Bryan Caplan - Labor Econ, Poverty, & Mental Illness

1. 0:00 – 0:33

   Intro

   1. DPDwarkesh Patel0:00

      (instrumental music) Okay. Today, I'm speaking with my good friend, Bryan Caplan, and this will actually be, uh, the second time we talk. This is the first, uh, the first time we talked was the first episode of this podcast, so, uh, yeah, I'm really excited about this.

   2. BCBryan Caplan0:13

      Oh, it's fantastic to be back here, Rakesh. Great to see how well you've been doing for yourself. And now, it is my privilege to get to speak to you.

   3. DPDwarkesh Patel0:20

      (laughs) Excellent. Okay. So, uh, today, we're talking about your book, Labor Econ Versus the World, and it's a collection of your essays throughout the years, and I highly recommend it. Um, okay, so here's my first question. What percentage

2. 0:33 – 3:47

   How many workers are useless, and why is labor force participation so low?

   1. DPDwarkesh Patel0:33

      of the work, uh, working-age population is zero or negative productivity?

   2. BCBryan Caplan0:38

      Hmm. That's a good question. So this is working-age population, not actual those... Not, not the ones that are, in fact, currently working?

   3. DPDwarkesh Patel0:47

      Yeah, yeah, yeah.

   4. BCBryan Caplan0:48

      Yeah. Hmm. Let's see. Well, I, so I'd be inclined to say probably something like three percent, although, of course, it's much higher if you just make someone do a job that they're not suited for.

   5. DPDwarkesh Patel1:04

      Right, right.

   6. BCBryan Caplan1:04

      So again, whenever people talk about zero productivity workers, I often want to say, "The fact that someone has zero productivity or negative productivity at the job they're doing doesn't show that they are a zero negative productivity person. Could just be that they are mismatched to the job." A common misunderstanding, actually. So yeah, I think it is, uh, very low for the working-age population for any job at all. One of the things that labor markets do, of course, is fire you from jobs where you have really low productivity, which encourages you to search around for something that you, where you are actually productive.

   7. DPDwarkesh Patel1:32

      Mm-hmm. So then what, what's the explanation for why labor force participation is like 60% or something? So there, there's like a gap of about like, uh, you know, like th- 37% or something of people who c- who, who could be contributing but are not?

   8. BCBryan Caplan1:44

      Well, I mean, the biggest explanation is working mom, or rath- not working moms, rather, mom, moms of, especially of young kids who don't want a job because they are busy taking care of their kids.

   9. DPDwarkesh Patel1:53

      Mm-hmm.

   10. BCBryan Caplan1:53

       So I say that is the first and foremost one, is family responsibilities. Uh, there's a small share of people that are rich enough and there isn't any job that they like doing, so that's, I think that's only maybe a couple percent of the population. Then you've got a larger po- percentage of the population where government retribution means that they really don't have that much of a gain from working, at least in the short run. And so I think often, it would still, in fact, be better for them in the long run just to get a job even if they don't make as much money when the, then, when they'll be, when they're receiving retribution because you get training and connections. So in the long run, it is a better strategy. There's another chunk of people's parents ch- are just either really nice or suckers, depending upon how you see it-

   11. DPDwarkesh Patel2:37

       (laughs)

   12. BCBryan Caplan2:37

       ... and will just take care of them. There's, of course, spouses, uh, even when you don't have kids, or romantic partners who will take care of you even though you are not working, right? And then, you know, finally, well, this is not, uh, this category doesn't overlap with, with, with the others, but then there are guys who just really don't want to go and conform. Uh, most often what they're doing is they work sporadically and they have a job, and then they are difficult and they get fired, and then they are unemployed for a while, then they find another job. Um, you know, they say like there's, uh... One of my favorite books on poverty, which is, uh, Promises I Can Keep, talks about the problems of single moms, and one of the main things that it talks about is they're not happy with the fathers of their kids. And then the question comes up, "Well, is the problem that they can't find jobs?" And they say, "No, no, no. He finds jobs all the time."

   13. DPDwarkesh Patel3:27

       (laughs)

   14. BCBryan Caplan3:27

       "The problem is keeping jobs." So I think that's another part of it. So yeah, of course, if you officially say that you're still looking for work but you just don't find a job, then you'll be counted as unemployed, but if sometimes you just say, "Screw it, I'm not even looking," and then they record that in, in the stats, then that will come out as saying that you aren't even, uh, trying, so.

   15. DPDwarkesh Patel3:46

       Mm-hmm.

3. 3:47 – 10:43

   Is getting out of poverty harder than we think?

   1. DPDwarkesh Patel3:47

      Yeah, so I'm glad you brought up, uh, I- I- I'm glad you brought up poverty. So you, uh, emphasize in the book, uh, the success sequence, so this is the idea-

   2. BCBryan Caplan3:53

      Mm-hmm.

   3. DPDwarkesh Patel3:53

      ... that, you know, if you get, um, married before you have kids, you get a high school diploma and you work full time, um, that you're virtually guaranteed to not be in poverty.

   4. BCBryan Caplan4:00

      Mm-hmm.

   5. DPDwarkesh Patel4:00

      Um, so now this raises the question-

   6. BCBryan Caplan4:02

      In the United States, in the United States anyway.

   7. DPDwarkesh Patel4:03

      Oh, sorry, yeah. In the United States.

   8. BCBryan Caplan4:04

      Yeah.

   9. DPDwarkesh Patel4:05

      Um, and, so this raises the question, if, um, if it's so easy to, uh, stay out of poverty or to not get into poverty in the first place, and if so many people are still avoiding doing these steps, like, wh- what, w- wh- what is the explanation? 'Cause clearly, being out of poverty is, like, something that b- a lot of people, w- you would think they would want. So, uh, uh, is, are these steps harder than we think? Like, what is the explanation for, for why so, why so many people are still failing to comply by, uh, these basic, uh, these basic steps?

   10. BCBryan Caplan4:34

       That's a great question. So when people ask me about the meaning of the success sequence, I say, "Well, imagine there's some research saying that here's a simple recipe to avoid poverty. First, be first in your class at MIT. Second of all, win a Nobel Prize. And third, marry someone who won an Academy Award." If that was the prescription, then people might reasonably say, "Well, hardly anybody can do that, so I'm not even gonna try. That's ridiculous. It's hopeless." And that's, and then if that's what you have to do to avoid poverty, then you could reasonably say, "Well, this is, most people just couldn't possibly do it." What's interesting about the succ- the success sequence is that it does sound quite easy, right? So American high school standards are very low. Basically, if you just show up and try, then you're very likely to get passed along so you'll graduate from high school. Uh, getting a job or working full time, you know, even when you go and ask people who are in poverty during all but very severe recessions, normally they'll say, "Yeah, it's easy to get a job. It's not actually very hard." This is, again, talking to actual poor people. This is not just the opinion of economics professors. And then finally, waiting until marriage to have kids, that sounds really easy. It's like, well, hmm, yeah. We've got reliable contraception. It's not like you need celibacy or anything. Just delay until you've got someone that you are comfortable raising the kids with. So as to why these three things, why people don't do them, well, there's a few possibilities. So one is that people just don't know. Right? I'd say this is really hard not to know, because you have so many pe- first of all, you have a lot of people telling you every, uh, uh, you know, your parents are telling you, teachers are telling you, other authorities are telling you, coaches are telling you. Uh, furthermore, it is totally normal even in neighborhoods where people are not following this for parents to want you to follow it.Which I think is a telling piece of information. Uh, because there is a critique saying that this, uh, the Success Sequence only works for people that are growing up in middle class neighborhood, and it is just not realistic for, uh, it is not actually a path to, uh, to out of poverty for other people. You know, if that's so, why is it that parents who themselves have not followed it push it so hard? Which again, it appears to be totally normal. It is really weird for a single mom to, to raise their kids saying, "You know what I want you to be? A single mom. It's the best. It's, uh, it's the only good path in life." All right, that's not normal. Instead, the normal thing is to say, "L- look at how I messed up my life. Don't do what I did. Wait." Right? And then people still don't wait. Uh, there's also a story saying, "Well look, even though it's, see people are telling you to do this, you don't have any good examples that you can, where you can see that anyone's followed it, so there isn't, uh, really any real proof." And here I say, "Hmm. Well, probably your teachers in school follow it, so you can look at them and you can say, all right, my teacher might not be the coolest person, but they're not living in poverty." Right? Bare minimum, right? "So my, so my teacher seems to have a path out of this." Uh, furthermore, it's actually very normal even in poor families for there to be successful members of the family who have escaped poverty, and normally do it by following the Success Sequence. So you'll have a relative who's in a family of single moms, but this is the one that didn't do it, and this is the one that waited and followed the path, and you will see her at family events. People may have some resentment. "Oh, th- they, she thinks she's so much better than the rest of us." But you know, you can't say that they don't have any firsthand experience with it. They've got that. So, I think the story that makes the most sense to me is it does require some impulse control, right, which is not fun for people. Right now, so yeah, finishing high school, you know, requires that you go and sit there and be bored. I mean, I remember high school. It was really boring, so like, especially when you're, when you've got young people that are making decisions, young people are famous for low impulse control. Same thing for working a job. A lot of what you're doing on a job is humiliating yourself, honestly. Right? (laughs) There's, there's a customer who's mistreating you and yelling at you or being rude for no good reason, and like to keep the job, then you say, "Yes, sir. I'm terribly sorry, sir." Your pride says to say, "Hey, don't talk to me that way. Like, what do you know?" (laughs) "You're the one who, you're the one that screwed up," but you're not supposed to say it on a job and it requires impulse control to keep your mouth shut. And then, of course, most notoriously, avoiding ha- avoi- avoiding kids that you're not ready to have requires impulse control. Right? And indeed, I would say that in all the work on poverty that I've read, I would say that poor sexual impulse control is actually the root of almost all the other problems, because it's one where a lapse in judgment actually leads to long-term responsibilities-

   11. DPDwarkesh Patel8:59

       Mm-hmm.

   12. BCBryan Caplan8:59

       ... in a way. You know, so you, like you, you can recover from yelling at a customer and getting fired. All right, fine. You burn some bridges, but you just look around and you get another job. But you really can't easily recover for, especially if you're the mom, from having a child where the dad isn't gonna help you or the other parent's gonna help you. It does mean that for 18 years, you really are trying to, at best, juggle a lot of complicated responsibilities, uh, right. Right. And, uh, and so you see, m- I mean, most crucially, I see, like one of the main critiques to the Success Sequence, by the way, is that full-time work does almost all the work. Um, now my understanding from Badwillcox, that's not true, and there actually is a marginal effect of the other pieces besides full-time work. But even if the full-time work critique were totally correct, the question is, well, how easy if, easy i- is it for a single mom to do full-time work? And yeah, it's, it's really hard. Right? Now, as to why people do it despite the fact there's like, look just a minor impulse control and then you'll have a much better life. Mm. ƒ. I mean, the answer for that is like, well, hmm. Um, hard to say. I mean, I would just, if I, if the person were asking for advice, I would say, "Look, this is really easy, do it," and they don't do it anyway. And I'm saying, "Man, it was so easy and you still didn't do it. Like, like I told you what to do. Why didn't you listen to me?" And there's the classic response of the irresponsible young person. Like, "Why didn't you do it?" "I don't know." (laughs) "I don't know." I mean, it's, it's one that's been, that's timeless where a young person does something where it seems like it was really easy to do the wise thing. They were told what the wise thing was. They didn't do it anyway. Right? I mean, what more can you say at that point, uh, other than, "Gee, uh, y- you've really messed up and you're no longer a child and you're now gonna be paying for this for a long time. Sorry."

   13. DPDwarkesh Patel10:40

       Yeah. So there's, there, there, you know, there's Charles Murray's story in Coming Apart, which

4. 10:43 – 14:56

   Are elites to blame for poverty?

   1. DPDwarkesh Patel10:43

      is that actually, um, the culture isn't emphasizing these values, or at least like the elites and the culture are not emphasizing these values-

   2. BCBryan Caplan10:48

      Yeah.

   3. DPDwarkesh Patel10:48

      ... uh, that they live by, right? So in that way you can say like, "Oh, it's like, you know, it's the elite's fault for not emphasizing these values that, uh, these people don't know about anyways." Or, um, I'm, I'm sure you saw, uh, Tyler's review of your book on Marginal Revolution-

   4. BCBryan Caplan10:59

      Mm-hmm. Yep.

   5. DPDwarkesh Patel11:00

      ... where he said about this, um, I mean, uh, he was broadly praising your book, but he said about, uh, this point that, "Oh, you're underestimating like the cultural factors, uh, that might, uh, get in the way of somebody achieving the Success Sequence." Um, yeah.

   6. BCBryan Caplan11:11

      Yeah.

   7. DPDwarkesh Patel11:11

      So I wonder what your reactions are to those.

   8. BCBryan Caplan11:13

      Yeah. So, so Charles Murray, I would say, look, there's probably a little truth to this, but it's a pretty damn lame excuse. He'll say, "Yeah, well, gee, why did you go and drop out of high school and fail to get a job and then y- uh, and then have kids, uh, way before you got married?" Like, "Well, the elites didn't tell me-"

   9. DPDwarkesh Patel11:29

      (laughs)

   10. BCBryan Caplan11:30

       ... "uh, that I should do these things." Like, look, there's a lot of people telling you to do this stuff. Teachers are not at the highest level of elite, but relative to a poor community, teachers are elite. You got parents, you got ministers. In a poor community, a minister, well, what's the minister telling you? Is he telling you to not do the Success Sequence?

   11. DPDwarkesh Patel11:46

       (laughs)

   12. BCBryan Caplan11:46

       No, he's telling you to do the Success Sequence. He might also be adding that this is an evil, racist society that's screwing you over. But if anything, that's a reason to go and be careful with your behavior so that this, the racist society has more trouble screwing you over, to say, "Look, I don't have a lot of second chances, so I better watch my behavior and be mindful." Um, right? Now, I mean, I think it is, it is fair to say, look, you know, elites could do a bit more, but again, to say, "Yeah, well, I wanted to do all these things, but the elites just didn't tell me. So blame them." I- it's a pretty lame excuse. This is about at the level of saying that you went and put your hand in a blender 'cause you saw it on a cartoon.

   13. DPDwarkesh Patel12:24

       (laughs)

   14. BCBryan Caplan12:24

       It's like, come on. (laughs) Right?

   15. DPDwarkesh Patel12:26

       Yeah, yeah.

   16. BCBryan Caplan12:27

       I mean- I mean, uh, if you're 10 then it's literally like tell the parents, "Hey, don't let the kid watch cartoons if they're just gonna (laughs) copy whatever horrible thing they see (laughs) Bugs Bunny doing." But if they are at the level where they know the difference between cartoons and reality, then it's like, hey, like exercise some responsibility there. Right? And again, for Tyler saying I'm neglecting cultural factors, I do talk a lot about cultural factors here. I mean, I- I'm well aware of the fact that people tend to imitate other people. It's just a question of how good is- good of an excuse is that? There's all my friends who say, "Well, if all your friends were jumping off the Brooklyn Bridge, would you?" Well, I don't know, maybe. Like, "Well, that's pretty foolish, is it not? Do you really even need me to tell you not to jump off the Brooklyn Bridge just 'cause all your friends are doing it?" So I have some other pieces where I just say, "Look, nobody really is willing to actually accept these kinds of lame excuses in- as a rule, because it would mean that you'd be going and exonerating people for horrible behavior." Someone who says, "Well, yeah, like I did go and, you know, commit a lot of war crimes, but there were a lot of other soldiers doing war crimes too around me." It's like, "Well, did they kill you if you didn't participate?" "Uh, no, but they would have laughed at me if I didn't go along with it." Yeah. Well, yeah, sometimes you need to be laughed at so you don't become a murderer. And then (laughs) I don't think you really need me to tell you that. It's obvious enough when you think about it. It's a very lame excuse to say, "Well, but the other soldiers would have laughed at me if I said let's not burn this village down, and I don't want to participate." By the way, this was also, I believe, the point of a pretty famous book, Hitler's Willing Executioners, which asked the question, what happened to Germans who just said, "I'm not participating in the Holocaust"? You might think it's a totalitarian despotism. You're gonna get shot yourself, or, you know, like, uh, sent to the concentration camp yourself if you say, "I refuse to go along with this immoral plan that you have." And what the book said is hardly any Germans were ever punished for refusing to go along. They would just say, "Oh, yeah. Okay. Well, he's not very comfortable with this, so I guess we di- we won't make him." (laughs) And it was like, that's all that it took? I mean, it's one thing to say, "Do you have the courage to go and die to avoid going and hurting an innocent person?" And it's a very different thing to say, "Do you have the courage to not be laughed at to avoid being a murderer?" Like, that's not that big of an ask actually. (laughs) And I will say, and I think many of your listeners will- will remember, are there times that you followed your conscience even though you had some peers laughing at you and you did it anyway? Is it really that hard?

   17. DPDwarkesh Patel14:52

       Yeah.

   18. BCBryan Caplan14:52

       Come on.

   19. DPDwarkesh Patel14:53

       Yeah. Um, but- but so I- I guess putting aside

5. 14:56 – 19:11

   Is human nature to blame for poverty?

   1. DPDwarkesh Patel14:56

      the question of moral blame, to the extent, uh, like the argument you're making there when you talk about the willingness of, uh, you know, let's say, Germans in Nazi Germany, you're- you're making the argument that like, oh, human nature is very- can do, um, very perceptive to what the peers- uh, what your peers think and they do want to disappoint the people you're working with and so on.

   2. BCBryan Caplan15:12

      Mm-hmm.

   3. DPDwarkesh Patel15:12

      Uh, or, you know, whether you're a community. So that implies that, causally speaking, the community matters a lot or the culture matters a lot. So, like what- what could be... I- I think, uh, Hanson react- Robin Hanson reacting to Tyler Cowen's review of your book, he said, you know, um... I guess he was- this is kind of amusing, so I don't know if he's like necessarily endorsing this, but he said, you know, maybe this kind of justifies, uh, cultural imperialism, uh, where big- a culture that has better values when it comes to success sequence adjacent stuff, they could kind of impose them on cultures that have worse values here. Um, so like what- what- what- what... Do you think that anything can be done to improve the culture, uh, when it seems dysfunctional in these ways?

   4. BCBryan Caplan15:48

      Hmm. Does greatly cutting back on redistribution or making it more conditional upon good behavior count as something we can do? I think that's a really obvious thing, is to just say, "Look, like these, it was pretty easy for you to go and avoid these problems, and so we're going to treat you differently because your problems were avoidable and you didn't avoid them."

   5. DPDwarkesh Patel16:12

      Mm-hmm.

   6. BCBryan Caplan16:12

      So that could just be lower amounts of payments or cut people off sooner or to say, "Look, you're not eligible." These are all possibilities. So there's that. In terms of other things to be done, I mean, you could actually go and teach the success sequence in schools. I don't know that it's gonna be all that persuasive because it really is just going and repeating pretty much what you're already telling kids anyway. I do have some thought that if you just ramp up the level of, of- of preaching by a factor of 10 or 50, then maybe it would work. So- so there is a lot of research saying that various things don't work and then the question is, well, they don't work because they have zero effect or they don't work because the dosage is too low? And honestly, I often think the problem is rarely the low dosage. It's just the question of, is this an organization that is actually has the steel to give a very high dosage? Uh, for example, foreign language education, right? The kind of foreign language education that goes on in American high schools essentially has zero effectiveness and yet people do learn foreign languages. How do they learn foreign languages? Well, you basically learn it when you take the intensity of a normal high school program and you ramp it up by a factor of 10 or 50 and then people learn.

   7. DPDwarkesh Patel17:24

      Right.

   8. BCBryan Caplan17:24

      Now given how much time schools are already spending on foreign language, which is typically, in say a place like California, is three years out of high school, you don't really have the time to ramp it up (laughs) by a factor of 10 or 50. It would just absorb the entire program and that's where you say the amount of effort that would be required to go and actually get fluency in Spanish is so high that we're better off not trying.

   9. DPDwarkesh Patel17:44

      Right.

   10. BCBryan Caplan17:45

       Uh, for something like this where people really are messing up their lives at a pretty early age, then maybe, and especially if you're not currently giving them three years of advice, you might only be giving them a few hours per year when you add it all up, maybe if you did go and multiply that by a lot, then it would actually have the effectiveness you're looking for. Um, definitely it's the kind of thing I say it's worth just trying and seeing whether- seeing whether it work if we just go and, you know, make a much bigger effort here and, you know, like- like, and also just, you know, consider A/B testing where some people just get the lecture and some people you go and actually meet people who messed up their lives. I mean, honestly, I don't think it would be at all a bad idea to go and recruit homeless people to go and talk to kindergartners. (both laugh) And just, you know, you're saying like- like especially you're in a poor area, and so you see these guys that are just sitting on the side of the road. Well, let's bring them in and talk to them, and find out what's going on. Ask them what they think they did wrong with their lives, if anything. Right? I mean, I, uh, you know, I think, I think people would just be so squeamish, like you don't want to go and traumatize five-year-olds by having them meet a homeless person and have him talk about his crack problem or whatever. But I would say, why not? Like, you know, if there's, if there's, if there's, like, you just convince one kid in the class not to become homeless with this experience-

   11. DPDwarkesh Patel18:56

       Mm-hmm.

   12. BCBryan Caplan18:56

       ... or, you know, if- if one isn't enough, do it 10 times, do it like, you know, twice a year until you're out of high... until you finish high school. Right? It seems like it's at least worth a try. It couldn't cost much.

   13. DPDwarkesh Patel19:08

       Yeah. Yeah. Um, go- going slightly off topic,

6. 19:11 – 24:43

   Remote work and foreign wages

   1. DPDwarkesh Patel19:11

      uh, does the fact that, uh, foreign remote workers are paid many multiples less than, uh, Americans who are also remote workers, does that suggest that, uh, y- you know, foreigners are lower productivity than you think? Maybe there's like some cultural barriers that are preventing them from being as valuable as Americans are. Maybe there's some other factor. But in any case, like, why is th- the fact that, you know, programmers in India who are working remotely are paid much less than programmers in America who are working remotely. Does that suj- does that suggest that actually, you know, the people in India are actually lower productivity than you think?

   2. BCBryan Caplan19:46

      It definitely suggests it. However, we have tests to show the suggestion is wrong, right? Because we actually al- we, we know what happens when there, you are a remote programmer in India, but we also knows what happen... We also know what happens when you move that remote worker to the US or another first world country, and then we see their wages skyrocket. So it seems like the, the most you could say is there might be some interaction between being foreign and not, and being remote. At least we know that being foreign and being present in a, in a first world economy in no way predicts lower pay or pro- um, probably and also like no difference in job performance really. Uh, so now as to why that is, I think one thing is that we've had, uh, the remote work took such a, there was such a huge increase during COVID that right now we, we perhaps we're just not in equilibrium yet. So the, right now it may be that it's taking time for first world companies to say, "Wait, we know we could get better workers that are as good for all this money in the third world." So maybe that's what's going on. But you know, I have to think that there is a reason why remote work, first of all, was rare before, and second of all, why most firms are eager to return to in-person work. So I think, I actually think that there are some serious problems with it that are a little, maybe a little hard to articulate. My best guess here is just that while it may be not that bad to go and switch to remote work when you already have a well-functioning team that you have assembled for in-person work, but it's probably a lot harder to get a well-functioning team that has never been in person. So essentially you might think of in-person work as being an investment in being able to cooperate well whether or not you're in person or remote in the future. And if you've never been anything other than remote, then maybe the team building doesn't work so well. But yeah, the other possibility is that we're just not in equilibrium yet. Again, the economic argument comes down to if you really can get someone just as good for a third of the price remote- from another country for remote work, then why don't you do it? Right now, again, of course there is the answer of lower productivity, which again I say is plausible until you actually see what happens when you move that same worker into the first world and you say, "Nope, turns out he was just fine and the problem had had- was probably remote work or maybe there's something about remote work and being in another country as well that might make it happen." So the other way, I do have a friend who's actually American living in Spain and he's applying for remote jobs and it doesn't work for him either, right? So it's not just, it's not something about, uh, being Spanish. It seems to be that a US company isn't interested in because he's in Spain, even though he is a well-credentialed American.

   3. DPDwarkesh Patel22:20

      Mm-hmm.

   4. BCBryan Caplan22:20

      And that is a problem for him. Um, now again, like you might say, "Why doesn't he just claim to be in Michigan?" Though the problem is he has been in Spain for a long time and therefore his whole CV is Spain oriented. So it looks like, you know, he'll basically, it looks like he is not well integrated into the US labor market at this point. Um, it is int- you know, but yeah, it is, it is a very good question.

   5. DPDwarkesh Patel22:38

      Is that, um, I, uh, a potential explanation occurs to me. I don't, I don't know if this makes any sense, but could you apply the signaling explanation here? So, you know, just like college, going through the immigration process signals that you have high conscientiousness and high conformity.

   6. BCBryan Caplan22:51

      Mm-hmm.

   7. DPDwarkesh Patel22:52

      And you know, you're like, you're, you know, gives you like more information about their, like, background as, as fa- as far as like crime and other things are concerned and even hiring within America would give, right? So maybe it's like-

   8. BCBryan Caplan23:01

      Mm-hmm.

   9. DPDwarkesh Patel23:01

      ... a signaling story, uh, like going through immigration, just the same way college is.

   10. BCBryan Caplan23:06

       Yeah, the problem is the immigration system I just don't think is really very meritocratic at all. It's quite arbitrary. I mean, remember, we even have the diversity lottery. So you know, like if you see that someone got into the US by winning the immigration lottery, you're inclined to say, "Well, he's just a lottery winner. He just got lucky. So I should think that he's not that good." Right? That's not actually the normal reaction. So I don't think... And that's a case where you know there's an enormous amount of luck involved. Let's see. And then again for other stuff, it's just so obvious that it's mostly about family reunification really. So it's like, look, this person was lucky enough to have relatives. I mean, there is some level of commitment to go and filling out paperwork and so on. But yeah, as to how much that makes you enthusiastic about hiring the person, and then on top of all of this, we actually have a whole separate body of evidence on illegal immigrants, where employers definitely seem to be more reluctant to hire illegal immigrants, but almost all of that appears to be just the problem of compliance and getting caught. Right? And we know this because we actually have the experiment of when you regulari- regularize illegal immigrants, then very quickly they get a big raise. Where so again, if you're an employer and you really thought that it's only the legal immigrants that have signaled something good about themselves, then when you see that there's an illegal immigrant who was regularized, then you should hold it against them and say, "Well, since he didn't go through the normal process, then I have to think that he's of low quality compared to other immigrants." I mean this does not seem to be the normal reaction that employers have. Normal reaction is, "Great, now I don't ha- now I can hire the guy I wanted to, plus I don't have to worry about getting fined or shut down or raided or anything else."

   11. DPDwarkesh Patel24:39

       Yeah, that makes sense. Um, what, what, what does the education system look like

7. 24:43 – 29:31

   The future of the education system?

   1. DPDwarkesh Patel24:43

      in equilibrium, given that there's no government cuts? Because if there's credential inflation-

   2. BCBryan Caplan24:46

      Hmm.

   3. DPDwarkesh Patel24:46

      ... wha- wha- like, uh, isn't it just like an escalating, um, uh, escalating cycle? So like eventually... Uh, I mean, you, it wouldn't make sense like eventually to get to the point where you need a PhD to be a janitor.

   4. BCBryan Caplan24:56

      (laughs)

   5. DPDwarkesh Patel24:56

      But like, what, what does the equilibrium look like?

   6. BCBryan Caplan24:58

      Yeah, great question. So I would say actually that if you keep the level of funding constant, then I would think that you... That we've reached equilibrium already. Uh, there are other... Uh, and there's actually periods when the share of Americans with college degrees was actually quite flat. So basically, during late '80s, early '90s, I believe, the share of... Like the, like the likes would be... What, what would it be? Like, share of like 25 to 29-year-old Americans who had finished bachelor's degrees was quite flat for about 15 years, which then led many people to say, "Okay, we've reached equilibrium, and now it's over." Then afterwards, uh, it resumed its upward increase, and it went from like 20, 25%. Now were getting like more like 35% of people in that age bracket have finished four-year degrees. Uh, as to what were the shocks to the system, yeah, that's an interesting question, and I don't have more than speculation here. Part of what's going on, of course, is that much of the rise is driven by women. So really, uh, there is a growing disparity between male four-year college graduation and female four-year college graduation. And so I think a lot of what's going on is that this is a period when it's becoming more and more normative for women to go and go to college and to get their four-year degrees. And there's, you know, as I said, people are conformists, so once... If you are a young woman, you see this is what almost all the other y- other young women are doing, then they're inclined to go and do that. Uh, there... So in terms of sheer affordability, uh, this is, you know, this is overall a period when college was becoming less affordable. It's, uh, it's easy to exaggerate that because there's also so much financial aid. And then furthermore, of course, people are getting richer on top of that, so it's... That's... But that is complicated, but, uh, nevertheless, uh, you know, at least I would say that it's probably not driven by changes in affordability too much. Let's see. Um, you know, like another story is, uh, just rising inequality is another reason to go and get more education. So when the gap between high school gr- high school graduates and college graduates goes up, this is a r- a reason for more people to go, so there's probably that too. So you can get changes in just the structure of the economy, higher return to quality. That kind of thing, uh, also matters, right? But yeah, but you know, the, like they're... I would say, like they're, you know, the idea that there's just a natural tendency for education to rise no matter what, I think that's wrong. There's this old line attributed to Herb Stein that anything that can't go on forever won't go on forever.

   7. DPDwarkesh Patel27:24

      Yep.

   8. BCBryan Caplan27:25

      Right? Very reasonable point. As to how far it can go though, um... Oh, yeah. The- there is something else that's... I don't think we have really good data on this, but I, um, very... I, I strongly suspect it, which is that schools are constantly slightly lowering (laughs) their standards over time-

   9. DPDwarkesh Patel27:41

      Right, right.

   10. BCBryan Caplan27:41

       ... in order to make it easier to finish. So that's something where it's very clear they lowered their standards between '65 and today, right? It was like... The intellect- Like, you know, the curriculum was just much more intellectually demanding back then. It is harder to say with great confidence that they've lowered standards between 2000 and 2022, but that is definitely my suspicion. It's one where if you are a college professor, especially at a lower-ranked school, you can, you'll appreciate what the pressure is, which is every year you have a class of students, most of them don't want to be there and really are not academically inclined, and then the question is, how many of them am I going to fail out? Now, if you have any pride in your work at all, you'll start by failing the people who never showed up and didn't even do the exam, right? (laughs) So it's like, "Okay, well, I can fire them with good conscience. Plus I don't even know what they look like, so it doesn't hurt my feelings, and I don't feel bad for them when I flunk them." Um, but then this, then there's question of, "What about the people that showed up and tried but no, zero? What do I do about them?" Most professors' pride still says, "No, I can't pass that person. It's sad, but I can't." But when you do it for 30 years in a row, probably there's a general tendency each time to go and fail maybe like 0.2 fewer people per year.

   11. DPDwarkesh Patel28:53

       Right.

   12. BCBryan Caplan28:53

       And then over time, (laughs) -

   13. DPDwarkesh Patel28:55

       So-

   14. BCBryan Caplan28:56

       ... this happens, and then there's also a culture of what's a, what, what, what is an acceptable share to fail? And then as the standards fall, you get weaker students there, and then the process continues to, uh, to, to amplify where standards keep going down. So I do think that there's been a lowering of standards, which means that more people want to go to college because they can, they actually have a, have a prayer of getting through. And then when you do that, that does f- spur further credential inflation because you've got too many people with low quality with their degrees in hand, and so you need an additional degree on, piled on top to get much confidence in the quality.

   15. DPDwarkesh Patel29:28

       Right. So then why don't, uh, more employers care about the hardness

8. 29:31 – 33:13

   Do employers care about the difficulty of a curriculum?

   1. DPDwarkesh Patel29:31

      of a curriculum for the college that they're-

   2. BCBryan Caplan29:33

      Mm.

   3. DPDwarkesh Patel29:33

      ... interviewing students from, uh, in, in comparison to like what level of a degree they have? So they'll care, like, does he have a master's or a bachelor's?

   4. BCBryan Caplan29:39

      Mm-hmm.

   5. DPDwarkesh Patel29:39

      They'll care less about, like, did he go to UChicago or Harvard? I, I'm g- I'm get- I like... I've heard that, you know, UChicago is much harder, right? Like I don't... But employers don't seem to care that much. Oh, like, you know, that, that's an even stronger signal of conscientiousness that he went to UChicago, um, as long as, you know, the incoming class had a similar GPA and SAT score. Like, shouldn't-

   6. BCBryan Caplan29:57

      Mm-hmm.

   7. DPDwarkesh Patel29:57

      ... employers care about that?

   8. BCBryan Caplan29:59

      You know, good question. Right, so here's what we know about the actual payoffs of different kinds of college degrees. The single best predictor of payoff is your major, and the majors that are thought by most people to be harder generally have much better payoffs.

   9. DPDwarkesh Patel30:11

      That's right, yeah.

   10. BCBryan Caplan30:12

       So step one is employers are doing that. They are much more eager to go and hire STEM majors. Econ majors, for your listeners who are trying to figure out what they want to do, earn a lot more than business majors. And you might think they're the same, but the world treats econ majors almost as well as CS or any, or any kind of, or electrical engineers, which when I discovered it, I was kind of amazed. I'm like, "Wow."What a deal.

   11. DPDwarkesh Patel30:36

       (laughs)

   12. BCBryan Caplan30:36

       I always tell my students, "Economics is the highest paid of all the easy majors." And when they start getting flustered and say, "Easy, it's a lot of..." Like look, you're, this is not CS.

   13. DPDwarkesh Patel30:45

       (laughs)

   14. BCBryan Caplan30:46

       You're not getting vitamin D deprivation (laughs) from-

   15. DPDwarkesh Patel30:49

       (laughs)

   16. BCBryan Caplan30:49

       ... go- going and doing your work for 72 hours straight underground. Come on. Like, like yeah, so it's harder than business, but it's not hard absolutely. Just put in a little bit of effort, and you'll, you'll get through as long as you can do pretty basic advanced math. You know, as long as you can take a derivative of so- of an easy function, you can get through econ.

   17. DPDwarkesh Patel31:09

       Uh, specif-

   18. BCBryan Caplan31:09

       So yes, hmm, so anyway, so yeah, major is the single biggest one. Now there is a big literature on why is it that on, on the return to selectivity of colleges. Uh, definitely difference, uh, very subtle differences like so Harvard or Chicago, it's very hard to pick up, uh, pick up much there. But again, I think you could just say, "Yeah, well employers don't distinguish because hardly anyone goes to those schools." They are really close in fact in terms of their quality. They are going to distinguish between Harvard and say Cal State Northridge, something like that. Uh, there is a puzzle about why don't employers seem to care, well seem to care more than they do about the selectivity of college, and it seems like part of it gets picked up in the major because harder colleges, people are more likely to do harder majors. And then another part of what's going on is people are looking at your overall background, so when, when, when we say that selectivity doesn't matter much, this is adjusting for a lot of other facts about you. So if we didn't, then we would see that we do actually have a, a noticeable gain from the selectivity of our college. Um, so I guess my main answer would be that they already are, are using a lot of information to distinguish it, and then really it comes down to for some further really fine grain differences, why don't they pay more attention to those? And I think the easy answer is the fine grain differences just don't come up that often. And then on top of all of it, so much of wor- of worker quality really doe- really does have to be observed, so it's enough to get you in the door. But there's enough uncertainty remaining where you can say, "Well look, it's the difference between what, uh, having say a 78% chance the person works out and a 76% chance the person works out, uh, that's almost a rounding error. So if I have a little bit of other information around the sev- on the person that would normally be 76, that can put me over the top and get me to go give that person a chance."

   19. DPDwarkesh Patel32:56

       Mm-hmm.

   20. BCBryan Caplan32:56

       So I think that what's going on is actually quite a bit more reasonable than you might think if you don't know a lot of the details.

   21. DPDwarkesh Patel33:03

       Right, yeah. Um, okay, so you, you, you, another point you make in the book is that, uh, market discrimination is often caused actually by government interference, and then-

   22. BCBryan Caplan33:12

       Mm-hmm.

   23. DPDwarkesh Patel33:12

       ... um, it, it, it

9. 33:13 – 42:01

   Why do companies and colleges discriminate against Asians?

   1. DPDwarkesh Patel33:13

      will, it will solve itself in equilibrium. Um, but, uh, I mean if you just look at, uh, like, uh, college discrimination of Asians, right? So you know-

   2. BCBryan Caplan33:21

      Yeah.

   3. DPDwarkesh Patel33:21

      ... like the government is not requiring Harvard to like discriminate against Asians.

   4. BCBryan Caplan33:24

      Yes.

   5. DPDwarkesh Patel33:25

      Um, but and in fact it like lowers the signal that Harvard is able to se- send if, uh, you know, they, they do aggressive affirmative action. But, um, and yeah, even like actual companies that are in the market proper like Google or something, they'll do affirmative action too, right? Um, and I mean you could say like a little bit of that is required by discrimination law, but probably not to the magnitude they're doing it.

   6. BCBryan Caplan33:43

      Mm-hmm.

   7. DPDwarkesh Patel33:44

      Um, uh, so like what is the explanation for why that hasn't been solved out by just competition?

   8. BCBryan Caplan33:49

      Right, so there's multiple things going on. So for colleges, the key thing is that they're nonprofits. And so I have this running argument with my colleague Alex Tabarrok, there is a whole economics of discrimination based upon the idea that, for example, if it was really true that women earn 70% as much as equally qualified men, that any moron has a quick, that's a get rich quick scheme, just fire all the men at your firm, replace them with equally qualified women, and save a massive amount on your labor costs. So that's sort of the classic economic argument, and I think it's basically sound. But the key premise is precisely that, that, that, uh, that you're dealing with for-profit organizations where there's someone that is willing to do something that sounds ugly in order to get rich. And so I mean I'm always telling them, "Look, this does not apply to nonprofits like academic departments or universities." So that's the first thing that I would say is that nonprofits at minimum the pressure on them to not discriminate is much weaker than for for-profits, so I would distinguish those two, uh, quite strongly actually.

   9. DPDwarkesh Patel34:46

      Yeah.

   10. BCBryan Caplan34:46

       And I'd say actually, nonprofits, you know, you should definitely expect them to do more discrimination, and the question just is what kind of discrimination are they, are they inclined to do right? Uh, so this is one where in the old days when there was a lot of antisemitism at top schools, then the top schools would be engaged in discrimina- discrimination against Jews. Right, well how could they afford to do that? Easy, they're sitting on a mountain of money that isn't theirs, right? They're not, they're not going to go bankrupt if they go and have a tight Jewish quota. It's not like they, like it, there's any, it's any skin off the nose of the admissions department, and therefore they can engage in whatever discriminatory preferences they may have precisely because they are a nonprofit.

   11. DPDwarkesh Patel35:25

       So then what explains the discrimination at Google, for example?

   12. BCBryan Caplan35:27

       Yes. So I was just about to get to that, Mukesh.

   13. DPDwarkesh Patel35:30

       That's all right. (laughs)

   14. BCBryan Caplan35:30

       Now in the case of for-profit businesses, again there, there is a certain kind of superstar company like Google where they are so rich that at least you might say, "Ah, they could probably afford to discriminate for 100 years too and still survive." Uh, so you know there are a few companies like that where they have just been so incredibly successful that now they have, they're sitting on a mountain of money. And then like they are no longer, they're not up against the wall saying, "Oh my God, if we don't do everything great, then we're gonna, we're going out of business." So now it's important to remember, there's, there's only, there's very few companies like that. They're, they're, they're famous. Also worth pointing out the companies that think they're in that position forever, it's not like Harvard. There are a whole bunch of companies that were in the same position as Google that are now bankrupt. Uh, so (laughs) um, even there, I think the people at Google do have some sense that there are limits to this. Now in terms of you know, well what the actual role of discrimination law is, I think that in the case of colleges, they are definitely going further than the law requires because there are true believers there, and the true believers are especially concentrated in the admissions departments. Uh, so that's where I'd say the main thing is the nonprofits. Although even there they do have the threat to hang over the heads of other people in the administration which is, "Well we don't want to be perceived as doing clearly less than all, than other comparable schools."Right? That is an important thing that you want, that y- that, uh, that, that's, uh, you want to, that you don't want to do if you want to avoid lawsuits, is to be obviously the, the, the group or the organization that cares less than everybody else and does less. So for nonprofits, I think that is, there is a bit of that. In the case of for-profit companies, I think actually that discrimination law is a major part of the reason why they actually are supportive of affirmative action, because they don't want to be less supportive than any comparable company, at least in an obvious way, for fear that then they will, they will paint a target on their own backs. Right? So I have a couple pieces that I wrote on this. I don't... I think they're in, they're, they're gonna be in a different book, if I remember correctly-

   15. DPDwarkesh Patel37:32

       Mm-hmm.

   16. BCBryan Caplan37:32

       ... because actually this is the first in a series of eight books of my best blog posts from, on EconLog from 2005 to 2022.

   17. DPDwarkesh Patel37:40

       Oh, cool.

   18. BCBryan Caplan37:40

       Right? But anyway, uh, what I say in another piece is that just imagine what would happen if you were a well-known firm and you just officially announced, "We strongly oppose any kind of witch hunt about discrimination. This firm is very fair, and we are, and we scrutinize all accusations of racism and sexism very carefully to make sure that you are not making false accusations against an innocent person." Now, imagine that you very loudly say this, right? Now, of course, there's protests and boycotts and so on that you might get, but on top of all of this, if you ever get sued, that is going to be discovered, and they are going to introduce it and say, "This is a firm where they actively punish people for going and trying to, uh, and, and trying to insist upon their rights." And you say, "Hey, we didn't... We, we, we were in compliance with the letter of the law." Well, how is a jury likely to see it when they say, "Look, this is what a normal firm looks like, where you have a bunch of propaganda about how we are doing everything in our power to go and help oppressed groups." And then there's another fir- and then you, and then we show... And what, what do we have at this firm? This firm is us- where you say, "At our firm, the battle against racism and sexism has long since won, has long been since won. We consider it an extremely minor problem, and our presumption is that accusation's to be false. Uh, we'll listen, but we are firmly convinced that mo- that we are, uh, in the, in the fairness of our own system, and so we are, we are going to carefully scrutinize and discipline people who level false accusations." Right? I think if you were that firm, you really would be painting a giant target on your back. It would not be safe. Right? So, um... Right? And this again is how there has been an expansion of discrimination law over time. Right? So, I mean, if you just say, like sexual harassment law, like at the federal level, as far as I know, there is no law against sexual harassment. Rather, this is just a judicial extension of the original '64 Discrimination Act. But it started with saying, all right, well, look, obviously it's illegal to discriminate. That's what the law says. Well, what if that you're just treated badly? Right? Well, hmm. Well, uh, yeah, I guess that could be discrimination too, right? Yes. Well, like is it discrimination because of your sex? Yes. Well, what if, you know, the like women get paid the same amount, they get promoted the same amount, but there's a bunch of calendars with women in bikinis around the firm. Could that be discrimination? And then this is the origin of the law for the hostile workplace. Now, sometime in the '70s there was one of my very favorite all-time court cases where there was a bisexual employer who was accused of di- of sexual harassment, and he said, "It's not discrimination. I, I harass men and women alike, totally. Like I, I am totally within the letter of the law."

   19. DPDwarkesh Patel40:22

       Right.

   20. BCBryan Caplan40:23

       And if ever a person had, was totally legally in the right was that guy. That guy, like I say, like unquestionably he had the law on his side, but he lost anyway. So the court basically said, "Look, we're not going to let bisexuals get away with sexual harassment when other people can't do it."

   21. DPDwarkesh Patel40:39

       (laughs)

   22. BCBryan Caplan40:39

       Like, "We're... No! No! We're not going to allow that. No." Right? And so it continued and then expanded to what we have now where people can get sued because some employees told jokes or graffitied a bathroom. Uh, so that is at the level where we're at. Now again, this doesn't mean that most firms have much to worry about, but it's hanging over your head and it's a reason, at least for prominent firms, to avoid doing anything because prominent firms are like piggy banks. Right? They're full of money and someone is, uh, people are just waiting there. "Hey, Elon Musk has a lot of money. What if we could go and sue him?"

   23. DPDwarkesh Patel41:14

       (laughs)

   24. BCBryan Caplan41:14

       You know, like, "He could pay."

   25. DPDwarkesh Patel41:15

       Right.

   26. BCBryan Caplan41:16

       "So let's, let's go after him." If it's just some guy's paint store, then probably not much is going to happen to you. Although even there, you're just a little bit worried. Right?I can see... And now the other thing to remember is that a lawsuit is not just a loss of money. It's also enormously stressful. So there's-

   27. DPDwarkesh Patel41:32

       Yeah.

   28. BCBryan Caplan41:32

       ... you know, don't underestimate just the worry of that. And just think about what is like if you've been sued once. How do you feel about getting sued twice? (laughs) Right? I think almost anyone who's been sued once, they're like, that was a terrible experience for them and they will be trying to think of ways to avoid having it again or having it happen again. One thing, of course, is to be super cautious. Uh, but there's a lot of ways of being super cautious. There's also the one where like, "Well, I profile people who might sue me and I don't hire them." Something else you can do.

   29. DPDwarkesh Patel41:58

       Okay, so I want to ask you about, uh, mental illness.

   30. BCBryan Caplan42:00

       Mm-hmm.
10. 42:01 – 50:38

    Applying Hanania's unitary actor model to mental health

    1. DPDwarkesh Patel42:01

       aware of Hanania's book-

    2. BCBryan Caplan42:02

       (laughs)

    3. DPDwarkesh Patel42:02

       ... um, uh, where he s- explains that the, uh, you know, unitary actor model can't explain, uh-

    4. BCBryan Caplan42:08

       Mm-hmm.

    5. DPDwarkesh Patel42:08

       ... American foreign policy. It's not one rational actor.

    6. BCBryan Caplan42:11

       Mm-hmm.

    7. DPDwarkesh Patel42:11

       It's, you know, these diverse interest groups that are within the establishment.

    8. BCBryan Caplan42:15

       Okay.

    9. DPDwarkesh Patel42:15

       Uh-

    10. BCBryan Caplan42:15

        I see where this is going.

    11. DPDwarkesh Patel42:16

        Huh?

    12. BCBryan Caplan42:17

        (laughs) I think I see where this is going.

    13. DPDwarkesh Patel42:18

        Right, right. So yeah, I was just about to say, um, can't you treat individual personalities this way? So, you know, there's different ways to think about this. Maybe you can think of like modules within the brain that have like, uh, that are trying to entice you this way or that, and did they temporarily get a hold of you? Maybe, I, I don't know, personality parts, you know, id, ego, whatever. There's, there's different ways you can talk about this. But could you apply a similar model to individuals where you say, um, just as you wouldn't say like the average American is responsible for the, you know-

    14. BCBryan Caplan42:44

        Mm-hmm.

    15. DPDwarkesh Patel42:44

        ... for the mistakes of American foreign policy-

    16. BCBryan Caplan42:46

        Mm-hmm.

    17. DPDwarkesh Patel42:46

        ... like, uh, the, uh, uh the individual is not responsible for the weird things that parts of their personality makes them do. Right?

    18. BCBryan Caplan42:54

        Right. So, I guess my first reaction to this is just introspection and say, look, I don't experience my mind as being like a bunch of interest groups that are pushing and shoving, going run another-

    19. DPDwarkesh Patel43:03

        But you're not mentally ill, right?

    20. BCBryan Caplan43:04

        Yes. Uh, well, so, well, here's the thing. There's two versions of it. One is just to say that everybody's like this, and then the mentally ill basically have worse interest groups.

    21. DPDwarkesh Patel43:13

        (laughs)

    22. BCBryan Caplan43:13

        And then the other one is to say that normal people are unitary and then the mentally ill are an out- are outliers who are not unitary, right? So, these are two different stories. The main thing that I would say, uh, is, uh, well, like any of the, there is actually a whole literature on hyperbolic discounting that d- uh, right, or self-control problems in general that tries to think of the mentally ill as being people that just fail to go and do the best long-run plan and instead focus on short-run plans. What I say is, this is actually just a deeply wrong story about what's going on with at least the severely mentally ill, 'cause here's the thing. The difference between people that guy, get diagnosed as severely mentally ill and people who just have some moderate problems, is precisely that the severely mentally ill are stubbornly convinced that they wanna do the objectionable stuff they wanna do. So, basically, if you're someone that says, "Gee, I have these violent urges. I need to go to a psychiatrist. I'm trying to control my violent urges. What can I do?" All right, you'll get classified as a moderately mentally ill person. But on the other hand, the person who is a full-blown serial killer, every second of their day they're stalking prey, that person seems very unitary. More unitary than most people, actually.

    23. DPDwarkesh Patel44:22

        (laughs)

    24. BCBryan Caplan44:22

        And yet, we'll call that person severely mentally ill, and that's the person who probably, if they're ever caught, will get, will go to a, will, uh, will, will be found not guilty by reason of insanity. Why? Because they were so organized and determined and focused. So...

    25. DPDwarkesh Patel44:37

        Wait, but, uh, I, I would say, um, like, somebody like Ted Bundy, what, we, like, um, may- maybe this isn't how the legal system works.

    26. BCBryan Caplan44:43

        I know Ted Bundy actually, the story, at least, I watched a documentary and then I read the Wikipedia article, so, or what, I mean, I, I watched a fictionalization of it and read the Wiki- Wikipedia.

    27. DPDwarkesh Patel44:50

        Yeah, yeah.

    28. BCBryan Caplan44:51

        It was, I believe it was the Zac Efron version.

    29. DPDwarkesh Patel44:53

        Right, right.

    30. BCBryan Caplan44:53

        But anyway, I think that the, uh, fictionalization was quite accurate, so.
11. 50:38 – 53:37

    Why are multinationals so effective?

    1. DPDwarkesh Patel50:38

       why is it that multinationals are just so much more effective than, uh, uh, than companies from, uh, you know, c- companies from developing countries? You would think that, you know, that they're actually familiar with the culture, they know the problems, uh, that the country faces, so they would be like, much more effective businesses. Um, why is it kind o- uh, why are companies that are founded in America, uh, that are foreign to the places where they're working, why are they just so much more effective?

    2. BCBryan Caplan51:02

       Right. So first of all, uh, we have, just to let people know, this is, this is not just our opinion. There is a, a very impressive body of liter- a body of research saying this very thing, so. Most assoc- most associ- most associated with the researchers Nicholas Bloom and John Van Reenen. Um, in any case, I say that a l- a lot of the answer is that the culture is the problem. (laughs)

    3. DPDwarkesh Patel51:22

       (laughs)

    4. BCBryan Caplan51:22

       The culture is the problem, so if you have a nepotistic culture to say, "Well, we need to come up with a, with a, with a hiring practice that works really good in our nepotistic culture." It's like, no, no, no. The whole problem is the nepotistic culture. You've got to switch over to a different cultural norm, because nepotism is cross-culturally a bad way to go and run a business. Meritocracy is the way to go, and this is what multinational companies bring in. Uh, so that's one of the, uh, one of the most obvious ones. Uh, but then, you know, similarly just having a lackadaisical attitude towards punctuality. This is another cultural problem that exists in many, some countries to a much greater degree than others. You know, every country has some late people, but some countries, lateness is almost a virtue. I was actually talking to a guy who worked at, I believe it was Toyota in Brazil. And so Brazilians, he told me, they all have a terrible problem with punctuality. And what did Toyota Brazil say? Like, you know, like, "If you wanna work at Toyot- uh, at, uh, Toyota Brazil, punctuality, we insist on this or you will be fired. Zero tolerance for lateness. Uh, this is our system." So really, they actually, to a much greater extent than in Japan, actually openly declared war on the cultural norm of it doesn't matter exactly when you show up. So I think that's all, that's probably a lot of the answer is that the main things that multinationals do is if there's a cultural norm that can be deployed usefully then yeah, then probably actually local firms would be better at that. But what multinationals do is they actually find the universal truths of business, and then they try to teach them to places where these norms go against the culture in order to go and bring them into the world of modern business, raising the productivity and giving them the opportunities that people in other countries have. Now of course, you know, just to be fair to say Toyota Brazil, like if you want to work in some inefficiently managed Brazilian firm where they respect Brazilian cultural norms, you can. But they totally paid so much better that it was considered a highly desirable job. So it's not just that there's some outside firm that comes in and says, "Your culture sucks. You have to do it our way." But rather it's an outside firm that comes in and says, "If you're willing to bend on the culture, we will go and give you a lot more money than you usually get in this country."

    5. DPDwarkesh Patel53:32

       Right.

    6. BCBryan Caplan53:32

       And it turns out a lot of people in those countries are happy to take that deal.

    7. DPDwarkesh Patel53:35

       So if cultural norms explain so much of the difference

12. 53:37 – 58:13

    Open borders and cultural norms

    1. DPDwarkesh Patel53:37

       between the productivity of firms across different countries, then does that make you less bullish about, uh, you know, open borders, because then you're importing people who have cultural norms that are just making companies ineffective, uh, from places where they come from, right?

    2. BCBryan Caplan53:49

       Right. Well, I'm not worried because basically country, uh, companies that are in the, that are in first-world countries are very similar to multinationals in terms of what they do. So they don't just go and say, "Well, whatever people in this, uh, in th- in this area or whatever applicants think is okay is okay." Instead, normally they've got this list of cross-culturally valid rules for the right way to run a business, and then they say, "Look, if you want to be here, you're gonna have to do them." Yeah, you could go and run your own business where you don't have to show up on time and see how that works for you, but if you want to go and work at our store, you have to do this. So I say really that we want businesses in the first world do is take workers who on their own would not follow these, because just because you are more accep- uh, open to pu- to punctuality than people in Brazil doesn't mean that you're all that thrilled about it. But a lot of what employers do is to go and take people that are not really w- well, well-suited for a team initially and to we- weld them into a team. This is what coaches for athletic teams do, of course, is you take a disorganized rabble and then you whip 'em into shape. And this is the very same thing that businesses do. Uh, you know, like routinely is, look, you've got someone, you, you have some managers at the top who know how things need to be, and then you have a bunch of flawed human material that shows up, and what are you gonna do with it? You could just say, "Oh, I can't work with this material, it's too hard and I give up," and then businesses are not run by those people. Instead, the normal thing is you have a manager who says, "Look, I've.First of all, I know what needs to be done. Second of all, I had to figure out a way to get people to do it, even though it's not the f- th- it is not, it is not their strong desire, anyway. Right? And if you go and read any book on management, it will give you a whole pile of advice on what to do. Uh, I'm a big fan of Dale Carnegie's How To Win Friends and Influence People. You know, a lot of what he says i- you know, for example, he says, "Give everyone a good reputation to live up to." Don't go and tell people, "You are a terrible late person, I hate you." That's not very motivating. Much better to go and say, uh, you know, to, you'll, you'll... First of all, notice when are people on time. "On time, excellent, great." Right? And then secondly, if someone is a little late, say, you know, say something more along the lines of, "Gee," you know, like, "normally, you're s- normally you're on time and I can count on you, and it was really hard for me to run the business today." Now obviously, there are some people that don't respond to being nice, and then people like that generally get fired after a while. Um, by the way, so let's see, I don't think I, I, I, I think this is actually in another book, but, uh, you probably are familiar with the book by Barbara Ehrenreich, Nickel and Dimed?

    3. DPDwarkesh Patel56:14

       No, no.

    4. BCBryan Caplan56:15

       Which, um, so, uh, basically, she went and, you know, was a famous journalist, went undercover, did a bunch of low skill jobs and then wrote about her experience and how terrible it was and how hard it is to be poor in America. Um, so anyway, that's the usual writeup of the book. So I've read it. I think it's a fantastic book, because there's a little bit of propaganda of that kind, but most of it, she just describes very, very neutrally what happened to her. And what happened to her is quite different from what her summary of what happened, uh, actua- actually was. So I mean, really, the only, like, when I read the book, I say, like, "Here's a worker who has a very negative attitude and that employers don't appreciate it and try to get her to get a better attitude and do their job." And (laughs) right? So, there's a lot of that going on. And then furthermore, the other thing that you really get out of the book is that people that are managing very low skilled workers probably are a lot more emotionally abusive and disrespectful than people that would be managing higher skilled workers. Right? But when you read the book, you realize why, which is, you know, two things. So one is honestly that with higher skilled workers, they have a lot more pride in their work, and so you don't need to be mean to them to get them to do their job well. It's more internally motivated. Whereas with someone who's washing dishes, like, it isn't like they wake up every day and say, "My calling is to wash dishes." You really do need to be harder on someone to get them to do their job well. But probably an even bigger factor is who manages a small town d- a small town diner? Right? Is it someone who has great social skills and just knows the right way to make everyone feel like an important special person? If you were that good with people, you'd be managing something m- uh, something much better than a small town diner. Most people who manage a small town diner are probably someone who was a good worker in that diner and they got promoted and they rose in the ranks, or maybe they actually started their own business and th- and they ran it. So again, this is a case where a lot of why it can be unpleasant to be a low skilled worker is that you're being managed by people whose main experience is being a low skilled worker, and if they had top social skills, they'd be managing a higher status team. So, that's something else you got out of the book.

    5. DPDwarkesh Patel58:08

       Right, right. Okay. Fi- final question, um, what do you think of Tyler's idea in his book,

13. 58:13 – 1:03:40

    Is Tyler Cowen right about automation?

    1. DPDwarkesh Patel58:13

       Average Is Over, that basically the econom- uh, the labor market is, uh, bifurcating into, uh, people who can work with computers and people who are getting, uh substituted by computers, and that's kind of the dominant theme of the labor market?

    2. BCBryan Caplan58:24

       Right. I'd say that the last 20 years of empirical research say that's wrong. Right? So here's my reading of empirical research. Empirical research says that from about 1980 to about 2000, there was a fall in the real wages of very low skilled workers and a corresponding rise in that of very high skilled workers. But then from j- uh, f- uh, like around 2000, that fall stabilized or even moderately reversed. And what we've actually seen since then is some fall in mid-skill wages rather than low skilled. So I say that just the facts don't really fit that story. Uh, then secondly, we can see during COVID actually, there's been so many changes to labor markets, but one of the main ones is suddenly, there is a great desire to go and attract low skilled workers. Right? Um, and w- you know, as to what's going on, I think there's, you know, there's a lot going on. I mean, one is that there are still the hangover of some of the most enormous redistribution in American history and world history, where even when it's cut off, still there's a lot of people who previously were working because they had debts to pay, and then they paid off all their debt during COVID, and now they are at least in a really good position, and also maybe their parents say, "It's okay for you to live at home without paying rent because of COVID." Right? (laughs) So there's a lot of people left because of that. There are some people who just, you know, you know, had enough money to go and retire early and they're scared of COVID. There's that. Um, so, um, um, and then, uh, there's, you know, and, and then on top of all this, um, you know, th- again, there still is this enormous overhang of this enormous fiscal stimulus, which was accommodated very readily by the Federal Reserve. I mean, if you go and take a look at wh- how much nominal GDP increased, so basically from the bottom to about three months ago when I last looked, US nominal GDP increased by 20%. This is an astronomical increase in demand. I mean, almost unprecedented actually. So normally what happens during recessions is the government has some countercyclical, uh, you know, demand policy to moderate the fall in demand, but there's still a fall in demand during recessions. This is one where actually the response was so enormous that it greatly overpowered any fall in demand, so actually demand went up, not down. So I think that's another thing that's going on is that there's just been this very, very large increase in demand, so that means that, again, it's very easy for workers of all kinds, but, you know, probably especially actually workers that deal with other people face to face. These are the industries where people were most worried about the COVID, and a lot of people said, "Hey, can I go and get a job where I'm just teleworking and then I don't have to worry about the disease?" And then once people get started doing that, there's a lot of desire just to cling to where you were. Um, so yeah, so I think that his story is basically wrong. There is a rising payoff, uh, for IT skills, but this is just one small part of a much larger world. Uh, and I think it's just a big mistake to think of this as, as the big thing that's happening. Uh, rather there is a, you know, you know, there's just a lot, there's a lot of factors going on. But anyway, just the, uh, just in terms of the description of the facts, the period where low sk- where the low skilled workers were doing badly was like 1980 to 2000, and since then s- and actually before COVID, it looks like there, it looked like there was a moderate recovery, and then since then, it looks like big recovery for them.

    3. DPDwarkesh Patel1:01:38

       Cool, cool. Awesome. This is a lot of fun, Brian. Thanks for coming on.

    4. BCBryan Caplan1:01:41

       Oh, yeah. My pleasure. Thank you very much. And-

    5. DPDwarkesh Patel1:01:43

       And, uh-

    6. BCBryan Caplan1:01:43

       ... book, again, is Labor Econ Versus the World, and you can get it on Amazon. And this is actually the first of a series of eight books of the very best things that I wrote over 17 years. Um, you can, by the way, get them all for free in the blog, but then you'll have to sift through thousands of posts. So this is where I try to curate them. And I organize them by theme, so if there's some particular topics you want to see more, you can buy the book on that, on that and get all of what I consider to be the best things I've written on that topic.

    7. DPDwarkesh Patel1:02:10

       Yeah. And, uh, let me add to that, that the pricing is incredibly fair on Amazon.

    8. BCBryan Caplan1:02:13

       (laughs)

    9. DPDwarkesh Patel1:02:13

       And, uh, and, yeah-

    10. BCBryan Caplan1:02:15

        Yep. W- Well, it's 12, 12 bucks for paperback and $9.99 for the e-book.

    11. DPDwarkesh Patel1:02:19

        Right. And then I... Yeah, I, I love the format of these sorts of essay compilations where you can... It, it makes it really easy to binge-read them, uh, you know, just, like, a couple pages at a time, and then, uh, it's a great way to, like, compartmentalize thoughts. So yeah, I highly recommend the book. All right, thanks for-

    12. BCBryan Caplan1:02:33

        And let me give a, give a shout-out to the two groups that gave me the idea for this. So LessWrong put out a little, uh, gift box of little books of their best essays, and I got one, and I really liked it, and I read a lot of stuff that I wouldn't normally have read because I had these little hard, hardcopy books. And then actually my friend Mike Humor decided to self-publish an intro philosophy textbook, um, it was, uh, you know, Knowledge, Reality, and Value, and, um, and he, uh, when he told me, and I asked him, like, "Well, was it a pain in the neck?" He said, "No, it was super easy." And so that, uh, was the one that I said, "Okay. Well, why don't I try this, see what happens?" And then I got the idea of doing eight books. So next one will probably be out in like two months, say.

    13. DPDwarkesh Patel1:03:08

        Oh, cool, cool.

    14. BCBryan Caplan1:03:09

        And that one will be Voters as Mad Scientists: Essays on... Or no, no, no. That actually... No, uh, in fact it will be How Evil are Politicians?: Essays in Demagoguery. That will be the second one.

    15. DPDwarkesh Patel1:03:18

        Ah, I see. Okay. Looking forward to it.

    16. BCBryan Caplan1:03:20

        All right. Thanks a lot, R- Rakesh. Talk to you later.

    17. DPDwarkesh Patel1:03:26

        Sure. (instrumental music)

Episode duration: 1:03:40