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arcades.in conversations withth tyler.com today I'm very honored to be here with ether Duo who recently has won a Nobel prize in economics the youngest economics winner ever and today our date of recording is also I believe the
publication date for her new book with abaj bonnery and that is called good economics for Hard Times Esther welcome thank you very much thank you for having me my first question has to do with what I think is maybe your most important
paper and that's the 2015 paper in science with ob Dean Carlin and some other co-authors and there you show that a cash transfer to the very poor combined with train training and coaching has super high rates of return
why don't people study that more it seems to be the most potent intervention we have to fight poverty other than migration so I think it has been studied a lot um and in it has also been adopted as policy after this original study and
other studies so the original project comes from Bangladesh and there actually has been a study and a long run study in Bangladesh by Robin burges and others who are now looking at a households 10 year hands and you continue to see a large differences between the households who got the transfer and they have a recent paper that they just released to say that they continue to study it where they are really putting a lot of theory
into it to look at the data through the lens of asking actually is there a poverty trap in which some of these household have fallen and they show that in fact there is such a thing with a threshold of wealth above which if
households can go above they can go to a point where they are significantly better off and if they are below it they go back to wherever they came from so I think that's a very important paper that's is making a big splash and show
people continue and in our case the part of the study was that I was the most involved with was in West Bengal and we also continue to study them after 10 years we are studying their children as well we are studying the impact on migration to good who not just oh we there is an effect but how all of these effect are kind of building on each other as I understand the paper there's a cost benefit ratio of 133% to 433 per across six countries and
that's enormous uh what exactly about the mentor makes the difference as opposed to just giving people cash what is the mentor or the coach actually teaching so just from the experiment this particular experiment it would be
hard to tell because one could say well you should try to do cash only and then we can see but subsequently uh Abit and din Kalen were involved in an experiment in Ghana where they just gave Goods so they call it a good drop paper so just
goods were given uh and without the coaching and there they find very clearly that the the coaching makes a big difference that people who you give just the assets to have more assets but it doesn't serve as a springboard for
more activities so descriptively what the coach do is two things number one is avoid the temptation of liquidating the assets quite early so if you give people a you know cash and they don't feel confident using them then the easiest
thing to to do is to sell them and then they have cash but they don't have the productive asset anymore the second thing is to provide the necessary the complimentary human capital for taking care of your assets so for example when people are giving cash some people are given cash to to start a petty business but I have no idea um you know even how to go to the market because the poorest person in the village are also exclud
included from productive activities they have not really been working or if they have been working it's that made in very local circumstances they really have no idea so the coaches are physically taking them to the market like this is how you take the bus and this is where you buy the trinket that you're going to send the village and this is where you know how you bargain for your Trinkets and then come back with a trinket and
sell them so there is an amount of um technical skills if you will and the third component which is harder to quantify but probably very important as well is the confidence training so they are meeting in groups and those are
people who've not been involved in productive activities often living of HS or uh of very Petty works and they are making them kind of confident that they can do it and how scalable is the coaching in your opinion that's a good
question to which we should have an answer soonish because uh there is now scale up of this programs in various countries and in particular in India some state governments in India are scaling this up as part of their program
so they are mainstreaming it as part of their program still with the support of the original microf Finance institutions that that have been running this program but you know hiring many many many people so you will be able to see
whether this was you know you could do this with like the best NGO worker of the country and you only have hundred of do and that's done or whether this is something that can be spread what is anaging in this respect is that in
Bangladesh the program is huge as it is it's enormous it reaches hundreds of thousands of families as it is so to some extent we already have the answer to how skill abilities because it's already skilled and even the evaluation
by Robin burges and others was done on a quite large scale have you ever thought you should just spend the rest of your career working on this intervention and 5% of the economic profession should just work on this with possible rates of return so high for the world's biggest problem which is poverty right why don't we we do much much more of working on this problem on this study one should certainly continue to do more working on
this study and working on on the the questions you were asking about the scaleup and working on how various modalities of it one already the study you mentioned in science was already a sign that there is at least some
interest in the economics Prof pass to focus on this question because it was the second paper on this the first paper was the evaluation of the mothership program in Bangladesh and people didn't you know say oh that's a nice program
let's go and study something new instead didn't can and led a group of people to replicate this sem evaluation in seven different countries which was a very major undertaking involving lots and lots of researchers and NGO so the fact
that people were willing to do that to write you know uh 12 page paper in science at the end of it suggest that there there is really a recognition that it's a very important uh topic now should everybody do that well I guess
they are probably diminishing returns to to effort in on on a particular problems and there are other interesting problem to look at so I'm glad that people continue working on this and I think the work is only going to deepen both on understanding the mechanism better understanding variations around it and understanding how to make it adopted as policy because I completely agree with you that of everything that I've done
studied in my life that this is one with the most uh important spectacular results you have some well-known papers with co-authors about micr credit programs in hydrabad India and I've long had some questions about how those
programs actually work so as you know often the borrowing families are paying annualized rates of 50 to 100% a year and they keep on borrowing they're not just Borrowers ones to bring the kid to the doctor they're in a steady borrowing
program and at the same time they're not just drained of all their wealth so does that imply there are rates of return on investment in those communities of 50 to 100% a year and if that's true why aren't the growth rates higher do you get my question how does the whole thing fit together well it actually does not imply that because the purity of this household maybe the majority of this households does not actually invest in
any productive activity with the money so most of the interest are paid from people's regular job but don't they just get drained dry if I borrow it every year at 80% it's not the same households that keep boring and boring and boring
in fact the number of repeat customers is less than you might think people uh join microf Finance take a loan buy something you know it can be like a durable good for example like a fridge or a cycle uh and then use their regular
income to repay it uh so for some household that's a very very expensive way to save in some sense because what they're looking for is accumulating enough money to to buy this durable good that they want for their household but
it's very difficult to save uh in because there are no saving instruments and there are a lot of Temptations Etc so the micro credit officer serves as a kind of a commitment device once you bought the money and the incentive of
the credit officer is very strongly to make sure that they that everybody reimburses then that will kind of create a way for you to get your assets and then progressively reimburse so that's kind of a funny way to save but it's I
think it's a reason reasonable response in the in the environment and then there are some people who are borrowing for business and we have a recent paper where we look at the same setting again but now uh 8 years after microf Finance
was introduced and in fact two years after it's gone because there was a huge crisis of micro finance and we look at the group of people who had a business before microc credit even got in so there are people who actually borrowed to invest in their business often and for those guys we actually see that some of these people are actually a very very high rates so there are some people with very high rates of returns as you were
saying you know 50% or 60% so first of all they are not very many and they are not necessarily the one that have access to money and that's kind of one of the big reason why the growth is lower is that there is a mismatch between the investment opportunity and who has the money and that's what microeconomic called misallocation your randomized control trials they're very large they employ large numbers of people I even
once visited the hydrabad project was very impressed how much was going on do you have a personal philosophy of management or leadership as Dlow the manager not the economist tell us a little bit about her so I kind of uh
stumbled on on to this because I you know as most academic I was not born to be a manager so I don't have um you know I didn't bring a pre-made philosophy to to this business but I developed one and um it has several elements to it but the
key is that uh I'm not a micromanager the key is that you want to give people pretty clear vision of where we're heading and then give them a lot of ownership for how we're get there and that is true for the whole organization
of jaal which is the you know the kind of the sum total the network of all these researchers were uh from the very beginning with the first executive director Rachel glener she it was really her thing to to lead and she put her
Mark to it and we were kind of behind as kind of enabler so that's through at that level that's still true today I think and it's true at the smaller level of the project where where everybody has a piece that they own and they run with
it and you know they'll make mistakes and then we have to correct the mistakes but the ownership of the piece of the project means that you get a lot of effort and a lot of creativity of everyone and then I must say that I'm in
a very good business for no credit to me because the people who get attracted to this work tend to be very committed and kind of passion driven so you get very good material to start with so you just need to give them a little bit of guidance and the move and which is the input that's the factor of production that prevents you from scaling your work more well I think it is skilled quite a bit uh if you took it but you're not
doing 5x of what you're doing right something stops you it could be money it could be talent I always try to be behind the money so I think lot of problems of some centers sometimes in Academia is you get some money to do
something and then you have to you know the idea to match the money uh we were always uh had some idea before and the the money comes so at some level the money is the is always the constraining factor at any point in time now you
could say why don't you get more talent to get more money but there are some limits to that another thing is I'm not sure I'm aiming at you know World Conquest uh in the sense that I'm more interested in and that I think that that really much applied to the three of us we were very much interested in creating a an ecosystem where that kind of work becomes easier because policy makers are interested Fender are interested Talent
is interested and because there are some things that are eased like when we started even the Hyderabad project we visited we were kind of still learning as we went and we made mistakes and um we still making mistakes but few are now
because there is an infrastructure and some learnings and this infrastructure can then be given to other younger people that have you know more imaginative great ideas to run with so I've kind of always been more interested
in doing that and using my own work as little bit of a testing ground you know trying new things that are quite risky because it doesn't matter to me if that fails I you know I have done you do you worry much that the RCT method it
centralizes Authority in too few institutions so you need a certain amount of money you need some managerial ability you need connections abroad uh it's not like running regressions everyone can do it on their PC is that
in some way going to slow down science so you get more reliable results but there's just much less competition of ideas it seems I think it would be the case if we had not be mindful of this problem from the beginning and it might
still be the case to some extent but I actually think that we've put a lot of uh effort in avoiding it to be the case so when you take an organization like jaal just in India we have 200 staff member and we have at any given time
thousand people running survey they are not running I say we but these people are not running my project these people are running the projects of dozens and dozens of researchers and when I started I couldn't have started without having the
backing of MIT because it was such a like risky proposition that you needed you know to be have able to easy like Risk Capital kind of things but at this point because of this infrastructure is much more normal sence
people can get in with no funding of their own in part because one of the thing we are doing as a network is uh raising a lot of money to redistribute to other people widely uh jaal has 400 researchers that are affiliated to it or invited researchers many of them quite quite Junior so that sort of maked the it I think it was very important to us and I think we've been quite successful at it at making the Tool uh more generally
available it's never going to be like running a regression from your computer but my philosophy is that if you have the drive and you're willing to put in your own Sweat Equity you can do it and our students and many other students who
are not in top institutions are doing it in your book uh the new book good economics for Hard Times you talk quite a bit about a revolt against the Elites in the United States but what if I say well the elites are underrated they're
pretty good who else runs rcts other than the elites I mean what's your response do you side with the Revolt or you side with the elites so first of all I think that it's good if it's not just the elite who are running our cities so back to my back to my point of trying to make it a general tool that's the elite of the kind of academic movement but you could say well they are still academic so in the broad scheme of things they
are still the elite so my problem is not with the elite my problem is with the attitude of the elite with respect to everyone else I don't even know what Elite means in this context but if us Economist as a profession spend more
time try to understand what are the problem of people who do not have say the the comfort of an academic career behind that then we can make progress in understanding the issues and therefore potentially in thinking through policies
that might help solve this issues so it would be a bit hypocritical of me to be against the elite B given that I'm like the elite of the elite in some sense like from when I was born it's it's the type of problem that you choose to to put your attention on that matters in your new book you seem at times quite skeptical about how well economists can understand what drives economic growth but what if I just looked at a few cases
I looked at say Singapore Ireland Poland which you've done remarkably well in the last few decades and in each case you had leaders who more or less followed the prescriptions of economics they had the will or the ability to do so I watched all of those experiments unfold I felt they were going to do pretty well they did extremely well actually better than I thought don't we in fact have a pretty good idea of what
does Drive growth it might be different for each country but you go to a country you look at it you have a good sense many countries have done it and it's worked why is that wrong well then I could you know give you South
Korea and it did pretty well too with an entirely different set of policies oh sure policies can be different but given a country it seems the leaders can know and if they have the will to do it it happens well if the the policies are
very different from one country to the other and are you know complicated function of the context and you know in in Ireland you need very low tax rates but in in South Korea you need industrial policy that a little bit
reflects our difficulty as Economist to have come up with is guidance for the next place uh because you know the next you take I don't know Ethiopia and they want to go the question becomes do we have anything in the experience of the
past country that will help us for sure predict the set of steps that Ethiopia needs to take that is going to lead them to grow my firm belief is that we don't but if you do then you have a side gig to help in Ethiopia and that would be great but Ethiopia is growing about 10% for 10 years run they invest about 38% of their GDP it may collapse for political reasons but if they stay on the track they on isn't that further
evidence that they figured out what they need to do to grow they had the will to implement it uh so far it's working politics allowing that's why I picked Ethiopia because in a sense they have so again they have their own path but like
the thing is the own path become so particular I'm not saying that good policy making is not feasible because we have lots of example of good policy making and lots of example of bad bad policy making actually but the good
policy making is so varied that at at a scientific level it becomes very quickly good things are good because the the path of Ethiopia even you know how the the steps that they had to take to kind of care out a place in international
trade for example is very different from what a country like China had to do just bar virtue of China existing etc etc so I'm certainly not saying that good policy making is not Fe I'm just saying that we haven't found it
seems to me empirically we haven't found like a series of prescription that we could uh give to Country saying if you do this thing it's going to work out and similarly Now growth is slowing down in India uh I don't think at least I wouldn't know what to tell them what to do like what they're supposed to do now I don't think they also I don't think themselves know so that's kind of what has turned out to to be difficult
empirically this is not me actually I'm not a microeconomist so I would I would not like have the arrogance to say that we haven't figured it out but that seems to be what the microeconomist have the conclusion theyve come to is that they
haven't gotten like a set of recommendation even context dependent recommendation that they can kind of run with as you well know there's a number of papers that suggest human capital is a factor of overriding importance for
economic growth I think Manu wild and RoR attribute % of growth to human capital what's your view of those theories as a gross accounting matter which is what fraction those differences what what's the correlation between how
much of the growth is explained by differences in human capital across country it does seems to be that human capital play play a role a big role even though the monkey Roman and wild figures gone down since then with the work of
Kazi for example so but it is important some of it is correlation that rather than causal effects that countries that have been good at increasing education have been good at doing other things also countries that have grown fast also
generate an incentive to invest in education that's all people by B bills and cl now that kind of nicely makes this point but the bottom line is that um I'm totally ready to believe that uh uh human capital broadly Define
education in particular plays a big role in in growth and to tell you the truth even if it didn't then it's not a big bet to invest in education anywh because worse come to worse people would be educated which seems to be a good means
to an end it could end in itself it's not just a means to an end but then the question becomes so so I will kind of totally go with the human capital is super important in fact it is what uh I think was the original impulse of
Michael ker when he he worked on the first RCT is he was coming from growth and he thought wow human capital plays a big role in growth now what's human capital when once you said education is important you have to start unpack this question is it years of education well not really clearly if people kids learn nothing that's not so useful so it has to be learning then you can start asking yourself questions or whether it's like
cognitive skills or non-cognitive skills or a mix of the two uh say you know like Heckman is telling us that non-cognitive skills is such a very important part of human capital and then you want to ask yourself the question well how do
cognitive skills get produced how non-cognitive skills get produced and that's kind of what kind of willing nearly LS you LS you to you know much more specific policy advice and hence potentially thinks that you can start
running your City on to return to what I think was your Master's thesis how well did the ussr's first fiveyear plan go well this is was actually uh this was my master Tes in uh in history and I was was interested in the time in in propaganda and not so much the first fiveyear plan per se but how over this period the talk and the use in propaganda of the big construction sites evolved so early in you know this is also the period where Stalin
Consolidated power at the beginning there was a lot of uh ways that the Soviet un could have gone it could have gone a more you know Market friendly way which is sort of what Lenin was hoping at some point it could it was going a completely Ethiopian everybody lived together kind of crazy way uh and then there was a Stalin thing which like the finally the form that they kind of adopted which was sort of boring inefficient deism and the
all of this played out in how they represented their construction sites like the big on the ne and so this is how how both economics and the narrative about economics were used to consolidate power and to consolidate grip on society and
you didn't like economics at first I read in one interview why not what what happened what soured you on it so I was you know exposed to the typical econ 101 course different version of it with in different scurve and and all that ja and
I thought it had no relevance that it was so far removed from any real person's life that it could not possibly be useful I also was skeptical that it was extremely ideological that uh you know if you want want to show that minimum wage is bad then it's very easy to write Supply demon car and an horizontal line and you know low and behold minimum w is bad and R distribution perverts incentives and I thought the conclusions were a little
bit too directly coming from the from the assumptions that were put in so I had only done economics initially because I wanted to do economic history and then I thought okay I'm done with this whole economics business at the same time I was a little bit uh dissatisfied with history for different reasons in particular because I thought it's you know not very immediate useful and so that's why I decided to go to Russia under the pretext of writing
my master thesis but really to get some exposure to the world and this is when I saw Economist in action because I was the research assistant of the research assistant of Jeff saxs whom I never met in this occasion but was kind of hustling for them and now I thought you know I didn't necessarily agree with everything they were doing but I thought that they had the luxury to to think about things and then to be heard by policy makers when
they had something to say and I thought wow this is like the best job in the world and I still think that on the internet there's a photo of a Teenage Esther Duo at least it looks like you protesting against fascism in Russia on
top of a tank is it uh that was a bus and it was me it was me so that was in 1991 so this is not uh when I lived one year there I lived one year in 9394 but this was in ' 91 I had gone to Russia about every year since I was a to
learn Russian and um I happened to be there um the Summer where um there was this put against garbage that's the year my wife left as a refugee and that that that summer so that so we actually watch TV and I do remember this like those G
they were called uh you know like fascist communist old half de C half dead making the co we were like a bit uh shocked and with my friend we decided that we would go out in town to see you know what's happening and we
went and we went towards the White House and we couldn't see very well because there were a lot of people so we saw this this trolley and I said let's go up we are going to have a good good view of what's going on and we we went to the top of the trolley and it was you know amazing because there was an immediate fraternization of of the troops and the people in retrospect it was you know not very reasonable thing to do but at the
time it sounded like completely happy moment there was a truck that was delivering bread and so you you know it was the end of Communism and and someone gave me that fascism near p plard and asked me to hold it I was like sure I'm
going to hold it so I'm holding my my plard we stayed there for a long time when six were happening and and next time I saw in the evening my parents called me that what are you doing because it turns out that that image was
on all the TV in the world and that's how I very briefly became the kind of the the the face of this revolution so so that photo was done in a book the guy never knew who I was and recently um he kind of put two and two together other than missing your family what was the hardest thing about living in Russia for a year oh Russia was a extremely extremely hard place to to to live in at that time it was uh extremely violent just a
daytoday and it was the end of Communism but it was Mafia was out there replacing it and people were really some people were really extremely poor uh they were given this vouches but they quickly exchanged them you saw this like woman queuing near the subway was like like one fish to sell and the whole thing was so hard like everything was hard so it was a a difficult environment I assume it still is but I haven't really gone back since
then do you have a favorite Russian novel uh so my favorite Russian Au that very originally is DOI and you know Crime and Punishment probably among the why is the French education system so good or would you challenge the premise the French
education system is very good at producing a very small Elite of very educated people and at reproducing it but productivity at the median is quite high in France right at the median of the productivity of the median worker
yes so it's not just training an elite yes although I wonder whether if we look in a generation or the current kids who are in school we will find the same thing because I'll tell you exactly why the the current pza and teams results so
friend exactly at the m in term of um the scores but with a lot of heterogeneity with excellent results at the top and really bad results at the bottom and the second thing that this test course also show I think it's the
the teams the math course is the strongest correlation of the oecd country between your socioeconomic class and your your score so this is the place where being in a bottom Quintel of socioeconomic class income parental
income is the most predictive of being in the bottom bottom quintile of the the mass performance so I do think we historically have an excellent system I do think it has roots in 19th century France and the Republic of the teachers
and both inclusive and demanding system at once and I think to some extent I'm the product of that but I also think that we've a little bit left it cble so I I I do hope that we kind of can recover it does child rearing in France strike you is more sensible than child rearing in the United States oh very much so very much so very much so you know that book bringing up baby so I think she picked up on something which is ring so true to me
which maybe is a more General point about the US versus France is in France people are reasonably content to just go with the flow and do you know what everybody does so every kid eats the same thing at at 4:30 and you know have
dinner at the same time and kind of uh has gone through the same experiences learn the same songs and and everybody thinks they are totally free but in fact they're all on this kind of pretty sensible ra and also they don't agonize
about it in the US child raring is um you know one more occasion to to make a statement about your identity so you know you're the kind of mother that carries the baby or you're the kind of mother that put the baby in
a stroller and somehow that sort of yeah almost can predict what you're going to think about Donald Trump and that's crazy like so people are so like you know concerned about uh what they do not only they feel that they have to invest
a ton of in in their children but also and they feel inadequate if they are not able to but also that exactly what they do kind of creates them as people so in France that's kind of not there and I think that that makes everybody so much more bedb children and adults why are the biggest and best French company is all old I think they all predate 1980 or so so that's a little bit above my pig grade um not that your other questions
were not above my pig grade but we're we're pay grade elevators at conversations with Tyler yes no I'm I'm I appreciate that but that might be above my pig rade even with your elevator um what e seem to to say about about that and I'm just going to parot someone like AUST is the idea that in the US failing is quite all right like bankruptcy is not really a problem bankruptcy lows are reasonably um easy to navigate and there is not much stigma
associated with with failing um and so people are so there is more churn in the system and that produces a bunch of horrible companies but those die so we don't see them and and that produces some good ones and the French system is less encouraging of uh failing and that is less conducive to lots of you know thousand flowers blooming and and there is no new things but I'm repeating something which is not deeply original and has some ring of
truth but honestly that's I'm not going to claim expertise there what is important to you from French Cinema oh so many things uh that's not above my fer like there so much inside my my playgr I I grew up watching movies the
French system is such that in the first two years of undergraduate you work like a mad person and then you can pretty much take vacations for the rest of your life so I decided against the rest of my life thing after you know going to
Russia and all that but in between I had this one year where I I used to go to the cinema about three or four times a week so I had a chance to get groomed in the American classic uh French classic you and what do you recommend to us uh so the Noel vag is still not you know not surpassed in a way and so in particular go you watch p and you know nobody has made a movie like that for me is go and Bron yeah so that's I would also put bro
in there uh it's just unbelievable Cinema on the wall of your home in Boston according to one newspaper is a slogan from the 1968 Paris riots and it reads quote nobody ever fell in love with the growth rate it's not on the wall of my house in
Boston but it's in a book of quotes uh that we on the wall of Paris it's a little red book that was in my parents book self which I was you know I read as a kid and I kept in I kept in my mind that we I knew we had that and was
looking for it could come handy at some point and it has a lot of it had a lot of this quotes from 1968 some of them are more well known than other like uh Su La PL is one of the most wellknown under the pavement you have the sea and then and this one which I found when we were working on the book and uh I wanted to it was kind of the epigraph of one of the first draft of the of the chapter on grow then somehow I think didn't make it
in the Final Cut and you think we should fall in love with growth rates no I don't think we one should the power of compound returns is remarkable right I I think one should uh have um healthy respect for grates and treat them as useful Companions and people that you have to make work for you so I think we should think of G rate as you know Chief of Staff not as things we should fall in love with and I think one issue that
countries have had when they've fallen in love with growth rate per se as opposed to why is it you want growth in the first place is that going back to the early conversation is pretty hard to manipulate grow rate for politicians
especially fluctuation growth rates and therefore if things are not going your way and you try like more and more crazy things to try to make growth come back because that's what you fallen in love with then you can put yourself
in pretty bad Corners one example is Japan for example I think they did fall in love with the G rate instead of kind of trying to think well you know maybe there is a reason why the the grocery have fallen down we should be kind of
comfortable with that and and uh do the best with what we have but could Japan have done better so it grew very rapidly it caught up basically to France then stopped at a certain Frontier short of the United States it's managed its
decline really quite well in per capita terms its growth rate is okay not spectacular social order is at a premium uh what have they done wrong well they've put themselves a pretty big uh Deb level which could become a Deb crisis in the making and which was kind of entirely unnecessary because when grow fell down in Japan in retrospect of course it's you know you always have 2020 hindsight but when grow fell down in Japan there was a reason
for that which is the the the population was aging the the working population as part as a share of the overall population was therefore becoming smaller so it is not surprising that there would be a slow down in the growth
of GDP per capita you know for a while it was compensated by the fact that there was a lot of tfp growth but that wasn't you know necessarily going to come forever because we don't really know where TP is coming from so at this
point they could have said well you know this is this it let's do exactly what you said they should do we should manage the manage expectation for the for the downfall we already quite rich and we have you know good standard of livings which we can make in a sense even better by addressing some of the issues that still remain in the Japanese society and they did some of that but on top of that they also said let's make let's try and
make grow come back and that there was this like sort of kesian spending spree that I don't think have any impact on growth but puts them in a not particularly desirable microeconomic situation at the moment why do you think in the United States Geographic Mobility has fallen so much you discussed that at length in the new book I think there are a number of reason some that are strictly economic as in financial and
some that are a little bit broader so on the financial side real estate is a big part of it and that's has been documented by other people than us but you can move to the South right there's freedom to build in the South plenty of
people move to Texas you won't move to the Bay Area but it's a big country exactly so that explains why people aren't moving where a lot of the jobs are if you were so but you you're you're right people could decide to move you
know 20 km away not to a city but to another place that happens not to be shocked by a shock now there is a the the issue that the uh in places where you would expect most people to move from are places which had been hit by
some by economic shock which is often clustered in nature because industry is is clustered so then when a region is hit by a shock that hit not just one company when everybody else is doing fine fine but kind of all the companies
because everybody was doing furniture or clothing or or everyone was doing something that is being replaced by robots or something like that you have a kind of equilibrium fact that then the places that are affected by the shock
get hurt then the places that are not directly affected by the shock get hurt too because the guys who were working uh they are less likely to buy guys and girls actually who are working are less likely to buy McDonald's and therefore
all the McDonald's Wes goes down Etc which then to a decline in the real estate prices and people find themselves underwater on their market and I think that prevents Mobility because at least they have a house to live in if they
don't go but if they sell the house they they have nothing to get themselves another place so that's kind of like a purely economic Factor then on top of that I think Child Care is kind of an issue because a lot of people have child
care provided by their extended family and uh you cannot move the entire family family again maybe due to this real estate things and then the child care options are pretty bad in this country in general for especially for small kids once they start going to school it's a bit better and then those are Eon some of the economic reasons then I I also think there are one social reasons which is people uh like to be part of a social
network they they think it's you know it's I think it's profoundly human that we uh we are not meant to be lonely we are meant to live with our friends and and um and derive some amount of meaning from our place in The Social Network and moving makes it makes it difficult especially if you're going to move to something that's completely like unknown uh and you don't exactly know what you're moving to and why and then finally is um and that's
one thing that I think we we think should we should start put in a little more in our economic model is the fact that it seems when you in surveys people keep declaring one thing uh to derive meaning from their job but they don't
they don't always do and they're more likely to be deriving meaning from their job if theyve H this job for a long time and if they've grown in you know in expertise and in ranks in doing this particular job so here the so the
geographic Mobility is coupled with or or the lack of geographic Mobility is coupled with a lack of sectoral Mobility where people aren't just not particularly excited or not excited at all to leave their job uh making uh Furniture to to take another job 200 kilom away being a security guard in a in a Furniture Company why is any of that so different from the 1980s when Mobility was quite High even for people without children Mobility now is much
lower than it was in the 80s what's the difference it's about half now what it was in 1948 and the decline start Ed in the '90s yes so it's very high in the 80s and then something happens and then something happens and the '90s are good years right you would think Mobility would be rising in the 90s now there's the internet you find jobs through the internet it's counterintuitive that Mobility is fallen so much not only that
but it's also the years where you start having a lot of geographically concentrated shocks because that's the the 90s and 2000 is when uh trade with China picks up so it's where you know entire town would you know seem that they should go and pick up so precisely at the moment where the the the factors you point out would have made Geographic Mobility easier and uh and and there was also more of a need for people to move
this is when we see people move less so we don't have the full answer to these questions but I think it's a little bit related to to this meaningful jobs question which is this is also the time where the movement the geographic movement would
be not associated with finding a job in an other Furniture Factory 200 kilm away but would be finding a job in a completely different sector where you would be starting from scratch and you're taking a job that you have
no you think is is demeaning in your recent New York Times IED uh you seem to argue that incentives are in general not that powerful in motivating people economically and that surprised me because if I think of most japal papers
incentives are pretty powerful so your own paper on Indonesian roads you put in much roads many more parents send their kids to school right it's a big response uh the recent paper on drunk driving in India with abaj uh police set up new
roadblocks people respond to that incentive they take other routes so there are all these papers you've done your lab is done showing incentives are powerful why in the oped say incentives don't matter so much what the oped says
is that Financial incentives are overrated well but getting educated or not being pulled over for a drunk driving traffic ticket they're closely related to Financial incentives uh the traffic ticket I think is much more than
the financial incentive like if you get stopped by a traffic officer you you you lose your car right this an instant so I think there is like the inconvenience is much much bigger so I I so the point is not that we are trying to make is not
that people are not sensitive to incentive because you can always construct incentive if you construct broadly enough then the incentive broadly enough then it's almost always true the point is also not that people
are not responsive to financial incentive whatsoever the point is that the the response to financial incentives is less than the is less than what typically we assume it is both in term of you know people seem to be pretty
realistic to taxes both at all levels of income from the studies we have people seem to be pretty elastic to receiving money for sure that doesn't get them that doesn't lead them to kind of go on vacation but that's just an income
effect right is not a price so that's an income effect so but that's still you know you would think the income effect also created this incentive to work at least that's in our model that's why we a bit worry of uh welfare but you take
the negative income tax experiment uh they in fact probably the first CI in the social science you know as early as the as the 70s they actually what they were doing this was kind of a Milton fredman idea um to kind of
simplify welfare but what they did in this experiment is to give people a certain level of income but it was such that it was taxed away at a pretty cheap rate uh so about 50% the the people were facing about a 50% marginal tax on their on their income and even there the labor Supply response were so low but take the French work many fewer hours a week than Americans isn't that mainly a tax effect a price effect I don't think so no no
well to start is there is a regulation that's uh but there are all these part-time jobs in the 1970s French and other European worked more than Americans taxx rates in Europe were lower the 80s expenditures and tax rates go up it's it's you know it's always difficult to compare two countries but my bet based on kind of extrapolating from the micro study is that that's not a financial that's not that's not a financial effect because I think it
comes much more from the from regulation like how much can you work anyways and from uh uh the availability of jobs the availability of part-time job that's actually much less partly also due to regulations uh and less to individual effort response because they're thinking that they're going to be taxed away that seems to me cont factual in the new book why not have more on social conservatism so take something like single Parenthood it
seems to be a big problem there are many new studies showing it's may be a bigger problem than we had thought it's a cause of poverty persistent poverty it's kind of a right-wing issue for whatever reasons why not have more right-wing
issues in your book we kind of do have these issues as outcome comes I don't know why it's a right wi issue to worry about single Parenthood because as you were saying all of the data suggest that it's not a very good thing to grow up as
a kid of a single mom in their teens so and it's not a good thing for the single mom in question either so it seems to me that it's not a it's not a right wi left wing issue in fact the person I know who is the most left wing probably is my mom and that's one of our like key battle himn try and reduce teenage pregnancy in in El Salvador and your father was a mathematician right Y and did you learn math from him I learned it at a very
fundamental level because is kind of very fundamental mathematicians so it left with with some it left me I think with some good Instinct uh going back to to the issues so I don't think single motherhood is a left wi or rightwing
issues what would make it a social conservatism issue is to approach it from a you know moral feeling kind of a way and what makes what makes it a progressive issue is to approach it at the outcome of you know conditions in
life that are potentially changeable or maybe it's the same thing and we do talk about it a bit in the book in particular for example one of the consequence of the fact that people are not mobile and that Industries are
cluster so that when there is a shock everybody like kind of suffers together is that in those town that are hit the most you do see a kind of an erosion of this people are less like of this like social norms people are less likely to
get to get married they are more likely to have children out of wedlock Etc so you do see this as one of the possible consequence of uh people's you know and and happiness what do you learn from rock climbing or how does it inspire you uh many things you can learn from rock climbing one is that it's a bit like empirical economics uh you kind of look at the wall and you have a decent idea of what might work so you have so think
of it as a theory or or an intuition but then when you try it out sometimes it works sometime it doesn't so that's kind of the data go going in the way it's also uh something you do socially you don't need another person um to catch you if you fall and you need to pay attention to the other person and a lot of Economics is very social in this way and it's not competitive or at least not the way I do it so it's kind of making slow and steady
progress towards some goal do you love South Indian classical music I like it uh love it would be a stronger statement than than than I should because I'm not a coner but uh I visit my husband is really into it so in fact South Indian
and North Indian both we listen to it at home and we go to some con we go to concerts whenever we are in India um chai is one place where we do a lot of work and jaal has its headquarters and it has some of the best South Indian
music so I am like kind of un un Enlighten amateurs I've been to the December Festival there it was fantastic took my daughter What In classical music interests you most in Western classic yes um to this I truly love uh and Indian classic I also love but with no expertise whatsoever wor classical I grew up listening to Forever what interest me the most I don't even know if interest in the world because it's kind of very visceral and what is it
what what do you put on what's your desert island disc oh that's uh um back uh so I listen to back almost every morning yes uh when I'm working and in particular to back contes yes so that's kind of my morning music then in the afternoon I kind of move on to more like Frontier stuff like Schuman or something like that it's only after dinner that it moves to poob Dylan so so definitely would be back and it would probably be um the one of the
passions or if I could have two I would take two the two passions St John and St Matthew's passion what advice do you give to your talented undergraduates that differs from the advice your colleagues would give them I give them almost all of them the advice to take some time off uh and to in part particular if they have any interest in development which is generally the reason why they come to see me in the first place but even if they don't
really to spend uh a year or two in a developing country working on a project not necessarily an r c any project like spending time in the field um this is what Michael ker did before he went back to graduate school
and I think that was determinant to him this to some extent is what I did with my little Russia experience and this was clearly very Central to me it's only through this this exposure that you can learn how wrong most of your intuitions are and
preconceptions are I can tell it to them till they are blue in the face to not let themselves be guided by what seems obvious to them but until they've confronted what they think is obvious to something entirely different and it doesn't come it's not clear whether or not this is different from what my colleagues would say I I don't know maybe some of my colleague would say that it's better off you know you're better off staying home and clanking
some data and getting getting these type of skills obviously it hasn't stopped you any but do you worry that development economics and some ways puts women at a disadvantage because some emerging economies are especially dangerous for women oh I think India in particular that may be the case I think development economics is the most um gender balanced subfield of all of Economics uh in fact if anything there are more women and more powerful women
in development than than men so whatever it is it does not stop them and there are many many women working on India so of course you you you don't do silly things uh and the advantage of working and of having this infrastructure that I was talking about before is that it makes it possible for people to always be in groups and to kind of work in a cont text where they are safe and at the same time they can you know they can get
the experience of living in this environments and I think that makes people often very aware that gender rights for example is something to to study very deeply so for example one of my graduate students M melway worked in rural up and one of the region one of the part of India which is which was some of the most like extreme uh gender inequity and you know she conducted a project like Master with a group of largely female
research assistant and got everybody to kind of go along with her last question if you could Institute a reform to increase opportunity for women in economics what would you do so I think there are two things that one could do
uh I don't know if there are reforms per se but one is to change a little bit the the climate uh in the economics profession it's not particularly anti-woman per se some people argue it is people are for example more likely to
interrupt women than men Etc but even if they weren't they're just in general likely to interrupt each other we are not a very uh touchy pH culture in in economics it doesn't bother me it turns out so that's not something that has
stopped me in any way but it bothers many people and it tends to bother women and I think minority more so changing the culture of course is not a reform per se but uh there are small things you can do that can help one thing we've done at
MIT very simple is to um Institute the the rule that someone who gives a seminar gets the first 15 minutes uninterrupted and that is for our Seminars the development seminars I think it's actually improved the experience for everyone the speaker and the audience so that's one that's not huge but think of this as one you know I'm not the magic buet type of person and I don't think there is one there one of the silver pellets you could do there
the other is not about uh there something we could do outside of the economic profession uh which is to change a little bit the image that economics has to the outside world I think for a lot of high school students college students they're a bit like me when I was trying you know considering economics is like number one it's like talk about U interest R and central banks and it's kind of boring and number two it goes at it with like incredibly
crude tools and and in fact both of the statement I think wrong about the state of our discipline in fact we study any number of issues including those but also you know Ultra extreme poverty discrimination inequality and we study them with lots of very sophisticated tools and relevant empirical tools Etc and making I think people were more aware at an early age before they choose a field there would be more woman to
start with choosing to study economics and then hopefully more would continue which I think is something we really need not just women but also minority because economics is a social science and as a social science we do need diversity and
experiences and point of views Etc because people with different background uh and including gender and life experiences will be interested in different questions and also will bring a slightly different um perspective to
those questions so you know it would be a bit more it would make the field more vibrant Esther Duo thank you very much congratulations again on the Nobel Prize of course and the new book with Aaj bonnery is good economics for hard times thank you thank you so much thanks for listening to conversations with Tyler and don't forget to visit conversations withth tyler.com donate to please support the show before the year's [Music] end