Inequality, Productivity Stagnation and Moore's Law | Tyler Cowen

Thank you all for coming. What I'd like to do tonight is give you my big picture take on the world economy. So, what's going on in very simple, you could say oversimplified, Macro terms. How should we think about some of the fundamental trends in the world? Why does politics today in so many countries feel so weird? What are the biggest challenges? And what are the things we need to do to create greater liberty and improve people's living standards? And I'm gonna try to tie all those huge topics together in really a pretty simple account. Here's what I take to be the most fundamental fact about Western economies since the '70s or '80s, depending on which economy we're talking about, and that is declining productivity growth. And here you see data for a number of Western economies plus Japan, and this is a fairly evident trend that productivity growth has slowed down.— it has continued to be slow. So just to give you an example, if we look at— Sethi, nice to meet you. —a variable total factor productivity growth, in the 1920s or 1930s, that was often as high as 3%, or it was at least 2%. If you take the last few decades, very often total factor productivity, it's about 1% or 1.5%. Say, smaller set of advances in new ideas. And intuitively, this corresponds, I think, to a common sense of how the world has changed. And, you know, the classic story here is that of my grandmother, who was born in 1905, which is now some time ago. When my grandmother was born, about 6% of Americans graduated from high school. Forget about college. Most people lived on farms. Clean water, electricity were up for grabs. It was a completely different country. There was not even radio, right? So take the first 50 years of my grandmother's life. You get to 1955. What does America look like? There's not only radio, you're starting to get TV. Cars are very, very common. They were not at all common in 1905. The proverbial chicken in every pot, car in every garage, middle-class America is well underway by 1955. And every aspect of the world, movies are a common thing. Every aspect of her world changed in a radical revolutionary way. In her first 50 years. Now take myself, I'm her grandson, my first 50 years. So I'm born in 1962, and by the time I'm 50, well, that brings us basically to 2012. Uh, when I was a kid, my mom took me around in a car. I still drive a car. Uh, there was radio and TV. There's still radio and TV. We have a lot more programs. We have satellite radio. It's much better, I think. Uh, there's computers and the internet. That's a really big change. I'm gonna come back to that. But if you put aside computers and the internet, it's remarkable how much less are the changes. And that's what we mean when we say that rates of productivity growth have been lower. My country, the United States, is built upon a myth, a myth that was once true, that basically every generation or two living standards will double. American politics is based on this idea. American culture, our norms about opportunity and mobility were shaped to a large degree the 20th century, the late 19th century. And we had that society. But since the 1970s, the early 1970s, those rates of progress— again, computers aside— have largely slowed down. So there is a big disjunction between what people expect and what they're getting. And furthermore, American institutions— you see this in our rates of savings, indebtedness, our government's budget deficit, our total our current level of debt, which is many trillions. It is astonishingly high. They're all based on the premise that tomorrow will be so much better, we can basically do what we want and then make up for it later. But for some time now, we've been living in a world where it's not always such a guarantee to make it up later. There is one group of people in my country, in your country, that can always make it up later. Those are the successful people who do tech, who earn phenomenal, or at least high amounts, uh, start businesses based on venture capital and a lot of promises. Most of these businesses fail, but the total gains from the ones that succeed are so high, you can just keep on playing this game again and again and again. This game itself might at some point end,. But so far it is not close to ending. And this year is like, oh, year of the IPO. Uber has an IPO. Lyft has an IPO. Not over yet. But for most of America, this is really a centrally important picture. And it is this compared to our expectations. So if you think of a country like Denmark or Japan, They have lower rates of productivity growth than they used to. They are managing their expectations accordingly. They're saving more. Uh, they don't have the expectation that tomorrow will always be much better. Now, to show you another picture, this is one of Israel productivity, and this is productivity growth. Productivity growth in Israel also has been problematic. Again, this is not at all true for the tech sector. These numbers are highly imperfect, but a way to think about standard of living issues, which are extreme, especially here in Tel Aviv, if you just think what's the ratio of rent or a home price to a typical income, and I don't mean a successful tech entrepreneur, That is a major problem. So the American economy, the Israeli economy, most Western and East Asian economies have serious problems with increasing their rates of productivity growth. And what we see happening is there's some set of scarce factors in Tel Aviv and San Francisco. That scarce factor is land. Land earns more and more of the surplus. People's real standard of living does not grow as it ought to. People are upset. Politics becomes weird. There's a sense of opportunity disappearing, not for everyone, but at least for the median voter, for the typical individual. Our real wage gains can be very hard to come by, or people will just have wages that more or less stay the same. But the rent goes up every year or two and they feel worse off. And I think, you know, just in its simplest terms, like what now is the crisis of the developed economies. That is how I would explain it in the simplest possible terms. And so much of the productivity stagnation comes in the area of services. So here I know the American economy much better than the Israeli economy. But if you look at, say, American healthcare, we don't even actually try seriously to measure productivity in American healthcare. What does that tell you about productivity in American healthcare? American healthcare costs about 18% of GDP, which I believe is the highest in the world. The last 3 years we have had declining life expectancy. How's that for progress?

Declining.

Uh, I don't necessarily blame our healthcare system for that, but it's a sign we're not making as much progress as we ought to. Or take elementary K-12 education in the United States. It costs a good deal more each year. A lot of that is labor costs. Are teachers getting better? Again, it's hard to measure. The way we measure this is by test scores. I'm not sure that's the right way, but it's a pretty obvious way. U.S. test scores over time, they're going up a little bit, but compared to how much more we spend, it's a very unimpressive performance. So you look at healthcare, you look at a lot of education, college education, which has been my sector my entire adult life. Even before I was an adult, I was like a participant. I went. So I see this every year, every day. Is it more productive? Frankly, I don't know. My students can email me. That's a big gain. Uh, I'm not sure how much it matters. If I think, what other productivity advance is there? Well, I go to class, I can show them a YouTube video. They like that. It's fun. Is it more fun than listening to me? Yes. Is that a big productivity gain in terms of learning or entertainment? I'm not sure. So you have really significant sectors. If you measure productivity in American construction, building things— again, these are imperfect measurements, but as we measure it, productivity in American construction is actually going down a small amount. So we have a lot of sectors that are failing us. Just some common sense comparisons. You want to fly on an airplane, right? You want to fly from Washington, D.C. to Tel Aviv. There is sometimes, but not always, a direct flight. I'm always disappointed when there's not because there's no easy, nice place to stop. It's not laid out that way. Right. So if you have a direct flight, it takes about 13 hours or a bit more than 13 hours. If you go back to, say, 1970, and, you know, until like 2 years ago, we were flying planes designed before 1970. But how long did it take in 1970 to fly from Washington, D.C. to Tel Aviv? Well, about 13 hours. How much better is the airplane experience? Again, hard to measure. There might be less seat space. That's a negative. You might need to spend more time in security. To get on the plane. The drive to the airport, there's more traffic congestion. When you're on the plane, you might, depending on the airline, have Wi-Fi. That's a productivity gain. But it's remarkable in a way how much the experience has not changed. And in some ways— sorry? The price is completely different. Price is different. But in terms of real productivity, is it a better experience?

If you need to pay for it less, then yes. The productivity. The productivity.

Increased. But the quality— You get the same for less. The quality improvement is very low. In an economy that is supposed to be making big advances in many sectors, a lot of basic things we do are not getting that much better. Our ability to cure the common cold, not obvious that it's better since 1970, right? There are things that are cheaper. You can Google what to do about the common cold. But technologically, there is a stagnant element to a lot of our services. Yes?

Do you expect exponential growth in home appliances forever? Like, you had exponential growth in home appliances from 1905 to 1955, as described. It reached a certain saturation. Tech has become better, but not exponentially better. And that's it. You have exponential growth now in the internet, in computing, right? Electricity was huge. Sewage was huge, water was huge, home appliances was huge. Now the internet is huge. All the other stuff are better. So they stopped being huge, and that's okay. Why do you expect the home appliances to become better from now to 50 years later than they have become already?

I'm not sure expect is the right word. I don't necessarily expect it. But if you are trying to sustain economic growth with a small number of highly innovating sectors, you will be disappointed. So in the 20th century, communications has revolutionized repeatedly and frequently. Today, communications is being revolutionized, but many other sectors are not. So I'm not saying I expect it, but that is the way to think about the dissatisfaction with the current moment, that we're not building such a bigger, bolder, brighter future as we thought we were going to. And to now turn to computers, if we think about where are we seeing productivity gains, the final piece in describing today's economy is to consider the tech sector and offshoots of the tech sector. Where you have phenomenal gains, many of which are due to Moore's Law, but some of them are just due to, you know, new ideas for products and building networks and building platforms. And you have this highly skewed set of advances in technology and productivity. So you have some group of people who are earning phenomenally high amounts, which I do not begrudge them at all. And then you have a large middle class, typically with relatively stagnant wages. And if you look at the United States, it's striking how much of the measured wage gains are coming from women who are better educated, which is great, facing less discrimination, which is great. But if you look at measured male wages at the median, they are not higher than they were in 1970. Not higher at all. Now, it's fine to say that measurement is misleading. Today we have free goods. You can read Wikipedia for free. The quality of the air is much higher. That is a very real benefit. It doesn't show up in GDP. The full value of that is, is really not measured at all. But nonetheless, when you have wage stagnation for so long, your vision of what progress looks like, it's very different from the 20th century vision, which was a pretty even advance for most income classes over time, and that most people would find, you know, one generation was much better off than the previous generation. So when the productivity advances are so skewed, you're basically in a world where you have a smallish number of people who are fantastically better off, and then other people, you know, it depends, but on average they're seeing only small gains. This is, I think, in some ways a description of Tel Aviv, but it is also a description of much of our world. And one way I put this sometimes is just the basic question you can ask yourself: are you working with tech or are you competing against tech? If you have been competing against computers, probably you have been losing. So the 1980s, you had a large number of jobs, basically people who filed papers in offices. Most of those jobs are gone. They exist in some different forms, people who do software. It is a smaller number of people The people who do software may be paid more, but there is less of a middle class from people who, say, file office paperwork. If you were in the 1980s a travel agent, there was a large number of travel agents in the United States. They would book flights for you. It was a normal middle-class occupation. Uh, today there are still travel agents. They tend to be a boutique service. You want someone to design the perfect African safari for you, and know which lodge camps you should stay, and you want like a birthday cake for your daughter on week 3, and someone plans that. There are still travel agents, and some of them make very good money by being this boutique service. But nonetheless, software automation has replaced a lot of those jobs. So this basic question: are you working to complement the computer, or are you competing against the computer leads to a very different income distribution than what we saw in a manufacturing-based economy. If you take a typical manufacturing job in the 1960s or 1970s and you ask how many of the eligible workers could be slotted into that job, did you need a college education, for instance, to have that job? Typically not. You needed to work pretty hard. Not show up drunk, do what you were told, you needed training, a company might retrain you if you needed retraining. If you ask what are the cognitive requirements today for working effectively with technology, they are much higher than the cognitive requirements for old-style manufacturing jobs. And arguably, the rate of retraining The rate at which you need to retrain yourself is much higher than it used to be. So if you ask the simple question, how many people in an economy are good at retraining themselves? Uh, that is a fairly small number. And so you end up with a situation where a fundamental feature of your economy, because the productivity gains are skewed across sectors, is simply very high income inequality. Uh, everyone has their favorite graph for demonstrating income inequality. Uh, this is one of them. It shows how fundamental income inequality is. One thing this shows, this graph, is that even within the top 1%, the top 1% of the top 1% are earning much more than just the top 1%. So when people say like, "Oh, the top 1%," or "We are the 99%," common American slogans, but like even within the top 1%, the big winners are leaving behind the other members of the top 1%. So there's a fractal nature to a lot of this inequality. And this, you could take it as a sign of the world being more winner-take-all, You could take this as a sign of higher returns to genius or super smarts. But if you just think about it, if you invent a new thing in information technology and you either own the intellectual property or you build some kind of platform or system, you're the first person to the market with a high-quality product, uh, you earn really extraordinary amounts. So you'll see in the popular press Claims that Mark Zuckerberg, who is still quite a young man, is worth about $70 billion. Uh, I don't know if that's exactly an accurate estimate, but as a ballpark estimate, it's pretty close. And, uh, this graph is showing we are living in that world where there's this mix of middle class stagnating somewhat, uh, very wealthy people, doing extraordinarily well. And the dividing line behind much of this is just the simple question: are you benefiting from the sector with the huge productivity advances, which is tech broadly construed, or are you just seeing, you know, fairly stagnant wage development? So to move—

yes, question. The first graph that we saw was— yes, with the decline in productivity. Yes. Yeah, so I see that in both your novels, this one and in the other one, there's something about the late '60s, early '70s that's like the year zero for when the world changes. That's right. Is there anything that we point— that the academic community points to that this is what happened, this is when we reached our peak and why?

What he wants to know is what does it look like if we go left, does it look more like the right part of the graph or the left part of the graph?

If you go left, the 20th century, you know, variables during World War II, I don't think you can interpret them one way or the other. But the 20th century earlier parts are very positive.

So there's no correlation between the first one and the second one?

The breakpoint in American data is exactly 1973, and we don't know why this is the case. It is often argued that 1973 is a breakpoint because the price of oil goes up a good deal because of OPEC and the embargo. That might be true. But since that time, price of oil, you know, in real terms has fallen a great deal and productivity has not bounced back. But at least in the short run, that seems to be the relevant shock that hits, of course, you know, most of the developed world. But why that persists the way it does, I suspect what's going on is just we had this earlier set of technologies like machines plus fossil fuels, and we did everything with them we can. Like you mentioned, you know, how much better can your kitchen appliances get? I cook in a kitchen from 1960. They added a microwave oven before we bought the house, but it's a 1960s kitchen. My wife redid it like a year ago, but the, you know, it's not that different from the old 1960 kitchen in terms of what I can do.

So So the evidence is pointing to stagnation in technology as opposed to social factors like World War II, Cold War, ideological philosophies that are coming in and out of style?

Quite possibly. And then we exhausted the old system of doing everything possible with machines. So we built cars, we built planes, we built, you know, very fast boats. And then at some point they're only getting a little bit better and we're waiting for the next big thing, which might come. And since that time, productivity is mostly slow. Question?

It seems to me that the reason is the regulatory expenditure of the early 1970s because this is the time you have a big booming regulation, the EPA and other agencies, and this is something that is still with us. It's not like the oil crisis, and this is a real cause for stagnation.

We regulate much more. I think that's another factor. Behind the stagnation. I don't think that explains why it pops up so suddenly in exactly 1973, but I think it's a general reason why productivity growth has stayed pretty slow. It's hard to prove that. It makes intuitive sense. Some of it may just be greater wealth, that a lot of people, if they don't work that hard, they live well enough that they don't feel, you know, challenged in the way that, say, immigrants to a new country might feel challenged.. They either have to succeed or they totally fail. So as accumulated stocks of wealth rise, it's possible motivation of many people goes down. Uh, that's hard to prove, but again, it's at least a possible partial explanation. It's interesting if you ask since 1973, when do you have really good productivity numbers? Uh, by far the best years for the United States are 1995 through 1998. Where productivity is like in the good old times. And people were very happy in those years. The labor market was great. You had real wage growth. And when you dissect that productivity growth, it comes mostly from information technology. Even a fair percentage of it is driven by Walmart. And just using IT to reorganize inventory control and basic management of business gives you a bunch of years of excellent productivity growth, wage growth. And then oddly, it mostly disappears again. And even though we have a lot more tech in our lives, it's yet to show up in the productivity numbers. And that's considered a major puzzle. It feels like our life is very different because we have this thing, right? You spend a lot of time with it. Maybe in some ways it makes you less productive. It distracts you at work. Maybe it makes leisure more fun than it makes working productive. It's not obvious what's the net productivity impact, like, of mobile devices and complete connectivity of everything all the time. Maybe a negative. It's hard to see it as a positive in the numbers. And the thing that was the big positive was a mid-1990s development that came mainly to businesses, and people at— most people at the time were unaware that something was going on. Basically, Walmart was working miracles with what we now would consider primitive computers. This, you know, iPhone in the middle of the 1980s would have been the most powerful computer in the world. And now we basically all carry one around. You would think that's a phenomenal breakthrough and maybe it still will be, but it might just be fun. It might be partly addiction. It doesn't yet seem to be productivity. And that too is an essential feature of the modern world, that the breakthrough we're most obsessed with, this one, is not obviously a positive. Like, how many of you here have one of these on you? Probably most of you do. You can get these reports now. How many hours a week do you spend with it? It's usually scary, right? So, yes?

You talked about inequality, but when you think about increasing productivity, expanding Charlie Collins maybe with —firing more people if it's like if machines can do more things. So what if like you imagine, okay, we're going to be so much productive, but like one person can do what 100 people would do more.

So we should also think about the price of increasing our productivity when we talk about it.

I think that's another way of saying the gains from the productivity are skewed. So like wages for managers, have gone up really a good amount. Wages for supervised workers have gone up much less, and that's consistent with what you're saying, that maybe information technology helps managers in essence fire the right people, or fire people and replace them with machines, and that will make a good manager more valuable, but it won't make a good worker more valuable. It makes a good worker more dispensable. Another factor in this equation, the rise of China. So a way to think about the productivity of information technology is that it has made China, the rise of China, possible. So obviously in the 1970s, China, still a very, very poor country. Measured per capita income there, I'm not sure this is accurate, but Comes in at about $200 per person. Obviously, that's not very good. And there's a breakpoint with China. And you can think of China as an information technology revolution. So one way of thinking about the world is our brilliant IT developments are mostly benefiting emerging economies, which is wonderful for them. There's no doubt the performance of these economies has been phenomenal. Not only China, but China most visibly and at the largest scale. So one way to think about this is that if you're a manager and you have information technology, you can manage an empire with, with much greater distance. So you can have a supply chain in China. If you think about an iPhone, its components are made in about 16 or 17 different countries all over the world. The ability to do that, which is fairly new in human history, is possible only because of information technology itself. So it starts with the fax machine, it then moves to email, it's now just generalized ways of communicating at a distance very rapidly, sending data at a distance, measuring, controlling your supply chain, improving it. It seems all of that has led to a great outsourcing of investment., and our innovations have gains which are not mainly captured domestically, but they're captured by lower-wage countries. Those lower-wage countries which manage to create a predictable enough environment that they bring in enough foreign investment, or they do their own investment based on information technology. Uh, so that too seems to be a plausible story, but I think information technology lies behind the Chinese miracle in a number of other ways as well. The Chinese fundamentally revolutionized autocratic government. And I think they learned this in large part from Singapore. It used to be the old-style Soviet economies where my wife is from. She grew up in Moscow, left in the early '90s. Old-style Chinese economy. Basically, people weren't happy. They would wait in line for hours They were frustrated. The governments dealt with this by just repressing people more. You know, it was illegal to have a Xerox machine and so on. There were samizdat copies of manuscripts. It ended up breaking down. The current Chinese approach, which really dates from the 1980s, is to actually poll people under communism, find out what they want, and give them much of it. It sounds self-evident. But probably the single biggest social or institutional breakthrough in the last 40 years is simply autocratic governments using polling and other ways of collecting information and deciding to be somewhat accountable. It doesn't mean they give them celebrations of, you know, Tiananmen Square massacre or like free and open discourse about Tibet or that you can say anything you want about, you know, the great leader. But on most topics, there's actually a lot of free discourse in China. A lot of Chinese people, if you speak to them, they will tell you, "Oh, discourse in America feels so stilted. There's so much you can't say. It's not as open and frank as it is in China." They're not right on every issue by any means, but on a lot of issues they are. And you could argue that on many, many public service issues, the Chinese government is way more responsive to its citizens than is, say, the United States Congress or the United States President or even a lot of local mayors. So the idea that autocratic governments would measure citizen preferences and respond to them, I think, is a huge breakthrough, and it's what has enabled those countries to capture the gains from information technology. So another of the fundamental dilemmas in the world we live in is simply America has a new main rival, which is China, which is growing and powerful. They're still growing probably at about 6% a year. And this leads to a geopolitical clash, but it also means there's a lot more Chinese competition at many different parts of the supply chain. It can hurt middle-class wages in many countries all the more. You have a lot of countries, you know, even a small country like Portugal, a country like Greece, they have radically deindustrialized over the last several decades, had a lot of economic problems. Much of that is due to China. It simply makes more sense for a lot of things to be made in China. China tolerates much greater pollution, has an incredible skilled workforce where you can mobilize large numbers of people pretty quickly. Chinese education system is good enough. At its peaks, it can be pretty incredibly good. Uh, Chinese workers seem at least to be good enough. And so if you're just thinking about, like, what are the key variables in the world over the last few decades, for me, it's fundamentally a technology story. A lot of stagnant sectors, a smaller number of super dynamic sectors, and that in turn has reallocated the geopolitical balance of power which creates yet this new set of problems. Call them like the China problems. And voters don't like that either. So if you think about the United States and you want to understand why do American politics feel weird, America feels it's lost status in the world. Like our GDP is a percentage of global GDP just keeps on falling because other countries are growing. America can't boss the rest of the world around so much anymore. That frustrates us. We don't quite like to admit it. Significant parts of America— manufacturing jobs, middle class— is hollowed out due to sometimes foreign competition, due sometimes to automation. And then combined with that, you have stagnation in a lot of service sectors and you have this extreme income inequality because the tech winners are earning these phenomenal amounts. So people see this and they were taught this myth of like eternal 3% progress every year for everyone, and they're not getting it. And just like with Brexit, uh, people start choosing different things. They don't necessarily think instrumentally, rationally about what they're choosing. They start making different choices. The different choices don't necessarily work. And then they cycle around through the political spectrum looking for something which will cure problems that at least in the short run are not very easily solved. So you have a discontent with politics, somewhat a dissolving of the center. Radical ideas on left and right become more acceptable again. People just aren't sure what they want. If you recall the Brexit negotiations, I think Theresa May had 8 different plans for Brexit. 8 Brexit plans, my goodness. What a plethora of innovation. And each one of them came up through Parliament. And as I think you all know, how many of those 8 plans won? Zero, right? 3 years ago they voted for Brexit. Still no Brexit. 8 plans, they're all voted down. We still don't know what's gonna happen. That's crazy. And you know what people used to say 5 years ago? They used to say the British have one of the best system of— systems of government in the world, and they're not wrong. But if you look at the pattern of British productivity, British wages, it's a slightly different story from the American story. But a lot of the fundamentals are the same. A lot of wage stagnation since the crash of 2008, 2009. Median wage in Britain has gone down and stayed down. Doesn't not appear to be bouncing back. And if you walk around London, I'm sure many of you, maybe all of you have been there, it's remarkable how many non-British people you see. They're typically quite wealthy. There are also poor immigrants, but large numbers of wealthy Russians, wealthy French, Americans, people from all over earning a lot more when British Wages at the median have been falling. Northern Britain being sort of torn apart by deindustrialization. People are upset and they're cycling around politically. And typically, as in the United States, as in most countries in the world, when you have big problems you cannot solve, who is it you blame? You blame the foreigners. So in the US, China is blamed and immigrants are blamed. Right, so Trump, his two cards are China and immigrants. He's remarkably articulate. He's the most powerful orator, American orator, like I've seen in my adult life. And many people hate him, but he is controlling the terms of debate because people are looking for something different. And if you ask who grabs the attention, it's Trump. Some things about him you might like, you might not like, But just who are people talking about every day? It's Trump, Trump, Trump. My wife talks to me about Trump. It's like I say to her, don't talk about Trump, like talk to me about China, about anything else, but it's Trump. So I think right now we're in this moment. The old style of politics doesn't appear workable. No one is quite sure what will replace it. And what you would call the intellectual class people in media, they're just extremely nervous in the well-to-do countries because they know the old-style politics is not working. They know their influence that they had, their hierarchies are dissolving. That you can have people like become YouTube stars and be much, much more famous than who we think of as the normally famous people. Uh, I was speaking in Korea not that long ago, and there were two British guys there. They were speaking, and they were by far the most famous people, uh, at the conference, which had, like, famous economists or, like, famous scholars, some leading Korean politicians. And here were these two British guys. They were maybe 30, and they had created a YouTube channel which focused on what do British people think of Korean culture, typically Korean food, when they try it. And like every week they would make several videos like British people like dealing with Korean culture. And they showed some of the videos like it's really fun. They have 10 million subscribers and the crowd went wild when they came on stage like to a degree far beyond the reception of any other speaker. Including like the famous scholars. British people like eating kimchi. And ew, I don't like this. And sort of slapstick about British people, Korean culture. And they're phenomenally famous. So like what happened to the old gatekeepers? So politically everyone is flipping out. And then these platforms like Facebook, YouTube, other places, Twitter, they really mean almost anyone can communicate their ideas. To a broader public. And that makes media nervous in the advertising market. Facebook and Google have beaten out, you know, traditional newspapers pretty soundly. So if you read the New York Times op-ed page, probably some of you do, like almost every day there'll be an op-ed criticizing big tech. I think today there were like 2. That's not unusual. The biggest target of the New York Times Now also the Financial Times, other than Donald Trump, biggest target is big tech. And there's a major movement underway to break up Facebook, Google, Amazon in the United States. So one way you can respond to these problems, well, you can demonize foreigners, but you also can demonize the winners. And who are the winners in this world? —of strongly concentrated gains in productivity. The winners are the tech sector. Who are the biggest winners in the tech sector? Facebook, Google, Amazon, right? Jeff Bezos, before the divorce, was at least the Western world's richest man. I'm not sure he was richer than the ruler of UAE, who controls a sovereign wealth fund worth, I think, $1.3 trillion. Like, he might be the first trillionaire ever. But, like, in the US, Europe, Jeff Bezos, I think it was, what, $130 billion? Now I think divided, I forget the divorce settlement, but he's not the richest man anymore. He's one of the 3 or 4. The richest woman now. Well, she is one of the richest women. Laurene Powell Jobs, the widow of Steve Jobs, is I think the richest woman, but she's giving her money away to charity. But in essence, another villain or demon in this story becomes big tech itself and corporations. And partly I wrote my book, Big Business: Love Letter to an American Antihero, to in essence defend the role of big tech in the American economy. For me, it gives us pretty amazing stuff for free.

Yes. But when you talk about it, you— what about antitrust law? And like, it's not about the villain, it's about What happens when you— I know it's like a crowd that doesn't love regulation. But what happens when you have nothing and this deregulation maybe makes the small businesses not— I don't know how to articulate it. But maybe we should do something about four, I don't know, big powers that —don't spread their— it's not money, it's— you get the point.

No, I get what you're saying. This is an increasingly common view. But keep in mind, Google, Facebook, they are not traditional monopolies. Traditional monopolies restrict output and raise price. If you look at their platforms, you can use those platforms for free. They don't restrict output for anyone. In the advertising market, they charge lower prices. They do for advertisers.

Facebook raised advertising fees by 300%.

Well, it's much, much cheaper than advertising without Facebook, where you would advertise on TV or radio. So Facebook rates have gone up, but you're reaching more people, the targeting is better. But compared to what the world was, small businesses then couldn't afford to advertise on television or radio. So Facebook, Google, even Amazon, they're actually in a sense broader anti-monopoly engines because they give small businesses a way to reach customers in a targeted manner. Like, I run a website of free economics videos on YouTube, and I've used Facebook to advertise pretty successfully. It didn't cost me very much. It helped jumpstart, you know, my website. So even though the companies are dominant in a particular platform or networking area, their net effect on the economy is to help a lot of smaller businesses. Take Amazon with cloud computing. You're doing a startup, so much of what you wanna do, you in essence can do through Amazon or another cloud computing supplier. Makes it easier to create startups, do things in the small business space. So I think those companies do a lot of things which break down monopoly And then from the consumer's point of view, it's a great deal. And if you look at advertising, there are still all the old ways you can advertise. They just cost too much. And like Facebook, Google are much cheaper than, you know, how the world used to be. So I'm pretty positive on those companies. My main reservation, which I would regulate more, is privacy. It's a bit beyond the scope of this talk, but that to me is a legitimate concern. I think we could do much better on that. I don't think it's easy to regulate more privacy. Part of the problem is the users themselves don't seem to care. So when you try to regulate privacy when people just wantonly give away all their personal information, it's very hard to make that work. So I'm not that optimistic about how well privacy regulation would go, but it is something I would work much harder at and do better. But the companies themselves, they have become like the third target. One target, immigrants. Another target, China. Another target, the major tech companies. Now to refer a bit of this back to Israel, which I am not at all an expert on. I've only been here 3 times. But it seems to me these developments are likely to all impact Israel. Your immigration issue is so totally different from ours, I'm just going to leave that aside. But I would say this, the rise of China is going to force Israel to make a lot of difficult choices because the current American strategy is to push smaller countries to choose. Are you with America or are you with China? And the optimal outcome for most of these small countries, including, I believe, Israel, is to be friendly with both. So you do a lot of business with China, but America is your main ally. And you have a very positive, albeit emotionally highly complex, relationship with the U.S. And you just sort of expand on all fronts at once. That is the ideal, I think, for Israel, for most people. But to the extent America makes you choose, and it is America making you choose, it's not China. If America says, well, we're keeping the Navy, you know what, the Sixth Fleet in Haifa, and you have a port with partial Chinese ownership and possible surveillance, and furthermore, we're sharing intelligence with you all the time, so you can't use Chinese piping from Huawei because it will all leak back to the Chinese government, and America is sending this message to countries around the world and in essence making them choose. Uh, that is maybe the single biggest thing going on in the world right now. It is relatively new, a development over the last 6 months, but it has been a long time coming. And, uh, Israel will have to finesse this a great deal, but ultimately I think it means Israel will not get its ideal outcome of just trading openly with China and being as friendly with America as possible. Other smaller countries like Singapore— strategy of Singapore is to be totally friendly with both China and America. America is trying to force Singapore to choose. There's a great crisis within Singaporean government. What are we going to do? Because they cannot live without close relations with both major countries. So I think we're seeing the world splintering. I think we're seeing the internet being splintered and Balkanized and carved up into different parts. I think there'll be a Chinese tech world and there'll be an American tech world. I'm pretty sure Israel will be closely connected to the American tech world and not the Chinese world for obvious reasons, reasons which have been in place for a long time. But this will be a major change to the global order. There will no longer be a pretense that there's one global world order that everyone is trying to integrate into. It will be— lots of hard choices have to be made. You'll always try to finesse them. You'll always be trying to stall us. Probably you'll succeed because Israel is more focused on Israel than America is. So you will like stall the hell out of us. Probably do pretty well. We'll always be upset and frustrated and irritated. There's a longstanding tradition in Israel. There's a big problem, you just kind of keep it manageable. You know, we can never solve this problem, but you keep the flame burning low, you stop it from exploding, you just keep on going. Israel's tremendous at that, right? And you're going to be tremendous at stalling the United States. And we'll always be upset and it will feel bad.

Yes, the one who will be installing the United States is the European Union. Them too. Which does not— they do not bend well to American will, especially not in tech, because they have a huge tech market. Yeah. And it's not like America can just do whatever they want.

It's not a small country.

Yeah. So, and that's also a big player. Yes, they're not counted as one of the major powers, but they are.

They are. I think the US-EU alliance is essentially over for this reason. The European Union is saying no. Germany says we're willing to use Huawei for our piping because it's cheaper and will be in place more quickly. And America is saying, if you do this, we won't share intelligence with you. And I, I know that NATO on paper still exists, but I don't really think it's a functioning alliance anymore. And that too is fallout from these other developments coming from tech, power of the tech sector, following rise of China, the resulting impact of that on geopolitics. And the idea of NATO as a thing, I think, is more or less dead. And the American view is, well, Germany, they won't even spend money on their own defense, but they send all this money to Putin for gas, and then they expect us to protect them. Which Trump just hammers on again and again and again. I think Americans, even if they don't like Trump, ultimately they mostly agree with him on that. Like at this moment, the anti-Trump forces refuse to say they agree with Trump, but I think in American politics, Trump has won that argument. And like the alliance with Europe, it's purely opportunistic. There's in a way nothing left there, and that to me is a little dangerous. So where do we go from here in this like new weird crazy world based on tech being full, you know, full of super high-powered growth rates and a lot of other sectors being pretty stagnant? Yeah, here's the slide. Where are we headed? Obviously, I don't know. I'm optimistic, and I know that sounds like a scary picture of the world. It is a scary picture of the world. But here's what I think, like, the new program for liberty should be. First, we should allow tech innovation to proceed. I don't want to take down the big tech companies. I think they've been one of the bright shining stars of the American economy. But I think also tech over time will make our other sectors much more productive. So you asked a while back, well, how much better can kitchen appliances get? They're still not getting better. But I wouldn't be shocked if 20 years from now you actually had major advances in tech, something like a robot that cooks for you. Not right around the corner, but the kitchen of 20 years from now could be very different from the kitchen I have today. After like 50 years of kitchen stagnation, I think kitchen stagnation is about to end. I think automobile stagnation is about to end. Healthcare stagnation, I wouldn't say it's about to end, but again, I think within all of your lifetimes, tech will infest healthcare and make it much, much better. Tech maybe will greatly improve education. That to me is a bit more of an open question. It's just hard to force unwilling minds to learn. That's often the problem. I'm not sure tech will easily solve that. But the optimistic scenario, which I believe in, is this extreme divergence of productivity growth rates will not be so radical. They will converge as tech is more and more not a separate thing, but tech is in every sector of the economy. So the very success of tech will mean just many things become cheaper. Living standards go up as healthcare, basic services, whatever, probably improvements come to a large number of those areas, and we go back to having a society where every year most people are considerably better off. That is my optimistic vision. I know it is speculative, but that's what the optimistic case looks like. Yes? starts before the first slide.

Yeah, because your first slide comes along and says, wow, productivity growth is really going way down. Yeah. And what we're expecting from our economy is that the economy is going to keep on growing. Yeah. And I will preface my statement saying that I'm an ultra-orthodox Keynesian, and I'll go back to a speech that Keynes gave in about 1930 called Economic Prospects for Our Grandchildren. Sure. Well, what you're taking for granted— your narrative, I'm not taking you me personally, you're now taking for granted what we expect from our economy is to keep on growing and keep on raising living standards. And what Keynes took for granted— he had an audience, it was a lecture— is that what we want for economy is to give us a humane standard of living. He says we're about to solve the economic problem according to the narrative that's before your first slide. We could never solve the economic problem because we're always having to keep on growing. We can never solve the problem. Kings took for granted, and apparently the audience took for granted, that we— this had meaning to them. We just want to get to a certain place. We get to the place, we can move on, and then we can stop thinking all the time about the economy, stop thinking about our standard of living, and we can start turning attention to things that are really important. Yeah, like YouTube. Pardon me? Like YouTube. Well, he apparently came from Christianity. I mean, he wasn't a very devout individual, but apparently It's not exactly easy to say where he— he thought it was very difficult to try and deal. He thought this was going to be easier to be worried about the economy all the time. But maybe that's the problem. Maybe the problem is not that our economy is not giving us what we expect. Maybe the problem is that we are looking at the— our deals have now been so focused on our economic success or our relative economic status that this point of view that— in this lecture, Keynes basically makes fun of the point of view that your narrative is based on. Jam tomorrow. He says, oh, some people think that we can never be happy because we have to jam tomorrow, jam tomorrow, jam tomorrow. And he makes fun of this point of view. And now if your narrative is explaining what people are doing, then apparently we've gone way beyond that. And basically we have done a very bad job of what Keynes think we're supposed to be doing, which is to, you know, to allow— to basically enjoy the fact that we can now, you know, have computers do all the stuff for us and concentrate on the important things.

So I think— I get that point. I once wrote a whole paper on that essay by Keynes, but I think Keynes was wrong about human nature. Parts of France, parts of Germany, parts of the Nordics where people take gains and they convert them to working 28 hours a week and just having a life which is good enough. And they have higher savings rates, more fiscally responsible governments. They're not playing global policeman. They're not trying to push back against China and Russia and defend Japan and Taiwan and do whatever else the US does. And maybe that is better, but I just don't think that will become the world. As long as you have countries like China out there, it's hard for everyone to be Denmark. Because the end result can be pretty unpleasant. So I think we're in the growth game whether we want to be or not, I guess. But I fully take your point. There's something crazy about it, right? Was there another hand up? Yeah.

So I would say that your last point about the difference between Denmark's expectation of life and the Americans' expectation of life American expectation of life and the Chinese expectation of life, it's different. So, and the point I'm trying to get at is that I'm half in disagreement with you and half in disagreement with the previous comment where I think that the truth is in the middle. So the United States culture is much more of chasing productivity or chasing the status. It's a culture that wants to work harder and wants to be wealthier and wants to have those Instagram, right? They want everybody to see that I'm successful and I have the wonderful life that everybody covets. And in Denmark, it's not so much, not so much of an issue. And within the countries, you're gonna get, I think you're gonna get the divergence that you see. That's where you see see all the decline in productivity because some people in America, they see, okay, this is the world of opportunity, I'm gonna work as hard as I can to, to reach the top of the pyramid. Yeah. And there's a bunch of people who are the majority who don't care so much about living the perfect life. So the productivity, you can see it increasing for this sector. Yeah. And you can see it stagnating for the rest of the, rest of with people. Yeah. And it's fine. I mean, you don't need to have a vision that has productivity at the center for everybody and for everything to rise.

I sort of agree with that, but I would want to stress this point: it depends on the country. So if you are a small country at the margins, it may be your optimal strategy is to be like Denmark. Don't innovate much, don't work too hard, take in free innovations from America, even from Israel, and you will have very good lives. You go to Denmark, we all, you know, great country. Ask people in Denmark, are they happy? Often they're number one. Like Denmark works, no doubt. But if you ask, can the United States do that? I think that's a very different question. If you ask, can Israel do that, given your unique geopolitical situation, I don't think Israel can ever be Denmark. There's something here that has to be driven and almost compulsive, and you even feel it on the streets, either Tel Aviv or Jerusalem, this intensity and energy. So you need some countries in the world, important ones, not to be Denmark. Israel is one of those. US is one of those. Denmark is not.

But I would say it's not a question of needing certain countries to be that way, to strive for higher productivity. Within the countries, you see that it's very much true for everybody who's sitting in this room, probably, and most of the people who are sitting in this Pushdan, in this area of Tel Aviv. And it's less so for the, for maybe most of the Haredi and Arab sectors. And not because they are failed sectors or they are not good sectors. It's because their people have different way of seeing life. They want other things out of life. They don't care so much about going and getting the next iPhone. And that's fine. I mean, you don't— I don't think that aiming for high productivity— this whole lecture is centered around improving productivity, and I'm not sure that's the right question. Not everybody wants to raise the productivity of their lives. Some are much more content, and that's fine.

You know, Haredi, they're your equivalent of our bohemian class in a sense. But even in Israel you see extreme tensions that the different ways of life give rise to different outlooks. You see it between America and Western Europe. They have now diverged in outlook so much they don't really get along anymore. And I don't think it's a stable equilibrium to have so many players defect from the growth game, especially when there's competition with what you might call nasty autocratic countries who do not wish us well, bigger problem here than probably anywhere else on earth. If you imagine Israeli technology stagnating and just waiting for the decades to pass and other countries' technology catches up or eventually exceeds, it's not sustainable.

But it's a caricature. In Israel you will always have people like us who want to— I work hard because I want to have a higher standard of living. Sure, yeah. And that's It's fine that they want it and it's fine that other people don't. I mean, you will always have those people. And it's not just the economy. So you're painting it as if China's economy rises, that's it, we're done. And I'm not sure that's the case. I mean, the United States still have nukes.

No, I'm not saying we're done. China is not going to conquer us.

I agree completely. And it's like, you've been saying it's funny, but it's not. It's fundamentally correct. If China decides that they want to rule the world, there's counterforces.

China will never rule the world, but if the United States became like Western Europe and decided to grow only 1% a year all the way out, within 20 years China would be a dominant power in Asia and our world would be much, much less free, and I think a much worse world. With much lower living standards, and the growth came. It means you get better healthcare. It means you have more opportunity. It means jobs are safer, are more creative. So it's not just sort of, "Oh, people have money and they spend it on more gadgets." It gives people better lives. It means we buy more things from places like Africa where people are truly desperately poor. Africa probably won't develop on its own. There's a thing, export-led growth. But you need the rest of the world to want to buy things. So there's so many problems out there which need innovation. Deaths from malaria are still really quite high, and those innovations are probably coming from the West. So, I mean, I'm a big fan of the growth game and the productivity game, and I get that at the margin, you know, you should let some people secede from that and they might end up being really happy. But like the world as a whole, it's— to me, it is about the growth game.

Yes. Thank you. So I'm just thinking about the earlier discussion about the drop from the early '70s to today.

Yeah.

And, you know, I'm just looking at some graphs here that show at least the United States really dramatic increases in the gold of government in the lives of individuals. For instance, I'm looking at a graph here from Mark Perry, who's from Oregon Enterprise.

Yeah, he was my student way back when. That's why I'm looking at it.

So in the late '60s, federal expenditures, 30% were direct payments to individuals. Yes. By the mid-'70s, this was up to 50%. Sure. By 2014, this is 70% and rising. Yes. So also, if you look at healthcare, you see the same thing, that I think like in the mid-'60s, like 50% of healthcare expenditures were individual out-of-pocket expenditures. Yeah. Today it's, it's less, certainly Less than 10%.

Yeah.

So we see over this period of time dramatic increases in the role of government in the lives of individuals. I'm just suggesting, you know, maybe there's, you know, it's not an accident. Yeah. That along with this we see dramatic drops in productivity.

Yeah, I agree with much of what you're saying, maybe all of it. Just to like close the formal part of the talk in terms of recommendations, repair damaged living standards. That we need to take healthcare, education, other low-productivity sectors, and just make them way more accountable, typically way more competitive, make them no longer stagnant. And that's the way to give people better lives again. There's plenty of prices in our economy, like flat-screen TVs. They're really cheap now. Maybe they'll get better, but, you know, flat-screen TVs are not the problem. The actual problem in either people's budgets or the government's budget, depending on how you finance things in your particular country. But it is healthcare, education, and getting a place to rent or a house to buy. Those are what are actually hurting people. One of the most striking statistics in the United States is simply the cost of living in an above-average school district is much higher than it used to be. And that is a big reason why people are upset. That makes people's lives much worse. That price ought to be falling over time. It is rising significantly. Buying into a very good school district— there's different ways you can solve that problem. You can make housing cheaper, you can make schools better. You should actually be doing both of those. But in essence, repair damaged living standards with higher accountability, more price— more price transparency. Have these areas act more like markets, limit rent-seeking in your economy, and through that and the spread of tech to many sectors of your economy, basically rebuild a middle class, have higher mobility, higher opportunity. That is my optimistic vision. It is a hope. It's not quite a prediction, but it is more or less what I expect. But in the meantime, people are somewhat going crazy. Politics is weird. Income distribution is something we never really expected in earlier decades. People are looking around for answers, cycling through different political points of view. China is a major issue which is not going away. It's not the world of the 1990s anymore. Neoliberalism is not really on the rise. Blaming foreigners is up. The world is scarier. All the intellectuals are unhappy. But I think, I hope, If we have a future that goes down these paths, we can restore growth and living standards again to a much greater percentage of people in a particular country. We've already had a bunch of questions, but now we open for more, I believe. And thank you all for coming and listening. And you can ask questions about anything. It doesn't just have to be about the talk. Yeah, sure.

I read a blog called The Marginal Revolution. And the last few days, there's been a number of posts saying that a lot of this so-called productivity stagnation is just a necessary side effect of the fact that a lot of our economy— more and more economy— the more that we're going to innovate in technology, the more our technology is going to be services. And services are just not going to get more productive because teaching— I read an article a long time ago. They managed to dig up a classroom from ancient Sumeria, 4,000 years ago. It's like today's classroom. What are you going to do? You teach kids to read. Whether you're in ancient Sumeria, you just invented the alphabet, or you're in Lignau. And so Alex basically thinks that there's no disease to solve. If you look at health care, if you're looking at all these things that you mentioned, if you're looking at education, he says The answer is no. You're just not gonna make a string quartet more productive.

Alex and I disagree on this deeply. Those are posts by Alex. So you look at healthcare. Physician salaries are like 8% of healthcare. I don't think the cost problems in healthcare are mainly about doctors' or nurses' salaries for that matter. We misuse technology in a crazy way. We way oversell and overinvest in procedures. Price transparency—— is complete— almost completely absent. Try to ask a hospital in the US, "Oh, I want to have this procedure. What will it cost?" No one will tell you. You can be at it for weeks. No one will tell you. It's not a well-functioning market. To me, the cost disease taken alone implies that markets will operate smoothly and with normal prices, but the bureaucratic frustration, lack of accountability in both education and healthcare to me are not captured by Alex's analysis at all. And there's plenty of parts of education and healthcare which are not that labor-intensive, and those parts still have escalating costs. So I think he's very wrong. And in fact, Friday— this Friday, I'm gonna— he and I have set aside an hour to debate this further with two of our colleagues. So I get what you're saying. It is the view of a lot of people, like, it's a serious view. There is some real data behind it. But this is my view, and I don't think Alex's view explains why people are so irritated, not just with the price, but the quality of what they get from their healthcare and education, that it's so defective. But I think there is something extra gone wrong in the sectors. A lot of it's government, as Bob said, but a lot of it— look, education is really hard, and I think I mentioned in passing before, I'm quite sure tech can improve healthcare a lot. I'm not totally sure how much tech can improve education. I think online can be a much bigger factor, but can everyone learn online? I don't know. I think more people can than are doing it now, so I'm cautiously optimistic. But just having better teachers— maybe tech will help us measure teacher quality better so we fire the bad ones, pay the good ones much more. I still think that can be done. But it's a little trickier. But again, Alex and I really disagree on that.

Yes? You always concentrate on what people feel about the economy. Yeah. So in the States, wages have been stagnant since 1970, something like that.

For men, not for women, right? Different story. Oh, okay. Yeah. But they haven't gone up very far.

In Israel, the real wages have gone up. Going up and up and up. Yeah, constantly. The past 10 years, the highest increase was at the lower classes. Yes, they've gone up faster than anyone else. Yeah, but it's not about activity, it was because of different wages. The wage— but it was not because of productivity. It was different. It was not because of productivity, but they have really gone up like real wages. And still, if you open the news, if you open newspaper, if you open Facebook, people are still unhappy with the wages. They said, they say it's expensive to live here, where actually it's cheaper than ever before, except in the center of Tel Aviv. Like, okay, open the window, get out, look, look around you. And people are still upset because that's human nature. They look on Facebook what the other, their neighbors are The grass is always green, right? So maybe people bitching about their lives, sorry, it's not a great standard of measuring life. Israel is a complicated case.

It's as if you have different layers in your economy, and significant parts of Israel are more like an emerging economy. In 1970, per capita income here was very low. It was not an economy on the frontier. And the emerging parts of Israel have done very well, just as emerging economies have done well all around the world. Is there still here a problem with the middle class where the best jobs can be in Tel Aviv or Jerusalem and rent is much, much higher even compared to other countries? It seems to me that the answer there is still yes. And the fact that you have this other layer of emerging economy that's done great, that's wonderful. But the closer you get to the frontier, and Israel's now one of the 25 wealthiest countries in the world per capita, the closer you get to the frontier, the more you will have the problems and the harder you will find it to have rapid wage growth for those lower income individuals. Because you won't just have all the catch-up that, you know, China has had, India is having, other countries are having. That is my sense from a distance about Israel. That it's very hard to talk about means or medians in the Israeli economy, way more than almost anywhere else, because you just have different groups and you need to look at them in a way somewhat separately.

But what I'm saying is, even though everyone has improved— yeah— and the poorest have improved the greatest— yeah— anyone else— yeah— the level of happiness is still the same. We don't know that. Yeah, yeah, we do. We have questionnaires. Israel is always among the top 10 happiest countries in the world, like 11 maybe. I know those questionnaires.

It's weird. I don't trust them. I'm not denying that. Because we're stupid. Israel can be happy. But the Israel of today is possibly much happier than the Israel of 30 years ago, even if the answers on the questionnaires are the same. This is much debated in the literature. I don't think the questionnaires are very good for answering time series of happiness. Happiness, or even cross-sectionally. Countries use words differently. Some countries you feel compelled to complain. You know, in Russia, if you smile on the sidewalk, people think you're a fool. It's higher status to complain. In America, everything has to be great. People in Puerto Rico typically give high answers on happiness questions. Are they happier? I genuinely don't know, but I don't really take for granted that they are. I would just say anything on happiness, interpret with a lot of caution. Yes?

One of the things I was thinking about during the lecture was, well, maybe the productivity didn't change much and the growth was very slow, but people's lives have changed a lot. Yeah. Phones did change everything, and people might be happier and living with better quality of life. Mm-hmm. Well, you could say otherwise, still, like, there have been significant changes in people's lives that are maybe not seen in the numbers, but they've been happening.

It's quite possible our leisure has gotten much better. Yeah. So now you have Netflix, maybe that's a big gain. Uh, you don't want to work that much. Yeah, it may not fully show up as a gain in GDP. Uh, that's a scenario where you're in essence eating into your future growth. It gets back to the, is it all a growth game? If it isn't, wonderful. You're just happier sitting at home watching Netflix, texting your friends. But to the extent it is a growth game, I get back to being worried if so many of our big advances are making leisure more fun and not making us more productive. We're eating into our social and economic capital.

So basically debt is the problem.

If you have no debt, it's much easier to just substitute into leisure. Yeah. And some countries do, others don't. And debt takes many forms. Israeli formal debt is much lower than it used to be relative to GDP, but you're leveraged in the sense that technologically you always have to stay ahead of your neighbors by quite a bit because the numbers are against you. Iran is there. You can't just say, oh, we have no debt, we can relax. It's a very special situation, I would say. So there's implicit and explicit leverage. Implicit leverage in Israel probably always will be very high, even when your explicit leverage is low. US has very high explicit leverage, but probably pretty low implicit leverage. You know, it seems we're pretty safe. Our neighbors are totally friendly. No one's gonna take us over. So there are ways in which we can relax that don't show up just in measured debt. That levels that you don't have.

Just interesting, personally, how do you manage to have discussions with both Jordan Peterson and at the same time people like Paul Krugman which are totally on the different sides of the map and still be a welcomed interviewer or discussion partner by both sides of the equation without alienating one of the sides. Because I know a lot of people in your position just like end up being either totally on the right or totally on the left and they can't have discussions with with both sides?

That's a very good question. I'm not sure I know the answer. I mean, my audience probably has a better sense of that than I do. But, you know, I've had like published dialogues with Paul Krugman, Jeffrey Sachs, Dani Rodrik, Larry Summers. Others, basically all like the leading left-leaning economists. And I just asked them like, would you do it? And they all said yes. And none of them have been paid either. It's not like, "Oh, we had to shell out the bucks to get Paul Krugman." Just asked him. I guess I think he thought he would get a fair treatment. And then when you do a bunch of these, if people feel the others have gotten a fair treatment, they're willing to do it too. But I'm genuinely mystified because I never thought any of those people would say yes. So there's some way in which I'm still misperceiving the world.

A lot of those people would not agree to be printed in the same newspaper as some of the other people that you interviewed. I think a lot of them see Jordan Peterson as a really terrible guy.

Yeah, and Peter Thiel, you know. Yeah, Peter Thiel and other people that you spoke to.

And I just don't know how you managed to do it.

You know, I think I approach those conversations trying to learn from those people and not trying to refute them. So I try to refute myself in a sense, and that changes the demeanor and the tone. And I guess it's working for attracting the people. Like sometimes readers will write to me and they'll say, "Oh, Krugman said this, Jeff Sachs said that, like how could you just let that slide?" They want me to like fight combat with them on every point. But somehow that's not what I think it should be. Like, if their arguments have weaknesses, maybe those weaknesses will come out more if I'm encouraging in drawing out the argument rather than in just refuting it. And that's been like part of what my podcast series has been about. But again, it's still a mystery to me. I think sometimes just Like if you do things that other people think can't be done, like they can be done. So just do them. That's a very naive answer, but I don't think it's totally off base either. So we're all like underinvesting in just doing things. Because I didn't approach this with any kind of plan or strategy whatsoever. I just like asked them and then did it. And it's gone pretty well. And it's a very popular podcast. And like famous writers we've had in it, like Margaret Atwood, All sorts of different people I didn't think would be possible. Martina Navratilova, the tennis star. Kareem Abdul-Jabbar, the basketball player. Um— Sorry? The public intellectual. Yeah, so for them it's like a platform where they can reach a quality audience. So I'm like giving them access to my audience. They value that. And it's kind of like a challenge. I sometimes say I approach the podcast I try to make every person look as smart as possible. And that's actually a lot more intimidating than when someone tries to make you look as stupid as possible. 'Cause you're used to that, people trying to refute you. Like, you always have your comebacks. But the pressure on you when someone's trying to make you look really smart, like, that's a real challenge for people. And I think they somehow respect that or they don't get enough of it elsewhere. And they're sort of keen to sign up and take on the challenge. Like if I ask you the hardest but sympathetic questions like, "How well will you do?" And people like that. Anyway, I thank you all for coming. If you have like any follow-up questions ever, you can just feel free to email me. My email is online. And I'd like to thank my hosts also for having me here in Israel. It's been a great privilege and I do hope to come back. And again, thank you all for the evening.