Podcast: Curiosity Unbounded, Episode 15 — Making sense of your dollars

SALLY KORNBLUTH: Hello, I'm Sally Kornbluth, President of MIT. And I'm thrilled to welcome you to this MIT community podcast, Curiosity Unbounded. Since coming to MIT, I've been particularly inspired by talking with members of our faculty who recently earned tenure. Like their colleagues in every field here, they are pushing the boundaries of knowledge. Their passion and brilliance, their boundless curiosity, offer a wonderful glimpse of the future of MIT.

Today, my guest is Christopher Palmer. Christopher is an Associate Professor of Finance at the MIT Sloan School of Management, where he teaches Corporate Finance. He's also affiliated with MIT's Jameel Poverty Action Lab, or J-PAL. Some of our guests on the podcast have taken us with them to the farthest corners of the scientific universe, but Christopher's research focuses on questions relevant to all of us every day.

He shows how people make decisions about consumer credit, household savings, and household debt. He's currently working on determining what policies are most effective at increasing household retirement savings, something I should be very concerned about, I should say. And on designing ways to reform the personal bankruptcy system, something I don't want to be concerned about. So, Christopher, welcome to the podcast.

CHRISTOPHER PALMER: Thanks. Fun to be here.

SALLY KORNBLUTH: Great. So can you tell me how you came to be here at MIT? I understand you have a rather long history with the Institute.

CHRISTOPHER PALMER: I do. My first job at MIT was when I was 18. I wasn't going here for my undergraduate college. That was at Brigham Young University in Utah. But I had taken econ 101 as a freshman and came back determined to find some opportunity to do something in economics for that summer. And there was a visiting professor in the Center for Real Estate here at MIT who had a grant to study what happened when Cambridge got rid of rent control in 1995. And he needed someone to drive around Cambridge and verify that this renovation in the data was, in fact, a renovation that had to do-- like, one of the buildings had put a gas station in on the ground floor. And in the data, it was being marked as, this is an apartment building that did a huge renovation. But that has actually nothing to do with housing and nothing to do with rent control. So that was my first research assistant job.

SALLY KORNBLUTH: And how did you get that from Brigham Young to here? How did you wind up getting that job?

CHRISTOPHER PALMER: Yeah, so I had grown up here in the Boston suburbs. And so he was my friend's dad.

SALLY KORNBLUTH: Oh, OK.

CHRISTOPHER PALMER: And so I had gone to high school with this kid. And I said, your dad's an economics professor. Does he know of anything?

SALLY KORNBLUTH: Oh, that's great.

CHRISTOPHER PALMER: Actually, he needed someone. So that was my first entree into MIT. And then I went back to college and finished up and applied for graduate school. And I always told people that MIT was my dream school. And I was really lucky and happy to get in. So, I came here and I did my PhD here. And when I graduated, I left and I taught at Berkeley for three years. And eight years ago or so, we had the opportunity to come back to Sloan, and we took it. We were really excited to be back.

SALLY KORNBLUTH: Fantastic. So how did you become interested in economics and household finance? What was the genesis of that?

CHRISTOPHER PALMER: So I'd always done math in high school. And when I started doing math in college, I had a math professor who said, you have to decide, are you the kind of mathematician that's doing the math because you like to use it somehow, or you just love the math for the math sake? And I realized I liked the stories that came with math, and in particular, I liked ones that had human intuition. So looking at physics, or electricity, or biology, and using all the math that you use there, I didn't have much intuition for how that world was working, but I had a lot of intuition for how people were making decisions and how companies wanted to operate, and that sounded a lot more fun. So then I gravitated towards economics.

SALLY KORNBLUTH: You know, that's really interesting because I think about this because I gravitated towards biology, and I kind of had a feel for how things work, you know what I mean?

CHRISTOPHER PALMER: It came natural.

SALLY KORNBLUTH: Yeah, and when I took physics, I couldn't understand how people had any intuition about that.

CHRISTOPHER PALMER: Yeah, what a great thing that we have the freedom to gravitate towards where our mind naturally has a good fit.

SALLY KORNBLUTH: Exactly. So it turns out you may have been studying here right around the time of the global financial meltdown of 2008. Was that a significant event in shaping your focus?

CHRISTOPHER PALMER: Oh, absolutely. It was 2008 was when I started. So fall of 2008, we were talking about Lehman Brothers, and Bear Stearns, and mortgage-backed securities, and bank runs, and the foreclosure crisis. And a lot of the classes just kind of ended up gravitating towards that topic. How could they not? It was such a big event that was in the headlines. And so it actually gave me permission to study some of those topics that I would have been interested in anyway, but weren't central to economics before the crisis. So housing was never fundamental to-- there was no field that did housing in economics. It kind of fit in a bunch of different fields, but you didn't have to justify why you were studying housing and to say, I'm interested in housing markets. Well, in 2008, 2009, 2010, that's a great answer.

SALLY KORNBLUTH: That's right.

CHRISTOPHER PALMER: Everyone wants to hear what you have to say about housing markets. So it definitely shaped what I did. And it gave me permission to do what I was already interested in. So that was a pretty exciting time.

SALLY KORNBLUTH: Interesting. It's funny because I remember those years very well, because that was the beginning of my administrative career. I was a Vice Dean in the School of Medicine at Duke University. And it was my first foray into budget cutting. And I think that--

CHRISTOPHER PALMER: And the austerity that comes with a recession.

SALLY KORNBLUTH: Exactly, exactly. Which comes in handy, in general. So it sounds like you were studying the crisis in real time then.

CHRISTOPHER PALMER: I was, in many respects. And there's always a lag between when stuff comes out in print and when it's being studied. But that's one of the things that's amazing about being in a place like MIT is that we would have seminars that were coming that was like cutting-edge stuff. People would say something like, I'm trying to understand what's going on with unemployment and the housing market. And we just ran the data yesterday, and here's what it says. And so you really felt like you were at the tip of the spear.

SALLY KORNBLUTH: That's interesting. And my understanding in economics is that it takes a very long time to get a paper into a journal. You have a sort of public archive, public postings. So there must have been a lot of real time discussion way before anybody ever sees it in print.

CHRISTOPHER PALMER: Absolutely. It's one of the criticisms we have of our publication lag processes. By the time something comes out, you've already seen it as a working paper, you already saw it at a conference, you already saw it in a seminar. So the publication is useful for the citation, but the actual knowledge dissemination is predating--

SALLY KORNBLUTH: Yeah, that's very interesting. It's different from a lot of fields. Although more fields are gravitating towards the use of working papers and archives. Physics is obviously one that has done that for many years. And it's more prevalent in biology, which is very different from what I was being trained. Nobody said anything or did anything until you could read it in print. So it's pretty interesting.

Some of your recent work focused on housing voucher program, where you showed that introducing a personal guide or a navigator to assist people had a big impact on the voucher usage. Can you tell us a little bit about what the program is and about that work?

CHRISTOPHER PALMER: Yeah. So the brief, very brief history of this is we used to construct large public housing projects. When people say the projects, that's what they're thinking of. And because of the political process, these ended up being under-maintained, underfunded, segregated poverty, segregated racially, and not in the center of the city. One of the critiques is you didn't put them in a prime place to get to jobs. You kind of put them out in--

SALLY KORNBLUTH: And often inadequate public transportation.

CHRISTOPHER PALMER: Exactly, kind of transit deserts. And so the idea in the '80s was we should transition away from this. We should give people vouchers that qualified. They could take that to any landlord in the city and use it to pay for some of their rent. And then we'll get the kind of mixing and people moving to the opportunities that we think would be helpful for them.

But then decades later, as we looked at the numbers for that, it seemed like 80, sometimes 90% of the people using vouchers were in the same type of neighborhoods where the public housing projects were. And so we wondered why people were making that choice. Was the voucher program itself inadequate? Were there some feature of the neighborhood that they just really liked? So that was always in the back of my mind, is that as academics, we might measure a characteristic of a neighborhood and say, I don't understand why you're not moving to neighborhood A instead of neighborhood B. And they would say, well, that's nice that you think that's all that matters, but I actually want to be near my mom, and my mosque, and my grocery store, and whatever other things are important.

So, we just had a lot of evidence that was coming out about the value of growing up in certain neighborhoods. And it wasn't necessarily that you were growing up in the most expensive neighborhood in the country, but certain neighborhoods, even modestly priced, were better than others for kids to grow up there. So, with that research, we started wondering, well, what about the voucher program? Is there a way to make it smarter? Is there a way to understand whether people just want to be there, and then that's fine, or whether there's obstacles that we can address? So what happened was the Head of the Cambridge Housing Authority walked into the office of my Harvard co-author and said, you've been doing this research. How come you haven't thought about vouchers?

SALLY KORNBLUTH: Oh, interesting.

CHRISTOPHER PALMER: I had actually approached Housing and Urban Development years prior and asked them about doing this kind of research. And so found out about each other through the grapevine that they were going to be starting this and had this opportunity. We convened public housing authorities from all over the country that were interested in the issue. And we asked them what were the barriers and what have you been finding?  And not a lot of rigorous scientific evidence, just mostly people's intuition, anecdotally, best practices. And one of the things people said was people that are in this distressed state need a lot of help to get over all the obstacles of what's going on. And it's not the help that you could deliver by putting them in a room and giving them an orientation lecture. Here's how to find an apartment 101. It doesn't work that way because they have such different needs.

So that gave us the idea that, OK, maybe we want to think about a personalized touch to this and some kind of advocate for you, navigator is what we called it, that can sit down and work with you through your barriers. So we talked to all those public housing authorities, and it was the Seattle Public Housing Authority and the King County Housing Authority that were really excited in working with us. The Gates Foundation was really excited about working with them because of their Seattle connection. And so we did this experiment there. And the experiment effort itself is very MIT in its origins.

So when I was in graduate school, J-PAL had just started with Esther Duflo and Abhijit Banerjee. And I would look at the people that were doing these experiments in sub-Saharan Africa and India, and I would be jealous about how fun that looked. And also with the power of experimentation, which, like you said, is an MIT brand, right? We think about that all the time. The idea that you could do that in economics seemed great, but the idea that you could do it at scale in the United States seemed really hard to imagine. And we had the opportunity to do exactly that. And we thought to ourselves, if we can show in a randomized controlled trial that there's some better way to do the voucher program, then it won't seem so political when we pitch that to Congress. We'll have scientific evidence. We randomized the gold standard in evidence.

So the Gates Foundation was on board with exactly that. And the housing authorities were on board with exactly that. So we designed a suite of things that we thought would help. And the null hypothesis was, if this does no good, then we will learn that people just want to be where they are.

SALLY KORNBLUTH: So you must have had a control group, and then you have your navigator group. And it's just like people in a clinical trial.

CHRISTOPHER PALMER: And the control group, they got everything they would have normally gotten. There's a do no harm ethos here. They got the standard voucher, the standard briefing, all the supports of the public housing authorities were already doing. And then we crafted a program, we called it the Creating Moves to Opportunity program, for the treatment group. And around 50% of the treatment group moved to these opportunity neighborhoods, where it was really great for poor kids to grow up. And only 10% or 15% of the control group, which is similar to baseline.

SALLY KORNBLUTH: And what was the shortfall financially for the people who move? If you look at the housing markets in places like Boston, New York, Seattle, you could have a pretty big discrepancy. And how short do the vouchers fall? How does that play into people's psyche and selecting a new location?

CHRISTOPHER PALMER: So one of the nice things about the vouchers, and also historically a tricky thing about them, is if you qualify for the voucher, you pay 30% of your income, and the voucher covers the rest, up to a cap. And so historically, the cap was determined MSA-wide for the whole Metropolitan area, here's what's typical.  And so it kind of shuttled you into maybe the affordable, cheaper neighborhoods of the city, which weren't necessarily the best neighborhoods. And what Seattle did was get permission, and a lot of places have gotten this, permission to say the appropriate rent should depend on the zip code you move to. And the appropriate rent for Newton might be different than the appropriate rent for Chelsea. And so that program already existed and gave us the ability to be able to help people get to a place without worrying about that shortfall.

SALLY KORNBLUTH: And presumably as their income changes, the value of their rent, 30% of their income on a rolling basis. That's really interesting. So the value of those vouchers can be very, very different. And in reality, if I'm understanding this, then the incentivization should be to move to the biggest opportunity possible because your income is your income. And if the cap is way better, and you know--

CHRISTOPHER PALMER: Right, and yet at baseline, so few people were taking that leap.

SALLY KORNBLUTH: Yeah. No, that's really interesting.

CHRISTOPHER PALMER: That was curious for us. And we wanted to understand that. So the navigators found that the needs they were fulfilling were just totally different from person to person. And that's why you couldn't do this with a simple one size fits all program. For one person, they'd be filling out their rental application and there'd be a date that they didn't know, and so they would just get stuck. And they wouldn't know that you can just give your best guess and move on. And this isn't actually the highest stakes thing on the application. And for somebody else, they just couldn't imagine living there. And so the navigator would say, well, let me introduce you to somebody else who is similar to you who already lives in that neighborhood. And somebody else would say, well, I'm worried about my children in the following dimensions. Well, let me introduce you to someone at the school who could talk about that.

SALLY KORNBLUTH: Like being the poorest people in a higher income neighborhood.

CHRISTOPHER PALMER: Yeah.

SALLY KORNBLUTH: That's really interesting.

CHRISTOPHER PALMER: So they could envision that. And so that, it was thrilling. We got testimonials from people who felt like their lives had been changed. And we did a bunch of qualitative interviews to get those stories, and that was amazing. And then Congress basically said, OK, that worked in Seattle. It's very intriguing, provocative. Let's see if it works anywhere else.

SALLY KORNBLUTH: And would in the long term it be cheaper than the support of the public housing? In other words, I'm trying to think of the incentivization for cities to want to do this.

CHRISTOPHER PALMER: So most cities have these kind of public housing programs already. And they're wondering how they can help those vouchers work better. And there's all kinds of regulations on that. And they basically need permission from the Department of Housing and Urban Development to make some exceptions to be able to do these kind of projects.

SALLY KORNBLUTH: But you can imagine that living in the projects, the sort of classical projects, might or might not be more expensive for a city than having individuals take up the vouchers. And I'm just wondering how cities fall in terms of thinking about that.

CHRISTOPHER PALMER: So MIT actually is on the front lines of that kind of calculation as well. And we call it the marginal value of public funds. And it's this concept of, can this pay for itself kind of a thing. And there's some programs that kind of can. And so if you add up all the benefits for children to live in these particular neighborhoods, you do recover a lot of that public investment. So, part of it is when they're adults, they pay more in taxes because their incomes are a lot higher. Part of it is they're less likely to end up incarcerated. They're more likely to go to college, right? All of these benefits start to accrue to the city. And so if you can have the long run view that we hope government does, then you can really justify these sorts of investments.

SALLY KORNBLUTH: You really have to have the long-term view. I mean, it's not that different, again, bringing it back to the fields that I'm most interested in. If you think of some of these personalized medicines, for instance, the new genetically engineered sickle cell cure, they're very, very expensive. But the lifetime cost of caring for someone with sickle cell still exceeds the one time cost of these treatments. So it's very analogous.

CHRISTOPHER PALMER: I think about Wegozy and Ozempic in the same way. So expensive up front, but if you think about all the lifetime of problems it might avert, it can be exactly cost effective.

SALLY KORNBLUTH: Exactly. Really interesting. So you've done research that shows that ending rent control has resulted in increased gentrification and safer streets, but also in higher turnover of rental units, presumably because of cost. Any thoughts on what works when blending affordable housing with the benefits of gentrification?

CHRISTOPHER PALMER: Yeah, I mean, that term, just the benefits of gentrification, is such an interesting term because it's like--

SALLY KORNBLUTH: Who benefits.

CHRISTOPHER PALMER: Right. Gentrification, on the face of it, just seems like such a dirty thing. And it's interesting to think that there could be some benefits to this on the face of it. And there's different ways to think about gentrification. I mean, one way is that if you're against gentrification, then what you want is for our neighborhoods to stay segregated. That's a strange way to think about it, right? On the other hand, another way to think about it is, OK, so people that were segregated eventually made their desert into an oasis, and now you want to push them out of it because it looks good to you, right? So you can see both sides. And that's why it's such a charged issue.

In Cambridge, there were these interesting pros and cons of getting rid of rent control. On the one hand, rents went up for some people and that pushed out some people and they moved other places, and maybe they would have rather lived in Cambridge. On the other hand, you saw collateral damage in other ways, these kind of spillover effects from the rent control regime. When rent control ended, property values went up for people who owned their homes, near rent-controlled properties. And so that helped these people that were living in these neighborhoods that started to improve in various dimensions. You mentioned the crime dimension. That's one of them. So we had a great partnership with the Cambridge Police Department to get their archives and to do this project.

And we asked them, so why did this have an effect? Because they initially said, you should get into our archives because you'll find something, we saw it ourselves. And they said, first of all, it's not that we used to have criminals living in rent-controlled apartments and then they got priced out, and so crime went down. Crime committed in Cambridge is usually by people that are commuting to Cambridge to commit crime.

And so it's more that the whole pattern of Cambridge changed. And you had a neighborhood that now you had people that were new in the neighborhood. They were making investments in the security of the neighborhood, that included alarm systems, but also calling the police and walking their dogs at all hour of the night, and just kind of changing the pattern of how the city worked. And so that's an example of, if you get to stay in that neighborhood, and maybe that's an if, then that neighborhood is improving and that could be good for you.

SALLY KORNBLUTH: Well, but that must reflect just the income level of the neighborhood. I mean, again, it comes to the question of when you displace people from rent-controlled apartments, where do they go? So you're essentially, you may be minimizing crime in that neighborhood and just making people move to less safe neighborhoods.

CHRISTOPHER PALMER: So we looked at that, actually. And I don't know that made it in the published version of the paper, but we looked and said, did crime just move from one part of the Boston metro area to another? In which case, Cambridge might be really excited about it, but the governor might be ambivalent.

SALLY KORNBLUTH: Exactly.

CHRISTOPHER PALMER: And it seemed like crime went down Boston-wide when you had these changes. And that's consistent with some patterns that people found in Chicago when they had neighborhoods that had lots of public housing projects, they demolished those public housing projects. People kind of scattered. Crime went down kind of city-wide because the patterns were broken.

So, you used to just be able to consistently go and do some illegal activity. And now it's not so simple to just pick a different place. And things kind of get mixed up, and restarted, and reset. And so maybe there were some net benefits for the whole region.

SALLY KORNBLUTH: Oh, that's pretty interesting. So there's a general belief that owning real estate is one of the surest ways to financial security. And that it's also significant in building generational wealth. Do you think that holds true for the current generation?

CHRISTOPHER PALMER: Well, so that was an interesting revisiting of the American dream that happened in the '08 crisis. I remember being pressured at a family reunion in college in 2006, and my mom's cousin cornered me and said, you've got to buy a house now. And I was thinking, I'm still in college.  And that was just the belief, right? That's what you've got to do. And I think the rose-colored glasses came off when we saw that there's a dark side. And foreclosures are really costly and disruptive. That said, there seems to be strong evidence that the commitment device of you pay your mortgage payment and that pays down your debt, otherwise, you lose your house.

SALLY KORNBLUTH: It's a forced debt payment.

CHRISTOPHER PALMER: Yeah, it's a very forced savings. And you could try to undo that by taking out a HELOC. But in practice, a lot of people don't. They pay back their mortgage and that ends up building equity in their house. And it's not necessarily the most efficient way to do it, but it's a way that works really well for all of us humans that have temptations to spend money on other things.

SALLY KORNBLUTH: So this is probably a naive question, but obviously, as a result of the pandemic, there was a lot of remote work. We saw a lot of emptying out of office buildings and a lot of urban areas. To what extent is that building supply fungible? In other words, did that actually open up housing opportunities or no, because these things are configured so differently that it's not really relevant?

CHRISTOPHER PALMER: OK, so on the configuration point, it's a really interesting question that I think a lot of people have been looking at. This is how it was explained to me that really made a lot of sense. If you think about an office building floor plate, there is an elevator in the center, and then there's a really, really wide floor with windows on the outside. And you go through a lot of space before you get from the elevator to a window. But if you think about an apartment building, every apartment wants to have exterior windows in most of their rooms.

SALLY KORNBLUTH: Yes.

CHRISTOPHER PALMER: And so that doesn't really work with a really big office. And so what people have done is identified office buildings that have narrow floor plates that are really great candidates to convert to housing. And they've tried to do it and they're working on it. And they're working on the most affordable ways to do that.

SALLY KORNBLUTH: So I'd like to ask you to talk about retirement savings, personally. Something else you study. Just overall, how does the retirement savings picture look? How do you think about retirement savings?

CHRISTOPHER PALMER: One of the first things I think about with retirement savings is what we were just talking about with paying down your mortgage, it's the difficulty of saving. It's against our natures because it's a long run delayed gratification exercise.

SALLY KORNBLUTH: Yes.

CHRISTOPHER PALMER: And so we used to have pensions that were just automatic. You went to your job and they said, we're taking care of your pension when you retire based on years of service, we'll replace a bunch of your income. And that was a one size fits all approach that assumed that you were pretty much going to be at one job your whole life. And it doesn't work in a world where everyone's different, everyone has different needs, and different mobility, and different likelihood of staying at that job. And so that model didn't work so well. So now we have two models, I guess. We have the forced savings from Social Security. A lot of us are worried about how sustainable Social Security is, and whether it's going to be around to replace enough of my income when I retire. So we have to save on our own through things like 401(k)s.

And 401(k)s require you to take some initiative. They require you to say, I want to save this much and I want to invest it in these assets. And you have to make sure that you're saving enough for you to be able to retire someday. So that's the retirement savings landscape. I think about as this fundamental thing of do people have enough discipline to save enough for retirement now that the onus is on us and we've moved so far away from pensions.

SALLY KORNBLUTH: And presumably, it varies from employer to employer how these plans work. And some employers are probably happier with 401(k)s because if they have a matching program, for example, and people don't bother to save, they're saving what they would have saved on the pension.

Some are obviously automatic. You get X thousands of dollars based on your income. But it's an interesting thing.

CHRISTOPHER PALMER: So that's something that several of us at MIT have been studying, is how you design those programs for the benefit of the employees, for the benefit of the firms. There's tax benefits for how those things are set up. And so do you set up that matching in a way that benefits more people than others? And what does that look like? I think a lot of us have been interested in that.

SALLY KORNBLUTH: That's right. And at least as you say, with 401(k)s, they're portable, generally. So I think particularly the current generation, people tend to have a lot more employers, as you said, than in the past. So I guess the question is, people save this money and 401(k)s may be invested in money market or whatever it is. Do you advise, do people get out at a certain time? In other words, what do people do? Is there a strategy in retirement savings, as people actually near retirement, do they shift course?

CHRISTOPHER PALMER: Yes. And that's actually part of the trick with 401(k)s is, again, the onus is on you to make that change in your portfolio. And when you're young, you might want a lot of risk. And you're really going for the long run upside. And the closer and closer you approach to retirement, the less you can stomach a big swing in the market.

SALLY KORNBLUTH: Exactly, exactly.

CHRISTOPHER PALMER: And so imagine you were a couple years from retirement and the COVID wild swing happened. You might think, my retirement savings just went down by 20% because the stock market just had-- that's a huge hit on my standard of living. And you would ride it out if you were young. You could wait. And so you would want to think about trying to move things away from risky stocks and into safer bonds the older you get. That kind of active decision making is tricky for people that don't think about this on a daily basis. And so one thing that's developed is target date mutual funds, where they say it looks like you're going to retire in 2045. Invest in this, and we'll take care of that path for you.

SALLY KORNBLUTH: Interesting.

CHRISTOPHER PALMER: So that's been something that my colleagues at MIT Sloan have been studying actually.

SALLY KORNBLUTH: Very interesting. So let's talk for a minute about loans. You've studied how people shop for loans, specifically car loans. How does that impact a person's ability to save? And how does someone choose a car loan so the financing is of the maximum benefit to them?

CHRISTOPHER PALMER: Yeah, the adage that I always use is that people love to test drive cars, and they don't like to test drive loans. You might even find test driving a car stressful. It's much more stressful to shop for loans, or at least it's a big hassle. And so people might drive from here to Worcester to Springfield to try to find the best deal on their car, but they're not calling around and trying to get the best auto loan quote.

And they sometimes are assuming that their bank will give them the best rate, or the dealer is going to give them the best rate. And so there's a lot of reasons why people will neglect that side of the equation. And what we found in our research was that's actually a really important part of the equation, because if you think about your monthly payment as determining how much car you can buy, which is the way a lot of people think, then the interest rate has such a big effect on that monthly payment. So does the maturity of the loan. And so if it happens to be the one bank you ask gives you a loan that has a high monthly payment, you probably cope with that by buying a cheaper car to try to get things about where you've budgeted that you can afford. And so that's one of the things is if you get more quotes, you're more likely to find a loan that's more affordable and you can kind of buy the car you want. So the personal finance thing that comes out of this is, shop around for credit, not just for the car.

SALLY KORNBLUTH: Interesting. Interesting.

CHRISTOPHER PALMER: And we're lucky to live in an era where that's not too hard to do. Bankrate.com, for example, aggregates different interest rates on different products. And you can do a search there. You can often talk to a few banks, get the best offer you can. Bring that to the dealership and say, I'll just finance it outside, unless you thought you could beat this offer. And that's also strengthens your negotiating position.

SALLY KORNBLUTH: And if you had some lump sum of money, let's just say $30,000, and you wanted a new car, would you plunk that down and buy it without any financing?

CHRISTOPHER PALMER: So here's what I would do. So first of all, interest rates are kind of high right now. So I would think maybe that I might want to consider doing the cash instead of a car loan that was 7%. Sometimes the dealership is going to make money on the loan too. And so they're not so excited for you to pay with cash because they get an incentive for making you a loan. But there's no restriction on paying back the loan. So I would sometimes ask, is there a different price for the car if I pay with cash versus finance it through you? And they might say, if you pay with cash, we'll give you a discount. But they might say, if you pay with a loan, we'll give you a discount, depending on what their incentives are. And then regardless--

SALLY KORNBLUTH: You can pay it back a year later.

CHRISTOPHER PALMER: You can pay it back. Yeah.

SALLY KORNBLUTH: Oh, very interesting. So as I mentioned at the top, you're affiliated with J-PAL, also known as the Jameel Poverty Action Lab. And J-PAL takes a very MIT approach to figuring out the best ways to fight poverty. And this seems to comport well with what you were talking about in terms of the voucher program. Do experimentation, apply things as the results and the data show.

CHRISTOPHER PALMER: Yeah, evidence-based policy making.

SALLY KORNBLUTH: Exactly. So you're doing some work with J-PAL North America. So aside from the voucher piece, are there other projects you're working on with them?

CHRISTOPHER PALMER: Yeah. So J-PAL has just been a fantastic organization to get support from because they have this strong belief that experimentation can inform wiser policies across the world. And I looked wistfully, like I mentioned, at my development classmates who were doing this in the developing world. And then J-PAL North America basically said, actually, we can do this in the US too. So they supported our Seattle Housing Voucher project and gave us a lot of help on, here's how you set it up, and here's how you talk to policymakers, and here are the kind of briefs that can move the needle. And then I've had support from them in other experiments that I've done. Actually not in North America, despite the name J-PAL North America, in Ireland and in the UK. And so we did a mortgage refinancing experiment with the Irish government. And we did a savings account experiment with, do you put your money in the highest returning savings account, with the UK. And what's been fun is just that those things move policy. That's the value of this.

And so we moved policy with the voucher program in Seattle and Congress. We actually just got the results back a couple of weeks ago, that the extra sites where Congress paid for people to do our experiment had similar results, phenomenal results all over the country. And in Ireland, we had this thing where people don't refinance their mortgages enough, usually. They fail to take advantage of lower rates when they're around. And we came up with something where we sent people these reminder letters that were really short, easy to understand, and they had big effects. And now the Irish government is talking about doing that.

SALLY KORNBLUTH: Oh, very interesting.

CHRISTOPHER PALMER: And in the UK, there was a member of Parliament that was worried. He wanted to add a regulation. We jumped in and asked if we could test it first. We tested it. It didn't really have any effect. And he killed the regulation.

SALLY KORNBLUTH: Oh, interesting.

CHRISTOPHER PALMER: And so that's been really fun to have that.

SALLY KORNBLUTH: People following evidence and data. It's good. It's good. So as a final thought, what might be the one single thing that households could do to most improve their savings?

CHRISTOPHER PALMER: I think the easiest place to start would be maxing out the match that your employer gives you in your 401(k). You really want to do that. And you could think of that as free money in some sense. It's extra compensation that they use to hire you. They promised there was that benefits package. And taking advantage of that match is powerful. And then just thinking very deliberately about the discipline you have about savings, and thinking about the long run, and having that long run view, being your own best friend.

SALLY KORNBLUTH: Very interesting. Well, I enjoyed this. I learned a lot. So to our audience, thanks for listening to Curiosity Unbounded. I very much hope you'll join us again. I'm Sally Kornbluth. Stay curious.

Curiosity Unbounded is a production of MIT News and the Institute Office of Communications, in partnership with the Office of the President. This episode was researched, written, and produced by Christine Daniloff and Melanie Gonick. Our sound engineer is Dave Lishansky. For show notes, transcripts, and other episodes, please visit news.mit.edu/podcasts/curiosity-unbounded. Please find us on YouTube, Spotify, Apple, or wherever you get your podcasts. To learn about the latest developments and updates from MIT, please visit news.mit.edu. Stay updated on future episodes by following us on Facebook and Instagram at @curiosityunboundedpodcast. Thank you for joining us today. We hope to see you next time. Until then, stay curious.