Planet Money - Planet Money Live: Two Truths and a Lie

Episode Date: June 28, 2023

The shocks of the pandemic economy gave us a bunch of enormous natural experiments, which helped to prove or disprove conventional economic thinking.Take, for example, the bullwhip effect, the idea that the further away from the customer you are in the supply chain, the more volatile your orders are likely to be. This theory played out at an enormous scale, in the pandemic. Consumers and companies overreacted to the risk of shortages by ordering more products and hoarding them, causing massive shifts in the supply chain – just like the theory says.And the pandemic gave us a lot of natural experiments like this. So, on this special live edition of Planet Money, we looked for other big economic lessons from the past three years, and we took this information and turned it into... a gameshow! It's Two Truths and a Lie: Econ Edition. We get into questions about the workforce and labor market during the pandemic, and how it affected how economists view the world.This episode was hosted by Mary Childs. It was produced by Dave Blanchard, and edited by Jess Jiang. It was engineered by Josh Newell with help from Robert Rodriguez. Original music by Jesse Perlstein.Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. So often in economics, we get these theories that sound really good. They sound like they could be true, but there's no way to test them in the real world. So people run around believing these theories and repeating these theories that are completely mushy and untestable forever. Like there's this idea taught in business schools called the bullwhip effect. The idea that the further away from the customer you are in the supply chain, the more volatile your orders are likely to be. So like with the whip, the part that's close to your hand goes up and down a little bit, but the farthest part goes up and down a lot. And this interesting

sounding thing was suddenly everywhere in the pandemic. If you recall, there were a bunch of shortages and consumers, companies, everyone reacted by ordering more of the thing, ordering it earlier and hoarding it. And because all the different companies in the supply chain don't communicate very well or coordinate their needs, they tend to overreact. They freak out about running out of stock and they overorder, or they freak out about having excess inventory and they slash orders. So if some customers suddenly decide that they need an extra pack of toilet paper this week, that might mean the factory at the far end of the chain ends up with hundreds more orders one week and then no orders the next. And to see a perfectly manifested bullwhip effect at this enormous scale, it was kind of weirdly

beautiful. Because normally, real life is so much messier than models, contaminated by too many variables, and you're just never going to be able to convince a bunch of companies to please test this idea out. Until, suddenly, a pandemic, and a recession, and a total upheaval in the global supply chain test it for you. Hello and welcome to Planet Money, I'm Mary Childs. The shocks of the pandemic economy gave us a bunch of enormous natural experiments that helped to prove or disprove conventional economic thinking. Our mushy little theories that ended up being right or not so right. And in the episode you're about to hear, we're going to look for other examples like the

bullwhip effect, other big economic lessons from the past three years. And it's going to sound a little different. It's an excerpt from a live show we put on a few months ago. It's a game show. We play Two Truths and a Lie, econ edition. We had a musician on stage with us to score our performance. We had costumes. We performed our little hearts out. It was amazing. So today on the show, live from Big Sky, Montana, it's Planet Money. Welcome back. You're about to hear a part of our live show. Just to set the scene a little bit, there's a big stage, an audience, live show. Just to set the scene a little bit, there's a big stage, an audience, not to brag, but it is sold out. There are prizes. It's growlers full of local Montana beer, and we're gonna play a game. All right. Tonight, we are going to put your thinking to the test.

We are going to play two truths and a lie. We will show you three statements. Two of them are true, and one of them is not. And your job, all of you, is to find the wrong one. So that is what we're going to do. And to get some truths and some lies, I went to the pros, the professors, and I found out what they had learned. And we created three rounds with that. We, the professors, and I found out what they had learned. And we

created three rounds with that. We have three categories. And for each round, I will need a volunteer. Sound good? Let's find out what you know, Montana. Okay. Our first category tonight is the pandemic workforce. How work has changed or not. So who's going to be our first volunteer? Who I got? I see you right there, white shirt. Come on down. All right, yes, let's give it up. The first brave contestant walks on stage.

She is wearing a white shirt. She sits down on a little chair in the middle of the stage. Hi, I'm so excited you're here. Okay. What have you done? I'm just kidding. It's going to be really safe and easy. What's your name?

Camden. Hi, Camden. It's nice to meet you. Nice to meet you. Are you a big Planet Money person? Yeah. Okay, good. Who's your favorite host?

Just wondering. You. Thank you. Oh, my God. What a coincidence. This is amazing. Thank you. I like you.

I like you already. The question facing Camden is about the pandemic workforce. There are three statements. Two are true. One is not. I will read the three statements to Camden and she will pick the one that she thinks is not true. And then we will find out the answer together. Her three options are A. Remote work has not substantially hurt productivity. B, being remote has led to a more equal division between genders of administrative office work. And C, even in remote work, strategic incompetence is still a powerful way to avoid work.

powerful way to avoid work. Okay, I think the lie is B. You think B. Why is that? Because women always do more of the administrative office work. Camden, my girl, I love you. All right, let's find out what the lie was. Oh, my God. Obviously, she's right.

Unfortunately, obviously. Would you like to come choose a growler as your prize? I'm so proud. That was great. That was awesome. Yeah, take a glass, get into it. Not if you're driving. Not if you're driving. So to arrive at our lie, we're going to start with a truth. One of the big obvious things from the pandemic was that we could suddenly all work from home. So obviously part of the reason it worked was that we were all doing it. You know, once enough people actually did it, it became possible for people to do it. So because everything was suddenly up in the air and life looked so different, it seemed like maybe some of the bad old things could go away, like discrimination.

And that was at least the pet theory of Lise Westerlund. I'm a professor of economics at the University of Pittsburgh, and I've spent my entire career looking at gender differences in the labor market. Bless her heart, that has to be so depressing. Before the pandemic, Lise was studying what she called non-promotable work, which she also called crappy tasks. This is stuff that's not going to advance anybody's career, but it's just stuff that has to get done in order for the office to function. Common examples are taking notes at a meeting, organizing, coordinating somebody else's work,

onboarding, training new employees, recruiting, setting up meetings, organizing the holiday party, the list goes on and on, you know it well. And in her research, she found that women tend to, well, they're way more likely to be saddled with these tasks. And in this one case, she studied how employees at a professional services company were spending their time, and how much of that was crappy tasks. And she found that women were spending a full month of every year on these types of tasks. Men were not. But you might say this is just one organization, but it turns out that this shows up in every organization, every organization that people have looked at, every industry people have looked at.

If you're an engineer, if you're an architect, if you're a supermarket clerk, if you're a TSA agent, if you're in academia, all of these different professions load women with more of the non-promotable work. I hate it. But when the pandemic hit and sent all these workers home, Lise was optimistic that maybe her beautiful, perfect picture for the future, a world in which women would work free of the discrimination of the office, maybe it could finally be a reality. You know, nobody needs to make coffee for a non-existent office. Nobody needs to show the intern where the bathroom is if the intern is at home, right? Of course, there was a small issue of child care completely falling apart and kids needing homeschooling, and can you guess who disproportionately shouldered that? But, you know, so it wasn't quite the utopia she was hoping for, but it was as close to a natural experiment as she's likely to get. So she slowly starts getting some anecdotes, a little information on how her

utopian vision is actually going from people who saw her give a talk on Zoom and then emailed her with their experiences. It was sort of a gradual revelation because I was so optimistic about the remote setting initially. It came in part because I started getting lots of questions for women who suddenly felt like they were working even more hours than they did when they were in the office. Even more, you ask? How is that possible, you ask? ask? How is that possible, you ask? So I've met lawyers who have suddenly become in charge of preparing all the PDF documents for others because they somehow were the only people who knew how to do this. This, by the way, is strategic incompetence. If you're like, oh no, I just really can't do this basic computer task. Someone else is going to have to do it for me. To least this was such a horribly perfect example because it turned out that in remote work, crappy tasks were just different

in character, converting PDFs instead of getting coffee. And in fact, it's going to become much worse because I'm not going to see how busy you are. I'm not going to see all the other assignments that you have. These biases that we have subconsciously in the office place, we don't get the same reminders when we're working remotely of the mistakes that we're making. Without the visual cues, managers are just going to keep assigning more crappy tasks to women and then some. But these did have some good news. Once managers realize they're doing this, some can and do sometimes choose to act differently. Like maybe it's time to retire that awful meeting where everyone waits for someone, a woman, to raise their, her hand every time one of these bad, dumb tasks comes up. Nobody's going to object to saying, you know,

nobody wants to do this. Let's just draw names out of a hat. So the changes are so simple and so cheap. And once we become aware of it, you're going to be embarrassed the next meeting that you go to and somebody says, hey, Sue, why don't you do it? You did it so well last year. So maybe Lisa's utopian vision is still possible. It's just a little bit further away than maybe she thought. Okay, it's time for our second question. This one is about the strong labor market. Can I get a second contestant out there? All right, firsthand, come on up. Very exciting. All right, come on down. Yeah, you're going to be on NPR. That's right. I mean, we're going to try to cut it up. What if it, I don't know. I don't want to make any promises.

So, okay, what's your name? My name is Alan. Hi, Alan. It's so nice to meet you. Did you come from far away or near? Helena. A couple hours away. Okay, great, great.

And are you a big econ guy? Yes. Yeah? What's your favorite economic lesson? Just to put you on the spot, I'm so sorry. I mean, it's got to be the classics, supply and demand, right? Oh, do you prefer supply or demand? More of a demand guy. Demand guy.

I love that. Okay. I think I'm with you. I'm confused, but I think I'm with you. Okay. The second question is about the pandemic labor market. The three statements are, A, despite the strong labor market, workers have not gotten huge gains in protections, benefits, and real wages.

B. The U.S. is one of only a handful of countries in the entire world that does not have a federal policy for parental leave for workers. And C. Europe invented the model of direct employment and jobs programs to get people back into the workforce. Okay, Alan, you have 20 seconds to think. You can talk it through out loud. You can think it in... I'll be quiet.

Sorry. I'm going to go with C. You think C? Why? Feels obvious. I wanted to go with... I know B's not right, but... B's not right.

Yeah. Good for you, Alan. I'm wishy-washy, though. Good for you, Alan. I'm wishy-washy, though. Now I'm feeling like it's A. You think it's A? Okay. I'm nervous. Final answer? Phone a friend? Weakest link? I don't know.

Final answer, A. Okay, final answer, A. What do we got? Oh, no! You were right the first time! But guess what? We're nice. You get a growler anyway. Who cares? Thank you. Good job, thank you very much Yeah, big round of applause for Alan Thank you, Alan

Okay, so the lie is C The lie was C Europe did not invent direct employment And jobs programs Have you ever heard the saying Never let a good crisis go to waste? This was something that Rahm Emanuel apparently really liked to say during the Great Recession of 2008. Crises tend to be when we do our big structural change, our big stuff.

We, like, really get it together. Crisis after crisis, we show that we are able to mobilize, certainly the financial resources, to put in place policies that we prioritize. This is Pavlina Cherneva. She's an associate professor of economics at Bard College. She studies things like the Great Depression, different government responses and job programs and guarantees. So, okay, we have just had a pandemic and a recession, right? So what did we get? What did we do? In Europe, many countries decided that mass unemployment just was not tenable. Some governments there protected jobs in the private sector. Germany, Denmark, their unemployment

rates never went higher than 5.5 percent. 5.5 percent. In the U.S., we did not do that. We went the route of layoffs. We allowed firms to lay off workers, and then we said, well, we'll give you a contract, you know, maybe you can hold them for a couple months. Those contracts you references, those came from the Paycheck Protection Act, which was kind of our version of the German way. Under that program, small businesses could apply for loans at private banks, loans that were forgivable if the companies kept employees on the payroll. A public nudge for private employers. The American way. Our unemployment rate reached 14.7%. And there are still other ways. Like Pavlina told

me about this program in France, where for some areas that were struggling with long-term unemployment, the government just created jobs. It started as a pilot. And during the pandemic, the government recognized that these 10 municipalities were so effective in reducing the cost of unemployment, they increased them to 50, which is almost all major regions in France. And so this is becoming a bit of a model for some discussions at the European level. So cute. I am so glad that's working for them. But that sounds really radical, right? Like basically socialist, out of the realm of anything that we would do here in rugged individual America.

To me, this is the paradox because we invented this model. You know, like FDR was the one who said, OK, you're unemployed, come here. One jobs program that FDR established as part of the New Deal was the Civilian Conservation Corps, which employed three million people planting trees and building trails. The Civilian Conservation Corps was so popular, was so popular, people believed that it was kind of their right for the public sector to provide employment where it was missing. And that was just one program.

We also passed a ton of legislation. We put in an eight-hour working day, a minimum wage, social security, bench out labor. I mean, it was such a tapestry of very, very transformative policies. And according to her, this time around? We passed significant measures, but it leaves me wanting more. There were a few exciting things that she mentioned, like the enhanced child tax credit, where the government just gave money to people who had a child. Normally, we tie programs to some kind of employment status. This was just a stipend, no strings attached. And it was massively effective. It helped reduce child poverty by almost 50%. But it was temporary. It expired. And we also debated doing some kind

of paid federal parental leave, like almost every other nation on earth. But we decided not to. Private parental leave actually net regressed. Companies actually peeled it back. Okay? And this is where conventional economic thinking really just didn't hold up this time. Like, you would think, with such a strong labor market, the strongest in decades, that that would result in better working conditions, right? And to some extent, it did. You know, workers got hiring bonuses, more remote options, higher wages, except... Traditionally, you would expect that

the private employers will respond quickly and provide both the conditions and the wages to workers and some sort of adjustment process. But we see that it just takes far too long for these conditions to be negotiated. It just takes too long, especially as inflation was zooming up so much faster. Those higher wages, the average American hasn't experienced them. Sometimes those gains just turned out to be nominally higher. After you account for inflation, they weren't wage gains at all. Some months, workers weren't even keeping up. So we had a couple big crises. It was our big moment to do change, and we kind of just didn't.

Not in any permanent way, at least. Maybe next crisis. The third and final question, after the break. There are lines the Federal Reserve just won't cross. But when the economy is in crisis, those lines get blurry. You know, I don't think we had ever seen a world in which we thought the Fed was going to sort of jump into the corporate bond market. And we certainly hadn't seen a world where they were prepared to lend to Main Street businesses. So it really underlines that during moments of crisis, we've seen them get pretty creative.

A deep dive on Fed power. That's in our recent bonus episode. It's available now for Planet Money Plus listeners, whose support helps make this show possible. Okay, time for our last Truth and Lie segment. This one is about the economics profession and how it looks at the world and whether that might warrant changing.

So my last volunteer contestant, who do I got? I got somebody really enthusiastic. You're pointing at, who are you pointing at? This guy right here, Mr. Hand. Okay, come on down. Yeah! Yeah! right here, Mr. Hand. Okay. Come on down. Yeah. Hi, welcome. Take a seat. What's your name? I'm Tim. Hi, Tim. How are you? I'm great. You're good? Yeah. Are you having a good time? I'm having

a great time. Are you guys having a great time? Crowdwork, I like it. Thank you. That felt really good. Okay, are you ready to pick the lie? Ready. Let's do it. The three options are, A, economics has long embraced what's called place-based research, which is thinking about different communities.

B, economics doesn't really encourage field research, going out into communities and talking to people to collect data yourself. And C, it's been harder to collect or to conduct economic research on less populous communities. Okay, 20 seconds. I'm going to go for C. You're going for C, okay. Tim has picked option C, harder to get data on less populous communities. Okay, why is that? What's your thought process? It's a smaller sample size.

Does that mean it's true, though? Not necessarily, but I'm going to go for it. Okay, let's go for it. Okay, let's try it. C, what do we got? Oh, no. But you already know you're getting a growler, so it doesn't matter. I was getting nervous. Yeah. Enjoy. Share with your friends. Okay. Enjoy. Share with your friends. Okay. So this last one comes from Benga Adjelore.

He's an advisor in the Department of Agriculture focusing on rural development. And in that job, he's noticed kind of a big flaw in economics, like as a whole. As an economist, we've always loved natural experiments, but with states. And it's always talking about at the state level, looking at state variation. But we don't go a level lower. Because macroeconomics focuses on macro, the aggregate, the big, big picture. And there are a few institutional or cultural reasons as to why economics doesn't really zoom into the granular. For one, it's just not what they've been doing.

It's, you know, he's like, oh, well, I got the data, you know, sent this data. I run some models. I have my theory and then I publish it, right? That, you know, we don't actually need to go and talk to people. And so, like, the big joke is that, you know, I'm an economist. I don't talk to people. I technically had not heard that joke before, but it does make sense. Plus, getting granular data can be really hard, especially if you're talking about less populous areas.

Some of the data you want just don't exist at all. And by definition, there just aren't as many people living in the space doing things to generate data, like transactions. So there's just naturally less data to get. Bang has been working on this and thinking about it for years, but it just wasn't landing with people. In the pandemic, though, people started to understand because all these federal programs started cropping up. You remember like remote schools, remote work, it's all great. It's going to be fine. And people in some areas, it just didn't make any sense. They were like, we don't have internet really still. And the economists were just like, oh, wait, maybe this country is far more vast and diverse than we thought.

Huh. And Benga's argument is also getting easier because there's a growing ability to get better data. There's this really exciting team at Harvard that's been making this big splash with thrilling real-time data, big time. Excuse me, big data. It is also big time, though. People really care. These data sets of credit cards and mortgage payments by zip code, and it gets very granular, which enables economists to zoom in closer, which for really the first time allows for what's called place-based economic

research and policy. Place-based economics tries to think about what's happening to places and how to make them full of opportunity instead of focusing on people by demographic classes like socioeconomic bands or age or race, yada yada. And this is almost entirely new as a serious focus for economics. And it's got people kind of energized. Or some people. The rest are a work in progress. I think this is part of the process of learning lessons from the pandemic that I hope for. Yeah, fingers crossed. So that's what we've got for Two Truths and a Lie, Montana. Let's give it up for our three contestants. I'm so impressed. That was one segment of our big live show in Big Sky, Montana. Thank you so much to John Zirkle and all the fine folks at the

Warren Miller Performing Arts Center. Thank you for taking the chance and believing in us. We love you. To everyone else, we are available for hire for your next birthday party. This stage performance was produced and directed by Joanna Palowska and stage managed by Emily Kinslow. We love them and we miss them dearly. Josh Newell was our recording engineer. Sean Hartford ran sound. Jesse Pearlstein scored the show. Dave Blanchard produced it alongside the great team in Big Sky. Jess Jang edited the show.

I'm Mary Childs. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.