« The Weeds

Galaxy Brain Recession

2021-08-31

Matt, Dara, and German use this week’s episode to explore the infrastructure bill before Congress. They focus on broadband access for rural and urban America and explore the purpose of the money being set aside for Amtrak. Parallels between the two emerge both in the need for connecting Americans and in the pitfalls facing this country if we fail to make progress. This week’s white paper is a study of a methodology for predicting recessions based on individuals' expectations of their own employment status and perception of the economy rather than a scientific dissection of impersonal macro data sets.

Resources:

“What’s in the new infrastructure bill — and why it’s a big deal” by German Lopez (Vox; Aug 10, 2021)

White Paper: “The Economics of Walking About and Predicting Unemployment” by David G. Blanchflower & Alex Bryson (NBER; August 2021)

Hosts:

Matt Yglesias (@mattyglesias), Slowboring.com

Dara Lind (@DLind), Immigration Reporter, ProPublica

German Lopez (@germanrlopez), Senior Correspondent, Vox

Credits:

Ness Smith-Savedoff, Producer & Engineer

Erikk Geannikis, Producer, Talk Podcasts

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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Allow welcome to another absolutely meat on the box. He cast network. I met weeklies. He is here with from on Lopez public as darlin. I don't know if it's infrastructure weak or not, but there is an infrastructure bill that has passed the United States Senate that is being held hostage to some slightly peculiar intricacies dynamics. In the House of Representatives, but seems likely to become law in something close to its current form, and so it's worth talking about, I think not just the legislative gamesmanship around the bill, which is not our area of expertise and has sort of dominated the coverage.
But like what is actually in the bell, just quite a few things in the bell, some of which are not that I don't like not that much weeds to go into, but they're going to subsidize. Creating some electric vehicle chargers, they're going to put extra money into the normal state highway. Grant funds are they're going to put some extra money into mass transit. Do stars there's some municipal water systems, things in there that are probably earnest and and we're talking about some day, but something around with saying he's been working on that I want to know more about is rural broadband, which is a topic that Sir AIDS in the ether constantly always seems like a good idea. People should have internet in rural areas, certainly over the last year and a half or so there's been a very strong on the round argument made that it's important to a lot of you know, other, that it serves a utility function. In a lot of people's lives way, but I
never understand like exactly what the issue it like. What do we need to do here and what's going on in this bill so too, to go into this a bit of such of the problem that the has been really clear in the last year and a half his door was alluding to is The internet is obviously a big part of our lives, and not only is it a big part of our lives, but it's like I, so mobility problem now for a lot of Democrats. Consider like look. Our people can arise up to these jobs are require working from home if they dont have good internet. So The issue, as far as I am standard, as as far as experts have described to me, as essentially that, like, if you're a broadband company, why would you go to roll area servicing like three people when you can go into an urban market and serve potentially hundreds of thousands, if not millions, and that's essentially the calculus alot of these internet companies make so even if they do that's going to like rural areas will offer really shitty service. I mean the internet. Oh down all the time. I know plenty of people living in
are all areas, and they constantly complain about just about every single internet provider out there, because, even if aside from like the download and upload speeds, just being awful for even like doing zoom calls or just watch, Catholics or whatever its concept going down, they call the internet company, they don't do anything and the build sets out sixty five billion dollars to build out broadband nationwide. I should say that, based on what I have heard from my activists and experts, this isn't enough money to like a truly universal, but it's like a huge chunk of money and we'll get us pretty close apparently, but even aside from money. It does some like things like rules for uniform internet bill, so they ve kind of compare this to a nutrition label, which I think is interesting, but in terms like a uniformity that will be required for for these kinds of internet bills, there will also be like permanent discounts offer to Oh income, people mandatory low cost options for everyone as well and also, and they were, could it really matter
There is a ban on digital red lining where internet companies are essentially told. Like look, you can't just say in all these situations that, like there aren't enough customers here and you're not going to expand your service to like a few more sounds like right now: internet companies will arbitrarily stop even within, like local or county jurisdictions, because all say there that many customers and dislike mile danger or whatever, and that's one of the big things at the bill is trying to address here is like we need to make sure that, like low income, people, rural people have access, and just because the internet companies assume date all war by the internet does ambition get it. I mean, I think it's worth thinking about the sort of unit geometry of that the issue he right, because that explains how this problem arises right, but you know it class a little bit of money to strip
some wire, like from the main wire to a person's house but will cost a lot of money, is too like string that mean wire out along the road to the kind of backbone of that system. And so, if you have a lot of houses on a given block, it makes a lot of sense to invest in infrastructure, particularly if the houses are affluent and you think that they are like. He too want to buy inexpensive service from you, but the fewer people there are ride like the more rural areas and the lower income, the areas the less compelling it is to make that investment and its particularly true when you talk about the second investment tried. So like a deceit, I can get high speed internet from rise in or I can get it from Comcast. That's not assume. Burke, competitive marketplace, but it's not nothing right like if Verizon routinely was not fixing problems after outages like I could switch
to just like make its. Yet they underline the normal point here like in practice. It often means that when you inevitably call your current provider and threaten to leave as a customer, and then they offer you a better deal, that threat is not credible if your operating in a de facto monopoly way, but also just business wise right. It's very unattractive to make the apprentice s meant to be the second provider in a low density area, because you're gonna get like half the customers, and it's not that many customers and you're gonna be competing. So you know, like your profit margins, aren't, can be great in a big city, a kind of make sense these redundant builds. But you have to give people pretty large subsidies to make it worth doing in rural areas, and that's not new right. I mean it used to be that electricity was very unevenly distributed around
country, because stringing electrical wires out to every random small town is like really not a great business in the way that, like lights in Manhattan, is like an amazing business. People really like lights is very useful, but you know if there's not them People living someplace is expensive to bring them electricity and the government put a lot of money into it at a certain point and just decided you know, this is how it's going to be just like. The post office charges a flat rate, no matter where it is here, you're going we sort of took electricity and that domain, and we cannot talk about broadband as may be similar to those things, but have never really like dunning right. We ve never really bitten the bullet on just well. We're gonna have to spend a tunnel bunny district irish to places where it's not really efficient, because you know we just sort of think it's important, although I mean we dont, do it, even though
rural areas are very over represented in the political system, which is part of what makes this sort of vexing to me. I mean I guess this is this- was a tale or for some of the moderate senators to get on board with this, as they have those world constituents it and they want to get the broadband. I think the the point about trading this is like a utility is really the relevant angle here in terms of like how I think a lot of legislators are thinking about this. For the first time I mean this is this is by far the biggest investment a US if this bill passes would make into spanning internet access and the way that their approaching this, like none of it. If you read the actual detail, seems like. Oh, my god. This is such a radical, incredible planned. It just reads like this is what I imagine a lot the initial expansions I'd like to access to electricity and things like that looked like a hundred years ago or whatever, and- and it's the same thing here with with just approaching this dual
them like one. You do have a lot of low income borough people who just can't afford internet access and to the companies I mean that their not being like, devious. They would like to make as much money as possible and if they thought the customers were in an air, they would go there. So censure by bring all this money, and you know using some of the regulatory power, the federal government. Their goal is to just make it an attractive option for these companies and like make it so people in rural areas can really afford it. It really just comes down to this basic concept of Hey. This is a utility is like a standard that everyone is going to need going forward last year and a half a shown this, and we need to take it seriously so make about? This is like, as we know, from utility grids. You know. Certainly recent experience in Texas and less recent experience in California has demonstrated that, like it's not just about like do you have a grid or not it's about what is the carrying capacity and how you know neat.
Does that match the demand? And it certainly and this, as you know, I think, less premier, earlier policy issue than a future of work question that has led policy implications. But by the same token, by which the last year and a half has demonstrated that remote work cannot happen without widespread broadband and therefore to you know, have parts of the country that dont have broadband access. Is too weena limit them from the labour market like right now, it's very differ for the people of the world like at least it like. You know, Herman and frankly, for certain parts of this pandemic mad as well, who have like who, by their move, permanently out of the Deep Sea area, Herman or move like taken time in other parts of the country. Like it's hard you're, considering moving out of a major metropolitan area to think about. Ok, what do I know about what broadband access is like in the community's? I might be going too
would be much easier in a world where you have this bill and know that there is a certain baseline guarantee? That's probably going people on the margin more likely to move to those areas. And so the question for me is the same in that you end up having with a lot of like transit policy and other kinds of infrastructure policy? Are you building to serve the existing population or are you bill on the assumption that having that infrastructure in place will be a draw and will increase the population so that you don't end up with something getting overloaded almost as soon as it goes on line, I mean, I think, that you know the the sort of actual throughput capacity of the kind of fibre backbones is pretty good, and it's not so much the things get overload in. What I do think a question about this is: is that electricity transmission technology did not advance that much overshoot span of time right. So there was a bit
investment in providing like electricity court, unquote to people's houses, and then you know electricity in nineteen sixty five and electricity in twenty twenty are like it's pretty similar. You know it's like you got the electricity, the outlets work, your lights turn on the issue with broadband is only one issue with broadband. Is that it's a kind of a movie target right so like where I was last summer in May, and it has it speeds that are what we would have called broadband in a big city five to ten years ago, when they didn't have those speeds but like by today's standards, it seems lacking, and so the technology evolves. Our expectations of all read like we let web cameras aren't knew, but like the idea that you could do things on video calls constantly is built on the assumption that you have contemporary fast internet connections
so you, you kind of lagging behind a moving target, and it's hard to know it's. No one off bill is going to like create real equality, a round that they did it. There's a question politically of, like do. World communities actually place very high value on this idea, because, like a like, you can spend your own money on investing in local public services that you think are important communities rather country. Do that
and be I mean you talk about different sort of marginalized groups, indifferent contacts and you're. Sometimes talking about people who are under represented in the political system, but like whirl, America's very heavily over represented in the political system, and you see the ride like the agriculture industry is treated much more kindly than the vast majority of of economic output in the United States, and I just like, haven't like historically seen that, like I haven't, seen strong evidence that these senators from Montana Wyoming North Dakota, South Dakota, Kansas Nebraska, these very low density areas like that they actually care that much about world broadband, seemingly because their constituents also don't care that much possibly because you have a lot of self sorting right, like you know, people who do care in whom busily about accessed in its not hard to find a town in America, including some pretty small ones. Where liked
That is great, so I mean I, I wonder what kind of like dynamic politics around this are going to be like. Do we have a huge like a transformation that sticks or a kind of one off investment that goes away? I wanted the latch on to one thing you were talking about. There were just like the five of this technology is always changing and, like future proofing was a huge issue in terms of the negotiations with some of these bills. So there was like yours, essentially a debate between Democrats and Republicans on this. We're Democrats wanted to encourage as much I build up as possible, because that will have better speeds for everyone, and Republicans were essential, saying now. If, if a cable company or an internet company the sides. Look. We just need a bill by copper lines, which tend to be slower speeds than that. That should be fine and
kind of understand the republic inside here to some extent because their concern was if we made the bell about fibre. What if, like five g or six g, takes off seven g, all the jeez other jeez. What if that's up takes off? Unlike what this investment in fibre had made sense like this idea of future proof ethic. Ultimately, where the negotiations I am somewhere in the middle, where they are encouraging, like faster speeds, but there's like threshold around a hundred download twenty upload where that they have agreed to that will meet, possibly let cable companies and internet company society like look. We can just build copper lines in some of these rural areas, not only
not enough and like there are concerns about whether that future proving enough. But it just speaks of like some of the details in this bill about Lake, because our dealing with a with with a huge problem with this technology changing all the time. It's just not clear. What ultimately is the best option, at least to me as a layman, watching this as a journalist anyway, and it's a huge problem going forward with how Congress takes action, because I can't change before the money actually goes out. So I mean is anyone making the argument that met was kind of implying that from a public sector from private sector angle that, like that reason, you don't necessarily have to mandate. You know current top of the line technology is that once you have pressed in these rural communities? There's going to be a natural incentive to continue that that's going to become an expectation. People are going to get more invested in having high quality access and therefore they are going to become more responsive than they currently are to demand
that lake. You know, demand will genuinely increase once people get used to the idea of having broadband, or is the assumption that lake rural community these are not going to exercise any more active demand for broadband access than they are now. But it's going to continue to be the responsibility the federal government to make sure that they have. these things, because it will help them out. The theory goes in the long run of the big question mark right where, like I mean, I think Congress feels pretty and slated for the public in the law. ways and feel I they don't exactly to be super responsive with policy and in some respects. So like a MAC kind of alluded to this, if a few rural areas are demanding better access to internet? That's in large part going to like a few moderate senators and a few moderate representatives and who knows, if they're actually going to take that cause up to the Senate or the House of Representatives in the same way, some of its being like
really nationally demanded Miko. I'm in sympathy with, like I'm, either provisions than here that help like people in urban areas too, the word low income and experiencing digital red lining. So in those cases we know how that goes, as people have like in large part been neglected, enters a policy making for a long time and in some places. I say it's a big question market and ultimately, I covered change a lot of things up. It suddenly may this issue much more relevant and the question going forward is whether working for I'm really does take off in the way that a lot of people expect or, if all mentally. Like us, back to normal and while there's more virtual work, it's not really to the level that perhaps you would expect based on the unseeing I wanna take a break yarn and talk about turn. What the Amtrak provisions in this bill cause. I'm annoyed.
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Delaware is an unusual state in that it doesn't really have like an airport. So the Amtrak links from Wilmington to the other major cities of the northeastern United States are like really fundamental to the economy of Delaware and it has a sort of unique relationship. With Amtrak. In part, though, I mean because Delaware is situated on the northeast corridor, is there between DC and Philadelphia, not that far from New York in the sort of best train terrain of the country and anyway, so binding he's got this bell and it has a lot of money about sixty billion dollars for rail, some of that for freight, most of it for em, try, and you might be wondering like what kind of amazing futuristic trains, are we going to be getting for sixty billion dollar
noise and the legislation is not super specific, at least in terms of what we know now. It's not incredibly prescriptive, but Amtrak sort of put out through a sea and an article that you should expect nothing in exchange for the sixty billion dollars. They were warning, you don't expect the kind of high speed trains that you see in Europe and Asia that all of this money is going to be needed for maintenance, backlogs and they're. Not gonna do any thing of interest, then in parallel interact direct,
He put out this kind of document. Was there their vision document? They said, and it's got these various maps and things on it and their saying like oh there's, gonna be a train from Chicago to Madison was concept, and then you look at it in detail. You know their proposing a train. It's gonna run on the existing freight cracks. It's going to be slower than driving it's going to leave four times a day, and you know I love trains. I like em fuck, that's like why I'm fired up about this, but nobody would take a train from Chicago too. Madison that slower than driving it doesn't, it doesn't make sense. You know like it doesn't even like begin to make sense. High speed trains complete with play with
you could be a little bit slower than a plane and people will take the train anyway, because it's more comfortable because airports are annoying because airports usually far away from the downtown. The train is also great, like if you going specifically to New York City, because if you take a car to New York City, you then have the park the car and parking the car costs like a fortune. If we got almost anywhere else, it's like the opposite, it's like, if you drive to Madison, then you have your car, but if you go to Madison some other way than you, dont have a car. So it's a it's a debt set, this all seems like really obvious. I think to me here to anyone and it's really aggravating the Amtrak is not focused on trying to make good trains or make them in place where people might want to ride the train and is instead. I don't know why I d HU there trying to serve they just like that
on as many lines as possible on on a map, and this big infusion of money is like a great opportunity to try to impose some rigour in the thinking by either writing the bill and a more clearly or fire he for everybody I mean I don't know, but it's a gift you can't spend sixty billion dollars on improving passenger trains and then not have better trains like that's insane. So I guess the funding Western, for me is: do you believe, their assessment that the amount of money appropriated in the bill like that. All of that has to used on maintenance, backlogs stuff I mean, is that an issue of they just need to get more pos deficient maintenance. An issue of their spending money on maintenance, where they should just be scrapping existing infrastructure and ploughing forward into the future. Or are you saying that there should be more money in this bill in order to get em tracked where it needs to be? Very few minutes thing you,
is sorted. I guess one question is like: why are you running train rouse the don't generate enough fair revenue to cover the cost of meaning meaning the infrastructure right. They gives a little different from saying. You know, there's a big, ok, you know. There's environmental benefits, social benefits. You know not. Everything has to be a prophet wander prize. Unlike that's, that's fair enough! That's reasonable, but the theory that there are benefits right. It does hinge on people writing the train right if the rivalship is so love for the cost of providing the writer ship is so high that eat, like literally, can't cover the depreciation of the rolling stock like there's something wrong with the guy. It's difficult for me to second guess: they're, like exact and now
this of like how safe is the train ties here, but they are saying in the article at sight, o, you know Thanks to this bill inside passengers, aren't you need to bring their own duct tape with them to ride on the train? I would I mean I've written on the train. That's not actually my experience of it, but I just raises the question of what are they doing right and it's a difference between you know? Maintenance am Great ride. So if you are looking at the northeast corner- and you were to say, this is tunnel into baltimore- that's like really old part of it being old is that it has a a narrow diameter part of it having a narrow diameter. I don't really understand physics, but it's like the trains can go fast because of the air displacement and the narrow size of of, the tunnel she could do. People were replacing this tunnel right. You know
or we are straightening a curve someplace or were replacing that the wires the goals of the train has got a canary there's one. That's called a constant tension. Canary like better. So we say: ok, we're gonna working to replace this stuff and that's all we need new capital funds for, but then the output of, that is that the trains can go faster right and that's a like. We or you know congressional staffer could say like you could check on your calendar ride like they said by Ex day. Thanks to this upgrade, the trains would be fast, what's disturbing to me about the length of pure maintenance, they call this in New York. The empty air causes state of good repair, and it's like money that gets spent on things without any clear indication that anything is ever going to actually prove, and it's very like each is questionable right like like. Where does the money go exactly like why
Are you identifying projects that have that character? The broadband situation is actually quite parallel, like trees fall on these work, broadband lines like they do? They need to do something to keep them up and running, but if you were taught about a sixty billion dollar infusion of funds whose only stated purpose was to prevent the internet from breaking. like you would just be saying: that's very unambitious right, like you know, so, maybe sixty billion we'll get universal service to every body, or maybe you won't, but presumably, though, serviced some by right. Like you know,
and then you could say well, ok, if we had ten billion dollars more, we could have reached everyone, or twenty billion are or something right but like if you pass a broadband like a world Bruckian bill like you expect some people who currently do not have access to high speed broadband to get it s, like that's just obvious right and link. If we look back if this passes and ten years from now dislike no town in America, that has gotten fast internet that didn't work like that was that was bad. We ve fucked up and to set the bar so love to be like well, the trains won't break when sixty six billion dollars like it's just it's bizarre to me. You know a budget wise. If you look at what has been well construction costs costs in Europe like sixty billion dollars, should be enough to have a high speed train from Boston to Washington. Now, maybe you don't want to do that, like maybe you want to build a train? Someplace else
sir, or something like that, but it's a lot of money, our kind of experience. This problem recently had to go to Chicago to renew my spanish passport and I had become a spoiled from being in DC like if I wanted to go to New York or Baltimore could just get on a train sounds like maybe I'll try that here in Cincinnati, like Cincinnati, Chica bow and arrow like two big problems immediately. Just looking at Google One is up it was and one? I am the only train was running at one. I am an too it was nine hours which was like double the time. It takes a just drive there. So I think that the point that, like these transport, even make enough money to for Maintenance- I mean- surely part of that- must be that lay there are a lot of people like me. Looking this up and being like, I'm going to write that and then they lose revenue because he strains aren't fast it is just to say that, if like, if these trains were built to add another, since Cincinnati to Chicago line, would ever be profitable
but if it was going like four hours lake that someday, I would consider since I don't have to drive and a hate driving, but if you have to do it in it like. If you just sit there for nine hours at one a m. This is starting to be an option. There can be less peopled riding. There can be revenue, so you're gonna have to come back to Congress regularly asking for more money for maintenance. It just seems like a varies, stupid self, defeating model, and in that sense I mean it also seems a little bit like you know the the finance problem of easy, a bye Mary variable, or is it a continuous variable right like Are you satisfying the need for infrastructure? If you grant that like this, is thing that a every one ought to have says to and be that there are certain marginalized populations who will be especially hurt if they do not have access to. It is simply providing some thing sufficient to check that
or do you actually need to take into account? Is it of high enough quality that people can actually use it This often or like interdependent time saw this often with like municipal bus routes and infrastructure right, you would have a lot of circumstances in which, like the bus routes, weren't operating frequently enough or there weren't enough buses running for it to be a practical option for like the places where low income people actually lived, especially generally. and pushes the frontiers of that in various directions? And that's not necessarily as sensitive to people's people? Are going to change policy on that. But when you have ok we're going to remove this route entirely, that's when you are thinking about ok, who are we under serving who are we you know: do we have a certain obligation to provide something, unlike in practice, if it's going to take to hours to commute by bus into a city.
two hours can you back and if you don't make the precise half our time that buses leaving you're not going to be able to make it home all right, get into work like in practice. That's not an effective way. to commute and you're not going to be able to take that job and it seems like there's a disconnect in terms of a when we think that infrastructure is sufficient rather than just being in place. Why, and I think that that really underscores the the core of how M track is thinking about the sweat that like, if you think, of the train as like a public service, and they want to provide the train to as many communities as possible, and so they will look at it, and so they do can see right
that this Cincinnati to Chicago Route that you have to get on the train in Cincinnati in the middle of the night, that that doesn't work and that's really a train for Cincinnati right. It's a train that that passes through a show in their current proposal like they. They call out this, This Cincinnati Chicago thing, specifically amazing war. Ok, we want to raise the frequency Chicago Cincinnati to four times a day right. So you have this like midnight training, but also three trains that come during the daytime and it's going to be faster than a car. It's about a foot our drive- nay, I guess closer five hours, so it can be a little under four on the training, but it's still gonna be way slower than flying right. It's a two hour flight Chicago TAT, too. Since it had. He says it s not like up like a mass transit hub right where tons of people are getting around car less so that you know that the driving option is pretty compelling, there's a what
of flights from Chicago to Cincinnati. I mean I'm just looking at up. It looks like United thirty american in some forty five southwesterly thirty american, again nine thirty, eight southwest again TAT ten united again at ten fifty, so you don't is four times a day like really gonna make this compelling, because you have to think of the travel time right like it's faster than a car, but with a car you can just leave whenever right, you don't need to wait for what we trips a day, it slower and less frequent than a plain. It's not to say you could never have sedated Chicago train serve as the reasonably sized cities, but you'd have to spend like a lot like you'd have to really commit right, like you'd have to say. Ok, we are going to American, United and Southwest fly this and we are going to compete head to head with those We airlines were
frequent service. It's gonna be fast, and I think if you pencil, what out you might say? Ok, that's gonna cost a lot of money to build, and he just like it doesn't make much sense like in the scheme of things or it might makes but what they are doing now is kind of like half ass. You know it's like we're. We're gonna have a train like it's, not gonna, be a train anyone's really gonna wanna take, or at least I'm not gonna pay a high fair to take And if you do that, then you knock and where we are paying for the maintenance, and then you can become a back to Congress. Thanks, but we need money to like fix the cars on a sad sack, trained and like why? Why do that? Right? Where is lots of people take the train from DC to New York all the time if the trade was much faster, even more people would do. It They would pay a higher fair and if the train was really fast, you will go from DC to Boston on the train right like it's a
it's like a known mark where the investment is gonna pay off, but you have to get out of a kind of you to like an uncanny vow right where you going from. Ok, the train, those at one a m- and it takes nine hours to like The train also leaves at six a m and it takes five hours, like that's a big improvement, but it's not like. Why would you do it? It's like it's, it's not hard to get to Chicago, it's also just barely competitive with driving like could still just like. I think I would say. Let me I was a giant city, it's nice to have a car to get around like if I'm going to the spanish embassy to the train station and all that it would be nice to avoid that entire thing just drive directly to the nearest parking garage and then get my passport If so, it is as if it is even a vicious like one hour faster. I'm honestly, not sure, that's competitive enough, and you know be the ultimate judgment, like you said, is this line just isn't worth building and we should do the like high density market sat,
actually doing well in already and build those out more way I mean. that's where I guess that's such a fundamental difference between the northeastern United States and the MID West is like is having the car at the end of your destination like uproar, car right, and it was a mere you know, it depends what you're doing, but it just it's so much more likely right that you're gonna find yourself in York or GC, being like oh shit, where am I gonna park, this car verses? You can be in Cincinnati, you're gonna, like oh shit. How am I gonna get work going because I don't have a car right
and it's like I mean this is obviously not unknown. I think to the people who work in the transportation department like we ve all been places in America and kind. I know this, but it's not really integrated into the planning right. We're she's. If you're talking about competing with airplanes, then like that's fine but like you, train, has really fast to compete with an airplane because airplanes fast, that's my big policy and say I will point out that this is an example gets a little bit. We heard when we talk about verses, an airport, because it's not just that. This is an area where part is like not as a centrally located as downtown, but that it is literally in Kentucky. what are you gonna do not have a little time there, but other Yes, as someone with extensive experience, not having a car in Cincinnati Ohio, it is not an experience that I recommend yeah. That's weird! That's a weird lifestyle choice! If you live downtown its
twenty minutes away. It is a little weird. I love how to call the Cincinnati Northern Kentucky Airport US of that really makes any sense. Why did you see airports earned Virginia? That's life, you have it that's only because Lake Virginia took back. You know a large chunk of the ten miles where phantom, let's was it a break? And what's let's talk about predicting recessions, daydreaming about buying houses fun at all until the NGO, he kicks in government homer pairs, committing to change neighbourhood using colorful front door, but about soon loans, tax rates and the financial burden, and you kids and partners. If something happens, to look, if you are what, if you're welcome to the club, their waste make, does what it's a lot less. Carried out, which lack getting life insurance, the latter surprisingly affordable, especially for term coverage, if you think it makes sense to pay a bit each month to protect your loved ones, ladder is waiting for you and they make it fast and easy to get caught using a few minutes,
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This week's white paper is in and be our working paper called the economics of walking about in predicting unemployment by David G Blanche, flower and Alex Bryson. Theirs Some unique analysis here, but really this is the point of this paper- is kind of tell a story which is that when the twins, Oh seven, twenty away recession head a law of central economic planners. specially in Europe spent time saying, there's no way we could have predicted this, even though, in practice, you know things had already started happening in America six months earlier, you know there certainly would have some indicators, so there's something of a kind of building the historical case that a lot of throwing up of here. and no one could have predicted happened. What happened when Instead, people should have been a little bit more sensitive to to the inputs that they weren't looking at and from there. They build the
is that? Not only is it a good thing for the economy and especially central banks to be trying to predict recessions, but that they can do that by turning their attention away from more traditional indicators, of labour market rigidity and tortured, Ervay based assessment of like how normal people think the economy is going and why employees and their employers think about the chances, you know there are losing their jobs in the next twelve months and that sort of thing- and I admit that I initially came to this paper. Thinking out, the economists think they ve invented a new way to predict things and was very eyes jaundiced about it and have was totally sold Not for any like rational reasons to be clear, but just because it turns out that it flatter my preconceptions about economists, and the way that they use various classes of information
this is essentially saying economics thought that it had developed these fancy complicated tools to predict how the economy was supposed to go. instead of valuing the centre inside of micro economics, which is that pricing is an allocation of information and that the you'll for an efficient market? Is that people are going to have all of the relevant information and that is going to be reflected in the price and like there are laws, of challenges at both the micro and macro scales, to the idea that the price of something reflects the kind of most perfect allocation of information about its value by striking to me that the story of this paper is essentially economics, was born as a science, because people were like hey me, we should understand that when you have a market,
goods are being freely traded, that the price it Something lands is going to reflect the assessment. of the actors who are closest to it, about how much it's going to cost you continue to produce and what value is in terms of demand and went from there to go. no, no, no, we shouldn't think about what the people are actually on the ground have to say about employment. We should be looking at these larger actual things about the labour market that are. necessarily going to be as sensitive to real world conditions and therefore might not have the predictive ability to say twelve months out twenty four months out. Are we going to be in a position where we're gonna need to do some stuff to shore up a flailing economy? While I was in say there's a lot of interesting stuff in here about this debate over economics where should be like predictive or reactionary essentially some of the stuff. You are alluding to, and
I don't know what am I, I think, what one of the points that I was really sold for for this idea like being predictive, which are I mean, I don't think it's like a crazy, controversial idea, necessarily that you should try to predict recessions. People would love if we could do that reliably, but it can surprise if there's some economists, we'll just completely given up on the concept, is as far as I can tell it. There was this from this british economy. Assad gent, I'm sorry buttering this name but its Jan validity, and they essentially argued that like well. You know, doctors just treat healthcare problems and they don't try to predict a heart attack. They just try to treat it after. It happens.
I just found out so time, because that is completely wrong ray and the others actually like have a great deal of fun, pointing out how wrong that, like you, go to annual checkups, even if you're completely healthy, because you're hoping that you can like catch some health problems early. So I mean issues like argue for the EU Letty, of doing this I would say, like I read the study, I don't know this model will hold up in future recession, space on what they said it. It seems to hold up for the great recession. Maybe Qana did something Ferko bed, but I doubt it because you would expect people to know twelve months in advance. A covert was coming, but still at least the idea, seems sound to me. Yeah they're, doing something of a two step on the pivot recession. They're saying like. On the one hand, yes, of course we're not saying that someone could have predicted a pandemic by looking looking at survey data about people's assessed odds of unemployment. On the other hand, there saying, given that their was some softness
worry in these metrics, starting as early as twenty sixteen, it should have been, possible to predict that there was to be a recession at some point and or the recession was going to hit. The governor session was going to hit particularly hard in Europe and Lake things that when you're saying that there is a three to four, your window, in which you know if someone is saying and twenty sixteen that they expect unemployment to be high twelve months from now and your pointy did that we should have known something was coming in twenty twenty. That's not Super useful, predictably, because they're, not just talking about like shred econ bloggers, be able to lake take v. Three lapse and say I saw this coming twelve months ago. There saying should central banks be thinking about this when their setting economic policy and like I don't think the case is pretty, really strong for a central bank in twenty. Sixteen should have been planning for a twenty twenty recession based on
Information, they were getting that about twenty seventeen, and so I think that there is a I agree with you her month. maybe a little bit over fitted to the great recession and a little bit under fitted to you know that
possibility that we're going to continue to have global but event driven recessions. Going forward, you know one thing in terms of these like doktor analogies and this other stuff. That's always hard to capture mind around is that economics is a discipline and second academic thing where like to sell these professors and they published up it doesnt. What policy thing like lots of economists, work for the government and also most people like don't cross that barrier, but lots of people do right. There's always lots of traffic between academic economics works and, in particular, a central bank work, but also some other government things like it's normal for the president to appoint at least one often several like well regarded academic economists to high level jobs, which is not the way these things.
family work. Right, like the FBI, director is never like a sociologist from Princeton who had like a really good study of how organised crime function. Sprite you don't use in most fields is more of a conceptual distinction between like policy making and researching style shot out today, weeds time machine episode on the vulgar shock? If you want to know more about how the shifted yeah, but she was a good one, the issue with predicting recessions is always that like. If you could predict the recession, it probably would happen right like now. Maybe like you could write if everybody's ignoring you
but if you like, a famous economist right, like you'd, be invited to Jackson Hole to present your paper, the other people like the FED researchers would go. Take a look at it. The council economic advisers would think about what you're saying and if your work was convincing like, hopefully your work would be convincing. Hopefully people would pay attention to what you're saying and then they would do something different trite. So we had this question is a traditional recession. Indicator is when bond yields, but they call inverted. So, like the interest rate, five years out is lower than the interest rate one year out. This observed regularity that, when that happens over Sesar normally occurs at the most recent time. That happened, the feds started taking policy actions to prevent a recession from happening saw. Skinner. People in the economics takes universe, started dogma like well how we need to think about this threat
If a recession doesn't happen, do we say It shows like the yield curve, is meaningless if we say that shows the policy response marked then, as it happens, that was a covert pandemic. So if you are incredibly naive, about it. You'd say: aha like this is another win for the youth curve indicator, but, like that's, definitely wrong like we who live through. It know that that's just a coincidence, but like it's in the data right, if you, if you wanted to train it, I so I don't know it's like. I have mixed feelings about the whole thing it's like. How will we know if this is a reliable means to predict recessions, like maybe the European Central Bank will start paying more attention to this, and then the recessions won't happen, which would be good, like that's a good outcome for the world? What kind of bad for social science, which is it needs at least a couple runs?
policymakers completely ignoring this research, so that we can see how reliable it is. I was actually wondering about this a little bit on the converse side, which is like in the status quo world, where central banks are acting on this information that doesn't stop private actors from act on it right and I You wonder if there is like, if essentially what you're looking at- and they do assess that, like of several different survey based indicators, including what do people think about unemployment? What do people think about the economy? What to employers think about unemployment and very industries that, like all of those independently predict processions, but in terms of the employer thing in particular its trade, Me as plausible that, if you are an employer- and you believe that your dinner at the you're going to be faced, a lot of demand softness in the next twelve months. One thing you might do to prevent that from you know, taking your Benny into the red is to cut staff. Were you
and now, oh and therefore depressing women in your industry, and so I do think that, and you know it's possible, that there is a certain amount of feedback effects here, probably not to the extent that they can think an entire economy, but that were kind of double counting the uncertainty, because it is feeding action as well as indicating something in the future just build on that I mean I was like what if these metrics at these author suggest became really widespread. Basically, everyone knew about them. They re like a society of people like actually bahraini farther into recessions, essentially like they're, like alike, these numbers look bad, I'm gonna cut my spending start saving, I'm gonna cut back employment ploy, I'm an employer and so forth and, like then, you act. We have a recession that, in theory, should have been avoided with these metrics and to some extent, though,
This prompts remind me a lot of the big problems I mean I. I write a lot about public health. Obviously, so it is just like like even if these metrics were preventing recessions, I mean one thing we ve seen a lot of with like disease spread. Pandemics is lake. If you're successful, the public will not even notice that you successful one of the reasons we talk last week about the Bola Albert. and like one of the reasons there was a political backlash too. That is because the policy was successful. Americans felt comfortable criticising what they thought when wrong. Even ass people weren't getting sick like it wasn't a legitimate crisis, but like the public to see the benefits as clearly as say the volcano, Administration dead, so it is just to speak like in both. These sensitive seems like these. These kind of biometrics predicted
that's good backfiring like one. They might help cause a reception and people are trying to get ahead of it or to it. It might produce a success and we want even really know of it. Excess yeah. You know I mean one difference with the public health interventions. Right I mean there's something the central banking world has gotten reasonably good. Tat is coming up with lovers. They can pull buttons, they can press that are not that disruptive to people's lives. So there If central banking goes well, you know people don't necessarily get congratulated a good job and avoiding the recession. I didn't notice. but they also under surrogate yelled right. It's like if something goes wrong. There is a tendency to yell at the central bankers, because you were supposed to have good outcomes rather than bad ones, but if you have good outcomes, just nobody pays attention. You know which is sort of ideal, whereas when you're saying well, we're gonna like cancer.
School or like tell everybody to wear masks It's like everybody, notices the intervention and then, if the intervention fails psych well before these masks and it didn't help. And if the enraged succeeds Isabel, while these mass for no reason and you're in a really difficult situation right and they haven't yet unearthed in the infectious disease context like an equivalent of behind the scenes, interest rate manipulation. Where, if you do your job correctly, at least everybody gets. you're back right. That would be the virtue of swayed of central bankers can get better and better and better at forecasting economic problems. They really can just sort of address them with their tool kit and everybody can be happy, which is what we want. They want other difference to his like, I think, there's a difference between improving economic sector.
If people feel good about that where I was like, I'm not getting a bola and I'm not dying. I mean like. I think people just expect that to be the case like not necessarily with, in the same way that they might expect like improving economic conditions in their lives So at least you know, you have something to feel good about where I just like. I maintain The bare minimum for my health is not that exciting. At some point, this does kind of get to the fundamental problem of lake, the difference between household economics and Macro economics right that, like the reasonable, responds in a household economic context to Emma There's going to be a recession, is I'm going to stop spending and start saving, while that is very nice good for not causing a recession, and I do think, at a certain point. You know, especially because household I can are so moralized and there's so much willingness to blame people who find themselves in
short on liquidity, for not saving more that like that problem, isn't just you know, kind fun. Awareness, more sat irony, it's actually, genuine problem for preventing recessions, because if you have, formation being sufficiently widespread, then people are we need to react rationally and if you don't want people to react rationally to having information you're going to either to try to restrict that formation or your guy you have to be in a position where you accept that, like just by saying hey, we might be coming into recession, you're, going to make that recession more likely. Isn't it ironic ok, a bit with it. I think that we should cleared up thanks as always to our sponsors, thanks to our producer Smith's avatar,
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Transcript generated on 2021-09-01.