For those of you who may not know dean the only thing he likes more with joining as his dogs. That was my one joke. I have nothing else. Without further ado i will go ahead and let dean take the stage. Everybody dean baker. Thank you and i do like my dog. That is the crew today. At least a couple of decades and economics. The chance to put it together. Just to put as simply as possible. It has been documented any number of ways. That really talks more about wealth. In any case weve have a number of good reports solid data documenting this huge distribution of income. It showed that if you look at that United States and you look at the bottom half of the income problem. Its basically nothing since 1980. And i have many commerce men that will jump up at me. And a large share of the public has almost nothing to show for it. The question is why is that. It just happens. We have in the liberals the liberals who cant feel bad about it. A little bit long. The basic point is the Federal Reserve is hugely important in affecting the number of jobs in the economy and the wage workers get and the third is patents was that might find weird, why do i care about pens . Patents are huge amount of money and the fact a lot of people, including economist type people dont seem to know that is incredible. And enormous failing of the economics profession. We start with globalization. The classic story is what happens to be the case all these people in the developing world were ready to work for low wages, very poor and undercut our steelworkers, auto workers and that is the way of the world, we have to get used to it. You dont have a college degree, you cant compete in the World Economy and liberals feel bad about workers who lost their jobs in pennsylvania and other places, too bad. Conservatives. I want to say that story is fundamentally wrong. It is wrong in every respect. The place where i start the book i pick up on a theme in the primaries in march. I attribute this to box, wrongly indicted them. They said Bernie Sanders is the enemy of the worlds poor. Bernie sanders saying i want to protect jobs for manufacturing workers in the United States. The argument was that has been the story of development in places like china and the rest of the developing world that they got those jobs and that led to them getting out of extreme poverty and we should be happy about that and Bernie Sanders is their enemy. That is fundamentally wrong for a number of reasons. The idea that we had to displace workers in pennsylvania and ohio to accommodate the output of the worlds poor inside and the developing world, is fundamentally wrong and not hard to show that. The economic theory i learned that grad school is you are supposed to have many going from rich countries to poor countries, capital from rich countries to poor countries, the money should be going to the United States to china to malaysia to other poor countries. That matters because that would mean we would be running trade surpluses with those countries, using that money to build up their infrastructure, their Capital Stock and at the same time support the population. In the 1990s, we saw rich countries as a whole had large term plus surpluses in the world, they had large trade surpluses and countries like vietnam, malaysia, very large trade deficits. They are going very rapidly. They are richer than they are. And south korea and malaysia are richer than the United States, financial crises in 1997, this is the root of all evil. East Asian Financial crisis developing countries began large surpluses. The story is accumulating large reserves, the reason was the bailout from the financial crisis, Alan Greenspan and robert rubin, post harsh terms, they want to deal with the imf after that. That was a lesson they learned in latin american, south asia, anyone position to regulate reserves in the developing world did so after 1997. These countries instead of running trade deficits were net lenders, very diverse story so the people who argue for the Current System were the enemies of the world poor, not Bernie Sanders is that is true in theory and with a look of the period 1997, you are welcome to ignore it but that is not reality. A lot of people in the developing world happy to work on what they were doing. In michigan, ohio, and in the developing world happy to train as doctors, lawyers, dentists, and professionals, very difficult to do. And other professions, doctors want to know best. Without having completed us residency programs. We want to assure standards for doctors. Competent doctors, and in protectionism. And in canada, twice as much. And the human price for that, the difference of what we pay doctors and wealthy countries, 100 billion a year, that is real money. It comes to 700 a person. And let me mention one last point, globalization. And and copyright protections. Those are incentives. Those are protections. The distortion is in the market. I focus on prescription drugs. It is invariably drugs to be cheap in the free market to manufacture. And 84,000 in the United States. And the kind of things we get. Getting cheap stuff, the same drug. That is equivalent to a 40,000 tariff. When i say that to people, that is a patent, you can call it anything you like and impact on the market. And 4 people in the developing world pay lots of money that things are very cheap. And an and requires them to patent protected prices, premarket crisis. And educated people, and washington but in any case, and selling stock and bonds. And Interest Rate in december. Fed rate, Interest Rates, why did they do it. And reading their minds. And the job market getting too tight. And the direction is unambiguous. It slows the economy by a 10th of a , and talking to route 150,000 you are jobs in the economy. Lets think about trumps carrier show in indiana. How many jobs at the state fair . 700. 2000 times the small Interest Rate hike, no one paid attention to it. And a huge amount of attention. And much more concerned the cost of job growth. And Gerri Bernstein a few years ago, one of the measures we looked at is the gap between the measure of full Employment Level of unemployment, the nonaccelerated inflation rate of unemployment, we come out with that. We look at the difference between the actual rate of unemployment and the measure of the neighbor. Not saying they are god but a nonbiased measure. From 19471980, the Unemployment Rate is half a percentage point below the measure. To 2012, it was a 4 point above. 2000 years after 2007 after the crash, two third the data higher. It means much more restrictive monetary policy, higher unemployment and if they have their arguments. They are concerned about inflation. They place much more effort on containing inflation in the period since 1980 than the period prior to 1980. The point we make in the book, it is not just downsize the economy. We envision a story where the fed restrained demand and Unemployment Rate of 5 or 4 , not just the economy is smaller but has huge distributional effects. We analyze part of this is very strong racial components. If you get the Unemployment Rate down by a percentage point, we get the Unemployment Rate for africanamericans down by two Percentage Points, strongs strong relations, very strong relationship. The Unemployment Rate, one percentage point higher than necessary it is two Percentage Points fire than necessary, for African American teened 6 1. Hispanics, it is 1. 5 to 1 ratio. The other part of the story is the wage story. We talk about less educated workers the workers without college degrees, disproportionately the people who are losing jobs. If things get bad it tends not to be the manager who is laid off but the waitstaff. The retail clerk, the president manufacturing on the assembly line. Those are the people who lose their jobs and part of the story we had is if you look at patterns of wage growth over the last 40 years the only time you saw consistent wage growth are those in the middle and bottom, in the late 90s the years in which we saw low unemployment. We got the Unemployment Rate down 4 , year around average at 2000 and good wage stuff, it was more rapid than those in the bottom, the weight distribution, those in the middle and the top, things were going the right way. The larger point is you have the Federal Reserve board committed to maintaining higher rates of unemployment fighting inflation, downward pressure on wages of less educated workers. It wasnt god, it was the Federal Reserve, the argument for their policies, a policy choice. That was something that happened, simply not true. It was something we did. I make the point that we do this and they are not evil people but it sounds very sanitary. We dont want the economy to overheat and i dont want the economy to overheat but throwing people out of work, very few people realize it was one of the deck and i will skip to talking about patents. But this argument about automation eliminating jobs, there is not going to be any jobs for less educated people. That may or may not be true. I dont know the future and i dont think any of us do. For the present, that is not the case. Two things to point to, automation is productivity growth, not something new or exotic, we had automation forever. In the 50s and 60s, very good wage growth up and down the income ladder. We are seeing productivity growth, workers at the bottom, it is nothing that does that. We are worried about automation. This speaks to the quality of economic debate, policy debate, we are worried about automation destroying jobs at the same time the fed think they have to raise Interest Rates to destroy jobs. Sorry that doesnt make sense. Either one of those could be true but they cant both make sense. The fed doesnt think automation is going wrong so rapidly to destroy jobs, that is why they have Interest Rates, they feel they want fewer people working so it is not that wage pressure. The third area is patent policy and i raise this all the time with economists. They look at me like what are you talking about you focus on prescription drugs, that is their life and their health but a huge amount of money. We spent 430 a year on prescription drugs, 2. 3 gdp. A metric i use in the book, metric of comparison, what we spend on food stamps, a lot of conservatives beat up on food stamps. The largest antipoverty program, 70 billion a year on that, prescription drugs tween 9 times what we spend on food stamps, giving you that metric. A lot of money is saved there. How much will we spend if we snap our fingers and got rid of patents and related protections . Almost invariably the drugs we are getting are cheap to produce. It is very rare you have a drug the cost a lot of money to manufacture. I gave the example of a ratio of 4001. That is extreme but ratios of 501, 1001 are not uncommon and even a ratio of 101 doesnt mean we spent 43 billion a year for the drugs we are currently spending 430 billion a year on. That is an incredible waste and the way i talk about this is the same way economists talk about trade protection. If i say i want to put a 20 tariff on important steel, why that is bad, it is creating a gap between the free market price and protected price and giving Steel Companies incentive to pay off legislators and they will hire lawyers to expand, all of which is true. Except when you have patents that raise the price not by 20 at 1000 or 10,000 , much more true and companies have an enormous incentive to go to congress, we want longer and stronger protections, pretty good at that so they do that all the time, misrepresent their research, they might not be appropriate, turn on the tv, almost invariably see drug ads because i watch the news. Invariably you see drug ads. What are they telling me . Might not be that fond of it but i get some idea what i am getting with a car. I see their drug ads, the limbic figure skater was advertised in arthritic drugs. What can you give me . She takes a drug herself, skates around and i feel great now. Who cares . Obviously the drug company has done Marketing Research and what they are betting is someone suffering from arthritis to go to their doctor and say give me this drug or whatever. It is not a way to get good medicine. We see that for obvious reasons. They sometimes conceal evidence there drugs are harmful like drugs put out by merck, turns out it could be bad for people with heart conditions and a lot of people have arthritis with heart conditions. People die because of that. They have a big incentive. If they were selling at the same price as a bottle of aspirin they had reason to conceal the evidence and give them a big incentive. Also the nature of the search, had discussions with people from pharmaceutical industry, new competitors, talk about the 84,000, no one pays it anyhow, this whole industry of intermediaries. That is not useful either but there are drugs in the pipeline competing to bring down the price of 40,000 or whatever but that is not a good story. Where you have a monopoly on the drug, free market would have made sense, you have i am speaking of the doctor, seems to be a very effective drug, but makes sense to have a lot of money developing a second, 3 and fourth street, an effective treatment for it. And sitting down and saying those Research Dollars best spend, developing the second, third and fourth for hepatitis c, they dont have treatment. And a lot of people looking, and 32 billion a year from the federal government. And they get the output and couldnt get patents to make lots of money on it. If you double or triple the budget and have private industry do it, the point it is in the Public Domain. Someone working on a drug posting to the website, they benefit from that. The finished product, that is in the Public Domain, reducing generic. My argument would be way better off doing the system like that than the current patent system. Getting to the underlying issue, looking at this literally last night, looking at drug counts alone, in the order of 350 billion extra spending and i check this against the wage income, the Income Distribution is 1. 2 trillion. And going to give all the money to the bottom half of the Income Distribution would be the same as increasing wages on the order of a third. It would make a difference in their lives. When i talk about patent again, and the same issue arrived, the mri, why is it expensive . Was it actually cost . You need electricity, someone who knows what they are doing to give you an mri, and patents, it was much more extensive and for a long time, samsung and apple, and rushed into court for patent suits. They agreed to stop doing it. It is not a good use of resources. I could go on at length about this. There is a huge amount of money at stake. It is not something that happened, we made patents longer and stronger the last 40 years and overwhelmingly benefited people at the top. And benefiting people like bill gates and other very wealthy people. I dont beating up the system of executive compensation. And they rip off shareholders, Something Like john stump, ceo of wells fargo in the news, they walked away with 100 million. We could be sympathetic, someone like steve jobs was innovative, made lots of money perhaps. They are hardpressed to say with a great contribution was. Did john stump do a lot for wells fargo. Facing all sorts of charges, probably not. Walked away with 100 million. To sum up, we could look over the last we for decades, no doubt there has been a massive upper redistribution of incomes. And it was not something that just happened but something we did. The main thing is we could undo it. One last point which is front and center, spent a huge amount of life yelling about Social Security and why it shouldnt be cut. I am fine with that but the most important thing is to avoid redistribution in the market to begin with. You need different rules for the market so it doesnt lead to the same inequality we see today. That is where the biggest dividends are. Questions . [applause] always great to hear you speak. I want to touch on tpp and other intellectual property protections in those policies, previously mentioned a lot of free trade deals are protectionist, they have, beyond the glamour of building up global markets, tearing down barriers, there are entire chapters of intellectual property. Can you talk a little bit more, why do you have people like jason furman or barack obama who sell these bills overall but underestimate or overlook those chapters that are more protectionist. Jason furman is the council of economic advisers for the next few days. I dont know exactly its motives. Hardly a secret who is negotiating the tpp, 25 working groups and the washington post, you had a working group in intellectual property, people from pfizer, merck, microsoft, those companies but people from Big Drug Companies and the software industry. What do we think there are going to do, designing a trade deal, design something how do we disperse technology, innovation, the trade deal makes us richer. That was what went on. Why do economists defend that . A lot of economists look at these things, it is a fear free trade deal. To call it a trade deal, use a neutral term. The view of the mindset expanding world targets is a good thing, have to support it. If you could point out patent protection, copyright protection, there is a small sidebar and if you look at the tpp it is the other way. There is not that much to eliminate tariffs quote as, we have trade deals a