Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, it's January twenty eighth. I think our new mayor
Speaker 2: here in New York City. Maybe he hasn't done much,
Speaker 2: but the snowstorm seemed to go fairly well, not too
Speaker 2: many big disruptions.
Speaker 3: I wasn't here, but you were able to walk around,
Speaker 3: get out of your apartment.
Speaker 2: There have been several mayors who's like entire reputation failed
Speaker 2: because they couldn't handle a snowstorm, and so he seems
Speaker 2: to have passed the first test.
Speaker 3: So it feels like a low bar for New York mayors.
Speaker 2: I gotta say, my guess is, if we looked at
Speaker 2: I agree it is a low bar. But on the
Speaker 2: other hand, it's like, Okay, first big test of the
Speaker 2: new administration seems to be doing well. I don't think however,
Speaker 2: ultimately the Zarnmumdan the administration will be judged on snow removal,
Speaker 2: like this is not going to be how history probably
Speaker 2: remembers how well.
Speaker 3: No, and he certainly wasn't elected on his snow removal.
Speaker 2: No, no, this is capabilities.
Speaker 3: Although I did see the videos of him, you know,
Speaker 3: getting his shovel out, and.
Speaker 2: He's so good at like retail politics like that was like, say,
Speaker 2: he's so good at that.
Speaker 4: Yeah.
Speaker 3: But speaking of tests, I mean there are bigger tests
Speaker 3: coming up, right, mostly concentrated in the economic policies heah.
Speaker 2: Right, I think we know, like sort of and of
Speaker 2: course we talked to him, but like the affordability question
Speaker 2: in New York City clearly central one of the if
Speaker 2: the most central topic in the campaign. And what I
Speaker 2: would say is that the very most, not all of them,
Speaker 2: but at least a handful of the ideas that he's
Speaker 2: proposed are the types of ideas that like, economists hate them, right, So,
Speaker 2: especially anything where the government is intervening in rent, the
Speaker 2: idea of Like I there might not be a more
Speaker 2: hated idea among economists than anything that smacks rent control
Speaker 2: or anything like that.
Speaker 4: Right.
Speaker 3: So, I am not very knowledgeable when it comes to
Speaker 3: actual economic theory and how it's developed over time. But
Speaker 3: one thing I do know is that you know, the
Speaker 3: sort of forerunner or ancestor of a lot of traditional
Speaker 3: economic theory that we see today, like neoclassical economic theory
Speaker 3: Adam Smith, right, talking about like the freehand of the
Speaker 3: market and how if the market is functioning, like everything
Speaker 3: should be fine, right, Yeah, And.
Speaker 2: I think like economists, even like you know, almost all
Speaker 2: but the most sort of true hardcore lais a fair
Speaker 2: economists would say that there are areas that you know,
Speaker 2: they call it market failure, right right, there are certain
Speaker 2: situations in which maybe we can't expect markets to do
Speaker 2: the job. Maybe they'd say, like, oh, it really doesn't
Speaker 2: make sense. They have like private fire departments for example,
Speaker 2: although some people actually do propose private fire departments. But yeah,
Speaker 2: you know, even the most sort of like true believers,
Speaker 2: a sort of liberal or neoclassical economics, they're like, oh, yeah,
Speaker 2: well there are market.
Speaker 3: Failure, is right, in which case the government should see then.
Speaker 2: There's a role, but only in failure that unless you
Speaker 2: like define some areas like okay, there's a reason why
Speaker 2: markets don't work for this particular area, but that after
Speaker 2: then sandboxing a few of those things, then it's like, okay,
Speaker 2: as much as possible, you just want.
Speaker 3: To you all about don't interfere.
Speaker 2: Let the price signals do their work.
Speaker 3: Yeah, so this has become I guess the orthodoxy, and
Speaker 3: Mamdani is very much in the the heterodox. The heterodox. Yeah,
Speaker 3: that's a word that always comes up when people are
Speaker 3: talking about well, when economists start talking about policies that
Speaker 3: they don't like.
Speaker 2: That's that's right. It's a euphemism for policies that they
Speaker 2: they're like, ohtho, at least a handful of people wear
Speaker 2: that bad shortly. But like these history, how do they
Speaker 2: become the orthodoxy, et cetera. Right, like, it's not the
Speaker 2: law of gravity or that the Earth is round, and
Speaker 2: which are orthodox ideas for a good reason. There are
Speaker 2: some people who don't believe that the Earth is round,
Speaker 2: but they're like, I think we is pretty good. We
Speaker 2: have good reason to believe it.
Speaker 4: And they are the.
Speaker 2: People who don't believe that the round. They're not heterodox.
Speaker 2: They're cranks, right, right, Like that's like they're sort of
Speaker 2: a difference. Those are cranks. And so, but where do
Speaker 2: these orthodoxies emerge from? How did some ideas get shunted
Speaker 2: into the category of heterodoxy or whatever.
Speaker 3: And how did they evolve?
Speaker 2: I have no idea, Like, I mean, I've read a
Speaker 2: little bit about the past, but this is not much.
Speaker 2: I don't know much about this.
Speaker 3: We should talk about it.
Speaker 2: We should, especially because our new mayor may in fact
Speaker 2: pursue some heterodox ideas about economic management. Anyway, I'm very
Speaker 2: excited to say, we really do have the perfect guest.
Speaker 2: We're going to be speaking with, Jommy Modude. He is
Speaker 2: a professor of economics at Sarah Lawrence College, also a
Speaker 2: board member of the Law and Political Economy Collective, and
Speaker 2: he's written a lot about these topics, including sort of
Speaker 2: the intellectual history of some of these economic ideas. So, Jommy,
Speaker 2: thank you so much for coming on.
Speaker 4: Ou thank you so much. Joe and Tracy, what kind
Speaker 4: of stuff.
Speaker 2: You're teaching the kids at Sarah Lawrence these days?
Speaker 4: So the interesting thing is I teach Introduction to Economic
Speaker 4: Theory and Policy, which is a year long lecture and
Speaker 4: that actually deals with some of these central questions markets, money,
Speaker 4: the monetary system, and so on. And I actually teach econometrics.
Speaker 2: When you say actually, it's because like people don't expect
Speaker 2: this sort of unorthodox thinker to like actually do the numbers,
Speaker 2: the technical stuff.
Speaker 4: So it's interesting that you posted it that way because
Speaker 4: one of the things that I do teach in econometrics
Speaker 4: is method, like you know, like when you're it's not
Speaker 4: just about number crunching, but where do you get the
Speaker 4: numbers from? Yeah, and so like weaving in these questions
Speaker 4: of method as we're trying to understand social and economic
Speaker 4: reality is it makes for a solid training in economics.
Speaker 4: And you know, so those questions of method woven into
Speaker 4: the construction of theory, Yeah, that kind of informs the
Speaker 4: way I teach. And why that matters, not just as
Speaker 4: kind of a an inn ellectual exercise, but why that
Speaker 4: matters for practical issues like what you guys were talking about.
Speaker 3: So truly the perfect guests. Maybe just to begin with,
Speaker 3: we could perhaps define our terms a little bit. You know,
Speaker 3: Joe and I gave a properly terrible summary of neoclassical
Speaker 3: economic thought. But in your mind, what is the orthodoxy?
Speaker 4: So the orthodoxy is neoclassical economics. It comes from an
Speaker 4: intellectual tradition, which so if I may differ a little
Speaker 4: bit with what you say, Smith, Adam Smith is not
Speaker 4: the forerunner of neoclassical economics. The expression invisible hand in
Speaker 4: but I have my students do this experiment every time
Speaker 4: because it's an eight hundred page book The Wealth of Nations.
Speaker 4: How many times does the expression invisible hand appear there? Once?
Speaker 4: So the point here is that there was an older
Speaker 4: idea of what markets and of capitalism are and that
Speaker 4: gets revived again in the nineteen twenties and thirties, and
Speaker 4: I'll talk about that later. But that older idea, which
Speaker 4: is called classical political economy, did not make any assumptions
Speaker 4: about human behavior, that human beings are inherently rational, that
Speaker 4: markets behave in this optimal manner full employment. That would
Speaker 4: be neoclassical economics, right, that knowledge is more or less perfect.
Speaker 4: There was none of that you're.
Speaker 2: Talking about in the classical economics prior to neoclassical exactly
Speaker 2: talk what years and what thinkers are we talking about?
Speaker 4: So we could just talk about Adam Smith, Okay, yeah, great,
Speaker 4: to some extent, David Ricardo or Karl Marx, the physiocrats.
Speaker 4: I mean, so you had a range of authors in
Speaker 4: a wide range, ideologically not necessarily on the same page,
Speaker 4: but they had a vision of capitalism, which so the
Speaker 4: original name of economics was political economy, and that meant
Speaker 4: that you cannot really talk about economic questions without thinking
Speaker 4: simultaneously about and many of these folks were actually trained
Speaker 4: in law, So the question of law's role in structuring
Speaker 4: the economy this kind of lurks in that intellectual tradition,
Speaker 4: and one of the implications was that the economy is
Speaker 4: not some natural transhistorical institution or thing, but it is
Speaker 4: profoundly a product of history. And I think that's where
Speaker 4: the big split arises, because if you teach or if
Speaker 4: you study neoclassical economics, it is taught in a way
Speaker 4: by which the economy is treated as something eternal, as
Speaker 4: something almost in naturalistic terms, and therefore, like gravity, the
Speaker 4: economy is always there exactly. But also like the rational
Speaker 4: individual general equilibrium theory, all of these things are supposedly
Speaker 4: just happen. And in that sense, this idea of lesser
Speaker 4: affair that the economy is fundamentally pre political, that it
Speaker 4: arises before politics, rather like the kernel of a walnut,
Speaker 4: in which the walnut, which is the shell is if
Speaker 4: you think is constitutional law or politics or law that
Speaker 4: emanates from politics, that would encase this thing called the economy.
Speaker 4: And only under extreme search of this new classical economics,
Speaker 4: if there is quote unquote market failure, then the state
Speaker 4: can step in a little bit to do this that
Speaker 4: or the other, but fundamentally leave the market B. And
Speaker 4: you're familiar with this argument. This idea is not really
Speaker 4: there in Smith. And one of the things that people
Speaker 4: sometimes get surprised about, and I always tell this to
Speaker 4: my students is read his chapter on wages in the
Speaker 4: Wealth of Nations, and he says very clearly that there
Speaker 4: is a difference in power between those who own property
Speaker 4: and workers who don't own property. So this idea that
Speaker 4: the market is sort of this place where equals me
Speaker 4: to create contracts that was not in Smith. It was
Speaker 4: not in Ricardo. And of course you know that was
Speaker 4: not there. But people if you evoke marks, then people
Speaker 4: often say, well, you talk about socialism, Well Smith was
Speaker 4: not a socialist.
Speaker 2: What is his idea? Like, what was his contribution? Or
Speaker 2: I admit, like I'm like guilty too. It's like, oh,
Speaker 2: Adam Smith, the visible hand, right, the butcher. But I
Speaker 2: have been told and I have heard that the sort
Speaker 2: of caricature that we all have of Smith is wrong.
Speaker 2: What was his project?
Speaker 4: So I think the way to think about it is,
Speaker 4: you know, just to sort of get out something which
Speaker 4: I think is kind of important which is institutions. Okay, Now,
Speaker 4: there have been many different readings of Adam Smith, and
Speaker 4: so I'll come to them in a little bit, but
Speaker 4: just to get it out there. When when you talk
Speaker 4: about institutions, you're talking about the system of implicit and
Speaker 4: explicit social constraints within which we exist. Right. So we
Speaker 4: are having the spontaneous conversation, but in the context of
Speaker 4: a building which is subject to certain zoning laws and
Speaker 4: so on, we may and you know, in current zoning
Speaker 4: laws we cannot smoke, but.
Speaker 3: We were certain expectations involved.
Speaker 4: But those expectations are codified in a kind of a
Speaker 4: legal framework. Right. So institutions, the formal institution is law,
Speaker 4: and informal institutions are cultural norms, and notions are right
Speaker 4: and wrong and justice and all this. So Adam Smith,
Speaker 4: according to I think is a convincing strain of thought,
Speaker 4: was an institutionalist. He understood that, yes, the sphere of
Speaker 4: private behavior, private interactions, lesser affair, actually sits on a
Speaker 4: foundation which is of human creation, the system of property
Speaker 4: rights and the system, you know, the system of power
Speaker 4: relations and all of that. So politics was already there.
Speaker 4: It's not that the economy was pre political. Now those ideas.
Speaker 4: If you read Adam Smith his Glasgow University Lectures seventeen,
Speaker 4: you know that was before the Wealth of Nations. It's
Speaker 4: very clear that he's writing that. But what happened, says,
Speaker 4: the rise of neoclassical economics in the late nineteenth century
Speaker 4: eviscerates that history and it changes the story. The political
Speaker 4: goes out of a political economy and it becomes economics,
Speaker 4: so the principles of economics and so then this generation
Speaker 4: of economists are trained to think of the economy as
Speaker 4: completely separate from politics, and that in the post war period,
Speaker 4: so that leads to what is called the Walrasian general
Speaker 4: equilibrium theory. And I'll be happy to explain that, Arla.
Speaker 3: Can I just ask? I have so many questions already,
Speaker 3: but what was the environment that actually gave rise to
Speaker 3: the neoclassical So.
Speaker 4: This is really interesting because we're talking about the late
Speaker 4: nineteenth century and this is a time of enormous social turmoil.
Speaker 4: So to think that an idealized view of markets would
Speaker 4: arise when you know, you've got the great Depression of
Speaker 4: the eighteen ninety.
Speaker 3: And then it goes through World War One and World
Speaker 3: War two.
Speaker 4: Yeah, yeah, But here's the funny thing that happens in
Speaker 4: this tradition. So what is interesting about American economics is
Speaker 4: that the American Economic Association is founded by institutionalists. But
Speaker 4: institutionalists not of the neoclassical kind. They were explicit. So
Speaker 4: they were trained, these authors like Richard T. Eli and others.
Speaker 4: They were trained in the German historical school of economics.
Speaker 4: And the method of the German Historical school of economics
Speaker 4: was that theory has to be constructed in dialogue with
Speaker 4: social reality. W. E. B. Du Bois trains at Berlin
Speaker 4: but as a sociologist, and he brings that method to
Speaker 4: the study of racial inequalities in this country, in which
Speaker 4: he's constructing a theory of race and class by looking
Speaker 4: at actually the living standards of black people in this country.
Speaker 3: Right.
Speaker 4: So it's a particular method that was not deductive, but
Speaker 4: it was inductive. It was engaging with social reality. So
Speaker 4: what happens is that when the AEA is constructed of
Speaker 4: American Economic Association, these are institutionalists of that kind, and
Speaker 4: they come to dominate American economics right through the nineteen thirties,
Speaker 4: informing many of these economists lawyers who are part of
Speaker 4: Roosevelt's brains trust. I mean, many of those folks were lawyers,
Speaker 4: but you had these folks who were trained in a
Speaker 4: way by which they were absolutely opposed to this idea
Speaker 4: that the economy is pre political. What happens in the
Speaker 4: nineteen forties is the war, and then you had the role.
Speaker 4: And so Philip Morowski discusses this in his book Is
Speaker 4: a Historian of Economic Thought, Machine Dreams, in which he
Speaker 4: argues that economics eventually becomes dominated by mathematicians and engineers
Speaker 4: who kind of eviscerates society and politics and history and
Speaker 4: construct the economy as a machine populated by cybords right,
Speaker 4: pre program perfectly rational, exactly all knowing, all seeing, et cetera,
Speaker 4: et cetera, And that way of conceptualizing economics eclipses this
Speaker 4: older tradition and in so doing becomes dominant in the
Speaker 4: nineteen fifties and sixties. And in this way, I mean
Speaker 4: very much a state project, in the sense that these
Speaker 4: folks were employed at institutions that got a lot of
Speaker 4: money from the Department of Defense. So there was a
Speaker 4: very sort of like an intellectual framework is being constructed
Speaker 4: about the economy in which many of these authors were
Speaker 4: very explicitly trying to model weapons systems, input output, that
Speaker 4: kind of thing, and that how do you optimize this
Speaker 4: input output system that the flying plane, how to shoot
Speaker 4: it down, et cetera. So the economy becomes this engine
Speaker 4: and becomes increasingly more and more mathematically sophisticated, but in
Speaker 4: so doing divorce from social reality. In nineteen eighty five
Speaker 4: eighty six, the National Science Foundation convened a symposium on
Speaker 4: the state of economics teaching in the top graduate schools,
Speaker 4: and they were extremely concerned about what was being taught.
Speaker 4: That led to the Commission on Graduate Education in Economics.
Speaker 4: It was a survey of the top graduate programs in
Speaker 4: economics and the article in question was published in the
Speaker 4: Journal of Economic Literature, and it was pretty dismal because
Speaker 4: it was saying that these students are learning math, econ,
Speaker 4: but they cannot apply this to social reality. And the
Speaker 4: conclusion was quite interesting. They said, the concern is that
Speaker 4: the profession is trained idiot savants. That was an exact
Speaker 4: term in the JEL article.
Speaker 3: It's not the worst thing that's ever been said about economists.
Speaker 2: Yeah, that's true. That's true.
Speaker 4: So this issue of the way by which the discipline
Speaker 4: itself has sort of captured the narrative in which math
Speaker 4: becomes rigor as opposed to history and society, and so
Speaker 4: then government intervention and non intervention become the sort of
Speaker 4: flashpoints of the fight. But it's a false debate, I would.
Speaker 2: Argue, can we talk a little bit more about the
Speaker 2: post war environment coming out of the nineteen forties? My impulse,
Speaker 2: I feel like if I were there, it's like, you know,
Speaker 2: governments can be absolute monsters, right, and or.
Speaker 4: You're talking about McCarthy.
Speaker 2: No, I'm talking about the rise of militaristic dictators all
Speaker 2: around the world. True, like true, the sort of like
Speaker 2: monstrous creations. Of course, the first half of the twentieth
Speaker 2: century was like characterized by the rise of like.
Speaker 3: With strong dustrial policy.
Speaker 2: My impulse, like, I think if I had been around
Speaker 2: in the nineteen foury, I was like, oh, we need
Speaker 2: to like come up with an economics that constrains the
Speaker 2: state as much as possible, because we've just witnessed how
Speaker 2: the state can be absolutely monstrous and destructive. And of
Speaker 2: course right before that was the Great Depression, et cetera. Like,
Speaker 2: I don't know I would have I just in my mind,
Speaker 2: I would have a lot of sympathy for that view
Speaker 2: at the time.
Speaker 4: Here's the thing, though, so this I discussed is in
Speaker 4: one of the chapters in my book, and I had
Speaker 4: a lot of fun writing about this, is that if
Speaker 4: you look at post Second World War European reconstruction, it
Speaker 4: involved it was not less affair at all. It involved
Speaker 4: industrial and social policies, right, the mobilization of central banks.
Speaker 4: And actually the US Congress had two studies done on
Speaker 4: European central Bank's role in mobilizing finance and credit to
Speaker 4: promote industrial and social policies, you know, the reconstruction, building
Speaker 4: of hospitals, et cetera, et cetera, and the export economies
Speaker 4: and France and Germany and so so you did have
Speaker 4: a pretty strong state. But these were demo social democratic states.
Speaker 4: And this is an important point. I mean, you know, so,
Speaker 4: for example, the Bank of France is nationalized in nineteen
Speaker 4: forty five forty four, and the National Credit Council, which
Speaker 4: is at the core of the BF, has in it
Speaker 4: different constituents of French society unions, employers, farmers, and so on,
Speaker 4: who were sort of involved in planning the allocation of
Speaker 4: credit to different sectors of society. Across the border in
Speaker 4: Germany you have the KfW, which is a public bank,
Speaker 4: again with different stakeholders including unions, and they are involved
Speaker 4: in sort of the economic and social reconstruction through credit allocation.
Speaker 4: But these were democratic states, you know, So I hear
Speaker 4: that in the sense that, for sure, you can have
Speaker 4: industrial policy of a type which is consistent with authoritarianism. Yeah,
Speaker 4: and all of us would be a post authoritarianism. But
Speaker 4: there was an industrial policy of a social democratic kind also,
Speaker 4: and we have plenty of examples of those just from
Speaker 4: postwar Europe.
Speaker 3: So just to better understand, maybe we could apply some
Speaker 3: of the theory to current economic policies. When you look
Speaker 3: at Mamdani's agenda, you know, things like of freeze on
Speaker 3: rent or I think right now the hot topic is
Speaker 3: a tax on billionaires. How does that fit into the
Speaker 3: intellectual history of economics? And I guess how heterodox is
Speaker 3: it versus the orthodoxy that we've been talking about.
Speaker 4: Well, I mean it's a it's it's a it's a
Speaker 4: big question in the sense that I can answer it
Speaker 4: in two ways. One is the narrative that this is
Speaker 4: going to tank the economy. So let's just talk about
Speaker 4: the tax Park. Let's just get that out of the way,
Speaker 4: that this this small increase in the billionaires size is
Speaker 4: going to tank economy. And my responses were, geez, then
Speaker 4: capitalism would have been dead a long time ago because
Speaker 4: the sixteenth Amendment would have killed American capitalism.
Speaker 2: That was wait, remina, what's the is that the one
Speaker 2: that gave the government, the federal government the ability to.
Speaker 4: Well, that was the sixteen Amendment really legalized the progress
Speaker 4: income taxes, right, and so if you look at across
Speaker 4: the western world, you know, like in the US, tax
Speaker 4: rates were actually much more progressive in that as you
Speaker 4: know in the fifties and sixties, other countries had this
Speaker 4: growth of more progressive taxes Britain and Franz and so on.
Speaker 4: None of that led to the collapse of capitalism and.
Speaker 2: The people those were the golden agers of capitalis okay.
Speaker 4: So the question really is not the tex but what
Speaker 4: is it being used for? And right, and so's that's
Speaker 4: a separate conversation. But is that necessarily is that contrary
Speaker 4: to orthodoxy? And yes, in a way it is because
Speaker 4: it comes back to this idea that analytically, I mean,
Speaker 4: every textbook will tell you, well, you've got this self
Speaker 4: contained black box called the economy, which equilibrates at general equilibrium,
Speaker 4: the production possibility, frontier per et to optimality, all these
Speaker 4: sort of aspects of orthodoxy. So any act of state
Speaker 4: intervention into it will automatically generate some negative outcomes. Right,
Speaker 4: So from that standpoint, I would say that it is
Speaker 4: profoundy opposed to the Orthodoxy this way of thinking about it.
Speaker 4: But if you think of the Orthodoxy as a touchstone
Speaker 4: or as a gold standard, then of course you would say, well,
Speaker 4: these are outlandish ideas. But if you don't fall into that,
Speaker 4: that and then you would say, well, yeah, but this
Speaker 4: has been done. Is so weird about it?
Speaker 2: Can we go back? I want to talk more about
Speaker 2: the present tense, but we can't just like jump over
Speaker 2: the war completely without ay.
Speaker 3: You have you've talked about reconsty.
Speaker 2: No, no, no, but sorry, I want to go back
Speaker 2: to the war, not reconstruction. You're reading, or you did
Speaker 2: read Wages of Destruction.
Speaker 3: Right, which is why I mentioned German industrial policy.
Speaker 2: But it occurs to me there's something I think is
Speaker 2: very interesting. I think about it a lot, and i'd
Speaker 2: love your take out of this, Like if we hear
Speaker 2: like someone as an economist these days. Yeah, they come
Speaker 2: up with a bunch of like big ideas, they have theories,
Speaker 2: and they run tests and write papers and try to influence.
Speaker 2: But when you think of like, okay, the economists in
Speaker 2: the Department of War in whatever country was fighting at
Speaker 2: the time, et cetera, it seemed like a more humble
Speaker 2: profession in this sense, like a lot of the jobs
Speaker 2: seem to just be counting, not even like advanced mathematics
Speaker 2: per se, but the job seem to be a sort
Speaker 2: of like very like the people who keep track of
Speaker 2: the resources within the economy, and those are the economists,
Speaker 2: which sounds to me very different than the picture that
Speaker 2: we would often get in our head today. If you
Speaker 2: hear that someone is an economist, is that fair? Is
Speaker 2: that a fair understanding of history?
Speaker 4: I'm not sure that I agree.
Speaker 2: Okay, let's fine.
Speaker 4: Because I think that, I mean, in some sense, there's
Speaker 4: truth to what you're saying, because a lot of these
Speaker 4: economists who were involved in war planning, that's exactly what
Speaker 4: they were doing. I mean, you know, yeah, they were
Speaker 4: actually but they were actually doing math modeling. I mean,
Speaker 4: the whole mathematization of post war you know, math economy,
Speaker 4: and all of that really came from like sophisticated mathematical models.
Speaker 4: So it did come from that. But I think maybe
Speaker 4: what you might be getting at over here, but you know,
Speaker 4: just tell me what I'm hearing is that this notion
Speaker 4: that the economy is an engine and the economist is
Speaker 4: like this technician who is just like tinkering on with things, right,
Speaker 4: And I think this idea and so that's how the
Speaker 4: economist is kind of constructing this engine, as opposed to
Speaker 4: an economist who is actually attempting to fix the engine
Speaker 4: but also trying to see what the component parts are built.
Speaker 4: In another words, society, this is history.
Speaker 2: I'm going to take what you said and make it
Speaker 2: what I meant to say, Okay, because I do. Yeah,
Speaker 2: that's what I'm mean. Oh, that's exactly how I meant
Speaker 2: to put it. Okay, thank you for validating perspective.
Speaker 4: Okay. And I think those reflect two very rival methodologies.
Speaker 4: Ok So, I think that one of the things that
Speaker 4: so often gets missed out in the teaching of economics
Speaker 4: and then the learning of economics is that the students
Speaker 4: don't learn method They could say that way. I mean,
Speaker 4: a textbook should say Okay, this is neoclassical economics. Here
Speaker 4: is a method that is used, and here is this alternative.
Speaker 4: Call it whatever you like to. I generally don't use
Speaker 4: heterodox economics, I say critical political economy or you know
Speaker 4: that kind of thing. It employs a different method. And
Speaker 4: here's why it matters. Now, if you just do, like,
Speaker 4: spend a few chapters on that, that already sets the
Speaker 4: stage for an intelligent conversation. But if you don't do that,
Speaker 4: and it's just that this is economics, then what happens
Speaker 4: is it it kind of leaves out any possibility of
Speaker 4: even understanding the world. Right, So Chinese, the Chinese economic miracle,
Speaker 4: or the Japanese economic miracle, those are seen as somehow
Speaker 4: I don't know that they were cheating, right, right, this
Speaker 4: notion that these countries were cheating, as opposed to saying, well,
Speaker 4: you know, they use industrial policy of a certain kind,
Speaker 4: so did Sweden of a different kind in the post
Speaker 4: war period, And can we learned something from that theoretically?
Speaker 4: And what does that say about the relationship in politics
Speaker 4: and economics, which is exactly where we started out with.
Speaker 4: And I think that's the way the conversation should go.
Speaker 3: Can you just remind me very quickly, but how does
Speaker 3: neoclassical economics actually explain the fact that we do have
Speaker 3: market failures? Right? Because in theory, if the market is
Speaker 3: perfectly functioning and always generating an optimal outcome, always at
Speaker 3: equilibrium between supply and demand or whatever, they shouldn't be happening, right,
Speaker 3: And yet throughout history we have market failures all the time.
Speaker 4: So that's the way where I would say that market
Speaker 4: failures don't actually exist, because I mean, think about one
Speaker 4: instance of what is often characterized as market failure. Pollution. Now,
Speaker 4: pollution is ubiquitous. I mean any act of production involves
Speaker 4: inputs of raw materials which are extracted from somewhere. Then
Speaker 4: you've got a physico chemical process, outcomes and output, and
Speaker 4: it could be an intangible output, it could be you know,
Speaker 4: the output from your computer, right, And then there's waste,
Speaker 4: there's pollution. So now if pollution and waste are ubiquitous,
Speaker 4: and if market failures are ubiquitous, then they're not market
Speaker 4: failures logically, they are the legal design of the property
Speaker 4: rights that enabled the owner of the factory to actually
Speaker 4: dump chemical waste or for Google to take your in
Speaker 4: my private data, right it's a that brings you straight
Speaker 4: back to the fact that the social cost that industry,
Speaker 4: you know, can inflict, depends on the legal design of industry.
Speaker 4: So before the National Environmental Policy Actor sixty nine, industry
Speaker 4: had far greater leeway to dump more chemical waste than
Speaker 4: after that. So I would just say that, yeah, I
Speaker 4: think we need to move away from this notion of
Speaker 4: market failure. And then, you know, so that's a usual
Speaker 4: debate that well, okay, so you got market failure, then
Speaker 4: do we one state intervention or not? And I argue
Speaker 4: in the book that that's a bit of a lack
Speaker 4: of family debate between liberals and conservatives because both sides
Speaker 4: agree that there's market failure, and then one side said, well,
Speaker 4: we should probably not have state intervention, and the other
Speaker 4: side says the opposite. My point is they are always
Speaker 4: social costs, and politics, through the law, is going to
Speaker 4: be structuring the composition and level of those costs, and
Speaker 4: so I think that's where the conversation, I think should
Speaker 4: go to.
Speaker 3: So it's a political decision about which costs to minimize
Speaker 3: or avoid versus an economy.
Speaker 4: I mean, it's always been that, and that's where I
Speaker 4: think in that sense. If you come back to issues
Speaker 4: of affordability and such, I would say that if you
Speaker 4: let housing prices be whatever they are so that people
Speaker 4: lose their homes, that's as much a political structure ring
Speaker 4: of real estate as otherwise. You see what I'm saying. Yeah,
Speaker 4: So it's not any which way politics is there. The
Speaker 4: question is who's benefiting and who's losing. This is I
Speaker 4: think for me, this is the question.
Speaker 2: Okay, So there are some things where markets work very well. Right,
Speaker 2: you know, if we want to have really good bagels,
Speaker 2: then there's a good chance that like a good way
Speaker 2: to get there is you have a lot of bakery
Speaker 2: entrepreneurs and they're competing on price and quality and so forth,
Speaker 2: et cetera. But then they're gonna emmit waste. So let's
Speaker 2: just go back to the pollution example in the process,
Speaker 2: and we say, like, okay, the market worked really well
Speaker 2: in the creation of the bagel, but we have this problem,
Speaker 2: which is that they're creating they're creating waste that has
Speaker 2: to be solved. And even if that's benign, you know,
Speaker 2: it's like, of course anyone is good, but there's gonna
Speaker 2: be some waste involvary and it's not the most polluting thing,
Speaker 2: so we need some sort of like Okay, so then
Speaker 2: and the new classical economics, Yeah, there's market failure. This
Speaker 2: is why we have we have to have a public
Speaker 2: the sanitation workers, right because otherwise they'd always be dumping
Speaker 2: it out on the street. And so okay, so we
Speaker 2: have public sanitation workers. You reframe this and you're like, no,
Speaker 2: market failure isn't the right way to think about it.
Speaker 2: It's endemic to production. It's part of how market works.
Speaker 2: It's not failure. What do we then do with this
Speaker 2: information so that we no longer conceive of these sort
Speaker 2: of like edge cases of mostly markets work or frequently
Speaker 2: markets can work. But then you get market failures. You
Speaker 2: flipped this entire thing on the head and like, market
Speaker 2: failures are not a useful thing. Okay, we accept that premise.
Speaker 2: Then what do we do with that? Do we have
Speaker 2: this new lens, and then what do we.
Speaker 4: See Some of those social costs would need to be internalized.
Speaker 4: In other words, they would as they always have been
Speaker 4: said throughout the history of capitalism. Again, so this is
Speaker 4: not just an obbortuary statement, but if you look at
Speaker 4: throughout the history of capitalism, this janus faced nature of
Speaker 4: capitalist activity, wealth creation on the one hand, and social
Speaker 4: costs on the other hand. And then at some in
Speaker 4: various moments in time, some of those social costs were
Speaker 4: extremely high in terms of the rates charged on something
Speaker 4: on the other Monvill, Illinois eighteen seventy seven landmark Supreme
Speaker 4: Court case came out of the Interstate Commerce Act Commission,
Speaker 4: which put caps on railroads and on grain elevators because
Speaker 4: what was happening was that the farmers were storing, they
Speaker 4: were charging extremely they were being charged extremely high rates
Speaker 4: by grain storage elevators and railroads, and what was happening
Speaker 4: was the price for food was rising. So the Illinois
Speaker 4: state legislature put a cap on that went up to
Speaker 4: the Supreme Court. And so there was this whole idea,
Speaker 4: and the Supreme Court ruled in favor of price caps
Speaker 4: on these rates charge because they said, well, this is
Speaker 4: this is of social importance. Food should be affordable. There's
Speaker 4: a very long history of this in American constitutional history.
Speaker 4: That is basically exemplifying the basic point that at some
Speaker 4: points and in various points, some of these social costs
Speaker 4: were deemed too high, and then in some way they
Speaker 4: would need they had to either be internalized or you know,
Speaker 4: maybe smaller businesses could not internalize some of these costs. Okay,
Speaker 4: give them some kind of a tax credit. You see
Speaker 4: what I'm saying. There's intelligent ways of thinking about public policy.
Speaker 4: So Mamdani's policies, whatever they may be, they may affect
Speaker 4: I don't know, smaller businesses differently from a larger ones.
Speaker 4: So the ones that have less cash flow, they can
Speaker 4: get a tax credit as a write off, right, I mean,
Speaker 4: you can think about all of these kinds of policies,
Speaker 4: and at least that's whay I think about it. In
Speaker 4: practical terms.
Speaker 3: I'm trying to think how to frame this question, and
Speaker 3: I probably won't get it right, but here goes. We've
Speaker 3: been doing a lot of episodes on Venezuela recently, and
Speaker 3: so if I think about, you know, some famous heterodox
Speaker 3: economic policy that perhaps weren't kind of wrong, that would
Speaker 3: be a good examples when you're thinking of designing actual
Speaker 3: economic policy. If you're doing it prioritizing or politics, or
Speaker 3: on a political basis, and you don't have that sort
Speaker 3: of scientific rational framework that is so endemic in neoclassical thought,
Speaker 3: does that help you design policy? Is that a useful
Speaker 3: framework for you?
Speaker 4: I guess the question is what defines science. So the way,
Speaker 4: for example, the institutional economist that I was talking about,
Speaker 4: the way they designed policy was on the basis of
Speaker 4: theory that was evidence based, social reality, historical reality, court cases,
Speaker 4: you know, this kind of thing. Neoclassical economist doesn't do
Speaker 4: policy that way though, or theory. It's deductive, it assumed.
Speaker 4: So it's constructing this model on the basis of no evidence,
Speaker 4: neoclassical on.
Speaker 3: The basis of a reality that does not in fact
Speaker 3: exist exactly.
Speaker 4: Thank you for putting it that way, because that already
Speaker 4: exemplifies the problem, which is that how on earth are
Speaker 4: you designing a policy based on a theory for which
Speaker 4: you have which has not been subjected to any kind
Speaker 4: of theoretical you know, any kind of intellectual engagement with reality.
Speaker 4: In the wake of the financial crisis of two thousand
Speaker 4: and seven two thousand and eight, when prominent neoclassical economists
Speaker 4: were asked, wait a second, are you now going to
Speaker 4: rethink your models because this should not have happened per
Speaker 4: the neoclassical framework, they said, nope, And I think that's
Speaker 4: the problem here. That policy is being designed in this
Speaker 4: particular way on the basis of theory of this nature.
Speaker 4: But if you bring in a more engaged way of
Speaker 4: thinking about policy and politics, then the nature of the
Speaker 4: politics matters. I mean, who you know, is it a
Speaker 4: raitarian state? Is in a democratic state? So I don't
Speaker 4: like authoritarianism, sure, so I think policy should reflect theory
Speaker 4: on the basis of democratic principles in some in a
Speaker 4: broad sense.
Speaker 2: You know, going back to the contemporary debates about housing
Speaker 2: in New York City right now, and there are others
Speaker 2: who might buy exactly what you're saying at the conceptual lens,
Speaker 2: and they would say, you know what, Johnny is completely
Speaker 2: correct about everything. The problem is that existing politics have
Speaker 2: made it too hard to build. The problem is that
Speaker 2: existing politics have made it so that we're paying too
Speaker 2: much for labor, et cetera. The problem is that existing
Speaker 2: landlords control have too much influence and are constraining the
Speaker 2: building of new that they like. It strikes me as
Speaker 2: there are many versions of your framework that to take
Speaker 2: it to specific policies that don't necessarily lead to and
Speaker 2: therefore rent control is okay that you can say, look,
Speaker 2: there's our current system is riven with politics, and that
Speaker 2: the way to engage democratically, and the way to think
Speaker 2: about this is we need to liberalize. The solution to
Speaker 2: affordability is getting rid of some of these zoning laws, etc.
Speaker 2: It seems to me like that you could agree with
Speaker 2: sort of your conceptualization of some of these challenges and
Speaker 2: yet and still arrive at very different outcomes in terms
Speaker 2: of a policy response. And in fact, in fact, Zoran
Speaker 2: himself may even agree with that, because we know that
Speaker 2: he is more liberal than say, many on the left
Speaker 2: when it comes to the role of private capital for
Speaker 2: developing new houses.
Speaker 4: Okay, so my response is that this is true. First
Speaker 4: of all, to concede. I think in any kind of
Speaker 4: a discussion, you concede what the other person is saying.
Speaker 4: And this is true about the sort of impedibles of
Speaker 4: current politics and power structures, this and the other. But
Speaker 4: that's always been the case. It's always been the case,
Speaker 4: and so like if we thought of that as the
Speaker 4: supreme impediment to actually making things better, then we would
Speaker 4: have abandoned society, would have abandoned any attempts to, let's say,
Speaker 4: have safer cars. Sure, because the automobile industry for tooth
Speaker 4: and nail against seatbelts for decades, making them safer, you know,
Speaker 4: the whole design of cars. So the point here is
Speaker 4: it's not as though that proposing a policy implies that
Speaker 4: you wave a magic wand and it just happens. They're
Speaker 4: going to be insuperable problems and there's going to be impediments.
Speaker 4: But that's always been the case. That doesn't mean that,
Speaker 4: you know, you cannot lose track of the fact that
Speaker 4: lack of affordability in this country and elsewhere in the
Speaker 4: world has recently eroded democracy, yeah, as we know, and
Speaker 4: has has fuel authoritarian politics. There's a clear relationship here
Speaker 4: between economic and security and authoritarianism undeniably.
Speaker 2: Just to press further on this, however, so one of
Speaker 2: the things that the housing people love to say is that,
Speaker 2: you know, there was a rule change several years ago.
Speaker 2: Ironically it was under the Cuomo administration. There was a
Speaker 2: rule change that made it harder for landlords to raise
Speaker 2: the rent of a rent stabilized building after the tenant left.
Speaker 2: And then so then the new tenant comes in and
Speaker 2: they like, can't move it up by much. Meanwhile, we
Speaker 2: have inflation, and so we have this effect, at least
Speaker 2: according to many housing people where a lot of supply
Speaker 2: has been taken off the market because they can't raise
Speaker 2: the rent the law prevents them from raising the rent,
Speaker 2: and their maintenance costs have gone up, and so like
Speaker 2: these are no longer economical to run.
Speaker 3: Now.
Speaker 2: Again, Like, my point is not they're right, they're wrong, whatever.
Speaker 2: My point is that all of this could be true,
Speaker 2: and all of this framework can be very helpful, but
Speaker 2: it doesn't necessarily lead to the conclusion the Zoron is
Speaker 2: right to take a stronger line on what you can
Speaker 2: just do by FIAT in terms of price constraints.
Speaker 4: Well, you know, yeah it does. I mean I think
Speaker 4: I would disagree. Okay, great, because I think that if
Speaker 4: by that logic, then we shouldn't have ever done anything anyways, right,
Speaker 4: so we could have you know, so so for example, opposition,
Speaker 4: I mean, so like sort of moving this sort of
Speaker 4: the discussion a little bit away from housing. But let's
Speaker 4: say to taxation, right, we were talking about taxation earlier on.
Speaker 4: There was massive opposition during the Gilded Age that if
Speaker 4: you have progressive taxation, if you even have the sixteen Amendment,
Speaker 4: this is going to destroy the whole society. And so
Speaker 4: the struggles in that Gilded Age period which ultimately lead
Speaker 4: to the sixteenth Amendment, exemplifies the point that yeah, I
Speaker 4: mean there are going to be there is going to
Speaker 4: be opposition.
Speaker 2: So just well, then what is the limiting principle? Or
Speaker 2: maybe okay, there are different methods to doing economics, and
Speaker 2: you say, the new classicals of one method and other
Speaker 2: people of other methods, how do we know, Like, okay,
Speaker 2: let's say we want to impose more stringent caps on
Speaker 2: how much you can raise rent, Like we don't know,
Speaker 2: like it could go well and it could go bad. Right,
Speaker 2: I assume you would agree that there are ways to
Speaker 2: do this very badly.
Speaker 4: Yeah, of course.
Speaker 2: So what are the methods that we could employ that
Speaker 2: the new classicals are blind to such that we can
Speaker 2: get this policy.
Speaker 4: We could, for example, provide so for for the for
Speaker 4: the smaller landlords, the ones or the less or the
Speaker 4: ones who are they don't have enough cash to fix
Speaker 4: the leaks, you know, upkeep the building, that they could
Speaker 4: be given tax credits.
Speaker 2: Yeah.
Speaker 4: Right, So that companies for the rent control would be
Speaker 4: that Okay, if you're a large real estate cooperation and
Speaker 4: you've got lots of cash flow, then clearly you do
Speaker 4: have the cash flow to deal with the problems. But
Speaker 4: if you're a smaller landlord, then you could be given
Speaker 4: some kind of a tax credit, you could be given
Speaker 4: some kind of public subsidy that could deal with that
Speaker 4: kind of an issue, which brings you straight back to
Speaker 4: the question of the public financing after all of this. Right,
Speaker 4: So that's the way at least I would tentatively think
Speaker 4: about the issue.
Speaker 3: Since we've been talking about politics for basically this entire discussion,
Speaker 3: I want to talk about political realities for right now,
Speaker 3: what are the constraints that have prevented this kind of
Speaker 3: heterodox policy from becoming the norm in a place like America.
Speaker 4: Well, that's a great question, And I think the issue
Speaker 4: is that these kinds of ideas are not in the
Speaker 4: public domain. And so whenever you use the word economics,
Speaker 4: let's say it comes up, let's say, who are the
Speaker 4: experts who come say, let's say to CNN, They're already
Speaker 4: coming implicitly, even if they don't say it, from this
Speaker 4: idea that markets are sort of prime and then everything
Speaker 4: else follows afterwards. So I mean, in order to push
Speaker 4: back against that, you need to have more conversations about the.
Speaker 2: Discipline thank you for that.
Speaker 4: Thank you. I think that these kinds of conversations are
Speaker 4: helpful because at least it opens up the space for
Speaker 4: thinking about that well, I mean, okay, so when you're
Speaker 4: talking about foundational questions like the market economy, what exactly
Speaker 4: do you mean by that? And you know, so those
Speaker 4: are the kinds of questions I think. So the come
Speaker 4: back and coming back to your question that's an impediment
Speaker 4: because if you're going to say that, well, I want
Speaker 4: to make some aspect of social services I don't know,
Speaker 4: affordable or something, then you'll always come up to this
Speaker 4: impediment that will are you a state interventionist? Whereas this
Speaker 4: is the free market and that's the lingua franca. And
Speaker 4: that's the hard part of it, that to say that,
Speaker 4: well okay, to push the conversation further, as opposed to
Speaker 4: saying well, okay, you know, if you think of markets
Speaker 4: in different ways, then it may be hard to make
Speaker 4: the change. But at least the market is not pretty political.
Speaker 4: So for me, that's the problem.
Speaker 2: What's the basic gist of why Europe in the US
Speaker 2: from the historian perspective sort of went different directions, and
Speaker 2: obviously the democratic socialist, the democratic socialist tradition obviously much
Speaker 2: more robust in Europe. I mean, it's never really you know,
Speaker 2: it doesn't have as nearly as much history in the US,
Speaker 2: et cetera. Union is much more robust throughout Europe. How
Speaker 2: did that like generally speaking, except for maybe like a
Speaker 2: couple decades, partly just there's any sort of like socialis
Speaker 2: tradition every I took root in the US.
Speaker 4: First of all, we do have a long history of
Speaker 4: municipal socialism, but sewer socialism in this country. I mean,
Speaker 4: so there's you know of so you know, in other words,
Speaker 4: you know, there's a lot has been written actually that
Speaker 4: what Mamdani is doing here, it's actually pretty there's a
Speaker 4: long history behind that. Gail Radford has written about this
Speaker 4: a historian. I think the issue is and so that's
Speaker 4: the first point. The second point is that if you
Speaker 4: look at and this comes back, I think tracy to
Speaker 4: your question, which is that in the public discourse, we
Speaker 4: don't know, there's a kind of an idea that the
Speaker 4: New Deal was an outlier and therefore we need to
Speaker 4: basically go back to some pre New Deal romanticized small government.
Speaker 4: You know, Steve Bannon makes his that's why the attack
Speaker 4: against the administrative state is premised from this. The problem
Speaker 4: is the many legal historians and legal economic historians appointed
Speaker 4: and this is not true that the US developed a
Speaker 4: very robust developmental state in the reconstruction period. So there's
Speaker 4: a really a lot of history there that is not
Speaker 4: part of the public domain and the discourse on economics,
Speaker 4: because the teaching of economics does not require students to
Speaker 4: actually require not as an elective, but required them to
Speaker 4: actually read economic history in most places in their training.
Speaker 4: So they don't know the history, and so this new
Speaker 4: notion of the market prevails, and then they don't know
Speaker 4: their own history. I don't think that's any different in Europe,
Speaker 4: and we can talk about that, but there are interesting
Speaker 4: issues here. So for example, the American historically, the American
Speaker 4: taxation system was much more progressive than in Europe. Yeah, right,
Speaker 4: so there is that. But I think what happens in
Speaker 4: the post war period, post Second World War period is
Speaker 4: that that kind of sent a jolt for a lot
Speaker 4: of people, and I think that kind of revived the
Speaker 4: left in some sense because fascism and there was a
Speaker 4: clear understanding that massive inequality was you know, one of
Speaker 4: the one of the ingredients of the rise fascist movements
Speaker 4: in the nineteen twenties and thirties, and so reducing inequality,
Speaker 4: embedding social and economic rights and constitutions I'm thinking here
Speaker 4: with the German constitution super important as a kind of
Speaker 4: insulation at least to some extent, against a repetition of
Speaker 4: those horrors. So this created a kind of a different
Speaker 4: social model based on these progressive constitutions. We haven't had that.
Speaker 4: Our constitution is a first generation constitution, and in that way,
Speaker 4: there are no explicit commitments to economic and social rights,
Speaker 4: human dignity, the expression I don't think appears in the
Speaker 4: US Constitution. It does appear in a lot of these
Speaker 4: European constitutions, and that matters. You have the rights of
Speaker 4: personhood right the fourteen Amendment, but you know that, you
Speaker 4: know very well that how that's been weaponized for corporate
Speaker 4: personhood and so on. That's I think part of the
Speaker 4: story as to why the welfare state has been somewhat
Speaker 4: more robust, though it's all so seen fractures in Europe
Speaker 4: than here, where that has not been the case. So
Speaker 4: we're still stuck with this constitution, which at least in
Speaker 4: my view, is not a very good constitution.
Speaker 3: I wasn't expecting constitutional analysis to come into this conversation,
Speaker 3: but I think it does illustrate your point about the
Speaker 3: intertwining of politics and the economy. Can I ask one
Speaker 3: more thing, and maybe it doesn't even make sense or
Speaker 3: fit into this conversation, but when I think about las A,
Speaker 3: fair markets or economics, there seems to be an emphasis
Speaker 3: on absolute gains so positive some outcomes where it does.
Speaker 3: You know, two countries start trading with each other guns
Speaker 3: and butter or whatever. Both the countries are better off,
Speaker 3: it doesn't matter how much better off they are relative
Speaker 3: to each other. When we think about heterodox economics and
Speaker 3: the importance of politics, are we basically saying that every
Speaker 3: policy decision the emphasis is much more on relative gains
Speaker 3: versus absolute gains.
Speaker 4: I'm not aware of that tracy, That is not from
Speaker 4: my standpoint. I do think that markets and the sort
Speaker 4: of private initiatives in markets that does generate wealth. I
Speaker 4: mean that you go back to Smith. He says that,
Speaker 4: so in that sense, it's true that market activity does
Speaker 4: generate enormous social wealth. Yes it does. But what people
Speaker 4: tend to forget is that there's also a flip side.
Speaker 4: To that the social costs, and so we have to
Speaker 4: then think about, Okay, can we somehow how do we
Speaker 4: reduce some of those social costs in terms of affordability
Speaker 4: or pollution or climate crisis. That's I think saying that, Okay,
Speaker 4: markets are great, but what are they sort of embedded
Speaker 4: on that infrastructure that I was talking about that is
Speaker 4: sort of leading to massive emissions of greenhouse gases. I mean,
Speaker 4: that's clearly unsustainable and we all know that. So I
Speaker 4: feel like I don't know that I would necessarily to
Speaker 4: think about it in terms of positive and negative sum gains.
Speaker 4: I would just say that market activity does generate enormous
Speaker 4: social wealth, but also enormous social costs, and so then
Speaker 4: that's where I think the conversation has to go to
Speaker 4: how to reduce the social costs.
Speaker 2: Jommy Modude, thank you so much.
Speaker 4: Thank you so much.
Speaker 2: It's really fascinating conversation. Appreciate you so much time. Okay, Tracy,
Speaker 2: we should do more intellectual history episodes. I really like
Speaker 2: that topic. I don't know, like I think I'm.
Speaker 3: Still scarred from doing international relations at college, and whenever
Speaker 3: someone talks about intellectual histories of particular theories I kind
Speaker 3: of I get nervous.
Speaker 2: Let's just make the whole I'd be down to make
Speaker 2: the whole podcast A No, I do think this is
Speaker 2: like really interesting. Look, I think this is a very
Speaker 2: timely conversation because one thing, you know, he mentioned Bannon
Speaker 2: there at the end. One thing that I feel is
Speaker 2: that regardless of where many people are on the political
Speaker 2: spectrum these days, there seems to be a deep intuition
Speaker 2: that many people have about the corrosive effects of society
Speaker 2: on any quality, or the corrosive effects of.
Speaker 3: Inequality on society.
Speaker 2: And I thought your question was really good, which is
Speaker 2: like many people economists could say, like, look, you're better
Speaker 2: off too it in this relationship you uber driver, Like
Speaker 2: maybe you feel that you're maybe people find it to
Speaker 2: not be great work, but the alternative is nothing or whatever.
Speaker 3: You're not a billionaire, but at least your employee.
Speaker 2: You're employed, right, And this is something and a lot
Speaker 2: of people say, Look, everyone is on paper or maybe
Speaker 2: even in reality, better off from this set of transactions. Right,
Speaker 2: But then it aggregates up to something that I think
Speaker 2: people find to be very destabilizing.
Speaker 3: Right, So intuitively, a lot of people seem unhappy with
Speaker 3: their current situation.
Speaker 2: All right, so the transaction makes everyone happier in the
Speaker 2: micro sense. But then when everyone when it all scales out,
Speaker 2: this sort of like deep inequality. Who has the means
Speaker 2: to create, who has the ability to like actually do something,
Speaker 2: who is just a sort of who is not in
Speaker 2: that position? I think it feels very again destabilizing.
Speaker 3: Yeah, I do think. I mean, to Jommy's point, like
Speaker 3: it does feel like so much of it just boils
Speaker 3: down to politics, right, yeah, right, like the economy itself,
Speaker 3: to go back to how we began. This conversation did
Speaker 3: not spring forth from the universe. It's a human construction
Speaker 3: and we put a lot of thought and effort into
Speaker 3: how it actually works. And that's a political that Yeah,
Speaker 3: that's a political reality.
Speaker 2: Yeah. And like you know, we could talk all this
Speaker 2: stuff and like the contrast with Chinese industrial policy I
Speaker 2: think is very helpful for juries as one is. Okay,
Speaker 2: you could look at various things and say, well, this
Speaker 2: is actually very effective, and there was a role for
Speaker 2: the public sector and so forth, but it's like we're
Speaker 2: all at each other's throats. Yeah, right, then you're never
Speaker 2: going to have any hope of like operationalizing these ideas,
Speaker 2: and this why I've said this before, Like I feel
Speaker 2: like there are certain societal problems that truly like precede economics. Yeah,
Speaker 2: the toolkit does not entirely exist in economics to solve
Speaker 2: problems that on payper loook economic right.
Speaker 3: This I think is important because in the neoclassical perspective,
Speaker 3: so everything springs from the economy and the focus is
Speaker 3: on the economy itself. Meanwhile, as a society, you know,
Speaker 3: you might want to prioritize different outcomes, like maybe we
Speaker 3: should all be happy. You know, I would like to
Speaker 3: prioritize everyone's happiness. And to your point, like if we're
Speaker 3: all focused on relative gains, if free market capitalism is
Speaker 3: increasing inequality, then that might not necessarily do that.
Speaker 2: We should prioritize everyone getting off their devices and reading,
Speaker 2: and then I think we'll have a touch grass, we'll
Speaker 2: have better outcomes.
Speaker 3: Yeah, we're getting dangerously close to like talking about Bhuton
Speaker 3: and national.
Speaker 2: You know, we got to I've read some.
Speaker 3: Yeah, I know, I know that's why we should stop.
Speaker 3: Shall we leave it there?
Speaker 2: Yeah, let's leave it there?
Speaker 4: All right.
Speaker 3: This has been another episode of the ad Loots podcast.
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