Econ Battle Zone: Disinflation Confrontation

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0:33I'm Alexi from Santa Fe, New Mexico. I'm Amanda from Toronto, Canada. America from Queens, New York. Three Planet Money reporters with one shared goal. I'm here to see if I can rise to the challenge. I moved here to America to win. I actually am here to make friends.

0:56Welcome to another episode of Econ Battlezone. where today Alexi, Amanda, and Erica will put all their storytelling savvy and reporting moxie to the test as they battle it out for the title of Econ Battlezone Champion and the coveted Econ Battlezone Belt. Let's have today's contestants join us in Econ Battlezone Stadium. Alexi, Amanda, Erica, you all know the rules. You'll each be assigned at random your own econ challenge phrase that you will need to report out in a way that explains that phrase and delights our judges. Sounds good. Ready to win. I'm going to put some smiles on some faces, Keith.

1:40As you know, the inflation rate has come down a lot, but economists are still debating why that is happening. So today's challenge phrases all have something to do with that debate. It's up to you to teach us what the connection is. Computer, please shuffle today's phrases. Alexi, you're first. Supply chain healing. Sounds like a Marvin Gaye song. All right, Amanda, now it is your turn. R-star. Ooh, yeah, R-star. R-star, also known as the natural rate of interest. Erica, you're up. Labor hoarding. I'll take it. Contestants, you now have just 48 hours to become experts in supply chain healing, R-Star, and labor hoarding.

2:36Locate and interview your guests and explain everything to us in just three minutes. Do that well enough to wow our judges and your name will be marked in history as Econ Battlezone champion. But first, as you know, there is one more twist to Econ Battlezone. Your mystery ingredients. The extra little challenge you each must include in your story. Erica, you went last in the last round. This time, you will go first.

3:09Explain it to a child. Oh boy. I would be like, oh my god, where do I get access to a child? Erica, you will need to explain your econ challenge phrase to a child. Amanda, it's now your turn. In the public eye. Amanda, your entire story will need to take place and be recorded in a public place. How do you define public? Don't answer that. Oh, we're already nitpicking. Alexi, we will now reveal the final mystery ingredient Metaphor It's my middle name You must include as much metaphor as possible in your story Sweet Contestants, you have 48 hours The clock starts now I'm your host Keith Romer and this is Econ Battlezone.

4:14Yeah, got it. Got it, got it, got it. Our star in public. No worries at all. So I got this. Does anyone have a child I can borrow? Support comes from our 2025 lead sponsor of Planet Money, Amazon Ads. What do financial customers want more than low fees, promo offers, or premium perks? Trust. It's the number one factor that drives loyalty. Amazon Ads helps financial brands build that trust through relevant ads that reach customers at key decision moments, whether they're planning retirement, buying a home, or managing debt. Using rich first-party insights, Amazon Ads connects brands with the right audiences where they browse, buy, and stream.

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5:24Welcome back to Econ Battlezone. I'm joined now by our two guest judges who will be helping me select which of our three contestants will take home the title of Econ Battlezone Champion and the coveted Econ Battlezone Belt. First up, Luigi Zingales. He's an economics professor at the University of Chicago and a host of the podcast Capital Isn't. Luigi, what are some of the things you'll be looking for as our contestants try to explain their econ challenge phrases? It's relatively easy to be simple and entertaining, but screw up the economics big time. and it's really simple to be like good with the economics, but be bold with I can.

6:08And so trying to do the three things at the same time, that's where the battle zone is real. Our second judge is one of the hosts of the podcast today, Explained, and a former host of Planet Money, Noel King. Noel, what about those mystery ingredients? What are you keeping your eye on as our three contestants try to incorporate them into their stories? All right, I'm going to say right off the bat, Erica got very lucky. One of the mandates you get from the time you're a rookie reporter onward is you need to be able to explain this to a child. Amanda, I don't know. This is a real curveball here because is she going to be walking out into the street and doing this in public?

6:49Is she in Central Park? And then Alexi, I mean, it better be a darn good metaphor, right? This better be a metaphor for the ages as far as I'm concerned. So yeah, this should be a good contest, but ooh, Amanda.

7:04Our judges will have to wait to see how our three reporters rise to the challenge. Meanwhile, for Erica, Amanda, and Alexi, the clock has started. And they are already discovering just how difficult life in the battle zone can be. So I thought I had a kid because I have got two nieces. I was like, oh, they're perfect, but they both have the flu right now. Erica's challenge phrase is labor hoarding. But first, she needs to find a child, any child, to explain it to. I did text a friend and was like, your kid is pretty good. And she was like, yeah, but he thinks a car costs like$10 or something. So I don't know if he's the right kid, but he might be the right kid.

7:43I don't know. So you're going for availability over hard economics knowledge from your 8-year-olds. Yes, I'm going for, like, will your mom say it's okay for you to talk to me on Zoom for an hour? I am about to do my co-hosting with my eight-year-old co-host, Paul. His mom just sent me a message saying that he is willing but cranky. I am just hopeful that it works out. Here we go. Were there any things that your parents said, do not, no matter what you do, do not say those words? Like poop, poop, fart, butt. Okay. I think we can get through it without saying those words. Do you want to get it out of your system and just say them really quickly?

8:33I don't really need to say it right now. Okay. Fair enough. While Erica had her key interview locked down, Amanda was still scrambling to find the perfect guest. This is Amanda from NPR, from Planet Money. We spoke a long time ago. Actually, not that long ago. To help her explain R-Star, the natural rate of interest, she was hoping to land a very big fish, the president of the New York Federal Reserve Bank. So we have 48 hours to explain something, and I was given R-Star. Yeah. So the hope is to interview someone today or at the latest tomorrow. Without a firm commitment from the New York Fed, Amanda looked for a backup plan.

9:19I'm on Eventbrite, my favorite place to go find rando events. And I'm trying to figure out if I could show up at somebody else's event. Speed dating. Feels awkward. Life drawing. Huh. Sushi rolling class. I could just be like, hey, oh, you're rolling a tuna roll? Would you like to hear about R-Star? I feel like that transition could work. Alexei had no trouble finding experts who could explain the healing of America's supply chain. His challenge was getting them to play along with all his economic metaphors. Do you think of the global supply chain as kind of like thick iron chain? You might see tethered to a ship's anchor.

10:07Or do you see it more like a delicate gold chain that somebody like The Rock might wear over a turtleneck? is this a sprain? Is it a kind of like a hernia? I feel like Is it a heart attack? What are we talking here? It was a heart attack, right? Okay. Okay. I feel like I'm swimming in an alphabet soup of confused metaphors. That's a nice metaphor itself. Well, there's one at least.

10:46That sound, of course, means we are on to our second and final day of Econ Battlezone. Now, if Battlezone Day 1 is about dreaming big, Day 2 is when our contestants have to turn those dreams into reality. And our competitors start to reveal who they really are. I made a little bit of a pivot. I was going to just do like a traditional, regular thing. And then I was like, wait, shouldn't I make a three-minute prototype podcast called Planet Money is for the Kids? Ambitious, but it was a risk. Children's programming is a whole different kind of art form. It's a thing they say, like, don't make like a new dish for like a dinner party.

11:30That's essentially what I'm doing. And I don't really have a backup plan. Like if this doesn't work, I am just kind of done. At the same time, Amanda's big dreams were coming true. I am going to an event this afternoon where the CEO and president of the Federal Reserve Bank of New York will be speaking. And it looks like, if I'm lucky, I'll get a couple of minutes with him on his own, one-to-one. So that appears to be the plan. That is exciting news. I am really excited. But Amanda's exciting plan put her on a collision course with one of her competitors, Alexi. I was trying to figure out if I could try to get the folks from the New York Fed who put together the supply chain pressure index.

12:20Alexi was happy for Amanda, but he also wanted to secure his own interview. So he decided to plead his case. There you are. I've been looking for you all morning. I understand that you have heard about my interview. Yeah, that's right. It turns out the New York Fed is also in charge of keeping their fingers on the pulse of the global supply chain. So I thought it might be nice to try to, you know, go directly to the gurgling source itself. We have a lot of Fed contacts. Can you go to a different Fed? New York's the one that makes the index. Amanda, remember, was not here to make friends. She had moved to America to win.

12:59Her interview with the New York Fed would be the only interview with the New York Fed. It turns out the New York Fed is a scarce resource. Today it is. For you it is. I was a very, very competitive person. I used to play a lot of sports. And I put that part of me away. So as to not hurt anybody anymore. And now, it's back. I'm sorry. I'm sorry I've gotten this competitive. but I'm going to win. Erica, Alexi, and Amanda worked late into the night, writing their scripts and hunting for one last piece of interview tape that might help them earn the title of Econ Battlezone Champion. As the competition reached its final hours, nerves began to fray.

13:47Hey, everybody. It's Alexi. It's 7 a.m. on Thursday. Which means we are about four hours from the end of the competition. Um, I didn't sleep a lot. I'm tired. I have a really big coffee. Oh God, I finished it. Oh, I had a really big coffee. Oh man. I am really now actually starting to panic because I have a really good little segment, but it is an entire minute too long. The pressure's on. The pressure's on. I feel, I think I need to go lie down. And five, four, three, two, one. Reporters, step away from your editing software. Hands in the air. Let me see your hands. Amanda, how are you feeling about your piece?

14:42I'm feeling pretty good. You're going to end my three minutes, and you will understand a concept you did not understand when it started. Erica, how are you feeling about your piece? My three minutes is a three-minute kids podcast, and the child is my co-host. And he did a pretty good job. I feel like that's not good for the competition, to have Erica just doing, like, extra things. I don't think it was necessary, but once I was in, I couldn't stop. Alexi, how are you feeling about your piece? Keith, you know, every time I turn something in, I feel pretty terrible about it. But I'm not sure if that has any bearing on the quality or reality of the piece.

15:25So I think it's fine. It's fine. Coming up, our judges and our audience at home finally get to hear the stories our three contestants have been working so hard to make. And a new Econ Battlezone champion will be crowned.

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17:15Welcome back to Econ Battlezone. We are back in Econ Battlezone Stadium, where tensions are running high as Erica, Amanda, and Alexei wait to play their stories for our judges and see who will be named the next champion. I'm here with our two guest judges, Noel King, host of Today Explained. Hi, it's nice to see you. And from the University of Chicago and the podcast Capital Isn't, Luigi Zingales. Our pleasure. Luigi, Noel, your task is to decide which of our contestants did the best job explaining their challenge phrase and linking it to the debate about why inflation has been coming down, all while incorporating their mystery ingredient.

18:01Let's get right into it. Erica, you're up first. What do you have for the judges today? My assignment was define labor hoarding, and I had to explain this to a child. And my take on it was, well, let me explain it to a child by making a children's mini Planet Money podcast and host it with a child. All right. Without further ado, Erica, when you're ready, please press play. All right, here we go. You're listening to Planet Money is for the Kids from NPR. Hello and welcome to Planet Money is for the Kids. I'm Paul. And I'm Erica Barris. I'm eight years old. I like to watch TV, go outside, catch snakes.

18:50And do you like economics? Well, no, not really. So the first thing we're going to talk about is something called labor hoarding. I know what hoarding means. It's like taking a bunch of stuff and like keeping it. And I kind of know what labor means. Labor is work. And to help me explain labor hoarding, I called up economist Julia Pollack. Labor hoarding is when an employer tries to hang on to all of their employees because they value them a lot. People usually value things when they're difficult to get. And in the past few years, it's actually been very difficult to find people to work in your ice cream store or to work in your school.

19:32Or at your toy factory. Imagine you run a very busy toy factory, but then there's an economic downturn. And people aren't buying as many toys. If the factory doesn't need to make as many toys, it doesn't need as many workers. So you could just let those workers go or you could decide to hoard those jobs, hoard those workers. What choice would you make? I would keep the workers I had because whenever things got better, there would still be people who would want to buy stuff. And if you got rid of the workers you had, then you'd have to like go find new people that knew how to make those things.

20:14Which would be hard. There might not be a lot of people who know how to make toys very well. And I don't know if there are, but there might not be a lot of people who know how to make toys good. Bingo! Last year was one of the best years for people having jobs. Ever. Julia says if workers tried to leave jobs, employers offered them more money to stay. And there are hints of labor hoarding in jobs where things are slow right now, like in some financial services companies. A lot of them still have the same number of workers as they did when they were doing 10 times as much business. So the economy is good, even though we've been dealing with inflation.

20:54Well, I don't like inflation. Inflation is like the prices of things going up. Right. Inflation is the rate at which the price of goods and services in the economy increase. And disinflation is when that speed is getting slower. There is some anecdotal evidence that employers are hoarding workers. And they're competing, competing, competing and paying more and more and more. That can lead to inflation and delay disinflation. So all this supposed labor hoarding may be a reason inflation won't come down as fast as people would like. Are you into economics? Um, a little bit now. Cool. I'm Erica Barris.

21:38I'm Paul. This is NPR. Thanks for listening. Noelle, what'd you think? Erica, I thought you had the easiest assignment because as reporters, we're trained to be able to explain things to people as if they are children. However, I was very impressed that you included a child in the explanation with you. Really well done. Thank you. Luigi, what'd you make of it? I want to hire Paul as a research assistant. Is Paul available to be a research assistant, Erica? He is free after 7 p.m. and before 8 p.m. every evening. All right. Without further ado, then, let's turn our attention to Amanda. Amanda, what did you bring us today?

22:24My assignment is R-Star, fairly esoteric economic concept. And my secret ingredient is explaining in public. So I decided that I was going to try to find exactly the right person to explain R-Star. So that is what I would like to present to you today. All right, Amanda, when you are ready, go ahead and press play. R star. This is usually written with a small r and then an asterisk. The R, pretty straightforward. It stands for interest rates. So the price of money, how much it costs to borrow money. Now, it is the star in R star that's the interesting part. And looking for that star is how I found myself at the 2024 Regional Economic Outlook event in White Plains, New York.

23:11There are trays of cheese and cubes, bottles of Saratoga sparkling water, and a lot of bankers and real estate brokers. You know, members of the public who care a lot about interest rates. Would you consider this a public event? Yes, it is. Do you consider yourself someone who works for the public? A long-serving public. I've been in the Federal Reserve almost, well, over 29 years. Oh, and there's also this person, John C. Williams, president and CEO of the Federal Reserve Bank of New York and vice chair of the committee that sets interest rates for the country. He's the invited speaker at this event, and to my quite great surprise afterwards, he agreed to sit down and talk R-Star.

23:50It was really in the late 90s when he first started thinking about it. Now, I get the sense this is sort of a passion project, though, as well. All economics is a passion project. Now, when John Williams was a younger economist, he encountered an interesting question that had been around for about 100 years. What's a normal interest rate? Like, what's the interest rate that you would expect to see in the economy when the economy is doing well, inflation is low and stable? And for many years, it was just that, an interesting question, with not much of an answer. What is it? Is it number two? Is it three?

24:24And how do I know? And does it change? Imagine an economy that, over the long haul, is in this perfect equilibrium. Inflation's on target, the economy's growing at its potential, there's this perfect amount of borrowing and lending. Then in that economy, what would the hypothetical rate of interest be? So there's this idea of a neutral thing. It's not too hot, not too cold, kind of Goldilocks. To try to find this Goldilocks number, John Williams and his colleague Thomas Laubach designed a kind of mathematical model Put in some GDP, account for inflation, look at real interest rates, add a little noise, and voila, a model for estimating a neutral interest rate, R-star.

25:07And at moments like this, right now, when the economy has gone through a bunch of shocks, pandemic, inflation, the Fed looks to models of R-star, like the one that John Williams worked on. You know, it doesn't tell the Fed what it should do, but it is a useful way of thinking about, well, what's normal look like once we get through the current situation we're in? What is it we're heading towards? That is the star in our star, a hypothetical interest rate, one that isn't intended to heat up or cool down the economy. It's more of a guiding star for the Fed during this dark night of inflation. Thank you, Amanda.

25:46All right, judges. Noelle, let's start with you. Amanda, you had the hardest job explaining this very complicated thing in public. I didn't think you nailed the public. I thought it was a nice effort, but I thought your explanation was magnificent. I'm going to confess, I came to this not knowing what our star was. Right now, I could tell you what our star is, and that is planet money well done. Nice job. Luigi, your thoughts? I agree with Noel that she did an excellent job with explaining it our star. But I think that there was a little bit short the discussion of the impact on inflation, meaning she was running out of time.

26:26Fair. It's fair. All right. Thank you, judges. That leads us to our third and final contestant in Econ Battlezone. Alexei, what have you got for us? Hi, Noel and Luigi. For my challenge, I had to explain the term supply chain healing using the power of metaphor. And so the dish that I cooked up for you, I think of it as kind of the fall and rise of the global supply chain in the style of a medical procedural with a kind of hefty serving of mixed metaphors. Alexi, when you're ready, go ahead and press play. To figure out how a mixed metaphor like supply chain healing might help explain the disinflation we're seeing right now, I knew I needed to answer a couple of medical mysteries.

27:15First, what kind of injury did the supply chain actually sustain? And second, what does it mean for it to be healing? To get a diagnosis, I paged Kevin Kettles, who teaches supply chain management at Wayne State University. Do supply chain academics have, like, a name for themselves? Are you guys, like, the supply chain gang or something? Yeah, that's exactly right. We're the global supply chain gang. Kevin says that until recently, most people barely knew they had a global supply chain, much less worried that it might be sick. That was kind of medically negligent, he says, given how essential it is to the body of the global economy.