
April 12, 2021
Tyler Cowen: Economic Growth and the Fight Against Conformity | Lex Fridman Podcast
Check out on The Lex Fridman Podcast Page
Key Takeaways
- Wisdom is in the coming together of different ideas
- No one individual or idea holds all the wisdom
- The greatest philosophy works are interactions among thinkers
- Weird people are those who push science forward
- Academia tends to encourage conformism and mediocrity
- The internet allows us and encourages us to embrace our weirdness
- The US is one of the best countries to be a weirdo
- Tyler doesn’t think that cryptocurrencies will replace fiat for transactions
- Competition is not good or bad per se
- It can be highly destructive or fruitful
- “What really matters is how good your legal framework is” Tyler Cowen
- Large businesses were crucial in helping us deal with COVID-19
- Given enough time, even a low probability event, like a nuclear war, is going to happen
- The probability increases as weapons of mass destruction become cheaper
- The Osama Bin Laden of tomorrow may have access to those weapons
- Tyler thinks that at best we have 700 to 800 years
- The probability increases as weapons of mass destruction become cheaper
- Advice for young people
- Get as many mentors as you can for the things you want to learn about
- Build small groups of peers with common interests
- Love is the highest form of human connection
- It is part of the highest realization of who you can be
Key Books Mentioned
- Capitalism: The Unknown Ideal by Ayn Rand
- The Use of Knowledge in Society, essay by Friedrich Hayek from his book Individualism and Economic Order
- The greatest philosophy works are interactions among thinkers
- Life of Johnson (biography of Samuel Johnson) by James Boswell
- Dialogues of Plato (dialogues between Plato and Socrates)
- Complete Works of William Shakespeare
- Books by Tyler Cowen
Intro
- Tyler Cowen (@tylercowen) is a professor of economics at George Mason University, host of Conversations with Tyler, and co-maintainer of the Marginal REVOLUTION blog
- Tyler is also the author of The Complacent Class and Average Is Over
- Host: Lex Fridman (@lexfridman)
- In this chat, Tyler Cowen discusses economics, risks of mass destruction events, crypto, weirdness, and much more
Economics, Game Theory and Nuclear War
- Economics is a bit like Art, Science and even Magic
- Magic: sometimes it allows us to make everyone better off
- Art: its models are not very exact
- Science: occasionally propositions are falsified
- Economics doesn’t have strong predictive power
- Its usefulness is in helping us ask better questions
- For example, Game theory never predicted if the US would have a war with USSR
- Nevertheless, it is a useful lens to think about strategic conflict
- Game theory can help us understand why nuclear war is a low probability event
- Given enough time, even a low probability event, like a nuclear war, is going to happen
- The probability increases as weapons of mass destruction become cheaper
- The Osama Bin Laden of tomorrow may have access to those weapons
- Tyler thinks that at best we have 700 to 800 years
- The probability increases as weapons of mass destruction become cheaper
- Tyler sees humans mostly as collaborative and good
- But the presence of outliers like Hitler makes mass-destruction events possible
The American Dream, and Influence on the World
- The idea of the American Dream is mostly still there, but it was never perfect
- The highest immigrant earners are from India and Iran
- Despite possible discriminations they may face, these groups managed to be successful
- Among US nationals, intergenerational mobility has stalled in the past 40 years
- New generations are not richer than the previous ones
- The highest immigrant earners are from India and Iran
- There is still strong inequality of opportunities
- There are too few opportunities for the bottom half of Americans
- But it has been getting better as women and people of color are getting access to more opportunities
- Over time, injustices get smaller and smaller
- Why does the US have so much influence over the World (movies, podcasts, music, etc..)?
- In the US entertainment and humor really matter, even in science
- There’s a tendency to be direct, getting to the point, and connecting to the audience
- US culture and tax structure also attracts lots of top-talent
Pros and Cons of Capitalism in America
- Capitalism takes a different form in each country
- Pros of Capitalism
- Businesses drive most of the innovation and get things done
- Companies tend to serve consumers’ needs
- Larger businesses tend to pay the higher wages
- The US is a better country to be a weirdo
- This encourages creativity
- Problems with Capitalism in the US
- Racial discrimination
- Land-grabbing and oppression of Native Americans
- Life is more precarious than in other countries
- Less social security
- Weaker communities
Competition, Law, and Anarchy
- Competition is not good or bad per se
- It can be highly destructive or fruitful
- “What really matters is how good your legal framework is” Tyler Cowen
- In nature, competition for food leads to constant conflict
- If you have laws defining property rights and preventing violence, competition can work well
- More competition in healthcare would improve the quality of service people receive
- The term free market is not well defined
- We need a legal order to interfere with the market and preventing it from turning into a “mafia-run system”
- Some people in tech today are taking free markets to an extreme and embracing anarchy
- They hold we should get rid of centralized governments
- People can agree in a decentralized way on financial transactions, healthcare, security, etc…
- Tyler doesn’t share these ideas but he’s eager to learn from them how we can improve our current society
- Every society has some form of anarchy
- The goal is pushing that anarchy in the right corners, where it can be most productive
- They hold we should get rid of centralized governments
Do Large Businesses Benefit Society?
- Large businesses are usually seen negatively in society
- The internet exposes us to more information
- We’re able to find more things to complain about
- Our negativity bias makes us pay more attention to negative information
- Tyler’s book, Big Business: A Love Letter to an American Anti-Hero argues that many positive aspects of large businesses go unnoticed
- Large businesses were crucial in helping us deal with COVID-19
- Amazon, Doordash, Ubereats all helped us get stuff delivered to our homes
- Zoom allowed us to switch our whole education system online
Thoughts on Universal Basic Income (UBI)
- Tyler likes Mitt Romney’s idea of UBI, UBI for kids
- Kids are vulnerable
- Parents’ mistakes should not affect kids
- He doesn’t see automation as a threat to employment today
- Before Covid, both Japan and the US (the more industrialized economies) were at full employment
- We might revisit the question if things change
- Before Covid, both Japan and the US (the more industrialized economies) were at full employment
- New jobs will likely require higher levels of education
- He doesn’t think UBI solves this problem
- “Cushions get in the way of progress” Lex Fridman
- The greatest creators in history had to work really hard
- UBI may decrease our ability to innovate
Can Crypto Replace Fiat Currency?
- Bitcoin has taken over much of the role of gold
- We don’t have a clear theory of the value of Bitcoin
- It is hard to figure out what its value will be
- It depends on how valuable people think it to be
- Similar to art
- Tyler doesn’t think that cryptocurrencies will be widely used for transactions
- Once crypto is regulated, Tyler is not sure if there will be strong demand for it to be used to transact
- Many of crypto’s current advantages are due to regulatory arbitrage
- Ether has a better chance than Bitcoin to become a currency used for transactions
- Once crypto is regulated, Tyler is not sure if there will be strong demand for it to be used to transact
- Fiat currencies work really well, and people in crypto underestimate that
- It is not easy to outcompete fiat
Embracing Weirdness, The Internet and Academia
- Weird people are the ones who push science forward
- Academia tends to encourage conformism and mediocrity
- Young faculty members are particularly pressured to conform
- The internet allows us to embrace our weirdness
- You can get exposed to a much wider variety of people and ideas
- Academia is lagging behind the internet, but also seems to be moving forward
Can Economic Growth Continue Indefinitely?
- In The Great Stagnation, Tyler talks about the recent decline in economic growth
- Recently he became optimistic about future growth
- Breakthroughs in green energy, batteries, medicine, CRISPR may spur future growth
On Communism, Russia, and China
- Like Capitalism, the word Communism can mean very different things
- In the Soviet Union, it created destructive incentives which hindered progress and innovation
- Price incentives were removed
- Led to shortages, and corruption
- It alienated people and created an elite that didn’t believe in the system
- Price incentives were removed
- Russia Today
- The economy is way too dependent on fossil fuels
- Putin’s incentive is to steer economic power in a small number of hands
- In the long term, will negatively affect the economy
- In recent years, Russia already experienced negative economic growth
- Putin’s high approval rating is likely due to the lack of press freedom
- Culturally and historically there’s no entrepreneurial spirit
- This makes ambitious people leave to the US
- On China
- China seems to encourage entrepreneurship a lot better than Russia
- Compared to Japan, Taiwan, and Singapore, it is still doing much worse
- The CCP made a lot of good decisions
- Created infrastructure to attract people to cities
- Instilled a genuine meritocracy (reward and elevate talented people)
- Tyler doesn’t see it supplanting the US as the Global Power
- One person holding so much authority will create tensions picking successors
- Tyler expects serious problems to emerge in China in the future
- China seems to encourage entrepreneurship a lot better than Russia
Advice for Young People
- Get as many mentors as you can for the things you want to learn about
- You can try mentors and maybe they’re not good for you, but you’ll surely learn something
- Tyler learned a lot from having a mentor who was a Stalinist
- You can try mentors and maybe they’re not good for you, but you’ll surely learn something
- Build small groups of peers with common interests
- Consistently interact, talk about what you care about, and try to solve problems
- Many great achievements were made in small groups
- Over time, small groups may split up and that’s fine
Additional Notes
- Ayn Rand was a big influence on Tyler growing up
- He agrees with her view on wealth
- We should valorize wealth as it creates opportunities and good lives
- He disagrees with most of her philosophical points
- She had excessive certainty about her ideas
- Wisdom is in the coming together of different ideas
- No one individual or idea holds all the wisdom
- The greatest philosophy works are interactions among thinkers
- He agrees with her view on wealth
- Tyler doesn’t think Wallstreetbets has the potential to shift financial power
- It’s a way for people to have fun, make the headlines, and screw with some billionaires
- In the medium term, the price of those stocks will come back to where it ought to be
- Tyler takes data on UFO sightings from the Navy very seriously
- An issue is that the people with good equipment to collect data don’t want to get involved
- The Government’s secrecy around the issue creates distrust and prevents more research to be done
- Love is the highest form of human connection
- It is part of the highest realization of who you can be