0:33 Intro. [Recording date: July 24, 2017.] Russ Roberts: This is your 10th appearance on EconTalk. Tyler Cowen: Yeah. That's great. Russ Roberts: I know. It is. It puts you in the elite group of double-digit guests. Your most recent appearance was two months ago in May when we talked about your book The Complacent Class; and today we're talking a new book that you've written that's online--you can find it at Medium.com; we're going to be putting a link up to it. The title is Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals. What's your central claim or claims? What are you trying to advance in this book? Tyler Cowen: Since I was a graduate student I've been interested in the normative foundations of economics and political judgments. And in this book I try to argue we can actually solve the biggest issues in judging what makes a political or economic order right, why do we prefer one economic policy over another. So, it's a very philosophical book. And, unlike a lot of philosophy, which tends to lead to a kind of an anihilism or extreme skepticism, in this I try to suggest we actually have all the answers. We just need to be bold. And we can go through what those answers are. But, that's the overview of this fairly short book. I've worked on it for about 20 years, spending maybe a month or two a year trying to improve it. And then I figured finally it was ready. Russ Roberts: Well, it's a really interesting book and it does make a bold claim--more than one bold claim--which your summary captures one of those claims. Which is: We've figured it out. So, that's a bit strong. It's a strong claim, not just a bold claim. What have we figured out? What do you think is the central way we should be deciding the policy issues that divide us? Tyler Cowen: Economists for a long time have focused on economic growth, but most philosophers typically have not. I argue that if you systematically introduce the idea of sustainable economic growth into philosophy, welfare economics, social choice theory, that that allows you really to clear up a lot of different problems. And think of the fundamental problem in so much of philosophy as being what we call aggregation. If, you know, John wants one TV show and Sally wants to watch another show, and they only have one TV, well, how do we judge which is the better outcome? There's different attempts to solve that problem. Some people are egalitarians; other people want to maximize utility of the two. But I argue we should take a straightforward economic approach and basically ask, 'Well, what would they trade to do?' and then I aggregate this approach to the whole economy. And basically if you have one economy with a rate of compound growth over time higher than that of another economy, over some number of decades one of those situations will just very clearly be better than the other for almost everyone. So, that's the starting point of the book. The chapters cover a lot more issues. But that's kind of my entry point into the stuff talked about by John Rawls, Robert Nozick, Derek Parfit and other people.

4:19 Russ Roberts: How would you say that conclusion differs from simply saying we should pursue what's "efficient"? Which is a phrase I do not like. It has a very narrow meaning in economics: It basically means that we--well, I won't even try to summarize it. But help me out here. What's the difference between your economic approach and traditional economic welfare approaches? Tyler Cowen: Efficiency typically is quite a static concept. One novelty in my argument is I claim we should use an intergenerational discount rate of zero. That is, the distant future we should not discount at all. There's positive time preference within a life, but over the course of generations no one is sitting around impatiently waiting to be born. And once you adopt that move, the further-out future becomes very important for our deliberations. And then the gains from getting this higher compound rate of economic growth, they really do just overwhelm anything else in the calculation. And the typical more static or a-temporal economic treatment of efficiency--it may be useful for some problems, but it doesn't give you this whole perspective across time about how to think about, you know, social choices in general. Russ Roberts: I guess one way to think about it, now that I've gotten over stubbing[?] my brain there--it's earlier here in California where I'm recording this, so obviously I'm behind. One could argue that efficiency is making sure that the pie is as large as possible right now. And what you are suggesting is that we ought to make sure that the pie grows as fast as it can grow going forward. Tyler Cowen: That's right. Russ Roberts: Would you say that's a decent--? Tyler Cowen: That's a good way to put it. Yes. Russ Roberts: So, most people would say--I want to come back to the technical issue of discounting. I find your approach deeply appealing; and one piece of it deeply flawed--and I'll let you defend it. But let's just start with this idea that I think is not compelling to most people. It sounds very technocratic that we should just, 'Oh, let the economy grow as fast as possible; eventually everything will work out well.' A lot of people would find that unappealing, for one reason being it's mainly focusing on material well-being. And I know you have an answer to that; so I want you to answer that. The other, of course, is that it may leave a lot of people behind. People are very worried about that; rightfully so. So, try to deal with those two. Tyler Cowen: Let me first say I do adopt the qualification that maximizing growth should be subject to respecting human rights; and some human rights are absolute. We shouldn't trample over those even if it will somehow boost the growth rate. But on top of that, I think if you look at long enough time horizons, say, even relatively poor people today are much better off than they were in less wealthy societies of the 18th, 19th, or early 20th century--that they have access to cheap food, partial access to antibiotics, a much cleaner and healthier environment, safer water. And that even though some people are going to gain much more than others, if you take a longer term time perspective--I don't think you quite get to a literal unanimity of all humans being better off. Say, some people who love power or who want to see the impoverishment of others--they'll be worse off. But, from a practical point of view, virtually all people are better off, say, in a society that has 5 or 7 times the GDP (Gross Domestic Product) of an alternative course for economic policy. Russ Roberts: So, if I might, I just want to defend you a little more, completely in your point about human rights. You also say that leisure counts. And the environment counts. Tyler Cowen: Absolutely. And without the environment working, none of this will be sustainable. So, the long time perspective--it both puts a higher priority on the environment, but also a higher priority on economic growth. And it gives you some metric for trading those things off against each other.

8:22 Russ Roberts: So, I find the argument extremely compelling in many dimensions. I want to cast it in a different way, which is--I've used this in a couple of my books; I really think it's the right way to think about it--which is: If you asked a person in 1900 who suffered through economic change, who suffered through, say, the transformation of agriculture, the industrialization in the second half of the 19th century, there's a lot of hardship that that imposed. At the same time, the wellbeing of the children and grandchildren of those people were so extraordinarily and stunningly great compared to their lives that a lot of people--those people themselves would say this was a good deal. So, that to me is the logic of what you are talking about in taking a long-term perspective. But, for me, part of that requires a connection between the generations that's through love, which I think is often ignored, and it is there. And I'm wondering whether people alive today who maybe are less likely to have children than people in the past, whether some of those arguments don't work quite as well. What are your thoughts on that? Tyler Cowen: Well, keep in mind, this book is in a sense a companion to my trade release, The Complacent Class. And that's a book about how we're less willing to incur one-off costs for a much better future. So, if you are just asking, you know, 'How are people behaving today?' I think we have less of that willingness to sacrifice for the future; more sense of entitlement: 'I'm not going to give up anything now, no matter what it may bring later on.' So, I think we're moving in the wrong direction. I think even people who don't have children or who maybe do not love their children should be able to see the morally forcing nature of, 'We should choose the outcome that will both enable civilization to last for longer'--which is really compelling when you think about what means--'and have a higher standard of living for virtually all human beings.' I think those are the strongest values we can possibly cite, especially when combined with this notion of inalienable human rights as a kind of binding side-constraint on what we can do. Russ Roberts: Why is it important have a high standard of living? That sounds like a very--I know you have a much richer conception of that idea, but to most people that sounds very--it's something an economist would say who doesn't have much understanding about the human experience. Tyler Cowen: Keep in mind this isn't just money we're talking about. It's leisure time. It's ability to maintain your health, your ability to control your time. What people value and are willing to trade off against other goods. But, people who have higher living standards, there's plenty of good evidence that they tend to be happier within their societies. They live longer lives. They suffer less pain. They recover better from trauma. They are better able to be charitable to the rest of the world or people less fortunate than they are. I think most of what we consider the virtues co-moves with having a much higher level of social wealth. Russ Roberts: What about the argument that right now--I don't accept the argument but many people do--that many people are left behind in our economy. They don't share in the growth: the rising tide isn't lifting all boats any more. So your argument was great in the 1700s, 1800s, 1900s; doesn't hold today. Tyler Cowen: Well, I think today we're doing a very bad job at maximizing the rate of economic growth. So, if a person is complaining that right now we're not doing what I'm suggesting, I'm fully on board with that. Do I think there are plenty of changes we can make to economic policy that would both boost growth and improve the lot of people who are less fortunate--say, starting with education, or deregulating building, or helping our society be less crony-capitalist, more mobile and so on--there's plenty we can do. We're not doing it. We're totally failing; and we're the complacent class. And we need to get our act together. And this gets back to the two books' being complements to each other: But of course we're failing at that.

12:33 Russ Roberts: I guess--let's take some particular issues. Other people would pick different issues that they think are holding the economy back. And I want you to use the framework of the book to try to deal with them. And, underlying some of your claims, I would say--at least the way I read it and correct me if I'm wrong--there's a view that the Left and the Right could come together on many of these issues and not disagree as much as they appear to. So, issues that I think about, that we fight about--Left and Right--or things like immigration, issues like minimum wage or labor market regulation, tax policy: Do you think there are choices--there are opportunities--choose a word--that there's low-hanging fruit in the growth sphere that we're missing that could make a big improvement and that in theory Left and Right could agree on? Tyler Cowen: Sure. Just to take tax policy: American tax policy is one of the most complicated in the world. In some regards we tax capital at too high a rate; it slows down innovation. You have American firms shifting operations or just accounting profits overseas for the sole purpose of evading tax; that can really make sense. Most economists--and I include Democrats in this designation; Republicans, Democrats--think we could have a much better tax code and it would boost our rate of growth. So, we should do it. Russ Roberts: Okay; well, I think the idea is--that's one I think there is some agreement on among economists. Examples like lowering the corporate tax rate or changing the way we treat profits overseas. But the height of marginal rates--I guess the thing that comes to my mind, when I was reading your book--when I was being trained as an economist, there was this so-called equity-and-efficiency tradeoff. It's kind of what your book is about, at least the way it was framed when I was younger. Which is that if we try to redistribute income on the grounds of fairness or political expediency, either one, that we're going to pay a price in either efficiency--the pie is going to be smaller than it would be--or, more importantly in your case, the pie is not going to grow as fast. What evidence do you think we have that there is this potentially much higher growth rate awaiting us if we had better economic policy? Tyler Cowen: Well, let me first just go back a second and say I do think some redistributions could boost the rate of economic growth a lot, and they have in the past: Public health programs would be an example. Giving poor people more resources so they have more opportunity and they have a better chance to become creators or maybe even later, inventors. So, I don't think it means no redistribution. I think it says we should check redistribution by what kinds of redistribution will maximize the growth rate. I think in many particular individual areas in economics there is good evidence that particular reforms would boost economic growth. There is work by Enrico Moretti, for instance, that by deregulating building this would boost GDP and give people more opportunity that would be pro-egalitarian as well. Medical innovation: I think there's good evidence there that some policies have helped it; other policies have hurt it. Obviously, we should do more to help it. The tax code: I think there's some economic issues that don't fit into my book. So, you mentioned the minimum wage, what everyone thinks of that. And I tend to be skeptical of minimum wages. But I don't think there's anything in the framework of my book that clears up whether or not we should do it, because odds are it could well be neutral with respect to growth, even if there's this one-time reason not to put those people out of work. So, I don't think the framework handles all economic issues, but those that are growth-related or growth-sensitive, yes.

16:27 Russ Roberts: Let's talk about the mobility issue, and we'll start with inside the country. You referenced Moretti's work on regulation of housing supply; and a lot of people are starting to wonder about this. What's your take on this? Do you think we've made--it appears, it seems to me, and I don't have strong evidence for it, but it seems to me we've made a catastrophic set of mistakes in urban housing policy that, for reasons that--we can debate what the underlying cause is--but, a lot of people would be more productive living in the larger American cities. And those cities have become extremely expensive. I find it interesting that we--we have a lot of stories to tell about it, but the evidence is not so open and shut. Or, maybe you think it is. Talk about that. Tyler Cowen: I wouldn't say it's open and shut. But here's the thing that happened that surprised many people, myself included. The extent to which clustering benefits--having so many smart tech people together in San Francisco, or so many people in the arts or creative industries together in New York or Manhattan--those lately have been a lot stronger than most people expected. I think there was a sense of, 'Well, maybe I don't favor these building restrictions, but maybe, you know, there'll be overflow: some people will move to Atlanta. They'll move to Tulsa, OK, or wherever. They won't be quite as productive, but, you know, we'll work around it.' And how wrong that's turned out to have been. I think information technology in particular, is remarkably clustered. It's a bit like movie project evaluation in Hollywood or finance in New York, London, and Hong Kong. So, we're moving more toward clustering. And that's made, you know, a more or less constant policy be a lot more costly. And I think, you know, there are studies, like the Moretti articles. But also, just intuitively, you see productive people who want to move to San Francisco and they tell you, 'Hey, I can't afford it.' You then go to San Francisco; you see there's plenty of room there. I don't want to quite call that a proof; but what I would refer to as the anecdotal dimension. It very strongly supports the statistical work. Russ Roberts: Yah, let's talk about that clustering for a minute. It's a digression, but it's one that intrigues me. We invoke that--that clustering argument, that people are more productive around people like them. But, of course, you don't interact with most of them. You can't, almost by definition--just the physical constraints of human life and time. So, I happen to be in the Bay Area for the summer; I'm recording this on the Stanford campus, which sometimes feels like the center of the tech universe. And I meet a lot of really smart people here who are working in startups or in larger firms. And, is it really important that they are near other really smart people? It's hard to understand, for me. The place feels alive about these issues. It feels like a more dynamic place than, say, suburban Maryland where I live during the year. But, what's the underlying reality that's driving that productivity that we claim? I'm not sure that I understand what it is. Tyler Cowen: Keep in mind, in an indirect way you do interact with all of them. So, there's some kind of aggregation mechanism for information, so the best ideas get passed along, and you are in closer contact with those ideas. You understand them better in context. So, maybe if, in only the course of a week you only speak to 10 people; but those 10 people have spoken to 10 people who in turn--and so on down a chain. And what gets passed along are the best ideas relative to, say, the Bay Area. It's like being the Think Tank world in or near Washington, D.C. In the course of a week or month, how many other Think Tankers do I meet? You know, it depends where I go. But even if I only meet a few, what I'm hearing are the best dribs and drabs that world is producing. And then, on the hiring side, when you are going out to give people a job and set them to work doing something, and your company might have to ramp up quickly--you know, in the tech world you can't do that in Tallahassee. Actually, in the public policy world, you really can't do that in San Francisco very well. So, you know, I even live some of that firsthand as having a role at Mercatus Center and George Mason University doing hiring; and you see just how important that clustering is. If you are doing public policy work, you want to be near Washington, D.C. And you do learn from everyone here, even if you only meet with 10 of them. Russ Roberts: I don't think I've ever heard it romanticized that way, as "dribs and drabs." But I think you meant it in a positive way. Tyler Cowen: Yes, absolutely. I was [?].

21:13 Russ Roberts: Let me think about it maybe a slightly different way, which ties into this point about mobility. If a firm did start in Tallahassee, and it didn't work out--which most of them of course don't--most startups don't make it--you've got to move from Tallahassee. You've got to leave. You've got to start over. I think one of these advantages of these clusters that we are talking about is that once you are there--and I'm talking now about the worker, not the firm, but of course the firm also have economies of scale in this. But for a worker, you know, if it doesn't work out at Google, there are other places I can work that demand my skills; and I don't have to relocate to Minneapolis or Boston or New York or Washington or Chicago. And that's nice. Maybe-- Tyler Cowen: Especially for two-earner couples, right? Russ Roberts: Correct, where you've got to find that second-- Tyler Cowen: [?] Russ Roberts: Yeah. That just reinforces the point. I just wonder: I feel like we've made everything just a little harder for people to relocate, both in terms of real estate policy, and maybe some of it's emotional--maybe some of it's a wealth effect, that we don't like to start over when we're successful. I'm just trying to figure out why it's different. Why is it different now than 25, 30, 40, 50 years ago? It's hard to understand. Right? It's easy to tell the story at a point in time. It's a little harder to make the claim over time, it seems to me. Tyler Cowen: Well, look at what's grown in our economy. It's been information technology, finance, and creative industries, among other areas. Those are all very clustering-intensive. Something like cement production--you know, the cement producers are not all clustered in one part of Ohio. They are fairly spread out through the country because transporting cement is costly. So, so much of our economic growth has coming in clustering intensive areas. That's changed a lot. Schooling has become more of a race: there is a lot more credentialism. So, having your kid in the right school is more important. And that makes, say, Manhattan, San Francisco, much more problematic: you've got to pay for private schooling. For a lot of parents, that has changed and intensified. So, I think there are some things we can point to that seem pretty clearly in line with the overall story. The world being globalized, also. You want to reach global markets. Well, that's harder to do from Tallahassee. It's easier from New York or San Francisco. So, the value of being there is now much higher. Russ Roberts: Why do you think credentialism has grown the way it has? Why is it so important? Why do parents suffer? And that slightly goes against your point earlier about being willing to sacrifice for the future. Right? Parents relentlessly sacrifice for their children, to get them into the best private schools, the best universities. And, I've always been somewhat of a skeptic on that for my children. Part of it's my educational past. And part of it's just I feel like I've been in the kitchen. And, I know what the differences are between the most prestigious and the not-quite-as-prestigious schools. And it's a big premium that people pay for it; and personally, it's not worth it for me. But what do you think--why has that gotten "worse" or, depending on your view of it, why has it changed so much in the last 20 years? Tyler Cowen: Some of it is the law. So there are more licenses for more professions than ever before. Some of it is just overall growth of the service sector which tends to have more certification, even if it's of the non-legal sort. I think some of it is the greater complexity and indeed value of production: so, a lot of entrepreneurs, they don't want to take so many chances, so they want the Masters' degree or the Ivy League or Top 30 education, whatever it will be. And then some of it is this kind of signaling game where it inches up, what credential you need; in every generation it gets a bit worse. And it used to be to be an undergraduate degree; now it's a Masters'. Maybe someday it will be a Ph.D. And that's just institutions getting out of whack and no one really pulling the plug and really just saying, 'No.' I think all of those put together. Russ Roberts: Isn't some of it just demographic? That a very large cohort of the offspring of baby boomers is going through the university pipeline and there isn't enough? The costs of entry are very high. It's very difficult to start a first-rate university from scratch-- Tyler Cowen: Sure. Harvard doesn't take[?] that many more people. Yeah-- Russ Roberts: Yeah. Which is a puzzle, by the way. Tyler Cowen: Yes, I agree. Russ Roberts: They've tried to, right? Implicitly. Most of the great universities now are using MOOCs (massive open online courses) in other ways to extend their franchise and market share in a different dimension. But it's not--if you think of university as I do, as a finishing school for certain types of people, that role is very difficult to get online. So, the networking and the socialization part of college, the--what people are really willing to pay for, and they want a certain kind of product that's very difficult to create from scratch, almost by definition. Tyler Cowen: Well, the actual degree, the four-year degree with your name on it: Harvard admissions have gone up a bit; Princeton, Yale--they are working on it a little. But it's nothing compared to what a normal market would bring, which is this huge increase in demand stemming from globalization and higher return to skills-- Russ Roberts: Yup-- Tyler Cowen: and you would think, like, these schools would grow by a factor of 5, 10, 15. Whatever. But, of course, it's nothing like that. Maybe they boost admissions by 10% and then boast about it and say they are doing their best. And they cut tuition for the poorest students. But it's basically the same game but with more people trying to rush through the entrance.

27:01 Russ Roberts: Let's think about that just for a second. Why is it--and when I was at [the University of] Chicago in graduate school in the 1980s, in the late 1970s, Chicago had struggled in the late 1960s and 1970s with crime. And they thought about relocating--I think to Arizona. It's interesting that they didn't start a second campus. And then things got better. But--and they decided to stay. I think it was a threat to the city, basically: Rumor had it that the city punished Hyde Park, where the University is, for not supporting Mayor Daly and other Democratic candidates. So they would give them--they supported them in the election, but in the Primary they would always support the challenger. And so they'd give them lousy police service and lousy roads--no clearing--and garbage pickup. So the University created its own police department. Which was pretty effective. But they threatened to move--partially, I think just as a threat. But, why didn't they--not move, but why don't they create, why don't universities create franchises, extend the brand name? It's one thing to say, 'Well, Stanford wouldn't be Stanford if were 70,000 students.' That's true. But why isn't there a Stanford East, or a Harvard West, or a Chicago South? Why don't universities--or a George Mason West? You know, George Mason has a much better reputation than its sort-of on-paper quality--because it's distinctive. And its economics department is a huge part of that. Why wouldn't George Mason try to exploit that reputational advantage somewhere else outside of Virginia? Tyler Cowen: I think it's hard to do. Keep in mind what makes George Mason, say, special, is faculty of a particular kind. So you can't duplicate those faculty in a Star-Trek-like machine. You might hope to hire the equivalent. But to tell people, 'Well, there's this new school, George Mason West.' And it's starting with near-zero faculty and you're the first one to go there; and the colleagues you really want to interact with, they are 3000 miles away. I'm not saying no one would take it. But it's not such a compelling offer if faculty is a scarce asset. Keep in mind: Many schools do now have branches. Most commonly you see this branching into Singapore. There's a bit into China. Some--George Mason has a program in Korea. These are all new. We're not sure how they'll go. I think some of them actually will work. So, the branching we're seeing is into this high-demand area of Asia. And I think there's also about admitting too many Asians into the main campus branch for a lot of schools. And this is a way around that. Russ Roberts: Yeah, but I think you are--obviously, the faculty is a key part. I don't know how--it's quite as irreplaceable or unduplicatable as you might want to think. But, you'd think there would be some faculty who might want to live somewhere else other than Fairfax. Tyler Cowen: I think that a Harvard/California could work. I believe normatively Harvard should do it. I see zero signs they are about to. It would mean a dilution of control, a lot of headaches, a lot of new legal issues. You know, some reputational risk. But you could increase the number of people getting into some version of Harvard by really quite a bit. And that would be a wonderful thing for the country. And the world. Russ Roberts: So, I'm going to suggest a simpler explanation for this. Which is: Nobody has an incentive to do it. The faculty like where they are, mostly. There's no owner. The alums [alumni, alumns--Econlib Ed.] are something of a residual claimant. They are probably against this. They, as you say, they risk diluting their own reputational name. Tyler Cowen: That's right. They are significant, the alums. Russ Roberts: Yup, very. But it's just interesting how--it always bewilders my parents--that no one's really--there's no boss in a modern American university. The Provost or the President only give the illusion of control. It's a very strange enterprise. And it's interesting because it's something we ought to think about given how important it is, or at least how important it seems to be in our lives--both not just material lives, in the economic growth that we're talking about, but in other ways as well. Tyler Cowen: But these universities, they do take other value-maximizing actions, like trying to improve the sports team or treating their donors better or having the lawn look nice on graduation day. So, they're not incapable of responding to incentives. So, I suspect this idea of control is quite central, and risk, and alums, and the administration and the board just not wanting the headaches. And it's like when a lot of departments grow, the previous incumbents lose control. Some similar issues. Russ Roberts: But I really think it gets at the heart of what's dysfunctional about the non-profit sector, in general--and there are many wonderful things about them, the non-profit sector; I've sung its praises many times on the program, so don't misunderstand me. But the inevitable challenge of non-profits in my experience is that they want to grow. They just want to be bigger. They will sacrifice their mission, after a while. At first, the first founders of the organization and the early leaders are passionate about the mission; and they are very careful to make sure the mission is preserved. But after a while, the leaders care about just bigger. And they are willing to sacrifice the mission if bigger is the result. And that's just because there's no incentive for them to do something else, unfortunately, except for the passion of the people who care about that mission, either of the workers or the employees or the staff; sometimes the donors. The donors do care: that's why they give, generally. But if you think about the modern American university, the amount of money that they are sitting on in the endowments is shocking, really, as a social phenomenon. Because I think most people have a romance about the university--that it's created to help people and to allow people to educate themselves, and teach them, and help transform the world. And if that were true, they would do something really different from what they are doing. Tyler Cowen: I like the [?] of the new university called Minerva. I don't know if you've heard of it. Russ Roberts: I have-- Tyler Cowen: You spend 4 years abroad with peers in a setting--so, you live in like Istanbul, Buenos Aires. You learn things from living there, and then you take shorter, intense classes online with your group and receive instruction at a distance. That, too, is new. It's too soon to judge. But I have some hope that that will be a success and lead to some alternative models and more experimentation. Russ Roberts: It's just interesting as a parent of a 17-year-old and two other college students who are in traditional universities, that, the idea of a parent saying, 'Oh, you ought to try this. This looks good,' the way you might say if a new car model came out, you might encourage them to try, or a new style of clothing. The amount that's at stake with your university degree is--at least it's perceived to be quite high. And so I think the challenge that Minerva has, and other innovators, is getting people to jump who might otherwise go to a first rate brick-and-mortar university. And maybe not get the return from it that they could get at a place like this one. Tyler Cowen: I wish Harvard cared more about being bigger, actually. It seems to me, so many universities--they are willing to grow if they can grow in ways where they maintain some kinds of control. So, there's like new facilities; there's new external programs; there's new, say, athletics; new initiatives that require more administrators. But, just for the school to be bigger--I'm used to George Mason, which has gone from a few thousand students to 34,000 and improved quality pretty much the whole way through. Not that many schools are doing that. I'm spoilt, in a way. I know it's possible. Russ Roberts: Yeah. Well. It's hard to steer those cats on the faculty. We know that.

35:38 Russ Roberts: Let's turn to some of the questions--let's go back to your book, although it's been fun talking about something only related tangentially to it. But, let's talk about what you would say is the low-hanging fruit for improving the rate of economic growth. You know, I find it deeply distressing that our current economic policy debate is over whether we should renegotiate NAFTA (North American Free Trade Agreement). It's sort of the central piece of what we're debating. I guess another piece would be our tax policy. None of which is going well. Could be political reasons for that, obviously. But some of it I think has to do with our ideological differences in the country. What would you recommend that we do to boost the economic growth rate? Tyler Cowen: The United States--I think we should commit truly to free trade, which we are not doing now. I think our government actually should spend more supporting scientific research. You and I may disagree on that. I think we should radically deregulate building. I feel in almost all areas of the economy we should deregulate economic activity; I would say the environment and finance are more complicated stories there. Those are partial exceptions. Have systematic tax reform and treat capital income better. Those would just be a few things offhand that I would recommend. Russ Roberts: What's complicated about finance? Tyler Cowen: We have this thing called 'deposit insurance'-- Russ Roberts: Because I disagree with you on the science part; but if I got your whole platform, I'd be thrilled. I'd be happy to take a little too much science research that might be spent not so well, to get the rest of it. So, I'm sorry: I interrupted you. What's the issue with finance? Tyler Cowen: We have this thing called 'deposit insurance,' which, even if you abolished on paper, the actual guarantee in my opinion will not go away as long as we have Congress in the modern world. So that means there's some kind of backstop. So, there's always a chance financial institutions take depositors' money or creditors' money and in essence bring it to the casino to take too much risk in non-productive ways. And I do think the government has to do something to control that. My favorite direction is to have higher capital requirements. So, in essence the banks are first playing with their own money. But even capital requirements--they are not a simple thing to see through and enforce. And I think this will require a fair amount of financial regulation. And if we don't do that, we'll end up with periodic crises that will lead to even more financial regulation and possibly nationalization. So, I think that's a very tricky issue. But I don't think just, you know, hands off laissez faire makes sense there. Russ Roberts: What about environmental issues? You just mention them but you also spend a decent amount of time in the book talking them. How do they interact with the issues of growth that you are talking about? A lot of people would argue that growth is bad for the environment. Economists typically answer, 'Yeah, but countries that grow at higher rates and get wealthier tend to take care of the environment.' What's your take? Tyler Cowen: Most aspects of the environment improve with economic growth. Clean water is an example. Clean air is an example. There's something known as the Kuznets Curve--that as societies become wealthier, they do a better job cleaning up. That's true; but keep in mind, in part we have the Kuznets Curve because some government regulation is used. It's by no means entirely due to regulation, but partly it is. But, I think on this one issue of carbon, we see a lot of countries getting wealthier and not really doing much, if anything, to clean up their carbon emissions. And in that instance I would consider something like a carbon tax. And, if need be, cut taxes on other capital income to make up for the difference. Russ Roberts: So, you wouldn't say we should grow as fast as we can so we can adapt to the climate change that might be coming? Tyler Cowen: Well, I think a carbon tax is the way to grow as fast as we can. Look at it that way. We've got to tax something, right? So, you can either tax productive labor or you can tax something that with some probably emits a negative externality. In almost any model, taxing the negative externality will give you higher growth.

40:04 Russ Roberts: At one point, you ask about what we can do to make our civilization more stable. What are you thinking about there? What do you mean by 'making our civilization more stable'? And, what kind of actions do you think would be relevant? Tyler Cowen: Since WWII, we've lived in this funny upswing, where so many countries have had higher and higher standards of living, and more democracy, and in general a higher degree of public order. And we've started to treat that as historically normal. I don't know whether or not it's historically normal. But if you go back and you read classic history, or study antiquity, or for that matter, you know, read the Hebrew Bible, I think you get a very different perspective on what history normally looks like. So, I think there are key issues, such as cyber-security, nuclear terrorism, foreign policy. Hardly do we ignore those things. But I don't think they are sufficiently a civilizational priority. There are forms of existential risk that we could do more to protect ourselves against. But I think we're too complacent to actually do it. And furthermore, so much of the budget is spent on other things, it comes across to people as a difficult-to-swallow tax hike. I would much rather we spend more money limiting risk at the civilizational level than what we are doing now. Russ Roberts: A lot of people are worried about inequality. We touched on this earlier but I want to come back to it now. And, a lot of people would argue that it's the central problem of our age; it does put our society at risk of instability because there's a pervasive sense of unfairness--is the claim. What are your thoughts on how we should deal with that and how it might interact with the growth rate that you are more focused on? Tyler Cowen: Well, as we've discussed, there's lots we could do that would increase opportunity for people who now are less skilled or have lower incomes. But, I'm not persuaded by the view the inequality is somehow the root cause of political instability. If I look at a place such as Poland, which right now is flirting with semi-Fascistic idea or non-democratic ideas in a dangerous way, they've had a wonderful economic performance, for the most part. A lot of productive manufacturing jobs have come into Poland, actually, from Western Europe. It's a far, far nicer and better place than it had been under Soviet domination. And yet they are flirting with illiberal ideas. Now, I don't pretend to know why that's the case. But whenever I hear a kind of simple equation of, 'Here's this domestic tendency I don't like about American policy, so I'm going to say it's the root cause behind politicians I don't like, social movements I don't like, street crime, violence, collapse of public order.' When you actually look at the literature, the literature seems to suggest inequality gives rise to some disillusionment and some disengagement. Those are bad things. But if anything causes instability, you know, it can be rising expectations in some cases. So, I don't think we really understand the political consequences of inequality. But, I hear a lot of claims batted around that probably aren't true.

43:25 Russ Roberts: Let's turn to a philosophical question, which is utilitarianism, which you write quite a bit about in the book. I think you define yourself as a 2/3 utilitarian. What do you mean by that? Tyler Cowen: Well, that was a little tongue in cheek. But, I think if you are looking at a public policy, the first question you should ask should be the utilitarian question: Will this make most people better off? It's not the endpoint. You also need to ask about justice. And you should consider distribution. I think you should consider, say, how human beings are treating animals. You might want to consider other broader considerations. But that's the starting point. And if your policy fails the utilitarian test, I'm not saying it can never be good. But it has, really, a pretty high bar to clear. So, when I said "two thirds," that's what I meant. Russ Roberts: So, I like that, too. I mean, my view is it's sort of a starting point. It's not the end point. For a lot of people, it is the end point. But you write quite a bit--and I find it intriguing: Some of the more, harsher demands that utilitarianism might place on us. And, they are not so easy to answer. So, talk about what some of those are, about, say, having an ice cream cone when people are starving; or working selfishly at your job when you could relocate, say, as a doctor, and help poor people outside the United States. What are your thoughts on those? Talk about what some of what those issues are and then give us your take on them. Tyler Cowen: Well, this is the Peter Singer conundrum: How can you enjoy that active personal consumption, that chocolate ice cream cone, when, dot-dot-dot people are starving? You've been hearing this from your parents when you are a kid: How can you leave food on your plate when there's hungry children in Africa? Whatever the tale used to be. That's a morally interesting question, but I don't think it's the most relevant question. I think the most relevant question is: What can you do so the global economy grows at a higher rate? And that's going to help the poor, including in other countries more than anything else because of technology transfer, remittances, immigration. Multinationals, hiring people at higher wages, and so on. And if you ask the question, 'Well, what can I do for the poor in my own country, and other countries?' the answers will be to work really hard; try to innovate; save a lot; contribute to highly productive organizations. I do think we should feel a greater compulsion to do those things than we do now. So, I'm willing to bite that bullet. But, that to me is the moral dilemma. You know--not the ice cream cone. If the ice cream cone is what motivates people to produce value because they love ice cream, I say, 'Full steam ahead' with the ice cream cone. I'm worried that we are not innovating enough. Russ Roberts: Yeah. For me, the argument is, is really a failure to understand, I think the other side--that people would say--I think the example I remember from, I think it's from Will MacAskill, or he might be taking it from Singer, is: How can you throw a birthday party for your kid? That's just the most selfish thing in the world, because that amount of money could have an enormous impact on the wellbeing of a person elsewhere in a poorer society. And I guess the problem I have with that is: I don't think we have a very good understanding of how to make people's lives better who aren't living in our society. And, all these conundrums, all these puzzles and clever hypotheticals--they ignore that. They always assume: Oh, you can take this money and transform this person's life. As if there's just a box you could put the money in. We don't have that box. You know, people would say to--I love it when people say to me, 'Do you think we should give money to help education in poor countries?' and I'd say, 'No,' and they'd say, 'You are a selfish person.' And I said, 'We can't even figure out how to use money in the United States to make people's lives better in education. Why would I be so presumptuous to think I could do it in a different society, where the governance structure, the political institutions are designed often to steal that money?' I just don't see any evidence that there's such a mechanism. And to then--I'm willing to--the bullet I'd bite is to try and find mechanisms that will actually work. But the idea that somehow it's selfish of me to want to keep my money when I can't help people's lives--I don't understand it. Tyler Cowen: I'm more optimistic about philanthropy, perhaps, than you are. But, I would just take the stance that the much richer society will generate more philanthropy. You know, a lot of voluntary. Look at what Bill Gates is doing in Africa. I don't know that that's all working. I'm not well-informed about it. But he's certainly trying. And we know immigration works. We know having large multinationals who set up plants in other countries and hire people at hire wages--we know that works. We do know some things. I think we know, like, some number of public health programs work--if you vaccinate kids, or if we can get rid of malaria, or, you know, polio in some places, smallpox in others, that works. So, we know some things that work. And we've done a fair amount in those directions. So, to me, it would be strange to think we'll never find more things that work. But I think our path there is not kind of moralizing to people, and telling them to close up the birthday party or put down the ice cream cone. But, my goodness: Just could everyone, you know, working more, harder, smarter, and cultivating a culture of philanthropy? Which America largely has. To its benefit. Russ Roberts: Yeah. Don't misunderstand me. I'm a big fan of philanthropy, and I try to give away 10% of my after-tax income every year, for religious reasons; and I think there are ways to do that that are smarter than others. And I think it's important, as a human being, and as a way to make the world a better place. I think the challenge is getting those to scale and doing it in an organized way-- Tyler Cowen: Sure. Russ Roberts: So, I think the tougher criticism of my view would be: How can you only give 10%? And you make that point in your book: Given my relative material prosperity, I should be giving away maybe 40%. And I think that's--it's an interesting argument. I think I have to take that--I think a thoughtful person has to take that seriously who is living, you know, an incredibly rich life, not just in material wellbeing but in all the things that that material wellbeing brings, in terms of security and comfort. So, I think it's a legitimate question. And I do think that the way to do that is through private philanthropy rather than through the, sort of, government aid--which has a really bad track record. Tyler Cowen: I know a person--he works in the financial sector in New York. He makes a lot of money; and he lives on almost nothing. He gives it all away. And I find that admirable. I think there should be more of it. But I wonder, given that human beings are what they are, how sustainable it would be to have too much more of it. I don't know. But I think the correct answer is to say, 'Yes, we should have more of this. Let's try a bit more and see how it goes.' I think that's right.

50:26 Russ Roberts: But, as you point out in the book, and I think it's related to your point just now about human nature and the human condition: If you are not careful, you become a slave. So, the argument would be--well, it's not 40%, but you'd be giving 75% or 80% away--because your standard of living is so much higher than other people's. We don't have to go to poor countries outside the United States. We're going to stick with the United States, actually. Tyler Cowen: Fair. Russ Roberts: So, people in West Virginia, Kentucky, Mississippi, you name it--in your own state: you don't have to leave your own state, just different parts--it's immoral for you to live as comfortably as you do because there are people who live very badly nearby. And I do think it's not so straightforward to say, 'Okay, how can I help make their lives better?' But suppose I do find that way. It's a weird thing to become a, uhh, a servant of their wellbeing. Some might say it's the highest human experience you could have. You know, your friend in New York maybe is very happy. I don't know. Is he, or is she? I don't know. Tyler Cowen: He seems happy. Always hard to know. I'm not sure everyone could be happy that way. Russ Roberts: Yah. I think that's a challenge[?}. The more important thing to think about, of course: the time factor. So, you are going to go to school, get a medical degree, work for 8 years so that you can give away an enormous amount of money, and make lots of people's lives more pleasant. I don't know if that's an appealing marketing ploy. Tyler Cowen: Hmm.

52:06 Russ Roberts: At one point you talk about the Arrow Impossibility Theorem. And I think, right now, we are in a very interesting time in American politics. And partly as a result of nature of the partisan divide we are in right now--I think I am older than you. I remember when this divide was like this before. This is nothing new. I remember when Richard Nixon was in office. He was despised beyond words by his political opponents. So, it's not quite as new as it, as it might feel. But, there is something alarming about the state of things. And part of it, I think--part of it is the result of having an Electoral College: victors who didn't carry the popular vote; and that's very misleading, because once the incentives, the rules, are there, you should follow the rules. You are going to naturally try to win the Electoral College vote. Doesn't mean you would have lost the popular vote if that had been the only criterion. But there is a certain unease, I think, about the American political system. And I think of Arrow. I think of public choice generally. You talked about the aggregation problem; the challenge of the fact that we want different things: There's no such thing as 'The will of the people.' There's almost never such a thing even though it might get invoked. What is your philosophy in this book? What does it have to say about these issues? Tyler Cowen: One of the core arguments of the book is the way to resolve aggregation problems like the Arrow Impossibility Theorem is to move away from the static framework and think dynamically in terms of economic growth. And then, at the social level, the book is very much an encouragement for people to think big, and to believe in very significant--you could almost call them 'transcendent'--values. And that ethical thought needs to have what you almost might call the religious component; though I mean the word "religious" in the broad sense and not necessarily about a particular god. And that that's part of the path to getting to growth maximization--is changing how we think about our own social reality. In today's America, I see us in so many ways as moving in the opposite direction: being more petty, being more polarized, being more at each others' throats. Being actually less religious in the good sense. Being more complacent and more risk averse. So, our own values matter. They are one of the things that matter the most for boosting the rate of economic growth. Russ Roberts: Martha Nussbaum, recently, she and I both talked about transcendence. We had different understandings of it. So, this is--I don't think that word has been uttered until now, until Martha Nussbaum, on this program. And now, here it is again. And you've also now invoked religion, with a wink and an asterisk and a--I don't know what else. So, what do you mean by 'transcendent,' how you say; and what do you mean by 'religion'--quote "the good kind"--not any particular god? What does that mean to you? Tyler Cowen: Well, I think people as biological beings have a lot of programming to think about the immediate and short term. There's plenty of evidence for that. But to get to growth maximization we need this longer-term perspective. Now, how is it we are going to do that? Well, partly we could kind of whip ourselves into submission out of our high time preference, right? But that very often doesn't work. You get people to think about the deeper future, you know, love of descendents, care about higher values in some regard, looking beyond themselves, thinking about broader values. And those, you might call religious in some way. And I think that's the--you know, the whole answer to the problem, actually, whether you identify with a particular formal religion today or not. And personally, actually, I don't, as you know. Russ Roberts: I don't know, Tyler. You might have come over to my side or someone else's in the last few years. We don't talk that often. Go ahead. Tyler Cowen: Well, maybe someone told you. It's like [?] information in Silicon Valley. One of them would have told you, correct? Russ Roberts: 'Tyler's become a Mormon!' Correct. I would have heard. But you are not. So I don't want anybody to quote me out of context. You are not a Mormon. You are not a religious, an institutionally religious person. Tyler Cowen: Religion is very good for economic growth, in my opinion. And I think there is good evidence for that. And, by--I think monotheistic religion as well. So, we have highly secular societies, very often with falling birth rates--America is not the worst offender in that regard; but it's a potential problem for us--that shrinks economies and increases the debt burden. It lowers innovation. And if you ask: What predicts a willingness, say, to have children and contribute to the more distant future? Religion is one of the very best predictors there.