Tyler Cowen on AI Algorithms, Immigration, and Forgotten Truths

Welcome to The Future of Liberty, a project of Liberty Fund, hosted by Mitch Daniels.

Greetings, friends of freedom, and welcome to the latest edition of The Future of Liberty, a series in which we invite guests that talk with us about the future of human freedom, dignity, autonomy, things the Liberty Fund, our sponsor, holds dear. Today is— we've had some very interesting and impressive guests. This is the first time I'm going to use the word daunting. Our guest today is— eclectic is not a big enough word to encompass the, the interests, the knowledge base the insights that he has. And Dr. Tyler Cowen has been, while the chairman of the Mercatus Center, one of the most respected such institutions, certainly by me, anywhere, ranged the world intellectually and physically, knowledgeable about economics, yes, but literature, art, and a host of other topics. It occurred to me last night, this is a little like Pitching to the young Babe Ruth, who was both the best hitter and the best pitcher of his early baseball career. Dr. Cowen, you're a seasoned host of podcasts as well as a frequent guest on them. Thank you for sharing some time with us this morning.

Happy to be here. And I'm a longstanding affiliate and friend of Liberty Fund, I should add.

Yes, I watched, I think, your most recent visit with Russ Roberts. He, I believe, said it was the 19th time you've graced that program. So you've been more than kind, and we thank you for being so today. I, um, I feel a little guilty this morning. You are reputed to read 4 to 5 books a day, and now you're going to spend this time with us. Uh, maybe it'll limit you to 4 today. How in the world do you even choose, uh, that many books? Uh, let alone get through them?

Well, not all of it is my choice. Some of it is the review copies that come in the mail. Some of it is which books are new into the local public library. Some are what I spend my money on. Uh, I've been reading more and more history as I get older, but I would say very recently I'm spending a lot of time reading and studying the outputs of large language models. So I've actually been reading fewer books. In the last year. I'll read one book and keep on asking the AI about the book and the topics in the book.

Well, I'd like to come to the topic of AI after a while, but on our way there, let me ask you about, let me start by asking about one of your many books. It was titled The Great Forgetting, and you, in that book, you question why So many well-learned lessons seem to have to be retaught again. You mentioned rent control, the destructive nature of unchecked crime, and so forth. Isn't conservatism as we've known it largely about holding society, holding up to society truths so they're not forgotten? What, why do you think the, this is, continues to be, uh, a problem?

It may just be a matter of memory and what you grew up with. So there's an economist named Ulrike Mamendier, and she has some excellent papers that if, say, you came of age during a Great Depression or a stock market crash, you carry that memory with you for a long time. So when we get to 2007, 2008, we have another financial crash. We hadn't had a really big one actually since the Great Depression. So people think this can't happen. We're in the Great Moderation. It won't happen again. Of course, they turn out to be wrong. But when it comes to government interventions, whether it's central planning or price controls or rent control, farm subsidies, uh, we see the same things. There's just a forgetting because over time the very bad features of these policies, they drift away in the collective memory.

One of the, I think, verities that some of our great scholars have reminded us of over and over is the importance in economics of culture. So I think of the work of Thomas Sowell and one of our recent guests, Charles Murray. Among your— let's see, is polymathic an adjective? If it is, it applies to you. Knowledge bases is, I'm told, a Haitian art, about which I confess I know zero, but it's sometimes been an interesting question to me that Haiti occupying the same island as the Dominican Republic has wound— those two countries have wound up in such different places. Is that a cultural phenomenon or is something else explaining it?

While it's correct to say it is largely cultural, I'm not sure that's an explanation. It may just be pushing the matter back some bit. So in the post-World War II era, The Dominican Republic, it is wealthier than Haiti, but not by that much compared to what has happened. So there's a big divergence, I would say, starting probably in the 1970s or '80s. So if it were only culture, you would think it would have been very longstanding. Dominican Republic is now one of the 2 or 3 richest countries in Latin America. It's fairly well developed. They did special enterprise zones. It's just a pretty nice place. I've been there fairly recently. And Haiti gets worse and worse and worse. It may not even be a viable nation state. So there's something about the path dependence of the relative dictatorships they each had in the '60s and '70s where the Dominican situation could evolve into something stable. They created better interest groups and the Haitian situation for whatever reason could not. It may be that the Duvaliers did so much to destroy Haitian civil society that the only paths before them were those of gang rule and ultimate collapse, and then they had the big earthquake. So yes, it's cultural, but there's also something about the political evolution that multiplies with the cultural factors, and it's just led to this big, big difference.

Uh, you, you're an economist, I guess, uh, uh, first and foremost, and you've written about the importance of economic growth and the various threats to it. Mercatus, again, is— I think of as the nation's premier center of scholarship on the hazards of excessive government control and so forth. In the context of freedom, if we're— how worried should we be about the future growth trajectory of the United States and its effect on freedom when without— you know, growth has— and the promise of a better life and so forth has always been, I think, an important mainstay of American harmony and unity and the sense of morale in the country. So talk a little bit about our economic prospects and their implications, if you see any, for, uh, our political, uh, institutions.

Well, I'm very worried about this question. I think you and I would largely or maybe completely agree. We're an aging society, which can limit growth and productivity growth. We're in a rather dire fiscal situation where we're spending far more than we're willing to pay taxes for. So at some point we need a mix of spending cuts and tax hikes. I would prefer to do that on the spending side, but no matter what mix we choose, that can slow growth in the short run because the economy in the moment is somewhat addicted to debt and government spending. And in general, we're overregulating and not getting rid of many regulations. Uh, Doge has not gone especially well in that regard. So there's a lot of different forces that could lead to lower growth for the United States. There's now at least possibly protectionism from President Trump. We'll see what the final court rulings will be. At the very least, there's high uncertainty as a kind of tax on investment. So we need to get our act together. There's a lot of forces operating against us. There's some in our favor. We're cutting back, it seems, on high-skilled immigration and letting very good students and graduate students into this country from abroad. So we're making many, many mistakes. I wish you were in charge. I said this to you before we started. I feel we'd be in a much better growth position.

Oh, I think the country has enough problems as you just detailed them, but thanks for the sentiment. Yeah, the overhang of debt, which has been a preoccupation of mine a very long time, gets worse and worse. And It's hard to imagine that it won't crowd out, is not already crowding out, investment that could make us wealthier over time. Is there— how long do you think we can sustain the sort of debt and the debt trajectory that we're on before we pay a price, both economic and, as I say, maybe political?

Well, I think we're paying a price right now. Real interest rates are considerably higher. Than they were, say, a year ago? It depends what you mean by the word sustain. I don't think America is headed to be the next Greece, where we are literally bankrupt and hat in hand looking for some kind of bailout or defaulting on our debt. But does it mean that this mix of higher taxes, possibly financial repression, more government control, tightening our belts leads to slower growth and really much, much lower living standards for future generations? I mean, we're living that now. So we need to reverse course in some big way. You know, this is not an if or a when, this is a now. And we're not doing much about it. We're making it worse.

And back to the work and leadership of Mercatus, you know, some of us think that the most positive thing that may have been done in this question of growth for over the last few years may not have been tax improvements, although I think those were on balance well advised. I'm talking about the Trump cuts, which are now back on the table, but rather lifting the dead hand of regulation off so much of the economy. And there's evidence that that's going to happen at least for the next couple, 3 years again. Um, are there areas in particular in which you think, um, uh, sensible deregulation could liberate a faster growth, um, most effectively?

Well, at the level of the states, we've seen a great deal of regulatory reform. I don't need to tell you this. And the states that have partially deregulated have indeed grown much more quickly. The most visible examples, because they're large states, or Texas and Florida, but your own state, Idaho. There's numerous examples of this working. I see very little progress at the federal level. I think a significant part of the Trump administration wants to do this, which I'm sympathetic toward, uh, but they don't have Congress on board. They're not good at getting Democrats to work with them. They often don't understand the system other than on— you know, we're speaking in May 2025— other than nuclear power and permitting reform and getting rid of DEI, I don't think they've made nearly as much progress as they could have. Now, I'm happy they've done those few things, but there's a lot more they could do, and I'm worried that they'll drop the ball.

Yeah, I agree. I mean, I would add to that the recent voiding of the California air standards or carbon standards that threaten to become a national rule de facto. But I agree that's an exception.

AI policy has been good so far. I would add that. I'm sure if we thought about it, we'd think of a few more things, but I'm worried they'll do less than a fifth of what they might be able to do.

Yeah, well, there certainly are big obstacles. I was just gonna begin asking you about AI, a subject in which you are, you know, recognized expert. I've been fascinated as soon as we learned about the incredible electricity demands, both of crypto, but now especially artificial intelligence. It began to appear to me that, to use a term I don't want to confuse anyone with, this was going to trump environmental and other concerns that had been in the way of energy growth. Do you see that happening? I think I do, but maybe I'm just looking for it.

Absolutely. I think we need to relax our NIMBY-based constraints on solar and wind power and significantly build out our nuclear and make it much easier to build a nuclear power plant in less than 10 years, ideally 3 to 5 years, which we know is possible. Learn some lessons from, say, South Korea and learn how to do it more cheaply. That's a lot of work embodied in that when you look at every detail, every level. Uh, and again, we're not close to doing it. The Trump administration has made some good first steps, but we're not yet in the position to build a nuclear power plant, say, in 5 or 6 years the way we should be. Right.

It's not purely regulatory matter, or not purely nuclear regulatory matter, doesn't seem to me. It costs more to build everything here. I think of the struggles, even though there's consensus about building semiconductor fabs and other facilities here, they cost so much more simply by virtue of overall cost of living factors here, sometimes union preferential laws with regard to unions and so forth.

And there's so many layers of regulatory review, so it's not just the final cost on paper, it's the uncertainty along the way. It's a big deterrent.

With regard to artificial intelligence, you have been and you were an early, you were early on identifying its imminent arrival. You've been, I think, a strong proponent of it, and pretty much, if I read you correctly, in a go mode as opposed to a cautionary— the caution, more cautious approach that so many people have urged. Are you still in a go mode? Do you still see the upsides more than justifying the potential risks?

Still in a go mode. One point I would make is you learn nothing by sitting around waiting. Whatever risks you may think there are, and you know, one can debate that, you have to actually confront how the thing is working and interacting with your actual institutions. And, you know, the 6-month pause was absurd. We just would have had all the same issues 6 months later. The other reason to be in the go mode is simply we don't want China or other nations to beat us and get there first. That would be very bad for our national security. A third argument, which is maybe less definite, is simply, I think it will be fine. That does not convince everyone. I think the first two arguments are, you could say, stronger and more universal.

People have been, long before AI actually emerged in its, as it has just in the last few years, people were raising alarms about this, the so-called singularity and so forth. Some of us have been reading about that for 15 years or more. Um, are we, uh, can we be, uh, cavalier about even some of the things we've seen so far? Unless they're misreported, we may have seen the first— at least it was in a trial, I understand, uh, mode— but, uh, first attempt by a a machine to blackmail its operator out of shutting it down, the first signs of code rewriting itself to avoid shutdowns. Are these not the sort of things Stanley Kubrick was warning us about a long time ago?

I don't think we should be cavalier about any safety issue. Consider airplanes, right? You're very careful about getting on a plane that you regard to be safe. But that said, the notion that it's going to kill us all or end the world I don't see realistic support for that in any kind of data or peer-reviewed science. I would make this general point: AI is a big, big change over time, and any big change is going to bring a lot of problems. It's naive or misleading or just wrong to assert those problems do not exist. Typically, we don't know what form those problems will take. I would say I would rather deal with problems with more intelligence on our side rather than less. If we can't handle a dose of more intelligence, I would say we're not going to do very well anyway. But it is one of the major challenges facing our civilization, and we need to be up to it. We need to know it's coming. We all need to learn more about how it works. I sometimes say there are no experts on AI. I'm not an expert. I'm a person who uses it a lot. In its powerful form, you know, it's too new for us to really have true experts.

Let's stipulate that it's not going to, you know, kill us all or kick Homo sapiens to the curb. But one thing it's already doing and is certain to do is change our economic system, our modes of production, the goods that we— and services, the way we produce them. And each time we have such a new technology or a new era, people worry about the end of work and people not having enough jobs to go around and what that might mean. So first question, do you think this is just the next chapter of the economy responding and creating new jobs to replace the old, or will this one be, will this time be different and we really will idle millions of people?

We will create new jobs to replace the old. So many of the jobs we have, including I'm sure the jobs you've had, they also involve interfacing with the physical world. And AI doesn't do that at all. So you will use AI as your aid, your assistant. It will be very powerful. The real threat to jobs is someone else who knows how to use the AI better than you do, not the AI itself. Now, there are various self-contained systems, you know, programming would be one of them, graphic design, uh, you could say in the world of chess, where AI can just replace humans flat out. And we'll see some of that, but that's a pretty small part of our economy. And overall, we're going to see a lot more new projects. New ideas, advances in biomedical science, advances in materials, and that's just going to create a lot more new jobs. But of course, people will have to adjust. People don't like adjusting. We shouldn't trivialize those adjustments, but the alternative is to do nothing and just stay where we are with our debt and our lower rate of economic growth. How well is that going to go?

Uh, so does that mean that the, uh, uh,— now the recurring conversations about fashioning some sort of universal income and so forth for those people who would be left behind? Is that a moot question or is it back on the table?

Well, I don't think we will do it and I don't think we should do it and I don't think we can afford it. There was a recent randomized control trial that was actually funded in part by Sam Altman, that looked at guaranteed income on a limited basis, and people didn't end up better off. Giving people free money when they need a safety net is absolutely the correct thing to do, but in terms of your overall life trajectory, it is not how you make people better off.

The related topic of cryptocurrency. Very topical in the week that you and I are having this conversation, but I think— I'm sure it's going to remain that way. So I'm interested in your views about that. What is your take on the current state of crypto? It began— some of us understood it at least as a way to free and protect people against the fiat currency inflation that comes from it. Um, uh, is, is that still its future? Uh, it seems to be, uh, uh, to have branched off into new range, new, new realms, uh, such as, uh, just, uh, some would say speculative, um, investment.

I see crypto as quite useful, but I don't think it's a useful hedge against dollar collapse. What we see in the data is crypto is typically quite procyclical. That is, it does well when other things do well. If anything, it seems to be a complement with the dollar-based system. The form of crypto that's taking off as we're speaking is stablecoins, which are ways of participating in dollar-based systems, but avoiding some of the regulation. And we're seeing great mainstream interest in stablecoins, whether it be from Stripe or MasterCard. And I think that will cement dollar hegemony around the world and will be a pretty useful thing. It will mean I can send remittances to Mexico., which I do regularly, much more cheaply.

If the initial appeal of cryptocurrency was again to insulate people's assets and their activities from government, what should people think, what should people, friends of freedom, think about state-sponsored digital currency?

It's going to depend on the government. If you are Singapore or Sweden, you're a small country, a high-trust society, uh, your currency otherwise is not that important, and you issue a digital asset, that may go perfectly fine. I'm not opposed to that. Of course, it's up to those countries. But I worry if the United States did it, and we are, of course, the major player. That in essence we would drain funds from the private banking system and in the longer run end up nationalizing or quasi-nationalizing a lot more investment and lending decisions. So I don't want to do that.

In 2024, with a few months yet to go before the election, you quite correctly forecast that the change was coming. You said the vibes had changed and you were right, as you customarily are. I want to ask you now, looking back, whether you, particularly with regard to an issue, let's pick the issue of immigration, you're, you tend to remind us of the value, high value of immigration to the country. Are we better off or worse now that essentially open border has become essentially closed, and there are other limits being proposed.

My sense was in the last 2 years of the Biden administration, we did not do nearly enough to have a secure and predictable border policy. That was politically unstable. From an economic point of view, I actually have been fine with those individuals crossing over. I think they're a net contribution to our economy. But nonetheless, a nation is based on laws and some sense of cultural continuity. And a lot of Americans didn't like that. And I understand that. And I just think you, you need to enforce the law at some point. Uh, that said, there's been a spreading of the anti-immigrant mood against students who are immigrants, high-skilled immigration, uh, and that's a big negative for our country. So, uh, we run the risk of losing our position as the number one place to do science in the world, in part because we're cracking down on immigration in many different ways.

Some of us have hoped for a very long time that closing the border or reestablishing control at the border would be a sort of earnest money payment, a necessary prerequisite to building public support for more open immigration policy with regard to skilled particularly with regard to skilled immigrants. You know, do you see— I think we see evidence that the public is open to that. This administration may not be, but I'm hoping that the American people would welcome it if someone would just simply advance that.

A prediction I made a while ago is that if we start talking negatively about low-skilled immigration, or illegal immigration, that the word people hear is immigration and the negative sentiment spreads more generally. So I'm afraid we're getting into a situation where immigration is just somewhat politically toxic, even for Democrats. And you see a lot of Latino voters who are really not on board with just more and more immigration, you know, no matter at what level. And I think we're headed toward an era where we crack down on immigration, uh, more than had been the case. And that we do it across the board. It was my hope that we would be more liberal on high-skilled immigration, but I think it's gone the other way.

Well, one can, you know, one can hope for, um, that, that as pendulums swing, and one can hope that this one will. Um, uh, let me ask you another set of questions. Um, a few, uh, words are more pejorative these days than elite. Clearly, there have been, and not just politicians, but other factors, technology and the changes in the way people communicate and receive their information that have undermined the authority of institutions of all kinds. But one thing your fans, of whom I am a charter member, of the club, uh, like about you is you're contrarian in many ways. You've said some positive things about elites. Um, what do you say today?

Well, I would draw a big distinction between elites in government and elites in the sense of who are the smartest people on a topic. So elites in government have screwed up a lot, whether it's COVID or Biden being too old, or the list goes on and on and on. We don't have to go through it. But on a given question, if you want the right answer, The best thing to do is to ask the actual elites. They're not always correct, but they have the greatest expertise. And they've acquired a bad name because they're being confused with elites in government. Or I would say some of our elites are far too left-leaning or self-righteous or have other problems. They're too woke. Again, you could go on with the list. And that turns off the American people. That's a lot of common sense on the part of the American people. But don't throw out the baby with the bathwater. Scientists still know a lot of useful things, and we need to be listening.

I did want to ask you about the pandemic. At least at the time, you wrote that the lockdowns were— made sense, that the Barrington Declaration, Great Barrington Declaration, was an error. Have you changed your thoughts about that? I mean, we have some more facts than we had at the time.

Well, I would be more specific about what I actually said. So the US did not have lockdowns in the sense that, say, England did. Uh, we did have many things closed. So the NBA stopped its season. You could not go to a game. That was at first a private activity, but over time, different levels of government in essence mandated that such things couldn't happen. In my opinion, those were the right decisions. But once we got vaccines, which was basically, you know, January of 2021, uh, things should have been reopened rather promptly, and they were not. My beef with the Great Barrington people, and you see this now with Jay Bhattacharya, but it was evident from the other two, they've been anti-vaccine from the beginning. Jay is anti-mRNA vaccines. You can see the tape on YouTube. And those were our greatest protection. The vaccine saved millions of lives worldwide, and they said nothing about the vaccines and encouraging uptake and running the vaccine program well, did not endorse Operation Warp Speed. So I feel they were grossly irresponsible and actually anti-science. So I'm all for vaccines. I do think we should have ended the closures we had in very early 2021. Some states, you know, did faster than others, but a lot of them did not, and those were big mistakes.

I wanted to ask you about another of your books. I should always wave these around, not that you need any help selling books, but here was one that is still several years later being handed around. Are we still the complacent society you saw then? And what are the principal problems that that causes?

That book, I think it was 2018, give or take. And that was a time when mobility was at low levels. Things were very static. There was not a lot of technological progress. And I predicted in the book that this era would end. In another book, I called it the Great Stagnation. And I think that prediction has come true a bit more quickly than I would have expected. So AI. Is the single biggest change, but we've had a lot of advances in biomedical science, and the world is now in this very rapid flux in a way that's quite disorienting. So it's a very different picture from what I painted in the book, The Complacent Class, and the change came quicker than I thought. I thought it would take, oh, 10 years or so before it would flip, and it's happened already. I'd say right now we're a bit the terrified class, not the complacent class. I think it will work out okay. But we're seeing so much change now so quickly.

So we've been jolted out of our complacency as opposed to work ourselves out of it.

And we'd like to have quite a bit of it back again. It's understandable, right?

Yeah, yeah. So I may be conflating two thoughts that oughtn't be, and if so, you'll correct me, but another of today's high-tech leaders. This is Mr. Karp, who has written a recent book, Alex Karp, I guess. He faults Silicon Valley, to use the generality, for concentrating on consumerism, which I think was part of the complacency you wrote about. And has suggested that other folks there ought to follow the lead of Palantir and a couple other companies in committing more of their genius and their assets to the national interest. Is that something that libertarians should salute and applaud?

Well, Palantir and Anderill, they've been very impressive. They made great achievements. If you look at Catherine Boyle, who runs the American Dynamism Program at Andreessen Horowitz, they're trying to fund many more companies like that. Uh, that's all to the better. My biggest worry, and I don't blame the companies at all, I don't really blame anyone, is we do not have control over our own supply chains for making quality drones. Uh, I'm all for changing that, but I don't know actually how to do it. When you look at the cost differentials, you know, a few tariff subsidies, whatever. It's not nearly enough. So that to me is a major problem, and we're still looking for good solutions.

There are multiple schools of thought that believe that our society is headed for some sort of cataclysmic corner here a few years from now. Some see it in the political fishers that we have. Some see it just the economic— economically driven. Many of, I'll have to say, us think that it could be occasioned by our inability to pay our debts at some point, or a collapse of confidence that we can pay our debts. How likely do you think one of these occasional historic crises is, and what's the most likely cause, and what do you see on the back side of it?

Americans love to consume and we're irresponsible as voters, so we fund too many things with debt. I think that's the fundamental problem on the fiscal side. My best guess is we'll use a mix of inflation and tax hikes to avoid defaulting. Now, is that a crisis? I think it will be more like the late 1970s, which was very bad, but you wouldn't say it was a crisis in the sense of a pending default. I just think we'll have much lower living standards because of our own foolishness.

Well, there are a lot more zeros involved than there were back then, and the inflation that might be necessary to forestall more responsible fiscal policy could be a crisis of its own.

Oh, it'll be very bad. But, you know, we had, as you know, high inflation right after COVID. It was very bad for living standards. People hated it. They should have hated it, but it wasn't a financial crisis, right? It was just a bad situation where the dollar doesn't go as further and people have to stint. And I just think we'll see more of that.

Yeah. Well, um, unless it's hyperinflation of a kind that we haven't seen and, uh, our, our German friends would remind us is still possible.

I don't think we'll get that though. It would so raise the borrowing rates on our debt that it would be counterproductive to have a few years of 8 to 10% inflation and some series of tax hikes, which again, I'm opposed to all that, but I think it's what will happen.

Next to last, uh, question, rather stray one, but, uh, recently we've seen, um, something I never expected to see, actual calls for tyranny or an American Caesar. There's a fellow running around getting himself interviewed and writing named Yarvin. And my question to you is, is this a, is this a carniac, or is this, is this likely to be, or we'd like to hear more of this, or will there be actually louder cries for, um, uh, a, a new authoritarian system in the country.

My hope is that the trend has peaked. People are seeing that life under Trump is not in every way so wonderful. When the courts strike down his measures, a lot of people are relieved. I think Congress over time will get much more involved in constraining Trump, and we will return to somewhat of a saner path. Uh, but I don't feel I'm in a good position to predict our intellectual future. It wouldn't shock me if we started seeing left-wing versions of Curtis Yarvin calling for a kind of left-wing tyranny. I don't think that's gonna win elections, but just when it's out there, if say 10 to 15% of your people believe it, that's a very bad place to be. And we are in danger of that, and arguably we have it already.

Yeah, well, we'll be in less danger if more people, as I will certainly encourage them to read your work and follow your thought. Really want to thank you for joining us today. I like to close with these, with the same question, so I'll ask you, looking forward, do you expect the United States to be a more or less free society in the year 2050?

2050, 25 years from now, I think we will be less free. I see too many basic problems that we are not succeeding in addressing or even confronting. So I'm sorry that that is my report, but I do think we'll be wealthier. We'll have more opportunities in some ways. Uh, we'll live longer lives. There'll be a lot of advances in biomedical science. And it won't in every way be this terrible set of options will have many good things too.

Well, this was a great opportunity for me and for our audience. We thank you for joining us. Please continue to— on our series, The Future of Liberty.

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