Is the American Dream Still a Thing? with Harvard Economist Raj Chetty

19:31And I think we increasingly don't compare ourselves to our parents. We compare ourselves to everyone on the internet. Like we compare ourselves to the Kardashians. And this is both in terms of what you look like, but also in terms of what you can spend, et cetera. Do you have any data on what the net effect of social media has been on our belief in the American dream, our belief in progress, or the inhibition?

19:54Raj Chetty:It's a great question. So we haven't studied that directly, but my sense is that with the availability of social media, it makes it easier to compare yourself to others, basically. I do think that that likely has effects on well-being and happiness. Yeah. That people, you know, are constantly comparing themselves to their neighbor or other celebrities, etc. Yeah. And that makes it even harder to feel like you've achieved. Now, I think social media can also potentially create opportunities. So if you come back to connection, I actually think the internet used in the right way can potentially bridge divides.

20:30Raj Chetty:Usually we're constrained traditionally by geography, right? So why do neighborhoods matter so much? I think the key reason is it shapes who you interact with on the street, in the playground, in your schools, in jobs, et cetera. But in the world of the internet, in principle, you can interact with anybody anywhere, right? In practice, that doesn't happen. Actually, if you look at online interaction, it's just as segregated as interactions offline. But at least there's that potential. And I think cultivating that and thinking about how you might give the kid who's in a place where there's no way they could connect with a scientist or a person at a university or whatever.

21:05Right.

21:05Raj Chetty:Are there ways you can reach those kids? That would be very powerful. Yeah, it's like a kind of a public transport for a digital age. Exactly. At the same time, I think so much of what – I'd be so curious what the data actually reveals. And I know we're in this kind of uncharted territory where there is no data, so you probably feel very uncomfortable as a super data nerd. I feel fine as a podcaster. But I think that the internet drives a lot of consumption in the reaching for other people's sense, right? Because you could be making six figures in a city like Chicago or New York or San Francisco or any of these places or in Montana, and you could really feel like you're not succeeding.

21:44Raj Chetty:Yeah. And I think a lot of my audience is probably in that category of like, they're financially, they seem to be doing well. But you can go, you know, spend 10 minutes on a doom scroll and you can feel like you're failing. And it's driving people to like greater consumption as a path to progress versus saving, investing as a path to progress. Yeah, psychologists often talk about the distinction between happiness at a moment and then life satisfaction. And you can see how the internet and kind of the instantaneous gratification kind of economy we live in starts to put more weight on the former of really being focused on happiness and what are other people doing at this moment in time as opposed to investing in over my life.

22:26Raj Chetty:Do I feel like I have achieved something that I'm, you know, satisfied with? And is the American dream tied to life satisfaction? The way we've been measuring it, it's certainly more focused on long-term life satisfaction as opposed to instantaneous gratification. You know, I think the hope is that being more satisfied also enables being happier at any given point in time. Yeah, you might not want to. It's probably not a satisfying momentary decision to pack up your stuff and move even two miles to Queens. Yeah, yeah. But it might. Eventually it might pay off. We'll be right back after the break.

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24:15So tell me, what do you think is the most overrated and the most underrated path to economic mobility and progress?

24:21Raj Chetty:Yeah, most overrated path. So, you know, the simplest thing you might think of, Like, why do kids from rich families do better than kids from lower-income families? Simplest thing you'd think of, well, they're growing up with more money. Like, money itself is a path to prosperity. You can buy stuff that's going to help you do better. We find when you give people, say you win the lottery or you get money through some random event that gives you additional resources, follow those people over time, follow those kids over time. They're not actually doing that much better. Maybe surprisingly, it turns out.

24:50Oh, wow. I feel better for having never won the lottery now. Yeah.

24:54Raj Chetty:So I would say that's probably the most overrated. The most underrated, I would say, comes back to what we were talking about on friendships and social capital and networks and who you're influenced by. I mean, I see that and I look at this from a policy perspective. What are policymakers talking about? Everybody wants to talk about how much money do we devote to this program or that program? What are the resources allocated to this or that? Which obviously matters. There's much less discussion of social factors, like how do we set up communities where people are interacting? How do we bring people together?

25:26Raj Chetty:How do we bring people together? Which sounds like kind of, it's a nice thing to do, but like, is that about economic? Sounds come by, yeah. Yeah. Is it about economic prosperity and GDP and growth and so on? But I think actually, yeah, the data seem to suggest that's pretty important. I'm curious how you look at someone like Zoran Mamdani, who's trying to do in some ways both. Like I have – the mayor of New York is trying to both have redistributive impacts in terms of wealth and the economy, but also get people to come together in a big way, like scavenger hunts and, you know, all this stuff.

25:57Raj Chetty:And I look at people like Mamdani, you know, I look at any political candidate in recent years who's engaged with these issues. Often you see an interesting pattern in the data that it's the places where the American dream has faded the most by the measures we were talking about, where people are not doing better than their parents, for example, where they have the poorest chances of rising up, that there's the greatest support for populist candidates, both on the left and the right. Really? And it's basically a sentiment of I'm fed up with the system. We've got to change something. And maybe that means change something from the perspective of, you know, support Donald Trump.

26:31Raj Chetty:And maybe it means change something from the perspective of support Zoran Mamdani. And, you know, basically something very different from the current regime of we're just going to kind of do something like we were doing before. Is New York a city that you said you would marry in the previous analysis a city where the American dream has been fading? Yes, I would say in pockets of New York and especially from a cost of living adjusted perspective, right? Oh, yeah. So the key to all of this, which we've not really focused on, is when we say are we doing better than our parents, how we think about cost of living is central.

27:02Yeah, it's like it's PPP-adjusted dollars. Yeah, yeah. How do you deal with inflation, right?

27:06Raj Chetty:And so that's actually a point of some debate because how do you adjust for the fact that we now have iPhones and our parents didn't? Yeah. So it costs more to buy eggs, but we also have iPhones. That's actually kind of a tricky problem to think about. And so the government spends a bunch of time creating the current, you know, the price index, the CPI, consumer price index. But that basket is changing over time. So it sounds like kind of a wonky thing, but it's pretty important for determining, answering questions like, are you doing better than your parents? Or even determining what social security benefits are.

27:36Raj Chetty:And so, you know, New York, I think if you take into account the fact that cost of living obviously is much higher now than it was in the past, is a place where my sense is many people feel like prosperity, the American dream is increasingly out of reach. And that, you know, leads to support for candidates like Mamdani. Yeah. You know, are those policies sensible? I think it comes back to looking at the data on which things are most effective. From my perspective, what we find is investing in people's development, schools, what economists would call human capital. Yeah, child care. Child care, effective job training programs, pathways to opportunity.

28:20Raj Chetty:That's really the sustained way to make progress. I think redistribution from one group to another obviously can be part of the picture. Somebody's got to pay for all of these programs. But in and of itself, like I was saying earlier, simply giving money to lower-income people does not in the data seem to lead to sustained prosperity. Interesting, interesting. Semi-critique of Mabdani, maybe, I'm hearing in that. Why is it that if you are someone in your late 20s or early 30s right now in a city making a nice six-figure salary, you feel like you're kind of struggling to keep up? Is it inflation?

28:58Like, what is happening? here.

29:00Raj Chetty:So people, you know, of course, affordability is like the word people are interested in these days. I mean, the way I think about it from an economist point of view is what's affordable is, of course, a function of how much total money you're making and what things cost. So it's just a measure of what's your real income adjusting for prices. And the reality is there's been a lot of inflation in the past decade. And I think people are making some more money, but not a whole lot more money. I don't think it's merely like a comparisons thing that I'm comparing myself to the millionaire or the billionaire.

29:33Raj Chetty:I think genuinely there are tighter budgets for many people. Right. It certainly feels like affordability is a thing. And that also changes with the place, right? Like your decision about moving to Atlanta or moving to Charlotte, North Carolina, makes your life much more affordable. Like$150 ,000 goes a lot longer in those places, right? Absolutely right. At the same time, we also have to recognize that your opportunities to grow further for yourself and your family may be very different in those cities. Like, why does Silicon Valley, why does New York continue to attract lots of people? Because people feel like if I go to that place, I'm going to have opportunities that I would not have had had I gone to the lowest cost of living place.

30:12Raj Chetty:So I think the tricky thing is, are there places where I can both feel like it's sufficiently affordable and I have that career trajectory that I'm hoping for? Yeah. And maybe that, you know, intersection of the two things is becoming harder to find. I'm curious, your data, you've looked a lot at friendships, but you haven't looked at marriages or dating. So some of my students have actually started to explore marriage more directly. Yeah. So like dating up, is that a path to financial progress? I mean, mechanically, yes. If you marry somebody who's higher income, you measure household income.

30:45Raj Chetty:I mean, of course, that's going to be a path to prosperity. I mean, let me say something that we do see very clearly in the data for a long time, which is along with social capital and this friendship measure that we talked about, the other very strong predictor of differences in economic mobility across areas is the share of two -parent families in a place. So if you grow up in a place with more two-parent households, you are much more likely to rise out of poverty or do better if you're starting in the middle class, et cetera. That's a strong correlational pattern in the data. Now, one important thing in understanding that is that it's not driven by the immediate thing you'd think of, which is it's probably a good thing to be in a two-parent household versus a one-parent household.

31:29Raj Chetty:Actually, it turns out that even holding fixed your own parents' marital status, so like say you grew up in a single-parent household. If you grew up in a community with more two-parent households, you're more likely to rise out of poverty. So the mechanism is more nuanced than just, you know, it matters if your parents are married or not. So it's something about like seeing stable relationships endure over time, even if it's not your own parents. So one of the best things you can do for your kids is stay married or at least move to places where other people are married to, even if you're single.

31:57Raj Chetty:And we don't know for sure if it's literally the effect of marriage or like other things are different in those communities with stable relationships, right? So there might be lower levels of crime. There might be other influences that I think are correlated with that. I suspect it's a complex picture. But actually, you know, one interesting thing that I remember seeing in the data when we were moving from Cambridge to Palo Alto and I moved from Harvard to Stanford for a few years. One hard place to another. That's right. What I found interesting in the data, I was looking at it from the perspective of our kids, is the Bay Area turns out to be a place where people who grew up there have relatively low odds of being married compared to other places, including Boston.

32:38Raj Chetty:And so you see clearly in the data, actually, that there's this convergence pattern that earlier you move to the Bay Area or to a place like that, you do very well financially, but the less likely you are to be married. So it has this, you really replicate what is happening in the place you move to on every dimension. You've been focused on economics, but the same is true in terms of marriage as well. I think of it as like kind of a dosage effect. You're like a sponge and you absorb what's happening year after year where you're growing up. And then you might move somewhere totally different. You talk about in the research this friendship-friending bias.

33:13Raj Chetty:Yeah. Is there a bias to just like wanting to stay in your own cohort? Do you want to stay with people like at your own income level, for example? Yeah. Or I guess what's the incentive for people who are in your kind of rich friends, poor friends analysis? I'm really boiling it down to dumb words here. What's the incentive for people on the other side of that equation? to mix. I just had Dick Hosla, former CEO of Twitter on my podcast, were joking about his tax avoidance, but it's a serious problem and it actually, I see people like moving to places where they can lower their tax liability. And I wonder if we're losing something.

33:49I don't know if the word is lost Einstein, so it may be like lost FDRs, you know, because parents are moving to places where their kids are going to grow up not putting into the system.

34:00Raj Chetty:So that's the interesting thing about interaction and friendship, which is a little bit different from giving people money. It has to be a two-sided thing, as you're pointing out. So for it to happen, there needs to be something in it, perhaps, for kids from higher-income families as they're in these more integrated communities. And so I'll say two things on that. So first, it's definitely not a zero-sum game in the sense that if you've got a more integrated school, place where low - and high-income kids are together, we see clearly the low-income kids do better. The high-income kids do not seem to do significantly worse in terms of their own outcomes.

34:34Raj Chetty:So it's asymmetric in terms of economic outcomes. But then what's more, if you look at social outcomes, there's some interesting analysis done by another economist named Gautam Rao, actually looking at an experiment in India where they got kids to play together from different economic backgrounds. And he asked a different question. He says, okay, let's leave aside the educational outcomes and earnings and all that. Let's look at attitudes towards charity. Yeah, kindness. How much kindness, how much you want to help other people. And what he shows quite compellingly is that the kids from high-income families exhibit values, you know, in terms of generosity, charitable behavior years later that are much more positive if they were more exposed to kids from lower-income families.

35:16Raj Chetty:So if you kind of think about how we all would want our kids to be raised or what we ourselves would aspire to. Yeah, kindness is a key value. Exactly, and I think that's what's in it. You have that more global perspective if you're exposed to a broader set of people. I want to do a bit of a mobility, like an economic progress lightning round. So this is, again, taking that data from the social sphere and putting it into the individual agency. So if you were 30 today and you could either make more fancy friends, B, move to a more integrated town, or C, build a following on social media, what would you do?

35:59Raj Chetty:I think I would make more fancy friends, but I would maybe phrase that differently. How would you phrase it? Invest in interacting with people who can create opportunities. Yeah. It sounds like it's such a strange, like, transactional lens to relationship building that most people don't actually have, right? That's right. Especially kids. Yeah. Like, what's in it for kids? It's like, oh, do I like playing with this person? Yeah. Yeah. And it's not just transactional, right? And as we talked about, it can shape your attitudes. I think it shapes, like, how you feel, happiness and things like that.

36:34Raj Chetty:So I don't think it's about approaching it in this totally mercenary way, like here's this person who's going to, you know, get me something. But I think being exposed to a broad set of things is very important, especially in the current economy with things changing so much. If you have kids and can give them just one thing, what would it be? Options are a great public school education, a great network of friends who really care about them, or access to a private school with a lot of fancy people around. I think I would choose the middle, the supportive group of friends. The supportive group of friends.

37:07Raj Chetty:You know, one of the things you see empirically is just being in an environment with lots of higher income people or people who expose you to different things. If you don't interact with them, you get nothing. In fact, actually, Naima, we're seeing some early evidence that you have a negative effect. So think of it as like the small fish in a big pond kind of thing, where if you're with lots of folks who are doing the extra academic prep and this and that, and you are not feeling comfortable with those kids and not interacting with them, I actually think that could be detrimental. So that isolation in a context of sociality.

37:42Right, right.

37:43Raj Chetty:So what actually matters is genuine social interaction, not just I come and plop you in in a place where other people are doing things. Do you, as like an economist who knows all this information, do you really – and you have kids. Yes. They are held. Five in ten. So do you find yourself thinking about them in terms of data and having to pull back from that? Yeah, I feel like I also learn from their experiences and seeing how they're interacting with kids and what they find interesting and what's coming up in their school and so on. And then, yes, I think about it. You know, the reason I started looking at the marriage thing when we were moving.

38:20Raj Chetty:So I was just curious. You know, people were asking me, are you looking at neighborhoods with the Opportunity Atlas data? And Opportunity Atlas is this atlas that you have built, leveraging all of this anonymized IRS data to show every zip code in America. People listening or watching right now could go type their postcode in and find out a lot about the possibility of economic progress in your own zip code backyard, right? That's exactly right. and just type Opportunity Atlas in Google and we'll take you to this website where you can type in your home address and look up the sort of information I'm talking about.

38:49Raj Chetty:And I remember doing that. Yeah. And as I kind of expected, you know, plenty of good economic opportunities for people from our background in the Bay Area. Yeah, moving from Stanford to Harvard is not a hard move, Raj. But what struck me was the big difference in rates of marriage and that outcome being quite different. And so that was a context, and I remember telling my wife, you know, sure, our kids will be fine no matter what, but maybe they'll be less likely to get married if we're growing up and if they're growing up in parts of the Bay Area. Okay, and it's important for you for your kids to get married?

39:21Raj Chetty:Not necessarily. It's just as an observational, like, outcome of what might happen. Is there any data around marriage and affordability? Like, when the economy is worse, people pair up more? I feel like I've seen headlines around that. I don't know what the actual data is. But if you look at this issue in question of affordability, which seems predominant for the vibes and the feeling of our times, like we're like in this economy, in this economy, the meme, there's two things that really stick out to me. It's like being single in this economy where you have to pay double for – you can't split your bills with anyone.

39:51And then having kids in this economy, like people are like fear that. How do you look at those two decisions and the data around them? So I would say people might cohabit more when affordability becomes an issue.

40:08Raj Chetty:Marriage as a commitment is more complicated because actually, you know, there's discussion in the data. And this is a little bit debated. You know, do men need to get, men in particular, because of the traditional norm of breadwinning male, et cetera, that's held at least in some parts of the country. if the economy is not doing well and you've got many men who are not doing so well now, is that limiting rates of marriage because men kind of feel like I can't provide, I'm not going to get married until I'm kind of settled with my job. Yeah. And so then that goes the other way, right? But marriage itself is a huge enabler or commitment, cohabitation, just as we were talking about kids and friends.

40:46That is actually a propellant of progress, right?

40:50Raj Chetty:Just as a correlational pattern, like men who are married tend to be doing much better than men. who are not. Now, is that cause or effect? Like, that's hard to tell. Yeah. What about women? Women tend to be much more resilient, basically, than men, we see in the data. And I think you've spoken with Richard Greaves. Yeah. Spent a lot of time thinking about these issues as well. We generally find more resilience relative to changes in the economy. The chicks are going to be okay. And what about the kids' decision? What's the data around the decision to have kids? Or let me ask you this way. Is there like an economic point at which it makes sense to have a kid?

41:25Is there a certain economic threshold or, I don't know, I remember when I used to do economic development work in Vietnam, we'd say like, oh, when people have 1 ,500 GDP per capita, when the country, or provinces get to this level, people start buying motorcycles. I guess the 3 ,000, they start buying cars. I guess the 6 ,000, they start buying homes. Obviously, everything's a lot cheaper in Vietnam. Is there an income level at which it makes sense to have a kid? Because I think everyone these days is trying to figure out what that is.

41:53Raj Chetty:I mean, I guess I don't necessarily view it as like buying a house where there's a clear financial logic that you don't want to incur too much debt and so on. With kids, I think it's a little bit different because, as I was mentioning earlier, I don't think money itself is the crucial thing. It's about how you raise your kids and what they're exposed to. So I don't see it as you must have X dollars in order to raise kids successfully. In fact, a lot of the groups where we see the best outcomes for kids are low-income families like immigrant parents who have very little money. They live in places like Queens.

42:30Raj Chetty:And you see their kids doing great in the next generation. So it's more about context than cash. Yeah. And I think it comes back to some of what you were saying earlier on who are people comparing themselves to, right? So if you feel there's a certain lifestyle you need to have in order to have kids that you see on the web or whatever, then I can see how that feels like hard to attain. But in reality, there are lots of people whose kids do tremendously well without any of that. Right now, you teach at a small school outside of Boston, as they say, Harvard. You went there. Yes. You're an undergrad there.

43:05Raj Chetty:Yes. You did your PhD there. I did. You graduated at 23. I did. With a PhD. That's wild. Right? That's true. Yeah, and you were tenured at Harvard by the time you were 28 years old. Are you an example of the American dream? America has been, you know, tremendous for our family. I view myself less as I came up myself. I feel like I had all the resources and opportunities. My parents came to this country as immigrants. My mom's a physician. My dad is in statistics and econometrics, a professor. And you were how old, like seven or eight? I was eight years old. Okay. And so, you know, I was coming with those opportunities of professional background.

43:43Raj Chetty:I'm the last person in my family to publish a paper. I'm not going to pretend that I overcame some great obstacles. Like, I tried to do the best with the many opportunities I was given. You're not going to be like the Rockefeller kid I mentioned early on. Yeah. But certainly going one generation back, my parents grew up in families in South India in small villages where it was really high rates of poverty. My dad would talk about how they wouldn't have enough for everyone to eat, and he would kind of take food off his plate so his mom would have enough, and his dream was to someday be able to own a car.

44:16Raj Chetty:And, you know, so it was really extreme. And coming to this country, which they were able to do because of scholarships from, like, University of Wisconsin-Madison, you know, got the opportunity to come here, that changed everything. So for them, it was an American dream. It wasn't the Indian dream. they came here. Yeah, truly, I think America was viewed as the path to opportunity, and it truly was. Do you think that's still the case now? I think for many immigrants, America remains a tremendous source of opportunity. There's a lot of debate about this right now. Again, if you look at the data, you look at immigrants who come here to this country, pretty much irrespective of the country you come from.

44:53Raj Chetty:If not in that generation, in the next generation, you see their kids doing tremendously well. So the immigrant experience of the American dream is different to the kind of the American-born version. To a significant extent. And, you know, I think that's one of the challenges in this country. And, of course, it animates some of the political narratives. Yeah, it's part of the challenge. Why is it that our own native citizens, many of them don't have opportunities while we're giving opportunities to others? And I can understand that sentiment. But I think the way to look at it is not as a zero-sum game.

45:26Yeah.

45:26Raj Chetty:It's to figure out how you actually invest in creating more opportunities for the people who are here. Yeah, it's definitely not a zero-sum game because, as you said, the pie is constantly expanding. Exactly right. It's not like the pie has stopped expanding. That's right. Do you think this small school outside of Boston, Harvard, is still going to be a gatekeeper of economic progress? Like, fast forward 5, 10, 15 years. Yeah. Is it a gatekeeper of economic progress today, and will it be? We've spent a lot of time actually linking data on higher education institutions to tax records to be able to study.

45:54Raj Chetty:what happens if you barely get into Harvard versus go somewhere else or go to one college versus another? And, you know, not to add stress to folks, but it does actually end up mattering quite a bit if you do get into even, you know, Harvard versus another excellent institution like University of Michigan, Ann Arbor, UC Berkeley, outstanding places. Even that small distinction, you look at kids who get in off the wait list versus kids who don't, and you see really different outcomes, especially in their chances of reaching the upper tail positions of leadership, becoming a leading scientist or a senator and, you know, whatever it might be in different spheres, it matters.

46:31Raj Chetty:Now, will that be the case going forward? There's always going to be some scarcity in our society. I mean, people think with AI, you know, everything's going to become free sort of and everybody will have everything. There's only going to be a certain number of people who have podcasts or who have certain positions. There are only going to be 100 senators unless we change the rules. And so my instinct is whether it's Harvard per se or other institutions, there are going to be gatekeepers. I mean, that's just how it's got to function at some level in society. I think these institutions need to innovate in terms of continuing to be relevant, of course, in how we're teaching students.

47:12Raj Chetty:So we try to do this, you know, in my own class. Like with AI, you want to teach kids differently than without AI. And you've been outspoken in kind of your thinking that they should move away from the legacy system and try to broaden, use Harvard as a path to economic progress and not just a gatekeeper of, I think. I mean, I think these institutions contribute a great deal to society and we should extend those opportunities to more people. Right now we are on the precipice of AI and, you know, a lot of people, a lot of Silicon Valley sorts are talking about the K-shaped economy that we're going to see.

47:43So where after an economic shock, and we saw this a little bit in the pandemic, yeah, the rich get richer and the poor get poorer. Or the rich get richer and the middle class get poorer, actually. The middle class kind of goes away. You have the CEO of Anthropic, Dario Amadei, talking about AI eliminating up to 50 % of white-collar entry-level jobs in the next five years. Those are the exact jobs that you look at kind of in your data, like this entry-level. and these real path to progress careers. How do you look at the world right now? Are you worried that your data will be less relevant? Do you have new studies you have to do?

48:21How do you make sense of the world right now?

48:23Raj Chetty:So we're spending a lot of time right now focused on workforce training and how do you re-skill people in the economy with AI, but more generally there are lots of folks who could benefit from having better opportunities and better jobs. And what I would suggest to listeners is you don't want to think about education, I think, going forward as like a one and done. Like, I went to college, I learned what I had to, and now I'm doing my career. I think we're going to be more in kind of a perpetual learning economy. And so whether you formally go enroll again in an educational institution or some training program or whatever, or watch videos online and learn from ChatGPT or Claude, I think being in that mode of constantly learning and innovating is going to be even more important than ever.

49:06Raj Chetty:I also think social skills are going to be even more important than ever. And we already start to see that in the data. So there's some nice work actually, which predates AI, but I think it's going to be even amplified further by a colleague of mine named Dave Deming, showing that if you ask whose incomes have gone up the most in the economy, and suppose you classify people into two buckets, who's smart, as measured by like math aptitude, for example, or scores on tests, and who's socially skilled. It turns out if you have both of those things, you've done really well. If you have one of the two, not so much.

49:40Raj Chetty:And so if you're just like good at math and good at coding, but are not that good at relating to people and not building community, that doesn't have that much of a payoff. And increasingly so, right? Because the AI will be able to do that coding. Yeah. I wonder, does Deming's work show one is better than the other? If you only had to have one, would you rather be smart or would you rather be social? I think that varies by circumstance, right? So it depends upon which occupation you're in and so on. So like if you're in a tech occupation, then clearly, you know, technical skills are useful. If you're in a service occupation, then social skills are useful.

50:15Yeah. Though I asked this to 13-year-old, now 14-year-old Sabarnabari, who's like a, you know, he makes your trajectory look slow because he's about to graduate from NYU next year at the age of 14 or 15. Great. But he, I asked him like, does being smart matter anymore?

50:32Raj Chetty:Yeah. I didn't want to take this teenager and, you know, make him look at his whole life this way. But I'm like, can't you just outsource your brain to AI and focus just on being social? I mean, to some extent, a lot of knowledge. Yeah. I mean, I think. And even critical thinking is going. I mean, this is where I think CS people, you know, if you're in Silicon Valley, I talk to lots of folks at Stanford, at places like Anthropic and OpenAI. And then I talk to my economics colleagues here and elsewhere. And it's very interesting to see like a real, I think, divide in the views between computer scientists and economists.

51:04Computer scientists, I think, truly have the view like this is going to replace a significant part of human thinking.

51:09Raj Chetty:Economists have the view partly informed by history that 100 years ago, a third of people were farmers. You read things around that time that very much the same kind of language like, oh, if we've got these machines that are going to do everything we're doing, like how could we possibly have anything to do down the road? And who would have thought like 100 years later we would figure out search engines and the internet and you'd be optimizing, you know, search queries and stuff like that. You would have just never thought of that as like career possibility. How could you have? Right. And so my instinct is that, yes, you know, you won't be literally writing code just like you don't do arithmetic yourself.

51:50Raj Chetty:You use an Excel spreadsheet. I use an abacus, but yes. And so, I mean, that's a good example in and of itself. Like accounting, you know, accountants, some people thought, oh, once we had Excel spreadsheets, like we're not going to need accountants. But actually demand for accountants went up because you could do more stuff once you had an Excel spreadsheet, like optimize your taxes and figure out how to, you know, find the right combination of things so you pay the lowest tax liability. And so I think people will do different things. The simple way to put it is I think it's not that jobs will disappear.

52:23Raj Chetty:I think it's that tasks will disappear, that we won't have to do some mundane things that we don't want to do. Yeah. But I think jobs will adapt. But we need to be ready to adapt. And no doubt many people will lose their jobs, and we need to be prepared to help those folks. So speaking of continuous learning and speaking of adapting and, you know, the world changing, I end every episode of Smart Girl Dumb Questions asking my guests who are esteemed guests like yourself, the William A. Ackman Professor of Economics at Harvard University. By the way, is that Bill Ackman, Steve? That is Bill Ackman.

52:53Oh, okay. Do you interact with Bill often?

52:55Raj Chetty:I have spoken with Bill. Oh, okay. He has been speaking of the pie in large. I won't put you in the difficult position of having to comment on any of Bill Ackman's tweets. I appreciate it. But what is something that you don't know the answer to, something that you can't figure out? What's a dumb question you have that you wish you could get the answer to? I mean, it's of the moment, and I don't know if it's really a dumb question like that, but I would like to understand better how AI actually works. Oh, really? Like what are the mechanics of how when you type something in chat GPT? Yeah. Like at a deeper level, like how is it that that algorithm is actually giving us answers that make sense to us?

53:40This is the rare occasion, it happens like one out of every 12 episodes, where I can answer that for you. I mean, I can't fully answer it for you, but Jeffrey Hinton, who was a guest on the show, I actually had him lay out how these neural networks work, like when you put in a prompt. And in the process, he actually explained, to some extent, because we don't know fully, how our brain works. Because that's how the model works.

54:03Raj Chetty:Right, right. And it's basically like how your eye and your mind's eye make sense of information. It's wild. Right, right. But what we don't know is how it's going to change with real-world models, with visual learning, now that models are going to have cameras and maybe hands, robotic hands, to kind of grasp more of the world than just text or language as allowed. If you talk to computer scientists, I think even like Jeff Hinton, I would imagine, at a deeper level, I think people are surprised that it actually works. So it clearly does refine utility in it. But the logic of it is I'm basically going to predict the next word you want to say given the previous words that have been typed or the context.

54:47Raj Chetty:And if you had guessed, if I had asked you 10 years ago, like, I'm going to devise this algorithm that is going to do that kind of prediction problem, do you think it's going to be really good at interacting with you? You would have probably thought no. So somehow it does work, but I think it's not like totally clear why. Because it works like our brains. Because it doesn't work like search. That was his point. It's like it works like our brains and therefore it is able to do that thing. Yeah. It's able to understand when you say May, based on all that, you're not saying, you're saying the month or you're saying a woman's name or you're saying.

55:17Yes, yes. And it trained it over time. It's wild. Yeah. It is wild. One more thing. When do you think that we will start having different economic indicators to measure our economy? Like we were talking about, I think a lot of these things, GDP, GDP per capita, you know, they're not really great measures for what's happening, even our basket of goods or inflation metrics. Like things you're talking about, social capital, the possibility of progress. Like how do we hard code those into data and why in your many decades of consulting for every administration, I think Trump, Clinton, you worked with the Obama administration.

55:53You've advised the Trump administration. Why has nobody changed the numbers or the measurements?

55:58Raj Chetty:Yeah, it's a great question. And you're absolutely right that that would be incredibly valuable. And we're trying to work on that, actually. I think we're getting closer because we start to have these data like measures of who people's friendships are on like a mass scale. But, you know, is the government going to have official statistics based on Facebook data? But like people are using Facebook less and then you have to use Instagram. So like how do you get something that's stable where it took us decades actually of work to build the system of measuring what are called the national economic accounts?

56:30Raj Chetty:Like what is the level of GDP? Like things you just read in the news and you think, yeah, like you don't know exactly where that came from. But that's like the truth at some level. But actually, even that is not really the truth because those jobs numbers get revised all the time. They're based on surveys. Or I had this debate with Paul Krugman. Like it's the unemployment rate versus like the labor force participation rate in the zip code that you live in is a much more realistic indicator rather than saying to people, oh, it's around 4%. And you feel like you're in the bottom 4 % when in fact you're in a society where it's like 30 % of people are struggling.

57:02Correct.

57:02Raj Chetty:And so that kind of problem, I think, of granularity with the Opportunity Atlas kind of data, I think we can increasingly deal with. And with AI, which we don't know how it works, but with AI, I think it could help you. Yes. I mean, I think AI will help in terms of being able to do massive coding, pull massive sets of data together. But just think about things like when we live in the digital economy, there's sort of an exhaust pipe of stuff. Like there's a trail. Think of it as like cookie crumbs of everything we do from where we're working to maybe who we're interacting with to how many people are employed in your zip code at this time.

57:37Raj Chetty:Like that's a thing we can measure. And so I've been talking with people actually, you know, that you could imagine the Fed like using much more real-time data than surveys. And during the pandemic, our team actually set up an economic tracker using credit card data and payroll data and showed that those kinds of signals could actually be really informative in seeing how things were playing out. So building those systems so that we can use them continuously, I think, will be enormously valuable. Raj, you should do some kind of partnership with like Nextdoor and come up with this method because I think that sense of possibility, that narrative of the American dream that held so many of us and like had so many of us kind of like sprinting towards something or had our parents sprinting towards something for a generation of millennials and Gen Zers, we need something that feels more realistic.

58:25to get us there. That's right.

58:26Raj Chetty:I think being able to actually see it and not feel like people are telling me one thing and then my life feels totally different because there's so much variation. We need vibanomics. That's what we need. Yeah, vibanomics grounded in data. Thank you so much, Raj, for sitting with me. I really appreciate it. People can, we'll include links to all your work, but people should check out Opportunity Insights, the Opportunity Atlas, the Friendship Study in particular, and so we'll put links to all of that below. Sounds great. My pleasure. Thank you so much. Thank you.

58:59I'm a huge fan of Raj Heddy's work. It is geeky. It is nerdy. But it's also a kind of data that speaks to our moment in our culture right now. And I think a lot of economic indicators really don't. But Raj's work, which is very much focused on social capital and the American dream, I think these are things that resonate and they kind of talk to a generation that I'm in that's trying to make sense of a world that a lot of policymakers are telling us about and doesn't really feel like it fits into what we're experiencing. What I'm most going to take away from that conversation is actually the conversation about what I called lost FDRs, like the idea that, sure, you can do a lot better if you're friends with people who are more successful than you, more financially well-off than you are.

59:44But also, there's an incentive to reach across the other direction as well. If you want to have kids that are nicer kids, better kids, like more thoughtful about the world, more, you know, diversity oriented, and probably to the conversation about AI, more socially adept, right? Because they're not going to be living in this ivory tower. So I am really going to take that to heart. And I think we don't have a lot of conversation around what the upside is to actually paying our taxes and being part of these integrated communities when you are well off? Like, how do you not just run away to a gated community as you and I and other people we know make progress?

1:00:20So anyway, something to take home. That's it for this episode of Smart Girl Dumb Questions. This episode is part of the Smart Girl Dumb Questions Smart Money series brought to you by Chime. And I want to say thank you to my partners at Chime for making this possible. This episode was produced with Desta Wunderad, Melissa Lee Gibson, Sanjana Nigam, Aisha Jordan. It was edited by Darlena Chiem and Devi Chin. And I want to say a huge thank you to the GBH production group where I filmed at Boston, near that small school outside of Boston. And a big thank you to Phil, Juan Jose, Hannah, Terry, Howard, and the entire team there.

1:00:55They were such a delight to work with. If you're taping in Boston, you should head there. See you guys next week for an all-new Smart Girl Dumb Questions.

1:01:20We'll see you next time.