Oren Cass on a More Populist Conservatism

ladies and gentlemen the speaker has arrived and the principal attendee has arrived and so let's begin this is the program outcomes to tional government I'm Harvey Mansfield for what that may imply and and this is our first meeting for this coming semester so and for our guest today is Orin Cass graduate of Williams College and also the Harvard Law School so easy been around this place for a while or before he's the executive director of American compass it's an organization whose mission is to restore and an economic orthodoxy that emphasizes the importance of family community and industry to the nation's liberty and prosperity so before this he was a senior fellow at the Manhattan Institute where he was working on strengthening the labor market and addressing issues from a social safety net an environmental regulation to trade and immigration education organized labor the whole kaboodle he writes for The New York Times Wall Street Journal national affairs and National Review and he's written an important book much price by our friend Yuval Levin called the once and future worker so before this he was also domestic policy director for Mitt Romney's presidential campaign in 2012 and he was editor of the Harvard Law Review and worked for a Bain and management company in Boston so Orrin Kass going to talk on a conservative skepticism of markets all right well thank you very much for having me it is it's genuinely a privilege to be here and a excellent marketing maneuver for American compass which we just we officially announced on Tuesday actually and and are questioning what counts as conservative orthodoxy and what is actual conservatism and so to be able to say well professor Mansfield having me come speak about it on Friday is actually right off the bat you you at least confused some critics which I appreciate but I want like my conservative skepticism of markets and and fundamentally the question of what conservatism is in in America at this point and and what maybe it could be and should be it seems to me that what we call the right of center or shorthand conservative at least in the economic sphere is not actually genuinely conservative in any meaningful sense of that term in terms of a commitment to whether recognizing the limitations of human beings and the need to build a society that meets them where they are that respects the importance of traditional institutions and and so on and so forth and and I think what we have instead is what is classically called fusion ISM which was the coalition that that came together to defeat communism and win the Cold War which were very very important things glad they did it but was essentially a joining of economic libertarians social conservatives and and foreign policy Hawks with an agreement that each could accept each other's priorities and would have fairly free rein within their own area and so there are ways in which the right-of-center conservatism I think is is genuine is very conservative even today but on economic policy I think it's much fairer to call a libertarian or fundamentally market fundamentalist and this coalition worked in part because we were fighting the Cold War but also I think because it came together in a period when free markets which are something that obviously both conservatives and libertarians carry great deal about we're generating good social outcomes and so whereas libertarians tend to see the free market as the end unto itself and the end of the discussion conservatives I think much more see the market as a means a very powerful and effective means but ultimately a means to some of those other ends that I mentioned at the beginning and what we've seen over the past couple decades I think is is a coming apart is a situation in which the market outcomes and the policies we pursued on that behalf we're not necessarily generating the kinds of social outcomes that conservatives would say we want or need and and so I think all of a sudden we've sort of had conservatives and libertarians in this coalition looking at each other and and realizing they disagree fundamentally on things that they assumed they agreed on that all of a sudden they're saying no but wait we thought when we were talking about how great markets are we meant conditional on how they were actually performing and what we were getting and The Libertines are saying no no we thought it was just free markets because freedom is great and and and that conflict I think is a way to understand what is happening within the Republican Party right now what is happening within the right-of-center generally and and in my view one of the great shortcomings of what has been happening American politics and public policy very long time has been the absence of what you could call a genuinely conservative economics and so for one thing I think a genuinely conservative economics would be a lot more skeptical of markets than it is today and I want to here present a little bit about why I think that's the case and then start to describe what it would start to sound like if conservatives genuinely were re-engaged in the economic debates so I'm going to start with a very long quote from Hayek don't worry this is the only super text-heavy slide but I'm gonna make us actually read the whole thing because it's very important this is from his very famous essay why I am NOT a conservative and what he says is conservatives lack the faith in the spontaneous forces of adjustment which make the classical liberal accept changes without a / henshin even though he does not know how the necessary adaptation will be brought about it is indeed part of the liberal attitude to assume that especially in the economic field the self-regulating forces of the market will somehow bring about the required adjustment to new conditions although no one can foretell how they will do this in a particular instance now of course here when he's talking about liberal in the classic liberal sense I think he's actually describing quite well some of the distance you might expect between class between conservatives and libertarians and and I want to start by admiring his honesty he's quite straightforward here actually in acknowledging that there's there's a faith-based component to this the faces the faith is in spontaneous forces that he does not know how they will work it requires an assumption that the self-regulating forces will somehow deliver what we want in a way that no one can foretell and he then goes on to make a very specific prediction which I think we should hold him accountable for he says there is perhaps no single factor contributing so much to people as frequently reluctant to let the market work as their inability to conceive how some necessary balance between demand and supply between exports and imports or the like will be brought about without deliberate control some necessary balance between exports and imports now one reason that's interesting is we don't usually associate Hayek with the view that there is some necessary balance between exports and imports in fact we now live in an era where only a rube would say exports and imports need to be balanced and if anything massive trade deficits or somehow evidence of how great would do but in fact Hayek did say necessary boundary and exports imports and he asserted that they were a quintessential example of the sort of thing we could have faith would happen even though we don't understand how at the time he was writing in 1960 we were exactly midway through a two decade period in which trade in the US was essentially perfectly balanced we want to we ran a very slight surplus less than 1% of GDP over the period ending in 1969 with a trade surplus of 91 million dollars on more than a hundred billion dollars of trade so the period he was writing in this actually made a great deal of sense but he was not describing a universal truth in fact we have seen just as well in recent decades that the self-regulating market forces can spin wildly out of mountains and I think that goes more generally the period in which the libertarian economics that we now call conservative emerged and took took its place was a period when the market seemed to just be doing great the march of economic liberalisation seemed to be in lockstep with rising widespread prosperity and that's classic of economics generally which though we like to call it a science in fact typically tends to be a lot of folks describing what they see going on around them so Adam Smith is all about free trade and talking about marginal ISM in the exact period when that's starting to happen and then you get Marx during the exact period when the Industrial Revolution seems to not be going so well and then you get Schumpeter in the exact period when you start to see this extraordinary technological progress in disruption and then you get Keynes and all of that at the exact period when we had these problems of macro imbalances and question of aggregate demand and then you have Hayek and Friedman in the period when the market seems to just be doing fine with no one touching it but that's a description of a period in the middle of the 20th century it is not a universal truth and so I think what we need to think about more critically is when we actually should have faith in these spontaneous forces because there are spontaneous forces and they can be wonderful but when is it appropriate to have faith in them and what are they actually going to do because the other place I think we've overstepped beyond excessive faith is expanding the scope of that faith is forgetting that markets do particular things but we shouldn't have any faith that they're going to deliver outcomes in areas where they do not operate where the forces of markets that we like are not prevailing and so we get what I call somewhat chic Ashleigh the the drunk donkey problem and and I think a very good example of that is when you think about the allocation of resources and investment economy-wide so an interesting debate that's starting to bubble up on the right of centers questions of industrial policy and national economic development and should we be concerned for instance that the US has abandoned its investment in leadership in industry in actual supply chains that make things I think the answer is yes that's a huge problem we need to talk about it I a line response that is very standard on the right of Center is to make a Hayekian knowledge claim how can you possibly claim to know more or do better than the market is doing in the allocation of those resources but allocation of investment across sectors of the economy is not something that the market does you go back read read any economists you want go back to Adam Smith with the baker and the self-interest it predicts that actors pursuing their self-interest will try to maximize their own returns and generate efficiency more output for Less inputs in the process there's no reason to believe that those processes are going to lead to a to a generation of investment across sectors of the economy that are healthy to the long-run trajectory of the economy because that's not something that the individual decision makers are trying to optimize for and so the reason this is a drunk donkey problem is because in fact if you just say whatever the market does is what's going to happen it is as likely to be a good allocation for purposes of long-run economic development as drawing a big grid on a field and asking a drunk donkey to stumble across it and then make sure the investment goes in whichever squares he happens to step through in fact in some respects a drunk donkey would probably do a better job because our private actors acting in their self-interest are being induced to disinvest in the United States by foreign policies that particularly try to attract that investment away from us and if the status quo were a drunk donkey stumbling across a grid allocating resources across secretaries and someone were to come forward and say you know I think policymakers should probably take a look at that and if there's any prospect for improvement it would not be very sensible to respond how dare you suggest you can improve on the performance of the drunk donkey but that's what we've done in our assumption that markets which do some things very well we should instead assume are going to solve problems in our society that they are not designed to solve a second problem in the one I think central to understanding the challenges that we are having is the labor market so the labor market is a market left left to its own devices I think it will behave the way we expect a market to behave many respects but the problems that we don't actually want that and the reason we don't want that is that people aren't products and that's true in the moral sense but for our purposes more importantly it's during the economic sense in two important respects first people aren't products because supply is not responsive to market forces those spontaneous self-regulating forces that Hayek spoke about assume that supply and demand respond to price signals that's why we like price signals that's how the knowledge is supposed to be dispersed throughout the economy and generate behavior that is going to be good for us but we can't supply people in response to price signals we can have a price signal saying that chemists are worth more than cashiers screaming loudly to everybody for a hundred years and households are not going to shift their production lines from cashiers to chemists the supply of people we actually have in the economy subject to some ability to develop education and training programs and so forth is essentially fixed and so we can't simply say we are going to trust that self-regulating forces are going to address the imbalances we might have the second problem is that efficient outcomes are not per se good ones because you could say what's fine there are other markets where supply is fixed and everything else just has to sort of respond around that and we'll still get an efficient outcome but the efficient outcome you might get in many markets is one that just a lot of potentially inputs unused you might have an awful lot of inventory about on the shelf that's just a marked way down you might just have to write it off entirely and that isn't what we would call an efficient outcome that's what we want we want the market to tell us we didn't need all that stuff please please don't make it but that's not acceptable in the labor market that's not acceptable when it comes to people we can get an efficient outcome that tells us huge swaths of our population simply do not have market value or do not have sufficient market value to be worth employing certainly not in the places where they are and that could generate a very efficient outcome for us if again by efficiency we were simply saying we wanted to maximize outputs while minimizing inputs but that's not actually going to give us again if particularly if we are conservatives the society that we want and this is my illustration of the point this is a map of every county in the United States shaded by the share of income that comes from personal transfer excuse me from government transfers so 10% would represent 90 percent of the personal income is coming from actually earned income and 10% is from government transfers and as you can see in 1979 we sort of had a nice peachy map mostly 10 20 percent a couple places getting up to 30 and we had six point five trillion dollars of real GDP now if we fast forward to 2014 this is what the map looks like now it turns out this is an extremely efficient outcome okay we got substantial economic growth we dramatically increased redistribution and as a result in terms of absolute material living standards everybody in every one of those counties not individual but by segments socio-economic segments however you want to cut it everybody is better off everybody has more stuff everybody's material living standard is higher and so we could just we could we could declare victory in and go home this is the exact economic model that we pursued it's what I call economic piety which is an obsession with the idea of there's an economic pie and as long as you grow and divide the pie everybody can have more pie and who doesn't like pie I like pie but it turns out it also matters whose baking the pie and a model that simply says we can push ever harder yes we're going to create winners and losers but the winners can compensate the losers is a very pearl market approach to economic development and it is an extremely unconservative approach and I believe that we are all paying the price for it as a result so what's gone wrong well it seems to me that when we think about what it would look like for a market to be performing well well we should be asking for what a conservative approach to economics should be focusing on is a two step model of how the economy actually grows and develops we all love talking about step one which is the dynamism and the disruption right they serve these things are key and we should celebrate them and the more you show you are sophisticated by celebrating most aggressively disruption and showing you care less than anybody else about the cost of disruption because you know how good it is a disruption disruption is necessary a disruption isn't good certainly if you're a conservative there's nothing good about disruption other things equal if we could get more progress with less disruption that would be better and even to the extent that disruption happens it's not necessarily good and a really important example I want to emphasize here is let's talk about the mechanization of Agriculture so it's a very straight forward well understood point that of course it's great that we don't all still work on farms right we should celebrate the fact that once 90 plus percent of people worked on farms and now only 2 percent of people have to work on farms well on the one hand yes I agree that's great but but but there's a but there that we we assumed and then just forgot about all together if we had mechanized agriculture and said we only need 2 percent of the people to grow all the food and then everyone else should just sit at home and wait for the tractor to come around and bring and the food I don't think that would have actually been progress certainly not from a social perspective okay there was a second step that made the mechanization of Agriculture actually a good thing and that was on the back end the economy that was generating new and better opportunities for people in fact that's the only reason the mechanization of Agriculture was a good thing it's that it freed up the people that we had something better for them to do but that process isn't automatic and in fact it's broken down this is productivity in the manufacturing sector over three recent periods you know productivity growth is actually a pretty good measure of disruption in the sense that it shows the extent to which you can build more stuff with less hours of work so when we claim that there's lots of automation going on and so forth in theory we're claiming we should see a lot of productivity gains now one thing to notice is that productivity is not accelerated productivity growth over the kind of the golden age a middle age and the recent age has been pretty much steady it's actually down a little bit if you actually zoom on the most recent 10 years it's way down at all-time lows manufacturing productivity is actually declined in three of the last five years so the story that robots are throwing everybody out of work is is simply false but but let's zoom out a little bit and talk about three areas during which we were getting good productivity growth and it's striking to see that while the story is that we've lost all of these manufacturing jobs because of all this productivity growth in fact there's no correlation whatsoever between losing manufacturing jobs and productivity growth and the reason is because there's a second question how much more stuff were we making in the first period value add in the manufacturing sector was rising faster than productivity so yes people were becoming more productive and we were making even more stuff even faster in the middle period they were about the same in the recent period what's changed is we stopped making more stuff now put those two numbers together and you can then with the virtually the exact same productivity growth have one period where you add 3.4 million men patterning jobs and another one where you lose five million manufacturing jobs now if you want to be pedantic it is tactically correct that this productivity growth cost us all those jobs because if the productivity growth had been zero maybe the jobs wouldn't have gone away but I think it's very hard to look at this picture and say well we lost those jobs because of productivity growth we lost those jobs because we lost the second half of the process we lost the market that was actually taking the productivity gains and using them to create more and better opportunities for people to make more stuff and so economy-wide I think we have what I call the James Harden problem I don't know if I hopefully we have some basketball fans in the room and hopefully as a true basketball fan you hate James Harden framin who's not a basketball fan James Harden is a remarkable player he leads the league in scoring every year he was recently the most valuable player and he does that mostly with a very unique move called the step-back three the step-back three is when he dribbles for 15 or 20 seconds out of the 24-second shot clock then charges two steps in as if he's going to dribble to the basket gets his defender leaning back steps back a step and hoists a three-point shot now it's not actually an especially high percentage shot he makes about a third of them but it's worth three points and so it turns out that actually being able to make a third of your three-point shots anytime you want with no help from your teammates is a fairly efficient way to play basketball it's also an incredibly boring way to play basketball and there's a beyond wanting to spend a minute complaining about James Harden there's a point here which is that I think there's a really interesting analogy between how we think about market economies and how we think about professional sports okay in professional sports is a system in which we set up a competition we ask people to compete within the reset of rules we've designed but the competition isn't actually the point the way that basketball owners make the reason the league is successful is not by winning the most games at the margin it helps a little bit but what matters is that it's an entertaining product now you could try to generate an entertaining product with central planning that's what world Wrestling does right you could generate entertaining problems by scripting out Kay now James I want you to dribble here now you try to block him I mean may the Harlem Globetrotters actually do that right you that you can create an entertaining product that way but the premise of professional sports is we're going to create the most entertaining product that satisfies the most fans generates the most revenue by setting up a competition and within the competition everyone's gonna try to score the most points right if James Harden tries to showboat and be entertaining we're all gonna boo him and say he's not doing what he's supposed to do but we're gonna trust that that competition is going to generate the spill overs that we actually care about as a society and that's actually the premise of setting up competitive markets in our society it's not actually important to us who is winning the competition in the markets or whether they're earning a lot of money doing it the profits aren't the point the point is that all that competition is supposed to generate spill overs for our society in terms of innovation new and better things higher quality of life better job opportunities for people but it's not inherent in the system that's going to happen and you get the same problem in sports for one thing there are very boring sports right like well actually curling we all pretend to care about once every four years but curling is actually a very boring sport it is you would not build a professional league around it even the very successful popular leagues face a problem over time which is that people find efficient ways to win within the competition that don't generate the spill overs that we care about hack-a-shaq James Harden and the step-back three the NCAA actually banned dunking in the 60s when Lew Alcindor later creme abdul-jabbar was too dominant then a few years later they said you'll actually be much more entertaining if people were allowed to dump they brought back dunking right in baseball we've had to lower the mound we've had to raise the man we have to juice the ball baseball is going through a crisis right now to where there's such an obsession with the efficiency of the three true outcomes walk strikeouts home run that less and less of the game is now dedicated to actual entertaining play on the field baseball is gonna have to do something about it but it would be ludicrous to step back and say about the NBA well guys this is just the natural state of the world that obviously natural law demands that basketball be played this way so if it's boring just fare and watch anyway we changed the rules and likewise I think what we have seen happen in the market economy is that over time under the set of rules we've set up and this has happened in other eras as well people have found really efficient ways to win within the game that do not generate the spillover benefits that we want and you could run off a list of things that I would call the step back threes of the modern economy leveraged buyouts merger and acquisition activity generally cost-cutting offshoring well anyone who has or will ever work for a consulting firm will discover that like 2% of the projects are actually growth strategy projects and 98% of the projects are how can we increase profit without actually making any risky investments and certainly without hiring any additional American workers because that's not actually the best way to make profit right now and so honestly that's not actually a that's not a criticism if as much as I distant he's doing what he's supposed to do but it's our job to say that the rules therefore have to change so what would conservatives say about economics if conservatives are actually ready to come forward and say you know what what we've been doing the last four years isn't working anymore and if we have conservative values we care about we're going to have to start talking about them and including them and how we talk about economic policy I think there are a lot of things we would think about differently oops so one is the importance of inequality and this goes back to the Valachi math I showed in the middle it is absolute Dogma on the right of center that inequality does not matter as long as everyone's absolute living standard is going up everyone's doing great there's actually a very famous speech by Margaret Thatcher in the House of Commons where she ridicules labor and as she does this whole thing with two fingers where during Prime Minister's Questions where she says she's basically got the upper class in the lower class and she says they would rather bring themselves down to here if it means everyone else will come down to here ever indifferent just like a funny British accent chortle but here's the thing if you're the lower group and you want to be living in a society with an intact social fabric opportunity for your kids markets that are responsive to your needs can you go out on a limb and say that this world is a heck of a lot better than this world okay and not just for social reasons not just come to apply to I feel bad about inequality it's not about feeling bad about inequality it's about all the very real intangible ways conservatives would take seriously the changes to quality and not nature of society and life in a society that looks like this and we'd want to do something about it we would think a lot more about the benefits of constraints on markets this is the James Harden point we would say actually it's our job to put constraints on markets and channel the competitive forces in the direction we want so one of my favorite examples of this is the tight labor market problem where the the free enterprise fans will will deliver you know page long ODEs to the extraordinary power of the free market and competitive forces to innovate and solve any problem then you say well here's a problem do that with the workers already in America and like in like their heads explode like that's impossible we're all gonna starve and the economy is gonna collapse but I don't think that's true actually I think if the key problem you had to solve to be a profitable businessman in America was finding a way to productively generate profit with the workers who are actually here I think we'd actually get a lot of really interesting competitive ativ competition that did that and I think we should on the flip side we would take a lot more seriously the costs of disruption we would stop saying and actually it's I'm a hoarder so I was I was looking recently at my first econ 101 paper I wrote at Williams College it's a little 500 word Iran on the wonders of free trade it actually has the sentence in there I'm not going to quote exactly but it essentially was people who lose jobs will move into other ones a but that's not true and if your theory of free market require of free trade and good economic policy requires people who lose jobs will move into better ones it's not a very good theory we think a lot more seriously about trade-offs between diffusion and agglomeration and and and I think there are two dimensions where this is important one is how we think regionally it's extremely fashionable to highlight the incredible power of agglomeration and the productivity gains we get from having economic that could be concentrated in places like San Francisco in New York now for one thing I'd go take a look at that research it's not not sure it's quite as good as as are our salutes to regression analyses would have us believe but more importantly there's a second side to the equation what are the benefits of non agglomeration or put another way what are the costs of agglomeration what happens to everybody else when you agglomerate cuz they're not all gonna move to San Francisco in New York and one way to see that is to ask yourself you know at the margin let's say we were thinking about where the next unicorn was gonna set up shop which would be better for America if it set up shop in San Francisco or if it set up shop in st. Louis you know glomer ation economics tells you would actually be better if they set up shop in San Francisco because they're gonna yell there's benefits they'd be more productive and efficient and successful I don't know that there's anybody who could look at the real world around us and say it would actually be be better for the total utility of this country to have that business based in San Francisco than st. Louis but we're gonna have to acknowledge that there's more to the story than just all of the great benefits of being in San Francisco so that's one the geographic one the second is we celebrate all the efficiency of conglomerates and there is great efficiency to that but conversely we also have to actually recognize the incredible value of local ownership right I don't deny that Home Depot will sell you a screw for less than a small hardware store would that's absolutely true but that's not the that is not the end of the economic conversation that consumer welfare maximization is not the only thing we would take seriously we would ask what the value of local ownership is to the fabric of the community what it means to the opportunities that people within that community have if there's an employer who's actually based in making decisions in the community and so forth and so that would be part of how we analyze things we would think a lot more seriously about value of non market labour and value of non market goods it's a really awkward problem for our market fundamentalism that most of the things we care about in life are not in the market like oops well like maybe we should have that in our models but if you were to kind of make your stacked bar of all the things that determine your quality of life and satisfaction with life the share of them that you actually buy and sell or have a price it's just not very large and so to assert that we are maximizing welfare when we maximize consumer welfare is simply a foolish assumption or assertion so I did goods first the Labour point is one that's been driven home to me especially over the last 24 hours I just put out a report showing how the costs facing a household have gone up much faster than a male wage earner as to his wages rise now one of the responses to that from the economists of the American Enterprise Institute has been well thank goodness the emancipation of women has ensured that both parents can work all the time and therefore they can afford all these things now that's true one of the ways households do manage to afford all these things is to have two parents working and in fact during the editing phase I was pressed a lot on the question well shouldn't we be showing this relative to household income I said no I'm not going to show it relative to household income unless you can tell me how I'm gonna calculate all the value that a parent who's not in the work force brings to his household in his community and we pretend that you can fully substitute that with a daycare center but that's not a full substitution at all and especially if we were conservative we would take much more seriously the value of all of the work at after people who are not in the formal labor force provide and the losses we suffer when we trade that off for labor that comes with a wage that we can count as GDP you can tell I'm getting the bond the page so don't worry I'm almost done we would think differently about the relationship between capital and labor I I for the life of me cannot figure out why it is a valid assertion that policies that maximize shareholder value in the short run will also be good for workers in the long run but policies that maximize wages in the short run will ultimately be good for shareholder value in the long run is not an equally valid claim kind of from a herbert Wexler neutral principles perspective I don't know how you can tell them apart I don't think either one is necessarily true certainly neither is true everywhere in all ways but to simply trust the first as a good way to run an economy and think that the second is ridiculous I think is an ideological commitment frankly that that comes at this point in good faith I mean if you're tell like oh it's the donors or something I don't think it's even true I just think it's something we don't think about and conservative someone we would grapple with the free trade free-market dilemma I place like Harvard I feel like I should have to bring a trilemma but I only have a dilemma and it's this free trade free markets pick one now supposedly free trade is how you show your commitment to free markets but if free trade means including into your market markets that are governed by authoritarian communists who wildly distort prices and incentives that I'm not sure how that improves the freedom of our market I'm talking about China and I actually don't know how you can be a fan of free markets and be committed to the idea that the freer market is better for innovation and all the outcomes we care about and then say that in policy terms the way you're going to realize that is to allow Chinese firms and laws to be a part of our market there's actually a trade-off here those don't go together and I think conservatives would much more greatly value the integrity of the domestic free market over the globalizing impulse and finally I think we would tell ourselves a different story about what it is we're trying to achieve here I think the the corner we have gotten ourselves into is that policy is focused on turning a bunch of dials that maximize economic growth and as long as we are maximizing economic growth all the other good things we want in life will follow again not a very conservative way to think about the world and in my view not a very good way to think about the world and it is that problems being born out in the fact that we've done a lot of dial twisting and yet our capacity to generate growth in our economy keeps going down I think it would make a lot more sense to flip that around and say economic growth is an emergent property of a healthy society and the way we maximize growth over the long run isn't the tax cut and Jobs Act it's a policy environment that's actually going to get the foundations of our society right and that when those things are right the growth will come as it did in an era when by the way Union concentration was five times higher and the top marginal rate was three times higher and the same goes for individual liberty and this is a point I think Senator Josh Hawley makes very well the way that you maximize individual liberty for our society is not to make sure we are maximizing the individual liberty of every single decision for every person at every point actually doing that is a great way to make sure you end up with an incredibly unfree Society in the long run and so those great things that are in the in the mission statements of all of our think tanks free enterprise individual liberty limited government I agree we want all of those things but the conservative looks at those things and says the way I get those isn't by just evaluating every economic policy with as Jack Spencer the head of economic policy at Heritage said just asking the question what maximizes economic freedom we get those things by actually being thoughtful about the policy environment that's going to build the good society that actually lets us realize those in the long run thank you very much well that was full of interest and and possible contention yeah all right so where do we go batted baggage shorts but I wanted to I noticed this conference in the summer in which you're in engages some debate on industrial policy of course Industrial Policy this is not the first time we've heard of it it was very prominent in the 80s and it was firmly rejected by the Reagan administration Don Regan who was great for quotes so I guess that my questions are the contours that you think would formulate an industrial policy that would be particularly considering that it's really just minuscule well I would take some issue with the idea that the Reagan administration rejected industrial policy at least to the extent that you know between the plaza Accords and the Japanese import quotas and what they did with defective Japanese chip makers there was actually a much higher level of protectionism aggressively advanced on behalf of industry then certainly we would associate with Reagan and in fact to me a mother that is in part why we have a Japanese auto industry in the US now in terms of what the contours of industrial policy would look like today I think there are sort of there are three components one is actually identifying some goals that we should have so actually being comfortable saying manufacturing matters manufacturing matters in ways that a drunk donkey won't be aware of in part because of the kinds of employment opportunities that it provides in part because what it means to the health of local economies that otherwise essentially have nothing tradable that they're able to produce because of what it means for broader ecosystems and the complexity of supply chains and the fact that what you make in one area affects what you can or can't make in others and what you make today affects what you can and can't make tomorrow and then of course there's the entire sort of national security side of it which which I tend to focus on less because I'm so interesting the economics but for many peoples actually be that should be number one on the list so so I think saying there's actually a policy valid policy preference here that we should have confidence lining up behind is step one and then I think there are two areas of policy one is on the trade front and going back to the Hayekian idea that some balance between imports and exports is actually necessary because you know other things equal actually I think free trade is great but it has to be free trade the word trade is actually super important in there if if we were importing 600 billion dollars of stuff from China and China was importing 600 million dollars of stuff from us I think we would be much better off than in a world without trade the problem is that it's 600 to 100 and that is both a problem because it means therefore we didn't see that real value add growth the other 500 is just domestic production that does not occur and secondly because it actually still is trade we have to send something back and what we're sending back is i/o use so so what you would what you would do about that you know first of all I think you would take a much harder line on China which the Trump administration has started to do but not in an especially strategic way you would I think very aggressively go after intellectual property theft market access issues and so on and so forth and you'd say give them that our our ideal is what I just described but given the choice between what we have and very little trade we would prefer very little trade and then at some point then you kind of have to put up your hands and say and now it's up and now it's up to them so that's one component then domestically I think we need to do a lot more to invest in our capacity to do those things well so one component of that that I think for instance the German system actually does very well is essentially public-private partnerships that commercialize technology coupled with a much greater R&D focus at the university level on things relevant to manufacturing whether that's material science logistics robotics and so forth so there's that component of it I think we need a totally different approach to environmental regulation that says yes there are negative externalities associated with big industrial products projects and there are positive externalities and relative to where we are now the positive externalities are actually a lot bigger and then I think we need to have a very different approach to the education system that says batch you know bas well in two parts one to the extent we are subsidizing higher ed it is for engineers because if had step one we said manufacturing is more important than dance then it's step two we get to say we're going to subsidize engineering degrees and not dance degrees no offense I don't know if you have a lot of dance majors at these but dance is wonderful the expression of the human body and all of that but then also we shove a we should be investing much more intensively in on college pathways and actually putting people into the workforce sooner particularly people who can and will excel in exactly these kinds of jobs if we subsidize their movement into them the way that we currently lavish money on people who are hanging out at places like this so those are sort of the components that I would lead with yeah land professor Landy in equality discussion in the context rice of rising rising boats are you saying even in a economy that's growing satisfactorily you'd still would worry about inequality there's an old argument by wonderful economist Hirsch who you're probably familiar with about positional goods and certain things are can't be expanded and I understand that leadership and beachfront property but but I think you're trying to dig deeper here yeah so dig deeper yeah so so positional goods is certainly a component of it and like you said that's that's nothing new to recognize that those are important I think the two other elements that that and I'm doing I'm working on this I need to formalize it better so this is a little [Music] unstructured but that the two elements that I think are really important one is the way in which markets will tend to focus on and meet the needs of people who have a lot of disposable income and I think what we've seen in recent decades is a shaping of our society and an economy and focus of investment on the upper class consumer and if you if you have a huge divergence in economic well-being even if you're still seeing absolute material gains at the bottom I think you still end up in a position where essentially the economy and society aren't for you anymore in a sense and but yes there's actually a very important emotional and cultural element to that but I think there's a also a very tangible utility element to it so an example would be well so two very different examples one example would be vacations so 50 years ago the standard family vacation was a road trip to national phenoms wildly overgeneralizing road trip to national park and you stay at the Howard Johnsons today all of our investment in hotel and vacation amenities are from a profit maximizing perspective wisely focused on much higher-end vacations and if you are someone who has a little bit more income than you had back then you could still do the road trip but we've focused much less on the quality of the natural park experience and the motel is going to be not nearly as good and so on and so forth and so that's a substantive utility issue and then along with that comes the problem that also the idea of doing a road trip and staying at the motel is now a punchline on for Saturday Night Live not something to be proud of taking your family on a totally different example the other extreme that I think is really interesting is in a market like health care where you have risk sharing and so whether or not you as an individual can afford and would be best off in a system that frankly said some you know some of the highest end treatments are just not affordable to you your insurance premiums still reflect a market that assumes that everyone should have access to those treatments now could you address some of that with deregulation and offering different kinds of insurance products different people maybe but you'd still have a problem that then among other things all of the best doctors are gonna be serving people are in the high end of the market if you want to try to hire a teacher for your community you can't pay them as much as the teacher in the higher community so I think that divergence is really important second category is network effects there's a book I highly recommend by a Stanford economist called the human network and it takes all of the very interesting research being done on network theory and dynamics of networks and applies it to human relationships and what he shows is that human networks naturally I'm gonna forget the cool technical word for it but sort of separate and when you have separation networks you then get very interesting system at systemic behaviors so the example he uses is let's say you have two clusters of people do you have his name something Jackson Matthew Jackson all right the human network reviewed by yours truly in the Wall Street Journal so the example he gives is okay let's say we have two clusters of people and let's just find some basic rules let's talk about dropping out of the labor force and let's define the rule that if half the people you know drop out of the labor force you drop out of the labor force too and he says all right so let's draw this network and let's say there are sort of a relatively high level of connections between the two sides of the network and let's call these a high-income and low-income Network you can pick a bunch of nodes and have people drop out but it doesn't cascade because people also still have connections to the other side once you thin the number of connections between the two sides below a certain level it Cascades and instead you end get to an end state where everyone's out of the labor market now in the one hand that's a totally abstract kind of theoretical thing but I think it's describing something true that as we get greater cept I Virgen Singh incomes we naturally get greater divergence in in where people live in what their networks are I think people you know particularly who go off to college and end up with networks based around colleges end up with a much higher share of their relationships not even being local and you lose all of the cross subsidies that you used to benefit from in a community by virtue of being the low income people in a mixed company so those arts competition yeah Susan Cho maybe you could say something about how this would translate but the second thing also just stemming from what you just said I'm very I'm extremely sympathetic to you I know you know but I'm not consumer I'm not a conservative but I I love almost everything that you say okay but it's all in the main right it's all in the name I you speak a lot about local community and maybe this is where the the conservative thing kind of does a little attune and all that but we're also you also were very careful to to talk about our country and our national interests and this is also we distinguish you from some free-market people say no the relevant no you know it's the whole world and if we're you know it's not our it's not our benefit it's the whole world's benefiting people aren t are richer and so on so what if some of us are poor it's better for me but you're you're focused on on our country and its interests as a legitimate kind of parameter you tweet too so if that being the case what about civic identity nationally and not simply locally in other words I'm wondering if you could say something about the way inequality harms a sense of net when when everybody took the train whether it was first class or second class you know use great old movies from the 30s you know the 20th century when you know when the rich are all in their private planes and the rest of us are sort of you know in the steerage of the regular it sort of destroys the sense that we're all in it together which can have really damaging repercussions down the road when the rich lived in gated communities and they don't have to mess with traffic and and so on so what about that part of it in other words the national interest the political interest which has to be more than local is there some way in which you are conservative critique of the market would would translate yep nationally yeah so I think the National component of it is is very important there's a very interesting tension within these right-of-center debates right now which is that if you know if you were to go ask people like well what do we call Orin that was weird they'd say oh well he's a national conservative that's that's actually the term being used for it right now because this idea of a national identity as contrasted with the kind of global who cares as long as GDP is going up model is is a distinctive component of it but you're right that it conflicts somewhat with the local emphasis and so one thing some of the folks being called national conservatives say is well it's all relative but the world where the kind of neoliberal alternative is globalism then yes we would like to say let's not forget about nationalism but our ideal isn't well let's do everything at the national level our ideal in a lot of cases is let's get back to something more local so I think there's a lot of tension in the relationship between those things in my mind the national component is is incredibly important to focus on for two reasons one is that our politics is national and our political that is the the level at which we have a lot of our fights and so from one side I think it's incredibly important to reject the idea of well if some of us get poorer but we helped people in other countries that's you know that's welfare enhancing and good policy if you want to make that case as a matter of foreign aid that's fine but if we're going to be a democratic republic then the constituents are of the elected representatives are the interest group and that's not a xenophobic or provincial view that is a description of how it has to work or everything else actually breaks down when you start pulling on it so that's why I think is he still that's the defense of America first yes absolutely which by the way was John McCain's slogan right like ever that's weird like yes actually it's like I saw his country first but yes it's actually bizarre that someone would try to contend that they want to be a leader of the American people but they are not going to advance the interests of the American people I don't I don't know how you go down that path coherently the second component I think that's really important is is an economic one which is that a lot of the ways in this goes to this kind of free trade versus free markets point one problem is you have an awful lot of countries that are not free markets at all another problems you have ones that are just at wildly different stages of development and the idea that you will improve the well-being of the average person in the more developed country if you redefine the relevant labor market as developed country plus extremely underdeveloped country again it's just not supported by actual economics now you can say well you're going to generate more overall output and redistribute to those people but if you're talking about how the labor market feels to them it's not going to be good and so I I think it's you know if we had relatively free trade and common standards and so forth with the EU that's fine that's not that's not the issue the issue is the model that says we should expand our labor market to include markets and wildly different stages of development I think has very serious consequences and and so those are the ways in which I think the the national border is really important and then the the point you're making sort of out solidarity I think then then goes to both of those because as a political matter I don't know how you operate a national political community if you've thrown out the Solidarity in the sense that people actually have some responsibilities to each other that is different from their general responsibilities to mankind and then economically I don't know how you actually get the market outcomes that we want if people aren't bought into the idea that we have that and that's that point I made about how we should actually be comfortable with constraints we should actually be comfortable saying you as a capitalist in this country capitalism is not a system of people with capital get to just go get whatever they want from whoever they want capitalism capitalism is a system by which capital works with labor to generate good outcomes and we are going to force you to do that yes I'm sorry but what can you add one other thing the I just want to thank you for making your point out that you're not a conservative but this all sounded good because I it's a very important point which is that one thing that's going on here sure but but saying that's going on here is a realignment and one of the reasons I think what I'm talking about is not just to me at least intellectually satisfying but politically important is that that libertarian group is actually is loud and extremely small and trading those people out for the much much much much much larger group of people who would frankly find reasonable non conservative that's what yeah that's what the political scientists call you is also a massive political win in the long run thank you and I see you're launching so like I offer some question comments in the spirit of unsolicited advice I guess I would just start by saying that you know there's a no no true Scotsman fallacy problem here I've actually there been a number of debates that I've been able to attend recently or see on the televised what is conservatism a whole number of people will assemble and debate it and I guess 90% of the people present normally don't agree with each of the speakers but they still hold these these these events you know in listening to the talk and to me the big things that were missing if this was a conservatism that I I'm skeptical but if I was to sign on to was that there's not very much in the way of discussion of innovation and there there's a kind of static element to the way you discuss the economy sort of the view from washington d.c you survey this powerful economy which is number one and how shall work best for the american people and we can't just believe in free markets that's going to be humane and nonsensical when your example that I would like focus on was when you said what is it really better for a unicorn a unicorn by the way is is not a mythical creature or 1 billion dollar plus market cap new startup companies so would it be better for them to start up in for a unicorn to set up shop I think was your worden in San Francisco or in st. Louis and you said I think everyone would agree it would be better for st. Louis there's a problem nobody is setting up shop in st. Louis because Unicorn set up shop when there's four or five people working for them with almost no money and they have to set up in San Francisco or somewhere like that in order to grow and become a billion dollar company they can relocate to Texas where taxes are lower and the Conservatives are more free market so I just wonder if in what's how do you see this dimension of competition and innovation especially international again the discussion of China was centered on trade and you mentioned also though that we should have we should be able to say I guess sir you should be able to say as a conservative we believe in manufacturing that's great but our semiconductor and you know chip manufacturing and assembly of products we don't have the United States does not have the capacity anymore we allow that to see to China and other countries South Korean so so it's great to say that we believe in manufacturing but we can't manufacture Apple iPhones here it's not possible in the next least five years so I just sort of to me that was a missing piece but I have a suspicion that you have some ideas about that no it's very well what I mean I would say actually if there were some reason why we needed to manufacture iPhones in this country we could manufacture iPhones in this country in one year I mean like five years is longer than the Manhattan Project took so I'm pretty sure we could manufacture an iPhone here in less than five years when by it when you can buy Samsung content the price it would go well that's a different question you you were talking about it's a capacity and engineering question these and and III mean I'm being a little bit pedantic but I think is a really important point that we have this like well that like that's not how things work and that's not how things work because we say that's not how things work there's the the actual constraints on things like what can you actually manufacture there's a there's actually very good research on the question but if you did manufacture something you know an iPhone in the US how much more expensive would actually be and putting aside the problem that we gave up all of our supply chains and the answer is not that much more it would be more expensive but Labor's not that big a component of it to begin with and while US workers cost more you but all you they are more productive and and so on and so forth so so I think there's a there's an element of the market fundamentalism I think we have to resist is to defend the market outcomes that we see today as inevitable and enviable because they're not they're a function of what we've set up around them second and this is necessary disagreeing with you but I think it's worth highlighting it is it is extremely funny and frustrating to see how we have shifted our argument from well it doesn't matter what we make here Michael Boskin was George HW Bush's share of his council economic advisors famously said potato chips computer chips what's the difference and Christina Romer Obama's chair as recently as 2011 or 2012 said essentially the same thing about hair dryers and haircuts and then once it's all gone the exact same people turn around and say well obviously we can't make it here be anything here because all the supply chains are over there now and it's very frustrating and so if you said okay well we want to do something about that what are the kinds of constraints one thing you could do is you could have local content requirements like clearly we need to make I phones here but if you take 5g as an example if you said actually build it you know building out 5 G's Horton and 5g technology and whatever we deploy in the future for our kind of nationwide communications networks must be made with things sourced domestically now from where we stand today that's like well that's a crazy policy surely of like everything would we begged Germany and we begged the United Kingdom and they rejected us so I'm not sure what you're referring to 5g we've tried to block non-us technology from those markets no we tried to tell them not to buy a wall way and we wanted them to use Ericsson or something else right I'm saying what have you said in the u.s. it's it's gonna have to be built here and if you did that and you actually created the latent demand for the stuff then you would in fact very quickly see a lot of investment flow to doing exactly that because that would now be a good way to earn profit in our economy so you can do it I think the you know the unicorn example is is then also it is a different flavor of exactly the same thing which is yes you're right today with everything else exactly the way it is obviously the unicorn is going to go to San Francisco or the respective unicorn would want to set up in San Francisco but but that's the problem the question is should we step back and say like well that's efficient let's move on to the next topic or should we say gosh that's actually probably not a great trajectory for our development and certainly should we have said 20 years ago that's probably not what we want to have happen over the next 20 years so what is it that sends everybody to San Francisco and what policy levers might we have now one example of a policy lever we have is all of our funding support for higher education if we said federal research grants are now capped by MSA so yes everyone can try to work in Cambridge and Palo Alto but they're going to be competing for the same this much grants and there's gonna be just as many grants also available to people at the very fine universities in st. Louis you would very we spread out the research efforts nationwide now I anticipate some of the room is thinking oh but the research would be far less productive if it were spread out that way than a hazard is concerned which I would say first of all that is that is a merely an assertion for which there is with which we don't actually know is true and secondly yes there are costs and benefits to things and if the result of this were some marginal decrease in the rate of certain types of innovation but a much more broadly diffuse allocation of talent and innovation I think again in the long run that would probably be a lot better so we could do that we could also design our tax code in a way that your marginal tax rate was Dedic dictated by the wealth of your zip code not just your personal income like well that's a crazy outlandish thing like no it's not till 1913 we do you have any even have an income tax why don't we say you're the top marginal rate is 20% in most of the country going up as high as 80 percent if you choose to live in a place where the average income is above a million dollars that's actually not a rhetorical question why don't we do that ask Elizabeth Warren very much and and there are many things we can do but my question is what will we do in other words as a conservative sort of more impressed by political and economic forces and and sizing up the power of nationalism let's say in China you know if one was an objective observer would wouldn't say I mean whenever likes to say anything in praise of despotic country but it it does seem that the Chinese can draw on a certain kind of ethnic attachment nationalism and and and and and and and and asked for sacrifices from its citizens I guess I don't see America now being able to to do in the same way and and and I'd like to think it was possible but but but but I I really doubt it so for instance it does seem to me if we call China's bluff and say well it's either this or well we won't have trade with you you know we would win that I do think we would win that but will we do that because I would involve a huge disruption and sacrifice I mean one thing I imagine would certainly happen is that stock values would fall dramatically and a lot of people would be angry and then eat any of us we have elections and and you know those those there's the ability of Americans to say well you know it could be tough it's gonna be tough but we need to do this as a people and so forth I hate I can see that the Chinese constantly doing that I and they're resonating and but but with us no and 5g also is is tamina a a full example for the u.s. shocking because there's no question that that's been the strength of the US by kind of technology and IP for so long and the Chinese have been so far behind so ridiculously far behind and then get 5g Huawei run by you know military officer of China they say on this campaign very deliberately engaging promote acts of theft against American companies and and and and Japanese companies and then they and and and they end up holding the vast majority of IP on 5g the only American company that comes anywhere has any any shirt that you could speak of and this is its way behindest welcome and what's striking about welcome is it's being sued by the US government why complaints of Apple is one of the greatest friends China has is that and so that again speaks to I think the the lack of strength of Poker national nationalism that's partly the effect of a long run effective of liberalism I could say by anyway I just want you address that that question that factor yeah I mean I certainly think it's a fair point I you know I'm not here to say Mitch McConnell's gonna Ram this all through the Senate next week but I do think there's a again problem of looking at where we are and not where we should be going which is like saying Peabody Church would say like I apologize for my Peabody judge meme but what I mean by it is that I think what you're describing exactly right and in a sense exactly what I mean when I say that we have not had conservative economics in this country for the last 40 years and that that has been not just detrimental to a political particular political coalition I think it's been detrimental to the way we as a nation think about a lot of these problems that these fights have and and the way that we have been conditioned to process these issues play out in this incredibly narrow space between classical liberals and progressive liberals where we all agree the goal is to grow the economic pie and maximize consumer welfare and the only question is which set of policies grows the pie the fastest and how much cutting of the pie to do and and when you are in that and by the way and we are both going to assert that these are all purely win wins where I like right up through the green new deal and and massive tax cuts like equally ludicrous things to claim our pure win wins and so merely as long like there are no trade-offs in life thanks to the wonders of this weird ideology and yet if you step back and like try to pull the actual American people on what they believe what I am describing and calling actual conservatism I believe the best day suggests like you get about 40 percent of the country for that there are kind of significant segments that are kind of pro-business you know conservative and sort of very progressively socially liberal and then there's like the two percent that's actually like I'm socially liberal and fiscally conservative Michael Bloomberg libertarian and so there's all sorts of interesting political science questions about why we have nevertheless ended up where we have I recommend Michael Lin's book the new class war which I think looks as a very interesting take on kind of how these political Continuum's have developed but I don't know what would happen if people actually started talking this way and if if we have learned anything from Donald Trump and Bernie Sanders it's that they're an awful lot of ways to get up and talk that people thought like well oh so you can't talk like that that are in fact wildly more popular than the way everyone was talking and so obviously we will not be chime not you know we will not be China and and and proceed down that path but America has a actually pretty good track record whether it's the repeated religious revivals or you know what what were periods of you know an extremely protectionist regime through the late 19th century kind of very aggressive or on poverty in the 60s of actually doing some of these things and so no we won't get a hundred percent of what I'm talking about but I certainly think we can do better than we're doing now I'm gonna ask you a question because no one else has asked yet about about the family and and women so I I censor well first and there's an emanation of pro-trump from what you say and also a penumbra of anti feminism some are that you raise doubts about the value of of a two-income family which actually Elizabeth Warren has herself as well so what about that and what would you say but it's probably by what you understand the conservative interest in the family to be well when you say anti-feminism I think the question is which feminism true the the the basic what I would call actual feminism of saying that men and women should have political economic social legal civil equality and the same set of options open to them I am a hundred percent on board with the idea that the outcome we should be striving in society is a world where 50 percent of the senior executives in every fortune 500 company are women which is an actual like thing they are pledging I think is absurd and it is not reflective of what women say they want and for women who do want that they should absolutely have that opportunity and should not have any obstacles to pursuing it but if you set that as the goal then you actually end up with a very strange problem which is that when you're setting your hiring policies and promotion policies and so forth you actually have to discriminate against people who want anything else you actually have to advance a model that you know we have to go down this path of sort of let's make sure we have a paid leave system that ensures that women are working right up until the moment the child is born and surely will return to work shortly thereafter and don't you dare suggest that you have any sort of other flexible options that they might prefer because if you do then that's gonna ripple forward into different outcomes down the road and so it seems to me that we both should have a much more aggressively pluralistic acceptance of what people want and recognize that therefore the outcomes we are going to see based on what we know people say they want are not going to be perfectly statistically distributed and then secondly I think we should actually be comfortable having a view of an actual affirmative preference which is that we should want families that have a parents staying home with kids especially when they're young and it can be either parent and it's for that family to decide but when we are thinking about the well-being of the children I'm it's actually funny well places where there's actually very good consistent social science research right now is that daycare really is not very good for little kids like studies keep coming out on that and everyone keeps getting very upset about them and then they keep coming out and like oh like really are we gonna be stunned that like the way that humans evolved to raise children and have in all cases throughout history like is proving to be a good way to do it I think we should probably be comfortable saying that and then we should also equally value all of the other things that it means to have somebody doing work outside the market which we don't today okay but listen or aren't you making in regard to the family an exception to your rule that consumer preferences as they are now shouldn't rule oh no because yeah dark isn't it the case that either your for feminism or you're against it and it's true there are different feminism's but most of them favor the principle that a woman should leave the house and have a career and get the kind of same kind of honor in respectability in life that that a man can get well first of all don't you either have to push in favor of feminism or against it don't raise your toe peon I would like to I would like to disassociate myself from that comment first of all no I reject your you are for feminism or against feminism because I think it gives far too much power to radicals to define the term in ways that is not what most people actually understand the term to be and and really confuses the debate so I think to the extent that the term has therefore become unuseful we have to talk about what we are actually for or against and that's why I distinguish civil political legal economic equality of opportunity from seeking perfectly distributed outcomes with respect to the thinking about how things are versus how they might be I would speak in my own defense in in two respects one I am speaking about how people would like it to be that is people consistently report on surveys women consistently report on surveys wishing that they were not working full time between and are dissatisfied with the extent to which they are working particularly when they have young kids and both men and women across races across education levels share that view so it is in a sense just as as people have consistently for a long time said they wish they could have more had more kids than they have that's one component and then the second component is the idea that sort of career success is the measure of sort of honor and standing in a community I'm not going to deny that there are places where that is the case but I am going to deny one that it is widespread the case that is it's very funny that the exact same progressives who insist that obviously it's incredibly important that women be in the work force to accomplish those things also then turn around and will abet all of the horrible jobs and terrible employment conditions and how bad jobs are I mean it's fine to say like well obviously being a Harvard professor is great but the idea that like raising a family and being an active of a community in doing all of those things is like less fulfilling or rewarding or honorable or respected than the median job in this country I don't think is true and to the extent it is true that is something we should change and be very comfortable standing up and saying you are wrong very good those are very anti-feminist remarks those are extremely Pro feminist remarks okay more people working isn't just a yeah I I disdain universal basic income the excuse me for so for a couple of reasons one and and this sort of goes to the substantive how did the the components of this fit together is it seems to me the standard that we should be calling for is self-sufficient households that the family is the relevant unit of economic analysis and a family should be a productive contributor to a community and able to support itself not obviously by growing its own food and make its own medicine but by creating as much value into the society as it needs to take in the market as it needs to take from it I think that that is a very good thing to focus on in part because of the implications for life satisfaction and a meaning and community and culture but also because of those ends we were talking about like limited government that if what we actually want at the end of the day is the Society of Free People in limited government I think that has to be the table stakes that we are building around and universal basic income I think abandons that there are two more political reasons that I strongly object universal basic income one is that it's a it is a release get-out-of-jail-free card it is the upper-class saying wow we are going in a bad direction I'm not willing to actually contemplate any changes or sacrifices of any nature so please let me know to whom I need to write my check and I think we need to take that off the table and say no no the only acceptable substance is the ones where there are actual sacrifices made to try to correct these challenges and then the second problem and this goes the question of like well is it a good idea like what would the policy effects of it be I am a huge skeptic of evidence-based policy and the impulse to like well let's just pilot it and send people checks for a year and see what happens because choosing a random group of people and sending them a check for a year is called a lot that's that's the lottery that's that's not an actual measure of what it would mean to a society to shift to a model where it is no longer your responsibility to provide for yourself and your family and I think we have a much better proxy to look at which is how we raise children in this society because we actually we can look around and we can say actually gosh most people especially the elites who are calling for this stuff actually have enough money to set up the equipment of a basic income for their kid like if we actually if we actually thought that was the right environment to raise kids in you can do it right now and this isn't like a Chicken Hawk why don't you send your kid off to war argument because there we all agree that it is a sacrifice to be sent off to war here the claim is the basic income is actually good for the recipient so if you actually think the basic it's good for the recipient well then why like by all means let's get started but we don't because in fact we all know and again this is a conservative assertion about things we can say about human nature without having run a pilot that that is a terrible model for society and the incredible tragedy of the basic income is that there is no opt-out so the basic income is the equivalent your crazy Uncle Sam showing up at Thanksgiving and telling your kid he just set that up and then come and come by every few weeks just to remind your kid that when they turn 18 if they just want to go smoke pot and backpack around Europe they can do that and as soon as families are like yeah that's great I hope someone does that like like then we will be headed toward a basic income and and until then I think we should be comfortable sort of pointing out it's Christmas yes my questions I mean part of what you're saying I think goes back to the thing and you showed some economic statistics going back to the 70s and pretty good post-war where things were quote unquote good basically for the baby boomer generation and now I guess the premise is they're not so good for a lot of people is that kind of do I hear you kind of saying that is that are the part of what's going on here you're saying capitalism isn't working for a lot of people now so you've got some prescriptions in here taxes and subsidies and things is that doing kind of here do I have that right yeah the way I I get very comfortable yeah description because then we have to get into a whole of like well like how we define that what the I think the point that I'm trying to make with those illustrations is that markets can operate in different ways and generate different kinds of outcomes and the way that they were behaving in the outcomes they were generating were better and closer to what we would like to see markets delivering than what they are doing okay got it okay so there's my question so if we think about the post-war generation up through the 70s the rest of the global economy was sort of a shambles Japan was destroyed Europe was destroyed we kind of had it all to ourselves so we're kind of overachieving maybe if I don't know if that's the right word but we're overachieving relative to where we might have been otherwise and then what happened Japan came back and they took her on in forestry you know a lot of other industries and then China came in and it sort of the same thing so now we under it so maybe the relative we look back and we say gosh they can really good in the 60s 50 60 and then they deteriorated and now they are really bad quote dad but maybe they're the actual sort of equilibrium is in the middle somewhere and maybe police curse cookin - you're saying they're not the right person to kind of in a cycle maybe there's some self-correcting kinda it's gonna over time if you like capitalism the invisible hand work a little bit I mean that strikes me as a draw as an example of the drunk donkey fallacy like I don't I don't I don't I don't know but the reason I say that is I I don't I don't think that there's anything about the invisible hand that would do that that's not that's not the claim about the invisible hand and so I would be and and that's why I like this Hayek quote where he's just a certain sort of faith in spontaneous forces so much of Hayek's work is fantastic because because he actually does the work to say like here is how the price system works and how these things translate and why you get the results you get and that's fantastic but when you cross over to the well because we have an intuition that markets are good we're just going to start asserting that if you just let the market do its thing some good thing we want will happen I just I don't think that's that's a valid a analytical approach you would have to tell me what it is either empirically that you're observing or that you expect to happen that would cause that upswing for many years gave us a huge tailwind and then now it's come back in in the last 30 or 40 years giving us a huge headwind and maybe now things China you can see jobs are moving from China now to like cheaper places like Vietnam so maybe the I'm not sure that helped I'm not sure how that helps us I mean there are four billion people poorer than the Chinese right but I want to do wages in China were really really low and now they're coming back maybe they're correct itself it's a self-correcting thing and that will happen in eventually two and it'll sort of be good for everybody like so like 200 years from now after the entire I apologize that wasn't that was a little bit snide but this is yeah I don't I don't I don't see any actual mechanism there that you've described but beyond faith that markets are good so we should try to tell it just so story about that I'm also not sure about the the Tailwind story because it's on the one hand it's absolutely correct that the rest of the global economy was was in shambles but levels of trade were actually very low so it's not the case that we were doing some sort of East Asian style export led growth it's just a case that we were just kind of doing our own thing would be a fair characterization in which case I would say like well then isn't that just an argument for no trade I don't think it is and there are much reasons it's not but if what you're saying is well gosh when there wasn't global trade and we just had our domestic market we had all these great things and high levels of innovation and then once we start having a lot of global competition it went away like you could conclude some different things from that it's all I'm saying what I'm saying we look back and like my parents they had you know they're you know long retired now they had things Cornell Coakley and now we get their people Millennials don't have things good at core it is sort of a narrative the you know it's partly because of those reasons all those people came back in the workforce and depress wages here and why not so I think we look back to make the comparison that you made you know the distribution chart that you showed and how it's changed since 1979 you know some of that always sort of forces that you know are official in a way so maybe maybe this is then we look back we say things are really good now they're not so good maybe the comparison isn't really back then then we wouldn't see the you know I'm saying no look and that's fair my organism that will we should just go back to the 1960s or you know well let's get back to 90 percent marginal tax rates and 40 percent you know unionization it's that there is nothing inevitable about what we have right now and we should feel comfortable saying that what we have right now is not actually what we want and that we're probably gonna have to do something about it one more question to empower women talk about a lot of different changes kind of happening and saying that is there another country that you feel does it better in terms of bouncing market forces regulating them in the way that serves the national interests the people is there an example there I mean there are there are a bunch of sort of of examples of components of it and so you know one thing I think if you look at at Northern Europe one of the things to think tour in Europe does very well I would say is they have an aggressive affirmative emphasis on maintaining a manufacturing sector and they have an education system that much more heavily emphasizes non-college pathways yeah and Germany Switzerland some of the Nordics sort of you're talking more like Denmark Netherlands etc so like they I think do that sort of component of it very well some of the East Asian countries I think have done a much better job of frankly resisting globalization in a sense and actually maintaining a domestic set I mean obviously they trade a ton but a sense that the domestic economy is operated for the domestic workforce and that I think there's a higher level of solidarity that comes up comes with that but there's also a much higher level of ethnic homogeneity as well and then a really strange example that's unfair in many ways but also fascinating is Israel Israel is fascinating because first of all the its fertility rate is through the roof and not because of the Orthodox Jews the secular Jewish fertility rate in Israel looks unlike anything else in the developed world they have and they have pursued an incredibly aggressive industrial policy to become this you know incredibly diverse advanced innovative economy from a starting point where I don't know what theory of comparative advantage and economics you could come up with where you're like well looking around like Israel is going to have more companies on the Nasdaq than like any country but you know than any country but the US it it it had a it has a much more intentional approach now there are some very unique things that you can't replicate about Israel like the fact that it is under constant existential threat which helps with the kind of cohesiveness like the fact that it has a Universal conscription program that that accomplishes a tremendous amount that deep prioritizes College builds across socio-economic networks and so it's not like you'd say like well we should just implement those laws but I think it is informative to look and see that you can have that that there are different knobs in a modern liberal society that can be in very different positions and can actually generate very different outcomes well thanks this has been wonderfully disruptive [Applause]

Channel: Program on Constitutional Government at Harvard

Views: 716

Rating: 5 out of 5

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Id: kd591AkzFQQ

Length: 97min 1sec (5821 seconds)

Published: Tue Dec 22 2020