WEBVTT - RoboPod and the Perpetual Money Machine – Cautionary Questions 2… from Cautionary Tales 0:00:15.356 --> 0:00:21.676 Pushkin. Hey, it's Jacob. 0:00:22.476 --> 0:00:27.156 Recently I co hosted an episode of another Pushkin podcast, 0:00:27.236 --> 0:00:31.516 a show called Cautionary Tales, hosted by Tim Harford and 0:00:31.796 --> 0:00:34.716 Tim and I on that show answered a bunch of 0:00:34.756 --> 0:00:39.076 listener questions, and as it happens, those questions were largely 0:00:39.076 --> 0:00:41.196 about themes that we talk about a lot on what's 0:00:41.196 --> 0:00:46.836 your problem, technological innovation, climate change, etc. So I thought 0:00:47.196 --> 0:00:50.396 that show would be interesting to people who listen to 0:00:50.436 --> 0:00:54.476 this show would be interesting to you. So here's the episode. 0:00:55.036 --> 0:00:55.836 I hope you like it. 0:00:56.996 --> 0:01:00.556 Hello listeners, Tim Harford here, as loyal listeners will know, 0:01:00.836 --> 0:01:03.476 caution Me Tales is a podcast about learning from the 0:01:03.516 --> 0:01:06.156 mistakes of the past. But it also seems to me 0:01:06.196 --> 0:01:08.076 that we can learn from things that have gone well 0:01:08.076 --> 0:01:13.276 in the past. Example, getting Jacob Goldstein on the show. 0:01:13.996 --> 0:01:18.236 Jacob is Jacob is back for an episode of Cautionary Questions. 0:01:18.236 --> 0:01:18.876 Hello Jacob. 0:01:19.236 --> 0:01:23.476 What's the opposite of a cautionary tale, A salutary tale, 0:01:23.596 --> 0:01:25.596 a salutary story? 0:01:25.996 --> 0:01:27.556 I guess we salute you, Jacob. 0:01:27.756 --> 0:01:28.436 We can do better. 0:01:28.516 --> 0:01:30.476 Let's try and punch that up. We'll work on it. 0:01:30.516 --> 0:01:32.236 For those of you who don't know. Jacob is the 0:01:32.236 --> 0:01:35.356 host of pushkin podcast What's Your Problem, which is a 0:01:35.396 --> 0:01:38.836 brilliant show about people who are trying to make technological progress. 0:01:39.276 --> 0:01:42.596 He is also the author of the book Money, The 0:01:42.676 --> 0:01:45.556 True Story of a Made Up Thing, and he's the 0:01:45.556 --> 0:01:48.796 perfect person to help me answer all of the questions 0:01:49.036 --> 0:01:52.756 that you lovely people have been kind enough to send in. 0:01:53.076 --> 0:01:55.676 So Jacob, wonderful to have you back. Of course, our 0:01:55.796 --> 0:01:59.436 virtual mail bag is bursting with queries on topics as 0:01:59.516 --> 0:02:04.276 varied as climate investing and careers advice. So Jacob Goldstein, 0:02:04.476 --> 0:02:09.876 are you ready? Yes, let's do it. 0:02:29.836 --> 0:02:31.116 So, Tim, We're going to start with a couple of 0:02:31.116 --> 0:02:33.556 emails that came in after the last time you and 0:02:33.636 --> 0:02:35.036 I talked on the show, and one of the things 0:02:35.076 --> 0:02:39.156 we talked about was what happens if AI and robots 0:02:39.236 --> 0:02:43.196 take all of our jobs. So the first question about that, 0:02:43.396 --> 0:02:45.476 which is frankly really more of a comment, but a 0:02:45.516 --> 0:02:49.956 lovely comment, comes from Karen, who writes, Dear Tim Harford, 0:02:50.236 --> 0:02:52.956 I was, as usual enjoying your recent Q and A 0:02:52.996 --> 0:02:54.356 episode with Jacob Goldstein. 0:02:54.396 --> 0:02:56.596 She's a woman of taste. I like how this thoughts. 0:02:56.756 --> 0:02:59.836 I like her already, and your lively discussion about what 0:02:59.996 --> 0:03:03.996 happens when everyone loses their jobs. To AI, at one 0:03:04.036 --> 0:03:08.916 point you said, quote, how would we react if our 0:03:08.956 --> 0:03:12.476 desire for mastery, or desire for meaning, or desire to 0:03:12.516 --> 0:03:15.916 feel useful if all that had to be satisfied without 0:03:15.916 --> 0:03:18.396 having a job, And what would we do? And could 0:03:18.436 --> 0:03:22.836 we cope? And I don't know well, said Tim Harford. 0:03:23.476 --> 0:03:28.236 Karen writes, you could just have easily asked what do 0:03:28.316 --> 0:03:33.356 people do after they've retired? She goes on, My work 0:03:33.436 --> 0:03:36.516 was very meaningful to me too. I led policy teams 0:03:36.556 --> 0:03:39.956 that advise government minister as it was fast paced, exciting, fun, challenging. 0:03:39.996 --> 0:03:42.916 I loved my job. So when I retired I wondered 0:03:42.916 --> 0:03:46.116 about all the things you expressed concerns about on your show. 0:03:46.556 --> 0:03:49.996 Here is the truth as I see it. Whatever you're 0:03:50.036 --> 0:03:52.076 doing for a living, it's not all of you. It 0:03:52.276 --> 0:03:55.076 just takes most of your time. All the other parts 0:03:55.116 --> 0:03:57.476 of you, all those pushed down by the demands of 0:03:57.556 --> 0:04:02.036 capitalist discipline, emerge once your time has been freed. Then 0:04:02.076 --> 0:04:04.316 you find out what else you are, what else makes 0:04:04.356 --> 0:04:07.516 you happy, and what else gives you meaning and purpose. 0:04:07.756 --> 0:04:10.956 So there is really nothing to fear from our robot 0:04:10.996 --> 0:04:15.116 over Lord's my very best regards Karen, Wow, way to 0:04:15.196 --> 0:04:16.996 start the show with our best question, and the other 0:04:17.076 --> 0:04:20.996 questions can't possibly be as good as that. It's really lovely, rights, it's. 0:04:20.996 --> 0:04:24.276 Really lovely, And I agree with all of the stuff 0:04:24.316 --> 0:04:28.156 about what we do for a living is not all 0:04:28.236 --> 0:04:31.716 of us. It's a very interesting thought, though. Is retirement 0:04:31.996 --> 0:04:37.116 the same as living your entire life not working because 0:04:37.116 --> 0:04:40.036 a robot took your job? And we have some evidence 0:04:40.076 --> 0:04:42.476 on this point, tell me where is the finding? 0:04:42.556 --> 0:04:43.276 So these three. 0:04:43.116 --> 0:04:46.876 German economists published this research just over a decade ago 0:04:47.276 --> 0:04:49.956 looking at people's life satisfaction. Turns out people are quite 0:04:49.996 --> 0:04:52.596 happy being retired. And if you have a job and 0:04:52.636 --> 0:04:56.036 then you retire, nothing happens to your life satisfaction. You 0:04:56.036 --> 0:04:59.996 will fine before, you're fine after. But if you're unemployed, 0:05:01.276 --> 0:05:05.076 you're miserable. And if you then retire from a situation 0:05:05.196 --> 0:05:09.236 of unemployment, your life satisfaction goes up. I mean it's 0:05:09.276 --> 0:05:11.356 the same thing, right, Like you go from not having 0:05:11.396 --> 0:05:13.236 a job to not having a job. But there's something 0:05:13.276 --> 0:05:17.036 about your identity as a retired person versus a person 0:05:17.196 --> 0:05:19.596 who is looking for a job and can't find a job. 0:05:20.036 --> 0:05:22.196 It makes a huge difference to how people feel about themselves. 0:05:22.876 --> 0:05:26.116 Unemployed in the data does not mean a person who 0:05:26.116 --> 0:05:28.636 doesn't have a job, right, It means a person who 0:05:28.716 --> 0:05:31.436 wants a job and doesn't have a job, And that's 0:05:31.476 --> 0:05:35.676 an important difference. And so I wonder in that study 0:05:36.236 --> 0:05:40.236 if that difference is actually quite significant, right, Like, if 0:05:40.236 --> 0:05:42.596 you want a job and don't have a job, you're 0:05:42.636 --> 0:05:46.956 going to be unsatisfied in that dimension, Whereas if you 0:05:47.036 --> 0:05:50.636 don't have a job and don't want a job, it's fine, 0:05:50.756 --> 0:05:51.716 that sounds fine. 0:05:51.956 --> 0:05:54.596 Yeah, yeah, So I think that's right, Jacob, And I 0:05:54.636 --> 0:05:58.476 think a lot of this depends on what people's expectations are. 0:05:58.596 --> 0:06:01.596 They're expectations of themselves, what they think other people expect 0:06:01.756 --> 0:06:04.516 of them. But I would guess there's a huge difference 0:06:04.516 --> 0:06:08.356 in the scenario where the robots take everyone's job and 0:06:08.396 --> 0:06:12.836 where all they just doing, you know, hobbies, whatever we want, 0:06:13.076 --> 0:06:15.836 our living standards are taken care of by the robots 0:06:16.116 --> 0:06:19.596 and everyone's in the same boat, versus a situation where 0:06:20.236 --> 0:06:22.636 a lot of people lose their jobs to the robots 0:06:22.676 --> 0:06:24.796 and a lot of other people don't, which I think 0:06:24.876 --> 0:06:25.836 is more likely. 0:06:26.396 --> 0:06:31.036 So traditionally we thought of technological unemployment as happening to 0:06:31.356 --> 0:06:37.516 people with lower job skills, right, people with less education, strong, 0:06:37.676 --> 0:06:42.116 people who were getting replaced by machines. Plainly, the new 0:06:42.196 --> 0:06:47.756 wave of generative AI threatens you and me, which is. 0:06:47.676 --> 0:06:50.156 What makes it existentially threatening. 0:06:50.676 --> 0:06:55.036 It does people losing their jobs to technology are more 0:06:55.356 --> 0:06:59.956 broadly drawn from across the income spectrum and the education spectrum. 0:07:00.156 --> 0:07:02.516 How does it change the sort of social implications because 0:07:02.556 --> 0:07:05.676 on a fundamental level, what we're really talking about is 0:07:06.316 --> 0:07:08.356 whether you have a job or not, and how you 0:07:08.396 --> 0:07:11.876 feel about that is largely determined by social norms. Right, 0:07:11.916 --> 0:07:14.676 That's actually what's going on here. It's a status game 0:07:14.716 --> 0:07:17.356 to some significant degree, and it's uncomfortable to call it that. 0:07:17.476 --> 0:07:19.596 I don't think I like my job because it gives 0:07:19.636 --> 0:07:21.516 me status. I think I like my job because it's 0:07:21.516 --> 0:07:24.676 fun and I'm contributing something to the world. But obviously 0:07:24.716 --> 0:07:26.436 we all care about status. 0:07:26.036 --> 0:07:27.716 And it does give you status. You have one of 0:07:27.716 --> 0:07:30.436 the best jobs in the world. You're a podcasta. 0:07:30.076 --> 0:07:32.436 Listen, we're walking right up to the next question in 0:07:32.436 --> 0:07:34.116 a very elegant way from Neil. 0:07:34.676 --> 0:07:35.436 Hello, Tim. 0:07:35.876 --> 0:07:40.796 During your recent Cautionary Questions episode, Jacob Goldstein jokes that 0:07:40.836 --> 0:07:44.356 if AI takes everyone's jobs, the two of you will 0:07:44.396 --> 0:07:47.956 still do a free podcast together. I understand the jest, 0:07:48.876 --> 0:07:51.716 but it begs the question, By the time AI is 0:07:51.756 --> 0:07:54.476 good enough to take over most jobs, won't it also 0:07:54.556 --> 0:07:58.076 be better than us at creating entertainment and art. I 0:07:58.116 --> 0:08:00.836 think we as humans don't want to admit that as possible, 0:08:00.836 --> 0:08:03.676 but it's definitely the goal of AI developers all over 0:08:03.716 --> 0:08:06.796 the world At this very moment. I'm curious what that 0:08:06.916 --> 0:08:09.836 possibility could mean for humanity and what we might do 0:08:09.956 --> 0:08:12.676 to avoid or prepare for it. Thank you for all 0:08:12.756 --> 0:08:17.876 your excellent content. The robots have nothing on you yet. 0:08:18.876 --> 0:08:23.516 Yes, Jacob, have you heard the podcasting software that notebook 0:08:23.796 --> 0:08:24.956 LM have just released? 0:08:24.996 --> 0:08:27.436 This is a Google product, Tim. 0:08:27.556 --> 0:08:30.556 Not only have I heard it, I uploaded a chapter 0:08:30.716 --> 0:08:34.356 of my book about paper money in China and queued 0:08:34.436 --> 0:08:37.076 up a moment of it to play for you right now. 0:08:38.076 --> 0:08:40.276 You know how we always hear about Marco Polo bringing 0:08:40.316 --> 0:08:44.156 back these crazy stories from China, right well, get ready 0:08:44.156 --> 0:08:46.956 for this trying out. China was light years ahead of 0:08:46.996 --> 0:08:48.116 Europe when it came to. 0:08:48.116 --> 0:08:50.596 Money, centuries ahead to be exact. 0:08:50.636 --> 0:08:54.116 We're talking paper money, folks, Yes, centuries before it ever 0:08:54.156 --> 0:08:55.116 showed up in Europe. 0:08:55.236 --> 0:08:57.716 It's wild. It really flips the script on how we 0:08:57.836 --> 0:09:03.076 usually think about financial history. Absolutely, So, just to be clear, 0:09:03.396 --> 0:09:06.796 I just uploaded a chapter of the book clicked whatever 0:09:07.076 --> 0:09:10.516 make a podcast, didn't make any choices, didn't tell it 0:09:10.556 --> 0:09:13.076 to do anything but that, and that's what came out. 0:09:13.196 --> 0:09:18.236 And these are two synthetic voices reading a script that 0:09:18.676 --> 0:09:22.396 was created by a genitive AI in response to your 0:09:22.676 --> 0:09:25.436 wonderful book Money the True Story of a made up thing. 0:09:25.756 --> 0:09:28.916 And it's pretty good. It's pretty good. 0:09:29.076 --> 0:09:32.196 It's definitely good enough to be very scary. 0:09:32.996 --> 0:09:36.876 I've heard worse human podcasters, for sure, So I mean, 0:09:36.956 --> 0:09:40.076 maybe this is all happening sooner than we think. But 0:09:40.636 --> 0:09:43.796 what Neil is basically driving at is, by the time 0:09:44.196 --> 0:09:48.196 the robots take our jobs, won't they also be better 0:09:48.236 --> 0:09:51.476 than us? So they will make a better podcast than 0:09:51.516 --> 0:09:54.356 we will. They will draw better pictures than we will, 0:09:54.356 --> 0:09:56.316 they will write better pros than we will, they will 0:09:56.356 --> 0:09:58.876 compose better music than we will, and so on. And 0:09:58.996 --> 0:10:02.716 is that a problem. I'm not sure that's the problem. 0:10:02.796 --> 0:10:05.836 I'm worried about. The computer already draws better than I do. 0:10:06.796 --> 0:10:11.876 And Lobar respect y Loba, and it's great. I'm like, wow, 0:10:11.996 --> 0:10:14.676 I can create art for my hobby projects. 0:10:14.916 --> 0:10:15.356 That's great. 0:10:15.356 --> 0:10:17.636 I'm not doing anybody out of a job, But now 0:10:17.676 --> 0:10:21.556 my own creativity is unlocked by the computer. Of course, 0:10:21.956 --> 0:10:23.836 maybe there comes a time where I don't need to 0:10:23.836 --> 0:10:25.516 do any of that. I just press the button and 0:10:25.556 --> 0:10:28.836 the computer just produces everything, and it's better than what 0:10:28.876 --> 0:10:29.516 I could produce. 0:10:30.556 --> 0:10:33.876 Does that matter? I want to add a wrinkle rinkle away. 0:10:34.676 --> 0:10:36.956 When I was talking about making a podcast with you 0:10:37.116 --> 0:10:40.636 after the robots take our jobs, part of what I 0:10:40.676 --> 0:10:44.636 was imagining was that somebody would listen, right, Like, not 0:10:44.756 --> 0:10:46.716 that we could make a living out of it, but 0:10:46.756 --> 0:10:49.556 that we would be doing it for some audience. 0:10:49.996 --> 0:10:50.196 Right. 0:10:51.236 --> 0:10:54.476 My hope, although I really don't know, is that even 0:10:54.516 --> 0:10:57.796 if AI makes a better podcast than us, people will 0:10:57.876 --> 0:11:02.316 listen just because people like people. And one interesting case 0:11:02.396 --> 0:11:04.916 to consider is chess. 0:11:05.356 --> 0:11:05.556 Right. 0:11:05.716 --> 0:11:11.116 Chess has this history where first people were better than machines, 0:11:11.756 --> 0:11:14.916 and then for a long time computers could beat people, 0:11:15.036 --> 0:11:18.636 but a person working with a computer was better than 0:11:18.676 --> 0:11:20.596 just a computer. Yeah, and then a few years ago 0:11:20.636 --> 0:11:23.436 that ceased to be the case. And obviously many many 0:11:23.476 --> 0:11:26.556 computers can beat every single human being on earth, but 0:11:28.196 --> 0:11:33.596 chess players still like are famous among nerds, right, Magnus 0:11:33.636 --> 0:11:37.236 Carlson is like a rich guy, yes, superstar, and people 0:11:37.676 --> 0:11:40.196 pay lots of money to watch him play worse chess 0:11:40.236 --> 0:11:43.676 than a computer. So my hope is we can be 0:11:44.116 --> 0:11:48.676 if not the Magnus Carlson's of podcasting, the whoever is like, 0:11:49.316 --> 0:11:51.636 you know, way worse than Magnus Carlson, but still a 0:11:51.636 --> 0:11:52.596 pretty good chess player. 0:11:52.676 --> 0:11:56.076 Sure, and you may be right, but I think my 0:11:56.196 --> 0:12:00.356 point is it's worth playing chess even if nobody watches you, 0:12:00.676 --> 0:12:02.316 even if it's just you and a friend. 0:12:02.716 --> 0:12:05.636 Yeah, but is it worth making a podcast if nobody 0:12:05.676 --> 0:12:08.596 listens that, what are we bothering with the microphones for? 0:12:08.636 --> 0:12:09.716 Then you could just call me. 0:12:09.756 --> 0:12:12.036 Yeah, yeah, Okay, we could have to think it's the 0:12:12.076 --> 0:12:14.396 pocast that nobody listens is a fun conversation. 0:12:14.916 --> 0:12:17.636 Welcome to the podcast for Noah, I'm Jacob Waldstein. 0:12:19.156 --> 0:12:21.156 If people weren't listening, it would be different. But I 0:12:21.156 --> 0:12:24.076 think people would still be creating stuff. People would still 0:12:24.076 --> 0:12:26.556 be making apt and that will be fine. That's my 0:12:26.636 --> 0:12:27.276 answer to Neil. 0:12:28.556 --> 0:12:32.116 Okay, Tim, We're going to go from the robot apocalypse 0:12:32.196 --> 0:12:35.996 to the climate apocalypse with our next question from Julian, 0:12:36.436 --> 0:12:41.476 who writes Dear Tim. Lately, more and more news breaks 0:12:41.556 --> 0:12:45.836 of climate change harming the economy. For example, I remember 0:12:45.876 --> 0:12:49.716 a recent story about home insurance premiums rising steeply and 0:12:49.796 --> 0:12:54.076 hazard zones for flooding storms or landslides. That made me wonder, 0:12:54.516 --> 0:12:57.196 isn't there a way to profit from climate change too 0:12:57.676 --> 0:13:00.716 that would allow us to hedge against these economic risks. 0:13:01.236 --> 0:13:02.156 Could you set up a. 0:13:02.116 --> 0:13:05.116 Fund that would act, in effect, like a climate change 0:13:05.156 --> 0:13:09.036 insurance policy. Excellent show, by the way, Deep insights told 0:13:09.236 --> 0:13:13.236 via gripping stories. All the best from Vienna Julian. 0:13:14.476 --> 0:13:17.876 It's a very interesting question. The thing that immediately springs 0:13:17.916 --> 0:13:20.076 to my mind is I once saw one of the 0:13:20.076 --> 0:13:25.316 most amazingly persuasive pieces of rhetoric ever that was not 0:13:25.356 --> 0:13:29.316 intended to be persuasive, and it was at a commodities conference. 0:13:29.436 --> 0:13:33.356 There was a bunch of guys who trade agricultural commodities 0:13:34.316 --> 0:13:38.156 and therefore have a big interest in climate variability, but 0:13:38.196 --> 0:13:42.916 at the same time were culturally Midwestern and therefore climate skeptic, 0:13:43.436 --> 0:13:46.276 And the guy giving a talk at this conference was 0:13:47.036 --> 0:13:50.556 rather professorial Germanic character. I can't remember if he was 0:13:50.636 --> 0:13:55.196 German or Austrian or Swiss and he was from one 0:13:55.236 --> 0:13:58.756 of those big reinsurance companies. He just gave a talk 0:13:58.916 --> 0:14:02.516 explaining how they were raising all of their insurance premiums 0:14:02.876 --> 0:14:05.156 because of climate change, and showed loads and loads of 0:14:05.236 --> 0:14:09.036 data about climate change and how they were changing their 0:14:09.356 --> 0:14:12.556 pricing model. And there's a bunch of people who I 0:14:12.596 --> 0:14:18.636 think were politically predisposed to be climate skeptics were like, huh, 0:14:19.196 --> 0:14:22.316 this guy is not Hillary Clinton and the Dems coming 0:14:22.356 --> 0:14:24.396 to take away our freedoms. This guy doesn't want to 0:14:24.396 --> 0:14:26.756 persuade us of anything. He's just telling us that the 0:14:26.796 --> 0:14:29.876 price of insurance is going up and here's why. And 0:14:30.116 --> 0:14:32.796 I really felt the mood in the room change because 0:14:32.796 --> 0:14:35.796 of that talk was fascinating. And what that gets at 0:14:35.916 --> 0:14:38.996 is that insurance gives us a kind of truth about 0:14:38.996 --> 0:14:41.676 the risks that we face. Because insurance companies operate in 0:14:41.716 --> 0:14:44.396 a competitive market, they want to offer the most expensive 0:14:44.396 --> 0:14:46.476 premiums they can get away with, but they're forced by 0:14:46.476 --> 0:14:49.436 competition to keep the premiums low, and so as the 0:14:49.436 --> 0:14:52.396 premiums rise and rise and rise, that generally indicates that 0:14:52.396 --> 0:14:54.916 the risk is rising and rising and rising too. So, 0:14:54.956 --> 0:14:57.356 to return to Julian's question, is there a way to 0:14:57.396 --> 0:15:00.436 profit from climate change. I mean your podcast What's Your Problem, Jacob, 0:15:00.476 --> 0:15:03.276 You've talked to many entrepreneurs who are hoping to make 0:15:03.316 --> 0:15:05.276 money while also saving the planet. 0:15:05.436 --> 0:15:09.996 I was thinking about that. It is encouraging to talk 0:15:10.036 --> 0:15:13.756 to these people who are very smart and I think 0:15:13.836 --> 0:15:18.036 truly believe that the work they're doing will mitigate the 0:15:18.116 --> 0:15:23.036 damage from climate change. And the progress has been extraordinary, 0:15:23.196 --> 0:15:25.716 right like the fall in the price of solar power 0:15:25.876 --> 0:15:30.316 in particular, it's staggering. You know, people are making batteries better, 0:15:30.356 --> 0:15:32.396 and there are really hard parts of the problem like 0:15:32.476 --> 0:15:36.116 cement and planes, and people are working on that. And 0:15:36.556 --> 0:15:39.516 you know, Bill Gates started a venture capital fund called 0:15:39.636 --> 0:15:43.676 Breakthrough Energy Ventures. That is exactly what Julian is asking about, right, Like, 0:15:43.716 --> 0:15:47.236 the point of this fund is to profit from climate 0:15:47.356 --> 0:15:51.156 change by helping to solve or mitigate climate change. 0:15:51.276 --> 0:15:53.756 So I think there are all these hopeful stories and 0:15:53.796 --> 0:15:57.196 it is very encouraging. But fundamentally to come back to 0:15:57.396 --> 0:16:01.396 this idea of our kind of inverse insurance policy, I 0:16:01.516 --> 0:16:03.316 think that the answer is no. 0:16:03.636 --> 0:16:03.876 Yeah. 0:16:04.276 --> 0:16:10.396 Fundamentally, insurance moves the cost around the person whose house 0:16:10.436 --> 0:16:13.356 got burned down or the person whose home was destroyed 0:16:13.356 --> 0:16:16.596 in a hurricane, they don't have to pay for rebuilding it. Instead, 0:16:16.636 --> 0:16:19.516 the insurance company pays, but somebody still has to pay. 0:16:19.636 --> 0:16:22.676 And insurance moves that risk around and that's very valuable, 0:16:23.356 --> 0:16:26.436 but it doesn't make the cost go away. And climate 0:16:26.516 --> 0:16:29.676 change increases these costs, and all the insurance in the 0:16:29.676 --> 0:16:32.516 world is not going to reduce them in aggregate. It'll 0:16:32.516 --> 0:16:34.516 shift them to different people, but it's not going to 0:16:34.516 --> 0:16:37.676 reduce them. For that we need you sell the panels, Jacob. 0:16:38.236 --> 0:16:39.996 You know, when you put it that way, like, what 0:16:40.076 --> 0:16:45.036 we really want in terms of moving the economics is 0:16:45.076 --> 0:16:48.276 you want the people who are consuming the fossil fuel, 0:16:48.316 --> 0:16:50.596 who are flying on the plane, who are eating the 0:16:50.636 --> 0:16:53.956 hamburger to pay the full cost of that. Right, you 0:16:53.996 --> 0:16:58.276 want to internalize that cost which is now not in 0:16:58.316 --> 0:17:01.716 that transaction. And you can do that with a carbon tax, 0:17:01.796 --> 0:17:03.636 Like it's a great idea. You can even have a 0:17:03.676 --> 0:17:06.796 carbon tax and then just give everybody the money back. Right, 0:17:06.836 --> 0:17:11.036 the government collects money from people for consuming carbon essentially, 0:17:11.076 --> 0:17:13.236 and then sends a check to everybody in the country 0:17:13.236 --> 0:17:13.916 at the end of the year. 0:17:13.956 --> 0:17:15.316 So the government doesn't. 0:17:14.996 --> 0:17:17.156 Even have to take more money in the aggregate and 0:17:17.236 --> 0:17:20.996 like it's super elegant, and it's just politically doesn't really 0:17:20.996 --> 0:17:23.116 seem to be happening, but it is in a way 0:17:23.156 --> 0:17:24.756 solving the problem fundamentally. 0:17:25.116 --> 0:17:25.676 Absolutely. 0:17:26.116 --> 0:17:29.516 All Right, that's enough about that. We'll be back in 0:17:29.676 --> 0:17:33.956 just a minute. 0:17:40.356 --> 0:17:43.196 We are back. I'm Tim Harford. I am talking to 0:17:43.316 --> 0:17:46.756 the amazing Jacob Goldstein. And this is another of our 0:17:46.916 --> 0:17:50.436 Cautionary Questions episodes where you have been sending in your 0:17:50.476 --> 0:17:52.916 questions and Jacob and I are going to try and 0:17:52.916 --> 0:17:54.676 answer them. Jacob, what have you got for me? 0:17:54.956 --> 0:17:55.196 Tim? 0:17:55.236 --> 0:18:00.876 This is a throwback. It's from Robert who writes, Hi, Tim, 0:18:01.956 --> 0:18:04.276 why did no one go to jail after the two 0:18:04.276 --> 0:18:07.556 thousand and eight financial crisis? I remember the savings and 0:18:07.636 --> 0:18:11.276 loans financial crisis during the Reagan presidency when Charles Keating 0:18:11.436 --> 0:18:15.636 was jailled love your show, Robert from Illinois. 0:18:16.356 --> 0:18:19.716 Yeah, and a throwback because we first met each other 0:18:19.956 --> 0:18:21.716 shortly after the financial crisis. 0:18:21.396 --> 0:18:24.916 In twenty ten, when the question on everybody's lips was 0:18:25.276 --> 0:18:26.356 Who's going to jail? 0:18:26.876 --> 0:18:29.636 Yeah, I mean it's not literally true that nobody went 0:18:29.636 --> 0:18:31.876 to jail, but he madeoff went to jail for example. 0:18:32.156 --> 0:18:34.676 I mean, I think the short answer is if you 0:18:34.716 --> 0:18:36.676 want people to go to jail, then first they have 0:18:36.716 --> 0:18:39.276 to commit a crime. And the weird thing about the 0:18:39.276 --> 0:18:43.396 financial crisis is I don't think many people did commit crimes. 0:18:43.596 --> 0:18:45.596 All of this crazy stuff that happened, and all the 0:18:45.636 --> 0:18:49.556 outrageous things that people did were I think mostly legal, 0:18:49.636 --> 0:18:51.356 which is of course the real scandal. 0:18:52.356 --> 0:18:57.156 Yeah, you know, everybody talked about housing and crazy sliced 0:18:57.236 --> 0:19:00.716 up bonds built on mortgages, right, that was the sort 0:19:00.716 --> 0:19:04.676 of part of the story that everybody heard and told, 0:19:04.716 --> 0:19:06.996 And that part of the story is true. But there 0:19:07.076 --> 0:19:09.596 is another piece of the story that I actually think 0:19:09.996 --> 0:19:13.796 is a really fundamental driver of the crisis that you 0:19:13.836 --> 0:19:17.436 didn't hear as much because it's a little more abstract 0:19:17.476 --> 0:19:22.436 and a little nerdier. And that is basically that starting 0:19:22.436 --> 0:19:25.036 a long time before the crisis, starting in like the 0:19:25.116 --> 0:19:29.796 nineteen seventies, there arose in the United States what came 0:19:29.836 --> 0:19:33.316 to be called a shadow banking system, where because of 0:19:33.636 --> 0:19:36.396 regulations on banks in the US that were set up 0:19:36.436 --> 0:19:39.156 after the depression, when there was a giant banking crisis, 0:19:39.956 --> 0:19:44.476 clever finance people came up with financial structures that looked 0:19:44.556 --> 0:19:47.556 like banks but weren't regulated like banks, and in particular, 0:19:47.636 --> 0:19:50.516 they looked like bank deposits. Right, So a bank deposit 0:19:50.716 --> 0:19:53.956 is a weird thing where you put your dollar in 0:19:53.996 --> 0:19:57.836 the bank and you have your deposit and it's worth 0:19:57.836 --> 0:20:00.076 a dollar, and then the bank takes your dollar and 0:20:00.276 --> 0:20:02.556 lends it out to somebody else, or your one thousand 0:20:02.596 --> 0:20:04.396 dollars and lends it out to somebody else for a 0:20:04.436 --> 0:20:07.116 mortgage that doesn't have to be paid back for thirty years. 0:20:07.876 --> 0:20:11.676 And so then there is this inherent fragility in that system, right, 0:20:11.716 --> 0:20:14.436 because if we all come back and ask for our money, 0:20:14.676 --> 0:20:16.516 the bank won't have it. And it's not because the 0:20:16.556 --> 0:20:20.956 bank is greedy or evil or incompetent. It's because of 0:20:20.956 --> 0:20:24.116 the fundamental structure of banking. That fragility is inherent in 0:20:24.156 --> 0:20:26.836 the fundamental structure of banking. And what happened in the 0:20:26.876 --> 0:20:31.196 financial crisis is that there were billions of dollars that 0:20:31.236 --> 0:20:34.596 were deposit like. They weren't exactly deposits. They weren't insured 0:20:34.596 --> 0:20:37.316 by the federal government, but they were in money market 0:20:37.436 --> 0:20:40.316 mutual funds, which people may be familiar with, and were 0:20:40.316 --> 0:20:43.676 explicitly set up to be like a bank deposit, but 0:20:43.716 --> 0:20:46.076 could pay higher interests and weren't regulated and in the 0:20:46.156 --> 0:20:48.876 repo market, which is like a weirder version of the 0:20:48.916 --> 0:20:52.956 same thing, let's say, and everybody came and asked for 0:20:52.996 --> 0:20:55.276 their money back in two thousand and eight, and of 0:20:55.356 --> 0:20:58.716 course the shadow banks which were not called banks or 0:20:58.716 --> 0:21:01.316 shadow banks didn't have it, and that was a core 0:21:01.436 --> 0:21:04.316 driver of the crisis. And it wasn't illegal, as you said. 0:21:04.796 --> 0:21:07.996 But it's like that is what all financial crises are. 0:21:08.116 --> 0:21:10.996 They just have like different flavors, different skins. 0:21:11.236 --> 0:21:13.516 I mean you say it wasn't because the shadow banks 0:21:13.796 --> 0:21:16.556 were lazy or incompetential greedy. I mean I think they 0:21:16.596 --> 0:21:18.516 probably were incompetent and greedy as well. 0:21:18.676 --> 0:21:21.356 Fair well, greed. I shouldn't have brought greed into it. 0:21:21.396 --> 0:21:24.116 Greed should be fun, but greed, right, like incompetence is 0:21:24.156 --> 0:21:25.676 not illegal, and neither is greed. 0:21:25.916 --> 0:21:29.156 Yeah, they certainly didn't break the rules, ye, right. And 0:21:29.236 --> 0:21:34.116 in fact, one of the key under the radar failures 0:21:34.236 --> 0:21:37.516 that week in September in two thousand and eight, when 0:21:38.076 --> 0:21:41.116 Lehman Brothers the investment bank failed and then everybody else 0:21:41.116 --> 0:21:43.796 failed and the government bailed everybody out, was the very 0:21:43.836 --> 0:21:46.556 first money market neutral fund that had been created forty 0:21:46.596 --> 0:21:50.276 years earlier, and was very much like a bank and 0:21:50.396 --> 0:21:54.076 suddenly couldn't give everybody their money back. And so it's 0:21:54.156 --> 0:21:58.156 totally understandable that everybody is angry when one industry blows 0:21:58.196 --> 0:21:59.716 up the economy. And by the way, all the people 0:21:59.716 --> 0:22:01.796 in that industry are getting rich and it's not obvious 0:22:01.836 --> 0:22:04.156 what they're providing to us. But it is in fact 0:22:04.236 --> 0:22:08.396 a really hard problem to solve, like banks are inherently unstable, 0:22:08.436 --> 0:22:11.316 and people love of making things that look like banks 0:22:11.676 --> 0:22:12.996 and are inherently unstable. 0:22:13.396 --> 0:22:16.436 Thank you, Jacob for reminding me of the concept of 0:22:16.476 --> 0:22:19.916