This dichotomy where markets are over here and government's on the other side of the ledger just is not descriptive. It's just not accurate. It's not that markets just work and then occasionally government comes in and intervenes. It's actually that the two are more in a dance. I think that we need to throw out that dichotomy and think more about markets as institutions that need attention and cultivation.
Welcome to Technovation. I'm your host, Peter Hy. My guest today is Chris Hughes. Chris is best known as a co-founder of Facebook 21 years ago. He also directed Barack Obama's organizing efforts digitally in his 2008 campaign. More recently, Chris co-founded and is the chair of the Economic Security Project, a nonprofit advocating for economic power for all Americans. He's the author of multiple books, including his latest, which is Market Crafters: The 100-Year Struggle to Shape the American Economy. I look forward to hearing more about the topics covered therein through this conversation. Chris, welcome to Technovation. It's great to speak with you today.
Well, I wonder if you could take a moment and define market crafter, a term that will not necessarily be a term of art to everyone listening yet, but would love to have you assist in helping us understand what you mean by it.
Market craft is when policymakers guide or shape a market towards a political or social goal. So that can be things like making Americans richer, their economic lives more stable, towards national security, to make all of us safer. There are all kinds of goals that it can be pointed to, but it's a method of organizing and managing markets to accomplish it. And you know, I see in the history of American capitalism a recurring pattern of policymakers, some of whom are on the left, many of whom are on the right, guiding these markets toward these goals. Of course, sometimes they succeed, sometimes not infrequently they fail. And the thing that I'm most interested in is pulling out the lessons from those experiences to apply to our current policy environment and where we might head from here.
And how much, as you point out, there is market crafting on the, and you do so very well in the book, there's market crafting on the left, there's market crafting on the right. There's certainly a lot of bipartisan market crafting. We'll get into some examples of that momentarily. What would you say is the batting average of market crafting in terms of, you know, off the top of your head as you think about those that have been successful versus, you know, acts of various administrations for instance that maybe are not going so well?
It really depends and it's hard to paint with such a broad brush because it depends on the era and it depends on the context. What I see in the history is that when market craft works, it's because policymakers charge an institution with a clear mission and then invest that institution with the discretion and power to get it done. So about a fifth of the chapters in the book are about the Federal Reserve. And it's partially because I love the Fed. I'm slightly obsessed with it. I think its history is just fascinating. But it's also because it is one of the most successful market crafting institutions in the United States. We don't tend to think of it that way, but that is what it's doing. You know, the Federal Reserve sets the price of short-term credit and then it enforces that price by actively managing markets through its open market operations, buying and selling short-term treasury bills or in some cases mortgage-backed securities to ensure that price is held. And then if for some reason the market becomes disorderly, as they like to say, they will step in not just in these bailout moments like in 2008 or 2009 but anytime you have a kind of credit crunch or a spike. And so, you know, most people in finance I think would say we like having a central bank. We want to have a central bank. I think most Americans, when they understand that that's what's responsible for having a stable currency, would agree. But that's market craft. That's an institution with a clear mandate: price stability, full employment, financial stability, with a meaningful amount of power and discretion to get it done. And more often than not over the long course of its history, it has been successful.
How did you come to this topic, Chris? What inspired you to write the book?
So about, well as you noted in the introduction, you know, I started my career in tech and then worked for President Obama on the, well at that time candidate Obama, on his 2008 campaign and then I wandered a bit to be honest. I did a stint in venture capital. After that I was in the media world owning a magazine and I had a lot of different interests but didn't quite know what I wanted to do professionally. And then about 10 years ago I turned towards economics first as an activist and in the nonprofit world and then over the past several years as a researcher and academic. I ended up getting a masters in economics at the New School. Now I'm working on my PhD at Wharton and I've just, you know, fallen for the, well, I've really become invested in the effort to rethink how economics works and to ensure that we're thinking about the role of institutions in the world of it. And so marketcraft in particular was, you know, a topic that I increasingly wanted to cover as the world began to focus more and more on industrial policy in the Biden administration. You know, in 2021 and 2022 with the Inflation Reduction Act focused largely on climate, the CHIPS Act focused on semiconductor manufacturing to some extent, the infrastructure bill. All of these things people were talking about as industrial policy which in some sense they are but I think that's too narrow of a way of thinking about the story, the history of market craft in the United States. So I wanted to zoom out another notch and think about healthcare markets and financial markets and energy markets using this broader framework of market craft. And so that set me on the journey of writing the book and here we are.
And how did you decide at this stage of your career and the success that you've achieved to go back to school now pursuing as you mentioned a PhD at Wharton? I mean obviously it's helped you get immersed, has given you a structure and reason I suppose to delve deeply into these with a variety of experts no doubt that you collaborate with there but what made you think to go back and what will you have gained at the end of that that you didn't have before?
I think it's been a deep craving to become an expert, to know all the things on a certain set of topics and for me that is the history, function, methodology and importance of central banking, industrial policy, anti-monopoly policy to some extent, tax policy, a lot of economic issues but not just economic issues broadly but those that involve public policy and the institutions that guide and shape markets in the first place. And so I could have I guess done a lot of that research on my own, but I'm an extrovert. I like people and I wanted to work with a community of scholars who were working on a similar topic and it's been amazing. I mean, I still have to write the dissertation so let's talk in another year or two. I'd like to focus my energies on that on the other side of this book, but it's been really rewarding. I mean, it's just fun.
And as a matter of further definition, what's the difference between market crafting and industrial policy? Is there a significant overlap to the Venn diagram between the two?
Yeah. So, industrial policy is a phrase that conjures up the idea of the state, you know, famously quote unquote picking winners and losers, right? Like that's the phrase that people often like to use. And that is actually somewhat rare in American history. What's much more likely is the state will choose an industry to support or a market to shape and guide. And so when we talk about industrial policy, the connotation, you know, it makes you think of like blue-collar workers and the industrial Midwest and its industry. And so that is too narrow I think if we're thinking about something broadly and you see that running into political barriers. If you remember in the Biden years there was a real effort to think about the care economy which is one of the sectors of the economy that's where jobs are growing and we need significantly more people. The Biden folks sort of tried to talk about that in the context of industrial policy and it just I think sort of fell flat at least it did for me because supporting home healthcare aides just doesn't really sound or feel like industrial policy. However, it I think broadly speaking was the right thing to do. We need more healthcare workers. We need that work to be, those workers to be more abundant. We need it to be cheaper for consumers. And so that to me is an effort or an impulse at marketcraft. And similarly with the Fed or in housing markets or in all of these different places, we need this broader concept of saying, hey, we have a goal. We want to take housing as an example. We want to build 4 million housing units by 2030. In order to do that, we are going to need to think about all kinds of things. Certainly streamlining building requirements and zoning as a lot of folks are talking about these days, but also public investment from the state, potentially a housing construction fund that would change the cost of developing, standard setting for modular housing, procurement. I mean, we could go through a whole list of public policy tools that could help craft that market to bring down prices. And I think personally I think that's what we should be doing. And I think if we were just talking about an industrial policy for housing, it would be too narrow.
That's interesting. And you note that there's often a feeling of markets sort of versus the government, which you note as a false dichotomy. And in some ways I read portions of the book as sort of an answer to Adam Smith or Milton Friedman. In some ways you talk about the markets, you note that markets are not necessarily natural phenomena, that in fact intervention is necessary. Is that a fair reading?
