[Music] hi everyone this is Jeff producer of conversations with Tyler I wanted to let you all know that today's episode featuring Jason Ferman was recorded in January of this year it was originally scheduled to release in March but when Co hit we held the episode and now we find ourselves in August and it's as good a time as any to release it so please enjoy this somewhat long lost episode of cwt with Jason Ferman
conversations with Tyler is produced by the mercada center at George Mason University Bridging the Gap between academic ideas and real world problems learn more at [Music] arcades.in hello today we are here with Jason Ferman who is a professor at Harvard's Kennedy School and former chair of the Council of economic advisors under President Obama Jason welcome thanks for having me first question why has us investment Behavior been so sluggish for
so long you start with the easy ones you there's no there's no warmup here Tyler I think there's a lot of reasons some of it isn't a problem it's that you don't need as much investment from businesses in the type of intangible
economy that we have today relative to the type of heavy industry we used to have but I think part of the investment shortfall does reflect problems and failures in economic policy and in particular the increase in concentration
in certain industries has led to Greater Monopoly power and has reduced some of the incentives um and need to make investments in those Industries and I that's part of the investment shortfall we can and should do something about but if I take a sector like say hospitals where there's quite a bit of Monopoly power there's been plenty of investments into Healthcare is there a correlation between sectors with a lot of Market
power and sluggish investment um there is you see this in research by Tomas philipon you see it in research that Jan Eberly has done both of them have shown that the predictions you'd get by looking at increasing concentration are pretty similar to the predictions you'd get in terms of where you see the investment shortfalls um I know Jan urb did look at the hospital industry and I thought that was one of the shortfalls
um but I'm not completely positive about that of course Health has 18 different issues and distortions um going on in it all at once but there's a lot of investment in Tech and while there may be market dominance there's not Market power there in the sense of high prices and restricted output right so again should we think Market power is actually the problem here I think Market power is a problem in some sectors I think that
um I actually think the health sector is an example of where it is the problem that has been very well measured and very well documented is higher prices as a result of Market power so I'm quite confident in the health sector Market
power leads to higher prices if higher prices investment if higher prices are for something like drugs then I think it's tough I think you do have a trade-off between are you getting more Innovation on the one hand and higher
prices on the other hand I don't quite know the exact thing to do there when it comes to hospitals I think there's very few efficiencies that come out of these mergers the only efficiency that might come out of them is that you can pay nurses less um than you used to and I'm not sure how thrilled we should be about that what do you think of the Rossy hansburg paper that if you look at the US economy sector by sector rather than
National concentration indices that there's no apparent increase in Market power I think that you can't you know these these macro measures of Market power are limited and problematic and that's something we always knew we knew that the first time we published them at the Council of economic advisors a lot of the researchers that have published them have known that the question is like anything else in economics does it have
predictive power does it explain something does it work and it does seem associated with things like profitability with things like markups at an aggregate level and some of the aggregate models it matches features of
the data like the rise in the return to Capital relative to the safe rate of return on treasuries so you know is this going to work for every sector no retail for example more concentration in part that's more competition at the local
level in part that's more Innovation so in retail the National numbers I think are really misleading um in other sectors I think they're not non-balance um I think they're not if investment is important does that make you an economic pessimist given the apparent end of the savings glut from Asia I I think I I'm an economic realist you know you look at Robert Gordon and he's been turned into this big pessimist this pole of prediction
that's you know this negative we've run out of ideas there nothing ever's going to happen turns out if you just look at average productivity growth over the last 50 years and assume that's what you're going to get over the next 50 years we're going to have a GDP growth rate that is around 2% maybe a little bit below it and that's just from continuing the last 50 years so the average of the last 50 years is better
than the average of the last 15 years so in some ways I'm an optimist I think we'll get back to our historical productivity growth but the idea um that we're going to get Way Beyond that certainly could happen but I don't think is a reasonable forecast of what's going to happen referring to Gordon here's another softball question why did productivity fall so much after either 1973 or and say the last 15 years this is the easy podcast yep um
you know I I think there's some things you know less infrastructure investment less R&D there were some major projects in terms of highways in the 1950s the lunar Landing in the 196 s Etc I'd like to think that was the answer to your question I think the truth is when you go and quantify that type of public investment it's sort of a couple ten of a percent of the answer um in the recent period I do think the increased concentration
we're talking about might be a tenth or two percentage point of the Slowdown that we've seen um some of it may be that you need to invert your question and ask not why did productivity slow slow down but why was productivity so fast well there's a lot of very special things you know about the 1950s and the 1960s um just coming off of World War II and in terms of the you know 95 to 2005 well it's a relatively short period of
Time stuff fluctuates you know you have a period of faster growth but broadly speaking you know we're in a world of 1 and a half% productivity growth if we're lucky unfortunately it's been more like one lately and you know that's just what
it is what is your take on the degree of unmeasured benefits from the internet high low intermediate intermediate but most of them were in the base 5 10 15 years ago Google online travel online shopping Wikipedia it's
not like adding these are going to add to to your measure of productivity growth in the year 2019 or the year 2018 they might add to the level of productivity but they were in the level they were in the base a while ago now
and they've just continued up so I certainly think there's some things we're not measuring a bunch of it though is about the use of our time and YouTube may be better than TV but it's only a bit better than TV so you can't just
take the gross benefits of YouTube you have to do the net benefits relative to the other ity and then if you're being a paternalist you could ask is it any of this a good use of our time um but without even going there I think you get sort of decent size impact on the level of well-being a small impact on the growth of well-being over the last decade let's say your productivities are and you can make two or three key
changes to boost productivity what would they be forget the filibuster what your productivities are uh well number one two and three would be more immigration uh more immigration of talented people that will add to um Innovation here in the United States that would um you know bring their ideas with them that would start businesses now if I had to go to four five and six um a much increased Federal R&D um it's Fallen as a share of
GDP um consistently since the 1960s a business tax reform that um included more incentives for investment like expensing and an expanded R&D credit to encourage businesses to internalize more of the benefits that their research has for others um and
then finally investing in American higher education I'm all for more immigration but don't you find it strange that the relatively High productivity 50s and 60s have a fairly limited number of immigrants now some of
them contribute a great deal Einstein right simple example productivity shortfall comes right after we increase immigration a lot so maybe it's not the number one factor is it the number one factor in the Slowdown probably not um but we have a lot of micro evidence that you know papers that take a look at what happens when immigrants come and not only do they patent but you know Jennifer hunts found that the Americans
end up patenting more when they're in the presence of those immigrants so I I this is something where I think we have a good enough set of Micro Data we don't need to use sort of macro decades to try to make inferences what about EMB is a way of raising productivity growth let everyone move to Oakland or maybe even San Francisco would that help a great deal that would be on my list too if we keep going probably we'll discover that
a large fraction of the thoughts I have about Economic Policy would would fall under on the heading of enhancing productivity um absolutely I think there's a real you know mismatch of people globally um people that would be more productive if they were in the United States than they were in the country that they were in and then there's a mismatch not not nearly as large but but a still sizable one within the United States itself um the places
where people can most productively add to the economy places like the Bay Area the Boston area the Washington area are um ridiculously and unnecessarily expensive to live in because of artificial constraints on building that drive uh drive people out and keep people from coming in the US is losing some of its manufacturing capacity and certainly a lot of its manufacturing work work force are there external benefits to keeping those activities
more in the US significant benefits I don't think that manufacturing itself should be an important objective of US policy I it's one type of job it's been a good type of job but there's other good types of jobs um as well so I wouldn't focus on you know where physical things are being made as opposed to where services are being made and in fact if anything I think the error in policy is probably to do a little bit too much emphasis on
manufacturing and a little bit less on Services what do you think of the National Security argument that say when building a ship we might be dependent on South Korean components if there were a war in Asia those might be for some reason unreliable we depend for China on for rare Earths uh we depend on Taiwan to some extent for high quality chips even though we make our own is the supply chain extended too long and it
was a kind of economic fantasy and it doesn't make National Security sense I don't consider myself an expert in any of those national security questions so I would be open to thinking about the National Security concerns associated with the supply chain I have an awful lot in specific cases both when I was in government and just in the world more generally heard people people make National Security arguments that I found tendentious and
pretty you know unpersuasive so I think there may be some that are persuasive and that are true there's an awful lot um that aren't you know our Administration towards the end worried a bit about semiconductors um when I've looked at that there's enough of a diversified World supply enough of an ability to scale up if necessary in the United States um that I don't think ON Semiconductor I think there it was protectionism um under the guise of
national security so you know I think we should accept the possibility of National Security take it seriously but be really really weary that a lot of protectionist arguments um use that trappings has the China shock literature changed your view of what is an optimal policy adjustment to foreign trade the first economics class I took as a freshman in college we were told that trade had winners and losers we were told that the winners were diffuse
intended to have smaller gains and the losers were concentrated and tended to have large losses that seems to be exactly what the China shock literature has found but the losers turned out to be bigger losers than we had thought right opioid deaths were not predicted say at their current magnitude I think the China shock literature is a fantastic contribution to labor economics and is less important in thinking about
trade I think we've learned about weaknesses and deficiencies in the structure of our labor markets the ability to connect people with jobs the ability of people to move after a shock happens to get themselves retrained to have some form of insurance that um could help them in the event that their next job has a lower pay so yes that literature together with other observations about what's been going on with for example prime age men in the
workforce has affected the way I think about the dynamism and efficient allocation of Labor in the American Workforce um much more than it's affected the way I think about trade why did labor markets recover so slowly from the 2008 crash you would think well it's the world of the internet everyone has all this information matching markets are better but the labor market recovers quite slowly why well I remember in 2009 n um Alan
Krueger was the assistant secretary for economic policy at the treasury and he looked at every single oecd country in the last not going to get any of these numbers exactly right but let's just say in the last 50 years who had seen an unemployment rate rise rapidly in a short period of time by a couple percentage points and he asked the question how quickly does it come down um what he found was the fastest that
any oecd country achieved was 7 T of a percentage Point per year it's not just the United States it's not just the presentent for the last 50 years a couple dozen countries you unemployment rates can go up very quickly unemployment rates cannot um come down very quickly in fact the pace that the unemployment rate declined in this recovery was about the same or slightly faster than the pace it did in the 1980s the only area where for the economy
probably consistently outperformed forecasts after the recession was the unemployment rate it was consistently lower than What was forecast um now the employment rate was not higher than was forecast GDP growth was weaker um but the unemployment rate itself I don't think it was abnormally slow in its recovery but say after three or four years once the nominal shock has worked its way through the system what is the
most important rigidity in preventing a more rapid adjustment is it the people are unwilling to move locations or somehow matching markets are not working what what needs to be fixed right I mean you certainly saw both the 2 one
recession and the 2007 through n recessions you saw disproportionately long periods of long-term unemployment of people working part-time for economic reasons so involuntarily part-time and people leaving the workforce and you
know the participation rate falling so something about both of those shocks led to very prolonged all three of these negative consequences you you know take a crappy job you don't get a job at all or you give up entirely both of those shocks I think it's related to the fact that both of those shocks hit at the same time that labor market fluidity and labor market dynamism was lower than it had been people were moving from job to
job less businesses were creating and destroying um fewer jobs and so yes I think if you have a less fluid labor market then a shock will have all of these bad consequences that begs the question of why we have a less fluid um
labor market I think some of it is land use and the expense of moving to places some of it is occupational licensing some of it is the cost of healthcare and lockin it' be interesting to see whether that's gotten better after the
Affordable Care Act but I think that question you know how do we have a more fluid labor market means that the matching model model will work better the next shock hits what do you think are the best place-based policies for America's lagging regions or do you maybe not even believe in place-based policies I was about to say I'm not sure I can think of any place-based policies that I'm particularly enthusiastic about
I don't mind algorithmic place-based policies you know this place has a bigger deeper recession so it gets a larger Federal allocation of Medicaid or it gets longer unemployment insurance benefits so there's that type of place
base that's based on a formula about State unemployment rates or state incomes that I think can make sense the regional development we're going to go into this area create this new cluster create this new industry I think that's
littered with a history of failur so I don't even know that we know what we're doing when it comes to place-based policy even if academics knew what they were doing when it came to place-based policy I think when the political system implemented it I don't think there's any area of policy where Congress is less interested in expert input than the area of which locations in the country should get resources but how about region
specific Visas so you let people move into the US you give them a path toward a green card uh they're supposed to start off in Maine or West Virginia or Idaho they won't all stay there but you know maybe half of them would for 5 years
should we do that Tyler you are just so much more creative and imaginative than um I am so my my rather prosaic mind hears an idea like that and thinks the idea that we're going to have internal checkpoints within the country even if
it's for one type of people and doesn't apply to others I don't even quite know how we do that it seems but no checkpoint you enforce through the IRS so you're you're sent to Idaho if you leave Idaho in less than four years you
pay another 20% of your income and tax to the federal government there's no strong enforcement but also a lot of people if they show up in Idaho they will stay I think out of good faith maybe half of them won't but if half of
them do that seems like a big achievement and you're for more immigration anyway right so you don't mind if they trickle down into Nebraska yes I was about say if the only way for me to get more immigrants is they have to be in one part of the country um I would probably um settle for that and compromise with you on this plan um beyond that I don't again I you know maybe that's not where they're can make the biggest
contribution um to the American economy to the American Fisk um to their own families so I guess I'd rather let people choose that then make the choices about where they want to live including immigrants make those choices as you know Brian Kaplan has a book out about open borders coming from the left Matt glacius has a forthcoming book arguing we should Target an America of 1 billion people do you think right now we're just
thinking too small about numbers in this country 320 million it's not very much China and India they're geopolitical Rivals I mean shouldn't we have a plan to get to an America of say 700 million people and they can't all go to Manhattan not even Staten Island oh first I think within any conceivable range that I can imagine for Public Policy I'd rather have more immigration than less immigration when you've decided on the amount you
have I then do believe in enforcement I think it is perfectly reasonable for the United States to decide who can uh be here certainly reasonable for the United States to decide who can vote in the United States I'd like those rules to be much more permissive and then to enforce um the much more permissive place that we set those rules um I guess I just you know can I imagine 700 million a billion I certainly think economically we could
support that number of people in the land that we have um in this country if that happened you'd end up with an awful lot of people moving to Idaho without having to tell them to move to Idaho because prices in New York and San Francisco would go up um even more than they have already um I do think Brian kaplan's book which I loved didn't take completely seriously some of the transition issues and some of the transition cost the speed with
which these changes happen politically culturally um economically I think that is is relevant what about having the US government change policy to induce or encourage a higher rate of savings is there anything we should do or is the savings rate just fine I'm not that worried about the savings rate I don't think it's the constraint on business investment right now because the cost of capital is very low I think in terms of
retirement security the first place I would go for retirement security would be to expand Social Security rather than to raise um savings and so I think the main issue with low savings is just an intertemporal consumption one that we're borrowing from foreigners today we'll need to repay those foreigners um in the future and with a current account deficit of around 3% of GDP I think we're on the edge of where we need to be
worried but um not really that far past the edge of where we need to worry if we wanted to increase savings though certainly um you could do it on the private side but you could also decide you're going to reduce the budget
deficit but since we're borrowing at real rates pretty close to zero right depending on the term structure and what day you're talking about and the growth rate of the economy is positive why shouldn't the US actually borrow much
more either cut taxes spend more some combination of those two changes what's the constraint so you still 3% of GDP it's just a number right as a percentage of wealth it's below 1% why not do much more right so we have interest rates that are lower than our growth rate that means we can on a sustained basis run a primary deficit we can spend excluding interest in excess of what we collect in taxes right now though our primary deficit is
set to be about 4% of GDP that means our debt under that plan would ASM toote to about 400% of GDP and perfectly possible that we'd be fine at 400% of GDP I'd like to sort of explore how far we could get a whole lot more slowly than committing ourselves to our current fiscal trajectory which is a 400% of GDP steady state def debt um or something even higher than that if borrowing rates stay low do you think borrowing more then is an actual free
lunch and we need only worry about rates going back up or is it simply pushing around resources and we I mean there's ultimately a resource constraint that um we have in terms of what the potential of the economy is and you can relax that resource constraint at the level of the planet with the United States borrowing financing consumption from other regions in the world um and paying those regions of the world back in the future but by
the way if what we're doing with the rest of the world is financing consumption and financing investment that will um come out of our well-being in the future so no I don't think we have um a free lunch there what's the best way to think about the risk that borrowing rates in real terms rise above the growth rate of the US economy look I I think the risk is symmetric if you look at the last 140 years about 25% of the time interest
rates have been real interest rates have been lower than where they are now 75% of the time they've been higher you look around the advanced economies today um and in most all of the advanced economies real interest rates are lower than they are in the United States so I think there's a certain amount of symmetry I think rates could go down rates could go up at the extremes though there's not symmetry rates can't go down
by 10% points rates could go up by um 10 percentage points so I think there is some tail risk there I don't know that it's so large that I would make a big effort to deal with it if you want to deal with it you don't even need to reduce the deficit you can just borrow more longterm and lock in the low interest rates you have now but you know I wouldn't want to go hug wild and assume it'll never happen either there's
new paper from the bank of England probably you've seen it and in any case you know Larry Summers but it suggests there's a long-term secular decline over centuries that real rates basically get lower what should we infer from that
anything I think so much damage uh was done to economic forecasting by the experience of the 1980s we had this brief relatively brief period of unusually very high interest rates and people built that into their forecast
and for the next 20 or 30 years there was something almost that felt normal about the 1980s and then the decline from the 1980s felt strange when a lot of what we've seen in interest rates in recent years is going back to the types of interest rates and the type of trend we were on before then you know in terms of a longer term decline of interest rates you have to be careful about are you think you know what's happened to
you know risk associated with interest rates bonds used to be um you know more risky than they are right now bonds might be negatively correlated with um what your consumption is the marginal utility of your consumption so maybe
they should actually have a lower interest rate now than the pure safe rate of return so I think there's a couple other um different factors going on there what is the right way to think about the economic losses from brexit so
Paul Krugman says oh two to three% of GDP one off it's bad but they'll get over it what's your take I put brexit primarily in a medium to long-term cost of the set of microeconomic efficiencies associated with somewhat worse Supply chains somewhat worse you know composition of imports and exports and yes putting that in the couple percent of GDP poor over the long run seems a about right you know is that two is it five I don't know
I think it's a negative number and it's not a large upfront negative number a few questions about tech which you've been working on lately in the United Kingdom you once wrote a piece called Walmart a progressive success story can we today say the same about Amazon it does lower prices right I have a lot of fondness for Amazon I order a lot from Amazon I've personally benefited a lot from Amazon I think in awful lot of American customers do I
think Amazon's online retail platform also is to some degree competing with brick and mortar retail and once you place it in that market it's a relatively small player in all of it so personally actually think Amazon would probably be lowest on my list of concerns but that doesn't mean I have no concerns about Amazon and don't think it needs to be you know monitored and and I think some of the proposals that I made in the
context of a report in the United Kingdom I don't think would constraint an awful lot of what's good about Amazon's business model what's your biggest concern my biggest concern is more the online search social media um social networking and so not Amazon per se right so not not Amazon per se I I think I think those are sectors where first of all there's a whole set of social concerns and Democratic concerns are probably much
more important um than anything in terms of competition um but those are areas where you can see you know you know Google and Facebook didn't get to where they are today through organic growth Walmart was largely organic growth it was efficient it opened up a new store then it opened another store then it opened another store and each one of those stores was better than the other things in the neighborhood so it succeeded
Amazon a lot of organic growth although certain key important Acquisitions along the way Facebook has three major social media companies Allin one because it bought two of those three almost every component of Google was except the
search algorithm was purchased at some point um along the way so those are a little bit more like merger to monopolies and when you have that I have less of a presumption of efficiency if you grew I think you're probably
efficient we probably shouldn't do anything about you if you bought a bunch of things I get more worried but if you take Facebook is there consumer harm so the WhatsApp page it's totally clean and pure it's beautiful there are no ads on it there are no ads on it because it's part of Facebook the bigger company so aren't customers better off with Facebook the company owning say WhatsApp Instagram and Facebook the page I would
much rather have have competition I think what benefits consumers is you know choices lower prices more price is zero right and there's a lot of social networks I can go on fortnite I can recruit people through my blog I can email you I can text you on my cell phone so many ways to network with people these are advertising companies first of all and but the online ad but online advert I mean you know if something drives up the price of steel
am I going to say well I don't have to to pay any more for steel cuz I don't buy any steel well I buy a lot of products that have Steel in them and I'm paying more for those products I am paying more for any product that has to pay more in advertising fees to um Google and Facebook which dominate the online ad but they don't dominate advertising and it's a much lower price for advertising than before Facebook and
Google came along right but the right question is the counterfactual of what would the price of online advertising be if there were 5 online advertisers in companies instead of two online advertising companies I think it would be lower I think the price of those products we also pay separate from that of course in you know the form of privacy in the form of giving up our data and then in all sorts of ways of less Innovation that we don't even see
because something doesn't exist because it was too hard to enter the market what do you think of gdpr as privacy legislation I have mixed feelings about it I think privacy legislation is important I think it's something that people care about I personally for myself don't care that much about it and tend not to you know do lots of privacy settings on things even when I have a choice and and know what I'm doing so I don't personally
relate to it as much but something that people care about I'd like in a world where I thought people were informed I would think competition and choice would fully solve the problem I think it contributes to solving the problem um but probably isn't enough uh gdpr also though is cumbersome and in some ways has been an impediment um to competition because the big companies can navigate it much more easily than small ones can
won't that be true of any effective privacy legislation that it will make worse the dominance of the larger companies because any law the bigger companies have better legal staff PR and so on you can make laws that are dependent on size the recommendations that I made in my UK report were a code of conduct for the largest players and it wouldn't apply to the medium or small ones that's easy to do if the code of
conduct is around anti-competitive Behavior that's much harder to do if the code of conduct is about something that's considered a human right you know it's not like we would say industrial safety rules shouldn't apply to a small business and only should apply to a big business if you think that a business shouldn't be killing people it's workers you think that you should think that regardless of the size of the business so privacy has
been approached from a human rights frame rather than from a competition and economic frame um I think there's some Merit though to that that human rights approach does the European Union treat the big tech companies fairly if we're economists we think about this in terms of incentives they're American companies they just want to tax them won't it be the case we would think in a public Choice model that the European Union
would treat them not well enough I think maybe I'm not as immersed in public Choice as you are Tyler but um given where we're sitting I think that the Europeans have a pretty fair and impartial anti-rust system that is
largely blind to nationality look at what they did in Seamans and alom you had a merger of two major European companies one from France one from Germany the commission said they couldn't merge both of those countries were infuriated I
think they take a tougher approach to antitrust but they take that across the board with their own companies and with American companies I think they do it in a pretty even-handed manner but say the proposed digital tax of what 3% would that be so popular if Facebook were a French company I am less sympathetic to the specifics you ask me at antitrust in enforcement the antitrust enforcement but gener EU policy toward the tech
comp I think yeah I don't think you want to put it all in one bucket antitrust the cases against Google were brought through a very technocratic relatively independent I think honest process the tax proposals are coming from
politicians and yes absolutely your public Choice models I think apply a lot more to those politicians I think those politicians are right that they're missing out on a bunch of taxes they should be getting I think they're wrong
to have sector specific levies and proposals in some case jury rigged um just to get at American companies so yes Anti-Trust in Europe I think is fair taxes I think is a bit sort of anti-American if you want to call it that um and privacy I'm less sure of the answer to my guess is it's more that's what Europeans believe as a belief about the world and not a form of protectionism it seems they don't mind Huawei for their
5G networks right there's a big emphasis on privacy and until Trump pressured them Germany was fine we'll have Huawei in to do our 5G network doesn't that seem discordant to you now that you say it um to some degree does as I said I'm
I'm not sort of immersed in how the policymaking in Europe gets done on the issues of privacy and I think Huawei is um you know sort of easier to understand that somebody's tracking you or somebody's keep keeping data on you or
someone's deciding what the search results about you are and that's transparent and you can see that happening and you can decide if you think that's fine or if you think that's not fine in some cases Europe decided it wasn't fine Huawei was an awful lot of information that I don't have access to and that you don't have access to either do you worry that data portability for social networks could stifle Innovation
let's say I develop a new Social Network it's based around virtual reality and then The Regulators ask me well how do we Port your data into Facebook or the incumbents and I say well that can't be done and they say well then you don't
satisfy data portability and The Innovation is stifled don't you lock in the current way of doing things with data portability I worry about that and that's why you want to apply it for example more or make it mandatory for
large companies and not for Tyler cow's new um virtual reality company so I think there's a set of costs and benefits and I think the right way to get that mix of costs and benefits is with the large companies the lack of portability you know creates a barrier to entry entrenches them and reduces competition so I'd turn the dial one way for them and for smaller companies I'd turn the dial the other way or not even
have a dial but doesn't it have to be symmetric so if Facebook cannot export to the new virtual reality social network uh in essence people coordinate on portability into what we have and having any kind of certified dominant
standard even if you regulate it more heavily in essence Ur as that standard keeps on dominating the market because you have to export from Facebook into which providers right the government has to make a list and that worries
me I think it should worry you and so you know to I you know the if the UK um moves forward establishing the digital markets unit I recommend it as they have been moving forward would love to have you on it asking that set of questions I don't think that something has downsides and concerns is in this case at least a reason not to do it I think in some spaces like messaging they're reasonably mature could you know the iPhone have
introduced animojis in a world of required interoperability we could have figured out a way to do that and by the way if the world lost animojis probably would still have have uh have turned I think we should ban most uses of facial surveillance do you agree in the US I don't think I agree I don't know I I we you're you're allowed to have a police officer on the street looking at somebody you're allowed to post a wanted
poster for somebody and then if somebody with their eyes recognizes that face you know call in a tip line and have the person arrested I don't know why we would want to give privacy you're worried about privacy and cameras always know where you are and they track your face they track your gate if it's private sector the government can subpoena them I'm not say that a terrible violation I'm saying we shouldn't I I care an awful lot about
you know violations of someone's right to life like murdering them or theft and sexual assault breaking and entering all of these things I think these are problems too and and all of our law enforcement violates some
principle we take people and lock them up we take people's rights away in all sorts of ways and there's a process for deciding whether you're allowed to have a search warrant whether you're allowed to put someone in prison and so I think
we need to put processes around this that respect balances of Rights but I would hate to give up a tool that could keep us safer what's the most likely legitimate future use for Block chain not gray markets not black markets not people playing around I'm really bearish on blockchain it's you know and and maybe I know less than everyone that's excited about it but everyone that's excited about it also has a stake in it and a reason to
be excited about it to me um very little of it seems like something that couldn't be done more cheaply and efficiently with the types of systems we we had in the past I mean they couldn't do anything resembling what visa and
MasterCard the number of transactions they process a second today we just can't do that with blockchain technology okay are you up for a round of overrated versus underrated sure I toss something out growing up in New York City
overrated or underrated underrated why it's just it's an amazing City and you can you know walk right outside children can have a lot of autonomy in New York they can ride the Subway they can take the bus they can get so many different types of food have so many different types of experiences um I think it's uh I think it's an amazing Place juggling overrated or underrated um maybe correctly rated am I allowed to say that you're allowed to
say that okay you're a juggler correct still uh I juggle at my own children's birthday parties would be probably my uh where where I make appearances now other than just practice what makes for a good juggler I spent ridiculous amounts of time in in high school and to some degree Middle School on juggling so that's probably the just probably just practice part of you must think it's underrated in a way right three body
problem science fiction novel underrated what's important about it it's so good it's everything in it is so plausible and real in a way that you can only have in hard sci-fi it operates on sort of every time level a time span of years especially in the first book and a time span of um billions or maybe it was trillions of years by the time you get to the third book and it um you know just the way you think about computers is different when
you hear about you know when you learn about the human computers that they have there the firmy Paradox is something I worried about from time to time now I'm almost scared of an alien civilization discovering we exist and wanting to destroy us and make sure they don't find out about us who is an underrated figure from pre 20th century world history I guess Abraham Lincoln isn't a reasonable answer he's probably correctly rated certainly
important certainly highly rated I don't have a great answer for you what's your favorite movie might be something conf conventional like Blade Runner but I'm really partial to a romantic comedy called kiss me stupid that I once saw at the Brattle had never heard of it walked in there and found it just so delightfully Pleasant fun and I've watched it probably twice since then it's made me happy every time I've seen
it which is the best Matt Damon movie he was your college roommate correct he he was my he was my college roommate um I was you know when I saw him in the uh John Grisham one that he was in the rain maker I think it was that was his first super successful one um he the day I met him in college when he showed up at College told me he wanted to be a movie star told me he was going to be a movie star he was completely confident of it and I cried
at the end of that movie when I saw that he had achieved you know his dream and his plan if you're recommending an Africa trip for someone where do you tell them to go I did a six we honeymoon in Africa started in Cape Town ended up on a island off the coast of Tanzania and climb M uh off the coast of Zanzibar actually um small island off the coast of zanbar and climb Mount kilamanjaro in between those two so I think that's what anyone
should do that's the trip to do are you up for a few questions about money and finance sure these are again easy ones should we allow Banking and commerce to mix in the US as is done in many other countries I don't see any large benefit to allowing that and on the precautionary principle I don't see any particular problem we'd be solving by allowing a greater mixture than we do why do you think it evolves in so many
other places so China now has it right to a major extent I'm not sure what those efficiencies are some of them may be rent capture but we see it so many times including in the us when we allow it uh why isn't the presumption to allow it banks will be bigger more Diversified safer lower cost of capital yep I don't have conviction on this so I'd be open to changing my mind which macro indicators do you think are now not so meaningful
anymore GDP could be more meaningful if we measured it better the inflation rate gets harder and harder to measure over time so I think the one that probably has deteriorated in meaningfulness is the measure of inflation number one we don't measure it well and number number two it's sort of low enough that it's hard to get that excited about it and is that a a quality of goods problem or how we do chaining over time or where are we going wrong
and measuring the inflation more and more of the economy is in areas that are harder to measure the quality of like Health Care being the most notorious how productive is health care so you know the old Ran study from the 1970s that's an old study but you give people more Health Care only the poorest people end up being healthy Christian Scientists Amish who don't use much health care at least their life
expectancy is still quite High sort of what percent capacity do you think our Healthcare sector is operating at certainly if you look at differences in mortality differences in health outcomes Behavior genetics social environment I think all matter a lot more than health care it's much easier to know how to change health care though than it is to know know how to change all of those others so I think at the margin we might have more gains that
we're able to make in healthcare even if I agree with you I don't think that's the number one factor in health what do you think is the promising future direction for fintech I think that's a great place where you know more
competition and more choices I'm fine with the big tech companies entering it I think that would be a good thing but as long as we put some of the rules in place up front I'd love to see some smaller ones and just you know the fact
that payments aren't simple and free for anyone anywhere in the world between anyone else and anyone else in the world to me seems like the lowest hanging fruit for billions of people and something that we should fully be able to solve in the near future our last conversation was with Reed Hoffman and he suggested that highered in the US now is operating maybe at 30% of possible capacity or Effectiveness and I think he
meant the good schools not the Community College gone wrong or something uh what's your response to that and what Improvement do you think we should make if any yeah the hard thing is that there's so little that we have evidence on I co-taught the introductory economics course at Harvard um this with daveon with David labson um this past semester we did micro next semester we're doing macro we have over 600 students we put a
huge amount of effort into rethinking the course how we taught the course what we were teaching in the course how we did assignments how we um assessed people what we expected them to know and we did all of that with frankly
less sort of randomized trial rigorous evidence than I would do on most of the public policy questions that I work on because it's simply not there we used an awful lot of judgment I talk to different people um I asked you your
opinion of this question um I think what we did was was good but that there's some other thing we could have done in terms of changing how we do the lectures how we do the assignments that would be even better that it's right next to us and that I don't realize it because the evidence is there um I'm painfully open to that possibility myself and and would you know love to know so um the observation that we're operating at 30%
capacity that's probably true but that's only useful if you can tell me what I need to do to get to 50 or 100 and I don't know where to find that information but just taking that one class SEC 10 now that you've taught it
what don't other people teach enough of in that class one thing that I think David lebson and I I hope did very well and certainly tried very hard to do and and seemed to be something the students appreciated was convey our enthusiasm
and excitement for economics in David laon's case conveyed that enthusiasm for how many different things in your own life it helps you to think about decision making under uncertainty if you enter an auction if you're dealing with splitting a bill with your roommate deciding whether to do your homework in my case I think I brought more excitement to the questions about public policy we talked about tax policy
Health policy climate and the like so I think one thing we did hopefully was teach students but another thing is tell them here's this whole area of knowledge that can help you in so many different ways that you might not have realized
you may want to not just pay attention in our class um but maybe even keep learning about it in you know the many different ways you can learn about economics and what what should instructors try to do to ensure that
students remember the content they've been taught and in some way however broadly apply it use it vote on it I did read There is a literature on economic pedagogy and the scariest paper I read in that literature I can't remember who it was by compared performance on a test a year after an economics class people who had taken the class to people who hadn't asking them questions like you know what's the opportunity cost and the two
groups performed quite similarly so that is certainly my biggest objective is to have students who in my class most of them aren't going to take another economics class so that when they're dealing with an issue 15 20 years from now they're thinking to some of the ideas we talk to them that's my highest and most important objective and that's the hardest one to be sure you've accomplished or even know how to evaluate whether or not you have
accomplished you've co-authored a paper on corporate income tax with Robert J Barrow and you any disagree within the context of the paper should more people do this more than one voice in a paper absolutely what did you learn from that experience well first of all we started that paper the goal was largely to estimate the the economic effects of the 2017 tax law and we had a number of conversations we agreed on the general
modeling approach and we said you know what we're going to do we may reach two different sets of Point estimates and if we have two sets of Point estimates we're going to put them together in a table and there's going to be a crosswalk so you can see what assumptions I used what assumptions Robert used in the course of writing that paper we converged and we ended up having quite similar views on the causal question of what the impact of this law
would be we then evaluated the law quite differently so the body of the paper we intended to actually have different voices but we ended up having a pretty unified voice when it came to the conclusion and what inferences we drew from all of this um we had very different voices um but I would love to see more people paired up you know take inequality you know force people who have two different sets of numbers to
write a paper ER together so we can have something that you know we can reliably understand as the truth on the issue or alternatively understand you know what the what those differences are yeah I'd love to see more of that I will close
with a few questions about what I call the Jason firm in production function who was your first Mentor ever I can't think remember that far past um high school but we had a geometry teacher at my high school named
Mr Sturm who just the level of rigor he brought to proofs and thinking was something that I learned a huge amount from and what was special about you in high school intellectually obviously you were smart but what set you apart what did you do that was different I mostly did what I wanted to do and not what I was told to do so if I wasn't interested in a subject I did very very little on it and if I like something I would read
you know 12 other books that no one told us to read on the topic um I remember when in the um Harvard application they had a you list all the books you'd read in the last year I wrote down that list and then I was so terrified they would think that I was a liar that I end up that I ended up cutting that list in half less they would think I was I was making things up you are to this day a prolific book reviewer on Goodreads why
do those out of habit or why choose Goodreads for your reviews uh I think Goodreads is the third platform I've been on more people are on that platform than others so that's why I'm there I actually don't even particularly love
the platform but it's where other people are I started the reviews for myself just to remember what I thought about a book and why I thought it and you know now there's a few people that are reading my Goodreads reviews but I still
rarely spend more than half an hour on um any one of them and for me I'm always trying to discover I think a little bit like you Tyler although presumably much lesser version of you really omniferous and read in a a lot of different genres within fiction and non-fiction always trying to find new things and um you know good reads I've gotten to know if it's you know young adult fantasy it needs to have at least a 4.5 or above or
you shouldn't read it but it's not like I'd not read Madame bovery because it got 3.7 because a bunch of you know college students were mad they were assigned it now let let me try a very embarrassing question on you I sometimes tell people I think that along a particular Dimension which I can't quite myself Define that I think you are the greatest Economist in the world a particular kind of policy Economist I guess but if you
had to describe what you think is the dimension of Economist where you are the best how would you put it economists who have been chair of the Council of economic advisors and read everything that Charles Dickens has ever written um but I'm I I I yeah I think you're kind ER about me than I would be frankly but through some kind of mix of breadth and being analytical and knowing facts and theories about different areas and
having real world experience but being focused on policy not writing a column not I mean you've done a lot of published academic research but it's not the focus of your life right the way it is been for say Jo diglets and his
earlier years and along that Dimension who's better than you seriously I I'm embarrassing you I I I don't yeah I think you're honestly think you are embarrassing me I think this isn't the way I'd think about myself I certainly
the embarrassing it's certainly the case for any human being that if you draw the criteria narrowly enough you can have a set of people that includes just one and they can be the very best in that set and is it harder to produce Jason Ferman today through the academic process and is that something we should regret I have grad students that come to me and say they love my career trajectory how do they have it and I don't know what to
answer them because what I've done has been pretty idiosyncratic I don't know that it would work out for you know even one out of 10 other people that tried it you know presumably a bunch luck circumstances um Etc so I think it's always been hard to have this I think maybe a little bit harder now because the think tanks tend to be more tribal more part of and so there may be a bit less of a space for you know just wanting to think what
you want to think as opposed to being useful in the short term and what's that key idiosyncratic move you made or was done to you that enabled it to work for you I mean I didn't intend to go into public policy I ended up almost
accidentally at the Council of economic advisers in the middle of grad school I discovered I liked it and ended up staying in government longer than I expected but you know there probably been a dozen things from Joe stiglets
calling and asking me to come to the Council of economic advisors to you know something that happened yesterday and last question if you've read all the Dickens novels which one is your favorite and why Bleak House for sure I love that you have a woman's voice in it um Esther summerson I love the huge number of you know every Dickens thing you can imagine um is in that book you know villains you know heroins you know uh
Scoundrels you you have a little murder mystery right in the middle of it a Police Inspector um so I think that book contains everything on this we fully agree Jason Ferman thank you very much thank you thanks for listening to
conversations with Tyler you can subscribe to the podcast in iTunes Stitcher or your favorite podcast app and if you like this podcast please consider rating it on iTunes and leaving a review this helps other people find the [Music] show