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welcome to another episode of the weeds, I'm your host Dylan Matthews and today, I'm joined by box. Senor corresponded Foreman Lopez, hello and pro public a reporter. Darwin allow this week we're talking about inflation as you ve pray We noticed prices for all kinds of things are going up right now. The Labour department report on Thursday that consumer prices jump to five percent over the past year at the highest inflation rate. In the U S, since two thousand and eight but spike in the price of airline travel cars, your meals caused more to experts. describe it as a perfect storm. Business reopening across the country supply chain, problems creating shortages. Last week we learn that the consumer price index, which measures the prices actual customers pay for stuff, grew by five point. Four percent

here too a year before that's really high, when the Federal Reserve is aiming for an average of two percent inflation, but as with everything The details are more complicated. The FED uses a different inflation measure called personal consumption expenditures. That's risen, less comparing prices to a year ago, is tricky cause a year ago to the businesses weren't yet open the whole world felt like it was on fire. It was October. Twenty twenty station right now is really uneven. Some goods like gas and Cars have gotten way more expensive, whereas the delta variant has pushed prices for air, air and travel down and before the current crisis, before we got all, inflation was usually way lower than two percent, so there is an argument that we should except some higher growth and in full, and right now tat kind of average it out to two percent, so Herman DORA. What do you make of us? One thing: that's interesting here is not even to some.

nice is going up, I think, Neil or when at the New York Times I mean he just erotic at peace, on this people to check out, but basically the concept of shadow inflation, which is this, then it's not just higher prices are also seem like the rationing of, but well both rationing, an just lower quality services in general. So, there's some good that, on this, like, I think people have experiences anecdotally, but like Black box intelligence- that customers sentiment on restaurant cleanliness fell by four point. Two percent: this year, J D Power found that fifty seven percent of people, God customer Service within five minutes at their highest, raided retailers, which was down from sixty eight percent and twenty eighteen. And I mean you can notice the steward just like it's really hard to get some sleep, which plays into like tight supply. Things like I still can't get a play station five and I'm very angry about it. There's also issues like I mean I went on vacation in September and, like the hotel, I stayed out wasn't doing room service right, like that's a decline

in quality and emits it's kind of related to place in its way the supply constraints for dealing with just like the tide, labour market issues and all that, but it is just to say that, like you're, you're, saying this in all sorts of ways may economy and the shadow info should ways like a way to see how widespread this has. Even if the price on something you buys a necessarily going up as Dillon intimating, it's a little bit weird to talk about standard like year over your trends and inflation, because neither last year nor this year was super normal and like when you disaggregated. It's not just that inflation is more of a problem in some sectors than It's that, like there are so many layers of events that have overtaken the economy in the last eighteen months, that it's really hard to distinguish between event driven stuff, and you know things that are artifacts of changes in fiscal and monetary policy.

And lake on one level it doesnt actually matter to you, Joe consumer. If the reasons that used cars, for example, are a lot more expensive is because there has been this big crunch in the supply of used cars. There have been a couple of exotic instructs, their verses lake- you know, there's just your money doesn't go as far as it used to the fact of the matter is that its harder for you to buy a car affordably but late in terms of pollen The response that matters a great deal, because it's a question of you know in a world where inflation is really about the amount of money circulating in the money supply or the amount of spending which the governments engaging in some of the things that the Bush administration is doing, to try to curb it so far, don't make a lot of sense. Like you know, the Biden Administration announced that extending hours at the port of LOS Angeles, which

You know if you, if you think about it, for as a supply chain problem totally could resolve as obliging bottleneck. Get some more goods into american markets, reduce the price of the goods that are already there. That makes sense from an economic perspective, but like its. It takes a little bit of thinking through to understand it, nation issue. If you think of inflation in this very classical like how far does your money goes? Sort of way and There are just so many examples of that. I'm in her mind, like you know, can we say that the kind of like degrading of service in restaurants in hotels is about the price of labour, or is it about the fact that you know there was this big health scare eighteen months ago that a lot of businesses responded to with a lot of hygiene theater and there hasn't necessarily been a big push for them to rebound from re leg.

How much of a problem with customer service is just that? A lot of you know call centres have not really gone back to being fully staff, because it's not a great idea to have a lot of people in a room together like talking all the time there are so many layers of of kind of questions here that light. Individual industry experts can probably answer in a pretty detailed fashion, but Quires so much granularity to figure out the question in any individual sector that it's really hard to. You know that when you're looking at the global sends a lake aggregating inflation measures to say what's going on with the economy, broadly, it's hard to get from that level of very specific event. Live detail to any huge story of whether what's happening is just an artifact of of we had a pandemic pandemic, Bristol kind of pandemic. Things haven't really gotten back to normal from that yet verses. This is an actual problem that, if we do,

Try to take measures to curb inflation purse Seine now is gonna get away for us yeah I mean, I think, hear your answer may bring their diet, which is that, when a policy that inflation they bitterly dont mean just like any prices anywhere getting higher actually someday. I learn last week that eight I hadn't done before that the term inflation was goin to refer to a growth in the amount of money sloshing around in the money supply, not a rise in prices and those things are connected. Obviously, but there are not the same thing so like one way. This this manifests is the fight five point: four percent increase in the sea either we mentioned earlier, that includes gas and food, and generally gas and food are not included in the so called core inflation measures that places like the FED look at in the region. Is that the fact can't really control them and they don't have much to do with the Euro money supply and ends or general state of the economy. The prey

The whale is set on a global market, and even the countries bays the? U S can't control that marketing can't set what the price is going to be. Something similar is true for soil and we and others are vague or cultural commodities that that affect how expensive food you buy is in Oh when a kind of cyber inflation they generally dont mean that stuff like in part, because it's out of the feds purview and in part because it doesn't seem like the kind of thing where it moves in in turn, with everything else. In and by the same token like there are some parts of the economy where we just accept the prices are going to keep getting way way.

Higher away. We lower serve independent of what else is going on in the economy, an obvious example, our computers. We are talking to each other on a zoom on a laptop that costs. I think it retails for maybe a thousand dollars, and it is vastly more powerful than supercomputers and nineteen eighty that cost millions of dollars like in some sense, that is a dramatic reduction in the price of computing, but that's just like an ongoing secular as the kindness would save millions of continuing apart from recessions and booms, secular change in the economy and similarly like for a long time, health care and education have been seen. Prices rise faster than the rest of the economy, able to use like paid college twitching witness this, but it's it's always been on the high end.

an economist sometimes sometimes know what they are talking about. Some instinctly know where we're talking about an economic commentators, sometimes think they know what they talk about when they say inflation, but the really referring to a specific kind of thing that happens to prices that might, or might not be indicated by specific prices on specific things going up or down. So I think like for the Herman example, Adam Sandler experience over the weekend, where I went to a waffle house, and they were just like dramatically understaffed and didn't have enough like stuff to make waffle house waffles and eggs and stuff, and I paid the same prices that you always pay it. While I was, I wasn't mad cuz, it's waffle, house and everything's ridiculously cheap anyway, and I like probably tipped more because I felt bad because all the servers working really really hard but like if, if that just happened in like the chain breakfast industry,

That would not be very concerning having what people are worried about is that you can see some kind of across the board pressure on a whole lot of things, and you see stuff lake median inflation, which is served, the inflation rate of the kind of good that in the middle, if you sorted every kind- good by how much prices are increasing, are decreasing and then pick the one in the middle so that you're not looking at times of really fast increasing a really fast, decreasing outliers. That's also going up an and that, I think, is where people start get worried and and think this isn't just a quirk of a couple things in the economy. This might be a water thing that's happening and we were gonna getting out this, but this idea of inflation, if you like Lord inflation, like an econ one hundred and one class or just follow bunch of this conversation to consume likes of abstract force like prices are kind of just magically rise me, but I think what makes it clear is just like one supplies tight, because companies pulled back,

the pandemic and to demand as high, because people are now going out more in their return to normal. Also, the government through money up pull over the past year and a half people have more savings because they haven't been goin out as much the issue the supply and demand issue in a lot of ways, at least for me, that has been really helpful, unlike understanding what we're talking about our time on inflation, because if you just think like why our prices rising it that that answer is just as important as just like the concept of inflation rise and it is- I don't know if her for be like what, when I brought that the shadow inflation thing into this, for example, it itches help for me to conceptualizes, because I think a lot of the conversation around this and one inflation means gets really tripped up so as an example with a bill that Congress is working on right now, one of the things that some of the critics of the bell and some of the sceptics

Joe Mansion have said about the reconciliation bellows that look. If all this government spending is helping push inflation, not because it feeling demand, like maybe we shouldn't be doing this three point? Five, trillion dollar bill over the next ten years, and that makes sense right everybody! I think, if conceptually that that that's intuitive, like like that's leaving, wrap your head around But if you also start looking at the issue more comprehensively lake, look at it as the supply problem, too Then you start thinking like ok, but some of these measures for example, like paid leave, would help more women get in the workforce, because I wouldn't have to quit their job to take care of a baby or something and you know maybe that increases the amount of women in the world, or like the labour supply increases it and restaurant will have enough staff so on and so forth.

They look at it another way. Historically, a lot of the inflation that we seem like, including, in particular in the Sixtys and Seventys, was title oil and obviously oil prices can drive inflation causes oil is used for just about everything transporting all sorts of goods. so like what are we don't rely on oil as much anymore? What have we have more clean energy sources? Maybe that'll keep inflation down Is this away, like thinking of this more comprehensively that I think is often missing these conversations or retie about just like any government bill? Any garment effort than increased spending will cause more. later. When reality, at least in the long term, it could actually help keep inflation down time. This, too, like the debate going on in Congress, is, I think, the the thing. The other thing we have to really keep in mind when we're thinking about inflation is like. Is this a problem? And if so, what should the government be doing to solve it? Because there are

of levels of things going on here on one level. Herman, as you said, lake is this. A problem is really relevant. To can Joe Biden get enough votes in the Senate to pass these three point: five trillion dollar package that he wants to pass, but on another level, as we ve covered in plenty of weeds white papers, dislike cognitive problem that people who you no support administration in power have with assume early hadn't problematical have generally where, if, if you support the party in power, your more likely to believe That the economy is going well and if you support the part, out of power, you more likely to believe become he's going badly. Unlike that manifests itself in a lot of ways, and One of them is that trends like inflation, where

month to month. Whether or not it really is looking like a blip or something that event driven verses like an actual real secular problem. Each kind of data point is going to spark a little mini debate. You know people getting entrenched in the idea on data point, one or two that oh there isn't a problem yet that can feed into the existing cognitive biases. Like I, you know, I read into this in other policy areas. All the time where, like the so, who are you know, data professionals will say after data points, one in two like hey. We really don't have enough evidence yet that this problem, it's definitely not. It would definitely hasty to lake start a policy response, assuming that this is a problem, but then, after a few

for months you start getting a little more evidence, the like data, professional starting. Ok, yes, now we can say that this is a problem. We can start talking about policy solutions, but their political allies. You haven't been following those kind of updated data points are still using the know. This isn't a problem. The expert said it wasn't a problem and that can really get in the way of both a lot economic commentary, and you know the kind of broader lake. How should Wall Street responding to with ie by administrations agenda should whilst creepy? worried that there's going to be runaway inflation. How does that play into the existing biases that lake? You know the business sector often has about democratic president's that kind of thing. So it's it's kind of worth keeping your head on a swivel about the inflation. Did they eat and understood ending that they're kind of a lot of underlying police- who concerns, but at the same time, recognising that you know

the reason that politicians are really scared of Indiana. That bit like that. There's a really strong learn reaction to not wanting to oversee runaway inflation is that that really can be a political liability, and so you know it's something of a learned response for the pilot. Like Joe Mansion who are looking at this in going well, you know I dimension, like isn't going to be the last democratic centre in his seat for quite some time, but like even Joe mansions prospects of future re election should choose to pursue. It are a little bit dependent on you know. Is his party being blamed?

for the price of everything going up at once, but keep your head on. Israel was a good way to put our innocence. I thank you. It's easy for dimension to serve worry about this, for a variety of book reasons. Bathing also just like alive news. Consumers, who might be some devoutly by administration or supports on this policy's, might have incentive to overlook things that scene problematic. Yes, some because of motorway reasoning which affects everyone, like I wrote a piece a few months ago, just title: don't worry inflation am now not panic, but I'm a little worried about inflation thing. I think it's like good to be able to change your mind about that kind of thing like Bent Ben Castlemaine, add at the times have a nice thread after Most recent data release just showing or consumer prices, from twenty seventeen to the present and

having what was talking to me about it is that it's not just that prices are up from a year ago. Prices are well above what you did think they would be if we just continue the trend from twenty seventeen to the present without any any kind of pandemic. That is, We had to stay the course after twenty seventeen, no recession, no pandemic presses would be considerably lower than they are now, and I dont know that that's indicative of a problem, but as yet For said, it's not always obvious what that means in terms of how to solve the problem, like it's probably the case that there are supply bottlenecks and supply chain issues that can be resolved

that would ease some of that pressure and allow prices too, to fall or steady, even as people are buying more things at the same time like if you imagine that that, like Joe Biden headed instead of giving everyone fourteen hundred dollars have given everyone twenty thousand dollars, there are no there's, no combination of efficiency improvements in the economy that would have not had prices rise in response to that lake. We can do things a little better like we do not live in a perfect world, and even even if we did live in a world of perfect efficiency, presses would rise, and that case like it's like it's it's worth asking where that points, and I dont know I like I am hopeful that these are to left to be done. Stuff on supply chains will be enough to get us down to two two or three percent average inflation. By of things about the economy, this year of surprise means I'm I'm not

super confident either way. I mean it's just worth emphasising that this uncertainty is like pretty universe. All right, lace, it's it's not just Dylan's old. Take was wrong and he's securly wrong in the world. I think a lot of a lot of people have been wrong about this. Like I mean the FED, if you listen to the FED and Jay Powell, the chairman, he they believe that this is tempeh that they keep saying that system. But if you listen to their statement, they'll say, but if it's not about blonde. As these are the steps will take right. Like there, we reserve the right to panic right, I mean everybody is couching what they say about this, because we genuinely dont know what I mean Nobody needs to be told us, but obviously the last year and a half have been really freakin weird. Like as a result of that, like maybe that's what's happening, but who knows, and and it's a big problem, obviously when, when we're trying to devise policies to address this, but it also just invite- I think some like me for

flexibility and the ability to change your mind as the facts on the ground change in other ways Talking about our expectations for inflation, I think we're we're gonna take a quick break, but when we come back we're gonna talk about the past. You have sensation, that's gripping the nation, that's right, every Jeremy, reds white, hot white paper on inflation expectations, I wrote that no one else made me say that will be ready By now. You probably know at least one person who blew up their life or the course in the pandemic. You know percent in your life who packed up their home and moved across the countryside unseen or left a toxic job or impulse adopted a pet or two or three. I know someone got three. And we usually tell stories just like that- distilled into a happy ending or Britain into an attention grabbing one liner, but the farmers fascinating parts of the story often the leader more than

This is a new package. From straight talk. The wireless produced by vocs creative examines this. raise the winding road that leads to life altering shifts hosting you'll Prescott, a fashion return: author on the other side of her own more than this moment, butchery you just six people who change their lives by leading into the unexpected curves in the road get new weapons every Monday, wherever you wasn't upon, casts and took out a first of its kind, transcript experience at fox dot, com wash them more than this. axioms. Today is a ten minute daily NEWS: podcast, it's not a run through the headlines, it's just the biggest stories and why they matter actually has today everything from politics and space to race and justice. Do you hear from Post nice Mobutu every morning? Listen

and follow acts used today wherever you get your pockets. Welcome back to the weeds, so we ve been talking about inflation and expectations for inflation. Answer worry we're gonna move a bit from than the current situation. Now, in October, twenty one into some of the research literature on on inflation and inflation expectations and specifically of a paper that is gonna bet is clear. two viral as a working paper from the Federal Reserve Board of governors, can it's by Jeremy Red, whose eyes Senor Adviser at the FED he's been staff. Economists, therefore, over twenty years, has peachy from Princeton served in the car. in a demonstration of a variety of economics roles, Let's paper is not just skeptical of inflation, but surprisingly, for someone with his pet actually is very sceptical of like some key concepts in economics or even lake. now makes itself as a discipline. Yeah

so. There's there's an already famous footnote in this paper footnote to which I will read and fall. I leave aside the deeper causes. and that the primary role of mainstream economics in our society is to provide an apologetic for criminally oppressive, unsustainable and unjust social or pretty hot. Take right now A pretty agnostic way. To put it, it's like, I'm definitely use to you kind of writing this into into copyright labour. Ok, yes, I know that a certain amount of the audience just thinks that all of this is like an honest that is on the world's most exploitative capitalist pig, but we're inside firstly about that the meat of the paper, which is less about serve these or role of economics is discipline and more about inflation works and and what inflation expectations are and how they matter. So I think important context for the paper is that of the dollar in view. I think it's fair to say in macro economic. Three now is there

inflation works is kind of like a self fulfilling prophecy, most models of how inflation worse include as a variable inflation expectations or what people think inflation will be in the future and the ideas that when people expect more inflation in the future, they'll get more inflation. So the key is you want to keep inflation expectations in check? Make sense, if you think about it like if I expect that playstation fives are a rise in price by a hundred bucks in a month or every other consumer thinks that Sony would be crazy to not increase them. That's right, that's just money that they could get in. that the theory has been that this operates on a kind of Societal level in red does not think there is any good empirical evidence that is actually how anything works. So guys wait, wait, Jamaica, the paper, seems like such an intuitive cancer. That, for me, it's hard to lake

We need robust empirical evidence for it, but at the same time, I think, like one you see this is like the consumer. Expectations are just like inflation expectations and general really are not a good short term gauge of predicting inflation like. I think there is ok evidence for that pay. Some. What rod was argued but at the same time it is worth saying that there has been some push back on this paper. Obviously this is like the mainstream should a macro economics. That's not surprising that there's push back but earth like a good twitter thread from Ricardo Rise at the London School of Economics and I am not an economist- I'm probably gonna- butcher this a bit but like basically my understanding of it is like you know, maybe inflationary patients aren't that useful for short term expectations for like predicting that before regime shifts.

Do you like? Are we seeing something like a more permanent long term increase in inflation, like maybe, expectations are good for gauging that and like he did post a few studies? That suggest that's true. I think they were mostly micro studies, but they were pretty compelling. said they were there like. Look when when expectations are up like it's like the Sony example, you just gave right. Of course, stony is going to prices if everybody expects a price to increase like why one day, leaving money on the table. This is still I'd like that nobody has answer for for some of this stuff. Framing here is like this is still an area where there is a lot of debate and write. His Duffy not gonna, be the last word on it any like what if it strikes me that its helpful to lake dependent underline the states of the EU expectation debate because, like this is a lot of why you know, if you think back to the weeds time. Machine episode, Dillon

we brought you under the weeds time machine to train them, when there are nineteen, seventy nine you and re other in our time machine. Yes, why the lessons that we learn from that and took him to the present day is that Lake Z, fear of repeating that situation has really lead. We have very specific role of what the Federal Reserve ought to be doing, which, among other things, you now has- led to this very specific mandate to like control inflation, which like has indeed there, are lots of feeders into that one of them, is that you know the FED a lot of the things that the FED. send signals about future FED actions and so on core mandate is to prevent inflation from getting out of control and or mechanism for that mandate? Is managing extract,

actions about inflation, so that inflation doesn't get out of control a lot of things that the FED does, which otherwise seem to be a little bit like theatrical, make a lot of sense because their working on this theory that you know the people who care a lot about when the FED says we're not raising rates now, but like we're going to raise race in six months. You know that that's like a trusted whole thing. I kind of wonder like Dylan. What's your read what: how would it changed the way that the FED works? If Lake germ IRAN, words like go around to his colleagues. In the end, you know get like a consensus amount of support that, like actually this expectation management thing is, is in fact a lot of theatre, the hasn't had a whole lot of effect on how the economy has run. so I should say now. I have a request in the interview germs red and he he handed me off to press agent at the FED who has not replied to my emails. I'll, give you three gases as to why

I ve I think they're Virgil extremes here- and I think there there's a version of inflation expectations that I could see the FED adopting more reserved- and it may be more useful, said Joe again, and who is a veteran fat economist out there, the Petersen Institute into a very smart guy who serve understands the inner operations of of being very well. and I thought about this recent saying you know I think inflation expectations matter bathing. What square the circle is. The people's inflation expectations are based on what happened to them in the recent past. That that their sort of a very fancy of all of inflation expectations. Aware like every like small. We're company in America is pain. Vigorous attention to it with J Powell says, unlike will there, there lumber halls too, to take advantage of expected changes in interest rates, and we don't really

have any survey or other evidence that that really happens like people watch CNBC sometimes, but that doesn't seem to be a major driver of of business decisions. what does seem to be a driver, business decisions. Anything Virginians cite some good. For this is like in the eighties Inflation has been high over the last few years. Business is expected, to be high, and so they expect to to keep raising prices for their goods and raising wages for their workers going forward. That strikes me as possible and I think that also like next to how a lot of people reason about a lot of things like businesses make decisions based on. What's worked in the past. Recent patterns have been an so that suggests a sort of different causal pathway where, instead of inflation, expectations, driving inflation, inflation drives inflation expert, and any made in turn right. More inflation fight you gotta have have inflation did to have an inflation problem.

And that's not super reassuring in the current situation and we're. So we do have some information right now in that might in turn, starve affect people's expectations. If it goes on for long enough, I think the more it's Surfin operational Covid thing, the less people will look at it and be like okay. That's how it what I expect like life to be like going forward bathing another and others of its an alternative way to think about inflation, but both as are of a different model, you can find in some of reds other work. he's he's approaching of Alan Blinder, whose a great economist Princeton and they have a few papers about the seventies inflation, and I talked about this a little bit. An interval crap asset and you can see summarize their view. Is it's the oil stiff. When I talk to my parents, who are alive during that period, and asked what it was like they're, like yeah guess, was really expensive. Cousin

in nineteen, seventy three: all the arab countries stopped exporting gas to the west, to punish them for support Israel, and then the price of gas went up again in late seventies, because there was- massive revolution in IRAN and in one of the world's biggest whale exporters was in the midst of like unprecedented turmoil. And the argument of of binding right is. You know explains more than you might think it does not have that it might not be just sort of like a mystical loss of confidence in the central Bank and and a loss of credibility. It might just be that lake gas prices rose the prices of lot Their stuff rose too. There are some other labour supply side things. It's not just gas there. a lot more labour unions, then that had cost of living increases built into their contracts, and so there might have, More serve spiral in where inflation

it's too automatic raises in contracts leads to more inflation, as, as those firms raise prices to pay for the new salaries. My favorite example of differing up I'm sick of it. It feels too stupid to be real, but apparently was is that is that until like the eightys, the consumer price index included some mortgage payments in in what they are measuring, and so, when the FED raised interest rates that mechanically raised inflation, people were paying more in their mortgages, and so so everything that they did to fight inflation by raising interest rates. Like came back at them because of some work and how this was calculation, which again it's so but we are narrow. Lawyer invites yes, no your and we are learning more every day, but but I think that tells a kind of different story about what should happen in the near future, which, as you know, we should treat summit

These eggs as anomalies caused benches bye, bye covered, but by the Biden Stimulus, which might have been a little too big in retrospect, compared to what the the economy wanted. I think it's better to go to big than to small. I think that human cost of having much higher unemployment rate now and a much lower wages is much greater than the human cost of inflation at the present moment. But the ban stimulus is temporary How can we allow its bent next year? And so I think, of a ruddy in view might suggest that we should HU. It is kind of a transitory shock. The way that sort the OPEC embargo in the iranian revolution or cow, transitory shocks, rather than are big regime changes. What they're just keep coming back to an. I keep harping on this budget like what we don't. How about this in the authorities earlier, and I think what the fat I think is pretty good at being a flexible, humble,

to some degree organization that it will adapt on the fly like these are just really smart people who general a Vulcan legged of Deer who was not late you this is this- is when, like the difference between those of us, you remember the greens Right, not, I should say this super gear. This just green, so can be so long drew a kind of get rid of that. Of the fad recently that has been one of em like a better but like yet is like within spurned anarchy and on. I think we can say like they have been good at experimenting and many when the wrong you know adopting on the fly. The thing is that like the only? U S political system. I can think that really works outweigh like if you're thinking, flexibility and humility, you would never say, oh yeah, that's Congress. You would probably be laughed at in any setting of you said that and it just like it's the opposite.

really all like the checks in our system really create gridlock and make it really really difficult to adapt on the fly, two different situations, and I think, just from a policy perspective. The fact that we are still having debate about basics of economics should problem We invite some humility inflexibility in these systems, but we just don't have a man. I think. That's it. huge from going forward, as we actually try to resolve this issue, if it does turn out that this is a regime chef, not not something more temporary. It's interesting You think of humility and flexibility is being like Complementary Valley in this context, because you know it weird seem to me that, if fee, if we have led to problems, one of which is that our institutions are way to school erotic, to respond to any crisis in a timely fashion.

and the other one of which is that we know so little about the underlying phenomena. We're trying to fix that any solution we come up with is unlikely to fix the underlying phenomenon that those things kind of balance each other out rightly. This is a lot of the traditional like classical liberal argument for limited government is that the government cannot be as energetic and responsive as other institutions that can they can manage things more flexibly have better sources of information and therefore, if the government tries to help it will be like it. It's just going to say ram. Large things in you know into the side of various other entities that there is just going to cause a lot of like big explosions in collisions and action movies set pieces instead of actually

fixing things, but it seems to me that what you're saying a slightly different right that lake, if you have the underlying you- know epistemological flexibility to lake, to adapt your assessment of what's happening. Pretty quickly. Did that does give you the ability to mount sufficient bonds is two things, and I am wondering which one of these you think is more true right now, we're late. If we don't really know what's going on, is the ability to be responsive to what we think is going on really going to help us, while I would say like one. We do know some things like were hit. I like it. I dont want to say that with dunno, literally nothing like I mean you take the divine ministries and recent moves to address a port of LOS Angeles. Stop it. Just we have massive ships just sitting at sea doing basically nothing because I can't get a ride like because of the workers by shortage and all that, like that's an obvious issue that we can address

like you know, the binding ministration has enough executive flexibility in they brought private companies on board to actually get the stuff done, but, like you could imagine that situation. If it's something that had required Congress would it have happened? I honestly don't know. That's. The kind of example on talking about. Obviously, yes, if Congress starts like throwing out, Ray random idea. Anybody has ever had to resolve inflation. Like that could create problems, but it when things do pop up that obviously lake they may not have obvious solutions, but they do have some solutions and something that we can get out at the margins, that's kind of what I'm thinking about. When I say we should be flexible and adaptable I don't I I've I've groaning. increasing cynical of Congress. Over like since I became a reporter and yeah, I think that's warranted and it is very difficult, me to imagine them always getting this right.

Or even doing anything really I mean they struggle with just about anything outdated seems like yeah I mean the fight is hardly perfect, but I agree with him on that. It's like among the more agile institutions and the federal government, which was the idea like yours, is founded and nineteen thirteen in large part as a response to a series of financial panax and, as I serve financial crisis manager, and to do that job, you need to be able to do quick, infusions of capital and to banks and and and quick changes to policy drawn the fly without asking who announced permission and yeah it's it's observed is too

in to imagine twenty twenty in a world where Japan had to go to Congress and get Nancy Policy image Mcconnell in and on track to Greece on anything that he wanted to do like one of one thing he did when a voting is under raided achievements was opening things got swap lines with a lot of foreign banks swap lines, basically what you trade, domestic currencies, four dollars, and so in the case of many countries, trading of more variable domestic currencies to more trusted to dollar assets, and I think a lot of you will credit that move with preventing. Does our colleague panic in the? U S from turning into a world wide financial panic akin with what happened in two thousand? Eight, that's huge! That's like a! If that's the only thing he

ed. You you'd be like you would have an unbelievable accomplishments compared to many other public servants. Can you imagine going to tunnel tropical rain and the like? I, I really want, I really want an arduous here. Yeah I want Indiana Mega, go take to get dollars easy and it might help us, but is really to help Beth none of it would have gotten dine and yet for all its flaws. It is an institution that has the power to adapt quickly, we're going to pivot

super hard from this interesting conversation about inflation dynamics to our boy paper of the week, which is about the great migration of African Americans from the south to the north in the early 20th century. But first we're going to take a quick break. Comcast has build a broadband network with one simple purpose: to keep customers connected every single day. In the last ten years we have invested thirty billion dollars and fifteen billion since two thousand and seventeen alone to keep America's largest gig speed broadband networks fast, secure and reliable, because more Americans rely on Comcast Stay connected. We work around the clock to build a better network every single day, Comcast better. Today,

even better to learn more Comcast? Stockholm welcome back. So our white paper the week is by a word, to run in court, whose an economics professor Princeton, about what happened to african Americans who move from the south to the north from nineteen forty, two nineteen, seventy, so the superior that sometimes called the second great migration as restrained five years. Also its awesome substantial movement northward, but is much bigger and volume from nineteen. The nineteen seventy and a lot of attention has been paid in economics. In recent years. Five people across Teddy Shoe the aid that there are some regions of the country or even some like neighborhoods, that are high mobility kids. Their born there really good chance to climb the income ladder to escape poverty to do better than their parents, but other neighborhoods regions are low mobility. So it seems on this

like the great migration, should have had the effect of moving people from discriminatory environments that were low mobility in the Jim Crow south to less discriminatory higher mobility environments in urban north. Cities ensure enough a some earlier. Research by the running courts colleague lay a boost and use these also an economist at Princeton. She found the incomes of migrants more than doubled relative to if they stayed in the south. So overall great migration was very good for the migrants, but what drink or fines is that This progress was was kind of squelched it. It would have been even greater if white Northerners had not responded to black southerners movie northward by making policy changes that really dramatically reduced upward mobility.

In the north, so she finds it that areas where more african Americans move too in the north. South levels of mobility fall not for white residents, but just for back once and and particularly for black man, she finds that these areas spent more on police. They incarcerated more people, they had more segregated schools. One of the darkest fact Wade's in here is that white residents in areas where lots of African Americans mood during the great migration were like weird vote, firmer George Wallace in eighteen, sixty eight compared to white people in areas with less migration, so that migration seem to prompt them to have more like avowedly, racist politics, higher migration areas, more severe and deadly riots in the late sixties and sixty eight nineteen sixty seven than the more immigration areas so bitterly she just finds us masses. overwhelming white backlash to the great migration and finds that the severely hurt black progress in the north. So

Incredibly jury. No! What do you think of this paper? I mean I can have the same reaction to death. The guys had to their own paper in terms of lake. It there's a certain amount of intuitive nests happening Burmese like yes, it does out that places are made of people. You can't leg, you can't. You know on a macro level, change your out new, notably you can't expect mapper. Changes to happen The basis of the grass is greener on the other side, without there being kind of some change in the ecosystem, based on the fact that there are more, you know like entities eating grass. That said, I do think that The fact that this is my reaction speaks to something that isn't necessarily like chatty and at ALS fault. It's be way that their findings have been interpreted, which is that it's really really tempting in economic commentary to turn observations about macro friends, which is

they were all the moving to opportunities has always been and turn it into prescriptions for individual living right and like a lot of movie. to opportunity. Just like a lot of the findings about lake, you know the role of educational attainment, n, n n in lower opportunity neighbour. AIDS or that kind of thing is turned into a if you love income parent who has a suspiciously high amount of time to your reading. The New York Times upshot like that. Besides, that you really want the best for your children than the best thing you can do is to act wisely and like that's, not the point of what moving to opportunity is about its much more about like it's much more, a way to think about inequality. Just by saying, if you take to people at birth who are in every other respect similar, we can predict life outcomes and like if you care about egalitarian ism. That may be as a problem that you that Lake Genome, that might be a policy problem now

That's the problem of individual behaviour for people who choose not to move out of those areas. At the same time, though, it is, I mean the black migrants themselves still benefited like. That's that's something that at least found optimistic to some degree about this very overall when paper? Is that, like the situation was far from perfect, but at least for some of these migrants who was better than it would be otherwise, which is also fairly intuitive? I think I mean obviously moving to a place where they do not have explicitly racist policies. Just you know subconsciously her implicit racist policies or accidental time. Is this pikes illicit red lining another light, but yeah was some very explicit raises I'm everywhere and just understand like moving from a place. That literally, has segregation written until you are entering. placed on building mermaids system of racial apartheid, exactly like that, that's what I'm getting at. Obviously there are. There are still many any problems I mean the papers about other, so many may bronze, yes, tussle theirs, but I think it's interesting too

does it is it's a way of showing how systemic racism works in a lot of these cases are reason on focusing on, like those less explicit explicitly. Racist policies is because that is often how we produce play disparate outcomes in the. U S is with like you now when they said: let's get tough on crime, I'm at in response to the second great migration, there were black lawmakers who voted for these laws There was like a genuine fear of crime, and all of that that was feeling this the way It was implemented in a world where people are racist, subconsciously or not, is like what we ve seen with with mass incarceration and what not, it's also worth emphasising that, like the George, why finding a so grand, because just for anybody who does not know who George watches, All you have to know about him is he once said segregation now segregation forever and like the people vote, sadly, that was essentially the core of his bullet of

stood in a school house door to prevent black kids from entering the school. Like these, had some problems with them. Yellow one people when doing so when done is described people voting for him more. That is not like you know. Maybe they are voting for something else. On this platform, that was his platform, so there's likes clearly some racial motivation, their written that has huge implications at a time when I think a lot of, like you, know a lot of academic Social scientists, who are Never there like preferred political programmes, are, I think, as it as a profession, spur to save Beverly strongly anti Trump and with a lot of flooding, science, has been kind of wondering about lake. How to prevent the recurrence of a trump. Like figures a finding that increased exposure to racial difference, spikes, engagement with and endorsement of policies. dont, explicit, Rachel resentment and lake perpetuating racism. That's the kind of thing that

the chill down the spines of a lot of political scientists yeah, but, like all that said lake, it's really wanna. Honan on this, like that, the policies of many of the policies overdone and responses were framed as race neutral and they like have had horrible effects. I mean that what they would like mass incarceration for incarceration- there are lots of ways to look at this one of the most effective ways of the New York Times and twenty fifteen published up a peace where they said that there were essentially one point: five missing black men and communities, and it's like, if you think about this, ass meant losing one point: five million a year like fathers, brothers workers in the community. Obviously that's gonna have a huge effect and, like you see, and in every statistic with a criminal justice system, black people are disproportionately affected and it is just one way of say like yes, as was framed race neutral and it had racially disparate outcomes. And this just how how work sometimes like these people were reacting to racially motivated fears. They then free

It is a race, neutral policy and it had a racially desperate, fact because they were rooted in racially motivated fears is just how this sometimes, and it really makes a frost. because I like lots of institutions in the. U S at say like look. Unless something is explicitly racist, you cannot address. It is a race issue, but, like so you have to do, that, like others, use had to face the reality of the outcomes, and you know act accordingly, even if the Supreme Court says. That's not ok like that, something that You know, maybe we should think about as the Publican and policymakers yeah. I think one ones are sad quota to the finding about George. It was is that she also adapts some work that that Seth Stevens David wets, another Congress did on or measuring prejudice today, using Google results and basically physically what he does this search for the unworthy and for people who, like jokes, that include the inward

and one of the fines in this paper is that those kinds of searches are higher in areas that had more migration, and this is our best. I was kind of research. I think sometimes aid by explain this to people. Like our people just searching for rap works there not searching for at there. There is searching for racist joke. and so yo that deserve is of high depressing quota that it's not just the. Why population had a big backlash in the sixties and over time the generations got more tolerant. Maybe they did their there's a lot more research to be done here, but this finds a lot of persistence and prejudice even to this day, looking at Google Data, the dynamic of disinvestment and and systematic neglect and fear based punishment of black urban communities after the great migration is like yeah policy is a big part of it, but it's also just a story of again the macro effective alot of individual decisions and lake when we're talking about

those kind of individual measures of prejudice. It's good to remember that, like a lot of this is due to end visual white families deciding there goes the neighbourhood and, of course, like the real estate industry, deciding that the integration was a strong predictor of falling home values. But like this wasn't primarily be expressed in politics like a meeting Thirdly, it was primarily a new politics. Vit was made possible because of the self sorting of people who had previously been urban whites into the suburbs, where they had a certain degree of political control over metropolitan areas without actually have, and you spend aid, have engaging with the residents therein domino, I would just say obviously lot on a policy level. There is there someone I'm just using that except by mid. Somebody's may are still in place like that. That tells you, but I remember like two to your point: DORA

when there were riots in Baltimore a few years ago and in response to the Freddy Gray police killing like one one place filled Friday Gray, there were stories like depressing that artists essentially explore in how some other places getting this, Roy burn down in whatever or places that were destroyed, burned down in the previous sixties the seventies riots, and it's like you know, there are complex The reasons why, essentially there there was like an increase in in crime in some of these situations, but it like gave people cover to do all these This is no way like one. When people were reacting and look like white flight happened, they were war. I mean there were riots in the sixties, usually in response to some form of police brutality. So it's not just at the white people like saw like a flood of black migrant just said of screw this we're leaving. That was a lot of it.

Not not as I wasn't, but if there is an element of like why is crime rice in their complicated socioeconomic conversations around that, unlike tons of things, go into that. Why is a police getting harsher on these now black residents and like sparking these riots, and like that's, how you saw this flight happened? So it is just a bunch of individual decisions, not not just like explicitly risks, but some people were. I'm scared of the crime in writing. In my neighborhood bower near my neighborhood, now I'm going to leave and it just speaks. I think like how complicated this all isn't really how these. decisions that people are making at the moment and can seem small like I'm just moving my family took place. I think a safer can have long term effects on just about everybody around them. Right and, of course, like no individual family. In that circumstance, light would reasonably like you don't reasonably expect some one to say. Ok, I am looking at best. It seems like a lot of big things are happening that are way beyond my control, but, like

I need to take a moral stammering remain in air and like remained in my home, because I dont believe in de facto segregation but at the same time those people did have more power and more agency. Then the folks who were moving in who had been the victims of rational heart hide and were now, but in a gene subject to de facto segregation, and so it can be, can be really hard visual level to tease out lake the endeavour will obligation that falls upon you when you are, smaller than any broad sociological phenomena. But also have more privilege and more resources than a lot of the other individuals who are we are interacting with That's offer us today. I think so much to boxes from on Lopez and Republican Darlin for joining the panel are producer so. If you alone would be Nelson is are, at a trail adviser, Amber hollows, the deputy at a trial director for talk podcast in I'm your post Dillon,

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