Tyler Cowen: Economic Growth & the Fight Against Conformity & Mediocrity | Lex Fridman Podcast #174 | Summary and Q&A

TL;DR

Economist Tyler Cohen discusses the multidimensional nature of economics, the art and science of capitalism, and the challenges faced by governments in maintaining social order and economic progress.

Key Insights

• 🏰 Economics encompasses art, science, and philosophy and can be seen as a form of "modern magic" that aims to improve everyone's lives by making changes. It provides models and principles that can guide human behavior and society, although it may not have the same predictive power as more concrete sciences like physics.
• 🌍 The world faces the risk of destructive events, such as nuclear or biological warfare, due to the increasing availability of weapons of mass destruction. While the probability of such events is low, as time goes on, the likelihood increases, especially with the emergence of new technologies and the decreasing costs associated with their production.
• 💡 The American Dream is still largely alive, although there are challenges to achieving upward mobility, particularly for certain marginalized groups like native-born Americans. However, immigrants, particularly those from countries like India and Iran, have been able to achieve economic success and high earnings in the United States, demonstrating that the American Dream is still a possibility for some.
• 📈 Capitalism, with private ownership of capital goods, has created wealth and opportunity in America. However, it also has its drawbacks, such as income inequality and lack of social security for vulnerable populations. While capitalism may not be perfect, it has led to innovation, economic growth, and higher wages.
• 😡 There is often a negative perception of big business, but it has played a crucial role in advancing society, particularly during challenging times like the pandemic. Companies like Amazon, Zoom, and Moderna have shown their ability to adapt quickly, innovate, and provide essential services. However, the negativity towards big business often comes from taking their positive impact for granted and focusing on their imperfections.
• 🇷🇺 Russia, under Putin's leadership, has faced economic challenges and structural problems. While Putin has gained popularity, the country still struggles with corruption, dependence on fossil fuels, and an absence of diverse economic power, which hinders sustainable growth. Russia has not been able to foster an environment supportive of entrepreneurship and lacks social and political concordance for balanced power distribution.
• 🇨🇳 China has made significant economic progress, but it still falls behind countries like Japan, South Korea, and Taiwan. While China has been successful in governing and making good decisions, its economy remains reliant on fossil fuels, and its state-owned enterprises have not kept up with the productivity of the private sector. China's long-term growth prospects are uncertain, although it boasts of remarkable achievements.
• 😬 Government control and involvement in China are a mixed bag. China is successful in building infrastructure, attracting people from rural areas to cities, and implementing meritocratic systems that allow smart individuals to rise above their social backgrounds. However, welfare systems and government support for citizens are not as robust as one might assume. China has seen significant economic growth, but it still faces challenges.
• 💭 A sense of optimism is emerging regarding economic growth and breakthroughs in areas such as green energy, battery technology, mRNA vaccines, and medicine. Superior computation and access to computational abilities have facilitated progress. While there are concerns and potential problems, recent breakthroughs have generated hope for continued growth.
• 👥 Clubhouse and live conversations using voice-only communication offer a unique connection and a sense of intimacy that text-based platforms lack. However, some individuals may find it less productive or prefer other forms of communication, such as reading and writing. Clubhouse is well-suited for intimate conversations or tributes that involve multiple perspectives and individuals sharing their experiences.
• 🌐 Technology, such as artificial intelligence, has the potential to provide deep understanding and connection, fulfilling our fundamental need for personal interactions. However, shared experiences and long-term memory are essential components often lacking in current AI systems. As technology advances, the possibility of connection and understanding may increase, allowing for more fulfilling relationships.

Transcript

the following is a conversation with tyler cohen an economist at george mason university and co-creator of an amazing economics blog called marginal revolution author of many books including the great stagnation average is over and his most recent big business a love letter to an american anti-hero he's truly a polymath in his work including his lo... Read More

Questions & Answers

Q: Is there a realistic possibility of creating physics-level descriptions and models of the world in economics?

Economics will not be able to achieve the same predictability as physics. However, it can help ask better questions and understand the logic behind strategic conflicts and cooperation.

Q: Are you surprised that nuclear weapons haven't been used to destroy humanity yet due to the logic of mutually assured destruction?

It is not surprising that nuclear war hasn't happened yet, given its low probability. However, the risk remains, as low probability events may eventually occur, potentially involving different nations and different destructive technologies.

Q: Is there hope for the American Dream to provide equal opportunities for all Americans?

The American Dream is still accessible for immigrants who succeed in achieving high incomes and higher education. However, intergenerational mobility has declined for native-born Americans, particularly compared to earlier periods. Efforts should be made to address inequality and create more opportunities for individuals in the bottom half of the income distribution.

Q: What are some of the downsides of capitalism?

Capitalism can lead to racial, gender, and wealth inequalities, and it may also result in weaker communities and less social security compared to some European countries. However, it remains a powerful economic system that drives innovation and provides opportunities.

Q: How would you describe the system of the Soviet Union and its economic impact?

The Soviet system devolved into a decentralized, corrupt structure that hindered economic progress, innovation, and consumer goods. It was a dysfunctional mixture, differing from central planning, resulting in economic inefficiencies and alienating the populace.

Q: What are some of the challenges faced by Russia and its current system?

Russia's economy depends heavily on fossil fuels, and it lacks the necessary concordance between economic, social, and political power to sustain broad-based economic growth. The system's incentives tend to concentrate wealth, leading to structural problems. Additionally, entrepreneurship faces cultural barriers, making it less conducive to a thriving business environment.

Q: How would you compare China's economic growth and political system to other countries in the region?

China has experienced impressive economic growth, but it still lags behind other countries in terms of living standards, freedom, and democracy, such as Japan, South Korea, Taiwan, Hong Kong, and Singapore. The Chinese system has strengths but also faces significant challenges, such as state-owned enterprises losing relative productivity compared to the private sector.

Q: Is there a possibility of large-scale government programs like universal basic income (UBI) being effective?

The effectiveness of government programs like UBI depends on various factors. The Chinese government has been successful in building infrastructure and creating a meritocratic system that elevates individuals from disadvantaged backgrounds. However, the implementation and feasibility of UBI or other similar programs need to be examined in the specific contexts of each country.

Summary

In this video, Tyler Cowen, an economist and author, discusses various topics including the nature of economics, the possibility of predicting human behavior, the risk of nuclear weapons, the American dream, the pros and cons of capitalism, and the negative perception of big business. He also touches upon Ayn Rand and her philosophy of objectivism, as well as the emergence of new platforms like Clubhouse.

Questions & Answers

Q: Is economics more art, science, philosophy, or magic?

Economics encompasses elements of art, science, philosophy, and magic. It is like magic in the sense that it seeks to make improvements that benefit everyone. It is an art due to its imprecise modeling, and it is a science as it occasionally falsifies propositions. It contains simple general models but cannot fully capture the complexity of human behavior.

Q: Will economics ever become predictive?

Economics is not likely to become highly predictive. Its main value lies in helping us ask better questions rather than providing exact predictions. While game theory can be useful in understanding strategic conflict, it cannot accurately predict whether wars or peace will occur. Thus, economics is more about improving our understanding than giving precise forecasts.

Q: Are you surprised that nuclear weapons have not destroyed civilization yet?

It is not surprising that nuclear weapons have not caused widespread destruction as of yet. Although there is always a low probability of such an event occurring, it has not happened due to luck and the general thinking that a first strike would lead to mutually assured destruction. However, Tyler Cowen believes that eventually, human beings will destroy each other with these weapons.

Q: Is human nature fundamentally good or bad?

Tyler Cowen does not hold a negative view of human nature. While there are outliers like Hitler in history, humanity generally cooperates and gains from cooperation. However, there will always be individuals who act irrationally or in destructive ways, which can affect the equilibrium of cooperation and lead to conflict.

Q: Can evil people with the intent to destruct society acquire the means to do so?

Cowen believes that it is possible for individuals with destructive intent to acquire the means to harm society. He gives an example of the possibility of another "Osama bin Laden" gaining access to nuclear or biological weapons. While such events have a low probability of occurring, the risk increases as destructive technologies become cheaper and more accessible.

Q: What is the current state of the American dream?

The American dream still exists, but its realization varies across different groups. Immigrants, particularly individuals from India and Iran, are among the highest earners in the US, showcasing the opportunities available in America. However, for native-born Americans, intergenerational mobility has stayed relatively constant for the past 40 years, showing that there are limitations and inequalities in achieving the American dream.

Q: Is capitalism primarily good or bad?

Capitalism, with its private ownership of capital goods, is generally a positive force, promoting wealth creation and opportunity. However, Tyler Cowen acknowledges that there are drawbacks, such as racial inequalities and a lack of opportunity for certain groups. He believes that the focus should be on improving capitalism, rather than abandoning it entirely.

Q: Should certain aspects of life be protected from competition?

There are areas where competition should be limited, such as violence and territorial disputes. However, in sectors like healthcare, more competition is needed to improve services and treatments. Cowen argues that competition with a strong legal framework prevents the economy from devolving into mafia-like systems while promoting innovation and wealth creation.

Q: What are the positive impacts of big businesses?

Big businesses have played a crucial role in responding to challenges like the pandemic. They have demonstrated competence, resources, and incentives to adapt quickly and provide essential services. For example, companies like Amazon, UberEats, and Zoom have shown resilience and reliability, highlighting the benefits of large-scale operations.

Q: Why do we often focus on the negatives rather than appreciating the positive impacts of technology?

Cowen suggests that negativity bias and neuroticism play a significant role in our tendency to focus on the negatives. We are more bothered by criticism or flaws than we are pleased by praise. Moreover, the internet enables us to see more of everything, and the more we see, the more we find to complain about. This bias can lead to an underappreciation of the positive impacts of technology and innovation.

Q: What are your thoughts on Clubhouse as a new platform?

Cowen believes that Clubhouse is perfect for tribute-style discussions, where individuals can come together to share anecdotes and perspectives about a particular topic or figure. However, he personally finds podcasting more beneficial due to its wider reach and the opportunity to control the content consumption. He also acknowledges the value of live conversations on Clubhouse but feels it may not be the best platform for his specific skill set as a fast reader.

Summary & Key Takeaways

• Economics is a combination of art, science, and philosophy, with elements of magic in the way it aims to improve the welfare of everyone.

• While economics can provide simple models of human behavior, it cannot predict societal outcomes with certainty due to the complexity of human interactions.

• The game theory of mutually assured destruction has helped prevent nuclear war so far, but the probability of destructive events increases as technology becomes cheaper and more accessible.

• The American Dream is still alive, but there are issues of social mobility and unequal opportunities, particularly for marginalized groups.

• Capitalism has both positive and negative aspects, with its strengths lying in innovation, consumer services, and getting things done, but it also perpetuates social and economic inequalities.