Transcriber: Helena Bowen Reviewer: Denise RQ
Back in 2011, I was a student at UC Berkeley studying Public Policy.
Protests surrounding tuition hikes were gripping the school.
However, many years ago, the University had adopted a policy
whereby only a handful of high-income students pay more when tuition goes up.
In fact, the additional revenue collected from those students
actually gets shifted down to most other students
in the form of bigger financial aid packages.
I created this visual model of how the policy works
and we found that most of the people out there protesting
were primarily low and middle income students
who would actually benefit from the hikes.
This was circulated all over California.
The protests diminished
and the President of the University sent me this letter
explaining his trouble in communicating the policies.
It was clear to me that our notions around tuition hikes
is that it would limit access to disadvantaged groups.
However, it's often the case that rhetoric will supersede logic
when our public institutions are so complex
that the ordinary citizen doesn't have the hours in the day to understand them.
The consequence of all of this is that we as citizens
unknowingly advocate for things against our own interests
(Laughter)
or the interest of those we care about.
This creates unnecessary gridlock.
It distorts our voice into government,
and then government can't perform its job of serving people.
So while the President of my University just wanted
to make college more affordable, just like the protesters had wanted,
he faced immense barriers for really no reason at all.
I started wondering if this problem existed
outside the walls of my university.
Were peoples' beliefs consistent with how public policy would impact them?
I started a project, and we looked at how the Obama and Romney plans
would impact different zip codes in the United States.
We took their tax and spending proposals,
we turned them into algorithms, and we simulated the impacts
against a bunch of tax records and census records.
We discovered something very big
and that is most Americans vote against their own financial self-interest.
(Laughter)
Now, I know it's a common belief that many red states do this
because of social issues.
Thomas Frank wrote a bestseller about it called, "What's the Matter with Kansas?"
where he argued that the Republican Party leverages non-economic issues
to win votes in Middle America.
But this non-economic voting is much more pervasive than we think.
Some of the most liberal parts of the country happen to be
some of the biggest benefactors of Republican policy.
Here's San Francisco.
The red areas are benefited by Romney's plan.
Here's New York.
I started to wonder if this was just an American thing.
Was this happening in other countries?
So we took a look at other countries in the Western world and found
that the U.S. actually has the lowest rate of class-based voting
in the entire Western world.
That is to say, we simply don't consider our personal finances when we go to vote.
So the ironic thing: our common thread as Americans
is our shared ignorance around public policy.
(Laughter)
But a lot of this has to do with our country's diversity.
We get divisive about other issues, like culture and religion,
while in more ethnically homogenous countries,
the biggest divisions are social class,
so their political parties tend to form around those things.
I had a feeling that what was happening in America wasn't deliberate.
I felt that most of us, at our core, are moderates.
Most of us aren't not going to forgo the livelihoods
of our friends and family for ideology.
Most of us simply want to live better lives and in better neighborhoods.
That's not to say that self-interest should be our only criteria when voting,
but we should at least know the impacts of our options.
While I was still a student at Berkeley,
I started building a web application with my friend Jeremy.
It was a tool that could show how much you would pay in taxes
and what benefits you would receive under the Obama and Romney plans,
based on your own demographic information.
It took a few months to develop.
We didn't know what to expect really,
but we put it online one night, and we emailed a few blogs,
and I went to bed, and the next morning,
my phone started buzzing with calls and emails from journalists.
Even though it wasn't a cat video, it had gone viral.
(Laughter)
We started getting interviews from all over the world.
By election day, it was used over four million times.
Somehow, it really struck a chord with Americans.
But it also agitated many people.
Here are some emails from our users:
[Your app is very biased. Nice try lying to America. - Andrew R.]
[Saw your charts... total crap. - John H.]
(Laughter)
When information contradicts our preconceived notions,
we often reject the validity of the source,
or we retreat to higher moral ground.
Here's a journalist who refused to write about us and criticized our mission.
But all of this, it didn't bother me.
All that mattered to me was if we were helping Americans
form sound opinions around public policy.
And fortunately,
a team of professors at Berkeley did a controlled study on our site,
and they found that 6% of our users shifted their support
to the plan that benefited them more.
That was shocking,
because that was enough to change the outcome of an American election.
This call to rational thinking, this influence,
started attracting the attention of governments from all over the world.
They started emailing us, asking us to build an analog for them.
They told us that they have no way
of communicating the pros and cons of policy
in a way that the ordinary citizen could understand.
They can't even do the right thing anymore
because of how the media and politics would distort proposals.
We started thinking: was there a way to scale what we did
for the election to every policy issue
so that could be the universal form of communicating this information?
So I put together a bigger team, and we embarked on a not-so-trivial task,
and that was developing a model of the U.S. economy.
(Laughter)
We spent about a year merging data sets from places like the IRS and census.
It culminated in over 200 billion data points
on the U.S. population.
And don't worry, they're anonymized. They won't be selling them to the NSA.
(Laughter)
What this allowed us to do was measure the impact of any change
to a parameter of economic policy down to the individual level.
This became our new company, and it's called Outline.com
and our mission is to help governments improve the well-being of Americans.
It's really simple.
Now, I know you guys are a smart audience and you're probably wondering:
"How does he do it, what do you mean 'model'?"
So I'm just going to do a little, quick lesson.
There are two types of economic modeling:
there is partial equilibrium and dynamic modeling.
Partial Equilibrium is the kind we do,
and that measures the first-order impacts of a decision,
the direct transfer of resources from household to government.
Dynamic modeling is the kind we abstain from.
It measures the second-order effects and beyond,
how effects feed into each other.
For instance, if you spend more on education,
sometimes it lowers crime.
We realized that the impacts of those types of second-order effects
are very uncertain, but also highly politicized,
so we abstain from that,
and we realized that most people don't even know the first-order impacts,
so we can't even begin to have a conversation
about what would happen subsequent to them.
Now I'll stop talking and I'll jump into a demo
of how it actually works, if we could switch over.
This is for the Commonwealth of Massachusetts.
This is a tool we built for Deval Patrick's administration.
It was a pilot.
So now I'm going to perform a tax cut.
Here you can see every zip code in Massachusetts,
so I'll zoom into where we are right now, so we can get a little closer.
These are all the taxes that I can cut.
I'm going to move this slider over, and see what happens.
I'll cut it, maybe, down to there.
Then in real time, it will calculate it
against millions of tax records on the back end.
You'll also see that I bankrupted the state. I'm sorry.
(Laughter)
Let's say I want to make up for that tax cut with a cut to education.
We can look at how it impacts different income levels from rich to poor.
So we'll go over to the spending tab,
and maybe we'll cut education by a few billion dollars,
and then in real time,
you'll see that the bottom two income quintiles were impacted the most.
So now I can take this set of policies,
and I can actually find out how it impacts a particular demographic.
So for instance, if this person was single, they drive,
they make $50,000 a year, maybe they trade stocks,
and they made $1,000 in capital gains, and they have two kids.
Each of the policies is itemized.
In this scenario, this person would gain $625
from this particular set of policies.
You can see education right there.
We showed this to governments and they were shocked by the speed
that we could do this analysis.
What used to take them months to create and assess a single policy,
they could now come to our site
and build out the infrastructure of government in real time.
Not only that, it could be made digestible completely to the public.
It shifted from a communication medium to a policy-making tool.
Most importantly, it was open to the public,
so anyone can propose ideas now,
with the same understanding of the impacts as an economist.
We're now working with a handful of governments across the country
and we're expecting
around 10% of American economic policy will be made with the aid of Outline.
But I want to take a step back and explain what the big picture is.
In the 15th century, printing technology allowed for ideas
to come from a new source, and that was the public.
It shifted from priests and monarchs,
and that facilitated a revolution in scientific, social and religious thought.
Design and data visualization are lowering the barriers
for us to influence and engage with public policy.
This will allow all of us, beyond economists and policy-makers,
to have a sophisticated and constructive conversation
about how our public sector should be organized.
Thank you.
(Applause)