Nick and Goldy kick off the New Year by answering more of your questions! Has there ever been a time period with strong deflation? Should folks prepare for an upcoming recession? Why aren’t we allowed to question the free market? And much more.
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Mark:
I would love to hear you weigh in on what I believe is the pernicious role of metrics in the workplace and in the economy.
Sarah:
I have a few questions about the upcoming recession.
Rich:
Rising wages should be a separate discussion when you’re talking about inflation, but everything I hear in the media is saying that rising wages is bad because it’s contributing to inflation. And hopefully, you’re addressing that in your book and maybe you can comment on this question.
Speaker 4:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, 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. Happy New Year, Nick, you make any New Year’s resolutions?
Nick Hanauer:
No, I need to do that, don’t I?
David Goldstein:
Yeah, yeah. I made a New Year’s resolution and that is, Nick, I resolve to do a better job of answering more of our listener questions.
Nick Hanauer:
Okay, well that sounds terrific.
David Goldstein:
Which is why, today, we are recording an AMA, an ask me anything. Our voicemail inbox has been overflowing with questions, and as we kick off the new year, we thought it would be a good idea to clear that voicemail box out.
Nick Hanauer:
Excellent. Well, let’s get to it.
Rich:
Hey, Nick, this is Rich from California. Here’s my question, based on everything you guys have said and I’ve read, rising wages should make it possible for people to afford more expensive things. And therefore, it should be a separate discussion when you’re talking about inflation and rising wages. But everything I hear in the media is saying that, “Well, rising wages is bad because it’s contributing to inflation.” And no one seems to address the other side of it, which is it actually combats inflation when people make more money because they can afford to buy things. And as you know and as you said, we’re way behind on catching up on rising wages. And hopefully, you’re addressing that in your book and maybe you can comment on this question. Thanks a lot. Keep up the great work.
Nick Hanauer:
Rich poses an excellent question about the relationship between inflation and wages. And while, of course, it is true that when wages go up, particularly if wages go up a lot, prices generally have to increase because wages are a component of virtually every price of the cost of making virtually every product and service. But if you earn $7.25, which is the national federal minimum wage, and that was to double to $15 an hour or go even higher, $20 an hour, let’s say, yes, prices would go up, but a 3% increase in product prices is a small price to pay, not to pun, for a 50 or 75% increase in wages. And the main problem of the American economy, the thing that we’ve talked about again and again, Goldie, is the fact that we are living through a generation of wage suppression.
David Goldstein:
Right.
Nick Hanauer:
And the median full-time worker earns about 50k today. If they hadn’t gotten so screwed over by these decades of neoliberal policies, they’d earn about $100,000 a year. And would prices be higher if every American earned, every middleclass American earned in the range of twice as much? Absolutely, but it is unequivocally true that all of those families would be on a relative basis, better off. They would be able to afford more. They’d have more savings, they would pay more taxes, all of the things that it takes to make an economy thrive.
David Goldstein:
Right. So I just want to add a little context and a little history onto your answer, Nick, and that is we did raise the minimum wage to $15 in Seattle and there was a lot of research done by researchers who were initially hostile to the minimum wage increase. And they found little or no impact on prices in restaurants and grocery stores, two industries that hire a lot of minimum wage workers. So we had a substantial increase in the minimum wage and little or no observed increase in prices. And there’s a lot of reasons why that may have occurred, but let’s be clear, workers are not always paid exactly what they’re worth. They’re not always paid according to their marginal productivity, and therefore, there’s a lot of room within prices in the current economy to absorb the cost of higher wages.
The other thing is a little historical context and that is this idea, this idea that it is rising wages that is fueling inflation is so 1970s. That was the theory behind Fed chair Paul Volcker’s dramatic increase in interest rates and we’re talking nothing like what we’re doing today. We’re talking 17% interest rates just to inflict this really painful recession in order to break the power of labor to demand higher wages. And the whole purpose of what he was doing was crushing demand for labor, to reduce the power of workers organized and otherwise to continue to demand higher wages. And that was to get out of an inflationary cycle that arguably wages did play a significant role in, though probably not as significant as the theory that informed even Volcker said.
But to be clear, this is not the 1970s. This inflation is not that inflation. We have global inflation. The US isn’t close to the worst inflationary economy within the developed world right now. You have inflation in Europe, you have inflation in Asia, you have inflation in Africa and in Latin America. It is all over the world. So to say that somehow it is American workers getting higher wages that is causing inflation just isn’t true. We have a global supply chain crisis. So well, you said in theory, let’s be clear it’s theory that we don’t necessarily accept, but it’s also the evidence for it is 50 years old. It’s an economy that no longer exists. This is an entirely different economy and there is no evidence that it is the demand for higher wages that has increased inflation in the United States.
And in fact, while wages have been increasing at a higher pace now than before the pandemic, it is at a lower rate than inflation. Wages are not keeping up with inflation. Therefore, it cannot be wages that are largely responsible for inflation.
Nick Hanauer:
Exactly. And whenever we talk about an issue like this, it’s always important to punctuate it by reminding people how out of control corporate profits and things like stock buybacks are. Because part of the big problem is that corporate profits have basically doubled as a percentage of GDP. Stock buybacks have gone from zero to about 1.3 trillion, I think, last year. Just for perspective, 1.3 trillion is enough to pay every working person about another $10,000 a year. So here’s 1.3 trillion that corporate America effectively flushes down the toilet in terms of capital efficiency. All it is just a Ponzi scheme for rich people. And all of that money could have been used for wages. And then none of the challenges that ordinary families are now facing from higher prices would exist because everybody would have more money to spend.
And make no mistake, that’s not inflationary. You’re just taking money out of the cost and moving that $1.3 trillion from one column to another, right? It’s just a different group of people who are getting it. It’s still in the stack of expenses. So I guess the punchline is we can pay people a lot more and we might have a little bit more inflation, but that doesn’t mean we shouldn’t.
David Goldstein:
Yeah. So this is a perfect segue, Nick, because we have an email from Carly. Carly writes, “With all this talk of inflation, I’ve been wondering why no one ever talks about deflation. Has there ever been a time period of strong deflation? It seems to me that deflation would be beneficial for the masses, but would it have bad side effects like people losing jobs?” Well, I guess the best way to answer that, Carly, is to say, yes, there has been a time period of strong deflation and you might know it as the Great Depression.
Nick Hanauer:
That’s right.
David Goldstein:
From around 1929 to 1934, we had on average about 7% annual deflation. That meant prices fell on average 7% a year and it resulted in mass unemployment, the highest unemployment and most enduring unemployment in American history. That’s why we call it the Great Depression. It was greater than anything we’d ever experienced. And in fact, much of what President Franklin Roosevelt experimented with in the New Deal we’re measures to break that deflationary crisis, break that cycle. And that’s where all that government spending came in. That is where efforts to raise the minimum wage came in, support for industries to expand manufacturing. And the problem with deflation, you have to understand that if we’re in a deflationary cycle, you would have to be nuts to invest money in expanding manufacturing, in expanding your business.
Nick Hanauer:
Or doing anything.
David Goldstein:
Right.
Nick Hanauer:
Because your future returns are going to be lower than the costs you’re taking on to produce …
David Goldstein:
Right.
Nick Hanauer:
… whatever it is.
David Goldstein:
You take money valued now and invest it in a future that is smaller than the present. And that is the opposite of capitalism. Capitalism is all about borrowing money from the future on the expectation that the future will be much larger than the present. So you’re going to take your money and you’re going to invest it in the future and you’re going to get returns because the economy will be bigger in the future. In deflation, GDP shrinks. And so the economy is smaller, there’s less purchasing power, you can sell less and so that feeds in on itself. And after the financial collapse of 2008, the housing market collapse and the financial collapse, the Great Recession, what the Federal Reserve feared most was deflation. They feared we were heading into a deflationary cycle. You heard a lot this term that they used which was … What was it, Nick? The secular-
Nick Hanauer:
Secular stagnation.
David Goldstein:
Right. You heard this term secular stagnation.
Nick Hanauer:
Stagnation.
David Goldstein:
They were talking about a deflationary cycle, a long period of what they feared would be slow growth and they kept setting inflation targets. Like now, they’re setting an inflation target where they want to get down to about 2.5%. Well, back then, they were trying to get up to 2.5% and they couldn’t, no matter how much quantitative easing they did, no matter how much they cut interest rates. And we got to the point where interest rates were just above zero and other countries, Japan most famously cut interest rates below zero to try to avoid a deflationary crisis and Japan ended up with decades of stagnation.
Because once you’re below zero, there’s not much you can do. And I believe and I don’t think there are many analysts talking about this, but I believe a lot of what’s driving the Federal Reserve now is that they saw an opportunity for the first time in 15 years to raise interest rates substantially and they jumped on it because they want to be able to slash interest rates in the future if they need to in order to head off a deflationary cycle. They fear deflation more of an inflation, I think, long term because deflation is the Great Depression.
Nick Hanauer:
Yeah, that’s right. Okay. Next.
Sarah:
Hi, I’m Sarah from Seattle and I have a few questions about the upcoming recession. And I think I kind of know what you think, but I was hoping that you could go more into what the signs are to look out for when it’s about to start, really, really start and maybe even some signs of when it’s coming to an end and maybe just some good advice for someone who’s scared of maybe losing their job in this recession. Thanks.
Nick Hanauer:
Well, Sarah, you’re asking about the upcoming recession and I know that there’s a lot of talk in the news about the upcoming recession. And of course, it is true that there will be in a recession in the future, much in the same way as there will be an Ice Age in our future, but it’s very hard to tell when that will be. And I think it’s also really important to acknowledge that in these massively polarized times, there’s a huge constituency of folks who desperately want the country to go into recession, because if it does not, President Biden or whoever it is that runs instead of him will win and the Republican will not because the economy has actually been in relatively great shape and it’s getting better all the time.
So I have been personally very, very skeptical about this inflation talk since it began because my sense of the economy is that in most ways it’s booming, other than the fact that there’s been this big correction in the stock market which was wildly overvalued to begin with.
David Goldstein:
To borrow a phrase, it was inflated.
Nick Hanauer:
It was inflated. And the fact that the stock market is lower makes small number of rich people very, very, very sad, but the stock market has virtually nothing to do with the real economy and that feels and seems very, very healthy right now. And there’s another thing I think that we have to take into account, which is the momentous achievements of the Biden administration over the last 24 months on economic policy. So if you add it up, there’s about 4 trillion that have been and will be deployed over the next couple of three, four or five, 10 years, money going into infrastructure, money going into the energy transition, money going into healthcare, all sorts of things like that, the first major investments in the country in the middle class that we’ve had really in a generation and that is highly anti-inflationary. Those are the sorts of programs that prevent recessions. So did I say highly?
David Goldstein:
You said anti-inflationary, but you know what? You misspoke, but I’m going to say that, yes, they are anti-inflationary.
Nick Hanauer:
And they are.
David Goldstein:
You meant to say anti-recessionary, but I would argue they’re also not inflationary and that they invest in …
Nick Hanauer:
Capacity.
David Goldstein:
… expanding critical infrastructure, both public and private, that is needed to expand the supply chain and provide cheap reliable energy.
Nick Hanauer:
That’s right.
David Goldstein:
And let’s remember how important energy is to prices. It was the various oil shots of the 1970s that tipped us into that inflationary cycle, that stagflation cycle in the first place. And it was cheap oil in the 1980s that was largely responsible for our recovery. So once we make that shift to green energy, one of the advantages of green energy is that the prices are very stable.
Nick Hanauer:
As for advice, with respect to losing your job in a recession, boy, that’s a tough one, but here’s at least one piece of cheap advice is don’t work for a schmuck like Elon Musk. That would be my best advice.
David Goldstein:
Yeah, I-
Nick Hanauer:
You don’t want to lose your job.
David Goldstein:
I will say that our recent experience of recessions has been really distorted. Recessions tend to be relatively short and they, over the past half century, have tended not to be severe until the Great Recession which was the worst economic downturn since the Great Depression. And until we hit the pandemic recession, which was just a bizarre confluence of circumstances. It was a black swan event which is unlikely to be repeated very often. So we had two extremely severe, unusual and scary recessions. There are some arguments to say that we had a recession this past year in the technical sense of the term of GDP decreasing for two consecutive quarters. And that may or may not have been true with the final numbers, but it didn’t have an effect on employment.
Nick Hanauer:
On employment, which is mostly what you’re worried about in a recession …
David Goldstein:
Right.
Nick Hanauer:
… is everybody losing their job and the opposite occurred during this “technical recession”.
David Goldstein:
Right. And so there may be a recession, but I would just say that if GDP shrinks and nobody is there to feel the fall, did it make a noise?
Nick Hanauer:
Yeah, there you
David Goldstein:
A tortured metaphor. If you still have your job, it’s not a recession.
Nick Hanauer:
Yeah, exactly.
David Goldstein:
Okay, here’s a question I know you’ll love to answer, Nick. We got an email from Jason who asks, “In your podcast, you are often rightly critical of the economics 101 view of the world. As someone who must teach econ 101, is there a right way to teach it? Should we even bother trying to fix economics or just let the whole thing go and allow some future field of human ecology or complexity science to teach us how societies acquire and organize resources?
Nick Hanauer:
Oh, Jason, such a good question and so hard to answer. So, a, I have guilt. I suspect Goldie has guilt. My co-author Eric Beinhocker has guilt that we have not yet published our book that seeks to upend the orthodox view of economics. And so in the absence of being able to point you to an alternative, it feels really crappy and inadequate to say, “Yeah, econ 101 sucks,” even though it really, really does. But I think you pose a really, really important question which is, is it better to have a bad framework than no framework? And I just don’t know. The econ 101 view of the world is like, if one thing goes up, another thing goes down. Raising wages kills jobs. Tax cuts for the rich create growth, all that nonsense. It’s just a bad framework and the intuitions that were built on top of the econ 101 …
David Goldstein:
Right.
Nick Hanauer:
… worldview have obviously done a lot of harm, but you’ve got to replace them with something. And the good news is that I think the social science of the last 40 years suggests what that is, but you do really have to rip economics down to the studs to get to a better answer about where prosperity comes from and how to get more of it. What’s interesting is even in your question is embedded the framework of neoclassical economics which is how societies acquire and organize resources. And that way of thinking about what an economy is we just think is wrong.
Markets don’t work by efficiently allocating scarce resources, although that is the orthodox way to look at it. Markets are the greatest social technology ever invented for creating prosperity because they allow huge numbers of people to cooperate, to compete, to evolve new solutions to human problems which is what prosperity is. So the point of economics is to try to figure out what prosperity is, where it comes from and how to justly and sustainably get more of it. And we believe that our framework can point humanity in a much better direction than the existing framework, but you do really have to go back to square one. How do we answer this question?
David Goldstein:
Yeah, so I would say, Jason, that absent the new economics, absent an introductory textbook that can introduce your students to the new way of economics, which you’re right, has a lot to do with human ecology and complexity science and many other fields typically thought of as outside of economics. I think you can use your existing econ 101 textbooks to teach your students to critically think about economics by showing them where the textbook is if not always wrong, not always right. If you’re using, for example, Mankiw’s Principles of Economics, which is the most widely used econ 101 text, but I’m sure this is true in almost all of them, that textbook in particular uses the minimum wage as the illustration of the natural and universal inverse relationship between price and demand.
There’s a chart there showing that if you raise the minimum wage, it will decrease employment and it makes that assertion. And yet, we have decades of empirical evidence showing that this is not true. So that chapter will say, “Oh, well, in the monopsony context, that won’t hold true.” Well, it’s great. You now get to have a discussion, “Are these monopsony markets largely? Is that why raising the minimum wage is not decreasing employment or is there something deeper, more fundamentally flawed in the models at the heart of neoclassical economics?” So I think it is useful to take the existing textbooks and step through them with a critical eye and question all of their assertions and teach your students to question those assertions and maybe while you’re there suggest that they read further into things like complexity science and evolutionary psychology and-
Nick Hanauer:
Yeah, but Goldie, I think we can offer actually a practical suggestion, which is that our friends, Sam Bowles and Wendy Carlin …
David Goldstein:
That’s right.
Nick Hanauer:
… who are absolutely at the forefront of new economic thinking with help from lots of people and in fact fairly substantial donation from yours truly have created something called CORE Econ, C-O-R-E Econ, which is a new econ 101 curriculum which I believe for educators is free or darn near free.
David Goldstein:
Yeah, it’s completely free. It’s online. It’s in the public domain.
Nick Hanauer:
That’s right. Go check out CORE Econ and that may be of great use to you. That’s at least a step in the right direction.
David Goldstein:
Okay. Nick, you’ve been spending a lot of time in London recently.
Nick Hanauer:
I have.
David Goldstein:
So this is a question that you might be able to answer. On Facebook, Chris messaged us asking, “Do you think Britain would do well to move to the Nordic model, both economically and socially? Britain is in one huge and dire mess, compounded greatly in my view by Brexit. Thanks.”
Nick Hanauer:
Couple of things. I think, first, Chris is right that the UK is currently suffering from a massive self-inflicted wound which was Brexit. And withdrawing from the European Union has made commerce flowing in and out of Great Britain much, much harder. And if you compare, however inadequate this may be, GDP growth rates for all the major European countries plus Great Britain, Great Britain is way below everybody else. It’s really terrible. And they have a conservative government in charge who is probably in many ways pointing the country in an even worse direction just because conservative economics, trickledown economics are all they know and there are no tools there to really get them out of the mess.
But to the main point, I just don’t think there’s any question that what we call the Nordic model, which is basically a commitment to markets, but with an equally big commitment to making sure that markets that mostly create good and don’t create harm and that there’s a big safety net and that inequality is moderated to a certain extent. That is currently on Planet Earth the best available governance model that we have. So should Britain be heading towards that model? Hell yes. So should the United States and frankly so should every country in the world and the countries … It’s just unambiguously true that the countries that basically do that, whether they are in Scandinavia like Norway or Sweden or countries that do that who are not in Scandinavia like Australia and New Zealand just end up with economies that work better and certainly have circumstances for their middle-income families that are far better than the people who don’t. And so, yeah, hell yes, they should do that, and if they did, it would be better.
David Goldstein:
Wasn’t Britain already a good portion of the way towards the Nordic model before Thatcher?
Nick Hanauer:
Well, geez, I don’t know.
David Goldstein:
Certainly much further along than we were.
Nick Hanauer:
Yeah, probably. Probably.
David Goldstein:
Yeah, we’re big fans. I think one of my favorite episodes, Nick, was our conversation with Anu Partanen, the author of The Nordic Theory of Everything. And at the end of that podcast, I revealed that I think I might be a secret Nord.
Nick Hanauer:
A Jewish Nord.
David Goldstein:
Yeah. The thing that was so appealing about Anu’s argument is that she points out that they’re actually more free than Americans. The American, and I suppose to some extent maybe the British reaction to a strong social safety net to social democracy is that big government impinges on your freedom. But she points out that you don’t have to worry about how you’re going to pay for daycare, how to go back to your job when you have small children because there’s always access to affordable daycare, that you don’t have to worry about moving into a neighborhood where the schools are good because all the schools are good. You don’t know have to worry about how you’re going to pay for an illness or a medical emergency because your healthcare is always paid for. You don’t have to worry about how you’re going to pay for college and whether your parents will support you and help pay …
Nick Hanauer:
Right.
David Goldstein:
… your tuition because college and graduate school tuition is paid for. It gives you this freedom to the pursue the things in life that you value most outside of these financial limitations that we impose on people in countries like the United States where these things are not taken care of and they’re not guaranteed. And in some cases, they’re just not available. I know people who get on the waiting list for daycare before they get pregnant and the couples who plan their pregnancies around where they are on the waiting list. It’s not even a question of, “Can you afford it?” It’s, “Is there a slot for your child if you have one?” and that is utterly ridiculous. And we see if anything in the wake of the COVID crisis, if there’s anything that hasn’t recovered on the employment front, it’s the employment of child-rearing age women because a lot of them can’t return to work because they don’t have childcare.
And so perhaps we wouldn’t be as much in this inflationary cycle right now if we could get everybody who wants to work back into the workforce by making these necessary services available. So big vote for the Nordic model for me.
Mark:
My name is Mark, and I’m from Ooltewah, Tennessee. It’s East Tennessee. I would love to hear you weigh in on what I believe is the pernicious role of metrics in the workplace and in the economy. Now, my question is rooted in my 30 years’ experience as director in a large nonprofit that serve private colleges and universities. Now for the most part, I absolutely love my work, so I’m not complaining, but as I look at my job, it was mostly to add value to the extracurricular experience of students. It had to do with service learning, leadership development and stimulating a moral imagination. Now, while there are clearly ways of doing this productively and nonproductively, I found that it was impossible to capture the qualitative and intangible aspect of our work through the quantitative analysis of metrics that our overlords increasingly demanded of us.
And so if the rule of metrics is as pervasive as it seems to be, is our work in the economy really being served? Must everything first be counted in order for us to prove accountability? Thanks for wrangling with this question if you choose to and I love your show.
Nick Hanauer:
Yeah, so I love this question about metrics because I just find the quantification of everything and the modern obsession with KPIs and measuring everything to be taking us in many ways in the wrong direction. Now, don’t get me wrong, you do have to measure some stuff, right? You have to be clear sighted about what you’re doing and how it’s going and how you’re performing relative to others and all sorts of other stuff like that, but the amount of optimization that occurs when we let the measurement rule the roost, it’s just crazy. And even in a relatively simple business where you have these incentives in place based on measurements for employees, things as simple as sales, if your company sells umbrellas and it happens to not rain in a particular salesperson’s territory and they don’t sell any umbrellas, does it make sense to not pay them any money because they didn’t sell umbrellas …
David Goldstein:
Meet their quota. Yeah, they were nonproductive.
Nick Hanauer:
… even if they’re the best salesperson that you have? It’s ludicrous to be …
David Goldstein:
Right.
Nick Hanauer:
… imprisoned by these metrics. And we often, and certainly in public life, measure all the wrong things. GDP being the canonical example of measuring the wrong thing. And, Christ, Goldie, we don’t even measure median GDP.
David Goldstein:
Right.
Nick Hanauer:
Right? We measure average GDP, which means that the GDP that Bill Gates and Jeff Bezos create cancels out the GDP … How am I saying this? You know what I’m trying to say, is that-
David Goldstein:
Right. When you have … A lot of GDP is income. You’re measuring income. And so the income of Bill Gates just basically distorts the average GDP. You think, “Yeah. Oh, great. Look how much the economy is growing.”
Nick Hanauer:
Average GDP, yeah.
David Goldstein:
Right.
Nick Hanauer:
But these people are winning and everybody else is losing.
David Goldstein:
Right. Bill Gates and Jeff Bezos and Elon Musk. Well, not recently Elon Musk, he’s been negative GDP the last couple months, but yeah-
Nick Hanauer:
Yes, he has.
David Goldstein:
Yeah, it doesn’t say anything about the lived experience of the typical person. So clearly, metrics can be useful, they can be informative, they can help paint a picture of the economy, but the thing about metrics is that some things are easier to measure than others and we tend to measure the things that are easiest to measure and ignore the things that are hard for obvious reasons. You can put a number. If there is a dollar value on something, you can report dollar values. What you can’t do, and we’ve had this conversation, Nick, and we could be snarky about it if you want, but, “How do you measure my productivity? How could you possibly do that?” And the typical measurements are absurd.
Nick Hanauer:
Right.
David Goldstein:
We’ve talked about this that if I’m producing 10,000 words a month and you’re paying me $10,000 a month, I’m getting a dollar word and I suddenly start producing 12,000 words a month and they’re just as good, high-quality words, maybe even better. And as a reward, you give me a raise to $13,000 a month because you think I deserve more than a dollar a word and I should be paid for every word because you’re a good guy. My productivity has decreased because you’re getting fewer words per dollar, even though I’m producing more words and higher quality words because you increase my pay, my productivity goes down under the typical way of measuring productivity. And that’s crazy because that’s not the real world. The real world is I got more productive. I’m more valuable. I’m producing more value. The fact that you’re paying me more doesn’t change that.
Nick Hanauer:
Yeah, yeah. Now the whole thing is a little crazy. And so we want to use metrics, I think judiciously, but we definitely don’t want to live in a world ruled by these dumb algorithms because they will create more harm than good. That’s for sure.
David Goldstein:
Okay. Nick, question about free markets via email from Anthony. Anthony asks, “Ages ago, I came to the resolution that the free market is not a force of nature such as wind, fire, etcetera. So why are free markets treated that way? Why aren’t we allowed to question them?”
Nick Hanauer:
Yeah. Well, Anthony, you’re dead right, free markets are not a natural phenomenon or a force of nature. They are a social and political construct created by and for human societies. And if they’re well managed and pointed in the right direction, they create a lot of good. And if they’re not, they don’t. But the question about why free markets are treated this way is a political and social and psychological one. And it has a lot to do with who has power and who wants to keep the power and doesn’t want anybody else to have power. And if you are a captain of industry, if you’re the Chamber of Commerce, if you represent the interests of capital, then you definitely want markets to be as unconstrained as possible. Because if they are, all of the benefits will accrue to capital. And the whole ruse around free markets is really a ruse around tricking people into believing something that will effectively entice them to cede power, status, and privileges to the owners of capital.
And that’s what that whole game is about, right? It’s a propaganda game aimed at convincing the broad public that anything that constrains businesses or capital will be bad for everybody. And look, corporations hate regulations for the same reason that robbers hate cops. It makes it harder to steal. So we should be confident that the market is not free or does not benefit from being unconstrained and aggressively regulate them to ensure that economic activity creates welfare for societies and all the economic activity that’s enriching the few but harming people gets stamped out. And that’s that, so-
David Goldstein:
Right. We’re not allowed to question free markets for the same reason historically we would be branded as heretics for questioning God.
Nick Hanauer:
Yeah, or the church …
David Goldstein:
Or the orthodoxy.
Nick Hanauer:
… right?
David Goldstein:
Yeah, the church. It-
Nick Hanauer:
The church.
David Goldstein:
It serves the interests of the-
Nick Hanauer:
Of the powerful.
David Goldstein:
Of the powerful and keep you from questioning the ideology that keeps them in power.
Nick Hanauer:
Yeah, there you go. Okay, gang, if you want to be part of our next AMA episode, please call and leave your questions on our voicemail line at (731) 388-9334 or fill out the contact form on our website, pitchforkeconomics.com. Please remember to follow or subscribe to the show wherever you listen. And if that happens to be on Apple or Spotify, please, pretty please with sugar on top, leave us a five-star rating or review. Thank you so much for listening.
Speaker 4:
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 @PitchforkEconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.