284. Is Income Inequality Inevitable? (Earth 2.0 Series)

In pursuit of a more perfect economy, we discuss the future of work; the toxic remnants of colonization; and whether giving everyone a basic income would be genius -- or maybe the worst idea ever.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

  Freakonomics Radio is sponsored by PNC Bank. Boring. Great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example? Well, PNC Bank did, since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely-not-yolo type. PNC Bank: brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC.

• 0:48Stephen J. Dubner?

  Freakonomics Radio is sponsored by hotels.com. Hotels.com helps you find and book the right stay for work faster. With business preferences, save your travel must-haves, like gym access or breakfast, just once, then get tailored results whenever you search for work-travel. Plus, with a free membership, you can save up to 20% on hotels and earn rewards on every stay for future travel. Book now at hotels.com. Visit hotels.com for details.

• 1:20Stephen J. Dubner?

  Freakonomics Radio is sponsored by Amica. You know what they say, if you want to go fast, go alone. If you want to go far, go together. So, go with Amica and get coverage from a mutual insurer that's built for their customers, one that looks after what's important to you together. Auto, home, life, and more, coverage that fits your unique needs. Amica helps you protect what matters most. Visit amica.com and get a quote today.

• 1:53Stephen J. Dubner?

  Freakonomics Radio is sponsored by ChatGPT. ChatGPT Work is a new way to work in ChatGPT. ChatGPT Work can pull info from across your apps and connect to your tools to help you create finished work. You can even automate work in ChatGPT with the Scheduled Tasks feature, and the whole time, you stay in control. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro plans.

• 2:29Speaker 01

  What if we could remake Earth?

• 2:31Speaker 02

  This is Meghan down in Texas.

• 2:33Speaker 01

  My name is Andrew Short. My name is Galucia. My name is Chris Adamson. This is Paul. This is Donnie Back.

• 2:37Speaker 02

  And I live in Atlanta. I'm from Romania.

• 2:39Speaker 01

  And South Africa. What would you change?

• 2:42Speaker 02

  One thing I've always wanted to reboot is how we define. The thing that I would like to change. What I'd like society to do is to treat. What I would change? Force every citizen to understand their responsibilities to themselves and to society. And if I had to choose one system.

• 2:54Speaker 03

  If I could change any one system.

• 2:56Speaker 02

  I would reboot the human understanding of. The thing I've always wanted to reboot is. How we schedule education. If I could change anything, it would be the global mathematics system.

• 3:03Speaker 03

  Just got way out of hand.

• 3:04Speaker 02

  It's really a flawed system.

• 3:06Speaker 03

  If it were up to me, I would just say, okay, everybody, let's stop. Let's regroup, let's shut everything down, and let's build the whole system up again from scratch.

• 3:22Stephen J. Dubner?

  Last week, we began a thought experiment. If we could reboot our planet, Earth 2.0, we're calling it, how would we upgrade our existing institutions and systems, the way we do government, healthcare, education, you name it? This is going to be an ongoing series. The first topic we're getting into, economics. In our first episode, we looked at how far we've come in terms of overall prosperity.

• 3:46Speaker 04

  If we go back 200 years, then we have basically the entire world population living in material conditions that we would call extreme poverty by the standards of today.

• 3:59Stephen J. Dubner?

  We looked at the friction between free markets, guided by the invisible hand.

• 4:04Speaker 05

  I am unapologetically in favor of free markets.

• 4:07Stephen J. Dubner?

  And a more hands-on approach, in which the government is heavily involved in shaping the economy.

• 4:12Speaker 06

  They tax a lot, and they guarantee access to a lot of services: health, education, daycare, childcare, vacation time, family support, and so forth.

• 4:23Stephen J. Dubner?

  Today, we're going to get a bit more granular. We'll be talking about the future of work.

• 4:29Speaker 01

  That not only did something great for the employees, it also set a standard for other businesses there.

• 4:35Stephen J. Dubner?

  We'll talk about smarter taxation.

• 4:37Speaker 07

  Well, the main problem is that we exempt so many things from income taxation that we end up taxing only a small part of income.

• 4:52Stephen J. Dubner?

  And we'll remember to keep our eye on the economic ball.

• 4:56Speaker 05

  Anytime you're trying to analyze a complex problem, just forget all the other stuff at first and just say, well, what does this do to the productivity of mankind?

• 5:16Speaker 08

  From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 5:36Stephen J. Dubner?

  We like to ask questions on this program, sometimes questions that are, to be honest, unanswerable, like today's question: If we had the chance to totally reboot our economic system, what would that new system look like? Why do we bother with a question that may strike you as absurd? The MIT economist Abhijit Banerjee says it better than I ever could.

• 5:58Speaker 09

  I have no blueprint for a better world. But I think that doing things consciously, we thought, asking lots of questions, not doing them because this is how we've always done things. This is our tradition. This is the normal in the world, asking questions. Why do we do these things? Is this the right thing to do? What is the actual evidence for it? That's key. We won't have a blueprint for the world, but we will have a better way of building a better world.

• 6:29Stephen J. Dubner?

  So let's start with a question that a lot of people are asking these days. What should be done about income inequality?

• 6:36Speaker 01

  Inequality has been proven to be a problem for economies, and it's a problem for countries, and it's a problem for sports teams.

• 6:43Stephen J. Dubner?

  That's Rosebeth Moss Cantor of the Harvard Business School. She trained as a sociologist, but is best known today as a management sage.

• 6:52Speaker 01

  One of the striking things about sports teams on losing streaks is that losing teams often had stars. Just like third world countries have rich people, even though most people are poor, losing teams have stars, even though the team isn't winning. The difference is that the stars look out for themselves. They feel no obligation to lift up the other players, to teach them, to include them. They only care about their own record, just like rich people in an African country can take their money and go park it in Switzerland or the Cayman Islands and not care about lifting up their country. Whereas on winning streaks in countries, as well as sports teams and companies, generally

• 7:35Speaker 01

  those at the top feel some obligation toward the education, the training, the development of people below them. So just to make things work well, inequality doesn't help. And then if you have a lot of people who feel left out of the system, well, they do get angry, and they sometimes surprise you with their feelings. But also, they often go passive. They think nothing could be done to change anything. And because of that, they're not very motivated, and nothing does change.

• 8:10Stephen J. Dubner?

  It's a compelling argument, to be sure, but not everyone shares Cantor's views on inequality.

• 8:16Speaker 05

  It's definitely the kind of problem that we should just worry a lot less about.

• 8:21Stephen J. Dubner?

  Brian Kaplan is an economist at George Mason University.

• 8:24Speaker 05

  So again, like, the main predictor of living standards of not just most people, but the poorest people in a country is productivity in that country. Countries that produce a lot of stuff aren't just good places to be rich or middle class, they're good places to be poor. You know, so when people complain about people being left behind, well, you know, like, you know, China's got 1.3 billion people, sure, someone's going to be left behind in there, but is it better to be poor now in China than it was 20 or 30 or 50 years ago when people are starving to death? There is really no question. So, I mean, it's only by going and, you know, forgetting history, forgetting comparisons, and then searching through a vast number of people to find a sad story that we can forget the big picture, which is really what we should be doing at all times.

• 9:08Speaker 05

  What is the big picture? Not that we can find something that happened that's bad in a world so vast we can't even imagine it, but saying, like, what is happening overall? What is the general trend? And how can we keep the general trend good?

• 9:22Stephen J. Dubner?

  Again, it's a reminder that, overall, the prosperity curve is still rising. But still, as some countries and people become incredibly rich, isn't it natural to try to close the gap beneath them? A few months back, I had a chance to put this question to Sir Angus Deaton, an emeritus professor of economics at Princeton. Deaton won a Nobel Prize in 2015 for his analysis of consumption, poverty, and welfare. I'd love to talk for a moment about inequality, the degree to which it is inevitable, perhaps the degree to which it is desirable, and the parts of it we should worry about and those we shouldn't.

• 10:00Speaker 10

  Well, that's a great question. I mean, I just spent last week in Davos being asked nonsensical questions, like, how do we kill inequality? You know, how do we remove inequality? And, you know, I'm just not sure that inequality is the right concept, in that it has so many sides to it, and so many causes, and so many effects. That focusing exactly there doesn't seem to be the right thing. In fact, I just got something from some social organization today, which said we define inequality as stagnant wages, you know, which is a very, very odd definition of inequality. I mean, inequality, you know, is about the spread to some extent, you know, the dispersion.

• 10:43Speaker 10

  So taking it from there, I think there's always going to be some inequality, at least in the worlds in which we live. There is this interesting fact that for most of human history, in which we were all living in hunter-gatherer bands, there appears to have been almost no inequality. And yet, from farming onwards, from the Neolithic Revolution, there's been a lot of inequality. And, you know, even in the perfect Rawlsian world, where you're trying to maximize the welfare of the worst off, you would need some inequality, because otherwise, the worst off person, like everybody else, would have nothing. So, I mean, that's just a simple economic story as to why there ought to be some inequality.

• 11:23Speaker 10

  If you go all the way back to the Athenians, there was the question as to whether extreme income distribution, wealth disparities, were not compatible with a functioning democracy. And if they were, what sort of democracies could you have? And could you design constitutions that would somehow contain that? So that's sort of a separate question, which economists don't typically think about very much.

• 11:49Speaker 11

  What we know about the history of human society for at least 4,000 years is we've grappled with the same types of problems.

• 11:56Stephen J. Dubner?

  That's James Robinson. He's a political scientist and economist at the University of Chicago.

• 12:02Speaker 11

  You know, if you go back to the Epic of Gilgamesh, I think the first version of that is about 2,100 B.C. It's all about the same thing, you know, how can you create authority hierarchy, which is very important for providing public goods, cooperation, protection against attack, et cetera, but control hierarchy? So I think the problems starting a new society would be, how do we create this system of authority? How do we keep it under control?

• 12:33Stephen J. Dubner?

  Robinson is the co-author, along with Daron Acemoglu, of an important book called Why Nations Fail. In it, they try to propose a simple way-

• 12:43Speaker 11

  A simple way to think about why some societies are successful economically and other societies are not. And really, that's about the institutions of a society. To be economically successful at some level, economists understand very well what that involves. It involves innovation, it involves investment in education and capital entrepreneurship. And we know that human beings, and I don't need to tell anyone associated with free economics this, human beings respond to incentives. But the incentive systems in different societies are very, very different because of their institutions. So the institutions that create all this prosperity and innovation in the United States are absent in other parts of the world.

• 13:27Speaker 11

  And the reason for that is fundamentally, in our view, political. You need to have the right sort of politics and political institutions if you're going to create economic institutions that create broad-based incentives and opportunities and that create prosperity.

• 13:42Stephen J. Dubner?

  That's probably not very surprising to hear that it's hard to build a good economic infrastructure without a good political infrastructure. But Robinson, digging deep into economic history, did find some surprises.

• 13:54Speaker 11

  There's some interesting lessons from the colonial experience.

• 13:57Stephen J. Dubner?

  For instance?

• 13:59Speaker 11

  We're interested in these big questions about, why has North America been so successful economically than South America for the last 200 years?

• 14:06Stephen J. Dubner?

  The US and Canada, colonized primarily by England, have done far better than a lot of Latin and South American countries, colonized by Spain, for instance.

• 14:16Speaker 11

  So what's the key to that?

• 14:17Stephen J. Dubner?

  The key is what Robinson calls inclusive institutions. The English colonial model often called for integrating laborers into their system of production and trade, whereas, say, the Spanish colonies-

• 14:30Speaker 12

  Whereas, say, the Spanish colonies more likely were based on the idea of extracting wealth from other people or taking a lot of resources out of the ground and not investing as much in human capital.

• 14:41Stephen J. Dubner?

  That's Tyler Cowen, an economist at George Mason University. English colonization, he says, had another advantage.

• 14:48Speaker 12

  They had better laws and somewhat less corruption, more of a common law tradition. They're more likely to have an independent judiciary.

• 14:57Stephen J. Dubner?

  As Cowan and Robinson see it, the North American colonies flourished because their institutions placed a high value on human capital, they're settlers, that is, rather than the exploitation of a native population. And, the argument goes, that difference still persists, which would explain why there's still such intense political friction in much of Latin and South America between the elites and the underclass. The US, of course, has its own history of slavery in the South. Interestingly, Robinson points to the greater poverty in the South as further support of his argument against an economic system that's built on exploitation. Now, the days of wholesale colonization are, of

• 15:40Stephen J. Dubner?

  course, long gone, at least for now, but if we are considering a more perfect economy for Earth 2.0, surely it would be wise to think about the lessons learned from those earlier colonizations and to look for modern parallels. For instance, a company isn't a country, but how a company treats its employees, its partners, its customers, well, that must have some bearing on how an economy develops.

• 16:08Speaker 01

  Multinational corporations have a very important role to play in developing countries.

• 16:13Stephen J. Dubner?

  Rosebeth Moss Cantor, again, from the Harvard Business School.

• 16:17Speaker 01

  There are some certainly that exploit, and it depends on the industry. When the only reason companies would go to developing countries was for the natural resources, for mining, for oil, then they would extract those natural resources and leave. What did they care about how they treated their employees? But when companies go because they see a business opportunity, there's a market, a market for their goods and services, or a workforce that they could educate to do things to world standards and supply other markets in that region, then they have to treat people differently. And they definitely can make

• 17:01Speaker 01

  a big difference. I remember when Procter & Gamble was building up its business in Egypt. And one of the things P and G did, because their employees all over the world had health insurance, they worked in Egypt to make sure there was a good health insurance scheme in Egypt, so they could give it to their employees too. And that not only did something great for the employees, it also set a standard for other businesses there. So multinationals that bring in values and bring in best practices from other parts of the world can educate that country and be a very big part of their development.

• 17:39Stephen J. Dubner?

  The key, Cantor says, is to treat people like people and not like physical resources to be plugged into your business model.

• 17:47Speaker 01

  If you don't pay attention to the people on the other end of that equation, even if you think you have the power, it doesn't work. And there are many ways that those without power can rebel. I was just in China with China's leading global company. They sell, they make refrigerators, sell appliances, very sophisticated company. And their story of how they went from a backwater to a global giant, all involves motivating people to get involved by treating them as though their ideas matter. And that was Communist China, winning in capitalism by empowering people to start

• 18:28Speaker 01

  businesses off the company platform, to provide ideas, to care about high quality.

• 18:33Speaker 11

  So that, I think, is crucial.

• 18:36Stephen J. Dubner?

  James Robinson again.

• 18:37Speaker 11

  If you're going to set up a society on a new planet, you don't want to have the government running itself off the labor of robots, you know, or mining rents, or you have to set up an economy where everybody is needed, everybody is valued. And I think that's a big lesson from these successful experiences.

• 18:55Stephen J. Dubner?

  An economy where everybody is needed, where everybody is valued.

• 19:00Stephen J. Dubner?

  How do you do that? Especially as new technologies make so many old jobs obsolete.

• 19:06Speaker 05

  You're saying, you know, driverless cars, isn't that going to threaten the jobs of drivers? Yeah, it totally threatens the jobs of drivers. And we totally want driverless cars right here, right now, to be awesome because it will enrich mankind.

• 19:18Stephen J. Dubner?

  That's coming up after the break. Also, one quick thing, WNYC, the public radio station that produces Freakonomics Radio, would like you to take a survey about the podcasts you listen to. It's anonymous, it'll take just five or 10 minutes. Go to wnyc.podcastingsurvey.com. You can also find the link in the show notes for this episode on Freakonomics.com. Thanks.

• 19:52Stephen J. Dubner?

  Freakonomics Radio is sponsored by Granola. You know that moment when a meeting ends and someone says, let's circle back on this next week, and everyone nods, but no one writes it down? Then next week rolls around and it's radio silence? That's why Granola exists. Granola is an AI-powered notepad built for the way real people actually meet. You take rough notes like you normally would, and in the background, Granola securely transcribes the meeting. Then it turns everything into clean, structured, actually useful notes when the meeting ends. And the best part? Granola works through your device's audio, which means it integrates seamlessly into the video conferencing tools you already use. No setup, no awkward bots. It's just your normal meeting with superpowers. If meetings are eating up your day, Granola is a no-brainer. You can try it totally free.

• 20:36Stephen J. Dubner?

  Just head to granola.ai/freakonomics. That's granola.ai/freakonomics to get your time back. Try it for free at granola.ai/freakonomics.

• 20:54Stephen J. Dubner?

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• 21:38Stephen J. Dubner?

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• 21:59Stephen J. Dubner?

  Freakonomics Radio is sponsored by hotels.com. Hotels.com helps you find and book the right stay for work faster. With business preferences, save your travel must-haves, like gym access or breakfast, just once, then get tailored results whenever you search for work travel. Plus, with a free membership, you can save up to 20% on hotels and earn rewards on every stay for future travel. Book now at hotels.com. Visit hotels.com for details.

• 22:33Stephen J. Dubner?

  If you want to think about building the perfect economic system, there are so, so, so many elements to consider. Money, for instance. What is the optimal form of money?

• 22:46Speaker 13

  That's a great question and a hard question.

• 22:48Stephen J. Dubner?

  That's Tavnit Suri, a professor at MIT.

• 22:51Speaker 13

  Yeah, and I'm actually a development economist studying mobile technologies and mobile finance in Africa, amongst other things.

• 22:59Stephen J. Dubner?

  Mobile finance is a pretty basic concept.

• 23:02Speaker 13

  So, mobile money is the ability to use your cellphone to store and transfer money to other people, person to person.

• 23:09Stephen J. Dubner?

  But Suri and others have found it can provide large advantages, especially for low-income people.

• 23:16Speaker 13

  The biggest two findings are that mobile money improves financial resilience, which is the ability to deal with bad events. And basically, we find that it has an effect on poverty. It's going to reduce poverty. We sort of do a back of the envelope to show it reduced poverty by about two percentage points in Kenya, which is about 190,000 households. And that some of these effects are coming from women moving occupation out of agriculture into what we call retail/business. And we see your financial investments become better. You're saving more because you have this ability to save in your phone. And basically, so people are able to do these things.

• 23:56Stephen J. Dubner?

  If you want to hear more on this topic, check out an earlier Freakonomics Radio episode called, "Why Are We Still Using Cash?" Another basic question to consider if we're building a new, better economic system: taxation.

• 24:09Speaker 07

  We've got to reform our tax system. Our tax system is scandalously inefficient.

• 24:15Stephen J. Dubner?

  That's Alice Rivlin. She's an economist who's had big jobs at the Federal Reserve and the Office of Management and Budget.

• 24:22Speaker 07

  The main problem is that we exempt so many things from income taxation that we end up taxing only a small part of income. But that means that to raise revenue, we have to have high rates. So I think there is a pretty broad consensus, certainly among economists, but also among politicians, that it would be good if we could have a broader definition of income, tax all income, not make exemptions for this and exceptions for that. And then we could have lower rates. And lower rates contribute to higher economic activity.

• 25:07Stephen J. Dubner?

  Rivlin is speaking, of course, to the American tax dilemma. Your mileage may vary a lot from country to country.

• 25:15Speaker 07

  So the problem is that there are major vested interests in the things that we exempt. Like, for instance, the fact that health benefits that you get from your employer are not taxed, they're not part of your income. In the world of big corporations, the tendency is to give very rich, elaborate health benefits in place of increasing wages because the tax system skews it that way. We also have very big benefits for borrowing on your house, the so-called mortgage deduction.

• 25:57Speaker 07

  That is very valuable, especially to people who have high incomes and very large mortgages. We don't need to encourage high-end housing. It would be much better to convert that deduction for mortgage interest to a credit. And that would mean that everybody would get the same amount of credit against their mortgage. And there's quite a lot of bipartisan consensus on what to do about it, but we haven't done it because we aren't willing to sit down and do the hard work of hammering it out.

• 26:37Stephen J. Dubner?

  But of all the elements to consider when conceiving a more perfect economy, perhaps none is larger and more pressing than the future of work. We are living through an era of astonishing technological advances, including automation and robotization, and it is rattling labor markets all over the world.

• 26:58Speaker 14

  A recent study by Oxford University says nearly 50% of current US jobs are in danger from automation.

• 27:05Speaker 15

  What can we do to protect ourselves from robot automation?

• 27:08Speaker 14

  But for some, the rise of the robots could lead to a sea change in society that we haven't even begun to anticipate.

• 27:16Stephen J. Dubner?

  The most susceptible jobs tend to be lower-paying jobs, which means that lower-income workers, who are already doing worse than average, will be put at even greater risk. That, at least, is how some people see the future of work.

• 27:29Speaker 16

  My name is Eric Olin Wright. I'm a professor of sociology at the University of Wisconsin, where I have taught since 1976.

• 27:38Stephen J. Dubner?

  Whether it's because he's a sociologist or because his worldview has been informed by Marxism, Wright has a different view than most economists about our worst economic problems.

• 27:50Speaker 16

  Well, I suppose among the most glaring is the concentrations of power that come along with the concentrations of wealth that are characterized by a global economic system with gigantic corporations that are able to amass vast sums of money, capital, which enable them-- it's not simply that this enables them to act in markets in a particularly destructive way sometimes, but it enables them to wield power outside of markets as well. If you took the top 10 corporations in the United States and called them a country, they would be roughly the eighth wealthiest country in the world. So our corporations are really political entities.

• 28:35Speaker 16

  And I think of that as a huge failure because of the way in which it dramatically undercuts democratic values and egalitarian values.

• 28:43Stephen J. Dubner?

  What kind of solution would Wright propose?

• 28:47Speaker 16

  If we had social policies in place that distributed the gains from trade in a broadly egalitarian manner, I don't think people would be in favor of protectionism at all. They would see that, yes, international trade has broad benefits, not narrow benefits.

• 29:04Stephen J. Dubner?

  What kind of social policies is Wright talking about?

• 29:08Speaker 16

  An unconditional basic income, which you could pay for out of the gains from trade, right?

• 29:13Stephen J. Dubner?

  We've also looked at this topic before on Freakonomics Radio. The episode was called, "Is the World Ready for a Guaranteed Basic Income?" That was only a year ago, but since then, interest in the idea has been cascading. Eric Olin Wright sees it as win-win.

• 29:29Speaker 16

  Well, let's use a significant part of that increased wealth of the society generated by the economist's favorite, free trade, and provide an unconditional basic income for everybody. My view is an unconditional basic income should be pegged at, you know, a bit above the poverty line. Think of it as the sort of no frills but decent standard of living. It gives people a different kind of freedom from what they have in a ordinary capitalist market. It lowers the coercive pressure on people to work, but it doesn't reduce the incentive. If you work, you earn more income, right? So it's true, there'll be some people who will be perfectly happy to live just on the basic income.

• 30:14Speaker 16

  But there's no disincentive to earn more. You know, it's not like means-tested poverty grants, where if you start earning money, you lose your welfare. You don't lose your basic income. Everybody gets the basic income. Bill Gates gets the basic income.

• 30:30Speaker 05

  So I'm very strongly against the universal basic income.

• 30:33Stephen J. Dubner?

  That's Brian Kaplan again, from George Mason.

• 30:35Speaker 05

  Saying, "Let's give everybody free money, no matter what, people perfectly able-bodied, people perfectly able to take care of themselves." That, to me, just seems crazy at the outset. But more importantly, if you just do a small amount of math and realize, "How much would it cost?" The cost is enormous. Right now, the welfare state, we're able to keep the cost down because we don't give money to everybody.

• 30:57Stephen J. Dubner?

  Kaplan, as you've probably deduced, leans more libertarian than Marxist. But his argument isn't only mathematical.

• 31:04Speaker 05

  So I am old-fashioned enough to really like the distinction between the deserving and the undeserving poor. Right now, we have a lot of very expensive government programs that give money to everybody eventually. So, you know, old-age programs. Social Security writes checks to Bill Gates, like anybody else. And again, to me, this is insane. Why tax everybody to pay for them in a situation that everybody knows they'll eventually reach, as long as they don't die young? Thinking about kids and the elderly in the same breath is crazy. Like, kids, you're born an orphan. There's nothing you could have done about that. So that's totally not your fault. But if you are starving when you're elderly, then there's a question, "Well, why didn't you plan for this?" Which was totally foreseeable in every way.

• 31:45Stephen J. Dubner?

  You may not be surprised to learn that Kaplan also has a different view of the labor markets generally. For starters, he's in favor of more immigration and more open borders.

• 31:55Speaker 05

  Why trap perfectly good talent in Haiti, or Congo, or India, or wherever it happens to be born, when it can do so much more in another part of the world, enriching not only the immigrant, which is what we usually focus on, but enriching the world just by producing more stuff? Whenever I'm talking to undergraduates, I always say, "Look, first rule of economics, keep your eye on production. If you produce a ton of stuff, mankind will be rich. If you produce a small amount of stuff, mankind will be poor." And anytime you're trying to analyze a complex problem, just forget all the other stuff at first, and just say, "Well, what does this do to the productivity of mankind? If it's higher, then this is a good thing that we should be rooting for. If it's lower, it's a bad thing that we should not be rooting for."

• 32:38Stephen J. Dubner?

  But what if the production of all that stuff comes at the expense of the people who, historically, have made that stuff? What if entire classes of work are swept away by technology? Driverless vehicles, for instance. In the US alone, a few million people make their living as drivers.

• 32:56Speaker 05

  Saying, "Driverless cars, isn't that going to threaten the jobs of drivers?" Yeah, it totally threatens the jobs of drivers. And we totally want driverless cars, right here, right now, to be awesome, because it will enrich mankind. And if you sit around thinking about the few people who lose from progress, rather than all the people who gain, you'll never get anywhere. We would really be back in the Stone Age if every time someone came up with an idea, we sat around saying, "Yeah, but whose job could be lost as a result of this?" That's just the kind of thought that needs to be suppressed, because it leads to a world of poverty and misery.

• 33:31Stephen J. Dubner?

  Kaplan may sound a bit more doctrinaire than even most economists you're used to hearing, but when it comes to the relationship between prosperity and technology and the future of work, most economists we spoke with for this Earth 2.0 thought experiment were roughly in agreement, especially about the idea of a universal basic income.

• 33:49Speaker 07

  I'm not one who would move in that direction.

• 33:52Stephen J. Dubner?

  Alice Rivlin again.

• 33:53Speaker 07

  I think we've got to get people working and producing and being valuable, rather than just subsidizing people not to work.

• 34:02Speaker 07

  It's not that Rivlin thinks that old-style manufacturing jobs will come back. It's not likely because technology has changed so rapidly and it is more efficient to produce a lot of things with more technology or over in different places. But, she says, there's an opportunity to be had. What we should be focusing on, I think, is the people that we need in a service economy to do really important jobs for improving our quality of life. One is very well-trained people to work with small children.

• 34:44Speaker 07

  Early childhood nurturing and education, we know now, is really, really important. And yet, we are not paying a living wage to people who take care of children in daycare centers and in early childhood education. We should find a way to professionalize those jobs, recruit people who have had more training and who can earn higher wages. And there are lots of other examples of that. In healthcare, in care for the elderly, we have an awful lot of people now who are living for a very long time and many of whom need care.

• 35:28Speaker 07

  And they don't just need warehousing in a nursing home. They need interesting things to do and be part of and a caring atmosphere. And that takes people with skill. And it takes people that are paid enough. And we haven't figured out how to make these human service jobs into really important parts of our economy that are well-compensated. That's a big challenge.

• 36:00Speaker 06

  One of my ethical precepts is that everybody should be carried along, broadly speaking. In other words, if we're rich, we don't have to have people suffer.

• 36:11Stephen J. Dubner?

  That's Jeff Sachs. He's one of the most decorated economists of the past half-century. He's worked with the United Nations, with the Vatican, with countries all over the world, mostly on fighting poverty.

• 36:22Speaker 06

  And the fact that we can't figure that out, that, to my mind, is really a failing of our moral insight, not a failing of kind of economic technique, per se. If jobs are going away, we should organize society to help enjoy creative and leisure time, not, by the way, cling to having to have a 40-hour work week.

• 36:49Stephen J. Dubner?

  Now, does that mean Sachs is in favor of a universal basic income?

• 36:53Speaker 06

  Well, it's funny. I am in favor of a universal basic dignity, universal basic needs, universal healthcare, universal education. The pure cash transfer approach, I find a little naive, actually, though I can see some role for it. I think that the way we meet basic needs, to an important extent, should not be cash transfers, but should be by helping everybody to be incorporated into the decent systems which give people their health, their education, and their dignity.

• 37:29Stephen J. Dubner?

  So what would Sachs do if we made him chief economist of Earth 2.0?

• 37:36Speaker 06

  You don't want to really create Earth 2.0 in the way that you've stated, because we're likely to make a disaster that way. But what I think is extremely important is to have a historical and a moral view. And a historical view says that societies change. They mainly change, in my opinion, because of technological changes. Institutions change as... Technologies change. We do things differently. We live our lives differently. Instead of working in the fields, we work in factories. Instead of working in factories,

• 38:20Speaker 06

  the robots work in factories. We work in services. So that's where history comes in. And then values come in by saying that we don't just view ourselves, in my opinion, as an open, unguided evolutionary process. There are some parts of economics, like Austrian economics, will say, "Well, an economic system is just an open, self-organizing, evolving system, full stop." But I think that that's where the moral framework comes in to ask, as technology changes, as we can do things differently, or do, in fact, do things differently,

• 39:01Speaker 06

  how should we adjust as a social animal, living in a society, for a decent ethical world in which we should all be striving to be good people?

• 39:15Stephen J. Dubner?

  To that end, Sacks argues, there are some basic economic considerations to think about.

• 39:21Speaker 06

  One is, we're just phenomenally rich. It's unbelievable. And we therefore have solved, in the macro-average sense, what John Maynard Keynes called the "economic problem," meaning, we don't need extreme poverty, we don't need suffering from deprivation anywhere in our world. It wouldn't take almost lifting a finger to make sure that everybody has access to basic health and education in this world, because we're so good, we're so rich, our technologies are so smart. So that's one compelling fact

• 40:01Speaker 06

  for me, which is that things like nearly 6 million kids under the age of 5 dying each year because they don't get the vaccine, or they don't get the antibiotic, is just absurd, and I would say obscene. So that's that's

• 40:15Stephen J. Dubner?

  That's one compelling fact, but also you're saying that's part of what we don't want to throw away because economics to a degree is what helped us achieve that wealth. So if you don't want to throw out that baby with the bathwater, correct?

• 40:27Speaker 06

  You better believe it. And that's why globalization is an important thing. That's why technology is an important thing. And where, you know, some people say, look at all the downsides of technology. They're incredibly naive. Because first of all, we got 7.5 billion people on the planet. And to keep people fed with the safe water and basic access to modern energy services, day by day, requires a complexity and a sophistication that is beyond the awareness of almost everybody on the planet, how complex these systems are.

• 41:05Speaker 06

  The artificial intelligence, the robotics revolution, the digital age in general, is the third point that I would say right now, we're living through our own phenomenal industrial revolution. And what you learn from economic history and from eyes open is that this again is absolutely reshaping our lives and will do a huge amount of good for the world if we also combine it with a moral framework. And in the particular case, say of robotics and automation, it has dawned on a lot of people, and I think correctly, that it's

• 41:50Speaker 06

  going to eat up a lot of jobs. I expect also, my economics job is going to go the way of most other jobs as well, because smart Watson is going to be able to read the economics journals, make the keywords, and do the Bayesian upgraded probabilistic analyses better than a macroeconomist, and probably pretty soon. But what is going to happen is that if we're not watching, a lot of people are going to be left behind. And so a debate that says, you know, computers are good, robots are good, robots are bad, is obviously kind of

• 42:31Speaker 06

  the dumb naive debate we generally have. They're good in certain ways, but they have side effects that should be handled.

• 42:41Speaker 06

  I really believe that if we think together in our best mode as human beings, in the mode of problem solving, these are really solvable problems. I love to bring the universities, the businesses, civil society and government together. The nerdy term is a multi-stakeholder. Okay, that's, you know, UN jargon, but I am a believer in that we can really do better. And I'm a believer that deliberation, and I'm a believer in expertise, by the way, which is, I want to put in a good word for experts, because when you live in systems,

• 43:25Speaker 06

  there are engineers who understand the systems, and then there are the rest of us who don't understand them at all, but depend on them and live on them. And sometimes the anti-expert view, because experts can become self-interested and corrupted and so forth, but the anti-expert view is unbelievably dangerous, because we live in a world of such sophisticated systems that you or I and basically everyone on the planet could barely say how our phones or computers or almost anything else actually works. And thank God, there are people that know how it works.

• 44:02Speaker 06

  So, all of this is to say that let's get some shared goals, let's have them meet the morality and the ethics test, that that's decent society. Let's create ways that knowledge and fairness and accountability can really be brought to the table. Let's plan.

• 44:31Stephen J. Dubner?

  Thanks for listening to our first installments of Earth 2.0. We'll follow up with more episodes in the coming months. Let us know what you want to hear about. You can drop us a line at [email protected], or you can hit us up on Twitter or Facebook. Coming up next week on Freakonomics Radio.

• 44:48Speaker 17

  Let's do a little quiz. Can you name a substance that is caloric, that is, it contains calories, but is not nutrition, that there's no biochemical reaction in the body that requires it, that what's consumed in excess causes cellular, organ system, human damage and death, and we love it and it's addictive?

• 45:10Speaker 18

  I tried to give it up once, but it didn't work out at all. Because I'm addicted to sugar. I can't help it.

• 45:18Stephen J. Dubner?

  There's a war on sugar, if you haven't heard. Is it justified? That's next time on Freakonomics Radio.

• 45:26Stephen J. Dubner?

  Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Stephanie Tam with help from Greg Rosalsky. Our staff also includes Shelley Lewis, Christopher Wirth, Merritt Jacob, Eliza Lambert, Alison Hockenberry, Emma Morgenstern, Harry Huggins, and Brian Gutierrez. You can subscribe to Freakonomics Radio on iTunes, Stitcher, or wherever you get your podcasts. And if you want to keep up with everything we've got going on, you can check out Freakonomics.com. Thanks for listening.

• 46:07Stephen J. Dubner?

  Freakonomics Radio is sponsored by Ozempic. Innovation happens through rethinking what's possible. And when it comes to GLP-1s, Ozempic pill does just that. Learn more about Ozempic semaglutide tablets, 4 in 9mg, by calling 1-833-OZEMPIC or visit Ozempic.com to view the medication guide and ask your doctor what's possible with FDA-approved Ozempic pill.

• 46:37Stephen J. Dubner?

  Freakonomics Radio is sponsored by Southern Company. The world and its energy needs are always changing. Southern Company's commitment to meeting this demand stays the same. That's because Southern Company believes energy is more than a utility, it's what powers possibilities. So they are looking ahead and investing $80 billion in infrastructure upgrades and are committed to fueling growth in ways that benefit all customers so that reliable and affordable energy is accessible for generations to come. Go to SouthernCompany.com to learn more. Southern Company, building the future of energy.

• 47:16Speaker 19

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• 48:00Speaker 19

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• 48:16Speaker 20

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