• So, good afternoon everyone.

I’m Ann Harrison.

I’m the dean of the Haas School of Business.

Welcome to today’s Dean’s Speaker Series.

As you may know, our flagship dean speaker series

invites preeminent business leaders to share their insights

with our community.

I am so excited today,

I cannot tell you how excited I am

to welcome two exceptional leaders

who are actually members of our very own faculty.

They are trailblazing women in their fields

and they’re using their academic chops for the public good.

I’ll start with Ulrike.

Ulrike Malmendier is the Edward J. and Mollie Arnold

professor of finance at Haas,

and she’s also a professor in the economics department.

She received a PhD in business economics

from Harvard University and a PhD in law

from the University of Bonn.

Ulrike studies economics and finance with a behavioral lens.

She looks at why and how people make mistakes

and why often decisions are biased

and deviate from the classical economic paradigm.

Her work stands out for its originality and creativity.

An example is her Depression Baby paper.

In it she shows that the economic conditions that prevailed

when you were younger actually influenced your views

on money for life.

In 2013, Ulrike was awarded the prestigious

Fischer Black Prize from the American Finance Association.

That is given to the top finance scholar in the world

every other year under the age of 40.

That is the top prize in finance.

All the famous names you know in finance,

people like Fischer Black, et cetera, et cetera,

get that award.

She also received UC Berkeley’s

Distinguished Teaching Award.

Last year, Ulrike was appointed

to Germany’s Council of Economic Experts,

which is the top advisory board to the national government.

As part of that council,

she is spending time with the heads of states

of all the major European countries.

The council has just issued its annual recommendations,

which we’ll hear more about in a moment.

Please welcome Professor Malmendier.

(audience clapping)

So let me turn to Catherine.

Catherine Wolfram is the Cora Jane Flood

Professor of Business Administration at Haas.

She’s also served as our associate dean

for academic affairs

before she left regretfully for Washington.

She also served as the faculty director

of the Energy Institute at Haas.

She’s an affiliated member of ARE

in the College of Natural Resources.

She’s part of the Energy and Resource Group at UC Berkeley.

And she was the program director

for the National Bureau of Economic Research’s

Environment Energy Economics Program,

which is a top national program in the US

looking at environment and energy issues.

Catherine is a two-time winner of our Cheit Award

for Excellence in Teaching.

She received a PhD in economics from MIT

and a bachelor’s from Harvard University.

Catherine’s work focuses on the economics of energy markets,

energy policy, climate change, and environmental regulation.

In March, 2021, she was appointed

as deputy assistant secretary

for Climate and Energy Economics

in the US Department of Treasury,

which as you know,

is led by Haas Professor Emeritus Janet Yellen.

She’s currently a visiting professor

at Harvard’s Kennedy School.

Welcome Professor Wolfram.

(audience clapping)

I shouldn’t be saying this,

this is completely off the record,

but they are both being recruited by top schools

whose names you can only imagine.

One of them is a little further down on the peninsula,

and then the other school’s like Harvard.

I hope you’re having a terrible time at Harvard.

So, following today’s discussion,

we will have time for audience questions.

So please think of questions that you might have.

I’m gonna start with questions for Ulrike.

Ulrike, you have a thriving academic career.

You live in Berkeley, 5,600 miles from Berlin.

Now, how did you get to be appointed

to Germany’s Council of Economic Advisors

and why did you wanna do it?

• Well, that’s an excellent question

because it started off from me writing a big op-ed,

why no self-respecting economist

should ever join the German Council of Economic Experts.

(all laughing)

And the occasion was I’d gotten a prize

from the Association of German Economists

and was talking about policy advising

and complained that whenever we have a new administration

come in, you know, I remember very much when Obama came in,

next thing I know, half of my department gets emptied up

because people go to Washington

and now it happened again under Biden.

Germany doesn’t have that tradition

of really trying to seek out the top minds,

and I feel very much that this should change.

And next thing I know, I got a call from,

at that time the Chancellor Angela Merkel,

whether I would want to join

the Council of Economic Experts.

And I answered, “Well, did you read the article?”

But since then, people were saying,

since it’s a little bit differently organized,

it’s independent, you decide a little bit yourself,

you know who’s in there and so on.

If you really want to change it, be part of it.

And that was the big motivation.

• I see.

Did you all hear where she said

that she got a phone call from Angela Merkel?

• Her team, her team.

• Okay, so next question.

I understand that the council is known

traditionally as the council of the “five wise men,”

but this time around there are actually three women

on the council, one of them being yourself.

Now, as a woman in the male dominated field

of economics and finance,

do you feel that you bring a different perspective

to the role?

• Yeah, so I do think it was a big mistake

to leave out an entire agenda

from this type of policy advising.

You mentioned my research on experience effects.

I do think what we’ve lived through in our lives shapes us

and we bring a different perspective to the table.

So it’s good, it has changed

so that the wise men are now also a lot of women.

At the same time I would want to emphasize that

what has changed mostly is the, you know,

how economics has changed, much more evidence-based

and so on.

So I don’t know whether you can really gender

how we’re working right now, but I’m glad it has changed.

• So let me talk about another aspect of your background

that’s different from a lot of other economists.

You are a pioneer in the area

of behavioral economics and finance.

How is that different from classical economics

and how has that affected

what you bring to this important role?

• Yeah, it’s quite interesting

how it interacts with all thoughts of economic questions.

So obviously one big topic on the table this year

was inflation, not only here in the US but also in Europe.

And exactly the topic you brought up early on,

how experiences, times we lived through tend to stay with us

is something that’s very relevant for inflation experiences.

So when inflation, you know, was scratching the two digit,

the 10% real in Germany, I was not happy.

But what I kept telling policy makers,

not only let’s not only think about, you know,

fixing it right now, but let’s keep in mind

that there might be long run implications

if we stay there too long.

People get risk adverse,

they get different attitudes toward saving and investment.

And there was lots of interest in hearing that.

Another quick example is labor markets.

Germany, like many countries in Europe

have this demographic problem

that leads to not having enough labor force

and how do we now attract people into the country?

How do we help people to find the type of jobs

and train for the type of jobs that are future oriented?

Traditional economics, as you know, incentives,

punish, carrot or punishment.

And so as a behavioral economist, I get often asked,

well, what other means could we use?

Like involving peers, involving nudges,

involving lowering the threshold

to get being mentored about maybe changing your career.

It’s actually amazing how interested policy.

Every politician I meet will start with,

“Well, you as a behavioral economist.”

I didn’t expect that.

• Ah, interesting.

So you as a behavioral economist,

you just put out your first annual report

on this Council of Economic Advisors.

This is kind of a big question,

but maybe you can give us the 30 second answer

on how is Germany doing overall?

• I’ll try.

Not as badly as some have worried about last fall,

in particular with the energy crisis,

with the war in Ukraine and what’s happening to oil prices.

People are very concerned about what would happen

to the German economy.

We at the council were a little more optimistic.

Lots of things were going on there

that German industries have still lots of demand

for their products, which I haven’t quite worked through.

Maybe partly because of supply chain issues.

German consumers were forced to, they save a lot anyhow,

but they were forced to save even more

during the COVID crisis.

And so we were predicting that that will buffer a little bit

the strain of, you know, the economic downturn

that was about to come due to the energy crisis.

And I think so far we are right.

So mildly optimistic.

• I see.

So did you have specific policy recommendations

that you spearheaded?

• Yeah, I mean,

so we always pick like 3, 4, 5, 6, like main topics.

One is inflation.

They are, you know, the ECB decides

how to set interest rates.

But we put a lot of emphasis into this theme

of thinking about long run implications

if we stay up at this relatively high levels of inflation.

We also warned the German government not to be too generous

with the physical on the physical side.

I think in the US that didn’t necessarily always go well.

Maybe the checks that were distributed during COVID

could have been fine-tuned a little bit more.

So we were arguing a lot for fine-tuning,

for finding those folks who really need the support

on the industry side and on the consumer side.

And I think we’re being heard there.

In terms of the labor markets,

I already alluded to us again,

having a little bit of a behavioral push

to kind of lower the threshold to help people to retrain,

to find career path, which are future oriented.

We going away from just punishment, stopping support,

but going to the workplace,

having a different type of mentoring in place.

I think that got a lot of good reception.

And then of course we worked a lot on energy topics

and how to help Germany get through this period

of very high prices without throwing incentives

out of the window, right?

So the immediate instinct of governments, of people,

of politicians want to be reelected is,

oh, let’s just put a price cap at a very low level.

And so people can just, you know,

heat their places at prices.

They don’t have their gas bills, their energy bills explode.

The problem is you destroy incentives if you do that, right?

Like if you don’t pay more than you used to pay,

then there’s no incentive to save energy

and that was very urgently needed

in light of the reduced supply of energy

from Russia in particular.

So lots of talks about how one could do that

with lump sum payments and keeping the incentives up.

It was frustrating but I think we prevailed.

• Well maybe you could talk a little bit more about that.

Inflation is a really big topic in the US

as it is in Europe.

In the Eurozone inflation rates right now

are four times higher than what the European Central Bank

would like them to be.

What are you proposing in order to get inflation down

since you don’t wanna hurt incentives?

• Okay, so first of all there is the monetary side, right?

So central banks react as they did and do here in the US

by raising rates and just having a voice out there

saying that it’s important to keep raising interest rates

to combat rising inflation,

I think played some role.

I mean we definitely, you know,

had meetings with Christine Lagarde

and other people of the ECB and kind of made sure

because do you remember, team transitory people thinking

this might like, you know, not last

and might worry too much.

So our voice was there in the mix.

Now on the physical side, however,

governments want to help consumers

who are dealing with these increasing prices.

And I was in the chancellory on the day

Germany passed this 200 billion package

to support consumers and industries in Germany

to get through this period of energy crisis

and high prices.

And I literally remember them basically

running a victory lap and then throwing the document down

and they passed it through

and it’s called the doppervom syndrome.

Like I dunno, like they’re very proud of the thing

and it’s great.

Of course we do need support.

But if you just now distribute money

not thinking very much about who really needs it,

you push this additional money into the economy,

well that will only, you know, stimulate prices

to go up further because people can afford

paying those prices.

So going to, you know,

the secretary in Treasury

and also in the Economics and Climate department

and kind of discussing how important it is to be targeted,

which by the way needs a better

data infrastructure in Germany.

One big thing we are pushing for

to find out which consumers really need the support

and which are the industries

which will long term survive this price,

say twice as high as US prices

was one thing we are very involved in.

But then, I mean, just a funny little anecdote.

In December specifically,

the government wanted to help people

to get through the winter where the energy,

the bill would be really high.

And they basically wanted to pay the bill

for people who are heating with gas.

And I understand the impulse.

But if you say I’m paying your December bill,

then there are no incentives to save, right?

Like, you know, you just heat and open the window

at the same time, you know, the government is paying.

So I’ve helped design a structure.

I mean it was actually not the council,

but it was the commission.

But one of my colleagues is on that commission

carefully designed like a scheme where they said,

well we basically gonna subsidize you

but in the reality we’re paying 1/12ths

of your past consumption.

In December, still from the first kilowatt hour on

you have incentives to save that money.

You know, if you don’t consume amount,

you get the money back.

And so they worked and worked in convincing the politician.

At some point, one, what would be the US

like person just below the secretary,

kind of whose background is in law apparently said,

“Okay, but you know, it’s so complicated,

why don’t we just pay the December bill?”

And we’re like, no.

So you have to be at the right place at the right moment

and say, “Well remember incentives.

You know, we went over that,” and then luckily it passed.

(Ulrike laughing)

• Wow, that’s a great story.

Let’s talk a little bit more about energy.

So Germany has been able to

dramatically slash its dependency on Russian gas

in part because of these amazing policies

that you’re in the middle of designing,

but also in part by building a new import terminal

for liquid natural gas.

So is this an overall sustainable strategy?

• In the long term I mean, renewables are the future.

Even with the completely faulty Russian plan in place,

it was supposed to be a crutch to get us

to a bigger role for renewables.

Like to use gas kind of to get there.

I think right now

I’m very impressed how our politicians

managed to pull it off to get these

L and G terminals to work at that fast pace.

I do hope that more broadly people in Germany

will take note that, you know,

approval processes can be much faster

than they have been in Germany in the past

and apply this also, you know,

to wind energy and solar energy,

which often gets kind of stuck in these like

long approval processes.

But I do think in general this process of transformation

to renewables is still very much what we have in mind.

• Wow, that’s great to hear.

And here at Berkeley we understand what you mean

by long approval processes.

(all laughing)

So let me ask you, this is the last question

I’m going to ask you before we turn to Catherine.

So even though the EU is clearly pushing the US

to tackle climate change,

they’re not so happy with how the US is doing that.

There’s been pushback from Germany and the EU

because we’re using subsidies to promote clean energy,

at least in President Biden’s Inflation Reduction Act.

In fact, the two of you were talking about this

in the Green Room about using subsidies as a tool.

Can you talk a little bit more about that?

Is that going to lead to a trade war?

• That was apparently the first reaction

of our treasury secretary.

He has since then clarified

he’s not wanting or anticipating a trade war.

So there is serious concern

and honestly disappointment about this distortion.

As much as everybody in Europe is super excited

about the US turning to green energy,

trying to get, you know, green hydrogen sources of energy

kind of off the ground, establishing a network

and also taking note that, you know,

Europe should have done that long ago, right?

We were into this much longer than the US

and so now it looks as if the US might be leapfrogging ahead

and this is to be applauded, this is inspiring,

this is fantastic, this is great news for,

you know, this earth.

But at the same time,

maybe in particular in Europe where we work so hard

to think about subsidizing not too much,

not distorting competition

between the different EU member countries,

it was a huge disappointment

when people read the fine print, so to speak.

Say, “Oh, we’re gonna support electric vehicles

and electric battery production,” but it has to actually,

the final assembly has to be in the US,

it has to be produced 80% in the US

like when these details kind of came out.

So that has been a big disappointment.

I think the US and Europe are trying to work

and find ways to make this

kind of disadvantaging of European industries less severe,

which I very much support.

I think it’s important to keep talking

rather than throwing words like trade war into the round.

But at the same time, you know,

it comes at a moment where

Europe is already grappling with a situation

where in the long run energy prices for sure, you know,

in the gas oil realm will be significantly higher

than in the US.

And that means that a lot of companies are thinking about

leaving Europe, going to the US among other places

and that’s very tough for Europe

and Europe has to think hard now about

what are our comparative advantages,

what should we support?

Where is it long-term sustainable?

Where could we be leaders?

I personally think rather than getting in a trade war

or even a subsidization war,

I’m working closely with my French colleagues

who actually, by the way, at least some of them

are also at Berkeley.

The current leader used to be at Berkeley.

I still know him from Berkeley, Camille Londer.

My French colleagues are very much,

well if they do bio American, we do bio European

and you know, you kind of can see where that’s going.

I rather think we should step back and focus on

where we could be leaders on and which industries,

whether it’s knowledge work related or even car related,

you know, we might leverage advantages we have

and kind of think more into the future.

• Wow, thank you so much.

So you’re saying that Europe is excited

that America is moving aggressively

on the climate change front.

But as you point out, very disappointed

that the form it’s taking is through subsidies and not,

for example through a carbon tax.

Catherine, would you like to comment on that?

(all laughing)

• Sure, so I, yeah, I think at a high level,

these issues of trade and how the US and the EU

either work together or work against one another

are super important.

Climate change is of course a global problem.

We need to solve it as a global community.

So we need to solve it multilaterally

and I guess I see there being kind of two paths forward.

The bad path is that we get into subsidy wars,

the subsidy wars, we don’t kind of push things down

a learning curve, but we end up competing

for scarce resources like lithium

and then we have to subsidize even more.

And ultimately, you know, along the bad path,

if the EU ends up giving up on carbon pricing

because the US isn’t doing carbon pricing,

that would be a bad outcome.

You know, the European Union has a cap and trade program

that’s been very effective in driving down emissions

in the power and industrial sector.

I think the good path though is that we figure out

that we can work together

and that we can actually use trade

to help address climate change.

So one thing that I’ve been thinking a lot about lately

is methane emissions.

And it turns out that the very dirty countries

in terms of methane are Turkmenistan, Iran, Iraq.

We would wait forever

if we wanted to have every country kind of decide on its own

to address climate change.

Iran and Iraq are not gonna be

kind of high on the list to do it.

Iran is one of the very few countries

that is not signed on to the Paris Climate Agreement.

But if the US and the EU can get together and say,

“Iran, we don’t really want your oil,

or you gotta kind of clean up your act

in terms of the methane emissions associated with your oil,

otherwise we’re not gonna import it,”

that’s a way in which we could use trade

and kind of use our communal buying power

to make some real change in terms of climate change.

So, you know, I think these trade and climate issues

are super, super important and policy makers

have kind of the bad path that they could go down,

but there’s also a good path

and hopefully they’ll choose the latter.

• Well, let’s just step back for a second

and maybe you could just tell us

what made you decide to go to Washington?

• Sure, sure.

So like a lot of my colleagues,

I wanted to be relevant to policymakers

and I wanted to have my research influence decisions,

but I figured I really should probably understand

what it’s like to be a policymaker

and see how the sausage is made.

So when Janet Yellen was appointed as treasury secretary,

I reached out to her actively.

So, if anyone is interested in policy,

I guess I would firmly encourage you to do the same.

Just don’t wait for them to come to you.

Life in DC is so, so hectic.

They’re going a million miles an hour.

I used to think that they would kind of

scan the whole field of environmental economics

and pick like the best person who is the exact right match.

But you need to kind of raise your hand and say, "

I’m ready, I’d like to be there."

And, you know, it’s 11:00 PM at night and the guy has

the job of finding somebody to fill the role.

If you volunteered, then it’s attractive.

So basically there had been a position in treasury

working on environmental issues

during the Obama administration,

not during the Trump administration

that the environmental position got eradicated.

But I reached out to her and I said,

“If you’re interested in having that position again,

I’d be happy to fill it.”

So it worked out.

• Wow, that’s a really important lesson for all of us,

being proactive, right?

Not waiting for them to call you, you call them.

I think it’s great for us all to hear that.

I wanted to ask you a question

back to this conversation about subsidies.

Why do you think the Biden administration is so reluctant

to put a price on carbon?

• Yeah. (all laughing)

Well, there was a small window of opportunity

and a bunch of people said that there were 49 senators

that would’ve been okay with the carbon price.

There was a small window

when Jen Psaki from the podium said…

One of the concerns was that Biden had made this pledge

not to raise taxes on people

who made less than $400,000 a year.

And so there was the question,

well, if we have carbon pricing,

would that be a violation of that pledge?

But Jen Psaki from the podium said,

“No, that’s not a violation.”

So there was some movement for it,

but in the end, Senator Manchin had a lot of sway

and Senator Manchin did not like carbon pricing.

So here we are.

• Thank you. Thank you for that insight.

So the US Treasury might not sound like the obvious place

to make a difference in climate policy,

but it turns out that your timing was really fortuitous.

So tell us a little bit about how you did that

and tell us about your work on the Inflation Reduction Act.

• Sure, so when I started talking to treasury,

it was the end of December, 2020.

The Georgia elections hadn’t happened yet,

and the war in Ukraine hadn’t happened yet.

So after I started talking to them,

the two Georgia elections went the Democrat’s way,

which meant that they could use

what’s called budget reconciliation

to pass a climate legislation.

Budget reconciliation basically meant that

any of the climate activities had to go through treasury,

had to be in the tax code.

So treasury ended up playing a super, super important role

in designing the provisions or, you know,

commenting for sure on the provisions

that were in the Inflation Reduction Act.

So it was a different office.

There’s an office of tax policy

and since a lot of the actions

were happening through the tax code,

they were really the ground zero or the center

of the Inflation Reduction Act.

And actually, I can remember for instance,

those of you that are following the discussions

about green hydrogen and what counts as green hydrogen,

there are people in the office of tax policy saying,

“Wait a minute, it’s gonna be really hard

to define what counts as green hydrogens.”

So I got kind of a front row seat

to the Inflation Reduction Act.

I can’t claim that I was part of it

since I wasn’t in that office.

The second thing that happened was the war in Ukraine,

the invasion by Russia almost a year ago.

And there again, you know,

you wouldn’t think of treasury being central

to thinking about energy policy,

but treasury is very important in thinking about sanctions.

So treasury has an Office of Terrorism Financing

and Financial Crimes.

It kind of sounds like they’re

the office for financing terrorism,

but they’re against financing terrorism.

But they run sanctions,

they run the sanctions program.

And so I got very, very involved

in designing and implementing the price cap on Russian oil.

And that was absolutely fascinating

just to see it go from a memo.

And I can’t take credit for the idea,

but I definitely take credit for writing the early memo

and, you know, pushing it hard

through the actual implementation.

So that was really, really fascinating to see.

• [Ann] Tell us more how you did that.

• I mean, I didn’t do it by myself.

There were definitely other people at treasury,

but you do kind of see the power of the personality.

The head of the Office of Terrorism Financing

and Financial Crimes is a force to be reckoned with.

And she, you know, she would go to her counterparts

in the UK and Berlin and just say, okay.

You know, she’s petite and smiles,

but here’s what we’re gonna do and it would get done.

• And why did they agree to this price cap?

• So one thing about the price cap is,

and I guess I should step back and explain a bit

what it does for those of you that that haven’t followed it.

Basically the idea is to put a cap on the price

that’s paid to Russia for exports of Russian oil.

And the way that’s enforced

is by saying that the EU companies, the UK companies,

the US companies can’t insure,

can’t transport oil out of Russia

if the price is above the price cap.

And so right now for crude oil, the price cap is $60.

It seems like it’s kind of working.

There are definitely some exports out of Russia

that are above that cap,

but they’re not traveling on Greek tankers

and they’re not being insured by UK companies.

So, you know, basically,

actually now I’m forgetting what the question was.

What is it?

• [Ann] You were telling us how you made this happen.

• Yeah, how we made it happen.

So one thing that’s useful is that it’s a solution

to kind of how, so basically Russia is,

what there’s, McClean had this phrase to describe Russia.

Russia is a petrol station masquerading as a country.

So Russia’s, you know, huge, huge share

of the government finances

come from the export of natural gas and the export of oil.

And so early on in the war, there was the position

that we need to be really careful about energy markets

and we don’t want to sanction, for instance, banks

that are actively involved in the energy trade.

And so we were trying not to royal energy markets,

but in the meantime, Russia was just minting money

because the oil prices, gas prices had gone up

because of this war that they had started.

So it was just kind of particularly galling

that they were making more money off the war

that they had created.

So the strategy that’s typically taken,

if there are countries that are, you know, Iran,

that are doing things that the US government doesn’t like,

is an outright embargo.

Let’s just say we don’t want anybody

to be buying oil from Iran.

We just couldn’t do that in the case of Russia.

Russia is too big an oil exporter/

That would’ve driven the price of oil up dramatically

if the US had kind of tried to impose an embargo

or you know, even worse if a coalition of countries.

And so the price cap is its kind of middle ground

that we can’t do an embargo,

we can’t let Russia continue to mint money

so let’s try to keep the oil coming out of Russia

but limit the revenues that Russia is getting.

• [Ann] Has that happened? Has it been effective?

• Yeah, that’s the million dollar question.

It went into effect in December for crude oil

and then in February for the petroleum products.

The way at treasury we framed it

was that the price cap had two goals.

One goal was to reduce Russia’s revenues

and the other was to keep global oil markets stable

and not to cause a global recession

because oil prices had really spiked.

And so I think by those two metrics, it’s going well.

Russia, if you look at the statements coming out

of the Ministry of Finance there for instance,

they’re hurting.

They are talking about implementing one-off business taxes

because their revenues from oil exports have gone down.

So I think, you know, that’s a very promising development

in terms of trying to limit their ability

to have money to buy tanks and pay soldiers

and oil markets are quite calm.

So Russia made a statement last week

that they were gonna cut production

by about 500,000 barrels a day.

And we were always nervous about that at treasury,

about them reacting to the price cap by cutting production.

But the oil markets, they went up a little bit,

but now they’re back down today with the inflation print.

So yeah, I think by those two metrics so far

it has been successful.

• Well, congratulations.

So let me just step back and ask another question

that’s kind of off that path.

So you were an academic before you went to Washington.

How is the culture different in Washington?

• It’s 180 degrees different.

So one thing Ann, I think you’ll appreciate,

deans are kind of the bosses of professors,

but not really the bosses of professors.

I was the deputy assistant secretary.

The assistant secretary was my boss,

and my boss would call me occasionally, not all the time,

Friday night at 8:00 PM say,

“We want something by Saturday morning.”

And I had to, you know, I had to do it.

So, you know, one thing is the hierarchy,

it’s definitely hierarchical in DC.

The other thing is just the language.

I mean it’s the English language.

But for instance in DC

you say that you wanna table something.

In common parlance that means like,

we’re gonna put that idea aside, right?

And DC table means like, put it on the table,

we’re moving forward with this.

So, and all the acronyms, I mean they’re, yeah just yeah,

lots of learning new language, new culture for sure.

• Well, I like the idea of asking for something

on Friday night and having it appear on my desk

on Saturday morning.

(all laughing)

Yes, so let me ask you a different question.

So knowing you well

and knowing the amazing amount of publications and research

and travel all over the world you’ve done

in energy and regulation, you have a very deep knowledge

of the energy, probably deeper

than many Washington policymakers.

So how was your expertise received?

• So for one thing,

I was a deputy assistant secretary,

it did not matter that I was a professor

or I was a grad student.

I was defined by my position in DC

and not by, you know,

what I had done before necessarily.

I definitely, yeah, it’s a little bit striking.

I would think, well, come on, I wrote a paper on that.

Why are you questioning what I’m saying about that?

But it’s the way,

it is the hierarchy.

But, you know, I definitely was able to,

I had connections in the economics field

and so I could call friends that I knew that, you know,

can you gimme an answer to this in the next four hours?

That was definitely something that was useful.

So I drew on my network certainly, but yeah,

your standing in the academic field

doesn’t necessarily carry over to standing in DC.

• So we now have the opportunity to field questions

from all of you.

First before we move to the question/

So I’m going to ask if you have questions to go to the mic

and identify yourself and then ask the question

to Ulrike or Catherine or both of them.

But before we get to questions,

can we just do a round of applause for these amazing women?

(audience clapping)

It’s just amazing to me to have three women up here

and doing incredible.

Well, I’ll exclude myself.

These two women are doing amazing things.

I’m just so thrilled.

So questions from the floor?

• Thank you all for being here.

It’s kind of weird walking all the way back

just to say hi again.

Thank you so much for being here.

It’s super amazing to meet everybody here.

As business people…

My name is Julian,

I’m a second year MBA full-time student.

As business people policy seems sometimes to be a little bit

outside of our world, for better or for worse.

There’s a million questions that I can ask you guys,

but maybe the question I wanna ask you guys the most is,

what is the most misunderstood thing about your job

that you’d like people to understand?

• I’ll start.

So somebody said to me when I was coming in to government,

they said, “There’s not a hidden army here.”

I guess as an academic you think,

well this would be a good policy idea,

why isn’t this being done?

And I think a lot of the issue is

that there’s just not enough capacity there to do it.

That there are a lot of good ideas that yeah,

they just need somebody in government to kind of take it,

take the bull by the horns and drive it through.

And if that doesn’t happen,

if there’s not the right person that’s really motivated

to do that, it doesn’t happen.

One thing that I, you know,

one of the kind of translations that I started to do

was millions to billions.

Like a hundred million dollar program in government is tiny.

That, yeah, that’s just kind of something

that is a nuisance that people have to deal with it,

they have to deal with it.

• Yeah, to also chime in.

First, quite similar.

I think what I had completely misunderstood about

politics and policy is, Catherine used the word

like how the sausage is made.

I kind of had this impression that has some deep thinking

and careful preparation and ultimately a bunch of guys

get into a room and then later there’s the law initiative.

And that was a little shocking.

But then it also showed how if you are at the right place,

if you can be in the room, you know, you can help.

You can help just by explaining things a little bit.

Partly very basic things.

But also it’s often, you know, as you said, like motivation.

It’s not that people are necessarily

like fiercely against or for it.

If just somebody goes there and presents the thing

and has the right idea ready at the right moment,

it will happen.

And so that aspect had really not been clear to me.

And it is kind of motivating, again, going back to teaching.

You know, sometimes I feel like, okay,

we’re gonna teach again, like basic incentive,

like moral hazard, asymmetric information.

Well, turns out if you can explain those well

you can do a lot of good in the world.

So I’m like all motivated to, you know,

teach folks to take all this eco knowledge with you

and if you engage in policy.

So, that was another aspect I hadn’t expected.

• Hello, I’m Farnam.

I’m second year PhD student at Haas.

So I was wondering how did you realize

you are ready to go into that direction?

Because you could have done that 10 years ago

because you were already an expert then.

So that is my question. Thank you.

• [Catherine] Go ahead.

• I’m not sure I ever felt ready.

So, I also took note of what Catherine said earlier,

you know, you just need to go out there

and like make yourself be seen.

That’s a lesson I learned,

although I didn’t quite do it myself.

I mean, people did call me up in the end

and I was really thinking.

So the first answer is, I didn’t necessarily feel ready,

but on the other hand I was thinking

when I had the opportunity and I thought about doing this

and possibly changing nothing, you know,

being very frustrated was like administrative hurdles

or unwillingness to get things done.

I was thinking, well, it’s a little dramatic,

but like from the deathbed perspective,

which we like to assume like, you know,

would you like looking back

don’t you think you should have tried at least?

And just kind of assuming this perspective of

at least I want to have told myself I tried,

I have something to contribute,

I might fail and the probability of failure

might be bigger than 50%, but I want to do it.

So just getting clarity about that was key for me.

• Yeah, I don’t think you’re ever really ready in some ways.

People talk about how the first couple months in government

is like drinking from a fire hose and to me,

there was definitely that aspect, but I also felt like

it was sometimes like running through a sprinkler, you know,

one of those sprinklers that goes back and forth

and like sometimes a sprinkler was over there

and I was over there.

I mean it was just, yeah,

there’s a lot of learning that happens

when you get there.

And I think for that reason,

going kind of early and often,

if you wanna be part of policy, getting in,

learning the language, learning the ropes,

learning you know, how the legislative branch

interacts with executive branch.

One thing I learned for sure is the power of the PR,

public affairs.

It’s definitely pushed to journalists

what we want them to say or you know,

what stories we want them to cover

or just kind of learning all of those things

that you don’t get exposed to in an academic environment.

Yeah, I think you should go

even if you think you’re not ready.

• Hi, thanks so much for taking the time

to be here with us today.

I’m Zofia, I’m a second year undergrad

studying data science here at Berkeley.

I’m also Polish,

so the German connection is super close

to sort of me and my heart and my connection

to my home country.

I’m also the founder of a foundation

called Girls Future Ready.

So for the past five years we’ve helped over 80,000 girls

from Central Eastern Europe be prepared for

being future ready in their future careers.

So you both talk a lot about this idea of, you know,

being in the room where it happens

and having an impact on what’s happening around the world.

How do you get into that room,

especially when you’re a young person?

You know, I’m 20,

I’ve been working in activism since I was 14

and there’s a huge struggle when it comes to

either being a woman or being a young woman specifically.

What is your biggest piece of advice

when it comes to getting in that room

and having the influence that you’re looking for?

• This is gonna be very specific to policy,

but in some ways I’m an anomaly

because I was not involved with the campaign.

I reached out to Yellen after the election had been won

and after the, you know,

after some of the people had been seated.

But I think getting involved early in the campaigns

is really important.

Also, one thing I noticed for sure

is it didn’t really matter which campaign you were part of,

there were definitely people that had high ranking jobs

that had been part of the Buttigieg

or the Kamala Harris campaigns.

So you know, everything gets consolidated

in the general election and people that have been,

it’s not a matter of kind of picking the right horse.

Even if you work for a different campaign you can, yeah,

you can be part of the administration.

So I guess maybe trying to scale up a little bit,

like get involved early.

• [Zofia] Baby steps is what you’re trying to say.

• Yep, yep.

• [Zofia] Cool.

• Yeah and I would add to that,

I think it’s great if you found your thing

you are motivated to work on, you care about,

you want to improve in the world

and then do this one additional step

and kind of find who in which ministry

kind of is working on these topics.

And you don’t, you know,

you don’t have to start with the secretary

and talking to him or her right away, you know.

You might find some kind of groups which is kind of

working around this theme and we reach out to them

and there’s a lot of interest in people,

I mean who are informed not kind of coming up

with random opinions based on like newspaper articles.

I mean there’s a lot of that as well.

So we are maybe a little specific in kind of coming from,

you know, academia and having this whole academic career

and like having the expert status right away.

But there’s so much hunger for people

who have concrete ideas and tips

and like putting in the work

of trying to get to that person.

Like imagine you know, Catherine looking for like

some answer within four hours or so.

Once you’ve established the connection to her,

she might come to you when she needs this answer quickly.

So that’s something which I feel

for too long I didn’t realize,

you know, that I could provide my knowledge that way.

I regret that, that I wasn’t seeking out more earlier.

• [Zofia] Totally. Thanks ladies so much. Thank you.

• Hi, I’m Adrienne Openuloper, been working in MBA

and I have a question on a topic

specifically to the carbon quantitative easing.

So in the topic carbon quantitative easing is a method

to like gain money for the carbonizing the world.

What are your thoughts as policy makers and as academics

on that specific topic?

• So if I heard the question correctly,

you were talking about the policy of quantitative easing

which was implemented during the time

which are different from now

when the kind of inflation rate was very low

and kind of was very successful way

for both in the US and in Europe

of getting through this period of low inflation.

The big,

I dunno what you mean was what we were taught about it,

but right now it’s obviously not what we want.

We want tightening.

• Yeah, specifically to carbon.

So like the definition is a conventional monetary policy

that is featured as a proposal, international climate policy

called Global Carbon Rewards.

So like a global, a carbon money

in order to create some easing with a future view.

So I don’t know if you have come across this,

but it is around. - [Ulrike] I haven’t,

Have you? - No I haven’t.

Yeah, I’m curious to follow up with you

to learn more about it.

• Hi, thank you so much for being here today

and speaking with us.

It’s been highly informative.

So I’m Cleo.

I’m a senior in Berkeley Haas and I lived in Germany

when Trump was president

and when Merkel was a chancellor.

So the politics were highly different

and it was very interesting to learn about

the different perspectives.

Professor Malmendier, can you please talk about

how on a cultural perspective

or maybe in terms of policy differences,

how the German economic responses to inflation

and the Ukrainian war the past couple years

have perhaps differed from what you’ve noticed

in the United States?

And could you elaborate on those nuances?

• So the reactions to the increasing inflation rates

and the Ukrainian war are actually much less different

than I, you know, the time when you lived in Germany,

the differences between German politics and US politics

at that time.

So I’m kind of…

• [Cleo] That’s a good thing for the US.

• Yes, I’m actually happy that we are converging somewhat.

It’s, yeah like, I mean just to kind of compare a little bit

the US and the Europe perspective

on those two things however.

So I mean for starters on the inflation side

we have in Europe we have the ECB Monetary Policy

is made at the EU level, it’s decided at the EU level.

And then you have all these member countries

who may do all sorts of stuff on their physical policy side,

which may or may not be consistent with the Monetary Policy

and may or may not make the life of Christine Lagarde

harder or easier.

So that’s an interesting difference.

It has been particularly interesting to see

in on the inflation side how, you know,

the US was some month ahead and with inflation increasing

and possibly reacted a little bit too slowly

in kind of reacting to that

and Europe had the benefit of kind of watching that

and like being behind and so you would’ve thought

they’re on it right away,

but they completely followed US as example

and like waited for my days a couple of months too long

before kind of they jumped on, all right,

that’s a problem we have to deal with.

But yeah, the main difference is kind of this, you know,

ECB doesn’t have the dual goal of the Fed here,

which has to care about both inflation and about the,

you know, output gap, the labor markets kind of side.

It’s only about stability of money and nevertheless

of course it has to be in the back of the mind

of the ECB president that she doesn’t want to

kill the economy, which Ann asked me about

already not like in the best shape ever

without declaring it an official goal.

And then also how to make sure

that the European Monetary Union doesn’t break apart

if we do something very drastic, you know?

Many of us worry about the high debt quotas

of certain countries in the US, in the EU

and so how do you factor that in?

On the Ukraine war,

I have been mostly fascinated by

the different discussion in the public.

So for example, I dunno whether some of you follow that

on Twitter, there was like this whole group

of macroeconomists, German macroeconomists

but also other ones who are like strongly arguing

for an embargo against the Russian gas,

like a complete embargo.

And the public debate revolved all around that

and people were super interested in that

and back and forth was different argument.

And so how much people would get into

the nitty gritty of that was a strike in contrast.

Also we mentioned the IRA.

You know, in my role, I get invited to talk shows a lot

and so there might be some, you know,

10:00 PM or 11:00 PM talk show and you know,

the secretary or the treasury secretary might be there

and somebody of the position and some journalists and me

and apparently people switch on the TV

and would like to hear about the nitty gritty

about which batteries are subsidized or not

and are discussing about that, very different culture.

So that’s kind of, as I’m flying back and forth,

that fascinates me a lot.

• [Cleo] That’s super interesting. Thank you.

And thank you both so much.

• Hi, thank you very much for being here today.

Myself and many of my classmates as MBAs

are probably going to be mostly engaging with policy

from the private sector side and in the United States

there’s definitely a understanding

or at least a preconception that most businesses

get their foot in the door through political contributions.

So I was wondering if you had any thoughts

on how we might better engage with the policy side,

both responsibly and effectively?

• Yeah, I mean we’ve been talking a lot about

the Inflation Reduction Act

and there are explicit calls for comments

and the companies are submitting comments.

So that’s definitely one approach.

We also had a number, I mean, for instance,

working on the price cap on Russian oil,

we had a number of conversations with business leaders,

with people in the insurance industry

just to try to figure out like how the industry works

and how they might react to this novel policy approach.

I think a lot of those ended up

being organized through lobbyists.

So yeah, kind of having somebody on the ground in DC

who has their ear to the ground and knows, you know,

the week that we’re talking about something

that’s relevant to that, to your company’s interest,

that does seem important.

I mean, in DC timing is everything.

I thought about this from the perspective as an academic,

but it just, I now know that if you put out a paper

in the week that people are talking about abortion

and your paper is about climate, it’s not gonna land.

If you put it out in the week

that people are talking about climate,

then you’ll get traction.

So definitely having somebody on the ground

that knows the week that they’re talking about

the issue that’s relevant to your company seems important.

• And I would also want to add to that,

that’s of course more the German perspective,

which I don’t know exactly how things are, you know,

work in Washing.

You having that, you know,

that that being on your mind is a really good thing.

And like you asking like what processes,

what mechanisms could be changed

to make sure that we’re not having politicians be influenced

too much by certain perspectives from the business

or the anti business side,

I think is a really good thing.

So I found sometimes things kind of fall into place

and that’s the way we do think.

I remember when I still thinking about

whether or not to accept this position

and the Secretary of Economics and Climate,

Robert Habeck called me up and I was talking about

this theme we had today that I think it’s important

for good economists to be in the room

and that I regret that Germany

hasn’t implemented this more broadly.

He was saying yes indeed.

So every week I’m talking to my Dux CEOs

and they’re talking about, you know,

that they have to leave Germany,

it’s all too expensive and like explain what the issues are

and I’m learning a lot,

but I’m always wondering why are there not

any of my economists in the room

or some economists in the room who have like,

who are not necessarily captured by one side

or the other side.

And so not sure he has changed this,

but I think there’s at least discussion about changing,

like who should be in the room of these discussions,

who might be able to provide a counterpoint.

And so people like you,

your generation going out

and trying to change the mechanism

would be a really great thing.

• [Speaker 1] Thank you.

• I think we have time for one last question.

• Hi. Thank you both for being here.

My name is Paul Love.

I’m a senior at the Undergraduate Business School.

What I found very interesting in the talk

was kind of this discussion on the, you know,

somewhat like the distortion of incentives.

The example in Germany being, you know,

you open your window and you put the heater on full blast

if the government’s gonna cover your energy bill.

I guess just sort of drawing on that, you know, belief

and almost that core tenant of behavioral economics,

when you think about policy making perhaps in other aspects,

you know, whether that be in Germany

or whether that be in the US,

how much of a factor almost is that,

and is there some concern

that we’re perhaps going down this road where, you know,

at times it can feel like the electorate

feels like that they can vote themselves

all of the dollars and you know,

there’s almost this culture of access and you know,

overspending in some sense?

So just curious from both of your perspectives, I guess,

how much is this thought of as a concern in policy making?

• Go ahead.

• Sorry.

It’s interesting that.

So one aspect I picked up from what you said is

the kind of intrinsic versus extrinsic motivation part.

So like you’re doing what’s in your incentive,

you vote for it, you go for it.

And on the other hand you might do things

because it’s your value and you care about it.

And in fact in behavioral economics,

that’s the debate where the extrinsic motivation

can sometimes kill intrinsic motivation.

And a lot of politicians think about that.

I mentioned Robert Habeck

and one of the first conversation I had with him

was discussing with him a paper in an Israeli childcare

where they show that extrinsic motivation

and he loves that paper and has cited it since then.

So there’s a lot of thinking about it,

but what I do want to avoid

is that we contrast one with the other.

So sure we might, you know,

keep the window closed and not have the heater on

and the window open because we say,

“This is the moment, we have to get through the winter,

we gonna show it to Russia that we can do that,”

and so on and so intrinsic motivation is great.

That doesn’t mean that financial incentives help too,

and that people will, you know, elect politicians

that will represent their incentives.

They’re both at work and just ignoring one versus the other

is a mistake.

So that’s one lesson I, yeah, I’ve learned

and I’m trying to communicate.

• You have the last word, Catherine.

• The way I experienced that was through gas prices.

People are very, very focused on gas prices

in the administration.

Ron Klain would tweet about gas prices daily practically,

and it did kind of strike me,

is this self-fulfilling?

Is the fact that the administration

is devoting so much attention to gas prices

part of why everyone’s focused on gas prices?

I don’t know the answer to that question,

but yeah, I do think it’s a good question.

You know, how much is politics reactive

and how much is politics driving the conversation really.

• [Paul] Thank you.

• Well, on that note,

we are so, so lucky to have these two luminaries here today.

Let’s give them an incredible round of applause.

(audience clapping)