Podcasts about Milton Friedman

Photo: No known restrictions on publication. @Batchelorshow #Debating Systemic Risk again: 1/4: Samuelson Friedman: The Battle Over the Free Market. by Nicholas Wapshott . https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market-ebook/dp/B08589Z7M9/ref=sr_1_1?dchild=1&keywords=Nicholas+Wapshott+%2B+samuelson&qid=1627690920&s=digital-text&sr=1-1 In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Photo: No known restrictions on publication. @Batchelorshow #Debating Systemic Risk again: 2/4: Samuelson Friedman: The Battle Over the Free Market. by Nicholas Wapshott . https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market-ebook/dp/B08589Z7M9/ref=sr_1_1?dchild=1&keywords=Nicholas+Wapshott+%2B+samuelson&qid=1627690920&s=digital-text&sr=1-1 In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Photo: No known restrictions on publication. @Batchelorshow #Debating Systemic Risk again: 3/4: Samuelson Friedman: The Battle Over the Free Market. by Nicholas Wapshott . https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market-ebook/dp/B08589Z7M9/ref=sr_1_1?dchild=1&keywords=Nicholas+Wapshott+%2B+samuelson&qid=1627690920&s=digital-text&sr=1-1 In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Photo: No known restrictions on publication. @Batchelorshow #Debating Systemic Risk again: 4/4: Samuelson Friedman: The Battle Over the Free Market. by Nicholas Wapshott . https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market-ebook/dp/B08589Z7M9/ref=sr_1_1?dchild=1&keywords=Nicholas+Wapshott+%2B+samuelson&qid=1627690920&s=digital-text&sr=1-1 In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Hello everyone, and welcome to Ideas Untrapped podcast. My guest for this episode is Decision Scientist, Oliver Beige - who is returning to the podcast for the third time. Oliver is not just a multidisciplinary expert, he is one of my favourite people in the world. In this episode, we talk about scientific expertise, the norms of academia, peer review, and how it all relates to academic claims about finding the truth. Oliver emphasized the importance of understanding the imperfections in academia, and how moral panics can be used to silence skeptics. I began the conversation with a confession about my arrogance about the belief in science - and closed with my gripe about ‘‘lockdown triumphalism''. I thoroughly enjoyed this conversation, and I am grateful to Oliver for doing it with me. I hope you all find it useful as well. Thank you for always listening. The full transcript is available below.TranscriptTobi;I mean, it's good to talk to you again, Oliver. Oliver; Tobi, again.Tobi;This conversation is going to be a little bit different from our previous… well, not so much different, but I guess this time around I have a few things I want to get off my chest as well. And where I would start is with a brief story. So about, I dunno, I've forgotten precisely when the book came out, that was Thinking Fast and Slow by the Nobel Laureate Daniel Kahneman. So I had this brief exchange with my partner. She was quite sceptical in her reading of some of the studies that were cited in that book. And I recall that the attitude was, “I mean, how can a lot of this be possibly true?” And I recall, not like I ever tell her this anyway…but I recall the sort of assured arrogance with which I dismissed some of her arguments and concerns at the time by saying that, oh yeah, these are peer-reviewed academic studies and they are most likely right than you are. So before you question them, you need to come up with something more than this doesn't feel right or it doesn't sound right. And, what do you know? A few years, like two or three years after that particular experience, almost that entire subfield imploded in what is now the reproducibility or the replication crisis, where a lot of these studies didn't replicate, a lot of them were done with very shoddy analysis and methodologies, and Daniel Kahneman himself had to come out to retract parts of the book based on that particular crisis. So I'm sort of using this to set the background of how I have approached knowledge over my adult life. So as someone who has put a lot of faith naively, I would say, in science, in academia and its norms as something that is optimized for finding the truth. So to my surprise and even sometimes shock - over different stages of my life and recently in my interrogation of the field of development economics, people who work in global development - [at] the amount of politics, partisanship, bias, and even sometimes sheer status games that academics play and how it affects the production of knowledge, it's something that gave me a kind of deep personal crisis. So that's the background to which I'm approaching this conversation with you. So where I'll start is, from the perspective of simply truth finding, and I know that a lot of people, not just me, think of academia in this way. They are people who are paid to think and research and tell us the truth about the world and about how things work, right? And they are properly incentivized to do that either by the norms in the institutional arrangements that birthed their workflows and, you know, so many other things we have known academia and educational institutions to be. What is wrong with that view - simply academia as a discipline dedicated to truth finding? What is wrong with that view? Oliver;There's many things. Starting point is that it was not only Daniel Kahneman, behavioral economics has multiple crises also with Falsified work. Not only with wrong predictions, wrong predictions are bad but acceptable. This is part of doing science, part of knowledge production. But Falsification is, of course, a bigger problem now and they had quite a few scandals in that. The way I approach it always is sort of like a metaphor from baseball. Basically there's something called the Mendoza Line in baseball which is a hitter that has a 200 hitting average. This is like the lowest end of baseball. If you go below 200, then you're usually dropped off the baseball teams. And on the upper end you have really good hitters that hit an average of like 300 or something. If you have a constant 300 average you usually get like million dollar contracts, right? We can translate this to science in a lot of ways. Of course, there is a lot of effort involved in going from a 200 average to a 300 average to a 20% average of being right to 30% a average of being right. But still if you're at a 300 level, you're still wrong 70% of the time. And so the conversations I observe, they're people that are not specialists in a field [and] we're trying to figure out who is right in a certain conversation. Talking about conversations in a scientific field we basically try to use simple pointers, right? One of the pointers is of course a paper that has gone through peer review. You see these conversations of like, okay, this paper has not been peer reviewed, this paper has been peer reviewed. But peer review does not create truth. It sort of reduces the likely likelihood of being wrong somewhat but it doesn't give us any indicator of this is true. The underlying mechanism of peer review usually cannot find outright fraud. Cannot detect outright fraud. This happened quite a few times. And also peer review is usually how close is the submitted paper to what the reviewers want to read. There is a quality aspect to it, but ultimately it changes the direction of the paper much more than it changes quality. So academia overall is a very imperfect truth finding mechanism. The goal has to be [that] the money we spend on academic research has to allow us to get a better grasp of so far undiscovered things, undiscovered related relationships, correlations, causal mechanisms, and ultimately, it has to give us a better grasp of future and it has to give us a better grasp of what we should do in order to create better futures. And this all basically comes down to, like, predicting the future or things that were in the past but yet are to be discovered. Evolution tends to be a science that is focused on the past, looking at things in the past. But there's still things we have to discover, connections we still have to discover. And this is what academia is about. And the money, the social investment we put into academia has to create a social return in the way that we are better off doing the things we need to do to create a better future for everyone. And its [academia] track record in that regard has been quite mixed. That's true.Tobi;So let's talk a little bit about incentives here. Someone who has also written quite a lot, who talked so much about some of the issues - I think he's more focused on methods. He's andrew Gelman, the statistician. I read his blog quite a lot, and there's something he consistently allude to and I just want to check with you how much you think that influenced a lot of the things that we see in academia that are not so good, which is the popularity contest - the number of Twitter followers you have; whether you are blue checked or not; bestselling books; Ted Talks that then lead to people making simplistic claims. There's the issue of scientific fraud, right, some of which you alluded to also in behavioral economics, behavioral science generally. There was recently the case of Dan Ariely, who also wrote a very popular book, Predictably Irrational, but who was recently found to have used falsified data. And I recall that you also persistently criticized a lot of people during the pandemic, even till date - a lot of people who made outright wrong predictions with terrible real life consequences because policymakers and politicians were acting under the influence of the “expert” advice of some of these people who will never come out to admit they are wrong and are less likely to even correct their mistakes. So how is the incentive misaligned? Oliver; Okay, many questions at once. How does academia work? And like I always like to say that academic truth finding or whatever you want to call it is not too far away from how gossip networks work. The underlying thing is, of course, any kind of communication network is basically sending signals. In this case, snippets of information, claims, hypotheses and the receiver has to make a decision on how credible this information is. You have the two extreme versions, which is basically saying, yeah, I just read this paper and I think this paper makes a good claim and is methodologically sound or I just read this paper and this paper is crap as everything about it is wrong. So you basically start with a factual claim and an evaluation. This happens in science Twitter in the same way a gossip network communicates typically good or bad news about the community. Also, a gossip network communicate hazards within the community, sending warnings, which is what academics have been doing quite a bit over the last two and a half years. And they also have this tendency to, a) exaggerate claims, reduce claims, and [they] also have this tendency to create opposing camps. Because very few middling signals are being retransmitted. I've been watching the funeral of the Queen, I have no strong opinion about British royalty in either direction so if I post something on Twitter about it, nobody will retweet. And, of course, the two extreme ends will be retweeted. This is how Twitter works, but it's also how science usually works. You'll see that strong claims in either direction are being transmitted much more frequently than middling moderate claims. So the bifurcation of opinions is inherent in both of them. This element of credibility, that you build credibility, based on how someone else reflects your own beliefs. Your own prior beliefs, really. This is the core mechanism [that if] I read something that confirms my prior beliefs, I'm much more likely to retransmit it with a positive note that "I really like this and I think it's methodologically sound." And if it's something that contradicts my prior beliefs, I'm very much more inclined to question its methodology. And I think we've seen this to an extreme over the two and a half years because we had situations where the discussion was very polarized. And the really bad thing to observe in a scientific discourse in general, but also the amplified scientific discourse on Twitter, is like the absolute lack of quality control when something confirms one's own prior beliefs. So this is usually what a scientist has to do. Like, if I get something that confirms my beliefs, I still have to do a minimum quality control [to check] if it's actually methodologically sound. And this clearly did not happen. People were just passing on anything that confirmed their beliefs and basically expected someone else to do the quality control. The first job any academic has is basically to subject everything, even that confirms your beliefs, and this is also [what] you think is true, you still have to subject it to quality control. And clearly this rarely ever happens. This is why academia is supposed to run on confrontation that, basically, the other camp does it. But if you bring academia together with Twitter, which is [an] amplification network that runs on social engagements, likes and retweets, then you have a very toxic mix. And this is the situation we had over the last two and a half years, how scientific communities can coalesce around things that are just not empirically sustainable.Tobi;Now pardon my language, there's a way that academics, whether they are scientists or social scientists (I know economists are particularly notorious in this arena), they completely f**k with your mind when you're a skeptic. So I'll give you an example. Two days ago…I opened with the replication crisis in psychology, so two days ago, I read a SubStack by someone who is presumably a psychologist, who was then basically complaining that, “oh, yeah, after the replication crisis, a lot of them in academia who were doing PhDs, were also having their own crisis of confidence, because then you have to confront a public who thinks they know everything.” So, like, you describe your study or you say you found something and someone says, "oh, but the field didn't replicate." The whole thing just sounded like some weak apologia that just didn't make any sense. I recall that sometimes a little bit after the financial crisis [of] '07-'08, if I recall correctly, Paul Krugman was dismissing something Talib, Nicholas Nassim Talib, wrote by saying that, oh, if you think you found something that a whole community of academic experts… I'm not quoting him verbatim, I'm paraphrasing… If you think you found anything that a whole academic community of experts missed, then you are most likely to be wrong.So, it brings me to the question of skepticism and how to approach it, because at the other extreme end of this is to say… and certainly there are people like that in the world today who think that no scientific knowledge is true, who question even proven medicine, and there are also conspiracy theorists who say outrightly false things for their own motives, no doubt. So, like, how does one deal with skepticism? Especially if you have conspiracy theorists and outrightly ignorant people on one side, and on the other side you have academic confusion or experts who out of their own biases or some of these institutional and social problems that you have described can also not really come out and admit that, oh, we botched this and this and this is what we are doing to correct our errors. How do you handle skepticism in such a milieu?Oliver; The first thing is and it's also the reason why I like the baseball metaphor is if you are [an] academic, you're an expert in a field, you spend far more time studying this field than others, you're communicating with other experts in the field, so you can get this feeling, and probably justified feeling that because you put more effort into it you should get more reward in the form of more recognition and more credibility. But you should also come up with a realization or understanding that any field you're in and that includes economics and all other fields, there are so many things that are still undiscovered, so many things that are undiscoverable that we have to build axiomatic constructs around in order to actually help us move forward. And if you're able as an academic to move from 20% right over many years to 30% right, you're still 70% wrong. So these are not empirical numbers, but I think they get the point across. And if you don't get that, then you're doing something wrong in academics in general, right? And we've seen this arrogance that was not supported by imperial superiority, like, quite a bit over the last years. Especially Paul Cook when he got some of the things very wrong just recently when he came out, when he admitted that most macroeconomists have been dead wrong about inflation for over a year. And then he claimed that nobody could have foreseen that. This is doubly wrong. You can be arrogant or you can be incompetent, but you cannot be both at the same time. Basically, academia is also a competition for attention. This is an attention industry and exaggerated claims get more attention than moderate claims. So this is not a problem. The problem is, and I see in the discussion is the complete absence of understanding of what the scientific method entails. And that clearly, a lot of academics become specialists in a particular subsection of the scientific method but don't have an understanding of how the whole thing works. Which is interesting, especially in economics, because economics has this very strong claim that it underwent An Empirical Revolution over the last 20 years, which is certainly true. Econometrics have got a much bigger role over the last 20 years, but they also claimed that because they underwent an empirical revolution, they also underwent a credibility revolution, that their results are much more credible and this is a much bigger claim. And this is not a claim that recent events have validated or recent economic performance has not been up to par to support it. But the key thing [is that] the scientific method is basically starting out from a theory which does not have to be a formal way of expressing, but you have to have an overarching idea of how things are connected, how some things cause other things. And from this, you have to be able to create predictions. Basically, foresee future discoveries. And you do this in a number of steps. The first step is usually formalization. You try to come up with a formal model. There are lots of discussions about like, okay, how formal does a model have to be? Usually, formalization is a self-discipline device. It means that you don't come up with ad hoc predictions, but the predictions are based on a clear mechanism that should be working under a variety of conditions. And then once you have a formal model, which we've seen a lot of people trying to build formal models over the last few years, and a lot of them have gotten more attention than they deserved or that they expected, and then you come up with a hypothesis. Hypothesis usually means are you comparing your own view of the world to competing views of the world. You try to find the positions where they diverge the most or where it becomes visible. And then you do empirical test experiments. Or in economics, you try to do a natural experiment or control trials in order to show that your overarching theory, your model, is closer to the truth than the competition. But the key is also and this is remarkably what a lot of people have just simply missed out on, this is the replicability and the role of moving away from a subjective view of the world to an objective view of the world so this can be refuted or replicated by others.And this also means that people who are opposed to your viewpoint have to admit that your view of the world was better than others. And this has almost completely broken down. Because in the two scenarios, economics (macroeconomics) in particular has been dead wrong, especially about inflation which is really one of the core predictive elements of macroeconomics and they have been dead wrong for an extended period of time for the very simple reason because they did not want to acknowledge it. And this is a problem, right? So then we start obfuscating about where you went wrong and you're trying to play political games that being wrong was not just unexpected change in economic environment or social environments or something but being dead wrong was basically caused by your model being fundamentally wrong. Very clearly economics should be in a crisis. The crisis should be clear within the field and the less the field itself owns up to this crisis, the more the outside world [should] pressure the field itself to come clear with its wrong predictions because the cost of getting these things wrong are staggering Tobi;True. So I have three questions but I'll ask them differently. You mentioned towards the end of your answer you talked about political games which is something that also gets me really angry and sometimes confused. And a related issue about that I found also is in development economics. But that will take us into the second question. So let's talk about the politics here. For example, take a field like economics which is highly partisan. You have some people that are called neoliberal economists. Some people are socialists, some people are heterodox, some people are capitalists. I know within the field of macroeconomics itself, they have all these other labels - new Keynesian monetarist, you know, whatever. But what I'm getting at is the role of partisanship, because you always have rival camps accusing themselves of partisanship. One story I related to, which I'm sure you also must have come across is - I saw a story on Twitter a couple of weeks ago before the Chilean constitutional referendum that Mariana Mazukato, Gabriel Zukman and Thomas Piketty, who are all economists, who are all leftists, who mix their research with political preferences and policy advocacy, plan to travel to Chile to celebrate the new draft constitution because it's a win for justice, it's a win for this or that. It's the final rejection of the Pinochet dictatorship and the neoliberal imposition that is. I did not encounter in that particular discourse chain anybody asking what is good for Chile, and Chileans, and even more relevantly how Chileans feel about this. And, I mean, what do you know? The referendum happened and 60% of the voters rejected the new draft. And I know that partisanship and political games, like you said, play not just in economics, it happens in other fields as well. So I'm curious - is this okay? And how exactly did should I say, scholars, particularly in social science, people that have been able to make extraordinary contributions to our body of knowledge and what we know, how have they managed to keep their politics, their personal politics away from their work? Or is it just that everything just used to be easier before we had Twitter? Oliver;Politics and economics have been intermixed long before Twitter. So this is not particularly new, and the mechanism itself is also not new. But your starting point is basically, as I said, like, very simplified that the role of academia is to predict the future and to design strategies to reach good futures. So in that situation, it's not surprising that academics take political positions. The problem comes in, of course, that if the ideological mix in academia and the ideological mix in the overall population and the ideological mix in sort of the ruling elites don't line up. This is a tricky situation, but being close enough to the highest echelons of power for long enough to observe what happens. If you have a change in the administration in Washington DC, then usually the new administration brings in economic experts from favourite schools. And then if the administration loses to the other party, then the other party brings in their favourite economists. So in that regard, if you have this semiconstant exchange of viewpoint, an economic viewpoint gets discredited, it gets replaced via the political process with other people, this is usually how you get closer to the view - I used to call it the drunk unicyclist. You're not really moving forward in a straight path, but you're moving around left and right, and you just try to avoid falling into a ditch. And this is what we observe. No political process is perfect. And as long as the political interests of the academics and the political interests of the elite are aligned with population ones, this is as good as we can get it. I generally have a problem with ideology in economics, but it's inevitable. And my quality is that I be able to read and appreciate writers from the left end of the spectrum, on the right end of the spectrum. I usually deduct points over ideological bent. But good thinkers can make good points even if they are driven by ideology. The problem also comes in when there is essentially no penalty for being wrong in academia. So basically being wrong and being catastrophically wrong externalizes the damage to others. So the worst scenario you do if you're tenured faculty, sort of what I call the endowed chair blue check, like a tenured faculty with a wide reach in social media, you can be dead wrong,you can be persistently wrong, completely unwilling to own up being wrong, and there's no real penalty to it. This is the major problem we're facing right now.Tobi;So that then brings me to the question of niches or what I'll call cottage industries in academic research generally. I know recently I did ask you about what you think about the EA movement. I'm not talking about them, but for descriptive purposes we see the behavior of that group, the adherents, the critics and how much commitment, particularly adherents display to their tribe. I see a lot of that too in academic research. One group I am very familiar with is in economic development (development economics) where everything now is about field experiments and randomized control trials. And one of the fundamental ways it biases research in my opinion and also have negative real life consequences is, if you do a field experiment, a randomized control trial on cash transfer, say in a Kenyan village over a period of time and you measure your results and they are positive and say oh yeah, well, cash transfer works. But the real question that policymakers, whether local governments or central governments or regional governments really deal with every day are sometimes bigger than that. So, like, for example, if you want to choose between building a power station for that particular village at $1 million versus scaling up your cash transfer program, what you'll find is that development economists in the current paradigm would most likely go for the cash transfer plan. Let's scale it up. We have tested this. It works. Essentially they are biased to what they can measure - like, we don't know the spillover benefits of electrification, it would be difficult to design a study, there are so many externalities. So basically they reduce real-life situations into the parameters of their methods and its limitations. And such behaviour is very, very similar to what you see with other social groups. Whether it is the Effective Altruism movement… I was briefly involved also with the Charter City people where for every problem that they can see, the solution is to build a charter city.That movement was actually inspired by your dear friend, Paul Romer. So there is this almost blind commitment and loyalty to their method, to their cottage industry. And sometimes I see it as just drumming up support for their tribe, as opposed to a commitment to the truth and finding what works. So, again, pardon my big question, what's going on here?Oliver; Okay, two things on the starting point about tribes within academia is…like, one of my favourite sayings is that tribalism is the shared belief in counterfactuals, counterfactual being everything that is unknown. And the less we know, the more unknowns there are, the more we tend to flock with our own tribes. So this is something you see everywhere in academia. That's what we call thought collectives. Ludwig Fleck, one of the guys who influenced Thomas Kuhn, came up with this term, thought collectives, to describe this idea that people that share the same idea of causal mechanisms tend to come together and confirm each other and create this thought collective. And this is, of course, what we see here, especially in academia. Economics has additional problem. I think it's not nearly as strong in development economics as other fields, but it's also visible there. This is very much the way economists are recruited. Economics, especially US and UK-centric economics, is extremely mathematicized. So, like, mathematical skills are basically number one, two, and three and the priority. And so you have basically a situation where real-world understanding has almost no role in getting accepted into PhD programs or getting promoted within the system. It used to be theory knowledge, formal theory knowledge. Now it's econometrics knowledge that gets you promoted. And this is very far away from qualification to solve real-world problems. And of course, people are impressed by mathematical skills. So this is something that you can play as a trump card. And this is what happens in the field. And the field is closing itself off from all kinds of outside knowledge because of that, especially in the social sciences. And in my world, I use people with mathematical skills, but only for very, very clearly defined tasks. I have my own mathematical skill set, but I also understand what the limitations are, and I think that's a major problem. And basically, if everyone around you came up in this system that promotes mathematical skills over real-world skills, then you believe that this is the only thing you need. And it's been very clear that basically every ten years, economics has a major crisis about being completely wrong in their predictions. And this intellectual monopoly is a major problem with that.Tobi;My third question in that line then pertains to the philosophy of science. Oliver;Yes. Tobi;So there are people who argue that a lot of these problems are also because modern science or the methodology of science today is divorced from some kind of philosophical foundation. I'm familiar relatively mildly with three philosophical approaches to science and let's just say truth finding. Thomas Kuhn basically puts everything down to competing paradigms. Like my last question, you know, competing tribes. And it's the tribe that wins at the moment that sort of has the monopoly of truth, not strictly, but socially. Then there's Karl Popper, which is also quite popular, that for anything to be valid as truth, it has to be falsifiable. And we've seen this play out so much in particle physics with things like string theory and things like many-worlds interpretation and so many things where their critics are saying, you guys are basically making claims that are not falsifiable, that cannot be tested and what you are doing is not science. And that has been going on now more or less for about three decades, right? And, of course, there's the Lakatos approach, which sort of fits into your own view, correct me if I'm wrong, which is that science has to make novel claims and it has to be predictive, it has to make predictions about the world. So my question then is academia, science, the truth-finding industry, so to speak, or the knowledge production industry, is it having a philosophical crisis?Oliver;I think it has more of a structural crisis. I'm not that deep in the philosophy of science I'm much more interested in the process itself. But one of the things that I think matters to me is Milton Friedman's claim that there are no wrong assumptions but whatever assumptions you make about the world has to generate correct predictions. A theory is being evaluated by its ability to produce non-falsifiable predictions, right? Predictions that turn out to be true even if others don't believe them. This is something you see in the arts as well, you see actually in religion as well, this mechanism of belief propagation that starts with one person believing and over time and over time, can be many decades, of something being accepted as true by everyone. So everyone starts believing in it. Basically, social contagion mechanism. I've always been interested in this. One scenario where this happens or should be happening is science. Right. This is, of course, a process. A process happens via this academic mechanism of peer-reviewed publications, getting tenure based on publication records and so on. And these are all very very imperfect mechanisms. The two extreme versions of that [are] the American system, which is extremely stratified, and the German version is the opposite, it's non-stratified, [and] we produce a massive amount of mediocrity. So, like, neither of them are optimal mechanisms to create truth. And we've seen that over the last two and a half years that political posturing took precedence over truth finding. Is it in a crisis? I think, yes, very clearly. We have two and a half years where very wrong, easily debunkable claims were propagated and were not retracted, even after they've been proven to be wrong. And ultimately, we're in a situation where an economic crisis is very clearly caused by misjudgment from people which we support and pay for being less wrong than the overall population. And that just simply did not work.Tobi;One last thing I'll like to get off my chest and then I'll pass them out to you is, I mean, specifically, if we follow from our last two podcast episodes, I'm a bit frustrated that there is a bit of lockdown triumphalism that the people who vigorously and vehemently used their academic or expert pedigree…Oliver;Credentials. Tobi;Yeah…to advocate for lockdowns are also taking a sort of victory lap. So the pandemic is over. Everything is back to normal. We did the right thing, even though the whole world was against us. That frustrates me a little. I was still watching a clip on YouTube recently because you get even more sensible take from everyday people, people who are experiencing these things than people who are building models and tweeting. One person somewhere here in southwest Nigeria complaining during the pandemic that the government has decided that it is better for us to die at home of hunger than not die from the pandemic. Because this pandemic, we don't know what it is, we don't know how it spreads, but without giving us any information, you basically confined us to our homes with no means of livelihood and nothing to depend on. That makes me sad because in Nigeria here and in many parts of Africa today, a lot of what we are seeing as, and are calling the food crisis, cost of living crisis, whatever it is you want to call it, did not necessarily start, but were aggravated or exacerbated by that approach to the pandemic. And it makes me sad that the people that are culpable, we can have a situation where they can take a victory lap. So that's me. Over to you. What would you like to get off your chest about everything that we have disclosed today?Oliver; Number one is epidemiological modelling was clearly an empirical debacle. The predicted epidemic wave that would take five to six months, that would wipe all large parts of the population never happened. And we have, I don't know, how many thousand waves in our database now, they all go for eight weeks. They start declining, acceleration starts declining very early on. And now we had enough scenarios where simple no measures were taken at any time during the wave. The key moment in that case was, I think, Paul Krugman complained that Denmark was removing all restrictions at the height of the epidemic wave and basically the very next day, the Danish wave dropped. Not a lot of people saw it, but it was extremely embarrassing for him. I've been in very much the same situation because I was living in the United States in the early 2000s and I was very clear from the very beginning of the Iraq war that Saddam Hussein did not have bioweapons. And so the whole invasion was built on Untruth. And the United States and the UK back then also knew that. Back then there was a strong moral panic, especially in the United States, against anyone who was basically speaking against the rationale for going to war. Now, 20 years later, almost nobody is willing to admit that they were speaking up in favour of the invasion back then. This is like a one-generation thing. And we'll see the same thing about the epidemic. This is very clear. The young people who had to carry most of the restrictions…up till now in Germany they're still forced to wear masks at school. They will have a very different view about what happened than the politicians in power. These are the things that'll evolve over many, many years. So I expect the same thing to happen. The interesting thing is really sort of back then it was more on the right end of the spectrum that drove this moral panic. Now it's moved over to the left end of the political spectrum. This is something that we're still to be investigated, why these moral panics unfolded onto the ideological spectrum as we know it. But it might be an interesting topic for the next call.Tobi;True. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com/subscribe

I noticed that some christian friends like you, Stefan, because listening to you they can get rational explanations for things that they used to support with faith-based arguments like "God said so". They become even more proud because they think "God is logos, my beliefs are rational" but I can't help seeing them as more "atheistic", because there's no more "god" in many of their stands, there's only logic. They like you because they can have the cake and eat it too?I always recommend people I try talking to about libertarianism listen to Milton Friedman's free to choose TV program that's free to watch on YouTube. It's great for opening people's minds to the ideas. What are you thoughts on geographical determinism, the idea that Europeans were destined to become more advanced than people from other places because of their environment?What do you think could be behind falling IQ over the last few decades?Hi Stef, is natural law not the basis of human rights (at least the negative rights)? Since they are so widely accepted in the western world, why is it so hard to argue for natural law vs. utilitarianism? Many people I argue with defend the greater good for the most people as the moral standard and discard natural law due to this.Hi, Stef! I think I should talk to you because you always say call me before and I am developing a relationship which involves everything what not supposed to be in it including other beings and talking to god. How did I get into this after eight years of listening to Freedomain?

Tired of leaders who prioritize power over trust? You're not alone. According to the Edelman Trust Barometer 2023, a lack of faith in societal institutions triggered by economic anxiety, disinformation, mass-class divide, and a failure of leadership has brought us to a deeply and dangerously polarized state.But don't worry, in this podcast, we've got you covered. We speak with globally renowned keynote speaker and founder of The Trusted Executive, Dr. John Blakey, who shares the importance of trust and purposeful leadership in the 21st century. During our conversation, John notes how leaders can inspire trust in their people by exhibiting nine habits of trust under the three pillars of ability, integrity, and benevolence. Our discussion emphasizes the need for purposeful leadership that prioritizes the power of trust over the trust in power.Here are some key takeaways that you won't want to miss:Importance of Trust:John shares a personal experience from 18 years ago when his boss questioned his response to a good day and asked if he was "too effing nice". In the 21st century, leaders need to be creative in defining great leadership and rely on trust instead of power. The Trust Executive Foundation attracts leaders who prioritize trust.Nine Habits of Trust:We delve into the details of John's nine habits that inspire trust in people and why transparency is critical in building trust. Businesses need to contribute to more than just profit-making.Evolution of Power:We map out how the evolution of power is changing, and how existing power struggles will formulate in the market. The challenges in driving factors that lead to sell are not new, but crisis can be the catalyst for change.Creating Clear Visions:We explore why business leaders need clear visions for their organisations and how to galvanise movements for change both internally and externally. We draw comparisons to current notable leaders and how the Edelman Trust Barometer notes the loss of trust in governments and media requires business leaders to articulate new visions and agendas. We also focus on the Triple Bottom Line vision (people, profit, planet) and why it's a priority for investors and the communities you serve.Articulating Beliefs:We highlight why business leaders need to be clear about their values and beliefs and articulate clear narratives that resonate with people's values. We provide insight on Milton Friedman's Neoliberalism and how it promotes shareholder value above anything else, which is no longer relevant and is to the detriment of society. We explore whether stakeholder capitalism is the way forward in today's changed creator economy. Purposeful Leadership:Leaders need to focus on the future and create something new by exhibiting purposeful leadership. We discuss why people with the seed of leadership should be excited about the opportunity to create something new.It was an absolute pleasure to have John on the show. We're grateful he made the time to come sit down with us. This one is packed with wisdom and practical tools regarding trust, motivation, purposeful leadership, and we sincerely hope you enjoy the exchange! As always, you can find the podcast on Apple, Acast, Spotify, and wherever you get your podcasts. Remember, by creating clear visions and articulating beliefs, leaders can inspire change and create a better future for everyone. Enjoy! Join our tribe and lets grow together https://plus.acast.com/s/purpose-made-podcast. Hosted on Acast. See acast.com/privacy for more information.

The task of nation-building did not end with our founders, and does not stop at our politicians. It's up to us to build the India we want to see. Nitin Pai joins Amit Varma in episode 318 of The Seen and the Unseen to talk about his life, his learnings and his liberal nationalism. (FOR FULL LINKED SHOW NOTES, GO TO SEENUNSEEN.IN.) Also check out: 1. Nitin Pai on his own website, Mint & Mastodon . 2. The Nitopadesha -- Moral Tales for Good Citizens. 3. The archives of The Acorn, Nitin Pai's blog. And its current avatar. 4. Nitin Pai's ideas, notes and current research and teaching. 5. The Takshashila Institution. 6. Seven Tenets of Indian Nationalism -- Nitin Pai. 7. In support of a liberal nationalism -- Nitin Pai. 8. A republic - if we can keep it -- Nitin Pai. 9. Saving the Nation From Nationalists -- Nitin Pai. 10. The real problem is that we have too little republic -- Nitin Pai. 11. The operating system of liberal democracy needs a major upgrade -- Nitin Pai. 12. Social harmony is a matter of national interest -- Nitin Pai. 13. Liberal democracies must protect their citizens' minds from being hacked -- Nitin Pai. 14. Understanding Foreign Policy — Episode 63 of The Seen and the Unseen (w Nitin Pai). 15. Russia, Ukraine, Foreign Policy -- Episode 268 of The Seen and the Unseen (w Pranay Kotasthane and Nitin Pai). 16. The City and the City — China Miéville. 17. The State of Our Economy -- Episode 252 of The Seen and the Unseen (w Puja Mehra and Mohit Satyanand). 18. The Tragedy of Our Farm Bills — Episode 211 of The Seen and the Unseen (w Ajay Shah). 19. Who We Are and How We Got Here — David Reich. 20. Early Indians — Tony Joseph. 21. Early Indians — Episode 112 of The Seen and the Unseen (w Tony Joseph). 22. The Moral Arc: How Science Makes Us Better People — Michael Shermer. 23. History of European Morals — WEH Lecky. 24. The Expanding Circle: Ethics, Evolution, and Moral Progress — Peter Singer. 25. How the BJP Wins — Prashant Jha. 26. The BJP's Magic Formula — Episode 45 of The Seen and the Unseen (w Prashant Jha). 27. Caste, Capitalism and Chandra Bhan Prasad — Episode 296 of The Seen and the Unseen. 28. Episodes of The Seen and the Unseen w Pranay Kotasthane: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10. 29. Rohini Nilekani Pays It Forward -- Episode 317 of The Seen and the Unseen. 30. Samaaj, Sarkaar, Bazaar : A citizen-first approach — Rohini Nilekani. 31. The Crowd: A Study of the Popular Mind — Gustave le Bon. 32. Crowds and Power — Elias Canetti. 33. EO Wilson on Amazon, Wikipedia and Britannica. 34. Narendra Modi takes a Great Leap Backwards — Amit Varma (on Modi, Mao and locusts). 35. FAQ: Why Anna Hazare is wrong and Lok Pal a bad idea -- Nitin Pai. 36. Sadanand Dhume on Twitter -- and this podcast! 37. Social media is an existential threat to civilisation -- Nitin Pai. 38. Reframing the social media policy debate -- Nitin Pai. 39. The coming regulation of social media is an opportunity for India -- Nitin Pai. 40. The Double ‘Thank-You' Moment — John Stossel. 41. Thinking Fast and Slow — Daniel Kahneman. 42. Human — Michael S Gazzaniga. 43. The Interpreter — Amit Varma. 44. The Elephant in the Brain -- Kevin Simler and Robin Hanson. 45. Freedom to Think -- Susie Alegre. 46. Addiction by Design: Machine Gambling in Las Vegas — Natasha Dow Schüll. 47. The Importance of the 1991 Reforms — Episode 237 of The Seen and the Unseen (w Shruti Rajagopalan and Ajay Shah). 48. The Forgotten Greatness of PV Narasimha Rao — Episode 283 of The Seen and the Unseen (w Vinay Sitapati). 49. The Life and Times of Montek Singh Ahluwalia — Episode 285 of The Seen and the Unseen. 50. The original Takshashila. 51. Understanding Gandhi. Part 1: Mohandas — Episode 104 of The Seen and the Unseen (w Ram Guha). 52. Understanding Gandhi. Part 2: Mahatma — Episode 105 of The Seen and the Unseen (w Ram Guha). 53. Hind Swaraj — MK Gandhi. 54. Nikita -- Elton John. 55. The Importance of Cities — Episode 108 of The Seen and the Unseen (w Reuben Abraham & Pritika Hingorani). 56. The Gentle Wisdom of Pratap Bhanu Mehta -- Episode 300 of The Seen and the Unseen. 57. The Arthashastra -- Kautilya 58. On Exactitude in Science — Jorge Luis Borges. 59. Emergent Ventures. 60. Friedrich Hayek on Wikipedia, Britannica, Stanford Encyclopedia of Philosophy and Econlib. 61. Milton Friedman on Amazon, Wikipedia, Britannica and Econlib. 62. Arshia Sattar and the Complex Search for Dharma -- Episode 315 of The Seen and the Unseen. 63. Every Act of Government Is an Act of Violence — Amit Varma. 64. The Generation of Rage in Kashmir — David Devadas. 65. Counterinsurgency Warfare — David Galula. 66. We Won't Need To Fight A War If We Can Win The Peace — Amit Varma. 67. Kashmir and Article 370 -- Episode 134 of The Seen and the Unseen (w Srinath Raghavan). 68. Think the Unthinkable (2008) -- Vir Sanghvi. 69. Independence Day for Kashmir (2008) -- Swaminathan S Anklesaria Aiyar. 70. The Anti-Defection Law — Episode 13 of The Seen and the Unseen (w Barun Mitra). 71. Our Parliament and Our Democracy — Episode 253 of The Seen and the Unseen (w MR Madhavan). 72. Abby Philips Fights for Science and Medicine — Episode 310 of The Seen and the Unseen. 73. Why Read the Classics? — Italo Calvino. 74. History Of Western Philosophy -- Bertrand Russell. 75. Ideas: A History from Fire to Freud -- Peter Watson. 76. Arthashastra -- Kautilya (translated by Shama Shastri). 77. The Upanishads. 78. The Mahabharata -- translated by Bibek Debroy. 79. Brihatkatha, Kathasaritsagara, Panchatantra and Hitopadesha. 80. Charvaka and Jayarāśi Bhaṭṭa. 81. Tattvopaplavasiṃha -- Jayarāśi Bhaṭṭa. 82. The Hitchhiker's Guide to the Galaxy -- Douglas Adams. 83. Catch 22 -- Joseph Heller. 84. Commanding Hope -- Thomas Homer-Dixon. 85. Paul Auster, David Mitchell, Haruki Murakami, Ryu Murakami and Terry Pratchett on Amazon. 86. Piercing -- Ryu Murakami. 87. 2021 - The Year in Fiction -- Nitin Pai. 88. Bhimsen Joshi, Kishore Kumar, Hemant Kumar, Radiohead, Norah Jones, Louis Armstrong, Nina Simone, Himesh Reshammiya and Yehudi Menuhin on Spotify. 89. Take Five -- The Dave Brubeck Quartet. Check out Amit's online course, The Art of Clear Writing. And subscribe to The India Uncut Newsletter. It's free! Episode art: ‘The Bigger Picture' by Simahina.

Welcome to the Explaining History Podcast. In this episode, we dive into the American neoliberal counter revolution of the 1970s, a period of profound political and economic change that continues to shape the world we live in today.During this decade, a new political and economic philosophy emerged, driven by figures like Milton Friedman and the Chicago School of Economics, that sought to roll back the gains of the New Deal and reassert the power of the free market. This movement, called neoliberalism, would have profound effects on American society and on the rest of the world.In this episode, we explore the key figures and ideas that drove the neoliberal counter revolution, from the deregulation of industries to the privatization of public services, and the resulting increase in income inequality and economic instability. We also examine the political and cultural shifts that accompanied these changes, including the rise of the conservative movement and the decline of labour unions.Join us as we uncover the complex and often contentious history of the American neoliberal counter revolution of the 1970s, and its lasting impact on our society and economy.You can access Explaining History Study Guides and Ebooks here Become a member at https://plus.acast.com/s/explaininghistory. Hosted on Acast. See acast.com/privacy for more information.

Because I write so much for work, I don't always have the energy to put my random thoughts (and, sometimes, deep thoughts) into written form. My choice, then, is between a podcast or tossing those ideas. So here's that podcast. I managed to cover gender and sexuality, Biden and the PLO, Ukraine, the war in Ukraine, education, socialized medicine, and a touch of Milton Friedman who, surprisingly, sort of intersected with my life.

Read the following articles in ProMarket:There Is a Direct Line from Milton Friedman to Donald Trump's Assault on Democracy, by Martin WolfGeorge Stigler and the Challenge of Democracy, by Anat AdmatiCorporations Are Not “We the People,” by Geoffrey StoneeBook: Milton Friedman 50 Years Later, a ReevaluationAlso, check out relevant past Capitalisn't episodes:Martin Wolf: Is Capitalism Killing Democracy?Why Capitalism Needs DemocracyThe Breaking Point Of Democracy With Morton Schapiro and Gary Morson

In this KEEN ON episode, Andrew talks to the co-author of THE BIG MYTH, Erik Conway, about how American business taught us to loathe government and love the free market ideologies of neo-liberal economists like Milton Friedman. Erik Conway is a historian of science and technology residing in Altadena, CA, and works for the California Institute of Technology. He is the author of seven books, on topics as diverse as aviation infrastructure development in the 1930s and 1940s to Mars exploration in the 2000s, and dozens of articles and essays. He is currently finishing a history of near-Earth asteroids research. In 2011, Conway shared the Watson Davis and Helen Miles Davis prize from the History of Science Society with Naomi Oreskes for their book Merchants of Doubt, which has been translated into 7 languages. It became the basis for the 2014 documentary by the same title, produced by Robby Kenner and Participant Media. He is the co-author of THE BIG MYTH: How American Business Taught Us to Loathe Government and Love the Free Market (2023) Named as one of the "100 most connected men" by GQ magazine, Andrew Keen is amongst the world's best known broadcasters and commentators. In addition to presenting KEEN ON, he is the host of the long-running How To Fix Democracy show. He is also the author of four prescient books about digital technology: CULT OF THE AMATEUR, DIGITAL VERTIGO, THE INTERNET IS NOT THE ANSWER and HOW TO FIX THE FUTURE. Andrew lives in San Francisco, is married to Cassandra Knight, Google's VP of Litigation & Discovery, and has two grown children. Learn more about your ad choices. Visit megaphone.fm/adchoices

Shermer and Oreskes discuss: the myth of market magic • market fundamentalism • market absolutism • market essentialism • capitalism and democracy • well-regulated vs. poorly regulated capitalism • U.S. Constitution and capitalism • what the founding fathers believed about markets • what Adam Smith really said about markets and capitalism and how economists rewrote Adam Smith • why markets need regulation in the same way sports need rules and referees • rhetorical fallacies of market fundamentalists • child labor laws • bank failures • Sherman Anti-Trust Act of 1890 • Ludwig von Mises, Friedrich Hayek, Milton Friedman • religion and capitalism • think tanks • collective action problems. Naomi Oreskes is Professor of the History of Science at Harvard University. Her opinion pieces have appeared in the New York Times, the Washington Post, the Los Angeles Times, and many other outlets. Her TED talk, “Why We Should Trust Scientists,” was viewed more than a million times. Erik M. Conway is a historian of science and technology and works for the California Institute of Technology. He is the author of seven books and dozens of articles and essays. Their new book is The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market.

All we can say about this episode is "hang on tight!" The America you thought you knew, may not be as you were taught. Dr. Professor Robin McCutcheon earned her PhD in Economics from Wayne State University in Detroit, Michigan and has been teaching economics for over 20 years. In all of the economics courses she teaches {Principles of Economics (both micro- and macro-), Money & Banking, Comparative Economic Systems, Labor Economics, and Managerial Economics}, she uses the Principles of Free Market Systems. Dr. Robin uses Ayn Rand, Ludwig Von Mises, F.A. Hayek, Milton Friedman, and W. Cleon Skousen, and every idea she can glean from radio hosts like Rush Limbaugh and Mark Levin, to explain in plain English how our Country's Founding Principles lead to free markets and are the best path to liberty, freedom, and prosperity for everyone. Over 90% of her students exit her courses avid and staunch Libertarian or Fiscal Conservatives. Dr. Robin's website: http://lync-sync.com/login.phpOrganic Act of 1871 pdf: https://ia600900.us.archive.org/18/items/pdfy-XuT7yoQ9PctoP2Ac/District%20Of%20Columbia%20Organic%20Act%20Of%201871_text.pdfSUPPORT THE SHOW:Buzzsprout https://www.buzzsprout.com/1853952/supportSubscribeStar https://www.subscribestar.com/jesse-jaymzOne time gift donation via Paypal https://paypal.me/dangerousinfo?country.x=US&locale.x=en_USPatreon https://www.patreon.com/JesseJaymzJOIN OUR GUILDED CHAT ROOM: https://www.guilded.gg/i/Evx9g1VkGold and silver affiliate:American Coins and Jewelry https://www.ebay.com/str/goldandsilvertreasureWaterford, MichiganMatt-(248) 978-7686https://www.subscribestar.com/jesse-jaymz/subscribe?tier_id=57006SUBSCRIBE STARS:Jill BarcRyan Mansfield ShowCarmie RosarioKenneth AllenChad GeyerPatriot MillerSheryl E.Manny EspejoShannon RuffEmail the show: http://dangerousinfopodcast@protonmail.comJoin my mailing list: https://mailchi.mp/03e09a1333c8/jessejaymzemailsignupSocial Media:Instagram https://www.instagram.com/jessejaymz1/Twitter https://twitter.com/jaymz_jesseGab https://gab.com/JessejaymzTruth Social https://truthsocial.com/@jessejaymzRumble https://rumble.com/c/DangerousInfoPodcastSMART is the acronym that was created by technocrats that have setup the "internet of things" that will eventually enslave humanity to their needs. SMART is the acronym that was created by technocrats that have setup the "internet of things" that will eventually enslave humanity to their needs. Support the show

Welcome to Ideas Untrapped. My guest today is Vincent Geloso who is a professor of economics at George Mason University. He studies economic history, political economy, and the measurement of living standards. In today's episode, we discuss the differences between democracies and dictatorships, and their relative performance in socioeconomic development. The allure of authoritarian governance has grown tremendously due to the economic success of countries like China, Korea, and Singapore - which managed to escape crippling national poverty traps. The contestable nature of democracies and the difficulty many democratic countries have to continue on a path of growth seems to many people as evidence that a benevolent dictatorship is what many countries need. Vincent challenges this notion and explains many seemingly high-performing dictatorships are so because their control of state resources allows them direct investments towards singular objectives - (such as winning Olympic medals or reducing infant mortality) but at the same time, come with a flip side of unseen costs due to their lack of rights and economic freedom. He argues that the benefits of dictatorships are not as great as they may seem and that liberal democracies are better able to decentralize decision-making and handle complex multi-variate problems. He concludes that while democracies may not always be successful in achieving certain objectives, the constraints they place on political power and rulers mean that people are better off in terms of economic freedom, rights, and other measures of welfare.TRANSCRIPTTobi;You made the point that dictatorships usually optimise, not your words, but they optimise for univariate factors as opposed to multiple factors, which you get in democracy. So, a dictatorship can be extremely high performing on some metric because they can use the top-down power to allocate resources for that particular goal. Can you shed a bit more light on that? How does that mechanism work in reality?Vincent;Yeah, I think a great image people are used to is the USSR, and they're thinking about two things the USSR did quite well: putting people in space before the United States and winning medals at Olympics. Now, the regime really wanted to do those two things. [That is], win a considerable number of medals in [the] Olympics and win the space race. Both of them were meant to showcase the regime's tremendous ability. It was a propaganda ploy, but since it was a single objective and they had immense means at their disposal, i. e. the means that coercion allows them, they could reach those targets really well. And it's easy to see the Russians putting Sputnik first in space, the Russians putting Laika first in space. We can see them winning medals. It's easy to see. The part that is harder to see, the unseen, is the fact that Russians were not enjoying rapidly rising living standards, they were not enjoying improvements in medical care that was commensurate with their level of income, they were not enjoying high-quality education. You can pile all the unseens of the ability of the USSR as a dictatorship to allocate so much resources to two issues, [which] meant that it came with a flip side, which is that these resources were not available for people to allocate them in ways that they thought was more valuable. So, the virtue of a liberal democracy, unlike a dictatorship, is that a liberal democracy has multiple sets of preferences to deal with. And in a liberal democracy, it's not just the fact that we vote, but also that people have certain rights that are enshrined and which are not the object of political conversation. I cannot seize your property, and it's not okay for people to vote with me to seize your property. And in these societies, the idea is that under a liberal democracy, you are better able to decentralize decision-making, and people can find ways to deal with the multiple trade-offs much better. Whereas a dictatorship can just decide, I care about this. I am king, I am president, I am first secretary of the party, I decide this and we'll do this regardless of how much you value other things that I value less than you do.Tobi;Two things that I want you to shed more light on. Depending on who you talk to or what they are criticizing, people usually selectively pick their dictatorships. If someone is criticizing, say, for example, capitalism, they always point to the Cuban health care system in contrast to the American health care system. How the American system is so terrible, and how capitalism makes everything worse because of the profit motive. And how we can do better by being more like Cuba.  On the other end of that particular spectrum, if you're talking about economic development, critics of democracy like to point to China. China is not a democracy. And look at all the economic growth they've had in the last 40 years, one of the largest reductions in human poverty we've ever seen in history. I mean, from these two examples, what are the shortcomings of these arguments?Vincent; Let's do Cuba first, then we can do China. So, the Cuban example is really good for the case I'm making. Because the case I'm making is essentially that the good comes with the bad and you can't remove them. So, people will generally say with Cuba, “yes, we know they don't have political rights, they don't have economic freedom, but they do have high-quality health care.” And by this they don't mean actually health care, they mean low infant mortality or high life expectancy at birth. My reply is, it's because they don't have all these other rights and all these other options [that] they can have infant mortality that is so low. That's because the regime involves a gigantic amount of resources to the production of healthcare. Cuba spends more than 10% of its GDP on health care. Only countries that are seven or ten times richer than Cuba spend as much as a proportion of GDP on health care. 1% of their population are doctors. In the United States, it is a third of that, 0.3% of the population are doctors. So, it's a gigantic proportion. But then when you scratch a bit behind, doctors are, for example, members of the army. They are part of the military force. The regime employs them as the first line of supervision. So, the doctors are also meant to report back what the population says on the ground. So, they're basically listening posts for the dictatorship. And in the process, yeah, they provide some health care, but they're providing some health care as a byproduct of providing surveillance.The other part is that they're using health care here to promote the regime abroad. And that has one really important effect. One of those is that doctors have targets they must meet, otherwise they're penalized. And when I mean targets, I mean targets for infant mortality. [If] they don't meet those targets, the result is they get punished. And so what do you think doctors do? They will alter their behaviour to avoid punishment. So in some situations, they will reclassify what we call early neonatal death. So, babies who die immediately after exiting the womb to seven days after birth, they will reclassify many of those as late fetal deaths. And late fetal deaths are in-utero deaths or delivery of a dead baby so that the baby exits the womb dead. Now, if a mortality rate starts with early neonatal death [and] not late fetal ones, so if you can reclassify one into the other, you're going to deflate the number total. And the reason why we can detect this is that the sources of both types of mortality are the same,[they] are very similar, so that when you compare them across countries, you generally find the same ratio of one to the other. Generally, it hovers between four to one and six to one. Cuba has a ratio of twelve to 17 to one, which is a clear sign of data manipulation. And it's not because the regime does it out of, like, direct intent. They're not trying to do it directly. It'd be too easy to detect. But by changing people's incentives, doctors' incentives, in that case, that's what they end up with.There are also other things that doctors are allowed to do in Cuba. One of them is that patients do not have the right to refuse treatment. Neither do they have the right to privacy, which means that doctors can use heavy-handed methods to make sure that they meet their targets. So in Cuba, you have stuff like casa de mata nidad, where mothers who have at-risk pregnancies or at-risk behaviour during pregnancy will be forcibly incarcerated during their pregnancy. There are multiple cases of documented, pressured abortions or literally coerced abortions. So not just pressured, but coerced. Like, the level is that the person wants to keep the infant, the doctor forces an abortion to be made. Sometimes, it is made without the mother's knowledge until it is too late to anything being done. So you end up with basically the infant mortality rate, yes, being low, but yes, being low because of data manipulation and changes in behaviour so that the number doesn't mean the same thing as it does in rich countries. And now the part that's really important in all I'm saying is [that] what people call the benefits for Cuba is relatively small. My point is that, yeah, maybe they could be able to do it. But the problem is that the measures that allow this to happen, to have a low infant mortality rate are also the measures that make Cubans immensely poor. The fact that the regime can deploy such force, use doctors in such a way, employ such extreme measures, it's the reason why Cubans also don't have property rights, don't have strong economic freedom, don't have the liberty to trade with others. Which means that on other dimensions, their lives are worse off. That means that, for example, their incomes are lower than they could be. They have higher maternal mortality. So, mothers die to [a] greater proportion in labour than in other countries or post-labour. There are lower rates of access to clean water than in equally poor countries in Latin America. There are lower levels of geographic mobility within the country, there are lower levels of nutrition because, for example, there are still ration services. So that means that, yes, they have certain amount of calories, but they don't have that much diversity in terms of what they're allowed or are able to eat without resorting to the black market. Pile these on. These are all dimensions of life that Cubans get to not enjoy because the regime has so much power to do that one thing relatively well. Let's assume it's relatively well, but the answer is, well, would you want to make that trade-off? And most people would probably, if given the choice, would not make the choice of having this. So, those who are saying, “look at how great it is,” are being fooled by the nature of what dictatorships are. Dictatorships can solve simple problems really well, but complex multivariate problems, they are not able to do it in any meaningful way.The other part that is going to be of also importance is when you look at Cuba, before we move on to China, the other part about Cuba that's worth pointing out is, I was assuming in my previous answer that the regime was actually doing relatively well. Even without considering all the criticism, it still looks like it has a low infant mortality rate. But when you actually look at the history of Cuba, Cuba was exceptional in terms of low infant mortality. Before the Castros took over, Cuba already had a very low level of infant mortality even for a poor country. And so with a friend of mine, a coauthor, Jamie Bologna Pavlik, we used an econometric method to see if Cuba has an infant mortality rate that is as low as it would have been had it not been for the revolution. So, ergo, we're trying to find what is the effect of the revolution on infant mortality and we're trying to use other Latin American countries to predict Cuba's health performance. And what we find is that in the first year of the regime's, infant mortality actually went up, so it increased relative to other Latin American countries, but it gradually reverted back to what would be the long-run trend. So that Cuba is no more exceptional today in terms of infant mortality than it was in 1959. That is actually a very depressing statement because it's saying that the regime wasn't even able to make the country more exceptional. So even if it's able to achieve that mission quite well, it's not clear how well they've done it. At the very least, they haven't made things worse in the very long run, they only made things worse in the short run. So when you're doing, like, kind of, a ledger of goods and bads of the regime, all the bad trade-offs I mentioned: lower incomes, higher mortality rates for mothers and maternity, lower rates of access to clean water, lower rates of access to diverse food sources, lower rates of geographic mobility - pile these on, keep piling them on, that's the cost. What I'm saying is what they call the benefits, they're not even as big as it's disclaimed. The benefits are relatively small.And now with regards to China…Tobi;Yeah.Vincent;The Chinese case is even worse for people because they have a similar story with GDP. So, in China, a regional bureaucrats have to meet certain targets of economic growth. Now, these same bureaucrats are in charge of producing the data that says whether or not there is economic growth. You can see why there is a who guards the guardian's problem here? The person who guards the guardian is apparently one of the guardians. So you could expect some kind of bad behaviour. And there is an economist, Luis Martinez, out of the University of Chicago. What he did is he say, well, we have one measure that we know is a good reflector of economic growth and it is artificial light intensity at night. Largely because the richer a country is, the more light there will be at night time. And so if you have like 1% growth in income, in real numbers, you should have some form of commensurate increase in light intensity during night time. If the two deviates, it's a sign that the GDP numbers are false, that they're misleading. Because if they deviate, the true number, the always true number will be the light intensity at nighttime. So, when Martinez used the nighttime light to compare GDP in Chinese regions overall and the actual GDP, he found that you can cut the growth rate of China by, maybe, two-fifths, so it is 40% slower than it actually is. So, China is not even as impressive as it is. And the thing is now think about the pandemic, think about how extreme the measures that China deployed to restrain this has been, no liberal democracy would have been able to do that, no free society would have tolerated forcibly walling people into their houses. And there are massive downsides to the communist regime in China. Like, yes, the regime is free to do whatever it wants, but it also means that it can put Uyghur Muslims into concentration camps. It also means that it can wall people into their houses when they do not comply with public health order. It also means that people are under the social credit system where they are being largely surveilled on a daily basis. It also means that the government can allocate massive resources to the act of conquering Taiwan or flexing muscles towards Japan. All things that when you think about it, is that really an improvement in welfare? Obviously, you can say that, oh yeah, they're doing X or Y things really well but here are all the bad things that come with this. And those bad things are on net much worse than the good things.Tobi;Now, you keep emphasizing liberal democracy and I want to get at the nuance here because I've seen several results. Either it is from Chile and other countries that say unequivocally that democracies are better for growth than dictatorships, even in the case of Chile, despite all the reforms of Pinochet regime. But what I want to get at is, what exactly about democracies make them better? Because, for example, we can think of Nigeria and Nigeria as a democracy. We've had uninterrupted election cycles for over two decades now, but there's still very weak rule of law. Successive governments still rely on extracting oil rents, basically. And, the degree to which people enjoy rights vary depending on who is in power or their mood on any particular day. And, of course, Nigeria is a democracy. So is it liberal democracy? Is that the key factor?Vincent;So, think about it this way.Tobi;Yeah.Vincent;Think about it this way. Inside the big box of liberal democracy, there is for sure democracy. But the part that makes the box liberal democracy is not only the smaller babushkadal inside that box which is a democracy one, it is the other constraints that we put on the exercise of political power. The true definition of a liberal democracy, at least in my opinion, is that not only are people allowed to vote, but they are restraints on what we can vote on. So, for example, if it's not legitimate for me to steal from you, it is no more legitimate for me to vote with two other people to steal from you. The act of democracy should warrant some acts that are outside the realm of political decision-making. There are also constraints that exist on rulers, so it's not just that there are some rights that are not subject to conversation. There could be also incentives that prevent rulers from abusing the powers they have. That would mean, for example, checks and balances, where there are different chambers that will compete with each other, different regional powers of government that will compete with each other for jurisdiction, and so they will keep each other in balance. It could also be some form of external constraint, because a liberal democracy can also rely on external constraints upon political actors. It could be the fact that people can leave the country, the fact that taxpayers can migrate to another country, puts pressure on politicians to not abuse them. People can move their capital out of the country, [this] creates a pressure on politicians to not try to steal from them, because people will just remove all the productive capital and the ruler will be left with very little to exploit as a result, regardless of whether or not the ruler is elected or not. So the way to think about this is liberal democracy is, you want to have a system where there are rules, incentives, constraints that make it so that we are not betting on a man or a woman, for that matter, being the correct man and woman for the moment. We care about a set of incentives, constraints, and rules that will make sure that even the worst human being possible will feel compelled or compulsed [sic] to do the right thing. So, that's like the old Milton Friedman thing, it's like “I don't want the right man. I want to have a system that makes sure that even the most horrible person on earth is forced to do the right thing.” That's what a liberal democracy is.Now, it is a broad definition that I've provided. It is not narrow in any way. It is not specific, largely because I don't think it can be what works. It's not everywhere the same. The general family to which this belongs is universal. But the way it can work is not the same everywhere. A homogeneous, small, Sweden probably doesn't need as much level of, say, breakdown of provincial versus federal powers. Whereas, from what I understand, Nigeria is a somewhat multinational country, multiethnic country with multiple groups east and west from what I understand the divide is in Nigeria. There, it might be good to have a division inside the country where things that are most homogeneous, you leave to the federal government, to the highest level of power. Then the things that you can delegate to the local level, [it is] better to do it that way. Countries that are incredibly heterogeneous maybe need even more federalism. What is optimal for one place won't work elsewhere. So I couldn't take Belgian institutions and then just dump them in Nigeria. Same as I couldn't just say, well, let's take Swedish institutions and dump them into Canada. But what makes generally Sweden work better in terms of institutions than Nigeria, for example, is the fact that Sweden does fit in that general box of liberal democracy. There are clear constraints, there are restrictions, there are constitutions that are well respected, there's a strong rule of law, and politicians are compelled to not fall prey to their own baser instincts.Tobi;  A couple of months ago, I had Mark Koyama on the show.Vincent; Great guy. He's a colleague of mine.Tobi;Yeah. So, we were talking about state capacity. We're talking about his book with Noel Johnson. So I did bring up your paper on state capacity, [in] which, basically, one description that stuck with me is that you never really find a poor, but highly capable state in history…Vincent;You mean backwards. A rich society with an incapable state?  Tobi; Yes, a rich society with an incapable state. Thanks for that. So, I've been trying to disentangle this state capacity thing, I know Bryan Caplan basically dismissed it as a sleight of hand. Right. So, like, how does it work and how is it a necessary ingredient for economic development, so to speak?Vincent; I am actually quite respectful of the state capacity literature in one way. So let me do like kind of a quick thing. State capacity says that you want the state to be able to do certain missions. Right, so we're not making judgments as to whether the mission is good. State capacity is about the abilities of the state. The reason why that literature has emerged since the 2000… here's a story of economic thought really briefly: in the 1950s, Samuelson and others show, ‘oh, well, there are market failures' and then a few years later there are the public choice rebuttals, where the public choice economists say, ‘well, you're kind of wrong. There are also government failures.' And the state capacity crowd tries to come in between these two and say, ‘yeah, there are market failures and there are government failures. How do we get a state to solve the market failures but not fall into government failures?' Okay, straightforward, good argument. The part that I'm sceptical of is that the argument of the state capacity crowd is that you will have a lot of rich societies that will have strong states, you will have much fewer societies that have strong states but are very poor (the USSR would be a good example of that), [and] you will have a lot of societies that are poor and have weak state. The thing is that they can't seem to explain why it is under their theory that there are no societies that are relatively weak state but rich. Even though in history we do have many examples of these and they collapse all the time.The argument that I make with my colleague, Alexander Salter, is that societies that have weak states will fall prey to predation because their neighbours with stronger state will try to capture their wealth by conquest. If they are conquered, they grow immensely poor, they are made poor. Basically, it's a terrible event for them. Or they resist, and if they resist ably, the result from resistance is that they have to build a strong state themselves to resist predation by other rulers. And so in the argument me and Alex build, it boils down to: the state is not necessary for development, but it is inevitable as an outcome. So, the task of political science, of political economy, is understanding if we are going to be stuck with one of them, how do we make it that we get the least terrible one? If it's not necessary, but it is inevitable, then how do we get to one that will maybe do some benefit, or at least, we can get the best kind possible? Well, that's where the liberal democratic answer gets into. [It] is [that] we need to find sets of constraints, rules, incentives that force the politicians to make it too costly for them to engage in predatory behaviour, in redistributive behaviour, and that they concentrate on what you could call productive behaviour. That would be like solving externalities. Like dealing with pollution or producing public goods stuff that markets have a harder time to produce. Getting into that category is the task of what liberal democracies are trying to do. That is a much harder proposition. Daron Acemoglu in his somewhat awful book, The Narrow Corridor, calls it a narrow corridor. (I don't like that book that much. I think it's a horrible piece of literature. He should have kept it at Why Nations Fail, we had everything we needed with Buchanan, and it was much better in the other version. He was a much worse version of that.) So, Parenthesis over on Daron Acemoglu, but his point is still relatively okay. There is a narrow corridor on which we evolve. That is a very narrow equilibrium that we want to stay on to, to avoid veering either into more territorial forms of government or into different types of authoritarian[ism], in a certain way. So the corridor for a liberal democracy is very, very, very, very narrow.Tobi; I like that description. The state is not necessary but inevitable. Whereas with the traditional state capacity crowd, the state is often assumed and never justified.Vincent;Actually, that's a bit unfair to them. The state capacity crowd, a lot of them are interested in state capacity as a story of the origins of states. That, I think, is a much-valued contribution. However, the issue of whether or not state capacity is linked to growth, I think this is where there's overstretching. My point is “no, there's very little reason to believe that state capacity is related to growth.” State capacity is more the direct or indirect result of growth in the past. So, either you are getting state capacity because you get conquered and you get imposed it by somebody else, or you get state capacity because you want to protect your wealth from other predators.Tobi; For the record, I'm not talking about your colleagues. There's this industrial policy school in development economics who are also big on state capacity, who think the state has to do this heavy lifting. They sort of assume the state and not justify it. But I won't let you go without asking you this final question. You recently published a paper - talking about the work of Thomas Piketty, the French economist - with Phillip Magness, I should say. What is your critique of his work? Because so far as I can tell, yes, I read the op-ed in the Wall Street Journal, [but] everybody else is sort of pretending that a critique of Piketty does not exist. And the political coalition around their research, along with [Emmanuel] Saez and [Gabriel] Zucman is moving rapidly apace, whether it is in taxation or other forms of agenda. So, what is your critique? I know there have been others in the past Matthew Rognlie, I'm not sure how to pronounce his last name.Vincent;Yeah. Our argument is actually very simple. And to be honest, I don't really care about the political conversation where, [for] the political people who are using Piketty's work, I ignore them. There may be a motivation for doing this work because it tells you the importance of his work, but the person I'm trying to talk to is Piketty himself. And the point we make in the paper is that he [not only] massively overestimates inequality in terms of levels, but he also misses times a lot of changes. In the article that me, Phil, another Phil, and John Moore published together in the Economic Journal, we find that there is a very different timeline of inequality in the United States. The most important part is that unlike Piketty and Saez, who can assign most of, and later Zucman… who can assign most of the changes in inequality to tax policy, we find that actually half the decline in inequality that happens between, say, 1917 and 1960, half of it is because of the Great Depression. And just as good economists, we should not be happy that, okay, the rich are growing poor faster than the poor, but the poor are also growing poor. That is not a decent outcome. So we're minimizing the role of fiscal policy and tax policy in doing inequality, but also the other changes that we find give a very different story of what matters in changing policy rather than being taxes, it has more to do with labour mobility within the United States. With capital mobility within the United States. So poor workers from the south, mostly black Americans, move to richer northern cities where wages are higher. Capital moves from the rich north to the poor south where workers are made more productive. So, the levelling has to do with a very standard force in economics - it's a Solow growth model - capital goes to where the returns are greatest, labour goes where the wages are greatest. Most of the convergence is explained by this, not by tax policy changes. So that's the critique we make of them. And there's a lot of other people who are joining in, Gerald Holtham, David Splinter, a lot of people are actually finding that their numbers don't make much sense and they're actually in violation of a lot of other facts of economic history, even though they're correct in the general idea that inequality fell; fell to 1960 and rose since the 1980. The problem is that all they got right is the shape, but they got wrong the timing, the levels, the extent of the changes. They got most of it wrong. They just got the general shape right. And that's no great feat.Tobi;Thank you so much for joining me.Vincent;It was a pleasure. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.ideasuntrapped.com/subscribe

Martin Wolf is a renowned Financial Times columnist, and his new book is The Crisis of Democratic Capitalism. In it, he argues that liberal democracy and market capitalism are inextricably linked – and that both must be reformed to survive. Bethany and Luigi discuss with Wolf how meritocracy, rising inequality, polarization, and the erosion of trust led to this crisis and debate whether it was policy failures or the mistakes of capitalism that exacerbated it. Ultimately, they also try to answer the question: Will the US be a functioning democracy by the end of the century?Show notes:Read the following articles in ProMarket:There Is a Direct Line from Milton Friedman to Donald Trump's Assault on Democracy, by Martin WolfGeorge Stigler and the Challenge of Democracy, by Anat AdmatiCorporations Are Not “We the People,” by Geoffrey StoneeBook: Milton Friedman 50 Years Later, a ReevaluationAlso, check out relevant past Capitalisn't episodes:Why Capitalism Needs DemocracyThe Breaking Point Of Democracy With Morton Schapiro and Gary Morson

Because it is so well researched and presented, Cutting School: The Segrenomics of American Education, is a frustrating read. To tell the story of privatization, segregation, & the end of public education requires a massive cast. In her book Dr. Noliwe Rooks, my guest today, runs a precise thread from Reconstruction, Nelson Rockefeller, & Brown v Board through to Milton Friedman, every president in my lifetime, Teach for America, KIPP charter schools, Mark Zuckerberg, & more. Segrenomics has the kind of power that will be viewed with suspicion in states most impacted by it which are cracking down on theoretical frameworks that attempt to provide structural, systemic explanations. An interdisciplinary scholar, Noliwe Rooks' is the chair of and a professor in Africana Studies at Brown University and the founding director of the Segrenomics Lab at the school. Her work explores how race and gender both impact and are impacted by popular culture, social history and political life in the United States. She works on the cultural and racial implications of beauty, fashion and adornment; race, capitalism and education, and the urban politics of food and cannabis production.GuestsDr. Noliwe Rooks is a professor and chair of Africana Studies at Brown University and the founding director of the Segrenomics Lab. Her research focuses on the interplay between race, gender, popular culture, social history and political life in the US. She is the author of four books and numerous articles, essays and op-eds. Her most recent book is Cutting School: Privatization, Segregation, and the End of Public Education.ResourcesCutting School: The Segrenomics of American Education by Dr. Noliwe RooksDr. Noliwe Rooks @ Brown UniversityDr. Noliwe Rooks' website Hosted on Acast. See acast.com/privacy for more information.

The Nobel prize winning economist Dr. Milton Friedman, said the business of a business  is making money - but within the acceptable social norms. Dr. Raghuram Rajan, Katherine Dusak Miller Distinguished Service Professor of Finance at Chicago Booth School and he was the 23rd Governor of the Reserve Bank of India, looks into how “social norms” have changed and how the businesses need to adapt to adopt sustainable practices. May it be their impact on the planet, how they treat their employees and or make their products. He talks about how there needs to be regulations to guide and help the corporations to achieve these goals.Further, with countries setting goals for netzero, how can we actually have a plan that is accountable and works. Dr. Rajan proposes a global incentive scheme to reduce carbon emissions. On April 19th, 2022 he presented this solution to The Coalition of Finance Ministers for Climate Action that required countries who exceed the per capita global country average for carbon emissions, estimated at 5 tons, will pay to a global carbon incentive fund. He calls this payment Global Carbon Incentives (GCI). He further explains - “this annual payment would be calculated by multiplying the excess emissions per capita by the country's population and a dollar amount called the Global Carbon Incentive. So if the country's population is 30 million, its per capita emission in 17 tons, and the GCI is set at $10, it would pay $30 million*(17-5)*10= $3.6 billion. Countries below the global per capita average would receive a payout commensurate with their “under-emission”.This fund could be managed by a quasi government agency like the World Bank. Mindful Businesses is one of the first media outlets to share Dr. Rajan's solution. Listen to it in our latest episode.https://en.wikipedia.org/wiki/Raghuram_Rajanhttps://mindfulbusinessespodcast.com/Mentions:Coalition of Finance Ministers for Climate Action.Angad Daryani - Founder - PraanRam Palaniappan - Founder of Earnin www.instagram.com/mindful_businesses_podcast www.facebook.com/Mindfulbusinesses #raghuramrajan, #globalcarbonincentive, #carbonemmissions, #greenhousegases, #SDGs

Richard Epstein is our returning guest. Richard is an American legal scholar known for his writings on torts, contracts, property rights, law and economics, classical liberalism, and libertarianism. He is the Laurence A. Tisch Professor of Law and director of the Classical Liberal Institute at New York University, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution In this episode we talked about: Historical Perspective of  Land Use and Regulation Government Real Estate Agencies Inflationary and Interest rates Environment Macroeconomic Outlook ​​Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Richard is an American legal scholar known for his writing on torts, contracts, property rights, law and economics, classical liberalism and libertarianism. He is the Lawrence, a Tish professor of law at nyu, and the director of the university's Classical Liberal Institute.   Richard, it's great to have you back on. How you doing?   Richard (39s): It's always great to be here, Jesse.   Jesse (41s): Well, we're gonna have a bit of a, a crash course here in in property rights land use regulation, and kind of talk about how we got to where we, we are right now in, in the US in Canada as it as it relates to property rights. And it'll be topical for anybody interested in real estate, real estate investing development law. And you know, if you're ever interested to see why certain investment firms pick different states or pick different countries, you know, we'll, we'll touch on the intricacies and differences between how some of these laws develop.   But Richard, why don't we, why don't we start from the beginning? You talked about a historical perspective when it comes to land use and regulation, so I'll leave it with you here.   Richard (1m 29s): Okay, look, well the first thing to note is that when densities and real estate densities are very, very low, there's very little reason to have any kind of land use regulation. Land use regulation is a function of having large numbers of people within relatively close levels. One way to try to regulate this is from the private law of nuisance dealing with offensive smells and so forth. And that certainly is a part of the system. But when you're dealing with modern zoning laws, it turns out it's a relatively unimportant part of the system unless you're dealing with certain kind of very difficult industrial manufacturing areas.   But if you're going to the sort of the city life, the, the story really begins in 1916 when in New York City they realize that if you put up certain kinds of large buildings, the equitable building, what it's gonna do is gonna block light in other parts of town. And so the question was, are you willing to suffer that and let people build as they will, or do you think that you could kind of regulate densities and distances? And the initial New York statute was designed to deal with exactly that. And so they put up kinds of restrictions and they were relatively modest, but nonetheless they were there.   The one that was put into place in Washington was a high limitation. And in 1909 the Supreme Court said it's okay for you to do that. There's some kind of average reciprocity of advantage in everybody having the same kind of stuff. And so it's also another effort to sort of attack the light interest one way or another. And zoning of that particular sort was a relatively modest affair. I think the entire zoning book was, you know, 20 pages or something of that sort. But the movement got Abe boost from a very strange location in the United States.   And that strange location was a Department of Commerce where the Secretary of Commerce was none other than Herbert Hoover, later known for his other kinds of deeds. And what he did is he called together a national conference of local people trying to explain why it was that a general kind of zoning law was something that ought to be put into place throughout the United States. And federal government at that time had no power to regulate zoning within cities today in the United States. And in principle has that power, but it is virtually never exercised.   But what Hoover did was to persuade all of these towns and all these governments that they should put together a zoning package which is much more comprehensive than the ones that they had before. The theory behind this stuff was how you organize land uses as opposed to blocking light. And the notion of a zone actually quite literally meant this. We put in this zone, we put manufacturing in that zone, we put commercial in this other zone, we put in apartment houses, this other zone we put in single family homes.   And the theory was that if you have each zone with a pure type of, what would happen is you would prevent all sorts of nasty kinds of interactions between people and everybody would be better off. It turns out that this is a colossal blunder in the way in which you organize because what it does is it gets you uniform zones within use. It prevents incompatible uses from taking place, but it also prevents compatible uses from taking place. And so if you wanna get a sense of how, for example, real estate is organized in a more or less voluntary market, take any city, whether it's Toronto or New York and just go vertical.   And at the bottom what you do is you see a series of real estate stores, mainly commercial one way or another in New York. And probably in many other places, the escalator in these real estate stores goes down, not up because what you do is you have a lot of space below ground that doesn't change the profile, the building above ground. And so you do that. And then above that what you do is you probably have some degree of office space, which is a different kind of use. And above that you start having hotels in one kind of amenities.   And then above that what you do is you probably have some residential units and on the top you have some fancy club where everybody could look out at fine dining or a conference center. So you get four or five different uses stacked with one another. If you change the order, you would realize that this is not a random phenomenon, it's the way of maximizing value. A traditional zoning statute makes that extremely difficult. And so when Jane Jacobs wrote her famous book in 1961, she was always against single use areas because she said, if you're alive during the day, you're gonna be dead at night.   Or if you're alive at night, you're gonna be dead during the day. If you have the right kind of mix, you can have a steady flow of people in and out of the city and get greater utilization of your public resources. So the zoning system essentially made this mistake. And the case that demonstrated this was a case called Ewa cited in 1926, which was the same year that Hoover called his particular meeting in Washington. And what was the UK case about? It was about an industrial site between the nickel white railroad and some fancy highway on the south.   And what happened was a unified plot, and it was ideal for a major plant of one kind or another, but the city fathers decided that they were gonna change the way that this thing operated. And so what they did is they created zones going from top to bottom in that area and there was a zone that was designed to be manufacturing and then there was a commercial zone and there was a certain kind of residential zone and then a over the apartment house and a play zone. And what happened is you start looking at this stuff, you realize that having divided this thing, the loss and value is necessarily enormous.   You had a single owner of this patent and as you know Jesse, one of the fundamental theorem of real estate is if you have a single owner, every time you decide to do something on behalf of one of your potential buyers of renters, you're gonna hurt somebody else. So your constant job is to try to figure out how it is that you maximize the net value of all the uses that you sell, taking into account direct and indirect benefits like views and so forth. And sure enough, if you start looking the way these things go, you never see any of these things where the rental units are buried down below and the parking spaces are above.   The whole thing is organized in a way to sort of maximize access on the one hand and views on the other hand. And people really know how to do that and they're experts in excuse. So what you're doing is you're taking away the actual owner who's all the right incentives. He can only maximize his values if he maximizes that of his buyers and renters and and putting in place a government organization. And what it did in zoning, excuse me, what that did in zoning is it knocked out 75 or 85% of the total value by creating artificial barriers, discontinuities of one sort or another.   And it goes to the Supreme Court and the question is, is this thing constitution? Well, it was argued that it was a taking of one kind or another cause you saw the huge value. But the Supreme Court in a sublimely stupid opinion by a conservative judge known as Sutherland, a decent man, but a terrible judge on this stuff said, well, you know, you gotta have zoning laws because you have to have traffic regulations of one form or another. So what he was doing was talking about this areas where these units were already divided and you had to coordinate them and saying, that's the rule that we have when we already have a coordinated unit.   And so what you do is you know, for certainty that you've got a huge loss in net value. And the net question as a social thinker is, is there gonna be some external benefit that justifies the losses that you're imposing? And then you look around and you say, well, is it gonna be the fact that you're gonna prevent nuisances? Well, you could do that by saying you can't admit slope. And in fact, if it's a large part of land ly, every landowner wants a little bit of setback from the street, right, in order to give themselves a little bit more flexibility.   And so they have a garden or they have some kind of a statute in front of the place and so forth. And so there's gonna be zero probability of nuisances against neighbors. But on the other hand, you shut this thing down as a con industrial site, there are gonna be a lot of people who live in the neighborhood who now will not be able to get jobs. So if you're trying to figure out what the net effect of construction is, the standard zoning model is every time you build something here, it's gonna have a negative effect everywhere else. The more accurate situation is there a few uses that you have to ban and you can do that.   But most of the interactions that are gonna take place within the nearby neighborhood are gonna be positive. And so you put into place a system which essentially is doomed to fail from the start. And then the question is, what about constitutional attacks on? And what you always have to say about something like the Euclid decision is the moment you sustain the constitutionality of what must be the dumbest plan imaginable for land use planning, you're never gonna be able to attack anything else because every other program's gonna be less stupid than the one that you have here, even though they're plenty dumb.   And so essentially in the United States and in Canada, I believe there was no serious challenge to zoning ordinances that took place for the next 50 or 60 years. The system essentially went on autopilot and the positive externalities would be taken into account in some cases politically but never legally. So one of the things you mentioned, you can interrupt me at any time, is how do different towns respond to this stuff? Well, it's a very funny game. I'll tell you just a little anecdote is we wanted to build a house in Michigan at a time when the area was somewhat depressed and there was a zoning ordinance that was administered by the local government on behalf of the state and they were desperate to get our house in there.   Why is that? Because in the usual exurban communities, they have two tiers of taxes. They have low taxes for people who live there full-time and high taxes for com, people who live there for the summers or the weekends or whatever. And they were desperate to get those revenues. So our architect goes out and presents his plan and this is what the host of the situation said, this is 35 years ago, but it's the same story. I said, Mr Grun, would you like to go first? You came a long way. Now what's going on is they really wanted that stuff.   And there are many towns in the United States where zoning has done in exactly that way. So that what happens is if you have the equid frame of mind in Ohio, it gets taken over in New York, it then spreads to building permits and other situations like that. And so essentially to construct something in New York City is about as difficult as breaking into a bank cuz nobody wants you to come. You go to Texas, it takes, you know, two weeks to get a building permit as opposed to three years to get a building permit, the land use review processes, is your building gonna fall down?   Will you let us know? Is your building going to have no access to the street? Will you let us know? So essentially what they worry about is a little bit about massing. They worry a lot about safety construction floors and so forth. And the very important issue of how you coordinate entrances and exit from a large building onto a complicated city set of griefs. And those are all the things that you really have to worry about. But what goes on inside the box is something for which in general it is very unwise zoning board to take hold of.   But you take a place like New York, it's not only zoning, it's handicapped regulation. So somebody will tell you how wide the hallways have to be in order to accommodate a wheelchair that you don't need of a bill that's no longer made, which will reduce the value of your house by 20% every time you try to do a renovation. So the thing to understand is every community is not so stupid as to try to take advantage of the full powers of the zoning law, but you can easily find configurations where local politics are such that the dumbest of the dumbest get to the top of the roof.   And if you wanna find a place in which that's likely to happen, you go to San Francisco, you go to New York, not so much Chicago, although they have a terrible mayor and so forth, it's essentially major progressive communities tend to be most insistent and what they do is they drive people away with their stupidity.   Jesse (13m 46s): So Richard, the, this kind of, it reminds me a bit of this common misconception between freedom and license and the, I guess we could back up and say from, from a standpoint, I don't think I, if you are extremely lez fair in disposition that you think that there's no limits on on, you know, what you can do with your property, but, but there is seems to be a certain balance. So there are certain externalities that are easy to control and, and others that are different. For instance, you know, the law of trespassing, it's very obvious but the, you know, the externality of environmental issues or you know, smell emanating front property.   So I, I'm curious to, to know that for instance, I live in downtown Toronto. If I'm walking down the street, as much as I don't like to be the nimbyism not in my backyard type of person, when there's certain condos put up in certain sight lines where there was one sun is there's no longer sun, we, we certainly lose something as a community the way that we go about ameliorating that or or dealing with it is, is not efficient. And it reminds me a bit of a book by Charles Murray, I think it was by the people and it was talking about like what you're talking about a lot of regulations that you know, say you have a commercial building and the steps need to be this many inches and have these, these spindles and and realize it doesn't apply to a certain case.   So, so where's the balance when it comes to the ability for you to have efficiencies and be able to have that quick turnaround time like in some of the southern states as opposed to not, not limiting other rights that are external to say your   Richard (15m 21s): Property. Now look, as I mentioned to you, light is one of these very difficult issues as is density. And the point about light and views is everybody knows that you attach an enormous positive value to their use. And so for example, if you have in New York an apartment on Central Park West that looks over the park, it's gonna be worth $40 percent more than a unit in the same building and that looks down the street that another street. So these things are extremely valuable and so the question then is how do you manage to preserve them?   And it turns out I think the only thing that you can say is that in plan unit developments, these things are gonna be naturally taken to account for the reasons that I mentioned at the outset. The developer who denies somebody of view in order to give somebody else a lot of space, he may lose more money on the view apartment than he will gain on the space apartment. So he'll do something else. When it comes to uncoordinated development, it's an absolutely killer and one of the kinds of regulations that have been sustained and it's one for which I have a little bit of sympathy, I'm not sure exactly how hard a setback regulation.   So the same time they put Euclid into place, they said you could require everybody to set back 10 feet from their neighbor, 10 feet from the floor. Now is this a good or a bad idea? Well it really depends. So let me give you the Epstein situation circa 1950. I grew up in a duplex, not a duplex, it's a semi attached house. We had a neighbor on one side with a common party wall and it was open on the other side. And essentially this was a kind of an effort to sort of create that sort of compromise that you want to have, you reduce the density a little bit by having that common wall and so forth but you kept the openness by making sure that every two units instead of every single unit has some setback or partition from the guy behind you.   And and I think trying to put zoning ordinances like that into place is not going to give rise to a huge thing. And there's a simple way to try to test this out. The zoning ordinances that I mentioned in equi were ordinances that resulted in a loss of value, easily measurable because of the market value of the land of 80%. Now you put a setback regulation in on a large unit owned by a common developer and you ask yourself how much is gonna be the reduction in value if any from this situation?   And remember the people who live in the houses, houses are the people who walk on the public streets and probably it's gonna be the case that the sort of setback regulations you're talking about will have relatively modest effect on property values and positive effects on neighborhood amenities. And so they should be upheld is being some kind of constitutional, the reason why this is so difficult is I suppose you have a part which is 25 feet wide, having a setback on that is gonna be very, very difficult than the width. But if you have one of 40 feet you can start to do it.   So the sizes make a difference, the ratios make a difference, which means that it's extremely difficult when you're doing these things that kind of figure out the way in which they go. One of the things I do when I teach land use, however it is kind of interesting is you wanna see how a constructive zoning situation did the case book. I had my friend Bob Eon and Vicki Beam with the editors at the time, they had a proposed plan for development with entrance entrances on various streets and configurations within the law.   And then they, that was before they spoke to the planning bureau and then what happened? They show the same thing after you look at the planning bureau and I'm very happy to say this was a positive story. The revised plan was much better than the original plan by any standard that you could ought to do better access in the right places, better internal configuration on the roads and so forth. So what it does so is that planning should not be regarded necessarily as an evil to send all evil, but it has to be done with a set of incentives where it is that the people who are designing these particular program are trying to maximize the value of the unit development, not trying to destroy it.   And so, so much depends when you go into a government as to whether they're the welcoming kind of government or whether they're just people or outright hostile. Now this has huge implications for constitutional law. If you have government which is responsive and reliable, giving in their reign is almost a wonderful thing cuz they're doing good things and they'll do 'em better. But if you have a terrible government and giving it its reign, they're gonna take advantage of you and wipe out private values. Well when you plan your law, you have no idea in the same state or in the same county whether the local zoning boards are gonna be the good guys of the bad guy.   And how do you then put together a set of rules to deal with people who are so fundamentally different than the way in which they approach land use? That's the fundamental challenge. And essentially the way I think you do it is you start off worrying about the bad guys and what you say is the kind of test that we're gonna put into place is that which talks about overall diminution and value taking into account all the members of the community. And then if you take that over and you look to the good guys, they'll pass that test.   The bad guys won't. So that overall will make a difference. Let me give you an illustration. Okay, nice one. I think having to do, not so much with urban planning but with beach fund planning and as you know as a real estate guy, beach funds are very sensitive because the value of the land is so much determined by access to the public road. Everything changes. When you're in most parts of the world you tend to have squareish lots or when in beachfront company tend to have bowling alleys, very narrow cuff to give as many people possible, some degree of frontage with respect to the beach and so forth, right?   Well one of the things that you have when you face the beach is you have an erosion risk. And once you realize that the maximum private values come from having relatively narrow and deep plus you realize that there's no way that individual owners in an uncoordinated fashion are going to be able to stop their erosion risk. Your parts are too small, you build a wall on your thing and it simply destroys the guy to the left of you and the right of you. So you need to do is have a common wall if you're gonna be able to do this at all.   And then the question is how do you put this into place? And here's a scheme called stop the beach nourishment was the name of the case decided by Justice Scalia who came out with the right result having no idea what the actual logic of the scheme was. So these guys realized they had an erosion risk, they realized they had a collective action problem because there was no way any single owner alone could make his press situation better without making his neighbors worse. And if you're trying to figure out how you're put together a wall that's gonna have to deal with say 40 or 15 homes, a single continuous wall's gonna be much better than a HighSpot a little one.   So they did is they said we're gonna require that, but they made a deal and the deal was what you have to do when we put this wall up is give up the rights that you have to exclusivity on the seawood side of that wall. So what was once a private piece of land above the high watermark now became collected, okay, you lost something. But on the other hand we're gonna give you two things in exchange. One, we're gonna protect your house and that's worth the law. And two, we're gonna make sure that nobody builds on the seawood side of the wall so that your views are protected on the one hand and your access to the beach are protected on the other.   So you look at this kind of scheme and you say, are these people entitled to compensation? Well you'd have to be a little bit nuts to think. So if it turns out when you're taken into account the cost of construction and all the other net benefits, the value of every piece on the breach goes up by 10%, right? At that point, compensation is not what you want. It's what we call technically implicit in-kind compensation. That is the nature of the project itself imposes reciprocal obligations on people. Each of them have to pay X, each of them get y Y is greater than X.   So if you have NX N Y minus nx, it's a greater gain still. So it works. Now is this always gonna work? No, Jesse, life is unkind to us. If the units are heterogeneous, it turns out it's harder to get common projects that work. So think of the beachfront in which some guys on a rocket, he doesn't care about the erosion risk given where he's located. Or some people have bigger houses, some people have a small narrow part. When you have heterogeneity, it's harder to make the thing work.   And so what do you have to do? There's an institution with the odd name of owl, T O W E L T Y. What you do in effect is you start making side payments so that those people who are given burdens that are greater than their benefits receive cash payments from the other. And if they could make the cash payments and still come out net winners, what you've done is you've taken an unequal distribution of good fortune that is somehow need the protection and some don't. And the side payments allow you to equalize the benefits so that everybody in this particular area get the same rate of return from common project.   And I think you, you've worked real estate, right? Yep. And you understand that in certain cases where you make global improvements with local disadvantages, you have to have implicit transfer payments or explicit one, if it's a common unit development, it comes out in the pricing. If it turns out they're separate units, it has to be an explicit make and you can do all of that stuff. But the key thing to understand when you're doing land use regulation, given the adjacencies, you can't say that what goes on in one plot of land is irrelevant to what goes on the next.   What you try to do is to put into a project that satisfies two conditions. One, overall all values of all the unit owners and so forth of property owners are increased. And B, you are going to give a uniform rate of return because if you don't do that, then the following will take place. We have a development and 60% of the percent of the people game a hundred percent and 40% of the people lose 50%. If you don't have transfer payments, you're gonna have a Holy War taking place because the losers are gonna do everything they can to bottle that up.   And as you know, generally speaking on this conflict, a simple majority is not enough to prevail over determined resistance. That's just the way committees and organizations struck. It's a multiple stage project in order to put legislation through and the veto guys that all they have to do is to shut down one of the gates. Whereas the pro guys, all they have to do is to keep every gate open, which is a much harder tan. So given that fundamental asymmetry the correct solution of transfer payments so is to make it that foolish for people to object if the side payments will leave them better off than they were before.   And so that's how you have to start thinking about managing various kinds of real estate projects. And that's why it is at the zoning model so utterly rigid because the other thing that it does, it doesn't allow the subsequent contractual variation.   Speaker 3 (26m 34s): So   Jesse (26m 35s): That's, yeah, it's fascinating to, to see cuz we, we deal with different, like we were mentioning before, different provinces or different states and you just have obviously varying sets of, of norms, varying sets of laws for regulation. I wanna get your take on something that was recently passed or pushed forth in, in the Canadian context. I think every country in some aspect, I know in the states and in Canada we're, we're affordable housing is constantly talked about. And the question of how do we deal with affordable housing, you know, depending on your political disposition you'll have a different tool or different, you know, different view.   You know, obviously I'm biased in the commercial and residential real estate space that we think, I think a lot of the regulations really hamper us and and limit the supply. Now, I'm not sure if you're aware of this, but recently something called the prohibition on purchase of residential properties by Non Canadians Act was was passed and it was basically it, it's a two year moratorium on foreign individuals buying property in the states. Now if you really look at the actual details of it, you realize that people in MySpace and the commercial real estate space aren't really affected because it's limited to I think three or four or less units.   I think it's four or less units. So you know, the large companies buying properties or multi-residential or commercial pro larger commercial properties. But I'm curious of your view of how, you know, you see a government agency, C M H C, the Canadian Morgan Housing Corporation as our equivalent of Fannie Mae, Freddie Mac, you see them past this with the talk about how we're gonna increase affordable housing and, and we're gonna address supply con issues by, you know, banning, you know, foreign individuals from, from buying it.   And I feel like that's, that's kind of doing it as backwards, you know, we're, we're not looking at the actual source of what the issue is. So I'd like to get your take on that. I know we didn't chat about it before.   Richard (28m 29s): Hope swings the eternal on this stuff. I am a fierce opponent for the most part of a firm of affordable action affordable housing programs. But let me explain why this is not just a sort of a terrible situation. There are two ways in which you could try to expand the housing for the port. One of them is you could reduce the various regulatory obstacles that stand in the path of constructing that or two, what you could try to do is to force a subsidy on somebody else so that people are going to pay only a fraction of the price that the housing that they occupy is going to cost.   And very, the first thing you used to do is you always start with the first. If there are a series of barriers to entry that you could remove, what it does is it will lower cost, lower administrative expenses and increase the availability of units so that you will start with the housing program just by getting rid of the obstacles. Let me give you an example. Many places, so like New York City have rent control. What rent control does is it means that people have large houses when they had children keep their large houses when the children have gone away.   And so there's nothing more common than in New York City to have a 2,500 square foot units with one person living in them if you had no rent control system subsidy kind of right? Well what happened is that woman would sell her house to a family of four. So what you would be able to do just by getting rid of the rent control restrictions would prevent residential mobility is increase the supply of housing without changing a single thing in the external world by making sure that units are fully occupied up to their rational level.   And so that's the kind of thing that you want to start with. Always get rid of the crazy restrictions before you put something else into place. And we know that there are many kinds of odd restrictions on zoning, how many units you could vote in a given area. The neighbors are always trying to Beto these kinds of things and if they succeed, you're gonna s cut down the supply. The liberal progressive view on this is we keep all of this stuff in place, we have a housing shortage, what we then do is we decide that we're gonna subsidize housing. This is what Governor HOK is trying to do in New York State in a lame brain program where she thinks she can force every single community in town to get some state money in order to build the housing that she would like to be built in the places where she wants to build them.   These programs of coercion never worked and they're costly. So you're talking about affordable housing, they're two ways you can do it. One way, the honorable way is to put it on the public budget. You say, we happen to believe that it's important to have poor people in the community, it's going to cost us a thousand dollars a unit per month to get them here and they can only afford to pay $600. So what we are gonna do is we're gonna appropriate money from the public treasury $400 a month for each of the units that we want to create.   And there will then be political decisions as to how far you want to go with this program. And my view, the moment you put this on balance on the balance sheet for the public, what you will see is a huge diminution in the desire to do this. And this will create greater pressures to increase housing by reducing barriers to entry, which is exactly what you want. So you want to do is if in fact you're going to have a public subsidy, make it outta general revenues. But local communities don't like general revenues. So what they try to do is they try to put it on the developers, right?   And so you get the following kind of scheme. All developer, if you wish to build three market rate units of housing, you have to build one affordable unit. And what you do is you take your excess rents from the market rate housing and use that to support the other housing. And we the public have to pay nothing about it. Well it turns out, of course there is no free lunch on this situation. The first thing you're gonna have to do is you're gonna have to raise the the rents or the sales prices on the unaffordable market rate units above what they were.   If you assume that the demand is constant regardless of the price, then you live in a world that I do not understand. So what's gonna happen is the market rate housing is gonna be above market rates. You're gonna see essentially a kind of price control system put into place a form of monopolization and you're not gonna be able to sell as many of those. And if you can't sell as many of those, you're not gonna be able to sell as many of the affordable units. And so what happens is you put this thing, the total stock is going to start to go down in the availability.   Then of course what happens is the people are being forced to pay this stuff, they're gonna try to fight one way or another in order to cheat on this. So you're gonna have to have excessive monitoring on the way in which it goes. Then on the other side, the moment you have affordable housing, it turns out you have affordable housing criteria. And so to give you a kind of a simple illustration, suppose you assume that the affordable housing unit at $600 a month as opposed to a thousand dollars a month must go to a family that earns under $40,000 a year.   So you elect family in at $40,000 a year and then it turns out in the second year the spouse goes to work and total family income is $48,000, not $40,000. Well one of the two things could happen, either the second job is kept off the books so that what happens is the person don't move but they violate the criteria. And once one person does it, everybody does it. So after a while it's just subsidized housing, but you're not gonna be able to keep your target population or what you can do under these circumstances say, all right, we're gonna throw you out of this affordable housing unit, which isn't gonna do anybody any good cuz then you have all the costs of trying to find another tenant to fill it in.   Or what you can do is you say, okay, well we'll do is you now got $48,000 for this thing, we're gonna raise you by 10% and so forth. But somebody has to figure out what those increments are and then you're gonna have to calculate them on an annual basis and you're gonna have to do this for 50,000 units inside a very large town. It becomes a completed administrative nightmare. And so it's just very, very difficult to kind of put these programs into place and yet the more difficult it becomes, the more insistent people are creating them.   And so what happens is you get this kind of situation where you get a lot of cheating at the bottom and real restriction to elite people at the top. And then you have to know what are you gonna do with the rest of the zoning system. So it's just another piece and a messy kind of puzzle. If you want to give subsidies to people, the only way that really works is to give them a subsidy of them and say if you spend $500 on a unit a month, we will give you a 10% increment over that.   So you could get $600 and sure enough the landlords will be aware of that. Then what will happen is the price that you bid will have to be a little bit higher because they're gonna try to take some of the subsidy for themselves. It's very, very difficult to run cross subsidies in a housing market and that's what they're trying to do in Canada. And when you said the last point you mentioned, oh you can't sell to Americans, right? Well who's that gonna hurt amongst other people? Canadians, right? Because the Canadians who want to sell their property are now gonna be forced to take a lower price for what's going on.   If you'll let the Americans in, you're gonna get more on the real estate taxes and so forth gonna increase the general vibrancy of the community and you can now start to afford to open up new housing. And so you don't wanna put these models in place which assume we have to keep the bad guys from out because there's a static source of housing, there's a total fixed amount of supply that you can't increase if you know that people wanna come in, the appropriate thing to do is to build more unit and that means to relax these units. Canada last I looked, is a big country, right?   It has what, 35, 40 million people, right? Well I mean I think that you can figure out a way to find some plot of lands to build additional units so as to accommodate virtually everybody. But what happens is all the people in favor of affordable housing and subsidy have no idea of the resiliency or the sense of how markets work. And they don't have any idea as to how the eminent domain and the regulatory power should be done. Remember, I'm trying to figure out what you do with regulation. I didn't say you could build anything you want anywhere you want to do it.   There are certain kinds of minimum constraints, but the constraints that I'm talking about, you know, on structural integrity, parking places, access to streets and so forth is about 10% of what they're doing today. But it's the 10% that is most valuable and it turns out it's the 10% that it's least controversial. And so it turns out that you do all of that stuff, which is fine, but all the other stuff that you do is largely a mistake.   Jesse (37m 20s): So a couple points first of all that it kind of reminds me of the, if, if anybody hasn't read Capitalism and Freedom by Milton Friedman, I think it's a, it's a great tax and the the cutoff example you use, I think was how he described his negative income tax of if there are transfer payments, you know, you don't just have a cutoff where people now start try to game the system. And the piece I'm curious about, you mentioned the honorable way to do it and, and I guess the dishonorable way in the honorable way situation there where you have a, a certain amount from the public purse that, that you appropriate to provide to people for affordable housing.   You, you find whatever, whatever test or criteria that that you know, that is needed, what is the mechanism? You mentioned giving them subsidies, but would there be a situation where you have a, you have a developer, they're building X amount of units, the government says this amount has to be affordable, however, the the c the rent, the, the payment will be a payment directly from, you know, whatever a Canadian agency or are you saying put it directly into the hands as a subsidy for rent so that it can only be used in one fashion from the prospective tenant?   Or are you saying give them cash?   Richard (38m 34s): Well this is the way way I would do it. You wanna get units at a subsidy, what the government does. You take a private developer and it says we are gonna rent this unit from you for X dollars and you're gonna give us permission to rent it to Subedit to somebody else for X minus Y and we will pay that difference cause we're gonna have to pay you the rent and then we'll collect less and the rest will take from the public purse. You could do it. Justice Scalia actually talked about that in a case called Pinella as a potential way of dealing with it.   But what it does in effect is it means that you can't hide behind various indirect loses and tie in arrangements of one kind or another. You put it on the public budget and once you put it on the public budget, there's gonna be a public debate as to how it ought to be done. And so, strangely enough, using a taking wall makes democratic processes more true because otherwise what you do is now imagine what the discourse is gonna be like on rent control or an affordable housing where you know that you, if you get a political majority, your majority can force some vulner minority to have a net loss in order to stay in business, right?   So you have to have this heavy tax and so the de deliberative process will work, this follows all the progressives in on in New York or in oil Toronto will come together and say, how much can we extract from landlord my way of rent control and not drive them completely out of business? And I said, well you know, we got a lot of working room here. And of course they always miscalculate because generally if you're a progressive, you underestimate the, the violence of response, the dramatic nature of response to regulation. You assume people are gonna be relatively indifferent when in fact they're gonna be furiously backed.   So what you do is you get a deliberative process, which is designed to say how can a 70% majority really stick it to a 30% minority? But if on the other hand you do it the way I'm talking about it through the public trust, there's no way that any group can hide a general revenue tax is gonna hit them all. So now they're going to have to ask whether they think this is important enough to them to support it. And since they're paying the money, they're gonna be a lot more reluctance since Margaret Thatcher's old jokes, she says, you know, socialism last so long as you haven't run out of other people's money.   And that's exactly what people are kind of trying to do with this system. So, but you have to understand about affordable housing, rent control projects and so forth. There are all various reasons of price control schemes and the simple price control scheme is just a cap. And what happens is you discover at the cap and a price control scheme, there are lots of buyers and there are very few sellers. You have a systematic shortage. And then you're gonna have to figure out what kind of political intrigue is going to figure out who are gonna be the lucky winners amongst the shortages.   All right? And who's gonna be left out to drive? This is a terribly unstable system, but that's what you're doing. And as you mentioned where ways to do that, you could find minority groups and you could exclude them. You could take people who don't live in the community and exclude them. And so just to give you the sort of the political dynamic in any large city, there's always a strong constituency for rent control cuz these are sitting tenants who now think that they could get a subsidy in New York City or in Toronto. We're not talking trivial numbers.   No, oftentimes the difference between a rent controlled price and a market price in that very small part of the market, which is unregulated, could be a difference of four or five fold per square foot as you well know, right? And so   Jesse (42m 6s): I can give you just a, it's just a quick one that just we, a property we're dealing with today, the market rent is $4,300 or sorry, the, the, yeah market rent is $4,300. The, the on the books rent right now in, in a, you know, rent controlled AR area is, I think it's 1,650. So yeah, you know we're now   Richard (42m 26s): It's two half, right? Yeah. And you know, in some places it's higher in New York City it's actually larger than that because what they did is they put the stabilization cap in at $2,500. So essentially a 22,000 square foot unit that's controlled in New York City's $2,500, the same unit on the open market is 10 to $12,000, right? So it's a five or six fold difference. So let's just assume it's a thousand dollars a month, right? That's $12,000 a year, that's a trivial amount.   And then you have to capitalize as a hundred thousand dollars subsidy. If you're talking about these larger numbers, it gets close to a half a million dollars in that transfers to people they'll fight very hard for. So then somebody said, I remember this well if there's a short is what we have to put as a maximum cap on the sales price of homes. Now this is different, the landlords are people you're willing to screw, but the voters that you have are these homeowners and you're not gonna be able to win a lot of election if you tell a given homeowner your house is worth 3 million. But we like the rent control model when you sell at the maximum that you could ask for is $1,800 and then all of a sudden, amazingly you've got 1500 people standing on your front door, he is trying to bid for the property below that, somebody's gonna try to sneak you a few extra dollars to put it his way.   So we don't have sales control, we do have rent control, but the basic maximum about this is supply and demand aqui brace. Whereas all price control systems create chronic shortages, which lead to chronic intrigue, affordable housing is essentially a price control system which is much more complicated than the simple rule, but it's gonna create all the same kinds of distortions and more why? More because it gives you more room to wiggle and giggle. And what happens is when people start making private accommodations for their own benefit, what it always does is reduce the total amount of social welfare and that can take place.   And what happens is you give it to take the progressive mind in New York City and you see the complete failure. They don't talk about deregulation or destabilization very often. They say, oh we gotta have another set of restrictions, another set of taxes and another set of subsidy. And then they wonder, well why are all the people leaving this state? Now I don't think this has happened in Canada, right? I mean cuz I don't think you have anything close to the disparities that you have in the United States, but let's be very clear about this.   New York state has the largest percentage of people leaving the state each and every day. California is next. You are talking about hundreds of thousands of people abandoning the state in a given year. I mean, it's gotten to the point where it's that large. And then you ask yourself, well what are you going to try to do in order to keep them here? And we know this, we're gonna have more affordable housing, higher taxes, greater subsidies, more pro-union benefits. So you want to increase the cost of housing, just require everything to be done by union construction firms and so forth.   And so more people are gonna leave, right? And then you have the same cycle over and over again. Some people will not learn that essentially the exit, right? Is a constraint on what you can do. People don't like to leave their homes in order for you to get somebody to leave their friends and their neighbors. You have to create massive dislocations and the political system to override the local benefits that you have by just being in a community with your friends and family. And that's exactly what's happening.   California lost a half a million people I think in the course of a year. Well it's a 40 million people state. So it's 2%, you do this for five years, however, it's all of a sudden, hey you really have completely rewritten the map of the United States unless you can control the exit rights. And so you know what they're trying to do, of course you're aware of this. They're trying to control exit rights. Now how are they trying to do that? They try to impose wealth taxes, crazy system. And they say, if you leave the state in order to avoid the wealth tax, we're going to impose an exit tax on you equal to the wealth tax that we would've imposed upon you if you had stayed.   And that's the sign, that's what East Germany did to keep people. And that's what these countries are trying to make themselves   Jesse (46m 40s): Like. So Richard, I I know that's, it's fascinating. I think we could talk, we could talk for another half an hour on that point alone. I think we talked, chatted a little bit about it on the last time that you were on, but we got up five minutes here and it's not a lot of time, but I'd be, it'd be remiss me not to ask you about, you know, with your work and, and writings on, on law and economics, our current inflationary and interest rate environment. I know it's a broad topic, but I would like to get your take on not necessarily what has happened in the last 12 months.   Obviously we use historical aspects as a way to look at the future. You know, we can say that feds acted too late, feds acted improperly. But what I'm curious about is what your view is on the next short to midterm. How we, how we, where we go from, from here and how you think this will unfold or it ought to unfold.   Richard (47m 33s): Look, I mean it, it's quite clear that we kept interest rates artificially low for a very long period of time. And it's like everything else you say, ah, this is going to stimulate investment. But on the other hand, you now have people who are living off their retirement savings and the interest rates have been cut by two-thirds under this situation. And so they are really kind of hurting. So it turns out manipulation of interest rates are like wealth transfers from one group to another. And in general, the winners always get less by way of profit than the losers do because the uncertainty means that the whole game is going to be bad.   So the first thing you have to do when you think about this stuff is to figure out how you stabilize this and take it out of politics. One of the reasons why the gold standard actually worked, not withstanding the fact that it seems highly improbable to do so, is it's a lot more difficult to manipulate the supply of gold than it is to manipulate the supply of paper, right? And so what it did is it created a natural degree of stability and then people could adjust to that situation. The current situation, when you have this uncertainty, it means that every financial transaction has an additional degree of risk associated with it.   Cuz you don't know whether the dollars that you're gonna get tomorrow are gonna relate in some particular way to the dollars that you're spending today. So the stability point is, I think the first thing that you want The, the second thing I think that one wants to recognize is that inflation is not just a monetary phenomenon. It is too many dollars tasting too few goods, right? And well, you can screw this equation up in two ways. One is you could create too many dollars, which is running the printing press to the point where the money starts to come out in a pandemic.   There may be a lot of dollars out there, but there's not gonna be a lot of activity. So the velocity of money will be slow, which means that the increase in the quantity of money is not going to show itself immediately. But the moment the velocity of money starts to speed up and the quantity of money starts to speed up, then you got a problem. But on the other side, it's chasing too few goods. You can have a system on direct regulation of the production of goods that favors it or destroys it. If you increase overall productivity, you're gonna reduce inflationary pressures because what's gonna happen is you have more dollars chasing more goods and the more goods offset, the more dollars on the other side.   What you see in the United States, I think more so than in Canada, is this relentless effort to shut down production through a system of transfer payment. So this kind of exacerbates the overall problem, and it's something of course, which the Fed cannot solve or any monetary problem can solve because the determinants of overall goods production are going to be industrial organization. They're gonna be labor laws, they're gonna be zoning laws, they're gonna be taxes and tariffs on imports and experts, all exports, all of which fall outside of the purview of the Fed.   It's not that the Fed is irrelevant, it has a huge role to play on one side of this equation, but it has no role to play on the other. You see somebody like Joe Biden, I mean, you know, he is generally regarded as one of the dumber people ever to take in public office that widely known but not widely spoken today. But you know, every time he sees something, if it's a good move, it's because government has done it. If it's a bad move, it's because greed has taken play. He has no idea that changes in market conditions could lead to changes in prices.   And that changes in prices that reflect scarcity are generally a good thing. Because if you raise the price, the people will stay on the market the longest of those that get the net profit, largest net profit out of the use of goods. It's not great that you have to cut things down, but better to do it that way than by some government allocation scheme, which is the only question that you start to add. And so what you do is you get these constant drumbeat of people on top of the market. And one of the things that happened is if you look for example, at a Congress which has lost its way, or a government in Canada that loses its way, even the threat of regulation will have very bad effects on the operation of A, so if somebody says there's a 20% chance that there's gonna be a windfall profits taxed on oil in the next year or so, it is going to skew investment in consumption systems all the way down the line, even if it never passes.   And the reason why you like constitutional prohibitions against certain kinds of fools errands like this is very simple. What it does is it gets that element of risk outta the situation. So the ideal theory of constitutionalism is you put into a constitutional, those constraints that make sense in good times are bad, but you don't try to constitutionalized those restrictions that will work on one set of times. But not only. So for example, on taxation, there is no way you wanna put in a rule that says you cannot tax more than 22% of the economy and put it into the government in wartime or crisis.   You may need more money than that. But what you can do is to say, look, when we do this taxes, we are going to do it through a flat tax, and that means that everybody's gonna go up or down at the same ratio. That constraint doesn't stop you on the revenue side, right? But what it does is it does a great deal to stop the partisan fighting where one group is strong enough to impose specialized taxes on another or to get disproportionate gain. So the theory of pro-rata benefits off of common investment was the exact same theory I talked about was stop the beach renourishment, right?   Hmm. Have hydrogen as people, and you're trying to get uniform rates of return by side payments and so forth. Well, with taxes, you don't have to worry about those complications. You keep the system flat and that you then do is just change the rate. But of course, course the progressives have exactly the opposite situation. They're trying to figure out how to get 90% of the money outta 1% of the people. And so you take a state like California and tech was good last year, and they get huge surpluses from these rich folks. The tech business seems to be fairly bad this year, right?   Google's laying off people, everybody's laying off people, and all of a sudden they run enormous deficits. Well, that's what's going to happen to you if you don't use a more robust tax. A flat tax is much more stable when you're starting to deal with differences and conditions and so forth, which is one of the political economy reasons why you want it. If you listen to people like a manual size, and Elizabeth Warren, all they're interested in is shoveling money from people they don't like the people they do like, and they seem utterly oblivious to the whole question about growth and political stability.   And so this is a great tragedy that's taking place right now. The movement of getting rid of the standard limitations on the income tax, the realization requirement, the net increase in wealth requirement and so forth, is likely to take hold in some places. There'll be a huge constitutional battle over it. I think much of it will fail, but some of it might succeed. And what happens is just what I mentioned, every, every state that wants to impose a wealth tax, wants to impose an exit tax as well.   And that's East German, the sign of a socialist. The government is a prohibit exit because they know they don't have enough to offer you to keep you here in a voluntary.   Jesse (54m 59s): And on that ominous note, my guest today has been Richard a Epstein. Richard, thanks again for being part of Working Capital.   Richard (55m 6s): Great.   Jesse (55m 13s): Thank you so much for listening to Working Capital, the Real Estate Podcast. I'm your host, Jesse for Galley. If you like the episode, head on to iTunes and leave us a five star review and share on social media. It really helps us out. If you have any questions, feel free to reach out to me on Instagram, Jesse for galley, F R A G A L E. Have a good one. Take care.

Andrew For America presents the 6th installment of his supercut show, which is an artfully assorted arrangement of clips which illustrate Andrew's "always consistent" points. Andrew explains nearly everything! This supercut includes: Obama, Bush, Biden, 9/11, the Rothschilds, the WEF, Albert Pike and the freemasons, the Illuminati, Blackrock, Clayton Morris on Putin's plan to combine oil with gold-backed currency (Petrogold), Milton Friedman on inflation, CBDC's (central bank digital currency) are the end of freedom and ushers in total surveillance, FDR, fascism in America, and how Smedley Butler saved us all, Project Artichoke, JFK on weather control, why does the UN building in Senegal, West Africa look like a hurricane, chemtrails, MLK, Gandhi, and other “created heroes” who worked for the elite, Hitler worked with the Zionists, presidential inaugurations happen simultaneously with the raising of Osiris ceremony, Luciferian doctrine and the tenets of satanism, Naomi Wolf on fabricated fiction in mainstream media, the Smith-Mundt Modernization Act, propaganda, Osama Bin Laden was a CIA "creation," JP Morgan funded Epstein, Milton William Cooper predicted 9/11 and sums up everything, the "Insurrection" was a pathetic attempt at the German Reichstag Fire, Jim Tucker on the Bilderberg Group, the CIA interrogated Jesse Ventura while he was governor, FTX, The Black, White, and Grey Pope, The Black Nobility, MK Ultra and the CIA flooding our streets with psychedelic drugs, how we are dumbed down, poisoned, and programmed since birth, and more! Visit politicsandpunkrockpodcast.com and buy a t-shirt or donate to the show! Visit altmediaunited.com and check out all the awesome podcasts! Visit allegedlyrecords.com and check out all of the amazing punk rock artists! Visit patreon.com/andrewforamerica and become a "My Fellow American" subscriber for only $3 per month! Visit soundcloud.com/andrewforamerica1984 to check out Andrew's music!

Garett Jones is an economist at George Mason University and the author of The Cultural Transplant, Hive Mind, and 10% Less Democracy.This episode was fun and interesting throughout!He explains:* Why national IQ matters* How migrants bring their values to their new countries* Why we should have less democracy* How the Chinese are an unstoppable global force for free marketsWatch on YouTube. Listen on Apple Podcasts, Spotify, or any other podcast platform. Timestamps(00:00:00) - Intro(00:01:08) - Migrants Change Countries with Culture or Votes?(00:09:15) - Impact of Immigrants on Markets & Corruption(00:12:02) - 50% Open Borders?(00:16:54) - Chinese are Unstoppable Capitalists (00:21:39) - Innovation & Immigrants (00:24:53) - Open Borders for Migrants Equivalent to Americans?(00:28:54) - Let's Ignore Side Effects?(00:30:25) - Are Poor Countries Stuck?(00:32:26) - How Can Effective Altruists Increase National IQ(00:39:13) - Clone a million John von Neumann?(00:44:39) - Genetic Selection for IQ(00:47:02) - Democracy, Fed, FDA, & Presidential Power(00:49:42) - EU is a force for good?(00:55:12) - Why is America More Libertarian Than Median Voter?(00:56:19) - Is Ethnic Conflict a Short Run Problem?(00:59:38) - Bond Holder Democracy(01:04:57) - Mormonism(01:08:52) - Garett Jones's Immigration System(01:10:12) - Interviewing SBFTranscriptThis transcript was autogenerated and thus may contain errors.[00:00:41] Dwarkesh Patel: Okay. Today I have the pleasure of speaking with Garrett Jones, who is an economist at George Mason University. . He's most recently the author of the Cultural Trans. How migrants make the economies. They move to a lot like the ones they left, but he's also the author of 10% Less Democracy and Hive Mind. We'll get into all three of those books. Garrett, welcome to the podcast. [00:01:06] Garett Jones: Glad to be here.Thanks for having me.[00:01:08] Migrants Change Countries with Culture or Votes?[00:01:08] Garett Jones: Um, [00:01:09] Dwarkesh Patel: first question is, isn't the cultural transplant still a continuation of your argument against democracy? Because the isn't one of the reasons we care about the values of migrants, the fact that we eliminate democracy. So should review this book as part of your critique against democracy rather than against migration specifically.[00:01:27] Garett Jones: Um, well, I do think that, uh, governments and productivity are shaped by the citizens in a nation in, in almost any event. Um, I think that even as we've seen recently in China, even in a very strong authoritarian dictatorship, which some would call totalitarian, even there, the government has to listen to the masses.So the government can only get so far away from the masses on average, even in, uh, an autocracy. If you had [00:01:57] Dwarkesh Patel: to split apart the contribution though, um, the, the impact of migrants on, let's say the culture versus the impact that migrants have on a country by voting in their political system, um, uh, how, how would you split that apart?Is, is the, is mainly the impact we, the cultural impact we see for migration due to the ability of migrants to vote or because they're just influencing the culture just by being [00:02:19] Garett Jones: there? I'll cheat a little bit because we don't get to run experiments on this, so I just have to kind of guess, uh, make an informed guess.I, I'm gonna call it 50 50. Um, so the way people, uh, the way citizens influence a country through formal democracy is important. Uh, but citizens end up placing some kind of limits on the government anyway. And the people in the country are the, they're the folks who are gonna work in the firms and be able to either establish or not establish.Those complicated networks of exchange that are crucial to high productivity. . ,[00:02:52] Mean vs Elite IQ[00:02:52] Dwarkesh Patel: I wanna linger on hive mind a little bit before we talk about the cultural transplant. Um, if you had to guess, does, do the benefits of National IQ come from having a right tail of elites that is smarter or is it from not having that strong of a left tail of people who are, you know, lower productivity, more like markedly to commit crimes and things like that?In other words? Uh, yeah, go ahead. [00:03:14] Garett Jones: Yeah. Yeah. I, I think, uh, the upper tail is gonna matter more than the lower tail, um, in, in the normal range of variation. Uh, and I think part of that is because, uh, nations, at least moderately prosperous nations have found tools for basically reducing the influence of the least informed voters.And for. Uh, basically being able to keep productivity up even when there are folks who are sort of disrupting the whole process. Um, you know, the, the, the risks of crime from the lower end is basically like a probabilistic risk. It's not like it's, it's not like some, uh, zero to one switch or anything. So we're talking about something probabilistic.And I think that, uh, it's the, the median versus the elite is the, is the contrast that I find more interesting. Um, uh, median voter theorem, you know, normal, the way we often think about democracy says that the median should be matter more for determining productivity and for shaping institutions. Um, and I tend to think that that's more important in democracies for sure.So when we look at countries, if you just look at a scatter plot, just look at the raw data of a scatter plot. If you look at the few countries that are exceptions to the rule, where the mean is the mean, IQ is the best predictor of productivity compared to elite iq. Um, . The exceptions are non democracies and South Africa.So you see a few, uh, places in the Gulf where there are large migrant communities who are exceptionally well educated, exceptionally cognitively talented. Um, and that's associated with high productivity. Those are a couple of Gulf states. It's probably cutter, the UAE might be Bahrain in there, I'm not sure.Um, and then you've got South Africa. Those are the, those are the countries where the average test score, it doesn't have to be iq, it could be just Pisa, Tim's type stuff. Um, those are the exceptions to the rule that the average iq, the mean IQ is the best predictor of national productivity. [00:05:14] Dwarkesh Patel: Hmm. Uh, interesting.Um, does that imply the fact that the, um, at least in certain contexts, the elite IQ matters more than the left tail. Does that imply that we should want a greater deviation of IQ in a country? That you could just push a button and increase that deviation? Would that be good? [00:05:33] Garett Jones: No. No, I don't think so. Uh oh.If you could just increase the deviation, um, holding the mean constant. Yeah. Yeah. I think so. In the normal range of variation. Yeah. Yeah. Yeah. So, mm-hmm. , um, is it, and I think that it has more effects. It, no, it's people at the top who are, um, tend to be coming up with, uh, the big breakthroughs, the big scientific breakthroughs, the big intellectual breakthroughs that end up spilling over to the whole world.Basically the, the positive externalities of innovation. This is a very, almost Pollyanna-ish, uh, Paul Roamer new endogenous, new, uh, new growth theory thing, right? Which is the innovations of the elite, a swamp, uh, the negatives of the low skilled among. , [00:06:14] Dwarkesh Patel: can we just apply this line of reasoning to low skilled immigration as well?Then that maybe the average goes down, the average IQ of your country goes down if the, if you just let in, you know, millions of low skilled immigration immigrants, and maybe there's some cultural effects to that too. But, you know, you're also going to the, that the elite IQ will still be preserved and more elites will come in through the borders, along with the low scale migrants.So then, you know, since we're caring about the devi deviation anyways, uh, more immigration might increase the deviation. Uh, and then, you know, the, we just, uh, that's a good [00:06:46] Garett Jones: thing. So notice what you did there is you, you did something that didn't just, uh, increase the variance. You simultaneously increase the variance and lowered the mean Yeah.Yeah. And median, right? And so I think that, uh, hurting the mean and median is actually a big cost, especially in democracies. And so that is very likely to swamp, uh, the benefits of, um, the small, the small probability of getting. Hire elite folks in as part of a low-skilled immigration policy. Mm-hmm. , so pulling down the mean or the median is that that's a, that's that swamps that swamps the benefits of increasing variants there.Yeah. Yes. [00:07:26] Dwarkesh Patel: But if you get rid of their migrant's ability to vote, and I guess you can't do that, but let assume you could do that. Yeah. What exactly is, like, what is the exec mechanism by which the, the, the cultural values or the lower median is impacting the elite's ability to produce these valuable externalities?You know, like there's a standard compared to advantage story that, you know, they'll, they'll do the housework and the cooking for the elites and they can do the more productive [00:07:52] Garett Jones: Yeah. Taking all the institutions as given, which is what a lot of open borders optimists do. They take institutions as given they take cultural norms as given.Um, all that micro stuff works out just fine. I'm totally, I'm totally on board with all that sort of Adam Smith division of labor. Blah, blah, blah. Um, but, institutions are downstream of culture and, uh, cultural norms will be changing partly because of what I call spaghetti theory, right?We meet in the middle when new folks come to a country. There's some kind of convergence, some part where people meet in the middle, um, between the, the values, uh, that were previously existing and the values that have shown up, uh, that migrants have brought with them. So, you know, like I I call it spaghetti theory because, um, when Italians moved to America, that got Americans eating more spaghetti, right?And if you just did a simple assimilation analysis, you'd say, wow, everybody in America eats the same now, like the burgers and spaghetti. So look, the Italians assimilated, but migrants assimilate us. Um, uh, native Americans certainly changed in response to the movement of Europeans. Um, English Americans certainly changed in response to the migration of German and Irish Americans.So this meeting in the middle is something that happens all the time, and not just through Democratic channels, just through the sort of soft contact of cultural norms that sociologists and social psychologists would understand. [00:09:15] Impact of Immigrants on Markets & Corruption[00:09:15] Garett Jones: Um, no, I'm sure you saw the book that was released, I think in 2020 titled, uh, retro Refuse, uh, where they showed, uh, slight positive relationship between, uh, immigration and, you know, pro-market, uh, laws.[00:09:27] Dwarkesh Patel: And I guess the idea behind that is there's selection effects in terms of who would come to a country like America in [00:09:32] Garett Jones: the first place. Well, they never ran the statistical analysis that would be most useful. I think they said that. Uh, so this is Powell and Na Roth Day. Yeah. They ran a statistical analysis that said, and they said, in all of the statistical analysis we've ever run, we've never found negative relationship between low-skilled migration, any measure of it, and changes in economic freedom.And, um, I actually borrowed another one of Powell's data sets, and I thought, well, how would I check this theory out? The idea that changes in migration have an effect on economic freedom? And I just used the normal economist tool. I thought about how do economists check to see if changes in money, changes in the money supply, change the price level.That's what we call the quantity theory, right? Mm-hmm. , the way you do that is on the x-axis. You, you show the change in the money supply On the y axis, you show the change in prices, right? This Milton Friedman's idea. Money's always everywhere. Yeah. Inflation's always neverwhere Montessori phenomenon. So that's what I did.Uh, I did this with a, with a, um, a student. Uh, we co-authored a paper doing this. And the very first statistical analysis we ran, we looked at migrants who came from countries that were substantially more, uh, corrupt than the country's average. And we looked at the, the different, the relationship between cha, an increase in migrants from corrupt countries, and subsequent changes in economic freedom.Every single statistical analysis we found had a negative relationship. , we ran the simplest estimate you could run. Right? Change on change. Change in one thing, predicts change in another. They somehow never got around to running that very simple statistical analysis. CH one change predicts another change.Hmm. We found negative relationships every time. Sometimes statistically significant, sometimes not always negative. Somehow they never found that. I just don't know how . But [00:11:21] Dwarkesh Patel: what about the anecdotal evidence that in the US for example, the, in the periods of the greatest expansion of the welfare state or of governed power during the New Deal or great society, the levels of foreign-born people were at like historical lows.Uh, is that just a coincidence or what, what do you think of? I'm [00:11:38] Garett Jones: not really interested in, uh, migration per se. Right. My story is never that, like migration per se, does this bad thing. Migrants are bad. That's never my story, right? Mm-hmm. , as you know, right? Yeah. Yeah. So my story is that migrants bring, uh, cultural values from their old country to their new country.And sometimes those cultural norms are better than what you've got, and sometimes they're worse than what you've got. And sometimes it's just up for debate. [00:12:02] 50% Open Borders?[00:12:02] Dwarkesh Patel: So if you had to guess what percentage of the world has cultural values that are equivalent to or better than the average of Americas? [00:12:11] Garett Jones: Uh oh.Equivalent to or better then? Yeah. Uh, I mean, just off the top of my head, maybe 20%. I dunno, 30%. I'll just throw something out there like that. Yeah. So I mean, like for country averages, right? Yeah, yeah, yeah, yeah, yeah. Um, [00:12:25] Dwarkesh Patel: currently we probably don't have, uh, it would probably be hard for like 20% of the rest of the world to get into the us.Um, w w would you support some, uh, PO policy that would make it easy for people from those countries specifically to get to the us? Just, uh, have radical immigration liberalization from those places? [00:12:44] Garett Jones: Um, that's really not my comparative advantage to have opinions about that, but like, substantial increases of people who pass multiple tests, like, let's take the low hanging fruit and then move down from there.Right? So people from, uh, countries, uh, that ha um, on average have say higher savings rates, um, higher, uh, education levels. Higher s what I call s a t, deep root scores and, um, countries that are, say half a standard deviation above the US level on all three, [00:13:18] Dwarkesh Patel: right? Why do they have to be higher? Why not just equivalent, like, uh, you get all the gains from trade and plus it can't be, you know, equivalent.So it's, there's no [00:13:27] Garett Jones: trade. Part of the reason is because the entire world depends on US innovation. So we should make America as good as possible, not just slightly better than it is. So very few firms would find that their optimal hiring policy would be hire anyone who's better than your current stock of employees.Would you agree with that? [00:13:42] Dwarkesh Patel: Yeah. But you, uh, have to pay them a salary. If you're just, uh, if it's just somebody just comes to the us, you don't have to like pay them a salary, right? So if somebody is better, that, if somebody's producing more value for a firm than the salary would pay them, I think [00:13:52] Garett Jones: like is is a firm's job to maximize its profits or to just make a little bit more than it's making right?Maximize profits. But yeah, there you go. So you pack, you find the best people you can, you know, sports teams that are hiring don't just say, we wanna hire people who are better than what we got. They say, let's get the best people we can get. Why not get the best? That was Jim Jimmy Carter's, that was Jimmy Carter's, uh, biography.Why not the best. But you, [00:14:16] Dwarkesh Patel: you can do that along with getting people who are, you know, unexpected, uh, terms as good as the existing Americans. Why gives [00:14:24] Garett Jones: y'all like, I don't care what you, why you want this? This seems like crazy, right? What are you talking about? But [00:14:29] Dwarkesh Patel: I, I'm not sure why not the best what the trade out there, huh?No, I'm not saying you don't get the best, but I, I'm saying once you've gotten the best, what is the harm in getting the people who have equivalent s a t scores and, and the rest of the things you [00:14:41] Garett Jones: mentioned. I think part of the reason would be you'd wanna find out, I mean, if you really wanna do something super hardcore, you'd have to find out what's best for the planet as a whole.What's the trade off between, um, Having the very best, uh, most innovative, talented, frugal people in America doing innovating that has benefits for the whole world, versus having an America that's like 40% better, but we're the median's a little bit, the median of skills a little bit lower. Right. Uh, because the median's shaping the productivity of the whole team.Right? Yeah. This is what you, you know what it means when you believe in externalities, right? [00:15:14] Dwarkesh Patel: But if you have somebody who's equivalent by definition, they're not moving the median down. [00:15:19] Garett Jones: That's, you're, you're totally right about that. Yeah. But like, why wouldn't I want the best thing possible? Right. Okay.I'm still trying to figure out why you wouldn't want the best thing possible. You're trying to go, why? I don't want the best thing possible. I'm like, why not? [00:15:31] Dwarkesh Patel: I'm not disagreeing with you. I'm just, I'm a little bit confused about why that that precludes you from also getting the second best thing possible.At the same time you're, because you're not limited to just the best. [00:15:42] Garett Jones: Right. Well, uh, because the second best is going to have a negative externality on the first best. Everything's externalities. This is my worldview, right? Everything's externalities. You bring in the second best, you're like, you're not, that person's gonna make things on average a little worse for the first best person.[00:16:00] Dwarkesh Patel: But it seems like you were explaining earlier that the negative externalities are coming from people from countries with, uh, low s a t scores. And by the way, s a t you can explain what that means just for the audience who's not familiar with how you're using that term. [00:16:11] Garett Jones: Oh yeah. So, um, there, there are three prominent, uh, measures in what's known as the deep roots literature and, uh, that are widely used.Uh, two are s n a, that state history and agricultural history. That's how many thousands of years your ancestors have had experience living under organized states or living unsettled agriculture. And then the T-score is the tech history score. I used the measure from 1500. It's basically what fraction of the world's technology were your ancestors using in 1500 before, uh, Columbus and his expansive conquest ended up upending the entire world.Uh, the world map. So s a and T are all predictors of modern prosperity, but especially when you adjust for migration. [00:16:54] Chinese are Unstoppable Capitalists [00:16:54] Garett Jones: Gotcha. [00:16:55] Dwarkesh Patel: We can come back to this later, but one of the interesting things I think from the book was you have this chapter on China and the Chinese people as a sort of unstoppable force for free market capitalism.Mm-hmm. . Um, and it's interesting, as you mentioned in the book, that China is a poorest majority Chinese country. Um, what do you think explains why China is a poorest, uh, majority Chinese country? Maybe are there like non-linear dynamics here where, uh, if you go from 90 40 to 90% Chinese, there's positive effects, but if you go from 90 to 95% Chinese, there's too much?[00:17:26] Garett Jones: No, I think it's just, I think just communism is dumb and it has terrible, like sometimes decades long effects on institutional quality. I don't really quite understand. So I'd say North Korea, if we had good data on North Korea, North Korea would be even a bigger sort of deep roots outlier than China is.Right? It's like, don't, don't have a communist dictatorship in your country. Seems to be pretty, a robust lesson for a national prosperity. China's still stuck with a sort of crummy version of that mistakes still. North Korea, of course, is stuck with an even worse version. So I think that's, I, my hunch is that that's, you know, the overwhelming issue there.Um, it's, it's something that, it's, it's sort of a China's stuck in an ins. Currently China's stuck in an institutional cul-de-sac and they just don't quite know how to get out of it. And it's, uh, bad for a lot of, for the people who live there. On average, if the other side had won the Chinese Civil War, things would probably be a lot, lot better off in China today.Yeah. [00:18:22] Dwarkesh Patel: Um, but what, what is that suggestion about the deep roots literature? If the three biggest countries in the world, China, India, and America, Um, it, it, it under predicts their performance, or sorry, in the case of China and India, it, uh, it, it over predicts their performance. And in the case of America, it under predicts maybe the, how, how reliable is this if like the three biggest countries in the world are not, uh, adequately accounted for?[00:18:45] Garett Jones: Uh, well, you know, communism's a really big mistake. I, I think that's totally accounted for right there. Um, I think India's underperformance isn't that huge. Um, the US is a miracle along many ways. Um, it's, we should draw our lessons from the typical country, and I think, uh, population weighted estimates, I don't think that basically one third of the knowledge about the wealth of nations comes from the current GDP per capita of China, India, and the us, right?I think much less than one third of the story of the wealth of nations comes from those three. And, uh, again, in, in all three cases though, if you look at the economic trajectories of all three of those people, oh, all three of those countries, uh, they're all, uh, China and India growing faster than you'd expect.And also, I wanna point out. This is the most important point actually. Um, when we look at, uh, when Kaplan made this claim, right? Brian Kaplan has made this claim, right? Yeah. That the SATs, that the ancestry scores, the deep root scores don't predict, um, the prosperity of, uh, the, the low performance of Indian China.He only checked the S and the A and the s a T scores. Okay. Which letter did he not predict? Which letter did he never test out? He never tested the T. What do you think happens when he tests the T? Does it predict, uh, China [00:20:02] Dwarkesh Patel: and India and America, [00:20:03] Garett Jones: Hey, start, they t goes back to being statistically significant again, UhhuhSo with T, which we've always known is the best of the deep root scores, somehow Kaplan never managed to measure that one. Just as Powell Naste never managed to run the simplest test change in, uh, migrant corruption versus change in economic institutions somehow, like the simplest test just never get run.[00:20:26] Dwarkesh Patel: Okay. And then what is the impact if you include t. If you, [00:20:29] Garett Jones: if you, if you look at tea, then, um, then, uh, contrary to what Kaplan says, uh, the deep roots, that deep roots measure is sig statistically significant. [00:20:38] Dwarkesh Patel: Okay. Um, yeah, I, [00:20:40] Garett Jones: interesting. The puzzle goes away, [00:20:42] Dwarkesh Patel: interesting. [00:20:43] Garett Jones: Um, yeah. So somehow these guys just never seem to run like the simple things, the transparent things.I don't know [00:20:49] Dwarkesh Patel: why the, um, the weird, huh? The, the, the one you mentioned from, what was it Nassa, the name of the guy who wrote the Richard at re refuse [00:20:57] Garett Jones: the Yeah, yeah. Powell Naste. [00:20:59] Dwarkesh Patel: Yeah. Yeah. That you said you did the regression on institutional corruption, uh, and from the countries to come from. Is that, was that right?I, [00:21:06] Garett Jones: and so yeah. The, the measure they use, I just took, I took Powell's dataset from another study, and it was the percent. Of it was basically, um, the percentage of your nation's population, the percentage increase in your nation's population from relatively poor or corrupt countries. They had multiple measures, UhhuhSo, and what is on the y axis there? Y axis is change in economic freedom. That's my preferred one. Gotcha. There's also a change in corruption one, which is a noisier indicator. Um, you get much clearer results with change in economic freedom, so. Gotcha, [00:21:38] Dwarkesh Patel: gotcha. [00:21:39] Innovation & Immigrants [00:21:39] Dwarkesh Patel: Um, now does the ideas getting harder to find stuff and great stagnation, does that imply we should be less worried about impinging on the innovation engine in these, uh, countries that people might wanna migrate to?Because worse comes to worst. It's not like there are a whole bunch of great new theories that were gonna come out anyways. [00:21:58] Garett Jones: Uh, no. I think that, I think that it's always good to have great things, um, and new ideas. Yes, new ideas are getting harder to find, but, um, that, but that the awesome ideas that we're still getting are still worth so much.Right. If we're still increasing lifespan a month, a year, uh, for every year of research we're doing, like, that just seems great. Right? A decade that adds a year to life, so, mm-hmm. , just to use a rough, uh, ballpark measure there. But, so we [00:22:25] Dwarkesh Patel: have a lot of these countries where a lot of innovation is happening.So let's say we kept, uh, one or two of them as, you know, immigrate, uh, havens from any potential, uh, downsides, from radical changes. You know, we already had this in the case of Japan or South Korea, there's not that much of migration there. Mm-hmm. . What is, what is a harm in then using the other ones to decrease global poverty by immigration or something like [00:22:48] Garett Jones: that?Well, um, it's obviously better to create a couple of innovation powerhouses, um, rather than none. Right? So obviously that's, that's nice. But instead, I would prefer to have, um, open borders for Iceland if the Open borders advocates are right and open borders. , we'll have no noticeable effect on institutional quality, then it's great to move, , to have our open borders experiment run in a country that's lightly populated, has a lot of open land, and, um, has good institutional quality.And Iceland fits the bill perfectly for that. So we could preserve the institutional innovation skill, uh, the institutional quality of the, the what I call the I seven. Uh, that's, you know, China, Japan, South Korea, the us, Germany, uk, France, and choose any country out of the a hundred, out of the couple of dozen countries that have good institutional quality.Just pick one of the others that aren't one of those seven, pick one that's not an innovation powerhouse and turn that into your open borders, uh, country. Um, you could, uh, if you wanted to get basically Singapore levels of population density in Iceland, that'd be about 300 million people, I think. I think I, that's about what the numbers end up looking like.Something like that. But [00:24:00] Dwarkesh Patel: the, so you can put entire, but, but the value of open borders comes from the fact that you're coming to a country with high conglomerations of talent and capital and other things, which is, uh, not true of Iceland. Right. So isn't the entire [00:24:13] Garett Jones: No, no. I thought the whole point of open borders, that there's institutional quality and there's some exogenous institutions that make that place more productive than other places.Mm-hmm. . And so by move, I, I, that's my version of what I've been exposed to as open borders, the, is that institutions exogenously exist. There's some places have, uh, moderately laissez, fairer institutions in their country and moving a lot more people there will not reduce the productivity of the people who are currently there, and they'll become much more productive.And so, like the institu, you know, the institutional quality's crucial. So, I mean, if you're a real geography guy, you'd be excited about the fact that Iceland is so far, so close to the north. because latitude is a predictor of prosperity. [00:24:53] Open Borders for Migrants Equivalent to Americans?[00:24:53] Dwarkesh Patel: Um, I want to go back to the thing about, well, should we have open border for that 20% of the Popula global world's population that comes from Yeah.Um, equivalent, s a t and other sort of cultural traits as America. Mm-hmm. , because I feel like this is important enough to dwell on it. You know, it seems similar to saying that once picked up a hundred dollars bill on the floor, you wouldn't pick up a $20 bill on the floor cuz you only won the best bill.Uh, the $20 bills is right there. Why not pick it up? Um, [00:25:18] Garett Jones: so what if you have, yeah. What if the $20 bill makes your, turns, your, uh, a hundred dollars bill into like an $80 bill and turns all of your 80 a hundred dollars bills and $80 bills. [00:25:27] Dwarkesh Patel: But is it, aren't your controlling for that by saying that they have equivalent scores along all those cultural tests that you're.[00:25:34] Garett Jones: No, because, um, the median, so, so take the simple version of my story, which is the median of the population ends up shaping the productivity of everybody in the country. Right? Or the mean, right? The mean skill level ends up shaping the productivity of the entire population. Right? So that means we end up, I mean, I, I try not to math this up.I don't wanna math this up for the, you know, in a popular book, but it means we face a trade off between being small, a small country with super awesome, uh, positive externalities for all the workers by just selecting the best people. And every time we lower the average skill level in the country, we're lowering the average productivity of everyone else we're creating.We didn't, [00:26:11] Dwarkesh Patel: what? We didn't lower it. So you have to have skills that are lower compared to, than the median of a median American. You, [00:26:18] Garett Jones: so this is, this is a c Paraba story, right? Like if you could suppose the US is at 80 now on a zero to a hundred scale, right? Just, just saying it's 80. Yeah. Yeah. And you have a choice between being hundred and being 99.if you're at 99, the 99 is making, all compared to the world of average of a hundred, the world of an average 99 is making, reducing the productivity of all those hundreds. Okay. So if we chose 90, we're reducing the productivity of all those hundreds. [00:26:48] Dwarkesh Patel: Yes. Okay. So let's say we admit all the smartest people in the world, and that gets us from 80 to 85.That's a new, that's a new media in America. Yeah. At that point. And, but this is because we've admitted a whole bunch of like 90 nines that have just increased our average. Yeah, yeah. Um, at that point, open borders for everybody who's ever been 85, [00:27:08] Garett Jones: like I, this is, this is, ends up being a math problem. It's a little hard to solve on a podcast, right?Because it's the, it's the question of do I want a smaller country with super high average productivity? Or a bigger country with lower average productivity. And by average productivity, I don't just mean, uh, uh, a compositional effect. I mean negative external, I mean relatively fewer positive externalities.So I'll use the term relatively fewer positive externalities rather than negative externalities, right? So like, I don't exactly know where this is. Trade off's gonna pan out, but, um, there is a case for a sort of Manhattan when people talk about a Manhattan project, right? They're talking about putting all like a small number of the smartest people in a room.And part of the reason you don't want like the 20th, smartest person in the room. Cause, cuz that person's gonna ruin the ruin stuff for our, for the other smart people. I, it's amazing how your worldview changes when you see everybody as an external. I, [00:28:02] Dwarkesh Patel: I'm kind of confused about this because just having, at some point you're gonna run outta the smartest people, the remainder of the smartest people in the world.If you've admitted all the brilliant people. Yeah. And given how big the US population is to begin with, you're not gonna change the median that much by doing that. Right. So it's, it's almost a global end to just having more births from the average American. Like if, if the average American just had more kids, the population would still grow.Mm-hmm. and the relative effect of the brightest people might dilute a little bit. Um, but I I, [00:28:33] Garett Jones: and that maybe that's a huge tragedy. We don't know without a bunch of extra math and a bunch of weird assumptions. We don't know. So like I'm, there's a point at which I have to say like, I don't know. Right. Okay.Yeah. Uh, yeah. Is diluting the power of the smartest person in America, like keeping us from having wondrous miracles all around us all the time? I mean, probably not, but. I don't know, [00:28:53] Dwarkesh Patel: but, [00:28:54] Let's Ignore Side Effects?[00:28:54] Dwarkesh Patel: but I guess the sort of the meta question you can ask about this entire debate is, listen, there's so much literature here and it's hard to tell what exactly will happen.You know, it's possible that culture will become worse. It's possible, it'll become better. It's possible to stay the same, given the fact that there's this ambiguity. Why not just do the thing that on the first order of effect seems good? And, you know, just like moving somebody who's like in a poor country to a rich country, first order effect seems good.I don't know how the third and fourth order effect shapes out. Let's just, you know, let's just do the simple obvious thing. [00:29:22] Garett Jones: I, I thought that the, one of the great ideas of economics is that we have to worry about secondary and tertiary consequences. Right? [00:29:28] Dwarkesh Patel: But if, if we, if we can't even figure out what they are exactly, why not just do the thing that at the first order seems, uh, good.[00:29:35] Garett Jones: Um, because if you have a compelling reason to think that the, uh, direction of strength of the second and third and fourth order things are negative and the variances are really wide, then you're just adding a lot more uncertainty to your outcomes. So, And adding uncertainty or outcomes that has sizable negative tail, especially for the whole planet.Isn't that great? Go ahead and run your experiments in Iceland. Let's run that for 50 years and see what happens. It's weird how everybody's obsessed with it running the experiment in America, right? Why not running in Iceland first? Because America's [00:30:05] Dwarkesh Patel: got a great, a lot of great institutions right there.We can check and see what [00:30:08] Garett Jones: Iceland Iceland's a great place too. Um, and I use Iceland as a metaphor, right? Like it's, people are obsessed with running it in America. Like there's some kind of need. I don't know why. So let's try in France. Um, let's try, let's try Northern Ireland. , [00:30:24] Dwarkesh Patel: uh, are,[00:30:25] Are Poor Countries Stuck?[00:30:25] Dwarkesh Patel: are places with low s a t scores and again, s a t we're not talking about the, uh, in case you're skipping to the timestamp, we're not talking about the college test.Um, the deep roots. [00:30:35] Garett Jones: S a t Exactly. Uh, state history, agricultural history, tech history. [00:30:38] Dwarkesh Patel: Right. Exactly. Are, are those places with, uh, low scores on, um, on that test? Are they stuck there forever? Or, uh, is there something that can be done if you are a country that has had a short or not significant history of, um, technology or agriculture?[00:30:56] Garett Jones: Well, the, I start off the book with this, which I really think that, uh, one thing they could do is, uh, create a welcoming environment for large numbers of Chinese migrants to move there persistently. I don't think that's of course the only thing that could ever work, but I think it's something that's within the range of policy for at least some poor countries.I don't know which ones, but, uh, some poor countries could follow the. Approach that many countries in Southeast Asia followed, which has created an environment that's welcoming, welcoming enough to Chinese migrants. Um, it's the one country in the world with large numbers of high s a t score, uh, with alar, with a high s a T score culture, large population.It's enough of an economic failure, so for at least a little longer that, uh, folks can, might be able to be interested in moving to a poor country with lower s a t scores. In a better world, you can do this with North Korea too, but the population of North Korea isn't big enough to make a big dent in the world, right?Mm-hmm. , uh, China's population is big enough. Yeah. [00:31:54] Dwarkesh Patel: Another thing you're worried have to worry about in those cases though though, is the risk that if you do become successful in that country, there's just gonna be a huge backlash and your resources will. AppD, like what happened famously. [00:32:05] Garett Jones: So in, in Indonesia, right?Yeah. There have been many Oh, yeah, yeah. Times across Southeast Asia where anti-Chinese pogroms have been, um, uh, unfortunately a fact of life. So, yeah. Yeah. [00:32:15] Dwarkesh Patel: Or Indians in Uganda under, uh, IDI. I, I mean, yeah. Yep. Um, yeah. Yeah. Uh, okay. So actually I, I'm curious how you would think about this given the impact of National iq.[00:32:26] How Can Effective Altruists Increase National IQ[00:32:26] Dwarkesh Patel: Um, if you're an effective altruist, what, uh, are you just, uh, handing out iodine tablets, uh, across, across the world? What, what are you doing to increase national [00:32:34] Garett Jones: iq? Yeah. This is places, this is something that I, yes. Uh, finding ways I, this is what I call a, a Flynn cycle. Like I wish, I'm hoping for a world where there are enough public health interventions and probably K through six education interventions.to boost test scores in the world's poorest countries. And I think that ha ends up having, um, uh, a virtuous cycle to it, right? As people get more productive, then they can afford more public health, which makes them more productive, which means they can afford more public health. I think brain health is an important and neglected part of child development.Um, fortunately we've done a fair amount to reduce the amount of environmental lead, um, in a lot of poor countries. That's probably having a good effect right now as we speak in a lot of the world's poorest countries. You're right. Um, iodine, basic childhood nutrition, uh, reliable healthcare, uh, to, you know, prevent the worst kinds of just mild childhood infections that are probably, uh, creating what the, what they, what economists sometimes call health.Things that end up just hurting you in a way that causes, uh, an ill-defined long-term cost. A lot of that's gonna have to show up in the, in the brain. Um, I'm a big fan of the, of the view that part of the Flynn Effect is, uh, basically nutrition and health. Mm-hmm. , uh, Flynn wasn't a huge believer in that, but I think that's, um, certainly important in the poorest countries.Yeah. [00:33:57] Dwarkesh Patel: Um, I, I think Brian showed an open voters that if you look at , the, um, IQ of adoptees from poor countries, um, who go, uh, Sweden is the only country that collects data, but if you get adopted by a parent in, um, uh, Sweden, uh, the, the half the gap between the averages of two countries, half gap, yeah, yeah, yeah, yeah.Goes away. So, I mean, is one of the ways we can increase global IQ just by moving kids to, uh, countries with good health outcomes that, uh, will nourish their [00:34:27] Garett Jones: intelligence. Well, that's a classic short run versus long run effect, right? So, uh, libertarians and open borders advocates tend to be focused on the short run, static effects.So, um, and so you're right, moving kids from poor countries to richer countries is probably gonna raise their test scores quite a lot. And, uh, then the question is, in over the longer run, are those, uh, lower skilled folks, the folks with lower test scores, uh, going to degrade the institutional quality? of the places they move to, right?So if you close half the gap between the poor country and the rich country, half the gap is still there. Right? And if I'm right, , that IQ has big externalities then, , moving people from a, uh, lower scoring country to a richer scoring country and closing half the IQ gap still means on net you're creating a negative externality in the country the kids are moving to.[00:35:17] Dwarkesh Patel: Um, yeah, yeah. Uh, we can come back to that, but yeah. Yeah. So [00:35:23] Garett Jones: it, it's, it's basically, you just look at the question, is this lowering the mean test scores in your country? And if it's lowering the mean test scores in the long run, it's on average gonna lower institutional quality productivity savings rates, those.Um, it's hard to avoid that. It's hard to avoid that outcome. So, uh, I don't [00:35:38] Dwarkesh Patel: remember the exact figures, but didn't Brian address this in the book, um, in the Open Borders book as well, that you can, even if there's a, the, a national iq, uh, lowers on average, if you're just, uh, if you're still raising the global iq, that, that it's still nets out positive, or am I [00:35:54] Garett Jones: remembering that wrong?Well, that, notice what he's, he, what he does is he attributes, uh, he says there's some productivity that's just in the land, that's just geographic factors. Yeah. So basically being close for, and so that, so basically moving people away from the equator boost productivity substantially. And again, that's, uh, a static result.Um, the reason I, uh, I mentioned that ignores all the I seven stuff that I'm talking about where anything that lowers. Um, level of innovation in the world's most innovative countries has negative costs for the entire planet in the long run, but that's something you'd only see over the course of 20, 30, 50 years.And libertarians and open border advocates are very rarely interested in that kind of [00:36:33] Dwarkesh Patel: timeframe. Is there any evidence about, uh, the impact of migration on innovation specifically? So not on the average institutional quality or on, you know, uh, the, the corruption or whatever, but like, just directly the amount of innovation that happens or maybe the Noble Prizes won or things [00:36:48] Garett Jones: like that?Um, no. I mean, I would presume, I think a lot of us would presume that, uh, the European invasion of North America ended up having, uh, positive effects for global innovation. It's not an invasion that I'm in favor of, but if you wanna talk crudely about Yeah, yeah. Whether migrations had an effect on innovation, uh, you'd probably have to include that as any kind of analysis.[00:37:07] Dwarkesh Patel: Yep. Yep. , do you think that the people who are currently Americans, but , their ancestry, traces back to countries with low s a t scores? I i, is it possible that US GDP per capita would be higher, without that contribution?Or how do you think about that? [00:37:21] Garett Jones: I mean, that it follows from thinking through the fact that we are all externalities positive or negative, right? I don't know what in, in any particular, any one particular country could turn out to be some exciting exception to the rules, some interesting anomaly. Um, but on average, we should presume that the average skill level of voters, the average, uh, traits that we're bringing from, uh, the nations, that the nations of our, of our ancestors are as having an effect on our current productivity for gut ori.So just following through the reasoning, I'd have to say on average, that's most likely. Uh, but it, there could always be exceptions to the rule. [00:37:56] Dwarkesh Patel: I guess we see large disparities in income between different ethnic groups across the world, not just in the United States. Yeah. Doesn't that suggest that some of the gains can be privatized from whatever the cultural or other traits there are? Cuz if these, if over decades and centuries these sorts of, uh, these sorts of gaps continue, [00:38:18] Garett Jones: I don't see why that would follow.Right. Um, [00:38:21] Dwarkesh Patel: uh, if everything is being, if all the externalities are just being averaged out over time, what did you expect that these GA gaps would [00:38:29] Garett Jones: narrow? Well, I mean, I'm being a little rhetorical when I'm saying everything's literally an externality, right. I don't literally believe that's true. Um, for instance, people with higher education levels do actually earn more than people with lower education levels.So that's literally not an externality. Right. So some of these other cultural traits that people are bringing with them from their, um, ancestors, nations of origin, um, could be one or one likely one source of these income differences. I mean, if you think about differences in frugality, uh, differences in personal responsibility, which show up in the surveys, uh, that are persistent across generations, those are likely to have an effect on long run productivity for you, yourself and your family.So, mm-hmm. , let alone the hive mind stuff, where you find that there's a positive relationship between test scores and, and product. [00:39:13] Clone a million John von Neumann?[00:39:13] Garett Jones: There was a [00:39:14] Dwarkesh Patel: blogger who took a look at your 2004 paper about the, um, impact of National IQ on, um, on G uh, G D P. Um, and they calculated, so they were just speculating. Let's say you cloned a million John Mond Nomans, and as assume that John Mond Noman had an IQ of 180, then you could, uh, let me just pull up the exact numbers.You could, um, you could raise the average IQ of the United States by 0.21 points, um, and if it's true that one IQ point contributes 6% to, uh, G increasing G, then this proposal would increase U US GDP by, uh, 1.2, uh, six two 6%. Do you buy these kinds of extrapolations or 1.26%? Yeah. Yeah, because you're only cloning a million, [00:39:58] Garett Jones: Jon.Oh, yeah. Yeah. Okay. So this is about 1 million Jon. Yeah. Yeah, that sounds. I mean, that's the kind of thing where I wouldn't expect it to happen overnight. Right. I tend to think of that, uh, the IQ externalities as being two, three generations. I, I lump it in with what economists call organizational capital.That sounds about right. Yeah. Yeah, yeah. I mean, I, I can't remember where I saw this. I think I, I stumbled across it myself at some point too, so. [00:40:19] Dwarkesh Patel: Yeah. Yeah. Uh, by the way, his name is Avaro Dam Bernard, if you wanna [00:40:22] Garett Jones: find it. Oh, okay. Yes, yes. Okay. Yeah, it's, I mean, in, in, it's in that ballpark, right? It's just this idea that, and, and more importantly, um, a million John Bon Nomans would be a gift to the entire planet, right?Yep. Yep, yep. So, yeah, if you had a, if you had a choice of which country to have the John Vno, the million John Von Nomans, uh, it's probably gonna be one of the I seven maybe there's, maybe there's a, maybe Switzerland would be a good alternative. [00:40:46] Dwarkesh Patel: What is the optimal allocation of intelligence across the country?Because one answer, and I guess this is the default answer in our society, is you just send them where they can get paid the most, because that's a good enough proxy for how much they're contributing. Yeah. And so you have these high glomeration of talent and intelligence in places like Silicon Valley or New York.Um, and, you know, because their contributions there can scale to the rest of the world. This is actually where they're producing the most value. Another is, you know, you actually, you should disperse them throughout the country so that they're helping out communities. They're, you know, teachers in their local community.Um, I think there was, uh, A result. There was an interesting anecdotal evidence that during the Great Depression, the crime in New York went down a ton, and that was because the cops in New York were able to hire the, you know, they had like a hundred applications for every cop they hired. And so they were able to hire the best and the brightest, and there were just a whole bunch of new police tactics and every that were pioneered at the time anyways.So, is the market allocation of intelligence correct? Or do you think there should be more distribution of intelligence across the country? How do you think about that? [00:41:50] Garett Jones: Yeah, I mean, the mar the, the market signals aren't terrible. Uh, but, uh, this is my, my Interpol Roamer kicks in and says, uh, innovation is all about externalities.And there's market failures everywhere when it comes to, in the fields of innovation. Mm-hmm. . And so, you know, I, I personally, I mean, I, I like the idea of finding ways to allocate them to, to stem style, stem style technical fields, and. , we do a fair amount of that, and maybe we do the, maybe the US does a pretty good job of that.I don't have any huge complaints at that, at the, at the crudes 50,000 foot level, um, for the, you know, the fact that people know that there's, uh, status games they can play within academia that are perhaps more satisfying or at least as satisfying as the sort of corporate hierarchy stuff. So, yeah. Yeah. I I You don't want 'em all just, I wouldn't encourage them to solely follow market signals.Right. I'd, I'd encourage them to be more HandsOn and, uh, play a variety of status games because the academic, um, and intellectual status game is worth a lot, both personally and than it leads to positive spillovers for. [00:42:58] Dwarkesh Patel: But how about the geographic distribution? Do you think that it's fine that there's people leave, uh, smart people leave Kentucky and go to San Francisco or, yeah, [00:43:08] Garett Jones: I'm a big glomeration guy.Yeah. I'm, I'm, yeah, I'm a big glomeration guy. Yeah. I mean, the internet makes it easier, but then like, still being close to people's, being in the room's important. Um, there, there's, there's something, uh, both HandsOn and Gerard in here about, like, we need to find role models to imitate, and that's probably important for productivity.[00:43:30] Dwarkesh Patel: Um, are there increasing or decreasing returns to National iq?No, [00:43:38] Garett Jones: I think, um, you know, my findings were that it was all basically log linear. And so log linear looks crudely, like increasing returns. . So yeah, it looks exponential, right? So yeah, there's increasing returns to National iq. Yeah. Are are you? But, but this is, this is a commonplace finding in a sense because so many, uh, like human, all the human capital relationships I'm familiar with end up having something like a log linear form, which is exponential.So why is that? Um, yeah, there's something multiplicative that that's how, what I have, that's all I have to say is like it's something. Somehow this all taps into Adam Smith's pin factory, and we have multiplicative not additive effects when we are increasing brain power.Um, I have, I suspect it does have something to do with, uh, a, a better organization of the division of labor between people, which ends up happening something close to e to, uh, exponential effects on productivity. [00:44:39] Genetic Selection for IQ[00:44:39] Garett Jones: A are, uh, are you a fan of genetic selection for intelligence, uh, as a means of increasing national iq or do you think that's too much playing at the margins if it's voluntary?I mean, people should be able to do what they want and, um, after a couple day decades of experimentation, I think people would end up finding a path to, uh, government subsidies or tax credits or something like that. I think people voluntarily deciding what kind of kids they want to have. is a, a, a good thing.And so by genetic selection, I assume you're meaning at the most elementary level people testing their embryos the way they do now, right? Yeah. So I mean, we, we already do a lot of genetic selection for intelligence. Um, anybody, you know, who's, uh, in their mid thirties or beyond who's had amniocentesis, they've been doing a form of genetic selection for intelligence.So it's a widespread practice already in our culture. Um, and, uh, welcoming that in a voluntary way is probably going to have good effects for our future. What [00:45:40] Dwarkesh Patel: do you make of the fact that G B T three, or I think it was Chad g p t, had, uh, measured IQ of 85? Yeah, [00:45:47] Garett Jones: I've seen a few different measures of this, right?You might have seen multiple measures. Um, yeah, I think it's, I think it's a sign that basically, and, and when you see people using non IQ tests to sort of assess the outputs of G P T on, um, long essays, it does does seem to fit into that sort of, not quite a hundred, but not, not off by a lot. Yeah. I mean, I think it's, I think it's a sign that a lot of, uh, uh, mundane, even fairly complex, moderately complex human interactions can be simulated by a large, uh, language learning model.Mm-hmm. . And I think that's, that's, uh, gonna be rough news for a lot of, uh, people whose life was in the realm of words and dispensing simple advice and solving simple problems. That's pretty bad news for their careers. I'm, I'm disappointed hearing that, so [00:46:36] Dwarkesh Patel: Yeah. Yeah. [00:46:37] Garett Jones: Um, at least for the transition. I dunno what the, I dunno what's gonna happen after the transition, but [00:46:41] Dwarkesh Patel: Yeah.I'm hoping that's not true of programmers or economists. I like you. I mean, [00:46:46] Garett Jones: it might be right. I mean, it's, if that's the way it is, I mean, I, the, I mean, the car put a lot of, uh, people who took care of horses right out of outta work too, so. [00:46:55] Dwarkesh Patel: Yep. Um, even, okay, so let's talk about democracy that I thought this was also one of your really interesting books.No, thanks. Yeah. [00:47:02] Democracy, Fed, FDA, & Presidential Power[00:47:02] Dwarkesh Patel: even controlling for how much democratic oversight there is of institutions in the government. There seems to be a wide discrepancy of how well they work. Like the Fed seems to work reasonably well. I, I, I don't know enough about macroeconomics to know how the object level decisions they make, but mm-hmm.you know, it seems to be a non-corrupt, like, uh, technocratic organization. Um, enough, but yeah. Yeah. Uh, if you look at something like the fda, it's also somewhat insulated from democratic processes. It seems to not work as well. Mm-hmm. , what determines controlling food democracy? What controls, what, what determines how well an institution in the government works?[00:47:38] Garett Jones: Well, I, I think, um, in the case, the Fed, it really does matter that they, uh, the people who run it have guaranteed long terms and they print their own money to spend mm-hmm. . So that means that they're basically, Congress has to really. Make an effort to change anything of the Fed. So they really have the kind of independence that matters.Right. You know, they have a room of their own. And, uh, the FDA has to come to Congress for money more or less every year. And the fda, uh, heads do not have any kind of security of appointment. Their appoint, they serve at the pleasure of the president. Mm-hmm. . So I do think that they don't have real independence.Uh, I do think that they're basically, um, they're living in this slack, this area of slack to use this sort of mcno gas PolySci jargon. They're living in this realm of slack between the fact that the president doesn't wanna me, uh, muddle with them, uh, metal with them, excuse me. And the fact that Congress doesn't really wanna medal with them.But on the other hand, , I really think that that the f d A and the C d C are doing what Congress more or less wanted them to do. They reflect, they reflect the muddled disarray that Congress was in over the period of say, COVID. Hmm. Uh, that I think that's a first order importance. I mean, I do think the fact, it's the fact that, uh, f d A and c d C don't ha, uh, seem to have that culture of, um, raw technocracy the way the Fed does that, I think that has to be important on its own.But I think behind that, some of that is just like F D A C D C creatures of Congress much more than the Fed is. Should the [00:49:17] Dwarkesh Patel: power of the president be increased? [00:49:20] Garett Jones: Uh, no. No. Like the power of independent committees should be increased. Like more Congress should be like the Fed. If, uh, my plan for a Fed re for an FDA or CDC reorganization would be.Making them more like the Fed, where they have appointed experts who have long terms and they have enough of a long term that they can basically feel like they can blow off Congress and build their own culture. [00:49:42] EU is a force for good?[00:49:42] Dwarkesh Patel: Mm-hmm. , , so the European Union is an interesting example here because they also have these appointed technocrats, but they seem more interested in creating anno annoying popups on your websites than with dealing with econo, the, you know, the end of economic growth on the continent.Is this a story where more democracy would've helped, or how do you think about the European Union in this context? [00:50:04] Garett Jones: No. And the eu, like, uh, the European, European voters just aren't that excited about democracy. I, excuse me, aren't that excited about markets overall. The EU is gonna reflect that, right? Um, what little evidence we have suggests that, uh, countries that are getting ready to join the eu, they improve their economic freedom scores, their sort of laissez fairness.Hmm. Uh, on the path to getting ready for. , uh, join an eu. So, and then they may increase it a little bit afterwards once they join. But basically it's like, it's like, uh, when you're deciding to join the eu, it's like you decided you have your rocky training montage and get more laissez-faire. And so EU on net is a mess at polls in the direction of markets compared to where, uh, Europe would be otherwise.I mean, just look at the nations that are in the EU now, right? A lot of them are, um, east of Germany, right? And so those are countries that don't have this great, you know, uh, history of being market friendly. And a lot of parties aren't that market friendly, and yet the EU sort of nags them into their version, like as much markets as they can handle.So [00:51:05] Dwarkesh Patel: what do you think explains the fact that the Europe, uh, Europe as a whole and the voters in there are less market friendly than Americans? I mean, if you look at the sort of deep roots analysis of Europe, you would think that they should be the most. Uh, most in favor of, I don't know if the deep roots, uh, actually maybe they apply that, but Yeah, [00:51:23] Garett Jones: compared to the planet as a whole, they're pretty good.Right? So, um, I, I'm, I never get that excited about like, the small little distinctions between the US and Europe, like these 30% GDP differences, which are very exciting to pundits and bloggers and whatever. I'm like 30% doesn't matter very much. That's not really my bailiwick. What I'm really interested in is the 3000% between the poorest countries and the richest countries.So, like I can speculate about Europe, I, I don't really have a great answer. I mean, I, I think there's something to the, the naive view that, um, the Europeans with the most, uh, what my dad would call gumption are those who left and came to America. Some openness, some adventurousness. Uh, and maybe that's part of what trans, uh, made we, so basically there's a lot of selection working, uh, on the migration side to, uh, make America more open to laissez fair than Europe would be.[00:52:14] Dwarkesh Patel: Does that overall make you more optimistic about migration to the US from anywhere? Like, you know, the same story [00:52:20] Garett Jones: of Yeah. Center is perab us like America, America gets people who are really great, right? I went with you there. Yeah. [00:52:26] Dwarkesh Patel: Does, um, elite technocratic control work best in only in high IQ countries?Because otherwise you don't have these high IQ elites who can make good policies for you, but you also don't get the democratic protections against famine and war and things like that. [00:52:43] Garett Jones: Oh, I mean, I don't know. I think, I think the case for, for, uh, handing things over to elites is pretty strong in anything that's moderately democratic, right?Um, I don't have to be. Anything that's substantially more democratic than the official measure of Singapore, for instance. I mean, that's why my book 10% Less Democracy, really is targeted at the rich, rich democracies. Once we get too far below, uh, the rich democracies, I figure once you put elites in charge, they really are just gonna be old-fashioned Gordon to rent seekers and steer everything Jordan themselves and not give a darn about the masses at all.So that's, you know, uh, elite control in a democracy, a a lot of elite control in any kind of democracy, I think is gonna have good effect. If it's re you're really looking at something that is, uh, that meets a Mar Sen's definition of a democracy competitive market. Competitive party's free press. [00:53:38] Dwarkesh Patel: Mm-hmm.does Singapore meet that criteria? [00:53:41] Garett Jones: No. Because their parties aren't really allowed to compete. I mean, that's pretty obvious. Yeah. The, the pa the People's Action Party really controls, uh, party competition there. [00:53:52] Dwarkesh Patel: So, but it, I guess Singapore is one of the great examples of technocratic, um, technocratic control, and [00:53:59] Garett Jones: they're just an exception of the rule.Most countries that try to pull off that lower level democracy wind up much [00:54:03] Dwarkesh Patel: worse. So what is your, uh, what is your opinion of Neoreactionaries? I guess they're not in favor of 10% less democracy. They're more in favor of a hundred percent less democracy. [00:54:12] Garett Jones: But yeah, I think they're like kind of too much LARPing, too much romanticizing about the roheim, I guess.I don't know. What is rheum? Yeah. The, these guys in the Lord of the Rings, you know? . , romanticizing Monarch is a mistake. Um, it's worth noting that, uh, as my colleague Gordon Tok pointed out, as along as many others, uh, in Equilibrium Kings are almost always king and council, right.and so it's worth thinking through why King and Council is the equilibrium. Something more like a corporate board and less like, um, either the libertarian ideal of the entrepreneur who, who owns the firm, or the monarch who has the long-term interest in being a stationary bandit in real life. There's this sort of muddled thing in between that works out as the equilibrium, even in the successful so-called monarchies.So it's worth thinking through why it is that the successful so-called monarchies aren't really monarchies, right? They're really oligarchies. [00:55:12] Dwarkesh Patel: Yep. Yep. Um, if you look at the median voter in terms of their preferences on academic policies, it seems like they're probably more, um, in favor of government involvement than the actual policies of the United States, for example.Yeah. What explains this? Shouldn't the media voter theorem that we should be much less libertarian as a country than? Yeah, that's a great [00:55:35] Garett Jones: point from, um, Brian Kaplan's excellent. Bill Smith of the rational voter. Right? Yeah. I think part of it, I mean, I think his stories are right, which is that, uh, politicians facing reelection have this tradeoff between giving voters what the voters say they want and giving the voters the economic growth that will help the politicians get reelected, right?Mm-hmm. Um, so it's, uh, it's a version of saying like, you know, I don't want you to p

Photo: No known restrictions on publication. Demolition of J.P. Morgan offices 23 Wall Street, May 1923. @Batchelorshow 1/4: Samuelson Friedman: The Battle Over the Free Market by  Nicholas Wapshott  (Author) https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market/dp/0393285189/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr= In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Photo: No known restrictions on publication. Morgan interior @Batchelorshow 2/4: Samuelson Friedman: The Battle Over the Free Market by  Nicholas Wapshott  (Author) https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market/dp/0393285189/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr= In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Photo: No known restrictions on publication. Morgan interior @Batchelorshow 3/4: Samuelson Friedman: The Battle Over the Free Market by  Nicholas Wapshott  (Author) https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market/dp/0393285189/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr= In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

Photo: No known restrictions on publication. Bankers Trust Building 1912 @Batchelorshow 4/4: Samuelson Friedman: The Battle Over the Free Market by  Nicholas Wapshott  (Author) https://www.amazon.com/Samuelson-Friedman-Battle-Over-Market/dp/0393285189/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr= In 1966 two columnists joined Newsweek magazine. Their assignment: debate the world of business and economics. Paul Samuelson was a towering figure in Keynesian economics, which supported the management of the economy along lines prescribed by John Maynard Keynes's General Theory. Milton Friedman, little known at that time outside of conservative academic circles, championed “monetarism” and insisted the Federal Reserve maintain tight control over the amount of money circulating in the economy.

In economics, there tends to be two dominant ways of thinking about inflation. Either you agree with Milton Friedman, who described inflation as always and everywhere a monetary phenomenon (the result of too much money printing). Or you're more of a New Keynesian who thinks that higher prices are all about the relationship between demand and capacity. In a new paper inspired by Odd Lots and the series of disruptions that have rocked the economy since the global pandemic, UMass Amherst Economics Professor Isabella Weber describes a potential third way of thinking about inflation. She identifies systemically significant sources of inflation, or industries that could end up having a broader impact on a wide variety of prices. The hope is that by identifying these important sources of inflation early, policymakers can put in place measures to make sure price increases don't get out of hand. See omnystudio.com/listener for privacy information.

The Far Middle episode 87 is dedicated to Sidney Crosby, who “epitomizes greatness on the ice,” says Nick as he highlights the best all-around player the NHL has ever seen, as well as Crosby’s leadership and his winning record. While Crosby, alongside Alexander Ovechkin in Washington, continues to accumulate points, another accumulation is also happening in Washington, and that’s the country’s federal debt load. There’s a crazy, scary trifecta facing our country’s fiscal health and government finances, explains Nick. That trifecta is a federal debt of $31 trillion and quickly growing, paired with continuous budget deficits and raging inflation. As interest rates are raised to fight inflation, the cost of servicing debt increases, thereby increasing debt, resulting in a serious math problem that doesn’t compute. Nick then points out where we’re seeing this trifecta come to light, adding concern is the fact tax revenues are near all-time highs. Should tax revenues decline, our fiscal situation will only worsen. Nick goes on to explain that government spends endless amounts of money not just to help the poor, or to right a wrong, but to now also to save the planet. This leads to a look at GM who expects its EVs will be profitable in 2025, thanks to recently enacted federal subsidies. As billions of tax dollars go from the middle class to multi-billion-dollar corporations, Nick says, sarcastically, that’s a price worth paying because it’s going to tackle climate change and save the planet. Nick next passes the puck from GM to FTX and Sam Bankman-Fried. Nick looks at how the crypto sham company duped investors for billions, doing so in part by ESG manipulation and virtue signaling. Nick juxtaposes GM and FTX to Vanguard, who has quit the Net Zero Asset Managers Initiative, as well as the Glasgow Financial Alliance for Net Zero. Vanguard’s decision is a refreshing affirmation that Milton Friedman’s teachings are alive and well. Transitioning overseas, Nick comments on French President Emmanuel Macron who says he has backed a strategy of “absolute defense of Ukraine.” However, Nick calls out France’s energy policies, which have not done anything over the past decade to help Ukraine. While France’s words ring hollow, sometimes words matter greatly and to the benefit of all mankind, which leads to this episode’s conclusion: a reflection on Martin Luther King, Jr.—a master of the written and spoken word.

One of my best episodes ever. Lars Doucet is the author of Land is a Big Deal, a book about Georgism which has been praised by Vitalik Buterin, Scott Alexander, and Noah Smith. Sam Altman is the lead investor in his new startup, ValueBase.Talking with Lars completely changed how I think about who creates value in the world and who leeches off it.We go deep into the weeds on Georgism:* Why do even the wealthiest places in the world have poverty and homelessness, and why do rents increase as fast as wages?* Why are land-owners able to extract the profits that rightly belong to labor and capital?* How would taxing the value of land alleviate speculation, NIMBYism, and income and sales taxes?Watch on YouTube. Listen on Apple Podcasts, Spotify, or any other podcast platform. Read the full transcript here.Follow Lars on Twitter. Follow me on Twitter.Timestamps(00:00:00) - Intro(00:01:11) - Georgism(00:03:16) - Metaverse Housing Crises(00:07:10) - Tax Leisure?(00:13:53) - Speculation & Frontiers(00:24:33) - Social Value of Search (00:33:13) - Will Georgism Destroy The Economy?(00:38:51) - The Economics of San Francisco(00:43:31) - Transfer from Landowners to Google?(00:46:47) - Asian Tigers and Land Reform(00:51:19) - Libertarian Georgism(00:55:42) - Crypto(00:57:16) - Transitioning to Georgism(01:02:56) - Lars's Startup & Land Assessment (01:15:12) - Big Tech(01:20:50) - Space(01:23:05) - Copyright(01:25:02) - Politics of Georgism(01:33:10) - Someone Is Always Collecting RentsTranscriptThis transcript was partially autogenerated and thus may contain errors.Lars Doucet - 00:00:00: Over the last century, we've had this huge conflict. All the oxygen's been sucked up by capitalism and socialism duking it out. We have this assumption that you either have to be pro worker or pro business that you can't be both. I have noticed a lot of crypto people get into Georgism, so not the least of which is Vitalik Buterin and you endorse my book. If you earn $100,000 in San Francisco as a family of four, you are below the poverty line. Let's start with just taxing the things nobody has made and that people are gatekeeping access to. Let's tax essentially monopolies and rent seeking. The income tax needs to do this full anal probe on everyone in the country and then audits the poor at a higher rate than the rich. And it's just this horrible burden we have. Dwarkesh Patel - 00:00:39: Okay, today I have the pleasure of speaking with Lars Doucet, who developed the highly acclaimed Defender's Quest game and part two is coming out next year, but now he's working on a new startup. But the reason we're talking is that he wrote a review of Henry George's progress and poverty that won Scott Alexander's Book Review Contest and now it has been turned into an expanded into this book Land is a Big Deal. So Lars, welcome to the podcast. New Speaker: Great to be here, Dwarkesh . Okay, so let's just get into it. What is Georgism? Lars Doucet - 00:01:12: Okay, so the book is based off of the philosophy of a 19th century American economist by the name of Henry George from once we get George's and basically George's thesis is kind of the title of my book that land is a big deal. Georgism is often reduced to its main policy prescription that we should have a land value tax, which is a tax on the unimproved value of land, but not a tax on any buildings or infrastructure on top of the land, anything humans add. But the basic insight of it is that it's kind of reflected in the aphorisms you hear from real estate agents when they say things like the three laws of real estate or location location location and buy land, it's the one thing they're not making any more of. It's basically this insight that land has this hidden role in the economy that is really underrated. But if you look at history through the right lens, control over land is the oldest struggle of human history. It goes beyond human history. Animals have been fighting over land forever. That's what they're fighting over in Ukraine and Russia right now, right? And basically the fundamental insight of Georgism is that over the last century, we've had this huge conflict. All the oxygen's been sucked up by capitalism and socialism duking it out. We have this assumption that you either have to be pro worker or pro business that you can't be both. And Georgism is genuinely pro pro worker and pro business. But what it's against is is land speculation. And if we can find a way to share the earth, then we can solve the paradox that is the title of George's book, progress and poverty, why does poverty advance even when progress advances? Why do we have all this industrialized technology and new methods and it in George's time it was industrial technology in our time its computers and everything else? We have all this good stuff. We can make more than we've ever made before. There's enough wealth for everybody. And yet we still have inequality. Where does it come from? And George answers that question in his book. And I expand on it in mine. Dwarkesh Patel - 00:03:15: Yep. OK, so yeah, I'm excited to get into the theory of all of it in a second. But first I'm curious how much of your interest in the subject has been inspired with the fact that as a game developer, you're constantly dealing with decentralized rent seekers, like Steve or iOS app store. Is that part of the inspiration behind your interest in Georgism or is that separate? Lars Doucet - 00:03:38: It's interesting. I wouldn't say that's what clued me into it in the first place. But I have become very interested in all forms of rent seeking. In this general category of things we call land-like assets that come to first mover advantages in these large platform economies. I've started to think a lot about it basically. But the essence of land speculation is you have this entire class of people who are able to basically gatekeep access to a scarce resource that everybody needs, which is land, that you can't opt out of needing. And because of that, everyone basically has to pay them rent. And those people don't necessarily do anything. They just got there first and tell everyone else, it's like, well, if you want to participate in the world, you need to pay me. And so we're actually the actual connection with game development, actually clued me into Georgism. And I'd heard about Georgism before. I'd read about it. I thought it was interesting. But then I started noticing this weird phenomenon in online multiplayer games going back 30 years repeatedly of virtual housing crises, which is the most bizarre concept in the world to me, like basically a housingcrisis in the Metaverse and predecessors to the Metaverse. And as early as the Alt Online (?)online when I was 19, this is this online game that you could play. And you could build houses in the game and put them down somewhere. And so what I found was that houses were actually fairly cheap. You could work long enough in a game to be afford to buy blueprints for a house, which will be put it somewhere. But there was no land to put it on. And at the time, I thought, oh, well, I guess the server failed up. I didn't really think much about it. I was like, this stinks. I didn't join the game early enough. I'm screwed out of housing. And then I kind of forgot about it. And then 20 years later, I checked back in. And that housing crisis is still ongoing in that game. That game is still running a good 25 years later. And that housing crisis remains unsolved. And you have this entire black market for housing. And then I noticed that that trend was repeated in other online games, like Final Fantasy 14. And then recently in 2022, with all this huge wave of crypto games, like Axi Infinity, and that's Decentral Land and the Sandbox. And then Yuga Labs' Board-Ape Yacht Club, the other side, had all these big land sales. And at the time, I was working as an analyst for a video game consulting firm called Novik. And I told my employers, it's like, we are going to see all the same problems happen. We are going to see virtual land speculation. They're going to hit virtual. They're going to reproduce the conditions of housing crisis in the real world. And it's going to be a disaster. And I called it, and it turns out I was right. And we've now seen that whole cycle kind of work itself out. And it just kind of blew my mind that we could reproduce the problems of the real world so articulately in the virtual world without anyone trying to do it. It just happened. And that is kind of the actual connection between my background in game design and kind of getting George Pilled as the internet kids call it these days. Dwarkesh Patel - 00:06:43: There was a hilarious clip. Some comedian was on Joe Rogan's podcast. I think it was like Tim Dillon. And they're talking about, I think, Decentraland, where if you want to be Snoop Dogg's neighbor in the Metaverse, it costs like a couple million dollars or something. And Joe Rogan was like, so you think you can afford to live there. And then Tim Dillon's like, no, but I'm going to start another Metaverse and I'm going to work hard. But OK, so let's go into Georgism himself. So Tyler Cohen had a blog post a long time ago who was comparing taxing land to taxing unimproved labor or unimproved capital. And it's an interesting concept, right? Should I, so I have a CS degree, right? Should I be taxed at the same level as an entry level software engineer instead of a podcast or because I'm not using my time as efficiently as possible. And so leisure in another way is the labor equivalent of having an unimproved parking lot in the middle of San Francisco or capital. If I'm just keeping my capital out of the economy and therefore making it not useful, maybe I should have that capital taxed at the rate of the capital gains on T-Bill. And this way, you're not punishing people for having profitable investments, which you're kind of doing with a capital gains, right? What would you think of that comparison? Lars Doucet - 00:08:07: Yeah, so really, before you can even answer that question, you've got to go back to ground moral principles you're operating on. Like, is your moral operating principle like we just want to increase efficiency? So we're going to tax everyone in a way to basically account for the wasted opportunity cost, which brings up a lot of other questions of like, well, who decides what that is. But I think the Georgist argument is a little different. We're not necessarily like it is efficient, the tax we propose, but it actually stems kind of from a more, from a different place, a more kind of fundamental aspect of justice, you know? And from our perspective, if you work and you produce value, your work produced that value, right? And if you save money and accumulate capital in order to put that capital to work to receive a return, you've also provided something valuable to society, you know? You saved money so a factory could exist, right? You saved money so that a shipping company could get off off the ground. You know, those are valuable, contributed things, but nobody made the earth. The earth pre-exists all of us. And so someone who provides land actually does the opposite of providing land. They unprovide land, and then they charge you for opening the gate. And so the argument for charging people on the unimproved value of land is that we want to tax unproductive rent seeking. We want to tax non-produced assets because we think we want to encourage people to produce assets. We want to encourage people to produce labor, to produce capital. We want more of those things. And there's that aphorism that if you want less of something, you should tax it. So I mean, maybe there is a case for some kind of galaxy brain take of, you know, taxing unrealized opportunity costs or whatever, but I'm less interested in that. And my moral principles are more about, let's start with just taxing the things nobody has made and that people are gatekeeping access to. Let's tax essentially monopolies and rent seeking. And then if we still need to raise more taxes, we can talk about that later. But let's start with, let's start with just taxing the worst things in society and then stop taxing things we actually want more of because we have this mentality right now where everything's a trade off and we have to accept the downsides of income taxes, of sales taxes, of capital taxes because we just need the revenue and it has to come from somewhere. And my argument is it's like, it can come from a much better somewhere. So let's start with that.Dwarkesh Patel - 00:10:39: Yeah, yeah. So I guess if it was the case that we've implemented a land value tax and we're still having a revenue shortfall and we need another kind of tax and we're going to have to keep income taxes or capital gains taxes. Would you in that situation prefer a sort of tax where you're basically taxed on the opportunity costs of your time rather than the actual income you generated or the returns you would interest your generate in your capital? Lars Doucet - 00:11:04: No, I think probably not. I think you would probably want to go with some other just like simpler tax for the sake of it there's too many degrees of freedom in there. And it's like, we can talk about why I will defend the Georgist case for property tax assessments, you know, for land value tax. But I think it gets different when you start like judging what is the most valuable use of your time because that's a much more subjective question. Like you're like, okay, are you providing more value to society as being a podcaster or being a CS computer science person or creating a startup? It's like that may not be evident for some time. You know what I mean? Like I can't think of an example, but like think of people who were never successful during their lifetimes. I think the guy who invented what was it? FM radio, right? He threw himself out a window because he never got it really adopted during his lifetime but it went on to change everything, you know? So if we were taxing him during his lifetime based off of what he was doing of being a failure, like if Van Gogh was taxed of his like wasting his life as an artist as he thought he was, which ultimately led to his suicide, you know, a lot of these things are not necessarily realized at the time. And so I think that's, and you know, it would need a much bigger kind of bureaucracy to like figure that all out. So I think you should go with a more modest. I mean, I think after land value tax, you should do things like severance tax on natural resources and other taxes on other monopolies and rents. And so I think the next move after land value tax is not immediately to capital and income taxes and sales taxes, but to other taxes on other rents seeking and other land like assets that aren't literally physically land. And then only after you've done all of those, if you still, you know, absolutely then, then move on to, you know, the bad taxes. What is this, severance tax? Severance tax is a tax on the extraction of natural resources. Is what Norway does with their oil industry that has been massively successful and a key reason that Norway has avoided the resource curse? Yeah. Basically, it's, Georgist purist will say it's essentially a land value tax but of a different kind. A land value tax like you can't normally like extracts just like land like on this, in this house you're living on, you're like, you're not using up this land, but non-renewable resources you can use up. Yeah. You know, and so a severance tax is basically, Nestle should be charged a severance tax for the water they're using, for instance, you know, because all they're doing is enclosing a pre-existing natural resource that used to belong to the people that they've essentially enclosed and now they're just putting it in bottles and selling it to people. You know, they should be able to realize the value of the value add they give to that water, but not to just taking that resource away. Dwarkesh Patel - 00:13:53: No that makes sense. Okay, so let's go deep into the actual theory and logic of Georgism. Okay. One thing I was confused by is why property owners who have land in places that are really desirable are not already incentivized to make the most productive use of that land. So even without a property, sorry, a land tax, if you have some property in San Francisco incentives, let's go, why are you not incentivized to construct it to the fullest extent possible by the law, to, you know, collect rents anyways, you know what I mean? Like why are you keeping it that as a parking lot? Lars Doucet - 00:14:28: Right, right, right. So there's a lot of reasons. And one of them has to do with, there's an image in the book that this guy put together for me. I'll show it to you later. But what it does is that it shows the rate of return. What a land speculator is actually optimizing for is their rate of return, right? And so if land appreciates by 10% a year, you know, you're actually incentivized to invest in vacant land or a tear down property because the building of a tear down property is like worth negative value. So the land's cheaper because there's garbage on it, you know? Then you are to necessarily invest in a property and you're basically your marginal dollar is better spent on more land than it is on building up. Dwarkesh Patel - 00:15:16: But eventually shouldn't this be priced into the price of land so that the returns are no longer 10% or they're just like basically what you could get for any other asset. And at that point, then the rate of return is similar for building thingson top of your existing land than buying a new land because like the new land is like the, you know, that return has been priced into other land. Lars Doucet - 00:15:38: Well, I mean, arguably, empirically, we just don't see that, you know, and we see rising land prices as long as productivity and population increases. Those productivity and population gains get soaked into the price of the land. It's because of this phenomenon called Ricardo's Law of Rent and it's been pretty empirically demonstrated that basically, and it has to do with the negotiation power. But like why some people do of course, build and invest, you know, there's a lot of local laws that restrict people's ability to build. But another reason is just like, it also has to do with the existing part of it. It part of the effect is partially the existing property tax regime actively incentivizes empty lots because you have a higher tax burden if you build, right? So what actually happens is a phenomenon that's similar to oil wells, right? You have, it's not just because of property taxes, those do encourage you to keep it empty. But there's this phenomenon called land banking and waiting for the land to ripen, right? Sure, I could build it now, but I might have a lot of land parcels I've got. And I don't need to build it now because I think the prices might go up later and it would be better to build on it later than it is now. And it's not costing me anything to keep it vacant now. If I build now, I'm gonna have to pay a little bit more property taxes. And I know in three years that the price is gonna be even better. So maybe I'll wait to incur those construction costs then and right now I'm gonna focus more on building over here. And like I've got a lot of things to do, so I'm just gonna squat on it here. It's the same way I have, I'm squatting like, you know, I bought to my shame, like about 30 domain names, you know, most of them bought before I kind of got ontoGeorgism. And it's like, yeah, I'll pay 15 bucks a year to just hold it, why not? You know what I mean? I might use that someday. Right. And it's like, I should probably release all the ones I have no intent of using because I was looking for a domain for my startup the other day and every single two word.com is taken. Right, right. And it has been for like 10 years, you know, and it's a similar phenomenon. It's just like some of it is economic, rational following of incentives. And some of it is just it's like, well, this is a good asset. I'm just gonna hold on to it because why not? And no one is, and I don't have any pressure to build right now. And this happens on the upswing and on the downswing of cities. So while the population's growing and while the population's declining, people will just buy a lot of land and hold it out of use. Cause it's also just a great place to park money because it's an asset that you know if the population ever starts growing, it's gonna keep its value better than almost any other hard asset you have. Dwarkesh Patel - 00:18:16: Yep yep. I guess another like broader criticism of this way of thinking is, listen, this is all, and sorry for using these like podcast lingo of scarcity mindset, but this is all like scarcity mindset of, you know, land is limited. Well, why don't we just focus on the possibility of expanding the amount of usable land? I mean, there's like not really a shortage of land in you. Maybe there's a shortage of land in urban areas. But you know, why don't we like expand into the seas? And why don't we expand into the air and space? Why are we thinking in this sort of scarce mindset? Lars Doucet - 00:18:48: Right. Okay, so I love this question because actually our current status quo mindset is the scarcity mindset. And Georgism is the abundance mindset, right? And we can have that abundance if we learn to share the land. Because right now, you know, why don't we expand? And the answer is we've tried that. We've done it twice. And it's the story of America's frontier, right? And so like right now there's plenty of empty land in Nevada, but nobody wants it. And you have to ask why, right? You also have to ask the question of how did we have virtual housing crises in the Metaverse where they could infinitely expand all they want? Like how is that even possible, you know? And the answer has to do with what we call the urban agglomeration effect. What's really valuable is human relationships, proximity to other human beings, those dense networks of human beings. And so the idea is not necessarily that like, in a certain sense, the issue is that land is not an indistinguishable, fungible commodity. Location really matters. Or America has a finite amount of land, but it might as well be an infinite plane. We're not going to fill up every square inch of America for probably thousands of years if we ever do, right? But what is scarce is specific locations. They're non-fungible, you know? And to a certain extent, it's like, okay, if you don't want to live in New York, you can live in San Francisco or any other like big city. But what makes New York New York is non-fungible What makes San Francisco San Francisco is non-fungible That particular cluster of VCs in San Francisco until or unless that city completely explodes and that moves somewhere else to Austin or whatever, you know, at which point, Austin will be non-fungible. I mean, Austin is non-fungible right now. And so the point is that the way Georgism unlocks the abundance of it, let me talk about the frontier. We have done frontier expansion. That is why immigrants came over from Europe, you know, and then eventually the rest of the world, to America to, you know, settle the frontier. And the losers of that equation were, of course, the Indians who were already here and got kicked out. But that was theoriginal idea of America. And I like to say that America's tragedy, America's problem is that America is a country that has the mindset of being a frontier state, but is in fact a state which has lost its frontier. And that is why you have these conversations with people like boomers who are like, why can't the next generation just pull itself up by its bootstraps? Because America has had at least, I would say two major periods of frontier expansion. The first was the actual frontier, the West, the Oregon Trail, the covered wagons, you know, the displacement of the Indians. And so that was a massive time, that was the time in which Henry George was writing, was right when that frontier was closing, right? When all that land, that free land was being taken, and the advantages of that land was now being fully priced in. That is what it means for a frontier to close, is that now the good productive land, the value of it is fully priced in. But when the frontier is open, you can just go out there and take it, and you can get productive land and realize the gains of that. And the second frontier expansion was after Henry George's death, was the invention of the automobile, the ability to have a job in the city, but not have to live in the city. The fact that you could quickly travel in, like I commuted in to visit you here, right? That is because of the automobile frontier opening that has allowed me to live in some other city, but be able to do productive work like this podcast by driving in. But the problem is, sprawl can only take you so far, before that frontier as well closes, and by closes I don't mean suburban expansion stops. What I mean is that now, suburban homes, you fully price in the value of the benefits are able to accrue by having that proximity to a city, but still being able to live over here, through of course, for Ricardo's Law for it. Dwarkesh Patel - 00:22:37: Yeah, but I feel like this is still compatible with the story of, we should just focus on increased in technology and abundance, rather than trying to estimate how much rent is available now, given current status quo technologies. I mean, the car is a great example of this, but imagine if there were like flying cars, right? Like there's a, where's my flying car? There's like a whole analysis in that book about, you know, if you could, if people are still commuting like 20 minutes a day, you know, a lot more land is actually in the same travel distance as was before, and now all this land would be worth as much, even in terms of relationships that you could accommodate, right? So why not just build like flying cars instead of focusing on land rent? Lars Doucet - 00:23:21: Well, because these things have a cost, right? The cost of frontier expansion was murdering all the Indians and the cost of automobile expansion was climate change. You know, there has to be a price for that. And then eventually, the problem is you eventually, when you get to the end of that frontier expansion, you wind up with the same problem we had in the first place. Eventually, the problem is the first generation will make out like gangbusters if we ever invent flying cars, even better like Star Trek matter teleporters. You know, that'll really do it. Then you can really live in Nevada and have a job in New York. Yeah. There are some people who claim that Zoom is this, but it's not, you know, we've seen the empirical effects of that and it's like, it's the weakest like semi-frontier we've had and it's already closed. Because, because of Zoom, houses like this over in Austin have gone up in value because there is demand for them and there's demand for people to telecommute. And so anyone who, so the increased demand for living out in the suburbs is now basically priced in because of the Zoom economy. And so the thing is the first people who did that, who got there really quick, the first people to log in to the ultimate online server were able to claim that pace of the frontier and capture that value. But the next generation has to pay more in rent and more in home prices to get that. Dwarkesh Patel - 00:24:34: Actually, that raises another interesting criticism ofGeorgism, this is actually a paper from Zachary Gouchanar and Brian Kaplan, where it was titled the Cerseioretic critique of Georgism, and the point they made was one of these, like one way of thinking about the improvement to land is actually identifying that this land is valuable. Maybe because you realize it has like an oil well in it and maybe you realize that it's like the perfect proximity to these like Chinese restaurants and this mall and whatever. And then just finding which land is valuable is actually something that takes capital and also takes, you know, like you deciding to upend your life and go somewhere, you know, like all kinds of effort. And that is not factored into the way you would conventionally think of the improvements to land that would not be taxed, right? So in some sense, you getting that land is like a subsidy for you identifying that the land is valuable and can be used to productive ends. Lars Doucet - 00:25:30:Right, yeah, I know. So I've read that paper. So first of all, the first author of that Zachary Gouchanar yeah, I'm not been able to pin him down on what exactly meant on this, but he's made some public statements where he's revised his opinion since writing that paper and that he's much more friendly to the arguments ofGeorgism now than when he first wrote that paper. So I'd like to pin him down and see exactly what he meant by that because it was just a passing comment. But as regards Kaplan's critique, Kaplan's critique only applies to a 100% LVT where you fully capture all of the land value tax. And the most extreme Georgists I know are only advocating for like an 85% land value tax. That would still leave. And Kaplan doesn't account at all for the negative effects of speculation. He's making a speculation is good actually argument. And even if we grant his argument, he still needs to grapple with all the absolutely empirically observed problems of land speculation. And if we want to make some kind of compromise between maybe speculation could have this good discovery effect, there's two really good answers to that. First, just don't do 100% LVT, which we probably can't practically do anyway because of natural limitations just empirically, you know, in the signal. It's like you don't want to do 115% land value tax. That drives people off the land. So we want to make sure that we like have a high land value tax but make sure not to go over. And so that would leave a sliver of land rent that would still presumably incentivize this sort of thing. There's no argument for why 100% of the land rent is necessary to incentivize the good things that Kaplan was talking about. The second argument is when he talks about oil, well, we have the empirical evidence from the Norwegian massively successful petroleum model that shows in the case of natural resources how you should deal with this. And what Norway does is that they have a massive, massively huge severance tax on oil extraction. And according to Kaplan's argument, this should massively destroy the incentive for companies to go out there and discover the oil. And empirically, it doesn't. Now what Norway does is that they figured out, okay, so the oil companies, their argument is that we need the oil rents, right? We need these oil rents where we will not be incentivized for the massive capital cost of offshore oil drilling. Well, Norway's like, well, if you just need to cover the cost of offshore oil drilling, we'll subsidize that. We'll just pay you. We'll just pay you to go discover the oil. But when you find the oil, that oil belongs to the Norwegian people. Now you may keep some of the rents but most of it goes to the Norwegian people. But hey, all your R&D is free. All your discovery is free. If the pr