Jun 17, 2025
On June 5, The Capitol Forum held a conference call with Sandeep Vaheesan, Legal Director at the Open Markets Institute, for a discussion of his recent review of “Abundance,” the book by Ezra Klein and Derek Thompson, and his new book “Democracy in Power: A History of Electrification in the United States.” The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Good morning, everyone. And welcome to our conference call with my good friend Sandeep Vaheesan on his recent review of “Abundance”, a new book by Ezra Klein and Derek Thompson that is a topic of much conversation these days. I’m Teddy Downey, Executive Editor here at The Capitol Forum.
Sandeep, as many of you know, is Legal Director at Open Markets Institute. His work focuses on antitrust regulation, infrastructure policy. And he’s appeared in the New York Times, Boston Review, Pro Market, and other publications. He’s also the author of “Democracy in Power: A History of Electrification in the United States.” I’d like to touch on that as well in this conversation. And that book examines the development of public and cooperative utilities in the 20th century and the relevance of these models to today’s infrastructure challenges. And Sandeep, thank you so much for doing this today.
SANDEEP VAHEESAN: Thanks for having me, Teddy.
TEDDY DOWNEY: When I have Sandeep on, I always like to say that he was the first The Capitol Forum interview, live interview, guest back in 2012 on a talk about beer, consolidation in the beer industry. So, he has a special place in the hearts and minds of The Capitol Forum founders here.
And before we get started, if you have questions, please type them into the questions page of the control panel. We’ll collect them and try to get them in the second half of the call.
Sandeep, you wrote this review. To my knowledge, it is by far the most comprehensive policy analysis critique of the book. I should admit, I cannot bring myself to read this book. I’m fairly confident it’s poorly researched and not thorough since I’m generally familiar with Ezra Klein’s body of work.
But what I’d like to do here, you have done the dirty work. You’ve gotten your hands dirty. You’ve read this book. What I’d love to do is break up the conversation into two sections. First, talk about the specific policy analysis that they do of problems, the problems that they see. And then maybe we can talk about the solutions that they propose and debunking them and proposing some other solutions. Maybe start off with why you did this review. And then if we can then proceed to the specific critique of the policy, the analysis that’s in the book of the policy problems in the U.S.
SANDEEP VAHEESAN: Sure. So, I should say up front that I ended up reading this book three times in the course of researching and writing this review and I’ll let your listeners either envy or pity me for doing that. So, I was certainly planning to engage with this book and the broader discussion around so-called abundance. But in early February, Matt Lord, who’s the Executive Editor at Boston Review, reached out and asked if I wanted to write a review for them. And I said, yes, of course, I’d love to do it.
And so, I got involved maybe a little bit sooner than I had planned, which was quite fortuitous and good in hindsight. And so, I started reading the book soon after Matt reached out and got through it pretty quickly. It’s a very easy read. You can read it in an afternoon if you’re motivated. It’s clear. It’s easy to follow. They write well. And I quickly realized they’re trying to tell a very simple story here and one that I ultimately concluded was simplistic and wrong.
And one of their basic theses is that the United States needs a lot more affordable housing and clean energy. No dispute there. I agree with that. And the main reason we don’t have those two things today is because of what they view as excessive public rules around land use.
So, in the housing section of the book, they talk about zoning rules that prevent construction of multifamily housing and greater densification. These are especially binding in suburban areas where subdivisions tend to be populated with single family homes. Density tends to be fairly low. And so, they say, well, let’s lift these restrictions. Let’s permit multifamily housing. And that will address our housing crisis.
And they’re right that we are in the midst of a chronic housing crisis. Millions of people are struggling to keep a roof over their heads. We do need to build more housing, but I think their diagnosis is fundamentally off. And I’ll concede the point about zoning. I think there are places where we should allow for greater density. We should allow construction of multifamily homes. I think it’s especially true in suburban areas.
But simply lifting zoning restrictions is probably not going to produce this burst of housing construction that they suggest in their book. And the reason is we’ve already done this in a number of places. Many places have already followed the policy program of abundance when it comes to housing. They’ve outlawed single family home zoning. They’ve allowed for the construction of multifamily housing, ranging from everything from duplexes to high-rise apartment buildings.
And the results thus far have been fairly modest. We’ve seen an increase in the housing stock in some places and not much elsewhere. And there’ve been studies saying that on average, the effects of upzoning, as they call it, allowing more dense development are fairly modest. And I think this really exposes a basic shortcoming and blind spot in the book, which is that simply because the private sector can build doesn’t mean that they will.
So, we can give developers the option of building multifamily housing, but that doesn’t mean they’ll exercise the option to use some financial industry lingo. The reason is they build based on profit considerations. They’re looking at a portfolio of investment options, including simply buying and sitting on land and parking funds inlong-term securities. And if housing is more attractive on a risk-adjusted basis relative to these alternatives, you can expect developers to build.
But that aspect, that really important part of the story, is completely missing in the book. The book is very much one of the private sector wants to build, and public land use rules are standing in the way. And the implication is, well, if you lift these rules, you’ll see an explosion of housing construction. And defenders of the book and the broader program will say, okay, well, they’re not trying to address all the barriers to housing. That’s fair. It’s a relatively short book. But they don’t even acknowledge them. So, they don’t acknowledge things like finance, land prices, availability of materials and labor.
So, there’s just a lot missing in the book. And the book isn’t presented as “abundance, necessary but not sufficient conditions for abundance.” Their vision is if we do these things, we will actually have abundance. And the introduction of the book is interesting. They present the United States in 2050 and talk about how we’ve achieved a utopia of sorts. It’s not a particularly appealing utopia, but it’s a utopia that many Silicon Valley people have promoted. They talk about development of AI that proves to be liberatory for working people. We have things like drone delivery in the future. We have all kinds of pharmaceutical medications to keep us healthy. And so, they say, well, we’ve achieved this because we learned to build again. And in their view, what’s standing between us and building again is all these public land use rules.
TEDDY DOWNEY: And I just want to stay on housing for a quick second. I mean, as you point out, obviously, there are places with low, much more flexible zoning laws like Houston and prices are still pretty high there. They still have some of the same challenges.
My wife is an architect and we try to look at what has D.C. done? And there’s a tremendous amount of development, but a lot of it’s for chasing yuppie rents and studios and one bedrooms. And that’s more profitable to just try to take those renters away and compete there rather than do something that’s two, three, four bedroom and that could more address the family housing issue, which is separate.
It just strikes me as these policy discussions are very specific, very local. They require really detailed study of how to fix them. And it doesn’t seem like they do that either. What’s your take on the policy prescriptions that you saw when it comes to housing, when it comes to these specific areas and how it might be lacking in terms of coming up with a real solution?
SANDEEP VAHEESAN: Yeah. So, they end up focusing very narrowly on public land use rules. So, in housing, they talk about zoning. In energy, they talk about environmental review. And so, they don’t really grapple with the other barriers. In the case of housing, they don’t even pay lip service to it. You’d never realize reading the book that the United States actually had a major housing construction boom in the early 2000s, fueled by irresponsible lending, which burst in 2006/2007 and produced the greatest financial crisis since 1929.
Their story is we knew how to build through the 1970s. That’s when many communities tightened their zoning restrictions and we no longer build. And they focus on California. They say this is especially acute in California. All these well-meaning liberals have erected these barriers to housing construction. And so, California doesn’t build enough housing.
Well, if you look at what was happening in the early mid-2000s, California was actually building a lot of housing, especially in the suburbs, exurban areas. There were points in the early to mid-2000s where California was actually permitting more homes than Texas was.
And one thing I should emphasize is an important theme in this book is contrasting dysfunctional California with dynamic, growing Texas. And so, they say, California forgot how to build things. Democrats in California forgot how to govern effectively. But not all hope is lost. Look at Texas. They’re a model. They’re building all this housing. They’re building a lot of renewable energy. And it’s a little bit funny, coming from self-described liberals to talk about how wonderful Texas is. And so, there are a few problems with this story.
So, when you measure housing costs in relation to income, Texas looks a lot less attractive. Sure, on average, housing costs are lower in Texas than in California, but so are incomes. And what really matters is how much does your housing cost in relation to how much you’re making each month? Housing can be very cheap. But if you’re not making that much money, what good is it? You still might be paying 40, 50 percent of your income just to rent an apartment. That’s one problem. Texas isn’t as wonderful as they suggest.
Second, they talk about Houston as this model. A lot of housing is getting built. One reason is they don’t have public zoning rules. And that’s true. Houston is the largest city in the United States that doesn’t have public zoning. But look at how development has proceeded in Houston. A city defined by sprawl, suburbs, outer suburbs. It’s not a model of dense development. And if you look at population density in the city of Houston versus San Francisco, San Francisco is far denser. It’s not even close.
And so, what’s actually happened in Houston is you’ve had this system of private-led housing development where home builders have built based on what’s most profitable. And one thing that they have done, which isn’t mentioned in the book, is they’ve established private zoning restrictions through something called restrictive covenants, which established many of the same obstacles to dense development that public zoning rules do. So, you have this parallel private system of land use that’s encouraged low-density sprawling development.
So, say what you will about California, but it is dense. San Francisco is among the densest places in the United States, and Houston isn’t that.
TEDDY DOWNEY: You mentioned the financial collapse. And at the beginning of your review, you sort of portray the book as almost like a doubling down on neoliberalism, sort of deference to private industry, and sort of skeptical of government policymaking. And when I read your review, it reminds me of a lot of the arguments that we heard before the financial collapse on how government needs to get out of the way of innovation, and the financial sector needs to just—and what did we get from that? Sort of Clinton era deregulation of financial markets. And we got a housing collapse. We got a financial collapse out of that.
And it looks like there’s no—I mean, just to my reading of it—no grappling with the underlying ideology that’s behind these ideas. Do they address sort of neoliberalism or this whole intellectual debate about neoliberalism? Or do they just ignore it and kind of come up with this plan and pretend that intellectual struggle hasn’t happened?
And also, one of the interesting things, I just read a book called “Fabulous Failure”, which is about the Clinton era. And Larry Summers is the only one that doesn’t apologize for what happened during the financial collapse. Rubin, Clinton, pretty much everyone else involved, has said we made mistakes. We shouldn’t have done that. And it seems like these guys thought it was a good thing, as far as I can tell from reading your review.
SANDEEP VAHEESAN: The book presents a rather strange history. The common, I would say even well-known, account of the 1970s now is that was the decade when the United States experienced an ideological break with what had come before. There was a rupture of sorts.
The previous era was one defined by active government working for ordinary people, best exemplified by Franklin Roosevelt’s New Deal, and that the subsequent era was one in which the government pulled back in some important ways. It was no longer playing this muscular role to protect ordinary people from corporate power, certainly not investing in basic goods the way it once did. Any number of people have written about it.
The Klein/Thompson history is one in which, in the 1970s, well-meaning liberals started placing barriers in the way of infrastructure development. So, this book does have a villain. It’s someone like Ralph Nader, a professional class lawyer who is trying to protect the public through litigation and the courts.
And in Klein and Thompson’s view, this was really the decisive change of the 1970s. You know, they acknowledged that there were problems with the post-war development. There was not due consideration for environmental and social costs.
But they say, well, the correction went too far in its own right. And so, we now have a system in which the public, the public sector, public regulations, are standing in the way of abundant housing, abundant clean energy, et cetera.
And that history really struck me. I have not seen anyone present 20th century American history this way. You know, you would think that the only difference between now and the New Deal was the New Deal was a period in which we had fewer public rules on land use, but otherwise, was identical to today. Like they don’t talk at all about the federal government breaking up holding companies, entering the power business on a large scale, giving working people important labor and employment rights. None of that is there. It’s a story of continuity, except for one thing, litigious liberals gaining and wielding power starting in the late 1960s and picking up in the 1970s.
So, what you talk about is largely absent in the book. They don’t talk about the financial crisis of 2008. They don’t seem aware that a lot of their rhetoric is actually quite similar to what we’ve heard before. You can find speeches by Jimmy Carter in the late 1970s that sound exactly like what Klein and Thompson talk about, special interests, public sector unions getting too greedy, the need to unleash private capital.
So, for those of us who follow this history, who are following the debates in the early 2000s, this sounds eerily similar to what Wall Street’s defenders were saying. I think what’s new about this book is instead of saying deregulate finance, deregulate airlines, they’re saying now it’s time to deregulate land use. It’s in a sense the last frontier for neoliberals.
TEDDY DOWNEY: And I want to get to Pharma in a second because that’s another area that you talk about that is addressed in the book. But first, I want to actually stay on why is this possibly appealing to the public right now? If you had said a book about pushing Clinton era neoliberal policy 2.0 in 2025, after sort of widespread agreement at the failure of neoliberalism to result in good outcomes, from a societal standpoint, we have both parties are sort of in agreement that concentrated economic power is a problem. Both parties are in agreement that we’ve outsourced too much. We have political instability in this country. We have questions around rule of law and democracy, commitments to rule of law and democracy. Things are not good, right? I failed to see how someone could look at what’s going on right now in this country and say things are good.
And yet, this book calls for the exact same types of policies that got us to where we are. I find that to be, that would be laughed at. I mean, if you told me if this book was going to be pitched, I would laugh. I would think no one would buy it. It would have no cultural resonance whatsoever.
However, I am appalled at how wrong I am about that. This book is a bestseller. People are talking about it all the time. You know, I don’t know how. Maybe it’s just in pockets, the coast or whatever. But it’s definitely in the public discourse, certainly in Washington. Why do you think that is? How is that possible? And would love to get your take on that.
SANDEEP VAHEESAN: Yeah, I’m with you. It is depressing that we are seeing, at this point, the third or fourth attempt to rebrand and rejuvenate neoliberalism. And I, yeah, I see the book everywhere. I see people reading it on the metro when I go to work. And I think it reflects one persistent problem, which is what should have been the lessons of 2007 and 2008 were quickly memory holed. We’re talking about an event that was on par with what happened in 1929. It should have fundamentally discredited the political economic regime and ushered in something new, different and radically better than what we had.
We didn’t get that. I think that reflects, in large measure, failure of political leadership, as well as a commitment among many elites to the old system. They didn’t actually want to break with neoliberalism. They wanted to keep it alive and perpetuate it. So, I think there’s that deep problem.
Looking at the present moment, I see this book as a reaction to some of the discrete ways in which the Biden administration broke with neoliberalism. So, in our area, antitrust, there were important cases and policies that represented something different than what came before, the more aggressive posture on mergers, commitment to protecting working people from employer power. In industrial policy, there was a recognition that if we are serious about climate, we actually need to spend a lot of money promoting renewable and other forms of clean energy.
And with Kamala Harris’s loss last November, the people are now figuring out, well, what went wrong? And in abundance, I think, is an interpretation that says what went wrong is these tentative breaks with neoliberalism. That was the mistake of the Biden administration. And if Biden had followed the Obama playbook, we wouldn’t be where we are today.
I find that odd. Because by all accounts, Kamala Harris was ready to break with Biden administration’s experimentation with what we might call post-neoliberalism, ran a very middle-of-the-road campaign, talked about a lot of the things that proponents of abundance want.
So, it’s audacious that they’re now trying to say that actually the reason Trump is back in the White House is because of the Biden administration’s baby steps toward a new political economic regime. And I think a more honest approach would be, we had our candidate in November. She was mostly saying what we wanted her to say. You could probably call her an abundance candidate, and that was unsuccessful.
So, there’s a battle going right now over narratives, what actually happened. And abundance is one part of the effort to say that the good things that happened under Biden, in my view, were actually a mistake and we should go all in on neoliberalism as exemplified by Barack Obama and Bill Clinton.
TEDDY DOWNEY: One of the things you mentioned in your piece is that this feeds into decades of sort of propaganda around neoliberalism and decades of anti-government rhetoric directed at certain state activities from Democrats and Republicans alike. I sort of think about that as an extremely successful political movement. In some ways, you can date it back to the Powell memo sort of challenging the exact moment that you talked about earlier, the Ralph Nader movement, and challenging corporations to take back power and influence the judiciary, Congress, elections, universities more. How do you think about rhetoric and propaganda and that sort of just creeping back as a comfortable narrative to fall back in, right?
It’s like, well, we were successful when we were—the Clinton administration was successful politically in some respects to one re-election in the presidency, Obama, two presidencies as well, two terms. Maybe we should just fall back into this rhetorical ideology that worked for us before. I mean, obviously, I find that very intellectually dissatisfying and not rigorous to sort of make that conclusion, but how do you think about the rhetoric and that just propaganda over time as being easy for people to fall back on?
SANDEEP VAHEESAN: Yeah, I think the fact that Clinton and Obama were both two-term presidents is a helpful fact for the so-called abundance movement. But I’m not a political strategist. I won’t offer a counsel on how to run a successful or winning campaign. I’m a policy person. And what I see is we have almost a half century of wage stagnation, growing inequality, and heightened precarity for almost everyone in the population.
And I think now the professional classes are starting to see it with the explosion in AI. That to me is a problem regardless of who’s in office or who runs a successful election campaign. There are broader trends here that are deeply alarming and at least explain in part why we are in this political moment today where you have a hard right government that is trying to dismantle the good parts of the national state in the United States, where the world’s richest man is overseeing this dismantling.
So, putting aside Obama and Clinton’s political fortunes, it’s hard to say that they were successful in any meaningful sense in making ordinary people’s lives better, which was their stated aim. So, I think it’s important to step back from electoral politics and look at some of these broader trends, and they’re deeply concerning.
And a little bit of an irony in the book is they say that we really need to focus on—to the extent there are villains, and they very much try to present American society as this cohesive, unified whole, but they have this one exception. They say we need to worry about the comfortable professional classes. Like they’re the ones standing in the way of progress. And the implicit corollary is, well, oligarchs aren’t a comparable political problem, the very rich. But this book comes out in a time when Musk is leading the destruction of federal state capacity.
So, it’s a little bit odd to be saying, actually, don’t look at what’s in Washington. Ignore the fact that people have been laid off after years of dedicated public service. It’s really your neighbor who’s the villain. Demand that they do better, and just ignore Musk and Doge.
So, in a sense Musk is the most powerful counter to the basic thesis of this book. And he’s showing, in rather brazen and ugly terms, that with great wealth comes great power. And he’s exercising it in some very naked and gross ways. But other billionaires have comparable power, they just happen to be more strategic.
TEDDY DOWNEY: And as I mentioned, I want to get to pharma in a second. But before we get there, I want to talk about one more way that—and see if the book addresses this. Because this is something we write about a lot. Obviously, we’re in the weeds on public policy, particularly when it comes to competition and pricing. And in housing, particularly rental housing, you’ve got massive private equity and hedge fund ownership of housing, rental housing. You’ve got RealPage being banned for successfully allowing collusion on rents.
By the way, when interest rates went up, housing prices didn’t go down. You just have no—there is no connection between price that—there’s no sensible price seeking mechanism in either buying a house or renting a property at this point. And yet, is there a discussion about that in terms of how this whole neoliberal approach to finance and tech has affected the price of housing at all? Was that in there? Is that discussed at all?
SANDEEP VAHEESAN: No, that’s not in the book. There’s no mention of Blackstone or RealPage or all these actors that are trying to make as much money from housing as quickly as possible. And one common defense you see is, well, Blackstone is not that significant in the grand scheme of things. They don’t own that many units. RealPage is also not that significant.
And the book, and I would say the broader movement—I should use “movement” in quotes—is very much fixated on public barriers. They don’t really care about private power. They either grudgingly acknowledge it or they just write it off and say, well, that’s not where the action is.
But if you look at RealPage they’re everywhere. In almost every major city, RealPage has signed up a significant fraction of landlords to work with them in this collusive price setting scheme. And it’s a straight up collusion. And we can talk about all the data they have, all the fancy computers they have, but this is just collusion. They’re just using more high-tech means of facilitating this landlord cartel.
And by all accounts, the effects on rent are significant. We’re talking about 5 to 7 percent higher rents. We’re talking about landlords deliberately keeping units off the market to boost their collective profit. So, in a place like D.C., there are apartment units that could be occupied by someone, that could be someone’s home, that are sitting empty because it’s more profitable for this collective of landlords to have them empty. Basically, what they’re doing is prioritizing high rents over volume.
And if you read some of the complaints that have been filed against RealPage – I especially recommend the complaints filed by D.C. and Arizona—they say that RealPage’s success was in persuading landlords to focus less on occupancy. Pre-RealPage, landlords tried to get 99 percent, 100 percent occupancy. Now they realize they can actually make more money through this collusion if they have an occupancy of 95 or 96 percent.
Then when you multiply that figure across hundreds of thousands of units, millions of units, you’re talking about a significant number of apartments that are sitting empty. So, that’s RealPage. Blackstone, there’s this idea —
TEDDY DOWNEY: Let’s stay on that. Doesn’t that fundamentally affect this argument of more housing, more units will get you lower price? I mean, ignoring this is such a fundamental flaw in understanding how the market is broken. Their solution is more volume in the market. But if the software says, just let 10 percent—it’s better for you to let, fine, it’s at 5 percent, 10 percent, 15 percent, and then all of a sudden you added more housing stock, you get no reduction in price, no more affordability, doesn’t help.
SANDEEP VAHEESAN: Yeah, there’s a simple story that landlords and developers have fundamentally different interests. That the landlords want to make as much money from the existing stock as possible, while developers just want to build and disrupt any collusive arrangements that may exist. But oftentimes, developers and landlords are the same entity. And even if they weren’t, developers are in the business of making money.
So, if RealPage allows them to build and sell apartment complexes for more money than they would have otherwise, they are also pro-RealPage. So, the idea that developers just want to build, build, build is simple, and frankly, farcical. They’re also in the business of making money. They’re not fundamentally different from landlords.
TEDDY DOWNEY: Yeah, and they get paid more if the landlord feels like they’re going to be more profitable.
SANDEEP VAHEESAN: Right, exactly. If the landlord projects steady rent increases over the next 10 to 15 years, they’re going to pay more money to acquire the projects the developer has built.
TEDDY DOWNEY: You know, I was just in Miami, interestingly, where there’s been tons of housing being built. But the affordability crisis, I was talking to people at the coffee shop, whatever, workers, and they’re like, I’ve got to move because I can’t afford to live here anymore.
SANDEEP VAHEESAN: Right, it gets back to something you were saying earlier about it matters what gets built. If we’re talking about pencil towers to market to domestic and foreign oligarchs as investment vehicles, that’s not actually going to address the housing crisis. You actually have high rise buildings where most of the units are empty most of the time because a wealthy Russian or wealthy Qatari said, you know what? Buying property in New York is attractive. I don’t actually plan to live there. I might go there for a week and a year. But I’m going to buy a unit in midtown Manhattan and hold it for 10, 15 years, resell it, make a tidy profit. Nobody’s actually living there in the meantime. So, what gets built matters immensely.
TEDDY DOWNEY: Yeah, let’s move onto pharma. I’m sure Ezra Klein is going to be able to look forward to $100,000 speaking gigs at Blackstone’s next conference. So, let’s talk about the pharma companies that he can get a big speaking fee at.
What do they talk about when it comes to pharma regulations? I mean, obviously, we do a lot on pharma here about pricing and IP. Would love to get their diagnosis of the policy problem when it comes to pharma and what your take on that was.
SANDEEP VAHEESAN: So, their view of pharma and a lot of basic research and development is, yes, the state should continue supporting it through grants. So, they support that type of federal spending. But what needs to change is the federal government, and specifically institutions like the National Institutes for Health, need to be more willing to take risks. They should be more eager to fund projects that seem very speculative and uncertain at the outset.
So, their view is federal funding agencies are playing it too safe. And so, they talk about the development of the mRNA COVID vaccine and its history and say that they had this very smart researcher at the University of Pennsylvania who wasn’t taken seriously by her institution because mRNA was seen as a non-viable path for developing vaccines.
She was vindicated. Her critics were proven wrong. And so, they use the story to say that, in general, our public institutions need to be willing to fund these long shot projects. Yeah, on paper, they may not be that promising, but the state needs to be willing to take certain risks. And maybe in most cases it doesn’t pay off, but then when it does, it pays off spectacularly as we saw with the COVID vaccines starting in late 2020.
And it’s interesting. So, in some ways, this is not the conventional neoliberal story where the state simply needs to step back and let the private sector flourish. They acknowledge the need for public investment. They accept that certain important lines of activity are not sufficiently profitable for the private sector to pursue. And so, they say, well, the state should keep funding this work. It’s too important. There are certain social needs that won’t be met. And yeah, I’m broadly sympathetic to that point.
Where their basic ethos comes through is they say, yes, we should liberally fund certain things, but we shouldn’t load them with too many public conditions. So, what they call this is they call it everything bagel liberalism. They say that we end up conditioning public money with so many mandates and requirements that what the public wants ultimately doesn’t get built or developed because the private sector says, yeah, we want this money, but all these conditions make taking the money unattractive. And yeah, in theory, this could be a problem. Simply too many conditions make public money not enticing.
But the devil’s in the details. Like, well, what public conditions are you talking about? As a basic matter of justice, I think it would strike people as unfair to simply give money to the private sector without expecting anything in return. That seems like classic corporatism. But on the other hand, there are conditions that may go too far. We might be expecting too much from the private sector.
So, the things they cite are conditions like prevailing wage requirements, which we’ve had at the national level since the 1930s. In the housing space, they talk about requiring the installation of air filtration systems in apartment buildings located next to major highways.
So, when they actually talk about specifics, they’re not talking about a scalpel. They’re actually talking about taking a bludgeon to many traditional and necessary conditions on public money. They talk a lot about the childcare requirements and the CHIPS Act, which ultimately turned out not to be an impediment to the construction of new chip plants in the United States, a fact that they don’t mention in the book.
So, what I see is they really want a state that is liberally subsidizing the private sector without actually expecting much in return, which I think is both bad politically and bad from a policy perspective. What’s to prevent corporations from taking money and turning that public money into big compensation packages for the CEOs, more stock buybacks? We might end up actually enriching some already very wealthy people if we follow the Klein-Thompson program literally.
TEDDY DOWNEY: And do they talk about patent thickets, product hopping, all the things from a legal standpoint where these companies tend to focus tremendous, tremendous efforts in legally protecting their monopoly rents versus doing more R&D? Which the thing I am sympathetic to about drug development is it’s very hard and requires a ton of money. It is a boom or bust thing. You can fail. It’s not a guarantee that your drug will succeed. In fact, it’s really, really hard. And I think there’s plenty of room for discussion about how to best sort of incentivize or work with private industry to get new drugs.
But to me, the most obvious problems with the pharmaceutical industry are beyond if we even go past the obvious PBM sort of middleman adding on layers of rent, then you get to the IP, the patent thickets, the product hopping, all the tactics to preserve that patent, that monopoly, as opposed to going and getting a new drug. Obviously, we’ve seen tons of acquisitions over the years as well. But do they talk about any of this as a hindrance to getting more life-saving medicine, drugs, more innovation?
SANDEEP VAHEESAN: No, that side of the story is completely absent in this book. Frankly, the pathologies of the patent system and our present institutional setup is actually encouraging a lot of wasteful activity. It’s promoting massive expenditures on advertising and marketing. Just turn on the nightly news and you’re bombarded with ads for this drug or that.
The patent system itself, as you say, at a basic level makes sense. Drug development is costly. It’s uncertain. You want to give drug companies some limited exclusivity to pursue these risky undertakings. But right now we have a system where the patent rules are actually encouraging things like product hopping, evergreening, development of me-too drugs, drugs that have been on the market for decades, generations. And pharma companies say, well, instead of developing a new life-saving drug, what if we make a trivial tweak to an existing drug and get fresh 20 years of patent protection? Something as inconsequential as turning a tablet into a capsule or vice versa.
So, the present system is basically giving lucrative monopolies to pharma companies and we the public are not actually getting anything useful in return. But this whole side of the story is completely missing in the book. The need for patent reform.
Groups like IMAC have documented the abuses of the patent system. Pharmaceutical companies getting dozens, hundreds, of patents simply as a way of keeping out generic competition. Not pursuing patents based on their quality, but really as an entry deterrence mechanism. But yeah, you would not realize how fundamentally broken the patent system is reading “Abundance”. You would think it’s mainly a product of an unduly risk-averse public sector.
TEDDY DOWNEY: And do they get into the PBM issue at all? Because the PBMs, in addition to sort of extracting rent, they also create a barrier to access the market. You can’t necessarily get your new drug or your generic drug to market because you’ve got to bribe or effectively pay off, pay a rebate, whatever we want to call it, to the PBMs to get access to the market. I mean, that seems like a fundamental issue. If you want to be confident that you’re going to be able to get your drug to market, dealing with the PBM seems like a problem. That’s more of a cost issue necessarily in some respects than an innovation one, but it seems like something worth talking about. Does that come up at all?
SANDEEP VAHEESAN: No, that doesn’t come up at all. And yeah, the whole private side of things doesn’t really come up in the book in general.
TEDDY DOWNEY: And we’re not going to be able to spend as much time on energy as I want, especially since you wrote a whole book about it, but were there solutions that they—I guess my question is not just about solution, but just in terms of the magnitude of the problem. Like if you were going to weigh the things that they’re talking about versus the things that we’re talking about, my personal bias is that the things we’re talking about are 70, 80, 90 percent of the problem. Like if you dealt with these policy issues, you could have a very robust, innovative, functional pharmaceutical market, pharmaceutical industry, where the companies are plowing more money into bringing life-saving drugs to market as opposed to IP shenanigans or whatever other schemes that they might be thinking about instead of, or stock buybacks or whatever, instead of actually investing in the business, competing, et cetera, innovating.
I’m putting it at 70, 80, 90 percent of the problem. They’re missing out. They’re talking about 1, 2 percent, 5 percent max. But what’s your kind of estimate of how much of the problem they’re really addressing and how much they’re just ignoring?
SANDEEP VAHEESAN: Yeah, I think they’re focused on relatively minor parts of the problem. So, I’ll talk about energy, which I know a lot more about than pharma. The energy section of the book is heavily focused on environmental review, specifically the National Environmental Policy Act and California’s equivalent of that. There’s an extensive discourse around this. People talk about it as permitting, like we need permitting reform.
And what these laws require the state, the relevant state actor, to do is study before building, identify the social environmental impacts, do a thorough job of it. And once you do that, you can fund or undertake a project. And it seems like an eminently sensible requirement. When you build a power line, you’re talking about a piece of infrastructure that’s going to be in the ground for the next 50, maybe even a hundred years. It seems reasonable to actually study the impacts, figure out where can we site this line to have minimal impacts before you actually start building?
And so, they say NEPA is a big obstacle to clean energy development. They say that—and I think I’m quoting the book here. They say dozens of clean energy projects have failed to be built because of NEPA. They don’t actually cite any examples. They simply make this assertion.
And I spent some time digging into the empirical research around NEPA. And NEPA is not what’s holding up clean energy development. There was a conscious effort under the Biden administration to further expedite the NEPA process, ensure that fewer projects have to go through the full environmental impact statement process. And if you look at the numbers, the problem for a lot of wind and solar projects is not environmental review. It’s that they’re not able to connect to the grid in a timely fashion. Private companies that own the transmission grid don’t want more zero carbon energy, especially from competitive sources. And so, interconnection is the big issue. Environmental review is a relatively minor problem in comparison.
But they put NEPA front and center and say that NEPA permitting reform, as they call it, is what we really need. And as with housing, they don’t grapple with the fact that utilities, merchant power developers, will build when they see substantial, stable profits. And if they don’t, they won’t invest. And it’s not as though once public barriers are removed, there’s going to be this wild rush to invest. These companies are still profit-seeking entities. They will do what they think is profitable.
And look at the progress we’ve made on climate change in the United States. There’s more renewable energy online today than there’s ever been. But if you look at how much progress we’ve made over the past 20 years, it’s not nearly enough.
We need to really accelerate the pace of clean energy investment and development. And the program Klein and Thompson present is not actually going to do that. It might help at the margins, but it’s not actually going to unleash the explosion of investment that we need to seriously decarbonize by 2050, let alone 2040.
TEDDY DOWNEY: I want to stay on energy just because that is your area of expertise. And we’ve talked a lot. Look, we’ve gone into what’s missing from the book. Obviously, I like to have—look, I think if you’re a policy person, you want to look at as much 100 percent of the problem as possible if you’re going to come up with policy solutions. So, I think it’s just useless and borderline to have a book that looks at like 5 percent of the problem in three different markets, right? If you’re a policy person, what are you going to do with that? What can you really do with that?
But that said, we have the benefit, tremendous benefit, of not being limited to abundance, which sounds pretty unhelpful for this exercise. But taking a step back, look at having a whole more holistic look at the problems, let’s stick with energy since you’ve spent so much time there. What are some of the solutions? What are some of the policy ideas? What are some of the things that states and other countries are doing to enjoy more, let’s say, clean power production? What are the policies that work in this area that would address more holistically some of the problems that we run into in the U.S.?
SANDEEP VAHEESAN: So, I’ll talk about the historical experience in this country, which is what I’m most familiar with. So, if we go back to the 1920s and 30s, a significant fraction of Americans did not have any type of electric service. This was especially acute in the countryside.
So, when FDR was elected in 1932, only about one in ten farmers has power. And it’s worth remembering, this was a time when the United States was still substantially rural. Today, about 85 percent of people live in urban areas. Back then it was closer to 50-50. So, you’re talking about tens of millions of people without electricity.
And the reason they didn’t have power is private utilities said, this is not a profitable market to serve. We’re going to build lines, which costs a lot of money, into these sparsely populated areas. And even if we do that, the people there are not actually going to use that much juice. So, they largely wrote off the rural market and said we’ll get to it when we see sufficient profits.
FDR is running for president in 1932 and says, this is unacceptable. Electricity is no longer this luxury. It’s a necessity to make everyone’s lives materially better. And I want to deliver universal electrification. And so, he’s elected in a landslide. What does his administration—what does the new Congress do?
They say, we really need to do two things. First, we need to better regulate the private utilities. A lot of what the private utilities are doing is purely extractive behavior, enriching a handful of executives and promoters. What we want to do is we want to put these utilities on a quasi-public footing. We’ll allow them to make reasonable profits, but they also need to take their public service mandate seriously. They need to be willing to serve all customers on just and reasonable terms.
So, that’s one part of the New Deal program when it comes to power. The second part, in some ways the more radical part, is the federal government’s going to invest directly in power generation capacity. This is most famously exemplified by the Tennessee Valley Authority, which built hydroelectric dams in much of the Southeastern United States to generate large amounts of low cost electricity, which were distributed throughout the region.
And Roosevelt’s vision here was really twofold. First, the public sector is simply going to expand the total power generation capacity of the United States. He said, we need more power. We’re going to raise living standards, industrialize, and a lot of the people in his administration were quite farsighted and said, there’s a good chance we’re going to have another global conflict. Look at the rise of Hitler in Germany, Mussolini in Italy, fascism in Japan. And if we go to war again, we will need lots of electricity to power the war industries. That’s one part of it.
The second part of it is he articulates this idea of the yardstick. He says, if the federal government gets involved in this business, what we’re going to do is really compete head-to-head against the private sector and force the private sector to do better on rates and reliability.
And so, the idea of public-private competition. We’re very familiar with public-private partnerships where the state works together with private entities, develop infrastructure. His vision was very different. We’d have rivalry between the public and private sector where the public sector is constantly spurring the private sector to do better.
And this program was enormously successful. So, I mentioned the one in ten figure earlier. So, in the mid-30s, about one in ten farmers had electricity. Thanks to this program of federal investment and regulation by the 1950s, that number was up to nine in ten. So, the vast majority of farmers had electricity by the early 50s.
And what was interesting about the rural electrification part of this program was what the federal government did was say, we’re not actually going to directly build lines in the countryside. What we’re going to do is we’re going to provide low cost credit to rural electric cooperatives. These are consumer owned local institutions to build the lines. We’ll give them cheap credit. We’ll provide them with technical support to stand up power systems.
And they did. I mean, it’s really phenomenal when you think about it. They’re serving a market that the private utilities had written off as unprofitable. Second, they’re actually helping ordinary people build and operate their own power systems, which is remarkable because power systems are technically complicated. You need expertise to keep the lights on. And the federal government, working in partnership with hundreds of communities, actually electrified the countryside. Something that the private sector had said was impossible earlier.
So, if we’re serious about decarbonizing our society, certainly decarbonizing our power sector, we really need to look to this precedent of public regulation, public investment. Rather than simply saying that the private sector wants to invest, let’s remove all the barriers to private sector investment.
TEDDY DOWNEY: We’re out of time here, but I want to come back to what you think readers who find themselves liking this prescription from Klein and Thompson, being kind of sucked into this story. For me, I can’t read this type of stuff because I’m allergic to the lack of rigor that is in these types of books, the platitudes. You mentioned the tautology, the simplicity. I spent my whole life getting into the weeds and learning the weeds of these policies and these markets, right? So, for me, it’s just unpalatable to read this type of stuff.
But obviously for a huge number of people, this type of narrative is enticing. And I’m curious what your message to the people who like this, how they can really learn about this stuff. Like what is it or what should they keep in mind so that they’re not sucked into this? How can they really learn about solutions and problems and not fall for this type of sleight of hand, this type of simple rhetorical, simple ideological solutions that are prescribed in this book?
SANDEEP VAHEESAN: Yeah, so first I’d say to look to history. If you want to understand how we attained universal electrification, how we built lines into the most remote, thinly populated, parts of the country, it wasn’t by following the Klein-Thompson program. It was by doing the New Deal, regulating private utilities to serve the public, federal government investing in power generation capacity, funding rural electrification projects.
The successful precedent we have from the 20th century is very, very different from the Klein-Thompson program of the state simply stepping back and allowing the private sector to invest. And I think you sort of gave me a hook to say this, if they want to learn more about this history, I encourage them to check out my book. I go into great detail about how and why the New Deal was successful.
But then even looking more recently, I mean, the Klein-Thompson program is what we’ve been doing for almost 50 years now, since the late 1970s. We tried it in a number of industries. We tried it in banking. We tried it in trucking. We tried it in airlines. We tried it in telecommunications. And you don’t need to know too much about recent history completely. This hasn’t been successful. It’s been extraordinarily successful in enriching Wall Street, corporate executives, other wealthy people. It hasn’t been so good for ordinary people. And the idea that if we just do more of it, we’ll get something fundamentally different is madness. Einstein’s definition of insanity.
And the book really needs to be understood as an attempt to win this ideological battle within the Democratic Party. It’s not a serious empirical or policy book. Not at all. It’s about saying we should stick with the status quo. Let’s do more neoliberalism. Let’s not talk about economic populism. Let’s not talk about social democracy. Let’s stick with what we’ve done. And the book is trying to win that fight. It’s not really trying to present a comprehensive or even substantial diagnosis of the problems facing us today.
TEDDY DOWNEY: You know, one other thing, I think, just to harp on this and why reading your book is so much more useful is obviously you have studied the history, just to follow-up on that history and getting in the weeds. And there’s no way to really learn about these markets and these policies and what works and what doesn’t work without studying history, without having great attention to detail, without being extremely rigorous. And I don’t know much about Thompson, but those are not things I would use to describe Ezra Klein.
You know, you make your money going off and working for Vox. And they make their money—I don’t know how they made their money. I think it was by paying people very little to write about sports and making a lot of money on the ad.
So, they’re not really focused on getting in the weeds, learning the history and things like that. And so, reading your book, obviously, where you have done that, obviously, I think ends up getting you to a place if you want to learn about policy, if you want to have some ideas about solutions, that’s really the way to go.
Even if people might disagree with you in the end about the solutions, at least they have learned the history. They have gone through thoroughly to understand that history and are better equipped to engage in a policy solutions conversation.
And Sandeep, this was a pleasure, as always, to talk to you. Please do go out and get Sandeep’s book. I was recently at a book event, had a very engaging conversation with Sandeep. And can’t thank you enough for doing this, Sandeep.
SANDEEP VAHEESAN: Yeah, thanks so much for having me. It was a lot of fun. And I’ll just wrap by saying, I’m sure there are things I missed in my book. I’m aware of that. I’m sure skeptical readers will say I missed X, Y and Z. But it was a product of almost five years of research. And I certainly aimed to be as complete and thorough as possible. And reading “Abundance”, you don’t come away with that same conclusion. You don’t feel like it’s a product of a serious research effort.
TEDDY DOWNEY: Yeah. And The Capitol Forum obviously values rigor and research. So, we will always be reading Sandeep’s stuff. I cannot promise I will ever read anything from Ezra Klein, but that’s probably a good way to depart. Thank you so much, Sandeep. Thanks to everyone for joining us today. This concludes the call. Bye, everyone.
