Factually! with Adam Conover - The Cost of Doing Nothing with Michael Greenstone

Episode Date: May 27, 2020

American economist, professor and chief economist during the Obama administration, Michael Greenstone, joins Adam this week to discuss transitioning our economy during a pandemic, balancing safety with the economy and what the costs and benefits truly are, and how economics can clarify policy disputes. Learn more about your ad choices. Visit megaphone.fm/adchoices See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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So if all of that sounds good, if you want a big box of delicious snacks like this for yourself, use the code factually for $15 off your first order at Bokksu.com. That's code factually for $15 off your first order on Bokksu.com. I don't know the way. I don't know what to think. I don't know what to say. Yeah, but that's alright. Yeah, that's okay. I don't know anything. Hello, everyone. Welcome to Factually. I'm Adam Conover. And look, there's this voice that pipes up whenever the conversation turns to solving big societal problems. To any policy proposal, no matter how logical, no matter how necessary, no matter how well thought through, this voice replies like it just heard an 11-year-old's plan to buy a mountain bike. The voice says, sounds nice, but how are you going to pay for it? You've heard this voice. This is the cheap dad voice. Let's call it that. And the cheap dad voice is a permanent feature of America's political conversation. Let's try it out. Let me give you an example. Say we need to transform our nation's health care system because it provides worse care

at a higher cost than any other rich country. And people here are dying as a result. So you come up with a plan to fix that. You advance it and someone will respond. Mark my words. Sounds nice, but how are you going to pay for it? Or mention that, you know, it might be necessary to continue an expansion of unemployment benefits during an unprecedented pandemic. You know, someone's going to say sounds nice, but, but how you gonna pay for it? You know, it feels good to use the cheap dad voice, right? It feels responsible, feels serious, important, it's fiscal responsibility. But the truth is that the cheap dad voice is just a rhetorical feint. Cheap dad voice is just a rhetorical faint. Cheap dad voice is bullshit because in focusing exclusively on how much it costs to fix a problem, we avoid the question of how much it will cost

to do nothing about that problem. And as our guest today has shown in his work, the cost of doing nothing to solve some of our biggest problems is monumental. The fact is, to any policy choice, there are costs and benefits, including and especially when that choice is do nothing. So let's look at a real example. Let's look at social distancing and the virtual shutdown of our economy that we're all living through right now. Now, we've all heard the argument that the cost of social distancing to our economy and our freedom is just too great. The voice of cheap dad echoes in the rhetoric. How are we going to pay for this

shutdown? Now, there's no question that the economic damage of social distancing has been immense. You know, I'm not going to comment on whether your sacred freedom has been violated just because you can't rip beers on a crowded beach. That's not what this episode's about. But I will agree it is incontrovertible that unemployment numbers, for instance, are higher than at any point since the Great Depression, in no small part because of all the non-essential businesses that are shut down right now due to stay at home orders. But the focus of the social distancing conversation has felt oddly binary, like our choice is to save the economy or save lives, which, of course,

it is not, because as it turns out, saving lives has economic benefit. You know, it's good for the economy when masses of people don't die. So you might look at the economic benefit of the social distancing policies we've had as well. But if you want to do that, if you want to figure out how to quantify that benefit, you also have to figure out what it would cost us economically to lose all those lives. And this problem is complex from an economic standpoint, but it's far from impossible to solve. Our guest today crunched the numbers and he found that moderate social distancing policies could save as much as $7.9 trillion. That's more than a third of America's entire annual gross domestic product. So in this case, we clearly derive an enormous economic benefit from doing something, and we have to compare that against the enormous economic costs of doing nothing.

Here's another example. What about climate change? Our global economy has depended on fossil fuels since the end of the 19th century. Energy is a multi-trillion dollar industry, and the vast majority of it is based in fossil fuels. So when we talk about transitioning to a green economy, that cheap dad voice comes back, right? It says, well, this is going to be too expensive to transition our entire economy. Why? We'll lose money if we do this. But again, we have to weigh what are the costs of doing nothing instead. And that is so often left out of our conversation. So how do we

find out what these costs and benefits truly are and how can economics clarify these policy disputes? Well, to answer these questions and more, our guest today is Michael Greenstone, economics professor at the University of Chicago and former chief economist of the Council of Economic Advisors during the first Obama administration. I found this conversation fascinating. You know, there are a lot of ways that the economic mindset is both intuitive but also counterintuitive to me. We poked at each other a little bit. We got to some really fascinating places.

I think you're going to love this interview. Please welcome Michael Greenstone. Well, Michael, thank you so much for being here. My pleasure. Thank you for having me. So there's this big question about COVID-19 right now where we're all social distancing, our economy is in lockdown. And there's this question that is on the tip of everyone's minds of, you know, when does the economic cost start to interfere with our desire to save lives, right? Like how do we balance those two things? People are arguing about this on television, on Twitter. How do you see it as an economist? I understand you've done some work about this. Yeah. So I think if you just step back from it,

COVID-19 arrived, it moved into our living room and it brought with it two real big problems not two features neither which i would consider good the first is there's absolutely a health crisis everyone understands that it's almost like it's from science fiction it's this invisible disease that seems to travel unbelievably easily across space and unfortunately kills a lot of people. So that's one nasty feature. The second nasty feature is that people and governments rightly respond to that by saying, hey, wait a minute, I'm not sure I really want to be around this COVID-19. Let's do some social distancing and let's either mandatorily through government or people's

own actions say, you know, I don't really want to be in a big crowd right now. And that social distancing has unleashed what I think is probably the greatest economics crisis in modern times. The rate at which we're seeing the economy implode is, you you know there's no historical precedent so this already outranks 2008 yeah we're crushing 2008 wow because 2008 i mean i was in my 20s i remember listening to the news and you know trying to process it and and this is a once in a lifetime event was how it felt and this will be going on for two months and we're already crushing 2008 holy shit yeah uh like i was uh actually i took a break from academia and i was working in the white house uh in uh the 2009 and we couldn't believe like we would go home every day carrying like on our shoulders oh my goodness the economy lost 700 000 jobs this month uh well you know now we're

losing tens of millions of jobs a month. So you can't even see 700,000 from where we are. Wow. And so how do we, what do we, what do we do about this? I mean, like, how do we process trying to evaluate how we feel about social distancing and how we enact those policies, given that that is the fallout. Yeah. So I think job one is let's try to get some information. Right. And this is happening in, you know, very quickly. And there's this sense of the fog of war here, like what's left, what's right. It's very hard to figure that out in real time. And yet, you know, there's incredibly urgent questions that I think we need information for, like who's going to be the

hardest hit, who's at the greatest risk health-wise, what can policy do to make it better, what can policy do to make it worse? I recently gave a briefing to some people on the hill via Zoom. And, you know, it's incredible thirst for, well, what's going on in my community? And, you know, actually, you said that you're in Los Angeles. A very close friend of mine from college has a travel business. And he lives in Los Angeles. You know, what's going to happen to his business? So there's like a series of very very urgent questions and i think what is interesting is that if we had gone if this had been a couple decades ago probably what economics could have contributed uh was could be some pencil and paper and deriving under a bunch of assumptions what was going on and what could be done and there's still some of that going on but what i find so interesting is there due to this complete revolution in computing power and

access to data and all the buzzwords that people like machine learning and ai and every other buzzwords you like uh we can actually kind of figure out what's, you know, to a first approximation, what's going on in real time. And, you know, I know I listened to a recent episode you had with Anne Case and Angus Deaton, and that's exactly what they did. They kind of figured out in near real time what's happening to a certain set of people in the United States economy. And at even higher frequency, that's what we're trying to do. And in fact, at the University of Chicago, I direct the Becker Friedman Institute, and we are trying to set lots of the economists on campus here after some of these really central questions. And since we're in podcast land, it would be a failure on my part not to announce

that we actually do have our own podcast called Pandemic Economics. It's co-hosted by Tess Bigland from Marketplace and Eduardo Porter from The York Times, where economists come and talk about what they found out about what's going on in real time. So one of the things that I know you've written about are the potential economic benefits of social distancing, that when we look at social distancing we see this horrible fallout that you've talked about that you know i mean just my industry i've talked about on the show before stand-up comedy is dead i'm worried about the half dozen uh comedy clubs in uh you know los angeles here shutting down comics i know being out of work uh that's clearly terrible i might be tempted to say hey let's reopen the economy as soon as possible because i see that loss so vividly um but you've

written about how at the same time social distancing at this time could have economic benefits as well that we wouldn't want to ignore yeah so what's absolutely true is this response by people in governments is imposing very large costs. I hadn't yet thought of comedians as really the most endangered group. We weren't in your economic model. You didn't include comedians. No, but, you know, there's lots of things that are missing from economic models. And that's why talking to people like you.

I know it's not that big of an industry, but it is people's livelihoods, Michael. Yes, I know. And duly noted. So that's on the one hand. And then on the other hand, which you can just see this play out, you can see it when Dr. Fauci is testifying in Congress. And then on the one hand and the other hand, you got the Treasury Secretary saying we got to let let her rip and get the economy going. There are enormous potential benefits. And so I wrote a little paper that took one of the epidemiological models at face value. And that model suggested that if we did pretty aggressive social distancing beginning kind of at the end of March for three or four months, you could save about 1.7 million lives in the United States.

And that's relative to kind of a everything stays the same scenario, like not just like that there would be no social distancing policy, but that people continue to go to comedy clubs even if, you know, they wouldn't stop going even on their own, which is probably not the case. And if you take those 1.7 million lives that would be saved and kind of use standard, so beware when an economist says standard techniques, to turn that into dollar value, that turns out to be about $8 trillion. And it was very striking. That's like $60,000 of benefit for the typical American household.

And it's almost impossible to think of any policy or actions that would create such value for people. And I suspect you'll want to unpack, whoa, where did the trillion come from? But yeah, the top line answer is it's a trillion. So so this argument is let me rephrase it and see if I've got it. So so this argument is let me rephrase it and see if I've got it. Even if you're a cold blooded capitalist who doesn't care about human life at all, all you care about is dollars. Right. That's your only moral. That's the only thing you make your judgment based on is is how many dollars are earned or saved. Yeah. Who's a banker in It's a Wonderful Life? What's his name again?

Mr. Is it Mr. Potter? Is that it? Mr. Potter. Yeah. We'll call him Mr. Potter or we can even call Mr. Burns from the Simpsons. You're Mr. Burns. I like that. You're Mr.

Burns. Yeah. And all you're looking at is how much money the economy is going to gain and lose. You say we're losing way too much money by keeping everything closed. We got to open up. Your argument is that, well, if we open up one point seven million people are going to die. And that isn't just bad because we don't want one point seven million people to die or even one person to die. We do want to save those lives, but also the economic activity of those lives, those people having jobs, those people buying things, those people investing money, those people being part of the economy.

If you lose those one point seven million people, you're losing eight trillion dollars from the economy also. Is that what you're saying? And so it has an economic cost. Yeah, but it's broader. And so this is where I can see what you're trying to do is you're trying to paint me in the very near, you're trying to call me Mr. Potter, Mr. Brown. No, no, no, no, no, no. I'm saying, I love this because I love it when you can make, you can use someone's own, hey, even by your logic, we, you know, we should, we should look at it in a better way yes okay and so sorry the reason i was being a little prickly is what i was trying to say is it's not just

measured in like more sales at popeye's new you know chicken sandwich although i understand that that is worth trying and uh people love that chicken sandwich they do love that chicken sandwich but uh it's also measured in in how much people enjoy being alive, like how much they enjoy spending time with their kids, how much they enjoy spending time with their friends. And so there's a wonky phrase, it's called the value of a statistical life. And it turns on, when we observe people in the economy,

how much they're willing to spend to reduce the risk that they face themselves. And so like a canonical way that economists try to measure this is to look for people who have otherwise identical jobs, except one job, one of the jobs has a lower fatality risk on the job, say, than another job, and see how much more the man or the woman in the higher risk job gets paid. So think if you had identity, suppose you had the 7-Eleven night clerk where there was like armed guards all over the place, and so no one could ever be hurt, and the 7-Eleven night clerk at a place where there's none of that, there's greater fatality risk in the second case. And in the market, you would expect that people would be paid more for facing that fatality risk. And so we can see that in the data.

And from that, you can infer how much people are willing to trade off money for a reduction in fatality risk. So, and from that, those studies, there's this sort of number for here's the dollar value people put on their on their own life their own life yes wow own life yes uh economics is a weird discipline i mean i understand that what you're saying makes sense to me but it's almost like when you're talking to like a physicist about quantum physics or something and you're like i understand the math checks out but like this is some counterintuitive stuff uh no it's not uh you you do it on a day-to-day basis everyone does it on a day-to-day basis i love this tell me why oh no here's an example like uh ah let's just pick on you what kind of car do you drive i actually

don't drive the listeners of this podcast know that I don't. But before I stopped driving, I drove a 2010 Toyota Prius. Excellent. Okay. Is that the safest car on the road? and says to me, we should buy a new car because they've got more safety features. And I say, the current one is fine. I don't want the extra climate emissions that come from buying a new car. Let's just stick with the one that we have, which drives fine. Okay. And maybe it would have cost some more money as well. Yes. And it costs more money to buy. Yeah. It's an extra $30,000 to buy a new car. The one that we already have is fine. Yeah. And so the idea is from your trade-off of money. And so let's just for the time being set aside the climate emissions. Yeah. We can talk all about that later, but

suppose like you could have a less safe car that costs less or a more safe car that costs more. And the idea is from those choices that you're making about your life, we can infer how people are willing to trade off money. You know, and then let me just add what we would like, you know, if we were in economics, there's this great thing called the social planner. And the social planner takes everyone's as they are, their preferences and their and tries to make society better. And so what we would like Mrs. Social Planner to do is to enact policies that reflected our own tradeoffs. And so as an example, like how many guardrails should there be on the side of the highway? They cost a lot of money, but they save lives.

And so using, you know, Adam's tradeoff of money and safety in his cars, that should influence what the social planner does. And I'll just, this is a cartoon example that I'd like to give. You know, we don't choose, so first of all, I could end all road fatalities instantaneously. And the way I would do it is I would build a separate road for every single person and I would put airbags all around the side of the road. And no matter what you did, no matter how drunk you were, no matter how terrible a driver you were, you could never kill yourself and you could certainly never kill anyone else because you'd have your own road. Now, why don't we do that? Well, that's an unbelievable amount of money and it's just not worth it. We would rather have the money to buy other stuff. And so play

to type here, as an economist, we'd rather have the money to get the deluxe cable package or the faster internet connection or to eat out more or whatever it is that people like to do. And it's this fundamental trade-off between safety and money that people are revealing in their actions all the time. And just to bring it back to COVID, that's what we're facing as a society. How much death are we willing to accept versus how much loss of economic activity? So I think if I can, again, rephrase what you're saying into my dumb, dumb words, is that when we're talking about the economy, if you're talking to an economist, you're talking to Mr. Burns. You have to say, hey, part of the economy only matters insofar as these things have value to people.

Right. Like that's what economics is. We're talking about value doesn't exist if there aren't humans to value things. And one of the things humans value economically is our own lives. And so you need to price that in to this decision. And so you need to price that in to this decision. And so if we let those people die, we are de facto removing like a ton of important economic value that we need to we need to include. Exactly. And then, you know, if you want to caricature like, you know, Dr. Fauci has now become basically

a natural hero. So I don't want to caricature him, but let's caricature a public health person who show doesn't really exist and they might only care about saving lives no matter the cost yeah and our job as a society and people is to figure out how to navigate between mr burns and this fictional public health person got it but but let me okay i want to challenge you on something that you said a moment ago. Because this is, it gets to the root of one of my, not concerns about the field of economics, but a way I find myself thinking when I, because I love economics, I find it a fascinating way to

think, but I find myself bumping up against some of the logic sometimes, which is that a lot of economics has this sort of like presumption of rationality of the status quo. Right. So, for instance, you use the example of like, oh, we're making this trade off with our transportation system, with cars. Right. Folks who listen to this podcast know I'm like a wonk about transportation. I'm a public transportation person. Right. One of the arguments that I hear made time and again is like we there is a better transportation system out there for us. Right. More public transportation, less driving would result in less fatalities, cheaper cost of transport, less climate emissions, all these things. Right. cost of transport, less climate emissions, all these things. Right. It's one of those things where if you look at people who study transportation, they're urging us, my God, just make these common sense reforms and we'll have a transportation system that works better for

everybody. And we refuse to do it right out of inertia, out of desire to not spend the money out of any number of human reasons. Right. Which if you're looking at the, at the sheer, uh, you know, numbers, the sheer rationality should be quite obvious to do. Right. Um, so my point being that, you know, there's like, there's this presumption of rationality in the, in the way we do things, but humans are not actually that, that rational creatures and human societies like taken together are not actually that rational, um, or behave in behave in weird ways. And I wonder if you could speak to that at all and how that applies to our decision making around COVID, because, you know, this is that sort of same problem writ large. Like, are we capable of making policy decisions that actually are rational in this way?

Yeah, that's a terrific question. OK, so there's a lot to unpack there. And I know policy decisions that actually are rational in this way? Yeah, that's a terrific question. Okay, so there's a lot to unpack there. And let me- I know I said a whole lot. This is what I do to my experts. I unpack about five paragraphs and they're like, oh my God, that's a whole lot. Let me go through it one by one.

Yeah, so let's just, let me play econ person for a little bit here. On your transportation example, and then maybe we can turn to COVID. On your transportation example, what I would say is the problem is that there are a lot of what economists like to call externalities from the way in which we travel. When I drive in my car, I shoot the pollution in the air that causes air pollution. People die from that. In addition to that, it shoots the CO2 in the air. It's changing the planet.

We're warming up. All kinds of damages associated with that. is like a Soviet-style big hand of government come in and reframe exactly the transportation system, the more natural economic solution to that would be, well, let's figure out how large those externalities are, and let's put them into the price of gasoline. And then when people are making choices about how much to drive versus how much to take buses, they will be facing the consequences of their choices, which we don't currently. And so that and not prejudging what transportation system would come out the other side, but taking those externalities or impacts of people's decisions and making them face them. That's a very, very economics for economics. It's a very, very simple thing to do. Uh, now you might be thinking to yourself, well,

fine, that's great. That's on the blackboard. Uh, why is not, why isn't our social planner, who I talked about before, or let's call them Mr. Trump, why isn't he enacting policies like that? Uh, and you know, that's a deeper question about democracy, I would say. And I kind of think at the end, often in a kind of squirrely, windy way, we do get the government we ask for. And honestly, I think the biggest I'm wandering now, the biggest issue with climate is that I think people aren't demanding it. And so government's not delivering it. Interesting. I mean, the thing I'd say about the externalities, I understand the principle of externalities and like pricing that stuff. That's the idea behind carbon taxes and things like that that which are policies that make a lot of sense but there's also a degree to which like the transportation system is concrete

rebar like it is built you know like a a city says the road goes here right and then uh if you uh you know you you can't just send buses down a street that's designed for cars, right? You need to build a train system is the, is the point I'm making. And so like there, you know, there is a degree to which some amount of planning from some central sources is necessary. I totally agree. And I think that should be reflected in decisions about building public transportation systems. I'm just,

you're getting a slight resistance from me on lots of urban planners have lots of ideas about the way they would like to plan society. And, you know, I don't know that that always, it's a little bit like they're, they're a little bit like the public health professional I was using as a caricature before. They really care about one thing, whereas people care about a bunch of things. And ultimately, they have to make tradeoffs around those things. And I don't know that we want to design our society to maximize the functioning of public transportation. We probably have that and some other goals that we want to try to achieve. So what are the goals that I don't my intention is not to make this a public transportation show. Right. But so I

understand that. But a lot of times to me, it seems that the reasons that we don't choose what seem to be better public policy programs, better outcomes are not rooted in something that's rational or something that is uh you know makes sense that uh is you know again based on inertia based on uh politics politics is like an important interesting field but you know there can be political barriers to getting something done that don't make sense right that are that are based in prejudice or based in uh again inertia um are you saying that those serve like an economic purpose for the people who hold them that like those barriers are in fact functional in some way uh they're a great question uh there can of course so let's again let's call congress and the president uh the social planner who are trying to figure out what would be best for all of America.

And there's a bunch of competing interests. There's people, there's the damages that are going to come from climate change, and they're real. And then there's also the costs that people would have to pay today for a different form of transportation. today for a different form of transportation. In a frictionless world, so you should be very careful about the frictionless world, the social planner will just implement that and Congress will do that. Of course, we live in a world where people have vested interests and they work very hard to protect them. And I think there is, there's a lot of that going on with respect to climate right now. And, you know, the fossil fuel companies, the long history to Exxon of denying climate science and funding, climate deniers,

there are people who are protecting what is theirs. And that gets in the way of a well-functioning democracy for sure. But I guess I want to, you know, somewhat optimistically say, I do think in the end, we kind of get the government we demand. And it's not always immediate and it can be windy. And there's an example I'd like to give. If you go back six years ago, you, China and particularly Beijing, you know, there was no sunshine. There was, the air pollution was like dystopian. And there was, you know, there was no sunshine. There was the air pollution was like dystopian. And there was, you know, people were, it was just the way it was. And you couldn't imagine that there would be a different way to live there. In a really short period of time, it became a political priority

for the Communist Party to get rid of air pollution. That was a function of several things. There was some research, some of which I contributed to, on demonstrating the health effects of air pollution in China. There was, of course, also the very famous episode of the U.S. Embassy reporting the true pollution numbers. And in that very short period of time, in China, everything completely shifted. And that's not a democracy,

and at least not in the way that we understand one here in the United States. And what I took away from that is when people really begin to demand something, governments find ways to deliver it. And so like, while I'm very passionate about climate change, and I think it is an enormous risk to people in the United States and around the world. I don't think that that is at the top of the political agenda of the majority of the American people. And so am I shocked? Yeah, no, no, not yet. It's rising, but yeah. It's rising. But am I shocked that Congress doesn't feel compelled to act on it? No, I'm not shocked by that. And I literally, I ask myself all the time, like,

how is it that we're doing such a terrible job of communicating this, that it does not, has not become an urgent political issue? Well, it's interesting. It's, I think that people communicating are, are communicating very hard and are often doing it very effectively, but there are entrenched interests that are communicating in the opposite direction. But I want to get to, to climate after our break, but I want to talk a little bit more about COVID before we get there. So so you'd characterize the when I was talking about, hey, what are the barriers to a more economically beneficial public transportation system or a better public transportation system? Some of that's friction is how you'd put it. That's vested interests. And maybe that that's it takes a little bit longer to get to that economically ideal state that's actually benefiting everybody.

But if you look at, say, COVID-19, you're making this argument that, hey, it's actually in our economic best interest perhaps to stay closed down a little bit longer or to maintain social distancing or there are these benefits to it. Right. And I think we are aware right now that there's a possible future in which everything reopens too quickly. People stop social distancing. People, you know, open up too fast. And a lot of that is maybe because of what you say as the there are people demanding it. Right. Certainly the people who have the current administration's ear are demanding it very hard, even though, in your view, it might be against their sort of our general economic self-interest to do so, because we'll actually lose all these lives. Why why does that happen and how do we make sure that it doesn't? make sure that it doesn't. Okay. So let me back up. I think what my research has shown is that there, I'm going to be very, try to word this very carefully. There are very large gross benefits. And when I say gross, I don't mean like nasty. I mean, not, it's just counting the benefits. It's not saying anything about the cost. Let's, let's turn to the cost for a second.

And a lot of the research, there's been incredible research coming out of the University of Chicago and the Becker Friedman Institute in the last few months. And some of it is really quite eye-opening. The job loss numbers economy-wide we know, but once you start to peel it back, say the bottom 20% of wage earners, there's been like a 35% decline in employment for them. And then you take the top 20% of wage earners, this is pre-COVID, there's only been a 9% employment decline for them. And what is striking to me about that is COVID is taking the people who are least equipped to handle some big economic shock. They don't have open lines of credit. They can't go, you know, spend a lot on their credit card. They don't have lots of savings in general.

They don't have a lot of equity in their house. And imposing is very sharp shock on them. Yeah. And that's real. And that's affecting people's lives. And, you know, if I, I don't know anything about your personal finances, but if I stopped getting my salary for three months, you know, if I, I don't know anything about your personal finances, but if I stopped getting my salary for three months, I would, we would find a way to get through and it wouldn't change our life very much. I'm privileged enough to have an emergency fund is I'm, I'm happy to say that. And I feel lucky to be in that position. And I know a lot of people don't. And so, and then let me add, there's a second, there's a second piece of research that really

caught my attention. It, and this is a little bit what I meant about the computing and the data revolution. It was actually able to track people who got stimulus checks from that came out of the legislation. And what they found is that on average, 25 to 35% of the money that people received in those stimulus checks was spent in the first 10 days so that's telling me these are guys men and women who are really hard up uh and you should let go and they're just desperate to get start spending and you know buy food and pay the rent and utilities like that so i want so i think what i'm you know to back up i take that to say there are very large costs from social distancing.

I also think, from my own research, there's very large benefits. And how that gets traded off, that's really like a societal decision. And I suspect it looks very, very different in Appalachia than it looks in Silicon Valley. And I think that's where you're seeing very different responses around the country. But there's one caveat I want to add to that. What's, if COVID were self-contained to local communities, I think that would be totally fine that local communities would make their own judgments. The problem is, of course, is that this disease is so nasty and it spreads so easily that, you know, what they do in Milwaukee matters for me here in Chicago.

And I think it strikes it that actually this tradeoff, even though it's so different in Appalachia than in Silicon Valley, there really needs to be a federal role. And, you know, obviously, in my estimation, we're seeing almost complete abdication at the federal level. Yeah, I don't doubt that. I mean, you're absolutely right about who's being affected the most. But also a lot of the people, at least, you know, here in here in L.A., which is, you know, coastal and high median income for a lot of folks, et cetera, also extremely high cost of living. But, you know, the places that are protesting the most are some of the wealthiest areas, like huntington beach uh etc is not uh that's not appalachia right uh that's that's one of the wealthiest parts of town like you know people in uh uh you know south la are not protesting in the same way as the folks who just want to go to the beach right yeah i mean uh how people make these trade-offs is not only a function of their income.

I don't mean to imply it is. Yeah. It's that, you know, people are just going to see the problem a different way. And, you know, it's almost a tangent and I worry you'll want to edit it out. But I I we were talking about the value of statistical life before and talking about what it is economy-wide. What's really striking is how different it is in different segments of the population. And so I have some ongoing research looking at people in the army and what the decisions that they made during the ramp up and the ramp down of the Iraq and the Afghanistan wars, when the army was desperate to keep, uh, get people to re-op after they finished their first term. Uh, and you know, this is not like I wasn't ever in the army. And so these,

I don't think they are people who are willing to be in the army or reflective of the average American. Uh, so they're probably much more comfortable with risk, but you know, these, they were very responsive to risk, but they were even more responsive to money uh and so you saw very low values of a cisco life for people uh who were in the army from the trade-offs they were making between accepting bonuses to re-up versus uh facing increased mortality risk so there's a it's just there's a lot of heterogeneity that's like a fancy word. There's lots of differences in how people make these trade-offs across the population. That research is so fascinating and you're right. It is a tangent, but we're not going to edit it out because I'm really interested in it. And I do have a question for you off of it. Cause my only

concern is, and I'm sure you have research on this. How good are people at evaluating their own risk of losing their life? Because I would imagine like a lot of people I was just reading, you know, from an immunologist. Here are all the things you should have a concern about, you know, about getting COVID-19. Right. Here's the various situations. Here's how much you should worry about going to the grocery store. Here's how much you should worry about going to this place or that place. And I'm looking at that and I'm going, wow, comedy clubs, we should not be going to them because stuff, you know, aerosolizes, you know, talking spreads it a lot. Small, poorly ventilated places with a lot of people.

That's even more dangerous than touching stuff. Right. And so I now know, OK, this is one of the most dangerous places I should go. There's a lot of comedians who are going to say, yeah, I'll do that. Fifty bucks. Yeah. Sign me up. And they don't know the risk of going because they're not equipped to make that.

Look, some comedians are very smart. Some are very stupid. And they're not going to be able to evaluate that. They're not going to have an awareness of it. So how do you account for that? So first, I'm so sorry. I'm going to try and play comedian for one second. Oh, do it.

In front of a professional. So I guess, of course, you're assuming that not everyone understands that the ingestible Clorox tablets were a bad idea from the president. Right. Yeah, exactly. Exactly. There's the Darwin Awards, right? Yes.

Yeah. So let me turn to your question. I think your question is super important for the kind of broad literature on the value of statistical life. That is, do I actually know my mortality risk? Like, you know, I do make some graduate students upset sometimes. I hope it will never lead to my death. But really, I don't know it very well. And I think it's a good question about the general economy. That's exactly why I chose to study people in the military. That is a salient feature of the job, mortality risk. And that was a salient feature, especially salient feature of the job during the ramp up and the ramp down of the Iraq and Afghanistan war. And that was a salient feature that especially salient feature of the job during the ramp up and the ramp down of the Iraq and Afghanistan war. So that just a little plug for that paper. That's why I think it's an that is an existential question for that literature.

And I think it's important to find settings where you can have some confidence that people really do know what's going on. But this is something that people who are studying the value of statistical life, hopefully they're they're figuring that out and they're putting that into their evaluation. And we're just using the output of that to say, hey, this is what the research has shown us. Absolutely. I did want to just get one plug in here for, you know, in light of these challenging trade-offs that governors, mayors, and maybe the federal government is involved in doing, I think there's not going to be a right answer. You know, the governor of Illinois might think that what his people want is something different than the governor of California or the governor

of Oregon or the governor of Alabama or something. But what I think is like a near crime is that there is a total absence of basic information. We don't actually have a legitimate plan in place to even figure out what fraction of the population has antibodies or what fraction of the population is currently infected. We don't know what antibodies mean even because we don't understand how the disease works in the body well enough. Correct. But a, a good way to begin to understand is to collect data on that. Yeah. And the fact that we're not doing that I think is makes to your question about how is the social, I'm posing this on you, but how's the social, you're saying how's social planners supposed to make this the trade-off if they don't really understand what

the benefits and the costs are? And what I'm trying to say is like, well, a key ingredient into that is actually knowing what the antibody rate is and that we are not collecting that for the general population. You know, we have it for like weird subsets of people. I guess everyone involved in Major League Baseball, we now, there's some new study on that. And so we have that. Obviously, we have it for the sick. That's not super useful to just get it for the sick. Like, why don't we have it for the general population? And then the last thing I would say that I find really interesting about American society is while we're sitting around waiting for the vaccine, which is kind of what we're doing, and not just the vaccine, but the cheap vaccine and the one

that gets delivered everywhere, there is something else that we could do. And that is like a total Korean, Taiwanese, Hong Kong, Singaporean,aporean call what you want testing and contact tracing yeah we are not doing that that's not people talk about it but no one's really doing it in any way that would resemble what those countries are doing and it's fascinating like could something like that actually work in the united states like with our cowboy culture of like individualism and privacy, you would have to give all that up. And I would certainly do it. I would certainly do it because to have a real contact and tracing program. But, you know, I don't see any movement to doing it here. I mean, the appeal to American cowboy culture has been used so many times as a reason to not even try to do things.

I would hope we would at least give it a shot and say, hey, people are dying. Maybe, you know, hey, just do it for like a couple of months so we can save some lives. You can imagine that. Hey, in World War Two, people would have done would have done that. And 10 times more. Right. People would have made those sacrifices in order to save lives and make America a better country.

And and we could be doing that. I want to end the first half of our show by asking what you would do if you were making policy, given what you understand about the economy in this deeper way. But it sounds like what you'd say is we need more testing and more data as quickly as possible before we can even make those determinations. I think that's right. I think we have to have better, let's say there's things that are just like inarguable in my view. I would get a representative estimate of the antibody rate in local communities across the country. That's not that hard to do. I would make that a national priority. Then I would, you know, if it were up to me, I would institute a serious testing and tracing program. And I think

that would be a way that we could have a nuanced social distancing policy that allowed the economy to operate and just, you know, isolated people who are really sick, it would actually allow universities to operate for that matter. That's, you know, that's the path that I would be on. But, you know, someone has to articulate it and someone has to bring the American people along on it. And I don't see that being done. Yeah, neither do I. Well, look, I find it really fascinating talking to you. And I have so many more questions about economics and especially about the climate. We got to take a quick break.

We'll be right back with more Michael Greenstone. OK, we're back with Michael Greenstone. Look, you just told me during the break that you just wanted to add one additional point. And so please go for it. Yes, on COVID, I think it is, you know, in addition to having real testing and contact tracing, my goodness, we couldn't spend enough on trying to develop a vaccine and trying to develop effective therapies. Like, I don't, like, I would be shoveling money out the

door. Like the cost economic costs of this are so enormous that there's no way you couldn't spend enough that you spend too much on trying to identify these vaccines. So absolutely. Well, so in the first half, we were bumping up against each other a little bit about some of the assumptions of you know economic thinking in general right and this again this is why i really enjoy talking to economists and thinking about economics because every so often a very small group of people who are it's this wonderful mix of intuitive and counterintuitive right where i Where I'm like, oh, yeah, yeah, that makes sense. And then I come across another idea where I'm like, wait, can that really be how we're talking about human society? And that's why I enjoy it so much. if you have any version of what economics is and what it's for and what you think its utility is

when we're thinking about these big problems like COVID-19 or the climate crisis, because so often people think it's totally bloodless, right? And they think, well, economics, that's just about trying to figure out how rich people can get more money. And that's the lens through which they want to look at the world. But the way that you talk about it, it starts to feel more like a sort of quantified sociology in a way or something like it's we're talking about when you're talking about people's happiness and what that's worth to them. You're talking about something deeper. And I'm trying to put my finger on what it is. Yeah. So I think at the Thanksgiving table, that's definitely true that people think that economists are, let's call them Mr. Burns from The Simpsons or Mr. Potter from It's a Wonderful Life.

And it's money, money, money, money, money, money. And that is so wrong and so terrible and does such a disservice to how thoughtful and fully formed we are as people and how we think about the world. Defend your people, Michael. Yes, yes. Some of my best friends, by the way, are economists. And I think what we try to do that I think economics is very good at is trying to observe, is very good at is trying to observe uh and maybe quantified sociology is not a terrible label uh is to try to understand the choices that people are making and what that teaches us about the things that they value uh and those things that they value for sure are money because money lets them do lots of things but they also value other things

and you can see and just returning our conversation about the value of fiscal life it's really a primed example of like people are trading off risk and money uh and from the rates at which they trade those off we might learn something about how they how they perceive the world and you know what choices they would like the social plan or a government or somebody to make on their behalf. That's, that seems like such a powerful lens to look at people through, but it brings me back. Oh, then we're done. Let's stop right there. Well, it brings me back to my question of, of how do you account for when people don't know what they value? I mean, I've experienced in my own life a time where I made a decision that was not didn't make sense for. I realized later that it was wrong because it didn't take into account what was actually important to me.

And it took work for me to figure out what was important to me. And that's that's a personal example. But there's also people do things that are not in alignment with their values and what's best for them all the time because they are stupid or they're misinformed or they're, you know, they're just human. Right. They just it's just a human thing to do. So how does economics account for this? Great question. So the first thing which you're digging at is very important is there's an assumption in kind of neoclassical standard economics that there's, ready for this, perfect information. So people know everything all the time and they can make, they know their preferences and they know all the consequences of that and they'll make choices based on that. And from that, then we can perfectly understand how they're willing to trade off, you know, time with their family or changes in their mortality risk with money and all that's really simple and easy. Of course, perfect information is not true. And so then you often see people trying to make choices based on imperfect information. The whole subfield of behavioral economics, I think,

often has come from finding these instances where people seem to be acting against their interests or making very small pieces of information or changing the default on something has a very, very large consequence on on their actions and i think that behavioral economics has been incredibly important influential in uh demonstrating exactly uh the limitations that uh people exhibit i think it's had a harder time articulating a new theory that describes human behavior. And kind of neoclassical people, and it's not without theories in the behavior of mathematics, but the more neoclassical view is, well, fine, there's some information, quote-unquote, frictions.

That is, people don't know everything. And we can still learn a lot from what people's choices are. Are there cases in which you ever feel that economics where you're like, oh, man. So that's a wonderful answer. Right. But do you find times where when you're looking at human behavior, where you're like, wow, economics doesn't have an explanation for this, like can't help me in this case. Like we have to go to another field to to understand humanity does that make sense uh yeah that does uh uh yeah i think there's a there's we can be too uh i think we could shove anything into the neoclassical model with uh you know, if you introduce enough, quote, unquote, frictions.

Yeah. And rationalize it. And, you know, there's many instances where that's probably not a good idea. But, you know, I would say I could turn back to, you know, maybe 30 minutes ago, one thing, you know, now that we have all these computers and the data, uh, we can get much more nuanced pictures of how people behave. Uh, and that's been extraordinarily useful in helping us get out of kind of the caricature neoclassical vision of economics, where you have the utility maximizing man or woman who is just ruthlessly maximizing their utility with perfect information. And now we're beginning to learn, well, the world is a lot more complex. And it's probably like a lot of my friends from high school who kind of always thought,

oh my God, Michael has lost it. He's signing up for this kind of neoclassical view of the world. But when you look around, we know that's not true. And I think there's kind of a meeting of the minds now, which is economics is getting closer to reality because we actually have the data that helps us update the models. Yeah, that's really cool. That's I've I've sensed that happening in my again, as a total layman, just reading about economics, I've noticed more of those types of arguments. And I don't know, I I just think about all these different models of looking at human behavior. You know, we had Rachel Bitticoff around a few weeks ago. Who's a political scientist? You know, we've had psychologists on.

on. These are all different models for understanding humanity, and they all make sense insofar as they're sort of in their spheres. And then towards the edges are and exactly what it is that economics helps us to understand and where we start to feel the need to bring in other fields. Yeah. You know, there's one thing that I think is probably where most economists are. One side of the line is, look, I know that you actually have a much more nuanced view of this, but let's just suppose you really did have the full-time urban planners view on exactly how public transportation and society should be set up. And I think what economic starting point is, well, there's no particular, they don't, the urban planners don't have a monopoly on understanding people's preferences and they might have the preferences of their own that they're substituting for people.

And so we should put a lot of weight on people's revealed actions. And I think sometimes where there's a discomfort with behavioral economics and a discomfort, again, to just, you know, make fun of the urban planners, again, to just, you know, make fun of the urban planners, is you can't tell, like, are you trying to reflect what, are they trying to reflect what people's preferences are, or are they trying to substitute their own preferences for people? And a lot of economists get pretty anxious if once we start getting away from the choices that we see people make kind of in the wild, I guess. that we see people make kind of in the wild, I guess. Yeah, and that's one of the, that's when I love economics the most is when it is talking about what people do

rather than what they should do or what a sort of idealized model of them does. And by the way, I think that's what good urban planning would do as well is by saying, wait, how do people actually move around given their druthers, right? Because so much of what we consider-

Yeah, and that word should, by by the way if i could pick on should should makes economists anxious like should according to who like right right um but and for the record some of my best friends are urban planners and i actually know they have much more nuanced views on the economy and the way some of you should be set up than i'm suggesting but there's also a way in which you know some of what we think is preference is actually the result of people just living under what is in fact a regime of, hey, we live under the car regime. Right. And people say, I love to drive my car. But, you know, if they actually had the choice, you know, if they actually experienced another way of life, what would they say they prefer? Right. And what are the costs that maybe are being imposed on them that they don't realize?

You know, that being said, like, you know, good urban planning would include, yeah, this is how people actually behave. So I want to turn to- I agree. We live in a world where a lot of decisions were made a long time ago. And a lot of the choices we're seeing might certainly reflect the constraints that those previous decisions have made. And people might live in a, you know,

if we're starting afresh, might want to live in a very different way. I agree, but just because they might doesn't mean that they would. Oh, absolutely. This is really fascinating. Okay, I want to move to I want to talk about climate change because we've we've alluded to it a bunch of times and you have this. So in a similar way to which we were talking about covid in which the the price of doing nothing

actually has a cost for us, right? Not just in lives, but economically. I believe you'd argue the same thing is true of climate change. Is that not true? Absolutely. So let me start by, so I guess what you're talking about is something called the social cost of carbon. I like to call that the most important number that no one has ever heard of. And what it is, is it is a monetary value of the damages associated with the release of an additional ton of CO2.

And I think it's central to setting rational climate policy because it tells you, well, every time I put an extra ton of this stuff in the atmosphere, these are the damages that I'm going to leave for my children and their children and society in the United States and society in Bangladesh and everywhere. And by setting that, that's a sharp line on how much we should be willing to spend to prevent that ton from happening. And so like if you can reduce and and it, uh, it, let's suppose that social cost government's about $50 a ton. Uh, there's some reason to think that, uh, if you could, uh, reduce, uh, uh, carbon emissions for $10 a ton, every time you reduce the ton, you'd get $40 of benefits. It seems like a great deal and we should do it. Yeah. But if it costs

a hundred dollars a ton, maybe we don't want to do it if the benefits are only $50. But if it costs $100 a ton, maybe we don't want to do it if the benefits are only $50. And so where do those costs come from? Like in terms of when you're looking at climate change, like what are the events that could occur that would impose those costs on us? What are you thinking? Yeah, sure. So the way there's a – we're on a podcast, so I can't show you the beauty of some of my graphs, but I'm sure they're, I'm sure they're gorgeous. Mike, thank you for saying that. You're such, I love a good graph. I, sometimes I just admire them. You know, I just go to the,

I just go to the graph museum and just like, look at the prettiest graphs. You know, it's coming, it's coming. I'm joking it out. I'm joking, but well-visualized data is something to behold. So please tell us about this. Yeah, I don't know. So the way I like to think of it is we got the extra ton of CO2 that goes up in the atmosphere. It changes the atmospheric concentration of CO2. That changes temperatures. And then that unleashes a set of changes in the world we're used to, the world we

know. And that is melting of ice and sea level rise. So that's one of the damages. The higher temperatures make it very complicated to grow crops in the ways that we have, uh, it, there's, uh, lots of evidence, uh, on that, uh, higher temperatures, especially in the summer, uh, cause, uh, increased rates of mortality, uh, on the cost side, on the benefit side, actually they reduce deaths associated with cold days. So they're just going to lead to like a very large changes in our life. You know, all of that can sound a little abstract. So one piece of work that I'm doing right now is actually on what's going to happen to crop choice in the United States. What are, you know, are we going to continue to grow the same crops? And what's really interesting is what

we find with a co-author of mine is that by the middle of the century, if, and you're in LA, so maybe you don't know this, but in the great expanse surrounding me, the corn and soybean belt, that's going to be gone. There'll be no more corn and soybean grown. Because of climate change. Yeah, because of climate change. It's just going to get too hot.

Now, maybe Monsanto or somebody will develop a new seed that will allow it. But with current technologies, they're going to try. With current technologies, there'd be no more change. So the main thing I just want to say is like, we're, we're running an experiment. It's going to induce all kinds of changes in our life. Sea level rise, higher temperatures. It will be much more pleasant to be outside in the summer.

There'll be extra mortality, extra mortality risk, crop yields, all kinds of things will change. And those, you know, those, those have costs and we should be taking account of them. So it seems like COVID-19 and climate change is something in common here, which is that in order to solve this problem, we have to bear enormous costs, right? Like an energy transition is going to be expensive. I know there's a lot of debate about, you know, is it possible for our economies to grow the same at the same rate if we cut out fossil fuels to the degree that we need to that, you know, to the degree to which fossil fuels are just a big part of the economy? Is there going to be a hit in that regard? These are expensive things, same as shutting down the economy is same as, you know, distributing free vaccines to everyone in America would be. But there's also a cost that comes with not doing the thing that is we think about less.

It's like maybe a little bit more invisible to us because we don't see it as a as a choice in quite the same way. Yeah. So actually, you know, I want to, one pivot I want to make here, which I think I'll work my way back to you, I hope, and you can redirect me if I'm not, is I actually am a little uncomfortable talking about climate change in isolation. And I like to think of it actually as the global energy challenge.

And the reason I do is that I think what we, there's a societies around the world are trying to do is trying to find a balance between three different goals. Uh, the first is how do we get access to inexpensive and reliable sources of energy that are critical for economic growth and the improvements in living standards that basically every person on the planet wants. Uh, now there's some of that in the United States, and you were pointing to it, like people don't really like paying higher electricity rates. But just bend your mind over to like India or Bangladesh.

And like now you have – I do a lot of work in the state of Bihar, which is a state of about 100 million people in India. Per capita electricity consumption there is like 200 kilowatt hours per person per year. And so what is it in the United States? It's like 13,000. Wow. So now you, so what they're, a primary goal for them is how do I get inexpensive and reliable sources of energy?

And there's just no getting around that those guys are not excited about 200 kilowatt hours per year. So that's one goal. And the second goal. And let me just add, I understand that totally, because if you think about, you can't deny people who want the enormous benefits of electricity, right? Having it, you can't go say to someone in India, Hey, I don't think that you should have electric clothes washing, right? Because I have it and your life will be better if you have it. And that's not a way that we can address climate change

is by telling other people they can't have what we have. I totally agree, but I'm going to maybe even say it's slightly more sharp pointed than you just said it. You can say it all you want but it's not going to happen it's like it's you know it's nothing that they would entertain like

oh yeah this climate change thing why don't i stay at 200 kilowatt hours per year that seems like a good deal for me no they're working to get up no matter what anybody says and we need to account for that in our how we address climate change yeah okay so that's number one like how are we going to get inexpensive and reliable energy not just in the great state of california uh but uh around the world the second thing is the least expensive way to get that is primarily by using fossil fuels and that creates two problems. The first is that in unintended and undesirable part of using fossil fuels is it creates this horrific air pollution, particulates air pollution. The average person, based on my research, on the planet is losing

about two years of life expectancy due to particul yeah, due to particulates air pollution. And for me, it's more than that because I live in LA. So great. No, no, no, no. That's not true. Like, uh, that was, that was true in 1970, but yes, you're worse than most of the United States, but like even the, the, the level of air pollution in LA is great, uh, compared to what it was and is certainly great in a global perspective. True. I mean, yeah, it's very bad in India, speaking of which, I know that. Yeah. Yeah. So like the average person in India is losing about four years of life expectancy because their air pollution is not in compliance with WHO standards. So I would say that's the second goal.

How do we manage the local environmental problems, which is basically air pollution? And then the third goal is where we started, which is climate change. And so this same source of energy, which is the least expensive, setting aside these externalities, fossil fuels, and so that means people want to use it, is all, and it involves a release of particulate matter, but it also involves a release of CO2. And that's, you know, really increasing the odds of disruptive climate change. And so, why I was pushing back on just talking about climate change is, I think the clearest way to think about the

challenge that we're facing, society's facing, is how can we navigate between these three goals? And now let me just add, this is a long answer, but let me add one more layer to it, which is we were talking about a little bit about before with respect to COVID is the way that I see the problem here in Chicago and the way that you see the problem in California is almost certainly very, very different than the way that people in developing countries see the problem. Like, what do we want to do? We're pretty rich. We want to avoid something really nasty happening. So we're willing to spend some money on it.

Like, what are people in India and China and Bangladesh and other sub-S money on it like what are people in india and china and basel dash and other sub-saharan africa what are they thinking they're thinking like i am effectively dying today from you know poverty or you know very low levels of consumption uh and yeah i get that there could i might be increasing climate change but that's a manana problem. Like right now I got to get out of this mess I'm in. And the, what's so nasty about climate change as a problem is that we need, the planet doesn't care where the emissions came from. And so, uh, you know, we need to find a solution that works for everybody, not just for people in California, not just for people like you who like to take buses, not just for, you know, people in Bihar, India, like it has, it has to work for everybody. And finding a way that society can navigate between those three goals, given that there's

not one society, these trade-offs look very different in different places, is why the problem is so thorny. Wow. Yeah. that's an extremely good description. I mean, I always have that person in India taking as our prototype. In the back of my head when I'm thinking about climate change, you know, that, yeah, that's a big part of the challenge, but I rarely look at it so clearly as that. I do want to say, though, that there's also people out there who are dying of climate change right now, like people in island nations, for instance, the Marshall Islands, I believe, are currently like we're not going to be able to live in our homes in a matter of a few decades. The water is lapping around our ankles. Help us, please. You know, absolutely. There's no doubt

about that. And, you know, that's just like the canary in the coal mine for, look, one day in the United States, we're going to have a conversation. Hey, which parts of the Atlantic coast should we let go? Yeah. And I don't know how you resolve that. Well, let me say, actually, I do know part of it. We're going to spend every last dollar protecting Manhattan. And then other parts, I don't really know how we're going to sort that out. And, you know, I should add, like, in the beauty and the insight and the transparency of Blackboard economics, there is such an easy solution to this, which is that the rich countries should just pay the poor, you know, subsidize low carbon energy in the poor countries. Right. And now we can just return to your politics.

You know, I dare you to run for senator on a campaign of we should spend one hundred billion dollars a year subsidizing the energy of people in India. Even in California, that might be a tough sell. It's really funny because you hear this argument against, you know, one of the new lines against doing anything about climate change is, oh, well, China's not going to do anything and they're just going to use all this wonderful oil energy and out-compete us and win, right? To which my counter-argument would be like,

well, this is a global problem. I mean, like, no one's going to win if climate change happens to the worst degree it can. Like, we're not gonna, we're duking it out with another country while we slowly sink into the ocean is not a good course of action. But also, every other country in the world can make the same argument about us.

They could say, hey, why should we do anything about this? When the United States reaped all the benefits of exploiting fossil fuels for the past 70 to 100 years. And now, as soon as we're on the upswing, now we're being told we can't. How fair is that? The United States should be fixing this problem. And I think they'd be right to have that perspective. But you don't hear that often voiced in United States politics. But I do want to return this question, which on.

Well, is this climate change, this global energy challenge problem insoluble? And because of, hey, these guys aren't doing it, so why should we do it? I actually don't think that. I think, but I do think it requires really global leadership. And that's a strange phrase for an economist, because I guess it stands up political science as an important discipline. Your arch enemy in the discipline, political science. That's right.

And I think what we have a lot of evidence that, like, when the United States has taken a lead on global climate change negotiations, that that has been actually pretty effective at getting other countries to do things. And I really think you can have an America first program and still believe that global leadership on climate change is important. And let me explain why I'm saying that. Climate change is important. And let me explain why I'm saying that. What is sometimes missed is that when we cut our emissions, it's providing benefits for everyone else.

But when those guys cut emissions, they're providing benefits for us. And I think there's a huge miss that happens when we withdraw from those international negotiations, because if we can influence what China does and what India does, then, you know, they're going to produce enormous benefits for us by reducing their emissions. And so that kind of dynamic reaction is, I think, completely absent from what I would call like the 1.0 version of America first, which is, well, China's not going to do it. So why should we do it? No, that's missing. If we do something and China does something in return, we're going to get benefits. I also, I enjoy talking to you because again, it, it deflates the normal stereotype we have of economics, which is the bloodless discipline that only cares about how many gold coins Scrooge mcduck has in his money tower right um but you're describing these are economic reasons economic thinking that leads us to solving the climate crisis or finding a way to solve it that's actually more pragmatic and

and maybe more achievable than some of our normal approaches it's a really it's a really engaged version of the of the discipline which is really wonderful hear. That's nice of you to say, I think that puts you in a small circle of people who feel economists have some social value. Well, and you might you know, you should consider it and you might want to move out of the circle, but we'll have you in there for now. Well, I hope that, you know, again, so much of these, so, you know, so much of the problem of climate change, we need, we need American leadership. We need political leadership. We also need corporate leadership. We need business leadership in a real way, not in a greenwash tale. We put out some nice ads

with pictures of windmills in a way, but in uh way can i just stop there if i since i don't walk through airports anymore but like if i walk through one more airport and see like uh the the picture from bp or actually my favorite is when it's from stat oil which is the norwegian company government-owned uh energy company one more picture of a windmill like you know at least with the Saudis, you know what you're getting. They're not messing around. They're selling the fossil fuels and that's that. It's just comical to me to see these advertisements. Oh, yes, 0.1% of our capital budget this year went to clean energy sources, never mind the 99.9% that was.

Yeah. Yeah. Yeah. I mean, but, but having said that, I don't want to pick on them. Like it's reflection of our choices. You know, they're just serving, they're supplying what we're demanding. Yeah. But there's a degree to which you can say that you can say they're just supplying what we're demanding.

They're just, it's the shareholders that are making them do it. Right. It's, it's all of that. No, it's not that it's, we're just supplying what we're demanding they're just it's the shareholders that are making them do it right it's it's all of that no it's not that it's we're making them do it because we're making these choices on what kind of energy we want to consume but what is that we don't have we were coming in for a landing but i have to i have to ask you about this uh because i'm sorry i'm sitting here in la i'm not able to choose what kind of energy I consume. Right. This is a system that was built for me by people against my protests. Right. I'm like, hey, more L.A. is currently, I believe, you know, engaging more natural gas plants. Right. When it shouldn't be when it should be doing solar. right? And I would love them to stop. I would

love them to make that choice, but I don't have the ability to make that choice. It's the energy companies and the people who are leading the government who need to make those choices, are not. Yeah. So let's go back to fundamentals here. Is there an externality from our uh using fossil fuels absolutely uh is that do we have we put in place policies to affect choices uh so that we will that will influence the choices we make no and that's where i come back to where we started like i kind of think we get the government we want uh and uh i share your passion that x you might not have used these words but that externality should be reflected in prices that is when you go to buy gas you should reflect the price should reflect the climate damage uh that you're about to do by

running your car uh but we have to demand that from the government. We're not doing that, I think, insufficiently to compel action. So you're saying that we need to make the it's the broader choice of being politically engaged, civically active, of going out to the march, which, by the way, I went to the most recent climate march in L.A. So I did make the choice to exert some pressure. I mean, I stood around and waved a sign for a little bit and then I went home. That was the most I could do. But it's that mass movement, the individual choices of individual people to join that mass movement that's going to make the difference. That's what we need to see in your view. Absolutely. And then I just want to remind you of it's wonderful that California is leading the nation and in maybe not as much as you would like. Yeah. Reducing carbon emissions.

But like we also shouldn't. I worry sometimes about the environmental movement in the United States that we the environmental movement in the United States would be satisfied if the United States would just reach some sufficient level or sufficiently low level carbon emissions. But if we don't keep our eye on the ball on how to make that an attractive choice for the other parts of the world, it's not going to make that much of a difference. Yeah, you need to make it the natural thing to do

to make these choices. You need to make it the best choice for do to make these choices you need to make it the best choice for people for these people who in my estimation uh just like we are are trying to balance these three goals inexpensive and reliable energy that's why the la whatever it is chose natural gas that looked like the cheapest thing to them uh air pollution and climate change. And like, I feel like you have to keep all three of those goals in mind at once and, you know, ideally find a way to set up a system. I would call that system a carbon tax and a tax on pollution so that these look like, so these are choices so that people can make fully informed choices

that reflect all three of their goals, not just one of them. Well, I feel like we could keep talking about this for so long, because everything you say gives me a new idea. So first of all, we can unpack, how have I done on the comedy scale? Have I even registered?

Oh, this has been a very funny conversation with an economist for a conversation economist this has been very very good i think honestly uh michael i really thank you for coming on the show to talk to us it's been it's been a really fascinating conversation thank you for getting into it with me uh my pleasure i'd be happy to have another one someday, even off podcast. Well, thank you once again to Michael Greenstone for coming on the show. That is it for us this week on Factually. I want to thank our producer, Dana Wickens, our engineers, Brett Morrison, Ryan Connor, our researcher, Sam Roudman, Andrew WK for our theme song. I've been Adam Conover. You can find me online at adamcon theme song I've been Adam Conover you can find

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