Transcript
Speaker: Hey everybody and welcome to the most recent episode of the Project Liberal podcast. Today we are joined by a guest that I'm very excited to speak to. We're going to talk about the case to be optimistic, why the current state of the economy is not as bad as you might think.
Speaker: and why there are a lot of things to be optimistic for in the future. We are joined by Jeremy Horpital. Jeremy is an economist and the associate professor of the UCA College of Business. He's also the director of the Arkansas Center for Research in Economics. Jeremy, hopefully I didn't screw up the intro. I want to give you a second to introduce yourself. No, you did just great. Thanks, Josh and Jonathan. Great to be here with you guys. Yeah.
Speaker: I don't know how much I have to add to that. I'm an academic economist, but also you mentioned I'm a director of a research center here. So I get to do a lot of student, we do student reading groups and speakers and things like that. I get to do a lot of media, including, I think we'll talk about my social media, but I do a lot of local media here too, talking about Arkansas specific issues. That's what we focus on.
Speaker: I just, I just love, you know, using the economics I learned in the, we do the classroom and through my research to try to bring that out in the broader world too. I've been at my current university for 8 years, but I've been.
Speaker: I got my PhD in 2009 from George Mason University. I've been teaching at various universities since then. And I did my undergraduate in economics. So I've been doing economics in some shape or form now for over 20 years. So just kind of live and breathe it every day and try to make it fun, but also to make it relevant. I think it's
Speaker: A lot of, to a lot of people, even people that kind of follow the stuff closely, a lot of it does seem mystifying, especially if you start getting into the weeds of the data. So I know we'll probably talk about some of that today, but just trying to, you know, communicate to people on their level and try to also keep it fun for me. So that's what I do, spend my day teaching and then jumping on Twitter.
Speaker: I, I, um, I'm going to mess up the quote, but I think it was Mark Twain, maybe apocryphally said, you know, there's lies, damn lies and statistics. Right. And so how do you, you know, on Twitter, everyone's throwing out numbers that counteract each other, fight, you know,
Speaker: contradict each other. Some are just outright lies. Some have, you know, one variable that's missing that completely changes the story behind it. How have you kind of found yourself in a position to be kind of like, you know, you're the go -to source for me, at least. You're one of my go -to sources when I'm like, when I come across this statistic and I think, wait a second, this doesn't feel right. I can go to your page and I'll search your profile and say, you know, whatever it is and try to figure out, you know, what the story behind some of these numbers are. How have you kind of found yourself in that position?
Speaker: I think part of it is I'm always trying to figure things out for myself. A lot of these things, when I go on Twitter to explain to people, I myself didn't quite understand it, so I want to dig in and see what's the best data or different sources of data to answer a particular question. I write for a blog called Economist Writing Every Day, and there's seven of us, and we each post one day. One of my co -bloggers, one time we were sitting down, we met at a conference, and he said,
Speaker: I love your post because I can tell like you don't have a preconceived notion coming to your post and the post is clearly just you figuring out for yourself like what data can I find they can look at the different angles of this and so I think I know I just I just enjoy you know the process of trying to trying to make sense of the world through data and I think that you know so a lot of the way I
Speaker: I do it is just by, you know, I'm figuring out for myself, you know, but then over time, you know, when this particular question comes up, I can say, Oh, I know for that one, here are the best sources. So, you know, I'll have it, you know, my back pocket, but a lot of it is, you know, if there's a new question, like, you know, the question about crime rates, right? Like, I'm no expert on crime, but you know, I know who to look to. I know what some of the good sources are with crime. There's like challenges of crime.
Speaker: under reporting data and things. So like, you know, I know those those exist. So, you know, for a question like that, you know, I've written blog posts about crime rates. I'm like, OK, what are the what sources do you got to look to? What are the limitations of that data? And so a lot of it's just kind of me figure it through on my own and then and then showing people what I've learned.
Speaker: Got it. You had written, actually, on theeconomistwritingeveryday .com, which I would recommend for our audience to check out. I think one of the most recent posts you wrote was, how the economy is doing versus how people think the economy is doing. This is the thing that I was hoping to kick us off on because, and we talked to Kathy Reisenwitz, who was a guest on our show last week about this very topic.
Speaker: It seems to me in the mind of most people, and this isn't even on Twitter or in the social media. This is what I hear from my parents and the friends I talk to in real life. Everyone feels like the economy is doing really bad. And one of the things you outlined in this article was that, hey, that emotional feeling doesn't mesh with the facts. So one of the questions I was going to tee you up for, Jeremy, was to talk about the facts and help us think through what exactly do you mean when you say the economy is doing better.
Speaker: And then I want to talk about why do you think people have such emotional disconnect? But can you tee us up for like the state of the economy now versus say like before COVID and before the last dip? Yeah, no, that's a really good topic to get into. I think a lot of people have been noticing this lately that even as the economy improves, as we see it in the data, a lot of people are still very pessimistic about the economy.
Speaker: There's a number of things in there, but I think the first one is we can just look at broad measures of how the economy is doing, whether that's unemployment rate, or you can go beyond that and look at other measures of how the labor market is doing. You can look at GDP as the broadest measure of how the economy is performing.
Speaker: You look at all these, and this post you mentioned, I went through, I didn't quite know it was going to be this, but you look at a lot of these, you compare them. November 2023 is the most recent data when I wrote that. Compared to November 2019, a lot of these are exactly the same to the first decimal place. All these different measures of how the labor market's doing. In that post, I say, okay, all these broad measures say the economy is performing almost exactly as it was before the pandemic.
Speaker: So then it could be then that people feel pessimistic because, well, maybe various measures of wages or income or wealth haven't kept up. So it could be that, well, now the economy is growing, but wages are still behind. So then in that post, I put together four or five different measures of wealth or income or wages. And all those are higher than they were in November of 2019 as well. Now, they're not much higher. And so you might think that
Speaker: you know, maybe one of the challenges is that it's not, you know, wages weren't going up as fast as people would have liked. But I think that, you know, all, you know, I think you've got the data up here now, right? So start off with the, you know, how people think about it. Well, people think it's much worse than November 2019, like much, much worse. But, you know, all the data suggests it's very close to what it was. Wages are up. I even went into a little bit, some people will say, well, what about, is this,
Speaker: Is it just temporarily good because people are taking on more debt and people still sometimes see a chart or you see these charts of credit card debts is at all time highs, right? Well, with that, I'll say, okay.
Speaker: How do we contextualize that? The easiest way is to divide total credit card debt by people's annual income, or how much they're paying on credit card debt by their income. And so those two measures at the bottom there look at total debt payments as a percent of disposable income, or total debt as a percent of GDP. And these, again, that first one is to a first decimal place, the same as it was before the pandemic. So you have all this data looking almost exactly the same,
Speaker: You have real wages adjusted for inflation being a little bit higher, not super strong growth since before the pandemic, but it's not lower. Wealth is quite a bit higher. Yet on all these measures of consumer sentiment or just talk to your family over the holidays, people feel like the economy is not doing so well. So that's kind of the data. If we then shift to why do people think this? I think there are a lot of good explanations that capture part of it.
Speaker: I think number one is that maybe wages, the cumulative growth hasn't been as fast when we adjust it for inflation. I think actually we're pretty close to trend if you kind of projected a trend. I think really though, it's just the, it is the cumulative effect of inflation. And I think that people see the prices going up, right? Like they observe that in their daily behavior. They don't really probably know what percent
Speaker: their wages have gone up, and they also don't know what percent the price is. They just know prices are up a lot, right? I mean, the latest one is orange juice. Everyone's like, oh, orange juice is now $750 a gallon. And it is. And you know, when orange juice prices are up a lot this year, orange juice prices are up 36 % the last year, but that's the outlier.
Speaker: Overall, groceries are up less than 2%, right? So people can find the one that's way up. Uh, orange juice, it's like the new gasoline, right? It's way up, but gasoline's down, right? So you got to kind of look at all the data together. I think people tend to, you know, for various psychological reasons, tend to focus on the one thing or two things they can find that look bad. They're not that good at judging in percentage terms, how much has my income gone up?
Speaker: The average person probably doesn't even know how much consumer prices have gone up in the past four years. They know they've gone up, but is it 20%, is it 30%, is it 50 %? They probably don't even know, right? Because they only know the prices they observed directly, unless you're following the Consumer Price Index releases and looking at the friend charts every day like I do. You don't know exactly how much it's up. So I think it's normal that in a time when prices have gone up a lot, people aren't certain exactly how much they've gone up, that people probably feel like their wages haven't kept up with that.
Speaker: It's also true that for some people, wages haven't kept up, right? So if I say the median wage has kept up, that might mean that a lot of people below the median have not, and they might feel pessimistic. And then some people whose wages have far exceeded inflation, this will be especially people who have changed jobs in the last four years, they probably have a big increase in their pay, but they may still feel for other reasons that it's not as good.
Speaker: Now, I conclude that post by saying that actually, even though people are pessimistic, they're less pessimistic than they were a year and a half ago. So as the data has gotten better and as we haven't had a major economic slowdown or recession, which a lot of people, including economists, thought we might have,
Speaker: You know June 2022 is kind of the worst point as far as when people judge the economy so about a year and a half ago That's also the month the inflation was at the highest rate So that kind of all goes together and as inflation has come down people got more optimistic But they're nowhere near as optimistic as they were
Speaker: four years ago about the economy. There's some partisan aspect to this too. And you see this when the party in power, especially the presidency flips, Democrats and Republicans kind of flip how they view the economy. Like all of a sudden it's terrible just because someone we don't like is in office. And so that is part of it. Republicans seem to flip a little more in terms of the economy being good or bad when their person is not in power. So I mean, some of the data is that.
Speaker: But even people who identify as independents are much more pessimistic than they were four years ago, despite the data looking pretty similar, right? So there's, you know, and if we want to talk more about this specifically, this question, but I think that's how I kind of approach a question to say, you know, let's not just look at the price of orange juice, right? Let's look at wages. Let's get all prices. Let's see how people have done. Let's see how the overall, you know, labor market is doing, you know, going beyond just the unemployment rate. Let's look at other measures of how the labor market is doing.
Speaker: and then try to have a judgment on how things are overall. Of course, well, I think we'll be clear, even if your listeners don't know me before today, I'm a very optimistic person about the economy, but I think there are always reasons for pessimism. And I could probably give you a list of a dozen things, right? I think that not everything is perfect and there are some dark clouds on the horizon, but I think still, most of the data now actually looks really, really good. So we've had,
Speaker: If you look at a six year timeframe, which some of this sounds like cherry picking, right? You look at the six year timeframe and how many of the months in that six years was the unemployment rate below 4 %?
Speaker: This has been like the best six years ever for the labor market. Now, we had a really bad year in 2020. We had a pretty bad year in 2021, but we're now back under 4%, which is it's rare to be under that at all. And to be under that for like over half of the months in the past six years is really rare. It's also why wages have been growing so much because when the unemployment rate is low,
Speaker: workers have a lot more power, whether they're in unions or not, they have a lot more power in a real sense of bargaining or changing jobs. And so part of the reason wages have been strong and have been outpacing inflation over the last four years, now not the last two years, but over the last four years, wages outpace inflation. Part of that's because the unemployment rate other than 2020 has been really, really low. So that has helped workers a lot.
Speaker: Noted. No, is that in part because there's fewer people working or their house, you know, you often hear the objection whether the unemployment rate is low because fewer people are in the job market. So there's not as many people to measure. Do you see that at all? That's that's a good question. But the best way to look at that is to look at the number of people employed divided by the population. So you're looking that's called the employment rate rather than the unemployment rate. You can look at the employment rate. And if you narrow it in on the people who are of working age,
Speaker: This is another one that when Josh put that table up there, I had that one on there. It's like 80 .7 % and it was 80 .6 % or something. Yeah, prime age employment rate, 80 .3 % in November 2019, 80 .7 % in November. It's a little higher, right? If you look at people of working age,
Speaker: a slightly higher percent of them are working than were before the pandemic. It's actually the highest it's ever been other than the late 1990s. Percent of people of working age that are working is higher than it's ever been other than the really great economy of the late 1990s. Now, there are lots of other things. You can look at people outside that prime working age, are young people working more or less or elderly people. But that prime working age is, I think, the best statistic to look at.
Speaker: And that took a long time to come back from the bottoms in 2020, but we are now back to what are essentially normal levels of working age adults that have a job.
Speaker: Just to add a little bit of context for our audio listeners, we showed this on the chart earlier, but multiple job holders are also at the same level. Not only are we seeing the same with prime age employment, but we're seeing the same amount of people. It's not like we're at a bunch of people working part -time jobs or multiple jobs at the exact same level compared to before the pandemic, which is interesting to me. Do you feel like this is simply due to the fact that
Speaker: Our emotional state is lagging behind the data. I think you had indicated that a bit in the article that you wrote. Let's just say anecdotally, I don't know, you probably had a similar experience, Jeremy, when you were dealing with COVID. I remember going to the grocery store with my wife and my kids every couple weeks and seeing the prices tick up over and over and over and over and over again. That happened for years, until 2022.
Speaker: And I did, because I'm so obsessed about this, I did kind of see a leveling off. I didn't see that same kind of acceleration, but I feel like after two years of that, it was baked into the emotional state of our family just to expect that every time we go to the grocery store, we're going to have a higher bill. And I don't think that's going to wear off. It may not wear off between now and election day, but I'm curious as to whether or not you feel like, is that simply the reason or are there other economic factors that you think might also kind of be at play here that maybe weren't covered in the chart that we looked at?
Speaker: Well, I mean, one thing you can do is you can look at, you know, just prices of groceries. If you adjust wages for just the price of groceries, groceries have gone up more than wages the past four years, right? So if that's like the one, if that and gasoline are the one, the common prices you're observing, those have both outpaced
Speaker: wage growth over the past four years. But grocery spending, and I've got some other long historical charts on this, grocery spending is at historic lows as a percent of income. People spend about, I know the exact number, but something like 5 % of their income on groceries, right? So if you're focusing on the 5 % of the prices you pay, you know, and if those have slightly outpaced paid wages, you might feel like, well,
Speaker: These are the prices I observe. They seem to be going up all the time. I check the data, and actually they are, right? You can look at lots of different food products, and they've gone up. Wages have gone up a little over 20%, and groceries have gone up 25%. So you're not wrong if those are the only prices that you're anchoring on and you're thinking about. But that is not where people spend most of their money, even though it might feel like it, right? That's the money that you're actually going.
Speaker: paying, you're buying it every week or every two weeks and you're actually putting money down rather than being automatically withdrawn from your checking account or something. It's a lot more tangible. I think another thing which might, this lag in people feeling good about it maybe, I think as we start to see more grocery prices actually go down, because a lot of people say, well, when are the prices going to go down?
Speaker: And the truth is for some things they might never, something might stay high, but a lot of the categories of grocery prices are now dropping. So a lot of things are lower than a year ago. Orange juice is not. Orange juice is up 36%. But there are a lot of things that are down, and not just a little, a lot of things are down 10 % or 20 % compared to last year. So I think psychologically as people start observing those and saying, hey,
Speaker: First, it happened with eggs. About a year ago, eggs were like $5 a dozen. They're clearly lower than that. Now, no one can deny this. Eggs are like half the price they were last year. That was a weird thing. Orange juice is like the eggs of last year. But I think as people start to see more things being clearly cheaper than they were a year ago, or in some cases, even two years ago. Maybe if we start to see because food prices have their own wild fluctuations,
Speaker: As people start to see some things maybe even coming down below what they were before the pandemic, I think that might get people to start realizing that, oh, you know, these things are actually cheaper. You know, milk, eggs, maybe they're cheaper than they were two or three years ago. And they notice, and my wages are higher. So I think as more people realize that, they might come to view the economy differently. You know, part of what I do, and I think what you guys do sometimes is say, well, you gotta remind people of this, right? Like if you show them this,
Speaker: You know, maybe they won't believe you the first time you show them a chart, right? But they'll start to think, oh, okay, I got to think about overall, what's my family's income? How much has that gone up? Overall, how much have prices gone up? But I got to think beyond just, you know, the price of orange juice. Got to think about all groceries. No, I got to think about all prices, right? Look at not only gasoline, but natural gas and electricity.
Speaker: Those were up a lot last year, and now they're back down, right? And people are going to see lower heating bills this summer, right, as they pay their electricity or gas bills. And I think as people start to see those things, maybe that will change the mood. And again, these indicators of economic sentiment or consumer confidence, like they are improving a little bit.
Speaker: The December numbers we're starting to see are actually looking really good. I mean, nowhere near pre -pandemic, but like way better than they were a year and a half ago. So I think people are slowly coming around to this. And I think, you know, as long as the economy keeps improving, which there's no guarantee it does. I mean, we have recessions from time to time and we could have one this year. But as long as we don't have a major economic downturn, as long as unemployment stays under 4%,
Speaker: I think more and more people will see, yes, prices, price increases are slowed down, some things are dropping, and my wages do keep going up. I think as people realize that, people will start to feel better about the economy. For a lot of people, again, the partisanship, a lot of people are concerned about what's happened during the Biden term and what will it look like on the eve of the election day. I care about those things too, right? I care about politics too, but for me, I care about what do things look like? How are people doing over the long run?
Speaker: And, you know, how are people at all income levels doing over the long run, and that's kind of what I'm always looking to, knowing that not only does it influence the election like politics does influence the economic system right I mean that the economic policies we have are determined by that so I think
Speaker: I do care about that too, but I guess for me, I'm less concerned whether real wages have gone up since January 20th, 2021 when Biden came into office, are we better off? I think that's an interesting question because voters care about that. For me, I'm interested in the long -run trends and are people really getting better over time? For that, you have to look at the data. It's hard to - It's important to zoom out.
Speaker: Yeah, and it's hard for people to judge these things, right? Like, are you better off than your parents? They ask people listening surveys, are you going to be better off than your parents? Like, this is just a really hard question, especially because, you know,
Speaker: if you're trying to compare yourself to your parents at the same age, like you were a child at the time, right? Like you didn't know what's going on. You didn't know what your parents income was. Like it's just very hard to judge, right? So these kind of sentiment things I think are, they're important to know, to know what people are thinking, but I don't think they really tell us a whole lot about how the economy is actually performing.
Speaker: Well, and your parents have 30, 40 years. My parents, I think 35 years longer of working to get to where they are now. So for me to expect to be at their level is not lining up with reality. I think that there's kind of going back to
Speaker: Back to perceptions. We don't talk about when gas prices are low nearly as much as we talk about when they're high. We wouldn't buy us to pay a lot of money for eggs or orange juice. We talk about that. But when they go back down, we're not going to mention it to our friends. Oh, prices are down nearly as much as we talk about it when they get high. I also think there's some economic ignorance.
Speaker: among people when they see the price of eggs go up and they see the price of orange juice go up and say oh that's that's because of inflation when in reality a lot of times it's because of massive supply chain issues especially with eggs i don't know exactly what's going on with orange juice but with eggs they have major factories go down uh with the disease and they had to shut them down completely and there's a huge backlog and decrease in supply which had obviously inflation had something to do with it but a large portion of us really supply chain issues
Speaker: Yeah, orange juice and oranges is kind of that way too now. Even there's some supply chain issues in Brazil, but I think that agricultural commodities have that aspect to them that a particular type of commodity might be having something weird going on, which is why in these measures of inflation, we also talk about core inflation, which pulls out food and energy. A lot of people see that as a trick like, why are they pulling it out? Those are the things I buy. Those are the only things I know the price of. Why are they pulling those out? But because those are so volatile,
Speaker: And this is when the Fed is trying to see, have we got inflation down enough? They look to those core measures because there's some agricultural commodity that's going either up a lot or down. Gasling goes up and down a lot because they're very volatile. That's why these core measures of inflation exist in the first place so that we can see what actually is going on to most prices, not the volatile ones. But most people either don't know about that or
Speaker: or they think it's a trick. I'm talking to people who think that, oh, the CPI, the consumer price index doesn't include food. I'm like, no, no, it does. There's a subversion of it that doesn't, but there's a good reason for that. But the thing, it does include food. I feel like I remember some stuff going viral about that a couple of months ago. I always hear that every time the reports drop.
Speaker: Very interesting. So Jeremy, you touched on something that I think is a good transition to kind of the next section of the conversation, which is about kind of how people feel they're doing relative to their parents. And, you know, this story is a mix for everyone you talk to. They have different anecdotes on the situation. But one thing I'd say ties it all together. And this is the narrative I hear online. As a millennial, I hear this all the time.
Speaker: You know the Boomers screwed over the previous the next generations and Millennials aren't accumulating wealth and Millennials can't get ahead and honestly from my perspective as a millennial I do see that there are challenges economic challenges like I do think housing is something we should touch on and how they like what caused that that is a problem but I one of the things I think you've talked about and you've caught a bit of heat on it online is like I
Speaker: if you look at the macro sense from per capita income for generation to generation, and millennials are on track compared to relatively to previous generations. So I wonder if you could help us unpack that. How do you feel we are doing relative to different generations? Yeah, absolutely. No, I think that's a great thing to talk about. And it's funny, you say I've caught a lot of heat. I've actually gotten tons of, I think, positive feedback on this, too, of people saying, oh, this is the right way to show the data. So yeah, people have different reactions to good news.
Speaker: So, you know, one thing I've looked into a bit and put together a number of charts and written a few blog posts about this is looking at the average wealth for each generation and then kind of lining up the generations at the same point in time. Right. So Jonathan, you mentioned, well,
Speaker: My parents are 30, 40 years ahead of me, okay, but what about when they were the same age as you, right? So let's get the data, let's look at, and there is pretty good data that's collected on this by the Federal Reserve on what each household has for wealth at a point in time.
Speaker: Um, and then, and then you can kind of desegregate that into, you can do it by race or gender, you know, gender of the head of household, but, you know, doing it by generation is what I focused on. And, you know, when you do that, it's kind of striking when you, when you try to put the data, I mean, you gotta, you gotta.
Speaker: They give you the aggregate data, and they'll tell you millennials hold X trillion dollars of wealth. But you want to, first of all, of course, adjust it for inflation. But then you want to say, OK, we've got to put it on a per capita basis. So the baby boomers, as their name indicates, are a very large generation. Gen X, the generation after them, which I'm a part of, it's a smaller generation. And the millennials are a little bigger again. So just knowing how much and totally generation has,
Speaker: It might be interesting in some sense in terms of political power or whatever, but I think in terms of how they're doing, you need to look at per person or per household. It's striking though when you put the data together, and it doesn't go back super far in this dataset. It goes back to 1989, but it is far enough back where you can get the median baby boomer and the median millennial at the same age. You can line them up.
Speaker: When you do that, it's striking that all three of these generations, Boomers, Gen X, and Millennials, have almost the exact same per capita wealth at this point at the age Millennials are at right now. They're all lined up exactly almost. Now, that's the basic data for those watching the video. There's the chart.
Speaker: kind of in the middle there at about age 35 or so is where the median millennial is now. And they have almost exactly the same wealth as baby boomers, a little less than Gen X. But if you notice also,
Speaker: going out, Gen X and Baby Boomers, they track pretty closely throughout most ages. Gen X does Gen X now. Look at Gen Xers again like me. Look at the median Gen Xer. They actually have quite a bit more wealth than the median Baby Boomer, adjusted for inflation, which I guess another thing people might be surprised about. But some would look at this and say, okay, well, all right.
Speaker: totally pessimistic view is wrong. We're not worse off. But shouldn't we expect each generation to get better off, right? If you're only as good off as the last generations, okay, that's a different, you know, narrative than you were worse off. But wouldn't we expect them to get better off? I think
Speaker: You know, there's a couple of things going on here. Number one, we see with Gen X, they actually do, when they get to their peak earning years, actually they actually do exceed boomers. I think that's for a pretty clear reason. And one, and that is that as generations have gone on, more of them go to college, which means they have higher earning potential over their lifetime, but more of them also acquire student debt, which is when they're young, going to make them look like they have a lot less wealth, right? You have this debt you take on,
Speaker: Having that debt might make it hard to do other things like buy homes. When you talk about homes, too, that's a really important part of it. But you don't have any asset when you graduate from college. There's no asset on your balance sheet from that. Whereas when you buy a house, there is. You get a debt, but you get an asset. There's no asset. The asset is your future earning potential. And so what we see then over time, at least with Gen X, we saw this, is that
Speaker: They have higher earnings in each year and and eventually their debt goes down enough where their income is now meeting their wealth is increasing relative to the past generation. Millennials have an even higher level of debt than Gen Xers. People probably anecdotally know this but it's true in the data. More of them have debt from student loans and it's at a higher level even adjusted for inflation.
Speaker: But even given that, they're already equal to baby boomers, even though they have a lot more student debt, even though it's harder for them to buy homes, which is another way of acquiring wealth, they're already caught up, right? So this suggests over their lifetime, even if we do nothing to fix housing, millennials will probably surpass the other generations by the time that they are another 20 years older. But the other optimistic, and this is a policy thing, right?
Speaker: is if we kind of fix or at least partially fix the housing situation, this could be really good for young people that haven't bought homes yet. A lot of millennials have, at least half of them now are homeowners. But half of them, it's half them aren't, right? So if we can, you know, and I know with Kathy Riesenwitz, you talked a lot about this, I think you spend most of the podcast talking about MBism and things related to that. But, you know, that's another thing where I think
Speaker: Policy needs to change and this is weird because it's policy at the very local level in some cases There's not one federal law that we could pass and fix all this But you know, that's another one where I think I think if we fix that then the case for Millennials Looking better than the last two generations even stronger, right Gen X right now is about 20 % more wealth than Boomers did at the same age. That's a lot of wealth. That's a lot more wealth Millennials, I think I am optimistic. I mean, I think
Speaker: I mean, every millennial I've met, you know, is, to me, the opposite of what the narrative is about them being lazy or entitled. Like, I don't see that at all. And I'm a college professor. And, you know, although the students I teach now are no longer millennials in my early career, I taught millennials. Now they're not right. But like, I never observed that. I mean, you know, and I think that
Speaker: I don't want to say never, but to me, that was not the tenor I got from that generation as I was starting teaching. It's not from the next generation, Gen Z either. I think that they have so much potential that they do have some policy headwinds, particularly the cost of housing. That is just the clear biggest one to me, but there are other things too.
Speaker: I am optimistic, even if there are no policy changes, I am optimistic that if we were to pull up the data in 20 years, millennials are going to be looking so much better than baby boomers did at the same age. But it's hard to say that now in debate that 20 years it'll look good. But that is what we saw for Gen X.
Speaker: Yeah, yeah, that's assuming that we can keep the economic conditions good enough so that millennials don't elect some sort of economic populace that try to bring us out of the isolation, isolation in the world.
Speaker: There's this book, which, you know, maybe we talk about, you know, there's this idea of wage stagnation over time. There's a great book by Michael Strain at the American Enterprise Institute. The title of it is The American Dream is Not Dead. But the subtitle is something like But Populism Could Kill It, right?
Speaker: He presents an optimistic view of wage growth of the last 40, 50 years. But he says, like, we need to realize that it has been good, but also, like, it's not guaranteed. Like, none of this is guaranteed, right? Like, policy could improve on things like housing. Policy could get worse. I mean, really could.
Speaker: And I think in some countries, you are seeing it get worse, especially in, you know, especially Eastern European countries where they've had more right wing populists get in power either as head of state or just in their legislature. Like policy can get worse. And I think that's why these conversations are important, not just to look at where we've been, but where we're going. Yep, yep. And making sure that go for John. I think that people very much have a tendency to look at short term view.
Speaker: And we talk about immediate price of gas going up, the price of eggs going up, or juice, whatever it may be. What are your best examples of prices or the cost of, you mentioned Americans are spending only 5 % of their income on groceries. What are some of the best examples of where we are spending far less than we used to in the past to supply basic needs? I've got a blog post on this one too.
Speaker: I mean, groceries are the clear one where we're spending just a lot less, right? At the household level, it's just gone way down and in the aggregate. Housing is one where it's pretty stable. I mean, not stable, but it's kind of 25 to 35 % of an average household's income goes to housing, and it's been in that band for the last hundred years, right? So that hasn't gone down or up. Other things, though, have gone up.
Speaker: People spend more in education, people spend more in healthcare. That's especially true if you're looking at the national level, right? In terms of what a household spends, they actually don't spend that much out of pocket on healthcare. But as a nation, we spend a ton on healthcare and a lot more, right? So those are things that have gone up. But yeah, I think over the long run, that's one thing you can look at is, are people spending less on something? But spending a household's income's gotta go somewhere, right? It's 100 % of it. If something's going down, something else has to go up. So I think the other thing to look at is to say,
Speaker: You can do these long run comparisons of have people's wages gone up.
Speaker: more than prices for particular goods. Julian Simon was an economist who used to do a lot of these kind of pioneer of doing this approach, like let's compare prices to wages, which seems obvious, right? But, you know, to particular types of prices. But there's a great new book, recent book called Super Abundance by Marion Toopy and Gail Pooley. They also contribute to a website called humanprogress .org, which is a Cato Institute project.
Speaker: They have a lot of data looking at a dozen eggs, right? How much have eggs changed in price over the last, say, 100 years? But they say, not in dollar terms. Let's look at how many hours of work would have taken to buy those eggs 100 years ago. How many hours of work would have taken a day? And just on the egg example, the real price of eggs has gone down like 99%.
Speaker: Right in terms of how much time it takes to buy that doesn't it's like not it's something like that. I don't want maybe I remember maybe it's not I thought it was a sweet and meat and whatnot too. There was the same trend route serious Yeah, so you can look at all those food items over the past hundred years, which again, I like to look at this because
Speaker: I think people have a sense that, yeah, things are better than 100 years ago, but how much better? And if you look at all these different consumer goods, not just food, but all sorts of consumer goods, the amount of time it takes to buy these, it's just gone down dramatically. And these are massive improvements to standard living. I think this is a nice way of putting it to people because you can say, well, GDP per capita just for inflation is up six times, and they're like, okay, well, what
Speaker: doesn't really mean to me, but if you say, well, you know, it used to take an hour of work to buy this thing, now it takes two minutes, like, oh, okay, they understand that, right? That the work you do goes a lot further. So I think looking at data like that, I think it is a good way to put things in perspective. You could do that over a short run too, right? You could do those comparisons over a short run. You could do it over four years, right? Because you can say, okay, gasoline,
Speaker: The price of it is more than it was four years ago, but wage is rough, so how do we compare them, right? One is you can adjust it for that, but also you can say, how many hours of work at the average wage would it take to buy a gallon of gasoline, right? And if you look at that way, it's actually very close to what it was four years ago. Now, it's not true for everything, but that's another way we call those time prices. You can look at the time price, how much time does it take to buy something? Maybe that's another good way to look at things, especially in the long run when, you know,
Speaker: People, people have a sense of, well, yeah, we know wages were lower in the past and prices were, you know, a can of beans was, you know, 25 cents. Right. But okay. Like, and now it's, you know, that's three bucks. But okay. How much, how much of wage has gone up? People have no idea because they weren't alive a hundred years ago. Um, and then the further thing I like to do is the really broad picture is that, you know, that people take this for granted in some sense. Right.
Speaker: or not that they take it for granted, but they expect their wages to grow faster than prices. They expect their real wages to go up. And if it doesn't happen, they really matter whoever's in power, right?
Speaker: I think that is an okay way to look at the world, but the broader perspective is that the growth in real incomes that we've seen in the past couple hundred years are unusual in human history. If you go back in most countries past 100 years ago, but like if you look at the US or Western Europe, if you go back two or 300 years ago, growth in real income was not the norm.
Speaker: a secular trend, meaning an upward trend over time in terms of real wages. They had essentially been flat for most of human history that we can find and that there were centuries and millennia of people's real incomes not going up at all or going up a little bit and then going down so that the overall trend was flat. This is despite the fact that there have been many improvements in technology and health over that time period too.
Speaker: but didn't produce any growth in real income. So, you know, I do this sometimes on Twitter, but I also, you know, I teach a class in economic history, and we really try to emphasize this there, is that, you know, the modern world, if we take that to mean the last 200 or 300 years, is highly unusual in human history in many ways, but especially for economic growth.
Speaker: that the incomes we have today are just so much higher than they were 100 or 200 years ago, and not just income on paper, like income in terms of what it can buy. And that is not the norm in history. And we need to then very carefully understand why that is. What is the set of both political and social policies
Speaker: that have allowed us to have this large amount of economic growth, because that has not been the norm historically. And it's still not the norm in a few places in the world today. Now, most of the world has finally caught on to growth, including most of sub -Saharan Africa, which until really 30 years ago was not growing. But most of the world has seen that growth. But again, like we said before, this is not guaranteed. Policy can move in a way that either slows down that growth or
Speaker: puts us back into a period of stagnation and we should be worried about that. And as an economist, to me, that is the biggest long -term worry that we do take it for granted. We forget why our economy performed so well compared to the past and that we start chipping away at things like property rights, at things like free trade.
Speaker: at things like a general climate that is accepting of business and of making money. I think as we turn away from those things, and we might think in general on some of those, we think it's the left that turns against those, but increasingly we've seen a lot of people on the right. I mean, there's all this stuff lately with conservatives rejecting property rights in various small ways. And that worries me that they're willing to give away this important foundation of economic liberty
Speaker: for temporary political gain because they don't want a Japanese company to buy a US steel company, so therefore we're going to take away their property right. This very much worries me that even the people that think generally on the right are much more supportive of private property rights are willing to junk a portion of it for, you know,
Speaker: Even if they think it's the right thing to do, I think they don't even think it's the right thing to do. I think they just think it's politically popular. I think they are motivated by owning the libs. It's kind of like you saw a pro -Trump Twitter account talking about how should we seize Bill Gates farmland? It's like, wait, wait, what? Guys, you do not want to go down that path. The moment you start going down that path, guess what? You're not the only ones in government. They're going to start seizing other things as well.
Speaker: Yeah, and Deidre McCloskey calls what the last 250 years like great enrichment and it's one of the things that we we think about it That's one of the reasons why we started project liberals because we believe that liberalism is what caused that It's basically what you had said Jeremy. It's like liberal values inherently are what created this unprecedented shockingly novel
Speaker: Economic condition that we're living in and it can all be lost within a matter of time It's one of the reasons why I'm so intense. I feel like Against the right is because I feel like on the left I don't really expect them to have a real kind of comprehensive understanding of the nature of economic freedom I just based on my upbringing seeing the way the left operates on
Speaker: On the right, I feel like, inherently, for a long time, we expected them to have that by default. And now you're seeing them almost outright reject those values. And it's concerning for both John and I, because where is the voice in mainstream politics today that's speaking about liberal values and arguing for economic freedom? Because without that, the great enrichment can be lost, right? And so it's dangerous. It really can, yeah. I mean, it really can. And I think we, I don't want to be the doomer, right? But this is the doomer situation for me that we
Speaker: Not that we forget that, but we push so much against it, against all those liberal values, and that that reverses all the progress. And then people start looking for someone to blame, and that usually results in more illiberalism. So I think that's the worry.
Speaker: within the broad frame of liberalism, there are lots of different forms of government and democracy that can be supportive of that. I was looking at the data the other day, if you look at the most productive countries in terms of output per worker, they're essentially the US and then the Scandinavian countries.
Speaker: Now these two u .s and scandinavian countries you might think in many ways we have radically different policies and we do in some ways people overstate it a little bit but you know i mean the scandinavian countries i think he'd much more towards what you know progresses in the u .s. would want i mean that form of liberalism works as long as you have the core things right right you have
Speaker: private property, you have a tolerance for business, you have free trade, you have rates of taxation, which they're much higher there overall, but they do it in ways that it's not as restrictive. They have very low corporate tax rates and things like that.
Speaker: And the extent they have high taxes on labor, they tie it very closely to benefits people are receiving. Now, maybe that's not my ideal world, but it keeps the core liberal values in place. And that allows you to have lots of varieties of liberalism, but there are some core aspects to it that we can't lose sight of. And I think in the US, there are many on the right and the left that want to get rid of some of those without realizing they're part of a package that promotes
Speaker: economic freedom but also personal freedom in many ways.
Speaker: Yeah, I think that liberalism is an extremely resilient system. It does have its limits. But I think if we can maintain those core values at the very center of them, I think it can withstand a lot of things around it. It can support many different systems around it, different types of health care systems, et cetera, et cetera. The main important thing are those free trade, private property rights, and basic individual freedom to trade. I think that you talked about Eastern European countries losing that.
Speaker: The move now seems to be that they are trying to preserve the liberal economics while having more of these kind of impositions on personal freedoms. Do, as an economist, when you look at that, you say, okay, that can probably work, but as long as they preserve some of these economic freedoms, they can probably maintain their success. Or do you look at that and go, no, they're going to have long -term consequences as a result of that?
Speaker: Yeah, I think it would depend on the particular policies, but I think in general, it's very hard to restrict personal freedoms for a long time and preserve the economic freedoms. So there's been a bit of research done. Hayek and Friedman both had kind of general ideas about the relationship between
Speaker: economic and personal freedom, but economists since then have kind of tried to test these things, right? Can you be stable in having low on one freedom and high freedom in another area? And there are a few countries or regions of countries we might call liberal autocracies, but most of those also, they still generally reflect
Speaker: respect personal freedoms. Singapore is an example where they probably have, I would say, quite a bit less personal freedom than we do in the US, but still maintain economic freedom. But I think that's the unique example where they do that. In most places, like if you look in Hong Kong, where they for a while did have a lot of economic freedom,
Speaker: without much personal freedom. Well, they had much more personal freedom than the rest of China. There was an increasing demand for it for more personal freedom. And then that was cracked down on. So I think that people don't just want economic freedom. They don't just want to be rich. They want to be free in lots of other ways. And once you're rich,
Speaker: And a lot of these countries, Singapore and Hong Kong, I think are the best examples of countries had really high levels of economic freedom, and they became very rich. And then people start demanding other freedoms, and then are you going to give them to them or not? And then the crackdown might involve cracking down on economic freedom too, which is always the worry in terms of preserving that liberal economic growth.
Speaker: A liberalism always needs a bad guy. And guess what? It's the people who are opposed to you politically, the wealthy businessmen who you don't like. Those are who you're going to go after. Well, how do you go after them? You go after them through economic means. Yeah. Well, by restricting economic freedom, inherently. Yeah. OK. Well, we've got five, 10 more minutes before we've got a break. There was one other topic I wanted to talk about if you guys are comfortable with changing gears a little bit before we wrap up.
Speaker: And that was about crime. We've touched on the generational divide. We've touched on the cost of living, the economic conditions. Another thing that I hear all the time is that violent crime is on the rise. I see these photos of
Speaker: Cars getting broken into everywhere on Twitter. Everyone's freaking out about how the world's going to this crap and Joe Biden's America. Where are we at with crime relative to the big picture, Jeremy?
Speaker: No, it's a great question. There's a short run version, there's a long run version, and then there is the anecdotal version, right? The, oh, I saw a car get broken too, so crime must be bad, right? So here's, and I'm not an expert in this area, but I try to rely on other experts. One of my favorite ones to follow is Jeff Asher, follow him on Twitter, and he has a sub -stack too. He's really good at breaking down the data and explaining it on crime. But the truth is that it,
Speaker: In 2020, 2021, and 2022, crime is way up. I mean, compared to the baseline, which most people, the baseline is the past 10 or 20 years, crime is way up. That's absolutely true. It was true for homicide. It was true for other crimes that we measure and that we can measure well. Penny crimes are sometimes hard to measure. They might go under -reported, but major crimes, rape, robbery, carjackings, car theft,
Speaker: All those were way up during the pandemic. I don't think that the social scientists that studied this fully know why, but we do know it was up. This is not a reporting thing. It clearly was up. It seems like it would be if you'd lock everyone in their homes and take away their jobs and stuff. Sorry, not to cut you off, but I think it feels natural. In 2020, people are mostly in their homes, so maybe it's hard to get people in their homes. Fair enough.
Speaker: The data we have, though, for it kind of went up and up and up. 2022, as best as I can understand from the data, kind of peaked, right? So 2021 and 22 are about even.
Speaker: And 2023 has just come way down dramatically in terms of homicides, which are, of course, the biggest crime, but also the most serious crime, but also the one that's least likely to be underreported. Homicides are way down. And the year is not quite over, and the data always comes in a little late, but all the early data suggests homicides are way down, as well as most categories of violent crime, that those are all down as well.
Speaker: This is not true everywhere. One city where it's not true is Washington, D .C. Washington, D .C. is not down. It's actually up. It's continuing to go up. So if, you know, if someone is, you know, someone in the D .C. bubble, right, who has a lot of Twitter followers, like, I've seen crime everywhere. Like, it's true. You are correct. In D .C., and a few other statements, mostly actually mostly just D .C., crime is continue to be elevated and continues to go up. And I don't know exactly what's going on, but that's quite clear in the data.
Speaker: And also an interesting kind of deviation from those trends is car thefts continue to be up. But that's actually due to some technological thing with Kia's and Hyundai's where the thing where the key fob has to be in the car, like somehow that's easy to disable or something. I don't know. But there's tons of auto thefts are still up. It's especially true in DC too.
Speaker: But anyone's got it, I don't want to bash these brands because they're actually great brands, but like they're going to fix this. Kia's and Hyundai thefts are way up as apparently they're easy to steal. There was a viral TikTok video about it apparently that made that drill though. So like that, so like if your perception of this is, well if you live in DC and you're focusing on cars being stolen, it looks like crime's way up. And that is true, right? But that's like the orange juice, right? Orange juice price is way up.
Speaker: You got to look at it all. You got to look at the whole US. If you do that, crime has started to come back down. Violent crime actually looks like from the early data, and it's early, and there might be reporting issues, but 2023 looks like it might be back to 2019 levels in terms of violent crime. Homicide is not quite back down to 2019 levels, but that's a huge improvement, right? Now, that was a lot of crime that happened those years.
Speaker: The other thing, though, I know we're getting towards again, the other longer term perspective I like to bring in, and this isn't even that long. If you go back to the 1980s and early 1990s, crime was through the roof. And not only was it high, it was increasing. And everyone who studied this, this is a major error, I think, on the people who studied it, they thought it was going to keep going up, right? The murder rates were going to keep going up, and the crime was just going to get worse and worse, especially in cities. After about 93 or 94, it started coming down.
Speaker: all categories of crime, especially murder. And so the baseline that people are used to, you know, 2019 or the decade before that, that was a huge improvement. Like crime rates cut in half from what they were in the 1990s. Some people were like, oh yeah, the 90s, man, it was so great. The 90s crime was out of control. And a lot of cities got under control.
Speaker: There's different theories about which methods work the best to do that, and that's outside my area, but I know it's something that the criminologists and sociologists still debate, but clearly crime went down for reasons we probably can never completely understand, but the baseline that we're used to is so much better, which is great. We want things to get better, but there was a crime spike
Speaker: It started in the 70s and peaked in the early 90s. Places like New York City were the epicenter of this. Crime was out of control there. Crime in New York City is extremely low levels right now. Overall, the murder rate I think got cut in half in the US. In New York City, it was like a tenth or something. It was some crazy reduction in the murder rate compared to the 90s. It did go up again in the pandemic, but no city
Speaker: I don't want to say no city, but very few cities are anywhere near what they were in the early 90s in terms of murder rate and violent crime. So that's maybe the silver lining. Crime went up for three years during the pandemic. It was really high, but it's coming back down and we never got back up to the 1990s peak.
Speaker: So that's maybe the silver lining to what was clearly a bad social and legal trend the past few years. That seems to be getting better too. I don't know how that will feed into the narrative of how the world is doing, but that does seem to be getting better. So never someone post a TikTok of stuff's locked up at CVS. Yeah, but well.
Speaker: If you look at historical murder rates, going back 200, 300, 400 years ago, you can see some 10 times higher murder rates in some areas. Over time, it has come down. I think as far as the anecdotal, I saw a crime, it must be up. One thing I heard once, and I don't know where I heard it, but when the advent of cell phones came out, what did we see go up and what did we see go down?
Speaker: Well, we saw more police officers beating people up and we saw fewer and fewer people were reporting alien sightings. It's not because there's a change in level of either of those things. It was just that when we had cell phones, we could actually record an event in front of us. We were able to record what had been happening.
Speaker: already, or in the case of aliens, not been happening this whole time. So perception is a weird thing. How we perceive the world on an individual level or as a societal level, we have to teach ourselves how to bring in that information, absorb that information, and actually interpret it and apply it to the real world. Because I think as humans, we're too anecdotal. We want to hear the gossip. We want to rely on, oh, our neighbors said that they saw somebody sneaking around the neighborhood type of
Speaker: type of story as opposed to the overall broad crime data. That's a normal human reaction to it. But I think, you know, good journalism on this does the both. They're like, here's the anecdote. And like, does that match up with the data? Sometimes it does, right? But sometimes it doesn't. So I think, you know, when people are writing about these things or talking about on TikTok, like, I think it's useful to like
Speaker: I mean, I try to, as you guys know, I try to give the best context for it. And that doesn't always paint a rosy picture, but I think it often paints a better picture than the anecdote does.
Speaker: Well, we can end it there. I think that's a really great way to close. Again, I appreciate you joining us. I think that, again, it's always inspiring when you can take a step back and look at it, put things in context. And I think you do a great job of doing that online. And I really appreciate you taking an hour to talk to us today. Do you have anything you want to pitch, Jeremy, other than economistwritingeveryday .com, which I would recommend to the audience to check out? Anything that you want to tell our audience to check out?
Speaker: Nothing of mine necessarily pitch, but I think a website that it's really useful if I know a lot of people know about it, but if you don't, it's called our world of data. It's a really great resource for finding lots of objective day, especially for doing comparisons between countries or comparisons over time.
Speaker: I highly recommend if you're looking for where can I find objective data? Now a lot of this isn't like up to the minute but like if you want to find good objective long -run data it's called our world and data and they have tons of data on there but they have this one essay that's called like the short history of global living standards where they look at six broad trends over the past 200 years and show you know what does the data say and you know how do we interpret that you know what might have caused this they look at you know
Speaker: economic trends and health trends and trends of democracy and education and show how these have all gotten dramatically better over the last 200 years. But they do it with a nice visualization or a couple of them and just a simple description of what's the data we're looking at.
Speaker: And how does that explain it? But, you know, this whole website, I mean, they have literally tens of thousands of data sets on there, but it's really easy to access and they explain it very well. So our world and data, I will pitch that. I have nothing to do with them other than I steal their data all the time. Well, another call out, follow Jeremy on X or Twitter at J -M -H -O -R -P. But again, Jeremy, thank you for taking the time. We appreciate it, everybody. If you want to learn more about Project Liberal, go to projectliberal .org.
Speaker: But we will see you guys soon on the next episode. Thanks everyone. Thanks guys
