Myths That Built Trickle-Down Economics: Regulations Kill Growth (with Robert Reich)

Summary

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Episode Summary:

"Myths That Built Trickle-Down Economics: Regulations Kill Growth"

Podcast: Pitchfork Economics with Nick Hanauer
Guests: Robert Reich, Molly Moon Neitzel
Date: June 23, 2026

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Overview

This episode, part of the "Myths That Built Trickle-Down Economics" miniseries, tackles the widely held belief that regulation kills economic growth. Host Nick Hanauer, writer Paul Constant, and their guests, including former Labor Secretary Robert Reich and entrepreneur Molly Moon Neitzel, deconstruct the narrative that regulations are inherently bad for prosperity, detailing how the fight over regulation is really about whom economic rules are written to protect. The episode demonstrates that regulations often drive growth, create fairness, protect welfare, and are essential for a thriving market economy.

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Key Discussion Points & Insights

1. The Myth: Regulation Kills Growth ([00:00]-[04:14])

• Historical context: Regulatory fights are about power—who gets protected in the economy.
• Neoliberal position: "The rich and the powerful and big companies shouldn't be constrained by regulation... If we in any way constrain the rich or the powerful, it will be for everyone." (Nick Hanauer, [03:10])
• Real world record: Every era resists regulation—the same arguments used against child labor laws are now used against higher minimum wages or workplace safety.

Notable examples:

• CEOs demanding high standards for others but not for themselves.
• Past claims that child labor laws, dental hygiene rules, or the Fair Labor Standards Act would destroy industries now seem absurd in hindsight.

2. What Does Regulation Really Do? ([05:23]-[13:15])

• Regulation as the driver of market trust: "There are no successful economies in the world that aren't highly regulated." (Nick Hanauer, [07:18])
• Regulations don't simply limit activity; they discourage harmful economic behavior and promote prosperity by solving collective action problems and preventing cheating.
• Case in point: Hanauer describes his own experience in the pillow industry, where lack of regulation facilitated rampant fraud—cheap, low-quality pillows were sold as "goose down," harming consumers and honest competitors.

Notable Quote:

• "My little industry was a microcosm of the dynamics of regulation... It's so important for market economies to be regulated in a way that prevents cheating and solves the collective action problems." (Nick Hanauer, [13:05])

3. Regulation From a Small Business Perspective ([13:30]-[20:04])

• Molly Moon Neitzel's story: As an ice cream shop owner, she supported Seattle's minimum wage hike because it leveled the playing field, making it easier for ethical businesses to compete with those underpaying workers.
• Regulation can lead to a better, fairer labor market, but also introduces new challenges to solve, like pay equity between tipped and non-tipped workers.

Notable Quote:

• "It wasn't creating an even playing field for small business owners that wanted to pay people living wages." (Molly Moon Neitzel, [13:54])

4. Regulations as Protections—Robert Reich’s Perspective ([24:29]-[36:36])

• Reich reframes regulation: Regulations are "protections”—for health, safety, labor rights, and against fraud.
• Trickle-down's regulatory component: Deregulation is a boon for the wealthy and a risk for the majority. Regulatory rollbacks under Trump, for example, benefited corporations but left average Americans exposed.
• Wealth accumulation and rulemaking: As wealth concentrates at the top, the rules skew ever more in favor of the wealthy, undermining democracy and fairness.

Notable Quotes:

• "With regard to tax benefits... we've seen that tax benefits that go to the wealthy don't help anybody. They don't actually end up raising wages for people in the middle or at the bottom. We've also seen it with regulations..." (Robert Reich, [24:58])
• "Instead of using the word regulations, we ought to use the word protections because that's what regulations are." (Robert Reich, [29:52])
• "You can't have a free market without government." (Robert Reich, [35:25])

5. The Mechanics and Morality of Regulation ([36:44]-[38:44])

• Regulation is not a necessary evil, but an essential tool:
  • "Regulation is what holds us to ever higher standards, and it's what inevitably enables trust." (Nick Hanauer, [37:39])
  • It encourages an economy toward prosperity, roots out collective action problems, and makes high-level cooperation—and complexity—possible.
• Cooperation and prosperity: Without regulation, cheating flourishes and competition becomes a race to the bottom; with regulation, economies can sustain growth and fairness.

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Memorable Moments & Quotes with Timestamps

• Regulatory Double Standard:
  "No one wants to be held to a high standard, but everyone wants everyone else held to a high standard." (Nick Hanauer, [02:28])
• Historical Absurdity:
  "If the government forced dentists to wear masks when they performed oral surgery... they would lose the patient-doctor bond." (Paul Constant, [04:39])
• True Prosperity & GDP:
  "GDP doesn't measure the difference between a diesel burning truck... and an electric car." (Paul Constant, [08:35])
• Pillow Business Case Study:
  "We turned ourselves into what our competitors derisively called the 'down police'... to out and shame cheaters." (Nick Hanauer, [22:45])
• Minimum Wage Debate:
  "A lot of restaurant owners... were just saying we flat out can't afford it. That's what tips are for." (Molly Moon Neitzel, [15:12])
• Regulations as Protections:
  "Instead of using the word regulations, we ought to use the word protections." (Robert Reich, [29:52])
• The Free Market Myth:
  "It's not. You can't have a free market without government." (Robert Reich, [35:25])

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Important Segments & Timestamps

• [02:19] The basic human aversion to accountability and how it shapes regulatory debates.
• [05:23–07:48] Why all prosperous economies are highly regulated—empirical global evidence.
• [09:58–13:15] Hanauer's pillow industry example of the need for regulation.
• [13:45–18:35] Molly Moon Neitzel on minimum wage, pay equity, and new workplace protections.
• [24:29–36:36] Robert Reich’s deep dive: Trickle-down, deregulation, “regulations" vs. "protections,” and whose costs and benefits matter.
• [37:08–38:44] Final synthesis: Regulation, trust, cooperation, and the fabric of prosperity.

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Concluding Insights

Regulations are not economy-destroying constraints, but the very protections that make prosperity, trust, and fair competition possible. The myth that deregulation always leads to growth is, as history shows, consistently wrong. Prosperity emerges not from unleashing the unregulated, but from crafting rules that encourage positive-sum cooperation and solve collective action problems. The real question is not whether to regulate, but whom the rules serve.

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For further exploration:

• [Robert Reich’s “Saving Capitalism” documentary on Netflix ([34:47])**
• Inequality for All featuring Nick Hanauer ([35:48])

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Transcript

[A]

Hi there, Pitchfork listener. I'm Greg, a producer here at Pitchfork Economics. This week we're kicking off a short archive miniseries we're calling Myths that Built Trickle Down Economics. The idea is simple. We're revisiting some of the economic stories that have shaped American policy for the last several decades, asking whether they still hold up. Now, first up is one of the biggest myths of all, the idea that regulations automatically kill growth. That neoliberal claim is especially relevant right now as the Trump administration continues trying to destroy or eliminate agencies like the Consumer Financial Protection Bureau, which has returned over $21 billion to Americans who were the victims of financial wrongdoing, scams, predatory practices. A federal appeals court recently blocked the administration from immediately moving forward with plans to sharply reduce the agency staff. And that's a glaring reminder that fights over regulations are really fights about who the economic rules are supposed to protect. In this conversation, former U.S. department of Labor Secretary Robert Reich helps unpack this deeper question, not whether the economy has rules, but for whom those rules are written. Reich has spent decades making these ideas accessible. One of the best economic communicators, including through his work with Inequality Media. And this episode is a pretty useful place to start as the myth that less regulation means more prosperity.

[B]

The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.

[A]

The last five decades of trickle down economics haven't worked.

[B]

But what's the alternative? Middle out economics is the answer. Because the middle class is the source

[C]

of growth, not its consequence.

[B]

That's right.

[D]

This is Pitchfork Economics with Nick Hanauer,

[B]

a podcast about how to build the

[D]

economy from the middle out.

[B]

Welcome to the show. I'm nick hanauer, founder of civic ventures.

[E]

Hi, my name is paul constant. I'm a writer at civic ventures.

[B]

Yeah, there is nothing big corporations and rich people like more than not being constrained by anybody. And you know one of the things that is so funny about life is no one wants to be held to a high standard, but everyone wants everyone else held to a high standard. So you will find lots of CEOs of big corporations pounding the table about how public school teachers should be held to a very high standard of accountability. But when that same logic is applied to their own institutions, oh my God, that would be. You know, that's a big government job killing attack on freedom.

[E]

Yeah, who are you to tell me we can't use asbestos in our wall?

[B]

Yeah, ye. We should be able to determine that ourselves. And by the way, sadly this applies to everyone. Police officers don't want to be held to a high standard. My children don't want to be held to a high standard. I don't particularly like being held to a high standard myself. It is a truism of, I suppose, human existence that people like other people to be held to a high standard, but prefer not to be held to a high standard themselves. And so the, the issue of regulation is a very important one in human societies because it sort of defines how we relate to one another. And if there's one thing the trickle downers love to say, it is that the rich and the powerful and big companies shouldn't be constrained by regulation. And if we do that, that it kills jobs and growth and wages and everything else. Again, taking this claim, taking the canonical form of trickle down economics, that if we in any way constrain the rich or the powerful, it will be for everyone.

[E]

Yeah, I mean, you know, if you look at the historical record, there's just things that now, you know, you might hear, oh, I don't know, say Andy Puzder, the former head of Carl's Jr. And Hardee's chain of fast food restaurants,

[A]

claim that if your concern is to create entry level jobs for young Americans, then a $15 minimum wage is something you should be protesting against.

[E]

But if you look back, you'll see the Puzders of their day saying that if they weren't allowed to have children work in their factories, that they would go out of business and nobody would have any new clothing. My favorite one is somebody who represented a dentist organization saying that if the government forced dentists to wear masks when they performed oral surgery on their patients, that they would lose the patient. Dr. Bond, that comes from being able to see someone's face. It sounds ludicrous now, but at the time people took it seriously. And I believe that speech was before Congress or a lawmaking body of some sort.

[B]

The truth is that they just didn't want to spend the money on the mask.

[C]

Right?

[E]

Yeah. Paper masks. That's the summer home eventually.

[B]

And the thing that's so interesting is that when people make contemporary arguments against regulation, they are often plausible. Because you don't know the future.

[C]

Right?

[B]

That's the thing. You actually do not know the future. But when you go back in history and mine for these quotes, they are always ridiculous. My favorite, of course, is the objection to the Fair Labor Standards act, which was passed in 1938. I'm looking at a quote right here that said that the Fair Labor Standards act would create chaos in business. Never yet known to us. It sets an all time high in crackpot legislation. This is a quote from 1937. And again, the thing is that nothing happened to the economy after the FLSA passed other than we created the American middle class and multiple generations of huge amounts of shared prosperity. It's so interesting to contextualize these quotes in history because the more of them you look at, the more ridiculous the contemporary claims tend to be. But I think what's important is to sort of deconstruct for people why regulation matters and why it's not just not bad for growth. It actually is the thing that creates growth in market economies. And to do that you have to think back to earlier episodes where we learned about what true prosperity really is. So to be fair, if in the neoliberal framework where gdp, which is basically any kind of economic activity, is the way in which you judge whether the economy is improving, then anything you do to restrict any kind of economic activity at all is bad, is bad for growth, and therefore bad for everybody. But once you see prosperity as improving welfare, like actually improving people's lives and the way we've characterized that is solutions to human problems, then you instantaneously can see that some economic activity actually solves problems. But lots of economic activity actually creates more problems than it solves. And the point of regulation is to encourage economic activity that improves welfare and to discourage economic activity that doesn't, that destroys welfare. And there are no successful economies in the world that aren't highly regulated. In fact, you can basically stack rank the countries in the world from most prosperous to least prosperous. And what you quickly see is there are no libertarian paradises in the world where nobody pays any taxes, nobody follows any rules, and everybody lives like a king. And 100% of the of the highly prosperous, stable and secure economies in the world are highly regulated high tax states. There are 205 simultaneous experiments in this going on in the world. And you know, like empirically the evidence is super, super obvious.

[E]

That's an interesting point that I don't think gets made enough is that the GDP doesn't measure the difference between diesel burning, you know, truck that spews CO2 into the air and an electric car, Right? Like they're of equal value.

[B]

Yes.

[E]

So why wouldn't you choose the one that doesn't destroy the planet, right? But to the gdp, it's the exact same thing, right?

[B]

From the point of view of gdp, the companies that manufacture cigarettes are judged in the same way as the companies that manufacture the products that repair the damage that cigarettes do to the human body. And therefore it makes little sense to not regulate the things that create lots and lots of human harm and to try to encourage the things that create lots and lots of human benefit. Now, obviously, reasonable people can disagree in the gray areas around what's a benefit and what's a harm. If you own a nightclub in a neighborhood and would prefer, and your customers would prefer for that nightclub to be open till 4am in the morning, that's understandable. The people who live in the neighborhood may have a different view about how late that nightclub should be allowed to stay open. And they'd like these. Yes. Okay. Yeah, but they, you know, people need to sleep. And that's a legitimate countervailing view. The point of democracy and the function of democracy, you know, is to sort those conflicts out. And high functioning democracies use regulation to adjudicate these conflicts, which are often not clear. You know, Paul, I've had a lot of personal experience with the issues around regulation because I grew up in a profoundly dishonest business which was the pillow business.

[E]

The pillow business.

[B]

The pillow business is a profound, or at least was a profoundly dishonest business that would have benefited enormously from regulation. And here's why. So a good pillow made out of white goose down is actually very expensive to make because white goose down, real white goose down, costs someplace between 20 and $30 a pound to make. And so a good pillow will have a pound or a pound and a half of white goose down in it. And so, you know, the manufactured cost is going to be 30, $35. And then you have to have profit on top of that. And then you sell it to store and they want to sell it for twice as much as that again. And so a good pillow really needs to cost in the range of $50 to $75. But it turns out that you can grind up chicken feathers and put them in a pillow and ground up chicken feathers only cost about a dollar a pound. And the thing is that on the first day, Certainly most consumers, 98% of consumers would never be able to tell the difference between a pillow that had ground up chicken feathers in it and versus white goose down. And many of the companies that we competed with in the pillow business preferred to make their white goose down pillows out of ground up chicken feathers. And this is not surprising, right? Because if the wholesale price of a white goose down pillow is $35 and you can make one for $3.

[E]

Right.

[B]

You can make an enormous amount of profit selling those $35 pillows that only cost you $3 to retailers.

[E]

And so these chicken feather pillows, these are the ones that I had in my early 20s that were like, crunchy when I put my head on them.

[B]

Yes. And made you sneeze and went flat instantly and blah, blah, blah, blah, blah. And so in our industry, which was very, very, very lightly regulated because it was a small industry, there was an enormous amount of cheating. And when you went to a store and bought something, the chances were very, very high that you were not getting what it was labeled. And as a consequence, consumers were harmed. And the industry was harmed too, because your experience of a white goose down pillow was that it was a piece of crap instead of the really amazing product that it is, when it is, it truly is what it is. And so my little industry was a microcosm of the, the dynamics of regulation and the way in which it's so important for market economies to be regulated in a way that prevents cheating and solves the collective action problems in that industry and encourages a race to the top rather than a race to the bottom.

[F]

When you're an employer that wants to do the right thing and wants, wants to pay living wages and everybody else isn't spending nearly as much as you are on labor, it makes it really hard to feel competitive.

[D]

Hi, I'm Sarah Leibovitz, a producer on Pitchfork Economics, and that is Molly Moon Neitzel. She's a small business owner here in Seattle and believe it or not, also a fan of regulation.

[F]

I own Molly Moon's Homemade Ice Cream. We are an ice cream company that has been in Seattle now for a little over 10 years. I have seven ice cream shops in Seattle and Redmond. And we like to say that we're making the world better one scoop at a time. There were a lot of folks involved in labor and in workers rights who were very much interested in increasing the minimum wage in Seattle. And I was a small business owner who was really concerned about the low minimum wage in Seattle and how it wasn't creating a very good environment for employees. And it wasn't creating an even playing field for small business owners that wanted to pay people living wages. And so I was very much excited about raising the minimum wage and considered concerned about the how it got done.

[D]

As Nick and Paul pointed out, business owners and government officials have been fighting over regulations for centuries. They've whined about child labor standards and discrimination acts and literally every other form of regulation you can think of. They frame it as something that will bring small businesses to their knees, that'll stop the economy in its tracks and destroy every job America's ever had. When Molly backed the minimum wage increase In Seattle in 2015, she heard a lot of those arguments.

[F]

I mean, a lot of restaurant owners and people in the food industry were just saying we flat out can't afford it. And that's what tips are for. But I saw some restaurant owners in particular get really nasty and say like, that their employees didn't deserve a higher wage. It was a really, it was a really emotional and difficult conversation, I think, for Seattle to have. And I know a lot of restaurants are still trying to figure out how the last couple of years of the seven year transition is going to look. But I do think the conversation has gotten a little less emotional and a little more fact based now that we're more than halfway through the transition.

[D]

But that regulation did pass. Seattle has a $15 minimum wage. So why are we still talking about this or regulation in general? Didn't we get what we wanted here in our little corner of the country? Why don't we just enjoy our little regulation and move on to other topics? Well, as Molly points out, increasing the minimum wage didn't just like suddenly lead to a happy society without any problems.

[F]

In the Beginning of the seven years, we made a plan to raise wages 215 as our entry level wage in five years. I wanted to give ourselves plenty of time, but I also kind of wanted to beat the timeline of small businesses. And we're not the smallest kind of business in Seattle. What we found is that over the last five years, the discrepancy between tipped workers and non tipped workers has only gotten worse in our company. And I think throughout Seattle, people at Molly Moons who were scooping ice cream and it was their very first job and they were 18 years old, were making like 26, $27 an hour. And folks who had been working in kitchens for two or three or five years were not making anywhere close to that. So the front and back of house discrepancy was really tough. So on December 31st of 2018, we eliminated tips from our company and we raised starting wages from. We were at $13 an hour. We raised all of our starting wages in front and back of house to $18 an hour. And then all of our leads, which is the majority of our front of house service employees, start at 23.50 an hour.

[D]

It'd be easy for one of those business owners who disagreed with Molly to point at those issues and say, look, it didn't solve anything, it just made more problems. But that's an oversimplification. Raising the wage to $15 an hour, as Molly said, evened the playing field. It created room to analyze and research what actually worked best for employees employees to create a more just payment system that actually benefited its workers. Like any good regulation, it opened the door for more necessary changes. It's a starting point. And Molly's taken that idea that regulation is helpful and allows small businesses to grow to heart.

[F]

So one of the regulations that I'm most excited about and I helped to lobby for in Olympia a couple of years ago was washing state's new paid family leave law. And it's really exciting that this year 2019, all businesses and workers are paying into a state run program to fund paid family leave. And starting January 1st of next year, every single worker in the state will be able to take paid family leave when they bring a child home through birth fostering or adoption, or when they're really sick, recovering from surgery, or caring for a loved one who's really sick or recovering from surgery. It's structured very much like unemployment or like an insurance program. And so it's costing employers and employees this tiny payroll tax which almost none of us will notice. And employers who have 50 employees or less aren't even required to participate at all. But every worker, no matter where you work and no matter how long you've been somewhere, can take the benefit because you file for the benefit with the state. You don't go ask your employer if you can take the paid leave. You file with the state, which means it's just going to be a far more equitable system and men and women can take it in equal ratios.

[D]

Molly realizes what a lot of business owners fail to acknowledge. That good regulations help businesses, help them grow and evolve and better serve their communities. That ultimately those business owners who fought against child labor standards or whatever weren't on the right side of history or on the right side of the economy.

[B]

I say, gentlemen, that you must investigate what effect it would have on the mills of North Carolina not to allow children of 13 to work in the mills. But even if it, the equal pay act could be administered and enforced, no evidence is presented demonstrating a need for it.

[E]

The Fair Labor Standards act would create chaos in business never yet known to us. It's an all time high in crackpot legislation. Let me make it very clear that I am not opposed to this.

[B]

Too many people are missing the forest

[C]

through the trees when they look at this bill.

[B]

What's most significant about it is not

[C]

its impact on homosexual workers or religious employers or Whether it covers cross dressers,

[B]

it's the ratcheting up of federal government interference in the free market.

[C]

Peter Sprague, 2013.

[B]

No evidence is presented demonstrating a need for it. Norman Simler, Council of Economic Advisors, 1963

[E]

and an operation would be much more destructive than constructive to the very purposes which is designated to serve. Representative Arthur Philip Lamnick, 1937.

[B]

You might as well sweep that mill out of existence. Unnamed mill owner, 1906. But the thing is, is that not every business person is dishonest. Most are honest and want to do the right thing. But in any industry, if the worst, most dishonest actors are not called to account, they drag the entire industry down with them. If you have a competitor that is making white goose down pillows that cost you $30 for $3, and in every sales competition they're undercutting your price by $5, even though their costs are $20 less than you, and you're losing all the business to them, then you're forced eventually to either go out of business or start competing in the way that they do. And so this is super corrosive to any industry or circumstance because it creates basically a death spiral. And I would tell you that. So in our company, for whatever reason, it was my dad who was a very, very honest man who was like, we are never going to cheat and we're just going to try and make it that way. But we ended up because we could never get the federal government to allocate the resources it took to actually regulate these things. Which means you have to go into retail stores, buy pillows which are expensive, open them up and test them, which costs a lot of money. Right. So it's hard to keep an account of this, but we turned ourselves into what our competitors derisively called the down police. So we ended up being the police force of our industry. And we went around and we bought products from ourselves and our competitors and we sent them to independent labs and we outed people and we sent the results to their retail customers and to the press and so on and so forth to humiliate them and to put the fear of God into them. And for sure, for the retailers created huge liability because now they were being fraudulent in the right.

[E]

Once they knew they were.

[B]

Yeah, once they knew they were. Yeah, yeah, yeah. And, you know, and over time, you know, we turned the industry from this horrific cheating morass into a reasonable industry. But, you know, you couldn't do it without some form of regulation. And in our case, we had to pay for it ourselves. But in most industries, it's not possible or feasible to do that, which is why government regulation is so essential.

[E]

One of the greatest sort of weapons in the arsenal against trickle down economics is Professor Robert Reich, who was Secretary of Labor under Bill Clinton. So he's been dispelling trickle down myths for probably longer than some of you have been alive.

[B]

Yeah.

[E]

So we called him up to talk about regulations.

[C]

Hi.

[E]

Hello. Hi there, Professor Reich.

[C]

Yeah, hi, Paul.

[E]

We tend to think of trickle down as working in three tiers. The transfer of wealth from the 99% to the top 1%. We think of wage suppression and lower taxes for the wealthy. But I feel as though deregulation slips through the cracks. And I was wondering if you could talk a little bit about how that functions in terms of income inequality.

[C]

It is a form of trickle down economics. If you define trickle down economics as giving benefits to the wealthy on the supposition that somehow those benefits are going to trickle down to the middle class and the poor, they haven't. With regard to tax benefits, we've had now years, starting with Ronald Reagan, in which we've seen that tax benefits that go to the wealthy don't help anybody. They don't actually end up raising wages for people in the middle or at the bottom. And we have also seen it with regulations, particularly under the Trump administration, where regulation after regulation has been either repealed, curtailed, or not enforced on the supposition or on the promise that somehow the economy is going to grow, these businesses are going to be doing better without the regulations, and everybody, therefore is going to be better off. Well, every step along that so called logical pathway has been proven wrong. You get rid of some of these very important regulations that are really protections of public health, like the clean coal regulations with regard to coal plants and energy sources, or regulations that are governing or have until now been governing education and the financing of education, where we basically said as a country, no, we're not going to continue to provide a lot of money to private for profit educational institutions that are not really educating, that are just in the business of raking in money. Those student loans are not going to be given any longer. They're not going to be honored. That was the regulation. And the Trump administration is in the process of getting rid of it. And the Trump administration is also rolling back Dodd Frank, which was a very important regulation for separating investment and commercial banks, and therefore not repeating the financial crisis that we had in 2007, 2008. The Trump administration is rolling back not just environmental, but also very important public health Regulations having to do with asbestos and many other chemicals. These are all being done at the behest of industries and industry lobbyists who are now very often in positions of political power in the Trump administration. On, again, the very flimsy public excuse that they will increase corporate profits. That will make everybody better off. Well, they are increasing corporate profits. Corporate profits. The combination of the tax cut, the corporate tax cut, and also these regulatory rollbacks have increased corporate profits dramatically. And the stock market has done extraordinarily well. But average Americans are bearing the risk. Average Americans are going to be doing worse off and are doing worse off because all of these protections that they have relied on are no longer in place and they don't have much of the stock market. It's not that average Americans really are benefiting from a huge surging stock market. The richest 1% owns over 40% of the entire value of the stock market. The top 10% of Americans, the richest 10%, have over 80% of the value of the United States stock market. So nothing is trickling down except the risks and the burdens and the costs and the future risks.

[E]

It seems as though, even though it doesn't benefit the majority of Americans, regulation is a dirty word to a significant portion of the American voting public. Do you think this is a successful messaging campaign by conservatives, or is there sort of a deeper meaning behind the animus that many Americans have to the idea of regulation?

[C]

Well, it's been a message campaign for Republicans for much of the past 50 years. And, you know, to some extent there's a kernel of truth. I am not in favor of any regulation whose benefits are less than their costs. But you've got to ask benefits for who and costs for whom? I mean, if it, if they're just costs on business and businesses, major investors and executives, but the benefits are for most Americans in terms of health or safety or labor protections or protections against fraud. Well, then it's a different kind of cost benefit analysis you want to do. You want to make sure that most Americans are protected. And instead of using the word regulations, we ought to use the word protections because that's what regulations are. Regulation has become a bad word. Well, it's time to use the real meaning, which is protections. If those protections are worthwhile, if they are important, even though they may cost a company a lot of money, well, we should say they have to be in place. If they're going to protect workers from losing their limbs or their lives, then those regulations are important. Even if they cost companies a lot

[E]

of money, that Sort of brings a new meaning to the phrase rule of thumb. When you were Labor Secretary for Bill Clinton. Can you talk a little bit about some ex examples that you might have had with considering whether a protection was good for the people or bad for the people and sort of the cost benefit analysis that you had to do?

[C]

Sure. Let's take a very common worker safety regulation, which requires that if workers are cleaning complicated machinery, they've got to be able to shut down those machines completely so that the machinery does not start up accidentally and cause grave injury to those workers. Well, a lot of businesses complained. They said they didn't want to attach those automatic shutdown systems and valves. That was just too expensive. And they made a case to Congress, and there was a lot of pressure brought to bear upon me when I was Secretary of Labor. But then I looked at the data, and the data showed that at times when businesses violated this rule, the result was an increase in worker debt and an increase in loss of limbs because these machinery, these pieces of machinery would start up accidentally and when workers were inside them trying to clean them. Well, you know, my reaction was not only are we not going to get rid of this regulation, but we ought to enforce it more heavily and impose higher fines on businesses that essentially ignored these regulations. You see, it's not just a matter of whether you have a regulation in place or not. It's also a matter of whether it's enforced. And one thing that the Trump administration has done, and certainly big American businesses don't want to pay these costs, have done it time and time again, is that they have made sure that Congress does not approve of appropriate the money necessary for enforcing regulations that are on the books. If the businesses cannot get rid of the regulations simply through the legislative process, if they don't have enough clout to repeal the regulations or get rid of them legislatively or even administratively, they just make sure there's not enough money to enforce them.

[E]

What do you think that hopefully a future Democratic administration could learn from past Democratic administrations, the Clinton and Obama administration, in terms of protections and how to enforce them and how to communicate to the people about the importance of them?

[C]

Well, first of all, I think that progressives and future administrations, whether they're Republican or Democratic, ought to be talking about regulations as protections, health protections, worker protections, protections against fraud, protections against injury, and so on. They are protections. If a cost benefit analysis shows that the costs for average people are much greater than the benefits for average people, then there's no place, there's no reason to have a regulation but you shouldn't just look at the cost for business and measure them against the benefits for average working people or average consumers. We're also talking about consumer regulations or consumer protections because you see there are. These people are in different positions in terms of income and wealth. Businesses, shareholders, top executives, top investors. They may have to pay a little bit more in order that average working people or consumers or your small investor is adequately protected. So it's not enough just to do cost benefit analysis. You also want to be examining who's benefiting and whose costs and risks are going up.

[E]

And if people listening to this podcast are just hearing about you for the first time, I think that probably the easiest way for them to learn about you would be to check out Saving Capitalism on Netflix. And I was wondering if you could maybe talk a little bit about. About that project.

[C]

Yeah. It emerged from a book I wrote a few years ago called Saving Capitalism. The purpose of that book project was to look at the reality of the economy and see where the economic rules governing the economy were coming from. And it turns out, not surprisingly, that as more and more wealth and income and power that comes with wealth and income accumulate at the top, the rules of the economy, the actual rules make the economy and govern the economy, are more and more skewed in the direction of helping the people at the top and not helping the average person or the person in the bottom 50%. And that was basically the purpose of the book, was to eliminate the mythology of the free market, that the whole choice was between free market and government. It's not. You can't have a free market without government. And the real issue is who's making the rules, who's influencing the rules? Where are the rules coming from? And how can the rules be adopted and changed so that the market works for the vast majority instead of the small group at the top? And now we took. I took that book and along with Jake Kornbluth, we did a movie, a documentary that is now on Netflix called Saving Capitalism. And coincidentally, the first documentary we did with Nick Hanauer, Nick is in it called Inequality for All, is also on Netflix now.

[E]

Okay, wow. Thank you so much for your time, Professor Reich. It's really an honor to talk to you. You're just one of the leading lights in economics and, and one of the best messengers we have on it. So it's really great to talk to you.

[C]

Well, thank you, Paul. Bye bye.

[D]

Take care.

[B]

So, Paul, regulation, it's a thing.

[E]

It is, it is. And I think an interesting thing about regulation and politics is you get a lot of politicians, even good progressive politicians, who treat regulation like it's a necessary evil.

[B]

Yeah.

[E]

And I think that, that what I hope we've, you know, proven here is that it's not a necessary evil.

[B]

It's an indispensable part of creating prosperity in human societies. Yeah, absolutely. And I just, just, you know, just playing it back, you know. Regulation is what solves the collective action problem, problems which are inherent in any economy. It's the thing that prevents cheating. And by preventing cheating, it prevents industries or circumstances turning into essentially death spirals. Right. A race to the bottom and encourages race to the top. Regulation is what holds us to ever higher standards, and it's what inevitably enables trust.

[C]

Right.

[B]

If regulations are good, companies can trust other companies, consumers can trust the products that they buy. And trust leads to higher and higher levels of cooperation. And as we learned in earlier episodes, it is cooperation that enables complexity, which is the source of all prosperity in human societies. Regulation is what encourages economic activity that produces prosperity, and it discourages economic activity that destroys prosperity for the broad public. And it's why, while it is certainly true that there are bad regulations or counterproductive regulations in general, the more complex a society becomes, the more regulation you need to hold it all together and to hold it to an increasingly high standard.

[G]

Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to follow, rate and review us. Wherever you get your podcasts, find us on other platforms like Twitter, Facebook, Instagram and threads. Itchforceconomics. Nick's on Twitter and Facebook as well. Ickhanhower for more content from us, you can subscribe to our weekly newsletter, the Pitch over on Substack. And for links to everything we just mentioned, plus transcripts and more, visit our website, pitchfork economics.com as always, from our team at Civic Ventures, thanks for listening. See you next week.