Latest / The Capitalism and Freedom in the Twenty-First Century Podcast / Long-run Economic and Political Trends, Schools of Economic Thought, and Economics Education

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Long-run Economic and Political Trends, Schools of Economic Thought, and Economics Education · The Capitalism and Freedom in the Twenty-First Century Podcast

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>> Jon Hartley: This is the capitalism and freedom in the 21st century podcast where
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we talk about economics, markets, and public policy.
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I'm John Hartley, your host.
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Today I'm joined by Tyler Cowen, who is a professor of economics at
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George Mason University, the faculty director of the Mercatus center,
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co-founder of the popular Marginal Revolution blog with Alex Tabarrok,
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a Bloomberg opinion columnist, author of several books,
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including an economics textbook.
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He's co founder of Marginal Revolution University, co founder of
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Emergent Ventures, a fellowship and grant program at the Mercator Center funded by
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the Thiel Foundation that seeks to fund zero-to-one ideas.
1:17
Welcome.
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>> Tyler Cowen: Hello, happy to be here.
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Thank you, John.
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>> Jon Hartley: So I wanna first get into how you first got interested in economics.
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You grew up in New Jersey.
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You did your undergrad at George Mason University.
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You got your PhD in economics from Harvard under the the great Thomas Schelling, and
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then you came back to George Mason to join the economics faculty.
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How did all this interest in economics start?
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>> Tyler Cowen: When I was 13 years old,
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I decided that I wanted to start to learn both philosophy and economics.
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So I started taking trips to the River Vale Public Library in northern
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New Jersey, and I took out the different books that I could at the same time,
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my father had been a subscriber to something called the Freeman,
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which comes from foundation for economic education, and that was about economics.
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I mean, even as a 13-year-old, I found that too boring.
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I wouldn't say I was attracted by the Freemen.
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It seemed too simple to me, but it nonetheless was a thing that showed me
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there was a world out there where people discussed economics.
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So I started reading a lot of books also, again in philosophy.
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At the same time in philosophy,
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Plato made the strongest impression on me in economics, Milton Friedman,
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capitalism and freedom, and also the Ayn Rand book, Capitalism, the Unknown Ideal.
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Her fiction I was never that much into.
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And I don't really think she's very correct on matters of abstract philosophy,
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but her vision of capitalism as a system where people produce things and
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those people should have high status, that attracted me immensely.
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>> Jon Hartley: Fascinating, it's interesting because I think there's very
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few libertarians these days that sort of Count Milne Friedman as a big influence.
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I feel like it's almost always Hayek or Mises.
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That's fascinating, just in terms of- I read Hayek when I was 14,
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individualism and economic order, and that was a huge influence.
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>> Tyler Cowen: But I did read Milton Friedman first.
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>> Jon Hartley: But you were a bigger Friedman fan.
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>> Tyler Cowen: Well, I don't know about bigger.
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Hayek to me did seem like the deeper thinker, but Friedman was more practical,
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and I had the sense always with Hayek, there's some amount of B's in there,
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which maybe it's b's you might agree with, but it's a little too Germanic and
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metaphysical at times.
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And Friedman never made that mistake.
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And I just kept on reading.
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So I read Adam Smith, probably, I was 14, read a lot of classical,
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early neoclassical economics.
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So my own learning of economics, in a funny way,
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it sort of follows the path of history of thought a fair amount.
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And what most people learn in graduate school came to me really quite late.
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So I rather intuitively can think like an earlier economist in a way that's
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extremely unusual today.
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>> Jon Hartley: And so you had an early interest in free market economists,
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and that led you to George Mason as an undergrad.
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At what point did you know that you want to do an economics PhD?
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>> Tyler Cowen: I think by 14 I was convinced I was going to be an economist.
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Philosophy seemed too impractical and that there was not enough progress,
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maybe no real answers.
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So I guess by 14, and the first textbook I read was Paul,
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the economic way of thinking.
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Then I read Alshon and Allen University economics.
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Somehow I got a copy of that, maybe from the same library, and
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that just put me on a pretty consistent track.
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And again, this is the 1970s.
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So in the 1970s, it's very easy to grow up and think, well,
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all the free market ideas are true.
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You know, the issues that were the issues then there were very clear,
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simple cases for free market ideas, like inflation was too high, marginal tax rates
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were too high, labor unions could screw up great Britain, go on down the list.
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Someone grows up today, well,
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there's climate change, whatever you think of that.
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It's like very complicated, right?
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You don't just hear climate change and
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think, I've got to be a free market economist.
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But the issues of the 70s were tailor-made for that kind of thinking.
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Communism was around and rampant and quite terrible.
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And you thought, well, we wanna future world where there's no more communism,
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of course, no more central economic planning.
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>> Jon Hartley: That's fascinating.
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Well, and I mean, amazing, I mean, it seems like, trivial,
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I'm sure to yourself at the time.
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But I guess, I think back the 70s, I mean, there were even those in
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Richard Nixon's administration who were advocating for price controls.
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And I guess maybe it was obvious in certain corners.
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But I wonder even then, I feel like it wasn't maybe until the Reagan
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revolution that sort of free market ideas became part of the mainstream or
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I could be totally wrong here.
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I wasn't born until 1989, literally the day after the Berlin Wall fell, but.
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>> Tyler Cowen: I think the undercurrent before the Reagan revolution
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was extraordinarily strong and it attracted a lot of talent.
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And when Reagan was elected, it all seemed to me like old news.
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In fact, I thought Reagan would fail.
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There was a good chance it would be a bad thing that Reagan was elected.
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I was quite skeptical of Reaganism.
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So it wasn't this new thing like, here's Reagan,
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I'm all excited about this guy's ideas.
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I was a bit rolling my eyes and let's just hope this doesn't go too badly.
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>> Jon Hartley: I feel like it's basically what kind of happened to Liz Truss,
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in a sense.
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It's amazing how, yeah, it's so
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strange to me how no one basically even gave her a shot, and
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there was this pension sort of crisis that arguably was or wasn't her fault.
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And it's amazing how short-lived the trust revolution was in comparison to that.
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>> Tyler Cowen: She had, what a month?
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Reagan had 8 years.
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>> Jon Hartley: Right. >> Tyler Cowen: The thing about Reagan I
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did not foresee at all.
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I mean, you can debate how much credit he should or should not get, but communism
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did fall, an ex post that ratified the whole era, and that was a shock to me.
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If communism hadn't fell,
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I think I would have looked back on the Reagan years as well.
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They did two or three good things, but this actually didn't really deliver.
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And in some sense domestically, that probably is the correct perspective.
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But of course, communism falling, reforms in China just changed everything.
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And Reagan is seen as the us president who was the embodiment of all that, right?
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>> Jon Hartley: Absolutely, and perhaps even less so
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that the Reagan free-market domestic policy, but
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more so the Reagan strong foreign policy and Star Wars and
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all that, I think, sort of spooked the USSR and
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sort of partially caused its eventual downfall.
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I mean, obviously the USSR had its own internal problems as well, but, yeah,
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a fascinating part history discussed.
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So you got into Harvard, your PhD student, economics at Harvard.
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What was the department at Harvard like that when you were schooling there?
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>> Tyler Cowen: Well, this is, I believe, 1984 we're talking about.
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Just to norm, things Larry Summers had just started.
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Teaching. Martin Feldstein was an important person
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in the department.
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People like Barrow and Schleifer hadn't arrived yet.
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A whole bunch of macro and theory people had just left.
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Olivier Blanchard had just left.
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So people with a super short run focus thought Harvard was in decline.
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That turned out really not to be true.
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Half the classes I had, I learned nothing.
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The other half, like with summers with Joe called, were just fantastically good.
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I was in an especially talented class of grad students.
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So Abhishit Banerjee, who later won a Nobel prize, he was in my class.
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Alan Krueger, who would have won a Nobel prize had he lived, he was in my class.
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So I think possibly we had the most talented Harvard class in recent memory,
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or maybe ever.
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So that was great.
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But I was an outsider.
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Mostly the faculty, I found, were quite tolerant.
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I don't have any complaints there.
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The other grad students, not necessarily.
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A lot of them were very left wing, kind of whiny, wanting a bit, you know,
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to cancel people who are not like they were calling them fascists and so on.
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They thought Reagan was this terrible thing that meant the end of the world.
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So I had mixed experience at Harvard, but
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I have no complaints about the faculty at all.
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>> Jon Hartley: How do you find Thomas Schelling?
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I mean, he was sort of, I think, in the Kennedy school at that time, or, yes,
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but he had still kept his appointment in economics.
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>> Tyler Cowen: So the three people I worked with were Joseph Kalt,
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who had been in economics but moved to the Kennedy school.
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Richard Zeckhauser, I think he had then still a joint appointment, and
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Schelling had a joint appointment, and they just seemed closest to me.
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They were all great, you know,
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Schelling, I ended up spending the most time with and got to know the best.
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And I'd read Schelling quite a few years earlier.
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And I just thought when I was there, I should go seek him out.
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>> Jon Hartley: What were your fields?
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>> Tyler Cowen: Well, my formal fields were public finance and
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industrial organization.
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>> Jon Hartley: Fantastic.
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>> Tyler Cowen: And my examiners were Joseph Kalt and Martin Feldstein.
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And then the third whom they chose was Richard Cooper, who did international.
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We had oral exams back then, and those three people quizzed me.
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>> Jon Hartley: Wow, that's fantastic.
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What a legendary group of Harvard professors to learn under most of whom,
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save maybe Zeke Howard, have all passed.
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So you then joined the faculty of George Mason?
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>> Tyler Cowen: Well, UC Irvine was my first.
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>> Jon Hartley: Okay, UC Irvine first.
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>> Tyler Cowen: And Schelling helped me get that job.
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He was really instrumental in that.
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He did me some very significant favors.
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And favors is not the right word.
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But he helped me in some very significant ways throughout my career.
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And that was really a big deal to go to Irvine, and
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I had wonderful colleagues there.
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Most of all, I'm a high glazer.
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But David Lillian, Lynn de Cohen, I just learned so much in my few years at Irvine.
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That was a great time.
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And I was like already too much in the George Mason bubble.
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So to get out into the so called real world was very important.
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>> Jon Hartley: Fantastic.
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So you wrote a bunch of papers on monetary economics with former Fed board member and
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Chicago Booth professor Rennie Krozner.
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You wrote several papers on public choice and
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cultural economics, but now from what you've written,
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you sort of describe yourself as more of a consumer research than a producer,
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but you're very prolific in all your books, blogs, podcasts.
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Do you think that.
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I'm curious,
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do you think that economic research is declining in terms of its influence?
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If a bunch of Bloomberg journalists for example, at the power to effectively
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launch a crazy macroeconomic theory like modern monetary theory and
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it's advocates into the general public discourse, or propel an idea like
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greedflation, the idea that it's corporate greed that's driving inflation,
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not government spending or spy shocks, and hence we need price controls to stop it.
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If journalists are that powerful and can propel ideas into the mainstream or
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into the public discourse, it's totally contrary to mainstream economics research.
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What does that say about the power of persuasion from mainstream academics?
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Has mainstream academia become too narrow in the questions that it's trying
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to answer with the tidal wave of applied micro and empirical economics?
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>> Tyler Cowen: Well, there's a lot of different questions in there.
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I would respond to a few points.
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I think a certain kind of economics peaked in status in the 1990s when it seemed all
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neoliberalism was on the permanent rise.
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The world was simply globalizing.
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Reforms would work if you stuck to them enough and
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those claims might still be true.
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That's, you know, one can debate that, but for a while after the nineties,
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they seemed less true than they seemed in the nineties, and everyone got confused.
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And then you have the financial crisis.
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I think today economic research is incredibly high quality in the sense that
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a very specific result,
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you should be more inclined to believe today than ever before.
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You look at even famous papers from the 1980s.
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I mean, so often they're just crap.
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You look at it and you're like, people believe that.
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Like, maybe it was the best estimate.
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I don't want to name names, but like,
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very well known people who were doing the best they could at the time, right?
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Like it's not their fault.
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It's not that they were bad, just that knowledge is cumulative.
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And now you read these papers, they're 97 pages long,
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the referee reports are 15 pages long.
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The responses to those create three new appendices and
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seven different extra robustness checks.
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But that's also overkill, and there's a definite loss of relevance in economics,
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much less than before.
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It has ceased to be a carrier of new ideas is the way that I like to put it.
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So in some regards, clearly higher quality but less a carrier of good new ideas.
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>> Jon Hartley: So nothing is new under the sun.
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I guess we've had like at least 100 years of theory or so
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before empirical economics came along.
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I guess we're getting more precision in terms of these answers,
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but not many big, new, sweeping, world changing macro or
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micro theories, maybe with the exception of this idea of networks and
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Matt Jackson's work or something like that.
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Could you even name a theory like Akerlof and adverse election that's had as
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much impact in terms of theoretical contribution over the past 20, 30 years?
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I couldn't.
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I have issues finding an example.
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>> Tyler Cowen: Like I went to Harvard when theory was at its peak or
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a little bit past it.
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People still thought, well, we might figure out game theory and
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what are the proper solution refinements for these games.
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But now you have empirics and even these pieces, while on average I think they're
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very good, when they're bad, there's no way you can tell.
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They look so careful.
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You would have to redo all the research.
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And if there's mistakes in coding in there,
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which I'm not saying is the main case, but surely it's gonna be true.
15:03
Reasonably often.
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You just never know.
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Like 1983, you could pick up someone's paper, read it,
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just kind of see how smart they were or what techniques they knew, and
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it was at a much lower level, but you could judge it almost immediately.
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Now you just have no idea where the bodies are buried.
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And that's another issue again, even though average quality is higher.
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So I would say,
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like Jeremy Stein heard behavior was the last significant new idea in theory.
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And that, I think, is 1990.
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That's a long time ago now.
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>> Jon Hartley: Absolutely.
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But it's also amazing too.
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A lot of these ideas are still somewhat timeless in the sense that you think about
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Thomas Schelling and these sort of stable equilibria and
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thinking about nuclear deterrence and game theory.
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We'll get into that much later, but it is interesting to trade off now.
15:51
We seem to be good gathers are smaller questions that have more precise answers.
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Deworming seems to make.
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People better off in developing countries?
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A narrow question, but one that we can sort of answer more convincingly and
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with the ability to replicate them in randomized controlled trials.
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But I'm curious, speaking sort of this topic of growth, which is still sort of,
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I think, one of the biggest sort of mystery questions of economics,
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what causes growth?
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I recall in the past, you described yourself as cultural economist.
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You like ranking cultures, places and people.
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You do a lot of travel, you have all this interest in exotic food.
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Do you subscribe to the idea that culture shapes institutions,
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which then shapes economic growth?
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Or how do you go about studying cultures, and why do you think they matter?
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>> Tyler Cowen: When it comes to economic growth,
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I think it's all mutually determined.
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But like many people I know, I would say over the decades I have
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somewhat downgraded the importance I place on policy as mattering,
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and definitely upgraded the importance I place on culture.
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Just a simple example that popped up on twitter.
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I think yesterday you look at Malaysia, which is a way above average
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middle income country, and I think ethnic Chinese in Malaysia,
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although they face some extra-legal penalties, they have per capita incomes,
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I think more than 2x higher than native Malays in Malaysia.
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Living under the same laws, the same policies, with some disadvantages, so
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that has to be something like culture driving a more than 2x difference.
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I'm not saying every country is just like Malaysia, but the more you go to different
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places, you do see that like highly general theories, they don't quite work.
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You have places like New Zealand in the late eighties, early 1990s.
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They more or less did what economists told them they should do.
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In retrospect, I still think that was good advice.
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I'm glad they did it.
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I lived there at the time I was involved.
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But in terms of per capita income, New Zealand hasn't caught up.
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They're at least 30% behind, depending what year you look at and
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how you convert exchange rates and so on, and they're not going to catch up.
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And they've repudiated a lot of those earlier policies.
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So I now think there's some culture in New Zealand, which is a particular way.
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It has its strengths and weaknesses.
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And my starting point for thinking about New Zealand is that culture,
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not the reforms they did.
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>> Jon Hartley: That's fascinating.
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I mean, it's also,
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I mean, super interesting to think about the interactions between culture and
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policy too, in the sense that there are some places that just may not be able to
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have rule of law for certain cultural reasons.
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>> Tyler Cowen: That's right.
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>> Jon Hartley: Yeah. >> Tyler Cowen: And in some places,
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rule of law is overrated.
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China has had an incredible growth record, certainly no rule of law.
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They have a system of corruption, I wouldn't call it efficient, but
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you basically get bribes by getting things built, and
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they've done well enough with that.
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In the long run it's super dangerous, they need to undo it.
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They probably can't, they're locked in in a bad way.
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But you can't say rule of law is essential for growth.
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I might have said that when I was 14, but I've since then had all these decades of
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watching China and going there and they've managed their own way, which I really
19:09
would not recommend to other countries, but clearly it's gone pretty well.
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>> Jon Hartley: Yeah, I guess also too, they're only at,
19:16
in terms of per capita terms, or maybe at only an 8th or a 7th of what the US is.
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And so, I guess the question is how easy is catch up growth versus
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being on the frontier of growth and all sorts of fasting.
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>> Tyler Cowen: But most countries don't even do much catch up, right?
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And I don't think they're gonna do any more catch up for that matter.
19:36
And I think they've painted themselves into a terrible corner where for
19:39
every problem they rely on the state, and
19:41
all that was baked into their earlier successes.
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So I get all that.
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I'm just saying, when I was much younger and you told me, well, the Chinese,
19:49
they're not going to do shock therapy,
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they're gonna keep all these things to stay don't enterprises.
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And you made me give a forecast, I would not have predicted 5% growth,
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much less an average of eight to 10%.
20:01
So that's the case like clearly I was wrong, or
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I would have been wrong if I'd made a prediction and I've changed my views.
20:07
But I still see how screwed up China is, and
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the statism is already coming back to haunt them.
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>> Jon Hartley: Absolutely, and it's also interesting too.
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I mean, we had, the exception of maybe China, for
20:18
a long time people didn't really believe in economic convergence.
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And there are these papers like Divergence, Big Time by Lant Pritchett
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that were written, and why weren't poorer countries growing or catching up?
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And interestingly,
20:31
if you look at over the past couple of decades, since around the year 2000,
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it seems like some of these poor countries are finally starting to catch up.
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>> Tyler Cowen: But then all these other places don't, you can look at Ireland and
20:43
Singapore and decide, FDI is so important, and it is for those places.
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You look at Japan, Korea, and
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you might think, FDI it's not really actually that important.
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And both views in some ways are correct.
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And you need this bigger picture where you're willing to relax some
21:00
generalizations and just realize the contingencies of a lot of things.
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And that to me, is what makes travel important.
21:06
Travel is how you learn the contingencies,
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and you're always forced to re-examine what you thought you knew.
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>> Jon Hartley: Absolutely.
21:13
So, I wanna pivot into the Marginal Revolution blog.
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You started the Marginal Revolution blog in 2003 with Alex Tabarrok.
21:23
Obviously, you were ahead of everyone else in terms
21:26
of starting a central repository for economics news and
21:30
information, well ahead of Twitter and what it's kind of used for today.
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What led you to create the Margin Revolution blog, and
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what is the original story behind it?
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>> Tyler Cowen: Well, the person who got me interested in blogging was
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Eugene Volokh, who for a brief while had me writing at Volokh Conspiracy,
21:46
which still exists, it was mainly a legal blog.
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And working with Eugene on that, I realized blogging was a kind of future.
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And I thought, well, there should be a pure economics blog that does for
21:58
economics what Volokh Conspiracy was doing for legal scholarship.
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So I went to Alex Tabarrok, he and I were talking, Alex came into my office and
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he said, Tyler, we should write a principal's textbook.
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And I said, Alex,
22:10
we should write a blog first and then write a principal's textbook.
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And that's what we did.
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And that was 20 years ago, almost not to the day, but like one more month,
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it'll be 20 years, I think.
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>> Jon Hartley: Wow, and it's just amazing in terms of the influence that it's had.
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It's certainly one of the blogs I read every day, one of the few blogs left.
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I guess there aren't so many blogs now around, so much is pivoted to Twitter,
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but I feel like it's one of the few news sources that I read every day,
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which speaks to just how successful it's been.
22:44
So you recently told the Financial Times that your personal ambition as
22:49
an economist is to be the individual who's done the most to teach
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the world economics broadly construed.
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And I'm curious to sort of get into Marginal Revolution University, what
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is it and how is it different from other ways of teaching basic economic concepts?
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And how many people has it reached,
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if you have any sort of general sense of what the statistics are?
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>> Tyler Cowen: Marginal Revolution University is a series of YouTube videos
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that teach economics.
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We have a complete micro and macro class up, but we have about 20 classes in total.
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Our micro and macro classes are generally at a pretty high technical level, for some
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of them we have actual movie makers come in and film us like we're making a movie.
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So we're the number one economics blog, as far as I know.
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We get emails every day, most of all from India, but Middle east,
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all over the world, also America.
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We're now at 18%, used in 18% of us high schools.
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>> Jon Hartley: Wow.
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>> Tyler Cowen: And we aim to be in 25%.
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Now, those can be varying degrees of use.
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Like, we would count just one video, but that's something so
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a lot of people learn best by video.
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And we were.
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Very early, putting basic economics lessons on video.
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Unlike a lot of what I write, it doesn't try to be too complicated.
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It really tries to make things simple.
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Like, here's why demand curve slopes downward.
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Here's the effects of attacks.
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Here's what elasticity is.
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And the world has needed that.
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So we thought we would do it.
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And we've now been working on it, I don't know, eight years, I'm not sure.
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And it's gone great.
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I don't know what our total number of unique views is.
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It's like many millions.
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>> Jon Hartley: I mean, that's incredible.
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>> Tyler Cowen: Yeah. >> Jon Hartley: I mean,
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18% to 25% of high schools, that's incredible.
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>> Tyler Cowen: Well, we're not at 25%, that's the goal.
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>> Jon Hartley: That's the goal, okay.
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>> Tyler Cowen: Yeah, but we're in the teens.
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>> Jon Hartley: In the teens, I mean,
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having even just a couple percent is incredible.
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I mean, I guess it's a free thing you can access?
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It's just on YouTube?
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>> Tyler Cowen: No ads.
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You can do it without losing any privacy.
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Like, you can sign up for updates, but you don't have to.
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You can just click and watch and then you're anonymous to us.
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So it's very school friendly.
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Teachers don't feel they're like helping someone make money off the kids, and
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that's on purpose.
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And we try to make it as easy to use as possible.
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And there's not like eventually some other product we sell you.
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So it's there, that's it.
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>> Jon Hartley: That's incredible.
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So the teachers, they still come up, like with their own tests, stuff like that.
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>> Tyler Cowen: We have test banks and we have problem sets and exercises and
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multiple choice.
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That's very important part of teaching.
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Not just the videos, our core videos, when you use them,
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you can quiz yourself, which people really like.
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Not all of the videos have that, but micro and macro does.
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So we've tried to make it as complete as possible.
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I teach an online principles course every year.
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This year I'll have over 400 students, and there's an online text, but
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most of the students actually use more video than text, but
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they have their choice or they can do both.
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And they use those same Marginal Revolution University videos.
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So it's possible to teach the whole principles class online from start to
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finish where no one has to talk into a Zoom camera or show up in a classroom, and
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there's massive excess demand for that class.
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>> Jon Hartley: That's incredible.
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I mean, how do you think economics education is changing?
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Like, obviously you're a big part of that change that I think is underway.
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Do you think that in the future, classic textbooks, like the sort of Samuelson and
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Mankiw's Principles of Economics will matter less?
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And will fewer people acquire human capital through traditional universities
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versus, online options like YouTube or Coursera or
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I guess, Marginal Revolution University?
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I mean, again, it seems like actually having coursework and tests and some
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sort of learning enforcement mechanism is really important for actual retention.
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I don't think I can learn something as well if I'm just listening to YouTube
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videos versus watching videos or taking some sort of instruction and being forced
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to remember something and write something down, like on a test or in an essay.
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But I mean, how do you see the Internet in sort of educational instruction online,
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disrupting how economics has been taught?
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>> Tyler Cowen: People have different learning styles,
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so I think we're gonna have a lot of different options forever.
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But I think the modal option in equilibrium will be a mix of YouTube
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videos, an AI bot that you quiz and quizzes you all the time, and then
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an instructor who comes by periodically to encourage you and pat you on the head.
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>> Jon Hartley: Fascinating.
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>> Tyler Cowen: Most of your learning you do from the video and the bot, but
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again, clearly there are people who want something other than that and
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they'll be able to get it.
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>> Jon Hartley: Yeah, so I wonder,
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too, whether- >> Tyler Cowen: I don't think that's 80%
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of the market, but I think it's at least 30% to 40%, and
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it will be done more than any other single option.
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>> Jon Hartley: I mean, do you think somebody could use ChatGPT to cheat on
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a Marginal Revolution exam?
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I mean, I guess there's gotta be some enforcement mechanisms to making sure
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people are actually learning rather than just copying or outright cheating.
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I always wondered, maybe actually people actually do written tests as opposed to
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anything using a computer.
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I mean, at this point, if you have access to ChatGPT, which obviously students do,
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there's almost no way to prevent or maybe even detect.
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I know there's Detect GPT and things like that, but
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I feel like as long as chat bots stay one step ahead,
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they could probably figure out how to outsmart the detection algorithms.
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>> Tyler Cowen: People also use it to cheat in class, but I think basically,
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as of now, we will need to force all exams to be in the classroom and
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ban all smartphones.
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This is not what we are doing.
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I think we should do this for all methods of evaluation,
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including for my classes, but that's not up to me.
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So I think it will rapidly be a crisis and we'll need to act.
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But nonprofit institutions of higher ed, maybe you've noticed this,
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they're not always the quickest to respond to a crisis.
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>> Jon Hartley: Yeah, absolutely.
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I mean, it's fascinating just to think that going back to pen and paper.
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Interesting how an old school technology is maybe the best solution to this.
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I'm curious, would you support mandatory economics education in schools, and
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do you think that would be broadly impactful to society?
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>> Tyler Cowen: Well, if you mean in high schools,
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we face this issue with marginal revolution University.
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One reason we're so popular is a lot of state legislatures have mandated such
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education, but there's no one in the school who can teach it,
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especially smaller schools, rural areas.
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So they turn to us, which I'm very happy about in principle.
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I like the idea of mandatory economics education, but
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if you're doing it in states and school districts where there are no teachers or
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maybe the teachers have negative value, then of course, that's a problem.
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So we're kind of in between right now, and
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we can't quite deliver on the mandatory side of the promise.
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So we should be a little skeptical.
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>> Jon Hartley: That's fascinating,
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which states have some sort of mandatory economics component to it?
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>> Tyler Cowen: It's really quite a few, more common in Republican run states.
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I think North Carolina is one of them.
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I think Virginia is one of them.
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I once knew the list and, you know, states get added to that list, but
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not very much taken off because more laws are passed than ever repealed, as we know.
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So it's a lot of the country.
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And again, it can go very well.
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I think high schools should teach you personal finance, like buy and hold,
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diversify.
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Here's compound interest.
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Here's borrowing money, what it means, and many do a good job, many don't.
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We have a lot of videos on personal finance also, just trying to teach
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people those basic truths, like, don't just think you can beat the market.
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Trading a lot doesn't have to be a good thing.
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Diversification is a very high value for your own portfolio.
31:08
>> Jon Hartley: It's fascinating how I think, despite all the attempts to teach
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these things, which I think are all good and true, how difficult it
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seems to actually get those things to stick with the broader public.
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Speaking of Virginia and getting back to George Mason University,
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where you currently are a professor, you are described as sort of being in
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the public choice wing of George Mason University.
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And I sort of wanna get into sort of schools of economic thought here because
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I do think that it's kind of relevant to how we teach economics, and
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it's one of the things that people tend to think about first.
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I think certainly those that have only taken maybe one or
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two classes in economics.
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On your blog at Marginal Revolution,
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you often post about Austrian business cycle theory.
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You describe yourself as a state capacity libertarian.
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You're one of the leading thought leaders in the sort of state.
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State capacity libertarian school of thought, which I think, to paraphrase,
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means something like the broad strip belief in incentives markets.
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And capitalism are very powerful, but sort of work in conjunction with political
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realities when the governments correct me if I'm wrong there.
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And I mean, how would you describe your views in general about the role
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of government in economic well-being?
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I mean, do you think civilization policy makes sense from both sort of monetary and
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fiscal policy sense?
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Do you think there's some role for redistribution?
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And do you think that policy, and perhaps institutions,
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depending on how one defines it, sort of matters for growth?
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And I know you mentioned earlier that you sort of backed off a little bit from
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policy and have shifted more toward culture.
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But I'm curious, I feel like these are sort of bedrock things,
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are you a Keynesian versus a Chicago school or Austrian economist?
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I feel like that's one of the first things that,
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when you talk to people about economics, and they've only had that one class,
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those are one of the first things they talk about.
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Where do you put yourself in that nexus, assuming you think it's relevant, too?
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>> Tyler Cowen: Yeah, there's a lot of, again, different questions in there.
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Certainly, my biggest early influence was the Austrians, and
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I would not discount that as an enduring influence.
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But unlike a lot of Austrians at the policy level, I do think we need a social
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welfare state, if only to keep democratic capitalism stable.
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It might be overrated how much welfare actually helps poor and other people, but
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I think it's essential.
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And you don't end up with a freer society if you try to get rid of that.
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And none of the major reforms in Western countries have succeeded in getting rid of
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that, which I take seriously.
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Now, monetary and fiscal policy, I tend to think monetary policy is more powerful,
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as Milton Friedman did.
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For fiscal policy, there's a very simple rule that I see very under-stressed, and
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that's just spend on projects that have a greater than one benefit to cost ratio.
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And if you wanna use those projects for a cyclical policy, okay,
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if you screw that up, you're still spending money on something worthwhile.
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And somehow that gets lost in the scuffle, and everyone's talking about canes and
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digging ditches.
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I mean, you say that stuff to the public,
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you're not doing fiscal policy any favors with that talk.
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It's gonna be great, it's a free lunch, we can waste the money,
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aggregate demand goes up.
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The best way to get aggregate demand up sustainably is to produce things that
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are valuable and generate enduring real incomes.
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And that pushes you back to this cost-benefit rule.
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You want projects for the benefits exceed the costs, that to me is so simple,
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it doesn't make you anti-fiscal policy per se.
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I just think it's a very, very, very good rule of discipline.
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So that makes me, I don't know what you wanna call it,
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you could say fiscal conservative.
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But again, if the project is good, I'm very willing to spend.
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>> Jon Hartley: But I guess there's a question of how many government projects
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are there out there that have such positive benefits.
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Obviously, when we're talking about fiscal projects now, you think about
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the so-called inflation Reduction Act, all these EV subsidies, and things like that.
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It totally just depends on what your forecasts are in terms of the social
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cost of carbon and things like that.
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I've always sort of seen fiscal policy sort of like there's sort
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of two different styles or two different types.
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There's the sort of actual government spending, the Big G,
35:25
which is tanks, equipment, things like that.
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And then there's sort of the fiscal transfer side of things.
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And obviously, if you go back to 2008 stimulus that was very
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focused on those sort of physical, sort of capital and Big G projects.
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And those things tend to have sort of smaller fiscal multipliers in general.
35:47
Whereas you look at things like transfers, seamless checks,
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things like that seem to have much higher fiscal multipliers.
35:55
But then also sort of, I think, have a greater tendency to spur inflation,
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and they become much more popular in the sort of Covid response.
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I mean, how would you think about, for example,
36:08
transfers in this sort of framework?
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>> Tyler Cowen: Well, just a few points,
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I think the data show the transfers from 2008, 2009, they were not very effective.
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People didn't spend much of the money, assuming you wanted it spent.
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So that's one reason why we so overreacted when we did basically the 4
36:28
trillion of combined monetary fiscal policy transfers.
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It was way too much,
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but people had this immediate background experience where it way underperformed.
36:38
So I think one cautionary lesson there is just how much policies can be
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context-dependent, and don't assume you're fighting yesterday's war.
36:47
Now, the 2008 fiscal stimulus, my sense and Mercatus commissioned some
36:52
research on this, is it didn't put that many people back to work.
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It mainly chased after the laborers who already had jobs.
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And the problem workers were lower skilled than who typically might be useful on
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a lot of these government projects.
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So if the employment effects are not that positive,
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well, you'd better hope they're good projects, right?
37:12
Gets back to my earlier point.
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Now, there's so many projects they did, most of which I've never looked at or
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I'm not even aware of.
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I would just say, you wanna look at them and just try to do the good ones.
37:23
That was not the emphasis at the time, I'm sure a whole bunch of them were quite
37:27
good, and I'm pretty sure a whole bunch of them were not quite good.
37:30
But we're approaching it too much with a macroeconomic lens and
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not enough microeconomic discipline, I would say.
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>> Jon Hartley: Absolutely, I mean,
37:37
it's interesting to think about the American Recovery and
37:41
Reinvestment Act and how sort of, I think, unprepared we were for that.
37:44
In the sense that Congress can't pass a bill that the tune of hundreds
37:48
of billions of dollars and you don't even necessarily know where to spend it.
37:52
I think there have been some good sort of initiatives in recent years of trying to
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come up with lists of sort of ready-to-go projects or ideas,
38:00
particularly sort of in the infrastructure space.
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Here's a list of bridges that actually need to get rebuilt, and
38:06
now they can be sort of finally done.
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And I think in part that did to some degree come into fruition in the 2020
38:13
aftermath and infrastructure bill that actually got passed recently and so forth.
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But I guess I'm just curious in terms of getting back to teaching and
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just the state of economics.
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And as an academic discipline, I mean, schools of thought of traditionally a lot
38:30
to do with economic theory, particularly macro.
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I mean, do you think that schools of economic thought will matter less in
38:36
the future, with the rise of empirics and apply economics?
38:39
Traditionally teaching history of economic thought and schools of thought has been,
38:44
I think, a big part of how we teach introductory economics.
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Keynesianism versus Chicago school,
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monetarism versus Austrian school or something else.
38:53
I mean, a lot of people who don't have much economic education I mentioned before
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still seem to know a lot about history of economic thought.
39:00
But don't actually know a ton of economics in visa or
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a ton of sort of microeconomics.
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Do you think how we teach schools of thought is that outdated?
39:11
Will they matter less in the future?
39:14
If you go back to the 70s and 80s,
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it was a big deal when somebody said they were a Keynesian or a monetarist.
39:21
And this was certainly Milton Friedman versus others,
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Mil Friedman versus Samuelson.
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They had dueling Newsweek columns.
39:29
Even more recently, I remember when it was a big deal when Richard Posner at UChicago
39:34
sort of traditionally associated part of the law and economic's wing of the Chicago
39:38
school sort of after 2008 declared he was a Keynesian and we need to rethink that.
39:43
At that time, that seemed like a really big deal.
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But now, with sort of the applied micro takeover of economics.
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Schools aside, apart from sort of these things in the media,
39:54
like modern monetary theory, or people that pride themselves on being Austrian,
39:59
GMU, I think, is a bit of an exception.
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I just don't hear about schools of economic thought as much anymore.
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>> Tyler Cowen: Yeah, we're not supposed to talk about them.
40:07
It's fallen into ill repute.
40:09
But I would say if you don't talk about schools of thought,
40:12
you will end up as a prisoner of at least one of them and not even know it.
40:17
That people do approach questions with presuppositions, and when they pretend,
40:20
they don't, typically, that's when the presuppositions are the strongest.
40:24
So I would like to see more schools and
40:27
graduate schools teach history of economic thought.
40:30
My next book will be on history of economic thought and the great economists.
40:34
So, I'm doing my bit toward this end, but I don't see us as overturning what is
40:38
the current trend of all these super long, super careful empirical papers
40:43
that pretend there aren't so many presuppositions behind it all.
40:47
>> Jon Hartley: Well, I mean, it's fascinating.
40:48
I do think that, like some of these applied micro papers can sort of answer or
40:52
shed a lot of light on some of these schools of thought questions.
40:56
Like I'm a big mill Friedman fan, but one thing that he kind of wrote about in
41:01
capitalism, freedom, was that this idea that fiscal policy, just almost as if
41:06
the physical multiplier was zero, or these bounce the wheel sorts of approaches,
41:12
he labeled that they wouldn't have any effect on economic activity.
41:17
But we have a lot of great data now, and we have some tons of natural experiments,
41:21
and it's pretty clear that the marginal propensity consumed is something.
41:25
And fiscal multipliers per product is something.
41:27
And certainly, like there's an associated cost with each of these things.
41:31
And sure, maybe if you're doing it in a micro sense, you're not accounting for
41:34
general equilibrium effects, and that may make the multipliers actually much lower.
41:39
And there's some evidence of that out there too.
41:40
But I guess, like at some level I feel like there's maybe a new sort
41:45
of synthesis that's occurred in the supplied micro world where,
41:50
at some level, sort of every school was sort of right at some sort of level, but
41:56
maybe not as much as some of its sort of biggest proponents once claimed.
42:02
Maybe monetary policy isn't as impactful or certainly monetary
42:07
aggregates don't seem to be as predictive of inflation at a smaller scale or
42:13
shorter periods of time, but clearly matter over longer periods of time.
42:19
And every inflation is associated with a big increase in the supply of money.
42:25
And similarly same thing with fiscal policy.
42:27
It's like, yes, there are fiscal multipliers for a greater than zero.
42:30
But it's not like projects are often at all self-financing.
42:34
I'm curious what your take is.
42:36
Are we in a sort of new neoclassical synthesis or
42:39
I guess what some people name these things.
42:43
If the average economist, applied economists is part of a school,
42:46
what school would that be?
42:47
I guess even if they didn't know what school they were part of?
42:50
>> Tyler Cowen: I think a strong agree to just about everything you said.
42:53
I'm a little cautious to label it a new synthesis.
42:56
I think there are macro truths that actually change over time, and
43:00
this makes me nervous.
43:01
So when Milton Friedman wrote and made those claims about the money supply,
43:05
I thought at the time they were pretty well justified.
43:08
You can go back and reread those papers.
43:11
He was not crazy wrong.
43:12
But that said, after some date, m two say,
43:15
does really seem far less predictive than it had been in Friedman's time.
43:20
So I think most of all, we need to keep an open mind about like our current
43:24
synthesis, whatever we call it.
43:26
Well, that's maybe going to change too.
43:28
It might become more Friedmanite.
43:30
It's possible, I don't really have a prediction, but just to keep an open mind.
43:34
And Keynes, Friedman, Hayek, I mean, they're all great macroeconomists.
43:39
It's easy to pick out cases where they're clearly wrong and dump on them.
43:43
But the real skill is seeing just how much talent and insight they had and
43:47
trying to carry that with you while realizing on a given case it might not be
43:52
a case where their ideas really apply either.
43:54
>> Jon Hartley: Absolutely, I mean, it's asking how.
43:56
I think you wrote a column recently about how maybe monetary aggregates are kind of
44:00
relevant.
44:00
Again, m2 is shot up.
44:02
So is inflation.
44:03
It's fascinating how sort of over 30 years or so
44:05
after inflation became totally stable, and it seemed like we couldn't
44:09
really target monetary aggregates when the Fed was trying to.
44:11
In the late 80s, that sort of failed.
44:14
And my demand, I guess, was unpredictable, I guess.
44:16
Yeah, to your point, it totally depends on maybe the macroeconomic regime and
44:21
maybe in very good, very stable times, it becomes much more difficult
44:26
to break things versus when money supply is growing super rapidly,
44:30
then becomes a relevant all of a sudden.
44:33
So maybe speaks to just, we don't necessarily realize how
44:38
good we had it over that great moderation through up until
44:42
Covid sort of period where we had low inflation,
44:46
just to pivot to sort of this topic of growth again and innovation.
44:52
You are very active in actually funding innovators.
44:56
Can you explain what emergent ventures is all about?
44:59
It's backed by the thiel foundation.
45:01
What's your philosophy around finding talent?
45:04
You've written a book titled talent.
45:06
I'm curious, what spurred you to sort of jump into this game of backing people,
45:11
and how did that come together?
45:14
I think that's something very rare for an economist to be getting into, and
45:18
all the more interesting.
45:20
>> Tyler Cowen: Yeah, it's a little more than four years old, and
45:23
I have longstanding experience in the world of philanthropy, and
45:27
I often found it frustrating.
45:29
So just how long it can take to apply, how long the application has to be,
45:34
how many different committees or layers of approval it has to go through?
45:38
Maybe fine for some purposes, but it's become far too bureaucratic.
45:42
And this is America's private sector, right?
45:45
It's not the government that makes foundations do this.
45:48
So I tried to reimagine philanthropy as if I were designing a system from scratch.
45:52
And the key components of what we do is 2% overhead.
45:57
So someone gives us a dollar, we'll spend 98 cents of that dollar.
46:01
That's remarkably low overhead as you may know,
46:04
a university could charge a minimum of 20%, sometimes 50%.
46:07
So, we're doing 2% overhead, one layer of no.
46:11
So, there's one person who can give the green light or red light, for
46:15
many grants that's myself, though I now have separate individuals.
46:19
One does India and the other does Africa, but I do the rest of the world.
46:24
And then most people get an answer within two weeks.
46:26
Very often, you get an answer within two days, and things are very quick.
46:30
And if you are awarded something, we just send you the money and
46:35
your reporting requirement.
46:37
Your report cannot exceed one page in length, and we don't want it formatted.
46:41
And that was just my view of one ideal way of doing philanthropy.
46:44
And I'm not paid to do this.
46:46
There's no staff that's being carried, no, like buddies.
46:49
I've got to keep on payroll.
46:50
So it's not my incentive to be risk averse, keep the money coming in,
46:54
do a lot of safe grants, hand out everywhere to please everyone.
46:59
My incentive is just to pick what I think is good.
47:01
And the people who do India and Africa, Shrudi and Rashid,
47:04
they face the same conditions.
47:06
So for me, it's been a great experiment.
47:09
I'm very happy with it.
47:10
I'm gonna do more.
47:11
You mentioned Thiel foundation.
47:13
They were our opening grant, and that was incredibly important.
47:16
It would not have existed without them.
47:18
But in terms of total funds, they would not be at 2%.
47:22
So it's not mainly money from them or any single place.
47:26
>> Jon Hartley: I mean, it's incredible.
47:28
Like, at some level, I feel like this is totally turning the existing system of
47:33
grant making on the part of governments, universities,
47:36
I think the National Institutes of Health, or I think National Science Foundation.
47:42
I feel like it's totally turning that on its head because I feel like that's become
47:45
such a bureaucratic process.
47:48
How do you have the time to even, I mean, you're managing a blog,
47:52
which is posting several times a day.
47:55
You've got podcasts, you're writing books.
47:58
How do you have the time to review?
48:01
Ideas, I mean you're just like, you just answer them as soon as they come in.
48:06
Is that sort of your process of- >> Tyler Cowen: A lot of the no's
48:10
are immediate, but look, you've got to work hard, right?
48:13
You can't waste time.
48:14
But I also view the different activities as supporting each other,
48:18
feeding into each other.
48:20
So when I read all these applications, typically from younger people for
48:23
emerging ventures, I feel I just really have my finger
48:26
on the pulse of where innovation is happening or maybe will be happening.
48:30
And that makes me much better at all the other things I do.
48:33
So it is a lot of time.
48:35
But in this regard, they're not totally separate activities.
48:38
You know, I've my own views where I'm bullish bearish.
48:41
And it's not that I'm technical experts in these fields.
48:44
I just look at the levels of talent being attracted.
48:47
And if a lot of smart young people are doing something,
48:49
I become way more bullish on it.
48:51
I think it's not a bad metric.
48:53
>> Jon Hartley: That's fascinating.
48:54
And I guess, you find that some of the best ideas come from within the US or
48:58
outside the US?
48:59
>> Tyler Cowen: Well, I know you're from Toronto or you're there now.
49:02
I've been amazed of the quality of applications from Ontario.
49:07
And it's typically children of immigrants living right outside of Toronto,
49:11
but not in Toronto.
49:13
They're one of the strongest groups I end up seeing and
49:15
I didn't really grasp that before doing emergent ventures.
49:19
So of course I'm way more bullish on Ontario than I used to be.
49:23
And I know a lot of them end up in the US.
49:25
But still, Ontario's this incredible talent pool.
49:27
I don't even know if Canadians fully appreciate it.
49:30
>> Jon Hartley: Well, it's fascinating.
49:32
And I know there's a new initiative that's been brought forth
49:36
by the Trudeau government tech transfer program.
49:40
And the idea is that those H1B sort of these issues can sort of move to Canada.
49:46
I mean, it's interesting and maybe just speaks to migration and
49:51
you look at sort of different migrant groups and ethnic innovation.
49:57
Bill Kerr has done a lot of research on this and I know that one of his
50:02
interesting findings that you'll find in the USPTO patent data
50:07
is that ethnic Indians often had the highest patenting rates,
50:12
well above any other ethnic group, as well as asian immigrants.
50:17
And interestingly, Canada, for I think a number of reasons,
50:21
tends to select on those particular immigrant groups in particular, which
50:26
I think in general just have these very high rates of patenting and innovation.
50:32
And so maybe that is a part of and just having an immigration system
50:36
that's more conducive to high-skilled immigration and
50:40
just allowing more high-skilled immigrants in general is part of that.
50:46
That would be my sort of working conjecture.
50:48
>> Tyler Cowen: Yeah, sure.
50:50
And India is still greatly underrated even after all the recent coverage which has
50:54
given it more deserved attention.
50:56
There's so much coming from India.
50:58
I think India will be for the next like 30 years what central Europe was for
51:02
the early to mid 20th century, and the world just hasn't digested that yet.
51:07
This is why I set up emergent ventures India as separate.
51:10
I was getting so many good India applications and
51:13
a Shruti Raja Kopalan who runs that.
51:15
I just thought it needed its own person and someone who, of course,
51:19
was from India and knows India very well and that's just gone great.
51:22
So I'm super bullish on India.
51:25
Also, yes, and Indian migrants both.
51:28
>> Jon Hartley: I mean, it's the whole study of innovation and migration.
51:34
It's one of my own personal research interests.
51:37
But I wanna sort of move back to Thomas Schelling and
51:40
sort of this topic of where the world and its geopolitical system is going and
51:46
where its various global systems are going.
51:50
Nuclear war, deterrence seemed like topics that are now back in along
51:54
with sort of the state of democratic political systems.
51:58
I think the latter's maybe a little overhyped and certainly been around since
52:02
the mid-2010s with the election of sort of various so-called populist candidates.
52:06
But get back to your late PhD advisor Thomas Schelling,
52:09
who thought a lot about nuclear deterrence and civil equilibria.
52:13
We have this Oppenheimer movie coming out this summer about
52:16
the Los Alamos National Laboratory and the development of first nuclear weapons.
52:20
We've got this terrible and
52:22
strangely rare land war between a nuclear power, Russia and Ukraine.
52:27
It seems like very, very rare that we see something like that.
52:31
How transformed do you think the sort of just nuclear in general has been
52:36
since the 1940s?
52:37
Obviously, you're an advocate for renewed nuclear power or
52:42
renewed reliance on nuclear power as an energy source, do you think that nuclear
52:47
disaster of some form is inevitable over the next century or a couple centuries?
52:53
And avoiding conflict between nuclear powers seemed to be working so
52:59
well up until recently.
53:01
This era of the end of history and last man in the 1990s,
53:06
I feel like that was the peak Kumbaya amongst democratic,
53:10
hapless nations moment occurred.
53:13
It was also after the end of the USSR, end of communism, when sort of Fukuyama
53:18
narrative sort of really took hold and we had, again, this idea that harmonious
53:23
global democratic capitalism was sort of the end state of political history.
53:28
But I mean, recently we've seen all these aggressive,
53:32
non-democratic countries like China, Russia, Saudi Arabia,
53:35
and even a case being made that democracy's made way in India and
53:39
all this sort of new battle lines drawn across, across various allegiances.
53:43
I'm curious,
53:44
what do you make of the future in terms of its global political economy and conflict?
53:49
>> Tyler Cowen: Well, in any given year, the chance of nuclear weapons being used,
53:52
I think, is extremely low, and that's good news.
53:55
But as you know from probability, if the clock ticks and you have enough years,
53:59
the chance they will be used is actually pretty high.
54:03
And that's what worries me.
54:04
It may even be accidental use, but things can spiral out of control.
54:08
So at some point, the accident will happen or the war will come, and
54:12
that will be a terrifying time.
54:13
We'll need to get through it.
54:15
I think it's implausible to think nuclear weapons never will be used.
54:18
I've been very deeply concerned with this.
54:20
I mean, even before I met Schelling, it's partly why I sought out shelling.
54:25
And I've never had a period in my life where I thought I didn't need to have
54:30
this as my number one worry for the world.
54:32
>> Jon Hartley: I mean, I'm curious, so nuclear stuff aside for a moment,
54:36
I'm curious, like, what do you think about,
54:39
you just wrote a review on your blog of Patrick Deneen's new book,
54:44
Regime Change, and he's sort of this post-liberal.
54:48
We need to rethink liberalism school of thought.
54:51
What do you think is the state of free market capitalism and
54:55
sort of democracy in the world today?
54:58
I mean, do you think that sort of the end of democracy?
55:01
It's like a very overhyped narrative?
55:04
Do you think that we're sort of in a new Washington consensus,
55:09
that free trade and things like that are kind of a bygone or
55:14
past era and even free capital flows?
55:17
The IMF isn't really big on anymore.
55:20
Are we in a new regime that has some same power in terms of how
55:24
international economics should be working?
55:28
Or do you think that this is just all of a flash in the pan and
55:31
we'll get back to neoliberalism sooner than we know it?
55:35
Or maybe we're just neoliberals under a new name,
55:39
I guess maybe a third option, I guess.
55:42
>> Tyler Cowen: I think media overstate a lot of trends.
55:45
So clearly, cross border immigration is down more broadly, but
55:50
trade across borders really is not down.
55:53
It's proven remarkably robust,
55:55
even with COVID which was a huge negative shock of some kind.
55:59
Some countries are less democratic.
56:01
Turkey would be an example, though they do still have elections,
56:04
which seem to matter.
56:05
But you can see more countries going backwards than forwards.
56:09
You could say peruvian democracy is under threat.
56:12
A number of latin countries,
56:14
maybe the risk of a non democratic coup has gone up, so we should be concerned.
56:19
But I think that as a trend, it is much, much overstated.
56:23
And the successful countries where people want to live are democratic
56:27
capitalist countries, and everyone more or less knows that.
56:31
And I don't think that's gonna change.
56:33
So I would still bet on democratic capitalism and its associated ideologies.
56:39
I know it's somewhat out of fashion,
56:41
but there's what people say and what people do, and just look,
56:44
where do people actually want to migrate when they have the choice?
56:47
It's obvious which places and systems are still winning.
56:50
And I think that enduring truth will prove more important.
56:54
>> Jon Hartley: Do you think that this whole sort of new wave of ideas
56:57
around industrial policy, do you think that that has stayed in power?
57:01
>> Tyler Cowen: Well, I think for green energy we have to do something.
57:04
I'm never sure what is best to do, but if we do something that
57:08
rubs me the wrong way, I feel there's some version of that I need to accept.
57:12
I'm not sure we're doing the right version of that, but something's gonna happen that
57:17
free trade lovers will not be entirely comfortable with.
57:20
I don't know if we'll solve the carbon emissions problem, but
57:24
whatever, wherever we end up, I think it will be a one time thing.
57:27
And more and more of the economy which is relatively free will grow at the expense
57:32
of the parts which are not relatively free.
57:35
Just like, say, the tech sector has kept on growing.
57:38
Now AI is likely to grow as a part of our economy.
57:42
So the long run prognosis, I think, looks pretty good for neoliberalism,
57:47
and this exception for green energy, again, I think we need to do something.
57:51
So for me, it's not the end of the world.
57:54
But again, if you look at the details of what Biden has done,
57:57
there are still a lot of good criticisms you can make.
57:59
It's like jobs created count as a benefit, not as a cost.
58:03
And we as economists more or less know that's wrong, right?
58:06
>> Jon Hartley: Absolutely, Tyler, we've seen both economic growth and population
58:11
hit a slowdown, certainly in developed countries over the recent decade.
58:15
I mean, do you think that economic growth and population are hitting an upper bound?
58:20
And why do you think this may or may not be the case?
58:23
I mean, do you think that there's economic reasons or
58:26
more cultural reasons underlying this phenomenon?
58:29
>> Tyler Cowen: I think the main cause behind the demographic slowdown with
58:33
population is simply the ongoing spread of birth control and
58:37
many women realizing that having more than one kid is not always that fun for them.
58:42
It's not obvious that that will change anytime soon.
58:45
The economic growth slowed down.
58:46
I think artificial intelligence will, in due time, reverse and that we have a new,
58:51
transformative, general purpose technology that will have many applications.
58:56
And I think we'll see a lot more progress again.
58:58
And the world will change rapidly and will feel very weird for a while.
59:02
So we're gonna get a mixed bag.
59:03
Elon Musk is right, we need to worry about shrinking population, but
59:07
we have a lot of time to solve that problem.
59:09
I don't think at the moment we have any solution in sight.
59:12
>> Jon Hartley: I'm curious, you sort of outlined some technological and
59:16
sort of economic reasons.
59:17
There's obviously some people believe that the cost of housing is a big part of why
59:22
people are having less children.
59:24
I think certainly land use regulations are a huge issue causing housing
59:28
supply shortages, not just in the US, but across developed countries.
59:34
And some have sort of responded that we need to be YIMBYs and
59:37
get affordable housing.
59:39
Some places, like Hungary under the Viktor Orban government, are changing tax laws so
59:43
that people have more than four children, don't have to pay taxes for
59:46
the rest of their lives.
59:47
I'm curious, you're a cultural economist.
59:49
I'm curious, you don't see this as maybe being sort of a broad cultural phenomenon?
59:54
I've seen some statistics from Pew, for example,
59:58
that those that have seen a decline in religious belief or, say,
1:00:03
recent decades, are a big chunk of those who are less likely to have children.
1:00:09
Often these things, it's an all of the above answer, and
1:00:13
it's not just one monocausal type explanation.
1:00:17
But I'm curious, do you see any interactions between culture and
1:00:21
technology?
1:00:22
People are spending two or three hours a day on their cell phones, on social media.
1:00:27
Maybe that's affecting culture in such a way that they, I don't know,
1:00:31
don't feel as much social pressure to have children when you, traditionally, if all
1:00:37
your friends were having children, there'd be social pressure on you to do so.
1:00:42
Do you see there being some sort of maybe a cultural explanation?
1:00:46
>> Tyler Cowen: I don't think it's mainly economic.
1:00:48
So, as you know, Japan has built plenty and their TFR is about 1.3.
1:00:53
South Korea has built plenty.
1:00:54
It's not as cheap to live there as in Japan, but their TFR,
1:00:58
0.8 countries that have tried birth subsidies,
1:01:01
which I'm willing to try, but it doesn't seem they've been especially effective.
1:01:05
And maybe they're just not big enough yet.
1:01:07
But at some margin, the expense really matters, too.
1:01:10
So I think it's mostly cultural, and the joys of raising children have not
1:01:15
gone up as much as the joys of doing other things.
1:01:18
Maybe that's the key problem.
1:01:20
>> Jon Hartley: Wonderful, well, Tyler, I'm gonna have to stop there.
1:01:22
This has been such an interesting conversation and
1:01:25
a real honor to have you on.
1:01:27
So many thought provoking questions and answers.
1:01:31
Thank you so much for joining us today.
1:01:33
Certainly looking forward to your upcoming book on schools of economic thought and
1:01:36
famous economists.
1:01:37
>> Tyler Cowen: Great to chat with you, and we'll be in touch.
1:01:39
>> Jon Hartley: Today, our guest was Tyler Cowen, who is a professor of economics
1:01:43
at George Mason University and the faculty director of the Mercatus Center,
1:01:47
as well as the co-founder of the popular Marginal Revolution blog.
1:01:51
This is the Capitalism and Freedom in the 21st Century podcast,
1:01:54
where we talk about economics, markets, and public policy.
1:01:57
I'm Jon Hartley, your host.
1:01:59
Thanks so much for joining us.