0:33 Intro. [Recording date: November 25, 2014.] Russ: I want to start with a longish quote from the book, which I thought sets it up very nicely, and I get you to add anything to that before we get started into the substance. Here's what you say. And this, in a way, is--it's not the way you phrase it, but this in a way is an explanation for why you wrote a book called The End of Socialism. Some people would say, 'Well, there really aren't any socialists any more.' And you have the following point very early on. It goes like this: Although few people call themselves socialists, a large proportion of policies, and indeed a political worldview, that is what I will call "socialist inclined." Socialist inclined policy is that which tends to prefer centralized over decentralized economic decision making. It also tends to distrust granting local people or communities a wide scope to organize themselves according to their own lights, especially when they decisions conflict with larger corporate or social goals. It tends to prize material equality over individual liberty, and is willing to limit the latter in the service of the former; and it tends to hold that self-interest is either morally suspect or can be eradicated from or at least diminished in human behavior by the proper arrangement of political, economic, and cultural institutions. A great number of people regardless of party affiliation fall somewhere along those continua in the directions of socialism. The argument of this book applies therefore to all those policies, beliefs, and positions that are socialist inclined even if not avowedly socialist. So your book is an attack not just on socialism per se, but this socialist inclination. Which I do agree with you, I think is very widely held. In fact, I would suggest it's in many ways perhaps the dominant viewpoint of most Americans. Guest: Yeah, I think that's a good point. I mean, it's true that not many people call themselves 'socialists.' And people define 'socialism' in various ways. They define 'capitalism' in various ways. But I was trying to look for a way to understand both of them such that, first of all, they are opposed--and they are in a deep sense opposed--but also in a way that adherence to sort of both systems of political economy would accept. And I thought that the key to understanding the difference between the two systems of political economy really was this question of who makes the decisions. So, who is making the relevant economic decisions? Is it a third party, a person, group, agency who is making it on behalf of others? That's what I'm calling the impulse toward centralism. Or, is it principally individuals or communities, localized communities, themselves? That's what I'm calling decentralized decision making. And that is a spectrum. There's a spectrum between, at the limit--on the one hand of the centralized version you have a view that might be complete or full socialism where all economic decisions are make by a centralized group of people. On the other hand, you have at the limit where all economic decisions are made by individuals. But understanding the two systems in this way as endpoints along this continuum I think is constructive in placing our political landscape today and locating where policies or positions or individuals are on exactly this spectrum. Are they inclining more toward centralized decision making or decentralized decision making? Russ: And you set up a comparison that really focuses on that--and I think of it the same way: I think it's the central way to think about it--is it top down, or is it bottom up? And I think you are also more of a bottom up person. You identify though, in the book, each of these views with two different champions. For the socialist inclination, you use G. A. Cohen. And for the capitalist inclination, the bottom up one, you use--your friend and mine--Adam Smith. Why those two? And, of course, when I emphasize, as you just did implicitly--Adam Smith is not a hard-core libertarian. We'll talk later about his views on government. But he's definitely capitalist-inclined. So, why did you chose those two? Guest: Well, for a couple of reasons. Take the easy one first. I think Adam Smith is the natural person to select for the decentralized or the capitalist political economy, not only because history has--and I think rightly--conceived of him as being sort of the father of a market economy, a commercial society, but also in many ways, I think--and I think you may share this judgment--his analysis is perhaps the most sophisticated, both on the level of moral philosophy and on the level of what we now think of as pure economics. So I think he's the natural choice. And people associate him and his tradition with the capitalist tradition. So I think he was the natural choice for that. For the centralized system of political economy, you might initially think that the counterpoint to Smith might be Karl Marx. I considered Marx. But the problem with Marx, I think, for this purpose-- Russ: It's too easy. It's not fair. Guest: Well, he has a lot of metaphysical baggage, as I would call it. There are a lot of metaphysical assumptions that are somewhat complicated and difficult to sort through that would, if I took him as my paradigm, I'd have to spend a lot of time sorting through a lot of his rather tortuous prose. And I thought that would distract from the point of the discussion. G. A. Cohen, whose book that just came out a few years ago called Why Not Socialism?--with a question mark--in some sense, his--so he was a lifelong, he's recently deceased--he was a lifelong socialist. He spent a lot of his career defending in one way or another socialist or socialist-inclined political philosophy against market- or capitalist-inclined political philosophy. And he's a sophisticated thinker and quite an influential one. So, I thought he would be a good counterpoint and a good paradigm to take. Russ: Yeah; I didn't know his work until I read your book. As well as another book you recently edited, called What Adam Smith Knew. Which is a reader of both defenders and opponents of capitalism. And Cohen--you excerpt from that book; you mention Cohen's-- Guest: Right. Russ: And it's quite provocative. And we'll talk a little bit about Cohen's approach. And I'm sorry to see that he passed away--obviously because it's always sad to see when someone dies, but also because I was hoping to interview him on EconTalk. So, that's not going to happen now. So we're going to have to have a conversation about some of his claims.

8:00 Russ: I'm going to start with one that you quote. You say he claims that socialism envisions human life as based on "communal reciprocity." Which he defines as an "anti-market principle according to which I serve you not because of what I can get in return by doing so but because you need or want my service; and you, for the same reason, serve me." It's a lovely idea. What's wrong with it? Guest: It, in some ways--and at first blush, maybe even at second blush--doesn't sound all that different, actually from what goes on in market exchanges as might be conceived by Adam Smith. When you think about the famous passage from Smith about the butcher and the baker, that we address ourselves not to their humanity--we don't ask them to take pity on us or for purposes of charity to trade with us, but rather we address ourselves to their self-love, to their self-interest. What that means for Smith is that when you are going to exchange with another person who has the right and opportunity to say 'No, thank you' if they would like to go somewhere else, you really have to focus yourself not on what you want, but on what they want. And that notion of a kind of communal reciprocity, to take Cohen's term, is built in, I think, properly understood, into the kind of market exchange Smith is talking about. But for Cohen, what he envisions is what I call, or what I would call, a criterion of mere need. So, if I need something, or if I want something, and if you have that thing--whatever it is that I need or I want--now for Cohen that suffices as a justification for your not only giving it to me, but maybe even being required to give it to me. And the problem that I see with that--one of the problems; there might be others--is that I don't think that that gives proper respect to you. Because you after all have limited, like everybody else, you have scarce resources; you have various things that you might put your resources toward; you have your own schedule of value, your own purposes in life. And if my need or my want is sufficient to trigger, maybe even to demand that you provide for me something that you have, then that disrespects, and indeed doesn't even pay any attention to whatever other needs, goals, purposes that you yourself are serving. So it's as if my needs trump yours. Which in my view makes it not an equality of human agency, but rather mine being superior to yours. And I think that runs afoul of a very deep moral principle that I see in Smith, which is an argument in favor of an equality of moral agency. Each person deserves respect as a moral agent. And part of what that means is that each person has the right to sometimes say 'No, thank you' and go somewhere else. If all that's required in order to demand or command an exchange is for one person to need or want something, then that really subjects the other party to the whims or needs or wants of the first party. And that I think violates that moral principle of equality of moral agency.

11:19 Russ: So, the challenge, of course, and let's get to one of the harder cases right away--let's take my children. So, my children have certain incredible advantages that are well above the average person's. Some of those are genetic--they have some genetic handicaps, too, of course. But they have a lot of advantages. They have grown up in a house that has lots of books. They've grown up in a house where parents pushed education. They've grown up in a house that's well above the median and so they have certain expectations for their own financial success. Some of that I think is unfortunate; but they are there. So my children are likely to be--they may not be--but they are likely to be very successful in the financial sense. They may not be happy; they may have all kinds of challenges. But they are unlikely to be poor. They have a natural advantage that just came from being born in my house. They didn't choose it. They didn't earn it. They still have to earn some of course of what they do with their life. They have to work hard and there's a limit to what I can help them with, but from the natural advantages I am giving them, they have certain advantages. Now, contrast that with a child growing up in a different house--maybe growing up with a single parent, going to a horrible school as opposed to the school my kids have been lucky enough to go to. And that child is going to grow up--some of them will succeed despite those disadvantages, but it's likely that my children will be more successful than the children growing up in that household with poor school and difficult family life. So, to what extent then is the moral agency of my children--my children may choose to help those folks who are less well off than they are. I hope they do. But let's suppose they don't. Suppose they are selfish: they don't want to help anybody else, they are very self-[?] self-interested, but selfish. And G. A. Cohen would say, and many others would say they have not earned the financial success that they have and will have, and therefore it's okay, it's appropriate, it's moral for the state to trump their moral agency, their decision not to aid poorer people and to take some of the income that they have--I was going to say 'earned' but in fact much of it they did not earn: it just came luckily to them. What's wrong with that argument? Guest: Well, there are a lot of assumptions built into that argument that I think need to be parsed out. First, a couple of things that you mentioned but I want to emphasize. One is that one's background does not necessarily determine one's achievement or outcome in life. So there are plenty of stories of people who had very privileged backgrounds and turned out not to be particularly successful in life; and the reverse is true, too: there are plenty of people who didn't have very privileged backgrounds but turned out through dint of some combination of hard work or luck to achieve very highly in life. So, the first thing to emphasize is that one's background doesn't necessarily determine what happens to a person, although to your point, which is really the strongest part of this objection: it certainly at least arguably has a large effect. So, when we get to evaluating people's relative success in life, some portion of that certainly--and I think this is your point--is attributable not to the actual agency, work choices, that individuals made, but to circumstances that they had lucky or unlucky. Russ: And you mention this throughout the book. I'm not suggesting you didn't--that you are blind to it, of course. It's a major issue. Guest: It is a major issue. And no book on evaluating the merits of socialism would be complete without addressing that squarely. So, that's the first point to make, that one's background doesn't necessarily determine outcomes in life. But there's a practical and a moral issue that I would raise. First, the practical issue. The practical issue is, the conclusion of the way you stated the objection is: shouldn't the state step in, maybe even in fact is the state morally required to step in, to try to equalize maybe the starting point of people, so that the unchosen background--whether that's genes, education, family life, etc.--the unchosen part of their life outcomes, that that's equalized to some extent? Shouldn't the state step in? Well, the practical issue that I would raise with that is that there is a very large assumption built in there, and that is that the state can do that. So, it's one thing to say, 'Wouldn't the world be better if people started off with something like a relatively equal footing?' It's an altogether separate question to say, 'Well, what can third parties, including government parties, do to actually effectuate that?' And a lot of the argument that I make in the first half of the book is really exploring that in detail. Because it turns out that there are a lot of difficulties involved in going from the intention to the result, and trying to actually get from--this intended result of we would like people to have relatively equal starting points, to, what's the political machinery that we have at our disposal and how likely is it that it will actually effectuate this? And in fact what you see--you don't have to look very hard--is a lot of the actual programs, agencies, policies that are proposed or that are in existence now attempting to satisfy some of these intentions, oftentimes are not very effective; and in fact many times are very counterproductive. So, there's a very large question about what we're actually able to do aside from what we might intend to do. But the other part about it--what I said is a moral point that one might raise about this--one of the consequences I would say of the Adam Smithian or the capitalist worldview of political economy, is that if you have a state--the state is, at least arguably, although some will argue against this--the Smithian position is that the state is able to do some things very well, but a whole lot of things it can't do very well. And one of the things it can't do very well is collect the knowledge that's required to know exactly what kinds of things would be good for you. Knowing what kinds of help a particular person or particular family need in order to give their children, let's say, a good chance in life--that requires an intense personal familiarity with the person or the situation involved. It's very difficult to gather that information from afar. Now, when I call that a moral consideration--that sounds like a practical consideration. But it becomes a moral one in the following way: What that means on the Smithian view and what I'm calling the capitalist-inclined system of political economy, is that moral obligation falls on precisely the people who do have that knowledge. And that's typically localized individuals. In other words, on you and on me. So, when you and I see people, individuals, families, local communities, we become aware of people who could use some help. If we have some ability to provide some help, that obligation falls on us. It doesn't fall on a distant third party that arguably does not have the relevant knowledge to know what kinds of help would actually be help, as opposed to what kinds of policies or redistributions or programs might be helpful, might not be helpful, might be counterproductive, etc. So, the moral obligation--it's not that it goes away and that there's no moral obligation; indeed there is. In fact that I would argue that it becomes more robust because it falls on us as individuals.

19:39 Russ: So, I'm going to agree with half of that; I want to disagree with half and let you respond. So, the part I disagree with is--well, it's a subtle point. I think it's not such a big knowledge problem as to what people need. Especially if you take the socialist agenda on its face. One of the strangest things to me about the socialist inclination is its materialist focus. It's focus on material equality, as opposed to flourishing. So, what I find depressing about American life today isn't so much that there are a lot of people who struggle to succeed--although that's depressing. It's that their ability to enjoy life, to express oneself, to use one's talents is so limited among so many parts of the population, because of the failure of the school system, because people have been unfortunately have spent 10-15, well, some length of time in the American school system without it encouraging flourishing, is what depresses me. It's also true that it doesn't help people get jobs and it doesn't help make them more productive. But that's not, to me, the main thing. But on the socialist claim--there's different flavors of it, of course--but one of the socialist claims is just pure material inequality. It seems to me that that's pretty easy to fix. You don't need a lot of localized knowledge. You do need localized knowledge for what people really care about. You do need localized knowledge for what skills people need. But, reading and writing? That's pretty basic; we don't do such a good job on that. So, while I accept the argument, the socialist argument, that say public provision of schooling, on an equality argument, is compelling. I don't agree that it should be publicly done, but I accept the logic within the logic of their own argument. But it's a failure. So to me, that suggests on purely practical grounds--forget the moral question for now, which I also agree with you on. But putting the moral question aside, the public schools are poorly run; they should be, to me, disbanded and replaced by private schools that are supported for charity and scholarships and other things, and designed by using local knowledge on what people really need, etc. So I totally agree with the thrust of your point. But it seems to me, within the socialist agenda, pure redistribution of income is something government is very good at and has done fairly successfully. If you asked, how successful has it been? Does the purely redistributive part of government today have an impact? And I think it has a huge impact. And I think when you look at the studies that people have done, when you do pre- versus post-transfers of the distribution of income, it's significant. So, I don't understand that second point, that there's some knowledge problem with redistributing income within the socialist agenda. It seems to me it's a straightforward thing. The U.S. government does it pretty well; European governments do it very well. They have definitely boosted up the bottom and created a safety net, financed mostly by people of higher income. And I don't like that because I'd rather, like you, I'd rather see it done privately. But it seems to me on its own terms it's pretty successful. Guest: Yeah. And I'm going to agree with your argument--on its own terms. So, if what we're measuring is material equality or relative rates of material equality, yeah, that's pretty easy to do. And it's pretty easy to set up a system of mechanisms, political mechanisms, that will do that. The larger question I think--you put your finger on the right one--and that is: To what end and to what effect? What exactly is the effect of doing that? And the results are not all that good. So if the only thing you are measuring is, is there greater inequality of wealth or less inequality of wealth, well, that the state can manage. But it seems to me that that's a pretty poor proxy for the kinds of policies we should have in a humane and just society. What we want in a humane and just society is what Aristotle called eudaimonia. This is the full flourishing of humanity, leading a life well and truly lived with the cognizance of having done well, exploiting and exploring one's possibilities. That's something that the state can't do, or at least has a much harder time doing. And if the only thing that were necessary for that were the distribution of wealth, the redistribution of wealth, well, then the state would do it. But what we've seen in the United States and what we've seen in Europe and elsewhere is that even if you have increasing levels of redistribution of wealth, that doesn't mean that you have increasing levels of human flourishing. That doesn't follow. Now, some of the--you said the knowledge problem is not maybe as big a problem at least at the fundamental level. So, does everybody need to know how to read, write, and account, as Smith puts it? Yah. It seems like those are some necessary--those are not sufficient, but it seems like they are necessary elements of human flourishing. Well, it doesn't take very much to be able to get a child to be able to read, write, and account. It certainly doesn't take 12 years of schooling for that. It would take a fraction of that. But that's an element that's--so even on that fairly low level, we don't always succeed very well in the public schooling system in the United States. But even at that low threshold, that's not telling you any of the details about what's required for any individual human being about what's required for leading a fully flourishing human life. And as you know, what we get in the United States and through a lot of its social programs and a lot of what I would more generally call social-inclined policy, is an attempt not just to give a sort of floor below which, a minimum threshold below which no one will fall. But really to sort of capture and engineer a full life for people. And a lot of what goes on in Washington today, where all the action is, is not just what are the basic minimums. But instead, what are all the aspects of human life that we can engineer centrally so that we can ensure that human beings lead the kind of lives we would like to lead? So it's a much more ambitious agenda than the one you are describing. And I think that's when the knowledge problem really comes to the fore.

26:06 Russ: You've opened up quite a Pandora's Box; you are getting us toward the nanny state, which is something you deal with in the book in some detail. My inclination is to say that the glass right now is half full. I worry about the future of the nanny state. I think at it's current level, it's fairly modest. You know, it might keep me from getting a large soda in New York City; it makes it hard for people to advertise cigarettes for me. But the social engineering part of government is modest compared to what its potential could be. So I'm not quite as worried, at least at the current level. But let me play G. A. Cohen for a sec. Wouldn't he respond to your point about flourishing and eudaimonia by saying, 'Yeah, that's all true, but if you are hungry you can't really flourish?' So, if we could provide that minimum--which we don't, exactly; we have this complex welfare system; Europe is a better model for what G. A. Cohen is talking about. But wouldn't he argue that by removing the worries of hunger and giving people a basic level of income it gives them a much better chance of flourishing than a more laissez faire model? Guest: Oh, I'm sure he would argue that. And I think there's a lot to say about that. First of all, to the question, which I think is implicit in what you are arguing: Is wealth all that matters? And I think the answer to that is obviously, 'No. Wealth is not the only thing that matters.' But what wealth does do is it enables the things that do matter. So, if I have to worry about whether my children can eat today, then I can't very well be spending time contemplating the highest good or what virtue is, etc., or contributing time, talent, and treasure to my church. I'm just worrying about feeding my children. So, a minimum--below a certain minimum level of wealth, none of these other questions matter. Now, if you take a bit of an historical perspective on the human condition, not just as it appears today but as it appeared throughout a longer stretch of human history, in the vast majority of the recorded human history, the average person was quite poor. As Thomas Hobbes described in 1650 in The Leviathan, Hobbes said that the life of man was nasty, poor, brutish and short. Well, in the 17th century and basically everything up until the 17th century, he had that right. That was true. It was in contemporary dollars the average worldwide GDP (Gross Domestic Product) if you just take the total amount of production of wealth and divide it by the number of people on the planet, it's something like $1-$3 dollars per day that almost all human beings in human history lived on. At that level of wealth, which is really a level of poverty, there's not a whole lot of other things that people can worry about. That's all they are worried about. But what happened historically is that around the 18th century or so, overall levels of wealth began to increase, to the point where today, worldwide, we enjoy unprecedented levels of wealth. Now, there are lots of interesting questions about that: What exactly caused it? What could we do to maintain it? Those are interesting questions. But the way they relate to the argument I think you are making is that once we begin to rise out of humanity's historical norms of poverty, it's then that these kinds of questions about our obligations to one another really take force. Because now we are in a position to actually make a difference. And if you ask, 'What is it that caused that rise in wealth?'--well, it wasn't redistribution of wealth. So, there's a lot of redistribution of wealth going on and all sorts of zero-sum wage[?] throughout all of human history. And although the Pharaoh was wealthy and the Roman Emperor was wealthy and in the Song Dynasty the Chinese Emperor was wealthy, everybody else wasn't. So, what began to happen in the 18th century and moving forward to the 19th, 20th, and 21st century, is that more and more of human exchange, human association, began to be informed with the Smithian model of understanding other people as peers and having the right to say 'No, thank you.' And that's really what's transformed and enabled us to have the levels of wealth we have today. Now, getting back down to brass tacks. If there is a child alive today--and there are many, maybe a billion or so in the world today that are still living at those historical norms, a). what's our obligation to them, and b). what's the best way to execute that obligation? I think the obligation from outside a kind of institutional level is to figure out what the what the institutions are that have enabled the other 6 billion or so other people to rise out of those historical norms and to spread those institutions or figure out some kind of way to encourage the growth of those institutions in the other places that are yet to enjoy their benefits. And then on a personal level, I think it does place a personal obligation on us to help where we can. Enjoying wealth, the kinds of wealth that we in the United States enjoy today, is far beyond what previous generations could have imagined. And that's not an end in itself. But that gives us all sorts of tools that we can use to help others achieve similar levels, so that they can begin to enjoy some of the good things in life that are similar, that our wealth has enabled us to achieve. Russ: Yeah. For me it's mostly a practical issue. I just don't think we know how to help people very well. And it's possible--I'm not going to conceded this--it's possible that helping itself is part of the problem. Obviously, giving people things is different from them earning them. And I think that suggests that the ideal is to help people find ways to earn prosperity rather than to receive it from others. Guest: And I think also, Russ--excuse me for interrupting--I think that's in large part, not exclusively, and institutional question. I think sometimes we have--and this is part of what I in the book argue is an aspect of the socialist-inclined mindset--is that you have some people, like us, who have been lucky enough to enjoy the existence of certain institutions and have succeeded in them or are living a kind of life that is well above historical norms of poverty; but we think of other people who are still at those historical norms as people who need us to do something for them. Oftentimes, I think that's a dangerous mindset to have. One of the great insights that Smith brought to the fore, right at the beginning of the Wealth of Nations was that human beings are pretty much the same all the way around the world. So, if you give them the opportunity and let them face the rewards for success and also face the consequences of making bad decisions, they figure out for themselves how to better their own condition. So, a lot of times I think, you know, the socialist world view thinks that there are some people who just can't figure it out for themselves and we're going to have to do it for them. And that, I think, is often not the case. And maybe never the case, or almost never the case. Most people can figure out how to improve their own conditions, if just given the right opportunity and allowed to do so.

34:06 Russ: I want to go to the G. A. Cohen camping example. So, G. A. Cohen tells the story of a camping trip where we take a bunch of stuff, all kinds of gear and food and we load it up in our cars and we head off into the wilderness. And the idea is we are going to have a little vacation together. There's going to be a lot of community; we're going to do a bunch of stuff together; we might go hiking together, we might cook together--with a bunch of friends. And it's a very idyllic image that he conveys. And then he talks about how unpleasant that trip would be if we used the capitalist norms that we're accustomed to. So, he suggests that if one of the members of the party knows about, say, a special source of water in the wilderness that his father had told him about and he proceeds to offer to sell it to the other people because his father had endowed him with this knowledge, people would be offended. He talks about somebody's a better fisherman than the others, so he decides he wants the better-tasting fish, he wants to make the other people eat the less tasty fish because after all he caught them. And he has a couple other examples. These are all--it's a very clever example and it taps into a deep emotional response that we have, that we would not want to go on a trip with those folks. Most of the time. Or the person who is, say, the best cook of the group who decides to sell his services to the rest of the group. So, what's wrong with G. A. Cohen? What's wrong with that example? Guest: Well, there are a couple of things. Just on its own terms, it's a highly stylized scenario. Let's put it that way. I mean, there are all sorts of restrictions and assumptions built into it. Which are instructive. Russ: And he concedes that--to be fair to him. Guest: Yes. But they still have to be explored. So, for example, all of the things that we bring with us to the camping trip, those just sort of appeared out of nowhere. So, there's no sense of those having to have been produced or traded for, exchanged, created. This is the tents and all the tools, pots and pans, all the things he describes. So those just came out of nowhere. But okay, we can concede that to him. But more important I think is the idea that there's a fairly narrow range of purposes that people have on a camping trip. You have a relatively small number of people, all of whom either know each other in advance or are going to get to know each other very soon, very quickly, because they are all together in this joint project. But the sense of a single, joint project, with a single, one or two purposes for the joint project, for a limited duration--camping trips don't go forever; they go for a weekend or something, or maybe a week at most. If you are bringing your kids and family it's probably not going to be more than a week. That's a very stylized kind of scenario, a very unusual scenario. We might be willing to say to Cohen is, 'If you have that kind of scenario, yeah, maybe you're right. That's the best way or maybe that's a way to organize a camping trip.' The problem is, a society is not like that scenario. Because what we have in a country, like the United States, with over 300 million people, we don't have people who know each other; we don't have people who all have the same schedule of value and the same hierarchy of purpose. We don't have the ability to look each other literally in the eyes and say, 'Do you mind if my kid rides your kid's bicycle?' or not. We can't do those things on a larger scale. It's not just that scale makes things more difficult. It's that once you get out of a very small group, that kind of scenario is just no longer possible. We have to find alternative ways of associating with one another, of exchanging, trading, partnering; and relying on that kind of deep personalized knowledge where you actually look each other in the eye is simply not going to be transferable to a large scale society. Maybe another way of looking at that is, look at a typical family, or sort of a stereotypical family where you have parents and kids. Would you want, within that family, within that household, would you want people bidding and offering and making exchanges for, 'I'll charge you this much to sit on the couch,' etc. and 'this is my half of the room,' and you've got to get a ticket to come into my half of the room or something. No. That's absolutely not going to work. But what works in a family or in a very small community is not necessarily something that's transferable to a larger community. In fact, it's pretty demonstrable that it won't work. The only way that you'd be able to get that kind of cooperation is if you completely regiment the entire society along the lines of a military or something, where you have some clear leaders who give orders and everybody else just follows them. And in fact that's actually the historical pattern that socialist communities have taken. They start out, they can often start out as small communities. But if it's more than just people in a family or a very small group, well then they're going to become regimented very quickly. And the tradeoff you will then begin to see, the forgone prosperity, the forgone wealth, the forgone innovation, entrepreneurship, and ultimately prosperity is exactly the pattern that socialist communities have taken. Russ: Yeah, so, I was fascinated by this. I want to--I'll go back to the quote that Cohen had earlier--"I serve you not because of what I can get in return by doing so but because you need or want my service; and you, for the same reason, serve me." Now, I have to confess--I don't have to confess it; I'm proud of it, actually--that's how I teach my children to behave toward each other. And I would argue that--and I've mentioned it many times on this program, I think--Walter Williams points out that a family is a socialist enterprise. It's top down. The parents, sometimes the mother, sometimes the father, sometimes they act in concert--but they run the lives of the children to a certain extent, up to a certain point, certain age. And I would argue--and I'm trying to give Cohen his due and I'm bending over backwards here to give socialism its due. I think it's not just that the family works better when I just say to one of my children, 'Well, you get the last piece of chicken,' instead of auctioning it off--an example I've used before. So, I don't auction off the last piece of chicken; I don't auction off the bedrooms; I don't give the kids points or allowances and let them bid on these different things, and allocate their incomes accordingly to their own preferences. I decide who gets what room. For a while two of my sons roomed together, and then eventually one got their own room. So, those are made by fiat, by my wife and myself. One argument is it works better because there's lower transactions costs, you can't do the bidding and keeping track of the money and all that. But I think that's the wrong argument. I think the reasons we run our families that way is because it's better, not on efficiency grounds, because it's more rewarding. It's more pleasant. There's something deep inside us that wants to live that way. And I think Cohen's problem--this is a Hayekian insight from The Fatal Conceit--is that that really nice urge which works great in a family and works usually pretty well on a camping trip, although some camping trips end with some families squabbling and in disarray. But extending them to a large area--it's a lovely idea; it doesn't work. In fact, more than it doesn't work-- Guest: It's a romantic ideal. Russ: But it's a good ideal. I want to see if you agree with me that it is a good ideal, even though we don't--and so we do feel uncomfortable that people have certain advantages, say, which Cohen points out on the camping trip that they are able to exploit. We might decide that we shouldn't let the state enforce, reduce those advantages; but the idea that, the emotional response that the camping trip provides I think really explains why we are so deeply attracted to the socialist inclination. Guest: Yeah. And that is the Hayekian point. We are a small-group species. And we've developed certain psychological and social instincts that have served us well in our evolutionary history, which was largely a very small group evolutionary history. The ones that survived are the ones that had a very small, but extremely cohesive and also in many ways an equal status in the community, more along the lines of what you were describing about the socialist family. You had a leader, but wealth and resources tended to be shared within very small margins. And those instincts we carry with us today.

43:27 Guest: But I want to part with you on one aspect of that. So you asked, is that a kind of a good ideal? It certainly has captured and continues to capture--I think it resonates with us on a deep and almost psychological level. And that's been present throughout a lot of recorded human history. People have talked about golden ages, where human beings existed in these kind of spontaneously harmonious small groups where everybody's needs were met and nobody had much more than anybody else, and people spontaneously wanted to give to one another only because the other needed it--in other words, to serve one another. And that's a very powerful idea. But that works in the family. I think the reason that works in the family is not only because it's a small group, although that's one big part of it. But another reason is that children aren't yet fully adults. And that's a very important distinction. So, one reason why we think it's appropriate for a parent to establish the overall mission and purpose of their lives as a family is because the children aren't yet equipped to do that. You mentioned almost fleetingly--you said, the adults make the decisions, 'up to a certain point.' Precisely right. At a certain point, what we do is we recognize that our children are now transitioning into becoming adults. And at that point, their lives become their own. They are now the captains and authors of their own lives, with all the good and bad that comes with it. They are free to make decisions for themselves and also accountable to be held responsible for those decisions. So, the argument that I make in the book about socialism and capitalism, part of it hinges on this distinction between being a child and being an adult. The socialist model, I think, is exactly captured by this idea that there are some adults in the room who need to run the show for the children. And it takes that model of differential hierarchy and applies it to all of society. And what I say is, hold the horses for a second. Because in society in general what we're talking about is millions of adults who are not only capable but who are morally responsible for their own lives. Not one group of people who know how to run a life and then a bunch of people who are incompetents. And I think that's precisely the aspect of the argument that we miss. That holds for a family and that's why we think it's right--the parents, yeah, you decide who gets the chicken and who doesn't get the chicken. But in a larger society, that's made up of competent adults, free people, the same amount of authority that the parent assumes on his or her own behalf is exactly the same amount of freedom and authority and responsibility that we should grant to all of the other normally functioning adults in society. Which is almost everybody else in society. Russ: That's a great point. Actually, it reminds me of a different problem with my point. So, let me critique my point in a different way, which is I thought you were going to say, which is that it's not just a small group; and it's not just a small group of adults and children. It's a small group of people who have chosen to care about each other. So, my wife and I aren't just thrown randomly together. We fell in love and chose to get married. We care deeply about our children. So, it's true we don't know exactly what they're thinking and we may make mistakes in thinking about what's best for them. But we clearly--our interests are very much aligned through emotional and genetic ways. If you take the next level up, which is the camping trip, or the kibbutz is an example you use in your book a few times, kibbutzim--kibbutzes--struggle. It's not clear they're a successful model, even though they are a small group. Because it's very hard for people to make those decisions, to share and be egalitarian in a setting where they don't love each other. It's much easier for me to tell my son, 'Don't exploit your younger brother when you swap that baseball card.' Which I do, by the way. My oldest son, when he was younger, unfortunately would often try to get a good deal. And my youngest son, who was ignorant--there was an asymmetric information problem, "market failure" in the language of-- Guest: That's why we don't allow a market there. Russ: Yeah. And so I don't. I'd stop it. I was the commissioner. Eventually, I had to approve all trades of cards, to defend the interests of my youngest, uninformed, often uninformed son, because I didn't want him to look back later and realize he'd been taken advantage of. And I wanted my older son to take that into account when he proposed trades. But doing that with people you do not love, don't have a family connection with, is much more challenging. And certainly as it gets larger it gets increasingly difficult. Guest: And if you don't have a stake in the outcome. In a family, you have a biological, psychological, emotional stake in the outcome of your children's lives. And for people who don't know each other--take any two random people in the United States--they don't have a similar sort of stake in one another's outcomes of their lives--you just can't rely on the same kinds of motivations. Russ: Yeah. I just--you can argue it's an ideal that such a person would want to serve a stranger for what the stranger needs. But to count on that seems like a model that certainly Adam Smith would not agree with. Because he understood that love falls off as distance increases.

49:13 Russ: Let's talk a little bit more about Smith. You talk about Smith's ideal vision for the role of the state. What is it? Guest: Well, he says peace, easy taxes, and a tolerable administration of justice. Which is not much. So, Smith was not what I would call an a priorist philosopher. So, he was not like John Locke, say, trying to deduce the principles of government from natural law. He was an empirical, more pragmatic investigator: Let's look and see what kinds of societies succeed and what kinds of societies don't. And the conclusion he reached, on an inductive basis, looking throughout history and data, the data he was able to assemble, suggested to him that, first of all, you didn't need a government. But it had only a few duties. So, it needed to provide against foreign invasion. So, that's something like an army. It needed also to protect citizens against aggression from their fellow citizens. So, it needed something like a police and port system to adjudicate disputes. And then Smith had his third category, which is a bit more amorphous. He said, there are certain public works that he thought the government could also be justified in providing. But they had to meet two criteria. And they are actually surprisingly stringent criteria. The two criteria something would need to meet in order to be justified for public provision, were, first of all, it had to benefit the entire great society, as he said, not just one group of people at the expense of another. And second, it had to be something that couldn't be provided by private enterprise. That private enterprise couldn't get a profit for providing. And now--what falls into that third category is a matter of some dispute. And maybe even speculation. But he thought it was things like, elementary education; maybe roads, bridges, canals, so infrastructure, things like-- Russ: Sewage. Guest: Yeah. Maybe some aspects of public health. So, he was not an anarchist. He was not even, if you like, a Randian, Ayn-Randian limited-to, almost limited-to-zero government sort of person. That's not him. He was willing to allow for there to be some flexibility. But the way I think--it was a small government, but in the few things that the government did, he thought it should be, have the powers and be robust enough to actually satisfy those particular goals, that it should rightly have. Russ: So, what was his, what would you say his view on redistribution was? Those people have made claims for him, so I'd like to hear it from--you're closer to the horse's mouth, in my mind, than others. So, go ahead. Guest: Yeah. No. I think redistribution for the sake of redistribution would have been alien to him. He was interested in endorsing the institutions that allowed people 'to better their own conditions'. That's his phrase--but, better their own conditions. Smith had, actually, really a robust, large faith that people, given the opportunity, would be able to figure out what would constitute bettering their own condition and to figure out ways to improve their condition. You just needed to give them the institutional security to give them that opportunity. So, there's a whole lot of what goes on today under the name of 'redistribution.' I think Smith would have thought, is, 'Could I be counter-productive,' so that's an empirical matter. But then in many ways it's just unnecessary. Once you secure basic protections of life, liberty, property and contract--voluntary contract or voluntary promise--then that gives people the conditions they need in order to flourish all on their own.

53:13 Russ: So, let me step away from these issues of equality and socialism just for a sec, because you've raised an interesting [?] here I want to get into, which is: you and I have talked about this before. And I've talked about it recently in some recent EconTalk episodes related to my recent book. But one of the interesting questions is, you said people would better themselves; and I'm thinking: Yes, Smith talks about the propensity to truck, barter, and exchange, which is definitely[?] an urge to get a better deal, to find something or improvement. But it's fascinating to me that Smith, in the Wealth of Nations is focused on material prosperity, more or less. There's human flourishing in there. But he's also worrying about starving to death versus not. In The Theory of Moral Sentiments he was very discouraging of the urge to better yourself, in the material sense. He, of course, says, 'Man naturally desires not only to be loved and to be lovely,'--and by loved, he means respected, admired, paid attention to, praised. And he says the wrong way to do that is to make money. And we have this impulse to do that because rich people get more attention than poor people; and poor people are pitiful because no one pays any attention to them--says Smith. It raises the question whether Smith would accept this idea, that people won't even get better off, or if it's even worth doing. Guest: Yeah. I mean, that's a complex question with a lot of different parts. It sounds like a simple question or a simple issue, but it really isn't. It goes back in some ways to something we talked about at the beginning of our conversation, which is that if there are people who aren't sure whether they can eat or whether they can feed their children today, whose children are actually in danger of starving, well then none of the rest of this really matters. That's what matters. But once you reach a certain threshold, which is actually pretty low by contemporary Western standards-- Russ: And in Smithian standards, very low. Guest: Yeah, by Smithian standards, extremely low. But once you pass that standard, a potential danger--and I think this is what Smith was trying to envision--I mean, remember, he was writing at the cusp of commercial society. So, he could have had no idea about what kinds of things markets could produce or a market-based society could produce. There's no way he or anybody else could have had any idea. But one of the things I think he may have been worried about is that, in a commercial society, that could generate the wealth that could enable people to ascend above this threshold. Whatever that minimum threshold is, they can ascend above the threshold. Which would have the great, good benefit for humanity that a). they are no longer worried on a day-to-day basis, 'Can I eat today?' And this would be true for their children; and it would also enable them to turn their attention to other kinds of, actually call forth the powers and the imagination of human beings, that otherwise would have just been left afoul[?] of, because they couldn't exploit those higher powers, in the service of higher ends. On the other hand, there is the worry that if you have a commercial society, people can begin to become--I think he was worried--they can be confused about what the actual goals of the society are. And what I mean by that is that, is begin to think that the generation of wealth can become an end in itself. And that having the wealth is already everything you need to have to be happy, to have a fully flourishing eudaimonic life. And Smith thought that would be a mistake. And I think he's right about that. That is a mistake. And I think he thought that that was a worry and a potential danger. Now, he thought it was worth the bargain--that bringing people out of those historical norms of poverty was worth running this risk--but nevertheless it was a risk: that people would begin to conflate wealth with happiness. So, instead of seeing wealth as a tool to enable them to achieve, and others around them to achieve what true happiness might be, that it could stand in place of the happiness itself. And that was a real worry. And I think that brings us back to another aspect of our conversation which we've already had, which is education. What becomes the goal of education, then? Well, part of the goal of education is not just teaching each new generation as they come along about what the institutions are that enable wealth generation, but also what the components of a life well lived really are. And the relation between those two. So, education, then, can really take on a much deeper and more important role in human society, once we've reached a certain level of wealth. Russ: Yeah, it's ironic I think that at our university level education at least, to some extent our K-12, is becoming increasingly focused on the job market as opposed to a life well lived. Which--it's easy to get on a soapbox about that; I'm not going to do that right this second. Guest: Well, it's a confusion of what's necessary with what's sufficient. It's like asking: what's the purpose of a firm, a business? Is it to make a profit? Well, that's necessary for the success of a firm, but that's certainly not sufficient for why we should want to have firms in the world. I think it's similar to the institutions that enable wealth generation. That's necessary for leading a flourishing life, but it's certainly not sufficient.