Tyler Cowen on Big Business, Socialism, Free Speech, and Stagnant Productivity Growth - #21

Thanks for joining us. I'm Steve Hsu.

And I'm Corey Washington, and we're your hosts for Manifold.

Our guest today is Tyler Cowen. Tyler is the Holbert Harris Professor of Economics at George Mason University. He's an author of the blog Marginal Revolution, as well as the New York Times column Economic Scene. He's also the author of numerous books, which communicate social science ideas to a broad audience. His most recent book, Big Business: A Love Letter to an American Antihero, is an impassioned defense of corporations and their essential role in a balanced, productive, and progressive society. Welcome, Tyler.

Happy to be here. By the way, I write for Bloomberg now, not the New York Times anymore.

Oh, I'm sorry, okay.

Don't worry.

Everyone switch your bookmark to Bloomberg. So it's great to have you, Tyler. I think I first came to know you through your blog, which, if I'm not mistaken, you've been writing for over 15 years now. Does that sound right?

It's going on 17 soon, I believe.

Yes, fantastic. And I think you once told me over dinner last time I saw you that of all the things you've done, your many academic papers, the students you've trained, the books, popular books you've written, that Marginal Revolution is really the thing you're most, maybe most proud of or has had the most impact. Is that true?

I think it's had the most impact. I find when I meet people now, they will mention my podcast just as often Conversations with Tyler Cowen. But we have about 50,000 readers a day, and they're very deeply dedicated. And I think the idea that you enter another person's mind for some number of years before you stop reading in disgust, perhaps, is more significant than a book, because they see how you tackle different problems, and there's some kind of mental triangulation that goes on.

Yes, so I'm curious, because you were, I would say, kind of early to the academic blogging game, and— you know, had a huge impact and still have a huge impact. Where do you see it going now? Do you see the torch being handed off to podcasting, or do you see both coexisting for a long time?

I don't think blogs will come back in a big way in areas of, say, public policy. There are many very particular economics blogs, but the golden age of economics blogging was during the financial crisis. I think we've done quite well keeping readers. Because we're also filling the niche. How many websites are there that you can go to at least once a day and find something interesting? And there actually aren't that many for a lot of people's interests, but we're one of them, even for non-economists. So of course there's New York Times, Financial Times, they have much more than we do, but you get past that and a bunch others, uh, it's like the internet's become a desert in some funny ways, and a lot of the best conversations have gone private or they're in walled or gated gardens. And Marginal Revolution is still there and open, and fresh content every day.

Is there any specific reason or cause for the internet to have become a desert? Why do you think that happened?

Well, no one was ever paid to begin with, right? So if you're going back to 2006 or 2009, so a lot of the best people were hired by media outlets, and they are paid, and their work is elsewhere, like on Vox or New York Times, Upshot, That's great. They're still producing. And the others have stopped. So, you know, I work for Bloomberg, but I also still keep the blog, and that's unusual. It may reflect my unusual work habits, but I think that's the core problem. There was a kind of bubble, and when everyone realized they were just never gonna get paid, it somewhat fell apart. I wonder if podcasting will be the same. I suppose I think it will, though a lot of my smartest friends I think the podcast bubble will prove eternal.

In 2004 when I started my blog, very much inspired by both you and by Brad DeLong, I thought, "Oh, there'll be this brief window before all professors start blogging because all professors are so interesting and want to profess their ideas." But of course I was 100% wrong, and even at a giant university like Michigan State, which has 50,000 students and thousands of faculty, I think there are probably only a handful of really active blogs. I think it's really restricted to people who are polymaths like yourself, who are just incredibly interested in a broad range of things and able to write quickly and well.

But there's also something about the temperament, so it's even more restricted. You need a kind of sturdiness and relentlessness, maybe even a kind of humorlessness at some level, that you would just keep on doing this thing. And there is positive feedback, but it's weird and indirect. And it's striking to me how many of the major bloggers started quite early like Brad DeLong, Matt Yglesias, Ezra Klein, Megan McArdle, Eugene Volokh, and at some point, there just weren't going to be that many more and those people are in some way or another still going.

Sorry to interrupt. I have to say that I think what happened to blogging may just be what happened to other forms of media, which a lot of the content got captured by Facebook and Twitter. Why would someone put a blog out when they can tweet something and get immediate responses and it's shorter? Pithier, maybe you have to put a little less effort in to get positive feedback.

I think Twitter has kept blogs down, but I think blogs were dwindling before Twitter was a thing. Facebook definitely, but I find Facebook conversations just awful. And maybe the lesson is people never wanted blogs from blogs, they wanted Facebook chat from blogs. And once they could get Facebook chat, blogs weren't needed. So that's depressing.

Yeah, I quit Facebook over exactly the same sentiment that you did. I found conversations there to be just kind of incredible echo chambers and just really difficult to introduce any kind of topic that was substantive.

Yeah, I find Facebook and Twitter conversations to be sort of anti-intellectual or anti-rationalist. People stake out strong positions and it's very hard to have any kind of meaningful exchange.

I'm a bigger fan of Twitter than most people, I would say. It can be awful. But if you're careful about whom you follow, like I just wrote a column for Bloomberg, the idea of doing zoning like on a street-by-street or block-by-block basis, which is a strange bizarre idea, I'm not sure it could work, but it's not an idea that's really out there. And I've read or scanned, you know, 20, 30 tweets today with people who are urbanists giving feedback on this idea. Well, how is it done in Houston? What kind of selective exceptions have been allowed in other cases? And I've learned a lot from that. So I think Twitter, people don't use it properly, and I find Twitter search very useful and very underrated.

Yeah, I think to get up to speed on what specialists in a particular area are thinking, it's useful to follow or look at their feeds, and I think it definitely can serve that purpose. I wanted to mention a quote that I like from Borges, in which he talks about an invisible circle of friends. So he says, if you're a writer, You put your deepest thoughts on the page, and of course he was writing in an earlier era before the internet. You put your deepest thoughts out there, and there are a bunch of people who are invisible to you who may be very interested in what you have to say, but you may never meet them in your life. And what I like is occasionally I go to a conference and some people come up to me and say, "Oh, Steve, I've been reading your blog for many years." And I'm sure this kind of thing happens to you as well.

Yes, I try to meet a lot of people, of course., and that's gone pretty well for me, but that absolutely exists. And the privilege of being able to let out a plea for help and have people in almost every world city be somehow wanting to help you, to me, that's a pretty high value.

Yeah, it's pretty amazing situation to be in, actually.

It doesn't work for North Korea, but really, you know, most of the world's GDP is covered. And you show up somewhere, you just immediately start having interesting conversations. It was not that way in the good old days.

Yeah, I try to do that. I think my blog doesn't have as many readers as yours, so it's sort of hit or miss for me when I go to a random city. But before I leave the blogging and podcasting topic, I just wanted to ask, mentally in your own mind, how do you rank or relate the reach or impact of these various media?

Well, when you say various, what's on your list?

Oh, books, podcasting, and blogging.

Well, right now a book is becoming just a badge that gets you onto podcasts. So if you're on a big podcast, way more people will absorb your ideas than through the book itself. And data from Kindle suggests maybe 10% of people even read the books they buy, which is also depressing. So I think right now podcasts rate very Highly. Books much lower than they used to. Radio much lower than it used to. Radio used to be our internet and ideas would be carried not by tweets or blog posts or Facebook debates, but by songs. And that was a free access system. And the Beatles would sing Revolution or All You Need Is Love and you talk about that. That was actually a pretty neat system. It worked better than people realize in some ways. Uh, but right now I'm bullish on podcasts short-term for influence.

So Corey, there's hope for us if we can just get our numbers up.

Oh, we gotta, we just gotta live through the bubble and we'd be one of the survivors.

It's returns to persistence and all of these media, I strongly believe. So Alex and I were blogging at Marginal Revolution for a few years and we were like, eh, you know, why are we doing this? And we just kept on doing it. And then it took off.

I just want to mention this story about a guy called Evan Williams, who's a well-known startup founder. I think he runs Medium now in San Francisco, but his first startup was Blogger, which he sold to Google. And I met him soon after that, and I said, "What are you working on?" He said, "I'm working on something called Odeo." This was like 2005. I said, "What's that?" He said, "It's a tool set for podcasting. Podcasting is about to take off, and it's going to be huge." This was 2005, so his timing was wrong, but out of Odeo came Twitter. Twitter was actually a side project of people in the startup Odeo. So he was involved in early blogging, Twitter, and podcasting, which he sort of mistimed.

I had not known that, and it's interesting. Why did podcasting take so long? Obviously the technology is simple, to say the least.

I think smartphones played a big role in it, because it was just more cumbersome to get podcasts back when Odeo was trying to do it. Now it's very easy to get them.

And traffic congestion helped and the rise of the gym.

Yes.

I think you can't ignore content though. The rise of Serial really attracted a lot of people because it had really strong narrative content. People like stories. Guys like us are addicted to information, but people need good stories to really get excited about podcasts.

I taught Serial to my class once in the law school, and they all started off thinking the guy must be innocent. And they all finished Serial thinking he must be guilty.

I have to admit, I haven't listened to it. You guys recommend it, I guess.

Okay.

It gets repetitive. The first maybe 5 episodes are great and perhaps worth listening to, but to listen all the way through is a fool's errand.

Great. I went on that errand.

So did I.

It paid back. So let's— can we move to—

I want to talk about his book, which does interact, I think, with some of the themes that you want to discuss. So Your new book, and at least I think it's your latest book because you're so prolific, I can't always keep track. But so your latest book called Big Business, as I mentioned, is an impassioned defense of corporations and their essential role in a balanced, productive, and progressive society. I feel that you're kind of rowing against the zeitgeist here because I seem to detect resurgent support for socialism, perhaps driven by inequality, and also resistance to the concentration of power in big tech. So I'm curious how you feel your book has been received and how it interacts with the current zeitgeist.

I'm a contrarian by nature, and I would note the right wing is also pushing back against big business. Tucker Carlson of Fox News, he just gave a talk in DC and the title was "Big Business Hates Your Family." While I wasn't at the talk, from the title I have a sense of what he might have said. The book has been reviewed in most major media outlets. I would say respectfully, and no one has found mistakes in the argument, but that said, people are simply not willing to start believing it. That in their view, the correct emotional stance toward big business simply has to be one of hostility. So I'm not sure what impact my book will end up having. I think right now, It's something people don't quite know what to do with. It's gotten a lot of attention, for that I'm grateful. I'm not convinced I'm changing people's minds.

Can you lay out your argument supporting big business and defending against its most common criticisms? The common criticisms made of it?

Well, most of the book just goes through the facts in a very sober manner. So I'm not setting out to defend big business against all criticisms. I think actually a lot of the criticisms are correct. So there's a pretty high degree of fraud in many sectors. Our healthcare establishment is guilty of some pretty great sins and so on. But I found the dialogue has become so slanted in the opposite direction that you will hear claims like, uh, the American economy is simply filled with monopoly and it's getting worse every year. That does not seem to be true. Uh, that big tech is destroying our democracy or ruining our lives. Uh, there are problems in our democracy, but that does not seem to be true. People talk about big tech and privacy. It does not seem to be the biggest threat to our privacy by any means. There's plenty of talk about big business being corrupt or fraudulent. Again, much of that is correct, but if you look at how corrupt or fraudulent people are in non-business settings, if anything, that seems to be worse. So I just take what are a lot of the current extant criticisms and go through them one by one and say, well, what do the facts actually show? The verdict comes out much more for big business than what you hear, but I don't think we should defend big business per se, right? It screws up a lot.

One of the striking arguments that you made, which I think ran counter to my priors, but your argument was pretty convincing, was about CEO pay. Prior to hearing your arguments, and I think Corey probably agrees with me, I was thinking CEOs are overpaid. Their performance is quite irregular and hard to measure relative to the lowest paid workers in their company. They're paid— the ratio has just grown enormously in the past 20, 30 years. But maybe you can go through your argument for why CEO pay isn't out of line.

Well, CEO pay has risen roughly in lockstep with the overall stock market. And essentially, if you take CEOs and you pay them with some mix of stock in their company and/or options, that's going to be the case, right? And in fact, you pay them with stock and/or options to motivate them and align their incentives to those of the company. Now, the stock market has done very well. CEO pay, in turn, has done very well. I don't think I can arrive at a final judgment and say that's morally correct as an outcome, but it's not that mysterious. It's not based on CEOs somehow ripping off the rest of the economy. Most of the rise in inequality in this country has come across firms. That is, that some firms like Google or Walmart have pulled away from other firms in terms of their productivity. What we really want are more super firms, not fewer.

In your argument in the book, I think you make a point which undermines my position. As a guy who has done startups and I've seen how difficult it is to go from zero to one. I am fully on board with the founder and initial team of a company, or even somebody who joined a little bit later and scaled it up, with them making, say, huge $100 million, billion-dollar fortunes. But to us, it seems, to the entrepreneurs, it seems like sometimes the business is running just fine, some guy parachutes in, runs it for 5 years, and that guy makes $100 million for doing what seems to us, as the startup guys, a pretty kind of easy job, relatively speaking. But then you point out that envy is local, that probably I just don't like these CEOs who come in later because I'm more on the side of the startup guys and we're envious of the guys who come later and run the company.

I would point out and indeed emphasize, a lot of CEOs will end up being overpaid, but that's a pretty general mechanism. A lot of journalists or sports athletes, they also end up being overpaid. Any market where you have some number of superstars and everyone's chasing after the next big thing, you bid up the wages of a lot of people and they don't all come through as the next Michael Jordan or the next Taylor Swift. A lot of book contracts, music contracts, they're overpaying people because not everyone is the next superstar CEO. Again, I don't think it's anything sinister. I do think in a sense you might consider it unfair that some people are getting so much. But again, it's arising out of some pretty natural processes that in the broad sense, uh, make a good deal of sense.

I, I think you made the point that the average worker isn't really that upset that the CEO maybe gets paid tens of millions of dollars a year. It's people that are maybe academics or journalists or what have you that are really mad about it. Is, is that really true?

That has been my personal experience. I don't I think I have a way of proving that, but it's your next-door neighbor, your in-laws, the people you went to high school with, your colleague down the hall. Maybe they got a 6% raise, you got a 4% raise, or you got nothing. That seems very unjust to you. Maybe it is unjust. That's what's actually causing people anguish in my experience.

I think there's actually a fair amount of research on people's attitudes towards income inequality, and I think it's a fairly potent issue in—— as far as polling goes. I don't think we have to go on our personal experience here. We should just try to figure out what the facts are. I don't have them right now, but I'm a little bit comfortable when we defer experience when there's actually a fact to be found.

But if you ask people about some ostensible problem, they will always say they're concerned with it. I don't find those polls very reliable. There are some polls where people will say, you ask them, "Is income inequality a social problem?" and they'll say yes. They've heard on TV it is. They feel they're supposed to say yes. But I wouldn't at all infer from that that that's actually what people are worried about.

You want some sort of ordinal rank of topics they're concerned about rather than just asking a single topic in the abstract. So I'm just urging that we should maybe do a little Googling to try to see if there's any data on this.

Yeah, it's a pretty complicated question because, of course, if I just read an article and I see some guy is making 100 or 1,000 times more money per year than I am, of course My initial reaction might be pretty negative, but then if you ask me, well, does the existence of this class of people really enhance my overall well-being and the growth of the economy? I might actually be convinced that it's actually okay, just like I don't mind LeBron James getting paid a lot of money.

Well, I mean, I think you're reasonable, Steve, to take the criticism that you may be acting out of envy, but I think part of the question is— unfortunately, Tyler, I didn't have a chance to read your book. I will, hopefully over the weekend. I think you're concerned about the question of whether these people have particular skills that warrant that kind of pay, whether they are in fact like top-flight athletes, or they just happen to be people who, like many others, could probably run this company and just got lucky enough. You and I have talked about the benefits of luck in extraordinary economic success. Yes.

I think one of the reasons the startup guys get so mad about this is that we're measured very precisely on success, so if your startup fails, it's very obvious, and if you scale it to something which becomes huge, you obviously succeeded. Whereas with the CEOs, it's quite hard, at least for us, to know to what extent they influence the success, the short-term success or failure of their—

And recall your theory, which you stated a while ago, but I don't know if Tyler's aware of it. Steve's view is that the quality of people in a company is inversely proportional to the size of the company. And so thus that the quality of people in startups, many of the founders are incredibly talented, and as companies get larger, the mean level of talent goes down. In these large companies, I think, Steve, your view, which is at least driving your skepticism about their pay, is that the CEOs of these very large companies are not actually that talented. I guess it's certainly much—

in my view, it's certainly much harder to measure performance in a going concern than in the very unique situation where you're trying to go from zero to one. So when you have a going concern like our university, you can actually have a lot of people that aren't really generating that much value, but for some reason they're in their job and there isn't that much turnover, so they stay in their job. CEOs aren't quite in that situation, but in actually observing some boards which actually review public company CEOs, it doesn't seem like they are really tracking that well either, how well or poorly that CEO is doing sometimes.

Well, I think if you look at what CEOs have to do today, it's much more than what they had to do in the past. So there's some abstract activity called managing, but they have to understand tech. They have to be able to upgrade the level of technology in their company. They probably need to understand global supply chains, which is not at all easy to do. They may have to be on social media. Uh, media mistakes are much more important than they used to be. They need to know much more about the law and government relations and possibly lobby in Washington. I'm not saying that was absent say in 1958, but it's much more significant today because there's much more regulation, many more lawsuits. So I wouldn't suggest they're all so talented, but the demands placed on them are much higher. The stakes are higher than before. And if you look, say, at General Electric, which seems to have had bad senior management, the company essentially has fallen apart. But if you look, say, you know, at Walmart or Coke Industries or a lot of companies that They're pretty old by now, but they're still doing very well, or Amazon for that matter. What you need to do to keep a big company great for the reasons you mentioned can, in a sense, be harder.

Amazon, of course, is quite different because its founder is still running it. And so you could argue this person's already been vetted for extraordinary talent and vision and ability to basically revolutionize an industry.

Oh, sure. But then it's not just that size. Is the main determinant of how well a company will do in terms of smarts or talent. And you look, say, at Apple, even after it was run by Steve Jobs, they made a lot of very good decisions. Tim Cook and others, not as innovative, but really kept the company on track.

Until now, it looks like that maybe the lack of innovation is catching up with them.

Well, we'll see, but it's an incredible run. Their best products are still insanely profitable. They sell to the whole world. Maybe that's simply what they should be doing. That how much better the iPhone, you know, 23 will be someday. Well, I stopped paying attention at like iPhone 6, I don't even know, but they don't even seem different to me anymore. So there's kind of, you know, iPhone great stagnation has set in.

So Tyler, I think in my generation, which I guess is almost the same as your generation, there was quite a lot of scrutiny on socialist ideas. So anytime in a discussion, except maybe in a few academic departments, if somebody endorsed a Marxist or socialist view on economy or the way society should be organized, people are very quick to retort and you would get into very vigorous debate. But it seems to me now that a huge chunk of our political class, et cetera, et cetera, are able to just talk about socialism as if we had just completely forgotten all the negative aspects of it. Do you think my perception is right, or?

Your perception is correct. And on the right wing, people won't use the word socialism, but it will be some kind of corporatism, and they will be actually related ideas. And in some ways, that's more dangerous because the other conservatives, Republicans, won't speak up and oppose it the way they might go crazy, say, if Elizabeth Warren says something.

So I want to jump in here a little bit because I think there's actually a— terminological problem in the discourse. What people are calling socialism in many debates these days is actually kind of social democracy. So it's somewhere to the left of the Democratic Party. Bernie Sanders is not a socialist by any stretch of the imagination. He's kind of a left-wing Democrat. And so I think these people aren't talking about state takeovers of most of the economy. Some of them are floating the idea of have Medicare for All, but the majority of people are floating some kind of public option, but they're not talking about large state takeovers of parts of the economy, and they're not talking about massive price controls. So I think, look, I think people have forgotten the history of socialism, but also they have forgotten what socialism actually involves, because what they're calling socialist didn't really resemble what exists in most socialist countries. That's my two cents.

I agree people have forgotten, but I think some of what is advocated is really quite bad. You mentioned Bernie Sanders. In the 1980s, he did call for the nationalization of all major US industries, and he was very close to the Soviet Union. And anyone who was alive and around back then knows what that means. I'm not suggesting those are still his views, but basically we're considering electing a man who was a literal socialist and sympathetic to communism. And he's moved a bit more toward the center, and when he was actually mayor, he was somewhat pragmatic. I know all that. But at the end of the day, that's his core worldview, and I think it's still with him. And I find that horrifying, and I think we should respond to that in the same way we would respond if, say, a former Nazi were running for office.

I have to say, I disagree with that. I'm not sure being a socialist qualifies the same as being a Nazi. I think you can't hold someone responsible for views they held 30 years ago if they've changed. Sanders is not advocating anything like large-scale nationalization.

Well, not now, but keep in mind, he seems to have been sympathetic to a government that killed large numbers of people, right? That was a common thing on the American left, to be an apologist for communism and to overlook those truths. And again, I think he's evolved away from that, but he's a pretty stubborn guy, he's not that flexible. His core view of corporations and labor unions and how economies work, it's still coming from that period And if someone were a former Nazi and simply evolved into being some kind of strange corporatist, right-wing Republican, I completely think we should all find that totally unacceptable. I don't really see the difference.

I'm just not sure what evidence one has for his core views. I'm not sure the guy, like many politicians, actually has core views. I think he adapts to the political context, and he's realized that those kind of views are no longer acceptable. Maybe he's completely rejected them. It's hard to say. He's a pragmatist like most politicians are, and he simply doesn't have deep core principles, which I'm not sure anybody should have actually.

You realize you're right. That might be true of the former Nazi as well. Yeah, people learn.

We have this discussion about segregationists right now with Biden. I'm sure there are quite a few people who are still— were probably former segregationists, whether you know it or not, who've kind of evolved into being some version of conservative. And I personally don't have a problem with that. People's views change. They realize they're wrong, and they are now adopting more morally acceptable outlooks.

Was Biden ever a segregationist or he just worked with them?

No, he worked— No, I'm not saying— I'm talking about if there were segregationists, Biden talked about working with them, but I'm saying personally for me, you might find someone who's a segregationist in the past and later realize that their views were wrong, and they evolve out of them. Now, I don't see any reason to say that segregation must be that person's core position if they no longer hold it. They may have just realized that it wasn't correct and they've adopted something else. I think that's a sign of open-mindedness, which we should probably encourage.

I sort of agree with Tyler that one should look at what Sanders thought about the Soviet Union long ago, but of course people can evolve in their views. I was more thinking when I raised this topic about people like AOC or even Andrew Yang, who's proposing universal basic income. Income, some of their proposals in the past would have been met with the political death penalty. If you said some of those things that they're saying now in America 30 years ago, your political career would be over. But now it seems like at least in their base, it's completely uncritical, the response to these kinds of things.

But I think they're also responding to a very different kind of environment. As you know, the basic income is actually driven in part by developments in tech, at least the fear of what may happen in the future as more jobs are essentially eaten by tech as AI pervades all of society. They're basically thinking that some people may not be able to get jobs, and in the interest of social stability, we might want to advocate universal basic income. I think there are other arguments against it, but I think it's sort of from a very different motivation than the socialism in the past. It's actually not arguing everybody should be paid the same amount. It's a certain type—

Keep in mind, Bernie Sanders, to this day, he favors a law that would forbid me from buying private health insurance. So if I had a child with some kind of medical condition not covered by the government system, I would be forbidden by law under threat of imprisonment, you know, backed up by physical violence, from buying an insurance policy that would help me help my child get the care he or she needs. And I think that really is still close to the ideas of communism. So I think we should find that so grossly objectionable. That a person who believes that should not be a viable candidate. I think it's anti-American in the worst sense, and it's still a residue of his former views. And yet, like, two-thirds of the Democratic Party has endorsed this bill. I think a lot of them don't even know what's in it.

Let me switch, move a little bit away from politics, because obviously— That's fine. Yeah, it's hard to converge on something like that. But I wanted to ask you about Piketty. The thesis that inequality is increasing because, in general, the rich can invest their money in such a way as to earn a return which is systematically better than the rate of inflation or the rate of GDP growth, and therefore you end up with these concentrations. How strong do you feel is the empirical support for that kind of thesis?

Matt Rownley, who then was a graduate student at MIT, he's now at Northwestern, He went back and worked through all the numbers for the current period, and he found that the increase in inequality really had resulted from gains in the value of land rather than superior capital returns, and that Piketty's hypothesis was not correct for the current day. It may be a good account of the late 19th century on continental Europe, but it's not a good theory of inequality as we know it It's an impressive book in many ways, and there's a lot of work in it, a lot of insight, but the core message doesn't seem to be correct.

So I just want to follow up to get an explanation. The thesis is the recent rise in wealth is largely due to the value of land. Is that the reanalysis?

That's not Piketty's thesis. That's what Matt Rownley found.

So can you elaborate on that one?

Piketty's view is, well, if the economy is, say, growing at 2% and capital yields you 4%, that over time people who own capital will get wealthier and wealthier relative to everyone else. And that is a possibility, but also capital has diminishing returns. Capital in general is risky. And when you just look at the actual numbers, there is an increase in wealth inequality, but virtually all of it stems from the value of land holdings. So a bunch of people bought real estate in Manhattan, San Francisco, wherever, That made them wealthier. Wealth inequality is up. Others were denied those opportunities or didn't have the foresight. And it seems to be land is the culprit, not capital income. And that's been accepted. Matt's work has held up. It's interesting, originally Matt came up with that idea. He wrote a Marginal Revolution comment. I covered something from Piketty and Matt was one of the writers in our comment section and he later turned it into the study. So very indirectly, I'm happy to have had a minor hand in that.

It's funny, Steve, you and I had a discussion about this actually, because I think a few years ago I had a couple of properties, one in DC and one in New York, and I actually like real estate quite a lot. And you were very skeptical of real estate because you thought it just wasn't liquid enough.

Oh, my complaint against real estate is that there are certain hot markets which maybe you can predict what they'll be, and then investing there gives you outsized returns. But if you average over the whole country, I think actually returns from real estate, aside from the tax fraud and various other strategies that are involved in real estate in terms of depreciating your property and things like that, just the flat-out sale price increases, that tends to actually underperform the stock market as far as I understand.

But— This is a longstanding debate. I would say amongst researchers, it's not resolved. But in this dataset, it's unlikely the people who got wealthy through land were buying homes in Akron, Ohio. Right. It's not disaggregated, but it's highly plausible to believe it's well-off people buying land in well-off coastal regions or London, wherever.

So unlike some kind of forward-looking dynamical problems in economics, this one seems like it's actually resolvable. And so are you optimistic that there'll be a consensus in economics as to whether Piketty was right, and if he was right, what the cause was for the increase in inequality? Oh, I think there is a consensus.

There's not a consensus in what I would call popular economics or media economics, but amongst actual researchers, people have stopped talking about Piketty. It's seen as interesting work in economic history, but still it lives on. It was a bestseller. It looks and feels like an academic book. Indeed, it is one with a lot of valuable material in it. But if you just ran a Twitter poll, this is not what people would tell you. But economic historians would support what I'm saying.

Does that mean no Nobel for Piketty for this work? Probably not. Okay.

But stranger things have happened, right? Elections can be funny.

Does this consensus cross ideological lines within economics?

Yes.

So left-wing economists also think that it's inaccurate?

It's a tricky term, left-wing economists. I mean, no one should be like left-wing or right-wing per se. I think you would find some people on Twitter with PhDs in economics who would, if not quite defend Piketty on this exact question, just say, "Well, it was so valuable for drawing our attention to the problem," and not be quite willing to admit that it's wrong. And that would be a kind of defense, ideologically motivated. But I've never heard anyone serious say, "No, Matt Rhonely is wrong and Piketty is right," on that exact matter. I've never heard anyone say that, because I think it would be very hard to.

That's a very hopeful scenario that academia could actually work properly. I hope that what you're saying turns out to be true.

But the transmission belt is not working properly, so don't get your hopes up, right? Yes. So you could poll these economic historians and maybe see consensus. But it doesn't leak out very well.

So I want to turn to a related topic, which I heard you talk about on YouTube in a very nice lecture you gave, I think it was in Tel Aviv recently. And one of the things you talked about there was the productivity thesis concerning to what extent productivity growth has slowed, and perhaps the reason for this is that we've harvested a lot of the low-hanging technological fruit. Maybe you could elaborate a little bit on your thoughts there.

Well, economists have a few different ways of measuring productivity growth, but by the method which I take to be the most reliable, earlier in the 20th century, you typically have productivity growth of 2 to 3% quite commonly, say in the 1920s and even the 1930s. And that's an era where really all of America is being completely transformed. And then in recent decades, since about 1973, Some years are exceptions, but very often the rate of productivity growth is 1% or even a bit lower than that. And it's hard to find sustained years where productivity growth is, say, exceeding 1.5%. Now you can debate, are those the right numbers? Do they adjust for quality in every way? But I think when you study the whole literature and work through each one of those questions, it's hard to avoid the conclusion that productivity growth is down significantly. And the simple issue of, if not for semiconductors, the internet, computers, what other major breakthroughs have there been since, say, I was a kid? It's hard to come up with much. So cars are better, yes, radios are better, many things are better. But if you compare the first 50 years of my grandmother's life, she was born in 1905, Most people worked on farms, they didn't graduate from high school. Fast forward 50 years to 1955, it's like some version of modern America where there's like sanitation and electricity, not for everyone, but it's on its way and pretty common. And things like radio, you know, hadn't existed, or cars, or airplanes. Every area, not just communications, you saw then major breakthroughs. So I think we're living in mostly a technologically stagnant age.

So when I looked at this talk, there are actually two different issues I think you raised. One was a slower productivity growth and the other was kind of asymmetry in income growth or wealth growth. That's right.

That talk in particular, yes. Yeah.

And these are actually very separate topics. So my sense is that a lot of the disaffection has come from wage stagnation for the middle class. And you harp on this, right? Male wages. Have not increased since 1970. It strikes me that had male wages been increasing over that period of time, you probably wouldn't have had Trump and a lot of the reaction you've got to the current economy. So I'm asking you, is it productivity growth or is it wage stagnation? Because those two things could operate independently, although they may be—

They tend to move in pretty close conjunction. First thing to keep in mind is The talk of mine you saw was to an Israeli audience, and they have not had wage stagnation because they were much poorer, say, in the 1970s. So I was tailoring the remarks to their experience somewhat. But in America, if you just measure male wages, they were about as high in real inflation-adjusted terms in 1970 as they are today. I find that astonishing. I think those numbers are a little misleading. There are gains in the quality of life, like less air pollution, that are not counted by those numbers, but that it could even possibly be true. It's a sign of great national failure, and I would even say disgrace. And it is in the middle. The poor actually have seen, you know, more gains than the middle class has. And I don't feel we're on the verge of solving this problem, that it's so deeply rooted in the bureaucratization of American life, excess credentialism, so many veto points for different kinds of major changes.— which, yes, a lot of startups can get around because they're working digitally, that's wonderful, but the rest of the economy can't sidestep those restrictions.

You discussed a couple of possible explanations for this kind of stagnation. As you know, there are a lot of other theories, right? One is that there are just incredible returns to education, technology, that people who occupy this middle rung may not have access to. I'm curious, there's a huge range of theories. Why do you think it's driven by more regulation or bureaucracy rather than simply the world requiring— giving inordinate returns to higher skills and education level?

Well, there are higher returns to higher skill. So if you're a very good programmer, you'll be paid a lot to begin with, a fair amount. And then if your product can be exported to the whole world, you'll be paid all the more. But that itself should not account for wage stagnation in the middle. Public universities are fairly open with community college. It's very patchwork, but there are ways in which you can get degrees, not quite for free, but actually pretty close to free. And I think there's been some corresponding failure of national spirit in America. We've become complacent. I once wrote a book called The Complacent Class. And I think the key problem is our previous technological miracle, which was fossil fuel-powered machines. We did almost everything you can do with that, and we arrived at diminishing returns, and we haven't had the kind of moonshot-like commitment to breaking through with further progress. So it's not anyone's fault in particular.

So I agree with Corey that maybe there are sort of two topics here. As a kind of technologist, One of them is, aside from wage growth, have we sort of stagnated in the rate of technological progress in our civilization? And I'm pretty persuaded by a lot of the arguments that someone born at the turn of the century, 20th century, saw in their lifetimes, you know, electrification of their house, maybe indoor plumbing, air conditioning, all kinds of appliances that didn't exist before. Whereas in my generation, you know, I'm driving my car at the same speed that my dad was driving his car. My car's— Slower. Slower, yeah, but my car's a little bit safer. I have airbags. When I fly to London, I'm flying at the same speed that people were flying. They're better at packing us in on the flight, managing their inventory because of computers. But in a lot of the basic core engineering and physical science type things, the rate of progress, I think, in some way, it's a little bit hard to define what you mean by the rate of progress,, but it hasn't been that impressive, i.e., where's my flying car? And almost all the good stuff is on the information technology side, but we're very poor at measuring the returns on that. So if my son can be happy all afternoon just doing stuff on his phone and it's all free, how do I measure that in terms of productivity gain? I mean, he gets an infinite amount of entertainment from his phone. He's 13 years old., but how do I measure that?

Probably productivity loss for the rest, for most of society. It makes sense.

Yes. Yes.

We're getting better at measuring that. For one thing, as you well know, the internet is more and more monetized. So more of the things you're doing generate revenue for someone. That may be unfortunate, but it's a fact. So more of the internet is included in GDP than back in earlier times when all you would do is like read blogs. Uh, but there are also ways of valuing people's time. You can measure how much time do people spend on Facebook? How much is that worth an hour? It's imperfect, but when you do those studies, a guy named Chad Syverson at University of Chicago has adjusted for a lot of the unmeasured value of the internet, and he finds that at best, under the most generous assumptions, it explains only about a third of the productivity shortfall. And again, to date, no one has found any big problems in his calculations. We need to keep an open mind that there might still be something we're missing, But as far as we can tell, the unmeasured value of the internet, while significant, does not come close to obliterating that measured productivity gap.

So I think that thesis or that picture is plausible to me. I think one of the things I would say as a natural scientist is that there is some just structure of the difficulty of innovations and discovery. And so it could very well be that we discovered a lot of the low-hanging, picked a lot of the low-hanging technological fruit. Fruit, and now we're confronted with much more complex problems that we're working on. Now, those could burst through and create huge chunks of productivity gain, like say from quantum computing or AI or genomics, but we have been stuck, I think, for a while. I think that's plausible to me.

Well, I think it's reasonable to see that we've been in a period where IT has basically been encapsulated in an unmovable box for the past 50 or 60 years. You have very large mainframes, your desktops, your laptops, your mobile phones now. But the fact is, the kind of changes you want to see in your personal life are really going to come from making these things mobile and robotic. And we're just on the cusp of that, it seems. So I think it's— we've had 50, 60 years of kind of, you know, basically solid-state IT advancements. But in the next 20 or 30 years, you're probably going to see pretty large changes in how your cars work, in what goes on in your home, through just the expansion of robotic technology. I think what you may be seeing is just sort of the end of this paradigm of IT and the beginning of the next.

I hope that optimistic view turns out to be correct. I could give evidence against it in the sense that, say, Moore's Law has ended. For example, our ability to continue to miniaturize features on a CPU has basically stopped and is kind of near the end. Feature size is not going to get that much smaller before we actually hit quantum physics. It could go either way, I think.

But is the barrier to robotics a matter of basically chip design? I sense it's more of a kind of software engineering design. It's not that robots aren't working well now because you don't have small enough chips. So we haven't actually solved the AI problem fully, and that's not going to require massive advances of Moore's Law into the future.

Well, it's interesting because if you actually ask, like, in my lifetime we got more than a factor of a million in CPU, in compute, and storage, and bandwidth. Are our software tools 100 times better than they were 50 years ago? Maybe, but they're not anywhere near a million times better. But look at robotics, right?

Look at Boston Dynamics, right? Look at robots 20 years ago and look at them now, and think of what they're going to be like in 20 years, right? And that's not going to require a continued advance of Moore's Law before you get robots being very, very good.

So I'm not sure whether you're, in your mental extrapolation of the next 20 years, whether you're sort of implicitly kind of assuming that there's a kind of Moore's Law acting in the background.

I guess I think it's going to— even if the curve begins to bend, I still think you're going to get robots inserting themselves into life, which will change a lot of your daily experience of your home and your car. And that we're on the cusp of that right now, I think. And the fact that Moore's Law is not going to continue in the way it was before is actually not going to stop that advance. That's what I'm arguing.

From my vantage point, there's been a major loss of national will in this country. So we set out to put a man on the moon against strong odds. We do it really very rapidly. Often overlooked is the Clean Air Act of 1970. Other than the internet, in a way, it's the last great thing this nation did. One of the wisest pieces of legislation ever passed, saved millions of lives, helped many kids. When the Clean Air Act was written, the standards were so extreme, the demands, the timetable were so rapid, so tough, It was considered insanely impossible that America could never do this. And some of the standards did end up being relaxed, but for the most part, you know, we met the targets and made the Clean Air Act a reality. And it's hard to imagine the America we know now doing something like that, say, with climate change. And the Clean Air Act was not a tech thing. A small amount of tech was involved. The moon had a bit more tech involved. But again, a lot of the work was just improving physical systems. And we did those two things in the '60s and 1970. And in terms of physical systems, we haven't done anything since with vastly superior technology. So I think the problem is more than just, well, how well will the technology for robots do? We could get robots in your home as a nice add-on, but to really be willing to transform the structure of our lives, It just seems there are too many veto points, regulations, hesitancies, inertia, status quo bias. It wasn't that long ago that we did the Clean Air Act and made it work.

It was phenomenal. I agree with the observation that it seems harder to accomplish big things in America and the West in general, whether that's some kind of spirit of the age thing, or it is indeed bureaucracy and the way we have our society organized right now. I'm not entirely sure. But I will say that I just came back from Beijing, and this is a mega city with roughly, if you count the undocumented people, the people who are not really residents there but work there, it could be a city of 25 million people. And they have 20 subway lines now where if you get on the subway at one end, that line at one end, and you ride it to the end, you're on the train for 90-plus minutes. It's unbelievable, and all of this stuff is less than 5 or 10 years old. Their ambition and their ability to just get stuff done is just unbelievable in comparison to the United States. We can't even upgrade Amtrak.

I rode that as a kid. I'm still riding it. It's slightly worse.

I think it's not just national will, but it seems to be definitely national cohesion. There are just many people who would oppose developing such a system you described, Steve, and there's just so many people who would oppose something on the analogy of the Clean Air Act today. You couldn't politically get it through. It's ironic because the Clean Air Act is essentially regulation, but we don't have a unified view as to what the society should be, what our policy should be. We don't have the command politics they have in China, and maybe that's a function of the fragmentation of the country.

Do you feel there are any areas where, say, 65%, 70% of Americans would actually all agree on what should be done in a poll, but still there's some bureaucratic or institutional obstacle for going there?

I think I sent out this article about basically how Democrats have distorted views of Republicans, Republicans distorted views of Democrats, but in that poll, they point out that half of the college Republican clubs in the country had basically passed a resolution calling for carbon tax. It suggests that maybe not our generation, but you may find will among the next generation to address climate change. There's definitely a lot more skepticism among people our age than there are among people in their 20s and so forth. So things may change when we die off.

I hope they do. But if you think about the layers of environmental review embedded in any new project, how long it took New York City to open the subway line, Second Avenue subway line, how costly it is to build infrastructure in this country compared to almost anywhere else, those seem like very deeply rooted problems. And if the favorable aspects of youth opinion, you know, continue as those people age, I don't think that's nearly enough to overcome them, actually. I'm hopeful, and I think things that appear impossible in the short term can end up happening. Who would have thought in so few years we have all the world's people connected and able to make phone calls to each other and send data, right? That was not obvious, and here we are. For free. South Asia, Africa, very poor locations, you can do it.

It's interesting, a friend of mine is the chief consultant at the MTA, and he'll go unnamed, but if you want to hear about the problems of a large system in trying to get things done, maybe we'll be able to have him on with some sort of voice correction. But the second out of the subway is a disaster, is a very difficult problem. It's a problem across the system for many reasons.

Yes.

So Tyler, I wanted to ask you a couple of questions, and feel free to answer either short, in a short answer, or go on as long as you want. So one of my questions is, if you had unbounded resources, so Bill Gates turned over a huge amount of money to you, what experiment in social science or dataset would you fund?

I suppose I would do more funding on whether good methods for charter schools are replicable or whether they're just noise, accidents, and randomness. But that's not the main thing I would do. The main thing I would do is hand the money out on a decentralized basis to other people to make those decisions because I really don't think I'm the best person whose judgment should be trusted on that question.

Got it. Okay. Another related question. I give you a one-time use time machine, and it has a dial which you can set to +10 years, +30 years, +100 years, and you get to go forward in time and look around and observe that society of the future to see what actually happened in the future, and then come back. What value of x is most interesting to you, and what question about the future are you most interested in answering?

Whether we're still around, I think I would go 150 years into the future, that's far enough away to be very different. But if you pick, say, 5,000 years in the future, you might just simply not understand what you're seeing.

So the main question is existential, whether we would continue to be around in 150 years?

I'm pretty sure human beings will still be alive, but will we have intact civilizations making regular progress with more or less world peace reigning? That to me is very much an open question. And that's what I would want to see.

Aren't you curious about winning some bets from your colleague Robin Hanson about cryogenically frozen brains and people living in simulations, stuff like that?

I feel pretty confident about those judgments as it stands. I don't think we're due for any of that to happen, and I think it may even be harmful to pursue it. I'm all for life extension, but there's something about at some fundamental level accepting that we're humans who must die and that even if you have some powers that past a certain point, you should use those resources to help other people rather than just try to live forever. Great. And I don't think we'll ever all be uploads. I can't even get Siri to understand simple questions. Uploads to me seems highly unlikely. I worry much more about will war come back and who will be damaged, and the level of peace we see today, I'm not convinced by Steven Pinker that it's permanent.

I think uploads are difficult, but I think Siri will get much better in your lifetime.

Of course, but it's got much better in the past year. Yeah.

It shows how difficult a lot of the more ambitious projects are. Self-driving cars, we're now told, are not coming right away. We need to wait some more. How long? The answer is not clear. Last mile problem and so on. Just try sending money to Mexico without someone taking 7% of it away from you. That's very hard to do.

I actually have a couple of questions, Tyler, that were raised in your Tel Aviv talk. You said some things that I definitely didn't know about. You talked about people in China saying that there's often much more open discourse in China about policies than there is in the US. It's interesting, this is something I'd actually heard about Israel in regards to the Israeli-Palestinian conflict, you get much more open discussion there. Than you do in the US. I'd like to have you say a little more about that. I also found it very interesting that you said that one of the major advances in China that really allowed it to take off was the government just simply started polling people and collecting data on people's views, and then enacting policies that were responsive to those views. I think that's a major innovation in autocracy. Sure, and it's worrying.

I mean, it's great that the Chinese are so much better off. But the Chinese have found a method, at least in their culture, to make autocracy work. It does appear to be stable, and they've had an incredible growth trajectory since about 1979, and we need to be worried about this. And I think being open to the idea of polling citizens has been the single most important thing they've done. The old-style Soviet or Maoist approach— we're going to tell you what you want, and if you don't get it, we're going to lie to you— and if you don't believe our lies, we're going to tell you you don't deserve it, and if you don't believe that, we'll take it away from you or we'll send you to a camp. That clearly didn't work. There is considerable censorship in China. I don't at all wish to apologize for them, but there is also less political correctness, and there are frank, open debates about all kinds of things. Not Tibet, not Tiananmen Square, not the Communist Party, and that's all terrible, But nonetheless, the kind of stifling uniformity you see in American academia, you cannot find in China. On some issues, of course, Taiwan, Tibet, it's awful.

Yeah, I have to comment on this since I was just there for an extended period. There are certain no-go zones where people will get very uncomfortable if you want to talk about those things. For example? Tiananmen, for example, but even there, like the software developer I was talking to said to me, like when he happened to go in for a job interview at a tech company on, I think, is it June 4th? And the other guy just smiled at him and said, "Hey, you know what day today is, right?" And he said, "Yeah." And so it was like a little joke. But you would be careful if you were at a dinner and you started saying some strong things about what happened on June 4th about that you might get into some trouble or something. But aside from those specific areas that are no-go zones, The discussion is much more open in China because they don't have political correctness. They are much more realistic about the way the world works and things like this. So yes, it's in many ways a more open society than ours.

But isn't that just their form of political correctness? That we have our no-go zones and so do they?

Right. But theirs are very tightly constrained about certain things the Communist Party is sensitive about, whereas all kinds of other things can be discussed.

But is this also just not— I mean, there may be a degree of political correctness on campus, right? But you're talking about the tech sector and you've operated both in the tech sector here and the tech sector there. Do you find that you don't find— you find less open discussion in the US tech sector compared to Chinese tech sector?

Well, yes. I mean, for example, you have a steady stream of Google engineers who are going public about the level of, shall we say, political conformity within Google and Facebook, places like this. So yeah, definitely. If you were an engineer at a Chinese company, there are lots of things you could discuss which would get you in trouble at Google. Just to give you an example, I mean, in China you could talk about kind of potential of innate differences between males and females. If you said that kind of thing here or at Google, you might get into real trouble. I mean, real trouble where HR actually contacts you. So that's your—

Tim Damore was fired. We all know this, right?

Yes. So that's the Tiananmen here, right? Is that any different?

It's different because here we point at China and we say, "That is a totalitarian autocracy because they can't talk about Tiananmen Square." Whereas we say, "We live in an open democracy and our universities pursue truth, but we can't talk about certain concepts." All I see is that you found an issue that isn't discussed here and there's an issue that isn't discussed there. Right. There are many such issues.

Yeah. So I don't— but it's not really so much a question of us pointing a finger.— is a reason to think that their discussions in their tech sector is more open than ours.

There, they know they are being told not to discuss certain things and that the government is censoring certain things. Here, we do not admit that our society is censoring certain things.

So it's a different—

The enforcers are different, right? There, it's the government. If not for the government, there would be open arguments about Tibet and China all the time. And indeed, there were in the 1990s before there was as much censorship as there is right now.

Another way to say it is they know they're being lied to occasionally by their media. We do not generally realize we are being lied to.

That's different from the original question. The original question was the extent of the discourse, not the nature of the overseer, not the awareness of it, not finger-pointing. Right.

So then it's an issue of how you measure. Like, okay, there are these 5 topics you can't discuss in China. There are these whatever n topics you can't discuss here. And then what's greater? It's accounting. It's a measurement. Do we have any reason to think that one is larger than the other? I think it's hard to actually define what you mean by more or less in that context. It's just different. But the difference is that we routinely point to them and say, "Oh, wouldn't it be nice if those poor Chinese people could live in a free country like ours?" We do this for all parts of the world, right?

I mean, it's kind of US hubris.

I showed my law students a movie this last semester called The Chinese Mayor. It's a Chinese movie. About a Chinese mayor who wants to demolish a lot of buildings and have the citizens push back and complain. And my students, who are very well-educated, super smart, very, you know, coastal, cosmopolitan, whatever, they were shocked just that in China you could in essence complain to the mayor and speak your mind, and there was very open discourse about what to do about these buildings. So I don't at all want to say things are somehow better in China. I don't think that's true. But our understanding of China is typically very far off. I would put it that way.

But this is a point that's true of the rest of the world in general. The US seems to be woefully ignorant of the rest of the world, although the world cannot afford to be ignorant of the US.

But I don't think Americans have the same misconceptions, say, about Australia. They may have other misconceptions, but—

We have misconceptions not about Australia. We have misconceptions about France. We have misconceptions about Germany. We have misconceptions about various parts of Africa. We have misconceptions about— For instance, many Americans think that Sweden doesn't have private health insurance, and so we have total misconceptions about Scandinavian healthcare. So I think just the level of understanding of the US relative to the rest of the world is comparatively low. Sure. I would actually like to get to something else, and maybe you can just end on our high note, which is we've been discussing current politics here. Your theory that stagnant productivity growth, or decreased productivity growth, let's say, is an explanation for the current response, the fact that the rise of populism in the US, and you argue the same is true for Brexit in the UK. I'd just like to, if you could, kind of explain why you think this is the reaction to lower productivity growth.

I think something like Trumpism or populism or Brexit, they're all a bit different, but I think low productivity growth is only one of the causes. Eric Kaufmann has a recent book, I interviewed him on my podcast, and he thinks that rising immigration is the most significant cause of the backlash, and I'm inclined to agree with him. If we have to rate causes ordinarily, that people simply grow uncomfortable when there's such a high rate of change as to who is surrounding them. Some of it is racism, I think, but a lot of it is just status quo bias. But I think low productivity growth is nonetheless a major factor. That if you just imagine all American incomes going up 2.5%, 3%, as was often the case, say, in the mid-1960s, we would have a much happier country and there'd be a lot more opportunity and a lot more upward mobility. And a lot of the complaints of the so-called populists They just wouldn't ring very true.

Here's the thing is where we live at least— Where's that? Michigan? We're in Michigan, yeah. Yeah. We're not being overrun by immigrants in Michigan. It's places like this would seem to have fairly low levels of immigration and may in fact need it for jobs that are often the most anti-immigrant.

I'd like to comment on that, Corey, because earlier when we were talking about civilizational decline and I said, hey, are there any issues that regular polling shows 65% or 70% of Americans really want it, but it never gets done. I think immigration reform is one of those things, and it's pretty clear what the majority of American people want. They actually want less immigration. I want to tell you about when I was a professor at the University of Oregon. I got there around 1998, and I bought, as a young professor, I bought a house. And at that time, all the trades work, the roofing, remodeling, putting in a hardwood floor, it was done by, for lack of a better word, white Oregonians who would do that kind of work. By the time I was a more senior professor and we moved into a bigger house when my kids were born, all of that work, putting in the carpeting, the floor, the roofing, was done by Mexicans. And that cannot have not had a difficult effect on working class white Oregonians. And I think there are similar things in Michigan too. You just don't see it that much. But the people that you hire to do work on your house, I wonder what the composition of those people is.

You know, again, I'd like to see some statistics on number of immigrants settling in Michigan, but I don't think there's a huge correlation between the number of people, immigrants settling in a particular area and the immigrant and immigrant sentiment. No, it's inverse.

Exactly. You know, tell people in Michigan, well, there's one American political party, the Democrats, and they've been boasting that America will soon be majority non-white. They don't like it, and some of that is racism, some of that may be other motives, but just as a flat-out description of our country, they don't like it. And if you told people in 1965 what was going to happen, they would have been shocked. They just literally would not have believed that this would happen. And I think Brexit the same. The extent to which London is not an English or British city anymore, I find it a vast upgrade. I'm happy. I'm very anti-Brexit, but I understand. I was in London in 1979 and I was in London this year. I understand the difference and I do get that it upsets people for reasons which are not merely racism. They feel they're losing their country.

No, I think that's something I think Democrats really, at least many people on the left, really don't quite acknowledge. They don't kind of get how unsettled people are by change. I share with you, one thing you used to say about New York is, "The great thing about New York is you can be a New Yorker and not even be an American." I really like that fact. You can be from anywhere in the world, you can not even be a citizen and you can be a New Yorker, but I see that many people may find that uncomfortable and react to it. I was thinking when I was listening to your discussion of productivity growth. And I think it's something you actually said in your talk is that when things are not going well, people blame either foreign country or poor countries or immigrants. So the causation, as I understood you making the case, was that this economic dissatisfaction drove the anti-immigrant sentiments and also drove our opposition to China. We had a guy on recently, Mark Moffett, who made a similar argument. He says, "When things are plentiful, people are quite willing to accept newcomers into their midst, but it's when scarcity arises that you tend to find people getting more xenophobic." So I was curious because in your talk, you seem to be saying that the immigrant— the issue with immigrants was effectively a symptom of economic malaise rather than an independent driver. But now you seem to be suggesting you think it's actually an independent driver.

I think it's both, but I also think it's an independent driver. And I think another major independent driver not discussed much is the US has lost global status, partly because of our own stupid decisions, but partly just the rest of the world is bigger and better. And we feel that and don't quite admit it to ourselves. And then we— makes it feel like something's wrong. There's talk, "Make America Great Again." It's striking to me that that's the motto, right? Make America great again. Well, we're not going to be back to the day where 60% of the gold reserves of the world are held in the United States, right? That will never, ever, ever be the case. I don't care what we do.

It's interesting. I think you nailed it, actually. This is an issue in which there's enormous racial difference, because you can see a lot of white America may be nostalgic for the period when America had unbridled power. That was also the era of segregation when Black Americans, other minorities were much less off, so there's absolutely no nostalgia. There may be negative nostalgia for those periods, so that's a huge cleaving point. Absolutely, yes. You said something else that was very interesting. You talk about, you think the era of the kind of one world internet, one tech world is coming to an end. Yes. That there's really going to be a US tech world, US-centered tech world. And a Chinese-centered tech world. You said something else that was quite interesting, which was you thought that Europe and the US, the alliance between US and Europe had effectively come to an end because the worldviews had diverged so much. And Europe was taking kind of a pragmatic point of view by trying to straddle these two worlds. And I think your example of, how do you pronounce it, Huawei? Huawei? Huawei. Huawei. Huawei. Basically giving the finger to the US and saying, "Look, Huawei's systems are cheaper and easier to implement, and so we're going to use them." And that is effectively going to alienate Europe from the US long-term. I'm not quite sure I have that sentiment. I think European outlook is much closer to the US than it is to China, but I guess I'd like to hear your elaboration on those thoughts.

Well, the countries in NATO are mostly unwilling to spend 2% of their GDPs on defense, and we put up with that for a while. You know, it may even be efficient that we carry almost all the burden, but on the other hand, one needs to see that's not sustainable politically either. And if your country won't spend 2% of GDP to defend itself, that says to me the military alliance is over. So you take the United Kingdom, We used to call that the special relationship. Recently, Iran seizes two of their tankers with no provocation. And Pompeo just says, "Oh, you'll have to deal with it." And maybe we're helping them behind the scenes, probably we are. But at the end of the day, we're not part of the Rambo brigade. They don't even have the aircraft carriers they had in 1982. And everyone's quite embarrassed by this. And then we just decide to stop talking about it. It's incredible. Compare it to how people would've responded in 1980. Don't you think this— It's become a non-story.

Don't you think this is actually a good thing? I don't know.

I mean, compared to what? But I think it shows— Compared to— In the short run, we have more resources to spend on other problems, but in the long run, I don't think it's sustainable. Global order will fray, and the bad actors, including Iran and China, will take advantage of it and keep on winning victories and be emboldened.

Look, I'm not an isolationist, but I really strongly advocate pulling US troops out of Europe and most of the rest of these countries. And again, if Europe doesn't want to spend 2% on its defense or whatever, it spends what it wants to spend, that should be their business, but shouldn't be our business to defend them and to spend our resources there. So I agree, it's unsustainable.

It might be better, but if Putin takes Eastern Estonia and Ukraine becomes chaotic and Germany decides it wants to build nuclear weapons and Poland too, That could be better, but it could also be much worse. It's a very risky path to go down. I would agree.

I agree. All change is risky here. I'm willing to— and look, I agree it's understandable. I just don't think there's any other options in this case. The US is not going to continue to fund European defense, so we're going to go down this road in some form or other.

And when Trump says all these things about Germany, 'Oh, you're not part of the Western Alliance anymore.' I mean, it's been attacked so much, but he's not completely wrong. Germany spends its money on gas from Putin and then asks America to defend it from Putin. That is not politically sustainable. It is for a while, not forever.

I'll just throw in a little anecdote related to Huawei for you. So there's a big issue of which country should use Huawei infrastructure to build out their 5G networks, and obviously it's very contentious. The US is trying to keep everybody from doing it. I was meeting with some very senior scientists in Germany who are actually involved in national security issues and defense, and they pointed out to me, they reminded me that the US NSA had been caught listening to Merkel's cell phone. And it wasn't the Chinese that were listening to Merkel's cell phone, it was the Americans. Part of the reason for the hostility to Huawei is that they won't put in backdoors for US intelligence, unlike all the other companies that are building out telco infrastructure. The Germans are in a funny situation, right? Do you want to be spied on by the Chinese or do you want to be spied on by the Americans? They're going to have to make a choice.

They've made the choice as far as I can tell.

Tyler, your future seems to be a kind of growing schism between the US and China, maybe not breaking out in all-out war, but how do you see this playing out over the next 20, 30 years?

That China becomes truly the major power in Asia and consolidates Hong Kong and brings Taiwan into its orbit, and that more Asian countries become like Cambodia and take something like marching orders from Beijing on many issues., and now that the world is significantly less free. I don't think it's the end of the world. I don't think there'll be a major war between America and China, but I think it will be fairly unpleasant compared to a future we might have had.

I think if you talk to most sophisticated business people or technologists who are not in the US, they, especially ones in Asia, they view this as two systems, but not good versus evil. There are aspects of one system they like better, there are aspects of the other system they like better, and they can see these two systems are going to compete, but it's not the end of the world. Here, we're mapping it back onto the Cold War as if, "Okay, now we're back in the Cold War, and instead of the Soviet Union, we have China to compete with." But you will have places like Hong Kong and Taiwan that formerly were very free, and they'll become quite not free.

And, you know, the incentive in places such as East Africa will not be to be a blossoming democracy along the lines of Ghana or Senegal, but to be somewhat autocratic. And I think we'll see that, and I think it will be worse for those areas. So I am greatly concerned. I don't feel I'm hysterical or alarmist or paranoid, but the notion that not all of the world will become globalized and in some way in the Western orbit, I do think that's an enormous, great loss. Yeah.

I mean, I think the US should be realistic that, okay, we have another existential competitor now in place of the Soviet Union. Now, as far as the internal political evolution of China, it's still kind of up in the air. So if you went back 5 or 7 years, most of the top intellectuals and political scientists would've been surprised that somebody like Xi could arise and amass so much power, they thought it was heading the other way. They actually thought they were heading toward liberalization. And after Xi is gone, perhaps it may go back that way. It's not at all clear what the trend is. So one can—

But China in its history, look at the long-term trend. China has never ever been democratic and it probably won't be.

No, it probably won't be democratic in the full-blown Western sense, but it could still liberalize far beyond where it is today.

It could, but I think the opposite is more likely at this point. And I don't view— I know a fair number of Chinese. I don't see them in general as demanding liberal democracy.

Yeah, that's the rise we've seen. That's what we've seen over the past decade and a half. People seem extremely happy with improved economic opportunities and are just not all that interested in what many intellectuals like us consider to be extremely valuable things like free speech and open elections.

Yeah, it's kind of a trade-off. The current trade-off is you don't bother me while I'm trying to get rich, and I won't try to take political power from you guys, and people seem fairly satisfied with that. How long that will continue, I don't know.

Yeah, Russia is also kind of running a parallel experiment, although not with the same economic success, so I think it would be an interesting question how long Russians satisfied under Putin if he can't give them something like Chinese levels of development. I know many people from Russia.

My wife was a refugee from Soviet Union, and even in America where there's no censorship at all, it's striking to me how many non-Jewish or non-ethnic minority Russians are pro-Putin. I would say most of them are, and their GDP has been shrinking for 5 years, but nonetheless, there's something culturally attractive about a strong leader. And I don't see Russia liberalizing anytime soon either.

So you said that you're surprised at how many non-ethnic Russians are pro—

Non-ethnic, so Armenians, Kazakhs, people who are Jewish or part Jewish, they're fairly reliably anti-Putin. Yeah. And those who are just what you might call ethnic Russian or close to pure ethnic Russian are far more pro-Putin than you might've thought in the 1990s they would be.

Yeah, my ex-wife is Uzbek and she hated, hates Putin, hates the entire culture, did everything she could to get out of the, it was post-Soviet Union, but to get out of Uzbekistan at the time.

As did my wife, but that's not the dominant sentiment there.

So I think we're over time, Corey. Do you have any more questions for Tyler? If not, we should probably call it. I don't.

I really appreciate all the time you've given us, Tyler. This has been a really interesting discussion.