1 00:00:00,080 --> 00:00:03,199 Speaker 1: Hi, it's Justin Wolfer's I'm a regular guest on Slight's 2 00:00:03,200 --> 00:00:05,640 Speaker 1: podcast What Next, Where Mary Harris and I talked through 3 00:00:05,680 --> 00:00:09,520 Speaker 1: the economics behind the headlines. Today, I'm sharing a recent 4 00:00:09,560 --> 00:00:12,640 Speaker 1: episode with the Platypus community that I think you'll enjoy. 5 00:00:13,480 --> 00:00:22,080 Speaker 2: Take a listen, Deal or no deal. 6 00:00:22,720 --> 00:00:25,200 Speaker 3: For the last few days, that has been the question 7 00:00:25,680 --> 00:00:33,440 Speaker 3: swirling around the US and Iran. Both countries said they 8 00:00:33,440 --> 00:00:36,760 Speaker 3: were planning to extend their on again off against easefire. 9 00:00:37,680 --> 00:00:40,440 Speaker 3: Neither country seemed eager to share the terms of that 10 00:00:40,520 --> 00:00:44,480 Speaker 3: agreement in writing until yesterday. 11 00:00:45,080 --> 00:00:46,320 Speaker 2: It's a page and a half. 12 00:00:47,040 --> 00:00:50,600 Speaker 3: Justin Wolfers from over at Platypus Economics had been waiting 13 00:00:50,640 --> 00:00:53,280 Speaker 3: for this moment, not like he had high hopes about 14 00:00:53,280 --> 00:00:54,280 Speaker 3: what he was going to find. 15 00:00:54,960 --> 00:00:57,960 Speaker 1: If someone has something awesome, they can't wait to show 16 00:00:57,960 --> 00:01:01,360 Speaker 1: it to you, Therefore they can wait to show it 17 00:01:01,360 --> 00:01:05,240 Speaker 1: to you. You shoot infer it not so great. 18 00:01:06,360 --> 00:01:15,520 Speaker 3: In process being workshopped, President Trump was certainly keeping his 19 00:01:15,600 --> 00:01:18,840 Speaker 3: options open. He got in front of multiple microphones to 20 00:01:18,880 --> 00:01:22,360 Speaker 3: say he could reneg on this ceasefire anytime, that if 21 00:01:22,360 --> 00:01:26,640 Speaker 3: he did, he could simply blame JD. Vance. But if 22 00:01:26,640 --> 00:01:31,400 Speaker 3: this thing holds I wanted justin to explain what happens. 23 00:01:31,440 --> 00:01:31,640 Speaker 2: Then. 24 00:01:32,760 --> 00:01:35,560 Speaker 3: I think of the war in Iran as a crisis 25 00:01:35,560 --> 00:01:38,600 Speaker 3: of many kinds, Like it's a human crisis. People have 26 00:01:38,600 --> 00:01:42,320 Speaker 3: been killed, thousands of people. It's a crisis of democracy 27 00:01:42,520 --> 00:01:45,600 Speaker 3: because the way we went to war here did not 28 00:01:45,800 --> 00:01:50,360 Speaker 3: involve Congress incredibly hamhanded, just stumbling into war. I think 29 00:01:50,400 --> 00:01:53,200 Speaker 3: of it as a crisis of international diplomacy because of 30 00:01:53,240 --> 00:01:56,080 Speaker 3: how little we looped in our allies. Right, But it 31 00:01:56,120 --> 00:02:02,040 Speaker 3: was also an economic crisis, or is an economic crisis? 32 00:02:02,080 --> 00:02:05,800 Speaker 3: How big of an economic crisis? The answer is really 33 00:02:05,800 --> 00:02:10,480 Speaker 3: really big economically. Was this a different kind of crisis 34 00:02:10,480 --> 00:02:13,040 Speaker 3: than you expected at the beginning of the war, because 35 00:02:13,080 --> 00:02:17,280 Speaker 3: you came on at the start and you were like, listen, everyone, 36 00:02:18,120 --> 00:02:20,200 Speaker 3: keep your powder dry for a second. This is in 37 00:02:20,280 --> 00:02:25,679 Speaker 3: the nineteen seventies. The United States is more energy independent. 38 00:02:26,280 --> 00:02:29,480 Speaker 3: We're going to have to see how this goes now 39 00:02:29,520 --> 00:02:33,520 Speaker 3: that it's a few months in, and maybe maybe going 40 00:02:33,560 --> 00:02:36,760 Speaker 3: to come to some sort of conclusion at some point soon. 41 00:02:38,639 --> 00:02:43,880 Speaker 3: Is the economic damage bigger or different than you expected? 42 00:02:44,760 --> 00:02:47,600 Speaker 1: I think it's roughly of the order of magneture I expected, 43 00:02:48,440 --> 00:02:51,400 Speaker 1: which makes it bigger than almost anyone else's talking about. 44 00:02:55,040 --> 00:02:58,120 Speaker 1: My calculation is this will cost the typical American family 45 00:02:58,160 --> 00:03:01,080 Speaker 1: of the thousands or tens of thousands of dollars. And 46 00:03:01,120 --> 00:03:03,320 Speaker 1: so the question is if you'd gone door to door 47 00:03:03,360 --> 00:03:06,920 Speaker 1: and you'd said to your neighbor, we're thinking about bombing Iran. 48 00:03:08,080 --> 00:03:09,560 Speaker 1: I'm not quite sure I can tell you what the 49 00:03:09,560 --> 00:03:11,720 Speaker 1: benefits are, but the president's making the case that we 50 00:03:11,840 --> 00:03:14,440 Speaker 1: need to. But I need you to write a check 51 00:03:14,520 --> 00:03:16,919 Speaker 1: for thousands of dollars to authorize this. 52 00:03:18,000 --> 00:03:20,360 Speaker 3: How long will that cost endure? 53 00:03:21,200 --> 00:03:24,400 Speaker 1: When I say this will cost the typical American family 54 00:03:24,480 --> 00:03:26,640 Speaker 1: thousands or tens of thousands of dollars, that is not 55 00:03:26,720 --> 00:03:29,400 Speaker 1: per year, that is in total over the future. And 56 00:03:29,440 --> 00:03:32,680 Speaker 1: so that's the projection understanding the fact that wars have 57 00:03:32,800 --> 00:03:37,640 Speaker 1: persistent effects. Have we written the full check right now? No, 58 00:03:39,200 --> 00:03:42,080 Speaker 1: So there's probably still real pain ahead. 59 00:03:44,240 --> 00:03:47,440 Speaker 3: Today on the show, why you have not stopped paying 60 00:03:47,760 --> 00:03:50,760 Speaker 3: for this war and Iran even if this new deal 61 00:03:51,480 --> 00:03:54,040 Speaker 3: is for real? I'm Mary Harris. 62 00:03:54,360 --> 00:04:11,440 Speaker 4: You're listening to what next stick around. 63 00:04:12,600 --> 00:04:17,640 Speaker 3: I think most of my listeners are self centered, maybe 64 00:04:17,640 --> 00:04:22,200 Speaker 3: me too, and want to know how this war, even 65 00:04:22,240 --> 00:04:25,960 Speaker 3: if it ends, could continue to impact them in their 66 00:04:26,040 --> 00:04:28,520 Speaker 3: pocket books. And I think the main thing Americans have 67 00:04:28,520 --> 00:04:30,880 Speaker 3: been feeling is high gas prices, right, high gas prices, 68 00:04:31,200 --> 00:04:34,120 Speaker 3: high inflation, which is also kind of high gas prices 69 00:04:34,200 --> 00:04:36,800 Speaker 3: because the inflation is baked into the cost of getting 70 00:04:36,800 --> 00:04:40,799 Speaker 3: your goods wherever they're going to target or the farmer's 71 00:04:40,880 --> 00:04:45,440 Speaker 3: market or wherever. Are these things changing anytime soon? The inflation, 72 00:04:45,760 --> 00:04:48,160 Speaker 3: the gas prices they have, they. 73 00:04:48,080 --> 00:04:51,560 Speaker 1: Are There's two stories that are true, and it's important 74 00:04:51,560 --> 00:04:55,200 Speaker 1: to paplekeep both them in mind. The moment the straight open, 75 00:04:55,360 --> 00:04:58,240 Speaker 1: life gets easier than it was the day before the straight. 76 00:04:58,360 --> 00:05:01,479 Speaker 3: Opened, but not easier than like January. 77 00:05:02,160 --> 00:05:06,600 Speaker 2: Right. So if the question is will life get better, 78 00:05:06,680 --> 00:05:10,359 Speaker 2: the answer is yes. If the question is was this 79 00:05:10,560 --> 00:05:11,039 Speaker 2: worth it? 80 00:05:11,200 --> 00:05:14,080 Speaker 1: Then you want to compare where we are to where 81 00:05:14,120 --> 00:05:15,800 Speaker 1: we would have been if we hadn't gone to war. 82 00:05:16,040 --> 00:05:18,640 Speaker 1: Do we know that, Yeah, we do because we knew 83 00:05:18,680 --> 00:05:21,680 Speaker 1: what oil price futures expected oil prices to be through 84 00:05:21,680 --> 00:05:24,039 Speaker 1: this period. They expected oil to be round about sixty 85 00:05:24,040 --> 00:05:25,839 Speaker 1: dollars a barrel, and they expected that for the next 86 00:05:25,839 --> 00:05:29,880 Speaker 1: several years. And that's no one's expectation right now. I 87 00:05:29,920 --> 00:05:31,880 Speaker 1: want to be really clear with people. Oil is not 88 00:05:31,920 --> 00:05:33,599 Speaker 1: going back to where it would have been without the 89 00:05:33,640 --> 00:05:40,400 Speaker 1: war anytime soon, and it's going to plummet. And that's 90 00:05:40,480 --> 00:05:45,800 Speaker 1: because it double reverse plummet at first, which is say 91 00:05:45,839 --> 00:05:47,760 Speaker 1: it rose sharply the long way, it's going to come 92 00:05:47,880 --> 00:05:50,760 Speaker 1: down not quite as sharply and not quite as far 93 00:05:50,960 --> 00:05:53,360 Speaker 1: so your life is worse even as what we're going 94 00:05:53,400 --> 00:05:55,680 Speaker 1: to have as talking heads on TV saying. 95 00:05:57,800 --> 00:05:59,239 Speaker 2: Look, oil prices are coming down. 96 00:05:59,480 --> 00:06:03,440 Speaker 3: This is a perfect place for Donald Trump to enter, 97 00:06:03,640 --> 00:06:07,119 Speaker 3: like he's great at like having these situations that are 98 00:06:07,560 --> 00:06:10,480 Speaker 3: better but not actually better, and like making the most 99 00:06:10,520 --> 00:06:13,200 Speaker 3: of them, basically coming in and saying, like, prices are down. 100 00:06:13,279 --> 00:06:16,320 Speaker 3: It's like true, but not down in the way that 101 00:06:16,320 --> 00:06:18,840 Speaker 3: they would have been. They're down because of you know, 102 00:06:19,160 --> 00:06:21,799 Speaker 3: the mess you made that then you like fixed halfway. 103 00:06:22,480 --> 00:06:24,480 Speaker 2: Yes, we have seen this movie before. 104 00:06:24,720 --> 00:06:26,600 Speaker 1: Look the economics teacher in me, which just wants to 105 00:06:26,600 --> 00:06:28,200 Speaker 1: say to your audience, is actually a really deep and 106 00:06:28,200 --> 00:06:31,520 Speaker 1: important lesson here, which is what you when you're evaluating 107 00:06:31,560 --> 00:06:33,719 Speaker 1: the quality of a policy, it's not whether something rose 108 00:06:33,839 --> 00:06:36,839 Speaker 1: or fell, it's where is it relative to the counter factual. 109 00:06:37,960 --> 00:06:39,920 Speaker 1: And when you do this kind of factual thinking, if 110 00:06:39,920 --> 00:06:41,960 Speaker 1: we hadn't gone to war, what would oil prices be 111 00:06:42,040 --> 00:06:45,080 Speaker 1: that's when you understand the cost this war is imposing 112 00:06:45,120 --> 00:06:48,159 Speaker 1: on you. When you say where oil price is compared 113 00:06:48,200 --> 00:06:51,240 Speaker 1: to two weeks ago, that's when you're falling for it. 114 00:06:52,279 --> 00:06:54,719 Speaker 1: And I think the American people have fallen for the 115 00:06:54,800 --> 00:06:58,360 Speaker 1: mistake of comparing today with the past too often. 116 00:06:58,960 --> 00:07:02,719 Speaker 3: So we're else talking at a time when the FED 117 00:07:03,279 --> 00:07:06,720 Speaker 3: scheduled to meet. Kevin worsh New FED Chair will be there. 118 00:07:07,160 --> 00:07:10,680 Speaker 3: He's under a lot of pressure to lower interest rates. 119 00:07:11,640 --> 00:07:17,680 Speaker 3: With inflation up, typically you would not lower interest rates. However, 120 00:07:18,760 --> 00:07:20,800 Speaker 3: there is pressure. And there's also the fact that, as 121 00:07:20,840 --> 00:07:24,440 Speaker 3: you said, you know that inflation may be coming down 122 00:07:24,600 --> 00:07:27,840 Speaker 3: a bit, but just not down to where you would 123 00:07:27,880 --> 00:07:30,440 Speaker 3: have expected or wanted it to be. What does that 124 00:07:30,560 --> 00:07:32,360 Speaker 3: mean for a meeting like the one that's going to 125 00:07:32,360 --> 00:07:33,720 Speaker 3: happen today. 126 00:07:33,920 --> 00:07:36,120 Speaker 1: I can tell you that it's an absolute certainty that 127 00:07:36,160 --> 00:07:37,160 Speaker 1: nothing will happen today. 128 00:07:37,320 --> 00:07:37,880 Speaker 2: Huh. 129 00:07:38,800 --> 00:07:41,960 Speaker 1: FED Fund's futures, which is basically a futures market or 130 00:07:42,000 --> 00:07:45,120 Speaker 1: a betting market on what happens, says it's a ninety 131 00:07:45,200 --> 00:07:49,000 Speaker 1: nine point four percent chance that the FED announces no change. Now, 132 00:07:49,080 --> 00:07:51,160 Speaker 1: you might say, we had all of that drama about 133 00:07:51,160 --> 00:07:52,960 Speaker 1: the next FED chair and you're telling me nothing's going 134 00:07:53,040 --> 00:07:54,880 Speaker 1: to happen. Remember, the FED chair is only one of 135 00:07:54,880 --> 00:07:58,560 Speaker 1: twelve people who've had this plug just arrived. He could 136 00:07:58,840 --> 00:08:00,920 Speaker 1: kick up a stink if he wanted to. Probably not 137 00:08:00,960 --> 00:08:02,960 Speaker 1: a good idea too, but he could kick up a stink. 138 00:08:03,040 --> 00:08:04,640 Speaker 1: If he does kick up a stink, he's still not 139 00:08:04,680 --> 00:08:07,520 Speaker 1: going to bring eleven other people along. The FED is 140 00:08:07,520 --> 00:08:09,800 Speaker 1: trying to weigh the labor market on the one hand, 141 00:08:09,800 --> 00:08:12,320 Speaker 1: and the good news is that's looking a little healthier 142 00:08:12,320 --> 00:08:14,120 Speaker 1: than when the FED last matter. 143 00:08:14,240 --> 00:08:16,640 Speaker 3: And I think that this is actually legitimately confusing for 144 00:08:16,680 --> 00:08:20,160 Speaker 3: people because they want to have a really clear picture 145 00:08:20,240 --> 00:08:23,280 Speaker 3: of like things are bad, things are good, and what 146 00:08:23,320 --> 00:08:27,760 Speaker 3: we have more is what you're seeing, which is complicated dynamics. So, yes, 147 00:08:28,320 --> 00:08:34,520 Speaker 3: unemployment is kind of looking better, So what does that 148 00:08:34,640 --> 00:08:37,280 Speaker 3: mean for understanding the economic impact of the war? 149 00:08:37,760 --> 00:08:40,480 Speaker 1: I really want to emphasize one economics lesson today, which 150 00:08:40,480 --> 00:08:45,719 Speaker 1: is counterfactual thinking. Anytime you see something, I want you 151 00:08:45,800 --> 00:08:51,120 Speaker 1: to say or what right, So the unemployment rate is low? 152 00:08:51,559 --> 00:08:54,960 Speaker 2: Or if we'd gone hadn't gone to wall, where would 153 00:08:54,960 --> 00:08:55,200 Speaker 2: it be? 154 00:08:55,520 --> 00:08:56,800 Speaker 3: Do you know the answer to that question? 155 00:08:57,120 --> 00:08:58,679 Speaker 1: I think there's two things that are true and one 156 00:08:58,720 --> 00:09:00,960 Speaker 1: I'm more certain of than the other. The economy is 157 00:09:00,960 --> 00:09:01,600 Speaker 1: not a disaster. 158 00:09:01,679 --> 00:09:02,160 Speaker 2: Right now. 159 00:09:02,480 --> 00:09:04,520 Speaker 1: You're not allowed to say that in front of certain liberals. 160 00:09:04,520 --> 00:09:07,120 Speaker 1: They scream and yell and call your names. But it 161 00:09:07,160 --> 00:09:10,000 Speaker 1: turns out I've got lots of data and on my side, 162 00:09:10,080 --> 00:09:13,640 Speaker 1: the economy is not a disaster. And it's also the 163 00:09:13,679 --> 00:09:16,760 Speaker 1: case that economic policies but an absolute train wreck. The 164 00:09:16,840 --> 00:09:20,080 Speaker 1: economy can be okay, but not as good as it 165 00:09:20,080 --> 00:09:24,240 Speaker 1: should be. It's a hard I'm not here to do politics. 166 00:09:24,840 --> 00:09:27,880 Speaker 1: It's a hard political story to sell. But I think 167 00:09:27,960 --> 00:09:30,760 Speaker 1: that's the truth now. I said, I'm more confident about 168 00:09:30,760 --> 00:09:33,080 Speaker 1: one part of that and the other that the economy's 169 00:09:33,160 --> 00:09:34,520 Speaker 1: okay is actually just a fact. 170 00:09:34,760 --> 00:09:36,120 Speaker 2: We have so much data on it. 171 00:09:36,120 --> 00:09:39,400 Speaker 1: It's absolutely true that the economy would be better with 172 00:09:39,480 --> 00:09:43,600 Speaker 1: a smarter, more thoughtful set of policies. That's a guess, 173 00:09:44,720 --> 00:09:46,600 Speaker 1: but it's a guess that most economists share. 174 00:09:47,080 --> 00:09:50,480 Speaker 3: Is the economy okay in other countries? Like I wonder 175 00:09:50,520 --> 00:09:54,760 Speaker 3: a little bit whether the okayness of the American economy 176 00:09:56,200 --> 00:10:03,000 Speaker 3: blinds some people seeing the global changes this war maybe 177 00:10:03,040 --> 00:10:03,520 Speaker 3: bringing on. 178 00:10:04,480 --> 00:10:07,040 Speaker 1: So you have the same problem, which is in other countries, 179 00:10:07,080 --> 00:10:09,160 Speaker 1: some of them would have been good and now they're moderate. 180 00:10:09,960 --> 00:10:11,920 Speaker 1: Some of them would have been moderate, now they're terrible. 181 00:10:12,480 --> 00:10:16,000 Speaker 1: But what we do know is this war had much 182 00:10:16,080 --> 00:10:20,760 Speaker 1: much sharper effects on countries that didn't have their own energy, 183 00:10:21,280 --> 00:10:23,920 Speaker 1: and in particular Europe, which is not a country but 184 00:10:23,960 --> 00:10:29,760 Speaker 1: a beautiful continent. But Europe has suffered a lot more 185 00:10:29,800 --> 00:10:32,160 Speaker 1: than the United States the energy. As much as you 186 00:10:32,200 --> 00:10:34,760 Speaker 1: and I are whining about what we're paying at the pump, 187 00:10:35,720 --> 00:10:38,160 Speaker 1: the effect on the typical European families been much higher. 188 00:10:38,200 --> 00:10:40,560 Speaker 1: And that's also true for much of Asia. And the 189 00:10:40,600 --> 00:10:42,920 Speaker 1: story we've really not told in the United States is 190 00:10:43,760 --> 00:10:46,720 Speaker 1: that the two biggest commodities to become more expensive out 191 00:10:46,760 --> 00:10:49,400 Speaker 1: of this has been energy and food because of the 192 00:10:49,400 --> 00:10:56,040 Speaker 1: fertilizer shortage. Food and energy are most of what very 193 00:10:56,040 --> 00:10:58,960 Speaker 1: poor people spend their money on. And so what that 194 00:10:59,040 --> 00:11:02,560 Speaker 1: means in the world horust countries where the people are desperate. 195 00:11:03,400 --> 00:11:08,480 Speaker 1: We've shifted them from grinding poverty to worse and substantially worse, 196 00:11:08,640 --> 00:11:09,080 Speaker 1: and so. 197 00:11:09,400 --> 00:11:11,040 Speaker 3: And that on top of all the other things that 198 00:11:11,040 --> 00:11:14,280 Speaker 3: have happened, like shutting down a lot of USAID, that 199 00:11:14,400 --> 00:11:16,640 Speaker 3: sort of stuff. So it's like these things compound. 200 00:11:17,720 --> 00:11:20,360 Speaker 1: Yes, it might be easier for all of us to 201 00:11:20,440 --> 00:11:23,240 Speaker 1: just go through our days and not talk or think 202 00:11:23,280 --> 00:11:27,200 Speaker 1: about the portion of the world that's in grinding poverty, 203 00:11:27,240 --> 00:11:30,640 Speaker 1: because the moment you do it becomes it brings. 204 00:11:30,360 --> 00:11:31,560 Speaker 2: You a little close to tears. 205 00:11:32,080 --> 00:11:34,959 Speaker 1: And then the idea that we're taking those economies and 206 00:11:35,000 --> 00:11:37,600 Speaker 1: therefore those people and belting them around their head for 207 00:11:37,640 --> 00:11:42,160 Speaker 1: an ill defined foreign policy goal. You know, it brings 208 00:11:42,800 --> 00:11:45,280 Speaker 1: this doesn't seem to matter in American politics, but it 209 00:11:45,280 --> 00:11:47,520 Speaker 1: brings the moral stakes of what we've been doing into 210 00:11:47,559 --> 00:11:48,200 Speaker 1: sharp relief. 211 00:11:49,800 --> 00:11:55,160 Speaker 3: We may not know how the global economy is changing, 212 00:11:55,640 --> 00:11:57,560 Speaker 3: we just know it is like we see all these 213 00:11:57,600 --> 00:12:01,400 Speaker 3: signals like, for instance, in the midst of fighting this war, 214 00:12:01,840 --> 00:12:06,400 Speaker 3: the UA left opak right, this like group that prices oil. 215 00:12:07,240 --> 00:12:11,920 Speaker 3: That's a big change. The fact that China is more 216 00:12:11,920 --> 00:12:15,720 Speaker 3: invested in renewable energy than the United States, And now 217 00:12:15,760 --> 00:12:18,600 Speaker 3: so much of the globe is looking at renewable energy 218 00:12:18,640 --> 00:12:21,560 Speaker 3: because they're not confident necessarily even if the strait of 219 00:12:21,559 --> 00:12:24,400 Speaker 3: horror moves opens, that they're going to get oil reliably. 220 00:12:25,040 --> 00:12:25,240 Speaker 2: Yeah. 221 00:12:25,640 --> 00:12:26,720 Speaker 3: Is that a fair way of seeing it? 222 00:12:27,160 --> 00:12:27,719 Speaker 2: Yeah? 223 00:12:27,880 --> 00:12:30,360 Speaker 1: And this it's the point I was trying to make earlier, 224 00:12:30,440 --> 00:12:34,720 Speaker 1: which is history tells US wars a major inflection points right. 225 00:12:35,320 --> 00:12:39,160 Speaker 1: Japan rewired itself as a passivest nation after World War Two. 226 00:12:39,480 --> 00:12:42,080 Speaker 1: Germany today is very different than Germany before the war. 227 00:12:43,720 --> 00:12:49,600 Speaker 1: Everything changes and everything's on the table when countries are 228 00:12:49,600 --> 00:12:50,240 Speaker 1: being destroyed. 229 00:12:53,760 --> 00:13:03,400 Speaker 3: We'll be back after a quick break. I was struck 230 00:13:03,400 --> 00:13:06,719 Speaker 3: by the fact that the US Federal Reserve actually has 231 00:13:06,760 --> 00:13:11,040 Speaker 3: an index of geopolitical risk. And if you look at 232 00:13:11,080 --> 00:13:15,920 Speaker 3: that index, what you see is these massive spikes. A 233 00:13:16,000 --> 00:13:18,920 Speaker 3: spike for nine to eleven, a spike for the Iraq War, 234 00:13:19,320 --> 00:13:22,679 Speaker 3: smaller spike for COVID, big spike for you, bigger spike 235 00:13:22,720 --> 00:13:28,400 Speaker 3: for Ukraine, and about an equal spike for Iran. Do 236 00:13:28,480 --> 00:13:32,600 Speaker 3: we know because we have an index like that, how 237 00:13:33,600 --> 00:13:39,720 Speaker 3: these moments of geopolitical risk have played out? And does 238 00:13:39,720 --> 00:13:41,679 Speaker 3: that inform our thinking right now? 239 00:13:42,200 --> 00:13:42,480 Speaker 2: Yes? 240 00:13:43,080 --> 00:13:46,400 Speaker 1: Does geopolitical risk matter for the economy? In order to 241 00:13:46,480 --> 00:13:49,400 Speaker 1: answer that question, they had to measure geopolitical risk. I 242 00:13:49,440 --> 00:13:51,280 Speaker 1: want to be clear, there's no easy way of doing this, 243 00:13:51,320 --> 00:13:54,400 Speaker 1: and there's a million reasons you can argue with their measure. 244 00:13:54,559 --> 00:13:57,520 Speaker 1: Their measure is largely based on newspaper reports, but treated 245 00:13:57,520 --> 00:14:00,680 Speaker 1: in a sophisticated way, so they've created this measure, and 246 00:14:00,679 --> 00:14:02,520 Speaker 1: then what they did is they went back through history 247 00:14:02,559 --> 00:14:05,280 Speaker 1: and then used some sophisticated economic modeling to say, does 248 00:14:05,400 --> 00:14:09,520 Speaker 1: geopolitical risk matter for economies? And the answer is overwhelmingly yes. 249 00:14:09,960 --> 00:14:14,920 Speaker 3: You've pointed out on your blog that Donald Trump has 250 00:14:15,880 --> 00:14:18,360 Speaker 3: said the war has coming to an end fifty times. 251 00:14:18,960 --> 00:14:21,440 Speaker 3: So if that's true this current time, you're like, I 252 00:14:21,440 --> 00:14:23,680 Speaker 3: don't know what that means. And you're not going to 253 00:14:23,680 --> 00:14:26,120 Speaker 3: be like, well, I'm going to open that new office 254 00:14:26,120 --> 00:14:26,800 Speaker 3: in Dubai. 255 00:14:27,360 --> 00:14:30,520 Speaker 1: You're just not exactly and so or I'm going to 256 00:14:30,560 --> 00:14:32,720 Speaker 1: open a research center that gives me access to the 257 00:14:32,720 --> 00:14:38,000 Speaker 1: best Israeli mathematicians. Also immigration, can I get the nerds 258 00:14:38,040 --> 00:14:40,160 Speaker 1: that I want into the labs that I want. That's 259 00:14:40,200 --> 00:14:45,120 Speaker 1: a big one, right, but unclear. So these FED economists 260 00:14:45,120 --> 00:14:47,880 Speaker 1: they created this index. They went back, they studied the 261 00:14:47,920 --> 00:14:49,840 Speaker 1: history of the world, literally the history of the world, 262 00:14:50,240 --> 00:14:53,960 Speaker 1: and they said they concluded that in the past rises 263 00:14:54,000 --> 00:14:56,760 Speaker 1: and geopolitical risk have been very, very bad for the economy. 264 00:14:57,320 --> 00:15:00,840 Speaker 1: And if you take that rise in gr political risk 265 00:15:01,640 --> 00:15:04,240 Speaker 1: and you plug it through their estimates of the effects 266 00:15:04,280 --> 00:15:06,560 Speaker 1: of geopolitical risk on an economy, which is which is 267 00:15:06,600 --> 00:15:10,880 Speaker 1: based on past experience that says, my memory is roughly speaking, 268 00:15:11,040 --> 00:15:12,960 Speaker 1: that we're going to lose two hundred to four hundred 269 00:15:12,960 --> 00:15:13,600 Speaker 1: billion dollars in. 270 00:15:13,640 --> 00:15:17,760 Speaker 3: Output whoa globally in the United States. 271 00:15:17,560 --> 00:15:20,160 Speaker 2: In the United States, just in the United States, in the. 272 00:15:20,240 --> 00:15:23,560 Speaker 1: United States, so that's two to four thousand dollars per family. 273 00:15:23,760 --> 00:15:27,640 Speaker 1: It's hard to be very precise about this, but we 274 00:15:27,720 --> 00:15:30,640 Speaker 1: think the bill is high. 275 00:15:31,120 --> 00:15:34,840 Speaker 3: I think we have two things happening at once. There 276 00:15:34,960 --> 00:15:39,480 Speaker 3: is the geopolitical risk of the war itself, and then 277 00:15:39,600 --> 00:15:44,920 Speaker 3: there is the geopolitical risk of Donald Trump. And those 278 00:15:45,000 --> 00:15:49,200 Speaker 3: things I think could be supercharging each other. Like I 279 00:15:49,280 --> 00:15:53,280 Speaker 3: was watching Donald Trump do his spiel about the deal 280 00:15:53,720 --> 00:15:55,960 Speaker 3: today and about how it's not really a deal. You know, 281 00:15:56,000 --> 00:15:57,560 Speaker 3: I'm not going to agree to it. I might go 282 00:15:57,600 --> 00:16:00,960 Speaker 3: back to fighting whatever, which is so many times before, 283 00:16:01,120 --> 00:16:05,760 Speaker 3: and it struck me his main innovations as a political 284 00:16:05,760 --> 00:16:12,320 Speaker 3: actor have been blatant, lying consistently, and just the innovation 285 00:16:12,440 --> 00:16:14,360 Speaker 3: that if you're a celebrity, they let you do it 286 00:16:14,640 --> 00:16:19,200 Speaker 3: the lies, along with other things potentially, but also when 287 00:16:19,200 --> 00:16:23,040 Speaker 3: people challenge your lie, you just exhaust them, you double down. 288 00:16:23,400 --> 00:16:26,320 Speaker 3: Like you can see this in his life as a 289 00:16:26,400 --> 00:16:29,600 Speaker 3: private citizen with all the lawsuits. He was very comfortable 290 00:16:29,680 --> 00:16:33,120 Speaker 3: filing against people and would just like keep going with 291 00:16:33,200 --> 00:16:36,560 Speaker 3: them to make people go away. He would just commit 292 00:16:36,680 --> 00:16:37,320 Speaker 3: to the bit. 293 00:16:38,600 --> 00:16:41,320 Speaker 1: Which I think would explain why at one level, what's 294 00:16:41,360 --> 00:16:46,720 Speaker 1: a relatively small conflict and I don't want to editorialize, 295 00:16:46,720 --> 00:16:49,200 Speaker 1: but relative to World War Two and a whole lot 296 00:16:49,240 --> 00:16:51,960 Speaker 1: of other you know, we just woke up one morning 297 00:16:51,960 --> 00:16:54,960 Speaker 1: and decided to stop bombing Iran. This isn't the end 298 00:16:55,000 --> 00:16:57,920 Speaker 1: of the world. We could just stop it another morning. 299 00:16:58,920 --> 00:17:02,920 Speaker 1: I think this geopolitical index has responded so strongly because 300 00:17:02,920 --> 00:17:08,000 Speaker 1: of the immense rise in risk and uncertainty and the 301 00:17:08,000 --> 00:17:13,480 Speaker 1: interaction of those I think you're exactly right, Mary, is paralyzing. 302 00:17:15,200 --> 00:17:19,159 Speaker 1: The thing I want to add is what the lying does. 303 00:17:19,960 --> 00:17:24,840 Speaker 1: The economics of the lying is that includes lying in contracts. Right, 304 00:17:24,880 --> 00:17:26,640 Speaker 1: I write a deal with Trump, I don't expect it to. 305 00:17:26,560 --> 00:17:27,199 Speaker 2: Be here tomorrow. 306 00:17:27,920 --> 00:17:29,639 Speaker 1: Now. What I want you to imagine is try and 307 00:17:29,720 --> 00:17:33,040 Speaker 1: imagine an economy without contracts. 308 00:17:34,840 --> 00:17:39,359 Speaker 2: Nothing would work, no rules. Are you going to get paid? 309 00:17:40,600 --> 00:17:42,480 Speaker 2: Is your cleaner going to come to your house? 310 00:17:42,480 --> 00:17:47,600 Speaker 1: Given that you may or may not stiff them. Contracts 311 00:17:48,359 --> 00:17:51,480 Speaker 1: are the essence of how we do business with each other. 312 00:17:52,480 --> 00:17:57,840 Speaker 1: We don't just trust, we create a legal structure around it. 313 00:17:58,240 --> 00:18:02,959 Speaker 1: And so this is the first post contract presidency. So 314 00:18:03,200 --> 00:18:04,920 Speaker 1: I'm not saying he's literally gotten rid of all the 315 00:18:04,960 --> 00:18:07,440 Speaker 1: contracts in the world. I'm saying the presidency is running 316 00:18:07,440 --> 00:18:11,160 Speaker 1: as if the United States won't write deals, won't respect deals, 317 00:18:11,160 --> 00:18:15,080 Speaker 1: and effectively won't contract with anyone. And what that does 318 00:18:15,200 --> 00:18:17,480 Speaker 1: is it actually reduces the number of options the United 319 00:18:17,480 --> 00:18:21,640 Speaker 1: States has. If you never tell the truth, no one 320 00:18:21,680 --> 00:18:24,959 Speaker 1: will ever trust you, and therefore the set of choices 321 00:18:25,000 --> 00:18:29,280 Speaker 1: they will offer you as smaller. So there is a virtue, 322 00:18:29,640 --> 00:18:32,880 Speaker 1: an economic virtue to truth. That it's not just you know, 323 00:18:33,320 --> 00:18:39,080 Speaker 1: lying as a sin. Once you routinely lie, you're not someone, 324 00:18:39,240 --> 00:18:41,399 Speaker 1: you make it harder for anyone to do business with you. 325 00:18:41,680 --> 00:18:43,240 Speaker 1: And that's the world we're in right now. 326 00:18:44,119 --> 00:18:52,640 Speaker 3: I think there's this false idea that Americans just want 327 00:18:52,640 --> 00:18:55,600 Speaker 3: to hear about kitchen table issues, and like we don't 328 00:18:55,600 --> 00:18:58,119 Speaker 3: want to hear about like democratic reform and all that 329 00:18:58,119 --> 00:19:01,919 Speaker 3: sort of stuff. I think what this war has proven 330 00:19:01,960 --> 00:19:05,679 Speaker 3: to me, and I'm curious if you'll agree, is that 331 00:19:05,720 --> 00:19:10,200 Speaker 3: there's a real argument to be made that the anti 332 00:19:10,440 --> 00:19:16,280 Speaker 3: democratic actions this president has taken are making you. 333 00:19:16,280 --> 00:19:17,720 Speaker 2: Poorer by a lot. 334 00:19:18,480 --> 00:19:23,439 Speaker 3: And if I'm a politician who maybe isn't in favor 335 00:19:23,640 --> 00:19:26,840 Speaker 3: of the anti democratic actions, I would be talking about 336 00:19:26,880 --> 00:19:33,000 Speaker 3: this all the time, the fact that this is how 337 00:19:33,040 --> 00:19:37,639 Speaker 3: our country runs, and when it stops working in this way, 338 00:19:37,720 --> 00:19:44,879 Speaker 3: it is bad for you American citizen materially, because right 339 00:19:44,920 --> 00:19:46,879 Speaker 3: now there's this funny division of like, well, we just 340 00:19:46,920 --> 00:19:48,760 Speaker 3: have to keep talking about healthcare and like that's what 341 00:19:48,800 --> 00:19:50,640 Speaker 3: the American people want to hear, and we want cheaper 342 00:19:50,720 --> 00:19:53,040 Speaker 3: drug prices, et cetera, et cetera. And I think there's 343 00:19:53,040 --> 00:19:55,080 Speaker 3: some truth to that, but I don't think you have 344 00:19:55,119 --> 00:19:57,800 Speaker 3: to stop talking about the other stuff because it's deeply related. 345 00:19:58,480 --> 00:19:58,760 Speaker 2: YEP. 346 00:19:59,600 --> 00:20:01,639 Speaker 1: One of the the most important economic questions you can 347 00:20:01,680 --> 00:20:03,880 Speaker 1: ask is why are some countries rich and other countries poor, 348 00:20:05,200 --> 00:20:07,480 Speaker 1: Because once you figure out that recipe, then you could 349 00:20:07,480 --> 00:20:10,960 Speaker 1: make your country richer. And the answer turns out to 350 00:20:10,960 --> 00:20:14,760 Speaker 1: be what economists call institutions, which is basically the rules 351 00:20:14,760 --> 00:20:17,879 Speaker 1: of the game. Do we have a set of rules 352 00:20:17,920 --> 00:20:20,800 Speaker 1: that encourage people to invest and to grow the pie, 353 00:20:22,000 --> 00:20:23,600 Speaker 1: or do we have a set of rules that are 354 00:20:24,520 --> 00:20:27,159 Speaker 1: extractive that I encourage you to steal your neighbors slice 355 00:20:27,160 --> 00:20:29,639 Speaker 1: of pie, because if we spend all our days stealing 356 00:20:29,680 --> 00:20:32,119 Speaker 1: our neighbors slice of pie, no one gets baking. This 357 00:20:32,200 --> 00:20:35,040 Speaker 1: is the first president in my lifetime who I think 358 00:20:35,119 --> 00:20:39,520 Speaker 1: has actually worked to destroy that. This is where the 359 00:20:39,520 --> 00:20:43,159 Speaker 1: most important issues are, things like he tried to destroy 360 00:20:43,200 --> 00:20:45,480 Speaker 1: the independence of the Federal Reserve so that it would 361 00:20:45,520 --> 00:20:48,600 Speaker 1: serve his interest rather than the American peoples. I want 362 00:20:48,640 --> 00:20:50,280 Speaker 1: you to remember two hundred years ago, two of the 363 00:20:50,359 --> 00:20:52,840 Speaker 1: richest countries in the world were the United States in Argentina. 364 00:20:54,520 --> 00:20:56,520 Speaker 1: They were the two countries that you would bet on 365 00:20:56,560 --> 00:21:00,600 Speaker 1: to be intensely rich in the future. An argent got 366 00:21:00,600 --> 00:21:03,639 Speaker 1: the wrong institutions. It had military cups, and it had 367 00:21:03,840 --> 00:21:07,240 Speaker 1: a fragile relationship with democracy, and people started to realize 368 00:21:07,280 --> 00:21:10,000 Speaker 1: it was better to steal the neighbor's pie than to 369 00:21:10,040 --> 00:21:12,479 Speaker 1: go out and bake a bigger pie. The US had 370 00:21:12,520 --> 00:21:14,920 Speaker 1: a different set of institutions. We bake the bigger pie. 371 00:21:16,240 --> 00:21:18,360 Speaker 1: This is one of the most important lessons of economics 372 00:21:18,400 --> 00:21:21,160 Speaker 1: teaches us. And the part that we all get wrong 373 00:21:22,520 --> 00:21:24,359 Speaker 1: is none of it plays out at the level of 374 00:21:24,400 --> 00:21:29,080 Speaker 1: a news cycle, and so everything you said, Mary is correct, 375 00:21:29,119 --> 00:21:31,359 Speaker 1: but the way it shows up in economic data is 376 00:21:31,440 --> 00:21:33,320 Speaker 1: your kids are going to wake up in twenty years 377 00:21:33,400 --> 00:21:37,760 Speaker 1: time and there's a job that could have been invented 378 00:21:37,800 --> 00:21:40,800 Speaker 1: but won't have been. There'll be a new technology that 379 00:21:40,840 --> 00:21:45,040 Speaker 1: could have extended your life that won't have me. It'll 380 00:21:45,040 --> 00:21:46,840 Speaker 1: be a bunch of things that don't happen. 381 00:21:47,119 --> 00:21:50,680 Speaker 3: But justin shouldn't we say that? Like the business world 382 00:21:50,720 --> 00:21:53,639 Speaker 3: has been pushing for fewer rules and less regulation for 383 00:21:53,680 --> 00:21:56,600 Speaker 3: a long time, and this is like an end point of. 384 00:21:56,480 --> 00:21:59,440 Speaker 1: That sort of are you going to two thirds agree 385 00:21:59,480 --> 00:22:02,960 Speaker 1: with you? So implicit in everything I said as a 386 00:22:03,040 --> 00:22:06,320 Speaker 1: view that what markets do is create extraordinary wealth, and 387 00:22:06,359 --> 00:22:08,440 Speaker 1: I know many of it left leaning viewers will be 388 00:22:08,680 --> 00:22:10,760 Speaker 1: like somewhat suspicious of that, to which I'm just going 389 00:22:10,800 --> 00:22:13,760 Speaker 1: to say, look at South Korea versus North Korea. One 390 00:22:13,760 --> 00:22:15,960 Speaker 1: of those embraced markets, one of them didn't. One of 391 00:22:15,960 --> 00:22:17,800 Speaker 1: them is rich, one of them is in grinding poverty. 392 00:22:18,200 --> 00:22:21,000 Speaker 1: That's sort of the argument. And markets have all sorts 393 00:22:21,000 --> 00:22:22,359 Speaker 1: of problems. I'm going to admit to them, but I'm 394 00:22:22,400 --> 00:22:24,119 Speaker 1: just going to run over them right now to get 395 00:22:24,160 --> 00:22:27,760 Speaker 1: to the key point. Markets generate extraordinary wealth, they do 396 00:22:27,880 --> 00:22:31,679 Speaker 1: say they generate extraordinary ideas and so on. The key idea. 397 00:22:31,880 --> 00:22:34,600 Speaker 1: The thing that really makes markets work is competition. It's 398 00:22:34,600 --> 00:22:37,400 Speaker 1: not business, it's competition. Competition means you have to create 399 00:22:37,400 --> 00:22:40,560 Speaker 1: a better mouse trap at a lower price. So if 400 00:22:40,560 --> 00:22:42,880 Speaker 1: you love markets, it's not that you love business, it's 401 00:22:42,880 --> 00:22:47,159 Speaker 1: that you love competition. The problem is business hates competition. Yes, 402 00:22:48,200 --> 00:22:50,800 Speaker 1: So the thing that means that capitalism delivers for ordinary 403 00:22:50,800 --> 00:22:54,200 Speaker 1: Americans is the force of competition is the number one 404 00:22:54,280 --> 00:22:56,720 Speaker 1: thing that business wants to destroy, because if you force 405 00:22:56,760 --> 00:22:59,320 Speaker 1: businesses to compete, they have to do more research and 406 00:22:59,359 --> 00:23:02,800 Speaker 1: development than the less research and development. So you're absolutely right, 407 00:23:03,040 --> 00:23:05,960 Speaker 1: welcome to Man one oh one class. There is a 408 00:23:06,040 --> 00:23:10,840 Speaker 1: deep tension inherent in capitalism, which is competition is what 409 00:23:10,960 --> 00:23:14,760 Speaker 1: makes it deliver, and the competitors hate it and they're 410 00:23:14,800 --> 00:23:17,240 Speaker 1: always trying to get rid of it. That, by the way, 411 00:23:17,320 --> 00:23:20,159 Speaker 1: explains why there's a long queue of CEOs lining up 412 00:23:20,160 --> 00:23:22,000 Speaker 1: to get on Air Force one or lining up out 413 00:23:22,040 --> 00:23:24,840 Speaker 1: the front of mar Lago. They're lining up to talk 414 00:23:24,880 --> 00:23:27,479 Speaker 1: to the king, to say to the king, could you 415 00:23:27,560 --> 00:23:29,760 Speaker 1: please get all these bloody competitors off my back. 416 00:23:30,760 --> 00:23:34,160 Speaker 3: We've spent so long bashing. Like the Elizabeth Warren point 417 00:23:34,160 --> 00:23:36,200 Speaker 3: of view, which is like I'm a capitalist who believes 418 00:23:36,240 --> 00:23:38,960 Speaker 3: in regulation. But now here we are. 419 00:23:39,960 --> 00:23:44,480 Speaker 1: Here's a line that my students like, at least if 420 00:23:44,960 --> 00:23:48,480 Speaker 1: because I hope we have some center right people in 421 00:23:48,520 --> 00:23:53,800 Speaker 1: the audience welcome. The key idea here is if you 422 00:23:53,960 --> 00:23:57,600 Speaker 1: think that all of these market forces deliver great outcomes, 423 00:23:57,720 --> 00:24:01,840 Speaker 1: and I do, I'm with you. Realize it's not business 424 00:24:02,119 --> 00:24:06,280 Speaker 1: that does that, it's competition, which means what I want 425 00:24:06,280 --> 00:24:09,080 Speaker 1: you to do is not be pro business, but to 426 00:24:09,119 --> 00:24:13,400 Speaker 1: be pro competition. In fact, the President committed this intellectual era. 427 00:24:13,600 --> 00:24:17,840 Speaker 1: The President is pro business but not pro competition. And 428 00:24:17,880 --> 00:24:20,199 Speaker 1: so the President talks to all these blacks's, oh you 429 00:24:20,200 --> 00:24:22,199 Speaker 1: get a tariffic exception because I wouldn't want you to 430 00:24:22,240 --> 00:24:27,600 Speaker 1: have to compete too hard, and he helps individual business. 431 00:24:27,720 --> 00:24:31,680 Speaker 1: Every time he calls the CEOs of the major companies, 432 00:24:31,720 --> 00:24:33,960 Speaker 1: he's making life harder for the small business that wants 433 00:24:34,040 --> 00:24:39,119 Speaker 1: to come and destroy those incumbent players. So he's making 434 00:24:39,160 --> 00:24:42,399 Speaker 1: the mistake of being pro business when what economic theory 435 00:24:42,800 --> 00:24:46,560 Speaker 1: and history both tell us is it's the forces of competition. 436 00:24:46,680 --> 00:24:49,639 Speaker 1: It's markets that deliver the outcomes, not businesses. So I 437 00:24:49,680 --> 00:24:51,640 Speaker 1: want to urge people who think of themselves as pro 438 00:24:51,680 --> 00:24:54,200 Speaker 1: business to think a little harder and think, hey, wait 439 00:24:54,200 --> 00:24:57,960 Speaker 1: a minute, maybe it's pro market or pro competition that 440 00:24:58,520 --> 00:24:59,440 Speaker 1: I really care about. 441 00:25:03,000 --> 00:25:06,439 Speaker 3: Justin, I'm so grateful for your time. Thank you for 442 00:25:06,440 --> 00:25:11,080 Speaker 3: coming on the show. Justin Wolfers is an economist and 443 00:25:11,160 --> 00:25:13,880 Speaker 3: professor at the University of Michigan, and you can check 444 00:25:13,920 --> 00:25:17,960 Speaker 3: out his work over at Platypus Economics. And that's the show. 445 00:25:18,440 --> 00:25:21,840 Speaker 3: What Next is produced by Rob Gunther, Patrick fort Evan Campbell, 446 00:25:21,920 --> 00:25:25,560 Speaker 3: and Madeline ducharm Paige Osburn is the senior supervising producer 447 00:25:25,560 --> 00:25:28,679 Speaker 3: of What Next and What Next tvd Miilabel is the 448 00:25:28,720 --> 00:25:32,359 Speaker 3: executive producer of podcasts. Here It's Late. Ben Richmond is 449 00:25:32,400 --> 00:25:35,800 Speaker 3: the senior director of Podcast Operations, And I'm Mary Harris. 450 00:25:36,040 --> 00:25:37,440 Speaker 3: Go check me down a blue s guy. Say hey, 451 00:25:37,560 --> 00:25:40,520 Speaker 3: I'm at Mary Harris. Thanks for listening. Catch you back 452 00:25:40,560 --> 00:25:41,640 Speaker 3: here next time.