My Conversation with Russ Roberts

The podcast master himself, here is the audio and transcript, here is the opening summary:

What are the virtues of forgiveness? Are we subject to being manipulated by data? Why do people struggle with prayer? What really motivates us? How has the volunteer army system changed the incentives for war? These are just some of the questions that keep Russ Roberts going as he constantly analyzes the world and revisits his own biases through thirteen years of conversations on EconTalk.

Russ made his way to the Mercatus studio to talk with Tyler about these ideas and more. The pair examines where classical liberalism has gone wrong, if dropping out of college is overrated, and what people are missing from the Bible. Tyler questions Russ on Hayek, behavioral economics, and his favorite EconTalk conversation. Ever the host, Russ also throws in a couple questions to Tyler.

Here is one excerpt:

COWEN: Here’s a reader question. “In which areas are you more pro-regulation than the average American?” They mean government regulation.

ROBERTS: Than the average American?


ROBERTS: I can’t think of any. Can you help me out there, Tyler?

COWEN: Well, I’m not sure I know all of your views.

ROBERTS: What would you guess? Give me some things to think about there. In general, I think government should be smaller and regulations should be smaller.

COWEN: I’ll give you–

ROBERTS: Let me give you a trick answer. Then I’ll let you feed me some.

COWEN: Sure.

ROBERTS: Many people believe that the financial crisis was caused by deregulation. I think that’s a misreading of the evidence. It’s true that some pieces of the financial sector were deregulated, but government intervention in the financial sector was quite significant in advance of the crisis. In particular, the bailouts that we did of past failed financial institutions, I think, encouraged lenders to be more careless with how they lent their money, mainly to other institutions, not so much to people out in the world like you and me.

Deregulation’s a little bit tricky, so I wanted to get that in. I’m not sure how that pertains to the question. It does, probably, in some way. So give me something I should be more regulatory about.

COWEN: Well, one answer —

ROBERTS: Baseball? Baseball, of course. [laughs]

COWEN: I would say animal welfare — government should have a larger role. But also what counts as a tax-exempt institution, I would prefer our government be stricter.

ROBERTS: Well, I’m with you there. Yeah, okay, kind of.

COWEN: Well, that’s more regulation, okay?

ROBERTS: I guess.

COWEN: Kind of.

ROBERTS: Yeah, kind of. It’s different standards.

COWEN: Higher capital requirements for banks.

ROBERTS: I’m okay with that. Yeah, that’s a good one. I’d prefer a laissez-faire world for banks, more or less. If we can’t credibly promise not to bail out banks — if that’s the case, we live in a world where banks get to keep their profits and put their losses on taxpayers — bad world. A more regulated world would be better than the world we live in; not as good as my ideal world, though. But there’s a case where I would be in favor — like you just said — more capital requirements.

You’re on a roll. See what else you can come up with for me.

COWEN: Spending more money for tax enforcement, especially on the wealthy.

ROBERTS: Not the worst thing in the world.

COWEN: You can spend a dollar and bring in several times that, it seems.

ROBERTS: I don’t think rich people cheat on their taxes. Do you? [laughs]

COWEN: “Cheat” is a tricky word, but I think we could spend more money.

ROBERTS: We could probably collect more effectively.

COWEN: And it would more than pay for itself.

ROBERTS: Yeah. That’s probably true.

COWEN: We’re actually big fans of government regulation today.

ROBERTS: Yeah, we’ve really expanded the tent here. [laughs]

Do read or listen to the whole thing.


Climate change?

Don't be a dope.

How do you leave out pollution as an area that could use more regulation? Climate change might destroy the planet, and the libertarian response is, "The markets will fix it."

Again, climate change can not destroy the planet.

Technically, Tyler *might* wake up tomorrow as a kaiju and destroy DC, but I don’t think a kaiju tax a) will solve the problem as posed nor b) be effective at preventing Tyler from becoming a kaiju.

Sure that sounds absurd to you, but CO2 will “destroy the planet” sounds equally absurd to me. Similar implication on the kaiju tax.

Meaning - there are more differences than just the prescription (the market will solve it) one of which is, I think people, particularly in the US would prefer a warmer climate than the one we have now as evidenced by people retiring south and not retiring North. So I even think the plans discussed for global warming are welfare decreasing even if I grant that they would be effective at their stated goal. (To be clear, the analogy breaks down on this point as I think the outcome of Tyler as a kaiju is welfare decreasing)

"Climate change might destroy the planet"
with all due respect,this is a colossally ignorant statement

Some idiot told me eating a pound of bacon a day would cause my heart to explode. As this was a colossally ignorant statement that doesn't at all reflect reality, I have nothing at all to worry about.

Brazil is an excellent analogy to the state of USA academics. Without the pragmatic vision of a great leader, Brazil would not attempt to answer the challenge of the mountain ranges that isolate Brazil’s great cities from each other and the interior and dampen economic growth.

Similarly, faculties in the USA loll about in languorous leisure secure in sterile sinecures, producing little of pragmatic value.

In The Spirit of Bolsonaro modern management techniques must be applied to the taxpayer subsidized education industry. Non-academic outside managers must be brought in to supervise, plan, direct and discipline academics to assure a public return to lavish direct funding and tax expenditures that promote their luxuriant growth and lascivious indolence. Cowen’s love letter to bog business extols USA management. Such management techniques are the roads that must be built through the swamp of USA academia to restore the opportunity for future progress and growth. May The Spirit of Bolsonaro inspire US leaders to undertake that difficult and arduous path.

Exactly. President Captain Bolsonaro has said God has chosen him to lead Brazil.

I loved the bit at the end where he said in which areas classical liberalism had failed. I agree with him there.

The irony is that the biggest recent failure of classical liberals has been the broad acceptance of the false premise that the financial crisis was an inevitable result of risk-taking and overbuilding of housing. For Russ, this has become a major focus. He frames it in terms of government intervention, but in the end, the main result of this error has been an acceptance or support for post-crisis government intervention that has effectively made mortgage lending untenable in many markets. This has caused the loss of millions of construction jobs, wiped out trillions of dollars of net worth from working class balance sheets, caused rising rents that especially hit the low tier markets that are effected by it, and severely hampered the economies of the mid-tier urban centers that had, for decades, been the landing point for aspirational working class Americans.

Classical liberalism should have a lot to say about this unfortunate development, but instead its proponents have been led astray by the false premise. The excerpt Tyler included here is a great example of the cognitive dissonance the false premise has created. Russ tries to make the answer about how government interference caused the crisis, but note that this is his answer to the question “In which areas are you more pro-regulation than the average American?”

+1. I love Russ, but finance ain't his thing.

@Kevin Erdmann - when is your book coming out? Self-publish? Maybe GoFundMe? Nobody mainstream will touch that revisionist thesis with a ten foot pole I would hazard.

How do you say "Muh Roads" in Brazilian Portuguese?

"Mais estradas".

At least Cowen and Roberts have a sense of humor, warped though it may be. Down here in the South, we have an expression that it's not the heat, it's the humidity that makes us miserable. One could say the same thing about regulation: it's not the regulation, it's the excessive risk-taking that makes us miserable. R is (and has been) historically low for decades so owners of capital either invest in safe assets (e.g., government bonds) or reach for a higher yield by taking on more risk. Of course, excessive risk leads to financial crises that require government bailouts to prevent economic Armageddon. Government regulation is equivalent to preventive war.

What many ignore is R: why has it been depressed? Some answer that it's because there's been no significant innovations that will generate a rate of return that will propel the economy forward. The end is nigh! Some answer that the government did it with regulation, regulation that is intended to mitigate excessive risk-taking resulting from a low R, which just circles back to R. Some answer that it's because of government bailouts in the event of a financial crisis. Our Austrian friends would let prices tumble down, down, and down, wringing out the excesses that build up in the economy including excessive risk-taking. That's why our Austrian friends are kept in the attic.

What's your explanation for a low R? And what's your solution?

Patents. Asked and answered. Any more questions counsellor?

If you were to ask me to name an interviewer better than Russ Roberts, it would be extremely difficult for me to think of a single name.

(I immensely enjoy Tyler's quite different interview style as well.)

Now we know. Russ and Tyler are big tent regulators. They could have used them in "Dumbo."

Higher capital requirements for banks is not an example of additional regulation, it is merely fiddling with the dial that prior regulation has already put in place

It’s always struck me as interesting how someone so enamored by emergent phenomena as Russ could think it probable that our universe has a God. It would be like looking at a coordinated market and saying, “It’s too crazy that prices reflect supply and demand and help direct resources to their most productive use. There MUST be a person setting prices. I have faith in it!” Biological complexity, like prices, is an emergent phenomena that is more simply explained without invoking any supernatural beings.

The standard answer is that it is the existence of anything at all -- the universe, physical laws, time -- that in some sense must require a Prime Mover.

This perfectly encapsulates why I get so frustrated with free-market fetishism. The political right constantly presents the left view as, "lets punish the big corporations and give the money to welfare queens!". It's like no, you've never sat down and seriously engaged with a progressive person.

When you do actually ask progressive thinkers which areas they would like more regulation in, they come up with examples just like in the posted conversation, and come out looking very reasonable. Hmmm, its almost as if there is a coordinated effort by those who stand to lose via regulation to make counterarguments look ridiculous......

Progressives are much worse than that and get worse as they move left every day.

You just went right ahead and proved to be the person I'm talking about, didn't you?

We can easily invert your comment: rather, the exchange illustrates how reasonable "free-market fetishists" like Cowen actually are, and how rare it is for a "progressive person" to engage with what such fetishists actually believe.

Research supports this conclusion as well since conservatives tend to be much better at correctly identifying the positions of leftists than vice-versa

The wellness snake oil industry could use a little more regulation.

the cbd meme zombies are making a lotta bold claims
not supported by empirical evidence

"If we can’t credibly promise not to bail out banks — if that’s the case, we live in a world where banks get to keep their profits and put their losses on taxpayers — bad world. "
We need to credibly promise to bail the banks on a more regular basis. AT least we make the right to coin bettable. The worst outcome is to pretend we defeated the right to coin, we didn't.

I cannot get more credible then as I have a problem. I will die and Russ Roberts' children will be required to execute the right to coin. And, legally, right to coin was meant to be executed as the monetary bailout.

What about a balanced policy: bail out the bank but hang the CEO?

"Why do people struggle with prayer?" What on earth does that mean?

God knows.

could be a straussian reference to this one

apparently the lefties now make pastors apologize if they pray
for the Donald
+1 postmodern

Maybe some people feel silly doing it. If you don’t believe it could be awkward in he same way positive affirmations are (“I’m good enough and I’m smart enough and gosh darn it people like me”). Would be nice to know what they’re referring to though.

To answer the first question, the virtue of forgiveness is that we forgive Tyler Cowen for his post about the Barr explanation of the Mueller report, explaining who the winners and losers were. So what if he jumped the gun a little? The guy has a stout heart, and some day, in the fullness of history, he will come back with a matured take. Forgive and forget is what I say. Anyone can slip a notch and be a tool.

What are the virtues of forgiveness? Are we subject to being manipulated by data? Why do people struggle with prayer? What really motivates us? These questions will all be answered, in the ripeness of time, on blogs.

That was a good interview, but I was hoping Cowen would ask Roberts if he used auto-tune for his rap videos. If so, that may have been a first in econ rap.

Russ notes that SSRIs haven't been as effective as advertised, but an important side effect of their development may have been a reduction in heavy alcohol consumption. It's not yet clear if the pathway is causal, but the dramatic increase in antidepressant usage over the past 30 years has coincided with a drop in binge drinking among young adults. This correlation is consistent with a story in which the marginal person with mental health problems is substituting to a safer technology, and it suggests that prizes for innovation may be an even better public policy lever than we thought.

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