10:29

power. I suppose what's 50 trillion

10:32

dollars between friends

10:34

right? 79 trillion. Oh is it

10:36

79 trillion dollars now? 79 trillion.

10:38

I mean because in the real

10:41

world that view that markets

10:43

were perfectly efficient and

10:45

all this stuff did lead

10:47

to a 79 trillion dollar transfer

10:50

of income from the bottom nine

10:52

deciles to the top 1% over

10:54

the last 50 years. So these

10:57

are pretty serious. These are pretty

10:59

serious issues. So Nick, that's quite

11:02

a theory. Do you have any

11:04

empirical work to test it? We

11:06

do, we do, there is, huge

11:09

amounts, huge amounts. There's, well, it's

11:11

based on the original, the original

11:13

Rand report from a few years

11:16

ago, but there's an update coming

11:18

that, you know, updates the numbers,

11:21

the top line numbers on this.

11:23

It's the, due to rising inequality

11:25

since 1975. Basically, it's

11:27

counterfactual how much the

11:30

bottom 90% would have

11:32

earned had income distributions

11:34

remain constant across distributions

11:36

over the past 50

11:38

years. Sorry, sorry, you're

11:40

assigning 100% of the

11:42

credit for that to... Well,

11:44

rising in... Economics. Well, who's been

11:47

guiding the economy for the past

11:49

50 years? Yeah. I mean, look,

11:51

the decisions were made, choices were

11:54

made, it wasn't like inevitable that

11:56

we were going to concentrate, wealth,

11:59

and power. the top. Yeah and

12:01

the consensus in the economics profession

12:03

for decades was that there was a

12:05

basically a mechanical inverse correlation between the

12:07

amount that you paid people at the

12:10

bottom and the number of jobs

12:12

in the economy and I can tell

12:14

you because we we do this work

12:16

directly 15 years ago when I

12:19

went and started talking to people

12:21

you know in the United States

12:23

Senate whether they were Democrats or

12:25

Republicans that consensus had completely shaped

12:28

their view of policy. So it

12:30

really wasn't until 2012 when

12:32

we cooked up the $15

12:34

minimum wage that that framework

12:37

of thought began to get

12:39

disrupted. But it was, I mean,

12:42

that theory, which lives in

12:44

academia, totally captured

12:46

the policy-making apparatus

12:48

and resulted in the

12:50

minimum wage not tracking productivity

12:53

gains, basically stuck it. you

12:55

know, 1980 levels. I mean,

12:57

the $7.25 minimum wage a

13:00

day, $2.13 per hour for

13:02

tipped workers, is a

13:04

byproduct of that consensus.

13:07

That's how we got

13:09

that. Well, I mean, I guess I would,

13:11

I mean, obviously we can't, we can't hash

13:13

all this out. Yeah, yeah. I taught a

13:15

class for several years at the Kennedy School

13:17

and in the Econ Department here called the

13:19

Cause of the Consequences of In Equality. And

13:21

part of what I did in that class

13:24

was tried to get students to apportion credit

13:26

for different forces to the rise in inequality

13:28

in the US and globally since the 1970s.

13:30

And part of the point was. So where

13:32

did you guys come out? That's really interesting.

13:34

Yeah, yeah. So part of the point was

13:36

to say, whatever your favorite explanation is, it

13:38

has to be, if it's going to

13:40

be monocausal, it's going to be

13:42

one thing. It has to be

13:44

consistent with all the fact patterns.

13:46

And it has to explain, for

13:48

example, why top incomes rose in

13:50

all the OECD countries, even though

13:52

the top marginal tax rate changed

13:54

in different times, the different rates

13:56

in those countries. So it can't

13:58

just be taxes. But just, I was

14:01

trying to teach students the skill of

14:03

weighing a bunch of different explanations in

14:05

their heads, all of which are contributing

14:07

in some ways, but none of which

14:09

are fully consistent with any set of

14:11

facts. And so I think that's a

14:14

useful exercise and I would apply that

14:16

here to say. The economics profession surely

14:18

deserves some blame for what's happened in

14:20

terms of inequality in the country since

14:22

1970. But I would say also a

14:24

lot of it is political decisions too.

14:27

Is that, you know, that kind of...

14:29

But the political decisions are at least

14:31

partially informed by the economics profession.

14:33

Yeah, of course. All I can

14:35

tell you is when lefty, when

14:37

lefty democratic senators deeply believe that

14:39

if you raise the minimum wage,

14:41

it will be, it will kill

14:43

jobs. Right? the chemistry department didn't

14:45

come up with that the poetry

14:47

department didn't come up with that

14:49

it was the economics department that

14:51

came up with that and that and

14:53

that to a certain extent has been

14:56

the challenge of governing in the United

14:58

States and in the West overall because

15:00

lots of most of the West was

15:02

sort of dominated by the neoliberal this

15:04

sort of generalized neoliberal

15:07

framework and getting and getting back

15:09

to actually the the core topic of

15:11

the piece you wrote in the Atlantic.

15:13

It wasn't just the economics department, it

15:16

was the economics department at a handful

15:18

of elite universities predominantly. Yeah. If you

15:20

could go into the idea of what

15:22

like eight schools, is that what the

15:25

number was? I can't remember. It was

15:27

something like eight schools, yeah. Yeah. Although,

15:29

you know, given our previous conversation, you

15:31

might not be so excited about my

15:33

description for that, which is to fund...

15:35

practical work what I

15:38

would think of as engineering work

15:40

in economics at less elite departments

15:42

so that I would say yeah

15:45

yeah yeah 100% okay good so

15:47

I would say yeah this is

15:49

economics equivalent of DEA we're going

15:51

to have more diversity and okay

15:53

no yeah diversity is the core

15:56

value yeah I mean just because

15:58

we are putting you on the spot

16:00

a little bit doesn't mean we

16:02

think it's fun. Just because we're

16:05

going to put you on the

16:07

spot a little bit doesn't mean

16:09

we you know we're not trying

16:12

to shoot the messenger or blame

16:14

you for all of this. But

16:16

the other thing that I've always

16:19

been puzzled by is the

16:21

hold let me let me back up

16:23

and say that human societies

16:26

are constructs that are

16:28

held together by stories,

16:30

right? By narratives. And

16:33

for all of human history,

16:35

those narratives generally

16:38

are produced by and

16:40

benefit elites, right? The

16:42

stories are not necessarily

16:44

true, but they are very good

16:47

for the people in charge,

16:49

generally. I mean, if they're

16:51

the ones telling them, yes,

16:53

people like to tell stories.

16:56

Yeah, exactly. The economic narrative

16:58

for the last 50 years

17:00

has been massively biased towards

17:02

the wealthy, right? Tax cuts for

17:05

the rich, create growth, deregulation. in

17:07

the US, in the US, right,

17:09

in particular. Well, I would say,

17:11

it depends on what you mean

17:13

by the fast past few centuries.

17:16

Like I would say that was

17:18

more true in the 80s and

17:20

90s than it's been in the

17:22

last two decades. No, no, no,

17:24

no, no, no, no, for sure.

17:26

During that sort of neoliberal

17:29

era, it really swung that way.

17:31

And you know, when the 50s

17:33

and 60s and 40s, it definitely

17:36

shifted. The common story is

17:38

just a bunch of old rich

17:40

white dudes who conspired to fuck

17:42

over the poor, right, in the

17:44

economics profession, but I don't think

17:46

that that's true, right? Like there

17:49

was no conspiracy. But how did

17:51

it, what's your sense of why

17:53

that happened? How did that happen? And

17:55

I just want to point out that

17:58

the elites were talking about here. it's

18:00

largely old rich white dudes. I

18:02

think in order to dominate the

18:05

profession. Yeah, yeah. So in

18:07

my opinion to try to understand

18:09

this, I think you have to

18:11

go back to the 1970s and

18:13

think about what was happening

18:15

in the country. Yeah. You know,

18:18

inflation was super high. The economy was

18:20

stagnating. People were upset. And so for

18:22

better or worse, you know, we were

18:24

coming out of a time. Yeah. For

18:26

sure. Was that. people wanted something different

18:28

and you know Ronald Reagan in his

18:30

time was was I think was really

18:32

the you know in the Reagan administration

18:34

was really what ushered this in and

18:37

it was in response to public demand.

18:39

Part of it was a sense of

18:41

wanting to increase national competitiveness to win

18:43

the Cold War. It was trying to

18:45

see some economic benefit from the big

18:47

investments we've made in the military industrial complex

18:49

and some of those technologies like were the

18:52

early days of technologies like the internet and

18:54

computers that were really transformative for society and

18:56

kind of upended the winners and losers of

18:58

the country. And so I think in that

19:01

time, you know, some people would say it

19:03

was needed, but it was certainly requested. And

19:05

then what happened was that led to some

19:07

excesses it was you know greed is good

19:10

and you know we had the movie Wall

19:12

Street and we had soaring incomes and then

19:14

I think what you're seeing now is a

19:16

backlash to that so I think of it

19:19

is actually I mean this is not going

19:21

to be surprising I'm the two-handed economist in

19:23

the classic joke I would I would like

19:25

to have something in the middle of those

19:27

two yeah you know I think that competition

19:30

is one of the greatest forces for good

19:32

in all of human society. And

19:34

I think what you see oftentimes

19:36

is the relatively well off insulating

19:38

themselves from competition. So I actually,

19:40

for me, there's something actually quite

19:43

beautiful about neoclassical economics. I just

19:45

think that what happens is people

19:47

under the guise of neoclassical economics

19:49

do things that aren't very competitive

19:51

that end up benefiting rich people.

19:53

So I see a lot of

19:55

what the excesses of that age

19:57

are as being actually non-competitive, capturing.

19:59

100%. And we could have a

20:02

multi-hour conversation about this, but part

20:04

of what led us there, I

20:06

think, are again some of the

20:09

underlying assumptions that make you want

20:11

to believe those things. So for

20:13

example, the idea that seeing the

20:15

economy as a prey to optimal

20:18

equilibrium within which a thing like

20:20

efficiency can be possible. Now if

20:22

you assume that... If you assume certain

20:24

things and other things become possible,

20:27

if you don't assume that it's

20:29

a prey to optimal equilibrium, if

20:31

you think of it as an ecology

20:33

in which the word efficiency actually

20:35

doesn't really apply, then you end

20:37

up just in different places and

20:39

different stuff. But let's not go

20:41

down that red hole. Let's talk

20:43

a little bit more about David's

20:46

prescription for how to make

20:48

the economics profession. better because

20:50

I thought in your article I thought

20:52

you had really good ideas. Well thank

20:54

you for saying that. To be clear

20:56

it was written before the Trump administration

20:59

started slashing funding federal funding for research.

21:01

It was, it was and then I

21:03

have I have since written another article

21:05

for the Atlantic about the folly of

21:07

cutting NIH funding so I guess I'm

21:09

on that on that beat. So my

21:11

prescription was look if the problem so

21:13

the not problem the state of the

21:16

economics profession is that it's a mix

21:18

of humanistic and interpretive and empirical as

21:20

I said earlier and what you see

21:22

is increasing concentration of major prizes and

21:24

funding and just kind of clubs in

21:26

more interpretive fields. That's, I think, it's

21:28

not something anyone's doing on purpose to

21:31

your point, Nick. It's kind of inherent

21:33

to the exercise. Yeah, yeah. It's, it's

21:35

like these are measures of what our

21:37

favorite thing is in many cases, right?

21:39

Yeah, it's more about trends, what's hot,

21:41

you know, yeah, right. And so my

21:43

solution was to create through a variety

21:46

of incentives, okay, which is a, you

21:48

know, economic. you know, classic economic point

21:50

of view is to create various

21:52

incentives through a mix of government

21:54

funding and kind of social status

21:56

and a program on both sides

21:58

of like valuing. what I would

22:00

call economic engineering more. So solving practical

22:03

problems using the tools of economics. And

22:05

I think sometimes that involves using high-brow

22:07

theory, mathematical theory. I gave the case

22:09

the example in the article of auction

22:11

theory and how auction theory was used

22:13

to auction off SEC broadband spectrum and

22:15

Paul Milgram and Bob Wilson won the

22:18

Nobel Prize for that. And that was

22:20

like literally save the government billions. And

22:22

so it's not about theory versus imperics.

22:24

It's really about valuing practical contributions and

22:26

not just can you publish an ela.

22:28

paper in a top journal and have

22:30

it be highly cited by your peers. It's

22:33

about an impact test in the world. And

22:35

my argument was the best way to do

22:37

that is for agencies like the NIH and

22:39

the NSF to fund impactful economic research not

22:42

to do things like give, you know, most

22:44

of the NSF's money in Econ is given

22:46

to early career awards, so finding the top

22:48

people in top departments and giving them unconditional

22:51

money drops and NSF doctoral fellowships. which is

22:53

funding graduate students at the top departments. And

22:55

I'm not against any of that. I would

22:57

like more. But if you push me and

23:00

say, you have to budget neutral, I would say, let's

23:02

do more funding of high impact projects, the

23:04

bridge building analogy, like how to create

23:06

good markets that reward, you know, that

23:08

link buyers and sellers, how to like,

23:10

you know, have a more transparent monitoring

23:12

system for the health of the economy,

23:14

creating new data sets, all things that

23:16

just provide public value, I would be

23:18

funding those things. I think that would

23:20

make the professional more egalitarian. It would

23:22

also make the world a better place.

23:24

Yeah, yeah. I mean, I'm often struck when

23:26

I meet with economists sometimes

23:29

how uninterested some of them are

23:31

in what's happening in the real

23:33

world, right? And you're like, and I'm

23:35

like, so how is this going to

23:37

help the average American? And they're like.

23:39

What? It's so hard to mathematize

23:41

that, Nick. You know, you've put

23:44

that, put, you know, that into

23:46

a model. Should have to sign

23:48

the same thing that doctors do

23:51

about whatever, helping people? First, first,

23:53

first, two hours? Yeah, and I

23:55

think, you know, actually, so when

23:58

I wrote this piece, I got

24:00

a lot of, I mean, it obviously generated

24:02

a lot of conversation in my profession. I

24:04

got a lot of notes from people.

24:07

Did you get a lot of hate mail?

24:09

No, no hate mail. Some people thinking I

24:11

was wrong, they weren't unkind about it. They

24:13

were engaging. But the thing that I found

24:15

very striking was that I got, I got like

24:18

almost universal positive feedback from

24:20

the more junior members of the discipline. And

24:22

often they were people saying, hey, we're doing

24:24

this already. I do think people my age

24:26

in a bit younger, my age in a

24:29

bit younger. are like much more into this

24:31

way of work and some of the some

24:33

of the work I'm most excited about in

24:35

the economics profession is work happening among people

24:37

who are you know graduated around the time

24:40

I did or later who were out there

24:42

in the world doing really interesting things so

24:44

a lot of it's already happening. Yeah you

24:46

also and I don't think you use the

24:48

word but I think if I read the piece

24:50

correctly you also think we need to

24:52

do something to change norms

24:54

within the profession, particularly in

24:56

terms of what you're awarding,

24:58

that there's almost no awards

25:01

in economics that are predicated on,

25:03

I don't know, improving people's

25:05

lives. Yeah, or even just impact in

25:07

the real world. So like, one example,

25:10

I think I got cut from the

25:12

piece for space, but I was, the

25:14

society of labor economists, I'm a labor

25:16

economist, so I know that well, has

25:18

an award they just started. called the

25:21

Edla Zero Award, and it's an award

25:23

for a mix of people who've had,

25:25

you know, research for people, sorry, for

25:27

people who had a mix of research

25:29

impact and policy impact. And the first

25:31

award went to John Aabout, who I

25:34

don't know if you know John Aabout,

25:36

but it really distinguished labor economists who

25:38

also has really distinguished labor economists who

25:40

also has worked tirelessly for years to

25:43

improve data access to the census. So

25:45

it's like an award that says, look,

25:47

you're a good. You know, you should

25:49

be rewarded explicitly and implicitly in terms

25:52

of norms for taking your insights into

25:54

the world and making it better. And that's

25:56

very different than, you know, like the Nobel

25:58

Prizes for actual... sciences where

26:00

you're largely, you're often rewarded for

26:03

practical results. Yes, I mean, well,

26:05

part of it is inherent to the

26:07

field itself. So if you discover, you

26:09

know, if you make some scientific

26:12

discovery, regardless of what university you're

26:14

at, it's just clearly valuable and it

26:16

leads to downstream innovations. And so, you know,

26:18

there are lots of examples of that in.

26:20

in the natural sciences and the physical sciences,

26:22

and actually think in economics, we have that

26:24

too. You know, I do believe economics is

26:27

a science, and I think we can make

26:29

it more so by being a bit more

26:31

systematic about our discoveries. I think you're seeing

26:33

a lot more of that, people taking replication

26:35

much more seriously, making data sets public, you

26:37

know, it's all part of a process that

26:39

we've undergone in a profession. in response to

26:42

criticisms such as yours, and I think those

26:44

are healthy and fair criticisms. You know,

26:46

I made the D.I. joke, but if

26:48

you're going to call economics a science,

26:50

I mean, there's various papers that show

26:52

it, that it is one of the

26:55

least diverse. It is the most, in terms

26:57

of gender equality, racial equality,

26:59

and and a more

27:01

recent study on socioeconomic

27:04

equality that it it

27:06

draws people from higher

27:08

income backgrounds. Disproportionately. Isn't

27:10

the woman that we

27:12

interviewed on that Harvard

27:15

researcher too? Probably because they're

27:17

all these eight schools Nick.

27:19

And I'll tell you it's been

27:21

a struggle on this podcast as

27:23

a couple of old white men

27:26

trying to get guests who aren't

27:28

at the very least white men, we

27:30

make an effort to try to keep

27:33

our guests diverse and it's hard. I

27:35

mean, we have to go out of our

27:37

way to do it because the, when

27:39

we're interviewing economists, because the number outside

27:41

of profession, it's a lot easier, but

27:44

it is so dominated by white men

27:46

of a certain socioeconomic background. So Goldie,

27:48

I mean, I mean, I want, I

27:50

share your view that the profession should

27:52

be more diverse and have done some

27:54

work unless many of us have to

27:57

try to try to make that happen.

27:59

I think that's a. important goal I

28:01

agree with it but as far as

28:03

that whether that I don't think that

28:05

really speaks to whether economics is a

28:07

science for me of what a science

28:09

is a I'm not saying that I'm

28:11

saying but I'm just comparing it to

28:13

other sciences that this is an apples

28:15

to apples comparison if you if you

28:17

compare it to other scientific fields those

28:19

fields you know the hard sciences

28:22

in particular are really diverse. It's

28:24

a lot of first-generation

28:26

Americans within the US.

28:29

It's coming from drawing

28:31

from broader socioeconomic backgrounds.

28:33

It's more gender diverse.

28:36

It's more racially and

28:38

ethnically diverse. Whereas economics,

28:40

if it wants to, you know,

28:43

if you're comparing it as a

28:45

science, it is the least diverse

28:47

of the sciences. Yeah, well, I mean,

28:49

again, like, I'm not... I deplore that, too.

28:51

I just think those are separate issues. To

28:53

me, the definition of a science... isn't based

28:55

on who's in it, it's based on whether

28:57

the profession moves forward a body of knowledge.

28:59

So do we build on our discoveries? Do

29:02

we learn from our mistakes? Do we update

29:04

our theories and our empirical results? And I

29:06

think, you know, no science is perfect and

29:08

economics is no exception to that. We've got

29:10

a lot of work to do. We've been,

29:12

the profession's been wrong about a lot of

29:14

work to do. But I think, I feel

29:16

like we know more in economics than we're

29:18

building a body of knowledge and

29:21

for that I'd call a call

29:23

a call a science. Yeah. If

29:25

you were the Elon Musk of

29:27

economics. Yeah, if you were the

29:29

Elon Musk of economics, and then

29:31

we just subtract the

29:35

sociopathic narcissism.

29:37

And assume that you're

29:39

not that. Yeah. What would

29:41

you do with the profession?

29:44

Yeah. I would. influence

29:49

all of

29:51

the major

29:54

professions in

29:57

the of

30:00

new data sets and, you know, creating more

30:02

incentives to do essential descriptive work about the

30:04

economy. So I think we just, professionally, we

30:06

have very little incentive, let me give you

30:08

one example. I recently, with a couple of

30:10

co-authors, Alex Bacon, and Blandon, produced what we

30:12

think of as the first nationally representative survey

30:14

of generative AI usage in the US. So,

30:16

you know, it's been cited a million times

30:18

already, it's incredibly high value work, but like.

30:21

people have very, I mean, we're having trouble

30:23

getting it published, to be honest, because it's

30:25

just simple descriptive work, like what share of

30:27

people are using AI, who's using it, what

30:29

are they using it for, that kind of work is,

30:31

in my view, horribly underprovided in economics, because it's hard to publish

30:33

in a top five journal, in the economics, because it's hard to

30:35

publish in a top five journal, in the economics, because it's

30:37

hard to publish in a top five journal in the top

30:39

five journal, because it's hard to publish in the top five, in

30:42

the top five, and the top five journal, and the top

30:44

five journal, and the top five journal, and the top five

30:46

journal, and the top five journal, and the top five journal, and

30:48

the top five journal, and the top five journal, and the top

30:50

five journal, and the top five journal, and the top five

30:52

journal, and the top five journal, and the top five journal,

30:54

and the top five journal, and the top five journal, and the

30:56

top five journal tweak the incentive so that everyone has a much

30:58

stronger incentive to create data and to create basic insights about

31:00

how the economy works to inform decision-making. And I

31:03

think we should be professionally rewarded for

31:05

that. That's a huge hole in the

31:07

profession, it might be. I don't know.

31:09

On the one hand, you have actual

31:11

empirical data on how AI is being

31:13

used. And on the other hand, you

31:15

have Elon Musk telling you how it's

31:17

being used, which is more authoritative. Well,

31:19

I think... I think minus because he's

31:21

just one guy. And yet he's

31:23

the one with all the rewards.

31:26

Yeah. For now. Okay. I'm sorry.

31:28

I mean, listen, I'm going to

31:30

move today. Yeah. Remember Robespierre. That's

31:32

all I'll say. No, but I

31:34

actually, I mean, I think that

31:36

that kind of change, not only

31:39

would it make, I mean. the

31:41

primary value of it was it

31:43

would make society better we would

31:45

make better decisions yes yeah about

31:47

things that really affect people's livelihoods

31:50

but the other thing is i really do think

31:52

it would make the economic profession more diverse not

31:54

just you know ethnically and you know in terms

31:56

of socioeconomic background but just like a wide variety

31:58

of people would go into it they would see

32:00

value of it. We would, you know,

32:02

and so I think it would, and

32:04

it would improve the public's perception of

32:06

economics because we'd be providing something of

32:09

more value. So that's my magic

32:11

wand. One final question, why do

32:13

you do this work? Because I love it.

32:15

You know, to me this is like a

32:17

hobby more than a job. Like I just

32:19

get excited about it. I mean, I really

32:21

do. Like I wrote that piece because I

32:24

was hoping to influence the profession in a

32:26

way that I think creates more value

32:28

for the world. data nerd

32:30

skills to help people, you

32:32

know, and that's that's why

32:34

I'm doing this and I

32:36

still think it's a really

32:38

valuable thing to try and

32:41

do. That's great. That's

32:43

great. Well, David, thank you

32:45

so much for being with

32:47

us. It's really fun. I

32:49

hope we will see you again

32:52

on the podcast. Best of luck

32:54

on your work. Thank you so

32:56

much. Hey, thanks a lot. It

32:58

was a dialectic neck. Yeah. But

33:01

great guy. And I think really

33:03

on to I think an important

33:05

problem. I thought it was really

33:07

interesting conversation because it really

33:09

did highlight some of the

33:12

stuff that has emerged, but

33:14

you don't really think about

33:16

the source of. And you know, I

33:18

think Nick, we need to get into

33:20

a little bit about why this

33:23

is important. And that is,

33:25

you know, we made this

33:27

comparison to. you know corporate

33:29

America how it's monopolized by

33:32

big powerful corporations and

33:34

that reduces competition

33:36

and innovation. And that's

33:39

a really important point, that

33:41

there just isn't a lot of

33:43

competition within the Econ field, because

33:46

if you want to make it

33:48

in the Econ field, if you

33:50

want to be a prestigious economist,

33:52

if you want to potentially win

33:54

a major prize like the Nobel,

33:56

or you want to be named to

33:58

the Federal Reserve. or the

34:00

Treasury Department or some top

34:03

administration official, you need to

34:05

go along to get along at

34:08

these handful of elite universities,

34:10

and so you're not incentivized

34:13

to rock the boat in any

34:15

way. Yeah. The other thing is, and this

34:17

is something we haven't talked

34:19

about for a while on the

34:21

podcast, but one of the... core assumptions

34:23

that we make in our own

34:25

economics is that it's when I

34:27

talk about diversity and I brought

34:29

that up a couple times it's

34:31

not about fairness it's not I

34:33

mean it is but it's not

34:35

simply about fairness it's that this

34:38

is where innovation comes from

34:40

you want cognitive diversity and

34:42

you don't get cognitive diversity

34:44

if you out of a

34:46

set of institutions that don't

34:48

have socio-economic, gender,

34:51

racial, etc. diversity.

34:53

You're not going to get

34:55

as much out of it. So

34:58

when you have a profession dominated

35:00

by the same type of people

35:03

working at the same type of

35:05

institutions, you're going to get

35:07

less innovation because you have

35:09

less people, fewer people working

35:11

at these problems coming at

35:14

it from different perspectives, which

35:16

is where innovation comes from.

35:18

And so that has, I

35:20

think, arguably led to stagnation

35:23

within the field for a

35:25

very long time. That's why it's

35:27

important. For sure. And because it's

35:29

such an influential field in terms

35:32

of politics and policy. You want

35:34

that competition and diversity to be

35:37

there. Yeah, and you know, the

35:39

truth is that I don't care

35:41

if you're a scientist or, you know,

35:44

I suppose, you know, the best

35:46

scientists are better at,

35:48

I don't put this. The thing

35:50

about people is what we believe

35:53

is rarely based on facts and

35:55

evidence. It's what makes us feel

35:57

good. And if you're an old...

36:00

rich guy an economic framework that

36:02

privileges old white rich guys is

36:04

just going to feel better than

36:07

one that privileges people who

36:09

are not like you and so you know if

36:11

the if the if the profession had

36:13

been more diverse over the

36:15

last 50 years but socioeconomically

36:18

racially gender I think it's

36:20

likely that we wouldn't have

36:22

ended up with these frameworks so much

36:24

because a lot of people who were

36:26

in the field would have would have

36:28

pushed back on them. They would have

36:30

been like, you know, tax cuts for

36:33

the rich probably don't create

36:35

growth. That's just a thing rich

36:37

people say to poor people. Oh,

36:39

you're just a you're just a

36:41

camp following court. Yeah. I mean,

36:43

this is, you are challenging the

36:45

core economic, the core principle of

36:47

economic science. I mean, I, I

36:50

go back to the, that Paul

36:52

Romer piece that I mentioned, the,

36:54

the trouble with macro economics and

36:56

a weirdly funny paper. by

36:58

an economist, but in his

37:01

abstract, he compares the past

37:03

50 years of macroeconomics to

37:05

string theory. He says

37:07

a parallel with string

37:09

theory from physics hints

37:11

at a general failure

37:14

mode of science. that

37:16

is triggered when respect

37:18

for highly regarded leaders

37:20

evolves into a deference

37:22

to authority, that displaces

37:24

objective fact from its

37:26

position as the ultimate

37:28

determinant of scientific truth. And

37:30

to some extent, Nick, this is

37:32

what we've been pushing back here

37:34

on this podcast for years. There

37:37

is scientific truth out there. And,

37:39

you know, David's not wrong. A

37:41

lot of people in the profession...

37:44

understand this, they accept it,

37:46

it's talked about within the profession,

37:48

it just doesn't come through to the

37:50

people making the decisions. Correct. And

37:52

that's the big problem, is that

37:54

you can still get away with

37:57

saying that lower taxes for rich people

37:59

will be... good for the economy

38:01

or that raising the minimum wage

38:03

will be bad for the economy,

38:05

right? be bad for the economy right like is why

38:07

we're about to get tax cuts

38:09

for the rich to no increase

38:11

in the minimum wage. in the

38:13

minimum wage right. Well, that was

38:15

fun. well that again, if you want

38:17

to read more from David,

38:19

we will provide a link to

38:22

his piece in a Atlantic, his piece

38:24

in up break up big econ Pitch

38:30

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