Bloomberg Radio host Barry Ritholtz speaks to Angus Deaton, senior scholar at the Princeton School of Public and International Affairs. In 1976, he became a professor of econometrics at the University of Bristol and moved to Princeton as a professor of economics and international affairs in 1983. He became an emeritus professor in 2016. In 2015, he received the Nobel Memorial Prize in Economic Sciences. He is the author of almost 200 papers and six books, including The Great Escape: Health, Wealth, and the Origins of Inequality; Economics in America: An Immigrant Economist Explores the Land of Inequality; and, with Anne Case, of Deaths of Despair and the Future of Capitalism.
This is Master's in Business with Barry rid Holds on Bloomberg Radio.
This week on the podcast what a Delight, I got to spend about two hours with Sir Angus Deeton. He won the Nobel Prize in twenty fifteen for his work on consumption, poverty, welfare, wealth and health inequality. Really, the work he's done on inequality tame after the Nobel Prize, based on a book him and his wife put out in a number of papers, he wrote, 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 Princeton forty years ago. He's been here about half his life. I found this conversation 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 college degree. You know, the United States has very much become a bifurcated nation and where Professor Daton draws the line, 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 found this just to be fascinating, charming, delightful, and I think you will also, with no further ado my conversation with Sir Angus Deeton.
Thank you very much for having me.
Well, well, I've left out about ninety percent of your CV. You're the author of two hundred plus papers, six books. Deaths of Despair, which you wrote with and Case 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 going to talk about in a few minutes, but let's just start with what you cover, which is kind of fascinating health, happiness, development, poverty, well being, inequality, and the best ways to collect and interpret evidence for a public policy. That is quite an eclectic, broad set of interests. How do they all relate to each other?
Well, I think there are 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 wealth being in a fairly broad sense. I mean, in England we used to call it welfare, but welfare here means something else.
You got a dirty connotation in the United States.
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, is 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.
Let's just start with your career, which 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. Brief and undistinguished. Who puts that in their CV?
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 it was much more fun to be an academic. There's also I had a girlfriend in Cambridge.
So about that. One of the things I found fascinating in your Nopell Prize acceptance speech, for lack of a better word, you said you became an economist by accident. You're going to have to give us some more color on that. 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 not really for me. And like most students, you move up a grade and you discover you've been the smartest thing there's ever been until you get there and all of a sudden, there's a whole lot of other people.
Who are These guys are really good 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 alternaty said, There's only one other thing for people like you.
It's called economics, right, Economics for people who were only fair at mathematics or.
Something like that. 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 in it anymore. And as soon as I started studying economics, I always thought it hooked.
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 brought you here?
Well, I think I'd 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, most interesting economists were working in the US. I mean, it was a bigger country. That had not been true forty years before when Keynes was in Cambridge, right, and so on. But you know, the Kynesianism had sort of lost its well, he was no longer alive, right, and the old Kynsians were a bit grumpy and not so very interesting.
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 the Berkeley crowd and Princeton Harvard Yale crowd comes a little later.
There were a lot of people I remember reading the Princeton Studies and International Finance, which seemed to me very interesting at the time. I'd met Fritz Makhlop, who was at Princeton when I was still in Britain. For instance, there was Bob Solo, who was always, you know, a great hero of mine, even long before I met him. I mean, that paper on Economic Growth is a transcendent piece of work and really sort of shaped the way generations of economists have thought. And it's one of these things that really does tell you something that you've always thought is really not quite right, and it just comes from thinking about it harder. And boy, was that an amazing example to all of us. There were also a lot of econometricians here, and I was sort of into My first job as a professor was a professor of econometrics at Bristol, So you know, I took my math into statistics and things.
Am I remembering correctly? Is Solo the economist who said productivity is everywhere except the economic data?
Am I getting one of the many clever things right?
He was quite an influential economist. So you have all of these big economic names in the United States taking the mantle from Kines and other people in the UK and elsewhere. How do you translate that into a job at Princeton when you're working at Cambridge or Bristol.
Well, I was working at Bristol. I was publishing papers that 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 the Orly Ashenfelter, who's another incredibly influential person in modern economics. And I went to visit Princeton for a year in seventy nine and really liked it. At Bristol at that time was suffering from a real cash crunch. Missus Thatcher didn't care for the universities very much. Really, yeah, really.
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 fifty billion dollar hedge fund with a small liberal arts college attached to it. I'm surprised to learn of that.
Well, they're 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. 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. And what had happened was that there was a five year financial settlement every five years at Conquinium 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. And Missus Stancher, I think it's not uncommon. I mean, I don't think missus Stancher thought much of sort of point he headed intellectuals, as it were, And even though she'd been to Oxford to herself, and I think it was probably true that most of the university establishment was fairly hostile.
Are you finding after forty years here in the United States, we're starting to see some criticism, at least in terms of political correctness. And even what young and not particularly experienced college students say about things in the Middle East of Harvard was essentially shouted out of her office. How do you look at this?
The mess that's happening in Israel and cause is something very different, I think, and huge, and it's affecting all parts of American society in ways that we really have not seen before. But there's a sort of separate issue of sort of political correctness within American universities. It's interesting that. I mean, I taught at Princeton for more than thirty years. I never encountered that at Princeton, So I never felt that I had to issue trigger warnings or that students wouldn't let me talk about certain things so they put their hands out with their face when I said the wrong words.
That really goes on in college.
Well, I'm told it does. But you know, I'm a consumer of this, just as you are read about it in the newspapers, and it makes me scared. I worry. I have grandchildren to granddaughters at school in the city here, and I wore by 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 pen et cetera. I read about it in the newspapers. I don't have anything original to say.
Maybe it's generational. But if I had a professor I didn't like, I would go down to the registrar drop the class. There was a market system there that if you really said stuff that enough students didn't care for, they wouldn't take your class. They'd take somebody else's.
That rarely happened to me. I remember one student who didn't like the grade at given.
Way that it's too late.
It was too late, but I don't think she came back for the second half of the course.
And then the other thing I have to ask you about having grown up in the UK. What was your experience like being an immigrant to the United States in the nineteen eighties and having to adopt to a very different set of economic circumstances. We'll talk more about healthcare, which obviously is a world of difference. What we your experience is like as a legal immigrant.
Legal Yeah, I was legitimate, documented alien. The initial title of.
That book was shock and Awe, really.
Which was in this sense, you know, I felt a lot of awe at the amazing things that went on in America and also a good deal of shock. So the healthcare system was a big part of it, which was sort of feeling that I didn't know how to negotiate this. I didn't know the difference between a pediatrist and a pediatrician, which turned out to be something I had to know.
You had a GP, a general practitioner if you needed something specific, they would send you that way. Or did everybody do everything in the UK?
No, not everybody did everything, but the gps. The general practitioners were gatekeepers too, you know, more advanced care or specialized care, and I think that worked pretty well for us. So that was quite a shock. I also liked having a lot more money. That was certainly different, and I'd worried about money my whole life.
Our professors higher paid in the United States than they are in the UK.
They were then, for sure in Britain in those days, pretty much all professors were paid the same and it wasn't very much. Really, I had a lot more money.
Here in the United States. Yes, I have a vivid recollection of being in the UK during the financial crisis for work, and you walk down the streets from New York in mid two thousand and eight, the tension is palpable, and I didn't get that same sense in Europe. I was in the UK and Brussels on one trip and my conclusion was, Hey, if you're not stressing about losing your healthcare because you're getting fired, it still sucks to lose your job, but the stress level seems to be a little less. Is that an oversimplification or is that a.
I hadn't noticed that, But it's certainly true that not having to worry about healthcare is something that is a big difference between the two much.
It's a huge burden, and when people do the comparison, all right, you're paying a lot more taxes there. But one of the biggest single contributors to inflation here, not the past few years during the post COVID surge, but the past forty years it's been growing at seven eight nine percent. Your insurance costs and your hospital costs that's a lot relative to two percent inflation rate.
Here, I'm a little time, and that's not happened in Britain, and it hasn't happened in other European countries, and it hasn't happened in Canada. It's just specifically specific to the United States. And we could talk about some of the reasons for that. But when I first came here, I mean, the other bits about it that I really liked is, you know, I worked with and got to know and hung out with a lot of really great economists, and I learned a ton. I deflected a little bit of your question, but my interests are fairly eclectic, so I work on a lot of different things. And at Princeton I could always find some colleague who knew about X, and X was something I'd just gotten interested in, whereas in Britain that would have been much harder, really interdisciplinary sort of thing, or even within the discipline, you know. And some of it was the mathematics, you know, I would have colleagues who knew how to do some obscure piece of mathematics, or I would say, this person's using this estimator, you know, how does that work? I remember John Campbell and I when he was a young assistant professor. He's now a very senior finance guy at Harvard. He and I went down to the Engineering Library to discover how what the spectrum at zero meant idea, and then we used that in our work, you know. So it was a wonderful place to do that, whereas at Bristol it would be much harder. Quite apart from the fact that at Bristol University of the library was unionized and shut at four o'clock in the afternoon and was open on weekend.
Wow. Plus, just off the top of my head. At Princeton you had some guy named Ben Bernanke. I think he did something.
I helped him. He came after I did.
That's amazing. And then Paul Krugman, another Nobel laureate, has been there for the longest time. I think he now is affiliated with City University.
That's right. And Chris Simms, who's a Nobel laureate, and Danny Knneman was there and I worked with that. Danny and I wrote a paper together. The one I don't want to forget is Arthur Lewis, who got the Nobel Prize the year I was visiting, and he remains the only black scientific Nobel Laureate ever true. Yes, on the others are peace laureates or literally.
So let's start with that subtitle. You call the US the land of inequality. I'm not arguing with that premise. I'm curious what led you to make that the subtitles. Why is that so defining to the economy of the United States.
Well, it's not just income inequality. It's inequality in many spaces. So the qualities of extreme wealth and the extreme poverty which seem to exist here. I mean, you have people African Americans living along the Mississippi Delta who are probably a poorest just about anyone in the world. And you know, you have the richest people in the world, and you don't seem to have quite those same extremes in Europe the same extent. But if you come to inquality itself, that's pretty why too. So you know, we economists like to use things called Genie coefficients and so on, and the Genie coefficients are you know, Americas are one of the champion Genie coefficients.
Of fine Genie coefficients for the for the late people.
It's a measure of how far people are apart on average, and unless you want the mathematics, that's a good way of thinking about it, right. It's the sort of average distance between any two pairs of people divided.
By the mean, the dispersion of wealth.
Yes, well or everybody so, and a lot of that is good. You know. It is the land of opportunities, right, and you know people are encouraged to get very, very rich, and very rich people are celebrated in America. In Britain where I grew up, they were described as fat cats, and the newspapers really.
Like that here too, but that was the nineteen twenties.
Well, there's some truth to that. And as I think I say in the book, in America, ordinary people seem to like fat cats. They would like a dose of feline obesity for themselves.
Which is which is a great line. You're implying something I want to explore because I think you're onto something. Are these two sides of the same coin? Is wealth inequality and you know, greater riches than previously imagined? Do these go hand in hand? And how does opportunity play into that?
Well, that's something that people have thought about it in economics for hundreds of years. Perhaps thousands of years really, so that you know, these two things certainly aren't connected for sure, And a lot of it's also got to do with mobility. So societies that have a lot of mobility tend to be relatively equal, where societies where everybody inherits everything, like Britain land on a class in the seventeenth century.
Although being landed gentry doesn't seem like a bad gig, No, it's.
Not a bad gig at all. But what happens if you're the third son of a landed gentry and you're in trouble. You're in trouble.
You better have some skills.
You're a lot of inequality there right for that sort of thing, and that you.
Forget about prema geniture and the first son. We don't really think in those terms.
In the States, maybe there's anyway.
But the other one, well, well, correct me if I'm wrong. Is that more of a UK thing or do you see parallels in the United States?
No, it's it's very much a UK thing, and it goes with not just the UK but the European thing. And like when the Tokeville came here, you know there were none of those kings or jukes or all the rest of it, and that was, you know, a big difference, and that made them very unequal compared with here. So America at its funding was a very equal place. And you know, the finding fathers sort of assumed that democracy would work and would require a fairly equal class of artisans and farmers and so on. So it was only when it became a sort of industrial society and finance crept in and so on, then you begin to get these normous spread Now that's the good side of it. You know, it's very hard to complain about people who get rich in the public interest, right, so who do things that help spread wet wealth around that creates jobs, that makes other people well love to But there's a potential dark site, which is the takers, as it were, the people who use government or who use regulars or you would lose lobbying. For example, the term that we economists tend to use is rent seeking rather than rentiers. I mean a rent here is someone who owns land and rents it out right, whereas or someone who lives off capital. But rent seeking is people who use the political system to try and butter their bread a little more thickly and of course you get that in Britain too, I mean the corn Laws, which were you know, you had an aristocratic land owning class who passed the corn laws to keep the price of grain up and that's what they lived off, was growing wheat and selling it. But here you worry a lot about people getting rich through lobbying, through restrictive practices, minor ones, major ones. You worry about the way that banks sometimes behave. I mean, our banks really sucking blood from the rest of us sort of ideas. Some people tend to think we need banks are very important, but banks and then of course you got this healthcare system that seems to be making a huge amount of money, which they don't make in other countries. And there's a lot of people get paid huge sums of money, a lot of stuff that's being done. So that's the negative side of high inequality, which is an equality not doing anyone any good. Sometimes we talk about takers versus makers, uh huh, And you know makers are good and they benefit everybody, but takers are not good. They're stealing from people.
So let's there's so many different ways to go with this. Why don't we talk first before we get to healthcare. Let's talk about minimum wage. Okay, all right. So carden Krueger very famously wrote a paper about changing in the minimum wage. They were looking at fast food restaurants in southern New Jersey and Pennsylvania. I think New Jersey had an increase in the minimum wage. And it's not like there's a very robust border there. You can hardly tell when you're one area or the other. It didn't the rising minimum wage. A modest increase in minimum wage did not seem, according to the data, to cause an increase in unemployment, as was widely predicted. They got pushback on that paper for literally decades before card won the Nobel Prize in was that twenty one.
I'm not sure it's died down. I quote Jason Furman as saying, even today they persuaded about half of the profession, and the other half of the profession think it's not right. It's important too. They wrote a book called method Measurement, which had many studies in it, and they did a really very good job of reconciling their findings and other findings. And that's in some ways much more important work. I mean, the Pennsylvania New Jersey thing, it sounds like, you know, ones on either side of the Delaware water gap sort of idea. But some of the New Jersey restaurants were on the shore and some of the Pennsylvania ones were in Pittsburgh or something, you know, So there were a lot of and what should happened was they what happened was not. There was certainly no decrease in employment in New Jersey. There was a decrease in employment. Sorry, yes, there was a decrease in employment in Pennsylvania.
A rise in unemployment.
So when you compared the difference of the two, it was quite large, and it went in the opposite direction to what people have predicted. But the action was actually in Philadelphia, in Pennsylvania rather than in New Jersey. But in their book and in dozens and dozens and dozens of studies since, that result has been pretty strongly replicated that for modest increases in the minimum wage, it does not give rise to increases unemployment.
If you just stop and think about it for a moment, if you're paying the poorest or the lowest paid people in a region a dollar or two more in an hour, they're just going to go out and spend that on you know, frivolous things like food and medicine and rent. But if if you are freezing that so that the profits are higher for either the corporation or the franchise owner, that's probably not going to be spent locally. It's going to be saved or invested, but that'll be elsewhere. It won't be in that local town. I would assume the higher salary is just going to stimulate the local economy. Is that an oversimplification of what they found or is that no?
I think that's there, but I don't think they would have thought of that as the major effect. I mean, after all of that, that many fast food workers in you know, Pennsylvania, and compared with everyone, so the amount of extra money they get from the minimum wage is going to be pretty small relative to the size.
I drive down the New Jersey Turnpike, it looks like ninety percent of the people are working in fast foods.
Well, that's because you're on the New Jersey Turnpike, you know. For in Princeton for a long time, they wouldn't let fast food joints in the town. Right There are a few places, snooty places, Yeah, there are a few. So it's a small impact on the macro economy the local.
On the local economy. Why is this is the assumption just, hey, if you make us pay more per hour, we're going to hire less workers.
Well, that's the belief, and that's what happens in textbook models of labor markets. It's just that the textbook model doesn't do a very good job. But there's a very important issue with this that I talk about in the book. And I think this over the last of the years since that paper was written and that book was written, not only has there been a lot of replication, but what it's suggesting is there really is some surplus in these joints which could be dedicated to either profits or labor wages.
In other words, they're not working on such a tight margin that there is a little buffer.
Well that what economists call that is monopsony, which means they have some power over the workers, so they can actually deliberately lower their wages because it's hard for the workers to go somewhere else Whereas in the textbook, if you lower someone's wage below the prevailing wage, those people will just vanish.
They'll quit the job.
They'll quit the job. So what you've got here is there is monopsony in that you can force people's wages down and it's hard for them to move.
I love that word, which I think I don't remember if you mentioned it or I just know her work. Joan Robinson. She has one of my all time favorite quotes about economics, which is, we study economics not to predict the future, but so as to not be fooled by economists. There's a that's just so full of insight and so interesting. I think she's finally getting her due these days, and she hadn't for a long time. Let's stay with minimum wage, you implied, this still isn't accepted. There's a Nobel Prize to card and I guess indirectly to Kruger. There's tons and tons of studies that have validated their original research. There still seems to be a lot of resistance to accepting those facts. Is this a case I forgot what physicist I'm stealing this from Physics Advances One funeral at a time is the same thing taking place in economics?
There may be some of that. I think it's rather more than a half. And in Britain, where they have a much much higher minimum wage than here. It's supported by everyone on the right and the left.
Really, yes, is it thinking, Hey, if the companies pay for it, well, then it's not on the government to cover it.
That I think is an important part of the story. And I don't think they have the lobby that they have here by the fast food industry to help keep wages done.
And that's a big deal.
A lot of the opposition against carden Kruger was from the EPI, which is a lobby against cute for Faster.
Now that changed. EPI is also the economic policy and one that's very funny. I recall about a decade ago looking at minimum wage and it hadn't increased in a while, and the big opponents were not just fast food, but the big box retailers like Walmart. And what's kind of ironic, by fighting minimum wage, they ended up giving the upstart Amazon an opportunity. At one point, I want to say, this is about five six, seven years ago, Amazon just said our minimum is fifteen dollars an hour. They went out and scooped up all the best people in areas for warehouses and delivery, and suddenly places like Walmart were scrambling, and there was a long period of time where Walmart couldn't get enough w workers to stock their shelves. It ultimately they ended up hurting themselves.
Yep. But another part of this that is very important is most states or I don't know what fraction of American above the federal minimum wages that are above the federal ones. It's also true that something like seventy percent of Americans would like to see a higher minimum way seventy percent. That's the sort of number that comes out in these polls. I haven't looked at the most recent one. And yet you know it doesn't go through in Washington because the lobbyists are very powerful and they're you know, paying campaign contributions and all the rest of it.
I mean, it wouldn't be the worst thing in the world if your taco bell or your McDonald's cost a buck or so more. We're all going to end up paying for it through Medicare Medicaid eventually, right indirectly between diabetes and god knows what else in a country that has our healthcare issues. So let's transition. Let's talk a little bit about healthcare. Okay, in the UK, it's cradle great, right, You're covered from you're born a UK citizen, you got full healthcare coverage.
Not for there are some things where you have to pay, like prescriptions prescription drugs, but very heavily subsidized, and also you have to wait. And so there's a lot of private healthcare in Britain where people avoid the lines.
So if you how bad are the lines, well, it.
Depends where you are and it can be quite soon, but you might have to wait a couple of years to get a hip replace for you. Really, and the same is true in Canada.
I was going to ask because I've heard the same thing in Canada about both things about some of the weights for specific surgeries and the rise of this sort of concierge medicine for the people who can afford it, they wait a week to get in to see a doctor.
If that a lot of people in America have concierge medicine, Yeah, they.
Have, so clearly it's it's a you difference. Ultimately in canon and the UK you're paying for that through higher taxes, but.
It only costs half as much as the charegy.
So that's where I was going to go. Why if the US has the supposedly more efficient private sector, then big slow, incompetent, bureaucratic government. Why does US healthcare cost twice as much as the rest of the world and create worse outcomes.
Well, because it's full of rent seecrets, which is what we were talking about before. I mean, there's a lot of people getting very wealthy out of that. Their device manufacturers, they're pharma companies. There's hospitals which are a huge part of this. Also, remember if you're in the UK and the government pays for everything, there's no insurance industry. Uh huh, right, So that insurance industry is a big chunk of change. And it's not their profits they're making it so expensive though, that's in there too, But it's just that they exist.
There's a giant middleman between the doctor and the patient.
Who's spending a lot of time trying to stop the stop you getting the healthcare you need.
That is very true. My personal experience has been insurers are very happy not to have you do anything. To be fair, A lot of times people will make an appointment and it's a month off and by the time the month rolls away. The issue is especially if it's like a sports injury, but if you have something really serious don't we want people to get in and engage in preventive medicine before it gets worse.
It's not entirely clear. Preventive medicine sounds like a great idea, but it's not always such a great idea. So, for instance, one of the thing about prevented medsine I worry about a lot is smart watches for it, right, So if you got one of those, you're going to get all sorts of false positives, right, and you're going to spend a huge amount of time getting tests for things that you know you probably don't have. And so prevented medicine of that sort can cost a lot of money. There are types of prevented medicine like taking anti hypertensives or taking statins, for instance, which save an enormous number of lives. They don't cost hardly anything, and those have been the things that have been largely responsible for the rapidly increase well the decrease in mortality and the increase in life expectancy in the last quarter of the twentieth century.
I sort not the studies themselves, but some articles about them that found there are all these proactive things that are a little expensive that insurers could do, but they don't because their experience has been the average person switches either insurers or jobs, and therefore you're going to switch your coverage provider something like every four point seven years, and if the payoff for these expensive preventive things are seven to ten years down the world road, they have no incentive to do it.
I didn't I haven't seen that, but it sounds entirely plausible.
It was just kind of, hey, don't you want to prevent these No, they're not going to be a client in five years, so I mean, yeah, well that could be. What other factors do you observe about healthcare in the United States versus elsewhere?
Well, the major thing my colleague, my late colleague, Ryan Hart, who is our sort of local healthcare expert, and it was a very fine researcher and lecturer, is a very funny man, very witty man. He wrote a book called It's the Price is Stupid sort of idea, and the argument is that almost everything in the US costs about twice as much as it costs another country. Really, yeah, so all these drugs, you know.
Everything healthcare related.
You're saying, yeah, everything healthcare. So if you look at the price of drugs, and you can look at the identical drugs, and you can look at them across countries, and there's any number of papers who've done this, you know, in the New England Journal of Medicine and the JAMMA and so on, and you know they costs. The same company is selling the same drug at twice the price, are more than twice the price here than they do in other countries. Now, in Britain, for instance, they have a thing called NICE, which is the National Institute for Healthcare Excellence or something, and what they do is they evaluate new drugs and they look, they do a cost benefit test and they disallow it if it doesn't save enough lives as it were, or cause enough extra health route per dollar. So then what happens is the farmer companies, if they want to sell it in Britain, they reduce the price to meet that cut off. Right in America they don't. They charge the full freight, so it just costs a lot more. There are arguments for that that you hear from the farmer companies all the time, which they say, we're doing their research here, and you know Britain is just piggybacking off that I think those arguments are wearing a little bit thin nowadays, but it's I can't disprove that.
Do any other countries. And I don't watch a whole lot of television commercials. Everything I watch is either streaming or DVR, so I fast forward through it. But it seems every other commercial is for some pharma product. When I was a kid, none of these obscure medicines advertised on TV. I still don't even know who asked their physicists about restless leg syndrome. Their physician, right, their physician, not their physicists. But it just seems sort of bizarre that we have all these ads. Does any other country in the world.
I think there's a one, which it may be New Zealand, either New Zealand or Australia forget me. And that's illegal everywhere else in the rich world. And it's true. I went along to my doctor and he said, well, you know, if you're a pregnant woman, maybe it would be a good idea, but you're not, so we don't really need that. But that's part of it. The other part of it is there's a very large amount of relatively low value stuff that's quite profitable and is done on a regular basis. So, for instance, if you want to have an MRI in Britain, you might have to drive ways or travel in order to get one, or you might have wait a month or two. Whereas every doctor's office in Princeton has one of these things. They're laying idle most of the time. That costs a lot of money. So there's just a lot more of those procedures being done which are helpful but maybe not super helpful.
I really kind of fascinating. What else accounts for this big gap? You mentioned certain things that are inexpensive. We just passed a law here that capped insulin for I want to say Medicaid recipients. I could be getting that wrong. At some very moderate modest cost. I think insulin has been off patent for decades.
It was off patent from the day it was invented. Oh is that the inventor sold it to a hospital in Canada for a dollar each and that was it. They no money, no patent, no nothing, It's never been.
So how on earth does something like that become crazy expensive in a place like the United States.
Well, because it's allowed to become crazy, pens you know, they have different delivery systems or slightly different drugs, so they'll tell you that drugs are a little bit better and all the rest of it. So they can keep rolling this out and then get patents on things that don't change the basic thing very much. And so that happens. And I think it's not Medicaid. I think it's anyone on Medicare Medicare who's like anyone over sixty five, and there's a limit on how much, And so it's pretty widespread.
Given all of this, what has led to all of this inequality in the United States, what policies are should we be pointing a finger at.
Well, here's something. Maybe let's just go back one second to the because the hospital's a big part of this. They're just unbelievably expensive and they're very luxurious compared with hospitals in Britain. If you go into a hospital in Britain, there might be twelve people in the ward. There's no private rooms, for instance, and that sort of thing is very very expensive. And maybe we're a rich country, maybe we want to have that, but it certainly costs a lot, and there are cheaper ways of doing that, and it seems to have very little effect on life expectancy, and you know it doesn't kill you as 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 and health has stopped growing. And there are people who were involved in the writing of Obamacare who claim that the provisions in Obamacare are actually kicking in, but I don't think anyone knows the answer to that.
I'm going to tell you my single biggest observation about the ACA and Obamacare is as soon as that became a law of land, which is what was that two eleven.
It was the law earlier, but it didn't kick in for a couple of years.
All of these walking clinics popped up everywhere where you didn't have to go to your regular physician, and you didn't have to go to the emergency room. You could walk in, show an insurance card, they would diagnose you for something. Half the time it's an antibiotic, and they send you on your way. And those are everywhere, especially in cities that were kind of medical deserts for a while. I'm curious what the impact of that might have been.
Some of them are very cheap. They don't do very much most of them, and a lot of people go in there wanting an antibiotic, but they've got flu and it's a virus. They say, you can't do that. So I've gone in there to try and get things, and you know, I didn't get what I wanted. To go somewhere else. But I think there are things like that which are helping control costs. But I'm now out of my zone of expertise here, But I mean, the one thing that Anna and I spent a lot of time writing about in our book was that if you have insurance through your employer, right, that cost nowadays about eleven thousand dollars a year per employee and about twenty thousand dollars for a family policy. That costs about the same for the CEO as it does for the CEO's driver, right, because you're ensuring the body, not the salary, right, Right. So this puts an enormous burden on low wage workers, and it's been a big contributor to outsourcing jobs, so that most companies don't hire their own security, their elevator operators, they're transport people their you know, food service people and all the rest of it, and a lot of good jobs have been lost because of that. So that's one of the ways in which this very expensive healthcare is eating the harm of our economy.
Huh. So, in other words, people, companies, employers don't want to hire a forty thousand dollars employee right still far above minimum wage, but on the bottom half of the wage spectrum, because there's an eleven thousand dollars right tag on top of that for healthcare.
One CEO told us that their HR people came run into the annual conference where they were looking ahead for the pricing and a lots of it, and he said, we have bad news for you that your health care costs the policies you have are going to cost forty percent.
More forty forty zero.
It was only one year, but as you said, these things are going up like crazy.
Nine percent a year for yeah, again, three or.
Four years and it can be forty percent. So there's this sort of thing. And so the company said, you know that we can't do that, it's not going to happen, and what should we do? And they said, you get McKenzie and you fire all your low paid.
Staff really and then hire them back through some company that is gonna.
The ramjam cleaning company, you know, a wheels driving company, and you know this CEO at least, and I have no way of verifying this thought that many of these workers were undocumented, ah.
Alien, so they would never get hired anywhere else anyway.
Well, there's an informal economy. Yeah, but they're probably not getting healthcare benefits, so you've shifted the healthcare benefits out of the company essentially. And you know it means you're much more interested in hiring high income workers and very uninterested. You said, as someone who's being paid thirty thousand a year, forty thousand a year, you don't want to carry eleven thousand dollars worth of health care insurance.
Huh. That's really quite fascinating. Let's talk about immigration. It seems like the total numbers of legal US immigrants have been falling over the past few decades, at least relative to the overall labor pool. Tell us what's going on with immigration in the United States.
I actually didn't know that, though i'd heard something yesterday which.
Well, is falling and then it's starting to tick back up. But it's still below where we were had you just projected it out twenty years ago.
Yeah, that could well be. No, I don't know much about that, and you know, I am obviously a well documented alien. I'm not an alien. I'm not an American citizen, though it took me thirty years to get run into doing that.
Dual passports or just one.
I have dual passports, which in Britain they allow you to do. I would not be sir Angus if I'd given up my b that's right passport and they check on that.
Oh really, Well you get a phone call from the Queen Angus, what's going on?
No? No, no, no no. But it's a very British thing. That are secret committees that you've no idea, who are members of those of the Great and the Good who decide who they're going to give knighthoods to or other honors. And I have friends who are British who have a Nobel prize who did not get one for many, many years.
So it wasn't just the pride because you are a year later got the knighthood, that's right. What was that call like? As long as we're talking about it, well, it.
Doesn't come from the Queen or even from the Prime Minister, but it does come from the British Consulate here in New York City and say would you accept a knighthood if it was bestowed on you? And I said, well, are you kidding?
Of course, of course you have to go fly back to London for this.
Well, there's actually a bunch of places you could go. I could do what Sean Connery did and insist that it'd be given to me in Scotland, which is where I grew up, at Holyrood Palace. But there's a whole bunch of dates over the years, and it's an interesting thing because the royal family always does it. They've never delegated, even during wartime to civil servants however, elevated or anything. So there's about four members that are all who do this, and the Queen, you know, did very few towards the end of her life. But you know, Charles did a lot, Princess Anne does a lot, and William Wills does a lot. He did me, he knew quite a lot about my work and he hit me with the sword that was his grandfather.
So I think it's hilarious that Sean Connery said oh, knighthood, bring me the Queen, send the royal family to me. I'll be right here in Scotland. Who else could have gotten away with that? I don't know, but that's absolutely hilio. So so let's talk a little bit about what you see in terms of legal immigration, what's happening here in the States and how important is it?
Yeah, okay, I mean the legal immigration is a lot of its high end immigration.
I mean skilled, skilled people, semi wealthy.
Who are going to work for you know, and you see the CEOs of people like Microsoft.
And so all the Silicon Valley, something like twenty five percent of the c suite, maybe even more. We're not not born in.
The United We're not born in the United States, right, And there's also long literature of creativity and immigrants, so that many of immigrants in the United States Tesla not Elon Musk, but Elon Musk of course was born in South Africa. Yeah, we're immigrants. And there's some suggestion immigrants are much healthier than non immigrants, and that's partly because immigrants are sort of selected special people.
Self selecting. You're going to pick up and move halfway around the world. Yeah, you have to be motivated. You have to be fairly robust to do that, and you have to have a certain type of mental attitude and constitution, I would imagine.
I think that's right. But of course the big controversy nowadays is not about that end of things. It's about the other.
End, illegal immigration, well, or.
The less skilled undocumented aliens who are swarming across the border in large numbers, and we have no mechanism for stopping that. So I don't want to talk about that because that's not my area of expertise, and you hear about it in the newspapers and on the radio and television all the time. But just about this question as to whether immigration lowers the wages of Native Americans now, David Carr is one of the big authors who claims it doesn't have any such effect as the toll. Paul Krugman, who you've talked about, has been writing blistering pieces in the New York Times saying it doesn't decrease local wages, denouncing the lump fallacy, which says that there's only finite number of jobs in America and if immigrants get them, there's none left, or there's fewer left for ordinary people, and I suspect that's not true. I think we've been getting this wrong actually, and really I think it does in fact, and so I think one of the reasons that inequality is so high now is because fifteen percent of the population is foreign born, which was also true during the Gilded Age, and we had this huge dip. I don't know if you've seen these pictures, but if you go back to eighteen ninety, but fifteen percent of the population was foreign born. If you look at it now, fifteen percent is foreign born. And in the trough in the late sixties it was down to I don't know, seven or eight percent.
Post war era is that it dropped in half.
Yeah, Well, what happened was the laws the banning of immigrants making it almost impossible were in the twenties, so it took a long time to come down. And then there was this Heart Cellar Act which was passed in I think nineteen sixty eight, and it was passed under the promise that there would be no increase in immigration at all, and that turned out to be completely false. And it was completely false because they weren't counting the family members who were allowed to come in afterwards, and that's what's driven the huge increase.
Back to fifteen percent what we saw, or go.
Back to fifteen percent, And if you look at income inequality in America it looks exactly like that too.
So so that leads to the obvious question, how parallel is or what is there a mechanism between immigration and inequality?
Yes, I think so, though I'm now out on a limb and lots of my economist friends are going to denounce me and Paul Krugman and that is probably going to beat me over the head with a chair or something. But even in that, you know.
David Lee, by the way, he's a very genteel.
I know, I know, Paul. It's not like debating Larry Summers, which I did recently.
Oh I'm so sorry.
Yeah, but you should watch the video as a video.
Oh really, I'll link to it in there.
Which it was a very unpleasant unkinnter. But he took great objection to this book. So I think it is true that once happened, if you bring in large numbers of unskilled immigrants, then that is good for rich people because it provides and it's good for employers and provides a very large, very cheap labor force pool of low wage workers who work in agriculture, who work you know, if you go to Princeton, New Jersey and walk around town, they are all these beautifully maintained houses covered with velvet green lawns, you know, and everything is immaculately maintained. Well. I don't think anyone who you would see doing that work. You would hear them speaking English.
All farm born. They're all foreign so at least the children of farm board I've noticed. So it's landscapers, it's farm workers. During the financial the building boom leading up to the financial crisis, the it was commonly understood that painters, framers, stonemason, roof plumbers, electric like a huge influx of people from Mexico and South America who were skilled workers. These aren't unskilled workers, and they paid they were paid a pretty decent wage for building houses. You still see, that's a pretty substantial slice. And when people complain they can't find farm workers or they can't find roofers, it's because they're very often it's because there's been some shift in who is working where, who was staying where. Right, Again, all anecdotal, not hard data, but it's just if you look.
At these inequality patterns in the Gilded Age when you had these huge houses and many servants and all the rest of it. Now we don't have domestic servants, but we do have people who do the same things. We look after our yards and to look after it. And you know, if you go to European countries, you just don't see that. I mean, I remember talking to some Danish friends and they say they can't afford to have the roof on their house replaced because you know, relative to their salaries, it costs four or five times what it would cost in prinsident.
Really. Yeah, so we pay more for health care but less for landscaping and contract absolutely. Huh. That's really fascinating. So what other factors are driving inequality? When it comes to immigration, I have like a very distorted perspective because I think of the people like yourself or Silicon Valley or Elon Musk coming into the United States either starting businesses or bringing over a highly regarded stem we call it skill set, science, technology, engineering, and math. Is that who's coming over as legal immigrants? Or is that sort of a distorted perspective?
And legal immigrants You've got both because a lot of them are families of unskilled people, not particularly skilled. But you also compared with the general population, where you think it would probably be a normal curve with skills in the middle. Immigrants, I think in almost all countries are more bimodal. H Yes, you've got these very skilled people places like Australia. And someone told me the other day that sheriff immigrants foreign born in Australia is over thirty percent.
That wouldn't surprise me.
And they would like more. And that's because they have an income test or they have a wealth test or whatever.
Oh really, yes, And where are those immigrants coming from. Are they coming from the Philippines and Vietnam or are they coming from elsewhere?
Many places, I think. I mean they're very you know, strong Serbian Greek communities, but also a lot of them from East Asia nowadays.
Pretty good for a penal colony, right.
Pretty good for a penal colony. You know, they call the latest the new immigrants, they call them boat people, and that's the first thing they do when they get to Australia is buy a bone.
That's very funny because when we talk about both people in the United States, they're coming over from Cuban elsewhere on a boat, not buying a boat. That's really fascinating. So we haven't really talked about education very much other other than the whole PC thing. How significant is education to inequality, whether it's on the immigrant side or domestically born and raised.
Okay, so let me go back to not income inequality against so much, but this education inequality because I think this distinction that is so important here between people who have a four year college degree and people who do not, that inequality is threatening to bring us down. I think that's the most serious.
So before we get to college, there is a relatively small group of people who aren't even high school graduates.
But that's the client over tirement.
That's faded to a very small percentage.
About what third of the population has a four year BA or more about a third of the population has some college, which means they went to So it's two thirds no some college, but some college include a two year no.
I mean there's a third with a college degree, and then another an additional third with some college meaning they have a high school degree.
No, they have a high school degree, but they also have maybe a whatever the thing that you get from a junior.
College ged the equivalent degree.
No, no, no, g d's equivalent for high school. This is oh, the community college. It's called an associates agree or something, or they've been to college but didn't finish. Right, So the people with a two year degree and being to college but didn't finish or another third got it, and then there's a third who have high school or less. And the people who didn't graduate from high school are not all that many anymore.
It's becoming a small So let's bring this back to college. How significant I assume a college degree is very significant, or even a two year degree is significant to your future earnings and your standard of living. How why does that gap?
Well, the gap is enormous. If you look at the wages we used to You know, when I first came to Princeton, what you were handed out with the ration was that a BA bought you a forty percent premium.
And your wage that much.
It's now over one hundred.
Get out of here, double, it's double. That's amazing.
So not only that, but those are the people who are not getting fired from their jobs because the rising healthcare costs. Whereas the people that degree or not and what had really changed my mind about it, you know, and this happened to me very late in life after with it about pride, was this realization that when Anne and I were working on these people who were dying.
From deaths of despair, that's of.
Despair from opioid overdoses, from suicide, from alcoholism, that those that huge increase which started, you know, in the late nineties and goes on rising today, that's all among people without a BA. So you've got a BA, you've got a vaccine against these things.
That's amazing. I vividly recalled during the pandemic lockdown, if you had a college degree and you're working in what we think of as a white collar job, you could work remote. Your job was pretty safe, and if you didn't have a college degree, you were up for grabs.
If you look at the data, and then we have a recent paper that's coming out at Brookings, if you look at what happened during COVID, the people with a college degree had a slight drop in life expectancy, maybe half a year. But if you didn't have a four year degree, it's huge drops. It really got hit.
So not just income but life expectance.
Expectance yeah, income, I don't care about so much, you know, because if you're.
Dead doesn't really matter.
It doesn't really matter. And this is a terrible inequality because you know, this third of it's only a third of the population. I have a four year college degree and they're doing great. Their life expectancy continues to go up at least until the pandemic, and then only fell a little during the pandemic. But if you don't have that, your life expectance had been falling since nineteen twenty ten.
Really, yes, that's amazing.
I mean, it's just awful. And this gap in nineteen ninety two and life experiences about two years, it's not like thirteen years.
And this is driven by the opioid crisis and the tendency for people without education are just much more likely to find themselves on the wrong end of that.
It's not just the opioid crisis. The opioid is very important. Suicides are probably important, and suicide just a horrible thing, you know. The suicide researchers have believed since the nineteenth century that more educated people more likely to commit suicide. Is that true? It was true for many years. It's not true in the US anymore.
It's flip and.
Our suicide rate is like it used to be in Lithuania or in the Soviet Union before it collapsed. So this is to us, is a signal that there's something really, really wrong. But the fallen life experiencing a lot of them being driven by cardiovascular disease, which is, you know, this drop that was falling like a stone in the seventies and eighties and nineties for people that to be it stopped.
Huh, that's fascinating. I was looking at gun deaths earlier today for a different project I was working on. I think it's something like, I'm doing these numbers off the top of my head, so I'm going to get it wrong. I think there's something like forty thousand automobile deaths a year in the United States, a slightly higher number of gun related deaths, of which something like two thirds or three quarters or suicides does sound about right.
I don't know that number, but I know that the suicide rate is running at about forty thousand Americans a year, oh so, and much of that is guns, at least by men. Women tend not to shoot themselves. They take poison or suffocatable.
The numbers are really quite astonishing. How does the US compare to other developed, modern wealthy.
Countries incredibly badly?
Really?
Well, you know, first of all, the US is the only country that let pharma companies like Purdue Pharma poison the population. It just doesn't happen in other countries because that's not allowed. And you know, Perdue Pharma was paying enormous sums of money for campaign finance for politicians. Some of those politicians intervene to stop Pharma being you know that stop that. The DEA investigating these people. There's a thirty minute show which is just incredibly horrible, and that happened.
To be fair, they made them take their name off of a wing of a museum. So now they've certainly learned their lesson. Yeah, absolutely, And in fact, the settlement, which costs eight or ten or twelve, but some ungodly amount of money, keeps getting rolled back. I don't know what the state is now.
There are a lot of lawyers out there. Half the lawyers are working for Purdue and the other half are working for ex President Trump.
Well, that's a that's a challenge. I guess it's the attorney full employment legislation.
Well, except you know, the thing about the FIRMA was once the docs realized what they'd done right and pulled back and said, we're not giving you any more of that, the illegal drug dealers moved in. And so it's now a fentanyl epidemic. Fentanyl is in some sense of illegal drug.
But it's it's poison. The number of overdose is it's been a line straight up going back, you know, for almost fifteen years now.
Yeah, but it picked up once the doctor you know, so this was ignited by pharma. You know, J and Jay, which is one of the most you know, prize names in corporate America, was growing poppies and half of opium puppies over half of Tasmania to feed this thing. Oh really, Yes, that's a huge fine for that.
And you know, you could get legal weed anywhere. I know, it's a different body.
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.
Well, you really shouldn't be smoking or eating edibles when you're fourteen. You're not supposed to have access to that. But they always had access to illegal drugs. That's the challenge. Do you take the money away from the illegal cartels who do marijuana and worse. You know, we see the parallels with cigarettes and alcohol. We still haven't figured this out.
We certainly haven't figured it out. So the alcohol is another way of killing yourself, you know, like suicide.
And slowly over time.
Yeah, it just takes longer.
Yeah, it's there's no doubt about that. So I'm kind of fascinating you're bringing up deaths of Despair from the book you wrote co wrote with your wife. When we look at consumer sentiment in the United States, despite lowest unemployment rate in fifty years, a fairly robust economy, stock market all time, Hyes, the consumer sentiment, especially in twenty twenty two, during that inflation surge, it collapsed. It was worse than during COVID, worse than the financial crisis, worse than the dot com implosion, worse than the eighty seven crash. Is this spate of negative consumer sentiment less related to inflation than perhaps all of these other things, inequality, deaths of despair, and a streak of hopelessness that seems to be at work in the bottom half of the United.
States that's my hypothesis too. I read the book, but I don't have any well, except the consumer sentiment bit was sort of more recent than 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, one point two million of them died during COVID, and you know another two hundred thousand a year are dying from two hundred and fifty thousand a year are dying from alcohol, opioids, and suicide, and none of that is happening in any of these European countries.
Oh really, the gap is that big, So clearly we.
Need They're obviously suicides in Europe.
Sure, but I mean one point two million is a low estimate. I've seen numbers as high as two million. Clearly we didn't do a great job during COVID. Hold that aside, alcohol related deaths, suicide go down the list. The US is far and away worse than Well.
The right way to put this is, it's not worse than if you go to Lithuania, for instance, a lot of people died by suicide.
But I'm not sure Lithuania is the country I want to con you know, to me, I look at Switzerland, the UK, Japan, France, Germany, Italy, those should be Australia.
Yeah, we have to be a bit careful about levels and changes. So this huge upsurge since the late nineties in deaths of despair and to some extent in cardiovascular disease going the wrong way is unique. You don't see that rise in any other rich country. There's one other rich country. It's where I come from, Scotland. It has a drug epidemic almost as bad as the.
Oh And where are those drugs coming from?
If they're illegal drugs? But they're not opioids, they're metem tedements and things. Huh. And I don't really know enough about that. It's very hard to get the sort of data that and I would like to get, even though people in Scotland certainly talk to us about it.
So why is the US seeing the cardiac deaths which have been improving for so long? Is this just a function of US obesity or what's the driver of that?
I don't know, and I don't think anyone knows, and there's been The literature is not really picked up on the fact that it's cardiovascular mortality is going up for people without a degree, and it's going down for people with a degree.
Oh really, so it's very bifurcated.
Also, well, it's bifurcating too, and it may be that people are not taking their antique hypertensives that they used to obesity. It's possible, but it's a little hard to tell the story because if you look across different states, they're different to beast levels that it doesn't really seem to correlate.
Generally speaking, if you don't have a college degree, are you more likely to disregard doctor's orders and not take medicine? Is that the implication here?
It's possible. That's an inflammatory statement. People get very upset with you when you say that. It's like blaming the victim sort of idea.
But it's probably trying to figure out why the victims are victims and there should be no stone left on time.
Well, it also may be that it's hard to get in some places, it's hard to get access to doctors and stuff. And also, I mean, there's a positive side, but the gaps are still increasing, which is in cancer. So you know, Nixon declared war on cancer in what nineteen.
Sixty fifty years ago.
Nothing happened until nineteen ninety and then cancer downs have been falling quite rapidly, but they've been falling much more rapidly for people with a college degree people without. So for instance, breast cancer mortality for women used to be higher among people who were not educated, and that's the higher. Sorry, it used to be higher among women who were educated. College women had much higher mortality rates from breast cancer, and that's not true anymore.
Were I kind of remember seeing something about that. Was it that the rates were higher or the discovery of that's what it was that was ultimately at fault.
No, the discovery doesn't affect mortality. The discovery effects the number of years you survive after diagnosis, which is why we should never pay any attention to that number. Well, people do, but mortality rates are not affected by you know, well except that you might save someone's life by tacticularly. But the statistic that's very dubious is the one that says, you know, how many years you get to survive after diagnosis, because you could diagnose everybody with cancer at birth and then they'd live a really long time.
Well, I mean credible diagnosies. So let's bring this back to economics, okay, because I have to ask what should be the role of economists in issues of public policy, deaths of despair, wealth, health and income inequality? What role should your profession play in trying to make this a little less terrible.
Well, let me take back to one of the very first questions you asked me, which is I think about human well being, right, and it's much broader than just money. And economists have been focused on money or the amount of money that people spend, you know, on consumption, on income, and some economists of March Sen would be the leading figure here, has always said you've got to look at mortality rates, you've got to look at health. But there's happiness measures, so lots of other things there too. But you know, this is what I was saying a few minutes ago, that the American economy, just in terms of money, doing so much better than the European countries. But we're dying in drops, the bodies are piling up in the street. In what sense can you say we're doing well? And I think economists just have to get much broader about what they think about. Doing well.
Means is that the phrase economism is that where that comes from ignoring not really.
I mean economism is more like the minimum wage stuff you use a simple textbook, And that was James Quack calling that term, but it's no. I think it's just when you economists do policy and they think about people getting better off or worse off, they're thinking about unemployment and jobs and money, and they're not really thinking about whether people are flourishing or not.
Let's take that another step. When I think of how economists play into the role of things like this, the focus seems to be things like efficiency, productivity, not life satisfaction or happiness. How do you steer the profession towards being a little more holistic and looking at the whole picture, not just the dollars and cents.
Well, what made me steer back was these deaths of despair, because you can't talk about them in ordinary economics language. There's something else going on, and I think the sociologists, many of the good sociologists, have really much better handle on what how people's lives are coming apart with de industrialization, for instance, So well.
Let me interrupt you a second. In the other book which I didn't read but kind of skimmed an online outlearn you do turn that into an economic analysis. It's not just woe is us. These are the deaths of despair. You correlate it to regional income and health education levels. You really bring in a lot of things I think of as classical economics into analyzing deaths of despairs. Is that fair?
Yes, But not only we talk about levels of religion, how people have checked out of going to churches anymore.
We talk about that's community as well.
It's not unity. But that's a big difference. Economists don't talk about community at all, whereas sociologists spend a lot of time thinking about community. And so their chain would be here's the wages in some place in the rust belt or something. The wages go down, the jobs go away. But it's not just the jobs. I mean, it's the schools, it's the police force, it's the you know, community. Bob Putnam wrote this fabulous book on bowling alone, you know and social capital. His bowling alone guy was bowling in a union hall, or no unions in the private sector anymore. You know, and that was an important sort of power for ordinary working people. So I think power is incredibly important, and I think economists have just lost it there.
So I want to tie this back to economics, and I'm going to share an anecdote, will you. So during the pandemic in the first few months, we're locked down. You can't really do anything. You're a little bored. My wife and I, we live out on Long Island. We would get in the car and go for a ride and just drive around different towns where perhaps we might not have been previously. And to me, everything is an economic study. Whatever I do, I try and find a way to turn it back into economic data. And one of the things I noticed is that towns that had robust public spaces could be a waterfront beach, could be a large park, athletic fields, whatever seemed to be open to the public and was a useful recreational area. Those seemed to be affiliated more with wealthier towns. Now I can't figure out which came first. Did the town become wealthy because they had this attractive area and a lot of people wanted to live by it, or do only wealthy towns are only they able to afford these sorts of things. So it's a little bit of a chicken or an egg. But it comes back to if there's a robust sense of community, what does that mean for inequality, what does it mean for general happiness? And does that reduce those sort of deaths of despair that you've highlighted.
I think it probably does, And I think that I'm not sure you have to disentangle the chicken and egg. And I think we're on the same page here that you know, I'm an economist, you know you're in cognist.
I'm not really, but I'm fascinated by the wage and the wealth.
That's coming into the community is the driving of this thing, right. But you know, if people lose their jobs, for instance, you can't just give them the money to make it up, and any we don't, okay. And those things that happen in the community, like the destruction of those open spaces, the destruction of the public library, the destruction of the schools, you know, the loss of unions and things. Those are aspects of people life that are not summarized by the amount of money they spend. So those public goods, those public spaces are important to people, but They're not just the money they get, right, it was just the money that mattered to them. They would never invest in those public spices.
So I'm glad you brought that up because part of the reason you won the Nobel Prize was saying, why are we looking at people's income? We should really look at how consumers spend their money, and that gives us a better way to evaluate, especially the bottom quartile or so tell us about this kind of error by economics focusing on income instead of focusing on consumption.
Well, in the current speak that I'm talking about now, I think of income and consumption is sort of the same time. Huh right, I just want to get away from money. I want to say that their marriages are really important to them. Sure, and marriages are dysenterating among people without a behavior exactly?
Oh is it?
So?
US has been about a fifty percent divorce rate for since World War Two? What is it for people who don't have.
I don't know the rates, but there are graphs and animized book. And what happened was divorce went up for everybody, and then it stopped going up for people with a college degree, and it's still going up for people without a degree. So you get these serial cohabitations, you know, in which men and women get together, they don't get married. The woman doesn't think the guy has got enough prospects, she doesn't stop her having a couple of kids with him, right, and then she trades him in for a better model, as they were. And so you get these families which the sociologists have studied in great depth of people. You know, men in their fifties who have maybe six kids, but they don't know any of them because they're all living with other men. Well, that du to your life, and that's not just sort of a consumption thing. That's your life coming apart. You know, the things that give you meaning are just not there anymore.
The household formation failing to gel is very significant, yeah, and more significant for people without color absolutely.
And the same is true for pain, for instance. Not pain is hard to measure, but if you look at something that people usually wouldn't lie about, like psiatic pain, you know specific enough 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 BEA.
The assumption is they're more likely to be in a trade or some doesn't do it from manual labor that leads to that or no.
In fact that people have looked at that and it doesn't work because actually the jobs they're doing in McDonald's are an Amazon warehouse. They may not be ideal, but they're not as dangerous working in a car assembly plant wherever they were working.
Where they may have a college degree.
Well they have, but the point is that you can't explain the rising pain by the changing job makes.
So it's not just physical labor. The degree is very very significant, seems to.
Be, and we don't really know what produces that. It's like half the pup Well's. I don't want to quote a number, but a large number of Americans suffer from non specific lower back pain for its rights, which the medical system has no idea what to do with. Again, less less than a college degree.
Wow, that's unbelievable.
So this really is a story of people's lives coming apart.
So the question is as a society, as a nation, uh, and not just economists but all of us, what should we be trying to do to improve the overall standard of living throughout the United States? What what else can we be doing? Besides mandating a college degree.
I don't think mandating and college degree would nestlely do it because it's the social function of the college degree or the college degrees. So think one of my favorite things that gets me into trouble, that would get me into trouble in this building is I think we ought to be much more friendly to unions and that working people need more power. There's hardly any members of Congress who don't have a college degree. For instance, I think something like two percent of all state legislators do not have a college degree.
Wow.
And I always think of going back to Britain in nineteen forty five when Clement Attlee was the socialist Prime minister immusiately out of the war. Seven members of his cabinet had their first jobs down a coal mine.
Wow.
Right, And so that was just a completely different you know, and those people had their hands on the levers of power. Probably the greatest foreign secretary that Britain ever had, Ernest Bevin, who was the driving force behind NATO, was the illegitimate child of a prostitute who came up through the union movement.
Wow. So I don't see the unions reversing their negative fortunes. This has been a trend. I think you can go back to nineteen eighty with the rescue of Chrysler. It's been pretty much pat Co. Yeah, it's been pretty straight down since that era. So besides the rise of unions, what else could impact this challenge we face.
Well, I think that the de industrialization is much more serious than economists have tended to be. And they said, you know, loring tariffs is a good thing. You know, we can almost 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 that.
So you raise a really fascinating point. People have been talking lately about reshoring as opposed to offshoring and deglobalization. We've just passed a lot of legislation and funded building semiconductor plants, building wobile plants, anything that's decarbonized. Manufacturing has gotten the green light in the United States. Might this have a positive impact on inequality?
Absolutely? I think so. I'm quite enthusiastic about it. And it's not an accident. You know, Janet Yellen is a good friend and she has promoted our Deaths of Despair book every time she gets a chance, for example, And we have other friends in the administration who are very much on the same page on this too.
How long does it take?
That's a question, isn't it right?
So if we're in the midst of you know, all this legislation, the Chips Act, the Inflation Reduction Act, the Infrastructure Bill, these are all ten year funded policies. Ten years from now, might we see a country where the Deaths of Despair has fallen and some of the healthcare outcomes, wealth and income inequalities. Might they be shrinking ten years from now?
That's what I'd like to see.
So I know I only have you for a limited amount of time, Why don't I jump to my favorite questions that I ask all our guests? Okay, starting with what what has been keeping you entertain these days? What are you what are you watching or listening to?
Well? I was a late comer to podcast, but I've done a fair number like this, and some of the people like I like Cardiff Garcia's podcast The New.
Bar Ft is that where he is.
He used to be the ft but now he's independent. He has a podcast called The New Bizarre which I like a lot. The New Bizarre Okay, it's not Bizarre, but bizzarre as an Arab market, right, and he has a very entertaining range of guests, and I like him. The other one that's a bit different is The New Yorker has writers and sas choose one of their favorite pieces of fiction and reads it on a podcast someone else's, and then the fiction editor of The New Yorker, Deborah Triesman, who was Danny Conneman's daughter in law, I think huh, discusses the in a lengthy conversation after the reading. And I find those absolutely fascinating. I mean, I've always liked short stories, and hearing people really people who spend their lives thinking about short stories talking about them is quite a revelation. So those are two of my favorite parts.
I have a flight coming up. I'm gonna definitely download some of those.
Yeah. Absolutely.
Let's talk about mentors who helped shape your career.
Someone we haven't talked about was a man called Sir Richard Stone, who was a who worked for Canes during the War on helping to pay for the war when Kines was working on that, and he got an l price for his work on national income accounting, and I always wanted to be like him. And he was very kind to me, and you know, he had a wonderful dinner table where all sorts of interesting people came for meals. He was a real wine connoisseur, and he wrote beautifully and he was a real imparasis. So these were all the things I wanted to be.
How did you know him.
Well, I was just when I came back from the Bank of England, which I was so memorably unsuccessful. He had a research project funded by someone or other and I was a lowly research assistant on that for five years or something, so about the lowest job you can ever have in academia, I think.
So let's talk about books. What are some of your favorites and what are you reading right now?
Well? I like detective novels, though I think of that as a sort of guilty pleasure, and being a good Calvinist, I tried to ration that a little bit.
Uh huh.
I love the uh the Ian Rankin books about Edinburgh, for instance.
And Rankin Ian Rankin Ian Rankin gotcha.
And he has a detective called John Reebis who's one of these emotionally underdeveloped cops who is very smart but has problems with these emotions. I like those a lot, but I read a wider I tried to alternate between work and you know, so I've been reading and Admati's book on the Bankers have No Clothes, but banks alto have been made to have more capital than they have, which I was reading the newspaper yesterday. They're not taking huge ads at National Air, Union station and so on, demanding that they don't have to do that.
It's going to affect profitability if they do well, that's.
Right, But they're getting profits at the at the expense of putting all the rest of us at risk. Right, And you know that that's one of the takers that we're talking about as opposed to makers that we need to do something about. And we haven't really talked about banks that I don't know as much about them as I know about healthcare. But there's a similar amount of rent seeking going on in.
Both those to say the very least.
To say the very least in both of those industries. And I'm reading Paul Thereu's in your book about George orwoll uh And it's a novel and it's a novel about Oral's early days in the Burmese police.
Huh, that sounds really interesting.
It is very good.
Our final two questions, what sort of advice would you give a recent college grad interested in a career in any of the sort of economics work that you've done.
I think it's it's advice that I would probably have moved away from. But it's still true, which is, you really need to learn as much method as you can handle, and in finance and in many other things too. I mean, I don't really subscribe to the view that you can't think straight unless you can do it mathematically. But you know, I remember my son saying to me when he was fourteen, He said, would you have regarded yourself as a well qualified mathematician in your time? But not like you? So I think that's a lot of these people have done very, very well. So that's a piece of advice I would it's a bit late by the time you graduated from college. If you cadure in the social department, that's probably not the best advice.
And our final question, what do you know about the world of economics today? You wish you knew forty or so years ago when you were leaving the Bank of England.
Not much actually, I think for me it's been a great adventure all along. And I love learning new stuff, and I love reading stuff and their real ideas there that I didn't know before. And I've been incredibly important to fortunate. I was going to almost said, unfortunately, I've been incredibly fortunate Mary. And you know I got the Nobel Prize in twenty fifteen. The work that and Case and I have done, which is what both of us are best known for, was done after that. Really, so it's like a whole new career for me.
With the Nobel Prize focusing attention on that work.
It certainly did because the first paper in the precedings in National Academy of Sciences came out three days after the Nobel Prize by coincidence. And I can tell you when you get the Nobel Prize, it really is being like hit by a bus. You know, there were reporters on our lawn about half an hour after the announcement.
You didn't get the did you get the phone call? Where who is this? Really?
Yeah? I knew the person I was took to. I know you did pretty well. Yeah, so and he said angus, this is not a prank, and I said, tourist. And I never thought it was a preak until you said that.
And now I'm wondering, So I think it was Dick Taylor said he was in the shower and his wife answered the phone. Tell he's and yells from the shower tell them thanks. But I'm busy thinking it's someone's just pulling his leg, right, right, I could be getting it wrong. It may not be.
I hadn't heard that story, but it's like you hear all sorts of things like that, right, yeah, yeah, sure. But then this paper came out about a week later, and it was like being hit by ten buses because it had this enormous impact. Right, And you know that one of the best stories I think I'm tell in the book was in those days, and I think they've resumed it again. The American Nobel's got to go to the Oval Office and meet the president, right. And when we were in, there's a little ante room outside the Oval Office which had these Norman Rocks whole paintings which are not there anymore. They belong to someone else. And a voice, someone came from inside and said, would Deaton and Case go to the front of the line please, which we were not there alphabetically, And the door opened and it was not a flunky. It was Obama. Oh really yeah, And so I said, mister President, I'm delighted to meet you, and I'd like to introduce you. And he said, Professor Case needs no introduction. Oh really, I am familiar with her work and I'm a great fan. Wow. And we spent almost all the time in the Oval office talking about the paper that had come out three days before. Hu and he knew it inside out.
Your wife must have been walking on air.
Yeah, she came out of the White House floating. I think I'm in love.
Fascinating, Professor, Thank you for being so generous with your time. We have been speaking with Sir Angus Deaton, winner of the twenty fifteen Nobel Prize in Economic Sciences. His latest book, Economics in America, An Immigrant Economist, explores the Land of Inequality, is out today. If you enjoy this conversation, well, be sure and check out any of the previous five hundred discussions we've had over the past nine and a half years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcasts. And check out my new podcast, At the Money. It's in the Masters and Business feed and it's short, ten minute conversations about money with some of our favorite Masters and business guests are earning it, spending it, and most importantly, investing it. At the Money wherever you find your favorite podcasts. I would be remiss if I did not thank the Crack team that helps us put these conversations together. My audio engineer is Meredith Frank. Attika Vaalbrun is our project manager, and Wanna Luke is my producer. Sean Russeau is my head of research. Sage Bauman is the head of Podcasts here at Bloomberg, And I'm Barry Griholtz. You've been listening to Masters in Business on Bloomberg Radio.