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- [00:10]
A
Hello and welcome to the Economists Hour edition of Slate Money, your guide to the business and finance news of the week. I am Felix Salmon of Axios. I am joined as ever by Emily Peck of HuffPost. Hello. By Anna Shymansky of Breaking Views. Hello, and rather excitingly, I am joined here. I'm in Washington, D.C. this week and I'm joined in his hometown by Binyamin Applebaum of the New York Times.
- [00:41]
B
Hi.
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A
You are here to plug a book.
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B
I'm here to plug a book.
- [00:45]
A
What's the book?
- [00:46]
B
It's called the Economist's Hour and it's a fast paced, exciting, thrilling history of the role of economists in public policy.
- [00:54]
A
If you only read one book about the role of economists in public policy this year, make it this one. No, really do. It's got some great stuff in it. And we're going to touch on a bunch of stuff in the book. In this episode we are going to talk broadly about economists and whether they have made the world better or worse. We're going to talk about the value of a human life and how you can put a dollar amount on it and we are actually going to give you a dollar amount. So if you listen to this episode, you will find out how much your life is worth. And you know, this is service journalism. Exactly. And we are going to talk about what has been going on between the NBA and China and whether companies morals can extend to places like China. It's a good episode even. You're gonna, all Anna Shymansky fans are gonna love this. We are going to wonk out enormously about the Federal Reserve balance sheet in Slate Plus. So there's a bunch of, of cool stuff which you're going to want to listen to coming up on Slate Money. Okay. So Binya, tell us about your book.
- [02:03]
B
It came out when, came out in early September.
- [02:05]
A
Came out in early September. So it's still fresh. It's still a newborn.
- [02:08]
B
Fresh and new.
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A
But it is. How would you describe it? What's the elevator pitch?
- [02:12]
B
It's the history of a revolution that starts in the late 1960s and the early 1970s where economists begin to assume a really central role in shaping economic policy in the United States. In particular, advocating for the government to step back and do a lot less management of the economy, to rely much more on markets to allocate resources. And it's the story of how that happened and what the consequence has been.
- [02:35]
A
So with hindsight, was this a good idea?
- [02:38]
B
No is the one word answer.
- [02:40]
A
One word answer.
- [02:41]
B
I mean, it had benefits. There were Problems. That part of the story gets lost sometimes. In the late 60s and early 70s. Listeners who are old enough to remember that period will remember that the economy wasn't doing well. There was a lot of concern about back then, the bogeyman was Japan rather than China. But there was this sense that we were falling behind and there was a need for new approaches to policy. And in important respects, these economists introduced new and beneficial ideas. But like many revolutions, it went too far. And we're living with the consequence of that.
- [03:07]
A
And what would you say is the single most deleterious consequence of the invasion of the economists?
- [03:14]
B
I'm going to cheat and pick three, but I'll do them quickly. The first is that over time, growth has slowed down, in large part because we're simply not investing anymore. We're not relying on government to do the things that government does well. Education, for example. The second is that we've seen inequality soar. One of the big shifts that you see in this period is that economists really convince policymakers to stop worrying about inequality, to stop making equality a goal of public policy. And this is a really important reason that inequality has exploded in recent decades. And the third is that I think that that is straining our democracy. One of the reasons that we're having trouble getting together and making good collective decisions is that we have less in common. We, the people, is getting strained because we, the people, have less and less in common.
- [03:56]
C
Wow.
- [03:56]
A
So the economists are really. They really fucked us.
- [03:59]
B
I think it's a story about. Yeah, some things that went pretty wrong.
- [04:02]
D
I think one of the interesting things you talk about in the book, which I really liked, was the role regulation plays in our lives and the role economists played in getting rid of a lot of regulation. My favorite example, I think, maybe was airlines, how there was a big push to get rid of regulation, heavy regulation of the airlines. It clearly wasn't working. But then somehow in 2019, we wound up with kind of this. What is it? Three airlines now that have basically a monopoly over air travel. Prices have stopped falling on air travel and sort of a failure of deregulation. And then you compare that to Europe, where they've still kind of kept an eye on things, and there's cheaper flights.
- [04:41]
A
And more airlines and more competition. Yeah. How is it. How is it that Europe. Europe has more competition on airlines when America is like the deregulatory state?
- [04:52]
B
It's the first time in history that it's been cheaper to fly in Europe than in the United States. Yeah. So, I mean, I think when we talk about economic policy. We often talk about the Fed, we talk about taxes. We don't talk enough about regulation, which is really a central part of what modern government does. And the airline story is a fascinating example of this arc because in the early 1970s, the airline industry was basically, it was very expensive. There weren't a lot of flights. It was basically something that rich people did. And that was because the government was tightly regulating the industry. There was literally a board of people here in Washington. If you wanted to fly From Chicago to St. Louis, you needed to come here and get a license. The price was determined by this board. What you could serve on the airplanes was determined by this board. And so you basically had this tightly regulated industry. And during the 1970s, economists, a guy named Alfred Kahn come in and on behalf of the federal government, deregulate the airline industry, Take apart these rules, get rid of that board. They literally have a marine bugler come and play them out. And all of a sudden airlines are free to fly where they want to, to compete on price, to compete on service. And, and, and you get a huge explosion in air travel. And that's great. But this is where we start talking about a revolution that went too far. Because what happens is that they so much eliminate economic regulation that they also stop worrying about industry consolidation. They allow the players to come together. And so you go from having, you know, a whole bunch of small airlines to a smaller and smaller number of larger and larger airlines, and then finally just four big airlines. Anyone who's been online and shopped for airfares knows that they don't compete on price. And meanwhile, Europe has been taking a harder line and refusing to allow that consolidation, preserving competition, managing the marketplace. And the result is that it's cheaper to fly in Europe.
- [06:33]
C
And I think that's a fair argument that particularly in this instance, we saw one point, you're going to increase competition, but then it ends up in kind of crony capitalism. But I'm also kind of curious in, in the book, because it's certainly true that you had a lot of politicians begin to point to economists and say, economists support these policies, thus I can do them. But it was the politicians themselves who were implementing these policies. And it wasn't as though these ideas didn't exist before, you know, Milton Friedman came along.
- [07:02]
B
So it depends on the ideas, but there are really instances. And for me, one of the fascinating things about researching and writing this book is I went into it wondering to what extent it was going to be possible to trace specific ideas from their origin in academic economics into policymaking and into our lives. And it turns out that in many of these cases, the paper trail is just remarkably specific and clear. And antitrust, this question of whether you allow companies to get together and consolidate as they've done in the airline sector is a really great example of this, because it actually is the case that economists articulated a new version of what antitrust policy should be focused on reducing consumer prices as much as possible, treating corporate conduct in general as if it was okay, unless you could find specific evidence of harm, Assuming the corporations were so busy competing that for the most part, they didn't have time to take advantage of customers. This is a model that economists articulate, teach to lawyers. Those lawyers become judges. They continue to cite the economists in their legal opinions. And so you can literally see the march of this idea from the minds of very specific economists right into jurisprudence, right into law. And the fact that we now have four airlines is really a direct consequence of the ideas that economists taught to politicians.
- [08:19]
A
So I want to pick up on this, because the way you're talking on the big picture level is very much like you have a natural prelapsarian state of affairs, where politicians believe in equality and redistribution and various other noble things. And then economists come along, and then the politicians kind of get browbeat by the economists, and suddenly they start becoming libertarian Republicans or whatever. And I can see the other side of it. I can see Anna's point of view as well, which is that you get a bunch of politicians who will take any excuse to reduce taxes and do what their rich funders and benefactors tell them to do, and they will just pick up on any economist who says the kind of things that they need as an excuse to implement these policies. So why do you believe that politicians are naturally good?
- [09:13]
B
I certainly don't. So I think every story starts somewhere, and there's always a tendency to sort of contrast the complexity of what you're telling with the simplicity of what preceded it. That's clearly not the case. I mean, the world before this economist's hour was a complicated place where the same special interest groups were in competition. The set of ideas was different, but the politicians were the same venal beings, and they were wrestling with how to serve the interests of their constituents and how to, you know, perform their jobs in much the same way. What changes is the introduction of these new ideas which reshape that competition among interest groups, providing ammunition to big businesses, allowing them to articulate a case for why what was in their interest was also in the public interest. Allowing them to compel politicians and to shift essentially the balance of power in the political system. Not because politicians were good and then corrupted politicians were the same politicians that they'd been before, but because the terms of debate had shifted.
- [10:15]
C
I do think this is an important point though, because, you know, you, you rightly criticize a number of economists in the book for kind of having so much, you know, kind of the hubris to think that they can kind of figure out exactly how all of these very, very complicated parts of an economy, as complicated the United States would work. And I think that's a completely fair criticism. However, the alternative can often be politicians essentially doing the same thing. So if you're kind of eliminate, or you probably, I'm sure you wouldn't say eliminate, but if you wanted to reduce the power of the economists, like what would come in its place.
- [10:51]
B
So let's take a specific example. So one of the ways in which this process unfolds is in the world of deciding whether or not you're going to implement a specific regulation. The government's thinking about writing a new safety rule. Should it do it or should it not do it? Is it worth it? And historically, that process was awfully subjective. And economists introduced real discipline in the form of what they called cost benefit analysis, where they tried to put a dollar figure as much as possible on both the costs of the policy, which often are more straightforward and explicit, the cost, for example, of putting a stronger roof on a car, and then the benefit, which can be a lot harder to count. You might know, for example, that stronger roofs are likely to save a certain number of people in crashes each year. But then you need to figure out how to put a value on the lives that are being saved. And economists introduced that discipline to the policymaking process. So without them, we'd be much less explicit in our calculus of costs and benefits. It's very possible that we would make less, we'd make less informed choices and that we would not make choices that are as good for society in the aggregate. And so there's a clear sense in which the presence of economists has improved the decision making process. But again, it's a question of how far do you go with that process. If you put economists into the position of being essentially the sole adjudicators of the value of a policy and you sort of surrender the role of politics in that process, I think that that's something to be worried about. I think that's where it goes too far. So you need the economists in the room and you need the politicians in the room. And what we're really talking about is how you strike a balance between those two competing forms of decision making.
- [12:28]
D
I also really liked in the book, the section on Taiwan, which sort of brought home for me just how much the free markets concept works as sort of this ideology and marketing. Because in that case, the success of Taiwan's economy was kind of messaged and marketed as a triumph of free markets, when in reality the Taiwanese government was carefully managing the country's industry and growth. And I thought it was interesting the way you sort of like broke open the notion that free markets are going to solve everything, bring growth, and that there's this other thing going on which is governments are actually needing to and do manage their economies.
- [13:11]
B
Yeah, it's a really fascinating story and sort of getting to learn about it was one of the real pleasures of working on this book and going there and talking to people there. But it's a great point because I mean, the word free market is a really freighted word and not a very specific word. So relative to mainland China, Taiwan absolutely had a free market and benefited from the openness of its economic policies. But relative to sort of the ideal free market in which everyone's free to trade with whomever they want and you can move money into the country, you can move money out of the country. That wasn't Taiwan at all. This is a country that very carefully managed the value of its currency in order essentially to encourage exports invested in specific export industries. You know, started off, for example, by. By building a power plant to power a fertilizer plant, and then requiring its farmers to buy fertilizer from the fertilizer factory, allowing them to pay with the rice that they were growing. I mean, this was a very intentional construction of an industrial economy that went on for decades and culminated in massive state investment in semiconductors, which are still essentially the foundation of Taiwan's industrial economy. And this process emulated the rise of. Explicitly emulated the rise of Japan. Japan in turn, was emulating the strategies that had been employed by Germany. Germany lured them here in the United States. And so there's this myth about the free market that actually bears very little, very little. It's not at all the way these stories actually unfolded. And in the retelling we've purified.
- [14:42]
A
My favorite example of a state supported export sector is K Pop, which everyone thinks of as being like this thing that just appeared on the international scene and Suddenly every single 13 year old in the world is bopping along to some Korean boy band. But it was 100% a strategic export initiative by the Korean government. And you're like, wow.
- [15:06]
C
Yeah. And I think this is a good point because I think one of the failures of the Washington consensus, this idea of, like, free capital, free trade, is that countries are at different stages of development. And as you point out, like, if you're looking at how the US developed, how Germany developed, how all of these different countries developed, it was not from having completely open markets. However, the argument then becomes, once you do become developed, at what point do you start to kind of loosen those strings? And that is. That is complicated because it's you. If you have a government that has tremendous control over the economy, it's sometimes challenging for them to give that up.
- [15:41]
A
Okay, so that is the perfect segue to. Because I really want to talk about this. We have a news hook here, which is what just happened with the NBA in China. China is the classic example of a country which has been developing, was poor, has become richer and richer, is now in most respects a middle income country, is growing much faster than any developed country, and has just an insanely large degree of control and growing degree of control over everything that happens in the economy. It's nowhere close to being a free market. And that control is now being exercised not only within China, but outside China in places like tweets from NBA managers. And there was this idea, which I think is now completely proven false, that as China got richer, it would liberalize. And that hasn't happened. Yeah. So, Binyamin, what did you think about this latest exercise of not particularly soft power by the Chinese?
- [16:47]
B
Well, big picture, I think it's fascinating for exactly the reason you said. For a very long time, our policymakers and our corporate leaders explicitly justified engagement with China by arguing that essentially working with them was the best way to, you know, expose them to American values and the American system of government, and that they would inevitably move in that direction. And so if you went to China and didn't criticize them openly, silence was essentially the best form of criticism, because ultimately your message would get home and they would accept that you were right. And that looks ridiculous in retrospect. China has developed on its own terms, has in many ways hardened its commitment to its form of government. And what we're now seeing is that it is asserting a prerogative, not just to control the way that American corporations behave in China, but to control the behavior of American corporations outside of China. And that, frankly, that's a real problem and a real challenge to the United States and to the role that Corporations play in our society. Because you really want to start worrying when you're in a position where another country with a very different set of government and a very different set of values is. Is essentially directing the behavior of your own companies, of your own citizens. That I think is worrisome.
- [18:01]
C
Yeah, I mean, I think we've. Because this isn't a, you know, it's not a new thing in the sense that we've had companies, you know, we had all the airlines over the last few years, and then recently have, you know, Tiffany's versus Versace, like all of these different companies. And it tends to be the same thing, which is China gets angry, and then whatever happens, they just undo. They pull it down.
- [18:19]
A
It's invariably. I mean, historically, it has been about considering Taiwan to be a country that's been the big one, but there's been lots of other ones as well.
- [18:26]
D
Three T's. Taiwan, Tibet and Tiananmen Square. Traditionally, you're supposed to stay away, and now there's a fourth letter, but it's H. It's Hong Kong. Can't talk about that either.
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C
I'm curious to see what exactly is going to happen here, because what we've seen is actually a tad different, by which I just mean that the initial response from the NBA is exactly what we've seen in the past being like, oh, no, no, no one should have ever really said that. But we're not. We're going to pretend we, you know, care about free speech. However, then, you know, Silver, Adam Silver, the head of the NBA, has kind of altered that a bit. And it's been interesting because you did have this game that. That was played in China and you did have a lot of people who went to it. And so I'm kind of curious that if China's bluff is called a little bit, if other companies then may say, do we necessarily always have to react in the most extreme possible way when China starts to kind of push back on us?
- [19:20]
A
What's their incentive not to?
- [19:22]
D
Well, the NBA has, I think I'm not the first to say this has unique leverage in China. There's only one NBA. It's a pretty special situation. And China has had love for American basketball for a long, long time. Whereas, like, a company like Versace or. Or even Apple could pull out of China and be replaced by other companies. There's only one mba, and possibly China needs the NBA in a way it doesn't need these other companies.
- [19:52]
B
I'm skeptical that we're seeing real pushback from the NBA. I Mean, Adam Silver came out and gave a very nice statement about how much he loves free speech and he should be applauded for saying it. But the fact remains that, you know, the last thing the Houston Rockets have done is to reprimand their general manager and send out their star player to apologize. We haven't heard anything more from them since then.
- [20:09]
A
I love that he came out. He came out and said, this is, this is James Harden, right? He came out and said we apologize. And like, he didn't actually say what he was apologizing for. No one knows what he was apologizing for, but he's just apologizing.
- [20:21]
B
Yes, it was very, very tactful.
- [20:23]
C
I mean, I agree. I'm, I'm not saying that 100%. Okay, this is, you know, things are changing, but I think even the fact that we're talking about this, because as I said, this is not actually a new, really new thing, but this is the first time it's ever gotten this much press. And obviously partly that relates to the fact that it's the NBA and that's popular, but I also think you can't compl. Completely divorce it from what's been going on with us and China in the last few years.
- [20:45]
D
I also think this kind of exposes the lie of the Woke brand or the Woke company. I mean, there's just no such thing. There are limits. And it's, it's. Governments allow companies to be enlightened or not enlightened. And in the US Especially lately with sort of an abdication of ethics from, you know, the White House, I feel like a lot of companies have tried to kind of like jump into the breach or something, and it's just, it's wholly inadequate. And I feel like one of the things that's kind of triggering about this NBA episode is it kind of exposes a bit of that. You know, companies aren't governments. They can't, they can't just come out and support free speech in the same kind of way.
- [21:23]
A
Well, they can, but they don't. I mean, this is, this is what Erica Pandey wrote in my Axios newsletter this week. Because why should I write it when I have colleagues who can write my newsletter for me, which is much easier. Which is basically that American companies in particular, but all companies really globally, have very parochial morals and that they can stand up and talk about how woke they are and how much they believe in various high minded ideals within US Borders. But the minute they get onto their corporate chair and fly to Beijing, they leave those Morals behind.
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D
Because it's not real morals.
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A
Well, I mean, that's. I mean, yes, basically, I think if they were genuine morals, then they would be universal.
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B
Right.
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A
I mean, that kind of. There's no such thing as a. As a moral code which kind of ends at your national borders.
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D
Right. It's what you're allowed to do. Like your behavior expands to the boundaries set by the politicians and the government and the Constitution.
- [22:19]
B
I mean, morality is a cultural phenomenon. And I think that there's. I think that one wants to be careful about arguing that American companies are not entitled to some extent to behave differently in other countries. That. That seems baseline, reasonable, but it is clear that, you know, there are instances in which companies have historically asserted that there was some moral reason not to be doing business in a particular country. Apartheid South Africa stands out as an obvious example of that phenomenon. You can get to a point where there is a consensus that the behavior of a specific country is sufficiently objectionable that the corporate sector is going to take notice of it.
- [22:51]
A
Except for, I think that if you look objectively at what China is doing with the Uyghurs, if you look objectively at what Saudi Arabia is doing in Yemen, like, these are worse than what South Africa was doing in the 1980s. So, like, we have. We've blown past that one.
- [23:06]
C
Well, I'm not.
- [23:06]
B
Yeah.
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C
I don't know if we're necessarily going to say what is worse, but it is worse.
- [23:10]
A
It is. I mean, you know, they are murdering millions of people. It is objectively worse. I'm not defending apartheid for a minute, but this is object. Like, the reason why we are doing business with Saudi Arabia and with China is because they have a fuck ton of money in a way, in the way that South Africa just didn't.
- [23:28]
C
We just do a lot more business.
- [23:29]
A
If South Africa. If apartheid South Africa was the size of China, we would have been doing business there.
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D
I mean, you could just look at. I think I sent around that piece. It was Peter Kafka, I think, on Vox, which talked about Apple in China. And I mean, the stakes are just so high for Apple particularly. It's like billions of dollars. Apple can't just be purely ethical and moral at this point. It's too entrenched there. It would lose so much money.
- [23:54]
C
No, it's the same thing with the NBA. I mean, it's like something like $4 billion. So it's, it's. And it's hard because you don't want to say, like, oh, well, you shouldn't have any ethical standards but then it's like you are a business that's making money, so then it's complicated. Exactly.
- [24:08]
D
That's why business can never be ethical. At the end of the day, it's all about the money.
- [24:12]
C
So then you agree with Milton Freeman that the only social responsibility of a business is to make money for its shareholders.
- [24:17]
D
The social responsibility lies with governments and regulators.
- [24:20]
C
I actually agree with that, yeah.
- [24:22]
B
I think that businesses themselves can be said to have social responsibility. I'm not sure why it's unreasonable to ask businesses to uphold certain ethical standards in their business. It is much harder if you're relying solely on external forces to constrain the behavior of businesses. You need businesses to have some sense of obligation, for example, you know, to not committing fraud, to not taking advantage of their customers. If all you're relying on is regulators to prevent those kinds of abuses, you're in a very difficult situation and you're going to see a lot more misbehavior. So I'm not at all willing to say that companies have no social obligation. I think they absolutely do. Corporations are creations of the state. They are part of our society. They have an obligation to behave as part of our society. I think it's very difficult to. I think the tricky questions are around what that means exactly and at what point a company should constrain its behavior or its business in a foreign country. Those are really hard questions. But the baseline idea that companies have no social obligations makes me very uncomfortable.
- [25:19]
D
I don't think they have no social obligations, to be clear. I just think they can't be left alone to, to have them on their own. They need to be regulated. There need to be laws that say no fraud. You know, they can't just leave it to the companies.
- [25:32]
A
But I want to ask Binya about like, what's a good example of a company having living up to its social obligations above and beyond any profit motive and doing something not because it is being forced to by regulators, but just because it's the right thing to do, you know, especially in the sort of international arena.
- [25:53]
B
So I think we probably have a lot more examples than we realize. I think American companies in general undertake, you know, fairly wide ranging efforts above and beyond their baseline obligations in all sorts of areas. You know, corporate recycling programs, efforts, you know, Pepsi Cola has this wide ranging program, for example, to identify safe sources of drinking water in the countries where it operates. You know, there's obviously a marketing value to that. I don't want to represent that, that we're witnessing an instance of Perfect altruism. But it is the case that American corporations often engage in ways that extend beyond their bottom line needs. And the converse is also true that we do see instances of companies refraining from doing business with countries whose behavior they regard as so objectionable. It's clear that the more money they're making in a place, the harder it is to convince them to stop doing business there. But it happens. It has been known to happen in the past and will in the future. There are companies that brand themselves. Patagonia is an obvious example of this. It's a company that really makes a big point of its social responsibility and has had to modify the way that it does business in order to maintain that image because its customers expect that standard of behavior from that company. So I think there's lots of examples of it in practice. Many of them sort of are quiet and go unnoticed. But I think there's plenty of example.
- [27:11]
A
And to be fair, I think the most obvious one is just Facebook and Twitter and even Google, all of which are banned in China and none of which are changing anything really to try and get unbanned in China. Mark Zuckerberg I remember ummed and dad a little bit about whether he wanted to be in China and then eventually came out and said, you know what? There is nothing we can do within our sort of ethical framework that would get us approved in China. If we were to do everything the Chinese government wanted, that would violate everything we stand for and therefore we're just going to give up on China. And that was the right thing to do.
- [27:46]
D
I mean we saw people trying, just, just recently we saw Google trying to go back to China and offered to create a search product that would fit within the boundaries of what China allows. And the only reason they're not doing it is because their employees stood up and said no way.
- [28:00]
B
Yeah.
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C
And I think this is just, we're, we're going to run into these issues more and more. We just, we. It's. The US has been, had been the dominant power for so long and in a sense this made it a little bit easier for countries because we were just this enormous market. But now as you have China becoming again in many ways kind of equal to the United States in terms of a market. This is going to bring up questions over and over again that we have not had to deal with in a while and the answers aren't simple.
- [28:27]
D
And I did have one question is this part of people are talking lately about a great decoupling between China and the US is the kind of Hub, the furor over NBA and China, kind of a sign that this is happening. Like, Farhad Mandu had a column in the Times that was like, American companies just shouldn't do business in China anymore. And it kind of seems like that's what the President wants in a way.
- [28:49]
C
Yeah. I mean, I think it's sign of tensions, but.
- [28:51]
D
Sign of tensions?
- [28:52]
B
I think it's the opposite. Right. I think the extent of the furor underscores how deeply intertwined these two countries are. People might want a great uncoupling, but you know what we're taught. This conversation really highlights how hard it is to imagine that actually happening.
- [29:05]
A
Let's jump back into your car roofs for a minute here, Vinya, because there's this thing which has been going on for what, like 40 years now, where you look at a regulation like Karus should be stronger because that saves more lives. And then rather than just saying great, Karus should be stronger because that saves more lives. You do a cost benefit analysis, and you put a dollar amount on the value of each marginal life saved, and then you work out whether it makes financial sense to impose that cost onto the automakers. And if the. If. If an investment of like 20 bucks would save a thousand lives, and obviously you do it, but if an investment of a billion dollars would save two lives, and you don't, because lives aren't worth half a billion dollars. And this is. This is this new sort of technocratic approach to safety regulation, right?
- [30:00]
B
So after World War II, the federal government, the Air Force, creates a think tank on the beach in California called the Rand Institution, where they basically say, we're going to have scientists working for the government. We'll pay them. We'll let them be on the beach. And the first question they put to these great minds is, what's the most efficient way to kill everyone in the Soviet Union? And so these guys work at the problem for a while, and they come back and they say, we figured it out. What you do is you get a lot of cheap airplanes and load them up with a lot of bombs and sail them into the teeth of the Soviet defenses. And they may shoot down a bunch of them, but enough of them are going to get through to obliterate the Soviet Union. And they take this document to their only client, the Air Force, and present it. And the Air Force looks at them and says, well, what about the pilots? You know, they're basically proposing a kamikaze attack on the Soviet Union. The Air Force, of course, is run by pilots, and they wanted to know why Rand wasn't more worried about the value of pilots? And it's a good question. And. And Rand said, well, we couldn't put a price tag on pilots. We know how much bombs cost, we know how much airplanes cost, but we don't know how much pilots cost. And that begins a real process. So at that time, across the federal government, more and more agencies are asking questions like this and relying on economists to answer them. And it becomes clear that a central and recurring issue in these calculations, a dam designed to prevent flooding, a car safety feature designed to prevent accidents, is how much are those lives worth? And this debate and effort to answer the question continues for quite some time. The guy who finally figures it out is a guy named Thomas Schelling. And what he says basically is earlier attempts had relied on things like the value of a life insurance policy, although, of course, most people with life insurance policies would rather live. So we can assume that the value understates their own valuation of their lives. And he said, what you want to do is ask people how much their lives are worth. Well, what does that mean in practice? So some of his students figure out that you can sort of extract an estimate of that by comparing the amounts of money that people make with the risk of death in their jobs. So, for example, the people who clean the insides of the windows of skyscrapers are paid less than the people who clean the outsides of the windows of skyscrapers, because if you're on the outside of the building, there's a greater risk of injury or death. And you can extract from that a sense of the value that people are putting on their own lives. And by the early 1970s, economists are beginning to use essentially that technique to arrive at estimates of the value of preventing a single death. And over time, that methodology becomes the core of this cost benefit analysis process that is now used to evaluate the vast majority of federal regulations. The current valuation is about $10 million.
- [32:31]
A
But it changes from context to context. Right.
- [32:33]
B
It's. So this is one of the things that's completely fascinating about it. It's this technocratic process based on these, you know, careful studies. But in practice, what happens is that you see, for example, during George W. Bush's administration, the value of human life declines. And then the Obama administration comes into office and it increases. Well, what's going on? Well, they're monkeying with the numbers. So the Bush administration comes in and says, hey, you know what? Maybe the lives of old people aren't worth as much because they're going to die sooner. And they propose this as a methodology, or maybe, you know, which I think is true. Well, yeah, but maybe an old person puts a higher value on each remaining year of life.
- [33:10]
A
I mean, that's probably true. Maybe the value per year of life is higher, but the overall value of the life, the net present value of the life, if you will, is lower. I think this is the deeply intuitive argument that Greta Thunberg is making. You know, we have to listen to young people when it comes to something like global warming, because the old people are going to be dead by the time the worst effects happen.
- [33:35]
B
And in a funny way, so when the Obama administration comes in, they commission a study on whether the value of children's lives is worth more, and they conclude that they are worth more. So what you basically have is, you know, you can agree even that that younger lives have more value than older lives. And it's still a question of whether you want that to push up your baseline number or to push down your baseline number.
- [33:53]
A
And of course, you also run into massive sort of lobbying noise from the AARP and people like that who are like, how dare you put a lower value on old lives? And so these decisions become incredibly politicized.
- [34:06]
D
It was sort of the end of the line for the economists versus the politicians. It's like, we have to listen to the old people. They're actually quite valuable to us, the.
- [34:15]
A
Politicians, mostly, because they vote yes in very large numbers.
- [34:18]
C
And it also shows you about how all of this is just essentially based on estimates, right? Because if you're trying to determine if someone has enough life insurance, you're going to be estimating how much they're going to make over their life versus how much they're going to consume. And the discount rate then you're using on that, you factor in, like, well, how risky is their job? I mean, there are a lot of different things, like, so you're never going to get any, like, perfect number here. I mean, it's kind of showing no.
- [34:41]
A
One, no one is pretending that's a perfect number. But there is a science to this, and it's a kind of weirdly distasteful science, which no one really likes looking straight in the eye. And they kind of like it when a bunch of economists and actuaries disappear off into a dark room and do it without drawing too much attention to themselves. And the people who do it in the glare of public opinion, the people who do it in public, basically, there's only one person I know of who does it a lot in public, and that's Ken Feinberg, he's a really unique person on a bunch of different levels. Like, Ken Feinberg keeps on getting these jobs of putting values on human lives precisely because he is the one person who can do that in public and not just get torn apart. And I don't know anyone else who can do it.
- [35:24]
B
It is clearly very hard to do. And the more, as you say, there's a reason that they sort of wrap it in technology. I mean, these are choices we have to make when we decide to implement a new regulation. We are inherently placing a value on human life. And making that choice explicit is surely better than leaving it unspoken and unconsidered. It allows us to make more informed choices. It's also important to recognize, as you say, that this process cannot be purely scientific. These are estimates. They reflect values. One thing that has been hotly debated is whether more painful deaths we should seek to prevent more assiduously. If you're going to die of cancer, is that worse than dying in a car crash? Because, you know, it's sort of a prolonged and miserable death. There's just lots of questions that you encounter that are fundamentally normative, even in the context of, you know, what is presented as a science.
- [36:13]
D
I thought it was interesting too, how in thinking of your book through sort of a gendered lens, because it is all, almost all entirely men, you know, coming up with these theories that then shape our policies. And in the, in the question of valuing life, it seems like in the beginning lives were valued. You know, back in slave owning times, you know, the value of a life was, you know, how much a slave could, you know, get on the, on the market. And then it comes, then it changes to how much is a worker worth? And when you think about, you know, the value of life in those terms, and then you think about how much is a woman worth if she's not, quote, unquote, productive in earning money, then what does it mean? And I just was wondering if anyone had thought about that, you know, back when we were valuing human life based on productivity and worth to an employer.
- [36:58]
A
If you remember when we had Mersabar Adaran on, you know, there was an entire financial superstructure built around the slave industry, and the slaves were like, securitized, right?
- [37:09]
D
And it's such a toxic notion to think of, you know, valuing a human life based on their productivity or their status as a worker.
- [37:16]
A
And yet ultimately, that's what it always comes down to. Even Ken Feinberg does that. He, he adjusts it. He will do the net present value calculations and decide that someone who was earning a million dollars a year had a higher value on their life than someone who was earning $50,000 a year. And then he will adjust it so they become closer together, but he still leaves the delta there.
- [37:34]
C
Well, to me it's just ridiculous, right? But I think that to me it would be a little bit more accurate if you said we're not valuing it's impossible to value human life. It's, you know, however you can value human capital. And I think that it, to me that's fundamentally often what is they're doing. And that's also slightly makes more sense than to say to actually value a human life.
- [37:57]
B
But they are valuing human life in the sense that what they're doing is deciding how much of our resources we should expend to preserve human lives. And the difficulty in doing that that you're highlighting is real. And it's a fundamental limitation of economic policy, which is that there's a tendency to focus on things that can be quantified and it leads to a discounting of the things that can't. And so it's true that our assessment of the value of human life rests largely on economic output rather than other intangible forms of social value and contribution to society. It's not that women are valued less than men if they earn less than men. These estimates are applied in a non gendered way. But the fact remains that economics as a tool of policymaking, one of its constraints, one of its blind spots is that it focuses on the things that can be quantified.
- [38:44]
D
I would push back a little bit on that because I would say non working women's economic output isn't actually valued in our society. There are women who do all kinds of work and the work gets assigned a zero value.
- [38:59]
A
No, that's true. The question is whether their lives are valued lower as a result.
- [39:03]
B
Right. The government doesn't differentiate if it's trying to figure out how many people are going to die in auto accidents. It doesn't assign a lower multiplier to the lives of female victims.
- [39:12]
C
Right.
- [39:12]
D
Okay.
- [39:13]
A
One of my favorite like wonkish jokes, if you hang out with development types in a bar at about like 10 o' clock at night, after a couple rounds of drinks, everyone will start making jokes about qualys and someone will say oh quali. And then everyone will start laughing because it's an inherently ludicrous thing on some level. But on the other hand, people still use qualys because for exactly the reasons you're talking about there's no better alternative. So Vinya, tell us what a QALY is.
- [39:44]
B
QALY is a quality adjusted life here. And the basic concept is this. If I tell you that you have five more years to live and I ask you whether you'd rather spend those five years out and about living a full life or in a hospital bed on life support, are you capable of deciding which of those two states you would prefer? Most people probably would agree that it's better to have full mobility, full use of your faculties, full enjoyment of your senses. And so this is an effort basically to, you know, it sort of gets down to some of the questions we were talking about with age, but also that even if you're going to, even beyond taking count of how many years a person may have left, the quality of those years is a significant variable as well. And so you can sort of refine this methodology further and further and further to try and get a sense of what's actually valuable. And qualities are used, as Felix suggests, in the international development context as an analytical tool. The United Kingdom uses them in its cost benefit analysis. It's a refinement of this methodology.
- [40:40]
A
Are they on some level ludicrous or are they, you know.
- [40:43]
B
Well, I don't think it's ludicrous. I mean, as I just suggested, I think, you know, conceptually we can all agree that a person on life support in a hospital bed is experiencing something that may not.
- [40:52]
A
I guess my question is at some, at some point do you run into sort of practical limitations or like, should, I mean, in your sort of ideal world, should we just stop valuing human lives and start just valuing qualities instead?
- [41:06]
B
No, I think you're still valuing human lives. If you're valuing qualities, that's just a form of the valuation of human lives. No, I think, as I said, you know, that this is either implicit or explicit in regulatory decision making. And we're better off if it's explicit. And I think we'd be even better off if we were more explicit about what we're doing and we made sure that we were having a discussion that is seated in a political context. I'm not sure why economists have any special ability to decide whether cancer deaths should be valued more highly than car crashes. That is fundamentally a choice that a society could make, but it doesn't seem to me a choice that can be made through some type of.
- [41:39]
A
But this is clearly something that society. This is a choice, this is a conversation that society does not want to have. This is one of those things where if you talk to like normal people and say, can we have like a clear and transparent and open conversation about the value of a human life in dollar terms, they're like, no, you run up against an incredibly strong human reluctance to do this in public. Right, Absolutely.
- [42:03]
C
And I think this is just one more example of real limitation with economics is that economics models are all perfect until you add humans. And then pretty much it's not, not so much anymore because humans just don't behave as they're supposed to.
- [42:16]
B
But you don't need to have a New England town meeting for the entire United States. Right. You can rely on the mechanisms of representative governance to provide this kind of input to the economists. We don't need Grandma to wrestle with the value she places on the remaining years of her life. But maybe we ought to have Congress engaging a little bit more with the way that regulators are using these methodologies.
- [42:35]
A
Have you met members of Congress? Let's have a numbers round, people. Emily, did you bring a number?
- [42:41]
D
I brought one, Yeah. I brought 1978. That is the year that we passed in this country the Pregnancy Discrimination Act. And it was in the news this week because there was a whole hubbub over Elizabeth Warren who said she was fired in 1971 because she was pregnant and school teachers weren't allowed to teach while they were pregnant. And I was not happy about that story because it was silly because in 1971, school teachers weren't allowed to teach while they were pregnant. So fired, not fired, was a matter of semantics. But I enjoyed how the story kind of played out in the media because we just got a lot of stories about pregnancy discrimination which longtime listeners of this podcast will know is one of my obsessions. And it was just a good conversation that came out of the whole thing.
- [43:26]
C
And I think it also was just an indication of how a lot of people don't realize that it was really not that long ago that this, these. I mean, we obviously still have pregnancy discrimination, but it was not that long ago that the level of overt discrimination. I think people don't realize this is not something that was 100 years ago.
- [43:43]
D
Right, exactly. It was just. It wasn't even considered discrimination. No, it was just the way it was.
- [43:48]
A
My number is minus 0.02%, which is the yield that Greece paid on its latest auction of three month treasury bills. Yes, people, Greece has now joined the list of countries which have negative yielding debt, which is kind of amazing on a bunch of levels because there are very few corporations which have negative yielding debt. And Greece is a lot less credit worthy than many corporations. And so there is something unique about sovereign debt that accounts for essentially all of negative yielding debt out there. I'm not entirely clear why.
- [44:29]
C
Well, because you have also central governments by buying the debt. I mean, like it is fascinating, I mean it is fascinating to see this in Greece and honestly partly it's because they, they have been able to offer in relative to other European nations, they can still offer more yield. I realize it's negative, so it's kind of a little bit of hard to conceptualize that. But the other idea is like, do you think they're going to default in the next three weeks? Probably not.
- [44:55]
B
Right.
- [44:55]
A
But you could make, you could make the same argument about a bunch of Swiss pharmaceutical companies, right? Maybe they are issuing debt at negative yields and they just haven't really been noticing. Binya, did you ring a number?
- [45:06]
B
I didn't know I was supposed to, but I guess I'd go back to that 10 million number, which is the value of statistical life. The number that the government says you and I and all of us.
- [45:15]
A
Is this like written down somewhere? They've.
- [45:18]
B
It's curiously round, so it's not exactly 10. It adjusts for inflation. So it's around $10 million.
- [45:26]
A
It's 10 million. It's 10 million, like 2017. $17.
- [45:29]
B
Yeah, I know they won't adjust the.
- [45:31]
D
Minimum wage, but they adjust.
- [45:33]
A
So the inflator is like cpi. It rises with consumer prices.
- [45:37]
B
It rises with consumer prices.
- [45:38]
A
So like every, every day that your like bottle of Coke goes up a little bit in price, the value of your life goes up a little.
- [45:46]
B
Paying a little bit more for consumer goods. You should know that your own value is increasing too.
- [45:51]
A
That's brilliant.
- [45:52]
C
So My number is 1.3 billion. And that is the amount that Ecuador is supposed to save by getting rid of its fuel subsidies, which has caused tremendous number of kind of riots. And you actually had Lenin Moreno's government have to flee the capital. You've had deaths and the capital or the country?
- [46:17]
A
Is he still in the country?
- [46:18]
C
He's still in the country.
- [46:18]
A
He's still in the country.
- [46:20]
C
Exactly. And he also somewhat came back to the capitol and left again. It's a whole thing. But like this is yet another indication of just when you inherit a country from a regime that essentially like I would say destroyed the economy, but left it really, really in really bad shape, it is very hard to change that because the changes you have to make, people hate and then you have to flee the capital.
- [46:40]
A
Not to mention there's a bunch of crazy econopolitical chaos going on next door in Peru as well.
- [46:46]
C
That is true. Yeah. That's a corruption story. And even related to Odebrecht and Lava Jatto, like the. You know, it's interesting.
- [46:53]
A
Yeah. It's really hard to keep up with non Trump related news these days, but there's a lot of it.
- [47:01]
C
It's true.
- [47:01]
B
And South America in particular is an area, the northern part of South America. Let's say things are not going well. I mean, I guess in Brazil they're not going that great either.
- [47:09]
A
But I mean, Argentina.
- [47:13]
B
Yeah, yeah.
- [47:15]
A
I mean, maybe there's a little bit of Chile, which is.
- [47:17]
C
Chile's doing okay. Yeah.
- [47:18]
B
They have a refugee problem now, right?
- [47:20]
A
Yes, it's true.
- [47:22]
C
That's Colombia. But yes, all of the regions around Venezuela or countries around everyone.
- [47:27]
A
Everyone is doing badly. Okay. I think we're gonna wrap this one up. We are gonna have a Slate plus segment on the Fed. So all you Slate plus listeners, we actually get to geek out about monetary policy on this show. Everyone else, that's it for us this week. Many thanks to listening. Many thanks not only to just me and Molly, but also to Melissa Kaplan for producing. And we will talk to you next week on Slate Money.