Tyler Cowen on The Complacent Class 5/8/2017

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Today is March 28th, 2017, and my guest is author, economist, and infovore Tyler Cowen, the Holbert L. Harris Chair of Economics at George Mason University. Tyler also chairs the Mercatus Center at George Mason with colleague Alex Tabarrok. He's co-author of the popular economics blog Marginal Revolution and co-founder of the online educational platform Marginal Revolution University. Tyler's latest book is The Complacent Class: The Self-Defeating Quest for the American Dream, which is our topic for today. Tyler, welcome back to EconTalk.

Hello, Russ. Thank you for having me.

Uh, what do you mean by the complacent class?

That something is wrong in America and there's less urgency about solving that problem than ever before. And in some critical regards, social change has slowed down. We are less innovative, less mobile, and more segregated. That would be the nutshell version. I could give you some examples.

So to me, and this is my only intellectual problem I have with the book, you know, of course I have quibbles here and there, there's a lot of fascinating ideas in it, but to me, your definition of complacency is more a description of stasis, a case of a reduction in dynamism, which certainly is— you write about a lot in the book, but I don't sense the distinction between a less dynamic, more stable economy and a complacent one. So tease that out a little bit for us.

The rate of productivity growth in the United States has had periods of being higher and lower in American history. In a lot of the late 19th century, it's not even clear according to the numbers that our rate of productivity growth was always so high. Yet American society was not complacent. We had a frontier mentality, an immigrant mentality. We were very likely to move across state lines. We were willing to accept a lot of risk. And that in turn helped us later on get the rate of productivity growth up higher. What I see today is a culture where younger people are more willing to keep on living with their parents, less interested in buying a car, more likely to aspire to being on disability. As a kind of future and less interested in, you know, protests and social change than say they were in the 1960s or 1970s. Those to me are all signs of complacency.

So one argument against that which you make in the book, I don't think you agree with it, but part of this is certainly the result of the fact that life's pretty good. We're richer than we used to be. And one could view this as what economists call an income effect, meaning something that we want more of as we get wealthier. Certainly as we get wealthier, one of the things we want more of is safety. We want more stability. Is that part of the answer or the explanation?

I think it's part of what drives complacency, but I don't think the choice to be more complacent is welfare maximizing for society as a whole. So there's an external social benefit to risk-taking, both in a lot of economic models and in my argument.— a way of looking at our current problems. If everyone slows down change, in the longer run, someone has to pay the bills, and we're not doing a very good job of that, I would say.

Well, some of that's politics, and we'll come to that.

Of course, the politics reflects us, right?

Yeah, no, no, I'm agreeing with you. But what interests me about your central thesis of the book is that in many ways, it is a It's a cultural claim that could be explained partly by economic factors, but you're mainly talking about what's happened to American culture over the last 40 or 50 years. Is that accurate?

That's right. I view this as starting really in the very late '70s, early 1980s, when people decided the risks and volatility of the 1960s and '70s were simply too much. And largely they were right, but we've gone too far in the opposite direction.

So, to give you an anecdote, your book's a mix of lots of data, but also lots of anecdotes and interesting speculation. I think about my father, who was born in Memphis, Tennessee in 1930. His father was a peddler. And I think my dad had a very strong desire to not be a peddler and to get out of Memphis. And he became the first person in his family to get a college degree, ended up getting getting a master's degree even, and got out of Memphis very shortly after I was born, uh, when I was 1, 1 year old. Um, you point out that one of the ways that this complacency manifests itself is less physical mobility in the United States. Talk about what we know about that and how that fits in.

The rate of moving across state lines is down about 50%. From its 20th century peak in 1948 to 1971, insofar as we have the data. So people are just staying put more often. Uh, some of that is a kind of complacency. Some of it is simply it's a pain in the neck to move. I haven't moved myself in a long time, and I'm glad that I haven't. But the net result of that socially is labor markets become less flexible, we become more locked into jobs, the economy changes more slowly. And it affects the entire mentality of the United States. We no longer think of ourselves as such a pioneer nation. What we do is make our places nicer. We don't transform them in radical ways, build new infrastructure. A lot of aspects of our society actually are in decline. Just try taking the train up to New York City.

Yeah, I have many times. It's a bit of a crapshoot. Yeah.

You take it because the plane flight is even worse, right?

No, no, exactly. I take it because the delay of loading and security is more pleasant, but then the ride itself is a mixed bag. Sometimes it's more pleasant on the plane, but often the train is more pleasant. I like getting up and walking around and it's a little more comfortable seat, et cetera, et cetera, et cetera. But, there are some surprises that you receive, as you point out or imply, that are unexpected in terms of arrival delay, et cetera.

It's stunning to me. The trip is probably worse than it was 50 years ago.

But there's Wi-Fi. But it's really bad Wi-Fi. It's a little better, but I don't know. There's probably less leather in the seats on average. Now, you mentioned this in the book, of course, because it's an important economic factor in a lot of different areas. But one of the things that's made that mobility, the physical mobility we're talking about, less pronounced is various restrictions on supply housing, zoning, and so on that have made—

And occupational licensing, yeah.

I'm gonna come back to that, but just let's start with just—

Civic benefits, yeah.

I wanna talk about housing in particular. It's really attractive for young people to live in vibrant cities like New York, Washington, Boston, San Francisco, and it's incredibly expensive. And it's not just the fact that the demand is high because it's nice to live there. The restriction on supply have made the rents dramatically higher. How much of that is part of the problem?

I don't think we have a way of measuring that empirically, how much of the problem it's explaining. I think it's most likely the single most important factor. And the complacency is the general social notion that as long as we're quote-unquote making our cities nicer, that there's not some long-run consequence to all of this, and we can more or less ignore that and feel good about the fact that D.C. is a more gentrified place than it was, say, 10 or 15 years ago, and of course also much more expensive.

Yeah. You mentioned occupational licensure. You mention it in the book as well, but you don't talk about it much. Why is it important? What's changed?

I don't think it's one of the most important factors. I think it's a significant factor. So as more and more people have service sector jobs, and in general as our economy ossifies and becomes more ruled by special interest groups operating through government, a higher percentage of jobs are covered by licenses, and transferring or getting a license from one state to another is not to be assured. There are some consortia and the like, uh, and this means people who have licenses are less likely to move across state lines. You'll notice the rate of moving, like, across counties within a state is not really down very much. It's really longer distance moves that have declined, not super short distance moves.

While I was reading your book, I thought about, um, the aftermath of the housing boom. In places like Las Vegas and other so-called sand states, Arizona and elsewhere, parts of Southern California. And a rather large number of folks were put out of work when that boom ended. Millions of construction workers, millions of manufacturing workers around the same time were also out of work. And due to, of course, a variety of factors, automation and foreign trade, And I find it interesting that we as a profession haven't used that as a remarkably— as far as I know, tell me if I'm wrong— a remarkably interesting experiment. Here are these folks who've been making a very good living in these two fields for their skill sets, and all of a sudden they're confronted with the fact that one, their job is gone, and two, it might not come back for a long time, if at all. And what did they do? Did they just stay in Nevada? Did they migrate to other states for other types of construction, manufacturing jobs. I don't think we've— I don't think we took advantage of that. Maybe sociologists have.

I agree that's understudied. I think one thing that goes on, there may be a kind of prisoner's dilemma problem. So everyone says, "Well, let the other people leave." So you think jobs will come back. You may expect not as many jobs will come back. So you'd like to be the one who stays, the other people leave, and you apply for that new smaller number of jobs and get something without having to move away. But if everyone feels that way, then no one leaves and mobility ends up a bit stuck. I suspect that's an issue. It's hard to prove.

Yeah, it's hard to sustain that though without some kind of safety net or other alternative ways to keep food on the table since this didn't take 6 months, but it's, it's a multi-year phenomenon, right? It's hard to— I mean, lots of migration.

There's spouses who work, you know, there's some amount of savings, there's black and gray market labor, driving Uber. There's things you can do. That may not be great for your future, that will enable you to keep on eating in addition to, say, unemployment insurance and welfare.

So, you know that— and this is an interesting observation— I've moved a lot more than you have, I suspect. I've lived in maybe 10 different places growing up and as an adult. And I was born in the South. I went back to the South a lot. As a kid and a teenager and as an adult. And when I was going back to the South in say 1962, having lived in Moses Lake, Washington, it was pretty obvious that the South was really different. And you point out that those differences somewhat for the better, of course, but for whatever conclusion you might want to draw, a lot of the differences between the different regions of the country have homogenized. They've gone away. Uh, why is that? Why do you think that is, and how does that fit in with your thesis?

I think different parts of America have become more homogeneous, in part because we're more of a service sector economy, and service sector jobs are often a bit the same everywhere. Not in Silicon Valley, but if you look at the economy of Columbus, Ohio, Denver, Colorado, many parts of Northern Virginia or where you live in Maryland. There's a sense of, you know, retail and healthcare and personal services and some business services. And the sameness, those tend to be sectors that have low rates of productivity growth. So you're not going to move from one part of the country to another, say, to work in a Starbucks, most likely. You might have some other reason for wanting to move, but it's not like the automobile sector in Detroit where people moved to Detroit to get those jobs, or mining during the California Gold Rush Again, Silicon Valley would be the exception, but most of this country is not like that anymore, and it doesn't drive much labor mobility.

Well, as you point out, I live in Montgomery County in Maryland, and it's actually the case that even though the mix of stores in my brother and sister's town of Memphis, Tennessee, that I mentioned, are roughly the same as the ones we have here, their malls actually look better. Because their zoning and I think I assume county restrictions are such that it's easier to start new stuff. And so the architecture of those service providers is newer and it looks better. That's the only heterogeneity that you kind of get. It's not particularly attractive. As you point out, architecture is in kind of an unexciting period in American history, but it's a little more aesthetic compared to the older, uh, stuff that's here in Montgomery County.

There's also a sameness of outlook. You know, you can go to Arlington, Virginia, Ann Arbor, Michigan, Santa Monica, California, and something about how people think feels the same— how they vote, whom they've decided to live next to, how they date. And it's not that all of America is like that, but the fact that people are clustering more by political ideology, I think, is unhealthy— and is giving us much worse governance than used to be the case.

Now, some of the complacency that you talk about comes from the fact that we're older as a population. I looked up the data. The median age in the United States has risen steadily since 1970 from 28 to 37 in 2010. That's actually an enormous increase.

Sure. More to come.

Yeah, and there's more to come. It's the baby boomer population aging and then people living longer— when they do get older, dying later on average. How much of that's part of our— you know, you talk about the lack of innovation. How much of that is just due to aging?

I think some, but if you look at millennials as a generation, they in some critical regards seem to be less dynamic. I'm not suggesting any kind of moral flaw in them, but a lot of them have grown up in a global economy. They may have higher student debt. Their opportunities have not been so great. And I think that's shifted their cultural outlook. They're used to an American government that fails at major tasks. So whereas I grew up with the space program, which put a man on the moon, maybe they grew up with the second Iraq war or the financial crisis. And I think that shapes their outlook. And, and, and they're pretty young, so I don't think it's only a matter that we're older as a nation, though of course that's true.

You talked about, mentioned earlier about lack of interest in cars, and you talk about, you document that in the book about how unexcited teenagers are today about, say, getting their license compared to a generation ago. And I think that's true. Of course, some of what's going on under the surface is more dynamic. You know, it's one thing to say, yeah, teenagers wanna sit at home or live longer at home. But of course, as you point out in the book, the car of 1970 is today's computer app or today's smartphone. Which is a way of expressing oneself, it's the way to meet other people. Is some of the apparent complacency we're talking about and lack of dynamism just harder to notice?

Well, so many of the tech innovations encourage leisure at home. So Amazon will ship you all kinds of things. You can watch so many movies and TV shows on Netflix. The idea of cocooning has become easier, more comfortable, more fun. Obviously, that's a pleasure. We all experience it. But when that comes at the expense of actual, you know, productivity gains in firms and people moving around, developing an actual dynamic mentality— you know, the research of Roz Chetty, one of the things I think it shows is you can't deny the physical and geographic spaces you live in. Where you are matters, how you're growing up, the people you're interacting with face-to-face. And I think in all those areas, we're not making huge progress, and we so often are using information technology to slow down change rather than to accelerate it.

I'm going to use you as an example, or maybe me, to take this point a little further. So you're— on the surface, Tyler Cowen is stuck in a rut. He's still at George Mason. He's been there forever. He's still living in Fairfax, or wherever you live. I apologize.

I used to live in Falls Church. So don't say I'm not changing here.

Okay, so on the surface though, he's just, he's the same professor. And we know professors are risk-averse. They don't take chances, not innovators. And yet you've done incredible innovation. You started a blog. It's one of the most popular, top 3, probably, economics blogs, Marginal Revolution. You have an online university set of videos you're creating. You do podcasts like I do, Conversations with Tyler Cowen. True, they're in real— some of them are in person in front of an audience. But I think a lot of what we're actually doing, I'm just wondering if some of the ways that we observe economic activity in America is not capturing the dynamism that's actually there.

There's two different points in that. One is how, you know, you and I should think about our own lives. I would just say within academia, we are the exceptions, and the overwhelming trend I see is people who get tenure— my goodness, they have tenure— and they don't take additional risks. And I'm pretty sure you agree with me on that.

I think I do.

And I think overall academics are among the most complacent of the complacent groups. In American society.

Fair enough.

The second is how to measure the gains from the internet, and there are now a few papers which I've written about in the book and in some columns which try to measure those gains and look at, do they overturn the notion of a productivity crisis? And they don't. Those gains simply aren't large enough to restore productivity numbers to where they used to be. So you're talking about wonderful—

you're talking about the unmeasured parts of the internet or the unpaid-for parts, etc., right?

Correct.

Yeah.

And a lot of it, of course, is paid for, and it's in GDP, but there are some unpaid-for parts. And those just don't seem large enough in value to restore productivity gains to where they used to be. And I think just if you look at how are people in this country reacting to the new world they live in, whether it's how they're voting or polarization or the opioids crisis, uh, the behavior of men in the workforce, uh, the decline in the number of Mexican immigrants who want to come here, there's a lot of other non-CPI-requiring data that to me suggests we're not improving the world at the rate we used to, and that's a big form of complacency.

It's hard to understand why that is. I know there are a lot of different theories, and I'll let you share what you think are some of the more plausible ones. But if you think about— and there's a big question today, it appears that college graduates don't have as great a future as they once had. Yet, if you major in a STEM field, it seems to me that— and of course, that's a small proportion, it's not a majority. But if you major in a STEM field, it seems like the world is going to be your oyster. There's going to be an enormous amount of opportunity for you. So how much of this, going back to one of your earlier books, averages over, is a mix of people who have tremendous opportunity and others who just are going to struggle to be part of any any of that economic growth.

Oh, I agree. If you're a person who today is hell-bent on creating opportunity, possibly you're even an immigrant, you're very good with information technology, uh, that group of people is extremely non-complacent in America today. It's just that it's a fairly small minority and it doesn't describe the nation as a whole. It's as if we're having more specialization in non-complacency, and I think that's politically and also sociologically dangerous. We're relying on fewer and fewer people to be non-complacent, the kind of free-riding occurring.

You mentioned the opioid crisis, and we've— it's come up quite a bit recently in various programs with Sam Quinones, Quinones, and, uh, Tom Wainwright and Angus Deaton. Um, It's a large phenomenon, that and the heroin problem. Let's just call it the— I think of it as the escape problem. Um, how do you understand it?

Some of it, I think, is regionally economic development in this country is not as even as it used to be. There's less catch-up from poorer regions which used to approach the per capita income levels of the better-off regions. And now, you know, the Rust Belt is not catching up to Silicon Valley, and I don't think it will anytime soon. So there's something about technology that encourages clustering and more geographic specialization and face-to-face. So you have dying areas, a sense that politics isn't doing much for people, where I think you and I would largely agree. Yep. Uh, and then some drugs are better and more potent than before— not better for you, but they, you know, give you maybe a more intense high. They're easier to get. Prescription practices, it seems to me, need to be revised significantly, both in terms of how they're legally regulated but also the voluntary institution. And to me, what's striking is, you know, the drug of the 1980s was cocaine, which riles people up. And a lot of the recent drugs, the opioids and also marijuana, they're drugs that put you to sleep. And people want that kind of escape. And they're not drugs that make you violent. That's obviously in some ways a good thing. But precisely for that reason, they can in some ways destroy you more easily. You're simply there in a corner and you're less of a social problem in the short run. And so it continues.

So if I were doing some really cheap armchair psychology, which we're all somewhat prone to, uh, Taking the long, long view, one might be tempted to think about Brave New World a little bit here, Aldous Huxley's book, and the drug Soma. Is it possible that as religion becomes less important to people, less attractive, as work becomes perhaps harder to find, that even the comforts of the internet are not as much of a solace and that that we're heading toward a really not so attractive future.

Uh, for many people, but not all. I think it's important that you mention religion. A true belief in adherence and participation in religion is a significant bulwark against, say, becoming an opioid addict or even having big problems in the labor market. And it gives you a social network and people to look after you. This country is becoming less religious. I feel overall that's to its detriment. And I say that as a non-religious person myself, and I think that's yet another factor.

You mentioned monopoly power as part of the challenge, that there's less churn and dynamism in the market for firms. What's the evidence that that's real, and why would it be important if it is?

I try to word that carefully in the book. Concentration indices are up. Now, as we both know, those can be misleading. You can have potential competition in an area, and I think due largely to the internet, we do have more potential competition today. There's more globalization. It's funny to me that people who on one hand complain, "Well, the Chinese are competing against us too much," are then saying on the other hand, "Well, there's much more monopoly." Like, those can both be true at the same time, but you need to be very careful. As to what exactly is going on. I think a lot of the increase in concentration ratios is coming from one of two factors. One is just bad law, bad regulation. So the healthcare sector, it's much more concentrated. Uh, probably a lot of that is just regulations are so high for hospitals, for insurers. There are bigger economies of scale. That might not be the only reason, but I think it's a big one. The other thing going on in concentration indices is I do think for more or less purely market reasons, retailing is more concentrated. There are more and bigger chains. There's less turnover. Uh, I don't view that as a major social problem, but I think it's a symptom of a, a more general sense of our economy just isn't changing that much anymore. And the chains are mostly winning out because they have better customer service. Probably they have better product selection. Uh, but again, in the longer run, I do think there's some social cost in terms of less entry, less disruption, uh, less product innovation. Again, not a big problem in my view, but it's not my ideal for the American economy where like chains last forever.

Yeah, I'm with you on that. Uh, I, I wonder a lot about that regulatory burden. Now let's talk about that for a minute. And just to make the argument clear, you know, it's really part of the root of the bootlegger and Baptist argument of Bruce Yandle, that firms will often support regulation, painting themselves as in favor of safety or whatever it is, but knowing at the same time that they'll profit from it. And they'll profit from it because their smaller competitors won't be able to absorb the compliance costs. This appears to be happening in the financial sector and banking right now in the aftermath of Dodd-Frank. Tyler Cowen: And that argument, I find it deeply appealing, partly because I'm not a big fan of regulation per se. I'm not anti-regulation literally, but I'm skeptical of it. And I also like it because it's kind of cool. It's kind of contrarian and clever, and it's a cool hidden insight. But I wonder also if it's true. It's very hard to quantify it's true. A lot more pages in the Federal Register, but is it genuinely harder to enter new areas, start a business, thrive, expand, etc.? Do we know much about that?

Yeah, at Mercatus, we've compiled a database of regulations where we analyze them linguistically and we try to see what you can learn from that. I think the overall picture is complicated. So, longstanding sectors typically are becoming much more regulated— too regulated, I would say, in almost all cases. The good news is there are some newer sectors such as information technology and parts of the internet which are not that regulated at all. So describing that picture in terms of averages or even medians is probably not an accurate way to look at it. But I think the significant fact here is simply longstanding sectors are stultifying. You see this with Big Pharma. When there was talk of Donald Trump appointing a fair— fairly radical deregulator to head the FDA, uh, the Big Pharma companies were not pushing for this. If anything, they were worried. They wanted an establishment pick. So I see a good deal of anecdotal evidence that this problem is getting worse. Uh, not really having any new banks since Dodd-Frank. There's like one new Amish bank somewhere that's very small. So we're shutting down too many parts of our economy. And it can even be the case each one of those decisions may feel like the right thing to do, but again, the end result is you get lower rates of economic growth, and compounded, the long-term result of that is just a disaster.

Now, you're somewhat, um, you make the point that our perception of the innovative nature of our economy is exaggerated. On incorrect, that innovation has slowed down, that even with the internet, and you pick on Elon Musk as an example of someone who is sort of held out as an extraordinary innovator, and yet his ideas are at best speculative, may not have any viability. The Hyperloop seems like a long shot, as you point out.

And they need big subsidies, it seems, too.

Yes.

Even that may not be enough.

Which is not good. But if you had to ask me who were the Thomas Edisons of our era, I don't know if he's the right, he's probably not the right figure to use, but you like to point out that the transformation of life from 1900 to 1950 was, or 1960 or '70, is much greater than how much life has been transformed in recent decades. And if I had to pick the figure that was transformational the figures I would pick, I would pick Jeff Bezos and I would pick Steve Jobs. They have changed our lives in extraordinary ways. Now, you might not, there might be some negative effects, like, you know, the fact that, and I don't have one of these, but the fact that you can have a button next to your washing machine that you can push to bring Tide to your house via Amazon. I agree, that's not, that's remarkable. It's not that exciting, but so many aspects of Amazon and so many aspects of the Apple transformation of the phone, music, the computer have really changed certainly your life and mine in just extraordinary ways in terms of access to information, books, facts, ideas. Life has changed a lot. So when you talk about complacency, one of my problems is that Again, going back to my dad, my dad is— people in their 80s, people in their 70s, and somewhat even me, someone in his 60s, life's changing so fast, it's hard to keep up with being able to turn everything on and keep it charged. And there's just— it's a hugely different life than we had 25 years ago. And I see lots of change. Do you disagree?

Well, I think Bezos and Jobs are good picks. But I would say in the earlier part of the 20th century, you had figures like that in literally every part of the American economy. And right now it's only in a few areas. And if you just try to measure simple variables— what's the consumer surplus from having an internet connection? It actually doesn't seem extraordinarily large. If the price goes up, people do less of it, more or less at normal rates. And I think it's striking that you mentioned the two of us as examples. I have a much earlier book called The Age of the Infowar where I argue that for people who are obsessed with information, as the two of us arguably are, life is indeed much, much better, and this is all, you know, a fantastic revolution. But that's actually not most people. It's possible the median American did not read a single book last year. Uh, there's a lot of watching of cable TV, and a lot of lives haven't changed that much. And maybe Facebook substitutes in for what used to be network TV, and that's an improvement.

Uh, small—

I think you're extrapolating too much from our lives, people we know, the so-called coastal elites. And, uh, in this country, the number of people who think their lives will not be better than that of their parents, uh, seems to be rising considerably.

Well, it's an excellent point, and I, you know, it would certainly also apply to our to our listeners right now. Most of them are— most of you out there, why are they listening to us otherwise? You're probably in the same group. I wish you were larger, more numerous, that is. I don't want you to get larger. And we, of course, have many, many fine episodes on weight loss that many of you have benefited from. But it's certainly true that it is Most fun for the Infobore, again, it's a record for most references to my dad. My dad on his iPad, which wasn't easy for him to use at 86, but he listens to the Limelighters, which is a group I bet you know, Tyler, but most of our listeners will not know, a folk group of the '60s. He listens to opera. His world is so rich. Musically now because of the internet. And those of us sitting in front of our TVs, um, we're getting it. The TV we're watching is a lot better. The screen's better. The show is better. Uh, Netflix and others have just— HBO have transformed visual TV. I mean, it's just, it's just that television is just an amazing thing. But where I'll agree with you is that maybe I exaggerate day-to-day life because the transformation— because I have too much leisure. Too much time to spend as an infivore surfing that, that virtual world.

Yeah, I agree television is much better, but I think it's striking that music and movies are almost certainly worse. So what's happened with music is people can listen so easily to the best of the past, the amount of attention paid, royalties paid to currently created music is falling. And what I find remarkable is I can listen to, you know, music from the early to mid-1990s, say Alanis Morissette And if that same music came out today, I wouldn't know it was, you know, 20, 25 years old. It sounds the same. There's not that much innovation. So I think we need to ask ourselves, if information technology is in every way so dynamic, so wonderful, why is our music sounding the same and not really going anywhere? If you're in 1967 and you heard music, I mean, even from 5 years earlier, forget about 20, it would have sounded quite different and archaic. I think movies also are hard to prove. It's a subjective evaluation, but obviously much worse. They're tentpole franchises that rely too much on CGI. They have worse performances, worse dialogue, and are not close, say, to the Hollywood masterpieces of the 1970s. So, you know, again, TV's much better. I would readily grant that. But if you're only getting 1 out of 3, and then we're thinking this is all so wonderful, I think we should be more skeptical there.

Well, audio's better because we have podcasts.

Oh, sure.

That's a joke, but sort of true.

No, but it's true. It's a true joke.

Yeah, right. It was meant to amuse, but there was truth behind it. I mean, it just—

Learning is much better for those who love learning.

Yeah.

Right?

Yeah, for sure.

And that's probably your father too.

Yeah, for sure. I'm going to push back a little bit on the movie thing. I do think that a lot of the things, we don't call them movies, but serials like House of Cards, Sherlock, The Sustainables.

Television. Television's better. Movies, they're worse.

Yeah. Well, they kind of merge together, I would argue, but maybe that's a distinction worth making. There's a strange part of your book, which I enjoyed a lot, where you sort of complain, but certainly observe that we don't riot. As much as we did in the 1960s and 1970s. And certainly, there's a theme in that section that that's not necessarily a good thing. So talk about that change. And I thought you had some great insights into policing in there. Talk about why that's changed and what it portends.

Well, I don't favor rioting. I've also never done it myself. But that said, the fact that it is so less frequent, I think we should think critically about and not just cite as a completely positive thing. We have bureaucratized protest in this country. Like most other things, it's much harder to get the necessary permits and clearances. You can be shut down at any time for national security reasons. There are more bureaucracies you need to go through. Strictly on the private side, it's much more a matter of having PR consultants and people managing your event than it used to be. So the fixed costs are higher, the law is tougher, the regulations are more onerous. And I wouldn't call that a direct restriction on freedom of speech, uh, but I don't think it's an entirely positive thing either. And the police in turn have learned a great deal. They make sure demonstrations don't get out of control. They have better surveillance, communications. They apply management technique. They, for the most part— Ferguson was an exception— they defuse trouble before it gets started. And there's been this overall pacification of our culture, which on any given day, week, or month is certainly to be preferred. But in the longer run, if it means we lose our ability to course-correct, again, I just want people to think more critically about this.

I'll just go back to something we were talking about a minute ago because I want to hear you talk about this piece of it. You write very beautifully about your childhood and young adulthood and then the present and how you were straddling two worlds and how much you appreciate that and how young people today are not. They're in one world. Talk about what you're referring to there.

Well, you and I, we belong to what I think will be seen as a unique generation. We grew up without having an internet, so we had to learn how to look for used books, how to track down scholars, how to make personal contacts in a particular way, how to use a library in the old-fashioned sense— what it meant to browse the shelf for books. Uh, but you— the only book you might have in the house would be, you know, a great classic, Tocqueville, and you would read it for the 5th or 6th time and study it in depth because you couldn't just go browse your Twitter feed. Now that had big advantages and also big disadvantages. But then when we're in, you know, more or less our 30s, we're still young enough to adapt to this new internet world where there's blogs, there's Twitter, there's search, there's reading small bits of things. So many things are searchable. It's so easy to email people and contact them. You can watch the speakers you love on YouTube and so on. And the ability to have both of those worlds of learning I feel is quite special and is actually one of the greatest blessings of my life that most people my age don't appreciate. And those who are either too old or too young to have, you know, bridged those two eras, I feel they're missing something quite significant. By the way, I think it was Ben Kuznoka who first made the point to me, so I would credit Ben, as I believe I do in a footnote. Yeah, he said, you're so lucky, Tyler. I said, what do you mean? And then he explained this to me. —And Ben is young, he's, I think, not even 30. Yeah.

—But why do you— you're not much of a curmudgeon. I try not to be one. I think as you get older, you drift inevitably toward curmudgeonliness. But what would be the argument that, let's say, a young person would— how would you convince a person they missed something? Most of them would think you're crazy. I mean, why would you want to go, go wander in a library or use a map?

Or, you know, I don't think most young people do think I'm crazy. And I talk to young people all the time, and, and I often make this point to them, and I'm not sure I know of any case of one who has failed to grasp it. Maybe they hadn't understood it to begin with, but when I say it The response is a kind of astonished recognition. Say it again. Say it again.

We're talking about nostalgia for 1990 right now is what we're talking about, right? This pre-internet era. No, I know, but, but that's how we—

before the '90s, really. Sure, of course.

But there's a certain strangeness.

Go ahead. Social media can distract you and keep you busy and keep you too tied up with, you know, fairly short or sometimes even superficial messages. There's something addictive about it. It's— those are nonetheless very, very powerful tools for learning and connecting. We should agree with that. And we may even think the new world is better on that. But there is something from the old world when you didn't have that, that you had to master other ways and styles of learning. And if you can put that together with the new approaches, that's just very powerful. And people I tell this point to, generally they get it. And I think the younger people get it all the more. 'Cause they live the downside of the tech world more directly.

I agree with that. We've talked on here a number of times about how people are aware of this challenge of what we could call an addiction to Twitter or to Facebook or to your phone. Or to your podcast, yeah. Well, I don't come out often enough. I guess you could listen more than once, and thank goodness.

Go to a Liberty Fund conference, as I know you do all the time.— and if you look at probably the smartest, most incisive, insightful commentators, and then just ask yourself, like, on average, are those people spending more or less time on social media than the other participants? We know the answer, and there's something to that.

Now, I think what's gonna— my view on this is that, you know, I keep the Jewish Sabbath, so I'm guaranteed a 25-hour window every week without electronic devices, which I'm grateful for, for many, many reasons, but that's one of them. And I think that— I'm not suggesting that more people are going to become religious Jews, but I do think there will be some cultural pressure to find ways to detach oneself from devices and the internet going forward. Do you agree?

Yes, I do. I already have people writing me, you know, declaring their intention to quote unquote quit Twitter. As if it were a drug. We'll see if they do, but that they're even thinking about it.

Yeah, I think about it myself. It's not so much for me the addiction as the snark factor occasionally wears me down. And I only— one of the reasons I stick with it is I think I should be able to get over that, but it's not so easy.

You also raised the demographic question in what you said. So I find in my own life, I was most pessimistic as a teenager. In the 1970s when I really thought the world was falling apart, and maybe in a way it was. And then over the next two decades, I became much more optimistic. I think my optimism peaked in the mid to late '90s, and I think since then, you know, not in absolute terms— I know all the numbers on poverty reduction and life expectancy that you do— but if you just ask the question today, do more people believe in freedom than in the 1990s? I think the answer is no. And I think that's extremely important. And I think, you know, we should be more pessimistic in some significant ways.

Yeah, what's happened to me, it's interesting. I think I developed a reputation as an optimist somewhere in the— certainly my own self-image had that as my character. And the financial crisis was a jarring realization that I'd been overly optimistic. And then— 9/11 for me. Yeah, that too. I remember after the anthrax scare, wondering if we'd ever be able to have commerce again across international borders and state lines and how incredibly destructive that would be. That turned out not to be a worry that was real, but it of course could happen again, things like that. But what I find interesting is that— so the financial crisis was a big jar of my worldview of optimism that things, processes would just normally work out better. And then in the last 5 years, what's happened, and I don't know if it's just what I consume or whether it's real, I can't tell yet, maybe it's too early, but this feeling that I'm doing fine and other people aren't, which is, I think, where the rest of the world was over the last 25 years. I don't know if that's a media-generated problem or whether it's real, but I, I think we'll get more information on it going forward.

I find Russia, Turkey, some aspects of China, Syria, uh, to be very, very troubling. There you have countries which ought to be becoming more free, at least by my views of the 1990s, and they're becoming less free. And I don't think we really have a perfectly good explanation for why.

Well, I was thinking about people in the Rust Belt, but I'll add that too.

Well, sure, but, you know, of course, much better off than, say, people in Syria.

Yep. Of course, offsetting that is this unbelievable revolution that you and I read about. You perceive it because you travel, but the transformation of life in China and India over the last 25 years is a wonderful thing. And mainly really, really good and a source of some optimism.

But surely we all have some fear, even if it's not our modal forecast, that there are some features of the world today that look a bit too much like 1910 for comfort, where living standards are rising but some cultural foundations are eroding, some ideas are getting worse, attachment to liberty is dwindling. And what's the long-run sustainability of that? You know, I don't think any of us know, but I think our level of concern there should be rising.

Well, I think what makes you an interesting thinker, Tyler, is that even though you're trained as an economist, you don't think it's all about money, and you don't think it's all about markets. Uh, they're important, of course, but I think some listeners say, 1910, what was wrong with 1910? Well, it was 4 years before 1914, which was an upheaval of the First World War that changed everything, led to World War II. Culture matters and the perception of who we are and our identity matters. And I think it's something you do very well.

Yeah, keep in mind, a lot of my earliest economic research was on the economics of culture, and that's always stuck with me. It's true. It seems to me still a missing element in most economic models, including narrowly-based macro.

Yeah, for sure. Speaking of culture, you write about architecture and fashion, which again, most economists don't. You argue they've become more stable. What do you mean? And why do you think that is?

In the United States, I think contemporary architecture is only very rarely good. There are a certain number of trendy, expensive buildings, you know, one may or may not like them, but at least they are an attempt to do something ambitious.

They grab your attention. Sorry? They grab your attention. They grab your attention, yes.

And again, opinions may vary, but at the very least, I admire the ambition. I find it striking the extent to which we've used our wealth to build more structures, and hardly any of them are as nice as, say, you know, an old-style Georgian home as you would see in London, when people were much, much poorer. I don't mean a little poorer, you know, there were many multiples of times poorer, and yet many of them lived in nicer buildings, and we don't seem to care. It seems to me interiors are vastly improved with every generation, including, you know, ours compared to 30 years ago, and obviously to some extent that's what people value. But if you have a theory where what's wrong with the world is people are getting too good at leisure at home and not good enough at interfacing physically, geographically with everyone else, and then you see the way architecture is evolving, that interiors just are better every year and exteriors remain mediocre, ugly, and not even worth looking at, that to me is at least an interesting parallel.

I may Maybe you know about this, I don't. I wouldn't be surprised if you do, but obviously, you know, a college campus, many college campuses are designed to evoke the campus of really 16th or 15th century England. Some do it well, some don't, but— and of course, there are many exceptions. There are beautiful campuses that don't do that, but it seems to me that a lot of what we do is imitate the past and certainly But one of the things that we do, as you point out, is we don't do anything radically different. But is there any measure of that? I don't mean empirically. I mean, do you have any intuitive feel that we just have a nostalgia for the past and continue to build buildings that look something like they used to?

I think it's running out of ideas, a sense that in architecture everything has been done, that even shock value has lost its shock value. And if I— when I visit universities, colleges, which I do all the time, there are hardly any new ones which I consider attractive at all. Somewhere like UBC in Canada, that's stunning, but it's more the site, uh, than necessarily what they have built. And furthermore, that's Canada. So, you know, even our universities with main endowments, they don't look better than historical buildings. So there's something about the older notion of culture, kind of the visual, the physical, the regional, that we can't do very well anymore. You know, same you could argue about public sculpture, or even just go to Alexandria, Virginia, and look at some of the 18th century homes. People still live in them. They are less practical, but the notion that they really do look nicer than something built last year, when maybe back then per capita income was what, I don't know, $200 a year? It's hard to measure, right? But that to me, we don't think enough about— probably less— that when it comes to culture, it's much easier to have negative progress than when it comes to purely material goods. And maybe that's a problem for the sustainability of our world.

Talk about fashion and how casualness has emerged and how the role that signaling plays in how we dress.

Well, being a casual person myself, I'm very glad being casual is in vogue and probably will stay in vogue. But what I find striking is societies with a lot of upward mobility often tend to have strict dress codes. So you see this today with Mormons in Mormon businesses. You see it in Japan in its heyday years, you know, the businessman or journeyman suit, they more or less all look the same. There's something about upward mobility where actually clothing is not that casual and one is being more formal and trying to impress, and that is oppressive. But the thing about being casual is it actually makes it harder for people to prove themselves. So Bill Gates goes to a meeting and he may show up dressed very casually, but he's still Bill Gates. Either everyone knows, or if you really needed to, you could Google him. So there's a code of casual that's actually very difficult for, say, people from other cultures in America to master or demonstrate. It's actually made signaling harder. Just that right way of looking casual is in a funny way more conformist than like the blue suit and tie, which you could do and then innovate around and try to climb to the top. So I find this disturbing the more I think about it.

I think you're in a small group there, but it's an interesting— about being— finding it disturbing, but it's an interesting observation.— and as you point out, most of us are pretty happy about the trend overall, but it is interesting how that's happened. It's not obvious to me how or why it has happened. Any thoughts on that? I don't know if maybe you just gave them—

I'm not sure. Your father maybe has told you stories how men were expected to wear ties, sometimes even sitting at home, and expected to wear hats. So I think there's something about formality and hierarchy that actually can make mobility more possible. That's a politically incorrect thing to say, but the notion that like all ideas are tolerated and everything is equally valuable and you can sort of wear any kind of clothes you want provided you somehow feel like you could be living in downtown San Francisco, uh, I think that's a very alluring but very dangerous cultural move we've made. Well, the places where you see it at its most extreme are exactly the places where it's hardest for other people to move in, you know, get a cheap apartment or flat and work their way up. And that to me is no coincidence. It's enforced by building restrictions. You go to a Silicon Valley party, people, you know, show up in their shorts or, you know, flip-flops, and maybe they earn a lot of money, uh, and that's actually part of the problem. It's a very counterintuitive view, but I think the more one goes around the world looking at it this way the more it makes sense.

Yeah, I like your point that it's— there's a real art to looking good casually. And I don't know if that agrees or disagrees with the rest of the thesis, but I do think it's— instead of getting a very highly tailored and expensive suit, now you have to know exactly how to match your t-shirt with your running shoes in a way that doesn't make you look the wrong kind of geeky or whatever it is.

Yeah, so you're an immigrant to this country, just imagine that, and you show up at a workplace and they tell you, look, you know, put on a blue suit jacket and a tie and burgundy shoes. I mean, don't you feel immense relief at that, actually? Yeah, of course. Yeah, for sure. Relative to whatever else might be thrown at you. And that's really just the point right there. And once you get that intuition, just apply that logic more broadly.

Uh, you mentioned we You mentioned Tocqueville a few minutes ago as being your only library book, but you spend quite a bit of time on him in your book. And talk about what he meant by pantheism and how you see it relating to transcendence and the current situation in America.

Tocqueville's notion of pantheism, I'm not sure I understand, and I haven't read Tocqueville in the original France— French, but at least as I read him, Tocqueville, as a theorist, saw America was headed in a direction of greater complacency, much greater mediocrity, noting and indeed insisting upon the notion that mediocrity is greatly underrated or undervalued, like a mediocre life is a wonderful thing to have, but that nonetheless, you know, markers of social status would ossify, and through a kind of indirectly enforced conformity, change in this country would slow down. And Tocqueville arguably was the first theorist of, uh, the complacent class, and I try to give him full credit for that. I think it's remarkable how much of that he saw in advance. Now, he calls it pantheism, by which he does not seem to mean, you know, the Spinoza notion of identifying God with the material universe. For him, I think it's, you know, a way of thinking about how idolatry works in this new society, that people copy each other to an extreme degree. In a way, he's a forerunner of René Girard in those passages too. What's his—

what's the concept of transcendence and why is that important?

Transcendence gives us something beyond ourselves to aspire to. It gives us external standards. It gives us a kind of hierarchy or rigidity, even if we use it just to rebel against, uh, and that's very useful. You know, another group in American life that I view is not very complacent, and that would be Mormons. They have a robust middle class, high income growth, a lot of mobility, very good social indicators. There's a new Megan McArdle piece on this on Bloomberg today. And they're also the group, you know, they have a lot of hierarchies in various ways, yet in other ways are highly egalitarian, very entrepreneurial and dynamic, very religious, of course. And I think there are lessons in the Mormon experience, too.

—You also have some praise for immigrants and their— the dynamism that they add. —Yeah.

You know, I think immigrants are more neurotic than average, and that's very useful. You actually want a country in some ways filled with neurotics or partial neurotics. They're driven or they're motivated, and immigrants have so often in the past refreshed this country's dynamism. They, you know, are doing it now again to some extent. To the extent that's happening. And, uh, but life as an immigrant is extremely uncomfortable. I think those of us who are not immigrants, uh, forget that. You know, my wife was not only an immigrant but a refugee from Soviet Russia, and when she came here, it was a long, long time before she really fit in again or knew how things worked or, you know, started her second career. It's very difficult. And we now have this view like people born here shouldn't have to go through something like that. But that again is another way of framing this complacency. Immigrants rarely think that. They all know they're in for big adjustments, and even if they don't know it at first, it hits them over the head.

You say something, uh, which I found really, um, provocative in the book about politics. You say elections these days often seem more about who is to blame than who is to govern. What do you mean?

Well, Trump has turned out to be the master of that. You know, I wrote that sentence when I had no inkling Trump would win, but if you look at his tweet stream, it's remarkable how much he's still blaming Hillary Clinton for this, that, and the other. He now likes to blame Paul Ryan. Uh, not saying you— there's nothing you can blame those people for, but look, he's president. Actually, one might expect he takes responsibility for governing and getting something done. But he's, uh, rather obviously wallowing in blame, and the two parties blame each other. So the Republicans vote to repeal Obamacare, what, 60 times or so? And then they get in power and, uh, doesn't seem they can do it. What does that tell you about complacency? Most parts of the budget, the two parties, for all of their symbolic differences, are very much in agreement about, and probably even Obamacare will not fundamentally change or go away. That to me is an underappreciated truth. It's been pointed out before, but I don't think we've really internalized how much of a stronghold that has over what happens or doesn't happen in this country.

In the last part of the book, you speculate that maybe there's some deeper trends going on that are going to, uh, hit us in the face. I, I just wonder about the inevitable observation, the obvious observation that whatever's happening here seems to be happening elsewhere. Brexit seems something like the Trump phenomenon. Populism seems on the rise. Uh, how much of this is cultural versus financial/economic?

I don't think we know, but I tend to lean toward cultural explanations. I find it interesting to look at the countries that don't seem to be so populist or so alt-right right now. And two of those would be Ireland and Spain. So what characterizes Ireland and Spain? Again, this is highly casual empiricism, if you would even call it that. They're both Catholic countries. Ireland has a recent history, the two Irelands, of conflict. So I think the notion of violence is fresh in their minds, and they take it seriously in a good way, which I find reassuring, but in another way, I find it worrying. Spain has an experience of fascism that is not so distant, and the Civil War, although it was a long time ago, if you walk into any Spanish bookstore, it's amazing how much it dominates, you know, the titles that are there put out on display on prominent tables. So that Spain and Ireland are inoculated from recent trends, to me, is evidence for a kind of cyclical theory, that if you haven't had certain bad things for a while, you forget how bad they are. And they tend to come back. Germany also seems fairly inoculated. Maybe that's still an open question. France, we'll see soon enough. But to look at the cross-sectional variations, countries where populist, outright movements don't get off the ground, it tends to be, uh, places that still remember their troubles.

Well, let's close with this idea of the cyclical nature of history. I think there was As you point out in the book, the excitement over this so-called Great Moderation, excitement over the end of history, the fall of the Soviet Union, that induced a lot of optimism in most of us. It looked like the outside world from the United States, the trouble spots after the fall of communism, that that was going to get better. We seemed to have figured out how to keep the economy on an even keel. I'm saying, I'm smiling in a dark way because we obviously didn't. And you speculate thoughtfully on alternative ways of thinking about history and how just the fact that we're thinking about those ways is going to affect how things turn out. Sort of a little bit of a Heisenberg uncertainty principle there. Talk about that. Not the Heisenberg uncertainty principle, but about the role of cyclical forces in history perhaps.

Well, I, you know, I'm still an optimist. There's more human capital or talent in the world today than ever before. But increasingly, I think the bumps along the path will be much bigger than I had thought. I think the financial crisis could prove just to be a warm-up act. I think the notion that you can have developed countries with fairly reasonable economic policies that see declining wages for decades on end is a reality. If you look at somewhere like Greece and Portugal— now Greece is terrible policy, Portugal is not great policy, but they're not like Greece. But it's simply the case that in those countries the equilibrium is for wages to keep on declining. And that was not really part of my mental toolbox, say, 20 years ago. I thought you needed very bad policy for that to happen. Uh, and I don't necessarily agree with Steven Pinker that the world will just get more and more peaceful. I think as memories of conflict recede A, it becomes more thinkable, and B, the rogues out there are more and more willing to take advantage of the complacent. You know, Israel to me is a very interesting country. I don't think they're complacent at all, because they understand so readily that their survival depends on them not making many mistakes. And not many parts of the world have that understanding right now, and that actually is one of my worries. I assume you tie that into Israel's innovative economy then.

Very much so.

It makes them perfectly geared to be innovators because they know it's innovate or die. Singapore is more like Israel than many people realize. Their security situation, while it's fine now, it doesn't have Israel's history of the more recent wars, but they correctly consider themselves to be extremely vulnerable and that they can't count on us forever. And they too are extremely non-complacent about their future. They all think, look, we may not be here 50 years from now. We cannot afford to make too many mistakes. In this country, it seems to me, in the United Kingdom, we're pretty much at the opposite point of view.

My guest today has been Tyler Cowen. His book is The Complacent Class. Tyler, thanks for being part of EconTalk. Thank you very much, Russ.

Always a pleasure to chat with you.

This is EconTalk, part of the Library of Economics and Liberty. For more EconTalk, go to econtalk.org, where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for EconTalk is Rich Goyette. I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday.