The Irrational Economy with Nobel Laureate Richard Thaler — The Weekly Show with Jon Stewart

[00:00:00] Jon Stewart: We are papering over a broken system with nudges when we have to shove ourselves into what makes the most sense for healthcare, which every other developed country in the world has already realized, which is free market incentives don't work in a system with those kinds of externalities. Healthcare will never be a functioning market. And the system is designed to exploit people's need to not die. And by creating the ACA and all those other things, we're papering over what should be the reality of the system, which is centralizing it is the only way to create something that will efficiently help people not die. That's where I would crystallize my argument in all of this. [00:00:54] Richard Thaler: Right. And obviously we're going to have no listeners left if we, if we, we don't have. [00:01:08] Jon Stewart: Hey everybody. Welcome once again to the weekly show podcast with Jon Stewart. My name is Jon Stewart and we're going to be talking, you know, this has been, I feel like the news of the world has so matched the climate here in the Northeast, which is dark and gray and apocalyptic. And this feeling that we are hurtling towards something just truly unimaginable and inexplicable. And it's why today I just don't even want to fucking deal with it right now. I, you know, in, in all these different ways, today's show is going to be a slightly different. We're once again, every now and again, we'd love to bring on, uh, experts, uh, people of such regard and, and note, uh, to come and play with me. Uh, like, uh, let's say a person with a cat and like a little string toy. Uh, me being of course, uh, the cat, those, uh, individuals being the person. And, and, and today we want to talk about, you know, uh, our ability as a country to fix the seemingly intractable systemic problems, more economic and who better to do that with than an economist and an economist that, uh, has in some ways changed the way that, uh, economists talk about, uh, the incentives that go into our economy. Uh, he is a behavioral economist, which is something I didn't even know, uh, that there was, uh, but, uh, uh, a brilliant thinker and another in our continuing series of, uh, uh, brilliant thinkers. We obviously had Jeffrey Hinton on who explained to me in childlike terms, uh, what AI actually is. And I think for this guest will, will be no different. Uh, so I'm excited to get to it. Let's, let's jump in now. Richard Thaler. Ladies and gentlemen, uh, in our ongoing efforts to entertain and educate, uh, we once again are going to welcome somebody to the program who is so, uh, accomplished and smart, uh, that it'll be entertaining to watch him play with me, uh, like a monkey with a small grape. That's right. Uh, our, our guest today, a professor from the university of Chicago and American economist, the founding father, one of the founding fathers of behavioral economics and awarded a Nobel prize in Ecom in 2017, which I assume, uh, he will be giving to Donald Trump because that's where, uh, everybody has to give their, their Nobel prizes. But please Richard Thaler, thank you for joining us today. [00:03:49] Richard Thaler: It's a pleasure, John. And, uh, I, I was thinking of offering you the prize. [00:03:55] Jon Stewart: Well, it's very kind of you, sir. I could never, I don't have enough space on my wall. I've got so many peace prizes up there. [00:04:02] Richard Thaler: It's pretty small, you know, the, the prize itself. Yeah, but, uh, the one I've offered to Trump is bigger, but, uh, smart. [00:04:10] Jon Stewart: That's a totally smart move on your part. That's why you're the behavioral, uh, economist, which by the way, sir, what a fantastic segue, uh, to get into this. Most people think of economy, uh, uh, economists as macroeconomists, microeconomists. Then there's this idea. You, you sort of created this field called behavioral, uh, economics. So if you could just very briefly, and I apologize for the remedial nature of it. What, what is behavioral economics? How does it differ from what we consider to be kind of traditional economics? And, and how did you even think of it? [00:04:47] Richard Thaler: Yeah. So I'll, I'll use one fancy word you may not know, which is pleonazum. Pleonazum. Wait, what? Pleonazum. So there's a guy smarter than me named Herb Simon, who wrote a definition of behavioral economics and said, the phrase seems like a pleonazum. What is that? A redundant phrase, meaning what other kind of economics could there be? Presumably economics is about the behavior of people in markets. Yes, thank you. Right. So why do we need that? Well, the reason we need that is standard economics leaves out the people. They're all about the markets. And then there are firms and workers and governments and countries and consumers. They're all people. You pick up a big economics textbook, you'll not see the word people. There are agents. And these agents are, they're kind of like Spock in the old Star Trek series. Super logical. Very logical. And maximizing. They're as smart as the smartest economist. [00:06:18] Jon Stewart: So when economists make a model in terms of how a market is going to behave, the assumptions that they make are that the people that make up the model are logical, rational, and will behave in the manner that maximizes value in the model. Would that be right? [00:06:40] Richard Thaler: Yes. And they do that in part because that's the easiest kind of model to write down. It works out very simple. Right. I mean, suppose you tried to write down a model of John wandering through Costco. Okay. Choosing the optimal stuff to put in a basket. Right. I mean, no one can solve that problem. It's too hard. So you simplify the modeling task by saying, okay, he's going to choose the best bundle. And that, the math is easy. And then they add to that an assumption that people are selfish jerks. [00:07:24] Jon Stewart: Well, I mean, you know, I don't want to, I don't want to say anything, but that, that seems like a relatively simple assumption. [00:07:33] Richard Thaler: Yeah. Okay. So anyway, the idea is, well, what if we introduce some people? Because there are, people run firms, people interact in markets, in fact, more and more people are interacting in markets every which way you can, right? You can bet on anything now. [00:07:54] Jon Stewart: But how would that, how would that manifest? So if I, if I'm an economist and I want to make a model about, and I assume they model what would be the most efficient market for cereal, and they want to model how you would create that, how would introducing what you're suggesting change economic modeling, which I assume means you would be changing how policy is created, because policy, I would assume then is downstream from economic modeling. [00:08:29] Richard Thaler: Right. Good. [00:08:30] Jon Stewart: Okay. [00:08:31] Richard Thaler: So let's start with a simple experiment, please. We go into a classroom. I actually brought a prop. What? A mug. What are you, carrot top? What are we doing here? Yeah. You're a professor. I got a mug here. All right. Now, so what we did was we go into a classroom and we put a mug. I was teaching at Cornell at the time. So it was a Cornell insignia. Safety school. Let's, let's just point out very quickly, safety school. [00:08:58] Jon Stewart: All right. Yeah. [00:08:59] Richard Thaler: Okay. Uh, William and. Sir, sir, sir, we don't have time for this. Okay. No slurs. So Cornell is a very fine school. Yeah. Uh, so, uh, every other student. has a mug sitting in front of them. Okay. And, uh, their neighbor doesn't get a mug. Okay. Okay. Now we have a market for the mugs and we say, if you have a mug, John, you can sell it. Here's a price list. If it's $10, will you sell it or keep it? 950. And then you go down until, okay, I'll sell at eight, but I won't at 750. [00:09:37] Jon Stewart: Okay. [00:09:38] Richard Thaler: All right. And then the guy sitting next to you. Doesn't have a mug. He has a price list and each of the following prices, will you buy? Okay. Yes. So half the people are buyers. Half of them are potential sellers. [00:09:54] Jon Stewart: Okay. [00:09:54] Richard Thaler: So, uh, their worth will be determined in this market. Now, what does economic theory say? It says the value you put on that mug should not depend on whether it's sitting right in front of you or on the desk next to you. Well, it turns out it, so the mugs are distributed at random. What we should see is let's rank the people from highest to lowest on how much they liked at one of those mugs. The half that like mugs the most should end up with them. [00:10:35] Jon Stewart: Yes. That's what traditional economics would tell you. [00:10:38] Richard Thaler: Right. Okay. So about half the mugs should change hands. [00:10:44] Jon Stewart: Oh, they're saying that, uh, they're assuming that there is a rationality to people's affection for the mugs. [00:10:52] Richard Thaler: Uh, well, then it doesn't depend on- Or a randomized value. We did randomize. Okay. Right? They were handed out at random. Yeah. And the assumption is that the value you put on that mug shouldn't depend on whether it's sitting directly in front of you or adjacent to you, or in other words, whether you now own it. And that will be the key phrase. And we'll come back to that. Right. Okay. You do realize I am failing this class right now. No, no, no. John. I am lost. You're, you're doing great. You know, at current grade levels. Yes, sir. A plus plus. Oh, that's very kind of you, sir. In the class. Do I have a mug? Uh, you know, you can buy one. [00:11:47] Jon Stewart: All right. All right. I didn't get a mug. [00:11:49] Richard Thaler: Fair enough. Okay. So what happens? The people who have the mugs really don't want to sell them. The people who don't have mugs aren't all that interested in buying one. [00:12:04] Jon Stewart: There's no market. [00:12:04] Richard Thaler: There is a market. But the people who have a mug demand about twice as much to give it up as the ones who don't have a mug are willing to buy it. Ooh. So instead of half the mugs trading, we get about 20%. So what's the lesson? You know this old Steven Sills song, Love the One You're With? Sure. All right. That's, I call this the endowment effect. That if you're endowed with something, you want to keep it. You won't give it up. But you don't have it? Eh, you know, okay. If the price is right, I'll buy it. This is a phenomenon we call loss aversion. That if you have something, you're going to fight like hell to keep it. [00:13:00] Jon Stewart: If you don't have it, eh, meh, it's a mug. You know, the mug experiment is the genesis of behavioral economics, if I can sum this up, because traditional economics would say half the mugs would change hands based on value and markets and how they should operate in terms of people that have something and people that don't and people that want it. But what you found is only 20% changed hands because of behavioral tendencies that were not included in the model. Correct. A plus. Come on, brother. I'm going to give you guys a little insight into who I am as an individual. There's nothing that I enjoy more than what I like to call a little breakfast for dinner. Now, breakfast for dinner, it's a treat. It takes me back to the childhood when you felt like, remember to get breakfast for dinner and you were like, we're breaking all the rules. What? Scrambled eggs? Where am I? What world is this? Magic spoon. It gives you that feeling. Saturday morning cereal. Well, you get there 13 grams of protein. Zero sugar. Five grams of net carbs per serving, which is how I always chose my cereals when I was younger. I used to say to my mother growing up, how many? What's my net carbs here? Five grams, seven grams. What are we dealing with? How much protein? In this bowl of chocolate Dracula cereal. That's right. Count chocolate. Man, did I eat like crap. But this stuff, magic spoon, keeps you fueled, whether it's breakfast, late night snack, post-workout, whatever it is. Magic spoon. Look for magic spoon on Amazon or at your nearest grocery store. There are plant-based versions of the cereal as well. Even vegans. Could you feel like they had a chown? You'll find vegan options at Whole Foods. Or get $5 off your next order at magicspoon.com slash TWS. That's magicspoon.com slash TWS for $5 off. So this all sounds, if I may, insane to me because there could be somebody who is like a mug. People have called me worse. A mug fetishist. But the idea that economics don't take into account, because buy low, sell high takes into account greed. It takes into account you're trying to get value. It seems like basic economics does. [00:15:36] Richard Thaler: Let me give you an example. Suppose that your uncle gives you an inheritance. Sentimental. Is it a mug or is it something different? It's like a thousand shares of some stock. Okay. But my uncle gave it to me. Your uncle gave it to you. All right. So you send it over to your wealth manager or broker or whatever. [00:16:04] Jon Stewart: All right. The thousand shares I got from my uncle. [00:16:06] Richard Thaler: Yeah. And then the question is, do you keep them? Let's ignore taxes. [00:16:14] Jon Stewart: Okay. Do I keep the shares or do I sell them for the money? [00:16:17] Richard Thaler: Or you put them into an index fund. [00:16:21] Jon Stewart: Okay. [00:16:21] Richard Thaler: Economic theory would say the fact that if there are no tax issues, the fact you got those shares from your uncle. If you wouldn't have owned a thousand shares of that company before, you shouldn't now. Just put it in with all the other stuff. [00:16:39] Jon Stewart: Don't do anything with it. [00:16:41] Richard Thaler: No. Just keep it. Just keep it. No. Not just keep it. [00:16:45] Speaker ?: Oh. [00:16:48] Richard Thaler: Diversify the way you would everything else. [00:16:53] Jon Stewart: So those thousand shares should be turned into some should be in higher risk. Some should be in medium risk. Some should be in fixed income. I should split that up in the manner that I would split up any asset that I have. Exactly. That's what standard economic theory would say. [00:17:11] Speaker ?: Right. [00:17:11] Jon Stewart: Standard economic theory says the best thing I would do is to do that. But behavioral economics says I won't do that for a variety of reasons. One being maybe I'm lazy to being maybe I have sentimental value to my uncle and therefore those thousand shares are the only thing I have to remember him by. Apparently, I didn't take any pictures. I just have this thousand share inherited. So I'm not going to do that. And so standard economics misses all those externalities that are part of the human condition and therefore their models suck. [00:17:53] Richard Thaler: Well, we'll not make a value judgment. Too pejorative. Too pejorative. Too pejorative. You can say that. Right. But let me just add that notice one result of this experiment is people have a tendency to just stick with what they have. So if they got a mug, they're much more likely to end up with it than if they didn't get a mug. Okay. [00:18:19] Jon Stewart: I see. Okay. Okay. Possession, nine tenths of the law. So, and standard economics doesn't take in possession. And how far would this possession theory skew economic models if they don't take it into account? For instance, I have a house. So the theory of economics would be I will continue to try and get better, more valuable housing or diversity rather than just holding it since I have. [00:18:51] Richard Thaler: Yeah. Yeah. And it's that particular house. So we call this status quo bias. Okay. That people have a tendency to just stick with what they have. [00:19:03] Jon Stewart: Yes. A body at rest tends to stay at rest. Exactly. Right. Do they really not take this into account in standard economics? That seems insane to me. Like, is that really something they don't consider? [00:19:14] Richard Thaler: They would consider it if there's transaction costs. So, but in the stock example, there are none, right? It would, the cost of changing a thousand shares of Google into a thousand, put that money into an index fund will cost you $10, right? So, if it was an offer to buy your house, then there would be costs to moving and- Yeah, it's a pain in the ass. Right. But for most things, the economist would assume that because the cost of switching things around is low, we can ignore it. [00:20:06] Jon Stewart: So, how does this manifest in markets? Because I want to, I want, the reason why I want to talk about this and I'll give the broader example is, you know, things like climate policy or the ACA or those kinds of things. These are solutions to, because economics is in some ways, it's, it's the lubricant that we use to create solutions to problems or, uh, uh, you know, uh, better conditions for people's lives, uh, and, and how that affects all that. And I think the premise here is that standard economics misses, and so the solutions that we design for the problems in our lives are ill-conceived. [00:20:50] Richard Thaler: Great. So, let's take climate change as an example. Great. All economists, including this one, think that the first thing we should have done when we figured out there was climate change is impose a carbon tax. [00:21:09] Jon Stewart: That, wait, most economists think that? Yes. May I, may I suggest that that's incorrect? Uh, you may, but I, I'm included in those. Can I say why I think it's incorrect? Yeah, sure. So, the minute you put a carbon tax on, people see their energy prices go up and you will no longer be serving in office politically. [00:21:30] Richard Thaler: All right, then we're in agreement. Well, what I'm saying is if, if you're God or king, uh, you know, or president, and you could say, all right, what policy should we have, then the correct policy is the one that sets the prices to give people the incentive to, so if, if we increase the cost of heating your home to reflect the externality, the cost you're imposing on other people, then you'll have, then you'll have the correct incentives to put in solar or insulate or switch to a heat pump or whatever. We run a poll of expert economists every couple of weeks at the University of Chicago, and there is one on that, and yeah, everybody says, yeah, that would be the ideal policy. [00:22:29] Jon Stewart: So, they're saying a carbon tax would be the thing to solve the climate crisis because, uh, rather than changing the behavior, you have to make using fossil fuels, which are the driver of climate change, so much more expensive, that it changes people's behaviors because they won't change behavior on their own. Is that standard economics or is that behavioral economics? [00:22:56] Richard Thaler: No, that's standard economics. That's standard. That's standard. Feels behavioral, but that's standard. No, because, it's standard because it's just changed the price. And then it's, the alternative is, we say, you're not allowed to have, uh, we can't have cars that, uh, get less than such and such gas mileage. Right. Which we've done. We have, right. So, we have lots of regulations. [00:23:26] Jon Stewart: Okay. [00:23:27] Richard Thaler: We essentially don't have a carbon tax. [00:23:31] Jon Stewart: So, the way we do it is, so, standard economics, what they say is, uh, we have a series of either incentives or regulations. So, it would sort of be a mix of subsidies and regulations. And that is how we will manage the energy market while also keeping an eye on trying to reduce emissions. And that's how economists would design a program to solve it. So, we've done that with, we subsidize solar. We subsidize electric vehicles, uh, and we regulate the miles that they must get there. And they must have a catalytic converter. Right. All that is what you would consider to be standard economic theory. [00:24:21] Richard Thaler: No, no. So, we're almost there. [00:24:23] Jon Stewart: I am fucking this up. [00:24:24] Richard Thaler: You are not. You're not. So, what economists would say is, we don't need all those rules and regulations. Just set the price right. But doesn't the market set the price? Isn't that free markets? No, the carbon tax will automatically raise the price of a Hummer, of operating a Hummer, because it only gets eight miles to the gallon, compared to some EV. So, we don't have to regulate, all we have to do is get the price right. That's standard economics. And then the market will change. [00:25:03] Jon Stewart: Then the market will change. But isn't that just an intervention? Isn't, how is that a market? That's just the government saying, if we set a price that is unreasonable, the market will behave. [00:25:15] Richard Thaler: It's just setting the price so that you have the incentive to act in a way that's best for society. [00:25:23] Jon Stewart: But that's not economics. Economics doesn't take into account what's best for society. Yes. [00:25:29] Richard Thaler: Yes, it does. What? [00:25:31] Jon Stewart: Wait a minute. [00:25:32] Richard Thaler: Wait a minute. I'm, well, let me. Hold on here. Hold on here. Economists know about externalities. And now, here's the point I want to make. We don't have carbon taxes. Why? Because, and you started with this, so you got to the answer right away. You got to this because people hate taxes. They hate high prices. So, what do we have? We have lots of subsidies. We have no taxes. [00:26:11] Jon Stewart: Yes. Well, we have, that's not exactly, I mean, we have gas taxes. Like, if you go to California, it's very different than buying gas in New York. Correct. Very different than buying gas in Minnesota. [00:26:21] Richard Thaler: You know, that's, that's, that's right. All right. But even in high gasoline tax states, the taxes on emissions are still way too low compared to what they should be. [00:26:37] Jon Stewart: Compared to what they should be if our goal is to reduce carbon emissions. Right. But that's not the goal of economics. The goal of economics in a capitalist system is to make the most amount of money for your shareholders. So, my point is, since when is economics about improving the human condition and not just making money for the companies that are extracting the fossil fuels from the earth? Well, if isn't that, everything else is interventionist. [00:27:06] Richard Thaler: Okay, so I did not anticipate that my role here was going to be as the defender of neoclassical economics. But here I am. Oh, we're here, baby. I am here. All right. And, you know, my economist friends will be proud that I'm defending them. All right. So, look, there's an economist named Arthur Pigou. [00:27:36] Jon Stewart: Oh, Pigou's work is, I don't miss an essay. [00:27:40] Richard Thaler: Yeah. So, no, he's died 100 years ago. Oh, that's what I meant. Anyway, there are Pigouvian taxes. So, in any economics textbook, it will say that if you're causing some harm, then the way to fix it is to charge you for the harm you're causing so that you will decide just the right amount of harm. [00:28:14] Jon Stewart: Is Pigouvian familiar with the 2008 financial crisis? Because that is not what happens. [00:28:22] Richard Thaler: Okay. I'm not saying any economist thinks that we have these optimal policies. What I'm saying is that's how it's supposed to work. That's the way any economist, basically, would have advised, you know, take any council of economic advisors before this one, because they always had real economists. They would all be saying something similar to, well, what we really should do is this. But then they would say, but it's true, boss, that people hate taxes, and if they're Republicans, they really hate taxes, but we all hate paying taxes, and so we'll subsidize EVs. We won't tax Hummers, and we won't tax gas, and we won't tax them. So, and that all goes back to the mugs, that it's because we hate losing more than we like winning. So, what we'll do is we'll have all these policies where we subsidize you to do the right thing, as opposed to penalizing you via prices for doing the wrong thing. [00:29:48] Jon Stewart: Folks, do you love coffee, but you think the names are lame? Sanka. Maxwell House. Lame. I don't want to drink. I don't want to drink somebody's house. Well, this episode is brought to you by Ninja Luxe Cafe. That's an espresso maker that's bringing your favorite coffee shop into your home, and it has a cool name, so you can feel decent about drinking it. This Ninja Luxe Cafe espresso machine, it gives you the quality brew, but without having to give the barista your name, and then have them read it, dripping with contempt. Maybe you're a latte guy, latte gal, I don't know. I'm going to finish it with fancy microphone. They got that too. Barista Assist Technology handles the details. Grinding, weighing, brewing. You don't have to. Ninja Luxe Cafe makes cafe quality without the guesswork. And without the drive to your coffee shop. Listeners of this show get $60 off the Ninja Luxe Cafe premiere series with code Stuart, exclusively on SharkNinja.com while supplies last. So this is the problem, I think, that we get to then with economics, because let's say we'll bring it back to climate policy. What I'm suggesting is all markets are designed to some extent. We sort of have this fiction that we live in a free market where it's only the rules of supply and demand, and that our policies have to basically give way to these market forces that if left to their own devices will solve these. But what I'm getting at is government intervention in markets is seen as a negative and paternalistic anti-capitalist movement where muckety-mucks and elites design systems that are not as efficient and functioning as capitalist markets. But we all know that that's a fiction, that we intervene in markets, you know, the big thing is always the government's not supposed to pick winners and losers. But they do it all the time, and they've done it since time immemorial as governments. [00:32:19] Richard Thaler: There are two different issues here. Putting a tax on a bad, like pollution, isn't interfering with markets, it's making the market efficient in the sense that the price people are paying reflects the cost they impose on others. And it's not picking winners and losers, it's picking, there will be losers, people who like to drive gas guzzling cars will lose, but we're not aiming it at them, it's a free choice. [00:32:57] Jon Stewart: No, they won't lose because, let's say, that's because they have the money to burn, it doesn't affect them. In other words, the downstream cost of the pollution that they create won't affect them because they are buffeted either by geography or wealth. [00:33:16] Richard Thaler: So that the tax itself is, no, but look, let's think of what we did. What did we do? We subsidized EVs. And who was the beneficiary of that? Mostly rich guys. [00:33:31] Jon Stewart: Right. But we also, the EPA regulated what you could put out into the environment. I mean, that's how, we got cleaner air when the government regulated what you could actually do. [00:33:43] Richard Thaler: That's true, that's true, but the choice to have subsidies and regulations, it benefited some companies versus others. I mean, Tesla was a big beneficiary of this. [00:34:01] Jon Stewart: No, I'm saying government always picks winners and losers and then pretends like that's something that they can't do. Like, Donald Trump's a great example. He's like, government can't pick winners and losers. Oh, NVIDIA, I'll let you sell chips to China if you give me or Intel. How about this? I'll take 10% of your company. Like, I guess what I'm saying is, aren't we all operating under a fiction? And if we were more, if we were more honest about the way economies worked, we could be more honest about the way we solve some of these larger scale problems. [00:34:36] Richard Thaler: So, I think, okay, you're skipping one step ahead. I don't want to do that. Take me back. Take me back. In a world where we don't know any of the people in any of the companies. So, we're back in the world of inside an economist's head. Oh, boy. We just have, there are firms and there are people and there's something people are doing that causes harm to others. The solution to that, that all economists agree to, is put a price on that bad and then let the market clear and some, the people who produce bads will suffer. And if they're poor, they'll suffer more, but that's true of all policies. That part is uncontroversial. I'm not saying that's a world we live in. In fact, my point is, Sweden. So, economists don't live in the world that we live in. No, no, they would call this a first best, meaning if they could design everything, that's the way they would do it. They would try to make the prices reflect the harms that are people causing and then let the chips fall where they may. That's very different from giving contracts to your buddies, which, you know, has been going on at the local level as long as there have been politicians and buddies. We've just taken it to new levels. [00:36:23] Jon Stewart: Is the idea of behavioral economics to help economists get more grounded in what the actual externalities are? Is that the point? Because the way you're describing economists and the way that they talk about the economy seems utterly removed from reality to some extent. [00:36:44] Richard Thaler: No, no. Okay, so here's where- I am the worst student you have ever had. Oh, John. You are so far from that. These are very good questions. All right. Let's get to it. All right. So, the point I want to start with is, economists don't have a good answer to the question, why do we have only subsidies rather than taxes? Because as far as economists are concerned, they're the same. It's just a sign. If we subsidize the good thing or tax the bad thing, you know, if there are red mugs and blue mugs and the red mugs- [00:37:32] Jon Stewart: In their model, they see no distinction between a subsidy and a tax. And what you're saying is, a tax is actually much worse than a subsidy in real-world economics because people view losses as more damaging than wins, which is the subsidy. [00:37:50] Richard Thaler: Perfect. You nailed it. All right. So, if we're trying to understand the world, it's important to understand this thing about losses and about status quo bias. [00:38:03] Jon Stewart: So, how would you take behavioral economics, staying with the climate model, if an economist would say, it really makes no difference whether you do a tax or a subsidy. But very clearly, we only do subsidies. So, somebody must understand the political realities of all this. We've understood since the '70s that the world is warming through our climate policies. They've had Kyoto treaties and giant conferences every year where everybody flies private jets to discuss how we're going to change fossil fuels. And they all work through subsidies and caps and cap and trade and net neutrality and all these different goals and things. And nothing has really changed. We've made certainly advances in solar and wind and batteries and EVs, but the energy needs of the world continue to spiral and AI. And my point is, everything we've done has been utterly inadequate and I guess I'm trying to figure out, what are we misunderstanding about the solutions and how can behavioral economics give us a better angle on it than the standard economics and the standard political realities which have failed us. [00:39:41] Richard Thaler: God, almost 20 years ago, I wrote a book with Cass Sunstein called Nudge. Yes, I remember Nudge. It was a book about how we can help in this kind of situation. And so, here's one example. All right, we're in this world where gas guzzling cars are too cheap and we all would like to put a tax on that, but we can't. Well, one thing we can do is we can put labels on the cars telling you how much it's going to cost you to operate this car. [00:40:23] Jon Stewart: Well, that will help a little. Like a food labeling will help you with health and if people see like, oh, this car is going to cost me $6,000 a year to buy gas for, this other car is going to cost me $3,000 a year to buy gas for, that's a piece of information that will help me make a decision. And that decision, we think, will also be better for the environment. And so, those are little things, nudges, that move us in the right direction. [00:40:52] Richard Thaler: Right. Another example is you probably get a utility bill. Yeah. That I'm guessing you personally don't look at. Oh, I look at it every day. That tells you how much energy you use compared to your neighbors with a similar house. [00:41:11] Jon Stewart: Ooh. You're going with shame. Shame. You're going with economic benefit and then also shame. [00:41:17] Richard Thaler: Well, shame and no end, patting on the back. Ah. Right? If you've put in solar or a heat pump. All right. Oh, John. Most guys with McMansions like yours. [00:41:35] Jon Stewart: You are misunderstanding my neighborhood, sir. They would in no way. They'd be like, what are you, a pussy? [00:41:43] Richard Thaler: What are you doing over there? OK, so in any case, my co-author, Cass Sunstein, was the so-called regulation czar for President Obama for a while. And his job was to make sure all the regulations that were being passed did more good than bad. [00:42:03] Jon Stewart: A series of nudges that would incentivize people through a variety of psychological, some would say manipulations, but understanding that that could drive our economy incrementally to a more positive climate future. Let me ask you a question. Yeah. Are we in a nudge economy or should you write a book called Shove? Because, you know, it feels like the incentives and subsidy taxes are all inadequate. To address the reality of people's behavior and the totality of what we face. Why aren't we redesigning the entire systems? Go ahead. [00:42:51] Richard Thaler: So nudge has two sets of critics. One would you could think of as complete free market guys that's saying, go away, let markets do it. Yeah. [00:43:04] Jon Stewart: But they live in la la land. [00:43:05] Richard Thaler: Yeah. Then there are the others who are saying, come on, we have to tell people what to do. You want me to, my next book should be called Shove. [00:43:19] Jon Stewart: Yes. Let me, yeah. You go ahead and then I'll explain why I think I'm different than those two. But go ahead. [00:43:27] Richard Thaler: And I would just say, one of my colleagues has written such a book and I will point out to that person and you that if we're in that world, sometimes Trump is president. So if we want to design a system where the government just tells us what to do as opposed to nudge us, wouldn't that be worse? [00:43:57] Jon Stewart: Well, first of all, the government tells us what to do all the time. I mean, any, any regulation and all those kinds of things. So, you know, it's, you're saying we should shove, we should shove. Let me explain what I'm saying. All right. Do it. So when I say shove, I don't mean the government saying to people, you are not allowed to use this much electricity or you are not allowed to use this much gas. I would do that when I say shove, it means understanding what the 10,000 years of, you know, human endeavor and progress on this earth really means. We are a species that if shit's easier, we will do it that way. Like the horse didn't go by the wayside of the car because, you know, of anything other than like, wait a minute, I can get there in half the time. And not have the smell of horse shit done. Like we are incentivized to, you've given me a product that makes my life easier. We don't care where the electricity comes from. When I say shove, it's this, it's stop thinking incrementally about the subsidies and the thing people want the convenience that modern life has provided them, whether they live in the global South or whether they live in our thing. And shove means these incremental systems and with all its political peril and all those things, aren't what's actually going to solve the problem. Shove means looking at mitigating the damage that human beings in all their greed and convenience need, in other words, shove is not telling people what to do. It's getting scientists to help us clean up this mess, meaning carbon capture or other types of models. Because what you won't be able to do through a series of nudges is make people not want the most efficient, convenient, cheapest thing that they can possibly get. And anything that doesn't take that into account is naive. So I'm not suggesting a paternalistic government that decides, oh my God, climate changes and we've got to be better people. And how do we incentivize everyone to be better people? I don't think, I mean, my view is you can't. You actually need to think completely differently and create a model that creates robust markets in damage mitigation and carbon mitigation. That's my position. [00:46:47] Richard Thaler: OK, but what I would say is that position is identical to the one that you mocked. Whoa, whoa. The standard economic prescription, which is set the prices right and then people will have all the incentive to invent the new technologies to solve it. If the carbon prices are right, then people are going to pour all kinds of money. [00:47:25] Jon Stewart: That's only one way of doing it, though. That's setting the carbon price is not necessarily the only way to do it. The other way to do it is create a market for mitigation. That's what I'm saying. It's not just about carbon. [00:47:39] Richard Thaler: There will be a market for mitigation. [00:47:43] Jon Stewart: Yes. [00:47:44] Richard Thaler: But if it doesn't cost you much to emit carbon, then people won't buy it. [00:47:53] Jon Stewart: No, it's not that people will buy it. It's that you need to create a market for profit for companies, not people. John, am I am I nuts? [00:48:07] Richard Thaler: Uh, yeah. Yeah. [00:48:11] Jon Stewart: Yeah. Yeah. You know what's interesting about the avocado? And I've never really thought about this. When you cut it open, you get that perfect little scoop with the little indentation. 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Go to avocado green mattress.com slash T W S to get up to 15% off avocado green mattress.com slash T W S for up to 15% off mattresses avocado green mattress.com slash T W S. But then explain to me how nudge is going to, you know, everything we've been talked about is this isn't, this is an urgent crisis and all the nudging and subsidies is only incrementally inching us to something. Meanwhile, you have a whole global South that hasn't developed the progress at the pace that in the global North has. And now we're telling them you have to do it through these series of subsidies and, and, and markets. That seems unrealistic. It seems more realistic to go to Exxon or wherever they are and go, we'll give you a shit ton of money. If you can figure out how to clean carbon out of our atmosphere. [00:50:25] Richard Thaler: Well, but we wouldn't have to go to them to do that if the prices were right. [00:50:30] Jon Stewart: But what I'm saying is if you, if you live in the reality of the world, look at the yellow vest movement in Europe, like even Europe with their, uh, we're doing the right thing. And we ride our bikes everywhere. When you, when you set the carbon price, not to the market of supply and demand, but to the idea of what would be best for the world, you make yourself politically untenable. And if, if, and, and that's, that's to me, the largest problem. [00:51:04] Richard Thaler: We're in agreement and the, the, you just said I was out in a, wait a minute. No, we are in agreement. We, no, but John, you want, you want to have it both. [00:51:16] Jon Stewart: Professor, I'm going to, when are your office hours? Professor, I'm coming in there. This grade C minus. [00:51:24] Richard Thaler: Come on, man, man. You know what? I've given you office hours at 8am California time. This is the first time I've ever had office hours at eight o'clock in the morning, John. Sir, point taken. And I have a long career. Point taken. So. Objection sustained. You know, you have office hours anytime you want, but it's going to be starting at 10, my time. Done. Henceforth. Works better for me too. So let, let, let me move to a slight, one direction. Yes. Yes. Yes. Yes. GPS. Okay. If you have to, you do leave home occasionally, I hear. [00:52:10] Jon Stewart: Pretty occasionally so. Yeah. That's not, not a ton. [00:52:14] Richard Thaler: Yeah. You know. Pretty comfortable. Before we get off the topic of status quo bias. [00:52:20] Jon Stewart: Yes. Yes. [00:52:22] Richard Thaler: You know, some people have called me the first clinical economist. [00:52:26] Jon Stewart: Because of the psychological aspect of what you do? [00:52:29] Richard Thaler: Yeah. Yeah. Yeah. And I, I think there is some danger you suffer from status quo bias syndrome. [00:52:38] Jon Stewart: Oh, tell me more. You know, I'm always up for having a new illness. [00:52:43] Richard Thaler: Yeah. Uh, doesn't like leaving home. [00:52:47] Jon Stewart: Yeah. Um. No questions asked. [00:52:50] Richard Thaler: Start every show with some left-handed scribbling that looks sort of panic. [00:52:59] Jon Stewart: Oh, by the way, if anybody would see it, there is no artistry there. It is really. [00:53:04] Richard Thaler: You know, Brittany and, and her, uh, team. Yes. Our, our producers. [00:53:10] Jon Stewart: Yeah. [00:53:10] Richard Thaler: Yeah. They, they tell me that, um, there's a lot of status quo bias syndrome in, in, in our book. You're saying inertia. There's a lot of inertia. Yeah. Yeah. I get you. I get you. And I, I would add, um, continuing to root for the Mets for. Oh, sir. [00:53:29] Jon Stewart: Yeah. You know, I'm, I'm, if you're saying that I somehow seem to be in love with the type of pain, um, I, you know, yeah. Masochism runs in my family. [00:53:39] Richard Thaler: I'm going to get in a lot of trouble for the following statement and then I will move on. Yes, please. I don't think there's anything wrong with firing your team. Oh, sir. You're treading on very dangerous ground right now. Look, I also grew up in New Jersey. [00:53:57] Jon Stewart: This type of, uh, heresy, sir. Galileo, Galileo was, was killed for less, sir. [00:54:04] Richard Thaler: Yeah, I know. I know. We could both, we may not want to air this episode, you know, but, uh, because I think we both could get burned at the stage. Not at all. Not at all. But, but I grew up in North Jersey, but, uh, so I grew up a Yankees fan in the mantle and Maris glory years. Sure. And then I grew to hate George Steinbrenner and in my class on managerial decision-making, I had one of my rules. Don't be like George Steinbrenner. [00:54:40] Jon Stewart: Fair enough. [00:54:41] Richard Thaler: Okay. [00:54:42] Jon Stewart: You're saying don't go to jail for any violations of certain shipping rules. [00:54:46] Richard Thaler: No, no. I mean, don't hire and fire the same manager three times. Okay. Every. But George Steinbrenner did win championships. He did, but not in a way that you enjoy, or I approved of. Okay. Um, and so I fired the Yankees. All right. [00:55:08] Jon Stewart: And I'm just saying you should, you know, but after you fired the Yankees, they apparently still had a job. [00:55:16] Richard Thaler: So what I'm saying is no firing has no impact, you know, but look, my son. The Yankees suffers from this. When, when he was a kid, he fell in love with the dolphins. [00:55:29] Jon Stewart: Uh, great, great uniform. Dan Marino. I'm assuming that was a Dan Marino era. [00:55:33] Richard Thaler: Uh, great uniform. His wife and two daughters, you know, they live in San Francisco. They all adopted the Niners. I could see that. And, but they have to put up with that turquoise and orange. [00:55:47] Jon Stewart: Yeah. Yeah. [00:55:48] Richard Thaler: You know, the costs he's imposed. [00:55:51] Jon Stewart: So is the point you're making here, if I may, is the point you're making that I am not giving humankind enough credit for an ability to adapt to, uh, understanding that the long-term harms that our short-term, uh, actions are taking, uh, are damaging us. And that if I'm just nudging them enough, we will understand that long-term, that the short-term pleasure is not worth the long-term harm. [00:56:24] Richard Thaler: No, I mean, what I was just doing is giving you a little shit, but let's, let's, let's, let's get back to climate change. Um, GPS is my favorite kind of nudge and I'm, I have geographical, I'm sort of geographically dyslexic, uh, and GPS is like saved me. I can wander around in a strange city and find my way back to my hotel all by myself. [00:57:02] Jon Stewart: You're a big boy. [00:57:04] Richard Thaler: Normally I need my wife leading me by the hand. [00:57:07] Jon Stewart: Yes. [00:57:08] Richard Thaler: Now, uh, and my motto, my mantra is design policy, make it easy. Yes. That's my mantra. Make it easy. [00:57:17] Jon Stewart: You and I are agreeing. Okay. You can't tell people to go back to paper maps because, so let's say we found out that GPS, uh, emits something through the towers that they use in the satellites that is heating the environment, nudging people back to maps, isn't going to work. And so what I'm saying is you have to create shoves that create new avenues and new incentives that allow people to still enjoy the benefits of that progress while mitigating. [00:57:52] Richard Thaler: No, but we don't, uh, when no, nobody's required to use GPS, but it's better. [00:57:58] Jon Stewart: It's exactly right. That's my point. And oil and like energy is better. People need energy. And, and a lot of the suggestions from governments is let's use less. Okay. So bear with me, John. Yeah, please. Let, let's switch to a different problem. Let's do ACA. Let's do healthcare. Cause that's another one that I think in terms of its incentives and subsidies, but it's nudging a broken system when we should be shoving. Oh, okay. [00:58:31] Richard Thaler: So let's go there by way of retirement saving. Because I, yes. Okay. Because that one, we did a little thing. All right. So one of the problems economists ignore is that people have self-control problems. You know, uh, we're fat. We drink too much. We don't save enough. The dark vision. We, you know, look around, open your eyes. Social security was kind of a way to mitigate that. Yeah, but it's, it works pretty well for, uh, uh, one segment, which is people who have regular low paying jobs. The replacement rate is kind of okay, but, uh, if you're in and out, not so much. And, uh, uh, for the upper middle class, social security, isn't enough really to live on. And the, we used to have these old fashioned defined benefit pension plans that guaranteed you an annuity, depending on how much you made and how long you worked. And they got replaced with these 401k things. [00:59:53] Jon Stewart: Right. And those pensions were generally matched by employers and they were, uh, uh, part of the responsibility and, and compensation package that you would get from the, the old world of you went to work at a factory and you left it 45 years later. [01:00:07] Richard Thaler: Right. And you just, you had no decisions to make and with the new 401k, you had to join and decide how much to save and how to invest. Right. And that was hard. And a lot of people in the early days of these didn't even join. And the company was matching their contributions. It's the dumbest thing. It's turning down free money. So how did we, I'm not going to say fix this, but improve it. One thing we did was we said it used to be, if you wanted to be in the 401k, you had to fill out a form with, okay, let's change the default. People are good at doing nothing. So you're not a fan of people, sir. Uh, can we go back, rewind the tape to the diagnosis of John, right? Yes. Okay. So you got now get, uh, you, you, you now get a message saying, welcome to our firm. Uh, we're going to enroll you in the 401k plan, unless you fill out this form. [01:01:25] Jon Stewart: Right, right, right. So, so you made it so that the opt out took an action, whereas the opt in did not take an action, therefore incentivizing the opt in, which is the better outcome for people in terms of money. [01:01:38] Richard Thaler: Right. And, and incentivizing costs just by changing the box, right? So again, what do we, regular economists would assume it doesn't matter what boxes ticked. If by joining, I get a match. [01:01:55] Jon Stewart: Would they really? Like they don't, regular economists don't take into account pain in the ass, like that level of it. [01:02:03] Richard Thaler: They would say the cost of ticking a box versus 6% of your salary. [01:02:09] Jon Stewart: Yeah. I mean, really? Here's what I would say. Businesses understand that. That's why your credit card bill is unintelligible. Like when you read all that fine print, you have no idea what you're reading. And that's purpose obfuscation. It's purposeful. They understand that people aren't going to wade through that. They're not going to understand that. Wait a minute. After six months, this goes up to 21%. They, they understand how to manipulate us all the time. Absolutely. All right. We are exactly on the same page. Yes. The system is designed to exploit us and people are, uh, don't have an ability to understand that because of the way that the system is allowed to be designed. [01:02:51] Richard Thaler: Right. And look, making it opt out is good for people. And we improved pension plans just by switching which boxes ticked. Right. No, that's a, that sounds like a very smart. But, uh, of course, companies learn the same trick, not from us, or at least I'm not taking [01:03:19] Jon Stewart: the blame. They're reverse engineering. Of course. Nabisco makes chips that, uh, they design them so that they're almost impossible not to eat. You get fat and then big pharma makes GLP ones and that makes it so that, uh, you control your appetite. Nabisco has to engineer that to get past. I mean, this is the cycle of exploitation. And I mean, that's again, that gets back to the incentive here is greed. It's that's what, that's what we're doing. And that's why I'm saying nudges sometimes are inadequate and shoves. Yeah. [01:03:55] Richard Thaler: Okay. I totally agree. So far, the only thing we disagree about. Matt's the Mets. Matt's the Mets. Yeah. Okay. The two things we disagree about. [01:04:06] Jon Stewart: How long do you think it's going to take you to cook dinner tonight? What do you think it's going to take 30 minutes, 60 minutes? It takes me about four hours because I like to have it roasted by the sun's heat and put the ingredients together and just lay it on a windowsill. And whatever happens happens. That's why I'm always hungry. But factor is bringing you deliciousness in two minutes. Two minutes. Factor meals are already made. Chefs designed by dieticians delivered to your door. You just heat it for two minutes, not by the sun, whatever, however you eat things. They got proteins, veggies, healthy fats, no refined sugars, no artificial sweeteners, no refined seed oils, seed oils. You can choose from 100 rotating meals every week. The meals are fresh. They're never frozen. There's no prep. There's no cleanup. There's no mental load involved in getting a healthy meal. Head to factormeals.com/TWS50OFF and use code TWS50OFF to get 50% off your first Factor box plus free breakfast for a year. That offer is only valid for new Factor customers with code. Qualifying auto-renewing subscription purchase. Make healthier eating easy with Factor. [01:05:31] Richard Thaler: The two things we disagree about are the Mets. Yeah. And whether getting the prices right would be sufficient. [01:05:40] Jon Stewart: So let's look at the ACA because the whole idea there is if we create a market for insurance, we'll get the prices right and we'll subsidize for the people who can't because to get the market to be efficient, we need everybody to be in it. And to get the insurance companies to allow everybody to be in it, we're going to have to make sure that we subsidize them because the markets include people with pre-existing conditions or people who are not healthy and the insurance companies don't want to deal with that. So we do little nudges about, you can check this box because it's a very complicated market. And I look at that and think we are papering over a broken system with nudges when we have to shove ourselves into what makes the most sense for healthcare, which every other developed country in the world has already realized, which is free market incentives don't work in a system with those kinds of externalities. Healthcare is not, will never be a functioning market. And the system is designed to exploit people's need to not die. And by creating the ACA and all those other things, we're papering over what should be the reality of the system, which is centralizing it is the only way to create something that will efficiently help people not die. That's where I would crystallize my argument in all of this. [01:07:12] Richard Thaler: Right. And obviously we're going to have no listeners left. If we, if we, if we, we don't have. Yeah. Yeah. If we go all the way down that path, the, what I, here's what I will say. I was actually in the white house while the webs, the catastrophic website that was being designed for ACA, which crashed on the opening day. Right. Uh, somebody was designing that. And, uh, I was talking to somebody. I said, could, wait, you were in the white house while that was going on. While they were not, while it was crashing before that, when somebody was designing it. And I said, Oh, can I go, go talk to that guy? And they said, Oh yeah, go, go see that guy. And they show me some screenshots. And, uh, so here's what in a bit behavioral economist thinks about. They had to, somebody had decided that the plans should be grouped into categories. And the categories should get labels of metals. Like platinum, gold, silver, bronze. Oh, sell it like timeshares. And so I said, what, what, um, why, why should we do this? And, uh, I never got an answer of what the theory was for why. [01:08:55] Jon Stewart: Uh, I think the theory is like credit cards. Like you get a platinum, you get a black card, you get it. Right. One is basic. One is got some frills. The other is free drinks and food. Right. [01:09:05] Richard Thaler: But then down at the bottom, there was another category. And it didn't get a medal was called catastrophic. [01:09:14] Speaker ?: Hmm. [01:09:15] Richard Thaler: I said, wait a minute. So a catastrophic policy is one with a high deductible. [01:09:21] Jon Stewart: It only helps you if you really, if the shit hits the fan. Yeah. [01:09:25] Richard Thaler: But economists, a lot of economists would say that's probably the most efficient policy. But my, my comment to these guys was, wait, you're not calling one of the brands catastrophic. Right. We've got platinum, gold, bronze, catastrophic. And they say, yeah, well, that's what economists call those plans. [01:09:51] Jon Stewart: But my comment would be catastrophic is how I would, uh, categorize the choice to treat health care like it's a product that companies like health insurers haven't already figured out how to exploit for maximum profit to the detriment of people who we always know. People don't shop around for healthcare, making it more transparent doesn't mean they'll shop around. They want to live. They want to go to the best doctor that they can, who is nearest to them, especially in an emergency. They don't get a choice. And for us to continue to treat this as though it is some functioning market that we can do our usual games of subsidies and labeling to, to, to fix that. My point is that's a market that needs a shove. Yeah. [01:10:53] Richard Thaler: Okay. So I'm going to make two points. Yeah. One is some friends of mine and I ran a quick little experiment, uh, simply changing the name of the catastrophic policy to economy or value in our experiments reduced the number of uninsured by 10%. Right. That was good. It's better. [01:11:22] Jon Stewart: No, no, no, no, no, no. I'm not saying there isn't goods to be had. Okay. All right. That's point one. But let me, let me say this. Are there still people who go bankrupt because they get sick? Have we fixed the problem that needs to be? [01:11:37] Richard Thaler: No, we have not. [01:11:39] Jon Stewart: No, we have not. Are there still people that, that. [01:11:42] Richard Thaler: Okay. All right. So yes, I, I think. [01:11:49] Jon Stewart: Don't let, don't let perfect be the enemy of good is the point. [01:11:53] Richard Thaler: Yes. And if we're striving for perfect. You're, you're absolutely right, John. There are vested interests. The hospitals, the insurance companies, the doctors that don't want nurses to be able to do a lot of stuff. And pharmacists are the most over-trained people in the economy because they end up working in some God awful Walgreens or. [01:12:33] Jon Stewart: Right. Meanwhile, it's the benefit managers that are making all the money because they're the middlemen setting the prices. But if we allow ourselves to be satisfied by these incremental positives and not let perfect be the enemy of good. Don't we lose sight of. Don't let insane. Be the enemy of, of sane. Or don't let sane be the enemy of insane. Like if we have a system that is. Like blatantly insane. [01:13:02] Speaker ?: Aren't we? [01:13:03] Jon Stewart: Yes. You make all these improvements. I'm not suggesting that there will ever be anything that's perfect. But if we continue to accept. Such a broken and corrupted system as our only option is incremental improvements within that. Aren't aren't economists and policymakers and everyone else robbing us of an opportunity. Because sometimes you need to. To to view it on not to go with the other terms of economics, but the macro, not the micro. [01:13:45] Richard Thaler: Right. So what I would say is. You know, Mark Cuban has a little company that. Sure. It's very smart. Very smart. [01:13:56] Jon Stewart: But why doesn't the government do that? [01:13:59] Richard Thaler: Well, because all of the vested interests. But that's my. Okay. Well, but. That's my point. Okay. But look. Suppose you. You say. Medicare for all. [01:14:16] Jon Stewart: Medicare for all that want it. Yes. Great. [01:14:19] Richard Thaler: Right. [01:14:20] Jon Stewart: So language matters. Sure. Having a system that people can buy into. Anybody that wants to join a system. So that you remove the possibility of going bankrupt because you get sick. To me. Is like the baseline of a healthy society. [01:14:36] Richard Thaler: Well. So I would. I would go further. Yeah. My plan would be. If we're going to start with something. Yeah. I wouldn't start with that. Okay. I would start with. Catastrophic insurance for free for everyone. Okay. Now we're getting somewhere. [01:14:55] Jon Stewart: That's what I'm. I'm a behavioral economist. I'm with you baby. All right. [01:15:00] Richard Thaler: You've graduated. Let's go Mets. Let's go Mets. Let's go Mets. He was so close. He was. He was almost there. You know. Ah. So. You know. We can't. We can't ignore. All the vested interests. [01:15:17] Jon Stewart: No. But they're the ones we should be. Nudging and shoving. Not consumers. I think we're always shoving. On the wrong end of the horse. [01:15:26] Richard Thaler: Well. But. The problem is. That there's. There. There's. All those vested interests. Have lots of money. And. And. They support. Both parties. And. [01:15:41] Speaker ?: They. [01:15:42] Richard Thaler: They will. Make it. Difficult. [01:15:49] Jon Stewart: But that's. The job. Of. Of. Governance. I would say. Here's what I would love for economists. And behavioral economists. I think could play a big part in this. Is to help us understand that. You know. The founders looked at. The system. And said. There's going to be a balance. A power. Checks and balances. Between the executive. And the judiciary. And the legislative. But there's another power. And that's corporate power. And it's really the fourth branch of government. And maybe one of the most influential branches. And the only thing that we have in this country. That is. Powerful enough. To in any way mitigate that. Is the government. Yeah. And if the government refuses. To take a courageous stand. In mitigating that. Damage. The damage of. You know. I remember. Alan Greenspan was on my show. In like 2008. 2009. That must have been exciting. [01:16:43] Richard Thaler: Oh. [01:16:44] Jon Stewart: I tell you. He was only. At that time. I think he was. He was 98. He might have been 103 at that time. And I asked him. You know. The financial crisis 2008. Like. What the hell happened? And he goes. I think we. Over rested. Made. I think we overestimated. The bank's ability. To regulate themselves. Yeah. [01:17:04] Richard Thaler: And I was like. [01:17:05] Jon Stewart: Do you mean you were idiots? Because. That's insane. Well. [01:17:10] Speaker ?: You know. [01:17:11] Richard Thaler: But we. Look. We. We. The Fed. The Fed. The Fed is probably. The. You could argue. The best functioning branch. Of the government. Uh. And. Certainly. You can argue. It's. Got the best. Uh. At least right now. The. The. The. Best trained. People. Working for them. And. It's a well functioning. Branch of the government. That. And. Uh. [01:17:49] Speaker ?: You know. [01:17:49] Richard Thaler: That. May all change. [01:17:51] Jon Stewart: I think. I think. I believe. The plan. Is already in place. To knock down. The east wing. Of the Fed. [01:17:59] Richard Thaler: And. You know. Goolsbee. You know. Love him. He's the president. Of the Chicago Fed. [01:18:06] Jon Stewart: Come on. [01:18:07] Richard Thaler: I love Goolsbee. Yeah. Tell him I said hello. Tell him to come on this show. You know. [01:18:12] Speaker ?: I'm. [01:18:12] Jon Stewart: I'm sure. Well. Right now. Uh. He's in the Fed. He's not allowed to talk much. Yeah. And. Anyway. That's tough on him. [01:18:22] Richard Thaler: He's funny. You know. [01:18:24] Jon Stewart: Now I like Goolsbee. [01:18:25] Richard Thaler: Um. So. Where were we? Um. You know. [01:18:30] Jon Stewart: The. We were tearing down the fabric of. Uh. Capitalist institutions. And reforming them. All right. [01:18:36] Richard Thaler: The problem is. We wouldn't know where to start. And. There. There's just. The. You know. If Mark Cuban can't. Do it. I mean. Just. Any one step. So. My version of. Right. Free catastrophic for all. I think. Is a good place to start. But. It wouldn't. Eliminate. The power. Of. The American Medical Association. To. Limit. What. Physicians assistants can do. And the insurance companies. And. I understand. All the benefit managers. And. All the layers. I. I. It's above my pay grade. To think about. [01:19:22] Jon Stewart: No. I understand. And you know what. It's. It's a great place. I think. To. And I've so appreciated. Your time. And your office hours. You've been so generous. With them. And. You know. [01:19:36] Richard Thaler: I'm. No. No. I don't allow. Pass. Fail. What. No. No. I am. I'm not going near you man. [01:19:47] Speaker ?: But. [01:19:47] Richard Thaler: You know. [01:19:48] Jon Stewart: But. [01:19:49] Richard Thaler: You know. Let's do that. [01:19:51] Jon Stewart: Let's do that. Let's do that. Let's do that. Yeah. Okay. But I think the point that I think. Maybe. I love coming to. Is this. I love the idea of those. Really smart. Incentivized nudges. And those things. Not allowing. That. To remove. Our higher. Aspiration. Of actually. Looking at. The logistics. And the guts. Of something. And. And. And getting systems. That are not. As exploitative. That. You know. Government has to have. A larger role. In mitigating. The damage. Look. Capitalism is the operating system. We have. But it's clearly not. A free market. It's. Intervened in. By governments. And all kinds of other. Corrupt actors. And the crony capitalism. That goes along with it. And. My point is. Let's continue. To do those. Really smart things. That you're talking about. But we. Cannot lose sight of. The larger. Goal. Which is to. That a government. Has to be there. To help mitigate. The collateral. Damage. That the operating system. We've chosen to use. Often creates. [01:21:01] Richard Thaler: Yeah. And. We need. We need. Another show. John. To figure out. How to get there. [01:21:09] Jon Stewart: Oh. We will. We can. Yes. We can. The audacity of hope. Baby. Yeah. Yeah. [01:21:18] Speaker ?: You're a good man. [01:21:19] Jon Stewart: You're a good man. Professor. Thank you. For joining us. Professor Richard Thaler. University of Chicago. And. One of the founding fathers. Of behavioral economics. The 2017. Nobel Prize. In econ. Which is. Sitting on. Donald. Trump's. Fireplace mantle. As we speak. But it's up for sale. [01:21:41] Richard Thaler: Up for sale. [01:21:42] Jon Stewart: Up for sale. [01:21:43] Richard Thaler: Up for sale. For the highest bid. Whoever wants. [01:21:46] Jon Stewart: You know what. And. And you can get that. And a Cornell mug. I'm assuming. For just seven. Seven dollars more. [01:21:54] Richard Thaler: Or. A nudge mug. There you go. [01:21:58] Jon Stewart: Excellent product placement. Thank you so much. Professor. Thank you John. Pleasure to meet you. Pleasure to meet you too. Hey folks. It's Quince time. Today's sponsor. Quince helps you forget about all the fashion nightmares. Quince. They bring together the premium materials. The thoughtful design. The quality. You stay warm. You look sharp. You feel your best. Each piece. Made from premium materials. By trusted factories. That meet rigorous standards. For craftsmanship. And ethical production. But they cut out the middleman. I don't like middlemen. Do you like middlemen? Maybe you're a middleman. Maybe you do like middlemen. But you cut out the middlemen. And you cut out the traditional markups. Quince delivers the same quality. As these luxury brands. At a fraction of the price. Refresh your winter wardrobe. With Quince. Go to Quince.com/TWS. For free shipping on your order. And 365 day returns. Now available in Canada too. That's Quince. Q-U-I-N-C-E.com/TWS. Free shipping and 365 day returns. Quince.com/TWS. Man. My favorite part of the interview. If I may. Was how slowly he talked. To try and. I really felt like. I think he was about like 10 minutes into it. When he was like. Hmm. I'm gonna have to change my tact here. Because. Little brain. Is not. [01:23:30] Speaker 3: No. Yeah. [01:23:32] Speaker 4: I don't think he was expecting that conversation. My favorite part was when he psychoanalyzed you. I think that was the first time. That's happened. On the pod. That is right. Oh. [01:23:42] Jon Stewart: I gotta tell you though. I thought he. He kind of fucking nailed it. [01:23:48] Speaker 4: I mean. They don't give out. Nobel prizes for nothing. You know. [01:23:52] Jon Stewart: No. I thought he. I thought he did an excellent job. Did any of that resonate though. With. You guys. I think. I get where he's coming from. With that idea of like. Don't let perfect be the enemy of good. But I don't know that they. If. It's not to suggest that incrementalism. Isn't still a part of the equation. [01:24:10] Speaker 3: Of course. [01:24:11] Jon Stewart: But I don't know if they understand. The general frustration. Within the public. 100%. [01:24:18] Speaker 3: I thought it was. Incredibly illuminating. That a conversation. About healthcare. His grievance. Or. What his brain went to. Was the categorization. Of shitty plans. Like. Not having those categories. Yes. Explaining. In. Really big print. Exactly what these plans do. Does not mean. They don't all suck still. [01:24:41] Speaker 4: Yeah. I think it's like. So if economists argue. That you should choose. The catastrophic. Plan. Because that would be optimal. And then behavioral economists argue. We need to change the name. Because. Because people aren't choosing. The most optimal plan. Then we need to find someone. That will argue. That the problem is actually. The most optimal plan. Is a plan. That you will go broke. If you need to use. Like. That's the real problem. Here. [01:25:07] Jon Stewart: Those are trying to explain. Like. Aren't you just. Like. Polishing turds. [01:25:12] Speaker ?: At that point. [01:25:13] Speaker 4: But. [01:25:14] Jon Stewart: I mean. I get his point. That there is like. You did help some people. [01:25:18] Speaker 4: Yeah. [01:25:19] Jon Stewart: Absolutely. That gives you license. To ignore. The larger totality. Of. Climate change. Health care. Of. By. Incrementalizing. You also are forgetting. That you all. You have to maximalize. [01:25:34] Speaker 4: As well. [01:25:35] Speaker 3: Big. Structural. [01:25:37] Jon Stewart: Change. [01:25:38] Speaker 3: Thank you. I was thinking a little bit. When you were bringing up. The subsidies. That's. A shove. Right. And if we just think about. The subsidy itself. This. The shove is even small. In comparison. To what we should be doing. Right. Take away the subsidy. 1.5 million people. Drop out. Of. The ACA marketplace. Those are the people. Who are young. Who are. Holding up the system. For like. The 5% of people. Who are really using it. But the whole thing. Is going to start. Crumbling. Because of. Supposed to be a fix. Which it's not. [01:26:10] Jon Stewart: That's right. That's right. I think. I almost think. He would still categorize. Subsidy as. Like. A nudge. And the shove. Would be. The redesign of it. But they don't. Boy. I thought he got really like. That was where he was like. Uncomfortable. Like. You can't just. You know. You can't. [01:26:30] Speaker 5: Bring your weight. On insurance companies. That's not right. [01:26:33] Jon Stewart: His pauses got longer. In those moments. It just got sad. That's when he went to like. Yeah. But anyway man. I thought. I thought that was. I thought he was. Really interesting. And very. Very illuminating. I think. For me. What about Brittany. What do we got for. [01:26:49] Speaker 5: The listeners there. What do they got there. What do they want. John. Of all the Trump news this week. Which development. Worried you the most. [01:26:57] Speaker ?: Oh. [01:26:58] Jon Stewart: I think. Uh. The election. You know. With all the. Uh. The elites are going to get out of. Uh. Everything. I'm sort of accustomed to. As we said on the show last night. Uh. sanctuary city in this country. Which is. This. Privileged class that. There is no crime. They can commit. That would have any kind of accountability to it. Uh. It was the. The. The raid on. Uh. The Fulton County. Uh. Electoral board. Along with his. Offhand remark about nationalizing. The election. Only in. Uh. I think the 15 states. That caused him a problem. [01:27:36] Speaker 4: Yeah. I'm just spitballing here. But what if they nationalize the elections. In the 15 states that caused me a problem. Right. [01:27:43] Jon Stewart: Yeah. I mean he's going to end up. Tariffing states. [01:27:46] Speaker 3: Oh sweet lord. And this was like a small related. Uh. Situation. But he actually called. Tulsi Gabbard. After assigning her. That mission. Trump was just on the phone. With her. While they're doing. [01:27:58] Jon Stewart: Why is he even assigning her anyway? What the fuck is the president. Assigning. The DNI. To an FBI. He's not supposed to be assigning the FBI to stuff. They're supposed to be independent. [01:28:10] Speaker 3: And she's also under some top secret investigation. While this is all going on. The whole thing's a mess. But. [01:28:16] Jon Stewart: I agree with you. Do you know what the invest. [01:28:18] Speaker 3: No. It's top secret. It's like locked away. So that even Congress doesn't know. So they don't want it to get out. [01:28:23] Jon Stewart: It's in a safe. I bet it's about the streak. The streak in the hair. [01:28:26] Speaker 3: Oh, don't talk about people's gray streaks. [01:28:28] Jon Stewart: No, no, no, no, no, no, no, no. It's the streak. People are going to say, what is that? What is. That's clearly. She's giving a sign to somebody. Yeah. [01:28:36] Speaker 3: We hold our secrets. And then. [01:28:38] Jon Stewart: Is it Putin? Is that who would. Yeah. No, I agree with you. And the problem is you don't ever think. There'll be no accountability for any of them in the first place anyway. So they're operating under, as they would say, as JD Vance would say, absolute immunity, which is a fucking ridiculousness. What else? What else do they want? What else do these viewers, listeners? Yeah. [01:29:01] Speaker 5: Um, why can Trump threaten to sue everyone for a gazillion dollars, but no one can sue him [01:29:07] Speaker ?: back? [01:29:08] Jon Stewart: That is a Zen Cohen. That is, I think I might have that. That was a, I believe that might've been a fortune cookie that I got the other day. That's one of those, the Buddhists will go to a monastery and they will sit there in silence for years, pondering the question of why, uh, Trump. Now, to be fair, no one has been sued more than Donald Trump in my estimate. Like if you go through his construction records, every fucking contractor he's ever worked with is like, uh, hey man, you still owe me 15% of the money. And he's like, come and get me. [01:29:47] Speaker 4: Try it. He's a victim. Yeah. [01:29:51] Jon Stewart: Poor, poor, sweet billionaire president. [01:29:56] Speaker 3: Ooh. There have been some recent suits, but I think that, I mean, he's making so much money off the presidency, probably go on forever. [01:30:03] Jon Stewart: He's killing it. [01:30:05] Speaker 3: Whereas people can't afford to continue these suits. [01:30:09] Jon Stewart: Oh, they've got, I mean, the Supreme court made it basically so that like, he kind of, no matter what he does, uh, you know, it's sort of in the guise of his presidential duties, you're not even allowed to do discovery. I think part of why you can't sue him is like, I'm suing you. Great. What evidence do you have? Well, I'd like to see your emails. Boy, I'd love to, but I don't, I don't have to, but his, you know, it's interesting. The, the, the mindset that he had as, you know, running Trump enterprises is the same as he has when it comes to be president. It's the exploitation he did, like on all of his contractors, everybody. People don't realize like so many contractors in New York city, fucking hate that guy. Cause his, his whole strategy was I'll pay you just enough money to satisfy a certain portion of the contract, but I won't pay you the final 10 or 15%. And knowing that you as a small contractor, the hassle and money it will take you to try and recoup that won't be worth it. And so I will get myself 10 to 15% off of everything that I do. [01:31:13] Speaker 4: That's behavioral economics, right? [01:31:17] Jon Stewart: Jillian Spear tying the whole show together. [01:31:19] Speaker 5: We're tying it all together. [01:31:21] Jon Stewart: One more, one more question. [01:31:23] Speaker 5: Alrighty. John, which Superbowl halftime show will you be watching? Bad Bunny or Kid Rock? [01:31:30] Jon Stewart: Puppy bowl. [01:31:32] Speaker 4: There's already counter-programming if only Turning Point USA now. [01:31:36] Jon Stewart: No, I always watch a Superbowl halftime show. I don't, I don't particularly care who's on it. Hey, it's a continuity issue, behavioral economics, status quo thinking. [01:31:44] Speaker 3: Nice. Inertia. [01:31:46] Jon Stewart: I feel bad. Like I feel bad. Not bad, but I mean, he's a superstar, but Bad Bunny. Like the shit this guy's take, he reaches the pinnacle of his professional career in a kind of global superstar to get the opportunity to do a halftime show. The guy's clearly a fucking extraordinary musician and entertainer who's earned this place. And the idea that he's facing a backlash, my favorite backlash to it is, you know, you got to get a fucking American in there. And you're like, uh. [01:32:17] Speaker 4: Yeah. Read a fucking book. Right? Ay yi yi. [01:32:21] Jon Stewart: The Jillian sigh tells us all we need to know. It drives me crazy. [01:32:25] Speaker 4: I love Bad Bunny. Like, oh, he's going to kill it. I can't wait. Bonito. That's why I'm tuning in. [01:32:30] Speaker 5: I'm so excited. [01:32:31] Speaker 4: The game's going to be a blowout. He's wonderful. [01:32:34] Speaker 5: He just won two, three Grammys Sunday night. Right. Plus he's really hot. So. Really? He has Kid Rock beat in that. Yeah. [01:32:43] Speaker 4: For sure. [01:32:44] Jon Stewart: Wait. So the Bad Bunny also has a little bit of a machismo, a little bit of a vibe going. [01:32:50] Speaker 5: Oh, yeah. Interesting. [01:32:52] Jon Stewart: You know, but to be a musician versus a comedian. You know, this comedian is never done about comedians. It's always musicians. People love the, it's something with the hips not lying. Well, listen, very, very lovely guys. Thank you once again. Brittany, how do they, how do they stay in touch with us for all this? [01:33:13] Speaker 5: Twitter. We are Weekly Show Pod. Instagram threads TikTok Blue Sky. We are Weekly Show Podcast and you can like, subscribe and comment on our YouTube channel, The Weekly Show with Jon Stewart. [01:33:23] Jon Stewart: And Instagram, baby. If you want to see all of my nasal pores, join, join me on my page. Thank you guys so much. Lead producer, Lauren Walker. Producer, Brittany Mamedovic. Producer, Jillian Spear. Video editor and engineer, Rob Vitola. Audio editor and engineer, Nicole Boyce. Executive producers, Chris McShane and Katie Gray. We will see you guys next time. The Weekly Show with Jon Stewart is a Comedy Central Podcast. It's produced by Paramount Audio and Busboy Productions.