Nick and Goldy are back to answer more of your voicemails! They’re tackling questions about housing, what our economic theory is actually called, portable benefits for gig economy workers, and more. Enjoy, and happy new year!
Resources:
TED Talk reading list: https://www.ted.com/talks/nick_hanauer_the_dirty_secret_of_capitalism_and_a_new_way_forward/reading-list?language=en
TED Talk references: https://www.ted.com/talks/nick_hanauer_the_dirty_secret_of_capitalism_and_a_new_way_forward/footnotes?language=en
Our website: https://pitchforkeconomics.com/
Our twitter: @PitchforkEcon
Our instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Nick Hanauer:
Hey there, this is Nick Hanauer. You’ve reached the magic voicemail box where you can leave me a question for my Ask Me Anything episode. All you have to do is state your name, where you’re calling from, and your question.
Speaker (Intro):
From the offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, one American capitalist’s take on how we got into this mess and how we can get out.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, Senior Fellow at Civic Ventures.
Nick Hanauer:
So Goldie, we get to answer some questions from listeners today, which is always really fun. It’s just interesting to hear from folks what interests them.
David Goldstein:
Right.
Nick Hanauer:
I mean, we know what interests us but that’s [inaudible 00:01:05].
David Goldstein:
It’s actually one of the downsides of podcasting. Back in the day when I did talk radio-
Nick Hanauer:
People could call in.
David Goldstein:
Yeah.
Nick Hanauer:
And yell at you.
David Goldstein:
Yeah, and then I got to yell back because I could press the button and cut them off and continue talking. But it was engaging.
Nick Hanauer:
Asynchronous is less, you get a lot less feedback, in a way.
David Goldstein:
Right. So, it’s not quite the same thing where we get to have a conversation with our listeners, but we certainly enjoy hearing from them. A, it’s nice to know that people are listening and B, it’s nice to know that they’re listening so carefully that they have such interesting questions.
Nick Hanauer:
Right. And it teaches us a lot about where stuff that we think, it feels like we’ve explained well, where we clearly haven’t, where it’s too complicated or where the explanations that we have offered have not been complete or satisfactory.
David Goldstein:
Right. We know this so well because we keep talking about it.
Nick Hanauer:
Yeah.
David Goldstein:
We lose track of the fact that we’re using codes that other people might not get.
Nick Hanauer:
Correct.
David Goldstein:
And that’s bad narrative.
Nick Hanauer:
It is. That’s bad. It’s bad form. So anyway, it should be fun to answer these questions.
Steve:
Hey guys, this is Steve calling from New Jersey. I have a question I am super surprised has not come up, at least on the first call and Ask Questions episode. What do you call and how you consider your economic philosophy? If I’m trying to find more information, in general, about the types of schools of thought that you’re espousing, what’s it called? I mean it’s not communism, it’s not socialism, it’s not pure capitalism, it’s not neo-liberalism. What is it? And then, where do I go if I want to learn more about it from a scholastic point of view? It seems like everything you’re saying is directly against Economics 101, so clearly taking an Economics 101 class doesn’t seem like a good idea. Where does one go if they want to learn more from a scholastic point of view of what you guys are talking about? Thanks for everything and keep up the good work.
David Goldstein:
Good question there, Steve from New Jersey. We’re not socialists.
Nick Hanauer:
We are not socialists.
David Goldstein:
And I know personally I’m not a capitalist.
Nick Hanauer:
Yeah.
David Goldstein:
I know you’re a capitalist in terms of that’s what your job is.
Nick Hanauer:
Yeah.
David Goldstein:
But what we’re talking about is not capitalism, as it is traditionally understood.
Nick Hanauer:
Correct. Correct. And we do have a secret new phrase that we’ll be debuting hopefully next year. There’s a book on its way.
David Goldstein:
And that will be the ultimate authority.
Nick Hanauer:
Yeah, that’s right. So Eric Beinhocker and I, along with a massive amount of help from Goldie and somebody who works for Eric too, are working hard on a new book on economics, where we will offer a new phrase to describe the thing between capitalism and socialism that we think we should dedicate ourselves to. But in broader terms, there’s a whole ton of stuff that listeners can read to get themselves up this sort of learning curve. But there is the beginnings of an alternative curriculum, isn’t there?
David Goldstein:
Right. So if you don’t want to take your traditional Econ 101 course, there is an alternative curriculum that is available online at core-econ.org. It’s a complete beginning economics course. You can step yourself through it. It’s also available free to instructors and to universities to use in the classroom. And it really gets to a lot of the science that is informing our work, informs this work. Sam Bowles, who’s been on the podcast.
Nick Hanauer:
Yeah, this was one of his big projects.
David Goldstein:
Right.
Nick Hanauer:
In addition to that, one fun thing you could do is watch my latest Ted Talk called, The dirty secret of capitalism — and a new way forward. And then, click the footnotes tab and there’s a big reading list of books that we think lay a lot of these ideas out. Starting with my coauthor, Eric Beinhocker’s book, The Origin of Wealth: Evolution, Complexity, And the Radical Remaking of Economics. Taking together all of those things should help. So Steve, from New Jersey, thank you for your question.
David Goldstein:
And of course, you want to look for our book coming next year, within the next 12 months we hope.
Nick Hanauer:
Yes.
Sarah Schwab:
Hey, my name is Sarah Schwab. I am from Milwaukee, Wisconsin. And I have a question for you. I’ll try to articulate this as best as I can. I love your podcast, I love the work that you’re doing, but it often sounds to me like there’s an underlying assumption in your sort of new economic model that is, what I’m going to call, the fixed pie. Meaning in order for more people to have more, the people at the top have to have less. And I’m wondering if that’s intentional. Obviously, that makes a ton of sense, but I’m wondering if there’s another option, another way of looking at it, where the people toward the bottom can grow and can grow faster than those at the top without anyone necessarily having to lose in sort of a growing pie model. So again, I’m not an economic scholar, just wanted to throw that out there and thanks again for all that you do.
Nick Hanauer:
So Sarah Schwab, from Milwaukee, that is a fantastic question. This tension between growing the pie and splitting the existing pie up differently is a super important one for you to tease out. And it’s really worth addressing, sort of in detail, that question. So, the first thing I think we have to acknowledge, is that there are really two dimensions within which the economy can grow. The one is the economy in aggregate, which is the whole pie. And when we think about economic growth, I know most people think of it in terms of money, but in fact what we really mean when we think about economic growth is are we improving the material circumstances of the majority of people? And the truth is that the rate at which we improve the material circumstances of most people is inextricably intertwined with how many people actually get to contribute to improving the material circumstances of all people, both as consumers satisfying their personal wants and needs and also as creators of solutions to human problems, which is the thing that improves the material circumstances of all people.
David Goldstein:
So the way I would summarize this, Sarah, is that the pie actually grows faster when the portions are distributed more evenly.
Nick Hanauer:
Correct.
David Goldstein:
That the unequal way we are distributing the pie now, the gross inequality that we’re seeing in our economy, is actually slowing down the growth of the entire pie.
Nick Hanauer:
That’s right.
David Goldstein:
And if we include more people in the benefits of the economy, as Nick said, as innovators, entrepreneurs, workers, and as robust consumers, that pie will grow faster.
Nick Hanauer:
Correct.
David Goldstein:
Now we’re not talking about splitting it up exactly evenly.
Nick Hanauer:
Yes.
David Goldstein:
That never works. There’s always people that are going to excel, that are going to produce more, that just circumstance, they’re going to end up with more. But there’s this balance, at some point there’s too much inequality. And we’re that point right now, which is hurting growth.
Nick Hanauer:
And so in a very real way, in our economy, if we want to maximize the rate at which the pie grows and secure our democracy, by the way, just a separate thing, we have to find a way to ensure that everyone is fairly compensated, not just very rich people. And the immense wealth that we are seeing in our society is a product of a bunch of rules and norms and laws and circumstances that enable a few people to make a lot while other people don’t. So for instance, if Jeff Bezos, who’s apparently worth $100 billion today, was required to pay his workers enough to get by without government assistance, without food stamps, to live in jail-
David Goldstein:
Well, hell, Just to have a dignified middle-class life.
Nick Hanauer:
That’s right.
David Goldstein:
Like workers. He used to, 40 years ago, do similar work.
Nick Hanauer:
,Exactly. Then he would still be very, very rich. But instead of $100 billion, he might have 10 billion. And likewise, across the economy. And if all of the workers in those Amazon warehouses or all the McDonald’s workers or all the Walmart workers were paid enough to lead stable, dignified, middle-class lives, they would be both more productive as people, as employees, but also would have the capacity to buy more stuff, which both increases the velocity of the economy, the size of it. But more particularly, it also increases the range of possibilities in the economy because the more disposable income people have, the more possibilities are created for businesses to meet that demand. And so these two things are linked, really more than linked, inextricably intertwined. So we want to reduce the inequality in the society to increase the size of the pie, not decrease it.
David Goldstein:
Right. It is a positive sum game.
Nick Hanauer:
That’s right.
David Goldstein:
And you get more gain the more equal it is.
Nick Hanauer:
Yeah, to a point.
David Goldstein:
To up to a point.
Nick Hanauer:
To a point, exactly.
David Goldstein:
Right. But from where we’re starting right now-
Nick Hanauer:
We have a long ways to go.
David Goldstein:
Yeah. Yeah, before we’ve made it too equal.
Nick Hanauer:
Yeah.
Tim Connor:
Hi, this is Tim Connor from Portland, Oregon. I’d like to hear you talk a bit about the housing crisis because of course the neoliberal solution is always to deregulate and encourage, allow developers to do whatever they want as far as building more housing, or what I’ve noticed in Portland, and I suspect you’re seeing in Seattle and San Francisco and other cities. What happens if the developers just build more expensive housing, then that just drives prices up and increases homelessness even more? So what do you got to say about that? Thanks.
Nick Hanauer:
So Tim from Portland, with questions about the housing affordability crisis in America. Yikers, that is a very complicated subject and something that we, here at Civic Ventures, are devoting a ton of thinking to. There is no quick answer to your question, but we’re going to, in a few minutes, try and detail what’s causing the crisis and the kinds of things we need to collectively do to make it better.
David Goldstein:
So first off, I think that your observation is not incorrect, that if you leave this problem entirely to the market, the market will do a great job of dramatically reducing the price of luxury housing. Because that is what they’re naturally going to build first because that is where the largest margins are.
Nick Hanauer:
Correct.
David Goldstein:
And since the constraint is the amount of land available in cities like Portland and Seattle, you’re going to try to get as much profit out of each piece of land as you can get. That is capitalism.
Nick Hanauer:
Yeah.
David Goldstein:
That said, we do need to loosen land use rules in, certainly in Seattle, maybe Portland’s done a better job of it because in Seattle where we have 65% of the land here zoned as single family detached housing, that really puts a crimp in your ability to deal with the explosive growth we have. And so we have a shortage of supplies. So we need more density in city. We need to build taller, we need duplexes and triplexes, we need multifamily housing and we’re going to have to change land use rules. Do you agree with that?
Nick Hanauer:
Yeah, but it’s actually more complicated than that because one of the things that we have to just acknowledge, in all of our fast growing cities, is the inexorable urbanization of planet earth. That in a technological economy, in order to participate effectively in that economy, you basically need to be part of that network, which means you need to live in the cities, which is why these cities are growing so fast, which is putting huge amounts of pressure on the housing stock. Again, part of the housing affordability crisis is the wage suppression crisis over the last 40 years, right?
David Goldstein:
Right.
Nick Hanauer:
Part of the hellscape that neoliberalism has created is a circumstance where for most citizens, their wages have been stagnant for a really long time, while housing prices and rents have gone up dramatically. And one of the ways in which we’ll have to address the housing affordability crisis is by raising wages.
David Goldstein:
If you raise wages, things get-
Nick Hanauer:
Much more affordable.
David Goldstein:
As long as you’re building more supply.
Nick Hanauer:
That’s right.
David Goldstein:
Otherwise you’re just bidding up the existing housing. So there is, the affluent will be taken care of by the market. Low income households, there’s going to have to be some sort of government subsidy on either the construction side of it or the capital side or on the rent side. And then we get to one of the thorniest issues, which is that missing middle, which the market is also not addressing in cities like Portland and Seattle. And there, I think Nick, in our office, we have come to the conclusion that we need whatever you want to call it, a public option on housing. We need the government to build and maintain large amounts of rental housing outside of the market.
Nick Hanauer:
And this is the approach that all of the cities on earth who have successfully addressed this problem at scale have adopted.
David Goldstein:
Right.
Nick Hanauer:
Places like Vienna, Singapore. And the idea is incredibly simple, but it’s sadly expensive and it takes a long time, which is to build high quality middle-class housing in great locations and then simply maintain the price of those rentals-
David Goldstein:
At cost.
Nick Hanauer:
At cost. Not rising with the market. And just know, listeners, that we’re going to devote an entire episode of Pitchfork Economics to the housing affordability crisis in the nation.
David Goldstein:
So to sum it up, you need multiple solutions happening at once. We do need smart land use regulations so we can build more density where we need it, that’s number one. We need to focus on raising wages because part of the affordability crisis is what you earn. And we need to focus on creating a lot more supply in cities like Portland and Seattle where there’s been a lot of growth, because no matter how much we raise wages, if you’re not keeping up with supply, you’re just going to bid up the existing housing.
Nick Hanauer:
Yeah. No matter how good your policies are.
David Goldstein:
Right. And some of that supply, that’s going to have to come from the government.
Andrew:
Hi, this is Andrew from New Jersey. Given the recent law passed in California, do you think Uber might support the idea of portable benefits? If so, would you work with Uber in trying to pass legislation establishing a portable benefits system? Thanks.
David Goldstein:
Good question Andrew. So Nick, would you work with Uber on portable benefits?
Nick Hanauer:
Well, in the interest of full transparency, we are working with Uber on portal benefits. And in fact, Dara, the CEO of Uber, David Rolf, a local labor leader and I signed a joint letter of agreement in principle a year and a half ago to explore, in the State of Washington, a policy framework that would bring portable benefits to workers in our State. And one of our team members, Jessyn Farrell, who at that time was in the State legislature, helped craft the beginnings of that legislation. So we are trying to do something here in our State to address these issues. Again, in the interest of full disclosure, it is complicated and it will take a while. So I bet you they’re even more motivated today to try to figure something out than they were. But while Travis Kalanick, who I didn’t know, but who by all accounts was basically a sociopath, didn’t care about workers and portable benefits, the existing CEO would probably want to do something, reasonably.
David Goldstein:
Would rather negotiate it himself rather than having it forced upon him by a democratic legislature.
Nick Hanauer:
Exactly. But they should’ve moved quicker, shouldn’t they have?
David Goldstein:
Yeah. So I may be a little more skeptical of working with Uber, but if they’re willing to come to the table and work out something that may be leads the entire market towards portable benefits for everybody, then that would be a net plus.
Nick Hanauer:
Yeah. Thank you for your question.
Brad:
Hey Nick, my name is Brad, from Michigan. I have an interesting question for you. I know one of your favorite topics is the minimum wage. Well, I just saw a meme on Facebook, the most reliable of places to get economic information. It had an interesting idea. It says, “What if we pegged minimum wage to the cost of living, specifically housing, of that particular city or even County”. So does something like 2% of the cost of housing and then that would end up being, they said something like San Francisco was like $41 or something. I was just curious about what you would think about something like that. I’m skeptical, but I’d like to hear your thoughts. Thanks so much Nick.
Nick Hanauer:
So Brad from Michigan, that’s a really interesting question about the minimum wage and pegging it to various things. I’m going to extract from your question, the principle I think you’re suggesting, that the minimum wage should be tied to local costs.
David Goldstein:
Cost of living, is what you’re saying.
Nick Hanauer:
Cost of living. So that is a possibility and not a terrible idea, but not one I personally am in favor of because I think that one of the worst parts about our national economy is the divergence in prosperity between urban places and rural places, small places and big places. And I think that if you peg the minimum wage to cost of living, what you effectively do is reinforce these dynamics.
David Goldstein:
The regional inequality.
Nick Hanauer:
The regional inequality, that you make places that are poor and cheap, continue to be poor and cheap because you haven’t impacted the wages at all. Another approach, and the one that I subscribe to, is to impose wage standards, including the minimum wage, not by region, but by company size. Because a Walmart, even in the smallest, poorest town in America, can afford to pay $20 an hour for a worker and give them healthcare and everything else. And I think that that’s a far better way to organize the economy. But with this one caveat, and that is that I think an even more interesting thing to peg the minimum wage to, in addition to standardizing it around company size, is to peg at the minimum wage to the wages of the top 1%.
Nick Hanauer:
This is a policy formulation that I’ve wanted to outline for a long time. I think it’s a really cool idea, which is to basically connect the minimum wage to the maximum wage, so that everyone in the country rises and falls together. So if those hedge fund dudes want to pay themselves a couple of billion dollars a year, well fine, but that means that the minimum wage will rise essentially in concert. And I think that that will have a really interesting effect on the economy, both at the high end and at the bottom, as people begin to grapple with the fact that the real benefits of the economy are going to be more equally shared. I think it would be a super interesting and fun thing to do.
David Goldstein:
Yeah. I’ll take a simpler approach to this. My only reason why I would support tying minimum wage to something like local cost of living would be to avoid a lowest common denominator problem, that we can’t raise the minimum wage high enough in Seattle because then it would be too high in Alabama.
Nick Hanauer:
Right.
David Goldstein:
You don’t want to do that.
Nick Hanauer:
Yeah.
David Goldstein:
So certainly there are places like Seattle that can afford a much higher minimum wage. But again, I’m with you and worrying about reinforcing the existing economic inequality between regions. I think that’s bad for this country. Large corporations can afford to recycle money through some of the poorer part of the countries by paying them a higher wage relative to lower costs than they do elsewhere.
Nick Hanauer:
That’s right. And just think about how great it would be for those small places.
David Goldstein:
Right.
Nick Hanauer:
It’d be amazing.
David Goldstein:
So Nick, not all of our questions have come in by voicemail. Some of them were emails. It’s a shame we don’t have anybody to read them. Oh, Oh, Oh wait, look who’s sitting across the table from us. It’s Annie.
Annie:
Hey guys. So Annie here, podcast producer and policy researcher here at Civic Ventures. And Goldie, you are right for once. Not all of our questions come through voicemails. A lot of them come through to my email inbox, and I want to pass one along to you right now. It’s from Spencer Quinn. He says, “Hey guys, living in South Florida and seeing the economic disparity between the top 1% of the world who play here and the bottom 1% who live here and serve them makes me want to be part of the solution in some way. How can I get involved? What can I donate money to?”
Nick Hanauer:
So Spencer from South Florida, that’s a great question about how to be involved and how to make a difference. What I think is the most impactful is to be part of or helpful to worker organizations that are trying to increase standards. And I’m sad to say I actually don’t know anything about the civic landscape in Florida, but there is somebody out there who’s trying to, among other things, raise the minimum wage in Florida to reform the labor standards that allow Florida businesses to exploit workers. And I guarantee you those folks are under-resourced. And I would love to see you help with some of those folks.
David Goldstein:
Well one of our theories in the office is that political money can actually be much more, you get a much better return sometimes than on charitable money. You can put money into a food bank, which is great, helps people who are food insecure or you could put money into a ballot initiative that would raise the minimum wage. And that does a lot more for a lot more people.
Nick Hanauer:
Yeah. And so we’re very enthusiastic about helping with those things. And in fact, in our political practice at Civic Ventures, we stand up a lot of ballot initiatives and do that work often.
David Goldstein:
Spencer, another theory in our office is that the way you make big change is by changing narrative. And I’ll just raise a pet peeve of mine, which is the woeful state of modern journalism, which makes it much harder for us to get our narrative out because A, most of the media is corporate controlled and B, there just aren’t that many of them left. So if you’ve got your favorite not for profit media outlet, I know I give to ProPublica every year. Listen to your podcasts when one of your favorite podcasts, economic podcasts, is asking for a little money, give them a little money, find the places where you find the best information and support them and that will go a long way towards helping us change hearts and minds on about how the economy.
Nick Hanauer:
Thank you listeners for all those really cool and interesting questions. Like I said before, it’s always really interesting to hear what people are thinking about or what they’re confused by or what they want more information about.
David Goldstein:
And it’s also fascinating over the course of the year, Nick, because it’s been a year, it’s been a little more than a year now.
Nick Hanauer:
Oh, it has been a year. Yeah.
David Goldstein:
This podcast, how much the conversation is changing. You can hear it in the questions. There’s still a bit of that neoclassical influence in some of the questions, but you can really feel people are trying to get beyond that and wrap their minds around what the new economic thinking is teaching.
Nick Hanauer:
Yeah. And for sure, in the political discourse that’s taking place in the democratic primary anyway, we have come far. Boy, the center of gravity around the policy agenda has changed so much since 2016, it’s really super gratifying.
David Goldstein:
So who knows, Nick, maybe after another year of this podcast, maybe the pitchforks won’t come after all. Maybe you’ll be lucky.
Nick Hanauer:
We’ll see. And if you do have questions, please call our number and leave a message, (731) 388-9334. That’s (731) 388-9334. Also, we take episode suggestions. So if you’ve got a killer idea for an episode, lay it on us and maybe we’ll do it.
David Goldstein:
Yeah, an economic topic, a question, an author that we might not be aware of, send it our way. And if you don’t want to leave a voicemail, there’s contact information on our website, PitchforkEconomics.com and maybe we’ll have Annie read it for you.
Nick Hanauer:
In the next episode of Pitchfork Economics, we’re going to talk to our friends, John Arnold and Priti Krishtel, about the egregious prices Americans pay for pharmaceuticals and why and how that industry is so screwed up. It’ll be a really interesting episode. I hope you’ll listen.
Speaker (Outro):
Pitchfork Economics is produced by Civic Ventures. The magic happens in Seattle in partnership with The Young Turks Network. If you liked the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on medium at Civic Skunkworks and peek behind the podcast scenes on Instagram @PitchforkEconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.