Capitalisn’t: Can We Build a Middle Class Without Factories?

Dani Rodrik: It's not a conclusion that I reach willingly. I mean, I reach that conclusion because there is simply no option. If my story doesn't convince you, Luigi, that the services-based strategy can deliver some development, then the alternative is not to say, "Let's go manufacturing." The alternative is just simply to be very pessimistic about the future.

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Bethany McLean: I'm Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi Zingales: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Bethany: There's a massive disconnect right now between the economic data, and how people actually feel. The data says inflation is down, things are affordable, you should be happy. The voters say the system is broken.

Luigi: For the last 40 years, the North Star of our economy was simply make things cheaper. We assumed that if goods were affordable, people would be happy. By that metric, we succeeded. Consumer goods have never been more accessible. Yet people are angry.

Bethany: Maybe we forgot that we aren't just consumers. We're also producers. We're workers and we're citizens. This tension between being a producer and being a consumer is exactly why we invited Dani Rodrik back to Capital Isn't. He was uncomfortably early in warning that if you push globalization too far, if you privilege cheap prices over Social Security, you are going to get a massive political backlash.

Luigi: Because people aren't just consumers, they're also producers. They care about dignity, stability, and whether their work gives them a place in society.

Bethany: Exactly. It's that idea that sits at the center of Dani's new book, Shared Prosperity in a Fractured World. He frames the moment we're in around three enormous challenges, rebuilding the middle class and rich countries, reducing poverty and poor ones, and stopping climate change.

Luigi: The problem is that the politics of our times are pushing those goals into conflict with each other. The old framework for managing those conflicts, the neoliberal consensus, the rules-based international order, hyper-globalization, no longer describes reality. In fact, in his new book, Dani goes as far as saying, "It's gone. Not dead, but gone." Countries are turning inward, industrial policies back, resilience has replaced efficiency as the buzzword of the moment.

Bethany: Then, there's China. China undercuts one of the most powerful political myths in the West, that manufacturing is the path back to middle class jobs. I was stunned to learn this from his work, that even in China, the world's factory, manufacturing employment has been falling for more than a decade.

Luigi: Which leads to Dani's most provocative claim. The future of work is overwhelmingly in services, even in poor countries. The real question is whether we can make service jobs productive, well-paid, and dignified, or whether we resign ourselves to an economy built on bad jobs. Let's welcome Dani Rodrik, who is the Ford Foundation Professor of International Political Economy at Harvard Kennedy School of Government, and the author of Shared Prosperity in a Fractured World.

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Luigi: One of the most interesting aspects of your book is your emphasis on services, because this tradition has been that countries succeeded by industrializing. You're saying that this story cannot be replicated anymore, and that countries need to develop by emphasizing services. We need to increase the productivity of services. Can you elaborate on these points?

Dani: First, let me say that it's not a conclusion that I came to easily, because it does mean, essentially, getting rid of all my intellectual capital, having essentially done most of my academic work on the importance of manufacturing, industrialization on the one hand, as the key to economic growth, as key to rapid economic growth in the past. Also, all my work on international trade and globalization, because if I'm now focusing on services, most of which are actually non-traded.

A lot of the discussion on globalization and trade really becomes second order in nature. It is not a conclusion that I've come to easily, but I think it's an inevitable conclusion if you look at economic development from the perspective of how do we get people into better jobs. I think the most telling thing for me as to why manufacturing can no longer be relied for generating employment, is that China, which is, of course, the undisputed leader in manufacturing, and it continues to increase production and exports of manufacturing, is losing tens of millions of workers in manufacturing over the last decade or so.

My Chinese data source tells me that, in the last 15 years, China lost 30 million jobs in manufacturing. Which is greater than the total sum of workers in the United States and Germany in manufacturing taken together. There is simply no way, during the Biden administration, which I think made a significant, and quite serious effort to rebuild the manufacturing base. Manufacturing construction went up, and we have now new, shiny semiconductor factories being built.

It doesn't show anywhere in the jobs data, manufacturing jobs as a share of total employment has continued to fall during the Biden administration. It has continued to fall under the second Trump administration, despite all the tariffs. It's just-- If you look at the numbers, you cannot avoid the conclusion. There's no future in manufacturing when it comes to jobs. Now, I have to be very careful. There are a lot of other reasons you might care about manufacturing.

For national security, some manufacturing segments may be very important. For innovation, there are certain areas in manufacturing, advanced manufacturing semiconductors that might be very important for national innovation. Manufacturing has always played a disproportionate role in that, but if you're trying to create a middle class society, generate good jobs, and worry about a social cohesion, which is a lot of what is driving now, this, both I think the erosion of democracy, and the backlash, manufacturing is not the answer.

That is a basic statistical fact, I think, and it's just basic math. That's not where the jobs are going to be. Look at all the job projections that you see. You look at the Bureau of Labor Statistics in the US, the 10 largest occupations in the next 10 years, for example. They're all non-traded services, long-term care, retail, food preparation, warehouse work, and it's a different kind of world where we have to start thinking, if we're going to get broad-based development and good jobs for people, and create middle-class societies, it'll have to come out of services. We just simply have no other choice.

Bethany: Make the case that this matters beyond the debate about services versus manufacturing, that it matters because the creation of a sustainable middle class is actually core to the life, at least, most of us want to live, and the political system in which most of us, I think, still want to live.

Dani: There's a long line of thought that goes all the way back to the ancient Greeks and Aristotle about how the middle class is essential to a democracy. You cannot have too much income polarization and inequality if you want a sustainable democracy, but I think essentially what creates a middle class, is a sense of contribution to society through work that people do. It's a social recognition, the sense of dignity and identity that, that work brings along.

Economists, I think, have long had a blind spot on this issue, because I think going back to Adam Smith, economists always think about in terms of consumption, and maximizing consumption possibilities. Work actually is a negative thing. The only thing that work is good for is to give you the money, so you can actually buy more stuff. It's leisure that enters your utility function.

I think that has made economists have a blind spot that when you have a series of displacements, whether it's technology, whether it's globalization, whether it's austerity, that is creating joblessness, and I think economists have tended to be a rather kind of a mug attitude, "Just get a training, or move somewhere else, and maybe we'll provide you for compensation."

Whereas, we have studies that show that, in monetary terms, this utility of losing a job might be five or six times the cost of actually the foregone earnings. That sense of social recognition and identity that jobs brings, is critical for social cohesion and, ultimately, I think our political system, which is, I think, why we need to pay attention to it.

Bethany: I got into an argument with my parents a few years ago about manufacturing versus services. They were lamenting the decline of manufacturing jobs, and I said, "Why is a service job really any different? You're just providing something somebody needs." I've thought about it subsequently, and I think the big difference is that, it would be a different kind of capitalism if we have economy built around service jobs, because manufacturing jobs can be leveraged to create profits, whereas service jobs are one, and it's one person creating one thing, and that person is irreplaceable in a world of AI, but they can't be leveraged.

In other words, if somebody's doing a mani-pedi, they can't be leveraged. If somebody's a skilled nurse providing a service to somebody at home, they can't be leveraged. Isn't this version of capitalism maybe more fair and more equal, but fundamentally different?

Dani: It is different. I think organizational forms are very different. There are some kinds of services that look like factory work. Amazon has essentially turned a warehouse work into factory work, and uses pretty much even more advanced Taylorist principles of division of labor, and technologies of monitoring and surveillance to intensify work to the maximum extent possible.

Others aren't. Many personal services, especially long-term care, for example, which is one of the largest occupations, requires a personal touch. It's not tons of workers working in one place together, so it's very different. Then, there are tons, of course, small and medium-sized enterprises that provide services, and those all are very, very different. I think the challenge here is that manufacturing has been historically very easy to deploy new innovations, and new technology.

That's why, so in fact, when we're talking about manufacturing losing jobs, it's because it's becoming so productive, that is, that you're replacing workers with robots or machinery, and labor productivity goes up, so output goes up, but employment goes down. Historically, it's been very difficult to engage in that kind of productivity increase in services. As the old joke among economists goes, "It takes as long to conduct the Beethoven Symphony today as it did in the 19th century."

Bethany: I had not heard that joke. [chuckles]

Dani: This is changing. Here is, I think, another reason to be optimistic. Our new technologies are making services-- If you look, actually, over the last decade, in many services such as retail, restaurants, logistics, labor productivity has actually increased at the same rate, if not at a higher rate than in manufacturing. This is very different. Think about what Uber has done to ride sharing, what Amazon has done in warehousing and retail.

Now, of course, you have both sides of the new technologies there. On the one hand, you have the potential of new technologies to increase labor productivity, and therefore, increase wages, especially at the very bottom, which is what has happened over the last decades or so. At the same time, when technology, these new innovations are purely being controlled by the platforms, or the monopolies, or the large corporations, you also get not necessarily good jobs.

Of course, warehouse jobs in Amazon or gig work, Uber hasn't turned out to its potential, because of the intensification of work, because of the nature of the technologies that are being deployed are those that are purposefully designed to eke the maximum surplus out of the workers. Also, you need the public, you need governments to put their thumbs on the scale, in terms of pushing for the kinds of technologies that are more worker-friendly, so that some of the productivity benefits of these new innovations can be more broadly shared.

The good news is that, we know that we can achieve some increases in productivity through these new innovations. AI, of course, is a completely different level. My worry is that if you just leave that to Silicon Valley, or the large platform companies, you're just going to get-- Maybe even if you get higher wages as a way to convince people to show up for work, you don't necessarily get good jobs where individuals have a sense of agency, control over their lives and so forth.

Luigi: I think that, basically, in many service jobs, there are no economies of scale. Massage or manicure or whatever is very hard to have economies of scale. In some, you have economies of scale. Think about Starbucks, or even better, Netflix. We are all old enough to remember Blockbuster. Blockbuster was in the service business, and the productivity increased tremendously. Why? Because there are no people involved anymore.

The moment you increase the productivity, you destroy the jobs. Blockbuster was employing a lot of people. Netflix is employing nobody to deliver the tapes. The tapes are self-delivered, and, sure, employ some people administering, et cetera., but it's a completely different sector. I don't see in the near future, how the services can produce high productive jobs for the masses, especially in developing countries.

We had Raghu discuss his book on the podcast a year ago, and he's also sharing your view that we should push into services. My question to him is, you have a third of the Indian population who is illiterate. What kind of jobs do you give to them that are good jobs in services now?

Dani: That's a really important question. It is not as if we are saying, "Okay, should you go down the industrialization path where you have the option of moving a third of your workforce into manufacturing, as traditionally and historically successful countries have done, or should you go down the services path which is untested, and has all the problems that you're mentioning?"

The first option doesn't exist. It's not going to happen. You can completely shut off your economy, and try to develop in autarky, see how much that's going to get you. If you remain a semi-open economy, where you're forced to compete with the Chinas and the Vietnams of this world using technologies that are roughly similar, there's no way that you're going to get more than 10%, 15% of your labor force into manufacturing. Then, you have to worry about what you're going to do with the rest, 85%.

Either you have a poor services economy in the future, or you're going to have slightly richer services economy in the future, because I don't think manufacturing is an option. Then, the question becomes, what is it that you do? I concede the point, which I think is important for policymakers to realize that under a services-based model, even in the best case, you're not going to grow at East Asian rates.

However, because it's a bottom-up strategy, because you're actually creating not highly productive, but more productive jobs than currently exist in these micro enterprises, or highly informal enterprises in developing countries, it's a more inclusive strategy. This is not a trickle strategy like the export-oriented, where you're getting the export-oriented companies getting rich first, and then all the wealth and riches are going to eventually trickle down.

The quality of growth under a successful services-based strategy would be higher actually. That's the upside for a services-based strategy. It's not a conclusion that I reach willingly. I reach that conclusion, because there is simply no option. If my story doesn't convince you, Luigi, that the services-based strategy can deliver some development, the alternative is not to say, "Let's go manufacturing." The alternative is just simply to be very pessimistic about the future.

Luigi: When you look at the United States, what are you going to do to create this good job, to strengthen, or recreate the middle class? Suppose for a second that Gavin Newsom is elected president in 2028, and he appoints you head of the New Economic Council or whatever. You pick the choice. What are you going to suggest that he should do to recreate? Because at this point, I think we need to recreate the middle class in America.

Dani: As I argue in the book, first, I don't think anyone, including myself, has the answer. I think we will need a lot of experimentation. That's one of the underlying themes in the book. I think where we start is by building on things that we already know have worked. The Biden administration actually made a good beginning, but a lot of that was overshadowed by their focus on manufacturing.

When we think about the signal industrial policy measures of the Biden administration, we think about the Chips and Science Act, which was heavily focusing on manufacturing and semiconductors. We think about the Green Transition. Again, for national security and climate change reasons, both of those were important, but they didn't address the question of services in a major way.

Below the radar screen, there were some interesting experiments that I would build on, and enlarge. That's strategy number one. Those were things like the Recompete Program, or the Good Jobs Challenges, or the regional challenges where some money was set up by the Department of Commerce, essentially, competitions for localities to come up with regional plans. That is to say, "Here's our vision for the future. This is what we produced in the past. Here's what we want to produce in the future. Here are a bunch of cross-sectoral coalitions and alliances that we've built together between our economic development office, our mayor's office, our workforce training, and community college workforce training programs. Here's our idea."

The idea was that the federal government puts up a pot of money, and invites competitions from local authorities to come up with visions about how they're going to develop, and develop their workforce, develop small and medium-sized business enterprises, moving away from the model of, we're basically simply trying to subsidize large-scale firms that, if they don't go to one locality, they will go to another, so on that, they don't actually create much.

There's already these models of local cross-sectoral economic development partnerships that in a number of cases have been quite successful. I would try to stimulate such programs. I think that would be plank number one. I think the second very important federal plank would be to think about, going back to our earlier discussion, how do you stimulate new technologies that are much more labor-friendly?

Technologies that would increase workers' agency autonomy, the kinds of tasks they can perform, allow them to perform much more sophisticated tasks, making those jobs both better, and also providing higher degrees of customer satisfaction, reducing costs down the line, built on the model of the ARPA model in the United States. We have an Advanced Research Projects Agency for defense that's called DARPA. That's the original ARPA.

We have it for clean energy. We have it for health. I think we need it for workers. I talk in the book about an ARPA-W. It is an ARPA for workers, an agency that will be focusing on developing frontier technologies that are more labor friendly, that is steering technology in that direction. I think in long-term care, which is extremely important, this connection, because it is the largest single occupation going forward. In some sense, and it's also the most difficult one to think of in terms of how you're going to turn some of the worst jobs in the United States into good jobs.

In my view, an important part of this is going to be through the introduction of new technologies that actually enhances the ability of care providers to provide much more specialized services somewhat along the lines of how the nursing profession developed over time, for example, with the introduction of new medical devices, and diagnostic devices that they were enabled to do things that only physicians could do before.

Now, before those innovations could actually be deployed and disseminated, they had faced the same kind of pent-up demand, because, if the institutional organizational backdrop is that you cannot reap the benefit, so that, for example, a nurse that is providing the same service as a physician can get reimbursement from the federal government only at 50% the rate that the physician gets, you're not necessarily going to have a lot of demand for medical facilities using nurses to provide, perhaps, those innovations.

There's a similar problem with long-term care, is that a lot of the benefits of increased sophistication on the part of caregivers, so that you can raise their wages, would be felt in the form of reduced rates of emergency admission into hospitals, or shorter hospital stays, reduced rates of chronic diseases. These are a huge reduction in cost, but are not necessarily benefits, or profits that would show up on the profit and loss statement of long-term care providers, because they are cost savings that appear somewhere else in the health system.

What we need, therefore, is also to think about organizational innovations that are going to be able to internalize some of these effects. This just points to the difficulty, and the nature of the task that we face. I think the first step to addressing questions and difficulties like this is to realize what a priority it is in the first place. That's what I'm trying to point out.

Luigi: Historically, it was not just productivity that gave us good jobs. It was productivity plus power of unions. We had periods, and you know better than I do, that at the beginning of the Industrial Revolution, productivity was phenomenal, but was not good for workers. Inevitably, the service economy tends to make unionization more difficult, because one of the big advantages of the old factories, is that we're bringing everybody together in the same place, making unions easier to form. Now, they're much more difficult. How do you make sure that this productivity is somewhat shared with a broader workforce?

Dani: Yes, you're right. Historically, there have been three mechanisms through which you get good jobs. One is productivity. The other is workers' self-help, and collective bargaining, and the third has been government mandates, minimum wages or work standards. I do think there's room for higher minimum wages in the United States, for example. We don't want to go all the way to then having to face the kind of trade-offs that economies like the French economy, or the Spanish economy face, where you have relatively high collective bargaining wages or minimum wages, but then it shuts off certain segments of the workforce from being able to enter the labor force, because of being priced out due to high wages. That's the problem that productivity addresses.

Now, the unions, you're right that many service jobs are not very conducive to unionization, but there are other mechanisms. There are sectoral wage bargaining is one way you can address this in things like gig work, and also that you can have sectoral collective bargaining without the high rates of union penetration of union incidents. If you're interested in increasing the collective bargaining power of workers, I think there are many other ways, and it doesn't necessarily rely on union formation, and workers being in close proximity, developing a class consciousness, and leading to unions.

Bethany: Running through all of this, I think, is a theme of AI, and who controls it seems central, both to the future of democracy, to how we can get more productivity out of service jobs, to how we can make sure that productivity is broadly shared. In that world, what do you think is the least bad governance model for AI?

Dani: I do think, because we don't have a good idea of how to regulate AI, I do think we need to regulate it, but I think we need to have different models of regulation compete with each other. We need to encourage experimentation and regulation. Now, that cuts against the gains from coordination, and market size, and network effects and so forth. It's a trade-off we need to make that there are benefits from regulatory diversity, especially in domains where we know very little about what's going to work. We need to pay the cost of that regulatory diversity in terms of some loss of efficiency, and technological innovation, but especially in this domain where the results are so uncertain, will it actually want to encourage a world where there's going to be different models, and different types of regulation, including at the subnational level.

Luigi: Now, my last question, Europe is experimenting a lot with regulation. Do you have something to say about that?

Dani: No. I think Europe has been more adventurous on regulating big tech, and I think that's great. I do think that Europe is structurally out of kilt in the sense that too much centralization that prevents different countries going around their own way, and doing enough experimentation at the national level, but not so much centralization that EU can take a big leap forward, and develop its own vision for the future.

I think the EU is stuck in this halfway house that forestalls national-level experimentation, yet doesn't have the kind of centralization of authority, and political legitimacy to promote developing its own vision for the future as Europe. That's unfortunate, because I think the world needs Europe. Europe is the only remaining part of the world that is still democratic, and has a social and economic model that still generates significant amounts of wealth. I do very much wish that Europe will pull its act together.

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Bethany: If you're enjoying the discussions Luigi and I are having on this show, there's another University of Chicago Podcast Network show. You should also check out. It's called Not Another Politics Podcast. Not Another Politics Podcast provides a fresh perspective on the biggest political stories. It's not told through opinions and anecdotes, but rather through rigorous scholarship, massive datasets, and a deep knowledge of theory.

If you want to understand the political science behind the political headlines, then listen to Not Another Politics Podcast, part of the University of Chicago Podcast Network.

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I liked that he was trying to find an optimistic way forward, given the state of manufacturing, but as I think he even admitted, it's a forced kind of optimism, in the sense, that it's better than the alternative. I think we have a long way to go to make service jobs into the kind of jobs that can be sustainable for human dignity. Is it possible to give a job more value than society has subscribed to it by dint of force?

Jobs like working in a nursing home, or being a home healthcare aide are incredibly critical, and going to be all the more critical with our aging population. They should be incredibly well-respected jobs, but yet we treat those jobs in terms of their pay, and what we demand of the people who do them, as if they're at the bottom rung of our society. Can you take jobs like that, that are necessary service jobs, and make them be elevated to a place where people can earn a decent living, and earn respect for doing them? Or is there something innate in the makeup of a job and its history, that it becomes impossible to elevate it?

Luigi: I think it's definitely possible. It requires a different structure of society. Think about the priest. It's a service job. It's not particularly well-paid. It's incredibly, at least historically, very high prestige. It is possible to give prestige. Then, think about the military. In a lot of countries, the military is highly paid. It's prestigious.

Bethany: I get that. That's helpful. That's still not quite the question, because those jobs started out as prestigious. They always were. Is there an example that you can think of? I actually can't, of a job that was absolutely not prestigious that was viewed as the bottom of the barrel that somehow rose to become a prestigious job. Maybe medicine is something like that. I think healers were always valued. I don't know. I struggle to think. Maybe journalists, actually. [laughs]

Luigi: Actually, surgeons. [crosstalk]

Bethany: Oh, no. Although journalists are going back to where we came from, but [laughs] maybe that's a good example.

Luigi: Oh, the surgeons were considered no better than barbers. Now, they are at the top of the pyramid in terms of--

Bethany: Okay, so maybe.

Luigi: I think it is possible. Also, if you think about some of the craft and job, painters, especially successful ones, have always been considered highly. Even sculpturer has been considered lower level. Now, they are among the most prestigious jobs. I think it's possible. I want to first spend more time understanding how manufacturing jobs became so profitable and so desirable.

At the beginning of the Industrial Revolution, productivity shot up like crazy, but wages didn't. Wages in manufacturing started to rise much later. The question is, why they rose later? I think, in part, could be unionization, but unionization, especially in the United States, came quite late to the game. A couple of years ago, we had Bessent as a guest, and he was saying that part of the reason was that the new job required new specialization, and so they became more segmented, and they were earning some grants. I think that, that's one factor.

The other, as we got some more and more capital in production, the risk that the workers could damage that capital became much bigger. You have started to pay jobs as a way to motivate people to behave well, rather than as really a compensation for the marginal productivity of labor. Think about if you work in chain production, it's enough that you put a screw in the wrong place to stop the place for many hours.

It's not a coincidence that Henry Ford is the one who invented efficiency wages, and started to pay people three times as much. As long as they behave properly, and by the way, he required also them not to drink, and to behave properly in their personal lives. It came also with some moral aspect to it, but that is one of the sources of the increase in labor wages for the manufacturing sector.

My puzzle with what Dani was saying is that if you make the typical service job more productive, I'm not so sure that you're going to see a massive increase in wages, because you're going to see a lot of people being fired, and we do have experience. In the conversation, I mentioned the case of Netflix when we had Blockbuster distributing their movies. You remember that the productivity there was not very high.

Now, the labor productivity went to the roof, because, how many people do you need to distribute the movie through Netflix? Very few, and maybe the couple of people who are at the very top are paid more, but a lot of other people are unemployed.

Bethany: Yes, but I think there are different kinds of service jobs. There are service jobs that are leverageable, where people can be replaced by systems, or by a different method of distribution, but there are service jobs where people are not replaceable, and at least in terms of home healthcare and nursing care aids, and service like getting a mani-pedi, which I did yesterday, those jobs are not replaceable.

Those are not jobs where there's any kind of leverage. In other words, you need the human to do the job. They can't be replaced by a system. I could be wrong. Maybe they're robots who will be taking care of our elderly at some point, but I think we're a long way away from that. I think we have to be careful what kind of service job we're talking about, whether or not the people can be replaced.

Luigi: Are you sure that they cannot be replaced easily?

Bethany: I don't think. I mean, I would not have a robot do my hair. [laughs] I've not yet seen robots in mani-pedi salons. I have not seen robots being rolled out in nursing homes. I don't see how you get when you can have a home--

Luigi: In Japan, there are robots in nursing homes. I think that part of the story is that labor is so cheap that why to use it? If you go to a car washer, you see a lot of people still washing cars by hands, but it's not because you couldn't do it automatically. There are the cash washers. It's very expensive, and if the labor is so cheap, why to use the car washer?

Bethany: Well, I think we'd have to have a deeper dive on this to know what jobs labor is replaceable, and what it isn't. I'm going to stand by my argument about home health care. If my mother needed a home health care aide, I would not be comfortable with turning a robot loose on her. [laughs] I think we might be a ways away from that, but nonetheless, going back to the question, then, is it worth subsidizing those jobs if they can be done more cheaply?

Should we not allow them to be done more cheaply, so that people have time to adjust? Isn't it David Autor's argument that, had we given people time to adjust to the China shock, had we eased the adjustment, the societal disruption would have been less? Isn't there an argument here for some sort of government subsidization that allows people time to adjust?

Luigi: Yes, but the subsidization needs to be very targeted, because you don't want other people to specialize in the wrong direction. It should be really targeted more to our older people. It's not obvious. I understand the dignity of work, but it's not obvious whether what you want is simply to provide them some supplemental income, or to make the supplementary income contingent on their continuing to work, because in some cases, it might be much cheaper to just give them a supplementary income, and that's it.

Bethany: No, and you're right. It's really complicated because it's not just supplemental income versus subsidizing a job, but also by age, and who do you decide what age someone has to be to qualify for a subsidized job, if that is indeed the thing? Because I understand your point, if you allow a subsidized job for a 21-year-old, the chance that they're going to figure out what to do in the new economy is less likely. It's a really interesting question.

You'd think that should almost be an area that people should start to specialize in school, like how to design this kind of program, or not. [chuckles] Just let the market do it and see what happens, I guess. I'm not sure I like that answer.

Luigi: No, I think that would be a little bit dangerous, especially, I think, from a social point of view. Your view is that we need to find a way to redistribute some of the plentiful production that will come along the way, and then the question is, what forms this redistribution should take place?

Bethany: Yes, mine is whether labor was meant to be key to our lives or not. I think it has become key to the human makeup, and I think rewiring humanity to feel good without being productive is really interesting. A lot of this self-help stuff now about how to live a happy life talks about finding a way to be a value, and a way to be useful. I think if you take away work from people's lives, that whole question gets a lot more complicated.

Luigi: It does. First of all, maybe we should teach people also how to enjoy their leisure time more effectively. I think that more educated people enjoy reading, watching theater, writing on their own. These can be very satisfactory activities that are not necessarily for production, but are pleasant. It would be good if, on average, people would work less. Remember, Keynes was predicting that we'll work very little.

Bethany: Yes, I know.

Luigi: I think they might have missed by 50 or 60 years the change. We saw a dramatic reduction in number of hours worked between, let's say, the early 19th century, and the early 20th century, or the middle of the 20th century. From the middle of the 20th century to today, I don't think that the number of hours worked has really plummeted.

Bethany: Yes, but I don't know about you, but I always enjoy my leisure time more when I feel like I've earned it. Maybe that's just in my upbringing, and maybe you can rewire people not to feel like they need to earn their leisure time. I don't know. That's a question. Is that innate to human beings, or is that a wiring issue, nurture versus nature? What I fear in this, I've seen some numbers suggesting that upper-income people have worked more and more.

Looking at the overall numbers of hours worked is really misleading. I worry that it becomes this-- The well-off get to work, and get to enjoy the feelings that come with being a productive member of society, and from producing, and from accomplishing somebody and everybody else. You get to go try to figure it out. You might say that, that's the opposite of the way the 18th century when rich people were people of leisure for the most part and that, therefore, this is a good inversion. Again, back to that question of human dignity, I'm not sure it is a good inversion.

Luigi: Really, in a sense, every time I go skiing, for example, it's very painful all the phase up to the moment in which you're up the mountain. You have to dress up, wear your boots, it's cold. I always think about, if you were to pay me for doing that, I wouldn't be doing it, because it's so painful that will not justify this. I do it only because it's fun. There are a lot of activities that now are part of work, but could also be part of fun.

When you compete in a sport, there are some people who do it for business, but a lot of people do it for fun. You write and you are so good that major newspapers publish what you write, but a lot of people like to write. Yes, there is a satisfaction that people read you, but is the pay the most important aspect of what you're doing? No.

Bethany: The process of producing something, and putting it out there is really important to me. It's really important to my brain. If you took that away from me, and I could go skiing every day, I don't think I'd be particularly happy. Then you could say, "Well, Bethany, you can write for yourself, even if nobody ever reads it, and you don't get paid any money for it." I don't know, maybe.

My argument is that would require a pretty substantial rewiring of my brain. I suspect that might be true of more people than not, that being productive in a way that society recognizes as productive for my work, while not always fun, is important to me on some deep level. Again, that might just be the way I was raised. Maybe it is possible to rewire people.

Luigi: Maybe it is the Protestant ethic.

Bethany: Maybe it is. [chuckles] Maybe it is.

Luigi: As a recovering Catholic, I see a lot of people who don't do anything. They're happy. Just think about the priests, with all due respect, many of them. Oh, the monks. The monks basically don't do anything except praying, call it work. I think that the Greek, Roman traditional philosophers, they were philosophizing. You can consider that work, you can consider not, but certainly it's intellectual activity that is very enjoyable.

Bethany: All right, Luigi, I'll make you a deal. As AI comes from my job, and I am no longer employed. I'm getting my UBI from the government. I will go stand out there on the street corner and preach.

[laughter]

You can come, maybe. Maybe if I won't need the quarters you toss in my bag, as you walk by, maybe you can, I don't know, buy me a glass of wine instead. That'll help me preach all the better. Okay.

Luigi: Deal.

[laughter]

Bethany: Anyway--

[music]

Matt Hodapp: Capitalisn't is a podcast from the University of Chicago Podcast Network and the Stigler Center in collaboration with the Chicago Booth Review. The show is produced by me, Matt Hodapp, and Lea Ceasrine, with production assistants from Utsav Gandhi, Matt Lucky, Sebastian Burka, Andy Shi, and Brooke Fox. Don't forget to subscribe and leave a review wherever you get your podcasts. If you'd like to take our conversation further, also check out promarket.org, a publication of the Stigler Center, and subscribe to our newsletter. Sign up at chicagobooth.edu/stigler to discover exciting new content, events, and interviews.