Freakonomics Radio - 362. Why Is This Man Running for President?

Episode Date: January 10, 2019

In the American Dream sweepstakes, Andrew Yang was a pretty big winner. But for every winner, he came to realize, there are thousands upon thousands of losers — a “war on normal people,” he calls it. Here’s what he plans to do about it.

Hey there, it's Stephen Dubner. Hope your new year is off to a good start. Hope you haven't broken all your resolutions yet. A couple quick announcements before we start today's episode. First, next week we will be resuming our Hidden Side of Sports series with a look at the mental side of sports. But also, in a couple of months, we will be participating in the famous MIT Sloan Sports Analytics Conference,

which means we will have access to some of the sharpest sports analysts and coaches and owners and athletes in the world. So we want your questions for them. Send us the sports questions you've always wanted answered on any aspect of any sport whatsoever. The weirder the question, the better. Our email is radio at Freakonomics.com.

Thanks, and now on to today's episode. Andrew Yang is not famous, not yet at least. Maybe he will be someday. But let me tell you his story. He's 44 years old. He was born in Schenectady, New York, a city long dominated by General Electric, the sort of company that had long dominated the American economy. But which, as you likely know, doesn't anymore.

Yang's parents had both immigrated from Taiwan and met in grad school. His mother became a systems administrator, and his father did research at IBM. He got his name on 69 patents. Their son Andrew studied economics and political science at Brown. He got a law degree at Columbia and ultimately became a successful entrepreneur with a focus on widespread job creation. In the American dream sweepstakes, Andrew Yang was a pretty big winner. But along the way, he came to see that for every winner, there were thousands upon thousands of losers.

The economist Joseph Schumpeter famously described capitalism as an act of creative destruction, with new ideas and technologies replacing the old, with nimble startup firms replacing outmoded legacy firms, all in service of a blanket rise in prosperity. The notion of creative destruction has for decades been part of the economic orthodoxy, and it's undeniable that global prosperity has risen, not just by a little bit. But Yang, like many others, has stopped believing in the economic orthodoxy of creative destruction. As he sees it, there's just too much destruction, and the blanket rise in prosperity isn't covering enough people. We are living through what Yang calls a war on normal people,

a war that Yang fears is getting uglier all the time. And that's why he has taken to saying this. I'm Andrew Yang, and I'm running for president as a Democrat in 2020. I can think of a million things that you personally, Andrew Yang, with your resources and abilities and so on, could have done other than running for president of the United States. And yet that's the one you've chosen. So why? So imagine if you were the guy getting medals and awards for creating jobs around the country and realizing that the jobs are about to disappear in an historic way. And all of the solutions involve really a much more intelligent, activated government than you currently have.

And I went around and talked to various people being like, hey, guys, is anyone going to solve the biggest problem in the history of the world? And I could not identify anyone who was going to run and take it on. So you put your hand up and said, I guess I will. Yeah. You know, I'm a parent like you are. I've got kids who are going to grow up in this country. And to me, just believing that we're going to leave them the show that I think is coming and not doing something about it struck me as really pathetic. Today on Freakonomics Radio, what Yang sees happening in the middle of the country that coastal elites don't see.

We are blasting communities to dust and then pretending like we're not and pretending like it's their fault and pretending that somehow it's unreasonable to be upset about your way of life getting destroyed. What he fears will happen as the problem continues to metastasize if, for instance, autonomous trucks put 3 million drivers out of work. F*** this. Let's get 30 guys together with our trucks and our guns and show up and protest the automation of their jobs. And we'll hear Andrew Yang's proposed solutions, including this one. A psychologist in the White House. From Stitcher and Dubner Productions, this is Freakonomics Radio, the podcast that explores the hidden side of everything.

Here's your host, Stephen Dubner. The conversation you're about to hear is in many ways a continuation of conversations we've had in multiple episodes over the years. Episodes like, is the American dream really dead? And is the world ready for a guaranteed basic income? Episodes like, yes, the American economy is in a funk, but not for the reasons you think. And did China eat America's jobs? You may want to give those episodes a listen for a deeper look at the economics involved. But first, who exactly is Andrew Yang? Years ago, he worked as... A knife salesman. A knife salesman? Oh, yeah, Cutco. I still know the sales pattern. Let's hear it.

You know what's really dangerous? It's not a sharp knife. It's a dull knife, because then you start putting elbow grease into it, and that's when accidents happen. So here's how I would thumbnail your story. Immigrant kid, smart, got good education, tried a few things in the labor force, including high-end lawyer, then some entrepreneurship, got involved with a company that was sold, so you cashed out, then took the nonprofit route to try to inspire other people to become entrepreneurs in places where there wasn't a lot of drive for that already. And then during that process, you got exposed to the way the economy was failing in large parts of America.

But then instead of just like saying, wow, that's tough, but I got mine and I'm going to go back to my coast and lead my comfortable life. And for the people who are not leading this life, you know, I wish them well, but I'm out of here. You disrupted your life in order to do something about it. As an entrepreneur, I feel driven to try and solve problems, and this seems like the greatest problem that we face. And you think, hey, if I bust my ass for several years, I have a chance to potentially accelerate the eradication of poverty and helping my country manage through the most difficult transition

in decades. And I think if I put my heart and soul into it, I have some chance of making that happen. And then if you don't do that, you must be an a**hole. When he was 24, Yang landed a job in New York at Davis Polk, one of the most prestigious law firms in the world. I was making $125,000 plus a bonus of the most prestigious law firms in the world. I was making $125,000 plus a bonus of maybe another $25,000 or so. And I have Asian parents, so they were quite pleased with this state of affairs. And I thought, wow, this is a really lousy job.

When I was growing up as a kid playing Dungeons and Dragons, I didn't dream about being the scribe. I dreamt about going in the woods and killing something, which did not help my parents feel any better about my decision to quit the firm. So yes, he quit what many people might see as a dream job. He got involved in an internet startup that combines celebrity and charity. So we called it StarGiving.com, and we got Hootie and the Blowfish and MTV and Magic Johnson to donate meet and greets with themselves to their nonprofits. The launch of StarGiving coincided with the bursting of the dot-com bubble. The firm lasted just five months.

I mean, I was a very sad 26-year-old who still owed $100,000 in law school loans and had parents still telling people I was a lawyer, even though I was not. And so I joined another startup, and I was very worried that it was also going to go under. So I started throwing parties on the side as a side hustle. And then I also started teaching the GMAT on the side for a friend's company. So I had three jobs during that time. The job that stuck was the GMAT teaching, GMAT being the standardized test you take to get into business school. The company was called Manhattan Prep,

and Yang ended up becoming its CEO. That's right. So I personally taught the analyst classes at McKinsey, Goldman Sachs, J.P. Morgan, Morgan Stanley. And so imagine doing that for six, seven years and then seeing the country go to shit during the financial crisis and then think, well, I know why that is, is because the smart kids have been becoming

Wall Street bikers and management consultants while the rest of the country was getting hollowed out. In 2009, Yang's company was bought by the testing firm Kaplan, which was owned by the Washington Post Company. We were acquired for low tens of millions, so I walked away with some number in the millions. He soon left the Washington Post Company to start a nonprofit called Venture for America, a recent college graduate, trains them with various business skills, and then sends them to work at a startup or early stage growth company in Detroit, New Orleans, Cleveland, Baltimore, a city that could use the talent. Then you work at that startup for two years, helping it grow. And at the end of two years, if you want to start your own business, we have an accelerator and a seed fund to help you do so.

It's going to create 100,000 jobs around the country. We've helped create over 3,000 jobs to date. And dozens of our alums have started companies, some of which have now raised millions of dollars and generated millions in revenue. So you said you hope to create 100,000 jobs. And then you just said you've created 3,000 jobs. So that sounds like you're a little short. Well, create 100,000 by a certain date. What's the date? So we had 2025 as our target date. So we would need algorithmic growth. I gather what you learned about how the world worked outside of the coastal corridors and outside the Ivy League and so on was an awakening, yes?

Yeah, it was for sure. What was different in Detroit and Pittsburgh and elsewhere that you went from what you imagined? Well, so some of the structural force, and I'll describe this company. It had a couple of very bright founders at a Brown University, and they got started in Providence. And the company starts to do well, hits its strides, doing a couple million in revenue. And then an investor in Silicon Valley says, hey, you guys should come out here and we'll invest $10, $20 million in you. But you should really come here. So then the guys say, well, I guess we have to take that.

So that company goes from 100 employees in Providence, Rhode Island to zero employees. And I can feel the mayor of Providence and the governor of Rhode Island thinking right now, no, no, no, please don't go. Oh, they were there. I mean, the mayor was like, they're like saying, please don't go. And then the guys are like, well, you got to do what's right for your business. And so they went out to Silicon Valley and now the company has 100 employees in San Francisco. And so there becomes this really unfortunate dynamic that if you're an entrepreneur who's succeeding in a place like Detroit or Providence or St. Louis, the goal is to get sucked, that the nature of that is changing really, really fast due to technology and particularly automation. How much of that were you starting

to see up close and how surprising was that to you? Yeah. So my thesis was that if you started, let's say, a tech company in a place like Detroit, that it would create additional jobs in that community that were not necessarily skilled jobs. But what I learned was that these companies, in order to be successful, did not need to hire huge numbers of people. That right now, the way businesses grow is that businesses grow lean and mean. And so they're not going to hire the thousands of employees that industrial companies used to employ in a place like Detroit or Cleveland or St. Louis. And it became clear to me that as much as I was excited about and proud of the work I was doing, it felt like I was pouring water into a bathtub that had

a giant hole ripped in the bottom because we're blasting away hundreds of thousands of retail jobs, call center jobs, food service jobs, eventually truck driving jobs. And so my army of entrepreneurs doing incredible work, starting companies that might employ 20, 30, 40 people was not going to be a difference maker in the context where that community was going to lose 20, 30, 40,000 retail jobs, call center jobs, transportation jobs, et cetera. And I was horrified. Like I was flying back and forth being like, what the hell are we doing? We are blasting communities to dust and then pretending like we're not and pretending like it's their fault and pretending that somehow it's unreasonable to be upset about your way of life getting destroyed. And so it's, I had a wake up call, a reckoning,

as you said. But then when Donald Trump became president in 2016, I was like, I'm convinced that the reason why he won the presidency is that we automated away 4 million manufacturing jobs in Michigan, Ohio, Pennsylvania, Wisconsin, Iowa, Missouri. And we're about to triple down on that by blasting away millions of retail jobs, call center jobs, fast food jobs, truck driving jobs. I think if we had realized how traumatic the pace of change would have been, we would have, at a minimum,

had much better policies in place to assist workers and communities that suffered these very severe and immediate consequences. That's the MIT labor economist David Autor from our 2017 episode, Did China Eat America's Jobs? And we might have tried to moderate the pace at which it occurred. And we also had a huge trade deficit, and that meant that we simply did a lot less manufacturing. So that meant that workers had to make a tougher transition out of manufacturing into something altogether new, and I think that upped the challenge.

I think the other thing that we have to recognize and that economists have tended not to emphasize is that jobs aren't purely income. They are part of identity. They structure people's lives. They give them a purpose and a social community and a sense of relevance in the world. And I think that is a lot of the frustration

that we see in manufacturing-intensive areas. And I think that that's costly even beyond the direct financial costs. It's been tempting, especially from a political view, to blame all this job loss on global trade, immigrant labor, and offshoring. But Autor and most other economists agree that the much larger driver of job loss is technology and automation in particular. So we automated away 4 million manufacturing jobs.

Back to Andrew Yang. This was like the auto manufacturing plants, like a lot of the even like consumer good, like furniture manufacturing in North Carolina, like a lot of that stuff has gotten automated away. Now, I studied economics, and according to my economics textbook, those displaced workers would get retrained, reskilled, move for new opportunities, find higher productivity work, the economy would grow. So everyone wins the market. Invisible hand has done its thing. So then I said, okay, what actually happened to these 4 million manufacturing workers?

And it turns out that almost half of them left the workforce and never worked again. And then half of those that left the workforce then filed for disability, where there are now more Americans on disability than work in construction, over 20% of working-age adults in some parts of the country. So the former manufacturing workers, a lot of them are on disability. A lot of them are also, especially if they're younger men, they're spending 25 to 40 hours a week playing video games? Yeah. So it did not say in my textbook, half of them will leave the workforce, never to be heard from again. Half of them will file for disability. And then another significant

percentage will start drinking themselves to death, start committing suicide at record levels, get addicted to opiates to a point where now eight Americans die of opiates every hour. And so when you say MI4 automation and artificial intelligence and all these fantastic things, of course I am. I mean, we might be able to do things like cure cancer, help manage climate change more effectively. But we also have to be real that it is going to displace millions of Americans. People are not infinitely adaptable or resilient or eager to become software engineers or whatever ridiculous solution is being proposed. And it's already

tearing our country apart by the numbers where our life expectancy has declined for the last two years because of a surge in suicides and drug overdoses around the country. None of this was in my textbook. But if you look at it, that's exactly what's happening. And so the fantasists, and they're so lazy, and it makes me so angry, because people who are otherwise educated just literally wave their hands and be like, industrial revolution, like 120 years ago, been through it before. And it's like, man, if someone came into your office

and pitched you an investment in a company based on a fact pattern from 120 years ago, you'd freaking throw them out of your office so fast. The Industrial Revolution is a textbook example of creative destruction. Old technologies giving way to new, the rising tide lifting all boats. But history doesn't actually happen that smoothly. If you look at the Industrial Revolution, there was massive social change. Labor unions were originated in 1886 to start protesting for rights.

There were massive riots that led to dozens of death and caused billions of dollars worth of damage that led to Labor Day becoming a holiday. Universal High School got implemented in 1911 in response to all of these changes. And it was a tumultuous time. I mean, there was like a whiff of revolution the whole time. And according to Bain, this labor force displacement this time, the fourth industrial revolution,

is going to be three to four times faster and more vicious than that industrial revolution was. So even for those lazy ass people who are just like, we've been through this before industrial revolution, be like, well, the industrial revolution was hellacious and it's going to be three to four times worse according to Bain, who presumably you respect because, you know, like they're good at figuring this stuff out. I mean, if you look at government funded retraining programs, the efficacy level, according to independent studies,

is between 0% and 15%. And only 10% of workers would even qualify for these programs anyway. So we're talking about a solution that will apply to between 1% and 2% of displaced workers. And that's the kind of lazy crap that people are putting out there as a solution. So if a revolution happens, how does it start and what's it look like? So to me, the rubber hits the road with the truck drivers.

I mean, there are three and a half million truck drivers in this country. Only 13% of them are unionized. And so the odds of there being a collective negotiation very low. 87% of them are part of small firms of let's call it 20 to 30 truckers and 10% of them own their own trucks. So think about that. If you borrowed tens of thousands of dollars to be your own boss and be an entrepreneur, and then your truck cannot compete against a robot truck that never stops.

The odds then of these truckers showing up at a state capitol saying, f*** this, let's get 30 guys together with our trucks and our guns and show up and protest the automation of their jobs. So we're disintegrating by the numbers. You can see it in our political and social dysfunction. And so expecting that disintegration process to be gentle would be ignoring history. Well, even though revolutions do happen and armed violent revolutions obviously have happened, most bold predictions turn out to be wildly wrong. And usually there's a lot less deviance from the past than predictors predict. So what makes you think you're not wrong on this one? I don't know thousands of truck drivers, but I do know some.

And they do not strike me as the sort who will just shrug and say, okay, I guess that was a good run. I'm going to go home now and figure out what job is there for someone who's a 50-year-old former truck driver. But you also are going to see call center workers, fast food workers, retail workers. I mean, there are 8.8 million people working in retail in this country. The average retail worker is a 39-year-old woman with a high school degree who makes $11 to $12

an hour. And so when 30% of malls close in the next four years, what is their next opportunity going to be? So we have to start being honest about what's happening, where the market does not care about unemployed cashiers or truck drivers or fast food workers. And the biggest issue to me is that we're measuring economic value in a very narrow, archaic way. We invented GDP almost 100 years ago during the Great Depression. The government's looking around

saying like, things are going really badly. Like, we need a number for this. And then Simon Kuznets comes up with GDP and says a few things. He says, we should not use this as a measurement for national well-being because it's really bad for that. We should include parenthood and motherhood in the calculation because it adds so much value. And we should not include national defense spending in the calculation because- If I remember my history, all three of those were ignored then, yes? Yes, yes, yes. We're like, that's great, Simon. And now it's like our end all be all. My wife is at home with our two boys right now, one of whom is on the autism spectrum. And what is her work valued at?

I'm guessing zero. Yeah, about zero. And I know that she's working harder than I am and that the work she's doing is more important. So your wife doesn't really factor into GDP. In fact, she's probably kind of a drain on it, really, right? Because she could be out there where there's opportunity cost of her not working. She might be able to be a management consultant consultant somewhere. And that would be like a much more valuable use of her. So management consultants and the finance industry, financial services, banking, real estate, you argue that many of the most remunerative occupations in America are rent seeking activities, rent seeking as economists use it to describe basically extracting value from transactions without really adding value. And you argue that many of the most

beneficial for society jobs, teaching, nurturing, caring, creating, et cetera, are the least remunerative jobs. How can you rail against that disparity while also wanting to bask in the benefits of the capitalism that set up those incentives? Capitalism is a wonderful, magical, powerful thing. But it optimizes for capital efficiency and capital gains above all else, really. And that worked well for a long time because in order for capital efficiency, workers needed to benefit, consumer economy needed to benefit, middle class needed to benefit.

It's like Henry Ford and his, like, how can my workers buy my car? But we're now at a point where Ford does not need those humans to build that car and that they can have markets all over the place. They don't really care what's going on in their own backyard. They're just these big changes afoot. And the question is how we're going to manage them as a country.

And that's what I'm trying to answer. That's why I'm running for president. Coming up after the break, one of the first things that a President Yang would do. We need to join every other industrialized country in the world and give the public a slice, a sliver, of every Amazon transaction, every Google search. The conversation continues right after this.

Until recently, Andrew Yang was running Venture for America, a nonprofit that tries to persuade young would-be Wall Streeters to launch startups in places like Cleveland, Baltimore, Detroit, and St. Louis. In 2014, he published a book about this effort. It was called Smart People Should Build Things. While the book pointed out the need for a dramatic overhaul of the American economy, it was, for the most part, an optimistic book. Last year, Yang published another book called The War on Normal People, and it is not remotely

optimistic. He argues that the American economy has failed most Americans and that the American political class has failed them again by refusing to focus on the underlying fault lines in the economy. This collapse in Andrew Yang's optimism is what led him to run for president. He's already been to Iowa and New Hampshire several times. But let's be honest, he is a very long shot in what's expected to be a very crowded field. Let's use Twitter followers as a proxy for the viability of some other possible Democratic candidates. Joe Biden has 3 million followers. Cory Booker, 4 million.

Elizabeth Warren, 4.6 million. Bernie Sanders, 9 million. Mike Bloomberg has 2 million Twitter followers and over $40 billion. Andrew Yang, meanwhile, has raised about $600,000 and has roughly 27,000 Twitter followers. But he also has ideas that he thinks will compensate. There's one idea in particular that he's banking on. Sure. My first big policy is the freedom dividend, a policy where every American adult between the ages of 18 and 64

gets $1,000 a month free and clear, no questions asked. So the freedom dividend is your phrase for what most of us know as the universal basic income, yes? Yeah, yeah. It's a rebrand of universal basic income because it tests much better with Americans with the word freedom in it. You mean the actual, right, as nomenclature, the idea is the same. Yeah, yeah. So universal basic income tests great with about half the country. And then the other

half of the country do not like it. Because? Because, you know, there's... It's got welfare connotations. Something along those lines. We tested a bunch of names. And then when you had the word freedom in it, then all of a sudden testing shot up among self-identified conservatives. They like hated universal basic income, hated prosperity dividend, all of a sudden freedom dividend. It's like ding, ding, ding. What about progressives, liberals, Democrats? Progressives, liberals, Democrats liked it no matter what the name was. What were some of the other names that didn't work?

Citizens dividend, future dividend, prosperity dividend. We had a lot of dividends. I think of a dividend as a payout on an investment. What does it mean in this case? Well, it's a payout to ownership. And we are the owners and shareholders of this, the most wealthy and advanced society in the history of the world. So this is a dividend for us. And there's nothing stopping a majority of shareholders, majority of citizens from voting themselves a dividend. It's been law in Alaska, and it's wildly popular in a deeply conservative state where a Republican governor said, hey, who would you rather get the oil money? The government who's just going to screw it up, or you, the people of Alaska. And so the people of Alaska now love it. Wildly popular, has created thousands of jobs, has improved children's health and nutrition, has lowered income inequality,

and it's untouchable through many different regimes. The Alaska dividend comes from oil revenues from the state, whereas a freedom dividend that would go to every person in the U.S. would be funded how? So the headline cost of this is $2.4 trillion, which sounds like an awful lot. For reference, the economy is $19 trillion, up $4 trillion in the last 10 years, and the federal budget is $4 trillion. So $2.4 trillion seems like an awfully big slug of money. But if you break it down, the first big thing is to implement a value-added tax, which would harvest the gains from artificial intelligence and big data from the big tech companies that are going to benefit from it the most.

So we have to look at what's happening big picture, where who are going to be the winners from AI and big data and self-driving cars and trucks? It's going to be the trillion-dollar tech companies, Amazon, Apple, Google. So the big trap we're in right now is that as these technologies take off, the public will see very little in the way of new tax gains from it. Because if you look at these big tech companies, Amazon's trick is to say, didn't make any money this quarter, no taxes necessary. Google's trick is to say, it all went through Ireland, nothing to see here. And so even as these companies and the new technologies soak up more and more value and more and more work, the public is going to go into increasing distress. So what we need to do is we need to join every other industrialized country in the world and pass a

value added tax, which would give the public a slice, a sliver of every Amazon transaction, every Google search. And because our economy is so vast now at $19 trillion, a value-added tax at even half the European level would generate about $800 billion in value. Now, the second source of money is that right now we spend almost $800 billion on welfare programs. And many people are receiving more than $1,000 in current benefits. So we're going to leave all the programs alone. But if you think $1,000 cash would be better than what you're currently receiving, then you can opt in and your current benefits disappear. So that reduces the cost of the freedom dividend by between $500 and $600 billion. Now, the great parts are the third and fourth parts. So if you put $1,000 a month into the hands of American adults, who right now, 57% of Americans can't pay an unexpected $500 bill,

they're going to spend that $1,000 in their community on car repairs, tutoring for their kids, the occasional night out. It's going to go directly into the consumer economy. And so if you grow the consumer economy by 12%, we get $500 billion in new tax revenue. And then the last $500 billion or so we get through a combination of cost savings on incarceration, homelessness services, healthcare, because right now we're spending about a trillion dollars on people showing up in emergency rooms and hitting our institutions. So we have to do what good companies do, which is invest in our people. So what persuades you that that number, $2.4 trillion, could even be close to justified

through the menu of savings that you just described. I guess more broadly, why should someone believe that this Democratic-inspired version of higher taxes or new taxes with a VAT and more income redistribution, why should someone believe that any more than Democrats disbelieve the Republicans' idea of lower taxes and trickle-down economics. Oh, man. I mean, if you put $1,000 into the hands of a struggling American, it's going to make a much bigger difference, not just to that person, but it's also going to go back into the economy. If you give a wealthy person $1,000, they wouldn't even notice. You could just, like, slap it into their account and, you know, it'd be like a non-event.

And so everyone knows that putting money into the hands of people that would actually use it is going to be much more effective at strengthening our economy and society. One easy argument against a UBI is that if you give everyone a dividend, like you're proposing $1,000 a month per person, all that new money in the economy will cause the kind of inflation that will render that $1,000 much less powerful. What's your argument against that? Yeah. So I looked into the causes of inflation that are making Americans miserable right now. And they are not in consumer goods like media or clothing or electronics. Those are all getting cheaper, still getting much cheaper.

Yeah. And a lot of that is being made more efficient by technology and supply chains and everything else. The three things that are making Americans miserable in terms of inflation are housing, education, and healthcare. And each of those is being driven by something other than purchasing power. Housing is being driven by the fact in some markets people feel like they need to live in, let's say, New York or Seattle or San Francisco

to be able to access certain opportunities, and then there's not much flexibility in terms of their ability to commute a long distance. Education, it's because college has very, very sadly gotten two and a half times more expensive, even though it has not gotten two and a half times better. And then the third is healthcare, which is dysfunctional because of a broken set of incentives and the fact that individuals aren't really paying in a marketplace. So if you put $1,000 in the hands of Americans, it's actually going to help them manage those expenses much better, but it's not going to cause prices to skyrocket

because you can't have every vendor colluding with every other vendor to raise prices. And there's still going to be price sensitivity among every consumer and competition between firms. I think people should have a guaranteed minimum income. That, again, is the MIT economist David Autor. So essentially our system of income distribution is primarily based on the scarcity of labor, right? The most valuable asset you own is your human capital. And if all of a sudden, you know, there was a machine that could do exactly what you did, it wouldn't be clear what skills would you sell to the market. The idea of a universal basic income has been around for a long time, and you might be surprised by the political diversity of its supporters.

In the 18th century, founding father Thomas Paine argued for a universal payout, representing our collective share of America's natural resources. In the 20th century, the economist Milton Friedman pushed for a different version called a negative income tax. Then and now, there is a common objection. You know, if you give people money for nothing, why won't they just quit their jobs? The economist Evelyn Forge studied the effects of a small Canadian experiment that paid out a universal income. Her finding?

The finding was that primary earners really don't reduce the number of hours they work very much when you offer a guaranteed annual income. A neuroscientist in Seattle said something to me that really stuck with me. Andrew Yang again. He said the enemy of universal basic income is the human mind. And what he meant by that is that people are programmed for resource scarcity. They think, hey, there's not enough to go around. You get it, I don't get it. And then if we all get it, there's not enough to go around. You get it, I don't get it. And then if we all get it, it's somehow going to harm us. And that's what we have

to overcome. We have to overcome this knee-jerk sense of scarcity that is baked into, in many ways, the way we're trained to perceive value in money. So that's big policy number one. All right. And what's big policy number two for would-be President Yang? Number two is digital social credits. Which are what? Digital social credits are a new way to reward behaviors that we need more of in society. So right now, the monetary market does not recognize things that we know are crucial to humanity, like caregiving and raising children,

volunteering in the community, arts and creativity, journalism, environmental sustainability. And so we're getting less and less of those things because the market does not care about them. What I'm proposing is we create a new currency that then maps to various activities that we want to see more of. All right. So give me a for instance of how it

would work. Let's pretend that I am a 58-year-old laid-off carpenter. Maybe you, President Yang, are already giving me a freedom dividend, which I appreciate. So talk to me about what digital social credits would do for me and how it would actually work. and then the person thanks you, gives you a hug, takes a picture of it. And then you then get this digital social credit, let's say call it 300 points. So you have these 300 points and you're like, okay, that's good. And then you get another ping and saying, hey, your neighbor needs a ride and they don't have a vehicle and you do. So you give them a ride and then you get some more points.

And then at the end of the week, you say, you know what? If I go to Cabela's, I can trade those points in for hunting gear or camping gear. I could use it to go to the local ball game. Okay. And then the vendors who are giving their goods or services to you for those social credits, what do they do with the social credits? They can take the social credits and go to the government and then the government can exchange it for money. And what's funding the money for the social credits and go to the government, and then the government can exchange it for money. And what's funding the money for the social credits from the vendors? So, I mean, the U.S. government would be backing it or foundations or various companies because if you're a company, you're a sponsor of this, I mean, you'd kind of enjoy the heck out of it and it would drive business to your establishments. But the great thing about this is you could induce hundreds of billions of dollars worth of social activity at a small fraction of the cost. Because right now, if I have 100,000 American Express points, how much does that cost American Express? A thousand dollars, maybe?

Zero, because I haven't done anything with it yet. Before I redeem it, it costs them nothing. But I love my points. I look at them. They seem to have value. I could trade them in whenever I want. And so what you'd see is you'd end up building up a parallel economy around people doing things for each other. This is based on a practice called time banking that's in effect in hundreds of communities around the country. So time banking is one of these ideas that's been around for a while now, and it's met with some success in some places. But it's certainly never been scaled up the way that you're talking about. What makes you think that it's attractive enough for enough people to want to use it and that it is ultimately scalable? Time banking holds that everyone's time has intrinsic value and that if I do something

for you for an hour, I then get a time credit that I can then give to someone else to do something for me for an hour. And everyone can do something, watch your kids or walk your dog or move some trash or whatever the task happens to be. So the obstacle to more widespread adoption of time banking has been the administration. Because you need a person in each community who is tabulating and keeping track of transactions. And now with technology... Oh, this sounds like a job for the blockchain. Yes. So you could have a public ledger on the blockchain. You could make this happen much, much more easily, much more cost-effectively.

And there are people, I'm happy to say, who are working on technical solutions for this. People like this. My name is Anita Bieberg, and I'm the CEO of Seva Exchange Corporation, which is an AI and blockchain startup that's reinventing volunteerism using time banking. The chairman of Seva is Edgar Kahn, who helped launch the modern concept of time banking and wrote a book about it called No More Throwaway People. He came up with this in 1980 when he was actually given a diagnosis after having a heart attack at 46. And he was only given two years to live and maybe two hours a day to do

anything. So what he was thinking about was, what can I do in this world to still be useful? So he came up with the idea of time banking, where you give an hour of your time within a community and you'll receive a credit of that hour redeemable for something you need. So it's a give-and-take system rather than a one-way volunteering. Edgar Kahn obviously lived on, and so has time banking. It exists in a few dozen countries, usually at quite small scale.

One of the larger exchanges, similar to what Andrew Yang is proposing, is a British organization called Tempo. It found that nearly 60% of its participants had rarely or never volunteered before. B-Berg's time banking group, meanwhile, Seva Exchange Corporation, that's S-E-V-A. Seva actually means volunteer in Sanskrit or service, to serve. The Seva app is a spinoff of timebanks.org. What we're doing is trying to create the largest volunteer exchange network.

How would it work? We offer powerful motivators to retain volunteers. Motivators like gamification. It's a lot more exciting to run up a score and earn badges, especially if you're doing good. Also, skills matching. Whatever you're passionate about or you're highly skilled at and willing to offer, you get matched to the critical needs of either an organization or a person. And rewards via the blockchain.

Our digital social credits is called Seva Coins, and they will be redeemable for more time, or you can donate them. We're also working with colleges for loan forgiveness and micro-scholarships for students. Biberg and Seva have gotten some pushback from religious institutions. They've said, oh, we volunteer for the sake of volunteering. And I said, that's wonderful. The more people like that, the better, because now they can just donate those to an institution need or give it back to the church for hours.

So every hour you give, another hour can go to someone else in need. Those are the micro components of how SEVA's digital social credits would work, but it's the macro view that makes this idea particularly attractive to a would-be politician like Andrew Yang. We're redefining work. So there are some forms of work that money will not easily pay for, like building strong families, revitalizing neighborhoods,

making democracy work, advancing social justice. So time credits were specifically designed to reward, recognize, and honor that work that most people never valued before or felt valued for. Andrew Yang believes that injecting all that undervalued work into the, quote, real economy would solve a couple problems at once. It would give people access to more of the goods and services they need and can't afford, and it'd boost morale by revaluing skills that the market no longer values. Yeah, that's right. I don't mean to be

a skeptic or a cynic, but what makes you think that the best overseer of a big scaled-up time banking or digital social currency is the government itself? I don't think so. I mean, one thing I'll say to quote my friend Andy Stern, the government is terrible at most things, but it is excellent at sending large numbers of checks to large numbers of people promptly and reliably. And so the government would not be administering this at all. I mean, the best the government would be doing would be allocating social credits to various communities who could then have the credits flow through nonprofits and NGOs and organizations that are closer to the ground and could administer it more effectively. But ultimately, when all those vendors want to take in their DSCs,

their digital social currency, coins, whatever, and cash them in for real cash, it's the government they're coming, it's Treasury they're coming to, yes? Yeah, yeah. So there's like a government budget allocation, but the government budget allocation would be essentially like proportional to population and then each community would be doing different things with it because like something that would be effective in Mississippi would not be necessary in Montana or Missouri.

So digital social credits and a universal basic income. These are Andrew Yang's two most prominent proposals in his presidential campaign. There are, of course, many others, most of which align with a standard democratic platform. You can see them all at yang2020.com. I had asked him his most outlandish position. So my most outlandish, we should have a psychologist in the White House that's looking in on the mental health of the executive branch because it doesn't make any sense to me to have that much power and responsibility without some sort of mental health professional monitoring. Did you have this idea before the current presidency? I think would also help destigmatize mental health issues and anxiety and depression around the country and just say, look, we all have struggles. That includes people at the top of the government.

Another thing I think is really important is that right now we expect people to be sort of martyrs if they enter into government service and then they turn around and become lobbyists to make a lot of money. So we need to take advantage of the fact that the government can pay much, much more and then just require people to not go back to industry afterwards. Because if you're a human being and you know your stint is going to end in two or three years, you don't want to be too harsh on the companies that could end up paying you and giving you lots of money later. So you're arguing for a $4 million salary for the US president? Yeah, because it's true for presidents too. I mean, if you're going to get paid a quarter of a million by some company after you leave office just to show up and schmooze and give a speech, then human nature is like, maybe I shouldn't be too harsh on this company. And I'll say this raise can go into effect for the president after me. Like I do not give a

how much I get paid. But the president after me should get paid enough so that we know that they're just looking out for us and not going to just speech it up afterwards. You happen to be the Democratic entrepreneur as would-be president who happens to be running after the successful campaign of a Republican entrepreneur as president, who a lot of people agree his entrepreneurship and CEO-ship have not contributed to a stable presidency or to a business-like presidency, et cetera, et cetera. Does that not strike you as potentially terrible timing? Well, the reason why Donald Trump, in my mind, aside from the fact that we've blasted away all these manufacturing jobs, is that many Americans were desperate for some kind of change agent. some extent with Barack Obama winning in 08, where the citizens of the United States have

been casting about for some kind of change because they know that our government is failing us. And so Donald Trump is a terrible president because he's a terrible president. He's not necessarily a terrible president because he was not steeped in our government for decades. And genuine entrepreneurs like myself regard Donald Trump as a bullsh** marketing charlatan. So, you know, he gives us all a bad name. The goal is to show what real builders and entrepreneurs would do to solve some problems. If you were a bookmaker, what are the odds that you're laying off for Andrew Yang winning the presidency in 2020? I think the latest odds I saw were I was like 201. Let's pretend for just a second that you don't win the presidency, but that you do impress a lot of people with your energy and ideas and vision.

And you are invited to run as VP on the Democratic ticket. One of the fun things about running for president is you spend time with other candidates on the trail. I have some ideas, but my vision is that there is a set of patriots that are all heading to D.C. to try and save this country. I plan to be in that group. And, you know, if it's as president, fantastic. If it's as vice president, also fantastic. I just want to solve problems, man. I don't really care about the seating chart. You know, and someone said to me, it's like, hey, what if Joe Biden takes all your ideas? I would say that's fan-freaking-tastic. Like, I'm not some freaking, like, you know, crazy person who's, like, you know,

been measuring the drape since I was 16 or any of that jazz, you know? I just want to, like, keep this country together for your kids and mine. Coming up next time on Freakonomics Radio, our Hidden Side of Sports series resumes with a look at the mental side of the game. Everybody in the NFL is in a really tight range physically. And what separates great players from average players is all in the mental piece. I was a poop show in my head. I was so afraid. There's a lot of pitchers who pitch no hitters in the bullpen and can't take it with them across the lines. Gymnastics is terrifying.

I was just thinking, you know, he just, no idea what's coming. You're trying to run a race except you've lost one of your feet. That's next time on Freakonomics Radio. Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Harry Huggins. Our staff also includes Allison Craiglow, Greg Rippin, Alvin Melleth, and Zach Lipinski. Our theme song is Mr. Fortune by the Hitchhikers. All the other music was composed by Luis Guerra.

You can subscribe to Freakonomics Radio on Apple Podcasts or wherever you get your podcasts. The entire archive is available on the Stitcher app or at Freakonomics.com, where we also publish transcripts and show notes and much more. If you would like to hear the entire archive ad-free, plus lots of bonus episodes, go to StitcherPremium.com slash Freakonomics. We can also be found on Twitter, Facebook, and LinkedIn, or via email at radio at Freakonomics.com. Freakonomics Radio also plays on many NPR stations. Check your local station for details. As always, thanks for listening. Stitcher