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Pitchfork Economics with Nick Hanauer
Myths That Built Trickle-Down Economics: Zombie Economics (with Paul Krugman)
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A
Hi there, Pitchfork listener. I'm Greg, a producer here at Pitchfork Economics. This week we're continuing myths that built trickle down economics with a different kind of myth. The idea that bad economic ideas disappear once the evidence proves them wrong. They don't. They get rebranded, recycled, and shoved back into the policy debate. As if we haven't already seen how the story ends. Oh, tax cuts for the rich will magically pay for themselves. Taking healthcare and food assistance away from struggling families is fiscal responsibility. Tariffs are free money paid by other countries. And if government would just get out of the way, the market would solve everything on its own. But those ideas have continued to fail over and over. Somehow they keep getting resurrected in our politics because they still serve powerful interests. That is what Nobel Prize winning economist Paul Krugman calls zombie ideas. Dead ideas that somehow keep walking around eating our brains in shape our public policy. And that is why this episode is such an important part of this series. Trickle down economics was not built on evidence. It was built on stories that sounded simple, served the wealthy, and survived long after they were proven wrong. So today we are revisiting Nick and Goldie's conversation with Paul Krugman about how to spot zombie economics, why these bad ideas refuse to die, and what it takes to finally kill them. Can you even kill them?
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B
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
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C
The last five decades of trickle down economics haven't worked. But what's the alternative?
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B
Middle out economics is the answer.
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C
Because the middle class is the source of growth, not its consequence.
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B
That's right.
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D
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
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B
I'm Nick Hanauer, founder of Civic Ventures.
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C
I'm David Goldstein, senior fellow at Civic Ventures.
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B
Today we get to talk to definitely one of our favorite and certainly one of the highest profile economists in the world, Paul Krugman. He writes a column in the New York Times.
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C
Really? One of the foremost economic communicators in the country. In the world.
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B
In the world over the past 20 years. Yeah, I think we almost always agree with him, Right? Directionally. Although what will be interesting to explore is how he comes to the same conclusions that we do. I mean, it's safe to say that our positions can be even more extreme than his. Of course, we're more extreme than almost everybody.
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C
We're not extreme. It's everybody else who's extreme.
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B
Yeah, that's right.
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C
We're the centrist.
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B
Exactly. Everybody Else is. Yeah, I forgot. But it will be really interesting to talk to him about his book, his new book, Arguing with Zombies. To be clear, most this is a collection of essays. So a lot of this, I didn't remember a lot of the columns, but I almost certainly read many of them before. And it sort of documents his longstanding fight against just neoliberal nonsense.
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C
Right. The ideas that dominate the economic and policy debate that have no basis in reality.
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B
Correct. And you know, we call it trickle down economics. He calls it zombie ideas. I think we're roughly talking about the same thing. Should be a great conversation. We're very lucky to get to talk to him.
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D
Hi there. I'm Paul Krugman, professor of Economics at the Graduate center of the City of New York, columnist for the New York Times, and author of Arguing with Zombies.
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B
Let's start with you just sort of explaining. Tell us about your book, but also speak to the title of the book and why you chose to title it in that way.
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D
Yeah. Some years ago, actually, before I started writing for the Times, I ran across the term zombie ideas. It was actually in a paper about Canadian healthcare, but it was about things that people believe in the political sphere that are demonstrably false. They've just been proved wrong by evidence over and over again. And yet they just keep on. They stay out there, they continue shambling along, eating people's brains. And it struck me, particularly with us putting this book together, much of which is columns written over a period of 20 years or so, that the same bad ideas just keep on coming at us, that the columns that point out some nonsense in 2004 are followed by columns that point out the same nonsense in 2019. And you'd have to try to understand why it is that bad ideas just keep on coming.
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B
Yeah. Why don't you describe some of those zombie ideas.
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C
We can start with one. Just today, Steve Mnuchin said this, and this is a quote which we still think the tax cuts will pay for themselves.
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D
Zombie idea, that is America's leading zombie, may not be the most important, but that's the one that has had the biggest impact on our politics. To claim that tax cuts, particularly tax cuts for rich people, are magic. They cause incredible things to happen and the money comes flowing in and they pay for themselves. And the number of cases in which that has actually happened, and we've tried it many times, is zero. It just has. It has never happened. It never worked. But it's completely taken over the Republican Party. Each time it fails, it just seems to get stronger yeah.
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B
So take us through some of the other zombie ideas. The landscape of economic zombieism.
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D
The most important, because it may destroy all of us, is climate denial. Maybe 30 years ago you could argue. Okay, I don't really, I'm not fully convinced, even though even then the evidence was starting to get clear. But at this point, to deny man made climate change is. It's basically impossible if you pay any attention to the facts. And yet I just saw, as of just before the midterms, 73% of Republicans in the Senate denied that man made climate change is happening and basically viewed it as some kind of giant hoax by the scientific community. So that just keeps on going. And every time there's a cold snap, they say, see, global warming is fake. So that's a zombie. That again, that's an existential threat zombie that cannot only eat our brains, but can eat civilization. The idea that government debt is the most important, critical, scariest thing there is, that everything else has to take second place to holding down the level of government debt. Of course, unless there's a Republican in power who wants to cut taxes. But the obsession over government debt, which completely dominated conversation in Washington for several years in the middle of the last decade, is a zombie because it's been shown wrong again and again and then it still just keeps on cropping up. I can go on, but do go on. Well, all right. Healthcare. It's amazing how often even now I run into people who, who insist that providing some form of universal health care where everybody in the country is covered is impossible. That it's, it's, it's inconceivably expensive or it just doesn't work, or it would destroy the economy, which is something that they managed to do, something they managed to believe even though every other advanced country has it. And the, that sort of went along with, I mean, the, the view that Obamacare, which was sort of a half a loaf, yeah, half measure a whole lot better than none, got us basically half the way to universal coverage and saved a lot of people's lives, including some people I know. But that, that was a massive failure. And people who predicted that the number of people, uninsured Americans would go up and that the cost of healthcare would, would soar were completely wrong year after year and just kept on saying the same thing. So that was a zombie. Is a zombie still going on? And there are things that are more sort of, maybe things that are of a little more interest to economists. Although there was a time when everybody on, well, I would get mail from people who Say, I'm a little puzzled. Why hasn't inflation taken off? Because all the experts said that inflation was going to soar under Obama. And I said those weren't actual experts. The belief that printing money always under all circumstances leads to hyperinflation is something that doesn't seem to go away no matter how long it turns out to be again and again. I'm sure that I'm missing some, but that's just kind of a quick tour of zombieland.
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B
Yeah.
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C
Well, we'll throw you one of our favorites. One of our big issues in the office is the minimum wage. Raising the minimum wage, that's a sure fire job killer. Is that a zombie?
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D
It's turning out that it is a zombie. Now, it's not quite as bad in a way as some of the others because 30 years ago you might have made that case. Thirty years ago, economic textbooks argued that minimum wages would reduce unemployment 101. And it's only when evidence started to come in that which wasn't that easily done because the trouble with economics is they're always doing lots of things at the same time. So isolating the effects of any one policy change is hard. But some economists realized that actually in the case of minimum wages, we get a lot of natural experiments where one state raises its minimum wage and the neighboring state does not, or in some cases a city raises its minimum wage. And it's now there's just overwhelming evidence that at least within the range that we see in the United States, minimum wages don't raise unemployment, they don't cause jobs. I think every economist, I think everyone has to say, look, there's got to be some point at which it becomes a problem that a $30 an hour minimum wage is probably going to have some negative employment effects. But there's absolutely no evidence that raising it from 775 to 12 or even 15 is likely to have serious effects. And we keep on getting experiments. I'm not sure exactly where you're calling
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B
from, but Seattle, Washington, home of the $15 minimum wage.
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D
Yeah, exactly. So I was about to say, yeah, you did it. And the Seattle experiment, there were a lot of extreme dire predictions there. And if anybody has admitted having gotten it wrong, I haven't seen it. So that zombie is still shambling along eating people's brains, despite his as clear, this is as good, as close to an actual experiment in economics and economic policy as you're ever going to get.
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B
Yeah. The minimum wage in Seattle, Washington today, by the way, is $16.39 plus tips to be clear. Right, yeah. Like not only is the minimum wage 1639, there's actually no tip penalty here
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C
and they can't hire enough workers.
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B
Yeah. And unemployment is at record lows. Actually, let's just dive in right here, Paul, because I think this is where our conversation, I think, can get quite interesting. So the first thing is that I would dispute your claim that if the minimum wage or wages rise, employments fall as a zombie idea is less important than some of the other ones because.
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D
Oh, I wouldn't have said it's less important. I would have said it's less unforgivable than. There was a time when simple economic models did seem to suggest that raising the minimum wage would reduce employment. Of course, that was a long time ago. And at a certain point, if the evidence tells you that your theory is wrong, you say, okay, then the theory is wrong. And I sometimes get people say, you wrote in 1991 that raising the minimum wage could cost jobs. And I said, yeah, some evidence has come in since then. When, when I get new facts, I change my views. What do you do? And the truth is we have now at this point, a lot of facts. So I'm just saying that there was never ever any reason to believe that tax cuts would pay for themselves. Once upon a time, it was understandable that some people thought that raising minimum wages would cost jobs. But really we now have decades of carefully collected and assessed evidence on this, and in the United States they don't.
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C
And yet the Econ 101 textbooks that are being used today still use the minimum wage as the illustration of the supply curve.
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D
Yeah. I will say, as the author of an Econ 101 textbook, there is a problem that you face, which is that they're kind of mandatory. We need to talk about what are the effects of price floors. And there aren't. There are hardly any prices in America. So the minimum wage is pretty much it. And then you kind of get yourself into this sort of thing. Well, if the minimum wage were high enough, then probably it would reduce employment. But yeah, this was one of the huge surprises. Usually economic evidence, if there's something that seems obvious, usually the evidence says, yeah, actually it was obvious. This is one of those cases where it turned out that it was really not at all what even fairly left leaning economists expected to find.
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B
Here's what I want to just drill in on, though. The minimum wage has been raised in the United States of America 22 times federally in our nation's history. And you can actually go back and look at each one of the. To say nothing of the hundreds of times locally, each one of these events was a natural experiment. And you can actually go back and look at the data back to. Was it 1938 when the FLSA was first enacted?
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D
Yeah.
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B
And. And there was zero evidence in each one of those cases that the minimum wage killed jobs. And what I found frustrating being on. You may not know this, but we were on the front lines of the whole $15 minimum wage fight. We picked the number, we built the narratives, fought the campaigns. What I found so shocking was that everyone treated this minimum wage increase as the first ever in American history. Even my left leaning economist friends, I kept on going back to them and saying, but we have done this dozens of times before and there has never been evidence that the minimum wage killed jobs ever, anywhere. So why, why today must we prove again that this modest increase in wages for poor people is a threat to the economy? And that's what I want to zoom in on is why. Why is it that there is an industry in economics devoted to assuring us that if we make poor people slightly richer, that will not kill jobs? But there are no studies going on, for instance, examining the job killing impacts of Jeff Bezos $130 billion wealth, because surely it must be true that If Jeff Bezos $130 billion of wealth was spread over millions of other workers, that would create jobs. What's super interesting to me is why we look at one thing but not the other. Like, why is it that when poor people get richer, that threatens the economy, but when rich people get richer, that must be an unalloyed good? That perspective I find puzzling.
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D
Example that is, that is definitely one that I think about a lot is there's endless obsession with the notion that aid to the poor is going to reduce their incentives to work hard. Nobody ever seems to worry about inherited wealth reducing the incentives of heirs to work hard. The full Bernie, is that all of this is about the influence of rich people, millionaires and billionaires. And that's not true. A lot of it is.
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B
Yeah.
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D
And it's definitely the case. So the tax cuts, pay for themselves thing is kept alive entirely because it serves the interests of people with benefits in the tax cuts. It's entirely supported by billionaire funded institutions. And the people who propound it are never people who have any kind of independent reputation for economic research. It's all. It's propaganda.
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B
Yes.
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D
It doesn't take a whole lot of money to keep a bad idea alive. The marketplace for ideas is pretty thinly financed. And it really only takes a handful of malign billionaires to keep bad ideas in circulation. Now there are other things that go on. I do talk in arguing some about the problems of the economics profession and the and particularly the confusion in response to financial crisis, which in that case had at least initially very little to do with class interests, at least in any direct sense. It had to do with the fact that economics has this beautiful model of how the world works.
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B
Confusing beauty with truth, as you put it.
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D
That's right, yeah. And econ 101, we teach our students. I teach. I mean you got to do this. Do you want to have a textbook that people will use? You have to put the other stuff in as. But it's more complicated that. But first you have to teach this simple model in which everybody is rational and in which markets all work the way they're supposed to. And in that model a minimum wage increase should cut jobs. In that model, the incentive effects of anti poverty programs should be something that you need to worry about. And there is this bias towards going with this beautiful simple story, which as it happens in most cases ends up also dovetailing with the bias towards saying things that makes billionaire donors happy. Yes, but it's not all pure mercenary stuff. It is a problem also of the sort of inherent bias of economics, which I don't have great answers for except to say be aware of it, that beautiful models are not necessarily true.
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C
Can I just make a suggestion? And that is since most students don't get any further than Econ 101, starting with these beautiful models based on what you call in your book silly assumptions, might be part of the reason why these zombies are so difficult to kill.
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D
It's a little bit. Although again, the tax cuts pay for themselves thing, which is the most important consequential zombie in US politics, doesn't come out of Econ 101. The possibility that taxes could be so high that cutting down would actually increase revenue is there. But there's nothing about the structure of Econ101 that makes you think that that's likely. So you don't want to blame it too much, but some of us do talk about this quite a lot. Trying to figure out, even for center left economists, what we tend to do is you start with this idealized model of a perfect economy and then you introduce some flaws and say, okay, let's talk about realistic ways in which the world isn't like that. And there would be a lot to be said for starting with the flaws built into your account from the beginning, except that no one has figured out how to do that in a way that easily teachable. Right. And I guess we've all. I had a discussion, one of the. One of our. My book discussions for arguing with zombies. We had a discussion with Heather Boucher at Center for Equitable Growth. She and I were basically talking about what can we. What can we do to change this? Because we know that this is a bias that's kind of inherent in the way we teach economics. But we don't have. Neither of us, I think, had a great alternative except to say, got to keep on looking for it.
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C
One of the things that's very frustrating for us is that essentially what we're trying to do, a lot of our. What we're trying to do is synthesize the complexity economics, evolutionary economics, all of that latest science into a coherent narrative. And that's a hard thing to do, to simplify down to a beautiful, elegant story about how the way the economy works compared to the beautiful, simplified, neoclassical neoliberal story that dominates and keeps these zombies alive.
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D
Yeah, I do want to come back and just say that, look, the most destructive zombies out there, the tax cuts, pay for themselves. Climate change is a myth. Those don't come out of Econ 101. Those are Econ 101. It says. It talks a lot about externalities and pollution and the need for government policy to correct it. So this is not. There's plenty to blame Econ101 for, but not everything is coming out of that. But I understand where you guys are coming from, and it's something I've wrestled with a lot over the years. And I think everyone else who's aware has done this. The trouble we do have. So we. Behavioral economics, how do people really act as opposed to this idealized, optimizing Homo economicus is. Anybody who isn't an idiot subscribes to that. Of course, nobody is that optimizing person that we model in the textbooks. But what do people do and what do people do in real world situations? The answer is it's complicated because people are not completely stupid, but they're not perfectly smart either. And trying to model people who are imperfectly smart, you end up with a kind of a collection of stories and cases which if you're a good economist, you try to apply to whatever the problem is at hand as best you can. But if you're trying to teach 3,000 students at a community college some basic economics, we're saying, well, this is all nuanced and Complicated is actually a little problematic.
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B
Let me just zoom in on something. So if you assume that the economy truly is an equilibrium Pareto optimal system, then as neoclassical economics assumes, then for sure when you raise wages, it kills jobs because it moves the economy away from equilibrium. Which is why we, when I suggested to my center left economic professor friends that we were going to do the $15 minimum wage, they thought I had lost my mind. All of these folks were absolutely convinced that Seattle, Washington was going to slide into the ocean if we did this policy. But here's the thing. If you understand the system in a completely different way, essentially as an ecology, which is what it is, then there is no such inverse relationship between wages and jobs that businesses effectively eat the wages of workers. Which is why when workers wages rise, so does business activity and jobs. And it was that perspective on how a human economy works that gave us certainly me confidence that the policy would work out. Which is why I think, coming back to Goldie's question about these models, why we're so nervous that if we don't kill these models we can't get beyond the zombie ideas. Does that make sense?
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D
It does. The trouble is I tried to do evolutionary economics for a bit a ways back and found it not as helpful and clarifying my own thought as I hoped it would be. And it's not as easy. And by the way, if you actually look at what evolutionary theorists do look at it, actually read what they write, a lot of it ends up looking an awful lot like econ 101. Look up John Maynard Smith with a name like that, should have been an economist. And his models, they look a hell of a lot like economics.
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B
Okay, interesting.
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D
Put this way, I'll say this at the sense of at least me and some of my colleagues were not as narrow minded as you might think. It would be a lot easier if it were just sort of ingrained prejudices. But there were reasons why the field gravitated towards this kind of perfect markets paradigm. And while that paradigm clearly falls way short, it's not so easy to replace it. And I would say that if your model tells you that nothing, that wages never matter for employment, then that's got to be wrong too.
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B
Of course.
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D
I just did a few days of a book promotion in Spain and I get a little grief from the Spanish left for some reason. I'm talking about Spain, God knows why. Don't think a word of Lane. But I got some grief for saying at the height of their crisis that the Spanish wages needed to come down relative to German wages to make Spain more competitive. As long as they were on the euro, that was going to have to happen. And they would say, well, you know, the Middle Ages are not that high and it's hard to live on them. Which is true. But the trouble was, given the realities of how international business works, Spain just needed to be at a cost competitive place to make stuff. And that happened. They actually had, over a number of years, through grinding suffering and high unemployment, Spanish wages were slowly grounded down. I think they didn't fall much, but they didn't rise while German wages rose. And now Spain has a thriving automobile industry because it's got a labor cost advantage. So it's not that this stuff is all nonsense.
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B
No, of course not.
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D
It's just when it's realizing that the orthodoxy that the Econ 101 basically don't believe it unless there's evidence. And sometimes the evidence will tell you that in the relevant case it's just not at all right.
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C
So let's get to the positive side of what we can do here. Obviously you've been one of the most effective economic communicators over the past 20 years. How do we contribute towards your fight against zombies? How do we kill some zombies?
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D
You never, I mean the whole point about zombies, actually, you really can never fully kill them. Unless we actually were able to eliminate billionaires, which, which is not in the cards even. No matter who becomes president, there's always going to be big money to support some dumb stuff and there's always going to be some of the problem of what I call very serious people who go for something like, well, we must control our debt, which sounds serious because everybody else who sounds serious is saying it. So those things never go away. What you could try to do is loosen the grip of zombie ideas on people who are in some position of influence and with at least moderately progressive values. So I'm hoping if there's a next Democratic president that he or she will not listen to the people who say, well now you have to balance the budget. Yeah, Republicans, that they will instead say, okay, government borrowing is not that bad a thing, but we should use it for good stuff. We should use it for infrastructure, not
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B
tax cuts for rich people.
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D
Yeah, yeah. And I think that there's some chance of doing that. I mean, Obamacare, even though it's a Rube Goldberg device, it's a compromise scheme and more complex by far than you would want it to be. But got 20 million people health insurance and that came out of a long campaign. I think on the Part of progressive economists, progressive health economists, saying, look, there's a lot we can do here. It's not actually all that expensive to provide health care because the uninsured in America are mostly young adults who are actually pretty cheap. They don't usually require triple cardiac bypass operations. And there are some fairly straightforward, even if technically a little bit complicated, things we can do to get these people under the insurance umbrella. So, as I say, I'm arguing with zombies, not trying to kill them, because I know that they never really do die. But you can try to argue with them enough so that you can get good stuff done.
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B
So our view on zombies, because we are in violent agreement with your analysis, is that you cannot kill the zombie ideas because these ideas are not propagated because they're true. They're propagated because they are effective. They advance the interests of the people who are propagating them. But what you can do, I think, and what we've tried to do, is you can inoculate people against these zombie ideas by showing them that the people saying them aren't saying them because they're true, they're saying them because they're effective. That these things sound like economics, but are actually intimidation tactics masquerading as economics and convert fear into anger.
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D
That's what I say right in the beginning of arguing with zombies. Among my principles for writing is be honest about dishonesty. Don't pretend that we're having good faith discussions when we're not. There are good faith discussions, yeah. Ben Bernanke and I disagree about the effectiveness of quantitative easing and forget about it. That's not worth discussing on the op ed page. But nobody really believes scare quotes or unbeliefs in the magic power of tax cuts. That's all about serving interests. And you can document, you can look at who does it and where it comes from. It's like climate change denial. I guess it's Naomi Orskis who's done this. Of scientists who have written skeptical client pieces, how many have received funding from fossil fuel interests? And the answer is all of them. Right? So, yeah, you can make that case. And I think it can be effective. I think if you can make the case that something is being argued, that the argument is not being made in good faith, then it helps. It helps you make the case against it.
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B
And whenever somebody says that policy will harm the very people it's intended to help, then you know they're scamming you.
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C
So. So, well, once a very long while it happens.
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D
But it's. But but very often not. That's right. There are people who are people who have sounded, you know, centrist in the past who have changed their minds and showing that they were in fact in good faith. Again, one of my, I've been doing, you know, I've been book touring for our Hebrew zombies and, and I get, I get pretty interesting questions in the audience and. But one of them was on why do some people say that the deficits don't matter and why is that so very different from what say, Larry Summers is saying? And I say, have you looked at what Larry's been writing lately? He's, he's actually been just finished a big paper that concluded it's time for Washington to put aside its dead obsession and focus on more important things. So there are some people who can be persuaded by evidence. And one way to look at the Obama years is to focus on all the things you hoped might happen, that didn't. But another is to say, hey, we got a big expansion of health insurance, we got some substantial tax increases on the 1%. We got some substantial investments in green energy that are actually paying off now in the boom in solar and wind power. So there's glass half empty, glass half full. But there are, but certainly the glasses aren't totally empty.
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C
Can I ask you, I'm just curious. It's a little bit of a personal question. My father was a psychiatrist and psychiatrists are very much alike. I once read a book, Children of Psychiatrists, and it was amazing how our experiences were similar. And the thesis of the book was asking the question, does psychiatry create a certain type of person or does it attract a certain type of person? And I've noticed this with economists as well. Is there something about economics that attracts a certain type of person to the field or does the field of economics create a certain type of person?
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D
Probably both. Let's put it this way. I'm sitting here at the Stone center for the Study of Socioeconomic Inequality, which is actually genuinely interdisciplinary. And we talk to cross sociology, poli sci, economics, and we have invited speakers from all kinds of people who do ethnology and so on. And I list some of their research, a lot of which involves just going out and talking to people in detail about their lives. And I think to myself, I could never do that. So it's kind of certainly someone, I think economics on average probably attracts people who are more comfortable with spreadsheets than with one on one interviews. It's going to attract people who do have a little bit of a depersonalized view of the world. And then there's also, to the extent that the field was for a long time pretty dominated by models of how great markets are. I think economics attracted people who were somewhat, on average, somewhat certainly more conservative than other social sciences. Now it turns out that most of the well known economists in my generation, I would say in the next generation behind, are in fact center to left of center. But that wasn't always true. And that's probably certainly relative to sociologists, we're a pretty conservative profession.
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C
So.
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D
Sure. And then maybe if you spend a lot of time with models in which people act, always act in their self interest, you start to think that that's what people are actually like.
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B
Right. A lot of white men too.
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D
That's changing fast.
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B
It is changing fast.
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D
Yeah. That field's gotten more diverse. The last recent, if you track winners of the Clark medal, which is the best economist under 40 medal, that's gotten substantially more diverse. We're getting more women getting that now, but it's definitely true.
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C
So we have one final question for you, and that is why do you do the work that you do?
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D
I think basically in the hope that I can make a little bit of a difference. I don't have grandiose visions. One of the things that kind of an interesting thing, I somehow or other ended up with the best journalistic spot in the world, op ed page of the New York Times. And my ability to move public opinion is still almost invisible. You can at best nudge things a little bit, but it can make some difference. I think I played some role in us not privatizing Social Security, which is the first thing I talk about in arguing with zombies. I think I played some role in us getting even an incomplete healthcare reform. I argued against destructive austerity policies. And unfortunately I think we kind of lost that argument. But it was the right argument to make. So if you can make a little bit of a difference, especially in something this economics is about society. And if you can make society even infinitesimally better than you've justified your existence,
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B
that's a fantastic answer. We think you're making a difference. You're helping us.
- [38:00]
D
All right, good luck.
- [38:01]
B
Thank you, sir.
- [38:02]
D
Okay, take care.
- [38:03]
B
Okay, bye.
- [38:04]
C
Byes. So, Nick, what do you think? Did we kill any zombies today?
- [38:11]
B
I don't know. It's great to of course talk to a fellow traveler who has devoted his life to pushing back against these terrible ideas. And there was a lot in obviously Paul's book that I completely agree with. But you know, there was some stuff that he said, and that he's written that I don't agree with because I think that you and I, you and I both think that it's the underlying models that are as problematic as the ideas themselves.
- [38:43]
C
And I think this gets to. If we have a quibble with the book, it's that he doesn't reject modeling.
- [38:50]
B
I mean, the neoclassical modeling.
- [38:54]
C
The neoclassical modeling. He talks about the limitations, he talks about where it goes wrong. In the book. He, he says they're based on silly assumptions. And we agree with all that. Our take is that actually it's the models and the silly assumptions of orthodox economics that that's the virus that's actually creating the zombies.
- [39:17]
B
Yeah.
- [39:19]
C
And what we've been trying to do on this podcast and in the work in our office is develop a vaccine.
- [39:27]
B
Yeah, right. And kill the virus.
- [39:29]
C
Right.
- [39:29]
B
So look, if you're an economics professor and your job is to teach economics, I'm deeply sympathetic to needing to hang on to even, you know, like, stuff that you know isn't altogether true in the absence of an alternative. And I know enough about the landscape to know that there isn't a ready alternative. Although the core curriculum that's being developed at INET is coming along and that will be a thing that teachers of economics can use. But, you know, the truth is that it is from things like seeing a human economy as an equilibrium system that these zombies ideas proceed. Right. That is where the virus comes from. And the virus, I think, can be thought of as the deep intuitions of the people who ply the trade.
- [40:23]
C
If you're teaching any 101 course, you're going to have to simplify things, Correct? Right. I mean, that's just the base. That's why it's 101. So I understand the need to simplify concepts for a 101 audience. The problem is that when you have these models that are based on things like Homo economicus, because these models basically simplify and assume you will generally behave rationally and have perfect information and all that.
- [40:55]
B
And be self regarding.
- [40:56]
C
And be self regarding. Selfish. I mean, we've seen what you end up with is indoctrinating these impressionable 101 students with ideas that are wrong and that you understand are wrong, that do not hold up in the real world and that your colleagues understand do not hold up in the real world. But these freshmen and sophomores taking these class is they don't understand that because they don't move on to the next level. I'll tell you one of the things that I found most striking was near the end when we talked about what type of people the field attracts. And he acknowledges somewhat conservative. It's somewhat conservative field.
- [41:43]
B
And I think that you cannot discount the sociological reality that the vast majority, majority of economists are rich white dudes who work largely at the behest of other rich white dudes. And the biases lean in that direction. Right. And that's how you wound up with a profession which will obsess over the possibility that raising wages for poor people will kill jobs, but has, to my knowledge, never once done a study of the job killing effects of a few people amassing great wealth. It is a remarkable, again, sociological phenomenon that there is such attention paid to the risks of increasing wages for poor people, but no attention paid to the job risks of letting a few people amass enormous amounts of income and wealth. I mean, you can do the math very, very easily. If you just assumed that instead of a 23% share of income for rich people, we continued to get the 8% share that we had in 1980 and
- [42:57]
C
there'd be an extra 2 1/2 trillion dollars to spread around the rest of the economy, that might do something to the demand side.
- [43:07]
B
Yeah, a little bit.
- [43:08]
C
Maybe a little bit more than that. Tax cut.
- [43:09]
B
Yeah, exactly. But these are obvious questions that should be asked. There's a clear narrative benefit to exploring it. But nobody is in the profession, at least that I know of. And that speaks to the fundamental biases of both the people and the ways of understanding the field embedded in neoclassical economics. And so anyway, just fascinating conversation and super obviously, really, we're very fortunate to get Paul to spend so much time with us chatting about this stuff.
- [43:47]
C
Yeah, we need more zombie fighters. And as Paul Krugman points out, we can't stop the fight because that's the thing about zombies.
- [43:58]
B
They don't die.
- [43:59]
C
They never die.
- [44:05]
B
Pitchfork Economics is produced by Civic Ventures.
- [44:07]
D
If you like the show, make sure
- [44:09]
B
to follow, rate and review us.
- [44:10]
D
Wherever you get your podcasts, find us
- [44:13]
B
on other platforms like Twitter, Facebook, Instagram and threads. Pitchfork Economics Nick's on Twitter and Facebook as well.
- [44:20]
D
Ickhanhower for more content from us, you can subscribe to our weekly newsletter, the
- [44:24]
B
Pitch over on Substack. And for links to everything we just mentioned, plus transcripts and more this, Visit
- [44:29]
D
our website pitchforkonomics.com as always from our
- [44:33]
B
team at Civic Ventures, thanks for listening.
- [44:35]
D
See you next week.