EconTalk

John Taylor of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about his new book, First Principles: Five Keys to Restoring America's Prosperity. Taylor argues that when economic policy adhere to the right basic principles such as keeping rules rather than using discretion, then the economy thrives. Ignoring these principles, Taylor argues, leads to bad economic outcomes such as recessions, inflation, or high unemployment. Taylor illustrates these ideas with a whirlwind tour of the last half century of American economic policy and history. The focus is on monetary and fiscal policy but Taylor also discusses health care reform and other policy areas. The conversation closes with a look at the likelihood that economic policy will change dramatically after 2012.

Tyler Cowen of George Mason U. and author of An Economist Gets Lunch, talks with EconTalk host Russ Roberts about food, the economics of food, and his new book. In this wide-ranging conversation, Cowen explains why American food was once a wasteland, the environmental impacts of plastic and buying local, why to stay away from fancy restaurants in the central city, and why he spent a month shopping only at an Asian supermarket while living in Northern Virginia.

David Autor of MIT talks with EconTalk host Russ Roberts about the Social Security Disability Insurance (SSDI) program. SSDI has grown dramatically in recent years and now costs about $200 billion a year. Autor explains how the program works, why the growth has been so dramatic, and the consequences for the stability of the program in the future. This is an illuminated look at the interaction between politics and economics and reveals an activity of government that is relatively ignored today but will not be able to be ignored in the future.

Richard Burkhauser of Cornell University talks with EconTalk host Russ Roberts about the state of the middle class. Drawing on recently published papers, Burkhauser shows that changes in the standard of living of the middle class and other parts of the income distribution are extremely sensitive to various assumptions about how income is defined as well as whether you look at tax units or households. He shows that under one set of assumptions, there has been no change in median income, but under a different and equally reasonable set of assumptions, median income has grown 36%. Burkhauser explains how different assumptions can lead to such different results and argues that the assumptions that lead to the larger growth figure are more appropriate for capturing what has happened over the last 40 years than those that suggest stagnation.

Eugene White of Rutgers University talks with EconTalk host Russ Roberts about the regulation of banks and financial crises. White argues that most regulation tries to limit the choices of banks to restrain them from making choices that create instability or fragility. A better approach, White argues, is to change the incentives facing bankers so that they would be encouraged to make prudent choices without the need for top-down monitoring. He shows how in the 19th century various regulations and market results encouraged stability and prudence while some regulations made the system more fragile. White discusses the lessons for the current crisis and what might be done to improve the current state of regulation.

Don Boudreaux of George Mason University talks with EconTalk host Russ Roberts about the nature of public debt. One view is that there is no burden of the public debt as long as the purchasers of U.S. debt are fellow Americans. In that case, the argument goes, we owe it to ourselves. Drawing on the work of James Buchanan, particularly his book Public Principles of Public Debt: A Defense and Restatement, Boudreaux argues that there is a burden of the debt and it is borne by future taxpayers. Boudreaux argues that all public expenditures have a cost--the different financing mechanisms simply determine who bears the burden of that cost. Boudreaux discusses the political attractiveness of debt finance because the taxes lie in the future and those who will pay for them may not be clearly identified. The conversation closes with a discussion of the role of expectations in both politics and economics of debt finance.

Daron Acemoglu of MIT and author (with James Robinson) of Why Nations Fail talks with EconTalk host Russ Roberts about the ideas in his book: why some nations fail and others succeed, why some nations grow over time and sustain that growth, while others grow and then stagnate. Acemoglu draws on an exceptionally rich set of examples over space and time to argue that differences in institutions--political governance and the inclusiveness of the political and economic system--explain the differences in economics success across nations and over time. Acemoglu also discusses how institutions evolve and the critical role institutional change plays in economic success or failure. Along the way, he explains why previous explanations for national economic success are inadequate. The conversation closes with a discussion of the implications of the arguments for foreign aid and attempts by the wealthy nations to help nations that are poor.

Emanuel Derman of Columbia University and author of Models. Behaving. Badly talks with EconTalk host Russ Roberts about theories and models, and the elusive nature of truth in the sciences and social sciences. Derman, a former physicist and Goldman Sachs quant, contrasts the search for truth in the sciences with the search for truth in finance and economics. He critiques attempts to make finance more scientific and applies those insights to the financial crisis. The conversation closes with a discussion of career advice for those aspiring to work in quantitative finance.

Charles Calomiris of Columbia University talks with EconTalk host Russ Roberts about corporate debt, capital requirements, and financial regulation. This is an in-depth conversation about how debt works on a firm's balance sheet and the risks that debt vs. equity pose for the survival of the firm. Calomiris applies these insights to financial regulation--how it works in practice and the firm's choices in responding to various interventions including bailouts and capital requirements. The conversation closes with a discussion of some of the government interventions in the financial crisis.

David Weinberger of Harvard University's Berkman Center for Internet & Society and author of Too Big to Know, talks with EconTalk host Russ Roberts about the ideas in the book--how knowledge and data and our understanding of the world around us are being changed by the internet. Weinberger discusses knowledge and how it is attained have changed over time, particularly with the advent of the internet. He argues the internet has dispersed the power of authority and expertise. And he discusses whether the internet is making us smarter or stupider, and the costs and benefits of being able to tailor information to one's own interests and biases.

Adam Davidson of NPR's Planet Money talks with EconTalk host Russ Roberts about manufacturing. Based on an article Davidson wrote for The Atlantic, the conversation looks at the past, present, and future of manufacturing. Davidson visited an after-market auto parts factory in Greenville, South Carolina and talked with employees there as well as with executives at corporate headquarters. What is the future of factory work in America? Why are some manufacturing jobs in America while others are in China or elsewhere? The conversation looks at these questions as well as how well or poorly the U.S. education system prepares students for the world of work.

David Owen of the New Yorker and author of The Conundrum talks with EconTalk host Russ Roberts about the ideas in his book. Owen argues that innovation and energy innovation have increased energy use rather than reduced it and similarly, other seemingly green changes do little to help the reduce humanity's carbon footprint or are actually counter-productive. Only large reductions in consumption are likely to matter and that prescription is unappealing to most people. Owen points out that New York City, ironically perhaps, is one of the greenest places to live because of the efficiencies of density. The conversation concludes with a discussion of how to best approach global warming given these seeming realities.

William Black of University of Missouri-Kansas City and author of The Best Way to Rob a Bank Is to Own One, talks with EconTalk host Russ Roberts about financial fraud, starting with the Savings and Loan debacle up through the current financial crisis. Black explains how bank executives can use fraudulent loans to inflate the size of their bank in order to justify large compensation packages. He argues that "liar loans" were a major part of the crisis and that policy changes made it easy to generate such loans without criminal repercussions.

Eugene Fama of the University of Chicago talks with EconTalk host Russ Roberts about the evolution of finance, the efficient market hypothesis, the current crisis, the economics of stimulus, and the role of empirical work in finance and economics.

David Rose of the University of Missouri, St. Louis and the author of The Moral Foundation of Economic Behavior talks with EconTalk host Russ Roberts about the book and the role morality plays in prosperity. Rose argues that morality plays a crucial role in prosperity and economic development. Knowing that the people you trade with have a principled aversion to exploiting opportunities for cheating in dealing with others allows economic actors to trust one another. That in turn allows for the widespread specialization and interaction through markets with strangers that creates prosperity. In this conversation, Rose explores the nature of the principles that work best to engender trust. The conversation closes with a discussion of the current trend in morality in America and the implications for trust and prosperity.

Nassim Taleb, author of Fooled By Randomness and The Black Swan, talks with EconTalk host Russ Roberts about antifragility, the concept behind Taleb's next book, a work in progress. Taleb talks about how we can cope with our ignorance and uncertainty in a complex world. Topics covered include health, finance, political systems, the Fed, your career, Seneca, shame, heroism, and a few more.

Dean Baker of the Center for Economic Policy and Research talks with EconTalk host Russ Roberts about the financial crisis. Baker sees the crisis as part of a broader set of phenomena--rising inequality and declining unionization. Baker is highly critical on both economic and political grounds of the policy attempts to stimulate the economy as well as the governance structure of the Federal Reserve. The conversation closes with a discussion of potential innovations to lower the budgetary cost of health care.

Scott Sumner of Bentley University and the blog The Money Illusion talks with EconTalk host Russ Roberts about the state of monetary policy, the actions of the Federal Reserve over the past two years and the state of the economy. Sumner argues that monetary policy has been too tight and helped create the crisis. He disputes the relevance of the so-called liquidity trap and argues that aggressive monetary policy is both possible and desirable. The conversation closes with a discussion of what we have learned and failed to learn during the crisis.

Alex Tabarrok of George Mason University talks with EconTalk host Russ Roberts about his new book, Launching the Innovation Renaissance. Tabarrok argues that innovation in the United States is being held back by patent law, the legal system, and immigration policies. He then suggests how these might be improved to create a better climate for innovation that would lead to higher productivity and a higher standard of living.

Dan Klein of George Mason University talks with EconTalk host Russ Roberts about the ideas in Klein's new book, Knowledge and Coordination. Klein argues that allegory is a powerful way to think about outcomes of emergent order. He goes deeply into the concept of the invisible hand and creates a novel way to evaluate processes that not under any one's control. Klein then suggests novel ways of evaluating economic outcomes outside of the traditional metrics and techniques. Along the way, Klein emphasizes the role of uncertainty and imperfection in the entrepreneurial process.

Mike Munger of Duke University talks with EconTalk host Russ Roberts about profit. What is profit's role in allocating resources? How should we feel about the people who earn profits or who take them in ways that may not be earned? How easy is it to discover profitable opportunities? Munger examines these questions through a series of stories, real and fictional, to illuminate the sometimes puzzling nature of profit.

Tyler Cowen of George Mason University talks with EconTalk host Russ Roberts about the European crisis. Cowen argues that Greece is likely to default either in fact or in spirit but that the key question is which nations might follow--whether Italy and Spain can find a road to economic health and honoring past debts. Cowen gives his best guess as to what is likely to happen to the euro and the European Union and the implications for the rest of the world. He explores some less likely scenarios as well. He is pessimistic about Greece and the short-run prospects for preserving the status quo, but he is optimistic in the long-run about the European Union though it may have a different structure down the road.

Simon Johnson of MIT and the author (with James Kwak) of 13 Bankers talks with EconTalk host Russ Roberts about the origins of the financial crisis and how the next one might be prevented. Invoking the work of George Stigler, Johnson argues that the financial sector has captured the regulatory process and the result is that regulation and government intervention have been steered more by the interests of the financial sector than to the benefit of the general public. Johnson argues for capping the size of banks in order to reduce the danger of systemic risk and the too-big-to-fail excuse for bailing out banks. Johnson also discusses the role of the Fed in subsidizing risk-taking and leverage in the financial sector.

Gary Taubes, author of Good Calories, Bad Calories, talks to EconTalk host Russ Roberts about what we know about the relationship between diet and disease. Taubes argues that for decades, doctors, the medical establishment, and government agencies encouraged Americans to reduce fat in their diet and increase carbohydrates in order to reduce heart disease. Taubes argues that the evidence for the connection between fat in the diet and heart disease was weak yet the consensus in favor of low-fat diets remained strong. Casual evidence (such as low heart disease rates among populations with little fat in their diet) ignores the possibilities that other factors such as low sugar consumption may explain the relationship. Underlying the conversation is a theme that causation can be difficult to establish in complex systems such as the human body and the economy.

Roy Baumeister of Florida State University and the author of Is There Anything Good About Men talks with EconTalk host Russ Roberts about the differences between men and women in cultural and economic areas. Baumeister argues that men aren't superior to women nor are women superior to men. Rather there are some things men are better at while women excel at a different set of tasks and that these tradeoffs are a product of evolution and cultural pressure. He argues that evolutionary pressure has created different distributions of talent for men and women in a wide variety of areas. He argues that other differences in outcomes are not due to innate ability differences but rather come from different tastes or preferences.

Steven Kaplan of the University of Chicago talks with EconTalk host Russ Roberts about the richest Americans and income inequality. Drawing on work with Joshua Rauh, Kaplan talks about the composition of the richest 1% and 1/10 of 1%--what proportions come from the financial sector, CEOs from non-financial corporations, athletes, lawyers and so on. Then he discusses how the incomes of these different groups have changed over time. Kaplan argues that these groups have increased their incomes by similar proportions, suggesting that a failure of corporate governance is not the explanation of rising CEO pay. The discussion closes with a discussion of the financial crisis and the compensation in the financial sector.

Ryan Avent of the Economist and author of The Gated City talks with EconTalk host Russ Roberts about The Gated City and how cities have restricted access to land and housing. Avent argues that restricted access has raised housing prices artificially on both the east and west coast of the United States, reducing urban populations and restricting access to labor markets. He argues that this in turn has artificially depressed growth in the United States by keeping workers from their most productive opportunities. The conversation closes with a discussion of possible policy changes that might make cities more accessible to development and growth.

Valerie Ramey of the University of California, San Diego talks with EconTalk host Russ Roberts about the effect of government spending on output and employment. Ramey's own work exploits the exogenous nature of wartime spending. She finds a multiplier between .8 and 1.2. (A multiplier of 1 means that GDP goes up by the amount of spending--there is neither stimulus nor crowding out.) She also discusses a survey looking at a wide range of estimates by others and finds that the estimates range from .5 to 2.0. Along the way, she discusses the effects of taxes as well. The conversation concludes with a discussion of the imprecision of multiplier estimates and the contributions of recent Nobel Laureates Thomas Sargent and Christopher Sims.

Nicholas Wapshott, author of Keynes Hayek: The Clash That Defined Modern Economics, talks with EconTalk host Russ Roberts about John Maynard Keynes and Friedrich A. Hayek--their ideas, their disagreements, their friendship and how the two men influenced economists and public policy during their lifetimes and beyond.

Frank Rose, author of The Art of Immersion and correspondent for Wired Magazine, talks with EconTalk host Russ Roberts about how the web has changed the art of storytelling and the interactions between the web, advertising, games, movies, and television. Rose argues that when a new medium is introduced, whether it is the book, movies, or the web, there is always a period of exploration as to how storytelling, the author, and the audience will interact. While there have always been readers, viewers, and listeners who immerse themselves in good stories, the web allows this immersion to expand dramatically, partly because the audience can share reactions and insights with each other as well as becoming part of the creation of the story in ways that past media have not allowed. Rose chronicles these developments with specific examples and speculates on where storytelling on the web might be headed. The conversation closes with a brief discussion of the passing of Steve Jobs.

Bruce Meyer of the University of Chicago talks with EconTalk host Russ Roberts about the middle class, poverty, and inequality. Many economists and pundits argue that the middle class has made little or no economic progress over the last 30 years, that poverty rates are stagnant or rising, and that inequality has increased dramatically. Meyer, drawing on his research over the last ten years, argues that these conclusions are either false or misleading. He argues that standard measures of economic progress and inequality are based on faulty inflation data or a misplaced focus on pre-tax income instead of post-tax income or consumption.

Alex Rosenberg of Duke University talks with EconTalk host Russ Roberts about the scientific nature of economics. Rosenberg, a philosopher of science talks about whether economics is a science. He surveys the changes in economics over the last 25 years--the rise of experimental economics and behavioral economics--and argues that economics has become more scientific and that economists have become more aware of flaws in economic theory. But he also argues that economics is unable to make precise predictions about the effects of various changes in policy and behavior. The conversation closes with a discussion of the role the philosophy of science can play in the evolution of economics.

Garett Jones of George Mason University talks with EconTalk host Russ Roberts about the workers who were hired with money from the 2009 American Recovery and Re-investment Act--the stimulus package. Jones (with co-author Daniel Rothschild) recently completed two studies based on surveys and interviews with firms who received stimulus funds and workers who work at those firms. They found that 42% of workers hired had been unemployed. The remainder came from other jobs or from outside the labor force such as retirement or school. Is 42% a big number or a small number? Jones argues it is small and defends his conclusion. The conversation also includes a discussion of the labor market generally and why the stimulus spending may not have been effective.

Robert Frank of Cornell University and author of The Darwin Economy talks with EconTalk host Russ Roberts about competition, government and the relevance of Darwin for economics. In a lively and spirited discussion, Frank argues that because people care about their relative standing with their neighbors, standard conclusions about the virtues of competition are misleading. He argues that competition is often wasteful and he suggests directions for tax policy and other forms of government intervention to take these effects into accounts.

Clifford Winston of the Brookings Institution talks with EconTalk host Russ Roberts about the market for lawyers and the role of lawyers in the political process. Drawing on a new co-authored book, First Thing We Do, Let's Deregulate All the Lawyers, Winston argues that restrictions on the supply of lawyers and increases in demand via government regulation artificially boost lawyers' salaries. Deregulation of the supply (by eliminating licensing) would lower price and encourage innovation.

Eric Hanushek of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the importance of teacher quality in education. Hanushek argues that the standard measures of quality--experience and advanced degrees--are uncorrelated with student performance. But some teachers consistently cover dramatically more material and teach more than others, even within a school. Hanushek presents evidence that the impact of these differences on lifetime earnings for students can be quite large. The conversation closes with a discussion of school finance and the growth of administrators within school systems.

Brendan O'Donohoe of Frito-Lay talks with EconTalk host Russ Roberts about how potato chips and other salty snacks get made, distributed, and marketed. The interview follows an hour-long tour of a local supermarket where O'Donohoe showed Roberts some of the ways that chips and snacks get displayed and marketed in a modern supermarket. The conversation is a window into a world that few of us experience or are even aware of--how modern producers and retailers make sure the shelves are stocked and their products get noticed.

David Brady of Stanford University talks with EconTalk host Russ Roberts about the lessons of the election of 2010 and what we might expect from the elections of 2012. Brady draws on political history as well as survey results from work with colleagues Doug Rivers and Morris Fiorina to speculate about the elections of 2012. Along the way he discusses the power of the independent vote, how ObamaCare affected the election of 2010, and the prospects for the Republican nominee in 2012. Taped a few days before the deal on the debt was reached, Brady gives his thoughts on the politics of the negotiations. The conversation concludes with a discussion of whether Obama will have a primary challenger.

Debra Satz, Professor of Philosophy at Stanford University, talks with EconTalk host Russ Roberts about her book, Why Some Things Should Not Be For Sale: The Moral Limits of the Market. Satz argues that some markets are noxious and should not be allowed to operate freely. Topics discussed include organ sales, price spikes after natural disasters, the economic concept of efficiency and utilitarianism. The conversation includes a discussion of the possible limits of political intervention and whether it would be good to allow voters to sell their votes.

Anat Admati of Stanford University talks with EconTalk host Russ Roberts about ways to make the financial system more stable. In particular, Admati explores the implications of higher capital requirements. She argues that current policies subsidize leverage--high levels of debt relative to equity--and that current levels of leverage increase the vulnerability of the system to swings in asset prices. She then gives her response to criticisms of higher equity levels. The conversation concludes with a discussion of the role of academic economists and finance professors as advocates for various policies.

Keith Hennessey of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the debt ceiling and the budget process. Hennessey, who worked for Senate Majority Leader Trent Lott on budget issues in the late 1990s, explains the politics of the debt ceiling and the budget process. Using his past experience as a staffer, Hennessey gives those of us on the outside a window into what is actually going on in the hallways, who has power, and how information flows up and down in the chain of constituents, members, party leaders. The conversation closes with Hennessey's best guess of which outcomes of the current negotiations are most likely and why.

John Taylor of Stanford University talks with EconTalk host Russ Roberts about the state of the economy and the prospects for recovery. Taylor argues that the design of the fiscal stimulus was ineffective and monetary policy, so-called quantitative easing, has also failed to improve matters. He argues for a return to fiscal, monetary, and regulatory normalcy as the best hope for economic improvement. The conversation concludes with a discussion of the impact of the current crisis on economics education.

Abhijit Banerjee of MIT talks with EconTalk host Russ Roberts about Banerjee's book (co-authored with Esther Duflo), Poor Economics. The conversation begins with how randomized control trials (a particular kind of social experiment) have been used to measure the effectiveness of various types of aid to the poor. Banerjee goes on to discuss hunger, health, and education--the challenges in each area and what we have learned about what works and what does not. The conversation closes with a discussion of the role of the labor market in the private sector.

David Skeel of the University of Pennsylvania Law School talks with EconTalk host Russ Roberts about bankruptcy and the government bailout of the auto industry. Skeel argues that the bailout damaged the rule of law by not allowing a bankruptcy procedure to take its course. Skeel speculates on how bankruptcy for GM and Chrysler might have proceeded. He also argues that the costs to the taxpayer of the bailout have been underestimated. The conversation concludes with a general discussion of the effects of bankruptcy.

James Otteson of Yeshiva University talks with EconTalk host Russ Roberts about Adam Smith. The conversation begins with a brief sketch of David Hume and his influence on Smith and then turns to the so-called Adam Smith problem--the author of The Wealth of Nations appears to have a different take on human nature than the author of The Theory of Moral Sentiments. Smith worked on both books throughout his life, yet their perspectives seem so different. Otteson argues that the books focus on social behavior and the institutions that sustain that behavior--market transactions in The Wealth of Nations and moral behavior in The Theory of Moral Sentiments. Both books use the idea of emergent order to explain the evolution of both kinds of social behavior and social institutions. The conversation concludes with a discussion of what Smith got right and wrong.

Mike Munger of Duke University talks with EconTalk host Russ Roberts about the psychology, sociology, and economics of buying and selling. Why are different transactions that seemingly make both parties better off frowned on and often made illegal? In theory, all voluntary transactions should make both parties better off. But Munger argues that some transactions are more voluntary than others. Munger lists the attributes of a truly voluntary transaction, what he calls a euvoluntary transaction and argues that when transactions are not euvoluntary, they may be outlawed or seen as immoral. Related issues that are discussed include price gouging after a natural disaster, blackmail, sales of human organs, and the employment of low-wage workers.

Todd Buchholz, author of Rush: Why You Need and Love the Rat Race, talks with EconTalk host Russ Roberts about the ideas in the book. Buchholz argues that competition and striving for excellence is part of our evolutionary inheritance. He criticizes attempts to remake human beings into gentle creatures who long to return to an Eden-like serenity. He argues that it is action, creativity, and planning for the future that makes us happy. The discussion includes the implications of our interest in the future for theater and story-telling.

Barry Eichengreen of University of California, Berkeley and author of Exorbitant Privilege talks with EconTalk host Russ Roberts about the history and importance of the dollar as the dominant international currency. Eichengreen explains the advantages to the United States of the dollar's dominance, the historical circumstances that led to its dominance, and the likelihood that the dollar might be supplanted by a competitor. Along the way they discuss China's currency policy, the state of U.S. monetary policy, the causes of the crisis, the risk of inflation in the United States, and the future of the Federal Reserve.

William Easterly of New York University talks with EconTalk host Russ Roberts about the oft-heard claim that poor countries led by autocrats grow faster than poor countries that are democratic. Drawing on a recent paper, "Benevolent Autocrats," Easterly argues that while some autocracies do indeed grow very quickly, a much greater number do not. Yet, the idea that the messiness of democracy is inferior to a dictatorship remains seductive. Easterly gives a number of arguments for the perennial appeal of autocracy as a growth strategy. The conversation closes with a discussion of the limitations of our knowledge about growth and where that leaves policymakers.

Tim Harford, author and journalist, talks with EconTalk host Russ Roberts about Adapt, Harford's book on the virtues of failure and the trial and error process. Harford argues that success is more likely when there is experimentation and trial and error followed by adapting, rather than following a top-down, ex ante plan driven by expertise. The conversation looks at the what war can teach us about information, knowledge, and planning, the challenge of admitting mistakes, and the implications of trial and error for our daily lives.