Latest / Yaron Brook Show / Conversation w/ Vincent Geloso: The Gilded Age & Inequality? | Yaron Brook Show

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Conversation w/ Vincent Geloso: The Gilded Age & Inequality? | Yaron Brook Show · Yaron Brook Show

• 0:02
  Speaker 1: A lot of them unders of the national so interesting
• 0:10
  Speaker 1: and an individual lots.
• 0:14
  Speaker 2: This is the show, all right, everybody, welcome to your
• 0:22
  Speaker 2: one book show on this Monday, December fifteenth. And I'm
• 0:27
  Speaker 2: really pleased to have Vincent and I you know, you
• 0:32
  Speaker 2: have to correct my pronunciation, but geluso, that's perfect, gluso great.
• 0:38
  Speaker 2: I usually I usually butchered the name. So welcome Vincent.
• 0:42
  Speaker 2: It's great to have you on.
• 0:44
  Speaker 1: It's a pleasure.
• 0:45
  Speaker 2: So Vincent's an assistant professor of economics of Judge Mason University,
• 0:49
  Speaker 2: where I don't know, probably half the free market economists
• 0:54
  Speaker 2: in the United States work. It was you got to
• 0:59
  Speaker 2: pee the London School of Economics and we were talking
• 1:02
  Speaker 2: before we started it. He was the lone free marketer
• 1:07
  Speaker 2: at the l C. I mean and know a little
• 1:09
  Speaker 2: bit about the LC Department is not friendly to to
• 1:13
  Speaker 2: to free marketers. So he survived that.
• 1:17
  Speaker 1: So I have I have to confess that I was
• 1:21
  Speaker 1: lonely ideologically, but they were. They were intellectually generous.
• 1:26
  Speaker 2: Good yeah, it's and and uh uh so, uh tell us,
• 1:33
  Speaker 2: how did you how did you get into free market economics?
• 1:36
  Speaker 2: I mean you're you're Canadian from Quebec. Yes, not a
• 1:40
  Speaker 2: bastion of freedom generally and markets in particular. So so
• 1:46
  Speaker 2: how did how did you? How did you get into this?
• 1:49
  Speaker 1: So I started doing politics when I was a bit
• 1:53
  Speaker 1: younger towards the center. I veered a bit towards the
• 1:58
  Speaker 1: neo conservative right when I was in my early twenties.
• 2:03
  Speaker 1: But as I was gradually exposed to more and more
• 2:06
  Speaker 1: economics training, I gradually realized the limits of central planning.
• 2:15
  Speaker 1: And it meant not just central planning in terms of
• 2:17
  Speaker 1: economic policy, but in terms of multiple aspects of any
• 2:21
  Speaker 1: type of voluntary exchange, going from cultural exchange to choice
• 2:28
  Speaker 1: of languages to use, to education, to things that are
• 2:33
  Speaker 1: less obvious at first sight to economists. But once I
• 2:38
  Speaker 1: started appreciating the complexity of societies and how order could
• 2:45
  Speaker 1: emerge without a plan, I gradually became free marketer actually
• 2:54
  Speaker 1: anti status very first, but later gradually free market here.
• 3:00
  Speaker 2: Okay, And and what the interest in the history of
• 3:03
  Speaker 2: of of economics or economic history? So which way is it? So?
• 3:08
  Speaker 2: What what's what?
• 3:09
  Speaker 1: So when when people say history of economic they mean
• 3:12
  Speaker 1: history of economic taught, so that can be tracing the
• 3:15
  Speaker 1: evolution of economic ideas. Whereas economic history is what I
• 3:20
  Speaker 1: specialize in the measurement of living standards in the past
• 3:26
  Speaker 1: and trying to understand the importance of certain events in
• 3:31
  Speaker 1: human history or certain processes the emergence of property rights
• 3:36
  Speaker 1: institutions in the West, uh, the emergence of liberal democracies,
• 3:41
  Speaker 1: the emergence of constitutions, the process of economic growth, the
• 3:45
  Speaker 1: process of innovation.
• 3:48
  Speaker 2: UH.
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  Speaker 1: I was really rapidly interested in those questions, largely because
• 3:55
  Speaker 1: it speaks to the fundamental essence of the human and venture,
• 4:00
  Speaker 1: which is to end up conquering your state of poverty.
• 4:06
  Speaker 1: And history is kind of the you know, the empirical
• 4:09
  Speaker 1: observations that we have to see that process of civilization
• 4:14
  Speaker 1: building that humans are very good at and if given
• 4:20
  Speaker 1: in the correct incentives. And it felt natural for me
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  Speaker 1: to engage in economic history rather than the minutia of
• 4:30
  Speaker 1: economic policy today, even though I do that bill in
• 4:33
  Speaker 1: that domain occasionally.
• 4:35
  Speaker 2: So I think the first time I was introduced to
• 4:38
  Speaker 2: you or discovered you was a tweet you had during
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  Speaker 2: the the April was the tariff tsunami or whatever we
• 4:47
  Speaker 2: want to call it, where you know, as Trump was saying,
• 4:53
  Speaker 2: when a tariff Canada and everybody and the Canadians were
• 4:56
  Speaker 2: saying we're going to retaliate. You came out and said
• 5:00
  Speaker 2: this should do she should lower tariffs if anything, or
• 5:02
  Speaker 2: something like that, or should do nothing, or should lower
• 5:05
  Speaker 2: tariffs your lower tests to zero. And I was impressed
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  Speaker 2: because I didn't, you know, I hadn't seen anybody else
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  Speaker 2: say that. So run us to the logic of that,
• 5:14
  Speaker 2: given you know, given them points of tariffs these days.
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  Speaker 1: So so when that started coming out, and I'll be honest,
• 5:24
  Speaker 1: I never thought tariffs would be something I would discuss
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  Speaker 1: public policy wise, at least like a year ago. But
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  Speaker 1: when that started coming out, I proposed to the Montreal
• 5:36
  Speaker 1: Economic Institute, with whom I collaborate occasionally, that we issue
• 5:42
  Speaker 1: a policy note explaining that unilateral trade liberalization is the
• 5:48
  Speaker 1: way to go, so that obviously it would be good
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  Speaker 1: if everybody liberalizes together, and that's, you know, the ideal world,
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  Speaker 1: but in a world of less than ideals, open borders
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  Speaker 1: in terms of goods and services and capital investments is
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  Speaker 1: the second best policy, even if no one goes along.
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  Speaker 1: And so we made the case for that, and to
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  Speaker 1: just make a summary of the case, the very obvious
• 6:15
  Speaker 1: part is tariffs end up being taxes on consumers so
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  Speaker 1: in one way, you're going to reduce demand for other
• 6:22
  Speaker 1: services in the economy as you increase costs for some people,
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  Speaker 1: but also at the same time you increase costs of inputs.
• 6:31
  Speaker 1: But the most important cost of protectionism that a lot
• 6:34
  Speaker 1: of people forget, and even economists sometimes don't put their
• 6:38
  Speaker 1: fingers on it, is that once a government decides to
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  Speaker 1: it says publicly it will do tariffs, it opens the
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  Speaker 1: door to rent seeking, which means that every interest group
• 6:47
  Speaker 1: is going to lobby like beggars at the popular soup,
• 6:52
  Speaker 1: asking for their own tariff, their own exemptions. And the
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  Speaker 1: process of rent seeking is socially costly because so many
• 6:59
  Speaker 1: resources are spent just trying to get favors from the
• 7:04
  Speaker 1: politically powerful. And this is a form of institutional not corruption,
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  Speaker 1: but perversion degradation that happens. So it's kind of a
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  Speaker 1: poison and the long run is even more damaging. So
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  Speaker 1: I was trying to make the case that the correct
• 7:20
  Speaker 1: route for Canada was to stick with free trade and
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  Speaker 1: in fact to remove whatever barriers it has. Notably, in
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  Speaker 1: terms of this, Canada is pretty restrictive on a few
• 7:31
  Speaker 1: things like telecommunication services, air transport, and of all things,
• 7:36
  Speaker 1: well of two of all things very Canadian things maple
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  Speaker 1: syrup and for which there is really big supply side
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  Speaker 1: restrictions in my home province, but also dairy and avian
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  Speaker 1: at poultry production. So these are insanely restrictive systems that
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  Speaker 1: are designed to restrict competition on each of these markets.
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  Speaker 1: Can even consumers pay more. If consumers were free to
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  Speaker 1: pick whoever producer they wanted to buy from, their living
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  Speaker 1: standards would massively increase and at the same time it
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  Speaker 1: would liberate massive sums for other sectors of the economy
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  Speaker 1: to grow. And that's the case we were making, and
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  Speaker 1: we made no friends.
• 8:22
  Speaker 2: Yeah, I was gonna ask you, what was the response
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  Speaker 2: in Canada?
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  Speaker 1: Well, I had one response that made me very happy.
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  Speaker 1: Was the son of former Prime Minister Brian Maroney, who
• 8:35
  Speaker 1: was the for Canadians. Maroney was Canayans know, but non
• 8:41
  Speaker 1: Canadians won't know that. Maroney was the prime minister who
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  Speaker 1: unpopularly advocated free trade in the eighties and was pretty
• 8:50
  Speaker 1: adamant about it and basically ran a referendum election on
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  Speaker 1: a free trade deal with the US, and so pretty
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  Speaker 1: much like the closest thing to a political champion of
• 9:02
  Speaker 1: free trade in Canada that's consistent was Brian mrooney, and
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  Speaker 1: his son was saying, I'm very happy that you're channeling
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  Speaker 1: the spirit of free trade battles. Okay, this is you know,
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  Speaker 1: it's one wine and I'll take it. I don't get
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  Speaker 1: a lot of wins in terms of the battle of ideas,
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  Speaker 1: but that was, you know, a minor one, and I'm
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  Speaker 1: very happy about it.
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  Speaker 2: But did you get did you guys get a lot
• 9:26
  Speaker 2: of negative negative commentary?
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  Speaker 1: Oh? Yes, that The usual response that is not the
• 9:33
  Speaker 1: first time it's been encountered, is that obviously this was
• 9:39
  Speaker 1: politically naive. The other ones are doing it, we have
• 9:42
  Speaker 1: to do it too, And so I had to reply
• 9:46
  Speaker 1: the usual reply that it's I have to tell my
• 9:50
  Speaker 1: kids very often, not because the other kid does it,
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  Speaker 1: that you have to do it too, somewhat counterproductive to
• 9:57
  Speaker 1: play this game. So I was surprised that I had
• 10:00
  Speaker 1: to explain to people who are my age and far older,
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  Speaker 1: even though I'm no spring chicken, that I had to
• 10:08
  Speaker 1: explain to them the same thing I have to tell
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  Speaker 1: my six year old about how to behave in the
• 10:12
  Speaker 1: real world. So that was a bit of a frustrating one.
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  Speaker 1: But the other one we frequently get is the one
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  Speaker 1: that Americans subsidize their own industries, especially in farming, And
• 10:25
  Speaker 1: each time I have to explain to them that that's
• 10:28
  Speaker 1: actually something that we as Canadians, even though I live
• 10:31
  Speaker 1: in the US now, should actually welcome. If Americans want
• 10:34
  Speaker 1: to tax themselves, first of all, they're making themselves less
• 10:40
  Speaker 1: attractive to any investments by virtue of the higher taxation.
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  Speaker 1: That's number one. Number two is if we're importing it,
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  Speaker 1: we're importing their tax dollars. So that's the closest thing,
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  Speaker 1: at least from the Canadian advantage points to a free lunch.
• 10:54
  Speaker 1: So Canadians should actually welcome other countries giving them their
• 10:59
  Speaker 1: tax payer money without any effort for it. And every
• 11:03
  Speaker 1: time I said, oh, you're being flippant, and it's true,
• 11:06
  Speaker 1: I was being a bit flippant, but it's still true.
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  Speaker 1: And even if let's say I was overstating the case,
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  Speaker 1: it still goes back to the first argument. If the
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  Speaker 1: other person is doing it, you don't have to do it.
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  Speaker 1: If it's done.
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  Speaker 2: And last question on this, and then we'll go to
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  Speaker 2: the to the Gilded Age. What's your assessment of the
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  Speaker 2: Canadian response to the turfs.
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  Speaker 1: Confused, garbled, and incomprehensible. I think they're trying to and
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  Speaker 1: this probably results one of the things I mentioned earlier,
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  Speaker 1: because of the rent seeking, they're trying to patch work
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  Speaker 1: political considerations with grand standing, essentially to reduce the damages
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  Speaker 1: of the terrorists, but at the same time accommodate political necessities.
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  Speaker 1: The result of this is something that makes absolutely There's
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  Speaker 1: an expression in French which is a Niekernite neither head
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  Speaker 1: nor tails. You can't there's nothing to understand about it.
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  Speaker 1: And even and this is especially since when we know
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  Speaker 1: what the easy answer is is because the one big
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  Speaker 1: policy that's that would actually end the conversation over tariff
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  Speaker 1: is this thing called supply matterer. So I briefly alluded
• 12:30
  Speaker 1: to it. But in Dairien poultry, which is the two
• 12:33
  Speaker 1: big sticking points for American negotiators is in Canada, since
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  Speaker 1: the nineteen seventies, we have a quota system where you
• 12:40
  Speaker 1: have to acquire a right to own cows and chicken.
• 12:44
  Speaker 1: You don't even have to have the chickens, you just
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  Speaker 1: need to buy the quota to have them. And this
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  Speaker 1: number of quota has been essentially fixed since the seventies.
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  Speaker 1: The result is the number of the demand has outstripped
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  Speaker 1: the supply. Prices are really high, and that system would
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  Speaker 1: not be sustainable were it not for massive tariffs that
• 13:08
  Speaker 1: prevent American producers that do not have to labor under
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  Speaker 1: these costs of the quota system, because they could enter
• 13:16
  Speaker 1: the market at much lower price, which is why we have.
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  Speaker 1: For example, on cheese the tariff is above two hundred
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  Speaker 1: and eighty percent. On milk it's above three hundred percent.
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  Speaker 1: And if you look at price gaps between the US
• 13:31
  Speaker 1: and Canada, actually here in Virginia, which is not a
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  Speaker 1: dairy lane in any way, shape or form, price of
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  Speaker 1: milk in a solid container is half the Canadian price
• 13:43
  Speaker 1: and the Canadian price comes in a plastic bag. I'm
• 13:46
  Speaker 1: not kidding. This is something people don't know. In Canada.
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  Speaker 1: We decided to reduce the cost so much we were
• 13:52
  Speaker 1: going to sacrifice on every feature of quality that consumers
• 13:57
  Speaker 1: might care about. And then the this is an seriator
• 14:01
  Speaker 1: point for me, is the dairy union farmer who have
• 14:04
  Speaker 1: basically sent very rude messages to one of my ex
• 14:08
  Speaker 1: in the past saying really good, They're very aggressive, and
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  Speaker 1: they kept saying, oh but you know, you're comparing American
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  Speaker 1: price with Canadian one, but ours come in the plastic bags.
• 14:20
  Speaker 1: They're come in the solid packaging. And I'm like, you
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  Speaker 1: realize that actually makes my case. You know, maybe Canadians
• 14:26
  Speaker 1: would like to actually get the milk itself cheaper, but
• 14:30
  Speaker 1: would be okay with paying a bit more for not
• 14:33
  Speaker 1: having milk in a bag. There is one state in
• 14:35
  Speaker 1: the US, however, where milk in the bag is popular,
• 14:37
  Speaker 1: and it's Nebraska. And when you go there, it's even
• 14:40
  Speaker 1: cheaper than everything else, and the fine enough.
• 14:44
  Speaker 2: Don't freak out at about plastic. You know, we can't
• 14:50
  Speaker 2: even drink use straws in some states in the United States.
• 14:53
  Speaker 1: Well, this is this is well, I'll be less generous
• 14:58
  Speaker 1: than I usually am. This is status contradictions that are
• 15:03
  Speaker 1: better shuffled under a carpet.
• 15:05
  Speaker 2: Yeah. Yeah, And then are many of them. There are many,
• 15:08
  Speaker 2: many of them. So you have a book coming out
• 15:13
  Speaker 2: next year that's exciting, So I am I'm sure you are. Yeah,
• 15:18
  Speaker 2: I'm too. I'm go get it. I'm we get to
• 15:19
  Speaker 2: read it, you know. I and one of the most
• 15:24
  Speaker 2: interesting periods in human history, I think, well maybe the
• 15:27
  Speaker 2: most interesting period in human history in my view has
• 15:30
  Speaker 2: to be the nineteenth century the century in which we
• 15:32
  Speaker 2: in a sense became rich, right, we stopped being put
• 15:35
  Speaker 2: And there's so little good economic history on what actually
• 15:41
  Speaker 2: happened in the nineteenth century. So I'm excited by the
• 15:44
  Speaker 2: fact that you know your books to tell us a
• 15:47
  Speaker 2: little bit about what period it covers and the what
• 15:50
  Speaker 2: the what the idea is.
• 15:54
  Speaker 1: So the point that I'm trying to make in that book,
• 15:57
  Speaker 1: which covers the period eighteen seventy nineteen ten in the US,
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  Speaker 1: so basically the Gilded Age, progressive era, everything from the
• 16:04
  Speaker 1: end of the Civil War essentially to World War One.
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  Speaker 1: And the case I'm trying to make is that markets
• 16:09
  Speaker 1: are the most egalitarian forces that the world ever saw.
• 16:13
  Speaker 1: And I don't mean a galitarian in the philosophy of egalitarianism,
• 16:18
  Speaker 1: but in the sense of if you look at the
• 16:21
  Speaker 1: ladder of income and you look at person on the first, wrong,
• 16:27
  Speaker 1: second third, up to the ninety nine rung of the ladder,
• 16:32
  Speaker 1: does everyone enjoy the same rate of economic growth? Is
• 16:37
  Speaker 1: the growth going largely the same for everyone or some
• 16:42
  Speaker 1: people getting faster? Is it faster at the bottom. And
• 16:45
  Speaker 1: the point I make is that actually, well functioning markets
• 16:50
  Speaker 1: will generate massive improvements for pretty much everyone, and that
• 16:57
  Speaker 1: we massively under estimate the amount of economic growth that
• 17:03
  Speaker 1: took place in America for the bottom ninety percent of
• 17:06
  Speaker 1: Americans from eighteen seventy nineteen ten.
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  Speaker 2: So there's this perspective that, you know, the nineteenth centuries
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  Speaker 2: a period of extreme poverty. You know, we've already dickens,
• 17:19
  Speaker 2: you know, child labor, and you know dirty slums and
• 17:24
  Speaker 2: real horror. So to what extent is the truth to that?
• 17:29
  Speaker 2: And you know what going into the guild and age,
• 17:33
  Speaker 2: what was the situation and kind of what was the
• 17:35
  Speaker 2: situation coming out of the guilded age.
• 17:38
  Speaker 1: So obviously at the beginning, so eighteen seventy, the world
• 17:43
  Speaker 1: is very poor, and in the United States people are
• 17:46
  Speaker 1: very poor now by global standards. Back then American were
• 17:51
  Speaker 1: already pretty wealthy. But you know, from anyone's vantage point
• 17:55
  Speaker 1: using a time machine today going back to that period
• 17:59
  Speaker 1: would find that this looks like very extreme poverty. If
• 18:03
  Speaker 1: they ended up going to the house of someone who's
• 18:06
  Speaker 1: an industrial worker in say Chicago or New York, they
• 18:11
  Speaker 1: would find this to be a very poor living condition.
• 18:14
  Speaker 1: But what I point out is that actually we probably
• 18:17
  Speaker 1: underestimate how poor people were at the beginning, and we
• 18:21
  Speaker 1: massively underestimate how much better off they got, so that
• 18:24
  Speaker 1: the starting point is lower than we believe, and the
• 18:29
  Speaker 1: end point, by World War One is higher than we believe.
• 18:32
  Speaker 1: Which is why I say that in this period you
• 18:34
  Speaker 1: get growth that is so rapid at the bottom that
• 18:37
  Speaker 1: it's the first massive eradication of poverty that takes place.
• 18:42
  Speaker 1: And it's seen in stuff obviously incomes, but also things
• 18:46
  Speaker 1: that are less obvious. So there's lower lifespan and equality.
• 18:51
  Speaker 1: So if you look at how much if you take
• 18:54
  Speaker 1: people and you'll take a how long they live, essentially,
• 18:58
  Speaker 1: you would find much more at the beginning of the
• 19:01
  Speaker 1: period and inequality of life spans. At the end of
• 19:04
  Speaker 1: the period, not only does the average lifespan increase, but
• 19:09
  Speaker 1: they've increased far more for people who used to die
• 19:12
  Speaker 1: far earlier. So and that's very obvious from lower infant
• 19:16
  Speaker 1: mortality rate, but it's also obvious for people above age ten,
• 19:20
  Speaker 1: so that there's reductions in life and you want to
• 19:24
  Speaker 1: think about health inequality, Uh, there's reductions in inequality in
• 19:31
  Speaker 1: the cost of living. So the goods that are falling
• 19:34
  Speaker 1: in prices more in that period are goods that feature
• 19:39
  Speaker 1: more predominantly in the baskets of the poor. So once
• 19:43
  Speaker 1: you account for that, you realize, oh, Americans were got
• 19:48
  Speaker 1: the poorest. Americans got a much much more impressive rate
• 19:54
  Speaker 1: of improvement over the period, so much so that ye're
• 20:00
  Speaker 1: in year out from eighteen seventy to nineteen ten, Americans
• 20:06
  Speaker 1: saw their living standards broadly defined, increased by two and
• 20:12
  Speaker 1: a half percent every year. And that mat seem small,
• 20:15
  Speaker 1: but it means that by nineteen ten living standard like
• 20:19
  Speaker 1: a person would have seen his living standard close to
• 20:22
  Speaker 1: three times higher than he would have had at the
• 20:26
  Speaker 1: beginning of the period. So this is a like a
• 20:29
  Speaker 1: near tripling of living standards, and a forty year window
• 20:33
  Speaker 1: is exceptional. And when you then compare, and this is
• 20:36
  Speaker 1: the part that's pretty provocative I think in the upcoming work,
• 20:40
  Speaker 1: is if you look at the top one percent of
• 20:42
  Speaker 1: Americans and you look at their improvements and living standard,
• 20:45
  Speaker 1: accounting for the health stuff, accounting for the cost of
• 20:48
  Speaker 1: living differences, they increase at the same rate as the
• 20:52
  Speaker 1: bottom ninety percent of Americans. So what you're getting is
• 20:56
  Speaker 1: a society that is no more in egalitarian or no
• 21:00
  Speaker 1: less egalitarian at the end than at the beginning. But
• 21:03
  Speaker 1: the improvements in absolute terms have been so massive that
• 21:09
  Speaker 1: the poorest Americans are richer than the average Frenchman, the
• 21:16
  Speaker 1: average British, the average German, the average Italian. Americans have
• 21:22
  Speaker 1: in that period what I call the first egalitarian enrichment.
• 21:26
  Speaker 1: Again I use the term as an ejective, the first
• 21:30
  Speaker 1: egalitarian enrichment of the Western world. And it had not
• 21:34
  Speaker 1: been seen before. You had had period of enrichment before,
• 21:38
  Speaker 1: but living standards would have increased slower at the bottom
• 21:41
  Speaker 1: than at the top. This period was unique, and it
• 21:47
  Speaker 1: was the first for having such massive improvements at the bottom.
• 21:51
  Speaker 2: So this is counted to kind of the conventional story
• 21:54
  Speaker 2: that's told, which is this is the age of robber
• 21:57
  Speaker 2: barons who get super rich by exploiting the poor. You know,
• 22:01
  Speaker 2: the the what is it unions fighting employers to get
• 22:08
  Speaker 2: raises and again reinforcing this idea of exploitation. So you
• 22:14
  Speaker 2: know what is wrong in the other story other than
• 22:16
  Speaker 2: empirically it's wrong, But what is kind of driving that story?
• 22:20
  Speaker 2: And of course why is it that this was such
• 22:22
  Speaker 2: a period of enrichment across the board.
• 22:25
  Speaker 1: So the argument that I try to explain to people
• 22:29
  Speaker 1: is that and I have to make a small digression.
• 22:31
  Speaker 1: There's a big concept in economic history. It's called the
• 22:34
  Speaker 1: Kusnitz curve, and it's name after an economist called Simon Cousinants,
• 22:38
  Speaker 1: and he basically said that as societies develop, when they're
• 22:43
  Speaker 1: very poor, they will have as they get richer, for
• 22:47
  Speaker 1: the average person, there will be more in equality, and
• 22:50
  Speaker 1: then after a certain point in equality will decline. And
• 22:53
  Speaker 1: his argument was essentially, think about it this way. A person,
• 22:56
  Speaker 1: you get like a largely agrarian economy and everyone's a
• 22:59
  Speaker 1: farm and the first guy who goes to the city
• 23:02
  Speaker 1: for the high wages in the city, he creates a
• 23:05
  Speaker 1: lot of inequality just because he's the first guy to
• 23:07
  Speaker 1: earn the higher wages. And as long as it's really
• 23:10
  Speaker 1: hard for people to move from the countryside to the city,
• 23:13
  Speaker 1: you will keep seeing inequality increase until there's a critical
• 23:17
  Speaker 1: mass of people inside the city. This argument the Cousin's curve.
• 23:23
  Speaker 1: The way I argue to people is that we've miscomprehended
• 23:27
  Speaker 1: the logic is people see it as like an inevailability
• 23:30
  Speaker 1: or either it never applied or it's just something that
• 23:33
  Speaker 1: we have to go through. And I say that's incorrect
• 23:35
  Speaker 1: to think about it. The Kuzness curve emerges if you
• 23:39
  Speaker 1: have poorly functioning markets, markets with lots of friction, where
• 23:44
  Speaker 1: it's hard for people to move to the industries that
• 23:47
  Speaker 1: want the workers. Because if an industry in a city
• 23:50
  Speaker 1: wants to offer twice the wages that farmers have, then
• 23:55
  Speaker 1: that's saying that there's huge potential in the city. If
• 23:58
  Speaker 1: there's a friction either because of geography or distance, or
• 24:03
  Speaker 1: communication costs or the ability to communicate information, or because
• 24:07
  Speaker 1: property rights are weak right, or that I can't do
• 24:10
  Speaker 1: certain forms of industrial organization, then you're going to have
• 24:15
  Speaker 1: this process take longer and longer. However, if markets can instantaneously,
• 24:20
  Speaker 1: and I'm going to use this as an extreme, they
• 24:22
  Speaker 1: can instantaneously move a person from a low value sector
• 24:26
  Speaker 1: to a high value sector, from a low value place
• 24:29
  Speaker 1: to a high value place, the cousin It's curve never emerges.
• 24:33
  Speaker 1: So the thing I point out is America's markets are
• 24:36
  Speaker 1: so dynamic, they're so open, they're so exhaustive compared to
• 24:43
  Speaker 1: other places, and the protection of property rights that are
• 24:46
  Speaker 1: afforded that the Cousett's curve never has a chance to
• 24:49
  Speaker 1: exist in America. But that's because markets were so well functioning.
• 24:53
  Speaker 1: And this is what I argue makes it that you
• 24:56
  Speaker 1: get this great, this first egalitarian and rich because America's
• 25:01
  Speaker 1: markets are a lean and mean, egalitarian growth machine. They're
• 25:05
  Speaker 1: they're designed the way they exist because they have. Now
• 25:09
  Speaker 1: it's not ideal, it's not close to what we want.
• 25:12
  Speaker 1: There's obviously legal discrimination against African Americans. There's uh legal
• 25:17
  Speaker 1: discrimination against the property rights of women for for some
• 25:20
  Speaker 1: periods of time. But even despite these imperfections, they're far
• 25:24
  Speaker 1: ahead in their exhaustiveness and uh than than other places.
• 25:30
  Speaker 1: That entrepreneurs find ways to conquer natural frictions. They find
• 25:34
  Speaker 1: ways to build railways, to build telegrams, to build infrastructure
• 25:39
  Speaker 1: that relays information that moves worker from one place to another,
• 25:43
  Speaker 1: that make market work better. Because if you're like an
• 25:46
  Speaker 1: entrepreneur or a person who thinks about like profit opportunities,
• 25:49
  Speaker 1: and you realize that there's a worker in Mississippi and
• 25:52
  Speaker 1: if you just move them magically to New York, he's
• 25:55
  Speaker 1: three times more productive. Then if you can find a
• 25:59
  Speaker 1: way to move him to New York are at a
• 26:00
  Speaker 1: low cost, then you make a profit and you make
• 26:02
  Speaker 1: society better off. So that's the thing I point out
• 26:06
  Speaker 1: and One of the other things I point out, and
• 26:08
  Speaker 1: this is an argument that regards to innovation, is people
• 26:12
  Speaker 1: tend to think that innovation requires like so's if there's
• 26:17
  Speaker 1: spillovers from an innovation, So you invent something and you
• 26:20
  Speaker 1: don't get the full reward. So some people can basically
• 26:23
  Speaker 1: freer ride on some of the benefits that you have
• 26:26
  Speaker 1: from your from the innovation. And so people say this
• 26:28
  Speaker 1: is a case for government invention, and I say, no,
• 26:30
  Speaker 1: you got it backwards. If there's spillovers and we observe spillovers,
• 26:34
  Speaker 1: what it means is property rights are so secure that
• 26:36
  Speaker 1: people are willing to do innovations that have spillovers and
• 26:40
  Speaker 1: they don't care that there's spillovers. They actually are okay
• 26:44
  Speaker 1: with people free writing because the private benefits are so
• 26:47
  Speaker 1: large that they'll do it. So if you think about it,
• 26:49
  Speaker 1: like in a dynamic sense, the innovations that we observe
• 26:52
  Speaker 1: in America that are that have tons of spillovers, they're
• 26:57
  Speaker 1: there because property rights are supertant.
• 27:00
  Speaker 2: Give an example of an innovation from that period that
• 27:03
  Speaker 2: had significant spillovers railways.
• 27:06
  Speaker 1: So railways, like the person who develops a railway, he
• 27:11
  Speaker 1: gets rewards in terms of the revenues from the traffic
• 27:15
  Speaker 1: along the line. But people whose estates or land or
• 27:20
  Speaker 1: farms are near the railway, the value of their estates
• 27:25
  Speaker 1: has gone up. They've got they've obtained wealth because now
• 27:28
  Speaker 1: they have an easier access to markets. So the railway
• 27:33
  Speaker 1: yes understands that, like some people will move there and
• 27:35
  Speaker 1: they will try to buy some land around it, but
• 27:37
  Speaker 1: it can buy all the land around the railway, so
• 27:41
  Speaker 1: some people get some spillovers. Same thing with for example,
• 27:46
  Speaker 1: barbed wire. Barbed wire is a magnificent invention in American history.
• 27:52
  Speaker 1: Think about like a farmer who needs to protect from trespass,
• 27:58
  Speaker 1: not from just neighbors, but just the nameghbor's animals, And
• 28:01
  Speaker 1: a neighbor's animal doesn't really care what the property line is,
• 28:05
  Speaker 1: will come, We'll trample on corn, we'll trample on we'll
• 28:09
  Speaker 1: eat the crops. So there's cost to fencing your land,
• 28:13
  Speaker 1: and if you're doing it with the timber, it's pretty expensive.
• 28:17
  Speaker 1: But now if you get barbed wire, barbed wire is
• 28:21
  Speaker 1: incredibly cheap. It's like exceptionally cheap, so cheap compared to
• 28:26
  Speaker 1: the alternatives that now more land can be used, Like
• 28:30
  Speaker 1: farmers don't need to use they can pick better crops,
• 28:33
  Speaker 1: crops that now they can pick crops that utter animals
• 28:36
  Speaker 1: from the neighbors might have liked, but now they won't cross,
• 28:39
  Speaker 1: so they can pick the optimal crops, not the optimal
• 28:42
  Speaker 1: crops under constraint of I don't want the utter animal
• 28:45
  Speaker 1: the neighbors animals to come on my farm. And which
• 28:48
  Speaker 1: yet is even though the guy who made the barbed wire,
• 28:51
  Speaker 1: the only profit he makes is the barbed wire, but
• 28:54
  Speaker 1: the social returns that he generates the spillover is more
• 28:58
  Speaker 1: land that is used, more land that is better used,
• 29:03
  Speaker 1: and obviously better crops that are being used, more remunutory
• 29:08
  Speaker 1: of crops. So the result is, but that guy just
• 29:11
  Speaker 1: makes profit from the barbed wire, he doesn't tap into
• 29:15
  Speaker 1: the vast number of spillovers that come from his innovation.
• 29:19
  Speaker 1: And these are just two examples, but you can pile
• 29:21
  Speaker 1: them up. You can add in the telegram the telegraph.
• 29:24
  Speaker 1: You can add in refrigeration, which allow for seasonal goods
• 29:30
  Speaker 1: to now become non seasonal canned goods. Can goods massively
• 29:35
  Speaker 1: reduced problems of health and cities. These are all individually
• 29:40
  Speaker 1: very small, but when you accumulate them, they generate together
• 29:44
  Speaker 1: a sum that is of massive improvements and absolute living standards.
• 29:48
  Speaker 1: But all of these require well functioning markets, and well
• 29:51
  Speaker 1: functioning markets require strongly protected property rights. And America that
• 29:59
  Speaker 1: this perfectly well, which is why the main claim of
• 30:02
  Speaker 1: the book is markets are and I want to keep
• 30:05
  Speaker 1: pointing this out to people, markets are egalitarian forces. There
• 30:09
  Speaker 1: are forces that raise the poor, and they will raise
• 30:12
  Speaker 1: the poor far more than we actually understand. Even economists
• 30:16
  Speaker 1: who are free markets that generally they'll do like a
• 30:19
  Speaker 1: small giveaway, and they say, yeah, but you know what
• 30:21
  Speaker 1: we care as fighting poverty is no, No, I'm guaranteeing
• 30:24
  Speaker 1: you that societies that have markets will actually improve the
• 30:27
  Speaker 1: lot of the poor far more than they will that
• 30:29
  Speaker 1: of the rich.
• 30:31
  Speaker 2: And so what was special about the United States in
• 30:35
  Speaker 2: that period eighteen seventeen nineteen ten, and is how things
• 30:42
  Speaker 2: change in stand And how does it compare the United States?
• 30:45
  Speaker 2: They say, to what was going on in the UK
• 30:47
  Speaker 2: or Canada during that same period.
• 30:50
  Speaker 1: Well, here's an example for the UK of something that's
• 30:52
  Speaker 1: really weird in the UK. Servants who work in you know,
• 30:57
  Speaker 1: rich people's household, if you want to think about it
• 30:59
  Speaker 1: this way down an abbey. If you want to have
• 31:01
  Speaker 1: like a reference in your mind that's if you left
• 31:04
  Speaker 1: your employer, it was a criminal offense. So certain types
• 31:08
  Speaker 1: of breaches of contract where like we're deemed criminal, and
• 31:13
  Speaker 1: this works in a way to restrict the functioning of
• 31:16
  Speaker 1: labor markets. So there is in other countries there are
• 31:23
  Speaker 1: violations like this of property rights. But also in terms
• 31:28
  Speaker 1: of industries, there's a lot of industry where you still
• 31:31
  Speaker 1: have to ask permission to enter the industry, you need
• 31:35
  Speaker 1: to talk to politicians. The United States, despite having for example,
• 31:39
  Speaker 1: pretty high tariff on the inside market of the US,
• 31:43
  Speaker 1: which is pretty big in and of itself, barriers are
• 31:49
  Speaker 1: very limited, and in fact, the Constitution gives a lot
• 31:53
  Speaker 1: of checks and balances to limit the state, the police
• 31:56
  Speaker 1: powers of the different states to intervene in ways that
• 32:01
  Speaker 1: could negate people's right to an occupation, to a trade,
• 32:07
  Speaker 1: to make contracts as they so desire, so that these
• 32:10
  Speaker 1: safeguards are functionally deeper than they are in Europe. Not
• 32:15
  Speaker 1: that Europe has no property rights, but if you want
• 32:18
  Speaker 1: to think about an intensity of the protections and depth
• 32:21
  Speaker 1: of property rights, the United States is miles in leagues
• 32:25
  Speaker 1: ahead of this. Despite the very obvious glaring hole for
• 32:30
  Speaker 1: the US which is a Djuri segregation. But in the
• 32:33
  Speaker 1: book I spent an entire chapter explaining that in a
• 32:36
  Speaker 1: weird way. That actually makes my case even stronger, because
• 32:40
  Speaker 1: if you look at African Americans in that period, they
• 32:42
  Speaker 1: are converging very mildly towards whites. So they start the
• 32:47
  Speaker 1: beginning of the period with incomes roughly twenty percent that
• 32:51
  Speaker 1: of whites. They end the period at roughly thirty to
• 32:55
  Speaker 1: thirty five percent. So there's some convergence. But this is
• 33:00
  Speaker 1: some convergence under legal segregation, with barriers in southern states,
• 33:07
  Speaker 1: for example, against recruitment agents, so people from the nord
• 33:10
  Speaker 1: who try to recruit workers from the South to go north.
• 33:14
  Speaker 1: Some state legislatures pass laws preventing this recruitment, and very
• 33:19
  Speaker 1: frequently these laws are struck down by the Supreme Court arguing,
• 33:25
  Speaker 1: well initially under privileges or immunities doctrine of the fourteen Amendment,
• 33:29
  Speaker 1: but later under substantive due process clause, argue that this
• 33:34
  Speaker 1: is a violation of fundamental rights. So they strike down
• 33:37
  Speaker 1: very frequently these laws, and even though they have some damage,
• 33:41
  Speaker 1: the reality is the environment is actually even allowing some
• 33:45
  Speaker 1: degree of market forces to be harnessed by the African
• 33:49
  Speaker 1: American community, allowing them a mild degree of convergence. So
• 33:53
  Speaker 1: the thing I try to point out is actually the
• 33:56
  Speaker 1: true tragedy in what I'm describing is not what everyone
• 33:59
  Speaker 1: else keeps saying that, oh, look there's rising inequality. Is no,
• 34:05
  Speaker 1: there wasn't. The true tragedy here is that there was
• 34:08
  Speaker 1: a group of people who had innate skills, innate abilities
• 34:13
  Speaker 1: that they were not allowed to tap and the small
• 34:17
  Speaker 1: degree to which we allowed them to tap into those
• 34:20
  Speaker 1: potential it allowed them some degree of convergence. So the
• 34:24
  Speaker 1: true tragedy is all the loss potential. So if the
• 34:30
  Speaker 1: lean and mean, egalitarian growth machine that was America's market
• 34:33
  Speaker 1: economy had been allowed to work, had been allowed to
• 34:36
  Speaker 1: be written by everyone, America would have been an even
• 34:40
  Speaker 1: more exceptional place than it was by nineteen ten. So
• 34:45
  Speaker 1: this is where I point out that we don't understand
• 34:48
  Speaker 1: how exceptional that period was and how inherently egalitarian. Again,
• 34:57
  Speaker 1: I don't mean this in the philosophy philosophical sense. I
• 34:59
  Speaker 1: mean in the distributional sense how egalitarian market forces are.
• 35:05
  Speaker 2: When did blacks in the south start emigrating north and
• 35:09
  Speaker 2: take jobs in northern cities?
• 35:12
  Speaker 1: So this is the Great Migration. It starts well, some
• 35:17
  Speaker 1: degree of debates, but it accelerates very much after World
• 35:22
  Speaker 1: War Two. So this is where there's a big jump
• 35:25
  Speaker 1: in the nineteen twenties. And this is like a very
• 35:30
  Speaker 1: mean no after World War two. So if I said
• 35:33
  Speaker 1: the nineteen twenties, I'm sorry. And so there's a slight
• 35:36
  Speaker 1: pickup in the twenties, but in the forties there's a
• 35:39
  Speaker 1: really big pickup. There's a great book by if anyone interested,
• 35:43
  Speaker 1: by Leah Platt Bustan from she's at UC Berkeley. Now
• 35:47
  Speaker 1: if I'm not mistaken, but she has a very beautiful
• 35:50
  Speaker 1: book called Competition in the Promised Land, where she points
• 35:54
  Speaker 1: out that this was the largest egalitarian force. The migration
• 35:58
  Speaker 1: of blacks from south to north was the largest one
• 36:01
  Speaker 1: of the largest egalitarian forces during the nineteen forties and fifties,
• 36:05
  Speaker 1: and explains a large share of the convergence between blacks
• 36:08
  Speaker 1: and whites pre civil rights legislation. So obviously the question
• 36:18
  Speaker 1: of these forementioned laws that prevented migration, well people from
• 36:24
  Speaker 1: now the north to come and try and recruit blacks
• 36:26
  Speaker 1: from this out had a mild effect initially in slowing
• 36:31
  Speaker 1: down that potential. Now, how much did they slow it
• 36:34
  Speaker 1: down as a matter of debates, but in essence it
• 36:37
  Speaker 1: does speak to this core point that I keep trying
• 36:40
  Speaker 1: to point out is if people are allowed to use
• 36:44
  Speaker 1: market forces by pitting employers in New York against employers
• 36:48
  Speaker 1: in California against employers in Mississippi, because they're free to
• 36:52
  Speaker 1: move around, this feature of a market economy will be
• 36:56
  Speaker 1: insanely egalitarian. And we under estimate how much there was
• 37:02
  Speaker 1: of this in that particular period. And again I keep
• 37:08
  Speaker 1: reiterating this. This was in a period with very different
• 37:13
  Speaker 1: technological abilities than today, which makes me wonder if we
• 37:18
  Speaker 1: gave let's say, a bit more of the freedom that
• 37:20
  Speaker 1: people had back then, and just like just a bit more,
• 37:25
  Speaker 1: given the insane level of technological abilities that we have now,
• 37:29
  Speaker 1: how much of this egalitarian growth machine could we reclaim
• 37:33
  Speaker 1: and put America on a growth track where living standards
• 37:37
  Speaker 1: for everyone raised by two three four percent a year
• 37:41
  Speaker 1: and people at the bottom of the income ladder can
• 37:44
  Speaker 1: see their absolute living standards increase, but they can also
• 37:48
  Speaker 1: climb along the ladder so that in the next generation
• 37:51
  Speaker 1: they're far wealthier than their parents, but they're also far wealthier.
• 37:55
  Speaker 1: And say a person and that was the median income
• 37:58
  Speaker 1: person was a generation and ago. We want a society
• 38:03
  Speaker 1: like this. And the key point is markets are so agalitary,
• 38:07
  Speaker 1: are so egalitarian in their nature that it is a
• 38:10
  Speaker 1: tragedy that we have not allowed them to work as
• 38:14
  Speaker 1: much legally speaking.
• 38:17
  Speaker 2: And usually in the name of trying to help the poor.
• 38:21
  Speaker 1: Yes, very often in the name of trying to help them,
• 38:24
  Speaker 1: but in reality we put under But that's because I
• 38:27
  Speaker 1: think people have a negative prior about markets, either because
• 38:31
  Speaker 1: it looks like it's disorganized, whereas no, it's does it
• 38:37
  Speaker 1: looks like it's disorganized, but there is order in that
• 38:40
  Speaker 1: seeming chaos because people try to figure out new plan,
• 38:46
  Speaker 1: people try and adapt to new situations, and the great
• 38:51
  Speaker 1: virtues that markets also generate. And this is something that
• 38:54
  Speaker 1: comes from related research of mind, which is probably the
• 38:57
  Speaker 1: next book I'll be working on. Is my related agenda
• 39:01
  Speaker 1: is income, mobility and economic freedom. And rather than just
• 39:06
  Speaker 1: looking at inequality, I look at can a person born
• 39:09
  Speaker 1: in the poorest death style of society can he climb
• 39:12
  Speaker 1: to the top death sile and societies that are very
• 39:15
  Speaker 1: economically free, especially with respect the property rights and regulation,
• 39:19
  Speaker 1: can make massive climbs along the ladder over time relative
• 39:24
  Speaker 1: to themselves in the past or relative to their parents.
• 39:28
  Speaker 1: And this I think is important because obviously the absence
• 39:33
  Speaker 1: of legal barriers help, but economic growth has Another feature
• 39:37
  Speaker 1: that people underappreciate is because market economies require specialization to
• 39:42
  Speaker 1: generate growth, specialization are also pat ways for ascendance. So
• 39:48
  Speaker 1: if you have more specialization, you have more ways to
• 39:51
  Speaker 1: rise up. In a society that's only a galitar, that's
• 39:54
  Speaker 1: only a grarian, the only way up is to work
• 39:58
  Speaker 1: harder on the farm. However, if you have another sector emerging,
• 40:01
  Speaker 1: you could work harder on the farm, but you could
• 40:04
  Speaker 1: work in another sector and work harder in that other sector.
• 40:07
  Speaker 1: So now you have three ways up. Just because you
• 40:10
  Speaker 1: added one other sector. Well, that's one pathway. Market economies
• 40:16
  Speaker 1: generate these new extra pathways for upward mobility, and that
• 40:20
  Speaker 1: connects to the point of the book is markets are
• 40:24
  Speaker 1: so inherently egalitarian, and people don't see that part because
• 40:28
  Speaker 1: they just focus on the chaotic seeming nature of it.
• 40:32
  Speaker 1: But what seems like chaos is these new pathways to
• 40:36
  Speaker 1: upward mobility.
• 40:38
  Speaker 2: So I was going to ask you about mobility. So
• 40:40
  Speaker 2: during this period, do you see dramatic mobility and does
• 40:44
  Speaker 2: it go both ways? That is it upward mobility. But
• 40:48
  Speaker 2: do we also see people lose all their money? I mean,
• 40:52
  Speaker 2: do we see download mobility as well?
• 40:54
  Speaker 1: So we have a hard time measuring it. So, without
• 40:57
  Speaker 1: getting into the details of the measuresurement battles, if we
• 41:02
  Speaker 1: look at white Americans, there is a very high level
• 41:05
  Speaker 1: of what we call relative mobility. So this says, if
• 41:08
  Speaker 1: you were in the bottom twenty percent of the income distribution,
• 41:12
  Speaker 1: can you rise will you stay in that bottom twenty
• 41:15
  Speaker 1: For white Americans, there was a great deal of relative mobility,
• 41:18
  Speaker 1: and it stayed more or less stable over the period. However,
• 41:23
  Speaker 1: once you include Black Americans, you see that there is
• 41:27
  Speaker 1: less mobility socially speaking, but there's actually a slight improvement
• 41:33
  Speaker 1: over the period. So and that coincides with my point
• 41:37
  Speaker 1: that there was a mild improvement for blacks in the
• 41:42
  Speaker 1: sense that they had some improvement, but these were again
• 41:45
  Speaker 1: very small and very far below what potentially could have been.
• 41:50
  Speaker 1: So that in that narrative, I think when people think
• 41:55
  Speaker 1: about income mobility, it was pretty exceptional America. But that's
• 42:01
  Speaker 1: relative mobility. Relative mobility doesn't ask how much you're better
• 42:05
  Speaker 1: off relative to say, your parents or how much better
• 42:08
  Speaker 1: off you are relative to yourself ten, fifteen, twenty years ago.
• 42:12
  Speaker 1: This is absolute mobility. Absolute mobility definitely one of the
• 42:17
  Speaker 1: highest in the Western world. So there's like a new
• 42:20
  Speaker 1: paper that came out very recently by the same person
• 42:24
  Speaker 1: I mentioned earlier, Leaplot Boston and the United States had
• 42:27
  Speaker 1: one of the highest level of absolute mobility. So do
• 42:31
  Speaker 1: you out earn your parents at by age thirty? You
• 42:35
  Speaker 1: out earned your parents when they were thirty? And the
• 42:37
  Speaker 1: answer was yeah, most Americans did. And when I say most,
• 42:42
  Speaker 1: the near totality of Americans did. And this was not
• 42:46
  Speaker 1: the case in other nations. The proportion was smaller elsewhere.
• 42:51
  Speaker 1: So what you observe is the United States was a
• 42:54
  Speaker 1: very mobile society, the in where markets were allowed to
• 43:03
  Speaker 1: work best, but even where they were not allowed to
• 43:06
  Speaker 1: work fully by legal discrimination, markets were eroding the barriers
• 43:13
  Speaker 1: by allowing Some think about it this way is this
• 43:17
  Speaker 1: is how I think of most state interventions or legal
• 43:22
  Speaker 1: discriminations that the state puts on. Is the human creativity
• 43:26
  Speaker 1: is a river the state puts on a dam. The
• 43:29
  Speaker 1: river still has its own flow and power, and if
• 43:34
  Speaker 1: the dam could crack eventually, the continuing force of markets
• 43:39
  Speaker 1: and human creativity eventually erodes this, and in this case
• 43:43
  Speaker 1: it was a poorly built dam, or at least poorly
• 43:46
  Speaker 1: built relative to the power of market forces in America.
• 43:52
  Speaker 2: So this is also a period of massive immigration, you know,
• 43:57
  Speaker 2: you know, relative to the population in America, immigration was enormous.
• 44:02
  Speaker 2: How does that fit into the story? I mean people
• 44:05
  Speaker 2: coming not just from other parts of the United States,
• 44:08
  Speaker 2: but actually from outside of the United States.
• 44:11
  Speaker 1: So there's two ways this factors in. So one is
• 44:13
  Speaker 1: a boring mechanical wat statistically is people who come from
• 44:18
  Speaker 1: other countries, if they come, and so it will still
• 44:23
  Speaker 1: apply by the way, today, let's say, like tomorrow morning,
• 44:26
  Speaker 1: only doctors migrate from other countries to the United States.
• 44:30
  Speaker 1: That will swell the right end of the income distribution.
• 44:34
  Speaker 1: If only unskilled workers entered, that will swell the left
• 44:38
  Speaker 1: end of the distribution. So anything that is not exactly
• 44:42
  Speaker 1: identical to the current distribution of income in the United
• 44:46
  Speaker 1: States will change in equality. So in the period we're
• 44:50
  Speaker 1: talking about, the left end ended up being swollen. So
• 44:54
  Speaker 1: people were entering at the bottom. But that's like, first
• 44:59
  Speaker 1: of all, already really telling because a Norwegian who enters
• 45:03
  Speaker 1: at the bottom of the US income distribution is still
• 45:06
  Speaker 1: better than you would have been in Norway. So there's
• 45:10
  Speaker 1: this a massive jump forum. And the thing I point
• 45:14
  Speaker 1: out is actually there's two ways you can do this.
• 45:16
  Speaker 1: You can either do something that's called removing a composition bias.
• 45:20
  Speaker 1: You want to compare the US population with the similar
• 45:24
  Speaker 1: population right, so where the left end is not allowed
• 45:28
  Speaker 1: to be swollen. That actually creates the impression that there's
• 45:31
  Speaker 1: more inequality. Once you remove it, it actually shows that
• 45:34
  Speaker 1: there's less inequality increase over the period. Or the other
• 45:39
  Speaker 1: way you can look at it is if you look
• 45:41
  Speaker 1: at the global distribution of income, American markets being so
• 45:45
  Speaker 1: dynamic reduces global inequality in the sense that it pushes
• 45:50
  Speaker 1: up people so much, not by anything that's related to
• 45:54
  Speaker 1: their skills. By the way, right, the Norwegian who came
• 45:58
  Speaker 1: from Oslo to Minnesota, and as a Canadian, I don't
• 46:02
  Speaker 1: understand why you'd move from cold to cold. I think
• 46:05
  Speaker 1: you both to Florida or something like this. But let's like,
• 46:08
  Speaker 1: I've had my first snowless winter a few years ago,
• 46:11
  Speaker 1: and I didn't know snow was optional. As a Canadians
• 46:14
  Speaker 1: like I just assumed that was always going to be there.
• 46:16
  Speaker 1: But if you think about the movement that this person makes.
• 46:20
  Speaker 1: He makes a massive income jump, and that means that
• 46:25
  Speaker 1: if you take all the people in Norway and all
• 46:27
  Speaker 1: the people in the US, him moving to the US
• 46:30
  Speaker 1: reduced inequality. But he's still the same guy. He still
• 46:33
  Speaker 1: has the same skill, the same education, the same experience,
• 46:36
  Speaker 1: the same family. Nothing has changed about him. The only
• 46:39
  Speaker 1: thing that has changed He's been brought to better institutions,
• 46:43
  Speaker 1: better property rights, better and more capital. And the result
• 46:48
  Speaker 1: is magically he's fifty sixty seventy percent richer than he
• 46:53
  Speaker 1: was had he stayed in Norway, which means that when
• 46:57
  Speaker 1: I say America, it was in egalitarian groat machine. I'm
• 47:00
  Speaker 1: still understating my case because I'm only looking at it
• 47:03
  Speaker 1: from the vantage point of an American. If I look
• 47:05
  Speaker 1: at advantage point globally, this was an even more powerful
• 47:09
  Speaker 1: poverty eradication machine than people even appreciate.
• 47:15
  Speaker 2: So if the result had been that the rich god
• 47:19
  Speaker 2: richer faster, but it would still be true that the
• 47:22
  Speaker 2: poor god richer significantly richer three times is rich. Would
• 47:26
  Speaker 2: that have would Would that have made you less happy
• 47:30
  Speaker 2: with the results of the book. I'm just of the
• 47:32
  Speaker 2: of the research. If the poor still getting you know,
• 47:36
  Speaker 2: getting less poor. Doesn't matter what the top of the
• 47:41
  Speaker 2: distribution is doing.
• 47:43
  Speaker 1: Uh from my vantage point, No, So I generally I
• 47:49
  Speaker 1: care about the absolute living standard of people, and I
• 47:51
  Speaker 1: think the ideal that we should normally strive for is
• 47:54
  Speaker 1: a high mobility society. That I am better off than
• 47:58
  Speaker 1: my parents, and my parents were better off than their parents.
• 48:00
  Speaker 1: And if I'm born in the bottom ten percent, I
• 48:03
  Speaker 1: can climb up. And the guy who is born in
• 48:06
  Speaker 1: the top one percent, if he wants to just go around,
• 48:10
  Speaker 1: fart around, waste all his fortune and return to the mean,
• 48:14
  Speaker 1: then that's his problem, and that's the society I would
• 48:18
  Speaker 1: I desire. But that argument, if I think is true
• 48:25
  Speaker 1: but does not convince, does not appeal to as many people.
• 48:29
  Speaker 1: So I think I would have been sad in the
• 48:31
  Speaker 1: sense that I don't think the book would be as appealing.
• 48:34
  Speaker 1: I think here the virtue of when I was trying this,
• 48:37
  Speaker 1: I actually had the prior that you have just stated.
• 48:40
  Speaker 1: I actually expected to show Look, the rich one percent
• 48:44
  Speaker 1: got yes, richer, but we underestimate the improvements at the bottom.
• 48:47
  Speaker 1: That's what I expected to happen. But I actually underestimated
• 48:52
  Speaker 1: even high who's a rabid free marketer, and like a
• 48:56
  Speaker 1: very optimistic guy, I undersmated how much returns had gone
• 49:03
  Speaker 1: to the very poor. In fact, in the book, when
• 49:06
  Speaker 1: I wrote the first draft, I was I couldn't believe myself.
• 49:12
  Speaker 1: So what I did is I shifted all my hypothesis
• 49:15
  Speaker 1: to the most conservative one, so I use the worst
• 49:19
  Speaker 1: price index, the one that went most against me when
• 49:22
  Speaker 1: I was talking about something called the missing poor problem,
• 49:25
  Speaker 1: so that census would not census enumerators missed a lot
• 49:29
  Speaker 1: of people who were the poorest in society. When I
• 49:33
  Speaker 1: was looking at mortality amongst the very poor, I kept
• 49:36
  Speaker 1: using systematically the worst assumptions possible to hinder my case.
• 49:41
  Speaker 1: And the thing I point out in the book is
• 49:44
  Speaker 1: relatively is made to be short and accessible to all.
• 49:47
  Speaker 1: But there's an one hundred and fifty page appendix something
• 49:50
  Speaker 1: like this where I go through the alternative hypothesis, where
• 49:54
  Speaker 1: I actually make the case that if you ease some
• 49:57
  Speaker 1: of my conservatives asumptions, you might find that actually my
• 50:03
  Speaker 1: case is even stronger than I state. So that's what's
• 50:06
  Speaker 1: because I couldn't even believe my own my own argument initially,
• 50:13
  Speaker 1: and that makes me happy, because that's it will generate
• 50:19
  Speaker 1: it at least the debate, And I'm okay if I'm
• 50:23
  Speaker 1: mildly off, because I gave myself some confidence interval around
• 50:28
  Speaker 1: which I am very confident of the of my general conclusion.
• 50:34
  Speaker 2: So to what extent is the phenomena from eighteen seventeen
• 50:38
  Speaker 2: ninety ten still occurring today? That is, to what extent
• 50:42
  Speaker 2: do we see do you think we see we're seeing
• 50:45
  Speaker 2: the same phenomena today, given that we've lost a lot
• 50:48
  Speaker 2: of the protections of property rights we've lost, you know,
• 50:51
  Speaker 2: we're much more highly regulated and more redistributive than we
• 50:54
  Speaker 2: used to be.
• 50:55
  Speaker 1: So I'm not sure I out of answer that directly,
• 51:00
  Speaker 1: but I can answer it in a series of milder ways.
• 51:05
  Speaker 1: The best one I can give is why didn't socialism
• 51:08
  Speaker 1: pick up in America the same way it did in Europe?
• 51:11
  Speaker 1: Because if you look at Europe on the eve of
• 51:13
  Speaker 1: World War One, every major European country has a significantly
• 51:18
  Speaker 1: large size socialist party. The US doesn't. And there's a
• 51:24
  Speaker 1: very famous book by Seymour, Martin Lipsett and Gary Marx.
• 51:28
  Speaker 1: I always forget if it's David Marx or Gary Mark,
• 51:30
  Speaker 1: but anyway they have it didn't happen here why socialism
• 51:34
  Speaker 1: fail in America? And their claim is, well, the American
• 51:38
  Speaker 1: constitutional system offers so many slowing safeguards that it had
• 51:44
  Speaker 1: a harder time picking up, but also that these safeguard
• 51:48
  Speaker 1: generates so much economic growth that the poor understood that
• 51:52
  Speaker 1: they were far better off than elsewhere, and not only
• 51:57
  Speaker 1: that they were far better off, but that they sensed
• 51:59
  Speaker 1: the improvement from time to time. So I think we
• 52:02
  Speaker 1: still live in the shadow of this in that sense
• 52:05
  Speaker 1: that some very bad ideas are not as able to
• 52:11
  Speaker 1: break through the American market in terms of policy implementation,
• 52:17
  Speaker 1: largely because people still understand instinctively some reflexes that are
• 52:22
  Speaker 1: transmitted through traditions that markets have worked really well at
• 52:27
  Speaker 1: generating people's upward mobility. You'll have probably someone in the
• 52:34
  Speaker 1: room who will mention a grandfather who told him that
• 52:37
  Speaker 1: he was dirt poor in southern Italy, came to the
• 52:40
  Speaker 1: United States, and now he has a flat screen TV,
• 52:44
  Speaker 1: and he's looking at it and he thinks the world is,
• 52:47
  Speaker 1: you know, could be better, But he understands the distance
• 52:51
  Speaker 1: that has been traveled relative to ancestors not far removed.
• 52:57
  Speaker 1: So I think there is that kind of TRANSMISSI that
• 53:01
  Speaker 1: that carries on in which Dan explains why certain really
• 53:04
  Speaker 1: bad ideas don't don't well cross the border from north
• 53:11
  Speaker 1: to south because some of them have are in Canada,
• 53:14
  Speaker 1: but also don't cross the Atlantic as well. So I
• 53:17
  Speaker 1: think that would be the way I would answer your question.
• 53:20
  Speaker 1: I think this period we still probably have some benefit
• 53:25
  Speaker 1: from it in terms of immunity to the what I
• 53:28
  Speaker 1: could call socialist populism. I think it has Americans, They're
• 53:33
  Speaker 1: not immune, but if we can think of immunity as
• 53:38
  Speaker 1: some dial it's not zero immunity.
• 53:44
  Speaker 2: So over the last you know, forty years, China has
• 53:48
  Speaker 2: seen a dramatic reduction in poverty. To what extent do
• 53:53
  Speaker 2: you think that what's happened there is similar to what
• 53:59
  Speaker 2: was going on in the US in eighteen seventies and
• 54:01
  Speaker 2: nineteen ten.
• 54:03
  Speaker 1: So obviously in terms of the pace of improvement, it's
• 54:07
  Speaker 1: pretty exceptional. But the big difference is the United States
• 54:15
  Speaker 1: is having this in a you know, largely open society
• 54:21
  Speaker 1: with very strongly protected property rights, whereas China is a
• 54:25
  Speaker 1: far more territarian regime. And there's some literature that I mean,
• 54:33
  Speaker 1: it's a nascent subset of the literature that points out
• 54:36
  Speaker 1: that liberal reforms. Even in like modest liberal reforms, they
• 54:41
  Speaker 1: can get reversed very very easily in countries with you know,
• 54:48
  Speaker 1: mild to moderately acceptable institutions, let alone horrible institutions like China,
• 54:55
  Speaker 1: And it kind of fits a dictator who liberalized. This
• 55:00
  Speaker 1: can also be a dictator who deliberalizes, which is and
• 55:04
  Speaker 1: this will freak out some free market people when I
• 55:07
  Speaker 1: say this, but when we look at Chile, we have
• 55:09
  Speaker 1: some ways to test the empirical effect with some causal
• 55:14
  Speaker 1: methods of Pinochet's regime, and we don't find effect of
• 55:18
  Speaker 1: his reforms until he leaves office. But it's not because
• 55:24
  Speaker 1: he leaves office that's important, because there's a constitutional reform
• 55:27
  Speaker 1: that creates safeguards, that creates checks and balances, and now
• 55:31
  Speaker 1: people know that whatever the reforms are, the dictator can
• 55:35
  Speaker 1: just turn around. So it's also that these kind of regimes,
• 55:39
  Speaker 1: because they have these features of discretionary powers to politicians,
• 55:44
  Speaker 1: any reform will not give its full benefits. So in
• 55:49
  Speaker 1: a way, what I'm wondering when you're talking about China
• 55:51
  Speaker 1: is kind of the same thing as with African as
• 55:53
  Speaker 1: American for the US is how much more potential would
• 55:58
  Speaker 1: there have been if China had been and we're going
• 56:02
  Speaker 1: very extreme counterfactual here, but had been a liberal democracy
• 56:07
  Speaker 1: with strongly protected property rights, checks and balances, divided powers,
• 56:16
  Speaker 1: market preserving federalism, where different provinces can compete with each
• 56:20
  Speaker 1: other to attract investment, capital workers. I wonder how much
• 56:26
  Speaker 1: less poverty did be in the world today. Hence my
• 56:30
  Speaker 1: returns to my core points. Markets are inherently egalitarian. The
• 56:34
  Speaker 1: more you give them room to work, the more they
• 56:37
  Speaker 1: will generate improvements that will matter dis proportionately for people
• 56:41
  Speaker 1: at the bottom.
• 56:43
  Speaker 2: So tell us a little bit about when the book's
• 56:45
  Speaker 2: coming out, and how people can get it when it
• 56:47
  Speaker 2: comes out, and all the good marketing stuff.
• 56:50
  Speaker 1: So I sent the last version today to the University
• 56:55
  Speaker 1: of Chicago Press.
• 56:56
  Speaker 2: So it's.
• 57:00
  Speaker 1: So it's that they decide the date. I forget exactly
• 57:04
  Speaker 1: which date they said, but it should be I think
• 57:07
  Speaker 1: at the beginning of the second half of twenty twenty six,
• 57:10
  Speaker 1: if everything goes well. But I don't want to hold
• 57:13
  Speaker 1: them to a date because they have, like they don't
• 57:15
  Speaker 1: want to cannibalize their own sales. So but it is
• 57:19
  Speaker 1: coming out in twenty twenty six, that one I'm willing
• 57:21
  Speaker 1: to bet my shirt on, although no one would want
• 57:25
  Speaker 1: to see me going shirtless. But so it's coming out
• 57:28
  Speaker 1: with University of Chicago Press.
• 57:32
  Speaker 2: Title The Great Enrichment, The Great Enrichment.
• 57:38
  Speaker 1: So I'm you're actually, by the way, the first I
• 57:41
  Speaker 1: talked to since I handed in the final draft.
• 57:44
  Speaker 2: Okay, that's great, but congratulations, that's a terrific achievement. Is that?
• 57:50
  Speaker 2: Is that from Didri's Uh? The great enrichment?
• 57:55
  Speaker 1: Is that?
• 57:56
  Speaker 2: Is that a did she coin that?
• 57:58
  Speaker 1: So she has that term, but the title is not mine.
• 58:04
  Speaker 1: What I wanted to do was the first egalitarian enrichment,
• 58:08
  Speaker 1: and the editor explained some technical reasons why it doesn't work.
• 58:15
  Speaker 1: So he proposed a series of alternative and I think,
• 58:19
  Speaker 1: as a wink wing to Dedre McCluskey, I thought that
• 58:24
  Speaker 1: was probably the best title. Uh so it's the one
• 58:30
  Speaker 1: in the contract that we settled on. Good even though
• 58:34
  Speaker 1: it wasn't my first choice. But I think that's okay
• 58:38
  Speaker 1: because the more I'm thinking about it, the more I
• 58:40
  Speaker 1: like my second choice more. Then maybe it's post factor
• 58:44
  Speaker 1: rationalization or cognitive dissidents in subway, but I'd like to
• 58:49
  Speaker 1: get more and more.
• 58:50
  Speaker 2: It's not clear that the author has any insight into
• 58:54
  Speaker 2: what the title should be, given that the title is
• 58:56
  Speaker 2: there for marketing purposes, and you know, as is, I
• 59:00
  Speaker 2: don't know how good we are marketing.
• 59:02
  Speaker 1: I would tend to agree, and that would fit with
• 59:06
  Speaker 1: the fact that people who have been doing this for
• 59:10
  Speaker 1: twenty years probably have some knowledge that I do not,
• 59:14
  Speaker 1: is my assumption. So I can at least my strategies.
• 59:18
  Speaker 1: I ask them the questions of why, and generally at
• 59:21
  Speaker 1: least the one I'm dealing with. He's a great guy,
• 59:24
  Speaker 1: Chad Zipperman. He gives me very good answers, and I'm like, oh, yeah,
• 59:28
  Speaker 1: that makes a lot of sense.
• 59:30
  Speaker 2: Specialization, as we said, the vision of labor wooks. All right,
• 59:36
  Speaker 2: thanks Vincent, this has been fascinating. We've got some questions
• 59:40
  Speaker 2: from the audience, if you don't mind taking some of them.
• 59:43
  Speaker 2: Some of them I'm on the fun side and less serious.
• 59:48
  Speaker 2: So let's see what we have. Let's start with Shasbad,
• 59:52
  Speaker 2: who's got a Star Trek question for you, says, the
• 59:57
  Speaker 2: economics in Star Trek have been you have ambiguous. Sometimes
• 1:00:02
  Speaker 2: they say they don't even use money. Wouldn't it be
• 1:00:05
  Speaker 2: impossible to have a civilization spanning hundreds of planets? Without
• 1:00:09
  Speaker 2: using money of some kind, no matter how advanced they are.
• 1:00:15
  Speaker 1: So I think we're people will try to put a
• 1:00:18
  Speaker 1: lot of coherence on a fictional edifice because there is
• 1:00:23
  Speaker 1: I can't believe I'm going to have this discussion and
• 1:00:25
  Speaker 1: it will peg my status as a nerd. There are
• 1:00:28
  Speaker 1: episodes in the Space nine where we understand that they
• 1:00:31
  Speaker 1: have credits, and there's I think a few episodes so
• 1:00:34
  Speaker 1: they have latinum bars in the Space nine. They have
• 1:00:38
  Speaker 1: some credits in the next generation, so there's mention of this.
• 1:00:45
  Speaker 1: Will some people seem to use some type of currency. Now,
• 1:00:52
  Speaker 1: how much of this is like the initial creator Gene
• 1:00:56
  Speaker 1: roden Berry's weird politics that just get care and some
• 1:01:00
  Speaker 1: people like it. However, there is one thing that's that
• 1:01:07
  Speaker 1: I always thought was interesting is if you compare the
• 1:01:10
  Speaker 1: economics of Star Wars with those of Star Trek, there's
• 1:01:13
  Speaker 1: no productivity growth. As the Star Wars universe, they're the
• 1:01:17
  Speaker 1: same technologies over a long period of time, they don't
• 1:01:21
  Speaker 1: change that much, whereas Star Trek looks like a far
• 1:01:23
  Speaker 1: more dynamic world. Now, as an economist, if I see this,
• 1:01:27
  Speaker 1: my assumption is that to some degrees, markets must be
• 1:01:31
  Speaker 1: much more functional in Star trek than in Star Wars,
• 1:01:35
  Speaker 1: because you wouldn't see that much growth without some degree
• 1:01:39
  Speaker 1: of well functioning markets.
• 1:01:41
  Speaker 2: And for that they would need something that serves as money.
• 1:01:44
  Speaker 1: Something that serves as money is something that serves to
• 1:01:47
  Speaker 1: coordinate economic activity, coordinate very complex exchanges, and also very
• 1:01:52
  Speaker 1: secure property rights somehow. Now they don't go into that,
• 1:01:55
  Speaker 1: but by virtue of what the universe gives me in
• 1:01:59
  Speaker 1: terms of information. But again, it's a fictional world, so
• 1:02:03
  Speaker 1: let's not try to. If we're going fictional world, we
• 1:02:06
  Speaker 1: could talk about socialism for hours.
• 1:02:10
  Speaker 2: True. True, Well you made chasbut's day. I think though,
• 1:02:13
  Speaker 2: because you know you gave you a much more nod
• 1:02:16
  Speaker 2: answer than I could have, So I think that's good.
• 1:02:20
  Speaker 2: All right? Lincoln asks what is a bigger hood of ts?
• 1:02:23
  Speaker 2: Economic growth? Regulations, attack and spending policy both a bad
• 1:02:27
  Speaker 2: But I'm I'm which one do you think.
• 1:02:32
  Speaker 1: Regulation? By far? So, when the electoral campaign was happening,
• 1:02:38
  Speaker 1: I had this puzzle that I put by all my
• 1:02:41
  Speaker 1: fellow economists just to see how they would react, and said,
• 1:02:44
  Speaker 1: let's say you have to take ten percent tariffs, but
• 1:02:48
  Speaker 1: you get something in return, one thing in return? What
• 1:02:54
  Speaker 1: would it be? So it doesn't. Maybe you can think
• 1:02:56
  Speaker 1: it doesn't compensate fully, but you'll give me something that compensation.
• 1:03:00
  Speaker 1: It's the most right by definition. And the one that
• 1:03:04
  Speaker 1: came out very frequently were a mixture of the following
• 1:03:08
  Speaker 1: removing certificate of needs regulation and healthcare which basically limit competition.
• 1:03:14
  Speaker 1: They basically allow incumbent hospitals or other types of businesses
• 1:03:19
  Speaker 1: if it applies to them, to vote on whether a
• 1:03:22
  Speaker 1: new hospital should enter the market, which is I would
• 1:03:26
  Speaker 1: always yeto opponent entering my own market, but that's never
• 1:03:30
  Speaker 1: understood why this is necessary, So that came up. Housing
• 1:03:34
  Speaker 1: regulations came up very frequently as well, largely because of
• 1:03:38
  Speaker 1: by the way of all the regulations we have in
• 1:03:40
  Speaker 1: the US, this is probably the most depressing for income
• 1:03:45
  Speaker 1: mobility because you're locking high opportunity areas from people who
• 1:03:50
  Speaker 1: are in low opportunity areas but cannot get a wage
• 1:03:54
  Speaker 1: jump sufficient enough to compensate the rent increase. So what
• 1:03:57
  Speaker 1: you're doing is creating essentially parallel markets rather than a
• 1:04:01
  Speaker 1: national market, which is a really bad thing. So that
• 1:04:05
  Speaker 1: came up very frequently, And then there was a collection
• 1:04:10
  Speaker 1: of either removing some FDA regulation for food energy regulation,
• 1:04:17
  Speaker 1: regulation on nuclear energy as well, But rarely did people
• 1:04:23
  Speaker 1: say reduce government spending by ten percent. And the reason
• 1:04:27
  Speaker 1: for this is the literature on the welfare state suggests
• 1:04:32
  Speaker 1: that of all the things the States does, it's not
• 1:04:37
  Speaker 1: the worst, and it's there's bad ways of doing it,
• 1:04:44
  Speaker 1: but when you compare to other alternatives. So, for example,
• 1:04:47
  Speaker 1: if you were let's just go full Milton Freeman here,
• 1:04:50
  Speaker 1: take the welfare state, replace it by a negative income tax,
• 1:04:53
  Speaker 1: which is a variant of the basic income, it's actually
• 1:04:57
  Speaker 1: would probably limit all lot of the damages of the
• 1:05:01
  Speaker 1: welfare state. And it's not clear whether that would be
• 1:05:03
  Speaker 1: like a dramatic bad or super great positive, or if
• 1:05:08
  Speaker 1: you had more means targeted measures. So the welfare state
• 1:05:12
  Speaker 1: literature is complex to navigate because sometimes you could get
• 1:05:18
  Speaker 1: some improvements by making some reforms, but even like the
• 1:05:23
  Speaker 1: very damaging thing is relatively small when again you compare
• 1:05:28
  Speaker 1: with things like housing regulation, daycare regulations, certificate of the
• 1:05:32
  Speaker 1: barriers to entry, tariffs. And this is the way I
• 1:05:38
  Speaker 1: always think about it. I still don't remember who told
• 1:05:41
  Speaker 1: me this, but I still think it's true. There's three
• 1:05:43
  Speaker 1: horses in a race. There's the Adam Smith horse, There's
• 1:05:46
  Speaker 1: the Joseph Schumpeter horse. And there's the size of government horse.
• 1:05:51
  Speaker 1: You want the first two to run faster, right, The
• 1:05:55
  Speaker 1: other one can keep spending as much as he wants
• 1:05:57
  Speaker 1: as long as he doesn't drag the other ones. He
• 1:06:00
  Speaker 1: can actually be dragged by the other ones. But it's
• 1:06:04
  Speaker 1: the thing that slows down the other two is regulation
• 1:06:09
  Speaker 1: closed markets. So hence, why if you ask me, in
• 1:06:13
  Speaker 1: a world where we have to prioritize and I can't
• 1:06:16
  Speaker 1: get my ideal set of policies, take a chainsaw or
• 1:06:20
  Speaker 1: run through the zoning code, or run through the regulatory
• 1:06:23
  Speaker 1: codes the Federal Gazette randomly pick fifty percent of the
• 1:06:27
  Speaker 1: pages to rip off. You'll probably break some eggs, but
• 1:06:30
  Speaker 1: you'll probably make a lot more omelets than you would expect.
• 1:06:35
  Speaker 1: So yeah, that would be my answer.
• 1:06:38
  Speaker 2: I live in Puerto Rico, so I have a soft
• 1:06:39
  Speaker 2: spot for the Jones Act, so I.
• 1:06:43
  Speaker 1: Would put it in my list as pretty damaging. In fact,
• 1:06:45
  Speaker 1: I was a peer reviewer for and now I mean
• 1:06:49
  Speaker 1: I shouldn't disclose this normally, but I was a peer
• 1:06:52
  Speaker 1: reviewer for someone who made a study on the Jones
• 1:06:56
  Speaker 1: Act and saw the damages as being actually even more
• 1:06:59
  Speaker 1: substantial than I expected. I think it came out the
• 1:07:03
  Speaker 1: close alone to I think point three percent of US GDP,
• 1:07:08
  Speaker 1: which is again shouldn't like for people all point three
• 1:07:12
  Speaker 1: point three is huge? Yeah, all right? Point three percent
• 1:07:16
  Speaker 1: for one one is I'm sorry, this is I just
• 1:07:20
  Speaker 1: want to point out that. And I had to go
• 1:07:22
  Speaker 1: through that paper like that that seems big, and the
• 1:07:24
  Speaker 1: guy was actually down playing it. So I was this
• 1:07:28
  Speaker 1: is it's it's it's a big deal.
• 1:07:30
  Speaker 2: Yep. Yeah. Lincinos asks why do you think there was
• 1:07:35
  Speaker 2: never Silicon Valley type boom in the EU or Canada.
• 1:07:40
  Speaker 2: Some companies have made modest improvements like Spotify for music
• 1:07:43
  Speaker 2: or Shopify for e commerce, but no major innovations equivalent
• 1:07:47
  Speaker 2: to Facebook, Amazon, Google, Nvidia.
• 1:07:52
  Speaker 1: Well, there's a I don't know the answer to that,
• 1:07:58
  Speaker 1: but there is a semi answer that I can give,
• 1:08:01
  Speaker 1: so I'll be cautious. Here is one thing that's very
• 1:08:05
  Speaker 1: at least for the two examples I have in mind
• 1:08:07
  Speaker 1: are for my native Quebec and France, is very often
• 1:08:11
  Speaker 1: when a sector tries to innovate something in either of
• 1:08:14
  Speaker 1: those places, the state very often comes in right after
• 1:08:18
  Speaker 1: and say we want to participate, and then what you
• 1:08:20
  Speaker 1: get is a flurry of political entrepreneurs who are there
• 1:08:25
  Speaker 1: because the state is signal that it will dispense subsidies
• 1:08:29
  Speaker 1: and privileges, and then you get a lot of noise
• 1:08:32
  Speaker 1: between the true innovator and the political entrepreneur. The person
• 1:08:39
  Speaker 1: who is really good that she's moosing and dining the politicians.
• 1:08:43
  Speaker 1: So that would be my answer is very often this
• 1:08:47
  Speaker 1: is what happens. But again, the two examples I have
• 1:08:50
  Speaker 1: in mind of this is France and Quebec. So I'm you,
• 1:08:56
  Speaker 1: I don't know enough about this for example in Germany
• 1:09:00
  Speaker 1: or Italy or the UK. However I could. I don't
• 1:09:04
  Speaker 1: know why I didn't think about this. But Ireland, Ireland
• 1:09:07
  Speaker 1: has a massive tax sector and I don't think it
• 1:09:11
  Speaker 1: planned to have one. What it did is it massively
• 1:09:13
  Speaker 1: cut corporate taxes. Yeah, so I don't know why I
• 1:09:16
  Speaker 1: didn't think of that as my first answer. Yes, Europe
• 1:09:19
  Speaker 1: could have this, it could just do what Ireland did.
• 1:09:23
  Speaker 2: But it is interesting that Ireland's tech sector is mainly
• 1:09:26
  Speaker 2: American driven. It's not innovative in the same sense as
• 1:09:33
  Speaker 2: silicon value is. It's driven around support for American companies
• 1:09:37
  Speaker 2: that are based there because they based it, because they
• 1:09:39
  Speaker 2: get corporate tax break.
• 1:09:43
  Speaker 1: So some people say that, but I've recently read a
• 1:09:46
  Speaker 1: paper that uses one of the causal method I was
• 1:09:49
  Speaker 1: reading recently that tries to disentangle different things about Ireland.
• 1:09:54
  Speaker 1: And there is genuine growth and investment boom that happened
• 1:09:59
  Speaker 1: in the pendant of the foreign capital flow, So there is.
• 1:10:04
  Speaker 1: It seems like it had spillovers on otter sectors of
• 1:10:07
  Speaker 1: the Irish economy, So it's I think this is there
• 1:10:12
  Speaker 1: might there's some of it is sufficiently true that the
• 1:10:15
  Speaker 1: pooh poohing that people make of the Irish policy sounds plausible,
• 1:10:21
  Speaker 1: but it's also pooh poohing. It's there's gender the reforms
• 1:10:25
  Speaker 1: were genuinely positive.
• 1:10:29
  Speaker 2: Andrews says, what do you think of the modern pessimistic
• 1:10:32
  Speaker 2: attitude of many Americans? You know, the life was better
• 1:10:37
  Speaker 2: than the fifties kind of attitude, Given how good American
• 1:10:40
  Speaker 2: stand up living is in historical tombs.
• 1:10:45
  Speaker 1: I think this speaks to expectations versus reality. So it
• 1:10:50
  Speaker 1: could be that people expected year in, year out five
• 1:10:54
  Speaker 1: percent growth, right, let's exaggerate, and they get two percent.
• 1:10:58
  Speaker 1: Now two percent is a big deal. That means that
• 1:11:01
  Speaker 1: every thirty five years more or less you're living standard increases,
• 1:11:05
  Speaker 1: so it's not it doubles, so it's not I take
• 1:11:11
  Speaker 1: that like I take an extra two percent. But if
• 1:11:13
  Speaker 1: you're expecting five and you're getting two five means you're
• 1:11:17
  Speaker 1: getting an improvement pretty much every ten years, like ten issues. Ye, yeah,
• 1:11:23
  Speaker 1: you're getting it. Like like fifteen years, I think is
• 1:11:25
  Speaker 1: the number I have in the back of my mind,
• 1:11:29
  Speaker 1: like I'm not going to do mental calculation on the
• 1:11:31
  Speaker 1: spot this might happen despite having a PhD in the matter.
• 1:11:34
  Speaker 1: I can't. I can't do fifteen percent at the bar.
• 1:11:37
  Speaker 1: But if you're expecting so much more and you're getting
• 1:11:41
  Speaker 1: far less, even if it's a lot, people are disappointed.
• 1:11:45
  Speaker 1: And I think this is where a lot of the
• 1:11:47
  Speaker 1: nostalgia comes around. These people's baselines seem to have been foiled,
• 1:11:53
  Speaker 1: and I kind of get the feeling. But I think also, like,
• 1:12:00
  Speaker 1: don't confuse levels with trends. Right, level wise, we are
• 1:12:07
  Speaker 1: so much better off. I'm sorry, Like, and this is
• 1:12:10
  Speaker 1: just a story. I keep telling to people how much
• 1:12:14
  Speaker 1: people don't appreciate how wealthy the US is. So when
• 1:12:20
  Speaker 1: I crossed the border, we moved to the US, my
• 1:12:22
  Speaker 1: wife and I. My wife was pregnant with our second son,
• 1:12:26
  Speaker 1: and the pregnancy went in the last the last day
• 1:12:30
  Speaker 1: of the pregnancy, things went very poorly and there was
• 1:12:34
  Speaker 1: a risk that I am, either my second son or
• 1:12:38
  Speaker 1: my wife would have life was on the line. And
• 1:12:45
  Speaker 1: the thing that was fascinating is that in the hospital
• 1:12:48
  Speaker 1: room there was a very amazing large amount of resources
• 1:12:55
  Speaker 1: ready to go for emergency procedures that were entirely different
• 1:12:59
  Speaker 1: than what was happening. And I remember the birth of
• 1:13:03
  Speaker 1: our first son, who was born in Canada, where there
• 1:13:06
  Speaker 1: was far less resources, the material was less impressive. It's
• 1:13:10
  Speaker 1: not that people were lazy, it's just you could see
• 1:13:13
  Speaker 1: what the difference between my native Quebec and my adopted Virginia.
• 1:13:19
  Speaker 1: The difference in income between them is roughly forty thousand
• 1:13:22
  Speaker 1: dollars US. You could see what the difference in wealth
• 1:13:27
  Speaker 1: did in terms of a deeply personal outcome. So when
• 1:13:32
  Speaker 1: I say people don't understand the difference in levels, you
• 1:13:37
  Speaker 1: don't like. The United States is far better off than
• 1:13:39
  Speaker 1: it was in the past on dimensions we failed to appreciate,
• 1:13:44
  Speaker 1: and is still far better off than a lot of
• 1:13:46
  Speaker 1: places that we also think is developed. Don't confuse that
• 1:13:53
  Speaker 1: with thinking that we are under the potential that we have.
• 1:13:56
  Speaker 1: I think we are below potential. But that's not the
• 1:13:59
  Speaker 1: same same thing as saying, well, this is not great.
• 1:14:03
  Speaker 2: Yeh HUPA. Campbell said, despite a horrible anti growth political climate,
• 1:14:11
  Speaker 2: do you foresee a stock market growth and quality of
• 1:14:15
  Speaker 2: life increases from AI in the tech sector.
• 1:14:20
  Speaker 1: Yes, I actually tend to believe that. I mean, I'll
• 1:14:26
  Speaker 1: make a conditional statement. So this is based on a
• 1:14:28
  Speaker 1: paper with one of my graduate students, Pradior Sharma, who
• 1:14:32
  Speaker 1: if ever someone is listening and is an academic employer
• 1:14:36
  Speaker 1: and is looking to hire him, and you've seen a
• 1:14:38
  Speaker 1: CV on your pile, please hire him. He's a really
• 1:14:41
  Speaker 1: great student. We wrote a paper where we looked at
• 1:14:44
  Speaker 1: the effect of industrial automation on income mobility across generations,
• 1:14:51
  Speaker 1: and there was a lot of people showing that where
• 1:14:55
  Speaker 1: new technologies emerged fast, income mobility went down. And what
• 1:14:59
  Speaker 1: we pointed out is is actually this is entirely conditional
• 1:15:02
  Speaker 1: on the degree of occupational licensing on these markets. The
• 1:15:06
  Speaker 1: more occupational licensing you have, the more frictions you put
• 1:15:09
  Speaker 1: for people to move to new jobs and also to
• 1:15:12
  Speaker 1: allow prices of certain services to fall so that people
• 1:15:16
  Speaker 1: don't get higher real wages from prices falling, but you're
• 1:15:21
  Speaker 1: also not getting people being able to relocate across industries.
• 1:15:26
  Speaker 1: So we point out that most of the effect of
• 1:15:28
  Speaker 1: new technologies that people tend to perceive as regressive are
• 1:15:34
  Speaker 1: actually conditional on bad policy. So here I could see
• 1:15:39
  Speaker 1: ways in which AI could be regressive. However, I do
• 1:15:43
  Speaker 1: not believe it is inherently regressive. We can have as
• 1:15:48
  Speaker 1: much improvement as we allow it to be at the bottom.
• 1:15:53
  Speaker 1: The more we try to put hurdles on people's ability
• 1:15:56
  Speaker 1: to adapt, the more likely it is that things like
• 1:15:59
  Speaker 1: AI could become even more disruptive than they are enhancing. Yep.
• 1:16:06
  Speaker 2: So Lincoln, as a question about education is does education
• 1:16:08
  Speaker 2: really colorate economic and wealth growth. We have a majority
• 1:16:12
  Speaker 2: of young people have college degrees, and almost everyone graduated
• 1:16:15
  Speaker 2: high school, but we grow at a slow rate compared
• 1:16:18
  Speaker 2: to you know, fifty years ago, sixty years ago, and
• 1:16:21
  Speaker 2: especially compared to the guilded age.
• 1:16:25
  Speaker 1: So I have an office neighbor who Brian Kaplan would
• 1:16:31
  Speaker 1: say that you are entirely correct. I am not as
• 1:16:36
  Speaker 1: sanguine as him on this. I would point out that
• 1:16:42
  Speaker 1: from very low level of education, some improvements in education
• 1:16:46
  Speaker 1: is going to have huge effect. But if everybody's already
• 1:16:49
  Speaker 1: educated at one unit, increase in years of schooling is
• 1:16:54
  Speaker 1: not going to have a huge effect. So we're probably
• 1:16:56
  Speaker 1: in the very, very strongly increasing marginal returns of education
• 1:17:03
  Speaker 1: in rich country, which is probably what you're describing. But
• 1:17:07
  Speaker 1: there's also a part of this that we don't allow
• 1:17:10
  Speaker 1: enough markets in education. One of the things I pointed
• 1:17:14
  Speaker 1: out in the book is that, and I was really
• 1:17:18
  Speaker 1: happy to put that in, and it's one of my
• 1:17:20
  Speaker 1: next research agendas. A lot of what people point out
• 1:17:26
  Speaker 1: as being a galletarian in that period is the rise
• 1:17:28
  Speaker 1: of elementary schooling in the United States, and there's a
• 1:17:31
  Speaker 1: big rise of literacy rates. And I point out that
• 1:17:34
  Speaker 1: while this is true, there was a lot of private
• 1:17:38
  Speaker 1: complements that existed on the side that improved the efficacy
• 1:17:42
  Speaker 1: of whatever the public sector was doing. So, for example,
• 1:17:44
  Speaker 1: where Catholic schools existed at parochial schools, parochial schools had
• 1:17:50
  Speaker 1: one effect as first of all, Catholics didn't send their
• 1:17:52
  Speaker 1: kids to public school but still pay the taxes, so
• 1:17:55
  Speaker 1: they allowed more funding for the other kids. But more importantly,
• 1:17:58
  Speaker 1: they created competition on some margin, so schooling governance was
• 1:18:06
  Speaker 1: a bit better. And there's a great historian, Richard Gross,
• 1:18:09
  Speaker 1: who wrote a very good book. It's a more qualitative
• 1:18:12
  Speaker 1: than quantitative, and this is where I want to bring
• 1:18:14
  Speaker 1: my research is trying to quantify some of his points.
• 1:18:16
  Speaker 1: Is he actually points out that where there was that competition,
• 1:18:20
  Speaker 1: public schools were better by virtue of the contrast and
• 1:18:25
  Speaker 1: the ability of people to defect between schools. And the
• 1:18:27
  Speaker 1: other thing I point out is there was a strong
• 1:18:30
  Speaker 1: and vigorous market in correspondence schooling in that time, and
• 1:18:34
  Speaker 1: that meant schooling for adults who had already left school
• 1:18:39
  Speaker 1: and generally people who would have had a higher cost
• 1:18:42
  Speaker 1: of schooling in terms of foregone income than everybody else.
• 1:18:47
  Speaker 1: And so I try to point out in the book
• 1:18:49
  Speaker 1: that a lot of what people assigned to governments in
• 1:18:52
  Speaker 1: terms of the egalitarian and Richmond actually was even more
• 1:18:56
  Speaker 1: effective because there was markets working around what's happening. Take
• 1:19:01
  Speaker 1: that for today. Imagine if we allow just vouchers and
• 1:19:05
  Speaker 1: people moving around between schools and letting people experiment with
• 1:19:09
  Speaker 1: methods of teaching. Like, there's something I would love to
• 1:19:13
  Speaker 1: do as a university is offer a VA and economics
• 1:19:16
  Speaker 1: that takes a year where every week you get a
• 1:19:20
  Speaker 1: one week intense course in Principles one and a one
• 1:19:23
  Speaker 1: week intense course and Principles two. And it's a one
• 1:19:26
  Speaker 1: year and it's intense. There's no break, there's classes on weekend.
• 1:19:29
  Speaker 1: The teacher teaches the whole year, all the set of content.
• 1:19:31
  Speaker 1: Once he's done, he takes a year off, right, But
• 1:19:34
  Speaker 1: it's an intense thing, and you don't lose three years
• 1:19:36
  Speaker 1: of income. Some people would be adequate for this. Some
• 1:19:39
  Speaker 1: people like the three years. And the thing is is
• 1:19:42
  Speaker 1: that when you have more and more government intervention, there's
• 1:19:45
  Speaker 1: weird ways in which you end up with an overly
• 1:19:48
  Speaker 1: standardized product that is two uniform eyes, and people don't
• 1:19:52
  Speaker 1: try to experiment on the formula. And I think a
• 1:19:54
  Speaker 1: lot of what you might be describing, I think it's
• 1:19:57
  Speaker 1: Lincoln who asked the question. I think what Lincoln is
• 1:19:59
  Speaker 1: asking here is maybe a part of this is this
• 1:20:02
  Speaker 1: decreasing marginal return I mentioned earlier, but also this lack
• 1:20:06
  Speaker 1: of ability of letting markets try shit out.
• 1:20:09
  Speaker 2: Yep, all right, we have let one last question from Andrew.
• 1:20:14
  Speaker 2: He says, how do markets work as well as they do?
• 1:20:16
  Speaker 2: Still do? Given them out of government intervention? In the
• 1:20:20
  Speaker 2: economy today.
• 1:20:23
  Speaker 1: That is a story. If I had the answer for this,
• 1:20:27
  Speaker 1: I'd be very happy to have one. However, I can't.
• 1:20:32
  Speaker 1: I can't help but being amazed at how well markets
• 1:20:36
  Speaker 1: keep working despite the amount of regulatory burdens we put
• 1:20:44
  Speaker 1: in people's way. I think it's it's a testimony to then.
• 1:20:51
  Speaker 1: So I had my Like every libertarian, it usually starts
• 1:20:54
  Speaker 1: with ain Ran. So I had my rand my Ranyan
• 1:20:58
  Speaker 1: moment when I was younger. But I still kept this
• 1:21:00
  Speaker 1: idea that the exercise of reason is a very very
• 1:21:08
  Speaker 1: powerful tool. And someone who's dedicating the exercise of reason
• 1:21:12
  Speaker 1: in the pursuit of wealth creation is an incredible, incredible machine.
• 1:21:20
  Speaker 1: So I think that might be why you're getting this.
• 1:21:24
  Speaker 1: Markets are still working very well, it could work even better.
• 1:21:28
  Speaker 1: But the exercise of reason channeled by the quest for
• 1:21:32
  Speaker 1: profit is an exceptional engine of wealth creation. And I'm
• 1:21:39
  Speaker 1: still amazed, despite all the sand in the machine, how
• 1:21:42
  Speaker 1: well the machine works.
• 1:21:44
  Speaker 2: That is a great place to end. This is great,
• 1:21:48
  Speaker 2: This was fun, Good luck with the book.
• 1:21:51
  Speaker 1: Thank you very much.
• 1:21:52
  Speaker 2: Absolutely, have a great night. Bye, guys. Shall see you
• 1:21:55
  Speaker 2: guys tomorrow and Vincent, hopefully we'll meet in push in
• 1:21:59
  Speaker 2: one of these days
• 1:22:00
  Speaker 1: I hope so too good, right mhm