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Too Much Education Can Be Bad for Your Economic Health · Trumponomics

• 0:04
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:07
  Speaker 1: global economy to you. Both this week and next, we're
• 0:15
  Speaker 1: going to be talking a bit about education. Oscar Wilde
• 0:18
  Speaker 1: said you could never be overdressed or over educated. But
• 0:22
  Speaker 1: in his day, people didn't like to wear black tie
• 0:25
  Speaker 1: without the tie, and white trainers with absolutely anything at all,
• 0:29
  Speaker 1: and he probably never found himself being served by a
• 0:32
  Speaker 1: waiter with two pH d s. Victorian times, only a
• 0:35
  Speaker 1: tiny fraction of the population had degrees. But in most
• 0:39
  Speaker 1: rich countries today, at least a third of the adult
• 0:42
  Speaker 1: population has graduated from university, and many of those heavily
• 0:46
  Speaker 1: credentialed workers feel distinctly under employed. Over education is a
• 0:52
  Speaker 1: particular problem for Greece. It turns out a country you'd
• 0:55
  Speaker 1: think already had its fair share of economic challenges to
• 0:58
  Speaker 1: deal with. We have a report from our europe Economy reporter,
• 1:01
  Speaker 1: Jeanette Newman on that. In a moment. We'll also have
• 1:04
  Speaker 1: an update from the annual gathering of the Economist Great
• 1:07
  Speaker 1: and Good of the American Economic Association. But first you'll
• 1:11
  Speaker 1: remember we ended rather less worried about trade wars. Now
• 1:16
  Speaker 1: two weeks into there's been fear of a real war
• 1:19
  Speaker 1: breaking out in the Middle East thanks to US action
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  Speaker 1: on Iran. Ziad Our, chief Middle East economist, has been
• 1:25
  Speaker 1: sitting in Dubai thinking about the economic impact of all this. Yea,
• 1:33
  Speaker 1: thanks for joining us. In the past week, we've seen
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  Speaker 1: a very muted market reaction to what could be a
• 1:38
  Speaker 1: major ratcheting up of tension in the region. Markets haven't
• 1:42
  Speaker 1: moved much, and although the oil price did rise a
• 1:45
  Speaker 1: bit at first, I see it's now below where it
• 1:47
  Speaker 1: was at the start of the year. Do you think
• 1:49
  Speaker 1: this calm reaction is justified? And maybe you should remind
• 1:53
  Speaker 1: us what's at stake economically in the region, what it
• 1:56
  Speaker 1: might mean for the global economy and oil supplies if
• 1:59
  Speaker 1: things take another negative turn. The market reaction has been muted,
• 2:03
  Speaker 1: so basically, financial markets currently expect all prices to revert
• 2:08
  Speaker 1: to an average of sixty five dollars per barrel in
• 2:11
  Speaker 1: twenty so they expect any geopolitical tensions to recede and
• 2:16
  Speaker 1: any supply disruption to be temporary. Are they right? Well,
• 2:20
  Speaker 1: potentially there are certain sources and scenarios in which markets
• 2:24
  Speaker 1: could be surprised by a longer last thing supply disruption.
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  Speaker 1: We identify three Basically, the first one is the potential
• 2:32
  Speaker 1: of U S sanctions on Iraq. Iraqi is of the
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  Speaker 1: second largest producer uh It produces four point seven billion
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  Speaker 1: brows of oil a day, and US sanctions on your
• 2:41
  Speaker 1: luck that could prevent the export of Iraqi oil could
• 2:46
  Speaker 1: lead to much higher all prices that's not currently priced
• 2:49
  Speaker 1: and in the market. The second potential source of risk
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  Speaker 1: is attacks on on oil facilities in the Gulf by Iran.
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  Speaker 1: We've seen an attack on Saudi around call last Denver,
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  Speaker 1: which took five percent of global all supply of market immediately.
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  Speaker 1: Saudi Arabia is able to restore that very quickly, but
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  Speaker 1: we can imagine a scenario in which the damage is
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  Speaker 1: longer lasting. And finally, we could also envisage a scenario
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  Speaker 1: in which oil trade routes in the Gulf might be disrupted.
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  Speaker 1: We have twenty percent of global all supply goes through
• 3:22
  Speaker 1: the Gulf and the Strait of Hormos, and if if
• 3:25
  Speaker 1: there is an escalation in geopolitical tensions, if there are
• 3:27
  Speaker 1: attacked on all tankers in in in that area, then
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  Speaker 1: that could surprise markets with a much harder or price
• 3:34
  Speaker 1: because simply the amount of bales of all at risk
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  Speaker 1: are very large, I guess what I mean, we're used
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  Speaker 1: to thinking it. Certainly, you know, in the old days
• 3:43
  Speaker 1: spike in oil prices, I mean, famously in the seventies,
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  Speaker 1: but also since then, you know, it really had a
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  Speaker 1: devastating impact on the global economy. I mean, one of
• 3:51
  Speaker 1: the things I've struck by in the research that you've done,
• 3:54
  Speaker 1: and and the chief a mere economist, Jamie Rush, is
• 3:58
  Speaker 1: that the impact of big oil price rises not like
• 4:01
  Speaker 1: it was, I mean, not for for a number of reasons,
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  Speaker 1: I guess. But we shouldn't. We don't fear it in
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  Speaker 1: quite the same way, do we. No, we don't at all.
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  Speaker 1: What was hundred dollar or price in twenty two thou
• 4:12
  Speaker 1: two thousand and eleven, that would not feel like a
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  Speaker 1: hundred dollar or price to day. It would feel more
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  Speaker 1: like a seventy six dollar or price. And that's simply
• 4:20
  Speaker 1: because the you know, over time, the prices of other
• 4:23
  Speaker 1: goods and services have gone up, so the real value
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  Speaker 1: of hundred dollar barrel of oil is less than that. Also,
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  Speaker 1: because of energy efficiency, we need less oil to produce
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  Speaker 1: each unit of global g d P. And because of that,
• 4:36
  Speaker 1: you know, the impact of the global economy of a
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  Speaker 1: spark in all prices is also less significant now. But
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  Speaker 1: also we've seen a structural shift in the oil market.
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  Speaker 1: The world's largest economy, the US, is producing a lot
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  Speaker 1: more all these days, as spark in all prices tends
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  Speaker 1: to shift income from all exporters to all imports the globe.
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  Speaker 1: As largest economy, the US has is producing more oil
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  Speaker 1: and therefore the impact of our our prices is less
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  Speaker 1: adverse in the global economy because it's less adverse on
• 5:07
  Speaker 1: on the US. So all of these factors. You put
• 5:09
  Speaker 1: all of these factors together, if you get an increase
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  Speaker 1: of nominal are prices from seventy dollars stay two hundred dollars,
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  Speaker 1: the impact of global on global growth is something like
• 5:19
  Speaker 1: twenty to thirty basis points by the beginning of twenty two,
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  Speaker 1: So it is quite muted. It's not incredibly significant as
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  Speaker 1: we've had in so if the world was going to
• 5:30
  Speaker 1: grow three percent, it might grow two point seven two
• 5:33
  Speaker 1: point eight, although I guess we could guarantee that people
• 5:35
  Speaker 1: would still complain busily about the prices they were paying
• 5:39
  Speaker 1: at the pump. Yeah, I think we'll probably end up
• 5:41
  Speaker 1: talking about this again. And stephonomics in certainly a hell
• 5:44
  Speaker 1: of a year for Saudi Arabia to be leading the
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  Speaker 1: g twenty summit later on in the year. I wonder
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  Speaker 1: how whether how that meeting will go down, or even
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  Speaker 1: if it happens, if tensions continue to be so so high.
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  Speaker 1: But until then, Ze, thanks very much, thank you. Now
• 6:10
  Speaker 1: onto Greece. It's no longer in economic free fall, but
• 6:14
  Speaker 1: it's still living with the legacy of the financial crisis,
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  Speaker 1: and one problem it's facing is that there are more
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  Speaker 1: educated Greeks than there are jobs to give them. Here
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  Speaker 1: Jeanette Newman, this is a peaceful stretch of green on
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  Speaker 1: the outskirts of central Athens. It's the site of one
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  Speaker 1: of the Western world's first institutions of higher learning, Plato's Academy.
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  Speaker 1: Now it's a park where neighbors walk their dogs. Marble
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  Speaker 1: slabs from Plato's time lies scattered in the grass. If
• 6:55
  Speaker 1: it weren't for a tiny shack of a museum built
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  Speaker 1: a couple of years ago, he would have no idea
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  Speaker 1: that this place was home to a forefather of the
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  Speaker 1: modern day university. But in Plato's homeland, the modern university
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  Speaker 1: system has become somewhat antiquated. Out of step with the
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  Speaker 1: challenges facing present day Greece. Here in Greece and many
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  Speaker 1: other countries, enrollment and higher education has shot up over
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  Speaker 1: the past several decades. Many parents and their children equate
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  Speaker 1: more studies with more job opportunities, but the number of
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  Speaker 1: young workers with graduate studies has outpaced the number of
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  Speaker 1: jobs that require those degrees. The mismatch is particularly acute
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  Speaker 1: in Southern European countries such as Greece, which are still
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  Speaker 1: recovering from the region's devastating economic crisis. That's led to
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  Speaker 1: a problem that academics have given the somewhat bewildering name
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  Speaker 1: over education. Over education is described as a situation whereby
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  Speaker 1: individuals are employed in a job where the level of
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  Speaker 1: education required either to get or to perform that job
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  Speaker 1: in question, is below the level of edge occasion held
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  Speaker 1: by that worker. So an example would be a graduate
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  Speaker 1: in a non graduate job, such as perhaps a waiter
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  Speaker 1: or bartender. That's a Dell Wheeland, a researcher at the
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  Speaker 1: Economic and Social Research Institute in Ireland, the word over
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  Speaker 1: education sounds like it's judging you for getting that PhD.
• 8:22
  Speaker 1: In nineteenth century comparative French literature, it's not. We'll leave
• 8:26
  Speaker 1: that to your friends. But the issue does tend to
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  Speaker 1: be overlooked by policymakers. I'm Constantas. I'm an expert specializing
• 8:43
  Speaker 1: in issues of vocational education and training. Constantinos Pulakas thinks
• 8:49
  Speaker 1: he knows why. He studied the topic at the European
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  Speaker 1: Center for the Development of Vocational Training. That's an agency
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  Speaker 1: based in his native Greece. He estimates that as many
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  Speaker 1: as were in ten young Greeks with a university degree
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  Speaker 1: could be over educated, meaning they work in a job
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  Speaker 1: that doesn't require that degree. There was a long period
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  Speaker 1: where even mentioning the term over education was was something
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  Speaker 1: that was frowned upon. If you if you're saying that
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  Speaker 1: over education is a problem, there's a fear that, you know,
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  Speaker 1: some families, some young people may interpret that as basically saying,
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  Speaker 1: you know, you shouldn't be pursuing more education, or that
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  Speaker 1: getting a higher degree may be useless. In fact, workers
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  Speaker 1: who have an advanced degree are overall better off in
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  Speaker 1: terms of employment rates than those without one. They also
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  Speaker 1: make an economy more productive and innovative. But over education
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  Speaker 1: still has a cost. Let's say you have an m
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  Speaker 1: b A, but you work. In a job that doesn't
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  Speaker 1: require an MBA, you will earn on average, around fourteen
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  Speaker 1: percent less than someone who is required to have an
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  Speaker 1: MBA in her job. She's matched. Now, you will still
• 10:03
  Speaker 1: learn more than someone in your company who has less
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  Speaker 1: education than you do. You will learn more than a
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  Speaker 1: colleague who has, for instance, a bachelor's degree compared to
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  Speaker 1: your m b A. But over educated workers tend to
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  Speaker 1: feel that their skills and studies aren't being put to use.
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  Speaker 1: Individuals who are over educated have lower levels of job satisfaction,
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  Speaker 1: and what happens in terms of this is that individuals
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  Speaker 1: who have lower levels of job satisfaction they are much
• 10:31
  Speaker 1: more likely to move jobs, and there's costs of the
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  Speaker 1: firm associated with this cost of the individual and costs
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  Speaker 1: of the firm. Greece provides an extreme example that illustrates
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  Speaker 1: how overeducated workers are more likely to jump from job
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  Speaker 1: to job. During the past decade, as Greece's economic crisis deepened,
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  Speaker 1: an estimated four hundred thousand Greeks with a university degree
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  Speaker 1: or higher left the country a massive brain drain. Even
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  Speaker 1: before the crisis, Greek universities have been pumping out graduates
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  Speaker 1: at a rate that's out of whack with the demand
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  Speaker 1: for those higher degrees. Their universities aren't good at preparing
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  Speaker 1: them for the job market, and apprenticeships aren't as institutionalized
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  Speaker 1: in Greece as in other European countries. Pulakas, the Greek
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  Speaker 1: over education expert, says the crisis also laid bare other
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  Speaker 1: deep seated problems. Many Greeks say job offers are based
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  Speaker 1: more on personal connections than professional merit. It can also
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  Speaker 1: be hard to lay off under performing workers. In a
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  Speaker 1: healthier economy, workers would have greater opportunities to find a
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  Speaker 1: job that matches with their degree, and he wouldn't have
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  Speaker 1: incentives or she wouldn't have incentives to go outside of
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  Speaker 1: the country to manage to get these opportunities. So, in
• 11:47
  Speaker 1: a sense, they over education and the brain drain phenomenon
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  Speaker 1: or inter linked in my In my view, ironically, the
• 11:53
  Speaker 1: exodus of so many highly skilled workers has created a
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  Speaker 1: problem for the Greek economy, a lack of qualified workers
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  Speaker 1: that's getting in the way of the country's nascent economic recovery.
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  Speaker 1: To address the shortfall, the Greek government has launched an
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  Speaker 1: initiative with a curious but catchy name it's called Rebrain
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  Speaker 1: Greece platforms. That's a Greek government officials speaking at a
• 12:28
  Speaker 1: conference in Athens in early December. Hundreds of people had gathered,
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  Speaker 1: buzzing with ideas about how to bring brains back to Greece.
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  Speaker 1: At the conference, Greece's Center right government announced details of
• 12:40
  Speaker 1: its rebrain plan. Officials are offering salaries of around three
• 12:44
  Speaker 1: thousand euros per month or about thirty three dollars. They're
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  Speaker 1: offering it to Greeks who returned from abroad and take
• 12:51
  Speaker 1: vacant technical jobs that companies are already having a hard
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  Speaker 1: time filling. The Greek government will pay about two thirds
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  Speaker 1: of that. The company that employs the right ane will
• 13:00
  Speaker 1: pay the rest. Officials based this salary on an analysis
• 13:04
  Speaker 1: of what mid level Greeks ages forty are already earning
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  Speaker 1: in major European cities. The government will initially target a
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  Speaker 1: group of about five hundred Greeks who will receive the
• 13:14
  Speaker 1: subsidized salaries for two years. Non Greeks can also apply,
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  Speaker 1: but they are required to speak Greek so that they
• 13:20
  Speaker 1: can work more efficiently. Other countries that suffered brain drains
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  Speaker 1: are also trying something similar. Portugal launched a program in
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  Speaker 1: July to give as much as six thousand, five hundred
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  Speaker 1: euros to Portuguese who return home. Spain subsidizes the salaries
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  Speaker 1: of some scientists who come home. Those countries, as well
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  Speaker 1: as Greece, are also facing rapidly aging populations. That adds
• 13:42
  Speaker 1: an additional urgency to bring back younger workers. Dmitris Panopolis,
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  Speaker 1: one of the economists at the Greek Labor Ministry working
• 13:52
  Speaker 1: on the Rebrain project, told me at the conference that
• 13:55
  Speaker 1: the program is overdue. This is the first public initiative,
• 14:00
  Speaker 1: I mean governmental initiative targetting directly to the people living abroad.
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  Speaker 1: This is the first one. Panopolis himself has felt the
• 14:08
  Speaker 1: cost of Greece's brain drain. Several years ago, Panopolist did
• 14:12
  Speaker 1: his MBA in Greece with a group of five friends.
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  Speaker 1: The only one stayed in Greece was me. The other
• 14:18
  Speaker 1: five lift as a labor economist and data analyst. Panopolis
• 14:23
  Speaker 1: says the numbers show that he, like his friends probably
• 14:26
  Speaker 1: should have left Greece in search of better opportunities. To
• 14:30
  Speaker 1: a logical some logical people would go, and the data
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  Speaker 1: show that you should. But okay, if everybody leaves the ship,
• 14:39
  Speaker 1: somebody should say, I don't know. Panopolis says he knows
• 14:43
  Speaker 1: that it's one thing to bring talent in Greeks home
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  Speaker 1: to urgently fill some job vacancies. It's another thing to
• 14:48
  Speaker 1: keep them here. And it's also a challenge to keep
• 14:51
  Speaker 1: young graduating Greeks from leaving in the first place. That's
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  Speaker 1: why the government is also trying to foster the conditions
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  Speaker 1: to create better jobs increase that would help encourage qualified
• 15:02
  Speaker 1: workers to return on their own, and it would also
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  Speaker 1: ensure that there are worthwhile positions for the over educated
• 15:08
  Speaker 1: who have remained in the country. Officials are trying to
• 15:11
  Speaker 1: streamline bureaucracy. They are considering cutting the cost to higher workers. Also,
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  Speaker 1: they're providing financial incentives to companies that are creating jobs,
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  Speaker 1: such as in software engineering. Otherwise, well educated Greeks who
• 15:25
  Speaker 1: return could slip once again into the vicious cycle of
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  Speaker 1: over education, getting trapped in jobs that don't match their qualifications.
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  Speaker 1: If you don't have adequate incentives for you know a
• 15:38
  Speaker 1: lot of new and high skilled jobs being created in
• 15:41
  Speaker 1: the economy, and you can only do this by investing
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  Speaker 1: in dynamics sectors of the economy, ensuring that you have
• 15:49
  Speaker 1: entrepreneurship within your economy. If you don't have that part
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  Speaker 1: of the equation, you may still end up having a
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  Speaker 1: high incidence of over education. You must still end up
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  Speaker 1: seeing a high share of your graduate labor force working
• 16:03
  Speaker 1: in jobs where they would be considered to be non
• 16:06
  Speaker 1: graduate local level jobs. Government officials talk a lot about
• 16:10
  Speaker 1: the lack of skilled workers and how graduates need to
• 16:13
  Speaker 1: do a better job preparing for the coming robot replacement revolution,
• 16:18
  Speaker 1: as the case of Greece shows, though there's talent already
• 16:20
  Speaker 1: out there, so countries also need to make sure their
• 16:23
  Speaker 1: economies are creating jobs suited to those workers skills. Let's
• 16:27
  Speaker 1: call it a good match for Bloomberg News and Jeanette Newman.
• 16:37
  Speaker 1: We're going to talk more about education and the economy
• 16:41
  Speaker 1: next week with a report looking at education policy from
• 16:44
  Speaker 1: the standpoint of a single US state, Maryland. But right
• 16:48
  Speaker 1: now I'm going to catch up with DC based Federal
• 16:51
  Speaker 1: Reserve reporter Chris Condon on the annual meeting of the
• 16:55
  Speaker 1: American Economic Association, which is just back from I think
• 16:58
  Speaker 1: this year it was in in San Diego. Chris. That
• 17:01
  Speaker 1: is a is a massive gathering of the American Economic fraternity,
• 17:07
  Speaker 1: lots of sort of academic stuff that happens there, people
• 17:10
  Speaker 1: delivering their their papers and their research, but also some
• 17:14
  Speaker 1: pretty big figures in the world of economics. Tell me
• 17:19
  Speaker 1: what the big themes were this year and the sort
• 17:21
  Speaker 1: of highlights for you, sure you're you're absolutely right. It
• 17:26
  Speaker 1: is a boundless experience with papers and panels on every
• 17:30
  Speaker 1: imaginable topic under the economic sun. Disneyland is you pick
• 17:36
  Speaker 1: your favorite ride and you go plug down your ticket
• 17:40
  Speaker 1: and you go for that one. UM. And it was
• 17:42
  Speaker 1: a bit of its slow start, just sort of gathering
• 17:46
  Speaker 1: some sort of recognizable theme, but it really um kind
• 17:52
  Speaker 1: of exploded on Sunday morning, the last day of the conference,
• 17:55
  Speaker 1: when we had two star packed panels, one talking about
• 18:01
  Speaker 1: the the concept of Japanification, that is, is the US
• 18:05
  Speaker 1: and Europe headed for a phenomenon as we've seen in
• 18:10
  Speaker 1: Japan with very long term low interest rates and low
• 18:14
  Speaker 1: inflation and getting stuck there. Uh. Followed immediately by a
• 18:17
  Speaker 1: panel of very senior central bankers from around the world
• 18:21
  Speaker 1: from major central banks UM talking about that topic as
• 18:26
  Speaker 1: well and what lessons they've learned from the crisis. A
• 18:29
  Speaker 1: lot of talk about inflation, and through all of it,
• 18:32
  Speaker 1: a lot of talk about fiscal policy. In other words,
• 18:36
  Speaker 1: what central bankers cannot do? Um? Are they running out
• 18:40
  Speaker 1: of ammunition? And who must ride to the rescue um.
• 18:43
  Speaker 1: So that's really where it kind of all focused at
• 18:46
  Speaker 1: on the last day of the conference. I mean, I
• 18:48
  Speaker 1: noticed it's been a theme since then as well, because
• 18:51
  Speaker 1: the Bank of England Governor Mark Connie has also talked
• 18:55
  Speaker 1: one of his sort of final interviews before he leaves office,
• 18:58
  Speaker 1: he's talked about sent traw banks kind of running out
• 19:01
  Speaker 1: of tools to respond to shocks. I mean, it's something
• 19:06
  Speaker 1: we've talked about quite a lot. I mean, Larry Summers
• 19:08
  Speaker 1: has been sort of talking this up for for a while.
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  Speaker 1: But do you think it had reached another another level
• 19:13
  Speaker 1: or is it just that more people now agree that
• 19:15
  Speaker 1: it's that it's true that we're in what he would
• 19:18
  Speaker 1: call a kind of liquidity trap where when you, you know,
• 19:21
  Speaker 1: you put push interest rates down, but you're you're pushing
• 19:24
  Speaker 1: on the famously on a piece of string. You're not
• 19:26
  Speaker 1: able to get the money into the economy and get
• 19:28
  Speaker 1: the get the economy moving. Do you think it's more
• 19:31
  Speaker 1: people who kind of agree with that view now or
• 19:33
  Speaker 1: is it just absolutely absolutely I think the Larry's idea
• 19:37
  Speaker 1: of secular stagnation has moved beyond the stage of debate.
• 19:42
  Speaker 1: It is very widely accepted now, and now the debate
• 19:46
  Speaker 1: is what can we do about it and who must
• 19:49
  Speaker 1: do that action. And let's remember too, when we talk
• 19:53
  Speaker 1: about imploring fiscal policymakers to act in a certain way,
• 19:58
  Speaker 1: central bankers have to be very cautious. UM. It's not
• 20:02
  Speaker 1: really in the best interest of say, the Federal Reserve
• 20:05
  Speaker 1: to lecture Congress about what its job should be, when,
• 20:09
  Speaker 1: of course Congress is the is the authority that grants
• 20:12
  Speaker 1: the central bank its own independence. So it's a touchy
• 20:16
  Speaker 1: thing to go around talking about what, you know, what
• 20:19
  Speaker 1: Congress is doing wrong in what they should do. But
• 20:21
  Speaker 1: more and more central bankers are dropping that caution slowly
• 20:27
  Speaker 1: and imploring legislators around the world. In Mario Dragi, you
• 20:32
  Speaker 1: know he has done that. UH in the US are
• 20:34
  Speaker 1: doing it more and more. In Japan they're they're a
• 20:37
  Speaker 1: bit further along that stage UM in in trying to
• 20:40
  Speaker 1: get uh UM taxing and spending policies UH and in
• 20:45
  Speaker 1: some cases coordinated with monetary policy working in a way
• 20:50
  Speaker 1: that will help not only counteract, say the next drop
• 20:53
  Speaker 1: in demand, the next recession, but also help lift us
• 20:57
  Speaker 1: out of this this rut. We're stuck in a very
• 21:00
  Speaker 1: low growth, low trend growth, low inflation, low productivity. UM So, yes,
• 21:06
  Speaker 1: the the urgency is rising. The volume of those arguments
• 21:10
  Speaker 1: has risen, I think, and we've got to I know
• 21:13
  Speaker 1: that Christine Regard as she comes into the europe now
• 21:15
  Speaker 1: in the European Central Bank, has got to navigate that now.
• 21:19
  Speaker 1: And she says I heard her resist the notion that
• 21:23
  Speaker 1: Europe was facing Japanification. But she too is going to
• 21:26
  Speaker 1: face this dilemma about how much to push the fiscal
• 21:29
  Speaker 1: argument with European governments. I guess the assumption is she
• 21:32
  Speaker 1: will be able to push it a bit more because
• 21:34
  Speaker 1: of her close relationship, having previously been a finance minister.
• 21:38
  Speaker 1: But it's funny because you go all the talk of Japanification,
• 21:42
  Speaker 1: which used to be quite an obscure term, has now
• 21:44
  Speaker 1: become more more mainstream if you go to Japan, of course,
• 21:48
  Speaker 1: it feels like the sort of barely one percent growth
• 21:51
  Speaker 1: they've had there has actually served them reasonably well. They don't.
• 21:54
  Speaker 1: It doesn't feel like a super depressed economy, but they have.
• 21:58
  Speaker 1: It's got a shrinking labor for UM and a much
• 22:01
  Speaker 1: more extreme demographic aging issue than either even than Europe
• 22:06
  Speaker 1: and certainly than the US. I've always it would certainly
• 22:09
  Speaker 1: cause much more of a fuss I think, and be
• 22:11
  Speaker 1: much more of a problem politically in the US if
• 22:14
  Speaker 1: you had that kind of one percent growth there. I
• 22:19
  Speaker 1: did mention earlier that as well as these sort of
• 22:22
  Speaker 1: blockbuster sessions with central bankers, there's lots of economists on
• 22:27
  Speaker 1: the edges of these a A meetings talking about their research,
• 22:32
  Speaker 1: and it can be pretty interesting. Which one court which
• 22:35
  Speaker 1: was your sort of favorite economic paper that caught your eye, Chris,
• 22:39
  Speaker 1: I would have to point to the paper written by
• 22:43
  Speaker 1: Eric Brynhilson, he's a professor at m I T, along
• 22:46
  Speaker 1: with I think it was four other co authors, and
• 22:49
  Speaker 1: they attacked the problem that economists face in measuring g
• 22:54
  Speaker 1: d P in an age when new technologies have produced
• 23:00
  Speaker 1: so many new free or at least in terms of
• 23:04
  Speaker 1: money free goods and services. GDP, as you know, Stephanie,
• 23:10
  Speaker 1: is based on the costs of goods and services. So
• 23:15
  Speaker 1: if something is free, then you can't add it to GDP,
• 23:20
  Speaker 1: and and for the same reason you can't add it
• 23:22
  Speaker 1: to measures of productivity that creates a huge problem for economists,
• 23:26
  Speaker 1: and and GDP is further supposed to be a rough
• 23:29
  Speaker 1: proxy for measuring overall welfare in our society. So how
• 23:34
  Speaker 1: do we know that whether our our lives are being
• 23:37
  Speaker 1: enriched in some way by these new technologies if the
• 23:41
  Speaker 1: price tag is zero? So bring Hilson came up with
• 23:44
  Speaker 1: a very interesting set of experiments in which they asked
• 23:48
  Speaker 1: groups of people, um, would you be willing to give up,
• 23:52
  Speaker 1: say Facebook, for a month for fifty dollars? And they
• 23:57
  Speaker 1: as different subgroups different amounts of money, and they ended
• 24:00
  Speaker 1: upcoming UH. For for US Internet users, they came to
• 24:03
  Speaker 1: a median UH valuation of something around forty two dollars
• 24:09
  Speaker 1: a month for Facebook. So now they have a dollar
• 24:12
  Speaker 1: figure they could assigned to Facebook. And they created an
• 24:16
  Speaker 1: alternative sort of index of g d P and found
• 24:21
  Speaker 1: that by some estimates, if you if you did it
• 24:25
  Speaker 1: this way, Facebook could reasonably add up to about zero
• 24:30
  Speaker 1: point one one percentage points to GDP within this index.
• 24:35
  Speaker 1: So that's that's quite an extraordinary amount really for one product.
• 24:40
  Speaker 1: And you could apply this to many other things, perhaps
• 24:43
  Speaker 1: more practically to things like GPS mapping services, which really
• 24:48
  Speaker 1: do have a utility help us be more productive, and
• 24:52
  Speaker 1: so that kind of points the way. I'm sure there'll
• 24:54
  Speaker 1: be a lot more work on this. The points economists
• 24:57
  Speaker 1: in a direction where they might be able to better
• 24:59
  Speaker 1: measure how these new and quote unquote free technologies are
• 25:04
  Speaker 1: actually contributing to the economy and contributing to productivity. That's
• 25:10
  Speaker 1: very interesting. I suspect there will be some people who
• 25:12
  Speaker 1: have my thought of you know, how much would would
• 25:14
  Speaker 1: I pay someone to take Facebook away from me and
• 25:16
  Speaker 1: take some of these others. But I mean it's a
• 25:18
  Speaker 1: more serious point actually, although they you might find that
• 25:21
  Speaker 1: kind of addition of sort of hidden consumer welfare or
• 25:25
  Speaker 1: hidden g d P if you like, from the value
• 25:27
  Speaker 1: people put on Facebook. But if it is getting in
• 25:29
  Speaker 1: the way of people's productivity day to day, then there
• 25:33
  Speaker 1: could be hidden costs in there as well. So it's
• 25:37
  Speaker 1: I suspect that the debate will go back and forth
• 25:39
  Speaker 1: on this, but it will certainly be grist to the
• 25:41
  Speaker 1: mill of people who say we are not measuring what
• 25:44
  Speaker 1: matters in the economy today. Chris Condon, thank you very much,
• 25:50
  Speaker 1: my pleasure, thanks for listening to Stephanomics. We'll be back
• 25:56
  Speaker 1: next week with more brilliant insights into the global economy
• 26:00
  Speaker 1: in the meantime. You can find us on the Bloomberg Terminal, website, app,
• 26:03
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• 26:08
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• 26:11
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• 26:16
  Speaker 1: or you can also find me at my Stephonomics. The
• 26:19
  Speaker 1: story in this episode was reported and written by Jeanette Newman.
• 26:23
  Speaker 1: It was produced by Magnus Hendrickson and edited by Scott Lamman,
• 26:26
  Speaker 1: who is also the executive producer of Stephanomics. Special Thanks
• 26:30
  Speaker 1: this week to see a dowd Chris Condon and Andrew Atkinson.
• 26:35
  Speaker 1: Francesco Levy is the head of Bloomberg Podcast