A Fast Green Energy Transition is Likely to be Cheaper than Business as Usual

J. Doyne Farmer is Director of the Complexity Economics program at the Institute for New Economic Thinking at the Oxford Martin School, Baillie Gifford Professor in the Mathematical Institute at the University of Oxford and an External Professor at the Santa Fe Institute. His current research is in economics, including agent-based modeling, financial instability and technological progress.

In this presentation at Harvard Kennedy School, Prof. Farmer shares new research that shows that wind, solar, and other renewables would deliver energy security to the world and save $12 trillion by 2050.

Transcript

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies.

Farmer: It’s great to be here. The work I’m going to talk about today grew out of a visit in two thousand and eight by the Director of the National Renewable Energy Lab, Dan Arvizu, who came to SantaFe Institute to ask us if we could help them think out of the box, and what were they missing? And during the course of that visit, and a workshop, it became clear to me that the costliness, and the correct path to dealing with climate change really depended on not what technologies cost now, but what technologies will cost twenty years from now. So that set me on a path of trying to understand, to try to produce reliable answers to that question. And so that’s what this talk is about.

Now, just to provide a little context, energy makes about seventy five percent of emissions. So, if we can make the green energy transition, we’ve made most of the transition we need to make to deal with climate change, or at least to stop increasing Greenhouse gases in the atmosphere.

And the punchline that I’m going to deliver is that we can, and I’ll come back and discuss what “can” means, make green energy transition quickly in a profit, and I’ll throw out a scenario at least a possible scenario for doing that discuss a little bit about the possible roadblocks to making that happen. Now, most of the story is in this plot that I’m showing here, which is giving the history of the evolution of the global energy landscape over the last one hundred and forty years.

And so, we see in the panel on the left, where we update on the x-axis, and cost measured in standard units on the Y-axis we see the price of various forms of making energy through time. For example, here’s the prices of coal prices of oil, coal fired electricity. And so, you see they’re kind of bouncing around, and one of the striking things about this is while they wiggle, there’s no overall trend. In fact, I remember at this meeting in two thousand and nine. Dan saying, well, solar energy prices are coming down. And Dan saying, well, how do you know that coal prices aren’t going to do that, too? And that actually ended up with a paper that James wrote on the cost of coal-fired electricity, showing that yes, it did actually come down for a while. But then it went back up, decomposing that and finding the causes. And you know the main cause is that ultimately cold, for electricity is going to money about coal, which, as you can see from here and comes down in mathematical tests, is essentially flat over time.

These be a very different week than these. So, you see solar energy, wind batteries, electrolyzers. And so those have been coming down quite systematically through time.

And at present we’re in a peculiar state where we have many different sources of energy that are all competing around roughly the same cost. So, you can see it’s very unusual. This over here shows history of energy, so you can see traditional biomass remaining roughly constant, coal becoming dominant, oil and gas rising through time, nuclear power rising and then flattening out, and then once again solar energy when batteries, electrolyzers all shooting up and race where they’re being deployed at around forty percent per year.

So solar energy has been increasing deployment at forty percent per year. For the last thirty years it’s been dropping a price in ten percent per year for the last thirty years, which is something unique in terms of historical energy supply. So, the question is, what are these going to do? Are they going to just flatten out and remain around the same price level with the other ones? Or are they going to continue to drop? And so that’s what this talk is about, and then putting that together to think about the whole green energy transition. And, by the way, stop me at any point, if you have questions.

So, I’m just going to make a few observations about technological change. So, these are empirical observations, which is that first of all technologies, improve at very different rates, rates that are technology specific.

These rates are highly persistent, and this only becomes clear if you look at granular data, so you can really identify individual technologies and there’s an identified identification question. We can come back to say more about if people are interested. But for now, let’s say there’s a such thing as a technology that you can track the cost of through time.

I’m going to argue we can use this to make predictions in one of several ways. One is to just note the trend. So here we take a span of over twenty years. The price changes in goods ranging from hospital services to television sets all starting at some standardized zero point, and we see that over those twenty years hospital services went up by two hundred and twenty five percent. The quality adjusted price of televisions went down by ninety-five percent. So, in other words, by a fact, television has dropped in price by the fact of twenty over those twenty years hospital services went up by a factor of two or two and a quarter, and so this illustrates the point about diversity. It also illustrates my point about persistence. Hospital services went up every year. Television sets dropped every year. So, these changes were quite persistent through time.

This illustrates the point about heterogeneity from a different point of view. So, we take the price indices for us, goods relevant for us, manufacturing from one thousand nine hundred and fifty, eight to two thousand and eleven. Group them by type, and what you can in this re-plot. Now make a histogram of the average annual growth rate set for the price, and you can see that most things like here is a valve middle that most things sit on, and most things are not too far away from just going along with the herd, the herds moving at the inflation.

But then there’s some set of things. In this case, all computer electronics related things that are dropping in a cost in a much higher rate, suggesting that the heterogeneity of rates of change is a highly skewed distribution with a heavy tail on the positive side. We’ve done some other work that’s not yet published that reinforces this point of view.

It’s not just computers that do this, though they were one of the main things to do. So how do we take advantage of this? Well, we’re going to make use of empirical laws for forecasting technological costs based on historical data. The most famous of these is Moore’s law, so more in one thousand nine hundred and sixty-five made a pronouncement that semiconductor devices increased in density, on chips and identity, increased roughly, became twice as great every two years.

He later on, adjusted the timescale that I always mix up which way the adjustment went. But it’s been a remarkably accurate prediction now over a seventy-year span. There’s another, even older author, who is a very interesting figure. He is the brother of Seoul Wright, who is a famous evolutionary biologist, and Theodore Wright, who was considered one of the founders of political science, but he was the black sheep of the family who went off to World War. I became a flying ace and went to the aviation business, and in one thousand nine hundred and thirty-six he wrote his one academic paper, just mentioning that the cost of producing a specific airplane from a specific factory drops by twenty percent every time the cumulative production of that airplane doubles just an empirical observation.

And so this is an example of that actually, that I think James prepared for me a long time ago, and since then there have been a thousand papers written about Wright’s law looking at all kinds of other technologies, and demonstrating that they did this and the law is also moved from being about a specific item from a specific factory to being about much broader items like solar photovoltaic cells rather than globally, rather than solar and photovoltaic cells produced by a specific factory. And that’s the sense in which I’m going to be using here.

Wright, by the way, went on to become the head of an aircraft manufactured during World War II. And used its own law to successfully forecast the cost of aircraft production during World War II. And I’ll come back and say a little more about.

So, Wright’s law looks like this. If you put it magnetically, it says that X is the cumulative production that the cost of a good or positive technology drops its X to some power omega where omega is technology-specific and omega would be a positive number here for meeting. The cost goes down.

Now, here’s an example with four different technologies, transistors global takes Art describes in ethanol where we plot the total cumulative production on the x-axis and the average unit price and dollars on this axis and notice the plots are in log scale. So, the power law turns into a straight way, and this gives you some feeling abruptly. It’s not perfect. It varies in how well things stick to these curves depending on the technology. That also seems to be technology specific, but the pattern is pretty clear.

Now you might ask, where does Wright’s law come from? So, I would say it’s not very clear. But the best explanation is due to James McNerney and me and Redner and Trance. And so, we built on a model actually by John Muth, who, if for those of you who are economists, is the original, the original architect of rational expectations in economics. So, but he also did in those days non-rational thing, like ass ing that engineers just go dart to the dartboard, and what engineers are capable of doing is picking out which dark foes are better than which, and taking going with the best solution they found. And so, it turns out this gives you something like it also actually makes a prediction about how Omega scales with the complexity of the design of the device. As devices become more complex or less modular, then improvement becomes more difficult because you have to coordinate improvements across more pieces.

But let me just say I don’t think we fully understand Wright’s Law and Wright’s law. Certainly, also it’s a proxy in that cumulative production is presumably just a proxy for level of effort. And so cumulative production is much easier to measure than level of effort.

We took this, and actually several other laws like Moore’s law, and acquired a Library of Technologies, History of Technological Costs through time, and tested this and tested actually several other laws. We tested seven candidate laws, and we did this by, pretending to be in in the past, that, as we pretend to be at a given time in the past. We forecast each future date from that point in the past. If we didn’t know anything about the future, we repeated, after all, past days, and we scored the methods based on their forecasting errors, and we made an assumption that the improvement process is the same for all technologies except for parameters.

We’ll see more about that in a minute, so that allowed us to test our forecast. Now, the data set we tested on is shown here, and, as you can see immediately. It’s a bit of a monthly data set. There were fifty different technologies, chemical processes shown in black here, computer hardware shown in red. Actually, that day we got reward and more of a stop con er goods like beer energy related data sets their genomics.

So, we have several different data sets. The data was acquired by just basically grabbing every data set we could find where we had the cost versus time for a specific technology. And the data was put together by my postdoc, Bayla, Naj. Together with that help of some high school students, we wrote a paper actually testing this testing these different laws, and we showed that basically Wright’s law and Moore’s law came in with roughly a tie in this data set.

And we also did some things to try and understand how large the errors were, but for various reasons we couldn’t properly test this. Now, the side anecdote I can never resist telling is that, well, one of the things we showed was an equivalence between Moore’s law and the Wrights Law, and that if costs are dropping exponentially in time and deployments increasing exponentially in time. It’s easy to show that Wright’s law will haul under those circumstances, and that was the case for these fifty technologies.

This was originally pointed out by a fellow named Sahat Sahel, who wrote several books on technological change in the Eighty’s, and who mysteriously disappeared. One day the hell just vanished, and nobody knows what happened, and Bala became obsessed with Sahal, corresponded with his brother, and then, about two years later, he mysteriously disappeared. So, I’m sorry. I just can’t assist telling this. I was, you know Hope Vale is out there doing something good somewhere.

I’m not planning on mystery. So, I’m not obsessed with this. But anyway, thanks to Bailey’s work that we managed to put this data set.

Now, how did we model technological change? So, we rewrote Wrights law, which you would write just said, there’s a deterministic law that people have historically said, using regressions. We instead turned it into a Time series model. So, we rewrote it as a geometric random walk with drift.

That depends on where the rate of the drift depends on cumulative production of the good. And so, if y now is the logarithm of the cost, so the difference between the amount that the cost drops in, say, a year, is proportional to some constant omega times, the logarithm of the ratio of the accumulative production in here t plus one to your plus a noise term that has some scale.

So, this expression has two free parameters, Omega and S. And we ass e that all technologies follow this process. We take the data, and we fit Omega and pass from the data and on past data. And then we use that to predict future data.

Now, the key thing that we did was to derive expressions. For how accurate the forecasts are that is, let’s ass e the world really does follow this process, and to make things even simpler, Let’s say that this noise process is an Iv normally distributed.

I thought of the time that was going to be heroic assumption, because I ass e that this would be entail for the structure breaks and so on, but at least for the data step that we applied it to. To our surprise, it fit amazingly well, and we were able to derive expression for the normalized errors. That is, if this epsilon here is the absolute value of the squared error, and this K. Hat. Excuse me, that should have been s in the previous slide. I don’t know my slide’s consistent, so that’s the same as big as there, then, the ratio of these scales like this,

The normalizing constant that determines what the error is, has a term that’s proportional, to which is the forecasting horizon end of the future. So, because this is a diffusive process, then there’s a there’s the squared error goes according to scales, according to Tau, and actually, you know.

And then there’s another term that goes according to Tau Square, which has to do with the Estimation error. Where M. Is the number of data points in the data set that you’re fitting this okay. So, in other words, you take some data, and you do your best job to fit the parameters.

Then the error you will find a basis expression where this is a student distribution with M one degrees of freedom, so you can just derive this by from saying that the world follows this kind of process. And so, this clock over here shows what happens. The green line is the T distribution. The

The black line is what happens if we just ass e the simple geometric random walk, and the red line is what happened when we ass ed a random walk with put a little bit of correlation in positive correlation. So, in other words, what we found is to make this work. We had to ass e that the improvement rates are correlated from year to year.

And so, this is the result of making six thousand roughly forecasts for all horizons up to twenty years, and then taking all the data from fifty different technologies and twenty different horizons, and a bunch of different forecasts, and putting it all into one bin, and seeing whether it followed this law that we predicted a prior hold, and I should say, if I don’t, this is with Francois Hollande.

Well, we’ve actually showed this first for Moore’s law, and then there’s a paper with a bunch of authors led by Francois that chose it for my song, because Wrights law was a bit harder to juice. So, what we found is that we could not reject our null hypothesis, which surprised us.

Audience Member: Did you try with opening data and using the datasets to test by making predictions about this?

Doyne Farmer: That’s exactly what we did. So, we went. We did this process here. So, we pretended to be in the past, using only the data we had up to that point in time.

And yeah, and we actually did things like systematically look if we only use the five most recent points. We always saw that you always want to use the most data you can. Processes are surprisingly stationary.

Yes, you’re treating wars wrong and right. It’s all in some sense sort of in people handed way. And there, you know, right conceptually, you’re very, very, very different. Yeah, one of them is really the learning by doing deal.

Yeah, if the factory just takes a break, it because of a labor strike for years. One of them is you’re marching along the other. See that you’re just chilling out for a while. Yeah, I totally agree. And so, this has been debated in the literature which works better. And so, to try and resolve this question Francophone, Diana Greenwald and me.

I wrote a paper where Diana managed to acquire lots of data from World War II, which is a good natural experiment for us, because, unlike these other technologies here, that just, you know, are coming down smoothly over time and are being ramped up exponentially over time in World War II. The Us. Went from the eighteenth-largest military to producing two over three of the military, both sides. By so we got data on the costs of five hundred different types of military equipment. The data was crude. In other respects, we really only had started endpoints.

We did have the whole time series for maybe a hundred and basically what we were able to show by a lot. And let me say the key thing there is that the deployment ramped up enormously, and then it went back down, plunged out as the war was ending, so from that we could see that two things one is, the causality flows from. There is a strong element of causality flowing from cumulative production to cost, that is, and there was also an overall trend. Everything came down during that period.

And so, in other words, there was an exponential trend. But it we ass e the same exponential trend. For all of them there was, but there was also a significant, very significant Wrights law component.

Yeah, we are doing and the exactly right. So that suggests that there is the causality there, and that’s why, in what I’m going to show you in a minute. We’re going to use Wrights law rather than north long.

No, there’s some problems with that, too, that maybe I can come out and talk about it, you know. Then you get these miraculous things. If you don’t continue

Well, I mean you do even better if you have wars law.

So, it’s even more miraculous in that case, and a key clarifying remark in the study. We had to war, too. We ass e the same exogenous trend for all five hundred technologies to make this work for individual technologies. You really have to ass e very different trends for different technology.

And so, the exogenous trend that we saw in World War II Doesn’t really seem to explain more as well. Here, I think Moore’s law is really explained by the fact that lots of technologies happen to have exponentially increasing production exponentially driving across. Let me just emphasize again that different technologies improve at really different rates. Here is coal. Here’s the price of the coal in terms of, you know, lots of electricity you can generate what call. And here’s soarable political takes. And here’s nuclear power.

So, technologies behave really differently. Now we’ll move to talking about climate change. How long will it take for technologies to mitigate climate change? What’s the right investment strategy which technologies should we support, and how much will it cost?

So let me just show what happens when you apply the kind of thing to extension to four key technologies for dealing with climate change. So, we have in the Solar Vaughan able tanks. We’re plotting a logarithm of cost versus the logarithm of an experience. It’s just a shorthand for cumulative production. The same for wind and lithe batteries and p two x electrolyzers p two x means power to something, so that you start with electricity. You make hydrogen, and you use hydrogen and make a fuel like ammonia, or one of several other possible lyrics here for forecasts.

So, the Black Doc should the historical values through time. And if you stare at this for a while, you can see that it works pretty Well, that is, things tend to stay near the center of demand that were forecast, and they never actually straight outside of the ninety five percent confidence maybe one point two and you would expect them to do one time and twenty-Two x electrolyzers. You can see our regions are a lot sooner, because we have less data, and the data is noisy. Remember, there’s two technology-specific parameters one for the rate of improvement and one for the so this is just to give you a flavor for how this might apply to energy.

I also just want to remark that, you know. Now this isn’t so surprising because over the last fifteen years people were very aware that solar energy has dropped to be competitive. But back in two thousand and ten I actually made a forecast nature, and we predicted that it would. Its cost would follow all that of nuclear energy or call. And just to illustrate that at the time, like in two thousand and fourteen. The economist was still saying solar power. It’s by far the most expensive way to reduce carbon emissions. So we were, I was moderately successful in forecasting in contrast, the integrated assessment models and the International Energy Agency have done an extremely bad job of forecasting both deployment and cost of renewable energy, and consistently getting pessimistic about it here’s a plot where we’ve taken the data here plotted it in semi-log scale And so you see a rough, noisy, exponential decline, and you see forecasts made in the past that all go out of the slopes that are quite different from the historical slope. Here we made a histogram of about three thousand different predictions by various integrated assessment models that reported in two thousand and fourteen for the cost, for the rate at which solar would drop between two thousand and ten and two thousand and twenty. And this is the histogram of the forecast the most optimistic ones. This is what actually happened.

And similarly, if you look at integrated assessment models, they typically put in what are called floor costs, they ass e that there’s some cost where that the technology can’t go below. So, in these models they ass e they’ll follow Wrights law for a while, but then they’ll hit these floors and flatten out. They do this because otherwise, and that the answers become unstable. And this just shows historical floor costs compared with historical costs, showing that it just plunged right through the forecast as they then put up. And my forecast.

These models, by the way, also have deployment constraints. They put in constraints in the rate of deployment, and one of the problems with these

The evaluation of the scenario depends strongly on these two things, which have been more or less arbitrary. We’ve never seen any evidence for floor costs, so we don’t put them in to what we’re doing now.

So, we’re going to provide an alternative, just doing something very simple. We’re going to forecast technological costs conditional on the point. So, we’ll throw out some scenarios. We can debate whether they’re plausible or not, and we’re going to make a few representative scenarios, and we’re going to Ass e that sector by sector useful energy demand continues to grow as it has been growing historically at two percent a year. So that is, we ass e that there aren’t any dramatic changes in lifestyle or anything like that, apply the methods I just mentioned, and then we just add up the cost of the technologies needed to make the energy sector work.

We say that our fast transitions in our other and key technologies are solar global tanks with batteries and P. And we are picking these well, we’re picking these in part, because we think they’re good horses to bet on, but also because they have extensive data. There are other things that might may prove to be very important, like just moving power around and transmission lines which we don’t put in there because we don’t have good historical data, or how the cost will.

So, we use Wrights law to extrapolate, but we extrapolate existing deployment terms in this solution. I’ll show you a moment. We phase out fossil fuels over the next twenty-five meters, and we rely heavily on Power Dx fuel for energy storage. So, we ass e that we actually make so much P. Two x fuels that we can run the entire global energy system for a month, even if there’s no sunlight or no wind, which is pretty conservative.

We also use pfix fuels for liquid fuels, for heat, shipping and air transport, and usages like that.

Now, in the fast transition, let me actually show you what we do in all three of the scenarios. We investigated these three four key technologies.

So, we shall hear the historical data for the deployment now with solar energy. So, the average, the annual generation in terrawy hours for each year we put a dashed red line through it, just to show the trend. And then this is our fast transition scenario. This is our slow transition scenario, and this is our business as usual.

So, I’m putting this up here hopefully to convince you that we’re not doing something that’s crazy. We’re extrapolating an existing trend. In fact, we begin falling off of that existing trend by the way, as solar reaches maturity, and starts to flatten out. But at this rate it does solar energy and wind. You can see here become dominant after about ten years, and the cut, and completely displays fossil fuels in about twenty years, twenty, five years.

So, this is the same thing for batteries, showing what we ass e for batteries in these three scenarios and p-tax tools, where we ass e for p-text goals that we do see on the existing historical tread for another decade, noting that this is a much less mature technology than the.

And by the way, this is standard and technology literature to ass e that you have s curves. That is, technologies tend to grow exponentially for a long period, and then they flatten out when they reach saturation. So that’s what we’re doing here. You guys have a question

I’m: a bit of course.

Yeah. Our original business. As usual, we more or less flattened this out to make it a straight line, and the referees complain that we were. We were that that wasn’t realistic. So, we saw that our business-as-usual scenario. It didn’t matter very much.

They’re only price projections for. Yeah. So, we are saying these are assumptions, and we’re then going to predict prices. It’s true that integrated assessment models try and predict both of those in tandem. I think that’s one of their problems. They’re doing something they can’t really do.

And if you were going to do it well, because these end up, depending very sensitively on the assumptions that I mentioned before through time, which is shown down here for the three different scenarios, and so that when we’re doing it for useful energy, which is the energy you actually use, the amount of work that actually comes out vital energy, which is saying one energy would be, How much gasoline we have for our useful energy is, how much, How many joules of work do you actually get out of your car, and this shows the requirements for electricity, for electricity, generation, and storage, and which is then showing that we are talking about ripping the rhythm quite substantially by about a factor of four in order to make this happen.

These show the forecast for some of the key technologies. I should mention that what you can use Wrights, law for oil and gas, and actually because for those for those technologies the omega parameters effectively zero. And so, you just get a random walk if you, if you use Wright’s law, Random Walk turns out to be too diffusive. That is, overspend of time longer than about twenty, ten years. Prices just scatter around too much. There’s some mean reversion, so we add in for fossil fuels. We probabilistic nature of our forecasts and maybe I didn’t stress that enough that that the generalization we make of Wright’s law isn’t just making point forecast. It’s predicting the probability of outcomes at different cost levels at different points in time. And what we tested was that probabilistic prediction. I think these are the one standard deviation and the two standard deviation error bars in the forecast you can see the uncertainty going through time and as we’re also comparing to forecast and existing integrated accessible models are making about what the class will be at points of time, just to illustrate that our predictions are still substantially different than those of the other models.

And so, this is kind of the punchline it’s showing that if this is under the three scenarios, so fast, transitions flow, transition, no transition. These are we get already right here. Fossil fuel expenditures are coming quite negligible. This is a graph of the media expenditures on energy in each of the years shown so two thousand and twenty to two thousand and seventy, and then looking at the non-fossil fuel expenditures versus fossil fuel expenditures. So, the white is non-fossil fuel expenditures, and the shaded is fossil fuel expenditures.

Here we show the net present cost so we ass e a discount rate, and to put all the different years together. For the investments we ah bring all the costs back to the present by discounting them. And this is what happens if you use a two percent discount rate.

And again, you see the fast transition, the slow transition, and the no transition illustrating the uncertainty, but also showing that the fast transition is on average cheaper than either of the other two cases. This shows the mean cost as a function of a discount rate, illustrating that we don’t need to argue about the discount rate the amount we save changes, but the fast transition is the cheapest regardless. And finally, these are mentioned sort of for the vast composition of the time, and compared with the slow transition, or for no transition.

Maybe I’ll just make a remark about technology investment portfolios. We have a paper where we look at investing in technology as a generalized process. And one of the things we showed is that you can’t use intuition from finance. One hundred and one mark. Markowitz’s portfolio theory doesn’t work at all in this domain, because you know it in Markowitz’s portfolio theory, says that if you have a bunch of assets, and if you have a positive return on all the assets, if they’re not perfectly correlated, then you should diversify by scattering your bets across all the assets.

But if all these assets are following Wright’s law, there’s something very different, because to make progress down the learning curve you have to invest in them. And so, if you really knew which one had the best characteristics, you should just pick that one in with all your money.

But if you have uncertainty, then you need to spread your resources across the assets. And so, with a situation. You’re in a technical technology investment case shows you don’t want to put one egg and every basket you don’t want to put all your eggs in one basket you want to decide. You want to put Ah, most of your eggs in a small number of baskets, depending on how much uncertainty you have, and what the situation is, and it also shows that you get a lot of extreme sensitivity in these kinds of portfolios.

No, this is. This is a good time you asked about direct to your capture directly or captured with fossil fuels.

Yeah, and that would be additional. So, you would integrate. Put that in with an additional ranch law thing that you have. Yeah, So I can. Of course, we don’t have enough data to estimate anything.

Yeah, I mean. There is some historical data on direct air capture, and it doesn’t look good. It hasn’t come down. The other thing is direct. Air capture depends on fossil fuels being competitive without direct air capture, we predict that we’re going to reach a point where that’s not going to happen where that will be true fairly soon. So, if fossil fuels aren’t competitive without trick or capture, they certainly are competitive with it, and you know also direct. Your capture has all their kind of characteristics that make me think it’s not going to come down very much, but that’s more of a subjective judgment.

Now, that’s different from asking. The question of, are we going to need to use? Direct our capture to just pull C O. Two out of the air in the future? And that’s another story. And you know here again what we’re predicting. It helps that because we’re predicting electricity should become very cheap, particularly if you don’t need to deal with storage, and so, so, you know, you could easily imagine that the cost of direct air capture is going to come down quite a bit, using solar electricity.

Now, of course, what I’ve been talking about so far relies on extrapolating technological trends. And you know, one would like to go to something more fundamental and understanding this problem. And so, we’ve been thinking about.

Excuse me, different ways of doing that., for one thing, let me just say a little bit about Wright’s law. You know Wright’s law is a crude approximation at best, because if you pick a given technology, say take solar formal tags. Well, it’s composed of different things. There is the cost of building the cell There’s a cost of putting up the frame that’s going to hold it in place. There is the installation cost, the distribution cost, and these things all behave differently. So generally, you want to decompose things as much as you can, and look at the scaling relationships separately.

This actually relates to a paper another paper of mine with James that James’s elite author on where James showed.

If you take industries and you ask what is driving the price index of an industry that most of the improvements in the price. Sixty-five percent of the improvements on average in the price index ministry come from price improvements, and the inputs to that industry.

So, to really do this better. You want to think about the economy on a more fine-grained scale, and you want to think about the interaction of the different technologies with each other. So, we’ve been working on trying to do that, making more disaggregated models, and maybe just lift the discussion up a little bit. We’ve been pursuing a method of sort of modeling climate economics in a distributed way with on one that we have our energy systems model, which, as I, you know, Virgin, I just described to you. We’re like, for example, making this be the regional instead of law, which already gives significant improvements in terms of providing better advice.

Trying to extract information. We have about technological change. For example, coming from analysis of the patent space where we see interesting patterns like,

Go back and look in the fifties nuclear power. If you do a page rank for Patents nuclear power, it sits in the middle and fossil fuel. Sit in the middle. If you do that now? Renewables in the middle and nuclear power and fossil fuels?

We work on green industrial strategies that is thinking about imports and export stuff that overlaps with the work. Ricardo’s group does think about production networks. So, we have models both at the level of industries and of firms going beyond traditional input output of ah models to make dynamic models which we may use up through a comment because it’s sort of a sign day. We’ve been talking about hooking this up with agriculture and land use models more sophisticated models of household. In fact, we have a model of occupational labor, diffusion.

And so, we’re doing work. Now we’re coupling together our forecast for what’s going to happen in the production network when we rewire from fossil fuels to solar power and wind and batteries and electrolyzers.

And then how does that play out in terms of occupational labor, and then thinking also about treaties and government, and how that interacts with all of this. So, we’re basically pursuing independent projects each of these pains, but also starting to think about how to paste them together, at least pairwise or triple-wise to make improved forecasts, and put in more fundamental information.

I think I think this suggests that doing the things that we need to do to support this.

Yeah. So well, that’s an interesting question in that. When you go back and stop start looking at raw materials like things, your things you mine out of the ground. It’s a quite striking, not well appreciated fact that actually James was the first person to introduce me to. James went, looked at the Usages data, and observed that that century of data for more than one hundred different and ah, he fit some time series models to those, and what you see is once you adjust for inflation, They’re all flat except one exception. Ah, industrial diamonds! Now, industrial diamonds aren’t something You might out of the ground they’ve dropped by a factor of one hundred. Everything else. Nothing has changed by more than a factor of ten in price over a century.

Now that suggests what so raw materials? If there are things you’re mining out of the ground. Why? Because they aren’t going to get much cheaper. What gets cheaper are the processes, for you know making them into things, and that’s where That’s where the progress

I mean. The other thing you might have asked about is shortages of essential materials.

My impression, Yeah, there may be some shortages of essential materials, but when you go back through the history of technologies, shortages of essential materials. Whenever there’s a bottle of actuative essential material. Another material is found that provides a workaround, and there are quite a few historical examples of that chlorophyll carbons for refrigeration, and many others.

So, to wrap up, I think. What are we shown? Well, first of all, I think it’s important it we’ve been. It’s been clear for some time that renewables were getting cheaper and cheaper, but people were still viewing the renewable energy transition or the green energy transition getting rid of greenhouse gases as a burden. Who’s going to take on that we’re saying, Actually, no, it’s going to be cheaper than going on the way we are now. So even if you’re a climate denier, you should be willing to j p on board to make this happen. And it also, I think, reframes the whole discussion from having climate change be a burden to have it being an economic opportunity, and the players who get involved. The firms and the countries who get involved are likely to require the expertise to be players in the economy in the future. And so, I think it really reframes the whole discussion.

Now we also, you know, as I said, we were just throwing out the scenarios as assumptions, not as something we’re driving from first principles, so we try to make them plausible by extrapolating from existing trends.! But stuff has to happen to stay on those trend line in particular, I think the biggest one is the grid. We need to expand the grid globally by a factor of four, and that’s a pretty big change. It’s expensive. But if you look at paying ah, you know a grid even. Let’s say the grid cost was five hundred billion per year. I think that’s higher than the number we’d settled on now, but because we’re already paying four trillion a year for energy.

So, if we can reduce energy costs by, say, a factor of two. Then that dwarves the cost of building out the grid. But we have to worry about the political roadblocks to building out grids and doing that stuff. My son works for the Federal Energy Regulation Commission, and he said that there’s enough proposed renewable energy projects.

Sitting in the pipeline. We not approved yet, but having been given to the Commission, if they approved them all, we would more than double the electrical capacity in the Us. They can’t approve them all, because there isn’t a good capacity to put them all on. So, we really have to deal with that

We did look at stranded asset issues, by the way, and we found that that’s not so bad because you replace a gas station every twenty-five years.

We’re turning over our infrastructure all the time. So, we have to do is let the old infrastructure in the spot expire and replace it with infrastructure for renewables, and we, we pretty much get there without spending that many assets we do need to push on storage technologies. We need to stay on that trend for twenty years if we’re going to make it. And. And, as already said, we reframe climate change as an opportunity. And you know I found myself. I was sailing along the North African coast this s mer. So, this is a photo I took from my phone call. This would have been in Morocco, and, you know, dealing with the bizarre police states in Algeria that have to do with you, have a military government that controls the key resource oil and keeps the whole country under an iron fist.

Oh, I think there are going to be substantial geopolitical changes as a result of this transition. Twenty years is pretty fast, and countries like this are going to have serious problems dealing. So, I have a question, you know, but some large-scale Princeton study of a dead zero. Economy said, you have four and X: Yeah, that’s what we’re saying to it. And the course of keeping that I think it’s important to remember, though, that today in Massachusetts, I suspect in Brooklyn it’s not. A better generation is about forty five percent of our electricity. It includes some storage and some,

or back on capacity, or whatever you want to do, a factor in the overall price.

So that makes me wonder whether you just because solar and wind get super cheap balancing, it is maintained. And then it’s sort of like, well question, you know, module cost versus balance of systems.

Yeah, but burning cards are harder to see on the transmission, And the same is true for hydrogen. And right now, the electromagneters are about twenty percent of the cost of one thousand one hundred now so well, and the other cost, and you know the stuff where learning birds are. They happen? But that is obvious that giant storage tanks are going to come down and roast around, and that’s not even including the distribution of that.

And so, I just. I just wonder what you think about that tension. Yeah. Well, so we you know, we agree that the grid is going to be expensive, and we ass e we spend a lot of time researching. You know what the literature says about what it cost to install red new grid capacity, and there’s of course, a difference of whether you’re talking about transmission or distribution, and there’s a difference of whether you’re putting more wires in an existing line, or when you have to build a new line,

but we made pretty conservative assumptions. We ass e there’s no learning that the costs remain the same as they are now. We just scale them up because we’re doing a factor of four more. So, we increase the cost by a factor of four or five, what I think the people you’re talking to Don’t realize is if the other cost comes down.

Then, you know I mean, you know, if you can, you can get an upper bound by just asking What if the generation were free? Right? So yeah. So, we try to do that now, whether I mean we’re very open to seeing whether our numbers are, you know, having people go over our numbers and see whether they are correct or not. So, I agree. The devil’s in those details.

It’s also true that you have to. It’s very tricky. You see, when you get to fossil fuels, there’s no meaningful statement about cost of fossil fuel production, because you have places like Saudi Arabia, where it’s, you know, a few dollars a barrel, and shell oil in Canada, where it’s fifty dollars an hour, and so the price of fossil fuels depends on what the marginal cost is for whatever the marginal supplier is at that time, and that’s why it’s so valid.

That’s why I think one of the big side benefits of renewables is that we’re going to see much less volatile energy costs as a result.

Because there’s no reason to believe we’re going to have that kind of mechanism where we have such a radically different set of costs. You’re moving up and down the marginal price point all the time based on fluctuations in supply and demand that curves going to be a lot. Cloud.

But yeah, sorry I’m trying to remember. I’m killing. I did. Did I address all of the things you brought up a pretty small percentage of the concentrated.

Well, of course, you know, in the in that plot I showed with the different technologies, there are a bunch of lack of chemical processes, and one of the things you see is chemical processes. All tend to behave about the same way. So, it’s one of the more understood classes of technologies, and there are big economies of scale. From things like tank size, we get surface vol e, relation, surface, vol e relationships help.

So, I think electrolyzers will come, I mean, from looking at related technologies. I’ll be very surprised if they don’t come down in price as roughly, we would expect from the industry we have so far.

But time will tell. So, she thanks for everything That’s another way to answer Dan’s question in that, if you know solar, if you become so cheap you can just paint it on the roof of a building, and then the building is collecting solar energy.

Then you have a lot of possibilities for decentralized generation. You still are going to need to deal with storage

now. Electric vehicles already are going to increasingly provide an example of decentralized storage, and the costs we were looking at were caused for

ah industrial installations. There is a shift for a localized, ah decentralized generation, but if the costs come down enough, then that shift won’t matter much.

I would like to understand connection between different technologies. Evolution, of course. Or

Yeah, you really have to go technology by technology. Now, there is a question of what is a technology? you know, there’s twenty or thirty different flavors of solar photovoltaics, and it’s not clear if all of those follow the same scaling, many of them likely to, because there’s somewhat similar processes.

You know, a technology is always evolving through time. So, the technology is always changing.

Nonetheless, what the data suggests is, you can sort of designate something as a technology and look at its costs through time. Now, coal-fire electricity is a good example where up until the eighties people didn’t care too much about sulfur emissions, and then people started caring about it.

So, you might think a joule of energy is a joule of energy. But there’s dirty jewels and clean jewels. There’s intermittent jewels and steady jewels. So, there’s dangerous jewels and Saint Joules. So nuclear power suffered from that problem. So, your designation of the technology can shift, and the cost can shift if the requirements are placing on it, change as they did it with coal and nuclear power.

But this goes back to what I was alluding to with this plot I showed back here for our attempt to try and take a more holistic view of the economy, and use that to think about climate economics, because we really, we would like to be able to track all the technologies comprehensively and think about the ecology of interacting technologies and use that as the framework in which we think about things, rather than using what might be an inappropriate level of aggregation. And that puts noise on what’s happening, because you expect things like distribution scale very differently than technology parts.

So, we’re increasingly moving towards trying to find the right levels of decomposition and then combine things, often splitting things into their inputs. In the paper James wrote a paper on coal. Ah, in I don’t know. When was it? Two thousand and thirteen or fourteen back there somewhere, and what two thousand and eleven where, you know we decompose coal-fired electricity into operating and maintenance. The cost of building a plant, and we saw that those three things really became different and useful to split that.

So, it’s a tricky question that requires a lot of case-by-case judgment.

I don’t even trip from the very back a lot of the investment in these technologies. There’s been, you know, public investments variable of refinement, and we found that that investment makes a difference as the rate of change.

Yeah, so it’s a bit hard to say in a rigorous way. It certainly seemed like there’s in Germany. There were massive subsidies for solar energy that did correspond to a significant drop in price. This is usually called feed in Terrace. And when you think about when you actually go back, if you think about these curves, I’m showing here. Okay, you know, how did solar get solar is very expensive back at this point in time, and its cost keeps dropping well the very first toll ourselves in one thousand nine hundred and fifty-eight, Bangladesh.

Then people started using it, for you know weather stations at the South Pole places where it cost wasn’t a big issue, and then it got more and more in ex uses, so that the essential thing for a technology to roll out like this is that there be a set of niches such that it can keep advancing along, and as it does, its costs can drop, and so it’s important to keep that going, and I think the cost supports the price supports were important in keeping that happening.

But I Don’t haven’t seen a good study that really teases that out, and shows cause and effect, and it’s probably pretty hard to innovation is tell, you know that’s critical, and you know there’s Marian I’m, at Matsicado. But others have done studies, too, showing that public investment and technology has played a major role in seeding these things.

You’re essentially paying for the material and, the input energy in the house of when you,

I think we will evolve in the new technologies. We don’t we’re agnostic about that. But what’s predictable is the future costs what is not predictable, and the solutions that deliver those costs. I once heard of fascinating talk by a guy who was a chip designer. This was at a meeting in Sfi maybe fifteen years ago, and they were talking about Moore’s law. So, you guys all ass e Moore’s law is just inexorable, he just, and he said, having been a chip designer that wasn’t the way it felt to us at all. We felt like we were looking at a brick wall.

We couldn’t see any way to get to the next step, and then somebody would come up with an idea, and we would break through and find a solution. And miraculously that happened over and over again, and Moore’s law has sustained through that whole period.

You know. Some people say Moore’s law is just a self-fulfilling prophecy. That’s clearly not true, because, for one thing, when Moore wrote the law down. Nobody else was aware of it, and it is true that it has been useful for people to plan right, and I mean a great example of this is my friend Emily Ray Smith, who was in better of Ah CGI graphic techniques for Pixar. And he said they basically had it already to go five years before it actually got rolled out.

They didn’t know they just had to wait for Moore’s law. They had all the techniques down, and They waited five years, and sure enough then, and then then toy story was the result.

So, it does allow you to plan, but it’s not like it’s a done deal, or that it makes itself happen

But if the technology is predicted using silicon data that you were saying to keep it going?

The prediction can come from any.

And you know, you see this if you look at, say information technologies where we made a transition from mechanical information devices to vacumtubes, to discrete transistors, to integrated surface.

So, each of them has its own curve, and but the envelope that they followed is quite smooth, despite the fact that you’re leaping from technology and technology.

Why do you think we’ve here? It hasn’t it the grades more as well, because this also involves the technological.

Yeah. So, there’s It’s a mystery. I don’t think we have a good understanding. Now people have speculated that certain properties like modularity matter. Actually, our theory with James has something like modular, and we called design complexity.

And if you go out and test that you do see that? And there’ been a couple of tasks from our theory. Ah, that indeed, as the as the design complexity goes up, the learning rates tend to get worse.

But it’s very noisy, very noisy, and it’s like one of the facts that I think is amazingly strong. Is this one about stuff you mine out of the ground.

But you know, if you look at the way you extract oil now, it’s radically. It’s incredibly sophisticated compared to what was done a century ago.

Now there’s been there. A trade-off between the whale gets harder to find because we pulled so much out. Technology gets better to find it. But it seems very surprising that for one hundred different minerals you discover that those two trade-offs are just balancing each other across the century, you’d expect U-shaped curves that it would drop, and then it would go back up, and that’s not what you. See? So, there’s something else going on there, and you know, nuclear reactors are.

Well, a couple of things. If you actually, if you read an account of what they have to do to clean up a spill in a nuclear reactor. It’s pretty complicated.

And so, they’re complicated pieces of technology. This the French have maybe had a little bit of success in standardizing it so to make a cookie cutter. But it Hasn’t really paid off. French nuclear power is very expensive, too.

There’s a school of people very strongly advocating for making modular nuclear reactors. Small nuclear reactors not going to fly, because they’re fighting a big scaling law. To begin with, there’s a reason why they made them big to start with, and you have to make that back up, and there’s just no way they’re going to do that. But! But there’s a mystery. There’s still a mystery. There’s no way to predict a priori which technologies are going to improve quickly. And which are it’s a big problem. It’s fascinating problem.

Yep, Sorry, he hadn’t said. Had a chance Yet it might be that it’s general. Yeah, I know. I see your arg ent now, and There’s certainly an element of truth there at the same time, you know. If you look at, say the Danish experience with windmills. The Danes were early adopters of windmills and acquired expertise in windmills, and then they ended up becoming designers of windmills and have an industry around one else. As a result of that, this goes back to what Ricardo always stresses about dawn.

So, you get the know-how by being there early on and if the technology.

And so that’s the flip side of the argument for the concern that you raised.

Well, so we did a study of geographical variation in solar and wind prices, and a couple of things strike you. First of all, you might think that countries that have good solar and wind resources would be the one to install the most it’s roughly uncorrelated. It really has to do with politics, and there is a significant geographical variation due to things like how often the sun shines and institutional factors about installation costs in country A versus country. But, roughly speaking, if you look at solar energy the ins in the course of a decade at a ten percent per year improvement rate, you move from the ninety fifth percentile to the fifth percentile in the course of a decade. In other words: If you’re the place to have the most expensive energy in the ninety fifth percentile, then by a decade later, you’ll have the same energy cost that the people that were in the fifth percentile had,

So that roughly gives a scale of the geographic variation versus the temporal variation that said, we are trying to build out a regionalized version of our model to deal with that kind of thing.

Ricardo. Yes, and we said it was correlated with the information rates, or and you know the sunshine for free,

you know.

No. So please the stuff we’re going to do a variable cost right? So, when you work out the cost, the interest. Yeah,

Our purchase agreements out there,

you know, twenty dollars, and they have one hour soldier,

you know. You know the and it doesn’t. Generally, it could be that we didn’t look at interest rate. So that might be. =

No, I don’t yield.

It’s all right.

Yeah, one of the interesting things that people didn’t anticipate. That’s boosted solar.

The rollout has been that people have been willing to offer very low interest rates for solar projects, just because, in contrast a to nuclear power projects, they’ve been very reliable in terms of. If the project gets going, it tends to be delivered. The uncertainties are much smaller than ah in other domains, so Solar has benefited. Certainly, it’s benefited from the fact that we’ve had low interest rates now for two decades,

but it has among energy. It gets low interest rates because it’s reliable with us.

It’s substantial, and you know, I haven’t looked into that in as much detail as I would like, but the studies I’ve seen Don’t suggest that it’s, and they suggest it’s doable, and that the you know there was a review article in Pts. Six eight years ago, comparing the environmental impact of different technologies and solar, even when you take into account the need for rarer minerals and so on. It still gets the best rating relative to the competitors.

But I’m not thinking of investing in my yeah, you, okay? Well, yeah, well, you know, and I think that, by the way, I think part of the reason mining has this property of being so volatile, is because it requires such long-range investments. I grew up in a mining town, and you know, when the price of copper goes up, everybody goes to work, and when the price of copper goes down, they get laid off, but it takes five years to start up even to start up. An existing wine takes years of preparation.

So those big lead lag effects.

Yeah, one question about the fifty-six of investments,

You know the everybody is going to the cable for this

Well, yeah, so we’re not arguing there. There might not be bottlenecks that would not this top half. I think One thing that you know that I reflected on in doing this is that we’re very bad at thinking about exponential rates change in their mark. So, extrapolate this roll out. You hit the other curves up there.

So, we’re really at a critical point. Right now, we’re you know, solar energy is still just a percent or something of global power, but it’s about to burst forward on the stage, and then the question is, how far can it go before it starts any?

I mean my guess is that this won’t be a It’ll be a little b p, but it won’t be a long-term change in the trend. You know one of the reasons why I think renewables are going to have one of the positive side effects or energy security, which, with Ukraine, we see, is pretty important. It means, if you know, maybe, that if you’re in England, you have to pay more for your power than you do if you’re in Arizona. But if you’re willing to pay for it. You can get energy security, regardless of the natural resources you have regarding as we do now.

So, I think that’s going to be a big factor of pushing countries toward it. And so, we may even benefit from this isolationism in that regard, because it’s yet another incentive to go renewable.

Well, so one thing to realize is that renewables come in third when it comes to subsidies. So, fossil fuels get the most subsidies nuclear power against the second, and then and then renewables, even adding them all up. Yeah, so to do this, I mean, when I was talking to my side, I mentioned where it’s. The Federal Regulation Commission said promptly. Don’t quote me on this.

Thank you. Good set of questions. I really enjoyed the discussion. Thank you.

#DevTalks: Mobility and Economic Outcomes in the Age of Mass Migration

Leah Boustan, Professor of Economics at Princeton University, discusses her work, including her new book Streets of Gold: America’s Untold Story of Immigrant Success, on the mass migration from Europe to the United States in the late 19th and early 20th centuries. The discussion also addresses the prevailing narratives about the effects of migration and what that might suggest for policy design and debate.​​

Growth Lab research manager Nikita Taniparti moderated a discussion with Prof. Boustan on September 21, 2022 at Harvard Kennedy School.

Transcript

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies. 

Nikita Taniparti: Today I am truly thrilled and excited to welcome our speaker, Professor Leah Boustan, Professor of Economics at Princeton University, where she also serves as the Director of the Industrial Relations Section.

Her research lies with the intersection between economic history and labor economics and her first book, Competition of the Promised Land, Black Migrants and Northern Cities and Labor Markets, examined the impact of the great migration from the rural south of the United States during and after the World War II.

Her recent work including her new book, Streets of Gold: America’s Untold Story of Immigrant Success is co-authored by Ran Abramitzky and is on the mass migration from Europe to the United States in the late nineteenth and early twentieth century.

Professor Boustan is also co-director of the Development of the American Economy Program at the National Bureau of Economic Research, and she also serves as the co-editor at the American Economic Journal of applied research.

She was named in Alfred P Sloan Research fellow in two thousand and twelve, and won the ICA Young Labor Economist award in two thousand and nineteen. And very recently she was also named fellow to the Econometric Society. Very importantly for us, we’re welcoming her back to the Harvard campus, because it’s also the one place that you called home when you were doing your PHD in economics here.

So we’re going to start, we are presenting some context, setting data points to kind of get us on the same page. And then hopefully, we’ll have a conversation with some questions from the audience as well. But we are over to you.

Professor Boustan: I’m really delighted to be able to share some of the findings from my new book Streets of Gold here at the Kennedy School, which, in addition to the Economics department, the Kennedy School is my Alma Mater. I was part of the inequality program here when I was in grad school, in two thousand and two and two thousand and three.

So I wrote this book with Ran, my long-time collaborator, and we were inspired to write the book, because we believe that national conversations about immigration and immigration reform are driven mostly by myths rather than my fact and data.

And so we set about to share some of our findings to be part of this conversation.

One of the myths inspired our title, Streets of Gold. This idea that anyone can come to the U.S. with just a few dollars in their pocket, and they can quickly make it here. But the truth is a lot more complex.

So I think it’s well represented by this quotation. It’s painted on the wall of the Ellis Island Muse, and it’s attributed to unnamed Italian Congress, saying, “I came to America because I had heard that the streets were paved with gold. But when I got here I found out three things: First, the streets were not paved with gold; second, they weren’t paved at all; and third, I was expected to pave them.”

So we ask ourselves, how would American history change if we listen to these millions of unsung migrants. Note that this was an unnamed background we never know is full story. So we use data on millions of such immigrant families, both in the past and today, to rebuild what we know about immigration from the ground up. That’s our goal.

So where do these findings come from? In the historical case, we’re using the U.S. Census records which become a following after seventy two years and has been fully digitized, and we can use these to follow an immigrant as he lands in the Us, and then spends more years in the country over the course of his career. We also can see children living at home with their parents and then follow that child into the labor market.

So you can think of us like curious grandchildren who are using ancestry.com, the genealogy website. And in fact, that’s where we started with our work, and from there we build algorithms to follow more than just a few family members to really scale this up to thousands and then millions.

What I’m showing you here is one of the sense of manuscripts not selected at all at random. This is my grandfather, Matthew Flatt, who’s circled at the bottom, living at home with his parents, who were immigrants to the country, and his seven other brothers and sisters in the one thousand nine hundred and twentys census.

It turns out that my family’s story is very representative of what we find in the broader data. So my great grandfather, the immigrant generation never moved up the occupational ladder. And that’s something that we see very commonly in both the Ellis Island period, and today that the first generation, the immigrants themselves, move up pretty slowly. So where they start ends up determining when there is a their trajectory will be – if they start with a lot of skills, and they come already Seek a Phd, then that determines one path. If they start coming from a country with less opportunity for education, and they’re entering into a low scale of profession, that determines that path.

But the second generation, the children of immigrants rise. And you can see this with my family. The older kids in the family enter into white-collar positions in offices, or retail jobs and stores, and the younger kids, my grandmother and his younger brother enter the professions.

So what i’m hoping to do today is reassess some immigration myths. Is it really true that there’s an unprecedented flood of immigration today, and the answer is, no, we’ve been here before. Did the Ellis Island generation rise quickly with rags to riches and immigrants today are not as successful in moving up? The answer is, No, and we see this from my family. But we also see this when we scale up, and our immigrant families, their children today stuck in a permanent underclass.

And of course the answer again is not so just freely delay the groundwork for discussing these myths

to start off with. Are we in the midst of an unprecedented flood of immigration? We can see here the long history, one hundred and fifty years of immigrant entry into the country, and recently that fourteen percent of the population is foreign born.

If you ask Americans on surveys, they’ll tell you that we’ve never before had such large numbers of migrants. But of course that’s not true. We had fourteen percent of the population foreign born one hundred years ago, and in between we see this immigration valley. This dip which is policy-driven with the border closing in the nineteen twentys, and bottoming out at four percent.

Of course these waves are very different, and I wanted to show you that the earlier wave immigration, one thousand eight hundred are primarily immigrants from Europe. That’s the yellow part of this graph, whereas today immigrants are coming all over the world.

So there are many reasons to expect that there might be a quite different path today for immigrants. The past doesn’t necessarily have to represent, and so, when we end up finding that there is a common immigrant experience. It’s really quite surprising, contrary to some of our own expectations going into the research.

So second myth, did the Ellis Island generation rise from rags to riches? This myth is wrong in two different ways, kind of interesting. First of all, a lot of the Ellis Island generation migrants were not arriving in rags. So what we’re looking at here the zero line would be earning the same amount as the U.S. foreign born.

And if you see above the zero line. That means that you have immigrated from starting more than one, and the black arms are recent arrivals. The white bars are after we follow these migrants for thirty years. You see immigrants from many Western European countries already earning more than the Us.

So this would be the equivalent of the skilled engineers from India, China, Japan, from Germany. Today we also had many immigrants arriving in poverty, and four of arrivals did not move up to riches within one generation. So the black bars that are below the zero line we see There’s some progress by the time you get to thirty years out, but no one is converging to the earnings of the U.S.

Finally, our immigrant families stop at a permanent underclass today. What I’ll show you is what happens to children and immigrants for children of white U.S., for parents who are raised with similar resources, similar finances to our childhood, and I’ll show you patterns for the twenty fifth percentile of the income distribution. But this pattern is the same If you look at the thirty bit from the fiftieth, and what we’re going to find is that the children of immigrants, raised at the same point as the children of the U.S. – born and achieved more economic mobility over their lifetime.

So this is the picture for today. Each one of these dots I know it’s very hard to see the collections, but the point is, each one of these dots were black children’s parents were born in a set of different the purple dot with the honor our children, whose parents are white and we’re in the Us.

And those kids raise a twenty fifth percentile reach around the forty fifth percentile and adult. On average, children of immigrant parents reach the percentile. And you can see the dispersion around that average with with with kids of income parents from some sending countries reaching the sixtieth or sixty fifth percentile, even though they’re raised in China.

Same patterns in the past is our kids from one thousand eight hundred and eighty on the left hand side kids from one thousand nine hundred and ten on the right hand side. The Us dot, which is the purple dot, is always for the bottom of the picture, and we see the children of immigrants rising.

Nikita Taniparti: Thank you, Leah. I actually wanted to start with that graph and the idea of where do these myths come from, and what consequences do these myths have? Right? So we all live in the U.S. Many of us are immigrants. Do we hear the narrative of immigration that’s unreasonable?

And also in a way you’re telling us that that influence is policy where the tension between immigration patterns actually influences the policy debate and the policy decisions in the mid, when you’re actually influencing the ability of migrants to actually enter. So can you tell us a little bit more about some of those patterns and the underlying causes of how those two things talk to eachother.

Professor Boustan: So I believe your questions is where do these myths come from? And starting with the myth of an unprecedented flood of migration. Where do we get this within the lifetime of everyone who is in the country today? What they have experienced is a rise from the bottom of the immigration valley There were people who were kids in the nineteen, sixties, Nineteen, seventies and they looked around and saw four percent of the population foreign born. In many parts of the country that meant very close to zero percent more and more so.

And now they look around when they see fourteen percent more and more depending on where they live, and that seems like a first up to some people a frightening or dramatic change.

So we don’t have anyone who’s really, you know we can from their whole life experience. We’re back back on the one hundred and fifty years, and I think we have a lot of amnesia about how extensive migration was during the Ellis Island period.

We also have a lot of focus on what’s going on in our southern border, and the discussion of the prices as our quarter. The numbers that we regularly seem scary. Two million contact points at the southern border over the course of this year to date were only in September.

Those long-term points does not be individual. Sometimes there’s going to be more than one, or, you know, up to ten, up to fifteen contact points for a single individual, especially   under Covid, under Title Point. But that number seems quite frightening as well and contributes to this sense of crisis. If you think about the other myths, the   the ragged to richest idea that that’s actually very widely shared. I mean, there’s almost nothing that we can agree on in the Us today, and that’s around you.

But what we can agree upon is that the Ellis Island generation was good.

You hear President Trump talking about this when he talks about why, we have more migrants from Norway, and that sort of targeting back to one hundred years ago, saying the miners were better back then.

We also hear President Obama talking about this, not in contrast to immigrants today, but just really holding up and valorizing immigrants of the past. So this it comes from our families, you know, the selective memory of.

I remember my grandfather. I don’t remember my great grandfather. He’s the one who struggled didn’t. You know we never really spoke English. I never moved up the occasional matter. But I remember my grandfather became a doctor, and that’s the stories that we tell. It’s the stories of great success in our own family. We also hear this in high school there are many cases that were pulled out from the records selectively anecdotal cases of people who came with nothing, and eventually became CEOs,

and we often hear the story of history high school as well. We might explain something different when we tell it to each other and what we actually see. So zooming into this wrath to rich a story where you differentiate between It’s not really the first immigrants who come to America who experiences immense and quick ladder of growth, but it’s the their children. What does the American dream mean to us just in general. And then how do we understand the American Dream for immigrants?

Well, I think the use of the term American dream is very contentious. We perceive our book as teaching us that the American dream is not dead. It’s just as alive today as it was one hundred years ago. We can understand it as the idea of moving to the country to provide better opportunities for our children, even if we, as the immigrant generation might have to sacrifice and suffer in order to do so. But other people have very different and interpretations and meetings of what the American training means. So while we do embrace that term in the book, and if you see the cover image that I showed you on the very first slide, It has a very optimistic, a depiction of immigrants sort of in gray scale in the front, looking forward to what might be New York harbor, and seeing a rainbow above the country.

So there’s a very optimistic take that we embrace in the book. At the same time we recognize that the term American dream is very contentious. It means different things to different people. It might be something we can, you know, discuss further. People have a particular reason on that.

Nikita Taniparti: I’ll just kind of go over a quick question. So. Ah, we are looking your book. This book looks at immigration from out of the Us. But a lot of your other. One looks at internal migration. It’s hard to study that, but we also see a lot of mobility happening even in that valley of immigration, the twenties. So how has your other research trying to understand how mobility and economic outcomes were reshaped in America? How many in economic outcomes were reshaped in America. How many in economic outcomes were reshaped in America? How many in economic output structures change? Is it about agglomerating people as well?

Where people went? What are some of the factors at the beginning? What we observed?

Professor Boustan: Well, one thing that’s really interesting about our predators on the children of immigrants is the underlying mechanisms behind them.

You if you chat about this at the dinner party people will tend to say, well, that’s not surprising to me, because I know immigrants work harder, they have a better work ethic, and more persistent, and they care more about education. So people have in their mind a sense of immigrant values that they think would then be their kids. What we found in the data is that there’s another aspect of being an immigrant that matters a lot and can explain everything that we find in the past, and it’s still an important contributing factor today, and that is where immigrants choose to settle.

Immigrants move to the parts of the country that are the most dynamic, and provide the most pathway for upward mobility to anyone.

So what that means is, if you compare an immigrant family to a us-worn family living next door. The children actually don’t do any better in the immigrant house? What   How immigrants do better on average is that they tend to find themselves in those places that provide a ability for all in the past. It’s quite simple.

Immigrants avoided the U.S. South almost completely so at the time that fourteen percent of the country was foreign born. Only two percent of the population in the South was born, and the sound was an animal’s whole region, and cotton growing did not provide good upward mobility for either white or black Americans.

But even if you’re living outside the South immigrants went to particular states and cities that had a lot of upward moment  industrial jobs, and that provided pathways for their kids. So when you think about what is that special about immigrants? It’s that they reveal themselves willing to leave their homes in order to seek opportunity. They’ve already broken family ties. They’ve already left their home country, and once they get to the Us. Then they end up seeking out places that are very dynamic.

But there is a set of American us foreign who also do the same, and those are people who move across state lines. So if we look at us, foreign parents who are living outside of their state of birth.

Their kids look much more similar on average, to the children of immigrants. So really it’s this willingness to move. Crossing borders matters a lot. But even internal migration   matters as well.

Nikita Taniparti: And how do we think about moving for economic goals? But then, social integration, How do you create a sense of home in a new place, whether it’s moving from Texas to Massachusetts or India to Boston.

Professor Boustan: Well, a couple of things there, I mean. First, I didn’t mention anything in the really short presentation about some findings in our book about cultural integration. So we’re economists. We started out by looking at how our commitment is sharing the labor market, and what’s going on with their earnings. But when we talk to people they said,

Well, it’s all very well good, you know. Immigrants move up in earnings, children, immigrants, children, the children, and your parents do well know our immigrants really ever becoming American, and it’s hard to define what that means, but the there’s a whole set of practices that we can observe in data that will give us some clues here.

So we looked at everything that we could that we could measure both in the past from the present, and that includes food immigrants. Mary. What neighborhoods they live in? Are they surrounded by other immigrants in their neighborhood? Or are they living in more integrated areas? Do they learn English, and what names do they give to their children.

And along all those dimensions we see that immigrants do take steps to change the norms and behaviors as they live in the us, and they start. They end up at the end of their life, or even more like the U.S. born than they do than they did when they first arrived.

So that’s how we think about integration, is. It’s a very empirical question. If there’s no values based upon it not better necessarily to choose names that look like the names of he was born. But let’s just watch and observe what immigrants do, and we see that immigrants do start to change their behaviors as they spend time in the Us.

And at the same pace now as they did in the past. So I mean, this is one of those cases where my priors were really changed, I thought, Oh, in the hill this island period there was a lot of pressure from Normandy, and also immigrants were buying for a bureau, which is sort of more similar in cultural dimensions. So immigrants sort of became American very quickly in the past. They’ve jettisoned their whole language, They, you know, told their kids. Let’s only speak English at home, and these days it’s very different. Well, these days. It’s actually not that different in the data.

But there’s another interesting part of this question, which is sort of like underneath the surface, and I just wanted to to mention it. There. There could be trade-offs here where you know, for example, I mentioned immigrants moving out of neighborhoods with high foreign war, and share that some mitigated good, you know, for an immigrants who leave what you know what people would call on-splayed neighborhoods sometimes that comes along with earnings, but it also comes along with cultural loss.

And so we were able to look at this in a really interesting way. With one particular community, we were looking at Jewish immigrants who were moved out of the city of New York, around one thousand nine hundred to cities and towns all around the country through a volunteer self-health program to disperse the Jewish population.

Many of those immigrants did very well, leaving, but also many of those immigrants chose to move back to New York, and the immigrants that chose to move back to New York were different.

Initially, they had more Jewish sounding first aids they had more to resembling last days. So by at least that measure we could see, they were maybe more connected to the whole set of cultural and religious amenities that they would have received in a large immigrant area. And I really want to just make sure that I emphasize that point as well that you know there is going to be an element of loss and trade off when we see immigrants changing their behavior as they spend more time.

And I think that’s a really interesting note of optimism that you present in the book, which is how much people actually integrate. And then you say a point of not not so much. Optimism is segregation of African-american communities or Mexican and hispanic communities.

Are there some lessons that you’ve learned about from a policy perspective. What can you do to facilitate it? A little bit more to a valer to be support convergence of that upward mobility for these left behind communities.

Well, I was thinking about this. You know the connection between my first book and this book here, and you mentioned competition in the Promised Land. One of my main insights in writing that and getting started on the research that led to that book was that African-americans in the us are also an immigrant population. So in one thousand nine hundred around ninety percent of African Americans lived in the South by one thousand nine hundred and seventy. It was more like fifty over fifty, and in order for that rebalancing to happen across regions that represents the movement of millions of people.

And so, If we start to think of African Americans as an immigrant population, we can apply the same lens that we would use in thinking about the various immigrant groups that I showed you on this slide, and in some ways the African-american migration produced very similar results. And In Some ways. It produced very different results.

I would say that the first generation experienced a pretty similar pattern, where, by the meaning of the those black migrants who moved from south to north, doubled their earnings, and that’s the same as the European migrants in the Ellis Island period doubling their earnings by beefing Italy by leaving Norway and moving to the us.

When African-americans arrived in industrial cities in the North, they did not earn as much as the existing black population.

And there was convergence over the course of their lifetime. So it wasn’t complete convergence. But there was movement in earnings for the first generation. What’s really different?

So has been the experience of the second generation, the children of the great black migrants,

and I didn’t realize this how profound this was, until the work of a Laura Drennan or my colleague at Princeton, who was able to look at the second generation of children who were being great, of, of course, or in the early nineteen eighty S. In cities that had high or not as high inflows during the great black migration period. And then the children that were a part of that   second generation.   who lives in high grade black migration areas did not aspire as much upward mobility at all. So that’s where the difference really lies, and you dig below the surface. It’s the boys from that generation, and not the girls that were really experiencing this damper on Hubble mobility.

Now put that in touch with what we’re finding in the dot box that I was showing you. I showed you a dot plot for the sons I called them the children of, but they were the sons of foreign-born parents. We have a similar plot in the boat for the daughters, and we see a very different pattern for  . The daughters of immigrants from the Caribbean from majority black countries than we do for the sons. It’s quite similar to what a lure is found for the second generation of the great black migration. So here i’m starting to see some echoes.

It’s not true for all majority of black countries. We only have five of those sending countries in our data and due to privacy restrictions.

But for Nigeria and Dominican Republic the sons are also doing very well what I’m thinking about. Here are the data for Haiti, Jamaica, and Trinidad, and tobacco there. The sons are the one exception to this role that I told you that the children of immigrants out reform the children of white us for the children from those whose parents came from those countries. The sons are around to connect with the white Us. Form, but they’re not out remarkable.

The daughters are doing spectacularly well. So there is intersection here between race and gender,

and it’s showing up for whether your parents are foreign born, or whether your parents are part of this internal migration wave from south to north and I, you know certainly there’s some suggestive evidence. And all this paper that is incarceration and policing.

How is the earnings of someone who is incarcerated measured in our data?

If you’re incarcerated, you’re still in the dataset. But you’re if you have essentially zero learning, and that’s really pulling down the average, and we were able to take that group out now. I’m not saying we should, because they’re a meaningful part of the average.

But if we were able to take that group out, my guess is that the sons from those three countries I mentioned Jamaica Trend at to Vega and Haiti would be helpful for the Hawaiian restaurant. And so there is this over-policing and incarceration in Caribbean neighborhoods, as well as in the Neighborhood of the initial of great black Migrants, and that is something that primarily affects the sons of outdoors, and that’s one more question that I know the audience of questions, too. But so you’ve told us about how everybody’s trying to point them to the Us.

You sacrifice everything for your children. You really really try to make it, and then people leave and go back home. So migrants return, and I think the folks that both put it at about twenty, five to thirty percent.

Why do people return home? How do we understand what they do when they return home. How can you amplify the positive benefits of return migrants?

So we had just talked about how some people, some Jewish migrants, were sent to cities and towns around the country, and returned back to New York City. Part of what they were attorney for is a sentence of cultural and religious amenities in this large Jewish economy.

So now not to find that find your home country versus the United States. Some people are returning home because of the full of their home country. But they’re not moving to the Us. Necessarily, you know, out of some kind of misunderstanding or mis oppression of what they’ll mind here. I think the term migrants are often very strategic.

They understand that by moving to the Us. Like I said, you can double your earnings. And today, actually, in many cases it’s more than double your earnings.

So doubling your earnings was for the internal migration south to north that didn’t face any mobility barriers as well As for the Ellis Island period, where there were very few migration restrictions today with so many migration restrictions, the return to migration is actually elevated, and you might even trouble or quadruple your money.

So imagine that in the long run you do want to live in your home country. But you know that there’s this opportunity to move to a place, take it for three to five years. Earn a lot, and if you come home you end up deep frogging over some of the people from your from your local area that did not be. You can use the money that you’ve saved up to buy land. You can use it to build a house, you can use it to start a business. You can import some of the knowledge that you have that you’ve ah acc ulated and acquired here in the Us as well back to the whole country.

So we actually have seen this in the case of the Princeton area. We have a large Guatemalan community, and there were there was a a a guy who went to bed through our public schools, Princeton High School, and while he was at Winston High School. He was working at the local pizzeria, and he learned about bring up and pizza, and he brought and imported some ovens from New Jersey back to Guatemala,and he started the first, for out of Korea in his whole country, and it spreads around the country. And so That’s the kind of local knowledge that you might get. And i’m not only talking about, you know the science technology like the high skill you may be able to import a problem of knowledge across. And in many industries. So people come to gay knowledge also to gain savings and intentionally.

No, that’s not everyone. Some people return because of employment shops, health shops, family  , unexpected events when they need to return. But for many people return migration is part of a strategy, and really has always been around twenty five percent of the term migration in Ellis Island period and around twenty, five percent today.

I think we’ll take a few questions, but maybe for honest, you can have a hand the mic to people. And as you’re doing that I would really love about the focus, how it talks between data and these stories. So it will. The average story, not the Elam.  . I don’t think there’s a question over here first, that okay second room a registered name, and you

Hi   My name is Karissa. So i’m wondering if you managed to identify whether the upward economic mobility and information between Tommaker and Joe Taylor, because there’s a notion that migrants are taking American jobs, and i’m wondering whether it’s true.

I mean this is an enormous question, so I could go on at late. I want to make sure we have time for everyone else, but it’s,

I think, very hard to differentiate and put a label on someone as a maker or a jobmaker. Certainly we have this sense of high-level immigrants are creating jobs for others by opening businesses by patenting and invention and science, and that’s one. But we also have for low, skilled immigrants all sorts of ways in which more skilled immigrants are contributing to job creation and expansion of industriesSo I’ll give you a couple examples. One is markets that just simply wouldn’t exist if we didn’t have immigrants here working in those areas. People often say, Well, if if immigrants weren’t here, then the wages would rise, and us foreign would take the job, and we would just continue as always.

I’ll think about how this works in agriculture. For example, in the one thousand nine hundred and sixtys, we had a strong guest worker program in Mexico called the Brassero Program. President Johnson ended it, and his thought was, Well, if we don’t have the restaurant workers, then we’ll have to   agricultural jobs for investment. Kay was around a dollar an hour at the time, and farmers started to raise pay a little one dollars twenty five. Us home workers still did not come to the field, and so farmers decided well at that pay dollar twenty five. It might be worthwhile to be instead to invest in new machinery, to harvest or awesome. They shut down the production of these crops that have to be   tended by hand, and instead, i’ll shift into crops that could be harvested by the machine, so that market the market strawberries, asparagus,   micro greens, avocados, those   you know, free soapy and vegetables that we enjoy today.   dried up, and the types of fruits and vegetables that we had in the late sixtys early seventys for the types that you could easily harvest by machine, so that industry just simply shut down and shifted away from hand-harvested for sessions. Think about what would happen if we didn’t have immigrants entering in hair salons and managing.

I would simply paint our meals at home, and that is what I used to. I mean. I’m like a child in the seventys. We didn’t have   really an iceberg wet and frozen fruit and vegetables. We painted our nails at home, an idea that you would go and like get a manager was just

like something that only the very rich would do. And now it’s an enormous industry that’s available to many people. And so that is the kind of job creation for others that even lower skilled immigrants can provide by creating markets that said they were not there. Think about childcare. Many, many people would want to pull out of the core, pay market work in order to care for their own day full time and with childcare, and we now have an expansion of job opportunities for others, because we thinking the same.

Thank you so much for having me. My name is Carol. Let me see if I must be better so. One of my questions was around   using saving engagement as a key indicator of integration is wrong. There’s sometimes a notion that you parents. Don’t like to get involved in seven, five

But I actually used to work for the city of Boston, and we were at the Civic Academy, for I mean grandson.

We’ve always got applications for it, right? So i’m just really curious to see if you use that as a key indicator of integration, you know, around the country as well.

That’s a great idea. I have not, and thank you, though, is also asking me a little bit about immigrants and patriotism. And I’ve actually thought to myself, Well, it’s really hard for us to measure such a thing. But in the past hand today, today we have really good surveys, surveys of trust and institutions and attitudes towards American ideals and immigrants were higher than the Us. Warrant on all of the development. So immigrants are more patriotic Americans than us four, and J. But I have no idea what this would have looked like in the past. We don’t go back and do attitudinal surveys. But then I was thinking about it in more detail, and I was like, well,

I mean we can look at registering and enlistment for World War, One World War II. We can look at registering as a border, and that’s something that I actually supervised a senior basis for someone who was working on the Cps voter supplement on both Asian, American and Hispanic American voter registration. So there’s a lot that we could have done. We didn’t do by I’m Kate Jenning, who shared the growth up, and I was wondering do you immigrants who come to the Us as children and They look more like first-generation rooms for second generation.

So that is a really good question. The one point. Five generation are included as children of immigrants in our data. And so they’re contributing to the n bers that we see.

So if you break them out of in the data, they sort of look halfway between the the first generation and the second, but they are included in our social mobility N bers There tends to be sort of a rival Age cut off, after which the ah first the one point. Five generation looks more like the first generation, so they do face more barriers, and that tends to be at around like twelve years old, and so it has to do with learning English fluidly. And spending more time in American schools and public schools. And so they you can think of them as sort of in between. So if you’re interested in what the social mobility of the second generation, purely like people who are born in the country. Then you would have to script those folks out, and my guess is that what we would find would look even more startling in terms of we’re mobility that the and but I was wondering if it then in the add to the diversity of the place, for would there be reverse consolidity, et cetera, or some self-sustaining process, that if you look at all into that and the second one is I.

After I read your book. I saw another woman that we reached coming with a little bit of the idea that you know immigrants bring a lot of Ah, I don’t know what to call it main to the trains, and so on. Heard that, and and I mean that has been used by in some papers. By. I think about this and others on on, you know, attitudes towards their ability or marriage, or whatever that that come with immigration. And I can Guest done, thought that all Catholics were drunk, and it imposed restrictions on alcohol and whatever. So I was wondering, What can you say about this concerning the you know values being, you know, the challenge.

Oh,so on the first question. I think you’re really undoubtedly right that if there weren’t immigrants in those places, and those places wouldn’t look as dynamic as they do   in terms of the density of industrial jobs. Let’s say nineteen, ten or twenty. There’s some decision on the parklands where to locate, and they’re from located places where they have access to a strong and robust labor force. So what we’re saying here is morally descriptive, just in a very mechanical sense. Once we account for geography, the advantages that we see for the second generation children dissipate and think of it, just as I described that if you compare the next door, neighbors, we don’t see this immigrant advantage anymore. But there it is.

It’s certainly possible that one of the elements that makes those markets   more advantageous is because they have immigrants in them.

Yes, it could be so. Connor and Michael Stewart had a paper of pnas a couple of years ago, where they tried to understand in the past what makes a market more dynamic? What makes for all remote, and they basically do a horse race between public schooling and industrial jobs. And in the past, at these industrial jobs mattered a lot more and interestingly, the children of immigrants that we’re looking at in the past have fewer years of education than the children of the Us. Born, raised at the same point in the income distribution, despite earning more

So they’re earning more, even though they’re acting at the educational Spanish. So they’re in markets that had a lot of industrial and manufacturing job opportunities. And therefore, if you’re thinking about the opportunity, cost of staying in school for an extra year, i’m losing out

on the possibility of starting work. So people tended to leave school a little bit earlier, and in fact, it was in some of these more rural areas where public schooling really began and took off as sort of the work of.

So, at least historically, these areas were not necessarily the places with good public schooling, and they were, instead places of with really industrial powerhouses, possibly also with immigration, and the diversity of place contributing to that advantage

On the second question about bringing negative traits, whatever the trade might be, that trait disappears very quickly. And so it is not entirely clear from the question or the the work that you’re citing, which trades people have in mind. But whatever it is, they see that immigrants are race around half of the gap between their own behaviors and the behaviors of the Us. Born in the first generation, and by the second generation those gaps are almost entirely closed, if not entirely so. There are newspapers by R Kel, Fernandez, and others that show that there is some long term vestige of the country that your parents came from.

It’s a long-term vestige in terms of you can pick up as a a statistically significant effect of where your parents had been born. But it’s not important in an our spirit sense. It doesn’t explain very much of the difference between behaviors according to where your parents were based. So if you have enough data, you can certainly pick up this association, whether it’s women’s, labor, force, participation, or fertility, behaviors, or what have you? There are some immigrants coming from countries where women are less likely to work where it’s expected that you would have five or six children instead of two children, and you can pick off vestiges of this in the second generation. But it doesn’t explain very much. The overall pattern is really one of.

I think that it’s also interesting because I mean when people talk about we should only allow high-school workers, or and say no it always sense, because a lot of your findings are about it. Actually doesn’t matter, because, you see, it has been all of that kind of converging to this integration of our mobility, and really just positive followers.

I want to. You just say one big thing on that which is, there was a really truly excellent piece, very much engaging with the ideas and streets of gold by Raymond Salam, that just came out in Foreign Policy Magazine, and I don’t know if you guys have great han. He’s the president of the Manhattan Institute.

He’s often on fox news. We don’t agree on everything.

But there’s a lot of scope for overlap and places of agreement where we disagreed was really on this question of how selective immigration should be, and the way I see it, it’s a question of how many slots we have available right now. We have seven hundred thousand visa slots and around a million if you count direct spaces that come in without being part of that quota. So around a million interests a year, sure if we cut that number to one hundred thousand. I don’t think we should, but if we did, and that’s what happened during the one thousand nine hundred and twenty four to closure, Maybe we would want to prioritize the response to the scientists and engineers who contribute a lot in terms of economic growth in the first generation.

But if we have a million slots, or if we have a million, three hundred thousand songs, which is what some think tanks in Dc. Are suggesting, we need to keep up with the demographics and the slowing down in population growth, you know, like adding three hundred and about slots. We’re not talking something incredibly dramatic here. But we’re talking about one point, three million slots. Well, then, let’s think about what the labor market means are currently.

Do we need agricultural workers? Do we need child care? Do we need elder care construction? Do we need other personal services? There are many ways in which immigrants who did not get a chance to even go to high school, or did not get a chance to finish high school in their home country many ways that they contribute to the economy today, and then what we’re adding in streets of gold is to say that their children are not always going to be doing the same job, same occupations as their parents. The children have the opportunity, once they are educated in the Us. And fluent in English, to move up above the Median.

Thank you very much. I have a follow-up question on the discussion that we just had a record also on cultural assignation.

So following what you explained earlier about how my word is to let into more dynamic communities. And how does kind of someone observe over time? I wouldn’t expect that these communities culture also?

Ah simulates more to an international culture in a way right, so that the effect isn’t necessarily only driven from migrants as stimuli to Americans. But the Americans becoming more international in a way, right? And so along these lines.

I wonder if there is some observed pattern of polarization, cultural polarization, where, on the one hand, you have this culturally diverse environment where people, you know, immigrants move to, and then kind of the opposite.

I think that it’s very profound, and that’s undoubtedly going on. We do talk about it around the edges. It’s about about the different contributions that immigrants make it’s, not just economic contributions. It’s also bringing their foods, their music, different aspects of their culture with them, and the opportunity to live in a state like New Jersey, where I live, which is one of the most immigrant densities in the country, and you know to me it’s a really incredible set of opportunities for cultural exchange.

And that’s a preference that I hold, but not everybody. And so there may be continued sorting along those lines geographic sorting, or even if you all live in the same area, there might be my overall sorting where you go to different churches where you go to different restaurants, and I think that that’s like Seems like it’s certainly going on at an anecdotal level. But I think it’s okay.

I think it would be great to get a handle on and measure and  , and and have some ways of getting out of quantitatively the way that we talk about it. And I think that makes sense to me is that assimilation is a two way street. You know that immigrants change to become Americans, but us foreign also change   when immigrants right for course, migrants or minders that are going to be distribution on the basis. But do you see the success? That because it’s lower the barrier of my patient because that area so do you see any success?

So are you talking about refugees? And yeah, they used to display right?

So I mean, this has been really fascinating. There is good work done on refugee population in the Us. And also around the world in the modern data. But no one has ever come back to think about people who would be classified as refugees. One hundred years ago our refugee system was established in one thousand nine hundred and eighty. Before that we had some refugee act that designated particular populations as refugees going back to one thousand nine hundred and forty eight. But before that we had an

There were many immigrants from Europe who arrived due to a flight of persecution. So we wanted to look at that group as well, and we were able to do this, using some world histories of immigrants, who arrived between one thousand eight hundred and ninety, and one thousand nine hundred and fifty; and we found that these immigrants classified as refugees by us, according to the stories that they told for their reason for moving, were ah assimilating more fully into us Society, as measured by their details of their ability to see English.

We had one hour’s speech of these folks like that. When we had a audio tape we could classify their accent. We had a transcript. We could classify their vocabulary, and we found that refugee immigrants were more successful at integrating, and can think about the economic explanations. For this it makes a lot of sense. If you have no expectation that you’ll be able to go home.

You talked about the twenty five percent, which for migrants, then you have a stronger incentive to start investing in learning English, embedding yourself into labor market adwords, social networks.

We also looked at this in today for the modern data with using the new immigrant survey, and we see the same matter.

Other people have done similar work on refugees, modern data and find that refugees might start out with working staff, but they move up very quickly, and so I think all of the evidence is starting to line up that immigrants who feel like they have no home to go back to are those that actually is similar to that.

Thank you. Thank you for the talk, and uh for the very nice Ah, Kevin session, my question is related to Ah, what used to work in the past that may or may not be working today. And I can think of several, just you know, listening to you. One is the role that industrial employment has played in the past.

If the factories now are either in China, or at least in Alabama and rural parts.

Other things also that we go wrong or may have. But we are maybe, uh, just have of housing in these particularly dynamic places, and and so as an immigrant to have access to these places today. And the third thing is maybe the cost of education. 

So we have limited ability to really answer carefully, because our historical data is incredible. We have millions of people exactly where they’re living or their neighbors.  , We know their education level and their industry and their application. The modern data that I showed you comes from the opportunity, insights lab, and when we’re lucky enough to get attitudes from them of how children will raise a different income distribution there later in life according to their parents.

But we do not have the money or data, so we don’t know education. We don’t know occupation. We don’t even know exactly where the schools are living. 

Which is a lot smaller and doesn’t. Have good geography, anyhow, and we found that geography matters today, but not as much as a day of the past, which means a lot of scope for other explanation. Just because we see similar matters of over mobility doesn’t mean that the mechanisms have to be exactly the same in the past. Geography was just overwhelmingly a factor that mattered today. It may not matter as much, but we still see that it does matter, and I think that housing markets are somewhat of a key here.

The most productive areas in the country are now obscenely expensive to move to,

and immigrants seem to have a comparative advantage of moving to these high expense places relative to the Us. Born in part, because they’re willing to live in smaller housing units and double up in part, because they actually send some of their budget back at all through remittances or saving to go home. And so they don’t spend as much of their budget on the high cost of living location, whereas the Us. Foreign are spending their money almost entirely locally.

And so these reasons immigrants are sort of on this edge and getting into the most productive places still today. But I think there’s probably going to be a lot more scope for education mattering in the modern data than it did in the past. And we just we love to be able to work with the micro data. Maybe one day we can, or maybe that will be another source that will allow us to do that.

I think I’m going to actually go ahead, and i’m so sorry to be able to ask the questions. Maybe you didn’t come to the ah right now. If you haven’t read the book, or any of the s work. We’ve focused on one of our characters book around people. So you can be tested on what you learn today, but kind of reframing. As a lot of countries are in political type of ideological models of a very complex multi-passeted thing, or As you were saying, you might see similar trends, but the nineteen essence can be very different.

So there’s a lot of things I think, for us to be into, as there are policymakers of people who work policy papers by doing research.     So I really want to say thank you for starting the conversation here today. And hopefully, we can really about to continue this.

Thank you, Nikita. Thank you to everyone for your questions. I really appreciate it.

Betting on Green: Namibia’s Green Hydrogen Agenda

In this seminar, James Mnyupe, Economic Advisor to Namibia’s President, discussed the country’s commitment to green hydrogen, its strategy for securing foreign investment, from the private sector and Germany and the EU, the feasibility of the hydrogen market, and the risks.

Daniel Schrag, Director of Harvard’s Center for the Environment, moderated this session on September 26, 2022 at Harvard Kennedy School.

Transcript

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies.

(Mnyupe) Hi guys thanks a lot for coming out to listen to our conversation. It’s really good to be back. The last time I was here physically was in 2019, I took a class actually with the Harvard Kennedy School. I did an infrastructure and markets economy with a really cool lecture and I had a really good time so it’s good to be back.

As Ricardo has said, he together with the Growth Lab essentially the Namibian government sort of retained the services of the Growth Lab to help us think about economic complexity a little bit and this is where this journey started to a large extent as well.

So I started working for the Namibian government in in September 2020. To give you some context, Namibia’s GDP is anywhere between 11 to 12 billion US dollars on a good day our annual budget is about 2.77 billion. What we spend is about 3.3 so you definitely have a deficit of 500 million US dollars or more. I’m giving you all of those numbers to get context of who we are. Countries around two and a half million people the size of the country is about two and a half times Germany’s size so it’s about 824 a thousand square kilometers, being shared by two and a half million people and that gives us the dubious honor of being the second least densely populated country in the world.

Which before, this it was really hard to sort of see the utility of that particular statistics but it’ll start to come to light. So when we started trying to look at increasing the economic complexity of our country this is basically something we were going or we were looking to do with the growth lab. You know, what sort of new exports we could put together currently, maybe a sort of export minerals to a large extent, so you’d think of diamonds uranium some meat some fish so nothing too complex we’re not exporting Nokia cell phones just yet and then at the same time services or tourism right so that was it there may be an economy in a nutshell.

And then we got approached by a big green hydrogen developer I think it was October 2020 and we started looking into this whole green hydrogen thing. I started working with the world bank and they started saying to us, look, you are actually, potentially very uniquely positioned to do something very special in this space. You have some of the best wind resources on the planet we checked that with various tools that we were able to access through the Bloomberg new energy Finance tools and we saw that the capacity factors we could generate in Namibia.

55 percent or more than eight meters per second of wind meant you had a really interesting world-class wind resource especially in this area the solo was pretty good as well easily  north of 30 capacity factors in selected areas it just so happened to be in the very same area so typically Namibia has started to build some renewable energy potential around the country but like small plants right so Namibia produces, or we consume about four and a half terawatt hours of electricity and we import 60 to 70 percent of that.

I know right pretty sad, and we input a lot of that actually from South Africa right here and they produce a lot of that using coal-fired Power um our biggest generation asset is up here in the north in the ruachana area. And it’s Hydro right and then half of our population are certainly a working population work in the agricultural sector so you can imagine you’re very exposed to climate change right if you get hit by a big drought you don’t get enough electricity half of your people unemployed and you have to pay very high prices for emergency power you’re importing from qualified power stations which is that’s the right climate change um so that was sort of our reality and then we tried to turn our reality into this so after doing a lot of work in this area we essentially put together a fairly robust governance structure that I can talk to you to you guys in some detail.

We went out to the world we put out a global um RFP a request for a proposal and we invited private sector developers to Envision a future um that had green hydrogen as a big part of that and we got nine proposals from six developers, and I’ll show you one such project. But essentially, as we embarked on this economic diplomacy, we started actually getting a lot of interest from people who wanted to build projects everywhere.

We started unlocking interesting grants and funding from larger economies such as Germany and the EU that wanted to partner Namibia on this particular journey and this is where we are at the moment we’re envisioning about three hydrogen valleys we’re putting together a green hydrogen strategy and we’re going to launch that at cop27 um, and this is being done by McKinsey and this I think was a big part of the secret Source I think a lot of international players did not expect the government to organize itself as quickly as we did there’s a technical committee full of technocrats that essentially reports to a green hydrogen Council you could see my one of my roles is a green hydrogen commissioner which essentially entails project managing this Vision.

And then of course we’re reporting to cabinet and that’s the out ultimate decision-making body and so once you started creating a certain amount of clarity but also robust sort of governance structures it just engendered a lot more confidence and a lot more people were willing to come and take the risk of developing in Namibia so that got us you know going on a really exciting Journey this is um the project that is envisioned um in the southern part of Namibia actually the developers are online as well so if you get that really cool technical questions for them we can ask them um but essentially this in the beginning this was envisioned as a 9.4 billion US dollar project we’re now looking north of 11 billion closers to 12.

You must remember the size of our GDP when you’re thinking about that number and it essentially entails almost seven gigawatts of renewable energy assets three gigawatts or so of um electricity about 700 megawatt hours of battery 70 kilometers or so of transmission lines some pipelines that are at the industrial site with desalination at the front ammonia synthesis at the back and ammonia storage tanks you liquefy the ammonia, and you then bring that off to a ship this is a floating a floating boy Mooring system get that into a tanker and then that goes off to you to your client at the moment.

Our clients are predominantly envisioned to be German so two weeks ago we were in Germany in Berlin working closely with their Ministry of economic Affairs and climate change and there was a Business Roundtable where essentially, we were introduced to prospective off takers this particular company hyphen is 35 owned by a German company as well called nit rag and so Germany and Namibia are working very close through economic diplomacy trying to make this project um come to bear and I think Dan and I will get into some details around that as well.

Some interesting features that obviously are really important for Namibians full-time jobs about 15000 90 of those should be Namibian employees now you have to know that the town that is to host this project probably has a population of about 30 000 people ums so if you imagine that these full-time employees have two or three um dependents and most of them are coming from not and they don’t live in the in the town you could double the town’s population right and these are some of the challenges I think that we would love to be working very closely with Ricardo’s team to start really thinking about why this project actually means on the ground what are the anthropological issues socio-economic as well of course as techno economic.

But you know for example what does Namibia have to do um with our immigration policy as well Do all of these skills exist um and what would it take to bring in skills but also accommodate them in a manner that they Thrive as well big local content about 30 local content a big part of that is other local companies balance sheets big enough right um I think one of the examples the developer was giving was that the largest develop the largest construction company in Namibia their order book is typically about 70 million US Dollars and um this project might have an order book of about seven billion rights so we’re going to need many of those Namibian construction companies to actually absorb all of these um all of this capital.

I think this is another very interesting one – the idea is that the project will produce about 18 terawatt hours possibly more actually, because the project has been growing in size since then um about four to five of those terawatt hours would actually be curtailed energy and so we’re looking into the possibility of capturing some of that and actually, feeding that into the Namibian grid possibly with a bit more of a dispatchable profile.

And obviously that would require unique Investments strengthening the grid, a new connection battery storage as well possibly green hydrogen re-electrocution units as well and all of that will then obviously determine the price of this electricity relative to the Imports that we get from South Africa. We think they should be cheaper but we’ve commissioned two studies to do that we think this project can easily produce electricity at two cents a kilowatt hour we pay nine to twelve cents a kilowatt hour for our Imports so there’s an interesting opportunity there to get Namibia to be energy independent. At the same time, if this is the first of many projects you might actually be able to become an exporter of electricity let alone the molecules of to Europe.

Growth Lab Development Talks: The Role of Business in South Africa’s Future

The Growth Lab’s Development Talks is a series of conversations with policymakers and academics working in international development. The seminar provides a platform for practitioners and researchers to discuss both the practice of development and analytical work centered on policy. This event is co-sponsored by Harvard’s Center for African Studies.

Speaker: Ann Bernstein, Executive Director, Centre for Development and Enterprise, South Africa

Moderator: Soraya Mohideen, Harvard South Africa Fellow, HKS Mid-Career MPA ’23

About the speaker: Ann Bernstein heads the Centre for Development and Enterprise, South Africa. An independent think tank CDE is South Africa’s leading development policy centre, with a special focus on growth, jobs, education, cities and the role of business. Member of the Transition Team, then the Board of the Development Bank of Southern Africa (1994 – 2001). Fellow, National Endowment for Democracy, Washington DC (2005). Public Policy Scholar, Woodrow Wilson Center, Washington DC, 2013. Board member Brenthurst Foundation 2007-2017. In 2008 and 2009 invited African faculty member, World Economic Forum, Davos. Invited Fellow Bellagio Center, Rockefeller Foundation 2016. Her book, The Case for Business in Developing Economies (Penguin 2010) received favourable reviews in South African media, the Economist, Financial Times, Forbes and elsewhere. The book won the Sir Anthony Fisher Award 2012, Atlas Research Foundation, Washington DC.

Development Talks: Economic Policy in Albania after Three Crises with Etjen Xhafaj, MP

EN VIVO: Debate ambiental, con los candidatos a la Presidencia de Colombia

El tiempo se agota y el planeta está en riesgo. Los candidatos presidenciales respondieron a expertos sobre la crisis ambiental que vive Colombia y los efectos que genera para la humanidad. ¿Cómo proteger los bosques? ¿Cómo salvar las fuentes de agua? ¿Cómo producir sin causarle daño al medio ambiente?

A New Pathway for the Amazon Basin

With global leaders promising to end deforestation by 2030, the Amazon has the potential to become the world’s largest bioeconomy, strengthening local livelihoods while restoring and conserving ecosystems.

How can governments from across the region further pathways for collaboration with scientists, ecopreneurs and businesses to contribute to the Amazon’s sustainable development?

The World Economic Forum is the International Organization for Public-Private Cooperation. The Forum engages the foremost political, business, cultural and other leaders of society to shape global, regional and industry agendas. We believe that progress happens by bringing together people from all walks of life who have the drive and the influence to make positive change.

#DevTalks: Why We Fight – The Roots of War and the Paths to Peace

The Growth Lab’s Development Talks is a series of conversations with policymakers and academics working in international development. The seminar provides a platform for practitioners and researchers to discuss both the practice of development and analytical work centered on policy. 

In this talk, Chris Blattman, Ramalee E. Pearson Professor of Global Conflict Studies at The University of Chicago’s Pearson Institute and Harris School of Public Policy, discusses his new book,Why We Fight: The Roots of War and the Paths to Peace. The book draws on decades of economics, political science, psychology, and real-world interventions to lay out the root causes and remedies for war, showing that violence is not the norm; that there are only five reasons why conflict wins over compromise; and how peacemakers turn the tides through tinkering, not transformation.

Moderator: José Morales-Arilla, Research Fellow, Growth Lab; Postdoctoral Fellow, Department of Politics, Princeton University

Transcript

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies. 

José Morales-Arilla: Well, hello, everyone, and welcome to the Growth Lab’s Development Talks seminar series. Thank you all for being here. And I’m Jose Morales-Arilla. I will be moderating today’s seminar. The Growth Lab’s Development Talks is a series of conversations with policymakers and academics for international development, and the seminar provides a platform for practitioners and researchers to discuss both the practice of development and analytical work centered on policy. Today we are thrilled to welcome Chris Blattman, Ramalee E. Pearson Professor of Global Conflict Studies at the University of Chicago’s Pearson Institute and Harris School of Public Policy. Chris will discuss his new book, Why We Fight: The Roots of War and the Paths to Peace. Thank you so much for joining us. And so the first question I wanted to ask and I think it’s a fantastic book that presents a cogent framework for why the war should be rare and a rare alternative to conflicts. Now, right before the book was published, Vladimir Putin decided to invade Ukraine. How would you perhaps outline very quickly the framework that the book presents? And how would you describe the event from the perspective of the book.

Chris Blattman: Okay, first, thanks for having me. It’s been 20 years since I was a student here, so it’s nice to back and talk. It’s a chance to transform. But I always knew that a war would break out. Sometime around. I mean, unfortunately, war breaks out and something what happened when the book came out and I knew in my heart of hearts that it was going to be a part of the world that I knew precisely zero about, because that’s how things work. And so I don’t think I knew precisely zero, but like most people in this room, I probably couldn’t find Donbas on a unlabeled map six months ago. So I just want to be clear about that. And so and it was a weird moment to come out with a book that I, I didn’t write a book called Why We Don’t Fight. But chapter is in chapter one. It’s called Why We Don’t Fight because that’s the right starting point, because most of the time we don’t. And but that was also true. So everyone says, well, this war breaks out right. When the book came out. Yes. But two weeks later, India accidentally lobbed a cruise missile at Pakistan. And so we but we pay attention to as we should, like a medic pays attention to the severely ill, the direly ill patient. Right. And we pay all that attention as we should. But we can’t forget that the normal thing to do in these circumstances is not to it’s not to fight. That’s even true of Ukraine. For 20 years, Putin tried every other thing possible, from dark money to propaganda to assassinations, to attempts to co-op the government. Invasion was the last resort. And it was a resort he didn’t need to use against most of Southern neighbors. He didn’t need to invade Kazakhstan or when he did send in the peacekeepers. There was no resistance. And he didn’t need it to subjugate villagers. So. But I didn’t write about it. And I think, you know, the framework works reasonably well. If anybody remembers one thing when they leave the room. It’s that war is ruinous. We can see that, right? War is ruinous. And every reason we fight is the reason that one side or the other ignores those costs and goes to war in spite of spite. And so why did Russia ignore the costs and the ruin of war decided to do this. One is the person in charge didn’t pay for most of those costs. That’s what happens in autocracies. It can even happen in democracies somewhat, but that’s what happened. So we’ve unchecked leaders, so they’re too ready to use violence. They might even have a private interest in going to war. In this case, we definitely know Putin is not hearing most of the costs, but here you make it. What’s his private interest? Well, I don’t think it’s particularly strong, but I do think that Ukrainian democracy was a threat to his regime in the sense that Russians identify with Ukrainians more than anybody else on the planet to be tossed out to Russian leaders in the last 20 years. This is a dangerous example, not a life-threatening example for him, but a dangerous example where there’s a benefit to extinguishing that flame. The second. The two explanations you hear a lot in the media is that Putin is cabal, i.e. the Russian people, sort of there’s this vision of national Russian glory and, and, and coming back from past affiliations and getting the game back together with the Empire. Those are all stories of there’s some ethereal thing that they get through a war that they can’t get out of. Right. So they’re willing to pay some costs to go to war. And those kinds of intangible those are often really important. I think we exaggerate that in this case, but I think they’re part of it. The other story you hear is about Vladimir Putin and his regime’s misperceptions, how they got it wrong. I mean, they erroneously believe that they’d be able to sort of sweep it almost like an intelligence operation. And replace the government with public. Frankly, it could have happened, I think wasn’t totally out of the realm of possibility. He could have got on that plane. I think he’s just surprised everybody, maybe even so. So that’s certainly true. Isolated, insulated leaders sort of made the wrong people. But that. That I think understates what I think is the fourth root of a lot of wars is just sheer insurgency like we emphasize or exposed to. Got it wrong. So it must have been this proceeding. But actually, it’s really hard to get these things right. Like, think of this how many people think of the strength of Western unity on this, the pluckiness and the effectiveness of the Ukrainians, and then the inefficacy of the boldness of the initial Russian invasion. So all three things were like within the realm of possibilities. Right. But nobody predicted that Putin would get a bad draw on all three. Least of all, Vladimir Putin. So this was a gamble or always a gamble of uncertainty. So it’s not just misperception. The last is sort of I make an argument for the previous commitment problems so it’s hard to vote to trivial. I think that’s the least important stuff in the most important. A lot of countries, especially long ones. I think it’s we can talk more later in questions about why having commitment problems can be very hard in the war. But you can think of commitment problems is you just don’t trust the other side to hold up to a deal. And I think Ukrainians have been unable to make a deal that would satisfy Russia and its rising is far more powerful is in a position to do that for Ukrainians were unable to implement those records and I think Putin couldn’t trust them to implement anything because they perceive it as unjust, would say screw this and likewise no interest Putin because of his ideological stance. And so we’re I think there’s also an ideological problem at work here that that contributed. But for me, most of all, it’s the unfairness of Putin uncertainty. And it’s less about those intangible glory incentives and these perceptions.

José Morales-Arilla: Fantastic. And as I was reading the book and in all this was I was reading it as the conflict was happening. And I took issue with this with the idea of tinkering that that’s the best to building things. On the one hand, there’s this sense that, you know, you should go in any policy realm, with iterative adaptation, scientifically, you know assigning books to Matt Andrews and Lant Pritchett, I prefer that the view and all that kind of thing. But at the same time, it’s like a sort of almost kitchen sink reaction of the West and the invasion of Ukraine. And not only seems inconsistent with the idea of tinkering, but at the same time, when I was seeing those reactions, I was like, yes, yes, this is right. This is how you react to something like that. So how do you balance that? What’s your opinion of the West reaction to the invasion of Ukraine? And what do you think should have been done?

Chris Blattman: The last chapter of the book is called Piecemeal Engineering. After this, I do a beautiful Karl Popper, but the piece fell short of social engineering. But I make quite a little bad joke and I spell “piece” p-e-a-c-e and but it’s very much the book actually probably shows my Kennedy school roots. It’s not just that Andrews and Pritchett, Merilee Grindle, Dani Rodrik and like so many other so many. I actually teach a class on this and this. And it was only when Lant Pritchett, I said in my syllabus is like, Oh, I didn’t realize it was a Kennedy School school of thought until I saw the syllabus. And it’s about this piecemeal approach to poverty, but it’s much bigger than that. It’s Jane Jacobs and it’s James Scott and it’s so many great. Everyone has figured out why some policies work and some policies fail. I think have stumbled upon the fact that if you try to do grand things, they all go wrong. Now, what do you do in the middle? Well.  I’m not going to tell people how to fight a war. A kitchen sink approach to fighting. Maybe that’s the right approach. Maybe peace works. I’ve never been on a battlefield, so I don’t want to say. I think that you have to. I wanted to finish the book in a way that says, okay, I’m not going to give some big like Steven Pinker style, “everything is going to be better.” And I didn’t, you know, and he’s someone I admire, but I just don’t agree with that in this situation. At least Julie’s a good friend of mine, and I didn’t want to end on, “we’re done, what can you do?” Right. And, you know, as much as he would like me to handle it that way, I wanted to be constructive. So imagine your. But you have to think what can one individual or one institution. So if you’re the Turkish president. Right, or you’re the Israeli prime minister or something, what can you do? Well, I think you need to work on the margins. You need to think about what’s the one or two actions I can invest in that are going to solve one of these five problems here? Or what can I do to solve them? There’s a lack of dialog and the lack of trust that’s contributing to certain commitment problems. Or I’m in a position to actually try to reduce some of those tensions. Grains not getting out? Well, I’m just going to focus on trying to get the grain and trying to cleverly find a deal or a set of incentives or reinsurance or I’m the head of the Treasury Department. I’m going to try to make the sanctions regime that much more effective. I’m aware of all the limitations of both targeted and generalized sanctions. So I think that’s just how any individual or organization has to act. And anyone can try to act more boldly or probably than that would be in that. And you’re probably not going to be very effective at your piecemeal approach either. It’s just super hard. But it’s your pain, your only hope of, like, making any kind of difference in that kind of situation.

José Morales-Arilla: One of the points that highlights also is this idea that economic interdependence is about peace. And I saw a reaction to that from some of you later. Okay. In the nineties, we had these views of the paths for Chinese democracy, or the path to civilized prosperity is by connecting oil imports from Germany. Right. But then now, you know, 30 years later, we find that, you know, it is American firms that are needing to commit or censorship guidelines from the Chinese government just to be able to supply the market or, you know, it’s Germany, the one that is relatively tame in responding to the Russian invasion. Right. So on the one hand, maybe that’s the point is whenever you have economic interest, things are fine with a rival then you’re more cautious on how you respond. But at the same time, it also feels like dictatorships are always more foolish, a bit more hawkish in that interaction, which, you know, maybe that means that it doesn’t qualify as a kind of speech that comes out as one that is perhaps an enabling the democratic side of things. So. So. Yeah. So how would you think that, that democracies should be reacting in a way that prevent that from happening without compromising economic interests?

Chris Blattman: Yeah. So one thing I’m really careful to emphasize in the beginning is that peace isn’t necessarily just. And when I talked about peace, especially the first part of the book, I don’t label it as such. But there’s this idea of a negative peace that exists in like a peacebuilding. Like when someone says negative peace, that just means you’re not fighting hate one another, you may be on the cusp is just sort of brinksmanship, but you’re not fighting. This doesn’t make sense. You just love and peace and you struggle for it. And that’s kind of the world we live in most of the time, especially with the most serious adversaries. And that peace can also be not only is it hostile to be unjust in the sense that a powerful actor can get something that seems like an undeserving share, or they can do things that seem morally outrageous to many of us. And we kind of have to live with it because that’s what keeps me right. So in a way, to overcome it, we’re like when a cabal removes a country and subjugates all the serfs or all of the commoners or whatever, or a minority group exploits a majority group or majority group exploits minority group. That’s and that that exploitive group doesn’t revolt. Which is most human societies for most of history, that’s peace. But that’s not just. Being entwined with a dictator. Someone who’s not encumbered by the can sort of take aggressive actions without bearing the cost. That’s a bargaining chip in their favor. Right. They have more power than you do in some sense, because they can threaten to burn the house down more credibly than you can. And so that’s always going to be a bargaining chip in their favor and that’s going to lead to a split in the world or in your society, whatever we’re talking about, that that gives them an advantage. That’s tragic. I mean, but it’s how it is economic interdependence in those situations. First approximation, it’s not a magic solution, but the first approximation is like speed bumps for them on the road to using violence. Right. So they’re going to wield lots of tools to gain advantage. And what economic interdependence does is it says I’m less likely to use the tools that are going to blow up the thing that’s pumping money into my economy and my pocketbook. And so I’ll use assassinations and dark money and propaganda and political finagling and rhetoric. And instead of violence. And that’s a that’s an improvement, I think. But it’s not like that’s not happening. It’s not a happy message towards Carrington. That’s good enough. But it’s important.

José Morales-Arilla: It’s hard to put in a bumper sticker book, but it’s good. Oh, I understand. Another thing I really enjoyed about the book is that the underscoring of the concept of 20th-century, this idea that maybe there are institutional arrangements that can organically come about …  And then you make this fabulous discussion of it as the case of the gangs emerging, which is also a thing that you’ve done some fantastic research about. And I find that strange. But at the same time, A, I feel like it’s often the case that the Colombian case is used in conversation to kind of underscore a different kind of more Hobbesian kind of narrative, right? Of the importance of having the primacy of status and monopolies, the violence in a country. And then it’s actually one the policy say that a person that, you know, it’s only because the government gave war a chance that, you know, things kind of start to improve and that actually a meaningful negotiation with the guerrillas could start to happen because events the negotiation have in the past and they had broken down. So so how would you respond to that tension of should we aim or like state monopoly and which again, these view of like messy a, you know, transformational like chain of things or from the perspective of arguing for or pandering? And how would you react to that in that particular setting of economics?

Chris Blattman: So I think I need to clarify. So, I mean, when you say give or chance, I mean, they fought a 50-year civil war. It’s one of the longest civil wars in the history of the world. So. And are you thinking like that helped make the state stronger?

José Morales-Arilla:I’m not saying “I think” I’m saying it’s a narrative that’s out there about Colombia that says until the early 2000s that an effort to overpower areas.

Chris Blattman: Yeah. I mean, for me, Colombia’s like one of the great tragedies because here it’s one of those successful, dynamic places on the planet. It really is. It’s a thriving democracy in so many ways, so much to potentially export to. It should be this marvelous economic, and political, marvel for the whole atmosphere. And it is getting to that now. It’s kind of underperformance reasons it understands. And yet it wasted 50 years in this sort of low-scale, occasionally intense insurgency. So. So what would I say? I would say we shouldn’t mix up things you do to win a war versus things you do to find peace. Right. So one side won. The government basically won and the question is, what was the alternative path that could have could have ended this conflict? I don’t know this for a fact, because when I work on organized crime and crime laws. I don’t work on this sort of history. But one thing that happened repeatedly over 50 years and this Colombia is like a poster child for the commitment problem and why it’s hard to have a civil war. Because in a civil war, unlike an international war, any kind of internal war, one side has to put down their guns at least. Right. And then decide to join a political process. That’s usually what happens. And when you put down your guns, you have to trust that them, especially if you’re a smaller group, that the larger group is not going to murder you. Every time. I mean, there were horrible many, many ways. But every time they tried to put down their guns, either the government or some splinter faction within the government and military tried to assassinate them. And they went, “Right, I guess we can’t do that.” Again and again and again. And then they finally put down their guns. And what’s happened in the last few years? How many thousand leftist leaders have been murdered? Secretly. No, they don’t. Is there a serious investigation? I mean, it’s astonishing. So the continuation of that is I just think a self-inflicted wound. And I think Colombia isn’t Costa Rica partly because of that today. So I see it as big failure in that sense.

José Morales-Arilla: I guess we have time for one more question before we move to questions from the audience. The book makes a very nuanced point about the merits of foreign intervention, on the one hand highlighting the potential concerns about side effects on the population whenever they see the results. But at the same time, highlighting the promise of incentivizing a peaceful solution between potentially warring parties or preventing a massacre when our politics starts. So so that to me seems kind of nuanced. And I was wondering if you could perhaps highlight or elaborate a bit more on your views about like the role for foreign intervention in building peace. What’s the point that it would make?

Chris Blattman: Yeah. I think when you emailed me this question, you asked me what’s the Blattman Doctrine. Which is a great question. So on the one hand, I say like that is, you know, that whole piecemeal engineering approach sort of says, well, there is no one size fits all solution. And that’s like the classic mistake that we make. So I think it is a mistake to think that there’s one doctrine and that we can apply that to Syria and that which is, you know, which is a very different kind of political conflict than like what should the international community or the United States do in Colombia, where you have sort of a drug paramilitary fighting a government. So I don’t know that there’s a single, there’s not a single doctrine and unsatisfying answer, but I think there are some principles. Let me just say a few things that I think are not talked about, but I think would be huge if progress was made. One would just be I’d like to see a lot more supranational institutions. All right. Some people think multilateralism. I don’t like that word. Doesn’t really mean what I mean. So what do I mean? I mean, an easy one is I’d like to see the United States sign on to things like the International Criminal Court. Right. I would like to see a more sanctions response. Right. Which was not rules-based and not predictable. I would like to see more rules-based, predictable, institutionalized responses to specific kinds of crimes and invasions. Right. So International Criminal Court is one, but something that sort of institutionalized. It doesn’t have to be everybody. You just need a cluster of people to start. And I would like to see more, because the more predictable it is, the more it’s going to, I think both more effective a deterrent. But I’d also like to see, we should be pushing we should be encouraging this movement towards an East African Union, which is happening regionally. But we should be encouraging that because that’s going to be credible in that region. It’s also going to create a lot of checks and balances and otherwise highly centralized regimes which are fundamentally unstable. We could see Uganda and Rwanda implode, and I think the more supranational union there is there, whether it’s currency unions, trade unions, political union would be very stabilizing. The same thing in West Africa, like take these nascent movements and rather than have all of our development, diplomacy and humanitarian organizations push them in an individualized nationalistic direction and disincentivize them towards this natural, seemingly very popular path forward, you may actually try to point in the other direction. So I think that would be hugely stabilizing. So that’s one thing nobody talks about, but I just think would be so. So important for a lot of things good policy. But also these. And then. The second thing is, I’m very I used to be very optimistic about the ability to wield military power to end civil wars. Because I worked in Liberia and I witnessed things happen in Liberia next door in Sierra Leone and Cote d’Ivoire, like all these huge success stories of military intervention that don’t get talked about because they were over in a few months and didn’t lead to a 20-year conflict. But despite that, I’ve tempered my enthusiasm because I think it’s super unpredictable. And so the other thing I think about is and it’s linked to my first point about predictable rules-based orders when there are violators, when there are people fighting civil wars or there’s a Bashir in Syria, I think my instinct is the thing that might be productive is just to you might not be able to stop that conflict. I think there’s lots of things you can do and I would advocate for that. But I would just make life miserable for those people, for those leaders who made those decisions for the rest of their lives. Even at the risk of extending that civil war. Again because of a non-evidence-based faith in the deterrent effect of that for the next Bashir. I just think it’s this terrible trade-off. Well, it has to be. But I do think that makes me that sort of rules-based, predictable order that if you go that route, we’re going to make this we’re going to all that all those incentives you have for your private benefits and the costs, we’re going to zero in on that and you’re just going to really regret this no matter what. I think I would like to change the calculus of future.

José Morales-Arilla: So very interesting that once you make it a rule, there’s no going back and then it’s like maybe they’re right thing. If you want to make the point for another point, it’s like your decision on this is the rule.

Chris Blattman: And the problem, though, is that when that works, because when wars will break out still. Right, because it’s going to look like your rule has made no sense because you’re going to only see the cases where it failed to deter the war. So there’s a real selection problem and how we evaluate it, is this a good idea or not. And then it’s going to make it harder. And those conflicts, because ending those conflicts means going to the Bashirs and saying, you know what? You’ll do fine. You just…, we’re going to take care of you. If you can just stop fighting. That’s a really tough screw.

José Morales-Arilla: I think we’re gonna open it up for questions from the audience. Yes.

Attendee: Thank you. And I just want to say, I hope I’m not the only person in this audience situation of not having read the book yet. But now I really want to read the book, but it is useful for other people. Just if you could give like a thumbnail sketch of your argument about what are the roots of war and what is the past, the peace, and then the kind of the follow-up question is about this notion of something I very much agree with the need for a rule-based, predictable international order. But you didn’t say, haven’t said anything really about international law. The truth is, there is a rule-based international order. It’s called martial law around aggressive war. It’s been constructed very slowly since the interwar period. Okay. And it’s very hard to produce a new one. For example, the US will never ratify the ICC. As a political scientist, I promise you that two-thirds of your Senate or presidential system will never do it. So some of those suggestions, it’s not going to work. Politically it’s not going to work. And so I’m kind of stuck politically with some of you know, the Security Council is not going to go away, that the Security Council makes decisions about war and peace is not going to disappear. We’re not going to be able to create a new body that can do that. So from a political point of view, you know how you yeah, I completely endorse the idea that there are things that can be done, but some of them, like us, ratify ICC or change the Security Council aren’t going to happen.

Chris Blattman: So great. So what can I say? So thumbnail sketch. Well, let me give the. And because I’m here at Harvard. Let me give a slightly interesting thumbnail sketch of the interview, the academic version, which will resonate for some people. What I tried to do is sort of take the book. It’s not really about my ideas. The book is my attempt to synthesize 50 years of both like psychology, sociology, economics, politics, and make the game theoretic approach to thinking about conflict talk to the non-game theoretic approach which often does not. And so and the starting point is the idea that there are whether it’s Schelling or a whole body of labor economics or law economics. And eventually the study of conflict by people like John Kerry was to say, well, starting point is that we shouldn’t fight it because it’s costly and this is a powerful incentive. And then two of the reasons we are fighting are these sort of classic what we call rationalist bargaining failures of commitment problems and the role of uncertainty. And then I said, well, that’s great. And for the average person, a normal person has never heard these things before, which is a travesty because they’re like some of the most powerful ideas about science and game theory, and people should at least be aware of them. And for the political economists and some political scientists, they just never synthesize and really thought carefully and tried to organize and systematically think through the other reasons for it. And unchecked leaders, it’s basically actually kind of theoretic in saying this principle. These are problems like the person who’s making the decision is accountable. And then the other two, which are these are painful sounds and misperceptions is the way. So how would behavioral scientists think about that and say, well, we are not standard preferences? Meaning we might value things that are having utility function that has more than just territory that we value or anything. And then we also have misperceptions, which are the systematic ways in which we get that marketing calculus wrong. Most of all, we miss estimating the probability of winning, or we miss estimate the actions of. And so I try to walk through carefully. So it’s in a way, it’s trying to popularize a lot of social science on this. And then the path to peace is like, what do we know concretely by rolling those things back then? Some of the things that I talked about are a lot of things I talked to that are very hard to do. Like East African Union, there’s lots of just as there is like domestic political forces in the U.S. that prevent any international cooperation of this nature. That’s fundamentally why I think the East African Union may not emerged in my lifetime as a real political or discourse, for that matter. That said, I do think there’s things on the margin that one could do to at least disincentivize that so much of the international community and actually distort domestic incentives in the wrong way. And so on. So I think that would be something to think about shifting of the margin over a decade and then the US well. So I both as pessimistic as you but more optimistic in the sense that I don’t believe that the UN Security Council exists in order. And I don’t I’m not sure our current system of government in the United States is exact. I think it will probably exist in 100 years but there might be some changes on the margin. But dysfunctionality and our inability to have anything level of international agreement because of this system is really deeply rooted, problem at least the way the parties have a set of political coalitions that are formed. I think the only way this happens is the political coalitions in this country change for some reason, which and so in a hundred years I think it’ll be different. So I don’t think it’s going to happen next year. So that’s not a very so that’s kind of pessimistic. So there’s some of these things. But I you know, I do think we’re going to see some real movement on these over the span of decades. I agree. Some of the Latin doctrine was super pie in the sky long term, and I actually think those things will come about. I think I can imagine. I’d be very surprised if in 100 years. We don’t have a set of European Union-like regional units rather than just more atomized sort of system nations. I just don’t think sub-Saharan Africa and other parts of the world will be able to advance without incentives. 

Attendee: Since Jose mentioned cost, I want to ask you a question that came up to me when I read the book, which is how, you know, from this perspective, moral or political philosophy stemming from a corporation, if you are a rule based international order, is impossible without an authority or will, but this is impossible without its ordering or authority to actually enforce that rule, and that has to do. So what do you think of that? How is it possible and how you know, how do you answer to that? Um, and this also has to do with the fact that for me, any, no other way of thinking or because of my ignorance of that literature of treating conflict in war the same as conflict within a state or within a civil conflict, you know, against a or, you know, war between states. In the end, from this perspective, empirical perspective can be understood with a similar lens, with the same bullets. But, you know, absolutely no, that’s completely different because war doesn’t happen within a state and that’s security issues or is between these nations. And that that has consequences for how to understand peace and how to build peace and if it’s needed and what authority or otherwise they both. So yeah.

Chris Blattman: Hobbes wrote Leviathan after experiencing from the English Civil War. It was very friends of mine that said my understanding I might be wrong, I’m not a theorist. What he calls war, he doesn’t actually mean fighting, right? That’s inclusive, but he actually means the sort of tense posturing, the sort of hostility that’s like the natural state of humankind. And fighting is not necessarily so there’s not so much inconsistency in that sense between what I’m arguing. But certainly, um. And then so the question is then how do you have within that? How do you have more, more in the sense of hostile posturing and less violent fighting? And I think of both the leviathan, the overarching ruler was like his idea of what he was he was pushing. And so how would we do that in a rules based international order? So I’m not a scholar of international order, international law. And I’m only learning that. So where do I. What do I see? Let me give you the example of the international order in managing a world where you have 400 in the analogy and the way in which I think these ideas operate at different levels is really, really important. And of course, like the criminal groups and nations are super different. But I think we can learn a lot from seeing what they have in common sometimes. So for ten years, there are 400 street gangs and maybe 17 higher-level mafia-like organizations, the city, 12,000 armed, mostly young men. And the homicide rate currently is about a third of that in Chicago. They’ve managed to establish or appease the court to seal the back of Washington for a decade. And it took them a long time. There have been repeated bouts of war and when managing goes to war, it becomes the most violent place on the planet, literally. Homicide rates in the 1990s reached 400 per 100,000, which is about ten times that of the most violent American cities right now in multiples of civil wars. Okay. How did they do it? They built they’ve constructed all sorts of norms. Right. So, for example, early on, they tried to put the higher-level mafia-like organizations helping Arizona and the combos tried to establish a set of norms that they would follow and then try to force enforce through essentially neutral sanctions. One of those norms was we’re not going if every person has a bunch of affiliated combos. We’re not going to steal your cause. We’re going to create a norm. But you don’t steal another because that just creates. Not only does it create like a lot of unstable shifting coalitions, right? Which can create lots of weird, interesting dynamics that can be strategic or just sort of destabilizes any prior agreement. Interestingly, like the oldest peace agreement, one of the oldest peace agreements we know of the 30 years peace that tried to avert the Peloponnesian War between Athens and Sparta, that was like rule number one in there, which was, we’re not going to steal each other city states. Okay. So there’s some basic principles, like we’re going to try to maintain stable coalitions because it’s easier for stable coalitions to bargain than for unstable coalitions. Or they tried to instill norms of you’re not allowed to kill somebody without asking permission. You have to kill somebody because you have to kill people a lot of the time. But you have to ask permission at least through your side of all right. So they do that. They also establish what in international relations they would call hegemonic alliances, meaning the result would have a bunch of combos underneath it in that stable coalition and the person with direct the political activities of the combo so that they can negotiate on their behalf. Right. In international relations, we have had the moderate alliance with the United States of the Americas. We have another hegemonic alliance such as China. We have a hegemonic alliance in Russia. We have had a hegemonic alliance in the European Union. And that’s a much more that’s much easier to find stable bargain than oh, and then 200 allied countries just like this, it’s easier to find stability than 400. So I could go on and on. But they’ve constructed a bunch of formal and informal rules and institutions and norms that have made it easier to look to basic and constructive sanctions regimes and the targeted sanctions regimes. And, and. Peacekeepers and all sort of analogs to all the tools we use. They have mediators. All right. And the government facilitates this. All right. So when a war started to break out in 2019. All the leaders are in jail, by the way. This is useful because it means they’re on the same cellblock to put them in the same cellblocks. And they can be useful for peace. Useful for making them less powerful. Useful for peace. Because they can negotiate really easily and they can make long-term commitments to one another that they trust more. Because you can go across the hallway and at least talk about it or, you know, will some consequences. But when war was breaking out, the government transferred all of the leaders on the same day by coincidence, and they all ended up in the same building. But because they’re scattered across different prisons, there’s so many of them. And they all live in the same holding block. And then they arrest a mediator, sort of the equivalent of, like, Jonathan Powell or something of the criminal world. And he accidentally gets sent to the same holding cell. And a week later, the homicide rate is back down to its normal level. And they have a new you know, they’ve reinforced the convention center. So there’s lots of little things that are on the market to establish peace in a super fragile and imperfect, just like our international institutions are. And so that’s kind of like the. Piecemeal engineering? I think so. Trying to construct these things. And it’s better, frankly, it’s easier when it isn’t international.

José Morales-Arilla: In the context of piecemeal interventions. Something that I found supremely interesting in the book is the bringing psychology and this idea of therapy and actually a, you know, prevent the worst tendencies … and actually a lower participation. And I think that this seems like especially relevant in post-conflict settings where you have, you know, large amount of young, otherwise unskilled males that became really good at one thing. Right. And then how do you prevent them from exploiting that economic opportunity to rekindle conflict? And so so I was wondering if you could talk about what the book discusses on these things but also like what your research says on these things say on post-conflict settings have a transitional policies and also like the cycle of the psychological interventions to moderate the sentences.

Chris Blattman: Yeah. So, so some of my own work has been in West Africa and now Chicago. And this very micro-level. So I don’t usually operate at the level of Ukraine and Russia. Very, very micro-level. How do you stop? Smaller groups are fighting and how do you stop individuals from fighting? And one thing that seems to be very effective. It’s one of many tools, cognitive therapy, which is doing two things. One, it’s, I think, helping people reduce their misperceptions. Certain types of misperceptions, automatic misperceptions are slowing down the thinking, making sure mistakes. And it’s also helping people transition to social identities that with their existing norms of nonviolence, you don’t have to create norms of nonviolence. That’s super hard. You harness the fact that they exist as sort of chimps. We will adopt the but we will just sort of inherently sort of strive towards whatever is valued in our group. And if you just get them to think they belong to this group, then the idea is that people will change their behavior to conform to the forms better. And what kind of behavioral therapy is what we do that. Now, the implications are not that far. Vladimir Putin probably does need cognitive behavioral therapy. Most of us can benefit from this. But that’s not the international relations or the broader insight. The broader insight is what is this a microcosm? This is a microcosm of the fact that our misperceptions we do have a capacity for misperceptions, not only as individuals and groups, as we have slightly different misperceptions and groups that make us think as individuals. But the fact is, is that. Organizational rules and structures and institutionalized rules and norms, I think, are the way that. The human societies have successfully. Minimized or reduced our capacity for misperceptions and curb decision making and norms help enforce certain behaviors or sometimes for the opposite, but norms can shape them. And so I think that’s the insight we get that’s sort of common across all these things. And so so I, I tried to illustrate some of the commonalities, and it’s not a book about individual violence, but I sometimes use that because we have a lot of evidence at the individual level of how to solve misperceptions. And we have really limited evidence at the group level. So it’s almost like we have to try to learn something about the groups by taking what we know about individuals and extrapolating with causal.

José Morales-Arilla: We have a great question from the Zoom audience. And so what you mentioned about the social leaders in Colombia as the flagship or the commencement program is very interesting and provoking when implementing based on possible future agreements or subjugation loss. But at what level does coordination fail? We are seeing the Colombian government within the military and paramilitary results allegedly behind left based on environmental resignation.

Chris Blattman: So I think that’s a great yeah, we’re definitely getting to like that. But if the book is like 101, actually the book is 201, and then this is like a 301 question. One of my favorite books, there’s a political scientist at Northwestern, Wendy Pearlman, who actually my favorite book of all-time, she has written a book about Syria, which is just the dialog that she received from her, the graphic interviews, and just to write it, it’s just structured beautifully. But a really deep book, her first book is about Palestine. And it’s fundamentally about splinter groups and the difficulties of holding together a stable coalition and how that is inherently a persistent source of violence. And I see this as a little bit of a commitment problem and a little bit of the principal age problem, the unchecked leaders. Right. It’s sort of an amalgam of these things. And it says that. Two unified groups have a very easy time of very, very clear incentives to not fight. But if one or both of those groups has fragmentary groups with private interests, whether they’re any logical or material keeping the fight going, this could be people who make their money to warlords and they make their money through fighting. Or they could be any illogically committed to sticking it to the other side. Or they could think they can seize power in this group by sort of exploiting certain popular sentiments. Right. So you can see this on both sides of the coming public, see this on both sides of the conflict between Israelis and Palestinians. That’s much less stable. And what she traces out, I think, really persuasively is that she says, well, actually, this is a 100-year dispute. It’s only been extremely violent in maybe a fifth or fewer of those years. So it comports with this idea that most of the time we don’t fight. We don’t. Of course, we focus on all the fighting, but mostly it’s a negative piece and that it’s like low-skill violence. It’s not actually the actual worst in very brief, but maybe two weeks long. And what she traces is maybe from 2000, 2015, which is the most violent period of this hundred years, and she traces that to this fragmentation of control on one side or the other. She’s mostly focused on the Palestinian side and how that undermines the basic incentives for peace. I think that that is that’s a big risk and in political science we talk with those spoiler problems and splinter groups and this is like a fundamental and it’s this basic problem of unstable coalitions. It’s really hard to avoid.

José Morales-Arilla: There are these calls that I have seen in some of these contexts like and you know the leader will retreat and in the ways that you know heroes in so many of these conflicts I saw one where the ones that were put in a position of authority by a group and now they’re following this convention by betraying the reasons that they put you there. So and that maybe that opens that room for others like below to build, to challenge or position that leadership in that authority position. So it’s like bringing a stable of a reforming leader that wants to find a compromise whenever what I would say is such that reaching to the authority level what based off together is like actually challenging the other side or.

Chris Blattman: So it’s even worse than that. Okay. For the following. So let’s think about this current conflict consideration. But you could, you can imagine this happening. Any number of conflicts on each side, Zelensky and Putin, has incentives to infuriate their own coalition. And make them so livid and outraged at what the other side is doing that they refuse to compromise. All right. Now, partly this is a way to get people to fight. It’s a way to sort of strengthen your bargaining power views of your adversary. Because ideological rewards for fighting are cheaper than material rewards to pay them as much. But what it also does is this is part of the cost of working in this bargaining space between the two sides, where both sides for something within that bargaining means to fighting. But there’s a whole set of those bargains are unfavorable to you. If you can make people willing to fight just to stick it to another person or so outraged, I will never reward Russia. I will not give them one inch of territory. Because otherwise it’s just on principle. I only encourage people to talk just out of principle. I’ve been convinced that if you foster that, then you can go as Zelensky at the negotiating table, which eventually may happen and say, Look. What can I do? Well, we could agree on this, but on the original never happened. They’ll still overthrow. It’s a way to tie your hands. So it’s actually a strategy. And it’s one that is used at every level. Ethnic groups, civil wars, international wars. And both sides often do it. And the side that’s most effective at it often gets the better deal. Right? And not only because they set off all sorts of bargains, but because it strengthens their military capabilities. In the West, both sides overshoot the mark. And there’s zero room for compromise that anybody would accept. And I think some of the most intractable conflicts in the world, like Israel, Palestine and maybe Ukraine, Russia, have reached a space where for any logical, justifiable reason, they could all be totally reasonable. I’m outraged. They’ve eliminated the space where they will actually bargain because some compromises are to abort. That’s a psychological explanation for conflict that I don’t think we’ve explored enough as a profession. And I think it’s so important for these intractable conflicts and it’s such a psychological explanation that’s strategic in the sense that we have as leaders incentives to create it.

Attendee: I had a question. So. Because from what I understand, the, you know, they talk a lot about how this is a violent conflict has gone down a lot. Right. And they link a lot of this to the rise in democracy. So I’m wondering, because there is a lot of, I guess, backstepping, I don’t know how to put that. There’s a lot of where there used to be Democratic gains, there is kind of a loss at the moment. Do you say anything about that and that like how that’s connected to conflict also? Because when you look at like the great powers in history, you know, you talk about the text Britannica. There is a lot of challenge to the US as the hegemonic power. Right. And that has a lot to do with the Russian conflict as well. I just wondered if you had any insights about that.

Chris Blattman: I didn’t understand the second question.

Attendee: When you talk about great powers in international affairs, right, the United Kingdom and then the long peace of the UK. Right. And then now you have the US as supposedly the hedge on winning power in the world and what with the US kind of reneging on a lot of international fora and you have non-US powers trying to kind of challenge that. Do you think that that would be more conducive to conflict.

Chris Blattman: I mean, so in some ways I think the two answers are linked. Where violence is clearly headed to go down over time is within societies and especially within societies where there is a leviathan, but maybe not just a leviathan state and order, but as you say. More.. I would say Democrat in the sense would be more check and balance. Elections may be important, but check and balance societies are stronger. States have managed to drastically reduce violence within their borders. And then the Pax Americana or the Pax …. You know, but probably you know. But there’s been lots of empires, history, not all the facts. The world, Mongolia was not particularly peaceful, but they act a little bit like that. But then their sphere of influence. They tend to occur. They create order. It’s not necessarily just. But. But they do so. Then there’s violence between these societies, whether it’s these empires or between nations or between political factions within a nation. And that has not clearly declined over time. We actually have more civil wars technically right now, I think, than we ever had in recorded data, even the 1990s. On the other hand, almost all these wars are small insurgencies, so they’re not particularly violent. So but it’s just it’s not really clear that that violence is declining. I do think, though, that in this age, when we have more rules-based orders of which states are and when we have more checks and balances. I think we tend to have more peace about like an automatic recipe. And so that is why I think you’ve seen a trend towards fewer conflicts within these more balanced, strong state societies. And why, if we do have more checks and balances in the world and we do have, I think, stronger institutions, even informal ones. That’s why I think even if we have many conflicts, they tend to be low-scale. And then what does it mean to have a much more multipolar world and a weakening of super hard to predict? I mean, I think I think I think to the extent. Except it leads to less of like more checks and balances. And I think and the minute where the main players are checked and balance, I think it’s fair to say what fortunately the other two of the four big gorillas on the globe are not particularly checked and balanced, and they’ve been doing the opposite direction. Russia has personalized. And Xi Jinping tried to do the same in China. And that to me the personalization of power. China is the most worrisome thing on the planet. And we don’t talk about it.

José Morales-Arilla: We’ll have time for one more question.

Attendee: Hello. And thank you for your talk. I’m making my way thru your book. I’m curious about two points you make in the book and you brought up today. One is you talked about how peace doesn’t always necessitate justice. And the second point I think you make about negative peace, right, that we can go through years of brinksmanship and sort of other forms of other activities that are not exactly physical violence, but might be some other ways of showing your strength and such. But I mean, one might say that societies that grew up in such prolonged brinksmanship are also maybe not as doing as important, but they’re also suffering through a lot of negative consequences of groups that are systematically oppressed to nonphysical violence, stripping away of rights and human rights. So my questions are 1) Do you see if there’s a way to have justice and peace, both of them? And second, you know, war isn’t always just physical violence that breaks out ultimately with guns and cannons. But what about the violence that may not be as visible?

Chris Blattman: Yes. I saw the first half of the book is about negative peace, even if I didn’t use that jargon. And it’s about. How are we going to lose that negative peace and get the violence because of these psychological and strategic failures? And then the second half of the book, I don’t call it The Path to Peace, is about how you create a more positive peace, which is the jargon people use for this. We’re united in this brinksmanship where there’s basically lots of padding around you, where you don’t actually want to go to war. You’ve got this sort of brotherhood and sisterhood and harmony, which is the other way we think of peace. Right? And I try to sort of talk about what have society’s done over the long run a micro-scale microscale to build that installation. And so we talk about this not just economic interdependence with social interdependence, but also, I think cultural maybe logical interdependence. So us just the idea of human rights and that idea which would have to be created and promulgated and picked up is the fact that I, you know, some person on the other side of the planet, I actually give a whip for their well-being, especially if my government invades that that’s should be inherently pacifying, because now I’m internalizing the cost to the other group, which I don’t even need to get to. So there’s that there as well. What I think this was an enforcement of rules-based orders. There are checks and balances. And then I talk about some of the intervention. So so it’s by of sort of saying how what are the common threads? And that’s you know, it’s an incomplete list of ways that societies have achieved this. But to me, they were maybe the most important and the book was already too long. So a limited list. But basically, part two is like the possibilities.

José Morales-Arilla: Well, while we could stay hours discussing we’re out of time, so join me in giving our speaker a round of applause. Thank you..

Closing Regional Economic Divides

The Growth Lab Research Seminar series is a weekly seminar that brings together researchers from across the academic spectrum who share an interest in growth and development.

In this talk, Gordon Hanson, Peter Wertheim Professor in Urban Policy at Harvard Kennedy School, discusses his research on how to help lagging regions create better jobs for disadvantaged workers. Traditional industrial regions have fallen behind economically across high-income countries due to globalization, new technology, and now the energy transition. Hanson believes new approaches are needed to diagnose the causes of persistent regional economic distress and the effectiveness of alternative policies in relieving this distress.

Transcript (Part I)

DISCLAIMER: This webinar transcript was loosely edited and there may be inaccuracies. 

Gordon Hanson: And what we’re trying to understand is how we improve market mechanisms to develop better quality jobs in the global economy, with a focus in particular on those without a college education for whom the last 40 years have been very tough. Within that broader set of aims. We have a specific interest in places that have fallen on hard times the deindustrialization of high-income countries. Now, the beginnings of the industrialization in emerging economies has created pockets of regional distress, which are surprisingly long-lasting. So I’m going to talk to you about is a bit of our conceptual approach to thinking about how we go about policy design in this context and then tell you about what we know and don’t know about the effectiveness of a place-based policies in dealing with these issues. And then give you our plan of action and kind of tell you where we are in the scheme of things. So this is I’m not trying to pitch a set of results to you today. I’m trying to pitch an approach. And as a consequence of that, that feedback I get from you is enormously valuable because we’re really in early stages. So there are many ways to motivate what we’re doing. My own frame revolves around what’s happened to local labor markets in the US over the past three decades. And what we’ve seen is the entrenchment of joblessness. By which I mean low employment to population ratios that fall as a consequence of some shock. So my own work, I’ve studied the China trade shock and its impact on fracturing employment and how that has then translated into the absence of lot of employment creation in different places. But there’s a growing list of things that are responsible for regional economic distress. Manufacturing decline in general, which began way before the most recent wave of globalization picked ups, picked up steam, was important. If you think about you look around New England and we have cities like Lawrence and Lowell and Holyoke and Springfield, all of which lost manufacturing jobs after 1960 and had a very hard time bouncing back. You go to New Bedford today, which at one point was one of the richest cities. World Center whaling industry then was able to transition into textile and footwear production. Today, outside of a small tourist pocket near the port is a place that is where joblessness and despair have been present for a couple of decades. Technological change matters here. And now we have the ongoing energy transition. Now, this energy transition isn’t a new thing. Decarbonization is accelerating. But the movement away from coal began a couple of decades ago. And that wasn’t a movement of towards coal, towards non-fossil fuel-based industry, but just a move towards new forms of fossil fuels, natural gas in particular. So if we add up all of these shocks and then look at the regions that have been affected by what we see and hear is I’m showing you in dark blue are places where we saw substantial declines in the employment to population ratio since 1990. Now, why do I focus on this one particular measure? The employment to population ratio is the as close as you can get to a summary statistics on the economic health of a place. So you think about any economic model that tells us about labor supply, labor supply as a function of the real wage that workers can command in the marketplace if that real and real wages are difficult to measure. We can see nominal earnings, but there’s all sorts of issues with unobserved characteristics of people. We can see some local prices on a lot of local prices. We can’t. So detecting real wages with a great deal of precision is tough. But if real wages are low, people will work. And so that’s where the employment-population ratio comes in. A very simple indicator. Now it’s all the more powerful in the US context because it’s variation across place is enormous and the changes in the employment to population ratio have been large over the past few decades. And so that is a signal of a reduction in labor demand that hasn’t been followed by the successful transition of workers into new lines of activity. And that’s the core one of the core policy challenges we want to address.

Attendee :Why do you focus or start at 1990?

Gordon Hanson: As I’ll talk about we’re going to go way back. The story starts in 1910, 1910. We kind of industrialization is not quite complete in the U.S. North. And our focus just isn’t just on U.S. health. We’ve been stories from other countries as well. And there the timing really matters. So industrialization in the U.S., North Qatar really takes off in the late 1800s, keeps going at a steady pace during the first half of the 20th century. You get to 1960, and that’s when manufacturing starts to decline. And lots of high-income countries as a share of employment, not not in terms of as a share of GDP, but the share of employment. And so part of the story that we’re going to be looking at is how did northern cities adjust to the exodus of manufacturing jobs from 1960 to 1994? The time the shock happened before 1980, before skill, bias, technological change was a thing. We know that places that were specialized in manufacturing in 1960 had a bad couple of decades after that. We actually don’t know a lot about the nature of labor market adjustment, those shocks, pre-1990 shocks. One of the things we want to try and understand is are there some useful lessons about successful adjustment to some of those older shocks that we might be able to apply today? So we’re going to take as our first set of analyzes, we’ll take as a laboratory that us local labor markets going back over the past hundred years and understanding the decline of manufacturing and traditional energy jobs and some other traditional industrial jobs on local economies and how they adjusted and what were the things that made adjustment more successful? So there we just list a few of the shocks that people have studied. And in this work and my past work, I’ve been very interested in specific types of shock and specific types of shocks for the purposes of identification. You want to know that you’ve got an exaggerated source of variation in labor demand so that you can then study what happens or kind of we know all of that now. And so if you just use a simple Arctic measure of the projected decline in manufacturing employment for a case, what you see is we and we know this work from on from Erwin Charles Eric Herson and Schwartz that you know the broader declines in manufacturing really mere kind of adjustment to the china shop. So it’s about the loss of good jobs for people without a college education. So painful. So the sets of economic ills that come out of this include, one, what could be a spatial misallocation of resources. We’ve got people stuck in places with low employment rates and other people thriving in places with high employment rates. So Boston versus Holyoke. Holyoke and Boston aren’t that far apart. Are there barriers to the movements of capital or labor or technology between those two places, entrepreneurial talent between those places? And if those barriers exist, then we’ve got a source of inefficiency. Then we’ve got some endogenous processes at work with agglomeration of forces having been ever present since humans discovered that cities were a good thing. But those agglomeration of forces really seems to have changed in the eighties and nineties and are now really anchored in the concentration of highly educated workers. And that’s both due to sets of spillovers on the production side traditional, more salient externalities that seem to be a little more a little more steelworker centric. But also on the consumption side, when you gather lots of bright young people together, they then generate demand for the urban amenities that attract other bright young people to come there. The with if we then get this separation, you get the entrenchment of different of in spatial inequality. And as we have learned, that has real political consequences. The rise of support for populist nationalist politicians in the US, in France, Germany, UK is concentrated in places where we’ve seen greater of manufacturing jobs lost. This then rolls over into a whole bunch of attendant social consequences. So the work of anarchism echoes even about deaths of despair, manufacturing job loss and job loss and coal and other things isn’t the only thing responsible for those deaths of despair, but it contributes to it. And we’ve got a growing body of work that shows that. So what do we do in the face of all of these issues? One is do kind of what we’re doing now. And that is just let market forces work and market forces will do their thing. It takes a long time. So think about Pittsburgh and the loss of upscale manufacturing, which started really began in the 1960s and pickup picked up a pace in the 1970s. Pittsburgh has come back. It’s come back at about 60% of its former size. It’s come back with a very different composition of people. And it’s come back like after 2000. They have like a good 30 years of time in the doldrums. And one of our concerns about that whole generation of kids that are raised in that environment, and that means loss of economic opportunity for them. So then when it comes to policy, the traditional approach is to treat people and not places. And how do we treat people? We can treat people either by conditioning on their labor market status at a given moment in time. Are you unemployed? And then we might condition that nature of that aid on labor market conditions. And the way this works in the U.S. is pretty stingy unemployment insurance that gets generous when the national economy is in recession. Other economies handle this quite differently, and Britain is a little bit more generous than you ask, but kind of the same story. Denmark takes a very different approach in terms of in terms of what we do about the unemployed. The challenge with the way we’ve dealt with unemployment is that we tune generosity to what’s happening to the national labor market. A lot of this manufacturing job loss has happened off cycle. It’s happened actually during periods when the national economy is expanding. And so what you have is there is a lack of generosity, of short duration, of benefits in just not doing much on the ground to help folks. We also have means tested entitlement programs. And so that includes Medicaid. So you get some access to subsidized health care, includes negative income taxes. The earned income tax credit in the United States includes food stamps. The there are two challenges with these programs in terms of addressing areas in economic distress in practice. One issue is that we’ve simply dismantled a lot of these programs, starting with welfare reform in 1986, and we devolve lots of autonomy to states in terms of their design and their generosity. And the states that chose to be less generous happened to be the states where this job loss, the postwar problems, particular reconstitute. The second challenge is that there’s a running conflict in U.S. social policy in terms of is it about helping people in poverty, which those in the left advocate? Or is it about helping families, children, which those on the right advocate? The confluence of those two forces creates a system that heavily conditions aid in practice, having kids in the household in an environment where job loss is endemic and male employment rates in particular have fallen. Men become less attractive marriage partners. So we’ve seen an increase in single headedness over this time period, overwhelmingly dominated by women being at home, women living with their kids. And what that has meant is that men who have suffered negative shocks have access to pretty paltry policies in terms of allowing themselves to adjust. So whatever we think about the effectiveness of treating people in theory, in practice, we haven’t done a lot. Now the other approach is to treat regions. And there’s and I’ll talk a little about kind of what we know about the pitfalls of place based policies. And here though, and whereas the former is trying to help workers move to jobs, the second is helping new jobs to workers. And here, you know, you all know this well in the growth lab. You’ve got your Wyoming project up and running. There’s lots of experimentation happening on the ground. That’s what this project is about.

Muhammed Yildirim, Growth Lab Research Director: So there’s a question from Zoom. Can you repeat the trend when programing power transfers from federal to states? What happened?

Gordon Hanson: So in 1996, Bill Clinton promised to end welfare as we know it in the United States. And he did. You did a really good job in fulfilling that promise. So what that meant was that the federal government would continue to support certain federal programs, but there were new sets of conditions. One was a five-year lifetime limit on certain sorts of aid and pretty much all the cash based. So direct income support to low-income families was capped at five years. The second thing that happened was saying, we’re not going to tell states how to administer the state. We’re going to give them a block grant and then they can decide. And the block grants will go for food stamps or the block grants will go for temporary assistance to needy families, or the block grants will go to Medicaid. And then states can decide what they want to do. They can add money or it cannot add money. And so you now had an environment in which states had more autonomy over how much they added on. And there was a sharp variation across states in how much they did. This gets at a long-running tension in the U.S. over social policy with states in the U.S. in order to be more generous, states in the South be less generous. States in the West kind of somewhere between the two parts of the U.S. West, we have rugged individualism at work and little government support. And then we have California, which is taking kind of Bulgaria in 1957 as a model for economic policy. And so after 1996, what happened then was, in effect, a reduction in the overall level of federal support for poor social welfare programs, but also a lot of regional unevenness based on up based on other choices that state states were making. So this project, a big part of this project, is understanding the experimentation that’s happening at the local level with the federal government doing much less. And now states and localities left to us to figure stuff out. So how do we justify place-based policies?

Attendee Very good question on this. You seem to take as a given low geographic labor mobility. What’s the reason for that? Because you could think of the fourth pillar, which would be let’s move people. Is that the next slide?

Gordon Hanson: This is a slide, for example, perfect time. So you know that the reason we kind of missed all of this, the reason we didn’t think that globalization and technological change and the energy transition were going to create pockets of distress is that we thought of the U.S. economy particular as being highly geographically. And it was up until 1980. But that wasn’t what you could think we should think of as steady state mobility. It was mobility that was occurring during a period in which the West was still completing its transition to a spatial, steady state. It’s not that there was still substantial rural to urban migration going on, although there was a bit it was the U.S. is spilling out of the West and the U.S. is filling out California, Texas and Florida. And that meant there’s very strong labor demand and that helped grease the wheels for economies that were subject to shocks in that time period. So Kyle Magnum at the Philadelphia Fed has a really good, good work helping us understand how we miss, infer the nature of geographic labor mobility before 1980, 1990, because we look at that as a steady state phenomenon. It was part of a transition. So then you get after 1990 and what we’ve seen as kind of in the last four years, the steady decline in mobility. So there are two ways to understand that. And we’re not really sure what mix of the two gives us a false representation. One is that there are fixed cost to moving. There’s uncertainty. There is the absence of social insurance making reliance on family and also for child care. We’ve got now mom and dad not living together and leaving relatives around to take care of the kids or yourself when you’re sick. We’ve got all of these imperfections which mean that there’s stuff that we don’t. As your attachment to place get stronger in that environment. What we have is a disequilibrium in some sense in which we have differences in real earnings across place. There’s another view that comes along and says, well, if you add this and recall, Moretti has been writing about this on its own and then recently with Rebecca Wyman say, Well, if you actually look at variation and housing crises, prices are across place. That variation is huge. So when you look at actual differences in real earnings, it may not be that big what’s happening then? But that doesn’t mean that intervention isn’t justified. Intervention could still be justified because what we have at work behind that separation is a set of spillovers which lead to overconcentration of innovation and high skilled workers in India and superstar cities. Know one more second. So you then have that which story is matters? Because what do we want to do? Do we want to move workers out of distressed labor markets, or do we want to move skilled workers in? And there’s a set of there’s a set of theoretical papers, one paper by Cecile Guevarra and Pablo Obama, another paper by Adrian, all of which they kind of have have complementary but distinct frameworks about the nature of the externality at work. And getting it right matters. Because do we treat workers? We treat firms in new places. And we don’t we don’t really.

Attendee: Although I was also going to ask in the the sixties and seventies one, we assumed that maybe movement was the norm, but maybe it was just kind of part of the process. Also, that’s when a lot of the Reagan era immigration kind of flooded certain pockets of places. So how did some of that lead to this inequality entrenchment that you also mentioned before?

Gordon Hanson: Yeah, so that the large scale immigration so immigration kind of reaches its peak as a share of the US population in 1910 at 15% foreign born, childless population and then declines until 1970. And so in 1977, five years then changes in U.S. immigration policy and then shifts in what’s happening in Mexico and the incentive to migrate to the United States. That leads to the most recent U.S. immigration waves, which peaked 15 years ago. I know we’ve got a lot going on in the border right now, but immigration a lot. And so it’s that kind of 1965 to 2005 period where that big immigration we passed, much of it happened in the nineties. As you passed in terms of the quantity, the rate of growth was really fast in the eighties, but the big numbers happened in the nineties in 2000 that may have impeded the mobility of that of U.S. foreign workers in terms of moving to places to take advantage of those jobs. As newly arrived immigrants we know this has are a lot more responsive to variation in economic opportunities so that layers on upon.

Muhammed Yildirim: You have two questions from Zoom. So one question is related to the decline of property values. So do you think that this about kind of property values in the declining community? So the property values go down about the fact because of the wealth effect, it might be harder for them to move, but that the declining property values affect a significant portion of the lack of mobility in these communities.

Gordon Hanson: So that the there’s something where you look at and just as a methodological point, we think of it as hard to study changes in housing prices over time because there’s so much variation. And it’s not just what gets sold at any moment in time. In practice, as is often the case in economics and economics, our obsession with selection facts is over overdone. And if you look at changes in housing prices that you get from taking data from the U.S. Census and simply adjusting for number of rooms, age at which something was built and the observable things that changes and property values you get out of that series, out of the high-quality resales. We only have a couple decades super, super high. So going backwards in time, we can then tell you something about what all of this looks. Property prices decline, a number of things happen. One is it helps offset the decline in multiplexes. And so what that means is that disincentivizes moving. The other thing that happens is that it allows for a form of self-insurance. If you’re in a high-wage place and wages aren’t rising, you can then move to a low-wage place and you can kind of insulate yourself. So all of that means that the reasons for the housing price adjustment dampen labor mobility. Well, we have some other things going on too, which matter for the long run and matter for what we think about kind of the overall efficiency of the outcome. One is that now we’re we know that economic opportunity is highly place-based. And so if you think about what happens to the opportunities for the kids who grow up in these places, you know, one world we got access to, you know, it’s low wages, low housing prices. That means your tax base isn’t that great. Schools aren’t that good. That means that funding for regional public universities isn’t that good. And you kind of evolve into providing the services that we can or whatever tradeable stuff you can do for bigger, richer places. So that’s. So there is even if it were efficient, we might be concerned from an equity perspective about the outcomes that result. But it may not be efficient in the presence of the spillovers. Get overconcentration in superstars or something else that goes on to your home. Equity is collateral that you use to start new firms. We know that most net job growth comes from new firms. And as an aside, not all firms a tiny number of new firms. So we create lots of new firms. Most of them take a few of them, but a few that don’t generate most of the job growth. A lot of those new firms rely on home equity for collateral to get loans to do the work by Davis and Haltiwanger. Building on the larger earlier literature shows that that decline of property values reduces investments in new firm creation and that impedes adjustment. And what that means is you can then that reinforces this separation of what’s happening in and low wage, low house price, distressed places and other places there. And that is indicative barriers to the mobility of capital, which is another source of inefficiency. One of the things we’re doing in the project, so we’ve got data on the presence of U.S. banks at a very local level going back about 30 years. And I know we’ve seen some great work in getting a person saying you get this great presentation on concentration of local banking. If you’re a couple of weeks ago, the we’re looking at something in parallel. You got a bunch of local labor markets in which a single bank accounts for 70, 80% of deposits. Now, they may or may not exercise market power on the lending side, but if those banks get whacked on their balance sheets by what’s happening somewhere else, you’re then interrupting, interrupting the availability of capital in a place that really needs it to start in firms. And so what we then what we then see here to take all of this is, which is lots of sources of inefficiency due to underappreciated barriers of mobility of labor and problem, age old problems of investments of capital, some perhaps surprising imperfections in the nature of capital markets and our standard well known imperfections that come from the presence of these extra notes. So that creates the potential for place based policies to do something good. The potential, as I’m getting it right, is a whole nother story. Okay. So we know that when it comes to looking at place picks, policies we have, there are certainly examples of failure which we can focus a bit more on. There are also examples of success. So the Tennessee Valley Valley Authority was created in the 1930s in the US in order to improve the economic livelihood of Appalachian. So this is a part of the US that was remote, had limited roads and highways and electrical generating facilities, and you had entrenched, entrenched poverty. So Tennessee Valley Authority actually lasted for over half a century. Most of what it did was in about a 20 year period and built roads and canals and power plants and schools and connected Appalachia to the rest of the world. And that allowed industry to move in. So it allowed the region to transition out of agriculture into manufacturing at a moment in time when agriculture was releasing lots of labor. So that release of labor from agriculture from 1910 to 1960 was just mind blowing. And it’s this labor supply bonus. But if you don’t have roads or power, that labor supply bonus does happen. So what? Cline and her show in a 2014 paper in the Quarterly Journal of Economics is that this did promote all of this great industrialization in the aggregate. It’s not clear it improved national welfare for the U.S. overall, because we kind of just moved from one tradeable activity to another tradeable activity. It didn’t hurt, however, that if you if you want to play, if you care about inequality at all, there’s no way this wasn’t a really good thing. So we have to decide as a society what pereda ways we place on income people according to their well-being. Appalachian was really, really poor, so that’s an example of success in my book because even if even though the national efficiency outcomes are unclear on the equity side, this one doesn’t just seems really easy to justify. Then we have, you know, the development of practice and workforce development over the last three decades, a story which hasn’t been kind of fully told. But what we now have is is kind of well-recognized best practice. And that best practice sometimes called active labor market programs, sometimes federal labor market programs in which you identify workers in need. So this can be youth and underserved communities, could be the long run unemployed. And you do two things. First, you look at local employers in your place and you and you work with them and say, what type of workers do you want to hire? What skills do you want them to have? And sometimes this happens through community colleges. Sometimes this happens through bespoke training programs. Sometimes it happens through private training institutes. And you provide those skills. And what’s important here is to actually to really work with employers. So the Industrial Areas Foundation, which was started by Saul Alinsky, achieved fame for being by creating the community organizing framework that President Obama was a part of when he was a young person and he was maligned for being a community organizer. One of the things that the Industrial Areas Foundation has grown into is is building workforce development in communities with lots of low income workers, mostly in the south and the Southwest. And they have been using that developing this program of the past over the course of 30 years. Our Nestor Cortez, one of the co-founders of this operation, was a MacArthur Genius Award winner in the nineties, received a prize from the Kennedy School 1988. I think it’s kind of know what was the right thing to do for a long time. Larry Katz has a brand new paper with a team of coauthors here at Harvard, in which he looks at some of the programs implemented by the Industrial Areas Foundation, Project Quest, and also for other programs, all of which were subject to authorities. The other thing that these programs do is to provide wraparound services. That means you, you, you, you encounter workers and find out what’s going on. You assess their skills. You have to have some amount of screening. Employers will do. Employers are deeply skeptical of workforce development because they feel like you’re peddling these workers and not listening to what might. So you have screening and that means drug tests and pretty low level street drug tests and kind of basic test stuff. And then you provide career counseling. How do workers think about their future career counseling? We know from many different teams, including what I call a colostomy in Italy right now. Super important. And then you provide advice about how do you show up to work? What are the workforce habits? How you think about your career going forward? How do you think about advancing in your career? As problems come up on the job? How do you how do you address those problems? And so the combination of those two things a targeted workforce, a targeted training, and these wraparound services are really effective. Some over the studies that Katz looks at that all look at you have increases in hourly wages of between 15 and 35% over two your time period. And they persist. But some of these programs we follow orders out five years you’re not seeing attention effects. David Card and coauthors have just redone a meta analysis of sexual labor market programs. They look at 210 programs across 30 countries because they’re looking at so many programs, they have to look at a narrower set of outcomes. They’re looking at the changes in employment rates. And what they find is that these sorts of active labor market programs work the things that don’t work. The biggest thing that doesn’t work are public sector employment programs. And what you just pay people who have a job and those do not work. Here’s something I just learned that I had knowing that the U.S. in the 1970s is the U.S. has had workforce development programs through government legislation since 1963. And each decade, you get kind of a new piece of major legislation, which puts a new kind of paradigm in place, current paradigm, which really established under Bill Clinton. And then it was modified by Barack Obama in 2014. But it was kind of consistent with this framework. There are issues with it, which I’ll talk about a second. But in the 1970s, the workforce itself in the U.S. was primarily subsidies for workers to have public sector jobs U.S. and that’s where 60% of the planning for workforce development went in 1978, or 755,000 U.S. workers on subsidized employment in the public sector pay for personnel. So that part, the practice here, has evolved dramatically over time. The problem today with the way the U.S. does workforce development, it’s not like Denmark does it. And Mark, you lose your job, you get generous unemployment insurance and you get into what is, in effect, a national active labor market program. Right. And so Denmark, even though it’s much greater generosity, you see no higher you see no increased incidence of not employment associated with that generosity. The U.S. in kind of typical U.S. action, fashion, devolves a lot of autonomy to states. So states get money and then and those go to workforce development boards. 650 of U.S. and they give out vouchers to workers. Some of these workforce development boards are built into colleges. They’re responsive to what’s going on in the community. The great others are one or two person operations, which just are basically handing out vouchers. In other cases, these workforce development boards get captured by low-wage employers who say free training and sign us up and then that money gets. We do not have a good sense of how much of workforce development money goes into type one kind of best practice that this stuff how much goes into type to just you know being given out randomly and how much goes into type three, which is supporting your local monopsony? That’s something we’re going to try to address in more. So there’s also, you know, other there’s lots of anecdotal evidence about other things that might have worked. Let me talk about failures and failures. A fair number of failures on comes to place-based policy. One of the major pitfalls is that when done poorly, what happens is it’s just a transfer to landowners, that the policy gets kind of fully capitalized in the land values. And so taxpayers are providing money to landowners, and you aren’t really changing the process. So there’s a really good paper in AJ Applied Climate Policy that looks at Germany’s place-based policies along the border west, Germany’s place-based policies along the border with East Germany before reunification. I can get you conditioned on proximity to the border and they do a regression discontinuity design about me. Just inside. Just outside. What’s the primary difference between places? Differences in pattern and nothing else? Now, that was also, you know, that was a program which also might have been a dumb program. You weren’t conditioning on the right thing. You’re just conditioning on your longitude and latitude. You weren’t conditioning on local conditions. Another pitfall is that you put money in place and it just gets captured by special interests. And this could be. And so this is different than the first one. First one could be well-intentioned. Everyone’s doing the right thing. It’s just that market forces lead to that capitalization. The second one is a pernicious outcome in which local business says, Right, I’m going to put money on the table for place-based development. I’ve got the perfect project in mind for this to work by Kaitlyn Slattery at Columbia Business School, who’s going to be visiting here next year and on Star at Princeton. They have looked at using this approach developed by Greenstone Hornbeck and Moretti, where you look at two U.S. counties that were in the running for the plant. One wins, one doesn’t. And then what happens to aggregate economic outcomes? And they’re they’re kind of their canonical results are that when you subsidize investment in a particular industry, you get more that industry get a significant increase in employment in the sector. Subsequent impacts on aggregate employment in the locality are not. So you’re just replacing one thing for another. And impacts on land values or earnings appear to be low as well. Now, this doesn’t mean space policy doesn’t work because they could be dumb politics, they could be we could be investing not in distressed regions. We could be investing in richer labor markets, in poorer states. So there’s how you don’t take this as evidence that it doesn’t work, just that it can be done for. The other very cool result that Caitlyn has is when don’t when do tax breaks to firms locating in a place they peak in year two or three of the second term of a governor who’s incumbent and up for reelection. So you just see kind of the obvious political cycles. And then folks may know about Kansas City second quarter where the First World War happened during the Civil War. Second World War isn’t has as traumatic, but is is worthy of another call this time. So this is Kansas City in the United States, which as a metropolitan area straddles the borders of Kansas and Missouri between 1911 and 1999, 19 2019, the Kansas side of Kansas City said, We want to promote Kansas City, so we’re going to go recruit businesses who are the easiest businesses to recruit, the ones already in the city, just across the state border that’s going to Missouri. Look at these companies come back and then Missouri said, oh, no, no, we’re going to you’re going to be able to us we’re going to do it back to you. So between 1920 11 and 2019, there were there was about $335 million of tax subsidy spent by the two states just on getting firms to move back and forth across the country. So the definition of wasted spent so place based, we you want to find examples of place based policy gone awry. They’re easy to find, but there are examples in which it is done well. Aside from one of our cities with active labor force programs where you’re really talking about something that is. A strategy. It’s not a policy. It’s a strategy. You’re looking across different dimensions and saying, What do we want to be doing? Workforce development. What do we want to be doing in terms of helping local firms improve their capabilities? Which firms want to subsidize firms to which firms might need to provide some inducements not to leave? What sort of collective investment in infrastructure we need to make in order for this to happen? And an example that lots of people like to turn to is an organization called The Right Place in Grand Rapids, Michigan, where work at close who was hired to run this in the 1980s, showed up as a you know, as a pretty young professional. And at that moment in time to find Grand Rapids in utter disarray, just and had been suffering from a couple decades of manufacturing job loss and a place that had been a strong furniture manufacturing center for decades was now deep in the doldrums. A set of business leaders in the area came together and said, we need to do something. And what we need to do is find out how we improve the ecosystem here in Grand Rapids. That makes it attracted more business to invest. These what was one of the things that helped is that these 12 businesspeople had significant investments either and traded or traded stock in that locality. So what does that tell you? Well, they’re not multinationals or big, big companies. They just not care. They don’t you don’t have something invested in them. So the nature of the industry was there, which gave you business owners who internalized some of the local consequences of what had gone. And that might be but not a not a that might not be a necessary condition, but in some instances, a special point to get things going. So what did they do? So over the course of a couple of decades, they provided a set of coordinating activities which helped reduce uncertainty to bigger firms and help and help them understand what Grand Rapids was good at doing. They had to figure out what Grand Rapids was good at in the first place. This is something that Rodrik has talked about a lot in his work. How do you know? What do we know about industry? Industry is moving between places all the time. So when your industry leaves, what do you do next? It’s hard to figure out. So I don’t think picking winners in terms of subsidizing semiconductor firms think of Grand Rapids as being a traditional furniture manufacturer. Like, what do we do next? Furniture is an auto business to be here because it’s kind of like the lower end of it is like textiles. Here. You’re competing in the thinnest margins, lowest wage exporters globally. So they provided they helped firms figure out where you want to be, helped identify the infrastructure that they needed, help them manage the process of getting permissions. And then on the on the also on the coordination side, working with local public, regional public universities to make sure they were providing the right skills. So they helped expand the engineering offerings. And in local public universities, they helped firms in Grand Rapids identify export markets to which they can profit, in which they can profitably sell. And they convinced some multinational firms that Grand Rapids was a place for the best and because of its tradition, furniture. And then they also invested in some kind of public R&D. You don’t think of this as like saying we’re going to they were they figured out where innovation should go in in the furniture industry. It’s more that you create like it’s a form of technical assistance in which you’re providing consulting to businesses as they’re trying to figure out how they upgrade their operations technologically, digitally and so forth. So in developing country context, we’re totally on board with these sorts of the work that McLuhan and David McKenzie and others did with Indian textile firms ten years ago, in which you say you provide you provide McKinsey style management consulting to those manufacturers to stop long run improvements. They just did an update for that study. Ten years out, we had improvements in sales and productivity. At some point the same thing. And you see this gets derisively called industrial policy. It’s been asked to aid in developing country contexts and David McKenzie has recent work on a similar on in on interventions with Colombian auto parts manufacturers the ripple there is. How do you provide these things, Bishop? You have to go in on it. I have to give you your bespoke management consultants because they aren’t cheap, even when you’re using a suit. They are cheap, they say. And so they experimented with a bespoke services, one on one versus group learning. So you think of it as like executive education for business, and that group learning was just as effective as the other. So Dani and I had Bergin here a month or six weeks or so ago, along with some other practitioners and talking about what she was doing and said, you know, you have to just you have this ecosystem and it’s not a huge ecosystem. So it’s an ecosystem. So an ecosystem can can get off track easily. And so you’re not you know, you’re not you’re not centrally planning this, but you’re you’re trying to make sure that you’re you’re providing the things that allow the place to succeed. Now, is this replicable? We don’t know. Is there something special about Grand Rapids? There are some special things about. So it was a place where Dutch immigrants settled in the early 1900s and it kind of formed this tight knit community. And they invested in local industry. And you have this kind of place collection of medium sized firms. And so they were sticky, right? They had something going on within the broader region. There was the city of Grand Haven, which was facing similar issues. And they realized what we have. We have firms here. And the problem with that the firms are having is not their factory workers. It’s the engineers and the supervisors. And that that’s kind of the middle manager type. We got to convince them Grand Haven is a place of employment. So a local business owner who happens to be asking the boss’s father, as it turns out, of who is Donald Trump’s secretary of education, Edward Prince, he said, okay, downtown, it needs to be a place people want to live. And so how do we make downtown the a place to live? So he said, I’m going to make downtown something that’s a 12 month a year attraction. He put heated water pipes under the sidewalks in the downtown and all the stuff this part of Michigan and western Michigan, it’s really it’s not like Ann Arbor, Detroit. That’s. And they had a whole college there, which was right adjoining campus. And they worked with Hope College in terms of trying to develop some programing. And that would just make the city more attractive in terms of cultural activities. And it’s now a place that’s and you spent $250,000 on these two types. So a great discussion of this in a book called Our Towns by Jeff and Jim and Devin Balanced. So we can find these examples. And what Danny and I want to try and do is understand are the, you know, the Grand Havens and the Grand Rapids, are are they 5% of cases? Are they 20% of cases? Not 30%. Okay. We know what the average treatment effect of jobs is bad. We also know there’s heterogeneity and adjustment. Some places successfully transition into other activities. We also want to try and understand what are the conditions in these places that allow, allowed for and either have the social capital or allow that social capital. That’s one of the things that we’ll be looking at in part of this is how community colleges work. The community colleges in the US, the U.S. needs to centralize. All of these complicated jurisdictions are overlapping and intersecting and conflicting each other. But in many places, community colleges are quite responsive to what happens at local labor markets. Colleges do a couple of things. One of the things they do is they help people who aren’t quite ready to go to a four-year university. Get the skills they need to do that. Both my parents in politics and then on the air for your schools. So that’s kind of the college track. They also do a huge amount of vocational training and gift certificate programs that could be six, nine months in length in manufacturing and repair and construction and in the classic blue collar trades. We know that in a study done on the state of Michigan, in fact, published in a journal Labor Economics last year, you see increases in enrollment in vocational programs. When local labor markets see upticks in unemployment and people are choosing programs that are distinct from the sectors in which job loss is occurring. So we see young people making the right decisions about training. We also know that community colleges are severely underfunded. Look at the nature of that funding, really various prospects. One of the things we’re going to try and understand is the variation in the quality of community colleges in terms of being able to provide that vocational training in response and then try and understand new places with higher quality community college systems in terms of that responsiveness do better in adjusting to job loss occurs. Okay. So I’ll close. We’ll have plenty of time for you. And after that, with what we’re going to do and what we’re going to do at just kind of summarizing what we’re going to do is three things. One is kind of on the quantitative side, we’re going to track the flow of resources that were into the various buckets of play space policy, workforce development, technical assistance, tax subsidies for firms, and then and then specific types of, of, of infrastructure development. And and this just kind of has to be done in force because it’s the US, the Department of Labor does the same, Department of Education does the same, housing development, does this thing states do better things? In addition to that, we’re working with an organization called Camden, which collects data on what foundations are doing, that this is about 2010. We want to know the volume of resources flowing through private philanthropy because they’re very big in this space. We want to know, just in terms of the funding, is funding flowing to places that we that you identify as being distressed? Where can intervention look justified based on various theoretical fragments? We have the books and not super optimistic here can take one example just from the Trump administration. I don’t want to pick on the Trump administration. That example can be replicated by Democratic presidents before Trump’s opportunity zones created as part of the 2017 tax bill, provide subsidies for investments in low income ZIP codes. There are 8000 odd zip codes in the U.S. to qualify for opportunities. Less than 1% of them accounted for almost all of them. And those seem to be poor zip codes and rich. And that happened with empowerment zones under Obama. So it’s not a left/right thing. It’s just a poor policy design. So we want to know, are we missed allocating the resources that are on the table? And there’s a silver lining to the answer. Going to that mean yes. It means there’s money in the system that can be reallocated without having to optimize the spending. We also want to know about the complementarity or substitute ability funding, funding by state, federal and philanthropic sources. Do we see them going to different places, to same places? What’s the potential there? So that’s the quantitative and qualitative side. We want to understand the conceptual models that that these folks who are overseeing economic development have in their heads. And we want to understand that variation in practice across place. Helpful in this regard is that it’s the US and the U.S. as a country and donors told us. So what we have are all sorts of membership associations in which these people belong. So they’re all signed up. They have their websites. They’re part of bigger umbrella organizations. And that gives us a paper trail in terms of the. And what we have found in our preliminary discussions. And then also in talking to people who just know this space much, much better than we do, is that civic leadership is really important. Like Birgitte Close in Grand Rapids, you don’t necessarily need to have she doesn’t have a lot of money in herself, but she has a big megaphone and she has developed confidence in people in the community that she can help orchestrate a strategy that makes sense. So we want to be able we want to train great places according to the quality of civic leadership represented by the economic developments that we have. That’s really hard to do. So the version of that we actually pull off might be less ambitious, but we’re going to see how far we can go. There we are. So this is just kind of what what complicates good practice is this jurisdictional alphabet soup of jurisdictions that exist in the United States. There are commuting zones that we take as our measure of local labor markets. These are collection of counties in which people live and work. You’ve got lots of work in labor economics that says the right way to think about. That we have the jurisdictions that are defined by policy. And so this is just three alternative jurisdictions at the federal government level wherein in bringing states into their workforce development boards. Some states have plenty of the states have one of their boundaries do not follow the definition of what the commitments are. Here are economic development. So this is Department of Labor’s definition. Here are economic development districts defined by the Department of Commerce for you to get access to funding through the Small Business Administration, Economic Development Administration. And these geographies are different and these don’t follow the local type. And then we have opportunity zones. These are defined according to zip codes. And and and and their logic is, is distinct skill the one. The one thing about this that is actually useful for empirical research is you’re going to have this variation in jurisdictional fragmentation across place, which might be huge and due to just the happenstance or weirdness of how policy at the federal level and state. So one of the things we want to try to understand is, is that jurisdictional fragmentation an impediment to kind of effective local leadership? And finally, as we do all of this, aside from trying to think about estimating treatment effects like space policies or a little bit less interested in that, because so much of that is done, we’re more interested in understanding what we think of as the more central policy question. And that is, if you have the right structures in place, do you adjust more successfully when. I mean, literature approaches this as what’s that causal impact of policy on output. Why that to me is not the right policy. Policy question is when place why has a negative shock? What? What do you want your values to be for good outcomes over the next five, ten or 15 years? The other question is a fine question, but plenty well-researched. And we want to know that both in terms of these economic development operations, but also the other elements of a place, the quality and in college system and so on. So that’s that’s where we are now. And we’re hiring and expanding and talking and learning, and we’re going to be doing this for the next five years. That’s what I’ll be happy to turn to. Questions, please.

Attendee: Question is about the workforce development, especially in areas which are dominated by workers. So it seems to me that there’ll be a limit to where you will take them. They will never move. So my question based on that isn’t the solution to try to attract businesses that will. Employ the maximum number of unskilled workers?

Gordon Hanson: So I want you there to think about that. I want to kind of relax the definition of skill a bit and say to think of somebody who has a high school degree and they weren’t a superstar in high school. But they weren’t you know, they weren’t a dropout either. And now we’re thinking about what are the career tracks that are available to us. So if I can link that person directly or indirectly to affirm that is seeing expanding sales and rising productivity, whether that firm is headquartered there or somewhere else. Well, we know that being employed by a good the firm really matters for your long term prospects. So if I can get that worker with just a high school education, maybe some extra education and training into a connection to that firm, either as an employee or as an employee of a subcontractor for that firm that then puts that worker on this wage track rather than on this wage. And that what that means is that the accumulation of skill and experience and everything else varies enormously in terms of the possibilities that that are present. So what do we want that training to do? We want to allow that worker to make that job, but that’s at the level of the individual. We know that that works on an individual by individual that we’re more interested in. Is does it matter in the aggregate if I have better systems in place that do that? Does that make employers more willing to come in and say, okay, I’m confident that I can I can I have access to the workers that I need to grow and develop over time? The thing that the economic development people say again and again and again that the overwhelming constraint and in terms of their location decisions is talent and talent at multiple levels.

Tim O’Brien, Growth Lab Sr. Manager: And I have a lot of questions and thoughts because I’m a part of the Wyoming project. So I’ll save most of those. Spread them out over time. But essentially, I think that we want to maximize the ability to apply what you learn over the next two years to try to act on that place. So but one of the early things that that is in the ether is the Infrastructure and Jobs Act and potentially later the Build Back Better stuff. So I just wonder if you could say a few comments about how you think about that. If you have any ideas of what could go wrong or what could go right with it and how does it interact with basically the everything you presented here?

Gordon Hanson: We are at an utterly bizarre moment in the practice of place-based policy in the United States as a consequence of COVID, because the US government has put this incredible largesse on the table relative to what budgets looked like before. And my ask, it’s been so long, it’s got to get spent. My guess is that the variation and the quality of things that get funded is going to be absolutely enormous. So in the Wyoming context, you have the advantage of Wyoming not being that big and smaller places. Smaller places tend to get a disproportionate share of the funding. That’s just how because they have two senators and representatives. You have matters for how much funding you get in addition to your population. So it’s an appealing function, and that means they get more than the population would indicate. So that means in terms of thinking about what Wyoming can do if they tap into the right sources of funding, making it possible to support the question of what you do it. So I’ll tell you what we’re doing in our work, and I don’t know if this is going to have relevance for you. So a portion of what we’re doing is also looking at places that are going to be disrupted by transition. And that helpful thing here is that energy transition. As I mentioned, it’s been quite a long time. So one of the things I’m going to be working on this summer paper for the Aspen Economic Strategy Group is looking at fossil fuel specialized places in 1984 lots of country like and I’m going to be comparing those to observationally similar non-fossil fuel specialized places as of 1980. I’m not going to repeat the exercise for 2000. So I encourage you to for thinking about the Wyoming case is a. They were my comparatives. And the comparatives are not going to be like necessarily in Montana. And you want them to be comparators in terms of kind of the non-fossil fuel, stop it. But you want to look at the fossil fuel places, too, in terms of what they’re doing. But you want to know what kind of the time path of these places has been because the accumulated history is super important if you’re dealing with local labor markets in West Virginia that have been shedding jobs in coal since 1980, when the coal decline really began in earnest, it’s a very different situation than than some of the places in Wyoming, some of the coal places they like 1980, the 1980, 1990 decline or 1989 to 2005 might not a matter. They might have been only whacked in 2010. And so you have less history underfoot. So that’s one thing I would look at to understand the comparative economic development in the places you’re starting in. In a clear sense, I would then I think the most important thing for workers coming out of fossil fuels is can you get retooled to go do something else? And the worker training and workforce development is essential here. So the quality of the community colleges and other institutions in the workforce is key. We’re doing a bunch of stuff on this project and workforce is doing a bunch of stuff on this. We’re happy to make our data available for the planning part and at the tell you how we thinking about grading these places in terms of but in terms of quality, I don’t know anything about the community college system in Wyoming or whether it’s an important part of training there. But it’s it has to be the most obvious thing to look at because it’s there. It’s been doing it for a while and you don’t need to create that to know about the institution.

Tim O’Brien: Thankfully, they’re heavily interested in expanding the Community College Network and how to help it work better for the struggling and struggling places in the places that they expect to struggle in the future. So it’ll be super interesting.

Gordon Hanson: To look at the various projects that Nieves for her foundation have done. They have that. They have they’ve been doing this in Austin, in a Paso, in the Lower Rio Grande Valley, in Louisiana, in Phenix, and now in Iowa. And you have really different experiences based on what the players have done in those places and what the quality of work training institutions.

Transcript (Part II)

Attendee: I want to follow up about the community colleges. I hear that they’re very responsive to demand in local labor markets, but could they also act as a vector for new capabilities to spawn new industries in the way that like, you know, larger universities are able to do?

Gordon Hanson: I don’t know the answer to that question. My first guess would be not because of that, you know, the hub of the what is their M.O.? Their M.O. is to take care of workers who are not ready for four year schools. This could be they need remedial education. It could be that families are just not willing to let them be that far from home yet. It could be that they’ve got to work part-time and provide some income before they go away. It could be they just haven’t figured it out yet. And so they have to serve such a diverse collection of students and tasking them with being at the frontier is a big ask. Regional public universities are very different in the economic developer types are. The thing you commonly hear is that people who work in economic development, people who work in workforce development don’t get along. Workforce development are producing workers and they want you to buy their workers. I don’t care who you are. I don’t care if you don’t want them. That’s what is our product by our products. Economic developers say we want to we’re trying to close deals with companies. Those companies often don’t want more. Workforce development, especially community colleges are different because they’re not workforce development, which is has a different objective. They can be more impacted because they have to work with local employers to make stuff work. They don’t. On average, they may not. I’ve no idea about the Wyoming context, but they’re different in that respect. Economic, all the types also kind of a little skeptical about the value of our cities because, you know, just think about the incentives. What are the public universities about? They’re not about helping local businesses expand. That’s pretty far down their list of priorities. Now doesn’t mean it can’t happen, but you have to deal with the fact that you’re engaging institutions whose incentives are not aligned with the incentives of promoting economic growth in Wyoming. What I encourage you to do is to look at what the Economic Development Administration has done in Wyoming over time. If they give out grants or technical assistance to business and they’re out there and at least back to the mid-2000. All of it’s just all online. They don’t get that many their normal funding streams about $4 million a year. Right now they have 5 million. Okay. And we have a TaskRabbit who is working on something. Okay. This makes the difference.

Attendee: It seems to me like in the US context that the retention or attraction of higher-income workers to stay where you are is a really important complement to whatever you do on the business side, whether it’s like building more housing, or some of the amenity stuff that you mentioned in Grand Rapids. And I wonder when you talked about earlier the difference between the focusing on moving people to like superstar cities versus focused on places. Is there room to do both or do we really need to pick one or the other? Because, you know, maybe the stuff that that Erik Prince did, doesn’t work if we were able to relax this housing supply constraint in Chicago.

Gordon Hanson: Yeah, it’s a really important question. And it’s and there’s even there’s ever more murkiness about it. So if you had to ask me this. I would have said. And recruiting skilled workers to small towns is going to be really, really tough on the whole landscape. I don’t think it shifted as a bit as much as folks would like to believe, because cities have operated as cities have for 6000 years. But we may have that. But what’s happening on average doesn’t matter for Wyoming as small enough. That’s all it takes. If a piece of this happens to work for Wyoming, that could be a big deal. And the potential is there, as you know. Why why can’t Wyoming have it? It’s on Boise, Idaho. You know, I see no reason why not. And so there it’s the research probably isn’t that useful to you, as is understanding the attractiveness of specific places in Wyoming to the work-from-home crowd. Now realize what you’re getting here because the folks and the policymakers in Wyoming might say, Oh, we’re going to be part of the tech revolution in the silicon range. And that’s not what they’re going to get. What they’re going to get is back-office stuff, folks and human resources folks and or get you onboarding folks who provides our clients services. But that’s what Salt Lake City is telling us. That is doing that really well. That’s what Boise’s like. It’s not Austin. They’re going to get an awful lot of those are good jobs and the college-educated workers of workers and help create amenities that attract other skilled workers and potentially a very good deal.

Attendee: You mentioned the bad overlap between local labor markets and the administrative units. Do you think the best approach would be to improve that overlap or to centralize administration more?

Gordon Hanson: I don’t know. I mean, so let’s take a step back and say I think about policy advice we’re giving to different policymakers. So if we’re talking to the federal government, then obviously coordinating policy across different areas of practice is an important thing and we don’t do that. You have Department of Labor, does its workforce development say that economic development, immigration does. It’s then Treasury does it stuff through subsidized lending in low-income communities. And then Housing and Urban Development does its thing with empowerment zones and opportunities and so forth. So at the credible level, are you want to think about how you coordinate, knowing that what’s going to happen is you even you know, the last thing you want to do is like create an administration to bring all this stuff together, right? Because you know that that will get blown apart. So you have to understand that the process by which this works is that each of these areas of government has enabling legislation that gets updated about once every ten, 15 years. That sets the framework. And you want to think about designing that legislation, working in concert with other important complementary areas of enabling legislation and getting the jurisdictions right. One thing that and I just is way out of my area of expertise, but you need to know that Congress is going to want to pull this stuff apart and make sure that a certain amount of money goes in. That’s fine. But there’s clear potential there for right now. We don’t plan on spending a whole lot of energy talking to people at our level because our government is kind of shut down in terms of policy. So the policy advice that you then give at the state and local level is different because you have to take the federal structure and then the advice is conditional, may be conditional on the extent of fragmentation of it that you encounter.

Attendee: I have a question. All the places that you’ll be studying, because it seems based on your example being mainly like urban areas or areas that previously have localized economic activities. But what about rural areas that for like some intrinsic to our geography, geography like disadvantage or they just don’t have economy activities or like as a culture or things like that.

Gordon Hanson: So we’re not that focused on agriculture because agriculture employs very few people. But keep in mind that in the U.S. after 1968, manufacturing left big cities and went to smaller towns. So a lot of the places we’re talking about are places that have these broader communities. And these collection of counties have 20, 40, 60, 80, 100,000 people. So. So we have so where we are, a lot of the places we’re focused on are smaller places. So is that rural? Well, it’s kind of the rural proximity, and it’s a different set of challenges than low-income neighborhoods in big cities. We’re not really speaking to that. That’s a kind of a different pathology. I know we’re over time. I’m happy to take another question or two or maybe two.

Host: Let’s thank Gordon again.

Knowledge, Prosperity, and Economic Complexity

Prosperity is associated with technological progress, which is related to advances in scientific and productive knowledge. But where is that knowledge embedded, and how is it put to use? In this lecture at the Santa Fe Institute, Ricardo Hausmann sheds light on why the world is so unequal, why and how some lagging countries catch up and others fall further behind.