Latest / The Capitalism and Freedom in the Twenty-First Century Podcast / Consumer Sentiment, Junk Fees, Medical Debt, and the Future of Economic Policy with Neale Mahoney

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Consumer Sentiment, Junk Fees, Medical Debt, and the Future of Economic Policy with Neale Mahoney · The Capitalism and Freedom in the Twenty-First Century Podcast

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  [MUSIC]
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  >> Jon Hartley: This is the Capitalism and Freedom the 21st Century podcast,
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  an official podcast of the Hoover Institution Economic Policy Working Group
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  where we talk about economics, markets and public policy.
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  I'm Jon Hartley, your host.
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  Today my guest is Neale Mahoney,
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  who's a professor of economics at Stanford University and
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  the Director of the Stanford Institute for Economic Policy Research, or CPR.
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  Neale is a highly distinguished, widely published applied microeconomist, and
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  recently served as Special Assistant to the President for Economic Policy during
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  the Biden administration, working at the White House National Economic Council.
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  Welcome, Neale.
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  >> Neale Mahoney: Great to be on the podcast, Jon.
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  >> Jon Hartley: Really wonderful to have you on here.
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  I want to start, Neale, and just talk about your background and
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  where you grew up.
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  How did you first get interested in economics?
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  >> Neale Mahoney: Yeah, great question.
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  So I grew up in Amherst, Massachusetts, College Town in Western Mass.
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  Home of Amherst College, Hampshire College, and UMass Amherst.
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  My parents are both academics, my dad's a retired
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  professor of food science, with a PhD in biochemistry.
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  My mom actually defended her dissertation,
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  her PhD dissertation in nutrition when she was pregnant with me.
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  Took some time off to raise me and my brother and
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  then went back to Amherst College to work in a microbiology lab on research and
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  advising students once I was in elementary school.
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  So grew up academic house and in a house where there was a lot
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  of exposure to an interest in economic policy.
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  So listening to the news, reading newspapers, arguing about things.
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  As we got older and I came to economics out of an interest in policy.
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  I was thinking about the questions of domestic policy, international policy,
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  and found economics and economists to be illuminating and
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  credible in the frameworks they brought, which helped me think
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  about a complicated world in tractable ways and in the evidence and
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  the analytical rigor they brought to thinking about policy.
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  And that just hugely appealed to me and that set me on the track
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  to being first taking AP Economics in high school, then being an undergrad econ and
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  math major, and then finally going to get my PhD.
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  >> Jon Hartley: Great, and so you're a boss guest.
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  I think you must be a Boston Red Sox fan.
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  I guess, given the fields that your parents studied,
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  did that influence you to study health economics,
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  which is sort of a big, I think, theme in your own research or?
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  >> Neale Mahoney: Yeah, no, it's a good question, actually.
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  My interest in in health economics grew out
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  of the classes that I was taking at Stanford.
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  I was taking second year Industrial Organization
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  on competition and regulation in markets.
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  And you know, I found the, the tools, the frameworks to be very powerful.
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  I found the topics of inquiry to be Less interesting than I would like.
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  And there was, this was 2006, there was, I think,
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  a growing debate about healthcare policy.
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  And so my primary advisor is, I guess you have an advisor for life,
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  John Levin, but he's gone on to bigger and better things.
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  But he pulled me into a project on health insurance markets and
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  it was a combination of being able to use these IO tools with
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  an area that I think is important and interesting and
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  really rich with economics, which, which got me into health economics,
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  which continues to be, you know, a, a large share of my portfolio.
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  But I have very broad interests.
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  So you know, I, I'm working in lots of areas.
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  >> Jon Hartley: That's great. And IO being industrial organization for
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  those that aren't familiar.
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  And John Levin, I mean, he's now the President of Stanford.
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  It's amazing see how so
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  many economists in the president roles at various universities.
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  I wanna, first, I guess get into talking about some of your research you've done.
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  I think to start us off, you've done some really great work on consumer sentiment.
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  I think macro and micro people would find this really interesting.
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  I mean, yeah,
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  consumer sentiment is something that I feel like has been a big theme in the,
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  I guess behavioral macroeconomics, even in the sort of policy world for a long time.
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  A lot of, I think Wall street traders follow the University of Michigan
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  consumer sentiment surveys have been running for many decades.
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  How much does consumer sentiment really matter for the macroeconomy in your mind?
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  And I mean, what do we know about it?
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  We know it's I think correlated with economic activity variables.
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  But I mean what do we know is actually causal?
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  Does weak consumer sentiment cause negative economic activity?
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  Does negative economic activity cause negative consumer sentiment?
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  And what do we know about seminate measurement and
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  how much of it maybe is politically driven?
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  I know you've done a lot of work on this.
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  >> Neale Mahoney: Yeah, so great questions.
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  I will try and get to them as I maybe I'll tell you a little bit of the story of sort
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  of how we got into this space and what we found as a way of answering your question.
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  So together with another Stanford graduate student or Visma graduate student,
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  Ryan Cummings, we got interested in consumer sentiment, or
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  I guess started doing work in consumer sentiment in fall 2023.
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  When this really large gap emerged between consumer sentiment as
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  measured by University of Michigan and what you would predict if
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  you looked at the historical relationship between consumer sentiment and
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  economic outcomes and you sort of rolled that forward into that time period.
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  And so I think like many others,
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  we wanted to come up with explanations and whenever you see a big gap.
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  I think there are multiple factors at play.
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  I'm not going to argue that we understand everything that's going on,
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  but we wrote two pieces which we thought were illuminating and
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  got a good amount of traction.
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  One of them looked at political polarization.
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  As you mentioned, responses to these surveys on
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  consumer sentiments based on five questions have become,
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  I think, increasingly politicized.
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  So when a Democrat is in the White House,
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  people who affiliate with the Democratic Party tend to be more optimistic.
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  When a Republican is in the White House,
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  people who affiliate with the Republican Party?
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  One thing we pointed out, this sort of jumps off the page if you look at
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  the data carefully, is that this political polarization is not symmetric.
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  We wrote the line that Republicans cheer louder and boo harder, but
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  their sort of deviation is about two and a half times as large as that of Democrats.
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  And we could speculate on reasons.
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  Maybe they're just better fans to their team.
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  But that means that when Republicans are in office,
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  then because their positive sentiment is not canceled out by Democrats,
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  there's a little bit of a boost or a moderate boost, and vice versa.
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  So we found that if you adjust for this,
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  you can explain about one third of the gap.
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  So by no means all of it, but enough that it was sort of interesting to write up.
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  And I think it was something that resonated.
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  The second piece we wrote, which I think also resonated is this was in fall 2023.
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  And at that point inflation, the way economists measure it,
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  which is the change in prices over the last year had come down to,
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  I don't remember the exact number, let's call it around 3%.
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  And so there was this puzzle.
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  While yes, consumers, we know sentiment is dragged down by inflation,
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  but now measured inflation is historically close to normal,
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  why is sentiment still depressed?
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  And we made the point which is consumer.
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  While economists measure inflation as the price change over the last year,
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  consumers experience inflation as the change in prices when they go to the store
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  relative to what they think is normal.
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  And if you're buying eggs, maybe that's relative to the price last week or
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  last month.
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  But if you're going to buy a pair of new running shoes, you don't run as,
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  as much as you like to.
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  Like me, it's based on the price three years ago.
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  And so, if prices increased a lot two years ago, three years ago, and
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  not as much this year, you will still get sticker shot when you go into the door.
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  So we did this analysis, we found that inflation has
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  a enduring effect and that it has a half life of one year.
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  Which means a shock to inflation.
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  The impact in year one let's say it's 10 percentage points, in year two
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  it's 5 percentage points, in year three is 2 and a half percentage points.
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  And so it just takes a while for people to acclimate to the new price level.
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  >> Jon Hartley: Interesting.
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  So this is more but I guess, I think very timely, I guess,
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  with all these elections where incumbents are kind of being voted out of office.
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  That it's really price levels that matter,
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  rather than year over year inflation rates.
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  Which, I guess, year over year inflation rates is generally what
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  central bankers pay attention to and internal policy makers pay attention to.
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  But at the end of the day.
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  >> Neale Mahoney: It's just like one nuance, is it?
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  I don't think it's price levels, right?
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  A Coke costed a nickel for something like 100 years.
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  And even now we're not outraged when we go into the store and
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  bottle of Coke would cost 1.50.
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  But it takes a while for us to acclimate.
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  And so not as far as price levels, but
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  it's not just inflation over the last year that people are experiencing.
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  And so, you know, we had some estimates in the paper on,
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  based on historical patterns, how long it takes for
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  the impact of inflation to work its way through the system, two, three years.
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  But, you know,
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  I think that's the frame of mind that I think the evidence suggests that one
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  should take when we're thinking about the impact of inflation on consumer sentiment.
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  >> Jon Hartley: Interesting.
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  Well, I do know that when you look at elections,
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  there are these shocks to consumer sentiment.
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  Where basically members of the losing party,
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  their consumer sentiment basically
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  collapses after elections.
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  And this is a pretty, I think what I would say is like a pretty robust result,
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  I think, across countries.
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  What's interesting is I've seen some work by, I think Atif Mian and Amir Sufi,
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  and some others.
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  That they sort of look at elections as kind of natural experiments and
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  look at these sort of potentially exogenous shocks to consumer sentiment.
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  And, and what they find is that there aren't really
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  big real effects in terms of the differential between,
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  say, the losing parties, consumer spending versus the winning parties.
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  And I think that kind of casts some shade on the idea that consumer
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  sentiment really matters a ton in terms of economic activity and
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  that it's maybe a reverse causality thing,
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  that economic activity really causes shifts in consumer sentiment.
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  I'm curious what your thought is on the sort of causal questions.
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  Obviously, Wall Street traders are very closely following these consumer sentiment
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  prints when they come out from the University of Michigan and others.
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  But maybe it's more just a proxy for how economic activity,
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  real variables, are affecting consumers.
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  And I'm curious what you think about the whole causal question here.
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  >> Neale Mahoney: So there's, I don't remember all the details.
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  There was a study, I think it came out of the St.
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  Louis Fed probably close to 20 years ago which said that consumer sentiment is
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  a leading indicator of economic outcomes at that time.
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  But as it's become more politicized, it becomes maybe a leading
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  indicator of political outcomes, but less so of economic outcomes.
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  And consistent with the evidence that you just talked through,
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  one puzzle in the data has been that even,
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  even though consumer sentiment has been historically low,
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  that consumer spending behavior has been very robust.
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  And so I think that points to also, you know,
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  I wouldn't say that consumer sentiment is useless.
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  It's just it is teaching us a different set of things over time.
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  And, like, there's a lot of research to be done to help us understand what it's
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  teaching us, perhaps better and where it has less predictive power moving forward.
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  >> Jon Hartley: Yeah, absolutely.
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  And, I mean, it being a lead indicator is certainly useful in forecasting.
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  Which is largely something a lot of Wall Street and
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  sort of policy economists tend to do or tend to use.
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  So I know they find that data very useful.
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  I want to pivot a little bit to some of your other research.
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  A lot of your other research is focused on health care, you know,
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  industrial organization, consumer regulation, and
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  really want to start with talking about your work on junk fees.
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  So, I mean, could you explain to us what junk fees are exactly?
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  How pervasive are they in the economy and
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  what you think some of the right policy fixes are?
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  >> Neale Mahoney: Yeah, so maybe for context for this.
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  When I was in the White House in 2022, 2023,
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  and everything in the White House is done in team.
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  But I was a core member of the group that was sort of
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  building out the White House junk fees agenda.
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  Co-authored a blog which laid out the principles for
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  the agenda, ran policy processes,
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  I was writing speech blocks and tweets for the president.
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  I think the agenda was clearly good politics.
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  And what I was trying to do, and your listeners can tell me if we were
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  successful, is also trying to ground this in good economics.
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  So what do I think are the economics of these policies?
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  Markets work, and I'm a firm believer in markets.
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  When people can compare the price and ideally the quality of goods on offer and
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  move their business to firms that provide them a better deal,
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  that provides the incentives for firms.
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  That's sort of a bedrock principle behind competitive markets.
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  I think the most egregious example of junk fees are when there are mandatory charges.
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  Which are not rolled into sort of the upfront fee.
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  So if you're buying a concert ticket and, you know,
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  now I think these issues have maybe been made more salient, but
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  you're buying a concert ticket and you don't realize that you're going
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  to be hit with $20, $30 service charges when you're checking out.
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  And there's, you know, really good evidence from experiments showing that if
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  you knew, you might not buy the ticket or
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  you might buy a cheaper ticket because you have a certain budget in mind.
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  And so that's,
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  there's no economic reason why people shouldn't know the price when they're.
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  Before they enter the credit card information, before they select the seat,
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  before they make this both time commitment and I think also mental commitment into,
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  I'm gonna be near the front of my favorite concert.
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  So I think one thing that this agenda is trying to do is
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  get markets to work by forcing those prices to be upfront and all in.
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  There's a recent finalized rule by the FTC which does this for
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  lodging and for events.
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  Some states have gone further.
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  State of California.
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  And I think the idea is like when this happens, one,
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  it makes markets more competitive because it reduces search costs.
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  You don't have to click through seven screens to figure out the price.
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  Two, I don't think we want markets where nice guys finish last or
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  firms that try and do well by their customers end up getting worse business or
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  less business because they look like they're more expensive.
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  So I think it helps well meaning firms.
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  And there's this literature on exploitative innovation where I don't
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  think we want industries which are in the business of coming up with new tricks and
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  traps for consumers.
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  We want businesses to lower their costs and
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  increase the quality of what they're offering.
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  And so when you take these strategies off the table,
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  I think you're actually empowering markets to write that.
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  And obviously some,
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  not every policy is going to be constructed like I would construct it.
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  If, you know, I'm sitting in my office as an academic.
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  There are political considerations, there are industry pressure groups,
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  but that is the North Star that we've tried to lay out.
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  And you know, I've been, you know, whenever possible explaining this to
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  folks, lifting up policies which I think move towards this North Star.
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  And I think when policies stray from it, I'm also going to be critical.
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  So that is what I'm trying to do with this agenda.
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  >> Jon Hartley: And it's fascinating.
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  And, and I mean, anytime I feel like I book a hotel and I see a hotel price.
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  You know, it ends up being the case that there's just like an extra,
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  I don't know, 40, 50 being added here and there.
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  And it's, it takes a lot of time to figure out, like what.
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  It's not salient, what the actual price is.
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  And so I think it's a super interesting question because.
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  And I think it's feeds into free market and economic institutions,
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  which I think are a leading driver of growth,
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  especially liberal economic institutions.
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  And when we talk about the law and contracting,
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  which is very important, my limited understanding of contract loss,
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  is that there has to be this concept of mutual assent, right?
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  And so if people are voluntarily entering a contract but
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  not knowing the actual price, I think that kind of mucks up
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  this sort of bedrock principles of voluntary exchange and free markets.
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  I mean, there's a reason why at sort of a much worse level,
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  why we have legal protections against fraud, right?
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  People can't kind of lie during these sorts of economic transactions involving
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  contracting.
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  I think this is very much kind of related to that.
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  I guess that the challenge is these price deviations.
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  I mean, sometimes they're small, right?
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  I mean, it's extra $40.
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  You can't really sue someone for fraud, right?
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  But these are little frictions that I think can really,
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  at some degree, muck up voluntary transactions.
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  And I think that's maybe a free market case that you could kind of make for that.
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  I know you've also done a lot of work on medical debt as well.
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  I mean, just how big of a public policy issue is it and
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  what do you think the best policy fixes are there?
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  I do know that a lot of these hospitals have lots of medical debt that's kind of
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  outstanding.
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  I know there's a lot of charity care, but
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  obviously there's a lot of people that are being chased around.
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  You have to pay outstanding medical bills and so forth.
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  Often that skews to lower incomes.
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  Explain to us some of your work on that and what the big issues are there,
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  as you said.
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  >> Neale Mahoney: Thanks for taking me up for this.
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  I think since I was in grad school, I've been interested in
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  the intersection of our healthcare system and financial distress.
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  And part of this is economics.
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  Part of this is my sense of fairness, that having a health shock,
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  I think is incredibly disorienting, scary, burdensome.
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  And this is my preference, I don't wanna be in a world
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  where we're compounding that with financial shocks.
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  The question is, how can we do that with policy which generates
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  benefits and not too many unintended consequences?
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  And so it is sort of delivering help to people who are going through
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  difficult times.
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  And that's.
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  That is trial and error.
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  So, on medical debt,
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  maybe I can start by telling you about briefly about two studies,
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  I think, one which is discouraging and one which is more encouraging and
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  points us in a direction where I think we should go.
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  And I think the policymakers I've talked to have been responsive in
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  some of the policies they put out.
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  So starting in maybe it was 2016, myself and
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  people who became my co-authors saw an episode of Last Week Tonight
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  with John Oliver where as a stunt and to attract attention to the issue,
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  he bought and forgave millions of dollars in medical debt.
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  And you can buy this from collection companies.
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  Collection companies are expecting to collect pennies on the dollar
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  after the recovery costs and so it's cheap to do.
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  And so, you know, he did this stunt and, you know, we called.
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  So he worked with a, a nonprofit which at the time was called Rip Medical Debt.
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  Now they're called Undue Medical Debt.
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  And we called them up and said, you guys should study what you're doing.
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  You know, this could be really beneficial for people.
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  It could be the rare example of something which has a low cost and
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  high benefit, because there's a bunch of anecdotal evidence that these folks
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  are really struggling in that medical debt could help them get back on their feet.
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  And so they play ball with us, these wonderful people at the non-profit,
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  they agreed to randomize their debt forgiveness where possible.
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  They didn't have enough money, an athlete would want to buy and forgive.
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  Trae Young would wanna buy and forgive medical debt.
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  In Atlanta, they couldn't buy it all obviously, so they randomized it.
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  And so we got this data.
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  We also ran some of our own experiments and
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  we basically studied the impact on every outcome.
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  We thought we could measure your things you can see on credit reports.
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  We would run surveys where we'd look at mental health people going
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  back to the doctor.
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  Our results were largely, but not entirely disappointing.
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  So we found for people who had their debts reported to the credit bureaus,
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  removing that debt, I think unsurprisingly,
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  boosted their credit scores, especially if they didn't have other derogatories.
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  If you have seven flags on your credit report and they remove one,
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  you're not going to look that much better.
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  But if you have an otherwise clean credit report, it does make a real difference.
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  But we couldn't detect any impacts on mental health or on healthcare access,
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  despite this being a population where there's really poor mental health and
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  people are less likely to go to the doctor than I think clinicians think they should.
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  So that was one result.
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  I'll tell you another result, and then I'll tell you how we square the circle.
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  We also did a study with Kaiser Permanente where some nonprofit
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  hospitals in the US are required by law to provide financial assistance
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  to people who have large medical bills and are unable to pay.
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  There's a lot of investigative journalism suggesting the degree to which
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  they do this or the degree to which they make this easy is limited.
• 25:34
  I think Kaiser Permanente probably does a good job and the qualification for
• 25:39
  their program is based upon what we economists call regression discontinuity.
• 25:45
  So if your income is below a specific level and it's 350% of the federal poverty
• 25:50
  line, which, like, I think regular humans don't know what it is.
• 25:54
  I don't even know what it is for my family.
• 25:57
  If you just below, you qualify.
• 25:58
  If you're just above, you don't.
• 26:00
  So we get a whole bunch of people apply.
• 26:02
  We see people who just qualify, just don't.
• 26:04
  You can compare the people who qualify to the people who don't.
• 26:07
  The people who qualify for this financial assistance,
• 26:10
  they are more likely to take their meds.
• 26:13
  So it's Kaiser Permanente.
• 26:14
  So they're in this integrated system, we can see everything they do.
• 26:17
  More likely to take their meds, they're more likely to go back to the doctor.
• 26:20
  They're more likely to get tested in treatment for
• 26:24
  mental health, for early stage diabetes.
• 26:28
  So it does seem like addressing these financial constraints, which I think make
• 26:32
  people scared of going back to the doctor, showing up at the doctor is like
• 26:37
  a random number generator in terms of the bill you're going to get for many people.
• 26:42
  And removing that fear factor, eliminating some of those costs so that
• 26:48
  people can afford coinsurance deductible going forward makes a real difference.
• 26:56
  The medical debt relief we were studying, I previously told you that
• 27:01
  was occurring often five plus years after the hospitalization.
• 27:05
  So once the debt had been sent to collections,
• 27:09
  once a primary debt collector had scrubbed it over,
• 27:12
  I think at that point, other than the impacts on your credit report,
• 27:17
  it's probably a little bit, it's too little, too late.
• 27:22
  People have moved outside of the window where they need follow up care for
• 27:26
  their health condition.
• 27:28
  They're probably used to screening their phone calls,
• 27:30
  ignoring letters from debt collectors.
• 27:33
  And so I think what we're learning from this research
• 27:38
  is the burden of medical debt is real, but
• 27:42
  addressing it sort of super downstream where it's
• 27:46
  cheap is limited cost but limited benefit.
• 27:51
  Addressing it further upstream, some of those people are going to pay.
• 27:54
  So it's higher cost, but it also, you know, I think has demonstrated benefits.
• 28:02
  And what we're trying to figure out now in research, is there intermediate
• 28:07
  policies which give us some benefit, aren't too expensive, right?
• 28:13
  The folks who can and should pay are still paying, but the folks who are never going
• 28:17
  to be able to pay are getting relief early enough so they get the care they need.
• 28:22
  So that is the agenda.
• 28:26
  And we've seen lots of action by cities and
• 28:28
  states where I think they recognize that they're doing this downstream relief but
• 28:34
  they're also trying to address things closer to the source.
• 28:38
  So I'm cautiously optimistic that we are both going to figure out what is
• 28:42
  good policy and we're going to move towards doing it in this space.
• 28:47
  >> Jon Hartley: Yeah, very interesting too on the,
• 28:50
  I guess the RCT sort of limited results are interesting that you know,
• 28:55
  the credit scores change but not too much else.
• 29:00
  So I just wanna I guess pivot a little bit and I think medical,
• 29:04
  that's one, I think it's a huge issue and a lot of people come
• 29:09
  out of these unexpected health shocks in their lives and
• 29:13
  they either sometimes have challenges affording things and
• 29:18
  the medical debt can follow people around for quite some time.
• 29:24
  Just pivoting to a more of a macro level here,
• 29:28
  you served in the Biden administration on the National Economic Council,
• 29:33
  which is the White House's Economic Policy Coordination Council.
• 29:39
  You were particularly focused on energy and junk fees and
• 29:42
  a whole set of other issues.
• 29:45
  What do you think the major lasting accomplishments of the Biden
• 29:49
  administration's economic policy agenda are.
• 29:52
  I mean, we'll see how much the Inflation Reduction Act gets rolled back
• 29:57
  in the Republican reconciliation tax bill.
• 30:01
  I predict that much of it will be.
• 30:02
  But I'm just curious, sort of even beyond the Biden administration,
• 30:07
  what do you think the path forward on economic policy is for
• 30:12
  the Democratic Party following Kamala Harris's loss to Trump in 2024?
• 30:17
  I mean, do the Dems go back to more of a, a Clintonite vision of sort of,
• 30:23
  you know, free trade, somewhat more free market oriented, or
• 30:28
  more down the road of Elizabeth Warren with certainly a much
• 30:32
  more progressive approach that's less friendly to markets?
• 30:38
  >> Neale Mahoney: Yeah, so let me start with the last question, and
• 30:41
  this is something I've spent time thinking about.
• 30:45
  I think like many people who are in capital D Democratic policy circles,
• 30:51
  in the wake of the election, my view is that the Democratic Party can and
• 30:57
  really needs to be a big tent and that it's sort of a false dichotomy
• 31:02
  between the more progressive policy and the more centrist policy.
• 31:08
  I think instead it's building out and making case for good policy.
• 31:14
  And so let me tell you a little bit about sort of how I try and
• 31:20
  do that from where I sit as an economist and why I think it can be successful.
• 31:29
  I think there are sort of some policies which are say, coded as progressive.
• 31:35
  So some of the junk fees policies, I think are coded as progressive.
• 31:39
  They came out of those sort of think tanks.
• 31:42
  They were championed by people from that wing of the party.
• 31:45
  And this is not the case with every progressive policy.
• 31:48
  But I think these policies actually,
• 31:52
  when designed correctly and when messaged correctly, I think.
• 32:00
  I think have much broader appeal.
• 32:02
  And that is what I've been trying to do is using I think
• 32:06
  a long standing literature in behavioral economics and
• 32:11
  in sort of study of competition to show that.
• 32:15
  These policies should appeal to people who believe in markets and want them to work.
• 32:21
  And actually know that saving markets from some of their excesses
• 32:27
  is actually going to help having a more market oriented economy moving forward.
• 32:33
  They realize that this is sort of important policy to be championed.
• 32:39
  And so that's what I was trying to do, or one thing I was trying to do there is
• 32:43
  build a bridge between the progressive wing and the centrist wing.
• 32:47
  And I think we were reasonably successful in doing that in reading
• 32:52
  the types of journalists who then wrote op EDS in support of the policy.
• 32:57
  In terms of bipartisan support for some of the bills that were
• 33:03
  introduced in committee where we've seen this passed,
• 33:07
  I think with broad bipartisan support in states.
• 33:12
  So that would be one example of taking something that's coded as progressive.
• 33:16
  Using evidence to show that this is actually benefiting in a stories
• 33:22
  should be supported by groups which extend, I think across the right.
• 33:28
  You see folks like Holly who are supportive of some of these
• 33:33
  sort of competition consumer protection policies.
• 33:37
  I'll give you another example which works in the other direction,
• 33:40
  which is housing policy.
• 33:42
  I think the yimby sort of removing constraints on the supply of housing.
• 33:50
  Those policies are sort of traditionally coded as centrist,
• 33:55
  center right, center left, sort of deregulatory.
• 33:59
  But because of this huge body of evidence,
• 34:02
  I think there's been now understanding among the progressive left that.
• 34:07
  Even though deregulation isn't the first thing that
• 34:11
  those folks think about when they wake up in the morning,
• 34:16
  that housing is a sort of kitchen table issue for every American.
• 34:21
  And regulation is preventing us as a society from allowing people to live
• 34:26
  where they want to live, allowing people to live where the jobs are.
• 34:31
  And so we've taken a center, center right coded issue and
• 34:36
  with evidence created a much broader coalition.
• 34:40
  So that's just to return to your point.
• 34:42
  I think Democratic party can and should be a big tent and
• 34:47
  evidence can build bridges between progressives and centrists on good policy.
• 34:54
  And that's, I think that's sort of a key thing I try and
• 34:58
  do is how can I make a case for good policy and
• 35:02
  build a broad coalition in support of it.
• 35:05
  >> Jon Hartley: It's fascinating and I think there definitely are some
• 35:09
  realignments going on I think in both parties.
• 35:13
  And I think you're right that there is this sort of,
• 35:17
  I guess maybe even a neo Populist sort of bipartisan shift on things like for
• 35:23
  example, pro family taxation.
• 35:26
  And you see sort of pushes for
• 35:29
  expanded get child tax credits to some degree with maybe
• 35:34
  some favoritism towards baby bonus oriented policies.
• 35:41
  You've also got, I guess some thoughts on paid family leave and
• 35:47
  maybe some bipartisan consensus emerging on that too.
• 35:52
  But it's interesting too, I guess on the land use regulation front,
• 35:56
  you would think that in general maybe traditional Reaganite Republicans would be
• 36:01
  in favor of housing deregulation.
• 36:03
  And especially, it's deregulation that kind of helps, helps the poor a lot.
• 36:08
  It's interesting how I think that the Democratic Party is much more embraced,
• 36:13
  you know, the EMB movement.
• 36:15
  And I think it makes sense at some level because it is an issue that largely pits
• 36:19
  incumbent homeowners against non incumbent homeowners.
• 36:22
  And how you make the case to incumbent owner owners to somehow
• 36:27
  take a hit to their own housing values I think is a hard sell.
• 36:32
  Even though maybe in the long run there's a case that, you know, they'll bring in
• 36:36
  more economic productivity to their locality in the long run.
• 36:40
  But yeah it's an interesting question.
• 36:43
  I do think a lot of those YIMBY folks do like public housing too.
• 36:47
  I think the YIMBY movement itself is not purely sort of a free market one.
• 36:52
  I think there's many phases of it.
• 36:54
  I'm curious.
• 36:55
  One thought on behavioral economics is you work a little bit in the space and I know
• 37:00
  there was this big advent of behavioral economics in really the 2000s and 2010s.
• 37:06
  And I think this sort of peaked with the Thaler Nobel and
• 37:11
  you had the Kahneman Nobel, and these people were very influential
• 37:16
  I think certainly in the 2010s and late 2000s.
• 37:20
  Where do you think behavioral economics is at?
• 37:22
  It sort of offered that the whole RCT revolution was part of this and
• 37:27
  this idea that you could sort of study these interventions that could
• 37:32
  potentially be low cost, high benefit, have a big policy impact.
• 37:36
  Obviously, economists have totally shifted into doing this kind of
• 37:39
  research on the empirical front.
• 37:40
  But I feel like the more behavioral oriented type interventions that have,
• 37:47
  I guess maybe been a bit more challenging in the public policy sort of arena where.
• 37:55
  One like providing evidence that these things can scale is a big issue.
• 37:58
  There's the replication crisis has been a huge issue.
• 38:01
  Dan Ariely and a lot of other sort of behavioral economists have kind of been
• 38:04
  ensnared in there.
• 38:05
  But there's this explosion of behavioral ideas and
• 38:08
  I think there's a lot of them that don't really work very well too.
• 38:11
  That's kind of another problem.
• 38:13
  What do you think behavioral economics is?
• 38:14
  I mean, there's some people out there that said that
• 38:18
  behavioral economics is sort of dying or has died.
• 38:21
  What behavioral economics is, I think, hugely not well defined as well,
• 38:26
  like any rct, I guess, could be a behavioral economics kind of issue.
• 38:30
  But I think RCTs related to randomizing tax rates, for example,
• 38:35
  is I think, very different from maybe some of the more nudge oriented ones that,.
• 38:42
  Thaler and Sunstein wrote about in the late 2000s.
• 38:46
  But I'm just curious what your take is on sort of the state of evidence based
• 38:51
  research in particular as it relates to behavioral economics and policymaking.
• 38:57
  >> Neale Mahoney: So I don't think of myself as a behavioral economist.
• 39:01
  And I think one measure of success of behavioral economics is I
• 39:07
  do papers that I think have strong behavioral components.
• 39:12
  And so I think the field to some extent has been very successful
• 39:18
  because now there's all these people who think about, quote unquote.
• 39:25
  Behavioral factors in consumer decision making settings,
• 39:30
  even in, in firm settings, which wouldn't.
• 39:34
  And they don't think of themselves as doing behavioral economics.
• 39:36
  They think about themselves as studying retail, of studying competition,
• 39:41
  of studying the airline industry.
• 39:43
  So that actually strikes me as a true marker of success,
• 39:48
  that it is now just an accepted part of our toolkit,
• 39:53
  like any field where people are being entrepreneurial, something.
• 40:00
  Things are going to work and some things are not going to pan out,
• 40:05
  you know, at scale and that's fine.
• 40:08
  So I don't, I see that as a sign of a sort of a healthy field, you know,
• 40:13
  where people are being entrepreneurial and trying things and trying to scale things.
• 40:19
  So I don't.
• 40:20
  Yeah, I'm not deep enough to have sort of more sophisticated views than that.
• 40:27
  But, but it does strike me that, just like I'm not,
• 40:31
  I'm not a research design person, I'm not a sort of causal inference person.
• 40:37
  But all of my papers, I think had about causal inference in them.
• 40:41
  It's just an accepted thing that we do as economists.
• 40:47
  >> Jon Hartley: It's fascinating, yeah,
• 40:50
  it's one of those things where you're like in 2010s.
• 40:54
  We had this massive rise.
• 40:56
  All these governments were adopting these nudge units.
• 41:01
  And it was kinda presented along with, I think the book,
• 41:05
  Nudge, if you read it, by Cass Sunstein and
• 41:08
  Richard Thaler as this sort of third way type policy approach.
• 41:13
  And so, well, I think it's sort of a great idea in its day.
• 41:21
  I just feel like that the big issues that are really sort of come home to roost
• 41:26
  are taxes, trade is obviously back in the forefront, and has been since 2016.
• 41:32
  Both parties have pretty significantly shifted on trade.
• 41:36
  So I feel like a lot of the, which are really the more sort
• 41:41
  of classic issues have sort of kind of eclipsed that old
• 41:46
  kind of that maybe third way nudge sort of policy agenda or
• 41:51
  evidence-based policy agenda to some degree.
• 41:55
  I mean there's lots of RCT that shed lots of light on things, on many areas of
• 41:59
  public economics and, and definitely don't want to discount any of that.
• 42:03
  Research I think is super useful and super helpful.
• 42:05
  But yeah, it's, it's interesting just how, how like I feel like a lot of
• 42:10
  that evidence based policy work, like, you know, your junk fees work is a great
• 42:16
  example of something that's had success in terms of, you know, going from
• 42:21
  research to actually being implemented in actual the public policy space.
• 42:27
  But you know, you just wonder like,
• 42:29
  are there enough of these sorts of things that you can really scale to create like
• 42:34
  a policy agenda that's a sustaining sort of political one.
• 42:37
  And it's hard I think to even sell the masses on what even RCTs are.
• 42:42
  I mean, certainly, people with academic backgrounds understand that,
• 42:47
  but I think it can sometimes be a bit harder in growing a larger coalition.
• 42:53
  I wanna just spend a little bit of time talking about you and
• 42:57
  your new role at SIEPR.
• 42:58
  For the audience members who are less familiar with what SIEPR does,
• 43:02
  can you explain a little bit more about what it's doing and what your vision for
• 43:06
  it is as you step into the role as director?
• 43:08
  >> Neale Mahoney: Totally, so SIEPR, or Stanford Institute for
• 43:13
  Economic Policy Research is an institute at Stanford,
• 43:19
  and we try to do three things.
• 43:22
  So one is attract, train, and launch careers of
• 43:27
  young folks in economic research and in economic policy.
• 43:34
  So we host the Stanford pre-doc program which has 30 plus people.
• 43:41
  We have visiting postdocs, we run programs for undergrads.
• 43:47
  Something that I would like to do more of over time is bringing people and
• 43:53
  launch them into government jobs.
• 43:56
  I think having ambitious, well trained
• 44:01
  folks in government economic background,
• 44:07
  I think in the long run is just hugely important.
• 44:13
  So, so we'll be doing, doing more there.
• 44:16
  So that's, that's bucket one of what we do,
• 44:22
  Bucket two is that we, we host events.
• 44:27
  So we have an annual economic summit which has had many
• 44:31
  high profile speakers over the years.
• 44:36
  This year we have Jamie Dimon, Austan Goolsbee,
• 44:41
  Ruth Porat, other sort of household names.
• 44:46
  But then we also do almost on a monthly basis,
• 44:50
  events where we bring in leading sort of economic thinkers in business,
• 44:56
  in research and in policy, you know, to interact with our community.
• 45:02
  And so I think that's, you know, a great resource for, for
• 45:07
  students, for faculty, for, you know, folks who live nearby or
• 45:12
  who just want to watch something on YouTube.
• 45:17
  The third thing we do is we try to do work which bridges
• 45:21
  between economic research and economic policy.
• 45:25
  And so there it's everything from how can we support the type
• 45:32
  of research which is going to provide nonpartisan,
• 45:37
  rigorous answers to pressing policy questions,
• 45:42
  to how can we do the translational work or
• 45:46
  build models based upon economic research that will
• 45:52
  help inform policymakers on a quick term basis,
• 45:57
  let's say around housing policy or
• 46:01
  some other issue that they're thinking about.
• 46:07
  And we're trying to increase connective tissue with policymakers, so
• 46:11
  that when they're thinking through an economic issue,
• 46:15
  they can pick up the phone and call us, and we can direct them to an expert and
• 46:19
  help them think about the consequences and unintended consequences
• 46:24
  of what they're thinking about, or give them a menu of options.
• 46:28
  So, so I think, you know, super exciting job for me.
• 46:33
  I have a great staff.
• 46:34
  Stanford faculty and students are amazing.
• 46:38
  No, there'll be a learning curve but we're setting our height or
• 46:42
  our ambitions high and hopefully getting close to them.
• 46:49
  >> Jon Hartley: Well, that's terrific.
• 46:50
  I spent a lot of time at SIEPR events, and they're great.
• 46:54
  And SIEPR, there's a lot of great programming, and
• 46:58
  hosts a lot of great academics, and does a lot of great work.
• 47:02
  A real honor to have you on, Neale, and to hear about your career, and
• 47:07
  ideas, and as you're stepping into a SIEPR director role,
• 47:11
  what SIEPR's planning for the future.
• 47:14
  Thank you so much for joining us.
• 47:16
  >> Neale Mahoney: Thank you for having me, Jon.
• 47:17
  >> Jon Hartley: This is the Capitalism and Freedom the 21st Century podcast,
• 47:20
  an official podcast of the Hoover Economic Policy Working Group,
• 47:23
  where we talk about economics, markets and policy.
• 47:26
  I'm Jon Hartley, your host.
• 47:27
  Thanks so much for joining.