We all want to live happier, more fulfilling lives and build a better future for ourselves, but can economics help to make that dream a reality? Economist and philosopher Erik Angner is so confident that economics can save the world that he wrote a whole book about it. Erik helps Nick and Goldy overcome their usual cynicism by pointing out all the amazing progress that has been made in the economics profession, and he explains how economics can help build an even more glorious future for everyone.
Erik Angner is Professor of Practical Philosophy at Stockholm University, where he directs the PPE Program. He is the author of several books including A Course in Behavioral Economics and How Economics Can Save the World.
Twitter: @ErikAngner
How Economics Can Save the World https://www.penguin.co.uk/books/321644/how-economics-can-save-the-world-by-angner-erik/9780241502693
Website: https://pitchforkeconomics.com
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Nick Hanauer:
Economics as a profession has steered the world in kind of a wrong way.
Eric Angner:
This is not hopeless. There are ideas out there.
David Goldstein:
You’re claiming that economics can save the world.
Eric Angner:
On the one hand, I’m saying we need to take economics seriously, it can help. Dismissing it wholesale is positively harmful, but I’m also saying that economics is not in fact, as good as it could be.
David Goldstein:
We don’t disagree. It can save the world, but can and will are two entirely different things.
Nick Hanauer:
Or has, yeah.
Intro:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. It’s the best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures. Regular listeners of Pitchfork Economics might think that you and I are a little cynical, Nick. We talk a lot of smack about economics and people roll their eyes at me when I say this, but actually I think we’re steeped in optimism.
Nick Hanauer:
I agree. I agree. It’s a highly schizophrenic life to be as angry and cynical about the field of economics as we are, and yet devote virtually all of our energy to economics and improving it.
David Goldstein:
Right. And we do that because a) we believe that we can improve the field of economics. And in fact, Nick, it’s been almost nine years now since you brought me on to help you with your efforts. At the time you told me the mission was to redefine capitalism. I think we’re going beyond that, but so much has changed in the past nine years in the field of economics and in the public narrative about economics. There’s been all this movement, it’s actually really exciting.
And at the core of what we do, the mission of this podcast is to change the way people talk and think about economics, to tell a better story about how the economy really works. And we wouldn’t be doing this, we wouldn’t be wasting our time on this podcast and wasting your money when you could be out there and enjoying the good life if we didn’t think that there was progress to be made that we could actually change the world.
Nick Hanauer:
No, it’s so true. It’s so true. And sometimes we win and sometimes we lose. But you’re right, Goldie, there has been a lot of progress since we began. The $15 minimum wage went from the world’s dumbest idea to effectively common sense over that time. And the economic consensus around it dramatically changed. Not only did it change in terms of public perception, but also the economic consensus changed around it too. And we had a small part to play in all of that. But today we get to talk to an author who’s even more optimistic than we are named Eric Angner, a Swedish economist who’s written a new book called How Economics Can Save the World.
David Goldstein:
Yeah, and we don’t disagree. It can save the world, but can and will are two entirely different things.
Nick Hanauer:
Or has.
David Goldstein:
Very, very different. But it’ll be super fun to talk to Eric and maybe some of his optimism will rub off on us.
Eric Angner:
My name is Eric Angner. I’m professor of Practical Philosophy at Stockholm University, but I’m an economist as well as a philosopher. And most of my work, my research and my teaching is in the intersection of the two fields. I wrote a book most recently How Economics Can Save the World on Penguin, which came out just a few months ago in which argues that we should take economics seriously as a science in the interest of making the world a better place.
Nick Hanauer:
Can I ask you first, what is practical philosophy? I studied philosophy, but I don’t think it was very practical.
Eric Angner:
Practical philosophy is a technical term for questions that have to do with life, basically. Whereas theoretical philosophy concerns questions that have to do with the world. The distinction goes back to Aristotle actually. That’s how they organized his lecture notes. But here we have departments that are separated into theoretical and practical.
Nick Hanauer:
Oh, interesting.
David Goldstein:
So I’d like to start off, the big claim, you’re claiming that economics can save the world. But before we get into how, if you could make a distinction for us between economics, as you describe it broadly in the book and the kind of narrow neoclassical economics that still dominates at the introductory level, what most people learn in college and university,
Eric Angner:
What I’m defending is the idea of economics as a science, a systematic, empirical approach to the way that people behave in society and the implications of that behavior for the world as a whole. That means I’m not talking about the profession at all, right? The profession leaves very much to be desired. And the thing that I think of as economics doesn’t always match the stuff that gets taught, especially at the introductory level. Part of the problem that I’m trying to address is that there’s a picture of economics that you get at the undergraduate level and that you get when you listen to people on television or whatever, that doesn’t at all match the sort of stuff that people are doing in actual real life economics department.
There is so much exciting stuff happening that nobody ever hears about, and that’s not taught at the foundational level and so on. And so part of what I was trying to do with the book is to say, “Hey, economics is a lot more interesting than you might think. It’s a lot more actionable than you might think, and it doesn’t have the implications that some people claim it does.”
Nick Hanauer:
But, Eric, Milton Friedman was pretty excited about his work too.
Eric Angner:
Modesty wasn’t his strong suit, right?
Nick Hanauer:
As was James Buchanan and lots of other of my favorite people. And they were wrong. I mean, they were both positively wrong and in my opinion, normatively wrong. And economics as a profession not to gang up on you, has steered the world largely in kind of a wrong way for the last 40 or 50 years. I actually agree with you that there is some pretty exciting stuff going on in the field right now. Empirical stuff that is coming up against the neoclassical and neoliberal theory that has been so damaging. Why are you optimistic today?
Eric Angner:
So I think what’s going on is that people form an opinion quite reasonably of the whole discipline based on a small number of figures who get a lot of visibility in the media and elsewhere, authors of the textbooks and whatever. So when you turn on the television and somebody appears and they’re presented as an economist, I mean, you’re primed to think that they’re reflecting a consensus opinion of the profession or something. But the people that you see are not a representative sample of what people in the profession are doing. They’re people who actively seek out the limelight. And there are people who actively seek out controversy to some extent. Some of them are academics, many of them are hired guns. They work for think tanks. They’re paid to push a particular agenda. They’re not paid to tell you in a pedagogical fashion about the nature of the science.
And so one thing that I want to get away from is focusing on these high profile people who appear on television, who are there because they make for good TV, they’re combative or whatever. And I want to look at people who are respected economists, people in the profession who are taken seriously, but who are doing more thoughtful, multifaceted work. And so for example, I talk about Al Roth who designed the system that we use to allocate kidneys. He happens to be… He was my first economics professor, and so I know him and his work relatively well. And if you read his book on these things, he’s not at all pushing a neoliberal line. He believes in markets as a way to distribute even things like kidneys. But it’s not a commodity market. It’s not a market where the highest bidder gets the kidney and the poor people are left hung out to dry.
He explicitly criticizes the picture of the world that we operate with where you have the government on the one side and the free market, the less fair picture on the other. He’s pushing a view that’s very different from that. He’s not in favor of command and control solutions, very far from it, but he’s also not at all defending the laissez-faire view that you might get from somebody in the tradition of Milton Friedman. And I think in many ways he’s more representative of what the actual profession is doing. If you look at the profession politically, they’re somewhere in the middle. They might be a little left of center, in fact. They’re not the sort of you might think of the lunatic neoliberal apologist or something. People like that exist, but they don’t represent the profession as a whole.
They talk about Elinor Ostrom, right? She was a political scientist at first, but who did a ton of economics. She has similar themes where she says, “We need to go beyond this binary between individual and collective market and state. Many solutions to real problems are found at an intermediate level in civil society.” She talked about polycentricity, which is her vision of a good world where different problems are solved at different solutions by institutions that respond to people’s needs. This is a very different picture from the one that you get from the most high-pitched voices in the Financial Times and whatever, but that’s also economics, and these ideas are out there and they’re not getting the kind of attention that they deserve.
Nick Hanauer:
Before we come back and probe, could you expand on the thesis of your book a little bit more and give some examples? I’m mesmerized by the intersection of philosophy and economics because I think it’s exactly where we should be, but just expand on your thesis a little bit more.
Eric Angner:
Yeah. So when I say that economics can save the world, what I mean is that it can fix the big problems in the same way that modern medicine can fix illness or promote health. It might be worth spending a few moments just thinking about what that means. If I say that modern medicine works, that it cures disease, I’m not saying it’s that guaranteed to work, right? Medicine doesn’t work a hundred percent of the time. I’m not saying it works like magically, like a magic wand or a silver bullet. I’m not saying you have to have a medical doctor in order to affect a cure of a disease. I’m not saying medicine can fix the problem on its own, right? Normally medicine has to be combined with exercise and diet and maybe affection and human touch and things.
With that in mind, what I’m not saying is that economics can just fix big problems magically and on its own. It needs to be applied thoughtfully by practitioners who know what they’re doing. And it needs to be applied with a sense for the values of the people on the receiving end. And with a sense of ethics and aesthetics. You can’t be a good doctor if you don’t have a sense for medical ethics. And in the same way I’m arguing, you can’t be a good economist unless you have some sense for the relevant ethics and indeed aesthetics, right? If you’re going to build a better world, we might as well build a beautiful one with the help of artists and poets and philosophers and so on. And so I genuinely believe that economics and the other social and behavioral sciences can do a whole lot of good, but it’s not like, I’m not saying we should just hand the power over to the economist and ask them to fix it.
In fact, I explicitly argue against that view. So what I say is that economics has to be coupled with decent values, like a decent sense for what a good life is, a decent sense for what a good society is. And those sorts of questions cannot be, should not be addressed by economists alone. The values involved have to come from the population who are, as I said, on the receiving end of the interventions, the people who are paying for the research and the people who live with the consequences. So at the end of the day, I’m calling for economics to be taken seriously, but I’m also calling for economics to be coupled with decent ethics, decent aesthetics. It needs to be practiced with care and attention to people’s values and so on.
I might also add right away that the book has sort of two parts. On the one hand I’m saying we need to take economics seriously. It can help. Dismissing it wholesale is positively harmful. But I’m also saying that economics is not in fact as good as it could be. And so it behooves us to make it as good as it could be to improve it to the extent that we can in the interest of the wellbeing of humankind on the planet.
David Goldstein:
In the book, you talk about how exciting some of the interdisciplinary contributions to economics are. You say that economics is too important to be left to economists. What areas outside of economics do you see contributing the most to the field?
Eric Angner:
To my mind, the most important adjacent discipline really is philosophy. So philosophy is the discipline where we engage in normative reflection in a systematic way, in a manner that’s informed by centuries, millennia of human reflection on this. Values matter. Even if you draw a sharp line between the scientific and the philosophical, the descriptive and the normative, you can’t really implement economics. You can’t really use economics to try to make a better world without engaging, without presupposing some sort of vision of what a good life is and what a good society is.
And given that that’s true, we can’t have the choice of ignoring it. The choice that we’re facing is trying to engage in normative reflection in a systematic way, a manner that’s informed by centuries or millennia of reflection or just winging it. And if you put it in those terms, I think, I hope, that everyone will agree that engaging in some degree of reflection is a good thing. And so one thing that I call for by the end of the book is more integration between economics and philosophy.
Now, economics as it’s organized, it’s famous for being insular. Economists site non-economists at a much lower rate than other scientists site people outside of their discipline. And that’s got to change. I would love to see more interdisciplinary research. I’d love to see more teams integrating scientists and philosophers. Such teams exist. When it comes to happiness research, for example. I know of such groups and that’s wonderful. I’d love to see more of those.
David Goldstein:
Well, one of the things that I found fascinating in the book, and it’s a subject that I’ve spent a lot of time thinking about, is you talk about scarcity. And famously economics has been described as the dismal science. It’s been defined as a system for distributing scarcity, scarcity resources how best to distribute them. But you talk about a different way of thinking about scarcity.
Eric Angner:
Are you thinking about this sense of scarcity?
David Goldstein:
Yeah. The sense of scarcity. I found that fascinating.
Eric Angner:
Yeah. So if you pick up your random textbook, economics might be defined as the science of scarcity or the science of choice under scarcity or something. And in that sense, scarcity just means that there is less of the stuff around then we would want there to be. So everything is scarce, right? Because we want more of it than we have. But there’s another definition of scarcity that people use in economics, and it’s this psychological feeling of scarcity. The sense that you don’t have enough. This might conserve a sense that you don’t have enough money, but it could also concern a sense that you don’t have enough time or effort or something like that. And the thing about this sense of scarcity is that it has a way of interfering with our ability to reason and act rationally. So if you feel like you’re out of time, if you’re really stressed, you might be getting worse at dealing with stress.
I think we all recognize this to some extent. Some days you oversleep and you’re trying to make coffee and find your keys and turn on your computer all at the same time, and you’re likely to drop the keys and pour the coffee over the laptop and whatever. You’re just so much more likely to make mistakes when you’re feeling stressed like that. And this matters because if you are already poor and you feel a sense of poverty, a sense of scarcity, you will find it harder to act in ways that will make you not poor. And so being poor sort of has a tendency to preserve itself. The poorer you are, the greater the sense of scarcity, the harder it’s going to be to act in a way to get you out of poverty. So even if it were in principle possible to lift yourself up by the bootstraps, and that’s not at all a given, obviously, but even if that were true, you might not be able to do that.
And this is important because there are certain kinds of interventions that we might do to help people along that are very different from what people will otherwise defend. So in politics, but also to some extent in sort of policy discussions, economics, people will sometimes say that the problem is that poor people have it too good. Their lives are too easy, they’re getting too many benefits. What we need to do is to make their lives harder, to incentivize them to pull themselves up by the bootstraps or whatever. And what this research suggests is that that’s exactly the wrong way to go about it. When you make the lives of poor people harder, they’re just going to find it more and more difficult to do what they would want to do, the sort of thing that they know is rational.
So instead, what you might want to do is to make their lives easier. You might provide things like childcare, for example. Childcare is a massive problem for many people. If you’re a single mom, you can’t work if you don’t have dependable childcare. If you have a parent or relative who can do it, great. Many people don’t have that. And so if the government and city government can provide healthcare, making the lives of single mothers easier, that might reduce the sense of scarcity and help them pull themselves out of poverty.
So the conclusion is the complete opposite of what you might hear, and it’s a much more humane conclusion. But it’s not just like a do-gooder kind of thing. This is based in actual evidence, replicated research and so on. And people don’t know about this. They don’t hear about this anywhere as often as they hear about the importance of making the lives of poor people suck more.
David Goldstein:
What jumped out at me about that, Eric, is that it shows you how powerful the language of economics is in changing the frame in which we look at policy. Because if you take that knee-jerk definition of scarcity, that is classically used in economics that, “Oh, we don’t have enough of stuff.” And you look at things like childcare and you say, “Well, how can we afford it?” We already don’t have enough money. We have to figure out what’s the most efficient way to spend it.
But if you change that definition to that sense of scarcity and how that interferes with the ability of people in poverty to actually climb out of poverty, that it locks them into a certain way of responding to what’s going on in the world, you get a completely opposite set of policy prescriptions. One where you would provide childcare, where you would provide money. And it’s all locked up in how we think of that one word, how we understand it.
Eric Angner:
Yeah. Isn’t it interesting, right? You put on these different glasses and you see that something very different, a different phenomenon jump out at you. I guess I’m thinking about this in part because I have personal experience with it. So I used to live in the DC area where everything is super expensive and we had just had twins, my wife and I. So we went from one to three kids and childcare, where we lived in Fairfax, Virginia, was $1,100, I think, per child. So that’s 3,300 for three. And it’s not deductible as a business expense. So you have to make like 5,000 just to break even. And so as a junior academic, a postdoc or a junior professor, you might not even break even by putting your kids in daycare. Then we moved to Sweden where I grew up-
David Goldstein:
We’re talking per month. Per month.
Eric Angner:
Yeah, exactly. And here where we live, daycare is free if you’re poor or effectively free. If you’re solidly middle class, it costs like a hundred bucks a month. It’s run by the city. You’re guaranteed a spot if you need one within a certain timeframe, you can have it until school starts. And school of course is tuition-free as well. And this has economic consequences because all of a sudden, even if you’ve got a low salary, it makes sense for you to work. It’s pretty obviously efficient because you can have one staff member in a daycare center provide high quality childcare to eight kids. Whereas if all the parents or all the mothers stay home, then one person is in charge of two, three kids. And so there’s a strong economic case to be made for this sort of arrangement, and yet we don’t see it for whatever reason.
But this is economics too. You think about this from an economic lens, you see that providing daycare, especially for low income folks, is a really great idea if you want to get them back into work and allow them to support themselves in the long run. And this is another thing that economics tells you. Having work is really important for human happiness. Unemployment is a major predictor of unhappiness. It makes people feel terrible to be unemployed, even when you correct for the loss in income, for the vast majority of people having good work is important for them as human beings. And so if you provide daycare to the kids so people can go back to work, you give them more money, but you also give them the sense of purpose involved in having a good job to go to. This is such a win-win, right? And it’s economics.
Nick Hanauer:
Or psychology.
Eric Angner:
Right. So I don’t want to draw a sharp distinction between economics and neighboring [inaudible 00:23:32]-
Nick Hanauer:
Because I don’t know what kind of economists you’re hanging out with, but the ones I know actually don’t give a fuck. Mostly
Eric Angner:
You should come hang out with me and my friends because I go to conferences and I learn so many interesting things.
Nick Hanauer:
So why do the bad economists have so much influence on policy?
Eric Angner:
I don’t want to say they’re all bad, but you can see what happens. Who will have influence on policy? It’s not a random sample. Like the humble ones, the ones who see advantages and disadvantages and who understand value conflict and whatever, they are so much less likely to volunteer for that kind of service. They’re less likely to be sought out for that sort of service. The story of the president who wanted a one armed economist, right? Because he hated the ones who said, “On the one hand and on the other hand,” and I think that’s indicative of a big part of the problem.
And then you have the fact that so many of the people who appear as economists are hired guns. There are narratives of people working for think tanks where instead of getting some premises and being tasked with figuring out what conclusion those premises lead to, they’re given a conclusion and tasked with coming up with premises that will take them there. And in that kind of environment, you know what’s going to happen, right? The results are just not going to be serious.
And then there’s a bunch of wannabes, people who really aren’t economists at all, sometimes employed by banks, they appear on television presented as economists, and they’re effectively salespeople, right? Their job is to sell a certain institution and their financial packages, and we shouldn’t expect what they say to reflect the consensus opinion among economists or something. So part of what’s lacking here I think is just sort of economic literacy. I don’t want to blame anyone for lacking that because economics is famously inaccessible.
If you are a curious, intelligent, normal person, you’re trying to get a sense for what economics is about you could not pick up an economics journal and get anything out of that. It’s just going to be complete gibberish. Economists are sadly arrogant and they are sometimes not as accommodating as they could be to people who aren’t already themselves economists. And so there’s a lot of work that needs to be done there. But part of what I’m trying to say is that there is a really interesting economics out there that’s really helpful, both at the individual and at the collective level, and we would all be better off if we knew about it.
David Goldstein:
You have a book with an incredibly optimistic title, and Nick has been particularly cynical today, very quickly persuade Nick why he should be optimistic about economics and how it can save the world.
Eric Angner:
Let’s talk about climate change for a sec. So big problem. There are all sorts of jokes about how economists can’t agree on anything, but when it comes to climate change, overwhelmingly economists think that what we ought to do is to tax carbon emissions. There is an open letter signed by literally thousands of economists, Nobel laureates, fed officials and so on. This is not presented as a magic wand. It’s not presented as the only thing that we should do, but the idea is that we should just tax the hell out of the people who are causing the problem and then we should crank up the tax until the problem is fixed. Again, it’s not a magic solution. It might not work, it’s not going to work on its own. It needs to be combined with other sorts of energy efficiency standards and whatnot.
But here’s a solution or a proposed solution that’s like theoretically well grounded. It has been studied empirically and it appears to work in places where it’s being implemented, not by its own, but in combination with other interventions. It’s a intervention that economists from left to right agree on. You have the Mancur people and the Paul Krugman people and all sorts of other economists who just basically agreed that this have a shot of working, and it’s workable. This is a proposal that we could implement if not tomorrow, at least in the short term. And the fact that this is not getting more attention is to me, something of a scandal.
The open letter was published in the Wall Street Journal. This group took out whole page ads and whatever, but it fizzled away. They never could get the attention of the public and the opinion pages and whatnot. That could have several reasons. And maybe the people who would be taxed under this proposal don’t like it. It could be because people don’t understand the logic of the proposal. It could be that people distrust economists. But the point is that there are proposals out there that could be combined with other sorts of actions that just have a chance of working.
We could implement them. We should be able to build a coalition behind this kind of intervention. To me that gives me some degree of hope. This is not hopeless. There are ideas out there. How we implement it is obviously a political problem way above my pay grade. But let’s give it a shot, right? Let’s try.
Nick Hanauer:
Yep. Well, one thing I think we can agree on is that there’s a lot of important new work going on in the field, and you may or may not know that our work includes academic economics. And my co-author Eric Beinhocker at Oxford, and I have been hard at work trying to come up with a framework that can reform the field somewhat. But it all starts with empirically verifiable assumptions about human behavior, about the dynamics of human social systems, so on and so forth. You can’t make progress, for example, if you really believe the economy is a parade or optimal equilibrium within which if one thing goes up, another thing goes down.
Eric Angner:
So look I’m with you. I mean, I wrote this textbook in behavioral economics. So much of my work is in behavioral economics, which is based on the assumption that the foundations need to shift, right? They need to be a little more realistic if we’re going to be able to build an edifice that delivers on top of it. So I’m with you on that.
But I will add that if you look at successful sciences outside of the social sciences, Newton’s mechanics, for example, which everybody knows from high school, I guess, it starts with assumptions that are wildly false. It assumes that all the planets are point masses that’s infinitely small. It assumes that there’s this power of gravity that operates across the universe instantly and faster than the speed of light. These assumptions are obviously false. If everything you do is to look at the assumptions, then Newton’s theory should have been tossed in the trash bin within seconds, but that’s-
Nick Hanauer:
Except it makes perfect predictions.
Eric Angner:
That’s right. So the point here is that we assess the performance of a scientific model in general, not by looking at the realism of the assumptions taken out of context, but rather we judge the theory as a whole and we ask, does it deliver whatever thing we’re expecting it to deliver, whether it be understanding, prediction, control.
Now, I’m also with you that many economic models don’t deliver in that respect.
Nick Hanauer:
Anything.
Eric Angner:
But the point is that when we assess these models, we can’t just look at the truth of the assumptions taken in isolation. We have to look at the package as a whole, the hypotheses, the theory, the auxiliary hypotheses and whatever, and come to some sort of judgment about whether it delivers.
Nick Hanauer:
Okay. But if all the assumptions aren’t true and it doesn’t deliver any sort of ability to protect the future, I think we can agree-
Eric Angner:
In the trash bin it goes.
Nick Hanauer:
Yeah. And yet-
Eric Angner:
So essentially, Nick, economics is being besmirched by economics.
David Goldstein:
We are. I know we’ve been incredibly cynical of this, but we agree. I mean that economics can save the world. That it must save the world, and it just requires a better economics sense.
Nick Hanauer:
Yeah. I mean, yeah, this is what we devote our lives to. So if we strongly disagreed with you, we would not be here.
Eric Angner:
I thought you guys would be a lot harder on me than you have been. I mean it is a bold claim and whatever, but the fact that the reason why you’re in this field is presumably because you think economics can deliver if it were just better, right? And you also think economics ought to be, it’s a moral duty to make it better to the extent that we can. And that’s obviously exactly what I’m arguing.
We might disagree about specific theories and what they deliver and whatever. I think behavioral economics is a pretty cool area. Happiness economics is a cool area. The chapter on epistemic humility might be one of my favorites. You might not think economists would be studying humility given that they’re so not humble themselves. But there’s a science on that. And it leads to some very actionable evidence that we can implement in our own lives right now and that we can implement in groups to become more overconfidence proof. And that stuff is useful. It delivers.
Nick Hanauer:
So one final question, Eric, why do you do this work?
Eric Angner:
Oh, why do I do this work? Well, to some extent, this is my personal little crusade. I’ve always been interested in philosophy and I’ve always been interested in economics. And throughout my entire adult life, I’ve had economists come to me and say, “Oh, what’s the philosophy for, it’s all subjective anyway.” And I’ve had a philosophers come to me and say, “Oh, why you worry about economics.” My advisor at some point said, “Why are you still studying that shit?” This is how people talk. And so I’ve always had to justify myself, and it’s annoying, but it’s also been kind of helpful for me because it’s forced me to express to philosophers why one might care about social science and to social scientists, why one might care about philosophy. I think both of those things are important.
And so this book is to some extent a way for me to justify my own existence in career choices and stuff. But I also genuinely feel like there’s a lot of cynicism in the world. Some of that is directed against scientists. I’m a Gen X kind of person myself, so I’m fluent in cynicism. But I’ve come to think maybe in old age that cynicism is not that helpful. We have a duty to make the world a better place for the people who are alive who didn’t cause the problem themselves and for future generations.
I mean, I think about my kids who are going to have to suffer the consequences of the decisions that we’re making. We have a duty to make the world a better place, and that includes a duty to pay attention to the information that we have. We know some things that we could do that have a shot at improving things. We have no reason not to try to implement those things.
Nick Hanauer:
Yeah, that’s fantastic. Well, thank you so much for being with us today, and hopefully we can collaborate on making economics more useful in the world.
Eric Angner:
I would love that. Thank you all so much for the conversation. I loved every moment of it.
Nick Hanauer:
That was such an interesting conversation, Goldie, and I could have talked to Eric for hours. And I do think that the intersection of philosophy and economics is useful and righteous, as we’ve talked about many, many times. Economics as a field cannot be distinct from philosophy or politics. Political economy is what we should be talking about, not economics per se. Because at the end of the day, economics is how human societies rationalize who gets what and why. These are moral normative arguments about what society should be like and how it should work and why, and how that fits either within or without people’s moral frameworks.
David Goldstein:
And the biggest lie in economics, Nick, in the way it’s taught, in the way it’s presented as this idea that you can reduce it all to math, that it’s mathematics. And if you don’t get the economics, you don’t get the math and you can reduce it all. And it just numbers. It’s an equilibrium system so things always balance out. You can always do the math. And what that does is that divorces morality from economics. It says, well, yes, it might be bad for people. It might not seem fair. It might distribute vastly unequally, but it’s math. There’s nothing we can do about that. It’s math. That’s just the way the economy works. And if we do it any differently, well that’ll disrupt the equilibrium and be inefficient. And in the end, you’ll just end up hurting the people you’re trying to help.
And that strikes me as maybe not deeply immoral in terms of intent most of the time, but certainly immoral in practice. And in the end, it’s ends that count, not means.
Nick Hanauer:
That’s right.
David Goldstein:
And I think where we are now in economics is where medicine was around the turn of the previous century, around the early 20th century, and you’re beginning to see it become science and actual science it’s claimed to be for so long.
Nick Hanauer:
Not just a bunch of conjectures woven together into a mathematized story about cause and effect, which is essentially what it is today.
David Goldstein:
Right. And I think that maybe what you’ll see is as it becomes more of a real science, more grounded in science, it’s just like medicine. It’ll stop killing more people than it cures.
Nick Hanauer:
Yeah, which is probably what it does today.
David Goldstein:
Yeah. And I think a great example of that specifically, again, we talked about with Eric, his own situation with childcare when he was living in the DC area and a professor there.
Nick Hanauer:
And that was the middle out moment, wasn’t it, in that conversation?
David Goldstein:
Yeah, that was definitely the middle out moment because he was firmly middle class and he was earning what most people would think would be a good living. But when your childcare costs are 2, 3, 4, $5,000 a month, I mean, you could afford that Nick, but you’re not middle class. I could never have afforded that. And it’s interesting. You see what his solution was, was the exact same solution that a former guest of ours was, and we talked to Anu Partanen about her book, the Nordic Theory of Everything. When she and her husband started a family, they ended up moving from New York back to her home country of Finland where just like in Sweden, because in the Nordic countries, high quality childcare was guaranteed. It was nearby and it was virtually free. You’d pay no more than a couple of hundred dollars a month. Nothing if you couldn’t afford that.
And services like this that allow you to live a middle class life. We think in America middle class is about how much you earn. But that’s not it at all. It’s a state of mind. It’s a whole lifestyle. And if you can’t afford to send your kids to childcare, then you can’t afford to work. And so what we have, and we have this conversation going on right now with the criticisms of the Biden administration and their implementation of the CHIPS Act, where they’re putting amongst other things, childcare mandates on chip manufacturing.
Now understand this, these big chip manufacturers want a piece of a $39 billion federal subsidy for expanding domestic chip manufacturing. And they are objecting to having to provide childcare so that women can come into the workforce. At the same time, they’re complaining about how, “Oh, we’re going to have trouble finding enough qualified workers.”
Nick Hanauer:
No, it’s astonishing. That’s such a great example of the kind of… And their objection to having to provide services to the workers whose taxes are paying for these subsidies that they’re using to build these factories is being echoed by the great neoliberal left.
Nick Hanauer:
As if the quality of life of the workers who work in those factories is somehow distinct from the point of the exercise in the first place. We didn’t do the subsidies so that the United States would have chip factories. We did the subsidies to improve the lives of people in the United States.
David Goldstein:
And it goes one step further, and this was an important point that Eric made, is that it’s good for the chip manufacturers because now they have a larger pool of workers to draw from, qualified pool of workers because women, and in some case, men… I was a house daddy for the first couple years of my daughter’s life. That’s really inefficient to have somebody home taking care of one to maybe three kids when you can have one teacher per eight kids as a childcare professional, and now you can go back and do that specialized line of work that you are trained and talented and that you want to do and continue with your career.
That is a much more, if you want to think about it from a neoclassical perspective, a much more efficient way to run an economy. But it’s also, of course, more humane. And it gets to one of the core points of middle out economics and about our economics in general is that inclusionary principle, the more people you fully include in the economy, the faster and more prosperous it grows. And that’s not just for workers, it’s for businesses, it’s for everybody. And it’s about building this large, thriving, robust and secure middle class. A middle class that doesn’t have that sense of scarcity that Eric talked about. And that’s a very middle outtake on the economy.
What do you say, Nick? You feeling a little more optimistic that we’ve got somebody like Eric out there making these points?
Nick Hanauer:
Slightly.
David Goldstein:
Well, then success. Eric wins. Again, I think it’s a really important book. Encourage people to go out and get it. It is called How Economics Can Save the World. You can buy it wherever you want, but if you want to save the world a little bit better, go get it at your local independent bookstore.
Outro:
Pitchfork Economics is produced by Civic Ventures. If you like 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 Skunk Works, and peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.