There was one other best-selling book on display as we passed–Nudge: Improving Decisions about Health, Wealth, and Happiness, by Richard Thaler and Cass Sunstein. (Thaler is director of the Center for Decision Research at Chicago’s business school. Though without a formal title in Obama’s campaign, he consults regularly with Goolsbee. “My main role has been to harass Austan, who has an office down the hall from mine,” he has said.) Nudge is an introduction to behavioral economics, which since the 1970s has accumulated a substantial body of lore. Often, it has developed such insights with the help of neuroeconomics, which uses technologies like magnetic resonance imaging (MRI) and positron emission tomography (PET) to capture the neural mechanics of decision making. At Nudge’s beginning, Thaler and Sunstein provide readers with a big, easy metaphor: your brain, they write, is divided between your automatic system (your inner Homer Simpson) and your reflective system (your Mr. Spock).
What does all this have to do with Barack Obama? Much of Goolsbee’s writing is more technical than Freakonomics and Nudge, and his own research focuses on taxation, the Internet, and network effects; but in his policy prescriptions he’s very much of the new Chicago school of economics. When our tendencies to make irrational decisions are understood, the Chicago economists argue, we can design “choice architectures” (Thaler and Sunstein’s phrase) so that people default to better choices about matters like investment or taxation. Hence Obama’s proposal that companies offering 401(k) retirement accounts should enroll their workers automatically, making participation the default option and opting out a conscious choice. Thus, too, Goolsbee’s plan to simplify income tax filing for that majority of Americans who take only the standard deduction: under Goolsbee’s scheme, the IRS would send all those taxpayers a return with the relevant information, so that signing the prepared form would become the default choice–saving taxpayers 225 million hours and $2 billion in preparation fees.
America as Hospital
In March it seemed as if Obama might throw Goolsbee under the bus. A furor erupted over a leaked memo, written by a Canadian official, telling his superiors that in a February 8 meeting at Canada’s Chicago consulate, Goolsbee had given reassurances that the harsh rhetoric his candidate had voiced about the North American Free Trade Agreement while campaigning in Ohio–where many blame NAFTA for job losses–was only that. In the memo’s words, Goolsbee explained that Obama’s protectionist stance on the campaign trail was “more reflective of political maneuvering than policy.” Unfortunately, one of the Obama campaign’s first mass mailings had shown a padlocked factory gate with the words “Only Barack Obama consistently opposed NAFTA.” Although Goolsbee retained his title of senior economic advisor, he adopted (or was required to adopt) a lower profile.
With Hillary Clinton’s quest for the nomination defeated, Goolsbee is, once again, prominent in Obama’s run for the presidency. Still, the question remains: many American voters wish the U.S. industrial economy of the 1950s and ’60s could be restored, and with it the sweet deal unskilled workers enjoyed. Politicians fail to pander at their peril, and globalization is often held at fault for economic insecurity. But is it?
“Economic research hasn’t pointed at globalization as the main culprit,” Goolsbee says. For example, he explains, Chinese and American manufacturing barely overlap: the total of all imports into the U.S. amounts to only 16.7 percent of American GDP, and imports from China amount to just 2.2 percent. “In fact, the losers to China have been nations like Mexico,” he says; likewise, if Americans stopped buying cheap toys from China, the manufacturing jobs would return to nations like Mexico, not the U.S. Goolsbee adds, “Trade has helped the economy grow. Simultaneously, a sizable number of Americans haven’t shared in that bounty, and if we don’t pay attention to their concerns, all the political favor for open markets will dry up.”