Watch entire conversation here:
[Transcript edited for flow, clarity and length]
Mary Trump: As promised, here is Nick Hanauer. Hi, Nick. How are you?
Nick Hanauer: I’m so good, Mary. How are you?
Mary Trump: Well, I never know how to answer that question these days. Other than the collapse of democracy, I’m doing fine.
Nick Hanauer: I think that is the answer. I am doing fine. That is the standard answer. We’re as good as we can be under the circumstances.
Mary Trump: Wow.
Nick Hanauer: Correct.
Mary Trump: Nick, I recently read your, I guess, booklet. It’s not yet a book, but it will be.
Nick Hanauer: Yes. Okay. A big book will hopefully be done sometime this fall.
Mary Trump: Fantastic. Built on the booklet, Markets Built for Humans: Create an Economy for People, Planet, and Democracy. And as everybody probably knows by now, I’m not an economist, but I completely understand that one of the main reasons we are where we are today is because of our failed economic policies.
Nick Hanauer: That’s right.
Mary Trump: Because the American voter typically votes on the economy, and most American voters don’t understand the economy and how it’s been rigged to work against them. So Nick, I find your work fascinating. It’s one of those things when you have a sense of what’s wrong and how it could be made better, but then somebody like you comes along and lays it out so clearly, so succinctly, that one can’t help but wonder, “What have we been doing and why haven’t we been doing this?”
Nick Hanauer: Correct. Yeah. So why don’t I start by giving just a little bit of context? This booklet, Markets Built for Humans, that folks can download if they would like HERE , is based on a book scholarship that my co-author, Oxford University economist Eric Beinocher, and I have been working on for a long time—more than ten years. Eric wrote a very consequential book published in 2006 titled The Origins of Wealth, which effectively demolished the orthodox economic framework we live with today.
Mary Trump: And what is that framework?
Nick Hanauer: We call it neoliberalism or neoclassical economics. It can also be referred to as trickle-down economics, but it constitutes a framework of thought. Economics is a framework that ideally gives you an accurate way of understanding economic cause and effect. If you do this, then that will happen.
Historically, to generate that framework over the last 250 years, economists have used numerous assumptions about human behavior, the origins of prosperity, and the dynamics of social systems. Those underlying assumptions, while plausible when they were conceived, are not tethered to actual events on planet Earth.
Mary Trump: Can you give a few examples?
Nick Hanauer: Certainly. Utility theory, which many folks may have heard of, is one of the pillars that holds the framework together. It posits that we are all rational utility maximizers. This concept was introduced by Jeremy Bentham in 1787. Bentham, by all accounts, was a rather intelligent person, but we might classify him as being quite far on the spectrum today.
He didn’t run any experiments to verify that we are all utility maximizers; he merely thought it was a fascinating idea and wrote it down. However, because this notion is mathematically convenient, it found its way into neoclassical economics.
Another foundational idea in economics is that the economy is best understood as what’s called an equilibrium system. To illustrate, a car engine is an equilibrium system. If one component goes up, another must go down. This notion is also inaccurate.
The economy functions more like an ecology—a complex adaptive system. Why does this matter? Because if one believes the economy is an equilibrium system that is pareto optimal—meaning everything has self-organized into a perfect arrangement—then it stands to reason that raising wages will kill jobs, for example. Therefore, the economic consensus has long been that raising the minimum wage will result in job loss.
However, it’s crucial to understand that there is no empirical evidence supporting the assertion that raising the minimum wage leads to job loss. Wherever the minimum wage has been examined, there has been no evidence of job loss.
It wasn’t until 1994 that two economists conducted a rigorous analysis. Alan Kruger and David Card embarked on a study examining a natural experiment between New Jersey and Pennsylvania, where New Jersey raised the minimum wage and the other state did not. To their surprise, they found that there were actually more jobs where the minimum wage had been raised.
Mary Trump: That revelation is indeed fascinating.
Nick Hanauer: What is particularly interesting is that when they published their findings in the Wall Street Journal, another Nobel Prize-winning economist denigrated their work, labeling them as camp-following whores for daring to question the science of economics. The problem is that this framework is still taught in colleges today. If one were to take an introductory economics course, they would encounter these ideas as foundational truths, but in reality, they reflect ideology rather than science.
If one takes this ideology seriously and enacts policy based on it, as has happened over the last 50 years, the rich become richer while everyone else becomes poorer. That’s what we are attempting to address.
Mary Trump: And Nick, it’s tragic to think about how we arrived at this point. The antidote to the neoliberal consensus that you argue is both cynical and antihumanist has surprisingly been made palatable to both ends of the political spectrum by being cloaked in a veneer of scientific validity, often through mathematics. This has allowed neoliberal economics to pervade nearly every aspect of our lives, much to our collective detriment.
Nick Hanauer: That’s right. You articulated that perfectly. The neutrality point you mentioned deserves reiteration. Economists persuaded both the right and left that economics has nothing to do with morality or human flourishing, presenting it merely as a set of facts. A canonical idea of neoliberalism is that there is an inherent trade-off between a fair economy and one that is growing rapidly, but there is no evidence to support that assertion—it simply is not true.
This perspective has produced numerous societal pathologies. For instance, in 1972, Milton Friedman popularized the idea that the sole purpose of a corporation is to enrich its shareholders. This concept is integral to the neoliberal project. It is crucial to recognize that Milton Friedman did not state, “Screw the poor.” Rather, he articulated a more insidious notion: that prioritizing profits ultimately serves the poor.
This central claim of trickle-down economics asserts that when the rich get richer, it benefits the economy. Conversely, when the poor gain wealth, it supposedly harms the economy. This understanding did not just gain traction on the right; it also found acceptance among some on the left.
I hold a unique perspective on this issue because I was part of the push to implement the $15 minimum wage. We launched the first campaign in Seatac, a small town just outside Seattle, and from there, the movement spread to the city of Seattle and beyond.
However, when I initially discussed this with numerous Democratic policymakers, economists, and Congress members, nearly everyone believed we had lost our minds. I recently spoke with a prominent left-leaning economist who recalled that, at the time of our efforts, leftist economists arranged a conference call in which one person thought maybe our approach would be acceptable, while the rest believed we were delusional.
This response is particularly concerning because even individuals on the left often buy into this neoclassical fallacy. They make a grave category error by claiming that when wages rise, jobs must shrink. This reasoning is akin to asserting that when plants grow, animals must shrink—it’s simply flawed.
In reality, higher wages for workers can be seen as nourishment for businesses. The more money people earn, the more they spend, which leads to greater consumer demand. This, in turn, fosters more hiring and ultimately increases wages—a positive feedback loop that benefits everyone.
However, as neoliberals gained influence over the economy beginning in the 1970s, GDP growth rates fell from 4.5% to 2.5%. As wealth became more concentrated and wages stagnated, the velocity of the economy declined significantly.
If the majority of people lack disposable income, who will sustain businesses? This erroneous framework has permeated what many college students learn in their economics courses, cloaked as neutral and harmless while simultaneously facilitating the impoverishment of many while enriching a small elite for over 50 years. Until we dismantle this outdated framework and replace it with a 21st-century one, it will remain challenging to foster conditions conducive to human flourishing or to implement policies that genuinely benefit ordinary families in this country.
Mary Trump: You assert that the ideologies presented as scientific theories lack empirical backing. Considering the deliberate misunderstandings or misinterpretations of Adam Smith’s philosophies, as well as the dismissal of Keynesian economics, how did this situation arise? How were so many people misled?
You effectively connect the economic and moral failures, suggesting they are intertwined; it is essential to remember that the economy is not a detached system but integral to our humanity.
Nick Hanauer: Absolutely. The existing framework treats the economy as an entity above humanity—something we must revere. This perspective is fundamentally misguided. The economy is comprised of people, and its purpose should not solely be to generate returns for capital owners but to promote human flourishing for everyone. Your question effectively addresses a sociological issue about how we reached this point, which is a complex narrative that has been explored in various books.
In essence, the economics profession has long aspired to the status and credibility that physics enjoys. Economists saw the advancements in physics during the late 19th and early 20th centuries and wanted to replicate that success. This pursuit, widely termed “physics envy,” led to an effort to model everything mathematically, oversimplifying the complex realities of human societies.
My sympathy for that ambition is nuanced; who wouldn’t wish to predict outcomes as accurately as physicists do? However, the simplifying assumptions required to achieve that ambition often resulted in inaccurate depictions of real-world events.
Mary Trump: Are there recent examples of economists recognizing these shortcomings?
Nick Hanauer: Yes. The person behind GDP warned against using it as a measure of welfare, describing it as inadequate. And yet, we continue to rely on it because these models conveniently align with the self-interests of the wealthy and powerful.
Mary Trump: Exactly.
Nick Hanauer: Wealthy individuals recognized that neoliberal economics favored the accumulation of wealth at the top. Consequently, they mobilized resources, supporting think tanks and university initiatives to champion this ideology. Organizations like the Heritage Foundation, the Cato Institute, and the Manhattan Institute worked tirelessly to promote this understanding as a neutral, scientific method of interpreting reality. This narrative allowed for the assertion that while many individuals would suffer due to policies, such sacrifices were necessary for economic growth.
The result is a society in which the bottom 90% of Americans have been going backwards while a mere 1%—and in truth, often less—live in extraordinary wealth.
Mary Trump: And you cite alarming data regarding the widening chasm between the haves and have-nots. It’s staggering.
Nick Hanauer: Absolutely. Since 1975, approximately $79 trillion has been transferred upwards. For context, the median full-time worker in America earns around $63,000 today. If that worker had simply retained their same economic share since 1975, they would be earning close to $120,000. This trend extends to the 90th percentile as well.
When we studied these figures in 2018, individuals in the 90th percentile earned about $135,000. However, if they had maintained their share of GDP, they would instead be earning $180,000.
Essentially, the benefits of growth over the last 50 years have predominantly accrued to the top 1%. This outcome is a direct result of policymaking rooted in the neoliberal framework, including allowing the minimum wage—currently at $7.25, or $2.13 per hour for tipped workers—to fall instead of tracking productivity gains.
While economists may have had good intentions in mathematizing frameworks to make them predictably applicable, their results proved inaccurate, intersecting with the self-interest of very wealthy individuals. The rest is history—the story of neoliberalism.
Initially, the original neoliberals were genuinely concerned about left-wing totalitarianism, a legitimate threat posed by Russia and China. They sought to defend markets but ultimately went too far in doing so.
Mary Trump: Indeed. This situation appears to lend an air of inevitability to the current challenges we face.
Nick Hanauer: It does seem that way.
Mary Trump: I want to quote briefly from your booklet: “The United States today is existentially threatened by the radical inequality fostered by decades of the neoliberal consensus. The world desperately needs an alternative to both the neoliberal paradigm of the past and the populist authoritarianism represented by Donald Trump in the present. This is essential work for both our economy and democracy.”
It’s become unmistakably clear that the manner in which the economy is structured to benefit the oligarchs is fundamentally opposed to what constitutes a healthy functioning democracy.
Nick Hanauer: Absolutely. The issue with extreme inequality is not merely that it presents economic inconveniences for those affected. The implications run much deeper. Humans are inherently social beings, having evolved over millions of years to coexist in societal structures. This inequality undermines the norms of reciprocity that sustain social cohesion and, hence, democracy—this is the core narrative of our current predicament.
Are we allowed to discuss your uncle?
Mary Trump: Unfortunately, that’s often the main topic of conversation for me, so engaging in discussions like this feels refreshing.
Nick Hanauer: He embodies the very essence of our current landscape.
Mary Trump: Exactly. The fact that people are angry is valid, and they have every right to feel that way. If they aren’t angry, they are simply not paying attention.
Nick Hanauer: True. My concern is that the anger partly stems from the neoliberal consensus, and this anger leads many to empower individuals who will only entrench the system further for their personal gain. How do we break that cycle?
I must commend you for centering humanity and community in your work—concepts that neoliberal economics tends to ignore or downplay.
Nick Hanauer: Indeed, it’s vital for the Democratic Party to stop validating Americans’ perceptions that they are merely corporate pawns. President Obama is an extraordinary individual with commendable intelligence and moral character, yet during his eight years in office, he failed to address these pressing concerns thoroughly.
The highest call for raising the minimum wage during his administration was only to $10 by the end of his tenure. We established the $15 minimum wage campaign out of profound disappointment with that administration, realizing that if this was the best they could do, we would have to take the matter into our own hands.
The American voter has not been presented with viable alternatives, and this goes back to previous Democratic presidents, starting with Jimmy Carter.
Mary Trump: Certainly, Clinton’s triangulation comes to mind, which hasn’t resulted in beneficial outcomes. The Democratic Party seems persistently fearful of provoking the ultra-wealthy and corporations.
Nick Hanauer: Meanwhile, we know that when wealthy individuals increase their earnings, they typically reinvest them in self-enrichment. This is not the case for working and middle-class families, who funnel every bit they receive back into the economy. This approach ultimately benefits everyone, striking a balance across the economic ladder.
Mary Trump: Speaking of alarming statistics, there’s a disheartening index that assesses how many weeks the average American must work annually to cover basic living expenses.
In 1985, it was about 39 and a half weeks. What is the equivalent figure for 2025?
Nick Hanauer: Today, it stands at 62 weeks in a 52-week year.
Mary Trump: The implications are debilitating, as it suggests that many Americans begin each year in substantial deficit.
Nick Hanauer: Indeed. Furthermore, corporate profits as a percentage of the economy have surged to nearly 13%, up from around 6%. Meanwhile, the portion of the economy allocated to working people has dipped from 51% to 41%. This translates to about $2 trillion that has shifted from wages to profits.
What’s alarming is that our nation will spend $1.5 trillion this year—equivalent to 4.5% of GDP—on stock buybacks. This practice doesn’t stimulate growth; it stagnates it. If those profits were directed toward wages as they once were, we would be experiencing significantly faster economic growth—and we wouldn’t need to have these conversations.
This is not about maximizing growth but rather understanding that concentrated wealth and industries don’t benefit the broader society. This complexity underscores that our economic system benefits from mechanisms that dissolve rather than reinforce inequality.
Mary Trump: You’ve framed this entire discussion around restoring basic moral principles, which is crucial.
Nick Hanauer: Indeed, economic policy must be accountable to human outcomes. This understanding can illuminate the failures of existing policies and highlight the potential for adopting an entirely different set of criteria.
Mary Trump: I’m eager to dive deeper into these topics, given the depth of this conversation.
Nick Hanauer: Absolutely. Once you begin exploring this economic framework, it becomes evident that prioritizing human flourishing is a necessity. It’s absurd to think that raising the minimum wage results in fewer jobs.
Mary Trump: Exactly. There’s a lack of evidence to validate that claim.
Nick Hanauer: Zero evidence. The people in power benefit from perpetuating these fallacies because they serve their interests.
Mary Trump: And this bears a resemblance to the prosperity gospel, suggesting that wealth correlates not just with success but with moral superiority.
Nick Hanauer: There are indeed highly successful individuals who have earned their wealth through skill and hard work, but my grandfather’s billion-dollar success stemmed from utilizing substantial governmental assistance, for which he received significant grants from the Federal Housing Authority.
Mary Trump: That help is crucial, and overlooking it reflects a cynical perspective.
Nick Hanauer: Fortunately, we have actionable models that can serve as alternatives—models that can redefine how our economy operates, provided we get the right people into positions of power.
Mary Trump: Yes, indeed. We can create a market economy dedicated to human flourishing.
Nick Hanauer: It sounds simplistic because it can be accomplished.
Mary Trump: We simply need to do it and empower those who will facilitate this change.
Thank you for joining the conversation, please leave your comments below and download Markets Built for Humans HERE.
Thanks for ending on a hopeful note. We so much need for this to happen.
Nick and I are both old enough to remember that "Trickle Down Economics" was first called "Voodoo Economics" by the first George Bush and the majority of Establishment Republicans. It only takes about five minutes of thought to see why. If I'm a business owner and fewer customers are buying my goods or services, when I receive a tax cut will I go out and hire more employees to sit around and do nothing simply because I'm supposed to be a noble job creator? Of course not. Demand for my goods or services will determine my hiring and if my customers have less money to spend, demand will be down and I will not be hiring. The way to increase demand is to raise the wages of my customers and potential customers. Unfortunately, for three generations now, we've all been marinating in propaganda celebrating and worshipping the obscenely rich as our noble economic saviors.