ANNE CASE & ANGUS DEATON
The Princeton economists behind the “deaths of despair” thesis-Anne Case and Nobel Prize winner Angus Deaton-talk with Irwin Stelzer and Jeffrey Gedmin about their new book, the flaws of our economic and health care systems, and whether our national crisis could spur needed reforms.
Irwin Stelzer and TAI Editor-in-Chief Jeffrey Gedmin recently interviewed Anne Case and Sir Angus Deaton, the husband-and-wife team whose pioneering research on “deaths of despair” has reshaped the national debate. With their new book coming out amid a global pandemic, they discussed how its arguments relate to our present challenges-and whether today’s economic, political, and health crises could spur needed reforms. This interview has been edited for length and clarity.
Irwin Stelzer and Jeffrey Gedmin for TAI: Let’s start with a broad question. In your new book Deaths of Despair and the Future of Capitalism, you present data that are in many ways quite grim. But then you pivot and say that there are reasons for optimism-policies that are both feasible and capable of improving things. Where do you ultimately come out? Are you pessimists? Are you optimists? Are you each representing a different sort of view and temperament when you write together?
Anne Case: I’m an optimist by nature. I had thought that it would be too hard to have substantial change in the health care industry in the United States in my lifetime, but I’m now more optimistic that it’s possible. And I thought it would take something very bad for that to happen, and I think COVID may be that thing. When 38 million people lose their jobs, tying health insurance to employment is going to be shown to be a very bad idea. I think that people in the middle of the distribution are going to start to have the conversation about health care reform, and those are the people that we really have to reach if we want to see it happen.
Angus Deaton: The book was written before COVID, so I think most optimism would certainly be guarded by what happened since then. Though I think that Anne’s argument is right, that there’s going to be more chance of reforming health care now than before COVID. On the other hand, crises are always dangerous things. They can cut both ways, and if something has to be broken before it’s fixed, then breaking is a very dangerous way to fix things because you have no idea what will happen on the other end.
But let me take a more general fact. The last book I wrote was called The Great Escape, and it was this very triumphant tale of how ever since the Enlightenment, people have gotten richer and healthier and escaped from deprivation and ill health. This book with Anne is a much, much darker book, and if we’d written it in the time of COVID it would presumably be darker still.
But I’m still optimistic, because I think the power of reason has, over time, made us much better off. And of course, the story of The Great Escape-I make this very clear in the book-is a story with many interruptions, and some of the worst interruptions were the most recent ones. The 20th century is not a century of steady progress. It was punctuated by awful things-the Great Leap Forward, Stalin, Hitler and his gas chambers. And so no one in their right mind would argue that the world is on a path of steady progress. The way I would frame it is that we’re entering another dark period, and we’ll come out of it as we’ve come out of other dark periods in the past, but I can’t give you the timing on that. My guess is 20, 30 years from now we’ll look back and see this as a temporary eclipse, but I don’t know.
TAI: Both of you propose strengthening trade unions to offset some of the challenges that the white working class has faced. But trade unions are the ones who are fighting to prevent untying health care from employment, which is another thing you support. How do you balance those two wishes?
AD: Well, we don’t endorse that position just because we think workers need stronger rights. And I think it’s perfectly rational for the unions to do that without any alternative in place. Just as it’s rational for people in the middle class who have their own health insurance through their employer right now to want to keep it in place, even though it’s not a good system overall.
AC: We have to have an alternative that looks attractive, and we have to get people to connect the dots, where they understand that because health insurance is so expensive-because the health care industry has made health care in this country so expensive-it’s coming out of their wages. It’s coming out of their state coffers. So instead of paying for state universities and infrastructure they have to pay for Medicaid, and their share of Medicaid is expensive. We need people to begin to understand that employer-provided health insurance is not a gift, that it actually is, in a sense, a tax on their wages. If they perceived it that way, more people in the middle might be moveable.
AD: Furthermore, when Bernie Sanders was campaigning, some unions did support his plan for Medicare for All. Others have pointed out that Medicare for All would be good for wages, not bad for wages. A lot of people in unions, or who are funded by unions, understand this point very well.
TAI: Would it be fair to say that conservatives generally see the plight of the white working class as a cultural problem, driven by a decline in values and virtues? Whereas others, including you, say “not so fast,” and also look at economic factors?
AD: That’s probably right. We recognize the importance of social factors, for sure. I don’t like the idea of a “decline in virtue,” but I do think that changing social attitudes-about child-bearing outside marriage, for instance-and the availability of the contraceptive pill have had huge social consequences, some good, some bad. For a woman who is determined to go to college and become a professional, the contraceptive pill has opened up a whole new world of opportunity. But for people who don’t want to do that-or are not cut out to do that-it’s reduced their bargaining power and made their lives a lot worse.
And those are social factors. I wouldn’t characterize them as a decline in virtue, though I could see how you might. But on the other hand, it’s just not true that the decline in labor force participation reflects a decline in industriousness. People don’t suddenly wake up and say, “Damn it, work is boring, I don’t want to do it anymore.” I think what’s happened is that the quality of the jobs has gotten worse, wages have gone down, and then when people get shaken out of jobs they are often reluctant to come back into a market where there are fewer good jobs. If it was a decline in virtue, and people were pulling out of the labor force because of laziness, you’d expect wages to go up. That’s Econ 101, supply and demand. If people exit the labor market, the supply of labor should go down, and the price of labor-the wage that workers are paid-should go up. But that’s not what’s happened.If people exit the labor market, the supply of labor should go down, and the price of labor-the wage that workers are paid-should go up. But that’s not what’s happened.
And so it’s pretty clear that the effects of automation and globalization are destroying the market for people with a working-class education. That’s not a decline in virtue.
AC: It would be odd if the decline in virtue was limited to people whose wages have been falling for the last 50 years-that is, men with less than a bachelor’s degree. Why would there be just a decline in virtue for that group and not a decline in virtue for people who went to college? It seems more likely that what’s happened is that people without a BA cannot get married unless one partner has a good job, and jobs are getting worse not better.
TAI: In the book, you talk about the problems created by low wages. But then you suggest that it’s not just money, or even primarily money, that matters. You’re not very enthusiastic about guaranteed annual incomes and so on. Let’s say you could only pick one thing out of your list of reforms. Would just sending money to people, which is the easiest thing to do, be at the top of your list?
AC: No, definitely not. The top of the list would be cost control for the health care industry. Because if we could get that in line, it would have knock-on effects all the way through the system. And I believe that people define themselves in part by what they do. It helps with their sense of self to have a job with meaning. Just sending money doesn’t push us in that direction. Whereas fixing something further upstream, which would have consequences throughout the system, seems like a much better idea.
AD: People ask us, “Is money the real cause or are social problems the real cause?” There doesn’t have to be a single cause. This is all tied up together. We think that the money is certainly very important, but money comes with jobs, and jobs define a way of life. The working class has run into difficulties because globalization and automation have destroyed jobs, and with them ways of life.
Now those two forces, globalization and automation, will make us better off in the long run. So we don’t want to stop those. But the cost of health care, which is also destroying jobs, is a self-inflicted wound, and we can do something about it. People need money, but they need meaning in life as well, and just handing out checks will not satisfy most people.
That’s part of the problem with our education system. We’ve created this terrible split, which was predicted by Michael Young 60 years ago, between the so-called meritocrats and the people who’ve been left behind.We’ve created this terrible split, which was predicted by Michael Young 60 years ago, between the so-called meritocrats and the people who’ve been left behind. Our educational system is only training a third of people to go to college, and it doesn’t seem to be offering very much for the rest. And so I think that will have to change in the long run too.
AC: Part of the despair comes from life’s increasing fragility. The workplace is fragile, home life is fragile, there’s been a real loss of community. And when you put those things together, you get a fragile economy and a recipe for suicide. The lack of good jobs is what’s motivating people to numb themselves out with drugs or alcohol or to take their own lives.
AD: Our archetypal story is a guy in his 50’s, whose father and grandfather worked for General Motors at way above minimum wage. He’s lost that job, he has no commitment to the various jobs he’s bounced between, and his employers have no commitment to him. He finds it hard to get married because without a good job, the sort of woman his dad would have married is not available to him.
But he’s cohabited a few times and had a couple of kids. These women have thrown him out, and his kids live with someone else; he barely knows them. His life has come apart in all dimensions. You could blame that on robots or China if you like, but it’s a long and complicated train of causation. You can’t repair it with money, even though money would help.
TAI: How does COVID figure into all this?
AD: COVID has made it all worse. One of the reasons the stock market is doing so well is because there’s a real feeling that the bargaining position of labor has gotten much, much worse. You’ve got massive unemployment. Those people are being compensated for now, but it’s not going to go on much longer. Many of those jobs will never come back, or will come back very, very slowly. I think big tech, which many people have been worried about already, has gotten much stronger as a result of this crisis. It doesn’t involve physical contact, so it’s got a huge advantage over stuff that does.
In addition, I think we’re seeing the further consolidation of industry. A lot of small firms won’t come back, but Amazon, Walmart, and Netflix will get stronger.
Finally, we could have a lot of people come out of this saying: “Look, our health care workers did a wonderful job, so let’s leave health the way it is.” So COVID could spur health reform, but could also make it more difficult.
TAI: One of the great sentences in your book is: “The right way to stop thieves is to stop them stealing, not to raise their taxes.” But whenever people talk about reforming capitalism, they inevitably turn to the tax system-Biden, for example, wants to do something about the high marginal rates and capital gains taxes. So is your view that taxation is a battle not really worth having, and we should instead focus on stopping the stealing?
AD: We don’t think the fundamental flaw in capitalism is the existence of inequality.We don’t think the fundamental flaw in capitalism is the existence of inequality. That’s not to say that we would object to rolling back some of the tax cuts that have been given by this administration and earlier ones. But a lot of the inequality in America is generated by people stealing stuff, and there really ought to be bipartisan agreement about this. After all, the right hates rent-seeking and lobbyists just as much as the left.
AC: Well, unless they’re actually benefiting from them. The process just seems broken in a way that’s hard to fix. There are five health care lobbyists for every member of Congress, and just from December 2019 to today you can see them changing bills to favor the health care industry. That’s happening in other industries as well. We need a Federal Trade Commission (FTC) that’s strong and able to take on some of these companies, but everyone in Washington is looking at what’s in it for them, and we need to find a way to change that.
But along the way, we probably do need tax reform, because we are going to have to pay for what we do. But I think it’s the upstream stuff, again, that could really help us most in the long run.
TAI: Professor Joseph Stiglitz says that we have to break the nexus between wealth and political power before significant reforms can be accomplished. Do you agree with that?
AD: It’s not absolutely clear that wealth is what brings political power. Though it’s certainly true there’s a dangerous cycle, which you see in health care, where firms make a huge amount of money and then use that money to change the rules of the game, so that they can make even more money. But I’m not sure it’s billionaires per se that are the problem. It’s the industries that are the problem, and the lack of power by ordinary people.
This is another place where unions used to be important. They gave people a voice in Washington, but that’s not true anymore, because Google spends more money than all the unions spend on lobbying.
There’s also a real sense of missing representation. There’s almost no one in Congress who doesn’t have a college degree, for instance. That wasn’t always the case.
AC: The composition of the top 1 percent is somewhat surprising. It’s a lot of small or medium-size business owners. Those are people who are generally protected one way or another by special favors that they got written into a bill. Not all doctors are wealthy, but the largest single occupation in the top 1 percent are physicians. Now, physicians are protected by the way that we allow them to control the number of medical schools and residencies, for example. Which then allows some subset of them to earn very high incomes.
AD: And these professionals also get protection against foreign competition. Foreign doctors are not allowed to come to America if you were ever to be desperately in need of them, and yet there’s no similar protection for car workers or others in manufacturing, whose jobs are being supplanted by Chinese and other foreign manufacturers.
TAI: In the book, you describe health care as a uniquely American calamity. Why is it uniquely American? And given all the barriers to reform you just identified, why, Anne, are you optimistic that we can address these problems in the short to medium term?
AC: Both are really good questions. Why are people killing themselves in these ways in the United States, but not in other rich countries, which have also seen globalization and automation? Two things jump out immediately. One is that other countries have been controlling their opioids, whereas here, Big Pharma started distributing them to millions who were already in despair. The other is our health care system, which, as Angus said, has been marred by self-inflicted wounds unique to America.
I think I’m optimistic only because we are in such a desperate place right now. In the December 2019 budget bill, the left and the right both agreed that surprise medical billing was a horrible practice and should be stopped. But then hospitals leaned on important members of Congress and got that stripped out of the bill. So many, many, many thousands of people now presenting in emergency departments around the country are going to be saddled with tens of thousands of dollars worth of bills they cannot pay, and those people may organize and push for reform.
AD: Britain has the National Health Service which she’s very proud of, and which people love, but that didn’t protect them in this pandemic. I think the push for reform will not come from COVID itself, but from huge numbers of people being bankrupted and left with bills they can’t pay after the pandemic.
But let me just say one thing about the first thing you asked, about what makes America’s health system unique. The introduction of employee-based health insurance was in many ways an accidental, wartime development. But it also had to do with race.The introduction of employee-based health insurance was in many ways an accidental, wartime development. But it also had to do with race. After the war, when national health insurance was being considered, the Southerners in the Senate had no interest in paying for health care for people of a different race, and that was always going to be an obstacle to universal coverage.
AC: The other thing that makes me optimistic, although it comes from a bit of a dark place, is that, God willing, there will be a vaccine, and then it will be interesting to see how it’s priced. The pharmaceutical companies were able to take the teeth out of limited relief bills that gave them billions of taxpayer dollars to use on their vaccine research. So there’s really nothing to stop them from charging an extraordinary price for this vaccine. If they go that route, and they price it well above what people think is reasonable, I think that will cause quite a lot of agitation.
Most people shrug when they think about health insurance. They think it’s complicated and assume it’s really expensive, but then they shrug and move on. And I think if COVID begins to show some of the problems with the way we let the health care industry call the shots, it may lead us to reform.
TAI: If America’s health care system is so bad, why do so many people from other countries-including countries like Canada, which supposedly has a better health care system-come to America for treatment, and not the other way around?
AD: People come up with this bullshit all the time. It makes me really angry. Maybe we can treat a few rich foreigners, but we’re not doing a very good job of treating our own people. We have the worst health outcomes of any rich country in the world. That is true for life expectancy, and it is true for conditions amenable to treatment, for which the system is more directly responsible.
There’s no way of allocating health care without some kind of rationing. So of course Canadians will come here to do things that, in their national interest, they’re not permitted to get for free in their own country. We should not be paying collectively for flat-of-the-curve medicine to benefit providers.
AC: Our life expectancy is lower than that of any other rich country. On other health metrics short of dying, we rank very poorly relative to other rich countries. As Angus said, rationing is inherent to health care. That may cause a few wealthy people from abroad to come to the U.S. because they don’t want to wait, or because some procedure was deemed not to be cost effective. But what we have here is very expensive medicine, much more so than in other wealthy countries. It would be one thing if we thought, “Well, gosh, yes, we have the most expensive health care in the world but we’re the healthiest people in the world.” But that’s not the case.
AD: One way of putting it is we’re destroying the lives of American workers, so that a few rich people from Saudi Arabia can come to some expensive hospital in New York.One way of putting it is we’re destroying the lives of American workers, so that a few rich people from Saudi Arabia can come to some expensive hospital in New York. That’s an outrage. And that’s effectively what’s happening. I would not deny that in some special cases, in some parts of the country, we have far and away the best doctors and best care available. That’s also true in Britain, where I grew up. My kids were better treated in Britain for complicated conditions than when they came here. But we all tell anecdotes, and you have to look at the data.
TAI: A lot of young people seem to be wondering: “Is capitalism the right thing? Do we need to fix and reform capitalism, or is capitalism itself the problem?” What do you make of that?
AD: A lot of these young people were not born in 1989, and unlike many of us, did not live through the period of the Soviet Union. Never mind the Great Leap Forward in China. It’s not so surprising that when the present system’s not doing well, young people look around for alternatives. And socialism or communism is very beguiling if you don’t know any history. It sounds wonderful, until you actually see what sort of tyranny it brings.
But I think there’s a deeper thing going on in the West, which is this disenfranchisement of less educated people. It’s a big research topic right now-for instance Michael Sandel has a new book coming out on the tyranny of meritocracy. Daniel Markovitz at Yale has a book on this. And I would strongly recommend Michael Young’s book, The Rise of the Meritocracy, written in 1958, which was a dystopian fantasy about how the meritocrats would take over and divide the country into two classes: the “populists” at the bottom, and “the hypocrisy” at the top.
And in the election between Trump and Hilary Clinton, or in Brexit, for instance, all the things he wrote about have come to pass. Running this country as a meritocracy is going to leave a lot of people behind who feel that they’re failures, who are told that they’re failures.Running this country as a meritocracy is going to leave a lot of people behind who feel that they’re failures, who are told that they’re failures. The people who succeed think that it’s all their own doing and none of it is good luck. That is a terribly dystopian world, but it’s the world in which we live. And a lot of people are going to be very upset for a really long time.
TAI: How do you think this will all shake out in the 2020 election and beyond?
AC: We can hope that COVID will bring a move back towards respect for people who know something about science, or people who would know how to manage an economy. I think voters may be more inclined to support people who they think have the technical skills to put stuff back on the rails.
AD: The loss of respect for science is a terrible thing. Though I understand why it’s happened. Submission to expertise has not done many people well.
AC: That’s right. I think that’s why people were so angry in 2016.They saw one lever to pull and they pulled it, because they didn’t feel understood that they were hurting. But they’re still hurting, and on top of that, things are very, very shaky. So I think if someone could come along and make them feel that not only are they being heard, but also that they’re being respected, we could get stuff back on the rails.
But to be clear, we do not predict elections.
TAI: You’ve said that globalization’s benefits ultimately outweigh its costs. But in the short run, do you think globalization has been put on hold?
AD: Globalization had been in retreat for a decade before COVID happened. There’s no doubt that it’s going to retreat further.
Globalization has benefited a huge number of people around the world, but it’s been a disaster for some, and just compensating the losers isn’t enough. I have no doubt at all that globalization is going to be backed down, and some of that is good. I don’t think it’s a very good idea to be totally dependent on India and China for many of our medicines. And even the greatest proponents of globalization and free trade have always recognized some national security exceptions to that.
So I think in the future, we’re going to have to have a lower-return, lower-risk social and economic portfolio than the one we have now.
AC: I think we should have a lower risk portfolio, I don’t think we will. If people think there’s money to be made, they’re going to continue to outsource and let someone else bear the risk if things go wrong. So unfortunately, I don’t think that we can rely on people to think about national security concerns.
I also want to return to the compensation point. We teach our students about gains from trade, and we say there are winners and losers, but we never talk about compensating the losers; we just call them losers. Right now, we’re in a precarious position where large numbers of people realize that they’ve been hurt, and no one seems to be willing to help them. That’s got to change.
TAI: Finally, in this time of social distancing and lockdown, what are you reading? Or if you listen to music, what are you listening to? Or if you watch Netflix, what are you watching?
AC: Well, we’re working very hard looking at the COVID numbers, and at death numbers more generally. But dinner is very important to us, and as we’re starting to make dinner, we look to see what the Metropolitan Opera is offering us for free that night, and we oftentimes listen to the opera, which is just a great balm going into the evening after looking at bad numbers all day long.
AD: Well, I do spend most of my time thinking about COVID, trying to keep up with the enormous output by economists and other people. I’ve been extraordinarily impressed by how many economists have turned their skills towards thinking about these issues; our profession has not always been one that’s quick to respond to current emergencies. But in this case, I think it’s really been on the ball.
If you go to the National Bureau of Economic Research’s webpage, they have a huge selection of COVID stuff that’s been taken out from behind the paywall. And it’s tremendous the amount of really thoughtful, interesting stuff there. That doesn’t mean we’re not all heading towards catastrophe, but for those of us who’ve been interested in mortality and the economy, this is very much in our wheelhouse. So that’s what we’ve been doing.
I always dreamt that when I retired five years ago I was going to spend my time watching Netflix and reading books. I still read a lot of books. I’m reading the new biography of Frank Ramsey, which is fascinating. I’m also slowly making my way through Piketty’s new book-it’s important to understand where you agree and where you disagree with people on different parts of the spectrum.
TAI: What’s the next book going to be?
AD: Our next kind of book is going to be one we read, not one we write.