Zach Carter on the Life and Legacy of John Maynard Keynes | Conversations with Tyler

Hello everyone, and welcome back to Conversations with Tyler. Today I'm chatting with Zach Carter. He's a senior reporter at the Huffington Post, but more importantly, this year he published a new book as biographer called The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. And just last week, Publishers Weekly selected this book as one of its best 10 titles of the year. Zach, welcome. Let's start with a simple question. Wasn't Keynes simply wrong about the Treaty of Versailles?

Man, tough question out of the gate. I don't think so, but of course there are people who have made this case over the years. You can talk about the Treaty of Versailles as a— in his critique of the Treaty of Versailles, an economic critique or a political critique. I think a few years after, 1922, I believe, after the treaty had been signed, Keynes did a sort of follow-up analysis called A Revision of the Treaty, which was basically 80,000 words of I told you so. And he goes through the debt and resource numbers in detail and says, look, I was right. I find that persuasive. There's a very prominent critique from the 1940s by the son of the translator for Clemenceau at Versailles, which says Keynes is wrong about all the economic numbers. But I don't find that persuasive. And I don't have it in front of me, so I can't get into the exact details. But I don't think so. I think if you think about the Treaty of Versailles as a political document that sets the terms for international cooperation over the coming decade, the imposition of scarcity across not only Germany but also Britain and the victorious Allies through the refusal to wipe out debt and to impose de facto austerity on Germany through high reparations levies results in a lot of international discord. People see their money going to other countries. And it fuels nationalism and discontent. I think he's basically right about that, but do you not agree?

Well, if we look at the numbers, it seems Germany never paid more than 2.5% of its GDP in a given year in terms of reparations, and that's less than what Hitler asked Germans to pay for rearmament. So, if Keynes had simply made a political argument, "Well, this is going to irritate the Germans," politically, but he made an economic argument that it's impossible and that seems entirely feasible. There are plenty of countries back then, 2.5% poorer than Germany or more. Didn't Keynes in fact lend some credence to the notion that Germany had been stabbed in the back by the Allied powers by Britain's most prominent intellectual endorsing the notion? And he had somewhat of a political critique, but on the economics he was wrong.

Well, I mean, you're right that Germany never paid the reparations duties that were due, but I think that's sort of inherent in the critique. If they were unaffordable, they weren't going to pay them. And of course, by 1923, Germany is in a hyperinflation crisis. So I think the idea that Germany could afford to pay is tied up in the political circumstances of the day.

Well, but again, countries poorer than Germany didn't have to hyperinflate, right? The Germans brought that upon themselves. Plenty of Eastern Europe was more than 2.5% poorer than Germany. They made various mistakes. But in terms of what it interjected into German politics, didn't Keynes misread the situation thinking that his message ultimately would be supporting German liberalism? What turned out is that Europeans ended up more at each other's throats. And again, on the economics, it just doesn't seem that convincing. No one likes to pay 2.5% of GDP. But, you know, you go to the later 1920s, there's the transfer problem debate with Olin. Wasn't Keynes wrong about that as well?

Just to stick with the 2.5%, I mean, the task for Germany was not just paying money, it's holding together a democratic coalition. So, the politics of this are, I think, inseparable from the economic numbers. You know, when we talk about mistakes that the German government made in the 1920s, whether it's up to hyperinflation or or even later. And clearly, I mean, there are a lot of mistakes. I think into the late 1920s, Germany is deflating in a way that I think is wrongheaded. But particularly early on, I mean, the German government is trying to hold together a political coalition. And if that coalition— those political realities, I think, have to be taken into account. You have people who are suffering, particularly at the very early days of of the post-war treaty, like serious material suffering throughout Germany, people literally starving to death, largely due to the Allied blockade, but also just because the war cost a lot of money and drained a lot of resources. And so if you want to get people to support democracy under those circumstances, and remember Germany is in literal revolt, I mean, they're executing communists in 1919 and 1920, you've got to find some way to tell people, like, here is here is a better future for you. We are— you do not need to turn to authoritarianism on the right or the left. We are going to provide you with things. We are not going to raise your taxes. And each of these political parties needs to, you know, to have its own sort of financial base. So, you know, could Germany have raised more taxes and shipped more money abroad? Yeah, probably. But how much? I think Keynes is right. This was a— what was being asked of Germany was too much.

If we think of Bertolt Ohlin's critique in 1929, he's actually saying Keynes is oddly non-Keynesian. So Ohlin is saying, if you transfer the money abroad, the German mark will weaken. This will boost German exports. In what later became known as Keynesian open economy macro models, Germany gets back a lot of what it sent abroad. Probably not all of it, but quite a bit. Paul Samuelson thought Allain was correct. I mean, was Keynes wrong about the transfer problem in the late '20s?

Oh, I'm much more sympathetic to this sort of broader critique that Keynes in 1919 is not Keynesian. I mean, he's looking at this from a very— he's looking at these transfers as a very zero-sum game. Right? What Britain can't— you know, what Germany ships abroad, it can't— it doesn't get back. I mean, there is a time problem here, though, even if you accept this critique. It takes time for the money to come back to Germany. The money has to be lent back into the German economy by somebody, right? And during the 1920s— I think later on Keynes is pretty clear about this— you know, the United States is lending money. Not only to Germany, but to Europe. And so long as that game keeps going, the cycle of funds is sustainable. But of course, by, you know, the late 1920s, that's no longer— the United States stops lending money for various reasons. But, you know, right up into 1922, 1923, I mean, I think when you have the— the French government occupying the Rhine. There are political instabilities there that make the flow of funds pretty difficult. And those political tensions are occurring, they don't just spring up in 1923, they're there from the moment the treaty is signed.

Early in his career, why was Keynes so keen to work in the India Office? Right? He chose that.

Well, I don't know if he was so keen. He really wanted to work in the Treasury, the Treasury Department. And it was sort of a disappointment to him. I think he'd come in second or third on his big exams at the end of his time at Cambridge. He'd wanted to be number one. He was recognized as this brilliant fellow. So I think he wanted to be at Treasury, and he viewed the India Office as a bit of a disappointment. But I think one of the things he liked about working there was the way he could— he did seem to take to looking at the currency situation. He wrote a book, his first book, It's called, I think, Indian Currency and Finance. It's from 1912 or 1913. And it's sort of his first real serious analysis of the gold standard and the way it works within the British Empire. And so I think he finds it intellectually engaging in certain respects, but it's not quite as prestigious as being in Treasury, which is what he really wants. And he feels a little bit guilty about that. That sort of sense of ambition. His friends in Bloomsbury think that working for the government is this embarrassing sort of, you know, political thing to do. He should be pursuing, you know, art and aesthetics and writing and philosophy instead of government. So I don't think he's super happy at the India Office, but it is his sort of his introduction to the British bureaucracy, and I do think he he enjoys being part of the British bureaucracy. He likes being a man of affairs who's connected to sort of the great problems of the day. I don't think in the India Office he feels like he is attached to the grandest problems of the day. He feels like it's a sort of lesser-than kind of post.

What do you think of the substance of Keynes's work for the India Office?

It's interesting, you know, he has a lengthy report on— I haven't reviewed this in years— he has a lengthy report on conditions after a type of sort of recession in India where he says essentially the the British government's response has been rather lackadaisical, and a lot of suffering has happened, and you can see that his superiors are like, this is a little bit too much, can you tone it down? And he does. I think of it as sort of, he's, at this point in his life, he's thinking about liberalism and internationalism as He thinks the British Empire is sort of this grand liberal enterprise that is bringing freedom and democracy and prosperity to the rest of the world. And I think he views the relationship with India as— like everybody in Britain, it's the essential British colony economically in terms of resources. I don't think he ever really questions seriously what the substance of that relationship means based on the economic relationships that he's analyzing. He's looking at the India issue as a very technical and narrow issue, largely on how the gold standard operates and how India not allowing the convertibility of gold within its borders, you know, functions. And it's sort of a technocratic— it's a narrow and technocratic analysis. I think he's missing— I don't think he's focused on the big questions with India the way he would later be when he would be working at the Treasury during the war.

You know, I think of the India Office as having been good for Keynes. It made him less conformist. But if you look at his writings on Malthus, he was obsessed with Malthus at the time. He talked about competition between the races. He was interested in eugenics. He has a lot of remarks about India that show a bigger picture concern, but one that's very non-egalitarian. So I view Keynes on India as decidedly anti-egalitarian. Would you agree with that? Ah, no. But he wants the British to rule them. He never entertains democracy for India, which was not— that radical an idea then.

No, I agree with that. And yes, yes, I agree with that. But the idea that Keynes is— I mean, look, throughout his career, he's talking about— he views the British Empire as this sort of force of benevolence throughout the world. And he thinks that being part of the British Empire is a way for people from, you know, all— wherever they are, to participate in democracy and prosperity. And that is very much part of the sort of liberal imperialist conception of the time. The idea that it's not egalitarian, I— that's where I— you know, I think he's confused about that. I think he's just wrong. But I do think he believes the way that he thinks about about joining the British Empire, I think he believes that that is an egalitarian thing to do, which I think imperialists across time have believed when they come from a sort of progressive perspective. And of course, that's just often not true. And I think in the case of Britain and India, it's not.

But say in Indian Currency and Finance, Keynes shows this remarkable knowledge of numbers and statistics from India. Which he had a phenomenal grasp on. So he must have known the Indian growth rates under British rule were quite low, which has been confirmed by later research. It was one of the big problems with colonialism, not the only one. So I think my implicit mental model of Keynes, consistent with his interest in eugenics, is that he thought that India on its own was just intrinsically a slow growth nation and they'd have a slow growth rate under the British, but they would do worse on their own. Do you think that's the wrong implied mental model of how Keynes viewed this?

I don't know that it's wrong. I mean, you know, he clearly knows that something's not quite right, otherwise he wouldn't be studying the financial system in India and India's relationship with Britain under the gold standard and the particular way that India not having convertibility— I mean, it's the basic subject of Indian currency and finance. So he does think that British rule can be improved. But yeah, broadly, I mean, he's a liberal imperialist. He thinks that Britain is bringing prosperity and freedom around the world. And so he thinks that if you join the British Empire, particularly at this stage of his life, that you are signing up for, you know, to be led into the light.

I have at least 20 different friends who studied the General Theory, Keynes's book from 1936.

I'm sure you do, yes.

The big famous one. And I ask them, what's the central message of the General Theory? They all give me different answers. So I'd like to know, what's your answer? There's so much in the book, right? Incredibly rich and multifaceted, but what's the bottom line core of the general theory?

Yeah, you love the hard questions. It's— I think the bottom line— I mean, I wrote in the book that the bottom line core message of the general theory is that prosperity is not hardwired into human beings, that it has to be guided through political leadership. And I think that traces back to some extent to what you're just talking about India. I mean, he views the state and the government as, from a very early age, as this sort of guiding hand that can, it's, you know, in the case of India, it's a bit paternalistic, but also domestically, he believes that government is sort of a necessary force to organizing Human Affairs. And I, you know, on, on the general theory there, it's a complicated book, right? And in certain respects, it's, it's not always consistent with itself. But I think that, that there's a political message, which is that political guidance is needed for prosperity to exist, for markets to function. And I think there's also a reevaluation of what economics is doing and how economics functions. Keynes is not focused on scarcity at this point, and I think Michael Kalecki has written about this. I think he's— I think this, this idea that Keynes is refocusing the sort of nature of economics and economic, you know, humanity from competition for scarce resources towards Tyler Cowen: The idea that uncertainty about the future is the most important sort of psychological condition for, for economics. And if you believe in scarcity as the overriding issue, you're going to come to different conclusions about how the world works than if you believe uncertainty is the overriding issue. So I'm not sure which one of those is the most important, but those are the two that I think are key.

And at the more specific level of macroeconomics. Some people will say it's wage and price stickiness. Some say it's fiscal policy. Some say it's the theory of liquidity preference. That's what Milton Friedman thought.

Right.

Which of those makes it all work?

Interest rates. Look, I think Chapter 12, where he talks about financial markets, is a really, really critical chapter for me. In that chapter, Keynes is saying, If we want to— that's where the uncertainty really comes to be key. We don't know what the future brings. And so if we don't know what the future brings, the way that we think about markets as being things that correct for errors or social problems, really, is much more complicated. We don't know what the future is going to bring. Then, you know, we may hoard money when it, you know, may not be good for us to hoard money. We will make spending choices that are different. I mean, I think Paul Krugman has a fairly famous, at least among liberal economists, analysis of Keynes where he says there are these chapters 1 through 4 Keynesians and chapter 12 Keynesians. I don't really like that breakdown. I think Chapter 12 is really essential to understanding the critique of Say's Law, which you get in the first 4 chapters.

Did Keynes have significant misgivings about technocratic governance, and should he have had more misgivings given how British rule over India went, given how the post-war settlement went? Those people were by and large technocrats.

Yeah, and he— with a lot of these questions, it depends on which Keynes you ask. There's a great, just a great memoir that he presents to his friends in Bloomsbury in 1938, I think, where he says, you know, when I was young, I didn't realize that civilization was this thin crust that was preserved through the skillful acts of a few, right? That's a very not egalitarian way of conceiving of human progress. But at other times, you know, he seems to think that people are capable of you know, this sort of spontaneous flowering of goodness and light through aesthetic achievements, arts, art, whatever. And that people really— I mean, to believe in progress the way he does, he has to have a certain faith in the ability of ordinary people to make good decisions. He certainly thinks that good ideas will conquer bad ones, and this isn't just because the smartest, best people will be persuaded. He thinks people in general have this sort of rational rationality about them, or they will come to see things that are true as true. And I think, yeah, he probably does have too much faith on the balance of his life in the ability of technocrats to order affairs to the good. Certainly he has much, far too much faith in the ability of the British Empire to order its affairs. Although, I think the experience of Versailles sort of jaundices that view for him a bit. He sees the British Empire in a new light after the war, largely because his friends in Bloomsbury are telling him he's, you know, this terrible, horrible sellout for participating in the war, but he never totally loses that sort of sense of, or at least the desire to view the British Empire as this fountain of goodness and light, even in World War II when he's much more influential, I think, as a policymaker. You know, he's perplexed at the Americans' desire to carve up the British Empire. He just sort of takes for granted that, you know, obviously we would want to keep all of these different colonies and territories under British rule. That would be good for the world. And he can't even really come to see that Roosevelt is going in that direction when it's really quite obvious, at least in hindsight, what Roosevelt is doing. So yeah, I think he probably does have too much faith in technocrats, but also, you know, a lot of his legacy as a policymaker is forged by technocratic policymaking at the end of the war. You know, the British National Health Service is still with us. That is an innovation of British technocracy at the hands of the Socialist Labour Party at the time, and Keynes—

But that's not Keynes's doing.

Well, I mean, he does. He is the sort of financial architect of it. He works very, very closely with getting the numbers right and having the papers to wave around to say that this stuff adds up. And I think there's a decent argument to be made at the time that the numbers don't add up. But I certainly think Keynes is an important player in that milieu.

Do you think Keynes was in some ways too flexible a thinker? So you discuss in your book his 1933 essay on national self-sufficiency, which is quite protectionist, though usually Keynes was a strong free trader. And what's striking to me in that essay is not that he makes the Keynesian jobs argument, well, you need tariffs to protect domestic jobs, that you would expect, but there is a whole section talking down the benefits of division of labor, saying, oh, these aren't so great, we don't need it. Didn't he too many times put on the hat of a kind of advocate played too often the role of debater?

He certainly loved to play debater. I mean, he— that starts very early. He loves being part of the Cambridge debating union, I think the Liberal Debating Union. He loves debating conservatives in particular in his early days. You know, I think it's impossible to separate Keynes the political activist from Keynes the economic analyst. I, and I don't think, I don't know that he would want us to separate those things, at least, at least from this stage in history. I mean, certainly during his lifetime, he occasionally put on the hat, like, I'm just looking at the numbers, this is just what the numbers say. But, you know, he comes from a, he's a philosopher first and an economist second. In, in a lot of ways, I think his economics are just this sort of dressed-up kind of mathematical justification for philosophical views that he's been wrestling with on a deeper level, particularly when he's at Cambridge. He's embroiled in these debates with Bertrand Russell and Ludwig Wittgenstein and all of his friends in Bloomsbury about what constitutes a good life. And I think that social vision stays with him over the course of his lifetime. And the reason his economics keep changing is because he's trying to find some sort of intellectual justification for that social vision, which I think is really paramount in his worldview and in his work.

What should we make of the preface Keynes wrote for the German language edition of the General Theory, where he basically says to the Nazis, well, my ideas will work better under your system? It's not at all that I think Keynes was pro-Nazi. Clearly he was not at all. But is that another example of Keynes, in a sense, being too flexible, even philosophically?

He's aware— I mean, I think the precise language is—

Like Hayek never did that to Pinochet, right? Friedman didn't.

Well, I mean, what is the language? The language is something like, I'm aware that in many respects my economic system is easier to operate under an authoritarian government, something like that.

Something like that, but in German, of course.

Yeah. Yeah, look, I mean, isn't that just true, right? Like, if you're looking at Keynesian economics from a technical perspective, I mean, he is— it's a theory about how the state can organize resources better than atomized financial markets can, right? I mean, it's the dangers of the authoritarian government for Keynes are not in the organization of resources, but in what they're organized for. In his letters— his letter to Hayek about The Road to Serfdom, he discusses this in greater detail. He's clearly aware that this system can be abused. But if you're just thinking about how to create economic growth, I mean, yes, certainly, you don't have to deal with all of these inconveniences of democracy to just make things happen in an authoritarian system. I don't know if I read that as Keynes being sympathetic to the German government or advising—

No, he's not. He's sympathetic to his own ideas and wants to promote them. But to me, there's a discord. So Milton Friedman spends, what, 45 minutes talking to Pinochet, has a very long record of insisting economic and political freedom come together, maybe even too simplistically. Writes against the system of apartheid in South Africa and Rhodesia, calls for free markets there, and people give Friedman hell over that. And Keynes writes the preface for the Nazis and favors eugenics his whole life, and that's hardly ever mentioned.

I don't know that the way that Keynes talks about eugenics is as salient as you suggest. I mean, the best article that I came across on Keynes and eugenics by this guy, I think David Singerman. It's in the Journal of British Studies. It's a pretty in-depth look at the way Keynes came to eugenics and what he did and did not support, and it's very clear that Keynes didn't, didn't support eugenics in the way that, you know, Americans sterilizing, you know, poor Black workers in the South were interested in eugenics. Keynes was broadly interested in it from the perspective of birth control. He comes to it thinking about— this is a time when eugenics and genetics are not as clearly defined as they are today, so he's thinking about heritability of eye colors, how he gets involved in this stuff. And he never really supports anything other than birth control. And when he actually has power as a policymaker, he just doesn't do any of this stuff. He is working on the beverage plan. He is working on, you know, financial stuff that is much more egalitarian than what we think of when we think about eugenics. So—

But he is chair of the British Eugenics Society for 8 years late in his career.

And he doesn't do much. There, right? I mean, and there are big debates that are happening within that society, and he's mostly sitting them out. I mean, Singerman goes into this in much more detail. I think Singerman thinks— it's been a while since I've read the article, but, you know, Singerman seems to think that this is a useful way of understanding Keynes's worldview, but not that Keynes is, you know, some guy who's going around wanting to sterilize people and, you know, do the things that we think of with, with the eugenics movement in the United States.

I don't think he wants to sterilize people, but he has those essays on population which are not put into the collected works. They're not mentioned by Roy Harrod. And he is greatly worried that the people from some countries, I think including India, will outbreed the people from Britain, and this will wreak havoc, you know, on prices and wages, and it's a big crisis. And he even says we need to worry not only about the quantity of people, but the quality of people in the world.

Yes, and if you look at him in the 1920s in particular, he has extremely disparaging things to say about working people in general. There's an essay in 1926, I believe, where he is talking about the proletariat and the coming revolution. And he says, you know, how can I prefer a theory that holds up the working people who are the mud to the fish of of the middle class. He's very much a middle-class kind of pugilist. He believes that the British middle class that he comes from is the— much the way that he thinks that the British Empire is this fount of goodness and light, he thinks the British middle class is also superior. But I do think those ideas temper over the course of his career. He comes to believe that prosperity is something that can be shared more broadly and that in sharing prosperity more broadly— by prosperity, I mean the type of life that he and his friends in Bloomsbury lived around the turn of the century, where they're thinking about art and philosophy and, you know, doing all the stuff that intellectuals think of as fun. And he comes— I think he comes to think, to believe that that can be shared by a very broad swath of the population. But he does not believe that his whole life, certainly. Is it fair that Friedman gets— and Hayek get a lot of flak for talking to Pinochet, and Keynes, you know, wrote a German introduction to his book. You know, I think that's up for people to make their minds about. I think all of these thinkers, if you're trying to find a hero who fits, you know, some model for decency and goodness by today's standards, and you're looking at intellectuals from the early mid-20th century, you know, you're going to find things you don't like about them. I certainly think, you know, Joan Robinson, who is in a lot of ways one of, I think, the most important intellectual partners that Keynes works with on the General Theory, you know, what Joan Robinson goes on to say about North Korea is— North Korea is not quite as bad as it is today when she's praising it, but certainly what she says about China and the Cultural Revolution, I mean, I don't see how, you know, how you can really defend that stuff. It's pretty bad. And particularly for a theory that's supposed to be, you know, as I take Keynes, I take him to be thinking about economics as sort of the field where liberalism can fight authoritarianism. Through economic policymaking, we can keep authoritarianism at bay without resorting to war and violence and all these horrors that he's scarred by in World War I. And if that's the purpose of the project, then when you come around and start talking about the Cultural Revolution is a good idea, I think you've lost the plot a bit. So there are a lot of these people who are super smart, making great innovations in their field, who are also doing things that I think are just politically not indefensible, certainly by modern standards.

Are you ready for a bout of underrated versus overrated?

Tyler, I'm enjoying this. I hope you are. Yes.

Okay, first one, overrated or underrated, traveling in Taiwan?

Underrated. I love Taiwan. I mean, uh, soup dumplings. Um, it's just a— it's a beautiful place. Big mountains, beautiful ocean. Uh, What's not to like?

And other than Taipei, where should people go next?

Well, where do we go? Went to Taipei and we went to a beach town. I don't remember the beach town. My wife's family is from Shanghai and then Taiwan and then the United States. So we went on a trip with them, God, 4 years ago. And they were our tour guides. It was incredible. But yeah, I really only know Taipei. I can't give you better advice.

The 1965 Immigration Reform Act, overrated or underrated?

Wow, wow, you're going right at it. So my wife, who I just mentioned, just wrote a book on the 1965 Immigration Reform Act.

Tell us the title, please.

It's called One Mighty and Irresistible Tide: The Epic Struggle for American Immigration, 1924 to 1965. I don't— I find her book really complicated. I don't come away from that law— I think in general it's underrated because people just don't know what it is. I would say underappreciated, maybe. It's just not very well known, I think, in American society. But, you know, there are things about this law that work, there are things about this law that don't work. Some of the things that I think, at least from a progressive standpoint today, we'd say are good about the law are kind of an accident. That take place largely because the architects of the law don't intend them to take place. The sort of significant increase in Asian American immigration is— certainly the architects of the law aren't anticipating that. You know, look, my wife's family is here because of that law, so it's underrated. It's great. I met my wife. Otherwise, that wouldn't have happened. That was important for me. And certainly from a narrow self-interest standpoint, I'll say it's underrated.

The Sex Pistols, overrated or underrated?

God, come on, man. It's so hard because they, they're a one-trick pony.

One album, right? The rest you can forget.

And it's really just one note. I mean, all the good songs in there are basically the same song rewritten. But look, they change, they, they change the, the face of music. You wouldn't have The Replacement. I've been reading this this Bob Mehr biography of The Replacements, which are my favorite band. And you just absolutely wouldn't have that band without the Sex Pistols. I do think that people get that they're a big deal, though. You know, I think very highly of the Sex Pistols. I think I would say they're overrated. People, you know, they're deeply influential, but still overrated.

And that some of these former punk rockers now support Donald Trump, is that a blip? Or is that actual consistency?

It's tough with Johnny Rotten, John Lydon. He's— it's hard to say. I mean, the Sex Pistols are not anarchy for the UK, right? I mean, which kind of anarchy? There's anarchy from the right, from the left. I think Bodies is certainly conservative from an abortion rights perspective. I don't know. My next book is going to be is a look at populism in the 1890s. And I do think you have to grapple with the way that these sort of radical figures, radical ideas, you know, there's always an interpretation that makes them look good. But I do think you have to wrestle with the way that, you know, radical change is often flirting with stuff that's that's really not great. And this is something I mean, I really came to appreciate the conservative streak in Keynes' writing, writing this book. You know, he is very afraid of social change in this way that contemporary progressives are not. He likes Edmund Burke, and it's not like a con. He's not putting on some sort of act so that he can, you know, get more conservative subscribers to his Patreon. He really is worried about social change and social people. And I don't think people who haven't lived through revolutions and war often appreciate how bad things can go. So with the Sex Pistols, I'm not sure that the Sex Pistols, like Johnny Rotten loving Donald Trump is a huge change from 1977. But I also, you know, I didn't really follow Public Image Limited and a lot of the stuff that he did in the '80s musically.

It's not bad, but it's not important, I think.

Yeah, like it just didn't, it didn't do anything for me. I'm not like against it, but I remember listening to it when I was, you know, 17 or 18, you know, the age where you get into this stuff, and it just didn't grab me. So maybe there's a whole lot of really interesting intellectual stuff happening there that you could tell a story about, but I can't because I just don't know the material.

Samuel Delany, overrated or underrated?

Ah, yes. How do you know?

How do you know?

You did your research. It's super underrated. Underrated.

Why? Why is it important? Nova, tell us why.

Oh my God, I love that book. I just read it for a book club. Nova is, Nova is a book about all these things we're just, we're just talking about. It's about radical change. It's about economic competition. It's about the shift in paradigms between— in a society that is— intellectual paradigms and material paradigms in an internationalist society. It's about all the forms of social conflict and possibility that I think exist in a globalized world, even though it's about an interstellar society. It's about freedom and art and cruelty and truth, and it's also just a fun space opera. I mean, it's all packed into an exciting tale. His later stuff where he, you know, Nova is one of these, you know, 250-page sci-fi, you know, kind of thriller novels from the '60s. His later stuff where he gets into 800-page books about sexuality, I think are really good too, they're not fun the way NOVA is fun.

The Bretton Woods monetary system, overrated or underrated?

Underrated. You know, I think we only really had it for about 9 years, you know, once all of the, all of the rules had been implemented and everything. So it's not like it was this gigantic success for so long, but I, you know, I kind of agree with Paul Volcker, like that was that was a mistake to blow up. There were— there was a framework for international cooperation and harmony, I think, that was— that allowed for negotiation, and I— there was a sort of shared set of norms that I think we miss today. I think particularly the deterioration of the U.S. relationship with China right now, for instance, difficult thing to imagine if the U.S. and China were part of a Bretton Woods Accord.

But didn't it have to blow up? So, wasn't the whole thing premised on the notion that the U.S. could just keep on printing dollars, which actually the world wanted to have out there, and that other countries, but most of all the French, would never take those dollars and convert them into gold? And once the French started going to the gold window, which is inevitable, it's a general way that a speculative peg gets broken, It was all over. And there were particular details to how it ended. But speculative pegs— I'm sorry, pegs are hit by speculative attacks and they fail.

Right. And, you know, it's a story that you can— you see happening in the 1990s and all of the financial crises that happened there. So, yeah, yeah. I mean, it's— there's a weakness. I don't disagree with the critique. But, you know, everybody got along until it blew up. Maybe it did have to fail. I mean, Keynes certainly didn't like the idea of linking everything to the dollar and linking the dollar to gold. But I don't think he necessarily was worried about it predominantly from the sort of speculative peg, hot money kind of issue. I think he was more just issued about— more concerned about the replacement of Britain with America as a sort of geopolitical hegemonic issue. But, you know, I don't know. It seemed to work okay until it didn't.

Was the euro a good idea? Because if you like Bretton Woods, you might think the euro is a more enduring version of it. But it's not obvious to me the euro has gone well.

No, the euro has been a disaster. But was the euro a good idea? I mean, which part of the euro? The idea of these countries working together and in having a shared kind of sense of cooperation and fair play, that's good. You know, look, you can't do the euro without— you need to have monetary flexibility within the euro. And look, that's a problem within the Bretton Woods system, too. But the euro is clearly just too rigid a system to work. And I think it has resulted in the opposite of what it was intended to do. But was it a good idea? You know, well, it hasn't worked, let's say that.

Credit card and debit card fees. What is the incidence of those fees in today's America, 2020?

The incidence of credit card—

Who actually pays them in the end, final analysis? Not where are they levied up front, but the actual incidence.

I'm—

but you have an article on this, right?

Do I?

Some people think consumers pay them.

Oh, oh, swipe fees, swipe fees.

Swipe fees, yes.

I was like, there are so many fees, what do you mean? Oh, swipe fees, yeah, you know, I think ultimately consumers probably pay something. I think debit card—

I mean, my—

the significance of that article, this is from 2011, the swipe fee fight, You know, I think the significance of that fight is that it didn't really matter that much at all. Consumers, I do think, ultimately pay some of those fees in the form of higher prices, but retailers do their best to minimize that and capture those fees for themselves. So who pays? You know, a little bit of consumer, a little bit of the merchant, but it's they share these. It depends on the fee and the merchant, you know.

Now let's say we made it completely impossible for credit card companies to stop merchants from offering cash discounts, and there are indeed right now many cash discounts. Wouldn't that solve the whole problem? That if it were easier to use cash, those gains would be internalized through a cash discount, and buyers would decide credit, debit card, or cash and receive different prices. And things would be fine. Correct or not?

Uh, it sounds okay to me. I mean, we'll just see what happens.

But then it's an easy problem, right? It's not a big problem in that worldview, right?

I mean, look, I'm mostly an empiricist on these things. You just see what, what happens. Um, do, do prices go up? Do people like, you know, you can look into the corporate revenues or not. Um, I, I My general view about the swipe fee issue was not about whether merchants were taking it on the chin or consumers were taking it on the chin. It's just that it wasn't that big a deal, and that particularly in 2011, when we were in the middle of a terrible depression, the idea that we were going to fight over this in the Senate for 6 months struck me as extremely minor. We were talking about something that mattered largely, not even to retailers in general, but to large retailers that had to pay a lot of these fees. So, you know, Walmart, Target, these, these big companies, these fees add up over time. You know, what, what you do about it depends on what works. Try something.

Now, as you know, in Keynes's treatise on money, he endorses Knapp's state theory of money. Does the evolution of cryptocurrency show that Knapp in fact was wrong, that money is a market phenomenon?

Ooh, great question. I don't think so. I'm very critical of cryptocurrency in general. I don't— I'm very skeptical about it. And I think it's often just a sort of vehicle for fraud. Do we have cryptocurrency— is cryptocurrency really a currency? Do people really use it the way they use dollars and euros and other currencies. Not— I mean, there are transactions that take place, right?

There's a lot of gray market, black market transactions, but the point is they could, right? It's a kind of proof by existence. You can have an asset that's fully market-based.

You can, but you don't. I mean, it's, you know, we definitely have You definitely have cases of cryptocurrency disappearing, frauds, and the like. I mean, there is— but yeah, among cryptocurrency users, there is a sort of common agreement that this counts for something. Can that be sustained as a social phenomenon outside, you know, than some niche users. Particularly, I think it really does matter that this stuff is happening out— that so much of the use of the currency as currency is happening outside the political system, right? I mean, a lot of the stuff that's happening there is illegal. So we're talking about non-governmental activity. I don't think that— I don't know, to me the experience with cryptocurrency points the other direction, that you need some sort of political management of this stuff for it to have real meaning, that otherwise it's sort of a fleeting and not particularly useful medium.

Keynes works for, I think, 7 years on Treatise on Money. It's 2 volumes. At the end, what he comes up with is a tabular standard, which I'm fine with, by the way. But is it even a good book at all? I mean, Hansen, Hayek, they didn't like the model. They more or less trash it. Hayek will claim Keynes repudiated his own book. I mean, what's in Treatise on Money?

Yeah, I mean, I think he does repudiate his own book. I mean, how do you get to the general— I mean, there'd be no need for the general theory if the Treatise on Money was right. You know, The Treatise on Money is a big mess. It's like 800 pages, 2 volumes. Keynes himself says, aesthetically, it's a disaster, but he feels like he's come to the right answer. You know, by the end of the book, he's got this sort of weird justification for public works. He's come to the conclusion, by the time he's done with it, that public work spending and budget deficits are necessary. For getting out of the Depression. And he's just trying to— he's just tying himself in knots to come up with an economic theory that will justify that policy preference. And I don't think there are many— I mean, these people may exist, but I don't think there are many people who think the justification for public works in A Treatise on Money is is more persuasive than that in the general theory. He basically says this is sort of a one-time thing that we have to do because of the way trade relationships have worked out at this particular moment in time. It's very ad hoc. The thing that's important about the Treatise on Money is how much fun Keynes has talking about the rise of capitalism in the 16th and 17th century. And, and Knapp's theory, you know, Chartalism, theory of state, theory of money, I think that is really essential to the ideas that he develops further in the General Theory. If you take money to be a creature of the state rather than of markets, as we're talking about, then you're just allowed to do a lot. The idea of the market is something that can function independently of the government becomes much blurrier. And the idea of the state as sort of the thing that creates and guides markets, I think opens up a broader realm for government intervention. But God, I mean, it's a mess of a book.

You know, he does—

there's the international system where he talks about the Bancor and the international superbank. It's his sort of— that's sort of his blueprint for what he's going to bring to Bretton Woods later, which, you know, he loses on all of those important fights. So that's in there, but the whole thing is just a mess. I mean, he himself is changing his mind so many times over the course of this book in response to political circumstances. I think, you know, I think, look, even the general theory is a bit of a mess too. So it's not like, you know, he has one definitive statement that that is Keynesianism. I sort of reject that school of thought that it's all in the General Theory. But I think of it as sort of a step along the road. It shows that he's willing to change his mind, but he hasn't really— he hasn't figured it out yet.

For me, Keynes is one of the greatest biographical writers in the entire English language ever. What do you think is his best biographical portrait? In Essays and Biography, which is one of my favorite books, I might add.

It's good, isn't it? I think my favorite is just Newton because it's not— he packs so many ideas into the way he writes about Newton, and he does it— there's a couple of different essays on him. But the point about Newton as a— and look, I don't know enough about Newton to know if his biography is accurate, to be clear. You know, I know the big, big points on Newton's life, but I haven't read several biographies. But the, the way that he talks about Newton as, uh, as someone who was sort of a creative genius, the scientist as, as an artist who has a certain intuition about the way the world works, um, who then, you know, uses the math to, to explain, um, why his, his aesthetically kind of beautiful intuition about, about God's plan or the nature of reality, why that makes sense. I think Keynes is— maybe that's true about Newton, I don't know, I just don't know the guy psychologically enough, but I think that tells us something interesting about Keynes's own psyche. I think that a lot of Keynes's economic work functions in that way. And I also think it's useful to think about the scientist as somebody who is not just a bloodless technician, right? That scientific work is creative work. And the great scientists are people who are doing something that is aesthetically significant in addition to being technically significant. That they have an idea that they're possessed with. I, you know, we used to think of scientists as people in lab coats who just, you know, never smile. And that's not the way people are.

Did Keynes have good taste in art?

His friends didn't think so. Um, what is good taste in art?

I think he had excellent taste. He bought those Cézanne apple sketches. 4 people understood how wonderful they are. Some Degas ballerinas. Didn't pay that much for them. Cézanne and Degas were not undiscovered artists at that time. No.

But still, he did get them in a fire sale. I mean, so, you know, literally, he went to Paris and the Germans were getting close. They were under bombardment. That's why they were liquidating it. You know, I like Cézanne and Degas as much as the next guy. I think his friends, his friends were so fussy, you know, they were envious of his sort of social position there, and they couldn't do the economic work that he did. It just was over their heads. And so, you know, art was their thing, so they were always telling him he had bad taste. But, you know, those apples, those apples were pretty good in the Cézanne, right? What's the museum in Philadelphia that there was such a— Barnes.

Barnes.

Yes, the Barnes Museum. So I never saw the Barnes Museum when it was, you know, before its transformation. There's so many different— you can just see there's so many different— these artists, not every single one of their works was amazing. Sometimes they had bad— there are bad Renoirs, there are bad Cézannes. So, you know, I haven't seen every single one of the Cézannes that Cade's talked up. I mean, in the archives at King's College, there's a lot of art but it's most that's on display, but it's mostly stuff from other Bloomsbury people. So, and there I think, you know, I think the Bloomsburys themselves were probably overrated as painters at least, but whatever, these tastes shift. I think Keynes was probably okay. I don't think he was as bad as his friends said.

Let me ask you the question Ezra asked you. In the time of Keynes, especially the earlier years, why would anyone have defended the gold standard?

I think almost everyone did who thought about it, and I think it was tied up in a conception of liberalism and freedom that is very intuitively compelling to people who take Enlightenment liberalism seriously. If you believe that people ought to— that capricious sovereigns and governments shouldn't meddle in the affairs of the people and, you know, direct the flows of international commerce for their own short-term gains and political preferences, then the gold standard is a way to put some brakes on the government and to say not only that we will you know, not meddle in the currency for domestic purposes, but we won't interfere with international harmony and with the exchange of goods and ideas across different cultures. I think there is— it's very easy to see why people from a progressive perspective would see that as a good thing.

Why weren't they just correct? So, Christina Romer has shown GDP volatility was not higher before the Fed, and if countries had stayed on the gold standard, they couldn't have fought World War I. That sounds pretty good to me.

Well, if she's right, then, uh, then she's right. I think, um, ultimately politics exist, and, um, it's, it's hard to— it's hard to create a system that says when your back gets up against the wall you've just got to deal with it because people will break the rules. Um, the Keynesian argument against it, by the time he gets to the Treatise on Money at least, is, is that you have to do something about the social— the short-term social pressures that are caused, um, that when, when you are up against deflation, essentially, that unemployment, um social unrest, that is something governments will have to respond to. And if they don't, what you get will be worse than whatever you would— it will prevent the long run from coming to be. This is, you know, this is one of the sort of philosophical dimensions of the "in the long run we are all dead" claim. He's not just saying, you know, we can make things better in the short term and that's important. He's saying if you don't fix things in the short term, the long term may never actually happen. You have an authoritarian takeover or war or something. So I think particularly once you see— at least for Keynes, once he sees what the state of deprivation that's happening across Europe after the war, he just thinks that this is an untenable system. Before the war, you know, if the gold standard had been managed wisely, I mean, we never would have needed Keynesian economics, right? I mean, it would have there would have been no need for Keynes to come up with a complicated economic explanation for deficit spending or to try to focus on uncertainty as this key concept. Things just would have worked out.

In a famous essay, as you know, Economic Possibilities for Our Grandchildren, I think it's 1930, Keynes predicted we— I'm not sure who the we is here— would be working 15 hours a week. What did he get wrong, or was he just off by a few decades?

Well, I think, you know, there's the, um, Benjamin Friedman, I think, did, uh, did the analysis most recently. Um, Bob Solow did one at 2007-2008. Um, if you take living standard to be, you know, something like GDP per capita, then the actual productive output of society is pretty close to what Keynes is talking about in Economic Possibilities for Our Grandchildren, but the distribution of that output is not egalitarian. So, you know, the answer that I put in my book that I think is basically right is that most of these gains are captured by people at the top, and so as a result, we have people working all the time.

But median family income in the U.S. is now still past the range where Keynes would have predicted 15 hours of work a week, right? So, it is uneven distribution, but median wage in Keynes's time was pitifully low and now it's still pretty high.

I mean, you know, you can see the decline in working hours is pretty steady over the late 19th and into the, you know, 1940s. So, I think he writes that essay in 1928, it's published in 1930. Maybe it's 1926 when he actually writes it, but it's published in 1930. You know, even in the Depression, you can see this decline in working hours. It is very pronounced, and then it just kind of stops in the 1960s, 1970s. And that to me is— do we want to be working this long? I mean, most of us— at least I don't want to be working 40 hours a week.

You work much more than 40.

Yeah, but I would—

you wrote a book that just made a top 10 list. Right? That's not easy. What your wife does— her book is very highly regarded. She's an editor for the New York Times.

Yes.

It's an incredible amount of work. So you and she are going way past 40. Yeah. So what's the deal?

Yeah, well, you know, I think the books— the books are an interesting question. Like, does that count as work? You know, when I write about politics and economic policy, and specific issues that people are fighting about in Washington, that feels like work. It's stressful. It is— I have to learn things that I don't necessarily enjoy learning. Doing the book, the research, the history, that was fun. That was exciting. That was joyful in a certain way. Now, once we had our daughter, Almost 15 months ago. Congratulations. Thank you. To be perfectly frank, my interest in historical research has waned a bit. And so I don't know if I would think of historical work and work on the next book as the same sort of just pure expression of what I would do with my free time that I did this book. I would probably rather be hiking in the woods with my daughter or reading through books about bears or whatever she's into, my priorities have changed. But yeah, there's an argument that— I think Joe Stiglitz makes this in part— there's a whole book on Economic Possibilities for Our Grandchildren that came out about 2008 with all these different essays from people investigating what Keynes got right and what he got wrong. And one of the answers is that people actually like working and that there's a certain class of people who do work that's not really work. And I certainly consider myself to be in that class of people, and it's true that I like that work. But even, even the type of work that I do, I have— once, once my daughter arrived, I would just like to do less. And I think a lot of people with families, that's, that's, that's the case. You, you know, you, you would— you wouldn't work as much as you do if you could, if you could work less and feel a sense of security about the future. And that sense of security about the future is a tricky thing, because what constitutes security? You get accustomed to a certain standard of living. You want that for your children. So I admit that there's a gray area there, but— or it's not even gray, it's just kind of fuzzy. But yeah, I think a lot of people choose to work more than they probably should. And I'm sure that as my daughter gets older, whether I want to be writing more books or coaching basketball will be— a major decision.

Last question. What is your next overwork project?

Overwork project. The current working title is called Fields of Fire. It's a look at the populists of the 1880s and 1890s. And right now, looks like we're going to tell it through the lives of two white populists and two black populists from Georgia and North Carolina. And but we'll see, you kind of got to go where the research takes you with this stuff. But in a lot of ways, I think what the populists are working through in the 1880s and 1890s is very similar to what Keynes is working through. Their economic proposals are a bit different, but they see themselves as inhabiting an era of crisis in which the economic system is not working. And it's the same economic system. Really. It's the— they're writing about the gold standard at its outset. Keynes is writing about its maturity. And they're trying to come up with ways to reformulate politics to make the economic system work. And I think there's, as with Keynes, an enormous amount of promise and also an enormous amount of danger in what they're doing. And I think in the way— the same way that you talked about Keynes being enamored with the, uh, the British colonial system, or at least overly enamored with it. Um, I think the pop— there's a lot of intellectual stuff happening with the populace this period of time, which is inspiring but also, also dangerous. Um, and, uh, I just find it a fascinating era. So hopefully the book's— it's not a biography, but it will, it will try to try to work with a lot of the same currents and themes that were in the Keynes book.

Zach Carter, thank you very much.

Thanks, Tyler.