Cash transfers discourage work, price ceilings and floors (like the minimum wage) are economically inefficient, and trade makes everyone better off.

If you’ve ever taken a basic economics course in high school or even in college, these were probably the major takeaways. But these are myths --dire oversimplifications at best, and outright inaccuracies at worst --that often represent the most basic building blocks of conservative arguments against critical safety net policies. In this episode of Talk Policy To Me, GSPP economist Hilary Hoynes and TPTM reporter Reem Rayef unpacked the most nefarious myths to surface the truth about the impacts of economic policies, and imagine a better way to teach and learn economics.

Transcript

Reem: [00:00:02] Colleen.

Colleen: [00:00:02] Reem.

Reem: [00:00:02] Hey, how's it going?

Colleen: [00:00:07] I'm great. How are you?

Reem: [00:00:09] I'm great. I think we've got a moderately spicy episode in store today.

Colleen: [00:00:14] We do. Tell us about it.

Reem: [00:00:17] So today we've got an interview with a guest who's actually been on Talk Policy To Me before. It's Goldman School economics professor and all around fan favorite, Hilary Hoynes.

Colleen: [00:00:26] The best.

Reem: [00:00:29] We love. Last time Hilary is on the podcast, Talk Policy To Me alum Sarah Edwards spoke with her about the universal basic income. You should check the episode out. It was back in season two. For this episode, though, I wanted to zoom out a little bit and talk more broadly about the role of the field of economics in public policymaking, as well as its role in establishing and calcifying public attitudes about public policy.

Colleen: [00:00:54] Okay. So far, fairly mild.

Reem: [00:00:57] Well, yes, but I actually asked Hilary to come back on the podcast because after some years of GSPP econ doing my own reading, coming into my own politics and most of all digesting tweets from progressive economists on Twitter, I started to suspect that a lot of the harmful and neoliberal ideas that swirl around in the public consciousness and facilitate opposition to progressive economic causes in particular are actually seeded really early when we're first introduced to basic economic concepts in school, and I wanted to get Hilary's take.

Colleen: [00:01:32] And what are some of the harmful ideas that you're thinking of?

Reem: [00:01:35] I think there are a lot. I've compiled a pretty long list, but I got to talk to Hilary about three of them, and I think these are kind of the main ones. Number one is the idea that cash transfers discourage work and that that's big and categorically bad. Number two is the idea that the minimum wage kills jobs. And number three is that trade is good for everyone. It grows the size of the proverbial pie. And we should do it as much as we can.

Colleen: [00:02:03] Wow. Yes. Lies.

Reem: [00:02:05] Exactly. But their lies are myths that many of us just move through the world accepting our true because we are literally taught them in school where economics is treated like it's a natural science or like math, like some kind of organic state of the world that we're studying instead of creating all the time. I suspect there are lots of degree granting institutions where you could get a whole bachelor's degree in economics without ever really engaging with ideas about capitalism or racial capitalism or colonialism. And that's wild to me. So I tried to get our economist professor to denounce her field and everyone who works in it for taking part in this evil project.

Colleen: [00:02:44] Oh, okay. Interesting. Interesting. This is spicier. Did it work?

Reem: [00:02:49] No, not at all. And I'm a gremlin for trying. We did have an awesome and nuanced conversation, though. So here it is, talking myths. Your high school econ teacher told you with Hilary Hoynes.

Hilary: [00:03:18] Hi, I'm Hilary Hoynes. I'm a professor at GSPP. I'm an economist, and I have the privilege of teaching two classes here at GSPP. I teach the spring microeconomics course that's required or in the core. And I also teach a class that is, I like to just refer to it as my dream class, which is a class that's called poverty inequality and the social safety net, which is a sort of a wide ranging class. Everything from defining the problems around labor markets and wage stagnation and inequality, and then sort of going through bit by bit different policy solutions, predistribution, redistribution, and other sorts of things.

Reem: [00:04:03] So your social safety net class is extremely popular. And I think that the reason that that's true is, at least for me, it is because a lot of the kind of things that you come in understanding about economics or the kind of rules that you that you think about economics that are true are kind of totally torn apart. And in your course through kind of empirical stories and studies that we explore over the course of the semester. And that's really valuable and exciting and compelling and is also kind of the premise of this podcast, which is lies your high school economics teacher told you and I came up with this because it feels like so much of kind of my adult economics education, whether it's through GSPP or in my work or from like scrolling through economics, Twitter is like, Oh yeah, that rule that your high school economics teacher taught you about supply and demand or that thing that someone told you about how taxes work, that's actually not true or it's really only true in some very specific circumstances. So I have this set of myths that I sent to you, and for each of these myths, I want to kind of address three things. Well, actually, I guess four things. First of all, why is it a myth? Why is it not true? And how do we know? Why is it persistent? Why is it harmful? And how do we correct the record besides having everyone go to policy school and take your social safety net class? Okay. So the first one I want to talk about, because it's top of mind and top of news is the myth that cash transfers discourage work in like a big and important and significant way. And we have to begin with this one because of this huge pandemic relief package that was signed by President Biden about a month ago and includes a child tax credit that I think that you can claim some credit for. It's such a huge deal. And I would love for you to talk about what it is and how it works and why it's such a huge deal.

Hilary: [00:06:01] So the child tax credit has been part of our tax policy since 1997, and it's been expanded a few times, most recently actually under President Trump and the big, you know, Republican Congress tax cut that Trump signed in 2017, I think 2017. And so in the result of the child tax credit after its most recent expansion, is that each family gets $2,000 per year in a not fully refundable tax credit. We'll come back to that in just a second. That is phased out only at extremely high income levels like beyond the 95th percentile of the income distribution. So, for example, if you are a married couple, it's over $400,000 a year after, excuse me, income at that high level, your child tax credit of $2,000 per child on an annual basis is phased out. And so that is the sort of policy that then Biden expands and Biden enters the conversation. As many people have pointed out, that because the child tax credit is not fully refundable in tax jargon, meaning it only allows you to bring your taxes earned to zero and doesn't convert to being a refund, the poorest Americans do not have access to the child tax credit. And so when you kind of step back and say, hey, here's this policy, it's meant to help families cover the costs of having children. And in America you get this benefit until incomes up to almost a half a million dollars a year. But if you earn $12,000 a year, you don't get access to this. And so the starting point from this is such a kind of obvious point of equity or inequity that the this kind of origin of this is what if we took this existing policy and made it available to everybody, made it available to those who earned $10,000 a year, part time minimum wage workers or even those who have no earnings. And that is in fact what this policy did. It extended this child tax credit and made it more generous but more profound than that, perhaps, is this is the first cash benefit in America that is unconditional, that is available if you have earnings or you don't have earnings. So we took this policy, We provided it to those without earnings, and we also increased it so that the benefit amount was larger. So $250 per month, per family, per child under age six and $200 per month per family per child over six.

Reem: [00:08:46] So hopefully this was extended. But so it seems like this is a huge deal, not because a child tax credit didn't exist before. It sounds like even you said Trump expanded it in 2017. It's just now it is far more progressive because lowest income people can access it. And is it true that the kind of the cut off point at which you can no longer access it is higher?

Hilary: [00:09:10] So the existing $2,000 benefit is a little bit in the weeds. But hey, this is the Talk Policy To Me podcast. We can get in the weeds. The existing 2000s is staying as is. So that is still available to very high earners. The part that they bumped up to get to the $250 per month that is phased out somewhere in like $125,000 a year. So still pretty high up the income distribution. SNAP benefits, for example, which are also available to those who have no earnings, is phased out by income at the poverty level, which might be, you know, like $20,000 a year if you're, you know, an adult with a couple of kids in your family. So by that, by that sort of comparison, it's very much closer to universality than anything we've ever done before.

Reem: [00:10:01] Child tax credit or not, you mean?

Hilary: [00:10:04] Yes, 100%. Because the key universality is that those at the lowest income level, including those without earnings, are eligible.

Reem: [00:10:12] Right. That makes sense. So I was reading the NPR article where they talked to you and they said that this would have been politically unthinkable a few years ago. And I'm wondering, is that just because people are opposed to cash transfers for poor people?

Hilary: [00:10:28] To my mind, part of it is about cash, but I don't think it's only about the fact that it is cash. Welfare reform wasn't that long ago. I mean, I know to your listeners that it was a very long time ago, but in the context of American social policy, it was yesterday. You know, 1996, we took a cash transfer that was never generous, It was never great, but it was something and it kept a lot of people out of deep poverty. Even though there was stigmatization, there was you know, there was racial discrimination within it. And all the history of the welfare mothers and everything else, it wasn't great, but we were worse off without it because we we basically had an element of the safety net that was taken away and that was really part of this just sort of bargain that, you know, folks wanted to support the poor, but we needed to do it in a way that it was all loaded on to those who were working as opposed to those who weren't working. And this gets to your question, which is how much of that is because of the expectation that having benefits for the poor keeps them poor by by kind of preventing their smooth movement into the labor force? And so I think that what we've learned, I think, shows up really prominently in the fact that this policy is one that is quite universal in the sense that you can earn quite a bit before you lose access to this benefit. And by contrast, the old cash welfare program that predated welfare reform in 1996, essentially families would lose a dollar of benefits for every dollar in earned income that they accumulated. And so that creates very sort of perverse incentives to enter the labor market. And so I think what we've learned is that policies can reduce work, but we can design them in a way that help the targeted families and communities while making work not part of the equation. You get the child benefit if you don't work, you get the child benefit if you do work. So it's not creating huge changes on the margin. Increases in income make it may make it a little easier for some folks to cut back on their hours if that's important for them in the context of caring for their children or elders or anybody else. But it's not creating this really strong contrast between I can have the cash benefit, but if I work, I lose it, or I'm moving to work where I have some very low wage job that isn't translating to much in terms of increased income. And so it breaks that- it breaks that pattern.

Reem: [00:13:10] Hmm. To what extent is it a significant pattern like you were talking about, like prior to welfare reform, when there was an actual disincentive to work? Because for every additional value of income, you're going to lose some benefit. And so, I mean, to what extent did we observe that effect in the past?

Hilary: [00:13:29] So we we did we in fact observed the employment, like the research shows that employment was a bit lower because of the structure of the program. So there's kind of there's the glass half empty and the glass half full way of looking at that. It's like, yes, the data shows that when you have these very high phaseout rates, people work a bit less. But if you use those estimates to say, say how much of the difference between the work patterns among the poorest and the work patterns among people with a college education, how much of that difference is explained by the structure of the program? It's quite little. Maybe 20%.

Reem: [00:14:08] Sure, sure. So it seems like it's a question that is obviously worth asking when designing these types of policies. But I wonder, actually, it's not obvious that it's worth asking. I would I wouldn't like to what extent do you question the premise of like, why do we care if people are working as long as they are able to feed themselves and their families and have shelter over their head, like, is it is this just the wrong question to be asking? [00:14:31][22.9]

Hilary: [00:14:32] I'm really glad that you ask it because you and your classmates really push me to think about this in my teaching at GSPP over the years in a way that honestly I haven't been able to put into words so easily and other times in my career. So I think there's a couple of layers here. One layer is I think what we want is for the families to be well, both now and intergenerationally. And so you know that's my Northstar about what we what our goal is. Okay, so we want to generate- we want to have the resources available so that kids can grow up and make whatever their potential is. We want the families to be secure and safe and able to spend time nurturing their children to how they want, for example. But those things cost money to provide more resources for. And so the way that the work disincentives come in, I think the most neutral way that I can make the statement is that if a dollar of additional spending translates to only $0.50 more income because the household chooses to work less bundled with that cash transfer, then it's simply going to cost us more to help the outcomes in the family. And so the more the work disincentive is that's baked into the structure of the program, the more the cost of the program is going to be if the goal is to bring incomes up to poverty. So, I mean, that is just like a very kind of mechanical value without without value of whether working is good or bad, but instead is just well, the reality is if we create a program with a really steep phaseout on the first dollar, then we're simply going to have to pay a bit more to raise incomes up to poverty. And so that's just part of the cost of doing business that we need to think about compared to the benefits. And then separate from that is the question about whether if my goal is for kids to be well, in the long run, then I guess what I would like to know, which we actually have much less evidence about, is like to what extent is the child better off by having mom at home versus mom working? And how does mom working affect Mom's mental health and how does that translate to what it's like in the household? So that's a layer of complication that makes the problem a little bit more complicated. But I think is it's not secondary in terms of the magnitude, but it's secondary to thinking about like, you know, kind of like the big picture around the cost benefit of these programs. But to get let's get back before we move on, I do want to say and I and I didn't you know, at the very beginning you said this is a big deal. And I went to the place of this is a big deal because it's structuring a policy in a very different way than we've had in a long time. But more importantly, I don't want this to get lost. It's a big deal because the predictions are that this policy alone would reduce child poverty in America by 40% or more, which is really big and bigger than anything we've done probably in the history of child assistance as an anti-poverty measure.

Reem: [00:17:44] Well. So what were that like? What was the secret sauce that happened that that made this possible? Because it sounds I know that this was kind of something that you've been thinking about for a really long time. And so I'm sure you understand kind of like the like what pieces had to fall into place in order for this to become possible. Is it just that we had kind of a friendly political environment, or has something changed in our ethos collectively that is like, Oh, actually we just care about making families as well?

Hilary: [00:18:20] Yeah, I'm not sure this is the thing that I have my thoughts about. I'm not sure. I think one is COVID and the crises that we see and the fact that the impacts of COVID have been so severe on children and families with children in terms of the dramatic increases in food insecurity, the fact that this recession hit women a lot harder than men compared to typical economic downturns. I mean, just everything and the salience of the lines of the food banks and everything else, I think that has to be part of the story. And there's some pretty remarkable this is probably secondary, but myself and other scholars have been sort of making the point that our spending on the poorer overall hasn't changed that much. But the composition of how much goes to people who are working versus non-working has like completely flipped pre and post welfare reform. And so it used to be that most of the resources went to people who weren't working and now it's the opposite. You know, I've been sort of beating the drum on the fact that when you have policies that increase income that's tied to work, that might work pretty well when work is plentiful for most people, but it doesn't work very well when there isn't work. And so, you know, the Great Recession and then COVID ten years later, I think just sort of shines a light on the fact that we're not doing much insurance against job loss if all of our benefits are tied to work.

Reem: [00:19:57] So. Okay, So it seems like the way that I think we talk a little bit about how this kind of pseudo myth is persistent and why it's harmful. But the third question of how we correct the record, it feels like kind of experiencing something like the Great Recession where it's like, okay, well, certainly everyone would like to work, everyone is looking for work, but if we tie welfare to work, then people will be very poor for a long time because they can't find work and it's not really their fault. It feels like another way that we could correct the record is by integrating that ethnographic research that you were talking about, these kind of new ways of trying to factor in to kind of empirical economic work, the benefits of having a mother who is well and secure in her income and able to leave a job if she needs to. So what are other ways that we can start to kind of disentangle the confusion that is embedded within this myth that cash transfers and social safety net support generally discourages work.

Hilary: [00:20:56] One thing that will be interesting to see, I mean, political scientists talk a lot about policy feedback loops and how current action can affect future action. And one of the ways this comes up in this context is they argue that universal programs are less likely to cause stigma, categorization of like you are welfare, and I am not. And these kinds of differences that have been so harmful that I personally think have actually been a really big part of continuing this myth and, you know, the whole myth of the welfare queen that Ronald Reagan started now, you know, many decades ago, I think was really profound in affecting people's perception of these myths. And I think that was tied up with race and, you know, in very clear ways. And so I find myself thinking and hopeful that when we create something like this that is universal or so close to universal, could that allow us to break through this othering and myth, mythologizing myth, whatever that word is, that I think is actually tied up in this?

Reem: [00:22:15] Amen, do you feel ready to move on to the second one?

Hilary: [00:22:20] Sure, yeah.

Reem: [00:22:20] Great. Okay, So myth number two that I have here is that the minimum wage kills jobs, and this feels top of mind. Also because of the fight for 15 and the one fair wage battles that kind of have continued into the present. So maybe let's first debunk this one. Is it true that the minimum wage kills jobs?

Hilary: [00:22:42] No, it is not true that the minimum wage kills jobs. And it's interesting, the story on this is a bit different than the story on the welfare programs and discouraging work. I think this is a story of like research matters and more research leads to more evidence. And you just weigh the two next to each other and the evidence just really, really grows that that sort of pushes against the myth. So if you take a micro economics course, you're going to start with supply and demand. And the first application that you will do most likely in a basic microeconomics course is going to be what happens when you have price ceilings or price floors and to what extent does that move us away from the, you know, perfectly competitive market outcome? And even if they come from a place of goals of, you know, reducing inequality, say from increasing minimum wages, the punch line from that first application that almost everyone will get in a microeconomics course is that minimum wages are going to lead to less work. And so I think that there's a kind of profound reason why that is perpetuated is because it is such a robust prediction of our basic models. And so maybe we can get to how we think we can explain the findings, because this is really a story of the importance of research and really simple research. And it's also a story of the evolution of economics becoming more data oriented, more transparent and less theoretical. And so there was this really important study by my colleague here at Berkeley, David Card, and his colleague Alan Krueger. They were at Princeton at the time, and there was an increase in a state minimum wage in their area, and they organized a study where they surveyed fast food establishments sort of near the Pennsylvania and New Jersey border and studied what happened to employment in the months leading up to the minimum wage increase and in the months after and, you know, used the neighboring state as the comparison. I think it was New Jersey that increased and Pennsylvania that didn't. But I honestly don't even remember at this time. And so, you know, you use the neighboring state as a kind of control group for the state that experienced the increase in the minimum wage. And they found that actually jobs went up, they didn't go down. And this like a bomb went off in empirical economics when the study was out there. And then, you know, essentially this was, you know, back in the nineties and it's been replicated. Why it's been replicated? Because it's really important and there's been a ton of policy change to take advantage of. You know, states have increased their minimum wages, cities have increased their minimum wages. So there's a lot of little experiments for minimum wage scholars to evaluate, but to basically kind of do something very similar to that very simple New Jersey, Pennsylvania experiment, but sometimes expanding to many, many policy changes and many comparisons. And that work has very consistently found either zero effect on employment, a small increase in employment, or occasionally there's a study that finds a small decrease, but they're basically all hovering around zero. So there's just a I would say, a very compelling amount of studies that show that you increase minimum wages and it really doesn't do much to jobs. And if anything, it looks like it might increase them a bit, Like there's more studies that find that then find that it decreases.

Reem: [00:26:25] What would the story with the increase in employment be?

Hilary: [00:26:30] Yeah. So this has caused labor economists to think a lot about our basic model and what it's missing. And so the sort of basic model and what it's missing is something we call monopsony, the monopsony model or monopsony power. And essentially behind monopsony model is the fact that there's a lot of frictions in the labor market that make it not realistic. The assumption in our models that workers can costlessly move from one employer to the other to gain a small increase in a wage. So the traditional model, which we call the the law of one wage model is that, you know, Hilary's working here at, you know, ABC Books and finds out that, you know, Joes books across town is offering $0.25 higher wage and she leaves and goes across town and takes advantage of that job. And that fact then persists to, you know, force everybody into a kind of compliance on wages. But the reality is there's a lot of reasons why people don't fluidly move from place to place. They might not know about opportunities. It might be costly to leave. There might be things that the employer that are bundled with wage which makes them want to stay. They might be, you know, not able to move, you know, some distance because of location to childcare there, you know, partners work or all sorts of things. And so the result of that sort of monopsony model is that employers are able to capture some of that lack of perfect movement and wages are therefore in equilibrium a bit lower than our models suggest. And it turns out that in the presence of those kinds of frictions and all these things that lead to the real world of not perfect mobility in the labor market, it turns out when you put a wage floor in, it actually leads to higher wages and more employment by kind of compelling firms to kind of get in line with that wage. And so it sort of turns I mean, it's like a fairly profound turning the model upside down. Even the monopsony model says that if you raise wages high enough, you could start to get to the point of the number of jobs decreasing. And so, you know, any kind of thoughtful scholar is going to say, you know, I don't know what a $20 minimum wage will do. All I can tell you is the range of estimates that we have experienced and analyzed don't seem to have put us to the point where jobs actually go down. And, in fact, you know, as you know, I'm sure you and your listeners know the current federal minimum wage because it's set nominally and doesn't adjust year to year is now, you know, it's the lowest that it's been in decades. So, you know, by all accounts, minimum wages are very low right now. But when states impose wages and cities imposed wages, we don't see employment going down.

Reem: [00:29:36] Despite all the evidence. This myth is, I think, persistent. Why do you think it's so persistent?

Hilary: [00:29:46] Yeah, I think a lot of people hang on to those basic, you know, that basic model that you learn and you can't get past how this couldn't be true. You know, I don't it's not like economists are that political. But I do think that this is one of those things that really separates people that are a bit more progressive minded economists and those that are less so. But I will say that the polling of economists has shown movement away from that. Like the prevailing view is changing a bit. But the fact that it hasn't changed, you know, completely among, you know, a group of folks who, you know, should know about this work is somewhat problematic. So.

Reem: [00:30:31] Right. Yeah. And it's like even if economists are all fully in alignment about, okay, we now agree the minimum wage does not kill jobs. The minimum wage might actually increase jobs. Like what would it then take to kind of proliferate and like percolate that knowledge through a voting population?

Hilary: [00:30:49] Right. Right. And I guess on the voting population, I mean, we do know, though, however, that when the when minimum wages are put to like individual ballots and states, people vote them in, so Florida, right, in the last election voted in a $15 minimum wage. That's interesting.

Reem: [00:31:11] And is this another circumstance where we should question the premise, like part of me, like, say it was true that the minimum wage killed jobs for employers who pay $4 an hour. I think part of me is like, well, you know, that's how it has to be. Like, that wasn't a job that paid a living wage and that business didn't get to exist because they were underpaying their workers.

Hilary: [00:31:32] First of all, we don't really know which jobs go away. That's like a little bit of a harder problem that all we we typically know, like you count jobs in a county or something like that and you're like, okay. When we you know, when minimum wages go up, we see more or less jobs in the county. So, I mean, your point is a really profound one that I think we actually don't our data hasn't been good enough to sort of figure out exactly what kinds of employers are when we know, like by industry or things like that, but not individual employers. But I think that, you know, as policy analysts, we should be thinking about the benefits of these of this policy compared to the costs. And let's say there was a little bit of job loss. Let's just say there were. Then to my mind, if that wasn't very big, I would take the minimum wage any day because it's going to increase wages for an enormous amount of people. And if there's a little bit of offset, then, you know, we need to think about what to do about that. But I think to me, given wages and inequality and stagnation and poverty, I would do that. I would support that.

Reem: [00:32:30] Totally, and ideally we have like robust unemployment insurance and so that people who lose jobs are okay while they find a better paying one.

Hilary: [00:32:38] Right. Exactly right. The other piece is like, okay, if minimum wages go up and it doesn't lead to lower jobs. Something must have happened. And there's two logical possibilities. One is that the prices of the goods that those workers are making goes up or to the profits of the firm go down. And those are the two logical explanations for the observation that when wages go up, employment doesn't go down, something costs have gone up. So what's happening? And so are we don't our research is just kind of blossoming in this area. And it turns out, maybe not surprisingly, that there's more evidence of the increasing prices than the reduction in profits. And that's important because distributionally, you want to know who then is buying those goods, because then there's feedback of the additional costs.

Reem: [00:33:36] Myth number three that we talked about is that trade is good for everyone. And this one, I was thinking about this because I am a reader for Gabriel Zuckerman's American tax policy class. And we're talking about globalization and the ways in which, like an economy where capital moves across borders in a way that humans can't. That makes it really easy for corporations to kind of engage in rent seeking behavior that hurts workers and let them get away with that labor standards and enriches shareholders and limits our capacity to tax them. But I also really understand why this like trade is good for everyone myth is such a universal belief because when we trade easily, then we can kind of get the things we want and other people get the things that we want, that they want. And that feels like another like Econ 101 thing when we're first explaining like "what is a market" that emerges, so.

Hilary: [00:34:24] Yeah, I think here is where the myth comes down to who everyone is. So let's back up a little bit. That standard trade result is that is really an aggregate result. The standard trade result is that because of specialization across, say, countries, both countries can be better off by specializing and trading. Okay. I think we still think that that's true. But that part of what you said was for everyone. And the question is, who is everyone? And I think that implicit in the dialog and the mythmaking has been that everyone are these country entities. So the US, you know, has more GDP because of trade. And our trading country has more GDP because of trade. But that absolutely does not mean that everybody in the United States each has higher incomes because of trade. And that's the profound result that has really not been kicking around in trade for that long. And so here is a really important case where, you know, the pie is bigger, but it kind of matters how the pie is sliced up. And what we've learned from the research is that trade has generated gains that are pretty widespread but pretty thin. And so that would be like lower prices. So we all gain the benefits of these lower prices. And then there's some gains that are really concentrated like among the firms that are getting, you know, potentially very high profits from this outsourcing and so on. But then the third thing, and that's the the area where I think the discussions around trade have really been up ended is it turns out that there's quite substantial labor market implications of trade that tend to be very concentrated. So, you know, the folks who lose their job, it's a really big loss, whereas those of us who experience the benefits of prices are very thin and small but aggregate up to massive effects. And so that doesn't like on net we're better off, but the harm is felt in a very concentrated fashion. And it turns out because of the nature of trade and how it's how it's played out across industries, it's also been very concentrated geographically. And the geographic concentration of the losses and jobs have made the problem much harder to solve from a public policy standpoint than if the loss of jobs was randomly distributed across the country and there would be less, you know, like less underemployment concentrated in certain areas where there's not a match with a growth of an employing industry. And so all of that comes down to the fact that the pie is bigger. And so that's like the way in which it's not a myth. That's true. But that doesn't mean that it's that everybody is better off. And and I think as we've seen, there's been an incredible kind of political economy harm from the fact that the harms of trade has been sort of left untreated to sound clinical. And they're very concentrated.

Reem: [00:37:41] In something that I feel like is consistent through all three of these things, is like, oh, these myths are true if you just think about the most basic version of the microeconomics or macroeconomics that you learned in school and then you like start thinking about the fact that there are monopsonies or there are frictions, or when you start thinking about different slices of the pie, which parts of the economy are we thinking about when we think about trade. Then it gets more complicated. You just have to when you complicate the model, then you kind of start to see greater truths. But the way that we're taught economics, like most people, just learn the basic stuff and then stop, and then you just move through the rest of your life believing that trade is good for everyone and the minimum wage is bad and cash transfers are bad because that's that's what the models that you learned would tell you. And so, like, I think my hypothesis is that if you just did Economics 101, you could you could like come out into the world and that would lead you to be like pretty conservative.

Hilary: [00:38:43] Yeah. You know, it's interesting. And I do think that there's a lot of harm in stopping at the basics. I've been thinking a lot about how we need to invert how we teach economics. And I thought about this more at the college level. Not as much- my kids only had macro in high school, so I'm not even as familiar with how it's taught, but I could guess how it's taught. And I think that part of the part of the myth making in all of this is that in economics, when you teach economics, you start it like a science. And then we talk about policy as kind of an afterthought, where we talk about problems in society as an afterthought. And I think there's a lot of things that's wrong with that. Come to your question. I think what's wrong with that is that it can overpromise what the that the theories are set in stone like laws of motion, which they aren't. And so I think that that can create a lot of persistence. But I also think that there's a way in which it really alienates a lot of people from being interested in what I think is like the most exciting science in the world. And so I've been thinking a lot about how we need to turn economics upside down and start with the problem like we do at GSPP and then engage in the theory along the way. So you start with a problem poverty, low wages, stagnation, and then you try to talk about policy solutions and then you talk about the minimum wage and then you say, well, okay, in order to evaluate the minimum wage, we need to kind of think about, you know, what the benefits and costs of it would be. And you get the theory along the way, but it's within the context of a problem. And I feel like that could tick a few box from both, getting people excited about like economics is about trying to solve problems that are important that a lot of people can relate to. And it also puts the data first and the problem first. And that's what we can see in the world. And the theory is maybe that just makes the theory like a part of the narrative explanation along the way, as opposed to this is the theory. And now let's go see, you know, let's go look at some data. So that's my own. I think that there's a way in which, like I was starting to have these feelings even before I came to GSPP later in my career. But I've really been thinking about it a lot now. And there's also just been a lot of conversation in economics about how bad a job we're doing with respect to marginalized groups, being interested in economics from all the way from undergraduate through people like me in the field. And so it's I've just been doing a lot of thinking about that. And I don't know, that's one of the thoughts that I have that sort of knits together your statement of some of the challenges and what it might lead and some things that I've been thinking about.

Reem: [00:41:29] I think that's a great place to leave it. And I would wish that I had learned econ that way. I wish that we had started with problems and then we're like, okay, what are the useful tools and leave this Milton Friedman alone.

Hilary: [00:41:43] Right, Exactly.

Colleen: [00:41:58] Talk policy To Me is a co-production of UC Berkeley's Goldman School of Public Policy and the Berkeley Institute for Young Americans.

Reem: [00:42:05] Our executive producers are Bora Lee Reed and Sarah Swanbeck.

Colleen: [00:42:11] Editing for this episode by Reem Rayef and Elena Neale-Sacks.

Reem: [00:42:15] The music you heard today is by Blue Dot Sessions and Pat Mesiti-Miller.

Colleen: [00:42:20] I'm Colleen Pulawski.

Reem: [00:42:21] And I'm Reem Rayef. Catch you next time.