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so we have with us today Raj chedy of Stanford University and I think of Raj actually as the single most influential Economist in the world today and we'll get to why that is I'd like to go through a kind of Arc of Raj's life and research career and uh as I take it from
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your last name am I correct in thinking your family was part of the toml dispor diaspora that moved then to New Delhi and what's the story behind that that's right and thanks Tyler for having me pleasure to be here um so my last name
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cheddy actually is the name of a business cast in India the chettiars and uh my family's originally from Tamil Nadu and I grew up I was born in New Delhi India so my parents had actually come to the US and then gone back to India and were in New Delhi uh when I
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was born so there's a quotation by your mother in an interview with her she's a a well-known pulmonologist and she said quote by the time my children were older I felt education in the US was better and hence decided to move there do you
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in a sense think of you Raj chedy as as writing about yourself the papers on Mobility importance of physical environment I mean is this you you're writing about yes in many ways I feel like my interest in the topic and a lot of what the data shows Bears out my own
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personal experience so actually going back even from my own experience in my family going back to a previous generation uh to my parents yes uh my parents both grew up in large families in Indian Villages and as you might know what was common in developing countries
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at that time was to to pick one child to educate because most families didn't enough didn't have enough money to educate all of their kids and so it so happened to be the case that my mom was the one chosen to get higher education
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in her family and my dad was chosen to get a higher education in his family uh and I see through the generations the impact that that has had not just on their outcomes my mom's a physician my dad's a statistician and Economist um
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but on the subsequent generation with myself and my cousins the opportunity ities I've had I think were dramatically shaped by those decisions many generations ago and I've read online your grandfather was a close friend of Gandhi is that true yeah that's right so
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my grandfather whom I'm named after actually njin is my full name uh was a freedom fighter alongside Mahatma Gandhi and I had a lot of strong uh beliefs and principles that I share as well for instance uh the fact that my mom got an
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education was somewhat unusual at that time she was one of the first women to become a doctor in our community uh and so he believed very strongly in uh women's education and equal rights and so forth and when you were eight or nine you visited the Taj Mahal you had
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already I think moved to the US and then you went back and you visited the Taj Mahal and and this struck you in some way how would you describe that experience yeah so seeing the tajal you know is a striking experience in its own right uh because the monument is so
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Majestic but what struck me was the incredible contrast between the monument itself and what was outside which was one of the most impoverished areas in India and Agra and so just seeing the incredible contrast between the tourists
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and uh the the people who were begging for food basically outside from the tourists uh left a mark on me I think and I think back to that experiences wondering why things were so different on the inside versus the outside and
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that was a social justice feeling a problem solving puzzle solving feeling both or I what did you think at the time was the reason I think a bit of both I thought you know I don't think I fully understood the determinance of why people ended up in such different
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circumstances I certainly felt didn't seem very fair to me uh and so from a Justice perspective and also from the perspective of trying to think about ultimately how might you change something like that you know at that age I think I was too young to put those
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pieces together but experiences like that I think shaped the interest that I have today and in India how good was your kindergarten teacher so so I went to a a Catholic School actually in India my first few years and was a very strict school and
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what I remember is you had to learn all what school was this this was called St Columbus in New Delhi which I visited I think St Thomas and spoken there but yeah um and so it's the type of school where you know a lot of discipline you
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really had to do all of your multiplication tables and memorization and so forth and uh in so far as those kinds of non-cognitive skills something we see in our research discipline Focus things like that seem to be highly predictive of later
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outcomes perhaps that had a payoff so now let's fast forward to 1997 you're at University School of Milwaukee right that's right and Milwaukee in your later work you show to be a city where there's not a lot of upward Mobility uh it's a
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highly segregated City by income by race it's doing poorly on some social indicators what did you learn from those years you spent in Milwaukee you were quite young but if you're thinking about the Taj Mahal what was your thought about Milwaukee back then so I went to a
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an outstanding um college prep school private school in Milwaukee called the University School of Milwaukee and uh at the time I recognized the fact that the resources and opportunities we had at that school which was on something like
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150 acre campus on the north side of Milwaukee were extremely different from other schools that I visited which I happened to visit in the context of the chess team and other uh tennis team that I was on and so you'd see other schools and you'd see the vast difference
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in terms of how this private school looked relative to the Rel public schools and what the neighborhoods look like and so forth and you know it struck me even we lived on one side of the city and I'd take the bus through the entire
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city essentially to get to the school and so you could feel the degree of segregation which is one of the other things you know in our current work we see Milwaukee one of the most segregated cities you know those types of places tend to have the lowest levels of upward
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Mobility so I happen to be lucky and be on the other of the spectrum for kids and affluent families Milwaukee has as good outcomes as any city in the US uh and so my experience was very consistent with that and I think once again seeing
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those disparities made me wonder you know how much of where I will end up in life happens to be because of having the opportunity to go to this school as opposed to going to some other school within that City now your father he's a wellknown economist and uh he studied
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econometrics with Arnold zelner at University of Wisconsin at what age age did he start talking to you about bayy and econometrics which is one of his Fields right that's right so my dad is uh did a lot of early work in basan econometrics
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with Arnold zelner and uh um you know I think in the academic environment was something I grew up with since I was a kid I'm the last paper last person in my family to publish a paper um my sisters uh are also in in Academia in on the medical and bio side and um you know
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whether statistic or thinking about scientific questions or thinking about how to change things in the world that's the environment which I grew up from uh you know the the youngest of Ages my dad I remember brought home uh a computer from Belgium
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when I was three or four and I remember starting to learn how to do some simple basic programming on it at AG three or four that's amazing you know just trying to make like a simple input output things and a small game and so forth so
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you know that's the kind of environment I grew up in and even in high school you wrote a paper on time on the cross right the economics of slavery do you remember what you argued in that paper I think I remember I don't remember the details but I remember
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questioning the evidence um you know whether you could draw precise causal inferences but whether you could say given that data that the central thesis of time on the cross uh you know did that really seem to be valid or not I can't quite remember the details of my
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argument or um you know how rigorous it was I I'm sure I would poke holes in it myself given my uh current interest in data and in high school you also published a paper I believe on electron micro microscopy staining techniques and
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how did that come about um so when I was in high school I thought I'd become a biomedical scientist that's what I was interest like your mother in a like my mom and like my sisters I was really interested in things like biomedical engineering uh and so uh to get more
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experience with that I worked in a lab for a couple of years at the Medical College of Wisconsin when I was in high school and uh the the lab I happened to work in was an electron microscopy lab and they were developing staining techniques to identify different types
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of cells and so on that's the project I I was involved in I learned through that experience while you know that while science was fascinating and extremely important I was more excited about the statistical aspects of that work rather
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than the staining itself or the pipetting or the microscopy and I think that experience showed me that I was more interested in the number side uh thinking about social problems coming back to the earlier experiences we talked about and that kind of led me
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down a different path and then from your father you always knew economics was out there right yes and so now graduate school you go to Harvard and you're you're working with Martin feldstein I've long been of the opinion he's one
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of the very best and most underrated mentors in addition to being a great Economist himself but other than economics what is it he taught you that was of central important strategically or tactically or thinking about research well Marty was such an inspiring uh
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figure for me um in terms of the impact he's had on the profession the questions he was working on I think what struck me immediately was that the types of questions Marty asked and work on some of the most fundamental questions in
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economic policy and he didn't shy away from asking the big picture questions even it might even though it might be difficult to answer them perfectly and so what I think had a big impact on me and working with Marty is him giving me
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quite a bit of Independence even at a very early age so when I was a sophomore technically working for him as a research assistant he kind of said you know you seem to have a number of ideas let's talk about them rather than working on uh a specific project as an
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RA uh go work on the things you're interested in let's meet from time to time to to talk about your ideas and you know hearing that when you're 17 or 18 years old from somebody like Marty Falin is um builds a lot of confidence and was
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very inspiring so you were working with Marty when you were 17 yes that's right when I got to when I got to Harvard yeah now just a fast forward up to the present we'll go back to some of your earlier papers but Adam OIC who writes for Forbes he said a few months ago he
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was making predictions and he wrote on Twitter quote it has been months since Raj chedy unveiled some new really big results feels like we're due for a big one any day now and 3 days later you came out with the paper about the chance of you
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know rising up to be uh earning more money than your your parents were and here's my question we're at Silicon Valley where every every company asks you know what is their comparative advantage or what is the moat surrounding them that makes their
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position stronger and vulnerable so if we look at your papers they are about topics people have already thought about the day to work is completely state-of-the-art but I don't think it would be said you're doing something other people can't
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do and yet several times a year you come out with papers of great import that make a big splash and the results seem to hold up so what in fact is your competitive advantage that that's a tough question so um you know I think part of what we try
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to do is exactly as you said take old questions I think some of the most important questions in economics and social signs have not yet been fully answered and the recent availability of Big Data of various types allows us I think for the first time to tackle those
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classic questions what our research group tries to do I think is bring those two things together and use those both sound replicable right what's the non-replicable asset you know I think what hopefully our our contribution and
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scale is is showing how you can take those large data sets and kind of not get lost in them and bring out the the key lessons that are relevant for thinking about these classic questions so I think it's very easy students often
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have this reaction that you know all I need to do is get access to this big data set right and then I'm going to be all set for my thesis and what you end up finding is that that is often not the case it's very easy to write a paper that is not that good even with uh
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Cutting Edge data and modern techniques and so one of the things that I try to do and you know I think the easiest way to see this is if you internally within our research group see the iterations of the papers we've been working on where
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we start out is often very far away from the papers that people see as the as the finished product uh and so we work hard to try to write a paper that expost seems extremely simple oh it's obvious that that's the set of calculations you should have done so let me give you an
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example a concrete example in the context of the paper you just mentioned the one that came out I think after the that Twitter comment uh you mentioned where we look at the fading American dream and look at how children's chances of doing better than their parents have
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changed over time well it turns out when you dig into the details of that analysis in order to know if a child is doing better than their parents you you would think you need to have a data set where you see both the parents income
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and the kids income right now it turns out you don't have that data in the US going back to 1940 which is when we wanted to start our analysis in fact you only have that data uh starting really for kids born in the 1980s so the key
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conceptual idea of that paper was to figure out a way even though could not link parents and kids a statistical method of determining the fraction of kids doing better than their parents despite that data limitation and so I think often our conceptual advances are
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in the context of taking a big question using the best data that we can possibly get but then closing that Gap and trying to find creative methods and creative answers to to those old questions and you know executing um in the best way
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possible and making sure I think one thing I take pride in is the the conclusions we reach and the statements we we make we're quite confident in them so we're we take pride in the fact that subsequent studies do not end up showing oh you know there was some assumption
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made there that ends up being questionable or the data is not quite up to par Etc we're very careful on all those steps so if I'm trying to model the Raj chedy production function and I described it as such it's a kind of multiplicative model so there is getting
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the data but that's not the key Point that's not there's then some conceptual advance that allows you to see the data contest something that other people hadn't see and then there are numerous stages of execution and then there's
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also recruiting and managing the team and it's that there's a whole bunch of different steps and you're trying to do well at each of them and very few other people can do well at each and every one and maybe that's the way to think about
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your Moote is that fair to say that is our that is our strategy I think the other thing that's extremely important is we spend a lot of time uh on trying to achieve Clarity so I think there are ways to write papers in economics that are more accessible to the public and
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more thereby have greater impact and there are ways to write papers that are kind of more technically oriented and narrow the the set of readers uh and how did you learn the focus on Clarity that's just something you know I think
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coming from a science background um from childhood I've really appreciated the clarity for instance of scientific experiments where you can just say with Precision that this is what we think happen when you change something and so um you know having that interest from a
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young age I want to be able to explain my findings to my parents or my wife who's a um neuroscientist and so forth and so uh that type of focus I think is something that distinguishes our research group um and I think just trying to think in innovative ways about
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problems that people have worked on in the past so for instance there's been a lot of work on neighborhood effects for 30 years our group by no means is the first to think about neighborhood effects where we've tried to you know
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push forward a little bit is thinking about the mechanisms through which neighborhoods affect kids and showing that in particular every year of exposure during childhood seems really critical of something that struck us as
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being an intuitive hypothesis but then figuring out how to document that clearly in the data and that has led the field to be able to now look at neighborhoods in a very different way than people were looking at in the past we'll get back to that paper but let's
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briefly talk about two of your you know earliest hit papers that are still I think your two most heavily cited papers and the first one of those is on salience of taxes and prices so one of the results in this paper and there's more to it than this but consumers are
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less discouraged by the price when the price takes the form of a sales tax added on rather than when the price is embedded in a single net total price up front correct that's right and you still like that paper yes I still I still like
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it and there have been plenty of follow-ups studies verifying that result so I'm happy to see that now let me ask you people from Europe often when they come to the United States they say why is it that you charge prices this way they feel irritated consumers here don't
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feel irritated they're in an equilibrium where you just pay the price you see and we're in an equilibrium where the sales tax is almost always added on what accounts for that difference in terms of salience or other factors what accounts
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for the difference in how people are reacting Europe versus United States but Europe does it where there's no add-on yeah um so are you asking what accounts for the difference and why why does Europe do it differently from the US or
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why do Europeans react differently than Americans well both this should be it would seem if you would think suppliers would favor the add-on yeah well the suppliers definitely favor the add-on I mean I think the nature of the value added tax in Europe uh which is levied
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at various parts of the production process makes it a little bit more difficult or combersome to Levy the tax as an add-on at the end it's not that you can't do it but just when you think about the mechanics of it it's more
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natur to build it in along the way in the US we have a sales tax as opposed to a value added tax so you can see why it might be natural to just added at the end um what uh you know I think producers correctly recognize uh companies recognize that when the tax is
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added at the end it's in their favor because consumers don't cut back on demand as much as if the tax was included in the price and that would force companies to basically cut prices and bear some of the costs of the tax uh so you know this
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paper the coming back to your earlier question the way I started thinking about it is just um walking around in the real world if you think about how people react to taxes economists like to make the assumption that everybody pays attention to every tax in the economy
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right uh and my sense from just having conversations with friends is that in fact people have no idea on a day-to-day basis about what the tax rates are actually paying are uh and so I thought about okay how can we take take that
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disconnect and um just ask in the simplest possible context a sales tax what could be simpler than that it's much simpler than an income tax for example um you know are people even reacting rationally so to speak to the sales tax and you end up finding that
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that they're not would it make sense for suppliers to shove the sales tax into the price and then have their own add-on which would vary I mean in equilibrium can the suppliers do better by tricking customers more by having additional
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shrouding but not wanting to be determined by the sales tax why are we in this funny equilibrium where it's always by the percent of the sales tax yeah so I I don't think sales taxes are the only attribute that are shrouded there are plenty of other fees you pay
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for example think about Airline fees or cell phone fees often there will be a set of sear Chargers that you pay after the initial quoted price or when you're renting a car or when you're um you know looking at hotel room prices and so
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sales taxes are I think one of many examples like that and you know companies not wanting to include the sales tax is just an example of how they don't want to include other prices as well another classic example is printers and the toner cartridges you make the
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printer relatively cheap but the toner cartridg is quite expensive do you believe the macro micro literature seeming to show that retail prices are quite sticky there can be demand shocks and maybe for 18 months or longer that
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price won't adjust in nominal terms do you think that's actually what's happening yeah I mean I think there's pretty good evidence that companies don't change their nominal prices that often whether that's literally because of menu costs or some other sort of
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inertia I don't know but I think that evidence is there a salian story like does can your work help explain this it seems it can't be menu costs anymore not here in silic Valley at least yeah but it could be menu cost kind of more
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broadly WR in the sense of it takes time to think about optimal pricing strategies and you know reoptimizing that problem every single day devoting labor to that might not be the efficient thing to do could it be about salience I that's an interesting question I mean I
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think uh perhaps although I would think the salience model would push you towards wanting to change prices more in some ways because if consumers aren't paying attention in essence you're facing an inelastic demand curve in the short run and so you might want to catch
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them by surprise and occasionally have higher prices or lower prices I actually think sales have a lot to do with salience you know if you think about all those tags you see at the store it's not so much the dollar price reduction it's
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the fact that the thing says it's on sale I think that attracts people's attention and makes them want to buy I always tell my wife to ignore this if something's always on sale but for her it's Salient now another of your famous early papers was on corporations paying
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dividends and yours is one of the first pieces I think it's from 2003 where you show there's more rationality to the dividend process than we used to think so if I think of of what I learned in graduate school about dividends this was before some of the
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later tax reforms it seemed at the time there was no good reason to pay dividends at all or at least there was no good reason to pay dividends and have the firm raise new funds through the Capital Market at the same time that was like the more General
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Paradox uh now your paper shows that changes in dividends can be explained quite well but do you think especially in those earlier years before tax reform that the existence of dividends at all is a puzzle either statically or in the
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time series or do you feel that also makes sense I think the existence of dividends itself is a bit of a puzzle and our paper which shows that changes in tax rates affect the amount of dividends firms pay out uh doesn't fully address that puzzle so in particular in
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the point you're alluding to is that you would think it's more effective to repurchase shares and effectively return money to shareholders or do or do nothing uh thereby avoiding the dividend tax and just paying the capital gain
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Stacks um in practice companies pay dividends there have been explanations put forth which I think are plausible for instance you you need to constrain managers the amount of capital managers have on hand because otherwise there's a
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tendency to Empire build and invest in projects that aren't as efficient from the shareholders perspective as you might otherwise like and dividends for some reason are viewed as kind of a commitment if I'm going to start paying a dividend I'm going to keep paying that
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dividend if I choose to cut it back it's usually a negative very negative signal that a firm is sending and so that kind of forces managers to pay out money which could be efficient from a shareholders point of view if you think managers don't have the right incentives
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but that's maybe why the real puzzle is not dividends per se but the mix of dividends and managers who raise funds at the same time yeah it seems you're pulling in with one hand taking out with the other and paying a net price and a
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net cash position would seem to be some kind of Arbitrage loss because you're paying more tax than you need to I do think you can explain it though by um you know temporary needs for cash which make you want to raise Equity but
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then wanting to have a steady commitment to pay that money back signaling to shareholders you know you're not just trying to collect money in order to invest in some Pet Project or buy a private jet you have a commitment to actually delivering a return and paying
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back the dividends and what we found in that paper is that the sense in which there's some rationality here is that managers who own a larger fraction of shares and thereby have interests that are more aligned with sharehold ERS they tend to pay more dividends exactly as
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you might think now one of your best known papers series of papers is on the value of kindergarten teachers so let me ask you a few questions about this uh the result seems to have held up really quite well even though some people were skeptical
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to begin with and I'm interested in what the mechanism is so as you know much better than I do there's a lot of measures of teacher quality that don't seem to affect future earnings of the children in kindergarten class and the
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one measure that does matter is if the teacher has been teaching for more than 10 years and if that's the case again oversimplifying it's possible that's worth as much as a quarter million dollars a year in value for this typical kindergarten class if they have a
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teacher with more than 10 years of experience but the other measures of that teacher quality don't matter and the results you get measuring those children in grades 1 two and three they don't seem to be doing better because they had the kindergarten
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teacher with more experience so in terms of what's really going on in those numbers what do you think is the best story for the chedy result well if I can add one bit of nuance there so experience seems to matter but then the other thing more generally I would say
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is a strong predictor of teacher qualities so-called value added measures which are based on test scores so teachers impacts on students test scores if they rais their students test scores a lot we'd call them a high value out a
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teacher if they reduce their students test scores on average we'd call them a low value added teacher and these value added measures along with experience seem to be pretty strong predictors of of students later success now as you noted what is quite puzzling and
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surprising about this result uh is that prior studies and our own work shows that if you look at intermediate outcomes like test scores and later grades you don't find much of an impact but the impact reemerges when kids become adults so you know why is it that
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you see this kind of puzzling pattern of effects that disappear and then reappear in adulthood so our best hypothesis is that what's going on is that the teacher is not teaching you skills that end up showing up on later tests so it's not so
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much that they're teaching you how to do math better or teaching you trigonometry or something in later grades rather it's that they are teaching you things like discipline and social skills and other things that are valued in the labor
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market directly so but it doesn't help you on second grade test that yeah that does so you know in something like discipline that seems a little bit odd but take social skills for example so suppose the kindergarten teacher um helps you get a higher test score in
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kindergarten but in the process of doing so she's also a teacher who's able to manage the classroom effectively and help kids get along with each other all right so now getting along with somebody else is probably quite valuable in the
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labor market however it's not not necessarily going to have a direct payoff in terms of helping you do better on your third grade test now this is a bit of conjecture I don't know whether that's exactly the mechanism but what I can tell you is what does seem to
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persist are these gains in terms of students non-cognitive skills so there are subsequent surveys which in the context of the study we did of 12,000 kids in Tennessee um they assessed these children's uh ability to get along with
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other kids their ability to sit still you know various non-cognitive measures and you see that if you were in a better kindergarten classroom you're doing better on all of those non-cognitive Dimensions even though your academic performance is no longer better so that
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is suggestive evidence that that's the type of mechanism that matters here the teacher mattering after only 10 years of experience that to me also seems counterintuitive so I would think it normal if teachers needed a few years to learn how to teach but I almost would
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think their skills would Peak like years three through seven and after that there's a bit of burnout like oh my goodness these kindergarten kids I can't take it anymore more uh that somehow years seven through nine they're like the immature
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teachers sorry sorry let me let me clarify there that is in fact the in a subsequent study that's actually the the pattern you see in the data so it's the first couple of years of experience that matter the most so novice teachers don't
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do as well as slightly more experienced teachers but then you see essentially a flat profile the above below 10 that you're referring to in this earlier kindergarten star paper right was just a simple 5050 split of the data which when you have a smaller data set when you're
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running an experiment that's the most natural way to maximize statistical power and split the data in a subsequent study where we study all children in the New York City School District and we have 2 and a half million observations
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instead of 12,000 you start to see that it is indeed the first two years that matter the most so do you think this means it makes sense to pay teachers on some kind of seniority basis no actually so I think um paying teachers who are more experienced a bit
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more can make sense you know the novice teachers versus teachers who have two or three years of experience however the current system of pay essentially is a function of uh of entirely of experience so the more experience you have if you
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have 5 years or seven years or 10 years or 15 years your pay continuously goes up your pay does not depend in any way on any measure of performance and so as I was saying earlier while experience is one predictor of teachers impact in a way a much more important predictor
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are these value added or other types of measures of performance and I think tying pay or bonuses or efforts to retain teachers to Performance measures whether they're test score-based value added measures or principal ratings or
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something else is quite sensible and that is not something that's currently done in most us school systems it's a common view heard anecdotally though I've never seen ATT tested that kindergarten teaching in this country became much worse one smart women had
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better labor market opportunities uh do you think that's true yes and so that also might reflect that you know the earlier finding where we have find that teachers who had 10 or more years of experience seem to be better teachers they're also coming from an earlier
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cohort right relative to the teachers who have less experience who are uh becoming teachers more recently and so one of the things you see from other uh other research is some evidence that the quality teachers and earlier cohorts uh
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where women were more likely to go into teaching high-skilled women was much higher so I think that's plausible if we're trying to separate out the influence of environment on children young children what's your opinion of
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twin studies so there's plenty of studies of genetically identical twins but due to adoption they're raised in different families and then you can look at them down the line and see where they're similar see where they're different and if I understand those
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papers correctly they seem to suggest the environment doesn't matter all that much are you convinced by those or do you feel that's somehow a select sample of people we're looking at and it's not an indicative result more generally well
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there are a number of twin studies which show that um there are significant differences in kids outcomes uh depending upon the conditions in which they were raised but you can wreck them easily but if they're both incent families they seem to do more or less
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the same yeah I mean to me the most convincing piece of evidence along those lines is studies of adopted kids actually which directly try to assess the effects of environments I'm less a fan of the twin studies because I feel like you don't have a clear sense of why
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one twin ends up in a certain condition versus another twin you don't have an experiment there you don't know what's driving that variation in contrast there's some very nice work by Bruce sassot an economist at Dartmouth looking
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at Korean adopte kids who were effectively randomly assigned to families because of quirks and uh ordering of of families applications and so forth and he shows I think very convincing evidence that if you happen to be an adopted kid who ends up in a
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family that's more educated more affluent so forth you do substantially better in adulthood than if you end up randomly assigned to a less educated less affluent family living in a worse neighborhood so I think that's really clear evidence that conditional on
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genetics environment really matters it's a common view derives from William bmel and Bowen that education is subject to a kind of cost disease that it's harder and harder to augment productivity wages rise in other sectors of the economy education takes a rising
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share of GDP but doesn't really get much better do you accept that story or if not how would you modify it are we doomed to low productivity growth in K through2 education I don't think so because I think uh you know while in some limiting
34:26
case that might end up being true at the moment I see so many opportunities within uh the US K through2 education system to potentially have significantly higher productivity without dramatically higher costs so let me give you an example coming back to the case of
34:41
teachers my sense is if we were to try to keep the most effective teachers in the classroom and either retrain or dismiss the teachers who are less effective we could substantially increase productivity without significantly increasing costs but say
34:58
we do that what do we do next yeah I mean I think eventually it's conceivable that you know you move up the quality ladder and so you've got everybody getting a very good primary school education then you need to work on secondary education and so forth But
35:13
there again I would say there are lots of Bargains to be found in our most recent work looking at colleges and upward Mobility we we see that there are a number of colleges where kids seem to be doing extremely well that are not all
35:24
that expensive also I think here macroeconomic perspective is useful if you look at countries that have some of the best educational outcomes like Scandinavian countries they're not actually spending dramatically more than the United States so at some abstract
35:39
level I think that logic has to be right that eventually in order to raise the level of Education uh Beyond some point we're going to have to spend more and more on that but I don't think we're close enough empirically to such a point that
35:54
that is really a critical consideration at the moment some people I know who studied the Finnish system and who also know the South Korean and Singaporean systems claim that simply giving teachers a higher status especially in
36:06
smaller economies that may not have quite the opportunities that smart people would have in the United States has a big value added to K through2 education what's your opinion of that yeah I think status seems incredibly important the my sense of the K through2
36:20
education system in the US is unfortunately for many kids graduating from top colleges teaching is not not near the top of the list of professions that they'd consider and I think it's partly because in a sense they can't afford to be teachers because it entails
36:33
such a pay cut but also because they feel that it's not the most prestigious career to pursue so one example of that that I think illustrates that point is take the Teach for America program Teach for America is incredibly successful in
36:46
getting very talented kids to go into teaching at least for a short time I think the issue with Teach for America is those kids tend not to stay in teaching after a couple of years now what I think is striking about Teach for America I think the reason it's so
36:59
effective in attracting top talent is precisely because it's very difficult to get into Teach for America I think kids at top institutions like to do things that are hard to do basically it's like a gif and good the more the yeah it's more of a signal then
37:15
some European systems such as Germany they have much more extreme forms of tracking than we do so you get put on a non- Col track you're evaluated early what's your opinion of those systems my feelings too much tracking at an early
37:29
age is detrimental because uh children Bounce Around test score measures are imperfect there's no way you can perfectly gauge a person's trajectory at a very young age however I think there are some exceptions to that so at the very upper end of the distribution
37:44
gifted and talented programs I think there's good evidence suggesting that they can be extremely effective in promoting those kids uh learning and getting them on a path to be kind of the superstars in the econ economy who are starting the new companies discovering
37:59
the new drugs and so forth so while I would not Advocate tracking you know at the broadest level across 95% of the distribution I think there can be a role at the very top to give attention to to gifted and talented kids especially I
38:14
would say from disadvantaged backgrounds where often you don't have the stimulation and the resources if you're very smart kid at an early age is there attention here with your own work because part of what you're doing is trying to explain or you could almost
38:27
say predict the mobility children will experience and that's fairly well predicted we might think it's wrong that it can be predicted as well as it is but people actually don't move to better neighborhoods as often as we would like
38:41
and isn't in a sense that work potentially IR rationale for tracking not in normative this isn't the way the whole world should look but in the sense of we can identify these children run them through the cheddy equations and
38:54
then track them yes no uh to some extent but that's why I was emphasizing the upper taale I'm not convinced we can actually identify these children you know in terms of their potential outcomes at a very early age with a great deal of accuracy I think there's
39:09
some predictive power you can explain maybe a quarter of the variation that you'd see in adulthood with Early Childhood test scores and things like that they're certainly strong predictors but by no means are they kind of they don't get tell you your fate there's
39:23
lots of variation even conditional on how well you're doing or early in childhood and so I think it's important to to recognize that and not kind of condemn people to different tracks uh purely based on how they're doing it at the earliest ages again with the
39:39
possible exception of kids in the upper tale where I think it requires a lot of investment to get children to the point where they're going to be highly productive members of society having positive spillovers on others and so there's a rationale to potentially
39:52
invest there what's the most memorable thing a k through2 teacher did for you well I remember in high school uh being influenced by a number of teachers one anecdote that comes to mind off the top of my head in the context of this
40:05
conversation is uh a history teacher I had who taught an economics class in my high school um and he said uh you know Raj one day you're going to be on the Federal Reserve board and I remember thinking to myself there's no way because I'm going to do biomedical
40:22
science you know the this teacher clearly doesn't know my interests uh and I look back upon that and think wow he must have thought that I would be good at economics or interested in economics or something now there's a segment in all of these conversations in
40:37
the middle it's called overrated or underrated and I'll toss out a thing a name or something and you feel free to tell us if you think it's overrated or underrated and you're free to pass on any of these of course uh first would be
40:49
that the mozard of Madras AR Ramen uh the Indian musician overrated or underrated i' say underrated why uh I think he's had a huge influence on Indian music and bringing it to the Western World in particular uh and I think he um I like his music very much
41:05
and and what about it speaks to you what about it speaks to me I think just the combination of eastern and western influences on music uh where there's more of a um a beat basically in in western music than in traditional uh
41:23
tummel and carotic music and a RM really was the person who saw how to bring those together many westerners know Bollywood but toml Cinema actually produces quite a few films overrated or underrated overrated in my view why uh because there tends to be very little
41:41
Variety in uh in what those movies are about at least traditionally that is there you know it's typically about uh somebody it's typically about marriage that's what a lot of these movies revolve around and arrang marriages and kids not wanting to have a particular
41:58
arranged marriage and then ending up in a different situation there's a kind of a recipe to a lot of those movies given your work on mobility and all the data you've looked at what do you feel is the most underrated state in the United
42:12
States um Utah Utah why well Salt Lake City Utah is maybe not a place you'd think of as the having the most vibrant economy and so forth but it's a terrific place for Upward Mobility it always shows up in the top of our data in terms
42:28
of rates of upward Mobility uh Health outcomes lots of different dimensions um maybe it makes sense expost when you think about things like the community and the Mormon church and so forth but certainly exanti going into it if you had asked me where do you think the
42:45
place with the highest upward Mobility is going to be I would not have said Utah I've often argued more Mormonism would be good for this country and good for the middle class uh a tool goand and indeed uh your mother I think actually
42:58
endorsed this idea in in an interview the notion that you get things done by having a checklist and checking them off as a way of being more productive overrated or underrated underrated why uh checklists I think are incredibly useful to stay
43:15
organized and solve complex problems I think you need the way to make progress on complex research problems for example is to divide them into smaller manageable problems and then go down a list and solve that checklist in music the group The Piano
43:32
Guys speaking of Mormons overrated or underrated underrated The Piano Guys uh I think the piano guys are are great in terms of doing Renditions of popular songs and uh not too triumphalist too many major chords maybe in some cases but I like them uh bindii
43:52
or okra overrated or underrated underrated at I'm also a fan what's the best way to cook it uh there are many tummel preparations of okra it's a popular dish supposedly it's supposed to make you smarter so I had a lot of okra
44:07
when I was a kid trying trying to get that so let's say a friend of yours non-indian is going to make a trip to India maybe they've even been there before and they ask you where should I go other than the obious sites Taj Mahal Mumbai plenty of obvious things they
44:24
might do but they want a tip from you about how to better appreciate understand see India What place would you recommend to them and what Insight would you package along with that recommendation I would say the South I
44:36
think most uh westerners perception of India is based on North India Taj Mahal Delhi augra so forth uh but going to places in Tamil Nadu going to places in cartica increasingly you know if you think about Silicon Valley the corresponding place in India is in
44:54
Hyderabad and the the tech sector there um if I were to pick a specific place the area where I'm from there's a city called mother in tamilnadu which is a typical uh tamon City and you kind of get a I think a very different feel for
45:10
what India is relative to the relative to what you'd see in Delhi and I think what is striking is that India is really like a combination of many different countries with completely distinct languages completely different food uh culture and customs and so forth and so
45:24
what I would suggest is visiting at least two or three different states so you can see the diversity in the country chai is actually my favorite Indian city it may please you to know so I agree with that as you probably know in in the
45:37
history of South India there's this long-standing tradition of mathematical prodigies and your work isn't exactly mathematical but broadly speaking of course it is and why is it you think there's this connection between South India and this history of mathematical
45:53
prodigies do you have any thoughts on that is it something about the abstract nature of the philosophical thinking embedded inm yes it could be I mean the name that comes to mind most prominently is ramanin the man who knew Infinity um and
46:10
uh I think that type of thinking is maybe encouraged there's you know once you have kind of a tradition of people in that vein I remember hearing a lot about ramanin you know since I was a little kid and so you look up to to that kind of thing and maybe that influences uh
46:31
subsequent generations of children as well I think that kind of mechanism is actually extremely important in terms of what children choose to do there are a number of writers as you know who've tackled the highly diverse indian-american experience one of them
46:45
is jumo Airi who's actually been a guest on this podcast series but of that whole literature who or what in it speaks to you the most given that you have your grow Indian amican history yeah there are you know a bunch of books that I think broadly focus on
47:05
integration of Indians in Western society and you know what that entails and you know how different is America from India I think what speaks to me is um that there are you know obviously quite significant differences between the two cultur
47:27
but uh you know the experience I've had is that America has been an incredibly welcoming place since I was a kid when I first came to the United States it took some time to adjust as it would for any child coming from a completely different
47:39
background but I found uh on the whole Americans to be very interested in um Indian culture and to be very welcoming and I I guess you know that's the experience I've had I know other people have had you know different experiences but to me that you know that's the main
47:57
thing I think of in 1969 your father published a pretty well-known piece in the American e Economic Review called on measuring The Nearness of near monies and it implies there are a lot of close substitutes for monies so in light of
48:12
this given that India has recently tried a demonetization which has been highly controversial the Indian demonetization would you say underrated or overrated I'll have to pass because I don't know I don't have a good sense let's go now to some of your
48:30
research on Mobility which is maybe at this moment what you're best known for uh so you can identify counties or parts of the United States where Mobility for Generations is going to be especially High to what extent do you think that's picking up that simply some
48:49
of those regions end up with resource booms or other good events that is in a sense just random it doesn't per se have to do with the region or do you think we can adjust for that yeah so you know some of what drives upward mobility of
49:05
course is just having a very vibrant economy so to give you an example parts of North Dakota uh with the natural resource boom there we see is having very high upward mobility of course if you discover natural resources that's going to help more people move up the
49:19
income distribution but by and large that is the exception rather than the key driver of the difference as an upward Mobility that we find across places and I say that for a couple of reasons first uh even if you hold fixed the rate of growth the rate of economic
49:35
growth you find that some places have much higher rates of upward Mobility than others so to give you an example Atlanta is a city that's booming in terms of uh jobs and economic growth overall but Atlanta is one of the places
49:47
with the lowest levels of upward Mobility for kids growing up and low-income families there the second thing you see is these rates of upward Mobility to the extent we have data they tend to be quite persistent over time it's not like the places that have high
50:00
upward mobility in one decade suddenly have very low upward mobility in the next decade it's a pretty persistent phenomenon you know I think a striking example of that is um states in the middle of the US like Iowa for example
50:13
which historical data going back to work by Claudia golden and Larry cats has always looked like a place with very good outcomes for kids and lower income families and what's amazing about that is Iowa suffers from kind of a brain drain phenomenon where the most uh
50:29
successful people often end up leaving the state going to Chicago going to New York to get higher paying jobs yet generation after generation Iowa seems to produce very good outcomes for low-income families so that again suggests it's not about natural
50:44
resources or temporary booms it's something more persistent and getting back to the kindergarten teacher question so of the the physical mechanism as it operates through Geographic space what does Iowa do to you so to speak yeah what if you told a story about
51:01
molecules impinging on your body and impelling you to action what's the best story you can come up with for Iowa say or Utah yeah you know a few different things so Iowa is known for having very good public schools for a long time but
51:14
that too is arguably just part of the package yes so you know where did that you mean where did that come from why does Iowa have good Public Schools yeah you know one of the one of the strong correlates we find is that places that
51:28
are more integrated across socioeconomic groups that have lower segregation tend to have better outcomes for kids and that kind of thing in a rural area um you can see why that occurs in why might lead to better outcomes right so if you live in a big city it's very easy to
51:45
self-segregate in various ways you live in a gated community you send your kids to a private school you essentially don't interact with people from different socioeconomic classes if you live in a small town in Iowa pretty much there's one place your kids are going to
51:58
go to school there's one kind of set of activities that you can all participate in and that I think is likely to lead to more integration and you think that's causal rather than just restating the same fact about the quality of the place
52:11
no I mean our sense we don't have definitive evidence on this and we're working on trying to establish clear evidence but our sense is that integration actual contact with people from other backgrounds is a strong predictor and likely a causal
52:25
determinant of of kids long-term outcomes so I suspect that that's one major factor in what's going on now as I read your 2014 papers on Mobility they seem to suggest that at least in recent times intergenerational income mobility
52:40
in this country actually has not been getting worse contrary to what many people thought was the case and your former Harvard colleague Robert putam in his latest book he basically wrote he doesn't believe the numbers he's not faulting your work he just thinks
52:55
given the return to higher education is rising there's wage stagnation plenty of evidence of regional Decay that it must somehow be the case that intergenerational income Mobility is getting worse we're just not measuring it properly do you agree with putam or
53:10
do you agree with your own numbers I think our numbers are right uh um I think the fact is that relative intergenerational Mobility by that I mean your chances of moving up or down in the ranks in terms of percentile right has not changed significantly over
53:28
theast 40 years or something like that that is if you're born to parents in the bottom 20% your odds of making it to the middle class or to the top 20% look roughly the same today as they did 30 40 years ago now why is that the case I
53:43
think Bob correctly points out that there are lots of Trends going in a direction that might have led you to think that this would be getting worse over time so for instance he shows in his work that the Richer inves more in their children's education spending more
53:58
time reading to their kids for example relative to kids from lower-income families but you also have to remember that at the same time over the past 50 years we've been fighting the war on poverty right and investing more in uh
54:10
kids from lower income backgrounds trying to expand access to higher education expanding preschool programs Head Start start and so forth so the fact that you don't see any change in relative mobility in light of all those major social Investments you know from
54:26
that perspective it's actually surprising that things haven't improved right so my view is you've got these two countervailing sets of Trends and that's left us at kind of a standstill in terms of relative Mobility however in our more
54:38
recent work we show that absolute Mobility your chance of doing better than your parents which arguably is what people really think of yes as the American dream that has fallen dramatically over the past and that's your most recent paper from December yes
54:52
yes have you thought much about within this this country Geographic differences in gender inequality and this is a big issue in India people in South India will tell you it's better for women than North India I haven't seen data but I find that
55:06
believable uh where in the United States does gender equality come most naturally and where not do you have a sense yes is it an interesting question yeah and I think that's a very interesting question we find a sharp differences and outcomes
55:20
by gender uh across areas uh for various reasons and so let me give you a couple of examples so one we find that areas with more concentrated poverty so take the city of Baltimore for example we find very poor outcomes for boys in particular relative to girls and we
55:37
think that that has to do with crime and getting involved in gangs and so forth things that girls just are less likely to do and so as a result growing up in a place like Baltimore turns out to be extremely detrimental for boys we
55:48
estimate that you lose something like 30% of your earnings relative to if you had grown grown up in an average place in America whereas for girls it's slightly negative but not nearly as bad so they're a set of kind of urban uh ghettos you know places with
56:03
concentrated poverty that tend to have particularly negative outcomes for boys there are also other phenomena that are more subtle related to things like marriage patterns so um relating this back to personal experience I remember when working on these issues uh and
56:18
thinking about our decision to move from uh Harvard to Stanford at the time uh we actually were just expecting our first child a daughter and I noticed in our data that for kids and affluent families in the Bay Area uh daughters tend to
56:33
have very low household earnings and I found that kind of curious and we spent some time trying to dig into why that was partly given my personal interest in the issue so your own moving decision was influenced by this research uh and what you find is an
56:48
interesting explanation which is if you look at individual earnings rather than household income girls growing up here in the Bay Area do extremely well however when you look at household income they don't do so well and that's
57:01
because they're much much less likely to be married than if they grew up somewhere else so if you're in your mid-30s only something like a quarter or less of girls growing up in the Bay Area uh get are married and we show in our paper that every extra year you spend up
57:18
growing up in the Bay Area you're less likely to get married so I remember telling my wife you know I don't think we need to worry our daughter will be fine in terms of earnings it's just that she might not be married if we uh you
57:28
know move to California so you've lowered your expectations for grandchildren last question or questions sort of a bundle but now that you live here you're in sconed at Stanford up and running again you're at the heart of Silicon Valley what are your plans for
57:43
future research and questions both right now but even more speculatively say five or 10 years hence but start with the right now then we'll get to the longer term yeah so you know one of the things we talked about um digging more into whether segregation
57:58
and integration are really causal mechanisms that are driving differences in rates of upward Mobility so one way we're trying to get at that which is very much in line with uh thinking about uh Silicon Valley is using Facebook data
58:11
so in the past uh people like Bob putam and others have talked a lot about social capital and integration as being a key determinant but we've never been able to measure those things as precisely as we'd like like to be able to and Facebook data or more generally
58:26
social network data gives us I think the most precise lens uh to look at how people are connected and how that might influence their long-term outcomes so so you have a cheddy conceptual trick that maybe you won't tell us that will enable
58:41
you to convert Facebook data into a causal proposition that you will test and then execute on using the Raj chedy production function is that that's the hope that's the hope so we've got we've got a team of collaborators there and we're starting to explore the data and
58:54
figure out you know not by running experiments of course but just you know with the existing deidentified observational data can we find patterns so you know one example in the cities that have very high rates of upward Mobility do we see that there are more
59:09
links between kids from low-income and high income families that would be suggestive but then to get closer to causal inference one way you might be able to do that is to exploit uh the fact that kids tend to be friends with
59:22
children in the same grade but not friends with kids who were one grade ahead or one grade behind right now this the network of kids you're exposed to is going to tend to fluctuate across grades just by chance you might have more
59:35
low-income kids more girls more talented kids Etc right and so that's essentially going to be random variation from the perspective of a given child and you can see how you might be able to exploit that type of variation to understand whether the set of people you're
59:49
connected to ends up affecting your life trajectory so that's one early stage idea we're thinking about developing in that space and longer term more speculatively what do you dream of working on even if it might seem highly impractical or something you don't feel
1:00:03
you know enough about just yet at a very big picture level I mean what in our research group would' like to figure out is how we can increase upward Mobility we'd like to come with a recipe for how you can increase upward mobility in uh
1:00:17
specific cities in the long term you might think that important recent trends like automation driver cars these things could end up reshaping what cities look like maybe you'd be able to change how integrated people are taking advantage
1:00:33
of uh driverless cars which would allow people to commute in in very different ways uh I think thinking about how technology could be used to tackle some of these social issues strikes me as an important thing that that I'd be like that I'd like to be working on what I
1:00:51
see here in Silicon Valley is that technolog is completely transformed the way we live live our lives through the private sector I think it's to date had less of an impact on social issues and there's a big Arbitrage opportunity there as I'm sure you know since the
1:01:05
1990s segregation by income has been rising in this country and here Silicon Valley is one of the most extreme cases of that so seeing that are you on net a segregation Optimist or pessimist if I may ask I think current trends suest that
1:01:21
segregation will continue to grow in the US as you have um take the case of driverless cars for example one way that could go is if you have access to driverless cars it makes it all the more easy to go live further away in a secluded Place further reduce
1:01:37
interaction right and so I think it's very important to think about social policy in the context of that type of Technology how do you set cities up how do you do urban planning and architecture in a way such that you don't actually just facilitate more
1:01:51
segregation such that you make it attractive to live in a more uh mixed income Community that's a key challenge I think Ros jedy thank you very much for coming to chat with us it's been a pleasure thank you my [Music] pleasure thanks for listening to
1:02:07
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 show