SPEAKER_00 0:02

Hi everyone, this is Reasonable, a show about economics, business, and politics. And I'm Muscarivos. I'm very excited to speak with my guest today, Professor America Elizabeth Hummel. Professor Huffman has had an extraordinary career in economics and academia that spans over 50 years. She was a pioneer in the fields of experimental and behavioral economics, has written dozens of academic papers, and has thousands of citations credited and awarded. Professor Huffman has also had an extensive career in university administration. She has held the positions of Dean, Provost, and President in 2000, becoming the 20th president of the University of Colorado system. She served on numerous nonprofit and for-profit boards, including the National Science Foundation and Target Corporation. She's speaking with us from her home in Iowa. Professor Hoffman, thank you for joining me.

SPEAKER_01 0:55

You're very welcome. I'm happy to be here, Oscar.

SPEAKER_00 0:58

So I just wanted to start with people heard me say experimental and behavioral economics. So I was wondering if you could just give us a brief introduction on what is experimental behavioral economics and how is it different from what people would think is regular economics?

SPEAKER_01 1:17

Well, behavioral economics is what people really do, as opposed to what we theorize they should do or they might do. So, and experimental is the way that we get at those questions in behavioral economics. So for, let me see, what would be a good example? Um, why, for example, do people not save despite all the incentives we give to them to save? It turns out it it has a it has a behavioral reason that has to do with your how much what your time horizon is. And if your time horizon is very short, you're less likely to save, even even if your mother and your father and everybody tells you you've got to save because someday you will be as old as I am and you will want to have money. It it's very hard for people to absorb that when there are things they want to buy today.

SPEAKER_00 2:22

Is it fair to say like before experimental, before experimental behavioral economics was was that not accounted for in the field? Things like that?

SPEAKER_01 2:33

That's correct. So the field was very theoretical. And for that reason, a lot of students had trouble connecting with what they were learning in economics. Um experimental economics really started in the 1960s, but it didn't become accepted at all in the economics field really until the mid to late 80s. Um and uh and it what happened was that there was a market crash in 1987, and the theorists had said that we were beyond market crashes. Well, I've lived through five market crashes. Um and the experimentalists had already demonstrated that you could produce crashes in the lab in the laboratory, but nobody was listening to them. And then the crash of 87 happened. I mean, I remember I remember that morning coming to work and the crash was happening, and my co-author, my eventual co-author, who ended up winning the Nobel Prize, not me but him, um his phone was running ringing off the hook that day. And this is when all phones were handheld phones. It was not, it was not the kind of cell phones we have today. So he was sitting at his desk in Arizona fielding phone calls all day from economists and and um writers, journalists about this supposed new phenomenon of the market crash. And that was that was the beginning of the acceptance of behavioral economics. And that was a perfect example of something that was discovered in the laboratory that was conflicted with the theory at the time, the accepted theory at the time.

SPEAKER_00 4:39

So if I'm if I'm correct, you actually didn't start in the traditional field of economics, right? Like I think I read a word that I didn't understand, which was Cliometric. Did I is that what it's called?

SPEAKER_01 4:54

Cleometrics. Clio is the root Clio is the muse of history, and metrics is metrics. So it's basically the study of data or the use of data in economics, in economic history. So I started out as a as a historian. I actually got a PhD in history, and from there I I migrated into economics through my connection to cleometrics.

SPEAKER_00 5:28

And then you thought there's this new field of economics, I'll get into that, called experimental. Is that right?

SPEAKER_01 5:35

That's correct. And when I was a graduate student, uh one of the um founders of the field, Charles Plott, was one of my was a professor at Caltech where I was studying in graduate school. And basically, I had one more course I had to take at the end of my course, courses at the end of two years in coursework. And my advisor at the time said, you've got to take Charlie Plott's experimental course. And I said, Why? I'm in economic history, and he said, Because that is the next big thing. And you you can't leave Caltech without taking a course in experimental, and that changed my life.

SPEAKER_00 6:18

Wow.

SPEAKER_01 6:19

So I did some work in economic history, but most of my highly cited work is in experimental/behavioral economics.

SPEAKER_00 6:30

Which kind of brings me to my next question. You you did a ton of research in experimental economics, you know, you worked in all these laboratories, and it kind of struck me that fairly late into your teaching career you were still teaching econ 101. Why keep teaching econ 101?

SPEAKER_01 6:48

Because that's where the students get their first introduction to economics. And if econ 101 isn't taught properly, then the students' introduction to economics is all messed up. And actually at Iowa State, we take teaching of econ 101 very seriously. And in fact, since I taught 10 econ 10, I eventually, I eventually stopped teaching it because they wanted me to teach more experimental economics. But um, but now we have a coordinator of econ 101. It's such an important course that we have somebody who makes sure that the content is pretty much the same across all the courses and takes care of it and makes sure that the particular the graduate students who are teaching it are trained to teach it well. So we take very seriously. It's it's our it's one of the highest enrolled courses in the university.

SPEAKER_00 7:52

Most of the public, right, the general public does not study economics. Uh what are some concepts from economics that the general public you think, hey, if if they applied this to their lives, you know, they would they would have better outcomes.

SPEAKER_01 8:09

So most people think of markets as whatever the price that's they either think of markets as bad things or they think of markets as sort of perfect things that uh that tell you exactly what the price and quantity should be. So you so put I think that's not just your generation, it's my generation too. I mean, I think the average person has a sort of bifurcated view of markets. Either they're wonderful and they they take care of everything, or they're horrible because they don't take care of the poor of the poor. When in reality, the the the correct answer is a little bit of both. And so certain kinds of goods have what we call external effects. So, for example, when you drive your car, if especially if it burns gasoline, but even if it burned, even if it's electric, I can argue there are some externalities associated with the use of electricity. But certainly if you drive a gasoline-powered car, you're polluting the environment. Every time you get in the car, it's sending CO2 and other noxious gases into the atmosphere that for that have other people have to breathe. And I'll tell you, from living in places that have high pollution, I'm an asthmatic. It has a big effect on people who are prone to asthma. In fact, this morning I was a little worried I was having an asthma attack and wouldn't even be able to do this. Um, so every time you drive that gasoline-powered car, it puts stuff in the atmosphere that people like me, that make people like me sick. So you are imposing an externality on everyone who has to breathe the air. And the the the worse the air is in a in a particular community. I mean, central Iowa's not bad, but um the front range of Colorado is horrible for for polluted air. And where I grew up in the Northeast is really bad for polluted air as well. So um, but you don't you don't you don't pay for that. Now you may pay a gas tax, and part of the gas tax has a little bit of effect, but the gas tax is really for to pay for roads, which are important as well. So when you drive on the roads, you also have the external effect of just having a little bit of wear and tear on the road. Every time you drive down that road, and the gas tax is designed to take care of that, but the gas tax is not designed to charge you for the effect it has on my lungs, for example.

SPEAKER_00 11:04

Sure. And I like the way you worded that, and I think about you know, most people kind of fall into the buckets of okay, the the market is is a bad thing, we shouldn't trust it, etc. Or, yeah, it is a perfect being and it it can calculate everything and we just need to leave it alone. And I think you know, something we would like to do on this show is contemplate, you know, what you just said, which is okay, it's in in this situation it's a little bit of both, in probably most situations, it's a little bit of both, right? And how do you find that balance? And uh I I want to kind of hone in on that word to use externalities, because um the this concept kind of changed the way I view um regulation, for example, which is um and you please correct me if I'm wrong here, but so the the externality is when you know two parties, there's a transaction, and a third party that's not part of that transaction is affected by that, either in a positive way, because we you kind of gave a negative example, but there's also positive externalities, right?

SPEAKER_01 12:16

Exactly. That's it, that's a very that's a very good definition. So do you want me to talk for a bit about positive externalities?

SPEAKER_00 12:24

Yeah, if you don't know.

SPEAKER_01 12:25

I think that's a concept. Negative externality is generally easier for people to understand when you when you explain it in terms of sort of polluting the air and what it does to people like me who have asthma. Um it it most people can get that that idea. They don't know exactly what to do with it, and that's the next step. But let me first talk about positive extra knowledge, because again, you so you may, for example, let's look at schooling, for example. If if if the population is better educated, there's lots of evidence that people live longer, they're more productive, they um they're healthier, they tend to have fewer children, um, so they in in a very real world, in a very real sense, having a more educated population is a is a positive, a positive impact. But when you go to when you pay for college, for example, you're just paying for yourself. You're not you're not reaping the benefits of what you're giving to other people. Now, public the public spending on higher education is one way, so scholarships, for example, is one way to compensate people for the for the social benefit of um of having a more educated population. That's probably the best, that's one of the best, one of the most easy to understand examples. And there's a reason why we provide elementary and secondary school free for people, and that's because being educated up to a certain point is so valuable that it's it's worth it to the society to pay for it.

SPEAKER_00 14:31

Would vaccines be another example?

SPEAKER_01 14:34

Vaccines are another perfect example, exactly. Very controversial, unfortunately, these days, but that's a perfect example. So by vaccinating the entire population against measles, which we used to do, you're protecting everyone, even those who because of their health, can't get vaccinated. So there are always some people who can't get vaccinated because it would make them sick. And so we protect those people by by vaccinating everybody, and we protect everybody else by vaccinating. We have eliminated measles, smallpox, polio from practically the entire world, and now they're coming back because we're not vaccinating.

SPEAKER_00 15:27

So, in in that example, let's say the pharmaceutical company is selling this vaccine and you, the consumer, purchase it and take the vaccine, the positive externality there would be that you're helping build herd immunity. That would be a positive externality because those people are affected even though they weren't part of that transaction.

SPEAKER_01 15:47

Exactly. Exactly. And so by allowing a fairly large number of people who do not get sick from the vaccine to opt out of it, you you lower, you lower the herd immunity and you you invite another um pandemic.

SPEAKER_00 16:12

Sure. So I read a quote that you were giving to Caltech, actually, you mentioned it earlier, uh, and you said that in these public policy um courses that you teach, you ask the students to check in their politics at the door. That's right. Can you elaborate on that a little bit?

SPEAKER_01 16:36

What I wanted to do, what I used to do, I'm I'm retired now, but what I used to do was I wanted to, I wanted the students to consider all perspectives, from the most conservative to the most liberal. And so I did not want to hear from them what their politics were. And I did, I they didn't want to hear from me what my politics were. And so my goal in these courses was to get students to think out, I guess a very a way to say it is outside the box for them, to think about all the possible ways that you could address this particular problem. I started introducing a unit on pandemics, for example. And I would ask students to write a paper, to write a short, like one-page essay on why we should vaccinate, or or an argument, if you wanted to, an argument against vaccination. But it had to be grounded in economic theory and economic data.

SPEAKER_00 17:48

You know, just hearing you talk about that's kind of the attitude I think of people listening, maybe of obviously everybody has their political point of views, and as we start talking about some of these issues like vaccines, you know, people might think, okay, one thing or another. But um kind of to your point, is how do you break down, you know, hey, we should go this route, whether it's government intervention or hey, maybe government intervention is part of the problem in this scenario. And I I find it's harder and harder to really break down the specific issues and see on this issue, you know, is speaking of externalities, is it fair to say you know the government's role is we want to elevate positive externalities and minimize negative ones?

SPEAKER_01 18:43

Yes, or I I think a better way to put it is we want to force the consumers to internalize, that's the way we put it, to internalize the externalities. So we want people to pay the marginal cost or the that they're that they're imposing with negative externalities, or receive the marginal benefit that they're not getting from positive externalities. And um the the earliest work on this goes back to the 19th century, and it was basically the idea was you would you would either tax people or provide a payment to people, subsidies, and um and then you would try to figure out what that marginal cost or marginal benefit was. And by marginal we mean additional, but the additional cost that this person is imposing on other people, or the additional benefit this person is giving to other people. Since then, there I mean economists have suggested you can do things like ban a particular product, or you can force everyone to get vaccinated except those who would be who would get ill from vaccines. One is you work with the market, one is you say the market is not working, and we're going to force people to either accept the benefit or avoid the cost. Those would be two and state differences. And some of them, it turns out that paying people to get vaccinated, for example, just doesn't work. They don't not enough people do it to um to actually have any effect. So it it seems it turns out that requiring vaccinations for everyone except those who are who have compromised immunity, it actually works better. But it but people get very angry when they're told you must get vaccinated.

SPEAKER_00 21:05

Right, right. So you mentioned taking those externalities and trying to internalize them. I want to kind of focus in on that because kind of to your point, if if you kind of are, you know, hey, let's just let the market figure it out. We don't need to mess with it. You know, let this marketplace of producers and suppliers and consumers figure it out. To your point, unless you have a way of taking that externality and inserting it into the transactions, it it quite literally can never produce that right equilibrium because it's not part of the formula, that externality is not being accounted for.

SPEAKER_01 21:51

There's no incentive in the system that would push either firms or consumers to inter. The externality.

SPEAKER_00 22:01

And the price being paid is not a monetary one.

SPEAKER_01 22:06

Well, I mean, it can be monetized, but it isn't a monetary. It typically is not a monetary value.

SPEAKER_00 22:14

So I just watched this um documentary. Kind of the the timing is kind of funny. It's called Plastic Detox on it's on Netflix, if you're interested. And I'm sure, I'm sure people listening can kind of put it together what it's about, right? So there's a researcher who is following a few couples and she's trying to study fertility and the effects of microplastics, etc. And she's very clear that this is not a formal academic study. She's actually using the documentary to raise uh funds on to do a formal study. Um but they have you know chemists on and different academics talk about and I I couldn't help as we were preparing for the show is to think about okay, so there's all these chemicals that these suppliers are putting into these plastics to make them you know more malleable, firmer, cheaper, etc. And consumers are buying it. Is for so in this example the externality is the health effects that the way it's harming the consumer.

SPEAKER_01 23:20

Yes. The health effects, the the additional garbage effects. Um you know, there's this huge peat plastic island in the mid I guess in the middle of the Pacific, that um that is just apparent apparently it's totally gross. And um it's just all these things add up. But I think the scariest thing is is these microplastics that seem to to get in your bloodstream. I mean, I I'm sure I've been exposed to them my whole life.

SPEAKER_00 23:58

Um so once you once you've identified that's probably the the easier part, right? Is identifying the externality. That's that's probably the that's the easy part. The next the next task is you know, if if there is the will to correct it, what are the mechanisms? Like you mentioned some earlier, you have t taxes, subsidies, and then just bans, right, sometimes on negative externalities.

SPEAKER_01 24:24

If it turns out that these plastics are as bad as everyb as they seem as a as scientists seem to think they are, the only solution may be to just ban them. And if it turns out they're really affecting people's fertility, contributing to the increase in Parkinson's disease, for example. Um those are those are two in particular that have been pr proposed uh as um as being caused by the these microplastics. And um so that I mean, in and of itself, those two is imp are imposing a huge negative externality on society.

SPEAKER_00 25:12

And and the theory, I guess, or at least some people's theory is that if that if the damage was internalized, that people really wouldn't want to buy that cheap of plastic because it really isn't as cheap as it looks.

SPEAKER_01 25:28

Well, we don't know. The problem is it's an empirical question. When you impose a tax, you either collect a lot of money or you get people to use less. It turns out you can't do both. And it depends on this. A very slippery concept that I have a lot, I had a lot of trouble teaching to students, I had to have trouble teaching it to the average student, which we call elasticity of demand. Basically, by by what percentage do you change your your consumption as a result of a tax, for example. And it turns out that if your demand is what we call elastic, it means that you're highly responsive, then people will stop using, will use less and less of this product. But if you're if it's if your demand is what we call inelastic, in other words, you die it's not very responsive, then you can collect a lot of money, but people keep using it. And the perfect example is cigarettes. Because cigarettes are addictive, taxes on cigarettes don't have much effect on smoking. What does have an effect on smoking is getting to kids before they start smoking. And banning smoking, banning smoking in public places probably had the biggest effect combined with getting kids early and keeping kids from starting smoking. Those two things probably had much more effect than cigarette taxes on the percentage of people who smoke. By making smoking nasty and unattractive, we were actually able to reduce smoking. Another thing that asthmatics feel very strongly about.

SPEAKER_00 27:30

Sure. And I think that I keep coming back to externalities because I think it's very, especially in in the US, right? We have a very individualistic freedom. I can do what I want culture, right? So don't don't kind of tell me what to do, mind your own business, etc.

SPEAKER_01 27:50

And I think don't tread on me.

SPEAKER_00 27:52

Yeah, exactly. And I think externalities, at least for me, because you know, when I when I started really getting hooked into economics, I you know, I would consider myself pretty free market person. And I think externalities really helped me, oh, you know, there is a way to hold both. I can still, you know, have respect for the markets and understand it just can't price everything in. So the the smoking you you example you gave is it can't, you know, when you when you buy a pack of cigarettes, it's not taking into account um the secondhand smoke, the effect that it's having on another person.

SPEAKER_01 28:32

Right. But the cigarette tax was actually designed to try to get people to to smoke less. And it's it's very expensive to smoke these days because of the cigarette taxes. But once you're addicted, it's really hard to get you to stop.

SPEAKER_00 28:52

Because so because it's an elastic and w when you tax it, you can raise a lot of taxes, but you're not actually changing behavior. So then you have to go back to what is the goal of the tax? Are you are you actually trying to because now you're creating a different incentive for the government because now you know they like that revenue.

SPEAKER_01 29:12

Exactly. It's really it's and the government gets sort of they they get addicted, people in government get addicted to the revenue that comes with the taxes. So it's hard for it's hard for them to say, well, we're not we're gonna we're actually gonna change our strategy and try to get people not to start smoking.

SPEAKER_00 29:34

Which kind of reminds me, you know, you hear a lot of people when it comes to like the climate change conversation talk about like a carbon tax. And this is this is an example of, you know, some of these taxes theoretically may not do what we think they'll do, right? We may actually raise a bunch of tax revenue, which you could argue is a good thing. But if the goal is to actually limit carbon, that might not be the best tool. Because people might just pay the tax.

SPEAKER_01 30:02

We don't know enough about the elasticity of demand in carbon taxes. They've been fairly successful in Europe, um, which has which Europeans have a much lower carbon footprint than Americans do. But it would it would really take a worldwide carbon tax to get a to get a handle on what the real elasticity of demand for um using carbon to as fuel. Um and I'm I'm not I'm not sure we'll ever get a worldwide carbon tax.

SPEAKER_00 30:53

So we've been kind of talking about okay, when there's an uh a problem that the market seems to be struggling to correct, you know, and some different ways that governments can step in and the rationale for doing so, externalities, etc. Um I wanted to kind of talk about when government regulation is actually a bad thing, right? Where it and by by that I mean it hurts consumers in the end. Um one example that I kind of wanted to propose to you was rent freezes. Um I think that's correct me if I'm wrong, but a fairly established one where it's pretty easy to see that that doesn't help housing, but I'd I'd love for you to kind of explain that to us.

SPEAKER_01 31:39

Well, I've got I kind of almost need to draw a graph.

SPEAKER_00 31:44

We'll try to imagine.

SPEAKER_01 31:47

I'm trying to I'm trying to see if I can explain this graph to to your listeners. The the issue is that if you freeze the rent at a price that is below the market price, which is typically typically that's what happens, is that somebody decides, and unfortunately, they're they're toying with it again in New York City, and it's just been a disaster every time it's been done in New York City. So you you put a you you freeze the rent at below the market price. And first of all, then you have more consumers trying to rent because the price has gone down, and when the price goes down, more people come out of the woodwork and try to rent. At the same time, if you go into the supply curve at a lower at a price below the equilibrium price, landlords are less likely to offer rental properties and less likely to invest in keeping up what rental properties they have. So you and so you end up with a huge, what we call excess demand for rental properties. So you make the problem worse in some sense. There are proportionately more people trying to rent and not being able to find rental or not being able to find well cared for rental properties at this artificially low price.

SPEAKER_00 33:24

And that would be an example of not increased demand, but going up the demand curve? Is that right?

SPEAKER_01 33:32

Going down the demand curve. Going down to the demand curve. Moving down the demand curve to a higher quantity, lower price. If you think about the demand curve, that's sloping downward from high price, low quantity to low price, high quantity. So I'm trying to explain a graft to you. You end up moving down along the demand curve. And then the supply curve is the opposite. So the supply curve said shows that um people who have houses to rent are more like are more likely to offer houses to rent at higher prices than at lower prices. So you're as the what we call as an upward-sloping supply curve. I know I'm drawing, I'm drawing it with my hands, and and your your listeners can't can't see what I'm doing. Um so you move down to the supply curve to the left, down the demand curve to the right, and you create more, more, more, more excess. You create you create more problems than you than you had before.

SPEAKER_00 34:46

And what should happen if, you know, in a in a in a working market, in that example, okay, hey, prices are prices are too high. Rent right, people are saying that pri prices are too high. What what should happen?

SPEAKER_01 34:59

Well, there are there are a number of different things you could do. One of the things is the government could do is to provide rent subsidies for lower income people. So, and and that that's been used fairly successfully for a long period of time, but it's sort of gone out of favor as we've gone back to the market's great, um, long live the market.

SPEAKER_00 35:25

Um And on the supply side, because as as as rental uh prices keep going up and up and up, it should create an incentive for builders, right? Because now they're saying their profit margins should expand, which should incentivize competitors into the on the supply side, right?

SPEAKER_01 35:47

Yes and no. So if the market is at an equilibrium, in other words, if the supply and demand curves cross, and there's you're you're at a point where there's no incentive for any party to move. There's no incentive for um landlords to build more, to build or invest in more. There's no incentive for renters to come out of the woodwork and buy more. So that's what I'm saying. One thing you could one thing that has been has been fairly successful in the past is to offer rent subsidies to, say, poor people who can't otherwise purchase, compete. And so what that does is to shift to in to shift the demand curve to the right. And so it moves the equilibrium price down and quantity up. So then then there's an incentive. Then there's an incentive to invest in more low c in more lower cost housing.

SPEAKER_00 36:52

And if we had insight into the profitability on the supply side, assuming they're assuming their margins are are large enough where competitors should be coming in on the supply side. Hey, this is a really good business, people are making a lot of money, but nobody seems to be coming and competing on the supply side. Is that when you would look for, okay, what what is causing that? Because that to me would seem somewhat unnatural, right?

SPEAKER_01 37:25

So subsidies that can be given to consumers can also be given to to um builders. And one of the proposals that's been bandied about recently is to offer subsidies to builders who will who build low-cost housing.

unknown 37:45

Okay.

SPEAKER_01 37:45

And what that does is shift the supply curve out. And if you do both, if you give if you give a supply incentive and a demand incentive, then you can move you can move the equilibrium out at without without actually changing the average rental price.

SPEAKER_00 38:05

Well, I think we've given the uh the listeners a bunch to kind of imagine with supply curves and demand curves. I want to kind of pivot to um, I mentioned in the introduction you've had a very long career in university administration. So I wanted to kind of pivot from your economic expertise to um, you know, your experience in university administration. Um I guess my first question is you kind of alluded to it earlier. You know, college education has all these positive externalities, even for people who don't pay for college or go to college or school education, I should say. What what is what's the purpose of college?

SPEAKER_01 38:48

Well, that's a really good, it depends on which person you're talking about. So for the let's let's start with the individual. Why would you go to college? What why let me speculate as to why you went to college, besides the fact maybe it was fun. And and that's I think why a lot of people say, uh, you know, college education, they just have a lot of fun. No, when you when you invest in your what you're doing is you're investing in yourself. And think about, for example, this explosion of AI. That's gonna create a whole new set of jobs that didn't exist. We're focusing very much right now on the jobs it's it's going to destroy. And there's no question it's gonna destroy a lot of jobs. Every major new technological change destroys jobs. Going all the way back to the spinning wheel and the the um the loom. I mean, the Luddites were the people who destroyed looms because the um the automatic looms were putting them out of work. In say 1895, our whole economy was based on the horse. By 1920, that whole ecosystem was completely gone. Everybody whose livelihood depended on taking care of horses, building carriages, to, you know, creating creating things that that enhanced the horse economy, those jobs were gone. But a whole new set of jobs were created that had to do with gasoline powered engines and cars and trucks. And you think about in the 90s, the um personal computer eliminated tons of middle management jobs, but created a whole bunch of new jobs. And we don't look back and say, oh, I wish we had didn't have computers. Ditto smartphones, again, revolutionized the um the job market. That's what's happening in AI. And having a college education from a statistical point of view, you are more likely to be able to be able to survive the AI revolution with a college education. You are more likely to be able to adjust your life, adjust what you do. I mean, you're already what you're working on now. I mean, the digital marketplace is part of this revolution. And if you hadn't gone to college, you probably would not. Now, certainly some people like, you know, some of the tech the tech pros, they're just so smart that they didn't need to go to college. But the average person is not that smart and he and needs a college education to as a sort of a backstop during difficult times. And this is a we're in a very challenging time between between the AI revolution and the attack on on higher education that's coming. Um it's it's getting really hard for young people. Um, but without a college education, it's even harder. So from your perspective, there's a there there's a huge personal value. I mean, there's so much evidence that uh a college education, people who have college education make more money in the short run and the long run. They're their life, their life, they're they're happier, they're wealthier, etc. Um, they're more likely to save for retirement. I mean, I can go down the long list of things from a statistical point of view that um you benefit from going to college. But if but it but it the the society also benefits tremendously from having an having an educated. Um again, I go back to the AI revolution. There's a whole new workforce that is needed to produce these AI, these AI benefits. They're not just gonna come by accident. They're gonna come because people, well-educated people, create them.

SPEAKER_00 43:13

And going back going back to something we talked about earlier, right? Positive externalities, I think you already mentioned it. If uh in addition to all those personal um benefits that somebody who's educated would get, society at large benefits from having an educated populist. Which kind of begs the question is okay, you were you were a university president, right? You you've kind of saw this firsthand. College has gotten very expensive for people. Um is what's the role of the market here, and what's the role of of governments?

SPEAKER_01 43:57

Well, that's a that's a that's a very difficult question. Because it's college has gotten so expensive because um states and the federal government have disinvested in col in higher education. It has not become more expensive if you look at the spending per student. It's been it's been pretty much the same, adjusted for inflation for the last 20 plus years. But what has happened, one of the things that has happened, is that states and the federal government have disinvested in in higher education and students have been asked to pay a higher a higher percentage of the cost.

SPEAKER_00 44:42

And and we're just talking about the students there. We haven't even touched on all the all the research that that universities do and add to this to this country. I don't know if you want to say a little bit about that.

SPEAKER_01 44:55

I do. I do. That was going to be my next point. The thing that is one of the things that is really disturbing me right now is the disinvestment in research of all kinds, from vaccines to cancer research to even space research. You say, well, why should we spend money on space? Your smartphone. Your spark smartphone grew out of space research. You want to give up your smartphone?

SPEAKER_00 45:29

Right. Well, I think it's difficult for people to understand why, you know, whenever grants or all this public funding that goes to universities from from the government, it can kind of sound like, well, why do they need the money? Um But it it it really isn't just to line the pockets of the university. It's it's to help them do research that really the private sector just doesn't have the incentive to do.

SPEAKER_01 45:55

So basic research, which is that's probably the most important kind of research that is funded by the government. We call basic research. It's basically looking at things like cells and nanoparticles and and um Higgs boson, things that you probably have no idea what they are. But they but they underli they they underlie all the science that eventually becomes marketable. But that science takes so long, takes so long and so such a long time to come to fruition that there that you that for-profit companies have don't have an incentive to invest in it. And it's very hard to get the intellectual property. I mean, how do you get intellectual property out of an mRNA, out of mRNA, for example? And would you give me a little, I want to I want to I want to make a plug for NRNA, mRNA technology.

SPEAKER_00 46:59

Yeah, take your time.

SPEAKER_01 47:01

Because a lot of people got really scared by it because of COVID, of the COVID shots. This is a technology that was literally sitting on the shelf. It had been developed over a long period of time, and nobody had quite figured out how to apply it. Speaking of something that it's really difficult to get the to get private industry to invest in, if you if you know this is important, if the scientists know this is important, but they have not figured out an application, it's literally sitting there. And that's what happened. So with when the when the when when the call for COVID, when when President Trump in his first term made a huge investment in um creating a uh vaccine for COVID, Moderna, which had the patent on the mRNA vaccine and was not getting anything out of it, was able in a weekend to turn it around and start testing, start creating this vaccine because they had this technology. And now we're discovering that it may, it may solve, it may cure cancer, it may create, it may create vaccines for lots of other things. And and the the scare of the fear that people got about mRNA vaccine vaccines from COVID is is hampering um the research that might save millions of lives. And you know, each of each of your listeners might, their life might be saved. If we can fast track the mRNA, the technology the mRNA technology that is again sitting there. And scientists know scientists know what it does, but it's gonna take some time to devise the vaccines, devise the treatments, test them to make sure that they actually work and don't make people sicker, which by the way, the COVID vaccine was heavily tested. But again, it just seemed to come so fast, I think that people just didn't didn't trust it.

SPEAKER_00 49:19

And it's such a good point of you mentioned incentives a couple times, but it's such a it's such a good reminder that, you know, of why we need both, you know, to allow the market to create the products it's going to create, but also, you know, a a government that's kind of putting its thumb on the scale on in the areas that we want, like research and mRNAs, because you know, the private sector may not have the incentives or the time horizon to really invest in a technology that may or may not be profitable.

SPEAKER_01 49:53

Um so it's a time horizon. So um another example w which oh no, I'm I'm not I'm not gonna go into the auctions, the uh spectrum auctions. I think that's a bit much people can Google it at a particular time.

SPEAKER_00 50:10

Spectrum auctions.

SPEAKER_01 50:11

But it spectrum Google spectrum auctions, and and the research goes back to the 1970s in economics. And it was my it was it was research that was funded by the the National Science Foundation in the 1970s and early 1980s, and only became only only became something that that was applied in the in the marketplace that people could see in the 2010s.

SPEAKER_00 50:42

I think that's an important point to make is that a lot of these technologies that are are running and profiting some of the largest companies that people can think of were built on research done at universities by taxpayer funding.

SPEAKER_01 51:02

Exactly. Exactly. And this was this this actually it comes out of the Manhattan Project that developed the bomb that um won the war, essentially. And um it was it was realizing that that if you've seen Oppenheimer, and of course, then there are problems with the with the bomb as well, um, let's face it. But um it was the success of the government providing the basic funding and scientists basically leaving leaving their labs around the world and coming and working in this one place altogether for a period of time that resulted in the atomic bomb. And whatever you think about the atomic bomb, that it's that model that is really successful in getting in jump starting new research.

SPEAKER_00 52:01

Well, I think that is a great place to end. Elizabeth Hoffman, Professor Hoffman, thank you for joining me today.

SPEAKER_01 52:09

Well, thank you for asking me.

SPEAKER_00 52:13

Elizabeth Hoffman has spent five decades teaching and contributing to the field of economics and higher education. In 2010, she was awarded the Carolyn Schaum Bell Award from the American Economic Association. In 2024, she was inducted into the Colorado Women's Hall of Fame. She retired in 2025. For more information, you can visit her website, Elizabeth HoffmanEconomist.com. Thank you for listening to Reasonable. The show was produced by me, Oscar Ravis. If you'd like to submit a question or have a guess you'd like to appear on the show, you can email contact at reasonablepond.com. Again, that's contact at reasonablepom.com. If you haven't subscribed to the show, please do so and share this episode with a friend. Thank you.