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Okay, today I'm speaking with my good friend Brian Kaplan and this will actually be uh the second time we talked.
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So the first uh the first time we talked was the first episode of this podcast.
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So uh yeah, I'm really excited about this.
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It's fantastic to be back here.
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Great to see how well you've been doing for yourself and now it is my privilege to get to speak to you. [laughter] Excellent. Okay.
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So, uh, today we're talking about your book, Labor, Econ Versus the World, and it's a collection of your essays throughout the years, and I highly recommend it. Um, okay.
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So, here's my first question.
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What percentage of the work working age population is zero or negative productivity? H, it's a good question.
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So, this is working age population, not actual those, not not the ones that are in fact currently working. Yeah. Yeah. Yeah. Yeah. Hm. Let's see.
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Well, I So, I'd be inclined to say probably something like 3%.
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Although, of course, it's much higher if you just make someone do a job that they're not suited for. Right?
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So, again, whenever people talk about zero productivity workers, I often want to say the fact that someone is zero productivity or negative productivity at the job they're doing doesn't show that they are a zero or negative productivity person.
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Could just be that they are mismatched to the job.
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a common misunderstanding actually.
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So yeah, I think it is very low for the working age population for any job at all.
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One of the things that labor markets do of course is fire you from jobs where you have really low productivity which encourages you to search around for something that where you are actually productive.
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So then what's the explanation for why labor force participation is like 60% or something?
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So there's like a gap of about like uh you know like the 37% or something of people who who could be contributing but are not.
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Well, I mean the biggest explanation is working mom or not working moms rather moms of especially of young kids who don't want a job because they are busy taking care of their kids.
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So I say that is the first and foremost one is family responsibilities.
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Uh there's a small share of people that are rich enough and there isn't any job that they like doing.
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So that's I think that's only maybe a couple percent of the population.
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Then you've got a larger percentage of the population where government redistribution means that they really don't have that much of a gain from working at least in the short run.
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So I think often it would still in fact be better for them in the long run just to get a job even if they don't make as much money when the than when they're be when they're receiving distribution because you get training and connections.
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So in the long run it is a better strategy.
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There's another chunk of people's parents are just either really nice or suckers depending upon how you see it who will just take care of them.
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There's of course spouses uh even when you don't have kids or romantic partners who will take care of you even though you are not working right.
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And then you finally well this is not oh this category does overlap with with the others but then there are guys who just really don't want to go and conform.
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U most often what they're doing is they work sporadically and they have a job and then they are difficult and they get fired and then they are unemployed for a while then they find another job.
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another job. Um you so like there's uh one of my favorite books on poverty which is promises I can keep talks about the problems of single moms and one of the main things that it talks about is they're not happy with the fathers of their kids and then the question comes up well was the problem they can't find
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jobs and they said no no no he finds jobs all the time problems keeping jobs so I think that's another part of it so you know of course if you officially say that you're still looking for work but you just don't find a job then you'll be counted as unemployed but If sometimes you just say screw it, I'm not even looking. And then they record that in
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And then they record that in the stats, then that will come out as saying that you aren't even uh trying. So, yeah.
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So, I'm glad you brought up uh I'm glad you brought up poverty.
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So, you emphasize in the book uh the success sequence.
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So, this is the idea that you know if you get u married before you have kids, you get a high school diploma and you work full-time um then you're virtually guaranteed to not be in poverty.
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Um so, not this raises in the United States anyway. Oh, sorry.
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Yeah, in the United States.
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Um, and so this raises a question if um if it's so easy to uh stay out of poverty or to not get into poverty in the first place and if so many people are still avoiding doing these steps like what is the explanation because clearly being out of poverty is like something that a lot of people you would think they would want.
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So is are these steps harder than we think?
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Like what is the explanation for why so so many people are still failing to comply by uh these basic uh these basic steps? That's a great question.
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So, when people ask me about the meaning of the success sequence, I say, "Well, look, imagine there's some research saying that here's a simple recipe to avoid poverty.
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First, be first in your class at MIT.
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Second of all, win a Nobel Prize.
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And third, marry someone who won an Academy Award."
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If that was the prescription, then people might reasonably say, "Well, hardly anybody can do that, so I'm not even going to try. That's ridiculous. It's hopeless."
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And that's and then if that's what you have to do to avoid poverty, then you could reasonably say, well, most people just couldn't possibly do it.
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What's interesting about the sex these success sequence is that it does sound quite easy, right?
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So, American high school standards are very low.
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Basically, if you just show up and try, then you're very likely to get passed along.
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So, you'll graduate from high school.
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Uh getting a job for working full-time, you know, even when you go and ask people who are in poverty during all but very severe recessions, normally they'll say, "Yeah, it's easy to get a job.
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It's not actually very hard.
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This is again talking to actual poor people.
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This is not the opinion of economics professors.
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And then finally, waiting until marriage to have kids. That sounds really easy.
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It's like, yeah, we've got reliable contraception.
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It's not like you need celibacy or anything.
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Just delay until you've got someone that you are comfortable raising the kids with.
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So, as to why these three things, why people don't do them?
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Well, there's a few possibilities.
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So, one is that people just don't know, right?
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people just don't know, right? I'd say this is really hard not to know because you have so many people first of all you have a lot of people telling you every you know your parents are telling you teachers are telling you other authorities are telling you coaches are telling you uh furthermore is totally normal even in neighborhoods where
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people are not following this for parents to want you to follow it which I think is a telling piece of information because there is a critique saying that this this success sequence only works for people that are growing up in a middle class neighborhood and it is just not realistic for is not actually a path out of poverty for other people. If
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If that's so, why is it that parents who themselves have not followed it push it so hard, which again appears to be totally normal?
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It is really weird for a single mom to raise their kids saying, "You know what?
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I want you to be a single mom. It's the best.
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It's it's the only good path in life, right? That's not normal.
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Instead, the normal thing is to say, look, look at how I messed up my life. Don't do what I did. Wait." Right?
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And then people still don't wait.
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And then people still don't wait. Uh there's also a story saying well look even though it's people are telling you to do this you don't have any good examples that you can where you can see that anyone's followed it so there isn't really any real proof and here I say hm well probably your teachers in school follow it so you can look at them and
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you can say all right my teacher might not be the coolest person but they're not living in poverty right bare minimum right so my so my teacher seems to have a path out of this furthermore it's actually very normal even in poor families for there to the successful members of the family who have escaped poverty and normally do it by following the success sequence. So you'll have a
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So you'll have a relative who's in a family of single moms, but this is the one that didn't do it and this is the one that waited and follow the path and you will see her at family events.
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People may have some resentment.
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Oh, she thinks she's so much better than the rest of us.
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But again, you can't say that they don't have any firsthand experience with it. They've got that.
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So I think the story that makes the most sense to me is it does require some impulse control, right?
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Which is not fun for people right now.
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So yeah, finishing high school, you requires that you go and sit there and be bored. I remember high school. It was really boring.
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So I can especially when you're when you've got young people that are making decisions, young people are famous for low impulse control.
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Same thing for working a job.
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A lot of what you're doing on a job is humiliating yourself, honestly.
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There's there's a customer who's mistreating you and yelling you you're being rude for no good reason and like to keep the job. Then you say, "Yes, sir. Terribly sorry, sir."
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And your pride says to say, "Hey, don't talk to me that way." Like, what do you know?
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You're the one you're the one that screwed up.
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You're not supposed to say that on a job.
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And it requires impulse control to keep your mouth shut.
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And then, of course, most notoriously avoiding avoiding kids that you're not ready to have requires impulse control. Right.
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And indeed, I would say that in all the work on poverty that I've read, I would say that poor sexual impulse control is actually the root of almost all the other problems because it's one where a lapse in judgment actually leads to long-term responsibilities in a way, you know, so you like you can recover from yelling at customer getting fired. All right, fine.
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You burn some bridges, but you just look around, you get another job.
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But you really can't easily recover for especially if you're the mom from having a child where the dad isn't going to help you or the other parents can help you.
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It does mean that for 18 years you really are trying to at best juggle a lot of complicated responsibilities. Right. Right.
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And so I guess you most crucially I see like one of the main critiques of the success sequence by the way is that full-time work does almost all the work.
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Um, now my understanding from Brad Wilcox that's not true and there actually is a marginal effect of the other pieces besides full-time work.
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But even if the full-time work critique were totally correct, the question is, well, how easy easy for is it for a single mom to do full-time work?
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And yeah, it's it's really hard. All right.
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Now, as to why people don't do it despite the fact this like look just some minor impulse control and then you'll have a much better life.
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I mean the answer for that is well h um hard to say.
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I mean, I would just if I if the person were asking for advice, I would say, "Look, this is really easy. Do it."
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And they'll do it anyway.
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And I said, "Man, it was so easy and you still didn't do it."
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Like, like, "I told you what to do.
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Why didn't you listen to me?"
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And there's the classic response of the irresponsible young person like, "Why did you do it?" I don't know. I don't know.
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And it's it's one that's been that's timeless where young person does something where it seems like it was really easy to do the wise thing.
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They were told what the wise thing was.
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They didn't do it anyway.
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What more can you say at that point?
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U other than gee uh you you've really messed up and you're no longer a child and you're now going to be paying for this for a long time. Sorry. Yeah.
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So there's there you know there's Charles Murray's story in coming apart which is that actually the culture isn't emphasizing these values or at least like the elites in the culture are not emphasizing these values that they live by. Right.
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So in that way you can say like oh it's like you know it's the elites fault for not emphasizing these values that uh these people don't know about anyways.
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or um I'm sure you saw Tyler's review of your book on marginal revolution where he said about this um I mean he was broadly praising your book but he said about uh this point that oh you're underestimating like the cultural factors uh that might get in the way of somebody achieving the success sequence.
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Um yeah so I wonder what your reactions are to those. Yeah.
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So so Charles Murray I would say look there's probably a little truth to this but it's a pretty damn lame excuse.
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you say, "Yeah, well, gee, why did you go and drop out of high school and fail to get a job and then go then have kids before you got married?"
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Like, well, the elites didn't tell me enough [laughter] that I should do these things.
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Like, look, there's a lot of people telling you to do this stuff.
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Teachers are not at the highest level of elite, but relative to a poor community, teachers are elite.
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You got parents, you got ministers.
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In a poor community, a minister, well, what's the minister telling you?
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Is he telling you to not do the success sequence?
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No, he's telling you to do the success sequence.
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He might also be adding that this is an evil racist society that's screwing you over.
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But if anything, that's a reason to go and be careful with your behavior so that this the racist society has more trouble screwing you over to say, "Look, I don't have a lot of second chances, so I better watch my behavior and be mindful."
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Uh, right now, I mean, I think it is is fair to say, look, you know, elites could do a bit more.
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But again, to say, "Well, I wanted to do all these things, but the elites just didn't tell me, so blame them."
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Like it's a pretty lame excuse.
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This is about at the level of saying that you went and put your hand in a blender because you saw it on a cartoon.
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It's like come on, right?
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I mean, if you're 10, then it's tell the parents, hey, don't let the kid watch cartoons.
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If they're just going to copy whatever horrible thing they see Bugs Bunny doing.
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But if they are at the level where they know the difference between cartoons and reality, then it's like, hey, like exercise some responsibility there, right?
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But again for Tyler saying I'm neglecting cultural factors.
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I do talk a lot about cultural factors here.
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I mean I I'm well aware of the fact that people tend to imitate other people.
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It's just the question of how good is good of an excuse is that there's all my friends you say if all your friends were jumping off the Brooklyn Bridge would you?
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Well I don't know maybe like well that's pretty foolish is it not?
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Do you really even need me to tell you not to jump off the Brooklyn Bridge just because all your friends are doing it?
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And so I have some other pieces where I just say, look, nobody really is willing to actually accept these kinds of lame excuses and as a rule because it would mean that you would be going and exonerating people for horrible behavior.
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Someone who says, "Well, yeah, like I did go and commit a lot of war crimes, but there are a lot of other soldiers doing war crimes too around me."
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It's like, well, did they kill you if you didn't participate? Uh, no.
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But they would have laughed at me if I didn't go along with it. Yeah. Well, yeah.
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Sometimes you need to be laughed at so you don't become a murderer.
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And I don't think you really need me to tell you that.
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It's obvious enough when you think about it.
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It's a very lame excuse to say, "Well, but the other soldiers would have laughed at me if I said, "Let's not burn this village down, and I don't want to participate."
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I mean, by the way, this was also, I believe, the point of a pretty famous book, Hitler's Willing Executioners, which asked the question, what happened to Germans who just said, "I'm not participating in the Holocaust."
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You might think it's a totalitarian despatism.
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You're going to get shot yourself or you like sent to the concentration camp yourself if you say, "I refuse to go along with this immoral plan that you have."
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And what the book said is hardly any Germans were ever punished for refusing to go along.
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They would just say, "Oh, okay.
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Well, he's not very comfortable with this, so I guess we we won't make him.
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It was like, that's all that it took.
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I mean, it's one thing to say, do you have the courage to go and die to avoid going and hurting an innocent person?
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And it's a very different thing to say, do you have the courage to not be laughed at to avoid being a murderer?
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Like, that's not that big of an ask actually.
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And I will say, and I think many of your listeners will remember, are there times that you followed your conscience even though you had some peers laughing at you and you did it anyway? Is it really that hard? Come on. Yeah.
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Um but but so I guess putting aside the question of moral blame to the extent like the argument you're making there when you talk about the willingness of you know let's say Germans in Nazi Germany you're you're making the argument that like oh human nature is very um very perceptive to what the peers what your peers saying and they do want to disappoint the people you're working with and so on or you know that are in your community.
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So that implies that causally speaking the community matters a lot or the culture matters a lot.
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So, like what could be I I think uh Hansen react Robin Hansen reacting to Tyler Cowan's review of your book.
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He said, you know, um I guess he was this is kind of amusing.
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So, I don't know if he's like necessarily endorsing this, but he said, you know, maybe this kind of justifies cultural imperialism where a culture that has better values when it comes to success sequence adjacent stuff.
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They could kind of impose them on cultures that have worse values here.
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Um so, like what what what do you think there anything can be done to improve the culture uh when it seems dysfunctional in these ways? Hm.
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Does greatly cutting back on redistribution or making it more conditional upon good behavior count as something we can do?
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I think that's a really obvious thing is to just say look like these it was pretty easy for you to go and avoid these problems and so we're going to treat you differently because your problems were avoidable and you didn't avoid them. Mhm.
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So that could just be lower amounts of payments or cut people off sooner or just say, "Look, you're not eligible."
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These are all possibilities. So there's that.
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In terms of other things to be done, I mean, you could actually go and teach the success sequence in schools.
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I don't know that it's going to be all that persuasive because it really is just going and repeating pretty much what you're already telling kids anyway.
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I do have some thought that if you just ramp up the level of of of preaching by a factor of 10 or 50 then maybe it would work right so there is a lot of research saying that various things don't work and then the question is well they don't work because they
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have zero effect or they don't work because the dosage is too low and honestly I often think the problem is really low dosage it's just the question of is this an organization that is actually has the steel to give a very high dose usage. For example, foreign
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For example, foreign language education, right?
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The kind of foreign language education that goes on in American high schools is essentially a zero effectiveness.
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And yet, people do learn foreign languages.
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How do they learn foreign languages?
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Well, you basically learn it when you take the intensity of a normal high school program and you ramp it up by a factor of 10 or 50 and then people learn. All right?
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Now given how much time schools are already spending on foreign language which is typically in say a place like California is three years out of high school you don't really have the time to ramp it up by a factor of 10 or 50.
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It would just absorb the entire program.
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And that's where you say the amount of effort that would be required to go and actually get fluency in Spanish is so high that we're better off not trying. Right?
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uh for something like this where people really are messing up their lives at a pretty early age.
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Then maybe and especially if you're not currently giving them three years of advice, you might only be giving them a few hours per year when you add it all up.
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Maybe you did go and multiply that by a lot, then it would actually have the effectiveness you're looking for.
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Um definitely it's the kind of thing I say it's worth just trying and just seeing whether seeing whether it work if we just go and you make a much bigger effort here and you know like like and also just you know consider AB testing where some people just get the lecture and some people you go and actually meet people who messed up their lives.
18:17
I mean honestly I don't think it would be at all a bad idea to go and recruit homeless people to go and talk to kindergarteners [laughter] and just you know you say you know like like especially you're in a poor area and you say you see these guys that are just sitting on the side of the road.
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Let's bring them in and talk to them and find out what's going on.
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Ask them what they think they did wrong with their lives, if anything. Right?
18:36
I mean, I again, I think I think people would just be so squeamish like you don't want to go and traumatize 5-year-olds by having them meet a homeless person, have them talk about his crack problem or whatever.
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But I would say, why not?
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Like, you know, if there's if there's like you just convince one kid in the class not to become homeless with this experience, or again, if if one isn't enough, do it 10 times.
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just do it like, you know, twice a year until you're out of until you finish high school, right?
19:03
It seems like it's at least worth a try. Like couldn't cost much. Yeah. Yeah.
19:08
U going slightly off topic.
19:11
Uh does the fact that uh foreign remote workers are paid many multiples less than uh Americans who are also remote workers?
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Does that suggest that uh you know foreigners are lower productivity than you think?
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Maybe there's like some cultural barriers that are preventing them from being as valuable as Americans are.
19:29
Maybe there's some other factor.
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But in any case, like why is the fact that you know programmers in India who are working remotely are paid much less than programmers in America who are working remotely.
19:39
Does that s does that suggest that actually you know the people in India are actually lower productivity than you think?
19:46
It definitely suggests it.
19:46
However, we have tests to show the ingestion is wrong. Right?
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Because we actually all we we know what happens when there you are a remote programmer in India but we also knows what hap we also know what happens when you move that remote worker to the US or another first world country and then we see the wages skyrocket.
20:03
So it seems like the the most you could say is there might be some interaction between being foreign and not and being remote.
20:12
At least we know that being foreign and being present in the in a first world economy in no way predicts lower pay or and probably also like no difference in job performance really.
20:22
Uh so now as to why that is I mean one thing is that we've had the remote work took such a there was such a huge increase during COVID that right now we we perhaps we're just not in equilibrium yet.
20:34
So the right now it may be that it's taking time for first world companies to say wait we know we could get better workers that are as good for a lot less money in the third world.
20:43
So maybe that's what's going on.
20:45
But you know you have to think that there is a reason why remote work first of all was rare before and second of all why most firms are eager to return to inerson work.
20:53
So I think you have to think that there are some serious problems with it that are a little maybe a little hard to articulate.
21:00
My best guess here is just that while it may be not that bad to go and switch remote work when you already have a well functioning team that you have assembled for in-person work, but it's probably a lot harder to get a well functioning team that has never been in person. Right?
21:16
So essentially, you might think of in-person work as being an investment in being able to cooperate well whether or not you're in person or remote in the future.
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And if you've never been anything other than remote, then maybe the team building doesn't work so well.
21:29
The other possibility is that we're just not in equilibrium yet.
21:33
Again, the economic argument comes down to if you really can get someone just as good for a third of the price from from another country for remote work, then why don't you do it right now?
21:42
Again, of course, there is the answer of lower productivity, which again I say is plausible until you actually see what happens when you move that same worker into the first world and you say, "Nope, turns out he was just fine and the problem had had was probably remote work."
21:56
or maybe there's something about remote work and being in another country as well that might make it happen.
22:00
So, by the way, I do have a friend who's actually American living in Spain and he's applying for remote jobs and it doesn't work for him either, right?
22:07
So, it's not just it's not something about uh being Spanish.
22:12
It seems to be that a US company isn't interested in because he's in Spain even though he is a well-credential American and that is a problem for him.
22:20
and that is a problem for him. Um now again like you might say why doesn't he just claim to be in Michigan though the problem is he's been in Spain for a long time and therefore his whole CV is Spain oriented so it looks like you know he bas it looks like he is not well integrated into the US labor market at this point um is but yeah but is is a very good question um a potential
22:41
explanation occurs to me I I don't know if this makes any sense but could you apply the signaling explanation here so you know just like college going through the immigration process signals that you have high conscientiousness and high
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conformity and you know you're like you know gives you like more information about their like background as as far as like crime and other things are concerned and even hiring within America would give right. So maybe it's like a
23:00
So maybe it's like a signaling story uh like going through immigration just the same with colleges. Yeah.
23:06
The problem is the immigration system I just don't think is really very meratic at all. It's quite arbitrary.
23:09
I mean remember we even have the diversity lottery.
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lottery. So you know like if you see that someone got into the US by winning the immigration lottery you're inclined to say well he's just a lottery winner he just got lucky so I should think that he's not that good right that's not actually the normal reaction so I don't think and that's a case where you know
23:28
there's an enormous amount of luck involved let's see and then again for other stuff it's just so obvious that it's mostly about family reunification really so it's like look this person was lucky enough to have relatives I mean there is some level of commitment to go and filling out paperwork and so on. But
23:43
But yeah, as to how much that makes you enthusiastic about hiring the person.
23:49
And then on top of all of this, we actually have a whole separate body of evidence on illegal immigrants where employers definitely seem to be more reluctant to hire illegal immigrants, but almost all of that appears to be just the problem of compliance and getting caught, right?
24:02
And we know this because we actually have the experiment of when you regular regularize illegal immigrants, then very quickly they get a big raise.
24:10
So again, if you're an employer and you really thought that it's only the legal immigrants that have signaled something good about themselves, then when you see that there's an illegal immigrant who was regularized, then you should hold it against them and say, "Well, since he didn't go through the normal process, then I have to think that he's of low quality compared to other immigrants."
24:27
And this is not seen to be the normal reaction that employers have.
24:29
Normal reaction is great, now I don't now I can hire the guy I wanted to, plus I don't have to worry about getting fined or shut down or raided or anything else. Yeah, that makes sense.
24:39
um what what does the education system look like in equilibrium given that there's no government cuts because if there's credential inflation like isn't it just like an escalating um escalating cycle?
24:50
So like eventually I mean it wouldn't make sense like eventually to get to the point where you need a PhD to be a janitor but like what is equilibrium look like? Yeah, great question.
24:58
So I would say actually that if you keep the level of funding constant then I would think that you we've reached equilibrium already.
25:07
There are other and there's actually periods when the share of Americans with college degrees was actually quite flat.
25:14
So basically during late 80s early 90s I believe the share of like would be what would be like share of like 25 to 29 year old Americans who had finished bachelor's degrees was quite flat for about 15 years which then led many people to say okay we've reached equilibrium and now it's over.
25:30
Then afterwards uh it resumed its upward increase and it went from like 20 25% now we're getting like more like 35% of people in that age bracket have finished four-year degrees uh as to what were the shocks to the system.
25:45
Yeah, that's an interesting question and I don't have more than speculation here.
25:50
Part of what's going on of course is that much of the of the rise is driven by women.
25:58
So, you know, there is a growing disparity between male four-year college graduation and female four-year college graduation.
26:04
And so, I think a lot of what's going on is that this is a period when it's becoming more and more normative for women to go and go to college and to get their four-year degrees.
26:13
And there's, you know, as I said, people are conformist.
26:15
So, once if you are a young woman, you see this is what almost all the other young women are doing, then very inclined to go and do that. uh there.
26:23
So in terms of sheer affordability, this is you know this is overall a period when college was becoming less affordable.
26:32
It's uh it's easy to exaggerate that because there's also so much financial aid and then furthermore of course people are getting richer on top of that.
26:39
So it's that but that is complicated but uh nevertheless uh at least I would say that's probably not driven by changes in affordability too much. Let's see.
26:49
Um mean like another story is your rising inequality is another reason to go and get more education.
26:56
So when the gap between high school high school graduates and college graduates goes up, this is a a reason for more people to go.
27:03
So there's probably that too.
27:05
So you can get changes in just the structure of the economy, higher return to quality, that kind of thing uh also matters, right?
27:12
But yeah, but you know like there I would say like you know the idea that there's just an actual tendency for education to rise no matter what. I think that's wrong.
27:19
There's this old line attributed to Herbstein that anything that can't go on forever won't go on forever.
27:24
Yeah, very reasonable point as to how far it can go though. Oh, yeah.
27:28
There there is something else that I I don't think we have really good data on this, but I I'm very I I strongly suspect it, which is that schools are constantly slightly lowering their standards over time in order to make it easier to finish.
27:43
So, that's something where it's very clear they lower their standards between 65 to today, right?
27:49
right? it like the intelle like you know the curriculum was just much more intellectually demanding back then it is harder to say with great confidence they lowered standards between 2000 and 2022 but that is definitely my suspicion it's one where if you are a college professor
28:04
especially at a lower ranked school you can you'll appreciate what the pressure is which is every year you have a class of students most of them don't want to be there and really are not academically inclined and then the question is how many of them am I going to fail out now if you have any pride in your work at all. You'll start by failing the
28:20
You'll start by failing the people who never showed up and didn't even do the exam. Right?
28:22
So, it's like, okay, well, I can fire them with good conscience.
28:26
Plus, I don't even know what they look like, so it doesn't hurt my feelings, and I don't feel bad for them when I flunk them.
28:29
But then this then the question of, what about the people that showed up and tried, but no zero? What do I do about them?
28:37
Most professors, pride still says, "No, I can't pass that person. It's sad, but I can't."
28:44
But and when you do it for 30 years in a row probably there's a general tendency each time to go and fail maybe like 0.
28:50
2 fewer people per year and then over time [laughter] this happens and then there's also a culture of what's so what what what is an acceptable share to fail and then as the standards fall you get weaker students there and then the process continues to uh to to amplify where standards keep going down.
29:08
So I do think that there's been a lowering of standards which means that more people want to go to college because they can actually have a have a prayer of getting through and then when you do that that does spur further credential inflation because you've got too many people with low quality with the degrees in hand and so you need an additional degree on piled on top to get much confidence in quality. Right?
29:28
So then why don't more employers care about the hardness of a curriculum for the college that they're interviewing students from uh in comparison to like what level of a degree they have?
29:36
So they'll care like does he have a masters or a bachelor's?
29:39
They'll care less about like did he go to Chicago or Harvard?
29:41
I'm I'm like I've heard that you know Chicago is much harder, right?
29:45
Like I don't but employers don't seem to care that much.
29:47
Oh, like you know that that's an even stronger signal of conscientiousness that he went to Chicago.
29:50
Um as long as you know the incoming class had a similar GPA and SAT score.
29:55
Like shouldn't employers care about that? Yeah, good question. Right.
29:58
So here's what we know about the actual payoffs of different kinds of college degrees.
30:03
The single best predictor of payoff is your major.
30:06
And the majors that are thought by most people to be harder generally have much better payoffs. That's right. Yeah.
30:12
So step one is employers are doing that.
30:15
They are much more eager to go and hire STEM majors.
30:17
Econ majors, for your listeners who are trying to figure out what they want to do, earn a lot more than business majors.
30:22
And you might think they're the same, but the world treats econ majors almost as well as CS or or or electrical engineers, which when I discovered it, I was kind of amazed.
30:33
I'm like, "Wow, what a deal."
30:33
I always tell my students, "Economics is the highest paid of all the easy majors."
30:40
And when they start getting flustered and say, "Easy, it's all like, look, this is not CS.
30:44
You're not getting vitamin D deprivation from [laughter] going and doing your work for 72 hours straight underground. Come on." Like, like, yeah.
30:55
So, it's harder than business, but it's not hard. Absolutely.
30:58
just put in a little bit of effort and you'll you'll get through as long as you can do pretty basic advanced math.
31:02
You know, as long as you can take a derivative of some of an easy function, you can get through econ specific. Yes.
31:10
So, anyway, so you know, major is the single biggest one.
31:12
Now, there is a big literature on why is it that on the return to selectivity of colleges uh definitely differ very subtle differences like Harvard or Chicago, it's very hard to pick up pick up much there.
31:26
But again I think you could just say yeah well employers don't distinguish because hardly anyone goes to those schools they are really close in fact in terms of their quality they are going to distinguish between Harvard and say Cal State Northridge something like that.
31:39
Uh there is a puzzle about why don't employers seem to care seem to care more than they do about the selectivity of college and it seems like part of it it gets picked up in the major because harder colleges people are more likely to do harder majors and then another part of what's going on is people are looking at your overall background.
31:58
So when when when we say that selectivity doesn't matter much this is adjusting for a lot of other facts about you.
32:03
So if we didn't then we would see that we do actually have a a noticeable gain from the selectivity for college.
32:11
Um so I guess you know my main answer would be that they already are are using a lot of information distinguish it and then really it comes down to for some further really fine grain differences.
32:21
Why don't they pay more attention to those?
32:23
And I think the easy answer is the fine grain differences just don't come up that often.
32:28
And then on top of all of it, so much of of worker quality really really does have to be observed.
32:34
So it's enough to get you in the door, but there's enough uncertainty remaining where you can say, well, look, it's the difference between having say a 78% chance the person works out and a 76% chance the person works out.
32:45
That's almost a rounding error.
32:47
So if I'd have a little bit of other information on the se on the person that would normally be 76, that can put me over the top and get me to go and give that person a chance.
32:54
So I think that what's going on is actually quite a bit more reasonable than you might think if you don't know a lot of the details, right? Yeah. Um okay.
33:03
So you you another point you're making in the book is that uh market discrimination is often caused actually by government interference and then um it it it will solve itself in equilibrium.
33:14
Um but I mean if you just look at uh like college discrimination of Asians, right?
33:19
So you know like the government is not requiring Harvard to like discriminate against Asians. Yes.
33:25
Um but and in fact it like lowers the signal that Harvard is able to send if you know they do aggressive affirmative action but um and even like actual companies that are in the market proper like Google or something they'll do affirmative action too right um I mean you could say like a little bit of that
33:40
is required by discrimination law but probably not to the magnitude they're doing it um uh so like what is the explanation for why that hasn't been solved out by just competition right so there's multiple things going on so for colleges the key thing is that they're nonprofits And so I have this running argument with my colleague Alex Tabarok. There is a
33:56
There is a whole economics of discrimination based upon the idea that for example if it was really true that women earn 70% as much as equally qualified men that any has a quick has a get-rich quick scheme just fire all the men at your firm replace with equally qualified women and save a massive amount on your labor costs.
34:13
So that's sort of the classic economic argument and I think it's basically sound.
34:17
But the key premise is precisely that that that you're dealing with for-profit organizations where there's someone that is willing to do something that sounds ugly in order to get rich.
34:28
And so I mean I'm always telling them look this does not apply to nonprofits like academic departments or universities.
34:34
So that's the first thing that I would say is that nonprofits at minimum the pressure on them to not discriminate is much weaker than for for-profits.
34:41
So I would distinguish those two uh quite strongly actually. Yeah.
34:46
And I'd say actually nonprofits, you know, you should definitely expect them to do more discrimination.
34:50
And then the question just is what kind of discrimination are they are they inclined to do, right?
34:55
So this is one where in the old days when there was a lot of anti-semitism at top schools, then the top schools would be engaged in discrimin discrimination against Jews, right?
35:05
Well, how could they afford to do that? Easy.
35:07
They're sitting on a mountain of money that isn't theirs, right?
35:10
They're not they're not going to go bankrupt if they go and have a tight Jewish quota.
35:13
It's not like they like there's any it's any skin off the nose of the admissions department and therefore they can engage in whatever discriminatory preferences they have precisely because they are a nonprofit.
35:25
So then what explains the discrimination at Google for example? Yes.
35:27
So I was just about to get to that cash.
35:29
Now, in the case of for-profit businesses, again, there there is a certain kind of superstar company like Google where they are so rich that at least you might say, "Huh, they could probably afford to discriminate for a hundred years too and still survive."
35:44
Uh so like you know there are a few companies like that where they have just been so incredibly successful that now they have they're sitting on a mountain of money and then like they are no long they're not up against the wall saying oh my god if we don't do everything great then we're going to we're going out of business.
36:00
So now it's important to remember there's there's there's very few companies like that. They're they're famous.
36:05
Also worth pointing out the companies that think they're in that position forever. It's not like Harvard.
36:10
There are a whole bunch of companies that were in the same position as Google that are now bankrupt.
36:13
So um even there I think the people at Google do have some sense that there are limits to this.
36:20
Now in terms of you know what the actual role of discrimination law is.
36:23
I think that in the case of colleges they are definitely going further than the law requires because they're true believers there and the true believers are especially concentrated in the admissions departments.
36:36
Uh so that's where I'd say the main thing is the nonprofits.
36:39
Although even there they do have the threat to hang over the heads of other people in the administration which is well we don't want to be perceived as doing clearly less than than other comparable schools. Right?
36:52
That is an important thing that you want that that that you want that you don't want to do if you want to avoid lawsuits is to be obviously the the group or the organization that cares less than everybody else and does less.
37:02
So for nonprofits, I think that is there is a bit of that.
37:06
In the case of for-profit companies, I think actually that discrimination law is a major part of the reason why they actually are supportive of affirmative action because they don't want to be less supportive than any comparable company at least in an obvious way for fear that then they will they will paint a target on their own backs. Right?
37:25
So I have a couple pieces that I wrote on this.
37:27
I don't I think they're they're they're going to be in a different book if I remember correctly is actually this is the first in a series of eight books of my best blog posts from on econ log from 2005 to 2022. Oh, cool. Right.
37:40
But anyway, uh what I say in another piece is that just imagine what would happen if you were a well-known firm and you just officially announced we strongly oppose any kind of witch hunt about discrimination.
37:54
This firm is very fair and we are and we scrutinize all accusations of racism and sexism very carefully to make sure that you are not making false accusations against an innocent person.
38:05
Now imagine that you very loudly say this right now.
38:08
Of course, there's protests and boycots and so on that you might get, but on top of all of this, if you ever get sued, that is going to be discovered.
38:20
And they were going to introduce it and say, "This is a firm where they actively punish people for going and trying to uh and trying to insist upon their rights."
38:28
And you say, "Hey, we didn't we we we were in compliance with the letter of the law."
38:33
Well, how is a jury likely to see it when they say, "Look, this is what a normal firm looks like where you have a bunch of propaganda about how we are doing everything in our power to go and help oppress groups."
38:43
And then there's another firm and then you and then we show and what what do we have at this firm?
38:47
This firm is you where you say, "At our firm, the battle against racism and sexism has long since won has long been since won.
38:53
We consider it an extremely minor problem and our presumption is that accusations will be false.
38:59
false. uh we'll listen but we are firmly convinced that mo that we are the in the fairness of our own system and so we are we are going to carefully scrutinize and discipline people who level false accusations right I think if you were
39:14
that firm you really would be painting a giant target on your back it would not be safe right so um right and this again is how there has been an expansion of discrimination law over time right so I mean if you so like sex harassment law like at the federal level. As far as I
39:28
As far as I know, there is no law against sexual harassment.
39:31
Rather, this is just a judicial extension of the original 64 discrimination act because it started with saying, "All right, well, look, obviously it's illegal to discriminate.
39:41
That's what the law says."
39:41
Well, what if that you're just treated badly, right?
39:46
Well, h well, I guess that could be discrimination, too, right? Yes.
39:49
Well, like is discrimination because of your sex? Yes.
39:53
Well, what if you like women get paid the same amount?
39:55
get promoted the same amount, but there's a bunch of calendars with women in bikinis around the firm.
40:00
Could that be discrimination?
40:02
And then this is the origin of the law of the hostile workplace.
40:04
Now, sometime in the 70s, there was one of my very favorite all-time court cases where there was a bisexual employer who was accused of of sexual harassment and he said, "It's not discrimination.
40:15
I I harass men and women alike totally like I I am totally within the letter of the law." Right.
40:22
And if ever a person was totally legally in the right was that guy.
40:27
That guy like I say like unquestionably he had the law on the side but he lost anyway.
40:31
So the court basically said look we're not going to let bisexuals get away with sexual harassment when other people can't do it.
40:38
Like we're no we're not going to allow that. No.
40:42
And so it continued and then expanded to what we have now where people can get sued because some employees told jokes or graffiti at a bathroom.
40:53
So that is at the level where we're at.
40:55
Now again, this doesn't mean that most firms have much to worry about.
40:57
But it's hanging over your head and it's a reason at least for prominent firms to avoid doing anything because prominent firms are like piggy banks, right?
41:05
They're full of money and someone is people are just waiting there.
41:10
Hey, Elon Musk has a lot of money.
41:12
What if we could go and sue him? He could pay, right?
41:16
So, let's let's go after him.
41:16
If it's just some guy's paint store, then probably not much is going to happen to you.
41:20
Although, even there, you're just a little bit worried.
41:24
I guess now the other thing to remember is that a lawsuit is not just a loss of money.
41:29
It's also enormously stressful.
41:31
So, there's, you know, don't underestimate just the worry of that.
41:35
And just think about what is like if you've been sued once, how do you feel about getting sued twice?
41:38
[laughter] I think almost anyone's been sued once.
41:41
They're like that was a terrible experience for them and they will be trying to think of ways to avoid happening it again or having it happen again.
41:47
One thing of course is to be super cautious but there's a lot of ways of being super cautious.
41:52
There's also the one where like well I profile people who might sue me and I don't hire them.
41:56
Something else you can do. Okay.
41:58
So I want to ask you about uh mental illness.
41:59
So I'm you're aware of Hania's book um where he explains that the uh you know unitary actor model can't explain American foreign policy.
42:09
It's not one rational actor.
42:09
It's you know these diverse interest groups that are within the establishment.
42:15
I think I see where this is going. Huh?
42:17
I think I see where this is going. Right. Right.
42:18
So yeah, I was just about to say um can't you treat individual personalities this way?
42:22
So you know there's different ways to think about this.
42:25
Maybe you can think of like modules within the brain that have like uh that are trying to entice you this way or that and they temporarily get a hold of you.
42:31
Maybe I I don't know personality parts, you know, ego, whatever.
42:34
There's there's different ways you can talk about this.
42:36
But could you apply a similar model to individuals where you say um just as you wouldn't say like the average American is responsible for the you know for the mistakes of American foreign policy like uh the the individual is not responsible for the weird things that parts of their personality makes them do. Right. Right.
42:55
So I guess my first reaction to this is just introspection and say like look I don't experience my mind as being like a bunch of interest groups that are pushing and shoving.
43:03
But you're not mentally ill, right? Yes.
43:04
Uh well so well here's the thing.
43:07
There's two versions of it.
43:07
One is just to say that everybody's like this and then the mentally ill basically have worse interest groups.
43:12
And then the other one is to say that normal people are unitary and then the mentally ill are an out are outliers who are not unitary. Right?
43:20
So these are two different stories.
43:22
The main thing that I would say uh is like any of there is actually a whole literature on hyperbolic discounting that right or self-control problems in general that tries to think of the mentally ill as being people that just failed to go and do the best longr run plan and instead focus on short-run plans.
43:38
What I say is this is actually just a deeply wrong story about what's going on with at least the severely mentally ill. Here's the thing.
43:48
The difference between people that get get diagnosed as severely mentally ill and people who just have some moderate problems is precisely that the severely mentally ill are stubbornly convinced that they want to do the objectional stuff they want to do.
43:58
So basically, if you're someone that says, "Gee, I have these violent urges.
44:03
I need to go to a psychiatrist.
44:05
I'm trying to control my violent urges. What can I do?"
44:08
All right, you'll get classified as a moderately mentally ill person.
44:10
But on the other hand, the person who is a full-blown serial killer, every second of their day, they're stalking prey.
44:18
That person seems very unitary, more unitary than most people actually.
44:20
And yet we'll call that person severely mentally ill.
44:24
And that's the person who probably if they're ever caught will get will go to a will you will will be found not guilty by reason of insanity. Why?
44:33
Because they were so organized and determined and focused.
44:37
Wait, but I I would say um like somebody like Ted Bundy like maybe this isn't how the legal system works.
44:43
I know Ted Bundy actually the story.
44:43
At least I watched a documentary and then I read the Wikipedia article.
44:46
So or or I mean I watched the fictionalization and then read the Wikipedia. Yeah. Yeah.
44:51
It was I believe it was the Zack Efron version.
44:52
Anyway, I think that the fictionalization was quite accurate.
44:54
So So I don't think he's going to be a good example for what you want. So let's go with it. Okay. Okay.
45:00
Well, so some other serial girl killer who um who actually is a I actually don't know the story that well, but I think we have more sympathy for the person who has like I don't know fits of bad behavior but is generally uh you know nice person.
45:13
you know nice person. So we do understand oh like this is a person who is not a unitary actor and therefore we can sympathize with a part of him that's not this way we sympathize more than the person who's like wholly mentally ill but like is just pursuing a bad aim throughout right so I think that our understanding
45:29
but I say this there's still something weird about that because you say okay so we got a regular person and we're not worried about them or we think they've got a unit they're a unitary actor then you got the severely mentally ill we think they're unitary and then we come down to the person who is fits and we say They're the people where our regular story doesn't fit. And that might be
45:45
And that might be right, right? But it's weird. It's like, hm.
45:49
So the people that we normally think of as severely mentally ill also seem to be very, you know, very unitary.
45:53
So we're not going to so that that's our story is not that they are fighting against uncontrollable urges.
45:59
Rather, they identify with the horrible urges.
46:03
That's that really there's really nothing to them other than this person.
46:08
Like that's at least the heart of the person is that they are a person who stalks other people to torture and kill them.
46:12
and this is the main thing they like that they do for fun, right? It's like, gee, really?
46:17
Well, I mean, so I I I have read more than my fair share of biographies of serial killers.
46:21
So, yeah, it's the best story about them.
46:24
You know, there's a there's a little bit of, oh, gee, why am I this way?
46:28
Oh, well, time to go and murder and torture another person.
46:31
Um, in the other the other case, that's one where I will say that I'm just more confused as to what's going on.
46:37
You know, I mean, I mean, again, some, you know, like like there there are some cases where at least at least I'm very strongly inclined to say, you know, you like that look like it still seems to be very strategically designed to avoid get to avoid social consequences.
46:51
So, someone who is not a homeless level alcoholic where they drink so much that no one even wants to have anything to do with them, but someone who is periodically drunk to the point where their family is very distressed about it.
47:02
Again, it's easy [clears throat] to say like this the the devil rum has a hold of me.
47:05
But I was like, well, is does it though or is it more of that's a convenient excuse for you to do some of what you obviously have a a very strong desire to do?
47:15
have a a very strong desire to do? um you know you know like in like I'm not again not saying that is the that absolutely every case but still you know I guess the way that I think about mental illness is we have this very large category that has emerged in modern society as such a like it is such a large share of humanity winds up getting so diagnosed
47:39
and a lot of what I wind up doing is saying look we can cut out a lot of this a lot of this really doesn't it doesn't make sense to think of it as a disease And then we you know we can remove half we can remove half for some reasons we can remove another 30% for other reasons remove another 10% for some other reasons and at the end we're left with some cases where I'll just say I don't know maybe it's just hard to say. So,
47:59
So, you know, my son the other day was asking me like what would make you most convinced that a person really did have what we think of as a mental illness.
48:09
And I said like honestly would come down to I have known the person really well for a really long time and they always seem very honest and reliable and then they say I just feel something strange happening to me inside of my head, right?
48:22
And they said like isn't it weird that it's so heavily based upon firsthand anand anecdotes?
48:24
And I said, "Well, the problem is that like there isn't really any data that for a stranger that would convince me they're super reliable.
48:31
I really do have to have a lot of firsthand experience of the person to take their word for something like that."
48:36
Uh, so that's really where I would come down.
48:39
So, I mean, Tom, you know, Thomas S, who inspired a lot of this, he often spoke as if it was just a conceptual truth.
48:44
And I don't think that's true.
48:45
I think it's more of one where it's just what is the what is the story about what's going on in someone else's head that makes the most sense.
48:55
So when someone is doing something very strange, does it make the most sense to say that person has an illness that makes them do that?
49:00
Or is it make more sense to say that person has is is just very different goals than I do, but it doesn't mean that they are sick in any in any meaningful in anything other than a metaphorical sense.
49:09
Now see like like an example that I thought about quite a bit is what if I had a kid who wanted to become a nun.
49:16
So look, I want to go and marry Jesus and be celibate and have no grandkids.
49:21
Like, and honestly, if you know anything about all the value put on grandkids, that would be one of the worst things for me to hear.
49:26
And I would just like, no, that's what are you talking about?
49:30
This is it's like, well, I this is just what I want to do, right?
49:34
And yeah, it would be tempting to say, no, no, you're sick.
49:36
We have to go and get you to a doctor to go and explain to you how this is all based upon a delusion that there that you have this invisible invisible spouse that wants that that's going to be your husband, but he isn't really real.
49:48
and you're giving up your actual genetic figure.
49:51
You're giving up your genetic future for this to this thing that has imposed itself upon you and it's like it's not really what's going on.
49:58
It's like the person is taking seriously a bunch of doctrines that a lot of other people believe and being cons and and trying to live them consistently.
50:06
And yeah, I object because I think that they're mistaken, right?
50:09
And of course, I especially object because it's my genes [laughter] and not just my jeans, but also look, I've got plans for being a grandpa.
50:18
I'm like, you're cutting into those plans and I'm I I was planning on playing with my grandkids, not going and visiting you at convent.
50:24
That's not the life I want for myself and it's not the life I want for you.
50:26
So therefore, you're sick, right?
50:29
Very tempting, but just seems like a lie. Yeah. Yeah. All right.
50:34
Some some rapid fire questions.
50:36
So first is why is it that multinationals are just so much more effective than uh than companies from uh you know companies from developing countries.
50:45
You would think that you know they're actually familiar with the culture.
50:48
They know the problems uh that the country faces.
50:50
So they would be like much more effective businesses.
50:53
Um why is a why are companies that are founded in America uh that are foreign to the places where they're working?
50:58
Why are they just so much more effective? Right.
51:02
So first of all you just to let people know this this is not just our opinion there is a very impressive body of body of research saying this very thing.
51:11
So most say most associated with the researchers Nicholas Bloom and John Van Reinan.
51:16
Um but any case I'd say that a lot of the answer is that the culture is the problem.
51:20
[laughter] The culture is the problem.
51:23
So if you have a nepotistic culture to say well we need to come up with a with a with a hiring practice that works really good in our nepotistic culture. It's like, no, no, no.
51:31
The whole problem is the nepotistic culture.
51:33
You've got to switch over to a different cultural norm because nepotism is cross-culturally a bad way to go and run a business.
51:39
Merritocracy is the way to go and this is what multinational companies bring in.
51:43
Uh so that's one of you one of the most obvious ones.
51:45
Uh but then you know similarly just having a lack of dasical attitude towards punctuality.
51:51
This is another cultural problem that exists in in some countries to a much greater degree than others.
51:57
You know, every country has some late people, but some countries lateness is almost a virtue.
52:01
I was actually talking to a guy who worked at, I believe it was Toyota and Brazil.
52:09
And so, Brazilians, he told me they have a terrible problem with punctuality.
52:11
And what did Toyota Brazil say?
52:13
Like, like, if you want to work at Toy at Toyota Brazil, punctuality, we insist on this, we'll be fired.
52:20
Zero tolerance for lateness. Uh, this is our system.
52:22
So really they actually to a much greater extent than in Japan actually openly declared war on the cultural norm of it doesn't matter exactly when you show up.
52:33
So I think that's that's probably a lot of the answer is that the main things that multinationals do is if there's a cultural norm that can be deployed usefully then yeah then probably actually local firms would be better at that.
52:46
But what multinationals do is they actually find the universal truths of business and then they try to teach them to places where these norms go against the culture in order to go and bring them into the world of modern business raising the productivity and giving them the opportunities that people in other countries have.
53:05
Now of course you know just to be fair to say Toyota Brazil like if you want to work in some inefficiently managed Brazilian firm where they respect Brazilian cultural norms you can.
53:14
But Zota paid so much better that it was considered a highly desirable job.
53:18
So it's not just that there's some outside firm that comes in and says your culture sucks.
53:23
You have to do it our way.
53:23
But rather there's an outside firm that comes in and says if you're willing to bend on the culture, we will go and give you a lot more money than you usually get in this country.
53:31
And it turns out a lot of people in those countries are happy to take that deal.
53:34
take that deal. So if cultural norms explain so much of the difference between the productivity of firms across different countries then does that make you less bullish about uh you know open borders because then you're importing people who have cultural norms that are just making companies ineffective uh from places where they come from right right well I'm not worried because
53:51
basically country companies that are in the that are in first world countries are very similar to multinationals in terms of what they do so they don't just go and say well whatever people in this in in this area or whatever applicants think is okay is okay Instead, normally they've got this list of cross-culturally valid rules for the right way to run a business. And then
54:08
And then they say, "Look, if you want to be here, you're going to have to do them."
54:12
Yeah, you could go and run your own business where you don't have to show up on time and see how that works for you, but if you want to go and work at our store, you have to do this.
54:19
So I say really the what businesses in the first world do is take workers who on their own would not follow these because just because you are more accept open to to punctuality than people in Brazil doesn't mean that you're all that thrilled about it.
54:34
But a lot of what employers do is to go and take people that are not really well well suited for a team initially and to weld them into a team.
54:44
This is what coaches for athletic teams do, of course, is you take a disorganized rabbel and then you whip them into shape.
54:52
And this is the very same thing that businesses do, you know, routinely is look, you've got someone, you have some managers at the top who know how things need to be and then you have a bunch of flawed human material that shows up and what are you going to do with it?
55:06
You could just say, "Oh, I can't work with this material.
55:08
It's too hard and I give up."
55:09
And then businesses are not run by those people.
55:11
Instead, the normal thing is you have a manager who says, "Look, I first of all, I know what needs to be done."
55:17
Second, like to figure out a way to get people to do it, even though it's not the is not is not their strong desire anyway, right?
55:22
And if you go and read any book on management, it will give you a whole pile of advice on what to do.
55:27
Uh I'm a big fan of Dale Carnegy's How to Win Friends and Influence People.
55:31
And a lot of what he says is, you know, for example, he says, "Give everyone a good reputation to live up to.
55:35
Don't go and tell people you are a terrible late person. I hate you."
55:40
That's not very motivating.
55:42
motivating. much better to go and say you know to you first of all notice when are people on time on time excellent great right and then secondly if someone is a little late saying you know say something more along the lines of gee like normally you're so normally you're on time and I can count on you and it
55:57
was really hard for me to run the business today now obviously there are some people that don't respond to being nice and then people like that generally get fired after a while um by the way so let's see I don't think I I think this is actually in another book but uh you probably familiar with the book by Barbara Erin Reich, Nickel and Dime. No,
56:14
No, which um so you basically she went and so famous journalist went undercover, did a bunch of low-skilled jobs and then wrote about her experience and how terrible it was and how hard it is to be poor in America.
56:25
Um so anyway, that's the usual write up of the book. So I've read it.
56:26
I think it's a fantastic book because there's a little bit of propaganda of that kind, but most of it she just describes very very neutally what happened to her.
56:34
and what happened to her is quite different from what her summary of what happened act actually was.
56:41
So I mean really like like when I read the book I say like here's a worker who has a very negative attitude and then employers don't appreciate it and try to get her to get a better attitude and do their job. Right?
56:53
So there's a lot of that going on.
56:54
Furthermore, the other thing that you really get out of the book is that people that are managing very low-skilled workers probably are a lot more emotionally abusive and disrespectful than people that would be managing higher skilled workers, right?
57:07
But when you read the book, you realize why, which is, you know, two things.
57:09
So, one is honestly that with higher skilled workers, they have a lot more pride in their work and so you don't need to be mean to them to get them to do their job well.
57:18
It's more internally motivated.
57:20
Whereas with someone who's washing dishes, like it isn't like they wake up every day and say, "My calling is to wash dishes."
57:25
You really do need to be harder on someone to get them to do their job well.
57:28
But probably an even bigger factor is who manages a small town a small town diner, right?
57:32
Is it someone who has great social skills and just knows the right way to make everyone feel like an important special person?
57:40
If you were that good of people, you'd be managing some something much better than a small town diner.
57:44
Most people manage a small town diner, they're probably someone who was a good worker in that diner and they got promoted and they rose in the ranks or maybe they actually started their own business and and they ran it.
57:53
So again, this is a case where a lot of why it can be unpleasant to be low skilled workers that you're being managed by people whose main experience is being a low skilled worker and if they had top social skills, they'd be managing a higher status team.
58:05
So that's something else you got out of the book. Right. Right. Okay. Final question.
58:08
Right. Right. Okay. Final question. Um what do you think of Tyler's idea in his book averages over that basically the econom the labor market is bifurcating into people who can work with computers and people who are getting uh substituted by computers and that's kind of the dominant theme of the labor
58:24
market right I'd say that the last 20 years of empirical research say that's wrong right so here's my reading of empirical research empirical research says that from about 1980 to about 2000 there was a fall in the real wages of very low skilled workers and a corresponding rise in that of very high skilled workers. But then from like
58:43
But then from like around 2000 that fall stabilized or even moderately reversed and we've actually seen since then is some fall in midskll wages rather than low-skilled.
58:53
So I'd say that just the facts don't really fit that story.
58:58
that story. Uh then secondly we can see during co actually there's been so many changes labor markets but one of the main ones is suddenly there is a great desire to go and attract low-skilled workers right um as to what's going on I think there's you know there's a lot
59:13
going on I mean one is that there are still the hangover of some of the most enormous redistribution in American history and world history where even when it's cut off still there's a lot of people who previously were working because they had debts to pay and then
59:27
they paid off all their debt during co and now they are at least in a really good position and also maybe their parents say it's okay for you to live at home without paying rent because of co right so there's a lot of people who left because of that there are some people who just you know you had enough
59:41
money to go and retire early and they're scared of covid there's that um so um and then uh this you and then on top of all this um you know again there still is this enormous overhang of this enormous fiscal stimulus which was accommodated very readily by the Federal Reserve curve. If you go and take a look
59:58
If you go and take a look at what how much nominal GDP increased.
1:00:03
So basically from the bottom to about 3 months ago when I last looked US nominal GDP increased by 20%.
1:00:10
This is an astronomical increase in demand.
1:00:13
I mean almost unprecedented actually.
1:00:15
So normally what happens during recessions is the government has some contrayclical uh you know demand policy to moderate the fall in demand but there's still a fall in demand during recessions.
1:00:25
This is one where actually the response was so enormous that it greatly overpowered any fall in demand.
1:00:32
So actually demand went up not down.
1:00:34
So I think that's another thing that's going on is that there's just been this very very large increase in demand.
1:00:40
So that means that again it's very easy for workers of all kinds but you know probably especially actually workers that deal with other people face to face.
1:00:47
to face. These are the industries where people are most worried about the COVID and a lot of people said hey can I go and get a job where I'm just telework and then I don't have to worry about the disease and then once people get started doing that there's a lot of desire just
1:01:00
to cling to where you were um so yeah so I think that his story is basically wrong there is a rising payoff for it skills but this is just one small part of a much larger world um I think it's just a big mistake to think of this as is the big that's happening. Uh rather
1:01:16
Uh rather there is a you know there's just a lot there's a lot of factors going on but anyway just the just in terms of the description of the facts the period where low where the low skill workers were doing badly was like 1980 2000 and since then and actually before co it looks there looked like there was a moderate recovery and then since then looks like big recovery for them. Cool. Cool. Awesome.
1:01:38
This was a lot of fun Brian thanks for coming on. Oh yeah my pleasure. Thank you very much.
1:01:42
And that book again is Labor Econ versus the World and you can get on Amazon.
1:01:46
And this is actually the first of a series of eight books of the very best things that I wrote over 17 years.
1:01:53
Um, you can, by the way, get them all for free in the blog, but then you'll have to sift through thousands of posts.
1:01:59
So, this is where I try to curate them and I organize them by theme.
1:02:01
So, if there's some particular topics that interest you more, you can buy the book on that on that and get all of what I consider to be the best things I've written on that topic. Yeah. Yeah.
1:02:10
And let me add to that that the pricing is incredibly fair on Amazon.
1:02:13
And uh and yeah, 12 bucks for paperback and $9. 99 for the ebook, right?
1:02:19
And then yeah, I I love the format of these sorts of essay compilations where you can it makes it really easy to binge read them.
1:02:24
Uh you know, just like a couple pages at a time and then it's a great way to like compartmentalize thoughts.
1:02:29
So yeah, I highly recommend the book.
1:02:33
Let me give give a shout out to the two groups that gave me the idea for this.
1:02:37
So Les Wrong put out a little uh gift box of little books of their best essays and I got one and I really liked it and I read a lot of stuff that I wouldn't normally have read because I have these little hard copy books and then actually my friend Mike Hummer decided to self-publish an intro philosophy
1:02:52
textbook um knowledge reality and value and u and he when he told and I asked him like well was it a pain in the neck and no it was super easy and so that uh was the one that said okay well why don't I try this see what happens and then I got the idea of doing eight books so next one will be out in like two months say. Oh, cool. Cool. Oh, cool. Cool.
1:03:09
And that one will be voters as mad scientists essays on or no no actually no in fact it will be how evil are politicians essays on demagoguery.
1:03:15
That will be the second one. Ah I see. Okay. Looking forward to it. All right. Thanks a lot. Talk to you later. [music] [music]