The Standard of Living, 1919 vs. 2019

good afternoon everyone my name is Tom Gilligan and I'm the director of the Hoover Institution 100 years ago Herbert Hoover then station in Paris has director of the American Relief Administration a delegate to the post-war Paris Peace Conference telegraphed home to California with the $50,000 pledged to build a World War 1 collection at Stanford University we celebrate this pivotal moment as the founding of what was to become the Hoover Institution whose overall mission is to recall the voice of experience to make and preserve peace and to sustain the safeguards of the American Way of life in recognition of this momentous occasion we have organized a centennial speaker series titled a century of ideas for a free society the series features 11 panel discussions which take place over the course of the year to showcase the rigorous scholarship and research central to the institution's missions and values before we watch a short video to acquaint you with the history and founding of the institution and the legacy provided by Herbert Herbert Hoover let me briefly introduce the participants of today's discussion which is entitled a century of prosperity a review of the living standard between 1919 and 2019 our first panelist closest to me is Terry Anderson Terry is the John and gene Denault senior fellow at the Hoover Institution the past president of the property property and Environment Research Center in Bozeman Montana and a professor emeritus at Montana State University Terry is one of the founders of free-market environmentalism the idea of using markets and property rights to solve environmental problems most recent book unlocking the wealth of Indian nations was published in 2016 and explores the institutional underpinnings of American in Indian Reservation economies on Cogan on the far end is the Leonard and Shirley Ely senior fellow at the Hoover Institution and a faculty member in the public policy program at Stanford University John's research is focused on US budget and fiscal policy federal entitlement programs and healthcare his latest book the high cost of good intentions was published in 2017 and received the 2018 Hayek prize the book traces the history of u.s. federal entitlement programs from the Revolutionary War to modern times the Ohanian is the one sporting the interesting shoe he's a senior fellow at the Hoover Institution and a professor of economics and director of the Edinger family program and macroeconomic research at the University of California Los Angeles he is the associate director of the Center for Advanced Study in economic efficiency at Arizona State University and a research associate at the National Bureau of Economic Research where he co-directs the research initiative entitled macroeconomics across time and space he is also a fellow in the Society for the Advancement of economic theory his research focuses on economic crises economic growth and the impact of public policy on the economy George Shultz is the Thomas W and Susan B for distinguished fellow at the Hoover Institution George has had a very long and distinguished career in government in academia and in the world of business he is one of only two individuals in US history who has held four different federal cabinet posts he has taught at three of the country's most greatest universities and for eight years was president of a major engineering and construction company when asked to provide an introduction at Hoover roundtables and conferences he likes to keep it simple by saying George Shultz United States Marine the moderator for this panel is Peter Robinson the Murdock distinguished policy fellow at the Hoover Institution where he writes about business and politics at its Hoover's quarterly Journal the Hoover Digest and hosts Hoover video series programs host the video the Hoover's video series program entitled uncommon knowledge now please enjoy this introductory video and the program will follow thereafter the Hoover Institution is the nation's preeminent research center dedicated to generating policy ideas that promote economic prosperity national security and democratic governance Hoover research has directly led to policies that have produced greater opportunity and freedom in the United States and the world how has Hoover achieved this distinction by assembling an extraordinary fellowship of policy oriented academics and scholarly practitioners by offering open access to a world renowned library and archives and by resolutely focusing on ideas that define a free society Herbert Hoover is the founder of the institution that bears his name after graduating in Stanford's pioneer class in 1895 he became a successful mining engineer renowned humanitarian and president of the United States while administering famine relief to Belgium during World War one and participating in the subsequent Paris Peace Conference Hoover recognized the importance of collecting historical material that could yield knowledge about preventing a recurrence of the calamities he had witnessed in Europe in April 1919 he pledged $50,000 to Stanford University to support his war collection we celebrate this pivotal moment 100 years ago as the founding of what was to become the Hoover Institution by 1929 Hoover's war library contained 1.4 million items and had already become the largest and the world focused on the Great War and it's aftermath collecting expanded to include material related to social political and economic change in the 20th century Hoover Tower was completed in 1941 to house the rapidly growing library and archive in 1957 the collection was definitively renamed the Hoover Institution on war Revolution and peace Hoover's vision for the institution is captured in a statement to the Stanford Board of Trustees in 1959 the institution supports the Constitution of the United States it's Bill of Rights and its method of representative government the overall mission of this institution is from its records to recall the voice of experience against the making of war and by the study of these records and their publication to recall man's endeavours to make and preserve peace the institution itself must constantly and dynamically point the road to peace the personal freedom and to the safeguards of the American system by the 1970s the institution was generating influential research on government regulation tax policy national security healthcare social security energy and proposals to limit government expenditures many innovative public policy proposals developed by hoover fellows were adopted in the 1980s and Hoover contributed influential policy ideas for countering communism that ultimately led to the collapse of the former Soviet Union in 1991 the all-volunteer army the flat tax the Taylor rule for monetary policy and school choice and accountability are all transformative policy ideas generated by Hoover fellows Hoover's timeless fundamental values of freedom private enterprise and limited effective representative government derived from 100 years of scholarship and the lessons of history the Hoover Institution is poised for even greater impact in the years ahead in forming the marketplace of ideas advising the country's policy makers and illuminating the road to prosperity and peace in America and around the world this lecture series brings together hoover fellows to discuss how the ideas and values that have undergirded the institution for 100 years remain crucial in understanding and formulating public policy in the 21st century this past century has witnessed dramatic improvements in our standard of living the prosperity that we enjoy today could hardly have been imagined a hundred years ago the focus of this panel is on the sources of that remarkable advancement we'll consider the role of governmental and non-governmental institutions and of leadership and we'll consider the importance of Economic Policy property rights reward individuals who invest in human resources physical capital and resource stewardship that explains why the United States has such a productive labor force uses its resources wisely and takes care of the environment property rights are the key to prosperity good economic policies have been crucial in creating the economic growth and prosperity that our country has enjoyed America's historical record and considerable scholarly research shows that low tax rates limited regulation free trade and sound monetary policy other foundations of the free market process this created so much economic growth in this country so I've been around and seen it all I have five children I have 11 grandchildren and I have six and a half great-grandchildren so I'm wondering about them we placed plenty of challenges in the past we've always come through because we have had the right ideas ideas sustaining a free society and we've had leadership if we have those ideas and the leadership we need will be fine as we reflect upon this past century it is important to understand the policies and institutions that have allowed us to achieve this remarkable advancement in human well-being [Music] I'm told that that ah we wait for the screen to retract afraid of a screen I am afraid of a screen to statistics and a brief list statistic one gross domestic product per person in real terms that is adjusted for inflation in 1919 the year the Hoover Institution was founded $7,500 today one century later fifty seven thousand dollars an increase in GDP per person in the United States of America of seven hundred and sixty percent statistic to life expectancy in 1919 fifty-five years today seventy nine years congratulations chores you've beat the averages they're the list the telephone electricity the automobile antibiotics air travel the personal computer all first developed its scale large enough to make them available to ordinary citizens right here in the United States during this past century no other country has produced a record that matches that one century of prosperity why did it happen here one final note before the first question we have here four professional economists we've been talking among ourselves about the topic over the last several days three of our panelists tend to think of the question in just those terms economics one of our panelists keep saying we need to think bigger broaden the scope and the first question will go to that panelist born in 1920 George Schultz has occupied 99 of the 100 years that we are marking this evening George the very first question how should we think about prosperity well I think we have to remember 1919 is an interesting here that was the end of World War one and World War one was settled and rather than dick of terms and what we got out of that was World War two the United States at the end of World War one withdrew from the world we wouldn't join the League of Nations and so we wind up with a Great Depression the currency manipulation and the protectionism that aggravated it there were no rules the internationally recognized rules of the game in this said so we got the Second World War 56 million people were killed we had the Holocaust and then we had the Great Depression which I mentioned so it was a pretty tough time and it's interesting to me that as people looked back and saw this they wanted to produce something different so at the end of World War two our statesmen and economists took a different attitude we said what a crummy world but we're part of it whether we like it or not and we engaged there were 44 countries at Bretton Woods at which the basic rules of the game economically were laid out and more or less held and then comes the Cold War and NATO and time after time as problems arose the United States formed a group of kind of get out that problem and do something about it so all through this year there was a constructive engagement and I think it's fair to say that when the Cold War ended there had been created with a lot of leadership from the United States a security and Economic Commons from which everybody benefited including us our problem right now Peter is that Commons is falling apart there are also other forces that are changing the world dramatically but I'll stop at that point John Cogan the question of underlying institutions private property the rule of law free markets the importance of those institutions so first George George's point is very well taken you don't get prosperity in a world where you have a lot of political instability and where you have periods of armed conflict you get them during times of peace world organizations can play a powerful role in preserving the peace but institutions as George said don't just do it by themselves they require leadership and I'm sure George we will hear more about leadership from you but let me take a little bit of a different tack then and talk a little bit about the the way I see prosperity occurring it seems to me there are three fundamental keys to achieving sustained prosperity and I want to emphasize the word sustained prosperity the first is that individuals have to be free to pursue the vocation that suits their talents the best second they have to be able to have the opportunity to reap the benefits of their efforts and third the economic system has to provide individuals with the right incentives to produce the goods and services that not only benefit them the most but benefit society the most the institutions that give us those three attributes I think are the following you alluded to in Peter but most importantly the rule of law not the rule of men private property as Carrie mentioned in the introduction free and open markets or individuals allowed to build businesses and enter freely and then forth a well-defined and limited role of government in society if you give those four fundamental institutions right you have what I call the necessary conditions for a sustained economic prosperity if you get them wrong both economics and history teaches us that you will not have sustained prosperity you might be able to get it temporarily but eventually you will not be able to sustain it Terry John just mentioned your remarks in the video we saw a moment ago you said property rights are the key to prosperity explain that well I often describe property rights quite simply in the following phrase no one washes a rental car and that sort of captures what property rights are about and I was giving a presentation to some students once and I used that phrase and a student had the audacity to challenge me and say I was wrong and I said what do you mean I'm wrong and he said well that's not true I said who washes a rental car he said Hertz and that that summarizes property rights I think in a nutshell property rights are the key to providing the incentives for people to wash their rental cars to care for them I'm reminded of a study done by the Federal Reserve a few years back in which they examined the resale value of buses used in public transit buses owned by the private sector and buses owned by the public sector and what they discovered was buses owned in the private sector sold for higher resale prices used bus prices than those in the public sector there was the incentive to take care of that asset and it doesn't matter whether the asset as John suggested is our human capital our right to choose what we want to do and capitalize on it or the savings we we put aside which become the capital for our our economy or our resources our land our forests our oil and so on li immigration what role in the last century has immigration played in prosperity follow up on to follow up on John's point creating sustained prosperity so economic growth that lasts over decades over centuries such was we have in the u.s. it's challenging for society to achieve this if it wasn't there would be more examples in the United States that could have done this so it's it's it's it's a tall order immigration has been a big part of that we have been fortunate to attract some of the most creative and innovative talent from all around the world talent that's also been on entrepreneurial to sustain the economic growth we need to have a constant flow of new ideas and people who are willing to take the risk to try to implement those ideas in a competitive marketplace and you know we can point to people such as Andy Grove who helped start Intel here in the valley who developed microchip technology Sergey Brin Stanford's own Sergey Brin who co-founded guk Google who came from the Soviet Union and if any of you came here in Tesla we have Elon Musk who immigrated here from South Africa and what's interesting is that not only has this been very very good for us I think there's a reason why these are normally talented people came to the United States because this is the place to be where you can make ideas become not just reality but a remarkably big and important reality Terry you've you've spent a lot of time in your career analyzing studying American Indian reservations so contrast the underlying institutions of the nation as a whole with institutions such as they are on Indian reservations and the different results let me start with how I really got into that study I was visiting a tribal member from the Flathead reservation in Montana and I was taking some swiss people there to visit and i was on the way i was trying to explain to them that our our reservations typically are very poor health care standards are low and and the list goes on and we drive up to this house and it's a beautiful home the cows were out in the pasture up to grass up to their bellies and we walk in a beautiful library I mean everything was just the antithesis of what I'd said so I after we had gotten acquainted a bit I said to this gentleman how do you explain this and he said I owned this place and I said but we're on an Indian Reservation and he said a second time I own this place and I'm kind of dense and I I said but but doesn't it belong to the tribe and he finally put his elbow on the table leaned on his fist and said I own this place and I said you mean like I own my house and he said yes and I clicked Wow reservations have some private land but they have some land that isn't private indeed it's for all intents and purposes owned by the federal government and it occurred to me that it would be a way to get tenure if I could get it published to do a study comparing the productivity of the private lands versus what are called trust lands those lands held in trust by the federal government because of law in 1906 said Indians can't have their own land and tell they're deemed competent and capable by the Department of Interior think of those words so I examined this question and what you see on reservations is this stark contrast that illustrates what we're talking about the private property is very productive that which is held in trust isn't it can't be part of what leaves talking about it can't be used as collateral if you don't own it you can't take it to the bank and say will you let me have some money to buy a tractor and so that is just a stark example of how property rights matter and then to put it into the modern context Ronald Reagan's Secretary of Interior from George I'm sure knew James Watt said if you want to see an example of socialism don't go to Russia go to an Indian Reservation Russell Means the Native American who started the american indian movement in 1989 spoke to the senate and paraphrase what watt said and emphasize it's socialism and it is really what what provides a unfortunately for the people who live on reservations this stark contrast between the society that we all live in and socialism on a reservation as we've been laying into it here you need to have a good monetary system and only government can run it so you want government to do a good job and have a long run point of view toward what they're doing with the monetary system we've had good and bad but we need a good government there we need to realize that we have to look out for people when they're not making it well so we designed an unemployment compensation system and gives people some funds when they're unemployed doesn't give it to them and they've earned it by then what happened we have a social security system that helps you when you're a little older not bad but these are things and the government has to take a long-term point of view I spent a lot of time with President you know he was an honorary fellow at Hoover yes and one time when he was here I had a dinner party for him over at my house on campus and I had some heavy hitters there and all digging at Robert Reagan that first he said to me you were the Prophet ER at that meeting but what were you thinking I said I'm thinking that this guy has very strong views but he understands why he has the view therefore he can think strategically and give an example when we took office inflation was in the teens the economy was going nowhere and the Cold War was as cold as it could get Paul Volcker who had been my Under Secretary when I was secretary of the Treasury was a chairman of the Fed and he was doing what the Fed should do it was restricting their monetary supply to get rid of inflation and people kept running into the almost mr. president mr. president's gonna cause a recession we're gonna have lose seats in the midterm election and Reagan smiled and he put a political umbrella over Paul Volcker because he was able to think long and realize that you've got to do this to get inflation under control and by the end of 1982 it was done we did never recession we did lose seats but inflation came under control and the economy took off like a bird so the long-term thinking paid off but you need leadership John not just institutions you have to have leadership and you have to look the government to do a lot of it so don't don't dismiss government government it's important to get it right but it's important this did you hear that John Cogan we've discussed underlying institutions we've discussed well I'm sure we'll discuss this more but we've discussed the leadership necessary to make those institutions function draw the distinction between underlying institutions and what we're going to discuss next which is policy yeah so very briefly the way I've thought about this is you can think of institutions as more or less permanent arrangements or structures within a society more or less permanent and it's very important that that they remain so you think of economic policy think a little bit differently think about actions that government can take to reallocate resources within that institutional setting that a country operates and Silla can alter taxes spending national security monetary policy international trade and so forth so that's sort of the way I've come to distinguish it you get the institution's right but as George says if you don't get the economic policies right you're probably not going to succeed in creating prosperity so I thought about it maybe yes the institutions are the necessary conditions and getting the institution's right and then the policies right gives you the necessary and sufficient conditions for growth nice formulation we listen to a tale of two decades the 1920s the economy grew 42% and aside from a brief recession at the very beginning of the decade 2221 unemployment remained at 4% the 1930s which began in a certain sense in 1929 with a stock market crash the economy shrinks by 1/3 and unemployment for much of the decade runs at 25 percent now dissertations have been written and will be written about the contrast in policy that are linked to those two very different economic experiences but take us through it yeah great question D the 1920's 1930's provided I think a great illustration of how as economists and really as everyone we can learn how well-designed economic policies economic policies that promote protection of private property that enhance the ability of people to make mutually advantageous trades that those kind of policies can really promote and enhance economic growth and those policies weren't placed in the 1920s when we were growing at about 4% per year we can also learn how well-intentioned economic policies but badly designed economic policies policies that depress incentives to work or to save or to invest or to innovate can push an otherwise healthy economy off the rails and keep it off the rails for a long for a long time so in the 1920s policies promoted the facilitation of technology transfers we saw wide-scale electrification of industry we saw people moving off the farm into cities as technological change and agriculture made it possible to feed our country with relatively few farmers profits boomed businesses were highly highly profitable productivity growth was very very rapid we get to 1929 the stock market Falls and in response to the stock market fall what could according to my research what could have been a relatively short recession turned in a recession that really didn't end until world war two Peter you mentioned unemployment being at 25% the flip side of that the number of people working adults working was about 25% below what had been in 19th in the 1920s and that continued really up until the eve of World War two now as economists we study markets to function in a democratic society with good institutions in the United States and everything we know says that we should not have a decade or more of such miserable economic in a well-functioning country like the United States so this is where we can learn how badly designed economic policies one arrived when the stock market fell and we entered a recession for year after year after year the government thought you know with prices falling profits are falling and if we just had to figure out some way some way somehow to increase prices then profits would be up and businesses could pay their workers more and we would get out of this we would get out of this depression so what did the government do the government and this is really unheard of today the Sherman and Clayton Antitrust Acts were essentially completely abrogated all non-agricultural industry was not just encouraged but really strong-armed and required to form industrial cartels monopolies economic growth does not come from monopolies and the laws that govern this in fact were so extreme that there was there was a Taylor there's a Taylor named Jack McGee and Jack was prosecuted for pressing a suit for 35 cents when the tailor's code of fair competition prevented anyone from pressing a suit for under 40 cents these are the type of laws that were passed the 1930s economic growth is about competition is about allocating resources the most efficient producers it's not about shutting competition down we've learned a lot from that episode we've learned that competition is incredibly healthy we've learned the competition free competition open markets allowing the best to have access to resources it was what creates growth we paid a 10 or 12 year period which was a very cost to learn that all right John Cogan go ahead by the time of the 19:30 ended the marginal rate of Taxation was 90% so nobody didn't go anywhere after World War two a young man named John F Kennedy came along and he proposed to reduce it from 90 to 70 and LBJ followed him and he got it done and the economy responded and Ronald Reagan came along and he got it down from 70 to 50 and the economy responded so high marginal rates of Taxation will kill an economy okay just follow it up with just one you may we so secretary shots when you mentioned Eisenhower tax rates were so high in the 50s when Eisenhower left office and was going to write his autobiography his advance on the book was large enough that would have put him way into high tax rates Congress responded with a writer on a bill that allowed Eisenhower to be taxed to the money and my slower and a much slower rate we're talking about tax cuts and use your job was to cover the 20s one sentence on Andrew Mellon secretary of the Treasury Andrew Mellon and those tax cuts we entered the 1920s after the war and I think really a fundamental component was a sharp reduction the tax rates that prevailed during World War one you know particularly non-capital income almost all economic research that's been done the last 50 years including important research done here by Hoover economists shows that the easiest way to kill economic growth is by placing heavy tax rates on capital income and and melon melon knew that almost a century ago got it so the point to make forget it but you're up next you're on top what to think about these high marginal tax rates in the 50s is very few people pay to them and there's a political economy reason for that when you raise tax rates very high way you create incentives for lobbyists greater incentives for lobbyists to create loopholes to avoid those tax and daniel patrick moynihan once described the tax system as like a hydraulic system when the rates go up the loopholes go up and the ability to avoid goes up and so what we found over time is that when you lower taxes and broaden the base you get a much more efficient system when you try to raise taxes to raise revenues you automatically create more rent-seeking more loopholes and a less fair tax system and maybe Eisenhower's just one example of Ronald Reagan's proposed 1986 Tax Act passed the Senate 97 to 3 it eliminated all these tax breaks and lowered the rates and it worked it worked John two more decades you you're in your hop skip skipping around here so we've got we've got a century to cover here we go with the 70s and the 80s where he touched a little bit on the 80s already stagflation in the 70s I'm going to come to you on this as well unemployment rose from about 4% at the beginning of the decade to about 10% toward the end of the 70s inflation which had remained below 2% imagine that to below 2% throughout almost all of the 1960s rose to more than 13% by 1979 and in 1970 the economy grew by 1% in 74 and 75 it shrank that's the 70s here the years the 80s growth unemployment Falls to just over 5% inflation Falls to about 3% and the economy expands so dramatically that our late colleague here at the Hoover Institution Marty Anderson wrote I'm quoting him the period from 1982 to 1989 was the greatest expansion the world had ever seen in any country at any time close quote John Cogan contrasts the policies of the 70s with the policies of the well I do so with a little bit of trepidation because George here was serving in the White House during the 70's and during the 80s but I'll start and then you can even correct with George so here's the way I think the 70s and 80s give us a nice contrast between one type of economic policy which is not conducive to growth and another that is the policies of the 70s in the 80s different really in two ways one way was the policies of the 70s were really based on what I think of as very very short-term thinking the policies of the 80s were based upon a much longer view longer term policy view and I think that's very important when you think about how an economy grows if investors and entrepreneurs can't plan you won't get growth so having a long term vision for a policy it's very important for growth a short term vision really creates problems so let me give you a few examples one I'll steal from John Taylor's excellent writing on monetary policy John is characterized monetary policy in the 1970s as very stop/go inflation would start rising and the Fed would put on the brakes as it put on the brakes unemployment would start rising and they step on the gas and so we stop go stop go in the 80s as George said Paul Volcker came in the late 70s under Ronald Reagan's umbrella decided that his policy approach was going to be a long term approach with a very singular goal getting price stability a lot of pressure on him and a lot of pressure on Ronald Reagan as George has said to change that policy he didn't he stuck with it by the end of the decade inflation was down around 5% less than half of what it was when the effort started the other area where you had stop-go policy was on the fiscal side so in the 1970s we go into a little bit of a downturn and immediately the government would respond with investment tax credits with temporary tax rebates with Keynesian stimulus policies that were relative short term short term nature grants the states and local governments for one year expanded unemployment benefits out to 65 weeks and so forth so these are very very short term short term solutions they didn't work they got you a little bit of a sugar high but then the economy just subsided in the eighties very different approach we started the 80s with a recession as as a consequence in part of the monetary restraint to bring down inflation very deep recession very long recession there was a lot of pressure on President Reagan to not stay the course to give up bodies tax cuts reverse them to increase spending with short term stimulus plans he rejected the stimulus plans he rejected the the reversal of his tax rate reductions we saw the economy recover and Peter your statistics as they show it was just one of the best decades of the 20th century so that contrast between the two policies at a very high level of one being short term and the other being long term I think it's very important when thinking about the right economic policies and I'll say this too in several areas mostly in taxes and regulation the policy direction was very different in the 70s than it was in the 80s taxes were tax rates were raised significantly in the 70s not so much by statutory changes or legislative changes most of the increase in tax rates came from inflation pushing individuals into higher and higher tax brackets in the 1970s we had 14 different brackets in the code and so as inflation drove incomes up people were thrown into higher and higher rackets in the last four years of the 1970s the average tax rate average income tax rate in the United States went up by just under 20 percent so the equivalent to a 20 percent across-the-board increase in tax rates that was very damaging to the economy with Reagan as Georgia said rates came down to 70 percent and then down to 28 percent in the latter half of the 80s regulatory policy the same thing very different directions in the 70s of the age 70s big increase in the regulatory state there's been no decade quite like the 1970s for increases in the in the number of regulatory agencies or the regulatory burden the 1980s of course that was reversed first in the energy sector and then throughout the rest of the economy and we saw the results in terms of employment growth and income growth so George George to men I'd like to ask you about the contrast between Richard Nixon who in many ways typifies the policy of the 70 70s and Ronald Reagan you knew them both you served them both let me begin with here's Richard Nixon captured on tape in 1971 I'm quoting him the difficulty with wage price controls is that the damned things don't work they didn't work at the end of World War two and they will never work in peacetime close quote the following summer he imposed wage and price controls when you were director of OMB you were right there what's he thinking what's he what's he responding to well it was a very interesting period in the Johnson administration there was a Vietnam War and his Great Society guns and butter they called it and there was very concern about inflation so his council about that that economic advisors propounded the concept of guidelines and I'm a professor at the University of Chicago and I'm watching this I'm saying to myself this is the intellectual precursor of wage and price controls and I'm worried about it we had a big conference on building Pemberton gave a great speech Bob Solow came gave a speech the case against the case against the guidelines we had fun but it was important so then I become in office and I have this on my mind and I can just feel wage and price controls coming and I'm worried about it I made a speech called steady as you go and the argument was we have the budget under control if we have monetary policy consistent with keeping inflation under control and have the patient's steady as you go we'll get there it was blown away and I found a reason why in the archives the Hoover archives are stunning what you find in them I found a letter from Arthur Burns who is chairman of the Federal Reserve and helmets Germany said Arthur burns it's the Pope of economics is infallible but I found this letter and it argued to the president was a private letter I didn't know it's existed but I found it in the archives the letter from Arthur burns to President Nixon saying the economy has changed normal monetary policy won't work you've got to do something different here's at my suggestion as wage and price freeze followed by controls when I saw that letter I knew why I lost the chairman of the Fed gave the president advice that turned out to be disastrous but it was terrible because it worked so well for a short period I was scared to death but anyway in the end all it did was it helped the controls held back the economy artha thought the controls would control inflation so he could gun the economy but the gunning the economy didn't work because the controls had a hold of them but underneath it the gunning of the economy produced a lot of suppressed inflation which broke out I came back I have resigned but here imposed wage and price controls when I was Secretary of Treasury but when I came back with President Nixon here it was the result of it all so look let me ask you one more question now and this gets to the interplay between institutions and policy and leadership and here's the question Richard Nixon versus Ronald Reagan they're both Republicans they are both advised by a number of the same advisers Arthur burns advised Ronald ray advises Ronald Reagan you're advising both of them both of them listened to Milton Friedman I think there's some evidence that Ronald that Ronald Reagan took Milton Friedman more seriously but they're they're both in the same stream of thinking and policy advice and yet as John mentioned as you've made the point the difference between Richard Nixon and wage and price controls an assertion of state power on the one hand and then Ronald Reagan cutting taxes rolling back regulation achieving a stable dollar what's the difference is to what extent is that a difference in what policymakers and the economics discipline are learning between the 70s and 80s and to what extent is it it is it Ronald Reagan well I want to surprise you all right because I want to say something good about both of them but here is why Ronald Reagan was so beloved in the re-election campaign it was obvious we are sweeping mondale was his opposite number and he said I don't want to humiliate him let's let him win his own state so we pulled all of our ads and our efforts away from Minnesota and Mondale wanted by a lashe in in Minnesota but people realized in Reagan there was this kind of compassion I'm going to win I don't want to humiliate my opponent let him be have some stature and self-respect so that's the kind of guy he was now here's something on behalf of Nick Nixon was a strategist and I was involved many things with him that Bob not but in 1970 he decided to desegregate the schools in seven southern states this is 16 years after the brown decision they're still segregated that fact shows you how difficult people thought that process would be I'm Secretary of Labor and he decides that you can't just have this happen you got to manage it so he appointed a committee with vice-president agna the chairman of me the vice chairman and agna would have nothing to do with it so I became the chairman and Pat Moynihan was in the White House at the time so Pat joined my team and Len garment a lawyer terrific guy and a man named Murphy who was a advanced man type and we went to the president we said mr. president where we're going to manage this is we're going to appoint biracial committees in each state and we're not going to pay any attention to what political party they belong to oh we won't it's strong respected people and that's what we got so then everybody thought the toughest state would be Mississippi so we brought our bi-racial committee to the point out so the first ones I knew from my labor relations squares you gotta let people blow off steam so they blew off steam for a while and then I stopped that and I brought in the Attorney General and I said mr Turner what are you gonna do when the schools open he said I'm gonna enforce the law thank you out so that I could say to them well it's been an interesting discussion this morning but it's irrelevant it's going to happen these are your communities these are your children so the question is what are the problems and what can you do about them and I found that when you get people not talking principals talking prop problems then they want to solve the problems so people would get at it then I took him over to the diplomatic reception rooms in the State Department for lunch and there is a desk the Thomas Jefferson built himself on which he wrote the Declaration of Independence the quill is still there all men are created equal so we had our lunch we come back to this White House and by the time mid-afternoon comes things are going well I take him across the hill halt in the Oval Office and the president says here we are in the Oval Office think of the things that have affected the security and welfare of our country that have been decided in this office well now we have this major issue and he said I've made my decision but in a country like ours that's not enough people in the states and in the communities and the school districts have to make their decisions that's why you're here we want to work with you and if you work with us we'll try to get out this problem and we had more discussion they guys went out of that on cloud nine and so then toward the end Pat Moynihan and I are feeling pretty good about it we can pull this off the last state with Louisiana so we have the idea let's go to the south that will have great symbolic experience well how are meeting down there and then after the meeting we'll have all a co-chairman of the other state groups come and have a general meeting and before kickoff of the school year so we're having that meeting in the Oval Office and I make my pitch and Agnes says mr. president don't go there you'll be in a room half the people who black half the people we white there's going to be blood running through the streets of the south the blood will be on your hands don't go so the president looks at me and I say well mr. president whatever happens it's on your watch but we've been working hard on this and you've seen these people come in here they haven't been idle they been working we've been working with them and we think this is our best shot at bringing this off in a peaceful constructive way so he decides to go so Pat and I go down the night before we're meeting the Louisiana group and it's dawning on me it's going okay but not like it is in Washington turning on me it's one thing to bring people to the White House it's another thing to have a meeting in the hotel room in their home down it's not the same but we got pretty well along and all of a sudden the Pres arrives and I had to say mr. president they're not in quite the same stage they usually are when you see him in the Oval Office you got to put this over yourself and he did he listened to them he talked to them and he brought them around and then we had a meeting of all the people and it was like a revival meeting I'm saying have you thought of this probably thought of that point of you doing about this back and forth all around it was just exciting and the schools opened and there was no violence it happened so this was a Richard Nixon thing that he did to teaching importance he's faced up to something that was really difficult so I can criticize things like anybody else I resigned we did something that I thought was important and but he also did some good things I had a funny experience with the IRS one day the Commissioner comes to me and he says I just had a meeting with John Dean who came to my office and gave me this list of about 50 names of people he said the president wants to have a full field investigation done on each of them that's a very unpleasant process if that happens to you he says what do I do I say you don't do it I said well what do I tell John Dean tell John Dean you'll report to me and I said no so then on the Nixon tapes there are these discussions between the president and Dean what his little blue eyes think is not doing what we want but they never had the nerve to come back to me so we stopped that but then one day Johnny Walters comes again he says we have a process in the IRS where we take complicated returns and we do a random number process to select the ones we're going to audit they said well so what are you coming to me about he said well the President Nixon's name came up why come to me about it because we thought maybe you'd like to tell him so I call over and I get al haig and I tell him at about a half an hour he calls me back he said the prince up in Camp David he's steaming he thinks the IRS is out to get him and he wants to know by eight o'clock tomorrow morning whether any other sitting president has ever been audited so I con do Johnny Walters plan to do tonight in County but I'm gonna be here at 7:30 and I hope you'll be here too to tell me the answer to this question well Johnny comes and he says both John F Kennedy and Franklin D Roosevelt had complicated returns they were both orders while they were in office I thank God problems problems inequality the new york times columnist and nobel prize winner for economics paul krugman quote the reagan economy was a one-hit wonder yes there was a boom but while the rich got richer there was little sustained economic improvement for most Americans close quote and for that matter until this very administration there was very little growth in middle-class wages for something like three decades so we have an indictment of the system we may have experienced prosperity overall over this last century but it was very unevenly and some would argue unfairly shared ly so discussion discussions about inequality I think are I'm on among the most out the most polarizing issues we face today I think there's really two parts of that conversation and one part I think is very very misunderstood just from a factual basis so you'll often hear in the media that inflation adjusted wages have an increase in this in 1970s that's rather the wrong comparison because a growing component of worker compensation is employer provided health care health care is expensive health can be health care give me can be as much as 40 percent of worker compensation last year the Congressional Budget as they do on a regular basis put together distribution of income statistics and they include components such as employer provided health care they also make adjustments which are very sensible from the standpoint of the resources available to a family to adjust for taxes they adjust for transfer payments and the statistics that the CBO came up with are just very very different than most dis dis is the the statistics show you'll read the media since 1979 the lowest quintile of household earners so the bottom 20 percent have their resources or resources after taxes including health care including transfers have increased by eighty percent the Reese's have increased by 35 percent justice 2000 so while it's the case that a small number of people such as Bill Gates and Sergey Brin and Jeff Bezos of Amazon have created enormous fortunes it's not the case that everyone else is not going anywhere there's been income growth across all quintiles so it's important to understand what the statistics are measure properly and then the second point is you know ok Jeff Bezos Bill Gates Sergey Brin Mark Zuckerberg you know do they some people say do they deserve the wealth that they've accumulated well I would put it I would I would flip that coin around and say these are people who have transformed our society I mean the the the world we live in today is fundamentally different than where we lived in the 1970s and just think about what would you do with Amazon what you do with micro computers and software how easy it is now to use Google to search and find things so yes these people have accumulated large fortunes but I would say those are almost a grain of sand on the economic beach in terms of what they've done for us so it's an important issue but I think it is is critical to understand what the statistics are and and and let those who have really accumulated wealth what they've done for us Terry I want to come to bill gates now spends his formidable energy and intellect on giving his money away it's a big thing you mentioned just now Lee that we live in a transformed world and I asked each of you to think of some invention or development that you saw with your own eyes that the younger members of our audience today may find difficult to believe Lee yours was so when I was a kid our neighbors shared a single landline telephone line with their neighbors and walk around with mobile phones and this was very difficult but that because they had to coordinate who is going to use the phone when do I get it at 2 p.m. to 4 p.m. or do you get it from 4 p.m. to 6 p.m. and they could listen in on each other's phone conversations and this was this was you know today this is just seems like incomplete non sequitur Terry well I came prepared to help the people who were taping this program so I brought my bell + Howell you probably don't know about Bell + Howell it was a company that made these things and you had to put something called film inside and then you had to take the film to somebody who would then develop it and then you could put it on your movie projector and I got no offers from the crew to help the taping I don't know Terry challenge to the system a child an indictment of the system the environment has this century of prosperity come at the expense of our natural environment I another thing some of the people may not remember is a Beatles song well The Beatles were a group back a while back and and the Beatles had a famous song you have to admit it's getting better I wish I could sing I would have done a few bars and and I did a Hoover book a while back called you have to admit it's getting better and the subtitle is from economic prosperity to environmental quality and the bottom line of this book and and the data all support that that while there may be a period in in in the growth in the prosperity and the economic process where we are willing to sacrifice the environment in order to have economic growth that when we get a little bit wealthier and have higher incomes we become environmentalists and we are all environmentalists because we can afford to be environmentalists I've gone to Africa many times and and and you you talk to really poor people in Africa about saving endangered species and they look at you like are you crazy I am the endangered species my children are the endangered species my corn crops are so we have to be once we get rich enough we can afford to be environmentalists and the data show over and over that this country because it is wealthy has turned to improving the environment and they're just not anything you can measure whether it's forced cover whether it's its water quality whether it's general air quality all of those things have have been improving as a result of prosperity and I think that's crucial to keep in mind that it's not as George was talking about earlier it's not guns or butter in this case it's not the environment or economic growth they come together and and our country is a perfect example you contrast the United States environment with what existed in the former Soviet Union and none of us would want to move there and and for China today with with the air quality in Beijing so it it's it's economic prosperity allows us to be better environmentalists and and our country shows that on every single measure John Kobe and say I think the problem of climate change is very real and we don't have a choice we have to work on it hard on this stage about three or four weeks ago at a conference we had we brought it over here and Lucy Shapiro who's a professor of the medical school was here and she talked about the relationship of climate change to disease it's appalling what's happening and among other things for example tropical diseases are coming north we should be getting up our diagnostic and treatment capabilities we're not doing it but the R&D here at Stanford done energy and I chair the MIT Advisory Committee and their energy thing so I see what these people are doing it's not an accident that the cut the costs of electricity from solar have dropped precipitously or when that's a result of the any our energy R&D so I think we need a good half d tax on carbon make it brother the neutral and we need to have good support for energy Rd and I might say here at Stanford MIT both the private financing of R&D it's three to one government because private people see something is happening and they want to know about it and a lot of universities say oh my gosh you can't have anything to do with a private company and we say here and they say at MIT come on because we can do the R&D we can figure out what works we can discover whether it's caliber or not we don't have a commercialize it or scale it up that's what these people know how to do so it's a good partnership not a problem inequality you know we all kind of jump to the conclusion that rising inequality is a bad thing and that's not quite the right way to look at it rising inequality can be part of a good thing or it could be a bad thing it depends upon the causes and so as we pointed out one source of inequality is entrepreneurs developing products that benefit us all and they reap a large surplus from that from their inventions it will create higher inequality but it's a good thing for everyone society is better off because of their inventions on the other hand if inequality is a consequence of people manipulating the rules of the game and extracting surplus from you and from you towards themselves then I guess we would say that's a that's a bad thing and we need to take some some action to prevent it so when you think about inequality think about not inequality by itself but think about what the likely causes of that inequality are and the second point I would make if you're concerned about inequality forget the top one percent think about the bottom 20% and think about how raising their incomes up more and their standard of living up more that's where the focus of policy should be when we look at set aside the 1% and we look at growing inequality what economists conclude is that part of this inequality increase is due to an increase in the return to skill and what we're what we're seeing is the demand for skills high skilled labor goes up with technological advance but the supply of skilled workers has not increased accordingly and that's why the return to skill has gone up and so what we need to think about doing with our education system with our training with our employment system is increasing the skills the high skills of workers raising those people that have low skills at the bottom towards the top that's where the focus of policy should be for me not on the on the 1% Warren Buffett on this he says the guy who was much less wealthy than I am watches a Super Bowl on the same kind of TV I do so there are a lot of common goods here how did you handle when you were working on your doctorate in the 1970s so this is this is a little more show-and-tell so students today that are that are working in statistics don't know how good you have it you think about it when you're making a statistical calculation you don't have to you know have to go anywhere you can sit in your apartment pull out your laptop type in a few commands and within seconds you get your statistical results what was very very different when we were working on our dissertations and we were in school back then what you first had to do was to sit down and write out a set of detailed instructions pages and pages long detailing everything that the computer had to do and it was done not in a language that was anything remotely related to English for some reason they decided that Fortran would be the language of COBOL which had no relationship to English or any of it after you got done writing it up you then went down the hall to your you to your room that had punch card machines remember those old punch card machines well here is a punch card and so you would type out all of your instructions on that punch card now for my thesis for the last run of my thesis I had a punch card deck that was about this size about 87 cards to run some statistical analysis so once you got done though punching up your punch cards you then took it over to submit it to run on the computer and so there was a computer operator who took your punch cards and told you something like well you're in the queue Kogan come back in a few a few hours a few hours some of it you come back in a few hours and sure enough you had you know some typos in your program and the program didn't run so you go back to the punch card table punch redo your find your error correct it walk back to the computer to the computer operator resubmit it it's in the queue go good be back and feedback in a couple of hours so this would have this would go on and on and on and as it went on a new worry would start entering your mind the new worry was you drop your deck now most of the people you don't know how about how often do people it became so commonplace but people were dropping the decks all the time as you know five or six trips back and forth but in any event I always thought that maybe just maybe this automation of running regressions and doing statistical work has it really been all had beneficial because now students run you know five hundred regressions within within a couple of hours and choose the best results but it did teach me one thing there was some individual somewhere he's names been lost to history who ingeniously figured out a nice way for you to after you drop your cards to know how to put him back together again what he did was he drew a simple diagonal line from one side of the deck to the other so when you drop the deck he just had to match up the lines so new American genius the students who are here today if you take nothing else away from this panel take this you have no idea how old guys like us suffered for you so that you can lead the lives you lead last segment here and then we'll we will have it we'll try hard to save a few moments for questions piece of history and a statistic as this Institute here's the piece of history this institution was being founded in 1919 the Bolsheviks were consolidating their power in the Soviet Union and proclaiming communism as a system that would create a kind of paradise on earth for ordinary people seven decades later when the Soviet Union collapsed income per person and the USSR was only one-third that in the United States that's the piece of history here's this statistic a very recent poll showed that 19 percent of American Millennials hold a favorable view of communism I'll repeat that one in five young Americans holds a favorable view of communism Terry Anderson what's going on well I I think the the driving force in this is the discussion we've had here about about income inequality and this notion that somehow the system that has given us this progress this century of progress has has solidified these kind of strata that people can't get out of and I think that's a large driving force and I think then that is is coupled with a notion that somehow if we just collectivise our decisions we'll get it right this time that you know the Soviet Union had these leaders who didn't understand that Wenzel whele isn't working because South America is different and that some half we can move in the direction of a collective decision that that will we'll all come together as one big happy family and overcome the politics that that of course has divided us so so much and I I think that it's a combination of those two things that's leading to this this idea that you know it's wrong well I think the data tell us that that's wrong you you've given so socialism works until you run out of other people's money that Ronald Reagan's said said that social socialism works well in two places in heaven where you don't need it in Hell where they already have it you just talked about the data listen to this since Deng Xiaoping opened China to free markets in 1979 China has lifted some 750 million people out of poverty while remaining under the control of the Communist Party communism and economic growth can go hand in hand it didn't work in the Soviet Union but it certainly seems to be working in China and young Americans are smart enough to see that lis working in China and not better than 1979 but not nearly as good as the world they could they could live in so in 1979 per capita income in China was 349 dollars per year about 1/100 of US per capita income and just to set this age before Deng came in China in 1970s was not so different than the China of the late 50s and 60s under Mao when just a horrendous experiment of trying to use government planning for markets resulted in a famine that killed 60 million Chinese people the level of income in a society is proportionate to the extent and quality of democratic governance and the extent to which the protection of property rights and the economic freedom and under Deng China expanded economic freedom substantially so now there's private businesses operating in China today Chinese per capita income is no longer 1/100 of the u.s. it's about 17% of the u.s. it's increased because one component of what society needs to do to grow expand economic freedom trying to did some of that but teaching at UCLA for the last 20 years I've had a number of Chinese students and interestingly all of them want to stay here none of them want to go back to China and what they often talk about are the sharp restrictions on civil liberties and personal freedoms they face the fact that they can't use the internet freely the fact that they're afraid to complain the fact that they're afraid to criticize the government China used to grow at 12% per year compared to our 3% per year that was 12 years ago today to the best of our knowledge China's growing about 4 percent per year compared to our 3 percent per year they're at 17 percent of where we are now unless they improve the quality and extent of democratic governance they'll never come close to catching up to the US not even close George as the Cold War was drawing to a close you knew it most of us did not know it that the Cold War was drawing to a close you have I've heard you tell this story that you have you gave me Kyle Gorbachev tutorials in free market economics would you explain what was going on there well I got him aside he's a bright guy let me tell you how bright he is he came here to San Francisco after I left office and he was still in office more or less to see me he came down to Stanford they said I have a meeting with some of the leading intellectual lights at Stanford and interchange with them so I arranged it and it practically had to be a Nobel laureate to make the cut and we had chemists and chemical engineers and physicists and mathematicians and no freedom was the economics and so on around the room so these were really first class people and I had a meeting the day before with them and I said you got to figure out how to say in about four minutes something significant in your field that's some real meaning to it otherwise we will get around the room so we went around the room and he responded with information and candor to each statement that was made it was a breathtaking display of his intellectual capacity so one time we were meeting in the Kremlin and we had a break and I said let me tell you something and I had some information there and I said we are moving into a new era it's called the Information Age and if you have a society that's closed and carpark pairings you're gonna miss out on it it's going to leave you behind and he bought it and it got and I'm told it got into the Politburo notes and he tried to implement that and I think he was right we could talk we could talk and talk but I want to get to a couple of questions so I returned to the man who's occupied 99 of these last 100 years George Shultz as a boy you experienced the Great Depression as a marine you fought in the Second World War as a young economist you served in the Eisenhower White House oh I like Ike helping to put in place the policies that permitted the economic expansion of the 50s and 60s then you served in the cabinet's of two presidents determined to defend this nation and its values during the Cold War serving as Ronald Reagan Secretary of State is one of the architects of the collapse of communism as you told us in the film when we began five children 11 grandchildren 6 soon to be seven great-grandchildren what do young Americans most need to understand about the duties they will be called upon to fulfill well I think it all starts with your family a good family life is the building block of society and it's your great thing and I always look forward to our family gatherings and I watched these great grandchildren and they're so lively they're curious about everything everyone's know I want to learn something and looking at you and laughing look at me I just learned something so you learn you see we're born curious and we're born loving to learn so we want to keep that fire burning all the time then that seems to me we work in some place so we want to be part of that workplace we want to make it a friendly place I'm going to make it fun to come and we have a community to contribute to so all of these things are there and then it seems to me and you get this out of serving in the Armed Forces a certain patriotism you want to serve your country that's in Europe Marine that serving overseas and other you know service it's the same thing happens to you there are a lot of things you learn that you succeed as a team as an individual you know other thing you're a team and your work with seams and the team has a leader and you don't always get your way but but you follow that leader and every once in a while you're a leader and you've got to get people to follow so I'm from that reason I'm supporting organization called with valor and we support anybody who's been a veteran whether they're Republican or a Democrat because we think if you're a veteran you've learned these skills of saying I'm part of a team and I want to get something accomplished I'm patriotic so that's my advice Terry Anderson the Ohanian John Cogan George Shultz join me in thanking our panel if you would we have will we have microphones here if you'd like to we I think we have a few minutes for questions we may be able to get in one or two questions if anyone has a question and if go we'll go right ahead but just just to temper those of you who may be considering asking questions there are refreshments just outside so talk fast so I'm curious what you think about the sort of long line of academics parentally declaring doom whether it be like the Population Bomb or the various other theories that human life quality is about to drastically decrease how were they so wrong why were they so wrong why does it keep happening that is a profound question to anybody let me take a crack at it and I think it's quite simple I think that those those predictions are ignore the kind of the factors that have contributed to our prosperity they are based on a notion that there's a fixed amount of stuff be they resources space on the earth and that we are it's a wall and we are on a freight train with increasing speed and we must hit the wall and I think what the progress of the last century is is not only understanding how to regulate the speed of the train but moving the wall sometimes creating a whole new set of tracks as has been discussed here and and so I'm optimistic I'm optimistic because I think what what secretary Shultz has been talking about is still in US and I think it's that that that drive of human ingenuity that's difficult to keep down whether it's in China and especially difficult to keep down here because we have the right institutions that make it work when I take a crack at that yes great question we've been able to avoid those types of catastrophes if people are capable of remarkable things and markets allow people to create remark things suppression of the market means people can't create that and sadly most of the problems that we face throughout history to echo some of George's points or ones that we've done to ourselves the free market process is truly remarkable one if there's something we need we figured out a way to produce it question yeah question I originally came from China yeah then I got chanced almost a mid to the Stanford but I feel that's too expensive so I went to UCLA and graduate then I work for white chancellor you know my I'm Graham Mike Mike Graham field yeah it's Anderson form or team anyway and I stayed before UCLA and the school medicine give me the green car and I stay so just that's why most student came from China they decide to stay in this country because Frieden you know you know I'm bossy yeah but my question is currently you know us have fires you know trade war the China right and China's rise up as a second economy power TP you know in a world so so what is the future you know your expert you know predict you know what what would happen with the Troy war between China then what will be relationship with the US in China yeah John the question is us US and China trade war and the larger question what's the future of relations between China and the United States John you want to take a first crack so I hesitate to try to predict the future but I don't see it's a trade war in the offing and what I see is an administration that is using for the first time different tactics to get the Chinese to open their markets to get the Chinese to respect property rights to get the Chinese to respect our patents and open our open their markets to our businesses I don't see that ending up in a in a trade war I think the cost of a trade war are too high on both sides so I see eventually and my hope is eventually we'll get a resolution which will lower these barriers to entry and open up much more of a trade pattern between China and the United States thank you I think over you have a question oh okay oh you got there first all right I'm wondering with the current monetary policy of the national debt just keep increasing exponentially are we going to have to reduce it sometime and will that significantly decrease growth the debt the national debt is growing faster than the economy John and I actually sort of think that's your fault but what are we going to do about that so you're right the the the national debt has been growing faster than the economy for now over a decade and so we are on an unsustainable path and the projection of spending of course is much more rapid in the next ten and 20 years than it has been in the past so the way I've looked at it is we face this enormous challenge that if we don't gain control over these big entitlement programs mostly Social Security Medicare and Medicaid we are going to have either an enormous explosion in our debt or we're going to have to impose large significant taxes to numbers if we did nothing to control Social Security and Medicare we'd have to raise each and every tax in the federal tax code by 50 percent in 20 years what we know from economics is that would be profoundly damaging to the growth in the economy if we choose not to rely on taxes and instead we rely on debt to finance these payments the national debt will rise to about a hundred and fifty percent of our national income twice the level that it is today but we know from history is that eventually excessive levels of debt cause propensity for financial crises inflation or slower economic growth so the consequences for prosperity of not dealing with the entitlement problem I think are very significant we've got some time to deal with it we don't have to take it on tomorrow but we've got to deal with it within the next few years but I also think you don't have to tear up the safety net the kind of changes that have to be made in these programs if they're made in the near term can be very gradual they can slow the growth to a level that's affordable without cutting benefits significantly takes a lot of reform but but it's definitely doable George you've been involved in a lot of these big reformed you've been you've been involved in a lot of the big reforms over the last 20 years you've watched the debt rise what's your sort of sense about this well I think you take health care their costs are exploding we know how to produce better health at lower cost we know how to do that we need a political process that will get there and at least in my experience what you do is you put the ideas out there and you keep working them and sooner or later they necessity comes and you're ready sometimes it takes a crisis of some kind and my experience as a crisis can pass without anything happened unless you're ready so it's very important to be ready and the kind of studies we do around here are helping to get people ready so that's the way to get it done as far as I can see thank you last question no pressure just make it very very good at the risk of taking us off topic I'd really love to hear from each of the speakers what book you've read in your life that was the most influential and deeply affected you that's a terrific question Terry the most influential book start with Cogan start with culligan I'm just I'm just here I go ahead no no with him the question was the most influential book you've read in your life you get a moment to think about it your your life is much less extensive it's a very very good tough question you have stumped my panel all right well I you know I start thinking oh I need to go back before that one Oh before that one but I'm gonna stick with the modern one for me Matt Ridley's book the rational optimist just just creates such optimism that that that I considered a must-read just to keep us focused on the fact that what we've been talking about today not only has happened but can continue to happen because we as human beings are so inquisitive and and so interested in learning Matt Ridley our ID Ellie why the rational optimist director Gilligan you stand on the stage you got to answer the questions okay Lee a series of books I read by John Steinbeck helped push me into becoming an economist so can't cannery and he wrote he wrote about life turns the depression and cannery row was one that really moved me Wow give you my favorite but I I would say this the most impactful for me in the last 15 20 years was modern times by Paul Johnson it's a history of the 20th century and the growth and rise of communism to me the signature event of the 20th century was the rise of authoritarian governments in the form of communist and the collapse of those regimes and Paul Johnson tells the best story of how that came about so and that was published in 82 as I recall so you get it just as the turn is beginning under Reagan George I've been finishing a book by Doris Kearns Goodwin entitled leadership and she examines Lincoln Teddy Roosevelt Franklin Roosevelt and LBJ it's extraordinary she shows how their leadership qualities evolved in the case of TR he lost his mother and his wife practically on the same day he went out into what he called the badlands he came a cowboy and an environmentalist and the cowboy it's kind of self dependent shaped his character in the case of Franklin Roosevelt I didn't realize it but he was quite an athlete his young man then he was struck and he struggled at it and he wound up creating Warm Springs which is a place where people who had this problem could go and get treatment and and be able to handle themselves so out of the adversary came a leadership style and quality and a confidence that you could have hit by something bad and you could still come out of it and learn from it so it's a it's a very good book about leadership and we've talked here some about the importance of leadership so I particularly enjoyed this book Tom over to you gentlemen great job thank you all for attending please join me in a round of applause for our panelists

Channel: Hoover Institution

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Length: 96min 56sec (5816 seconds)

Published: Thu Apr 18 2019