Danny Blanchflower Discusses Labor Economics (Podcast)

this is the podcast for you. We talk about everything from unhappiness to unemployment, to what really constitutes full employment, to the rise of pain complaints in the United States and how it's related to the stresses caused by the financial crisis, as well as the ongoing flat wages that the United States have seen over the past thirty years.

We get into all manner of fascinating discussion of beverage of kens of Skadewski, of why the United States is fairly unique both in terms of our housing market and our employment mark get and why the US is now exporting stress and discomfort and economic anxiety to the rest of the world. It's really an absolutely fascinating conversation. I enjoyed it and I think you will also. With no further ado, my conversation with Danny blanch Flower. This is

Masters in Business with Barry Ridholtz on Boomberg Radio. My special guest this week is Danny blanch Flower. He has a storied history in the world of monetary policy and labor economics. He is currently a professor at Dartmouth where he teaches economics. He is a former member of the Monetary Policy Committee at the Bank of England. Currently he is a research associate at the National Bureau of Economic Research, and he is the author of a new book called

Not Working, Where Have all the Good Jobs Gone? Danny Lane for that hour, Welcome to Blomberg. Great to see your parents, Good to be here. Yes, it's good to see you again. So so let's get into your background a little bit before we start getting to the specifics of the book. You're a labor economist. What exactly is that and how did your way find your way into that specialty? Um? Well, labor labor econonomics is the study

of work. It's the study of jobs. It's about why people have got jobs, why they haven't, and it's about the price of labor. So it's about wages, it's about compensation. Actually, I got into it started to think about kids, starting to think about unemployment of the young, and in the nineties in the UK that was a really big deal. So I started to think about that and it just grew from there. And then then in the end I became a monitary policy maker and the labor market turned

out to be central to everything. So started out being a labor economists, did some macro but it turns out now the big issues around the world in macroeconomics are about labor economics. So it's been a long journey, but it's been kind of a good one. So let's talk a little bit about your time at the Monetary Policy Committee at the Bank of England. We're recording this on a day when Mario Monty basically is announcing that they'll do anything to support the economy, which President Trump here

in the United States declared unfair. For listeners who may not be familiar with you, You joined the Bank of Englands in two thousand and six, just as the financial crisis was starting to blossom for laugh of a better word, what was that experience? Like, Well, I was told at the beginning. I remember Gordon Brown told me that the hope is for you that central bank is going to

be boring. That's not that's not exactly how it turned out, um, And I think the big deal for me was I was going back and forth every three weeks between the US and the UK, and I think the big insight for me was that the things I saw in the US started to occur in the UK a few months later. And the first big deal for me was the failure of Northern Rock. There were thousands of people in the streets standing outside the branches of that bank for the first time in a hundred years, So that was your

sort of starter. We had bear Sterns here, not a depository bank. The closest thing was probably washing a mutual or there was some other bank right where there was a run on the banks. What is the guarantee from the UK equivalent of the federal departs an insurance company. Essentially,

that was the issue. There really wasn't one, and so by the by the end of the week where and when essentially the money at the Northern Rock ran out, the website failed on the Wednesday, there was no guarantee essentially from the government, and the only way to stop it was to actually introduce one, and that's what stopped the run. But that was a year before the market collapsed. I started to think that we were really disappearing into

a whole. So I started on my own to start to vote for rate cuts, and I voted for rate cuts for a really long time on my own, and I kept saying, there's a horrible session coming. Nobody else on the committee was really along with me. And then we got to September two thousand and eight and hell broke loose, and I remember thinking, Um, I did not expect to be in a position where three successive months my committee, including me, voted for fifty one, fifty and

a hundred basis point cuts in three months. And then we kept going and then we did queie. I mean, this was literally like the world was just dropping off a cliff. So it certainly was not boring. It was scary, um And in a sense, the story I think was that economics told us very little about what to do there. How low could we go? Could we go to zero? Could we go below zero? When you do quantitative easy? How much? What sort of easy? When do you do it?

How many auctions a week do you have? So we didn't know any of that stuff, So I think it was really scary and exhausting. So I have a pet theory, which I'll come back to again later, that economists always used the normal cyclical expansion contraction cycle as a frame

of reference. And so when you see something much more substantial coming along a credit driven crisis, financial crisis, unless you're looking at it from the correct perspective to a regular economic analyst, they're not seeing it very I think that's right. And what's happened. Economists said to me you should never expect central banks or economists to see turning points. I think that's a complete nonsense. I think what you have to have is you can't just look at the

mechanical things. You have to look at what I call the economics of walking about. Exactly as you said, think about what happened at the last great financial crisis, the Great crash, and think about what happened. And there were lots of indicators, the best indications actually at the bank what's called the banks agents schools, and the agents would go around the country and report. And when you looked at that, the world had dropped off a cliff by

around May oh, and nobody was listening to it. The economists weren't listening to it. So in fact, at those big turning points, you have to look around, you look at different measures, and it was quite clear across Europe and in the Nited States. All these countries were going down together and that was a really big deal. So I agree with you completely. Let's talk about a quote right in the beginning of the book, What's the Whole

World wants is a good job? Discuss. Yeah. I started working on this book, UM, and I was reading some results from Gallop and for some reason I went to the front of their of their page and they literally and I started out with this, They literally say, Um, here's one of Gallup's most important discoveries. They've been doing this since the nineties. What the whole World wants is a good job. So that's the theme of the book.

And I think what we've seen in the last decade is the loss of those good jobs, um, and the result of it has been populous movements around the world, people hurting. And the connection I make in the book is that central banks and other policymakers in the US especially say we're at full employment. And the theme of the book is when if we were at full employment, people wouldn't be hurting this way, and so I document that.

And a good example in the UK is we're eleven years in now from the start of that Great Recession. Real wages today in the UK a six percent below what they were in February two thousand and eight. And this in the UK anyway, it's the third slowest recovery ever. The last one three hundred years ago was the South Sea Bubble and the one before that six hundred years ago is the Black Death, which was good for productivity.

So anyway, so the logic is that we have had very slow recoveries and I think driven by macro errors. And now we see economy is slowing. But after ten years of recovery, still people are hurting. So the big question is what's going on and why is it that that people are hurting? And I think the story is lack of good jobs if you like, an expectation that things are going to be better in the future and deton in case of documented that essentially the driving force

behind the deaths of despair. They talk about as a failure in the labor market. So let's talk about some of those mistakes and we'll start with the UK. Before we moved to the US, the UK had a policy of a misguided policy I would call it of austerity. We've learned the lesson from Keynes in the midst of a financial crisis. You cut taxes, increased government spending, let the public sector step in for the private sector. That

didn't happen in the UK. When it happened, we saw the crash, the downturn, and then the bank having and through everything it had at its monetary policy no, but then fiscal policy Gordon Brown through all sorts of things at it reduced taxes, increased spending, but it was it was not like a hey, this is a depression, can kick out the gems. It was sort of sort of modest, modest recovery came, a pretty reasonable recovery, and then austerity came in two thousand ten and every data series you

can show in the UK just turned flat. So output was growing and then auster rity, which I call reckless, failed turned downwards. Knees precisely warned what There's an article I talked about in the book in Kine's warned about the long dragons of dragging, conditions of semi slump that follow the crash, and unless you come in there and

put public spending in, then you'll see slowing. The argument that George Osmond, who was Chancellor, made was that if you cut public spending, the private sector will step into the fold completely contrary to Canes also failed. It's also not how it works. Not how it works, you have to look at history. So didn't anybody say, dude, what are you doing? This is not reality. You're making this up me a lot. I called him Slasher Osborne, Lord Skidelski,

and I wrote them who was Kne's biography? We wrote a series of articles together saying this is an absolute disaster. So what you basically see is very weak recovery, no growth in real wages. And I think that austerity almost exactly leads to the vote for Brexit, precisely in the places that hurt most, the cold towns, the towns that have not seen much growth over the years. Brexit is directly attributable to the failures brought about by reckless, failed austerity.

Sterity leads to breakfast. Let's bring this to the United States. There was a whole bunch of government interventions, both on the monetary side and the fiscal side, designed to free up the frozen credit market. And then when we moved to fiscal stimulus, some people have called it an eight billion dollar stimulus, when it should have been three or four trillion, and it was temporary tax cuts and temporary

extension of unemployment benefits. But it wasn't the sort of large post depression policies we saw, and into that void step the FED. I have made the argument that the fedital let it all crash and burn, let everybody in Congress get fired and bring in a new batch. Had they done that, we wouldn't have had the teapot already,

we wouldn't have had the rise of populism. It would have hurt more at the time, but the recovery would have been faster, or tell me I'm wrong, Well, hindsight perhaps, Well that's fine, I mean, but I think the answer is that all the things you say about there was not enough fiscal stimmers think about in a sense that the impact on growth of the two trillion dollar tax cut not that great. Perhaps would have been better earlier.

The big thing that Cain's talked about that should have happened, and the big deal would have been an infrastructure spend which would have put construction workers. It was this was a housing market crash, all these construction working You to put those folks back to work. So what's happened and I think the best indicator. Forget the unemployment rate. We'll get to talking about the underemployment rate now in the SEC. But the employment rate, that's just the proportion of people

who are working today. That's two and a half percentage points below what it was in two thousand and eight and about three below what it was in two thousand three four. So that says the economy hasn't recovered. It says the labor market hasn't recovered. Um, And that's the result of not doing what you said. But I think you're completely right. Um. The lack of public spending was actually the big effect. So in the book I talk about now what's happened is we central banks say, oh,

we're at full in ploy We clearly are not. And now you've put the brakes on. And basically what you've done is you've you've slowed the economy down at a time when there's a there's essentially a global slow, and you've generated a trade war. And as I say, the Fed raised rates and now we've got another era slow in coming. Looks much like what happened earlier, perhaps or a lesser degree, but it looks to me like the

economist turn. So in the book, you talk about the rise of something fairly specific to America, not only stress and unhappiness, but physical pain. Pain is rising in America. It's shocking. Um. The evidence is, actually, that's exactly right. We've done a survey we looked at in a paper's accompanies the book out this month, where we ask people around the world for their levels of pain, and essentially Americans are twice as likely to say they're in pain

than other places I know. And so there's evidence from doctor's visits. A quarter of all visits to a primary care physician people report they're in chronic pain. So so. And the other thing to say about it, of course, is that at the same time as this the huge rise in opioid to deal with the pain. So what you see is, I mean, what you're seeing is a rise in the opio prescriptions to deal with the pain,

and the pain keeps on rising. But the reality is we're not exactly sure whether people really are in pain or they say they're in pain. I mean they say they're in pain. Maybe they are in pain very very often when people are stressed out, what looks like a minor ailment or pain becomes magnified exactly, so how how significant. And I have to share a quick anecdote. In the middle the financial crisis, I had a trip to London or an Amsterdam, and I was shocked that, look, unemployments

over ten percent in the United States. You can walk down the streets of New York and admittedly New York is a finance town and and the crisis hit finance really intensely, but you can just feel the stress levels in Manhattan much higher. Amsterdam was like people having a beer in the middle of the afternoon. The stress levels even in the midst of the storm, they were moderate compared to here. Well, you're starting to see a big

rise in the UK. So we have another paper where we actually tracked something which is pretty interesting, which is in the UK and since two thousand thirteen, happiness on various measures has been rising steadily, but worryingly, so has depression and anxiety. So you have the two things rising. Some people are doing just fine, others aren't doing just And obviously the problem is that the ones who aren't doing just fine see the others who are, and so

that's a big part of the story. But around the world we see arise in sort of isolation, loneliness, anxiety, depression. In the US, which is a really big deal. Happiness measures have been basically flat for college educated and for the least educated they have been plummeting for the last thirty years, so this is a big worry. So so measures of unhappiness, disconnection from society, all of those things are a worry, particularly for prime age, less educated folks,

mostly white, but there's some evidence of other groups. But essentially amongst white less educated there's a disaster and it relates to as well to opioid deaths, destince roces of the liver, and suicide. So this this is all going on at the same time we've seen recovery, but lots of folks around the world, especially in the United States, are hurting. So so let's see if we can find

the cause for this. Some people are blaming social networks and that when you go on Instagram, everybody else's life looks great and makes you feel terrible. There's a ton of new studies on that, and don't I don't know if that's the cause. We're at levels of income inequality that we haven't seen for a long long time, and if you look at the middle class or or the paid people paid less than the middle class, they're essentially

have not seen a raise in three decades. So is it all of these or are some of these factors more important than others. We don't exactly know. I mean, it's it's all of those. But I think I've been working on happiness behavior economics for a really long time, and I think if I would choose one thing we've learned from it, it's that relative things matter. People compare themselves to others. I mean a funny statistic, not funniest,

sad statistic. The three countries in the world that are the happiest up in Denmark, Norway, Sweden, they're the happiest countries in the world. That are also the countries in the world that have the highest suicide rates. Really yeah, so so exactly what you say is true. But I think what's in a decent amount of alcoholism if I recall right, absolutely, I mean obviously part of it is you say, oh, it's because of the hours of daylight, But why would you have so many people happy? You

can explain in the suicide that way. So I think what we're seeing is people compare themselves to others. Perhaps with social media it's easier to compare yourself to others, so so that really matters. And that's the As the income in equality has risen, wealth inequality has risen, the contrast becomes greater. So I think that's what's going on. And we've also I mean the think of that. Why why is happiness not risen in the United States? Perhaps

it's that people compare themselves to others. So Barry Piser a new BMW and is it going to make you happy? Well, it's gonna make you happy as long as Danny doesn't buy one. That's what the evidence looks like. So it's a surprise the happiness is flat. People clearly compare themselves to others. Let's talk about some of the really interesting things you discovered while doing your research for this book. Yes, um, let's talk about productivity. Do we have a productivity problem

or do we have a measurement issue? Well, a bit of both. Um. Clearly the forecasts for productivity have been wrong, I mean especially the greatest The greatest era was made back to what we were talking about in two thousand and ten, austerity was imposed and the government was forecast with this that would have no effect on productivity, and

they've continued to forecast that productivity would rise. And we have to think called a productivity puzzle, which is that we don't actually seem to have had much productivity at all, and in fact, in the UK for the last three

quarter's been falling um, which is shocking to me. And the reason I always asked that question of like you is that in my office we were on an asset management firm, and what we do with the ten people in the Manhattan office twenty years ago would have taken a staff of a hundred and so the ability to deploy sophomore and technology and really crank out an enormous amount of work and content, and the ability to reach

both clients. And so whenever I see there's these productivity figures, I'm like, I don't know where they're looking, but they're not looking at a service. Let's go with two bits to it. So productivity is just output divided by people or ours or something. So you kind of argued about output measure on the top, but I probably shouldna argue about what you divide through by I mean, what's your hours? What's my hours? Started around noon and by two o'clock

I'm heading home. I mean, the problems now, I started early, I started four thirty in the morning, and I and the last thing I do before I go to bed is log onto Slack and look at what's going on. But the problem, of course is that if you if you're not I mean the days where people went to a factory, they logged on at eight o'clock and they went home. You got eight hours. So not only is there a problem measuring the output, there's a problem of

measuring the labor input. That's a really big deal. I mean, I think, however, it's it is clear that there is a problem, and the problem is that wages haven't been rising. I mean the sort of connection everybody makes this, if productivity was rising, wages ought to be rising. So they infer back that the lack of wage for it. Therefore there must be approach ativity. Plus some of it, of course,

has to do with distribution. I mean, workers understand that if they get gains from productivity, they get higher ways, but perhaps not these days. Perhaps they think, Okay, there's a big rising productivity and the bosses are going to take all the gains, and there's an issue of that with the rising inequality issue, Do the workers actually think that if productivity was to rise, they would actually get a share of the spoils and perhaps that's something that's changed,

So that's kind of interesting. They are you surprised at how quickly the blush has come off the rose for the gig economy, Like between Airbnb and Uber and even selling crap on eBay. There was an expectation that hey, there's a way for a lot of people to pick up some money on the side. Hasn't worked out the way people and expect It hasn't worked out, And there's a big question about how big that gig economy is.

I mean, there's a set of studies which were suggesting it's really really big, and then a couple of years later had new data and they had to sort of pull it back. But it's still it's substantial how you look at it. But it depends how you define it. But I mean there's an issue saying the the UK, it gets go to there. There's been a huge rise in the UK and the self employment rate, right, you said,

this is fantastic. Turns out that the earnings of the self employed over the last five years have fallen in real terms, just when people get laid off, especially in a service or consulting world, you call yourself self employed, right, So I think in a sense, the gig economy, this self employed stuff, this is about fragile work. Many of these people can't get enough hours. That's the big story in my book. So there's there's two unn interrupt you

right here because there's two really interesting things. I want to talk about underemployment generally, but let's start with the specific. So I'm gonna two completely different companies, and you and I have discussed this previously. Walmart on the low end and then Starbucks on the high end. They are both somewhat notorious for telling people in the beginning of the week, hey,

you were your hours. And for a while Walmart store managers were incentivized to save money by slashing hours, which is why the stores look like junk for a couple of years. And workers don't have any connection to the firms. And I think what you've talked about is an inherent instability of work and inhering insecurity of workers. And that's the sense that they have in some sense that explains the lack of wage growth they're more concerned about keeping

their jobs. Just before two thousand let me tell you a story. Just before two thousand and eight, I had a big discussion argument with the government of the Bank of Being. He thought there was a huge wage rise coming. So I knew, I wait for this. I knew the chairman, the head of the British trade union Movement. I went to tuc House Penthouse Suite tuc House and I said, his name is Brendan Barber. And I said, Brendan, you

have to be the rbit. I won't tell anybody. Tell me, are you about to be able to go and get a huge wage increase? And he said, not for love nor money. He said, just acted what you and I have just talked about workers, and many of the workers representsive women. He said, they care about security, they care about being a flexibility, being able to keep the job. They can drop the kids off at school, and if they need to take two hours off to go to

the doctor with the kids, they can. And he said, there is no chance on the God's green earth that was in pre two thousand and eight that there's big wage increases coming. And I think that's where the world is. The point of the story is that balance probably wouldn't be existing if we were at full employment. As you would move towards full employment, workers, we'll be able to say I'm not taking that kind of job, thank you very much. Warm up. There's lots of better jobs out there,

and I'll go there. So I think the fact that this continues to exist says we're a long way from full employment. So how underemployed is the labor force in the United States, Well, let's see, and let's let me get more specific. How many people are working multiple part time jobs and they wish they were working one full time, permanent position. We don't exactly know that. We do have pretty bad men of that in the United States. That made and I've worked on it a lot. You six, well,

you seven, I'm talking about earlist better. I mean we're talking about I'm just looking at the latest numbers. In terms of the unemployment numbers, it's about six million. But if you simply want to look at this group, which is a particularly important group, which is part time for economic reasons, it's about four and a half millions. So it's about three quarters of the size or two thirds

three quarters of the size of the unemployed. But what really matters with those meaning those people want a full time job but they can't find one of them. And of course, the big story in the United States, which we don't have for other countries, is there's lots of other people, it turns out, that want more hours. To give an example that we'll call those folks involuntary part timers. What we know from around the world, we don't have

a measure of this in the US. You say, I'm part time, I've got twelve hours a week, but I'd like twenty. And that turns out to be a really big phenomenon around the world. Yep, yep. That seems to drive wage growth around the world. So we have a whole series of papers on this. Now you reference a phenomena called zero hour jobs. Explain what that is. So this is much like you're much like the story of Walmart.

So in the UK there's a thing called zero hours contract um and most people absolutely hate it, but they can't get anything better. It's the following. You can only have a contract with me. On a Sunday night, I will tell you how many hours this week you're going to have. I'm going to tell you which days they are on and what time they are. So I said you on Sunday night, You're going to work from four

pm to midnight on Thursday. That's it. Um And so obviously these workers say, hey, this stinks mostly and b I would like more hours than I can get. And essentially what we see as we've moved towards full employment a little bit, those numbers have fallen, but huge numbers of these workers. We're talking to you about a million workers in these and this is an exclusive contract with anybody else, exclusive contract, So they're they're waiting to know

what it is. They can't fill another hour, they can't fill other hours elsewhere. So and it's not just the number of hours, it's the timing of the abster. It's how do you do childcare or how do you organize your life? Daddy? You do that, And that's a really big deal. And I think if you just look at those contracts, if you were at full employment, workers would

be able to say, I'm not taking that. The definition of fulling I always like from Beverage, he says a full employment work as a standing by waiting for and I mean good the word goods in there, waiting for good offers of jobs to come in. We're a very long way from that. So if those contexts exists, how can the FITS or the Bank of Benglans say we're

any clear close to full employer? Makes no sense. So the standard description or the standard explanation for why the labor market is where it is is a combination of lots of people are under educated, we're under credentials, which are two distinct issues. And you add that to the rise of globalization where good factory jobs leave, and the

rise of technology and automation. You know, just routine repetitive jobs are easily replaced by a robot or software changes the skill sets that are needed in a modern economy. How much is are those issues to blame and how much is it something else? Well, I think those issues

are clearly to blame. So the globalization phenomenon was going on prior to two thousand and eight, But I think we should think of two thousand and eight is a structural break, and a structural break in the sense that employers are aware that their bargaining position is stronger, but

workers were scared. Workers were scared that the phrase safe as houses, Well that's no longer true, their houses went, their their assets went, and that and that's a really big I would just go back into I've tried to get people to think about the capital, how capital displaces labor in some sense. The reason it's doing it so strongly now is the relative prices. You can change the

capital labor mix by changing relative prices. Price of capital now, I mean you could capital is practically free these well exactly, so that in a sense, what you can do is to say, well, maybe what we should do is lower to firms the relative price of labor. We have been speaking with Danny bland Flower. He is the author of

Not Working, Where Have all the Good Jobs Gone? If you enjoy this conversation, we'll be sure and come back for the podcast extras, where we keep the digital technology rolling and continue recording our conversation about all things employment, financial crisis, and underemployment related. You can find that at iTunes, overcast, Stitchers, Spotify, Bloomberg, wherever finer podcasts are sold. We love your comments, feedback and suggestions right to us at m IB podcast at

Bloomberg dot net. Be sure to check out my daily column. You can find that at Bloomberg dot com slash Opinion. Follow me on Twitter at rit Halts. I'm Barry rit Halts. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast. So let's let's get to some of the questions that that we didn't get to during the broadcast portion, because so much of this is quite fascinating.

So first let's talk out optimism. The least optimistic people in America are poor whites, not we're blacks or Hispanics. How does this play into populism? Is it which came first? Well, hard to know which came first? On almost every measure, you see the least educated, particularly prime age, least educated, I can say in a number of ways, least optimistic,

most anxious, most unhappy. I have a pretty interesting measure, which is in one of the big surveys, they ask people about how many bad mental health days did you have in the last thirty meaning clinical and mental health days or just just just popular just taking a mental health day, just just straight asking them. They're really defined this state, so it's it's sort of done in the

consistent way for everybody. And the number of the number of bad mental health days for this group is when we're talking ten twelve a month, really ten twelve of and I can just draw you a picture by aide which is just a huge hill shape. So these folks have a high level anyway, and it rises maximizing out at around forty three forty four. So this is so

it starts lower. So that's the opposite chart of what Scott Galloway showed in his book um the Algebra of Happiness, exactly where you're very happy when you're young, Bottom's middle age. I've written lots of stuff on what I call the U shaping happiness, but just flip it over the last thing over, and what it turns out is that on all these measures that I can use words like anxious, depressed, lonely, not optimistic, all the isolated. So all of these things

appear to be um central to what's going on. These are entirely consistent with these deaths of despair. These same folks are are disproportioned of the ones that are committing suicide. So this is a new phenomenon in America. And what are we doing about it? I mean, these not these are nothing. People talk about deaths of despair. I talk about cries of helplessness cries for help. So in a sense, the story is these are cries for help that are

remaining unanswered. So I'm curious as to the role that healthcare plays in this on two sides of this. First, I referenced when I was in the UK and Amsterdam during the crisis, people were pretty blase. I think the United States, especially if you have a family, you have kids, and you lose your job, you lose your healthcare. That's got to be an enormous source of stress for people who are not working full time or in danger of losing their jobs versus the Europeans. But I think that's

absolutely right. And I think and by the way, ps on the other side, when they do have a mental health issue, they can't afford to get the treatment exactly. I think a good example is the state that I live in, which is New Hampshire. New Hampshire is I think ranks second third in um opioid deaths. Really absolutely so. New Hampshire is a very straight why frere dying? There is no basically no provisions there for drug rehabilitation. Live free from that what you're implying, live free from the

safety net? I mean, why is New Hampshire a place where we're having all I mean low unemployment rates, I mean this hugely low unploy beautiful stage so obviously and really nice people there. They're almost Canadian, almost Canadians me. So I didn't realize New Hampshire like West Virginia. You can understand get West Virginia, but New Hampshire. So I think the provision of healthcare is a really big deal. The other big deal actually if you go back to

opioid overdoses. I have friend of mine who's a psychiatrist in the UK, and he says, what happens in America is that dr patients can doctor shop. They can go to Barry and say give me opios and you say no, and they'll find keeping the more for myself. They'll find some other doctor. This is not a phenomenon that's true in any other country. Really not true. And my friend says, what happens is they come to him as a sarchatrist and he writes down in their national health record, you know,

Barry's records requested, requested. And I said, this by this guy is not in no way I'm going to give it to. So the next doctor goes he sees that he sees. Dr White says, no, I'm not giving it. So there's actually a national recor national record. We don't have that here. So what's interesting is that presumably the doctors around the world, I mean, I think of this, The doctors in Germany and France and Australia and Canada

read the same academic journals. Should the doctors here do And they don't prescribe opioids, They don't have an opioid crisis, they don't have an entire middlewear group of salesman on a regular basis, and they have a national health service which, just by the records we've talked about, prevents people going around doctor shopping. Can't happen, can't do it, doesn't happen.

So this is an American phenomenon which we have not dealt with, and people have talked about it, and the presidents talked about, oh we have we have to worry about the other plan I was told he had. Christie said, of all sorts of really sensible things. I read the plan. Christie came out with a sense of various work for everything. No, it's a great plan about what to do about done nothing.

So this is a terrible American phenomenon that we need to fix, and it's within our powers and ability to fix to help these people who are dying from despair. That that that's just shocking. So the other thing in the book that really, um was a little bit surprising, the bright side to an otherwise dark story. The happiness of Black Americans has risen strongly since the nineties seventies.

It is today almost equal to that white Americans. So here's the question, is black happiness rising is white unhappiness falling? But a little bit of both, Yeah, a bit of both. Um. I mean, one of the things which is interesting, as I say, the phenomena and I have just been talking about, was not actually a phenomenon for any any racial group other than whites. So the deaths of despair have not really been happening for Asians, Hispanics, or after An Americans.

So that's an obvious thing in a way that in a way you get happiness to rise because they haven't had the big burst of unhappiness. By construction means that that that that that that's happened. So yes, we've seen some some evidence of that in some ways. The labor economist in me learns this, and I remember my old teacher told me it's many moons ago. The people who do worst in the slump are the people who do

best in the boom. Is that true? That's true, because I don't think we've seen that here in the cycle. Well in general, that's true. But I mean that sort of explains the question you just asked me about blacks. Um. I mean, I always thought the good example always was the young African Americans. The young The unemployment of young African American used to be horrific, used to be horrific.

That's fallen more than any other. I mean, it's not great now, it's for what it was and where it's a third of what it was actually yea, So those numbers tend to fo So we've seen we've seen some improvement of the of the least of the ones who do worst. I mean, in essence, what you're likely to see in the downturn is though, that that turn comes

quickest for those groups. I suspect as we get into this downturn, the story we've just been talking about will change quickly, right, Um, So so that so that the unemployed rate of UM college educated, middle aged white men is not going to rise that much. If we go into a slump, other groups will. So it's a sicklicality. That's a big deal. But we have we have seen some improvements over time. So when your research for the book,

what else popped out is really counterintuitive? Well, lots of things. I've just got a more recent one which I've actually been working on. So the one thing in the happiness results that I was always puzzled by was that it appears in the data that children make you unhappy. I've I've heard that I have a nation and a new paper. I worked really hard on this, and the story always with me was, well, if children made you unhappy when I had three kids, wouldn't you think after the first

one you go, I've had enough of this. Well by the time you figure out what a pen the but there are your three Well maybe it's not till they're teenagers, but but that's so we've been working when it turns out that we have a data on a million Europeans and it turns out that once you control for the fact that having kids is really expensive, and so we have this data on how how much problems do you have paying your bills. Well, it turns out what's your

control for that children make you happy? It's actually about I mean my and I use stories of my kids. I have two daughters with babies, and one of them says, we buy hundred bucks a week in diapers and a bottle a gallon of milk every day, and the cost of childcare is so high, and it's it's just the cost and a book I talk about when we need to somehow rather help these fogs, help the kids, help

parents deal with the look at the high cost of children. Um. But that's so once you do that, it turns out the sign flips. It's a very nice result because I think it never made any sense, right. It didn't make sense to say that, you know, kids didn't make you happy. You need to meet more you mean more people's other people that make me happy. So that's pretty counterintuitive, but it makes sense once you explain it. Give me one more that really jumped out. Oh gosh, well I've got

another one. Here's another puzzling one. In the happiness literature, women are always happier than men, really, but when you go to unhappiness equations, women are also more unhappy than Is that just a confirmation bias. If you're looking for it, you know, I don't think so. I don't think so. I mean, there are the great thing about being a data person. Well you do this toime all the time. You look at the data and there are puzzles that

jump out. I mean, I think that the obviously big puzzle in economics is actually why, at the at the given levels of unemployment that we have, why is wage growth so weak? I mean, that's the big puzzle for a labor economists today. That's the great puzzle. At unemployment rates of four percent and lower in the past, around the world, wage growth will be near to five than anything else. And in this psych all that's something we haven't seen and policymakers have not been able to grapple

with it. And the book explains it basically, So are you and Reinhardt and Rogoff's camp that says, following a financial crisis, we tend to get subpar GDP, subpar wage growth, slow gradual recovery, but not like the two traditional regular cyclical recession slash recovery. That it's a much more drawn out and much more modest recovery. Look at Japan, look at Sweden, look at Mexico. Couldn't have said it better.

I completely agree. But I think in a sense that's a really big problem because I don't think policymakers got that. I mean clearly they just didn't see it, and they sort of and all the forecast they made and we think about the fensays we're gonna be able to raise rates because everything's gonna be back to normal and fine, the bankoping that says, you know, within eighteen months will be back and everything. So they absolutely what you said

is true. It's the biggest era that policymakers have made. They didn't get it, and that's exactly where we are now that there's a structural break and what it means is actually four percent unemployment. When the book spends a lot of time thinking about four percent unemployment is nowhere near full employment. Mark Carney asked me the other day, he said, I was at a meeting. He said, Danny, how low do you think the narrow is in the UK? That means the full employment rate of it? And I

said around two and a half. I was gonna say two percent, two two two and a half some number like that, and I think the reality said, yeah, gas, and I've said, and now what you think is okay. So now we see unemployment rates of three point six the big deal Actually in the last six months or so, unemployments continue to fall and the wage growth, which looked like it was picking up, has reversed itself. It's actually

slowed back down again. And when you're around the world, I can explain that with because I saw this coming, because a big chunk of that wage growth came from new minimum wage laws as the state and municipality labs and and in the UK actually this month we've seen in a little bit of a pickup and the reason was exactly that you saw a big rise in the public sector pay, which hadn't happened for a long time. And one of the big deals around the world, I

mean the UK is that a good example. In two thousand ten the government imposed a one pay freeze in the public sector, which free which feeds through the rest of the economy. So you push down on wages. What problem last month they spend less. But what it means is the full employment rate of unemployment has got lower lower, and the and the FED made the FED has been saying all along, oh the narrows four and a half five and because unemployments at three and we have to

raise rates. Turns out they got it wrong. Raising rates was an error. As I said, you probably not. I said every month of the last twenty five that that was a complete error, and it looks to be right. So let me let me push back on on the FED in the United States, where are we like around two percent? There were that range to So so here's the question that I think people like President Trump and people who are very dovish on rates, Um, here's the

pushback to them. We took rates to an extraordinarily low level that we were at zero for how many years plus quee, and that now that we're a decade past the financial crisis, these ultra low rates have rewarded capital, but they haven't rewarded labor. And what we need to do is normalized rates so that they're at a more reasonable level that will force people back into a traditional economic environment. I'm not saying I buy into that. So

that's the pushback, No, that's the pushback. Well, the first thing I think policymakers like me, central bankers like me who sat in two thousand and eight and saw what was going on. I mean, remember, we watched RBS fail, the largest bank in the world by assets. We watched Lloyd's Bank fail. So the scale of this shock was has been underestibate, underestimated by many, I think, And that goes back to your well said statement about why the recovery has taken so long. Was the scale of that

shock was so huge. And I think the argument to say we need to normalize, well, maybe that's true. That doesn't tell you when to normalize. You probably need to wait and look and see. Um the problem about a normalization if this shock is greater than you think and you're further from the neru than you think, you say, we need to raise rates for when the recession comes. But by raising rates you cause the recession. I mean an obvious and obvious twist in the place like the UK.

I mean, I was on a airplane and what happens it I'll tell the story. So what happens in the UK is people on variable rate mortgages at the start of the crisis there, which, by the way, the US fixed rate is is kind of unique. So let's go with this story. Five and a half percent most people are paying pay a hundred and fifty over over bank rates, so five and a half percent interest rates. That gives you seven. I'm on an air so rates get cut

to one. I'm on an airplane. The captain of the British Airways plane is standing in front of me with the bottle of champagne. I said you aren't you supposed to be fly in the plane and he says no. But the guys in the front sent me back to say thank you very much for getting their mortgages down to me. The captain hands the captain hands me the spratler's champagne and they all the people applaud me and stuff. But that's because you lowered them. So now in the

UK think of this. So so the mortgage price in the UK bank rates point seven five. So let's make it easier. People are paying two and a quarter. The second you start to raise rates, those mortgages are going to go up. And the people who are hurting, remember the people who who have who are a six percent real terms less than they have had a pick up because of the mortgage. As soon as you do that, take it away. So the answer is that UM clearly looks like it was a mistake. To raise rates. I mean,

who knows by how much? And the market has now essentially priced in what I say in the book, this was a huge era. The markets are pricing in I think I haven't looked in the last twenty minutes, but last time I looked, they're pricing in three cuts by by Christmas. We's amazing cuts in the market. Is it safe to say the Bank of England has a greater So let me back up a sec The argument in the US is the FED only affects the FED funds rate, and the bond market determines the long bond rate and

through that mortgages. However, the UK, what you're saying is the FED the Bank of England has a much greater impact on people's pocketbooks than in the US. A little has to work its way through. I gotta tell you a story. I was in the UK las k last week and going and doing the rounds in the financial papers. Was a guy in Denmark. So I think we're talking this morning about drog You talking about rate because they showed someone's new way a new mortgage contract in Denmark

with a negative interest rate. That's amazing, right, So I mean, right, yeah, I'll let you in a little secret. I'm in my house. September is five years. My expectation for interest rates were such that I did the two seventy two point seven five mortgage that was very well, thinking I get seven years before this goes up, and seven years from now, I don't think rates are going to be much higher. And so far, so far I've been right. Well, we'll see, well,

we'll see how accurate that ends up being. My wife was not happy, but it's worked out, okay. I mean, I just having my head and people listening to this podcast. In two thousand and eight August in the UK interest rates for five and a half and the markets have priced in five and a half percent for the next three years. Right, totally wrong, totally and completely right. Markets

get it wrong, all getting wrong. But I think in the UK, particularly on the mortgage front, there's been an impact and the balance between savers and borrowers has really been impact. But what it means is the ability of the bank having that to do what you've talked about, we need to raise rates so we can normalize things. You wipe out the housing market if you do that. So the ability of the bank of being almost ever now to raise rights, say above one is basically off

the table. I don't know if you know Torsten Slack, he has this fabulous the chart where he's where he talks about the markets got it wrong. I saw that last week. Always the market always gets fed up and fed actions wrong. You would think the market would have some insight. So much for the wisdom of crowd. Well, it's not just that. I mean remember that in a sense, what they plotted was what the FED said it was going to do. I mean that the market does the

FED know what it's going to do? Honestly, Well, the dot plots are really interesting right now, and I've been

giving presentation recently. If you look at the dot plots from March um, it looks like half the people think that we a rate rise in two thousand nineteen, and the majority think there will be at least two in two thousand and twenty, and the concreases increases, and that if you look as to say, I'm about three hours out of data here, But over the last week, by April of next year, the market has been moving back and forth between four or five cuts by April, and

the FED says, so this is a really big disconnect folks. So the question and toss this chart is a good one. The question is whether the markets have got it right this time. My suspicion is they do. So let's talk a little about Jerome Powell and his relationship with President Trump. This is not the typical president and presidential appointee. You would think this is an Obama deep state holdover. This is his guy. So is Richard and Think and so

are a number of others. I mean to put it, the chairman and the vice chairman have been appointed to to be frank and the book. Does the book actually site actually of the view that Trump is right? I mean, I think Trump is right in this case that interest rates are too high and they've made a mistake. So let's put that on the table for different reasons, but for reasons I lay out obviously the issue about the independence of the of the central as a big but

I think the discussion is not quite right. I think the question is the assumption is you allow the central bank to be independent because disproportionately it gets things right, more right than any any other way. The problem is if the central banks gets it wrong, and it does as occasion, and it's certainly got it wrong in two

thousand and eight. By September eight, they still really didn't know that US have been in recession since the event, since December oh seven, So obviously over the last decade, the fact that the Fed has got it wrong so many times does kind of bring the argument that changes the argument a bit to say they should be independent. So the pressure on them, obviously is really how they're supposed to be in But in this case it's hard to argue Trump isn't right but for the wrong reasons. Whatever,

he's right right, for the wrong reason. He's concerned about re election. Right, forget that reason. Economically, Economically, it's clear everything is slowing down and there's a recession eventually out there. And I take the views of me as a person voted on interest rates, well, for goodness sake, folks, what we did last time, we didn't get there soon enough, we got there late. I think there's very little downside

risk to an early rate cut. That might calm markets, it might cause some inflation, great, we'll have a bit. So let's let's talk about two things. They're both a little wonky. The first is northern rock, which you mentioned so in the US following the Great Depression, we set up Federal Deposit, an insurance company where all the banks pay a tiny, tiny fraction of their deposits and in the event of a collapse there account holders are made whole and theoretically bank runs are a thing of the past.

The UK doesn't have that identical setup, doesn't something a little different. I actually learned something about Northern Rock last week, which was actually, well, why is Northern Rock in the North. It turns out it's just in the north. The reason it was there, apparently, people tell me, was that the other banks wouldn't lend there, and so Northern Rock went there and could start making loans. Two people had no incomes and no real ability to pay. One was making

pretty bad loans. So that was the reason it was there. Okay, something else that happened. They lose a little on each loan, but they make it up volume. And they actually didn't have many branches. There was only at forty brands, so when the bank failed many of there were were two branches in London there was, and basically they were really tiny.

So when you have two desks and a thousand people kind of outside you're in a little you're in a little trouble, I think is something that people haven't noticed. And actually people tried to hire me and I refused to go. So what happened was one of them. So here's a big deal. Many of the people who worked at Northern Rock had their pensions and had had shares in Northern Rockets part of their as part of so

they were wiped out. The savers were protected, but unlike in the US, the shareholders were wiped out, meaning the bank, the Bank of England valued the shares of Northern Rockets zero. Right, Well, holders suddenly have something, but the equity holders that's the same as yes. But the other thing, of course is I say that the employees. The employees were really hurt because a lot of them had share options and all

the rest of it. And that you know, how many en Rons and Lehmans do we have to see before people, you know, look at look at General Electric, look good g how many this comes up over and over again and and unfortunately people don't learn that. Less Barry here was the other big less. I mean, I remember at the time and I was I got into trouble because I said, well, obviously, if you look at Northern Rock. There are other there are other institutions who look very

like that. Turns out in the UK there was Bradford and Bingley, an Alliance and Lester who look just like Northern Rock. And how did they do failed? Just the only issue Barry was when wasn't it? If it was

when they're gonna so who makes the account holders hall? Well, I I suspect we have to well unclear, maybe maybe these macro predential instruments maybe ways of ensuring that in the good times, you know, coverage is made so that so that in the end, in the bad times, the public don't have to come in and rescue those folks. It's a it's a big issue. But there is no fd I c T now there is now now After Northern Rock the government had to come and step in

and say we will protect all that told. There was actually a funny story. The government went in in the morning. If I recall and said, right, we're going to protect everybody who's a saver in Northern Rock. Then they had a little problem, which is everybody had money in an Irish banquin. Ha ha, I can move all my money to Northern So on the day that they did it money poured into Northern Rock and then the government had to say, hang on, folks, we're not going to guarantee

the world's savings. It's only going to relate to people who were here last week. So that but that was a big fundamental change and savers are now protected. But remember the big difference in a way in the UK, the big turn down in the world, crist which the world didn't know, was the failure of RBS. Much more important than much more important than Layman Brothers or anything else.

And the reason, oh, oh the world so so let's so the story was Alster Darling tells the story that he was at the financial meeting of the European Finance Ministers on October the seventh, two thousand and eight, and he gets a call from our yes and the chairman says to him, I can't make a payment today, Chancellor, and I need I can't make a fifty billion dollar

payment tomorrow. And they told him that if you had told Alistair, if you don't rescue RBS, there's a very good prospect that every credit card and cash machine in the world will fail. So six central banks together, that's the that's the biggest moment of the crisis, six central banks together cut rates. And if anybody in the world sees six central banks together cutting rates and led by the UK, you should have been told the global markets

are collapsing, and something happening in Britain. So it was the fed ecb Bank of Japan, Bank of Switzerland, Bangas, the Reeks banking and the Bank of England. That was the day that everything collapsed. Quite fascinating, all right. And then the last wonky thing I have to ask you before we start our speed round has to do with the Phillips curve. You do a lot of work with that for the lay person. Explain what the Phillips curve

is and why it's so wrong. Well, that's that's hard to do in simple The answer why why it's all wrong is that we used to think that the unemployment rate is what drove wages down. Turns out that's not true anymore. They're disconnected. They're disconnected. So what happened in the past firms pay was impacted by the unplayed outside

the firm. Well, what's happened today is under employments. The story two thirds of the workers over here got the hours that they want and they've got temporary workers, all sorts of freelances in there, paid less, and the workers on the one side of the room know that they can be replaced by the people on the other side of the room. Turns out the Phillips has to be written in underemployment under employments the story post two thousand

and eight. All the stuff about the unemployment rate is wrong because it doesn't do anything since two thousands and the and the big deal is the underemployment rate hasn't returned to its prerecession level, which makes me raise the final question, which is we've seen union membership plumbing in the US plumbing world. How important is the failure of unions, the death of unions to to driving both the underemployment and the economic insecurity of the employed. I mean, that's

how to really be a big impact. But in some sense you have to step back and say, well, what caused the decline in unions, And the answer is pretty much global forces. Globalization made it very much harder for a union to raise the price. So I think in a global market with selling at ten, union comes along rate gives benefits to its workers. The prices eleven and the firm gets wiped out because there's global forces. So the problem for unions is that you know they've been

wiped out by global forces. So that's that's further made workers more jobs, more insecure, more unstable, and less well paid. Good answer, All right, So let's go to our speed round. These are our favorite questions we ask all our guests. Um and I've terlored them specifically to you. Um So tell us what was the first car you ever owned? Year making model? I can't be remember. I mean I was, I'm an interesting person. I didn't know driving lines until

I was twenty seven. I lived in London, so you didn't. I didn't need one. And I mean if you had a parking space in London, you could never leave the car, take the car away from it because you could never find one to get. So I had a Mini was my first car, and a real Mini, a real Mini with wooden panels on it, little doors that you break down all the time. They are great. What's the most important thing people don't know about? Danny Blanchflower. Um, Oh, it's a very tough one. I used to be a

school teacher. You're still a school teacher. That maybe that is the best. Maybe right there you go. So you used to teach grammar school. I actually taught in a school that got I got paid danger money, the teacher, the school. I decided it was easier to go and talk to people like you, Barry and get that kind of aggravation, that kind of aggravation. Tell us who your early mentors were. Well, the big deal actually was my

dear friend Richard Freeman. He was a darker class of sixty four, the famous man to always always wear hats, who was famously wears hats to everything. But he's a great empirical economist and just taught me to go and look at the data. And that was that was not something the economists did. They for a very very long time. The role of data was seen as, you know, second second to what other people do. So everybody's favorite question.

Tell us some of your favorite books fishing, nonfishing, market related, economy related whatever. I always liked um Gas Gabrielle Gussie, Marquees is Hundred Years of Solitude. That just there's something I've read so many times. It just seen that man was a genius, and I didn't really realize that every other people thought he was a genius too, and gave him the Nobel Prize in in Literature. But I've been

a nonfiction wonk forever. I mean, I just I mean, it's my wife's so bored of really economics books, So give us what what do you think is the most interesting unexpected economics book you read recently? Oh my goodness, Well, I actually I read this great book by Kane's written a pay I've been reading endlessly that nobody knows about written in one and the reason I really like, what's the name of the point? It's it's about it's about his theories on unemployment. But I think it's I think

it's a great unemployment. Well, but I don't remember reading now, but you didn't. What you read was Kane's talking about unemployment rise after it had happened. This is a book, I mean, it's exactly what you've kind of been talking about. He's asked in what do you think is coming? And he says, it's not really about the crash, So it's not Reinhardt Road got it's actually Canes who has it.

And he talks about if you don't do the things that we've talked about that you need to do I mean, this is phrase I've used many times, the long dragging conditions of semi slump. So I keep going back to that. But the other one I read, and I think it's a really important one, is that I read a book by Beverage. I think, you know, Beverage, it's a great story when when Churchill said, what's the world going to look like after I come, after we get over the war?

Tell us what full employment would look like? And Beverage writes this thing, and he says, I have thought, and he says, I think unemployment the full employment rate of unemploy is three p but in the probably said Kines wrote to me and said, I can think it could be much lower. And in the UK it turns out unemployment average one and a half percent for that whole period. So that's that's about what the full employment means for

the work for people coming back from the war. And I think that's a great book to read, Beverage on full employment. So in you know, they thought about these things, and in ninete they thought about and the world repeats and we today have the Beverage curve correctly directly from Beverage. But it's a great and he talks that he said, he talks about what the welfare state should look like.

But I would encourage people to go and look at it, think about what full employment means, and it's you can just cross out and you can write in two thousand and twenty and the same thing. And so what a policymakers do? They didn't read that stuff. I have to ask you about a book that you reference the author of that is sitting at myself at home waiting to find its way into my queue, which is Lord Sadelski's Biography of Canes. He's a dear friend of mine. We've

written things. I gotta tell a great story. Um. He has a great book called The Master right the Return of the Master, and he sent it to me, and the whole time in my life, this is there. He sent it to me. I got home, my dog had eating it. This is completely true, and I had to get another one. My dog had torn it to pieces. I've literally had that literally. Um. William Goldman's book and Ventures in the Screen Trade I'm reading because Goldman's position

is nobody in Hollywood knows anything. They passed on Star Wars, they passed on Raiders. They're all terrible. I made the mistake of putting it down for two minutes. The poppy destroyed it. We have a Portuguese water dog, and I had to order a new one and keep it at a high So that and then there's another story to tell you. So Skidelski is not only the biographer of Kanes. There's a there's a there's a good kind of story about what's special about Skidelsky. He lives in Kane's house.

Oh really, that's a coincidence. Did he seek it out? Seek it out? To seek it out? So there's a great, great story to talk about inhabiting somebody's He writes in the back of my book as well, Son Robert and I have written the Lord, the Lord's you got to call him the Lord. He was. I think he briefly met him here at Bloomberth. He came through they do launches for different authors and stuff, and he's somebody else I have to he's yes, he's great and he and

he talks about the return of the Master. But in the book he talks about sadly the return of the Master was not as you know, it was not a as big a return as it ought to write it should it should have been a big drum roll roll um. So tell us about a time you failed and what you learned from the experience. Goodness, Well, I I think

I failed. The biggest failure I have made was in August two thousand and eight, and I've been calling a recession and we got the first call of what output in Q two was going to be and it and it was plus point two point two plus point two. And I've been saying forever I and I didn't believe, and I'm sure the revisions eventually took it minus point seven, right, But that was I mean, I just I mean in the sense it was the biggest fail because I doubted

myself so seriously. Oh, I really thought I've got this so wrong. And we did this terrible report in August two thousand and eight that I signed up to, which said no recessions coming. And I went home and I thought, well, I've either got to work this out. I gotta work out either I'm an idiot and I'm completely wrong and I have to quit, or I'm right. And I went

away and I thought it's one of these. And I talked to everybody, and eventually I decided that I was right, But that was in a sense, the big fail was getting it wrong, doubting what I'd said before, and just being tortured and then eventually deciding, Okay, I'm right, and then I did a big interview and then I went a whole hog on it. But I just doubt that number just made me think I got this so wrong. So heading into the financial crisis, so I'm all about,

what do we really know? What meta cognition? What do we think we know that we're wrong about? What do we not know that we not know? But heading into the financial crisis, I had no doubt that my forecast for a deep recession in the market crash was right. And the reason you have a moment of doubt, no, never the whole time. What what was shocking to me was that nobody else saw it. I couldn't understand. And the data point, the data point that made it wholly

unambiguous was this chart. I want to say I first picked it up from ned Davis and like oh three or O four, and then I started looking So I should have been looking for disconfirming data um which I could not find, and I started looking for confirming data, which was everywhere. So it's a historical relationship in the United States between median home price and median income. It's the same. I have the same in the UK exact.

So you look at that data series and for decades, decades, decades it you know, it bounces around two and three, two and two and suddenly goes four or five, six, It's like orders of magnitude. So so based on that chart, I tried to find other things. When you looked at the quest of homeownership versus the cost of renting, same things, you know, a longstanding relationship, and then it spikes. And

then the third one. The third chart was the value of the housing stock in the United States relative to GDP, and that was a little more volunteer volatile, but like around oh two or three or four, it just spiked. So my takeaway was either everybody's getting a giant raise or housing drops. So the second one I didn't really know about. The first I did, but it's effectively the same chart of rent is lighted. Basically, is a different

way to look at the same thing. Read is related to income and read to have ownership is ends up. If you've got in the UK exactly the same we call it house price to earnings ratios in the UK averages about three to three and a half. By two thousand and six seven it had got to two to

five point nine and twelve in London twelve. So then what was interesting if you look back, a series of people on the NPC, some before me coming to it, spent an awful lot of time arguing why this time was different and why the why the ratio had permanently changed. It was something about demographics. There was something about I mean,

let's go, let's go exactly, let's go with nonsense. And they said, you shouldn't read anything into this because this is all permanently changed, and they think they, um, yeah, nonsense. And so the justification for this rise was that, you know, literally the markets are so much more efficient than they would be. And they read Lucas who said, you know, in his Nobel Prize winning speech, I have shown me that depressions can't ever happen again. All is absolutely wonderful,

and Barry rightly laughs, that's right. You're you're listening to Confirmation Bias Radio with Danny and Barry. Um. So our last couple of questions, Um, so what do you do outside of the office for fun, What do you do to relax or when I'm back. Yeah, I like to go cycling with my white wife and I go cycling, but I had trouble with my ankles sometime ago. I used to pay quite a lot of golf. So you

and I met, I think the first time fishing. That So I've taken up a lot of fishing with our old friend David Kotoks here this morning, and I've I've become an avid fisherman. I'm going next week back to Florida to go fishing again, but a little bone fishing. No, Actually, I'm a snoot guy. I like, I've never gonnof fishing, but invited me. I have a house. I have a house on the water. When you come in, let's go.

I actually like the west coast of Florida. And then we discussed so we've not just for fishing, but you're inviting. It's the Midwesterners as opposed to us New Yorkers. They're much nicer, and you're a catch and release fishing hashtag catching release. What sort of advice would you give to a millennial or someone beginning their career who was interested in either economics, or later labor economics or monetary policy.

Um I I would go and read an article out yesterday by Nobel Prize winner Akoloff, who talks about the importance of trying to understand problems. Economics has become just math. People are trying very math, very mathy, and I think the story is focus on the patterns in the data, try and think, you know, what are what important question are you trying to answer? Focus on an important question? Okay, that's sort of contrary to many of the things that

have been in Economist. And yes, you have to publish in the top five question of journals, and I think it's a really good place to come and think, well, what what what are people in the world actually care about? Tell them focus on issues where you can answer questions. So your I think that your approach is the right approach. Is that is that? No? Sorry, it's it's George Jakolov. Yes, in his in his paper is about hard economics, which is go and do the math and lose sight of

lose sight of what the heck can we do? I mean, I was taught the Great Star. I was taught that's the walk about and walking about and my old supervisor said to me, Danny care about the well being of the man or the woman on the clapp of omnibus for American audience, clap was a part of London, and an omnibus is the bus before which was towed by the horse. But it's about I think about the well being of the ordinary person, perhaps the ordinary prime age,

less educated person living in Pennsylvania West Virginia. Don't lose sight of that. And I think, if that's what you do, I mean, think of what Deeton in case of doing. They're trying to understand how to improve the well being of the that's an honorable estate. And hence you're focused on unhappiness, stress, physical pain, and under employment. And I say to my students, this is so much better than so much of economics that focuses on, you know, trying

to add a squiggle to a diddle. When I download and go to read an economics paper, I will go through the first five, ten, twelve pages, and then I'll hit the page that's just a sheet of calculations and formulas and I tap out because I can't follow that, and neither kill most of the lap. And we don't have to because I mean go back to the greatest story of the Maybe we can end on this great story.

So the Queen goes to the London School of Economics and opens the new Department of Economics, and the chair says to her, there's a hundred and fifty economists here. And the Queen turns to him and says, what if there are a hundred and fifty economists here? How come they missed the great recession? And they turned her and they said they were working on something else. That's great. Our final question, what do you know about the world of labor economics today that you wish you knew thirty

years ago when you were first ramping up in this space? Wow? I mean everything everything. I mean, I didn't really understand that there were patterns in the data. I didn't really understand how related things were um and that in the thirty odd years that I've been looking at the labor market, how little improvement that I had seen for the average person. Shocking. That's a shocking story. You started just as the majors

decided to phrase right. I mean, in a sense, the story, the story is about the spread of global forces, and it's just about the spread of inequality. So I mean we've done well. We've done very well. People people around us have not done so well. We have family members, I mean my my, I have three kids, and they're all struggling. They're struggling to leave home, they're struggling to put the kids in child at they're struggling to buy

they're struggling to pay off their huge student debts. And I think that the word I used there was was you advisedly, it's life's a struggle. Quite quite fascinating. We have been speaking with Danny Blancheflower, author of not Working We'll have all the good jobs gone, and uh current

economics professor at Dartmouth. UM. If you enjoy this conversation, we'll be sure and look up an inch or down an inch on Apple iTunes, where you could see any of the previous two hundred and fifty such conversations that we've had over the past five years. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I would be remiss if I did not thank the crack staff that helps us put these conversations together each week. Michael Batnick is my head

of research Atika val Bron is our project manager. Michael Boyle is my producer. I'm Barry Ridholtz. You've been listening to Masters in Business on Bloomberg Radio.