Podcast Summary: Pitchfork Economics with Nick Hanauer

Episode: BONUS: Econ terms and definitions explained by Nick and Goldy
Date: March 8, 2019
Hosts: Nick Hanauer and David “Goldy” Goldstein (Civic Ventures)

Episode Overview

In this bonus episode, Nick Hanauer and Goldy take a step back to demystify some of the key economic terms they use frequently on the show. Aimed at making economics more accessible, the discussion blends clear, witty explanations with pointed critiques of mainstream economic thought. The hosts define and contextualize terms like neoclassical economics, neoliberalism, trickle-down economics, heterodoxy, monopsony, and stock buybacks, all while maintaining their trademark irreverence.

Key Discussion Points & Insights

The Importance of Defining Terms

• [00:04] Goldy points out that economic jargon can be alienating:

  “So, Nick, one of the problems with you knowing so much about economics is that you toss out these big words that we know really well... but not everybody is as tuned in as we are.”

• Nick references Bertrand Russell:

  “I think it was Bertrand Russell. If you want to discuss with me, define your terms.” (00:29 - Nick)

1. Neoclassical Economics

Definition and Critique

• [00:39 - 03:42]

  • Described as the “orthodox economic theory” taught in Econ 101, based on several main assumptions:
    • Humans are rational, self-maximizing, and selfish.
    • Value is equated with price: what you earn equals your worth.
    • The economy is an equilibrium system (Pareto optimal) where improvements for some necessarily hurt others.
  • Hanauer is critical, arguing these concepts were “made up” to fit mathematical models that don’t reflect reality.
  • Critiques trickle-down conclusions:

    “We have drawn a bunch of conclusions from neoclassical economics, like raising wages kills jobs and tax cuts for rich people create growth, which are just objectively false.” (03:35 - Nick)

• Notable Quote:

  “If you're an orthodox thinker... you have essentially crossed the beams and violated a law of nature. And you are therefore paying somebody more than they're worth. And therefore you've harmed the economy and harmed welfare and eventually killed jobs.” (01:55 - Nick)

2. Neoliberalism

Origins and Ideological Evolution

• [03:59 - 06:43]

  • Initially a response (in the 1930s-40s) to statism and collectivism amid fears of authoritarianism and communism.
  • Legitimate faith that market economies outperform non-market ones.
  • Over time, morphed into a rigid ideology rooted in neoclassical economics:
    • Freedom from constraint as the sole freedom.
    • Markets and competition as the only legitimate organizing principles.
    • Capital (especially concentrated capital) as the engine of growth.
    • Shareholder value maximization as the only corporate goal.
  • Goldy underscores its prevalence:

    “That sounds like mainstream economic and political ideology for the past 40 years.” (06:15 - Goldy)

• Hanauer doesn’t mince words:

  “All of that's bullshit.” (06:41 - Nick)

• Clarifies the difference:

  “Neoclassical economics, that is a school of economic theory and neoliberalism, is a political and economic ideology... built on top of that.” (06:43 - Goldy)

3. Trickle-Down Economics

Policy & Rhetorical Tool

• [07:09 - 07:45]
  • Defined as a set of memes and rationalizations, not a scientific theory.
  • Core claims:
    • Tax cuts for the rich create growth.
    • Deregulation benefits all.
    • Raising wages kills jobs.
  • Dominant in US policy since around 1980 (Reagan era).
  • Blunt summary:

    “Again, all of which is bullshit.” (07:43 - Nick)

4. Heterodoxy

Alternative Economic Thinking

• [07:45 - 09:17]
  • “Heterodox” = non-orthodox; challenges core neoclassical ideas.
  • Emphasizes human reciprocity, not just self-interest.
  • Redefines value as solutions and welfare, not price.
  • Sees economies as complex, non-equilibrium ecologies.
  • Goldy highlights interdisciplinarity:

    “It is actually a synthesis of the latest science in a broad number of disciplines. Physics, biology, evolutionary theory, psychology, sociology, anthropology, information theory, network theory.” (08:43 - 09:06 - Goldy/Nick)

5. Monopsony

Market Power from the Buyer Side

• [09:20 - 11:10]
  • “Monopoly’s evil twin.” Monopsony is where one (or a few) buyers control a market, depressing prices and dictating terms.
  • Example: Chicken farmers dependent on single agribusiness buyers (Tyson, Purdue).

    “As a chicken farmer, you're not really an independent business anymore. They make you buy the chicks from them, they give you standards on how to raise them, and they set the price per pound... they've really been impoverished over the last couple decades.” (10:24 - Goldy)

  • Hanauer stresses lost value:

    “All of the value... has been sucked out... and is aggregated into the earnings, bonuses and stock price of these big companies.” (10:44 - Nick)

6. Stock Buybacks

Corporate Practice and Its Consequences

• [11:12 - 13:06]

  • Definition: When a company uses its own cash to buy back its own stock, reducing share count, boosting price and earnings per share (EPS).
  • Hanauer and Goldy critique the practice as “pernicious,” benefiting the wealthy while doing nothing for the overall economy.
  • Scale highlighted:

    “Stock buybacks now represent about 5% of GDP. About a trillion dollars a year.” (12:40 - Nick)
    “A trillion dollars that does nothing in the economy but make a few rich people richer is a remarkable source of money for all those things.” (13:02 - Nick)

• Notable quip by Goldy:

  “That's like magic. You don't even actually be good at your job.” (12:14 - Goldy)

Memorable Quotes

• “All of that's bullshit.” (06:41 - Nick Hanauer)
• “We have drawn a bunch of conclusions from neoclassical economics, like raising wages kills jobs and tax cuts for rich people create growth, which are just objectively false.” (03:35 - Nick Hanauer)
• “Again, all of which is bullshit.” (07:43 - Nick Hanauer)
• “Monopsony is when you have dominant control of a market from the perspective of the buyer, you can control the cost of things.” (09:29 - Goldy)
• “That's like magic. You don't even actually be good at your job.” (12:14 - Goldy)

Timestamps for Key Segments

• [00:39] Neoclassical Economics - definition and critique
• [03:59] Neoliberalism - evolution from economic theory to ideology
• [07:09] Trickle-Down Economics - policy memes and myths
• [07:45] Heterodoxy - alternative economic thinking
• [09:20] Monopsony - market power from buyers, chicken farmers example
• [11:12] Stock Buybacks - definition and economic consequences

Conclusion

This episode serves as a rapid-fire glossary for frequently used economic terms, framed through the lens of the show’s critical, irreverent style. Hanauer and Goldy make a concerted effort to puncture the myths of mainstream economics, opting for plain language and real-world examples. They invite listeners to submit other confusing terms for future explanation, emphasizing the ongoing need for clarity and accessibility in economic discussions.